Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2022; Updates to State Innovation Waiver (Section 1332 Waiver) Implementing Regulations, 6138-6178 [2021-01175]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 86, Number 11 (Tuesday, January 19, 2021)]
[Rules and Regulations]
[Pages 6138-6178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01175]



[[Page 6137]]

Vol. 86

Tuesday,

No. 11

January 19, 2021

Part X





 Department of the Treasury





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31 CFR Part 33





 Department of Health and Human Services





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45 CFR Parts 155, 156





Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2022; Updates to State Innovation Waiver 
(Section 1332 Waiver) Implementing Regulations; Final Rule

Federal Register / Vol. 86 , No. 11 / Tuesday, January 19, 2021 / 
Rules and Regulations

[[Page 6138]]


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DEPARTMENT OF THE TREASURY

31 CFR Part 33

RIN 1505-AC72

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 155 and 156

[CMS-9914-F]
RIN 0938-AU18


Patient Protection and Affordable Care Act; HHS Notice of Benefit 
and Payment Parameters for 2022; Updates to State Innovation Waiver 
(Section 1332 Waiver) Implementing Regulations

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health & Human Services (HHS), Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This final rule sets forth provisions related to user fees for 
federally-facilitated Exchanges and State-based Exchanges on the 
Federal Platform. It includes changes related to acceptance of payments 
by issuers of individual market Qualified Health Plans and clarifies 
the regulation imposing network adequacy standards with regard to 
Qualified Health Plans that do not use provider networks. It also adds 
a new direct enrollment option for federally-facilitated Exchanges and 
State Exchanges and implements changes related to section 1332 State 
Innovation Waivers.

DATES: These regulations are effective on March 15, 2021.

FOR FURTHER INFORMATION CONTACT: 
    Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Usree 
Bandyopadhyay, (410) 786-6650, Grace Bristol, (410) 786-8437, or 
Kiahana Brooks, (301) 492-5229, for general information.
    Aaron Franz, (410) 786-8027, for matters related to user fees.
    Robert Yates, (301) 492-5151, for matters related to the direct 
enrollment option for federally-facilitated Exchange states, State-
based Exchanges on the Federal Platform, and State Exchanges.
    Erika Melman, (301) 492-4348, for matters related to network 
adequacy standards.
    Emily Ames, (301) 492-4246, for matters related to acceptance of 
payments by QHP issuers.
    Lina Rashid, (443) 902-2823, Michelle Koltov, (301) 492-4225, or 
Kimberly Koch, (202) 622-0854, for matters related to State Innovation 
Waivers.

SUPPLEMENTARY INFORMATION: In the December 4, 2020 Federal Register, 
HHS and the Department of the Treasury published the ``Patient 
Protection and Affordable Care Act; HHS Notice of Benefit and Payment 
Parameters for 2022 and Pharmacy Benefit Manager Standards; Updates to 
State Innovation Waiver (Section 1332 Waiver) Implementing 
Regulations'' proposed rule (85 FR 78572) (hereinafter referred to as 
the ``proposed 2022 Payment Notice'' or ``proposed rule'') that 
proposed revisions to regulations in 31 CFR part 33 and 45 CFR parts 
147, 150, 153, 155, 156, 158, and 184, and policies that would reduce 
fiscal and regulatory burdens across related program areas and provide 
stakeholders with greater flexibility. This final rule addresses only a 
subset of the policies and proposed regulatory revisions addressed in 
the proposed 2022 Payment Notice, including certain policies and 
related proposed revisions to regulations in 31 CFR part 33 and 45 CFR 
parts 155 and 156. HHS continues to review comments to the proposed 
2022 Payment Notice and intends to address the remaining provisions in 
future rulemaking.

Table of Contents

I. Executive Summary
II. Background
    A. Legislative and Regulatory Overview
    B. Stakeholder Consultation and Input
    C. Structure of Proposed Rule
III. Summary of the Proposed Provisions to the HHS Notice of Benefit 
and Payment Parameters for 2022, Analysis of and Responses to Public 
Comments, and Provisions of the Final Rule
    A. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    B. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
IV. Summary of the Proposed Provisions for State Innovation Waivers, 
Analysis of and Responses to Public Comments, and Provisions of the 
Final Rule
    A. 31 CFR Part 33 and 45 CFR Part 155--State Innovation Waivers
V. Collection of Information Requirements
    A. ICRs Regarding State Innovation Waivers
    B. ICRs Regarding Exchange Direct Enrollment Option
    C. Submission of PRA-Related Comments
VI. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Impact Estimates of the Payment Notice Provisions and 
Accounting Statement
    D. Regulatory Alternatives Considered
    E. Regulatory Flexibility Act
    F. Unfunded Mandates
    G. Federalism
    H. Congressional Review Act
    I. Reducing Regulation and Controlling Regulatory Costs

I. Executive Summary

    American Health Benefit Exchanges, or ``Exchanges,'' are entities 
established under the Patient Protection and Affordable Care Act 
(PPACA) \1\ through which qualified individuals and qualified employers 
can purchase health insurance coverage in qualified health plans 
(QHPs). Many individuals who enroll in QHPs through individual market 
Exchanges are eligible to receive a premium tax credit (PTC) 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.
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    \1\ 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 PPACA, was 
enacted on March 30, 2010. In this 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 (hereinafter referred to as ``Secretary'') and heads of all other 
executive departments and agencies with authorities and 
responsibilities under 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 PPACA that 
would impose a fiscal burden on any state or a cost, fee, tax, penalty, 
or regulatory burden on individuals, families, health care providers, 
health insurers, patients, recipients of health care services, 
purchasers of health insurance, or makers of medical devices, products, 
or medications. In the December 4, 2020 Federal Register, we \2\ 
published the proposed 2022 Payment Notice, which proposed to reduce 
fiscal and regulatory burdens across different program areas and to 
provide stakeholders with greater flexibility.
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    \2\ As this rule is jointly published by HHS and the Department 
of the Treasury, HHS clarifies that throughout this final rule, the 
term `we' refers only to HHS.
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    In previous rulemaking, we established provisions and parameters to 
implement many PPACA requirements and programs. In this final rule, we 
are amending some of these provisions and parameters, with a focus on 
providing states with additional flexibilities, reducing unnecessary 
regulatory burdens on stakeholders, empowering consumers, and improving 
affordability.

[[Page 6139]]

    As we do every year in the HHS notice of benefit and payment 
parameters (Payment Notice), we are finalizing the user fee rates for 
issuers offering plans through the Exchanges using the federal 
platform. For the 2022 plan year, we are lowering the federally-
facilitated Exchange (FFE) and State-based Exchange on the Federal 
Platform (SBE-FP) user fees rates to 2.25 and 1.75 percent of total 
monthly premiums, respectively, in order to reflect enrollment, premium 
and HHS contract estimates for the 2022 plan year. We are also 
finalizing a user fee rate for 2023 of 1.5 percent of total monthly 
premiums for FFE and SBE-FP states that elect in 2023 the direct 
enrollment option discussed later in the preamble.
    We are updating the standards related to QHP issuers' acceptance of 
payments for premiums and cost sharing to require individual market QHP 
issuers to accept premium payments made by or on behalf of an enrollee 
in connection with an individual coverage health reimbursement 
arrangement (individual coverage HRA) or qualified small employer 
health reimbursement arrangement (QSEHRA). We are also providing a 
clarification to the network adequacy rules to reflect the longstanding 
interpretation that Sec.  156.230 does not apply to plans seeking QHP 
certification that do not differentiate benefits based on whether or 
not enrollees receive covered services from providers that are members 
of the plan's provider network.
    We are establishing a new direct enrollment option under which a 
State Exchange, SBE-FP, or an FFE state can elect to rely on direct 
enrollment to offer individual market consumers an enhanced QHP 
shopping experience. Under this option, instead of operating a 
centralized enrollment website, states may, with HHS approval, use 
direct enrollment technology to establish pathways to QHP issuers, web-
brokers, and agents and brokers, to allow consumers to apply for and 
receive a determination or assessment of eligibility for insurance 
affordability programs and enroll in a QHP, or if applicable, be 
transferred to Medicaid or the Children's Health Insurance Program 
(CHIP).
    The Secretaries of HHS and the Treasury (collectively, the 
Secretaries) are finalizing the proposal regarding State Innovation 
Waivers under section 1332 of PPACA, with modifications in response to 
comments, to codify many of the policies and interpretations outlined 
in the 2018 ``State Relief and Empowerment Waivers'' guidance (83 FR 
53575) \3\ (hereinafter referred to as the 2018 Guidance) into section 
1332 regulations governing waiver application procedures, monitoring 
and compliance, and periodic evaluations in order to give states 
certainty regarding the requirements to receive and maintain approval 
by the HHS and the Department of the Treasury (collectively, the 
Departments) for State Innovation Waivers under section 1332 of PPACA.
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    \3\ https://www.govinfo.gov/content/pkg/FR-2018-10-24/pdf/2018-23182.pdf.
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    We intend to address the other topics and proposed policies 
outlined in the proposed 2022 Payment Notice in future rulemaking, 
taking into account comments received on those proposals.

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.
    These provisions of the PHS Act were later augmented by other laws, 
including PPACA. Subtitles A and C of title I of PPACA reorganized, 
amended, and added to the provisions of part A of title XXVII of the 
PHS Act relating to group health plans \4\ and health insurance issuers 
in the group and individual markets. The term ``group health plan'' 
includes both insured and self-insured group health plans.
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    \4\ The term ``group health plan'' is used in title XXVII of the 
PHS Act and is distinct from the term ``health plan'' as used in 
other provisions of title I of PPACA. The term ``health plan'' does 
not include self-insured group health plans.
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    Sections 1311(b) and 1321(b) of PPACA provide that each state has 
the opportunity to establish an individual market Exchange that 
facilitates the purchase of insurance coverage by qualified individuals 
through QHPs and meets other standards specified in PPACA. Section 
1321(c)(1) of PPACA directs the Secretary to establish and operate such 
Exchange within states that do not elect to establish an Exchange or, 
as determined by the Secretary on or before January 1, 2013, will not 
have an Exchange operable by January 1, 2014.
    Section 1311(c)(1) of PPACA provides the Secretary the authority to 
issue regulations to establish criteria for the certification of QHPs, 
including network adequacy standards at section 1311(c)(1)(B) of PPACA. 
Section 1311(d) of PPACA describes the minimum functions of an 
Exchange. Section 1311(e)(1) of 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)(1) of PPACA, and the Exchange determines that making the plan 
available through the Exchange is in the interests of qualified 
individuals and qualified employers in the state.
    Section 1312(e) of PPACA directs the Secretary to establish 
procedures under which a state may permit agents and brokers to enroll 
qualified individuals and qualified employers in QHPs through an 
Exchange and to assist individuals in applying for financial assistance 
for QHPs sold through an Exchange.
    Sections 1313 and 1321 of 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 PPACA 
provides for state flexibility in the operation and enforcement of 
Exchanges and related requirements.
    Section 1321(a) of 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 PPACA. Section 1321(a)(1) of PPACA directs the Secretary to issue 
regulations that set standards for meeting the requirements of title I 
of PPACA for, among other things, the establishment and operation of 
Exchanges. When operating an FFE under section 1321(c)(1) of PPACA, HHS 
has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of 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 benefits derived from federal activities beyond 
those received by the general public.
    Section 1321(d) of PPACA provides that nothing in title I of PPACA 
must be construed to preempt any state law that does not prevent the 
application of title I of PPACA. Section 1311(k) of PPACA specifies 
that Exchanges may not establish rules that conflict with or prevent 
the application of regulations issued by the Secretary.
    Section 1332 of PPACA provides the Secretaries with the discretion 
to approve a state's proposal to waive specific provisions of PPACA, 
provided the state's section 1332 waiver plan meets certain 
requirements. The Departments finalized implementing

[[Page 6140]]

regulations on February 27, 2012 (76 FR 13553) and published detailed 
guidance on the Departments' application of section 1332 to proposed 
state waivers on October 24, 2018 (83 FR 53575).
    The 21st Century Cures Act (Cures Act), Public Law 114-255, 130 
Stat. 1033, was enacted on December 13, 2016. Section 18001 of the 
Cures Act amends the Internal Revenue Code (Code), the Employee 
Retirement Income Security Act of 1974, and the PHS Act to permit an 
eligible employer to provide a QSEHRA to its eligible employees. 
Section 9831(d) of the Code, as amended by the Cures Act, establishes 
requirements for providing a QSEHRA. On October 31, 2017, the 
Department of the Treasury and the Internal Revenue Service (IRS) 
issued Notice 2017-67, 2017-47 IRB 517, to provide guidance on the 
requirements for providing a QSEHRA.
1. 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. In the July 15, 
2011 Federal Register (76 FR 41865), we published a proposed rule with 
proposals 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 Small Business Health Options 
Program (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).
    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), we set 
forth standards related to Exchange user fees. 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).
2. Health Reimbursement Arrangements
    On October 29, 2018, the Departments of HHS, Labor, and the 
Treasury published proposed regulations in the Federal Register (83 FR 
54420) on health reimbursement arrangements (HRAs) and other account-
based group health plans including individual coverage HRAs. On June 
20, 2019, the Departments of HHS, Labor, and the Treasury published 
final regulations in the Federal Register (84 FR 28888) on HRAs and 
other account-based group health plans.
3. State Innovation Waivers
    Section 1332(a)(4)(B) of PPACA requires the Secretaries to issue 
regulations regarding procedures for State Innovation Waivers. On March 
14, 2011, the Departments published the ``Application, Review, and 
Reporting Process for Waivers for State Innovation'' proposed rule \5\ 
in the Federal Register (76 FR 13553) to implement section 
1332(a)(4)(B) of PPACA. On February 27, 2012, the Departments published 
the ``Application, Review, and Reporting Process for Waivers for State 
Innovation'' final rule \6\ in the Federal Register (77 FR 11700) 
(hereinafter referred to as the ``2012 Final Rule''). On October 24, 
2018, the Departments issued the 2018 Guidance, which superseded the 
previous guidance \7\ published on December 16, 2015 in the Federal 
Register (80 FR 78131) and provided additional information about the 
requirements that states must meet for waiver proposals, the 
Secretaries' application review procedures, pass-through funding 
determinations, certain analytical requirements, and operational 
considerations. On November 6, 2020, the Departments issued an interim 
final rule \8\ in the Federal Register (85 FR 71142), which revised 
regulations relating to public notice procedures to set forth 
flexibilities in the public notice requirements and post-award public 
participation requirements for State Innovation Waivers under section 
1332 of PPACA during the Coronavirus Disease 2019 (COVID-19) public 
health emergency (PHE).
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    \5\ https://www.govinfo.gov/content/pkg/FR-2011-03-14/pdf/2011-5583.pdf.
    \6\ https://www.govinfo.gov/content/pkg/FR-2012-02-27/pdf/2012-4395.pdf.
    \7\ https://www.govinfo.gov/content/pkg/FR-2015-12-16/pdf/2015-31563.pdf.
    \8\ https://www.federalregister.gov/documents/2020/11/06/2020-24332/additional-policy-and-regulatory-revisions-in-response-to-the-covid-19-public-health-emergency.
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B. Stakeholder Consultation and Input

    HHS has consulted with stakeholders on policies related to the 
operation of Exchanges. We have held a number of listening sessions 
with consumers, providers, employers, health plans, advocacy groups and 
the actuarial community to gather public input. We have solicited input 
from state representatives on numerous topics, particularly the direct 
enrollment option for FFE states and State Exchanges.
    We consulted with stakeholders through regular meetings with the 
National Association of Insurance Commissioners (NAIC), and regular 
contact with states, health insurance issuers, trade groups, consumer 
advocates, employers, and other interested parties. We considered all 
public input we received on the proposals addressed in this final rule 
as we developed the policies in this final rule.

C. Structure of Final Rule

    The regulations outlined in this final rule are codified in 45 CFR 
parts 155 and 156. In addition, the regulations outlined in this final 
rule governing State Innovation Waivers under section 1332 of PPACA are 
codified in 31 CFR part 33 and 45 CFR part 155.
    We establish a new direct enrollment option for State Exchanges, 
SBE-FPs and FFE states to use direct enrollment technology and non-
Exchange websites developed by approved web-brokers, issuers, and other 
direct enrollment partners to enroll qualified individuals in QHPs 
offered through the Exchange.
    As we do every year in the annual HHS notice of benefit and payment 
parameters, we set forth the user fee rates for the 2022 benefit year 
for all issuers participating on the Exchanges using the federal 
platform. We also finalize modifications to the regulations addressing 
network adequacy standards for non-network plans. Finally, we require 
individual market QHP issuers to accept premium payments made by or on 
behalf of an enrollee in connection with an individual coverage HRA or 
QSEHRA.
    The changes in 31 CFR part 33 and 45 CFR part 155 related to State 
Innovation Waivers finalize with modifications the proposals to codify 
many of the policies and interpretations outlined in the existing 2018 
Guidance into the section 1332 waiver implementation regulations in 
order to give states certainty regarding the requirements to receive 
and maintain approval of State Innovation Waivers by the Departments.

III. Summary of the Proposed Provisions of the HHS Notice of Benefit 
and Payment Parameters for 2022, Analysis of and Responses to Public 
Comments, and Provisions of the Final Rule--Department of Health and 
Human Services

    In the December 4, 2020 Federal Register (86 FR 78572), we 
published the ``Patient Protection and Affordable Care Act; HHS Notice 
of Benefit and Payment Parameters for 2022 and

[[Page 6141]]

Pharmacy Benefit Manager Standards; Updates To State Innovation Waiver 
(Section 1332 Waiver) Implementing Regulations'' proposed rule. We 
received 542 comments in response to the policies in the proposed 2022 
Payment Notice. Comments were received from members of Congress, 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 are not addressed in this 
final rule.
    In this final rule, we provide a summary of the proposed provisions 
we are addressing in this final rule, a summary of the public comments 
received that relate to those proposals, our responses to these 
comments, and a description of the provisions we are finalizing.
    We first address comments regarding the publication of this final 
rule and the comment period.
    Comment: Multiple commenters criticized the length of the comment 
period, stating that a longer comment period is necessary to allow 
stakeholders to review the proposed rule and provide thoughtful 
comments. Some commenters also expressed concern that HHS would not 
adequately review and consider all comments before issuing a final 
rule; that HHS appears to be rushing to finalize substantial changes to 
regulations that would hamper access to coverage through the Exchanges; 
and that HHS should defer any major policy decisions affecting access 
to Exchange coverage to the incoming Administration.
    Response: We disagree that the comment period was not long enough 
to allow stakeholders to provide meaningful comments. Each year, we 
generally have set a 30-day comment period to accommodate issuer filing 
deadlines for the upcoming plan year and to avoid creating significant 
challenges for states, Exchanges, issuers, and other entities operating 
under strict deadlines related to approval of products. Moreover, we 
found commenters' submissions to be thoughtful and reflective of a 
detailed review and analysis of the proposed rule. We further recognize 
the importance of federal agencies reviewing and considering all 
relevant comments before issuing a final rule. For this reason, HHS 
determined that it was appropriate to address in this final rule only 
those policies in the proposed 2022 Payment Notice that were most 
important to advancing the policy goals of reducing fiscal and 
regulatory burdens across related program areas and providing 
stakeholders with greater flexibility. Limiting the policies addressed 
in this final rule allowed us to review all relevant comments and 
expedite the publication of this final rule.
    For reasons more fully reviewed in the preamble discussions related 
to specific policies in this final rule, we also disagree that the rule 
will hamper access to Exchange coverage. The policies we finalize in 
this rule have the potential to increase access to Exchange coverage. 
For example, the Exchange DE option we finalize in this rule has the 
potential to increase incentives for licensed agents, brokers, and web-
brokers to promote Exchange enrollment through improvements to the 
consumer application and enrollment experience. The policies this final 
rule adopts in relation to section 1332 waivers are designed to provide 
flexibilities that will allow states to propose and implement waiver 
plans to increase access to Exchange coverage by reducing premiums. In 
addition, the policies related to individual coverage HRAs and QSEHRAs 
are being finalized to remove obstacles and ensure individuals offered 
these types of coverage have seamless access to enroll in individual 
market QHP coverage.
    Finally, we disagree that major policy decisions should be deferred 
until a new Administration is in place, as this final rule constitutes 
a valid exercise of the Departments' rulemaking authorities.

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

1. Standards for Direct Enrollment Entities (Sec.  155.221)
a. FFE, SBE-FP, and State Exchange Direct Enrollment Option
    Classic Direct Enrollment (Classic DE) and Enhanced Direct 
Enrollment (EDE) are pathways offered as part of the FFE's DE program 
under which third-party entities (issuers, agents and brokers, and web 
brokers) are approved by HHS to assist consumers with QHP plan 
selection and enrollment through a non-Exchange website in a manner 
considered to be through the Exchange.\9\ The Classic DE and EDE 
pathways are available in FFE and SBE-FP states. In light of the 
success of the FFEs' DE program in improving the consumer experience, 
we proposed to provide additional options for states that wish to 
promote more flexible and lower-cost private sector approaches for 
assisting consumers with shopping and enrolling in individual market 
QHP coverage offered through Exchanges.
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    \9\ Classic DE is the original version of DE, which utilizes a 
``double redirect'' from a DE entity's non-Exchange website to 
HealthCare.gov where the eligibility application is submitted and an 
eligibility determination is made by the Exchange, and then back to 
the DE entity's non-Exchange website for QHP shopping and plan 
selection consistent with applicable requirements in Sec. Sec.  
155.220(c)(3)(i), 155.221, 156.265, or 156.1230(b). EDE is the 
version of DE which allows consumers to complete all steps in the 
application, eligibility and enrollment processes on the DE entity's 
non-Exchange website consistent with applicable requirements in 
Sec. Sec.  155.220(c)(3)(ii), 155.221, 156.265, or 156.1230(b). EDE 
uses application programming interfaces (APIs) that are made 
available, owned, and maintained by CMS to transfer data between 
HealthCare.gov and the DE entity's non-Exchange website.
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    While we have taken a number of actions to reduce the burden on 
states of establishing State Exchanges, we wish to maximize flexibility 
for all states to oversee their own health care markets and to address 
unique state market dynamics. In the Exchange Final Rule,\10\ we 
recognized that states are best equipped to adapt Exchange functions to 
their local markets and the unique needs of their residents.\11\ In 
addition, we recognized that for decades, issuers, licensed agents and 
brokers, and web-brokers have been engaging directly with consumers in 
offering health insurance and assisting consumers in selecting, 
enrolling in, and managing their coverage. We believe that the proposal 
to establish a new DE option for Exchanges would allow states to 
continue to more effectively exercise their traditional oversight 
authority over health insurance markets, while enhancing the consumer 
experience, increasing competition, and lowering costs.
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    \10\ 77 FR 18310 (March 27, 2012). Available at https://www.govinfo.gov/content/pkg/FR-2012-03-27/pdf/2012-6125.pdf.
    \11\ See, for example, 77 FR at 18313.
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    To date, Exchange eligibility application and enrollment activities 
have been supported through Exchange-operated websites. One of the 
primary advantages of this design is that consumers can access one-stop 
shopping for all QHPs offered through an Exchange and can access 
relevant details on such plans in a standardized format. Before 
Exchanges existed, consumers shopping for individual health insurance 
coverage who searched for this information would generally have to 
contact multiple issuers or visit

[[Page 6142]]

multiple websites, and the information would often be presented 
inconsistently, preventing true apples-to-apples comparison shopping. 
Exchange-run eligibility application and enrollment websites also help 
to manage coordination of coverage between private health insurance 
coverage and Medicaid and CHIP by offering full eligibility and 
enrollment integration between the programs or by providing connections 
to those public programs for individuals who may qualify for 
participation.
    While Exchange-operated eligibility application and enrollment 
websites have undoubtedly helped many consumers shop for and compare 
plans, they also present some significant potential disadvantages given 
historical and current implementations of Exchange-operated websites. 
First, as we explained in the proposed rule, it can be costly and 
burdensome to create and operate Exchanges, including not only the cost 
of designing and maintaining a complex website, but also the burden of 
staffing and operating call centers that must be scaled up during each 
annual Open Enrollment Period (OEP), and then scaled down during lower-
traffic periods.
    Second, the design of Exchange-operated websites also tends to 
result in choke points when a large number of consumers use the same 
website at the same time to apply, shop for, and enroll in coverage. 
For example, on high traffic days near the end of the annual OEP, some 
consumers trying to access HealthCare.gov have been redirected to the 
FFE call center or told to come back to the website at a later time to 
complete their enrollment due to high volume. The ability for consumers 
to shop for coverage through any one of the websites operated by 
Classic DE and EDE entities with which HHS partners during these high 
traffic days provides an important, additional avenue to ensure 
consumers complete their plan selection and enroll in coverage. 
Although we recognize that without robust participation and competition 
among DE entities, a DE entity's website may experience similar choke 
points due to high consumer traffic, we believe that providing 
Exchanges in states that elect this option with the flexibility to 
partner with more than one DE entity mitigates this risk.
    Third, we believe it is inherently difficult for Exchanges to keep 
up with the rapid pace of innovation in e-commerce and the ever-
evolving preferences of online shoppers, who are accustomed to shopping 
for the products they buy in a manner that is not only tailored to 
their specific needs, but is also aesthetically appealing and 
constantly refreshed. Federal and state governments, for example, can 
be limited in their ability to frequently refresh and update the 
consumer experience due to the length of time it can take to award 
vendor contracts.\12\ Finally, we have heard criticisms from some 
stakeholders, including agents, brokers, and web-brokers, that the 
Exchange-operated eligibility application and enrollment website model 
competes directly with and may crowd out market players such as web-
brokers, licensed agents and brokers, and issuers, dampening commercial 
investments in outreach and marketing by these market players to reach 
new consumers, including those who are currently uninsured.
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    \12\ For example, Federal contracting rules generally require 
full and open competitions under which federal agencies must seek 
proposals to fulfill an agency's needs for contractor services. See 
10 U.S.C. 2304 and 41 U.S.C. 3301. These competitions generally last 
for months and may impede an agency's ability to quickly engage a 
vendor for the information technology services like those that may 
be necessary to update, improve, or otherwise address issues with 
the consumer shopping, eligibility, and enrollment experience. 
Moreover, even if a federal or state agency has a suitable contract 
in place that covers such services, there may not be sufficient 
funds allocated to the contract or otherwise available to the agency 
to cover the services at the time they are needed or desired. In 
these situations, government agencies like State Exchanges and HHS 
may be required to delay the services until a future funding cycle. 
Commercial entities like DE and EDE entities generally do not face 
such impediments and may more readily respond to consumer needs and 
preferences.
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    We believe that both the FFE's DE and EDE pathways have promoted 
innovation and competition in states whose consumers use HealthCare.gov 
and have ultimately led to better experiences for consumers in these 
states. The FFE's Classic DE pathway has been in operation since the 
launch of the FFE in 2013. The FFE EDE pathway has been in operation 
since 2018. Together, for the 2020 Plan Year, the Classic DE and EDE 
pathways were responsible for approximately 29 percent of FFE 
enrollments. The recent experience from the 2021 Open Enrollment Period 
shows substantial growth in the use of the EDE pathway. The number of 
consumers who enrolled through the EDE pathway more than doubled from 
the prior 2020 Open Enrollment Period--increasing from approximately 
521,000 to 1,130,000 plan selections, representing 37 percent of FFE 
enrollments.
    Currently, the HealthCare.gov eligibility application and 
enrollment website and approved private sector non-Exchange websites 
operate in parallel to enroll consumers in individual market QHPs 
offered through the FFEs and SBE-FPs. Like Exchange-operated websites, 
non-Exchange websites operated by Classic DE and EDE entity partners in 
FFE and SBE-FP states are required to provide standardized comparative 
information to assist consumers shopping for coverage.\13\ DE entities 
are also able to provide assistance with a broader array of plan 
options, including both on- and off-Exchange plan options and ancillary 
products. These additional coverage options are important for many 
consumers who do not qualify for premium tax credits or have less 
incentive to enroll in Exchange coverage, including employees with an 
offer of an affordable individual coverage HRA who may wish to opt into 
that coverage, as well as employees offered both an individual coverage 
HRA and a cafeteria plan because section 125(f)(3) of the Code 
specifically prohibits using salary reduction contributions under a 
cafeteria plan to purchase on-Exchange coverage.\14\ Finally, the FFE's 
EDE pathway helps to reduce costs to the federal government by 
enrolling many consumers without using the FFEs' eligibility 
application intake and enrollment resources (for example, the 
Marketplace call center and the HealthCare.gov website).
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    \13\ See, for example, 45 CFR 155.220(c)(3)(i)(A) (for web-
brokers) and 156.1230(a)(1)(ii) (for QHP issuers).
    \14\ As detailed in the proposed 2022 Payment Notice, there is a 
growing cohort of consumers who may be interested in off-Exchange 
coverage options. See 85 FR 78616-78619.
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    To build on the success of the FFE's Classic DE and EDE pathways in 
FFE and SBE-FP states that use HealthCare.gov, and to offer additional 
flexibility to all Exchanges, we proposed a new opportunity for states 
to adapt Exchange activities to the needs of local state markets and 
leverage the benefits of direct enrollment to enhance the consumer 
experience through a private sector-focused consumer engagement and 
enrollment strategy. We proposed to add Sec.  155.221(j) to establish a 
process for states to elect a new Exchange Direct Enrollment option 
(Exchange DE option) in which a state can request to allow private 
sector entities (including QHP issuers, web-brokers, agents and 
brokers) to operate enrollment websites through which consumers can 
apply, receive an eligibility determination from the Exchange, and 
purchase an individual market QHP offered through the Exchange with 
advance payments of the premium tax credit (APTC) and cost-sharing 
reductions (CSRs), if otherwise eligible.

[[Page 6143]]

    We proposed in Sec.  155.221(j) that, subject to HHS approval, a 
state may elect for the Exchange in the state to engage one or more 
entities described in paragraph (a) \15\ to facilitate QHP enrollments 
through its Exchange. Under this option, similar to the current FFE DE 
program, approved DE entities would enroll qualified individuals in a 
QHP in a manner that constitutes enrollment through the Exchange \16\ 
and would also assist individuals in applying for, and receiving 
eligibility determinations from the Exchange, for APTCs and CSRs.
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    \15\ Section 155.221(a) identifies QHP issuers and web-brokers 
as eligible direct enrollment entities.
    \16\ Section 1401(a) of PPACA added new section 36B to the Code, 
which provides for PTCs for eligible individuals, while section 1402 
of PPACA provides for CSRs for eligible individuals. For individuals 
to be eligible to receive PTCs, among other requirements, PPACA 
requires that individuals be enrolled in a QHP through an Exchange. 
CMS has interpreted this statutory language to allow a QHP issuer to 
enroll an applicant who initiates enrollment directly with the QHP 
issuer. See Sec.  156.1230, whereby individuals enrolling directly 
on the site of a QHP issuer are considered enrolled ``through an 
Exchange'' so long as the issuer meets applicable requirements. We 
adopted a similar approach to allow a web-broker to enroll an 
applicant who seeks to enroll through the web-broker's website. See 
Sec.  155.220(a)(2) and (c), whereby individuals enrolling directly 
through the site of a web-broker are considered enrolled ``through 
an Exchange'' so long as the web-broker meets applicable 
requirements.
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    In Sec.  155.221(j)(1), we proposed requirements that would apply 
to traditional State Exchanges that do not rely on the federal 
eligibility and enrollment platform that want to pursue the Exchange DE 
option and become an SBE-DE. In Sec.  155.221(j)(2), we proposed 
requirements that would apply to states with an FFE or SBE-FP \17\ that 
want to pursue the Exchange DE option and become an FFE-DE or SBE-FP-
DE. We proposed that, subject to HHS approval, the Exchange DE option 
may be implemented in states with a State Exchange starting in plan 
year 2022. We proposed that, subject to HHS approval, the Exchange DE 
option may be implemented in states with an FFE or SBE-FP starting in 
plan year 2023.
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    \17\ As detailed further below, states with an SBE-FP can 
request to pursue the Exchange DE option as an SBE-FP-DE. If a state 
that currently operates an SBE-FP is interested in transitioning to 
a full State Exchange that implements this Exchange DE option, it 
would need to update its Blueprint accordingly, and meet statutory 
and regulatory requirements to become a State Exchange implementing 
the Exchange DE option (an SBE-DE). Such requirements include 
operating its own eligibility and enrollment platform rather than 
relying on the federal platform.
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    Under the Exchange DE option, states would be able to request to 
adopt a private sector-based enrollment approach as an alternative to 
the consumer-facing enrollment website operated by the Exchange (for 
example, HealthCare.gov for the FFEs). This de-centralized, private 
sector-focused approach would transition application and enrollment 
functions to websites operated by approved partners (DE partners) to 
serve as the online platform(s) through which consumers apply for and 
enroll in individual market QHPs offered through the Exchange in their 
state, as well as apply for and receive determinations of APTC and 
cost-sharing reduction (CSR) eligibility for QHP coverage offered 
through the Exchange. The Exchange in a state that elects this option 
would implement a direct enrollment pathway (or pathways) with secure 
connections between its back-end eligibility determination system and 
the websites (or systems) of approved issuers, web-brokers, or agents 
and brokers that enable consumers to complete and submit the single 
streamlined eligibility application as described in Sec.  155.405, 
receive an eligibility determination from the Exchange, select a plan 
and enroll in a QHP, with or without APTC and CSRs (if otherwise 
eligible). Exchanges would continue to be responsible for meeting, and 
ensuring its approved DE partners meet, all applicable statutory and 
regulatory requirements governing application for and enrollment in 
QHPs and other applicable state health subsidy programs.\18\ Under the 
Exchange DE option, the Exchange would also remain the entity 
responsible for making all determinations of whether an applicant is 
eligible for QHP enrollment, APTC, and CSRs, assessing or determining 
whether an applicant is eligible for Medicaid or CHIP, and conducting 
required verifications of consumer eligibility against trusted data 
sources. The Exchange would also continue to be responsible for sharing 
eligibility determination and enrollment information in coordination 
with issuers and HHS in accordance with 45 CFR 155.400, 155.430, and 
155.340. The Exchange will continue to issue the applicable APTC to 
carriers on behalf of qualified individuals, and continue to be 
responsible for sharing this information with the IRS to support 
reconciliation of APTC on individual tax returns.
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    \18\ See section 1413(e) of PPACA for a definition of the term 
``applicable state health subsidy program.''
---------------------------------------------------------------------------

    Consistent with section 1311(d)(4)(F) of PPACA and 45 CFR 155.302, 
under the Exchange DE option, the Exchange would also continue to be 
responsible for conducting assessments or determinations of eligibility 
for Medicaid and CHIP, and where appropriate, for referring individuals 
who are assessed or determined eligible for Medicaid or CHIP to the 
appropriate state Medicaid agency for enrollment in those programs.\19\
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    \19\ Section 1311(d)(4)(F) of PPACA requires Exchanges to inform 
individuals of eligibility requirements for Medicaid, CHIP, or any 
applicable state or local public programs and, if through screening 
of the application the Exchange determines such individuals are 
eligible for any such program and refer such individuals to the 
appropriate state Medicaid agency for enrollment in such program(s).
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    In proposing the Exchange DE option, we noted that the applicable 
statutory provisions do not require Exchanges to operate an enrollment 
website. Rather, section 1311(d)(4)(C) of PPACA provides that an 
Exchange must maintain an internet website through which enrollees and 
prospective enrollees of QHPs may obtain standardized comparative 
information on QHPs available in the state. Within the statutory 
framework, these are some of the specific minimum functions an Exchange 
must undertake to facilitate the purchase of QHPs under section 
1311(b)(1)(A) of PPACA and make available QHPs to qualified individuals 
and employers under section 1311(d)(2)(A) of PPACA. These minimum 
functions facilitate the purchase of QHPs by helping to make the 
purchase of QHPs easier and administering elements of the structure 
necessary to make QHPs available. An Exchange can continue to meet 
these obligations without operating a singular consumer-facing 
eligibility and enrollment website. In the context of operating an 
internet website, we interpret the statutory language at section 
1311(c)(5) and (d)(4)(C) of PPACA to require that Exchanges provide 
consumers with the ability to view comparative information on QHP 
options, but that the Exchange may direct consumers to other entities 
or resources for purposes of submitting applications for eligibility 
and enrolling in QHPs, with APTC and CSRs, if otherwise eligible. We 
further explained that Exchanges, rather than DE entities, in states 
that elect to pursue this new option would continue to be responsible 
for determining eligibility for, and granting, exemption certifications 
under section 1311(d)(4)(H) of PPACA, as applicable; making available 
an electronic calculator consistent with section 1311(d)(4)(G) of 
PPACA; establishing a Navigator program as required under section 
1311(d)(4)(K) of PPACA; and providing for the operation of a toll-free 
telephone hotline under section 1311(d)(4)(B) of PPACA.

[[Page 6144]]

    In connection with the Exchange DE option, the Exchange would also 
be required to make available a website listing basic QHP information 
for comparison, and a listing with links to approved partner websites 
for consumer shopping, plan selection, and enrollment activities. 
Consistent with section 1311(d)(4)(E) of PPACA, the comparative plan 
information presented on the Exchange website would need to continue to 
utilize a standardized format, including the use of the uniform summary 
of benefits and coverage established under section 2715 of the PHS 
Act.\20\ The standardized comparative information displayed on Exchange 
websites must also continue to include the quality ratings assigned to 
each QHP offered through the Exchange.\21\ Finally, the Exchange, along 
with its issuers and registered agents and brokers, which may also 
function as DE entities, would continue to be responsible for meeting 
federal accessibility standards under 45 CFR 155.205(c) for individuals 
living with disabilities and for individuals who have limited English 
proficiency.\22\
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    \20\ See 45 CFR 155.205(b).
    \21\ See section 1311(d)(4)(D) of PPACA and 45 CFR 155.205(b). 
Also see sections 1311(c)(3) and (c)(4) of PPACA and 45 CFR 155.1400 
and 1405.
    \22\ Covered entities such as States, recipients of Federal 
financial assistance from HHS, programs or activities administered 
by HHS under title I of PPACA (such as the FFE), and programs or 
activities administered by any entity established under Title I 
(such as State Exchanges), must comply with applicable federal civil 
rights laws that prohibit discrimination on the basis of race, 
color, national origin, sex, age, and disability. These laws include 
Section 1557 of PPACA (42 U.S.C. 18116) (Section 1557), Title VI of 
the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.) (Title VI), 
Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
(Section 504), and the Americans with Disabilities Act of 1990 (29 
U.S.C. 12101 et seq.) (ADA).
---------------------------------------------------------------------------

    Through private sector partners such as web-brokers and issuers, 
states may pursue alternatives to HealthCare.gov or other centralized, 
publicly-operated Exchange enrollment websites to enhance the consumer 
experience and provide additional incentives for insurers and licensed 
agents and brokers to conduct marketing and outreach to enroll more 
consumers in coverage. While states may consider creating enhanced 
commission structures or providing other market-based incentives, we 
also recognize the inherent incentive to issuers, web-brokers, and 
agents and brokers that will result from removing what some 
stakeholders view as a dominant public-sector competitor, making them 
the primary channels through which individuals shop for and enroll in 
individual market QHPs in those states.\23\ In the proposed rule we 
recognized that consumers who apply and enroll through a DE partner 
will have the benefit of assistance from a state-licensed agent or 
broker if they so choose. These agents and brokers will have been 
recognized by the relevant state as possessing the specialized 
expertise necessary to help consumers choose between health insurance 
options.
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    \23\ Removing this public-sector competitor may be of particular 
interest due to the competitive advantage Exchanges hold over web-
brokers under federal user fee and medical loss ratio (MLR) 
regulations. Consumers pay for both Exchange user fees and web-
broker commissions indirectly through higher premiums. However, 
Exchange user fees and web-broker commissions are accounted for 
differently in the MLR calculation. Exchange user fees, a portion of 
which are used to fund Exchange-operated eligibility and enrollment 
websites that could be considered to be competitive with EDE 
interfaces, are treated as taxes, which makes it easier to meet the 
MLR requirement. In contrast, web-broker commissions count toward 
administrative costs, which makes it harder for issuers to meet the 
MLR requirements. This MLR accounting disparity on that portion of 
the Exchange user fees arguably disadvantages EDE entities.
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(1) Federally-Facilitated Exchange Direct Enrollment (FFE-DE) and State 
Exchange on the Federal Platform Direct Enrollment (SBE-FP-DE) Option
    We proposed an option for any FFE or SBE-FP state to request the 
use of direct enrollment as the avenue through which individual market 
consumers and qualified individuals can shop for and purchase a QHP 
offered through the Exchange in the state, and apply and receive 
determinations of eligibility for APTC and CSRs. While SBE-FP states 
have the authority and responsibility for certifying QHPs and 
performing consumer outreach and assistance activities, because they 
rely on the federal eligibility and enrollment platform and consumer-
facing website, in this respect they are more similar to the FFE-DE 
model than the SBE-DE model. In addition, the current FFE DE program 
and accompanying requirements also apply in SBE-FP states.\24\
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    \24\ See, for example, 45 CFR 155.220(l) and 155.221(h).
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    Under the proposed FFE-DE and SBE-FP-DE option, HealthCare.gov 
would continue to provide the same standardized comparative information 
on QHP options that is available today. The FFE would post and maintain 
an up-to-date list on HealthCare.gov of approved direct enrollment 
partners operating in the state. As such, consumers would still be able 
to view comparative information on HealthCare.gov for all QHP options 
available in their area and would also be able to access information to 
connect with approved direct enrollment partners in that state. In the 
event that any approved direct enrollment partner does not have the 
technical capability to process a consumer eligibility application, 
HealthCare.gov would process that application. The Exchange would 
continue to have responsibility for operating a toll-free call center 
to provide eligibility and enrollment support for all consumers, 
pursuant to 45 CFR 155.205(a). However, under the Exchange DE option, 
there may be some cases where the DE partner may be best able to 
provide additional support to a consumer in completing their enrollment 
through the DE partner's website. We proposed to codify requirements at 
45 CFR 155.221(j)(2)(ii), whereby a state that elects to implement the 
Exchange DE option must execute a federal agreement with HHS that 
defines the division of responsibilities between HHS and the state. 
This would include the Exchange's responsibilities, as well as DE 
partners' responsibilities for various activities, such as those 
pertaining to operating a toll-free call center to provide eligibility 
and enrollment support for consumers that enroll in coverage through an 
approved DE partner's website.
    By leveraging private sector entities and directing consumers to 
approved direct enrollment partners, the vast majority of consumer 
traffic would flow to direct enrollment partners, leaving the 
HealthCare.gov structure in place primarily to provide the supporting 
functions that it does today, like the processing of data matching 
issues and special enrollment period verification documentation, 
casework, and eligibility appeals.
    As noted above, the FFE would remain the entity responsible for 
making eligibility determinations and verifying whether an applicant is 
eligible for QHP enrollment, APTC and CSRs. The FFE would also continue 
to reconcile eligibility and enrollment information with issuers, in 
accordance with 45 CFR 155.340, 155.400, and 155.430, in order for HHS 
to issue the applicable APTC to carriers on behalf of qualified 
individuals, and would share similar information with the IRS to 
facilitate the IRS' reconciliation of APTC on individual tax returns. 
Under this option, given that an FFE-DE state or SBE-FP-DE state would 
use one or more participating, federally-approved Classic DE and EDE 
entities, at a minimum, the FFE privacy and security standards \25\ and 
the FFE DE program

[[Page 6145]]

requirements \26\ would continue to apply.
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    \25\ See 45 CFR 155.260 through 155.285.
    \26\ See 45 CFR 155.220, 155.221, and 156.1230.
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    We proposed in Sec.  155.221(j)(2) that a state with an FFE or SBE-
FP may request to pursue the FFE-DE or SBE-FP-DE option starting in 
plan year 2023, as applicable. We proposed that, pursuant to a request 
from the state, HHS may partner with the requesting state to implement 
the direct enrollment option described in paragraph (j). The FFE or 
SBE-FP must meet all applicable federal statutory and regulatory 
requirements for the operation of an Exchange, including maintaining 
the single, streamlined eligibility application required under Sec.  
155.405. To obtain HHS approval to implement this option, the state 
must coordinate with HHS on an implementation plan and timeline that 
allows for a transition period, developed at the discretion of HHS in 
consultation with the state, necessary to operationalize the required 
changes to implement this option. We proposed to codify these new 
requirements at paragraph (j)(2)(i). Additionally, we proposed to 
codify requirements at paragraph (j)(2)(ii), whereby the state must 
execute a federal agreement with HHS that includes the terms and 
conditions for the arrangement and that defines the division of 
responsibilities between HHS and the state. Further, to obtain HHS 
approval to implement the FFE-DE or SBE-FP-DE option, we proposed at 
Sec.  155.221(j)(2)(iii) that the state must agree to procedures 
developed by HHS for the collection and remittance of the monthly user 
fee described in Sec.  156.50(c) in support of the responsibilities 
undertaken by the state and HHS. Finally, we proposed at paragraph 
(j)(2)(iv) that the state would be required to perform and cooperate 
with activities established by HHS related to oversight and financial 
integrity requirements in accordance with section 1313 of PPACA, 
including complying with reporting and compliance activities required 
by HHS and described in the Federal agreement entered into pursuant to 
paragraph (j)(2)(ii).
(2) State Exchange Direct Enrollment Option (SBE-DE)
    We proposed that a State Exchange that does not rely on the federal 
eligibility and enrollment platform can also elect the Exchange DE 
option to engage approved private-sector entities as the pathway (or 
pathways) for consumers in their state to apply for, and enroll in, 
QHPs offered through the Exchange. Under this option, the State 
Exchange would remain responsible for continuing to operate an internet 
website to provide the same standardized comparative information on QHP 
options that is available today and for making eligibility 
determinations via its eligibility rules engine for consumers applying 
for APTC, CSRs, and enrollment in QHPs offered through the Exchange. 
However, this new option would permit multiple private entities, such 
as a combination of web-brokers and QHP issuers, to provide the 
consumer-facing resources for consumers to apply for and enroll in 
individual market coverage offered through the Exchange. State 
Exchanges that pursue this option could thereby leverage direct 
enrollment technology and direct consumers to approved partner non-
Exchange websites to apply for APTC and CSRs, as well as select and 
enroll in a QHP offered through the Exchange (if otherwise eligible). 
In the event that direct enrollment partners in the state do not have 
the technical capability to process any consumer's application, the 
State Exchange would be required to maintain the capability to process 
that application through its own consumer-facing website.
    We proposed in Sec.  155.221(j)(1) that a state with a State 
Exchange that does not rely on the federal eligibility and enrollment 
platform may request approval to pursue the SBE-DE option by submitting 
a revised Exchange Blueprint within 90 days of their targeted launch 
date, in accordance with Sec.  155.105(e) to do so.\27\ We also 
proposed that the State Exchange must meet all other applicable federal 
statutory and regulatory requirements for the operation of an Exchange, 
including establishing and maintaining the single, streamlined 
eligibility application under Sec.  155.405. Following submission of a 
revised Exchange Blueprint, HHS would have up to a total of 90 days 
\28\ to review this revised submission and render a decision as to 
approval. We proposed to codify the new requirement at Sec.  
155.221(j)(2)(ii) that, to obtain HHS approval, the state would need to 
provide HHS an implementation plan and timeline that details the key 
activities, milestones, and communication and outreach strategy to 
support the transition of enrollment operations to direct enrollment 
entities. Additionally, in accordance with Sec.  155.105(c)(2) and the 
new requirement proposed at Sec.  155.221(j)(1)(ii), a State Exchange 
that implements the SBE-DE option would be required to demonstrate to 
HHS operational readiness for the State Exchange and its proposed 
direct enrollment entities to enroll qualified individuals in a QHP in 
a manner that constitutes enrollment through the Exchange and to enable 
individuals to apply for APTC and cost sharing for QHPs.
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    \27\ This approach is consistent with the framework established 
in prior rulemakings that require a state to notify HHS and receive 
written approval from HHS before significant changes are made to the 
Exchange Blueprint. See, for example, 77 FR at 18316. Significant 
changes could include altering a key function of Exchange operations 
or other changes to the Exchange Blueprint that would have an impact 
on the operation of the Exchange. This includes, but is not limited 
to the process for enrollment in a QHP. See, for example, 76 FR at 
41871.
    \28\ As detailed in Sec.  155.105(e), HHS generally has 60 days 
after receipt of a completed request to complete its review of a 
significant change to an Exchange Blueprint and, for good cause, may 
extend the review period by an additional 30 days up to a total of 
90 days.
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    While we proposed that State Exchanges that elect to implement the 
Exchange DE option would retain the flexibility to determine their own 
business controls, as well as to decide the state-specific requirements 
and mechanisms for approval and oversight of direct enrollment entities 
operating in the state, we would encourage these states to review and 
adopt processes and standards similar to those in the existing FFE 
federal direct enrollment and EDE framework, as described in 45 CFR 
155.220, 155.221, 156.1230, and in sub-regulatory guidance.\29\ 
Moreover, we proposed to codify a new requirement at Sec.  
155.221(j)(1)(iii) whereby State Exchanges that elect to implement the 
Exchange DE option are obligated to ensure that a minimum of one state-
approved direct enrollment entity meets the minimum federal 
requirements applicable to DE entities that seek approval to 
participate in the FFE DE program, including requirements at 45 CFR 
155.220 and 155.221, and is capable of enrolling all consumers in the 
state. In particular, we explained that we believe it is critical that 
State Exchanges that elect to implement the Exchange DE option ensure, 
at a minimum, that at least one approved web-broker DE entity meets 
requirements that align with the FFE standards under 45 CFR 
155.220(c)(3)(i)(A) and (D) \30\ to ensure

[[Page 6146]]

consumers have at least one option through which to view detailed QHP 
information for all available QHPs in the state that also meets 
accessibility requirements under 45 CFR 155.205(c). Therefore, we 
proposed that if no direct enrollment partner in an SBE-DE state meets 
these requirements, the state would be required to continue operation 
of its own Exchange website to ensure there is one enrollment pathway 
in the state that does. To assist states in meeting requirements to 
become an SBE-DE, we noted that states would have the flexibility to 
partner with an existing, HHS-approved web-broker direct enrollment 
partner as a starting point to develop their own direct enrollment 
programs, as these entities would have already met requirements for HHS 
approval to participate in the FFE's DE program.
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    \29\ See generally CMS guidance for becoming a web-broker in the 
FFEs, available at: https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2020-WB-Program-Guidance-052120-Final.pdf.
    \30\ In addition to ensuring there is at least one website 
available in the state that satisfies all accessibility requirements 
under Sec.  155.205(c), we proposed that there must also be at least 
one website available in the state through which consumers can view 
and enroll in all available QHPs in the state.
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    We requested comment on all aspects of these proposals, including 
any comments related to timing, governance, and any other 
considerations needed to effectively operationalize these proposed FFE-
DE, SBE-FP-DE, and SBE-DE options. The following is a summary of the 
comments we received and our responses.
    Comment: We received several comments that expressed support for 
the proposed Exchange DE option because of the flexibility it provides, 
noting that the Exchange DE option will increase consumer choice and 
competition among DE entities, potentially leading to reduced costs for 
consumers. These comments also included caveats or recommendations. For 
example, one commenter recommended delaying implementation of the 
proposed Exchange DE option pending additional stakeholder consultation 
to further explore potential advantages or disadvantages of the 
proposed Exchange DE option, including conducting consumer focus 
groups, accounting for operational considerations for QHPs and stand-
alone dental plans (SADP), and conducting an assessment of the 
potential impact of the Exchange DE option on enrollment and premiums. 
One commenter recommended additional consumer support options be made 
available, namely the adoption of controls to ensure non-QHP options 
are readily-identifiable. Another commenter recommended that HHS work 
closely with DE entities, including issuers, in advance of 
implementation of the proposed Exchange DE option to further develop 
operational requirements. This commenter also recommended that there be 
one primary website available to consumers to enter their information 
so that they do not have to complete multiple eligibility applications.
    Response: We appreciate commenters' support for this option and are 
finalizing with some minor clarifying edits to the regulatory text. We 
believe the Exchange DE option will provide states and Exchanges with 
additional flexibility to tailor consumers' health insurance shopping 
experience, allowing states and their residents to reap the expected 
potential benefits of leveraging private sector DE partners, including 
increased choice in consumer experience to complete the enrollment 
process, access to information on additional plan options, and lower 
costs. We also underscore that this option is strictly permissive for 
states, and we welcome states that are interested in pursuing these 
options to undertake research, stakeholder consultation particularly 
with issuers and web-brokers, and data gathering at the state level to 
inform any operational requirements related to how the Exchange DE 
option is implemented to ensure it is tailored to meet the needs of 
their residents.
    We also believe it is important for consumers to have access to 
tools and resources to compare their coverage options. Under the 
Exchange DE option, consumers will be able to view standardized 
information to compare QHPs using the website of their choice, and will 
still be able to access HealthCare.gov (or similar information 
technology infrastructure in a state with a State Exchange) should they 
choose to, or if necessary. Consumers will also continue to have access 
to other Exchange tools and resources--such as the single, streamlined 
eligibility application, a toll-free telephone number to request 
assistance, an electronic calculator to determine the actual cost of 
coverage after the application of any APTC and CSRs, as well as 
Navigators, other Assisters, and licensed agents and brokers. As 
detailed elsewhere in this final rule, at a minimum, the existing FFE 
DE program requirements will continue to apply in any state that is 
approved to implement an FFE-DE or SBE-FP-DE. These existing 
requirements include several safeguards to ensure non-QHP options are 
readily identifiable.\31\ For SBE-DE states, we finalize in Sec.  
155.221(j)(1)(iii) the requirement for the state to ensure that a 
minimum of at least one DE entity approved by the state meets minimum 
federal requirements to participate in the FFE DE program (including 
the FFE's plan display requirements) and we encourage these states to 
more broadly adopt standards similar to the existing FFE DE program for 
all DE partners approved by the state.
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    \31\ See, for example, 45 CFR 155.221(b)(1)-(3). In the proposed 
rule, we proposed to provide additional flexibilities regarding the 
plan display standards currently captured at 45 CFR 155.221(b)(1) 
and (3) in certain circumstances. See 85 FR at 78616-78618. We 
intend to address these proposals in future rulemaking and, if 
finalized, would also consider and address the intersection with the 
new Exchange DE option as necessary or appropriate.
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    We believe that the Exchange DE option will drive the private 
sector to make consumer-centric investments that will improve 
consumers' shopping experiences, as these private entities are 
incentivized to provide the best possible consumer experience to retain 
their consumer base year-over-year and to attract new consumers each 
year. While the Exchange DE option is not available today, with an 
expanded available customer base, issuers, web-brokers, and individual 
agents and brokers will have an increased incentive to invest in 
providing the resources necessary to serve a majority of consumers, and 
in focusing marketing and outreach activities to attract new consumers, 
including the currently uninsured population. We believe these 
increased incentives to invest in the consumer enrollment experience 
will, over time, increase consumer enrollment by persons who would not 
otherwise have enrolled, a potentially healthier population who may 
improve the health of the risk pool and lead to lower premiums.
    Comment: Nearly all commenters on this rulemaking cautioned about 
potential harmful impacts to consumers from the introduction of the 
Exchange DE option. Commenters asserted that the Exchange DE option may 
effectively eliminate access to HealthCare.gov and State Exchange 
websites, by allowing access to apply and enroll for QHP coverage 
through multiple private websites operated by DE entities. Commenters 
believed that because existing Exchange consumers have established 
relationships with, and have relied on, the centralized Exchange 
enrollment website in their state to serve as an unbiased resource to 
provide eligibility determinations, enroll in QHPs, and receive APTC/
CSR eligibility determinations, the Exchange DE option would result in 
a new, fragmented process that would likely lead to consumer confusion 
and mistrust. They further stated that the negative impacts of 
effectively eliminating the Exchange-run enrollment websites as an 
option would outweigh the benefits of making this new option available 
to consumers. One commenter, which operates as an EDE entity, noted 
that while DE entities account for a significant volume of

[[Page 6147]]

HealthCare.gov enrollment today, elimination of the centralized FFE or 
SBE enrollment platforms would lead to various forms of disruption for 
the majority of consumers who already are accustomed to relying on an 
Exchange-operated website for enrollment.
    Response: We understand commenters' concerns about the potential 
impact of the Exchange DE option and acknowledge that any transition or 
change can be unsettling and disruptive. However, we disagree that the 
potential negative impacts of the Exchange DE option outweigh the 
benefits given the success of the Federal DE and EDE pathways, and we 
note that the Exchange DE option is not a requirement for states, and 
that states have ample flexibility to tailor operational requirements 
and any transition steps to the needs of their health care markets. We 
also note that several states have made full transitions from the FFE 
to become an SBE, providing models of successful transitions to new 
enrollment platforms with minimal disruptions. In addition, an Exchange 
in a state that elects this option must at a minimum continue to 
operate an internet website that provides the same standardized 
comparative QHP information that is available today, along with an up-
to-date listing of approved DE entities operating in the state. We 
believe that the continued availability of this website will mitigate 
any potential consumer confusion caused by the availability of multiple 
enrollment pathways. We further note that in states that choose to 
implement the Exchange DE option, the Exchange will remain available to 
consumers whose eligibility applications cannot be processed by an 
approved DE entity. States choosing the Exchange DE option also have 
the flexibility to continue making available its Exchange eligibility 
and enrollment website despite the availability of DE partner websites, 
or to define other instances in which the Exchange enrollment website 
would be available to consumers, including instances in which a 
consumer makes a request to apply through an Exchange-run website. We 
are also requiring that Exchanges in states choosing to implement the 
Exchange DE option continue to meet all applicable statutory and 
regulatory requirements. This includes, but is not limited to, the 
Exchange retaining responsibility for making all determinations of 
whether an applicant is eligible for QHP enrollment, APTC, and CSRs, 
conducting required verifications of consumer eligibility against 
trusted data sources, and conducting assessments or determinations of 
eligibility for Medicaid and CHIP for all applicants, and where 
appropriate, refer individuals assessed or determined eligible for such 
coverage to the appropriate state Medicaid agency for enrollment in 
those programs. Consumers will therefore continue to have access to an 
unbiased resource for comparative QHP information and eligibility 
determinations in states that elect this option. We also strongly 
encourage DE entities to undergo appropriate coordination efforts with 
the Exchange. In particular, additional coordination will be required 
to ensure consumer communications, particularly consumer eligibility 
notices sent by the Exchange regarding coverage obtained by enrolling 
through a DE entity website do not result in consumer confusion.
    The FFE already has experience transitioning consumers already 
enrolled in Exchange coverage through HealthCare.gov between enrollment 
platforms to new State Exchange platforms as evidenced by the 
successful transitions of SBE-FP states to SBE states. Most recently, 
ahead of the plan year 2021 open enrollment period, New Jersey and 
Pennsylvania transitioned from SBE-FPs to SBEs. Among the most critical 
work streams associated with these transitions was the migration of 
these states' consumer eligibility and enrollment data from 
HealthCare.gov to the respective State Exchange eligibility and 
enrollment platforms such that existing Exchange consumers could re-
enroll directly through the State Exchange. We believe that any 
consumer disruptions can be minimized during a transition process by 
incorporating safeguards during the transition, such as robust 
stakeholder consultation with issuers and other partners, proactive 
coordination with other state agencies, targeted consumer outreach and 
education, and contingency planning to ensure consumers can fall back 
on HealthCare.gov if needed. The implementation plans developed under 
Sec.  155.221(j)(1)(ii) and (j)(2)(i) should include details on any 
such measures. In addition, for states pursuing the SBE-DE option, HHS 
intends to examine these types of issues as part of the operational 
readiness assessment under Sec.  155.221(j)(1)(i). Based on the FFE's 
experience, we expect that given the ability of existing DE entities to 
meet consumer needs and reduce burden on Exchanges, introducing DE 
entities as the primary consumer-facing pathway to enroll in coverage 
in states that elect this new option will be beneficial to all 
stakeholders.
    Comment: An overwhelming majority of commenters on this rulemaking 
argued that there are potential conflicts of interest, particularly 
financial incentives, that would put DE entities at odds with consumers 
seeking coverage and the policy goals of PPACA. Commenters noted that 
the proposed Exchange DE option will increase the incentive for DE 
entities, particularly agents and brokers, to compete among each other 
for commissions, which could lead to consumers being directed to the 
most profitable products, rather than those best-suited for their 
health care needs. Several commenters emphasized that, in many cases, 
the most profitable product for DE entities is non-QHP coverage. 
Commenters thus fear that the Exchange DE option could lead to 
deceptive marketing practices and an increase in fraud, as well as more 
consumers who are uninsured, or who enroll in coverage even if it does 
not adequately meet their health care needs. Commenters were also 
concerned that the Exchange DE option could result in consumers being 
steered toward less robust non-comprehensive coverage (for instance, 
short-term limited duration insurance (STLDI) plans) that generally 
bring higher commissions to agents and brokers and web-brokers, but do 
not meet PPACA requirements. Commenters also asserted that consumers 
could be required to pay higher out-of-pocket costs because they did 
not receive information related to, or were misinformed about, the 
availability of Exchange financial assistance. A few commenters raised 
similar concerns related to Navigators and other Exchange assisters 
using DE entity websites to enroll consumers since consumers could be 
misled by the inclusion of non-QHP products on the DE entity websites, 
by the omission of critical information related to coverage options, or 
by confusion that could result when consumers are required to visit 
multiple DE entity websites to review comprehensive information on all 
available QHPs in a state.
    Several commenters also raised concerns about protecting consumer 
privacy and security under the Exchange DE option, under which a 
consumer must share personally identifiable information with a private 
DE entity that could be misused in the absence of a robust regulatory 
framework to protect against this abuse.
    We also received many comments that cautioned against potential 
negative impacts of working with DE entities to coordinate coverage 
with other insurance affordability programs. In

[[Page 6148]]

particular, commenters noted that DE entities generally do not have the 
incentive or expertise to ensure consumers receive a Medicaid 
eligibility assessment or determination, and to subsequently transfer 
them to the appropriate state website to complete the enrollment 
process. These commenters requested additional information on how HHS 
would ensure that this coordination of coverage will occur in order for 
HHS to maintain its ``no wrong door'' policy.
    Response: We acknowledge that there must be sufficient oversight of 
all states approved to implement the Exchange DE option, as well as 
oversight of the DE entities themselves, to ensure the proper alignment 
and management of incentives. The many comments we received that raised 
concerns around potential misalignment of incentives and conflicts of 
interest serve to highlight key areas where HHS and the states can be 
proactive to implement additional controls and work closely with DE 
entities to prevent fraud, waste, and abuse, particularly with respect 
to protecting against deceptive marketing and inappropriate steering. 
We reiterate that, at a minimum, the existing FFE DE program 
requirements will continue to apply in any state that is approved to 
implement an FFE-DE or SBE-FP-DE. These existing requirements include 
safeguards to protect against deceptive marketing practices and ensure 
consumers have the information they need to make informed 
decisions.\32\ For SBE-DE states, we finalize in Sec.  
155.221(j)(1)(iii) the requirement for the state to ensure that a 
minimum of at least one DE entity approved by the state meets minimum 
federal requirements to participate in the FFE DE program (including 
the FFE's safeguards to protect against deceptive marketing practices 
and ensure consumers have the information needed to make informed 
decisions) and we encourage these states to more broadly adopt 
standards similar to the existing FFE DE program for all DE partners 
approved by the state. We note too that recent federal legislation 
addressing surprise billing \33\ generally requires issuers of STLDI 
plans to disclose to potential enrollees any broker commissions for 
STLDI plans prior to plan selection. This transparency requirement 
should further mitigate risk presented by any misalignment of 
incentives that could result in inappropriate steering. Other controls 
could also be implemented by states to check misalignment of incentives 
and mitigate the risk that DE entities will improperly steer consumers 
toward non-QHP products and allow consumers to make informed choices.
---------------------------------------------------------------------------

    \32\ See, for example, 45 CFR 155.220(j)(2)(i) and 
156.1230(b)(2). Also see supra note 30.
    \33\ See Sec. 202 of Division BB of Public Law: 116-260, the 
Consolidated Appropriations Act, 2021, signed into law on 12/27/
2020. https://www.congress.gov/bill/116th-congress/house-bill/133.
---------------------------------------------------------------------------

    We also reiterate that DE entities operating under the FFE-DE and 
SBE-FP-DE options would be required to meet FFE privacy and security 
standards while SBE-DEs have the flexibility to ensure similar 
standards are in place to protect consumer information. HHS intends to 
continue to strengthen the regulatory and operational controls that 
would apply to DE entities operating in FFE and SBE-FP states that 
elect this option to ensure that sufficient protections are in place. 
Generally, assuming due diligence and appropriate regulatory and 
operational safeguards to ensure oversight over DE entities, and taking 
into account that these organizations have a strong business interest 
in serving their customers effectively to maintain their customers, we 
believe that the balance of risk is acceptable. Thus, we believe that 
the potential benefits of the Exchange DE option outweigh the burdens 
of oversight and the risk of fraud, waste, and abuse.
    We also agree that it is important for consumers to continue 
receiving Medicaid and CHIP eligibility assessments or determinations 
when they apply for Exchange QHP enrollment and financial assistance 
through DE entities. In states implementing the Exchange DE option, the 
Exchange would still be required to establish and maintain the single, 
streamlined eligibility application as required under Sec.  155.405, 
and make eligibility assessments and determinations of Medicaid or CHIP 
eligibility as required under Sec.  155.302. Exchanges would also 
remain the entity responsible for making all determinations of whether 
an applicant is eligible for QHP enrollment, APTC, and CSRs, conducting 
required verifications of consumer eligibility against trusted data 
sources, and SBE-FPs and FFEs that elect this option can choose among 
HHS-approved entities already operating through the FFE's DE program, 
and we are requiring SBE-DEs to have at least one DE entity with whom 
they partner that can display and allow for enrollment in all QHPs 
available in the state. We also intend to work closely with states 
electing this option to ensure that they meet these and other 
applicable requirements, and that there are appropriate back-end 
application interfaces in place between the Exchange's eligibility 
platform and approved DE entities to ensure that all consumers have a 
seamless experience completing the single, streamlined eligibility 
application and receiving an eligibility determination just as if they 
were applying for coverage directly through the Exchange website. These 
are examples of the areas HHS intends to focus on when assessing an 
SBE-DE state's operational readiness under Sec.  155.221(j)(1)(i) and 
implementation plan under Sec.  155.221(j)(1)(ii). For states 
interested in pursuing the FFE-DE or SBE-FP-DE option, these are areas 
that would need to be considered and addressed, as appropriate, as part 
of the implementation plan under Sec.  155.221(j)(2)(i) and the Federal 
agreement under Sec.  155.221(j)(2)(ii). While we acknowledge comments 
that the Exchange DE option could produce a disjointed enrollment 
process to a certain degree for some consumers, we believe that the 
benefits of providing consumers with more options outweigh the 
drawbacks, especially since they will still be completing the single, 
streamlined eligibility application on an approved DE partner's website 
in order to access APTCs and CSRs, or access Medicaid and CHIP 
coverage, if eligible. We also believe our focus on coordinating 
closely with states as part of the rollout process and transition to 
the Exchange DE option will help mitigate any risk of a reduction in 
Exchange or Medicaid and CHIP enrollment, as well as any potential 
increase in the uninsured.
    Finally, the availability of the Exchange DE option does not 
directly affect the existence or operation of Navigator and other 
assister programs created by PPACA. As indicated above and detailed in 
the proposed rule, states that implement the Exchange DE option (DE 
states) will still be required to establish a Navigator program as 
required under section 1311(d)(4)(K) of PPACA. In all states that are 
approved to implement the DE option, the Exchange in the state must 
continue to make available an internet website that provides the same 
standardized comparative information on QHP options that is available 
on Exchange websites today. Therefore, Navigators and certified 
application counselors (collectively assisters), as well as agents and 
brokers, in DE states will still be able to view on State Exchange 
websites or HealthCare.gov, as applicable, comparative information for 
all QHP options available in the state, and will also be able to access 
information to connect with approved DE entities in their states. 
Moreover, each DE state

[[Page 6149]]

must ensure that at least one DE entity website is capable of 
processing all eligibility applications, including those that present 
complex enrollment scenarios, or else the state must continue to make 
available its own website that possesses such capability.
    Finally, we note that the DE option requirements we finalize in 
this rule will provide Navigators and certified application counselors 
greater flexibility to effectively assist consumers than currently 
exists under the FFE's assister programs. For instance, in 2015 the FFE 
issued guidance (the 2015 guidance) instructing that FFE assisters 
should not use non-Exchange websites when providing enrollment 
assistance except as reference tools to supplement information on 
HealthCare.gov. But given the consumer protections that will apply in 
DE option states to ensure ready access to information on all QHPs 
available in a state (which include consumer-protective requirements 
that were not in place at the time we published the 2015 guidance),\34\ 
there is no need to similarly limit assisters' ability to use DE entity 
websites to assist consumers.\35\ We appreciate that actual 
implementation of the DE option will require states and HHS to closely 
monitor the program to ensure that consumers are receiving complete and 
accurate information and effective assistance. In the event HHS becomes 
aware of the need for additional or different DE option requirements, 
or greater clarity regarding DE option requirements, HHS may issue 
future guidance or pursue future rulemaking.
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    \34\ See 85 FR 78613.
    \35\ As detailed in the proposed rule, we are also revisiting 
our policy regarding the ability of FFE assisters' use of web-broker 
non-Exchange websites. See 85 FR at 78611-78614. If finalized as 
proposed, this policy change would permit assisters in FFEs and SBE-
FPs to also use web-broker non-Exchange websites to assist consumers 
with QHP selection and enrollment, provided certain conditions are 
met.
---------------------------------------------------------------------------

    Comment: Many commenters argued that HHS does not have the legal 
authority under sections 1103,1302, 1311, or 1312 of PPACA to permit 
states and Exchanges to implement the Exchange DE option. Some 
commenters also argued that the Exchange DE option violates the spirit 
and intent of PPACA and represents an attempt to replace congressional 
legislation in violation of the Administrative Procedure Act (APA). 
Other commenters argued that the Exchange DE option is not based on a 
reasonable interpretation of specific aspects of PPACA and implementing 
regulations. In particular, some commenters argued that the Exchange DE 
option violates Section 1311(d)(1) of PPACA that requires that 
Exchanges be operated by a ``governmental agency or nonprofit entity 
that is established by a State.'' Some commenters also argued that HHS 
does not have the authority to delegate essential government functions 
currently performed by Exchanges to private entities.
    Response: We disagree. The Exchange DE option requires that 
participating states and HHS continue to meet all applicable 
requirements of PPACA, including applicable requirements under section 
1311 of PPACA. This is captured in the regulatory text at Sec.  
155.221(j)(1) and (2), which states that Exchanges must meet all 
federal statutory and regulatory requirements for the operation of an 
Exchange. As detailed above and in the proposed rule, Exchanges in 
states that elect this option must continue to provide the required 
minimum functions established in PPACA and comply with applicable 
requirements. This includes the responsibility to make all 
determinations of whether an applicant is eligible for QHP enrollment, 
APTC, and CSRs; conducting required verifications of consumer 
eligibility against trusted data sources; conducting assessments or 
determinations of eligibility for Medicaid and CHIP, and where 
appropriate, referring individuals who are assessed or determined 
eligible for Medicaid or CHIP to the appropriate state agency for 
enrollment in those programs; certifying plans as QHPs, making QHPs 
available to consumers, and facilitating the purchase of QHPs; granting 
exemption certifications, as applicable; making an electronic 
calculator available; establishing a Navigator program; and providing 
for the operation of a toll-free telephone hotline. In the context of 
operating an internet website, we interpret the statutory language at 
section 1311(c)(5) and (d)(4)(C) of PPACA to require that Exchanges 
provide consumers with the ability to view comparative information on 
QHP options, but that the Exchange may direct consumers to other 
entities or resources for purposes of submitting applications for 
eligibility and enrolling in QHPs, with APTC and CSRs, if otherwise 
eligible. An Exchange can continue to meet these obligations without 
operating a consumer-facing enrollment website and Exchanges in states 
that elect this option must continue to operate a website that provides 
the same standardized comparative information about QHPs that is 
available today.\36\ In addition, we maintain that states choosing to 
transition to the SBE-DE or SBE-FP-DE option must still meet the 
requirements of Section 1311(d)(1) of PPACA.\37\ The arrangements that 
states would make with the DE entities approved to provide a consumer 
shopping and enrollment portal would be no different than the current 
contracting arrangements that HHS enters into today with approved 
partners who participate in the FFE DE program. It is also similar to 
the arrangements Exchanges may enter into today to provide other 
services, such as a call center, to their consumers.\38\ Finally, we 
note how the Exchange DE option aligns with the general structure of 
how PPACA assigns states substantial authority to administer provisions 
of the law--including giving states the primary responsibility to 
create Exchanges and relying on states as the primary enforcers of 
PPACA's insurance regulations and Exchange requirements.\39\ 
Accordingly, HHS is of the view that the Exchange DE option is 
consistent with the language, spirit, and intent of PPACA and its 
implementing regulations and there is sufficient authority to permit 
states to pursue this option. Moreover, consumers would still have 
available to them a centralized website, operated by the Exchange, to 
obtain standardized comparative information about available QHPs, as

[[Page 6150]]

well as information about and links to approved partners' enrollment 
websites. Finally, they would still have access to the Exchange itself 
to apply for, and enroll in, coverage should that be necessary. Given 
that states electing the Exchange DE option remain subject to the 
requirements of PPACA and its implementing regulations, we further 
disagree that the flexibility we are providing to meet those 
requirements constitutes an attempt to replace congressional 
legislation in violation of the APA.
---------------------------------------------------------------------------

    \36\ We further note that HHS met its obligations under section 
1103 of PPACA when it established the internet Portal and developed 
the standardized format to be used for the presentation of 
information on coverage option by July 1, 2010. See, for example, 
Health Care Reform Insurance Web Portal Requirements; Interim Final 
Rule with Comment Period, 75 FR 24470 (May 5, 2010). We also 
disagree with commenters who suggested that sections 1302 or 1312 of 
PPACA are legal obstacles to the adoption of the Exchange DE option. 
Section 1302 relates to the development of the essential health 
benefits package and accompanying benefit requirements (for example, 
requirements related to cost-sharing and actuarial value levels of 
coverage). Section 1312 establishes requirements related to consumer 
choice and the establishment of single risk pools by issuers. As 
such, section 1302 and section 1312's single risk pool provisions 
generally outline benefits, plan design, and rating requirements 
applicable to issuers of non-grandfathered health insurance 
coverage, and issuers must continue to comply with these 
requirements in any state that elects to adopt the Exchange DE 
option. The other provisions in section 1312, such as those related 
to consumers' choice of whether to enroll in coverage through an 
Exchange, the continued operation of the market outside the 
Exchanges, the option for states to allow agents or brokers to 
assist with Exchange enrollments, and the enrollment of members of 
Congress in plans offered through an Exchange also would continue to 
apply in states that elect to adopt the Exchange DE option and do 
not preclude our finalizing the Exchange DE option.
    \37\ For FFE states that elect and are approved to transition to 
the FFE-DE option, CMS, on behalf of HHS will continue to be 
responsible for operation of the Exchange consistent with section 
1321(c)(1).
    \38\ See, for example, section 1311(f)(3).
    \39\ See section 2723(a)(1) of the PHS Act and section 
1321(c)(2).
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    Comment: Many commenters argued that the Exchange DE option is not 
legally permissible in the absence of a section 1332 waiver, and should 
only be approved through the section 1332 waiver process. Some 
commenters highlighted in particular the benefits of the section 1332 
waiver public notice and comment process as an additional safeguard 
that they asserted would be beneficial to any state interested in 
pursuing the Exchange DE option. Some commenters further argued that 
Georgia's recent section 1332 waiver proposal to implement activities 
similar to those proposed under the Exchange DE option was wrongfully 
approved and that even if another state were to apply for a section 
1332 waiver to implement the Exchange DE option, such a waiver plan 
would violate section 1332's coverage guardrail because they believe 
enrollment would generally be reduced.
    Response: The merits of the Departments' decision to approve 
Georgia's section 1332 waiver is not in the scope of this rulemaking. 
However, we clarify that a section 1332 waiver is not required for a 
state to be approved for and to implement the Exchange DE option. 
Georgia's section 1332 waiver is distinguishable from the Exchange DE 
option we finalize here because states that elect and implement the 
Exchange DE option would still be required to meet all Exchange 
requirements under PPACA, while under its section 1332 waiver plan 
Georgia waived certain Exchange requirements under section 1311.\40\ 
Moreover, under Georgia's section 1332 waiver, consumers in Georgia 
will no longer be able to access and utilize HealthCare.gov, and a 
state statute expressly prohibits the state from implementing a State 
Exchange and from establishing a Navigator program or its 
equivalent.\41\
---------------------------------------------------------------------------

    \40\ As detailed in Georgia's approval letter and Specific Terms 
and Conditions (STCs), the Exchange requirements in sections 
1311(b), (c), (d), (e) and (i) are waived to the extent they 
conflict with the Georgia Access Model as described in the state's 
approved waiver. See https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_State_Innovation_Waivers-/1332-GA-Approval-Letter-STCs.pdf.
    \41\ See O.C.G.A. sec. 33-1-23, available at: https://law.justia.com/codes/georgia/2019/title-33/chapter-1/section-33-1-23.
---------------------------------------------------------------------------

    In contrast, in states that elect the FFE-DE or SBE-FP-DE option, 
consumers will continue to have the HealthCare.gov website available to 
them to view standardized comparative information about QHPs and the 
Exchange will be required to continue to operate its respective 
Navigator program. States that elect to become or transition to an SBE-
DE would similarly be required to maintain and make available the State 
Exchange website for standardized comparative information, the state's 
respective Navigator program to assist consumers, and the state's 
associated eligibility rules engine to make eligibility determinations, 
as well as the state's enrollment platform, in the event that there is 
not a DE entity capable of processing a consumer's application. We also 
recognize the importance of a meaningful public notice and comment 
process, and note that states that elect to pursue the Exchange DE 
option have the discretion to provide for a state public notice and 
comment process should they deem it to be beneficial.
    Comment: Many commenters noted that programmatic guardrails or 
operational parameters are not adequately defined and incorporated into 
the rule to allow for effective implementation of the Exchange DE 
option, particularly with respect to ensuring oversight over DE 
entities. In particular, commenters noted a lack of clarity about the 
responsibilities of DE entities regarding administering consumer 
education and assistance to ensure consumers are not confused or misled 
about their coverage options. In particular, commenters noted that it 
is not clear how HHS would ensure DE entities operate in an unbiased, 
transparent manner such that consumers can effectively compare and make 
an informed choice among all available QHP options, know when they are 
viewing non-QHP options, and receive information on public coverage 
options they may be determined eligible for, such as Medicaid and CHIP. 
Several commenters noted that we should be more definitive about the 
responsibilities of the DE entities regarding display of QHPs and 
choice of QHPs, including how DE entities and Exchanges should handle 
the scenario where a consumer wishes to enroll in an issuer's QHP when 
a particular DE entity is not appointed to sell products by that 
issuer.
    Response: In proposing the Exchange DE option, we wanted to strike 
an appropriate balance to provide states with appropriate flexibility 
to implement the Exchange DE option in a manner that is tailored to the 
needs of their unique health care markets while still meeting the 
applicable federal requirements. We have included a broad framework of 
baseline federal requirements governing the Exchange DE option in this 
final rule and welcome states interested in pursuing this option to 
adopt any additional state-specific requirements they deem necessary to 
effectively oversee DE entities and protect consumers. It is important 
to note that the framework of programmatic parameters and federal 
requirements governing the Exchange DE option included in this final 
rule is meant to serve as a floor and not a ceiling. We also share 
commenters' concerns about ensuring effective oversight over DE 
entities and protecting consumers. As explained in the proposed rule, 
given that an FFE-DE or SBE-FP-DE state would use one or more DE 
entities approved to participate in the FFE DE program, at a minimum, 
the FFE privacy and security standards \42\ and the FFE DE program 
requirements \43\ would continue to apply. This includes the 
requirement for web brokers under Sec.  155.220(c)(3)(i)(B) to provide 
consumers with the ability to view all QHPs offered through the 
Exchange and the corresponding similar requirement for issuers at Sec.  
156.1230(a)(1)(ii); the requirement for web brokers under Sec.  
155.220(c)(3)(i)(A) to display QHP information comparable to 
information available on the Exchange website or display a subset of 
QHP information and a disclaimer with a link to the Exchange and the 
corresponding similar requirement for issuers at Sec.  
156.1230(a)(1)(iv); as well as the requirements at Sec. Sec.  
156.1230(b)(2) and 155.220(j)(2)(i) applicable to all DE entities to 
provide consumers with correct information, without omission of 
material fact, and refrain from marketing or conduct that is 
misleading, coercive, or discriminatory.
---------------------------------------------------------------------------

    \42\ See 45 CFR 155.260 through 155.285.
    \43\ See 45 CFR 155.220, 155.221 and 156.1230.
---------------------------------------------------------------------------

    For SBE-DE states, we codify in Sec.  155.221(j)(1)(iii) the 
requirement for the state to ensure that a minimum of at least one DE 
entity approved by the state meets minimum federal requirements for HHS 
approval to participate in the FFE DE program (including the examples 
highlighted in the prior sentence) and we encourage these states to 
more broadly adopt processes and standards similar to the

[[Page 6151]]

existing FFE DE program for all DE partners approved by the state. At 
the same time, however, SBE-DE states would retain general flexibility 
to determine their own business controls, as well as to decide the 
state-specific requirements and mechanisms for approval and oversight 
of direct enrollment entities operating in the state. HHS would review 
and assess an SBE-DE state's process, standards and oversight approach 
for DE entities as part of the operational readiness assessment under 
Sec.  155.221(j)(1)(i). We also intend to continue engaging 
stakeholders on, and develop, additional programmatic and operational 
requirements through future rulemaking and sub-regulatory guidance, as 
necessary or appropriate. Furthermore, additional technical assistance 
and operational details related to implementation of the FFE-DE and 
SBE-FP-DE options may be best defined and addressed during the 
development of the implementation plan under Sec.  155.221(j)(2)(i) and 
the federal agreement that states electing to implement the FFE-DE or 
SBE-FP-DE option must execute with HHS under Sec.  155.221(j)(2)(ii). 
This approach allows HHS to be responsive to programmatic and 
operational concerns in real time, as well as tailor the implementation 
to meet a state's unique market conditions or needs of its residents.
    Comment: Several supportive commenters recommended that CMS delay 
implementation of the Exchange DE option pending further research, 
evidence gathering, stakeholder consultation, and a more robust public 
comment process to quantify potential impacts and adequately inform 
programmatic and operational parameters. Many opposing commenters 
requested that we strike it from this rulemaking entirely for the same 
reasons. In particular, commenters noted interest in potential impacts 
on premiums, as well as how enrollment in various insurance 
affordability programs and the uninsured could impact the risk pool. 
Other commenters noted that it is not clear that the Exchange DE option 
represents a better value proposition than the current centralized 
Exchange enrollment model and requested that HHS gather additional data 
to quantify the value of this new option. Commenters questioned the 
premise that a centralized consumer-facing website is less efficient 
than fracturing the consumer-facing pathway and consumer experience 
among multiple platforms, potentially leading to increased cost and 
burden on consumers. Many commenters also contend that a centralized 
consumer-facing website is the more efficient and effective model for 
states and Exchanges, as well, rather than the state or an Exchange 
having to manage multiple DE entity relationships and their associated 
technical infrastructure, including multiple DE entity websites and 
their interfaces to the back-end Exchange eligibility and enrollment 
platform that must be managed under the Exchange DE option.
    Response: We proposed and are finalizing this new Exchange DE 
option in response to our experience operating the HealthCare.gov 
platform and stakeholder feedback, including the comments about 
challenges related to Exchanges becoming a dominant public-sector 
competitor that can crowd out other market players. We also emphasize 
this option is strictly permissive for states. Whether the Exchange DE 
option or a centralized Exchange website is more efficient, or provides 
better value, for a given state is contingent on the unique 
circumstances of that state's health care market and the needs of its 
residents. Therefore, we do not believe that one or the other can be 
characterized as generally more efficient, or a better value, across 
all states. As states consider and elect the Exchange DE option, we 
will coordinate and engage in information sharing with these states as 
appropriate to assess the efficacy and value of this option from the 
federal perspective. This will help inform our continued consideration 
and development of programmatic and operational parameters and any 
additional regulatory requirements related to these options. Given that 
the health care market of each state is unique, we also welcome states 
that are interested in pursuing the Exchange DE option to undertake 
their own research, stakeholder consultation, and data gathering to 
determine whether it represents a sensible value proposition for their 
consumers. We also welcome the sharing of any information and data on 
findings, best practices, and lessons learned. Finally, expected 
impacts to the premiums and the risk pool have been addressed in the 
Regulatory Impact Analysis (RIA) in this rulemaking.
    Comment: A few commenters noted that the potential consequences of 
the Exchange DE option, including Exchanges no longer serving as the 
single pathway for many to get covered, present potential barriers to 
accessing QHP or Medicaid coverage, and risks of being underinsured or 
becoming uninsured would disproportionately impact various vulnerable 
groups, namely historically-marginalized populations, individuals with 
pre-existing conditions, individuals with substance-abuse disorders, 
rural and low-income populations, non-English-speaking populations, and 
others. One commenter noted that it could encourage health inequities 
between white communities and communities of color particularly with 
respect to substance abuse addiction.
    Response: We share concerns about health disparities and the 
disproportionate impact on vulnerable population groups or the creation 
of inequity that exist in today's health care system, and commend 
commenters for identifying these issues as particular areas where HHS 
and states can remain proactive and diligent. States that elect to 
pursue the SBE-DE option should consider these issues and detail their 
communication and outreach strategy to target vulnerable populations as 
part of the implementation plan required under Sec.  155.221(j)(1)(ii). 
Similarly, HHS will partner with FFE-DE and SBE-FP-DE states to 
consider these issues when developing the implementation plan under 
Sec.  155.221(j)(2)(i). Through the various requirements and controls 
we are finalizing, particularly accessibility and non-discrimination 
requirements, the requirement that the Exchange remain available to 
consumers who need it, as well as the flexibility states will have to 
implement additional requirements and controls to protect consumers, we 
believe that such disproportionate impacts can be prevented or 
mitigated. We note that the Exchange DE option offers a platform for 
multiple DE entities to compete to serve consumers, which creates an 
opportunity for DE entities to specialize to serve specific 
populations, including vulnerable populations. As such, the Exchange DE 
option holds potential to better connect vulnerable populations to 
coverage than a centralized one-size-fits-all Exchange model. Again, we 
welcome the sharing of any information and data on findings, best 
practices, and lessons learned.
    Following our review of the comments, we are finalizing this 
proposal but have amended the regulatory text to underscore our 
requirement that State Exchanges electing the DE option must ensure at 
a minimum, that at least one approved web-broker DE entity meets 
requirements that align with the FFE standards under Sec. Sec.  155.220 
and 155.221 to ensure consumers have at least one option through which 
to view detailed QHP information for all available QHPs in the state 
and enroll in a QHP. We have also incorporated minor clarifying edits 
throughout the regulatory text. We

[[Page 6152]]

will also continue to assess the need for any additional programmatic 
and operational parameters, as well as any additions to the regulatory 
requirements, to ensure necessary protections for consumers in states 
that implement the Exchange DE option.

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

1. User Fee Rates for the 2022 Benefit Year (Sec.  156.50)
a. FFE and SBE-FP User Fee Rates for the 2022 Benefit Year (Sec.  
156.50(c))
    Section 1311(d)(5)(A) of PPACA requires states to ensure that 
Exchanges are self-sustaining, which may include the state allowing 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 PPACA directs HHS 
to operate an Exchange within the state. Accordingly, in Sec.  
156.50(c), we specify 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. In addition, OMB Circular No. A-25 establishes federal policy 
regarding the assessment of user charges under other statutes and 
applies to the extent permitted by law. Furthermore, OMB Circular A-25 
specifically provides 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 2021, issuers seeking to 
participate in an FFE in the 2022 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 2022 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).
    Activities through which FFE issuers receive a special benefit also 
include the Health Insurance and Oversight System (HIOS) and 
Multidimensional Insurance Data Analytics System (MIDAS) platforms, 
which are partially funded by Exchange user fees. Based on estimated 
costs, enrollment (accounting for anticipated establishment of state 
Exchanges in certain states in which FFEs are currently operating), and 
premiums for the 2021 plan year, we proposed a 2022 user fee rate for 
all participating FFE issuers at 2.25 percent of total monthly 
premiums. This proposed user fee rate reflects our estimates for the 
2022 benefit year of costs for operating the FFEs, premiums, 
enrollment, and transitions in Exchange models (from the FFE and SBE-FP 
models to either the SBE-FP, FFE-DE or State Exchange models (state 
transitions)). The proposed FFE user fee rate is lower than the 3.0 
percent FFE user fee rate that we established for benefit years 2020 
and 2021, and the 3.5 percent FFE user fee rate that we established for 
benefit years 2014 through 2019. After accounting for the impact of the 
lower user fee rate, we estimated that we would have the necessary 
funding available to fully fund user-fee eligible Exchange activities 
in 2022. We sought comment on this proposed 2022 FFE user fee rate.
    As previously discussed, OMB Circular No. A-25 establishes federal 
policy regarding user fees, and specifies that a user charge will be 
assessed against each identifiable recipient for special benefits 
derived from federal activities beyond those received by the general 
public. 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 
specify 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, unless the SBE-FP and HHS agree on an alternative mechanism to 
collect the funds from the SBE-FP or state.
    The benefits provided to SBE-FP issuers by the federal government 
include use of the federal information technology platform and call 
center infrastructure used to support eligibility determinations for 
enrollment in QHPs and other applicable state health subsidy programs 
as defined at section 1413(e) of PPACA, and QHP enrollment functions 
under Sec.  155.400. The user fee rate for SBE-FPs is calculated based 
on the proportion of FFE costs that are associated with the FFE 
information technology infrastructure, the consumer call center 
infrastructure, and eligibility and enrollment services, and allocating 
a share of those costs to issuers in the relevant SBE-FPs. Based on 
this methodology, we proposed to charge issuers offering QHPs through 
an SBE-FP a user fee rate of 1.75 percent of the monthly premium 
charged by the issuer for each policy under plans offered through an 
SBE-FP. This proposed rate is lower than the 2.5 percent user fee rate 
that we had established for the 2021 benefit year. The lower proposed 
user fee rate for SBE-FP issuers for the 2022 benefit year reflects our 
estimates of costs for operating the Federal Exchanges, premiums, 
enrollment, as well as state Exchange transitions for the 2022 benefit 
year, and the costs associated with performing these services that 
benefit SBE-FP issuers. We sought comment on the proposed 2022 SBE-FP 
user fee rate.
    We received public comments on the proposed FFE and SBE-FP user fee 
rates for the 2022 benefit year (Sec.  156.50(c)). The following is a 
summary of the comments we received and our responses.
    Comment: Several commenters supported lowering the FFE and SBE-FP 
user fee rates as proposed, with some commenters supporting the lower 
user fee rates so long as the reduction does not adversely impact FFE 
operations. Other commenters opposed the proposed user fee rates and 
asked that HHS raise the user fee rates to previous levels, 3.5 percent 
for FFE issuers and 2.5 percent for SBE-FP issuers, and use any excess 
user fees for education, consumer outreach, improving HealthCare.gov, 
or to otherwise increase funding levels for these activities. Some 
commenters asked that HHS maintain the current 2021 user fee rates of 
3.0 percent for FFE issuers and 2.5 percent for SBE-FPs issuers. Other 
commenters recommended HHS finalize a lesser reduction to the user fee 
rates than the 0.75 percentage point reductions we

[[Page 6153]]

proposed. Several other commenters opposed the proposed user fee rates, 
noting that the reduction in user fee rates could negatively affect 
State Exchanges by limiting the funding available for national 
marketing and outreach, which those states rely on to encourage 
enrollment in all Exchange types. However, one commenter suggested 
further lowering the FFE and SBE-FP user fee rates to 2 percent and 1.5 
percent respectively. This commenter stated that the additional 
reductions would better align the user fee rates with the reduced scope 
of operations performed by HHS.
    Several commenters asked that HHS use user fees to improve Exchange 
services for populations facing heightened barriers to enrollment, such 
as those in rural areas and those with limited English proficiency. One 
commenter questioned whether lowering the user fee rate was sound 
budgeting practice.
    Response: We are finalizing the 2022 benefit year user fee rates at 
2.25 percent for FFE issuers and 1.75 percent for SBE-FP issuers, which 
is lower than the user fee rates for the 2021 benefit year. We estimate 
that these user fee rates will provide the necessary funding for the 
full functioning of the federal platform for the 2022 benefit year. 
Based on future projected changes in costs, enrollment, and premiums, 
we project that HHS can fully fund federal platform costs associated 
with providing special benefits to these issuers.
    HHS remains committed to providing a seamless enrollment experience 
for consumers who enroll in coverage through an Exchange that uses the 
federal platform and to providing a value based approach to outreach 
and marketing activities. We believe that the services offered by the 
FFEs are sufficient to support all consumers seeking to enroll in 
coverage through the FFEs and SBE-FPs. The experience from the recently 
closed 2021 Open Enrollment Period shows HealthCare.gov and the call 
center operated well with the investments made over recent years to 
improve stability and the consumer experience on the federal platform. 
Specifically, the reduced user fee rates we adopt in this final rule 
will not impede federal platform services and will continue to apply 
resources to cost-effective, high-impact outreach and marketing 
activities that offer the highest return on investment. We will 
continue to evaluate consumer outreach and education needs within the 
normal budget process. Additionally, we will continue to evaluate the 
user fee rates and the associated costs to operate the federal platform 
for future benefit years.
    Comment: Some commenters requested more transparency and data on 
how user fees are calculated and allocated, and information on how 
funding for HealthCare.gov is allocated. Several commenters noted that 
without data transparency, it is difficult to meaningfully comment on 
the proposed user fee reductions. One commenter requested that HHS 
delay finalization of the 2022 benefit year user fee rates until more 
data is made publicly available.
    Response: We believe that the information provided in the proposed 
rule in support of the user fee rate proposals was sufficient to allow 
commenters to meaningfully assess and comment on the appropriateness of 
our user fee rate proposals. As we explained in the preamble to the 
proposed rule, the FFE and SBE-FP user fee rates for the 2022 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 2022 benefit year. To calculate these 
expected costs, we make reasonable assumptions about the expected 
market for the upcoming benefit years and we reconsider these 
assumptions and re-estimate these costs on an annual basis with the 
most recent data available. For example, for the 2022 benefit year, we 
considered whether we needed to make changes to our cost, premium, and 
enrollment assumptions based on data from the 2020 benefit year and 
made updates to our projections as appropriate.
    User fee-eligible costs are estimated in advance of the benefit 
year and are based upon cost targets for specific contracting 
activities that are not yet finalized, and therefore, proprietary. We 
will continue to outline user fee-eligible functional areas in the 
annual HHS notice of benefit and payment parameters, and will evaluate 
contract activities related to operation of the FFE user fee-eligible 
functions. 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 QHP issuers. For example, functions related to risk 
adjustment program operations and operations associated with APTC 
calculation and payment, 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 2022 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 
considered FFE user fee-eligible costs. SBE-FPs conduct their own 
health plan certification reviews and consumer information and 
outreach, and therefore, the SBE-FP user fee rate is determined based 
on the portion of FFE costs that are also applicable to issuers 
offering QHPs through SBE-FPs.
    Based on our estimates and after considering comments, we continue 
to believe that a user fee rate of 2.25 percent for FFE issuers and 
1.75 percent for SBE-FP issuers will provide the necessary funding for 
the full functioning of the federal platform for the 2022 benefit year, 
and therefore, we are finalizing the FFE and SBE-FP user fee rates as 
proposed.
b. FFE-DE and SBE-FP-DE User Fee Rates for the 2023 Benefit Year (Sec.  
156.50(c)(3))
    In the proposed rule, we proposed to allow states served by an FFE 
or SBE-FP to implement the proposed direct enrollment option under 
Sec.  155.221(j) beginning with plan year 2023, under which one or more 
private direct enrollment entities approved by the FFE would operate 
non-Exchange websites through which consumers may apply for and enroll 
in a QHP, with or without APTC or CSR (if otherwise eligible), in a 
manner considered to be through the Exchange. Under the Exchange DE 
option, QHP issuers offering plans through an FFE-DE or SBE-FP-DE would 
continue to receive some of the benefits received by FFE and SBE-FP 
issuers; however, some consumer outreach, education, and support 
activities would be provided by the state or through the approved DE 
partners.\44\ As previously discussed, OMB Circular No. A-25 
establishes federal policy regarding user fees, and specifies that a 
user charge will be assessed against each identifiable recipient for 
special benefits derived from federal activities beyond those received 
by the general public. As such, we proposed in new Sec.  156.50(c)(3) 
to charge issuers offering QHPs through an FFE-DE or an SBE-FP-DE a 
user fee for the services and benefits provided to those issuers by HHS 
as the administrator of the FFE. We proposed to charge issuers offering 
QHPs through an FFE-DE or SBE-FP-DE a user fee rate calculated based on 
the proportion of FFE user fee-eligible costs incurred by HHS that are

[[Page 6154]]

associated with implementation and operation of the FFE-DE or SBE-FP-
DE. We assumed that the use of FFE services will be less for FFE-DE and 
SBE-FP-DE states in 2023 than for FFE and SBE-FP states during the same 
time period. Therefore, to provide some certainty for states that 
consider a transition to a proposed FFE-DE or SBE-FP-DE, we proposed a 
2023 user fee rate of 1.5 percent of the monthly premium charged by the 
issuer for each policy under plans offered through an FFE-DE or SBE-FP-
DE in plan year 2023.
---------------------------------------------------------------------------

    \44\ See above for more information on the direct enrollment 
option under Sec.  155.221(j).
---------------------------------------------------------------------------

    In a state that implements the Exchange DE option, the Exchange in 
the state would no longer provide many of the consumer-facing 
enrollment-related activities that are currently being performed 
through the federal platform, or such activities would be substantially 
reduced. For example, the use of the Marketplace call center and 
HealthCare.gov website will be substantially diminished. Because of the 
role of the state in operating SBE-FPs, the value to issuers and the 
associated costs of operating these functions in FFEs are typically 
higher. The reduction of these functions and costs is reflected by a 
larger proposed reduction in the user fee rate for issuers in FFE-DEs 
from the rate applicable in FFEs (from 2.25 percent to 1.5 percent) 
than the reduction in the user fee rate for issuers in SBE-FP-DEs from 
the rate applicable in SBE-FPs (from 1.75 percent to 1.5 percent), 
resulting in the same proposed user fee rate for FFE-DEs and SBE-FP-
DEs. We sought comment on the FFE-DE or SBE-FP-DE user fee rate, 
including whether the rate should be state-specific or higher or lower 
depending on whether the Exchange is an FFE-DE or SBE-FP-DE. We also 
sought comment on the specific services HHS will provide consistent 
with the Federal agreement we proposed to require under new Sec.  
155.221(j)(2)(ii). We sought comment on the FFE-DE and SBE-FP-DE user 
fee rates for the 2023 benefit year.
    We are finalizing the 2023 FFE-DE and SBE-FP-DE user fee rate as 
proposed. We also make clear that HHS intends to collect these user 
fees on a monthly basis as it does with the FFE and SBE-FP user fees, 
consistent with the netting regulations at 45 CFR 156.1210. The 
following is a summary of the public comments we received on the FFE-DE 
and SBE-FP-DE user fee rate proposal for the 2023 benefit year and our 
responses.
    Comment: We received several comments in support of a lower user 
fee rate for FFE-DE and SBE-FP-DE states. Other commenters expressed a 
general skepticism or disapproval of this user fee rate as an extension 
of their disapproval of the proposed Exchange DE option. One commenter 
believed that increased reliance on agents and brokers calls for 
increased spending on their oversight, and thus a higher FFE-DE and 
SBE-FP-DE user fee rate than that proposed would be appropriate.
    Response: We are finalizing the proposed 1.5 percent of premium 
user fee rate for issuers offering plans through FFE-DEs and SBE-FP-DEs 
for the 2023 benefit year. We proposed this user fee rate to provide 
clarity and predictability regarding the user fee rate HHS would assess 
in FFE-DE and SBE-FP-DE states in order to allow states to evaluate 
whether to elect the Exchange DE option beginning with the 2023 benefit 
year. As discussed earlier in the preamble, this user fee rate is 
reflective of the costs incurred by HHS to support FFE-DE and SBE-FP-DE 
operations. Changes to HHS's costs, such as those related to oversight 
of agents and brokers, changes to underlying estimates of premiums and 
enrollment, or changes to the models adopted by states for their 
Exchanges could impact the user fee rate for 2023 or future benefit 
years. Therefore, we will continue to evaluate our estimates and will 
revisit the 2023 FFE-DE and SBE-FP-DE user fee rates in the 2023 
Payment Notice proposed rule in compliance with our regulations.\45\
---------------------------------------------------------------------------

    \45\ We note that even if this further consideration does not 
lead us to propose a change to the FFE-DE or SBE-FP-DE user fee 
rates applicable for the 2023 benefit year, we intend to address the 
2023 FFE-DE and SBE-FP-DE user fee in the 2023 Payment Notice 
proposed rule in compliance with our regulations. See 45 CFR 
156.50(c).
---------------------------------------------------------------------------

    Comment: One commenter questioned the validity of a single user fee 
rate for issuers in FFE-DE and SBE-FP-DE states. The commenter asserted 
that even where differences between the services provided to FFE-DE and 
SBE-FP-DE issuers were minimized, a single user fee rate may not be 
justified.
    Response: The 1.5 percent of premium user fee rate we proposed for 
FFE-DE and SBE-FP-DE issuers was calculated based on the proportion of 
FFE user-fee eligible costs that HHS anticipates it would incur to 
support the operation of an FFE-DE or SBE-FP-DE. We assumed that the 
use of federal platform services will be less for FFE-DEs and SBE-FP-
DEs in 2023 than for an FFE or SBE-FP during the same time period.
    Under the Exchange DE option, an Exchange would no longer provide 
many of the consumer-facing enrollment-related activities that are 
currently being performed through the federal platform for FFEs and 
SBE-FPs, or such activities would be substantially reduced. For 
example, the use of the Marketplace call center and HealthCare.gov 
website will be substantially diminished. Because of the role of the 
state in operating SBE-FPs, the value to issuers and the associated 
costs of operating these functions in FFEs is typically higher. The 
reduction of these functions and costs is reflected by a larger 
proposed reduction in the user fee rate for issuers in FFE-DEs from the 
rate applicable in FFEs (from 2.25 percent to 1.5 percent) than the 
reduction in the user fee rate for issuers in SBE-FP-DEs from the rate 
applicable in SBE-FPs (from 1.75 percent to 1.5 percent). These 
reductions resulted in the same user fee rate for issuers offering QHPs 
through FFE-DEs and SBE-FP-DEs.
2. Network Adequacy Standards (Sec.  156.230)
    We are finalizing the proposed revisions to 45 CFR 156.230, which 
implements section 1311(c)(1)(B) of PPACA and describes network 
adequacy standards for plans seeking certification as QHPs. As we 
stated in the proposed rule, we have received questions regarding 
whether Sec.  156.230 requirements apply to a plan that does not vary 
benefits based on whether enrollees receive services from an in-network 
or out-of-network provider.
    As we stated in the proposed rule, nothing in PPACA requires a QHP 
issuer to use a provider network and Sec.  156.230 does not impose any 
network adequacy certification requirement for QHPs that do not use a 
provider network. Accordingly, an issuer might design and seek QHP 
certification for a plan that does not use a provider network and 
provides equal benefits for the same covered services without regard to 
whether the issuer has a network participation agreement with the 
provider that furnishes the covered services. To address any ambiguity 
in this section, we proposed to codify this longstanding interpretation 
at paragraph (f) to provide that a plan that does not vary benefits 
based on whether the issuer has a network participation agreement with 
a provider that furnishes covered services is not required to comply 
with the network adequacy standards at paragraphs (a) through (e) of 
Sec.  156.230 to qualify for certification as a QHP. In the proposed 
rule, we explained that this proposal would simply clarify existing QHP 
requirements and would not add to, change, or remove any QHP 
certification requirements.
    We received public comments on the proposed updates to the QHP 
network

[[Page 6155]]

adequacy standards under Sec.  156.230. The following is a summary of 
the comments we received and our responses.
    Comment: Of the comments received addressing this provision, a 
plurality supported this clarification, asserting that it will 
encourage variety in the kinds of plans certified as QHPs, lower costs 
by fostering more competition between issuers, increase enrollee access 
to providers, and reduce pressure on providers to enter into network 
agreements with issuers.
    Response: We agree with commenters and are finalizing this 
clarification as proposed. Since plan year 2016, Sec.  156.230(a) has 
applied only to QHPs that utilize a provider network.\46\ The provision 
finalized here only clarifies this existing policy by adding explicit 
regulatory text reflecting the regulation's inapplicability to plans 
that do not utilize a provider network and do not vary benefits for 
covered services based on whether or not they are provided by an in-
network or out-of-network provider.
---------------------------------------------------------------------------

    \46\ 80 FR at 10830 (February 27, 2015). Available at https://www.govinfo.gov/content/pkg/FR-2015-02-27/pdf/2015-03751.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters opposed the proposed clarification, 
asserting that it would reduce CMS's ability to oversee QHP issuers and 
ensure issuer accountability. A few commenters requested clarification 
on whether plans that do not utilize a provider network must comply 
with other QHP certification and market-wide requirements, such as 
requirements related to maximum out-of-pocket limits, cost-sharing 
protections, coverage of essential health benefits (EHB), actuarial 
value standards, inclusion of essential community providers, and non-
discrimination standards under Sec.  156.125. Some of these commenters 
opposed finalization of this provision until CMS could be assured that 
such plans would comply with these requirements.
    Response: The provision finalized here only clarifies that plans 
that do not utilize a provider network are not required to satisfy the 
network adequacy standards at Sec.  156.230 to obtain QHP 
certification. This final rule does not add to, change, or remove QHP 
certification requirements, nor does it add to, change, or remove any 
requirement for these plans to comply with the market reform provisions 
under title I of PPACA. Plans that do not utilize a provider network 
must still comply with all applicable QHP certification requirements to 
obtain QHP certification, which ensures that any plan that does not 
comply with applicable QHP certification requirements will be denied 
QHP certification.
    Comment: A few commenters cautioned about the potential 
proliferation of QHPs that do not utilize a provider network, which 
could place consumers in the middle of payment disputes between issuers 
and providers. One commenter asserted that, while CMS should do more to 
encourage issuers to develop plans that do not utilize a provider 
network, QHP certification should be reserved for plans that utilize 
adequate provider networks and meet all other QHP certification 
requirements.
    Response: We proposed no substantive changes to QHP certification 
requirements and decline to disqualify plans that do not utilize 
provider networks from obtaining QHP certification. Since plan year 
2016, the text of Sec.  156.230(a) has stated that the section only 
applies to QHPs that utilize a provider network.\47\ While plans that 
do not utilize a provider network have always been eligible to apply 
for QHP certification, only 12 plans that did not utilize a provider 
network have ever been approved as QHPs in the FFEs.\48\
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    \47\ See 80 FR at 10830, 10873 (February 27, 2015) (explaining 
HHS's proposal to modify Sec.  156.230(a) ``to specify that this 
section only applies to QHPs that use a provider network'' and 
finalizing Sec.  156.230(a) to state that ``[e]ach QHP issuer that 
uses a provider network must ensure that the provider network 
consisting of in-network providers, as available to all enrollees, 
meets . . . standards [under Sec.  156.230(a)] . . . .'') (italics 
added). Available at https://www.govinfo.gov/content/pkg/FR-2015-02-27/pdf/2015-03751.pdf.
    \48\ Twelve such plans were approved as QHPs in Wisconsin for 
plan year 2016. See plan type data for QHPs, available at: https://www.cms.gov/CCIIO/Resources/Data-Resources/marketplace-puf.
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    Comment: One commenter requested that CMS disclose the plans that 
do not utilize a provider network that have sought or received 
certification as QHPs.
    Response: CMS releases QHP certification information in Public Use 
Files (PUFs) at https://www.cms.gov/CCIIO/Resources/Data-Resources/marketplace-puf. The Plan Attributes PUF lists the plan type for each 
plan approved as a QHP. There were 12 plans certified as QHPs in 
Wisconsin for plan year 2016 that did not utilize a provider network. 
No such plans have been granted QHP certification in an FFE since.
    We are finalizing this policy as proposed.
3. Enrollment Process for Qualified Individuals (Sec.  156.1240)
    We are finalizing the proposed revisions to Sec.  156.1240, with a 
modification in response to comments. Under Sec.  156.1240(a), QHP 
issuers are required to accept a variety of payment methods so that 
individuals without a bank account or a credit card will have readily 
available options for making monthly premium payments. Specifically, 
paragraph (a)(1) of Sec.  156.1240 requires QHP issuers to follow the 
premium payment process established by an Exchange in accordance with 
45 CFR 155.240. Paragraph (a)(2) requires QHP issuers to accept for all 
payments in the individual market, at a minimum, paper checks, 
cashier's checks, money orders, EFT, and all general-purpose pre-paid 
debit cards as methods of payment and to present equally all payment 
method options to allow a consumer to select their preferred payment 
method. We proposed to add new paragraph (a)(3) to require individual 
market QHP issuers to also accept payments on behalf of an enrollee 
from an individual coverage HRA or QSEHRA. As explained in the proposed 
rule, we received questions indicating that there is some confusion 
over whether issuers must accept payments on behalf of an enrollee from 
an individual coverage HRA or QSEHRA. Individual coverage HRAs are a 
new type of health reimbursement arrangement that employers may offer 
to employees as of January 1, 2020.\49\ QSEHRAs are another new type of 
HRA that qualified small employers can provide to their employees 
pursuant to section 9831 of the Code. In general, employers may offer 
individual coverage HRAs or provide QSEHRAs to their employees as a 
means of providing tax-advantaged reimbursements for medical care 
expenses, including premiums for individual health insurance coverage 
that they purchase for themselves and their families. Reimbursement 
from individual coverage HRAs and QSEHRAs may include employee-
initiated payments made through use of financial instruments, such as 
pre-paid debit cards, as well as direct payments (individual or 
aggregate) by the employer, employee organization, or other plan 
sponsor to the health insurance issuer.\50\
---------------------------------------------------------------------------

    \49\ See 84 FR 28888.
    \50\ See 84 FR at 28950-51 (``[E]mployer funds paid from an HRA 
go directly to a participant or a health insurance issuer because 
the economic substance of the transaction is the same--that is, the 
funds are being used to discharge an employee's premium payment 
obligations.'').
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    We proposed to add a new Sec.  156.1240(a)(3) to require issuers 
offering individual market QHPs to accept payments of premiums that are 
received directly from an individual

[[Page 6156]]

coverage HRA or QSEHRA that are made on behalf of an enrollee who is 
covered by the individual coverage HRA or QSEHRA. We proposed that QHP 
issuers would be required to accept such payments when they are made 
using a method of payment described in Sec.  156.1240(a)(2). We 
recognized some individual coverage HRAs and QSEHRAs prefer to make 
aggregate payments on behalf of multiple employees to a QHP issuer. We 
further encouraged QHP issuers to work with employers and 
administrators of individual coverage HRAs and QSEHRAs to facilitate 
these aggregate payments, as this approach could ease administration of 
individual coverage HRAs and QSEHRAs. We also explained that this 
proposal would help ensure that individual coverage HRAs or QSEHRAs 
operate as intended, and would address potential stakeholder confusion 
regarding whether QHP issuers must accept payments made from individual 
coverage HRAs or QSEHRAs. However, we did not propose to require QHP 
issuers to accept payments from individual coverage HRAs or QSEHRAs 
when made using a form of payment that is not described in Sec.  
156.1240(a)(2) or to accept aggregate payments from an individual 
coverage HRA or QSEHRA made on behalf of multiple enrollees.
    We are finalizing this policy, but with a modification to clarify 
that QHP issuers not only must accept payments made on behalf of an 
enrollee directly from an individual coverage HRA or QSEHRA, but must 
also accept payments made directly by an enrollee using funds from an 
individual coverage HRA or QSEHRA, so long as such payments are made 
using a form of payment that is described in Sec.  156.1240(a)(2).
    We received public comments on the proposed updates to Sec.  
156.1240. The following is a summary of the comments we received and 
our responses.
    Comment: Most commenters who commented on this proposal supported 
it. Several commenters noted that it would help overcome issuer 
confusion about whether they must accept payments from an individual 
coverage HRA or QSEHRA, which commenters stated has been an obstacle to 
the implementation of these options. One commenter reported that some 
issuers have refused to accept payments from an individual coverage HRA 
or QSEHRA when it was used to purchase coverage through a special 
enrollment period, and that this change would ensure that individuals 
offered an individual coverage HRA or provided a QSEHRA would be able 
to enroll in individual market QHP coverage. A few commenters 
encouraged CMS to require that QHP issuers accept aggregate payments 
from individual coverage HRAs or QSEHRAs made on behalf of multiple 
enrollees.
    A smaller number of commenters opposed the proposal and stated that 
whether to accept premium payments made by an individual coverage HRA 
or QSEHRA on behalf of an enrollee should be at the option of the 
issuer, rather than required by HHS. A few commenters were concerned 
that accepting these payments, particularly aggregate payments, was not 
issuer standard practice and would be operationally difficult to 
implement. They raised concerns about the issuer burden associated with 
building the IT infrastructure to facilitate roster, or list, billing.
    Response: We did not propose and are not finalizing a requirement 
for QHP issuers to accept aggregate payments from individual coverage 
HRAs or QSEHRAs.\51\ We also did not propose and are not finalizing any 
requirement that QHP issuers facilitate roster, or list, billing. We 
instead encourage QHP issuers to work with employers and administrators 
of individual coverage HRAs and QSEHRAs to facilitate acceptance of 
aggregate payments from these HRA vehicles. We are not inclined to 
require more at this time given the relative infancy of individual 
coverage HRAs and QSEHRAs, but we expect the proposal we are finalizing 
that requires QHP issuers to accept premium payments received directly 
from an individual coverage HRA or QSEHRA to ease administration of 
individual coverage HRAs and QSEHRAs. This rule will also make the 
individual coverage HRA and QSEHRA experience more seamless for 
employees by ensuring that individual coverage HRAs and QSEHRAs may pay 
employee premiums directly, rather than only reimbursing employees 
after they have paid first out of their own pockets.
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    \51\ 85 FR 78572, 78644.
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    We understand that some QHP issuers are working to build IT systems 
to accommodate aggregate payments. However, because not all QHP issuers 
can accept aggregate payments using their existing IT infrastructure, 
it could be costly and time-consuming to require all QHP issuers to 
accept them. As individual coverage HRAs and QSEHRAs grow in 
popularity, we anticipate the benefits of making such an IT investment 
may outweigh the costs for most QHP issuers. However, at this time, 
with individual coverage HRAs and QSEHRAs still in their infancy, the 
final rule does not require QHP issuers to accept such aggregate 
payments, even if such payments are made using a form of payment that 
is described in Sec.  156.1240(a)(2). Additionally, we recognize that 
it may not previously have been standard practice for every individual 
market QHP issuer to accept payments of premiums that are received 
directly from an individual coverage HRA or QSEHRA. Although some QHP 
issuers may incur administrative costs for operational changes 
necessary to comply with the payment acceptance requirement adopted in 
this final rule, such costs should be minimal because QHP issuers are 
already required to accept the forms of payment described in Sec.  
156.1240(a)(2) for all payments in the individual market. Therefore, we 
believe the benefits of requiring individual market QHP issuers to 
accept payments from individual coverage HRAs and QSEHRAs, rather than 
employees having to pay premiums out-of-pocket and then seek 
reimbursement at a later time, outweighs these administrative costs and 
is in the best interests of consumers.
    Comment: Several commenters stated that individual coverage HRAs 
and QSEHRAs constitute third party payments, which issuers are not 
required to accept under Sec.  156.1250.
    Response: Individual coverage HRAs and QSEHRAs are structured to 
reimburse an employee for eligible medical care expenses that are paid 
by the employee. HHS considers any payments for eligible medical care 
expenses that are reimbursed by an employer through an individual 
coverage HRA or a QSEHRA per the terms of the employee's compensation 
package, including payments for eligible individual market premiums, to 
be payments by the employee, not the employer. This remains true 
regardless of whether funds from an individual coverage HRA or QSEHRA 
are transmitted directly by an enrollee or by an employer. As such, 
payments from these HRA vehicles for individual market coverage do not 
constitute third party payments. To ensure that QHP issuers do not 
erroneously reject payments as third party payments when the payments 
are made in connection with an individual coverage HRA or QSEHRA that 
are transmitted directly by an enrollee or by an employer, we are 
finalizing revisions to Sec.  156.1240(a)(3) that make clear that all 
such payments must be accepted so long as they are made using a form of 
payment described in Sec.  156.1240(a)(2).
    We recognize that individual coverage HRAs and QSEHRAs may differ 
in how

[[Page 6157]]

they are administered. While some individual coverage HRAs and QSEHRAs 
may pay premiums directly to issuers on behalf of covered individuals, 
others may reimburse covered individuals for incurred or paid covered 
expenses. It is important that, regardless of how an individual 
coverage HRA or QSEHRA is administered, individuals covered by 
individual coverage HRAs and QSEHRAs be able to use HRA funds to enroll 
in QHP coverage. We can identify no compelling reason to treat payments 
from an individual coverage HRA and QSEHRA differently based on whether 
the payments are made directly to the QHP issuer or to the covered 
individual. In either case, the payment functions as a reimbursement to 
the employee for the employee's premium payment as part of the 
employee's compensation package.\52\
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    \52\ See 84 FR at 28951 (``[U]nder the [HRA] final rules, 
`reimbursement' may include employee-initiated payments made through 
use of financial instruments, such as pre-paid debit cards, as well 
as direct payments, individual or aggregate, by the employer, 
employee organization, or other plan sponsor to the health insurance 
issuer.'').
---------------------------------------------------------------------------

    After considering comments, we are finalizing Sec.  156.1240(a)(3) 
to require issuers offering individual market QHPs to accept payments 
of premiums that are received directly from an individual coverage HRA 
or QSEHRA that are made on behalf of an enrollee who is covered by the 
individual coverage HRA or QSEHRA. To address potential confusion about 
the payment acceptance requirements, in response to comments, we 
specify in the regulation text that QHP issuers must also accept 
payments that are made directly by an enrollee in connection with an 
individual coverage HRA or QSEHRA. These requirements apply so long as 
such premium payments are made using a payment method described in 
Sec.  156.1240(a)(2).

IV. Summary of the Proposed Provisions of the HHS Notice of Benefit and 
Payment Parameters for 2022, Analysis of and Responses to Public 
Comments, and Provisions of the Final Rule--Department of Health and 
Human Services and Department of the Treasury

A. 31 CFR Part 33 and 45 CFR Part 155--State Innovation Waivers

1. Section 1332 Application Procedures (31 CFR 33.108 and 45 CFR 
155.1308), Monitoring and Compliance (31 CFR 33.120 and 45 CFR 
155.1320), and Periodic Evaluation Requirements (31 CFR 33.128 and 45 
CFR 155.1328)
    Section 1332 of PPACA permits states to apply for a State 
Innovation Waiver (also referred to as a section 1332 waiver or State 
Relief and Empowerment Waiver) to pursue innovative strategies for 
providing their residents with access to higher value, more affordable 
health coverage. The overarching goal of section 1332 waivers is to 
give all Americans the opportunity to obtain high value and affordable 
health coverage regardless of income, geography, age, sex, or health 
status, while simultaneously empowering states to develop health 
coverage strategies that best meet the needs of their residents. In the 
proposed rule, the Departments sought to provide states with 
consistency and predictability by proposing to codify the Departments' 
interpretative guidance published in the Federal Register in 2018, 
regarding how the Departments will apply section 1332 of PPACA to 
determine whether applications for section 1332 waivers will be 
approved. In this final rule, the Departments are finalizing these 
policies, with modifications to explicitly incorporate major policies 
outlined in the 2018 Guidance into the text of relevant section 1332 
regulations.
    Under section 1332 of PPACA, the Secretaries may exercise their 
discretion to approve a request for a section 1332 waiver only if the 
Secretaries determine that the proposal for the section 1332 waiver 
meets the following four requirements (referred to as the statutory 
guardrails): (1) The proposal will provide coverage that is at least as 
comprehensive as coverage defined in PPACA section 1302(b) and offered 
through Exchanges established by title I of PPACA, as certified by the 
Office of the Actuary of CMS, based on sufficient data from the state 
and from comparable states about their experience with programs created 
by PPACA and the provisions of PPACA that would be waived; (2) the 
proposal will provide coverage and cost-sharing protections against 
excessive out-of-pocket spending that are at least as affordable for 
the state's residents as would be provided under title I of PPACA; (3) 
the proposal will provide coverage to at least a comparable number of 
the state's residents as would be provided under title I of PPACA; and 
(4) the proposal will not increase the federal deficit. The Secretaries 
retain their discretionary authority under section 1332 to deny waivers 
when appropriate given consideration of the application as a whole, 
even if an application meets the four statutory guardrails.
    The Departments are also responsible under section 1332 of PPACA 
for monitoring a waiver's compliance with the statutory guardrails and 
for conducting evaluations to determine the impact of the waiver. 
Specifically, section 1332 of PPACA requires that the Secretaries 
provide for and conduct periodic evaluations of approved section 1332 
waivers. The Secretaries must also provide for a process under which 
states with approved waivers must submit periodic reports concerning 
the implementation of the state's waiver program.
    In October 2018, the Departments issued the 2018 Guidance,\53\ 
which provides additional guidance for states that wish to submit 
section 1332 waiver proposals regarding the Secretaries' application 
review procedures, pass-through funding determinations, certain 
analytical requirements, and operational considerations. The 2018 
Guidance also includes information regarding how the Departments will 
apply the section 1332 statutory guardrails to evaluate whether a 
waiver is approvable. Section 1332 of PPACA and the 2018 Guidance 
empower states to address problems with their individual insurance 
markets and increase coverage options for their residents, and to 
encourage states to evaluate and adopt innovative strategies to reduce 
future overall health care spending. Together, the statutory guardrails 
and the 2018 Guidance provide states a reliable roadmap to follow in 
designing section 1332 waiver programs that will promote a stable 
health insurance market that offers more choice and affordability to 
state residents.
---------------------------------------------------------------------------

    \53\ 83 FR 53575 (Oct. 24, 2018).
---------------------------------------------------------------------------

    In this final rule, the Departments provide certainty to states 
that the requirements and expectations of the section 1332 program will 
not change abruptly, or without notice to states and the public, and an 
opportunity to comment. Specifically, the Departments proposed to 
incorporate by reference the 2018 Guidance in full in the regulations

[[Page 6158]]

governing section 1332 waiver application procedures, monitoring and 
compliance, and periodic evaluation requirements. The Departments are 
finalizing the policies, with modifications made in response to public 
comments to codify many of the policies and interpretations outlined in 
the 2018 Guidance specifically in the text of the section 1332 
implementing regulations. The Departments are of the view that this 
rulemaking will give states greater certainty regarding how the 
Departments will apply section 1332's statutory guardrails when 
determining whether a state's waiver proposal can receive and maintain 
approval by the Departments.
    31 CFR 33.108 and 45 CFR 155.1308 specify the application 
procedures a section 1332 waiver proposal must meet to be approved by 
the Secretaries. Under these regulations, an application for initial 
approval of a section 1332 waiver will not be considered complete 
unless the application complies with the application procedures under 
31 CFR 33.108(f) and 45 CFR 155.1308(f), including written evidence of 
the state's compliance with the public notice requirements set forth in 
31 CFR 33.112 and 45 CFR 155.1312. Furthermore, an application must 
provide a comprehensive description of the enacted state legislation 
and program to implement a plan meeting the requirements for a waiver 
under section 1332; a copy of the enacted state legislation authorizing 
such waiver request; a list of the provisions of law that the state 
seeks to waive including a brief description of the reason for the 
specific request; and the analyses, actuarial certifications, data, 
assumptions, targets and other information sufficient to provide the 
Secretaries with the necessary data to determine that the state's 
proposed waiver meets the statutory guardrails. The 2018 Guidance 
provides supplementary information about the Departments' analysis as 
to whether a proposed section 1332 waiver plan meets requirements for 
approval, the Secretaries' application review procedures, the 
calculation of pass-through funding, certain analytical requirements, 
and operational considerations. The 2018 Guidance also clarifies 
adjustments the Secretaries may make to maintain federal deficit 
neutrality, and explains how states may rely on existing legislative 
authority in certain circumstances as authorization for section 1332 
waivers.
    The Departments are of the view that formalizing these policies and 
interpretations through rulemaking will encourage more states to pursue 
waivers without being concerned that some of the rules may change 
without sufficient notice after they have submitted a waiver 
application. As such, the Departments are finalizing modifications to 
31 CFR 33.108(f)(3)(iv)(A)-(C) and 45 CFR 155.1308(f)(3)(iv)(A)-(C) to 
codify in regulation the manner in which the Departments will apply the 
comprehensiveness, affordability, and coverage `section 1332 
guardrails' \54\ as outlined in the 2018 Guidance. Specifically, this 
final rule adds regulatory language to 31 CFR 33.108(f)(3)(iv)(A) and 
45 CFR 155.1308(f)(3)(iv)(A) explaining that the Departments will 
consider the comprehensive coverage guardrail to be met by a state 
waiver plan if the plan will provide consumers access to coverage 
options that are at least as comprehensive as the coverage options 
provided without the waiver, to at least a comparable number of people 
as would have had access to such coverage absent the waiver. This final 
rule also adds language to 31 CFR 33.108(f)(3)(iv)(B) and 45 CFR 
155.1308(f)(3)(iv)(B) providing that the Departments will consider the 
affordability requirement to be met by a state waiver plan that will 
provide consumers access to coverage options that are at least as 
affordable as the coverage options provided without the waiver, to at 
least a comparable number of people as would have had access to such 
coverage absent the waiver. These modifications also provide, 
consistent with the 2018 Guidance, that the Departments will consider 
the comprehensiveness and affordability guardrails met if a waiver plan 
provides access to coverage that is as comprehensive and affordable as 
coverage forecasted to have been available in the absence of the 
waiver, and is projected to be available to a comparable number of 
people under the waiver.
---------------------------------------------------------------------------

    \54\ Under section 1332 of PPACA, the Departments may approve a 
state's section 1332 waiver application when the Departments 
determine the waiver plan will meet the four criteria specified in 
section 1332(b)(1), including the guardrails related to 
comprehensiveness, affordability, and coverage, as well as a fourth 
guardrail related to deficit neutrality.
---------------------------------------------------------------------------

    This final rule also adds regulatory language to 31 CFR 
33.108(f)(3)(iv)(C) and 45 CFR 155.1308(f)(3)(iv)(C) providing that for 
purposes of the coverage guardrail, coverage refers to minimum 
essential coverage as defined in 26 U.S.C. 5000A(f) and 26 CFR 1.5000A-
2, and health insurance coverage as defined in 45 CFR 144.103. No 
changes are being made to the Federal deficit neutrality guardrail 
under 31 CFR 33.108(f)(3)(iv)(D) and 45 CFR 155.1308(f)(3)(iv)(D), 
which prohibits approval of any waiver plan that is projected to 
increase the Federal deficit.
    The Departments are also finalizing a modification to 31 CFR 
33.108(f)(3)(i) and 45 CFR 155.1308(f)(3)(i) to provide that the 
Departments may consider existing legislation in analyzing whether the 
state has satisfied the requirement that the state enact a law under 
section 1332(b)(2)(A) of PPACA that provides statutory authority to 
enforce PPACA provisions or the state plan, combined with a duly-
enacted state regulation or executive order. The Departments are of the 
view that these modifications will allow states to better plan for 
future section 1332 waiver applications and provide certainty to states 
as they invest significant state resources toward the submission of a 
section 1332 waiver application and the implementation of a section 
1332 waiver plan, particularly waivers that require multi-year 
preparation.
    In the proposed rule, the Departments proposed to incorporate the 
2018 Guidance in full into the Departments' monitoring and compliance 
regulations at 31 CFR 155.1320 and 45 CFR 155.1320. Specifically, under 
the current regulations, the Secretaries reserve the right to suspend 
or terminate a waiver, in whole or in part, any time before the date of 
expiration, if the Secretaries determine that the state materially 
failed to comply with the terms and conditions of the waiver. The 
Departments will review and, when appropriate, investigate documented 
complaints that the state is failing to materially comply with 
requirements specified in the approved waiver and the specific terms 
and conditions (STCs) for the approval of the waiver signed by the 
Departments and the state. In addition, the Departments will promptly 
share with the state any complaint that they may receive and will 
notify the state of any applicable monitoring and compliance issues. 
States with approved section 1332 waivers must comply with all 
applicable federal laws and regulations (unless specifically waived) 
and must come into compliance with any changes in federal law or 
regulations affecting section 1332 waivers.
    The Departments are finalizing a modification to 31 CFR 
33.120(a)(1) and 45 CFR 155.1320(a)(1) to explicitly require that the 
Departments examine monitoring and compliance consistent with 31 CFR 
33.108(f)(3)(iv) and 45 CFR 155.1308(f)(3)(iv)and guidance published by 
the Departments. The

[[Page 6159]]

Departments are of the view that codifying many of the policies and 
interpretations outlined in the 2018 Guidance into the section 1332 
waiver implementing regulations will provide certainty regarding how 
the Departments will evaluate and review section 1332 waiver programs, 
as states submit information concerning the implementation of their 
waiver programs.
    In the proposed rule, the Departments also proposed to incorporate 
the 2018 Guidance in full in the periodic evaluation requirements 
regulations at 31 CFR 33.128 and 45 CFR 155.1328. Under current 
regulations, the Departments are responsible for evaluating the waiver 
using federal data, information reported by states, and the waiver 
application itself to ensure that the Departments can exercise 
appropriate oversight of the approved waiver. Per 31 CFR 33.120(f) and 
45 CFR 155.1320(f), the state must fully cooperate with the Departments 
or an independent evaluator selected by the Departments, to undertake 
an independent evaluation of any component of the section 1332 waiver. 
As part of this required cooperation, the state must submit all 
requested data and information to the Departments or the independent 
evaluator. The state generally must meet the statutory requirements in 
each year that the waiver is in effect; as such the primary focus of 
the periodic evaluations will be the four statutory guardrails. 
However, the Departments will consider the longer-term impacts of a 
state's waiver plan.
    The Departments are finalizing a modification to 31 CFR 33.128 and 
45 CFR 155.1328 to require that the Departments periodically evaluate 
approved waivers to ensure the program is consistent with 31 CFR 
33.108(f)(3)(iv) and 45 CFR 155.1308(f)(3)(iv) and guidance published 
by the Departments. The Departments are of the view that codifying many 
of the policies and interpretations outlined in the 2018 Guidance into 
the section 1332 waiver implementing regulations will provide certainty 
regarding how the Departments will evaluate whether a state may 
maintain approval of its section 1332 waiver. The Departments also are 
of the view that this policy will help states to anticipate the data 
that will be most relevant and helpful to the Departments' analyses of 
a state's compliance with the specific terms and conditions approved by 
the Departments and other applicable requirements.
    The Departments are finalizing the policies, as stated above, with 
modifications to 31 CFR 33.108, 31 CFR 33.120, 31 CFR 33.128, 45 CFR 
155.1308, 45 CFR 155.1320, and 45 CFR 155.1328 to codify many of the 
policies and interpretations outlined in the 2018 Guidance in the 
section 1332 implementing regulations. The Departments are of the view 
that the increased certainty that would result from incorporating these 
policies in the 2018 Guidance into the section 1332 implementing 
regulations will allow states to have greater confidence that the 
significant time and monetary investments necessary to plan for, 
submit, and implement a section 1332 waiver will not result in wasted 
resources and taxpayer dollars. The Departments are also of the view 
that these modifications finalized in this final rule will help to 
increase state innovation, which could lead to more affordable health 
coverage for individuals and families in states that implement a 
section 1332 waiver program.
    The Departments sought comments on these proposals. The Departments 
received public comments on the proposed updates to the regulations 
detailing the section 1332 application procedures (31 CFR 33.108 and 45 
CFR 155.1308), monitoring and compliance (31 CFR 33.120 and 45 CFR 
155.1320), and periodic evaluation requirements (31 CFR 33.128 and 45 
CFR 155.1328). In addition, the Departments previously solicited public 
comments on the 2018 Guidance for a 60-day period (October 22, 2018 
through December 24, 2018). During that period, the Departments 
received approximately 2,100 public comments.
    Based on the Departments' review and consideration of comments in 
response to the proposed rule and the 2018 Guidance, their experience 
with section 1332 waivers, and the positive market effects that have 
been attained as a result of existing section 1332 waiver programs, the 
Departments will not revise the 2018 Guidance or otherwise modify the 
policies that they are now explicitly incorporating into regulation in 
this final rule. However, in response to comments, the Departments will 
not incorporate by reference the 2018 Guidance in the section 1332 
implementing regulations, but are finalizing modifications to the text 
of those implementing regulations to codify many of the policies and 
interpretations outlined in the 2018 Guidance. Later in this section of 
the preamble, the Departments review and respond to comments received 
in 2018 in response to the 2018 Guidance, as well as those received in 
response to the proposals to incorporate the 2018 Guidance into the 
section 1332 implementing regulations in the proposed rule, which were 
largely similar to comments submitted on the 2018 Guidance.
    Comment: A few commenters stated that it is not proper to 
incorporate by reference the 2018 Guidance under 1 CFR 51.7(b) because 
it is an HHS publication or under 1 CFR 51.7(c)(1) because it has 
previously been published in the Federal Register. Another commenter 
stated that the 2018 Guidance is amorphous and imprecise, such that the 
proposed cross-references to the 2018 Guidance do not fit the 
definition of a rule under 5 U.S.C. 551. Other commenters asserted that 
it was bad policy to codify the 2018 Guidance by reference rather than 
by crafting concrete regulatory language.
    One commenter stated that the Departments failed to comply with 
H.R. 3010, the Regulatory Flexibility Act of 2011, which the commenter 
believes to include a legal mandate that a federal agency, as part of 
an agency's evaluation of any proposed regulatory change, must analyze 
its distributional effects, which specifically refers to the impact of 
a regulatory action across the population and economy, divided up in 
various ways (for example, income groups, race, sex, industrial sector, 
geography).\55\ The commenter further stated that the Departments 
failed to adequately identify and analyze the effects of codifying the 
2018 Guidance. One commenter noted that the Department of the 
Treasury's participation was necessary for any regulation issued 
regarding section 1332 waivers and CMS cannot act alone.
---------------------------------------------------------------------------

    \55\ The Departments' research shows that H.R. 3010, the 
Regulatory Flexibility Act of 2011, was never signed into law. 
Notwithstanding, the Departments respond to the commenter's concerns 
here and in the RIA, section VI.C.3 of this final rule.
---------------------------------------------------------------------------

    Response: The Departments appreciate these commenters' concerns and 
want to ensure the requirements are clear to the public. The goal of 
the proposal to incorporate the 2018 Guidance into the section 1332 
implementing regulations was to provide stability and certainty to 
states with existing waivers and to those who may be in the process of 
or interested in pursuing such a waiver. The Departments agree with 
commenters that suggested the Departments craft more specific 
regulatory text, rather than finalize the proposed incorporation of the 
2018 Guidance by reference, to codify the Departments' interpretations 
in these regulations. As such, in this rule, the Departments are 
finalizing

[[Page 6160]]

modifications to 31 CFR 33.108, 31 CFR 33.120, 31 CFR 33.128, 45 CFR 
155.1308, 45 CFR 155.1320, and 45 CFR 155.1328 to codify many of the 
policies and interpretations outlined in the 2018 Guidance in the 
section 1332 waiver program's implementing regulations. Specifically, 
the Departments are adding language to 31 CFR 33.108(f)(3)(i) and 45 
CFR 155.1308(f)(3)(i) providing that the Departments may consider 
existing legislation in analyzing whether the state has satisfied the 
requirement that the state enact a law under section 1332(b)(2)(A) of 
PPACA if that legislation provides statutory authority to enforce PPACA 
provisions or the state plan, combined with a duly-enacted state 
regulation or executive order. Additionally, the Departments are 
finalizing changes to 31 CFR 33.108(f)(3)(iv)(A)-(C) and 45 CFR 
155.1308(f)(3)(iv)(A)-(C) to codify many of the 2018 Guidance guardrail 
interpretations into regulations. The Departments are also finalizing 
changes to 31 CFR 33.120(a)(1) and 45 CFR 155.1320(a)(1) to explicitly 
require that the Departments examine monitoring and compliance 
requirements consistent with the guardrail interpretations outlined in 
31 CFR 33.108(f)(3)(iv) and 45 CFR 155.1308(f)(3)(iv) and guidance 
published by the Departments. Lastly, the Departments are finalizing 
changes to 31 CFR 33.128 and 45 CFR 155.1328 to require that the 
Departments periodically evaluate approved waivers to ensure the 
program is consistent with the guardrail interpretations outlined in 31 
CFR 33.108(f)(3)(iv) and 45 CFR 155.1308(f)(3)(iv) and guidance 
published by the Departments. As described below, the policies and 
interpretations outlined in the 2018 Guidance remain unchanged. These 
regulatory modifications are being made in response to commenters' 
recommendations to craft concrete regulatory language and to further 
ensure that these finalized requirements are clear to the public.
    Regarding some commenters' concerns that the Departments' did not 
analyze the distributional effect on the population and economy across 
subgroups that could result from incorporating the 2018 Guidance into 
regulation, the Departments are of the view that the data and 
information necessary to such an analysis are unavailable at this time. 
In particular, the Departments are unable to estimate or determine how 
many or which states may apply for a waiver using the regulatory 
modifications finalized in this final rule. As discussed in detail in 
the RIA under section VI.C.3 of this final rule, it would be difficult 
for the Departments to predict and analyze the impact of various state 
waiver plans that have not been submitted, including the distributional 
effects on various segments of the population. The Departments are of 
the view that meaningful analyses of the distributional effects of 
waiver proposals will be possible upon states' submissions to the 
Departments of complete section 1332 waiver applications. Pursuant to 
section 1332 of PPACA, the Departments must conduct reviews of section 
1332 waiver applications on an individual basis. The distributional 
effects of each proposed waiver plan will be analyzed as part of the 
Departments' review, and members of the public and other stakeholders 
will have two distinct opportunities to comment on the distributional 
effects of a waiver during the state and federal public comment 
periods.
    The Departments also agree that the Department of the Treasury's 
participation was necessary to the section 1332 proposals in the 
proposed rule. Thus, HHS did not act alone in developing or publishing 
the section 1332 proposals in the proposed rule. The proposed rule's 
section 1332 proposals were issued by both HHS and the Department of 
the Treasury, and in this final rule, the Departments are finalizing 
changes to relevant provisions in both 31 CFR part 33 (Treasury 
regulations) and 45 CFR part 155 (HHS regulations).
    Comment: A few commenters expressed their support for the 2018 
Guidance and its incorporation into the section 1332 implementing 
regulations. These commenters supported simplifying and streamlining 
the process for obtaining section 1332 waivers and affording states 
flexibility in meeting the guardrails for obtaining a waiver. Another 
commenter supported this proposal because it will provide certainty and 
allow states to utilize section 1332 waivers as intended, without 
adding unnecessary cost and time dealing with proposals that do not 
meet the necessary standards. The commenter further noted that such 
action is especially appreciated as state budgets are stretched thin 
due to the COVID-19 pandemic. One commenter noted that codifying the 
Departments' 2018 Guidance is especially important because of the 
significant time and taxpayer resources to develop and submit a waiver 
application. One commenter also noted that the process of developing a 
proposal and submitting it may take significant time and taxpayer 
resources, such that states may not want to undertake section 1332 
waivers if the probability of success is low and the probability of the 
Departments changing requirements is high.
    Furthermore, a few commenters noted that incorporating the 2018 
Guidance into regulation will continue to improve the ability of states 
to access the flexibilities allowed by section 1332 waivers, empowering 
new innovation in the push to lower health costs. One commenter noted 
that a June 2020 CMS analysis of the effect of implemented section 1332 
state-based reinsurance waivers found that premiums were an average of 
17.7 percent lower during the 2020 plan year in the 12 states that had 
approved section 1332 waivers in place than they would have been 
without those waivers. The same commenter also noted that the results 
of 1332 waivers have been impressive thus far and that CMS should allow 
states to rely on existing regulatory direction across administrations, 
particularly when the existing framework demonstrates clear, positive 
results.
    Response: The Departments appreciate commenters' support for these 
proposals. The Departments agree that codifying many of the policies 
and interpretations outlined in the 2018 Guidance into the implementing 
regulations will provide stability and certainty to states as they 
invest significant state resources towards submission of a section 1332 
waiver application and implementation of an approved section 1332 
waiver, particularly waivers that require multi-year preparation. The 
Departments also agree that implemented section 1332 waivers are 
lowering premiums for consumers, and that section 1332 waivers are an 
important tool to lower costs and strengthen state health insurance 
markets by providing a variety of coverage options. The Departments 
note that all states that have implemented a section 1332 reinsurance 
waiver plan have reduced premiums compared to a scenario without these 
waivers in place.\56\ As described in this preamble, the Departments 
are finalizing these policies, with modifications, to codify many of 
the policies and interpretations outlined in the 2018 Guidance into the 
section 1332 waiver implementing regulations and are not otherwise 
making changes to the 2018 Guidance.
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    \56\ See CCIIO Data Brief Series, State Relief and Empowerment 
Waivers: State-based Reinsurance Programs (June 2020), available at 
https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/1332-Data-Brief-June2020.pdf.
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    Comment: A majority of commenters did not support either the 2018

[[Page 6161]]

Guidance or its incorporation into the section 1332 regulations. Many 
of these commenters stated that the 2018 Guidance and its proposed 
codification would undermine the congressional intent underlying the 
section 1332 guardrails and effectively codify policy they believe is 
based on a misinterpretation of the statute. A few commenters 
recommended rescinding and abandoning the 2018 Guidance completely and 
that the Departments return to the prior interpretation of the 
guardrails described in now superseded guidance issued in 2015 
(referred to as the 2015 Guidance).\57\
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    \57\ Waivers for State Innovation, 80 FR 78131, available at 
https://www.govinfo.gov/content/pkg/FR-2015-12-16/pdf/2015-31563.pdf.
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    Response: The Departments acknowledge commenters' concerns, but do 
not agree that the 2018 Guidance suffers from the purported flaws these 
commenters describe. The Departments note that the 2018 Guidance has 
been in place for more than 2 years and states have relied upon it to 
better understand the submission requirements for a section 1332 waiver 
application and how the Departments apply and interpret these 
requirements. The Departments are of the view that the changes 
finalized in this rule provide predictability and certainty for states 
as they decide whether to invest resources in developing and 
implementing innovative wavier proposals. Further, the 2018 Guidance 
aims to lower barriers to innovation for states seeking to reform their 
health insurance markets. As described more fully below, the 
Departments maintain that the policies announced in the 2018 Guidance 
are based on a sound interpretation of section 1332 of PPACA.
    Comment: A majority of commenters did not support the policies 
outlined in the 2018 Guidance, specifically those related to how the 
Departments would analyze and determine whether a waiver proposal 
complies with the section 1332 guardrails. All of these commenters 
expressed concerns regarding the legality of the coverage, 
affordability, and comprehensiveness guardrail interpretations included 
in the 2018 Guidance.
    Many commenters expressed concerns with the focus on the 
``availability of comprehensive and affordable coverage'' in the 2018 
Guidance and its effect on how the Departments could apply the 
coverage, affordability, and comprehensiveness guardrails. Some 
commenters raised a fundamental concern that the Department's current 
interpretation conflicts with the plain language and Congressional 
intent of the statute, and stated that the Departments should revert to 
the previous approach (as outlined in the 2015 Guidance) requiring that 
only those actually covered in EHB-compliant plans be counted toward 
compliance with the guardrails. Some commenters asserted that the 
statute requires the Departments to consider the estimated number of 
state residents who would actually enroll in comprehensive, affordable 
coverage if the waiver were approved and implemented, not just the 
estimated number of residents who would have the opportunity to enroll 
in such coverage. The commenters were concerned that the focus on the 
interpretation of the availability of comprehensive and affordable 
coverage in the 2018 Guidance would result in fewer residents enrolled 
in comprehensive and affordable coverage, and would contradict the 
congressional intent behind the statutory guardrails. Other commenters 
asserted that the interpretation of the availability of comprehensive 
and affordable coverage for the coverage guardrail allows for a 
disjointed application of the guardrails whereby a state can meet the 
coverage guardrail, while its waiver plan reduces the overall 
comprehensiveness and affordability of coverage in a state.
    Some commenters were concerned that the Departments' consideration 
of all forms of private coverage in addition to public coverage, 
including employer-based coverage, individual market coverage, and 
other forms of private health coverage would include forms of coverage 
that are not subject to the federal market reform requirements, 
including short-term, limited duration insurance (STLDI) plans and 
association health plans (AHPs). Other commenters were concerned that, 
because the 2018 Guidance would allow for STLDI to be included as a 
form of coverage under the analysis of whether a proposed waiver plan 
meets the section 1332 guardrails, there may be consumer confusion 
regarding what STLDI plans cover and do not cover in terms of benefits 
and out-of-pocket spending.
    Commenters also expressed generalized concern that the 2018 
Guidance could permit states to implement waiver programs that support 
consumer uptake of alternative plan options, including plans such as 
STLDI and AHPs that can be underwritten, or plans that do not meet EHB 
standards. In particular, commenters were concerned, in relation to the 
affordability guardrail, that measures taken under a state waiver 
program to facilitate coverage in such alternative plan options (for 
example, allowing the use of subsidies for such coverage) would result 
in fewer comprehensive plans in the market, and that those 
comprehensive plans would be less affordable. Commenters asserted that 
this would perpetuate a tendency for comprehensive coverage to attract 
higher-risk consumers, while healthier, lower-risk consumers would tend 
to enroll in alternative plan options, with non-comprehensive coverage. 
This, the commenters assert, would change the risk pool, bifurcating 
the market into low-risk consumers enrolled in alternative plan options 
and high-risk consumers enrolled in comprehensive coverage and 
comprehensive coverage would become less affordable and less available. 
Commenters thus asserted concerns related to the comprehensiveness and 
affordability guardrails that fewer individuals would be covered by 
comprehensive, affordable coverage with cost-sharing protections, and 
any interpretation of the section 1332 guardrails that allows approval 
of a waiver plan that promotes less comprehensive forms of coverage 
such as STLDI and AHPs is inconsistent with the statute.
    Commenters also expressed concern that these alternative plan 
options are not subject to the same limitations as comprehensive 
coverage in terms of consumer protections and could also impact the 
affordability guardrail. For instance, these alternative plan options 
generally lack financial limitations like out-of-pocket maximums and 
are not subject to the federal prohibition on annual and lifetime 
limits for EHB. These commenters asserted that lower-risk consumers 
would tend to enroll in such alternative plan options because of these 
plan options' lower premiums and that these consumers would bear the 
financial risks associated with having coverage that places no limit on 
enrollee out-of-pocket expenses. Furthermore, commenters asserted that 
these consumers could then experience an unexpected, catastrophic 
health event, and could therefore be forced to pay substantially more 
in out-of-pocket costs than if they had enrolled in comprehensive 
coverage. Commenters asserted that such out-of-pocket costs would far 
exceed any savings consumers might achieve by rejecting comprehensive 
coverage and choosing a cheaper alternative.
    There were a variety of other comments related to potential market 
impacts of the interpretation of the guardrails included in the 2018 
Guidance. Some commenters noted that issuers offering comprehensive 
coverage might be more prone to exit a market

[[Page 6162]]

due to instability caused by the entry of alternative plan options. 
These commenters raised concerns regarding the potential degradation of 
the risk pool due to the increased likelihood of high health care costs 
with healthier consumers tending to choose alternative plan options. 
Other commenters raised concerns that the 2018 Guidance would lead to 
increased uninsured and underinsured populations, which would in turn 
increase emergency room utilization and health care costs. Some 
commenters were also concerned about the impact on the risk pool that 
they stated could occur as a result of the inclusion of alternative 
plan options as a form of coverage and allowing subsidies to be used 
towards purchasing these plans.
    Response: The Departments acknowledge commenters' concerns and 
agree that section 1332 waivers should be designed to improve a state's 
health care market while protecting those in vulnerable populations, 
including consumers with pre-existing conditions. However, the 
Departments are of the view that the 2018 Guidance is based on a sound 
interpretation of section 1332 of PPACA and represents a reasonable and 
appropriate application of the section 1332 guardrails. The Departments 
also are of the view that the 2018 Guidance provides states more 
flexibility to address problems caused by PPACA and to give Americans 
more options to get health coverage that better meets their needs. 
Under the framework outlined in the 2018 Guidance, states can pursue 
waivers to improve their individual insurance markets, increase 
affordable coverage options for their residents, and ensure that people 
with pre-existing conditions are protected. For all waiver requests, 
the Departments retain the discretion to decide whether to approve a 
section 1332 waiver based on the particular circumstances of each 
state's application, provided that the Departments determine that all 
of the guardrails are satisfied, and the Departments must in all cases 
evaluate each application for compliance with section 1332 statutory 
requirements.
    The Departments are of the view that the framework outlined in 2018 
Guidance is based upon a sound interpretation of section 1332 and its 
requirements for approval of a section 1332 waiver. Under section 1332, 
the Departments may approve a state's section 1332 waiver application 
when the Departments determine the waiver plan will meet the section 
1332 guardrails. For example, section 1332(b)(1)(C) of PPACA, the 
coverage guardrail, requires that a state's plan under a waiver will 
provide coverage ``to at least a comparable number of its residents'' 
as would occur without the waiver. However, the statutory text for the 
coverage guardrail is silent as to the type of coverage that is 
required or must be considered as part of this analysis. In addition, 
sections 1332(b)(1)(A) and (B) of PPACA state only that the state's 
waiver plan must ``provide'' coverage that is as comprehensive and 
affordable as would occur without a waiver, but do not require that 
people actually purchase and enroll in this coverage under a waiver. By 
its plain language, the term provide means ``to supply or make 
available'' and does not require or imply that people must use what is 
provided.\58\ Prior to the publication of the 2018 Guidance, the 
interpretations and policies outlined in the 2015 Guidance focused on 
the number of individuals actually estimated to enroll in comprehensive 
and affordable coverage that meets all requirements under title I of 
PPACA, in effect reading the ``to at least a comparable number of its 
residents'' language from the coverage guardrail into the 
comprehensiveness and affordability guardrails as well.\59\ However, 
neither the language nor structure of the statute compels that reading.
---------------------------------------------------------------------------

    \58\ Merriam Webster. Available at https://www.merriam-webster.com/dictionary/provide.
    \59\ See 80 FR 78132-33 (discussion of the affordability 
guardrail in the 2015 Guidance).
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    The Departments are of the view that the interpretations of the 
guardrails in the 2018 Guidance are reasonable and encourage states to 
provide, alongside coverage options that comply with PPACA market 
reforms, innovative coverage options that, while potentially less 
comprehensive than coverage established under PPACA, could be better 
suited to consumer needs and potentially more affordable and attractive 
to a broad range of a state's residents. Regarding the commenters' 
concerns about the focus on ``availability of comprehensive and 
affordable coverage'' as outlined in the 2018 Guidance (83 FR 53578) 
and its impact on how the Departments would analyze the guardrails when 
reviewing section 1332 waiver applications, the Departments are of the 
view that this focus loosens restrictions imposed by the 
interpretations outlined in the 2015 Guidance that were not required by 
PPACA and that previously limited state flexibility and consumer 
choice. While the 2015 Guidance focused on the number of individuals 
who would actually be provided comprehensive and affordable coverage 
under a proposed state waiver plan, the 2018 Guidance shifted focus to 
whether a waiver plan would actually make available comprehensive and 
affordable coverage to state residents. Under the 2018 Guidance and the 
regulatory changes finalized in this rule, the coverage available under 
the proposed waiver must be both as comprehensive and affordable as 
coverage available without the waiver. As noted previously, this shift 
comports with the plain language of the statute by establishing that 
``provide coverage'' does not mean anything more than for such coverage 
to be supplied or available to consumers under the waiver. This shift 
would allow states to provide access to health insurance coverage at 
different price points and benefit levels. This shift ensures that 
state residents who wish to retain comprehensive coverage similar to 
that provided under PPACA can continue to do so, while permitting a 
state waiver plan to also provide access to other coverage options that 
may be better suited to consumer needs and more attractive to many 
other individuals. In addition, the 2018 Guidance focuses on the 
aggregate effects of a waiver on all state residents, rather than 
requiring that the guardrails be met for specific sub-populations. This 
interpretation provides states more flexibility to consider the effects 
on all categories of residents and to decide that improvements in 
comprehensiveness and affordability for state residents as a whole 
offset any small detrimental effects for particular residents. As 
explained in the 2018 Guidance, the state's analysis should address in 
the application for the section 1332 waiver how the section 1332 state 
waiver plan supports and empowers those with low income as well at 
those with high expected health care costs.
    When applying the coverage guardrail, a comparable number of 
residents must still be covered as would have been covered absent the 
waiver. The 2018 Guidance also explains that the Departments conduct an 
assessment that takes into account whether the section 1332 state plan 
sufficiently prevents gaps in or discontinuations of coverage to 
address any decreases in coverage for specific sub-populations.
    The Departments generally have discretion to interpret the 
statutory guardrails, including ambiguous or undefined terms, and 
continue to be of the view that the interpretations and policies 
outlined in the 2018 Guidance are consistent with the statute. As such, 
the Departments are finalizing amendments to 31 CFR 33.108(f)(3)(iv) 
and 45 CFR 155.1308(f)(3)(iv) to codify policies and interpretations 
outlined in

[[Page 6163]]

the 2018 Guidance into the section 1332 waiver implementing 
regulations.
    In response to commenters' concerns regarding the Departments' 
consideration of ``all forms of private coverage in addition to public 
coverage, including employer-based coverage, individual market 
coverage, and other forms of private health coverage'' (85 FR 53579) 
for the purposes of the coverage guardrail as outlined in the 2018 
Guidance, the Departments are of the view that consumers are best 
suited to determine what coverage best suits their individual or 
family's needs, whether that is a QHP, a major medical non-QHP, an 
STLDI plan, or another available coverage option. Section 1332 waivers 
should empower states to present innovative plans to provide access to 
coverage to every state resident, including those individuals who are 
not eligible for Medicaid or CHIP or who cannot afford comprehensive, 
major-medical coverage, but still want or need some form of coverage to 
protect against catastrophic expenses. In addition, regarding some 
commenters' concerns that fewer people may actually be covered, the 
Departments note that when applying the coverage guardrail, a 
comparable number of residents must still be covered as would have been 
covered absent the waiver. In response to commenters' concerns 
regarding the impact on the affordability guardrail due to the 
alternative plan options that are not subject to the same consumer 
protections as comprehensive coverage, the Departments previously noted 
that the affordability guardrail refers to state residents' ability to 
pay for health care expenses relative to their incomes and may 
generally be measured by comparing each individual's expected out-of-
pocket spending for health coverage and services to his or her income. 
Therefore, states are required to include such analyses in waiver 
applications. As such, the Departments are finalizing amendments to 31 
CFR 33.108(f)(3)(iv) and 45 CFR 155.1308(f)(3)(iv) as discussed in this 
section of the preamble.
    We generally disagree with the commenters' suggestion that the 
consideration of alternative plan options, including STLDI plans, in 
the analysis of whether a proposed waiver meets the section 1332 
guardrails, may result in consumer confusion about the benefits and 
coverage offered by STLDI plans. If a waiver were approved that 
included alternative plan options, residents in the state would 
continue to have access under the state's waiver plan to the same metal 
level plans and catastrophic plans that include EHB that are available 
today. Consumers would therefore have access to at least the same 
coverage and cost-sharing protections against excessive out-of-pocket 
spending as without the waiver. The availability of alternative plan 
options would be another option for consumers to consider as they shop 
for and enroll in coverage. However, recognizing the need and 
importance to ensure consumers are making informed choices, the 
Departments note that existing federal regulation requires issuers of 
STLDI plans to prominently display in the contract and in any 
application materials a consumer disclosure notice that informs 
consumers about the limitations of STLDI plans.\60\ The Departments 
further note that, to the extent STLDI plans are displayed on non-
Exchange direct enrollment websites approved by the FFE to assist with 
Exchange applications and enrollment, those websites must clearly 
distinguish QHPs from other available coverage options and are 
prohibited from displaying STLDI plans side-by-side on the same website 
page with QHPs.\61\ These display requirements ensure that consumers 
can easily discern which plans are QHPs eligible for APTC and which are 
not. In addition, many states have adopted state-specific marketing and 
other consumer protection laws intended to help consumers understand 
the differences between the different available coverage options.
---------------------------------------------------------------------------

    \60\ See 45 CFR 144.103 (defining STLDI and providing the 
language of the required consumer disclosure notice).
    \61\ See 45 CFR 155.221(b)(1) (direct enrollment entities must 
``[d]isplay and market QHPs and non-QHPs on separate website pages 
on its non-Exchange website. . . .''); 45 CFR 155.221(b)(3) (direct 
enrollment entities must ``[l]imit 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. . . .'').
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    The Departments are of the view that concerns related to the 
potential increase in the cost of comprehensive coverage are not 
warranted because the application of the guardrails would prevent the 
approval of a waiver that would reduce access to comprehensive health 
coverage. Under the guardrails, a waiver clearly cannot be approved if 
it raises the cost of the comprehensive coverage that is available to 
consumers. The Departments are confident that the review process 
applicable to section 1332 waiver applications and the Departments' 
discretion to reject waiver applications that would result in 
unreasonable harm to a state's risk pool are sufficient to mitigate 
commenters' concerns that the cost of comprehensive coverage will 
increase, in terms of premiums and out of pocket spending. 
Specifically, the Departments are required to evaluate each state's 
proposal to determine that it meets the section 1332 requirements. The 
Departments undertake extensive analysis and reviews of research and 
program information as part of these determinations. As provided in 31 
CFR part 33 and 45 CFR part 155, subpart N, the waiver application must 
include analysis and supporting data that demonstrates that the waiver 
satisfies the guardrails. As such, a state is required to include an 
actuarial analysis and actuarial certification, economic analysis, data 
and assumptions and other necessary information to support the state's 
estimates that the proposed waiver will meet the requirements of 
section 1332. The actuarial and economic analysis must appropriately 
model the impact of the waiver plan, including impacts on enrollment 
and affordability for individual market single risk pool coverage, 
relative to a without-waiver baseline. Any net increase in premiums in 
the individual market risk pool in a with waiver scenario, compared to 
a without-waiver scenario, would likely not meet the guardrails and 
would not be an approvable waiver application. In addition the 
Departments maintain the discretion to deny waivers when appropriate 
given consideration of the application as a whole, even if an 
application meets the four statutory guardrail requirements. As such, 
the Departments can deny a proposed waiver plan that meets the 
guardrails, if the Departments determine the waiver would cause more 
harm than good to the state's residents or to a state's risk pool.
    Comment: Some commenters raised concerns regarding how the 
interpretation of the guardrails, including the focus on the 
``availability of comprehensive and affordable coverage'', in the 2018 
Guidance would impact maintaining protections for vulnerable 
populations and consumers with pre-existing conditions. In particular, 
commenters raised concerns that alternative plan options can terminate 
or deny coverage based on health status, which would tend to affect 
high-risk individuals. Commenters asserted that coupled with the 
diminished affordability of comprehensive coverage, this possibility 
puts high-risk individuals at great risk of going without effective 
coverage for their health care needs. Commenters also raised concerns 
that the guidance

[[Page 6164]]

provides the flexibility to craft hypothetical EHB-benchmarks that 
could further diminish the quality and affordability even of 
comprehensive coverage under a waiver program.
    Some commenters also expressed concern that the potential market 
effects would generally have a disparate impact on vulnerable 
populations, especially low-income consumers and those with pre-
existing conditions. Additionally, these commenters expressed concern 
that a disparate impact on any particular group would not necessarily 
cause the Departments to deny a waiver application, even though the 
impact on vulnerable population groups would be taken into account. 
Many vulnerable population groups were represented in the comments, 
including the elderly and those with pre-existing conditions like 
cystic fibrosis, ostomy/continent diversion, heart disease, arthritis, 
epilepsy, muscular dystrophy, leukemia/lymphoma, hemophilia, and 
others. Commenters raised the importance of ensuring compliance with 
specific PPACA market reforms including coverage of preventive services 
without cost sharing, the prohibition of pre-existing condition 
exclusions, the rating rules, and EHB coverage requirements, including 
prescription drugs and mental health and substance use disorder 
services. Commenters also stated concern for young adults who heavily 
rely on comprehensive coverage and key benefits like mental health 
care.
    Response: The Departments understand commenters' concerns regarding 
potential impacts on vulnerable populations. The Departments are of the 
view that it is important that vulnerable populations have the support 
they need to obtain affordable and comprehensive coverage that meets 
their individual or family needs. As outlined in the 2018 Guidance, the 
Departments are committed to supporting and empowering those in 
need.\62\ Furthermore, as discussed in the 2018 Guidance, the state 
should address in the application for the section 1332 waiver how the 
section 1332 state plan addresses the principles outlined in the 2018 
Guidance to support and empower those with low incomes as well at those 
with high expected health care costs as it relates to the coverage, 
comprehensiveness, and affordability guardrails. The Departments also 
note that state section 1332 waiver applications are reviewed by the 
Departments on an individual basis, and in the 2018 Guidance, the 
Departments explained that state waiver applications should also 
identify any types of individuals for whom affordability of coverage 
would be reduced by the waiver and any types of individuals for whom 
affordability of coverage would be improved under the waiver. In 
addition, the Departments have encouraged and continue to encourage 
states to develop waiver proposals that support and empower those with 
low incomes as well at those with high expected health care costs. The 
Departments further note and emphasize that section 1332 waiver 
authority cannot be used to waive many of PPACA's consumer protections, 
including coverage of preventive services without cost sharing, the 
prohibition against pre-existing conditions exclusions, guaranteed 
issue, or the rating rules. As such, consumers will continue to have 
access to comprehensive coverage options that are subject to and must 
comply with PPACA market reforms identified by commenters.
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    \62\ From 2018 Guidance principles: ``Support and empower those 
in need. Americans should have access to affordable, high value 
health insurance. Some Americans, particularly those with low 
incomes or high expected health care costs, may require financial 
assistance. Policies in section 1332 waiver applications should 
support state residents in need in the purchase of private coverage 
with financial assistance that meets their specific health care 
situations.'' (83 FR 53577).
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    Comment: A few commenters recommended that the Departments provide 
more flexibility for states to meet the requirement that a waivers will 
not increase the federal deficit. They recommended that instead of 
mandating that all waiver applications meet the deficit neutrality 
guardrail for each and every year of the waiver, they should instead be 
required to meet the deficit neutrality guardrail over a 10-year 
period. These commenters noted that this approach would be consistent 
with how CBO scores are generally analyzed for budget neutrality over a 
10-year period, and would be consistent with the current requirement 
for states to include a 10-year budget projection in a state section 
1332 waiver application.
    Response: The Departments appreciate these commenters' 
recommendation, but the Departments are not making any changes to the 
Departments' interpretation or application of the federal deficit 
guardrail. Therefore, the Departments continue to require that a waiver 
must not increase the federal deficit over the period of the waiver 
(which may not exceed 5 years unless renewed) or in total over the 10-
year budget plan submitted by the state as part of the application.
    Comment: A few commenters expressed concern that allowing states to 
rely on existing general authority to enforce PPACA, in conjunction 
with a duly enacted regulation or Executive Order, delays stakeholder 
notification of a state's proposal and does not provide stakeholders 
adequate time to prepare comments or work with state legislatures to 
address concerns with proposed legislation.
    Response: The Departments acknowledge these commenters' concerns, 
but note that the section 1332 implementing regulations include 
requirements for public notice at the state and federal level for new 
waiver applications.\63\ In addition, states are not precluded from 
providing additional notice of an intent to submit a section 1332 
waiver application under the section 1332 implementing regulations. The 
Departments therefore are not making any changes to this policy and 
will continue to apply the interpretation that permits states to rely 
on existing general authority to enforce PPACA, in conjunction with a 
duly enacted regulation or Executive Order.
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    \63\ See 31 CFR 33.112 and 45 CFR 155.1312; 31 CFR 33.116 and 45 
CFR 155.1316. Also note that there is flexibility under 31 CFR 
33.118 and 45 CFR 155.1318 for states to request, subject to 
approval by the Departments, modification from the normal public 
notice requirements during the COVID-19 PHE when a delay would 
undermine or compromise the purpose of the proposed waiver request 
and be contrary to the interest of consumers.
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    Comment: A few commenters stated that the revisions in the 2018 
Guidance constituted a significant change to prior section 1332 waiver 
policy and should have been proposed through rulemaking. Several 
commenters requested the Departments consider the comments submitted 
and publish a revised version of the guidance. Additional commenters 
stated that the 30-day comment period for the proposed 2022 Payment 
Notice was too short and did not provide sufficient opportunity for 
commenters to address the impact of these requirements to date and the 
potential prospective impact, including the potential negative 
consequences for consumers seeking affordable coverage to meet their 
health needs. Other commenters recommended that this rule is not an 
appropriate place to propose moving the 2018 Guidance into regulation 
and if the Departments want to pursue these policies, then the 
Departments must retract these provisions from this rule and repost the 
entire 2018 Guidance through the full APA rulemaking process with a 
separate notice-and-comment period.
    Response: The Departments appreciate commenters' interest in 
policies affecting section 1332 waivers. The Departments are of the 
view that a

[[Page 6165]]

longer comment period would have delayed the publication of this final 
rule and created significant challenges in providing certainty for 
states developing section 1332 waiver proposals or those with existing 
approved waivers. Furthermore, while the Departments generally disagree 
that the 2018 Guidance should have been formalized in rulemaking 
initially or that there is a need to codify amendments to the section 
1332 regulations through a separate rulemaking, stakeholders and the 
general public have now had two opportunities to provide feedback on 
the policies and interpretations outlined. The Departments have 
considered comments received in response to the 2018 Guidance, as well 
as those received in response to the section 1332 policies in the 
proposed rule. After consideration of these comments, for the reasons 
outlined earlier in this section of the preamble, the Departments are 
finalizing amendments to the section 1332 implementing regulations to 
codify many of the policies and interpretations outlined in the 2018 
Guidance. The Departments, however, are not changing any of the 
substantive policies or interpretations in the 2018 Guidance, as the 
goal of this effort is to provide stability and certainty to states 
with existing approved waiver plans and those who may be interested in 
pursuing a section 1332 waiver.
    Comment: Commenters requested that the Departments closely monitor 
waiver proposals to ensure fair and adequate access to affordable and 
comprehensive coverage, particularly in light of the COVID-19 PHE. A 
few commenters highlighted that the timing of this proposal could be 
particularly harmful given the current COVID-19 PHE. These commenters 
were concerned that this policy will have a disproportionate impact on 
certain populations, that have also been disproportionally impacted by 
COVID-19, such as certain racial and ethnic populations.
    Several commenters requested that CMS closely monitor waiver 
proposals to ensure fair and adequate access and payment for Federally 
Qualified Health Centers (FQHC) services.\64\ Commenters also 
encouraged CMS to prioritize section 1332 waiver proposals that 
maintain the statutory requirement for qualified health plans to 
include essential community providers, like FQHCs, that serve 
predominately low-income individuals, and that CMS encourage states to 
explore section 1332 waivers that expand the vital enabling services, 
including outreach and enrollment assistance.
---------------------------------------------------------------------------

    \64\ Specifically, the FQHC protections in section 
1311(c)(1)(C)) of PPACA and section 10104(b)(2) of PPACA (adding (g) 
to section 1311 of PPACA)) should not be compromised in any waiver 
granted to a state under section 1332.
---------------------------------------------------------------------------

    Response: The Departments note that the purpose of section 1332 
waivers is for states to pursue innovative strategies for providing 
their residents with access to higher value, more affordable health 
coverage. For instance, to date, reinsurance waivers have delivered 
measurable premium reductions. These benefits may be particularly 
important to address COVID-19, and the Departments have already issued 
regulations to provide states with flexibility to take advantage of 
section 1332 waivers to address the immediate issues COVID-19 
presents.\65\ The Departments are of the view that this rule further 
supports state efforts to take advantage of section 1332 waivers to 
address the COVID-19 PHE.
---------------------------------------------------------------------------

    \65\ See 85 FR 71142 (Nov. 6, 2020) (adopting flexibilities in 
the public notice requirements and post award public participation 
requirements for section 1332 waivers during the COVID-19 PHE).
---------------------------------------------------------------------------

    The Departments are of the view there are many areas, including 
those identified by commenters, in which compliance monitoring will be 
particularly important to ensure that approved waivers continue to meet 
the statutory criteria for approval, especially during the current 
COVID-19 PHE. Given that all policy changes can have a range of impacts 
due to the specifics of the state, such as the time the policy was 
implemented, the specific operational choices, and other market 
factors, the Departments may include strict safeguards and monitoring 
protocols in the approval letter and waiver terms and conditions to 
ensure that the waiver continues to meet the guardrails, including the 
impact on certain populations, for the duration of the waiver period. 
The federal government is committed to an all of government approach to 
providing COVID-19 relief.\66\ In addition, throughout the COVID-19 
PHE, CMS has worked to ensure the safety of the American public and has 
offered states, providers, suppliers, and group health plans and health 
insurance issuers flexibilities in furnishing and providing services to 
combat COVID-19. To the extent possible, the Departments intend to 
align this monitoring with each state's waiver design to effectively 
evaluate waiver program performance, while keeping administrative 
burdens to a minimum.
---------------------------------------------------------------------------

    \66\ See https://www.usa.gov/coronavirus.
---------------------------------------------------------------------------

V. 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. 
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 ICRs.

A. ICRs Regarding State Innovation Waivers (31 CFR 33.108, 45 CFR 
155.1308, 31 CFR 33.120, 45 CFR 155.1320, 31 CFR 33.128 and 45 CFR 
155.1328)

    The Departments are finalizing regulatory revisions codifying into 
section 1332 regulations policies initially announced in the 2018 
Guidance governing waiver application procedures, monitoring and 
compliance, and periodic evaluations to give states certainty regarding 
the requirements to receive and maintain approval of a section 1332 
waiver by the Departments. The Departments are not altering any of the 
requirements related to state innovation waiver applications, 
compliance and monitoring, or evaluation in a way that would create any 
additional costs or burdens for states seeking waiver approval or those 
states with approved waiver plans. The Departments anticipate that 
implementing these provisions will not significantly change the 
associated burden. The burden related to this information collection 
(Review and Approval Process for Waivers for State Innovation (CMS-
10383)) is currently under review by OMB. CMS did not receive comments 
on these ICRs.

[[Page 6166]]

B. ICRs Regarding Exchange Direct Enrollment (DE) Option (Sec.  
155.221)

    Current SBEs that elect to implement the Exchange DE option will 
need to revise their Exchange Blueprint (Blueprint) under Sec.  
155.221(j)(1) to describe precisely how the state proposes to implement 
the Exchange DE option in compliance with related requirements. We 
believe that any costs of revising the Blueprint will be nominal, as 
this process involves logging into a CMS web interface that serves as 
the repository for all states' Exchange Blueprints to input additional 
information on the updated processes and controls the state will 
implement to manage its new Exchange DE program. The burden related to 
completing the Blueprint is currently approved under OMB Control Number 
0938-1172 (Blueprint for Approval of Affordable State-based and State 
Partnership Insurance Exchanges (CMS-10416)). We sought comment on the 
burden associated with this activity, but did not receive any.
    Prospective DE entities must contract with an independent third-
party auditor to complete a security and privacy controls assessment, 
which must be submitted to HHS for review. Once approved, a DE entity 
must submit quarterly plans of action and milestones (POA&Ms) to HHS to 
document the identification and resolution of any new or existing 
security or privacy risks. We will prepare an ICR submission for review 
and approval by OMB through the normal PRA notice-and-comment process.

C. 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 requirements. The requirements are 
not effective until they have been approved by OMB.
    To obtain copies of the supporting statement and any related forms 
for the collections discussed in this rule, please visit the CMS 
website at www.cms.hhs.gov/PaperworkReductionActof1995, or call the 
Reports Clearance Office at 410-786-1326.

VI. Regulatory Impact Analysis

A. Statement of Need

    This final rule includes provisions related to FFE and SBE-FP user 
fees for the 2022 benefit year. It also includes changes related to 
acceptance of payments by issuers of individual market QHPs. It 
clarifies the regulation imposing network adequacy standards with 
regard to QHPs that do not differentiate benefits based on whether an 
enrollee receives services from an in-network or out-of-network 
provider. It also creates a new direct enrollment (DE) option for 
states served by State Exchanges, FFEs, and SBE-FPs. In addition, 
relating to State Innovation Waivers, this rule finalizes regulatory 
revisions codifying into section 1332 regulations policies initially 
announced in the section 1332 2018 Guidance, governing waiver 
application procedures, monitoring and compliance, and periodic 
evaluations to give states certainty regarding the requirements to 
receive and maintain approval of a section 1332 waiver.

B. Overall Impact

    The Departments have examined the impacts of this rule as required 
by Executive Order 12866 on Regulatory Planning and Review (September 
30, 1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA), Public 
Law 96-354 (September 19, 1980), section 202 of the Unfunded Mandates 
Reform Act of 1995, Public Law 104-4 (March 22, 1995), 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. An RIA must be prepared for rules with economically 
significant effects ($100 million or more in any one 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 one 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. An RIA 
must be prepared for major rules with economically significant effects 
($100 million or more in any one year), and a ``significant'' 
regulatory action is subject to review by OMB. The Departments have 
concluded that this rule is likely to have economic impacts of $100 
million or more in at least one year, and therefore, meets the 
definition of ``significant rule'' under Executive Order 12866. 
Therefore, the Departments have provided an assessment of the potential 
costs, benefits, and transfers associated with this rule. In accordance 
with the provisions of Executive Order 12866, this regulation was 
reviewed by OMB.
    The provisions in this final rule aim to ensure that consumers 
continue to have access to affordable coverage and health care, and 
that states have flexibility and control over their insurance markets. 
The changes related to the Exchange DE option and section 1332 waivers 
will reduce regulatory burdens for states. Through the reduction in 
financial uncertainty for states and issuers and increased 
affordability for consumers, these provisions are expected to promote 
greater market stability and to increase access to affordable health 
coverage. In states that implement the Exchange DE option, there will 
be start-up costs for states, DE entities (including web-brokers, 
agents and brokers, and issuers), and the federal government related to 
start-up, approval, implementation, and oversight. However, consumers 
in such states will likely have more options to shop for coverage and 
an improved shopping experience. Some issuers may incur minimal costs 
to make operational changes in order to accept payments on behalf of an 
enrollee from an individual coverage HRA or QSEHRA.
    Comment: A few commenters stated that the RIA in the proposed rule 
was inadequate.
    Response: As explained in the proposed rule, the Departments are 
unable to quantify all the effects of the provisions of this rule. 
There are uncertainties regarding the impact of several provisions. For 
example, it is not certain how many states will implement the Exchange 
DE option or how many states will submit section 1332 waiver 
applications. Therefore, the Departments have included qualitative

[[Page 6167]]

discussions of costs and benefits related to the provisions in this 
final rule.

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

    In accordance with OMB Circular A-4, Table 1 depicts an accounting 
statement summarizing the Departments' 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 allowing consumers to have continued access 
to coverage and health care, and stabilizing premiums in the individual 
and small group health insurance markets and in an Exchange. Although 
we are unable to quantify all benefits and costs of this final rule, 
the effects in Table 1 reflect qualitative impacts and estimated direct 
monetary costs and transfers resulting from some of the provisions of 
this rule.
    For 2022, we are finalizing a reduction in the FFE user fee rate 
from 3.0 percent of total premiums charged to 2.25 percent of total 
premiums charged, and a reduction in the SBE-FP user fee rate from 2.5 
percent of total premiums charged to 1.75 percent of total premiums 
charged. For the 2023 benefit year, we are finalizing the FFE-DE and 
SBE-FP-DE user fee rate of 1.5 percent of total premiums charged. While 
our current budget estimates may change in the future, we believe that 
it is important to keep the user fee in all markets at the lowest level 
possible to cover the costs of the Exchanges and keep premiums low for 
consumers and issuers. We expect transfers from the issuers to federal 
government to be reduced by approximately $270 million in 2022 and by 
approximately $60 million in 2023 due to changes in user fee rates and 
state transitions; transitions from FFE or SBE-FP to State Exchange, 
SBE-FP in 2022, or to FFE-DE in 2023 are included in the reduction in 
user fee transfers from issuers to federal government.

[[Page 6168]]

[GRAPHIC] [TIFF OMITTED] TR19JA21.030


[[Page 6169]]


1. Exchange Direct Enrollment (DE) Option (Sec.  155.221)
    We are finalizing the proposal to add Sec.  155.221(j) to establish 
a new Exchange direct enrollment (DE) option by which states can use 
direct enrollment technology to transition to private sector-focused 
enrollment pathways operated by QHP issuers, web-brokers, and agents 
and brokers, instead of or in addition to a centralized eligibility and 
enrollment website operated by an Exchange. State Exchanges, as well as 
SBE-FP and FFE states can elect, subject to HHS approval, to implement 
the Exchange DE option. The impact of the new Exchange DE option will 
depend on the specific Exchange model and the number of states that 
take advantage of the new option. There are various stakeholders in 
states that elect to implement the Exchange DE option that could be 
impacted, including consumers, State Exchanges, web-brokers, issuers, 
and agents and brokers, as well as the federal government. However, we 
note that the FFEs' current direct enrollment pathways (Classic DE and 
EDE) generally reduce operational costs to the federal government while 
alleviating certain burdens on consumers.
    The Exchange DE option may have varied impacts on consumers, and we 
solicited public comments to help us to understand how implementation 
of the Exchange DE option and a corresponding increase in the number of 
potential websites through which consumers could shop for QHP coverage 
might impact consumers and consumer behavior with respect to QHP 
enrollment.
    At this time, we do not anticipate that any of the 15 current SBEs 
will implement the Exchange DE option in plan year 2022 because these 
states have not implemented direct enrollment interfaces with web-
brokers or other direct enrollment entities similar to those 
implemented by the FFE. However, current SBEs that elect to implement 
the Exchange DE option will be responsible for meeting certain 
requirements for approval, in particular revising their Exchange 
Blueprint (Blueprint) under new Sec.  155.221(j)(1) to describe 
precisely how the state proposes to implement the Exchange DE option. 
We believe that any costs of revising the Blueprint will be nominal, as 
this process involves logging into a CMS web interface that serves as 
the repository for all states' Exchange Blueprints to input additional 
information on the updated processes and controls the state will 
implement to manage its new Exchange DE program. However, we sought 
comment on the burden associated with this activity, noting that the 
Blueprint is currently approved under the PRA under OMB Control Number 
0938-1172.
    For states seeking to transition to an SBE in future plan years and 
implement the SBE-DE option, we anticipate that start-up costs may 
potentially be higher than the start-up costs for states seeking to 
transition to an SBE without implementing the Exchange DE option, due 
to the additional interfaces that must be implemented between the 
Exchange's eligibility platform and each approved DE entity and managed 
on an ongoing basis by the Exchange. States transitioning to an SBE-DE 
will be required to complete the Exchange Blueprint in the same manner 
as required prior to this final rule and will be required to meet all 
required minimum functions of an Exchange. In terms of implementation 
costs, these states can realize savings by virtue of not having to 
maintain and operate a consumer-facing enrollment website capable of 
handling all Exchange-related internet traffic for all state residents, 
instead relying on DE entities and their websites to provide the 
majority of the Exchange's consumer-facing enrollment functionality.
    The costs associated with consumer-facing enrollment functionality 
may be relatively lower than those associated with building the back-
end Exchange eligibility platform, interfaces with DE entities to 
accept Exchange applications and complete eligibility determinations, 
the connections required from an Exchange's back-end eligibility 
platform to the Federal Data Services Hub for eligibility 
verifications, connections from the Exchange's back-end eligibility 
platform to the respective state Medicaid agency for coordinating 
Medicaid and CHIP eligibility determinations, and the Exchange's data 
management and reporting functionality necessary to submit required 
eligibility and enrollment data regarding all Exchange enrollees to HHS 
and the IRS. Based on recent state transitions to the SBE model, the 
design, development, and implementation costs for an Exchange depend on 
a number of factors. Recent design, development, and implementation 
costs have ranged from $4 million for a smaller state, to almost $24 
million for a larger state. As no SBE to date has implemented direct 
enrollment, however, we are not able to provide accurate cost estimates 
in this regard. States may be able to partner with existing federal DE 
partners who are already fully-compliant with federal operational 
requirements to achieve administrative savings related to the approval 
process for DE entities seeking to operate in their state. Any 
operational cost increases or savings may, in turn, affect an SBE's 
user fee and premium costs.
    We do anticipate that an SBE electing the Exchange DE option will 
have increased operational costs for ongoing monitoring and oversight 
of the approved DE entities, as well as for maintaining and managing 
the individual interfaces and transactions with each DE entity. 
However, any savings achieved through a decrease in call center volume 
or other consumer supports due to DE partners assisting consumers with 
enrollment would offset any increased operational costs. Any 
operational cost increases or savings stemming from implementation of 
the Exchange DE option could, in turn, affect an SBE's user fee and 
consumer premium costs.
    We also anticipate that the Exchange DE option can have significant 
impacts on prospective DE entities (including web-brokers, agents and 
brokers, and issuers) and the federal government as a result of start-
up, approval, and implementation costs. Such costs may be incurred by 
entities who enter a state's market as a new DE entity for the first 
time, or by existing DE entities that expand into new markets. We 
presume that DE entities will act rationally and enter a state's market 
or expand into new markets if the benefits exceed the costs. For the 
SBE-FP-DE and FFE-DE option, prospective federal DE entities pursuing 
approval to host their own DE platforms will incur a number of costs 
associated with startup and implementation activities, including costs 
to implement the appropriate privacy and security infrastructure, 
business controls, and with meeting eligibility application technical 
requirements related to ensuring the proper coordination with state 
Medicaid and CHIP programs.
    In terms of privacy/security approval and startup costs, 
prospective DE entities operating through the SBE-FP-DE and FFE-DE 
option will be required to implement almost 300 security and privacy 
controls consistent with a system security and privacy plan provided by 
CMS. After control implementation, prospective DE entities must 
contract with an independent third-party auditor to complete a security 
and privacy controls assessment test plan, which must be submitted to 
CMS for review. Once approved, a DE entity must submit quarterly POA&Ms 
to CMS to document the identification and resolution of any new or 
existing security or privacy risks. DE entities must also incur costs 
to

[[Page 6170]]

contract with a third-party auditor to perform an annual assessment of 
their security and privacy posture consistent with continuous 
monitoring requirements published by CMS, and feedback provided on 
their quarterly POA&Ms.
    In terms of approval and startup costs of implementing appropriate 
business controls, prospective DE entities that wish to serve an SBE-
FP-DE or FFE-DE option state and host an eligibility application also 
will be required to implement a dynamic user interface (UI) that adapts 
to consumer scenarios based on complex business rules and integration 
with a range of application programming interfaces (APIs). They must 
also implement post-enrollment support functionality. After 
development, integration, and testing are complete, a prospective DE 
entity serving an SBE-FP-DE or FFE-DE option state must contract with a 
third-party auditor to evaluate its implementation consistent with 
business audit report toolkits provided by CMS. The audit consists of 
evaluation of the UI to ensure its consistency with program 
requirements, as well as completion of functional and integration 
testing. Once approved, a DE entity is required to implement CMS-
initiated change requests to update its DE implementation as needed. In 
addition, DE entities are subject to periodic application audits to 
confirm their platforms continue to meet program requirements and 
remain functional.
    There are additional technical startup and approval costs related 
to the eligibility application functionality that DE entities serving 
SBE-FP-DE or FFE-DE option states are required to implement. They must 
have the ability to provide the Exchange with all the information 
necessary for it to determine eligibility to enroll in QHPs, as well as 
to determine eligibility for APTC, CSRs, Medicaid, and CHIP. Consumers 
who complete an eligibility application on a DE entity's website must 
be provided with an eligibility determination notice (EDN) from the 
Exchange, and related information must display within the DE entity's 
website UI about consumers' eligibility. Therefore, if a consumer is 
determined eligible for Medicaid or CHIP after completing an 
eligibility application through a DE entity's website, they will 
receive the same information in their EDN about that eligibility and 
next steps as if they completed the application on HealthCare.gov.
    We also anticipate that there will be costs specific to web-brokers 
and issuers that choose to enter into fee-based arrangements with other 
agents, brokers, or issuers, or that choose to enter new economic or 
legal arrangements with states, that help to offset the costs of the DE 
services provided. In terms of costs to issuers, generally any changes 
in issuer costs associated with the Exchange DE option could have 
downstream effects on premium rates. Issuers will be impacted by 
adjustments in Exchange user fees, and may have an incentive to promote 
direct enrollment if user fees are lower under the Exchange DE option, 
and the savings achieved through those lower user fees exceed the new 
costs of arrangements with web-brokers. Issuers may also be impacted if 
the Exchange DE option leads to shifts in consumer enrollment patterns, 
such as movement from a QHP offered by one issuer to another QHP. If 
issuers choose to build out standalone consumer-facing applications to 
enroll in coverage under the Exchange DE option, this would be another 
cost to consider that could impact them directly and have downstream 
impacts.
    There are a number of additional anticipated costs to the federal 
government associated with the Exchange DE option beyond startup and 
approval. Under the FFE-DE and SBE-FP-DE option, for instance, we will 
continue to provide back-end eligibility services, notice and tax form 
generation, the processing of data matching and special enrollment 
verification issues, eligibility appeals, casework, advanced customer 
service, enrollment reconciliation, IRS reporting, and an alternate/
backup consumer-facing eligibility and enrollment platform (as we do 
today). In addition, the HealthCare.gov website will continue to 
provide standardized comparative information for QHPs offered through 
an SBE-FP or FFE and will remain available for enrollment, as well to 
ensure there is an avenue to handle eligibility applications that 
approved DE partners are unable to process. Assuming an FFE-DE state 
chooses existing DE entities with whom HHS has partnered for the FFE's 
DE and EDE programs, we anticipate that there will be minimal increases 
in federal administrative costs associated with implementing the FFE-DE 
option since we have already implemented these programs. Any changes in 
payment amounts of the federal user fee for these services or any 
changes in issuer costs associated with the DE option may have 
downstream impacts on premiums, and therefore, federal tax expenditures 
on PTCs, which are benchmarked to premiums. We anticipate that any HHS 
costs associated with supporting the additional monitoring and 
oversight in states that elect to implement the SBE-DE option will be 
nominal given that SBEs will retain primary responsibility for 
overseeing their approved DE entities and HHS can leverage its existing 
SBE oversight mechanism \67\ and associated processes to ensure that 
this is occurring.
---------------------------------------------------------------------------

    \67\ https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/smart_2018_9.pdf.
---------------------------------------------------------------------------

    We sought comment on this proposal, including any additional 
consumer, state, SBE, HHS, issuer, web-broker, or other costs, benefits 
or transfers that should be considered. We also sought data and 
information that would help us to quantify the potential impacts 
associated with this proposal. Comment summaries and our responses are 
included earlier in the preamble.
2. FFE and SBE-FP User Fees (Sec.  156.50)
    We are finalizing an FFE user fee rate of 2.25 percent for the 2022 
benefit year, which is lower than the 3.0 percent FFE user fee rate 
finalized for 2021 benefit year. We are also finalizing an SBE-FP user 
fee rate of 1.75 percent for the 2022 benefit year, which is lower than 
the 2.5 percent SBE-FP user fee rate we finalized for the 2021 benefit 
year. We are finalizing an FFE-DE and SBE-FP-DE user fee rate of 1.5 
percent for the 2023 benefit year. Subject to HHS approval, SBE-FP or 
FFE states may implement the Exchange DE option starting in 2023. Based 
on our estimated costs, enrollment (including anticipated transitions 
of states from the FFE and SBE-FP models to either the SBE-FP or State 
Exchange models), premiums for the 2021 and 2022 benefit years, and the 
finalized user fee rates, we are estimating FFE and SBE-FP user fee 
transfers from issuers to the federal government will be lower by $270 
million in 2022 compared to those estimated for the prior benefit year. 
Costs may be shifted to approved DE entities (including QHP issuers) 
that states elect to use, so there may not actually be any cost savings 
on the part of issuers in SBE or FFE states that elect the Exchange DE 
option. As such, there may not be an incentive for issuers in FFE-DE or 
SBE-FP-DE states to adopt these models solely as a result of the lower 
user fee rate. While there will be reduced transfers to the federal 
government in FFE-DE or SBE-FP-DE states, we expect that available user 
fee collections from current and prior years will be sufficient to fund 
Exchange operations. Based on our finalization of the FFE-DE and SBE-
FP-DE user fee rates, transfers to the federal

[[Page 6171]]

government will be reduced by $60 million in 2023.
    Comment: While some commenters supported the reduced user fee rates 
stating that these rates could lead to lower premiums, many other 
commenters expressed concern regarding the reduced user fee rates and 
the potential impact on Exchange operations, specifically how these 
rates could impact enrollment. However, two commenters specifically 
criticized the information provided in the RIA section of the proposed 
rule. Both commenters expressed concern that HHS had not sufficiently 
analyzed the financial and health impacts of the proposed user fee rate 
reductions, as HHS had not investigated how reduced Exchange 
operations, Navigator services, marketing and outreach, health plan 
oversight, call center and consumer appeals services, among others may 
translate into reduced enrollment, and the health costs associated. The 
second commenter further suggested that the proposed user fee rate 
would not be sufficient to enable the Exchange to reduce premiums.
    Response: We are finalizing 2022 benefit year user fee rates at 
2.25 percent for FFE issuers and 1.75 percent for SBE-FP issuers as 
proposed. We have addressed the general concern for reductions in user 
fees in the earlier preamble response sections. With respect to the 
specific comment of the RIA, we have sufficiently analyzed the 
financial and health impacts of the proposed user fee rate reductions 
and our internal analysis suggests that user fees will provide the 
necessary funding for the full functioning of Exchange operations 
including Navigator services, oversight functions, call center, and 
appeals services, among others for the 2022 benefit year. Based on 
prior years' additional collections and future projected changes in 
costs, enrollment, and premiums, we project that HHS can fully fund 
Federal platform costs associated with providing special benefits to 
these issuers.
3. State Innovation Waivers
    The Departments are finalizing the policies, with modifications, to 
codify many of the policies and interpretations outlined in the 2018 
Guidance into the section 1332 waiver implementing regulations 
governing waiver application procedures, monitoring and compliance, and 
periodic evaluations to give states certainty regarding the 
requirements to receive and maintain approval of a section 1332 waiver 
by the Departments. As such, the Departments are finalizing changes to 
31 CFR 33.108, 31 CFR 33.120, 31 CFR 33.128, 45 CFR 155.1308, 45 CFR 
155.1320, and 45 CFR 155.1328. This final rule does not alter any of 
the requirements related to state innovation waiver applications, 
compliance and monitoring, nor evaluation in a way that would create 
any additional costs or burdens for states seeking waiver approval or 
those states with approved waiver plans. The Departments are of the 
view that the increased certainty regarding the application 
requirements will allow states to have greater confidence that the 
significant time and monetary investments necessary to plan for and 
submit a section 1332 waiver application will not result in wasted 
resources and taxpayer dollars. This increased certainty could help 
increase the number of states that apply for waivers and increase state 
innovation, which in turn could lead to more affordable health coverage 
for individuals and families in states that consider implementing a 
section 1332 waiver program.
    Comment: The Departments received many comments on the proposal and 
the potential impacts of the 2018 Guidance. Some commenters were 
concerned that finalization of the policy would increase health care 
costs, though the commenters did not define these costs further, and 
could potentially lead to increased premiums. A commenter stated that 
the Departments failed to analyze the distributional effects of the 
proposal, including its impact across the population and economy. The 
commenters asserted that the Departments failed to adequately identify 
and analyze the effects of codifying the policies in the 2018 Guidance 
in regulation.
    Response: The Departments acknowledge that federal agencies, where 
appropriate, should analyze and consider the distributional effects of 
regulatory actions, which are the impacts of a regulatory action across 
the population and economy, divided up in various ways (for example, by 
income groups, race, sex, industrial sector, geography).\68\ The 
Departments must analyze and determine whether each state waiver 
proposal complies with the section 1332 guardrails, which include 
comprehensiveness, affordability, coverage, and Federal deficit 
neutrality.
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    \68\ OMB Circular A-4, Regulatory Analysis (Sept. 17, 2003).
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    As explained earlier in section IV. of this final rule, a state's 
application and accompanying actuarial and economic analysis must 
appropriately model the impact of the waiver plan, including impacts on 
enrollment and affordability for individual market single risk pool 
coverage. Any increase in premiums in the individual market risk pool 
with the waiver, compared to a without-waiver scenario, would likely 
not meet the guardrails and would not be an approvable waiver 
application. To date, waivers have reduced premiums in comparison to 
premiums anticipated in the absence of the waivers.\69\ In addition, 
the Departments maintain the discretion to reject any proposed waiver 
plan that meets the guardrails, such as if the Departments determine 
would cause more harm than good to the state's residents, or for 
example to a state's risk pool.\70\ The Departments' approval letters 
for state waivers include information regarding the Departments' 
determination of whether a state's analysis and waiver plan satisfies 
the requirements of the section 1332 guardrails, as well as information 
on the projected impacts of waiver proposals.\71\
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    \69\ Information about the pass-through amounts states received 
is available on HHS's CCIIO 1332 website, and information on the 
methodology and key components of the pass-through calculation is 
available under the ``pass-through funding tools and resources'' 
section and data brief on state relief and Empowerment Waivers, 
available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_State_Innovation_Waivers-.
    \70\ The Secretaries retain their discretionary authority under 
section 1332 to deny waivers when appropriate given consideration of 
the application as a whole, even if an application meets the four 
statutory guardrail requirements.
    \71\ All section 1332 waiver approval letters available at 
https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_State_Innovation_Waivers-#Section_1332_State_Application_Waiver_Applications.
---------------------------------------------------------------------------

    The Departments also acknowledge commenters' interest in the 
distributive impacts of incorporating the policies described in the 
2018 Guidance into regulation text. As noted by commenters, OMB 
Circular A-4 is guidance issued by OMB and instructs that agencies 
should analyze the ``distributional effect'' of regulatory actions, 
which refers to the impact of a regulatory action across the population 
and economy, divided up in various ways (for example, income groups, 
race, sex, industrial sector, geography). However, the policies 
announced in the 2018 Guidance, specifically those that explain how the 
Departments will analyze compliance with the section 1332 guardrails, 
are not determinative of the specific waiver plans states may propose. 
Section 1332 waivers allow states to pursue innovative strategies for 
providing their residents with access to higher value, more affordable 
health coverage. The Departments have encouraged states to propose 
innovative approaches to meet the unique needs of their population 
through the flexibilities

[[Page 6172]]

Congress made available to states under section 1332 of PPACA. As such, 
the Departments are unable to predict or analyze the impact of various 
state waiver plans that have not yet been submitted, including the 
distributional effects on various segments of the population. Based on 
previous waiver applications, the Departments know that the impact of 
waivers vary widely based on the state's specific wavier plan. For 
example, the actual impact of the waiver on statewide average premiums 
compared to the estimated impact on statewide average premiums (that 
is, as estimated in the original state waiver application) for each 
waiver year varies based on the state's specific waiver program. In 
plan year 2020, states that implemented reinsurance waivers have 
lowered premiums ranging from 3.8 percent in Rhode Island to 37.1 
percent in Alaska when comparing with and without the waivers, 
depending on a variety of factors of the states' plans and the 
composition of the state's population.\72\
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    \72\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/1332-Data-Brief-June2020.pdf.
---------------------------------------------------------------------------

    A potential distributional impact for certain section 1332 waivers 
includes the substitution of pass-through funds from the federal 
government to the state in lieu of PTC, SBTC, or CSR, if a state waiver 
plan eliminates or reduces the amount of PTC, SBTC, or CSR that 
individuals and employers in the state receive (``pass-through 
funding''). \73\ Pass-through funding amounts are adjusted to ensure 
that waivers remain deficit neutral, as required by statute. As 
discussed in the 2018 Guidance and consistent with the Departments' 
regulations, when applying for a section 1332 waiver, the state should 
include in the waiver application sufficient analysis and supporting 
data to inform the estimate of any pass-through funding amount; states 
with approved waivers must report additional data and information to 
support the annual estimate of pass-through funding. Furthermore, pass-
through funding may be for the amount of federal financial assistance 
pursuant to the PPACA not paid due to an individual not qualifying for 
financial assistance or qualifying for a reduced level of financial 
assistance resulting from a waived provision as a direct result of the 
waiver plan.\74\ Although pass-through funding payments would be 
operationalized by the federal government, the transfers, as 
categorized for purposes of this regulatory impact analysis, would flow 
from the individuals and employers who would otherwise receive PTC, 
SBTC, or CSR (not from the federal government) to the relevant states 
for the purposes of implementing the waiver plan.
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    \73\ Information about the pass-through amounts states received 
is available on the CCIIO 1332 website and information on the 
methodology and key components of the pass-through calculation is 
available, under the ``pass-through funding tools and resources'' 
section and data brief on state relief and Empowerment Waivers 
``here: https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_State_Innovation_Waivers-.
    \74\ The guidance on State Relief and Empowerment Waivers is 
available online at https://www.federalregister.gov/documents/2018/10/24/2018-23182/state-reliefand-empowerment-waivers.
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    The Departments are unable to estimate or determine how many or 
which states will apply for a section 1332 waiver once the policies 
described in the 2018 Guidance are codified in regulation. Based on our 
interactions with states that previously proposed or considered 
proposing section 1332 waiver plans, the Departments anticipate that 
more states will be able to take advantage of section 1332 waivers if 
approval standards are reasonable, appropriate, and sufficiently 
flexible to allow states to design waiver plans that are capable of 
addressing the specific needs and circumstances of their residents. The 
Departments are also of the view that, despite the significant 
investment of tax dollars and other state resources necessary to 
consider, design, and submit a section 1332 waiver proposal, more 
states will consider a waiver as a viable option to improve or address 
specific problems in their health care markets if they do not have to 
be concerned that the Departments' standards will change without notice 
or an opportunity to comment. For these reasons, the Departments are of 
the view that codifying the policies announced in the 2018 Guidance in 
rulemaking, as a general matter, will likely provide greater 
opportunities for states to lower premiums, provide greater health care 
support for state residents at a greater variety of income levels, and 
develop innovative strategies to address the needs of vulnerable 
populations.
    The Departments note that the distributive impact of a state's 
particular waiver plan would be analyzed as part of the waiver 
application and review process. Specifically, as part of a state waiver 
application, final regulations at 31 CFR part 33 and 45 CFR part 155, 
subpart N, require a state to provide actuarial analyses and actuarial 
certifications, economic analyses, data and assumptions, targets, an 
implementation timeline, and other necessary information to support the 
state's estimates that the proposed waiver will comply with section 
1332 requirements to satisfy the section 1332 waiver guardrails. The 
2012 regulation also specified that data and assumptions used should 
include information on the age, income, health expenses, and current 
health insurance status of the relevant state population; the number of 
employers by number of employees and whether the employer offers 
insurance; cross tabulations of these variables; and an explanation of 
data sources and quality that the Departments would use to evaluate any 
waiver application and address regulatory impact across the population 
and economy. For example, state waiver applications' actuarial and 
economic analysis showed that enrollment increased when comparing the 
with and without-waiver scenarios over different age ranges and income 
levels for states that are implementing a reinsurance program.\75\ 
Furthermore, the Departments complete a preliminary review of any 
waiver application received in accordance with 45 CFR 155.1308(c) and 
3l CFR 33.108(c), and if an application does not have the 
aforementioned information the Secretaries can make a preliminary 
determination that the application is not complete. In that case, the 
waiver application would not be reviewed further unless additional 
information is provided.
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    \75\ An example of information showing the distributional impact 
of a waiver on the population by age can be found in Table 3C. See 
https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/Delaware-1332-Waiver-Application-July-10-2019.pdf.
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    Furthermore, section 1332(a)(4)(B) of PPACA provides that the 
Secretary of HHS and the Secretary of the Treasury shall issue 
regulations providing a process for public notice and comment at the 
state level, including public hearings, and a process for providing 
public notice and comment after the application is received by the 
Secretaries, that are both sufficient to ensure a meaningful level of 
public input. Current regulations at 31 CFR 33.112 and 45 CFR 155.1312 
specify state public notice and participation requirements for proposed 
waiver requests, and 31 CFR 33.116(b) and 45 CFR 155.1316(b) specify 
the accompanying public notice and comment period requirements under 
the Federal public notice and approval process.\76\ Under the current 
regulations

[[Page 6173]]

at 31 CFR 33.112 and 45 CFR 155.1312, states are required to provide a 
public notice and comment period prior to submitting an application for 
a new section 1332 waiver. In addition, under section 
1332(a)(4)(B)(iii) of PPACA and the existing implementing regulations 
at 31 CFR 33.116(b) and 45 CFR 155.1316(b), the Secretary of HHS and 
the Secretary of the Treasury are required to provide a Federal public 
notice and comment period following their preliminary determination 
that a state's section 1332 waiver application is complete. As such, 
the Departments are of the view that the public has a meaningful 
opportunity to provide comments on waiver proposals and to understand 
the distributional effects on various segments of the population prior 
to waiver approval.
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    \76\ Also note that there is flexibility under 31 CFR 33.118 and 
45 CFR 155.1318 for states to request, subject to approval by the 
Departments, modification from the normal public notice requirements 
during the COVID-19 PHE when a delay would undermine or compromise 
the purpose of the proposed waiver request and be contrary to the 
interest of consumers.
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4. Network Adequacy Standards (Sec.  156.230)
    We are finalizing the proposal to revise Sec.  156.230 to reflect 
the longstanding interpretation that plans that do not utilize a 
provider network are not required to comply with network adequacy 
standards to obtain QHP certification. We make no other changes to QHP 
certification requirements or requirements under the market reform 
provisions under title I of PPACA; plans that do not utilize a provider 
network must still comply with all other applicable QHP certification 
requirements to obtain QHP certification. Because the codified 
interpretation is the status quo, we do not anticipate any burden to 
result from finalization of this policy. We disagree with some 
commenters' assertions that finalization of this policy will create 
increased costs for consumers or a proliferation of plans that do not 
differentiate benefits based on whether enrollees receive covered 
services from in-network providers, which may not be advantageous for 
certain consumers. As we explain earlier in the preamble, the changes 
to the QHP network adequacy standard we are finalizing make no changes 
to QHP certification requirements. There have only been 12 such plans 
that did not utilize a provider network approved as QHPs, which were 
approved for sale in Wisconsin for plan year 2016. In the last five 
plan years, there have been no such plans approved for QHP 
certification. Accordingly, we do not expect this policy to result in 
increased consumer costs or any proliferation appreciable increases to 
such plans seeking QHP certification.
5. Enrollment Process for Qualified Individuals (Sec.  156.1240)
    We are finalizing this policy with some minor modifications to the 
regulatory text and the adoption of additional language specifying that 
QHP issuers must also accept premium payments using a payment method 
described in Sec.  156.1240(a)(2) that are made directly by enrollees 
who are enrolled in an individual coverage HRA or QSEHRA. We expect 
this approach will ease administration of individual coverage HRAs and 
QSEHRAs by altering the behavior of QHP issuers who do not yet accept 
premium payments using such payment methods. It will also make the 
individual coverage HRA and QSEHRA experience more seamless for 
employers and employees by ensuring that individual coverage HRAs and 
QSEHRAs may pay premiums for employees through direct payments to the 
issuer, rather than through reimbursements of premium payments to 
employees.
    We received several comments asserting that finalizing these 
changes would place cost burdens on issuers and have addressed them 
earlier in the preamble. As discussed, we did not propose and are not 
finalizing a requirement for QHP issuers to accept payments from 
individual coverage HRAs or QSEHRAs when such payments are made using a 
form of payment that is not described in Sec.  156.1240(a)(2) or to 
accept aggregate payments from an individual coverage HRA or QSEHRA 
made on behalf of multiple enrollees.\77\ While it may be possible that 
some issuers may incur administrative costs to implement operational 
changes necessary to comply with this requirement, such issuer costs 
should be minimal because QHP issuers, as a general matter, are already 
required to accept premium payments that are made using the forms of 
payment described in Sec.  156.1240(a)(2). Accordingly, the rule we 
finalize here does not require issuers to incur additional costs to 
invest in information technology infrastructure that can generally 
accommodate roster, or list, billing.
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    \77\ 85 FR 78572, 78644.
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6. Regulatory Review Costs
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this final rule, the 
Departments should estimate the cost associated with regulatory review. 
Due to the uncertainty involved with accurately quantifying the number 
of entities that will review the rule, the Departments assume that the 
this rule will be reviewed by all affected issuers, states, and some 
individuals and other entities that commented on the proposed rule. The 
Departments acknowledge that this assumption may understate or 
overstate the costs of reviewing this rule. It is possible that not all 
commenters reviewed the proposed rule in detail, and it is also 
possible that some reviewers chose not to comment on the proposed rule. 
For these reasons, the Departments consider the number of affected 
entities and commenters to be a fair estimate of the number of 
reviewers of this rule.
    HHS is required to issue a portion of this rule each year under 
their regulations and the Departments estimate that approximately half 
of the remaining provisions would cause additional regulatory review 
burden that stakeholders do not already anticipate. The Departments 
also recognize that different types of entities are in many cases 
affected by mutually exclusive sections of this final rule, and 
therefore, for purposes of our estimate, the Departments assume that 
each reviewer reads approximately 50 percent of the rule, excluding the 
portion of the rule that HHS is required to issue each year.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), the Departments estimate that the cost 
of reviewing this rule is $110.74 per hour, including overhead and 
fringe benefits.\78\ Assuming an average reading speed, the Departments 
estimate that it will take approximately 1 hour for staff to review the 
relevant portions of this final rule that causes unanticipated burden. 
The Departments assume that approximately 725 entities will review this 
final rule. For each entity that reviews the rule, the estimated cost 
is approximately $110.74. Therefore, the Departments estimate that the 
total cost of reviewing this regulation is approximately $80,287 
($110.74 x 725 reviewers).
---------------------------------------------------------------------------

    \78\ https://www.bls.gov/oes/current/oes_nat.htm.
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D. Regulatory Alternatives Considered

    In developing the policies contained in this final rule, the 
Departments considered numerous alternatives. Below the Departments 
discuss the key regulatory alternatives that were considered.
    As an alternative to the proposed reduction in user fee rates, we 
considered maintaining the FFE and SBE-FP user fee rates at their 
current 2021 levels. However, our analysis supported reducing the user 
fee rate. In

[[Page 6174]]

light of the projected premium and enrollment increases, HHS believed 
that a reduction in FFE and SBE-FP user fees was warranted for 2022.
    We considered including a requirement for states to submit and be 
approved for a State Innovation Waiver under section 1332 of PPACA as 
part of the proposed Exchange DE option described at new Sec.  
155.221(j). However, nothing under the plain terms of section 
1311(d)(4) PPACA governing the functions of an Exchange requires an 
Exchange to host a single, consumer-facing enrollment website to 
receive applications or support plan shopping and selection.\79\ Thus 
we concluded that there is no requirement in PPACA that must be waived 
to allow a state to implement the Exchange DE option, and requiring 
states to expend taxpayer dollars to file a waiver application would be 
unnecessary and unduly burdensome. We also considered aligning the 
implementation timeframe for all Exchange models interested in the 
Exchange DE option to plan year 2023; however, because we believe that 
this option could improve health insurance markets and that State 
Exchanges could implement the option by plan year 2022, we chose not to 
do so.
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    \79\ Section 1311(d)(4)(C) of PPACA requires only that ``[a]n 
Exchange shall, at a minimum . . . maintain an Internet website 
through which enrollees and prospective enrollees of qualified 
health plans may obtain standardized comparative information on such 
plans . . .''
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    Regarding the section 1332 waiver policies in this rule, the 
Departments considered not proposing to codify the 2018 Guidance. 
Additionally, the Departments considered proposing the 2018 Guidance 
through separate notice and comment rulemaking. The Departments did not 
take either of these options because it would be contrary to the 
interest of states. Specifically, the Departments concluded that not 
proposing codifying the 2018 Guidance would lead to uncertainty for 
states considering section 1332 waiver applications, and the 
Departments concluded that separate notice and comment rulemaking was 
unnecessary because this rulemaking provided a public notice and 
comment period.
    In this final rule, the Departments seek to provide certainty to 
states that the requirements and expectations of the section 1332 
waiver program will not change abruptly during a period in which states 
are doing the work to prepare a waiver proposal. The Departments 
considered alternatives to the interpretations set forth in the 2018 
Guidance, including interpretations that could further increase 
flexibility. However, the Departments determined that changing guidance 
and the criteria required for approval would increase regulatory 
uncertainty and make states less likely to submit section 1332 waivers. 
The Departments are of the view that finalizing these policies with 
modifications will help states that are interested in undertaking the 
complicated and potentially expensive work to design a waiver program 
that meets the four guardrails, as described in the 2018 Guidance. 
Codification of many of the policies described in the 2018 Guidance 
could also encourage more states to apply for section 1332 waivers. As 
discussed section IV.A. of this the preamble, this consideration is 
especially important because the process of developing and submitting a 
proposal may take significant time and taxpayer resources at the state 
level, and states do not want to undertake these efforts if the 
probability of success is low and the probability of the Departments 
changing requirements is high. As part of this rulemaking, the 
Departments substantively considered comments and determined that 
changes to 2018 Guidance were not warranted based on comments received.

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 final rule on small entities, unless the 
head of the agency can certify that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The RFA generally defines a ``small entity'' as (1) a proprietary firm 
meeting the size standards of the Small Business Administration (SBA), 
(2) a not-for-profit organization that is not dominant in its field, or 
(3) a small government jurisdiction with a population of less than 
50,000. States and individuals are not included in the definition of 
``small entity.'' HHS uses a change in revenues of more than 3 to 5 
percent as its measure of significant economic impact on a substantial 
number of small entities.
    The provisions in this rule will affect health insurance issuers in 
the individual and small group markets. The Departments are of the view 
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 $41.5 million 
or less are 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 $35 million or less.\80\ The Departments are of the 
view 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 \81\ submissions for 
the 2019 MLR reporting year, approximately 77 out of 479 issuers of 
health insurance coverage nationwide had total premium revenue of $41.5 
million or less. This estimate may overstate the actual number of small 
health insurance companies that may be affected, since over 67 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 $41.5 million. 
Therefore, the Departments do not expect the provisions of this rule to 
affect a substantial number of small entities.
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    \80\ https://www.sba.gov/document/support--table-size-standards.
    \81\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

    The changes related to section 1332 waivers may have an impact on 
small businesses. Section 1332 allows a state to waive Part I of 
Subtitle D of Title I of the ACA (relating to establishing QHPs); Part 
II of Subtitle D of Title I of the ACA (relating to consumer choices 
and insurance competition through Exchanges); sections 36B of the Code 
and 1402 of the ACA (relating to premium tax credits and cost-sharing 
reductions for plans offered through Exchanges); section 4980H of the 
Code (relating to employer shared responsibility); and section 5000A of 
the Code (relating to individual shared responsibility). To date, the 
Departments have approved one waiver that impacts small businesses. 
Hawaii's waiver waived the small business health options program (SHOP) 
and related provisions in order to allow Hawaii to operate its own 
state program consistent with its state law. The state program, the 
Prepaid Health Care Act, requires virtually all employers to offer 
coverage to their employees and provides small employers premium 
assistance. As part of its the waiver, Hawaii waived the SBTC under 
section 45R of the Code. As such, the SBTC amounts that would otherwise 
be paid to small employers in Hawaii has been provided as a pass-
through payment to the state, which it

[[Page 6175]]

used to support a state fund that helps small businesses cover their 
health care-related costs.
    In addition, section 1102(b) of the Act requires us to prepare a 
RIA if a rule under title XVIII, title XIX, or part B of title 42 of 
the Act 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, the Departments define a small rural hospital as a 
hospital that is located outside of a metropolitan statistical area and 
has fewer than 100 beds. While this rule is not subject to section 1102 
of the Act, the Departments have determined that this rule will not 
affect small rural hospitals. Therefore, the Secretaries have 
determined that this rule 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 final rule that includes any 
federal mandate that may result in expenditures in any one year by a 
state, local, or Tribal governments, in the aggregate, or by the 
private sector, of $100 million in 1995 dollars, updated annually for 
inflation. Currently, that threshold is approximately $156 million. 
Although the Departments have not been able to quantify all costs, the 
Departments 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 final rule that imposes substantial 
direct costs on state and local governments, preempts state law, or 
otherwise has federalism implications. In the Departments' view, while 
this final rule will not impose substantial direct requirement costs on 
state and local governments, this regulation has federalism 
implications due to potential direct effects on the distribution of 
power and responsibilities among the state and federal governments 
relating to determining standards relating to health insurance that is 
offered in the individual and small group markets.
    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, the 
Departments have engaged in efforts to consult with and work 
cooperatively with affected states, including participating in 
conference calls with and attending conferences of the NAIC, and 
consulting with state insurance officials on an individual basis.
    While developing this rule, the Departments attempted to balance 
the states' interests in regulating health insurance issuers with the 
need to ensure market stability. By doing so, the Departments 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. For states that elected previously 
to operate an Exchange, those states had the opportunity to use funds 
under Exchange Planning and Establishment Grants to fund the 
development of data. Accordingly, some of the initial cost of creating 
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. A user fee is 
assessed on issuers under all existing Exchange models, including State 
Exchanges where the user fee is assessed by the state, SBE-FPs, and the 
FFEs.

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 the Congress and to the Comptroller General a report 
containing a copy of the rule along with other specified information, 
and has been transmitted to the Congress and the Comptroller for 
review. Under the Congressional Review Act, the Office of Information 
and Regulatory Affairs designated this final rule as a ``major rule'' 
as that term is defined in 5 U.S.C. 804(2), because it is likely to 
result in an annual effect on the economy of $100 million or more.

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 primarily results in transfers and is thus not a 
regulatory or deregulatory action for the purposes of E.O. 13771.

List of Subjects

31 CFR Part 33

    Health care, Health insurance, Reporting and recordkeeping 
requirements, Waivers for State Innovation.

45 CFR Part 155

    Administrative practice and procedure, Advertising, Age 
discrimination, Brokers, Civil rights, Citizenship and naturalization, 
Conflict of interests, Consumer protection, Grant programs--health, 
Grants administration, 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, Sex discrimination, State and local governments, 
Technical assistance, Taxes, Women, Youth.

45 CFR Part 156

    Administrative practice and procedure, Advertising, Advisory 
committees, Age discrimination, Alaska, Brokers, Citizenship and 
naturalization, Civil rights, 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, 
Intergovernmental relations, Loan programs--health, Medicaid, 
Organization and functions (Government agencies), Prescription drugs, 
Public assistance programs, Reporting and recordkeeping requirements, 
Sex discrimination, State and local governments, Sunshine Act, 
Technical assistance, Women, Youth.

    For the reasons set forth in the preamble, the Department of the

[[Page 6176]]

Treasury amends 31 CFR subtitle A as set forth below:

PART 33--WAIVERS FOR STATE INNOVATION

0
1. The authority citation for part 33 continues to read as follows:

    Authority:  Sec. 1332, Pub. L. 111-148, 124 Stat. 119.


0
2. Section 33.108 is amended by revising paragraphs (f)(3)(i), 
(f)(3)(iv) introductory text, and (f)(3)(iv)(A) through (C) to read as 
follows:


Sec.  33.108  Application procedures.

* * * * *
    (f) * * *
    (3) * * *
    (i) A comprehensive description of the State legislation and 
program to implement a plan meeting the requirements for a waiver under 
section 1332 of PPACA. In analyzing whether the State has satisfied the 
requirement under section 1332(b)(2)(A) of PPACA that the State enact a 
law authorizing a waiver under section 1332 of PPACA, the Secretary and 
the Secretary of Health and Human Services, as applicable, may consider 
existing State legislation combined with duly-enacted State regulation 
or an executive order so long as the State legislation provides 
statutory authority to enforce PPACA provisions or the State plan;
* * * * *
    (iv) The analyses, actuarial certifications, data, assumptions, 
targets, and other information set forth in paragraph (f)(4) of this 
section sufficient to provide the Secretary and the Secretary of Health 
and Human Services, as applicable, with the necessary data to determine 
that the State's proposed waiver satisfies the general requirements for 
approval under section 1332(b)(1) of the Affordable Care Act consistent 
with the provisions of this paragraph (f)(3)(iv) and interpretive 
guidance published by the Secretary and the Secretary of Health and 
Human Services:
    (A) As required under section 1332(b)(1)(A) of the Affordable Care 
Act (the comprehensive coverage requirement), will provide coverage 
that is at least as comprehensive as the coverage defined in section 
1302(b) of the Affordable Care Act and offered through Exchanges 
established under the Affordable Care Act as certified by the Office of 
the Actuary of the Centers for Medicare & Medicaid Services based on 
sufficient data from the State and from comparable States about their 
experience with programs created by the Affordable Care Act and the 
provisions of the Affordable Care Act that the State seeks to waive. To 
satisfy the comprehensive coverage requirement, the Secretary and the 
Secretary of Health and Human Services, as applicable, must determine 
that the State plan will provide consumers access to coverage options 
that are at least as comprehensive as the coverage options provided 
without the waiver, to at least a comparable number of people as would 
have had access to such coverage absent the waiver. These coverage 
options must also satisfy the affordability requirement in paragraph 
(f)(3)(iv)(B) of this section;
    (B) As required under section 1332(b)(1)(B) of the Affordable Care 
Act (the affordability requirement), will provide coverage and cost 
sharing protections against excessive out-of-pocket spending that are 
at least as affordable as the provisions of Title I of the Affordable 
Care Act would provide. To satisfy the affordability requirement, the 
Secretary and the Secretary of Health and Human Services, as 
applicable, must determine that the State plan will provide consumers 
access to coverage options that are at least as affordable as the 
coverage options provided without the waiver, to at least a comparable 
number of people as would have had access to such coverage absent the 
waiver. These coverage options must also satisfy the comprehensive 
coverage requirement in paragraph (f)(3)(iv)(A) of this section;
    (C) As required under section 1332(b)(1)(C) of the Affordable Care 
Act (the scope of coverage requirement), will provide coverage to at 
least a comparable number of its residents as the provisions of Title I 
of the Affordable Care Act would provide. Coverage refers to minimum 
essential coverage as defined in 26 U.S.C. 5000A(f) and 26 CFR 1.5000A-
2, and health insurance coverage as defined in 45 CFR 144.103; and
* * * * *

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3. Section 33.120 is amended by revising paragraphs (a)(1) and (2) to 
read as follows:


Sec.  33.120   Monitoring and compliance.

    (a) * * *
    (1) Following the issuance of a final decision to approve a section 
1332 waiver by the Secretary and the Secretary of Health and Human 
Services, as applicable, a State must comply with all applicable 
Federal laws, regulations, and interpretive policy statements, as well 
as interpretive guidance published by the Secretary and the Secretary 
of Health and Human Services, unless expressly waived. A State must, 
within the timeframes specified in law, regulation, interpretive policy 
or guidance, come into compliance with any changes in Federal law, 
regulation, or policy affecting section 1332 waivers, unless the 
provision being changed is expressly waived.
    (2) The Secretary and the Secretary of Health and Human Services 
will examine compliance with Federal and regulatory requirements 
consistent with Sec.  33.108(f)(3)(iv) and interpretive guidance 
published by the Secretary and the Secretary of Health and Human 
Services when conducting implementation reviews under paragraph (b) of 
this section.
* * * * *

0
4. Section 33.128 is amended by revising paragraph (a) to read as 
follows:


Sec.  33.128   Periodic evaluation requirements.

    (a) The Secretary and the Secretary of Health and Human Services, 
as applicable, shall periodically evaluate the implementation of a 
program under a section 1332 waiver consistent with Sec.  
33.108(f)(3)(iv) and interpretive guidance published by the Secretary 
and the Secretary of Health and Human Services, as applicable, and any 
terms and conditions governing the section 1332 waiver.
* * * * *
    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR parts 155 and 156 as set forth below.

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

0
5. The authority citation for part 155 continues to read as follows:

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


0
6. Section 155.221 is amended by--
0
a. Redesignating paragraphs (c) through (h) as paragraphs (d) through 
(i), respectively.
0
b. Adding a reserved paragraph (c);
0
c. In newly redesignated paragraphs (g) introductory text, (g)(6) and 
(7), and (h) by removing the reference to ``paragraph (e)'' and adding 
in its place a reference to ``paragraph (f)''; and
0
d. Adding paragraph (j).
    The additions and revisions read as follows:


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

* * * * *

[[Page 6177]]

    (c) [Reserved]
* * * * *
    (j) Process for States to elect the Exchange direct enrollment 
option. Subject to HHS approval, and in addition to or in lieu of the 
Exchange operating its own consumer-facing eligibility application and 
enrollment website, a State may elect for the State Exchange, State 
Exchange on the Federal platform, or federally-facilitated Exchange in 
the State to approve one or more enrollment entities described in 
paragraph (a) of this section to make available a non-Exchange online 
website to enroll qualified individuals in a QHP offered through the 
Exchange in the State in a manner that constitutes enrollment through 
the Exchange, as specified in paragraph (j)(1) or (2) of this section. 
Through the websites of these approved entities, consumers in the State 
apply for and enroll in coverage using an eligibility application as 
described in Sec.  155.405, and receive eligibility determinations from 
the Exchange for QHP enrollment, advance payments of the premium tax 
credit and cost-sharing reductions, as well as receive assessments or 
determinations from the Exchange for Medicaid and CHIP eligibility in 
accordance with Sec. Sec.  155.302 and 155.405.
    (1) Direct enrollment option for a State Exchange. A State may 
receive approval, under Sec. Sec.  155.105(b) and 155.106(a), to 
operate a State Exchange using the direct enrollment option described 
in this paragraph (j). The State Exchange must meet all Federal 
statutory and regulatory requirements for the operation of an Exchange. 
An approved State Exchange that wishes to implement this option must 
submit a revised Exchange Blueprint in accordance with Sec.  
155.105(e). In order to obtain approval for the State Exchange to 
implement this option, the State must:
    (i) Demonstrate to HHS operational readiness for the State Exchange 
to enroll qualified individuals in a QHP through approved direct 
enrollment entity websites in a manner that constitutes enrollment 
through the Exchange, including enabling individuals to apply for, and 
receive eligibility determinations from the Exchange for QHP enrollment 
and advance payments of the premium tax credit and cost-sharing 
reductions, as well as receive assessments or determinations of 
Medicaid and CHIP eligibility from the Exchange as described in Sec.  
155.302, using the eligibility application described in Sec.  155.405;
    (ii) Provide HHS an implementation plan and timeline that details 
the key activities, milestones, and communication and outreach strategy 
to support the transition of enrollment operations to direct enrollment 
entities; and
    (iii) Ensure that a minimum of one direct enrollment entity 
approved by the State meets minimum Federal requirements for HHS 
approval to participate in the federally-facilitated Exchange direct 
enrollment program, including requirements at Sec.  155.220 and this 
section, particularly Sec.  155.220(c)(3)(i)(A) and (D) so that at 
least one approved web-broker in the state displays detailed 
information for all available QHPs and meets accessibility requirements 
under Sec.  155.205(c) and is capable of enrolling all consumers in the 
State, including those who present complex eligibility scenarios. Where 
no direct enrollment entity approved by the State meets such minimum 
Federal requirements or possesses the capability to enroll all 
consumers in the State, the State must offer a consumer-facing website 
that meets such requirements and possesses such capability.
    (2) Direct enrollment option for a State with a federally-
facilitated Exchange or State Exchange on the Federal platform. 
Pursuant to a request from a State, the federally-facilitated Exchange 
or a State Exchange on the Federal platform may partner with the 
requesting State to implement the direct enrollment option described in 
this paragraph (j). The federally-facilitated Exchange or State-based 
Exchange on the Federal platform must meet all Federal statutory and 
regulatory requirements for the operation of an Exchange. In order to 
obtain approval for the federally-facilitated Exchange or State 
Exchange on the Federal platform in a State to implement this option, a 
State must:
    (i) Coordinate with HHS on an implementation plan and timeline that 
allows for a transition period, developed at the discretion of HHS in 
consultation with the State, necessary for the federally-facilitated 
Exchange to operationalize the necessary changes to implement this 
option;
    (ii) Execute a Federal agreement with HHS that includes the terms 
and conditions for the arrangement and which defines the division of 
responsibilities between HHS and the State;
    (iii) Agree to procedures developed by HHS for the collection and 
remittance of the monthly user fee described in Sec.  156.50(c) of this 
subchapter; and
    (iv) Perform and cooperate with activities established by HHS 
related to oversight and financial integrity requirements in accordance 
with section 1313 of the Affordable Care Act, including complying with 
reporting and compliance activities required by HHS and described in 
the Federal agreement.

0
7. Section 155.1308 is amended by revising paragraphs (f)(3)(i), 
(f)(3)(iv) introductory text, and (f)(3)(iv)(A) through (C) to read as 
follows:


Sec.  155.1308  Application procedures.

* * * * *
    (f) * * *
    (3) * * *
    (i) A comprehensive description of the State legislation and 
program to implement a plan meeting the requirements for a waiver under 
section 1332 of PPACA. In analyzing whether the State has satisfied the 
requirement under section 1332(b)(2)(A) of PPACA that the State enact a 
law authorizing a waiver under section 1332 of PPACA, the Secretary and 
the Secretary of the Treasury, as applicable, may consider existing 
State legislation combined with duly-enacted State regulation or an 
executive order so long as the State legislation provides statutory 
authority to enforce PPACA provisions or the State plan;
* * * * *
    (iv) The analyses, actuarial certifications, data, assumptions, 
targets, and other information set forth in paragraph (f)(4) of this 
section sufficient to provide the Secretary and the Secretary of the 
Treasury, as applicable, with the necessary data to determine that the 
State's proposed waiver satisfies the general requirements for approval 
under section 1332(b)(1) of the Affordable Care Act consistent with the 
provisions of this paragraph (f)(3)(iv) and interpretive guidance 
published by the Secretary and the Secretary of the Treasury;
    (A) As required under section 1332(b)(1)(A) of the Affordable Care 
Act (the comprehensive coverage requirement), will provide coverage 
that is at least as comprehensive as the coverage defined in section 
1302(b) of the Affordable Care Act and offered through Exchanges 
established under the Affordable Care Act as certified by the Office of 
the Actuary of the Centers for Medicare & Medicaid Services based on 
sufficient data from the State and from comparable States about their 
experience with programs created by the Affordable Care Act and the 
provisions of the Affordable Care Act that the State seeks to waive. To 
satisfy the comprehensive coverage requirement,

[[Page 6178]]

the Secretary and the Secretary of the Treasury, as applicable, must 
determine that the State plan will provide consumers access to coverage 
options that are at least as comprehensive as the coverage options 
provided without the waiver, to at least a comparable number of people 
as would have had access to such coverage absent the waiver. These 
coverage options must also satisfy the affordability requirement in 
paragraph (f)(3)(iv)(B) of this section;
    (B) As required under section 1332(b)(1)(B) of the Affordable Care 
Act (the affordability requirement), will provide coverage and cost 
sharing protections against excessive out-of-pocket spending that are 
at least as affordable as the provisions of Title I of the Affordable 
Care Act would provide. To satisfy the affordability requirement, the 
Secretary and the Secretary of the Treasury, as applicable, must 
determine that the State plan will provide consumers access to coverage 
options that are at least as affordable as the coverage options 
provided without the waiver, to at least a comparable number of people 
as would have had access to such coverage absent the waiver. These 
coverage options must also satisfy the comprehensive coverage 
requirement in paragraph (f)(3)(iv)(A) of this section;
    (C) As required under section 1332(b)(1)(C) of the Affordable Care 
Act (the scope of coverage requirement), will provide coverage to at 
least a comparable number of its residents as the provisions of Title I 
of the Affordable Care Act would provide. Coverage refers to minimum 
essential coverage as defined in 26 U.S.C. 5000A(f) and 26 CFR 1.5000A-
2, and health insurance coverage as defined in 45 CFR 144.103; and
* * * * *

0
8. Section 155.1320 is amended by revising paragraphs (a)(1) and (2) to 
read as follows:


Sec.  155.1320  Monitoring and compliance.

    (a) * * *
    (1) Following the issuance of a final decision to approve a section 
1332 waiver by the Secretary and the Secretary of the Treasury, as 
applicable, a State must comply with all applicable Federal laws, 
regulations, and interpretive policy statements, as well as 
interpretive guidance published by the Secretary and the Secretary of 
the Treasury, unless expressly waived. A State must, within the 
timeframes specified in law, regulation, interpretive policy or 
guidance, come into compliance with any changes in Federal law, 
regulation, or policy affecting section 1332 waivers, unless the 
provision being changed is expressly waived.
    (2) The Secretary and the Secretary of the Treasury will examine 
compliance with Federal and regulatory requirements consistent with 
Sec.  155.1308(f)(3)(iv) and interpretive guidance published by the 
Secretary and the Secretary of the Treasury when conducting 
implementation reviews under paragraph (b) of this section.
* * * * *

0
9. Section 155.1328 is amended by revising paragraph (a) to read as 
follows:


Sec.  155.1328  Periodic evaluation requirements.

    (a) The Secretary and the Secretary of the Treasury, as applicable, 
shall periodically evaluate the implementation of a program under a 
section 1332 waiver consistent with Sec.  155.1308(f)(3)(iv) and 
interpretive guidance published by the Secretary and the Secretary of 
the Treasury, as applicable, and any terms and conditions governing the 
section 1332 waiver.
* * * * *

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

0
10. 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, and 26 U.S.C. 36B.


0
11. Section 156.230 is amended by adding paragraph (f) to read as 
follows:


Sec.  156.230   Network adequacy standards.

* * * * *
    (f) Exception. Paragraphs (a) through (e) of this section do not 
apply to a plan for which an issuer seeks QHP certification or to any 
certified QHP that does not use a provider network, meaning that the 
plan or QHP does not condition or differentiate benefits based on 
whether the issuer has a network participation agreement with the 
provider that furnishes covered services.

0
12. Section 156.1240 is amended by adding paragraph (a)(3) to read as 
follows:


Sec.  156.1240  Enrollment process for qualified individuals.

    (a) * * *
    (3) For payments in the individual market made using a payment 
method described in paragraph (a)(2) of this section, accept premium 
payments made by or on behalf of an enrollee in connection with an 
individual coverage HRA (as described in Sec.  146.123(b) of this 
subchapter) or qualified small employer health reimbursement 
arrangement (as described in section 9831(d)(2) of the Internal Revenue 
Code of 1986, as amended) in which the enrollee is enrolled.
* * * * *

    Dated: January 8, 2021.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: January 12, 2021.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
    Dated: January 13, 2021.
David J. Kautter,
Assistant Secretary (Tax Policy), Department of the Treasury.
[FR Doc. 2021-01175 Filed 1-14-21; 4:15 pm]
BILLING CODE 4120-01-P