Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2020, 17454-17568 [2019-08017]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 84, Number 80 (Thursday, April 25, 2019)]
[Rules and Regulations]
[Pages 17454-17568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08017]



[[Page 17453]]

Vol. 84

Thursday,

No. 80

April 25, 2019

Part II





Department of Health and Human Services





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45 CFR Parts 146, 147, 148, et al.





Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2020; Final Rule

Federal Register / Vol. 84 , No. 80 / Thursday, April 25, 2019 / 
Rules and Regulations

[[Page 17454]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 146, 147, 148, 153, 155, and 156

[CMS-9926-F]
RIN 0938-AT37


Patient Protection and Affordable Care Act; HHS Notice of Benefit 
and Payment Parameters for 2020

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

ACTION: Final rule.

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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 (FFEs) and State-based Exchanges on the Federal 
Platform (SBE-FPs). It finalizes changes that will allow greater 
flexibility related to the duties and training requirements for the 
Navigator program and changes that will provide greater flexibility for 
direct enrollment entities, while strengthening program integrity 
oversight over those entities. It finalizes a change intended to reduce 
the costs of prescription drugs. This final rule also includes changes 
to Exchange standards related to eligibility and enrollment; 
exemptions; and other related topics.

DATES: These regulations are effective on June 24, 2019.

FOR FURTHER INFORMATION CONTACT: 
    Jeff Wu, (301) 492-4305, Kiahana Brooks, (301) 492-5229, Ken 
Buerger, (410) 786-1190, or Abigail Walker, (410) 786-1725, for general 
information.
    David Mlawsky, (410) 786-6851, for matters related to guaranteed 
renewability.
    Avareena Cropper, (410) 786-3794, for matters related to 
sequestration.
    Allison Yadsko, (410) 786-1740, for matters related to risk 
adjustment.
    Jacalyn Boyce, (301) 492-5122, for matters related to Federally-
facilitated Exchange and State-based Exchange on the Federal Platform 
user fees.
    Abigail Walker, (410) 786-1725, Alper Ozinal, (301) 492-4178, 
Allison Yadsko, (410) 786-1740, or Adam Shaw, (410) 786-1091, for 
matters related to risk adjustment data validation.
    Ken Buerger, (410) 786-1190, or LeAnn Brodhead, (410) 786-3943, for 
matters related to the opioid crisis.
    Amir Al-Kourainy, (301) 492-5210, for matters related to 
Navigators.
    Carly Rhyne, (301) 492-4188, for matters related to special 
enrollment periods.
    Amanda Brander, (202) 690-7892, for matters related to exemptions.
    Daniel Brown, (434) 995-5886, for matters related to direct 
enrollment.
    Leigha Basini, (301) 492-4380, for matters related to health 
insurance issuer drug policy, essential health benefits, and qualified 
health plan certification requirements.
    Abigail Walker, (410) 786-1725, for matters related to the required 
contribution percentage, cost-sharing parameters, and the premium 
adjustment percentage.

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 Final Regulations and Analysis and Responses 
to Public Comments
    A. Part 146--Requirements for the Group Health Insurance Market
    B. Part 147--Health Insurance Reform Requirements for the Group 
and Individual Health Insurance Markets
    C. Part 148--Requirements for the Individual Health Insurance 
Market
    D. Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment Under the Affordable Care Act
    E. Part 155--Exchange Establishment Standards and Other Related 
Standards under the Affordable Care Act
    F. Part 156--Health Insurance Issuer Standards under the 
Affordable Care Act, Including Standards Related to Exchanges
IV. Collection of Information Requirements
    A. Wage Estimates
    B. ICRs Regarding Risk Adjustment Data Validation Exemptions
    C. ICRs Regarding Agent or Broker Termination and Web Broker 
Data Collection
    D. ICRs Regarding Direct Enrollment Entity Standardized 
Disclaimer
    E. ICRs Regarding Special Enrollment Periods
    F. ICRs Regarding Eligibility Standards for Exemptions
    G. Summary of Annual Burden Estimates for Requirements
    H. 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
    J. Conclusion

I. Executive Summary

    American Health Benefit Exchanges, or ``Exchanges'' are entities 
established under the Patient Protection and Affordable Care Act \1\ 
(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 to reduce their costs for 
health insurance premiums and to 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.
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    \1\ The PPACA (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 PPACA, 
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''.
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    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. This rule will, within the 
limitations of the current statute, reduce fiscal and regulatory 
burdens across different program areas and provide stakeholders with 
greater flexibility.
    Over time, issuer market exits and increasing insurance rates have 
threatened the stability of the individual and small group market 
Exchanges in many geographic areas. These dynamics have put coverage 
out of reach for many, notably those consumers enrolling outside of the 
Exchanges, who do not benefit from the PPACA's advance payments of the 
premium tax credit (APTC).
    In previous rulemaking, we have established provisions and 
parameters to implement many PPACA requirements and programs. In this 
rule, we amend these provisions and parameters, with a focus on 
maintaining a stable regulatory environment to provide issuers with 
greater

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predictability for upcoming plan years, while simultaneously enhancing 
the role of states in these programs and providing states with 
additional flexibilities, reducing unnecessary regulatory burdens on 
stakeholders, empowering consumers, and improving affordability.
    Risk adjustment continues to be a core program in the individual 
and small group markets both on and off the Exchanges, and we are 
finalizing recalibrated parameters for the HHS-operated risk adjustment 
methodology. We are finalizing several changes related to the risk 
adjustment data validation program that are intended to ensure the 
integrity of the results of risk adjustment, and others intended to 
alleviate issuer burden associated with complying with risk adjustment 
data validation requirements.
    As we do every year in the HHS notice of benefit and payment 
parameters, we are finalizing updated parameters applicable in the 
individual and small group markets. We are finalizing the user fee rate 
for issuers participating on Federally-facilitated Exchanges (FFEs) and 
State-based Exchanges on the Federal platform (SBE-FPs) for 2020 to be 
3.0 and 2.5 percent of premiums, respectively. These rates are a 
decrease from past years, which will increase affordability for 
consumers. We are finalizing updates to the premium adjustment 
percentage methodology and amount, and consequently the maximum annual 
limitations on cost sharing for the 2020 benefit year, including those 
for cost-sharing reduction plan variations.
    We are finalizing changes to the requirements regarding Navigators 
to reduce burden, increase flexibility, and enable Exchanges to more 
easily and cost-effectively operate Navigator programs. Streamlining 
the Navigator training requirements and authorizing but not requiring 
assisters to provide certain types of assistance, including post-
enrollment assistance, will allow assisters to allocate their resources 
in a manner that best meets community needs, consumer demands, and 
organizational resources.
    We are finalizing a number of changes in this rule that are 
intended to reduce the burden for consumers by making it easier to 
enroll in affordable coverage through the Exchanges. First, we are 
finalizing a policy that would provide additional flexibility to those 
in need of a hardship exemption that currently must be obtained by 
filing an application with an Exchange, by expanding the types of 
hardship exemptions that consumers may claim for 2018 through the tax 
filing process. Second, we believe consumers should have greater 
flexibility in how they shop for coverage, including the avenues 
through which they enroll in QHPs. As such, we have been working to 
expand opportunities for individuals to directly enroll in Exchange 
coverage through the websites of certain third parties, called direct 
enrollment entities, rather than having to visit HealthCare.gov. Third, 
we are finalizing several regulatory changes to streamline the 
regulatory requirements applicable to these direct enrollment entities. 
Fourth, we are finalizing a proposal to create a special enrollment 
period for off-Exchange enrollees who experience a decrease in 
household income and are determined to be eligible for APTC by the 
Exchange. This will allow enrollees to enroll in a more affordable on-
Exchange product when a consumer's household income decreases mid-year.
    We requested comment on automatic re-enrollment processes and 
capabilities, as well as additional policies or program measures that 
would reduce eligibility errors and potential government misspending 
for potential action in future rulemaking applicable not sooner than 
plan year 2021.
    In the proposed rule, we discussed why we believe increased 
transparency is a critical component of a consumer driven health care 
system, and expressed our interest to receive comments discussing ways 
to provide consumers with greater transparency with regards to their 
own health care data, QHP offerings on the FFEs, and the cost of health 
care services. We continue to believe that when consumers have access 
to relevant, meaningful, and consumer-friendly information, they are 
empowered to make more informed decisions with regards to their care.
    The proposed rule discussed a future opportunity for public input 
on ways to increase the interoperability of patient-mediated health 
care data across health care programs, including in coverage purchased 
through the Exchanges. To that end, in the March 4, 2019 Federal 
Register, we published the ``Interoperability and Patient Access 
Proposed Rule'' with a 60-day public comment period. The 
Interoperability and Patient Access Proposed Rule includes policy 
proposals to make certain health care data easily accessible through 
common technologies in a convenient, timely, and portable way. We 
encourage public input on that proposed rule.
    Additionally, we sought comment on ways to further implement 
section 1311(e)(3) of the PPACA, as implemented by 45 CFR 156.220(d), 
where a QHP issuer must make available the amount of enrollee cost 
sharing under the individual's plan or coverage for the furnishing of a 
specific item or service by a participating provider in a timely manner 
upon the request of the individual. We were particularly interested in 
input regarding what types of data will be most useful to improving 
consumers' abilities to make informed health care decisions, including 
decisions related to their coverage.
    We also expressed our interest in ways to improve consumers' access 
to information about health care costs. We stated that we believe that 
consumers would benefit from a greater understanding of what their 
potential out-of-pocket costs would be for various services, based on 
which QHP they are enrolled in and which provider they see. We stated 
that we believe that such a policy would promote consumers' ability to 
shop for covered services, and to play a more active role in their 
health care.
    We also are finalizing our proposal to create a limited data set 
file using masked enrollee-level data submitted to HHS from the 
External Data Gathering Environment (EDGE) servers for issuers of risk 
adjustment covered plans in the individual and small group (including 
merged) markets, with one modification: We will not make this limited 
data set available for public health or health care operations 
purposes. Thus, we are finalizing our proposal to make this file 
available to requestors who seek the data for research purposes only. 
In addition, we are finalizing our proposal to broaden the permissible 
HHS uses of the enrollee-level EDGE data currently submitted for 
purposes of risk adjustment. We believe this will increase 
understanding of these markets and contribute to greater transparency.
    We sought comment on ways that we can promote the offering and 
take-up of high deductible health plans (HDHPs) that can be paired with 
health savings accounts (HSAs), which can serve as an effective and 
tax-advantageous method for certain consumers to manage their health 
care expenditures. We also sought comments for ways to increase the 
visibility of HSA-eligible HDHPs on HealthCare.gov.
    In furtherance of the Administration's priority to reduce 
prescription drug costs and to align with the President's American 
Patients First blueprint, we proposed a series of changes regarding 
prescription drug benefits, to the extent permitted by applicable state 
law. These proposals included provisions that would allow issuers to 
adopt mid-year formulary changes to incentivize greater

[[Page 17456]]

enrollee use of lower-cost generic drugs and that would allow issuers 
to not count certain cost sharing toward the annual limitation on cost 
sharing if a consumer selects a brand drug when a medically appropriate 
generic drug is available. Based on issues raised by commenters, we are 
not finalizing these proposals. However, we are finalizing a change 
that would allow issuers and plans to exclude drug manufacturer coupons 
from counting toward the annual limitation on cost sharing when a 
medically appropriate generic drug is available. We expect this change 
to support issuers' and plans' ability to lower the cost of coverage 
and generate cost savings while also ensuring efficient use of federal 
funds and sufficient coverage for people with diverse health needs.

II. Background

A. Legislative and Regulatory Overview

    Title I of the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA) added a new title XXVII to the Public Health Service 
Act (PHS Act) to establish various reforms to the group and individual 
health insurance markets, including a guaranteed renewability 
requirement in the individual, small group, and large group markets.
    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 PHS Act 
relating to group health plans and health insurance issuers in the 
group and individual markets.
    Section 1302 of the PPACA provides for the establishment of an 
essential health benefits (EHB) package that includes coverage of EHB 
(as defined by the Secretary), cost-sharing limits, and actuarial value 
requirements. The law directs that EHBs be equal in scope to the 
benefits 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, adherence to the cost-sharing limits described in section 
1302(c) of the PPACA, and meeting the actuarial value (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 requirement to cover 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 1311(d)(3)(B) of the PPACA permits a state, at its option, 
to require QHPs to cover benefits in addition to the EHB. This section 
also 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.
    Section 1302(d) of the PPACA describes the various levels of 
coverage based on 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.\2\
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    \2\ 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) under section 2701(a)(5) of the PHS 
Act.
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    Section 1311(d)(4)(B) of the PPACA requires an Exchange to provide 
for the operation of a toll-free telephone hotline to respond to 
requests for assistance.
    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(c) of the PPACA generally requires a health insurance 
issuer to consider all enrollees in all health plans (except 
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 and small group market 
risk pools under section 1312(c)(3) of the PPACA.
    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 premium tax credits 
and cost-sharing reductions 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 for, among other things, the 
establishment and operation of Exchanges.
    Section 1311(c) of the PPACA provides the Secretary the authority 
to issue regulations to establish criteria for the certification of 
QHPs. Section 1311(e)(1) of the PPACA grants the Exchange the authority 
to certify a health plan as a QHP if the health plan meets the 
Secretary's requirements for certification issued under section 1311(c) 
of the PPACA, and the Exchange determines that making the plan 
available through the Exchange is in the interests of individuals and 
employers in the state.
    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. Office of Management and Budget 
(OMB) Circular A-25 establishes federal policy regarding user fees and 
specifies that a user charge will be assessed against each identifiable 
recipient for special

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benefits derived from federal activities beyond those received by the 
general public.
    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-than average risk populations, such as those with chronic 
conditions, funded by payments from those that attract lower-than-
average 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 Internal Revenue Code (the Code), as added by 
section 1501(b) of the PPACA, requires individuals to have minimum 
essential coverage (MEC) for each month, qualify for an exemption, or 
make an individual shared responsibility payment. Under the Tax Cuts 
and Jobs Act, which was enacted on December 22, 2017, the individual 
shared responsibility payment is reduced to $0, effective for months 
beginning after December 31, 2018.\3\ Notwithstanding that reduction, 
certain exemptions are still relevant to determine whether individuals 
above the age of 30 qualify to enroll in catastrophic coverage under 
Sec.  155.305(h).
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    \3\ Public Law 115-97, 131 Stat. 2054 (2017).
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    The Protecting Affordable Coverage for Employees Act (Pub. L. 114-
60, enacted on October 7, 2015) amended the definition of small 
employer in section 1304(b) of the PPACA and section 2791(e) of the PHS 
Act to mean, in connection with a group health plan for 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, for 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\ The term premium stabilization programs refers to the risk 
adjustment, risk corridors, and reinsurance programs established by 
the PPACA. See 42 U.S.C. 18061, 18062, and 18063.
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    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 June 19, 2013 Federal Register 
(78 FR 37032), we proposed a modification to the HHS-operated 
methodology related to community rating states. In the October 30, 2013 
Federal Register (78 FR 65046), we finalized the proposed modification 
to the HHS-operated methodology related to community rating states. We 
published a correcting amendment to the 2014 Payment Notice final rule 
in the November 6, 2013 Federal Register (78 FR 66653) to address how 
an enrollee's age for the risk score calculation would be determined 
under the HHS-operated risk adjustment methodology.
    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 
May 27, 2014 Federal Register (79 FR 30240), the 2015 fiscal year 
sequestration rates for the risk adjustment and reinsurance programs 
were announced.
    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 the HHS 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).
    In the November 2, 2017 Federal Register (82 FR 51042), we 
published a proposed rule outlining the benefit and payment parameters 
for the 2019 benefit year, and to further promote stable premiums in 
the individual and small group markets. We proposed updates to the risk 
adjustment methodology and amendments to the risk adjustment data 
validation process (proposed 2019 Payment Notice). We published the 
2019 Payment Notice final rule in the April 17, 2018 Federal Register 
(83 FR 16930). We published a correction to the 2019 benefit year risk 
adjustment coefficients in the 2019 Payment Notice final rule in the 
May 11, 2018 Federal Register (83 FR 21925). On July 27, 2018, 
consistent with 45 CFR 153.320(b)(1)(i), we updated the 2019 benefit 
year final risk adjustment model coefficients to reflect an additional

[[Page 17458]]

recalibration related to an update to the 2016 enrollee-level EDGE 
dataset.\5\
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    \5\ ``Updated 2019 Benefit Year Final HHS Risk Adjustment Model 
Coefficients.'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.
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    In the July 30, 2018 Federal Register (83 FR 36456), we published a 
final rule that adopted the 2017 benefit year risk adjustment 
methodology as established in the final rules published in the March 
23, 2012 (77 FR 17220 through 17252) and in the March 8, 2016 editions 
of the Federal Register (81 FR 12204 through 12352). This final rule 
sets forth additional explanation of the rationale supporting the use 
of the statewide average premium in the HHS-operated risk adjustment 
state payment transfer calculation for the 2017 benefit year, including 
the reasons why the program is operated in a budget-neutral manner. 
This final rule permitted HHS to resume 2017 benefit year risk 
adjustment payments and charges. HHS also provided guidance as to the 
operation of the HHS-operated risk adjustment program for the 2017 
benefit year in light of publication of this final rule.\6\
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    \6\ ``Update on the HHS-operated Risk Adjustment Program for the 
2017 Benefit Year.'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf.
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    In the August 10, 2018 Federal Register (83 FR 39644), we published 
a proposed rule seeking comment on adopting the 2018 benefit year risk 
adjustment methodology in the final rules published in the March 23, 
2012 (77 FR 17219) and in the December 22, 2016 editions of the Federal 
Register (81 FR 94058). The proposed rule set forth additional 
explanation of the rationale supporting use of statewide average 
premium in the HHS-operated risk adjustment state payment transfer 
formula for the 2018 benefit year, including the reasons why the 
program is operated in a budget-neutral manner. In the December 10, 
2018 Federal Register (83 FR 63419), we issued a final rule adopting 
the 2018 benefit year HHS-operated risk adjustment methodology as 
established in the final rules published in the March 23, 2012 (77 FR 
17219) and the December 22, 2016 (81 FR 94058) editions of the Federal 
Register. This final rule sets forth additional explanation of the 
rationale supporting use of statewide average premium in the HHS-
operated risk adjustment state payment transfer formula for the 2018 
benefit year, including the reasons why the program is operated in a 
budget-neutral manner.
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. Market Rules
    An interim final rule relating to the HIPAA health insurance 
reforms was published in the April 8, 1997 Federal Register (62 FR 
16894). 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.
4. 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 March 27, 2012 Federal Register 
(77 FR 18309), we established the original regulatory Navigator duties 
and training requirements. 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 
the 2017 Payment Notice final rule, published in the March 8, 2016 
Federal Register (81 FR 12204), we expanded Navigator duties and 
training requirements. In the 2019 Payment Notice final rule, published 
in the April 17, 2018 Federal Register (83 FR 16930), we removed the 
requirements that each Exchange must have at least two Navigator 
entities; that one of these entities must be a community and consumer-
focused nonprofit group; and that each Navigator entity must maintain a 
physical presence in the Exchange service area.
    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, published 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. 
In the 2019 Payment Notice final rule, published in the April 17, 2018 
Federal Register (83 FR 16930), we modified parameters around certain 
special enrollment periods.

[[Page 17459]]

5. Essential Health Benefits
    On December 16, 2011, HHS released a bulletin \7\ that outlined our 
intended regulatory approach for defining EHB, including a benchmark-
based framework. A proposed rule relating to EHBs was published in the 
November 26, 2012 Federal Register (77 FR 70643). We established 
requirements relating to EHBs 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 2019 Payment Notice, published in the April 17, 2018 
Federal Register (83 FR 16930), we added Sec.  156.111 to provide 
states with additional options from which to select an EHB-benchmark 
plan for plan years 2020 and beyond.
---------------------------------------------------------------------------

    \7\ ``Essential Health Benefits Bulletin.'' December 16, 2011. 
Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
---------------------------------------------------------------------------

6. 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 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.

B. Stakeholder Consultation and Input

    HHS consulted with stakeholders on policies related to the 
operation of Exchanges, including the SHOP, and the risk adjustment and 
risk adjustment data validation programs. We held a number of listening 
sessions with consumers, providers, employers, health plans, and the 
actuarial community to gather public input. We solicited input from 
state representatives on numerous topics, particularly essential health 
benefits, QHP certification, Exchange establishment, and risk 
adjustment. 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.

C. Structure of Final Rule

    The regulations outlined in this final rule will be codified in 45 
CFR parts 146, 147, 148, 153, 155, and 156.
    The changes to 45 CFR parts 146, 147, and 148 make a non-
substantive technical correction to the guaranteed renewability 
regulations.
    The changes to the HHS risk adjustment program established under 45 
CFR part 153 relate to the determination of the final coefficients for 
the 2020 benefit year, and the data sources used to calculate those 
coefficients. This final rule addresses high-cost risk pooling, where 
we finalize the same parameters that applied to the 2018 and 2019 
benefit years to the 2020 benefit year and future benefit years unless 
changed in future rulemaking. The finalized provisions in part 153 also 
relate to the risk adjustment user fee for the 2020 benefit year and 
modifications to risk adjustment data validation requirements.
    The final regulations in 45 CFR part 155 will provide more 
flexibility related to the training requirements for Navigators by 
streamlining 20 existing specific training topics into 4 broad 
categories. They also provide more flexibility to FFE Navigators by 
making the provision of certain types of assistance, including post-
enrollment assistance, permissible for FFE Navigators, but not 
required.\8\ They amend and streamline our regulations related to 
direct enrollment. They also establish a new special enrollment period, 
at the option of the Exchange, for off-Exchange enrollees who 
experience a decrease in income and are newly determined to be eligible 
for APTC by the Exchange. They also increase flexibility for 
individuals seeking the general hardship exemption by allowing them to 
claim the exemption on their federal income tax return for 2018 without 
obtaining an exemption certificate number from the Exchange. Finally, 
they include several amendments to the definitions applicable to part 
155.
---------------------------------------------------------------------------

    \8\ This assistance includes: Understanding the process of 
filing Exchange eligibility appeals; understanding and applying for 
exemptions from the individual shared responsibility payment that 
are granted through the Exchange; understanding the availability of 
exemptions from the requirement to maintain MEC and from the 
individual shared responsibility payment that are claimed through 
the tax filing process and how to claim them; the Exchange-related 
components of the premium tax credit reconciliation process; 
understanding basic concepts and rights related to health coverage 
and how to use it; and referrals to licensed tax advisers, tax 
preparers, or other resources for assistance with tax preparation 
and tax advice on certain Exchange-related topics.
---------------------------------------------------------------------------

    The final regulations in 45 CFR part 156 set forth provisions 
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 
2020. As we do every year in the HHS notice of benefit and payment 
parameters, we are finalizing updates to the premium adjustment 
percentage, which helps determine the required contribution percentage, 
the maximum annual limitation on cost sharing, and the reduced maximum 
annual limitation on cost sharing based on the premium adjustment 
percentage.
    We finalize the FFE and SBE-FP user fee rates for 2020 to be 3.0 
and 2.5 percent of premiums, respectively. The final regulations in 
part 156 also include a policy to incentivize the use of generic drugs. 
In addition, the final rule at part 156 includes changes related to 
direct enrollment to conform to the changes finalized to 45 CFR part 
155.

III. Provisions of the Final Regulations and Analysis and Responses to 
Public Comments

    In the January 24, 2019 Federal Register (84 FR 227), we published 
the ``Patient Protection and Affordable Care Act; HHS Notice of Benefit 
and Payment Parameters for 2020'' proposed rule (proposed 2020 Payment 
Notice or proposed rule). We received 26,129 comments, including 25,632 
comments that were substantially similar to one of eight different 
letters. Comments were received from state entities, such as 
departments of insurance and state Exchanges; health insurance issuers; 
providers 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 certain proposed 
provisions, a summary of the public comments received that directly 
related to those proposals, our responses to

[[Page 17460]]

them, and a description of the provisions we are finalizing.
    Comment: We received multiple comments criticizing the short 
comment period, stating that the length of 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 2020 plan 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 continue to try to expand the comment period while also 
providing industry stakeholders with more time to implement the final 
rule.
    Comment: We received multiple comments criticizing the timing of 
the release of the proposed rule, stating that publishing the proposal 
for this annual rule in January 2019 creates challenges for states, 
Exchanges, issuers, and other entities in implementing changes for plan 
year 2020.
    Response: We recognize the importance of a timely release of 
updates to our regulations, and make every effort to do so efficiently. 
After the comment period closed, we took steps to expedite the 
publication of this final rule. We will continue to support consumers 
and stakeholders to implement the changes in this final rule in a 
timely fashion.
    Comment: We received numerous comments cautioning us about making 
changes that would weaken the PPACA.
    Response: Our top priority at HHS is putting patients 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 made great strides in working to streamline our 
regulations and our operations with the goal of reducing unnecessary 
burden, increasing efficiencies and improving the patient experience. 
We will continue to seek innovative ways to reduce costs and burden 
while meeting the health needs of all Americans, within the constraints 
of the law. We are continuing to address feedback we receive from 
stakeholders and the public, and in turn we are making changes that 
will better serve patients and allow states to address the unique 
health needs of their populations.
    We sought comment on ways to further implement section 1311(e)(3) 
of the PPACA, as implemented by Sec.  156.220(d), to enhance enrollee 
cost-sharing transparency. We also sought comment on whether there are 
any existing regulatory barriers that stand in the way of privately led 
efforts at price transparency, and ways that we can facilitate or 
support increased private innovation in price transparency.
    We requested comment on automatic re-enrollment processes and 
capabilities, as well as additional policies or program measures that 
would reduce eligibility errors and potential government misspending 
for potential action in future rulemaking.
    Comment: Commenters who addressed this topic unanimously supported 
retaining automatic re-enrollment processes. Supporters cited benefits 
such as the stabilization of the risk pool due to the retention of 
lower-risk enrollees who are least likely to actively re-enroll, the 
increased efficiencies and reduced administrative costs for issuers, 
the reduction of the numbers of uninsured, and lower premiums. 
Commenters stated that existing processes, such as eligibility 
redeterminations, electronic and document-based verification of 
eligibility information, periodic data matching, and premium tax credit 
reconciliations, are sufficient safeguards against potential 
eligibility errors and increased federal spending.
    Response: We appreciate commenters' feedback and will take it into 
consideration as we continue to explore options to improve Exchange 
program integrity going forward. As we discussed in the preamble to the 
proposed rule, we agree that automatic re-enrollment significantly 
reduces issuer administrative expenses, makes enrolling in health 
insurance more convenient for consumers, and is consistent with broader 
industry practices. We are not making changes for these processes in 
this rule but will continue to consider the feedback provided for 
potential action in future rulemaking applicable not sooner than plan 
year 2021.
    Comment: All commenters that commented on efforts to increase price 
transparency supported the idea of increased price transparency. Many 
commenters provided suggestions for how to disclose health care costs 
to consumers, such as providing costs for common, shoppable services, 
including costs for both in- and out-of-network health care, and 
accounting for consumer-specific benefit information such as progress 
towards meeting a deductible, out-of-pocket limit and visit limits in 
health care cost estimates. One commenter supported implementing price 
transparency requirements across all private markets. Another commenter 
suggested that price transparency efforts be a part of a larger payment 
reform, provider empowerment, and patient engagement strategy. Some 
commenters expressed caution for how such policies should be 
implemented, warning against duplicating state efforts and passing 
along administrative costs to consumers, and cautioning that the 
proprietary and competitive nature of payment data should be protected.
    Response: We are not making changes to further implement the 
enrollee cost-sharing transparency requirements under Sec.  156.220(d) 
as part of this rule. We will take this input into account as we 
continue our efforts to promote price transparency in health care 
markets.
    We sought comment on ways that we can promote the offering and 
take-up of HDHPs that can be paired with HSAs. We also sought comments 
for ways to increase the visibility of HSA-eligible HDHPs on 
HealthCare.gov.
    Comment: Many commenters provided suggestions on how to improve the 
educational content about HSAs on HealthCare.gov, and methods to 
improve the technical aspects of HealthCare.gov to incorporate HSAs 
into the QHP shopping experience. Commenters also encouraged HHS' 
involvement in the incorporation of value-based insurance design 
principles into HSA-eligible HDHP designs.
    Response: We appreciate these comments, and will take them under 
consideration should we make any future changes to our approach towards 
HSAs on HealthCare.gov. We note that the rules for HSAs and HSA-
eligible HDHPs are set forth in section 223 of the Code and are under 
the jurisdiction of the Department of the Treasury and the Internal 
Revenue Service (IRS).

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

    For a discussion of the provisions in this final rule related to 
part 146, please see the preamble to part 147.

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

    Section 147.106 implements the guaranteed renewability requirements 
under the PPACA (applicable to non-grandfathered plans), and Sec. Sec.  
146.152 and 148.122 implement the guaranteed renewability requirements 
enacted by HIPAA (applicable to both grandfathered and non-
grandfathered

[[Page 17461]]

plans). We proposed amendments in Sec.  147.106, and conforming 
amendments to Sec. Sec.  146.152 and 148.122, which, taken together 
with proposed amendments to Sec. Sec.  156.122 and 156.130, aimed to 
reduce prescription drug expenditures.
    In the 2016 Payment Notice, we expressed concerns about the impact 
on consumers of mid-year formulary changes. We noted that, under 
guaranteed renewability requirements and the definitions of ``product'' 
and ``plan,'' issuers generally may not make plan design changes, other 
than at the time of plan renewal. However, we also stated that certain 
mid-year changes to drug formularies related to the availability of 
drugs in the market may be necessary and appropriate.\9\
---------------------------------------------------------------------------

    \9\ 80 FR at 10822.
---------------------------------------------------------------------------

    In the proposed rule, we proposed to add Sec.  147.106(e)(5) to set 
parameters in the individual, small group, and large group markets, for 
plan years beginning on or after January 1, 2020, for certain mid-year 
formulary changes, if permitted by applicable state law. At Sec.  
147.106(e)(5), we proposed allowing issuers, for plan years beginning 
on or after January 1, 2020, to make formulary changes during the plan 
year when a generic equivalent of a prescription drug becomes available 
on the market, within a reasonable time after that drug becomes 
available. We proposed that the issuer be permitted to modify its 
plans' formularies to add the generic equivalent drug. At that time, 
the issuer would also be permitted to remove the equivalent brand drug 
from the formulary or move the equivalent brand drug to a different 
cost-sharing tier on the formulary. We proposed that any mid-year 
formulary changes would have to be consistent with the standards 
applicable to uniform modifications in paragraph (e)(2) or (e)(3).
    We proposed that issuers, including issuers of grandfathered plans, 
would also be required to provide enrollees the option to request 
coverage for a brand drug that was removed from the formulary through 
the applicable coverage appeal process under Sec.  147.136 or the drug 
exception request process under Sec.  156.122(c).
    Under our proposal, before removing a brand drug from the formulary 
or moving it to a different cost-sharing tier, a health insurance 
issuer would be required to notify all plan enrollees of the change in 
writing a minimum of 60 days prior to initiating the change. This 
notice would identify the name of the brand drug that is the subject of 
the change, disclose whether the brand drug will be removed from the 
formulary or placed on a different cost-sharing tier, provide the name 
of the generic equivalent that will be made available, specify the date 
the changes will become effective, and state that under the appeals 
processes outlined in Sec.  147.136 or the exceptions processes 
outlined in Sec.  156.122(c), enrollees and dependents may request and 
gain access to the brand drug when clinically appropriate and not 
otherwise covered by the health plan.
    We also proposed changes to Sec.  147.106(a) to reflect that 
paragraph (e) currently provides an exception to the general rule on 
guaranteed renewability. This is merely a technical correction, not a 
substantive change. We similarly proposed technical corrections to 
Sec. Sec.  146.152(a) and 148.122(b).
    We sought comment on these proposals related to prescription drug 
benefits and coverage, including whether to limit the proposal related 
to mid-year formulary changes to the individual and small group 
markets, and whether a different advance notice period, such as 90 days 
or 120 days, would be more appropriate.
    Comment: While some commenters generally supported the proposal, 
many commenters opposed it, because they noted it inappropriately 
expanded or narrowed issuers' ability to make drug formulary changes 
mid-year. Several commenters opposed the proposal as overly 
restrictive. These commenters stated that federal law does not prohibit 
mid-year formulary changes, and that it is a current practice that 
occurs much more broadly than what the proposal would permit. For 
example, these commenters stated that formularies are changed when a 
biosimilar drug, a lower-priced brand name therapeutic equivalent, a 
new drug that is clinically effective, or an over-the-counter version 
of a drug becomes available; when there is a shortage of a preferred 
generic drug; when there is new evidence of the efficacy of a drug; or 
when there are expanded indications for a drug. One commenter stated 
that most states do not prohibit mid-year formulary changes, regardless 
of the federal guaranteed renewability requirements and stated that 
mid-year formulary changes should be allowed for all drugs as long as 
the changes are approved by the issuer's pharmacy and therapeutics 
committee, and notice is provided. Several commenters stated that 
approval by a pharmacy and therapeutics committee, notice to enrollees, 
and providing an exceptions process to request and gain access to 
removed drugs when medically appropriate and necessary, are all current 
industry practice.
    Many other commenters stated the proposal would improperly allow 
mid-year formulary changes and opposed the proposal because they noted 
it would hurt consumers. These commenters stated, for example, that 
consumers choose their plans based on the formulary composition at the 
beginning of the plan year and that changing formularies could result 
in patient safety and health issues such as additional emergency room 
visits, additional outpatient appointments, and higher medical costs. A 
few commenters stated that these dangers could occur notwithstanding 
the availability of an exceptions or appeals process. Many commenters 
stated that mid-year formulary changes arbitrarily eliminate an EHB.
    Response: In the 2016 Payment Notice, we stated that certain mid-
year changes to drug formularies related to the availability of drugs 
in the market may be necessary and appropriate. Comments to this rule 
supported that belief. At the same time, in the 2016 Payment Notice, we 
also expressed concerns about the impact on consumers of mid-year 
formulary changes.\10\ We appreciate the comments to this rule 
identifying potential negative impacts on consumers. Given the 
complexity of this issue, and the challenges of balancing the interests 
of consumers with the importance of mitigating the effects of rising 
prescription drug costs, we are not finalizing the proposal at this 
time. Rather, we will continue to examine the issue of mid-year 
formulary changes, and may provide guidance on this issue in the 
future. In the meantime, to the extent issuers make mid-year formulary 
changes consistent with applicable state law, our expectation is that 
all issuers (in the individual, small group and large group markets) 
will continue to provide certain consumer protections that, as 
commenters have stated, are generally consistent with current industry 
practice. These protections include pre-approval by a pharmacy and 
therapeutics committee, and reasonable advance notice to affected 
individuals of the mid-year removal of any drug from a formulary (or 
the placement of any drug on a higher cost-sharing tier). Additionally, 
we expect that affected individuals will generally have access to the 
appeals processes outlined in Sec.  147.136 or the exceptions processes 
outlined in Sec.  156.122(c), under which enrollees and dependents may 
request and gain access to a non-formulary drug when clinically 
appropriate and not otherwise covered by the health plan.

[[Page 17462]]

Several commenters specifically noted that issuers currently offer an 
exceptions process when making mid-year formulary changes. Therefore, 
our expectation is that issuers will also offer an appeals process or 
exceptions process when making mid-year formulary changes.
---------------------------------------------------------------------------

    \10\ 80 FR 10822.
---------------------------------------------------------------------------

    We do not agree that mid-year formulary changes arbitrarily 
eliminate an EHB. Rather, we remind issuers that all requirements in 
Sec.  156.122 related to EHB as applied to prescription drug coverage 
continue to apply in the context of mid-year formulary changes. For 
example, a health plan does not provide EHB unless it covers the 
greater of one drug in every United States Pharmacopeia (USP) category 
and class or the same number of prescription drugs in each category and 
class as the EHB-benchmark plan. Additionally, the EHB regulations at 
Sec.  156.122(a)(3) require the use of a pharmacy and therapeutics 
committee to establish and manage the formulary drug list throughout 
the year. Issuers required to provide EHB must continue to meet these 
requirements.
    Comment: Many commenters, including those who generally support and 
those who generally oppose the proposal, requested specific changes to 
the proposal. One commenter favored applying mid-year formulary 
restrictions to issuers in the large group market, while a few opposed 
doing so. One commenter stated that the uniform-modification-of-
coverage requirements should not apply to mid-year formulary changes in 
the large group market, while another stated they should not apply in 
any market. One commenter raised what it believed to be practical 
concerns with any restrictions on mid-year formulary changes in the 
group markets, since plan years in those markets are not required to 
align with the calendar year. Many commenters stated that mid-year 
formulary changes should be permitted as a way to add drugs, but not to 
remove drugs or move drugs to a different tier. A few commenters stated 
the formulary changes should not apply, for the rest of the plan year, 
to people already taking the affected drugs. Several commenters noted 
that we did not define ``generic drug,'' and offered definitions.
    Response: As stated in this rule, we are not finalizing the 
proposal at this time, and instead intend to continue to examine the 
issue of mid-year formulary changes. We appreciate the important 
considerations raised by commenters, in particular regarding the 
practical concerns with restrictions on mid-year formulary changes, and 
believe it is important for us to more fully explore these issues and 
other issues raised by commenters prior to issuing further guidance. We 
will consider all of these comments as we consider future guidance in 
this area.
    We also are not finalizing any changes to the definitions of 
``plan'' and ``product'' at Sec.  144.103--which incorporate by 
reference the uniform modification standards--with regard to 
determining whether a product and plan that have undergone formulary 
changes are considered the same product and plan. This definition 
provides that, among other things, within a product, each plan must 
have the same cost-sharing structure as before the modification, except 
for any variation in cost sharing solely related to changes in cost and 
utilization of medical care, or to maintain the same metal level of 
coverage. We interpret this provision to mean that for modifications of 
prescription drug formularies, each tier must continue to have the same 
cost-sharing structure, or any changes to the tier structure must be 
related to changes in cost or utilization of medical care, or to 
maintain the same metal level, to be considered a uniform modification 
of coverage, regardless of any changes made to the placement of drugs 
within the formulary. Additionally, the product must provide the same 
covered benefits, except for any changes in benefits that cumulatively 
impact the plan-adjusted index rate for any plan within the product 
within an allowable variation of 2 percentage points (not 
including changes pursuant to applicable federal or state 
requirements). Given the nature of formulary changes, our expectation 
is that generally, any changes to which drugs are covered under the 
formulary would not be of a magnitude that would exceed the allowable 
variation of 2 percentage points of the plan-adjusted index 
rate. However, if formulary changes do result in a change to the plan-
adjusted index rate outside this permitted variation, such changes 
would result in the product being considered to have been discontinued, 
and a new product to have been issued.
    Comment: While many commenters generally supported the requirement 
for issuers to provide an appeals or exceptions process, a few 
commenters recommended requiring an exceptions process of all issuers, 
suggesting it is more protective than the appeals process. We did not 
receive any comments that generally opposed such a requirement. In 
describing current industry practice, multiple commenters pointed out 
that issuers making mid-year formulary changes already regularly 
provide affected consumers with access to the exceptions process.
    Response: We agree with commenters that access to an appeals or 
exceptions process when a mid-year formulary change occurs is an 
important consumer protection. Although we are not finalizing our 
proposal, we note that issuers offering non-grandfathered group or 
individual health insurance coverage are required to provide an appeals 
or exceptions process under which enrollees and dependents may request 
and gain access to a non-covered drug, including one that was removed 
from the formulary (other than one removed for safety reasons) when 
clinically appropriate and not otherwise covered by the health plan, 
under Sec. Sec.  147.136 or 156.122(c), as applicable. We expect 
issuers to continue to do so, with respect to mid-year formulary 
changes.
    Comment: For the proposed notice requirement, many commenters 
generally agreed that a notice requirement is necessary, while only one 
stated otherwise. Many commenters agreed with the proposed 60-day 
advance notice requirement, while many advocated for a 90-day or 120-
day requirement. A few commenters stated it should be 30 days, 
consistent with the notice Medicare requires under some circumstances. 
Many commenters stated that the notice should be sent only to affected 
enrollees, while others stated the notice should also be sent to 
prescribers and pharmacies. A few commenters requested either a 
template or specific language. A few commenters stated that a two-step 
notice should be provided: The first notice should apprise enrollees of 
the availability of the generic drug, as well as any cost advantage to 
switching; at least 90 days later, the issuer must provide a second 
notice, stating that changes to the brand drug's cost sharing will 
occur; and only 60 days after the second notice is sent, could the 
issuer change the brand drug's cost sharing. A few commenters stated 
that state law should determine the timing and content of notices. 
Several commenters stated that notice to enrollees is common industry 
practice when mid-year formulary changes occur.
    Response: We agree with the many commenters who stated that 
providing advance notice to affected consumers is important, and 
although we are not finalizing the proposal at this time, we expect 
issuers will continue to provide reasonable notice to affected 
consumers, pending any further guidance on mid-year formulary changes. 
We will continue to examine this issue.
    We received no comments on the proposed technical corrections to

[[Page 17463]]

Sec. Sec.  146.152, 147.106, and 148.122, and are finalizing them as 
proposed.

C. Part 148--Requirements for the Individual Health Insurance Market

    For a discussion of the provisions in this final rule related to 
part 148, please see the preamble to part 147.

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

1. Sequestration
    In accordance with the OMB Report to Congress on the Joint 
Committee Reductions for Fiscal Year 2019,\11\ both the transitional 
reinsurance program and permanent risk adjustment program are subject 
to the fiscal year 2019 sequestration. The federal government's 2019 
fiscal year began October 1, 2018. Although the 2016 benefit year was 
the final year of the transitional reinsurance program, we continue to 
make reinsurance payments in the 2019 fiscal year for close-out 
activities. Therefore, the risk adjustment and reinsurance programs 
will be sequestered at a rate of 6.2 percent for payments made from 
fiscal year 2019 resources (that is, funds collected during the 2019 
fiscal year).
---------------------------------------------------------------------------

    \11\ ``OMB Report to Congress on the Joint Committee Reductions 
for Fiscal Year 2019'', p. 6. February 12, 2018. Available at 
https://www.whitehouse.gov/wp-content/uploads/2018/02/Sequestration_Report_February_2018.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 (Pub. L. 99-177, enacted on December 12, 1985), as amended, 
and the underlying authority for the reinsurance and risk adjustment 
programs, the funds that are sequestered in fiscal year 2019 from the 
reinsurance and risk adjustment programs will become available for 
payment to issuers in fiscal year 2020 without further Congressional 
action. If Congress does not enact deficit reduction provisions that 
replace the Joint Committee reductions, these programs will be 
sequestered in future fiscal years, and any sequestered funding will 
become available in the fiscal year following that in which it was 
sequestered.
2. Provisions and Parameters for the Risk Adjustment Program
    In subparts A, B, D, G, and H 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-than-average risk, risk 
adjustment covered plans to higher-than-average risk, risk adjustment 
covered plans in the individual and small group markets (including 
merged 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 did not receive any 
requests from states to operate risk adjustment for the 2020 benefit 
year. Therefore, HHS will operate risk adjustment in every state and 
the District of Columbia for the 2020 benefit year.
a. HHS Risk Adjustment (Sec.  153.320)
    The HHS risk adjustment models predict plan liability for an 
average enrollee based on that person's age, sex, and diagnoses (also 
referred to as hierarchical condition categories (HCCs)), producing a 
risk score. The current structure of these models is described in the 
2019 Payment Notice.\12\ The HHS risk adjustment methodology utilizes 
separate models for adults, children, and infants to account for cost 
differences in each age group. In 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, to 
calculate enrollee risk scores in the adult models, we added enrollment 
duration factors beginning with the 2017 benefit year, and prescription 
drug categories (RXCs) beginning with the 2018 benefit year. 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 reduction adjustment that accounts for 
differences in induced demand at various levels of cost sharing.
---------------------------------------------------------------------------

    \12\ See 83 FR 16930 at 16939.
---------------------------------------------------------------------------

    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 or PLRS) within a geographic rating area is one of 
the inputs into the risk adjustment state payment transfer formula, 
which determines the state payment or charge that an issuer will 
receive or be required to pay for that plan. Thus, the HHS risk 
adjustment models predict average group costs to account for risk 
across plans, in keeping with the Actuarial Standards Board's Actuarial 
Standards of Practice for risk classification.
i. Definitions (Sec.  153.20)
    In this final rule, we are making a technical correction to the 
definition of a risk adjustment covered plan under Sec.  153.20 by 
correcting a citation in the definition of ``risk adjustment covered 
plan'' from Sec.  146.145(c) to Sec.  146.145(b). Specifically, this 
definition was finalized in the final rule entitled Standards Related 
to Reinsurance, Risk Corridors and Risk Adjustment,\13\ and after that 
rule was finalized, the final rule entitled Amendments to the HHS 
Notice of Benefit and Payment Parameters for 2014 \14\ amended and 
redesignated the numbering under Sec.  146.145. Among other things, 
these amendments moved the excepted benefit provision from paragraph 
(c) to paragraph (b) of Sec.  146.145. Thus, the purpose of this 
technical correction is to update this citation to refer to the 
paragraph on excepted benefit plans under Sec.  146.145, consistent 
with the original intent of this definition when it was first adopted.
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    \13\ 77 FR 17220 (March 23, 2012).
    \14\ 78 FR 65046 (October 30, 2013).
---------------------------------------------------------------------------

ii. Updates to the Risk Adjustment Model Recalibration
    We used the 3 most recent years of MarketScan[supreg] data 
available to recalibrate the 2016, 2017, and 2018 benefit year risk 
adjustment models. For the 2019 benefit year, we recalibrated the 
models using 2 years of MarketScan[supreg] data (2014 and 2015) and 
2016 enrollee-level EDGE data. The 2019 benefit year was the first 
recalibration year in which enrollee-level EDGE data was used for this 
purpose. This approach used blended (averaged) coefficients from 3 
years of separately solved models to provide stability for the risk 
adjustment coefficients year-to-year, while reflecting the most recent 
years' claims experience available. For the 2020 benefit year, we 
proposed to blend the 2 most recent years of enrollee-level EDGE data 
available (2016 and 2017) with the most recent year of 
MarketScan[supreg] data available (2017). We also noted that if we are 
unable to publish the final coefficients in the final rule, consistent 
with Sec.  153.320(b)(1)(i), and as we have done for certain prior 
benefit years,\15\ we would publish the final coefficients for the 2020 
benefit year in guidance after the publication of the final rule. We 
sought comments on these proposals.
---------------------------------------------------------------------------

    \15\ For example, see 2018 Payment Notice final rule, 81 FR 
94058 (December 22, 2016). Also see https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Final-HHS-RA-Model-Coefficients.pdf.

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[[Page 17464]]

    We did not propose to make any changes to the categories included 
in the HHS risk adjustment models for the 2020 benefit year from those 
finalized in the 2019 benefit year models. That is, we proposed to 
maintain the same age, sex, enrollment duration, HCC, RXC, and severity 
categories for the 2020 benefit year models as those used for the 2019 
benefit year models.\16\ However, we proposed to make a pricing 
adjustment for one RXC coefficient for the 2020 benefit year adult 
models. Consistent with our treatment of other RXCs where we constrain 
the RXC coefficient to the average cost of the drugs in the 
category,\17\ we proposed to make a pricing adjustment to the Hepatitis 
C RXC to mitigate overprescribing incentives in the 2020 benefit year 
adult models. For the RXC coefficients listed in Table 1 of the 
proposed rule, we constrained the Hepatitis C coefficient to the 
average expected costs of Hepatitis C drugs. This had the material 
effect of reducing the Hepatitis C RXC and the RXC-HCC interaction 
coefficients. For the final 2020 benefit year Hepatitis C factors in 
the adult models, we proposed to adjust the plan liability associated 
with Hepatitis C drugs to reflect future market pricing of Hepatitis C 
drugs before solving for the adult models' coefficients. We proposed 
applying an adjustment to the plan liability to ensure that plans can 
continue to receive incremental credit for enrollees having both the 
RXC and HCC for Hepatitis C, and allow for differential plan liability 
across metal levels. We sought comment on these proposals.
---------------------------------------------------------------------------

    \16\ See 83 FR 16939.
    \17\ See Section 4.0, ``Constraints on RXC Coefficients to Limit 
Incentives for Inappropriate Prescribing'' of the Creation of the 
2018 Benefit Year HHS-Operated Risk Adjustment Adult Models Draft 
Prescription Drug (RXCUIs) to HHS Drug Classes (RXCs) Crosswalk 
Memo. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf.
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    We are not finalizing our proposal to blend the most recent year of 
MarketScan[supreg] data (2017) with the 2 most recent years of 
enrollee-level EDGE data (2016 and 2017) for 2020 risk adjustment model 
recalibration. We are instead finalizing an approach that would blend 3 
consecutive years of data--one year of data from MarketScan[supreg] 
(2015) with the 2 most recent years of enrollee-level EDGE data (2016 
and 2017), an approach that more closely aligns with the approach we 
used to recalibrate risk adjustment models for the 2016, 2017, 2018, 
and 2019 benefit years. This approach maintains our previously 
finalized policy of blending coefficients from 3 years of separately 
solved models and promotes stability for the risk adjustment 
coefficients year-to-year. Accordingly, we have incorporated the 2015 
MarketScan[supreg] data with 2016 and 2017 benefit year enrollee-level 
EDGE data for the final 2020 benefit year risk adjustment coefficients 
presented in this final rule. Additionally, we are finalizing the 
pricing adjustment to the plan liability simulation for the Hepatitis C 
RXC, as proposed, and are not otherwise making changes to the 
categories included in the HHS risk adjustment models for the 2020 
benefit year from those finalized for the 2019 benefit year models.
    The following is a summary of the public comments we received on 
the risk adjustment model recalibration proposals.
    Comment: Most commenters supported using enrollee-level EDGE data 
to recalibrate the risk adjustment models, with some commenters 
especially supporting the blending of 2016 and 2017 enrollee-level EDGE 
data and 2017 MarketScan[supreg] data for the recalibration of the 2020 
risk adjustment models. Some commenters stated that they had expected 
the 2020 benefit year models to incorporate coefficients solved from 
the 2015 MarketScan[supreg] data to maintain 2 of the same data years 
(2015 MarketScan and 2016 enrollee-level EDGE) as those used in the 
2019 benefit year models. These commenters raised concerns that using 
2017 MarketScan[supreg] and 2017 enrollee-level EDGE data may result in 
double counting certain enrollees to the extent the individual and 
small group market plans contribute data to MarketScan[supreg], and 
suggested that using currently available 2015 MarketScan[supreg] data 
with 2016-2017 enrollee-level EDGE data to recalibrate the 2020 risk 
adjustment models would allow the final coefficients to be published 
with the final rule. One of these commenters was concerned about 
volatility in coefficients relative to prior years, which blended 3 
consecutive years of data (rather than 2 data sets from the same year), 
wanting more information on whether this volatility would be reduced if 
2015 MarketScan[supreg] data were used. Some commenters supported HHS' 
intent to propose use of 3 consecutive years of enrollee-level EDGE 
data to recalibrate the risk adjustments models for the 2021 benefit 
year and beyond. One commenter supported maintaining the categories 
included in the HHS risk adjustment models for the 2020 benefit year.
    Response: We believe blending multiple years of data promotes 
stability and certainty for issuers in rate setting, helping to smooth 
significant differences in coefficients solved from any one year's 
dataset, particularly for conditions with small sample sizes. Because 
the MarketScan[supreg] data generally represent enrollees in the large 
self-insured employer market and the enrollee-level EDGE data 
represents enrollees in the small group and individual markets, using 
two datasets from the same year (2017 MarketScan[supreg] and 2017 
enrollee-level EDGE) would not significantly double count enrollees 
between the different datasets for the 2017 benefit year. However, we 
agree with commenters who noted that maintaining 2 years of data from 
one recalibration year to the next has a stabilizing effect by 
spreading the impact of new experience over 3 years. We recognize and 
agree with the concerns that recalibrating the 2020 benefit year risk 
adjustment models blending 2017 MarketScan[supreg] data with 2016 and 
2017 enrollee-level EDGE data may create unintentional volatility, as 
it would only maintain one of the three datasets that were used in the 
2019 benefit year recalibration. Based on comments received, we are 
finalizing the 2020 benefit year risk adjustment models using blended 
coefficients from 2015 MarketScan[supreg] data, and 2016 and 2017 
enrollee-level EDGE data. We intend to continue our efforts to 
recalibrate the risk adjustment models using enrollee-level EDGE data 
from issuers' individual and small group or merged market populations, 
and transition away from the MarketScan[supreg] commercial database. 
Specifically, beginning with the 2021 benefit year, we intend to 
propose to use the 3 most recent years of enrollee-level EDGE data 
available to recalibrate the risk adjustment models.
    Comment: Several commenters requested that HHS provide the final 
coefficients in the final rule and the actual proposed coefficients to 
be proposed in proposed rules in future years. However, one commenter 
requested that the final coefficients be made available by March 31, 
2019 due to state filing deadlines.
    Response: We appreciate the commenter's concern that the final 
coefficients be made available by the time of initial state rate filing 
submissions. Our ability to provide the proposed and final coefficients 
in the proposed and final rules depends on the availability of data and 
our ability to execute the model regressions with that data to solve 
the coefficients for the risk adjustment models for a given benefit 
year, reflecting any applicable

[[Page 17465]]

modifications adopted as part of the rulemaking process.
    Due to the availability of data and our ability to execute the 
model regressions, this year, we are able to provide the final 
recalibrated coefficients for 2020 benefit year in the tables below. In 
the future, we will continue to look for opportunities to update our 
processes to obtain and process the recalibrated coefficients as soon 
as practical. However, if data is not available or if we are unable to 
calculate the coefficients for the risk adjustment models for a benefit 
year in time for publication in the applicable final annual HHS notice 
of benefit and payment parameters, then we will publish the draft 
factors to be employed in the models in the final rule, including 
demographic factors, diagnostic factors, and utilization factors, and 
the datasets to be used to calculate the final coefficients.\18\ In 
such circumstances, we will also notify issuers in the final rule of 
the date by which final coefficients will be released in guidance.\19\
---------------------------------------------------------------------------

    \18\ See Sec.  153.320(b)(1)(i).
    \19\ Ibid.
---------------------------------------------------------------------------

    Comment: One commenter encouraged HHS to monitor the volatility of 
coefficients year-to-year in switching to enrollee-level EDGE data. One 
commenter recommended evaluating the models continually to ensure they 
fully capture the cost of the current standard of care for conditions. 
One commenter recommended HHS continue to contemplate the best way to 
incorporate drug pipeline data, while a different commenter supported 
continuing to reevaluate drugs. Another commenter supported monitoring 
and evaluating the impact on patient access of changes to the risk 
adjustment program.
    Response: As with every recalibration year, we continue to monitor 
the year-to-year changes in risk scores, including the volatility of 
the coefficients from year to year. As discussed in the proposed rule, 
we noted that for HCCs with corresponding RXCs and RXC-HCC interaction 
factors in the adult risk adjustment models, we are observing year-to-
year fluctuations in the risk score weights between the HCC, RXC, and 
RXC-HCC interaction factors. This fluctuation is mainly due to the 
collinearity between these factors, making the statistical models, and 
therefore, the coefficients solved for these factors, sensitive to 
small changes in the data. Although the HCC, RXC, and RXC-HCC 
interaction factors may be changing from year to year, the aggregate 
impact of the factors has remained relatively stable between 
recalibration updates. Similarly, the aggregate impact of the HCC, RXC 
and RXC-HCC interaction factors for the 2020 benefit year continues to 
be relatively stable.
    Additionally, we have been continuously assessing the availability 
of drugs in the market and the associated mapping of those drugs to 
RXCs in the adult risk adjustment model. As a results of this on-going 
assessment, we make quarterly updates to the RXC Crosswalk \20\ to 
ensure drugs, including new drugs, are being mapped to RXCs where 
appropriate, and intend to continue to make these updates in the 
future.
---------------------------------------------------------------------------

    \20\ April 4, 2019, was our last update of the 2018 Benefit Year 
Risk Adjustment (RA): Updated HHS-Developed Risk Adjustment Model 
Algorithm ``Do It Yourself (DIY)'' Software--Technical Details that 
includes the RXC Crosswalk. The RXC Crosswalk is available at 
https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated-DIY-Tables-2018.xlsx.
---------------------------------------------------------------------------

    Overall, we also continue to regularly evaluate the individual and 
small group markets (including merged markets) and assess whether 
updates to the HHS-operated risk adjustment program could improve the 
assessment of plan actuarial risk. We also regularly review the impact 
of the risk adjustment program on the markets. We expect to continue to 
review the risk adjustment program and propose changes as necessary.
    Comment: Most commenters generally supported a pricing adjustment 
for the Hepatitis C RXC coefficient to reflect changing drug prices. A 
few commenters were concerned that the proposal is over-adjusting the 
Hepatitis C RXC coefficient, and wanted clarification on the approach 
used for the adjustment. One commenter stated that HHS should modify 
the Hepatitis C RXC adjustment based on a days' supply variable. While 
some commenters agreed with the adjustment to Hepatitis C RXC to 
mitigate against the potential for misaligned incentives such as 
overprescribing, others disagreed with the implication that health 
plans influence providers' prescribing patterns.
    Response: We found significant pricing changes due to the 
introduction of new Hepatitis C drugs into the market upon review of 
the Hepatitis C treatments that are approved and expected to be 
available before the 2020 benefit year.\21\ Due to the lag between the 
data years used to recalibrate the risk adjustment models and the 
applicable benefit year, the data used for recalibrating the models do 
not precisely reflect the average cost of Hepatitis C treatments 
applicable to the benefit year in question. In addition, the first few 
years of enrollee-level EDGE data do not include days' supply 
information for the RXCs; thus, the enrollee-level EDGE datasets could 
not be used to model a variable for the days' supply of the Hepatitis C 
RXC. Since we are finalizing the risk adjustment models for the 2020 
benefit year coefficients with the 2015 MarketScan[supreg] data, which 
represents even older and costlier Hepatitis C trends than what is 
anticipated in the 2020 benefit year, we continue to believe the 
pricing adjustment as proposed is appropriate.
---------------------------------------------------------------------------

    \21\ See https://www.gilead.com/news-and-press/press-room/press-releases/2018/9/gilead-subsidiary-to-launch-authorized-generics-of-epclusa-sofosbuvirvelpatasvir-and-harvoni-ledipasvirsofosbuvir-for-the-treatment-of-chronic. Also see https://news.abbvie.com/news/abbvie-receives-us-fda-approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-6-in-as-short-as-8-weeks.htm.
---------------------------------------------------------------------------

    We believe the pricing adjustment, as finalized, is appropriate 
based on our review of published expectations for plan liability 
associated with Hepatitis C drugs. Additionally, we agree with 
commenters that due to the high cost of these drugs, without a pricing 
adjustment to plan liability, issuers would be overcompensated for the 
Hepatitis C RXC in the 2020 benefit year and could be incentivized to 
``game'' risk adjustment or encourage overprescribing practices. We 
appreciate the commenters' view that plans generally do not influence 
prescribing patterns. However, to avoid perverse incentives to 
influence overprescribing behavior, we are finalizing the pricing 
adjustment as proposed. This pricing adjustment leads to Hepatitis C 
RXC coefficients that better reflect anticipated actual 2020 benefit 
year plan liability associated with Hepatitis C drugs.
    As such, we are finalizing our proposed pricing adjustment to make 
a pricing adjustment to more closely reflect the expected average 
additional plan liability of the Hepatitis C RXC for the 2020 benefit 
year. In making this determination, we consulted our clinical experts 
to assess whether the lower cost Hepatitis C drugs are substitutable to 
ensure that plans that cover various treatments would continue to be 
compensated for their incremental plan liability. We found that due to 
the generic entrant, prices for all variations of Hepatitis C drugs are 
expected to be significantly lower in the 2020 benefit year than those 
observed in the currently available datasets (which reflect prior 
benefit years). We believe this approach to estimating the Hepatitis

[[Page 17466]]

C plan liability appropriately balances reflecting the changes in costs 
of the Hepatitis C drugs in the market in the 2020 benefit year while 
limiting the potential for overprescribing incentives. We intend to 
reassess this pricing adjustment in future benefit years' model 
recalibrations with additional years of enrollee-level EDGE data.
    Comment: Several commenters wanted HHS to consider incorporating 
the Pre-Exposure Prophylactics (PrEP) into the risk adjustment models, 
given the recent draft United States Preventive Services Task Force 
(USPSTF) Grade A recommendation \22\ for clinicians to offer PrEP with 
effective antiretroviral therapy to persons who are at high risk of HIV 
acquisition, citing that the high cost for PrEP therapy is likely to 
lead to cost avoidance strategies by issuers. One commenter expressed 
support for including preventive services in the risk adjustment 
models.
---------------------------------------------------------------------------

    \22\ U.S. Preventive Services Task Force, ``Draft Recommendation 
Statement: Prevention of Human Immunodeficiency Virus (HIV) 
Infection: Pre-Exposure Prophylaxis'' (2018) available at https://www.uspreventiveservicestaskforce.org/Page/Document/draft-recommendation-statement/prevention-of-human-immunodeficiency-virus-hiv-infection-pre-exposure-prophylaxis.
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    Response: We appreciate the commenters noting the draft USPSTF 
recommendation, which, if finalized, would require issuers to cover a 
high cost-therapy with no cost sharing. However, we are not 
incorporating PrEP into the risk adjustment models. As a general 
principle, RXCs are incorporated into the HHS risk adjustment models to 
impute a missing diagnosis or indicate severity of a diagnosis. While 
preventive services are incorporated in the simulation of plan 
liability, they do not directly affect specific diagnoses. We 
incorporate preventive services into our models to ensure that 100 
percent of those services are reflected in the plan's liability; 
however, many preventive services only count as preventive services 
under certain conditions. In the case of PrEP and the draft USPSTF 
recommendation, the recommendation is only applied if the enrollee 
meets certain conditions for ``persons who are at high risk.'' Some of 
the at-risk categories are not recorded in claims data, making them 
impossible to identify. Furthermore, the USPSTF recommendation for PrEP 
is only a draft recommendation, and we do not know if or when it would 
become final. We also note that we are aware of other current drugs 
that are preventive in nature that may be similar to PrEP in that they 
are medications recommended for a subset population that is at risk. 
While we do not plan to make an adjustment for PrEP at this time, we 
may consider soliciting comments in the future on whether and how to 
incorporate preventive medications into the risk adjustment models, and 
how to identify at-risk populations in the enrollee-level EDGE data 
that may be eligible for drugs classified as preventive services.
    Comment: Some commenters noted concern about the enrollment 
duration factors in the adult models, and wanted HHS to consider 
further adjustments to these factors. For example, certain commenters 
discussed the differences between special enrollment period enrollees 
versus open enrollment period enrollees that drop coverage during the 
plan year. These commenters noted concerns that the current combined 
enrollee duration factors do not adequately address both scenarios, and 
wanted the enrollment duration factors to vary for these different 
scenarios. In particular, one of these commenters expressed concerns 
about the changes in the enrollment duration factors over time, stating 
that the factors never seemed to correctly adjust for increased special 
enrollment period spending (particularly for those with the maternity 
HCC), and provided several recommendations on potential modifications 
to improve the enrollment duration factors, including special 
consideration for maternity and NICU-related HCCs. Another commenter 
requested that HHS take a holistic look at the child risk scores and 
whether duration factors would be appropriate for incorporation into 
the child models, as well as the relationship of duration factors with 
risk scores to age rating factors. One commenter supported HHS making 
adjustments to give greater weight to the enrollee-level EDGE data when 
recalibrating the model coefficients if HHS finds significant 
demographic or distributional differences in the enrollee-level EDGE 
data compared to the MarketScan[supreg] data, and was supportive of HHS 
continuing to analyze the enrollee-level EDGE data to study key 
differences between the individual and small group markets, including 
costs, utilization patterns, induced demand, and partial year 
enrollment.
    Response: While there are differences in total spending in 
MarketScan[supreg] data compared to enrollee-level EDGE data, we have 
found that the relative risk differences for age-sex, HCC, and RXC 
categories in the enrollee-level EDGE data are generally similar to 
those in the MarketScan[supreg] data. Therefore, we do not believe 
giving greater weight to the enrollee-level EDGE data is needed. Since 
the 2016 Risk Adjustment White Paper and Conference,\23\ we have 
continued to assess options to update the enrollment duration factors 
in the risk adjustment adult models as we stated we would. With the 
2017 enrollee-level EDGE data, we are now able to analyze whether to 
modify enrollment duration factors with a lens of differences between 
individual and small group markets, since the market identifier was not 
part of the 2016 enrollee-level EDGE data. Our preliminary analysis of 
2017 enrollee-level EDGE data found that separate enrollment duration 
factors for the individual and small group markets in the adult models 
may be warranted, given the differences in risk profiles of partial 
year enrollees between the two markets. Small group market partial year 
enrollees had a lower incremental risk on average than the individual 
market partial year enrollees in the 2017 benefit year data. 
Additionally, we did not observe a significant additional risk for 
special enrollment period enrollees or enrollees who dropped coverage 
prior to the end of the benefit year in either market.
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    \23\ https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf and 
https://www.regtap.info/uploads/library/RA_ConferenceSlides_033116_5CR_040516.pdf.
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    We did not propose and are not making any change to the current 
enrollment duration factors used in the adult risk adjustment models at 
this time. Our goal is to continue to analyze enrollee-level EDGE data; 
we will consider proposing changes to how partial year enrollees are 
accounted for in the risk adjustment models for future benefit years in 
notice-and-comment rulemaking. We intend to solicit feedback and 
recommendations in the future for potential updates to how partial year 
enrollees are accounted for in the risk adjustment models, including 
adjustments to the enrollment duration factors and the use of separate 
enrollment duration factors for individual and small group markets and 
may consider whether such factors should be incorporated in the child 
models.
iii. High-Cost Risk Pooling (Sec.  153.320) and Accounting for the 
High-Cost Risk Pool in the Risk Adjustment Transfer Methodology
    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 HHS risk adjustment models.\24\ Specifically, we 
finalized adjusting the models for high-cost enrollees in risk

[[Page 17467]]

adjustment covered plans beginning with the 2018 benefit year by 
excluding a percentage of costs above a certain threshold in the 
calculation of enrollee-level plan liability risk scores so that risk 
adjustment factors are calculated without the high-cost risk, since 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 high-cost enrollees, issuers 
of risk adjustment covered plans will receive a percentage of costs 
(coinsurance rate) above the threshold. We set the threshold and 
coinsurance rate at levels that will continue to incentivize issuers to 
control costs while improving the predictiveness of the HHS risk 
adjustment models. Issuers of risk adjustment covered plans with high-
cost enrollees will receive a payment for the percentage of costs above 
the threshold in their respective transfers for the applicable benefit 
year. Using claims data submitted to the EDGE servers by issuers of 
risk adjustment covered plans, we calculate the total amount of paid 
claims costs for high-cost enrollees based on the threshold and the 
coinsurance rate. We 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 is applied to the total transfer amount in each market, thus 
maintaining the balance of payments and charges within the HHS-operated 
risk adjustment program. 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 and 2019 benefit years.\25\ 
For the 2020 benefit year and beyond, we proposed to maintain the same 
parameters that apply to the 2018 and 2019 benefit years, unless 
amended through notice and comment rulemaking.
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    \24\ 81 FR 94058 at 94080 (December 22, 2016).
    \25\ See 81 FR 94058 at 94080 and 83 FR 16930 at 16943.
---------------------------------------------------------------------------

    Additionally, beginning with the 2018 benefit year, we added to the 
HHS risk adjustment methodology additional transfer terms to reflect 
the payments and charges assessed for the high-cost risk pool. To 
account for costs associated with exceptionally high-risk enrollees, we 
added transfer terms (a payment term and a charge term) that are 
calculated separately from the state payment transfer formula in the 
HHS-operated risk adjustment transfer methodology. Beginning for the 
2018 benefit year, we finalized the addition of a term that reflects 60 
percent of costs above $1 million (HRPi), and another term that 
reflects a percentage of premium adjustment to fund the high-cost risk 
pool and maintain the balance of payments and charges within the HHS-
operated risk adjustment program for a given benefit year. We described 
in detail in the 2019 Payment Notice how these terms will be calculated 
in conjunction with the calculations under the state payment transfer 
formula for the 2019 benefit year.\26\ These terms are described in 
detail in this rule, along with the calculations under the total state 
payment transfer formula, and are also highlighted as part of the 
illustration of the total risk adjustment transfer methodology below.
---------------------------------------------------------------------------

    \26\ See 83 FR 16930 at 16954.
---------------------------------------------------------------------------

    Similar to the 2019 benefit year, consistent with the proposed 
adoption of the same high-cost risk pool parameters (that is, a $1 
million threshold and 60 percent coinsurance rate), we proposed to add 
a term that would reflect 60 percent of costs above $1 million (HRPi) 
in the total plan transfer calculation and another term that would 
reflect a percentage of premium adjustment to fund the high-cost risk 
pool and maintain the balance of payment and charges within the HHS-
operated risk adjustment program for a given benefit year. We proposed 
to use a percentage of premium adjustment factor that would be applied 
to each plan's total premium amount, rather than the percentage of PMPM 
premium adjustment factor, consistent with the approach finalized in 
the 2019 Payment Notice. The percentage of premium adjustment factor 
applied to a plan's total premium amount would result in the same 
adjustment as a percentage of the PMPM premium adjustment factor 
applied to a plan's PMPM premium amount and multiplied by the plan's 
number of billable member months. We proposed to apply these same terms 
for future benefit years that maintain the same underlying parameters 
for the high-cost risk pool adjustment (that is, $1 million threshold 
and 60 percent coinsurance rate).
    We are finalizing the high-cost risk pool parameters and the 
additional terms to account for the high-cost risk pool in the risk 
adjustment transfer methodology as proposed for the 2020 benefit year 
and for future benefit years unless changed in notice-and-comment 
rulemaking. The following is a summary of the public comments we 
received on our proposal on the high-cost risk pool parameters and how 
to account for the high-cost risk pool in the risk adjustment transfer 
methodology.
    Comment: Most commenters supported maintaining the high-cost risk 
pool parameters at the $1 million threshold and 60 percent coinsurance 
rate. One commenter disagreed with the high-cost risk pool methodology 
due to concerns that issuers may try to ``game'' the system by 
inflating the cost of high cost services to push payments over the 
threshold, and stated that the methodology creates another level of 
uncertainty that insurers will need to factor into their premiums. This 
commenter stated that if HHS wants to continue the reinsurance program, 
it should be pursued outside of risk adjustment, and suggested HHS 
should instead create a permanent reinsurance program, using Medicare 
pricing to reprice all claims over $1 million and account for 
geographic pricing variations in its calculation of the high-cost risk 
pool payment and charge terms. One commenter cautioned against 
drastically changing the parameters from year to year which could 
result in instability, and supported the national funding approach for 
this aspect of the HHS risk adjustment program, as it maintains a 
balance between the level of assessments applied to support the program 
and the allowance for some risk-pooling across states or geographic 
areas. One commenter noted the importance for states to consider the 
high-cost risk pool program when designing state-based reinsurance 
programs, and that section 1332 waiver applications should address the 
potential overlap between the section 1332 program and the federal risk 
adjustment program to minimize the likelihood of federal taxpayers 
compensating issuers twice for the same high value claims. One 
commenter recommended HHS solicit feedback on possible changes in a 
separate rulemaking to incorporate a high-cost risk pool stratification 
methodology, to consider adoption of multiple high-cost pool thresholds 
with increased coinsurance amounts, and to adjust the issuer charge 
calculation methodology to avoid penalizing lower-cost issuers. Another 
commenter requested the ability to comment on the high-cost risk pool 
parameters each benefit year. Some commenters requested that data on 
the specific transfer amounts attributable to the high-cost risk pool 
adjustment, with charges and claims reimbursed reported separately, be 
sent to issuers in the EDGE reports, and that HHS publish the net 
amount (reimbursed claims--charges) by state and issuer in the

[[Page 17468]]

annual summary risk adjustment report with one requesting high-cost 
risk pool information in the interim risk adjustment report.
    Response: We are finalizing the high-cost risk pool parameters and 
the approach for accounting for the high-cost risk pool payment and 
charge terms in the risk adjustment payment transfer methodology as 
proposed. As detailed in the 2018 Payment Notice,\27\ we incorporated a 
high-cost risk pool calculation into the HHS risk adjustment 
methodology to mitigate any residual incentive for risk selection to 
avoid high-cost enrollees, and to ensure that, consistent with the 
statute, transfers better reflect the average actuarial risk of risk 
adjustment covered plans. It is not intended to be a continuation of 
the transitional reinsurance program established under section 1341 of 
the PPACA that ended at the conclusion of the 2016 benefit year. We 
continue to believe a $1 million threshold and 60 percent coinsurance 
rate for the 2020 benefit year and beyond are appropriate to 
incentivize issuers to control costs while improving risk prediction 
under the HHS risk adjustment models. Furthermore, we believe the $1 
million threshold and 60 percent coinsurance rate will result in total 
high-cost risk pool 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.
---------------------------------------------------------------------------

    \27\ 81 FR 94080.
---------------------------------------------------------------------------

    We also believe that maintaining the same threshold and coinsurance 
rate from year-to-year will help promote stability and predictability 
for issuers, and for all of these reasons, we are finalizing the $1 
million threshold and 60 percent coinsurance rate for 2020 benefit year 
and beyond without requiring notice and comment on the high-cost risk 
pool thresholds each year. We intend to release information about the 
2018 benefit year high-cost risk pool payment amounts, and the percent 
of premium charged by the high-cost risk pool in the 2018 benefit year 
summary risk adjustment report released under Sec.  153.310(e), and 
would follow a similar approach for future benefit years. We appreciate 
the comments suggesting various potential changes to the high-cost risk 
pool methodology. Once we have results and experience from the initial 
years of the high-cost risk pool in the HHS risk adjustment program, we 
intend to analyze those results including considering the geographic 
variation within those results. If we were to seek to make changes to 
these parameters for benefit years beyond 2020, we would do so through 
notice-and-comment rulemaking prior to any changes being implemented.
    We encourage states considering a state-based reinsurance program 
to consider the interplay between the high-cost risk pool adjustment in 
the HHS-operated risk adjustment program and any state-based 
reinsurance program. We have provided technical guidance to states 
considering state-based reinsurance programs to assist them in 
designing such programs in a manner that avoids double compensating for 
costs that would otherwise be compensated under the risk adjustment 
methodology, including the high-cost risk pool adjustment.
iv. List of Factors To Be Employed in the Risk Adjustment Models (Sec.  
153.320)
    The factors resulting from the equally weighted blended factors 
from the 2015 MarketScan[supreg] data and the 2016 and 2017 enrollee-
level EDGE data separately solved models, including the finalized 
constraints for the Hepatitis C RXC coefficient, are shown in Tables 1, 
3, and 4. For the purposes of the below coefficients, the adult, child, 
and infant models have been truncated to account for the high-cost risk 
pool payment parameters by removing 60 percent of costs above the $1 
million threshold.
    Table 1 contains factors for each adult model, including the age-
sex, HCCs, RXCs, RXC-HCC interactions, and enrollment duration 
coefficients. Table 2 contains the HHS HCCs in the severity illness 
indicator variable. Table 3 contains the factors for each child model. 
Table 4 contains the factors for each infant model. Tables 5 and 6 
contain the HCCs included in the infant model maturity and severity 
categories, respectively.

                                           Table 1--Adult Risk Adjustment Model Factors for 2020 Benefit Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
              HCC or RXC No.                           Factor                Platinum          Gold           Silver          Bronze       Catastrophic
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Demographic Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Age 21-24, Male.............           0.149           0.117           0.079           0.043           0.039
                                            Age 25-29, Male.............           0.143           0.111           0.072           0.035           0.030
                                            Age 30-34, Male.............           0.170           0.131           0.085           0.039           0.033
                                            Age 35-39, Male.............           0.208           0.161           0.106           0.051           0.045
                                            Age 40-44, Male.............           0.251           0.198           0.136           0.074           0.067
                                            Age 45-49, Male.............           0.294           0.234           0.165           0.094           0.086
                                            Age 50-54, Male.............           0.381           0.311           0.229           0.144           0.134
                                            Age 55-59, Male.............           0.427           0.348           0.259           0.166           0.154
                                            Age 60-64, Male.............           0.476           0.386           0.286           0.180           0.167
                                            Age 21-24, Female...........           0.233           0.185           0.122           0.061           0.054
                                            Age 25-29, Female...........           0.263           0.208           0.139           0.070           0.061
                                            Age 30-34, Female...........           0.350           0.282           0.203           0.124           0.115
                                            Age 35-39, Female...........           0.422           0.346           0.261           0.177           0.167
                                            Age 40-44, Female...........           0.467           0.382           0.288           0.194           0.183
                                            Age 45-49, Female...........           0.478           0.389           0.289           0.188           0.175
                                            Age 50-54, Female...........           0.523           0.430           0.324           0.211           0.197
                                            Age 55-59, Female...........           0.501           0.407           0.299           0.185           0.171
                                            Age 60-64, Female...........           0.508           0.409           0.295           0.174           0.158
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Diagnosis Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
HCC001....................................  HIV/AIDS....................           2.965           2.679           2.477           2.398           2.390

[[Page 17469]]

 
HCC002....................................  Septicemia, Sepsis, Systemic           7.468           7.261           7.144           7.172           7.180
                                             Inflammatory Response
                                             Syndrome/Shock.
HCC003....................................  Central Nervous System                 5.477           5.397           5.344           5.361           5.363
                                             Infections, Except Viral
                                             Meningitis.
HCC004....................................  Viral or Unspecified                   4.437           4.230           4.106           4.022           4.012
                                             Meningitis.
HCC006....................................  Opportunistic Infections....           5.920           5.844           5.796           5.758           5.753
HCC008....................................  Metastatic Cancer...........          21.104          20.616          20.288          20.316          20.320
HCC009....................................  Lung, Brain, and Other                10.886          10.539          10.306          10.268          10.263
                                             Severe Cancers, Including
                                             Pediatric Acute Lymphoid
                                             Leukemia.
HCC010....................................  Non-Hodgkin`s Lymphomas and            5.254           5.018           4.850           4.768           4.757
                                             Other Cancers and Tumors.
HCC011....................................  Colorectal, Breast (Age                3.851           3.620           3.454           3.369           3.358
                                             <50), Kidney, and Other
                                             Cancers.
HCC012....................................  Breast (Age 50+) and                   2.502           2.333           2.208           2.127           2.116
                                             Prostate Cancer, Benign/
                                             Uncertain Brain Tumors, and
                                             Other Cancers and Tumors.
HCC013....................................  Thyroid Cancer, Melanoma,              1.108           0.981           0.874           0.754           0.738
                                             Neurofibromatosis, and
                                             Other Cancers and Tumors.
HCC018....................................  Pancreas Transplant Status/            4.008           3.806           3.686           3.681           3.682
                                             Complications.
HCC019....................................  Diabetes with Acute                    0.470           0.406           0.345           0.281           0.273
                                             Complications.
HCC020....................................  Diabetes with Chronic                  0.470           0.406           0.345           0.281           0.273
                                             Complications.
HCC021....................................  Diabetes without                       0.470           0.406           0.345           0.281           0.273
                                             Complication.
HCC023....................................  Protein-Calorie Malnutrition          11.139          11.127          11.117          11.204          11.215
HCC026....................................  Mucopolysaccharidosis.......           2.368           2.269           2.192           2.130           2.122
HCC027....................................  Lipidoses and Glycogenosis..           2.368           2.269           2.192           2.130           2.122
HCC029....................................  Amyloidosis, Porphyria, and            2.368           2.269           2.192           2.130           2.122
                                             Other Metabolic Disorders.
HCC030....................................  Adrenal, Pituitary, and                2.368           2.269           2.192           2.130           2.122
                                             Other Significant Endocrine
                                             Disorders.
HCC034....................................  Liver Transplant Status/               9.422           9.331           9.272           9.246           9.242
                                             Complications.
HCC035....................................  End-Stage Liver Disease.....           4.595           4.386           4.253           4.225           4.222
HCC036....................................  Cirrhosis of Liver..........           1.282           1.152           1.065           0.999           0.991
HCC037_1..................................  Chronic Viral Hepatitis C...           0.847           0.741           0.667           0.594           0.586
HCC037_2..................................  Chronic Hepatitis, Other/              0.847           0.741           0.667           0.594           0.586
                                             Unspecified.
HCC038....................................  Acute Liver Failure/Disease,           4.287           4.119           4.015           3.981           3.978
                                             Including Neonatal
                                             Hepatitis.
HCC041....................................  Intestine Transplant Status/          31.374          31.347          31.328          31.345          31.346
                                             Complications.
HCC042....................................  Peritonitis/Gastrointestinal           9.205           8.962           8.803           8.803           8.804
                                             Perforation/Necrotizing
                                             Enterocolitis.
HCC045....................................  Intestinal Obstruction......           5.389           5.146           5.000           4.975           4.973
HCC046....................................  Chronic Pancreatitis........           4.008           3.806           3.686           3.681           3.682
HCC047....................................  Acute Pancreatitis/Other               2.028           1.869           1.761           1.675           1.664
                                             Pancreatic Disorders and
                                             Intestinal Malabsorption.
HCC048....................................  Inflammatory Bowel Disease..           2.185           2.010           1.877           1.774           1.760
HCC054....................................  Necrotizing Fasciitis.......           5.280           5.093           4.966           4.966           4.966
HCC055....................................  Bone/Joint/Muscle Infections/          5.280           5.093           4.966           4.966           4.966
                                             Necrosis.
HCC056....................................  Rheumatoid Arthritis and               3.170           2.968           2.818           2.754           2.746
                                             Specified Autoimmune
                                             Disorders.
HCC057....................................  Systemic Lupus Erythematosus           0.803           0.689           0.591           0.473           0.457
                                             and Other Autoimmune
                                             Disorders.
HCC061....................................  Osteogenesis Imperfecta and            2.651           2.462           2.325           2.244           2.234
                                             Other Osteodystrophies.
HCC062....................................  Congenital/Developmental               2.651           2.462           2.325           2.244           2.234
                                             Skeletal and Connective
                                             Tissue Disorders.
HCC063....................................  Cleft Lip/Cleft Palate......           1.841           1.676           1.561           1.476           1.467
HCC066....................................  Hemophilia..................          60.165          59.790          59.521          59.527          59.526
HCC067....................................  Myelodysplastic Syndromes             11.585          11.458          11.370          11.361          11.360
                                             and Myelofibrosis.
HCC068....................................  Aplastic Anemia.............          11.585          11.458          11.370          11.361          11.360
HCC069....................................  Acquired Hemolytic Anemia,             7.073           6.964           6.883           6.847           6.842
                                             Including Hemolytic Disease
                                             of Newborn.
HCC070....................................  Sickle Cell Anemia (Hb-SS)..           7.073           6.964           6.883           6.847           6.842
HCC071....................................  Thalassemia Major...........           7.073           6.964           6.883           6.847           6.842

[[Page 17470]]

 
HCC073....................................  Combined and Other Severe              4.606           4.478           4.394           4.381           4.379
                                             Immunodeficiencies.
HCC074....................................  Disorders of the Immune                4.606           4.478           4.394           4.381           4.379
                                             Mechanism.
HCC075....................................  Coagulation Defects and                2.791           2.702           2.634           2.596           2.591
                                             Other Specified
                                             Hematological Disorders.
HCC081....................................  Drug Psychosis..............           3.438           3.202           3.033           2.892           2.872
HCC082....................................  Drug Dependence.............           3.438           3.202           3.033           2.892           2.872
HCC087....................................  Schizophrenia...............           2.827           2.586           2.422           2.311           2.298
HCC088....................................  Major Depressive and Bipolar           1.602           1.438           1.313           1.184           1.167
                                             Disorders.
HCC089....................................  Reactive and Unspecified               1.589           1.433           1.312           1.183           1.165
                                             Psychosis, Delusional
                                             Disorders.
HCC090....................................  Personality Disorders.......           1.115           0.998           0.889           0.759           0.742
HCC094....................................  Anorexia/Bulimia Nervosa....           2.535           2.370           2.245           2.164           2.152
HCC096....................................  Prader-Willi, Patau,                   5.275           5.178           5.108           5.049           5.040
                                             Edwards, and Autosomal
                                             Deletion Syndromes.
HCC097....................................  Down Syndrome, Fragile X,              1.351           1.255           1.177           1.105           1.096
                                             Other Chromosomal
                                             Anomalies, and Congenital
                                             Malformation Syndromes.
HCC102....................................  Autistic Disorder...........           1.127           1.009           0.899           0.771           0.754
HCC103....................................  Pervasive Developmental                1.115           0.998           0.889           0.759           0.742
                                             Disorders, Except Autistic
                                             Disorder.
HCC106....................................  Traumatic Complete Lesion             10.383          10.248          10.157          10.135          10.131
                                             Cervical Spinal Cord.
HCC107....................................  Quadriplegia................          10.383          10.248          10.157          10.135          10.131
HCC108....................................  Traumatic Complete Lesion              7.512           7.355           7.247           7.209           7.203
                                             Dorsal Spinal Cord.
HCC109....................................  Paraplegia..................           7.512           7.355           7.247           7.209           7.203
HCC110....................................  Spinal Cord Disorders/                 5.070           4.849           4.700           4.653           4.647
                                             Injuries.
HCC111....................................  Amyotrophic Lateral                    1.804           1.606           1.474           1.372           1.360
                                             Sclerosis and Other
                                             Anterior Horn Cell Disease.
HCC112....................................  Quadriplegic Cerebral Palsy.           0.073           0.036           0.009           0.000           0.000
HCC113....................................  Cerebral Palsy, Except                 0.073           0.036           0.009           0.000           0.000
                                             Quadriplegic.
HCC114....................................  Spina Bifida and Other Brain/          0.544           0.452           0.392           0.341           0.335
                                             Spinal/Nervous System
                                             Congenital Anomalies.
HCC115....................................  Myasthenia Gravis/Myoneural            5.301           5.172           5.088           5.074           5.072
                                             Disorders and Guillain-
                                             Barre Syndrome/Inflammatory
                                             and Toxic Neuropathy.
HCC117....................................  Muscular Dystrophy..........           1.925           1.783           1.682           1.581           1.565
HCC118....................................  Multiple Sclerosis..........           3.769           3.557           3.406           3.322           3.311
HCC119....................................  Parkinson`s, Huntington`s,             1.925           1.783           1.682           1.581           1.565
                                             and Spinocerebellar
                                             Disease, and Other
                                             Neurodegenerative Disorders.
HCC120....................................  Seizure Disorders and                  1.275           1.128           1.020           0.917           0.904
                                             Convulsions.
HCC121....................................  Hydrocephalus...............           6.490           6.383           6.303           6.282           6.279
HCC122....................................  Non-Traumatic Coma, and                8.031           7.885           7.780           7.766           7.763
                                             Brain Compression/Anoxic
                                             Damage.
HCC125....................................  Respirator Dependence/                24.882          24.831          24.794          24.883          24.894
                                             Tracheostomy Status.
HCC126....................................  Respiratory Arrest..........           7.394           7.224           7.123           7.191           7.202
HCC127....................................  Cardio-Respiratory Failure             7.394           7.224           7.123           7.191           7.202
                                             and Shock, Including
                                             Respiratory Distress
                                             Syndromes.
HCC128....................................  Heart Assistive Device/               27.608          27.411          27.286          27.322          27.328
                                             Artificial Heart.
HCC129....................................  Heart Transplant............          27.608          27.411          27.286          27.322          27.328
HCC130....................................  Congestive Heart Failure....           2.607           2.505           2.437           2.423           2.422
HCC131....................................  Acute Myocardial Infarction.           7.214           6.923           6.738           6.797           6.807
HCC132....................................  Unstable Angina and Other              4.822           4.534           4.368           4.345           4.345
                                             Acute Ischemic Heart
                                             Disease.
HCC135....................................  Heart Infection/                       5.503           5.383           5.302           5.271           5.268
                                             Inflammation, Except
                                             Rheumatic.
HCC142....................................  Specified Heart Arrhythmias.           2.479           2.340           2.237           2.159           2.149
HCC145....................................  Intracranial Hemorrhage.....           7.332           7.062           6.890           6.848           6.844
HCC146....................................  Ischemic or Unspecified                1.907           1.754           1.666           1.624           1.620
                                             Stroke.
HCC149....................................  Cerebral Aneurysm and                  2.765           2.588           2.468           2.389           2.378
                                             Arteriovenous Malformation.
HCC150....................................  Hemiplegia/Hemiparesis......           4.362           4.253           4.188           4.232           4.240

[[Page 17471]]

 
HCC151....................................  Monoplegia, Other Paralytic            2.821           2.693           2.606           2.557           2.551
                                             Syndromes.
HCC153....................................  Atherosclerosis of the                 8.986           8.890           8.830           8.913           8.926
                                             Extremities with Ulceration
                                             or Gangrene.
HCC154....................................  Vascular Disease with                  6.374           6.218           6.114           6.091           6.088
                                             Complications.
HCC156....................................  Pulmonary Embolism and Deep            3.333           3.184           3.082           3.013           3.004
                                             Vein Thrombosis.
HCC158....................................  Lung Transplant Status/               22.628          22.505          22.423          22.495          22.505
                                             Complications.
HCC159....................................  Cystic Fibrosis.............           6.673           6.414           6.226           6.203           6.200
HCC160....................................  Chronic Obstructive                    0.867           0.759           0.665           0.564           0.551
                                             Pulmonary Disease,
                                             Including Bronchiectasis.
HCC161....................................  Asthma......................           0.867           0.759           0.665           0.564           0.551
HCC162....................................  Fibrosis of Lung and Other             1.918           1.813           1.742           1.688           1.680
                                             Lung Disorders.
HCC163....................................  Aspiration and Specified               6.343           6.311           6.288           6.291           6.292
                                             Bacterial Pneumonias and
                                             Other Severe Lung
                                             Infections.
HCC183....................................  Kidney Transplant Status....           6.355           6.161           6.035           5.970           5.965
HCC184....................................  End Stage Renal Disease.....          25.179          24.922          24.750          24.897          24.939
HCC187....................................  Chronic Kidney Disease,                1.067           1.016           0.985           0.997           1.001
                                             Stage 5.
HCC188....................................  Chronic Kidney Disease,                1.067           1.016           0.985           0.997           1.001
                                             Stage 4.
HCC203....................................  Ectopic and Molar Pregnancy,           1.003           0.868           0.740           0.542           0.512
                                             Except with Renal Failure,
                                             Shock, or Embolism.
HCC204....................................  Miscarriage with                       1.003           0.868           0.740           0.542           0.512
                                             Complications.
HCC205....................................  Miscarriage with No or Minor           1.003           0.868           0.740           0.542           0.512
                                             Complications.
HCC207....................................  Completed Pregnancy With               3.296           2.892           2.678           2.344           2.301
                                             Major Complications.
HCC208....................................  Completed Pregnancy With               3.296           2.892           2.678           2.344           2.301
                                             Complications.
HCC209....................................  Completed Pregnancy with No            3.296           2.892           2.678           2.344           2.301
                                             or Minor Complications.
HCC217....................................  Chronic Ulcer of Skin,                 1.908           1.800           1.730           1.702           1.700
                                             Except Pressure.
HCC226....................................  Hip Fractures and                      8.274           8.044           7.894           7.911           7.913
                                             Pathological Vertebral or
                                             Humerus Fractures.
HCC227....................................  Pathological Fractures,                4.796           4.648           4.546           4.494           4.488
                                             Except of Vertebrae, Hip,
                                             or Humerus.
HCC251....................................  Stem Cell, Including Bone             24.793          24.786          24.778          24.810          24.814
                                             Marrow, Transplant Status/
                                             Complications.
HCC253....................................  Artificial Openings for                7.812           7.725           7.666           7.696           7.700
                                             Feeding or Elimination.
HCC254....................................  Amputation Status, Lower               3.011           2.887           2.811           2.821           2.823
                                             Limb/Amputation
                                             Complications.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Interaction Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
SEVERE x HCC006...........................  Severe illness x                       7.044           7.251           7.387           7.555           7.575
                                             Opportunistic Infections.
SEVERE x HCC008...........................  Severe illness x Metastatic            7.044           7.251           7.387           7.555           7.575
                                             Cancer.
SEVERE x HCC009...........................  Severe illness x Lung,                 7.044           7.251           7.387           7.555           7.575
                                             Brain, and Other Severe
                                             Cancers, Including
                                             Pediatric Acute Lymphoid
                                             Leukemia.
SEVERE x HCC010...........................  Severe illness x Non-                  7.044           7.251           7.387           7.555           7.575
                                             Hodgkin`s Lymphomas and
                                             Other Cancers and Tumors.
SEVERE x HCC115...........................  Severe illness x Myasthenia            7.044           7.251           7.387           7.555           7.575
                                             Gravis/Myoneural Disorders
                                             and Guillain-Barre Syndrome/
                                             Inflammatory and Toxic
                                             Neuropathy.
SEVERE x HCC135...........................  Severe illness x Heart                 7.044           7.251           7.387           7.555           7.575
                                             Infection/Inflammation,
                                             Except Rheumatic.
SEVERE x HCC145...........................  Severe illness x                       7.044           7.251           7.387           7.555           7.575
                                             Intracranial Hemorrhage.
SEVERE x G06..............................  Severe illness x HCC group             7.044           7.251           7.387           7.555           7.575
                                             G06 (G06 is HCC Group 6
                                             which includes the
                                             following HCCs in the blood
                                             disease category: 67, 68).

[[Page 17472]]

 
SEVERE x G08..............................  Severe illness x HCC group             7.044           7.251           7.387           7.555           7.575
                                             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-Stage             0.873           0.935           0.977           1.119           1.136
                                             Liver Disease.
SEVERE x HCC038...........................  Severe illness x Acute Liver           0.873           0.935           0.977           1.119           1.136
                                             Failure/Disease, Including
                                             Neonatal Hepatitis.
SEVERE x HCC153...........................  Severe illness x                       0.873           0.935           0.977           1.119           1.136
                                             Atherosclerosis of the
                                             Extremities with Ulceration
                                             or Gangrene.
SEVERE x HCC154...........................  Severe illness x Vascular              0.873           0.935           0.977           1.119           1.136
                                             Disease with Complications.
SEVERE x HCC163...........................  Severe illness x Aspiration            0.873           0.935           0.977           1.119           1.136
                                             and Specified Bacterial
                                             Pneumonias and Other Severe
                                             Lung Infections.
SEVERE x HCC253...........................  Severe illness x Artificial            0.873           0.935           0.977           1.119           1.136
                                             Openings for Feeding or
                                             Elimination.
SEVERE x G03..............................  Severe illness x HCC group             0.873           0.935           0.977           1.119           1.136
                                             G03 (G03 is HCC Group 3
                                             which includes the
                                             following HCCs in the
                                             musculoskeletal disease
                                             category: 54, 55).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Enrollment Duration Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            1 month of enrollment.......           0.316           0.276           0.247           0.232           0.230
                                            2 months of enrollment......           0.302           0.263           0.234           0.219           0.218
                                            3 months of enrollment......           0.278           0.241           0.213           0.199           0.197
                                            4 months of enrollment......           0.241           0.208           0.179           0.165           0.164
                                            5 months of enrollment......           0.217           0.188           0.162           0.148           0.147
                                            6 months of enrollment......           0.185           0.160           0.137           0.123           0.122
                                            7 months of enrollment......           0.152           0.131           0.111           0.099           0.098
                                            8 months of enrollment......           0.118           0.103           0.088           0.079           0.078
                                            9 months of enrollment......           0.074           0.064           0.054           0.048           0.048
                                            10 months of enrollment.....           0.035           0.032           0.030           0.029           0.029
                                            11 months of enrollment.....           0.030           0.028           0.027           0.027           0.027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Prescription Drug Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
RXC 01....................................  Anti-HIV Agents.............           6.528           5.936           5.505           5.164           5.120
RXC 02....................................  Anti-Hepatitis C (HCV)                 8.369           7.752           7.359           7.413           7.430
                                             Agents.
RXC 03....................................  Antiarrhythmics.............           0.116           0.112           0.109           0.096           0.090
RXC 04....................................  Phosphate Binders...........           1.927           1.924           1.918           1.904           1.862
RXC 05....................................  Inflammatory Bowel Disease             1.746           1.591           1.470           1.293           1.266
                                             Agents.
RXC 06....................................  Insulin.....................           1.796           1.630           1.453           1.254           1.227
RXC 07....................................  Anti-Diabetic Agents, Except           0.644           0.547           0.452           0.315           0.296
                                             Insulin and Metformin Only.
RXC 08....................................  Multiple Sclerosis Agents...          18.819          17.877          17.252          17.101          17.067
RXC 09....................................  Immune Suppressants and               12.688          12.085          11.697          11.770          11.783
                                             Immunomodulators.
RXC 10....................................  Cystic Fibrosis Agents......          12.240          11.876          11.659          11.708          11.717
RXC 01 x HCC001...........................  Additional effect for                  0.273           0.520           0.735           1.187           1.247
                                             enrollees with RXC 01 (Anti-
                                             HIV Agents) and HCC 001
                                             (HIV/AIDS).
RXC 02 x HCC037_1, 036, 035, 034..........  Additional effect for                 -0.156           0.043           0.168           0.300           0.311
                                             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 for                  0.000           0.000           0.000           0.000           0.000
                                             enrollees with RxC 03
                                             (Antiarrhythmics) and HCC
                                             142 (Specified Heart
                                             Arrhythmias).

[[Page 17473]]

 
RXC 04 x HCC184, 183, 187, 188............  Additional effect for                  0.000           0.000           0.000           0.000           0.000
                                             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 for                 -0.820          -0.761          -0.692          -0.635          -0.626
                                             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 for                  0.289           0.247           0.309           0.355           0.360
                                             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 for                 -0.303          -0.259          -0.209          -0.169          -0.164
                                             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 for                 -1.409          -0.898          -0.556          -0.216          -0.157
                                             enrollees with RxC 08
                                             (Multiple Sclerosis Agents)
                                             and HCC 118 (Multiple
                                             Sclerosis).
RXC 09 x HCC056 or 057 and 048 or 041.....  Additional effect for                  0.536           0.652           0.731           0.831           0.844
                                             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 for                 -3.170          -2.968          -2.818          -2.754          -2.746
                                             enrollees with RxC 09
                                             (Immune Suppressants and
                                             Immunomodulators) and HCC
                                             056 (Rheumatoid Arthritis
                                             and Specified Autoimmune
                                             Disorders).
RXC 09 x HCC057...........................  Additional effect for                 -0.803          -0.689          -0.545          -0.428          -0.411
                                             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 for                 -0.783          -0.621          -0.528          -0.439          -0.427
                                             enrollees with RxC 09
                                             (Immune Suppressants and
                                             Immunomodulators) and (HCC
                                             048 (Inflammatory Bowel
                                             Disease) or 041 (Intestine
                                             Transplant Status/
                                             Complications)).
RXC 10 x HCC159, 158......................  Additional effect for                 38.322          38.485          38.558          38.691          38.706
                                             enrollees with RxC 10
                                             (Cystic Fibrosis Agents)
                                             and (HCC 159 (Cystic
                                             Fibrosis) or 158 (Lung
                                             Transplant Status/
                                             Complications)).
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 17474]]


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


                       Table 3--Child Risk Adjustment Model Factors for 2020 Benefit Year
----------------------------------------------------------------------------------------------------------------
             Factor                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
                                               Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male...................           0.201           0.156           0.105           0.060           0.054
Age 5-9, Male...................           0.141           0.105           0.064           0.031           0.028
Age 10-14, Male.................           0.178           0.141           0.094           0.058           0.055
Age 15-20, Male.................           0.231           0.186           0.132           0.084           0.079
Age 2-4, Female.................           0.153           0.115           0.074           0.041           0.037
Age 5-9, Female.................           0.097           0.068           0.034           0.009           0.008
Age 10-14, Female...............           0.169           0.133           0.090           0.058           0.055
Age 15-20, Female...............           0.251           0.197           0.130           0.069           0.063
----------------------------------------------------------------------------------------------------------------
                                                Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................           4.444           4.000           3.704           3.571           3.553
Septicemia, Sepsis, Systemic              12.684          12.483          12.370          12.357          12.358
 Inflammatory Response Syndrome/
 Shock..........................
Central Nervous System                     7.639           7.474           7.370           7.375           7.376
 Infections, Except Viral
 Meningitis.....................
Viral or Unspecified Meningitis.           3.537           3.306           3.162           2.985           2.961
Opportunistic Infections........          14.897          14.855          14.821          14.803          14.798
Metastatic Cancer...............          33.549          33.307          33.125          33.137          33.137
Lung, Brain, and Other Severe              9.316           9.063           8.873           8.780           8.769
 Cancers, Including Pediatric
 Acute Lymphoid Leukemia........
Non-Hodgkin's Lymphomas and                7.430           7.181           6.996           6.883           6.868
 Other Cancers and Tumors.......
Colorectal, Breast (Age <50),              3.288           3.116           2.980           2.862           2.844
 Kidney, and Other Cancers......
Breast (Age 50+) and Prostate              3.288           3.116           2.980           2.862           2.844
 Cancer, Benign/Uncertain Brain
 Tumors, and Other Cancers and
 Tumors.........................
Thyroid Cancer, Melanoma,                  0.971           0.848           0.742           0.624           0.608
 Neurofibromatosis, and Other
 Cancers and Tumors.............
Pancreas Transplant Status/               22.808          22.525          22.334          22.355          22.358
 Complications..................
Diabetes with Acute                        2.562           2.227           2.024           1.732           1.695
 Complications..................
Diabetes with Chronic                      2.562           2.227           2.024           1.732           1.695
 Complications..................
Diabetes without Complication...           2.562           2.227           2.024           1.732           1.695
Protein-Calorie Malnutrition....          13.857          13.753          13.679          13.719          13.724
Mucopolysaccharidosis...........           6.541           6.316           6.146           6.097           6.090
Lipidoses and Glycogenosis......           6.541           6.316           6.146           6.097           6.090
Congenital Metabolic Disorders,            6.541           6.316           6.146           6.097           6.090
 Not Elsewhere Classified.......
Amyloidosis, Porphyria, and                6.541           6.316           6.146           6.097           6.090
 Other Metabolic Disorders......
Adrenal, Pituitary, and Other              6.541           6.316           6.146           6.097           6.090
 Significant Endocrine Disorders
Liver Transplant Status/                  22.808          22.525          22.334          22.355          22.358
 Complications..................
End-Stage Liver Disease.........          16.546          16.340          16.213          16.213          16.213
Cirrhosis of Liver..............           3.126           3.000           2.914           2.887           2.887
Chronic Viral Hepatitis C.......           2.946           2.800           2.696           2.677           2.679
Chronic Hepatitis, Other/                  0.565           0.486           0.438           0.412           0.409
 Unspecified....................
Acute Liver Failure/Disease,              11.172          11.066          11.000          11.024          11.029
 Including Neonatal Hepatitis...
Intestine Transplant Status/              22.808          22.525          22.334          22.355          22.358
 Complications..................
Peritonitis/Gastrointestinal              11.360          11.054          10.851          10.833          10.833
 Perforation/Necrotizing Entero-
colitis.........................
Intestinal Obstruction..........           4.422           4.220           4.069           3.964           3.951
Chronic Pancreatitis............          12.558          12.300          12.130          12.111          12.111
Acute Pancreatitis/Other                   2.280           2.164           2.067           1.971           1.957
 Pancreatic Disorders and
 Intestinal Malabsorption.......
Inflammatory Bowel Disease......           7.491           7.076           6.790           6.672           6.656
Necrotizing Fasciitis...........           3.884           3.665           3.504           3.422           3.412
Bone/Joint/Muscle Infections/              3.884           3.665           3.504           3.422           3.412
 Necrosis.......................
Rheumatoid Arthritis and                   4.147           3.898           3.705           3.613           3.602
 Specified Autoimmune Disorders.

[[Page 17475]]

 
Systemic Lupus Erythematosus and           0.707           0.589           0.478           0.367           0.355
 Other Autoimmune Disorders.....
Osteogenesis Imperfecta and                1.308           1.197           1.101           1.020           1.009
 Other Osteodystrophies.........
Congenital/Developmental                   1.308           1.197           1.101           1.020           1.009
 Skeletal and Connective Tissue
 Disorders......................
Cleft Lip/Cleft Palate..........           1.309           1.130           0.998           0.869           0.853
Hemophilia......................          63.672          63.119          62.729          62.694          62.689
Myelodysplastic Syndromes and             14.847          14.726          14.643          14.617          14.613
 Myelofibrosis..................
Aplastic Anemia.................          14.847          14.726          14.643          14.617          14.613
Acquired Hemolytic Anemia,                 6.690           6.486           6.338           6.255           6.246
 Including Hemolytic Disease of
 Newborn........................
Sickle Cell Anemia (Hb-SS)......           6.690           6.486           6.338           6.255           6.246
Thalassemia Major...............           6.690           6.486           6.338           6.255           6.246
Combined and Other Severe                  5.228           5.082           4.975           4.916           4.908
 Immunodeficiencies.............
Disorders of the Immune                    5.228           5.082           4.975           4.916           4.908
 Mechanism......................
Coagulation Defects and Other              4.562           4.439           4.341           4.263           4.253
 Specified Hematological
 Disorders......................
Drug Psychosis..................           5.378           5.097           4.918           4.827           4.816
Drug Dependence.................           5.378           5.097           4.918           4.827           4.816
Schizophrenia...................           4.720           4.358           4.111           3.955           3.935
Major Depressive and Bipolar               2.523           2.294           2.112           1.933           1.909
 Disorders......................
Reactive and Unspecified                   2.437           2.219           2.042           1.864           1.841
 Psychosis, Delusional Disorders
Personality Disorders...........           0.505           0.407           0.299           0.163           0.145
Anorexia/Bulimia Nervosa........           2.473           2.274           2.118           2.023           2.009
Prader-Willi, Patau, Edwards,              1.577           1.426           1.324           1.254           1.244
 and Autosomal Deletion
 Syndromes......................
Down Syndrome, Fragile X, Other            1.523           1.376           1.270           1.181           1.169
 Chromosomal Anomalies, and
 Congenital Malformation
 Syndromes......................
Autistic Disorder...............           2.419           2.205           2.030           1.859           1.836
Pervasive Developmental                    0.522           0.436           0.337           0.218           0.203
 Disorders, Except Autistic
 Disorder.......................
Traumatic Complete Lesion                  9.975           9.927           9.898           9.978           9.989
 Cervical Spinal Cord...........
Quadriplegia....................           9.975           9.927           9.898           9.978           9.989
Traumatic Complete Lesion Dorsal           7.111           6.894           6.752           6.717           6.710
 Spinal Cord....................
Paraplegia......................           7.111           6.894           6.752           6.717           6.710
Spinal Cord Disorders/Injuries..           3.688           3.501           3.361           3.265           3.251
Amyotrophic Lateral Sclerosis             15.639          15.397          15.212          15.129          15.117
 and Other Anterior Horn Cell
 Disease........................
Quadriplegic Cerebral Palsy.....           2.136           1.935           1.829           1.823           1.824
Cerebral Palsy, Except                     0.189           0.141           0.109           0.080           0.076
 Quadriplegic...................
Spina Bifida and Other Brain/              1.317           1.190           1.100           1.029           1.020
 Spinal/Nervous System
 Congenital Anomalies...........
Myasthenia Gravis/Myoneural               10.492          10.315          10.194          10.192          10.192
 Disorders and Guillain-Barre
 Syndrome/Inflammatory and Toxic
 Neuropathy.....................
Muscular Dystrophy..............           3.105           2.925           2.800           2.692           2.679
Multiple Sclerosis..............           9.585           9.204           8.943           8.908           8.904
Parkinson's, Huntington's, and             3.105           2.925           2.800           2.692           2.679
 Spinocerebellar Disease, and
 Other Neurodegenerative
 Disorders......................
Seizure Disorders and                      1.998           1.839           1.701           1.554           1.535
 Convulsions....................
Hydrocephalus...................           4.263           4.146           4.066           4.043           4.041
Non-Traumatic Coma, and Brain              5.460           5.327           5.226           5.177           5.170
 Compression/Anoxic Damage......
Respirator Dependence/                    31.764          31.644          31.579          31.727          31.745
 Tracheostomy Status............
Respiratory Arrest..............           9.892           9.639           9.484           9.442           9.437
Cardio-Respiratory Failure and             9.892           9.639           9.484           9.442           9.437
 Shock, Including Respiratory
 Distress Syndromes.............
Heart Assistive Device/                   22.808          22.525          22.334          22.355          22.358
 Artificial Heart...............
Heart Transplant................          22.808          22.525          22.334          22.355          22.358
Congestive Heart Failure........           5.721           5.612           5.528           5.484           5.477
Acute Myocardial Infarction.....           5.658           5.556           5.512           5.497           5.494
Unstable Angina and Other Acute            4.360           4.255           4.196           4.165           4.163
 Ischemic Heart Disease.........
Heart Infection/Inflammation,             12.103          11.996          11.921          11.912          11.912
 Except Rheumatic...............
Hypoplastic Left Heart Syndrome            3.989           3.841           3.696           3.585           3.569
 and Other Severe Congenital
 Heart Disorders................
Major Congenital Heart/                    1.271           1.172           1.054           0.940           0.927
 Circulatory Disorders..........
Atrial and Ventricular Septal              0.828           0.738           0.638           0.551           0.541
 Defects, Patent Ductus
 Arteriosus, and Other
 Congenital Heart/Circulatory
 Disorders......................
Specified Heart Arrhythmias.....           3.678           3.514           3.378           3.301           3.291
Intracranial Hemorrhage.........          12.336          12.112          11.968          11.959          11.960
Ischemic or Unspecified Stroke..           4.916           4.834           4.788           4.787           4.788
Cerebral Aneurysm and                      3.106           2.925           2.803           2.713           2.701
 Arteriovenous Malformation.....

[[Page 17476]]

 
Hemiplegia/Hemiparesis..........           4.229           4.100           4.016           3.960           3.952
Monoplegia, Other Paralytic                2.907           2.753           2.650           2.591           2.582
 Syndromes......................
Atherosclerosis of the                    12.094          11.845          11.673          11.607          11.596
 Extremities with Ulceration or
 Gangrene.......................
Vascular Disease with                     11.883          11.747          11.650          11.669          11.670
 Complications..................
Pulmonary Embolism and Deep Vein          15.067          14.952          14.883          14.915          14.920
 Thrombosis.....................
Lung Transplant Status/                   22.808          22.525          22.334          22.355          22.358
 Complications..................
Cystic Fibrosis.................          22.808          22.525          22.334          22.355          22.358
Chronic Obstructive Pulmonary              0.373           0.307           0.222           0.134           0.123
 Disease, Including
 Bronchiectasis.................
Asthma..........................           0.373           0.307           0.222           0.134           0.123
Fibrosis of Lung and Other Lung            2.327           2.232           2.140           2.066           2.058
 Disorders......................
Aspiration and Specified                   6.863           6.796           6.748           6.770           6.772
 Bacterial Pneumonias and Other
 Severe Lung Infections.........
Kidney Transplant Status........          10.610          10.344          10.176          10.122          10.115
End Stage Renal Disease.........          32.082          31.966          31.885          31.983          31.998
Chronic Kidney Disease, Stage 5.           3.813           3.698           3.607           3.511           3.502
Chronic Kidney Disease, Severe             3.813           3.698           3.607           3.511           3.502
 (Stage 4)......................
Ectopic and Molar Pregnancy,               0.929           0.782           0.635           0.417           0.386
 Except with Renal Failure,
 Shock, or Embolism.............
Miscarriage with Complications..           0.929           0.782           0.635           0.417           0.386
Miscarriage with No or Minor               0.929           0.782           0.635           0.417           0.386
 Complications..................
Completed Pregnancy With Major             2.848           2.472           2.253           1.879           1.824
 Complications..................
Completed Pregnancy With                   2.848           2.472           2.253           1.879           1.824
 Complications..................
Completed Pregnancy with No or             2.848           2.472           2.253           1.879           1.824
 Minor Complications............
Chronic Ulcer of Skin, Except              2.720           2.626           2.539           2.464           2.456
 Pressure.......................
Hip Fractures and Pathological             6.385           6.075           5.850           5.736           5.724
 Vertebral or Humerus Fractures.
Pathological Fractures, Except             1.954           1.797           1.655           1.504           1.483
 of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone                 22.808          22.525          22.334          22.355          22.358
 Marrow, Transplant Status/
 Complications..................
Artificial Openings for Feeding           11.222          11.090          11.022          11.127          11.143
 or Elimination.................
Amputation Status, Lower Limb/             5.244           4.993           4.817           4.689           4.670
 Amputation Complications.......
----------------------------------------------------------------------------------------------------------------


                       Table 4--Infant Risk Adjustment Model Factors for 2020 Benefit Year
----------------------------------------------------------------------------------------------------------------
              Group                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity            242.262         240.657         239.483         239.461         239.461
 Level 5 (Highest)..............
Extremely Immature * Severity            148.994         147.251         145.979         145.799         145.783
 Level 4........................
Extremely Immature * Severity             34.940          33.753          32.859          32.577          32.555
 Level 3........................
Extremely Immature * Severity             34.940          33.753          32.859          32.577          32.555
 Level 2........................
Extremely Immature * Severity             34.940          33.753          32.859          32.577          32.555
 Level 1 (Lowest)...............
Immature * Severity Level 5              149.437         147.839         146.672         146.625         146.621
 (Highest)......................
Immature * Severity Level 4.....          71.066          69.513          68.370          68.254          68.240
Immature * Severity Level 3.....          33.916          32.618          31.662          31.423          31.400
Immature * Severity Level 2.....          24.559          23.305          22.377          22.064          22.026
Immature * Severity Level 1               24.559          23.305          22.377          22.064          22.026
 (Lowest).......................
Premature/Multiples * Severity           113.849         112.409         111.366         111.243         111.232
 Level 5 (Highest)..............
Premature/Multiples * Severity            26.707          25.337          24.357          24.088          24.061
 Level 4........................
Premature/Multiples * Severity            13.625          12.592          11.834          11.346          11.287
 Level 3........................
Premature/Multiples * Severity             8.285           7.520           6.882           6.224           6.128
 Level 2........................
Premature/Multiples * Severity             5.381           4.835           4.284           3.704           3.632
 Level 1 (Lowest)...............
Term * Severity Level 5                   87.084          85.832          84.905          84.690          84.663
 (Highest)......................
Term * Severity Level 4.........          13.879          12.979          12.323          11.859          11.806
Term * Severity Level 3.........           5.728           5.171           4.646           4.042           3.959
Term * Severity Level 2.........           3.614           3.188           2.691           2.051           1.970
Term * Severity Level 1 (Lowest)           1.596           1.375           0.973           0.579           0.544
Age1 * Severity Level 5                   57.825          57.074          56.512          56.400          56.389
 (Highest)......................
Age1 *Severity Level 4..........          10.546          10.003           9.561           9.255           9.219
Age1 * Severity Level 3.........           3.013           2.744           2.491           2.267           2.241
Age1 * Severity Level 2.........           1.880           1.673           1.452           1.219           1.191
Age1 * Severity Level 1 (Lowest)           0.515           0.455           0.374           0.314           0.307
Age 0 Male......................           0.646           0.595           0.560           0.489           0.478
Age 1 Male......................           0.120           0.106           0.093           0.073           0.070
----------------------------------------------------------------------------------------------------------------


[[Page 17477]]


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


     Table 6--HHS HCCs Included in Infant Model Severity Categories
------------------------------------------------------------------------
         Severity category                     HCC/description
------------------------------------------------------------------------
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.
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.

[[Page 17478]]

 
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.
------------------------------------------------------------------------

v. Cost-Sharing Reduction Adjustments
    We proposed to continue including an adjustment for the receipt of 
cost-sharing reductions (CSRs) in the risk adjustment models to account 
for increased plan liability due to increased utilization of health 
care services by enrollees receiving CSRs in all 50 states and the 
District of Columbia. For the 2020 benefit year, to maintain stability 
and certainty for issuers, we proposed to maintain the CSR factors 
finalized in the 2019 Payment Notice.\28\ See Table 7.
---------------------------------------------------------------------------

    \28\ See 83 FR 16930 at 16953.
---------------------------------------------------------------------------

    Consistent with the approach finalized in the 2017 Payment 
Notice,\29\ we also proposed to continue to use CSR adjustment factors 
of 1.12 for all Massachusetts wrap-around plans in the risk adjustment 
plan liability risk score calculation, as all of Massachusetts' cost-
sharing plan variations have actuarial values above 94 percent. We are 
finalizing the CSR adjustment as proposed.
---------------------------------------------------------------------------

    \29\ See 81 FR 12203 at 12228.

[[Page 17479]]



               Table 7--Cost-Sharing Reduction 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
------------------------------------------------------------------------

    Comment: Commenters supported the proposal that the CSR adjustments 
be consistent with those finalized in the 2019 Payment Notice. One 
commenter recommended that if HHS contemplates changing these factors 
for future benefit years, HHS should publish a white paper prior to 
rulemaking to provide issuers an advance opportunity to review and 
comment on the proposed approach. One commenter requested that HHS 
assess the impact of these factors and consider the possibility that 
issuers with a lower distribution of silver plan enrollees may be 
negatively impacted. One commenter supported continuing to use the CSR 
factor of 1.12 for Massachusetts' wrap-around coverage.
    Response: We are finalizing the CSR adjustment as proposed. We 
intend to continue to review the enrollee-level EDGE data, including 
the distribution of enrollees by metal tier, to assess whether changes 
to these factors are needed. If we were to consider changes to the CSR 
adjustment in the future, we would do so through notice-and-comment 
rulemaking.
vi. Model Performance Statistics
    To evaluate risk adjustment model performance, we examined each 
model's 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 also 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 will 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.\30\ The 
final R-squared statistic for each model that is shown in Table 8 
reflects the results from each dataset used in the separately solved 
models that are used to recalibrate the models for the 2020 benefit 
year, namely the 2015 MarketScan[supreg] data, and the 2016 and 2017 
enrollee-level EDGE data.
---------------------------------------------------------------------------

    \30\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis 
of Claims-Based Tools for Health Risk Assessment.'' Society of 
Actuaries. April 2007.

                           Table 8--R-Squared Statistic for HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
                                                               2016 Enrollee  2017 Enrollee-         2015
                           Models                               level EDGE      level EDGE    MarketScan[supreg]
                                                                   data       data R-squared    data R-squared
----------------------------------------------------------------------------------------------------------------
Platinum Adult..............................................          0.4189          0.4131            0.4120
Gold Adult..................................................          0.4131          0.4065            0.4065
Silver Adult................................................          0.4084          0.4011            0.4023
Bronze Adult................................................          0.4052          0.3974            0.3996
Catastrophic Adult..........................................          0.4047          0.3968            0.3991
Platinum Child..............................................          0.3109          0.3252            0.3330
Gold Child..................................................          0.3062          0.3201            0.3283
Silver Child................................................          0.3022          0.3157            0.3244
Bronze Child................................................          0.2986          0.3118            0.3207
Catastrophic Child..........................................          0.2981          0.3112            0.3201
Platinum Infant.............................................          0.3257          0.3168            0.3331
Gold Infant.................................................          0.3217          0.3127            0.3310

[[Page 17480]]

 
Silver Infant...............................................          0.3188          0.3096            0.3297
Bronze Infant...............................................          0.3172          0.3079            0.3294
Catastrophic Infant.........................................          0.3170          0.3077            0.3294
----------------------------------------------------------------------------------------------------------------

b. Overview of the Risk Adjustment Transfer Methodology (Sec.  153.320)
    We defined the calculation of plan average actuarial risk and the 
calculation of payments and charges in the Premium Stabilization Rule. 
In the 2014 Payment Notice, we combined those concepts into a risk 
adjustment state payment transfer formula.\31\ The risk adjustment 
transfer methodology (state transfer formula payments and charges and 
high-cost risk pool payments and charges) is applied after issuers have 
completed their risk adjustment EDGE data submissions for the 
applicable benefit year. The state 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, we calculate 
separate transfer amounts for each rating area in which a risk 
adjustment covered plan operates).
---------------------------------------------------------------------------

    \31\ The state payment transfer formula refers to the part of 
the HHS risk adjustment methodology that calculates payments and 
charges prior to the calculation of the high-cost risk pool payment 
and charge terms that apply beginning with the 2018 benefit year.
---------------------------------------------------------------------------

    The risk adjustment state payment transfer formula generally 
calculates the difference between the revenues required by a plan, 
based on the health risk of the plan's enrollees, and the revenues that 
the plan can generate for those enrollees. These differences are then 
compared across plans in the state market risk pool and converted to a 
dollar amount based on the statewide average premium. HHS chose to use 
statewide average premium and normalize the risk adjustment state 
payment transfer formula to reflect state average factors so that each 
plan's enrollment characteristics are compared to the state average and 
the calculated payment amounts equal calculated charges in each state 
market risk pool. Thus, each plan in the risk pool receives a risk 
adjustment payment or charge designed to compensate for risk for a plan 
with average risk in a budget-neutral manner. This approach supports 
the overall goals of the risk adjustment program, which are to 
encourage issuers to rate for the average risk in the applicable state 
market risk pool, to stabilize premiums, and to avoid the creation of 
incentives for issuers to operate less efficiently, set higher prices, 
or develop benefit designs or create marketing strategies to avoid 
high-risk enrollees. Such incentives could arise if we used each 
issuer's plan's own premium in the risk adjustment state payment 
transfer formula, instead of statewide average premium.
    In the absence of additional funding, we established through 
notice-and-comment rulemaking \32\ the HHS-operated risk adjustment 
program as a budget-neutral program to provide certainty to issuers 
regarding risk adjustment payments and charges, which allows issuers to 
set rates based on those expectations. Adopting an approach that would 
not result in balanced payments and charges would create considerable 
uncertainty for issuers regarding the proportion of risk adjustment 
payments they could expect to receive. Additionally, in establishing 
the HHS-operated risk adjustment program, we could not have relied on 
the potential availability of general appropriation funds without 
creating the same uncertainty for issuers in the amount of risk 
adjustment payments they could expect, or reducing funding available 
for other programs. Relying on each year's budget process also would 
have required us to delay setting the parameters for any risk 
adjustment payment proration rates until well after the plans were in 
effect for the applicable benefit year. HHS also could not have relied 
on any potential state budget appropriations in states that elected to 
operate a state-based risk adjustment program, as such funds would not 
be available for purposes of administering the HHS-operated risk 
adjustment program. Without the adoption of a budget-neutral framework, 
HHS would need to assess a charge or otherwise collect additional funds 
to avoid prorating risk adjustment payments. The resulting uncertainty 
would have also conflicted with the overall goals of the risk 
adjustment program--to stabilize premiums and reduce incentives for 
issuers to avoid enrolling individuals with higher-than-average 
actuarial risk.
---------------------------------------------------------------------------

    \32\ For example, see Standards Related to Reinsurance, Risk 
Corridors, and Risk Adjustment, Proposed Rule, 76 FR 41938 (July 15, 
2011); Standards Related to Reinsurance, Risk Corridors, and Risk 
Adjustment, Final Rule, 77 FR 17232 (March 23, 2012); and the 2014 
Payment Notice, Final Rule, 78 FR 15441 (March 11, 2013). Also see, 
the 2018 Payment Notice, Final Rule, 81 FR 94058 (December 22, 
2016); and the 2019 Payment Notice, Final Rule, 83 FR 16930 (April 
17, 2018). Also see the Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program Under the Patient 
Protection and Affordable Care Act for the 2017 Benefit Year, Final 
Rule, 83 FR 36456 (July 30, 2018) and the Patient Protection and 
Affordable Care Act; Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program for the 2018 Benefit 
Year, Final Rule, 83 FR 63419 (December 10, 2018).
---------------------------------------------------------------------------

    In light of the budget-neutral framework, HHS uses statewide 
average premium as the cost-scaling factor in the state payment 
transfer formula under the HHS-operated risk adjustment methodology, 
rather than a different parameter, such as each plan's own premium, 
which would not have automatically achieved equality between risk 
adjustment payments and charges in each benefit year. As set forth in 
prior discussions,\33\ use of a plan's own premium or a similar 
parameter would have required a balancing adjustment in light of the 
program's need for budget neutrality--either through reducing payments 
to issuers owed a payment, increasing charges on issuers assessed a 
charge, or splitting the difference in some fashion between issuers 
owed payments and issuers assessed charges. Such adjustments would have 
impaired the risk adjustment program's goals of encouraging issuers to 
rate for the average risk in the applicable state market risk pool, 
stabilizing premiums, and avoiding the creation of incentives

[[Page 17481]]

for issuers to operate less efficiently, set higher prices, develop 
benefit designs or create marketing strategies to avoid higher-risk 
enrollees. Adoption of a methodology that would require use of an 
after-the-fact balancing adjustment is also less predictable for 
issuers than a methodology that is established in advance of a benefit 
year. Stakeholders who support use of a plan's own premium state that 
use of statewide average premium penalizes issuers with efficient care 
management. While effective care management may make a plan more likely 
to have lower costs,\34\ we do not believe that care management 
strategies make the plan more likely to enroll lower-than-average risk 
enrollees; effective care management strategies might even make the 
plan more likely to attract higher-than-average risk enrollees, in 
which case the plan will benefit from the use of statewide average 
premium in the state payment transfer formula in the HHS risk 
adjustment methodology. As noted by commenters to the 2014 Payment 
Notice proposed rule, transfers may also be more volatile from year to 
year and sensitive to anomalous premiums if scaled to a plan's own 
premium instead of the statewide average premium. In all, the 
advantages of using statewide average premium outweigh the pricing 
instability and other challenges associated with calculating transfers 
based on a plan's own premium.
---------------------------------------------------------------------------

    \33\ For example, see September 12, 2011, Risk Adjustment 
Implementation Issues White Paper, available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/riskadjustment_whitepaper_web.pdf. 
Also see the Adoption of the Methodology for the HHS-Operated 
Permanent Risk Adjustment Program Under the Patient Protection and 
Affordable Care Act for the 2017 Benefit Year, Final Rule, 83 FR 
36456 (July 30, 2018) and the Patient Protection and Affordable Care 
Act; Adoption of the Methodology for the HHS-Operated Permanent Risk 
Adjustment Program for the 2018 Benefit Year, Final Rule, 83 FR 
63419 (December 10, 2018).
    \34\ There are many reasons why an issuer could have lower-than-
average premiums. For example, the low premium could be the result 
of efficiency, mispricing, a strategy to gain market share, or some 
combination thereof.
---------------------------------------------------------------------------

    In the HHS risk adjustment transfer methodology, the state payment 
transfer formula is designed to provide a per member per month (PMPM) 
transfer amount. The PMPM transfer amount derived from the state 
payment transfer formula is multiplied by each plan's total billable 
member months for the applicable benefit year to determine the payment 
due to or charge owed by the issuer for that plan in a rating area. The 
payment or charge under the state payment transfer formula is thus 
calculated to balance the state market risk pool in question.
    Although we did not seek comment on this topic, we summarize and 
respond to the comments on statewide average premium and plan's own 
premium received in response to the proposed rule below. Given the 
volume of exhibits, court filings, white papers (including all 
corresponding exhibits), and comments on other rulemakings incorporated 
by reference, we are not able to separately address each of those 
documents. Instead, we summarize and respond to the significant 
comments and issues raised by the commenters that are within the scope 
of this rulemaking.
    Comment: Some commenters expressed support for the operation of the 
HHS risk adjustment program in a budget-neutral manner and the 
utilization of statewide average premium as the cost-scaling factor to 
ensure that issuers' collection amounts equal payment amounts for the 
applicable benefit year. These commenters noted that use of statewide 
average premium results in balanced payment transfers in a state market 
risk pool and helps advance the market stabilizing goals of the risk 
adjustment program, and they supported maintaining the current risk 
adjustment state payment transfer formula and the budget neutral 
framework.
    Some commenters opposed the use of statewide average premiums. 
These commenters stated that the current risk adjustment state payment 
transfer formula's use of statewide average premiums penalizes 
efficient plans, and is a biased estimate of enrollee medical costs and 
actuarial risk that perversely penalize efficient, high-performing 
issuers. These commenters requested that HHS adopt alternatives to the 
existing risk adjustment methodology. One commenter supported the use 
of each plan's own premium as the cost scaling factor. This commenter 
stated that the risk adjustment state payment transfer formula does not 
need to operate as budget neutral, as section 1343 of the PPACA does 
not require that the program be budget neutral, and funds are available 
to HHS for the risk adjustment program from the CMS Program Management 
account to offset any potential shortfalls. The commenter also 
disagreed with HHS' rationale for using statewide average premium to 
achieve budget neutrality, and stated that even if budget neutrality is 
required, any risk adjustment payment shortfalls that may result from 
using a plan's own premium in the state payment transfer formula could 
be addressed through pro rata adjustments to risk adjustment transfers. 
This commenter further stated that use of statewide average premium is 
not predictable for issuers trying to set rates and compared the 
predicted risk adjustment results issuers set out in their respective 
rate filings with HHS' published actual risk adjustment results for a 
state, concluding that the risk adjustment program is failing to 
achieve its goal because its analysis found that issuers are failing to 
accurately forecast their risk adjustment results in their rate 
filings.
    Conversely, other commenters expressed concerns about alternatives 
to statewide average premium. One commenter specifically opposed using 
a plan's own premium stating that it would undermine the risk 
adjustment program, create incentives for issuers to avoid enrolling 
high-cost individuals, and would not automatically balance transfers to 
zero. This commenter noted that the PPACA's risk adjustment statute 
requires states, or HHS on behalf of the states, to assess a charge on 
plans with lower than the average actuarial risk in the state market 
risk pool, and to make payments to plans with higher than the average 
actuarial risk in the state market risk pool. This commenter also 
agreed that absent Congressional action to appropriate additional 
funds, the risk adjustment program must operate in a budget-neutral 
manner. Additionally, the commenter concurred that if HHS were to 
require states operating their own risk adjustment programs to operate 
the programs to cover any shortfall between collections and payments 
for a benefit year, HHS would be effectively imposing an unfunded 
mandate on states. This commenter noted that analyses by the American 
Academy of Actuaries and Oliver Wyman indicated that the risk 
adjustment program is working as intended by compensating issuers that 
enroll higher-than-average risk enrollees and protecting against 
adverse selection.
    Response: We agree that the use of statewide average premium 
supports the underlying goals of the risk adjustment program by 
discouraging the creation of benefit designs and marketing strategies 
to avoid high-risk enrollees and promoting market stability and 
predictability. The benefits of using statewide average premium as the 
cost scaling factor in the HHS risk adjustment state payment transfer 
formula therefore extend beyond its role in maintaining the budget 
neutrality of the program. Consistent with the statute, under the HHS-
operated risk adjustment program, each risk adjustment covered plan in 
the state market risk pool receives a risk adjustment payment or owes a 
charge based on the plan's risk compared to the average risk in the 
state market risk pool. The statewide average premium reflects the 
average cost and efficiency level and was chosen as the cost scaling 
factor in the state payment transfer formula under the HHS-operated 
risk adjustment methodology for a number of reasons. More specifically, 
HHS chose to use statewide average premium to encourage issuers to rate 
for the average risk, to automatically achieve equality between

[[Page 17482]]

risk adjustment payments and charges in each benefit year, and to avoid 
the creation of incentives for issuers to operate less efficiently, set 
higher prices, or develop benefits designs or create marketing 
strategies to avoid high-risk enrollees. HHS considered and again 
declined in the 2018 and 2019 Payment Notices \35\ and in the Adoption 
of the Methodology for the HHS-operated Permanent Risk Adjustment 
Program for the 2017 Benefit Year Final Rule (2017 Risk Adjustment 
Final Rule) \36\ and Adoption of the Methodology for the HHS-operated 
Permanent Risk Adjustment Program for the 2018 Benefit Year Final Rule 
(2018 Risk Adjustment Final Rule) \37\ to adopt the use of each plan's 
own premium in the state payment transfer formula.
---------------------------------------------------------------------------

    \35\ 81 FR 94100 and 83 FR 16930.
    \36\ 83 FR 36456.
    \37\ 83 FR 63419.
---------------------------------------------------------------------------

    As we detailed in the 2018 Payment Notice and the 2017 and 2018 
Risk Adjustment Final Rules,\38\ use of a plan's own premium would 
likely lead to substantial volatility in transfer results, and could 
result in even higher transfer charges for low-risk, low-premium plans 
because of the program's budget neutral framework. In addition, use of 
plan's own premium in a budget neutral program would require even 
greater transfer payments to high-risk, high-premium plans. 
Furthermore, use of a plan's own premium in the HHS formula would 
actually disadvantage high-risk, low-premium plans, or plans that some 
commenters referred to as the ``efficient plans,'' by undercompensating 
them based on their lower average premiums, which, in turn, could 
incentivize such plans to inflate premium prices to receive more 
favorable risk adjustment transfers along with increased premium 
revenue. If HHS instead applied a balancing adjustment to the state 
payment transfer formula in favor of these plans, low-risk, low-premium 
plans would be required to pay an even higher percentage of their plan-
specific premiums in risk adjustment transfer charges due to the need 
to maintain the program's budget neutrality. This type of balancing 
adjustment would also result in a reduction to payments to high-risk, 
low-premium plans that are presumably more efficient than high-risk, 
high-premium plans, further incentivizing such plans to inflate 
premiums as described above. In other words, the use of a plan's own 
premium in the HHS program would neither reduce risk adjustment charges 
for low-cost and low-risk issuers, nor would it incentivize issuers to 
operate at the average efficiency. The application of a balancing 
adjustment in favor of low-risk, low-premium plans could under-
compensate high-risk plans, increasing the likelihood that such plans 
would raise premiums. In addition, if the application of a balancing 
adjustment was split equally between high-risk and low-risk plans, such 
an adjustment would incentivize issuers to increase premiums or to 
employ risk-avoidance techniques. Finally, any such balancing 
adjustments would have to be determined after state transfers had been 
calculated, because an approach that uses the plan's own premium to 
calculate transfers would not necessarily result in budget-neutral 
transfers without a separate after-the-fact adjustment. As detailed 
above, such after-the-fact adjustments would impair the goals of the 
risk adjustment program and be less predictable for issuers. For all of 
these reasons, we previously declined and continue to decline to use 
each plan's own premium and are maintaining use of statewide average 
premium as the cost-scaling factor in the state payment transfer 
formula.
---------------------------------------------------------------------------

    \38\ 81 FR at 94100; 83 FR at 36458; and 83 FR at 63425.
---------------------------------------------------------------------------

    Comments: One commenter requested that HHS include a care 
management factor in the risk adjustment methodology, such as the care 
management effectiveness index (CME index) developed by Axene Health 
Partners, as this commenter believed that a care coordination factor 
would mitigate the impact of using statewide average premiums for 
issuers that successfully perform care management and improve health. 
This commenter stated that HHS represented in previous rulemaking that 
it could consider using the CME index in future years and encouraged 
HHS to follow through on that promise. Another commenter requested that 
HHS explore how plans with low administrative costs or high quality 
scores based on objective criteria and high-performing networks could 
be rewarded. One commenter stated that HHS' position in the proposed 
rule that it did ``not believe that the care management strategies make 
the plan more likely to enroll lower-than-average risk enrollees; 
effective care management strategies might even make the plan more 
likely to attract higher-than-average risk enrollees, in which case the 
plan would benefit from the use of statewide average premium in the 
state payment transfer formula in the HHS risk adjustment methodology'' 
was based on a faulty premise. This commenter stated that, in addition 
to care management strategies, the breadth of the plan's provider 
network has significant impact on price, and that, through the state 
payment transfer formula, enrollees who choose narrow networks 
subsidize plans from dominant issuers that can tend to have larger 
networks and higher prices. This commenter viewed this as a detrimental 
effect of the state payment transfer formula on plans with enrollees 
that choose narrow networks.
    Some comments suggested proposed improvements to the HHS risk 
adjustment program generally. A few commenters expressed a desire for 
broad risk adjustment changes, including an exemption for new and fast-
growing plans from risk adjustment for 3 to 5 years, applying a 
credibility-based approach to participation in risk adjustment based on 
membership size or market share, and placing an upper bound on the 
amount of a plan's risk adjustment transfer charge or using two-stage 
adult models that HHS proposed in the 2018 Payment Notice proposed 
rule. One commenter suggested HHS look at steps some states have taken 
to correct market distortions and consider the possibility of 
incorporating similar changes into the HHS risk adjustment models and 
state payment transfer formula. One commenter noted that HHS is aware 
of risk adjustment bias, has acknowledged its distortion, and has 
ignored the ``fix'' to switch the risk scores that were used by HHS 
with risk scores that more accurately represent the actual HCC costs or 
adopt another model that would eliminate estimated bias. This commenter 
also suggested HHS give states the option, at their discretion, to use 
a graduated cap on risk adjustment charges to reduce volatility and 
increase predictability of results, to establish a cap based on a 
percentage of premium to protect small issuers from the impact of large 
risk adjustment charges, or to allow states to consider structures in 
which caps shift at smaller more graduated intervals based on issuer 
size, to lower the risk that small enrollment shifts will tip an issuer 
between various caps.
    Response: We appreciate the feedback on proposed updates to the HHS 
risk adjustment program. As we have noted, we remain committed to 
evaluating the program and engaging stakeholders in the program's 
policy development. We continue to regularly assess whether the HHS-
operated risk adjustment program should be modified based on analysis 
of more recent data and changes (if any) in market dynamics, while 
weighing the tradeoffs of refinements with continuing to provide 
stability and predictability. Throughout this rule, we have identified 
several specific risk adjustment topics

[[Page 17483]]

we are currently assessing, anticipate seeking stakeholder feedback on, 
and may contemplate changes for future benefit years through notice-
and-comment rulemaking.
    We continuously evaluate whether improvements are needed to the HHS 
risk adjustment methodology, and will continue to do so as additional 
years' data become available. For example, beginning with the 2018 
benefit year, we adopted a 14 percent reduction to the statewide 
average premium to account for administrative costs that are unrelated 
to the claims risk of the enrollee population.\39\ While low cost plans 
are not necessarily efficient plans,\40\ we believe this adjustment 
differentiates between premiums that reflect savings resulting from 
administrative efficiency from premiums that reflect healthier-than-
average enrollees. HHS also modified the risk adjustment methodology 
beginning with the 2018 benefit year by incorporating a high-cost risk 
pool adjustment to mitigate residual incentives for risk selection to 
avoid high-cost enrollees, to better account for the average risk 
associated with the factors used in the HHS risk adjustment models, and 
to ensure that the actuarial risk of a plan with high-cost enrollees is 
better reflected in transfers to issuers with high actuarial risk.\41\ 
Other recent changes made to the HHS risk adjustment program include 
the incorporation of a partial year adjustment factor and prescription 
drug utilization factors.\42\
---------------------------------------------------------------------------

    \39\ 81 FR 94099.
    \40\ If a plan is a low-cost plan with low claims costs, it 
could be an indication of mispricing, as the issuer should be 
pricing for average risk.
    \41\ See 81 FR 94080.
    \42\ See 81 FR at 94071 and 94074.
---------------------------------------------------------------------------

    However, at this time, we decline to amend the risk adjustment 
methodology to include a CME index or a similar care coordination 
adjustment. As we previously noted,\43\ a change of this magnitude 
requires significant study and evaluation. Although this type of change 
is not feasible at present, we will continue to examine the 
feasibility, specificity, and sensitivity of measuring care management 
effectiveness through enrollee-level EDGE data for the individual, 
small group, and merged markets, and the benefits of incorporating such 
measures in the HHS risk adjustment transfer methodology in future 
benefit years, either through future rulemaking or other opportunities 
in which the public can submit comments. We believe that a robust risk 
adjustment program encourages issuers to improve care management 
effectiveness, as doing so would reduce plans' medical costs. As we 
explain above, use of statewide average premium in the HHS risk 
adjustment state payment transfer formula incentivizes plans to apply 
effective care management techniques to reduce losses, whereas use of a 
plan's own premium could be inflationary as it benefits plans with 
higher-than-average costs and premiums. While effective care management 
may make a plan more likely to have lower costs and premiums, we do not 
believe that care management strategies necessarily make the plan more 
likely to enroll lower-than-average risk enrollees. As we noted in the 
proposed rule, implementation of effective care management strategies 
may particularly attract high-risk enrollees with complex conditions 
that incur repeat utilization of services.
---------------------------------------------------------------------------

    \43\ See 83 FR at 93425.
---------------------------------------------------------------------------

    In addition, there are many reasons why an issuer could have lower-
than-average premiums. For example, the low premium could be the result 
of efficiency, mispricing, a strategy to gain market share, or some 
combination thereof. As such, we disagree with the comment that the 
risk adjustment state payment transfer formula unfairly results in 
enrollees that choose narrow networks subsidizing enrollees in broader 
networks, including enrollees in plans issued by dominant carriers. 
Networks are just one of many plan design characteristics that are 
captured through the use of the statewide average premium in the state 
payment transfer formula, which is designed to discourage the creation 
of plan designs and marketing strategies to avoid high-risk enrollees, 
in keeping with the goals of the risk adjustment program. Thus, to the 
extent certain plan network designs attract sicker-than-average 
enrollees, the risk adjustment program assesses the level of risk and 
compensates those plans for the incremental risk.
    We have previously considered other model changes, including the 
adoption of a two-stage adult model. Specifically, as discussed in the 
2018 Payment Notice proposed rule,\44\ we considered the use of a 
constrained regression approach under which we would have estimated the 
adult risk adjustment model using only the age-sex variables. Under 
this approach, we would have then re-estimated the model using the full 
set of HCCs, while constraining the value of the age-sex coefficients 
to be the same as those from the first estimation. We also considered 
creating separate models for enrollees with and without HCCs to derive 
two separate sets of age-sex coefficients. We evaluated the effect of 
these possible modifications, and ultimately decided to not move 
forward with such changes due to concerns of significantly 
undercompensating plans with higher-than-average actuarial risk.\45\
---------------------------------------------------------------------------

    \44\ 81 FR 61455 at 61473.
    \45\ 81 FR at 94083.
---------------------------------------------------------------------------

    We continue to evaluate ways to improve the risk prediction of the 
HHS risk adjustment models under various approaches to model estimation 
that might more precisely account for the non-linearities in plan 
liability as referenced in the 2016 Risk Adjustment White Paper.\46\ We 
are continuing to investigate HCC count models whereby the number of an 
enrollee's HCCs would be considered in calculating an enrollee's risk 
score, similar to the proposed Medicare Advantage risk adjustment model 
incorporating HCC counts.\47\ As another alternative, we are evaluating 
whether a non-linear term might improve the prediction of the models 
over the current linear model specification method for the adult 
models. For example, this non-linear method would include an additive 
term that is the sum of the risk score exponentiated to a factor solved 
by the models. The added non-linear term would be a measure of overall 
disease burden in which having combinations of HCCs can have a larger 
effect than the sum of the individual HCCs.
---------------------------------------------------------------------------

    \46\ Available at https://www.cms.gov/CCIIO/Resources/Forms-
Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-
032416.pdf.
    \47\ Advance Notice of Methodological Changes for Calendar Year 
(CY) 2020 for the Medicare Advantage (MA) CMS-HCC Risk Adjustment 
Model. December 20, 2018. https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2020Part1.pdf.
---------------------------------------------------------------------------

    We continue to evaluate alternative modeling approaches while 
considering several important trade-offs between making improvements to 
risk prediction and the year-to-year predictability of the models. We 
also are examining any shortcomings of the potential alternatives that 
include additional complexity, lack of transparency, and potential 
upcoding incentives. For example, because issuers would receive an 
incremental additional factor for coding another HCC, there might be an 
incentive for upcoding, particularly with a count model. We believe 
that these alternative approaches require further investigation prior 
to making any of these types of changes to the models. For these 
reasons, we intend to solicit comments in the future on potential 
proposed improvements to the current models, as well as alternative 
modeling methods involving either non-linear or count models for 
potential use in future benefit years of HHS-operated

[[Page 17484]]

risk adjustment model recalibration. We would especially be interested 
in comments regarding the factors HHS should consider in evaluating 
performance and their effects on subgroups in the population. We intend 
to also seek comment on the trade-offs we should consider, along with 
other risk adjustment topics.
    Comment: One commenter requested that HHS reopen rulemaking 
proceedings, reconsider, and revise the Payment Notices for the 2017, 
2018, and 2019 benefit years regarding the risk adjustment program 
under section 553(e) of the Administrative Procedure Act.
    Response: The requests related to the 2017, 2018, and 2019 benefit 
year rulemakings are outside the scope of the proposed rule and this 
final rule, which is limited to the 2020 benefit year.
i. State Flexibility Requests (Sec.  153.320(d))
    In the 2019 Payment Notice, we provided states the flexibility to 
request a reduction to the otherwise applicable risk adjustment 
transfers calculated under the HHS-operated risk adjustment 
methodology, which is calibrated on a national dataset, for the state's 
individual, small group, or merged markets, by up to 50 percent to more 
precisely account for differences in actuarial risk in the applicable 
state's market(s). We finalized that any requests received will be 
published in the respective benefit year's proposed notice of benefit 
and payment parameters, and the supporting evidence for the request 
will be made available for public comment.\48\
---------------------------------------------------------------------------

    \48\ 2019 Payment Notice Final Rule, 83 FR 16930 (April 17, 
2018) and Sec.  153.320(d)(3).
---------------------------------------------------------------------------

    In accordance with Sec.  153.320(d)(2), beginning with the 2020 
benefit year, states must submit such requests with the supporting 
evidence and analysis outlined under Sec.  153.320(d)(1) by August 1st 
of the calendar year that is 2 calendar years prior to the beginning of 
the applicable benefit year. If approved by HHS, state reduction 
requests will be applied to the plan PMPM payment or charge transfer 
amount (Ti in the state payment transfer calculation below).
    We proposed to amend Sec.  153.320(d)(3) to add language to provide 
that if the state requests that HHS not make publicly available certain 
supporting evidence and analysis because it contains trade secrets or 
confidential commercial or financial information within the meaning of 
the HHS Freedom of Information Act (FOIA) regulations at 45 CFR 
5.31(d), HHS will do so, making available on the CMS website only the 
supporting evidence submitted by the state that is not a trade secret 
or confidential commercial or financial information. Similar to the 
rate review program established under section 2794 of the PHS Act, HHS 
would release only information that is not a trade secret or 
confidential commercial or financial information as defined under the 
HHS FOIA regulations.\49\ In these circumstances, similar to the 
federal rate review requirements, we proposed that any states 
requesting a reduction provide a version for public release that 
redacts the trade secret and confidential commercial or financial 
information as defined under the HHS FOIA regulations, while also 
providing an unredacted version to HHS for its review of the state's 
reduction request. We also proposed that state requests for individual 
market risk adjustment transfer reductions would be applied to both the 
catastrophic and non-catastrophic individual market risk pools, unless 
state regulators request otherwise.
---------------------------------------------------------------------------

    \49\ See Sec.  154.215(h)(2).
---------------------------------------------------------------------------

    We are finalizing our amendment to Sec.  153.320(d)(3) to add 
language to provide that if the state requests that HHS not make 
publicly available certain supporting evidence and analysis because it 
contains trade secrets or confidential commercial or financial 
information within the meaning of the HHS FOIA regulations at 45 CFR 
5.31(d), HHS will make available on the CMS website only the supporting 
evidence submitted by the state that is not a trade secret or 
confidential commercial or financial information by posting a redacted 
version of the state's supporting evidence. In light of comments 
received, we are not finalizing our proposal to apply requests for 
individual market risk adjustment transfer reductions to both the 
catastrophic and non-catastrophic individual market risk pools within 
the state, unless the state requested otherwise.
    For the 2020 benefit year, HHS received a request to reduce risk 
adjustment transfers for the Alabama small group market by 50 percent. 
Alabama's request states that the presence of a dominant carrier in the 
small group market precludes the HHS-operated risk adjustment program 
from working as precisely as it would with a more balanced distribution 
of market share. The state regulators stated that their review of the 
risk adjustment payment issuers' financial data suggested that any 
premium increase resulting from a reduction to risk adjustment payments 
of 50 percent in the small group market for the 2020 benefit year will 
not exceed 1 percent, the de minimis premium increase threshold. We 
sought comment on Alabama's request to reduce risk adjustment transfers 
in the small group market by 50 percent for the 2020 benefit year. The 
request and additional documentation submitted by Alabama was posted 
under the ``State Flexibility Requests'' heading at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/. In light of our analysis of the information 
submitted with Alabama's request and the comments received, we are 
approving Alabama's request to reduce risk adjustment transfers in the 
small group market for the 2020 benefit year by 50 percent.
    The following is a summary of the public comments we received on 
our proposals regarding state flexibility requests under Sec.  
153.320(d), and on Alabama's 2020 benefit year reduction request.
    Comment: Commenters supported the ability of states to provide 
redacted versions of public-facing documents, although two raised 
questions about the scope of the redactions and whether the resulting 
documents would be sufficient to permit an effective review by 
interested parties.
    Response: We are finalizing this amendment as proposed, as we 
believe it is important to protect information that contains trade 
secrets or confidential commercial or financial information within the 
meaning of the HHS FOIA regulations at Sec.  5.31(d). However, we will 
seek to implement an approach with targeted redactions focused on 
information that would be considered trade secrets or confidential 
commercial, or financial information under Sec.  5.31(d), to support 
effective review by interested parties.
    Comment: One commenter opposed the application of state individual 
market risk adjustment transfer reduction requests to both the 
individual market catastrophic and non-catastrophic risk pools within 
the state. The commenter noted that the individual market catastrophic 
and non-catastrophic risk pools have different characteristics that 
impact the size of transfers.
    Response: After consideration of the commenters' concerns, we are 
not finalizing the proposed default to extend a state individual market 
reduction request to adjust transfers in both the individual 
catastrophic and non-catastrophic risk pools, unless the

[[Page 17485]]

state regulators request otherwise. When a state submits a reduction 
request related to the individual market transfers under the HHS state 
payment transfer formula, it will need to outline the risk pools the 
request and analysis apply to as part of its submission under Sec.  
153.320(d)(1). We are amending the regulatory language at Sec.  
153.320(d) to specifically reference state market risk pools consistent 
with this approach and to make some technical edits.
    Comment: The majority of comments about Alabama's state flexibility 
request expressed support for the state's request, with many stating 
that states are best equipped to evaluate the needs of their insurance 
markets. Commenters opposing this request pointed to the fact that 
states can elect to operate the PPACA risk adjustment program and 
propose their own risk adjustment methodology, or that the current HHS-
operated risk adjustment methodology is operating as intended. Multiple 
commenters expressed concern regarding the methodology Alabama used to 
provide evidence supporting its request, each stating that a more 
thorough actuarial analysis was needed, and some pointed to the 
requested 50 percent reduction as a crude and blunt figure not based on 
data.
    Response: We agree that states are best equipped to understand the 
needs of their insurance markets and in the 2019 Payment Notice, HHS 
provided the flexibility for these reduction requests when a state 
elects not to operate the PPACA risk adjustment program. For some 
states, an adjustment to transfers calculated by HHS under the state 
payment transfer formula may more precisely account for cost 
differences attributable to adverse selection in the respective state 
market risk pools. Further, allowing these adjustments can account for 
the effect of state-specific rules or unique market dynamics that may 
not be captured in the HHS methodology, which is calibrated on a 
national dataset, without the necessity for states to undertake the 
burden and cost of operating their own PPACA risk adjustment program.
    We reviewed Alabama's supporting evidence regarding the state's 
unique small group market dynamics that it believes warrant an 
adjustment to the HHS calculated risk adjustment small group market 
transfers for the 2020 benefit year. Alabama provided information 
demonstrating the presence of a dominant carrier in the small group 
market precludes the HHS-operated risk adjustment transfer methodology 
from working as precisely as it would with a more balanced distribution 
of market share. Alabama state regulators noted they do not assert that 
the HHS formula is flawed, only that it results in imprecise results in 
the state's small group market that could further reduce competition 
and increase costs for consumers. The state regulators also provided 
information demonstrating that the request would have a de minimis 
impact on necessary premium increase for payment issuers, consistent 
with Sec.  153.320(d)(1)(iii). We note that HHS reviewed the unredacted 
state supporting analysis in evaluating Alabama's request, along with 
other data available to HHS. We found the supporting analysis submitted 
by Alabama to be sufficient in evaluating the market-specific 
circumstances validating Alabama's request.
    Based on our review, we agree that any necessary premium increase 
for issuers likely to receive payments as a result of a 50 percent 
reduction to risk adjustment transfers in the Alabama small group 
market for the 2020 benefit year would not exceed 1 percent. HHS has 
determined that the state has demonstrated the existence of relevant 
state-specific factors that warrant an adjustment to more precisely 
account for relative risk differences and that the adjustment would 
have a de minimis effect. Therefore, we are approving Alabama's 
requested reduction under Sec.  153.320(d)(4)(i)(B) based on the state 
regulators' identification of unique state-specific factors in the 
Alabama small group market and the supporting analysis of a de minimis 
effect of the reduction requested. The 50 percent reduction will be 
applied to the 2020 benefit year plan PMPM payment or charge transfer 
amount (Ti in the state payment transfer calculation below) 
for the Alabama small group market.
    We also note that state regulators seeking a reduction to risk 
adjustment transfers in the state's individual catastrophic risk pool, 
individual non-catastrophic risk pool, small group market or a merged 
market for the 2021 benefit year should submit supporting materials to 
HHS as established under Sec.  153.320(d). We will review any requests 
received on an annual basis, will make the supporting evidence publicly 
available for comment in the proposed notice of benefit and payment 
parameters for the respective benefit year, and will consider the 
relevant comments in our review of the state request for the applicable 
benefit year.
ii. The Risk Adjustment Transfer Methodology
    Although the proposed HHS risk adjustment transfer methodology for 
the 2020 benefit year is unchanged from what was finalized in the 2019 
Payment Notice (83 FR 16954 through 16961), we believe it is useful to 
republish the calculation in its entirety. Additionally, we are 
republishing the description of the administrative cost reduction to 
the statewide average premium and high-cost risk pool factors, although 
these factors and terms also remain unchanged in this final rule.\50\ 
Transfers (payments and charges) under the state payment transfer 
formula will be calculated as the difference between the plan premium 
estimate reflecting risk selection and the plan premium estimate not 
reflecting risk selection. The state payment transfer calculation that 
is part of the HHS risk adjustment transfer methodology is:
---------------------------------------------------------------------------

    \50\ See 83 FR 16930 at 16960.
    [GRAPHIC] [TIFF OMITTED] TR25AP19.000
    
---------------------------------------------------------------------------
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 will be summed across all risk adjustment covered 
plans in the risk pool in the market in the state.
    The difference between the two premium estimates in the state 
payment transfer formula determines whether a plan pays a risk 
adjustment charge or receives a risk adjustment payment. The value of 
the plan average risk score by itself does not determine whether a plan 
will be assessed a charge or receive a payment--even if its risk score 
is greater than 1.0, it is possible that the plan will be assessed a 
charge if the premium

[[Page 17486]]

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 
under the state payment transfer formula are calculated at the state 
market risk pool level, and catastrophic plans are treated as a 
separate risk pool for purposes of the risk adjustment state payment 
transfer calculations.\51\ This resulting PMPM plan payment or charge 
will be multiplied by the number of billable member months to determine 
the plan's payment or charge based on plan liability risk scores for a 
plan's geographic rating area for the risk pool market within the 
state.
---------------------------------------------------------------------------

    \51\ As detailed elsewhere in this final rule, catastrophic 
plans and non-catastrophic plans and merged market plans are 
considered part of the individual market for purposes of the 
national high-cost risk pool payment and charge calculations.
---------------------------------------------------------------------------

    We defined the cost scaling factor, or the statewide average 
premium term, as the sum of the average premium per member month of 
plan i (Pi) multiplied by plan i's share of statewide 
enrollment in the market risk pool (si). The statewide 
average premium will be adjusted to remove a portion of the 
administrative costs that do not vary with claims (14 percent) as 
follows:

PS = ([Sigma]i(si [middot] Pi)) * (1 -0.14) = ([Sigma]i(si [middot] 
Pi)) * 0.86

Where:

si = plan i's share of statewide enrollment in the market in the 
risk pool;
Pi = average premium per member month of plan i.

    The high-cost risk pool adjustment amount will be added to the 
state payment transfer formula to account for: (1) The payment term, 
representing the portion of costs above the threshold reimbursed to the 
issuer for high-cost risk pool payments (HRPi), if applicable; and (2) 
the charge term, representing a percentage of premium adjustment, which 
is the product of the high-cost risk pool adjustment factor (HRPCm) for 
the respective national high-cost risk pool m (one for the individual 
market, including catastrophic, non-catastrophic and merged market 
plans, and another for the small group market), and the plan's total 
premiums (TPi). For this calculation, we will use a percent of premium 
adjustment factor that is applied to each plan's total premium amount.
    The total plan transfers for a given benefit year will be 
calculated as the product of the plan PMPM's transfer amount 
(Ti) multiplied by the plan's billable member months 
(Mi), plus the high-cost risk pool adjustments. The total 
plan transfer (payment or charge) amounts under the HHS risk adjustment 
transfer methodology for a benefit year will be calculated as follows:

Total transferi = (Ti [middot] Mi) + (HRPi-(HRPCm [middot] TPi)

Where:

Total Transferi = Plan i's total HHS risk adjustment program 
transfer amount;
Ti = Plan i's PMPM transfer amount based on the state transfer 
calculation;
Mi = Plan i's billable member months;
HRPi = Plan i's total high-cost risk pool payment;
HRPCm = High-cost risk pool percent of premium adjustment factor for 
the respective national high-cost risk pool m;
TPi = Plan i's total premium amounts.

    As we noted above, we approved Alabama's small group market 
reduction request for the 2020 benefit year. The approved reduction 
percentage (50 percent) will be applied to the 2020 benefit year plan 
PMPM payment or charge transfer amount (Ti) under the state 
payment transfer calculation for the Alabama small group market risk 
pool. The Alabama reduction to the PMPM transfer amounts is not shown 
in the HHS risk adjustment state payment transfer formula above. While 
we note that we addressed comments regarding the high-cost risk pool 
transfer calculation in the high-cost risk pool section above and 
comments regarding the cost-scaling factor in the state payment 
transfer formula in the overview of the transfer methodology section 
above, the following is a summary of the other public comments we 
received on the total plan transfer calculation published in the 
proposed rule.
    Comment: One commenter supported HHS reducing the statewide average 
premium to account for costs associated with administrative expenses 
that do not vary with claims. Another commenter recommended that HHS 
publish the analysis used to determine the 14 percent administrative 
expense factor, including the specific line items from the Medical Loss 
Ratio (MLR) Annual Reporting Form that were included as administrative 
expenses that do not vary with claims to determine the 14 percent 
reduction of premium.
    Response: As detailed in the 2018 Payment Notice,\52\ to derive 
this parameter, we analyzed and categorized administrative and other 
non-claims expenses in the MLR Annual Reporting Form,\53\ and 
estimated, by category, the extent to which the expenses varied with 
claims. We compared those expenses to the total costs that issuers 
finance through premiums, including claims, administrative expenses, 
and taxes, netting out claims costs financed through cost-sharing 
reduction payments.\54\ We compared these expenses to total costs, 
rather than directly to premiums, to ensure that the estimated 
administrative cost percentage was not distorted by under- or over-
pricing during the years for which MLR data are available. Using this 
methodology, we determined that the mean administrative cost percentage 
is 14 percent. While we are assessing whether other data sources might 
be able to supplement this analysis for potential updates for future 
years, we continue to believe that the current percentage represents a 
reasonable percentage of administrative costs on which risk adjustment 
transfers should not be calculated.
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    \52\ 81 FR 94100.
    \53\ To estimate the administrative cost parameter, we used 
information in the MLR Annual Reporting Form on health care quality 
improvement expenses incurred, the federal and state taxes and 
licensing on regulatory fees, and other non-claims costs. We also 
assumed 25 percent of general administrative expenses, as reported 
on the MLR Annual Reporting Form would be included in the 
administrative cost parameter. Information on the medical loss ratio 
data are available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
    \54\ The analysis used 2016 CSR payment data.
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c. Risk Adjustment Issuer Data Requirements (Sec. Sec.  153.610, 
153.710)
    In the 2018 Payment Notice,\55\ we finalized the collection of 
masked enrollee-level data from issuers' EDGE servers (referred to as 
``enrollee-level EDGE data'') beginning with the 2016 benefit year to 
recalibrate the HHS risk adjustment models and inform development of 
the AV Calculator and methodology.
---------------------------------------------------------------------------

    \55\ See 81 FR 94058 at 94101.
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    In the 2018 Payment Notice, we also stated that we would consider 
using this enrollee-level EDGE data in the future to calibrate other 
HHS programs in the individual and small group markets, and to produce 
a public use file to help governmental entities and independent 
researchers better understand these markets. We noted that a public use 
file derived from these data would be de-identified in accordance with 
the Health Insurance Portability and Accountability Act of 1996 (HIPAA) 
requirements, would not include proprietary issuer or plan identifying 
data, and would adhere to HHS rules and policies regarding protected 
health information (PHI) and personally identifiable information (PII). 
We also described in guidance the data elements in the enrollee-level 
EDGE data set and

[[Page 17487]]

the data elements proposed to be made available for research 
requests.\56\
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    \56\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Enrollee-level-EDGE-Dataset-for-Research-Requests-05-18-18.pdf.
---------------------------------------------------------------------------

    Under the HIPAA safe harbor for de-identification of data at 45 CFR 
164.514(b)(2), public use files are considered de-identified if they 
exclude 18 specific identifiers that could be used alone or in 
combination with other information to identify an individual who is a 
subject of the information. To make the enrollee-level EDGE data 
available as a public use file that comports with the requirements of 
Sec.  164.514(b)(2), we would have to remove dates (other than the 
year) and ages for enrollees ages 90 or older,\57\ and determine that 
the information could not be used alone or in combination with other 
information to identify an individual who is a subject of the 
information. Commenters stated that a public use file would be limited 
in its usefulness because it excludes dates that would be useful to 
conduct health services research. A limited data set, as defined at 
Sec.  164.514(e)(2), may include dates, which could enable requestors 
to do analyses they would not be able to do with a public use file. In 
addition, under Sec.  164.514(e)(4), a limited data set recipient must 
enter into a data use agreement that establishes the permitted uses or 
disclosures of the information and prohibits the recipient from 
identifying the information. We believe entities seeking to use the 
enrollee-level EDGE data will be able to better understand the 
individual and small group markets with a limited data set.
---------------------------------------------------------------------------

    \57\ HHS does not currently collect any of the other data 
elements under Sec.  164.514(b)(2) that would require de-
identification.
---------------------------------------------------------------------------

    Thus, in the proposed rule, we proposed to create and make 
available by request a limited data set file rather than a public use 
file, as we believe a limited data set file will be more useful to 
requestors for research, public health, or health care operations 
purposes. We noted that, under this proposal, we would make enrollee-
level EDGE data, beginning with the 2016 benefit year, available as a 
``limited data set'' file under Sec.  164.514(e). This limited data set 
file would not include the direct identifiers of the individual or of 
relatives, employers, or household members of the individual, which are 
required to be removed under the limited data set definition at Sec.  
164.514(e)(2) and which issuers do not submit to their EDGE servers. We 
also proposed to limit disclosures of the limited data set to 
requestors who seek these data for research, public health, or health 
care operations purposes, as those terms are defined under Sec.  
164.501. We stated that we would require qualified requestors to sign a 
data use agreement to ensure these data will be maintained, used, and 
disclosed only as permitted under the HIPAA Privacy Rule, and to ensure 
that any inappropriate uses or disclosures are reported to HHS. We 
noted that HHS components would also be able to request the limited 
data set file for research, public health, or health care operations 
purposes, as those terms are defined under Sec.  164.501. We also 
clarified that, if the proposal is finalized, we would make a limited 
data set file available on an annual basis, reflecting enrollee-level 
data from the most recent benefit year available on EDGE servers. We 
stated that if we finalize the proposal to make a limited data set file 
available, HHS would not offer a public use file based on the enrollee-
level EDGE data. We sought comment on this proposal.
    In addition, we explained in the proposed rule that we received 
feedback in response to the guidance describing the data elements to be 
made available as part of the public use file for research requests 
\58\ noting that researchers would benefit from additional data 
elements on enrollees' geographic identifiers, enrollees' income level, 
provider identifier, provider's geographic location, hashed claim 
identifier, enrollees' plan benefit design details, and enrollees' out-
of-pocket costs by cost-sharing type (deductible, coinsurance, and 
copayment). We noted that we began collecting a claim identifier \59\ 
to associate all services rendered under the same claim beginning with 
the 2017 benefit year enrollee-level EDGE data. Therefore, we stated 
that if we were to finalize the limited data set proposal, we would be 
able to include this grouped claims identifier beginning for the 2017 
benefit year enrollee-level EDGE limited data set file. However, 
regarding the other data elements commenters requested, we explained 
that either issuers do not submit them to their EDGE servers, or we 
currently do not extract them from issuers' EDGE servers due to 
concerns about the ability to use the data element(s) to identify 
issuers or plans. For example, issuers do not currently submit data to 
their EDGE servers on enrollees' plan benefit design, specific cost-
sharing elements (deductibles, copayments), provider identifiers, 
providers' geographic location, enrollees' income level, or enrollees' 
geographic location more specific than the rating area, and therefore, 
we are unable to extract such information as part of the enrollee-level 
EDGE data. However, issuers do submit enrollees' state and rating areas 
as part of the EDGE server submissions, making it possible to extract 
these data elements from the issuers' EDGE servers as part of the 
enrollee-level EDGE data. We stated in the proposed rule that, if we 
were to extract state and rating area data elements, we could also make 
such information available as part of the proposed enrollee-level EDGE 
limited data set file. We stated in the proposed rule that we continue 
to believe the enrollee-level EDGE data can increase cost transparency 
for consumers and stakeholders for the individual and small group 
markets, and can be a useful resource for government entities and 
independent researchers to better understand these markets. We also 
recognized access and use of enrollee-level EDGE data should continue 
to safeguard enrollees' privacy and security and issuers' proprietary 
information. We reiterated that we use the enrollee-level EDGE data to 
recalibrate the HHS risk adjustment models and inform development of 
the AV Calculator and methodology and stated that extracting additional 
state and rating area information could enable HHS to assess the impact 
of differences in geographic factors in the HHS risk adjustment 
methodology. In addition, we stated that stakeholders have noted that 
adding geographic elements to the AV Calculator would better estimate 
the AV of plans based on the cost differences across regions. 
Extraction of these geographic details (state and rating area) from 
issuers' EDGE servers could also help support other HHS programs and 
policy priorities, as well as provide additional data elements for 
researchers. We noted that although these geographic data elements are 
not currently extracted from the enrollee-level EDGE data set, 
extracting them would not increase burden for issuers, as issuers 
already submit these data elements as part of the EDGE server data 
submission process. We stated in the proposed rule that if we were to 
extract state and rating area

[[Page 17488]]

information, we would do so as part of the enrollee-level EDGE data 
extraction and would use this information to support the recalibration 
and policy development related to the HHS-operated risk adjustment 
program, the AV Calculator and methodology, as well as other HHS 
programs in the individual and small group (including merged) markets. 
We sought comment on whether to extract state and rating area 
information for enrollees as part of the enrollee-level EDGE data. We 
also sought comment on how state and rating area information could be 
used in the HHS-operated risk adjustment program, AV Calculator and 
methodology, and other HHS programs in the individual and small group 
(including merged) markets, as well as on how these data elements could 
benefit researchers and public health. We sought comment on, if we were 
to extract these data elements, whether to make state and rating area 
information available as part of the proposed limited data set file 
that would be made available to qualified requestors. We sought comment 
on the advantages and disadvantages of using state and rating area 
information for recalibration of the HHS-operated risk adjustment 
program, the AV Calculator and methodology, and other HHS individual 
and small group (including merged) market programs. In addition, we 
sought specific comment on possible research purposes for these data 
elements, whether the benefits of extracting these additional data 
elements outweigh the potential risk to issuers' proprietary 
information, and whether extraction of these data elements is 
consistent with the goals of a distributed data environment.
---------------------------------------------------------------------------

    \58\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Enrollee-level-EDGE-Dataset-for-Research-Requests-05-18-18.pdf.
    \59\ For the 2017 benefit year, we have included a unique claim 
identifier field, a hashed claim identifier, in the data extract. 
The claim identifier is a random hashed number assigned for each set 
of service line items associated with each claim, and cannot be used 
to identify the enrollee, plan or medical record. Including this 
claim identifier will allow data users to associate all service line 
items rendered under the same claim and also permit more rigorous 
checks of data quality.
---------------------------------------------------------------------------

    We also sought specific comment on the other data elements outlined 
in the proposed rule that commenters requested be part of the enrollee-
level EDGE dataset, but that issuers do not currently submit to their 
EDGE servers (for example, enrollees' income level, provider 
identifier, provider's geographic location, hashed claim 
identifier,\60\ enrollees' plan benefit design details, and enrollees' 
out-of-pocket costs by cost-sharing type, such as deductible, 
coinsurance, and copayment), and other enrollment and claims data 
elements not otherwise described in the proposed rule, and whether 
collection of such data elements could benefit the calibration of the 
HHS risk adjustment program, the AV calculator and methodology, and 
other HHS individual and small group (including merged) market 
programs. We also sought specific comment with examples on whether 
other data elements that issuers do not currently submit to their EDGE 
servers could benefit further research, public health, or health care 
operations as part of a limited data set file made available to 
qualified requestors.
---------------------------------------------------------------------------

    \60\ As noted previously, we began extracting a hashed claim 
identifier to identify all the service line items that belong to the 
same claim beginning with the 2017 benefit year enrollee-level EDGE 
extract.
---------------------------------------------------------------------------

    Finally, we proposed to extend the use of enrollee-level EDGE data 
and reports extracted from issuers' EDGE servers (including data 
reports and ad hoc querying tool reports) to calibrate and 
operationalize our individual and small group (including merged) market 
programs (for example, the HHS-operated risk adjustment program, the AV 
calculator and methodology, and the out-of-pocket calculator), as well 
as to conduct policy analysis for the individual and small group 
(including merged) markets (for example, to assess the market impacts 
of policy options being deliberated). We explained that we believe 
these additional uses of the enrollee-level EDGE data would enhance our 
ability to develop and set policy for the individual and small group 
(including merged) markets and avoid burdensome data collections from 
issuers.
    To further our commitment to increasing transparency in health care 
markets and help the public better understand these markets, we are 
finalizing our proposal with one modification. Under our final policy, 
we will create and make available, on an annual basis, enrollee-level 
EDGE data as a limited data set file for qualified requestors who seek 
these data for research purposes. We will not make this limited data 
set available to requestors for public health or health care operations 
activities. While these purposes are permitted by the HIPAA Privacy 
Rule, in light of comments received and HHS' operational limitations, 
HHS will not make this limited data set file available to requestors 
for public health or health care operations activities at this time. We 
note that we may consider exploring the use of the public health and 
heath care operations pathways for making the limited data set file 
available in the future. We did not propose to extract state and rating 
area information from issuers' EDGE servers or collect additional data 
elements, and based on comments received, at this time, we do not 
believe the benefits from additional data element extractions or 
collections would outweigh the costs of potential increased risk to 
issuers' proprietary information and increased issuer burden. As noted 
in the proposed rule, we will include the grouped claims identifier 
beginning with the 2017 benefit year enrollee-level EDGE limited data 
set file, as that is the first year that data element is available. We 
are finalizing our proposal to allow HHS to use the enrollee-level EDGE 
data and reports extracted from issuers' EDGE servers (including data 
reports and ad hoc querying tool reports) to calibrate and 
operationalize our individual and small group (including merged) market 
programs, including to conduct recalibration of the HHS risk adjustment 
program and to make updates to the AV Calculator, and to conduct policy 
analysis for the individual and small group (including merged) markets. 
We believe these additional uses of the enrollee-level EDGE data and 
reports will enhance our ability to develop and set policy for the 
individual and small group (including merged) markets and avoid 
burdensome data collections from issuers. We clarify that our policies 
regarding HHS uses of the enrollee-level EDGE data apply to the HHS 
components that currently receive and use such data for purposes of the 
HHS risk adjustment program. As we stated in the proposed rule, other 
HHS components will be able to request the EDGE limited data set file 
for research purposes, as that term is defined under Sec.  164.501. We 
also note that the enrollee-level EDGE data may be subject to 
disclosure as otherwise required by law.\61\
---------------------------------------------------------------------------

    \61\ See, for example, 2 U.S.C. 601(d).
---------------------------------------------------------------------------

    Comment: Many commenters supported HHS' proposal to create and make 
available by request a limited data set file using enrollee-level EDGE 
data. These commenters noted that the limited data set file will 
support research, public health, external accountability, and 
transparency. One commenter stated these data will provide researchers 
with a better understanding of Exchange functions and enrollees' health 
needs. Another commenter noted these data will help support state 
departments of insurance in the rate review process. However, numerous 
other commenters did not support the proposal to offer a limited data 
set file. Most of these commenters expressed concerns about the 
potential for unauthorized disclosure of PII and issuer proprietary 
information. One commenter stated it was particularly concerned with 
the enrollee-level EDGE data being used for the purpose of health care 
operations. One commenter stated HHS has not provided adequate 
assurances that the information would not be used for unauthorized 
purposes.

[[Page 17489]]

Several commenters expressed concerns about the potential of these data 
to undermine provider contracting and rate negotiations. Some 
commenters noted that offering these data could erode issuer confidence 
and could be used by some issuers to competitively price products and 
game the federal risk adjustment program.
    Response: We appreciate the comments we received on our proposal to 
create and make available by request a limited data set file using the 
enrollee-level EDGE data. We continue to believe the enrollee-level 
EDGE data can increase cost transparency for consumers and stakeholders 
for the individual and small group (including merged) markets and can 
be a useful resource for government entities and independent 
researchers to better understand these markets. These benefits align 
with HHS' goal to promote increased transparency in health insurance 
markets. We also recognize that any access to and use of the enrollee-
level EDGE data should continue to safeguard enrollee privacy and 
security and issuers' proprietary information. While we acknowledge and 
appreciate commenters' concerns, we believe the benefits of making 
these data available for research purposes outweigh the potential risks 
associated with unauthorized disclosure of these data. While some 
commenters stated that the limited data set file will benefit public 
health, others expressed concern. Moreover, HHS does not currently make 
limited data sets available for health care operations or public health 
purposes. Therefore, as discussed above, in light of comments received 
and HHS' operational limitations, HHS will not make this limited data 
set file available to requestors for public health or health care 
operations activities at this time. We note that we intend to use the 
existing process to make limited data set files available and 
requestors will be required to provide a research purpose as part of 
their requests.\62\ We believe the potential risks will be mitigated 
through the existing controls that limit access to these data to 
qualified requestors who seek these data for research purposes, by 
requiring requestors to enter into a data use agreement, and by 
continuing to apply the precautions already in place to mask enrollee 
identifiers. Under Sec.  153.720, issuers do not upload PII to their 
EDGE servers, and must establish and use a unique masked identification 
number for each enrollee and may not include the enrollee's PII in the 
masked enrollee identification number. Furthermore, when HHS extracts 
enrollee-level EDGE data, we create a hashed enrollee identifier, a 
system-generated random number, that cannot be linked back to the 
issuers' EDGE servers to identify the issuer or plan. As we noted in 
the proposed rule and reiterated above, this limited data set file will 
not include the direct identifiers of the individual or of relatives, 
employers, or household members of the individual, which are required 
to be removed under the limited data set definition at Sec.  
164.514(e)(2), as issuers do not upload these identifiers to their EDGE 
servers. Thus, we believe we will continue to protect enrollees' PII 
and issuers' proprietary information. Furthermore, the limited data set 
regulations under Sec.  164.514(e) impose specific limitations on use 
and disclosure of these types of data, and qualified requestors will be 
required to abide by these requirements and our policies for limited 
data sets. Requestors will be required to provide a research purpose as 
part of their request. The data use agreement will require the 
requestors to maintain, use, and disclose the limited data set only as 
permitted under Sec.  164.514(e) and report any inappropriate uses or 
disclosures of these data.\63\ As discussed below, we are not 
finalizing a policy to extract state and rating area information from 
issuers' EDGE servers, and therefore, we will not include those data in 
the limited data set file developed using enrollee-level EDGE data. 
Because the limited data set files will not include issuer or plan 
identifiable information, requestors with access to the limited data 
set files will not receive or be able to misuse any issuer trade secret 
information. Additionally, the extracted enrollee-level EDGE data does 
not include premium information from issuers' EDGE servers and 
therefore requestors will not be able to determine issuer-specific rate 
negotiation information. Furthermore, issuers do not upload provider 
(for example, hospital or physician) identifying information to their 
EDGE servers. Therefore, these types of provider identifiers cannot be 
extracted for the enrollee-level EDGE data collection either, 
mitigating commenters' concerns that the data could reveal issuer-
specific provider contracting or negotiated price information. 
Therefore, we do not believe the enrollee-level EDGE data could be used 
to identify issuer-specific proprietary pricing data.
---------------------------------------------------------------------------

    \62\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/Data-Disclosures-Data-Agreements/DUA_-_NewLDS.html.
    \63\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/Data-Disclosures-Data-Agreements/DUA_-_NewLDS.html.
---------------------------------------------------------------------------

    Comment: One commenter sought clarity on the types of entities that 
can request the limited data set file and the process HHS will use to 
consider requests. Another commenter noted HHS should develop strict 
standards for release of these data as a limited data set for which it 
should seek public comment.
    Response: As described in this rule, the limited data set will be 
made available in accordance with the regulations at Sec.  164.514(e) 
and existing policies and procedures for limited data set requests. The 
limited data set file, when available, would be provided to qualified 
requestors who seek these data for research purposes, consistent with 
other limited data sets made available by CMS.\64\ Requestors will need 
to submit a research purpose statement and sign a data use agreement to 
ensure these data will be used for the stated purpose only and that 
these data will be maintained, used, and disclosed only as permitted by 
the agreement or otherwise required by law. We will have final 
discretion over the decision whether to approve a request for access to 
the limited data set file.
---------------------------------------------------------------------------

    \64\ For information on the CMS limited data set process and 
data use agreements, see https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/Data-Disclosures-Data-Agreements/DUA_-_NewLDS.html#Policies.
---------------------------------------------------------------------------

    Comment: Several commenters expressed concern with any use of state 
and rating area information to support the operation of the risk 
adjustment program and other HHS programs. Some commenters noted 
outside entities could identify issuers and, possibly, individual 
enrollees in a limited data set if it included state and rating area 
data elements, which could risk issuers' proprietary information and 
enrollees' PII. However, some commenters who supported release of a 
limited data set also supported including state and rating area 
information in the limited data set, stating that this information 
would make these data more useful to researchers. Most commenters did 
not support the use of state and rating area information to calibrate 
the AV Calculator. Most commenters noted this would add increased 
complexity with little benefit, cause consumer and issuer confusion, 
and result in unintended consequences affecting the underlying AV 
Calculator and methodology. One commenter stated that there may not be 
adequate data in some states and rating areas to build models for the 
AV Calculator and methodology.
    Response: We appreciate the comments we received regarding

[[Page 17490]]

extraction and use of state and rating area information from issuers' 
EDGE servers. While we believe state and rating area information would 
enhance the usefulness of the enrollee-level EDGE data, including for 
the limited data set file, we agree that the risk of potential 
unauthorized disclosure of issuer- or plan-level information through 
inclusion of geographic identifiers outweighs these benefits. We 
understand that including geographic identifiers in the limited data 
set would enable qualified requestors who receive the limited data set 
file to identify issuers in states or rating areas with only one 
issuer. We appreciate the comments describing concerns regarding the 
extraction of state and rating area data elements, and as we did not 
propose to extract and use those data elements for the enrollee-level 
EDGE data, we are not making any changes in that regard at this time.
    We agree with commenters that using geographic information for the 
AV Calculator and methodology is neither required nor would enhance the 
current methodology. For AV Calculator and methodology updates in 
future years, we will continue to use enrollee-level EDGE data in its 
current format (without the state or rating area information).
    Comment: Many commenters did not support the collection of 
additional data elements, such as enrollees' income level, provider 
identifier, plan benefit design details, and enrollees' out-of-pocket 
costs by cost-sharing type (deductible, coinsurance, and copayment), 
that issuers are not already submitting to their EDGE servers. 
Commenters stated the submission of additional data elements would be 
administratively complex, burdensome, and beyond the minimum necessary 
data elements needed for recalibration of the risk adjustment program. 
One commenter noted HHS should expand the data elements available in 
the limited data set file, but did not provide further specificity, 
including how HHS would do that without first collecting those data 
elements on the issuers' EDGE servers.
    Response: We believe that collection of additional data elements 
that are not currently submitted by issuers to their EDGE servers, such 
as enrollees' plan benefit design details, and enrollees' out-of-pocket 
costs by cost-sharing type (deductible, coinsurance, and copayment), 
would enhance the usefulness of the enrollee-level EDGE data, including 
for the limited data set. However, we acknowledge the commenters' 
concerns that collection of additional data elements on issuers' EDGE 
servers could be administratively complex and burdensome for issuers, 
as it would increase their data collection requirement, and for HHS, as 
these data elements would have to be validated and added to the file 
structure that is submitted through the distributed data environment. 
We recognize the need to balance the benefits of enhanced transparency 
and helping the public better understand these markets against 
minimizing issuer and government costs and burden. As we did not 
propose to make any changes in this regard, we are not making any such 
changes at this time, and will consider whether to propose collection 
of any additional data elements for the EDGE server submissions for 
future benefit years.
    Comment: Some commenters supported HHS broadening its uses of 
enrollee-level EDGE data to improve and administer programs within HHS' 
scope, including to recalibrate the risk adjustment program and the AV 
Calculator and methodology. Most who commented supported HHS broadening 
the use of the enrollee-level EDGE data as proposed. One commenter 
noted HHS should not use these data for any other purpose without 
express issuer permission. Some commenters noted HHS should not use 
EDGE server data outside of the risk adjustment program, stating that 
such use would be inconsistent with the intent of using a distributed 
data environment for administering the risk adjustment program. One 
commenter did not support the use of EDGE data for policy analysis 
outside of the risk adjustment program, and recommended that, if HHS 
proceeds with this proposal, it should define policy analysis and seek 
public comment.
    Response: We are finalizing our proposal to allow HHS to use the 
enrollee-level EDGE data and reports extracted from issuers' EDGE 
servers (including data reports and ad hoc querying tool reports) to 
calibrate and operationalize our individual and small group (including 
merged) market programs (for example, the HHS-operated risk adjustment 
program, the AV Calculator and methodology and the out-of-pocket 
calculator), as well as to conduct policy analysis for the individual 
and small group (including merged) markets. We agree with commenters 
that our use of the enrollee-level EDGE data for these purposes will 
help improve our understanding of the nuances unique to the individual 
and small group (including merged) markets so that we can be responsive 
to market fluctuations and pursue updates to these programs, as 
appropriate. Additionally, we anticipate that leveraging these data in 
this way will increase efficiencies by reducing our need to initiate 
new, potentially burdensome data collections.
    HHS may use the enrollee-level EDGE data to help inform which of 
various policies related to the individual and small group (including 
merged) markets will further HHS' goals to promote transparency, 
support innovation in the private sector, reduce burden on 
stakeholders, and improve program integrity. Generally, policies that 
could be informed by these data would be developed or revised through 
the notice-and-comment rulemaking process. We do not believe using the 
enrollee-level EDGE data and reports extracted from issuers' EDGE 
servers for the purposes we have outlined is inconsistent with the 
intent of using a distributed data environment for the HHS operated 
risk adjustment program. In the 2014 payment notice, we finalized the 
distributed data model for data collection for the risk adjustment and 
reinsurance programs when HHS operates those programs on behalf of a 
State.\65\ In evaluating data collection options, we determined the 
distributed data collection model proved the most effective approach 
for obtaining and processing the data necessary for both reinsurance 
and risk adjustment calculations because such a model would minimize 
issuer burden while protecting enrollees' privacy. We did not propose 
and are not making any changes to the risk adjustment data transfer 
process between issuers and HHS. As discussed previously, we recognize 
the sensitivity of enrollee-level EDGE data and are taking precautions 
to safeguard these data. We believe the analyses and uses described in 
this rule would benefit issuers and the broader individual and small 
group market (including merged market) stakeholders. While we do not 
believe issuer permission is necessary for HHS to use enrollee-level 
EDGE data or reports as HHS would not make issuer proprietary 
information public nor would HHS require issuers to submit additional 
data elements, we appreciate the sensitivities related to enrollee-
level EDGE data and intend to continue following the current process, 
under which we engage in notice-and-comment rulemaking prior to 
expanding uses or disclosures of this data.
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    \65\ 2014 Payment Notice, 78 FR 15497.
---------------------------------------------------------------------------

d. Risk Adjustment Default Charge (Sec.  153.740(b))
    As described below, we are finalizing a change to the timeline for 
publication of the 2017 benefit year risk adjustment data validation 
results and the

[[Page 17491]]

accompanying collection and payment of adjustments related to these 
results. Consistent with those changes, the 2018 benefit year summary 
risk adjustment transfer report issued by June 30, 2019, will not 
reflect the impact of the 2017 benefit year risk adjustment data 
validation adjustments on 2018 risk adjustment transfers, but will 
continue to include information on the assessment and allocation of the 
applicable benefit year's risk adjustment default charges under Sec.  
153.740(b). HHS' calculation of the 2018 benefit year PMPM risk 
adjustment default charge will be equal to the 90th percentile of the 
2018 risk adjustment transfers not adjusted with the results of 2017 
risk adjustment data validation.\66\
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    \66\ As established in the 2015 Payment Notice at 79 FR 13790, a 
PMPM default charge is equal to the product of the statewide average 
premium (expressed as a PMPM amount) for a risk pool and the 75th 
percentile plan risk transfer amount expressed as a percentage of 
the respective statewide average PMPM premiums for the risk pool. 
See 79 FR at 13790. While this percentile was subsequently adjusted 
to the 90th percentile in the 2017 Payment Notice, the PMPM amount 
is otherwise calculated in the same manner. See 81 FR 12237.
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e. Risk Adjustment User Fee for 2020 Benefit Year (Sec.  153.610(f))
    As noted in this rule, if a state is not approved to operate, or 
chooses to forgo operating its own risk adjustment program, HHS will 
operate a risk adjustment program on its behalf. For the 2020 benefit 
year, HHS will operate a risk adjustment program in every state and the 
District of Columbia. As described in the 2014 Payment Notice,\67\ HHS' 
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 PMPM risk adjustment user fee rate specified in the annual HHS 
notice of benefit and payment parameters for the applicable benefit 
year.
---------------------------------------------------------------------------

    \67\ See 78 FR 15409 at 15416.
---------------------------------------------------------------------------

    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, merged, and small 
group markets.
    In the 2019 Payment Notice,\68\ we calculated the federal 
administrative expenses of operating the risk adjustment program for 
the 2019 benefit year to result in a risk adjustment user fee rate of 
$1.80 per billable member per year or $0.15 PMPM, based on our 
estimated contract costs for risk adjustment operations, estimates of 
billable member months for individuals enrolled in risk adjustment 
covered plans, and eligible administrative and personnel costs related 
to the administration of the HHS-operated risk adjustment program. For 
the 2020 benefit year, we proposed to generally use the same 
methodology to estimate our administrative expenses to operate the 
program, with the modifications described in this rule. These costs 
cover development of the risk adjustment models and methodology, 
collections, payments, account management, data collection, data 
validation, program integrity and audit functions, operational and 
fraud analytics, stakeholder training, operational support, and 
administrative and personnel costs dedicated to risk adjustment 
activities related to the HHS-operated program. To calculate the user 
fee, we divided HHS' projected total costs for administering the risk 
adjustment program by the expected number of billable member months in 
risk adjustment covered plans in the 50 states and the District of 
Columbia where HHS will operate risk adjustment for the 2020 benefit 
year.
---------------------------------------------------------------------------

    \68\ 83 FR 16930 at 16972.
---------------------------------------------------------------------------

    We estimated the total cost for HHS to operate the risk adjustment 
program for the 2020 benefit year to be approximately $50 million, and 
the risk adjustment user fee would be $2.16 per billable member per 
year, or $0.18 PMPM. The updated cost estimates attribute all costs 
related to the EDGE server data collection and data evaluation 
(quantity and quality evaluations) activities to the risk adjustment 
program rather than sharing them with the reinsurance program, which is 
no longer operational.\69\ We collected amounts under the reinsurance 
program for administrative expenses related to that program, which 
partially funded contracts that were used for both the risk adjustment 
and reinsurance programs. We no longer allocate indirect costs for 
personnel or administrative costs to the reinsurance program, and are 
reflecting the full value of those costs as part of risk adjustment 
operations for the 2020 benefit year. The risk adjustment user fee 
costs are also estimated to be slightly higher due to increased 
contract costs based on additional activities for the risk adjustment 
data validation program development and execution, including updated 
cost estimates associated with the non-pilot years of the risk 
adjustment data validation program, including estimates for error rate 
adjustments, development of the new risk adjustment data validation 
audit tool, and additional contractor support for risk adjustment data 
validation discrepancies and appeals. The estimated costs also 
incorporate the full personnel and administrative costs associated with 
risk adjustment program development and operations in the risk 
adjustment user fee for the 2020 benefit year. The personnel and 
administrative costs included in the calculation of the 2019 benefit 
year risk adjustment user fee for the 2019 Payment Notice final rule 
incorporated only a portion of the personnel costs, and excluded 
indirect costs. The 2020 benefit year risk adjustment user fee includes 
the full amount for eligible personnel costs, as well as eligible 
indirect costs. Finally, we estimated individual and small group market 
billable member months for the 2020 benefit year to remain roughly the 
same, as observed in the most recent risk adjustment data available for 
the 2017 benefit year.
---------------------------------------------------------------------------

    \69\ Although the 2016 benefit year was the final benefit year 
for the reinsurance program, close-out activities continued in the 
2018 fiscal year, including the collection of the second part of the 
2016 benefit year contributions for contributing entities that 
elected the bifurcated schedule, which were due by November 15, 
2017, and are expected to continue in the 2019 fiscal year.
---------------------------------------------------------------------------

    We received one comment on the proposed risk adjustment user fee 
for the 2020 benefit year, which supported our proposal to establish a 
risk adjustment user fee for the 2020 benefit year of $2.16 per 
billable member per year, or $0.18 PMPM. We are finalizing the risk 
adjustment user fee rate for the 2020 benefit year as proposed.
3. Risk Adjustment Data Validation Requirements When HHS Operates Risk 
Adjustment (Sec.  153.630)
    We conduct risk adjustment data validation under Sec. Sec.  153.630 
and 153.350 in any state where HHS is operating risk adjustment on the 
state's behalf, which for the 2020 benefit year is all 50 states and 
the District of Columbia. The purpose of risk adjustment data 
validation is to ensure issuers are providing accurate and complete 
risk adjustment data to HHS, which is crucial to the purpose and

[[Page 17492]]

proper functioning of the HHS-operated 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 
auditor. 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. Each issuer's initial 
validation audit is followed by a second validation audit, which is 
conducted by an entity HHS retains to verify the accuracy of the 
findings of the initial validation audit. In the proposed rule, we set 
forth a number of proposed amendments and clarifications to the HHS 
risk adjustment data validation program in light of experience and 
feedback from issuers during the first 2 pilot years of the program.
    The following is a summary of the general public comments we 
received related to risk adjustment data validation requirements when 
HHS operates risk adjustment. Additional comments related to the error 
estimation methodology and negative error outliers are discussed later 
in this rule.
    Comment: A few commenters urged HHS to adopt the HEDIS (Healthcare 
Effectiveness Data and Information Set) audit methodology, which only 
requires medical record review for supplemental codes that the plan 
pulls from medical records.
    Response: We continue to seek ways to improve the HHS risk 
adjustment data validation program for both accuracy and user 
experience, and will continue to examine approaches taken by other 
organizations when making updates to the risk adjustment data 
validation process. However, because the intent of risk adjustment data 
validation is to ensure the integrity of the risk adjustment program by 
validate all diagnoses for which an issuer received credit in risk 
adjustment, we believe that risk adjustment data validation should 
include all diagnoses, and not simply be limited to supplemental 
diagnoses. Additionally, we note that the HEDIS audit methodology is a 
two-part process that is customized based on an organization's 
informational systems, and that we believe that the distributed data 
environment precludes the need for such customization. As such, we are 
maintaining our current methodology for risk adjustment data 
validation.
    Comment: A few commenters requested relief for issuers experiencing 
difficulty with obtaining medical records from providers in connection 
with the issuers' risk adjustment data validation. One commenter stated 
that it was having difficulty accessing medical records that included 
mental health or substance use disorder diagnoses because state privacy 
law was more stringent than the relevant federal requirements, and that 
enrollee consent must be obtained even for summary information. Another 
commenter requested that HHS create a process to exempt issuers from 
validating HCCs for which a provider refused to supply a medical record 
and the issuer demonstrated good faith in trying to obtain such record.
    Response: In the 2019 Payment Notice, we finalized Sec.  
153.630(b)(6) to provide relief to issuers that are prohibited from 
obtaining medical records by state privacy laws in response to similar 
concerns expressed by some issuers. We recognize the difficulties that 
federal and state privacy laws can pose to issuers of risk adjustment 
covered plans for purposes of risk adjustment data validation, and our 
intention is not to penalize issuers that seek to obtain the necessary 
information from providers. We are continuing to consider possible 
approaches that permit users to meet the requirements of risk 
adjustment data validation consistent with all applicable privacy laws. 
Although we appreciate the comments, the proposed rule did not propose 
changes to Sec.  153.630(b)(6), and we are not making any changes to 
that provision as part of this final rule.
a. Varying Initial Validation Audit Sample Size (Sec.  153.630(b))
    In the 2014 Payment Notice, we established the risk adjustment data 
validation program that HHS uses when operating risk adjustment on 
behalf of a state. Consistent with Sec.  153.350(a), HHS is required to 
ensure proper validation of a statistically valid sample of risk 
adjustment data from each issuer that offers at least one risk 
adjustment covered plan in that state. The current enrollee sample size 
selected for the initial validation audit is 200 enrollees statewide 
(that is, combining an issuer's individual, small group, and merged 
market enrollees (as applicable) in risk adjustment covered plans in 
the state) for each issuer's Health Insurance Oversight System (HIOS) 
ID, based on sample size precision analyses we conducted using proxy 
data from the Medicare Advantage program. Those analyses calculated a 
range of sample sizes to target a 10 percent precision at a 95 percent 
confidence level. The resulting range of sample sizes were between 100 
and 300, and we selected 200 as a midpoint.\70\ In the 2015 Payment 
Notice, we stated that, after the initial years of risk adjustment data 
validation, we would evaluate our sampling assumptions using actual 
enrollee data and consider using larger sample sizes for issuers that 
are larger or have higher variability in their enrollee risk score 
error rates, and smaller sample sizes for issuers that are smaller or 
have lower variability in their enrollee risk score error rates. We 
also stated that we would use our sampling experience in the initial 
years of risk adjustment data validation to evaluate using issuer-
specific sample sizes.
---------------------------------------------------------------------------

    \70\ See 79 FR 13743 at 13756.
---------------------------------------------------------------------------

    The current initial validation audit sample size of 200 was 
selected to achieve an estimated 10 percent precision, assuming a 
distribution of risk score errors similar to that found in the Medicare 
Advantage risk adjustment data validation program. However, since the 
HCC group failure rate approach to error estimation (referred to as the 
HCC failure rate methodology) was implemented beginning with the 2017 
benefit year of risk adjustment data validation, we anticipate that the 
calculated precision would differ from the estimate we used, which was 
based on the Medicare Advantage error rate data. Therefore, beginning 
with the 2019 benefit year of risk adjustment data validation,\71\ we 
proposed to vary the initial validation audit sample size and set forth 
in detail and sought comment on several different approaches for 
varying the initial validation audit sample size. One proposed approach 
would vary the initial validation audit sample size based on issuer 
characteristics, such as issuer size, prior year HCC failure rates, and 
sample precision. We also solicited comment on an alternative approach 
to adjusting sample size that would increase sample sizes based on 
issuer size alone, and would continue to use the proxy Medicare 
Advantage risk score error rate data for the accompanying precision 
analyses. Additionally, we solicited comment on whether the issuers' 
enrollment should be calculated based on the year that is being 
adjusted or based on the benefit year in which the HCC failure 
occurred. In response to a comment we received on the 2019 Payment 
Notice that larger sample sizes could improve the accuracy of issuers' 
risk adjustment data validation samples, we solicited comment on 
whether to permit issuers of any size and HCC failure rate to request a 
larger sample

[[Page 17493]]

size before the applicable benefit year's initial validation audit 
commences. Finally, we also explained that under these alternative 
approaches, HHS would not increase the sample above 200 enrollees when 
performing the second validation audit pairwise means test because a 
200-enrollee sample is sufficient to achieve statistical significance 
in that test.
---------------------------------------------------------------------------

    \71\ Activities related to the 2019 benefit year risk adjustment 
data validation generally begin in the second quarter of CY 2020.
---------------------------------------------------------------------------

    After consideration of the comments submitted, we are not 
finalizing any increase to the initial validation audit sample size at 
this time. We will continue to consider potential changes to initial 
validation audit sample sizes for future benefit years of risk 
adjustment data validation. We may revisit these proposals, and may 
also consider additional alternatives, following further consultation 
with stakeholders and further analysis of actual enrollee data and non-
pilot year risk adjustment data validation results.
    Comment: A number of commenters did not support varying the initial 
validation audit sample size at all (regardless of the approach to do 
so), and recommended that HHS maintain the current sample size of 200 
enrollees. These commenters stated that increasing the initial 
validation audit sample size would create undue administrative and 
financial burdens, as well as disruption to plans and the provider 
community, without improving the quality of the data validation 
results. Other commenters generally supported varying the initial 
validation audit sample size, stating that larger sample sizes would 
help meet desired precision targets, and lend additional credibility to 
risk adjustment data validation results.
    Response: We continue to believe that larger sample sizes would 
help achieve the goals of increasing initial validation audit sample 
precision and ensuring the statistical validity of the sample. However, 
in light of the comments regarding the potential uncertainty related to 
using 2017 benefit year risk adjustment data validation results to make 
such changes, we are not finalizing any changes to the initial 
validation audit sample size at this time. We are maintaining the 
current initial validation audit sample size of 200 enrollees for all 
issuers of risk adjustment covered plans required to participate in the 
HHS risk adjustment data validation program. We are also sensitive to 
the concerns about the potential increased burdens for stakeholders and 
will consider how best to strike the balance between mitigating these 
burdens and increasing precision as we continue to analyze different 
approaches for varying sample size. HHS intends to revisit potential 
changes to initial validation audit sample sizes for future benefit 
years following further consultation with stakeholders and further 
analysis of actual enrollee data and non-pilot year risk adjustment 
data validation results.
    Comment: While one commenter supported the proposal to use 2017 
benefit year HCC failure rates to develop sample sizes for the 2019 
benefit year, another commenter did not support using 2017 risk 
adjustment data validation results, because the commenter believed that 
the methodology would not appropriately reflect the 2019 benefit year 
enrollee population. This commenter noted that any enrollee data used 
prior to the elimination of the shared responsibility payment would not 
reflect significant differences that could affect the risk profile and 
composition of the 2019 benefit year population.
    Response: We are not finalizing any changes to the initial 
validation audit sample size at this time. HHS intends to revisit 
potential changes to initial validation audit sample sizes for future 
benefit years following further consultation with stakeholders and 
further analysis of actual enrollee data and non-pilot year risk 
adjustment data validation results. We note that 2017 risk adjustment 
data validation program year results are the most recent results that 
would be available in the 2019 benefit year, as a result of the 
operational timing of the risk adjustment data validation program. As 
such, we note that any approach to modify risk adjustment data 
validation sampling for an upcoming benefit year based on consideration 
of HCC failure rates, would rely on previous benefit year failure 
rates, as more recent data would not be available prior to when initial 
data validation samples are drawn.
    Comment: A few commenters supported the proposal to vary the 
initial validation audit sample size based on HCC failure rates, sample 
precision, and issuer size as they believe larger sample sizes would 
help HHS meet desired precision targets and would lend additional 
credibility to risk adjustment data validation results. Another 
commenter encouraged HHS to increase the sample size as a means to 
potentially reduce data validation error rates. One commenter supported 
increasing sample size for the initial validation audit for those 
issuers that fall outside of the confidence interval. Several 
commenters supported the proposal to vary the initial validation audit 
sample size based only on issuer size, stating that sample sizes should 
be statistically significant and not capped at 200 or 400 for large 
issuers, and that larger sample sizes would increase the accuracy of 
the risk adjustment data validation results. Commenters also stated 
that if issuer size is used as a basis to determine the initial 
validation audit sample size, HHS should use the issuer's enrollment 
for the year that is being validated.
    However, many other commenters did not support the proposal to vary 
sample size based on HCC failure rates, sample precision, and issuer 
size. One commenter stated HHS should only do so once there is 
sufficient credible experience with the HHS risk adjustment data 
validation program, citing concerns with making such changes based on 
2017 benefit year data validation results, the first non-pilot risk 
adjustment data validation year under the HHS program. Another 
commenter did not support this proposal as they stated it effectively 
disincentives issuers from focusing on reducing their HCC failure rate 
because any issuer that is an outlier below the confidence interval 
threshold would be penalized by an increased sample size. The same 
commenter also noted the potential for annual variation in sample size 
would make it difficult for issuers to plan for staffing and resource 
needs.
    Other commenters did not support varying the sample size based only 
on issuer size, expressing concerns over undue administrative burden 
related to obtaining medical records and substantiating diagnoses, the 
financial burden of increased administrative costs, and the resulting 
disruption to plans and the provider community without improving the 
quality of the data validation results. Yet another commenter stated 
that until electronic health record interoperability and widespread 
data sharing is implemented, increasing the sample size would create 
undue administrative burden.
    Response: We share commenters' goals of increasing initial 
validation audit sample precision and ensuring the statistical validity 
of the sample, and while we believe that increased sample sizes could 
help achieve these goals, we are also sensitive to commenters' concerns 
about the burden of an increase to the sample size and the use of 
results from the first non-pilot year of risk adjustment data 
validation to establish larger sample sizes. However, while we 
recognize these concerns, we do not agree with comments that suggested 
that increased sample sizes will act as a disincentive for issuers to 
improve their failure rates. We believe that increasing sample size 
would

[[Page 17494]]

generally increase the sample precision, and could help issuers obtain 
more favorable risk adjustment data validation results by capturing 
enrollees with HCCs that may have been missed in smaller samples. We 
believe that this potential benefit would generally outweigh the 
additional costs of larger initial validation audit samples. As noted 
in this rule, we are not finalizing any increase to the initial 
validation audit sample size at this time, but intend to revisit these 
proposals and will consider the comments received on these proposals 
when we revisit potential changes to sample sizes for future benefit 
years.
    Comment: One commenter supported the proposal to use 2017 benefit 
year HCC failure rates to develop sample sizes for the 2019 benefit 
year, while another commenter opposed the use of prior-year error rates 
in determining sample sizes. One commenter stated they believe the 
current risk adjustment data validation error estimation approach had 
several flaws that would not be adequately addressed by increasing the 
risk adjustment data validation sample size for certain issuers. The 
commenter stated that these flaws included basing adjustments to risk 
scores solely on risk adjustment data validation outlier status, the 
use of national benchmarks with large confidence intervals, and 
adjustment of coefficients by the difference between an outlier 
issuer's HCC group failure rate and the weighted mean HCC failure rate. 
The commenter stated that rather than increasing the sample size for 
certain issuers and building on a flawed process, HHS should reevaluate 
the risk adjustment data validation methodology in its entirety.
    Another commenter opposed allowing issuers to request a larger 
sample size, stating that allowing such requests could provide 
opportunities for issuers to intentionally affect the data validation 
results of other issuers and disproportionately affect HCC failure 
rates and confidence intervals.
    Several commenters suggested alternative approaches to vary the 
initial validation audit sample size. One commenter suggested adopting 
sample sizes based on statistical significance with a 90 percent 
confidence interval and suppression of positive outlier resampling for 
issuers that have demonstrated a low HCC error rate over multiple 
years. Another commenter stated HHS should replace the current random 
sample of 200 enrollees with a data-driven targeted process that 
identifies situations that warrant investigation. Another commenter 
recommended HHS evaluate ways to ensure providers' timely submission of 
the needed information and documentation to validate the diagnoses 
captured on the medical record(s). Another commenter did not agree that 
HHS should continue to use the Medicare Advantage risk score error rate 
data to determine precision, and recommended that HHS use the available 
commercial risk adjustment data starting with the 2020 benefit year of 
risk adjustment data validation. Another commenter stated that if 
larger sample sizes were adopted, issuers with plans in multiple states 
should be given the option to use the existing sample sizes for the 
initial validation audit.
    Response: We remain interested in exploring ways to increase sample 
precision and the statistical validity of the initial validation audit 
sample and appreciate the different approaches offered. We are 
sensitive to commenters' concerns about the proposals outlined in the 
proposed rule and believe that further analysis is needed before making 
changes to sample sizes. Therefore, at this time, we are not finalizing 
any increase to the initial validation audit sample size and are 
maintaining the current sample size of 200 enrollees. We will revisit 
these proposals, along with the comments submitted, and may consider 
alternatives following consultation with stakeholders and further 
analysis of available data. We respond to comments on the risk 
adjustment data validation error estimation methodology in the preamble 
below.
b. Initial Validation Audit Sample Size--10th Stratum and Neyman 
Allocation (Sec.  153.630(b))
    In the initial years of risk adjustment data validation, we 
constrained the ``10th stratum'' of the initial validation audit 
sample--that is, enrollees without HCCs selected for the initial 
validation audit sample--to be one-third of the sampled initial 
validation audit enrollees. Under this current approach, the remaining 
9 age-risk strata were selected using a Neyman allocation \72\ which 
optimizes the number of enrollees per stratum for the remaining two-
thirds of sampled enrollees. Because we expected enrollees without HCCs 
to make up the majority of issuers' enrollees, in the absence of data 
from the individual and small group markets, we constrained stratum 10 
to ensure that healthy enrollees were sampled in the initial years of 
risk adjustment data validation to establish adequate sampling 
assumptions.
---------------------------------------------------------------------------

    \72\ Neyman allocation is a method to allocate samples to strata 
based on the strata's variances and similar sampling costs in the 
strata. A Neyman allocation scheme provides the most precision for 
estimating a population mean given a fixed total sample size. See 
https://methods.sagepub.com/reference/encyclopedia-of-survey-research-methods/n324.xml.
---------------------------------------------------------------------------

    In the proposed rule, we proposed to extend the Neyman allocation 
sampling methodology to also include the 10th stratum of enrollees 
without HCCs, such that samples will be assigned to all 10 strata using 
a Neyman allocation. Since a Neyman allocation approach is expected to 
provide a more optimal sample size allocation, we explained that we 
believe using the Neyman allocation for all strata would optimize 
issuers' initial validation samples and yield better precision than the 
one-third/two-thirds approach currently used in the enrollee initial 
validation audit sample. Further, an approach that permits for a larger 
portion of the sample to be allocated to the HCC strata as compared to 
the two-thirds allocation used in the current approach would result in 
a more robust HCC sample in support of the measurement of HCC failure 
rates under the HCC failure rate methodology finalized in the 2019 
Payment Notice.\73\ Finally, it would increase the probability of 
achieving our original target of 10 percent precision based on our 
historical observations of greater error rate variances among the HCC 
strata. We are finalizing the extension of the Neyman allocation 
sampling methodology to the 10th stratum, as proposed.
---------------------------------------------------------------------------

    \73\ 83 FR 16930 at 16961 (April 17, 2018).
---------------------------------------------------------------------------

    Comment: Some commenters supported extending the Neyman allocation 
sampling methodology to the 10th stratum, stating that doing so would 
effectively create an increase in the size of the sample actually 
available to validate the HCCs submitted to issuer EDGE servers. These 
commenters noted this approach would permit for a larger portion of the 
sample to be allocated to the HCC strata as compared to the two-thirds 
allocation used in the current approach, thereby resulting in a more 
robust HCC sample in support of the measurement of HCC failure rates 
under the HCC failure rate methodology finalized in the 2019 Payment 
Notice. However, other commenters did not support this proposal, as 
they were concerned that increasing the number of sampled members with 
HCCs would create undue administrative and financial burden on plans 
and the provider community without improving the quality of the data 
validation results or addressing their perceived flaws of the risk 
adjustment data validation sampling.

[[Page 17495]]

    Response: We are finalizing the extension of the Neyman allocation 
sampling methodology to also include the 10th stratum of enrollees 
without HCCs, such that samples will be assigned to all 10 strata using 
a Neyman allocation. As noted by some commenters, this is expected to 
provide a more optimal sample size allocation than the current one-
third/two-thirds approach. We believe this will also allow us to 
achieve greater precision in the HCC error rate methodology by 
expanding the portion of the sample that may be allocated to the HCC 
strata (that is, strata 1 through 9) because of the potential for a 
more robust HCC sample than the current approach provides. We are 
finalizing the extension of the Neyman allocation sampling methodology 
to also include the 10th stratum of enrollees without HCCs, such that 
samples will be assigned to all 10 strata using a Neyman allocation. As 
noted by some commenters, this is expected to provide a more optimal 
sample size allocation than the current one-third/two-thirds approach. 
We believe this will also allow us to achieve greater precision in the 
HCC error rate methodology by expanding the portion of the sample that 
may be allocated to the HCC strata (that is, strata 1 through 10) 
because of the potential for a more robust HCC sample than the current 
approach provides. We further believe that the benefits of more 
accurate initial validation samples generally outweigh the additional 
burden of increased sample sizes by capturing enrollees with HCCs that 
may have been missed in smaller samples. However, as discussed above, 
we will monitor the impact of this change and continue to consider 
modifications to the initial validation audit sampling approach for 
future benefit years in consultation with stakeholders.
c. Second Validation Audit Findings and Error Rate Discrepancy 
Reporting (Sec.  153.630(d)(2))
    Under Sec.  153.630(d)(2), issuers have 30 calendar days to confirm 
the findings of the second validation audit or the calculation of the 
risk score error rate, or file a discrepancy report, in the manner set 
forth by HHS, to dispute the foregoing. We proposed to amend paragraph 
(d)(2) to shorten the window to confirm the findings of the second 
validation audit (if applicable) or the calculation of the risk score 
error rate, or file a discrepancy, to within 15 calendar days of the 
notification by HHS, beginning with the 2018 benefit year risk 
adjustment data validation. In light of comments received, we will not 
shorten the timeframe under Sec.  153.630(d)(2) to 15 calendar days at 
this time, and will maintain the existing 30-calendar day window for 
issuers to confirm the findings of the second validation audit (if 
applicable) or the calculation or the risk score error rate.
    We also clarified in the proposed rule that there are two 
discrepancy reporting windows under Sec.  153.630(d)(2). First, at the 
conclusion of the second validation audit, we will distribute to 
issuers their second validation audit findings in the event there is 
insufficient agreement between the initial and second validation audit 
results during the pairwise means analysis, and the second validation 
audit findings will be used for the risk score error rate calculation. 
The window for issuers who receive second validation audit findings to 
confirm the findings or file a discrepancy, in a manner set forth by 
HHS, would begin when the second validation audit findings reports are 
issued. Second, at the conclusion of the risk score error rate 
calculation process, we will distribute the risk score error rate 
calculation results to all issuers for the given benefit year. Once the 
risk score error rate calculation results are distributed, the window 
to confirm the results or file a discrepancy, in the manner set forth 
by HHS, would begin.
    We reiterated, consistent with the approach finalized in the 2018 
Payment Notice, that issuers are not permitted to appeal the resolution 
of any discrepancy disputing the initial validation audit sample, or to 
file a discrepancy or appeal the results of the initial validation 
audit.\74\ As detailed in the 2015 Payment Notice \75\ and discussed 
later in this final rule, if sufficient pairwise means agreement is 
achieved, the initial validation audit findings will be used for 
purposes of the risk score error rate calculation, and therefore, those 
issuers will only be permitted to file a discrepancy or appeal the risk 
score error rate calculation.
---------------------------------------------------------------------------

    \74\ 81 FR 94106.
    \75\ See 78 FR at 72334 through 72337 and 79 FR at 13761 through 
13768.
---------------------------------------------------------------------------

    Finally, we proposed to amend Sec.  153.630(d)(2) to replace the 
phrase ``audit and error rate'' for which an issuer must confirm or 
file a discrepancy that appears at the end of the provision with ``the 
findings of the second validation audit (if applicable) or the 
calculation of a risk score error rate as a result of risk adjustment 
data validation.'' We are finalizing the amendments to Sec.  
153.630(d)(2) as proposed, except for the proposed shortening of the 
applicable timeframe from 15 to 30 calendar days.
    The following is a summary of the public comments we received on 
our proposals regarding the second validation audit findings and risk 
score error rate discrepancy reporting windows under Sec.  
153.630(d)(2).
    Comment: Commenters overwhelmingly opposed shortening the 
discrepancy windows for risk adjustment data validation, with a few 
suggesting that HHS revisit the idea after a non-pilot year of risk 
adjustment data validation has occurred. Several commenters suggested 
we examine other areas of the risk adjustment data validation timeline 
to possibly make shorter.
    Response: In light of comments received, we are not finalizing the 
proposal to shorten the discrepancy reporting window under Sec.  
153.630(d)(2) from 30 to 15 calendar days. Although 15 calendar days is 
consistent with the initial validation audit sample and EDGE 
discrepancy submission windows,\76\ we agree that such a change should 
not be made until after completion of the first non-pilot year of risk 
adjustment data validation and we have more experience with the 
process. Additionally, we will continue to examine opportunities to 
refine the risk adjustment data validation timeline for future benefit 
years.
---------------------------------------------------------------------------

    \76\ See Sec. Sec.  153.630(d)(1) and 153.710(d).
---------------------------------------------------------------------------

d. Default Data Validation Charge
    Under Sec.  153.630(b)(10), if an issuer of a risk adjustment 
covered plan fails to engage an initial validation auditor or submit 
initial validation audit results, we impose a ``default data validation 
charge,'' which the regulation currently refers to in paragraph (b)(10) 
as a ``default risk adjustment charge.'' As explained in the 2015 
Payment Notice, the default data validation charge is calculated in the 
same manner as the default risk adjustment charge under Sec.  
153.740(b).\77\ With the 2017 benefit year being the first non-pilot 
year of risk adjustment data validation, and the first year for which 
HHS may impose the default data validation charge for noncompliance 
with applicable data validation requirements, we proposed several 
amendments to further distinguish the default data validation charge 
assessed under Sec.  153.630(b)(10) from the default risk adjustment 
charge assessed under Sec.  153.740(b). First, we proposed to amend 
Sec.  153.630(b)(10) to replace the phrase ``HHS will impose a default 
risk adjustment charge'' with ``HHS will impose a default data 
validation charge.'' This change is intended to more clearly 
distinguish

[[Page 17496]]

between the two separate risk adjustment-related default charges. 
Second, we proposed to modify how the default data validation charge 
under Sec.  153.630(b)(10) would be calculated. While we would 
generally continue to calculate the default data validation charge in 
the same manner as the risk adjustment default charge under Sec.  
153.740(b), we proposed to calculate the default data validation charge 
based on the enrollment for the benefit year being audited in risk 
adjustment data validation, rather than the benefit year during which 
transfers would be adjusted as a result of risk adjustment data 
validation. By way of example, if an issuer is subject to the default 
data validation charge for the 2021 benefit year risk adjustment data 
validation and it offers risk adjustment covered plans in the same 
state market risk pool in the 2022 benefit year, its default data 
validation charge would be calculated based on 2021 benefit year 
enrollment data (rather than 2022 benefit year enrollment data). Under 
this example, the default data validation charge this issuer would 
receive for failing to comply with the 2021 benefit year risk 
adjustment data validation requirements would equal a per member per 
month (PMPM) amount for the 2021 benefit year multiplied by the plan's 
enrollment for the 2021 benefit year as follows:
---------------------------------------------------------------------------

    \77\ 79 FR at 13769.

---------------------------------------------------------------------------
Tn = Cn * En

Where:

Tn = total default data validation charge for a plan n;
Cn = the PMPM amount for plan n; \78\ and
---------------------------------------------------------------------------

    \78\ Except as otherwise provided in this final rule, the 
default data validation charge is calculated in the same manner as 
the risk adjustment default charge under Sec.  153.740(b). See 79 FR 
at 13769. As established in the 2015 Payment Notice, a PMPM default 
charge is equal to the product of the statewide average premium 
(expressed as a PMPM amount) for a risk pool and the 75th percentile 
plan risk transfer amount expressed as a percentage of the 
respective statewide average PMPM premiums for the risk pool. See 79 
FR at 13790. While this percentile was subsequently adjusted to the 
90th percentile in the 2017 Payment Notice, the PMPM amount is 
otherwise calculated in the same manner. See 81 FR at 12237. The 
2020 Payment Notice proposed rule did not propose, and this final 
rule does not make, any changes to this aspect of the calculation of 
the default data validation charge.
    In the 2015 Payment Notice at 79 FR 13790, we provided that En 
could be calculated using an enrollment count provided by the 
issuer, enrollment data from the issuer's MLR and risk corridors 
filings for the applicable benefit year, or other reliable data 
sources. The proposed rule did not propose, and this final rule does 
not make, any changes to the sources that could be used.
---------------------------------------------------------------------------

En = the total enrollment (total billable member months) for plan 
n.\79\
---------------------------------------------------------------------------

    \79\ Ibid.

    Third, we proposed to amend the allocation approach for 
distribution of default data validation charges among issuers. We 
proposed to allocate a default data validation charge to the risk 
adjustment data validation issuers that were part of the same benefit 
year risk pool(s) as the noncompliant issuer. However, we would not 
allocate default data validation charges to any other noncompliant 
issuers in the same benefit year risk pool(s). This approach is 
consistent with the methodology for allocating the default risk 
adjustment charges under Sec.  153.740(b), and includes all issuers in 
the same benefit year risk pool(s) that could be subject to a risk 
score adjustment as the result of other issuers' risk adjustment data 
validation results. Issuers in the same benefit year risk pool(s) that 
are exempt from the risk adjustment data validation requirements would 
also be included in the allocation of any default data validation 
charges. Therefore, we proposed to allocate any default data validation 
charges collected from noncompliant issuers among the compliant and 
exempt issuers in the same benefit year risk pool(s) in proportion to 
their respective market shares and risk adjustment transfer amounts for 
the benefit year being audited for risk adjustment data validation.
    As an illustrative example, assume there are 4 issuers (A, B, C, 
and D) in the individual non-catastrophic risk pool in state X for the 
2017 benefit year, and an additional issuer, E, in the 2018 benefit 
year individual non-catastrophic risk pool in state X. Assume:
     Issuer A does not comply with risk adjustment data 
validation requirements for the 2017 benefit year and is assessed a 
default data validation charge.
     Issuer B was exempt from risk adjustment data validation 
for the 2017 benefit year because it was a small issuer (that is, it 
had 500 or fewer billable member months statewide in state X).
     Issuers C and D complied with applicable 2017 benefit year 
risk adjustment data validation requirements.
     Issuer E was not in the individual non-catastrophic risk 
pool in state X for 2017.
    Issuer A's default data validation charge would be allocated to 
issuers B, C, and D in proportion to their 2017 benefit year transfer 
amounts and market shares. While Issuer B was not subject to risk 
adjustment data validation for the 2017 benefit year, it was still part 
of the same state market risk pool and would be subject to possible 
risk score adjustments due to the risk adjustment data validation 
results of Issuers C and D. Since Issuers C and D also participated in 
the individual non-catastrophic risk pool in state X for 2017 and 
complied with applicable data validation requirements, they would also 
receive part of Issuer A's default data validation charge. However, 
Issuer E was not part of the individual non-catastrophic risk pool in 
state X until the 2018 benefit year, and therefore, would not receive 
any part of Issuer A's 2017 benefit year default data validation 
charge.
    In the proposed rule, we noted that we intend to publish the 
default data validation charge information in the benefit year's 
report(s) released under Sec.  153.310(e) in which transfers are 
adjusted based on risk adjustment data validation results. We also 
explained that, following release of the report under Sec.  153.310(e), 
these amounts would then be included as part of the monthly payment and 
collection processes described in Sec.  156.1215 alongside the 
collection of risk adjustment charges and payments calculated under the 
HHS risk adjustment methodology for the applicable benefit year.
    Fourth, we clarified that a default data validation charge under 
Sec.  153.630(b)(10) is separate from risk adjustment transfers for a 
given benefit year, unlike a default risk adjustment charge under Sec.  
153.740(b), which replaces the issuer's transfer amount for that 
benefit year. For example, if an issuer fails to submit initial 
validation audit results for the 2017 benefit year, it would receive a 
default data validation charge based on 2017 benefit year data 
calculated in accordance with the formula outlined in this final rule. 
This default data validation charge for the 2017 benefit year would be 
in addition to, and separate from, the issuer's 2018 benefit year risk 
adjustment payment or charge amount as calculated under the HHS-
operated risk adjustment methodology. This means that an issuer may owe 
both a risk adjustment charge and a default data validation charge (for 
example, an issuer could owe a risk adjustment charge for the 2018 
benefit year and a default data validation charge for the 2017 benefit 
year risk adjustment data validation). Similarly, an issuer may owe a 
default risk adjustment charge for a given benefit year, alongside a 
default data validation charge for the benefit year being audited (for 
example, an issuer could owe a default risk adjustment charge for the 
2018 benefit year, as well as a default data validation charge for the 
2017 benefit year).
    We offered these proposals and clarifications about how HHS will 
assess and allocate the default data validation charge at this time to 
allow issuers to better understand the

[[Page 17497]]

implications of noncompliance with initial validation audit 
requirements as risk adjustment data validation operations transition 
away from the pilot years of the program.
    We are finalizing the amendments to Sec.  153.630(b)(10), as well 
as the proposed changes to the calculation and allocation of the 
default data validation charge, as proposed. As outlined further below, 
we are modifying the timing for publication, collection and 
distribution of the default data validation charges.
    Comment: Commenters were in favor of basing the default data 
validation charge on the enrollment of the year being audited rather 
than the year being adjusted. One commenter requested that we clarify 
the allocation methodology for issuers that have exited the market.
    Response: We are finalizing the proposals related to the default 
data validation charge, but are modifying the timing for publication, 
collection, and distribution of the default data validation charges. 
Rather than releasing this information as part of the annual summary 
risk adjustment transfer report released by June 30, information on 
default data validation charges and allocations will be published as 
part of the separate announcement of risk adjustment data validation 
results and related adjustments to risk adjustment transfers for the 
applicable benefit year so that issuers will not have to consult 
multiple reports for information on payments and charges related to 
risk adjustment data validation. Default data validation charge amounts 
will be included as part of the monthly payment and collection 
processes described in Sec.  156.1215 alongside the collection and 
distribution of the risk adjustment data validation-related adjustments 
to risk adjustment transfers. Please refer to the preamble section 
below on negative error rate outlier markets for further details on the 
updated timeline for publication of risk adjustment data validation 
results, as well as collection and disbursement of risk adjustment data 
validation related adjustments to risk adjustment transfers.
    We clarify that if an issuer is in a state market risk pool with a 
noncompliant issuer in a given benefit year, and then exits the state 
market risk pool in the subsequent benefit year, it will still be 
eligible to receive its portion of the allocation from the noncompliant 
issuer's default data validation charge. This approach is consistent 
with the general policy established in the 2019 Payment Notice \80\ to 
adjust exiting issuers' risk adjustment transfers based on risk 
adjustment data validation results, and it allows those who are 
compliant with applicable risk adjustment data validation related 
adjustments to gain the benefit of an allocation amount.
---------------------------------------------------------------------------

    \80\ 83 FR 16965.
---------------------------------------------------------------------------

e. Second Validation Audit Pairwise Means Test
    In the 2014 Payment Notice, we provided that a second validation 
audit will be conducted by an entity retained by HHS to verify the 
accuracy of the findings of the initial validation audit.\81\ 
Consistent with Sec.  153.630(c), HHS must select a subsample of the 
risk adjustment data validated by the initial validation audit for the 
second validation audit. In the 2015 Payment Notice, we indicated that 
to select the subsample, the second validation auditor will use a 
sampling methodology that allows for pairwise means testing to 
establish a statistical difference between the initial and second 
validation audit results.\82\ This pairwise means test uses a 95 
percent confidence interval (and a standard deviation of 1.96). To do 
pairwise means testing under the current approach, the second 
validation auditor tests a subsample of enrollees from an issuer's 
initial validation audit sample of 200 enrollees. If the pairwise means 
test results for a subsample indicate that the difference in enrollee 
results between the initial and second validation audits is not 
statistically significant, the initial validation audit results are 
used for calculation of HCC failure rates and risk score error rates. 
If the pairwise means test results for the subsample yield a 
statistically significant difference, the second validation auditor 
performs another validation audit on a larger subsample of enrollees 
from the initial validation audit. The results from the second 
validation audit of the larger subsample are again compared to the 
results of the initial validation audit using the pairwise means test 
with a subsample size of up to 100 enrollees. If there is no 
statistically significant difference between the initial and second 
validation audits of the larger subsample, HHS will apply the initial 
validation audit error results to calculate the HCC failure rates and 
risk score error rates. However, if a statistically significant 
difference is found based on the second validation audit of the larger 
subsample up to 100 enrollees, HHS will apply the second validation 
audit results to the larger subsample to calculate the HCC failure 
rates and risk score error rates.
---------------------------------------------------------------------------

    \81\ 78 FR 15437.
    \82\ 79 FR 13761.
---------------------------------------------------------------------------

    Based on the results of the second validation audit for the 2016 
risk adjustment data validation pilot year, we proposed to modify the 
statistical subsampling methodology to further expand the comparison of 
results between the initial and second validation audits. Specifically, 
when the larger subsample (of up to 100 enrollees) results indicate a 
statistically significant difference, we believe that further sampling 
by the second validation auditor is necessary and appropriate to 
determine whether the second validation audit results from the full 
sample should be used in place of the initial validation audit results. 
Therefore, we proposed that, if a statistically significant difference 
is found based on the second validation audit of the larger subsample 
(of up to 100 enrollees), HHS would expand its sample to the full 
initial validation audit sample to consider whether the second 
validation audit results of the full sample or the subsample (of up to 
100 enrollees) results should be used in place of initial validation 
audit results. Allowing the further testing of the sample provides 
assurance and confidence in the second validation audit results and the 
associated error estimation rate that will ultimately be used to adjust 
risk scores and transfers.
    To determine whether to expand the second validation audit to the 
full initial validation audit sample, we proposed to use a precision 
analysis. We proposed to use precision metrics, including the standard 
error and confidence intervals, to determine if the second validation 
audit review of the larger subsample (of up to 100 enrollees) is of 
high or low precision. If the results of the second validation audit 
precision analysis determined that the precision level is high, we 
proposed that HHS would use the second validation audit results for the 
larger subsample (of up to 100 enrollees) in place of the initial 
validation audit results for the error estimation and calculation of 
adjustments for plan average risk score, as applicable. However, if the 
second validation audit precision analysis for a larger subsample (of 
up to 100 enrollees) determined that the precision level was low, the 
second validation audit would expand and use the full initial 
validation audit sample of 200 enrollees for error estimation and 
calculation of adjustments for plan average risk score.
    We are finalizing this approach as proposed.
    Comment: One commenter stated that it believed the proposal would 
not substantially improve the process.

[[Page 17498]]

Another commenter did not explicitly oppose the proposal, but suggested 
better pairwise accuracy could be achieved through increased education 
and outreach.
    Response: HHS has an interest in providing issuers every 
opportunity to use the results submitted by the initial validation 
audit entity and attested to by the issuer before taking the step of 
replacing those results with second validation audit findings. 
Expanding the subsample further and then testing precision when the 
larger subsample (of up to 100 enrollees) results indicate a 
statistically significant difference allows additional opportunity to 
find the initial validation audit findings are valid. We disagree with 
the commenter that these proposals would not substantially improve the 
process. On the contrary, we believe that allowing further testing of 
the sample provides assurance and confidence in the audit results and 
the associated error estimation rate that will ultimately be used to 
adjust risk scores and transfers. Therefore, we are finalizing this 
approach as proposed. We remain committed to providing training and 
support as needed to improve the initial validation audit process and 
subsequent pairwise results.
f. Error Estimation for Prescription Drugs
    In the proposed rule, we proposed several options for incorporating 
RXCs in the risk adjustment data validation processes beginning with 
the 2018 benefit year risk adjustment data validation. Because the 
incorporation of payment RXCs into the risk adjustment models for 
adults began with the 2018 benefit year, we discussed whether 
modification was appropriate to the error estimation methodology to 
take into account the RXC failure rates as part of the HHS risk 
adjustment data validation process and we proposed various ways to 
incorporate RXCs into risk adjustment data validation processes, 
including adding RXCs to the error estimation methodology by treating 
RXCs similar to HCCs.
    The first proposal that we outlined would incorporate RXCs into the 
HCC failure rate methodology by adding each RXC as a separate factor, 
similar to an ``HCC'', for classification into the low, medium, and 
high HCC groups determined by the national failure rates for each RXC. 
To apply this change to the error estimation methodology finalized in 
the 2019 Payment Notice, we proposed the definition of superscript h 
would expand to a list of codes including both the 128 HCCs and 12 RXCs 
whereby HHS would first calculate the failure rate for each HCC and RXC 
in issuers' samples as:
[GRAPHIC] [TIFF OMITTED] TR25AP19.001

Where:

h_r is the set of codes including 128 HHS HCCs and 12 RXCs.
Freq_EDGEh-r is the frequency of HCC code h or RXC code r occurring 
on EDGE, which is the number of sampled enrollees recording HCC code 
h or RXC code r on EDGE.
Freq_IVAh-r is the frequency of HCC code h or RXC code r occurring 
in initial validation audit results, which is the number of sampled 
enrollees with HCC code h or RXC code r in initial validation audit 
results.
FRh-r is the failure rate of HCC code h or RXC code r.

    HHS would then create three ``HCC/RXC'' groups based on the HCC 
failure rates and RXC failure rates derived in the above calculation. 
These ``HCC/RXC'' failure rate groups would rank all HCC failure rates 
and RXC failure rates to assign each unique HCC and RXC in the initial 
validation audit samples to a high, medium, or low failure rate group. 
To assign each HCC and RXC to a ``HCC/RXC'' failure rate group, we 
proposed to use the current HCC failure rate ranking methodology that 
ranks each HCC/RXC failure rate divided into three groupings based on 
weighted total observations or frequencies of that HCC/RXC across all 
issuers' initial validation sample, or assigning HCCs and RXCs failure 
rates by taking into consideration the ranking of related HCCs and RXCs 
in the grouping. Under this approach, we would maintain a single 
classification for HCC and RXC high, medium, or low groups, instead of 
creating two separate classifications of RXCs and single component 
HCCs.
    Alternatively, we proposed incorporating RXCs as a separate ``HCC'' 
grouping in the error estimation methodology. Under this approach, we 
would keep the 128 HCCs in the three groups, but combine all RXCs into 
an additional, fourth separate group. Therefore, separate RXC and HCCs 
groups would be created, and their failure rates would be computed 
within those four groupings. This approach to group RXCs would be the 
same as for HCC groupings, which is based on the failure rates FRr of 
the 12 RXCs:
[GRAPHIC] [TIFF OMITTED] TR25AP19.002


[[Page 17499]]


Where:

r is the set of 12 RXCs.
Freq_EDGE\r\ is the frequency of RXC code r occurring on EDGE, which 
is the number of sampled enrollees recording RXC code r on EDGE.
Freq_IVA\r\ is the frequency of RXC code r occurring in initial 
validation audit results, which is the number of sampled enrollees 
with RXC code r in initial validation audit results.
FR\r\ is the failure rate of RXC code r.

    While we assumed that RXCs may be easier to validate, this proposed 
approach could take into consideration the potential differing failure 
rates within the RXC groupings as opposed to the single component HCC 
groupings, or isolate the RXC failure rates to a separate grouping from 
HCCs before applying those failure rates to the error rate calculation. 
This alternative approach would have also resulted in an additional 
grouping in the error estimation methodology, and having more groupings 
means that the number of groupings where it is possible for an issuer 
to be an outlier would increase. Further, in the event that all RXCs do 
not have similar, low failure rates, the confidence interval for an 
RXC-only group could be quite large, resulting in a significant 
difference between the outliers' failure rates to the group's failure 
rate mean, and by extension, could result in a larger failure rate 
adjustment factor for the RXC-only group.
    In addition to adopting one of the above approaches to group RXCs 
as part of the error estimation methodology, we would also need to 
incorporate RXCs into the error rate calculation under the error 
estimation methodology. To do so, we proposed three alternative 
approaches to incorporate and adjust for RXCs and RXC-HCC interaction 
factors in the error rate calculation.
    One option that we proposed to incorporate the RXCs in the error 
rate calculation was to add RXCs to the current methodology of 
calculating error rates, without accounting for any HCC-RXC interaction 
factors. To incorporate RXCs in the current error rate calculation 
under this option, we proposed to modify the formula to calculate an 
enrollee's adjustment Adjustmenti,e as follows:
BILLING CODE 4150-28-P
[GRAPHIC] [TIFF OMITTED] TR25AP19.003


[[Page 17500]]


[GRAPHIC] [TIFF OMITTED] TR25AP19.017


[[Page 17501]]


[GRAPHIC] [TIFF OMITTED] TR25AP19.018

BILLING CODE 4150-28-C
    The purpose of this second alternative for incorporating RXCs in 
the error rate calculation was to capture the sampled enrollee's 
characteristics and interaction between the single component HCC and 
RXC that may provide a more accurate calculation than not accounting 
for any interaction between the single component HCC and RXC. However, 
this approach would have added an additional step to the error rate 
calculation, whereby the risk score coefficient for a condition would 
be adjusted by the interaction coefficients between the single 
component HCC and the RXC and would have taken into account the full 
interaction coefficient separately for the HCC and RXC, which may 
result in an over-adjustment for the interaction terms.
    A third alternative to incorporating RXCs as part of the error rate 
calculation would be to adjust the risk score coefficient for a single 
component HCC and RXC by a modified interaction coefficient between the 
single component HCC and RXC indicator, if the coefficient exists. If 
there is no coefficient, the single component HCC and the RXC would not 
be adjusted by an interaction coefficient. This alternative approach 
was intended to capture a sampled enrollee's specific characteristics 
and interaction between HCC and RXC and modify the interaction such 
that the total adjustments are equal to the total interaction term 
value.
    We also generally solicited comment on how to weight risk score 
coefficients and account for the interaction terms between the single 
component HCC and the RXCs in calculating the error rate under these 
alternative proposed approaches. Additionally, in the error estimation 
methodology finalized in the 2019 Payment Notice, we did not include 
the severity illness indicator interactions for HCCs as they can be 
triggered by multiple combinations of HCCs, which would be overly 
complex to implement. As part of our current evaluation of the impact 
of adjusting for the RXC-HCC interactions in the error estimation 
methodology, we also sought comment on whether we should similarly not 
adjust for the RXC-HCC interactions.
    We solicited comment on all of these proposed approaches for 
incorporating RXCs into the error estimation methodology and error rate 
calculation, including whether we should consider alternative options.
    Finally, as an alternative to the aforementioned proposed policies, 
we stated that we were also considering methods for incorporating RXCs 
(or all drugs) into the risk adjustment data validation process other 
than as part of the error estimation methodology and error rate 
calculation. We proposed an option to treat RXC errors as a data 
submission issue. Specifically, under this approach, we would 
incorporate RXCs or all drugs into risk adjustment data validation as a 
method of discovering materially incorrect EDGE server data submissions 
in the same or similar manner to how we address demographic and 
enrollment errors discovered during risk adjustment data 
validation.\84\ Under this approach, instead of incorporating RXCs into 
the error estimation methodology and error rate calculation, we would 
treat RXC or general drug errors discovered during risk adjustment data 
validation in a manner similar to an EDGE data discrepancy, which is 
addressed in the current benefit year under Sec.  153.710(d). As such, 
these RXC or general drug errors would be the basis for an adjustment 
to the applicable benefit year risk score and original transfer amount, 
rather than the subsequent benefit year risk score. Any material errors 
identified through this process would result in a decrease to the 
issuer's original risk score, thereby resulting in a reduced risk 
adjustment payment or an increased risk adjustment charge for that 
issuer. If this alternative approach were adopted, the identification 
of RXC or general drug errors could also have the effect of reducing 
charges or increasing payments to other issuers in the state market 
risk pool, holding constant the other elements of the state payment 
transfer formula, due to the budget neutral framework for the HHS 
operated program. We solicited comment on this alternative approach, 
especially in comparison to the proposals for incorporating RXCs into 
the error estimation methodology or error rate calculation, and on 
whether other specific requirements would be needed to verify 
materiality of risk score impacts if we were to treat RXC or general 
drug errors discovered during risk adjustment data validation as a data 
submission issue through the EDGE data discrepancy process under Sec.  
153.710(d).
---------------------------------------------------------------------------

    \84\ See 83 FR 16930 at 16970 through 16971.
---------------------------------------------------------------------------

    After consideration of the comments received, we are finalizing an 
approach under which we will incorporate RXCs into risk adjustment data 
validation as a method of discovering materially incorrect EDGE server 
data submissions in a manner similar to how we address demographic and 
enrollment errors discovered during risk adjustment data validation, 
and will pilot the incorporation of these drugs into the risk 
adjustment data validation process for the 2018 benefit year. As a 
pilot year, the identification of RXC errors during the 2018 benefit 
year risk adjustment data validation process will not be used to adjust 
2018 risk scores or transfers.
    Comment: While some commenters generally supported adding RXCs to 
the error estimation methodology, many commenters discouraged HHS from 
doing so because they did not generally believe that adding this 
complexity to the error estimation methodology would deliver improved 
risk adjustment data validation results, and expressed

[[Page 17502]]

concern that it instead would increase administrative and financial 
burden for issuers and the provider community. Some commenters were 
concerned about making changes to the error estimation methodology when 
issuers have not yet seen the first non-pilot year of risk adjustment 
data validation results. Some commenters recommended retaining the 
current error estimation methodology that focuses on validating HCCs 
and not expanding the error rate methodology to include RXCs, while one 
commenter noted the proposed rule did not address changes that would be 
made to the member-level risk score adjustment calculation. Some 
commenters recommended that further consideration be given to the value 
of including RXC related errors before incorporating RXCs (or all 
drugs) as part of the data validation process. However, several other 
commenters supported treating RXCs in a manner similar to how we 
address demographic and enrollment errors discovered during the data 
validation process (or an EDGE server data discrepancy) as a more 
efficient and less complicated process than the other options.
    Response: As discussed in the proposed rule, we recognize there may 
be differences between HCCs and RXCs that need to be considered when 
incorporating RXCs into risk adjustment data validation. For example, 
it may be more straightforward for initial validation auditors to 
validate an RXC rather than an HCC because HCC validation requires 
recoding a medical record, with a potential for greater variation. 
However, given the incorporation of RXCs into the HHS risk adjustment 
adult models beginning with the 2018 benefit year and their ability to 
affect an issuer's risk score and calculated transfers in the state 
market risk pool, we believe it is important that RXCs are validated in 
some manner as part of risk adjustment data validation. Therefore, 
based on comments received, we are finalizing an approach, starting 
with 2018 benefit year risk adjustment data validation, under which we 
will incorporate RXCs into risk adjustment data validation in a manner 
similar to how we address demographic and enrollment errors discovered 
during the data validation process. This approach will not affect or 
require changes to the error estimation methodology, including 
calculation of the individual member error rate, which was finalized in 
the 2019 Payment Notice.\85\ That is, RXC failures will not be measured 
as part of the HCC failure rates used to adjust enrollees' risk scores, 
but will be treated as an EDGE discrepancy. This approach will ensure 
that RXCs are being validated while limiting burden to issuers and 
providers to validate these RXCs. Furthermore, for consistency with the 
EDGE server data discrepancy process and the policy regarding 
adjustments to transfers due to submission of incorrect data \86\, we 
are finalizing that RXC errors will only result in a reduced risk 
adjustment payment or an increased risk adjustment charge for that 
discrepant issuer with the errors and will not result in increased 
payment or decreased charges for that issuer.
---------------------------------------------------------------------------

    \85\ 83 FR 16930 at 16961-16966.
    \86\ See the November 15, 2018, Evaluation of EDGE Data 
Submissions for the 2018 Benefit Year Guidance, available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2018.pdf. Also see 83 FR at 16970-16971.
---------------------------------------------------------------------------

    Additionally, in response to comments, we are finalizing a policy 
to treat the incorporation of RXCs into 2018 benefit year risk 
adjustment data validation as a pilot year to allow HHS and issuers to 
gain experience in validating RXCs before RXCs are used to adjust 
issuers' risk scores. This approach will also allow for HHS and issuers 
to primarily focus efforts and resources on validating HCCs in the 2018 
benefit year risk adjustment data validation and understanding the 
first year of risk adjustment data validation results, which issuers 
will receive later this year (reflecting 2017 benefit year data 
validation results).
    Comment: Several commenters suggested piloting the incorporation of 
RXCs into the risk adjustment data validation process to gain 
experience in how best to evaluate RXC errors and understand potential 
implications in the risk adjustment data validation process. Some of 
these commenters recommended a pilot for 2 years to allow HHS, issuers 
and other stakeholders to gain experience with the incorporation of 
RXCs into the risk adjustment data validation process. Other commenters 
requested that HHS postpone the implementation of RXCs in risk 
adjustment data validation or focus current data validation efforts on 
HCCs. One of these commenters noted that HHS would have the means to 
address any obvious fraudulent activity regarding RXCs discovered as 
part of a pilot process.
    Response: We are finalizing the incorporation of RXCs in risk 
adjustment data validation beginning with the 2018 benefit year. 
However, in response to comments, we will treat the 2018 benefit year 
as a pilot year for purposes of incorporating RXCs, similar to the 
pilot years that we allowed for other aspects of risk adjustment data 
validation for the 2015 and 2016 benefit years. Under this approach, 
the risk adjustment data validation processes will proceed for the 2018 
benefit year in a similar manner as the 2017 benefit year, with the 
addition of RXCs being included and treated in a manner similar to how 
we treat demographic and enrollment errors during data validation. 
However, the identification of RXC errors as part of 2018 risk 
adjustment data validation will not be used to adjust risk scores. 
While we do not agree with commenters that piloting RXCs in risk 
adjustment data validation for 2 years is necessary at this time, we 
agree with commenters who suggested that piloting the incorporation of 
RXCs in risk adjustment data validation for the 2018 benefit year will 
provide HHS, issuers, and stakeholders with experience in validating 
RXCs and understanding potential implications before using identified 
RXC errors to adjust risk scores. Our intention at this time is to 
fully implement the incorporation of RXCs into risk adjustment data 
validation, as outlined in this final rule, beginning with the 2019 
benefit year of risk adjustment data validation.
    Comment: Commenters wanted additional information on how HHS plans 
to validate RXCs, with one commenter recommending a verification 
approach where the audit would confirm that the prescription is a valid 
paid claim by reviewing this information on issuers' source systems 
(similar to how demographic and enrollment data is validated in risk 
adjustment data validation), and not obtain the actual prescription, 
which a commenter thought would be burdensome and would lead to false 
results. Some commenters sought clarification as to what constitutes a 
valid prescription that would need to be obtained to validate the RXC 
and what would be considered acceptable documentation within the 
medical record system for the purposes of validating the RXC. One 
commenter, who wanted clarification on how HHS determines the 
materiality of errors and the size of the adjustment for data 
discrepancies, noted that issuers may not have the ability to provide 
other types of documentation to validate that a prescription was 
written by a provider, and another commenter stated that as long as the 
issuer paid for the drug, it would be difficult to see how the issuer 
acted in bad faith and that applying a data validation process that 
makes sure the issuer's claims and payments match what is reported to

[[Page 17503]]

EDGE is the only validation that might identify potential inappropriate 
or fraudulent actions. Other commenters suggested varying types of 
collaboration with stakeholders on methodology and documentation 
standards related to incorporation of RXCs into risk adjustment data 
validation.
    Response: As discussed in the 2018 Payment Notice,\87\ HHS does not 
perform risk adjustment data validation audits with the intent of 
determining whether a clinician correctly diagnosed a patient. Rather, 
HHS focuses on ensuring that enrollees' diagnoses on paid claims 
reflect the appropriately assigned HCCs and were diagnosed by a 
licensed clinician. Likewise, in validating pharmacy claims, we intend 
to validate factors such as whether the prescription was paid by the 
issuer, and whether the RXC eligible service code on a medical claim 
was paid by the issuer.
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    \87\ 81 FR 94077.
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    We believe that this type of approach to RXCs will be an effective 
approach for validating that issuers are providing accurate RXC claims 
information while limiting the burden on issuers and other stakeholders 
involved in the risk adjustment data validation process. Specifically, 
to validate RXCs in risk adjustment data validation, we will conduct a 
claims-based validation to evaluate the accuracy of RXC data 
submissions. Under this approach, similar to how we confirm demographic 
and enrollment data during the risk adjustment data validation process, 
we will not require the issuer to obtain a valid prescription for the 
RXC and will only subject issuers' source system documentation of 
pharmacy claims or medical claims to the initial validation auditor and 
second validation auditor review, thereby limiting the burden on 
issuers to validate the RXCs.\88\ Consistent with the treatment of 
demographic and enrollment errors discovered during data 
validation,\89\ we intend to communicate with issuers where significant 
RXC errors are found.
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    \88\ Further details on the process for how RXCs will be 
validated during the pilot year will be provided in the 2018 Risk 
Adjustment Data Validation Protocols that we anticipate will be 
released in May 2019.
    \89\ See 83 FR at 16970-16971.
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    Furthermore, in a non-pilot year, we would only adjust issuer risk 
scores for RXC errors in cases where an issuer has materially incorrect 
EDGE server RXC data submissions, and these discovered RXC errors would 
be the basis for an adjustment to the applicable benefit year transfer 
amount for the state market risk pools in question. We will work with 
these issuers to resolve potential discrepancies in a manner similar to 
the EDGE data submission discrepancy process.\90\ We also intend to be 
in communication with all issuers in affected state market risk pools 
throughout the second validation audit process when RXC errors or other 
identified data validation errors could result in adjustments to risk 
adjustment transfers.
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    \90\ See, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2018.pdf; https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RA-Adjustment-Guidance-9-2-15.pdf and https://www.regtap.info/uploads/library/DDC_AttestDisc_Slides_050818_v2_5CR_050818(1).pdf.
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    This approach will target materially incorrect RXC data and will 
not target an isolated RXC data error, which is similar to the goal of 
the error estimation methodology for HCCs finalized in the 2019 Payment 
Notice--to avoid adjusting all issuers' risk adjustment transfers for 
expected variation. The approach is also similar to how demographic and 
enrollment validation is occurring where the review involves the 
identification of errors that could result in the initiation of a 
discrepancy process for adjustments.\91\ Additionally, we intend to 
learn from the experience of validating RXCs during the pilot year to 
inform and potentially refine the approach for incorporating review of 
RXCs in data validation in future benefit years. However, as noted 
above, our intention at this time is to fully implement the 
incorporation of RXCs into risk adjustment data validation, as outlined 
in this final rule, beginning with the 2019 benefit year of risk 
adjustment data validation.
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    \91\ 83 FR at 16970 .
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g. Risk Adjustment Data Validation Adjustments in Exiting and Single 
Issuer Markets and Negative Error Rate Outlier Markets
i. Risk Adjustment Data Validation Adjustments in Exiting Issuer 
Markets
    Under the risk adjustment data validation program, adjustments to 
transfers are generally made in the benefit year following the benefit 
year that was audited. For issuers that exit the market following the 
benefit year being audited, and therefore do not have transfers to 
adjust during the following benefit year, we previously finalized an 
exception to this general rule such that we will adjust the exiting 
issuer's prior year risk scores and associated transfers where it has 
been identified as an outlier through the HCC failure rate methodology 
during risk adjustment data validation.\92\ In the proposed rule, we 
proposed to amend our policy to provide that, if an exiting issuer is 
found to be a negative error rate outlier, HHS would not make 
adjustments to that issuer's risk score and its associated risk 
adjustment transfers as a result of this negative error rate outlier 
finding. A negative error rate will have the effect of increasing an 
issuer's risk score and thereby increasing its calculated risk 
adjustment payment or reducing its calculated risk adjustment charge. 
To avoid retroactively re-opening a risk pool to make adjustments to 
other issuers' transfers based on an exiting issuer's negative error 
rate, we proposed to re-open the issuer's risk score and its associated 
risk adjustment transfers in a prior benefit year only if the exiting 
issuer was found to have had a positive error rate, and was therefore 
overpaid or undercharged based on its risk adjustment data validation 
results. When the exiting issuer is a positive error rate outlier, HHS 
would collect funds (either increasing the charge amount or reducing 
the payment amount) from the exiting issuer and redistribute the 
amounts to other issuers who participated in the same state market risk 
pool in the prior benefit year. This approach was intended to help 
ensure that issuers are made whole even if an issuer with a positive 
error rate exits the state, without the additional burdens associated 
with having transfers adjusted (including the potential for additional 
charges being assessed) for a prior benefit year for a negative error 
rate outlier when an issuer decides to exit a state.
---------------------------------------------------------------------------

    \92\ 83 FR 16965.
---------------------------------------------------------------------------

    Further, we proposed that to be considered an exiting issuer under 
this policy, the issuer would have to exit all of the markets and risk 
pools in the state (that is, not selling or offering any new plans in 
the state). If an issuer only exits some markets or risk pools in the 
state, but continues to sell or offer new plans in others, it would not 
be considered an exiting issuer under this policy. Finally, we 
clarified that under this proposed policy, a small group market issuer 
with off-calendar year coverage who exits the market but has only 
carry-over coverage that ends in the next benefit year (that is, carry-
over of run out claims for individuals enrolled in the previous benefit 
year, with no new coverage being offered or sold) would be considered 
an exiting issuer and would also be exempt from risk adjustment data 
validation for the benefit year with the carry-over coverage. 
Individual market issuers offering or selling any new individual market 
coverage in the subsequent benefit year would be subject to risk 
adjustment data

[[Page 17504]]

validation, unless another exemption applied.
    Comment: Several commenters supported the proposals regarding 
exiting issuers, indicating that it would not be helpful to market 
stability and would cause harm to issuers that remain in a market if an 
exiting issuer that was a negative error rate outlier resulted in 
adjustments to the risk scores and transfers in the state market risk 
pool. A few commenters supported the proposal, and some stated that it 
should be extended so that no issuer's risk score or transfer would be 
increased for a negative error rate, stating that doing so would create 
significant uncertainty in financial projections and pricing for 
issuers.
    Response: After consideration of the comments received, we are 
finalizing the risk adjustment data validation policies regarding 
exiting issuers, and will apply this policy to the 2018 benefit year 
risk adjustment data validation and beyond. We believe that the 
policies on exiting issuers mitigate the impact on remaining issuers, 
and will aid in the market's stability and proper functioning year to 
year by limiting the application of an exiting issuer's risk adjustment 
data validation results to situations where the issuer was overpaid or 
undercharged for the benefit year being validated. Comments on negative 
error rates generally (that is, for issuers who are not exiting 
issuers) are addressed in a separate section of this preamble below.
ii. Risk Adjustment Data Validation Adjustments in Single Issuer 
Markets
    For an issuer that is the sole issuer in a state market risk pool 
in a benefit year, there are no risk adjustment transfers under the 
state payment transfer formula and thus, no payment or financial 
accountability to other issuers for that risk pool.\93\ We do not 
calculate risk adjustment transfers for a benefit year in a state 
market risk pool in which there is only one issuer, and that issuer is 
not required to conduct risk adjustment data validation for that state 
market risk pool.\94\ However, if the sole issuer was participating in 
multiple risk pools in the state during the year that is being audited, 
that issuer will be subject to risk adjustment data validation for 
those risk pools with other issuers that had risk adjustment transfers 
calculated. In addition, the sole issuer may have been identified as an 
outlier for risk adjustment data validation, and its error rate would 
be applied to all of its risk adjustment covered plans in the state 
market risk pools where it was not the sole issuer. Its error rate 
would also be applied to adjust the subsequent benefit year's transfers 
for other issuers in the same state market risk pool(s). If the sole 
issuer that participated in risk adjustment data validation for a 
benefit year was identified as outlier, and in the following benefit 
year, a new issuer entered what was formerly the sole issuer risk pool, 
we proposed that the former sole issuer's error rate would also apply 
to the risk scores for its risk adjustment covered plans in the 
subsequent benefit year in the risk pool(s) in which had been the sole 
issuer--that is, the formerly sole issuer's risk scores and transfer 
amounts calculated for the benefit year in which a new issuer entered 
the state market risk pool which did not have risk adjustment transfers 
calculated in the prior year would be subject to adjustment based on 
the formerly sole issuer's error rate. In addition, the new issuer 
would have its risk adjustment transfer adjusted in the current benefit 
year if the former sole issuer was an outlier with risk score error 
rates in the prior benefit year's risk adjustment data validation.
---------------------------------------------------------------------------

    \93\ See 83 FR at 16967.
    \94\ Id.
---------------------------------------------------------------------------

    Comment: A few commenters disagreed with the proposals for new 
entrants into a risk pool that formerly was a single issuer risk pool. 
These commenters stated that all issuers should be treated the same 
under risk adjustment data validation, and that a new entrant who was 
not subject to risk adjustment data validation in the year before the 
year in which it entered the state market risk pool should not be 
subject to adjustments until both issuers have undergone risk 
adjustment data validation. One of these commenters also expressed 
concerns that the proposed policy would create ``perverse incentives'' 
and decrease market stability, and that issuers would face uncertainty 
about future liabilities associated with risk adjustment data 
validation depending on whether another issuer enters the market in 
question.
    Response: After consideration of the comments received, we are 
finalizing the policies related to the application of risk adjustment 
data validation results when there are new entrants into a risk pool 
that formerly was a single issuer risk pool for the 2018 benefit year 
risk adjustment data validation and beyond. We do not believe that this 
policy would create perverse incentives, decrease market stability, or 
cause uncertainty about future liabilities associated with risk 
adjustment data validation, as this policy results in consistent 
treatment for all issuers. Thus, transfers will be adjusted for 
outliers when another issuer joins a sole issuer state market risk 
pool, as risk adjustment data validation is based on all state markets 
and outlier status in one market is reflective of outlier status in 
others.\95\ In fact, we believe postponing the application of 
adjustments due to risk adjustment data validation outlier status for 
sole issuer state market risk pools until both issuers have undergone 
risk adjustment data validation possibly could create perverse 
incentives and result in market distortions, as issuers would not be 
required to substantiate their EDGE data submissions nor would the 
issuer identified as an outlier in other market risk pools in the state 
be subject to the adjustments deemed appropriate through the prior 
year's risk adjustment data validation. Additionally, we do not agree 
that issuers would face uncertainty about future liabilities associated 
with risk adjustment data validation depending on whether another 
issuer enters the state market risk pool in question. This sole issuer 
policy finalized in this rule is consistent with the policy established 
in the 2015 Payment Notice specifying that each issuer's risk score 
adjustment (from risk adjustment data validation results) will be 
applied to adjust the plan's average risk score for each of the 
issuer's risk adjustment covered plans.\96\ This policy also aligns 
with how error rates are applied if a new issuer entered a state market 
risk pool with more than one issuer.
---------------------------------------------------------------------------

    \95\ 79 FR 13768 through 13769.
    \96\ 79 FR 13743 at 13768 through 13769.
---------------------------------------------------------------------------

iii. Risk Adjustment Data Validation and Negative Error Rate Outlier 
Markets
    As discussed in the proposed rule if an issuer is a negative error 
rate outlier, its risk score will be adjusted upwards. Assuming no 
changes to risk scores for the other issuers in the state market risk 
pool, this upward adjustment would reduce the issuer's risk adjustment 
charge or increase its risk adjustment payment for the applicable 
benefit year, leading to an increase in risk adjustment charges or a 
decrease in risk adjustment payments for the other issuers in the state 
market risk pool. If an issuer is a positive error rate outlier, its 
risk score will be adjusted downwards. Assuming no changes to risk 
scores for the other issuers in the state market risk pool, this 
downward adjustment would increase the issuer's charge or decrease its 
payment for the applicable benefit year, leading to a decrease in 
charges or an increase in payments for the other issuers in the state 
market risk pool. The

[[Page 17505]]

intent of this two-sided outlier identification, and the resulting 
adjustments for outlier issuers that have significantly better than 
average (negative error rate) and poorer than average (positive error 
rate) data validation results is to ensure that risk adjustment data 
validation adjusts risk adjustment transfers for identified, material 
risk differences between what issuers submitted to their EDGE servers 
and what was validated in medical records. The increase to risk 
score(s) for negative error rate outliers is consistent with the upward 
and downward risk score adjustments that were finalized as part of the 
original risk adjustment data validation methodology in the 2015 
Payment Notice \97\ and the HCC failure rate approach to error 
estimation finalized in the 2019 Payment Notice.\98\ That is, the long-
standing intent of HHS-operated risk adjustment data validation has 
been to account for identified risk differences, regardless of the 
direction of those differences.\99\
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    \97\ For example, we stated in the 2015 Payment Notice that 
``the effect of an issuer's risk score error adjustment will depend 
upon its magnitude and direction compared to the average risk score 
error adjustment and direction for the entire market''. See 79 FR 
13743 at 13769.
    \98\ For example, in the 2019 Payment Notice, we stated that 
``we will use a 1.96 standard deviation cutoff, for a 95 percent 
confidence interval, to identify outliers'' and that ``when an 
issuer's HCC group failure rate is an outlier, we will reduce (or 
increase) each of the applicable initial validation audit sample 
enrollees' HCC coefficients by the difference between the outlier 
issuer's failure rate for the HCC group and the weighted mean 
failure rate for the HCC group.'' We also stated that 
``specifically, this will result in the sample enrollees' applicable 
HCC risk score components being reduced (or increased) by a partial 
value, or percentage, calculated as the difference between the 
outlier failure rate for the HCC group and the weighted mean failure 
rate for the applicable HCC group.'' 83 FR 16930 at 16962. The 
shorthand ``positive error rate outlier'' captures those issuers 
whose HCC coefficients are reduced as a result of being identified 
as an outlier; while the shorthand ``negative error rate outlier'' 
captures those issuers whose HCC coefficients are increased as a 
result of being identified as an outlier.
    \99\ An exception to this approach is the policy finalized, 
beginning for the 2018 benefit year of risk adjustment data 
validation, and discussed above in this rule for exiting issuers who 
are negative error rate outliers.
---------------------------------------------------------------------------

    However, we sought comment on the impact of the current approach 
under the error estimation methodology and the outlier adjustment 
policy for negative error rate outlier issuers, or issuers with 
significantly lower-than-average HCC failure rates, on other issuers in 
a state market risk pool, the incentives that negative error rate 
adjustments may create, and potential modifications to the error rate 
estimation methodology or the outlier adjustment policy, such as to 
utilize the state mean failure rate instead of the national mean 
failure rate, to modify the error rate calculation to the confidence 
interval instead of the mean, to exclude negative error rate outliers 
or to use other methods of lessening the impact of negative error rate 
issuers on affected risk pools, beginning with the 2018 benefit year of 
risk adjustment data validation or later.
    Comment: Some commenters recommended that HHS follow its current 
risk adjustment data validation methodology and outlier adjustment 
policy, beginning with the application of 2017 benefit year risk 
adjustment data validation to 2018 benefit year risk adjustment 
transfers, without further delay or material change. These commenters 
stated that further delay of risk adjustment data validation would be 
unreasonable, create market instability, and would fundamentally 
jeopardize the program's integrity. These commenters also expressed 
support for evaluating prospective improvements to the HHS risk 
adjustment data validation methodology and outlier adjustment policy 
for future benefit years.
    However, other commenters stated that issuers generally did not 
expect the significant financial impact of risk adjustment data 
validation to be as large as indicated by the 2016 pilot results that 
were released by HHS in July 2018,\100\ noting that the current risk 
adjustment data validation error rate methodology was not finalized 
until April 2018. These commenters also tended to express concern that 
the error rates are calculated based on adjusting to the mean, instead 
of the confidence intervals. Some of these commenters were also 
concerned that issuers may begin booking anticipated impact of risk 
adjustment data validation on 2018 risk adjustment transfers in their 
2019 financials, raising premiums due to the uncertainty associated 
with estimating those impacts. These commenters believe that the 
current risk adjustment data validation methodology would lead to 
higher premiums by compelling issuers to raise premiums to buffer 
against the potential of unpredictable risk adjustment data validation 
adjustments, which could create instability and unpredictability in 
rate setting, and affect market participation.
---------------------------------------------------------------------------

    \100\ On July 13, 2018, HHS released a memo via Risk Adjustment 
Data Validation Audit Tool for issuers titled, ``2016 Benefit Year 
HHS-operated Risk Adjustment Data Validation (HHS-RADV) Final 
Results'' that included the program benchmark metrics and the 2016 
benefit year HHS-RADV Results Job Aid report that included the HCC 
group definitions and an illustrative example of the steps for error 
rate calculation. Thus, issuers were provided with illustrative 
information on the 2016 benefit year risk adjustment data validation 
results under the methodology finalized in April 2018, but that 
information was provided for informational purposes only and should 
not have been used for purposes of rate setting. In addition, as a 
second pilot year, the 2016 benefit year risk adjustment data 
validation results were not applied to adjust risk adjustment 
transfers.
---------------------------------------------------------------------------

    Several commenters expressed concern about the impact of the 
negative error rate outliers in cases where the issuer had a zero error 
rate, particularly given the potential distributive effect of the 
adjustments to transfers based on market share. Another commenter 
stated that the exiting issuer proposal on negative error rates should 
be extended to all issuers such that no issuer's risk score would be 
increased because of a negative error rate. The commenter believes that 
this would avoid the creation of significant uncertainty in financial 
projections and pricing for issuers in the same state market risk pool 
whose transfers could be negatively affected by another issuer's 
increased risk score.
    One commenter questioned HHS' authority to apply the current risk 
adjustment data validation error estimation methodology to 2018 risk 
scores. Another commenter stated its belief that HHS has the authority 
to make adjustments to the risk adjustment data validation methodology 
finalized in the 2019 Payment Notice. Some commenters suggested that 
HHS treat the 2017 benefit year as another pilot year or postpone the 
implementation of the risk adjustment data validation adjustments to 
risk scores and transfers until later benefit years (for example, 2020 
and beyond).
    Many commenters recommended HHS convene a joint industry 
stakeholder workgroup to develop effective solutions to ensure the risk 
adjustment program achieves its goals and fulfills its intended 
purpose. Other commenters recommended broader changes to the risk 
adjustment data validation process, such as using a targeted data-
driven approach to risk adjustment data validation, dividing the audits 
into individual and small group to separate the impact on transfers, or 
creating a process to exempt issuers from validating HCCs for which a 
provider refuses to supply a medical record (when the issuer has 
demonstrated good faith in trying to obtain that record).
    Response: We did not propose and are not making any changes with 
respect to the application of 2017 benefit year risk adjustment data 
validation results to 2018 benefit year risk adjustment risk scores and 
transfers using the current HHS risk adjustment data validation 
methodology and outlier adjustment policy. HHS conducted 2 pilot years 
for

[[Page 17506]]

risk adjustment data validation, and we agree with commenters that 
another pilot year would not be appropriate at this time (absent the 
exception for Massachusetts issuers detailed below) because further 
delay could jeopardize the program's integrity. Thus, we are not making 
the 2017 benefit year risk adjustment data validation a pilot year, nor 
are we making any changes to the risk adjustment data validation error 
estimation methodology for the 2017 or 2018 benefit years.
    While the current error estimation methodology was not finalized 
until April 2018, it was applied prospectively to risk adjustment data 
validation for the 2017 benefit year. We have also been transparent 
about the potential for adjustments based on risk adjustment data 
validation results, including the two-sided nature of such adjustments, 
since the inception of the program. Consistent with Sec.  153.350(c), 
as finalized in the final rule Standards Related to Reinsurance, Risk 
Corridors and Risk Adjustment,\101\ 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 
covered plan due to errors discovered during data validation. This 
approach was also reflected in the 2014 Payment Notice, which noted our 
intent to make adjustments where an issuer under-reported its risk 
scores.\102\ Further, under the original risk adjustment data 
validation methodology finalized in the 2015 Payment Notice \103\, 
every failure to validate an HCC would have resulted in an adjustment 
to the issuer's risk score and would have also affected transfers for 
all issuers in the state market risk pool (including both issuers with 
HCC validation failures and those without) due to the budget neutral 
nature of the HHS-operated risk adjustment program.
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    \101\ 77 FR 17234.
    \102\ 78 FR at 15438.
    \103\ For example, we stated in the 2015 Payment Notice that 
``the effect of an issuer's risk score error adjustment will depend 
upon its magnitude and direction compared to the average risk score 
error adjustment and direction for the entire market''. See 79 FR 
13769.
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    However, as detailed in the 2019 Payment Notice, we recognized that 
many issuers would experience some variation and error 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-operated risk 
adjustment data validation pilot years reinforced this belief. As a 
result, to avoid adjusting transfers for any and all failures, we 
adopted the HCC failure rate methodology, which results in adjustments 
to an issuer's risk score only when the issuer's failure rate is 
statistically different from the weighted mean failure rate, or total 
failure rate, for all issuers that submitted initial validation audits 
(that is, the issuer is identified as an outlier). Similar to the 
original methodology finalized in the 2015 Payment Notice, when there 
is an outlier issuer, the transfers for other issuers in the state 
market risk pool will also be adjusted due to the budget neutral nature 
of the HHS-operated risk adjustment program. We further note that, 
based on our analysis of the 2016 benefit year risk adjustment data 
validation results and our analysis of the initial estimated 2017 
benefit year risk adjustment data validation results, we have found 
that the HCC failure rate approach to error estimation significantly 
reduces the overall transfer impact of adjustments when compared with 
results under the original methodology.
    Additionally, as detailed above, the identification of positive and 
negative error rate outliers and the resulting adjustments under the 
HCC failure rate methodology is consistent with the two-sided 
adjustment approach adopted under the original risk adjustment 
methodology finalized in the 2015 Payment Notice. Except as provided 
elsewhere in this final rule for negative error rate outliers resulting 
from exiting issuers, we continue to believe that adjusting for both 
negative and positive error rate outliers ensures that issuers' actual 
actuarial risk is reflected and that the HHS-operated risk adjustment 
program assesses charges to issuers with plans with lower-than-average 
actuarial risk while making payments to issuers with plans with higher-
than-average actuarial risk. It also incentivizes issuers to achieve 
the most accurate EDGE data submissions for initial risk adjustment 
transfer calculations. For all these reasons, we do not believe that 
further changes are needed to the error estimation methodology or the 
outlier adjustment policy at this time. We will apply the current 
methodology and outlier adjustment policy to both the 2017 benefit year 
and 2018 benefit year of risk adjustment data validation. We intend to 
solicit further comments and work with stakeholders regarding potential 
changes for future benefit years.
    However, as explained above, while issuers have been on notice 
since 2012 that adjustments based on risk adjustment data validation 
results could occur,\104\ we recognize that the initial experience 
during the pilot years of risk adjustment data validation has caused 
concern over the potential direction and magnitude of the adjustments. 
After consideration of the comments received, and further analysis of 
timing considerations (such as the impact on adjustments of any 
successful risk adjustment data validation appeals, as well as the 
proposed change to the risk adjustment appeals holdback for the 2018 
benefit year and beyond (``Proposed Holdback Guidance'' \105\)), we are 
updating the timeline for publication, collection, and distribution of 
risk adjustment data validation adjustments to transfers. We still 
intend to publish 2017 benefit year error rates in May 2019, but under 
our updated timeline, we intend to publish the 2017 benefit year risk 
adjustment data validation adjustments on August 1, 2019 after the 
release of the Summary Report on Permanent Risk Adjustment Transfers 
for the 2018 Benefit Year (intended to be released on June 28, 2019). 
The information released in the August 1, 2019 report on risk 
adjustment data validation adjustments to transfers will be based on 
the preliminary 2017 benefit year risk adjustment data validation 
results, prior to the resolution of appeals. The August 1, 2019 report 
will also include information on 2017 benefit year default data 
validation charges under Sec.  153.630(b)(10) and allocation of those 
amounts. We will also delay the collection and distribution of 2017 
benefit year risk adjustment data validation adjustments to 2018 
benefit year risk adjustment transfers and 2017 benefit year default 
data validation charges and allocations until 2021 to provide issuers 
with more options on how and when to book financial impacts from risk 
adjustment data validation, in keeping with guidance from state 
departments of insurance, where applicable. Specifically, we intend to 
update the Medical Loss Ratio Form Instructions to provide guidance to 
issuers, consistent with Sec.  153.710(g)(2) and (3), regarding the 
reporting of risk adjustment data validation adjustments for medical 
loss ratio reporting purposes. The guidance would instruct issuers to 
report risk adjustment data validation adjustments and default data 
validation charges and allocations in the same medical loss

[[Page 17507]]

ratio reporting year as the year when these amounts are collected and 
disbursed (for example, the 2017 benefit year risk adjustment data 
validation adjustments and default data validation charges and 
allocations would be reported in the 2021 MLR reporting year). We also 
intend to update the Unified Rate Review Template (URRT) instructions 
to permit issuers and states to consider risk adjustment data 
validation adjustment impacts in rates for the year when these amounts 
will be collected and disbursed (for example, issuers and states would 
have the option to consider 2017 benefit year risk adjustment data 
validation adjustments in rate setting for the 2021 benefit year, 
instead of 2020 benefit year rate setting). Changing the timeline for 
the year in which issuers may pay, receive, and account for their 
results from risk adjustment data validation in the MLR and URRT 
submissions will only change the timing. This approach will not change 
the associated processes and therefore will not increase burden on 
issuers or states. Delaying the collection and distribution of 2017 
benefit year risk adjustment data validation adjustments to 2018 
benefit year risk adjustment transfers until 2021 will also allow more 
time for HHS to work with issuers to resolve any risk adjustment data 
validation appeals. It will also help mitigate the potential for 
additional uncertainty and instability that could be created by making 
adjustments before appeals are resolved, as a successful risk 
adjustment data validation appeal could affect the calculated risk 
score error rate and accompanying adjustments to transfers.
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    \104\ See, Standards Related to Reinsurance, Risk Corridors and 
Risk Adjustment, 77 FR 17234, 2014 Payment Notice, 78 FR at 15438, 
and 2015 Payment Notice, 79 FR 13769.
    \105\ Available at www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Proposed-Changes-RA-Holdback-2018BY.pdf.
---------------------------------------------------------------------------

    We anticipate adhering to a similar timeline in future years for 
the collection and payment of risk adjustment data validation 
adjustments to risk adjustment transfers (along with default data 
validation charges and allocations), such that risk adjustment 
transfers without risk adjustment data validation adjustments would be 
reported by June 30th of the year after the applicable benefit year, 
and issuers would report those amounts in the medical loss ratio 
reports submitted by July 31st of the year after the applicable benefit 
year. The preliminary risk adjustment data validation adjustments that 
could impact that benefit year's transfers, along with information on 
default data validation charges and allocations for the applicable 
benefit year, would be reported after the June 30 report is published, 
and we would collect and disburse risk adjustment data validation 
adjustments and default data validation charges and allocations two 
years after the announcement. Issuers would be instructed to reflect 
those final adjustment amounts and default data validation charges and 
allocations in the medical loss ratio reporting year in which 
collections and payments of those amounts occur, and would be permitted 
to reflect those amounts in rate setting for that same benefit year. 
For example, 2018 benefit year risk adjustment data validation 
adjustments and default data validation charges and allocations would 
be collected and paid in 2022; issuers could account for the impacts of 
those amounts in rate setting for the 2022 benefit year, and issuers 
would report the adjustments and default data validation charges and 
allocations in the 2022 benefit year medical loss ratio reporting year. 
Furthermore, given these timeline changes for collecting and paying 
risk adjustment data validation adjustments being finalized in this 
final rule and in response to comments that we received indicating that 
some issuers had difficulty obtaining medical records, we are also 
considering options to extend the timeline for conducting and 
completing the risk adjustment data validation processes for issuers 
and HHS. We believe that this additional time may help issuers in 
completing the operational processes in future benefit years. 
Therefore, we intend to seek input on an updated risk adjustment data 
validation timeline beginning with the 2018 benefit year to provide 
more time for medical record collection during the initial validation 
audits and more time for the completion of the second validation audit.
    Comment: Some commenters supported the current policy that involves 
adjusting for both positive and negative outliers with one of these 
commenters noting that adjustments for negative outliers encourage 
complete and accurate coding, and more comprehensive documentation. 
Many commenters, on the other hand, supported the elimination of risk 
score adjustments for issuers that are negative error rate outliers, 
noting that a negative error rate issuer should not be rewarded for 
submitting incorrect or incomplete data to the EDGE server and that 
negative error rate outliers create uncertainty in the market, 
particularly for issuers within the confidence bounds (that is, those 
issuers who are not outliers). One commenter supported adjusting an 
issuer's risk score when the issuer's error rate materially deviates 
from a statistically meaningful value or when its error rate materially 
deviates from a statistically meaningful value by a multiplier figure 
that values back to the outlier cutoff point. Another commenter 
recommended that HHS apply the error rates to the transfers of the 
benefit year that is being audited, rather than to transfers in the 
following benefit year.
    Several commenters recommended that outlier issuers' error rates be 
calculated based on the ends of the confidence interval instead of the 
mean to eliminate the ``payment cliff'' under the current methodology. 
Some of these commenters preferred adjusting outliers to the nearest 
ends of the confidence intervals as a short term solution to reduce the 
negative financial impact on other issuers in the state market risk 
pool because, for example, they believe the nationwide weighted average 
provides an adjustment that is too large in states where the statewide 
group failure rate is lower than the nationwide average. Some of these 
commenters also noted that adjusting to the confidence intervals would 
minimize unexpected impacts on transfers and remove the extreme impact 
of small adjustments in HCC accuracy for issuers whose failure rates 
are near the edges of the confidence interval.
    Response: We did not propose and are not making any changes to the 
error estimation methodology applicable to 2017 and 2018 benefit years 
risk adjustment data validation. We have concerns about adjusting 
outlier issuers to the edges of the confidence intervals instead of the 
mean, which is why that approach was not adopted in the current error 
estimation methodology. Specifically, we are concerned that adjusting 
to the edges of confidence intervals may effectively reduce the impact 
of risk adjustment data validation results to the point that the 
positive error rate outlier adjustments may not provide enough 
disincentive to prevent inappropriate coding and the benefit of 
upcoding may outweigh the potential costs of the risk adjustment data 
validation risk score adjustments. However, in future years, after we 
have analyzed more data on the risk adjustment data validation results, 
we intend to consider refinements to the risk adjustment data 
validation process and methodology, and may consider alternative 
options for error rate adjustments, such as using multiple or smoothed 
confidence intervals for outlier identification and risk score 
adjustment. While we are interested in applying the risk adjustment 
data validation results to the benefit year being audited, we have 
concerns that in order to switch to that policy starting with the 2018 
benefit year, we would be adjusting 2018 benefit year risk adjustment 
twice (once for the 2017

[[Page 17508]]

benefit year risk adjustment data validation results and a second time 
for the 2018 benefit year risk adjustment data validation results). 
However, we will continue to consider modifications to risk adjustment 
data validation processes and methodologies, including which benefit 
year transfers' the data validation adjustments are applied to, for 
future benefit years. As mentioned elsewhere in this final rule, we 
intend to consider the comments received for potential updates to the 
current methodology and outlier adjustment policy for future benefit 
years. We will consult with stakeholders before implementing any such 
changes.
    Comment: One commenter requested that HHS treat the 2017 benefit 
year as a pilot year for Massachusetts for risk adjustment data 
validation purposes since the 2017 benefit year was the first year that 
Massachusetts issuers participated in the HHS-operated risk adjustment 
program. This commenter noted that there will be some distortion in the 
results of audits for issuers in Massachusetts, and was especially 
concerned that this distortion may be magnified for smaller issuers.
    Response: We understand that Massachusetts issuers are in a unique 
situation with regard to risk adjustment data validation for the 2017 
benefit year, since the 2017 benefit year was the first year in which 
Massachusetts participated in the HHS-operated risk adjustment program 
and submitted data to EDGE servers, and no Massachusetts issuers \106\ 
had an opportunity to participate in the pilot years of HHS risk 
adjustment data validation. Therefore, in response to comments and 
after consideration of the specific facts and circumstances involved, 
we believe that exercising our enforcement discretion to provide 
Massachusetts issuers with a non-adjustment year for risk adjustment 
data validation is appropriate. It is consistent with our general 
approach to implementing risk adjustment data validation in other 
states where HHS is responsible for operating the program and we will 
therefore exercise our discretion to operate risk adjustment data 
validation for the 2017 benefit year as a pilot year for Massachusetts.
---------------------------------------------------------------------------

    \106\ Participation in risk adjustment data validation is based 
on HIOS IDs and not parent companies. Therefore, while some issuers' 
parent companies in Massachusetts may have previously participated 
in the HHS-operated risk adjustment program in other states under 
other issuer HIOS IDs, no issuer HIOS IDs in Massachusetts 
previously participated in the HHS-operated risk adjustment program, 
including the pilot years of risk adjustment data validation.
---------------------------------------------------------------------------

    Massachusetts issuers will receive 2017 benefit year risk 
adjustment data validation error rate results, but these issuers will 
not have their 2018 benefit year risk adjustment risk scores or 
transfers for Massachusetts state market risk pools adjusted based on 
2017 risk adjustment data validation results. Furthermore, 
Massachusetts issuers' failure rates will not be included in the 
calculation of the national metrics for the 2017 benefit year risk 
adjustment data validation to avoid the potential distortion in the 
national metrics that will be applied to issuers in other state market 
risk pools. All other issuers in all other states and the District of 
Columbia will have their 2018 benefit year risk adjustment risk scores 
and transfers adjusted based on 2017 benefit year risk adjustment data 
validation results in accordance the current error estimation 
methodology finalized in the 2019 Payment Notice. In addition, to the 
extent that a Massachusetts issuer also offered risk adjustment covered 
plans in other state market risk pools, its 2018 benefit year risk 
adjustment risk scores and transfers for those other state market risk 
pools will be adjusted based on 2017 benefit year risk adjustment data 
validation results.
h. Exemptions From Risk Adjustment Data Validation
    In previous rules,\107\ we established exemptions from the HHS-
operated risk adjustment data validation requirements for issuers with 
500 or fewer billable member months statewide and issuers at or below a 
materiality threshold for the benefit year being audited. Additionally, 
on April 9, 2018, we released guidance indicating that we intended to 
propose a similar exemption from risk adjustment data validation 
requirements for certain issuers in or entering liquidation.\108\ The 
purpose of these policies is to address numerous concerns, particularly 
from smaller issuers and state regulators, regarding the regulatory 
burden and costs associated with complying with the HHS-operated risk 
adjustment data validation program. HHS previously considered these 
concerns and provided relief where possible, and under this final rule, 
we are codifying these exemptions in regulation at Sec.  153.630(g), as 
described further below.
---------------------------------------------------------------------------

    \107\ See 81 FR 94058 at 94104 and 83 FR 16930 at 16966.
    \108\ Exemption from HHS-Operated Risk Adjustment Data 
Validation (HHS-RADV) for Issuers in Liquidation or Entering 
Liquidation (April 9, 2018). https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RADV-Exemption-for-Liquidation-Guidance.pdf.
---------------------------------------------------------------------------

    In the 2019 Payment Notice, we finalized that beginning with 2017 
benefit year HHS-operated risk adjustment data validation, issuers with 
500 billable member months or fewer statewide in the benefit year being 
audited that elect to establish and submit data to an EDGE server will 
not be subject to the requirement to hire an initial validation auditor 
or submit initial validation audit results.\109\ We explained that 
exempting these issuers from the requirement to hire an initial 
validation auditor is appropriate because they will have a 
disproportionately high operational burden for compliance with risk 
adjustment data validation. We noted that, beginning with 2018 benefit 
year risk adjustment data validation, these issuers will not be subject 
to random (or targeted) sampling under the materiality threshold, and 
they will continue to not be subject to the requirement to hire an 
initial validation auditor or submit initial validation audit results. 
Issuers who qualify for this exemption will not be subject to 
enforcement action for non-compliance with risk adjustment data 
validation requirements, or be assessed the default data validation 
charge under Sec.  153.630(b)(10). We stated that the determination of 
whether an issuer has 500 or fewer billable member months will be made 
on a statewide basis (that is, by combining an issuer's enrollment in a 
state's individual, small group, and merged markets, as applicable, in 
a benefit year). In the proposed rule, we proposed to codify this 
exemption at Sec.  153.630(g)(1). We received no comments on codifying 
this exemption; therefore, in this final rule, we are codifying this 
exemption as proposed. Consistent with the finalized policy adopted in 
the 2019 Payment Notice, this exemption is available beginning with the 
2017 benefit year of risk adjustment data validation.
---------------------------------------------------------------------------

    \109\ 83 FR 16930 at 16966.
---------------------------------------------------------------------------

    Second, in the 2018 Payment Notice, HHS finalized a materiality 
threshold for risk adjustment data validation to ease the burden of 
annual audit requirements for smaller issuers of risk adjustment 
covered plans.\110\ We evaluated the burden associated with risk 
adjustment data validation, particularly, the fixed costs associated 
with hiring an initial validation auditor and submitting results to HHS 
on an annual basis. We established a materiality threshold for risk 
adjustment data validation that considered the burden of such a process 
on smaller plans. Specifically, we stated that issuers with total 
annual premiums at or below $15 million for risk adjustment covered 
plans (calculated statewide based on the premiums of the benefit year 
being validated) will not be subject

[[Page 17509]]

to the annual initial validation audit requirements, but will still be 
subject to an initial validation audit approximately every 3 years 
(barring any risk-based triggers due to experience that warrant more 
frequent audits). Under the established process, we will conduct random 
and targeted sampling for issuers at or below the materiality 
threshold, beginning with the 2018 benefit year of risk adjustment data 
validation. Even if an issuer is exempt from initial validation audit 
requirements under the materiality threshold, HHS may require these 
issuers to make records available for review or to comply with an audit 
by the federal government under Sec.  153.620.
---------------------------------------------------------------------------

    \110\ 81 FR 94058 at 94104-94105.
---------------------------------------------------------------------------

    We proposed to codify the materiality threshold exemption at Sec.  
153.630(g)(2), providing that an issuer of a risk adjustment covered 
plan would be exempt from the data validation requirements in Sec.  
153.630(b) if the issuer is at or below the materiality threshold 
defined by HHS and is not selected by HHS to participate in the data 
validation requirements in an applicable benefit year under a random 
and targeted sampling conducted approximately every 3 years (barring 
any risk-based triggers due to experience that warrant more frequent 
participation in risk adjustment data validation).\111\
---------------------------------------------------------------------------

    \111\ When selecting issuers at or below the materiality 
threshold for more frequent initial validation audits, we will 
consider the issuer's prior risk adjustment data validation results 
and any material changes in risk adjustment data submissions, as 
measured by our quality metrics. See 81 FR 94105.
---------------------------------------------------------------------------

    Consistent with the materiality threshold finalized in the 2019 
Payment Notice,\112\ we proposed to define the materiality threshold as 
total annual premiums at or below $15 million, based on the premiums of 
the benefit year being validated for all of the issuer's risk 
adjustment covered plans in the individual, small group, and merged 
markets (as applicable) in the state. We did not propose any trending 
adjustment to the materiality threshold, but stated that if we were to 
modify the definition of materiality to trend the $15 million threshold 
in future benefit years, we would propose that change through notice-
and-comment rulemaking.
---------------------------------------------------------------------------

    \112\ See 83 FR 16966.
---------------------------------------------------------------------------

    We noted that if an issuer of a risk adjustment covered plan within 
the materiality threshold is not exempt from the data validation 
requirements for a given benefit year (that is, the issuer is selected 
by random and targeted sampling), and fails to engage an initial 
validation auditor or to submit the results of an initial validation 
audit to HHS, the issuer would be subject to a default data validation 
charge in accordance with Sec.  153.630(b)(10), and may be subject to 
other enforcement action.
    We are codifying this exemption at Sec.  153.630(g)(2), including 
the establishment of a $15 million threshold that will continue to 
apply until such time as it may be changed through notice-and-comment 
rulemaking as proposed. Consistent with the original policy finalized 
in the 2018 Payment Notice, this exemption is available beginning with 
2018 benefit year risk adjustment data validation.
    Lastly, as noted in this rule, HHS released guidance on April 9, 
2018 indicating our intention to propose in future rulemaking an 
exemption from risk adjustment data validation requirements for certain 
issuers in liquidation or that will enter liquidation. The purpose of 
exempting these issuers is similar to the reasons outlined in this rule 
for smaller issuers and those below the materiality threshold--to 
recognize the burdens and costs associated with the risk adjustment 
data validation requirements on these issuers, given their reduced 
financial and staff resources. Under this proposal, certain issuers in 
liquidation or that will enter liquidation would be exempt from the 
requirement to hire an initial validation auditor and submit initial 
validation audit results, as well as the second validation audit 
requirements, and would not be subject to enforcement action for non-
compliance with risk adjustment data validation requirements or be 
assessed the default data validation charge under Sec.  153.630(b)(10).
    We proposed codifying at Sec.  153.630(g)(3) that an issuer would 
be exempt from the applicable benefit year of risk adjustment data 
validation if the issuer is in liquidation as of April 30th of the year 
when transfer adjustments based on data validation results are made 
(that is, 2 benefit years after the benefit year being audited). For 
the 2018 benefit year and beyond, we proposed that to qualify for the 
exemption, the issuer must also not be a positive error rate outlier in 
the prior benefit year of risk adjustment data validation (that is, the 
issuer is not a positive error rate outlier under the error estimation 
methodology in the prior year's risk adjustment data validation) as 
outlined in proposed paragraph (g)(3)(ii). If an issuer in liquidation 
or that will enter liquidation by the applicable date was a positive 
error rate outlier in the previous year's risk adjustment data 
validation, we proposed not to exempt the issuer from the subsequent 
benefit year's risk adjustment data validation, and the issuer would be 
required to participate in risk adjustment data validation or receive 
the default data validation charge in accordance with Sec.  
153.630(b)(10) unless another exemption applies.
    To qualify for this exemption in any year, we proposed under 
paragraph (g)(3)(i) that the issuer must provide to HHS, in a manner 
and timeframe to be specified by HHS, an attestation that the issuer is 
in or will enter liquidation no later than April 30th 2 years after the 
benefit year being audited that is signed by an individual with the 
authority to legally and financially bind the issuer. In proposed 
paragraph (g)(3)(iii), we proposed to define liquidation as meaning 
that a state court has issued an order of liquidation for the issuer 
that fixes the rights and liabilities of the issuer and its creditors, 
policyholders, shareholders, members, and all other persons of 
interest. Our intention with this policy was to align the definition of 
liquidation with state law on liquidation of health insurance issuers 
and the National Association of Insurance Commissioners' Model Act on 
receivership where possible.\113\
---------------------------------------------------------------------------

    \113\ National Association of Insurance Commissioners Model Act, 
Issuer Receivership Act. 2007. https://www.naic.org/store/free/MDL-555.pdf.
---------------------------------------------------------------------------

    While we understood the exact date of a liquidation order may be 
uncertain in specific circumstances, we proposed that the individual 
signing the attestation must be reasonably certain that the issuer will 
enter liquidation by April 30th 2 benefit years after the benefit year 
being audited.
    Under our proposal, we would accept an attestation from a 
representative of the state's department of insurance, an appointed 
liquidator, or other appropriate individual who can legally and 
financially bind the issuer. HHS would verify the issuers' liquidation 
status with the applicable state regulators for issuers who submitted 
an attestation under Sec.  153.630(g)(3). We also proposed that, 
because the April 30th 2 benefit years after the benefit year being 
audited is after the deadline for completing the initial validation 
audit for a given benefit year, an issuer who submits an attestation 
for this exemption but is determined by HHS to not meet the criteria 
for the exemption would receive a default data validation charge in 
accordance with Sec.  153.630(b)(10) if the issuer fails to complete or 
comply with the risk adjustment data validation process within the 
established timeframes for

[[Page 17510]]

the given benefit year, unless another exemption applies.
    Additionally, we noted that any issuer that qualifies for any of 
the three exemptions in proposed Sec.  153.630(g) would not have its 
risk score and its associated risk adjustment transfers adjusted due to 
its own risk score error rate, but that issuer's risk score and its 
associated risk adjustment transfers could be adjusted if other issuers 
in that state market risk pool were outliers and received risk score 
error rates for that benefit year's risk adjustment data validation.
    We are also finalizing the codification of the liquidation 
exemption at Sec.  153.730(g)(3) as proposed for the 2018 benefit year. 
For 2017 benefit year risk adjustment data validation, we intend to 
work with issuers in liquidation and will exercise our enforcement 
discretion, where appropriate, to provide relief consistent with the 
criteria outlined in the April 9, 2018 guidance \114\ and the proposed 
rule.
---------------------------------------------------------------------------

    \114\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RADV-Exemption-for-Liquidation-Guidance.pdf.
---------------------------------------------------------------------------

    Comment: Commenters generally supported the codification of a 
materiality exemption, but some suggested a different threshold, noting 
a flat materiality threshold would not account for variations across 
markets. Some of these commenters suggested a threshold based on a 
percentage of premiums (for example, issuers whose premiums account for 
less than 5 percent of the statewide premium). Alternatively, some 
commenters stated that if a flat materiality threshold is used, it 
should be updated in future benefit years to account for changes in 
market conditions. One commenter did not support the establishment of a 
materiality threshold that would exempt issuers from conducting risk 
adjustment data validation each year. This commenter stated that all 
issuers should be subject to the same requirements and operate on a 
level playing field, and if all issuers participate in risk adjustment 
data validation, all issuers will have audited results, which will 
promote overall confidence in the risk adjustment program.
    Response: Although we appreciate the comments, as noted in the 
proposed rule, we proposed to codify the materiality exemption that was 
finalized in the 2018 and 2019 Payment Notices. As detailed in these 
prior rulemakings \115\, we believe this exemption is appropriate 
because the fixed costs associated with hiring an initial validation 
auditor and submitting results to HHS may be disproportionately high 
for smaller issuers, and may even constitute a large portion of their 
administrative costs. Also, we estimated that issuers that cover under 
2 percent of membership nationally would qualify for this exemption, so 
the effect of the exemption on risk adjustment data validation is not 
material. HHS will continue to review and analyze whether the threshold 
should be updated for future benefit years, but we are maintaining the 
current $15 million threshold because we believe that, under current 
market conditions, it still delineates properly the limited group of 
smaller issuers of risk adjustment covered plans that is appropriate 
for the exemption's relief. As detailed in prior rulemakings that 
established this exemption, issuers who meet the materiality threshold 
would not be exempt from conducting risk adjustment data validation 
each year. Issuers meeting this exemption will be subject to random and 
targeted sampling to participate in risk adjustment data validation 
approximately every 3 years (barring any risk-based triggers due to 
experience that warrant more frequent participation in risk adjustment 
data validation), beginning with the 2018 benefit year of risk 
adjustment data validation. We agree with the commenter that issuers 
should generally be subject to the same requirements for risk 
adjustment data validation, but also believe there are limited 
exemptions that may be appropriate to address specific concerns. We 
believe that, for the reasons articulated above, there is adequate 
justification for the materiality threshold as currently structured. We 
are therefore finalizing the codification of the materiality threshold 
exemption at Sec.  153.630(g)(2).
---------------------------------------------------------------------------

    \115\ See 81 FR 94104 through 94105 and 83 FR 16966 through 
16967.
---------------------------------------------------------------------------

    Comment: Commenters disagreed with the proposal to exempt certain 
liquidating issuers from the requirements to hire an initial validation 
auditor, submit initial validation audit results, and undergo the 
second validation audit, and from enforcement actions for non-
compliance with risk adjustment data validation requirements, including 
the default data validation charge. One commenter stated that issuers 
facing liquidation might have incentives to submit inaccurate risk 
adjustment data given their financial pressures, and that requiring 
these issuers to participate in risk adjustment data validation will 
promote confidence in the program and the quality of the data submitted 
by these issuers. Two commenters had significant concerns that some 
plans might find ways to take advantage of the exemption without 
entering liquidation. Also, in order to create a level playing field 
for all issuers of risk adjustment covered plans, one commenter 
stressed the importance of requiring all issuers to conduct risk 
adjustment data validation each year, since this will promote 
confidence in the transfers by ensuring the quality and integrity of 
the issuer data.
    Response: While we recognize the commenters' concern that an issuer 
that anticipates entering liquidation may have an incentive to provide 
poor quality risk adjustment data, we require all issuers to attest to 
the accuracy, quantity and quality of their risk adjustment data after 
the applicable benefit year's data submission deadline during the EDGE 
Attestation and Discrepancy Reporting Process, and part of this 
attestation notes that issuers who submit false data upon which risk 
adjustment transfers are calculated could be subject to prosecution 
under the False Claims Act. HHS also has additional safeguards that 
help mitigate the possibility that issuers will provide poor quality 
data in connection with the risk adjustment program, including 
authority to impose a civil monetary penalty for failure to comply with 
risk adjustment data requirements, as well as to impose a risk 
adjustment default charge where an issuer failed the EDGE quality/
quantity evaluation by submitting inadequate data.\116\ Further, the 
requirements that the attesting individual be reasonably certain that 
the issuer will enter liquidation and that, beginning with the 2018 
benefit year, an issuer cannot be a positive error rate outlier in risk 
adjustment data validation for the prior benefit year are further 
safeguards intended to help protect against inappropriate use of the 
liquidation exemption. We also note that if an issuer does not enter 
liquidation by the applicable April 30th due date, this exemption would 
not be available and the issuer would be subject to a default data 
validation charge under Sec.  153.630(b)(10). Therefore, we do not 
anticipate that issuers will inappropriately attempt to claim the 
exemption without entering liquidation, and have put safeguards in 
place to protect against situations where an issuer attempts to do so. 
Since the liquidation exemption is consistent with our broader policy 
of providing relief where appropriate to issuers with limited 
resources, and the concerns noted by the commenters should be 
ameliorated by the safeguards and

[[Page 17511]]

enforcement authorities described above, we are finalizing the 
liquidation exemption for the 2018 benefit year as proposed. We intend 
to work with issuers who meet the criteria outlined in the April 9, 
2018 guidance \117\ and the proposed rule and will use enforcement 
discretion, where appropriate, to exempt these issuers for 2017 benefit 
year risk adjustment data validation.
---------------------------------------------------------------------------

    \116\ See Sec.  153.740(a) and (b).
    \117\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RADV-Exemption-for-Liquidation-Guidance.pdf.
---------------------------------------------------------------------------

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

1. Definitions (Sec.  155.20)
    We proposed to amend Sec.  155.20 to add definitions of ``direct 
enrollment technology provider,'' ``direct enrollment entity,'' 
``direct enrollment entity application assister,'' and ``web-broker.'' 
After consideration of the comments received, we are finalizing the 
adoption of these new definitions as proposed. For further discussion, 
please see the preamble to Sec. Sec.  155.220, 155.221, and 155.415.
    Comment: Several commenters supported the proposed definitions, in 
particular the distinction created between ``direct enrollment 
technology provider'' and ``web-broker.'' One commenter recommended the 
term ``direct enrollment technology provider'' not be included in the 
definition of ``web-broker'' to avoid potential confusion that direct 
enrollment technology providers are licensed as brokers. However, the 
same commenter agreed that direct enrollment technology providers and 
web-brokers should be subject to the same requirements and acknowledged 
the increased complexity of completely distinguishing them.
    Response: ``Direct enrollment technology provider'' is defined as a 
type of web-broker business entity that is not a licensed agent, 
broker, or producer under state law and has been engaged or created by, 
or is owned by an agent or broker, to provide technology services to 
facilitate participation in direct enrollment under Sec. Sec.  
155.220(c)(3) and 155.221. This definition refers to these entities as 
a type of web-broker business entity, and the accompanying definition 
of ``web-broker'' similarly includes a reference to direct enrollment 
technology providers, for the purpose of generally extending the same 
requirements to direct enrollment technology providers as web-brokers, 
unless otherwise specified. The creation of the term ``direct 
enrollment technology provider'' and its accompanying definition was 
necessary to distinguish these entities from other types of web-
brokers, where appropriate. See the below preamble discussion in 
Sec. Sec.  155.220 and 155.221 for further details.
2. General Functions of an Exchange
a. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    Section 1311(d)(4)(B) of the PPACA requires an Exchange to provide 
for the operation of a toll-free telephone hotline to respond to 
requests for assistance. In the 2017 Payment Notice, we explained the 
distinction between a toll-free call center and a toll-free hotline, 
for purposes of specifying the different requirements for SBE-FPs and 
other Exchanges.\118\ In the 2019 Payment Notice, we finalized 
regulations providing for a leaner FF-SHOP implementation, and have 
adopted that approach. In that rulemaking, we explained that the FF-
SHOPs will continue to provide a call center to answer questions 
related to the SHOP.\119\ Currently, employers purchase and enroll 
their employees in new FF-SHOP coverage through issuers and through 
agents and brokers registered with the FFE, and no longer enroll in 
SHOP coverage using an online FF-SHOP platform.
---------------------------------------------------------------------------

    \118\ 81 FR at 12246.
    \119\ 83 FR at 16997.
---------------------------------------------------------------------------

    Under this approach, FF-SHOP call center volume has been extremely 
low. Given this experience, we proposed to amend Sec.  155.205(a) to 
allow SHOPs operating in the leaner fashion described in the 2019 
Payment Notice to operate a toll-free telephone hotline, as required by 
section 1311(d)(4)(B) of the PPACA, and to eliminate the requirement to 
operate a more robust call center. We proposed to amend the 
interpretation provided in the 2017 Payment Notice of what is required 
to establish a toll-free hotline, as required by section 1311(d)(4)(B) 
of the PPACA. There, we stated that a toll-free hotline includes the 
capability to provide information to consumers and appropriately direct 
consumers to the federally operated call center or HealthCare.gov to 
apply for, and enroll in, coverage through the Exchange. Given that 
SHOPs that operate in the leaner fashion no longer offer online 
enrollment and to reflect the option for such SHOPs to provide a toll-
free hotline, rather than a more robust call center, we proposed that a 
toll-free hotline include the capability to provide information to 
consumers about eligibility and enrollment processes, and to 
appropriately direct consumers to the applicable Exchange website and 
other applicable resources.
    The toll-free hotline provided by such SHOPs would consist of a 
toll-free number linked to interactive voice response capability, with 
prompts to pre-recorded responses to frequently asked questions, 
information about locating an agent and broker in the caller's area, 
and the ability for the caller to leave a message regarding any 
additional information needed. We stated our belief that this hotline 
would adequately address the needs of potential FF-SHOP consumers 
requesting assistance, and appropriately direct consumers to services 
to apply for, and enroll in, FF-SHOP coverage.
    Comment: A few commenters were in support of operating the call 
center in a leaner fashion. One commenter was not in support of the 
proposal, concerned that consumers would not be able to obtain timely 
assistance.
    Response: The SHOP toll-free call center will continue to provide 
timely access to assistance. Consumers can immediately access pre-
recorded responses to frequently asked questions along with information 
about locating an agent and broker in the consumer's area. Further, the 
consumer can leave a message or send an email requesting any further 
information needed, which will be monitored daily for prompt response. 
Therefore, we are finalizing these changes as proposed.
b. Navigator Program Standards (Sec.  155.210)
    Section 1311(d)(4)(K) and 1311(i) of the PPACA require each 
Exchange to establish a Navigator program under which it awards grants 
to entities to 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 cost-sharing reductions; facilitate enrollment in QHPs; 
provide referrals to any applicable office of health insurance consumer 
assistance or health insurance ombudsman established under section 2793 
of the PHS Act, or any other appropriate state agency or agencies for 
any enrollee with a grievance, complaint, or question regarding their 
health plan, coverage, or a determination under such plan or coverage; 
and provide information in a manner that is culturally and 
linguistically appropriate to the needs of the population being served 
by the Exchange. The statute also requires the Secretary to develop 
standards to ensure that information made available by Navigators is 
fair, accurate, and impartial. We have implemented the

[[Page 17512]]

statutorily required Navigator duties through regulations at Sec.  
155.210 (for all Exchanges) and Sec.  155.215 (for Navigators in FFEs).
    Further, section 1311(i)(4) of the PPACA requires the Secretary to 
establish standards for Navigators to ensure that Navigators are 
qualified, and licensed, if appropriate, to engage in the Navigator 
activities described in the statute. This provision has been 
implemented at Sec.  155.210(b) (for all Exchanges) and at Sec.  
155.215(b) (for Navigators in FFEs).
    Section 155.210(e)(9) specifies that an Exchange may require or 
authorize Navigators to provide assistance with a number of topics not 
specifically mentioned in the statute, including certain post-
enrollment activities. This section specifies that Navigators operating 
in FFEs are authorized to provide assistance on these topics and are 
required to do so under Navigator grants awarded in 2018 or later.\120\ 
To provide more flexibility related to the required duties for 
Navigators operating in FFEs, we proposed to amend Sec.  155.210(e)(9) 
to make assistance with these topics permissible for FFE Navigators, 
not required, effective upon the awarding of the FEE navigator grants 
in 2019. We stated our belief that making assistance with these topics 
optional for FFE Navigators would reduce regulatory burden on FFE 
Navigator entities and better meet consumers' needs by allowing FFE 
Navigators to prioritize work according to consumer demand, community 
needs, and organizational resources.
---------------------------------------------------------------------------

    \120\ These topics are: Understanding the process of filing 
Exchange eligibility appeals; understanding and applying for 
exemptions from the individual shared responsibility payment that 
are granted through the Exchange; the Exchange-related components of 
the premium tax credit reconciliation process; understanding basic 
concepts and rights related to health coverage and how to use it; 
and, referrals to licensed tax advisers, tax preparers, or other 
resources for assistance with tax preparation and tax advice on 
certain Exchange-related topics.
---------------------------------------------------------------------------

    We acknowledge that HHS added these duties 2 years ago to ensure 
the availability of more robust consumer assistance; however, since 
that time, there have been programmatic and health care coverage policy 
changes that have caused us to reflect further. We stated our belief 
that consumers would be better served by allowing more flexibility for 
Navigators to tailor their services to make the most of their resources 
and to fit the needs of their communities.
    In the proposed rule, we emphasized that FFE Navigators would be 
authorized to continue to provide assistance with any of the topics 
listed under Sec.  155.210(e)(9). Under the proposed approach, if FFE 
Navigator grantees choose to provide any of the assistance specified in 
Sec.  155.210(e)(9), we will continue to expect them to assess their 
communities' needs and build competency in the assistance activities in 
which they are engaging. It is important to note that the current FFE 
Navigator training for annual certification or recertification might 
continue to include training on some of the Sec.  155.210(e)(9) topics. 
To supplement the required FFE Navigator training, we also plan to 
continue providing FFE Navigators with additional information related 
to these assistance activities through informal webinars, newsletters, 
and technical assistance resources such as fact sheets and slide 
presentations. FFE Navigator grantees that opt to carry out any of the 
assistance activities in Sec.  155.210(e)(9) will be expected to draw 
upon these materials to ensure their staff and volunteers are 
adequately prepared to provide that assistance. Our proposal also 
retained SBE autonomy to determine whether requiring or authorizing the 
SBE's Navigators to perform the activities listed in Sec.  
155.210(e)(9) best meets the state's needs and resources.
    We recognize that the time FFE Navigators currently spend providing 
assistance with the Sec.  155.210(e)(9) topics varies.
    To better understand the future impact of removing this 
requirement, we requested comment on how many hours per month FFE 
Navigator grantees and individual Navigators currently spend providing 
the assistance activities described at Sec.  155.210(e)(9), what 
percentage of their current work involves providing these types of 
assistance, and how that amount of work would be impacted if providing 
these types of assistance would no longer be required. We also 
requested comment on how FFE Navigator grantees and individual 
Navigators might reprioritize work and spend time fulfilling their 
other duties, if not required to provide the types of assistance 
described under Sec.  155.210(e)(9).
    In addition to proposing to increase FFE Navigator flexibility with 
regard to the types of assistance they provide, we also proposed to 
provide more flexibility related to the training requirements that 
Exchanges establish for Navigators. Sections 155.210(b)(2) and 
155.215(b)(2) establish Navigator training standards consistent with 
section 1311(i)(4) of the PPACA. Section 155.210(b)(2) specifies that 
Exchanges must develop and publicly disseminate a set of training 
standards to be met by all entities and individuals carrying out 
Navigator functions under the terms of a Navigator grant, to ensure 
expertise in several specific topic areas.\121\ Currently, under Sec.  
155.210(b)(2), Exchanges (including SBEs) that opt to require their 
Navigators to perform the assistance described in Sec.  155.210(e)(9) 
must also develop and disseminate training standards related to the 
specific assistance areas they require under Sec.  155.210(e)(9). Also, 
Navigators in FFEs currently must be trained in fifteen additional 
topic areas identified at Sec.  155.215(b)(2).\122\
---------------------------------------------------------------------------

    \121\ These areas include: the needs of underserved and 
vulnerable populations; eligibility and enrollment rules and 
procedures; the range of QHP options and insurance affordability 
programs; and, the privacy and security standards applicable under 
Sec.  155.260.
    \122\ These areas include: information on QHPs, including 
benefits covered, differences among plans, payment process, rights 
and processes for appeals and grievances, and contacting individual 
plans; the tax implications of enrollment decisions; information on 
affordability programs; Exchange eligibility and enrollment rules 
and procedures; privacy and security standards, customer service 
standards; outreach and education methods and strategies; 
appropriate contact information for other agencies for consumers 
seeking information about coverage options not offered through the 
Exchange; basic concepts about health insurance and the Exchange; 
working effectively with individuals with limited English 
proficiency, and disabled, rural, underserved or vulnerable 
individuals; providing linguistically and culturally appropriate 
services; ensuring physical and other accessibility for people with 
a full range of disabilities; and applicable administrative rules, 
processes and systems related to Exchanges and QHPs.
---------------------------------------------------------------------------

    To provide more flexibility related to the training requirements 
for Navigators, we proposed to streamline both the requirement in Sec.  
155.210(b)(2) for all Exchanges to develop and disseminate Navigator 
training standards on specific topics, and the list of required 
training topics for FFE Navigators in Sec.  155.215(b)(2). We proposed 
to amend the requirement at Sec.  155.210(b)(2) to require Exchanges to 
develop and publicly disseminate training standards to ensure that the 
entities and individuals are qualified to engage in Navigator 
activities, including in the four major areas currently specified at 
Sec.  155.210(b)(2)(i) through (iv). This would eliminate the training 
requirements at current Sec.  155.210(b)(2)(v)-(ix) that correspond to 
the activities outlined in Sec.  155.210(e)(9), since those activities 
would no longer be required. We also proposed to replace the current 
list of fifteen additional FFE Navigator training topics at Sec.  
155.215(b)(2) with a cross-reference to the amended Sec.  155.210(b)(2) 
topics.\123\ In the proposed rule, we

[[Page 17513]]

stated that we believe the revised regulations would be broad enough to 
ensure that each Navigator program fulfills the requirements described 
in section 1311(i) of the PPACA.
---------------------------------------------------------------------------

    \123\ We note that Sec.  155.215 also applies to non-Navigator 
assistance personnel, also referred to as enrollment assistance 
personnel. However, at this time, this program is no longer in 
operation in the FFEs.
---------------------------------------------------------------------------

    This approach would provide Exchanges greater flexibility in 
designing their Navigator training programs to ensure coverage of the 
most instructive and timely topics and to align the training with 
future changes in the Navigator program or the operation of the 
Exchanges, while still ensuring that Navigators are qualified to carry 
out their required duties. This additional flexibility would also allow 
Exchanges to focus on training areas they determine to be most relevant 
to the populations they serve and on the policy and operations of the 
Exchange in which they operate.
    Furthermore, Exchanges could opt to provide more training than 
would be required under these proposed amendments. For example, in 
addition to the FFE annual Navigator training, required for Navigator 
certification under Sec.  155.215(b), Navigators in FFEs are provided 
with training throughout the year that serves as a supplement to the 
annual FFE Navigator training by covering timely and appropriate 
training topics that might not be included in the annual FFE Navigator 
training. This additional training provided by FFEs, is consistent with 
the requirement that FFE Navigators obtain continuing education, as 
specified at Sec.  155.215(b)(1)(iv), and we intend to continue this 
practice.
    Currently, HHS provides SBEs, including SBE-FPs, the flexibility to 
decide whether they will require or authorize their Navigators to 
provide assistance on any or all of the areas described at Sec.  
155.210(e)(9). The changes that we are finalizing in this final rule do 
not change that flexibility. If SBEs choose to authorize or require 
their Navigators to provide assistance in any of the areas listed at 
Sec.  155.210(e)(9), they will still be required to ensure that their 
Navigators are qualified to provide this assistance.
    Under our amendments, any SBEs opting to authorize or require their 
Navigators to provide any or all of the types of assistance listed at 
Sec.  155.210(e)(9) will have the flexibility to determine effective 
approaches to training their Navigators on performing these types of 
assistance based on local experience. We believe each Exchange is best 
positioned to determine the training that is most appropriate for the 
activities of their Navigators.
    These proposals are intended to increase program flexibility within 
Exchanges and decrease regulatory burden related to Navigator training 
while maintaining standards that will ensure that Navigators are 
sufficiently prepared to carry out all required or authorized 
activities. We solicited comments on these proposals and received a 
range of comments in favor and not in favor of finalizing this policy. 
Streamlining the Navigator training requirements will allow Exchanges 
and Navigators to prioritize their training resources on those tasks 
that will best serve their state markets and Exchanges. HHS will 
continue to provide training on all current Navigator training topics. 
The format of the provided training may include other methods of 
technical assistance, but HHS is still committed to providing training 
on all of the streamlined Navigator training topics. We are finalizing 
these changes as proposed.
    Finally, we proposed allowing, but not requiring, Navigators to 
assist consumers with applying for eligibility for insurance 
affordability programs and QHP enrollment through web-broker websites 
under certain circumstances. We are not finalizing this proposal. For 
further discussion of that proposal, please see the preamble to Sec.  
155.220.
    Comment: We received some comments in support of the state 
flexibility the rule grants to SBEs to design their own training 
requirements. However, many commenters expressed concern about this 
proposal, citing the complexity of the enrollment process; the need to 
educate assisters on how to best serve underserved and vulnerable 
populations; the need to train Navigators on how to provide culturally 
and linguistically appropriate services; and the unique role Navigators 
play in helping underserved and vulnerable populations to both enroll 
in and use their coverage. Commenters also stated that reducing the 
number of mandatory training requirements may result in Navigators not 
being fully equipped to serve underserved and vulnerable consumers.
    Response: We agree with the commenters that supported the enhanced 
flexibility that the rule grants to SBEs to design the training 
requirements that are the best fit for their states. Nothing in this 
final rule prohibits SBEs from choosing not to streamline their state 
training or certification requirements to align with the required 
training in the FFEs. We believe it is important to provide SBEs with 
enhanced flexibility and the autonomy to design, provide, and implement 
the training that is the best fit for their communities.
    The streamlined training requirements will still cover how to serve 
vulnerable and underserved consumers as a required topic, and still 
require that Exchanges develop and publicly disseminate a set of 
training standards for Navigators to ensure Navigators are qualified to 
engage in Navigator activities. Additionally, the required Navigator 
certification and recertification trainings will not be the only source 
of training that HHS will provide to best educate Navigators in the 
FFEs on the complexities of the enrollment process, how to best serve 
vulnerable and underserved consumers, and how to serve consumers in 
ways which are culturally and linguistically appropriate. In addition 
to the required training, HHS will continue to provide training through 
other channels. These channels include webinars, policy briefs, job 
aids, newsletters, and fact sheets. HHS is committed to providing 
Navigators with sufficient training, and will continue to identify and 
provide trainings in areas in which it may be needed.
    Comment: Many commenters expressed concern that because all 
Navigator entities, as recipients of federal funds, must comply with 
section 1557 of the PPACA, Title VI of the Civil Rights Act of 1964, 
section 504 of the Rehabilitation Act, and the Americans with 
Disabilities Act, it is essential for HHS to continue to provide 
training on these topics. These commenters also expressed concern that 
if training on these topics were no longer required, Navigators would 
be unable to learn how to comply with these laws. These commenters also 
expressed their belief that Navigators often serve consumers who have 
disabilities, chronic illness, or Limited English Proficiency (LEP), 
and stated that if how to serve these populations were no longer a 
required training topic, Navigators would be unable to serve these 
consumers effectively.
    Response: We understand that Navigators must comply with anti-
discrimination laws and intend to continue to provide information about 
this topic as part of the broader required training category for 
serving vulnerable and underserved consumers required training 
category. We interpret the requirement for training standards to ensure 
the entities and individuals are qualified to engage in Navigator 
activities related to the needs of underserved and vulnerable 
populations to include topics such as:

[[Page 17514]]

     An overview of anti-discrimination laws such as section 
1557 of the PPACA, Title VI of the Civil Rights Act of 1964, section 
504 of the Rehabilitation Act and the Americans with Disabilities Act;
     Navigators' legal responsibility to comply with the above 
laws;
     Best practices for how to do so; and
     How to serve underserved and vulnerable consumers, 
including those who serve consumers who may have disabilities, chronic 
illness, or a Limited English Proficiency (LEP).
    We will monitor implementation of the revised Navigator trainings 
and their impact to ensure that these underserved and vulnerable 
populations continue to be properly served by the Navigator program. If 
HHS sees significant evidence that the capacity of Navigators to serve 
these populations and comply with anti-discrimination laws has eroded 
after these changes are implemented, we are open to reconsidering our 
approach.
    Comment: We received comments in support of the flexibility the 
rule grants to SBEs to choose whether their Navigators should continue 
to be required to provide certain types of assistance, including post-
enrollment assistance, or whether that should be optional.
    Response: We agree with the commenters who supported the enhanced 
flexibility that the rule provides. We also agree that SBEs should have 
the flexibility to either act in accordance with this rule by making 
certain types of assistance, including post-enrollment assistance, 
optional, or to continue to require it. We believe that SBEs, rather 
than the federal government, are best suited to determine the needs of 
the populations they serve, and how to best prioritize the work 
Navigators provide to meet those needs. This final rule provides SBEs 
with flexibility and autonomy to allocate their resources in ways that 
best serve the citizens of their states.
    Comment: Many commenters also expressed concern about the proposal 
that makes providing certain types of assistance, including post-
enrollment assistance, optional in the FFE. Commenters stated that the 
vulnerable populations that Navigators serve require ongoing assistance 
after enrollment and that Navigators play an important role in 
educating consumers on how to use insurance once they are enrolled, 
including their role in assisting consumers on how to file an appeal; 
how to report fluctuating income to the Exchange; how to reconcile 
their APTC; how to provide referrals to state agencies; how to answer 
consumers' questions about their health plans; how to provide education 
to improve consumers' health literacy; how to help consumers locate 
providers; and how to answer billing and payment questions.
    Commenters also stated that because of the trusted relationships 
Navigators build with consumers during the enrollment process, 
Navigators are best suited to provide the post-enrollment assistance 
that those consumers need.
    We also received comments that if providing certain types of 
assistance, including post-enrollment assistance, became optional 
rather than required, consumer health literacy and health equity may be 
impacted.
    Response: Nothing in this final rule prohibits Navigators in the 
FFE from providing these types of assistance. If Navigator grantees 
operate in areas where significant assistance in these areas is needed, 
those Navigator grantees retain the option to continue providing that 
assistance, and we would encourage them to continue to do so.
    We believe that, just like in the SBEs, Navigator grantees 
themselves, rather than the federal government, are in the best 
position to determine the particular needs of the communities they 
serve, and the type of assistance that is required to meet those needs. 
We also are committed to improving health equity, and encourage 
Navigators to continue their important efforts to reduce health 
disparities in the communities which they serve.
    This final rule provides Navigator grantees with flexibility to 
serve their consumers according to consumer demand, community needs, 
and organizational resources; and allows Navigators to prioritize their 
work accordingly.
    If Navigator grantees decide to continue to provide the types of 
assistance that will no longer be required, they and the Exchange are 
required to ensure that they are appropriately trained to provide that 
assistance. The FFEs will continue to provide training on post-
enrollment assistance via webinars, policy briefs, job aids, 
newsletters, fact sheets, and other resources, as needed, and urge 
those Navigators to review those resources and attend those trainings.
    Comment: We sought comment on the amount of time Navigators spend 
providing the types of assistance that will no longer be required, 
including post-enrollment assistance. Many commenters noted that the 
time Navigators spent providing such assistance was manageable, and 
that Navigators did not want or need the flexibility the rule provides. 
These commenters stated that enrollment assistance needs lessen after 
the conclusion of the open enrollment period, and therefore, that 
Navigators had the needed time to provide post-enrollment assistance.
    Response: We appreciate those who submitted comments on the amount 
of time spent providing the types of assistance that will no longer be 
required, including post-enrollment assistance. We believe the needs of 
the populations served by Navigators are not static, and not all 
communities have the same needs. The resources each Navigator may have 
to devote to providing this assistance may vary by grantee. We believe 
that it is essential to provide Navigators with as much flexibility and 
autonomy as possible to prioritize their work according to consumer 
demand, community needs, and organizational resources.
    Comment: Many commenters suggested that rather than making certain 
types of assistance, including post-enrollment assistance, optional, 
and streamlining the required Navigator training standards, HHS should 
instead allocate more funding to the Navigator program.
    Response: When Exchanges were in their infancy and public awareness 
and understanding of coverage options was low, HHS encouraged 
Navigators to provide intensive face-to-face assistance to consumers. 
This assistance included providing certain types of assistance, 
including post-enrollment assistance, as a required duty. It also 
guided the development of our training standards in past years. Since 
that time, public awareness and education on options for coverage 
available through the Exchanges has increased. Certified application 
counselors, direct enrollment partners, and Exchange-registered agents 
and brokers serve as additional resources for education on coverage 
options and outreach to consumers. We believe it is appropriate to 
scale down the Navigator program and other outreach activities to 
reflect the enhanced public awareness of health coverage options 
through the Exchanges.
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 final rule related to 
standards applicable to Navigators subject to

[[Page 17515]]

Sec.  155.215, please see the preamble to Sec.  155.210.
d. Ability of States To Permit Agents and Brokers To Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
    Throughout the preamble for Sec. Sec.  155.220 and 155.221, we 
proposed to use the term ``web-broker'' to refer to an individual agent 
or broker, a group of agents or brokers, or an agent or broker business 
entity, registered with an Exchange under Sec.  155.220(d)(1) that 
develops and hosts a non-Exchange website that interfaces with an 
Exchange to assist consumers with the selection of and enrollment in 
QHPs offered through the Exchange, a process referred to as direct 
enrollment. We have used the term ``web-broker'' in the preamble of 
prior rules, as well as in guidance, and proposed to generally replace 
the previously used informal definition with the one proposed in this 
rulemaking.\124\ We proposed to define ``web-broker'' in Sec.  155.20 
and use that term in Sec. Sec.  155.220 and 155.221, where applicable, 
to avoid confusion. We clarified that general references to agents or 
brokers would also be applicable to web-brokers when a web-broker is a 
licensed agent or broker. We also proposed to define ``direct 
enrollment technology providers'' as a type of web-broker that is not a 
licensed agent, broker, or producer under state law and has been 
engaged or created by, or is owned by, an agent or broker to provide 
technology services to facilitate participation in direct enrollment as 
a web-broker under Sec. Sec.  155.220(c)(3) and 155.221. The proposed 
definition of web-broker reflected the inclusion of direct enrollment 
technology providers. Therefore, references to ``web-brokers'' were 
intended to include direct enrollment technology providers, as well as 
licensed agents or brokers that develop and host non-Exchange websites 
to facilitate QHP selection and enrollment, unless indicated otherwise. 
Please see the preamble discussion related to Sec.  155.221 for further 
details. As noted above, we are finalizing these definitions as 
proposed.
---------------------------------------------------------------------------

    \124\ HHS previously defined the term ``web-broker'' as 
including an individual agent or broker, a group of agents and 
brokers, or a company that is interested in providing a non-
Federally-facilitated Exchange website to assist consumers in the 
QHP selection and enrollment process as described in Sec.  
155.220(c)(3).
---------------------------------------------------------------------------

    As described in the preamble to Sec.  155.221, we proposed 
significant changes to Sec.  155.221 to streamline and consolidate the 
requirements applicable to all direct enrollment entities--both issuers 
and web-brokers--in one regulation. To reflect these changes, we also 
proposed several amendments to Sec.  155.220. First, we proposed to 
move certain requirements that apply to all direct enrollment entities 
from Sec.  155.220 to Sec.  155.221. Specifically, we proposed to move 
the requirements currently captured in Sec.  155.220(c)(3)(i)(K) and 
(L), and to amend the requirement currently in (L), which as described 
further below, are now at Sec.  155.221(b)(4) and (d), respectively. We 
are finalizing these changes as proposed.
    We proposed conforming edits throughout Sec.  155.220 to 
incorporate the use of the term ``web-broker,'' as proposed to be 
defined, in applicable paragraphs to more clearly identify which FFE 
requirements extend to web-brokers. In the introductory text to 
paragraphs (a), (c), and (d), and in paragraphs (c)(1), (c)(5), (e), 
(f)(1), (f)(2), (f)(3), (f)(3)(i), (f)(4), (g)(1), (g)(2), (g)(2)(iii), 
(g)(2)(iv), (g)(4), (g)(5)(i)(A), (g)(5)(i)(B), (g)(5)(ii), 
(g)(5)(iii),\125\ (h)(1), (h)(2), (h)(3), (i), (j)(1), (j)(3), (k)(1), 
(k)(2), and (l), we proposed to add a reference to web-broker each time 
agents or brokers are referenced, to clarify that these paragraphs also 
apply to all web-brokers, including direct enrollment technology 
providers. In paragraphs (c)(3)(i), (c)(3)(i)(A), (c)(3)(ii), (c)(4), 
(c)(4)(i), (c)(4)(i)(E), (c)(4)(i)(F), and (c)(4)(ii), we proposed to 
replace some references to ``agent or broker'' with references to 
``web-broker'' to clarify when these paragraphs apply to only web-
brokers, and not to other types of agents or brokers who do not host or 
develop a non-Exchange website to assist consumers with direct 
enrollment in QHPs offered through the FFEs or SBE-FPs. We also 
proposed to revise the section heading for Sec.  155.220 to ``Ability 
of States to permit agents, brokers, and web-brokers to assist 
qualified individuals, qualified employers, or qualified employees 
enrolling in QHPs'', as well as the section heading for paragraph (i) 
to similarly add a reference to web-broker. We are finalizing these 
changes as proposed. Please see the preamble discussion related to 
Sec.  155.221 for further details on other proposed and finalized 
changes related to streamlining these regulations and clarifying the 
requirements applicable to web-brokers and other direct enrollment 
entities.
---------------------------------------------------------------------------

    \125\ We also proposed minor technical edits to the last 
sentence of paragraph (g)(5)(iii) to more closely align this 
provision with the language at paragraph (g)(4), which establishes 
similar parameters following the termination of an agent's, 
broker's, or web-broker's agreements and registration with the FFEs.
---------------------------------------------------------------------------

    We also proposed to amend Sec.  155.220(c)(3)(i) to add a new 
paragraph (c)(3)(i)(K) that requires web-broker websites to comply with 
the applicable requirements in Sec.  155.221 when an internet website 
of a web-broker is used to complete the QHP selection. We noted this 
new proposed requirement would also apply when an internet website of a 
web-broker is used to complete the Exchange eligibility application, 
through the existing cross reference to paragraph (c)(3)(i) in 
paragraph (c)(3)(ii)(A), but the applicable requirements under Sec.  
155.221 may differ depending on whether the non-Exchange website is 
used to complete the Exchange eligibility application or is used to 
complete the QHP selection. We are finalizing this amendment as 
proposed. Please see the preamble discussion related to Sec.  155.221 
for further details.
    We also proposed to amend Sec.  155.220(c)(3)(i) to add a new 
requirement at new paragraph (c)(3)(i)(L) that prohibits web-broker 
websites from displaying recommendations for QHPs based on compensation 
the web-broker, agent, or broker receives from QHP issuers. In the 
proposed rule, the term ``compensation'' would include commissions, 
fees, or other incentives as established in the relevant contract 
between an issuer and the web-broker. In the proposed rule, we 
recognized that web-broker websites often ask for certain information 
from consumers to assist with the display and sorting of QHP options on 
their non-Exchange websites. This may include estimated annual income, 
preferences regarding health care providers, prescription drugs the 
consumer takes, expected frequency of doctors' visits, or other 
information. We also acknowledged that web-brokers sometimes display 
QHP recommendations or assign scores to QHPs using the information they 
collect. We expressed support for the development and use of innovative 
consumer-assistance tools to help consumers shop for and select QHPs 
that best fit their needs, consistent with applicable requirements. 
However, we noted that we believe such recommendations should not be 
based on compensation web-brokers, agents, or brokers may receive from 
QHP issuers when consumers enroll in QHPs offered through Exchanges 
using web-broker non-Exchange websites. We are finalizing this 
amendment as proposed with the following clarification in response to 
comments. The definition of the term ``compensation'' for this

[[Page 17516]]

purpose includes commissions, fees, or other incentives granted by an 
issuer to a web-broker, agent, or broker. The inclusion of a reference 
to agents and brokers in this definition more closely aligns with the 
intent, which was to prohibit the display of QHP recommendations based 
on compensation received by any of these three entities from QHP 
issuers. The remaining revisions to the meaning of ``compensation'' are 
intended to capture any remuneration or incentives granted by an 
issuer, whether they be granted pursuant to the terms of a written 
contract or otherwise.
    We also proposed to amend Sec.  155.220(c)(4)(i)(A) to require a 
web-broker to provide HHS with a list of the agents or brokers who, 
through a contract or other arrangement, use the web-broker's non-
Exchange website to assist consumers with completion of QHP selection 
or for the Exchange eligibility application, in a form or manner to be 
specified by HHS. We explained that authority currently exists for HHS 
to request this information for agents or brokers who, through a 
contract or other arrangement, use the non-Exchange website to complete 
the QHP selection process.\126\ However, due to the trend of increased 
use and expansion of direct enrollment pathways for QHP enrollment, we 
explained that we believe it was appropriate to collect this 
information proactively and to also extend its collection to include 
the use of web-broker non-Exchange websites for completion of the 
Exchange eligibility application, so that we may investigate and 
respond more efficiently and effectively to any potential instances of 
noncompliance that may involve agents or brokers using a web-broker's 
direct enrollment pathway. Having this information would, for example, 
enable us to identify more quickly whether noncompliance is 
attributable to a specific individual or individuals, instead of the 
web-broker entity. We explained that we anticipate issuing further 
guidance on the form and manner for these submissions and were 
considering requiring the list must include, at minimum, each agent's 
or broker's name, state(s) of licensure, and National Producer Number. 
We further noted that we were considering adopting quarterly or monthly 
submission requirements, except for the month before the individual 
market open enrollment period and during the individual market open 
enrollment period, during which we were considering adopting weekly or 
daily submission requirements. We noted we were also considering 
requiring the submission of this data via email using an encrypted file 
format, such as a password-protected Excel spreadsheet, or 
alternatively requiring submission through a secure portal. We invited 
comments on the frequency and manner for these submissions, as well as 
other data elements that we should consider for inclusion as part of 
this required reporting. We also proposed to remove the final clause in 
Sec.  155.220(c)(4) that limits the scope of that section to agents or 
brokers using web-broker websites who are listed as the agent of record 
on the enrollments. Several years of experience observing web-broker 
operations has informed us that web-brokers often submit an entity-
level National Producer Number for all QHP enrollments completed 
through their websites. Therefore the web-broker business entity is the 
agent of record. However, the requirements stated in Sec.  
155.220(c)(4) are intended to apply broadly to agents or brokers using 
web-broker non-Exchange websites to assist with QHP selections and 
enrollments. We explained that we believe the existing requirements for 
web-brokers that provide access to their non-Exchange websites to other 
agents and brokers, such as verifying agents or brokers are licensed in 
the states in which they are assisting consumers and have completed the 
FFE registration process (see Sec.  155.220(c)(4)(i)(B)), as well as 
reporting to HHS and applicable state departments of insurance any 
potential material breaches of applicable Sec.  155.220 standards (see 
Sec.  155.220(c)(4)(i)(E)), should apply broadly to agents and brokers 
using web-broker non-Exchange websites, and not only to those listed as 
the agents of record. We are finalizing the changes to Sec.  
155.220(c)(4)(i)(A) as proposed. We intend to issue guidance regarding 
the form and manner for submission of information by web-brokers to HHS 
regarding the agents or brokers who use the web-broker's non-Exchange 
website to assist with the completion of QHP selection or the Exchange 
eligibility application.
---------------------------------------------------------------------------

    \126\ See Sec.  155.220(c)(4)(i)(A).
---------------------------------------------------------------------------

    Currently, Sec.  155.20 defines an ``agent or broker'' as a person 
or entity licensed by the state as an agent, broker, or insurance 
producer. Under Sec.  155.220(d), an agent or broker that enrolls 
individuals in QHPs in a manner that constitutes enrollment through the 
Exchange or assists individuals with applying for APTC or cost-sharing 
reductions must execute an agreement with the Exchange, register with 
the Exchange, receive training, and comply with the Exchange's privacy 
and security standards. When these regulatory provisions were 
originally drafted, it was anticipated that agents and brokers were 
predominantly individuals. However, with the expansion of direct 
enrollment, there are more FFE agents and brokers, including web-
brokers, that have obtained FFE registration in their capacities as 
licensed business entities, and not in their individual capacities as 
licensed agents or brokers (non-individual entities). As noted in the 
proposed rule, certain regulatory requirements, such as those regarding 
training are less suited for these non-individual types of licensed 
agents or brokers. For example, to comply with the requirement to 
complete training at Sec.  155.220(d)(2), we currently require agents 
or brokers that are registered with the FFEs as non-individual entities 
to designate an individual to take training on the entity's behalf, 
even though all individual agents or brokers assisting FFE consumers 
through the entity have to complete the training as individual agents 
and brokers. Because the training is not designed for representatives 
of a non-individual entity who are not providing direct assistance to 
FFE consumers, we explained that we believed it is appropriate to 
remove this requirement for licensed agent or broker non-individual 
entities. Therefore, we proposed to amend Sec.  155.220(d)(2) to exempt 
from the training requirement a licensed agent or broker entity that 
registers with the FFE in its capacity as a business organized under 
the laws of a state, and not as an individual person. We also explained 
that we did not intend for this change to alter the requirement that 
individual agents or brokers must complete training, as applicable, as 
part of the annual FFE registration process. Therefore, all individual 
agents and brokers interacting with individual market FFE or SBE-FP 
consumers, whether working independently or with a non-individual agent 
or broker entity, including web-brokers, would continue to be required 
to complete annual training. Individual agents or brokers interacting 
with FFE-SHOP or SBE-FP-SHOP consumers would continue to be encouraged 
to take FFE training on an annual basis. We also proposed to include 
language in Sec.  155.220(d)(2) to clarify that direct enrollment 
technology providers will not be required to complete FFE annual 
training because these non-individual entities will not be interacting 
with individual market FFE or SBE-FP consumers without the assistance 
of an individual agent or broker; they are

[[Page 17517]]

another example of a non-individual entity for which this training 
requirement is less suited. We are finalizing these amendments as 
proposed.
    To improve program integrity, we proposed to delete the existing 
Sec.  155.220(g)(3) and add new paragraphs (g)(3)(i) and (ii) to allow 
HHS to immediately terminate an agent's or broker's agreement with the 
FFEs for cause with notice to the agent or broker if an agent or broker 
fails to comply with the requirement to maintain the appropriate 
license under state law in every state in which the agent or broker 
actively assists consumers with selecting or enrolling in QHPs offered 
through the FFEs or SBE-FPs. We noted that the FFE agreements required 
under Sec. Sec.  155.220(d) and 155.260(b) that agents and brokers 
execute with the FFEs as part of the annual FFE registration process 
include the requirement to maintain valid licensure in every state that 
the agent or broker assists Exchange consumers. State licensure as an 
agent, broker, or insurance producer is a critical consumer protection 
to ensure that when assisting Exchange consumers these individuals and 
entities are familiar with rules and regulations applicable in all 
states in which they provide assistance to FFE or SBE-FP consumers. 
Licensure in every state where the agent or broker is actively 
assisting FFE or SBE-FP consumers is a predicate requirement to 
registering with the FFEs to provide such assistance. We explained that 
allowing for immediate termination of an agent's or broker's agreements 
with the FFEs for failure to adhere to the applicable state licensure 
requirements ensures that an unlicensed individual may not continue to 
possess the agent/broker role that enables access to the FFEs or SBE-
FPs to provide assistance to Exchange consumers as an agent or broker 
during the advance 30-day notice period that would otherwise apply 
under the current Sec.  155.220(g)(3). We explained that we believed 
allowing for immediate termination in these circumstances is 
appropriate to protect consumers, as well as Exchange operations and 
systems. Under this proposal, we would confirm information about 
licensure (or the lack thereof) with the applicable state regulators 
prior to taking action under the new paragraph (g)(3)(ii). In addition, 
we proposed that an agent or broker whose agreements with the FFEs are 
immediately terminated for cause under the new proposed paragraph 
(g)(3)(ii) would be able to request reconsideration under Sec.  
155.220(h). We further proposed amendments to paragraph (g)(4), such 
that, consistent with other terminations for cause under paragraph 
(g)(3), immediate terminations under the new proposed paragraph 
(g)(3)(ii) would result in the agent or broker not being registered 
with the FFEs or permitted to assist with or facilitate enrollment of 
qualified individuals, qualified employers or qualified employees in 
QHPs through the FFEs or SBE-FPs or assist individuals in applying for 
APTC and cost-sharing reductions (CSRs) for QHPs after the applicable 
period has elapsed. However, in these circumstances, the agent or 
broker would be required to continue to protect any personally 
identifiable information accessed during the term of his or her or its 
agreements with the FFEs. We also proposed to create a new paragraph 
(g)(3)(i) to retain the existing language describing the current 
notification process and timelines for termination for cause under 
paragraph (g) with advance 30-days' notice, except that we proposed a 
clarifying edit to reflect that the new paragraph (g)(3)(ii) would 
constitute an exception to the current process described in existing 
paragraph (g)(3). As detailed earlier in this preamble, we also 
proposed to add a reference to web-broker to the existing paragraph 
(g)(3) (proposed as new paragraph (g)(3)(i)) to clarify this paragraph 
also applies to web-brokers. We are finalizing these amendments as 
proposed.
    To promote information technology system security in the FFEs and 
SBE-FPs, including the protection of consumer data, we proposed to 
amend Sec.  155.220(k) by adding a new paragraph (k)(3) that would 
continue to allow HHS to immediately suspend an agent's or broker's 
ability to transact information with the Exchange if HHS discovers 
circumstances that pose unacceptable risk to Exchange operations or 
Exchange information technology systems until the incident or breach is 
remedied or sufficiently mitigated to HHS' satisfaction. We noted that 
this proposed language was identical to an existing provision that 
applies when an internet website of an agent or broker is used to 
complete QHP selection at current Sec.  155.220(c)(3)(i)(L) \127\ and a 
similar provision applicable to QHP issuers participating in direct 
enrollment at current Sec.  156.1230(b)(1).\128\ In proposed Sec.  
155.220(k)(3), we noted our intent for this provision to apply to 
agents and brokers who, once registered under Sec.  155.220(d)(1), 
obtain credentials that provide access to FFE systems that may be 
misused in a manner that threatens the security of the Exchange's 
operations or information technology systems. We explained that we 
believe this proposed change was necessary to ensure that HHS can 
continue to take immediate action to stop unacceptable risks to 
Exchange operations or systems posed by agents and brokers. Because the 
potential risks posed by agents and brokers with access to FFE systems 
are similar to those posed by web-brokers or QHP issuers participating 
in direct enrollment, we explained that we believe this change was 
necessary and appropriate to provide a uniform process and ability to 
protect Exchange systems and operations from unacceptable risks, as 
well as to protect sensitive consumer data. We noted that agents and 
brokers whose ability to transact information with the Exchange is 
suspended under this proposed authority would remain registered with 
the FFEs and authorized to assist consumers using the Marketplace (or 
side-by-side) pathway,\129\ unless and until their agreements are 
suspended or terminated under Sec.  155.220(f) or (g). We are 
finalizing this change as proposed.
---------------------------------------------------------------------------

    \127\ This provision also currently applies when an internet 
website of an agent or broker is used to complete the Exchange 
eligibility application through the existing cross reference to 
paragraph (c)(3)(i) in Sec.  155.220(c)(3)(ii)(A).
    \128\ As described elsewhere in this rule, we are finalizing the 
proposed deletion of Sec. Sec.  155.220(c)(3)(i)(L) and 
156.1230(b)(1) and replacement with similar authority in Sec.  
155.221(d) that will be applicable to all direct enrollment 
entities.
    \129\ For more information on the Marketplace pathway, please 
see the Health Insurance Marketplace Guidance: Role of Agents, 
Brokers, and Web-brokers in Health Insurance Marketplace (November 
8, 2016) Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Role-of-ABs-in-Marketplace_Nov-2016_Final.pdf.
---------------------------------------------------------------------------

    To further improve program integrity, we proposed in a new Sec.  
155.220(m) several additional areas in which we proposed to regulate 
web-brokers differently from agents or brokers. We explained that we 
believe these additional proposed changes in new paragraph (m) are 
important to further protect against potential fraudulent enrollment 
activities, including the improper payment of APTC and CSRs, to 
safeguard consumer data and Exchange operations and systems, and to 
ensure direct enrollment remains a safe and consumer-friendly 
enrollment pathway.
    At Sec.  155.220(m)(1), we proposed to allow a web-broker's 
agreement(s) to be suspended or terminated for cause under Sec.  
155.220(g), or a web-broker to be denied the right to enter into 
agreements with the FFEs under Sec.  155.220(k)(1)(i), based on the 
actions

[[Page 17518]]

of its officers, employees, contractors, or agents. For example, if the 
actions of such individuals or entities are in violation of any 
standard specified in Sec.  155.220, any terms or conditions of the 
web-broker's agreements with the FFEs, or any applicable federal or 
state statutory or regulatory requirements, whether or not the officer, 
employee, contractor, or agent is registered with the FFEs as an agent 
or broker, the web-broker's agreement(s) may be terminated under 
paragraph (g)(3) if HHS determines the specific finding of 
noncompliance or pattern of noncompliance is sufficiently severe. 
Similarly, if HHS reasonably suspects that an officer, employee, 
contractor, or agent of a web-broker may have engaged in fraud, whether 
or not such individual or entity is registered with the FFEs as an 
agent or broker, HHS may temporarily suspend the web-broker's 
agreement(s) for up to 90 days consistent with Sec.  
155.220(g)(5)(i)(A).
    At Sec.  155.220(m)(2), we proposed to allow a web-broker's 
agreement to be suspended or terminated under Sec.  155.220(g) or to 
deny it the right to enter into agreements with the FFEs under Sec.  
155.220(k)(1)(i), if it is under the common ownership or control, or is 
an affiliated business, of another web-broker that had its agreement 
suspended or terminated under Sec.  155.220(g). In general, for 
purposes of this provision, we proposed to define ``common ownership or 
control'' based on whether there is significant overlap in the 
leadership or governance of the entities. We also proposed to collect 
data during the web-broker onboarding process to assist with the 
analysis of whether the web-broker is under the common ownership or 
control, or is an affiliated business, of another web-broker that had 
its agreement suspended or terminated under Sec.  155.220(g).
    At Sec.  155.220(m)(3), we proposed allowing the Exchange to 
collect information from a web-broker during its registration with the 
Exchange, or at another time on an annual basis, in a form and manner 
to be specified by HHS, sufficient to establish the identities of the 
individuals who comprise its corporate leadership and to ascertain any 
corporate or business relationships it has with other entities that may 
seek to register with the FFE as web-brokers. We explained these 
provisions were important to maintain program integrity, because they 
will provide authority to collect information that will be used to 
minimize the risk that an individual or entity can circumvent an 
Exchange suspension or termination or other enforcement action related 
to non-compliance. We are finalizing the amendments to create new 
paragraphs (m)(1), (m)(2), and (m)(3) as proposed.
    As noted in the proposed rule, the use of direct enrollment through 
websites other than HealthCare.gov has expanded, as have the 
requirements on web-brokers seeking to participate in FFEs and SBE-FPs. 
For those reasons, we proposed to modify prior policy that prohibited 
Navigators and certified application counselors (together referred to 
here as ``assisters'') from using web-broker websites to assist with 
QHP selection and enrollment. Our proposal would have permitted, but 
not required, assisters in FFEs and SBE-FPs, to the extent permitted by 
state law, to use web-broker websites to assist consumers with QHP 
selection and enrollment, if the website met certain conditions 
designed to ensure that assisters were able to use it while still 
meeting their statutory and regulatory obligations to provide fair, 
accurate, and impartial information and assistance to consumers. To 
promote state flexibility and autonomy under this proposal, SBEs other 
than SBE-FPs would have had discretion to permit their assisters to use 
web-broker websites, so long as the web-broker websites that assisters 
were permitted to use in SBEs, at a minimum, adhered to the standards 
outlined in the proposal. Also, SBEs could instead have chosen to 
preserve the prohibition on assister use of web-broker websites.
    The expansion of direct enrollment and the implementation of 
enhanced direct enrollment increased interest in allowing assisters to 
use web-broker websites to assist consumers with selection and 
enrollment in QHPs offered through Exchanges. As detailed in the 
proposed rule, some web-brokers supported this idea, because of the 
unique role assisters serve in many communities. Some assisters also 
expressed a desire to use web-broker websites to provide an improved 
consumer experience by leveraging unique consumer assistance tools many 
web-brokers developed, such as those that provide access to real-time 
information on the status of submitted applications and enrollments.
    In the proposed rule, we explained that the implementation of 
enhanced direct enrollment by some web-brokers also presents consumers 
with an additional method of applying for insurance affordability 
programs, selecting and enrolling in QHPs offered through Exchanges, 
and receiving post-enrollment support services. We explained that we 
believe this new option should be available to all FFE and SBE-FP 
assisters who provide application and enrollment assistance, provided 
that the information and assistance the assister provides will remain 
fair, accurate, and impartial. We also expressed hope that allowing FFE 
and SBE-FP assisters to use web-broker websites to enroll consumers 
would encourage collaboration between assisters and web-brokers to the 
benefit of consumers by providing consumers the most appropriate 
support at each stage of the Exchange application and QHP selection and 
enrollment processes. To further support the use of web-broker websites 
by assisters, we also proposed to amend and replace Sec.  
155.220(c)(3)(i)(D) with new requirements for web-broker websites to 
display all QHP data provided by the Exchange, consistent with the 
requirements of Sec.  155.205(b)(1) and (c), for such websites to be 
eligible for use by assisters when otherwise permitted under state law. 
For FFEs and SBE-FPs, we proposed an optional annual certification 
process for web-brokers that would have been integrated into the 
existing annual web-broker registration process, or could have occurred 
during another time of year, during which a web-broker could have been 
certified by the Exchange by attesting to its compliance with the QHP 
data display requirements. We also proposed that if a web-broker 
website did not facilitate enrollment in all QHPs, it would be required 
to identify to consumers the QHPs, if any, for which the web-broker 
website did not facilitate enrollment by prominently displaying a 
standardized disclaimer provided by the Exchange, in a form and manner 
specified by the Exchange, stating that the consumer could enroll in 
such QHPs through the Exchange website, and display a link to the 
Exchange website. However, after consideration of comments, we are not 
finalizing the proposed modification to the prior policy that 
prohibited assisters from using web-broker websites or the accompanying 
proposals to amend and replace Sec.  155.220(c)(3)(i)(D). The current 
policy, which prohibits the use of web-broker websites by assisters, 
remains in effect. We are also retaining the existing requirement at 
Sec.  155.220(c)(3)(i)(D), which requires the display of all QHP data 
provided by the Exchange on non-Exchange websites used to complete QHP 
selection and/or the Exchange eligibility application.
    The following is a summary of the comments received on the proposed 
amendments, policies and clarifications related to Sec.  155.220. 
Comments related to the accompanying proposals under Sec.  155.221 are 
discussed later in this rule.

[[Page 17519]]

    Comment: Commenters that referred to the proposal at Sec.  
155.220(c)(3)(i)(L) to prohibit web-broker websites from displaying QHP 
recommendations based on compensation an agent, broker, or web-broker 
receives from QHP issuers unanimously supported it. Some commenters 
also supported prohibiting implicit recommendations based on 
compensation received from issuers by requiring web-broker websites to 
display all QHP information provided by the Exchange for all QHPs 
offered through the Exchange instead of displaying limited details and 
a standardized disclaimer as permitted under Sec.  155.220(c)(3)(i)(A). 
One commenter recommended requiring web-broker websites to display the 
rationale for any QHP recommendations they make.
    Response: We are finalizing the amendment as proposed at Sec.  
155.220(c)(3)(i)(L). As stated above, we are amending the definition of 
the term ``compensation'' for this purpose to include commissions, 
fees, or other incentives provided by a QHP issuer to the agent, 
broker, or web-broker. This better aligns with our intent, as well as 
comments received in support of the proposal, to prohibit the display 
of QHP recommendations on web-broker websites based on compensation an 
agent, broker, or web-broker receives from QHP issuers. While we 
acknowledge that web-broker websites may implicitly recommend QHPs 
based on compensation they receive from QHP issuers, we did not propose 
and are not establishing standards in this final rule in this regard. 
However, we intend to monitor implementation and effectiveness of the 
new standard finalized at Sec.  155.220(c)(3)(i)(L), which prohibits 
the display of QHP recommendations on web-broker websites based on 
compensation received from QHP issuers, and may consider proposing 
additional standards related to the display of QHP recommendations on 
web-broker websites, including requiring the display of a rationale for 
any QHP recommendations, in future rulemaking.
    We also clarify that under Sec.  155.220(c)(3)(i)(A), a web-broker 
website used to complete QHP selection or the Exchange eligibility 
application must disclose and display all QHP \130\ information 
provided by the Exchange, consistent with the requirements of Sec.  
155.205(b)(1) and (c). If not directly provided by the Exchange, a web-
broker may obtain additional information on QHPs displayed on its 
website directly from those QHP issuers with whom it has a contractual 
relationship. In accordance with Sec.  155.220(c)(3)(i)(A), if a web-
broker does not have access to all of the comparative information 
required under Sec.  155.205(b)(1) and (c) for a QHP offered through 
the Exchange, such as premium or benefit information, it must display 
the required standardized Plan Detail Disclaimer for the specific 
QHP.\131\
---------------------------------------------------------------------------

    \130\ With some limited exceptions, stand-alone dental plans 
(SADPs) are considered a type of QHP. See Patient Protection and 
Affordable Care Act; Establishment of Exchanges and Qualified Health 
Plans; Exchange Standards for Employers; Final Rule and Interim 
Final Rule (77 FR 18310, 18315) (March 27, 2012). The same display 
requirements extend to SADPs, including display of all applicable 
SADPs offered through the Exchange and all available information 
specific to each SADP on their websites, as well as including the 
Plan Detail Disclaimer to the extent that all required SADP 
comparative information is not displayed on the web-broker's 
website.
    \131\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Guidance-Web-brokers-Displaying-Disclaimers.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters supported the proposal at Sec.  
155.220(c)(4)(i)(A) to require web-brokers to provide HHS with a list 
of agents and brokers who enter into a contract or other arrangement to 
use the web-broker's website to assist consumers with Exchange 
applications and QHP selections. One commenter recommended the list be 
required annually and limited to include agents and brokers who have a 
signed agreement and actually used a web-broker's website to assist 
with QHP enrollment in the past year, and not any agents or brokers 
that could potentially have used the web-broker's website for that 
purpose but did not, in the interest of reducing burden. Another 
commenter expressed concern about the scope of this proposal and 
whether it extends beyond agents and brokers using a web-broker's 
website to business development partners through which it receives 
referrals.
    Response: We are finalizing the amendment as proposed at Sec.  
155.220(c)(4)(i)(A). As indicated above, we intend to issue guidance on 
the form and manner for these submissions and appreciate the desire to 
minimize the burden of this requirement. That is one of the reasons we 
are considering adopting a measured, targeted approach to reporting 
that would reduce the frequency of the submissions for most of the year 
by adopting quarterly or monthly submission requirements. We continue 
to believe that more frequent reporting, such as daily or weekly 
submissions, are more appropriate for the time period spanning from the 
month before through the entire individual market open enrollment 
period because of the increased volume of enrollments and the 
accompanying increased access to FFE systems and consumer information 
during this time. For this requirement to enable us to more efficiently 
and effectively investigate and respond to instances of noncompliance, 
including those situations that may pose risks to Exchange data and 
systems, we must have the information more frequently than annually. 
For example, agents, broker, and web-brokers may enter into new 
relationships and/or end existing agreements at any time during the 
year. The adoption of an annual reporting schedule would not capture 
these changes until the following year. As such, there is a risk that 
the data would become obsolete quickly, hindering our oversight and 
enforcement efforts. For these reasons, we decline to adopt an annual 
reporting schedule.
    We also believe the data collected must include information about 
all agents and brokers that are able to use a web-broker's website for 
direct enrollment, whether or not they have done so recently, since 
agents and brokers with this access are equally able to access the 
systems and engage in misconduct that we may need to investigate. In 
terms of the scope of information that will have to be reported, we 
clarify it extends only to those agents and brokers that have a current 
contractual or other arrangement with a web-broker to use its website 
to assist consumers with the completion of an Exchange eligibility 
application or QHP selection in the FFE or SBE-FP. Persons or entities 
only referring consumers to the web-broker's website would not be 
subject to this requirement.
    Comment: Several commenters supported the proposal at Sec.  
155.220(g)(3)(ii) to allow for the immediate termination of agreements 
with agents or brokers for cause if an agent or broker fails to 
maintain the appropriate state license in every state in which the 
agent or broker is actively assisting consumers with Exchange 
applications and QHP enrollment. One commenter pointed out that some 
national licensure databases contain inaccuracies and it is important 
to ensure accurate information is used as the basis for termination. 
Another commenter emphasized the importance of timely and accurate 
communication between HHS and state regulators as it relates to this 
proposal.
    Response: We are finalizing the amendments to Sec.  155.220(g)(3) 
as proposed. We appreciate the comments

[[Page 17520]]

expressing concerns about the potential for inaccurate data and the 
need for timely communications with state regulators. We will develop 
procedures to verify state licensure with applicable state regulators, 
which may include confirming national database information with 
information made publicly available by individual states, as well as 
outreach to state regulators. We also will continue our general efforts 
to coordinate oversight activities related to agents and brokers with 
states. In addition, as detailed above, agents or brokers whose 
agreements with the FFEs are immediately terminated under the new 
paragraph (g)(3)(ii) will be able to request reconsideration under 
Sec.  155.220(h).
    Comment: We received several comments on the proposals at Sec.  
155.220(m) related to the enforcement actions that may be taken against 
web-brokers. One commenter supported the proposals. One commenter 
requested we clarify the use of ``agent'' in proposed Sec.  
155.220(m)(1), relating to the suspension or termination of a web-
broker's agreement with the Exchange under paragraph (g), and the 
denial of the right for the web-broker to enter into agreements with 
the FFE under paragraph (k)(1)(i) based on the actions of its officers, 
employees, contractors or agents (regardless of whether these 
individuals are registered with the Exchange as an agent or broker). 
Another commenter expressed concern that these proposals appeared to 
provide authority to suspend or terminate a web-broker's agreement 
based on the actions of as few as one agent using the web-broker's 
website. A fourth commenter stated that the proposals should apply to 
non-web-broker agent or broker business entities and not only web-
broker business entities, and that HHS should provide examples of the 
actions that could be grounds for termination or suspension of a web-
broker's agreements, including whether such actions would need to be 
related to the operation of the web-broker's website.
    Response: We are finalizing these amendments as proposed.
    As explained in the proposed rule, the intent of these changes is 
to provide additional tools for HHS to guard against fraudulent 
activities, protect consumer data and Exchange operations and systems, 
and address serious cases of misconduct. Web-broker business entities 
participating or seeking to participate in direct enrollment are 
proliferating. In addition, the complexity of web-brokers' technical 
integrations with Exchange systems are increasing, providing greater 
access to sensitive consumer data and growing dependencies between 
Exchange and web-broker systems. After several years of experience 
observing web-broker operations and participation in the FFEs and SBE-
FPs, we found it was necessary to update our oversight and enforcement 
authority to add tools to combat fraud to align with these changes.
    We do not expect this authority will be used against the vast 
majority of web-brokers that make a good-faith effort to comply with 
applicable requirements. Further, we anticipate these provisions will 
have limited impact as they are designed to provide HHS greater 
flexibility to address the limited instances where there is evidence of 
significant misconduct or non-compliance by a web-broker, its officers, 
employees, contractors, or agents. We clarify that ``agent'' as 
referred to in Sec.  155.220(m)(1) is intended to refer to an 
individual or entity with a business relationship with a web-broker 
such that the entity or individual is authorized to act on behalf of 
the web-broker. ``Agent'' in this context may or may not refer to a 
licensed agent or broker registered with the FFEs to assist Exchange 
consumers, unless the licensed agent or broker is also authorized to 
act on behalf of the web-broker. We believe this new authority will 
close some current gaps in oversight of web-brokers, such as those that 
exist when an individual or entity registered with the FFEs is denied 
the right to enter into FFE agreements for future benefit years under 
Sec.  155.220(k)(1)(i) due to misconduct and the individual or entity 
tries to avoid the implications of the enforcement action by creating a 
new web-broker business entity that seeks to register with the FFEs 
before the expiration of the penalty under Sec.  155.220(k)(1)(i). 
Examples of the types of activities that could give rise to enforcement 
action under these new authorities are a web-broker's officer 
instructing his agent/broker employees to falsify data submitted on 
consumers' Exchange applications, a documented pattern by a web-broker 
entity of misusing Exchange consumer data, or the failure to adopt 
procedures to properly secure data and comply with applicable privacy 
and security requirements. As these examples illustrate, the activities 
for which an enforcement action may be taken under this authority are 
not limited to activities related only to the operation of a web-
broker's website.
    While each enforcement action is fact-specific, we generally 
clarify that if a registered agent or broker is believed to have 
engaged in noncompliance that we discover through our oversight of web-
broker websites, and there is no evidence that the web-broker was part 
of the noncompliance activities, we would take the enforcement action 
against the agent or broker (and not the web-broker). However, if the 
investigation reveals facts that indicate the web-broker was involved 
in the non-compliance, then we may also take action under this new 
authority against the web-broker (in addition to taking appropriate 
action for the agent or broker involved). We may consider expanding 
this authority to non-web-broker agent or broker business entities in 
the future. However, the specific concerns and potential risks the 
proposals were intended to mitigate are posed most acutely by web-
brokers by virtue of the more direct and expansive access they have to 
Exchange systems and consumer data. Therefore, we proposed and are 
finalizing this authority as limited to web-brokers at this time.
    Comment: Numerous commenters opposed the proposal to allow 
assisters to use web-broker websites and the proposed new regulations 
that would have replaced the existing Sec.  155.220(c)(3)(i)(D). 
Commenters were concerned about whether assisters could remain fair and 
impartial if they were assisting consumers using web-broker websites 
that did not offer enrollment into all QHPs offered through the 
Exchange, or that included QHP recommendations. Some commenters 
highlighted the confusion assisters and consumers may encounter when 
using web-broker websites that include marketing for non-QHP products. 
One commenter opposed any proposed expansion to the role of assisters.
    Some commenters supported prohibiting web-broker websites from 
recommending QHPs if this proposal was finalized. One commenter 
suggested that assisters should only be permitted to use web-broker 
websites that exclusively market QHPs, and web-brokers should not 
receive commissions for consumers enrolled in QHPs through a web-broker 
website if the consumers received support from assisters. Another 
commenter advocated for mandatory certification of web-broker websites 
before assisters may use them. One commenter supported requiring web-
broker websites to develop a separate pathway exclusively for assisters 
to use. One commenter recommended allowing web-brokers to compensate 
assisters to supplement federal funding for assisters, and noted that 
the compensation should be unrelated to whether the web-broker received 
a commission associated with the assistance provided to the consumer by 
the assister, and should include

[[Page 17521]]

compensation for assistance provided to consumers who are determined 
eligible for Medicaid.
    Some commenters supported specific elements of the proposal. 
Several commenters supported the flexibility proposed to be provided to 
SBEs, other than SBE-FPs, to either permit their assisters to use web-
broker websites or to instead preserve the prohibition on assister use 
of these non-Exchange websites. One commenter supported the proposed 
requirement that web-broker websites display all QHP data provided by 
the Exchange before assisters could use the websites. One commenter 
that generally supported the proposal described a potential outcome of 
the proposal would be the development of new consumer-assistance tools 
that assisters would be able to leverage when using a web-broker 
website to assist consumers.
    Response: We agree with commenters that there are concerns related 
to assister use of web-broker websites that warrant further 
consideration, and therefore, we are not finalizing the proposed 
modification to the prior policy that prohibits assisters from using 
web-broker websites or the accompanying proposals to amend and replace 
Sec.  155.220(c)(3)(i)(D) at this time. Adoption of approved enhanced 
direct enrollment functionality by web-brokers remains limited and we 
have decided to focus on the implementation and oversight of the 
enhanced direct enrollment pathway before allowing the use of web-
broker websites by assisters. This approach also allows web-brokers 
interested in participating in enhanced direct enrollment to focus on 
implementing and complying with those new requirements at this time. In 
addition, new insights may be gained about how best to approach and 
implement this policy change as more web-brokers are approved to 
participate in enhanced direct enrollment and we gain more experience 
with enhanced direct enrollment pathways generally. We intend to 
monitor these changes and may revisit the current policy regarding 
assister use of these websites including comments received on the 
policies in the proposed rule, at a later date. We believe assisters 
remain a critical component of the options available for consumers to 
receive support completing the Exchange eligibility application and 
selecting and enrolling in QHPs, especially for certain vulnerable 
populations that have historically unmet needs. The current policy, 
which prohibits the use of web-broker websites by assisters, remains in 
effect and we are also retaining the existing requirement at Sec.  
155.220(c)(3)(i)(D).
e. Standards for Third-Party Entities To Perform Audits of Agents, 
Brokers, and Issuers Participating in Direct Enrollment (Sec.  155.221)
    Direct enrollment is a mechanism for third parties to directly 
enroll consumers seeking QHPs through a non-Exchange website in a 
manner considered to be through the Exchange. Direct enrollment was 
created to provide consumers different options to shop for and enroll 
in QHPs offered through the Exchange. The entities that have been 
authorized to offer direct enrollment pathways to date are QHP issuers, 
as well as agents and brokers that develop and host non-Exchange 
websites to facilitate consumer selection of and enrollment in QHPs, 
referred to as web-brokers. As described above, in this rule we 
finalized a new definition for the term ``web-broker.'' Consistent with 
this new definition, we use the term web-broker throughout this final 
rule when we are referring to agents and brokers that develop and host 
non-Exchange websites to facilitate consumer selection of and 
enrollment in QHPs offered through an Exchange, otherwise known as 
direct enrollment, as well as direct enrollment technology providers. 
The original version of direct enrollment, or classic direct 
enrollment, is still in operation. It utilizes a double redirect from a 
direct enrollment entity's website where QHP shopping occurs, to 
HealthCare.gov where the eligibility application is completed, and back 
to the entity's website to finalize the selection of the QHP. Classic 
direct enrollment allows QHP issuers and web-brokers who meet 
applicable requirements to design and host a plan shopping experience, 
and assist consumers with the QHP selection process using relatively 
simple and limited application programming interfaces (APIs). The FFE 
direct enrollment program has expanded beyond the classic (that is, 
double-redirect) direct enrollment pathway as the FFEs' technical 
capabilities have significantly increased, beginning with proxy direct 
enrollment for plan year 2018 \132\ and continuing with the 
implementation of enhanced direct enrollment for plan year 2019 and 
beyond.\133\ The requirements and technical expertise needed to 
participate in each new iteration of direct enrollment have similarly 
increased as participants have greater access to and responsibility for 
sensitive consumer data and Exchange systems. With enhanced direct 
enrollment, HHS allows participants to create and host a dynamic 
eligibility application and integrate several new APIs that facilitate 
eligibility determinations, as well as the consumer's enrollment in a 
QHP, and data sharing with the applicable Exchange. Enhanced direct 
enrollment provides new options for consumers to receive more 
comprehensive services through a non-Exchange website, without the need 
to redirect to HealthCare.gov, for application and enrollment and 
ongoing support throughout the plan year. We explained in the proposed 
rule that we believe this will promote innovation and competition, and 
ultimately lead to better experiences for more consumers. We also noted 
that streamlining and consolidating regulatory requirements, when 
possible, will simplify the otherwise complex requirements to 
participate in direct enrollment and make it easier for direct 
enrollment entities and organizations interested in participating in 
direct enrollment to understand and comply with applicable 
requirements. We also explained that the complex and evolving nature of 
direct enrollment requires updates to accommodate innovation, ensure 
program integrity, and protect sensitive consumer data.
---------------------------------------------------------------------------

    \132\ Proxy direct enrollment was implemented on a temporary 
basis for plan year 2018. More information is available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Guidance-for-the-Proxy-Direct-Enrollment-Pathway-for-2018-Individual-Market-Open-Enrollment-Period.pdf.
    \133\ 81 FR at 94118.
---------------------------------------------------------------------------

    As detailed in the proposed rule, the entities that have been 
permitted to offer direct enrollment pathways to date have been QHP 
issuers and web-brokers that develop and host non-Exchange websites to 
facilitate selection of and enrollment in QHPs offered through an FFE 
or SBE-FP. Direct enrollment regulatory provisions have likewise been 
divided into sections separately applicable to QHP issuers 
participating in direct enrollment and web-brokers. As direct 
enrollment has evolved with the implementation of enhanced direct 
enrollment, many of the requirements applicable to QHP issuers 
performing direct enrollment and web-brokers have become increasingly 
similar. Therefore, we proposed to revise Sec.  155.221 to apply to all 
types of direct enrollment entities and to expand the requirements 
captured in this regulation beyond audits of direct enrollment 
entities. To reflect this change we also proposed to revise the section 
heading of Sec.  155.221 to ``Standards for direct enrollment entities 
and for third-parties to perform audits of direct enrollment 
entities.''

[[Page 17522]]

    As detailed above, we also proposed to amend Sec.  155.20 to 
include definitions of several terms we proposed to use in Sec.  
155.221 including: ``direct enrollment entity'' and ``web-broker.'' 
Specifically, we proposed to define ``direct enrollment entity'' as an 
entity that an Exchange permits to assist consumers with direct 
enrollment in QHPs offered through the Exchange in a manner considered 
to be through the Exchange as authorized by Sec. Sec.  155.220(c)(3), 
155.221, or 156.1230. We proposed to define ``web-broker'' as an 
individual agent or broker, group of agents or brokers, or business 
entity registered with an Exchange under Sec.  155.220(d)(1) that 
develops and hosts a non-Exchange website that interfaces with an 
Exchange to assist consumers with direct enrollment in QHPs offered 
through the Exchange as described in Sec. Sec.  155.220(c)(3) and 
155.221. As explained elsewhere in this preamble, we also proposed to 
define the term ``web-broker'' to include direct enrollment technology 
providers. We explained that it is important to distinguish ``web-
brokers'' from other agents and brokers utilizing a non-Exchange 
website to assist consumers with direct enrollment in QHPs offered 
through the Exchanges when they did not develop and do not host the 
non-Exchange website. Stated differently, agents and brokers using a 
non-Exchange website developed and hosted by a web-broker are not 
themselves necessarily web-brokers. For the reasons outlined in the 
preamble to Sec.  155.220, we are of the view that it is appropriate to 
impose different requirements on web-brokers and agents and brokers who 
are not web-brokers. The proposed definition and the proposed changes 
to Sec. Sec.  155.220 and 155.221 reflect this approach and would 
enable web-brokers, agents, and brokers to more clearly identify when 
requirements are applicable to only web-brokers.
    We also proposed to amend Sec.  155.20 to define ``direct 
enrollment technology provider'' as a type of web-broker business 
entity that is not a licensed agent, broker, or producer under state 
law and has been engaged or created by, or is owned by, an agent or 
broker to provide technology services to facilitate participation in 
direct enrollment as a web-broker in accordance with Sec. Sec.  
155.220(c)(3) and 155.221. This definition captures instances when an 
individual agent or broker, a group of agents or brokers, or an agent 
or broker business entity, engages the services of or creates a 
technology company that is not licensed as an agent, broker, or 
producer to assist with the development and maintenance of a non-
Exchange website that interfaces with an Exchange to assist consumers 
with direct enrollment in QHPs offered through the Exchanges as 
described in Sec. Sec.  155.220(c)(3) and 155.221. When the technology 
company is not itself licensed as an insurance agency or brokerage, but 
otherwise is functioning as a web-broker, we proposed that these 
technology companies would be considered a type of web-broker that must 
comply with applicable web-broker requirements under Sec. Sec.  155.220 
and 155.221, unless indicated otherwise.\134\ The proposed definition 
of ``web-broker'' reflects the inclusion of direct enrollment 
technology providers. As detailed above, we are finalizing these 
definitions as proposed. Please refer to the preamble for Sec.  155.20 
for a summary of comments on the proposed definitions.
---------------------------------------------------------------------------

    \134\ For example, amendments to Sec.  155.220(d)(2) exempt 
direct enrollment technology providers from the training requirement 
that is part of the annual FFE registration process for agents and 
brokers.
---------------------------------------------------------------------------

    We proposed to generally maintain the current requirements in Sec.  
155.221 that describe the standards for third-parties to perform audits 
of direct enrollment entities. However, to accommodate new content we 
proposed to add to this regulation, we proposed to redesignate the 
existing paragraphs (a) through (c) as paragraphs (e) through (g), 
respectively.
    We also proposed some amendments to existing requirements currently 
captured in paragraphs (a) through (c), as described more fully below. 
In addition, throughout the redesignated paragraphs (e), (f), (f)(2), 
(f)(3), (f)(4), (f)(6), (f)(7), and (g), we proposed conforming edits 
to change references to agents, brokers, and issuers to direct 
enrollment entities. We also proposed to update the regulatory cross-
references in the redesignated paragraph (f)(6) and (f)(7) from Sec.  
155.221(a) to Sec.  155.221(e) to align with other proposed 
streamlining changes to this regulation. We also proposed to add 
paragraph headings throughout this revised regulation for further 
clarity. In paragraph (e), we also proposed to add language to require 
that the third-party entities that conduct annual reviews of direct 
enrollment entities to demonstrate operational readiness consistent 
with new Sec.  155.221(b)(4) \135\ be independent of the entities they 
are auditing. We proposed this change because we believe an independent 
audit is less likely to be influenced by a direct enrollment entity's 
business considerations and therefore is more reliable. We note that 
current Sec.  155.221(b)(4) requires third-party auditors to disclose 
to HHS any financial relationships they have with the entities they are 
auditing. We explained in the proposed rule that we believe this 
disclosure requirement remains relevant even with the proposed addition 
to proposed paragraph (e) that will require auditors to be independent, 
because an auditor may be independent while also contracting with the 
entity it is auditing (and therefore having a financial relationship 
with the entity) to perform audits or other activities unrelated to 
those described in Sec.  155.221. We therefore proposed to retain this 
disclosure requirement at new Sec.  155.221(f)(4).
---------------------------------------------------------------------------

    \135\ Direct enrollment operational readiness review 
requirements are currently captured at Sec.  155.220(c)(3)(i)(K) for 
web-brokers and Sec.  156.1230(b)(2) for QHP issuers.
---------------------------------------------------------------------------

    We also proposed to clarify in paragraph (e) that an initial audit 
is required, in addition to subsequent annual audits, and that these 
audits must include review of the entity's compliance with applicable 
direct enrollment requirements. These clarifications do not represent a 
change from the current approach, as direct enrollment entities are 
currently required to demonstrate operational readiness before their 
websites may be used to complete QHP selections,\136\ and these audits 
must confirm compliance with applicable requirements.\137\ In paragraph 
(e), we proposed to add language to clarify that operational readiness 
must be demonstrated prior to the direct enrollment entity's website 
being used to complete an Exchange eligibility application or make a 
QHP selection. This language is consistent with the operational 
readiness review requirements currently captured at Sec.  
155.220(c)(3)(i)(K) for web-brokers and Sec.  156.1230(b)(2) for QHP 
issuers, which we proposed be moved to Sec.  155.221(b)(4), and 
accounts for the fact that direct enrollment entities participating in 
enhanced direct enrollment will host the eligibility application in 
addition to QHP selection.
---------------------------------------------------------------------------

    \136\ See Sec.  156.1230(b)(2) for issuers participating in 
direct enrollment and Sec.  155.220(c)(3)(i)(K) for web-brokers.
    \137\ See Sec.  155.221(b)(5). Also see Sec.  156.1230(b)(2).
---------------------------------------------------------------------------

    We proposed to maintain the last sentence that currently appears in 
Sec.  155.221(a) as the last sentence of the new paragraph (e) that 
states the third-party entity will be the downstream or delegated 
entity of the agent, broker, or issuer that participates or wishes to 
participate in direct enrollment, replacing the references to agent, 
broker,

[[Page 17523]]

and issuer with direct enrollment entity. In paragraph (f), we proposed 
to generally maintain the current requirement captured in Sec.  
155.221(b) that a direct enrollment entity must satisfy the requirement 
to demonstrate operational readiness by engaging a third-party entity 
that complies with the specified requirements.
    We also proposed to require under new paragraph (f) that a written 
agreement must be executed between the direct enrollment entity and its 
auditor stating that the auditor will comply with the standards 
outlined in paragraph (f). We proposed this new requirement because we 
believe the most effective way to ensure a direct enrollment entity has 
the necessary control and oversight over its auditor to ensure 
compliance with the applicable standards in Sec.  155.221 is for those 
standards to be memorialized in a written agreement between the 
parties. We proposed to delete the provision in current paragraph (c) 
that refers to each third-party entity having to satisfy the standards 
outlined in current paragraph (b), to avoid duplication with a nearly 
identical provision in proposed paragraph (f).
    We proposed to maintain, in the redesignated new paragraph (g), the 
provision that clarifies that direct enrollment entities may engage 
multiple third-party entities to conduct the operational readiness 
audits under proposed Sec.  155.221(e).
    We proposed a new paragraph (a) in Sec.  155.221 that will 
establish the types of entities the FFEs will permit to assist 
consumers with direct enrollment in QHPs offered through an Exchange in 
a manner that is considered to be through the Exchange, to the extent 
permitted by state law. We proposed to capture in Sec.  155.221(a) the 
two types of entities that are already permitted by the FFEs to use and 
offer a non-Exchange website to facilitate direct enrollment: QHP 
issuers that meet the requirements in Sec.  156.1230 and web-brokers 
that meet the requirements in Sec.  155.220. New proposed paragraph (a) 
also reflected that these entities would be required to comply with the 
applicable requirements outlined in the new proposed Sec.  155.221, 
which we proposed to capture the direct enrollment requirements that 
would apply to both web-brokers and QHP issuers participating in direct 
enrollment. For the remaining requirements that only apply to web-
brokers or only apply to QHP issuers participating in direct 
enrollment, we proposed to retain those requirements in Sec. Sec.  
155.220 and 156.1230, respectively.
    In the proposed rule, we described guidance that details several 
existing display standards applicable to issuers or web-brokers 
participating in direct enrollment.\138\
---------------------------------------------------------------------------

    \138\ See, for example, section 4.3 of the Federally-facilitated 
Marketplace and Federally-facilitated Small Business Health Options 
Program Enrollment Manual, available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Enrollment-Manual-062618.pdf. Also see, section II.B of the Guidance for Web-brokers 
Registered with the Federally-Facilitated Marketplaces (October 17, 
2016), available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Guidance-Web-brokers-FFMs.pdf.
---------------------------------------------------------------------------

    We explained that we received feedback from issuers and web-brokers 
suggesting there was some confusion about the current standards and 
guidance related to the display of QHPs and non-QHPs on non-Exchange 
websites used to facilitate direct enrollment. In an effort to clarify 
expectations, achieve greater uniformity in standards for all direct 
enrollment entities, and provide flexibility for innovation, we 
proposed to establish requirements under Sec.  155.221(b) for the FFEs, 
which would apply to all FFE direct enrollment entities. As noted 
elsewhere in preamble, some of the proposed requirements in Sec.  
155.221(b) were intended to streamline existing web-broker and QHP 
issuer direct enrollment requirements that are currently separately 
imposed under Sec. Sec.  155.220 and 156.1230 by capturing these 
similar requirements in one regulation. Other proposed standards in 
Sec.  155.221(b) are new regulatory requirements and are proposed to 
clarify or otherwise address compliance questions that have arisen 
under the existing regulations and guidance.
    At new Sec.  155.221(b)(1), we proposed to require direct 
enrollment entities to display and market QHPs and non-QHPs on separate 
website pages on their respective non-Exchange websites. We explained 
that this proposal was intended to balance the goals of minimizing 
consumer confusion about distinct products with substantially different 
characteristics, and allowing marketing flexibility and opportunities 
for innovation. At Sec.  155.221(b)(2), we proposed to require direct 
enrollment entities to prominently display a standardized disclaimer in 
the form and manner provided by HHS.\139\ Consistent with current 
practice for the other standardized disclaimers provided by HHS under 
Sec. Sec.  155.220 and 156.1230, we explained we would provide further 
details on the text and other display details for the standardized 
disclaimer in guidance, but noted its purpose would be to assist 
consumers in distinguishing between direct enrollment entity website 
pages that display QHPs and those that display non-QHPs, and for which 
products APTC and CSRs are available, during a single shopping 
experience. In new Sec.  155.221(b)(3), HHS proposed that direct 
enrollment entities must limit the marketing of non-QHPs during the 
Exchange eligibility application and QHP plan selection process in a 
manner that will minimize the likelihood that consumers will be 
confused as to what products are available through the Exchange and 
what products are not. For example, under the proposed display 
standards captured at Sec.  155.221(b)(1) through (b)(3), direct 
enrollment entities would be required to offer an Exchange eligibility 
application and QHP selection process that is free from advertisements 
or information for non-QHPs and sponsored links promoting health 
insurance-related products. However, it would be permissible for a 
direct enrollment entity to market or display non-QHP health plans and 
other off-Exchange products in a section of the entity's website that 
is separate from the QHP web pages if the entity otherwise complied 
with the proposed standardized disclaimer requirements. The proposed 
requirements captured at Sec.  155.221(b)(1)-(3) are intended to 
provide flexibility for direct enrollment entities to market valuable 
additional coverage that complements QHP coverage, while also allowing 
HHS to establish important parameters around the manner and type of 
non-QHPs that direct enrollment entities may market as part of a single 
shopping experience with QHPs. We explained that we believe marketing 
some products in conjunction with QHPs may cause consumer confusion, 
especially as it relates to the availability of financial assistance 
for QHPs purchased through the Exchanges. But we also appreciate that 
having flexibility to update these standards would allow us to adapt 
the display guidance as new products come to market and as technologies 
evolve that can assist with differentiating between QHPs offered 
through the Exchange and other products consumers may be interested in. 
We also noted our belief that the convenience of being able to purchase 
additional products as part of a single shopping experience outweighs 
potential consumer confusion, if proper safeguards can be put in place. 
In Sec.  155.221(b)(4), we

[[Page 17524]]

proposed to move and consolidate the parallel requirements currently 
captured in Sec. Sec.  155.220(c)(3)(i)(K) and 156.1230(b)(2) that web-
brokers and QHP issuers, respectively, demonstrate operational 
readiness and compliance with applicable requirements prior to their 
internet websites being used to complete a QHP selection. We also 
included language in proposed Sec.  155.221(b)(4) to clarify that 
operational readiness and compliance with applicable requirements must 
also be demonstrated prior to their internet websites being used to 
complete an Exchange eligibility application. We explained that this 
clarification was important as enhanced direct enrollment is 
implemented and approved direct enrollment entities are hosting the 
Exchange eligibility application on their non- Exchange websites. We 
proposed accompanying amendments to remove the operational readiness 
requirements from Sec. Sec.  155.220 and 156.1230 as part of our 
efforts to streamline the regulatory requirements applicable to direct 
enrollment entities. Lastly, in Sec.  155.221(b)(5), we proposed to 
capture the requirement for direct enrollment entities to comply with 
all applicable federal and state requirements. This would include the 
additional Exchange requirements in Sec. Sec.  155.220 and 156.1230 
that apply to web-brokers and QHP issuers that participate in direct 
enrollment, respectively.
---------------------------------------------------------------------------

    \139\ As proposed, this new standardized disclaimer would be in 
addition to the existing requirements at Sec.  155.220(c)(3)(i)(A) 
and (G) for web-brokers and at Sec.  156.1230(a)(1)(iv) for QHP 
issuers participating in direct enrollment.
---------------------------------------------------------------------------

    In Sec.  155.221(c), we proposed FFE requirements related to direct 
enrollment entity application assisters. Please see the preamble to 
Sec.  155.415 for further details.
    In Sec.  155.221(d), we proposed to consolidate and amend the 
existing parallel provisions in Sec. Sec.  155.220(c)(3)(i)(L) and 
156.1230(b)(1) to authorize HHS to immediately suspend the direct 
enrollment entity's ability to transact information with the Exchange 
if HHS discovers circumstances that pose unacceptable risk to the 
accuracy of the Exchange's eligibility determinations, Exchange 
operations or Exchange information technology systems until such 
circumstances are resolved, remedied or sufficiently mitigated to HHS' 
satisfaction. We proposed to remove the provisions from Sec. Sec.  
155.220(c)(3)(i)(L) and 156.1230(b)(1) as part of our efforts to 
streamline and consolidate the requirements applicable to direct 
enrollment entities in one regulation. The proposal captured in Sec.  
155.221(d) includes language that will extend the authority to suspend 
the ability to transact information with the Exchange to also include 
discovery of circumstances by HHS that pose unacceptable risk to the 
accuracy of the Exchange's eligibility determinations. This addition 
was necessary and appropriate as enhanced direct enrollment allows 
direct enrollment entities to collect and transmit the application data 
that the Exchanges use to complete eligibility determinations.
    Lastly, to account for direct enrollment entities that may be 
assisting consumers in SBE-FP states, we proposed a new Sec.  
155.221(h) to clarify that such entities are also required to comply 
with applicable standards in Sec.  155.221.
    We sought comment on all of these proposals. After consideration of 
the comments received, we are finalizing all of the amendments to Sec.  
155.221, as proposed.
    Comment: We received numerous comments on the proposals at 
Sec. Sec.  155.221(b)(1) and (3) to respectively require that QHPs and 
non-QHPs be displayed and marketed on separate website pages of non-
Exchange websites and to limit marketing of non-QHPs during the 
Exchange application and QHP selection process. Many commenters 
supported the proposal to require QHPs and non-QHPs be displayed and 
marketed on separate website pages on non-Exchange websites. Some 
commenters were opposed to any marketing of non-QHPs, even after the 
Exchange application and QHP selection process, on non-Exchange 
websites. One commenter stated that allowing this type of marketing 
creates incentives for brokers to advise consumers to spend more money 
on supplemental plans and less on QHPs, which the commenter was 
concerned would not be in the consumer's interest. Some commenters 
specifically cited concerns about the marketing of short-term, limited-
duration insurance plans. Some commenters recommended we adopt 
requirements that help consumers understand the differences between 
QHPs and non-QHPs, and the availability of financial assistance only 
applying to QHPs. One commenter agreed with the goal of the proposal to 
minimize consumer confusion, but was opposed to limiting the marketing 
of non-QHP products until after the Exchange application and QHP 
selection processes are complete, and claimed this limitation would 
suppress web-broker participation. One commenter was opposed to most 
limits on marketing non-QHPs, and wanted web-brokers to be able to 
display and market non-QHP alternatives to QHPs, rather than just 
complementary non-QHP products during the consumer's shopping 
experience.
    Response: We are finalizing the amendments to create new Sec.  
155.221(b)(1) and (3) as proposed. As explained in the proposed rule, 
we have consistently received feedback from QHP issuers and web-brokers 
about confusion with respect to the current guidance and standards 
related to the display and marketing of QHPs and non-QHPs on their 
respective non-Exchange websites. We believe this approach provides 
additional clarity and represents a balance that minimizes the chance 
that consumers will be confused about the products being offered to 
them, including which products APTC and CSRs are available for, while 
also allowing some marketing of complementary non-QHP products after 
the Exchange application and QHP selection is complete but during a 
single shopping experience on non-Exchange websites. This provision 
will not limit web-brokers or issuers from marketing non-QHP products 
to consumers outside the Exchange application and QHP selection 
processes, but if a consumer has decided to complete the Exchange 
eligibility application or to shop for QHPs on a non-Exchange website, 
we believe the marketing of non-QHP products to them during that time 
would cause confusion about which products are offered through the 
Exchange (and therefore subject to applicable requirements and eligible 
for APTC and CSRs) and which are not. The disclaimer requirement 
established at Sec.  155.221(b)(2) is intended to help consumers 
understand the difference between QHPs and non-QHPs, and that financial 
assistance is only available for QHPs. We do not believe this policy 
creates new incentives for brokers to market non-QHP products instead 
of QHPs. To the extent those incentives exist, they exist with or 
without this policy. Similarly, we do not believe this policy has any 
implications specific to the marketing of short-term, limited-duration 
insurance plans generally. Under Sec.  155.221(b)(1) it is not 
permissible to display or market any non-QHP plans, including short-
term, limited-duration insurance plans, on the same website pages as 
QHPs.
    As described in the proposed rule and above, the requirements at 
Sec.  155.221(b)(1) through (3) are intended to provide flexibility for 
direct enrollment entities to market valuable additional coverage that 
complements QHP coverage, while also allowing HHS to establish 
important parameters around the manner and type of non-QHPs that direct 
enrollment entities may market as part of a single shopping

[[Page 17525]]

experience with QHPs offered through the Exchange. We may release 
additional guidance, as may be necessary or appropriate, to further 
clarify the new standards we are finalizing at Sec.  155.221(b)(1) 
through (3) for direct enrollment entities that wish to display and 
market non-QHPs on separate web pages but as part of a single shopping 
experience with QHPs offered through the Exchange.
f. Certified Application Counselors (Sec.  155.225)
    We proposed allowing, but not requiring, certified application 
counselors to assist consumers with applying for eligibility for 
insurance affordability programs and QHP enrollment through web-broker 
websites under certain circumstances. We are not finalizing this 
proposal. For a discussion of the provisions of this final rule related 
to that proposal, please see the preamble to Sec.  155.220.
3. Exchange Functions in the Individual Market: Enrollment in Qualified 
Health Plans
a. Allowing Issuer Application Assisters To Assist With Eligibility 
Applications (Sec.  155.415)
    In the first Program Integrity Rule,\140\ we finalized Sec.  
155.415, which allows an Exchange, to the extent permitted by state 
law, to permit issuer application assisters to assist consumers in the 
individual market with an Exchange eligibility application if they met 
certain requirements. At Sec.  155.20, we define issuer application 
assister as an employee, contractor, or agent of a QHP issuer who is 
not licensed as an agent, broker, or producer under state law and who 
assists individuals in the individual market with applying for a 
determination or redetermination of eligibility for coverage through 
the Exchange or for insurance affordability programs. At current Sec.  
156.1230(a)(2), when permitted by an Exchange under Sec.  155.415, and 
to the extent permitted by state law, QHP issuers that elect to use 
application assisters are required to ensure that each of their 
application assisters at least: (1) Receives training on QHP options 
and insurance affordability programs, eligibility, and benefits rules; 
(2) complies with the Exchange privacy and security standards 
consistent with Sec.  155.260; and (3) complies with applicable state 
law related to the sale, solicitation, and negotiation of health 
insurance products, including laws related to agent, broker, and 
producer licensure, confidentiality, and conflicts of interest.
---------------------------------------------------------------------------

    \140\ Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, SHOP, and Eligibility Appeals; Final Rule, 78 
FR 54070 (August 30, 2013).
---------------------------------------------------------------------------

    In adopting this approach, we recognized that, in some states, a 
license may be required to assist an applicant applying for an 
eligibility determination or redetermination. We deferred to existing 
state laws related to enrollment assistance when deciding which 
individuals may assist applicants and enrollees as authorized under 
Sec.  156.1230(a)(2), and whether licensure would be required to 
provide such assistance. We stated that if state law requires a license 
to enroll applicants in coverage, then issuers and their application 
assisters would need to follow state law for licensure requirements. We 
also recognized that there were certain functions that issuers 
generally had their staff perform prior to the issuance of the first 
Program Integrity Rule, such as answering general information about 
plans, and we wanted to allow those individuals to continue to perform 
those functions, without meeting additional standards, if permitted by 
state law. We indicated that, if an issuer wants those individuals to 
perform additional functions, such as helping consumers as they apply 
for an eligibility determination or redetermination for coverage 
through the Exchange, or as they apply for insurance affordability 
programs, or as they report changes to an Exchange, those individuals 
could assist consumers with applications subject to the standards in 
Sec.  156.1230(a)(2), so long as providing such assistance did not 
otherwise conflict with state law. Additionally, we stated that 
facilitating selection of a QHP may be a typical function of issuer 
staff and issuer staff will be able to perform post-eligibility 
functions such as plan compare and selection, if permitted by state 
law, without being subject to the standards of Sec.  156.1230(a)(2). As 
currently codified, the application assister definition and 
accompanying requirements only apply to issuer application assisters.
    As described in the proposed rule, we believe providing parity for 
direct enrollment entities, when possible, promotes fair competition 
and maximizes consumer choice. In addition, there was no apparent 
reason why issuer staff are more qualified to assist consumers with the 
Exchange eligibility application than the staff of other direct 
enrollment entities, assuming all receive appropriate training and when 
otherwise permitted under applicable state law. Therefore, we proposed 
to expand the flexibility to employ or contract with application 
assisters to all direct enrollment entities, to create parity between 
issuers and other types of direct enrollment entities. Accordingly, we 
proposed changes to several regulatory sections. Specifically, we 
proposed to amend Sec.  155.20 by adding the term ``direct enrollment 
entity application assister,'' which we proposed to define as an 
employee, contractor, or agent of a direct enrollment entity who is not 
licensed as an agent, broker, or producer under state law and who 
assists individuals in the individual market with applying for a 
determination or redetermination of eligibility for coverage through 
the Exchange or for insurance affordability programs. We proposed to 
adopt the same approach for direct enrollment entity application 
assisters as the existing one for issuer application assisters. In 
other words, under our proposal, these application assisters would need 
to comply with applicable state law, including any licensure 
requirements, and we would continue to defer to existing state laws 
related to enrollment assistance when deciding which individuals may 
assist applicants and enrollees and whether licensure is required to 
provide such assistance.
    We also proposed to revise Sec.  155.415(a) to authorize an 
Exchange, to the extent permitted by state law, to permit issuer and 
direct enrollment entity application assisters, as defined at Sec.  
155.20, to assist individuals in the individual market with applying 
for a determination or redetermination of eligibility for coverage 
through the Exchange and insurance affordability programs. 
Additionally, we proposed to maintain language in Sec.  155.415(a) to 
mandate that all direct enrollment entities who seek to use application 
assisters, and not just QHP issuers, must ensure that their application 
assisters meet the standards currently captured in Sec.  
156.1230(a)(2), which we proposed to move to new paragraphs (b)(1) 
through (3) of Sec.  155.415, with two proposed amendments. Currently, 
Sec.  156.1230(a)(2)(i) requires all QHP issuer application assisters 
to receive training on QHP options and insurance affordability 
programs, eligibility, and benefits rules and regulations. In the 
proposed rule, we noted that licensed agents and brokers currently 
assisting consumers with QHP enrollment through the FFEs and SBE-FPs 
must have credentials to access FFE systems to offer that assistance. 
Those credentials are obtained during the FFE registration and training 
processes for agents and brokers. For application assisters to have 
similar access to FFE systems, so that they are also able to assist 
consumers as described in this

[[Page 17526]]

rule, they will need credentials similar to those obtained by agents 
and brokers during the FFE registration and training processes. 
Therefore, we proposed to require that application assisters providing 
assistance in the FFEs and SBE-FPs complete a similar annual 
registration and training process as to what is required for agents and 
brokers under Sec.  155.220(d)(1) and (2), in a form and manner to be 
specified by HHS, so that they will have the necessary training before 
being provided credentials to assist consumers and access FFE systems. 
This proposed new training and registration requirement for application 
assisters is captured in the new proposed Sec.  155.415(b)(1). 
Currently, Sec.  156.1230(a)(2)(iii) requires all QHP issuer 
application assisters to comply with applicable agent, broker, and 
producer licensure laws, which may not be applicable in a given 
circumstance. For example, another state licensure law may exist for 
professionals whose functions are more similar to application assisters 
than licensed agents, brokers, and producers. We, therefore, proposed 
to amend this standard (proposed to be redesignated at Sec.  
155.415(b)(3)) to require all application assisters to comply with 
applicable state law related to the sale, solicitation and negotiation 
of health insurance products, including any state licensure laws 
applicable to the functions to be performed by the application 
assister; confidentiality; and conflicts of interest. We did not 
propose any changes to the other standard for application assisters 
that requires compliance with the Exchange's privacy and security 
standards adopted consistent with Sec.  155.260 (proposed to be 
redesignated from Sec.  156.1230(a)(2)(ii) to new Sec.  155.415(b)(2)). 
We also proposed to delete and reserve Sec.  156.1230(a)(2) to reduce 
redundancies, as QHP issuers subject to the current standards captured 
at Sec.  156.1230(a)(2) would be subject to the requirements in Sec.  
155.415(b) if they elect to use application assisters. We note that any 
QHP issuers that are not direct enrollment entities, but use 
application assisters, will also be subject to these requirements and 
able to use application assisters, to the extent permitted by the 
applicable Exchange and state law. Finally, consistent with the new 
paragraphs at Sec.  155.221(c) and (h), we clarified that direct 
enrollment entities participating in FFEs or SBE-FPs will be permitted 
to use application assisters, to the extent permitted by state law.
    We sought comment on these proposed changes. We are finalizing 
these amendments as proposed, with technical edits to Sec.  
155.415(b)(3) to clarify that the reference at the end of the 
subparagraph to ``confidentiality and conflicts of interest'' is 
referring to such standards as are imposed under State law. We further 
note that HHS will permit application assisters to perform the 
assistance functions outlined in Sec.  155.415 to assist consumers 
using the FFEs and SBE-FPs, to the extent allowed under state law, 
beginning with the 2021 open enrollment period. HHS needs additional 
time to implement the registration and training processes necessary to 
operationalize this proposal while maintaining safeguards to protect 
consumer data and Exchange systems. SBEs that do not rely on the 
federal platform can implement these provisions sooner, to the extent 
otherwise permitted under state law. We intend to release future 
guidance about the form and manner of the registration and training 
processes under Sec.  155.415(b)(1) for application assisters 
participating in the FFEs or SBE-FPs.
    Comment: Two commenters supported this proposal. Two other 
commenters questioned whether direct enrollment entity application 
assisters would be subject to state laws applicable to licensed agents 
or brokers, such as those pertaining to protecting consumer 
information, conflicts of interest, and professional liability 
insurance. Two commenters also suggested direct enrollment entity 
application assisters should be subject to requirements similar to 
those for agents or brokers under Sec.  155.220.
    Response: We are finalizing this proposal as proposed, with a 
clarifying edit to Sec.  155.415(b)(3) to clarify that the reference at 
the end of the subparagraph to ``confidentiality and conflicts of 
interest'' is referring to such standards as are imposed under state 
law. We understand that in some states a license may be required for 
application assisters to assist consumers applying for an eligibility 
determination or redetermination. We defer to existing state laws 
related to enrollment assistance when deciding which individuals may 
assist applicants and enrollees as described in this rule, and whether 
state licensure is required to provide such assistance. If state law 
requires a license to engage in these activities, then application 
assisters will need to follow state law for licensure requirements. 
Since application assisters under the federal definition are not 
licensed agents or brokers, we do not believe it is appropriate to 
subject them to the same requirements imposed on licensed agents and 
brokers under Sec.  155.220. Notably, application assisters are not 
authorized to function in the same ways as licensed agents or brokers. 
However, there are some requirements finalized in this rule applicable 
to application assisters that are similar to those applicable to agents 
or brokers assisting consumers in the FFEs and SBE-FPs, including 
requirements to comply with Exchange privacy and security standards. In 
addition, as described above, application assisters in the FFEs and 
SBE-FPs will be required to complete registration and training similar 
to agents or brokers who participate in Exchanges. We will release 
future guidance about the form and manner for the registration and 
training processes for application assisters who wish to participate in 
FFEs and SBE-FPs. Also, as finalized in this rule at Sec.  
155.415(b)(3), all application assisters must comply with applicable 
state law related to the sale, solicitation and negotiation of health 
insurance products, including any state licensure laws applicable to 
the functions to be performed by the application assister, as well as 
applicable state law related to confidentiality and conflicts of 
interest.
b. Special Enrollment Periods (Sec.  155.420)
    Under our current rules, individuals who are enrolled in employer-
sponsored coverage or coverage purchased through an Exchange are 
eligible for a special enrollment period if they become newly eligible 
for APTC. However, no comparable special enrollment period exists for 
individuals who are enrolled in off-Exchange individual market 
coverage. We believe this may present a significant barrier for some 
individuals to remain in continuous coverage for the full plan year. 
Therefore, we proposed to amend Sec.  155.420(d) to add new paragraph 
(d)(6)(v) to authorize Exchanges, at their option, to provide a special 
enrollment period to enroll in Exchange coverage for off-Exchange 
individual market enrollees who experience a decrease in household 
income and receive a new determination of eligibility for APTC by an 
Exchange. We proposed to make this special enrollment period available 
to qualified individuals and their dependents who experience 
circumstances that result in a decrease in household income if the 
qualified individual or his or her dependent are both (1) newly 
determined eligible for APTC by an Exchange, and (2) had MEC in which 
they were enrolled in and entitled to receive benefits as described in 
26 CFR 1.5000A-1(b) for one or more days during the 60 days preceding 
the change in circumstances. We cite 26

[[Page 17527]]

CFR 1.5000A-1(b) because it sets forth criteria for what it means to 
``have MEC,'' including general requirements to be enrolled in and 
entitled to receive benefits under a program or plan identified as MEC 
under 26 CFR 1.5000A-2 and certain situations under which an individual 
is not enrolled in MEC but is treated as ``having MEC.'' Under this 
special enrollment period, qualified individuals and dependents will be 
eligible for Exchange coverage following the regular prospective 
coverage effective date rules described in paragraph (b)(1) of this 
section, and must enroll within 60 days from the date of the financial 
change, in accordance with paragraph (c)(1) of this section.
    We sought to provide individuals with more health coverage options 
and to empower them to enroll in the health coverage that best meets 
their needs and the needs of their families. For individuals and 
families with household incomes greater than 400 percent of the federal 
poverty level (FPL) who are not eligible for APTC, this may mean that 
they choose to purchase health insurance coverage outside of the 
Exchange during the annual open enrollment period or another eligible 
enrollment period, especially if the market outside of the Exchange 
offers additional plan options at more affordable prices. However, 
these individuals or families may experience a change in household 
income during the benefit year that makes their current health coverage 
no longer affordable. While paragraphs (d)(6)(iii) and (d)(6)(iv) 
currently provide special enrollment periods for individuals whose 
employer-sponsored coverage becomes unaffordable or does not provide 
minimum value, resulting in the employee becoming newly eligible for 
APTC, and for individuals previously in the coverage gap who become 
newly eligible for APTC as a result of a change in household income or 
move, respectively, there is no current pathway to Exchange coverage 
for enrollees in off-Exchange individual market plans who are newly 
eligible for APTC. Since no pathway to Exchange coverage currently 
exists, we believe that unsubsidized individual market enrollees whose 
household income has decreased may no longer be able to afford their 
unsubsidized health plans and may decide to terminate coverage mid-
year. Therefore, the special enrollment period in paragraph (d)(6)(v) 
will address this issue by establishing a pathway to Exchange coverage 
for qualified individuals enrolled in off-Exchange coverage who 
experience a decrease in household income and are newly determined 
eligible for APTC. We believe that this policy will help promote 
continuous enrollment in health coverage and bring additional stability 
to the individual market risk pool, which will likely have a positive 
impact on health insurance premiums.
    Individuals seeking to access the special enrollment period will 
not be current Exchange enrollees and will receive a new determination 
of eligibility for APTC through the Exchange's consumer application. 
For the FFEs, an individual's current household income and eligibility 
for APTC will be verified through the FFE's eligibility system and data 
matching issue resolution process, in accordance with the requirements 
in Sec.  155.320(c). To ensure that the special enrollment period is 
available to the intended population while mitigating risks of adverse 
selection and inappropriate use, we proposed to require the individual 
seeking access to the special enrollment period to provide evidence of 
both a change in household income and of prior health coverage. 
Verifying that a decrease in household income occurred will prevent 
individuals who enrolled in health coverage off-Exchange, but have not 
experienced a financial change, from attempting to use this special 
enrollment period for the sole purpose of purchasing a more or less 
comprehensive level of coverage mid-year. To protect the individual 
market risk pool from adverse selection, as mentioned in this rule, we 
proposed to include a prior coverage requirement, which will protect 
against individuals who opted not to enroll in health coverage during 
the annual open enrollment period from using this special enrollment 
period to enroll in Exchange coverage mid-year. Additionally, this 
prior coverage requirement will promote continuous coverage. The prior-
coverage requirement aligns with existing prior-coverage requirements 
for special enrollment periods at Sec.  155.420(d)(2)(i) and (d)(7). We 
envision leveraging existing pre-enrollment verification procedures 
\141\ to confirm eligibility for the special enrollment period, either 
through review of an individual's submitted documentation or through 
use of electronic data sources, when available, prior to sending the 
individual's plan selection to the issuer for enrollment. Consistent 
with current practices, in cases where eligibility is not verified 
electronically, individuals will be required to submit documentation 
within 30 days of plan selection to verify their prior coverage and 
their decrease in income. Consumer-submitted documents currently 
accepted by the FFE for purposes of demonstrating prior coverage and 
verifying attested income are currently identified on 
HealthCare.gov,\142\ and we anticipate developing additional consumer 
instructions relating to submitting documents to verify a decrease in 
income.
---------------------------------------------------------------------------

    \141\ Instructions for consumers to verify their eligibility for 
a special enrollment period are available at https://www.healthcare.gov/coverage-outside-open-enrollment/confirm-special-enrollment-period/.
    \142\ Available at https://www.healthcare.gov/help/prove-coverage-loss/ and https://www.healthcare.gov/verify-information/documents-and-deadlines/.
---------------------------------------------------------------------------

    We recognize that State Exchanges maintain flexibility to determine 
whether and how to implement pre-enrollment verification of eligibility 
for special enrollment periods and may not have the operational 
capacity to immediately implement and verify eligibility for this 
special enrollment period. Some State Exchanges may also determine 
there is insufficient need among off-Exchange consumers for this 
special enrollment period because of the rating and pricing practices 
specific to their state markets. Therefore, we proposed to make this 
special enrollment period available at the option of the Exchange.
    This special enrollment period is intended only for individuals not 
currently enrolled in Exchange coverage, since current Exchange 
enrollees who experience a decrease in household income mid-year may 
already qualify for a special enrollment period under paragraphs 
(d)(6)(i) and (ii), or may enroll in off-Exchange plans if they become 
newly ineligible for APTC under Sec.  147.104(b)(2)(i)(B).
    Paragraph (a)(4)(iii) of Sec.  155.420 generally limits the plans 
into which an enrollee who qualifies for a special enrollment period or 
is adding a dependent through a special enrollment period may enroll. 
Several special enrollment periods are excluded from this limitation. 
However, we proposed that the new special enrollment period will be 
subject to the rule in paragraph (a)(4)(iii). Therefore, should a 
qualified individual who qualifies for the special enrollment period in 
paragraph (d)(6)(v) already have members of his or her household 
enrolled in Exchange coverage and those enrollees do not qualify for 
another special enrollment period at the same time that provides them 
with additional plan enrollment flexibilities, the Exchange must allow

[[Page 17528]]

the qualified individual to be added to the same QHP as the Exchange 
enrollees in his or her household, if the plan business rules allow. If 
the plan's business rules do not allow the qualified individual to 
enroll, the Exchange must allow the current enrollees to change to 
another QHP within the same level of coverage (or one metal level 
higher or lower if no such QHP is available), and to add the qualified 
individual to the same plan as outlined under Sec.  156.140(b). As 
always, and at the option of the qualified individual, he or she may 
enroll in a separate QHP at any metal level, in accordance with Sec.  
155.420(a)(4)(iii)(B). We anticipate that this situation will arise 
relatively infrequently due to the availability of the special 
enrollment periods at (d)(6)(i) and (d)(6)(ii) of Sec.  155.420 for 
enrollees who become newly eligible for APTC or experience a change in 
eligibility for cost-sharing reductions.
    We also proposed to modify the types of coverage that may satisfy 
the prior coverage requirement by amending Sec.  155.420(a)(5) to 
include the coverage types described in paragraphs (d)(1)(iii) and (iv) 
of this section, such as pregnancy Medicaid, CHIP unborn child, and 
Medically Needy Medicaid, in addition to MEC described in 26 CFR 
1.5000A-1(b). We believe that this clarification is necessary to ensure 
consistency across our special enrollment period regulations for the 
types of coverage that qualify an individual for a special enrollment 
period. We already treat certain types of coverage, including pregnancy 
Medicaid, CHIP unborn child, and Medically Needy Medicaid, although not 
independently designated as MEC under 26 CFR 1.5000A-1(b), as MEC for 
purposes of qualifying for the loss of MEC special enrollment period 
described in Sec.  155.420(d)(1). However, individuals currently 
enrolled in these types of coverage will not qualify for special 
enrollment periods that require prior coverage. To avoid treating the 
same types of coverage differently for purposes of eligibility for 
different special enrollment periods, we proposed an aligning edit to 
paragraph (a)(5).
    Lastly, we proposed to clarify certain terms in Sec.  
155.420(b)(2)(iv), which addresses the coverage effective dates that 
apply to the special enrollment periods in Sec.  155.420(d)(1), (d)(3), 
(d)(6)(iii), (d)(6)(iv), and (d)(7). Specifically, we proposed to 
replace the word ``consumer'' with the phrase ``qualified individual, 
enrollee, or dependent, as applicable,'' to align with the terminology 
used at Sec.  155.420(d) to describe special enrollment period 
triggering events. We do not anticipate that this wording change will 
create additional cost or burden for Exchanges or for any other 
stakeholders.
    Comment: We received broad support from commenters for the 
proposals at Sec.  155.420. Commenters noted the proposed special 
enrollment period creates consistency with existing special enrollment 
periods available to individuals who are enrolled in employer-sponsored 
coverage or coverage purchased through an Exchange who become newly 
eligible for APTC. Commenters noted the proposed special enrollment 
period would promote continuous coverage among consumers and increase 
access to care. We also received comments in support of the 
modification to prior coverage requirements at Sec.  155.420(a)(5) to 
include coverage types such as pregnancy Medicaid, CHIP unborn child, 
and Medically Needy Medicaid, in addition to MEC described in 26 CFR 
1.5000A-1(b).
    Response: We are finalizing all policies under Sec.  155.420 as 
proposed. We note that the proposed new special enrollment period under 
Sec.  155.420(d)(6)(v) is available at the option of the Exchange. HHS 
is determining the date on which this special enrollment period will be 
implemented for Federally-facilitated Exchanges and State Exchanges 
using the federal eligibility and enrollment platform, and anticipates 
it will not be available until after January 1, 2020.
    Comment: One commenter expressed support for the proposed new 
special enrollment period under Sec.  155.420(d)(6)(v), but urged HHS 
to reduce the overall number of special enrollment periods to align 
with the private market and Medicare Advantage program.
    Response: HHS is committed to making sure special enrollment 
periods are available to those who are eligible for them, and equally 
committed to avoiding any misuse or abuse of special enrollment 
periods. Recently implemented special enrollment period policies, such 
as pre-enrollment verification and plan category limitations, are 
intended to promote continuous enrollment in coverage and protect the 
risk pool from adverse selection that may have a destabilizing impact 
on the market for existing enrollees. Given these mitigation 
strategies, we do not believe it is necessary to reduce the number of 
available special enrollment periods under Sec.  155.420 at this time.
    Comment: Several commenters wrote in support of the proposed 
requirement that the special enrollment period under proposed Sec.  
155.420(d)(6)(v) be available to consumers who were previously enrolled 
in MEC as defined at 26 CFR 1.5000A-1(b). These commenters wrote that 
continuous enrollment in comprehensive coverage is important to 
maintaining a stable risk pool, and expressed concern about adverse 
selection should the special enrollment period be made available to 
consumers enrolled in alternate types of coverage such as short-term, 
limited-duration insurance or health care sharing ministry plans.
    Response: We agree that the proposed prior coverage requirement is 
important to promote continuous coverage and protect against adverse 
selection, and note that MEC described in 26 CFR 1.5000A-1(b) excludes 
the coverage types of primary concern to commenters.
    Comment: Other commenters stated short-term, limited-duration 
insurance and other coverage types not currently designated as MEC 
should be considered to meet the prior coverage requirements for the 
proposed special enrollment period. Some commenters referenced HHS 
support for these coverage options in other rulemaking and guidance, 
and other commenters expressed concern that consumers may be misled 
into unintentional enrollment into short-term, limited-duration plans.
    Response: The Administration seeks to make more coverage options 
available to consumers, including short-term, limited-duration coverage 
and other forms of coverage that may not constitute MEC. However, the 
prior coverage requirements, as implemented in our other special 
enrollment periods, are intended to promote continuous coverage in MEC 
and protect the risk pool from adverse selection.
    Comment: One commenter suggested we amend the proposed regulatory 
text to reference prior coverage requirements at Sec.  155.420(a)(5) as 
opposed to 26 CFR 1.5000A-1(b) to enhance clarity of the prior coverage 
requirement.
    Response: We believe this change, if implemented, would require 
additional aligning edits for all special enrollment periods containing 
a prior coverage requirement. We will consider this when making future 
technical amendments to regulations at Sec.  155.420, but will not make 
such changes at this time.
    Comment: Other commenters stated eligibility for the proposed 
special enrollment period under Sec.  155.420(d)(6)(v) should be 
expanded to include consumers who were automatically re-enrolled in 
either subsidized or unsubsidized health plans which become 
unaffordable.

[[Page 17529]]

    Response: Consumers in this scenario may be eligible for the 
special enrollment period as proposed, provided that they experience a 
decrease in income and that the plan in which they were automatically 
re-enrolled meets the current definition of MEC. Consumers 
automatically re-enrolled into Exchange coverage and who experience a 
change in eligibility for financial assistance outside the annual open 
enrollment period may also access the current special enrollment period 
at Sec.  155.420(d)(6)(i) and (d)(6)(ii).
    Comment: Another commenter questioned whether the proposed new 
special enrollment period under Sec.  155.420(d)(6)(v) should be made 
available to consumers who experience a change in tax household 
composition or a resolution of a prior year tax return that causes an 
individual to become newly eligible for APTC in an Exchange plan.
    Response: We believe that many consumers who experience in change 
in tax household composition may qualify for a special enrollment 
period under existing regulations, such as in cases of marriage and 
gaining or becoming a dependent. HHS offered a one-time special 
enrollment period to consumers who did not enroll in Exchange coverage 
because they failed to reconcile their APTC on their tax return during 
the first year of implementation of this requirement. However, we do 
not believe a permanent extension of this special enrollment period 
through this proposal is appropriate, as consumers now have multiple 
years of experience with the requirement that they must file a tax 
return and reconcile APTC to remain eligible for future APTC. For these 
reasons, we are finalizing the eligibility requirements for the special 
enrollment period as proposed and will not expand eligibility as 
suggested by the commenter.
    Comment: Another commenter suggested that consumers should have 90 
days, instead of 60 days, to report their financial change to the 
Exchange.
    Response: We believe the current window of 60 days provides ample 
time for consumers to report triggering events to the Exchange and make 
authorized plan changes and, in many instances, encourages consumers to 
avoid extended lapses in health coverage. As a result, we will not 
increase the time within which consumers must report triggering events 
to qualify for a special enrollment period.
    Comment: Several commenters expressed support for our proposal to 
require consumers to submit evidence to demonstrate they have 
experienced a decrease in household income and met the prior coverage 
requirement. One commenter requested additional information on how 
these measures would protect against fraud.
    Response: We agree that requiring evidence of prior coverage and a 
decrease in household income are important program integrity measures 
that protect against fraud. We believe these requirements provide 
sufficient mitigation against inappropriate use of the proposed special 
enrollment period.
    Comment: Other commenters expressed concern regarding the consumer 
burden associated with verification requirements and requested more 
information on what types of consumer documents would be accepted. 
Another commenter stated that verifying a consumer's decrease in 
household income creates an undue burden, and that there is no evidence 
to support the notion that consumers will seek to switch plan category 
levels mid-year due to health status.
    Response: We appreciate that the proposed verification requirements 
do require consumers to submit documents in most cases. However, our 
experience with pre-enrollment verification for special enrollment 
periods demonstrates that consumers are not significantly burdened by 
these requirements, as the vast majority of special enrollment period 
applicants who are required to submit documents to complete enrollment 
are able to successfully verify their eligibility. We maintain that the 
verification of a consumer's decrease in household income is an 
important program integrity measure to ensure individual consumers are 
not able to access this special enrollment period solely due to a 
change in health status, and are finalizing this verification 
requirement as proposed. To mitigate consumer burden, we intend to 
utilize electronic data sources where possible and will leverage 
existing processes to accept document types that are currently in use 
by HHS to verify prior coverage and income information.\143\
---------------------------------------------------------------------------

    \143\ Consumer submitted documents currently accepted by the FFE 
for purposes of demonstrating prior coverage and verifying attested 
income are available at https://www.healthcare.gov/help/prove-coverage-loss/ and https://www.healthcare.gov/verify-information/documents-and-deadlines/, respectively.
---------------------------------------------------------------------------

    Comment: Many commenters supported making the proposed special 
enrollment period at Sec.  155.420(d)(6)(v) at the option of the 
Exchange. Other commenters urged HHS to require the special enrollment 
period for all Exchanges and questioned whether HHS would promote the 
new special enrollment period in its marketing and outreach materials.
    Response: We believe State Exchanges are well positioned to assess 
both the consumer need and the Exchange's operational capacity to 
implement the proposed special enrollment period and its verification 
requirements and we are finalizing the proposed special enrollment 
period at the option of the Exchange. Given the importance of pre-
enrollment verification to protecting against adverse selection and 
misuse of the proposed special enrollment period, we believe requiring 
the special enrollment period to be implemented by State Exchanges 
which have not fully implemented pre-enrollment verification may inject 
adverse risk into the Exchange's marketplace. HHS intends to update 
current technical assistance and training materials to include 
information regarding the new special enrollment period and will 
provide information to relevant stakeholder groups such as issuers, 
agents and brokers, and consumer assisters.
    Comment: Another commenter requested that State Exchanges who rely 
on the federal eligibility and enrollment platform be granted 
flexibility to choose to implement the special enrollment period.
    Response: HHS intends to implement this special enrollment period 
for all Exchanges currently using the federal eligibility and 
enrollment platform, and currently lacks the operational capacity to 
offer this flexibility.
4. Eligibility Standards for Exemptions (Sec.  155.605)
a. Eligibility for an Exemption Through the IRS (Sec.  155.605(e))
    Individuals can claim hardship exemptions through the tax filing 
process for hardships described in Sec.  155.605(e)(1) through (4), 
which include most hardship exemptions, but not the general hardship 
types described in paragraph (d)(1) of this section. Allowing the 
general hardship exemption types to be claimed through the IRS will 
increase flexibility and decrease burdens for individuals seeking 
hardship exemptions. Therefore, we proposed to amend Sec.  155.605(e), 
which describes the exemptions that can be claimed through the IRS tax 
filing process without an individual having to obtain an exemption 
certificate number from an Exchange, to add a new paragraph (e)(5) that 
will allow individuals to claim through the tax filing process hardship 
exemptions within all of the categories described in paragraph (d)(1) 
of this section on a federal income tax return

[[Page 17530]]

for tax year 2018 only. We are finalizing this change as proposed.
    This rule aligns with HHS guidance published on September 12, 2018, 
entitled, ``Guidance on Claiming a Hardship Exemption through the 
Internal Revenue Service (IRS)'' \144\ and with IRS Notice 2019-
05.\145\ We anticipate that the guidance and this rule will provide 
individuals with additional flexibility for claiming a hardship 
exemption by providing individuals the additional option of claiming 
this exemption on their federal income tax return for 2018 only.
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    \144\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Authority-to-Grant-HS-Exemptions-2018-Final-91218.pdf.
    \145\ https://www.irs.gov/pub/irs-drop/n-19-05.pdf.
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    Comment: Commenters generally supported the proposal for 
individuals to claim hardship exemptions on their tax returns without 
obtaining an exemption certification number from the Marketplace, 
because it will reduce burden on individuals.
    Response: We are finalizing this change as proposed. We agree that 
this change will lessen the burden on individuals by allowing them to 
claim the general hardship exemptions through the tax filing process 
for tax year 2018. It will further reduce burden since individuals will 
not be required to obtain an exemption certification number from the 
Marketplace prior to filing their tax returns.
    Comment: One commenter stated the proposal was unnecessary given 
that tax filing season for 2018 returns is underway (this change only 
applies to the 2018 tax year) and that HHS has not been transparent in 
the past about the specifications for claiming each type of hardship 
exemption.
    Response: The PPACA grants authority to the Exchanges to grant all 
exemptions. As a result, HHS has consistently codified in regulations 
any grant of authority it has provided to the IRS in subregulatory 
guidance for specific hardship exemptions. And although tax filing 
season for the 2018 tax year has already begun, HHS plans to maintain 
our prior practice of providing regulatory revisions when granting 
authority to the IRS for individuals to claim specific exemptions 
through the tax filing process. In 2018, HHS published guidance 
allowing individuals to claim the general hardship exemptions through 
the IRS on their 2018 tax returns.\146\ Also in 2018, we published 
guidance that provided examples of general hardships that an individual 
may claim, such as single-issuer county hardships.\147\ This guidance 
did not alter the existing regulations and did not create any new 
substantive requirements for people seeking a hardship exemption.
---------------------------------------------------------------------------

    \146\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Authority-to-Grant-HS-Exemptions-2018-Final-91218.pdf.
    \147\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2018-Hardship-Exemption-Guidance.pdf.
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    Comment: One commenter claimed the proposal undermines the original 
intent of Congress in enacting the individual mandate by making it too 
easy for individuals to claim a general hardship exemption.
    Response: While we agree that the PPACA's provisions incentivize 
consumers to obtain health insurance in many respects, the PPACA 
provides statutory authority for hardship exemptions. Consistent with 
its authority, HHS seeks to provide individuals with these exemptions 
in a manner that minimizes burden.
b. Required Contribution Percentage (Sec.  155.605(d)(2))
    Under section 5000A of the Code, an individual must have MEC for 
each month, qualify for an exemption, or make an individual shared 
responsibility payment. Under Sec.  155.605(d)(2), an individual is 
exempt from the requirement to have MEC if the amount that he or she 
will be required to pay for MEC (the required contribution) exceeds a 
particular percentage (the required contribution percentage) of his or 
her projected household income for a year. Although the Tax Cuts and 
Jobs Act reduces the individual shared responsibility payment to $0 for 
months beginning after December 31, 2018, the required contribution 
percentage is still used to determine whether individuals above the age 
of 30 qualify for an affordability exemption that will enable them to 
enroll in catastrophic coverage under Sec.  155.305(h).
    The initial 2014 required contribution percentage under section 
5000A of the Code was 8 percent. For plan years after 2014, section 
5000A(e)(1)(D) of the Code and Treasury regulations at 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. The excess of the 
rate of premium growth over the rate of income growth is also 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.
    As discussed elsewhere in this preamble, we proposed as the measure 
for premium growth a 2020 premium adjustment percentage of 1.2969721275 
(or an increase of about 29.7 percent over the period from 2013 to 
2019). We are finalizing the new premium growth measure that would be 
composed of individual market premium growth and employer-sponsored 
insurance premium growth. Therefore, as noted later in this preamble, 
we are finalizing a premium adjustment percentage of 1.2895211380 for 
the 2020 benefit year.\148\ This amount reflects an increase of about 
3.02 percent over the 2019 premium adjustment percentage (1.2895211380/
1.2516634051).
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    \148\ Note: As explained in the subsequent footnote, this amount 
differs from the proposed premium adjustment percentage due to the 
fact that we utilize the most recent NHEA data, which updated in 
February 2019.
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    As the measure of income growth for a calendar year, we established 
in the 2017 Payment Notice that we will use per capita personal income 
(PI). Under the approach finalized in the 2017 Payment Notice, using 
the National Health Expenditure Account (NHEA) data, the rate of income 
growth for 2020 is the percentage (if any) by which the most recent 
projection of per capita PI for the preceding calendar year ($56,261 
for 2019) exceeds per capita PI for 2013 ($44,922), carried out to ten 
significant digits. The ratio of per capita PI for 2019 over the per 
capita PI for 2013 is estimated to be 1.2524152976 (that is, per capita 
income growth of about 25 percent).\149\ This reflects an increase of 
approximately 3.9 percent relative to the increase for 2013 to 2018 
(1.2524152976/1.2059028167) used in the 2019 Payment Notice. Per capita 
PI includes government transfers, which refers to benefits individuals 
receive from federal, state, and local governments (for example, Social 
Security, Medicare, unemployment

[[Page 17531]]

insurance, workers' compensation, etc.).\150\
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    \149\ The 2013 and 2019 per capita personal income figures used 
for this calculation reflect the latest NHEA data, which was updated 
between the publication of the proposed rule and this final rule, on 
February 20, 2019. The series used in the determinations of the 
adjustment percentages can be found in Tables 1 and 17 on the CMS 
website, which can be accessed by clicking the ``NHE Projections 
2018-2027--Tables'' link located in the Downloads section at the 
following address: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. 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/ProjectionsMethodology.pdf.
    \150\ U.S Department of Commerce Bureau of Economic Analysis 
(BEA) Table 3.12 Government Social Benefits. Available at https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&categories=survey&nipa_table_list=110.
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    Using the 2020 premium adjustment percentage finalized in this 
final rule, the excess of the rate of premium growth over the rate of 
income growth for 2013 to 2019 is 1.2895211380/1.2524152976, or 
1.0296274251. This results in a required contribution percentage of 
8.00* 1.0296274251 or 8.24 percent for the 2020 benefit year, which 
when rounded to the nearest one-hundredth of one percent, represents a 
decrease of 0.07 of a percentage point from 2019 (8.23702-8.30358).
    We also requested comment on whether we should exclude any 
government transfers (that is, Social Security, Medicare, unemployment 
insurance, workers' compensation, etc.) from per capita PI, but we did 
not receive any comments in response to this request.
    Comment: Two commenters indicated that they oppose policies that 
reduce access to health coverage, including the proposed required 
contribution percentage increases resulting from the proposed change in 
premium adjustment percentage. Another commenter noted that the 
proposal would increase the number of individuals who are eligible for 
catastrophic coverage, which should be adequate to address a patient's 
needs and thereby not contribute to an expansion of short-term limited 
duration insurance plans.
    Response: HHS is required to update the required contribution 
percentage annually for purposes of determining whether individuals 
above the age of 30 qualify for an affordability exemption that will 
enable them to enroll in catastrophic coverage under Sec.  155.305(h). 
We note that as a result of the updated premium adjustment percentage 
finalized elsewhere in this rule, the required contribution percentage 
has decreased. For further discussion of the updated premium adjustment 
percentage for 2020, refer to section F(3)(e) of this preamble.

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

1. Definitions (Sec.  156.20)
    We are defining the term ``generic'' in part 156 in response to 
comments requesting a definition related to the proposal that amounts 
paid toward cost sharing using any form of direct support offered by 
drug manufacturers to insured patients to reduce or eliminate immediate 
out-of-pocket costs for specific prescription brand drugs that have a 
generic equivalent not be required to be counted toward the annual 
limitation on cost sharing. For a discussion of that proposal and the 
related definition we are finalizing at Sec.  156.20, please see the 
preamble to Sec.  156.130.
2. FFE and SBE-FP User Fee Rates for the 2020 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. 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 
annual 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 where 
enrollment is through an FFE or SBE-FP.
    OMB Circular No. A-25R established federal policy regarding user 
fees; it specifies that a user fee charge will be assessed against each 
identifiable recipient of special benefits derived from federal 
activities beyond those received by the general public. 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. As in benefit years 2014 through 2019, issuers seeking to 
participate in an FFE in the 2020 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. For the 2020 benefit year, issuers participating 
in an FFE will receive special benefits from the following federal 
activities:
     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).
    Based on estimated costs, enrollment, and premiums for the 2020 
benefit year, we proposed a 2020 benefit year user fee rate for all 
participating FFE issuers of 3.0 percent of total monthly premiums. 
This rate is lower than the 3.5 percent FFE user fee rate that we had 
established for benefit years 2014 through 2019. The lower user fee 
rate for the 2020 benefit year reflects our estimates of premium 
increases and enrollment decreases for the 2020 benefit year. We sought 
comment on this proposal.
    As 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. SBE-FPs 
enter into a Federal platform 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 the applicable benefit year and the monthly 
premium charged by the issuer for each policy where enrollment is 
through an SBE-FP, 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 SBE-FP issuers. The benefits provided to issuers 
in SBE-FPs by the federal government 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 QHP enrollment functions under Sec.  155.400. 
The user fee rate for SBE-FPs is calculated based on the proportion of 
user fee eligible 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. Based on 
this methodology, we proposed to charge issuers offering QHPs through 
an SBE-FP a user fee rate of 2.5 percent of the

[[Page 17532]]

monthly premium charged by the issuer for each policy under plans 
offered through an SBE-FP. This rate is lower than the 3.0 percent user 
fee rate that we had established for benefit year 2019. The lower user 
fee rate for SBE-FP issuers for the 2020 benefit year reflects our 
estimates of premium increases and enrollment decreases for the 2020 
benefit year. We sought comment on this proposal.
    We are finalizing the FFE and SBE-FP user fee rates for the 2020 
benefit year at 3.0 and 2.5 percent of monthly premiums, respectively, 
as proposed.
    Comment: The majority of commenters supported HHS' efforts to 
reduce the costs of operating the FFE and reducing FFE and SBE-FP user 
fee rates. Some commenters noted HHS should lower the user fee rates 
further or even eliminate the user fee collection to promote increased 
competition, improve access to coverage, and reduce issuer duplication 
of effort in the off-Exchange market. However, other commenters did not 
support the reduction of FFE and SBE-FP user fee rates, asking that HHS 
maintain current user fee rates. Several of these commenters encouraged 
HHS to either re-invest excess funds into consumer outreach and 
education activities or otherwise restore funding of those activities 
to 2017 levels. One commenter suggested HHS should use excess funds to 
support outreach to the uninsured, especially in rural areas. Another 
commenter noted that increased investments to marketing and outreach 
will result in lower Exchange premiums due to an improved risk mix, 
which would outweigh the costs of premium increases from a higher user 
fee rate. Other commenters noted that HHS needs to ensure that it is 
investing sufficient funds in improvements to FFE information 
technology.
    Response: We are finalizing the FFE and SBE-FP user fee rates for 
the 2020 benefit year at 3.0 and 2.5 percent of monthly premiums, 
respectively, as proposed. We will continue to examine cost estimates 
for the special benefits provided to issuers offering QHPs on the FFEs 
and SBE-FPs for future benefit years, and we will establish the user 
fee rate that is reasonable and necessary to fully fund user fee 
eligible Exchange operation costs. As we discussed in our proposal to 
reduce the FEE and SBE-FP user fee rates for the 2020 benefit year, we 
developed the user fee rates based upon estimated costs, enrollment, 
and premiums. We specifically noted that the reduced user fee rates, 
which we are finalizing as proposed, incorporate our estimates of 
premium increases and enrollment decreases for the 2020 benefit year, 
and are not solely a reflection of the total expenses estimated to 
operate and maintain the Federal platform and FFE operations. We also 
reiterate that any collections in excess of user fee eligible costs for 
a given year are rolled over for spending to the subsequent year's user 
fee eligible expenses. Finally, we note that outreach and education 
efforts will continue to be evaluated annually and funded at the 
appropriate level. HHS remains committed to providing a seamless 
enrollment experience for Federal platform consumers. We are committed 
to applying resources to cost-effective, high-impact outreach and 
marketing activities that offer the highest return on investment.
    Comment: One commenter noted HHS should further reduce user fees 
for issuers who take on additional activities administered by the FFE, 
such as direct enrollment and increased marketing and outreach.
    Response: All issuers offering QHPs on the FFEs and SBE-FPs receive 
the same respective special benefits HHS provides through the 
activities associated with operating the Federal platform. The amount 
of special benefits HHS offers issuers does not change even if an 
issuer chooses to take on additional activities, which may overlap with 
the Federal platform functions. Further, issuers who choose to 
participate as an Enhanced Direct Enrollment partner still derive 
special benefits from costs HHS incurs to operate the Federal platform. 
As such, our analysis of user fee eligible costs does not justify an 
additional reduction to the user fee rate beyond what is being 
finalized in this rule for the 2020 benefit year. We continue to 
annually review changes in estimated user fee eligible costs due to 
economies and structural improvements being made to the federal 
activities that work in concert to improve the enrollment and 
eligibility determination functions for issuers offering QHPs through 
FFEs and SBE-FPs, as well as the plan certification activities for 
FFEs.
    Comment: Several commenters requested more transparency from HHS on 
how we set the FFE and SBE-FP user fee rates and urged HHS to make 
available a breakdown of Exchange expenses by functional area. 
Commenters noted more transparency would reduce uncertainty among SBE-
FP states, allow states to better ascertain the cost effectiveness of 
transitioning to a different exchange model, and help identify areas 
for additional cost savings. One commenter noted HHS should issue a 
report outlining the use of Exchange user fees for past plan years and 
annually moving forward. Another commenter noted HHS should provide its 
specific assumptions for marketing and outreach budget levels through 
the annual payment notice process. One commenter requested HHS ensure 
no user fees are diverted to non-Exchange functions and urged HHS to 
provide refunds or credits to issuers for funds collected in excess of 
Exchange costs.
    Response: The FFE and SBE-FP user fee rates for the 2020 benefit 
year are based on expected total costs to offer the special benefits to 
issuers offering plans on FFEs or SBE-FPs and evaluation of expected 
enrollment and premiums for the 2020 benefit year. These estimates 
yielded an FFE user fee rate of 3.0 percent of premiums, and an SBE-FP 
user fee rate of 2.5 percent of premiums, based on the proportion of 
FFE functions that apply to SBE-FPs. We expect these user fee rates to 
result in adequate collections based on our current estimates of 
enrollment, premiums, and user fee eligible costs.
    User fee eligible costs are estimated in advance of the benefit 
year and are based upon contract costs that are not yet finalized. We 
will continue to outline user fee eligible functional areas in the 
Payment Notice, and will evaluate contract activities related to 
operation of the federal Exchange user fee eligible functions.\151\ The 
categories that are considered user fee eligible include activities 
that provide special benefits to issuers offering QHPs through the 
Federal platform, and do not include activities that are provided to 
all issuers. For example, functions related to risk adjustment program 
operations, which are provided to all issuers in states where HHS 
operates the risk adjustment program (all 50 states and the District of 
Columbia for the 2020 benefit year), are not included in the FFE or 
SBE-FP user fee eligible costs. However, costs related to Exchange-
related information technology, health plan review, management and 
oversight, eligibility and enrollment determination functions including 
the call center, and consumer information and outreach are incorporated 
in the FFE user fee eligible costs. SBE-FPs conduct their own health 
plan reviews and consumer information and outreach, and therefore, the 
SBE-FP user fee rate is determined

[[Page 17533]]

based on the portion of FFE costs that are also applicable to issuers 
offering QHPs through SBE-FPs.
---------------------------------------------------------------------------

    \151\ See the following FY2019 budget documents for a reference 
to estimates provided for the President's budget. HHS FY2019 Budget 
in Brief. Available at https://www.hhs.gov/sites/default/files/fy-2019-budget-in-brief.pdf; CMS FY2019 Justification of Estimates for 
Appropriations Committees. Available at https://www.cms.gov/About-CMS/Agency-Information/PerformanceBudget/Downloads/FY2019-CJ-Final.pdf.
---------------------------------------------------------------------------

    Comment: One commenter noted HHS should lower the SBE-FP user fee 
rate to 1.5 percent of premiums to better reflect the current stability 
of the Exchange information technology and outreach and marketing 
expenses borne by the SBE-FP states, and because HHS likely received 
excess funds in the 2018 and 2019 benefit years due to the increases in 
Exchange premiums attributable to the elimination of CSR payments and 
introduction of silver loading.
    Response: The final SBE-FP user fee rate for the 2020 benefit year 
of 2.5 percent of premiums is based on HHS' calculation of the percent 
of contract costs of the total FFE functions utilized by SBE-FPs--the 
costs associated with the information technology, call center 
infrastructure, and eligibility determinations for enrollment in QHPs 
and other applicable State health subsidy programs. We have calculated 
the total costs allocated to SBE-FP functions and enrollment and 
premium estimates to yield a user fee rate of 2.5 percent for SBE-FP 
issuers benefiting from functions provided by the Federal platform. We 
believe issuers offering QHPs through the Federal platform, either the 
FFEs or SBE-FPs, should be charged proportionally for the special 
benefits provided by the Federal platform. As described in this rule, 
user fee eligible cost estimates are reviewed on an annual basis and 
developed in advance of the benefit year. If necessary, we will apply 
an overcollection of user fee funds to user fee eligible expenses in 
subsequent benefit years, as permissible. As noted in this rule, 
anticipated Exchange premiums are one factor HHS considers when 
developing the FFE and SBE-FP user fee rates. HHS agrees that increases 
in premiums, all other factors being equal, should place downward 
pressure on the FFE and SBE-FP user rates. Indeed, we are finalizing 
our proposal to reduce both the FFE and SBE-FP user fee rates by 0.5 
percentage points based upon estimates of increased premiums and 
decreased enrollments for the 2020 benefit year. Although the commenter 
is correct that HHS reduced its outreach and education costs in 2018 
and 2019, we do not charge SBE-FPs for these costs as outreach and 
education activities are SBE-FPs' responsibility. Therefore any further 
reduction of outreach and education activities would not be reflected 
in the SBE-FP user fee rate.
    Comment: One commenter requested the user fee rate be charged as a 
fixed dollar amount instead of a percent of premium because HHS' 
Exchange costs are fixed.
    Response: As we have stated in prior payment notices, the FFE and 
SBE-FP user fee rates will continue to be assessed as a percent of the 
monthly premium charged by participating issuers. Setting the user fee 
as a percent of premium ensures that the user fee generally aligns with 
the issuer's use of the enrollment and eligibility functions performed 
by the FFE, and ensures that user fee charges reflect Exchange 
enrollment.
3. Silver Loading
    Section 1402 of the PPACA requires issuers to provide CSRs to help 
make coverage affordable for certain low- and moderate-income consumers 
who enroll in silver level QHPs, as well as Indians who enroll in QHPs 
at any metal level. Section 1402 of the PPACA further states that HHS 
will reimburse issuers for the cost of providing CSRs. Until October 
2017, the federal government relied on the permanent appropriation at 
31 U.S.C. 1324 as the source of funds for federal CSR payments to 
issuers. However, on October 11, 2017, the Attorney General of the 
United States provided HHS and the Department of the Treasury with a 
legal opinion indicating that the permanent appropriation at 31 U.S.C. 
1324 cannot be used to fund CSR payments to insurers. In light of this 
opinion--and in the absence of any other appropriation that could be 
used to fund CSR payments--HHS directed CMS to discontinue CSR payments 
to issuers until Congress provides an appropriation. In response to the 
termination of CSR payments to issuers, many issuers increased premiums 
in 2018 and 2019 only on silver level QHPs to compensate for the cost 
of CSRs--a practice sometimes referred to as ``silver loading'' or 
``actuarial loading.'' Because premium tax credits are generally 
calculated based on the second-lowest cost silver plan offered through 
the Exchange, this practice has led to consumers receiving higher 
premium tax credits. The cost of these higher premium tax credits are 
being borne by taxpayers.
    Silver loading is the result of Congress not appropriating funds to 
pay CSRs, with the result being an increase to the premiums of 
benchmark plans used to calculate premium tax credits, and the federal 
deficit.\152\ The Administration supports a legislative solution that 
would appropriate CSR payments and end silver loading.\153\ In the 
absence of Congressional action, we sought comment on ways in which HHS 
might address silver loading, for potential action in future rulemaking 
applicable not sooner than plan year 2021. Consistent with our 
discussion in the proposed rule, we are not finalizing any change in 
policy for silver loading in this final rule.
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    \152\ CBO estimates that, under current law, outlays for health 
insurance subsidies and related spending will rise by about 60 
percent over the projection period, increasing from $58 billion in 
2018 to $91 billion by 2028. See CBO report The Budget and Economic 
Outlook: 2018 to 2028, April 2018, page 51. Available at https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53651-outlook.pdf.
    \153\ The President's Fiscal Year 2020 Budget includes a 
legislative proposal to provide for a mandatory appropriation to 
make CSR payments for calendar year 2020. The proposal also allows 
for CSR payments to issuers who did not ``silver-load'' or ``broad-
load'' from the 4th quarter of 2017 through the end of 2019.
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    Comment: All commenters supported silver loading as an option to 
maintain consumer affordability and participation. The majority of 
commenters urged HHS to continue to allow states to determine how to 
implement CSR loading. Some commenters expressed opposition to the 
practice of ``broad loading,'' in which issuers increase premiums on 
all metal level plans (on- and off- Exchange) to mitigate the lack of 
CSR reimbursement. Those commenters stated that increasing premiums for 
all plans would force unsubsidized consumers to pay higher premiums and 
would decrease APTC amounts. Commenters noted the reduction in 
financial assistance, and large premium swings from year to year will 
cause consumer confusion and instability in the Exchanges, and such 
market disruption may lead to issuers leaving the Exchanges.
    Some commenters suggested that HHS should phase in a limitation on 
silver loading after permanent and stable funding is provided, to 
mitigate significant out-of-pocket costs for eligible enrollees who 
would see the amount of their premium tax credit reduced.
    Response: We appreciate the comments received and will take them 
into consideration in determining whether future action is appropriate.
4. Essential Health Benefits Package
a. State Selection of EHB-Benchmark Plan for Plan Years Beginning on or 
After January 1, 2020 (Sec.  156.111)
    In the 2019 Payment Notice, we finalized options for states to 
select new EHB-benchmark plans starting with the 2020 benefit year. 
Under Sec.  156.111, a state may modify its EHB-benchmark plan by:

[[Page 17534]]

    (1) Selecting the EHB-benchmark plan that another state used for 
the 2017 plan year;
    (2) Replacing one or more EHB categories of benefits 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; or
    (3) Otherwise selecting a set of benefits that would become the 
state's EHB-benchmark plan.
    Under any of these three options, the EHB-benchmark plan will also 
have to meet additional standards, including scope of benefits 
requirements. These options were intended to provide states with more 
flexibility in the selection of their EHB-benchmark plan than had 
previously existed. In the 2019 Payment Notice, we encouraged states to 
consider the potential impact on vulnerable populations as they select 
their new EHB-benchmark plans, and the need to educate consumers on 
benefit design changes. We also remind states to inform issuers of such 
changes should they select a new EHB-benchmark plan.
    In the proposed rule, we stated that we believe that the three new 
options--the third in particular--may provide states with additional 
flexibility to address the opioid epidemic. For example, Illinois made 
changes to its EHB-benchmark plan for plan year 2020 that aim to reduce 
opioid addiction and overdose by including in its EHB-benchmark plan 
alternative therapies for chronic pain, restricting access to 
prescription opioids, and expanded coverage of mental health and 
substance use disorder treatment and services.\154\ We continue to 
encourage other states to explore whether modifications to their EHB-
benchmark plan would be helpful in fighting the opioid epidemic.
---------------------------------------------------------------------------

    \154\ IL DOI Press Release, ``Illinois becomes first and only 
state to change Essential Health Benefit-benchmark plan,'' Aug. 27, 
2018. Available at https://www2.illinois.gov/IISNews/18098-DOI_Essential_Health_Benefit-benchmark_plan_Release.pdf.
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    Additionally, the 2019 Payment Notice stated that we would propose 
subsequent EHB-benchmark plan submission deadlines in the HHS annual 
Notice of Benefit and Payment Parameters. Accordingly, we proposed May 
6, 2019 as the deadline for states to submit the required documents for 
the state's EHB-benchmark plan selection for the 2021 plan year. We 
noted that this deadline would be delayed, if necessary, to be on or 
after the effective date of this final rule. To give advance notice to 
states and issuers, we simultaneously proposed May 8, 2020 as the 
deadline for states to submit the required documents for the state's 
EHB-benchmark plan selection for the 2022 plan year. Although not a 
requirement, we recommend states submit applications at least 30 days 
prior to the submission deadlines to ensure completion of their 
documents by the proposed deadlines. We recognize that these deadlines 
are earlier in the year than the July 2, 2018 deadline for the state's 
EHB-benchmark plan selection for the 2020 plan year. These deadlines 
would allow for an earlier finalization of a state's EHB-benchmark plan 
and a longer time period for issuers to develop plans that adhere to 
their state's new EHB-benchmark plan. States would have to have 
completed the required public comment period and submit a complete 
application by the deadlines.
    Comment: We received a number of comments supporting our 
encouragement of states to explore whether modifications to their EHB-
benchmark plan would be helpful in fighting the opioid epidemic. Some 
commenters supported such modifications, but only to the extent they do 
not impose strict limits on the doses of opioids for treating pain, 
which commenters stated could come at the expense of individuals who 
need access to these medications to treat their conditions.
    Response: We appreciate these comments, and continue to urge states 
to consider taking all appropriate action to address the opioid 
epidemic, including by making modifications to their EHB-benchmark 
plans.
    Comment: Several commenters supported the EHB-benchmark selection 
submission deadline as proposed. A few commenters expressed their 
desire for HHS to extend the submission deadline to allow states more 
time to evaluate their EHB-benchmark plans, and consider submitting 
changes to HHS.
    Response: We are finalizing May 6, 2019 as the 2021 plan year EHB-
benchmark plan selection submission deadline and May 8, 2020 as the 
2022 plan year EHB-benchmark plan submission deadline, as proposed. We 
recognize the proposed submission deadline for plan year 2021 is 
earlier in the year than the deadline for the previous plan year and 
also before the rule's effective date. However, unlike the 2020 
submission deadline, which we finalized in the 2019 Payment Notice 
concurrently with the policy at Sec.  156.111(a), we are not finalizing 
any new policy at Sec.  156.111(a) for 2021. Because states have now 
had over a year to determine whether to make EHB-benchmark plan changes 
for 2021, we believe that the deadline gives them ample time to submit 
the required documents to HHS and that they have been preparing for 
this deadline since proposed in the proposed rule. In having an earlier 
submission date than for the 2020 plan year, issuers and other 
stakeholders would have more time to understand benchmark plan changes 
made by the state and for issuers to design plans that will comply with 
changes to the benchmark. We do not believe that finalizing a later 
date, including a date on or after the rule's effective date, would 
give issuers sufficient time to design plans.
b. Provision of EHB (Sec.  156.115)
    In the 2019 Payment Notice, we also finalized a policy through 
which states may opt to permit issuers to substitute benefits between 
EHB categories. In the preamble to that rule, we stated that the 
deadlines applicable to state selection of a new benchmark plan would 
also apply to this state opt-in process. We therefore proposed May 6, 
2019 as the deadline for states to notify us that they wish to permit 
between-category substitution for the 2021 plan year and May 8, 2020 as 
the deadline for states to notify us that they wish to permit between-
category substitution for the 2022 plan year. We noted that the 2021 
plan year deadline would be delayed, if necessary, to be on or after 
the effective date of this final rule. States wishing to make such an 
election must do so via the EHB Plan Management Community.
    Comment: A few commenters supported the proposed submission 
deadline.
    Response: We are finalizing the submission deadlines as proposed. 
The deadline for the 2021 plan year is May 6, 2019, and the deadline 
for the 2022 plan year is May 8, 2020. Although the 2021 plan year 
deadline is before the rule's effective date, we believe that this is 
necessary in order for issuers to have sufficient time to design plans 
that take into account any benefit substitution changes.
c. Prescription Drug Benefits (Sec.  156.122)
i. Mid-Year Formulary Change Reporting Requirement
    At new Sec.  156.122(d)(3), we proposed that for plan years 
beginning on or after January 1, 2020, QHP issuers in the FFEs would be 
required to notify HHS annually in an HHS-specified format of any mid-
year formulary changes made in the prior plan year consistent with the 
proposed changes to Sec.  147.106(e). QHP issuers in the FFEs would be 
required to report the name of the drug being removed from the 
formulary, dosage, name of the generic equivalent, the Rx Norm Concept 
Unique Identifier

[[Page 17535]]

(RxCUI) associated with the brand and generic drug, if the brand drug 
was moved to a higher cost sharing tier or removed from the formulary, 
in a manner specified in the forthcoming PRA associated with this final 
rule. We proposed to use this information to understand how the 
proposed change would affect QHP enrollees. We sought comment on this 
proposal.
    Comment: Several commenters supported the collection as proposed. 
Other commenters suggested expanding the submission to require issuers 
to report to mid-yearly formulary changes to the state in addition to 
HHS. Other issuers suggested HHS use existing data sources to collect 
the information.
    Response: We are not finalizing this collection because we are not 
finalizing the proposal in this rule at Sec.  147.106(e). For more 
information about that proposal, see the preamble to Sec.  147.106.
ii. Therapeutic Substitution
    We solicited comments on two additional drug policies intended to 
consider the potential of therapeutic substitution. First, the 
prescription drug market became more efficient after several states 
passed laws that allowed for generic substitution. Similarly, 
therapeutic substitution, which consists of substituting chemically 
different compounds within the same class for one another,\155\ could 
be employed to improve the efficiency of the pharmaceutical market. We 
acknowledged that many stakeholders are opposed to therapeutic 
substitution and that there are concerns regarding efficacy, adverse 
effects, drug interactions, and different indications for drugs within 
a class. If therapeutic substitution were to become commonplace, 
efficient systems that allow for seamless communication among 
prescribers, pharmacies, and insurance companies would need to be in 
place. Therapeutic substitution may help decrease drug costs if it can 
be implemented in a way that does not negatively affect quality and 
access to care. We solicited comment on whether therapeutic 
substitution and generic substitution policies should both be pursued 
since each of the two options might offset any potential premium impact 
of the other, as well as whether certain drug categories and classes 
are better suited to therapeutic substitution than others. We also 
sought comment on any existing standards of practice for therapeutic 
substitution and whether those standards are nationally recognized and 
readily available for providers to use.
---------------------------------------------------------------------------

    \155\ Pengxiang, L., Sanford Shwartz, J., & Doshi, J.A. (2016). 
Impact of Cost Sharing on Therapeutic Substitution: The Story of 
Statins in 2006. Journal of the American Heart Association.
---------------------------------------------------------------------------

    Second, the majority of issuers, employers, and pharmacy benefit 
managers negotiate price discounts and rebates from pharmaceutical 
manufacturers by implementing tiered formularies, which link patients' 
cost-sharing obligations to the list price of each drug. Tiered 
formularies have been successful in attenuating the growth in 
pharmaceutical spending and overall drug spending. However, in recent 
years, drug spending has again increased. Reference-based pricing is 
one strategy for attenuating increases in pharmaceutical spending. 
Reference-based drug pricing occurs when an issuer in a commercial 
market covers a group of similar drugs, such as within the same 
therapeutic class, up to a set price, with the enrollee paying the 
difference in cost if the enrollee desires a drug that exceeds the set 
(reference) price.\156\ Implementation of reference-based pricing for 
drugs could bring down overall health plan costs, and perhaps premium 
increases, while increasing consumer out-of-pocket costs in some 
instances. Durable medical equipment benefits like eyeglasses and 
contacts are sometimes covered in a similar manner. Although reference-
based pricing is often discussed in the context of network adequacy and 
using certain providers within a particular network who are willing to 
accept a reference price, we do not intend for this drug policy to have 
network implications, and issuers are currently free to impose lower 
cost sharing for drugs obtained via mail order. We sought comment on 
the opportunities and risks of implementing or incentivizing reference-
based pricing for prescription drugs.
---------------------------------------------------------------------------

    \156\ Robinson, J.C, Whaley, C.M., & Brown, T.T. (2017). 
Association of Reference Pricing with Drug Selection and Spending. 
New England Journal of Medicine, 377:658665. Doi:10.1065/
NEJMsa1700087.
---------------------------------------------------------------------------

    Comment: Some commenters did not support the implementation of a 
policy related to therapeutic substitution due to concerns regarding 
efficacy, adverse effects, drug interactions, different indications for 
drugs within a class and the potential of such a policy to jeopardize 
consumers' access to clinically indicated drugs. Commenters noted that 
automatic therapeutic substitution overrides a treatment decision made 
between the patient and provider, which could put patients' health at 
risk. Additionally, commenters noted that they did not believe that the 
current health care system possesses the operational capacity to 
implement therapeutic substitution without jeopardizing the quality of 
and access to care. Commenters who were supportive of therapeutic 
substitution stated they appreciated HHS' efforts to allow additional 
tools and flexibility to manage drug costs and recommended that 
biosimilars and interchangeable biologics be therapeutically 
substitutable as well.
    One commenter supported the concept of reference-based pricing, but 
noted that implementation must be carefully considered. Commenters who 
opposed reference-based pricing stated they were not confident that 
there were transparency measures in place to enable reference-based 
pricing to be successful.
    Two commenters requested that HHS postpone its consideration of 
implementing reference-based pricing until greater transparency is 
achieved throughout the entire pharmaceutical supply chain. One 
commenter noted that if HHS were to implement reference-based pricing, 
it should allow patients to request an exception from the balance 
billing requirement if a medication is medically necessary but exceeds 
the reference price. Two commenters were receptive to a policy related 
to reference-based pricing, noting that implementation could have a 
positive impact on pharmacy spending, but cautioned that because this 
type of pricing model may be somewhat new in the pharmacy space, it 
could initially cause member confusion. Some commenters cautioned that 
implementation of this initiative would require extensive member 
communication. Additionally, one commenter noted that HHS should study 
the various ways group benefit plans are already employing reference-
based pricing before acting on regulatory requirements or incentives 
and cautioned against defining reference-based pricing explicitly 
before actually engaging in any formal regulatory activity concerning 
this practice, as premature definitions can be limiting.
    Response: We appreciate these comments and will take them under 
consideration for any future rulemaking.
d. Prohibition on Discrimination (Sec.  156.125)
    Opioid misuse and addiction is a serious national crisis that 
affects public health, as well as social and economic welfare. More 
than 115 people in the United States die each day from opioid

[[Page 17536]]

overdoses.\157\ The Centers for Disease Control and Prevention 
estimates that the total costs of prescription opioid misuse alone in 
the United States is $78.5 billion per year, including the costs of 
health care, lost productivity, addiction treatment, and criminal 
justice involvement.\158\ It has been an active Public Health 
Emergency, as determined by the Secretary under 42 U.S.C. 247d, since 
October 26, 2017.\159\
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    \157\ CDC/NCHS, National Vital Statistics System, Mortality. CDC 
Wonder, Atlanta, GA: US Department of Health and Human Services, 
CDC; 2017. https://wonder.cdc.gov.
    \158\ Florence C.S., Zhou C., Luo F., Xu L. The Economic Burden 
of Prescription Opioid Overdose, Abuse, and Dependence in the United 
States, 2013. Med Care. 2016; 54(10):901-906. doi:10.1097/
MLR.0000000000000625. Available at https://www.ncbi.nlm.nih.gov/pubmed/27623005.
    \159\ As determined by Acting Secretary Eric D. Hargan. 
``Determination that a Public Health Emergency Exists''. October 26, 
2017. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioids.aspx. Renewed by Acting Secretary Hargan. 
``Renewal of Determination that a Public Health Emergency Exists''. 
January 19, 2018. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-24Jan2018.aspx. Renewed by Secretary 
Alex M. Azar II. ``Renewal of Determination that a Public Health 
Emergency Exists''. April 20, 2018. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-20Apr2018.aspx. Renewed by Secretary Azar. ``Renewal of 
Determination that a Public Health Emergency Exists''. July 19, 
2018. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-19July2018.aspx. Renewed by Secretary Azar. 
``Renewal of Determination that a Public Health Emergency Exists''. 
October 18, 2018. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-18Oct2018-aspx.aspx. Renewed by 
Secretary Azar. ``Renewal of Determination that a Public Health 
Emergency Exists''. January 17, 2019. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-17jan2019.aspx.
---------------------------------------------------------------------------

    Several factors have influenced the opioid crisis, including: the 
opioid pharmaceutical manufacturing and supply chain industry; 
deficient patient and provider pain management education; rogue 
pharmacies and unethical physician prescribing; and the insufficient 
availability of treatment services, including Medication-Assisted 
Treatment (MAT).\160\
---------------------------------------------------------------------------

    \160\ ``The President's Commission on Combating Drug Addiction 
and the Opioid Crisis''. Pages 19-23. November 1, 2017. Available at 
https://www.whitehouse.gov/sites/whitehouse.gov/files/images/Final_Report_Draft_11-1-2017.pdf.
---------------------------------------------------------------------------

    MAT is the use of medication approved by the FDA for addiction 
detoxification, relapse prevention, or maintenance treatment, in 
combination with counseling and behavioral therapies to treat substance 
use disorders and prevent overdose through detoxification, relapse 
prevention, and maintenance treatment.\161\ MAT has proven to be 
clinically effective in treating opioid use disorder and to 
significantly reduce the need for inpatient detoxification services for 
individuals with opioid use disorder.\162\
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    \161\ There are four drugs currently used in MAT: Buprenorphine; 
naltrexone; buprenorphine in combination with naloxone; and 
methadone.
    \162\ ``Medication and Counseling Treatment''. September 28, 
2015. Available at https://www.samhsa.gov/medication-assisted-treatment/treatment.
---------------------------------------------------------------------------

    Despite this evidence, and despite the attention paid to the 
nationwide opioid Public Health Emergency, there is not comprehensive, 
nationwide coverage of the drugs used in MAT, at least among QHP 
issuers. A review of QHP issuer formularies in the 39 FFE and SBE-FP 
states for which we have data reveals that, while many QHPs cover all 
four MAT drugs, not all do. Specifically, for plan year 2018, 2,553 
QHPs (95 percent) in these 39 FFE and SBE-FP states cover all four of 
these drugs; 105 QHPs (4 percent) cover three; and 25 QHPs (<1 percent) 
cover two. Given the effectiveness of MAT and the severity of the 
nationwide opioid Public Health Emergency, we encourage every health 
insurance plan to provide comprehensive coverage of MAT, even if the 
applicable EHB-benchmark plan does not require the inclusion of all 
four MAT drugs on a formulary. In the proposed rule, we encouraged 
issuers to take every opportunity to address opioid use disorder, 
including increasing access to MAT and destigmatizing its use.\163\
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    \163\ ``For many people struggling with addiction, failing to 
offer MAT is like trying to treat an infection without antibiotics . 
. . We know that there is sometimes stigma associated with MAT--
especially with long term therapy. But someone on MAT, even one who 
requires long-term treatment, is not an addict. They need medicine 
to return to work; re-engage with their families; and regain the 
dignity that comes with being in control of their lives. These 
outcomes are literally the opposite of how we define addiction. Our 
fellow citizens who commit to treatment should not be treated as 
pariahs--they are role models.'' Azar, Alex. Plenary Address to 
National Governors Association, February 24, 2018. Available at 
https://www.hhs.gov/about/leadership/secretary/speeches/2018-speeches/plenary-addres-to-national-governors-association.html.
---------------------------------------------------------------------------

    In addition, we stated that we have become aware that a MAT drug's 
inclusion on a formulary does not necessarily ensure coverage of that 
drug when administered for MAT. We stated that we are aware that some 
issuers utilize plan designs which exclude coverage of certain drugs 
when used for MAT while the same drugs are covered for other medically 
necessary purposes, such as analgesia or alcohol use disorder. Under 
Sec.  156.125, which implements the provision prohibiting 
discrimination, an issuer does not provide EHB if its benefit design, 
or the implementation of its benefit design, discriminates based on an 
individual's age, expected length of life, present or predicted 
disability, degree of medical dependency, quality of life, or other 
health conditions.
    We reminded issuers that any indication of a reduction in the 
generosity of a benefit in some manner for subsets of individuals that 
is not based on clinically indicated, reasonable medical management 
practices is potentially discriminatory. As is the case for any EHB, 
issuers are expected to impose limitations and exclusions on the 
coverage of benefits to treat opioid use disorder, including the drugs 
used for MAT or any associated benefit such as counseling or drug 
screenings, based on clinical guidelines and medical evidence, and are 
expected to use reasonable medical management. If a plan excludes 
certain treatment of opioid use disorder, but covers the same treatment 
for other medically necessary purposes, the issuer must be able to 
justify such an exclusion with supporting documentation explaining how 
such a plan design is not discriminatory.
    We noted that a similar standard is imposed under the Paul 
Wellstone and Pete Domenici Mental Health Parity and Addiction Equity 
Act of 2008 (MHPAEA) (section 2726 of the PHS Act).\164\ Under 
regulations implementing the EHB requirements,\165\ the requirements of 
MHPAEA are extended to issuers of non-grandfathered health insurance 
coverage in the individual and small group markets, both on and off the 
Exchange. Under HHS regulations at Sec.  146.136 implementing MHPAEA, 
if a drug is offered under a plan for treatment of a medical condition 
or surgical procedures but is excluded for MAT purposes to treat a 
substance use disorder, that is considered to be a nonquantitative 
treatment limitation.\166\ A nonquantitative treatment limitation 
cannot be imposed on mental health or substance use disorder benefits 
in any classification \167\ unless, under the terms of the plan (or 
health insurance coverage) as written and in operation, any processes, 
strategies, evidentiary standards or other factors used in applying the 
limitation to the mental health or substance use disorder

[[Page 17537]]

benefits in the classification are comparable to, and are applied no 
more stringently than the processes, strategies, evidentiary standards 
and other factors used in applying the limitation to medical/surgical 
benefits in the same classification. In other words, the issuer must 
demonstrate that, as written and in operation, the processes, 
strategies, evidentiary standards, and other factors it applied in 
deciding that the drug is covered for medical/surgical purposes, are 
comparable to those it used in deciding that the drug is not covered 
for MAT purposes, and that there are no separate limitations that apply 
only for mental health or substance use disorder benefits.\168\
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    \164\ MHPAEA originally applied to large group health plans and 
large group health insurance coverage, and PPACA extended it to 
apply to individual health insurance coverage.
    \165\ Sec.  156.115(a)(3).
    \166\ For examples of nonquantitative treatment limitations, see 
Sec.  146.136(c)(4)(ii).
    \167\ Classifications under MHPAEA are as follows: Inpatient, 
in-network; inpatient, out-of-network; outpatient, in-network; 
outpatient, out-of-network; emergency care; and prescription drugs. 
Sec.  146.136(c)(2)(ii).
    \168\ See Sec.  146.136(c)(4)(iii), Ex. 10.
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    We also noted that federal civil rights laws, such as title II of 
the Americans with Disabilities Act and section 504 of the 
Rehabilitation Act, prohibit discrimination against individuals who 
participate in or have completed substance use disorder treatment, 
including MAT.
    Comment: Many commenters supported our continued interpretation of 
the prohibition on discrimination as it applies to the coverage of 
treatments for opioid use disorder. Many commenters supported our 
recommendation that issuers provide comprehensive coverage of MAT, 
thereby increasing access to MAT and destigmatizing its use. Several 
commenters suggested that HHS require coverage of all four drugs used 
in MAT, and a few commenters cautioned against such a requirement.
    A number of comments outside the scope of this rule encouraged HHS 
and states to take aggressive enforcement actions against all 
discriminatory benefit designs, including plan designs that may violate 
MHPAEA. A number of commenters suggested that discriminatory benefit 
designs exist with regards to women's health benefits and benefits for 
the treatment of sexually transmitted diseases.
    Response: We appreciate these comments and will take them under 
consideration as we continue to monitor and implement strategies to 
address discriminatory benefit designs and the opioid epidemic.
e. Premium Adjustment Percentage (Sec.  156.130)
    Section 1302(c)(4) of the PPACA directs the Secretary to determine 
an annual premium adjustment percentage, a measure of premium growth 
that is used to set the rate of increase for three parameters detailed 
in the PPACA: (1) The maximum annual limitation on cost sharing 
(defined at Sec.  156.130(a)); (2) the required contribution percentage 
used to determine eligibility for certain exemptions under section 
5000A of the Code (defined at Sec.  155.605(d)(2)); and (3) the 
employer shared responsibility payment amounts under section 4980H(a) 
and (b) of the Code (see section 4980H(c)(5) of the Code). Section 
1302(c)(4) of the PPACA and Sec.  156.130(e) provide 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 the regulations provide that this percentage 
will be published in the annual HHS notice of benefit and payment 
parameters. To calculate the premium adjustment percentage for the 2020 
benefit year, we calculate the percentage by which the average per 
capita premium for health insurance coverage for 2019 exceeds the 
average per capita premium for health insurance for 2013, and round the 
resulting percentage to 10 significant digits. The resulting premium 
index reflects cumulative, historic growth in premiums from 2013 
onwards.
    The 2015 Payment Notice (79 FR 13743) and 2015 Market Standards 
Rule (79 FR 30240) established a methodology for estimating the average 
per capita premium for purposes of calculating the premium adjustment 
percentage for the 2015 benefit year and beyond. Beginning with the 
2015 benefit year, the premium adjustment percentage was 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. In the proposed 2015 
Payment Notice, we proposed that the premium adjustment percentage be 
calculated based on the projections of average per enrollee private 
health insurance premiums. Based on comments received, we finalized the 
2015 Payment Notice to instead use per enrollee employer-sponsored 
insurance premiums in the methodology for calculating the premium 
adjustment percentage. We chose employer-sponsored insurance premiums 
because they reflected trends in health care costs without being skewed 
by individual market premium fluctuations resulting from the early 
years of implementation of the PPACA market reforms. We adopted this 
methodology in subsequent Payment Notices for 2016 through 2019, but 
noted in the 2015 Payment Notice that we may propose to change our 
methodology after the initial years of implementation of the market 
reforms, once the premium trend is more stable.
    As discussed in the 2015 Payment Notice, we considered four 
criteria when finalizing the premium adjustment percentage methodology 
for the 2015 benefit year: (1) Comprehensiveness--the premium 
adjustment percentage should be calculated based on the average per 
capita premium for health insurance coverage for the entire market, 
including the individual and group markets, and both fully insured and 
self-insured group health plans; (2) Availability--the data underlying 
the calculation should be available by the summer of the year that is 
prior to the calendar year so that the premium adjustment percentage 
can be published in the annual HHS notice of benefit and payment 
parameters in time for issuers to develop their plan designs; (3) 
Transparency--the methodology for estimating the average premium should 
be easily understandable and predictable; and (4) Accuracy--the 
methodology should have a record of accurately estimating average 
premiums. We continue to consider these criteria as we evaluate other 
sources of premium data that could be used in calculating the premium 
adjustment percentage.
    To date, the NHEA projections of per enrollee employer-sponsored 
insurance premiums have also been used by the Department of the 
Treasury and the IRS 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.\169\ The applicable 
percentage in section 36B(b)(3)(A) of the Code is used to determine the 
amount an individual must contribute to the cost of an Exchange QHP and 
thus, relates to the amount of the individual's premium tax credit. 
This is because, in general, an individual's premium tax credit is the 
lesser of (1) the premiums paid for the Exchange QHP, and (2) the 
excess of the premium for the benchmark plan over the contribution 
amount. The contribution amount is the product of the individual's 
household income and the applicable percentage.
---------------------------------------------------------------------------

    \169\ IRS Rev. Proc. 2014-37.
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    The required contribution percentage in section 36B(c)(2)(C) of the 
Code is used to determine whether an offer of employer-sponsored 
insurance is considered affordable for an individual, which relates to 
eligibility for the premium tax credit because an individual with an 
offer of affordable employer-sponsored insurance that

[[Page 17538]]

provides minimum value is ineligible for the premium tax credit. 
Specifically, an offer of employer-sponsored insurance is considered 
affordable for an individual if the employee's required contribution 
for employer-sponsored insurance is less than or equal to the required 
contribution percentage (set at 9.5 percent in 2014) of the 
individual's household income.\170\
---------------------------------------------------------------------------

    \170\ See also IRS Notice 2015-87, Q&A 12 for discussion of the 
adjustment of the required contribution percentage as applied for 
certain purposes under sections 4980H and 6056 of the Code.
---------------------------------------------------------------------------

    Section 36B(b)(3)(A)(ii) of the Code generally provides that the 
applicable percentages are to be adjusted after 2014 to reflect the 
excess of the rate of premium growth over the rate of income growth for 
the preceding year. Section 36B(c)(2)(C) of the Code provides that the 
required contribution percentage is to be adjusted after 2014 in the 
same manner as the applicable percentages are adjusted in section 
36B(b)(3)(A)(ii) of the Code. As noted in this rule, the Department of 
the Treasury and the IRS have issued guidance providing that the rate 
of premium growth for purposes of these section 36B provisions is based 
on per enrollee spending for employer-sponsored insurance as published 
in the NHEA.\171\
---------------------------------------------------------------------------

    \171\ See IRS Rev. Proc. 2014-37 (https://www.irs.gov/pub/irs-drop/rp-14-37.pdf).
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    In the proposed rule, we proposed to modify the premium growth 
measure that we used to calculate the premium adjustment percentage for 
the 2020 benefit year and beyond. We proposed to use a more 
comprehensive premium measure that captures increases across the 
market, including individual market premiums and employer-sponsored 
insurance premiums, for purposes of calculating the premium adjustment 
percentage. Specifically, we proposed to calculate the premium growth 
measures for 2013 and 2019 as private health insurance premiums minus 
premiums paid for Medigap insurance and property and casualty 
insurance, divided by the unrounded number of unique private health 
insurance enrollees, excluding all Medigap enrollees.
    This premium measure is an adjusted private individual and group 
market health insurance premium measure, which is similar to NHEA's 
private health insurance premium measure. NHEA's private health 
insurance premium measure includes premiums for employer-sponsored 
insurance, ``direct purchase insurance,'' which includes individual 
market health insurance purchased directly by consumers from health 
insurance issuers, both on and off the Exchanges, and Medigap 
insurance, and the medical portion of accident insurance (``property 
and casualty'' insurance). The measure we proposed to use is published 
by NHEA and includes NHEA estimates and projections of employer-
sponsored insurance and direct purchase insurance premiums, but we 
proposed to exclude Medigap and property and casualty insurance from 
the premium measure since these types of coverage are not considered 
primary medical coverage for individuals who elect to enroll. We 
proposed to use per enrollee premiums for private health insurance 
(excluding Medigap and property and casualty insurance) so that the 
premium growth measure more closely reflects premium trends for all 
individuals primarily covered in the private health insurance market 
since 2013, and we anticipated that the proposed change to use per 
enrollee premiums for private health insurance (excluding Medigap and 
property and casualty insurance) would additionally reduce federal 
premium tax credit expenditures, if the Department of the Treasury and 
the IRS were to adopt the proposed change.
    Using the private health insurance premium measure (excluding 
Medigap and property and casualty insurance), we proposed that the 
premium adjustment percentage for 2020 be the percentage (if any) by 
which the most recent NHEA projection of per enrollee premiums for 
private health insurance (excluding Medigap and property and casualty 
insurance) for 2019 (when proposed, $6,468) exceeds the most recent 
NHEA estimate of per enrollee premiums for private health insurance 
(excluding Medigap and property and casualty insurance) for 2013 (when 
proposed, $4,987).\172\ Using this formula, the proposed premium 
adjustment percentage for the 2020 benefit year was 1.2969721275 
($6,468/$4,987), which represented an increase in private health 
insurance (excluding Medigap and property and casualty insurance) 
premiums of approximately 29.7 percent over the period from 2013 to 
2019.
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    \172\ The 2013 and 2019 per enrollee premiums for private health 
insurance (excluding Medigap and property and casualty insurance) 
figures used for this calculation reflect the latest NHEA data, 
which was updated between the publication of the proposed rule and 
this final rule, on February 20, 2019. The series used in the 
determinations of the adjustment percentages can be found in Table 
17 on the CMS website, which can be accessed by clicking the ``NHE 
Projections 2018-2027--Tables'' link located in the Downloads 
section at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. 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/ProjectionsMethodology.pdf.
---------------------------------------------------------------------------

    We are finalizing the proposal to use per enrollee private health 
insurance premiums (excluding Medigap and property and casualty 
insurance) in the premium adjustment percentage calculation. As we 
discussed in the proposed rule, immediate application of this change 
will result in a faster premium growth rate for the foreseeable future 
than if we continued to use only employer-sponsored insurance premiums 
as in prior benefit years. We anticipate that this change will have 
several impacts on the health insurance market. As explained in this 
rule, the premium adjustment percentage is used to set the rate of 
increase for the maximum annual limitation on cost sharing, the 
required contribution percentage used to determine eligibility for 
certain exemptions under section 5000A of the Code, and the employer 
shared responsibility payment amounts under section 4980H(a) and (b) of 
the Code. Accordingly, a premium adjustment percentage that reflects a 
faster premium growth rate would result in a higher maximum annual 
limitation on cost sharing, a higher required contribution percentage, 
and higher employer shared responsibility payment amounts than if the 
current premium adjustment percentage premium measure (employer-
sponsored insurance only) were adopted for the 2020 benefit year.
    In the proposed rule, we stated that, if we finalize a change to 
the premium measure used in the premium adjustment percentage for the 
2020 benefit year, we expect the Department of the Treasury and the IRS 
to issue additional guidance to adopt the same premium measure for 
purposes of future indexing of the applicable percentage and required 
contribution percentage under section 36B of the Code. Additionally, 
the Health Insurance Providers Fee established under section 9010 of 
the PPACA also takes the measure of premium growth used for the 
applicable percentage in section 36B(b)(3)(A)(ii) of the Code into 
consideration for purposes of calculating the fee for 2019 and 
beyond.\173\ We expect the Department of the Treasury and the IRS to 
adopt the premium measure that results in a faster premium growth rate 
that we are

[[Page 17539]]

finalizing, which will result in slightly higher Health Insurance 
Providers Fees imposed on health insurance issuers that are required to 
pay the fee, over the long term. We anticipate that health insurance 
issuers subject to the Health Insurance Providers Fee generally would 
pass the fee on to consumers, and that higher fees would increase 
premiums in the individual, small, and large group markets, although we 
anticipate that any premium increases would be very small. 
Additionally, as stated in the proposed rule, a faster premium growth 
measure and corresponding increase in the applicable percentage will 
increase the amount that individuals receiving the premium tax credit 
contribute towards premiums, thereby reducing federal outlays for the 
premium tax credit that had increased significantly in the 2018 benefit 
year as many issuers increased silver plan premiums to offset the cost 
of providing cost-sharing reductions to eligible enrollees without 
receiving cost-sharing reduction payments from the federal government.
---------------------------------------------------------------------------

    \173\ See PPACA section 9010(e)(2). However, under section 4003 
of Public Law 115-120, Division D--Suspension of Certain Health-
Related Taxes, enacted on January 22, 2018, the collection of the 
Health Insurance Providers Fee is suspended for the 2019 calendar 
year.
---------------------------------------------------------------------------

    We have updated the impact estimates in the Regulatory Impact 
Analysis of this final rule to reflect impact estimates provided by the 
Department of the Treasury, pending their anticipated adoption of the 
premium measure finalized in this rule.
    Although commenters expressed concern about the impacts resulting 
from this change, as discussed later in the preamble of this final 
rule, we are finalizing the change as proposed--to use per enrollee 
private health insurance premiums (excluding Medigap and property and 
casualty insurance) as the premium growth measure for purposes of 
calculating the premium adjustment percentage. This approach allows us 
to achieve the statutory and regulatory goals of a more comprehensive 
and accurate measure of premium costs across the private market.
    Using the proposed premium measure, the premium adjustment 
percentage is calculated as the difference between the percentage (if 
any) by which the most recent NHEA projection of per enrollee premiums 
for private health insurance (excluding Medigap and property and 
casualty insurance) for 2019 ($6,436) exceeds the most recent NHEA 
estimate of per enrollee premiums for private health insurance 
(excluding Medigap and property and casualty insurance) for 2013 
($4,991), carried out to 10 significant digits.\174\ Using this 
formula, the final premium adjustment percentage for 2020, rounded to 
10 significant digits, using per enrollee premiums for private health 
insurance (excluding Medigap and property and casualty insurance) is 
1.2895211380 ($6,436/$4,991), which is an increase of approximately 29 
percent over the period from 2013 to 2019.
---------------------------------------------------------------------------

    \174\ The 2013 and 2019 per enrollee premiums for private health 
insurance (excluding Medigap and property and casualty insurance) 
used for this calculation reflect the latest NHEA data, which was 
updated between the publication of the proposed rule and this final 
rule, on February 20, 2019. The series used in the determinations of 
the adjustment percentages can be found in Table 17 on the CMS 
website, which can be accessed by clicking the ``NHE Projections 
2018-2027--Tables'' link located in the Downloads section at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. 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/ProjectionsMethodology.pdf.
---------------------------------------------------------------------------

    Comment: All commenters on this topic expressed opposition to or 
concerns about the proposed change, many of whom indicated HHS should 
continue to use the current measure, employer-sponsored insurance 
premiums, to measure premium growth. Almost all commenters were 
concerned about the impact of the proposal on the health insurance 
market and individuals and families, citing HHS' estimates of the 
impacts in the Regulatory Impact Analysis, including a decrease in 
enrollment and increase in premiums and out-of-pocket costs for 
consumers.
    Several commenters noted that individual market premiums should not 
be used to measure premium growth since 2013 because premiums have 
increased due to PPACA market reforms and federal policy and 
legislative changes, including changes in the composition of the 
individual market risk pool that occurred with the elimination of pre-
existing condition exclusions, the inclusion of a richer benefit 
package and lower cost-sharing than typically provided in the 
individual market in 2013, the cessation of CSR payments, the reduction 
of the individual shared responsibility penalty to $0, and the ending 
of the reinsurance program. Commenters stated these premium increases 
should not be included in the measure of premium growth because they 
are not based on utilization or cost of medical services.
    Several commenters noted our methodology is flawed because the 
proposal starts with 2013 as the base year, but the indexing provisions 
of section 1401 of the PPACA start with ``the calendar year after 
2014'' (2015) and then use the preceding year, or 2014 as the base 
year. They state that since EHB did not go into effect until 2014, 
utilizing a base year earlier than 2014 does not compare the prices of 
like individual insurance products. Several commenters recommended HHS 
use a base year no earlier than 2018 (rather than 2013) to avoid 
inclusion of premium increases resulting from PPACA market reforms and 
other federal policy and legislative decisions. Some commenters noted 
that HHS considered and rejected adopting using individual market 
premiums in the premium measure for the premium adjustment percentage 
for the 2015 benefit year because the premium trend was not stable, and 
the premium trend is still not stable, citing the PPACA policy and 
legislative changes mentioned in this rule and that 2019 is the first 
year new rules have taken effect regarding short-term, limited-duration 
insurance (STLDI) plans and association health plans (AHP), which may 
further disrupt the market and increase premiums. One commenter 
recommended only using individual market premium increases for 
underlying medical trends (in other words, not including premium 
increases resulting from federal policy and legislative changes), while 
a few commenters indicated that the change is not statutorily required, 
and urged HHS to delay the change until the premium trend is more 
stable.
    Several commenters stated HHS's justification provided for this 
change is inadequate and contrary to the legislative intent of the 
financial assistance structure of the PPACA. One commenter noted that 
the primary purpose of providing APTC to Exchange enrollees is so that 
the federal government, rather than low-income individuals and 
families, bears the burden of any premium increases in the individual 
market. A few commenters urged HHS to consider other ways to reduce 
federal expenditures, or to focus on efforts at lowering the overall 
cost of health care, rather than placing the burden on households. One 
commenter supported keeping federal costs reasonable, but was concerned 
about HHS doing so by way of reducing PTC to consumers, which will 
increase the number of uninsured individuals. Another commenter noted 
that while the proposed change will result in federal PTC savings (a 
decreased taxpayer burden), consumers receiving APTC are taxpayers, and 
that the negative effects of reducing their APTC would outweigh the 
benefits of lower tax burden.
    Another commenter noted that the proposed change will impact the 
coverage ``affordability'' percentages

[[Page 17540]]

that IRS releases each spring, which are used by applicable large 
employers to determine the affordability of their offers of coverage 
for purposes of the employer shared responsibility provisions. As such, 
the commenter urged HHS to work closely with the IRS on the timing of 
any change and recognize that employer plans rely on the timely release 
of this data each spring for their annual plan-development processes.
    Response: As stated earlier in this preamble, we are finalizing our 
proposal to calculate the premium adjustment percentage using a measure 
of premium growth that accounts for individual market health insurance 
premiums, as well as employer-sponsored insurance. Section 1302(c)(4) 
of the PPACA and Sec.  156.130(e) provide that the premium adjustment 
percentage is the percentage (if any) by which the average per capita 
premium for health insurance coverage for the preceding calendar year 
exceeds such average per capita premium for health insurance for 2013. 
The purpose of this index is to measure growth in premiums, and the 
statute gives HHS flexibility to determine how to measure premium 
growth. Because the individual market is much smaller than the group 
market,\175\ the increase in the percentage amount due to the change in 
methodology from measuring growth only in employer-sponsored insurance 
to using the new measure, which includes individual market health 
insurance, is quite small. Under the employer-sponsored insurance 
measure, the premium adjustment percentage would have been 
1.2551737602. As stated above, under the new premium measure, the 
premium adjustment percentage is 1.2895211380, or a difference of 
approximately 3.4 percentage points. Therefore the new premium measure 
does not result in a significantly larger premium adjustment 
percentage; however, it does more comprehensively reflect the actual 
growth in premiums in the insurance markets.
---------------------------------------------------------------------------

    \175\ Note for example the differences in enrollment between 
Employer-sponsored Insurance and Direct Purchase reflected in Table 
17 of the ``NHE Projections 2018-2027--Tables'' available in the 
Downloads section at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. In 2020, the Office of the 
Actuary projects Employer-sponsored Insurance enrollment will be 
176.6 million, and Direct Purchase enrollment will be 21.3 million.
---------------------------------------------------------------------------

    As stated in the 2015 Payment Notice, we previously excluded 
premiums from the individual market because they were most affected by 
the significant changes in benefit design and market composition in the 
early years of implementation of the PPACA market rules and were most 
likely to be subject to risk premium pricing. However, the PPACA is now 
past the initial years of implementation and issuers have had the 
opportunity to collect data on the risk composition of the individual 
market and adjust pricing accordingly. We have concluded, based on the 
general trend of stabilizing average premiums in the individual 
market,\176\ that the likelihood of risk premium pricing has decreased. 
We further believe that individual market premium increases going 
forward will more accurately reflect true premium growth, thereby 
addressing the bases we identified in the 2015 Payment Notice for 
excluding individual market premiums from the premium adjustment 
percentage calculation. Therefore, we are finalizing our proposal to 
measure growth of premiums issuers charged enrollees more 
comprehensively, by no longer excluding individual market premiums.
---------------------------------------------------------------------------

    \176\ ASPE Research Brief: 2019 Health Plan Choice and Premiums 
in Healthcare.gov States, showing a decrease in silver plan premiums 
for plan year 2019, available at https://aspe.hhs.gov/system/files/pdf/260041/2019LandscapeBrief.pdf.
---------------------------------------------------------------------------

    While the PPACA does contain financial assistance provisions that 
shift costs from consumers to the federal government as noted by 
commenters, it also requires the Secretary to measure premium growth, 
so that the effects of premium growth can be reflected in other payment 
parameters. As such, although we are sensitive to commenters' concerns 
about the potential impact on consumers, we continue to believe that a 
premium growth measure that affects cost-sharing and payment parameters 
in the employer group markets and individual health insurance market 
should comprehensively reflect premium growth in all affected markets, 
and should not be limited to employer-sponsored insurance growth. In 
effect, this change is a technical correction for measuring premium 
growth, as the previous exclusion of individual market data was not the 
most comprehensive method of premium growth measurement, but was deemed 
necessary as a result of the premium instability in the individual 
market immediately following implementation of the PPACA market 
reforms.
    Additionally, while we recognize comments noting that recipients of 
PTC are also taxpayers, reducing federal expenditures is not strictly a 
benefit to the federal government, but to all taxpayers, which includes 
those who are not PTC recipients. Further, we understand that the 
premium adjustment percentage is relevant to determine the 
affordability of plans offered by applicable large employers for 
purposes of the employer shared responsibility provisions. We will 
continue to work closely with the Department of the Treasury and the 
IRS to timely release information on the indexing of the various PPACA 
provisions.
    With respect to the comments requesting we use a different base 
year, the applicable statute, section 1302(c)(4) of the PPACA, requires 
the Secretary of HHS to establish a premium adjustment percentage that 
measures premium growth between the preceding calendar year (2019, in 
this case) and 2013. It is not legally permissible to change the base 
year to any year other than 2013, including the base year reflected in 
the PPACA section cited by commenters, section 1401.
    Comment: Many commenters opposed the proposed change and indicated 
HHS should continue to use the current premium measure; however, a few 
of these commenters stated if HHS does adopt the proposed change it 
should change some aspects of its approach. A few commenters 
recommended that HHS consider a delayed or gradual phase in of 
individual market premiums over several years.
    Response: As noted earlier in this section of the preamble, we 
believe that the growth of average premiums in the individual market 
has stabilized, and the reasons for excluding individual market 
premiums from the premium adjustment percentage calculation have been 
addressed.\177\ Although we considered a phase-in approach, we do not 
believe that further delay meets the statutory and regulatory goals of 
using a comprehensive measure of premium growth. Additionally, as 
stated above, we believe that the individual market is now sufficiently 
stable to justify the immediate inclusion of individual market premium 
growth in the indexing measure going forward. For example, in plan year 
2019, premiums for the second lowest cost silver plan decreased 2 
percent, the first decrease in that premium measure since the advent of 
the PPACA.\178\ As such, we believe it is appropriate to prioritize 
better achieving the goals of comprehensiveness and accuracy of the 
premium adjustment percentage methodology over the limited effect on 
mitigating impacts that implementing our proposal using a

[[Page 17541]]

phased-in approach would be likely to have.
---------------------------------------------------------------------------

    \177\ See id.
    \178\ Id.
---------------------------------------------------------------------------

    Comment: One commenter provided a detailed explanation about what 
they viewed to be legal deficiencies with our statutory analysis, our 
justification for the proposed change, and the procedural approach. One 
commenter indicated that HHS has underestimated the significance of the 
proposed change's impact on the Health Insurance Providers Fee and the 
increased premiums in the commercial and Medicare markets that may 
result from the proposed change.
    One commenter expressed that the proposed change will be doubly 
punitive to its state residents because as part of the state's market 
stabilization efforts, residents are subjected to a penalty for not 
carrying insurance. Additionally, the commenter noted that states that 
developed section 1332 waivers will be unduly penalized by this change 
because it will result in a reduction of premium tax credits. Another 
commenter noted that if more states implement section 1332 waivers, 
then a premium adjustment percentage that incorporates individual 
market premium changes would also reflect the impact of these waivers 
(that is, reduced individual market premiums) and could result in 
additional federal expenditures on premium tax credits through reduced 
required contributions. The commenter noted there could be challenges 
for states seeking new waivers to reflect the impact of this 
consideration when evaluating compliance with the deficit neutrality 
guardrail and the available amount of federal pass-through funding in 
their waiver applications.
    Response: We believe that section 1302(c)(4) of the PPACA provides 
the Secretary of HHS with the authority to update and modify the 
premium adjustment percentage and premium growth rate measure, and that 
our proposal was within this authority. While we recognize that any 
reductions to federal PTC spending could reduce the pass-through 
amounts that are available to states that implement State Relief and 
Empowerment Waivers under section 1332 of the PPACA, those reductions 
in pass-through payments would be consistent with the reduction in the 
federal savings attributable to such waivers. Additionally, as noted in 
the regulatory impact section of this rule, we are aware that, if 
adopted by the Department of the Treasury and the IRS, this change in 
premium measures will likely have the effect of raising premiums, and 
we understand that such increases could have additional consequences 
for consumers in states where they may be penalized for not carrying 
insurance. As explained in responses to other comments on this 
proposal, we believe these impacts are outweighed by the goals of 
achieving comprehensive and accurate calculations of premium growth. We 
will continue to consider possibilities for appropriate modifications 
to the calculation of the premium adjustment percentage that reflect 
the changing health insurance markets, and we will consider these and 
other comments as we develop future policy in this area.
    Based on the final 2020 premium adjustment percentage, we are 
finalizing the following cost-sharing parameters for benefit year 2020.
Maximum Annual Limitation on Cost Sharing for Plan Year 2020
    Under Sec.  156.130(a)(2), for the 2020 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 2020. 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.
    In the proposed rule, we proposed that the 2020 maximum annual 
limitation on cost sharing would be $8,200 for self-only coverage and 
$16,400 for other than self-only coverage, based on the previously 
proposed premium adjustment percentage of 1.2969721275 for 2020, 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.\179\ As 
stated in this rule, we are finalizing the change in premium measure 
used to calculate the premium adjustment percentage as proposed, and 
thus the final premium adjustment percentage for the 2020 benefit year 
is 1.2895211380. Based on this premium adjustment percentage, and the 
2014 maximum annual limitation on cost sharing of $6,350 for self-only 
coverage, the final 2020 maximum annual limitation on cost sharing will 
be $8,150 for self-only coverage ($6,350 * 1.2895211380 = $8,188.46; 
rounded down to the next lowest multiple of 50 dollars is $8,150) and 
$16,300 ($8,150 * 2) for other than self-only coverage. This represents 
an approximately 3.16 percent increase above the 2019 parameters of 
$7,900 for self-only coverage and $15,800 for other than self-only 
coverage.
---------------------------------------------------------------------------

    \179\ See https://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters expressed opposition to the increased 
maximum annual limitation on cost-sharing. Many commenters stated that 
they oppose the proposed change in premium measure for the premium 
adjustment percentage in part because of the effect it would have of 
further increasing the maximum annual limitation on cost-sharing for 
individuals and families. Multiple commenters suggested that if the 
premium adjustment percentage is not finalized as proposed, given the 
timing of the final rule, issuers should be allowed a safe harbor to 
use the proposed maximum annual limitation on cost-sharing for 2020. 
One commenter requested HHS lower the burden of out-of-pocket costs for 
patients or keep current cost-sharing limits at 2019 levels. Another 
commenter supported the flexibility to increase the out-of-pocket 
maximum to a higher limit and requested that HHS coordinate with the 
IRS in setting the maximum out-of-pocket limits for HSA-eligible HDHPs 
so they match.
    Response: We recognize commenters' concerns about the burden that 
an increase in the maximum annual limitation on cost-sharing places on 
consumers who meet the annual limit. However, the indexing of this 
parameter is required under section 1302(c)(1)(B) of the PPACA, and 
does not permit HHS to postpone updates to these parameters for the 
applicable benefit year. Therefore, we are finalizing the 2020 maximum 
annual limitation on cost sharing of $8,150 for self-only coverage and 
$16,300 for other than self-only coverage, based on the premium 
adjustment percentage for the 2020 benefit year that is finalized in 
this rule. With regard to the maximum out-of-pocket limit that applies 
for purposes of HSA-eligible HDHPs, annual adjustments are determined 
under section 223(g) of the Code, which by statute provides a different 
annual adjustment than the annual adjustment provided under section 
1302(c) of PPACA. Further, we note that the Department of the Treasury 
and the IRS have jurisdiction over HSAs and HSA-eligible HDHPs under 
section 223 of the Code.
f. 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

[[Page 17542]]

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) states that the Secretary may adjust 
the cost-sharing limits to ensure that the resulting limits do not 
cause the AV of the health plans to exceed the levels specified in 
section 1402(c)(1)(B)(i) (that is, 73 percent, 87 percent, or 94 
percent, depending on the income of the enrollee). Accordingly, we 
proposed to continue to use the 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 discussed in this rule, the finalized 2020 maximum annual 
limitation on cost sharing will be $8,150 for self-only coverage and 
$16,300 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. In this rule, we describe our analysis for 
the 2020 plan year and our proposed results.
    Consistent with our analysis in the Payment Notices for 2014 
through 2019, we developed three test silver-level QHPs, and analyzed 
the impact on AV of the reductions described in the PPACA to the 
proposed estimated 2020 maximum annual limitation on cost sharing for 
self-only coverage ($8,200). The test plan designs are based on data 
collected for 2019 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 2020, the test 
silver-level QHPs included a PPO with typical cost-sharing structure 
($8,200 annual limitation on cost sharing, $2,575 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, 
$3,500 deductible, and 20 percent in-network coinsurance rate); and an 
HMO ($8,200 annual limitation on cost sharing, $4,300 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 2020 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 of FPL (\2/3\ reduction in the 
maximum annual limitation on cost sharing), and 150 and 200 percent of 
FPL (\2/3\ reduction), will 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), 
will cause the AVs of two of the test QHPs to exceed the specified AV 
level of 73 percent. As a result, we proposed that the maximum annual 
limitation on cost sharing for enrollees with a household income 
between 200 and 250 percent of FPL be reduced by approximately \1/5\, 
rather than \1/2\, consistent with the approach taken for benefit years 
2017 through 2019. We further proposed that the maximum annual 
limitation on cost sharing for enrollees with a household income 
between 100 and 200 percent of FPL be reduced by approximately \2/3\, 
as specified in the statute, and as shown in Table 9. 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 test 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 will not reduce the benefit afforded 
to enrollees in the aggregate because QHP issuers are required to 
further reduce their annual limitation on cost sharing, or reduce other 
types of cost sharing, if the required reduction does not cause the AV 
of the QHP to meet the specified level.
    We tested again using the numbers based on the final premium 
adjustment percentage, which are reflected below, and arrived at the 
same conclusions. We are therefore not considering any changes to the 
level of the reductions at this time.
    In prior years we found, and we continue to find, that for 
individuals with household incomes of 250 to 400 percent of 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 in the statute. As a result, 
we did not propose to reduce the maximum annual limitation on cost 
sharing for individuals with household incomes between 250 and 400 
percent of FPL.
    We note that for 2020, 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. No state submitted a 
dataset by the September 1, 2018 deadline.

  Table 9--Reductions in Maximum Annual Limitation on Cost Sharing for
                                  2020
------------------------------------------------------------------------
                                                        Reduced maximum
                                     Reduced maximum   annual limitation
                                    annual limitation   on cost sharing
       Eligibility category          on cost sharing     for other than
                                      for self-only        self-only
                                    coverage for 2020  coverage for 2020
------------------------------------------------------------------------
Individuals eligible for cost-                 $2,700             $5,400
 sharing reductions under Sec.
 155.305(g)(2)(i) (100-150 percent
 of FPL)..........................
Individuals eligible for cost-                  2,700              5,400
 sharing reductions under Sec.
 155.305(g)(2)(ii) (151-200
 percent of FPL)..................
Individuals eligible for cost-                  6,500             13,000
 sharing reductions under Sec.
 155.305(g)(2)(iii) (201-250
 percent of FPL)..................
------------------------------------------------------------------------


[[Page 17543]]

    Comment: One commenter noted that the proposal to reduce the 
maximum annual limitation on cost sharing for enrollees with a 
household income between 200 and 250 percent of FPL by approximately 
\1/5\, rather than \1/2\, consistent with the approach taken for 
benefit years 2017 through 2019, hurts their members. The commenter 
recommended that HHS rescind its plan to go through with these 
regulatory changes and asks that the Administration continue to support 
legislation to appropriate CSR funding.
    Response: We share the commenter's concern about the impact of a 
smaller reduction in cost-sharing on individuals with a household 
income between 200-250 percent of FPL. We will continue to monitor plan 
AV and benefit design in future years for impact on premiums and out-
of-pocket costs. We are finalizing the reductions with modifications to 
reflect the final premium adjustment percentage and maximum annual 
limitation on cost-sharing.
g. Application to Cost-Sharing Requirements and Annual and Lifetime 
Dollar Limitations (Sec.  156.130)
    We proposed several policy changes to cost-sharing requirements, 
including a policy change as to what is included as EHB, which would 
affect the annual out-of-pocket limitation under PHS Act section 
2707(b) and the annual and lifetime dollar limit prohibition under PHS 
Act section 2711. Although large group market coverage and self-insured 
group health plans are not required to cover all EHB, non-grandfathered 
group health plans and health insurance issuers are subject to PHS Act 
section 2707(b), and all group health plans and group health insurance 
issuers are subject to PHS Act section 2711, which are incorporated by 
reference in the Employee Retirement Income Security Act of 1974 
(ERISA) and the Code.\180\ To comply with those sections, such plans 
and issuers must choose a definition of EHB to determine which benefits 
are subject to the annual out-of-pocket limitation and the prohibition 
on lifetime and annual dollar limits.\181\ Therefore, these proposals 
were relevant to, and would apply to, all health coverage and plans.
---------------------------------------------------------------------------

    \180\ Sections 2707(b) and 2711 of the PHS Act apply the annual 
cost-sharing limitation on EHBs and the prohibition on annual dollar 
limits on EHBs to non-grandfathered non-federal governmental group 
health plans of all sizes, and by implication, to large group health 
insurance issuers through which such plan provide coverage. 
Additionally, section 715 of ERISA and section 9815 of the Code 
incorporates those provisions by reference, applying them to non-
grandfathered privately sponsored group health plans and their 
health insurance issuers in the small and large group markets.
    \181\ Generally, for this purpose, a group health plan or health 
insurance issuer that is not required to provide EHB must define 
such benefits in a manner that is consistent with--(1) one of the 
EHB-benchmark plans applicable in a state under Sec.  156.110, and 
including any additional required benefits that are considered EHB 
under Sec.  155.170(a)(2) or (2) one of the three Federal Employees 
Health Benefits Program plan options as defined by Sec.  
156.100(a)(3), supplemented, as necessary, to meet the standards in 
Sec.  156.110. For more information regarding the application of the 
PHS Act section 2711 to group health plans and issuers, see the 
Departments implementing regulations at 26 CFR 54.9815-2711, 29 CRF 
2590.715-2711, and Sec.  147.126.
---------------------------------------------------------------------------

i. Cost-Sharing Requirements for Generic Drugs
    In 2014, the Departments of Labor, HHS, and the Treasury \182\ (the 
tri-departments) released an FAQ on the treatment by large group market 
health insurance issuers and self-insured group health plans, with 
regard to the annual out-of-pocket limitation, of an individual's out-
of-pocket costs for a brand drug when a generic equivalent is available 
and medically appropriate. Because large group market health insurance 
issuers and self-insured group health plans are not required to offer 
EHB, the FAQ states that such plans may include only generic drugs, if 
medically appropriate (as determined by the individual's personal 
physician) and available as EHB, while providing a separate option (not 
as part of EHB) of selecting a brand drug at a higher cost-sharing 
amount, as non-EHB. Thus, such plans could choose not to count toward 
the annual limit on cost sharing some or all of the amounts paid toward 
the brand drugs that are not EHB, if the participant or beneficiary 
selects a brand name prescription drug in circumstances in which a 
generic was available and medically appropriate (as determined by the 
individual's personal physician).\183\
---------------------------------------------------------------------------

    \182\ FAQs About Affordable Care Act Implementation (Part XIX). 
May 2, 2014. Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs19.html. This FAQ remains in 
effect for large group market and self-insured group health plans 
despite the fact that the related proposed policy for the individual 
and small group markets is not being finalized.
    \183\ In determining whether a generic is medically appropriate, 
the FAQ provides that a plan may use a reasonable exception process. 
For example, the plan may defer to the recommendation of an 
individual's personal physician, or it may offer an exceptions 
process meeting the requirements of Sec.  156.122(c).
---------------------------------------------------------------------------

    The FAQ also states that for non-grandfathered health plans in the 
individual and small group markets that must provide coverage of EHB, 
additional requirements apply.\184\ This reflects the implementation of 
the EHB requirements as implemented in the Patient Protection and 
Affordable Care Act (PPACA); Standards Related to Essential Health 
Benefits, Actuarial Value and Accreditation; Final Rule (EHB Final 
Rule),\185\ in which we stated that plans are permitted to go beyond 
the number of drugs offered by the EHB-benchmark plan without exceeding 
EHB. We further clarified in the 2016 Payment Notice that, if the plan 
is covering drugs beyond the number of drugs covered by the EHB-
benchmark plan, all of these drugs are EHB and cost sharing paid for 
the drugs must count toward the annual limitation on cost sharing.\186\
---------------------------------------------------------------------------

    \184\ For example, these plans have to meet the EHB drug count 
standard at Sec.  156.122(a) that sets a minimum threshold for drug 
coverage and while the drug count standard is based on chemically 
distinct drugs, these plans have to consider other factors in 
establishing their prescription drug benefit.
    \185\ 78 FR 12834, 12845 (February 25, 2013).
    \186\ 80 FR 10817.
---------------------------------------------------------------------------

    Given the increase in the cost of prescription drugs, and 
particularly brand drugs, in the proposed rule, we stated that HHS 
believes additional flexibility is needed for health plans in the 
individual and small group markets that must provide coverage of the 
EHB to encourage consumers to use more cost effective generic drugs. We 
proposed, subject to applicable state law, to allow a plan that covers 
both a brand prescription drug and its generic equivalent, for plan 
years beginning on or after January 1, 2020, to consider the brand drug 
to not be EHB, if the generic drug is available and medically 
appropriate for the enrollee, unless coverage of the brand drug is 
determined to be required under an exception process at Sec.  
156.122(c).
    Under such circumstances, if an enrollee purchases the brand drug 
when the generic equivalent was available and medically appropriate, we 
proposed that the issuer would be permitted to not count the difference 
in cost sharing between that which is paid for the brand drug and that 
which would be paid for the generic equivalent drug toward the annual 
limitation on cost sharing under Sec.  156.130, but would still be 
required to attribute the cost sharing that would have been paid for 
the generic equivalent toward the annual limitation on cost sharing 
under Sec.  156.130. This would maintain a balance between 
incentivizing the use of lower-cost drugs and the consumer protection 
provided by the annual limitation on cost sharing.
    We further proposed that for a plan to do so, the plan must have an 
exception process in place in accordance with Sec.  156.122(c) for the 
enrollee to request coverage of the brand drug.

[[Page 17544]]

    If finalized, this interpretation would have permitted all group 
health plans and group health insurance issuers to impose lifetime and 
annual dollar limits on such brand drugs because they would no longer 
be considered EHB and not be subject to the prohibition on such limits.
    HHS also considered an alternate proposal, under which an issuer 
would have been permitted to except the entire amount paid by a patient 
for a brand drug for which there is a medically appropriate generic 
alternative from the annual limitation on cost sharing at Sec.  
156.130. Because this alternate proposal also relied on an 
interpretation of what is considered EHB, the alternate proposal would 
have also applied to non-grandfathered group health plans and health 
insurance issuers subject to the annual limit on cost-sharing provision 
under PHS Act 2707(b), and in ERISA section 715 and Code section 9815.
    We proposed that these changes to the annual limitations on cost 
sharing would be effective starting with the 2020 plan year. We 
solicited comments on these alternatives, both of which we proposed to 
apply to group health plans, group health insurance coverage, and 
individual market coverage, regardless of whether they are required to 
cover EHBs.
    An issuer taking advantage of this proposed flexibility would be 
excluding the brand drug from coverage as EHB. Therefore, the issuer 
also could have imposed annual or lifetime dollar limits on coverage of 
the brand drug under those circumstances. Additionally, PTC (and APTC) 
could not be applied to any portion of the premium attributable to 
coverage of brand name drugs not covered as EHB, so issuers of QHPs 
would be required to calculate that portion of QHPs' premiums and 
report it to the applicable Exchange.
    We also solicited comments on any limitation on group health plans' 
and health insurance issuers' information technology systems being able 
to accumulate the cost sharing consistent with this policy, whether 
this proposed policy should be subject to or preempt any state law 
regarding the application of cost sharing between the generic and 
branded version of a drug that would prevent the application of this 
proposed policy, and whether an issuer not attributing cost-sharing to 
the annual limitation on cost sharing under this approach should be 
considered an adverse coverage determination and subject to the 
coverage appeals processes under Sec.  147.136.
    Finally, we sought comment regarding whether we should require, 
instead of permit, issuers to exclude brand drugs from being EHB if the 
generic drug is available and medically appropriate for the enrollee, 
unless coverage of the brand drug is determined to be required under 
the exception process under 156.122(c), and to exclude the cost sharing 
for the brand name drug from accumulating toward the annual limitation 
on cost sharing according to one of the proposed alternatives.
    Comment: A few commenters supported the policy as proposed. Several 
commenters suggested that we not finalize this policy due to the 
administrative cost and burden of implementing the policy, and the 
potentially harmful consequences for those with chronic medical 
conditions. Several commenters also expressed concern about being able 
to implement the policy for the 2020 plan year. Many commenters noted 
the proposal would increase out-of-pocket expenses for enrollees. Some 
commenters expressed concern regarding the policies' impact on 
actuarial values, which are based on EHB for certain plans. Other 
commenters were not in favor of the alternative proposal due to the 
complexity and administrative burden of determining cost sharing under 
the proposal. Commenters also stated that plans and issuers already 
encourage enrollees to use generic drugs, and that the proposed policy 
is unnecessary and undermines the definition of EHB. There were several 
comments requesting clarification of the term ``generic drug.'' A few 
commenters stated that the proposed policy should be optional for 
issuers.
    Response: In light of commenters' concerns about the complexity of 
implementing this proposal, we are not finalizing this proposal at this 
time, and will continue to review the points raised by commenters.
ii. Cost-Sharing Requirements and Drug Manufacturers' Coupons
    Drug manufacturers often offer coupons to patients to reduce 
patient out-of-pocket costs. Drug manufacturers may offer these coupons 
for various reasons: To compete with another brand name drug in the 
same therapeutic class, to compete with a generic equivalent when 
released, or to assist consumers whose drug costs would otherwise be 
extremely high due to a rare or costly condition.\187\ Some states 
prohibit the use of such coupons if a generic alternative is 
available.\188\
---------------------------------------------------------------------------

    \187\ Van Nuys, K., Joyce, G., Ribero, R., & Goldman, D.P. 
(2018). A Perspective on Prescription Drug Copayment Coupons. Los 
Angeles, CA: Leonard D. Schaeffer Center for Health Policy & 
Economics.
    \188\ For example, see, https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXII/Chapter175H/Section3.
---------------------------------------------------------------------------

    We recognize that copayment support may help beneficiaries by 
encouraging adherence to existing medication regimens, particularly 
when copayments may be unaffordable to many patients. However, the 
availability of a coupon may cause physicians and beneficiaries to 
choose an expensive brand-name drug when a less expensive and equally 
effective generic or other alternative is available. When consumers are 
relieved of copayment obligations, manufacturers are relieved of a 
market constraint on drug prices which can distort the market and the 
true costs of drugs. Such coupons can add significant long-term costs 
to the health care system that may outweigh the short-term benefits of 
allowing the coupons, and counter-balance issuers' efforts to point 
enrollees to more cost effective drugs.
    The Administration has identified high and rising out-of-pocket 
costs for prescription drugs, among other issues, as a challenge to 
consumers. In some cases, manufacturer coupons may be increasing 
overall drug costs and can lead to unnecessary spending by issuers, 
which is passed on to all patients in the form of increased premiums 
and reduced coverage of other potentially useful health care 
interventions. While the PPACA does not speak directly to the 
accounting and use of drug manufacturer coupons to the annual 
limitation on cost sharing, we believe that the overall intent of the 
law was to establish annual limitations on cost sharing that reflect 
the actual costs that are paid by the enrollee. The proliferation of 
drug coupons supports higher cost brand drugs when generic alternatives 
are available which in turn supports higher drug prices and increased 
costs to all Americans and for other federal health programs.
    For these reasons, at new Sec.  156.130(h)(2), we proposed, for 
plan years beginning on or after January 1, 2020, notwithstanding any 
other provision of the annual limitation on cost sharing regulation, 
that amounts paid toward cost sharing using any form of direct support 
offered by drug manufacturers to insured patients to reduce or 
eliminate immediate out-of-pocket costs for specific prescription brand 
drugs that have a generic equivalent are not required to be counted 
toward the annual limitation on cost sharing. Not counting such amounts 
toward the annual limitation

[[Page 17545]]

on cost sharing would promote: (1) Prudent prescribing and purchasing 
choices by physicians and patients based on the true costs of drugs and 
(2) price competition in the pharmaceutical market.
    We noted that this proposal, which is permissive, would also apply 
to non-grandfathered group health plans, to which the annual out-of-
pocket limitation applies under PHS Act section 2707(b) as incorporated 
into the Code and ERISA.
    We sought comment on this proposal and whether states should be 
able to decide how coupons are treated. Additionally, we sought comment 
on whether it would be difficult for issuers to carve out direct 
support offered by drug manufacturers from their calculation of 
enrollees' payments toward their annual limitation on cost sharing, and 
to carve out exceptions (for when a generic equivalent is not 
available, for example), when cost sharing paid by direct support 
offered by drug manufacturers will be counted toward the annual 
limitation on cost sharing, including whether information technology 
systems could be easily updated for this purpose. We also sought 
comment on issuers' ability to differentiate between drug manufacturer 
coupons and other drug coupons, whether their information technology 
systems would need modifications to make such differentiation, what a 
reasonable implementation date would be if implementation barriers 
exist, and how drug discount programs (as opposed to coupons) should be 
treated under this proposal. Finally, we sought comment regarding 
whether this policy should be limited to QHPs only.
    We are finalizing the policy as proposed, subject to the 
modifications discussed in the following responses to comments and a 
non-substantive grammatical correction. In addition, for consistency 
with the terminology currently used in Sec.  156.130, we are making a 
non-substantive modification to the finalized regulatory text from 
``insured patients'' to ``enrollees''. This modification is not 
intended to reflect a change in policy. Under this final rule, issuers 
are permitted to utilize this policy only to the extent permissible by 
applicable state law.
    Comment: Many commenters supported HHS' proposal. Some commenters 
recommended that all manufacturer support for cost sharing that is 
provided directly to the patient be excluded from the annual limitation 
on cost sharing, not just for brand drugs where generic equivalents are 
available. Several commenters recommended that HHS update the policy so 
that enrollees who indicate they may need a brand-name drug qualify for 
the appeals process in Sec.  147.136 or the drug exception process 
under Sec.  156.122(c). These commenters stated that if enrollees are 
found to require a brand-name drug, the issuer should be required to 
count brand drug coupons for that enrollee toward their cost-sharing 
limits. Some commenters also noted that coupon and discount programs 
are not transparent and recommended that HHS should standardize them to 
make their financial aspects more visible to pharmacies and issuers for 
purposes of implementing this proposal.
    Response: We appreciate the important considerations raised by 
commenters, in particular regarding the exclusion of all manufacturer 
support for cost sharing that is provided directly to the patients from 
the annual limitation on cost sharing. As noted in the proposed rule, 
this policy is intended to address the distortion in the market caused 
when consumers choose an expensive brand-name drug when a less 
expensive and equally effective generic or other alternative is 
available. Therefore, the final regulation limits the discretion to 
exclude manufacturer coupons from counting towards the annual 
limitation on cost sharing for specific prescription brand drugs that 
have a generic equivalent, as the availability of a coupon may cause 
physicians and patients to choose an expensive brand-name drug when a 
less expensive and equally effective generic or other alternative is 
available. Where there is no generic equivalent available or medically 
appropriate, it is less likely that the manufacturer's coupon would 
disincentivize a lower cost alternative and thereby distort the market. 
Similarly, when an enrollee is determined through an appeals process in 
Sec.  147.136 or the drug exception process under Sec.  156.122(c) to 
require a brand drug because the generic or other alternative may not 
be available or medically appropriate, the use of the manufacturer 
coupon would not disincentivize a less expensive choice. Therefore, 
under those circumstances, amounts paid toward cost sharing using any 
form of direct support offered by drug manufacturers must be counted 
toward the annual limitation on cost sharing. We have added language to 
the regulation text to address this clarification.
    We believe that standardizing drug manufacturer coupon and discount 
programs is outside the scope of this rulemaking. We will consider 
these and other comments as we develop future policy in this area.
    Comment: Some commenters were concerned that explicitly allowing an 
issuer to not count certain third-party payments towards the annual 
limitation on cost sharing is contrary to the PPACA. They expressed 
concerns that the proposal would increase out-of-pocket costs for 
certain patients with serious conditions, make medically necessary 
medication less affordable and accessible for them, and jeopardize 
their health because they find it more difficult to adhere to their 
drug regimen.
    Response: We recognize commenters' concerns about the burden 
associated with the exclusion of manufacturer coupons from counting 
towards the deductible and annual limitation on cost sharing for 
specific prescription brand drugs that have a generic equivalent. 
However, the availability of a coupon may cause physicians and patients 
to choose an expensive brand-name drug when a less expensive and 
equally effective generic or other alternative are available. Such 
coupons can add significant long-term costs to the health care system 
that may outweigh the short-term benefits of allowing the coupons, and 
counter-balance issuers' efforts to point enrollees to more cost 
effective drugs.
    Comment: Some commenters requested that HHS clarify the term 
``generic equivalent.'' One commenter suggested the proposed rule be 
limited to situations where the generic drug is rated as a therapeutic 
equivalent to the branded drug under the FDA Orange Book. Another 
commenter stated that the term ``generic equivalent'' was too broad and 
failed to reference the FDA's process of testing and approving generic 
drugs for use by consumers.
    Response: We intended our proposal to refer to the term ``generic 
equivalent'' under a commonly understood meaning. Generic drugs 
primarily are regulated by the FDA under the Federal Food, Drug, and 
Cosmetic Act (FDCA). Therefore, in response to comments, we are 
finalizing regulation text to define ``generic'' for this purpose by 
reference to the FDCA. This definition is consistent with the 
definition of generic used for the Medicare Prescription Drug 
Benefit.\189\
---------------------------------------------------------------------------

    \189\ 42 CFR 423.4.
---------------------------------------------------------------------------

    Comment: Several commenters were concerned that these changes 
should be permissive, but not required for plans and issuers. They 
highlighted that issuers may have difficulty in identifying when a 
coupon is used by enrollees to purchase drugs at a retail pharmacy. It 
may take issuers time to implement operational systems to track use of 
coupons.

[[Page 17546]]

    Response: We recognize commenters' concerns that use of these 
coupons may be difficult to track. Under the regulation, issuers may, 
but are not required to, undertake the option to exclude manufacturer 
coupons from counting towards the annual limitation on cost sharing.
    Comment: Several commenters noted that the final language should 
expressly provide that these limitations on coverage only apply to the 
extent consistent with state law.
    Response: In response to comments, we clarify that the ability to 
exclude amounts paid toward cost sharing using any form of direct 
support offered by drug manufacturers to insured patients to reduce or 
eliminate immediate out-of-pocket costs for specific prescription brand 
drugs that have a generic equivalent from being counted toward the 
annual limitation on cost sharing is subject to applicable state law. 
This means that states can require that such amounts be counted toward 
the annual limit on cost sharing. We are modifying the final regulation 
text to state this explicitly.
5. Segregation of Funds for Abortion Services (Sec.  156.280)
    At Sec.  156.280(c)(3), we proposed that, beginning with plan year 
2020, if a QHP issuer provides coverage of non-Hyde abortion services 
\190\ in one or more QHPs, the QHP issuer must also offer at least one 
``mirror QHP'' that omits coverage of non-Hyde abortion services 
throughout each service area in which it offers QHP coverage through 
the Exchange, to the extent permissible under state law. We proposed 
that a ``mirror QHP'' provide identical benefit coverage to one of the 
QHPs with non-Hyde abortion coverage, with the exception of the 
inclusion of the coverage of non-Hyde abortion services. We received 
over 25,000 comments on this proposal, and are in the process of 
reviewing them. As we are still reviewing the comments, we are not able 
to finalize this proposal in the timeframe necessary to ensure that 
issuers are able to implement such a change before the opening of the 
QHP certification application window for the 2020 benefit year. We may 
finalize it in a future rulemaking. If we finalize this provision in 
future rulemaking, it would not take effect sooner than the 2021 
benefit year.
---------------------------------------------------------------------------

    \190\ The Hyde Amendment as currently in effect permits federal 
funds to be used for abortions only in the limited cases of rape, 
incest, or if a woman suffers from a life-threatening physical 
disorder, physical injury, or physical illness, including a life-
endangering physical condition caused by or arising from the 
pregnancy itself, as certified by a physician. It further prohibits 
the use of federal funds for health benefits coverage that includes 
coverage of abortions in instances beyond those limited 
circumstances. In this rule, those services falling outside the 
scope of the Hyde Amendment are ``non-Hyde abortion services.''
---------------------------------------------------------------------------

6. Quality Standards (Sec. Sec.  156.1120, 156.1125, 156.1130)
    Regulatory reform and reducing regulatory burden are high 
priorities for us. To lower health care costs, enhance patient care, 
and reduce the regulatory burden on the health care industry, including 
for health plan issuers and the providers who deliver services through 
their plans, in October 2017, we launched the Meaningful Measures 
Initiative.\191\ This initiative is one component of our agency-wide 
Patients Over Paperwork Initiative.\192\
---------------------------------------------------------------------------

    \191\ ``Meaningful Measures Hub.'' May 5, 2018. Available at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html.
    \192\ Remarks by Administrator Seema Verma at the Health Care 
Payment Learning and Action Network (LAN) Fall Summit, as prepared 
for delivery on October 30, 2017. Available at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html.
---------------------------------------------------------------------------

    The Meaningful Measures Framework is a strategic tool for putting 
patients over paperwork by identifying the highest priority areas for 
quality measurement and quality improvement, to assess the core quality 
of care issues that are most vital to advancing our work to improve 
patient outcomes. This initiative is a new approach to quality measures 
that will foster operational efficiencies that include decreasing data 
collection and reporting burden while focusing on quality measurement 
aligned with meaningful outcomes.
    By including Meaningful Measures in our quality reporting and 
quality improvement programs such as the Quality Rating System, QHP 
Enrollee Experience Survey and the Quality Improvement Strategy, we 
believe that we can also address the following cross-cutting measure 
criteria:
     Eliminating disparities;
     Tracking measurable outcomes and impact;
     Safeguarding public health;
     Achieving cost savings;
     Improving access for rural communities; and
     Reducing burden.
    We encourage QHP issuers to use performance measures aligned with 
the Meaningful Measures Initiative in fulfilling their certification 
requirement to implement a Quality Improvement Strategy that provides 
increased reimbursement or other market-based incentives for improving 
health outcomes of plan enrollees.
    In addition, we will continue to assess quality measures in our 
programs including the Quality Rating System and the QHP Enrollee 
Experience Survey, to ensure that we are using a parsimonious set of 
the most meaningful measures for patients, clinicians, and health plans 
in those quality programs. If we propose any changes or removal of 
measures, we will include those for public comment in the Annual Call 
Letter for the QRS and QHP Enrollee Survey,\193\ as well as address 
potential changes to information collection requirements to comply with 
the Paperwork Reduction Act.
---------------------------------------------------------------------------

    \193\ Final 2018 Call Letter for the QRS and QHP Enrollee 
Survey. Available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/2018-QRS-Call-Letter_July2018.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters supported quality standards across the 
Exchanges, as well as the Meaningful Measures initiative to help 
streamline measures across quality reporting and quality improvement 
programs. One commenter recommended the stratification of quality 
measures by race, ethnicity, language, socioeconomic status, sex, 
gender identity, sexual orientation, disability, and other demographic 
factors and that we prioritize the inclusion of disparities-sensitive 
and health equity measures in the Meaningful Measures areas across 
domains. Some commenters mentioned that quality activities, such as the 
Quality Rating System and the QHP Enrollee Survey, empower consumers, 
promote high value care and are critical functions of an Exchange. Some 
commenters urged transparency of both price and quality data to help 
consumers choose high quality care.
    Response: We did not propose updates to the Quality Rating System, 
QHP Enrollee Survey or Quality Improvement System regulations in the 
proposed rule. We appreciate the comments and will take them into 
consideration as we continue implementing CMS quality reporting 
programs such as the Quality Rating System, QHP Enrollee Survey and 
Quality Improvement Strategy.
7. Direct Enrollment With the QHP Issuer in a Manner Considered To Be 
Through the Exchange (Sec.  156.1230)
    As described in the preamble to Sec. Sec.  155.220, 155.221, and 
155.415, we proposed significant changes to these regulations to 
streamline and consolidate the requirements applicable to all direct 
enrollment entities--both QHP issuers and web-brokers. To reflect these 
changes, we also proposed conforming changes in Sec.  156.1230(a)(2)

[[Page 17547]]

and (b). We proposed to amend Sec.  156.1230(b) to add a new paragraph 
(b)(1) that will require issuers participating in direct enrollment to 
comply with the applicable requirements in Sec.  155.221. We also 
proposed to delete and reserve paragraph (a)(2) of Sec.  156.1230 to 
reduce redundancies in light of the proposed changes to Sec.  155.415. 
We did not receive any comments specific to the proposed changes to 
Sec.  156.1230 and are finalizing these changes as proposed. For a more 
thorough discussion of these changes, please see the preamble to 
Sec. Sec.  155.220, 155.221, and 155.415.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
OMB for review and approval. This final rule contains information 
collection requirements (ICRs) that are subject to review by OMB. A 
description of these provisions is given in the following paragraphs 
with an estimate of the annual burden, summarized in Table 11. To 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the PRA requires that we solicited 
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 solicited 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.\194\ Table 10 in this final rule presents the 
mean hourly wage, the cost of fringe benefits and overhead, and the 
adjusted hourly wage.
---------------------------------------------------------------------------

    \194\ See May 2017 Bureau of Labor Statistics, Occupational 
Employment Statistics, National Occupational Employment and Wage 
Estimates. Available at https://www.bls.gov/oes/current/oes_nat.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 10--Adjusted Hourly Wages Used in Burden Estimates *
----------------------------------------------------------------------------------------------------------------
                                                                                Fringe benefits
              Occupation title                  Occupational     Mean hourly    and overhead ($/ Adjusted hourly
                                                    code         wage ($/hr.)         hr.)         wage ($/hr.)
----------------------------------------------------------------------------------------------------------------
All Occupations.............................         00-0000           $24.34           $24.34           $48.68
----------------------------------------------------------------------------------------------------------------
* Note that only the occupations related to the ICRs being finalized are included in the table.

B. ICRs Regarding Risk Adjustment Data Validation Exemptions (Sec.  
153.630(g))

    In this final rule, we are codifying Sec.  153.630(g)(3), under 
which an issuer will be exempt from risk adjustment data validation, 
beginning with the 2018 benefit year of risk adjustment data 
validation, if an issuer is in liquidation, or will enter liquidation 
no later than April 30th of the benefit year that is 2 benefit years 
after the benefit year being audited, provided that the issuer meets 
certain requirements. To qualify for this exemption, the issuer must 
provide to HHS, in a manner and timeframe to be specified by HHS, an 
attestation that the issuer will enter liquidation no later than April 
30th of the benefit year that is 2 benefit years after the benefit year 
being audited that is signed by an individual who can legally and 
financially bind the issuer. To qualify for the exemption, an issuer 
also could not have been a positive error rate outlier in the prior 
benefit year's risk adjustment data validation. We continue to 
anticipate that fewer than 10 issuers will submit this information to 
HHS annually. Under 5 CFR 1320.3(c)(4), this ICR will not be subject to 
the PRA, as it will affect fewer than 10 entities in a 12-month period.
    We are finalizing the proposal to codify at Sec.  153.630(g)(1) and 
(2) two exemptions for certain issuers from risk adjustment data 
validation that were finalized in the 2018 and 2019 Payment Notices. 
The reduction in burden for issuers who meet the criteria to be 
exempted under proposed Sec.  153.630(g)(1) and (2) was estimated in 
those rules, and have been incorporated into OMB Control Number 0938-
1155 (CMS-10401--``Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment). Codifying these policies as part of HHS 
regulations as finalized in this rulemaking will not affect current 
burden estimates.

C. ICRs Regarding Agent or Broker Termination and Web Broker Data 
Collection (Sec.  155.220)

    We are finalizing the requirement at Sec.  155.220(c)(4)(i)(A), for 
web-brokers to provide HHS a list of agents or brokers that by contract 
or other arrangement use the web-broker's website to assist consumers 
with QHP selection or completion of the Exchange eligibility 
application, in a form and manner to be specified by HHS. Currently, 
Sec.  155.220(c)(4)(i)(A) requires the provision of this information if 
requested by HHS. The burden on a web-broker to comply with this 
requirement is covered by the information collection currently approved 
under OMB control number 0938-1349 (CMS-10650--State Permissions for 
Enrollment in Qualified Health Plans in the Federally Facilitated 
Exchange & Non-Exchange Entities).
    We are finalizing the provision at Sec.  155.220(g)(3)(ii), to 
allow HHS to immediately terminate an agent's or broker's agreement(s) 
with the FFEs for cause with notice if an agent or broker fails to 
comply with the requirement to maintain the appropriate licensure in 
every state in which the agent or broker actively assists consumers 
with enrolling in QHPs on the FFEs or SBE-FPs. An agent or broker whose 
agreement(s) with the FFEs are immediately terminated for cause under

[[Page 17548]]

the new proposed paragraph (g)(3)(ii) will be able to request 
reconsideration under Sec.  155.220(h). Although the process to request 
reconsideration imposes a small burden on agents or brokers subjected 
to terminations, we anticipate fewer than 10 terminations annually 
under this new authority. Under 5 CFR 1320.3(c)(4), this ICR will not 
be subject to the PRA as we anticipate it will affect fewer than 10 
entities in a 12-month period.
    We are finalizing the proposal at Sec.  155.220(m)(3), that the 
Exchange may collect from a web-broker during its registration with the 
Exchange under Sec.  155.220(d)(1) or at another time on an annual 
basis, in a form and manner specified by HHS, information sufficient to 
identify the individuals who comprise the entity's corporate leadership 
or ownership, as well as any corporate or business relationships with 
other entities that may seek to register with the FFE as a web-broker. 
We believe the burden on a web-broker to comply with these requirements 
is covered by the information collection currently approved under OMB 
control number 0938-1349 (CMS-10650--State Permissions for Enrollment 
in Qualified Health Plans in the Federally Facilitated Exchange & Non-
Exchange Entities). In the supporting statement for that information 
collection, we stated web-brokers will also be required to provide 
other documentation as requested in response to emerging compliance 
issues, for HHS to monitor compliance. The information we proposed to 
collect based on proposed Sec.  155.220(m)(3) is the type of 
information we anticipated when we referenced other documentation in 
response to emerging compliance issues.

D. ICRs Regarding Direct Enrollment Entity Standardized Disclaimer 
(Sec.  155.221)

    We are finalizing the proposed provision at Sec.  155.221(b)(2) to 
require direct enrollment entities (both QHP issuers and web-brokers) 
to prominently display a standardized disclaimer, in the form and 
manner provided by HHS, to assist consumers in distinguishing between 
direct enrollment entity website pages that display QHPs and those that 
display non-QHPs during a single shopping experience. HHS will provide 
the exact text for this disclaimer and the language will not need to be 
customized. As described in the preamble, we will provide further 
information on the text and other display details for the standardized 
disclaimer in guidance. At that time, we will estimate the burden 
associated with this requirement, solicit public comment, and request 
OMB approval in accordance with the PRA, as may be necessary.

E. ICRs Regarding Special Enrollment Periods (Sec.  155.420)

    We are finalizing the proposed special enrollment period at Sec.  
155.420(d)(6)(v), which will be subject to pre-enrollment verification 
of eligibility for the FFEs. Where possible, the FFE makes every effort 
to verify an individual's eligibility for the applicable special 
enrollment period through automated electronic means instead of through 
an applicant's submission of documentation. Consistent with other 
special enrollment periods subject to pre-enrollment verification, 
individuals will be required to provide supporting documentation \195\ 
within 30 days of plan selection.
---------------------------------------------------------------------------

    \195\ Consumer submitted documents currently accepted by the FFE 
for purposes of demonstrating prior coverage and verifying attested 
income are available at https://www.healthcare.gov/help/prove-coverage-loss/ and https://www.healthcare.gov/verify-information/documents-and-deadlines/, respectively.
---------------------------------------------------------------------------

    We estimate an additional 4,700 consumers will submit documents 
annually to verify their eligibility to enroll through the proposed 
special enrollment period in the FFE, and that a consumer will, on 
average, spend approximately 1 hour gathering and submitting required 
documentation. Using the average hourly wage for all occupations (at an 
hourly rate of $48.68), we estimate the opportunity cost to a consumer 
completing this task to be approximately $48.68. We estimate the total 
annual burden on those consumers submitting documentation will be 
approximately 4,700 hours with an equivalent cost of approximately 
$228,796.
    We are revising the information collection currently approved under 
OMB control number 0938-1207 (CMS-10468--Medicaid and Children's Health 
Insurance Programs: Essential Health Benefits in Alternative Benefit 
Plans, Eligibility Notices, Fair Hearing and Appeal Processes, and 
Premiums and Cost Sharing; Exchanges: Eligibility and Enrollment) to 
account for this additional burden. SBEs that choose to operationalize 
the proposed special enrollment period are encouraged to follow the 
same approach for pre-enrollment verification of special enrollment 
period eligibility.

F. ICRs Regarding Eligibility Standards for Exemptions (Sec.  155.605)

    We do not anticipate that the amendment to Sec.  155.605(e) will 
create additional costs on, or burdens to, the Exchanges. We anticipate 
it will decrease burden on those consumers who, when applying for a 
hardship exemption, choose to apply for the exemption through the IRS 
for 2018, saving them approximately 16 minutes since they will not be 
required to complete the exemption application or submit supporting 
documentation. HHS will continue to process exemptions under current 
regulations for all SBEs that elect this option, and anticipates a 
decrease in the volume of exemptions processed.
    Based on historical data of the exemptions program and anticipating 
a decrease in individuals applying for exemptions as a result of the 
Tax Cuts and Jobs Act that reduced to $0 the individual shared 
responsibility payment for months beginning after December 31, 2018, we 
estimate that approximately 50,000 individuals will apply for a 
hardship exemption annually through the FFE.\196\ We expect 60 percent 
of those individuals will apply for a hardship exemption through the 
IRS for 2018, totaling 30,000 requests.
---------------------------------------------------------------------------

    \196\ Although the Tax Cuts and Jobs Act reduces to $0 the 
individual shared responsibility payment for months beginning after 
December 31, 2018, individuals may still have a need to seek a 
hardship exemption for 2019 and future years due to a lack of 
affordable coverage based on projected income.
---------------------------------------------------------------------------

    We estimate that the annual reduction in burden for the expected 
30,000 hardship exemptions through the IRS for 2018 will be 
approximately 8,100 hours. Using the average hourly wage for all 
occupations (at an hourly rate of $48.68 per hour) we estimate that the 
annual reduction in cost for each consumer will be approximately $13, 
and the annual cost reduction for all consumers applying for hardship 
exemptions through the IRS for 2018 will be approximately $394,308.
    We anticipate the burden will also be reduced for those consumers 
who currently apply through Connecticut.\197\ Based on the population 
of Connecticut, we expect 330 consumers from that state will apply for 
a hardship exemption through the IRS for 2018, as opposed to through 
the state Exchange. We estimate that the annual reduction in burden for 
the 330 hardship exemptions through the IRS will be approximately 89 
hours. Using the average hourly wage for all occupations (at an hourly 
rate of $48.68 per hour) we estimate the annual reduction in cost for 
each consumer will be approximately $13, and the annual cost reduction 
for all consumers in Connecticut applying for a hardship

[[Page 17549]]

exemption through the IRS for 2018 will be approximately $4,337.
---------------------------------------------------------------------------

    \197\ HHS processes exemptions for all SBEs except Connecticut.
---------------------------------------------------------------------------

    We will revise the information collection currently approved under 
OMB control number 0938-1190 (CMS-10466--Patient Protection and 
Affordable Care Act: Exchange Functions Eligibility for Exemptions) to 
account for this burden reduction.

G. Summary of Annual Burden Estimates for Requirements

                                              Table 11--New Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Burden per                     Hourly labor
      Regulation section(s)           OMB control No.       Respondents      Responses       response      Total annual       cost of     Total cost ($)
                                                                                              (hours)     burden (hours)   reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
155.420(d)(6)(v)................  0938-1207.............           4,700           4,700               1           4,700          $48.68        $228,796
                                                         -----------------------------------------------------------------------------------------------
    Total.......................  ......................           4,700           4,700  ..............           4,700  ..............        $228,796
--------------------------------------------------------------------------------------------------------------------------------------------------------
* There are no capital/maintenance costs associated with the information collection requirements contained in this final rule; therefore, we have
  removed the associated column from Table 11.

H. Submission of PRA-Related Comments

    We have submitted a copy of this final 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 collections discussed in this rule, please visit CMS' website 
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 final rule 
and identify the final rule (CMS-9926-F), the ICR's CFR citation, CMS 
ID number, and OMB control number.
    ICR-related comments are due May 28, 2019.

V. Regulatory Impact Analysis

A. Statement of Need

    This final rule finalizes standards related to the risk adjustment 
program for the 2020 benefit year, clarifications and improvements to 
the risk adjustment data validation program, as well as certain 
modifications that will promote transparency, innovation in the private 
sector, reduce burden on stakeholders, and improve program integrity. 
The Premium Stabilization Rule, previous Payment Notices, and final 
risk adjustment \198\ rules provided details on the implementation of 
the risk adjustment program, including the specific parameters 
applicable for the 2014, 2015, 2016, 2017, 2018, and 2019 benefit 
years. This final rule finalizes additional standards related to cost-
sharing parameters; the Exchanges, including exemptions, eligibility 
and enrollment; calculation of the premium adjustment percentage; and 
FFE and SBE-FP user fees.
---------------------------------------------------------------------------

    \198\ Adoption of the Methodology for the HHS-Operated Permanent 
Risk Adjustment Program Under the Patient Protection and Affordable 
Care Act for the 2017 Benefit Year, Final Rule, 83 FR 36456 (July 
30, 2018) and Patient Protection and Affordable Care Act; Adoption 
of the Methodology for the HHS-Operated Permanent Risk Adjustment 
Program for the 2018 Benefit Year, Final Rule, 83 FR 63419 (Dec. 10, 
2018).
---------------------------------------------------------------------------

B. Overall Impact

    We have examined the impacts of this final 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), 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).
    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 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 final 
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 final rule. In accordance with the provisions of Executive 
Order 12866, this regulation was reviewed by the Office of Management 
and Budget.
    The provisions in this final rule aim to ensure taxpayer money is 
more appropriately spent and that states have additional flexibility 
and control over their insurance markets. They will reduce regulatory 
burden, and reduce administrative costs for consumers and direct 
enrollment entities.
    HHS anticipates that the provisions of this final rule will help 
further the HHS' goal of ensuring that all consumers have access to 
quality and affordable health care and are able to make informed

[[Page 17550]]

choices, that the insurance market offers choices, and that states have 
more control and flexibility over the operation and establishment of 
Exchanges. Affected entities such as direct enrollment entities, and 
QHP issuers will incur costs to comply with the proposed new 
provisions, for example, those related to direct enrollment; and states 
will incur costs if they choose to implement the new special enrollment 
period. In accordance with Executive Order 12866, HHS believes that the 
benefits of this regulatory action justify the costs.

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

    In accordance with OMB Circular A-4, Table 12 depicts an accounting 
statement summarizing HHS' assessment of the benefits, costs, and 
transfers associated with this regulatory action.
    This final 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 
all benefits and costs of this final rule. The effects in Table 12 
reflect qualitative impacts and estimated direct monetary costs and 
transfers resulting from the provisions of this final rule for health 
insurance issuers and consumers. The annualized monetized costs 
described in Table 12 reflect direct administrative costs and savings 
to health insurance issuers and consumers as a result of the provisions 
regarding special enrollment periods, use of direct enrollment entity 
application assisters to carry out responsibilities currently performed 
by agents or brokers, and applying for hardship exemptions. The 
annualized monetized transfers described in Table 12 include changes to 
costs associated with the risk adjustment user fee paid to HHS by 
issuers, the potential increase in PTC for those qualifying individuals 
that use the new special enrollment period, and the potential decrease 
in PTC and increase in health insurance provider fees and employer 
shared responsibility payments due to the change in the premium 
adjustment percentage, and the corresponding changes the Department of 
the Treasury and the IRS are expected to make with regard to their 
policies on calculating these parameters. We are finalizing the risk 
adjustment user fee of $2.16 per billable member per year for the 2020 
benefit year to operate the risk adjustment program on behalf of 
states,\199\ which we estimate to cost approximately $50 million in 
benefit year 2020. We expect risk adjustment user fee transfers from 
issuers to the federal government to increase by $10 million, compared 
to the $40 million estimated for the 2019 benefit year; this increase 
is included in Table 12. Additionally, we are finalizing an FFE user 
fee rate of 3.0 percent of premiums for the 2020 benefit year, which is 
lower than the 3.5 percent FFE user fee rate finalized for 2014 to 2019 
benefit years. We are also finalizing an SBE-FP user fee rate of 2.5 
percent of premiums for the 2020 benefit year, which is lower than the 
3.0 percent SBE-FP user fee rate we finalized for the 2019 benefit 
year. Also, we are updating the premium adjustment percentage for the 
2020 benefit year, resulting in a final premium adjustment percentage 
of 1.2895211380 percent.
---------------------------------------------------------------------------

    \199\ As noted earlier in this final rule, no state has elected 
to operate the risk adjustment program for the 2020 benefit year; 
therefore, HHS will operate the program for all 50 states and the 
District of Columbia.

                                           Table 12--Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Benefits:
----------------------------------------------------------------------------------------------------------------
Qualitative:
     Greater market stability resulting from updates to the risk adjustment methodology.................
     Potential increased enrollment in the individual market stemming from lower premiums due to
     expansion of direct enrollment opportunities, 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..............................................
     Greater continuity of coverage for consumers related to the special enrollment period..............
     Reduced Navigator training compliance burden and increased flexibility in training design for
     Exchanges by streamlining the existing training topics into four broad categories..........................
     Reduced burden to FFE Navigators by making the duties listed at Sec.   155.210(e)(9) permissible
     for FFE Navigators, not required...........................................................................
     Strengthened program integrity related to agents and brokers and direct enrollment entities........
     Reduction in burden associated with risk adjustment data validation for issuers eligible for the
     liquidation exemption......................................................................................
     Potential reduction in economic distortions, and improvement in economic efficiency as a result of
     the reduction in Exchange enrollment due to the change in the method of calculating the premium adjustment
     percentage.................................................................................................
----------------------------------------------------------------------------------------------------------------
                     Costs:                          Estimate          Year          Discount         Period
                                                       (million)          dollar            rate         covered
                                                                                       (percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)...................        -$14.042            2018               7       2019-2023
                                                        -$14.037            2018               3       2019-2023
----------------------------------------------------------------------------------------------------------------
Quantitative:
     Costs incurred by issuers and consumers to comply with provisions related to special enrollment
     periods....................................................................................................
     Reduction in burden and costs for consumers applying for hardship exemptions through IRS...........
     Reduction in burden and cost for direct enrollment entities that choose to use direct enrollment
     entity application assisters to carry out responsibilities currently performed by agents or brokers........
     Regulatory familiarization costs...................................................................
----------------------------------------------------------------------------------------------------------------
Qualitative:
     Costs to issuers due to increases in providing medical services if health insurance enrollment
     increases..................................................................................................
     Potential costs to Exchanges that opt to implement the special enrollment period for qualified
     individuals who experience a decrease in household income and are newly determined eligible for APTC, and
     to issuers for processing related enrollments and terminations.............................................
----------------------------------------------------------------------------------------------------------------

[[Page 17551]]

 
                   Transfers:                        Estimate          Year          Discount         Period
                                                       (million)          Dollar            Rate         Covered
                                                                                       (percent)
----------------------------------------------------------------------------------------------------------------
Federal Annualized Monetized ($/year)...........            $954            2018               7       2019-2023
                                                          $976.6            2018               3       2019-2023
----------------------------------------------------------------------------------------------------------------
Quantitative:
     Transfer from health insurance issuers to the federal government of $50 million as risk adjustment
     user fees for 2023 (the amount will increase by $10 million from that previously estimated for 2020-2022)..
     Transfer from federal government of $15.3 million in premium tax credits to consumers enrolling
     through special enrollment period..........................................................................
     Health Insurance Providers Fees of approximately $50 million in 2020 and $70 million per year
     between 2021 and 2023, which is a transfer from issuers to the federal government, and Employer Shared
     Responsibility Payments of $100 million in 2020 and $110 million per year between 2021 and 2023, which is a
     transfer from employers to the federal government..........................................................
     Reductions in federal premium tax credit spending of approximately $980 million in 2020, $1.04
     billion in 2021, $1.09 billion in 2022 and $1.15 billion in 2023, which is a transfer from consumers to the
     federal government, due to the change in the method of calculating the premium adjustment percentage.......
     Between 2020 and 2023, net premium increases of approximately 1 percent or $181 million in
     additional net premiums per year, which is a transfer from consumers and the federal government to issuers.
----------------------------------------------------------------------------------------------------------------
Qualitative:
     The net effect on premiums is uncertain............................................................
     Potential increase in federal and state uncompensated care costs as a result of lower Exchange
     enrollment due to the change in the method of calculating the premium adjustment percentage................
----------------------------------------------------------------------------------------------------------------

    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 transitional reinsurance and temporary risk 
corridors programs ended after the 2016 benefit year. Therefore, the 
costs associated with those programs are not included in Tables 12 or 
13 for fiscal years 2020-2023. Table 13 summarizes the effects of the 
risk adjustment program on the federal budget from fiscal years 2019 
through 2023, with the additional, societal effects of this final rule 
discussed in this RIA. We do not expect the provisions of this final 
rule to significantly alter CBO's estimates of the budget impact of the 
risk adjustment program that is described in Table 13. 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 final rule (Table 12).
    In addition to utilizing CBO projections, HHS conducted an internal 
analysis of the effects of its regulations on enrollment and premiums. 
Based on this internal analysis, we anticipate that the quantitative 
effects of the provisions in this final rule are consistent with our 
previous estimates in the 2019 Payment Notice for the impacts 
associated with the APTC, the premium stabilization programs, and FFE 
user fee requirements.

                 Table 13--Estimated Federal Government Outlays and Receipts for the Risk Adjustment Programs From Fiscal Year 2019-2023
                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Year                                 2019            2020            2021            2022            2023          2019-2023
--------------------------------------------------------------------------------------------------------------------------------------------------------
Risk Adjustment Program Payments........................               5               6               6               6               7              30
Risk Adjustment Program Collections *...................               5               6               6               7               7              31
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note 1: Risk adjustment program payments and receipts lag by one quarter. Receipts 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: 2018 to 2028 Table 2. May 2018. Available
  at https://www.cbo.gov/system/files?file=2018-06/51298-2018-05-healthinsurance.pdf.

1. Risk Adjustment
    The risk adjustment program is a permanent program created by 
section 1343 of the PPACA that collects charges from issuers with 
lower-than-average risk populations and uses those funds to make 
payments to issuers with higher-than-average risk populations in the 
individual, small group, and merged markets (as applicable), inside and 
outside the Exchanges. We established standards for the administration 
of the risk adjustment program in subparts A, B, D, G, and H of 45 CFR 
part 153.
    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. Consistent with Sec.  153.610(f), 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 2020 benefit year, 
we estimated that the total cost for HHS to operate the risk adjustment 
program on behalf of all states will be approximately $50 million, and 
that the risk adjustment user fee will be approximately $2.16 per 
billable member per year, or $0.18 PMPM. The updated cost estimates 
attribute all costs related to the EDGE server data collection and data 
evaluation (quantity and quality evaluations) activities to the risk 
adjustment program, rather than sharing

[[Page 17552]]

them with the reinsurance program, which is no longer operational. 
Previously, we had collected amounts for reinsurance administrative 
expenses, which partially funded contracts that were used for both the 
risk adjustment and reinsurance programs. Now, those costs are borne by 
the risk adjustment program alone. Additionally, based on experience 
with the risk adjustment data validation program's development and 
execution, including development of the new risk adjustment data 
validation audit tool and additional contractor support for processing 
risk adjustment data validation discrepancies and appeals, we estimate 
higher costs associated with the risk adjustment data validation 
program. Finally, we are incorporating the full amount of eligible 
personnel and administrative costs associated with risk adjustment 
program development and operations, including indirect costs, in the 
risk adjustment user fee for the 2020 benefit year. The personnel and 
administrative costs included in the calculation of the 2019 benefit 
year risk adjustment user fees in the 2019 Payment Notice final rule 
incorporated only a portion of the eligible personnel costs, and 
excluded indirect costs. Finally, we estimate similar billable member 
month enrollment for the 2020 benefit year as the most recent 2017 
benefit year individual and small group market enrollment.
    We believe that the approach of blending (or averaging) 3 years of 
separately solved coefficients from the 2016 and 2017 benefit year 
enrollee-level EDGE data with the 2015 MarketScan[supreg] data will 
provide stability within the risk adjustment program and minimize 
volatility in changes to risk scores from the 2019 benefit year to the 
2020 benefit year due to differences in the datasets' underlying 
populations. Furthermore, we are finalizing the use of enrollee-level 
EDGE data and reports extracted from issuer EDGE servers to calibrate 
and operationalize HHS programs for the individual and small group 
(including merged) market programs, as well as to more broadly conduct 
policy analysis for the individual and small group (including merged) 
markets.
2. Risk Adjustment Data Validation (Sec.  153.630)
    Under Sec.  153.630, we proposed a few changes to the requirements 
for risk adjustment data validation.
    We are finalizing the changes to the pairwise means test that will 
increase the second validation audit sample to the full 200 enrollee 
sample size (rather than 100) in certain cases. We do not believe this 
policy will increase the burden on issuers because the second 
validation audit is conducted by HHS, not issuers, and issuers are 
already required to provide the initial and second validation audit 
entities with the documentation necessary to complete the audits for 
all 200 enrollees sampled. Instead, we believe that increasing the 
second validation audit sample size to the full initial validation 
sample of 200 enrollees, in certain cases, may increase the costs to 
the federal government of conducting the second validation audit, as 
HHS will now review the documentation submitted for all 200 enrollees, 
rather than only 100 in certain cases. However, we believe that the 
benefits from improving the process for validating the second 
validation audit results and the accompanying precision it will bring 
to risk score error rate adjustments will outweigh the increased costs 
to the federal government and better ensure the integrity of the risk 
adjustment program.
    We are finalizing our proposal to incorporate prescription drugs 
into risk adjustment data validation as part of the data validation 
process. We believe that it is important that prescription drugs are 
validated as part of risk adjustment data validation, as the HHS-
operated risk adjustment methodology started incorporating prescription 
drug factors beginning with the 2018 benefit year. HHS previously 
estimated the burden of incorporating drugs in risk adjustment data 
validation in the 2018 Payment Notice.
    The exemptions in this final rule for risk adjustment data 
validation codify two policies finalized in the 2018 and 2019 Payment 
Notices and also include one new exemption policy for issuers in or 
entering liquidation. The impact of the previously finalized exemptions 
was addressed in the 2018 and 2019 Payment Notices. We believe that the 
number of issuers that will qualify for the exemption for issuers in 
liquidation will be very small each year, and therefore, we believe 
that the overall reduction in burden will be limited. However, those 
issuers that are exempted from risk adjustment data validation will 
have less burden and administrative costs than an issuer subject to 
these requirements.
3. Ability of States To Permit Agents and Brokers To Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
    In Sec.  155.220(c)(3)(i), the new paragraph (c)(3)(i)(L) prohibits 
web-brokers from displaying QHP recommendations on their websites based 
on compensation a web-broker, agent, or broker receives from QHP 
issuers. Web-brokers often collect certain information from consumers 
and on the basis of that information display or sort QHPs, or apply a 
score to all available QHPs, indicating which QHP they believe is the 
best option for those consumers. We support the development and use of 
innovative consumer-assistance tools that may help consumers select 
QHPs that best fit their needs. However, we believe such 
recommendations should be based on information consumers have provided 
to web-brokers and not based on compensation received from QHP issuers 
when consumers enroll in their plans. We are not aware of any web-
brokers currently recommending QHPs based on compensation received from 
QHP issuers, so we expect the impact of this provision to be very 
limited.
    We are finalizing the requirement in Sec.  155.220(c)(4)(i)(A) for 
web-brokers to provide HHS with a list of agents or brokers who, 
through a contract or other arrangement, use the web-brokers' websites 
to assist consumers with QHP selection or completion of the Exchange 
eligibility application, in a form or manner to be specified by HHS. 
The authority currently exists for HHS to obtain this information by 
request. However, due to the trend of increased use and expansion of 
direct enrollment pathways, we believe it is appropriate and necessary 
to collect this information proactively, so that we may respond more 
efficiently and effectively to any potential instances of noncompliance 
that may involve use of a web-broker's direct enrollment pathway. 
Having this information will, for example, enable us to identify more 
quickly whether noncompliance is attributable to a specific individual 
or individuals, instead of the web-broker entity. We will release 
guidance that provides details on the form and manner of these 
submissions. We anticipate that it will require the list to include, at 
minimum, each agent's or broker's name, state(s) of licensure, and 
National Producer Number. We believe the burden associated with this 
data collection will be relatively limited, as we understand that web-
brokers collect and store this information as part of their normal 
business operations to identify individual agents or brokers utilizing 
their systems. The burden related to this provision is discussed 
previously in the Collection of Information Requirements section.
    Under new Sec.  155.220(g)(3)(ii), HHS is allowed to immediately 
terminate an agent's or broker's agreement if the agent or broker fails 
to maintain

[[Page 17553]]

applicable state licensure as an agent, broker, or insurance producer 
in every state in which the agent or broker actively assists consumers 
with applying for APTC or CSRs or with enrolling in QHPs through the 
FFEs or SBE-FPs. State licensure for agents and brokers in every state 
in which they are assisting consumers is a fundamental consumer 
protection and critical for program integrity. It has been a 
requirement in the FFE agreements with agents and brokers since the 
inception of the FFEs, and is adhered to by the overwhelming majority 
of agents and brokers. Therefore, we believe the impact of this 
provision on agents and brokers will be minimal, but the proposal will 
benefit consumers who might otherwise interact with unlicensed 
individuals and will improve Exchange program integrity.
    In Sec.  155.220(k) a new paragraph (k)(3) is added that will allow 
HHS to immediately suspend an agent's or broker's ability to transact 
information with the Exchange if HHS discovers circumstances that pose 
unacceptable risk to Exchange operations or Exchange information 
technology systems until the incident or breach is remedied or 
sufficiently mitigated to HHS' satisfaction. This language is identical 
to an existing provision that applies to web-brokers at Sec.  
155.220(c)(3)(i)(L) and a similar provision applicable to QHP issuers 
participating in direct enrollment at Sec.  156.1230(b)(1). Those 
provisions are being replaced with a very similar new requirement that 
applies to both types of direct enrollment entities in new Sec.  
155.221(d). Because the potential risks posed by agents and brokers 
with access to FFE systems are similar to those posed by web-brokers 
and QHP issuers participating in direct enrollment, we believe this 
change is necessary and appropriate to provide a uniform process and 
ability to protect Exchange systems and operations from unacceptable 
risks, as well as to protect sensitive consumer data. We note that 
agents and brokers whose ability to transact information with the 
Exchange is suspended under this authority will remain registered and 
authorized to assist consumers using the Marketplace (or side-by-side) 
pathway, unless and until their agreements are suspended or terminated 
under Sec.  155.220(f) or (g). We believe this authority will be used 
infrequently and only in cases where there will likely be the 
reasonable basis to suspend their agreements under Sec.  
155.220(g)(5)(i) but there is a need to take immediate action to 
protect sensitive consumer data or Exchange systems and operations. 
Therefore its effect on agents and brokers is expected to be relatively 
limited.
    In Sec.  155.220(m)(1), we are finalizing the provision to allow a 
web-broker's agreement to be suspended or terminated for cause under 
Sec.  155.220(g), and a web-broker to be denied the right to enter into 
agreements with the FFEs under paragraph (k)(1)(i) of this section 
based on the actions of its officers, employees, contractors, or 
agents, even if those persons are not agents or brokers registered with 
the FFE. In Sec.  155.220(m)(2), we are finalizing the provision to 
allow a web-broker's agreement to be suspended or terminated under 
Sec.  155.220(g), and for the entity to be denied the right to enter 
into agreements with the FFEs under Sec.  155.220(k)(1)(i), if it is 
under the common ownership or control, or is an affiliated business, of 
another web-broker that has had its agreement suspended or terminated 
for cause. We expect these provisions to have limited impact, as they 
are designed to protect program integrity and will only be utilized in 
limited cases when there is evidence of significant misconduct or non-
compliance. In those cases, we anticipate benefits to consumers 
stemming from our enhanced ability to address program integrity 
concerns and non-compliance issues. In Sec.  155.220(m)(3), we are 
finalizing the requirement for the Exchange to collect information from 
a web-broker sufficient to establish the identities of individuals who 
comprise its corporate leadership and to determine any business 
relationships with other entities that may seek to register with the 
Exchange as web-brokers. These provisions are also intended to protect 
program integrity by enabling the Exchange to have information 
necessary to determine if any individuals seeking to be web-brokers are 
attempting to circumvent a previous termination or suspension for cause 
of FFE agreements. The burden related to this provision is discussed in 
the Collection of Information Requirements section.
4. Direct Enrollment (Sec. Sec.  155.20, 155.220, 155.221, 155.415, 
156.1230)
    The changes to Sec.  155.220 are discussed above. In Sec.  155.221, 
we amend and redesignate the existing paragraphs (a), (b) and (c) to 
new paragraphs (e), (f), and (g). In new Sec.  155.220(e), we add 
language to require that the third-party entities that conduct annual 
reviews of direct enrollment entities to demonstrate operational 
readiness consistent with new Sec.  155.221(b)(4) \200\ be independent 
of the entities they are auditing. We believe an independent audit is 
less likely to be influenced by a direct enrollment entity's business 
considerations, and therefore, is more reliable. We expect no impact 
from this provision as it was included as a requirement in the 
agreements we executed with direct enrollment entities subject to these 
audits for plan year 2019. We also clarify in Sec.  155.221(e) that an 
initial audit is required, in addition to subsequent annual audits. 
This clarification does not represent a change from the current 
approach, as direct enrollment entities are currently required to 
demonstrate operational readiness before their websites may be used to 
complete QHP selections.\201\ Therefore we anticipate no impact of this 
proposed change. In Sec.  155.221(f), we require that a written 
agreement must be executed between a direct enrollment entity and its 
auditor stating that the auditor will comply with the requirements of 
paragraph (f). We believe the most effective way to ensure a direct 
enrollment entity has the necessary control and oversight over its 
auditor to ensure compliance with the applicable standards in Sec.  
155.221 is for those standards to be memorialized in a written 
agreement. We expect most, if not all, direct enrollment entities 
already execute written agreements with their contractors that will 
incorporate any regulatory requirements that fall within the scope of 
the work the contractor is performing for the entity, so we expect 
little to no impact from this change.
---------------------------------------------------------------------------

    \200\ Direct enrollment operational readiness review 
requirements are currently captured at Sec.  155.220(c)(3)(i)(K) for 
web-brokers and Sec.  156.1230(b)(2) for QHP issuers.
    \201\ See Sec.  156.1230(b)(2) for issuers participating in 
direct enrollment and Sec.  155.220(c)(3)(i)(K) for web-brokers.
---------------------------------------------------------------------------

    In the new Sec.  155.221(a), we are codifying in regulation the 
types of entities the FFEs permit to offer non-Exchange websites to 
facilitate direct enrollment in coverage offered through the Exchange 
in a manner that is considered to be through the Exchange. There are 
two types of entities that are authorized by the FFEs to offer direct 
enrollment pathways: QHP issuers and web-brokers. We expect this 
provision to have little or no impact as QHP issuers and web-brokers 
are already authorized by the FFEs to participate in direct enrollment.
    In the new Sec.  155.221(b), we establish and consolidate certain 
requirements that apply to all direct enrollment entities. 
Specifically, we add in Sec.  155.221(b)(1) that QHPs and non-

[[Page 17554]]

QHPs must be displayed and marketed on separate website pages on the 
direct enrollment entity's non-Exchange website. We consider this a 
clarification of existing standards that will have minimal impact on 
direct enrollment entities, and will minimize the chance that consumers 
are confused by the display or marketing of QHPs and non-QHPs on a 
single website page. In the new Sec.  155.221(b)(2) we require the 
prominent display of a standardized disclaimer in a form and manner 
provided by HHS. Similar uniform disclaimer requirements already exist 
for all direct enrollment entities. As a result, and because we will 
provide the disclaimer text, we expect the overall impact of this 
provision to be minimal. In the new Sec.  155.221(b)(3), we limit the 
marketing of non-QHPs during the Exchange eligibility application and 
QHP selection process on direct enrollment entities' websites in a 
manner that minimizes the likelihood that consumers will be confused as 
to what products are available through the Exchange and what products 
are not. This will also assist consumers in understanding the 
applicability of APTC and CSRs that they may be eligible for. Most 
direct enrollment entities have refrained from marketing non-QHPs in 
conjunction with QHPs citing a lack of clear guidance on what was 
permissible. Therefore we expect the impact of this provision to be 
minimal, and to be perceived as allowing increased flexibility. In the 
new Sec.  155.221(b)(4), we consolidate a provision requiring direct 
enrollment entities demonstrate operational readiness and compliance 
with applicable requirements prior to the entities' websites being used 
to complete an Exchange eligibility application or a QHP selection. 
Because this is an existing requirement, we expect no impact.
    In the new Sec.  155.221(c), the authority to use application 
assisters and the corresponding requirements when doing so apply for 
all issuers and direct enrollment entities and not solely QHP issuers. 
We are finalizing a new definition of ``direct enrollment entity 
application assister'' in Sec.  155.20 that mirrors the existing 
definition of ``issuer application assister'', as well as finalizing 
amendments to Sec.  155.415 to capture the requirements for entities 
using application assisters that align with the existing requirements 
currently in Sec.  156.1230(a)(2) for QHP issuer application assisters. 
There is one significant deviation from the existing requirements for 
application assisters. Currently, Sec.  156.1230(a)(2)(i) requires all 
application assisters to receive training on QHP options and insurance 
affordability programs, eligibility, and benefits rules and 
regulations. Licensed agents and brokers currently assisting consumers 
with QHP enrollment through the FFEs or SBE-FPs must have credentials 
to access FFE systems to offer that assistance. Those credentials are 
obtained during the FFE registration and training processes for agents 
and brokers. For application assisters to have similar access to FFE 
systems, so that they are also able to assist consumers as described 
here and in the preamble in this rule, they will need credentials 
similar to those obtained by agents and brokers during FFE registration 
and training. Therefore, we require that application assisters 
providing assistance in the FFEs and SBE-FPs comply with this training 
requirement by completing a similar registration and training process, 
in a form and manner to be specified by HHS, so that they will have the 
necessary credentials to provide consumer assistance. This new training 
and registration requirement for application assisters is captured in 
the new Sec.  155.415(b)(1). The burden placed on application assisters 
to complete the FFE training may exceed what may have otherwise existed 
if direct enrollment entities were developing and managing their own 
training programs. However, by requiring the FFE training to be 
completed by application assisters assisting consumers in the FFEs and 
SBE-FPs, it will relieve direct enrollment entities from the burdens 
associated with having to develop and manage their own training 
programs. Importantly, FFE systems will require this approach to comply 
with system security requirements and to enable application assisters 
to meaningfully be able to assist consumers in the FFEs and SBE-FPs. 
Therefore, taken together, we believe the net burden associated with 
this requirement will be minimal and will be acceptable to 
participating direct enrollment entities that elect to use application 
assisters, when permitted under state law. The reason we believe the 
net burden will be minimal is because the bulk of time associated with 
application assisters completing the training requirement will likely 
be comparable whether the training is developed and administered by 
direct enrollment entities or by HHS. However, there will likely be a 
small increase in the amount of time application assisters will have to 
devote to the registration process apart from training, specifically to 
creating an FFE account and completing identity proofing. In contrast, 
there will likely be a substantial reduction in burden on direct 
enrollment entities, because they will not have to develop and manage 
their own training programs. Instead they will be able to simply 
confirm their application assisters have completed the FFE registration 
and training process.
    We anticipate that allowing QHP issuers to use application 
assisters in the FFEs and SBE-FPs, and expanding that option to other 
issuers and web-brokers will provide cost savings to these entities. It 
is difficult to precisely estimate the number of applications for which 
a direct enrollment entity application assister provided help may be 
submitted. However, based on available data, we estimate that 
approximately 980,000 agent or broker-assisted direct enrollment 
applications will be submitted in plan year 2019. We estimate that it 
will take an insurance sales agent \202\ (at an hourly rate of $64.42) 
one hour to complete an application. We do not have information related 
to the number of states that will allow for unlicensed application 
assisters, as well as how many direct enrollment entities will hire 
application assisters or train existing staff as application assisters. 
Therefore, we estimate that half of assisted direct enrollment 
applications will be completed with the assistance of an application 
assister instead of an agent or broker. Based on these assumptions, we 
estimate that it will take an insurance claims and policy processing 
clerk \203\ (at an hourly rate of $39.52) one hour to complete each 
application. Thus, we estimate that the applications for 490,000 
applicants will result in an estimated total burden of approximately 
490,000 hours with an associated cost of approximately $19,364,800. If 
the applications are completed by an agent or broker instead, the total 
cost will be approximately $31,565,800. Based on these assumptions, we 
estimate an overall annual savings of approximately $12.2 million for 
direct enrollment entities using application assisters instead of only 
agents or brokers. In addition, we expect that the time that agents or 
brokers may otherwise have spent assisting consumers with their 
eligibility applications will often instead be devoted to assisting 
more consumers with plan selection and finalizing their enrollments. As 
a result, we expect this policy may also result in an overall increase 
in enrollment

[[Page 17555]]

through the FFEs and SBE-FPs. Lastly, these provisions provide 
increased flexibility and a level playing field to all direct 
enrollment entities and issuers.
---------------------------------------------------------------------------

    \202\ Bureau of Labor Statistics mean hourly wage for an 
Insurance Sales Agent (Occupational Code 41-3021) at $32.21 an hour, 
plus 100 percent fringe.
    \203\ Bureau of Labor Statistics mean hourly wage for an 
Insurance Claims and Policy Processing Clerk (Occupational Code 43-
9041) at $19.76 an hour, plus 100 percent fringe.
---------------------------------------------------------------------------

    In the new Sec.  155.221(d), we consolidate existing authority to 
immediately suspend a direct enrollment entity's ability to transact 
information with the Exchange if HHS discovers circumstances that pose 
unacceptable risk to the Exchange's ability to make accurate 
eligibility determinations, or Exchange operations or systems until 
such circumstances are remedied or sufficiently mitigated to HHS' 
satisfaction. We expect little or no impact from this proposal, since 
this is largely based on an existing authority.
    We also codify new definitions for the following terms in Sec.  
155.20: ``direct enrollment entity'', ``direct enrollment technology 
provider'', and ``web-broker''. We define ``direct enrollment entity'' 
as an entity that an Exchange permits to assist consumers with direct 
enrollment in QHPs offered through an Exchange in a manner considered 
to be through the Exchange as authorized by Sec. Sec.  155.220(c)(3), 
155.221, or 156.1230. We expect no impact from this provision as it 
merely codifies a definition for the term in such a way that the 
entities that are currently authorized by the FFE to host a direct 
enrollment environment are direct enrollment entities. We also amend 
Sec.  155.20 to define ``direct enrollment technology provider'' as a 
type of web-broker business entity that is not a licensed agent, 
broker, or producer under state law and has been engaged or created by, 
or is owned by, an agent or broker, to provide technology services to 
facilitate participation in direct enrollment as a web-broker in 
accordance with Sec. Sec.  155.220(c)(3) and 155.221. There may be 
instances when an individual agent or broker, a group of agents or 
brokers, or an agent or broker business entity engages the services of 
or creates a technology company that is not licensed as an agent or 
broker to assist with the development and maintenance of a non-Exchange 
website that interfaces with an Exchange to assist consumers with 
direct enrollment in QHPs offered through the Exchanges as described in 
Sec. Sec.  155.220(c)(3) and 155.221. In such cases, when the 
technology company is not itself licensed as an insurance agency or 
brokerage, these technology companies will be considered a type of web-
broker that must comply with applicable web-broker requirements under 
Sec. Sec.  155.220 and 155.221, unless noted otherwise. We expect no 
new burden associated with this requirement as it merely allows some 
flexibility in terms of how licensed agents or brokers may organize 
their businesses or pursue business relationships when seeking to 
become web-brokers. We also codify a definition of ``web-broker'' as an 
individual agent or broker, group of agents or brokers, or business 
entity registered with an Exchange under Sec.  155.220(d)(1) that 
develops and hosts a non-Exchange website that interfaces with an 
Exchange to assist consumers with direct enrollment in QHPs offered 
through the Exchanges as described in Sec. Sec.  155.220(c)(3) and 
155.221. As explained in the preamble, we also define the term ``web-
broker'' to generally include direct enrollment technology providers. 
Importantly, this definition will replace HHS' current web-broker 
definition, which is slightly different. However, we expect no impact, 
because all existing web-brokers will fall within the new proposed 
definition of web-broker.
    Conforming edits were also made to Sec.  156.1230 as part of the 
effort to streamline and consolidate similar requirements that apply to 
all direct enrollment entities in one regulation. We amend Sec.  
156.1230(b) to add a new paragraph (b)(1) that requires issuers 
participating in direct enrollment to comply with the applicable 
requirements in Sec.  155.221. There were minimal substantive changes 
to the underlying requirements applicable to issuers participating in 
direct enrollment. We therefore expect no new impact to issuers except 
to the extent previously discussed. We also delete and reserve Sec.  
156.1230(a)(2) to align with the changes, described in this rule, to 
Sec.  155.415 regarding application assisters.
5. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    Since implementing the direct-to-issuer enrollment system in plan 
year 2018, we have seen a marked decrease (greater than fifty percent) 
in the volume of SHOP Call Center calls. We anticipate that the SHOP 
Call Center volume will continue to decrease in plan year 2020, as 
employers will be in the third year of enrolling in SHOP directly with 
issuers, often with the assistance of agents and brokers. In addition, 
agents and brokers and small employers can now resolve most issues 
directly with impacted issuers using well-established issuer call 
centers and small group processes unique to each market. We anticipate 
a minimal number of new appeals of SHOP eligibility and special 
enrollment periods given anticipated employer participation and our 
observation that very few employers ever appeal SHOP determinations.
    In short, we will maintain a toll-free telephone hotline that the 
statute requires (at present 12 full-time equivalent employees are 
devoted to SHOP Call Center operations). We envision minimal contractor 
and staff support to maintain the hotline content and to respond to 
very few voicemail messages. Although we will maintain language 
translation service and incur the associated costs, we anticipate that 
such costs will be minimal given call volume. Moving to an interactive 
voice response system will eliminate staffing for 12 full-time 
equivalent employees required at the call center under the SHOP Plan 
Aggregate and Call Center contract and will provide a net savings to 
the government of approximately $2 million annually.
6. Navigator Program Standards (Sec. Sec.  155.210 and 155.215)
    We provide more flexibility to FFE Navigators by making the 
provision of certain types of assistance, including post-enrollment 
assistance, permissible for FFE Navigators, not required. The amendment 
of Sec.  155.210 to remove the requirement that Navigators in FFEs 
provide the assistance specified at Sec.  155.210(e)(9) will reduce 
regulatory burden and allow FFE Navigators to better prioritize work 
according to consumer demand, community needs, and organizational 
resources. Under the provision, Navigators in FFEs may continue to 
provide the types of assistance listed at Sec.  155.210(e)(9), but will 
not be required to do so.
    The time FFE Navigators currently spend providing assistance with 
the Sec.  155.210(e)(9) topics varies. To help quantify this burden 
reduction, we requested comment on how many hours per month FFE 
Navigator grantees and individual Navigators currently spend providing 
the assistance activities in Sec.  155.210(e)(9), what percentage of 
their current work involves providing these types of assistance, and 
how that amount of work would be impacted if providing these types of 
assistance would no longer be required. We also requested comment on 
how Navigator grantees and individual Navigators might reprioritize 
work and spend time fulfilling their other duties, if not required to 
provide the types of assistance described under Sec.  155.210(e)(9). In 
particular, we sought comment on what tasks Navigators might prioritize 
and complete during the time they otherwise might have provided these 
types of assistance.
    Commenters stated that the amount of time Navigators reported that 
they spent providing post-enrollment assistance varied widely. One 
commenter stated

[[Page 17556]]

that a broad range of post-enrollment activities were among the most 
common areas of assistance requested by consumers. Another commented 
that while they did not spend much time on tax processes, forms, 
appeals, or exemptions, the time they spent educating consumers about 
basic health concepts and how to use their health coverage was 
extensive. Another commented that, on average, Navigators visited each 
enrolled consumer ten times, and that three of those visits were 
dedicated to providing post-enrollment assistance. Another commenter 
stated that one of their Navigators spent 6 months and more than 40 
hours helping a consumer file an appeal.
    We amend Navigator training requirements at Sec. Sec.  
155.210(b)(2) and 155.215(b)(2) to provide greater flexibility to 
Exchanges in designing their Navigator training programs to ensure 
coverage of the most instructive and timely topics in a streamlined 
fashion and to align the training with future changes in the Navigator 
program or the operation of the Exchanges, while still ensuring that 
Navigators are qualified to carry out their activities as required by 
the Navigator statute and regulations. This additional flexibility will 
allow Exchanges to focus on training areas they determine to be most 
relevant to the populations in the Exchange service area, while still 
addressing all required or authorized Navigator functions. Because it 
will provide greater flexibility to tailor the training to current, 
local conditions in each Exchange, the revised approach might also help 
to ensure cost-effective use of Exchange Navigator funding.
    Moreover, we believe these changes will also grant greater 
flexibility to SBEs, including SBE-FPs, in designing their respective 
Navigator training, since SBEs that decide to authorize or require 
their Navigators to provide the assistance specified under Sec.  
155.210(e)(9) will not have corresponding training topics prescribed, 
but will have the flexibility to decide how best to prepare their 
Navigators to provide such assistance. This is similar to the 
flexibility SBEs have for creating training for other required 
Navigator duties. We believe granting SBEs the flexibility to focus on 
the topics they find best suited to prepare their Navigators for 
assisting consumers will allow for a more effective training program, 
and will reduce the regulatory compliance burden on these Exchanges.
    However, the burden reduction that this will achieve cannot be 
estimated since these changes are not intended to reduce the total 
number of hours of Navigator training annually and we are uncertain how 
each Exchange will choose to structure its respective Navigator 
training given this increase in flexibility. We continue to believe 
that each Exchange is in the best position to determine the training 
that is most appropriate for the activities of its Navigators.
7. Special Enrollment Periods (Sec.  155.420)
    We anticipate that amended Sec.  155.420 will impose moderate costs 
on Exchanges that opt to implement the proposed special enrollment 
period to update their user interfaces and make changes to their 
eligibility systems, but also acknowledge that Exchanges may choose to 
offer the special enrollment period through their call center or other 
existing enrollment avenues that could greatly reduce implementation 
costs to an Exchange. Additionally, we anticipate that verification 
requirements will impose costs relating to special enrollment period 
pre-enrollment verification systems, caseloads, and consumer messaging 
for Exchanges that perform pre-enrollment verification of special 
enrollment period eligibility. We expect utilization of the special 
enrollment period may vary among Exchanges depending on total Exchange 
enrollment and Exchange plan rates and pricing practices. Given these 
variable factors, we requested comments regarding anticipated costs, 
benefits and implementation approaches among Exchanges to assist in 
forming a future estimate.
    We do not anticipate this provision to significantly increase 
regulatory burden on issuers, but acknowledge issuers may encounter 
marginal costs associated with processing new enrollments and 
terminations related to the special enrollment period, and direct 
enrollment entities may also face minor implementation costs associated 
with updating their applications and systems to include the new special 
enrollment period. We estimate that it will take a mid-level software 
developer \204\ (at an hourly rate of $107.48) approximately 10 hours 
to make the required modifications to the direct enrollment entity's 
applications and system logic. We estimate a one-time cost burden of 
approximately $1,075 per direct enrollment entity. We further estimate 
a total one-time burden for 35 direct enrollment entities will be 
approximately 350 hours with an equivalent cost of approximately 
$37,618.
---------------------------------------------------------------------------

    \204\ Bureau of Labor Statistics mean hourly wage for a Software 
Developer, Systems Software (Occupational Code 15-1133) at $53.74 an 
hour, plus 100 percent fringe.
---------------------------------------------------------------------------

    Because this policy provides improved pathways to continuous 
coverage for special enrollment period-eligible consumers, we 
anticipate that the proposal will promote continuous coverage for 
consumers and thereby have a positive effect on the individual market 
risk pool. Additionally, we anticipate that eligible consumers may 
experience reduced out-of-pocket costs related to health care expenses 
resulting from access to more affordable health plans and a new pathway 
to maintaining continuous health care coverage, compared to if they had 
to drop out of off-Exchange coverage and pay out-of-pocket for all 
health care expenses incurred for the remainder of the year. We 
estimate that approximately 4,700 new consumers will use this special 
enrollment period on an annual basis to enroll in Exchange coverage, 
and that these consumers will be enrolled for an average of 6 months of 
Exchange coverage during the benefit year. Using the plan year 2019 
average monthly APTC amount of $544, we estimate total APTC transferred 
to consumers as a result of the proposed special enrollment period will 
be approximately $15,340,800 annually.\205\
---------------------------------------------------------------------------

    \205\ ASPE ``2019 Health Plan Choice and Premiums in 
HealthCare.gov states.'' https://aspe.hhs.gov/system/files/pdf/260041/2019LandscapeBrief.pdf.
---------------------------------------------------------------------------

    We invited comments on the potential costs and savings to 
Exchanges, issuers, direct enrollment entities, and consumers 
associated with the proposed special enrollment period. We did not 
receive comments on the cost estimates contained in these proposal.
8. Eligibility Standards for Exemptions (Sec.  155.605)
    We do not anticipate that the amendment to Sec.  155.605(e) will 
create additional costs or burdens on Exchanges, and we anticipate it 
will decrease burden on consumers. The addition of Sec.  155.605(e)(5) 
will enable individuals to claim a general hardship exemption on their 
federal income tax return for 2018 without an exemption certificate 
number from an Exchange. This policy will allow for more flexibility 
and will not result in any additional costs or burdens for issuers. The 
reduction in burden to consumers is discussed in the Collection of 
Information Requirements section.
9. FFE and SBE-FP 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

[[Page 17557]]

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 or SBE-FP. In this final rule, for the 2020 benefit 
year, we finalize an FFE user fee rate of 3.0 percent of the monthly 
premium, and SBE-FP user fee rate of 2.5 percent of the monthly 
premium. We estimate similar FFE and SBE-FP user fee transfers as those 
estimated for prior benefit years, and therefore, we finalized no 
changes to transfers from issuers to the federal government due to the 
finalized lower FFE and SBE-FP user fee rates.
10. Prohibition on Discrimination (Sec.  156.125)
    In the preamble to Sec.  156.125, we discuss a potentially 
discriminatory benefit design under Sec.  156.125: the exclusion of MAT 
drugs for the treatment of opioid use disorder while covering the same 
drugs for other medically necessary purposes, such as analgesia or 
alcohol use disorder. Because we did not propose a change to this 
policy, we do not anticipate any additional burden on states or 
issuers. However, to the extent this clarification causes issuers to 
cease prohibited discriminatory practices, the clarification could help 
consumers obtain needed MAT, lead to better health outcomes, and reduce 
the burden and out-of-pocket costs individuals may have otherwise 
incurred in attempts to obtain MAT.
11. Provisions Related to Cost-Sharing (Sec.  156.130)
    We are finalizing a premium adjustment percentage of 1.2895211380 
for the 2020 benefit year. The annual premium adjustment percentage is 
used to set the rate of increase for several parameters detailed in the 
PPACA, including: 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 (defined at Sec.  155.605(d)(2)), and the employer shared 
responsibility payments under sections 4980H(a) and 4980H(b) of the 
Code.
    Additionally, we finalized other cost-sharing parameters using an 
index based on the final premium adjustment percentage for the 2020 
benefit year. In Sec.  155.605(d)(2), we are finalizing a required 
contribution of 8.24 percent for the 2020 benefit year, which reflects 
the premium adjustment percentage calculation for the 2020 benefit year 
detailed in preamble.\206\ In Sec.  156.130(a)(2), we are finalizing a 
maximum annual limitation on cost sharing of $8,150 for self-only 
coverage, and $16,300 for other than self-only coverage. The CMS Office 
of the Actuary estimates that the proposed change in methodology for 
the calculation of the premium adjustment percentage may have the 
following impacts between 2019 and 2023: \207\
---------------------------------------------------------------------------

    \206\ As explained in Sec.  155.605(d)(2), for plan years after 
2014, section 5000A(e)(1)(D) of the Code and Treasury regulations at 
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. To calculate the final required contribution, we used 
the final premium adjustment percentage in the calculation: 8.00* 
1.0296274251 (1.2895211380/1.2524152976), or 8.24 percent.
    \207\ CMS Office of the Actuary's estimates are based on their 
health reform model, which is an amalgam of various estimation 
approaches involving federal programs, employer-sponsored insurance, 
and individual insurance choice models that ensure consistent 
estimates of coverage and spending in considering legislative 
changes to current law.

            Table 14--Impacts of Modifications to the 2020 Benefit Year Premium Adjustment Percentage
----------------------------------------------------------------------------------------------------------------
          Calendar year                2019            2020            2021            2022            2023
----------------------------------------------------------------------------------------------------------------
Exchange Enrollment Impact                   N/A             -70             -70             -70             -70
 (enrollees, thousands).........
Premium Impacts:
    Gross Premium Impact (change             N/A              0%              0%              0%              0%
     from 2018, %)..............
    Net Premium Impact (change               N/A              1%              1%              1%              1%
     from 2018, %)..............
Federal Impacts (dollars,
 millions):
    Premium Tax Credits                      N/A            -980          -1,040          -1,090          -1,150
     (million, $)...............
    Health Insurance Providers               N/A              50              70              70              70
     Fee Impact (million, $)....
    Employer Shared                          N/A             100             110             110             110
     Responsibility Payment
     Impact (million, $)........
                                 -------------------------------------------------------------------------------
        Total Federal Impact      ..............          -1,130          -1,220          -1,270          -1,330
         (million, $) *.........
----------------------------------------------------------------------------------------------------------------
* Note: While the premium tax credit impact figures are negative to signify reductions in Federal outlays, and
  the Health Insurance Providers Fee and the employer shared responsibility payment figures are positive to
  signify increased revenue to the Federal government, they are totaled together to indicate savings for the
  Federal government.

    As noted in Table 14, we expect that the proposed change in measure 
of premium growth used to calculate the premium adjustment percentage 
for the 2020 benefit year may result in:
     Net premium increases of approximately $181 million per 
year, which is approximately one percent of 2018 benefit year net 
premiums, for the 2020 through 2023 benefit years. Net premiums are 
calculated for Exchange enrollees as premium charged by issuers minus 
APTC. Gross premiums will be virtually unchanged.
     A decrease in federal PTC spending of $980 million to 
$1.15 billion between 2020 and 2023, due to an increase in the PTC 
applicable percentage and a decline in Exchange enrollment of 
approximately 70,000 individuals in each benefit year, based on an 
assumption that the Department of the Treasury and the IRS will adopt 
the use of the same premium measure proposed for the calculation of the 
premium adjustment percentage in this final rule for purposes of 
calculating the indexing of the PTC applicable percentage and the 
required contribution percentage under section 36B of the Code.
     Increased Health Insurance Providers Fees on health 
insurance issuers of approximately $50 million in 2020, and $70 million 
in years 2021 to 2023, based on an assumption that the Department of 
the Treasury and the IRS will adopt the use of the same premium measure 
proposed for the calculation of the premium adjustment percentage in 
this final rule for purposes of calculating the indexing of the Health 
Insurance Providers Fee.

[[Page 17558]]

     Increased Employer Shared Responsibility Payments of $100 
million in 2020, and $110 million each year between 2021 and 2023.
    Comment: One commenter, citing the Center on Budget and Policy 
Priorities, suggests the proposal would reduce premium tax credits for 
millions of consumers. For example, a family of four with an annual 
income of $90,000 would pay $220 more for their coverage (the effect 
would be smaller for premium tax credit recipients with lower household 
incomes). The commenter noted that these changes would also mean more 
people would be considered to have an ``affordable'' offer of employer 
coverage, and therefore, would be ineligible for the premium tax 
credit. These changes would reduce the overall affordability of 
coverage and the number of people covered.
    Response: As stated elsewhere in this rule, while we acknowledge 
the impact of the decrease in premium tax credits, we believe this is a 
technical adjustment to reflect premium growth in the entire individual 
market. Moreover, the benefits due to the decrease in federal 
expenditures outweigh those concerns and will be ultimately beneficial 
to taxpayers. Furthermore, we note that the 2020 required contribution 
percentage is lower than the 2019 required contribution percentage 
under the finalized method for measuring premium growth.
    Some of the 70,000 individuals estimated to not enroll in Exchange 
coverage each year as a result of the proposed change in the measure of 
premium growth used to calculate the premium adjustment percentage may 
purchase short-term, limited-duration insurance or join a spouse's 
plan, though a majority is likely to become uninsured. Either 
transition may result in greater exposure to health care costs, which 
previous research suggests reduces utilization of health care 
services.\208\ Economic distortions may be reduced, and economic 
efficiency and social benefits improved, because these individuals will 
be bearing a larger share of the costs of their own health care 
consumption, potentially reducing spending on health care services that 
are personally only marginally valued but that imposes costs on the 
federal government through subsidies. In addition, to the extent that 
this final rule reduces federal outlays and thereby reduces the need to 
collect taxes in the future, the distortionary effects of taxation on 
the economy may be reduced. However, the increased number of uninsured 
may increase federal and state uncompensated care costs.
---------------------------------------------------------------------------

    \208\ Manning, W.G., Newhouse, J.P., Duan, N., Keeler, E.B., & 
Leibowitz, A. (1987). Health insurance and the demand for medical 
care: evidence from a randomized experiment. The American economic 
review, 251-277; Keeler, E.B., & Rolph, J.E. (1988). The demand for 
episodes of treatment in the health insurance experiment. Journal of 
health economics, 7(4), 337-367; Finkelstein, A., et al. (2012). The 
Oregon health insurance experiment: evidence from the first year. 
The Quarterly journal of economics, 127(3), 1057-1106.
---------------------------------------------------------------------------

    As noted in this rule, the premium adjustment percentage is the 
measure of premium growth that is used to set the rate of increase for 
the maximum annual limitation on cost sharing, defined at Sec.  
156.130(a). In Sec.  156.130(a)(2), we proposed a maximum annual 
limitation on cost sharing of $8,200 for self-only coverage. We are 
finalizing a maximum annual limitation on cost sharing of $8,150. 
Additionally, we proposed and are finalizing reductions in the maximum 
annual limitation on cost sharing for silver plan variations. 
Consistent with our analyses in previous Payment Notices, we developed 
three test silver level QHPs and analyzed the impact on their AVs of 
the reductions described in the PPACA to the estimated 2020 maximum 
annual limitation on cost sharing for self-only coverage. We do not 
believe the finalized changes to the reductions in the maximum annual 
limitation on cost sharing for silver plan variations will result in a 
significant economic impact.
12. Regulatory Review Costs
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this final 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 final rule, we assume that the total number of 
unique commenters on the proposed rule will be the number of reviewers 
of this final rule. We acknowledge that this assumption may understate 
or overstate the proposed rule in detail, and it is also possible that 
some reviewers chose not to comment on the rule. For these reasons we 
thought that the number of past commenters will be a fair estimate of 
the number of reviewers of this final rule.
    We are required to issue a substantial portion of this final rule 
each year under our regulations and we estimate that approximately half 
of the remaining provisions will 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 final 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 issue 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 final rule is $107.38 per hour, including overhead and fringe 
benefits.\209\ We received 26,129 comments on the proposed rule, of 
which 497 comments were unique and 25,632 comments were substantially 
similar to one of eight different letters. We assume that for form 
letters, only the staff at the organization that arranged for those 
letters will review the final rule. Assuming an average reading speed, 
we estimate that it would take approximately 1 hour for the staff to 
review the relevant portions of this final rule that causes 
unanticipated burden. We assume that 497 entities will review this 
final rule. For each entity that reviews the rule, the estimated a cost 
of approximately $107.38. Therefore, we estimate that the total cost of 
reviewing this regulation is approximately $53,368 ($107.38 x 497 
reviewers).
---------------------------------------------------------------------------

    \209\ https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

D. Regulatory Alternatives Considered

    In developing the policies contained in this final rule, we 
considered numerous alternatives to the presented proposals. In this 
rule, we discuss the key regulatory alternatives to the finalized 
provisions that we considered.
    In proposing the risk adjustment model recalibration in part 153, 
we considered multiple alternatives such as maintaining the prior 
year's recalibration methodology of recalibrating the models using 2 
years of MarketScan[supreg] data and the most recent year of EDGE data. 
We also considered recalibrating the models using the most recent year 
of MarketScan[supreg] data available (2017) and the 2 most recent years 
of enrollee-level EDGE data (2016 and 2017). However, we are finalizing 
recalibration of the models using 3 years of blended data from the 
following sources: the 2 most recent years of enrollee-level EDGE data 
(2016 and 2017) available and 2015 MarketScan[supreg] data.
    Regarding proposed changes to Sec. Sec.  155.210 and 155.215, we 
considered taking no action to amend certain Navigator training 
requirements and duties, but determined that the proposed changes 
regarding training requirements will provide Exchanges

[[Page 17559]]

with needed flexibility, and the proposed changes regarding duties of 
FFE Navigators will help reduce burden on FFE Navigators.
    In proposing revisions to Sec.  155.221, we considered maintaining 
the existing regulatory framework that established standards for 
issuers and web-brokers participating in direct enrollment in separate 
sections, but we believe streamlining and consolidating the 
requirements applicable to all direct enrollment entities, when 
possible, improves clarity and promotes fair competition. For the 
display requirements at Sec.  155.221(b), we contemplated maintaining 
the current standards in regulations and guidance, but based on 
feedback received from direct enrollment entities, we believe the 
current framework may have caused confusion and limited innovation. 
Therefore, we determined that the establishment of clarified standards 
for the marketing and display of QHPs and non-QHPs is the best way to 
provide greater clarity for direct enrollment entities about what is 
required to minimize the potential for consumer confusion, while 
allowing direct enrollment entities more flexibility to be innovative 
in the marketing of non-QHPs to consumers who are interested in those 
products. For the addition of a new Sec.  155.221(c), we considered 
continuing to limit the authority to use application assisters to QHP 
issuers. However, to promote fair competition for all direct enrollment 
entities and issuers, we believe a better approach is to expand this 
authority to include all direct enrollment entities and all issuers.
    In proposing revisions to Sec.  155.420 governing Exchange special 
enrollment periods, we considered broader eligibility requirements for 
the special enrollment period proposed at Sec.  155.420(d)(6)(v). We 
considered if a special enrollment period could be offered without a 
decrease in household income to all Exchange applicants who were 
enrolled in MEC and determined eligible for APTC by the Exchange, or if 
changes in the applicant's household size could be considered in the 
eligibility criteria for this special enrollment period. We determined 
that eliminating the criteria for a decrease in household income will 
be problematic because it eliminates a triggering event for the special 
enrollment period and could allow for consumers who are potentially 
APTC-eligible to avoid the metal level restrictions in paragraph (a)(4) 
of this section by initially enrolling in off-Exchange coverage and 
then later choosing to buy a higher or lower level of coverage mid-
year. We also determined that verification of household size changes 
will be operationally problematic, as electronic data sources will not 
reflect recent changes to household size. Further, the special 
enrollment periods at Sec.  155.420(d)(2)(i) are currently available to 
qualified individuals whose household size changes due to gaining or 
becoming a dependent and already provides a pathway to Exchange 
coverage for individuals in this situation.
    We also considered if the special enrollment period proposed at 
Sec.  155.420(d)(6)(v) could be offered without a prior coverage 
requirement and determined that this requirement is necessary to ensure 
the special enrollment period is only available to the intended 
population, to promote continuous coverage among individual market 
enrollees, and to protect the individual market risk pools against 
adverse selection. Finally we considered the impact of not proposing 
this special enrollment period. Without the proposed special enrollment 
period at Sec.  155.420(d)(6)(v), unsubsidized off-Exchange consumers 
who experience a decrease in household income midyear and are 
determined APTC eligible will remain without a pathway to Exchange 
coverage. These consumers will remain at risk of terminating their 
unsubsidized coverage midyear because it is unaffordable, rather than 
maintaining continuous enrollment in health coverage by transitioning 
to an Exchange plan.
    Regarding the proposed change to Sec.  155.605(e) to allow 
consumers to claim all general hardship exemptions through the federal 
tax filing process for the 2018 tax year, we considered that without 
the recommended revisions to Sec.  155.605(e), individuals may 
experience a general hardship that prevents them from obtaining 
qualifying health coverage, and may experience undue burden to apply 
and qualify for an exemption from the individual shared responsibility 
provision. This change allows for more flexibility for individuals to 
claim these exemptions through the IRS tax filing process for the 2018 
tax year.
    We are finalizing our proposed change to the premium measure used 
in the premium adjustment percentage calculation under Sec.  156.130 to 
use a private health insurance premium measure (excluding Medigap and 
property and casualty insurance) in addition to employer sponsored 
health insurance premiums. However, we considered other alternatives to 
the final premium measure and methodology for calculating the premium 
adjustment percentage for the 2020 benefit year. We considered 
finalizing our proposed method with a gradual phase-in. We also 
considered maintaining our previous process of using employer-sponsored 
insurance premium amounts. In addition, we considered using NHEA 
estimates and projections of private health insurance premium measure, 
which includes premiums for employer-sponsored insurance, direct 
purchase insurance (which includes Medigap insurance), and property and 
casualty insurance. However, we ultimately decided not to propose or 
finalize the use of a private health insurance measure that included 
Medigap insurance because we believed it was inappropriate to include 
Medigap premiums in the measure as this type of coverage is not 
considered primary coverage for those enrollees who supplement their 
Medicare coverage with these plans. Moreover, although total spending 
for private health insurance in the NHEAs includes the medical portion 
of accident insurance (property and casualty insurance), we did not 
believe it would be appropriate to include those expenditures for this 
purpose as they are associated with policies that do not serve as a 
primary source of health insurance coverage. For the reasons explained 
in more detail in the preamble for Sec.  156.130, we ultimately decided 
to finalize the proposal as proposed.
    At Sec.  156.130 we also proposed that plans not be required to 
count drug manufacturer coupons toward the annual limitation on cost 
sharing, starting with plan years beginning on or after January 1, 
2020. We considered not proposing this flexibility, as these coupons 
may result in lower costs to individual consumers. However, 
manufacturer coupons may incentivize selection of higher-cost drugs 
when a less costly therapeutic equivalent is available which can 
distort the market and the true costs of drugs, adding significant 
long-term costs to the health care system.

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 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

[[Page 17560]]

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 final rule, the standards for the risk adjustment and risk 
adjustment data validation programs are intended to stabilize premiums. 
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.
    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.\210\ 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. Based on data from MLR annual report \211\ submissions 
for the 2016 MLR reporting year, approximately 85 out of over 520 
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 79 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 will result in their revenues 
exceeding $38.5 million.
---------------------------------------------------------------------------

    \210\ https://www.sba.gov/document/support--table-size-
standards.
    \211\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. This final rule will not 
affect small rural hospitals. Therefore, the Secretary has determined 
that this will not have a significant impact on the operations of a 
substantial number of small rural hospitals.

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 rule that includes any federal 
mandate that may result in expenditures in any 1 year by a state, 
local, or Tribal governments, in the aggregate, or by the private 
sector, of $100 million in 1995 dollars, updated annually for 
inflation. In 2019, that threshold is approximately $154 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 issues a 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, we 
have 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 final rule, we attempted to balance the 
states' interests in regulating health insurance issuers with the need 
to ensure market stability. By doing so, it is our 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 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 our view, while this final rule will not impose substantial 
direct requirement costs on state and local governments, this 
regulation has Federalism implications because it finalizes a change to 
the Alabama risk adjustment program in the small group market based 
upon a proposal provided by the state. We also proposed to make the 
special enrollment period at Sec.  155.420(d)(6)(v) at the option of 
Exchanges, to give states flexibility in whether they choose to 
implement it.

H. Congressional Review Act

    This final 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 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 issues, 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 final rule is an E.O. 13771 deregulatory action.\212\
---------------------------------------------------------------------------

    \212\ We estimate cost savings of approximately $14.3 million in 
2019 and annual cost saving of approximately $14 million thereafter. 
Thus the annualized value of cost savings, as of 2016 and calculated 
over a perpetual time horizon with a 7 percent discount rate, is 
$8.51 million.
---------------------------------------------------------------------------

J. Conclusion

    The analysis in this rule, together with the remainder of this 
preamble, provides a Regulatory Impact Analysis.
    In accordance with the provisions of Executive Order 12866, this 
regulation

[[Page 17561]]

was reviewed by the Office of Management and Budget.

List of Subjects

45 CFR Part 146

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Part 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Part 148

    Administrative practice and procedure, Health care, Health 
insurance, Insurance companies, Penalties, 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 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, Brokers, 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.
    For the reasons set forth in the preamble, under the authority at 5 
U.S.C. 301, the Department of Health and Human Services amends 45 CFR 
as set forth below.

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

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

    Authority: 42 U.S.C. 300gg-1 through 300gg-5, 300gg-11 through 
300gg-23, 300gg-91, and 300-gg-92.


0
2. Section 146.152 is amended by revising paragraph (a) to read as 
follows:


Sec.  146.152  Guaranteed renewability of coverage for employers in the 
group market.

    (a) General rule. Subject to paragraphs (b) through (f) of this 
section, a health insurance issuer offering health insurance coverage 
in the small or large group market is required to renew or continue in 
force the coverage at the option of the plan sponsor or the individual, 
as applicable.
* * * * *

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

0
3. The authority citation for part 147 continues to read as follows:

    Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, and 
300gg-92 as amended.


0
4. Section 147.106 is amended by revising paragraph (a) to read as 
follows:


Sec.  147.106   Guaranteed renewability of coverage.

    (a) General rule. Subject to paragraphs (b) through (e) of this 
section, a health insurance issuer offering health insurance coverage 
in the individual, small group, or large group market is required to 
renew or continue in force the coverage at the option of the plan 
sponsor or the individual, as applicable.
* * * * *

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

0
5. The authority citation for part 148 is revised to read as follows:

    Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-11 300gg-91, 
and 300-gg92, as amended.


0
6. Section 148.122 is amended by revising paragraph (b)(1) to read as 
follows:


Sec.  148.122   Guaranteed renewability of individual health insurance 
coverage.

* * * * *
    (b) * * *
    (1) Except as provided in paragraphs (c) through (g) of this 
section, an issuer must renew or continue in force the coverage at the 
option of the individual.
* * * * *

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

0
7. The authority citation for part 153 is revised to read as follows:

    Authority:  42 U.S.C. 18031, 18041, and 18061 through 18063.


0
8. Section 153.20 is amended by revising the definition of ``Risk 
adjustment covered plan'' to read as follows:


Sec.  153.20  Definitions.

* * * * *
    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 Sec.  
146.145(b) of this subchapter, individual health insurance coverage 
described in Sec.  148.220 of this subchapter, and any plan determined 
not to be a risk adjustment covered plan in the applicable Federally 
certified risk adjustment methodology.
* * * * *

0
9. Section 153.320 is amended by revising paragraph (d) to read as 
follows:


Sec.  153.320  Federally certified risk adjustment methodology.

* * * * *
    (d) State flexibility to request reductions to transfers. Beginning 
with the 2020 benefit year, States can request to reduce risk 
adjustment transfers in the State's individual catastrophic, individual 
non-catastrophic, small group, or merged markets risk pools by up to 50 
percent in States where HHS operates the risk adjustment program.
    (1) State requests. State requests for a reduction to transfers 
must include:
    (i) Supporting evidence and analysis demonstrating the State-
specific factors that warrant an adjustment to more precisely account 
for the differences in actuarial risk in the State market risk pool;
    (ii) The adjustment percentage of up to 50 percent requested for 
the State individual catastrophic, individual non-catastrophic, small 
group, or merged market risk pool; and
    (iii) A justification for the reduction requested demonstrating the 
State-specific factors that warrant an adjustment to more precisely 
account

[[Page 17562]]

for relative risk differences in the State individual catastrophic, 
individual non-catastrophic, small group, or merged market risk pool, 
or demonstrating the requested reduction would have de minimis impact 
on the necessary premium increase to cover the transfers for issuers 
that would receive reduced transfer payments.
    (2) Timeframe to submit reduction requests. States must submit 
requests for a reduction to transfers in the individual catastrophic, 
individual non-catastrophic, small group, or merged market risk pool by 
August 1 of the benefit year that is 2 calendar years prior to the 
applicable benefit year, in the form and manner specified by HHS.
    (3) Publication of reduction requests. HHS will publish State 
reduction requests in the applicable benefit year's HHS notice of 
benefit and payment parameters rule and make the supporting evidence 
available to the public for comment, except to the extent the State 
requests HHS not publish certain supporting evidence because it 
contains trade secrets or confidential commercial or financial 
information as defined in HHS' Freedom of Information regulations under 
45 CFR 5.31(d). HHS will publish any approved or denied State reduction 
requests in the applicable benefit year's HHS notice of benefit and 
payment parameters final rule.
    (4) HHS approval. (i) Subject to paragraph (d)(4)(ii) of this 
section, HHS will approve State reduction requests if HHS determines, 
based on the review of the information submitted as part of the State's 
request, along with other relevant factors, including the premium 
impact of the transfer reduction for the State market risk pool, and 
relevant public comments:
    (A) That State-specific rules or other relevant factors warrant an 
adjustment to more precisely account for relative risk differences in 
the State's individual catastrophic, individual non-catastrophic, small 
group, or merged market risk pool and support the percentage reduction 
to risk adjustment transfers requested; or
    (B) That State-specific rules or other relevant factors warrant an 
adjustment to more precisely account for relative risk differences in 
the State's individual catastrophic, individual non-catastrophic, small 
group, or merged market risk pool and the requested reduction would 
have de minimis impact on the necessary premium increase to cover the 
transfers for issuers that would receive reduced transfer payments.
    (ii) HHS may approve a reduction amount that is lower than the 
amount requested by the State if the supporting evidence and analysis 
do not fully support the requested reduction amount. HHS will assess 
other relevant factors, including the premium impact of the transfer 
reduction for the applicable State market risk pool.

0
10. Section 153.630 is amended by--
0
a. Revising paragraphs (b)(10) and (d)(2); and
0
b. Adding paragraph (g)
    The revisions and addition read as follows:


Sec.  153.630   Data validation requirements when HHS operates risk 
adjustment.

* * * * *
    (b) * * *
    (10) If an issuer of a risk adjustment covered plan fails to engage 
an initial validation auditor or to submit the results of an initial 
validation audit to HHS, HHS will impose a default data validation 
charge.
* * * * *
    (d) * * *
    (2) Within 30 calendar days of the notification by HHS of the 
findings of a second validation audit (if applicable) or the 
calculation of a risk score error rate, in the manner set forth by HHS, 
an issuer must confirm the findings of the second validation audit (if 
applicable) or the calculation of the risk score error rate as a result 
of risk adjustment data validation, or file a discrepancy report to 
dispute the findings of a second validation audit (if applicable) or 
the calculation of a risk score error rate as a result of risk 
adjustment data validation.
* * * * *
    (g) Exemptions. An issuer of a risk adjustment covered plan will be 
exempted by HHS from the data validation requirement set forth in 
paragraph (b) of this section for a given benefit year if:
    (1) The issuer has 500 or fewer billable member months of 
enrollment in the individual, small group and merged markets (as 
applicable) for the applicable benefit year, calculated on a Statewide 
basis;
    (2) The issuer is at or below the materiality threshold as defined 
by HHS and is not selected by HHS to participate in the data validation 
requirements in an applicable benefit year under random and targeted 
sampling conducted approximately every 3 years (barring any risk-based 
triggers based on experience that will warrant more frequent audits); 
or
    (3) The issuer is in liquidation, or will enter liquidation no 
later than April 30th of the benefit year that is 2 benefit years after 
the benefit year being audited, provided that:
    (i) The issuer provides to HHS, in the manner and timeframe 
specified by HHS, an attestation that the issuer is in liquidation or 
will enter liquidation no later than April 30th of the benefit year 
that is 2 benefit years after the benefit year being audited that is 
signed by an individual with the authority to legally and financially 
bind the issuer; and
    (ii) The issuer is not a positive error rate outlier under the 
error estimation methodology in risk adjustment data validation for the 
prior benefit year of risk adjustment data validation.
    (iii) For purposes of this paragraph (g)(3), liquidation means that 
a State court has issued an order of liquidation for the issuer that 
fixes the rights and liabilities of the issuer and its creditors, 
policyholders, shareholders, members, and all other persons of 
interest.

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

0
11. The authority citation for part 155 is revised to read as follows:

    Authority: 42 U.S.C. 18021-18024, 18031-18033, 18041-18042, 
18051, 18054, 18071, and 18081-18083.


0
12. Section 155.20 is amended by adding definitions of ``Direct 
enrollment entity,'' ``Direct enrollment entity application assister,'' 
``Direct enrollment technology provider,'' and ``Web-broker'' to read 
as follows:


Sec.  155.20   Definitions.

* * * * *
    Direct enrollment entity means an entity that an Exchange permits 
to assist consumers with direct enrollment in qualified health plans 
offered through the Exchange in a manner considered to be through the 
Exchange as authorized by Sec.  155.220(c)(3), Sec.  155.221, or Sec.  
156.1230 of this subchapter.
    Direct enrollment entity application assister means an employee, 
contractor, or agent of a direct enrollment entity who is not licensed 
as an agent, broker, or producer under State law and who assists 
individuals in the individual market with applying for a determination 
or redetermination of eligibility for coverage through the Exchange or 
for insurance affordability programs.
    Direct enrollment technology provider means a type of web-broker 
business entity that is not a licensed agent, broker, or producer under 
State law and has been engaged or created by, or is owned by an agent 
or broker, to provide technology services to facilitate

[[Page 17563]]

participation in direct enrollment under Sec. Sec.  155.220(c)(3) and 
155.221.
* * * * *
    Web-broker means an individual agent or broker, group of agents or 
brokers, or business entity registered with an Exchange under Sec.  
155.220(d)(1) that develops and hosts a non-Exchange website that 
interfaces with an Exchange to assist consumers with direct enrollment 
in qualified health plans offered through the Exchange as described in 
Sec. Sec.  155.220(c)(3) and 155.221. The term also includes a direct 
enrollment technology provider.

0
13. Section 155.205 is amended by revising paragraph (a) to read as 
follows:


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

    (a) Call center. The Exchange must provide for operation of a toll-
free call center that addresses the needs of consumers requesting 
assistance and meets the requirements outlined in paragraphs (c)(1), 
(2)(i), and (3) of this section, unless it is an Exchange described in 
paragraphs (a)(1) or (2) of this section, in which case, the Exchange 
must provide at a minimum a toll-free telephone hotline that includes 
the capability to provide information to consumers about eligibility 
and enrollment processes, and to appropriately direct consumers to the 
applicable Exchange website and other applicable resources.
    (1) An Exchange described in this paragraph is one that enters into 
a Federal platform agreement through which it relies on HHS to operate 
its eligibility and enrollment functions, as applicable.
    (2) An Exchange described in this paragraph is a SHOP that does not 
provide for enrollment in SHOP coverage through an online SHOP 
enrollment platform, but rather provides for enrollment through SHOP 
issuers or agents and brokers registered with the Exchange.
* * * * *

0
14. Section 155.210 is amended by--
0
a. Revising paragraphs (b)(2) introductory text, (b)(2)(iii), and (iv);
0
b. Removing paragraphs (b)(2)(v) through (ix); and
0
c. Revising paragraph (e)(9) introductory text.
    The revisions read as follows:


Sec.  155.210   Navigator program standards.

* * * * *
    (b) * * *
    (2) A set of training standards, to be met by all entities and 
individuals carrying out Navigator functions under the terms of a 
Navigator grant, to ensure the entities and individuals are qualified 
to engage in Navigator activities, including training standards on the 
following topics:
* * * * *
    (iii) The range of QHP options and insurance affordability 
programs; and
    (iv) The privacy and security standards applicable under Sec.  
155.260.
* * * * *
    (e) * * *
    (9) The Exchange may require or authorize Navigators to provide 
information and assistance with any of the following topics. In 
Federally-facilitated Exchanges, Navigators are required to provide 
information and assistance with all of the following topics under 
Navigator grants awarded in 2018, and will be authorized to provide 
information and assistance with all of the following topics under 
Navigator grants awarded in 2019 or any later year.
* * * * *

0
15. Section 155.215 is amended by revising paragraph (b)(2) to read as 
follows:


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

* * * * *
    (b) * * *
    (2) Training module content standards. All individuals who carry 
out the consumer assistance functions under Sec. Sec.  155.205(d) and 
(e) and 155.210 must receive training consistent with standards 
established by the Exchange consistent with Sec.  155.210(b)(2).
* * * * *

0
16. Section 155.220 is amended by--
0
a. Revising the section heading;
0
b. Revising paragraphs (a) introductory text, (c) introductory text, 
(c)(1), (c)(3)(i) introductory text and (c)(3)(i)(A), (c)(3)(i)(K) and 
(L), (c)(3)(ii) introductory text, (c)(4) introductory text, (c)(4)(i) 
introductory text, (c)(4)(i)(A), (c)(4)(i)(E), (c)(4)(i)(F), 
(c)(4)(ii), (c)(5), (d) introductory text, (d)(2), (e), (f)(1), (f)(2), 
(f)(3) introductory text, (f)(3)(i), (f)(4), (g)(1), (g)(2) 
introductory text, (g)(2)(iii), (g)(2)(iv), (g)(3), (g)(4), (g)(5)(i), 
(g)(5)(ii), (g)(5)(iii), (h)(1), (h)(2), (h)(3), (i), (j)(1) 
introductory text, (j)(3), (k)(1) introductory text, (k)(2);
0
c. Adding paragraph (k)(3);
0
d. Revising paragraph (l); and
0
e. Adding paragraph (m).
    The additions and revisions read as follows:


Sec.  155.220   Ability of States to permit agents and brokers and web-
brokers to assist qualified individuals, qualified employers, or 
qualified employees enrolling in QHPs.

    (a) General rule. A State may permit agents, brokers, and web-
brokers to--
* * * * *
    (c) Enrollment through the Exchange. A qualified individual may be 
enrolled in a QHP through the Exchange with the assistance of an agent, 
broker, or web-broker if--
    (1) The agent, broker, or web-broker ensures the applicant's 
completion of an eligibility verification and enrollment application 
through the Exchange internet website as described in Sec.  155.405, or 
ensures that the eligibility application information is submitted for 
an eligibility determination through the Exchange-approved web service 
subject to meeting the requirements in paragraphs (c)(3)(ii) and 
(c)(4)(i)(F) of this section;
* * * * *
    (3)(i) When an internet website of a web-broker is used to complete 
the QHP selection, at a minimum the internet website must:
    (A) Disclose and display all QHP information provided by the 
Exchange or directly by QHP issuers consistent with the requirements of 
Sec.  155.205(b)(1) and (c), and to the extent that not all information 
required under Sec.  155.205(b)(1) is displayed on the web-broker's 
internet website for a QHP, prominently display a standardized 
disclaimer provided by HHS stating that information required under 
Sec.  155.205(b)(1) for the QHP is available on the Exchange website, 
and provide a Web link to the Exchange website;
* * * * *
    (K) Comply with the applicable requirements in Sec.  155.221; and
    (L) Not display QHP recommendations based on compensation the 
agent, broker, or web-broker receives from QHP issuers.
    (ii) When an internet website of a web-broker is used to complete 
the Exchange eligibility application, at a minimum the internet website 
must:
* * * * *
    (4) When an agent or broker, through a contract or other 
arrangement, uses the internet website of a web-broker to help an 
applicant or enrollee complete a QHP selection or complete the Exchange 
eligibility application in the Federally-facilitated Exchange:
    (i) The web-broker who makes the website available must:
    (A) Provide HHS with a list of agents and brokers who enter into 
such a contract or other arrangement to use the

[[Page 17564]]

web-broker's website, in a form and manner to be specified by HHS;
* * * * *
    (E) Report to HHS and applicable State departments of insurance any 
potential material breach of the standards in paragraphs (c) and (d) of 
this section, or the agreement entered into under Sec.  155.260(b), by 
the agent or broker accessing the internet website, should it become 
aware of any such potential breach. A web-broker that provides access 
to its website to complete the QHP selection or the Exchange 
eligibility application or ability to transact information with HHS to 
another web-broker website is responsible for ensuring compliance with 
applicable requirements in paragraph (c)(3) of this section for any web 
pages of the other web-broker's website that assist consumers, 
applicants, qualified individuals, and enrollees in applying for APTC 
and CSRs for QHPs, or in completing enrollment in QHPs, offered in the 
Exchanges.
    (F) When an internet website of a web-broker is used to complete 
the Exchange eligibility application, obtain HHS approval verifying 
that all requirements in this section are met.
    (ii) HHS retains the right to temporarily suspend the ability of a 
web-broker making its website available to transact information with 
HHS, if HHS discovers a security and privacy incident or breach, for 
the period in which HHS begins to conduct an investigation and until 
the incident or breach is remedied to HHS' satisfaction.
    (5) HHS or its designee may periodically monitor and audit an 
agent, broker, or web-broker under this subpart to assess its 
compliance with the applicable requirements of this section.
    (d) Agreement. An agent, broker, or web-broker that enrolls 
qualified individuals in a QHP in a manner that constitutes enrollment 
through the Exchange or assists individuals in applying for advance 
payments of the premium tax credit and cost-sharing reductions for QHPs 
must comply with the terms of an agreement between the agent, broker, 
or web-broker and the Exchange under which the agent, broker, or web-
broker at least:
* * * * *
    (2) Receives training in the range of QHP options and insurance 
affordability programs, except that a licensed agent or broker entity 
that registers with the Federally-facilitated Exchange in its capacity 
as a business organized under the laws of a State, and not as an 
individual person, and direct enrollment technology providers are 
exempt from this requirement; and
* * * * *
    (e) Compliance with State law. An agent, broker, or web-broker that 
enrolls qualified individuals in a QHP in a manner that constitutes 
enrollment through the Exchange or assists individuals in applying for 
advance payments of the premium tax credit and cost-sharing reductions 
for QHPs must comply with applicable State law related to agents, 
brokers, or web-brokers including applicable State law related to 
confidentiality and conflicts of interest.
    (f) * * *
    (1) An agent, broker, or web-broker may terminate its agreement 
with HHS by sending to HHS a written notice at least 30 days in advance 
of the date of intended termination.
    (2) The notice must include the intended date of termination, but 
if it does not specify a date of termination, or the date provided is 
not acceptable to HHS, HHS may set a different termination date that 
will be no less than 30 days from the date on the agent's, broker's, or 
web-broker's notice of termination.
    (3) Prior to the date of termination, an agent, broker, or web-
broker should--
    (i) Notify applicants, qualified individuals, or enrollees that the 
agent, broker, or web-broker is assisting, of the agent's, broker's, or 
web-broker's intended date of termination;
* * * * *
    (4) When the agreement between the agent, broker, or web-broker and 
the Exchange under paragraph (d) of this section is terminated under 
paragraph (f) of this section, the agent, broker, or web-broker will no 
longer be registered with the Federally-facilitated Exchanges, or be 
permitted to assist with or facilitate enrollment of qualified 
individuals, qualified employers or qualified employees in coverage in 
a manner that constitutes enrollment through a Federally-facilitated 
Exchange, or be permitted to assist individuals in applying for advance 
payments of the premium tax credit and cost-sharing reductions for 
QHPs. The agent's, broker's, or web-broker's agreement with the 
Exchange under Sec.  155.260(b) will also be terminated through the 
termination without cause process set forth in that agreement. The 
agent, broker, or web-broker must continue to protect any personally 
identifiable information accessed during the term of either of these 
agreements with the Federally-facilitated Exchanges.
    (g) * * *
    (1) If, in HHS' determination, a specific finding of noncompliance 
or pattern of noncompliance is sufficiently severe, HHS may terminate 
an agent's, broker's, or web-broker's agreement with the Federally-
facilitated Exchange for cause.
    (2) An agent, broker, or web-broker may be determined noncompliant 
if HHS finds that the agent, broker, or web-broker violated--
* * * * *
    (iii) Any State law applicable to agents, brokers, or web-brokers, 
as required under paragraph (e) of this section, including but not 
limited to State laws related to confidentiality and conflicts of 
interest; or
    (iv) Any Federal law applicable to agents, brokers, or web-brokers.
* * * * *
    (3)(i) Except as provided in paragraph (g)(3)(ii) of this section, 
HHS will notify the agent, broker, or web-broker of the specific 
finding of noncompliance or pattern of noncompliance made under 
paragraph (g)(1) of this section, and after 30 days from the date of 
the notice, may terminate the agreement for cause if the matter is not 
resolved to the satisfaction of HHS.
    (ii) HHS may immediately terminate the agreement for cause upon 
notice to the agent or broker without any further opportunity to 
resolve the matter if an agent or broker fails to maintain the 
appropriate license under State law as an agent, broker, or insurance 
producer in every State in which the agent or broker actively assists 
consumers with applying for advance payments of the premium tax credit 
or cost-sharing reductions or with enrolling in QHPs through the 
Federally-facilitated Exchanges.
    (4) After the applicable period in paragraph (g)(3) of this section 
has elapsed and the agreement under paragraph (d) of this section is 
terminated, the agent, broker, or web-broker will no longer be 
registered with the Federally-facilitated Exchanges, or be permitted to 
assist with or facilitate enrollment of a qualified individual, 
qualified employer, or qualified employee in coverage in a manner that 
constitutes enrollment through a Federally-facilitated Exchange, or be 
permitted to assist individuals in applying for advance payments of the 
premium tax credit and cost-sharing reductions for QHPs. The agent's, 
broker's, or web-broker's agreement with the Exchange under Sec.  
155.260(b)(2) will also be terminated through the process set forth in 
that agreement. The agent, broker, or web-broker must continue to 
protect any personally

[[Page 17565]]

identifiable information accessed during the term of either of these 
agreements with the Federally-facilitated Exchanges.
    (5) * * *
    (i)(A) If HHS reasonably suspects that an agent, broker, or web-
broker may have may have engaged in fraud, or in abusive conduct that 
may cause imminent or ongoing consumer harm using personally 
identifiable information of an Exchange enrollee or applicant or in 
connection with an Exchange enrollment or application, HHS may 
temporarily suspend the agent's, broker's, or web-broker's agreements 
required under paragraph (d) of this section and under Sec.  155.260(b) 
for up to 90 calendar days. Suspension will be effective on the date of 
the notice that HHS sends to the agent, broker, or web-broker advising 
of the suspension of the agreements.
    (B) The agent, broker, or web-broker may submit evidence in a form 
and manner to be specified by HHS, to rebut the allegation during this 
90-day period. If the agent, broker, or web-broker submits such 
evidence during the suspension period, HHS will review the evidence and 
make a determination whether to lift the suspension within 30 days of 
receipt of such evidence. If the rebuttal evidence does not persuade 
HHS to lift the suspension, or if the agent, broker, or web-broker 
fails to submit rebuttal evidence during the suspension period, HHS may 
terminate the agent's, broker's, or web-broker's agreements required 
under paragraph (d) of this section and under Sec.  155.260(b) for 
cause under paragraph (g)(5)(ii) of this section.
    (ii) If there is a finding or determination by a Federal or State 
entity that an agent, broker, or web-broker engaged in fraud, or 
abusive conduct that may result in imminent or ongoing consumer harm, 
using personally identifiable information of Exchange enrollees or 
applicants or in connection with an Exchange enrollment or application, 
HHS will terminate the agent's, broker's, or web-broker's agreements 
required under paragraph (d) of this section and under Sec.  155.260(b) 
for cause. The termination will be effective starting on the date of 
the notice that HHS sends to the agent, broker, or web-broker advising 
of the termination of the agreements.
    (iii) During the suspension period under paragraph (g)(5)(i) of 
this section and following termination of the agreements under 
paragraph (g)(5)(i)(B) or (g)(5)(ii) of this section, the agent, 
broker, or web-broker will not be registered with the Federally-
facilitated Exchanges, or be permitted to assist with or facilitate 
enrollment of qualified individuals, qualified employers, or qualified 
employees in coverage in a manner that constitutes enrollment through a 
Federally-facilitated Exchange, or be permitted to assist individuals 
in applying for advance payments of the premium tax credit and cost-
sharing reductions for QHPs. The agent, broker, or web-broker must 
continue to protect any personally identifiable information accessed 
during the term of either of these agreements with the Federally-
facilitated Exchanges.
* * * * *
    (h) * * *
    (1) Request for reconsideration. An agent, broker, or web-broker 
whose agreement with the Federally-facilitated Exchange has been 
terminated may request reconsideration of such action in the manner and 
form established by HHS.
    (2) Timeframe for request. The agent, broker, or web-broker must 
submit a request for reconsideration to the HHS reconsideration entity 
within 30 calendar days of the date of the written notice from HHS.
    (3) Notice of reconsideration decision. The HHS reconsideration 
entity will provide the agent, broker, or web-broker with a written 
notice of the reconsideration decision within 30 calendar days of the 
date it receives the request for reconsideration. This decision will 
constitute HHS' final determination.
* * * * *
    (i) Use of agents' and brokers' and web-brokers' internet websites 
for SHOP. For plan years beginning on or after January 1, 2015, in 
States that permit this activity under State law, a SHOP may permit 
agents, brokers, and web-brokers to use an internet website to assist 
qualified employers and facilitate enrollment of enrollees in a QHP 
through the Exchange, under paragraph (c)(3) of this section.
    (j) * * *
    (1) An agent, broker, or web-broker that assists with or 
facilitates enrollment of qualified individuals, qualified employers, 
or qualified employees, in coverage in a manner that constitutes 
enrollment through a Federally-facilitated Exchange, or assists 
individuals in applying for advance payments of the premium tax credit 
and cost-sharing reductions for QHPs sold through a Federally-
facilitated Exchange, must--
* * * * *
    (3) If an agent, broker, or web-broker fails to provide correct 
information, he, she, or it will nonetheless be deemed in compliance 
with paragraphs (j)(2)(i) and (ii) of this section if HHS determines 
that there was a reasonable cause for the failure to provide correct 
information and that the agent, broker, or web-broker acted in good 
faith.
    (k) * * *
    (1) If HHS determines that an agent, broker, or web-broker has 
failed to comply with the requirements of this section, in addition to 
any other available remedies, that agent, broker, or web-broker--
* * * * *
    (2) HHS will notify the agent, broker, or web-broker of the 
proposed imposition of penalties under paragraph (k)(1)(i) of this 
section as part of the termination notice issued under paragraph (g) of 
this section and, after 30 calendar days from the date of the notice, 
may impose the penalty if the agent, broker, or web-broker has not 
requested a reconsideration under paragraph (h) of this section. The 
proposed imposition of penalties under paragraph (k)(1)(ii) of this 
section will follow the process outlined under Sec.  155.285.
    (3) HHS may immediately suspend the agent's or broker's ability to 
transact information with the Exchange if HHS discovers circumstances 
that pose unacceptable risk to Exchange operations or Exchange 
information technology systems until the incident or breach is remedied 
or sufficiently mitigated to HHS' satisfaction.
    (l) Application to State Exchanges using a Federal platform. An 
agent, broker, or web-broker who enrolls qualified individuals, 
qualified employers, or qualified employees in coverage in a manner 
that constitutes enrollment through a State Exchange using the Federal 
platform, or assists individual market consumers with submission of 
applications for advance payments of the premium tax credit and cost-
sharing reductions through a State Exchange using the Federal platform 
must comply with all applicable Federally-facilitated Exchange 
standards in this section.
    (m) Web-broker agreement suspension, termination, and denial and 
information collection. (1) A web-broker's agreement executed under 
paragraph (d) of this section, may be suspended or terminated under 
paragraph (g) of this section, and a web-broker may be denied the right 
to enter into agreements with the Federally-facilitated Exchanges under 
paragraph (k)(1)(i) of this section, based on the actions of its 
officers, employees, contractors, or agents, whether or not the 
officer, employee, contractor, or

[[Page 17566]]

agent is registered with the Exchange as an agent or broker.
    (2) A web-broker's agreement executed under paragraph (d) of this 
section may be suspended or terminated under paragraph (g) of this 
section, and a web-broker may be denied the right to enter into 
agreements with the Federally-facilitated Exchanges under paragraph 
(k)(1)(i) of this section, if it is under the common ownership or 
control or is an affiliated business of another web-broker that had its 
agreement suspended or terminated under paragraph (g) of this section.
    (3) The Exchange may collect information from a web-broker during 
its registration with the Exchange under paragraph (d)(1) of this 
section, or at another time on an annual basis, in a form and manner to 
be specified by HHS, sufficient to establish the identities of the 
individuals who comprise its corporate ownership and leadership and to 
ascertain any corporate or business relationships it has with other 
entities that may seek to register with the Federally-facilitated 
Exchange as web-brokers.

0
17. Section 155.221 is amended by--
0
a. Revising the section heading;
0
b. Redesignating paragraphs (a), (b), and (c) as paragraphs (e), (f), 
and (g), respectively;
0
c. Adding paragraphs (a), (b), (c), and (d);
0
d. Revising newly redesignated paragraph (e), paragraph (f) 
introductory text, paragraphs (f)(2), (3), (4), (6) and (7), and 
paragraph (g); and
0
e. Adding paragraph (h).
    The revisions and additions read as follows:


Sec.  155.221   Standards for direct enrollment entities and for third-
parties to perform audits of direct enrollment entities.

    (a) Direct enrollment entities. The Federally-facilitated Exchanges 
will permit the following entities to assist consumers with direct 
enrollment in QHPs offered through the Exchange in a manner that is 
considered to be through the Exchange, to the extent permitted by 
applicable State law:
    (1) QHP issuers that meet the applicable requirements in this 
section and Sec.  156.1230 of this subchapter; and
    (2) Web-brokers that meet the applicable requirements in this 
section and Sec.  155.220.
    (b) Direct enrollment entity requirements. For the Federally-
facilitated Exchanges, a direct enrollment entity must:
    (1) Display and market QHPs and non-QHPs on separate website pages 
on its non-Exchange website;
    (2) Prominently display a standardized disclaimer in the form and 
manner provided by HHS;
    (3) Limit marketing of non-QHPs during the Exchange eligibility 
application and QHP plan selection process in a manner that minimizes 
the likelihood that consumers will be confused as to what products are 
available through the Exchange and what products are not;
    (4) Demonstrate operational readiness and compliance with 
applicable requirements prior to the direct enrollment entity's 
internet website being used to complete an Exchange eligibility 
application or a QHP selection; and
    (5) Comply with applicable Federal and State requirements.
    (c) Direct enrollment entity application assister requirements. For 
the Federally-facilitated Exchanges, to the extent permitted under 
state law, a direct enrollment entity may permit its direct enrollment 
entity application assisters, as defined at Sec.  155.20, to assist 
individuals in the individual market with applying for a determination 
or redetermination of eligibility for coverage through the Exchange and 
for insurance affordability programs, provided that such direct 
enrollment entity ensures that each of its direct enrollment entity 
application assisters meets the requirements in Sec.  155.415(b).
    (d) Federally-facilitated Exchange direct enrollment entity 
suspension. HHS may immediately suspend the direct enrollment entity's 
ability to transact information with the Exchange if HHS discovers 
circumstances that pose unacceptable risk to the accuracy of the 
Exchange's eligibility determinations, Exchange operations, or Exchange 
information technology systems until the incident or breach is remedied 
or sufficiently mitigated to HHS' satisfaction.
    (e) Third parties to perform audits of direct enrollment entities. 
A direct enrollment entity must engage an independent, third-party 
entity to conduct an initial and annual review to demonstrate the 
direct enrollment entity's operational readiness and compliance with 
applicable direct enrollment entity requirements in accordance with 
paragraph (b)(4) of this section prior to the direct enrollment 
entity's internet website being used to complete an Exchange 
eligibility application or a QHP selection. The third-party entity will 
be a downstream or delegated entity of the direct enrollment entity 
that participates or wishes to participate in direct enrollment.
    (f) Third-party auditor standards. A direct enrollment entity must 
satisfy the requirement to demonstrate operational readiness under 
paragraph (e) of this section by engaging a third-party entity that 
executes a written agreement with the direct enrollment entity under 
which the third-party entity agrees to comply with each of the 
following standards:
* * * * *
    (2) Adheres to HHS specifications for content, format, privacy, and 
security in the conduct of an operational readiness review, which 
includes ensuring that direct enrollment entities 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 direct enrollment entities 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 direct enrollment entities 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 a direct enrollment entity 
for which it is conducting an operational readiness review;
* * * * *
    (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 (e) of 
this section;
    (7) Permits access by the Secretary and the Office of the Inspector 
General 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 a direct enrollment entity's 
obligations in accordance with standards under paragraph (e) of this 
section until 10 years from the date of creation of a specific audit; 
and
* * * * *
    (g) Multiple auditors. A direct enrollment entity may engage 
multiple third-party entities to conduct the audit under paragraph (e) 
of this section.
    (h) Application to State Exchanges using a Federal platform. A 
direct enrollment entity that enrolls qualified individuals in coverage 
in a manner that constitutes enrollment through a State Exchange using 
the Federal platform, or assists individual market consumers with 
submission of applications for

[[Page 17567]]

advance payments of the premium tax credit and cost-sharing reductions 
through a State Exchange using a Federal platform must comply with all 
applicable Federally-facilitated Exchange standards in this section.

0
18. Section 155.415 is revised to read as follows:


Sec.  155.415  Allowing issuer or direct enrollment entity application 
assisters to assist with eligibility applications.

    (a) Exchange option. An Exchange, to the extent permitted by State 
law, may permit issuer application assisters and direct enrollment 
entity application assisters, as defined at Sec.  155.20, to assist 
individuals in the individual market with applying for a determination 
or redetermination of eligibility for coverage through the Exchange and 
insurance affordability programs, provided that such issuer application 
assisters or direct enrollment entity application assisters meet the 
requirements set forth in paragraph (b) of this section.
    (b) Application assister requirements. If permitted by an Exchange 
under paragraph (a) of this section, and to the extent permitted by 
State law, an issuer may permit its issuer application assisters and a 
direct enrollment entity may permit its direct enrollment entity 
application assisters to assist individuals in the individual market 
with applying for a determination or redetermination of eligibility for 
coverage through the Exchange and for insurance affordability programs, 
provided that such issuer or direct enrollment entity ensures that each 
of its issuer application assisters or direct enrollment entity 
application assisters at least--
    (1) Receives training on QHP options and insurance affordability 
programs, eligibility, and benefits rules and regulations, and for 
application assisters providing assistance in the Federally-facilitated 
Exchanges or a State Exchange using the Federal platform, the assisters 
must fulfill this requirement by completing registration and training 
in a form and manner to be specified by HHS;
    (2) Complies with the Exchange's privacy and security standards 
adopted consistent with Sec.  155.260; and
    (3) Complies with applicable State law related to the sale, 
solicitation, and negotiation of health insurance products, including 
any State licensure laws applicable to the functions to be performed by 
the issuer application assister or direct enrollment entity application 
assister, as well as State law related to confidentiality and conflicts 
of interest.

0
19. Section 155.420 is amended--
0
a. By revising paragraphs (a)(5) and (b)(2)(iv);
0
b. In paragraph (d)(6)(ii) by removing ``; or'' and adding in its place 
``;'';
0
c. In paragraph (d)(6)(iii) by removing ``.'' and adding in its place 
``;'';
0
d. In paragraph (d)(6)(iv) by removing ``;'' and adding in its place 
``; or''; and
0
e. By adding paragraph (d)(6)(v).
    The addition reads as follows:


Sec.  155.420  Special enrollment periods.

    (a) * * *
    (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) or demonstrate that they had 
coverage as described in paragraphs (d)(1)(iii) or (iv) of this section 
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 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, in a service area where no qualified health plan was available 
through the Exchange.
    (b) * * *
    (2) * * *
    (iv) If a qualified individual, enrollee, or dependent, as 
applicable, loses coverage as described in paragraph (d)(1) or 
(d)(6)(iii) of this section, gains access to a new QHP as described in 
paragraph (d)(7) of this section, becomes newly eligible for enrollment 
in a QHP through the Exchange in accordance with Sec.  155.305(a)(2) as 
described in paragraph (d)(3) of this section, or becomes newly 
eligible for advance payments of the premium tax credit in conjunction 
with a permanent move as described in paragraph (d)(6)(iv) of this 
section, and if the plan selection is made on or before the day of the 
triggering event, the Exchange must ensure that the coverage effective 
date is the first day of the month following the date of the triggering 
event. If the plan selection is made after the date of the triggering 
event, the Exchange must ensure that coverage is effective in 
accordance with paragraph (b)(1) of this section or on the first day of 
the following month, at the option of the Exchange.
* * * * *
    (d) * * *
    (6) * * *
    (v) At the option of the Exchange, the qualified individual, or his 
or her dependent--
    (A) Experiences a decrease in household income;
    (B) Is newly determined eligible by the Exchange for advance 
payments of the premium tax credit; and
    (C) Had minimum essential coverage as described in 26 CFR 1.5000A-
1(b) for one or more days during the 60 days preceding the date of the 
financial change.
* * * * *

0
20. Section 155.605 is amended by adding paragraph (e)(5) to read as 
follows:


Sec.  155.605  Eligibility standards for exemptions.

* * * * *
    (e) * * *
    (5) General hardship. The IRS may allow an applicant to claim the 
exemption specified in HHS Guidance published September 12, 2018, 
entitled, ``Guidance on Claiming a Hardship Exemption through the 
Internal Revenue Service (IRS)'' (see https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Authority-to-Grant-HS-Exemptions-2018-Final-91218.pdf) and in IRS Notice 2019-05 (see https://www.irs.gov/pub/irs-drop/n-19-05.pdf), for the 2018 tax year.

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

0
21. The authority citation for part 156 is revised to read as follows:

    Authority:  42 U.S.C. 18021-18024, 18031-18032, 18041-18042, 
18044, 18054, 18061, 18063, 18071, 18082, and 26 U.S.C. 36B.


0
22. Section 156.20 is amended by adding the definition of ``Generic'' 
in alphabetical order to read as follows:


Sec.  156.20  Definitions.

* * * * *
    Generic means a drug for which an application under section 505(j) 
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) is 
approved.
* * * * *

0
23. Section 156.130 is amended by adding paragraph (h) to read as 
follows:


Sec.  156.130  Cost-sharing requirements.

* * * * *
    (h) Use of drug manufacturer coupons. For plan years beginning on 
or after January 1, 2020:

[[Page 17568]]

    (1) Notwithstanding any other provision of this section, and to the 
extent consistent with state law, amounts paid toward cost sharing 
using any form of direct support offered by drug manufacturers to 
enrollees to reduce or eliminate immediate out-of-pocket costs for 
specific prescription brand drugs that have an available and medically 
appropriate generic equivalent are not required to be counted toward 
the annual limitation on cost sharing (as defined in paragraph (a) of 
this section).
    (2) [Reserved]

0
24. Section 156.1230 is amended by--
0
a. Removing and reserving paragraph (a)(2);
0
b. Revising paragraph (b)(1);
0
c. Removing paragraph (b)(2); and
0
d. Redesignating paragraph (b)(3) as (b)(2).
    The revisions read as follows:


Sec.  156.1230   Direct enrollment with the QHP issuer in a manner 
considered to be through the Exchange.

    (a) * * *
    (2) [Reserved]
    (b) * * *
    (1) The QHP issuer must comply with applicable requirements in 
Sec.  155.221 of this subchapter.
* * * * *

    Dated: March 26, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 2, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-08017 Filed 4-18-19; 4:15 pm]
 BILLING CODE 4150-28-P