Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2022 and Pharmacy Benefit Manager Standards, 24140-24295 [2021-09102]
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Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
45 CFR Parts 147, 150, 153, 155, 156,
158, and 184
[CMS–9914–F2]
RIN 0938–AU18
Patient Protection and Affordable Care
Act; HHS Notice of Benefit and
Payment Parameters for 2022 and
Pharmacy Benefit Manager Standards
Centers for Medicare &
Medicaid Services (CMS), Department
of Health & Human Services (HHS).
ACTION: Final rule.
AGENCY:
This final rule sets forth
payment parameters and provisions
related to the risk adjustment program
and cost-sharing parameters. It includes
changes related to special enrollment
periods; direct enrollment entities; the
administrative appeals processes with
respect to health insurance issuers and
non-federal governmental group health
plans; the medical loss ratio program;
income verification by Exchanges; and
other related topics. It also revises the
regulation requiring the reporting of
certain prescription drug information by
qualified health plans or their pharmacy
benefit managers.
DATES: These regulations are effective
on July 6, 2021, with the exception of
the amendments to §§ 155.320(c) and
158.221(b) which are effective May 5,
2021.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
Jeff Wu, (301) 492–4305, Rogelyn
McLean, (301) 492–4229, Grace Bristol,
(410) 786–8437, Kiahana Brooks, (301)
492–5229, or Sara Rosta, (301) 492–4223
for general information.
Cam Clemmons, (206) 615–2338, for
matters related to health insurance
reform requirements for the group and
individual insurance markets and
administrative appeals for health
insurance issuers and non-federal
governmental group health plans.
Allison Yadsko, (410) 786–1740, or
Jacquelyn Rudich, (301) 492–5211, for
matters related to risk adjustment.
Isadora Gil, (410) 786–4532, or
Colleen Gravens, (301) 492–4107, for
matters related to EDGE discrepancies.
Joshua Paul, (301) 492–4347, for
matters related to risk adjustment data
validation.
Dan Brown, (301) 492–5146, for
matters related to web-brokers or direct
enrollment, other than the direct
enrollment option for Federallyfacilitated and State Exchanges.
Nicholas Eckart, (301) 492–4452, for
matters related to termination notices.
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Amanda Brander, (202) 690–7892, for
matters related to income
inconsistencies.
Marisa Beatley, (301) 492–4307, for
matters related to employer-sponsored
coverage verification.
Carolyn Kraemer, (301) 492–4197, for
matters related to special enrollment
periods for Exchange enrollment under
part 155.
Katherine Bentley, (301) 492–5209,
for matters related to special enrollment
period verification.
Rebecca Bucchieri, (301) 492–4400,
for matters related to EHB-benchmark
plans and defrayal of state-required
benefits.
Aaron Franz, (410) 786–8027, for
matters related to user fees.
Joshua Paul, (301) 492–4347 or Nora
Simmons, (410–786–1981), for matters
related to the premium adjustment
percentage.
Ken Buerger, (410) 786–1190, for
matters related to PBM transparency
reporting requirements.
Nora Simmons, (410–786–1981),
Adrianne Carter, (303) 844–5810, or
Amber Bellsdale, (301) 492–4411, for
matters related to disputes under 45
CFR 156.1210.
Nidhi Singh Shah, (301) 492–5110, for
matters related to the Quality Rating
System and the Qualified Health Plan
Enrollee Experience Survey.
Alper Ozinal, (301) 492–4178, or
Jacquelyn Rudich, (301) 492–5211, for
matters related to financial program
audits and civil money penalties.
Adrianne Patterson, 410–786–0696, or
Nora Simmons, (410–786–1981), for
matters related to netting of payments
under 45 CFR 156.1215 and
administrative appeals under 45 CFR
156.1220.
Christina Whitefield, (301) 492–4172,
for matters related to the MLR program.
SUPPLEMENTARY INFORMATION:
Future Rulemaking on Benefit and
Payment Parameters for the 2022 Plan
Year
In the December 4, 2020 Federal
Register, we 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 rule’’ or
‘‘proposed 2022 Payment Notice’’) that
proposed to reduce fiscal and regulatory
burdens across different program areas
and to provide stakeholders with greater
flexibility. In the January 19, 2021
Federal Register (86 FR 6138), we
published a final rule that addressed a
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subset of the policies proposed in the
proposed rule. That final rule, among
other things, finalized the user fee rates
for issuers offering qualified health
plans through the Federally-facilitated
Exchanges (FFEs) at 2.25 percent of total
monthly premiums, and the user fee rate
for issuers offering qualified health
plans (QHPs) through State-based
Exchanges on the Federal platform
((SBE–FPs) at 1.75 percent of total
monthly premiums. The final rule also
codified a new direct enrollment option
for states served by any Exchange model
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. The final rule
also finalized changes to regulations
governing State Innovation Waivers
under section 1332 of the Affordable
Care Act (ACA) that specifically
incorporate policies announced in
guidance in 2018.
On January 28, 2021, President Biden
issued Executive Order 14009,
‘‘Strengthening Medicaid and the
Affordable Care Act,’’ 1 directing HHS,
and the heads of all other executive
departments and agencies with
authorities and responsibilities related
to the ACA, to review all existing
regulations, orders, guidance
documents, policies, and any other
similar agency actions to determine
whether such agency actions are
inconsistent with this Administration’s
policy to protect and strengthen the
ACA and to make high-quality health
care accessible and affordable for every
American. As part of this review, HHS
examined policies and requirements
under the proposed 2022 Payment
Notice and the January 19, 2021 final
2022 Payment Notice to analyze
whether the policies under these
rulemakings might undermine the
Health Benefits Exchanges or the health
insurance markets, and whether they
may present unnecessary barriers to
individuals and families attempting to
access health coverage. HHS also
considered whether to suspend, revise,
or rescind any such actions through
appropriate administrative action.
In compliance with Executive Order
(E.O.) 14009 and as a result of HHS’s
review of the proposed 2022 Payment
Notice and the January 19, 2021 final
2022 Payment Notice, HHS intends to
issue rulemaking this spring to address
policies finalized in the final 2022
Payment Notice published on January
19, 2021. Specifically, in future
rulemaking, HHS intends to propose
1 86
FR 7793 (February 2, 2021).
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Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
new QHP issuer user fees rates for the
2022 plan year: A new FFE user fee rate
of 2.75 percent of total monthly
premiums; and a new SBE–FP user fee
rate of 2.25 percent of monthly
premiums. We also intend to revisit the
Exchange Direct Enrollment (DE) option
for states and the changes to regulations
governing State Innovation Waivers
under section 1332 of the ACA. HHS is
of the view that pursuit of these
proposals is consistent with E.O. 14009,
and this Administration’s goal of
protecting and strengthening the ACA
and making high-quality health care
accessible and affordable for every
American.
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 147—Health Insurance Reform
Requirements for the Group and
Individual Health Insurance Markets
B. Part 150—CMS Enforcement in Group
and Individual Markets
C. Part 153—Standards Related to
Reinsurance, Risk Corridors, and Risk
Adjustment
D. Part 155—Exchange Establishment
Standards and Other Related Standards
Under the Affordable Care Act
E. Part 156—Health Insurance Issuer
Standards Under the Affordable Care
Act, Including Standards Related to
Exchanges
F. Part 158—Issuer Use of Premium
Revenue: Reporting and Rebate
Requirements
G. Part 184—Pharmacy Benefit Manager
Standards Under the Affordable Care Act
IV. Implementation of the Decision in City of
Columbus, et al. v. Cochran
V. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding Submission of Adjusted
Premium Amounts for Risk Adjustment
C. ICRs Regarding Direct Enrollment
Agents and Brokers
D. ICRs Regarding Prescription Drug
Distribution and Cost Reporting by QHP
Issuers and PBMs
E. ICRs Regarding Medical Loss Ratio
F. Summary of Annual Burden Estimates
for Proposed Requirements
G. Submission of PRA Related Comments
VI. Waiver of Proposed Rulemaking and
Delay in Effective Date
VII. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice
Provisions and Accounting Table
D. Regulatory Alternatives Considered
E. Regulatory Flexibility Act
F. Unfunded Mandates
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G. Federalism
H. Congressional Review Act
I. Executive Summary
American Health Benefit Exchanges,
or ‘‘Exchanges,’’ are entities established
under the Affordable Care Act (ACA) 2
through which qualified individuals
and qualified employers can purchase
health insurance coverage in 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 costsharing payments to reduce out-ofpocket expenses for health care services.
The ACA also established the risk
adjustment program, which is intended
to increase the workability of the ACA
regulatory changes in the individual and
small group markets, both on- and offExchange.
In the December 4, 2020 Federal
Register, we 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 rule’’ or
‘‘proposed 2022 Payment Notice’’) that
proposed to reduce fiscal and regulatory
burdens across different program areas
and to provide stakeholders with greater
flexibility. In the proposed rule, we
proposed to amend provisions and
parameters to implement many ACA
programs and requirements, with a
focus on maintaining a stable regulatory
environment. As proposed, the changes
would provide issuers with greater
predictability for upcoming plan years,
while simultaneously enhancing the
role of states in these programs. The
proposals would also provide states
with additional flexibilities, reduce
unnecessary regulatory burdens on
stakeholders, empower consumers,
ensure program integrity, and improve
affordability.
Risk adjustment continues to be a core
program in the individual and small
group markets both on and off
Exchanges, and some of the major
proposals from the proposed rule
included recalibrated parameters for the
HHS-operated risk adjustment
2 The Patient Protection and Affordable Care Act
(Pub. L. 111–148) was enacted on March 23, 2010.
The Health Care and Education Reconciliation Act
of 2010 (Pub. L. 111–152), which amended and
revised several provisions of the ACA, was enacted
on March 30, 2010. In this final rule, we refer to
the two statutes collectively as the ‘‘Affordable Care
Act’’ or ‘‘ACA.’’
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methodology. We also proposed changes
to the risk adjustment models to include
a two-stage specification in the adult
and child models, add severity and
transplant indicators interacted with
hierarchical condition category (HCC)
counts factors to the adult and child
models, and proposed to modify the
enrollment duration factors in the adult
models. Additionally, we proposed
clarifications to the process for HHS to
audit issuers of risk adjustment covered
plans and reinsurance-eligible plans and
also proposed to establish authority for
HHS to conduct compliance review of
these issuers.
As we do every year in the HHS
notice of benefit and payment
parameters, we proposed updated
parameters applicable in the individual
and small group markets (including
merged markets). We proposed the 2022
benefit year user fee rates for issuers
offering plans through the Exchanges on
the Federal platform. We proposed
lowering the Federally-facilitated
Exchange (FFE) and State-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 also proposed user fee
rates of 1.5 percent of total monthly
premiums for FFE and SBE–FP states
that elect the Exchange DE option.3
These user fee proposals were finalized
in the final rule published on January
19, 2021 (86 FR 6138).
We proposed the 2022 benefit year
premium adjustment percentage,
required contribution percentage, and
maximum annual limitations on cost
sharing, including those for cost-sharing
reduction (CSR) plan variations. For the
2023 benefit year and beyond, we
proposed to publish these parameters in
guidance annually, and if not in
guidance, in the annual notice of benefit
and payment parameters or another
appropriate rulemaking. Additionally,
we proposed clarifications to the
process under which HHS conducts
audits of QHP issuers to ensure
compliance with federal requirements
related to advance payments of the
premium tax credit (APTC), CSRs, and
user fees. We also proposed to establish
authority for HHS to conduct
compliance reviews of QHP issuers to
ensure compliance with federal APTC,
CSR and user fee requirements.
We proposed changes to the
information that FFE-registered web3 As noted below, the proposals to establish the
Exchange DE option were finalized, with
modifications, in the final rule published on
January 19, 2021 (86 FR 6138).
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brokers are required to display on their
websites. In addition, we proposed
amendments to codify more detail
describing the operational readiness
reviews that must be successfully
completed as a prerequisite to a webbroker’s non-Exchange website being
approved for use by consumers to
complete an Exchange eligibility
application or a QHP selection. We
similarly proposed to add additional
detail about the operational readiness
reviews applicable to direct enrollment
entities.
Stable and affordable Exchanges with
healthy risk pools are necessary for
ensuring consumers maintain stable
access to health insurance options. In
order to minimize the potential for
adverse selection in the Exchanges, we
shared our future plans for rulemaking
under which we will propose
requirements related to Exchange
verifications of whether applicants for
QHP coverage with APTC or CSR have
access to employer sponsored coverage
that is affordable and offers minimum
value. We proposed to extend our
current enforcement posture under
which Exchanges may exercise
flexibility not to implement risk-based
employer sponsored coverage
verification and to remove the
requirement that Exchanges select a
statistically random sample of
applicants when no electronic data
sources are available.
We proposed new rules related to
special enrollment periods. In addition,
we proposed to require Exchanges to
conduct special enrollment period
verification for at least 75 percent of
new enrollments through special
enrollment periods granted to
consumers not already enrolled in
coverage through the applicable
Exchange.
We also proposed minor procedural
changes to provisions regarding
administrative hearings in parts 150 and
156 to align with the Departmental
Appeals Board’s current practices for
administrative hearings to appeal civil
money penalties (CMPs).
We proposed to release additional
data from the QHP Enrollee Experience
Survey (QHP Enrollee Survey). We also
solicited comments on potential
changes to the framework for the
Quality Rating System (QRS) to support
alignment with other CMS quality
reporting programs and to further
balance the individual survey and
clinical quality measures on the overall
quality scores. We noted that we were
considering ways to modify the
hierarchical structure for the QRS,
which is how the measures are
organized together for maximum
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simplicity and understanding of the
quality rating information provided by
the QRS.
We proposed revisions to the
regulations requiring the collection of
certain prescription drug data from QHP
issuers, and proposed to implement a
requirement for the reporting of this
data from pharmacy benefit managers
(PBMs) when a QHP issuer contracts
with a PBM to administer its
prescription drug benefit.
We proposed to further regulate the
standards related to QHP issuers’
acceptance of payments for premiums
and cost sharing. We also proposed to
make clarifications to the network
adequacy rules to reflect that § 156.230
does not apply to indemnity plans
seeking QHP certification. These
proposals were finalized in the final
rule published on January 19, 2021 (86
FR 6138).
We proposed to establish a new
Exchange DE option under which a
State Exchange, State-based Exchange
on the Federal platform or an FFE state
(through an agreement with HHS) can
leverage the potential of direct
enrollment to offer consumers an
enhanced QHP shopping experience. As
proposed, instead of operating a
centralized enrollment website, states
could use direct enrollment technology
to establish direct pathways to QHP
issuers, web-brokers, and agents and
brokers through which consumers
would apply for and enroll in a QHP
and receive a determination of
eligibility for APTC and CSRs. The
proposals for the Exchange DE option
were finalized, with modifications, in
the final rule published on January 19,
2021 (86 FR 6138).
We proposed to establish the
definition of prescription drug rebates
and other price concessions that issuers
must deduct from incurred claims for
medical loss ratio (MLR) reporting and
rebate calculation purposes. We
additionally proposed to explicitly
allow issuers the option to prepay a
portion or all of the estimated MLR
rebate for a given MLR reporting year in
advance of the deadlines set forth in
§§ 158.240(e) and 158.241(a)(2) and the
filing of the MLR Annual Reporting
Form, and proposed to establish a safe
harbor allowing such issuers, under
certain conditions, to defer the payment
of any remaining rebates owed after
prepayment until the following MLR
reporting year. We also proposed to
allow issuers to provide MLR rebates in
the form of a premium credit prior to
the date that the rules previously
provided. Lastly, we proposed to clarify
MLR reporting and rebate requirements
for issuers that choose to offer
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temporary premium credits during a
public health emergency (PHE) declared
by the Secretary of HHS in the 2021
benefit year and beyond, when such
credits are permitted by HHS.
In the proposed rule, the Secretaries
of HHS and the Department of the
Treasury proposed to reference and
incorporate specific guidance published
in the Federal Register in order to give
states certainty regarding the
requirements to receive and maintain
approval by the Departments for State
Innovation Waivers under section 1332
of the ACA. This proposal and the
accompanying regulatory updates were
finalized in the final rule published on
January 19, 2021 (86 FR 6138).
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 the ACA. Subtitles A and C of
title I of the ACA 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.
Section 2702 of the PHS Act, as added
by the ACA, establishes requirements
for guaranteed availability of coverage
in the group and individual markets,
including qualifying events that trigger
special enrollment periods under
section 2702(b) of the PHS Act.5
Section 2718 of the PHS Act, as added
by the ACA, generally requires health
insurance issuers to submit an annual
MLR report to HHS, and provide rebates
to enrollees if the issuers do not achieve
specified MLR thresholds.
Section 2723(b) of the PHS Act
authorizes the Secretary to impose
CMPs as a means of enforcing the
individual and group insurance market
requirements contained in Part A of title
XXVII of the PHS Act with respect to
health insurance issuers when a state
does not have authority to enforce or
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 ACA. The term ‘‘health plan’’ does not include
self-insured group health plans.
5 Before enactment of the ACA, HIPAA amended
the PHS Act (formerly section 2711) to generally
require guaranteed availability of coverage for
employers in the small group market.
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fails to substantially enforce these
provisions and with respect to group
health plans that are non-federal
governmental plans. Section
1301(a)(1)(B) of the ACA directs all
issuers of QHPs to cover the Essential
Health Benefit (EHB) package described
in section 1302(a) of the ACA, including
coverage of the services described in
section 1302(b) of the ACA, adherence
to the cost-sharing limits described in
section 1302(c) of the ACA, and meeting
the actuarial value (AV) levels
established in section 1302(d) of the
ACA. Section 2707(a) of the PHS Act,
which is effective for plan or policy
years beginning on or after January 1,
2014, extends the requirement to cover
the EHB package to non-grandfathered
individual and small group health
insurance coverage, irrespective of
whether such coverage is offered
through an Exchange. In addition,
section 2707(b) of the PHS Act directs
non-grandfathered group health plans to
ensure that cost sharing under the plan
does not exceed the limitations
described in sections 1302(c)(1) of the
ACA.
Section 1302 of the ACA provides for
the establishment of an EHB package
that includes coverage of EHBs (as
defined by the Secretary), cost-sharing
limits, and AV requirements. Section
1302(b) of the ACA directs that EHBs be
equal in scope to the benefits provided
under a typical employer plan, and that
they cover at least the following 10
general categories: Ambulatory patient
services; emergency services;
hospitalization; maternity and newborn
care; mental health and substance use
disorder services, including behavioral
health treatment; prescription drugs;
rehabilitative and habilitative services
and devices; laboratory services;
preventive and wellness services and
chronic disease management; and
pediatric services, including oral and
vision care.
To set cost-sharing limits, section
1302(c)(4) of the ACA directs the
Secretary to determine an annual
premium adjustment percentage, a
measure of premium growth that is used
to set the rate of increase for three
parameters: (1) The maximum annual
limitation on cost sharing (section
1302(c)(1) of the ACA); (2) the required
contribution percentage used to
determine whether an individual can
afford minimum essential coverage
(MEC) (section 5000A of the Internal
Revenue Code of 1986 (the Code), as
enacted by section 1501 of the ACA);
and (3) the employer shared
responsibility payment amounts
(section 4980H of the Code, as enacted
by section 1513 of the ACA).
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Section 1302(d) of the ACA describes
the various levels of coverage based on
their AV. Consistent with section
1302(d)(2)(A) of the ACA, AV is
calculated based on the provision of
EHB to a standard population. Section
1302(d)(3) of the ACA directs the
Secretary to develop guidelines that
allow for de minimis variation in AV
calculations.
Sections 1311(b) and 1321(b) of the
ACA 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 the
ACA. Section 1321(c)(1) of the ACA
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 the ACA
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 the ACA. Section
1311(d) of the ACA describes the
minimum functions of an Exchange.
Section 1311(e)(1) of the ACA 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 the ACA, 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
1311(c)(6)(C) of the ACA establishes
special enrollment periods and section
1311(c)(6)(D) of the ACA establishes the
monthly enrollment period for Indians,
as defined by section 4 of the Indian
Health Care Improvement Act.6
Section 1311(c)(3) of the ACA directs
the Secretary to develop a system to rate
QHPs offered through an Exchange,
based on relative quality and price.
Section 1311(c)(4) of the ACA requires
the Secretary to establish an enrollee
satisfaction survey that evaluates the
level of enrollee satisfaction of members
with QHPs offered through an
Exchange, for each QHP with more than
500 enrollees in the prior year. Further,
sections 1311(c)(3) and 1311(c)(4) of the
ACA require Exchanges to provide this
6 The Indian Health Care Improvement Act
(IHCIA), the cornerstone legal authority for the
provision of health care to American Indians and
Alaska Natives, was made permanent when
President Obama signed the bill on March 23, 2010,
as part of the ACA.
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quality rating information 7 to
individuals and employers on the
Exchange’s website.
Section 1312(c) of the ACA generally
requires a health insurance issuer to
consider all enrollees in all health plans
(except grandfathered health plans)
offered by such issuer to be members of
a single risk pool for each of its
individual and small group markets.
States have the option to merge the
individual and small group market risk
pools under section 1312(c)(3) of the
ACA.
Section 1312(e) of the ACA 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 the ACA
provide the Secretary with the authority
to oversee the financial integrity of State
Exchanges, their compliance with HHS
standards, and the efficient and nondiscriminatory administration of State
Exchange activities. Section 1321 of the
ACA provides for state flexibility in the
operation and enforcement of Exchanges
and related requirements.
Section 1321(a) of the ACA provides
broad authority for the Secretary to
establish standards and regulations to
implement the statutory requirements
related to Exchanges, QHPs and other
components of title I of the ACA.
Section 1321(a)(1) of the ACA directs
the Secretary to issue regulations that
set standards for meeting the
requirements of title I of the ACA for,
among other things, the establishment
and operation of Exchanges. When
operating an FFE under section
1321(c)(1) of the ACA, HHS has the
authority under sections 1321(c)(1) and
1311(d)(5)(A) of the ACA 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(c)(2) of the ACA
provides that the provisions of section
2723(b) of the PHS Act shall apply to
the enforcement of the Federal
Exchange standards and authorizes the
Secretary to enforce the Exchange
standards using CMPs on the same basis
7 The term ‘‘quality rating information’’ includes
the QRS scores and ratings and the results of the
enrollee satisfaction survey (which is also known as
the ‘‘Qualified Health Plan (QHP) Enrollee
Experience Survey’’).
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as detailed in section 2723(b) of the PHS
Act.
Section 1321(d) of the ACA provides
that nothing in title I of the ACA must
be construed to preempt any state law
that does not prevent the application of
title I of the ACA. Section 1311(k) of the
ACA specifies that Exchanges may not
establish rules that conflict with or
prevent the application of regulations
issued by the Secretary.
Section 1332 of the ACA provides the
Secretary of HHS and the Secretary of
the Treasury (collectively, the
Secretaries) with the discretion to
approve a state’s proposal to waive
specific provisions of the ACA,
provided the state’s section 1332 waiver
plan meets certain requirements. The
Department of Health and Human
Services and the Department of the
Treasury (collectively, the Departments)
finalized implementing regulations on
February 27, 2012 (76 FR 13553) and
published detailed guidance on the
Department’s application of section
1332 to proposed state waivers on
October 24, 2018 (83 FR 53575).
Section 1341 of the ACA provides for
the establishment of a transitional
reinsurance program in each state to
help pay the cost of treating high-cost
enrollees in the individual market in the
2014 through 2016 benefit years.
Section 1343 of the ACA establishes
a permanent risk adjustment program to
provide payments to health insurance
issuers that attract higher-than-average
risk populations, such as those with
chronic conditions, funded by payments
from those that attract lower-thanaverage risk populations, thereby
reducing incentives for issuers to avoid
higher-risk enrollees.
Section 1402 of the ACA provides for,
among other things, reductions in cost
sharing for EHB for qualified low- and
moderate-income enrollees in silver
level QHPs offered through the
individual market Exchanges. This
section also provides for reductions in
cost sharing for American Indians
enrolled in QHPs at any metal level.
Section 1411(c) of the ACA requires
the Secretary to submit certain
information provided by applicants
under section 1411(b) of the ACA to
other federal officials for verification,
including income and family size
information to the Secretary of the
Treasury.
Section 1411(d) of the ACA provides
that the Secretary must verify the
accuracy of information provided by
applicants under section 1411(b) of the
ACA for which section 1411(c) of the
ACA does not prescribe a specific
verification procedure, in such manner
as the Secretary determines appropriate.
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Section 1411(f) of the ACA requires
the Secretary, in consultation with the
Secretary of the Treasury, the Secretary
of Homeland Security, and the
Commissioner of Social Security, to
establish procedures for hearing and
making decisions governing appeals of
Exchange eligibility determinations.
Section 1411(f)(1)(B) of the ACA
requires the Secretary to establish
procedures to redetermine eligibility on
a periodic basis, in appropriate
circumstances, including eligibility to
purchase a QHP through the Exchange
and for APTC and CSRs.
Section 1411(g) of the ACA allows the
use or disclosure of applicant
information only for the limited
purposes of, and to the extent necessary
to, ensure the efficient operation of the
Exchange, including by verifying
eligibility to enroll through the
Exchange and for APTC and CSRs.
Section 5000A of the Code, as added
by section 1501(b) of the ACA, requires
individuals to have MEC for each
month, qualify for an exemption, or
make an individual shared
responsibility payment. Under the Tax
Cuts and Jobs Act (Pub. L. 115–97,
December 22, 2017) the individual
shared responsibility payment has been
reduced to $0, effective for months
beginning after December 31, 2018.
Notwithstanding that reduction, certain
exemptions are still relevant to
determine whether individuals age 30
and above qualify to enroll in
catastrophic coverage under 45 CFR
155.305(h) or 45 CFR 156.155.
Section 1150A(a) of the Social
Security Act (the Act) requires a health
benefits plan or PBM that manages
prescription drug coverage under a
contract with a QHP issuer to provide
certain prescription drug information to
the Secretary at such times, and in such
form and manner, as the Secretary shall
specify. HHS will limit disclosure of the
information disclosed by a health
benefits plan or PBM under this section
as required by section 1150A of the Act
and may only disclose the information
in a form which does not disclose the
identity of a specific PBM or plan, or
prices charged for specific drugs, except
that for limited purposes, HHS may
disclose the information to states to
carry out section 1311 of the ACA. An
issuer or PBM that fails to provide the
information on a timely basis or that
knowingly provides false information
may be subject to a civil monetary
penalty under section 1927(b)(3)(C) of
the Act in the same manner as such
provisions apply to a manufacturer with
an agreement under that section.
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1. Premium Stabilization Programs 8
In the July 15, 2011 Federal Register
(76 FR 41929), we published a proposed
rule outlining the framework for the
premium stabilization programs. We
implemented the premium stabilization
programs in a final rule published in the
March 23, 2012 Federal Register (77 FR
17219) (Premium Stabilization Rule). In
the December 7, 2012 Federal Register
(77 FR 73117), we published a proposed
rule outlining the benefit and payment
parameters for the 2014 benefit year to
expand the provisions related to the
premium stabilization programs and set
forth payment parameters in those
programs (proposed 2014 Payment
Notice). We published the 2014
Payment Notice final rule in the March
11, 2013 Federal Register (78 FR
15409). In the June 19, 2013 Federal
Register (78 FR 37032), we proposed a
modification to the HHS-operated
methodology related to community
rating states. In the October 30, 2013
Federal Register (78 FR 65046), we
finalized the proposed modification to
the HHS-operated methodology related
to community rating states. We
published a correcting amendment to
the 2014 Payment Notice final rule in
the November 6, 2013 Federal Register
(78 FR 66653) to address how an
enrollee’s age for the risk score
calculation would be determined under
the HHS-operated risk adjustment
methodology.
In the December 2, 2013 Federal
Register (78 FR 72321), we published a
proposed rule outlining the benefit and
payment parameters for the 2015 benefit
year to expand the provisions related to
the premium stabilization programs,
setting forth certain oversight provisions
and establishing the payment
parameters in those programs (proposed
2015 Payment Notice). We published
the 2015 Payment Notice final rule in
the March 11, 2014 Federal Register (79
FR 13743). In the May 27, 2014 Federal
Register (79 FR 30240), the 2015 fiscal
year sequestration rate for the risk
adjustment program was announced.
In the November 26, 2014 Federal
Register (79 FR 70673), we published a
proposed rule outlining the benefit and
payment parameters for the 2016 benefit
year to expand the provisions related to
the premium stabilization programs,
setting forth certain oversight provisions
and establishing the payment
parameters in those programs (proposed
2016 Payment Notice). We published
the 2016 Payment Notice final rule in
8 The term ‘‘premium stabilization programs’’
refers to the risk adjustment, risk corridors, and
reinsurance programs established by the ACA. See
42 U.S.C. 18061, 18062, and 18063.
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the February 27, 2015 Federal Register
(80 FR 10749).
In the December 2, 2015 Federal
Register (80 FR 75487), we published a
proposed rule outlining the benefit and
payment parameters for the 2017 benefit
year to expand the provisions related to
the premium stabilization programs,
setting forth certain oversight provisions
and establishing the payment
parameters in those programs (proposed
2017 Payment Notice). We published
the 2017 Payment Notice final rule in
the March 8, 2016 Federal Register (81
FR 12203).
In the September 6, 2016 Federal
Register (81 FR 61455), we published a
proposed rule outlining the benefit and
payment parameters for the 2018 benefit
year and to further promote stable
premiums in the individual and small
group markets. We proposed updates to
the risk adjustment methodology, new
policies around the use of external data
for recalibration of our risk adjustment
models, and amendments to the
Department of Health and Human
Services’ Risk Adjustment Data
Validation (HHS–RADV) process
(proposed 2018 Payment Notice). We
published the 2018 Payment Notice
final rule in the December 22, 2016
Federal Register (81 FR 94058).
In the November 2, 2017 Federal
Register (82 FR 51042), we published a
proposed rule outlining the benefit and
payment parameters for the 2019 benefit
year, and to further promote stable
premiums in the individual and small
group markets. We proposed updates to
the risk adjustment methodology and
amendments to the HHS–RADV process
(proposed 2019 Payment Notice). We
published the 2019 Payment Notice
final rule in the April 17, 2018 Federal
Register (83 FR 16930). We published a
correction to the 2019 risk adjustment
coefficients in the 2019 Payment Notice
final rule in the May 11, 2018 Federal
Register (83 FR 21925). On July 27,
2018, consistent with 45 CFR
153.320(b)(1)(i), we updated the 2019
benefit year final risk adjustment model
coefficients to reflect an additional
recalibration related to an update to the
2016 enrollee-level External Data
Gathering Environment (EDGE) dataset.9
In the July 30, 2018 Federal Register
(83 FR 36456), we published a final rule
that adopted the 2017 benefit year risk
adjustment methodology as established
in the final rules published in the March
23, 2012 Federal Register (77 FR 17220
through 17252) and in the March 8,
2016 Federal Register (81 FR 12204
through 12352). This final rule set forth
additional explanation of the rationale
supporting use of statewide average
premium in the HHS-operated risk
adjustment state payment transfer
formula for the 2017 benefit year,
including the reasons why the program
is operated in a budget-neutral manner.
This final rule permitted HHS to resume
2017 benefit year risk adjustment
payments and charges. HHS also
provided guidance as to the operation of
the HHS-operated risk adjustment
program for the 2017 benefit year in
light of publication of this final rule.10
In the August 10, 2018 Federal
Register (83 FR 39644), we published a
proposed rule seeking comment on
adopting the 2018 benefit year risk
adjustment methodology in the final
rules published in the March 23, 2012
Federal Register (77 FR 17219) and in
the December 22, 2016 Federal Register
(81 FR 94058). The proposed rule set
forth additional explanation of the
rationale supporting use of statewide
average premium in the HHS-operated
risk adjustment state payment transfer
formula for the 2018 benefit year,
including the reasons why the program
is operated in a budget-neutral manner.
In the December 10, 2018 Federal
Register (83 FR 63419), we issued a
final rule adopting the 2018 benefit year
HHS-operated risk adjustment
methodology as established in the final
rules published in the March 23, 2012
Federal Register (77 FR 17219) and the
December 22, 2016 Federal Register (81
FR 94058). This final rule sets forth
additional explanation of the rationale
supporting use of statewide average
premium in the HHS-operated risk
adjustment state payment transfer
formula for the 2018 benefit year,
including the reasons why the program
is operated in a budget-neutral manner.
In the January 24, 2019 Federal
Register (84 FR 227), we published a
proposed rule outlining updates to the
calibration of the risk adjustment
methodology, the use of EDGE data for
research purposes, and updates to HHS–
RADV audits. We published the 2020
Payment Notice final rule in the April
25, 2019 Federal Register (84 FR
17454).
In the February 6, 2020 Federal
Register (85 FR 7088), we published a
proposed rule that included updates to
the risk adjustment models’ HCCs and a
modification HHS–RADV error rate
calculation methodology. We published
9 ‘‘Updated 2019 Benefit Year Final HHS Risk
Adjustment Model Coefficients,’’ July 27, 2018.
Available at https://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/2019Updtd-Final-HHS-RA-Model-Coefficients.pdf.
10 ‘‘Update on the HHS-operated Risk Adjustment
Program for the 2017 Benefit Year,’’ July 27, 2018.
Available at https://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/2017-RAFinal-Rule-Resumption-RAOps.pdf.
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the 2021 Payment Notice final rule in
the May 14, 2020 Federal Register (85
FR 29164).
In the June 2, 2020 Federal Register
(85 FR 33595), we published a proposed
rule that proposed updates to various
aspects of the HHS–RADV
methodologies and processes. We
published the 2020 HHS–RADV
Amendments final rule in the December
1, 2020 Federal Register (85 FR 76979).
This final rule made revisions to the
HCC failure rate grouping algorithm,
finalized a sliding scale adjustment in
HHS–RADV error rate calculation, and a
constraint on risk score adjustments for
low-side failure rate outliers. The final
rule also established a transition from
the prospective application of HHS–
RADV adjustments to apply HHS–RADV
results to risk scores from the same
benefit year as that being audited.
In the September 2, 2020 Federal
Register (85 FR 54820), HHS issued an
interim final rule containing certain
policy and regulatory revisions in
response to the COVID–19 PHE,
wherein we set forth risk adjustment
reporting requirements for issuers
offering temporary premium credits in
the 2020 benefit year (interim final rule
on COVID–19).
In the December 4, 2020 Federal
Register (85 FR 78572), HHS issued a
proposed rule containing certain policy
and regulatory revisions related to the
risk adjustment program (proposed 2022
Payment Notice).
2. Program Integrity
In the June 19, 2013 Federal Register
(78 FR 37031), we published a proposed
rule that proposed certain program
integrity standards related to Exchanges
and the premium stabilization programs
(proposed Program Integrity Rule). The
provisions of that proposed rule were
finalized in two rules, the ‘‘first Program
Integrity Rule’’ published in the August
30, 2013 Federal Register (78 FR 54069)
and the ‘‘second Program Integrity
Rule’’ published in the October 30, 2013
Federal Register (78 FR 65045). In the
December 27, 2019 Federal Register (84
FR 71674), we published a final rule
that revised standards relating to
oversight of Exchanges established by
states and periodic data matching
frequency.
3. Market Rules
An interim final rule relating to the
HIPAA health insurance reforms was
published in the April 8, 1997 Federal
Register (62 FR 16894). A proposed rule
relating to ACA health insurance market
reforms that became effective in 2014
was published in the November 26,
2012 Federal Register (77 FR 70584). A
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final rule implementing those
provisions was published in the
February 27, 2013 Federal Register (78
FR 13406) (2014 Market Rules).
A proposed rule relating to Exchanges
and Insurance Market Standards for
2015 and beyond was published in the
March 21, 2014 Federal Register (79 FR
15808) (2015 Market Standards
Proposed Rule). A final rule
implementing the Exchange and
Insurance Market Standards for 2015
and Beyond was published in the May
27, 2014 Federal Register (79 FR 30240)
(2015 Market Standards Rule). The 2018
Payment Notice final rule in the
December 22, 2016 Federal Register (81
FR 94058) provided additional guidance
on guaranteed availability and
guaranteed renewability. In the Market
Stabilization final rule that was
published in the April 18, 2017 Federal
Register (82 FR 18346), we released
further guidance related to guaranteed
availability. In the 2019 Payment Notice
final rule in the April 17, 2018 Federal
Register (83 FR 17058), we clarified that
certain exceptions to the special
enrollment periods only apply with
respect to coverage offered outside of
the Exchange in the individual market.
4. Administrative Appeals Process
Related to Federal Enforcement in
Group and Individual Health Insurance
Markets and Non-Federal Governmental
Group Health Plans
On April 8, 1997 an interim final rule
with comment period was published in
the Federal Register (62 FR 16894) that
implemented the HIPAA health
insurance reforms by adding 45 CFR
parts 144, 146, and 148. Included in
those regulations were enforcement
provisions. In the June 10, 1997 Federal
Register (62 FR 31669), we published
technical corrections to these interim
final rules. After gaining some
experience with direct federal
enforcement in some states, we
determined that it was necessary to
provide more detail on the procedures
that will be used to enforce HIPAA
when a state does not do so. On August
20, 1999, an interim final rule with
comment period was published in the
Federal Register (64 FR 45786) that
provided more detail on the procedures
for enforcing title XXVII of the PHS Act,
as added by HIPAA, and as amended by
the Mental Health Parity Act of 1996
(Pub. L. 104–204, September 26, 1996),
the Newborns’ and Mothers’ Health
Protection Act of 1996 (Pub. L. 104–204,
September 26, 1996), and the Women’s
Health and Cancer Rights Act of 1998
(Pub. L. 105–277, October 21, 1998),
when a state does not enforce such laws.
We published a final rule on November
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25, 2005 in the Federal Register (70 FR
71020) that finalized this interim final
rule, and made non-substantive
amendments to the regulations detailing
procedures for enforcing title XXVII of
the PHS Act.
5. 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).
In the May 11, 2016 Federal Register
(81 FR 29146), we published an interim
final rule with amendments to the
parameters of certain special enrollment
periods (2016 Interim Final Rule). We
finalized these in the 2018 Payment
Notice final rule, published in the
December 22, 2016 Federal Register (81
FR 94058). In the March 8, 2016 Federal
Register (81 FR 12203), the final 2017
Payment Notice codified State
Exchanges on the Federal platform
along with relevant requirements. In the
April 18, 2017 Market Stabilization final
rule Federal Register (82 FR 18346), we
amended standards relating to special
enrollment periods and QHP
certification. In the 2019 Payment
Notice final rule, published in the April
17, 2018 Federal Register (83 FR
16930), we modified parameters around
certain special enrollment periods. In
the April 25, 2019 Federal Register (84
FR 17454), the final 2020 Payment
Notice established a new special
enrollment period. In the May 14, 2020
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Federal Register (85 FR 29204), the
2021 Payment Notice final rule made
certain changes to plan category
limitations and special enrollment
period coverage effective date rules,
allowed individuals provided a noncalendar year qualified small employer
health reimbursement arrangement
(QSEHRA) to qualify for an existing
special enrollment period, and
discussed plans for future rulemaking
for employer-sponsored coverage
verification and non-enforcement
discretion for Exchanges that do not
conduct random sampling until plan
year 2021.
In the December 4, 2020 Federal
Register (85 FR 78572), HHS issued a
proposed rule containing certain policy
and regulatory revisions related to user
fees, Exchanges, and section 1332 State
Innovation Waivers (proposed 2022
Payment Notice). A final rule was
published in the Federal Register (86
FR 6138) on January 19, 2021, that
addressed a subset of the policies
proposed in the proposed rule. That
final rule set forth provisions related to
user fees for FFEs and SBE–FPs. It
finalized the proposed 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 finalized a new direct enrollment
option for Federally-facilitated
Exchanges and State Exchanges and
implemented changes to codify in
regulations certain policies related to
section 1332 State Innovation Waivers.
6. Essential Health Benefits
On December 16, 2011, HHS released
a bulletin 11 that outlined an intended
regulatory approach for defining EHB,
including a benchmark-based
framework. A proposed rule relating to
EHBs was published in the November
26, 2012 Federal Register (77 FR
70643). We established requirements
relating to EHBs in the Standards
Related to Essential Health Benefits,
Actuarial Value, and Accreditation
Final Rule, which was published in the
February 25, 2013 Federal Register (78
FR 12833) (EHB Rule). In the 2019
Payment Notice, published in the April
17, 2018 Federal Register (83 FR
16930), we added § 156.111 to provide
states with additional options from
which to select an EHB-benchmark plan
for plan years 2020 and beyond.
11 ‘‘Essential Health Benefits Bulletin,’’ December
16, 2011. Available at https://www.cms.gov/CCIIO/
Resources/Files/Downloads/essential_health_
benefits_bulletin.pdf.
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The 2015 Payment Notice final rule,
established a methodology for
estimating the average per capita
premium for purposes of calculating the
premium adjustment percentage.
Beginning with the 2015 benefit year,
the premium adjustment percentage was
calculated based on the estimates and
projections of average per enrollee
employer-sponsored insurance
premiums from the National Health
Expenditure Accounts (NHEA), which
are calculated by the CMS Office of the
Actuary. In the 2020 Payment Notice
final rule, we amended the methodology
for calculating the premium adjustment
percentage by estimating per capita
insurance premiums as private health
insurance premiums, minus premiums
paid for Medigap insurance and
property and casualty insurance,
divided by the unrounded number of
unique private health insurance
enrollees, excluding all Medigap
enrollees. Additionally, in response to
public comments to the proposed 2021
Payment Notice, the 2021 Payment
Notice final rule included a policy
stating that we will finalize payment
parameters that depend on NHEA data,
including the premium adjustment
percentage, based on the data that are
available as of the publication of the
proposed rule for that benefit year, even
if NHEA data are updated between the
proposed and final rules.
In the December 15, 2020 Federal
Register (85 FR 81097), HHS published
the final rule, along with the
Departments of Labor and the Treasury,
that finalized using the premium
adjustment percentage as one alternative
in setting the parameters for permissible
increases in fixed-amount cost-sharing
requirements for grandfathered group
health plans.
7. Medical Loss Ratio (MLR)
We published a request for comment
on section 2718 of the PHS Act in the
April 14, 2010 Federal Register (75 FR
19297), and published an interim final
rule with a 60-day comment period
relating to the MLR program on
December 1, 2010 (75 FR 74863). A final
rule with a 30-day comment period was
published in the December 7, 2011
Federal Register (76 FR 76573). An
interim final rule with a 60-day
comment period was published in the
December 7, 2011 Federal Register (76
FR 76595). A final rule was published
in the Federal Register on May 16, 2012
(77 FR 28790). The MLR program
requirements were amended in final
rules published in the March 11, 2014
Federal Register (79 FR 13743), the May
27, 2014 Federal Register (79 FR
30339), the February 27, 2015 Federal
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Register (80 FR 10749), the March 8,
2016 Federal Register (81 FR 12203),
the December 22, 2016 Federal Register
(81 FR 94183), the April 17, 2018
Federal Register (83 FR 16930), the May
14, 2020 Federal Register (85 FR 29164)
and an interim final rule was published
in the September 2, 2020 Federal
Register (85 FR 54820).
8. Quality Rating System and Enrollee
Satisfaction Survey
The overall framework and elements
of the rating methodology for the QRS
were published in the November 19,
2013 Federal Register (78 FR 69418).
Consistent with statutory provisions, in
May 2014, HHS issued regulations at
§§ 155.1400 and 155.1405 to establish
the QRS and the QHP Enrollee
Experience Survey display requirements
for Exchanges and has worked towards
requiring nationwide the prominent
display of quality rating information on
Exchange websites.12 As a condition of
certification and participation in the
Exchanges, HHS requires that QHP
issuers submit QRS clinical measure
data and QHP Enrollee Survey response
data for their respective QHPs offered
through an Exchange in accordance
with HHS guidance, which has been
issued annually for each forthcoming
plan year.13
9. State Innovation Waivers
Section 1332(a)(4)(B) of the ACA
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 14 in the
Federal Register (76 FR 13553) to
implement section 1332(a)(4)(B) of the
ACA. On February 27, 2012, the
Departments published the
‘‘Application, Review, and Reporting
Process for Waivers for State
Innovation’’ final rule 15 in the Federal
12 ACA; Exchange and Insurance Market
Standards for 2015 and Beyond, Final Rule, 79 FR
30240 at 30352 (May 27, 2014). Also see the ‘‘CMS
Bulletin on display of QRS star ratings and QHP
Enrollee Survey results for QHPs offered through
Exchanges,’’ August 15, 2019. Available at https://
www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/QualityRatingInformation
BulletinforPlanYear2020.pdf.
13 See, for example, ‘‘Center for Clinical
Standards & Quality, CMS, The Quality Rating
System and Qualified Health Plan Enrollee
Experience Survey: Technical Guidance for 2021,’’
September 2020. Available at https://www.cms.gov/
files/document/quality-rating-system-and-qualifiedhealth-plan-enrollee-experience-survey-technicalguidance-2021.pdf.
14 https://www.govinfo.gov/content/pkg/FR-201103-14/pdf/2011-5583.pdf.
15 https://www.govinfo.gov/content/pkg/FR-201202-27/pdf/2012-4395.pdf.
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Register (77 FR 11700) (hereinafter
referred to as the ‘‘2012 Final Rule’’). On
October 24, 2018, the Departments
issued the ‘‘State Relief and
Empowerment Waivers’’ guidance 16 in
the Federal Register (83 FR 53575)
(hereinafter referred to as the ‘‘2018
Guidance’’), which superseded the
previous guidance 17 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, passthrough funding determinations, certain
analytical requirements, and operational
considerations. On November 6, 2020,
the Departments issued an interim final
rule 18 in the Federal Register (85 FR
71142), which revises regulations to set
forth flexibilities in the public notice
requirements and post-award public
participation requirements for State
Innovation Waivers under section 1332
of the ACA during the COVID–19 PHE.
In the December 4, 2020 Federal
Register (85 FR 78572), HHS issued a
proposed rule under which policies
announced under the 2018 Guidance
would be incorporated into regulations
governing State Innovation Waivers. A
final rule was published in the Federal
Register (86 FR 6138) on January 19,
2021, which adopted final regulations to
incorporate certain policies announced
in the 2018 Guidance regarding State
Innovation Waivers.
B. Stakeholder Consultation and Input
HHS has consulted with stakeholders
on policies related to the operation of
Exchanges and the risk adjustment and
HHS–RADV programs. 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 risk adjustment and
the direct enrollment option for FFEs
and State Exchanges.
We consulted with stakeholders
through regular meetings with the
National Association of Insurance
Commissioners (NAIC), regular contact
with states, and health insurance
issuers, trade groups, consumer
advocates, employers, and other
interested parties. We considered all
16 https://www.govinfo.gov/content/pkg/FR-201810-24/pdf/2018-23182.pdf.
17 https://www.govinfo.gov/content/pkg/FR-201512-16/pdf/2015-31563.pdf.
18 https://www.federalregister.gov/documents/
2020/11/06/2020-24332/additional-policy-andregulatory-revisions-in-response-to-the-covid-19public-health-emergency.
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public input we received as we
developed the policies in this final rule.
C. Structure of Final Rule
The regulations outlined in this final
rule are codified in 45 CFR parts 147,
150, 153, 155, 156, 158, and 184.
The changes to 45 CFR part 147 make
technical and conforming amendments
regarding limited and special
enrollment periods in the individual
market.
The changes to 45 CFR part 150 make
minor procedural changes to the
requirements for administrative appeals
of CMPs by health insurance issuers and
non-federal governmental group health
plans to align with current practices for
the Departmental Appeals Board. We
are finalizing parallel changes to the
requirements for administrative appeals
of CMPs by QHP issuers under 45 CFR
part 156, subpart J.
The changes to 45 CFR part 153
recalibrate the HHS risk adjustment
models consistent with the approach
outlined in the 2020 Payment Notice to
transition away from the use of
MarketScan® data. However, we are
finalizing the policy to use the 3 most
recent consecutive years of enrolleelevel EDGE data that are available in
time for incorporating into the
coefficients in the proposed rule, which
would utilize enrollee-level EDGE data
from 2016, 2017 and 2018 for the 2022
model recalibration, the same data years
used for the 2021 model recalibration.19
We are clarifying risk adjustment
reporting requirements for issuers that
choose to offer premium credits, if such
credits are permitted by HHS for future
benefit years. In this final rule, we are
also approving the requests from
Alabama to reduce risk adjustment
transfers by 50 percent in the individual
(including catastrophic and noncatastrophic risk pools) and small group
markets for the 2022 benefit year.
Additionally, we clarify the process for
HHS to audit issuers of risk adjustment
covered plans and reinsurance-eligible
plans and establish the authority for
HHS to conduct compliance reviews of
these issuers.
The provisions in part 153 also relate
to the risk adjustment user fee for the
2022 benefit year. In this final rule, we
revise the schedule for the collection of
HHS–RADV charges and disbursement
of payments such that these charges and
disbursements will occur in the same
calendar year in which HHS–RADV
results are released. We also finalize
19 As detailed below, the one exception relates to
RXC 09, which involved the use of only 2016 and
2017 enrollee-level data to develop the applicable
2022 benefit year coefficients and interaction terms.
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provisions under part 153 to update the
applicable regulations to reflect the
previously established framework
regarding when second validation audit
(SVA) findings can be disputed or
appealed, expand the conflict of interest
standard for initial validation audit
(IVA) Entities, and codify two
previously established exemptions from
the requirement to participate in HHS–
RADV.
In part 155, we finalize the required
contribution percentage for the 2022
benefit year. We amend the definition of
direct enrollment technology provider
and add a definition of QHP issuer
direct enrollment technology provider
in part 155 to recognize that QHP
issuers may also use QHP issuer direct
enrollment technology providers to
facilitate participation in direct
enrollment under §§ 155.221 and
156.1230, and make conforming
amendments to the definition of webbroker. We also codify more specific
operational readiness review
requirements for web-brokers and direct
enrollment entities. We also amend the
marketing and display requirements for
direct enrollment entities, and rescind
text contained in § 155.320 to
implement a federal court order
invalidating certain requirements in the
section.
We also finalize several amendments
to special enrollment period policy.
Specifically, we add new flexibility to
allow current Exchange enrollees and
their dependents to change to a QHP of
a lower metal level if they qualify for a
special enrollment period due to
becoming newly ineligible for APTC;
allow a qualified individual, enrollee, or
dependent who did not receive timely
notice of a triggering event and
otherwise was reasonably unaware that
a triggering event occurred to select a
plan within 60 days of the date that he
or she knew, or reasonably should have
known, of the occurrence of the
triggering event; and clarify that a
special enrollment period will be
available when a qualified individual or
his or her dependent is enrolled in
COBRA continuation coverage, and the
employer contributions or government
subsidies for such coverage completely
cease.
In part 156, we set forth the premium
adjustment percentage, maximum
annual limitation on cost sharing and
reduced maximum annual limitation on
cost sharing for the 2022 benefit year.
We also amend part 156 to establish that
for the 2023 benefit year and beyond,
we will publish the annual updates to
the premium adjustment percentage,
maximum annual limitation on cost
sharing, reduced maximum annual
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limitation on cost sharing and required
contribution percentage in guidance in
January of the benefit year prior to the
applicable benefit year, rather than in
the applicable benefit year’s annual
HHS notice of benefit and payment
parameters, as long as no change to the
methodologies to calculate these
amounts are proposed. We finalize a
methodology for analyzing the impact of
preliminary values of the reduced
annual maximum limitations on cost
sharing on the AVs of silver plan
variations. Additionally, we clarify the
process for HHS to audit QHP issuers
related to compliance with federal
requirements for APTC, CSRs, and user
fees and establish authority for HHS to
conduct compliance reviews of QHP
issuers to ensure compliance with
federal requirements for APTC, CSRs,
and user fee standards.
The changes to part 158 establish the
definition of prescription drug rebates
and other price concessions that issuers
must deduct from incurred claims for
MLR reporting and rebate calculation
purposes. The changes to part 158 also
remove the option for issuers to report
an amount equal to 0.8 percent of
earned premium in the relevant State
and market in lieu of reporting the
issuer’s actual expenditures for
activities that improve health care
quality for MLR reporting and rebate
calculation purposes to implement a
federal court order invalidating this
provision. The changes to part 158
additionally explicitly allow issuers the
option to prepay a portion or all of the
estimated MLR rebate for a given MLR
reporting year in advance of the
deadlines set forth in §§ 158.240(e) and
158.241(a)(2) and filing the MLR Annual
Reporting Form, and establish a safe
harbor allowing such issuers, under
certain conditions, to defer the payment
of rebates remaining after prepayment
until the following MLR reporting year.
In addition, the changes to part 158
allow issuers to provide MLR rebates in
the form of a premium credit prior to
the date that the rules previously
provided. Lastly, we clarify MLR
reporting and rebate requirements for
issuers that choose to offer temporary
premium credits during a PHE declared
by the Secretary of HHS in the 2021
benefit year and beyond when such
credits are permitted by HHS.
The addition of part 184 requires
PBMs under contract with an issuer of
QHPs to report prescription drug data
required by section 1150A of the Act.
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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
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
Pharmacy Benefit Manager Standards;
Updates To State Innovation Waiver
(Section 1332 Waiver) Implementing
Regulations’’ proposed rule. We
received a total of 542 comments in
response to the proposed 2022 Payment
Notice. Comments were received from
state entities, such as departments of
insurance and State Exchanges, health
insurance issuers, providers and
provider groups, consumer groups,
industry groups, national interest
groups, and other stakeholders. The
comments ranged from general support
of, or opposition to, the proposed
provisions to specific questions or
comments regarding proposed changes.
We received a number of comments and
suggestions that were outside the scope
of the proposed rule that are not
addressed in this final rule.
In this final rule, we provide a
summary of proposed provisions, a
summary of the public comments
received that directly related 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 the proposed 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 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
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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. The comment
period for the proposed rule closed on
December 30, 2020. HHS has had ample
time to review and fully consider
comments relevant to the rules and
policies finalized under this final rule.
We also disagree that the rules and
policies in this final rule will hamper
access to Exchange coverage. First,
based on a review of the comments as
a whole, we believe comments that
asserted the policies in the proposed
2022 Payment Notice would hamper
access to Exchange coverage were
largely relevant to proposals that were
finalized in the January 19, 2021 final
Payment Notice, including the Exchange
DE option finalized under 45 CFR
155.221(j), and the changes to the
regulations governing State Innovation
Waivers under 31 CFR part 33 and 45
CFR part 155.20 Such comments were
not focused on policies that we are
finalizing in this final rule, and for
reasons more fully reviewed in the
preamble discussions related to specific
policies in this final rule, we disagree
that the rules and policies finalized in
this final rule will hamper access to
Exchange coverage. Further, as noted
above, HHS reviewed the proposed 2022
Payment Notice and the January 19,
2021 final 2022 Payment Notice in
compliance with E.O. 14009 and
intends to issue a proposed rule this
spring to address certain polices,
including the Exchange DE option and
the changes to the State Innovation
Waivers regulations.
A. Part 147—Health Insurance Reform
Requirements for the Group and
Individual Health Insurance Markets
1. Guaranteed Availability of Coverage
(§ 147.104)
Section 147.104(b)(2) incorporates by
reference certain Exchange special
enrollment periods described in
§ 155.420, making those special
enrollment periods applicable to nongrandfathered coverage offered in the
individual market through or outside of
an Exchange. We proposed amendments
to § 147.104(b)(2) to clarify that
20 These comments were addressed in the January
19, 2021 final 2022 Payment Notice. See 86 FR
6138.
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24149
paragraph (b)(2)(ii) does not apply to
references in § 155.420(d)(4) (relating to
errors of the Exchange), and to make a
conforming amendment consistent with
the proposal in § 155.420(c)(5) relating
to special enrollment period availability
for individuals who do not receive
timely notice of a triggering event. We
are finalizing these amendments as
proposed.
Section 155.420(d)(4) establishes an
Exchange special enrollment period for
a qualified individual or their
dependent if his or her enrollment or
non-enrollment in a QHP is
unintentional, inadvertent, or erroneous
and is the result of the error,
misrepresentation, misconduct, or
inaction of an officer, employee, or
agent of the Exchange or HHS, its
instrumentalities, or a non-Exchange
entity providing enrollment assistance
or conducting enrollment activities.
Section 147.104(b)(2)(ii) states that,
when determining the application of a
special enrollment period for individual
market coverage offered outside the
Exchange, a reference in § 155.420 to a
‘‘QHP’’ is deemed to refer to a plan, a
reference to ‘‘the Exchange’’ is deemed
to refer to the applicable state authority,
and a reference to a ‘‘qualified
individual’’ is deemed to refer to an
individual in the individual market.
However, this paragraph was not
intended to change the application of
§ 155.420(d)(4), which is specific to
errors of the Exchange, not those of the
applicable state authority. It would be
inappropriate for the triggering event in
this case to apply to errors of the
applicable state authority because the
state does not perform the same
functions as the Exchange. For example,
the state authority does not perform an
enrollment function. Thus, basing the
triggering event on errors of the state is
inappropriate and could create different
special enrollment periods in the
individual market on and off of the
Exchange.
Therefore, we proposed to clarify that
§ 147.104(b)(2)(ii) does not apply to
references in § 155.420(d)(4). As a
result, issuers offering health insurance
coverage in the individual market must
provide a limited open enrollment
period under the same circumstances as
described in § 155.420(d)(4).
In addition, we proposed a
conforming amendment to
§ 147.104(b)(4)(ii), consistent with the
proposal in § 155.420(c)(5), to establish
that if an individual did not receive
timely notice of a triggering event
described in paragraph (b)(2) or (3) of
§ 147.104, and otherwise was reasonably
unaware that such a triggering event
occurred, an issuer of non-grandfathered
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coverage in the individual market,
whether inside or outside an Exchange,
must assign the date the individual
knew, or reasonably should have
known, of the occurrence of the
triggering event as the date of the
triggering event for a special enrollment
period. Consistent with §§ 147.104(b)(5)
and 155.420(b), the proposed provision
would allow the individual or
dependent to choose the earliest
effective date that would have been
available if he or she had received
timely notice of the triggering event or
another effective date that would
otherwise be available pursuant to
§ 155.420(b). We solicited comments on
this approach. We noted that this
provision would not apply for special
enrollment periods in the group market,
and sought comment on whether we
should exclude the reference to the
triggering events in § 147.104(b)(3) in
the amended § 147.104(b)(4)(ii) to retain
alignment of the individual and group
market special enrollment periods
required under § 147.104(b)(3).
We received public comments on the
proposed amendments to § 147.104.
Comments related to the proposal in
§ 155.420(c)(5) regarding when an
individual does not receive timely
notice of a triggering event and
otherwise was reasonably unaware that
a triggering event occurred are
summarized and addressed in the
preamble to § 155.420. The following is
a summary of and our response to the
comments we received related to the
proposal to clarify that paragraph
(b)(2)(ii) does not apply to references in
§ 155.420(d)(4) (relating to errors of the
Exchange).
Comment: A commenter generally
supported clarifying that the special
enrollment period for an error of the
Exchange does not extend to errors of
the applicable state authority when
applied market-wide in the individual
market.
Response: We appreciate this
comment, and we are finalizing the
amendment as proposed.
B. Part 150—CMS Enforcement in Group
and Individual Markets
1. Technical Corrections
Part 150 sets forth our enforcement
processes for all the requirements of
title XXVII of the PHS Act with respect
to health insurance issuers and nonfederal governmental group health
plans. We proposed to make technical
corrections to multiple sections of part
150. Specifically, we proposed to
remove all references to ‘‘HIPAA’’ and
replacing them with ‘‘PHS Act’’ to
clarify that the part 150 processes are
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used for enforcing not only the
requirements emanating from HIPAA,
but also the ACA and other legislation
enacted subsequent to HIPAA. These
proposed wording changes were made
in the February 27, 2013 Federal
Register final rule entitled ‘‘Patient
Protection and Affordable Care Act;
Health Insurance Market Rules; Rate
Review’’ (78 FR 13406). However,
because of an oversight, some references
were not updated at that time. In the
proposed rule, we proposed this change
to the definition of ‘‘Complaint’’ in
§ 150.103; the introductory text to
§ 150.303(a), as well as to
§§ 150.205(e)(2); 150.213(b);
150.305(a)(1), (a)(2), (b)(1) and (c)(1);
150.311(g) and 150.313(b).
We received one comment that
acknowledged these technical
corrections but made no other statement
about them, and we are finalizing the
clarifying amendments as proposed.
2. Administrative Hearings
Additionally, we proposed certain
procedural changes to part 150 sections
regarding administrative hearings. The
proposed changes are intended to align
with the Departmental Appeals Board’s
(DAB’s) current practices for
administrative hearings to appeal CMPs.
Specifically, we proposed changes to
remove requirements to file submissions
in triplicate and instead require
electronic filing. This change is
reflected in the proposed amendments
to the definition of ‘‘Filing date’’ in
§ 150.401, to the introductory text in
§ 150.427(a), and to the service of
submission requirements captured in
§ 150.427(b). We also proposed
amendments to several provisions in
part 150 to allow for the option of video
conferencing as a form of administrative
hearing in part 150 in addition to the
forms already allowed. To capture this
flexibility, we proposed amendments to
the definition of ‘‘Hearing’’ in § 150.401
and to the requirements outlined in
§ 150.419(a) related to the forms for the
hearing, § 150.441(e) related to
prehearing conferences, and
§ 150.447(a) related to the record of the
hearing. Finally, we proposed to update
§ 150.431 to allow the Administrative
Law Judge (ALJ) to communicate the
next steps for a hearing in either the
acknowledgement of a request for
hearing or on a later date. We proposed
parallel amendments to the
administrative hearings requirements
under subpart J of part 156.
We received a small number of public
comments on the proposed revisions to
the administrative hearing requirements
captured in part 150—CMS Enforcement
in Group and Individual Markets and
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subpart J—Administrative Review of
QHP Issuer Sanctions (§§ 156.901,
156.927, 156.931, 156.947). The
following is a summary of the comments
we received and our responses.
Comment: All commenters supported
the availability of electronic filing for
administrative appeals. However, two
commenters opposed the elimination of
the option to submit paper files. Those
commenters specifically noted that
consumers might not be comfortable
with technology or have access to
electronic means to file administrative
appeals.
Response: We appreciate the
commenters’ concerns about eliminating
paper filing as an option. However, the
administrative appeals procedures in
part 150 apply to plans and issuers; they
are separate and apart from consumer
appeals processes.21 In addition, the
proposed changes were intended to
update the administrative hearing
regulations in order to align with the
DAB’s current practices and did not
make changes to existing practices.
The DAB’s Civil Remedies Division,
which handles the administrative
hearings on CMPs under part 150 and
subpart J of part 156, fully transitioned
from paper to electronic filing to
increase administrative efficiency and
provide greater access and convenience
to parties. However, a party may request
a written waiver from the requirement
of using DAB E-File. See Civil Remedies
Division Procedures § 6, available at
https://www.hhs.gov/about/agencies/
dab/different-appeals-at-dab/appealsto-alj/procedures/filing-and-service-ofwritten-material. If a waiver is granted,
the party may file documents by U.S.
mail or an express delivery service. Id.
Therefore, because the changes were
intended to reflect the DAB’s current
practices that incorporate a written
waiver process, and because these
changes do not affect the consumer
appeals processes, we are finalizing the
revisions as proposed.
Comment: All commenters supported
allowing video conferencing as a form of
hearing. One commenter also noted that
the system should include third party
interpreters, whether foreign language
or sign language.
Response: We appreciate the
commenter’s accessibility concerns
regarding the video conferencing
system. While it is not specifically
noted in the administrative hearing
regulations in part 150 and subpart J of
part 156 language, the DAB complies
with applicable Federal civil rights laws
and does not discriminate on the basis
of race, color, national origin, age,
21 See,
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disability, or sex. The DAB provides free
aids and services to people with
disabilities, including sign language
interpreters, and provides free language
services to people whose primary
language is not English, including
qualified interpreters. Instructions for
requesting these services are available
here: https://www.hhs.gov/about/
agencies/dab/about-dab/
nondiscrimination-notice/.
The DAB’s Civil Remedies Division also
provides a written nondiscrimination
notice with similar instructions to
individual parties in every case.
Because DAB’s current system already
allows for these means of access and
these changes align our regulations with
the DAB’s current practices, we are
finalizing the revisions as proposed.
Comment: Two commenters requested
that HHS adopt specific timeframes for
the ALJ to communicate next steps for
an administrative hearing in order for
consumers to better prepare for the
hearing and to avoid delays in the
process. The regulation, as proposed,
allows the ALJ to communicate next
steps either in the acknowledgement of
a request for a hearing or on a later date.
Response: We understand
commenters’ concerns that the lack of a
specified time period for response from
the ALJ may allow for some uncertainty
related to the timing for the
proceedings. However, as previously
noted, the administrative appeals
procedures in part 150 and subpart J of
part 156 apply to plans and issuers; they
are separate and apart from consumer
appeals processes. Further, the
proposed changes were intended to
update the regulations in order to reflect
the DAB’s current practices and did not
make changes to existing practices for
administrative appeals by plans and
issuers. Therefore, we are finalizing the
revisions as proposed.
C. Part 153—Standards Related to
Reinsurance, Risk Corridors, and Risk
Adjustment
Subparts A, B, D, G, and H of part
153, provide standards for
administering the risk adjustment
program. The risk adjustment program
is a permanent program created by
section 1343 of the ACA that transfers
funds from lower-than-average risk, risk
adjustment covered plans to higherthan-average risk, risk adjustment
covered plans in the individual and
small group markets (including merged
markets), inside and outside the
Exchanges.22 In accordance with
§ 153.310(a), a state that is approved or
conditionally approved by the Secretary
22 42
U.S.C. 18063.
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to operate an Exchange may establish a
risk adjustment program, or have HHS
do so on its behalf.23 We did not receive
any requests from states to operate risk
adjustment for the 2022 benefit year;
therefore, HHS will operate risk
adjustment in every state and the
District of Columbia for the 2022 benefit
year.
We proposed changes to our approach
for identifying the 3 benefit years of
enrollee-level EDGE data that would be
used for purposes of the annual
recalibration of the HHS risk adjustment
models. We also proposed modeling
updates to improve the models’
predictive power for certain subgroups
of enrollees, as well as proposed
changes to the enrollment duration
factors for the adult models, and we
proposed to continue a pricing
adjustment related to Hepatitis C drugs.
We proposed to allow states to submit
multi-year requests for reductions to
transfer calculations under the state
payment transfer formula and we
outlined the 2022 benefit year reduction
requests submitted by Alabama.
Additionally, we proposed to clarify
risk adjustment reporting requirements
for issuers that choose to offer premium
credits, if permitted by HHS for future
benefit years, and to codify a materiality
threshold for EDGE discrepancies. We
proposed the risk adjustment user fee
for the 2022 benefit year and to codify
in regulation the previously established
exemptions from HHS–RADV
requirements for issuers with only small
group market carryover coverage in the
benefit year being audited and for sole
issuers in a state market risk pool during
the benefit year being audited. We also
proposed to revise the schedule for the
collection of HHS–RADV charges and
disbursement of payments such that
these charges and disbursements would
occur in the same calendar year in
which HHS–RADV results are released.
Finally, we proposed to shorten the
discrepancy reporting windows during
HHS–RADV, clarify and expand the
conflict of interest standards applicable
to initial validation audit (IVA) entities,
and update the risk adjustment
regulations to more clearly reflect the
previously established limitations on
the ability to dispute or appeal SVA
findings and clarify the timeframe for
HHS–RADV appeals.
1. HHS Risk Adjustment (§ 153.320)
The HHS risk adjustment models
predict plan liability for an average
enrollee based on that person’s age, sex,
and diagnoses (also referred to as
hierarchical condition categories
23 Also
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24151
(HCCs)), producing a risk score. The
HHS risk adjustment methodology
utilizes separate models for adults,
children, and infants to account for
clinical and cost differences in each age
group. In the adult and child models,
the relative risk assigned to an
individual’s age, sex, and diagnoses are
added together to produce an individual
risk score. Additionally, to calculate
enrollee risk scores in the adult models,
we added enrollment duration factors
beginning with the 2017 benefit year,
and prescription drug categories (RXCs)
beginning with the 2018 benefit year.24
Infant risk scores are determined by
inclusion in one of 25 mutually
exclusive groups, based on the infant’s
maturity and the severity of diagnoses.
If applicable, the risk score for adults,
children, or infants is multiplied by a
CSR adjustment that accounts for
differences in induced demand at
various levels of cost sharing.
The enrollment-weighted average risk
score of all enrollees in a particular risk
adjustment covered plan (also referred
to as the plan liability risk score) within
a geographic rating area is one of the
inputs into the risk adjustment state
payment transfer formula, which
determines the state transfer payment or
charge that an issuer will receive or be
required to pay for that plan for the
applicable state market risk pool. Thus,
the HHS risk adjustment models predict
average group costs to account for risk
across plans, in keeping with the
Actuarial Standards Board’s Actuarial
Standards of Practice for risk
classification.
a. Updates to Data Used for Risk
Adjustment Model Recalibration
Consistent with the approach outlined
in the 2020 Payment Notice to no longer
rely upon MarketScan® data 25 for
recalibrating the risk adjustment
models, we proposed to continue to
recalibrate the risk adjustment models
for the 2022 benefit year using only
enrollee-level EDGE data. However,
rather than using 2017, 2018 and 2019
enrollee-level EDGE data, we proposed
to use the 2016, 2017, and 2018
enrollee-level EDGE data (the same
years’ data used to recalibrate the 2021
risk adjustment models) to recalibrate
the risk adjustment models for the 2022
benefit year. We also proposed to
continue to use blended, or averaged,
coefficients from the 3 years of
separately solved models for the 2022
24 For the 2018 benefit year, there were 12 RXCs,
but starting with the 2019 benefit year, the two
severity-only RXCs were removed from the adult
risk adjustment models. See, for example, 83 FR
16941.
25 84 FR 17463 through 17466.
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benefit year model recalibration. We are
finalizing these policies as proposed.
Previously, we used the three most
recent years of MarketScan® data
available to recalibrate the 2016, 2017,
and 2018 benefit year risk adjustment
models. Then, starting with the 2019
benefit year, we began transitioning
from using the MarketScan® data to
using the enrollee-level EDGE data to
recalibrate the risk adjustment models.
The 2021 benefit year was the first year
that we recalibrated the risk adjustment
models using 3 years of enrollee-level
EDGE data.26 Specifically, for the 2021
benefit year, we used the 2016, 2017,
and 2018 benefit years of enrollee-level
EDGE data to recalibrate the risk
adjustment models. During prior
recalibrations, we implemented an
approach that used blended, or
averaged, coefficients from 3 years of
separately solved models to provide
stability for the risk adjustment
coefficients year-to-year, while
reflecting the most recent years’ claims
experience available. In some prior
years, this approach resulted in reliance
on data that could not be incorporated
into the coefficients until after the
publication of the applicable benefit
year’s Payment Notice, because the
associated data was not available in
time to incorporate into the models in
time for publication in the Payment
Notice.27 For example, due to the timing
of the proposed 2021 Payment Notice,
we were unable to incorporate the 2018
benefit year enrollee-level EDGE data
into the proposed coefficients in the
proposed 2021 Payment Notice, and
instead included draft coefficients in the
proposed rule reflecting only 2016 and
2017 benefit years’ enrollee-level EDGE
data.28 We were also unable to
incorporate the 2018 benefit year
enrollee-level EDGE data in the final
coefficients in the 2021 Payment Notice;
therefore, consistent with
§ 153.320(b)(1)(i), we released the final
2021 benefit year coefficients in
guidance after publication of the 2021
Payment Notice.29 We followed a
similar approach in other benefit years
when we were unable to incorporate the
most recent year of available data in the
26 85
FR 29173 through 29175.
for example, the 2018 Payment Notice
final rule, 81 FR 94058; and the 2021 Payment
Notice final rule, 85 FR 29173 through 29175.
28 See 85 FR 7097 through 7098 and 7104 through
7112.
29 See 85 FR 29173 through 29175. Also see
https://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/Final-2021-Benefit-YearFinal-HHS-Risk-Adjustment-Model-Coefficients.pdf.
https://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/Final-2021-Benefit-YearFinal-HHS-Risk-Adjustment-Model-Coefficients.pdf.
27 See,
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applicable benefit year’s Payment
Notice.30
Some commenters to the proposed
2021 Payment Notice expressed concern
about when the final blended
coefficients would be available, asking
that final coefficients be made available
earlier. Having the risk adjustment
coefficients for the upcoming benefit
year available earlier allows issuers
more time to incorporate this
information when pricing their plans for
the upcoming benefit year. Commenters
offered suggestions for ways HHS could
provide final coefficients sooner.
Stakeholders submitted similar
comments in prior years when the final
coefficients were released in guidance
after publication of the applicable
benefit year’s Payment Notice.31 While
in the initial years of risk adjustment
and implementation of the 2014 federal
market reforms (such as guaranteed
availability and community rating), the
markets underwent rapid changes in
which the relative impact of using the
most recent available data for
recalibrating the risk adjustment models
may have been more pronounced.
However, in recent years, HHS has
shifted from recalibrating the risk
adjustment models using a blend of the
three most recent years of large group
market data to using data collected
entirely from the risk adjustment
population (enrollee-level EDGE data).
This change has resulted in coefficients
that better reflect underlying market
conditions, and the markets have
continued to mature and stabilize in the
years following implementation of the
risk adjustment program and other 2014
federal ACA reforms, thereby reducing
the relative impact of the most recent
data year on model coefficients. As a
result, we continued to consider these
comments and we proposed to change
our approach for identifying the 3 most
recent years of enrollee-level EDGE data
that would be used to recalibrate the
risk adjustment models. Previously, we
used the 3 most recent years of data that
were available in time for publication in
the final rule or soon thereafter in
guidance. However, beginning with the
2022 benefit year, we proposed to use
the 3 most recent consecutive years of
enrollee-level EDGE data that are
available in time for incorporating the
30 See, for example, the 2018 Payment Notice
rule, 81 FR 94084. Also see https://www.cms.gov/
CCIIO/Programs-and-Initiatives/PremiumStabilization-Programs/Downloads/2018-BenefitYear-Final-HHS-Risk-Adjustment-ModelCoefficients.pdf. https://www.cms.gov/CCIIO/
Programs-and-Initiatives/Premium-StabilizationPrograms/Downloads/2018-Benefit-Year-FinalHHS-Risk-Adjustment-Model-Coefficients.pdf.
31 See, for example, 81 FR 94084 through 94085.
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data in the draft recalibrated coefficients
published in the proposed rule and we
proposed to not update the coefficients
for additional years of data between the
proposed and final rules if an additional
year of enrollee-level EDGE data became
available for incorporation. The purpose
of the proposed change was to respond
to stakeholders’ request to provide the
proposed coefficients in the proposed
rule and to release the final coefficients
earlier, while continuing to use the 3
most recent consecutive years of
enrollee-level EDGE data available to
recalibrate the risk adjustment models.
We explained that we believe this
approach promotes stability and avoids
the delays in publication of the
coefficients while continuing to develop
blended, or averaged, coefficients from
the 3 years of separately solved models
for model recalibration. As proposed,
the approach also would continue to use
actual data from issuers’ individual and
small group (or merged) market
populations, as well as maintain year-toyear stability in risk scores as the
recalibration would continue to use at
least 2 years of enrollee-level EDGE data
that were used in the previous year’s
models.32
For these reasons, we proposed to use
2016, 2017, and 2018 benefit years’
enrollee-level EDGE data for the 2022
benefit year model recalibration. We
sought comment on our proposal to
determine coefficients for the 2022
benefit year based on a blend of
separately solved coefficients from the
2016, 2017, and 2018 benefit years’
enrollee-level EDGE data and our
proposed approach to identify the 3
most recent years of data available for
the annual recalibration of the risk
adjustment models moving forward.
Additionally, we sought comment on
whether we should instead maintain the
approach that would use the 2017, 2018,
and 2019 benefit years’ data to
recalibrate the risk adjustment models
for the 2022 benefit year.
We also noted that the coefficients
could change if the proposed
recalibration policies, or other proposed
modeling parameters, were not finalized
or were modified in response to
comments. In addition, we explained
that, consistent with § 153.320(b)(1)(i), if
we were unable to finalize the final
coefficients in time for the final rule, we
would publish the final coefficients for
the 2022 benefit year in guidance soon
after the publication of the final rule.
32 As detailed earlier, the 2022 benefit year
recalibration would rely on the same 3 years of
enrollee-level EDGE data that were used in the 2021
benefit year. For the 2023 benefit year and beyond,
the recalibration would rely on 2 years of the
enrollee-level data that were used in the prior year.
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We received public comments on the
proposed updates to data used for risk
adjustment model recalibration and the
proposed 2022 benefit year model
recalibration approach. The following is
a summary of these comments and our
responses.
Comment: Many commenters
supported the inclusion of the actual
coefficients that would apply to risk
adjustment models for that benefit year
in the applicable benefit year’s payment
notice. Some commenters supported the
proposal to use the 3 most recent
consecutive years of enrollee-level
EDGE data that are available in time for
incorporating in the proposed
recalibrated coefficients published in
the proposed rule and to not update the
coefficients for additional years of data
between the proposed and final rules if
an additional year of enrollee-level
EDGE data becomes available for
incorporation. Some of these
commenters stated that providing the
recalibrated coefficients earlier in the
process will promote stability, better
meet the goals of the risk adjustment
program, and more closely align with
issuer pricing cycles for individual and
small group health insurance coverage.
Other commenters did not support the
proposed approach and recommended
instead to maintain the approach used
in previous years, which would lead to
the use of the 2017, 2018, and 2019
benefit years enrollee-level EDGE data
for model recalibration for the 2022
benefit year. These commenters stated
that incorporating newer data was more
important than having the model
coefficients earlier, with several
commenters expressing concern that the
proposed approach would rely on older
data that would not include the most
up-to-date experience and would not
accurately reflect the reality and
actuarial risk of the applicable benefit
year.
One commenter that opposed the
proposed approach stated that because
issuers are required to submit all claims
information to their respective EDGE
servers by April 30th following the end
of a benefit year, there should be enough
time to include the most recent year’s
enrollee-level EDGE data in the
applicable benefit year’s proposed
payment notice. The commenter
expressed the view that if the final
coefficients are known by the end of
March, issuers can properly incorporate
risk adjustment coefficients for ratesetting for the following year. However,
another commenter stated that they
preferred having the final coefficients
sooner, by the end of January, and
expressed support for the proposed
approach if the final coefficients
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incorporating the most recent year of
data that becomes available are not
expected to be ready within that
timeframe.
Response: We are finalizing the
proposals to use the 3 most recent
consecutive years of enrollee-level
EDGE data that are available in time for
incorporating the data in the
recalibrated coefficients published in
the proposed rule and that we will not
update the coefficients for additional
years of data between the proposed and
final rules if an additional year of
enrollee-level EDGE data becomes
available. We agree with commenters
that this approach promotes stability
and avoids the delays in publication of
the coefficients while continuing to
develop blended, or averaged,
coefficients from the 3 years of
separately solved models for model
recalibration using actual data from
issuers’ individual and small group (or
merged) market populations.
Additionally, we clarify that while we
may collect the most recent plan year’s
EDGE data prior to the publication of
the proposed rule, the data are often not
available in time for incorporation into
the proposed coefficients until much
later. This is because the process to
prepare enrollee-level EDGE data for
incorporation into risk adjustment
model recalibration is rigorous and
requires time for analysis and data
quality checks. Therefore, we believe
utilizing the 3 most recent consecutive
years of enrollee-level EDGE data that
are available in time for inclusion in the
coefficients in the proposed rule
promotes stability while ensuring data
quality and avoids the delays in
publication of the coefficients that
stakeholders have continued to raise
concerns about in comments on the
annual payment notices. This policy
will allow HHS to provide proposed
coefficients in the proposed rule that
reflects the same underlying data as will
be utilized for the final rule. This
approach will minimize changes
between the proposed and final
coefficients that result from differences
in data years, particularly in cases
where the risk adjustment models and
any accompanying proposed updates
are finalized without changes. As noted
earlier, in the initial years of risk
adjustment and implementation of the
2014 federal market reforms, the
markets underwent rapid changes in
which the relative impact of using the
most recent data for recalibrating the
risk adjustment models may have been
more pronounced. However, in recent
years, HHS has shifted from
recalibrating the risk adjustment models
using a blend of the three most recent
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24153
years of large group market data to using
data collected entirely from the risk
adjustment population (enrollee-level
EDGE data). This change has resulted in
coefficients that better reflect
underlying market conditions, and the
markets have continued to mature and
stabilize, thereby reducing the relative
impact of the most recent data year on
model coefficients.
This policy will also allow us to
continue to use the 3 most recent
consecutive years of enrollee-level
EDGE data available to recalibrate the
risk adjustment models. It also
continues to use actual data from
issuers’ individual and small group (or
merged) market populations and
maintains year-to-year stability in risk
scores as the recalibration would
continue to use at least 2 years of
enrollee-level EDGE data that were used
in the previous year’s models. Finally,
since this approach could allow us to
finalize the coefficients earlier, it could
allow issuers more time to incorporate
this information when pricing their
plans for the upcoming benefit year.
The proposed coefficients that were
published in the proposed rule reflected
the other proposed risk adjustment
model specification changes (that is,
inclusion of a two-stage model
specification in the adult and child
models; addition of severity and
transplant indicators interacted with
HCC counts factors in the adult and
child models; modification to the
enrollment duration factors in the adult
models; and removal of the current
severity indicator and enrollment
duration factors in the adult models).
However, based on our decision to not
finalize those proposed model
specification changes at this time as
described below, the proposed
coefficients outlined in the proposed
rule are not being finalized. Instead, as
discussed in more detail below, we will
continue to apply the current risk
adjustment model specifications (that is,
the enrollment duration factors for the
adult models and the severity illness
indicators in the adult models that were
finalized in the 2021 Payment Notice
will continue to apply for the 2022
benefit year, with trending adjustments
made to project the data used to develop
the factors forward to reflect the 2022
benefit year). The final coefficients
outlined below reflect the use of the
2016, 2017, and 2018 benefit years
enrollee-level EDGE data to develop
blended, or averaged, coefficients from
the 3 years of separately solved models,
as proposed, and the maintenance of the
current adult model severity indicators
and enrollment duration factors, with
trending adjustments made to reflect the
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2022 benefit year.33 In response to
comments expressing concern about the
use of older years of data, we note that,
similar to previous years, we used 3
years of blended data to develop the
2022 risk adjustment models with
certain adjustments to that data, such as
trending the data to reflect the
applicable benefit year.34 These
adjustments are necessary because
recalibration efforts have always used
data from prior benefit years to project
a future benefit year. As such, even if
we adopted the alternative approach
suggested by some commenters and
used the 2017, 2018 and 2019 data for
the 2022 benefit year recalibration, the
recalibration data would still need to be
trended forward to project for the
applicable benefit year. We believe this
approach of incorporating adjustments
to the enrollee-level EDGE data to
project the coefficients for the
applicable benefit year is appropriate
and consistent with the use of prior
benefit years data for model
recalibration, and strikes the
appropriate balance between the policy
desire to provide the coefficients earlier
in the pricing cycle for the upcoming
plan year and the concerns about
recalibration data not reflecting the most
up-to-date experience. After our
continued consideration of stakeholder
requests for earlier release of the risk
adjustment coefficients, along with the
comments on the proposed 2022
Payment Notice, we are finalizing the
proposals to use the 3 most recent
consecutive years of enrollee-level
EDGE data available in time for
incorporating the data in the
recalibrated coefficients published in
the proposed rule and that we will not
update the coefficients for additional
years of data between the proposed and
final rules if an additional year of
enrollee-level EDGE data becomes
available. The final coefficients outlined
below for the 2022 benefit year reflect
the use of the 2016, 2017, and 2018
benefit years enrollee-level EDGE data
for recalibration purposes.35
33 As detailed later in the preamble, the one
exception relates to RXC 09, which involved the use
of only 2016 and 2017 enrollee-level data to
develop the applicable 2022 benefit year
coefficients and interaction terms.
34 We previously discussed trending and
standardized benefit design parameters in the risk
adjustment models in the ‘‘March 31, 2016, HHSOperated Risk Adjustment Methodology Meeting
Discussion Paper,’’ March 24, 2016, available at
https://www.cms.gov/CCIIO/Resources/FormsReports-and-Other-Resources/Downloads/RAMarch-31-White-Paper-032416.pdf.
35 As detailed later in the preamble, the one
exception relates to RXC 09, which involved the use
of only 2016 and 2017 enrollee-level data to
develop the applicable 2022 benefit year
coefficients and interaction terms.
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Comment: One commenter sought
clarification on the reasoning and
implications for using the 2016, 2017,
and 2018 enrollee-level EDGE data.
Response: We proposed changes to
how we identify the 3 most recent
consecutive years of enrollee-level
EDGE data for the annual recalibration
of the HHS risk adjustment models to
respond to stakeholders’ request to
provide the coefficients earlier. This
approach allows HHS to avoid delays in
publication of the coefficients, which
will allow issuers more time to
incorporate this information when
pricing their plans for the upcoming
benefit years. While this approach will
utilize a set of data that is one year older
than what we have used in previous
years, we will continue to project the
coefficients to reflect estimated costs for
the applicable benefit year. We believe
that this approach will promote stability
while ensuring data quality and avoid
the delays in publication of the
coefficients. It also continues to use
actual data from issuers’ individual and
small group (or merged) market
populations and maintains year-to-year
stability in risk scores as the
recalibration would continue to use at
least 2 years of enrollee-level EDGE data
that were used in the previous year’s
models. Therefore, we are finalizing the
use of the 3 most recent consecutive
years of enrollee-level EDGE data that is
available to HHS in time for
incorporation in the proposed
coefficients in the annual proposed
payment notice.
Comment: One commenter noted that
the stated advantages for publishing
final coefficients earlier has similarly
applied in prior years as well, and HHS
could always publish the final Payment
Notice earlier. This commenter also
stated that the changed approach in the
proposed rule disrupts issuers’ settled
expectations, namely, that issuers had
assumed a continuation of past practice,
through which the proposed rule’s
coefficients are updated in the final rule
to include new data.
Response: As stated in the proposed
rule, we proposed changes to our
approach to identify the 3 most recent
consecutive years of enrollee-level
EDGE data that would be used for the
annual recalibration of the risk
adjustment models in response to
stakeholder feedback. HHS has
continued to receive numerous
comments from stakeholders that
expressed concerns about the timing for
release of the model coefficients and
asked that final coefficients be made
available earlier. The approach we used
in previous benefit years sometimes
resulted in delays in publication of the
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final coefficients until after the
publication of the applicable benefit
year’s Payment Notice,36 because the
associated data was not available in
time to incorporate into the models in
time for publication in the Payment
Notice.
We considered the potential
disruption to issuers’ settled
expectations and we explicitly sought
comments from stakeholders on
whether to finalize the proposed
approach, or whether we should instead
maintain the approach of using the
2017, 2018, and 2019 benefit years’ data
to recalibrate the risk adjustment
models for the 2022 benefit year. As part
of our analysis, we considered that it is
appropriate for HHS to consider changes
to program parameters through noticeand-comment rulemaking, including the
proposed changes to the approach for
the annual model recalibration. We
further note that even if we were to
maintain the approach suggested by
commenters to utilize the 2017, 2018,
and 2019 benefit years, changes in the
underlying data would attenuate the
relative impact of the most recent
benefit year data on risk adjustment
coefficients. This is because the
coefficients also incorporate changes to
the risk adjustment methodology for the
applicable benefit year, updated plan
design parameters, and certain other
adjustments to the data, such as
trending the data to reflect the
applicable benefit year. Finally, as noted
above, in the initial years of risk
adjustment and implementation of the
2014 federal market reforms, the
markets underwent rapid changes,
however, in recent years the markets
have continued to mature and stabilize.
We believe the approach finalized in
this rule will provide stability and
easier price prediction for issuers for the
2022 benefit year and beyond. It is an
appropriate and reasonable response to
comments submitted by stakeholders
over the years asking HHS to reevaluate
these issues and find a way to release
the coefficients earlier to align with
issuer pricing cycles.
Comment: One commenter who
supported the proposed approach noted
that there may be circumstances that
result in changes to the risk adjustment
models between the date the proposed
rule is published and the date the final
rule is published, and recommended
that if HHS makes any final
36 For example, the final 2021 benefit year risk
adjustment model coefficients were published in
guidance after the final annual benefit and payment
parameters. https://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/Final-2021Benefit-Year-Final-HHS-Risk-Adjustment-ModelCoefficients.pdf.
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modifications to the coefficients, they
should be issued no later than the
release of the final payment notice for
the applicable benefit year.
Response: We agree that the
coefficients could still change between
the proposed and final rules. There are
various reasons that this could happen,
such as the proposed recalibration
policies (or other proposed modeling
parameters) not being finalized, or those
parameters are modified in response to
comments. As stated above and
described more fully below, our
decision not to finalize the proposed
changes to the risk adjustment model
specifications and other proposed
model updates demonstrates how
changes between the proposed and final
rule can impact the risk adjustment
coefficients.
While we intend to make the
proposed and final coefficients available
as early as possible, we did not propose
to delete and are still retaining the
flexibility under § 153.320(b)(1)(i) that
permits HHS to release the final
coefficients in guidance after
publication of the final rule. Consistent
with prior years where we have invoked
this flexibility, we intend any
subsequent publication of final
coefficients would occur either in the
final rule or in guidance published soon
after the publication of the final rule.
Comment: Several commenters
recommended that we consider whether
utilizing the 2020 benefit year enrolleelevel EDGE data for future years’ risk
adjustment model calibration would be
appropriate in light of the COVID–19
pandemic.
Response: We did not propose to use
2020 benefit year enrollee-level EDGE
data as part of the annual recalibration
of the risk adjustment models for the
2022 benefit year. However, we
understand commenters’ questions
about the 2020 benefit year enrolleelevel EDGE data and its use for
recalibration of future benefit years’ risk
adjustment models. We intend to
carefully review the 2020 benefit year
enrollee-level EDGE data as it becomes
available to assess the potential impact
of the COVID–19 pandemic and
consider whether it should be used for
recalibration of the HHS risk adjustment
models in future benefit years.
Additionally, we note that our decision
to use the 2016, 2017, and 2018 benefit
years data for the 2022 benefit year
model recalibration provides an
additional year to evaluate the 2020
benefit year enrollee-level EDGE data
and assess the implications for using
2020 benefit year enrollee-level EDGE
data for risk adjustment model
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recalibration.37 If necessary, we will
propose any needed changes related to
risk adjustment model recalibration
through rulemaking published in
advance of the applicable benefit year.
After consideration of the comments
on these proposals, we are finalizing the
approach to use the 3 most recent
consecutive years of enrollee-level
EDGE data that are available in time for
incorporating the data in the
recalibrated coefficients published in
the proposed rule and to not update the
coefficients for additional years of data
between the proposed and final rules if
an additional year of enrollee-level
EDGE data becomes available. As a
result, we will use 2016, 2017, and 2018
enrollee-level EDGE data to recalibrate
the 2022 risk adjustment models.38
b. Risk Adjustment Model Updates
Beginning with the 2022 benefit year,
we proposed several updates to the risk
adjustment models. These proposed
updates include changes to the
specifications for the adult and child
models and updates to the enrollment
duration factors in the adult models to
improve the models’ predictions. We
also proposed to continue the market
pricing adjustment for Hepatitis C drugs
that has been in place since the 2020
benefit year.
We are not finalizing the proposed
model specification changes and
enrollment duration factor updates or
the accompanying removal of the
current severity illness indicators and
enrollment duration factors in the adult
models at this time. Therefore, the
current adult model severity illness
indicators and enrollment duration
factors, with trending adjustments made
to reflect the 2022 benefit year, will
apply for the 2022 benefit year without
the proposed specification changes. We
are finalizing and will continue the
market pricing adjustment for the
Hepatitis C drugs that has been in place
since the 2020 benefit year.
(1) Changes to the Model Specifications
Beginning with the 2022 benefit year,
we proposed to modify the adult and
child models specifications to improve
prediction for enrollees at both the low
and highest ends of expected
expenditures. The current HHS–HCC
models are estimated by a weighted
37 Consistent with the approach finalized in this
rulemaking, the earliest the 2020 enrollee-level
EDGE data would be used for model recalibration
is the 2024 benefit year.
38 As detailed later in the preamble, the one
exception relates to RXC 09, which involved the use
of only 2016 and 2017 enrollee-level data to
develop the applicable 2022 benefit year
coefficients and interaction terms.
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least squares regression.39 The
dependent variable is annualized
simulated plan liability expenditures,
and the weight is the person-specific
sample eligibility fraction. The effective
outcome is that the models predict per
member per month (PMPM)
expenditures.
As described in the 2021 Payment
Notice, the current HHS–HCC models,
which are linear models, underpredict
plan liability for enrollees without HCCs
(enrollees with low expected
expenditures) and underpredict plan
liability for enrollees with the highest
HCC counts (enrollees with high
expected expenditures).40 In the 2021
Payment Notice, we described options
that we were considering to address
these issues, such as adding a non-linear
term or HCC counts factors to the risk
adjustment models.41 For the non-linear
model option, we considered adding a
coefficient-weighted sum of payment
HCCs raised to a power that could be
interpreted as a measure of overall
disease burden. For the HCC counts
model option, we considered adding
eight indicator variables corresponding
to 1 to 8-or-more payment HCCs, similar
to the CMS–HCC risk adjustment counts
models used for Medicare Advantage.42
We have further evaluated the
performance of these options, their
potential for improved prediction, and
considered other alternatives to improve
the HHS risk adjustment models’
prediction.
Our initial analyses showed that the
non-linear and HCC counts models
would yield considerable gains in
predictive accuracy in the adult models
across several subgroups when
compared to the current linear
models.43 We tested both the HCC
counts and non-linear models’ impact
on the adult silver risk adjustment
models and found that the enrollees in
the lowest cost deciles had better
predictive ratios under either the HCC
counts or non-linear model specification
than under the current linear model
specification. However, both models
had shortcomings that prompted us to
39 See, for example, 78 FR 15420 and Section 3.7
of the ‘‘March 31, 2016 HHS-Operated Risk
Adjustment Methodology Meeting Discussion
Paper,’’ March 24, 2016. Available at https://
www.cms.gov/CCIIO/Resources/Forms-Reports-andOther-Resources/Downloads/RA-March-31-WhitePaper-032416.pdf.
40 85 FR 29188 and 29189.
41 Ibid.
42 ‘‘Advance Notice of Methodological Changes
for Calendar Year (CY) 2020 for the Medicare
Advantage (MA) CMS–HCC Risk Adjustment
Model,’’ December 20, 2018. Available at https://
www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/Downloads/
Advance2020Part1.pdf.
43 85 FR 7101 through 7104.
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consider alternate model options to
improve the predictive power of the
current HHS risk adjustment models.
For the HCC counts model, we noted
that we were concerned that the
presence of counts across all HCCs may
promote gaming in coding practices. We
explored ways to assure modeling
convergence across all metals and data
years, and found that the non-linear
models did not consistently converge in
all testing scenarios, and that
convergence could not reliably be
assured without constraining model
factors and revising those techniques
with each metal and data year model
run. Therefore, we continued to explore
additional types of model specifications
refinements that could balance the goals
of improving the models’ prediction
with mitigating modeling complexity
and gaming concerns. Specifically, as
described later in this section, we
explored a two-stage specification with
additional weighting in the second stage
based on the inverse capped prediction
from the first stage (‘‘two-stage
specification’’), a specification with
HCC counts included for a small
number of severity and transplant HCCs
(‘‘interacted HCC counts factors’’), and
an approach combining the two-stage
specification with the interacted HCC
counts factors.
For the two-stage specification, we
explored calibrating the adult and child
models in two stages: In the first-stage
estimation, the model coefficients
would be estimated using the current
model specifications; and in the second
stage, we would re-estimate the model
weighted by the reciprocal of the
predicted values of relative
expenditures from the first step
estimation with the same model
specification.44 The first stage of the
weighted estimation method involved a
linear regression (weighted by the
person-specific eligibility fraction of the
number of months enrolled divided by
12) of simulated plan liability on agesex factors, payment HCC factors, the
enrollment duration factors,45 and RXCs
for the adult models. For the child
models, the first stage of the weighted
estimation method involved a linear
regression of simulated plan liability on
age-sex factors and payment HCC
factors. The second stage involved using
the reciprocal of first-stage predictions
as weights for a second linear
regression.46 To stabilize the weights for
the second stage estimation, we
imposed lower and upper bound caps
on the first-stage predictions at the 2.5th
and 97.5th percentiles in the adult
models, and the 2.5th and 99.5th
percentiles in the child models. We
tested various caps for the weights
based on the distribution of costs, and
found these lower and upper bound
caps achieved better prediction on
average. This approach has the material
effect of weighting the healthier
enrollees, who represent a majority of
enrollees in the individual and small
group (including merged) markets but
who are underpredicted by the current
models, more heavily so that the
statistical model predicts their
expenditures more accurately. On the
other hand, this approach systematically
underweights, and therefore
underpredicts, very expensive enrollees.
However, the capped weighting
approach would mitigate the potential
to underpredict at the high end for
expensive enrollees, as well as any
possible low-end overprediction. In our
consideration of this option, we tested
various weights, including reciprocals
of the square root of prediction, log of
prediction, and residuals from first step
estimation, but the reciprocal of the
capped predictions resulted in better
predictive ratios for low-cost enrollees
compared to any of these alternative
weighting functions.
We also explored how the addition of
severity and transplant indicators
interacted with HCC counts, wherein an
indicator flagging the presence of at
least one severity or transplant payment
HCC is being interacted with counts of
the enrollee’s payment HCCs.47 The
goals for this approach were to: (1)
Address the non-linearity in costs
between enrollees with no or very low
44 This weighted approach is similar to the
weighted least squares approach with the weight
equal to the reciprocal of the estimated variance
that is often used to correct for heteroskedasticity.
However, in our proposed approach, we would use
the reciprocal of predictions from the first step as
weights to correct for underprediction of lowvalued coefficients.
45 We proposed to remove and replace the
enrollment duration factors in the adult models in
the proposed rule, but we are not finalizing the
proposed changes to the enrollment duration factors
in this final rule and will apply the current
enrollment duration factors of up to 11 months,
with trending adjustments made to reflect the 2022
benefit year, in the adult models for the 2022
benefit year.
46 Under the proposed two-stage specification and
interacted HCC counts model described later in this
section, we proposed to remove and replace the
severity illness indicators in the adult risk
adjustment models with the proposed interacted
HCC counts factors in the adult and child models.
However, we not are finalizing these proposed
model specification changes in this final rule and
will continue to apply the current severity illness
indicators in the adult models for the 2022 benefit
year.
47 For HCCs in a group, the group is counted at
most once. These groups of HCCs in the risk
adjustment models are typically detailed in the
Tables 6 and 7 of the HHS-Developed Risk
Adjustment Model Algorithm ‘‘Do It Yourself
(DIY)’’ Software.
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costs and enrollees with high costs; (2)
empirically incorporate the cost impact
of multiple complex diseases; and (3)
mitigate the gaming concerns with the
HCC counts model. We tested different
types of severity and transplant
indicators interacted with HCC counts
with the goal of improving prediction
for enrollees with the highest costs and
multiple HCCs to counter balance the
reciprocal prediction weights that
relatively underpredicted costs for these
enrollees. For this approach, we
assessed the HCCs for enrollees with
extremely high costs, and HCCs that
were being underpredicted in the
current risk adjustment models. We
found that many of the HCCs that were
flagged as being under-predicted were
those HCCs that indicated severe illness,
such as the transplant HCCs, and other
HCCs related to severity of disease;
therefore, we considered dropping the
current severity illness indicators in the
adult models and replacing them with
severity and transplant indicators
interacted with HCC counts factors in
the adult and child models. Table 3 in
the proposed rule 48 listed the HCCs that
were selected for the severity and
transplant indicators for the adult and
child models for purposes of exploring
this option. The severity and transplant
indicators were then interacted with
HCC counts factors, which are described
below.
The purpose of adding severity and
transplant indicators interacted with
HCC counts factors is to account for the
fact that costs of certain HCCs rise
significantly when they occur with
multiple other HCCs. To mitigate the
incentive to upcode multiple HCCs, we
only increased incremental risk scores
in the presence of at least one of the
selected HCCs in the severity or
transplant indicator groups in Table 3 in
the proposed rule. That is, an adult or
child enrollee would have to have at
least one HCC in the ‘‘severity’’ or
‘‘transplant’’ indicator groups in Table 3
in the proposed rule to receive the
interacted HCC counts coefficient
toward their risk score.
Under this approach, when an adult
or child enrollee has a severity indicator
HCC in Table 3 in the proposed rule, the
enrollee’s risk score would include the
sum of: (1) Severity HCC variable
coefficient; 49 and (2) applicable severity
HCC counts variable coefficient. The
HCC counts factors, which indicate the
48 See
85 FR at 78593.
is in addition to the HCC coefficients for
any other HCCs that the enrollee has, as well other
risk adjustment factors that the enrollee has (such
as demographic factors). If an enrollee has no
severity HCCs the severity count interaction term
coefficients are not applicable.
49 This
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counts of all payment HCCs for an
enrollee with at least one HCC,
interacted with the severity indicator in
Table 3 in the proposed rule, range from
one, two, to 10+ payment HCCs (1, 2,
. . . , 10+) for the adult models, and
from one, two, to 5, then 6 or 7, and 8+
payment HCCs for the child models. To
implement the severity indicator HCC
counts factors and further explore this
option, we removed the current severity
illness indicators in the adult models,
and added severity indicator interacted
HCC counts variables for the adult and
child models.
For the transplant-related HCCs
within the severity indicator HCC
counts in Table 3 in the proposed rule,
we found separating out transplant
HCCs into their own additional
indicator to interact HCC counts factors
improved prediction for these high-cost
enrollees. Therefore, for the transplant
HCCs, we created a separate transplant
indicator to interact with payment HCC
counts of 4, 5, 6, 7, or 8+ for the adult
models, and a single indicator variable
of payment HCC counts of 4+ for the
child models. For example, an adult
enrollee with a transplant HCC 34
‘‘Liver Transplant Status/
Complications’’ in the transplant
indicator group and three other payment
HCCs received the following factors
toward their risk score in the adult
models: (1) The four coefficients for
their individual HCCs (the three nontransplant HCCs and the HCC 34
transplant HCC coefficient), (2) severity
interacted HCC counts of 4 coefficient,
and (3) transplant interacted HCC
counts of 4 coefficient.50 The child
model operated similarly. For a child
enrollee with a transplant HCC in the
transplant indicator group and three
other payment HCCs, the following was
used to calculate the enrollee’s risk
score: (1) Coefficients for all four HCCs,
(including the transplant HCC
coefficient), (2) severity interacted HCC
counts of 4 coefficient, and (3)
transplant interacted HCC counts of 4
coefficient.
As an alternative, we explored
interacting the HCC counts factors with
each selected severity and transplant
HCC, but found it was sufficient to
interact the HCC counts factors with a
variable indicating the presence of at
least one of the selected HCCs in each
group to improve prediction for
enrollees with these HCCs. We also
explored different combinations of HCC
counts to identify the counts factors for
both indicator groups in the adult and
50 This is in addition to other risk adjustment
factors that the enrollee has (such as demographic
factors).
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child models that provided the best
balance of reasonable sample sizes and
relative cost differences between each
counts factor. More specifically, in the
adult models, we found that starting
with 4+ HCCs for the transplant
interacted factors improved predictions
of enrollees at the very high end in
terms of risk and cost and ending at 8+
HCCs instead of 10+ HCCs addressed
the small sample sizes of enrollees with
a transplant and 9 or more payment
HCCs. For the child models, we found
having one variable for 4+ payment
HCCs provided more stable estimates as
compared to separate variable for each
payment HCC above that number, given
the smaller sample sizes for children
than those for adults.
Lastly, we tested combining these
specifications into an alternative
approach that incorporated both the
two-stage specification and the severity
and transplant indicators interacted
HCC counts factors described above for
the HHS adult and child models. We
found this combined approach generally
improved prediction for enrollees at
both the low and highest ends of
expected expenditures. Specifically,
even though we found that the age-sex
factors and some HCCs might have
slightly worse predictive ratios under
the proposed combined approach than
the current linear models, we found that
this combined approach improves
predictive ratios in comparison to the
current models in each decile of
predicted plan liability. We also found
that this combined approach improves
R-squared in comparison to the current
model and that even though the
coefficients for the model factors that
are most impacted by the combined
approach (the age-sex factors and the
severity and transplant HCCs) would be
changing under the 2022 benefit year
models compared to the 2021 benefit
year models, the average enrollee’s adult
risk score in the recalibration sample in
the silver metal level only increased
slightly between 2021 benefit year
models to 2022 benefit year models.
Therefore, we proposed to modify the
HHS risk adjustment model
specifications for the adult and child
models by combining a two-stage
specification and adding interacted HCC
counts factors beginning with the 2022
benefit year. For the two-stage
specification, we proposed calibrating
the adult and child models in two
stages. The first stage of the weighted
estimation method would involve a
linear regression of simulated plan
liability on age-sex factors and payment
HCC factors for the adult and child
models, with the addition of the
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24157
enrollment duration and RXCs factors
for the adult models. The second stage
would use the reciprocal of prediction
as weights from the first step as a
second stage linear regression. To
stabilize the weights from the first stage
predictions, we proposed lower and
upper bound caps on the predictions at
the 2.5th and 97.5th percentiles in the
adult models, and the 2.5th and 99.5th
percentiles in the child models. This
two-stage specification would be
combined with the severity and
transplant indicators from the interacted
HCC counts factors. For the severity
indicator group, we proposed to add
separate count factors for one to 10+
payment HCCs counts factors (1, 2, . . .,
10+) for the adult models and one to 5,
6 or 7, and 8+ payment HCCs (1, 2,
. . . . 5, 6 or 7, 8+) for the child models.
The proposed HCCs that would flag the
severity indicator are listed in Table 3
of the proposed rule.51 For the
transplant HCCs, we proposed to
incorporate variables for 4 to 8+
payment HCCs (4, 5, 6, 7, 8+) for the
adult models and one variable for 4+
payment HCCs for the child models. All
variables, including the severity and
transplant indicators interacted in the
interacted HCC counts factors, would be
included in both stages of the
regressions. We proposed to incorporate
these model specification updates
beginning with the 2022 benefit year
HHS risk adjustment adult and child
models. We also proposed to remove the
current severity illness indicators in the
adult models beginning with the 2022
benefit year.
We sought comment on these
proposals, including on the HCCs
selected for flagging as severity and
transplant indicators listed in Table 3 of
the proposed rule such as whether we
should include HCC 18 Pancreas
Transplant in the transplant indicator
group, and the alternatives described
above. We also requested comment on
whether we should pursue both the
interacted HCC counts factors and the
two-stage specification beginning with
the 2022 benefit year (as proposed), if
we should implement one of the two
approaches beginning with the 2022
benefit year (and if so, which one), or
if we should wait to implement the
proposed changes that combines the
proposed model specification updates
until the 2023 benefit year.
We are not finalizing the risk
adjustment model specification changes
as proposed at this time, but will further
consider potential changes that could
increase the predictive power of the
HHS risk adjustment models. We also
51 See
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are not finalizing the accompanying
proposals to remove the current severity
illness indicators in the adult models;
those factors, as finalized in the 2021
Payment Notice, will continue to apply
to the 2022 benefit year adult models
with trending adjustments made to
project the data used to develop the
factors forward to reflect the 2022
benefit year.52
We received public comments on the
proposed updates to the model
specification changes. The following is
a summary of these comments and our
responses.
Comment: Many commenters opposed
the proposed risk adjustment model
specification changes and wanted to
know more about the specific impacts of
the proposed risk adjustment model
specification changes. Many of these
commenters were concerned that HHS
did not give stakeholders adequate
information or time to assess the model
specification changes, while some stated
that the model specification changes
were unexpected and not fully reviewed
with stakeholders in advance of them
being proposed for implementation.
These commenters suggested that,
consistent with recent efforts to update
risk adjustment data validation, HHS
should release a White Paper and
conduct listening sessions to provide
stakeholders with the opportunity to
evaluate the impact of the changes and
provide HHS with feedback in advance
of pursuing such changes through
rulemaking. Some commenters
generally wanted additional analyses or
more specificity about the model
changes while others requested specific
types of analyses.
Some commenters that opposed the
proposed model specification changes
were concerned the changes added
complexity to the models and would
hinder issuers’ ability to price
accurately, resulting in higher
premiums. Other commenters
recommended that HHS collect data to
estimate the impact of the proposed
model specification changes on risk
adjustment transfers before finalizing
them. Another commenter
recommended evaluating model
performance at the plan level instead of
the enrollee level using the plan liability
risk score predictive ratios because the
transfer formula operates at the plan and
rating level, wanting HHS to collect data
to do this type of analysis.
A few commenters were concerned
that the proposed model specification
changes would reduce the quality of
coverage available to consumers and
would threaten the market’s ability to
52 See
the Severity Factors listed in Table 1.
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support robust competition. One of
these commenters recommended that
we reconsider the goal of reducing
under prediction for enrollees with low
spending, because this commenter
believed that plans that
disproportionately attract sick enrollees
tend to attract enrollees who are higherthan-average risk based on
characteristics not captured in risk
adjustment, and that therefore risk
adjustment should underpay for low
spending enrollees relative to payment
for higher-risk enrollees.
However, other commenters
supported our proposed model
specifications changes. These
commenters tended to support
improving the predictive power of the
risk adjustment models and were
concerned about the potential for plans
to lose money on enrollees with no
HCCs under the current model
specifications, discouraging issuers from
enrolling healthier enrollees and
resulting in excessive risk adjustment
payments. One of these commenters
reported engaging in their own analysis
of the proposed model specification
changes and found that they achieved
HHS’s goals of improving the models’
prediction while mitigating modeling
complexity and gaming concerns.
Response: After consideration of
comments on these proposals, we are
not finalizing the proposed model
specifications changes at this time and
will retain the existing severity illness
indicators in the adult models. We
intend to continue to consider potential
changes that could increase the
predictive power of the HHS risk
adjustment models in future rulemaking
for future benefit years. While we
believe stakeholders had sufficient time
and adequate information to evaluate
these model specifications, as reflected
in the detailed comments received on
these proposals, we understand
stakeholders’ desire for additional
analyses on these types of model
specification changes prior to
implementing them in the risk
adjustment models. We also appreciate
issuers’ desire for additional time to
prepare for these types of model
specification changes and to consider
how to price for these model
specification changes. While we are
limited in our ability to evaluate model
performance at the plan level because
the enrollee-level EDGE data does not
include plan level information, to test
the performance of the risk adjustment
models for subgroups, we calculate the
expenditure ratio of predicted to actual
weighted mean plan liability
expenditures by subgroup, also referred
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as the predictive ratios.53 Regardless, we
agree that more time, and some
additional analysis, would help
stakeholders further review these
changes, help issuers price more
accurately, and prevent the introduction
of inadvertent volatility in the market(s)
as a result of new model specifications.
It will also help inform whether
refinements to these proposals or other
options would be appropriate to meet
the overall policy goal of improving the
models’ predictive power for the lowest
cost and highest cost enrollees and
developing a model that most accurately
captures risk for those with and without
HCCs. For these reasons, we are
considering releasing a technical paper
to provide further assessment of
potential changes to the risk adjustment
models and additional analysis of
options to improve the prediction of the
risk adjustment models. In addition, if
we decide to pursue these changes, or
other options, to improve the predictive
power of the models for future benefit
years, we would propose such updates
through notice-and-comment
rulemaking.
Comment: Some commenters were
concerned that the two-stage
specification would over-fit the model
or would worsen the fit along other
dimensions. One of these commenters
questioned the basis for the weighting
function chosen in the two-stage
specification noting that it appeared to
be arbitrary and recommended that HHS
consider using industry-standard
methods to test modeling choices for
overfitting and then publish the results
of these tests when explaining modeling
decisions. This commenter cautioned
against an overemphasis on improving
model performance in the absence of
both a sound theoretical basis for
changes and an independent data set to
confirm an increase in accuracy.
Another commenter recommended that
HHS not finalize the proposed risk
adjustment model specifications since
the two-stage specification does not
mitigate the under-prediction of health
care costs for enrollees with the highest
number of HCCs. One commenter was
concerned that the proposed two-stage
specification would not predict future
costs.
Response: We are not implementing
the proposed model specifications at
this time. However, in response to
comments, we note that as part of our
assessment of the proposed model
specification changes we tested for
53 March 31, 2016, HHS-Operated Risk
Adjustment Methodology Meeting. Discussion
Paper. March 24, 2016. https://www.cms.gov/CCIIO/
Resources/Forms-Reports-and-Other-Resources/
Downloads/RA-March-31-White-Paper-032416.pdf.
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overfitting of the models by running
predictive ratios on the separate
validation samples for both the child
and adult models. While the sample
sizes are smaller in the child models
than the adult models, leading to greater
fluctuations for the child models, we
found that the predictive ratios in the
separate validation samples showed no
material difference relative to predictive
ratios in the estimation sample. Thus,
we did not find empirical concerns with
respect to overfitting of the models with
the proposed model specification
changes.
As previously mentioned, we believe
it is appropriate to continue to analyze
the two-stage specification and
interacted HCC counts factors and are
considering releasing a technical paper
to provide our further assessment of
potential changes to the risk adjustment
models that could include these model
specification changes or other options.
In addition, we would pursue adoption
of any of these model specification
changes, or other options, for future
benefit years through notice-andcomment rulemaking.
Comment: Some commenters were
concerned about the potential for small
sample sizes for the interacted HCC
counts model specification. These
commenters tended to be concerned that
the number of enrollees could drop
significantly as the interacted HCC
counts go up, which could lead to
erratic interacted HCC counts factors
coefficients, and had concerns that the
proposed rule had some large changes
between coefficients and coefficients
going from negative to positive for a
given count across metal levels. One
commenter was concerned that the low
sample sizes at higher HCC counts
associated with larger coefficients could
increase the models’ volatility, making
it more difficult for issuers to price
coverage. Other commenters were
concerned that the interacted HCC
counts model specification could
incentivize unwanted gaming in coding
practices by issuers. One commenter
that supported the adoption of the
interacted HCC counts model
specification was concerned that the
interacted HCC count model change
would encourage issuers to invest
additional resources in diagnosis
coding. Another commenter did not
believe that using interacted HCC
counts factors would create an
opportunity for gaming, and did not
understand how using a full HCC counts
model specification would result in
gaming opportunities either.
Response: As noted previously, after
consideration of comments, we are not
finalizing the proposed model
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specification updates, including the
interacted HCC counts factors, at this
time. While we believe that the
proposed rule provided stakeholders
with adequate information to evaluate
these model specifications, we
recognize that stakeholders could
benefit from further analysis and
additional time to analyze the structure
of the proposed interacted HCC counts
factors. In response to the commenters
expressing concerns about negative
coefficients under the proposed
interacted HCC counts factors, we note
that when an enrollee has a severity
indicator HCC, the enrollee’s risk score
would include the sum of: (1) Severity
HCC variable coefficient; 54 and (2)
applicable severity HCC counts variable
coefficient. This means that even though
many of the interacted HCC counts
factors outlined in the proposed rule
were negative coefficients, the net
combined impact of the HCC
coefficients and the interacted
‘‘severity’’ or ‘‘transplant’’ HCC counts
coefficient, to the enrollee’s risk score
would be positive.55
In developing the proposed interacted
HCC counts factors, we also considered
sample sizes of the various interacted
HCC counts factors. We analyzed
multiple years of enrollee-level EDGE
data and we chose the model
specifications that grouped all of the
HCC counts interacted with individual
severity and transplant HCCs into two
sets of aggregated factors to maximize
sample size, reduce concerns of
overfitting the model, and reduce the
number of factors being added to the
54 This is in addition to the HCC coefficients for
any other HCCs that the enrollee has, as well other
risk adjustment factors that the enrollee has (such
as demographic factors). If an enrollee has no
severity HCCs the severity count interaction term
coefficients would not be applicable.
55 To further illustrate, we can consider a male
enrollee age 63 in silver metal level who has
diabetes but no other risk markers. Using the
proposed coefficients in the proposed rule, his
proposed model predicted cost would be: 0.343
(age-sex estimate) + 0.262 (diabetes HCC estimate)
= 0.605.
If he develops sepsis, which is an interacted
‘‘severity’’ HCC, his predicted cost would be: 0.605
+ 9.394 (sepsis HCC) + ¥5.824 (interacted severity
HCC counts factor for 2 total HCCs estimate) =
4.175.
If this enrollee also develops heart failure, his
predicted cost would further rises: 0.605 + 9.394 +
1.874 (heart failure HCC) + ¥4.526 (interacted
severity HCC counts factor for 3 total HCCs) =
7.347. As can be seen in these illustrative examples,
although the interacted ‘‘severity’’ HCC counts
factors are negative, the interacted ‘‘severity’’ HCC
counts factor rise with the enrollee’s total number
of HCCs, increasing the enrollee’s total predicted
cost as his number of HCC diagnoses increases. In
fact, the increasing risk scores with each additional
HCC is consistent with the current models and
predictions are higher for enrollees with many
HCCs under the interacted counts specification than
under the current model specification.
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models. The resulting sample size for
the proposed interacted HCC counts
factors were consistent with the sample
size for individual HCCs in the risk
adjustment models. Furthermore, by
limiting the proposed interacted HCC
counts factors to certain severity and
transplant HCCs, we believe that the
interacted HCC counts factors would
restrict the scope for coding
proliferation in accordance with the
principles of risk adjustment.56
As discussed in the 2021 Payment
Notice, we considered using a counts
model specification where all HCCs
were subject to the counts model
specifications, but, as stated in the
proposed rule, we were concerned that
the presence of counts across all HCCs
may promote gaming in coding
practices. This was our reasoning for
investigating an interacted HCC counts
model specification to find a way to get
the benefits afforded by the HCC counts
model while mitigating the potential for
gaming. The proposed interacted HCC
counts factors would have made
changes primarily to the HCCs most
associated with underprediction of
high-cost cases in the model and would
have only applied to less than two
percent of the population thereby
reducing the concern about additional
coding incentives in comparison to a
general HCC counts model.
We agree that stakeholders will
benefit from additional time to analyze
the proposed factors that we presented
in the proposed rule to understand the
incremental effects of the interacted
HCC counts factors and consider the
associated coding incentives. After
consideration of comments received on
these proposals, we are not finalizing
the proposed model specification
changes or the removal of the current
severity illness indicator factors in the
adult models at this time. However, we
intend to continue to consider changes
that can increase the predictive power
of the HHS risk adjustment models in
rulemaking for future benefit years and
also intend to provide stakeholders with
further information and additional
analysis on potential model
specifications changes.
Comment: One commenter believed
that inclusion of the interacted HCC
counts factors appears to be a
discriminatory practice.
56 We have described our principles for risk
adjustment in various documents, but a complete
list of them is available in the March 31, 2016,
HHS-Operated Risk Adjustment Methodology
Meeting Discussion Paper. March 24, 2016. Pages
12–13, https://www.cms.gov/CCIIO/Resources/
Forms-Reports-and-Other-Resources/Downloads/
RA-March-31-White-Paper-032416.pdf.
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Response: We are not finalizing the
policy at this time, but we disagree. The
interacted HCC counts factors proposed
to be added to the HHS risk adjustment
models are not discriminatory. HHS
takes very seriously our obligation to
protect individuals from discrimination.
Consistent with section 1343 of ACA,
the HHS-operated risk adjustment
program reduces the incentives for
issuers to avoid higher-than-average risk
enrollees, such as those with chronic
conditions, by using charges collected
from issuers that attract lower-thanaverage risk enrollees to provide
payments to health insurance issuers
that attract higher-than-average risk
enrollees. The proposed interacted HCC
counts factors would help predict
enrollee risk better for certain
subpopulations. Therefore, we do not
believe the inclusion of the interacted
HCC counts factors is a discriminatory
practice and as stated above, the
proposed inclusion of interacted HCC
counts would reduce the underprediction of the highest cost cases and
the under-prediction of the low-risk
enrollees, thereby helping to mitigate
the potential for adverse selection by
improving the predictive power of the
HHS risk adjustment models for these
enrollees.
Comment: One commenter wanted
HHS to consider using more metrics
than R-squared statistics to assess the
proposed model specification changes,
such as mean absolute prediction error
or predictive ratios for subsets of the
population. Another commenter was
concerned that the proposed revisions
to incorporate interacted HCC counts
factors and modify the enrollment
duration factors alone would result in
worse model performance among lowercost deciles even if they result in higher
R-squared values overall. Another
commenter wanted to ensure that HHS’s
modeling was taking into account the
high-cost risk pool component of the
HHS risk adjustment methodology.
Response: While we did assess Rsquared statistics for the performance of
our proposed model specification
changes, our primary metric to evaluate
performance and the proposed changes
was predictive ratios by subgroup. We
found that the proposed interacted HCC
counts and the proposed revised
enrollment duration factors (discussed
in the below section) improved the
model performance for the low-end
deciles even without the inclusion of
the proposed two-stage specifications.
We intend to continue to assess model
performance in future benefit years, and
we will also consider assessing the
mean absolute prediction error along
with predictive ratios and R-squared
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statistics as we continue to assess
potential model specification changes in
the future. We also confirm that the
annual recalibration of the HHS risk
adjustment models, including both the
development of final coefficients listed
in this rule and the proposed
coefficients reflecting the proposed
model specification changes in the
proposed rule, accounts for the costs
covered by the high-cost risk pool
component of the HHS risk adjustment
methodology.57 58
Comment: Some commenters focused
on the proposed timeline for
implementation of the proposed model
specification changes. Some of these
comments were opposed to
implementing the model specification
changes in 2022 and some supported
delaying implementation to the 2023
benefit year (or beyond). One
commenter wanted all model
specification changes completed within
one benefit year and then recommended
limiting model changes in future benefit
years to provide year-to-year stability.
Another commenter supported applying
the proposed model specification
changes beginning with the 2022 benefit
year risk adjustment models.
Response: As noted previously in this
rule, after consideration of comments on
these proposals, we are not finalizing
the proposed model specifications at
this time and are retaining the current
severity illness indicator factors in the
adult models. We agree that
stakeholders would benefit from having
additional analysis and time to consider
these changes. Therefore, we intend to
provide stakeholders with additional
analysis and further information about
potential model specification changes
and will continue to consider changes
that can increase the predictive power
of the HHS risk adjustment models. Any
such changes would be pursued through
rulemaking for future benefit years. As
part of our continued analysis of
potential future changes, we intend to
consider ways to balance the desire to
adopt refinements to improve the
predictive power of the models with the
need to promote stability.
57 Beginning with the 2018 benefit year risk
adjustment recalibration, we incorporated the highcost risk pool parameters in our recalibration of the
models by truncating 40 percent of costs above $1
million in our dataset used to simulate plan
liability. See, for example, 81 FR 94058 at 94082.
58 See, for example, the proposed 2022 Payment
Notice, 85 FR at 78586 (In announcing the proposed
coefficients, noting that ‘‘(t)he adult, child, and
infant models have been truncated to account for
the high-cost risk pool payment parameters by
removing 60 percent of costs above the $1 million
threshold.’’)
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c. Changes to the Enrollment Duration
Factors
In the proposed rule, we proposed
changes to the enrollment duration
factors in the adult risk adjustment
models to improve the prediction for
partial year enrollees with HCCs. After
consideration of comments received, we
are not finalizing the proposal to remove
the current 11 enrollment duration
factors of up to 11 months for all
enrollees in the adult models, or the
addition of new monthly enrollment
duration factors of up to 6 months that
would only apply for enrollees with
payment HCCs in the adult models. For
the 2022 benefit year, we will continue
to apply the current 11 enrollment
duration factors of up to 11 months for
all enrollees in the adult models, with
trending adjustments made to project
the data used to develop the factors
forward to reflect the 2022 benefit year.
See Table 1. Similar to the other
proposed model specification changes
outlined elsewhere in this rule that we
are not finalizing in this rule, we intend
to continue to analyze potential changes
to the enrollment duration factors to
improve model prediction for partial
year enrollees with HCCs.
As described in the proposed 2021
Payment Notice, we have been
considering potential adjustments to the
enrollment duration factors and
previously analyzed the current factors
using the 2016 and 2017 enrollee-level
EDGE data.59 We explored heterogeneity
(variations) of costs for partial year
enrollees in the presence of certain
diagnosis codes, by market (individual
or small group),60 and under various
enrollment circumstances, such as
enrollment beginning later in the year or
ending before the end of the year. Our
preliminary analysis of 2017 enrolleelevel EDGE data found that the current
enrollment duration factors are driven
by enrollees with HCCs. That is, partial
year enrollees with HCCs had higher
PMPM expenditures on average as
compared to full year enrollees with
HCCs. On the other hand, partial year
enrollees without HCCs were not
significantly different in PMPM
expenditures compared to full year
enrollees without HCCs. In the 2021
Payment Notice, we also explained that
our preliminary analysis found that, in
comparison to the effect of the presence
of HCCs on enrollment duration factors,
enrollment timing (for example,
enrollment at the beginning of the year
compared to enrollment after open
59 See
85 FR 7103 and 7104.
the enrollee-level EDGE data, merged market
enrollees are assigned to the individual or small
group market indicator based on their plan.
60 In
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enrollment period, or drop in
enrollment before the end of the year)
did not appear to affect PMPM
expenditures on average. While we did
not make changes to the enrollment
duration factors in the 2021 Payment
Notice, we stated that we were
considering eliminating the monthly
enrollment duration factors up to 11
months and replacing them with
monthly enrollment duration factors up
to 6 months for enrollees with HCCs.
We also stated that we intended to
review the trends observed in our
preliminary analysis using an additional
year’s data before proposing changes.
Since the publication of the 2021
Payment Notice, we have reassessed
enrollment duration factors for adults
using the 2018 benefit year enrolleelevel EDGE data. The additional data
year’s findings were consistent with our
prior finding that partial year enrollees
without HCCs do not have PMPM
expenditures that are significantly
different compared to full year enrollees
without HCCs. Therefore, beginning
with the 2022 benefit year, we proposed
to remove the current 11 enrollment
duration factors of up to 11 months for
all enrollees in the adult models, and
add new monthly enrollment duration
factors of up to 6 months to the adult
models that would only apply for
enrollees with payment HCCs. Under
the proposal, there would be no
enrollment duration factors for adult
enrollees without payment HCCs
starting with the 2022 benefit year adult
models. As part of this analysis, we also
considered adoption of enrollment
duration factors by market, but we did
not find a meaningful distinction in
relative costs between markets on
average once we implemented the
proposed enrollment duration factors of
up to 6 months for adult enrollees with
payment HCCs. Therefore, we did not
propose enrollment duration factors for
the adult models by market type at this
time. We also proposed to continue to
incorporate enrollment duration factors
only in the adult models.61 We solicited
comment on the changes to the
enrollment duration factors for the adult
models. We also sought comment on
61 As explained in the 2021 Payment Notice
proposed rule, we found that partial year enrollees
in the child models did not have the same risk
differences as partial year enrollees in the adult
models and they tended to have similar risk to full
year enrollees in the child models. In the infant
models, we found that partial year infants had
higher expenditures on average compared to their
full year counterparts; however, the incorporation
of enrollment duration factors created interaction
issues with the current severity and maturity factors
and did not have a meaningful impact on the
general predictive power of the infant models. See
85 FR 7103 and 7104.
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whether we should implement these
model changes starting with the 2022
benefit year, whether we should delay
implementation until the 2023 benefit
year, or whether we should create the
enrollment duration factors for different
lengths, such as up to 9 months of
enrollment, instead of up to 6 months.
We are not finalizing the proposal to
remove the current 11 enrollment
duration factors of up to 11 months for
all enrollees in the adult models, or to
add new monthly enrollment duration
factors of up to 6 months that would
only apply for enrollees with payment
HCCs in the adult models. We intend to
consider proposing changes that
increase the predictive power of the
HHS risk adjustment models model in
the future, including with respect to
improving model prediction for partial
year enrollees with HCCs. We received
public comments on the proposed
changes to the adult model enrollment
duration factors. The following is a
summary of the comments we received
on these proposals and our responses.
Comment: Many commenters were
opposed to the new enrollment duration
factors for up to 6 months for adult
enrollees with a payment HCC. These
commenters wanted additional analysis
on the new enrollment duration factors,
such as further evaluation of the new
enrollment duration factors in a White
Paper or dialogue during stakeholder
listening sessions. Other commenters
supported the new enrollment duration
factors (of up to 6 months for adult
enrollees with a payment HCC). These
commenters believed that the new
enrollment duration factors would
capture adverse selection related to
partial year enrollment and were
concerned that plans are unable to
recover premiums for the foreseeable
additional costs that result from partial
year enrollees.
A few commenters opposed the new
enrollment duration factors because
they believed that the current
enrollment duration factors that apply
to all adult enrollees help to offset
under-prediction of healthy enrollees in
the risk adjustment models and that the
proposed enrollment duration factors
would undermine this offset by only
applying to adult enrollees with an
HCC. Other commenters believed that
the current enrollment duration factors
helped mitigate some potential underprediction issues in the small group
market.
Some commenters wanted HHS to
implement the proposed enrollment
duration factors changes beginning with
the 2022 benefit year. Other commenters
recommended delaying implementation
of the proposed enrollment duration
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factor changes to the 2023 benefit year,
asking that HHS provide additional
analysis on the enrollment duration
factor changes in the interim to assist
issuers with pricing their plans to reflect
these changes. One commenter wanted
HHS to implement the proposed
enrollment duration factor changes now
so that carriers are not deterred from
enrolling people seeking coverage
during special enrollment periods with
millions of people losing employersponsored insurance due to COVID–19.
Response: Similar to the other
proposed model specification changes,
we are not finalizing the revisions to the
enrollment duration factors at this time
and will consider proposing changes
that increase the predictive power of the
HHS risk adjustment models in the
future. For the 2022 benefit year, we
will continue to apply the current 11
enrollment duration factors of up to 11
months for all enrollees in the adult
models with trending adjustments made
to project the data used to develop the
factors forward to reflect the 2022
benefit year. We recognize that
stakeholders would benefit from
additional analysis and time to assess
these or other potential changes to the
enrollment duration factors. We also see
value in making any changes to the
enrollment duration factors at the same
time as other model specification
changes under consideration to address
the under-prediction of no HCC
enrollees. This approach to aligning the
enrollment duration factors changes
with the timing of other potential model
specification changes targeted to
improve the predictive power of the
models would support a balanced
approach to addressing the overprediction of no HCC enrollees with
partial year enrollment at the same time
that we address the under-prediction of
no HCC enrollees (with full or close to
full year enrollment) in the risk
adjustment models. We note that the
current enrollment duration factors still
compensate plans for partial year
enrollees, and therefore, already help
mitigate any disincentive to enroll
partial-year enrollees.
Therefore, we are also not finalizing
the proposed changes to the enrollment
duration factors at this time and will
continue to apply the current 11
enrollment duration factors of up to 11
months, with trending adjustments
made to reflect the 2022 benefit year, for
all enrollees in the adult models. In
addition, we are considering releasing a
further analysis of potential changes to
the risk adjustment models that could
include updates to the adult model
enrollment duration factors.
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Comment: Some commenters wanted
HHS to consider whether enrollment
duration factors should be tied to
certain HCCs, believing that not all
HCCs contribute equally to the
coefficient for enrollees with the one
month enrollment duration factor and
wanting us to constrain the enrollment
duration factor to a subset of HCCs
driving the high one-month enrollment
duration factor coefficient value. One
commenter recommended HCC specific
enrollment duration factors for
maternity HCCs be finalized for the
2022 benefit year. Another commenter
recommended the creation of
enrollment duration factors up to 9
months of enrollment for adult enrollees
with HCCs (instead of up to 6 months
for enrollees with HCCs, as proposed).
Response: While we are not finalizing
changes to the adult model enrollment
duration factors at this time, as part of
our analysis of the enrollment duration
factors, we did review the most common
HCCs in the 2018 enrollee-level EDGE
data for one month enrollees. We found
that the most common HCCs for one
month adult enrollees are also common
HCCs in the enrollee-level EDGE data.
However, our main concern with the
suggestion to tie enrollment duration
factors to certain HCCs or specific to
maternity HCCs is that many new
factors would have to be added to the
models to create HCC-specific
enrollment duration factors, adding an
additional level of complexity and
potential instability to the models.
We also note that as part of our
analysis of potential changes to the
adult model enrollment duration
factors, we considered creating factors
for adult enrollees with HCCs for up to
9 months and tested this alternative
model specification using 2018 enrolleelevel EDGE data. We found that the
estimated coefficients for the factors
between 6 and 9 months were small and
in some cases negative. We also did not
find meaningful improvement in the
predictive ratios when using enrollment
duration factors up to 9 months. For
these reasons, we proposed using
enrollment duration factors of up to 6
months for enrollees with HCCs.
However, as detailed above, we are not
finalizing the proposed changes to the
enrollment duration factors or the
accompanying removal of the current
enrollment duration factors in the adult
models at this time.
Comment: Some commenters wanted
enrollment duration factors by market
type or wanted HHS to consider
whether the individual and small group
markets should have market specific
risk adjustment model coefficients.
Some of these commenters were
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concerned that the proposed enrollment
duration factors were created to address
a partial year enrollment issue that
primarily exists in the individual
market and had concerns about making
changes to the enrollment duration
factors in the small group market which
has non-calendar coverage that can
somewhat artificially create partial year
enrollees. Other commenters had
concerns about removing the previous
enrollment duration factors for the small
group market, believing that the
previous enrollment duration factors
mitigate the disconnect between the
calendar year for EDGE claims and the
renewal year for the small group market,
which is often not on the calendar year.
One commenter was concerned that
eliminating the existing enrollment
duration factors would be destabilizing
for any market where an issuer may
obtain a higher percentage of new small
employer business relative to other
competitors. Other commenters were
concerned about issuers’ ability to
capture HCCs in the small group market,
especially when plan renewal can occur
in December, limiting the amount of
time that issuers would have to collect
diagnosis codes for the applicable
benefit year of risk adjustment even
though the issuer would have claims for
December. Another commenter was
concerned about small issuers and
Medicaid issuers being able to
effectively capture HCCs from churning
enrollees.
Response: As discussed in the
proposed rule, we considered adoption
of enrollment duration factors by
market, but we did not find a
meaningful distinction in relative costs
between markets on average once we
implemented the proposed enrollment
duration factors of up to 6 months for
adult enrollees with payment HCCs.
Therefore, we did not propose and are
not finalizing market-specific
enrollment duration factors.
Furthermore, we are not aware of any
evidence that would indicate that
various types of issuers (for example,
issuers of various sizes, Medicaid
issuers, private market issuers) are
unable to capture HCCs for partial year
enrollees.
After consideration of the comments
received, we are not finalizing the
proposed revisions to the enrollment
duration factors at this time. For the
2022 benefit year, we will continue to
apply the current 11 enrollment
duration factors of up to 11 months,
with trending adjustments made to
reflect the 2022 benefit year, for all
enrollees in the adult models.
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d. Pricing Adjustment for the Hepatitis
C Drugs
For the 2022 benefit year models, we
proposed to continue applying the
market pricing adjustment to the plan
liability associated with Hepatitis C
drugs that has been in place beginning
with the 2020 benefit year final risk
adjustment models.62 We are finalizing
the pricing adjustment for Hepatitis C
drugs as proposed.
As explained in the proposed rule, we
continue to believe this market pricing
adjustment is necessary and appropriate
to account for the significant pricing
changes associated with the
introduction of new and generic
Hepatitis C drugs between the data years
used for recalibrating the models and
the applicable recalibration benefit year.
We also continue to be cognizant that
issuers might seek to influence provider
prescribing patterns if a drug claim can
trigger a large increase in an enrollee’s
risk score that is higher than the actual
plan liability of the drug claim, and
therefore, make the risk adjustment
transfer results more favorable for the
issuer. We previously stated that we
intended to reassess this pricing
adjustment with future benefit years’
enrollee-level EDGE data.63 However, in
alignment with the proposal to use the
same 3 years of enrollee-level EDGE
data for the 2022 benefit year model
recalibration as those used for the 2021
benefit year, we proposed to continue
making a market pricing adjustment to
the plan liability associated with
Hepatitis C drugs to reflect future
market pricing prior to solving for
coefficients for the 2022 benefit year
models.64 We noted that we intend to
reassess this pricing adjustment in
future recalibrations with additional
years of enrollee-level EDGE data. We
sought comment on this proposal.
We received public comments on the
proposed continuation of the market
pricing adjustment for Hepatitis C drugs
for the 2022 benefit year. The following
is a summary of the comments we
received and our responses.
Comment: Most commenters
supported the continuation of the
pricing adjustment for Hepatitis C drugs
stating that it would more accurately
reflect the average cost of treatment in
the risk adjustment models, ensure
enrollees can continue to receive
incremental credit for having both the
Hepatitis C RXC and HCC, and account
62 84
FR 17463 through 17466.
FR 29185.
64 The Hepatitis C drugs market pricing
adjustment to plan liability is applied for all
enrollees taking Hepatitis C drugs in the data used
for recalibration.
63 85
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for the introduction of new Hepatitis C
drugs. One commenter recommended
HHS clarify the data source and
approach used to constrain the Hepatitis
C RXC coefficient, and cautioned
against reducing the coefficient more
than the expected decrease in cost. One
commenter similarly recommended
HHS reassess this adjustment on an
ongoing basis to ensure the coefficient is
not constrained beyond the expected
decrease in the cost of the drugs.
Response: In response to comments,
we note that we continue to assess
trends in the enrollee-level EDGE data
as well as monitor for developments
that would impact expectations for
pricing for Hepatitis C drugs to ensure
that the adjustments are reasonable and
are not reduced below the expected
decrease in cost. We reassessed the
pricing adjustment for Hepatitis C drugs
for the 2022 benefit year model
recalibration using the most recent year
of data (2019 enrollee-level EDGE data)
and found the costs for Hepatitis C
drugs continued to show a significant
decline when compared to the costs in
the 2018 enrollee-level EDGE data.
Therefore, we continue to believe that it
is necessary and appropriate to use a
pricing adjustment for Hepatitis C drugs
for the 2022 benefit year since the data
used to recalibrate the risk adjustment
models, which does not include the
2019 enrollee-level EDGE data, does not
reflect the average cost of Hepatitis C
treatments applicable to the 2022
benefit year when newer and cheaper
Hepatitis C drugs will be available.
Because the cost of these drugs were
reflected in the 2016, 2017 and 2018
enrollee-level EDGE datasets without a
pricing adjustment to plan liability, the
Hepatitis C RXC in the 2022 benefit year
based on this data could
overcompensate issuers and incentivize
them to encourage overprescribing
practices to favorably impact their risk
adjustment transfers (increase their
payment or decrease their charge). The
pricing adjustment finalized here helps
avoid perverse incentives, and leads to
Hepatitis C RXC coefficients that better
reflect anticipated actual 2022 benefit
year plan liability associated with
Hepatitis C drugs. We intend to
continue to reassess this pricing
adjustment in future benefit years’
model recalibrations using additional
years of available enrollee-level EDGE
data.
Comment: One commenter agreed
with HHS’s stated concern that issuers
might seek to influence provider
prescribing patterns if a drug claim can
trigger a large increase in an enrollee’s
risk score that is higher than the actual
plan liability of the drug claim. In
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contrast, another commenter questioned
the view that issuers are gaming risk
adjustment by encouraging providers to
prescribe particular treatments when
they are unnecessary.
Response: Due to the changing cost of
these drugs reflected in the data used for
recalibration purposes (that is, the 2016,
2017 and 2018 enrollee-level EDGE
data), without a pricing adjustment to
plan liability, issuers could be
overcompensated for the Hepatitis C
RXC in the 2022 benefit year and could
be incentivized to ‘‘game’’ risk
adjustment or encourage
overprescribing practices. More
specifically, the absence of a pricing
adjustment could incentivize some
issuers to influence provider prescribing
patterns because the drug claim could
trigger a large increase in an enrollee’s
risk score that is higher than the actual
plan liability of the drug claim. This
would lead to the calculation of inflated
risk scores and would make the risk
adjustment transfer results more
favorable for the issuer (that is, increase
a payment or decrease a charge). To
avoid perverse incentives to influence
overprescribing behavior, we are
finalizing a market pricing adjustment
for Hepatitis C drugs. It is an
appropriate and necessary adjustment in
light of the cost of the drugs reflected in
the 2016 through 2018 enrollee-level
EDGE data and the introduction of
newer and lower cost Hepatitis C drugs
that will be available in the 2022 benefit
year. We intend to continue to reassess
whether this pricing adjustment is
needed for future benefit years.
Comment: One commenter expressed
concern about issuers potentially
gaming risk adjustment based on when
the Hepatitis C drug prescription is
filled. The commenter noted that
because HHS-operated risk adjustment
operates on a calendar year basis an
issuer could receive credit for a
prescription filled in December of Year
1 and receive credit for the same
individual for a prescription filled in
January of Year 2, potentially doubledipping in risk adjustment. The
commenter recommended we modify
the EDGE server requirements to
mandate the tracking of the days supply
of each prescription fill and scale the
coefficient by the percentage of a
recommended therapeutic regime
supplied over the course of the year to
reduce the possibility of gaming.
Response: While some stakeholders
have expressed concern about timing for
filling Hepatitis C prescriptions, we
have previously analyzed the potential
for issuers to game HHS-operated risk
adjustment by encouraging consumers
to refill prescriptions for the treatment
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for Hepatitis C in December and January
and have not found clear evidence that
this type of behavior is occurring.
However, as part of our consideration of
the comments received on this proposal,
we revisited this analysis using more
recent data and found similar results.
Therefore, based on our analysis and
continued study of this issue, we do not
believe modifications to HHS-operated
risk adjustment program or EDGE server
requirements are needed at this time.
However, we will continue to monitor
usage trends to assess whether
modifications to the Hepatitis C pricing
adjustment or the adoption of other
safeguards to prevent potential doubledipping are warranted in the future. We
further note that the proposed
suggestions by the commenter—to
modify EDGE server requirements or
scale the coefficient—would introduce
burden and complexity to the HHSoperated risk adjustment program. If we
determine pursuit of these types of
measures is warranted for future benefit
years, we would need to weigh these
disadvantages against any potential
benefits.
Comment: Some commenters asked
HHS to monitor the market and
introduction of new expensive therapies
and treatments, such as gene therapy
drugs, and incorporate them into the
risk adjustment model factors due to the
anticipated high costs of these drugs
and associated services. The comments
noted that the costs of very new, high
cost treatments will not be reflected in
prior year enrollee-level EDGE data. One
commenter noted that that while the
high-cost risk pool, which compensates
plans for enrollees with claims over $1
million, is helpful, there may be a need
for something more specific in the risk
adjustment model to account for these
costs.
Response: We did not propose to
update the risk adjustment model
factors to reflect the costs of gene
therapy drugs in the proposed rule and
are not finalizing such updates in this
rule. We recognize that the data used to
recalibrate the risk adjustment models
are lagged by several benefit years and
cannot account for the costs of new,
expensive gene therapy drugs that are
expected to be available by the 2022
benefit year. Thus, we considered
whether to include any gene therapy
drugs in the risk adjustment models for
the 2022 benefit year as a separate RXC
or an additive HCC. In considering these
options, our primary concern was that
we do not have adequate data on these
drugs to create a separate RXC or an
additive HCC for the 2022 benefit year
and we are concerned with the ability
E:\FR\FM\05MYR2.SGM
05MYR2
24164
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
to obtain data of an adequate population
size given the limited use of these drugs.
We note that if an enrollee in an
issuer’s risk adjustment covered plan
has claims for gene therapy or other
expensive treatments, that enrollee
would be eligible for the high-cost risk
pool payments if claims for that enrollee
are over $1 million. We intend to assess
the use of gene therapy drugs as
additional data become available and
consider whether model updates are
warranted to address their anticipated
costs in the future.
Comment: One commenter wanted to
ensure the required ancillary services
associated with pre-exposure
prophylaxis (PrEP) use were being
incorporated into risk adjustment.
Another commenter expressed concern
that some prescription drug codes
(Descovy®) that are used for PrEP would
map to an RXC in the risk adjustment
models while others prescription drug
codes used for PrEP would not.
Response: In the 2021 Payment
Notice, we incorporated PrEP as a
preventive service in the simulation of
plan liability in the risk adjustment
adult and child models with zero cost
sharing after careful analysis of
preventive drugs that are recommended
at grade A or B by the United States
Preventive Services Task Force
(USPSTF). We are again incorporating
the costs of PrEP in this same manner
in the 2022 risk adjustment models to
give issuers credit at the preventive
services level for the costs of these
drugs. We also considered treating
ancillary services for PrEP as preventive
services in risk adjustment model
recalibration. However, we found that
many of the recommended PrEP
VerDate Sep<11>2014
22:49 May 04, 2021
Jkt 253001
ancillary services (such as, HIV
screenings) already qualify as
preventive services and as such are
already calibrated at 100 percent plan
liability; therefore, no updates were
made to capture these services in the
simulation of plan liability in the adult
and child models. However, we will
continue to consider whether additional
PrEP ancillary services should be
treated as preventive services for risk
adjustment model recalibration for
future benefit years.
We further note that we also
continuously assess the availability of
drugs in the market and the associated
mapping of those drugs to RXCs in the
adult risk adjustment models. As a
result of this on-going assessment, we
make quarterly updates to the RXC
Crosswalk to ensure drugs are being
mapped to RXCs where appropriate,
including adding and removing new
and old drugs. In response to the
comments regarding the potential
different treatment of PrEP drugs in risk
adjustment, we note that in January
2021, we announced that consistent
with our treatment of other PrEP drugs,
Descovy® would be removed from RXC
1 in the final Benefit Year (BY) 2020 Do
it Yourself (DIY) update, released in
April 2021, since it can be used as a
preventive drug.65 Enrollees that use
Descovy® (or other PrEP drugs) in
combination with other HIV treatment
drugs will still receive credit for RXC 1.
65 HHS-Developed Risk Adjustment Model
Algorithm ‘‘Do It Yourself (DIY)’’ Software
Instructions for the 2020 Benefit Year (April 15,
2021 Update), available at https://www.cms.gov/
files/document/cy2020-diyinstructions04132021.pdf.
PO 00000
Frm 00026
Fmt 4701
Sfmt 4700
We will continue these types of reviews
in the future.
After consideration of the comments
we received on this proposal, we are
finalizing the proposal to continue the
market pricing adjustment for Hepatitis
C drugs.
e. List of Factors To Be Employed in the
Risk Adjustment Models (§ 153.320)
The final 2022 benefit year risk
adjustment model factors resulting from
the equally weighted (averaged) blended
factors from separately solved models
using the 2016, 2017, and 2018 enrolleelevel EDGE data, consistent with the
policies finalized in this rulemaking, are
shown in Tables 1 through 6.66 The
adult, child, and infant models have
been truncated to account for the highcost risk pool payment parameters by
removing 60 percent of costs above the
$1 million threshold.67 Table 1 contains
factors for each adult model, including
the age-sex, HCCs, RXCs, RXC–HCC
interactions, severity interactions, and
enrollment duration coefficients. Table
2 contains the HCCs in the severity
illness indicator variable. Table 3
contains the factors for each child
model. Table 4 contains the factors for
each infant model. Tables 5 and 6
contain the HCCs included in the infant
models’ maturity and severity
categories, respectively.
BILLING CODE 4150–28–P
66 As detailed below, the one exception relates to
RXC 09, which involved the use of only 2016 and
2017 enrollee-level data to develop the applicable
2022 benefit year coefficients and interaction terms.
67 As detailed below, we did not propose and are
finalizing any changes to the high-cost risk pool
parameters for the 2022 benefit year. Therefore, we
are maintaining the $1 million threshold and 60
percent coinsurance rate.
E:\FR\FM\05MYR2.SGM
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Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
24165
TABLE 1: Adult Risk Adjustment Model Factors for 2022 Benefit Year
Age 21-24, Male
Age 25-29, Male
Age 30-34, Male
Age 35-39, Male
Age 40-44, Male
Age 45-49, Male
Age 50-54, Male
Age 55-59. Male
Age 60-64, Male
Age 21-24, Female
Age 25-29, Female
Age 30-34, Female
Age 35-39, Female
Age 40-44, Female
Age 45-49, Female
Age 50-54, Female
Age 55-59, Female
A e 60-64, Female
HCC00l
HCC002
HCC003
HCC004
HCC006
HCC008
HCC009
HCC0l0
HCC0ll
HCC012
HCC013
HCC018
HCC019
HCC020
HCC021
HCC022
HCC023
HCC026
HCC027
HCC029
HCC030
VerDate Sep<11>2014
HIV/AIDS
Septicemia, Sepsis, Systemic
Inflammatory Response
Syndrome/Shock
Central Nervous System Infections,
Except Viral Meningitis
Viral or Unspecified Meningitis
Opportunistic Infections
Metastatic Cancer
Lung, Brain, and Other Severe
Cancers, Including Pediatric Acute
Lymphoid Leukemia
Non-Hodgkin Lymphomas and Other
Cancers and Tumors
Colorectal, Breast (Age< 50), Kidney,
and Other Cancers
Breast (Age 50+) and Prostate Cancer,
Benign/Uncertain Brain Tumors, and
Other Cancers and Tumors
Thyroid Cancer, Melanoma,
N eurofibromatosis, and Other Cancers
and Tumors
Pancreas Transplant Status
Diabetes with Acute Complications
Diabetes with Chronic Complications
Diabetes without Complication
Type 1 Diabetes Mellitus, add-on to
Diabetes HCCs 19-21
Protein-Calorie Malnutrition
Mucopolysaccharidosis
Lipidoses and Glycogenosis
Amyloidosis, Porphyria, and Other
Metabolic Disorders
Adrenal, Pituitary, and Other
Significant Endocrine Disorders
22:49 May 04, 2021
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0.128
0.128
0.159
0.187
0.222
0.251
0.333
0.372
0.418
0.217
0.236
0.306
0.372
0.425
0.433
0.470
0.445
0.446
0.086
0.086
0.109
0.129
0.157
0.181
0.253
0.283
0.320
0.151
0.165
0.226
0.283
0.326
0.329
0.366
0.339
0.337
0.049
0.049
0.065
0.077
0.099
0.117
0.181
0.204
0.232
0.093
0.103
0.155
0.204
0.238
0.234
0.269
0.241
0.235
1.520
1.379
7.045
w
Catastrophic
0.020
0.019
0.029
0.034
0.051
0.062
0.119
0.135
0.155
0.047
0.053
0.097
0.139
0.163
0.153
0.185
0.156
0.147
0.019
0.017
0.027
0.033
0.049
0.060
0.117
0.132
0.152
0.045
0.051
0.095
0.136
0.160
0.149
0.181
0.152
0.144
1.282
1.212
1.210
6.891
6.847
6.864
6.867
5.927
5.072
6.319
22.979
5.857
4.918
6.275
22.560
5.833
4.820
6.237
22.379
5.835
4.718
6.187
22.335
5.835
4.716
6.185
22.336
13.282
12.979
12.825
12.743
12.742
5.575
5.376
5.248
5.144
5.141
3.845
3.648
3.517
3.409
3.405
2.604
2.457
2.350
2.254
2.251
1.132
2.006
0.427
0.427
0.427
1.017
1.955
0.359
0.359
0.359
0.903
1.933
0.299
0.299
0.299
0.779
1.932
0.243
0.243
0.243
0.775
1.933
0.240
0.240
0.240
0.384
10.719
29.195
29.195
0.350
10.711
29.017
29.017
0.319
10.746
28.940
28.940
0.257
10.828
28.930
28.930
0.255
10.831
28.931
28.931
7.748
7.653
7.595
7.554
7.553
1.789
1.713
1.648
1.584
1.582
Fmt 4701
Sfmt 4725
E:\FR\FM\05MYR2.SGM
05MYR2
ER05MY21.005</GPH>
-
Factor
24166
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
Factor
HCC034
HCC035 1*
HCC035 2
HCC036
HCC037 1
HCC037 2
HCC041
HCC042
HCC045
HCC046
HCC047
HCC048
HCC054
HCC055
HCC056
HCC057
HCC061
HCC062
HCC063
HCC066
HCC067
HCC068
HCC069
HCC070
HCC071
HCC073
HCC074
HCC075
HCC081
HCC082
HCC083
HCC084
HCC087 1
VerDate Sep<11>2014
Liver Transplant Status/Complications
Acute Liver Failure/Disease,
Including Neonatal Hepatitis
Chronic Liver Failure/End-Stage
Liver Disorders
Cirrhosis of Liver
Chronic Viral Hepatitis C
Chronic Hepatitis, Except Chronic
Viral Hepatitis C
Intestine Transplant
Status/Complications
Peritonitis/Gastrointestinal
Perforation/Necrotizing Enterocolitis
Intestinal Obstruction
Chronic Pancreatitis
Acute Pancreatitis
Inflammatory Bowel Disease
Necrotizing Fasciitis
Bone/Joint/Muscle
lnfections/Necrosis
Rheumatoid Arthritis and Specified
Autoimmune Disorders
Systemic Lupus Erythematosus and
Other Autoimmune Disorders
Osteogenesis Imperfecta and Other
Osteodvstrophies
Congenital/Developmental Skeletal
and Connective Tissue Disorders
Cleft Lip/Cleft Palate
Hemophilia
Myelodysplastic Syndromes and
Myelofibrosis
Aplastic Anemia
Acquired Hemolytic Anemia,
Including Hemolytic Disease of
Newborn
Sickle Cell Anemia (Hb-SS)
Beta Thalassemia Maior
Combined and Other Severe
Immunodeficiencies
Disorders of the Immune Mechanism
Coagulation Defects and Other
Specified Hematological Disorders
Drug Use with Psychotic
Complications
Drug Use Disorder, Moderate/Severe,
or Drug Use with Non-Psychotic
Complications
Alcohol Use with Psychotic
Complications
Alcohol Use Disorder,
Moderate/Severe, or Alcohol Use with
Specified Non-Psychotic
Complications
Schizophrenia
22:49 May 04, 2021
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-
Catastrophic
9.633
9.608
9.605
9.604
9.480
9.468
9.490
9.489
3.107
1.038
0.871
2.965
0.951
0.785
2.901
0.717
2.873
0.819
0.653
2.872
0.816
0.651
0.871
0.785
0.717
0.653
0.651
33.660
33.619
33.587
33.545
33.545
8.835
5.241
3.546
3.034
0.532
8.653
5.066
3.407
2.855
0.444
8.577
4.982
3.355
2.755
0.356
9.981
9.883
9.868
8.561
4.928
3.341
2.665
0.249
9.923
8.562
4.927
3.342
2.664
0.245
9.925
5.231
5.080
5.019
5.016
5.016
1.372
1.265
1.169
1.076
1.072
0.658
0.562
0.457
0.334
0.330
2.433
2.281
2.177
2.083
2.080
2.433
1.904
70.009
2.281
1.780
69.723
2.177
1.690
69.594
2.083
1.604
69.568
2.080
1.601
69.568
14.086
14.086
13.994
13.994
13.949
13.949
13.929
13.929
13.928
13.928
14.086
2.795
2.795
13.994
2.679
2.679
13.949
2.593
2.593
13.929
2.514
2.514
13.928
2.511
2.511
4.770
4.770
4.683
4.683
4.639
4.639
4.615
4.615
4.614
4.614
2.606
2.537
2.486
2.442
2.441
2.622
2.446
2.303
2.144
2.138
2.622
2.446
2.303
2.144
2.138
1.224
1.095
0.995
0.891
0.887
1.224
2.622
1.095
2.445
0.995
2.323
0.891
2.205
0.887
2.202
9.695
9.532
Fmt 4701
Sfmt 4725
0.885
E:\FR\FM\05MYR2.SGM
05MYR2
ER05MY21.006</GPH>
HCC or
RXC No.
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
HCC087 2
HCC088
HCC090
HCC094
HCC096
HCC097
HCC102
HCC103
HCC106
HCC107
HCC108
HCC109
HCCll0
HCClll
HCC112
HCC113
HCC114
HCCl 15
HCC117
HCC118
HCC119
HCC120
HCC121
HCC122
HCC123
HCC125
HCC126
HCC127
HCC128
HCC129
HCC130
HCC131
HCC132
VerDate Sep<11>2014
Factor
Catastrophic
Delusional and Other Specified
Psychotic Disorders, Unspecified
Psvchosis
Major Depressive Disorder, Severe,
and Bipolar Disorders
Personality Disorders
Anorexia/Bulimia Nervosa
Prader-Willi, Patau, Edwards, and
Autosomal Deletion Syndromes
Down Syndrome, Fragile X, Other
Chromosomal Anomalies, and
Congenital Malformation Syndromes
Autistic Disorder
Pervasive Developmental Disorders,
Except Autistic Disorder
Traumatic Complete Lesion Cervical
Spinal Cord
Quadriplegia
Traumatic Complete Lesion Dorsal
Spinal Cord
Paraplegia
Spinal Cord Disorders/Injuries
Amyotrophic Lateral Sclerosis and
Other Anterior Horn Cell Disease
Quadriplegic Cerebral Palsy
Cerebral Palsy, Except Quadriplegic
Spina Bifida and Other
Brain/Spinal/Nervous System
Congenital Anomalies
Myasthenia Gravis/Myoneural
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy
Muscular Dystrophy
Multiple Sclerosis
Parkinson's, Huntington's, and
Spinocerebellar Disease, and Other
N eurodegenerative Disorders
Seizure Disorders and Convulsions
Hydrocephalus
Coma, Brain Compression/Anoxic
Damage
Narcolepsv and Cataplexv
Respirator Dependence/Tracheostomy
Status
Respiratory Arrest
Cardio-Respiratory Failure and Shock,
Including Respiratory Distress
Svndromes
Heart Assistive Device/Artificial
Heart
Heart Transplant Status/Complications
Heart Failure
Acute Mvocardial Infarction
Unstable Angina and Other Acute
Ischemic Heart Disease
22:49 May 04, 2021
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2.622
2.445
2.323
2.205
2.202
1.379
1.072
2.437
1.249
0.962
2.303
1.132
0.846
2.202
1.003
0.717
2.109
0.999
0.712
2.106
6.816
6.773
6.748
6.715
6.715
1.448
1.236
1.371
1.128
1.307
1.016
1.243
0.899
1.241
0.895
1.072
0.962
0.846
0.717
0.712
11.562
11.562
11.447
11.447
11.385
11.385
11.344
11.344
11.343
11.343
7.825
7.825
5.342
7.689
7.689
5.158
7.610
7.610
5.057
7.549
7.549
4.987
7.547
7.547
4.984
3.336
1.238
0.790
3.164
1.070
0.708
3.042
0.963
0.633
2.918
0.872
0.547
2.913
0.870
0.544
1.374
1.273
1.197
1.120
1.117
5.075
1.763
2.962
4.987
1.654
2.806
4.942
1.559
2.695
4.916
1.447
2.592
4.916
1.442
2.589
1.763
1.068
8.307
1.654
0.955
8.209
1.559
0.861
8.151
1.447
0.763
8.116
1.442
0.759
8.116
7.874
5.839
7.753
5.684
7.697
5.563
7.679
5.448
7.679
5.444
21.892
6.658
21.866
6.534
21.900
6.520
21.994
6.581
21.997
6.585
6.658
6.534
6.520
6.581
6.585
26.896
26.896
2.449
6.445
26.755
26.755
2.372
6.227
26.704
26.704
2.329
6.150
26.706
26.706
2.303
6.160
26.708
26.708
2.303
6.163
4.805
4.590
4.495
4.441
4.441
Fmt 4701
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05MYR2
ER05MY21.007</GPH>
HCC or
RXC No.
24167
24168
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
HCC135
HCC137
HCC138
HCC139
HCC142
HCC145
HCC146
HCC149
HCC150
HCC151
HCC153
HCC154
HCC156
HCC158
HCC159
HCC160
HCC161 1
HCC161 2
HCC162
HCC163
HCC174
HCC183
HCC184
HCC187
HCC188
HCC203
HCC204
HCC205
HCC207
HCC208
HCC209
HCC210
HCC211
VerDate Sep<11>2014
Factor
Catastrophic
Heart Infection/Inflammation, Except
Rheumatic
Hypoplastic Left Heart Syndrome and
Other Severe Congenital Heart
Disorders
Major Congenital Heart/Circulatory
Disorders
Atrial and Ventricular Septa! Defects,
Patent Ductus Arteriosus, and Other
Congenital Heart/Circulatory
Disorders
Specified Heart Arrhvthmias
Intracranial Hemorrhage
Ischemic or Unspecified Stroke
Cerebral Aneurysm and Arteriovenous
Malformation
Hemiplegia/Hemiparesis
Monoplegia, Other Paralytic
Syndromes
Atherosclerosis of the Extremities
with Ulceration or Gangrene
Vascular Disease with Complications
Pulmonary Embolism and Deep Vein
Thrombosis
Lung Transplant Status/Complications
Cystic Fibrosis
Chronic Obstructive Pulmonary
Disease, Including Bronchiectasis
Severe Asthma
Asthma, Except Severe
Fibrosis of Lung and Other Lung
Disorders
Aspiration and Specified Bacterial
Pneumonias and Other Severe Lung
Infections
Exudative Macular Degeneration
Kidney Transplant
Status/Complications
End Stage Renal Disease
Chronic Kidney Disease, Stage 5
Chronic Kidney Disease, Severe
(Stage 4)
Ectopic and Molar Pre1mancy
Miscarriage with Complications
Miscarriage with No or Minor
Complications
Pregnancy with Delivery with Major
Complications
Pregnancy with Delivery with
Complications
Pregnancy with Delivery with No or
Minor Complications
(Ongoing) Pregnancy without
Delivery with Maior Complications
(Ongoing) Pregnancy without
Delivery with Complications
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5.740
5.651
5.598
5.557
5.557
2.586
2.489
2.409
2.341
2.338
2.586
2.489
2.409
2.341
2.338
2.586
2.265
6.694
1.586
2.489
2.157
6.498
1.484
2.409
2.070
6.395
1.427
2.341
1.983
6.327
1.373
2.338
1.983
6.327
1.372
2.546
4.176
2.415
4.091
2.323
4.072
2.233
4.095
2.230
4.097
2.985
2.887
2.823
2.764
2.762
8.710
6.654
8.634
6.542
8.643
6.492
8.727
6.474
8.731
6.474
3.510
22.123
4.871
3.396
22.027
4.653
3.316
22.002
4.513
3.234
22.028
4.410
3.232
22.028
4.407
0.771
0.771
0.771
0.673
0.673
0.673
0.576
0.576
0.576
0.472
0.472
0.472
0.468
0.468
0.468
1.934
1.853
1.793
1.729
1.727
6.528
1.570
6.521
1.440
6.538
1.327
6.580
1.197
6.581
1.193
6.027
23.533
0.953
5.868
23.284
0.912
5.765
23.237
0.900
5.671
23.356
0.910
5.673
23.397
0.911
0.953
2.088
0.848
0.912
1.879
0.732
0.900
1.688
0.579
0.910
1.430
0.375
0.911
1.421
0.365
0.848
0.732
0.579
0.375
0.365
4.049
3.741
3.498
3.132
3.123
4.049
3.741
3.498
3.132
3.123
2.881
2.650
2.411
1.973
1.956
1.240
1.074
0.871
0.634
0.623
0.834
0.699
0.523
0.348
0.340
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05MYR2
ER05MY21.008</GPH>
HCC or
RXC No.
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
HCC212
HCC217
HCC218
HCC219
HCC223
HCC226
HCC228
HCC234
HCC251
HCC253
HCC254
SEVEREx
HCC006
SEVEREx
HCC008
SEVEREx
HCC009
SEVEREx
HCC0l0
SEVEREx
HCC115
SEVEREx
HCC135
SEVEREx
HCC145
SEVEREx
G06A
Factor
Catastrophic
(Ongoing) Pregnancy without
Delivery with No or Minor
Com lications
Chronic Ulcer of Skin, Except
Pressure
Extensive Third De ree Bums
Ma·or Skin Bum or Condition
Severe Head 1n·
Hi and Pelvic Fractures
Vertebral Fractures without Spinal
Cord In.
Traumatic Amputations and
Am utation Com lications
Stem Cell, Including Bone Marrow,
Trans lant Status/Com lications
Artificial Openings for Feeding or
Elimination
Amputation Status, Upper Limb or
Lower Limb
Severe illness x Opportunistic
Infections
Severe illness x Metastatic Cancer
Severe illness x Lung, Brain, and
Other Severe Cancers, Including
Pediatric Acute L m hoid Leukemia
Severe illness x Non-Hodgkin
Lymphomas and Other Cancers and
Tumors
Severe illness x Myasthenia
Gravis/Myoneural Disorders and
Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuro ath
Severe illness x Heart
Infection/Inflammation, Except
Rheumatic
Severe illness x Intracranial
Hemorrha e
Severe illness x HCC group G06A
(HCC 67 Myelodysplastic Syndromes
and Myelofibrosis or HCC 68 Aplastic
Anemia or HCC 69 Acquired
Hemolytic Anemia, Including
Hemol ic Disease of Newborn
Severe illness x HCC group GOS
(HCC 73 Combined and Other Severe
Immunodeficiencies or HCC 74
1 month of enrollment
2 months of enrollment
3 months of enrollment
4 months of enrollment
5 months of enrollment
6 months of enrollment
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0.365
0.274
0.172
0.103
0.100
1.879
18.976
2.884
15.439
8.537
1.795
18.728
2.767
15.331
8.317
1.748
18.594
2.683
15.260
8.230
1.715
18.523
2.612
15.212
8.224
1.715
18.521
2.609
15.210
8.225
4.959
4.798
4.692
4.599
4.596
5.447
5.311
5.259
5.255
5.256
25.813
25.812
25.822
25.845
25.846
7.305
7.240
7.229
7.258
7.259
1.987
1.884
1.830
1.795
1.795
6.236
6.388
6.514
6.663
6.667
6.236
6.388
6.514
6.663
6.667
6.236
6.388
6.514
6.663
6.667
6.236
6.388
6.514
6.663
6.667
6.236
6.388
6.514
6.663
6.667
6.236
6.388
6.514
6.663
6.667
6.236
6.388
6.514
6.663
6.667
6.236
6.388
6.514
6.663
6.667
0.275
0.260
0.277
0.217
0.203
0.170
0.226
0.210
0.224
0.171
0.162
0.134
0.207
0.190
0.199
0.148
0.139
0.113
0.188
0.175
0.184
0.136
0.127
0.102
0.188
0.175
0.183
0.136
0.127
0.101
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05MYR2
ER05MY21.009</GPH>
HCC or
RXC No.
24169
24170
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
--
Factor
7 months of enrollment
8 months of enrollment
9 months of enrollment
10 months of enrollment
11 months of enrollment
RXC02
RXC03
RXC04
RXC05
RXC06
RXC07
RXC08
RXC09
RXC 10
RXC 01 x
HCC00l
RXC 02x
HCC037_1,
036, 035_2,
035 1,34
RXC 03 x
HCC142
RXC 04x
HCC184,
183, 187,
188
RXC 05x
HCC048,
041
RXC 06x
HCC018,
019, 020,
021
RXC 07x
HCC018,
019, 020,
021
RXC 08x
HCC118
RXC 09x
HCC056 or
057 and 048
or 041
RXC 09x
HCC056
RXC 09x
HCC057
RXC 09x
HCC048,
041
VerDate Sep<11>2014
Catastrophic
0.128
0.088
0.049
0.004
0.001
0.101
0.069
0.036
0.001
0.000
0.084
0.055
0.027
0.000
0.000
0.074
0.048
0.021
0.000
0.000
0.074
0.048
0.021
0.000
0.000
6.743
0.113
2.045
1.805
1.626
6.306
0.103
2.052
1.670
1.437
6.111
0.100
2.043
1.528
1.238
6.038
0.067
1.988
1.322
1.043
6.042
0.049
1.911
1.314
1.035
0.785
23.781
0.676
22.923
0.555
22.485
0.397
22.214
0.391
22.215
17.156
17.920
16.639
17.605
16.445
17.496
16.445
17.496
16.448
17.499
2.213
2.397
2.671
3.133
3.148
-0.658
-0.550
-0.444
-0.312
-0.308
0.000
0.000
0.000
0.000
0.000
Additional effect for enrollees with
RXC 04 and (HCC 184 or 183 or 187
or 188
0.000
0.000
0.000
0.000
0.000
Additional effect for enrollees with
RXC 05 and HCC 048 or 041
-0.374
-0.313
-0.248
-0.170
-0.167
Additional effect for enrollees with
RXC 06 and (HCC 018 or 019 or 020
or 021
0.214
0.281
0.371
0.401
0.404
-0.427
-0.359
-0.299
-0.243
-0.240
-0.256
0.207
0.550
0.938
0.944
0.859
0.989
1.098
1.229
1.234
-1.372
-1.265
-1.169
-1.076
-1.072
-0.658
-0.562
-0.457
-0.334
-0.330
-0.250
-0.202
-0.156
-0.098
-0.096
Anti-HIV A ents
Anti-Hepatitis C (HCV) Agents,
Direct Actin A ents
Antiarrh hmics
Phos hate Binders
Inflammato Bowel Disease A ents
Insulin
Anti-Diabetic Agents, Except Insulin
and Metformin On!
Multi le Sclerosis A ents
Immune Suppressants and
Tmmunomodulators **
C stic Fibrosis A ents
Additional effect for enrollees with
RXC 01 and HCC 001
Additional effect for enrollees with
RXC 02 and (HCC 037_ l or 036 or
035 2 or 035 1 or 034
Additional effect for enrollees with
RXC 03 and HCC 142
Additional effect for enrollees with
RXC 07 and (HCC 018 or 019 or 020
or 021
Additional effect for enrollees with
RXC 08 and HCC 118
Additional effect for enrollees with
RXC 09 and (HCC 048 or 041) and
HCC 056 or 057
Additional effect for enrollees with
RXC 09 and HCC 056
Additional effect for enrollees with
RXC 09 and HCC 057
Additional effect for enrollees with
RXC 09 and HCC 048 or 041
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05MYR2
ER05MY21.010</GPH>
HCC or
RXC No.
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
HCC or
-
Factor
RXC No.
I
I
24171
Catastrophic
RXC lOx
HCC159,
Additional effect for enrollees with
158
RXC 10 and (HCC 159 or 158)
47.572
47.627
47.694
47.819
47.822
* HCC numbers that appear with an underscore in this document will appear without the underscore in the DIY
software. For example, HCC 35_1 in this table will appear as HCC 351 in the DIY software.
** The coefficients for RXC 09 Immune Suppressants and Immunomodulators, the HCC factors relevant for RXC
09 (HCC041, HCC048, HCC056, HCC057), and the related RXC 09 interactions (RXC 09 x HCC056 or 057 and
048 or 041; RXC 09 x HCC056; RXC 09 x HCC057; RXC 09 x HCC048, 041) result from the equally weighted
(averaged) blended factors from separately solved models using only the 2016 and 2017 enrollee-level EDGE data
and are otherwise consistent with the policies finalized in this rulemaking. See the preamble discussion that follows
for more details.
HCC042
HCC120
HCC122
HCC125
HCC126
Seizure Disorders and Convulsions
Coma Brain Com ression/Anoxic Dama e
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05MYR2
ER05MY21.011</GPH>
ER05MY21.012</GPH>
* This table contains the same list ofHCCs that applied to the severity factors in the 2020 and 2021 benefit years.
See, for example, Table 2 in the 2020 Payment Notice, 84 FR 17454 at 17474. The table was inadvertently not
published in the fmal 2021 benefit year risk adjustment model coefficients document. As such, the same list of
HCCs that will apply to the severity factors for the 2022 benefit year applied in the 2020 and 2021 benefit years.
24172
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
TABLE 3: Child Risk Adjustment Model Factors for 2022 Benefit Year
I
1
Age 2-4, Male
Age 5-9, Male
Age 10-14, Male
Age 15-20, Male
Age 2-4, Female
Age 5-9, Female
Age 10-14, Female
A e 15-20, Female
0.230
0.170
0.203
0.243
0.177
0.122
0.191
0.265
0.162
0.112
0.143
0.179
0.118
0.070
0.134
0.187
0.112
0.071
0.099
0.126
0.079
0.037
0.092
0.122
0.073
0.045
0.072
0.087
0.051
0.016
0.068
0.073
0.072
0.044
0.071
0.086
0.050
0,015
0.067
0.071
HIV/AIDS
Septicemia, Sepsis, Systemic Inflammatory
Response Syndrome/Shock
Central Nervous System Infections, Except
Viral Meningitis
Viral or Unspecified Meningitis
Opportunistic Infections
Metastatic Cancer
Lung, Brain, and Other Severe Cancers,
Including Pediatric Acute Lymphoid
Leukemia
Non-Hodgkin Lymphomas and Other Cancers
and Tumors
Colorectal, Breast (Age < 50), Kidney, and
Other Cancers
Breast (Age 50+) and Prostate Cancer,
Benign/Uncertain Brain Tumors, and Other
Cancers and Tumors
Thyroid Cancer, Melanoma,
Neurofibromatosis, and Other Cancers and
Tumors
Pancreas Transplant Status
Diabetes with Acute Complications
Diabetes with Chronic Complications
Diabetes without Complication
Protein-Calorie Malnutrition
Mucopolysaccharidosis
Lipidoses and Glycogenosis
Congenital Metabolic Disorders, Not
Elsewhere Classified
Amyloidosis, Porphyria, and Other Metabolic
Disorders
Adrenal, Pituitary, and Other Significant
Endocrine Disorders
Liver Transplant Status/Complications
Acute Liver Failure/Disease, Including
Neonatal Hepatitis
Chronic Liver Failure/End-Stage Liver
Disorders
Cirrhosis of Liver
Chronic Viral Hepatitis C
Chronic Hepatitis, Except Chronic Viral
Hepatitis C
Intestine Transplant Status/Complications
5.846
5.446
5.222
5.058
5.054
13.076
12.930
12.869
12.835
12.836
8.033
2.626
14.919
35.966
7.897
2.467
14.904
35.740
7.841
2.337
14.887
35.635
7.828
2.169
14.864
35.613
7.829
2.164
14.863
35.613
9.220
8.990
8.841
8.727
8.723
7.178
6.963
6.810
6.674
6.670
4.342
4.197
4.079
3.955
3.950
4.342
4.197
4.079
3.955
3.950
0.924
8.841
2.612
2.612
2.612
13.566
39.839
39.839
0.809
8.686
2.363
2.363
2.363
13.485
39.617
39.617
0.700
8.586
2.134
2.134
2.134
13.464
39.513
39.513
0.579
8.485
1.805
1.805
1.805
13.485
39.472
39.472
0.575
8.483
1.795
1.795
1.795
13.486
39.471
39.471
5.822
5.719
5.642
5.576
5.573
5.822
5.719
5.642
5.576
5.573
6.837
8.841
6.621
8.686
6.500
8.586
6.442
8.485
6.440
8.483
17.574
17.546
17.579
17.664
17.668
13.757
4.121
2.621
13.669
4.067
2.479
13.631
4.026
2.402
13.602
3.972
2.390
13.601
3.974
2.391
0.132
16.842
0.091
16.819
0.054
16.822
0.016
16.830
0.015
16.829
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05MYR2
ER05MY21.013</GPH>
►¾Iii
Factor
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
Fi@M@F
Peritonitis/Gastrointestinal
Perforation/Necrotizing Enterocolitis
Intestinal Obstruction
Chronic Pancreatitis
Acute Pancreatitis
Inflammatory Bowel Disease
Necrotizing Fasciitis
Bone/Joint/Muscle Infections/Necrosis
Rheumatoid Arthritis and Specified
Autoimmune Disorders
Systemic Lupus Erythematosus and Other
Autoimmune Disorders
Osteogenesis lmperfecta and Other
Osteodystrophies
Congenital/Developmental Skeletal and
Connective Tissue Disorders
Cleft Lip/Cleft Palate
Hemophilia
Myelodysplastic Syndromes and
Myelofibrosis
Aplastic Anemia
Acquired Hemolytic Anemia, Including
Hemolytic Disease of Newborn
Sickle Cell Anemia (Hb-SS)
Beta Thalassemia Maior
Combined and Other Severe
Immunodeficiencies
Disorders of the Immune Mechanism
Coagulation Defects and Other Specified
Hematological Disorders
Drug Use with Psychotic Complications
Drug Use Disorder, Moderate/Severe, or Drug
Use with Non-Psychotic Complications
Alcohol Use with Psychotic Complications
Alcohol Use Disorder, Moderate/Severe, or
Alcohol Use with Specified Non-Psychotic
Complications
Schizophrenia
Delusional and Other Specified Psychotic
Disorders, Unspecified Psychosis
Major Depressive Disorder, Severe, and
Bipolar Disorders
Personality Disorders
Anorexia/Bulimia Nervosa
Prader-Willi, Patau, Edwards, and Autosomal
Deletion Syndromes
Down Syndrome, Fragile X, Other
Chromosomal Anomalies, and Congenital
Malformation Syndromes
Autistic Disorder
Pervasive Developmental Disorders, Except
Autistic Disorder
Traumatic Complete Lesion Cervical Spinal
Cord
Quadriplegia
Traumatic Complete Lesion Dorsal Spinal
Cord
VerDate Sep<11>2014
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F@iiHI
11.679
5.173
12.085
7.147
9.151
3.587
3.587
11.439
5.010
11.919
6.966
8.799
3.403
3.403
11.329
4.892
11.851
6.850
8.595
3.278
3.278
11.294
4.779
11.844
6.733
8.441
3.181
3.181
11.295
4.775
11.845
6.731
8.437
3.178
3.178
5.087
4.860
4.711
4.609
4.606
0.678
0.566
0.450
0.321
0.316
1.313
1.210
1.124
1.042
1.039
1.313
1.185
71.879
1.210
1.042
71.450
1.124
0.922
71.242
1.042
0.789
71.155
1.039
0.784
71.154
15.280
15.280
15.144
15.144
15.071
15.071
15.026
15.026
15.025
15.025
15.280
5.410
5.410
15.144
5.204
5.204
15.071
5.058
5.058
15.026
4.935
4.935
15.025
4.931
4.931
5.839
5.839
5.714
5.714
5.636
5.636
5.578
5.578
5.576
5.576
4.605
2.924
4.499
2.758
4.413
2.632
4.331
2.496
4.329
2.491
2.924
1.113
2.758
0.972
2.632
0.844
2.496
0.716
2.491
0.712
1.113
4.606
0.972
4.331
0.844
4.146
0.716
3.976
0.712
3.970
3.008
2.800
2.630
2.454
2.448
2.668
0.452
2.154
2.474
0.356
1.987
2.307
0.244
1.858
2.135
0.126
1.740
2.128
0.121
1.736
1.637
1.531
1.457
1.379
1.376
1.447
2.668
1.334
2.474
1.245
2.307
1.151
2.135
1.148
2.128
0.457
0.369
0.267
0.166
0.162
11.900
11.900
11.756
11.756
11.694
11.694
11.680
11.680
11.681
11.681
8.823
8.627
8.523
8.442
8.440
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05MYR2
ER05MY21.014</GPH>
Factor
24173
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
Factor
S inal Cord Disorders/In'uries
Amyotrophic Lateral Sclerosis and Other
Anterior Hom Cell Disease
Quadri
Spina Bifida and Other Brain/Spinal/Nervous
S stem Con enital Anomalies
Myasthenia Gravis/Myoneural Disorders and
Guillain-Barre Syndrome/Inflammatory and
Toxic Neur
MuscularD
Multi le Sclerosis
Parkinson's, Huntington's, and Spinocerebellar
Disease, and Other Neurodegenerative
Disorders
Seizure Disorders and Convulsions
Cardio-Respiratory Failure and Shock,
lncludin
·
Distress S ndromes
Heart Assistive Device/Artificial Heart
Heart Trans lant Status/Com lications
Heart Failure
Acute M ocardial Infarction
Unstable Angina and Other Acute Ischemic
Heart Disease
Heart Infection/Inflammation, Except
Rheumatic
Hypoplastic Left Heart Syndrome and Other
Severe Con enital Heart Disorders
Ma'or Con enital Heart/Circulato Disorders
Atrial and Ventricular Septal Defects, Patent
Ductus Arteriosus, and Other Congenital
Heart/Circulato Disorders
lntracranial He
Cerebral Aneurysm and Arteriovenous
Malformation
Atherosclerosis of the Extremities with
Ulceration or Gan ene
Vascular Disease with Com lications
Pulmonary Embolism and Deep Vein
Thrombosis
Chronic Obstructive Pulmonary Disease,
Includin Bronchiectasis
Severe Asthma
Fibrosis ofLun and Other Lun Disorders
VerDate Sep<11>2014
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8.823
3.939
8.627
3.770
8.523
3.640
31.125
3.767
0.599
30.906
3.620
0.481
2.207
1=1111111111111111111
8.442
3.514
8.440
3.509
30.769
3.568
0.379
30.671
3.551
0.257
30.669
3.553
0.252
2.103
2.029
1.960
1.957
11.008
4.534
12.970
10.884
4.387
12.611
10.839
4.277
12.453
10.844
4.164
12.402
10.845
4.161
12.402
4.534
2.113
4.439
4.611
5.128
31.476
10.252
4.387
1.977
4.348
4.505
4.967
31.422
10.067
4.277
1.844
4.290
4.439
4.827
31.478
9.988
4.164
1.705
4.251
4.386
4.671
31.622
9.945
4.161
1.699
4.250
4.385
4.664
31.628
9.946
10.252
16.842
16.842
6.072
2.568
10.067
16.819
16.819
5.984
2.506
9.988
16.822
16.822
5.925
2.484
9.945
16.830
16.830
5.881
2.472
9.946
16.829
16.829
5.879
2.473
2.568
2.506
2.484
2.472
2.473
11.667
11.585
11.544
11.523
11.522
3.945
1.238
3.787
1.131
3.648
1.010
3.536
0.907
3.532
0.903
0.750
3.495
9.192
2.749
0.653
3.352
9.061
2.696
0.558
3.245
9.001
2.677
0.481
3.157
8.970
2.666
0.479
3.154
8.969
2.667
3.235
6.650
4.100
3.082
6.551
3.979
2.980
6.492
3.898
2.885
6.441
3.817
2.881
6.439
3.813
12.487
10.670
12.317
10.600
12.221
10.582
12.151
10.602
12.150
10.604
16.697
16.842
48.890
16.623
16.819
48.432
16.602
16.822
48.224
16.606
16.830
48.173
16.607
16.829
48.173
2.923
0.807
0.326
1.481
2.793
0.642
0.244
1.388
2.682
0.473
0.155
1.299
2.564
0.284
0.081
1.221
2.561
0.277
0.078
1.218
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I
Aspiration and Specified Bacterial
Pneumonias and Other Severe Lung Infections
Kidney Transplant Status/Complications
End Stage Renal Disease
Chronic Kidney Disease, Stage 5
Chronic Kidney Disease, Severe (Stage 4)
Ectopic and Molar Pree:nancy
Miscarriage with Complications
Miscarriage with No or Minor Complications
Pregnancy with Delivery with Major
Complications
Pregnancy with Delivery with Complications
Pregnancy with Delivery with No or Minor
Complications
(Ongoing) Pregnancy without Delivery with
Major Complications
(Ongoing) Pregnancy without Delivery with
Complications
(Ongoing) Pregnancy without Delivery with
No or Minor Complications
Chronic Ulcer of Skin, Except Pressure
Extensive Third Degree Bums
Major Skin Bum or Condition
Severe Head Injury
Hip and Pelvic Fractures
Vertebral Fractures without Spinal Cord
Injury
Traumatic Amputations and Amputation
Complications
Stem Cell, Including Bone Marrow,
Transplant Status/Complications
Artificial Openings for Feeding or Elimination
Amputation Status, Upper Limb or Lower
Limb
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I
6.551
8.841
41.577
4.600
4.600
1.923
0.748
0.748
6.508
8.686
41.472
4.492
4.492
1.710
0.621
0.621
6.495
8.586
41.473
4.394
4.394
1.517
0.449
0.449
6.508
8.485
41.558
4.283
4.283
1.269
0.237
0.237
6.509
8.483
41.561
4.279
4.279
1.263
0.227
0.227
3.475
3.475
3.173
3.173
2.908
2.908
2.463
2.463
2.447
2.447
2.381
2.158
1.902
1.424
1.402
0.695
0.548
0.358
0.177
0.172
0.695
0.548
0.358
0.177
0.172
0.349
2.815
16.569
2.060
16.569
4.530
0.244
2.721
16.375
1.921
16.375
4.320
0.120
2.638
16.274
1.808
16.274
4.167
0.014
2.567
16.231
1.694
16.231
4.054
0.0ll
2.565
16.229
1.690
16.229
4.052
3.934
3.751
3.603
3.446
3.440
4.758
4.565
4.430
4.284
4.279
16.842
10.291
16.819
10.196
16.822
10.202
16.830
10.268
16.829
10.272
4.758
4.565
4.430
4.284
4.279
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Factor
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Infant Risk Ad ·ustment Model Factors for 2022 Benefit Year
Group
Gold
Silver
219.854
142.713
32.417
32.417
218.550
141.194
31.185
31.185
217.927
140.396
30.495
30.495
217.743
140.023
30.117
30.117
217.744
140.018
30.109
30.109
32.417
130.150
68.882
32.417
25.400
25.400
31.185
128.727
67.469
31.185
24.244
24.244
30.495
128.031
66.748
30.495
23.568
23.568
30.117
127.783
66.449
30.117
23.149
23.149
30.109
127.781
66.443
30.109
23.138
23.138
107.912
28.422
14.035
7.977
106.702
27.186
13.101
7.290
106.087
26.499
12.435
6.663
105.833
26.110
11.838
5.951
105.828
26.103
11.817
5.922
5.674
81.816
15.824
5.991
3.567
1.808
62.403
12.415
3.129
1.972
0.571
0.606
0.103
5.092
80.759
14.941
5.423
3.090
1.450
61.770
11.949
2.858
1.743
0.494
0.567
0.086
4.517
80.174
14.315
4.855
2.524
1.001
61.417
11.629
2.629
1.522
0.441
0.529
0.069
3.966
79.859
13.754
4.253
1.922
0.720
61.239
11.372
2.433
1.314
0.403
0.460
0.050
3.945
79.852
13.738
4.230
1.897
0.710
61.234
11.364
2.426
1.306
0.402
0.457
0.049
I Platinum
Extremely Immature * Severity Level 5
Hi est
Extremel Immature * Severi Level 4
Immature * Severi Level 3
Extremel Immature * Severi Level 2
Extremely Immature * Severity Level 1
Lowest
Immature * Severi
Immature * Severi
Immature * Severi
Immature * Severi
Immature * Severi
Lowest
Premature/Multiples * Severity Level 5
Hi est
Level 4
Level 3
Premature/Mu
Level 2
Premature/Multiples * Severity Level 1
Lowest
Term* Severi
Term* Severi
Term* Severi
Term* Severi
Term* Severi
A el * Severi
A el * Severi
A el * Severi
A el * Severi
A el * Severi
A e 0 Male
A e 1 Male
I
I Bronze I Catastrophic
HHS HCCs Included in Infant Model Maturi
Term
A e1
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Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
TABLE 6: HHS HCCs Included in Infant Model Severi
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Cate ories
I
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
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Metastatic Cancer
Pancreas Transplant Status
Liver Transplant Status/Complications
Intestine Transplant Status/Complications
Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis
Respirator Dependence/Tracheostomy Status
Heart Assistive Device/Artificial Heart
Heart Transplant Status/Complications
Heart Failure
Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders
Lung Transplant Status/Complications
Kidney Transplant Status/Complications
End Stage Renal Disease
Stem Cell, Including Bone Marrow, Transplant Status/Complications
Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock
Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lvmnhoid Leukemia
Mucopolysaccharidosis
Adrenal, Pituitary, and Other Si!!nificant Endocrine Disorders
Acute Liver Failure/Disease, Including Neonatal Hepatitis
Chronic Liver Failure/End-Stage Liver Disorders
Major Congenital Anomalies of Diaphragm, Abdominal Wall, and Esophagus, Age< 2
Myelodysplastic Syndromes and Myelofibrosis
Aplastic Anemia
Combined and Other Severe Immunodeficiencies
Traumatic Complete Lesion Cervical Spinal Cord
Quadriplegia
Amyotrophic Lateral Sclerosis and Other Anterior Hom Cell Disease
Quadriplegic Cerebral Palsy
Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory
and Toxic Neuropathy
Coma, Brain Compression/Anoxic Damage
Respiratory Arrest
Cardio-Respiratorv Failure and Shock, Including Respiratorv Distress Svndromes
Acute Myocardial Infarction
Heart Infection/Inflammation, Except Rheumatic
Maior Congenital Heart/Circulatory Disorders
lntracranial Hemorrhage
Ischemic or Unspecified Stroke
Vascular Disease with Complications
Pulmonarv Embolism and Deep Vein Thrombosis
Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections
Chronic Kidney Disease, Stage 5
Artificial Openings for Feeding or Elimination
HIV/AIDS
Central Nervous System Infections, Except Viral Meningitis
Onnortunistic Infections
Non-Hodgkin Lymphomas and Other Cancers and Tumors
Colorectal, Breast (Age < 50), Kidney and Other Cancers
Breast (Age 50+) and Prostate Cancer, Benign/Uncertain Brain Tumors, and Other
Cancers and Tumors
Lipidoses and Glycogenosis
Intestinal Obstruction
Necrotizing Fasciitis
Bone/Joint/Muscle Infections/Necrosis
Osteogenesis lmperfecta and Other Osteodystrophies
Cleft Lip/Cleft Palate
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Severity Level 5 (Hi!!hest)
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 5
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
Severity Level 4
24178
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
I
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severitv Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
Severity Level 2
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HCC/Description
Hemophilia
Disorders of the Immune Mechanism
CoaE1Ulation Defects and Other Specified Hematological Disorders
Drug Use with Psychotic Complications
Drug Use Disorder, Moderate/Severe, or Drug Use with Non-Psychotic Complications
Alcohol Use with Psychotic Complications
Alcohol Use Disorder, Moderate/Severe, or Alcohol Use with Specified Non-Psychotic
Complications
Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes
Traumatic Complete Lesion Dorsal Spinal Cord
Paraplegia
Spinal Cord Disorders/Injuries
Cerebral Palsy, Except Quadriplegic
Spina Bifida and Other Brain/Spinal/Nervous Svstem Congenital Anomalies
Muscular Dystrophy
Parkinson's, Huntington's, and Spinocerebellar Disease, and Other Neurodegenerative
Disorders
Hydrocephalus
Unstable Angina and Other Acute Ischemic Heart Disease
Atrial and Ventricular Septal Defects, Patent Ductus Arteriosus, and Other Congenital
Heart/Circulatory Disorders
Specified Heart Arrhvthmias
Cerebral Aneurysm and Arteriovenous Malformation
Hemiolegia/Hemioaresis
Cystic Fibrosis
Extensive Third Degree Burns
Severe Head Injury
Hip and Pelvic Fractures
Vertebral Fractures without Spinal Cord Injury
Viral or Unspecified Meningitis
Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and Tumors
Diabetes with Acute Complications
Diabetes with Chronic Complications
Diabetes without Complication
Protein-Calorie Malnutrition
Congenital Metabolic Disorders, Not Elsewhere Classified
Amyloidosis, Porphyria, and Other Metabolic Disorders
Cirrhosis of Liver
Chronic Pancreatitis
Acute Pancreatitis
Inflammatory Bowel Disease
Rheumatoid Arthritis and Specified Autoimmune Disorders
Systemic Lupus Ervthematosus and Other Autoimmune Disorders
Congenital/Developmental Skeletal and Connective Tissue Disorders
Acquired Hemolvtic Anemia, Including Hemolvtic Disease of Newborn
Sickle Cell Anemia (Hb-SS)
Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital
Malformation Syndromes
Seizure Disorders and Convulsions
Monoplegia, Other Paralytic Syndromes
Atherosclerosis of the Extremities with Ulceration or Gangrene
Chronic Obstructive Pulmonarv Disease, Including Bronchiectasis
Severe Asthma
Fibrosis of Lung and Other Lung Disorders
Chronic Kidney Disease, Severe (Stage 4)
Chronic Ulcer of Skin, Except Pressure
Major Skin Burn or Condition
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Severit) Categor)
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Severity Level 3
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
24179
Pervasive Develo mental Disorders, Exce t Autistic Disorder
We received public comments on the
proposed list of factors to be employed
in the 2022 benefit year risk adjustment
models (§ 153.320). The following is a
summary of the comments on these
proposals and our responses.
Comment: A few commenters
expressed concerns that the HCC
coefficients in the list of factors would
adversely affect individuals with
preexisting conditions or diagnosed
disabilities. One of these commenters
was also concerned with the gender
differences in the list of factors.
Response: The list of factors for the
adult, child, and infant risk adjustment
models include the coefficients in the
statistical models developed by HHS to
predict the plan liability for an average
enrollee based on demographics,
diagnosed conditions (grouped into
HCCs), enrollment duration (for the
adult models), and prescription drugs
(for the adult models). The list of factors
represents the different levels of risk
plans take on in providing health
coverage to enrollees. These factors do
not affect enrollee costs and therefore do
not adversely affect any consumers,
including individuals with preexisting
conditions or diagnosed disabilities or
based on gender. Rather, the purpose of
the risk adjustment program is to
transfer funds from risk adjustment
covered plans with lower than average
risk to risk adjustment covered plans
with higher than average risk, with the
goal of minimizing adverse selection
and providing coverage to all
consumers. Therefore, these factors
actually help individuals with
preexisting conditions or diagnosed
disabilities through compensating plans
more for more severe conditions,
incentivizing plans to cover such
individuals rather than avoid covering
them. In addition, gender differences in
the list of factors that will be used for
the HHS risk adjustment models do not
result in differences in premium paid by
male and female enrollees.68 Rather, the
68 Section 2701 of the PHS Act prohibits issuers
of non-grandfathered coverage in the individual and
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different age-sex factors represent
differences in the level of risk plans take
on in providing coverage to men and
women; for example, adult women
within childbearing years tend to cost
more than men of the same age due to
pregnancy and childbirth.
Comment: A few commenters made
suggestions for additions to or deletions
from the list of factors. These
commenters asked that HHS not include
acute, unpredictable HCCs in the list of
factors, such as the severe head injury
and extensive third degree burns HCCs,
as these conditions do not differentiate
adverse selection risk. One of these
commenters asked that HHS bifurcate
transplant status codes into a set of
coefficients for transplant procedure
codes and another set of coefficients for
transplant history or status. Another
commenter suggested that HHS simplify
the risk adjustment models by
combining coefficients for HCCs where
similar risk selection patterns would
result in minimal member-level
prediction improvements when risk
scores are averaged at the plan level to
calculate the plan liability risk score.
Response: We continue to believe that
the acute conditions identified by these
commenters (severe head injury and
extensive third degree burns) should be
included in the risk adjustment models.
We detailed our consideration of
incorporating these HCCs in the risk
adjustment models in the paper on the
Potential Updates to HHS–HCCs for the
HHS-operated Risk Adjustment
Program.69 For example, we explained
that severe head injury represents a
condition with ongoing care costs,
similar to other injury HCCs currently
small group markets from varying rates with respect
to any characteristic aside from whether the plan
covers an individual or a family, rating area, age,
and tobacco use. Therefore, those four factors held
constant, female enrollees cannot be charged higher
premiums than male enrollees, and vice versa, for
the same plan.
69 Potential Updates to HHS–HCCs for the HHSoperated Risk Adjustment Program. June 17, 2019.
Available at https://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/PotentialUpdates-to-HHS-HCCs-HHS-operated-RiskAdjustment-Program.pdf.
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included in the V05 models 70 (for
example, hip fractures and vertebral
fractures). Stakeholders also had an
opportunity to comment on the addition
of these HCCs as part of the 2021
Payment Notice rulemaking.71 Based on
our analysis, these conditions indicate
the presence of underlying chronic
conditions and frailty, were
underpredicted in the risk adjustment
models, and have high costs in the year
after the diagnosis.72 Therefore, we do
not agree that the HCCs for severe head
injury and extensive third degree burns
do not differentiate adverse selection
risk, and we believe they are
appropriate to include in the risk
adjustment models, as previously stated
in the 2021 Payment Notice final rule.73
There is evidence of ongoing chronic
costs associated with these conditions,
and issuers can potentially adversely
select against enrollees with a higher
risk of incurring costs related to these
conditions in a given benefit year.
Isolating and omitting the near-term
ongoing costs for these conditions
would reduce the predictive accuracy of
the model without any benefit in
reduced model complexity, as the costs
for the excluded near-term codes would
end up in the associated longer term
HCCs. The ability to separate costs
associated with the acute event and
chronic conditions can be complex for
certain HCCs, including severe head
injury, extensive third degree burns, and
transplants. We also believe that by
including the acute costs for these
conditions, we are also accounting for
the ongoing costs of care during the first
year. The continued inclusion of these
HCCs in the risk adjustment models, as
proposed, is consistent with our goals to
improve model prediction and identify
chronic or systematic conditions that
represent insurance risk selection or risk
70 The shorthand ‘‘V05’’ refers to the HHS–HCC
classification for the HHS risk adjustment models
that applies through the 2020 benefit year.
71 85 FR 7088 at 7098 through 7101. Also see 85
FR 29164 at 29181.
72 85 FR 29164 at 29181.
73 85 FR 29164 at 29181.
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Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
segmentation. In addition, both of these
HCCs—extensive third degree burns and
severe head injury—are also payment
HCCs in Medicare’s CMS–HCC models.
As for transplant procedure versus
transplant status, we do not currently
use procedure codes to define any
HCCs, but we are interested in analyzing
this topic for further consideration for
potential model changes in future
benefit years.
Consistent with the risk adjustment
principles described previously,74 the
HHS-operated risk adjustment models
exclude HCCs containing diagnoses that
are vague or nonspecific (for example,
cough), discretionary in medical
treatment or coding (for example,
attention deficit disorder), or not
medically significant (for example,
heartburn). The payment models also
exclude HCCs that do not add
empirically to costs (for example, nonmelanoma forms of skin cancer). We did
not propose to combine HCCs and are
not finalizing combining HCCs in the
2022 risk adjustment models. At this
time, we do not believe that combining
HCCs for reasons stated by the
commenter is necessary, as we have
already analyzed and selected HCCs for
inclusion in the models that capture the
largest risk differences. However, in our
efforts to continuously improve the risk
adjustment models, we will continue to
analyze the risk adjustment model
factors for future benefit years and
consider whether changes are needed.
For all these reasons, we believe the
proposed and final list of factors
applicable to the 2022 benefit year
includes the appropriate HCCs.
Comment: One commenter suggested
creating separate models for the
individual and small group markets,
using only individual market enrolleelevel EDGE data for the individual
market models but supplementing small
group market enrollee-level EDGE data
with MarketScan® data for the small
group market models.
Response: We did not propose and are
not finalizing separate individual and
small group market models. At this
time, we are concerned that creating two
separate risk adjustment models for the
individual and small group markets for
each of the age groups (adult, child, and
infant) would result in significantly
increased complexity of the risk
adjustment program. For example, this
would double the number of risk
74 See, for example, the 2021 Payment Notice, and
Section 2.1 of the ‘‘March 31, 2016 HHS-Operated
Risk Adjustment Methodology Meeting Discussion
Paper,’’ March 24, 2016. Available at https://
www.cms.gov/CCIIO/Resources/Forms-Reports-andOther-Resources/Downloads/RA-March-31-WhitePaper-032416.pdf.
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adjustment models, complicating rate
setting for issuers and destabilizing the
child and infant models due to small
sample sizes. However, we intend to
continue to analyze the differences in
costs and utilization between the
individual and small group markets to
consider whether these types of changes
would be necessary or appropriate in
future benefit years. A more detailed
discussion of our current analysis of
these issues based on our review of the
2016, 2017 and 2018 enrollee-level
EDGE data appears in the proposed rule
as part of the discussion of the proposed
changes to the adult model enrollment
duration factors.75
After consideration of comments on
the proposed factors, we are finalizing
the above list of final coefficients for the
2022 benefit year.
As noted above in the Pricing
Adjustment for the Hepatitis C Drugs
preamble, we continuously assess the
availability of drugs in the market and
the associated mapping of those drugs to
RXCs in the adult risk adjustment
models. As a result of this ongoing
assessment, we make quarterly updates
to the RXC Crosswalk to ensure drugs
are being mapped to RXCs where
appropriate, including adding and
removing new and old drugs based on
approval status, prescribing patterns,
and expenditure data. In a recent
update, HHS removed
hydroxychloroquine from RXC 09
effective March 24, 2021, due to
concerns regarding unrepresentative
expenditures and off-label prescribing
during the COVID–19 public health
emergency.76 Additionally, based on
pre-2020 data, HHS’s analysis showed
that the costs of hydroxychloroquine are
much lower than the costs of other
drugs that one with HCC 048, 056, or
057 may take. However,
hydroxychloroquine still appears in the
2018 enrollee-level EDGE data we are
otherwise finalizing for use for 2022
benefit year model recalibration.
Therefore, we only used 2016 and 2017
enrollee-level EDGE data for the limited
purpose of developing the RXC 09
coefficients, RXC 09 HCC related
coefficients, and RXC 09 interaction
term coefficients for the 2022 benefit
year adult models.77 This approach best
aligns the 2022 benefit year adult model
75 See
85 FR at 78585.
HHS-Developed Risk Adjustment Model
Algorithm ‘‘Do It Yourself (DIY)’’ Software
Instructions for the 2020 Benefit Year, April 15,
2021 Update, available at https://www.cms.gov/
files/document/cy2020-diy-instructions
04132021.pdf.
77 The same concern was not present for the 2016
and 2017 enrollee-level EDGE data because
hydroxychloroquine was not included in the
crosswalk until 2018.
76 See
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coefficients with the removal of
hydroxychloroquine from RXC 09 and
avoids the undesired impact of diluting
the coefficient values for RXC 09
(including the associated interactions).
As seen in Table 1, the coefficients for
RXC 09 Immune Suppressants and
Immunomodulators, the HCC factors
relevant for RXC 09 (HCC41, HCC48,
HCC56, HCC57), and the related RXC 09
interactions (RXC 09 × HCC056 or 057
and 048 or 041; RXC 09 × HCC056; RXC
09 × HCC057; RXC 09 × HCC048, 041)
result from the equally weighted
(averaged) blended factors from
separately solved models using only the
2016 and 2017 enrollee-level EDGE
data.
f. Cost-Sharing Reduction Adjustments
We proposed to continue including an
adjustment for the receipt of CSRs in the
risk adjustment models to account for
increased plan liability due to increased
utilization of health care services by
enrollees receiving CSRs in all 50 states
and the District of Columbia. For the
2022 benefit year, to maintain stability
and certainty for issuers, we proposed to
maintain the CSR factors finalized in the
2019, 2020, and 2021 Payment
Notices.78
Consistent with the approach
finalized in the 2017 Payment Notice,79
we also proposed to continue to use a
CSR adjustment factor of 1.12 for all
Massachusetts wrap-around plans in the
risk adjustment plan liability risk score
calculation, as all of Massachusetts’
cost-sharing plan variations have AVs
above 94 percent.
We are finalizing the CSR adjustment
factors as proposed, including the CSR
adjustment factor of 1.12 for all
Massachusetts wrap-around plans.
We received public comments on the
proposed cost-sharing reduction
adjustments. The following is a
summary of the comments we received
and our responses.
Comment: Many commenters
supported the proposed CSR adjustment
factors for the 2022 benefit year and
continuing the CSR adjustment factor of
1.12 for all Massachusetts wrap-around
plans. Some of these commenters stated
that the current CSR adjustment factors
will ensure stability and that the CSR
adjustment factor of 1.12 for all
Massachusetts wrap-around plans
appropriately accounts for the different
market dynamics and the level of
wrapped benefits in Massachusetts.
Response: We are finalizing the CSR
adjustment factors as proposed.
78 See 83 FR 16930 at 16953; 84 FR 17454 at
17478 through 17479; and 85 FR 29164 at 29190.
79 See 81 FR 12203 at 12228.
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Consistent with the approach finalized
in the 2017 Payment Notice,80 we will
continue to use a CSR adjustment factor
of 1.12 for all Massachusetts wraparound plans in the risk adjustment
plan liability risk score calculation for
the 2022 benefit year, as all of
Massachusetts’ cost-sharing plan
variations have AVs above 94 percent.
We agree that the CSR adjustment factor
of 1.12 for all Massachusetts wraparound plans accounts for the state’s
unique market dynamics, and that the
continuation of the current CSR
adjustment factors for all states and the
District of Columbia lend stability to the
markets.
Comment: Some commenters wanted
HHS to analyze the CSR adjustment
factors for future benefit years to
consider whether changes are needed.
These commenters specifically asked
HHS to consider factors like whether or
not the state expanded Medicaid or
offers a Basic Health Program, as well as
the impact of the discontinuation of
CSR payments and implementation of
silver loading, in analyzing the CSR
adjustment factors for future benefit
years. One commenter opposed the CSR
adjustment factors and stated that, as a
result of these factors, the risk
adjustment models overcompensate
issuers for those enrolled in silver plans
and undercompensate issuers for other
metal level enrollees.
Response: We will continue to
examine whether changes to the CSR
adjustment factors are warranted in the
future as more enrollee-level EDGE data
becomes available. We appreciate the
suggestions for analysis from
commenters and may consider these
and other elements in our future
analysis. We note that the current CSR
adjustment factors are set at a national
level and do not vary by state, while the
suggested analysis on the effect of
expanded Medicaid or presence of a
Basic Health Program would vary by
state. Adopting an approach that would
require further variation by state would
introduce a level of complexity to the
risk adjustment program, which is
24181
another factor we would consider as
part of any such analysis.
Furthermore, notwithstanding the
cessation of federal CSR payments to
issuers in October 2017, section 1402 of
the ACA requires Exchange plans to
provide CSRs for eligible enrollees, and
plans face increased liability for silver
plan enrollees receiving CSRs. As such,
the CSR adjustment factors account for
the higher plan liability of CSR plans,
which is not experienced by other metal
level plans. Therefore, we do not believe
that the presence of CSR multipliers for
CSR-eligible enrollees in silver plans
automatically creates inaccurate risk
differentials between CSR eligible and
non-CSR eligible enrollees. Regardless,
any refinements to the HHS-operated
risk adjustment methodology, including
any potential changes to the CSR
adjustment factors for future benefit
years, would be proposed through
notice-and-comment rulemaking.
After consideration of the comments
received, we are finalizing the CSR
adjustment factors as proposed.
TABLE 7: Cost-Sharin Reduction Ad"ustment
Induced Utilization
100-150% ofFederal
Pove Line FPL
150-200% of FPL
200-250% of FPL
>250%ofFPL
1.12
Plan Variation 94%
Plan Variation 87%
Plan Variation 73%
Standard Plan 70%
1.12
1.00
1.00
>300%ofFPL
>300%ofFPL
>300% of FPL
1.07
1.12
1.15
To evaluate risk adjustment model
performance, we examined each
model’s R-squared statistic and
predictive ratios. The R-squared
statistic, which calculates the
percentage of individual variation
explained by a model, measures the
predictive accuracy of the model
overall. The predictive ratio for each of
80 Ibid.
VerDate Sep<11>2014
the HHS risk adjustment models is the
ratio of the weighted mean predicted
plan liability for the model sample
population to the weighted mean actual
plan liability for the model sample
population. The predictive ratio
represents how well the model does on
average at predicting plan liability for
that subpopulation.
A subpopulation that is predicted
perfectly would have a predictive ratio
of 1.0. For each of the HHS risk
adjustment models, the R-squared
statistic and the predictive ratios are in
the range of published estimates for
concurrent risk adjustment models.81
The final R-squared statistic for each
model that is shown in Table 8 reflects
the results from each dataset used.
Because we are finalizing the 2022
benefit year coefficients from separately
solved models based on blended data
81 Hileman, Geof and Spenser Steele. ‘‘Accuracy
of Claims-Based Risk Scoring Models.’’ Society of
Actuaries. October 2016.
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g. Model Performance Statistics
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from the 2016, 2017, and 2018 benefit
years’ enrollee-level EDGE data, we are
publishing the R-squared statistic for
each model separately to verify their
statistical validity. The R-squared
statistic for each model is shown in
Table 8.
- ,quared Sta fISfIC i or P ropose d HHS R.IS kAd.
TABLES : RS
1_1us tmen t M 0 dels
Platinum Adult
Gold Adult
Silver Adult
Bronze Adult
Catastrophic Adult
Platinum Child
Gold Child
Silver Child
Bronze Child
Catastrophic Child
Platinum Infant
Gold Infant
Silver Infant
Bronze Infant
Catastrophic Infant
We received comments on the model
performance statistics outlined in the
proposed rule. The following is a
summary of the comments we received
and our responses.
Comment: One commenter requested
more information on blending the
coefficients from separately solved
models based on the 2016, 2017, and
2018 benefit years’ enrollee-level EDGE
data and publishing the R-squared
statistic for each model separately to
verify their statistical validity.
Response: The final R-squared
statistic for each model that is shown in
Table 8 reflects the results from each
dataset used in the separately solved
models that are used to recalibrate the
models for the 2022 benefit year,
namely the 2016, 2017, and 2018 benefit
years’ enrollee-level EDGE data.82 As
stated in the proposed rule and the
preamble section above, because we
blended the coefficients from separately
solved models based on these 3 years of
enrollee-level EDGE data that were
available at the time of the proposed
rule, we publish the R-squared statistic
82 Our approach to recalibration involves using
blended, or averaged, coefficients from three years
of separately solved models, which promotes
stability for the risk adjustment coefficients year
over year, particularly for conditions with small
sample sizes. For more details, see ‘‘March 31,
2016, HHS-Operated Risk Adjustment Methodology
Meeting Discussion Paper,’’ March 24, 2016,
available at https://www.cms.gov/CCIIO/Resources/
Forms-Reports-and-Other-Resources/Downloads/
RA-March-31-White-Paper-032416.pdf.
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R-Squared Statistic
2016 Enrollee2017 Enrolleelevel EDGE Data
level EDGE Data
0.4401
0.4371
0.4349
0.4314
0.4314
0.4276
0.4281
0.4241
0.4279
0.4239
0.3147
0.3330
0.3291
0.3108
0.3259
0.3076
0.3041
0.3225
0.3040
0.3224
0.3276
0.3289
0.3244
0.3255
0.3224
0.3234
0.3206
0.3215
0.3205
0.3215
for each model separately to verify their
statistical validity.
After consideration of the comments
received on the model performance
statistics and for the reasons stated in
our responses, we are publishing the
final R-squared statistic for each model
above in Table 8.
h. Calculation of Plan Average Premium
and State Average Premium
Requirements for Extending Future
Premium Credits (§ 153.320)
On August 4, 2020, HHS adopted
temporary policies of relaxed
enforcement for the premium rules set
forth at 45 CFR 147.102, 155.200(f)(4),
155.400(e) and (g), 155.706(b)(6)(1)(A),
156.80(d), 156.210(a), and 156.286(a)(2)
through (4) to allow issuers in the
individual and small group markets the
flexibility, when consistent with state
law, to temporarily offer premium
credits for 2020 coverage.83 HHS
provided this flexibility with the intent
of supporting continuity of coverage for
individuals, families, and small
employers who may struggle to pay
premiums because of illness or loss of
incomes or revenue resulting from the
COVID–19 PHE.
83 ‘‘Temporary Policy on 2020 Premium Credits
Associated with the COVID–19 Public Health
Emergency,’’ August 4, 2020, https://www.cms.gov/
CCIIO/Programs-and-Initiatives/Health-InsuranceMarketplaces/Downloads/Premium-CreditGuidance.pdf.
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2018 Enrolleelevel EDGE Data
0.4232
0.4174
0.4134
0.4096
0.4094
0.3366
0.3327
0.3295
0.3261
0.3259
0.3095
0.3061
0.3039
0.3020
0.3020
In prior rulemaking,84 HHS finalized
the calculation of plan average premium
in the risk adjustment state payment
transfer formula as equal to the actual
premiums charged to plan enrollees,
weighted by the number of months
enrolled, and finalized the calculation
of the state average premium as equal to
the average of individual plan average
premiums, weighted by each plan’s
share of statewide enrollment in the risk
pool market, based on billable member
months. In the interim final rule on
COVID–19, HHS set forth risk
adjustment reporting requirements for
issuers offering temporary premium
credits in the 2020 benefit year. In the
proposed rule, we proposed how HHS
would treat temporary premium credits
provided for purposes of applying the
state payment transfer formula for the
2021 benefit year and beyond should
HHS adopt a similar relaxed
enforcement stance and permit such
temporary premium credits in future
benefit years during a PHE declared by
the Secretary of HHS (declared PHE).85
For states where issuers of risk
adjustment covered plans provide
temporary premium credits during a
declared PHE when permitted by HHS,
84 2014 Payment Notice final rule, 78 FR 15409.
Also see the 2020 Payment Notice final rule, 84 FR
17454.
85 The Secretary of the Department of HHS may,
under section 319 of the PHS Act determine that:
(a) A disease or disorder presents a public health
emergency; or (b) that a public health emergency,
including significant outbreaks of infectious disease
or bioterrorist attacks, otherwise exists.
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the plan average premium and statewide
average premium used in the state
payment transfer formula would be
calculated using issuers’ adjusted
premium amounts. Thus, the actual
premiums billed to plan enrollees
would be the amounts used in the
calculations under the state payment
transfer formula. This is consistent with
the general approach adopted in the
interim final rule on COVID–19 for
temporary premium credits in the 2020
benefit year.
We further proposed that HHS would
use adjusted plan premiums for all
enrollees to whom the issuer has
actually provided premium credits as a
reduction to the applicable benefit year
premiums, when calculating transfers
under the state payment transfer
formula for the 2021 benefit year and
beyond. This approach would also
extend to the calculation of transfers
under the state payment transfer
formula in states that receive approval
for a request to reduce transfers under
§ 153.320(d)—that is, the lower actual
premiums for which plan enrollees
would be responsible would be the
amounts used in the calculations under
the state payment transfer formula to
reflect these temporary premium
credits. As such, if an issuer in a state
with an approved 50 percent small
group market reduction request for a
given benefit year chooses to provide
temporary premium credits, the state
average premium will decrease, and
HHS would apply the 50 percent
transfer reduction to the lower PMPM
payment or charge transfer amount
calculated under the state payment
transfer formula for that state’s small
group market for that benefit year. As
detailed further later in this preamble,
we also proposed that issuers providing
these temporary premium credits must
report the lower, actual premium
amounts billed to plan enrollees to their
respective EDGE servers. We explained
that we believe that the applicable
definitions of plan average premium
and state average premium retain the
meaning previously finalized by
reflecting the actual monthly premium
billed to enrollees. The proposal would
build on lessons learned from the
COVID–19 PHE and would establish a
framework to recognize premium credits
as a reduction in premium for purposes
of the HHS-operated risk adjustment
program to align risk adjustment charges
and payments under the state payment
transfer formula with flexibilities HHS
may provide to issuers and states in
future benefit years during a declared
PHE. The proposal would not change
any other aspect of the state payment
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22:49 May 04, 2021
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transfer formula or the method for
calculating payments and charges under
the HHS risk adjustment methodology
(inclusive of the state payment transfer
formula and high-cost risk pool
parameters). We are finalizing this
policy as proposed.
We summarize and address all the
comments received on this proposal in
the Risk Adjustment Data Requirements
for Future Premium Credits (§ 153.710)
preamble section below.
2. Overview of the HHS Risk
Adjustment Methodology (§ 153.320)
We proposed to continue to use the
HHS state payment transfer formula that
was finalized in the 2021 Payment
Notice.86 Although the proposed HHS
state payment transfer formula for the
2022 benefit year was unchanged from
what was finalized for the previous
benefit year, we republished it in the
proposed rule. Additionally, we
republished the description of the
administrative cost reduction to the
statewide average premium and highcost risk pool factors, although this
reduction and the factors and terms also
remain unchanged from what was
finalized for the previous benefit year.87
We also proposed to apply this state
payment transfer formula, including the
administrative cost reduction, for the
2022 benefit year and beyond, unless
changed through notice-and-comment
rulemaking. Under this proposal, we
would no longer republish these
formulas in future annual HHS notice of
benefit and payment parameter rules
unless changes are being proposed. To
align with this proposal, we proposed to
update § 153.320(c) to replace the
current language that refers to HHS
specifying the applicable federallycertified risk adjustment methodology
in the annual HHS notice of benefit and
payment parameters for the applicable
year, to instead require HHS to specify
the applicable federally-certified risk
adjustment methodology in notice-andcomment rulemaking that is published
in advance of the applicable benefit
year. We are finalizing these policies as
proposed and will apply the proposed
HHS risk adjustment methodology
outlined in the proposed rule for the
2022 benefit year and beyond. The
published methodology will remain in
effect unless it is changed through
future notice-and-comment rulemaking.
We are also finalizing the update to
§ 153.320(c) as proposed.
We previously defined the calculation
of plan average actuarial risk and the
86 84 FR 17454 at 17480 and 17485; and 85 FR
29164 at 29191.
87 Ibid.
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24183
calculation of payments and charges in
the Premium Stabilization Rule.88 In the
2014 Payment Notice, we combined
those concepts into a risk adjustment
state payment transfer formula.89 This
formula generally calculates the
difference between the revenues
required by a plan, based on the health
risk of the plan’s enrollees, and the
revenues that the plan can generate for
those enrollees. These differences are
then compared across plans in the state
market risk pool and converted to a
dollar amount via a cost scaling factor.
In the absence of additional funding, we
established, through notice-andcomment rulemaking,90 the HHSoperated risk adjustment program as a
budget-neutral program to provide
certainty to issuers regarding risk
adjustment payments and charges,
which allows issuers to set rates based
on those expectations. In light of the
budget-neutral framework, HHS uses
statewide average premium as the costscaling factor in the state payment
transfer formula in the HHS-operated
risk adjustment methodology, rather
than a different parameter, such as each
plan’s own premium, which would not
have automatically achieved equality
between risk adjustment payments and
charges in each benefit year.91
Risk adjustment transfers (total
payments and charges, including highcost risk pool payments and charges) are
calculated after issuers have completed
their risk adjustment EDGE data
submissions for the applicable benefit
year. Transfers (payments and charges)
under the state payment transfer
formula are calculated as the difference
88 77
FR 17220 at 17246.
state payment transfer formula refers to the
part of the HHS risk adjustment methodology that
calculates payments and charges at the state market
risk pool level prior to the calculation of the highcost risk pool payment and charge terms that apply
beginning with the 2018 benefit year.
90 For example, see Standards Related to
Reinsurance, Risk Corridors, and Risk Adjustment,
Proposed Rule, 76 FR 41938 (July 15, 2011);
Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment, Final Rule, 77 FR 17232
(March 23, 2012); and the 2014 Payment Notice,
Final Rule, 78 FR 15441 (March 11, 2013). Also see
the 2018 Payment Notice, Final Rule, 81 FR 94058
(December 22, 2016); and the 2019 Payment Notice,
Final Rule, 83 FR 16930 (April 17, 2018). Also see
the Adoption of the Methodology for the HHSOperated Permanent Risk Adjustment Program
Under the Patient Protection and Affordable Care
Act for the 2017 Benefit Year, Final Rule, 83 FR
36456 (July 30, 2018) and the Patient Protection and
Affordable Care Act; and Adoption of the
Methodology for the HHS-Operated Permanent Risk
Adjustment Program for the 2018 Benefit Year Final
Rule, 83 FR 63419 (December 10, 2018).
91 See the 2020 Payment Notice final rule for
further details on why statewide average premium
is the cost-scaling factor in the state payment
transfer formula. See 84 FR 17454 at 17480 through
17484.
89 The
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between the plan premium estimate
reflecting risk selection and the plan
premium estimate not reflecting risk
selection. The state payment transfer
calculation that is part of the HHS risk
adjustment methodology follows the
formula:
Where:
P5 = statewide average premium;
PLRSi = plan i's plan liability risk score;
A Vi= plan i's metal level AV;
ARF; = allowable rating factor;
IDF; = plan i's induced demand factor;
GCF; = plan i's geographic cost factor;
s; = plan i's share of state enrollment.
92 As detailed elsewhere in this final rule,
catastrophic plans are considered part of the
individual market for purposes of the national highcost risk pool payment and charge calculations.
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22:49 May 04, 2021
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plan’s geographic rating area for the risk
pool market within the state. The
payment or charge under the state
payment transfer formula is thus
calculated to balance the state market
risk pool in question.
We previously defined the cost
scaling factor, or the statewide average
premium term, as the sum of the average
premium per member month of each
plan i (Pi) multiplied by plan i’s share
of statewide enrollment in the market
risk pool (si). We also previously
adopted a 14 percent administrative cost
reduction to the statewide average
premium 93 and proposed maintaining it
for the 2022 benefit year and beyond,
unless amended through notice-andcomment rulemaking. The following
formula shows the calculation of the
statewide average premium and the
adjustment to remove a portion of the
administrative costs that do not vary
with claims (14 percent):
= (Si (si · Pi)) * (1 ¥ 0.14) = (Si (si · Pi)) *
0.86
Where:
si = plan i’s share of statewide enrollment in
the market in the risk pool;
Pi = average premium per member month of
plan i.
To account for costs associated with
exceptionally high-risk enrollees, we
previously added a high-cost risk pool
adjustment to the HHS risk adjustment
93 See
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methodology. As finalized in the 2020
Payment Notice,94 we intend to
maintain the high-cost risk pool
parameters with a threshold of $1
million and a coinsurance rate of 60
percent for benefit years 2020 and
onward, unless amended through
notice-and-comment rulemaking. We
did not propose any changes to the
high-cost risk pool parameters as part of
the proposed rule; therefore, we would
maintain the threshold of $1 million
and coinsurance rate of 60 percent for
the 2022 benefit year.
The high-cost risk pool adjustment
amount is added to the state payment
transfer formula to account for: (1) The
payment term, representing the portion
of costs above the threshold reimbursed
to the issuer for high-cost risk pool
payments (HRPi), if applicable; and (2)
the charge term, representing a
percentage of premium adjustment,
which is the product of the high-cost
risk pool adjustment factor (HRPCm) for
the respective national high-cost risk
pool m (one for the individual market,
including catastrophic, non-catastrophic
and merged market plans, and another
for the small group market), and the
plan’s total premiums (TPi). For this
calculation, we use a percent of
premium adjustment factor that is
applied to each plan’s total premium
amount. The total plan transfers for a
94 84
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The denominators are summed across
all risk adjustment covered plans in the
risk pool in the market in the state.
The difference between the two
premium estimates in the state payment
transfer formula determines whether a
plan pays a risk adjustment charge or
receives a risk adjustment payment. The
value of the plan average risk score by
itself does not determine whether a plan
would be assessed a charge or receive a
payment–even if the risk score is greater
than 1.0, it is possible that the plan
would be assessed a charge if the
premium compensation that the plan
may receive through its rating (as
measured through the combination of
metal level AV, allowable rating factor,
induced demand factor, and geographic
cost factor) exceeds the plan’s predicted
liability associated with risk selection.
Risk adjustment transfers under the
state payment transfer formula are
calculated at the risk pool level, and
catastrophic plans are treated as a
separate risk pool for purposes of the
risk adjustment state payment transfer
calculations.92 This resulting PMPM
plan payment or charge is multiplied by
the number of billable member months
to determine the plan payment or charge
based on plan liability risk scores for a
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
given benefit year are calculated as the
product of the plan’s PMPM transfer
amount (Ti) multiplied by the plan’s
billable member months (Mi), plus the
high-cost risk pool adjustments. The
total plan transfer (payment or charge)
amounts under the HHS risk adjustment
methodology formula are calculated as
follows:
Total transferi = (Ti · Mi) + HRPi ¥
(HRPCm · TPi)
Where:
Total Transferi = Plan i’s total HHS risk
adjustment program transfer amount;
Ti = Plan i’s PMPM transfer amount based on
the state transfer calculation;
Mi= Plan i’s billable member months;
HRPi= Plan i’s total high-cost risk pool
payment;
HRPCm = High-cost risk pool percent of
premium adjustment factor for the
respective national high-cost risk pool m;
and
TPi = Plan i’s total premium amounts.
We sought comment on the proposed
HHS risk adjustment methodology for
the 2022 benefit year and beyond and
the proposed updates to § 153.320(c).
We are finalizing these policies as
proposed and will apply the proposed
HHS risk adjustment methodology
outlined in the proposed rule for the
2022 benefit year and beyond. We are
also finalizing the update to § 153.320(c)
as proposed.
We received public comments on the
proposed 2022 benefit year HHS risk
adjustment methodology, the proposal
to apply the same methodology to future
benefit years unless changed through
notice-and-comment rulemaking, and
the proposed updates to § 153.320(c).
The following is a summary of the
comments we received and our
responses.
Comment: Several commenters
supported the proposed HHS risk
adjustment methodology. One
commenter asked HHS to continue to
publish the methodology in the annual
Payment Notice to prevent issuers from
having to reference previous
rulemakings.
Response: We appreciate the support
for the state payment transfer formula
and believe that maintaining the HHS
risk adjustment methodology for the
2022 benefit year and beyond, unless
changed through notice-and-comment
rulemaking, will result in stability in the
markets by making it easier for issuers
to set rates because of the predictability
and consistency of the methodology. We
do not believe it is necessary to
continue to publish the methodology in
the annual Payment Notice, as we will
cite to the version of the Payment Notice
where the current methodology appears
in subsequent Payment Notices. We are
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22:49 May 04, 2021
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therefore finalizing the HHS risk
adjustment methodology and this policy
as proposed. As a result, for the 2023
benefit year and beyond, we will not
republish the HHS risk adjustment
methodology in the annual Payment
Notice, unless we are proposing to make
changes to the methodology. We are also
finalizing the proposed update to
§ 153.320(c) to reflect this approach.
Comment: A few commenters
opposed certain aspects of the state
payment transfer formula, such as the
use of the statewide average premium
and the 14 percent administrative cost
reduction. One commenter suggested
that HHS use statewide average claims
rather than statewide average premium
as the scaling factor in the state payment
transfer formula, and further suggested
that if HHS continues to use statewide
average premium, HHS should increase
the administrative cost reduction to 20
percent. A few commenters wanted
HHS to reevaluate the state payment
transfer formula, suggesting a focus on
the level of the administrative cost
reduction and an inquiry into whether
the administrative cost reduction and
the induced utilization factors should
differ between the individual and small
group markets. One commenter asked
for more information on the
administrative cost reduction,
specifically what information HHS
would find helpful in evaluating the
sufficiency of the existing
administrative cost reduction.
Response: We did not propose and are
not finalizing changes to the use of the
statewide average premium in the state
payment transfer formula. As detailed in
prior rulemakings,95 in light of the
program’s budget neutral framework,
HHS chose to use statewide average
premium to convert required revenue
and allowable premium state average
factors in the state payment transfer
formula from relative factors to dollar
amounts so that the total calculated
payment amounts equal total calculated
charges in each state market risk pool.
Thus, each plan in the state market risk
pool receives a risk adjustment state
transfer payment or charge that is scaled
based on the determination of plan
average risk within a state market risk
pool, resulting in balanced, budgetneutral transfers. This approach
supports the overall goal of the risk
adjustment program to encourage
95 See, for example, the Adoption of the
Methodology for the HHS-operated Risk
Adjustment Program under the Patient Protection
and Affordable Care Act for the 2017 Benefit Year;
Final Rule, 83 FR 36456 (July 31, 2018); and the
Adoption of the Methodology for the HHS-operated
Risk Adjustment Program for the 2018 Benefit Year;
Final Rule, 83 FR 63419 (December 10, 2018).
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issuers to rate for average risk and
mitigates incentives for issuers to
operate less efficiently, or to develop
benefit designs or create marketing
strategies to avoid high-risk enrollees. In
addition, our analysis shows that
statewide average claims is a volatile
measure, both across states within a
year and across years within a state, and
would be sensitive to unexpected claims
experience. Furthermore, unexpected
claims experience could particularly
cause instability for smaller issuers,
thereby reducing the predictability of
risk adjustment transfers. For these
reasons, we are not proposing or
otherwise considering the use of
statewide average claims in the state
payment transfer formula.
We also did not propose and are not
finalizing changes to the 14 percent
administrative cost reduction in the risk
adjustment state payment transfer
formula. As we noted in the 2018
Payment Notice,96 we analyzed
administrative and other non-claims
expenses, including quality
improvement expenses, in the MLR
Annual Reporting Form, and estimated,
by category, the extent to which
administrative expenses varied with
claims.97 We compared those expenses
to the total costs that issuers finance
through premiums, including claims,
administrative expenses, and taxes, to
ensure that the estimated administrative
cost percentage was not distorted by
under- or over-pricing during the years
for which MLR data were available.
Using this methodology, we determined
the mean administrative expense in
both the individual and small group
markets was 14 percent. For the 2022
benefit year, we engaged in the same
analysis and arrived at the same
conclusion. We set the administrative
cost adjustment based on our estimate of
the percentage of total costs that did not
vary by risk, so that issuers with higher
risk enrollees would still receive credit
through risk adjustment for the cost of
administrative activities that varied
based on the risk of the population (for
examples, discharge planning or
preventing facility-acquired infections
and reducing clinical errors). At this
time, we have not found evidence that
96 81
FR 94099 through 94100.
2016 and 2017, we removed the impact of
the reconciled amount of CSRs on claims costs as
part of this calculation. Payments through the CSR
program were discontinued in October 2017 due to
lack of a Congressional appropriation. As such,
although this line item still exists in the MLR
Annual Reporting Form, the amount entered by
issuers for the CSR line item should be zero dollars,
and it therefore should no longer impact the
administrative cost reduction calculation.
97 In
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demonstrates that a higher percentage is
necessary.
In response to comments, we further
clarify that the MLR Annual Reporting
Form provides all the information we
use to analyze the sufficiency of the 14
percent administrative cost reduction,
including administrative and other nonclaims expenses like quality
improvement activity expenses, and
taxes and fees that do not vary based on
enrollee health risk. We believe that this
is a sufficient and reasonable source for
data to calculate and analyze the
administrative cost reduction to the
statewide average premium in the risk
adjustment state payment transfer
formula.
Furthermore, we did not propose and
are not finalizing induced utilization
factors that vary by market. We are
concerned that adding different
utilization factors based on market to
the state payment transfer formula
would make the formula much more
complex, as this would double the
number of induced utilization factors in
the formula and make it more difficult
for issuers to price for. We note that we
intend to further consider the
differences between markets and
implications for risk adjustment, and
that any related changes to the risk
adjustment program would be proposed
in notice-and-comment rulemaking.
Comment: One commenter asked HHS
to study the correlation between risk
adjustment transfers and MLR rebates,
stating that it appears that transfers are
too high because a number of issuers
receiving risk adjustment payments
must pay MLR rebates to their enrollees.
Response: While risk adjustment
payments reduce the numerator of the
MLR calculation,98 whether an issuer
will owe MLR rebates is influenced by
a number of factors that are unrelated to
risk adjustment transfers. For example,
an issuer’s MLR and rebate position is
heavily influenced by the degree to
which its pricing assumptions
accurately accounted for realized claims
costs for the applicable benefit year. As
such, issuers may owe MLR rebates to
consumers while either receiving risk
adjustment payments or owing risk
adjustment charges for the applicable
benefit year. Additionally, our
examination of the HHS risk adjustment
methodology and risk adjustment data
for recent benefit years has shown the
program mitigates the influence of risk
selection on premiums and the
incentive for plans to avoid sicker
enrollees.99
98 See
45 CFR 158.130(b)(5).
for example, the Summary Report on
Permanent Risk Adjustment Transfers for the 2019
99 See,
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Comment: One commenter asked that
HHS reevaluate the state payment
transfer formula and stated that it favors
larger issuers over smaller issuers
because larger issuers have the ability to
dedicate resources to enable more
robust coding practices.
Response: We disagree that the state
payment transfer formula favors larger
issuers over small issuers. The risk
adjustment program transfers funds
from plans with lower-than-average risk
enrollees to plans with higher-thanaverage risk enrollees in accordance
with section 1343 of the ACA, and our
internal analysis has found that smaller
plans that enroll sicker than average
enrollees have also received high
payments as a percent of their
premiums. Further, HHS conducts
HHS–RADV in any state where HHS
operates the risk adjustment program to
validate the accuracy of the data
submitted by issuers to their EDGE
servers.100 EDGE server data are used to
calculate issuers’ plan liability risk
scores for use in the state payment
transfer formula as a part of the risk
adjustment program. HHS–RADV
establishes uniform audit standards to
ensure that actuarial risk is accurately
and consistently measured, thereby
strengthening the integrity of the risk
adjustment program.101 Therefore, any
potential coding differences between
plans of any size should not
inappropriately impact risk adjustment,
and to the extent there is any impact, it
should be significantly mitigated
through HHS–RADV.
Comment: One commenter requested
that HHS adjust the state payment
transfer formula applicable in states
where HHS operates the program to
ensure that charges for enrollees with no
HCCs do not exceed premium.
Response: We do not believe that
adjusting the state payment transfer
formula to cap or otherwise limit
charges to the level of premiums for
Benefit Year (July 17, 2020), available at https://
www.cms.gov/CCIIO/Programs-and-Initiatives/
Premium-Stabilization-Programs/Downloads/RAReport-BY2019.pdf; the Summary Report on
Permanent Risk Adjustment Transfers for the 2018
Benefit Year (June 28, 2019), available at https://
www.cms.gov/CCIIO/Programs-and-Initiatives/
Premium-Stabilization-Programs/Downloads/
Summary-Report-Risk-Adjustment-2018.pdf; and
the Summary Report on Permanent Risk
Adjustment Transfers for the 2017 Benefit Year
(July 9, 2018), available at https://
downloads.cms.gov/cciio/Summary-Report-RiskAdjustment-2017.pdf.
100 See 45 CFR 153.350 and 153.630.
101 See, for example, the 2014 Payment Notice
final rule, 78 FR 15409 at 15436–15438; and the
2018 Benefit Year Protocols ACA HHS Risk
Adjustment Data Validation, released June 24, 2019,
available at https://www.regtap.info/uploads/
library/HRADV_2018Protocols_070319_5CR_
070519.pdf.
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enrollees is appropriate. We are
concerned that, given the budget-neutral
nature of the HHS program, a cap on
charges would result in lower payments
to issuers with plans with higher-thanaverage actuarial risk.102 The cap may
also incentivize small issuers with plans
that attract healthier-than-average
enrollees to underprice premiums
because they would know their charges
would be capped to a percentage of
premium. Furthermore, consistent with
the framework set forth in section 1343
of the ACA, the HHS-operated risk
adjustment program focuses on risk
differentials at the plan level, not the
enrollee level.103 Risk adjustment
transfers under the state payment
transfer formula are therefore calculated
based on the plan liability risk score and
the statewide average premium, not
based on individual enrollees’
premiums. As described in a previous
section of this rulemaking, we continue
to consider future policy options to
improve the predictive power of the risk
adjustment models for certain
subpopulations (including enrollees
with no HCCs).
After consideration of the comments
received on these proposals, we are
finalizing the proposed HHS risk
adjustment methodology for the 2022
benefit year and beyond, unless changed
through notice-and-comment
rulemaking. We are also finalizing the
accompanying proposed update to
§ 153.320(c).
3. State Flexibility Requests
(§ 153.320(d))
In the 2019 Payment Notice, we
provided states the flexibility to request
a reduction to the otherwise applicable
risk adjustment state transfers
calculated by HHS under the state
payment transfer formula, which is
calibrated on a national dataset, for the
102 Congress did not authorize or appropriate
additional funding for risk adjustment beyond the
amount of charges paid in, and did not authorize
HHS to obligate itself for risk adjustment payments
in excess of charges collected. In the absence of
additional, independent funding or the creation of
budget authority in advance of an appropriation,
the introduction of a cap on charges would mean
that payments would have to be reduced by a
similar amount because HHS cannot make
payments in excess of charges collected consistent
with binding appropriations law. See New Mexico
Health Connections v. United States Department of
Health and Human Services, 946 F.3d 1138 (10th
Cir. 2019).
103 Compare 42 U.S.C. 18063 (establishing the
permanent risk adjustment program, which
involves an assessment and comparison of the
actuarial risk in each issuer’s plans in a state market
risk pool with the average actuarial risk of all plans
in the applicable state market risk pool) with 42
U.S.C. 18061 (establishing the transitional
reinsurance program, which involves an assessment
of actuarial risk of individual enrollees to identify
those that qualify as ‘‘high risk.’’)
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state’s individual (catastrophic or noncatastrophic risk pools), small group, or
merged markets by up to 50 percent to
more precisely account for differences
in actuarial risk in the applicable state’s
markets.104 We proposed that any
requests received would be published in
the applicable benefit year’s proposed
HHS notice of benefit and payment
parameters, and the supporting
evidence provided by the state in
support of its request would be made
available for public comment.105
If the state requests that HHS not
make publicly available certain
supporting evidence and analysis
because it contains trade secrets or
confidential commercial or financial
information within the meaning of the
HHS Freedom of Information Act
(FOIA) regulations at 45 CFR 5.31(d),
HHS will only make available on the
CMS website the supporting evidence
submitted by the state that is not a trade
secret or confidential commercial or
financial information by posting a
redacted version of the state’s
supporting evidence.106 In accordance
with § 153.320(d)(2), beginning with the
2020 benefit year, states must submit
such requests with the supporting
evidence and analysis outlined under
§ 153.320(d)(1) by August 1st of the
calendar year that is 2 calendar years
prior to the beginning of the applicable
benefit year. If approved by HHS, state
reduction requests will be applied to the
plan PMPM payment or charge state
payment transfer amount (Ti in the state
payment transfer formula above). For
the 2020 and 2021 benefit years, the
state of Alabama submitted a 50 percent
risk adjustment transfer reduction
request for its small group market and
HHS approved both requests.107
We received several general
comments on the state flexibility request
framework outlined in § 153.320(d).
However, we did not propose any
changes to that framework other than
the proposal to allow multi-year state
flexibility requests as explained below.
As such, these general comments on the
state flexibility request framework are
out of scope of this rulemaking and will
not be addressed in this rule.
a. Requests To Reduce Risk Adjustment
Transfers for the 2022 Benefit Year
For the 2022 benefit year, HHS
received a request to reduce risk
adjustment transfers calculated under
the state payment transfer formula for
104 83
FR 16955 through 16960.
CFR 153.320(d)(3).
106 See 45 CFR 153.320(d)(3).
107 See 84 FR 17484 through 17485 and 85 FR
29193 through 29194.
105 45
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the Alabama individual 108 and small
group markets by 50 percent.109
Alabama’s request states that the
presence of a dominant carrier in the
individual and small group markets
precludes the HHS-operated risk
adjustment program from working as
precisely as it would with a more
balanced distribution of market share.
The state regulators stated that their
review of the risk adjustment payment
issuers’ financial data suggested that
any premium increase resulting from a
reduction to risk adjustment payments
of 50 percent in the individual and
small group markets for the 2022 benefit
year would not exceed 1 percent, the de
minimis premium increase threshold set
forth in § 153.320(d)(1)(iii) and
(d)(4)(i)(B). We sought comment on this
request to reduce risk adjustment state
transfers in the Alabama individual and
small group markets by 50 percent for
the 2022 benefit year. The request and
additional documentation submitted by
Alabama was posted under the ‘‘State
Flexibility Requests’’ heading at https://
www.cms.gov/CCIIO/Programs-andInitiatives/Premium-StabilizationPrograms/. We are approving
Alabama’s requested reductions to 2022
benefit year transfers calculated under
the state payment transfer formula for
its individual and small group markets.
We received public comments on
Alabama’s requests to reduce risk
adjustment transfers for the 2022 benefit
year. The following is a summary of the
comments we received and our
responses.
Comment: Multiple commenters
supported Alabama’s request to reduce
risk adjustment transfers in its
individual and small group markets for
the 2022 benefit year, stating that the
HHS-operated risk adjustment program
has not worked properly in Alabama’s
markets and that states are best suited
to decide whether an adjustment is
necessary in their market risk pools.
Several other commenters opposed
Alabama’s request, stating that the state
did not meet its burden to substantiate
such request, that state flexibility
should not be permitted, and that states
seeking a reduction in risk adjustment
state transfers should operate their own
risk adjustment program. Many
commenters opposed to Alabama’s
request expressed more concern with
108 Alabama’s individual market request is for a
50 percent reduction to risk adjustment transfers for
its individual market non-catastrophic and
catastrophic risk pools.
109 Due to the COVID–19 PHE, we permitted
states seeking to request a reduction in risk
adjustment transfers for the 2022 benefit year an
extension until September 1, 2020 to submit such
request.
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the transfer reduction request for the
individual market compared to the
small group market. One commenter
stated that there was no mathematical
reason why the presence of one large
issuer would preclude HHS-operated
risk adjustment from functioning
appropriately in Alabama.
Response: In the 2019 Payment
Notice, HHS provided the flexibility for
states to request a reduction in risk
adjustment state transfers calculated by
HHS under the state payment transfer
formula when a state elects not to
operate the risk adjustment program. We
reviewed Alabama’s requests and
supporting documentation regarding the
state’s individual and small group
market dynamics that it believes
warrant an adjustment to the HHScalculated risk adjustment individual
(including catastrophic and noncatastrophic) and small group market
transfers under the state payment
transfer formula for the 2022 benefit
year. Alabama state regulators noted
they do not assert that the HHS risk
adjustment formula is flawed, only that
it results in imprecise results in
Alabama’s markets that could further
reduce competition and increase costs
for consumers. The state regulators
provided information demonstrating
that the request would have a de
minimis impact on necessary premium
increases in both the individual and
small group markets for payment
issuers, consistent with
§ 153.320(d)(1)(iii) and (d)(4)(i)(B). HHS
analyzed the information provided by
the state in support of its request, along
with additional data and information
available to HHS and the public
comments submitted during the
comment period on the proposed rule,
separately by market and found that the
request meets de minimis regulatory
standard in both markets. While we
recognize the comments expressing
more concern with the reduction
request for the individual market and
questioning how the presence of one
large issuer would impact how the HHSoperated risk adjustment program
functions in Alabama, we did not
propose and are not finalizing any
changes to the general framework or
review standards under § 153.320(d). As
such, a state is permitted to pursue
these reduction requests for the
individual, small group, or merged
market risk pools if the applicable
regulatory requirements are met. In this
instance, Alabama’s individual and
small group market requests both met
the applicable regulatory requirements;
therefore, HHS is approving Alabama’s
requested reductions to 2022 benefit
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year transfers calculated under the state
payment transfer formula.
Comment: Some commenters asserted
that the evidence provided by Alabama
does not substantiate the individual
market request. One commenter
requested that HHS conduct its own
comprehensive actuarial analysis of the
evidence provided by Alabama and
further noted that the 2018 and 2019
risk adjustment results provided by
Alabama in support of the request may
not be indicative of 2022 transfers, as
the past results do not take into account
the changes to the HHS risk adjustment
models applicable beginning with the
2020 and 2021 benefit years or the
proposed changes outlined in the 2022
Payment Notice proposed rule. Another
commenter stated that Alabama’s
suggestion that transfers were difficult
to predict is inaccurate.
Response: The evidence provided by
Alabama in support of its requests to
reduce risk adjustment state transfers by
50 percent in its individual and small
group markets was sufficient to justify
its request under the de minimis
requirement for HHS approval under 45
CFR 153.320(d)(4)(i)(B). We further note
that Alabama requested that, consistent
with 45 CFR 153.320(d), HHS not
publish certain information in support
of its request because it contained trade
secrets or confidential commercial or
financial information. If the state
requests that HHS not make publicly
available certain supporting evidence
and analysis because it contains trade
secrets or confidential commercial or
financial information within the
meaning of the HHS Freedom of
Information Act (FOIA) regulations at 45
CFR 5.31(d), HHS will only make
available on the CMS website the
supporting evidence submitted by the
state that is not a trade secret or
confidential commercial or financial
information by posting a redacted
version of the state’s supporting
evidence.110 Consistent with the state’s
request, we therefore posted a redacted
version of the supporting evidence for
Alabama’s request. However, we note
that HHS reviewed the state’s unredacted supporting analysis in
evaluating Alabama’s request, along
with other plan-level data available to
HHS and the relevant public comments
submitted within the applicable
comment period for the proposed rule.
We conducted a comprehensive analysis
of the available information and found
the supporting evidence submitted by
Alabama to be sufficient for us to
determine the validity of Alabama’s
2022 benefit year requests. We also
110 See
45 CFR 153.320(d)(3).
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evaluated the comments timely
submitted, and determined whether the
state’s requests met the applicable
criteria for approval.
We recognize there is some level of
uncertainty regarding future market
dynamics, including their potential
impact on future benefit year transfers.
However, to align with the annual
pricing cycle for health insurance
coverage, the applicable risk adjustment
parameters (including approval or
denial of state flexibility reduction
requests) must generally be finalized
sufficiently in advance of the applicable
benefit year to allow issuers to consider
such information when setting rates. As
such, there will always be an
opportunity for some uncertainty
regarding the precise impact of future
methodological changes (such as the
risk adjustment model changes
applicable beginning with the 2020 and
2021 benefit years) or unforeseen events
(such as the COVID–19 PHE and its
impact on enrollment and utilization).
With respect to Alabama’s 2022 benefit
year requests, HHS believes that the
evidence submitted by Alabama in
support of its transfer reduction requests
was sufficient, along with other
information available to HHS and timely
submitted comments, for HHS to review
and confirm that the requests meet the
criteria for approval set forth in
§ 153.320(d)(4)(i)(B).
Comment: Some commenters stated
that the reduction requests would
diminish the effectiveness of the HHSoperated risk adjustment program and
suggested that Alabama set up its own
risk adjustment program if it does not
believe the HHS-operated risk
adjustment program is appropriate for
its markets.
Response: We agree that states that do
not believe the HHS program is
appropriate for its markets can and
should consider operating their own
state risk adjustment program with a
federally-certified alternate risk
adjustment methodology tailored to
their market risk pools. However, as
detailed in the proposed rule and the
2019 Payment Notice, we adopted the
state flexibility reduction request
regulations in response to specific
feedback from certain states, and under
our current regulations, it is appropriate
to extend this flexibility for the 2022
benefit year. In addition, the approval
criteria codified in 45 CFR 153.320(d)(4)
are intended to ensure that approved
adjustments do not diminish the
effectiveness of the HHS-operated risk
adjustment program. As part of our
assessment of state flexibility requests,
we consider the potential impact on the
effectiveness of the HHS-operated risk
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adjustment program for the applicable
state market risk pools. We also intend
to continue to analyze the impact of
state flexibility requests and may
propose changes or solicit comments on
potential changes for future benefit
years.
Comment: A few commenters stated
that the approval of the requests would
result in increased adverse selection,
especially in the individual market. One
of these commenters asserted that the
reduction request in the individual
market would result in a premium
increase of more than 1 percent. This
commenter also asserted that approval
of the reduction request in the
individual market would make it
difficult for issuers to offer individual
market plans with broad networks.
Response: We appreciate commenters’
concerns and generally agree that
adverse selection concerns are
heightened in the individual market, as
enrollees typically have higher actuarial
risk, risk selection, and risk
segmentation in plan selection than
those enrolled in the small group
market. However, in this case, Alabama
has met the criteria for approval at 45
CFR 153.320(d)(4)(i)(B) for both its
individual and small group market
requests.
In addition, these commenters did not
provide any data or supporting evidence
during the public comment period to
support their assertions. Our analysis of
the information submitted as part of the
state’s request, along with other relevant
factors, including the premium impact
of the transfer reduction for the state
market risk pool, showed that the
transfer reduction requested by Alabama
would have de minimis impact on the
premiums to cover the difference in
transfers for issuers that would receive
reduced transfer payments. That is,
approval of the request would not result
in an increase in premiums of more than
1 percent. HHS does not believe that a
change in transfers small enough to
have a de minimis impact on premiums
should affect issuers’ operations, such
as changes to its provider networks.
Therefore, after consideration of the
information submitted in support of the
state’s request and other data and
information available to HHS, we find
that the evidence provided substantiates
the reduction request in both the
individual and small group markets and
meets the regulatory requirements for
HHS approval under 45 CFR
153.320(d)(4)(i)(B).
Based on our review of the comments
received on the proposed state
flexibility reduction requests within the
comment period and HHS’s analysis of
the requests submitted by Alabama,
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HHS is granting Alabama’s requests to
reduce risk adjustment transfers in the
individual (including catastrophic and
non-catastrophic risk pools) and small
group markets by 50 percent for the
2022 benefit year. Therefore, the 50
percent reduction will be applied to the
2022 benefit year plan PMPM payment
or charge transfer amount (Ti in the state
payment transfer calculation above) for
the Alabama individual and small group
markets.
b. Multi-Year State Flexibility Requests
We proposed several amendments to
§ 153.320(d) to allow states to request a
reduction to otherwise applicable risk
adjustment calculations under the state
payment transfer formula for up to 3
years, beginning with the 2023 benefit
year. Under current policy, states
seeking to reduce risk adjustment state
transfers in one or more of their market
risk pools must submit a request to HHS
each year describing the nature of their
request and providing supporting
documentation. HHS then reviews the
request, sets forth the request in the
applicable benefit year’s HHS notice of
benefit and payment parameters, and
approves or denies it based on the
evidence and analysis provided by the
state in the request and the comments
received to the applicable benefit year’s
proposed HHS notice of benefit and
payment parameters.
Under § 153.320(d)(1), states must
submit this request annually, and HHS
publishes state requests in the
applicable benefit year’s proposed and
final annual HHS notice of benefit and
payment parameters. Stakeholders have
requested that HHS allow states to
request multi-year risk adjustment
flexibility reductions. In recognition of
these comments, we proposed to
provide the flexibility for states to
request a reduction to otherwise
applicable risk adjustment state
transfers under the HHS-operated risk
adjustment methodology’s state
payment transfer formula for up to 3
years beginning with the 2023 benefit
year.111
We are not finalizing the proposed
policies or accompanying proposed
updates to § 153.320(d) to permit states
to pursue multi-year state flexibility
reduction requests. We are maintaining
the existing language and framework,
which permits states to submit annual
requests to reduce the otherwise
applicable risk adjustment calculations
under the state payment transfer
111 See 85 FR at 78599–78601 for details on the
proposed updates to § 153.320(d) to permit states to
seek multi-year state flexibility requests for up to
3 years.
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formula for its individual and small
group (or merged) markets for a given
benefit year to more precisely account
for state-specific factors or other unique
market characteristics.
We received public comments on the
proposed policies and updates to
§ 153.320(d) to permit states to seek
multi-year state flexibility requests for
up to 3 years. The following is a
summary of the comments we received
and our responses.
Comment: Some commenters
supported our proposal to permit states
to request reductions in otherwise
applicable risk adjustment state
transfers for up to three benefit years,
stating that multi-year state flexibility
requests would promote stability and
competition in the affected state market
risk pool(s) and would reduce burden
on states and HHS. However, several
other commenters opposed this
proposal, asserting that states would not
be able to accurately or reliably
anticipate state market risk pool
conditions or market dynamics that far
into the future in order for HHS to
provide sufficient support for multi-year
reduction requests. These commenters
also raised the same concerns raised to
the Alabama request above, including
that the proposal would undermine the
effectiveness of the HHS-operated risk
adjustment program and result in risk
selection, market destabilization, higher
premiums, and narrow or restricted
provider networks. These commenters
noted that states can run their own risk
adjustment program if they believe the
HHS-operated program does not
function properly in their market risk
pool(s). One commenter also noted that
inadequate advance notice of HHS’s
decision to terminate or modify the
request based on new available
information could disrupt rate setting.
Response: We are not finalizing these
proposed policies or the updates to
§ 153.320(d), as we agree with
commenters that there are concerns and
barriers to multi-year state flexibility
reduction requests. We agree that state
market conditions, including enrollment
and new entrants and exits to the
market, can change significantly over 3
years, and three-year reduction requests
could destabilize the market if
conditions significantly change during
the request’s approval period. While our
proposed framework included
mechanisms to address such situations
(for example, the proposed process and
authority for HHS to terminate or
modify a previously approved multiyear request during any one of the
subsequent years during the approval
period if additional data or new
information did not support the
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continuation of the state’s reduction
request and the state did not provide
sufficient supplemental evidence to
rebut such data or information), we
agree that further consideration of these
types of issues is warranted before
pursuing these proposals to permit
multi-year state flexibility reduction
requests. We are maintaining the
existing language and framework in
§ 153.320(d), which currently permits
states to submit annual requests to
reduce the otherwise applicable risk
adjustment calculations under the state
payment transfer formula for its
individual and small group (including
merged) markets for a given benefit year
to more precisely account for statespecific factors or other unique market
characteristics.
After consideration of the comments
on the policies and changes related to
the multi-year state flexibility reduction
requests, we are not finalizing the
proposals or changes to § 153.320(d)
related to such requests.
4. Audits and Compliance Reviews of
Issuers of Reinsurance-Eligible Plans
(§ 153.410(d)) and Audits and
Compliance Reviews of Issuers of Risk
Adjustment Covered Plans (§ 153.620(c))
a. Audits and Compliance Reviews of
Issuers of Reinsurance-Eligible Plans
(§ 153.410(d))
HHS recently completed the 2014
benefit year audits of a sample of issuers
of ACA transitional reinsurance-eligible
plans. During this process, HHS
encountered significant challenges that
impeded its ability to efficiently
administer and complete the audits.
More specifically, HHS experienced
difficulties receiving requested audit
data and materials in a timely fashion
from some issuers, and had difficulty
obtaining data from these issuers in a
format that was usable by HHS. HHS is
of the view that codifying additional
audit requirements and parameters is an
appropriate and necessary measure to
ensure that 2015 and 2016 benefit year
audits of ACA transitional reinsuranceeligible plans appropriately function to
protect the integrity of our programs.
We proposed several amendments to
§ 153.410(d) to provide more clarity
around the audit requirements for
issuers of reinsurance-eligible plans. As
proposed, the amendments explain the
audit process, including what it means
to properly comply with an audit and
the consequences for failing to comply
with audit requirements. We also
proposed to expand the oversight tools
available to HHS to also provide
authority for HHS to conduct
compliance reviews of issuers of
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reinsurance-eligible plans to assess
compliance with the applicable
requirements of subparts E and H of part
153. We explained that the proposed
HHS compliance reviews would follow
the standards set forth for compliance
review of QHP issuers participating in
FFEs established in 45 CFR 156.715.
However, compliance reviews under
this section would only be conducted in
connection with confirming
reinsurance-eligible plans’ compliance
with the standards related to
reinsurance payments in subparts E and
H of part 153. A compliance review may
be targeted at a specific potential error
and conducted on an ad hoc basis.112
For example, HHS may require an issuer
to submit data pertaining to a specific
data submission (for example, capitated
claims). Unlike the compliance review
authority established in § 156.715,
which is limited to QHP issuers
participating in FFEs, the compliance
review authority we proposed to codify
in the amendments to § 153.410(d)
would apply to all issuers of
reinsurance-eligible plans. We believe
this flexibility is necessary and
appropriate to provide a mechanism for
HHS to address situations in which a
systematic error or issue is identified
during the random and targeted auditing
of issuers of reinsurance-eligible plans,
and HHS suspects similarly situated
issuers may have experienced the same
systematic error or issue, but were not
selected for audit in the year in
question.
Specifically, we proposed to rename
§ 153.410(d) to ‘‘Audits and Compliance
Reviews’’ in order to clarify that the
authority described in this section
would apply to audits and the proposed
HHS compliance reviews to evaluate
issuers of reinsurance-eligible plans’
compliance with the applicable
requirements in subparts E and H of part
153. We similarly proposed to update
the introductory language in
§ 153.410(d) to incorporate a reference
to HHS compliance reviews and to note
that we would conduct these
compliance reviews consistent with the
standards set forth in § 156.715.
We also proposed to amend the
existing introductory language in
§ 153.410(d) to remove the last sentence
that discusses audit results and the
accompanying requirements that an
issuer must follow if an audit results in
a finding of material weakness or
significant deficiency. Additionally, as
detailed further below, we proposed to
replace this with a new proposed
framework that captures more details on
the audit process and requirements for
112 For
further details, please see 78 FR 65100.
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reinsurance-eligible plans. As amended,
the introductory language at
§ 153.410(d) would reflect the authority
for HHS, or its designee, to audit or
conduct a compliance review of an
issuer of a reinsurance-eligible plan to
assess its compliance with the
applicable requirements of subparts E
and H of part 153. We also proposed to
move the existing introductory language
in paragraph (d) requiring an issuer to
ensure its relevant contractors,
subcontractors, and agents cooperate
with audits to a new proposed section,
as detailed further below.
Also at § 153.410, we proposed to add
new paragraph (d)(1) to establish notice
and conference requirements for these
audits. The introductory language in
proposed paragraph (d)(1) reflects that
HHS would provide at least 15 calendar
days advance notice of its intent to
conduct an audit of an issuer of a
reinsurance-eligible plan. In proposed
paragraph (d)(1)(i), we proposed to
codify that all audits under this section
would include an entrance conference
at which the scope of the audit would
be presented and an exit conference at
which the initial audit findings would
be discussed.
Further, we proposed to amend
§ 153.410(d) to add a new paragraph
(d)(2) to capture the requirements
issuers must meet to comply with an
audit under this section. In proposed
paragraph (d)(2)(i), we proposed to
capture the requirement that currently
appears in the introductory text of
paragraph (d) for the issuer to ensure
that its relevant contractors,
subcontractors, and agents cooperate
with any audit or compliance review
under this section and also proposed to
expand it to similarly require the issuer
to ensure its relevant employees,
downstream entities and delegated
entities also cooperate with any audit or
compliance review under this section.
In new proposed paragraph (d)(2)(ii), we
proposed to require issuers to submit
complete and accurate data to HHS or
its designees that is necessary to
complete the audit. We explained that
such data would need to support the
appropriateness and accuracy of the
reinsurance payments under review as
part of the audit. For example, HHS may
request that issuers of reinsuranceeligible plans provide enrollment and
claims files, plan reference data, and
associated enrollee data sufficient to
show that reinsurance payments
received were appropriate.
HHS encountered significant
challenges in the 2014 benefit year
audits when some issuers submitted
data in a format that was not readable
by HHS. To address this issue, we
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proposed in new paragraph (d)(2)(ii)
that issuers must submit audit data in
the format and manner specified by
HHS no later than 30 calendar days after
the initial deadline communicated and
established by HHS at the entrance
conference described in proposed
paragraph (d)(1)(i). For example, HHS
may require issuers to submit the
requested audit data via Electronic File
Transfer. Additionally, under proposed
paragraph (d)(2)(iii), HHS proposed to
require that issuers respond to any audit
notices, letters, request, and inquiries,
including requests for supplemental or
supporting information, no later than 15
calendar days after the date of the
notice, letter, request, or inquiry. We
noted that we believe that the proposed
requirements in paragraph (d)(2) are
necessary and appropriate to ensure the
timely completion of audits and to
prevent waste that results from
repeated, fruitless attempts by HHS to
obtain data.
Recognizing that there may be
situations that warrant an extension of
the timeframes under § 153.410(d)(2)(ii)
or (iii), as applicable, we proposed to
also add a new paragraph (d)(2)(iv) to
establish a process for issuers to request
an extension for good cause. To request
an extension, we proposed to require
the issuer to submit a written request to
HHS within the applicable timeframe
established in paragraphs (d)(2)(ii) or
(iii). The written request would have to
detail the reasons for the extension
request and good cause in support of the
request. For example, good cause may
include an inability to produce
information in light of unforeseen
emergencies, natural disasters, or a lack
of resources due to a PHE. If the
extension is granted, the issuer must
respond within the timeframe specified
in HHS’s notice granting the extension
of time.
Under § 153.410(d)(3), HHS proposed
it would share its preliminary audit
findings with the issuer, and further
proposed that the issuer would then
have 30 calendar days to respond to
such findings in the format and manner
specified by HHS. HHS would describe
the process, format, and manner by
which an issuer can dispute the
preliminary findings in the preliminary
audit report sent to the issuer. For
example, if the issuer disagrees with the
findings set forth in the preliminary
audit report, HHS would require the
issuer to respond to such findings by
submitting written explanations that
detail its dispute(s) or additional
rebuttal information via Electronic File
Transfer. Additionally, we proposed at
paragraph (d)(3)(i) that if the issuer does
not dispute or otherwise respond to the
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preliminary findings within 30 calendar
days, the audit findings would become
final. We proposed in paragraph
(d)(3)(ii) that if the issuer timely
responds and disputes any audit finding
within 30 calendar days, HHS would
review and consider such response and
finalize the audit findings after such
review. HHS would provide contact and
other information necessary for an
issuer to respond to the preliminary
audit findings in the preliminary audit
report sent to the issuer.
We proposed to add a new paragraph
§ 153.410(d)(4) to capture the process
and requirements related to final audit
findings and reports. If an audit results
in the inclusion of a finding in the final
audit report, the issuer must comply
with the actions set forth in the final
audit report in the manner and
timeframe established by HHS. We
noted that the actions set forth in the
final audit report could require an issuer
to return reinsurance payments. We
maintained the regulatory requirements
related to corrective action plans for
reinsurance audits that currently appear
in paragraph (d) in proposed paragraph
(d)(4), which stated that (1) the issuer
must provide a written corrective action
plan to HHS for approval within 30
calendar days of the issuance of the
final audit report; (2) the issuer must
implement the corrective action plan;
and (3) the issuer must provide HHS
with written documentation
demonstrating the adoption and
completion of the required corrective
actions.
Lastly, if an issuer fails to comply
with the audit requirements set forth in
proposed § 153.410(d), HHS proposed in
paragraph (d)(5)(i) that HHS would
notify the issuer of reinsurance
payments received that the issuer has
not adequately substantiated, and under
proposed paragraph (d)(5)(ii), HHS
would notify the issuer that HHS may
recoup any payments identified as not
adequately substantiated. We explained
that under this framework, the
continued failure to comply with the
audit requirements and provide the
necessary information to substantiate
the payments made could result in HHS
recouping up to 100 percent of the
reinsurance payments made to an issuer
for the applicable benefit year(s) that are
the subject of the audit.
We also clarified that reinsurance
payment amounts recovered by HHS as
a result of an audit under § 153.410(d)
would be allocated, on a pro rata basis,
as further payments to the U.S. Treasury
under section 1341(b)(3)(B)(iv) of the
ACA and further reimbursement of
administrative expenses related to
operating the reinsurance program
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under section 1341(b)(3)(B)(ii) of the
ACA.113
We sought comment on these
proposals, including HHS’s clarification
of its compliance review authority, the
proposed timeframes for issuers to
respond to audit notices, reports,
inquiries, and requests for supplemental
information, and the process for issuers
to request an extension to respond to
such requests. We are finalizing the
proposed updates to the audit and
compliance reviews of issuers of
reinsurance eligible plans in
§ 153.410(d), with modifications to
certain audit timelines in response to
comments stating that issuers would
need more time to provide complete and
accurate data for an audit and respond
to HHS requests.
We received public comments on the
proposed updates to audits and
compliance reviews of issuers of
reinsurance-eligible plans
(§ 153.410(d)). The majority of the
comments we received to this section
were general comments that were also
applicable to the similar amendments
proposed in the below sections
regarding audits and compliance
reviews of issuers of risk adjustment
covered plans (§ 153.620(c)) and audits
and compliance reviews of APTC, CSRs,
and user fees (§ 156.480(c)). We
responded to these generally applicable
comments in the below section on
audits and compliance reviews of
APTC, CSRs, and user fees
(§ 156.480(c)). What follows is a
summary and our responses to the
comments we received that were
specific to audits and compliance
reviews of issuers of reinsuranceeligible plans.
Comment: A few commenters were
concerned that HHS is still conducting
audits of issuers of reinsurance-eligible
plans for monies received more than 5
years ago for a program that ended after
the 2016 benefit year. These
commenters asked that HHS reconsider
the overall approach and need for
conducting audits of issuers of
reinsurance-eligible plans.
Response: HHS has the authority 114
and the responsibility to audit issuers of
reinsurance-eligible plans to protect the
integrity of the reinsurance program and
ensure issuers received the appropriate
reinsurance payments during the 2014
through 2016 benefit years. We
recognize that the program ended with
the 2016 benefit year, but activities
113 See the Patient Protection and Affordable Care
Act; Exchange and Insurance Market Standards for
2015 and Beyond, Final Rule, 79 FR 30240 at 30257
through 30259 (May 27, 2014).
114 45 CFR 153.410(d).
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24191
related to the operation of the program
continued for several years. For
example, the final deadline for
remittance of 2016 benefit year
reinsurance contributions was not until
November 2017 115 and the last
payments to issuers of reinsurance
eligible plans were made in Spring
2018. Activities, such as these audits,
continue as HHS closes out the program.
We are planning to combine reinsurance
program audits for the 2015 and 2016
benefit years, which will help facilitate
a more efficient audit process and allow
HHS to end the audits of reinsuranceeligible plans more quickly. We will
similarly look for ways to combine
efforts for compliance reviews of
reinsurance-eligible plans, should we
determine it is necessary or appropriate
to pursue those additional oversight
measures.
After consideration of the comments
related to the proposals regarding audits
and compliance review of reinsuranceeligible plans, we are finalizing these
provisions as proposed, with slight
modifications to certain audit timelines
in response to comments 116 stating that
issuers need more time during audits to
provide complete and accurate data and
respond to HHS requests. As finalized at
§ 153.410(d)(1), HHS will provide at
least 30 calendar days advance notice of
its intent to conduct an audit of an
issuer of a reinsurance-eligible plan,
rather than the proposed 15 calendar
days. Additionally, as finalized at
§ 153.410(d)(4)(i), if HHS determines the
need for a corrective action plan as the
result of an audit, issuers must provide
a written corrective action plan to HHS
for approval within 45 calendar days of
the issuance of the final audit report,
rather than the proposed 30 calendar
days.
We also clarify that we will recoup
monies owed due to a finding as the
result of an audit of a reinsuranceeligible plan using the same method
with which we collect all debts. That is,
to recoup the amount identified in
§ 153.410(d)(5)(i), we will first net using
the process set forth in 45 CFR
156.1215, and we will then invoice
issuers for the remaining debt (if any
was owed).
115 https://www.cms.gov/CCIIO/Programs-andInitiatives/Premium-Stabilization-Programs/TheTransitional-Reinsurance-Program/2016-BenefitYear-Page.
116 These comments, along with the other general
comments submitted on the parallel amendments to
the sections on audits and compliance reviews of
reinsurance-eligible plans, risk adjustment covered
plans, and QHP issuer compliance with federal
standards for APTC, CSRs, and user fees, are
summarized and responded to in the below
preamble section on audits and compliance reviews
of APTC, CSRs, and user fees (§ 156.480(c)).
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b. Audits and Compliance Reviews of
Issuers of Risk Adjustment Covered
Plans (§ 153.620(c))
Although currently HHS primarily
uses the HHS–RADV process to audit
issuers of risk adjustment covered plans,
§ 153.620(c) provides HHS with the
authority to conduct audits of issuers of
risk adjustment-covered plans outside of
the HHS–RADV process. HHS intends to
begin audits of issuers of risk
adjustment covered plans to ensure the
proper payment of high-cost risk pool
payments and confirm compliance with
applicable requirements. As such,
similar to the proposals related to audits
and compliance reviews of issuers of
reinsurance-eligible plans and learning
from our experience with those 2014
benefit year audits, we proposed to
provide more clarity around the audit
requirements for issuers of risk
adjustment covered plans. These
proposals sought to explain the audit
process, including what it means to
properly comply with an audit and the
consequences for failing to comply with
such requirements.
We also proposed to expand the
oversight tools available to HHS beyond
traditional audits to also provide
authority for HHS to conduct
compliance reviews of risk adjustment
covered plans to assess compliance with
the applicable requirements of subparts
G and H of part 153. We explained that
the proposed HHS compliance reviews
would follow the standards set forth for
compliance review of QHP issuers
participating in FFEs established in 45
CFR 156.715. However, compliance
reviews under this section would only
be conducted in connection with
confirming risk adjustment covered
plans’ compliance with the applicable
requirements related to the risk
adjustment program in subparts G and
H of part 153. A compliance review may
be targeted at a specific potential error
and conducted on an ad hoc basis.117
For example, HHS may require an issuer
to submit data pertaining to a specific
data submission (for example, capitated
claims). Unlike the compliance review
authority established in § 156.715,
which is limited to QHP issuers
participating in FFEs, the compliance
review authority we proposed to codify
in the amendments to § 153.620(c)
would apply to all issuers of risk
adjustment covered plans. We explained
that we believe this flexibility is
necessary and appropriate to provide a
mechanism for HHS to address
situations in which a systematic error or
issue is identified during the random
117 For
further details, please see 78 FR 65100.
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and targeted auditing of a sample of
issuers of risk adjustment covered plans,
and HHS suspects similarly situated
issuers may have experienced the same
systematic error or issue but were not
selected for audit in the year in
question. As noted in the proposed rule,
we anticipate focusing our audit and
compliance review activities under
§ 153.620(c) on ensuring compliance
with requirements applicable to the
high-cost risk pool payments under the
HHS risk adjustment methodology.
Specifically, we proposed to rename
§ 153.620(c) to ‘‘Audits and Compliance
Reviews’’ to clarify that the authority
described in this section would apply to
audits and the proposed HHS
compliance reviews to evaluate risk
adjustment covered plans’ compliance
with the applicable requirements in
subparts G and H of part 153. We
similarly proposed to update the
introductory language in paragraph (c)
to incorporate a reference to HHS
compliance reviews and to note that we
would conduct these compliance
reviews consistent with the standards
set forth in 45 CFR 156.715.
We also proposed to amend the
existing introductory language in
§ 153.620(c) to remove the last sentence
that discusses audit results and the
accompanying requirements that an
issuer must follow if an audit results in
a finding of material weakness or
significant deficiency. As detailed
further below, we proposed to replace
this with a new proposed framework
that captures more details on the audit
process and requirements for risk
adjustment covered plans. As amended,
the introductory language at paragraph
(c) would reflect the authority for HHS
or its designee to audit or conduct a
compliance review of an issuer of a risk
adjustment covered plan to assess its
compliance with the applicable
requirements of subparts G and H of
part 153. We also proposed to move the
existing introductory language in
paragraph (c) requiring an issuer to
ensure its relevant contractors,
subcontractors, and agents cooperate
with audits to a new proposed section,
as described further below.
We proposed to add new paragraph
(c)(1) to establish notice and conference
requirements for these audits. The
introductory language in proposed
paragraph (c)(1) reflects that HHS would
provide at least 15 calendar days
advance notice of its intent to conduct
an audit of an issuer of a risk adjustment
covered plan. In proposed paragraph
(c)(1)(i), we proposed to codify that all
audits under this section would include
an entrance conference at which the
scope of the audit would be presented
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and an exit conference at which the
initial audit findings would be
discussed.
Further, we proposed to amend
§ 153.620(c) to add paragraph (c)(2) to
capture the requirements issuers must
meet to comply with an audit under this
section. In proposed paragraph (c)(2)(i),
we would capture the requirement that
currently appears in the introductory
text of paragraph (c) for the issuer to
ensure that its relevant agents,
contractors, and subcontractors
cooperate with any audit or compliance
review under this section and also
proposed to expand it to similarly
require the issuer to ensure its relevant
employees, downstream entities and
delegated entities also cooperate with
any audit or compliance review under
this section. In proposed paragraph
(c)(2)(ii), we proposed to require issuers
to submit complete and accurate data to
HHS or its designees that is necessary to
complete the audit. We explained that
such data would need to support the
appropriateness and accuracy of the risk
adjustment transfers (including highcost risk pool payments and charges)
under review as part of the audit. For
example, HHS may request that issuers
of risk adjustment covered plans
provide enrollment and claims files and
plan reference data and associated
enrollee data.
In new paragraph (c)(2)(ii), we
proposed that issuers must submit audit
data, in the format and manner specified
by HHS, no later than 30 calendar days
after the initial deadline communicated
and established by HHS at the entrance
conference described in proposed
paragraph (c)(1)(i). For example, HHS
may require issuers to submit the
requested audit data via Electronic File
Transfer. Additionally, under proposed
paragraph (c)(2)(iii), HHS proposed to
require that issuers respond to any audit
notices, letters, and inquires, including
requests for supplemental or supporting
information, no later than 15 calendar
days after the date of the notice, letter,
request, or inquiry. We noted that we
believe that the proposed requirements
in paragraph (c)(2) are necessary and
appropriate to ensure the timely
completion of audits and to prevent
waste that results from repeated,
fruitless attempts by HHS to obtain
necessary data.
Recognizing that there may be
situations that warrant an extension of
the timeframes under § 153.620(c)(2)(ii)
or (iii), as applicable, we proposed to
also add a new paragraph (c)(2)(iv) to
establish a process for issuers to request
an extension for good cause. To request
an extension, we proposed to require
the issuer to submit a written request to
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HHS within the applicable timeframe
established in paragraph (c)(2)(ii) or
(iii). The written request would be
required to detail the reasons for the
extension request and the good cause in
support of the request. For example,
good cause may include an inability to
produce information in light of
unforeseen emergencies, natural
disasters, or a lack of resources due to
a PHE. If the extension is granted, the
issuer must respond within the
timeframe specified in HHS’s notice
granting the extension of time.
Under § 153.620(c)(3), HHS proposed
that it would share its preliminary audit
findings with the issuer, and further
proposed that the issuer would then
have 30 calendar days to respond to
such findings in the format and manner
specified by HHS. HHS would describe
the process, format, and manner by
which an issuer can dispute the
preliminary findings in the preliminary
audit report sent to the issuer. For
example, if the issuer disagrees with the
findings set forth in the preliminary
audit report, HHS would require the
issuer to respond to such findings by
submitting written explanations that
detail its dispute(s) or additional
rebuttal information via Electronic File
Transfer. Additionally, we proposed
under paragraph (c)(3)(i) that if the
issuer does not dispute or otherwise
respond to the preliminary findings
within 30 calendar days, the audit
findings would become final. We
proposed under paragraph (c)(3)(ii) that
if the issuer timely responds and
disputes any audit finding within 30
calendar days, HHS would review and
consider such response and finalize the
audit findings after such review. HHS
would provide contact and other
information necessary for an issuer to
respond to the preliminary audit
findings in the preliminary audit report
sent to the issuer.
HHS proposed to add a new
§ 153.620(c)(4) to capture the process
and requirements related to final audit
findings and reports. If an audit results
in the inclusion of a finding in the final
audit report, the issuer must comply
with the actions set forth in the final
audit report in the manner and
timeframe established by HHS. We
noted that the actions set forth in the
final audit reports could require an
issuer to return risk adjustment
(including high-cost risk pool)
payments, or pay increased risk
adjustment (including high-cost risk
pool) charges. We maintained the
regulatory requirements for corrective
action plans for risk adjustment
(including high-cost risk pool) audits
that currently appear in § 153.620(c) in
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proposed paragraph (c)(4), which stated
that (1) the issuer must provide a
written corrective action plan to HHS
for approval within 30 calendar days of
the issuance of the final audit report; (2)
the issuer must implement the
corrective action plan; and (3) the issuer
must provide HHS with written
documentation demonstrating the
adoption and completion of the required
corrective actions.
Lastly, if an issuer fails to comply
with the audit requirements set forth in
proposed § 153.620(c)(2), HHS proposed
in paragraph (c)(5)(i) that HHS would
notify the issuer of payments received
that the issuer has not adequately
substantiated, and in proposed
paragraph (c)(5)(ii), HHS would notify
the issuer that HHS may recoup any
payments identified as not adequately
substantiated. We explained that under
this framework, the continued failure to
comply with the audit requirements and
provide the necessary information to
substantiate the transfer amounts under
review could result in HHS recouping
up to 100 percent of the risk adjustment
(including high-cost risk pool)
payments, or increased risk adjustment
(including high-cost risk pool) charges,
made to an issuer for the applicable
benefit year(s) that are the subject of the
audit.
We noted that any risk adjustment
payments or charges recovered by HHS
during an audit of a risk adjustment
covered plan would be paid on a pro
rata basis similar to the process for risk
adjustment default charge allocations to
the other issuers participating in the
applicable state market risk pool in the
applicable benefit year.118 We noted
that any high-cost risk pool payments or
charges recovered by HHS during an
audit of a risk adjustment covered plan
would be paid on a pro rata basis to
other issuers in the relevant national
market in the form of a reduced highcost risk pool charge in the applicable
benefit year. HHS would not, however,
re-run or otherwise recalculate transfers
for the applicable benefit year if monies
are recouped as a result of an audit
under § 153.620(c).
We sought comment on these
proposals, including HHS’s clarification
of its compliance review authority, the
proposed timeframes for issuers to
respond to audit notices, reports, and
requests for supplemental information,
and the process for issuers to request an
extension to respond to such requests.
We are finalizing the proposed updates
to the audit and compliance reviews of
issuers of risk adjustment covered plans
118 See the 2016 Payment Notice final rule, 80 FR
10780–10781.
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24193
in § 153.620(c), with modifications to
certain audit timelines in response to
comments stating that issuers would
need more time to provide complete and
accurate data for an audit and respond
to HHS requests. We will also adopt the
approach outlined for distribution of
risk adjustment payments or charges
under the state payment transfer
formula recovered by HHS during an
audit of a risk adjustment covered plan
would be paid on a pro rata basis
similar to the process for risk
adjustment default charge allocations to
the other issuers participating in the
applicable state market risk pool in the
applicable benefit year.119 We also
reaffirm that HHS would not re-run or
otherwise recalculate transfers for the
applicable benefit year if monies are
recouped as a result of an audit under
§ 153.620(c). However, after
consideration of comments and further
evaluation, we are not finalizing our
proposal to disburse high-cost risk pool
payments or charges recovered by HHS
during an audit of a risk adjustment
covered plan on a pro rata basis to other
issuers in the relevant national market
in the form of a reduced high-cost risk
pool charge for the same applicable
benefit year. We are continuing to
consider options and the best possible
process to disburse such amounts and
will set forth any proposed process in
future notice-and-comment rulemaking.
We received public comments on the
proposed updates to audits and
compliance reviews of issuers of risk
adjustment covered plans (§ 153.620(c)).
The majority of the comments we
received to this section were general
comments that were also applicable to
the similar amendments proposed in the
sections regarding audits and
compliance reviews of issuers of
reinsurance-eligible plans (§ 153.410(d))
and audits and compliance reviews of
APTC, CSRs, and user fees
(§ 156.480(c)). We responded to these
generally applicable comments in the
below section regarding audits and
compliance reviews of APTC, CSRs, and
user fees (§ 156.480(c)). We received one
comment specific to audits and
compliance reviews of issuers of risk
adjustment covered plans, and the
following is a summary of this comment
and our response.
Comment: One commenter asked for
clarification on the distribution of risk
adjustment amounts that are recovered
as the result of an audit and may be due
to an issuer that is no longer in
business.
Response: As noted above, we will
disburse risk adjustment payments or
119 Ibid.
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charges under the state payment transfer
formula recovered by HHS during a risk
adjustment audit on a pro rata basis
similar to the process for risk
adjustment default charge allocations to
the other issuers participating in the
applicable state market risk pool benefit
year. As such, we will allocate state
payment transfer amounts (payments or
charges) recovered by HHS during an
audit under § 153.620(c) among the
other plans in the impacted state market
risk pool(s) proportional to each plan’s
relative revenue requirement as
calculated under the state payment
transfer formula relative to the market
average of these products.120 HHS will
pursue options to make payments to all
of the appropriate issuers, including
those that may no longer be operating in
the relevant market. As for disbursing
high-cost risk pool payments or charges
recovered by HHS during an audit of a
risk adjustment covered plan, we are
continuing to consider options and the
best possible process to disburse highcost risk pool payments or charges and
will set forth any proposed process in
future notice-and-comment rulemaking.
For example, we may propose in future
notice-and-comment rulemaking a
recoupment disbursement methodology
that provides eligible issuers
participating in the current benefit year
with a reduction in high-cost risk pool
charges.
After consideration of comments on
these proposals, we are finalizing the
majority of the audit and compliance
review provisions as proposed, with
slight modifications to certain audits
timelines in response to comments 121
stating that issuers need more time
during audits to provide complete and
accurate data and respond to HHS
requests. As finalized at § 153.620(c)(1),
HHS will provide at least 30 calendar
days advance notice of its intent to
conduct an audit of an issuer of a risk
adjustment covered plan, rather than the
proposed 15 calendar days.
Additionally, HHS is finalizing at
§ 153.620(c)(4)(i) that if HHS determines
the need for a corrective action plan as
the result of an audit, issuers must
provide a written corrective action plan
to HHS for approval within 45 calendar
days of the issuance of the final audit
report, rather than the 30 calendar days
120 See the 2016 Payment Notice final rule, 80 FR
10780–10781.
121 These comments, along with the other general
comments submitted on the parallel amendments to
the sections on audits and compliance reviews of
reinsurance-eligible plans, risk adjustment covered
plans, and QHP issuer compliance with federal
standards for APTC, CSRs, and user fees, are
summarized and responded to in the below
preamble section on audits and compliance reviews
of APTC, CSRs, and user fees (§ 156.480(c)).
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that currently appears at § 153.620(c)(1)
and was proposed at § 153.620(c)(4)(i).
We adopt the proposed approach for
distribution of risk adjustment
payments or charges under the state
payment transfer formula recovered by
HHS during an audit of a risk
adjustment covered plan and will pay
those amounts on a pro rata basis
similar to the process for risk
adjustment default charge allocations to
the other issuers participating in the
applicable state market risk pool in the
applicable benefit year.122 We reaffirm
that HHS will not re-run or otherwise
recalculate transfers for the applicable
benefit year if monies are recouped as
a result of an audit under § 153.620(c).
As stated above, based on comments
received and after further evaluation, we
are not finalizing our disbursement
proposal for high-cost risk pool
payments or charges recovered by HHS
during an audit of a risk adjustment
covered plan and intend to address this
issue in future rulemaking.
Finally, we clarify that we will recoup
monies owed due to a finding as the
result of an audit of a risk adjustment
covered plan using the same method
with which we collect all debts. That is,
to recoup the amount identified in
§ 153.620(d)(5)(i), we will first net using
the process set forth in 45 CFR
156.1215, and we will then invoice
issuers for the remaining debt (if any is
owed).
5. EDGE Discrepancy Materiality
Threshold
As stated in § 153.710(a) through (c),
an issuer of a risk adjustment covered
plan must provide to HHS, through their
EDGE server,123 access to enrollee-level
plan enrollment data, enrollee claims
data, and enrollee encounter data as
specified by HHS for a benefit year.
Consistent with § 153.730, to be
considered for risk adjustment
payments and charges, issuers of risk
adjustment covered plans must submit
their respective EDGE data by April 30
of the year following the applicable
benefit year. At the end of the EDGE
data submission process, HHS issues
final EDGE server reports 124 which
122 See the 2016 Payment Notice final rule, 80 FR
10780–10781.
123 This is also known as the dedicated
distributed data collection environment.
124 These reports are: Enrollee (Without) Claims
Summary (ECS), Enrollee (Without) Claims Detail
(ECD), Frequency Report by Data Element for
Medical Accepted Files (FDEMAF), Frequency
Report by Data Element for Pharmacy Accepted
Files (FDEPAF), Frequency Report by Data Element
for Supplemental Accepted Files (FDESAF),
Frequency Report by Data Element for Enrollment
Accepted Files (FDEEAF), Claim and Enrollee
Frequency Report (CEFR), High Cost Risk Pool
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reflect an issuer’s data that was
successfully submitted by the data
submission deadline. Within 15
calendar days of the date of these final
EDGE server reports, the issuer must
confirm to HHS that the information in
the final EDGE server reports accurately
reflect the data to which the issuer has
provided access to HHS through its
EDGE server for the applicable benefit
year by submitting an attestation; or the
issuer must describe to HHS any
discrepancies it identifies in the final
EDGE server reports.
HHS reviews all reported EDGE
discrepancies to evaluate the
implications of each incorrect data
submission for risk adjustment transfers
and risk adjustment data validation. For
risk adjustment transfers calculated
under the state payment transfer
formula, HHS evaluates whether the
reported EDGE discrepancy is material
and has a process to address incorrect
EDGE data submissions that have a
material impact on risk adjustment
transfers for a state market risk
pool.125 126 Currently, HHS uses the
same materiality threshold for
reconsideration requests set forth in
§ 156.1220(a)(2) for determining
whether the EDGE discrepancy has a
material impact on the risk adjustment
transfers calculated under the state
payment transfer formula.
Consequently, the reported EDGE
discrepancy is considered material if the
amount in dispute is equal to or exceeds
the lower of either $10,000 or one
percent of the total estimated transfers
in the applicable state market risk pool.
After analyzing reported EDGE
discrepancies in prior benefit years, we
proposed to codify a materiality
threshold for EDGE discrepancies and
also proposed to establish a higher
materiality threshold for EDGE
discrepancies. More specifically, we
proposed the following materiality
threshold for EDGE discrepancies: The
Summary (HCRPS), High Cost Risk Pool Detail
Enrollee (HCRPDE), Risk Adjustment Claims
Selection Summary (RACSS), Risk Adjustment
Claims Selection Detail (RACSD), Risk Adjustment
Transfer Elements Extract (RATEE), Risk
Adjustment Risk Score Summary (RARSS), Risk
Adjustment Risk Score Detail (RARSD), Risk
Adjustment Data Validation Population Summary
Statistics (RADVPS), Risk Adjustment Payment
Hierarchical Condition Category Enrollee
(RAPHCCER), Risk Adjustment User Fee (RAUF).
125 See, for example, https://www.cms.gov/CCIIO/
Resources/Regulations-and-Guidance/Downloads/
EDGE-2019-QQ-Guidance.pdf. Also see 83 FR
16970 through 16971.
126 HHS may also take action on reported material
EDGE discrepancy if the discrepancy involved a
processing error by HHS, HHS’s incorrect
application of the relevant methodology, or a HHS
mathematical error, consistent with the bases upon
which an issuer may request reconsideration under
§ 156.1220.
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amount in dispute must equal or exceed
$100,000 or one percent of the total
estimated transfer amount in the
applicable state market risk pool,
whichever is less.127 Where an
identified material EDGE discrepancy
negatively affects the issuer without
having a negative effect on other issuers
within the state market risk pool, issuers
would be required to adhere to the
initial data submission and accept the
consequences of the data submission,
even when the monetary impact of the
inaccuracy on the issuer submitting
incorrect data is potentially substantial.
Therefore, HHS would generally only
take action on material discrepancies
that harm other issuers in the same state
market risk pool.128 In general we
expect about half of discrepancies that
are material under previous criteria
would no longer be material under the
new criteria.
We proposed to amend § 153.710, by
creating new paragraph (e) and
redesignating paragraphs (e), (f) and (g),
as (f), (g) and (h) respectively, to capture
the proposed EDGE discrepancy
materiality threshold and proposed to
apply it beginning with the 2020 benefit
year.129 We explained that we believe
this increased materiality threshold will
reduce burden on issuers having to
submit additional data to HHS when a
discrepancy is determined to be
potentially material and allow more
certainty and stability for risk
adjustment transfers. If a reported EDGE
discrepancy is determined to not meet
the materiality threshold, HHS would
take no action on the discrepancy and
the issuer’s data submission would
remain as submitted by the data
submission deadline for the applicable
benefit year.
We also explained that while HHS
generally only takes action on reported
material EDGE discrepancies that are
determined to harm other issuers,
issuers must continue to report and
describe any identified EDGE
discrepancy to HHS in a format
specified by HHS for each benefit year.
Issuers must report all data
discrepancies in order to permit HHS to
127 We are not proposing any changes to the
materiality threshold for reconsideration requests in
§ 156.1220(a)(2).
128 Consistent with the current process, HHS may
also take action on reported material EDGE
discrepancies if the discrepancy involved a
processing error by HHS, HHS’s incorrect
application of the relevant methodology, or a HHS
mathematical error, consistent with the bases upon
which an issuer may request reconsideration under
§ 156.1220.
129 The deadline for submission of 2020 benefit
year risk adjustment data is April 30, 2021. See 45
CFR 153.730. As such, the EDGE discrepancy
reporting process for the 2020 benefit year will not
begin until May 2021.
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determine whether such an error is
material and actionable and to evaluate
the impact on other issuers in the state
market risk pool. We sought comment
on the proposed EDGE discrepancy
materiality threshold and the
accompanying amendments to
§ 153.710. We are finalizing the EDGE
discrepancy materiality threshold and
the amendments to § 153.710 as
proposed.
We received public comments on the
proposed updates to the EDGE
discrepancy materiality threshold. The
following is a summary of the comments
we received and our responses.
Comment: Most commenters
supported the proposed increase to the
EDGE discrepancy materiality
threshold. These commenters noted the
increased threshold amount would
enhance program integrity by focusing
efforts on discrepancies that negatively
impact other issuers in the applicable
market risk pool, reduce the
administrative burden associated with
these data requests, and allow more
certainty and stability for risk
adjustment transfers. A few commenters
expressed the belief that the previous
threshold had been too low. One
commenter agreed with increasing the
threshold but noted they lacked the data
to confirm the proposed threshold was
appropriate.
Response: We appreciate the support
for increasing the EDGE discrepancy
materiality threshold. We agree with
commenters that the increased
discrepancy materiality threshold will
reduce issuer burden and allow for more
certainty and stability for risk
adjustment transfers. We also agree that
the current threshold, which was
established to be consistent with the
materiality threshold for reconsideration
requests set forth in 45 CFR
156.1220(a)(2), is too low for
discrepancies and most of the time
required HHS to reallocate minimal
amounts of risk adjustment monies. As
such, we are finalizing the EDGE
materiality threshold as proposed.
In assessing different EDGE
discrepancy materiality thresholds, HHS
analyzed the 2017 benefit year EDGE
discrepancies. Specifically, we reviewed
the discrepancy amounts and impacts
on affected issuers in the impacted state
market risk pools and considered a
variety of threshold amounts. We found
that $100,000 or one percent of the total
estimated transfer amount in the
applicable state market risk pool
balanced reducing the number of
reallocations involving small amounts
with maintaining data integrity and
confidence in the risk adjustment
program.
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24195
After consideration of the comments
on these proposals, for the 2020 benefit
year and beyond, we are finalizing the
EDGE discrepancy materiality threshold
as proposed, including the
accompanying proposed amendments to
§ 153.710, to reflect the amount in
dispute must equal or exceed $100,000
or one percent of the total estimated
transfer amount in the applicable state
market risk pool, whichever is less.
Where an identified material EDGE
discrepancy negatively affects the issuer
without having a negative effect on
other issuers within the state market
risk pool, issuers will be required to
adhere to the initial data submission
and accept the consequences of their
data submission, even when the
negative financial impact of the
inaccuracy on the issuer submitting
incorrect data is above this materiality
threshold. Therefore, HHS will only
take action on material discrepancies
that harm other issuers in the same state
market risk pool.130
6. Risk Adjustment User Fee for 2022
Benefit Year (§ 153.610(f))
If a state is not approved to operate,
or chooses to forgo operating, its own
risk adjustment program, HHS will
operate risk adjustment on its behalf. As
noted previously in this final rule, for
the 2022 benefit year, HHS will be
operating the risk adjustment program
in every state and the District of
Columbia. As described in the 2014
Payment Notice, HHS’s operation of risk
adjustment on behalf of states is funded
through a risk adjustment user fee.131
Section 153.610(f)(2) provides that,
where HHS operates a risk adjustment
program on behalf of a state, an issuer
of a risk adjustment covered plan must
remit a user fee to HHS equal to the
product of its monthly billable member
enrollment in the plan and the PMPM
risk adjustment user fee specified in the
annual HHS notice of benefit and
payment parameters for the applicable
benefit year.
OMB Circular No. A–25 established
federal policy regarding user fees, and
specifies that a user charge will be
assessed against each identifiable
recipient for special benefits derived
from federal activities beyond those
received by the general public. The risk
adjustment program will provide special
130 Consistent with the current process, HHS may
also take action on reported material EDGE
discrepancies if the discrepancy involved a
processing error by HHS, HHS’s incorrect
application of the relevant methodology, or a HHS
mathematical error, consistent with the bases upon
which an issuer may request reconsideration under
§ 156.1220.
131 78 FR 15416 through 15417.
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benefits as defined in section 6(a)(1)(B)
of Circular No. A–25 to issuers of risk
adjustment covered plans because it
mitigates the financial instability
associated with potential adverse risk
selection. The risk adjustment program
also contributes to consumer confidence
in the health insurance industry by
helping to stabilize premiums across the
individual, merged, and small group
markets.
In the 2021 Payment Notice, HHS
calculated the federal administrative
expenses of operating the risk
adjustment program for the 2021 benefit
year to result in a risk adjustment user
fee rate of $0.25 PMPM based on our
estimated costs for risk adjustment
operations and estimated billable
member months for individuals enrolled
in risk adjustment covered plans. For
the 2022 benefit year, we proposed to
use the same methodology to estimate
our administrative expenses to operate
the program. These costs cover
development of the model and
methodology, collections, payments,
account management, data collection,
data validation, program integrity and
audit functions, operational and fraud
analytics, stakeholder training,
operational support, and administrative
and personnel costs dedicated to risk
adjustment program activities. To
calculate the user fee, we divided HHS’s
projected total costs for administering
the risk adjustment programs on behalf
of states by the expected number of
billable member months in risk
adjustment covered plans in states
where the HHS-operated risk
adjustment program will apply in the
2022 benefit year.
We estimate that the total cost for
HHS to operate the risk adjustment
program on behalf of states for the 2022
benefit year will be approximately $60
million, and the risk adjustment user fee
would be $0.25 PMPM. The risk
adjustment user fee costs for the 2022
benefit year are expected to remain
steady from the prior 2021 benefit year
estimates. However, we project a small
decline in billable member months in
the individual and small group markets
overall in the 2022 benefit year based on
the declines observed in the 2019
benefit year. We sought comment on the
proposed risk adjustment user fee for
the 2022 benefit year. We also explained
that we would continue to examine the
costs and enrollment projections for the
2022 benefit year, particularly as we
receive more information on the impact
of the coronavirus disease 2019
(COVID–19) PHE, and proposed to
incorporate any such newly available
data to update the final 2022 benefit
year risk adjustment user fee rate that
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we would announce in the final rule.
We sought comment on these estimates
and the use of any newly available data
to update the estimates to reflect any
emerging cost or enrollment trends for
the final 2022 benefit year user fee. We
are finalizing the 2022 benefit year risk
adjustment user fee as proposed.
We received public comments on the
proposed risk adjustment user fee for
2022 benefit year (§ 153.610(f)) and
accompanying solicitation of comments.
The following is a summary of the
comments we received on the proposed
2022 benefit year user fee and our
responses.
Comment: One commenter expressed
concern regarding HHS’s assumption
that overall enrollment would decline in
the 2022 benefit year, which would
result in an increased risk adjustment
user fee amount. This commenter
requested additional detail on the
projected decrease in billable member
months.
Response: Our methodology for
calculating the 2022 benefit year risk
adjustment user fee was the same as the
one used for 2021 benefit year. But as
the commenter noted, when we
proposed the rule, we anticipated a
small decline in billable member
months in the individual and small
group markets overall based on the
declines observed in 2019 benefit year.
We continue to believe that the finalized
rate will ensure adequate funding for
HHS to operate the risk adjustment
program in all 50 states and the District
of Columbia for 2022. Importantly, we
also note that our assumption of a small
decline in billable member months did
not actually result in any increase in the
risk adjustment user fee from the
previous 2021 benefit year amount.132
After consideration of the comments
on this proposal, we are finalizing the
risk adjustment user fee for the 2022
benefit year as $0.25 PMPM as
proposed.
7. Risk Adjustment Data Validation
Requirements When HHS Operates Risk
Adjustment (HHS–RADV) (§ 153.630)
To ensure the integrity of the HHSoperated risk adjustment program, HHS
conducts risk adjustment data
validation (HHS–RADV) under
§§ 153.350 and 153.630 in any state
where HHS is operating risk adjustment
on a state’s behalf. The purpose of HHS–
RADV is to ensure issuers are providing
accurate and complete risk adjustment
data to HHS, which is crucial to the
purpose and proper functioning of the
HHS-operated risk adjustment program.
HHS–RADV also ensures that risk
adjustment transfers reflect verifiable
actuarial risk differences among issuers,
rather than risk score calculations that
are based on poor data quality, thereby
helping to ensure that the HHS-operated
risk adjustment program assess charges
to issuers with plans with lower-thanaverage actuarial risk while making
payments to issuer with plans with
higher-than-average actuarial risk. HHS–
RADV consists of an initial validation
audit and a second validation audit.133
Under § 153.630, each issuer of a risk
adjustment covered plan must engage an
independent initial validation audit
entity. The issuer provides
demographic, enrollment, and medical
record documentation for a sample of
enrollees selected by HHS to the issuer’s
initial validation auditor for data
validation. Each issuer’s initial
validation audit is followed by a second
validation audit, which is conducted by
an entity HHS retains to verify the
accuracy of the findings of the initial
validation audit.
a. Exemptions From HHS–RADV
(§ 153.630(g))
In 2020 Payment Notice, we codified
several exemptions from the HHS–
RADV requirements. In this rule, we
proposed to codify the previously
established exemption 134 for issuers
who only offer small-group carryover
coverage in the state during the benefit
year being audited at new proposed
§ 153.630(g)(4). As we discussed in the
2020 Payment Notice, under this policy,
a small group market issuer with offcalendar year coverage who exits the
market but has only carry-over coverage
that ends in the next benefit year (that
is, carry-over of run out claims for
individuals enrolled in the previous
benefit year, with no new coverage
being offered or sold in the state) would
be considered an exiting issuer and
would be exempt from HHS–RADV for
the benefit year with the carry-over
coverage.135
We also proposed to codify the
previously established exemption 136 for
issuers who are the sole issuer in a state
market risk pool during the benefit year
that is being audited at new proposed
§ 153.630(g)(5). As we discussed in the
2020 Payment Notice, for single issuer
market risk pool(s), there are no risk
adjustment transfers calculated under
the state payment transfer formula and
thus, no payment or financial
133 45
132 The
2021 benefit year risk adjustment user fee
amount is also $0.25 PMPM. See 85 FR at 29194–
29195.
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CFR 153.630(a) through (c).
FR 17503 through 17504.
135 Ibid.
136 84 FR 17504.
134 84
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accountability to other issuers for that
risk pool.137 As such, a sole issuer in a
state market risk pool is not required to
participate in the HHS-operated risk
adjustment program (except for
purposes of high-cost risk pool
payments and charges) for that state
market risk pool. However, if the sole
issuer was participating in multiple risk
pools in the state during the year that is
being audited, that issuer will be subject
to HHS–RADV for those risk pools with
other issuers that had risk adjustment
transfers calculated under the state
payment transfer formula.
We noted that these exemptions do
not introduce new policies; instead, the
proposed amendments to § 153.630(g)
were simply to codify these previously
established exemptions in regulation.
We also clarified that any issuer that
qualifies for the small group carryover
coverage exemption in new proposed
paragraph (g)(4) would not have its risk
score and its associated risk adjustment
transfers adjusted due to its own risk
score error rate, as the issuer would not
have participated in HHS–RADV for the
benefit year in which it only offered the
small group carryover coverage.
However, that issuer’s risk score and
resulting risk adjustment transfers could
be subject to HHS–RADV adjustments if
other issuers in that state market risk
pool were outliers and received HHS–
RADV risk score error rates for that
benefit year.
We solicited comments on these
proposals.
We only received comments in
support of codifying the HHS–RADV
exemption for issuers who are the sole
issuer in a state market risk pool during
the benefit year being audited and are
finalizing the amendment to
§ 153.630(g)(5) to codify that exemption
as proposed. We received several public
comments on the codification of the
HHS–RADV exemption for issuers
providing only small group carryover
coverage in the benefit year being
audited at § 153.630(g)(4), some of these
comments restated the proposal without
providing an opinion while others
expressed opposition to the proposal.
After consideration of the comments
received, we are also finalizing the
amendment to § 153.630(g)(4) to codify
this exemption as proposed.
The following is a summary of the
comments we received on the
codification of the exemption for issuers
providing only small group carryover
coverage and our responses.
Comment: Some commenters asked
HHS to reconsider the HHS–RADV
exemption for issuers providing only
small group carryover coverage in the
benefit year being audited. These
commenters expressed concern that an
exiting issuer with only small group
carryover coverage may potentially
make up a large portion of the market
for that calendar year. The commenters
also stated that issuers providing only
small group carryover coverage, who
have not undergone HHS–RADV in the
previous 2 years, should still be subject
to HHS–RADV requirements for that
year.
Response: After reviewing the
comments on the proposed amendments
to § 153.630(g)(4), we are finalizing, as
proposed, the codification of the
exemption from HHS–RADV for issuers
providing only small group carryover
coverage in the benefit year being
audited. As discussed above and in the
proposed rule, neither of these
exemptions are new 138 and the
proposals were to codify the previously
established exemptions in regulation.
We continue to believe that both
exemptions are appropriate.
With respect to the exemption for sole
issuers, we believe it is appropriate
because we do not calculate risk
adjustment transfers for a benefit year in
a state market risk pool in which there
is only one issuer and thus, there is no
payment or financial accountability to
other issuers for that risk pool. With
respect to the small group carryover
coverage exemption, we believe that this
exemption ensures that such small
group carryover only issuers (who are
considered exiting issuers) are treated
the same as other exiting issuers with
regards to HHS–RADV requirements.
With respect to concerns that issuers
seeking to use the small group carryover
coverage exemption might make up a
large portion of the market, based on our
past experience operating HHS–RADV
for the 2017 and 2018 benefit years, we
found that issuers that would qualify for
this exemption criteria are typically
very small issuers, with the majority
having fewer than 500 billable member
months statewide or below $15 million
in total premium. As a result, we do not
believe issuers that would qualify for
this exemption would make up a large
portion of a state’s market risk pool and
these issuers have generally had a
reasonable chance of being exempted
under other exemption categories.139
With respect to the comment on
issuers being subject to HHS–RADV
requirements if they have not
participated in HHS–RADV in the
previous 2 years, we note that generally
all issuers of risk adjustment covered
138 See
137 Ibid.
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84 FR 17503 through 17504.
45 CFR 153.630(g)(1) and (g)(2).
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plans in a state market risk pool must
participate in HHS–RADV unless they
qualify for an exemption specified in
153.630(g). As established at
153.630(g)(2), it is only issuers at or
below the materiality threshold that are
subject to random and targeted sampling
for HHS–RADV participation
approximately every 3 years (barring
any risk-based triggers based on
experience that will warrant more
frequent audits). This exemption for
issuers at or below materiality threshold
was created in response to stakeholder
requests to ease the burden of annual
audit requirements for smaller issuers of
risk adjustment covered plans. We
maintain that this exemption for issuers
at or below materiality threshold is
important given the fixed costs
associated with hiring an initial
validation auditor and submitting
results to HHS on an annual basis;
therefore, we do not intend to make
changes to it at this time.
After consideration of the comments
received on these proposals, we are
finalizing the codification of the sole
issuer and small group carryover
coverage issuer exemptions from HHS–
RADV and the amendments to
§ 153.630(g) as proposed.
b. IVA Requirements (§ 153.630(b)(3))
In accordance with § 153.630(b)(3), an
issuer must ensure that its IVA Entity is
reasonably free of conflicts of interest,
such that it is able to conduct the IVA
in an impartial manner and its
impartiality is not reasonably open to
question. In prior rulemaking, we
explained that to meet this standard, the
IVA Entity, among other things, may not
have had a role in establishing any
relevant internal controls of the issuer
related to the risk adjustment data
validation process when HHS is
operating risk adjustment on behalf of a
state, or serve in any capacity as an
advisor to the issuer regarding the
IVA.140 In the proposed rule, we
proposed to amend this standard and
clarify that to demonstrate that the IVA
Entity is reasonably free of conflicts, the
IVA Entity must also not have or
previously have had a role in
establishing any relevant internal
controls of the issuer related to risk
adjustment or the EDGE server data
submission process for the applicable
benefit year for which the IVA Entity is
performing the IVA on behalf of the
issuer. Additionally, the IVA Entity
must also not have served in any
capacity as an advisor to the issuer
regarding the risk adjustment or EDGE
server data submission for the
140 See
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applicable benefit year. For example,
the IVA Entity cannot serve as the
issuer’s third party administrator (TPA)
for purposes of the EDGE data
submission for HHS-operated risk
adjustment in the 2020 benefit year and
serve as the IVA Entity for that issuer for
the 2020 benefit year. We proposed
these changes because we are concerned
about conflicts of interest that could
arise if the same entity assists or
completes the EDGE data submissions
for an issuer for an applicable benefit
year, and then also serves as the IVA
Entity auditing the submission of that
data in HHS–RADV. This proposal was
in addition to the requirements set forth
in 2014 and 2015 Payment Notices.141
We sought comment on this proposal.
The only comments we received on
the proposed updates to IVA
requirements (§ 153.630(b)(3))
supported the proposal noting that there
is a potential conflict of interest if an
IVA Entity for a company also served as
the company’s TPA for purposes of
EDGE data submission or risk
adjustment. These commenters were in
support of the regulatory change. After
consideration of comments on these
proposals, we are finalizing this policy
and the accompanying amendment to
§ 153.630(b)(3) as proposed.
c. HHS–RADV Administrative Appeals
In the 2015 Payment Notice, we
established a three-level administrative
appeals process for issuers to seek
reconsideration of amounts under
certain ACA programs, including the
calculation of risk adjustment charges,
payments and user fees.142 In the 2018
Payment Notice final rule, we extended
this three-level administrative appeal
process to permit issuers to dispute the
findings of a second validation audit
with respect to the 2016 benefit year
HHS–RADV and beyond.143 As
previously explained, issuers are not
permitted to use the discrepancy
reporting or administrative appeal
processes under §§ 153.630(d)(2) and
156.1220, respectively, to contest the
IVA findings, because HHS does not
conduct the IVA or produce those
141 The 2014 Payment Notice final rule required
that that issuers ensure that IVA Entities are
reasonably capable of performing the audit, the
audit is completed, the auditor is free from conflicts
of interest, and the auditor submits information
regarding the IVA to HHS in the manner and
timeframe specified by HHS. 78 FR 15410 at 15437.
The 2015 Payment Notice final rule established
standards and guidelines regarding the
qualifications of the IVA Entity, including further
details on the conflict of interest standards. 79 FR
13744 at 13758–13759.
142 78 FR 13818 through 13820.
143 81 FR 94106.
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results.144 Instead, issuers should
review their IVA findings and discuss
any concerns with its IVA Entity prior
to attesting to and submitting those
results to HHS.145 As explained in the
2020 Payment Notice, only those issuers
who have insufficient pairwise
agreement between the IVA and second
validation audit will receive a Second
Validation Audit Findings Report, and
therefore, have the right to appeal the
second validation audit findings.146 The
existing regulation at § 153.630(d)(2)
captures this policy. In the proposed
rule, we proposed conforming
amendments to paragraph (d)(3) to
similarly add ‘‘if applicable’’ to the
reference to an issuer’s ability to appeal
the findings of the second validation
audit to ensure these regulatory
provisions also appropriately capture
this limitation.147 We sought comment
on these proposed amendments.
The only comment we received on the
proposal to codify the previously
established limits on the ability to
appeal SVA findings as part of the
HHS–RADV administrative appeals
process was in support of the proposed
clarifications. After consideration of the
comments on this proposal, we are
finalizing the conforming amendments
to § 153.630(d)(3) as proposed.
d. Timeline for Collection of HHS–
RADV Payments and Charges
In the 2020 Payment Notice,148 we
finalized an updated timeline for the
publication, collection, and distribution
of HHS–RADV adjustments to transfers.
This timeline was adopted to allow
issuers to report HHS–RADV
adjustments in a later MLR reporting
year and to consider, in accordance with
any guidance from the state DOIs, these
adjustments in rate setting during a later
benefit year (specifically, the year in
which the HHS–RADV adjustments are
collected and paid). We proposed,
beginning with 2019 benefit year HHS–
RADV, to revert to the previous
schedule 149 for the collection of HHS–
144 Ibid.
145 See, for example, Sections 9.1, 9.5 and 9.7 of
the ‘‘2017 Benefit Year Protocols ACA HHS Risk
Adjustment Data Validation, Version 2.0,’’ August
10, 2018.
146 84 FR 17495. If the pairwise means test results
conclude there is sufficient agreement between the
IVA and SVA findings, the IVA findings are used
to adjust risk scores. Issuers with sufficient pairwise
agreement do not receive a Second Validation Audit
Findings Report and there are no SVA findings to
appeal. See 84 FR at 17495.
147 As detailed further below, we propose similar
conforming amendments to the references to an
issuer’s ability to appeal the findings of the second
validation audit in 45 CFR 156.1220(a)(1) and (a)(3).
148 84 FR 17506 through 17507.
149 See 79 FR 13768 and 13769. Also see, for
example, Table 3 in the document entitled
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RADV charges and disbursement of
payments in the calendar year in which
HHS–RADV results are released (for
example, collection and disbursement of
2021 benefit year HHS–RADV
adjustments would begin in summer or
fall of 2023). We are finalizing the
change in the HHS–RADV adjustment
timeline as proposed.
HHS publishes the final summary
report of risk adjustment transfers
(without HHS–RADV adjustments) and
information on risk adjustment default
charges for the applicable benefit year in
the summer of the year after the
applicable benefit year (typically June
30th of the year after the applicable
benefit year), and issuers report those
risk adjustment amounts in their MLR
reports by July 31st of the year after the
applicable benefit year.150 Payment and
collection of these risk adjustment
transfer and default charge amounts
generally occurs in August and
September of the year after the
applicable benefit year. We separately
report the HHS–RADV adjustments and
information on default data validation
charges for the applicable benefit year
approximately one year after the final
summary report of risk adjustment
transfers for that benefit year is
published (typically 2 years after the
applicable benefit year in August 151).
Under the HHS–RADV timeline
effective prior to the publication of this
rule, HHS begins collection and
disbursement of HHS–RADV
adjustments and default data validation
charges and allocations 2 years after
announcing the HHS–RADV
adjustments (for example, collection
and disbursement of 2017 benefit year
HHS–RADV adjustments will begin in
2021 152). For MLR reporting purposes,
under the 2020 Payment Notice
approach applicable through 2018
benefit year HHS–RADV, issuers will
‘‘Proposed Key Dates for Calendar Year 2019:
Qualified Health Plan (QHP) Certification in the
Federally-facilitated Exchanges (FFEs); Rate
Review; and Risk Adjustment.’’ Available at https://
www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/Key-Dates-Table-forCY2019.pdf.
150 The one exception is for the rare
circumstances that HHS is unable to collect full risk
adjustment charges in a state market risk pool or
high-cost risk pool charges in a national market risk
pool. In such situations, issuers receiving lesser
payments can reflect the reductions in their MLR
reports.
151 HHS–RADV adjustments for the 2019 benefit
year will be published under a different timeline
due to the COVID–19-related delay in HHS–RADV
activities for the 2019 benefit year. See https://
www.cms.gov/files/document/2019-HHS-RADVPostponement-Memo.pdf.
152 https://www.cms.gov/CCIIO/Programs-andInitiatives/Premium-Stabilization-Programs/
Downloads/BY2017-HHSRADV-Adjustments-to-RATransfers-Summary-Report.pdf.
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reflect the HHS–RADV adjustment
amounts and default data validation
charges and allocations in the MLR
reporting year in which collections and
payments of those amounts occur.
Subject to approval by state DOIs,
issuers are also permitted to reflect
these amounts in rate setting for the
same benefit year in which those
amounts are paid or collected. For
example, 2017 benefit year HHS–RADV
adjustments and default data validation
charges and allocations were announced
in August 2019 and issuers will report
these amounts in the 2021 MLR
reporting year (MLR reports filed in
2022), the same year that the
adjustments and default data validation
charges will be collected and paid.
Additionally, subject to permission by
state DOIs, issuers were permitted to
account for the impacts of those 2017
benefit year HHS–RADV adjustments in
rate setting for the 2021 benefit year.
The 2020 Payment Notice timeline
was intended to address stakeholder
concerns regarding the predictability of
HHS–RADV adjustments, especially for
the initial payment year. However, since
the publication of the 2020 Payment
Notice, we have received feedback
stating that the extended timeline has
not provided the increased flexibility
intended by the policy and instead has
introduced undue complexity.
Specifically, stakeholders have
expressed concern that this policy
conflicts with state requirements for
financial accounting, and can negatively
impact their MLR rebate position,
particularly if the issuer experiences
substantial changes in enrollment over
the 3-year MLR calculation period.153
Additionally, in the 2020 HHS–RADV
Amendments Rule, we finalized a
transition from the prospective
application of HHS–RADV
adjustments 154 to a concurrent
application beginning with 2020 benefit
year HHS–RADV.155 More specifically,
we finalized a policy to transition to
applying HHS–RADV adjustments to the
risk scores and transfers of the same
benefit year being audited for all issuers
(for example, 2021 benefit year HHS–
RADV adjustments will apply to 2021
benefit year risk scores and risk
adjustment transfers, rather than to 2022
benefit year risk scores and risk
153 Issuer MLRs are calculated using a 3-year
average. See section 2718(b)(1)(B)(ii) of the Act and
45 CFR 158.220(b).
154 The exception to the prospective application
of HHS–RADV adjustments is for exiting issuers,
whose HHS–RADV results are currently used to
adjust risk scores and transfers for the benefit year
being audited (rather than the following benefit
year’s transfers). See 83 FR 16965 through 16966
and 84 FR 17503 through 17504.
155 85 FR 77002–77005.
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adjustment transfers, as would have
taken place prior to the finalization of
the 2020 HHS–RADV Amendments
Rule).156 To transition to this policy,
HHS will average the 2019 and 2020
benefit year HHS–RADV results of nonexiting issuers who participated in risk
adjustment for both benefit years 157 to
calculate the HHS–RADV adjustment to
2020 benefit year risk scores and
transfers, and will publish the HHS–
RADV adjustments to transfers along
with information on any default data
validation charges imposed for both
benefit years.158 Beginning with the
2021 benefit year of HHS–RADV, risk
scores and transfers will only be
adjusted once based on the same benefit
year’s HHS–RADV results (that is, 2021
benefit year HHS–RADV results would
adjust 2021 benefit year plan liability
risk scores).
Although the operational timelines of
the risk adjustment program and the
nature of HHS–RADV causes HHS–
RADV results to always be at least a year
behind the associated risk adjustment
transfers report, we have continued to
consider these issues. The above
referenced changes to the benefit year to
which HHS–RADV adjustments are
applied also lead us to revisit these
issues. We adopted the 2020 Payment
Notice timeline to provide issuers (and
states) with more options on how and
when to account for the financial
impacts from HHS–RADV. However, as
noted above, stakeholder feedback has
indicated that the approach did not
achieve its policy goal and instead
introduced unnecessary complexity.
Therefore, we proposed to revert to the
previous schedule for collection and
156 Ibid.
157 Exiting and new issuers who participate in
only one of the two benefit years will not have their
results for 2019 and 2020 averaged before being
applied to the relevant benefit year’s transfers. For
exiting issuers, positive error rate outlier issuers’
2019 and 2020 HHS–RADV results will be applied
to the risk scores and risk adjustment transfers for
the benefit year being audited. If a new issuer
entered a state market risk pool in 2020, its plan
liability risk score(s) and risk adjustment transfer
for the 2020 benefit year could be impacted by the
new issuer’s own 2020 HHS–RADV results, the
combined 2019 and 2020 HHS–RADV results of
other non-exiting issuers in the same state market
risk pool, as well as the 2020 HHS–RADV results
of exiting positive error rate outlier issuers in the
same state market risk pool.
158 We note that we intend to publish a separate
2019 benefit year HHS–RADV results memo that
will provide an overview of the 2019 benefit year
error rate results. We also plan to release a separate
2019 benefit year HHS–RADV Summary Report that
details adjustments to 2019 benefit year risk scores
and transfers if there are any exiting positive error
rate outlier issuers in the 2019 benefit year of HHS–
RADV. The average error rate approach is not
applicable for these issuers because exiting issuers
who participated in 2019 HHS–RADV will not have
2020 benefit year risk scores or transfers to adjust.
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24199
disbursement of HHS–RADV
adjustments and default data validation
charges and begin such activities in the
summer or fall of the calendar year in
which HHS–RADV results are released.
For example, collection of 2021 benefit
year HHS–RADV adjustments and
default data validation charges and
disbursement of such amounts would
begin in summer or fall of 2023. In
support of the new proposed timeline
for collection and disbursement of
HHS–RADV adjustments and default
data validation charges, we explained
that HHS would need to release the
applicable benefit year’s report on HHS–
RADV adjustments and default data
validation charges earlier in the year so
the amounts are available for issuers to
use for MLR reporting purposes. We
therefore also proposed to release the
applicable benefit year’s HHS–RADV
summary report no later than early
summer, and require issuers to report
those amounts in the MLR reports
submitted by July 31st of the same
calendar year in which the results are
released. For example, as proposed, the
summary report on 2021 benefit year
HHS–RADV adjustments and default
data validation charges and allocations
would be released no later than early
summer 2023, and issuers would be
instructed to report these amounts in
the 2022 MLR reporting year (MLR
reports that include 2022 benefit year
data that are submitted by July 31, 2023;
See Table 9). We would then collect and
disburse HHS–RADV adjustments and
default data validation charges and
allocations in summer or fall of the
calendar year in which HHS–RADV
results are released (for example,
collection and disbursement of 2021
benefit year HHS–RADV adjustments
and default data validation charges
would begin in summer or fall of 2023).
We noted that the Unified Rate Review
Template (URRT) instructions currently
permit issuers and states to consider
HHS–RADV impacts in rates for the year
when these amounts will be collected
and disbursed and specified, as an
example, that as 2017 RADV
adjustments will be collected in the
2021 calendar year, a state may allow
issuers to consider these adjustments in
their 2021 rate setting. Therefore, in the
proposed rule, we proposed to remove
this flexibility from the URRT
instructions.
We further explained that the
proposed timeline would help mitigate
concerns regarding the incongruity with
state financial accounting requirements,
as well as potential undue impacts of
HHS–RADV adjustments on MLR rebate
liability, which could result from the
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HHS–RADV adjustments being reported
outside the 3-year MLR aggregation
window and thus potentially distorting
the MLR experience of the benefit year
to which HHS–RADV adjustments
apply. Additionally, we noted this
proposed change may also help mitigate
the impact of any substantial changes in
enrollment between benefit years.
We proposed to begin this policy with
the collection and disbursement of
HHS–RADV adjustments and default
data validation charges for the 2019
benefit year and noted that due to the
delay in the 2019 benefit year HHS–
RADV,159 the timing of collections and
disbursements is different for the 2019
benefit year. We sought comment on
this proposal and whether any
consideration should be made in the
transition to this policy to account for
2017 and 2018 benefit year HHS–RADV
collection and disbursement of
payments and charges (under the 2020
Payment Notice timeline) also occurring
in 2021 and 2022.
We are finalizing the updates to the
timeline for collection of HHS–RADV
payments and charges, as proposed. As
such, HHS will publish the 2019 and
2020 benefit year HHS–RADV Summary
Report for non-exiting issuers in early
summer of 2022.160 161 Issuers will also
be required to include any payments
and charges reflected on this report,
along with risk adjustment transfers for
the 2021 benefit year, in their 2021 MLR
159 HHS–RADV adjustments for the 2019 benefit
year will be published under a different timeline
due to the COVID–19-related delay in HHS–RADV
activities for the 2019 benefit year. See https://
www.cms.gov/files/document/2019-HHS-RADVPostponement-Memo.pdf.
160 In the proposed rule, we proposed to publish
separate 2019 and 2020 summary reports in early
summer of 2022. However, as noted earlier in this
preamble, in the 2020 HHS–RADV Amendments
Rule (85 FR 77002–77005), we finalized a transition
from the prospective application of HHS–RADV
adjustments to a concurrent application beginning
with 2020 benefit year HHS–RADV. To effectuate
this transition, HHS–RADV adjustments for issuers
who participated in both the 2019 and 2020 benefit
years will be averaged together and applied to 2020
risk adjustment risk scores. As a result, we will be
publishing a single HHS–RADV summary report in
calendar year 2022 that details transfer information
from both the 2019 and 2020 benefit years of HHS–
RADV.
161 Consistent with the current application of
HHS–RADV results for exiting issuers identified as
positive error rate outliers, issuers who fit this
description for 2019 HHS–RADV will have their
results applied to the risk scores and transfer
amounts for the benefit year being audited, that is,
the 2019 benefit year. See the 2020 Payment Notice,
84 FR at 17503–17504. We will publish the 2019
HHS–RADV Summary Report for these issuers (if
any) in the 2022 calendar year. Additionally, as
finalized in the 2020 Payment Notice, for HHS–
RADV benefit years beginning with 2018, HHS only
adjusts exiting issuers if they are positive error rate
outliers. This policy remains unchanged for the
2019 benefit year and beyond. See the 2020 HHS–
RADV Amendments Rule (85 FR at 77003).
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reports, which must be filed by July 31,
2022. Issuers will be required to report
the 2019 and 2020 benefit year HHS–
RADV adjustments to transfers
(including default data validation
charge and allocation amounts) in their
MLR reports for the 2021 MLR reporting
year (MLR reports that include 2021
benefit year data that are submitted by
July 31, 2022). Finally, HHS will begin
collecting both 2019 162 and 2020 HHS–
RADV adjustments to transfers for nonexiting issuers along with any default
data validation charges imposed for
these 2 benefit years and disbursing
related payments in late summer or
early fall of 2022.
We received public comments on the
proposed updates to the timeline for
collection of HHS–RADV payments and
charges. The following is a summary of
the comments we received on the
proposed updated timeline and our
responses.
Comment: Many commenters
expressed general support for reverting
to the original schedule for the
collection and disbursement of HHS–
RADV payments and charges.
Commenters largely concurred with
HHS that these changes would help
resolve incongruities with state
financial accounting requirements and
potential undue impacts of HHS–RADV
adjustments on MLR rebate liability for
issuers whose enrollment experiences
substantially change over a 3-year
period. However, other commenters
were concerned about the overlap that
would occur during the transition
period as issuers would be required to
report 2017 benefit year HHS–RADV
impacts alongside 2019 and 2020
benefit years HHS–RADV impacts 163
during 2021 MLR reports (filed in
summer 2022) and would be required to
report 2018 and 2021 HHS–RADV
impacts in their 2022 MLR reports (filed
in summer 2023). Some of these
commenters requested clarification
about how the proposed policy affects
reporting of 2017 and 2018 HHS–RADV
adjustments, while one commenter
suggested that 2017 HHS–RADV be
reported in 2020 MLR filings and 2018
162 See https://www.cms.gov/files/document/
2019-HHS-RADV-Postponement-Memo.
163 2019 HHS–RADV is delayed due to COVID–
19 and, as such, results are scheduled to be released
in late spring/early summer 2022 (See https://
www.cms.gov/files/document/2019-HHS-RADVPostponement-Memo.pdf). Furthermore, we
finalized in the 2020 RADV Amendments Rule (85
FR 77002–77005) that 2019 and 2020 error rates for
non-exiting issuers will be averaged together at the
issuer level and will be applied to 2020 risk
adjustment transfers. Positive error rate exiting
issuer HHS–RADV adjustments for the 2019 and
2020 benefit years will continue to be applied
separately to the risk scores and transfers for the
respective benefit year being audited.
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HHS–RADV adjustments be reported in
2021 filings. Another commenter noted
the overlap in timelines, but did not see
the need to account for 2017 and 2018
HHS–RADV adjustments differently
than was proposed.
Finally, we received a few comments
requesting that we retain the allowance
in the URRT for states to determine
whether an adjustment for HHS–RADV
in the URRT would be reasonable and
justifiable in any particular benefit year.
Response: After considering all
comments on the proposed updated
timeline, we are finalizing the changes
to the timeline for collection and
disbursement of HHS–RADV results as
proposed, beginning with the 2019
benefit year of HHS–RADV.164 In
response to comments concerning the
transition period between the current
HHS–RADV timeline (applicable for the
2017 and 2018 benefit years) and the
timeline finalized in this rule
(applicable beginning with the 2019
benefit year), we considered whether
accommodations would be needed
during the transition period as we
recognize that the transition years will
result in 2 years of HHS–RADV being
reported during one MLR reporting
period.
This included consideration of the
options from the commenter suggesting
that 2017 HHS–RADV be reported in
2020 MLR filings and 2018 HHS–RADV
adjustments be reported in 2021 filings.
However, we did not propose and are
not making any changes with respect to
the timeline for collection and
disbursement of HHS–RADV results for
the 2017 or 2018 benefit year of HHS–
RADV. We also do not believe these
alternative options would appropriately
address 2017 and 2018 HHS–RADV for
MLR reporting purposes. First, the
current timeline for 2017 and 2018
HHS–RADV were established in noticeand-comment rulemaking,165 and as
such, issuers have expected and are
preparing to report these amounts on
their 2021 and 2022 MLR reports,
respectively, since the finalization of the
2020 Payment Notice. Second, we note
that the suggested option would require
that 2018 HHS–RADV be reported
alongside the combined results for 2019
and 2020 RADV, which would create—
rather than eliminate or mitigate—the
same concerns the commenter was
trying to address through their
alternative suggestions. The alternative
would just shift the overlap to a
different MLR reporting year. We further
note this type of overlap during a
transition period is a natural result of
164 Ibid.
165 84
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implementing this type of policy
change.
As outlined elsewhere in this rule and
in the proposed rule, after further
consideration of stakeholder concerns
regarding the timeline established in the
2020 Payment Notice, we proposed and
are finalizing the proposed update to
revert to the prior schedule for
collection and disbursement of HHS–
RADV results beginning with the 2019
benefit year. This update responds to
stakeholder concerns about the potential
conflicts with certain state accounting
requirements and the potential negative
impact on certain issuers’ MLR rebate
position. It also aligns with other
recently finalized changes to HHS–
RADV program requirements. We intend
to monitor implementation of the
collection and disbursement of HHS–
RADV payments and charges, including
feedback on lessons learned from
stakeholders, and will consider whether
further guidance or consideration of
these issues is warranted.
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To assist stakeholders in
understanding the MLR reporting period
associated with each benefit year of risk
adjustment and HHS–RADV,
incorporating the updated timeline that
is finalized in this rule, we have created
the following table that explains which
benefit years of risk adjustment and
HHS–RADV adjustments should be
reported in which MLR reporting years
for the 2020–2025 MLR Reporting Years:
TABLE 9: Risk Adjustment and HHS-RADV Benefit Years to Include in MLR Reports
for MLR Re ortin Years 2020-2025
2017
2019 & 2020 *, **
2022 (Filed in 2023)
2022
2018
2021*
2023 Filed in 2024
2023
2022
2024 Filed in 2025
2024
2023
2025 Filed in 2026
2025
2024
* Including multiple years ofHHS-RADV due to transition to the policy finalized in this rule to revert to
the prior schedule for collection and disbursement ofHHS-RADV results beginning with the 2019 benefit
year.
** See 2020 HHS-RADV Amendments Rule, where we fmalized a transition from the prospective
application ofHHS-RADV adjustments. [The exception to the prospective application ofHHS-RADV
adjustments is for exiting issuers, whose HHS-RADV results are currently used to adjust risk scores and
transfers for the benefit year being audited (rather than the following benefit year's transfers). See 83 FR
16965 - 66 and 84 FR 17503 - 04.]
Finally, we disagree with commenters
who suggest retaining portions of the
URRT instructions pertaining to
reporting HHS–RADV adjustments that
allowed states the option to allow
issuers to take into consideration the
impact of HHS–RADV from another
benefit year in rating for the upcoming
benefit year. Without the 2-year delay
between the release of HHS–RADV
results and the collections of HHS–
RADV adjustments, we are concerned
that the continued inclusion of these
instructions would be confusing.
Further, there is no longer a connection
between the collection and
disbursement of HHS–RADV
adjustments and the applicable
upcoming benefit year to support
continuing to provide the flexibility in
the URRT instructions. We intend to
monitor implementation of the
collection and disbursement of HHS–
RADV payments and charges and will
consider whether further guidance is
needed.
e. Second Validation Audit and Error
Rate Discrepancy Reporting Windows
Under § 153.630(d)(2), issuers have 30
calendar days to confirm the findings of
the SVA (if applicable) or the
calculation of the risk score error rate,
or file a discrepancy report, in the
manner set forth by HHS, to dispute the
foregoing. As explained in the 2020
Payment Notice, only those issuers who
have insufficient pairwise agreement
between the IVA and SVA receive SVA
findings.166 We proposed to amend
paragraph (d)(2) to shorten the window
to confirm the findings of the SVA (if
applicable) or the calculation of the risk
score error rate, or file a discrepancy, to
within 15 calendar days of the
notification by HHS, beginning with the
2020 benefit year HHS–RADV. The
proposed shorter discrepancy reporting
timeframes were intended to ensure that
we can resolve as many issues as
possible in advance of publication of the
Summary Report of Risk Adjustment
Data Validation Adjustments to Risk
Adjustment Transfers for the applicable
166 84
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benefit year. Based on the first 2
payment years of HHS–RADV, we
explained that HHS believes that this
shortened window would not be overly
burdensome to issuers, and that any
disadvantages of this shortened window
would be outweighed by the benefits of
timely resolution of as many
discrepancies as possible prior to the
release of the Summary Report of Risk
Adjustment Data Validation
Adjustments to Risk Adjustment
Transfers for the applicable benefit year.
We further noted that a 15 calendar day
discrepancy reporting window is
consistent with the IVA sample and
EDGE discrepancy reporting windows at
§§ 153.630(d)(1) and 153.710(d),
respectively. We proposed shortening
the discrepancy window in the 2020
Payment Notice, but did not finalize the
proposal in response to comments
suggesting that we revisit this proposal
once we had completed a payment year
of HHS–RADV.
We are not finalizing the proposal to
shorten the discrepancy reporting
windows under § 153.630(d)(2) for
issuers to confirm the findings of the
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SVA (if applicable) or the calculation of
the risk score error rate, or file a
discrepancy report to dispute the
foregoing from 30 to 15 calendar days
and will instead maintain the existing
30 calendar day discrepancy reporting
windows.
We received public comments on the
proposed updates to the SVA and error
rate discrepancy reporting windows.
The following is a summary of the
comments we received and our
responses.
Comment: Commenters were opposed
to the proposal to shorten the SVA and
risk score error rate attestation and
discrepancy reporting timeframe from
30 to 15 days and instead recommended
maintaining the existing 30 calendar
day reporting window. Several
commenters stated that they believed
that the proposed 15-day timeline
would not provide adequate time for
issuers to complete a thorough review of
the SVA findings or the calculation of
the risk score error rate. Another
commenter suggested that the
timeframes could be shortened
elsewhere in the HHS–RADV process in
order to keep the 30-day reporting
timeframes, noting that it would be
helpful for issuers to receive their HHS–
RADV error rates sooner for use in
pricing.
Response: After consideration of the
comments received, we are not
finalizing the proposal to shorten the
attestation and discrepancy reporting
window under § 153.630(d)(2) from 30
to 15 calendar days and will instead
maintain the existing 30 day attestation
and discrepancy reporting window.
Issuers will continue to have 30
calendar days to confirm the findings of
the SVA (if applicable) or the
calculation of the risk score error rate,
or file a discrepancy report.
As a result of these comments, we are
not finalizing the proposal to shorten
the SVA and risk score error rate
attestation and discrepancy reporting
timeframes from 30 calendar days to 15
calendar days.
8. Risk Adjustment Data Reporting
Requirements for Future Premium
Credits (§ 153.710)
As detailed earlier in this preamble,
on September 2, 2020, we issued an
interim final rule (IFR) on COVID–19
wherein we set forth risk adjustment
reporting requirements for issuers
offering temporary premium credits in
the 2020 benefit year to align with the
relaxed enforcement policy announced
in guidance.167 For the 2021 benefit year
167 See, for example, ‘‘Temporary Policy on 2020
Premium Credits Associated with the COVID–19
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and beyond, we proposed to
permanently adopt these risk
adjustment reporting requirements for
all health insurance issuers in the
individual and small group markets
who elect to offer premium credits
during a public health emergency
declared by the Secretary of HHS
(declared PHE) 168 if the premium
credits are permitted by HHS in future
benefit years. Specifically, we proposed
that issuers of risk adjustment covered
plans that provide temporary premium
credits during a declared PHE when
permitted by HHS in future benefit
years must report to their EDGE servers
adjusted plan premiums that reflect
actual premiums billed to enrollees,
taking the premium credits into account
as a reduction in premiums. In the
proposed rule, we also proposed to
clarify that HHS’s calculation of risk
adjustment payment and charges for the
2021 benefit year and beyond under the
state payment transfer formula would be
calculated using the statewide average
premium reflecting actual premiums
billed, which takes into account any
temporary premium credits provided as
a reduction in premium for the
applicable months of coverage during a
declared PHE when permitted by HHS
in future benefit years.169
As noted in the September 2020 IFR
on COVID–19, we believe that these
requirements are necessary and
appropriate because if HHS permitted
issuers that provided premium credits
to submit unadjusted premiums for the
purposes of calculating risk adjustment,
distortions could occur that financially
impact individual issuers. For example,
absent the requirement that issuers
offering premium credits report the
adjusted, lower premium amount for
risk adjustment purposes, an issuer with
a large market share with higher-thanaverage risk enrollees that provides
temporary premium credits would
inflate the statewide average premium
by submitting the higher, unadjusted
premium amount, thereby increasing its
risk adjustment payment. In such a
scenario, a smaller issuer in the same
Public Health Emergency,’’ August 4, 2020.
Available at https://www.cms.gov/CCIIO/Programsand-Initiatives/Health-Insurance-Marketplaces/
Downloads/Premium-Credit-Guidance.pdf.
168 The Secretary of the Department of HHS may,
under section 319 of the PHS Act determine that:
(a) A disease or disorder presents a public health
emergency; or (b) that a public health emergency,
including significant outbreaks of infectious disease
or bioterrorist attacks, otherwise exists.
169 As noted above, we are finalizing this
clarification and will calculate transfers under the
state payment transfer for the 2021 benefit year and
beyond using the statewide average premium,
reflecting actual premiums billed, taking into
account any temporary premium credits provided
during a declared PHE when permitted by HHS.
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state market risk pool that owes a risk
adjustment charge, and also provides
premium credits to enrollees, would pay
a risk adjustment charge that is
relatively higher than it would have
been if it were calculated based on a
statewide average that reflected the
actual, reduced premium charged to
enrollees by issuers in the state market
risk pool.
Therefore, we believe that requiring
issuers that offer temporary premium
credits during a declared PHE, when
permitted by HHS, to accurately report
to the EDGE server the adjusted, lower
premium amounts actually billed to
enrollees is most consistent with
existing risk adjustment program
requirements and mitigates the
distortions that would occur if issuers
that offer these temporary premium
credits did not report the actual
amounts billed to enrollees, while not
imposing additional financial burdens
on issuers, as compared to an approach
that would permit issuers to report
unadjusted premium amounts. We
requested comment on this proposal.
We are finalizing this policy as
proposed. Issuers of risk adjustment
covered plans that provide temporary
premium credits when permitted by
HHS in the 2021 benefit year and
beyond during a declared PHE must
report to their EDGE servers adjusted
plan premiums that reflect actual
premiums billed to enrollees, taking the
premium credits into account as a
reduction in premiums for the
applicable months of coverage.
We received public comments on the
proposals related to risk adjustment data
reporting requirements for future
premium credits (§ 153.710) and the
accompanying proposed policies related
to the calculation of plan average
premium and state average premium
requirements for extending future
premium credits (§ 153.320). The
following is a summary of the comments
we received and our responses.
Comment: Several commenters stated
that they supported the policies related
to the adoption of the flexibility to allow
issuers to grant temporary premium
credits to beneficiaries should a future
PHE be declared as this supports
beneficiary access to care. One
commenter expressed concern that
allowing plans to change their
premiums with knowledge of their
competitors’ premiums in the state
market risk pool gives them an unfair
advantage in risk adjustment. This
commenter was concerned that a plan
that initially offered too high a premium
relative to its risk could offer a premium
reduction to lower its risk adjustment
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payout after knowing its competitors
pricing structure.
Response: We believe that it is
important to require issuers that choose
to offer temporary premium credits
during a declared PHE to report the
actual reduced amount of premium
billed to enrollees in the state market
risk pool. If HHS permitted issuers that
provided premium credits to submit
unadjusted premiums for the purposes
of calculating risk adjustment,
distortions could occur that financially
impact other issuers. For example,
absent the requirement that issuers that
offer premium credits report the
adjusted, lower premium amount for
risk adjustment purposes, an issuer with
a large market share with higher-thanaverage risk enrollees that provides
temporary premium credits would
inflate the statewide average premium
by submitting the higher, unadjusted
premium amount, thereby increasing its
risk adjustment payment. In such a
scenario, a smaller issuer in the same
state market risk pool that owes a risk
adjustment charge, would pay a risk
adjustment charge that is relatively
higher than it would have been if it
were calculated based on a statewide
average that reflected the actual,
reduced premium billed to enrollees by
the issuer in the state market risk pool.
Therefore, the finalized approach is
most consistent with existing risk
adjustment program requirements and
mitigates the distortions that would
occur if issuers that offer these
temporary premium credits did not
report the actual amounts billed to
enrollees, while not imposing additional
financial burdens on issuers, as
compared to an approach that would
permit issuers to report unadjusted
premium amounts.
We also note that this proposal does
not seek to extend or expand issuer
ability to offer temporary premium
credits. Rather, we proposed to
permanently adopt policies to guide risk
adjustment calculations and reporting if
issuers of risk adjustment covered plans
elect to offer premium credits during a
declared PHE when permitted by HHS
in future benefit years. By limiting this
policy to future declared PHEs, the
potential creation of incentives for
issuers to adjust premiums with
knowledge of their competitors’
premiums in an attempt to achieve a
more favorable risk adjustment transfer
(that is, a higher payment or lower
charge) is limited. Further, we believe
the benefits associated with encouraging
issuers to provide temporary premium
credits to help consumers maintain
continuous health coverage during a
declared PHE outweigh these potential
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risks and is an appropriate approach to
balancing the different equities involved
during declared PHEs.
Comment: A few commenters
expressed concern as to how small
group market plans will be able submit
the actual premium amount billed to
plan enrollees through EDGE data, as
small group market premium reporting
is completed at a subscriber level. These
commenters requested that HHS clarify
the intended approach for issuers facing
this operational challenge.
Response: We understand the
importance of clarifying this process for
all issuers in the individual and small
group markets (including merged
markets) who offer temporary premium
credits during a declared PHE, when
permitted by HHS for future benefit
years, may fulfill the data reporting
requirements to offer premium credits
during a declared PHE if the premium
credits are permitted by HHS in future
benefit years. Issuers of small group
plans should apply the premium credit
or discount provided in the small group
market uniformly to all enrollees in the
policy eligible for the credit for the
applicable month, ensuring that the
aggregate premium reflected in their
internal system and EDGE is the lower,
reduced amount for that month,
including any premium changes that
result from retro-active enrollment
changes. If these premium credits are
permitted in the 2021 benefit year or
beyond, we intend to continue to work
closely with issuers to implement this
policy and will consider whether
further guidance is warranted.
Comment: Several commenters
supported the proposed approach to use
the actual premium amount billed to
enrollees, reflective of permitted
temporary premium credits, when
calculating the plan average premium
and statewide average premium for their
application in the risk adjustment
program. A few of these commenters
also mentioned that they supported our
proposal to follow this approach when
calculating the plan average premium
and state average premium calculation
in states with approved state flexibility
requests under § 153.320(d).
Response: We appreciate these
comments and agree with commenters.
We are finalizing this policy as
proposed. This policy ensures that the
plan average premium and statewide
average premium used in the state
payment transfer formula is calculated
using the actual premiums billed to plan
enrollees, and also applies this
methodology to the calculation of
transfers under the state payment
transfer formula in states that receive
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approval for a request to reduce
transfers under § 153.320(d).
After consideration of comments on
these proposals, we are finalizing as
proposed the policy to permanently
adopt these risk adjustment reporting
requirements for the 2021 benefit year
and beyond, for all issuers of risk
adjustment covered plans who elect to
offer premium credits during a PHE
declared by the Secretary of HHS
(declared PHE) if the premium credits
are permitted by HHS in future benefit
years. We are also finalizing, as
proposed, the permanent adoption of
the accompanying policy for HHS to
calculate the plan average premium and
statewide average premium under the
state payment transfer formula using
issuers’ adjusted premium amounts,
reflective of temporary premium credits
provided by issuers during a declared
PHE when such credits are permitted by
HHS. That is, the lower actual
premiums for which plan enrollees
would be responsible would be the
amounts used in the calculations under
the state payment transfer formula to
reflect these temporary premium
credits. This approach will also extend
to calculations under the state payment
transfer formula in states that receive
approval for a request to reduce
transfers under § 153.320(d).
D. Part 155—Exchange Establishment
Standards and Other Related Standards
Under the Affordable Care Act
1. Definitions (§ 155.20)
a. Definitions of QHP Issuer Direct
Enrollment Technology Provider and
Agent or Broker Direct Enrollment
Technology Provider
We proposed to amend § 155.20 to
add a definition of QHP issuer direct
enrollment technology provider, which
we proposed to mean a business entity
that provides technology services or
provides access to an information
technology platform to QHP issuers to
facilitate participation in direct
enrollment under §§ 155.221 and
156.1230. We also proposed that this
definition of QHP issuer direct
enrollment technology provider
explicitly acknowledge that a webbroker may also provide services to QHP
issuers as a QHP issuer direct
enrollment technology provider to
clarify that being a web-broker does not
preclude that entity from providing
technology services or an information
technology platform to QHP issuers to
facilitate QHP issuers’ participation in
direct enrollment. In addition, we
proposed to modify the current
definition of direct enrollment
technology provider in § 155.20 to
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distinguish it from the new proposed
definition of QHP issuer direct
enrollment technology provider by
renaming the term agent or broker direct
enrollment technology provider. We
proposed these new and modified
definitions to capture the full array of
potential arrangements between
technology companies and entities
seeking to use the direct enrollment
pathways to facilitate enrollments in
QHPs offered in an FFE or SBE–FP in
a manner that constitutes enrollment in
the Exchange. To align with these
proposed new and modified definitions,
we further proposed to modify the
definition of web-broker to replace the
last sentence, which stated that the term
includes a direct enrollment technology
provider, to instead indicate that the
term web-broker includes an agent or
broker direct enrollment technology
provider.
In the 2020 Payment Notice final rule,
we amended § 155.20 to define ‘‘direct
enrollment technology provider’’ to
mean ‘‘a type of web-broker business
entity that is not a licensed agent,
broker, or producer under [s]tate law
and has been engaged or created by, or
is owned by an agent or broker, to
provide technology services to facilitate
participation in direct enrollment under
§§ 155.220(c)(3) and 155.221.’’ 170 This
definition captures instances in which
an individual agent or broker, a group
of agents or brokers, or an agent or
broker business entity, engages the
services of or creates a technology
company that is not licensed as an
agent, broker, or producer to assist with
the development and maintenance of a
non-Exchange website that interfaces
with an Exchange to assist consumers
with direct enrollment in QHPs offered
through the Exchanges as described in
§§ 155.220(c)(3) and 155.221. When the
technology company is not itself
licensed as an insurance agency or
brokerage, the current framework
establishes that these technology
companies are a type of web-broker that
must comply with applicable webbroker requirements under §§ 155.220
and 155.221, unless indicated
otherwise.171
As the FFE direct enrollment program
has evolved, particularly with the
introduction and increased utilization of
the enhanced direct enrollment (EDE)
pathway, the technical requirements
170 See Patient Protection and Affordable Care
Act; HHS Notice of Benefit and Payment
Parameters; Final rule, 84 FR 17454 at 17562 (April
25, 2019).
171 For example, § 155.220(d)(2) exempts direct
enrollment technology providers from the training
requirement that is part of the annual FFE
registration process for agents and brokers.
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and expertise needed to participate in
direct enrollment have become
substantially more complex. As a result,
technology companies are increasingly
relied upon to develop, host, manage,
and customize the technical platforms
that underpin direct enrollment entity
non-Exchange websites. Technology
companies have emerged to support the
participation of QHP issuers in direct
enrollment, as well as agents, brokers,
and web-brokers. In the context of EDE,
some of these technology companies
build technical platforms prior to
finalizing contractual relationships with
agents, brokers, web-brokers, or QHP
issuers and some of these technology
companies provide platforms that are
used to host direct enrollment websites
for both QHP issuers and agents,
brokers, or web-brokers. Under the
current framework, the technology
company is itself a web-broker and often
provides direct enrollment services
under its own branding while also
wanting to offer its technology platform
and accompanying services to other
agents, brokers, web-brokers, or QHP
issuers to facilitate their respective
participation in direct enrollment. As
part of the services it provides as a
technology company, it may offer
customized direct enrollment websites
that leverage its technical platform to
other entities that allows for additional
systems or functionality or the use of
the other entity’s branding. Because the
current regulatory definition does not
include a reference to QHP issuers,
questions have arisen regarding the
ability and accompanying requirements
for QHP issuers to engage such entities
to assist with the development and
hosting of a non-Exchange website to
facilitate the QHP issuer’s participation
in direct enrollment. For these reasons
we proposed to create a new definition
of QHP issuer direct enrollment
technology provider and update the
definitions of direct enrollment
technology provider and web-broker as
described above, to clarify that QHP
issuers can also engage the services of
these technology companies and better
align with the evolving business models
of entities involved in the FFE direct
enrollment program. We also proposed
to include language in the new
definition of QHP issuer direct
enrollment technology provider to
clarify that when such entities partner
with QHP issuers, they are downstream
or delegated entities of the QHP issuer.
This is similar to the approach adopted
in § 155.221(e) for third-party auditors
hired by QHP issuers or web-brokers to
perform operational readiness audits. By
including this language, we intended to
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clarify and ensure that these QHP issuer
direct enrollment technology providers
would be subject to HHS oversight as
the delegated or downstream entity of
the QHP issuer, and the QHP issuer
would be responsible for compliance
with all applicable requirements. This
approach was also intended to clarify
that when providing its technology
services and support, or providing
access to an information technology
platform, to a QHP issuer, QHP issuer
direct enrollment technology providers
would be subject to the rules applicable
to the QHP issuer with whom they are
partnering to the extent they are
performing activities on behalf of the
QHP issuer implicating those rules. For
example, if a QHP issuer direct
enrollment technology provider is
assisting with the development of a nonExchange website for a QHP issuer, the
QHP issuer display requirements
captured at § 156.1230(a)(1)(ii) would
apply.
We sought comment on this proposal.
We did not receive public comments
on the proposal to update the definition
of web-broker, and are finalizing that
proposal as proposed. We received
public comments on the proposed
addition of a definition of QHP issuer
direct enrollment technology provider
and updates to the definition of direct
enrollment technology provider. The
following is a summary of the comments
we received and our responses.
Comment: Several commenters
supported the proposal to define QHP
issuer direct enrollment technology
provider and agent or broker direct
enrollment technology provider. One
commenter noted that technology
providers play an important role in
shaping the experience of consumers
and supported making regulations more
clearly applicable to them. Another
commenter supported the proposed
definitions, but requested clarification
that a single entity could serve as both
types of technology provider and as a
web-broker.
Response: We appreciate the
comments in support of this proposal
and are finalizing the proposal as
proposed. To clarify, a single entity may
serve as a QHP issuer direct enrollment
technology provider, an agent or broker
direct enrollment technology provider,
and as a web-broker. However, we note
that an entity that functions in multiple
capacities must comply with the
applicable rules for the context in which
they are operating. For example, if a
web-broker is hosting a direct
enrollment website for a QHP issuer and
therefore is operating as a QHP issuer
direct enrollment technology provider,
the QHP issuer display requirements
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captured at § 156.1230(a)(1)(ii) would
apply to the website the web-broker is
hosting on behalf of the QHP issuer
while the web-broker display
requirements in § 155.220 would remain
applicable to the website the web-broker
is hosting with its own branding.
2. Consumer Assistance Tools and
Programs of an Exchange (§ 155.205)
To continue our efforts to standardize
regulatory references to web-brokers, we
proposed to replace all references in
§ 155.205(c) to ‘‘an agent or broker
subject to § 155.220(c)(3)(i)’’ with the
term ‘‘web-broker.’’ In the 2020 Payment
Notice final rule, we amended § 155.20
to define the term ‘‘web-broker’’ 172 to
mean an individual agent or broker, a
group of agents or brokers, or an agent
or broker business entity, that is
registered with an Exchange under
§ 155.220(d)(1) and develops and hosts
a non-Exchange website that interfaces
with an Exchange to assist consumers
with the selection of and enrollment in
QHPs offered through the Exchange (a
process referred to as direct enrollment).
We also amended §§ 155.220 and
155.221 to incorporate the term webbroker as newly defined, where
applicable. However, at the time, we
overlooked the fact that § 155.205(c)
also contains several of these general
references to agents and brokers subject
to § 155.220(c)(3)(i) that should have
been updated as part of this earlier effort
to use the term web-broker as newly
defined. Such references appear in
§ 155.205 paragraphs (c)(2)(i)(B),
(c)(2)(iii)(B), (c)(2)(iv) introductory text,
and (c)(2)(iv)(C). To avoid confusion
and correct this oversight, we proposed
to standardize regulatory references to
web-brokers by replacing all references
in § 155.205(c) to ‘‘an agent or broker
subject to § 155.220(c)(3)(i)’’ with the
term ‘‘web-broker.’’ We sought comment
on this proposal.
In addition, we proposed to revise a
requirement related to website content
translations for QHP issuers and webbrokers participating in the FFE EDE
program that are subject to
§§ 155.205(c)(2)(iv)(B) and
155.205(c)(2)(iv)(C) respectively.
Currently under §§ 155.205(c)(2)(iv)(B)
and (C), QHP issuers and web-brokers
are required to translate website content
into any non-English language that is
spoken by a limited English proficient
(LEP) population that makes up 10
percent or more of the total population
of the relevant state. Web-brokers are
currently required to translate website
content within 1 year of registering with
the Exchange, while QHP issuers are
172 See
84 FR 17563.
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currently required to translate website
content beginning no later than the first
day of the individual market open
enrollment period for the 2017 benefit
year.
In the proposed rule, we proposed to
allow QHP issuers and web-brokers
participating in the FFE EDE program
additional time to come into compliance
with the website content translation
requirements. Specifically, we proposed
that a QHP issuer or web-broker
participating in the FFE EDE program
would have 12 months from the date the
QHP issuer or web-broker begins
operating its FFE-approved EDE website
in the relevant state to comply with
website content translation
requirements under
§§ 155.205(c)(2)(iv)(B) and (C) for
website content added to their websites
as a condition of participation in the
FFE EDE program. We noted this
proposed flexibility would not absolve
QHP issuers and web-brokers from
complying with website content
translation requirements under
paragraphs (c)(2)(iv)(B) and (C) that are
unrelated to their participation in the
FFE EDE program within the applicable
timeframes.173
We sought comment on whether this
proposed flexibility for QHP issuers and
web-brokers participating in the FFE
EDE program in relevant states would
have impacted accessibility to Exchange
coverage for LEP communities, or
otherwise would have negatively
impacted the operation of and consumer
access to Exchanges. In addition, we
sought comment from QHP issuers and
web-brokers as to whether this proposed
change would have fostered investment
in states where there is a significant LEP
community and provide additional
incentives for such entities to expand
into relevant states. Lastly, we sought
comment from assisters about any
impacts this proposed change would
have had on their proposed ability to
work with web-brokers and use EDE
websites as described in the proposed
rule (and below) when assisting
members of the LEP community with
Exchange enrollment.
We did not receive public comments
on the proposal to replace all references
in § 155.205(c) to ‘‘an agent or broker
subject to § 155.220(c)(3)(i)’’ with the
term ‘‘web-broker.’’ We are finalizing
that proposal as proposed. We did
173 See also ‘‘Guidance and Population Data for
Exchange, Qualified Health Plan Issuers, and WebBrokers to Ensure Meaningful Access by LimitedEnglish Proficient Speakers Under 45 CFR
155.205(c) and § 156.250,’’ March 30, 2016.
Available at https://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/Languageaccess-guidance.pdf.
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24205
receive public comments on the
proposal to provide additional time to
entities participating in EDE to translate
website content added to their websites
as a condition of participation in the
FFE EDE program. The following is a
summary of the comments we received
and our responses.
Comment: The vast majority of
comments received opposed finalizing
the proposal to provide EDE entities up
to 12 months to translate EDE-specific
website content. Generally, commenters
expressed concerns about possible
conflicts between the proposal and
statutory non-discrimination
requirements or asserted that the
proposal would create or exacerbate
racial or ethnic disparities. Some
commenters stated that allowing EDE
entities to delay the translation of their
website content could deprive LEP
populations of meaningful access in
violation of the non-discrimination
provisions in Section 1557 of the ACA.
One commenter pointed out this could
allow an EDE entity to go through an
entire open enrollment period without
translating its website content,
potentially leaving significant numbers
of LEP consumers without information
in their languages. The same commenter
acknowledged the significant resources
involved in developing an EDE website,
but did not believe it should take 12
more months to have it translated.
Another commenter stated this proposal
would limit coverage received by LEP
populations, creating racial and ethnic
disparities that raise serious concerns
under both the ACA and broader federal
civil rights laws. Another commenter
stated the existing translation
requirements are already inadequate
and should not be weakened at the
expense of LEP consumers. Two
commenters supported the proposal.
One stated the proposed rule struck an
appropriate balance between affording
EDE entities additional implementation
flexibility and maintaining the language
accessibility standards.
Response: While we appreciate the
comments in support of this proposal,
we are not finalizing this proposal given
the concerns expressed by the majority
of commenters, and the fact that no QHP
issuers or web-brokers (small or
otherwise) commented to specifically
indicate this proposal would incentivize
their participation in states where there
is a significant LEP population and
where translation of their websites
would have eventually been required.
Almost all commenters stated that this
proposal could reduce access to
coverage for LEP populations, create
further health inequities among this
population, or possibly violate statutory
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non-discrimination requirements. We
acknowledge these concerns are worth
careful consideration and outweigh any
argument to finalize this proposal at this
time.
4. Ability of States To Permit Agents
and Brokers To Assist Qualified
Individuals, Qualified Employers, or
Qualified Employees Enrolling in QHPs
(§ 155.220)
3. Navigator Program Standards
(§ 155.210)
a. Navigator and Certified Application
Counselor Use of Web-Broker Websites
In the 2020 Payment Notice, we
proposed, but did not finalize, a
modification of our policy that prohibits
Navigators and CACs (together referred
to here as ‘‘assisters’’) from using webbroker websites to assist with QHP
selection and enrollment.174 At the
time, adoption of EDE functionality by
web-brokers was still limited, and we
decided to focus on the implementation
and oversight of the EDE pathway before
revisiting the current policy regarding
assister use of web-broker websites.
Since then, EDE functionality has
become more user-friendly and
increasingly more consumers are using
the EDE pathway to enroll in Exchange
coverage.
In the proposed rule, we proposed
permitting but not requiring, assisters in
FFEs and SBE–FPs to use web-broker
non-Exchange websites to assist
consumers with QHP selection and
enrollment, provided the non-Exchange
website met certain conditions. We
proposed to provide states with a State
Exchange that does not rely on
HealthCare.gov the discretion to permit
their assisters to use web-broker nonExchange websites.
We proposed several amendments to
§ 155.220 to capture this flexibility for
assisters in FFE and SBE–FP states to
use web-broker non-Exchange websites
to assist consumers and sought
comment on all of these proposals.
We received public comments on the
proposal to allow, but not require,
Navigators and CACs in FFEs and SBE–
FPs to use web-broker non-Exchange
websites to assist consumers with
applying for insurance affordability
programs and QHP enrollment under
certain circumstances and to the extent
permitted by state law. The following is
a summary of the comments we
received and our responses.
Comment: The majority of
commenters opposed the proposal to
allow assisters to use web-broker nonExchange websites to assist consumers
with applying for insurance
affordability programs and QHP
enrollment. Commenters were
concerned about whether assisters could
remain fair and impartial if they were
assisting consumers using web-broker
non-Exchange websites that did not
offer enrollment into all QHPs offered
Sections 1311(d)(4)(K) and 1311(i) of
the ACA require the Secretary to
establish a Navigator program under
which HHS awards grants to entities to
conduct public education activities to
raise awareness of the availability of
QHPs, distribute fair and impartial
information concerning enrollment in
QHPs and the availability of APTC and
CSRs, and facilitate enrollment in QHPs;
provide referrals to any applicable office
of health insurance consumer assistance
or health insurance ombudsman
established under section 2793 of the
PHS Act, or any other appropriate state
agency or agencies for any enrollee with
a grievance, complaint, or question
regarding their health plan, coverage, or
a determination under such plan or
coverage; and provide information in a
manner that is culturally and
linguistically appropriate to the needs of
the population being served by the
Exchange. The statute also requires the
Secretary, in collaboration with states,
to develop standards to ensure that
information made available by
Navigators is fair, accurate, and
impartial. We have implemented the
statutorily required Navigator duties
through regulations at §§ 155.210 (for all
Exchanges) and 155.215 (for Navigators
in FFEs). Certified Application
Counselors (CACs) duties have been
implemented through regulations at
§ 155.225.
We proposed allowing, but not
requiring, Navigators and CACs in FFEs
and SBE–FPs to use web-broker nonExchange websites to assist consumers
with applying for insurance
affordability programs and QHP
enrollment under certain circumstances
and to the extent permitted by state law.
For a discussion of the proposal to allow
Navigators and CACs to use web-broker
non-Exchange websites to assist
consumers with applying for insurance
affordability programs and QHP
enrollment, along with a summary of
comments received and our responses to
these comments, please see the
preamble to § 155.220.
174 See
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84 FR 17515 through 17521.
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through the Exchange, or that included
QHP recommendations. Some
commenters highlighted the confusion
assisters and consumers may encounter
when using web-broker non-Exchange
websites that include marketing for nonQHP products. Several commenters also
expressed concerns regarding the cost of
providing adequate training to assisters
to understand multiple platforms for
enrollment. They noted that this may
take critical time away from assisters
serving consumers. Many commenters
expressed concern that assister use of
web-broker non-Exchange websites to
assist with QHP selection and
enrollment would reduce or not
facilitate enrollment in Medicaid and
CHIP. Also, many commenters
suggested that CMS invest resources to
improve and expand the functionality of
HealthCare.gov and expand assister
programs instead of dedicating
resources to implement this proposal.
Response: After consideration of the
comments received in response to this
proposal, we agree with the commenters
that there are concerns related to
assister use of web-broker non-Exchange
websites to assist with QHP selection
and enrollment that warrant further
consideration. Therefore, we are not
finalizing the proposed modification to
the current policy that prohibits
assisters from using web-broker nonExchange websites to assist with QHP
selection and enrollment or the
accompanying proposals to amend and
replace § 155.220(c)(3)(i)(D). The
current policy, which prohibits the use
of web-broker non-Exchange websites
by assisters to assist with QHP selection
and enrollment, remains in effect.
b. QHP Information Display on WebBroker Websites
We proposed to provide flexibility to
web-brokers regarding the information
they are required to display on their
non-Exchange websites for QHPs in
certain circumstances. Currently,
§ 155.220(c)(3)(i)(A) requires that a webbroker non-Exchange website must
disclose and display all QHP
information provided by the Exchange
or directly by QHP issuers consistent
with the requirements of § 155.205(b)(1)
and (c). To the extent that not all
information required under
§ 155.205(b)(1) is displayed on the webbroker’s website for a QHP, the webbroker’s website must prominently
display a standardized disclaimer
provided by HHS stating that
information required under
§ 155.205(b)(1) for the QHP is available
on the Exchange website, and provide a
link to the Exchange website. The
preamble in the proposed and final
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rules that established the current text in
§ 155.220(c)(3)(i)(A) explained the
intent of this requirement was that a
web-broker website must display all
information required under
§ 155.205(b)(1) unless the information
was not available to the web-broker, in
which case the web-broker website must
display the standardized disclaimer.175
Section 155.220(c)(3)(i)(D) similarly
currently requires web-brokers to
display all QHP data provided by an
Exchange on its non-Exchange website
used to participate in the FFE direct
enrollment program (whether Classic DE
or EDE). In the early years of Exchange
operations, we released a data file with
limited QHP details (the QHP limited
file) that provided web-brokers with a
basic set of QHP data that could be used
to satisfy the display requirements.
Display of the data elements from the
QHP limited file data, in combination
with a standardized disclaimer (the plan
detail disclaimer), became the de facto
minimum required to satisfy the webbroker’s obligation to display QHP
information on its non-Exchange
website. In adopting this approach, we
recognized that the Exchange may not
have been able to provide web-brokers
with certain data elements necessary to
meet the § 155.205(b)(1) requirements,
such as premium information, due to
confidentiality requirements, webbroker appointments with QHP issuers,
and state law. We also recognized some
of the data elements, such as quality
rating information, were not going to be
available in the initial years of the
Exchanges’ operation.176
In new proposed § 155.220(n), we
proposed to establish an exception to
the web-broker display requirements
captured at paragraphs (c)(3)(i)(A) and
(D). We proposed to revise paragraph
(c)(3)(i)(A) to require a web-broker nonExchange website to disclose and
display all QHP information provided
by the Exchange or directly by QHP
issuers consistent with the requirements
of § 155.205(b)(1) and (c), except as
permitted under § 155.220(n). We
proposed a similar revision to
§ 155.220(c)(3)(i)(D). At new proposed
paragraph (n), we proposed certain
flexibilities regarding display of QHP
information if a web-broker’s nonExchange website does not support
enrollment in a QHP, except in cases
where the web-broker’s website is
intended to be available for use by
assisters consistent with proposed
175 See
78 FR at 37046 and 78 FR at 54077.
Patient Protection and Affordable Care
Act; Program Integrity: Exchange, SHOP, and
Eligibility Appeals; Final Rule, 78 FR 54069 at
54077 (August 30, 2013).
176 See
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paragraph (c)(3)(iii)(A). In that case, the
flexibility at new proposed paragraph
(n) would not be available. A webbroker’s non-Exchange website may not
support enrollment in a QHP if the webbroker does not have an appointment
with a QHP issuer and therefore is not
permitted under state law to enroll
consumers in the coverage offered by
that QHP issuer. In such circumstances,
we proposed that the web-broker’s nonExchange website would not be required
to provide all the information identified
under § 155.205(b)(1). Instead, webbrokers would be required to display the
following limited, minimum
information for such QHPs: Issuer
marketing name, plan marketing name,
plan type, metal level, and premium
and cost-sharing information. To take
advantage of this new proposed
flexibility, we also proposed that the
web-broker’s non-Exchange website
would be required to identify to
consumers the QHPs, if any, for which
the web-broker’s website does not
facilitate enrollment by prominently
displaying the plan detail disclaimer
provided by the Exchange. The plan
detail disclaimer explains that the
consumer can get more information
about such QHPs on the Exchange
website, and includes a link to the
Exchange website. We noted that we
believed this proposal struck an
appropriate balance by recognizing that
web-brokers may not be permitted to
assist with enrollments in QHPs for
which they do not have an appointment
while still providing key information
about all QHPs on web-broker nonExchange websites to allow consumers
to window shop and identify whether
they may want to explore other QHP
options. It also would minimize burdens
for web-brokers by not requiring them to
build functionality and processes to
display all of the required comparative
information listed in § 155.205(b)(1) for
those QHPs for which they do not have
an appointment to sell.
To more closely align the plan detail
disclaimer text 177 with the intent of this
proposal, we noted that we planned to
issue further guidance revising the text
of the disclaimer so that it can be clearly
associated with any QHPs for which the
177 The current plan detail disclaimer states:
‘‘[Name of Company] isn’t able to display all
required plan information about this Qualified
Health Plan at this time. To get more information
about this Qualified Health Plan, visit the Health
Insurance Marketplace® website at
HealthCare.gov.’’ See also Section 5.3.2 of the
‘‘Federally-Facilitated Exchanges (FFEs) and
Federally-Facilitated Small Business Health
Options Program (FF–SHOP) Enrollment Manual.’’
Available at https://www.regtap.info/uploads/
library/ENR_FFEFFSHOPEnrollmentManual2020_
5CR_090220.pdf.
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24207
web-broker website does not facilitate
enrollment. For example, the current
disclaimer text states, in relevant part,
the web-broker ‘‘isn’t able to display all
required plan information about this
Qualified Health Plan at this time.’’ We
noted that we were considering
modifying this text so that it states, in
relevant part, the web-broker ‘‘doesn’t
display all plan information about, and
doesn’t facilitate enrollment in, this
Qualified Health Plan at this time.’’
We invited comments on the
proposed required limited, minimum
QHP details that must be displayed for
those QHPs that the web-broker does
not facilitate enrollment in through its
non-Exchange website and the proposed
edits to the plan detail disclaimer text.
We also sought comment on whether to
require display of any additional
elements identified under
§ 155.205(b)(1) among the limited,
minimum information, such as
summaries of benefits and coverage.178
We received public comments on the
proposed updates to requirements
regarding QHP information display on
web-broker non-Exchange websites. The
following is a summary of the comments
we received and our responses.
Comment: Almost all commenters
advocated for requiring that web-broker
non-Exchange websites display more
QHP information than the proposed rule
proposed to require, even in cases when
the web-broker non-Exchange website
does not support enrollment in a QHP.
The vast majority of commenters either
advocated for requiring web-broker nonExchange websites to display all
available QHP information for all
available QHPs, or generally supported
making it easier for consumers to obtain
comparative information for all
available QHPs when consumers are
using web-broker non-Exchange
websites. One commenter
acknowledged that the proposal
(including the proposed updates to the
plan detail disclaimer) represented a
significant improvement over the status
quo and would allow consumers to
make more educated comparisons
between QHPs when using web-broker
non-Exchange websites, but still
expressed a preference for requiring that
all information for all available QHPs be
displayed. Another commenter stated
that the ‘‘no wrong door’’ intent of the
ACA would be best met by requiring the
display of all available QHP information
178 Section 155.205(b)(1) references the following
comparative QHP information: Premium and costsharing information, the summary of benefits and
coverage, metal level, results of enrollee satisfaction
surveys, quality ratings, medical loss ratio
information, transparency of coverage measures,
and the provider directory.
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for all available QHPs on web-broker
non-Exchange websites. Another
commenter asserted that there is no
consumer-oriented rationale for webbroker non-Exchange websites to
display limited QHP information now
that there is access to APIs that provide
the information. One commenter
specifically noted that the proposal did
not require display of summaries of
benefits and coverage and quality
information when a web-broker nonExchange website does not support
enrollment in a particular QHP, and that
that information is critical for
consumers to evaluate and compare
QHP options. Two commenters
supported the proposal as proposed.
Response: After consideration of the
comments received, we are not
finalizing the proposed amendments to
§ 155.220(c)(3)(i)(A), (c)(3)(i)(D), or (n).
We agree that the display of more QHP
information on web-broker nonExchange websites is in the best interest
of consumers to aid them in comparing
QHP options without having to
potentially navigate to multiple
websites, and understand why the
majority of commenters advocated for
web-broker non-Exchange websites
displaying all of the comparative
information listed in § 155.205(b)(1),
including summaries of benefits and
coverage and quality information. We
also believe requiring web-broker nonExchange websites to display additional
QHP information is reasonable given
that QHP information has been more
readily accessible for some time, both
through public use files and the
Marketplace API. In addition, we note
that the specific suggestions made by
commenters regarding some of the QHP
information that should be displayed on
web-broker non-Exchange websites (that
is, summaries of benefits and coverage
and quality information) are part of the
QHP information display requirements
in § 155.220(c)(3)(i)(A) through its crossreference to § 155.205(b)(1).179
Thus, we intend to further consider
these issues and clarify the display
requirements for web-broker nonExchange websites in future rulemaking.
In the interim, we also intend to limit
our current use of enforcement
discretion that permits web-brokers to
only display issuer marketing name,
plan marketing name, plan type, and
metal level for all available QHPs,180 so
that web-broker non-Exchange websites
will be required to display all QHP
45 CFR 155.205(b)(1)(ii), (iv), and (v).
and Guidelines for Becoming a
Web-broker in the Federally-facilitated Exchanges:
An Overview for New and Existing Web-brokers,’’
October 2017, available at https://www.cms.gov/
files/document/processes-becoming-web-broker.pdf.
information consistent with
§ 155.205(b)(1) and (c), with the
exception of medical loss ratio
information and transparency of
coverage measures under
§ 155.205(b)(1)(vi) and (vii), for all
available QHPs. As such, until these
issues are addressed in future
rulemaking, beginning at the start of the
open enrollment period for plan year
2022, web-broker non-Exchange
websites will be required to display all
QHP information received from the
Exchange or directly from QHP issuers,
consistent with the requirements of
§ 155.205(b)(1) and (c).181 During this
time, we will exercise enforcement
discretion and not deem a web-broker
non-Exchange website out of
compliance with § 155.220(c)(3)(i)(A)
and (D) with respect to the display of
medical loss ratio information and
transparency of coverage measures if the
web-broker non-Exchange website
displays the other required standardized
comparative information consistent
with § 155.205(b)(1) and (c). Prior to the
start of the open enrollment period for
plan year 2022, if a web-broker’s nonExchange website does not display all
QHP information consistent with the
requirements of § 155.205(b)(1) and (c),
other than medical loss ratio
information and transparency of
coverage measures, it must prominently
display the standardized disclaimer
provided by HHS and provide a link to
the Exchange website. We note that this
interim approach applicable beginning
with the start of the plan year 2022 open
enrollment period does not establish
new requirements and instead
represents a change in the exercise of
enforcement discretion regarding the
standardized comparative information
web-brokers are required to display
under existing regulations following our
consideration of comments on the
proposed changes to the web-broker
QHP display requirements.182 We
intend to continue our collaborative
approach of working with web-broker
and other enrollment partners to ensure
consumers have information to make
informed coverage choices while
balancing the burdens and costs
imposed on our partners.
c. Web-Broker Operational Readiness
Review Requirements
We proposed amendments to further
clarify the operational readiness
requirements applicable to web-brokers
179 See
180 ‘‘Processes
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181 HHS makes QHP information available,
including the standardized comparative
information under § 155.205(b)(1)(i)—(v) and (viii),
through public use files and the Marketplace API.
182 See 45 CFR 155.220(c)(3)(i)(A) and (D).
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by adding a new proposed
§ 155.220(c)(6). In the 2018 Payment
Notice final rule, we adopted rules to
require web-brokers to demonstrate
operational readiness, including
compliance with applicable privacy and
security requirements, prior to
participating in the FFE direct
enrollment program.183 Our intent in
codifying this requirement was to build
on the onboarding and testing processes
for a web-broker to be approved to use
the direct enrollment pathways. We
noted the expectation that additional
operational readiness requirements
would be established specific to EDE to
account for the additional functionality
associated with that pathway.184 At the
same time, we established similar
requirements for QHP issuers to
demonstrate operational readiness and
compliance with applicable
requirements prior to their use of the
direct enrollment pathway.185 In the
2020 Payment Notice final rule, we
consolidated these similar requirements
from their prior locations at
§§ 155.220(c)(3)(i)(K) and 156.1230(b)(2)
into § 155.221(b)(4) as part of our effort
to streamline requirements applicable to
all direct enrollment entities.186 In the
proposed rule, we proposed to create a
new § 155.220(c)(6) to capture
operational readiness requirements
applicable to web-brokers that host nonExchange websites to complete QHP
selection or the Exchange eligibility
application. In proposed paragraph
(c)(6), we proposed to include
introductory language that reflects the
requirement for a web-broker to
demonstrate operational readiness and
compliance with applicable
requirements prior to the web-broker’s
non-Exchange website being used to
complete an Exchange eligibility
application or a QHP selection, which
may include submission or completion,
in a form and manner specified by HHS,
of certain information or testing
processes. As reflected in proposed
paragraphs (c)(6)(i) through (v), HHS
may request a web-broker submit a
number of artifacts or documents or
complete certain testing processes to
demonstrate the operational readiness of
its non-Exchange website. The required
documentation may include operational
data including licensure information,
points of contact, and third-party
relationships; security and privacy
assessment documentation, including
penetration testing results, security and
privacy assessment reports,
183 See
81 FR 94176.
81 FR 94120.
185 See 81 FR 94152.
186 See 84 FR 17524.
184 See
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vulnerability scan results, plans of
action and milestones, and system
security and privacy plans; and an
agreement between the web-broker and
HHS documenting the requirements for
participating in the applicable direct
enrollment program. The required
testing processes may include
enrollment testing, prior to approval or
at the time of renewal, and website
reviews performed by HHS to evaluate
prospective web-brokers’ compliance
with applicable website display
requirements prior to approval. To
facilitate testing, prospective and
approved web-brokers would have to
maintain and provide access to testing
environments that reflect their
prospective or actual production
environments. We proposed these
amendments to codify in regulation
existing program requirements that
apply to web-brokers that participate in
the FFE direct enrollment program and
are captured in the agreements executed
with participating web-broker direct
enrollment entities and related technical
guidance.187 We did not propose to
extend the same requirements to QHP
issuers participating in the FFE direct
enrollment program, because QHP
issuers, as HIPAA-covered entities, are
subject to longstanding federal
requirements and oversight related to
the protection of PII and PHI that are not
necessarily applicable to web-brokers.
With HIPAA privacy and security
regulations and oversight in place and
applicable to QHP issuers, HHS has
adopted a risk acceptance approach for
QHP issuers allowing them to
participate in the FFE direct enrollment
program, in some cases, without
imposing certain requirements that are
in place for web-brokers. In addition,
QHP issuers are subject to more
extensive oversight by state regulators
than web-brokers.
We sought comment on this proposal.
We received one public comment on
the proposed updates to web-broker
operational readiness review
requirements. The following is a
summary of the comment we received
and our response.
Comment: One commenter indicated
they did not object to this proposal
because it primarily codifies existing
guidelines to which web-brokers are
already subject. While acknowledging
that similar requirements may not apply
to QHP issuers, based in part on their
status as HIPAA-covered entities, the
187 See, for example, ‘‘Updated Web-broker Direct
Enrollment Program Participation Minimum
Requirements,’’ May 21, 2020. Available at https://
www.cms.gov/CCIIO/Programs-and-Initiatives/
Health-Insurance-Marketplaces/Downloads/2020WB-Program-Guidance-052120-Final.pdf.
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commenter recommended similar
requirements apply to non-web-broker
QHP issuer direct enrollment
technology providers. The commenter
went on to state that though these
entities may also be subject to HIPAA as
issuers’ business associates, issuers may
not apply the same type of security and
privacy oversight that HHS applies to
web-brokers.
Response: We are finalizing this
proposal as proposed. We appreciate the
recommendation to extend similar or
identical requirements to non-webbroker QHP issuer direct enrollment
technology providers, and may consider
proposing such requirements in the
future. However, we did not propose
and are not finalizing the extension of
the same additional operational
readiness review requirements to QHP
issuers participating in the FFE direct
enrollment program. As noted above
and explained in the proposed rule, we
did not propose to extend the same
requirements to QHP issuers because, as
HIPAA-covered entities, issuers are
subject to longstanding federal privacy
and security requirements that are not
necessarily applicable to all webbrokers. In recognition of the
applicability of the HIPAA privacy and
security framework and extensive
oversight of issuers by state regulators,
HHS adopted a different approach for
QHP issuer operational readiness
reviews, which includes not imposing
certain requirements applicable to webbroker direct enrollment entities. While
we continuously review our approach
and regularly evaluate whether to
enhance program requirements for all
direct enrollment entities, we believe
the current approach strikes the
appropriate balance between the burden
associated with program requirements
for different types of direct enrollment
entities and the risks posed by those
entities’ participation in the program. In
addition, our experience to date has
shown that most direct enrollment
technology providers that develop
technology platforms for purposes of
facilitating QHP issuer use of direct
enrollment are either facilitating
participation in the EDE program or are
also web-brokers, and therefore would
be subject to the more rigorous EDE
operational readiness review
requirements or the operational
readiness review requirements
applicable to web-brokers. To the extent
a small number of QHP issuer direct
enrollment technology providers are not
also web-brokers and are not subject to
the more rigorous EDE operational
readiness review requirements, those
entities are likely subject to HIPAA as
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24209
issuers’ business associates as the
commenter acknowledged. As part of
our continuous review and evaluation of
direct enrollment requirements, we
intend to monitor the types of entities
QHP issuers engage with as direct
enrollment technology providers and
may propose changes to the operational
readiness review requirements for QHP
issuer direct enrollment technology
providers in future rulemaking.
5. Standards for Direct Enrollment
Entities and for Third Parties To
Perform Audits of Direct Enrollment
Entities (§ 155.221)
a. Direct Enrollment Entity Plan Display
Requirements
We proposed to revise § 155.221(b)(1)
to clarify the requirements that apply
when direct enrollment entities want to
display and market QHPs 188 and nonQHPs. We proposed that in such
circumstances, the web-broker or QHP
issuer must display and market QHPs
offered through the Exchange,
individual health insurance coverage as
defined in § 144.103 offered outside the
Exchange (including QHPs and nonQHPs other than excepted benefits), and
all other products, such as excepted
benefits, on at least three separate
website pages, with certain proposed
exceptions described below.
In the 2020 Payment Notice final rule,
we amended § 155.221(b)(1) to require
direct enrollment entities to display and
market QHPs and non-QHPs on separate
website pages on their respective nonExchange websites.189 Similarly, we
amended paragraph (b)(3) to require
direct enrollment entities to limit the
marketing of non-QHPs during the
Exchange eligibility application and
QHP selection process in a manner that
will minimize the likelihood that
consumers will be confused as to what
products are available through the
Exchange and what products are not.190
Under the existing display standards
captured at paragraphs (b)(1) and (3),
direct enrollment entities are required to
offer an Exchange eligibility application
and QHP selection process that is free
from advertisements or information
about non-QHPs and sponsored links
promoting health insurance related
188 As detailed in prior rulemaking, with some
limited exceptions, stand-alone dental plans
certified for sale on an Exchange are considered a
type of QHP. See 77 FR 18315. CMS expects direct
enrollment entities to follow the same requirements
for stand-alone dental plan QHPs as for medical
QHPs, including the applicable display and
marketing requirements captured in §§ 155.220,
155.221, and 156.1230, except as proposed and
finalized at new § 155.221(c)(2) in the context of offExchange stand-alone dental plan shopping.
189 See 84 FR 17523 and 17524.
190 Id.
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products. However, under the current
framework, it is permissible for a direct
enrollment entity to market or display
non-QHP health plans and other offExchange products in a section of the
entity’s website that is separate from the
QHP web pages if the entity otherwise
complies with the applicable
requirements. We explained in the 2020
Payment Notice that we believe
marketing some products in conjunction
with QHPs may cause consumer
confusion, especially as it relates to the
availability of financial assistance for
QHPs purchased through the
Exchanges.191 We acknowledged at that
time that we may need to update these
standards as new products come to
market and as technologies evolve that
can assist with differentiating between
QHPs offered through the Exchange and
other products consumers may be
interested in. We also noted our belief
that the convenience of being able to
purchase additional products as part of
a single shopping experience outweighs
potential consumer confusion, if proper
safeguards are in place.192
In the proposed rule, we proposed to
amend paragraph (b)(1) to refine the
previously adopted policy, consistent
with the original intent of minimizing
consumer confusion about distinct
products with substantially different
characteristics, while providing direct
enrollment entities with more marketing
flexibility and opportunities for
innovation. QHPs are required to be
offered on- and off-Exchange under the
guaranteed availability requirements at
§ 147.104. The current framework
allows for direct enrollment entities to
display on- and off-Exchange QHPs on
the same website pages, as long as the
direct enrollment entity’s website makes
clear that APTC and CSRs are only
available for QHPs offered through the
Exchange.193 We noted that we have
observed various attempts by direct
enrollment entities to distinguish
between on- and off-Exchange QHPs
displayed on the same website pages,
but believed that even good faith efforts
to inform consumers about this
distinction have the potential to cause
confusion about which QHP a consumer
should select if APTC-eligible when two
instances of otherwise identical plans
(that is, the on- and off-Exchange
versions of the QHP) are displayed on
a single website page, but only one is
available with APTC. In addition,
paragraph (b)(1) currently prohibits the
display of off-Exchange QHPs on the
191 Id.
192 Id.
193 See,
for example, 45 CFR 155.220(j)(2)(i) and
156.1230(a)(1)(iii).
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same website pages as comparable nonQHP individual health insurance
coverage. This creates a segmented offExchange plan shopping experience on
direct enrollment entity websites that
does not allow consumers to easily
comparison shop among comparable
major medical health insurance
products. As described in the proposed
rule and further below, the recent
introduction of individual coverage
health reimbursement arrangements
(HRAs) increases the importance of
individual health insurance coverage
offered outside of the Exchange for
employees whose employers offer such
arrangements and also offer the
opportunity to make salary reduction
contributions through a cafeteria plan
under section 125 of the Code, and this
is part of the reason we proposed to
amend the current display requirements
for direct enrollment entities.
We proposed to revise § 155.221(b)(1)
to require that direct enrollment entities
display and market QHPs offered
through the Exchange, individual health
insurance coverage as defined in
§ 144.103 offered outside the Exchange
(including QHPs and non-QHPs other
than excepted benefits), and all other
products, such as excepted benefits, on
at least three separate website pages,
with certain exceptions. Requiring that
these three categories of products be
displayed and marketed on separate
website pages provides a more precise
delineation between the three categories
of products with substantially different
characteristics, either in the way they
can be purchased or the types of
benefits they offer, while still allowing
substantial flexibility in website design
to facilitate the consumer’s shopping
experience. We proposed the first
product category, QHPs offered through
the Exchange, must be isolated from the
other categories of products to
distinguish for consumers the products
for which APTC and CSRs are available
(if eligible). We proposed the second
product category, individual health
insurance coverage offered outside the
Exchange (including QHPs and nonQHPs other than excepted benefits),
must be similarly distinguished from
other products, because those plans
represent major medical coverage that is
subject to the same ACA market-wide
requirements as QHPs offered through
the Exchange, but that is not available
with APTC and CSRs. Therefore,
distinguishing between these two
categories of products by requiring that
they be displayed and marketed on
separate website pages would allow
consumers to more easily shop for
comparable major medical insurance
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subject to ACA market-wide rules while
maintaining the clear distinction
between plans for which APTC and
CSRs are and are not available. We
proposed that the third product
category, which encompasses types of
products not in the first two categories,
including excepted benefits, must be
displayed and marketed on one or more
website pages separate from the website
pages used for displaying and marketing
the first two categories of products to
assist consumers in distinguishing them
from major medical plans. The range of
products in the third category are not
subject to ACA market-wide rules and
APTC and CSRs are not available for
such products, and therefore they are
substantially different from the plans
that fall into the first two categories.
We also proposed to amend
§ 155.221(b)(3) to include clarifying
edits and to include the same
exceptions detailed in this final rule as
we proposed for paragraph (b)(1). We
proposed to revise paragraph (b)(3) to
limit marketing of non-QHPs during the
Exchange eligibility application and
QHP selection process in a manner that
minimizes the likelihood that
consumers would be confused as to
which products and plans are available
through the Exchange and which
products and plans are not, except as
permitted under new proposed
paragraph (c)(1). The proposal also
removed a redundant reference to
‘‘plan’’ that was included after ‘‘QHP,’’
and added references to ‘‘plans’’ after
the references to ‘‘products’’ to use
consistent language throughout
paragraphs (b)(1) and (3). We proposed
the same exceptions for paragraph (b)(3)
to align with the proposed changes to
paragraph (b)(1) to clarify that
displaying QHPs and non-QHPs on the
same website page, as would be
permitted under the proposed
exceptions in certain circumstances,
would not constitute a violation of
paragraphs (b)(1) or (3).
We proposed certain exceptions in
new § 155.221(c) to the proposed
updates to paragraphs (b)(1) and (3),
because we recognized that, in some
limited scenarios, consumers may be
best served by being able to directly and
easily compare plans offered on- and
off-Exchange. As of January 1, 2020,
employers may offer employees an
individual coverage HRA instead of
offering traditional group health
coverage.194 An individual coverage
HRA may reimburse employees for
medical expenses, including monthly
194 See Health Reimbursement Arrangements and
Other Account-Based Group Health Plans; Final
rule, 84 FR 28888 (June 20, 2019).
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health insurance premiums. To use the
individual coverage HRA, an employee
(and any eligible household members)
must enroll in individual health
insurance coverage, other than excepted
benefits, or Medicare parts A and B or
C. To satisfy this requirement,
employees (and any eligible household
members) can enroll in individual
health insurance coverage through the
Exchange or outside the Exchange. An
employee and any household members
offered an individual coverage HRA will
be ineligible for APTC if the individual
coverage HRA is affordable or if the
employee and household members
accept the individual coverage HRA
even if it is unaffordable. If an employee
and any household members offered an
individual coverage HRA that is
unaffordable decline the individual
coverage HRA benefit, they may qualify
for APTC (if otherwise eligible) if they
enroll in a QHP through the Exchange.
Some employees who are offered an
individual coverage HRA may also be
eligible, through a cafeteria plan under
section 125 of the Code, to pay a portion
of their health insurance premiums
through tax-preferred salary reduction
contributions. This type of cafeteria
plan benefit may only be used in
combination with off-Exchange
individual health insurance coverage.
Employers have flexibility to offer an
employee both the individual coverage
HRA and the cafeteria plan benefit
instead of providing traditional taxpreferred group health coverage.
However, employers may not offer
employees a choice of an individual
coverage HRA or traditional group
health coverage.
Consumers shopping and enrolling in
coverage through direct enrollment
entity websites may therefore wish to
see and consider additional non-QHP
individual health insurance coverage
(other than excepted benefits) options
that are only available off-Exchange. We
also noted that we believed consumers
may find it difficult to determine their
best option, especially when they are
part of a tax household with members
that may have varying eligibility for
APTC, CSRs, Medicaid, CHIP,
individual coverage HRAs, and cafeteria
plans. For this reason, we proposed to
provide an exception to the new
proposed display standards in
§ 155.221(b)(1) and (b)(3) to support the
development of innovative and
consumer-friendly plan comparison
tools by direct enrollment entities to
assist consumers in making the best
choices among individual health
insurance coverage options subject to
ACA market-wide rules for themselves
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and their families in these complex
situations.
In proposed new paragraph (c)(1), we
proposed to allow direct enrollment
entities to display and market QHPs
offered through the Exchange and
individual health insurance coverage
offered outside the Exchange (including
QHPs and non-QHPs other than
excepted benefits) on the same website
pages when assisting individuals who
have communicated, within the website
user interface or by communicating to
an agent or broker assisting them, they
have received an offer of an individual
coverage HRA, as a standalone benefit
or in addition to an offer of an
arrangement under which the
individual may pay the portion of the
premium for individual health
insurance coverage that is not covered
by an individual coverage HRA using a
salary reduction arrangement under a
cafeteria plan, so long as certain
conditions are met. As reflected in the
new proposed § 155.221(c)(1), the
conditions we proposed to adopt
included clearly distinguishing between
the QHPs offered through the Exchange
and the individual health insurance
coverage offered outside the Exchange
(including QHPs and non-QHPs other
than excepted benefits), and
prominently communicating that APTC
and CSRs are available only for QHPs
purchased through the Exchange, that
APTC is not available to an individual
who accepts an offer of an individual
coverage HRA or who opts out of an
affordable individual coverage HRA,
and that a salary reduction arrangement
under a cafeteria plan may only be used
toward the cost of premiums for plans
purchased outside the Exchange.
We noted that we wished to reduce
incentives that may lead to routing
consumer households to off-Exchange
plan shopping experiences based on
overly simplistic factors such as a single
member of a multi-member household
having an individual coverage HRA and
a cafeteria plan offer. Instead we sought
to encourage direct enrollment entities
to develop blended plan selection user
interfaces that incorporate on- and offExchange plan options when assisting
consumers who have communicated
receipt of an offer of an individual
coverage HRA while incorporating the
proposed conditions that are designed
to minimize the chance for consumer
confusion about the differences between
the different coverage options. For
example, a direct enrollment entity
exercising the flexibility under the
proposed exception in § 155.221(c)(1)
could clearly distinguish between onand off-Exchange plan options by using
frames, columns, different color
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schemes, prominent headings, icons,
help text, and other visual aids to
increase the chance that consumers are
aware of the distinctions between the
plan options. We emphasized the
proposal’s intent was to distinguish and
clarify user interface elements to be
clear, prominent, and difficult to ignore,
and therefore the use of an obscure
disclaimer in small text at the bottom of
the page or behind a link would not be
sufficient, for example. We noted that in
addition to the safeguards proposed in
the proposed rule, direct enrollment
entities in the FFEs are subject to
standards of conduct that require they
provide consumers with correct
information, without omission of
material fact, regarding QHPs and
insurance affordability programs, and
refrain from marketing or conduct that
is misleading.195 We solicited comment
on these proposals, as well as comments
on alternative approaches through
which direct enrollment entities may
assist consumers with individual
coverage enrollment when they have an
offer of an individual coverage HRA.
We proposed an additional exception
to § 155.221(b)(1) at proposed paragraph
(c)(2) to allow direct enrollment entities
to display and market stand-alone
dental plans certified by an Exchange
but offered outside the Exchange and
non-certified stand-alone dental plans
on the same off-Exchange dental plan
shopping website pages. Stand-alone
dental plans certified by an Exchange
and non-certified stand-alone dental
plans should be largely comparable
products among which consumers
looking for dental coverage off-Exchange
may wish to comparison shop. Since the
proposed change at paragraph (b)(1) to
allow display of all individual health
insurance coverage offered outside the
Exchange on the same website pages
(including QHPs and non-QHPs other
than excepted benefits) excludes standalone dental plans (since stand-alone
dental plans are excepted benefits), we
proposed this additional exception to
allow direct enrollment entities to
provide a consumer-friendly offExchange stand-alone dental plan
shopping experience where consumers
can compare the full range of standalone dental plans on a single website
page.
195 See 45 CFR 155.220(j)(2)(i), applicable to webbrokers, and 156.1230(b)(2), applicable to QHP
issuers participating in direct enrollment. Also see
‘‘Guidance Regarding website Display for Direct
Enrollment (DE) Entities Assisting Consumers in
States with Federally-facilitated Exchanges (FFEs)
and State Exchanges on the Federal platform (SBE–
FPs).’’ Available at https://www.cms.gov/CCIIO/
Programs-and-Initiatives/Health-InsuranceMarketplaces/Downloads/DE-Entity-Standards-ofConduct-website-Display.pdf.
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We proposed conforming
amendments to redesignate paragraphs
(c) through (h) in § 155.221 as
paragraphs (d) through (i) and related
updates to internal cross references. As
detailed in the proposed rule and this
final rule, we also proposed certain
amendments to the direct enrollment
entity operational readiness review
requirements in § 155.221(b)(4).
We requested comment on these
proposals.
We received numerous public
comments on the proposed amendments
to the direct enrollment entity plan
display requirements. The following is a
summary of the comments we received
and our responses.
Comment: Most commenters
supported the proposal to require direct
enrollment entities to display and
market QHPs offered through the
Exchange, individual health insurance
coverage as defined in § 144.103 offered
outside the Exchange (including QHPs
and non-QHPs other than excepted
benefits), and all other products, such as
excepted benefits, on at least three
separate website pages. One commenter
stated that guardrails should limit
opportunities for consumers to
accidentally enroll in or be steered
toward a non-subsidized QHP or nonQHP; and therefore, at a minimum,
substantially different coverage types
should be listed on separate website
pages (as proposed) to ensure
consumers compare apples-to-apples.
Other commenters expressed similar
sentiments, and in some cases
advocated for the inclusion of
additional safeguards to help consumers
understand the different products that
might be displayed to them (for
example, requiring that different
products be clearly labeled to aid in
differentiation). A few commenters
requested clarification about which of
the categories would include products
or services such as health care sharing
ministries, direct primary care
arrangements, group association plans,
and short-term limited duration
insurance, or requested confirmation
that such products or services would
have to be displayed on the one or more
website pages that included excepted
benefits and not on the website pages
that display on- or off-Exchange QHPs
and non-QHPs other than excepted
benefits. Several commenters expressed
opposition to the proposal. Generally
these commenters cited concerns about
consumer confusion if and when
consumers are presented with numerous
substantially different product options,
regardless of how those products are
displayed and even if they are displayed
on separate website pages.
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Response: We are finalizing the
proposal as proposed, but hope to
clarify several issues raised by
commenters. We intend to carefully
monitor how direct enrollment entities
modify their websites in accordance
with these requirements and anticipate
making updates in future rulemaking if
we believe such updates are necessary
to mitigate the risk that consumers are
confused by how different products are
being displayed or marketed to them on
direct enrollment entity websites. We
agree that guardrails are necessary to
help consumers understand their
options and minimize the chance they
inadvertently choose to enroll in a plan
or product that they did not intend to
enroll in or that does not meet their
needs. As we monitor direct enrollment
websites, we will evaluate whether the
user interface options direct enrollment
entities choose (for example, how they
convey to consumers the characteristics
of different products or services on
different website pages) are adequate in
terms of helping consumers distinguish
between and understand the advantages
and disadvantages of different products
or services. When designing their
websites, we encourage direct
enrollment entities to incorporate clear
labels or descriptions of different
products or services they offer to assist
consumers, and we may require specific
labeling or description requirements in
future rulemaking if we determine such
standardization would be helpful for
consumers or if we identify other
opportunities to improve the consumer
experience and better inform consumers
about the important differences between
substantially different products or
services marketed or displayed on direct
enrollment entity websites. We also
clarify and confirm that, as applied to
the other non-QHP products and
services identified by commenters,
§ 155.221(b)(1) requires that any
marketing or display of health care
sharing ministries, direct primary care
arrangements, group association plans,
and short-term limited duration
insurance not occur on the same website
pages as on- or off-Exchange QHPs and
non-QHPs other than excepted benefits.
When marketed or displayed on direct
enrollment entity websites, those
products and services should instead be
displayed on the separate website page
or pages reserved for all other products,
such as excepted benefits. The intent of
these amendments is to provide
additional clarity to direct enrollment
entities regarding the display and
marketing of products or services that
are not subject to ACA market-wide
rules and on- and off-Exchange QHPs, as
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well as non-QHP major medical
coverage that is subject to ACA marketwide rules. We appreciate the concerns
expressed by some commenters that
consumers may still be confused when
presented with numerous substantially
different options for products or
services, even if those products or
services are displayed on separate
website pages in a clear manner. As
described in the proposed rule and the
preamble above, a significant motivation
for adopting this policy was to reduce
consumer confusion about distinct
products with substantially different
characteristics. We acknowledge that
this approach may not eliminate all
consumer confusion or other risks that
may exist for consumers when they use
direct enrollment and other nonExchange websites. We intend to
carefully monitor direct enrollment
websites and may pursue refinements to
these website display requirements in
future rulemaking. We are also broadly
considering options for future
rulemaking intended to address risks to
consumers that use direct enrollment
websites not addressed by this policy,
including evaluating consumer
protections adopted by State Exchanges.
Comment: There were several
comments received related specifically
to the portion of the proposed rule that
would allow direct enrollment entities
to display and market QHPs offered
through the Exchange and individual
health insurance coverage offered
outside the Exchange (including QHPs
and non-QHPs other than excepted
benefits) on the same website pages
when assisting individuals who have
communicated they have received an
offer of an individual coverage HRA.
Several commenters supported the
flexibility provided by this exception.
One commenter recognized the need to
provide consumers with individual
coverage HRA offers information about
all relevant coverage options, but
expressed concern about consumers
being misled or confused about those
options and urged HHS to strictly
enforce requirements related to the
proposed exception. Another
commenter acknowledged that
consumers offered individual coverage
HRAs will need access to information
for both on- and off-Exchange options,
but opposed the proposed exception,
stating that allowing on- and offExchange options to be commingled on
the same website page would lead to
substantial confusion, even with smart
design choices to differentiate the plans.
One commenter recommended that the
exception be modified so that it is
available generally (without respect to
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whether a specific consumer the entity
is assisting has been offered an
individual coverage HRA) to entities
approved to use EDE that have
implemented eligibility application
functionality supporting individual
coverage HRA offers. The commenter
stated this alternative approach would
be less burdensome to implement than
accounting for specific consumers’
situations. One commenter noted this
exception as proposed does not apply to
consumers provided QSEHRAs, and that
if it is modified to account for such
plans, a requirement should be included
that direct enrollment entities
communicate to consumers the need to
reduce APTC by any employer
contribution.
Response: We appreciate the
comments and are finalizing this
exception as proposed. We note that the
individual coverage HRA market is
relatively new and still evolving, and
recognize that the flexibility and
requirements associated with this
exception should be monitored closely
and evaluated regularly for potential
modifications in future rulemaking. We
further recognize there is the potential
for confusion, even with strict
compliance with the safeguards we are
finalizing. We believe this exception
and the other related direct enrollment
entity plan display requirement
proposals finalized in this rule represent
a reasonable balance at this time and
appropriately take into account the need
to also support consumers who may be
offered new types of coverage
arrangements (for example, individual
coverage HRAs). Additionally, we
intend to closely monitor
implementation of the exception and
the accompanying display requirement
proposals finalized in this rule through
website reviews and will strictly enforce
the limitations and requirements related
to leveraging this exception, and will
make adjustments through future
rulemaking if deemed necessary. We
further note that most consumers using
direct enrollment websites are assisted
by agents or brokers who can help their
clients understand their options. To
help consumers offered individual
coverage HRAs navigate their different
options and to support agents and
brokers providing assistance to these
consumers, HHS has developed various
education, training, and other materials
on individual coverage HRAs.196 As
stated in the proposed rule, we hope
that this exception will lead direct
enrollment entities to design and
196 See, for example, https://www.cms.gov/CCIIO/
Programs-and-Initiatives/Health-Insurance-MarketReforms/Health-Reimbursement-Arrangements.
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implement innovative and consumerfriendly plan comparison tools to assist
consumers offered individual coverage
HRAs in making the best choices for
themselves and their families in these
complex situations. In addition, we
sought to reduce incentives that may
lead direct enrollment entities to route
consumer households to off-Exchange
plan shopping experiences based on
overly simplistic factors such as a single
member of a multi-member household
having an individual coverage HRA and
a cafeteria plan offer.197 As a result of
the comments received expressing
concerns about consumer confusion due
to this exception, we encourage any
direct enrollment entity considering
updates to its website design to leverage
this exception to contact us before
implementing any updates (by emailing
directenrollment@cms.hhs.gov). We are
interested in working collaboratively
with direct enrollment entities to ensure
their planned website designs meet
applicable regulatory requirements and
intend to carefully monitor
implementation under this exception.
We would pursue any refinements
through rulemaking, and if we deem
necessary or appropriate may also
consider adopting a mandatory review
and approval process before direct
enrollment entities could leverage this
exception in a future rulemaking.
We do not agree with the one
commenter that suggested this
exception be made broadly available to
EDE entities, without respect to whether
a specific consumer the entity is
assisting has been offered an individual
coverage HRA. This exception is
intended to be a targeted measure
focused on supporting consumers
offered individual coverage HRAs who
use direct enrollment entity websites to
shop for coverage.198 In those instances,
it would be appropriate to inform
consumers about the broader range of
individual health insurance coverage
options. The same considerations do not
exist for consumers who do not receive
individual coverage HRA offers. Direct
enrollment entities already design
different plan shopping interfaces for
their websites and route consumers to
them based on screening questions
197 There are additional complexities for APTCeligible consumers who receive an offer of an
individual coverage HRA that is unaffordable in
addition to a salary reduction arrangement under a
cafeteria plan. See, for example, 85 FR at 78617.
198 As detailed in the proposed rule, the recent
introduction of individual coverage HRAs increases
the importance of individual health insurance
coverage offered outside of the Exchange for
employees offered such arrangements alongside the
opportunity to make salary reduction contributions
through a cafeteria plan under section 125 of the
Code. See 85 FR 78616.
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intended to evaluate specific
consumers’ needs and circumstances.
For entities assisting consumers with
individual coverage HRA offers,
leveraging the flexibility afforded by the
exception finalized in this rule could be
accomplished using a similar approach
of asking consumers questions about
whether they have received an
individual coverage HRA offer and
routing them to different website pages
based on their responses. Finally, we
note that we did not propose and are not
finalizing an extension of the proposed
exception to consumers provided
QSEHRAs at this time, in part because
we have not noted the same interest in
serving such consumers from direct
enrollment entities. We may consider
creating such an exception in a future
rulemaking if necessary or appropriate.
Comment: We received a small
number of comments related to the
proposed exception to § 155.221(b)(1) at
proposed paragraph (c)(2) to allow
direct enrollment entities to display and
market stand-alone dental plans
certified by an Exchange but offered
outside the Exchange and non-certified
stand-alone dental plans on the same
off-Exchange dental plan shopping
website pages. One commenter stated
that dental plans offer a wide variety of
plan designs, and suggested that if the
proposed stand-alone dental plan
exception is finalized, it should include
a requirement that direct enrollment
entities clearly label different types of
dental plans. The commenter also
expressed concern that consumers may
not be able to differentiate between
stand-alone dental plans for which
APTC may be used and stand-alone
dental plans only available offExchange. Another commenter
requested implementation of the
proposed stand-alone dental plan
exception be delayed until testing the
approach with consumer focus groups
and evaluating its impact based on that
testing.
Response: We appreciate the
comments and are finalizing this
proposal as proposed. As mentioned
above, when designing their websites,
we encourage direct enrollment entities
to incorporate clear labels or
descriptions of different plans,
products, or services they offer to assist
consumers, whether major medical or
stand-alone dental plans. We may
require specific labeling or description
requirements in future rulemaking if we
determine such standardization would
be helpful for consumers or if we
identify other opportunities to improve
the consumer experience and better
inform consumers about the important
differences between substantially
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different plans, products, or services.
We also clarify that since the standalone dental plan exception is only
available to direct enrollment entities
with regard to their off-Exchange standalone dental plan shopping websites,
the risk that a consumer may
inadvertently choose a stand-alone
dental plan for which APTC is not
available is not relevant since APTC is
not available for any off-Exchange
stand-alone dental plans. Stated
differently, an APTC-eligible consumer
seeking to enroll in a stand-alone dental
plan on-Exchange that has wound up
shopping for stand-alone dental plans
on an off-Exchange website has
encountered a problem unrelated to the
stand-alone dental plan exception in
this rule. While we understand the
request to delay implementation of the
stand-alone dental plan exception until
consumer focus group testing can be
conducted, we consider multiple factors
when developing rules, including risk of
consumer harm, impact to the
operations of the private business
entities we are regulating, and the
availability of government resources to
conduct testing and oversight, among
other factors. We also believe this
exception is sufficiently narrow for the
proposal to be finalized as part of this
rule because it is limited to website
pages marketing and facilitating
enrollment in off-Exchange plans,
products, and services. In addition,
until the current rule at § 155.221(b)(1)
was finalized in 2019, this exception
would not have been required for
entities to display stand-alone dental
plans in this manner and we suspect
many entities were doing so at the time.
As mentioned above, we will be closely
monitoring and evaluating how direct
enrollment entities modify their
websites based on these updated rules
and will pursue future rulemaking if we
believe that is necessary or appropriate.
We may also engage in consumer focus
group testing in the future, if deemed
necessary or appropriate.
b. Direct Enrollment Entity Operational
Readiness Review Requirements
We proposed to revise § 155.221(b)(4)
to add additional detail on the
operational readiness requirements for
direct enrollment entities. Similar to the
proposed web-broker operational
readiness requirement at new proposed
§ 155.220(c)(6), we proposed these
amendments to codify in § 155.221(b)(4)
more details about the existing program
requirements that apply to direct
enrollment entities and are captured in
the agreements executed with
participating web-broker and QHP
issuer direct enrollment entities. We
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noted that these proposed requirements
are in addition to the operational
readiness requirements for web-brokers
at new proposed § 155.220(c)(6),
although web-brokers may not be
required to submit the documentation
required under this proposal to revise
§ 155.221(b)(4) or they may be permitted
to use the same documentation to satisfy
the requirements of both operational
readiness reviews depending on the
specific circumstances of their
participation in the direct enrollment
program and the source and type of
documentation. For example, a webbroker seeking to participate only in the
Classic DE program would only be
required to meet the operational
readiness requirements at new proposed
§ 155.220(c)(6), whereas a web-broker
seeking to participate in the EDE
program may be permitted to use its
third-party security and privacy audit
documentation for EDE to satisfy the
security and privacy audit
documentation requirements of
§§ 155.220(c)(6) and 155.221(b)(4)
assuming the Classic DE and EDE
systems and functionality were hosted
in the same environments subject to the
third-party audit.
In paragraph (b)(4), we proposed to
continue to require a direct enrollment
entity to demonstrate operational
readiness and compliance with
applicable requirements prior to the
direct enrollment entity’s website being
used to complete an Exchange eligibility
application or a QHP selection. We
added new proposed paragraphs (b)(4)(i)
through (v) to reflect that direct
enrollment entities may need to submit
or complete, in the form and manner
specified by HHS, a number of artifacts,
documentation, or various testing or
training processes. The documentation
may include business audit
documentation, including: Notices of
intent to participate including auditor
information; documentation packages
including privacy questionnaires,
privacy policy statements, and terms of
service; and business audit reports
including testing results. The required
documentation may also include
security and privacy audit
documentation including:
Interconnection security agreements;
security and privacy controls
assessment test plans; security and
privacy assessment reports; plans of
action and milestones; privacy impact
assessments; system security and
privacy plans; incident response plans;
and vulnerability scan results.
Submission of agreements between the
direct enrollment entity and HHS
documenting the requirements for
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participating in the applicable direct
enrollment program may also be
required. Required testing may include
eligibility application audits performed
by HHS. The direct enrollment entity
may also be required to complete online
training modules developed by HHS
related to the requirements to
participate in the direct enrollment
program.
We requested comment on this
proposal.
We received one public comment on
the proposed updates to direct
enrollment entity operational readiness
review requirements. The following is a
summary of the comment we received
and our response.
Comment: One commenter expressed
support for the proposed updates to the
direct enrollment entity operational
readiness review requirements.
Response: We appreciate the
commenter’s support of the proposed
updates to the direct enrollment entity
operational readiness review
requirements and are finalizing this
proposal as proposed.
6. Certified Applications Counselors
(§ 155.225)
In the proposed rule, we proposed to
allow, but not require, CACs to assist
consumers with applying for insurance
affordability programs and QHP
enrollment through web-broker nonExchange websites under certain
circumstances and to the extent
permitted by state law. For a discussion
of this proposal, along with a summary
of comments received and our responses
to these comments, please see the
preamble for § 155.220.
7. Verification Process Related to
Eligibility for Insurance Affordability
Programs (§ 155.320)
a. Verification of Eligibility for
Employer Sponsored Coverage
Exchanges must verify whether an
applicant is eligible for or enrolled in an
eligible employer sponsored plan for the
benefit year for which coverage and
premium assistance (APTC or CSR) are
requested using available data sources,
if applicable, as described in
§ 155.320(d)(2). For any coverage year
that an Exchange does not reasonably
expect to obtain sufficient verification
data as described in paragraph (d)(2)(i)
through (iii), an alternate procedure
applies. Specifically, Exchanges must
select a statistically significant random
sample of applicants and meet the
requirements under paragraph (d)(4)(i).
For benefit years 2016 through 2019,
Exchanges also could use an alternative
process approved by HHS. We are
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continuing to explore a new alternative
approach to replace the current
procedures in paragraph (d)(4)(i), under
which an Exchange may design its
verification process to confirm that
qualified individuals are not eligible for
or enrolled in an eligible employer
sponsored plan, disqualifying them
from receiving APTC or CSRs.
HHS’s experience conducting random
sampling revealed that employer
response rates to HHS’s request for
information were low. The manual
verification process described in
§ 155.320(d)(4)(i) requires significant
resources and government funds, and
the value of the results ultimately does
not appear to outweigh the costs of
conducting the work because only a
small percentage of sample enrollees
have been determined by HHS to have
received APTC or CSRs inappropriately.
We believe an approach to verifying an
applicant’s attestation regarding access
to eligible employer sponsored coverage
should be rigorous, while posing the
least amount of burden on states,
employers, consumers, and taxpayers.
Based on our experiences with random
sampling methodology under paragraph
(d)(4)(i), HHS is of the view that this
methodology may not be the best
approach for all Exchanges to assess the
associated risk for inappropriate
payment of APTC and CSRs. As such, in
2019, HHS conducted a study to (1)
determine the unique characteristics of
the population with offers of employersponsored coverage that meets
minimum value and affordability
standards, (2) compare premium and
out-of-pocket costs for consumers
enrolled in affordable employersponsored coverage to Exchange
coverage, and (3) identify the incentives,
if any, that drive consumers to enroll in
Exchange coverage rather than coverage
offered through their current employer.
We are still evaluating the results of this
study to ensure the best verification
process to ensure that consumers with
offers of affordable coverage that meets
affordability and minimum value
standards through their employer are
identified and do not receive APTC or
CSRs inappropriately. HHS will
consider changes to the verification
process outlined under paragraph (d)(4)
as part of future rulemaking.
As HHS continues to explore the best
options for verification of employer
sponsored coverage, we proposed that
HHS will continue to refrain from taking
enforcement action against Exchanges
that do not perform random sampling as
required by paragraph (d)(4), as an
alternative to performing this
verification against the data sources
required under § 155.320(d)(2)(i)
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through (iii), and will extend this nonenforcement posture from plan year
2021 through plan year 2022. We also
proposed that HHS will continue to
exercise such discretion as HHS
continues to evaluate the results of the
employer verification study described in
the proposed rule and of the futures
changes also discussed.
Comment: The majority of
commenters on this topic agreed with
HHS’s proposal to refrain from taking
enforcement action against Exchanges
that do not conduct random sampling to
verify whether an applicant has access
to or received an offer of affordable
coverage that meets the minimum value
standard through their employer. The
commenters agreed with HHS’s prior
study findings that the random
sampling process requires significant
resources with little return on
investment. Commenters also agreed
with HHS that an employer-sponsored
coverage verification approach should
provide State Exchanges with flexibility
and more opportunities to use
verification processes that are evidencebased, while imposing the least amount
of burden on consumers, states,
employers, and taxpayers and ensures
that only consumers who are eligible for
APTC/CSRs continue to receive them;
commenters noted that this is especially
important during the current COVID–19
public health emergency and allows
states to shift resources to help
consumers retain or enroll in QHP
coverage. One commenter further noted
that an efficient verification process to
verify whether an applicant has an offer
of affordable coverage through their
employer also provided an added
benefit as it reduces the employer
shared responsibility payment (ESRP)
burden for both the Internal Revenue
Service (IRS) and employers
nationwide. One commenter supported
the proposal, but proposed that HHS
allow State Exchanges to select their
own verification method that would not
add significant administrative burden
on states and stated that the current
proposal does not provide State
Exchanges with enough flexibility to
make any necessary changes that may
result from future rulemaking.
Finally, another commenter suggested
that, as HHS reviews the results of the
study discussed in the preamble to the
proposed rule, we should consider
releasing the results of the 2019 study
in an effort to provide transparency
regarding the demographic patterns that
HHS discovered as a result of this
research.
Response: We agree that the current
random sampling process required
under § 155.320(d)(4)(i) is not only
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24215
burdensome for states, employers,
consumers, and taxpayers, but it also
does not provide enough flexibility to
all Exchanges to develop a process for
employer-sponsored coverage
verification that more accurately reflects
their respective enrolled Exchange
populations. As discussed in the
preamble above and in the proposed
rule, HHS shares the same concerns
regarding the feasibility and
effectiveness of random sampling,
including the effectiveness of employer
and employee notices, and the impact
that such a verification process has on
Exchanges’ appeals processes. We also
agree that a verification process should
be evidence-based and informed by
certain risk-factors for inappropriate
payment of APTC/CSRs and that
additional flexibilities are important to
help states better serve their populations
during the current COVID–19 public
health emergency. Finally, as HHS
continues to evaluate the results of the
2019 study, we will explore the
possibility of releasing the results of the
study at a later date.
We disagree with the comment that
the proposal to extend enforcement
discretion to plan year 2022 provides
State Exchanges with less flexibility to
implement any future process changes
for employer-sponsored coverage
verification. State Exchanges have
existing flexibility under
§§ 155.320(a)(2) and 155.315(h) to
propose an alternative approach to
using the verification procedures under
§ 155.320(d)(2), or an alternative to
using the random sampling process
described under § 155.320(d)(4), in
order to verify whether applicants have
received an offer of affordable coverage.
We continue to encourage states to use
this flexibility to explore evidence or
risk-based approaches to conducting
this verification. Finally, these changes
do not impact State Exchanges that
currently verify offers of employersponsored coverage using approved data
sources under § 155.320(d)(2)(i) through
(iii) or use the random sampling
procedures under § 155.320(d)(4), and
have determined these methods are the
appropriate approaches for their
Exchanges to meet requirements under
§ 155.320(d).
Comment: Two commenters
supported the proposal but expressed
their ongoing concerns regarding
employer-sponsored verification,
specifically that the lack of a centralized
website or database for employers to
provide contact information and other
information Exchanges would need to
verify whether an employer offers
coverage that meets minimum value
standards is problematic and has led to
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many of the ongoing challenges
Exchanges have experienced. These
commenters suggested that HHS and
IRS should work together to develop a
single, streamlined verification process
that could be achieved in one of two
ways: (1) By establishing a simple, webbased platform or database where
employers could provide Exchanges
with their contact information which
Exchanges could query as part of their
verification attempts or (2) provide
employers with the option to report
their information to IRS well in advance
of Open Enrollment so that Exchanges
could query this information to verify
whether that employer offers coverage
that meets the employer shared
responsibility affordability and
minimum value tests. Commenters also
urged IRS and Treasury to allow
employers to provide real-time
employer coverage data on
HealthCare.gov to help consumers
compare coverage offered through their
employers with options offered on
Exchanges to make the best coverage
decisions based on their needs and
budgets.
Response: We did not propose
policies or requirements related to
future verification processes as HHS is
still evaluating the results of the 2019
study to determine the best path
forward. HHS appreciates the suggested
approaches for consideration and agrees
with the commenters that having
accurate, up-to-date contact information
for employers presents a significant
challenge for Exchanges attempting to
verify an applicant’s attestation that
they do not have access to affordable
coverage through their employer as
outlined under § 155.320(d)(4)(i)(D).
HHS will continue to explore all options
to implement a verification process for
employer-sponsored coverage that is
evidence-based and will continue to
work with our federal partners to assess
the feasibility of creating such a webbased platform or database to collect
employer contact information as
outlined above.
b. Verification Process Related to
Eligibility for Insurance Affordability
Programs
As noted in section IV of the
preamble, on March 4, 2021, the United
States District Court for the District of
Maryland decided City of Columbus, et
al. v. Cochran, No. 18–2364, 2021 WL
825973 (D. Md. Mar. 4, 2021), vacating
certain requirements under 45 CFR
155.320, which provides Exchange
income verification requirements for
resolving data matching issues related to
eligibility for advance payments of
premium tax credits. Under the current
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regulation, an individual who attests to
a household income within 100 percent
to 400 percent of the federal poverty
level (FPL), but whose income
according to trusted electronic data
sources is below 100 percent FPL, must
submit additional documentation
supporting the attested to household
income.199 Given the court’s order
invalidating this policy, we are
finalizing revisions to § 155.320 in this
final rule to rescind text implementing
the policy.
As explained below in the
Implementation of the Decision in City
of Columbus, et al. v. Cochran section,
HHS’s systems automatically generate
requests for income verification
information for those with income data
matching issues, and it will take some
time to redesign this function. Until that
redesign is complete and implemented,
however, HHS will be able to identify
consumers who receive requests for
income verification information as a
result of current system logic. We have
established a manual process to notify
those consumers that they need not
provide the requested information.
8. Special Enrollment Periods
(§ 155.420)
a. Exchange Enrollees Newly Ineligible
for APTC
We proposed to add new flexibility to
allow current Exchange enrollees and
their dependents to enroll in a new QHP
of a lower metal level 200 if they qualify
for a special enrollment period due to
becoming newly ineligible for APTC.
We are finalizing a modified version of
this policy to permit Exchange enrollees
who qualify for a special enrollment
period based on a loss of APTC
eligibility to change to a new plan at any
metal level, and to require that
Exchanges implement this change no
later than January 1, 2024.
In 2017, the Market Stabilization Rule
addressed concerns that Exchange
199 See 83 FR 16985–16987 (discussing
finalization of new paragraphs
§ 155.320(c)(3)(iii)(D) and (E), and modifications to
paragraphs (c)(3)(vi)(C), (D), (F), and (G)).
200 Section 1302(d) of the ACA describes the
various metal levels of coverage based on AV, and
section 2707(a) of the PHS Act directs health
insurance issuers that offer non-grandfathered
health insurance coverage in the individual or small
group market to ensure that such coverage includes
the EHB package, which includes the requirement
to offer coverage at the metal levels of coverage
described in section 1302(d) of the ACA. Consumerfacing HealthCare.gov content explains that metal
levels serve as an indicator of ‘‘how you and your
plan split the costs of your health care,’’ noting that
lower levels such as bronze plans have lower
monthly premiums but higher out of pocket costs,
while higher levels such as gold plans have higher
monthly premiums but lower out of pocket costs.
See https://www.healthcare.gov/choose-a-plan/
plans-categories/.
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enrollees were utilizing special
enrollment periods to change plan metal
levels based on ongoing health needs
during the coverage year, negatively
affecting the individual market risk
pool. The Market Stabilization Rule set
forth requirements at § 155.420(a)(4) to
limit Exchange enrollees’ ability to
change to a QHP of a different metal
level when they qualify for, or when a
dependent(s) newly enrolls in Exchange
coverage through, most types of special
enrollment periods.201
Generally, § 155.420(a)(4) provides
that enrollees who newly add a
household member through most types
of special enrollment periods may add
the household member to their current
QHP or enroll them in a separate
QHP,202 and that if an enrollee qualifies
for certain special enrollment periods,
the Exchange must allow the enrollee
and his or her dependents to change to
another QHP within the same level of
coverage (or one metal level higher or
lower, if no such QHP is available), as
outlined in § 156.140(b). However, even
prior to the change that we are finalizing
in this rule, § 155.420(a)(4) included
certain flexibilities to permit enrollees
to change metal levels through a special
enrollment period related to a change in
financial assistance for coverage through
the Exchange. For example,
§ 155.420(a)(4)(ii)(B) provides that
beginning January 2022, if an enrollee
and his or her dependents become
newly ineligible for cost-sharing
reductions in accordance with
paragraph (d)(6)(i) or (ii) of this section
and are enrolled in a silver-level QHP,
the Exchange must allow the enrollee
and his or her dependents to change to
a QHP one metal level higher or lower,
if they elect to change their QHP
enrollment, which they may wish to do
based on loss of previously-available
financial assistance.
Similarly, we proposed to add a new
flexibility at § 155.420(a)(4)(ii)(C) to
allow enrollees and their dependents
who become newly ineligible for APTC
in accordance with paragraph (d)(6)(i) or
(ii) of this section to enroll in a QHP of
201 These limitations do not apply to enrollees
who qualify for certain types of special enrollment
periods, including those under § 155.420(d)(4), (8),
(9), (10), (12), and (14). While special enrollment
periods under paragraphs (d)(2)(i) and (d)(6)(i) and
(ii) are excepted from § 155.420(a)(4)(iii),
§ 155.420(a)(4)(i) and (ii) apply other plan category
limitations to them.
202 Section 155.420(a)(4)(i), (a)(4)(iii)(B), and
(a)(4)(iii)(C) also provide that alternatively, if the
QHP’s business rules do not allow the newlyenrolling household member to enroll, the
Exchange must allow the enrollee and his or her
dependents to change to another QHP within the
same level of coverage (or one metal level higher
or lower, if no such QHP is available), as outlined
in § 156.140(b).
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a lower metal level. Under this
proposal, these special enrollment
periods in paragraph (d)(6)(i) and (ii) for
becoming newly ineligible for APTC
would be addressed in paragraph
(a)(4)(ii)(C), and so they will no longer
be subject to the separate rules in
paragraph (a)(4)(iii). Therefore, we
further proposed to revise paragraph
(a)(4)(iii) to include them in the list of
triggering events excepted from the
limitations at paragraph (a)(4)(iii). We
are finalizing a modified version of this
policy to permit Exchange enrollees
who qualify for a special enrollment
period based on a loss of APTC
eligibility to change to a new plan at any
metal level, and to require that
Exchanges implement this change no
later than January 1, 2024. We expect
that that providing Exchanges with
more time to implement the change and
exempting this special enrollment
period from limitations entirely will
reduce Exchanges’ implementation
burden and that this policy will help
impacted enrollees’ ability to maintain
continuous coverage for themselves and
for their dependents in spite of a
potentially significant change to their
out of pocket costs.
We proposed this new flexibility in
part because of concerns from agents
and brokers that some consumers who
qualify for the special enrollment period
in accordance with § 155.420(d)(6)(i) or
(ii) because they lose eligibility for
APTC based on an income increase may
lose a significant amount of financial
assistance without having gained
enough income to continue to afford the
coverage they selected when APTC was
available to them. In the proposed rule,
we provided an example of a qualified
individual whose estimated annual
household income increases to more
than 400 percent FPL due to an income
increase of less than $2,000.203 In this
example, the individual’s loss of APTC
would require them to pay over $7,000
more annually for their current plan.204
While this individual would qualify for
a special enrollment period due to a loss
of eligibility for APTC per paragraph
(d)(6)(i), under the previous rule they
would not be able to change from a gold
plan to a silver or bronze plan (or to a
catastrophic plan, if they were eligible)
203 See
85 FR 78623.
CFR 1.36B–2(b)(1) provides that to be
eligible for a premium tax credit, the taxpayer’s
household income must be at least 100 percent but
not more than 400 percent of the FPL for the
taxpayer’s family size for the taxable year. Per the
HHS Poverty Guidelines for 2020, 400 percent of
the FPL for 2020 for an individual in the contiguous
48 states and DC is $51,040. However, under the
American Rescue Plan Act of 2021, for taxable years
2021 and 2022, the upper limit on household
income at 400 percent of the FPL has been removed.
204 26
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to pay a lower monthly premium,
because paragraph (a)(4)(iii)(A)
provided that these enrollees may only
change to another QHP within their
current plan’s metal level. The
American Rescue Plan Act of 2021 will
help some individuals in the situation
described above because it allows
individuals whose household income
exceeds 400 percent FPL to qualify for
a premium tax credit if they are
otherwise eligible. The new law will
make premium tax credits available to
these families and caps the amount of
household income the family is
expected to contribute to their
premiums for purposes of calculating
the credit at 8.5 percent, based on the
cost of their second lowest cost silver
benchmark plan. However, this
flexibility is also necessary to ensure
access to coverage by those who
experience circumstances other than a
household income increase that may
cause consumers to become ineligible
for APTC. For example, in the proposed
rule, we also noted that Exchange
enrollees can lose eligibility for APTC
due to a change in tax household size,
without experiencing any change in
income, and we provided an example of
a family of two parents and a 20-year
old child with no income and who is
not a full-time student. We are updating
the example to reflect the changes made
for 2021 and 2022 by the American
Rescue Plan Act of 2021. If the family
applies during open enrollment in 2022
and qualifies for APTC based on a
household of three, and during 2023 the
child becomes employed and earns
enough income so that the parents no
longer plan to claim the child as a tax
dependent for 2023, their decrease in
household size could cause them to lose
eligibility for APTC. Loss of eligibility
for APTC based on not being permitted
to claim as a tax dependent an
individual projected at open enrollment
to be a tax dependent (loss of a
projected tax dependent) is likely a less
common challenge, because loss of a
projected tax dependent who was
previously enrolled in the same plan as
other household members may also
result in a lower premium for remaining
household members. However, in some
cases the decrease in premium may not
be enough to make up for the loss of
APTC.
As discussed in the proposed rule, in
many cases individuals enrolling in
Exchange coverage during open
enrollment will not anticipate
experiencing a situation in the middle
of the plan year like those described in
this final rule. Even if they are aware
that they could have a small increase in
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24217
household income or lose a projected
tax dependent, they may not realize that
these changes could make them newly
ineligible for APTC. Furthermore,
sometimes these changes are not
foreseeable. Additionally, it is
reasonable for individuals who
complete an application and then shop
for coverage on HealthCare.gov to select
a QHP based on premiums that are
reduced by the APTC amount for which
they are eligible at the time of plan
selection, particularly if they do not
realize that their financial assistance
could change based on loss of a
projected tax dependent or a small
household income change during the
coming year.
While this proposal was designed to
provide Exchange enrollees who lose
APTC with the chance to select lowercost coverage, we recognized that
changing to a new QHP mid-plan year
may cause enrollees to incur additional
out of pocket costs as a new QHP
selection typically resets the deductible
and other accumulators. We believe that
Exchange enrollees who lose APTC
eligibility are best able to weigh the
trade-off between reset accumulators or
maintaining an affordable monthly
premium. As discussed in the proposed
rule, a change may benefit some
consumers because price differences
between QHPs of different metal levels
can be significant. For example, in states
using the federal enrollment platform,
on average, silver plan premiums are 34
percent more expensive than bronze
plan premiums, and gold plan
premiums are 14 percent more
expensive than silver plan premiums.205
Further, enrollees who qualify to make
a new plan selection for an applicable
special enrollment period already must
consider this question.
Finally, in the proposed rule we
acknowledged that enrollees may lose
APTC eligibility and qualify for a
special enrollment period due to their
APTC loss for a reason other than a
change in household income or tax
family size. For example, a currentlyenrolled individual or household could
lose APTC and qualify for the related
special enrollment period due to an
expired inconsistency regarding
projected annual household income, or
because the Exchange has information
that they are eligible for or enrolled in
other qualifying coverage that is
considered MEC such as most Medicaid
coverage, CHIP, or the Basic Health
205 Calculated based on information in the ‘‘Plan
Year 2020 Qualified Health Plan Choice and
Premiums in HealthCare.gov States’’ report.
Available at https://www.cms.gov/CCIIO/Resources/
Data-Resources/Downloads/2020QHPPremiums
ChoiceReport.pdf.
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Program (BHP), through the periodic
data matching process described in
§ 155.330(d), and therefore are ineligible
for APTC. We sought comment on
whether stakeholders had concerns with
this possibility, and on how HHS can
help ensure that enrollees who lose
eligibility for APTC because of failure to
provide information to the Exchange to
confirm their APTC eligibility can
understand and take action on steps
needed to do so. Relatedly, we sought
comment on whether Exchanges should
limit the flexibility proposed in this rule
only to enrollees who qualify for a
special enrollment period because they
lost APTC eligibility due to a change in
household income or tax family size,
and continue to apply the current rule
at 155.420(a)(4)(iii)(A) to enrollees who
qualify for a special enrollment period
because they lost APTC for any other
reason. We also sought comment on
whether such a policy would impose
significant additional burdens on
Exchanges.
HHS believed that this proposal is
unlikely to result in adverse selection,
and may improve the risk pool by
supporting continued health insurance
enrollment by healthy individuals who
would be forced to end coverage in
response to an increase in premium.
However, we requested comment on
whether there are concerns with
permitting newly unsubsidized
enrollees to change to any plan of a
lower metal level to help them maintain
coverage (for example, permitting an
individual to change from a gold plan to
a bronze plan), or whether we should
instead only permit an enrollee to
change to a plan one metal level lower
than their current QHP. We also
requested comment from issuers on
whether there are concerns about
impacts such as experiencing a decrease
in premium receipt from enrollees who
opt to change to a lower-cost plan, or
whether they view adverse selection as
a possibility. We requested comment
from Exchanges, in particular, on
implementation burden associated with
this change to current plan category
limitations rules, including on whether
we should instead, to reduce this
burden, permit current enrollees and
currently enrolled dependents who
qualify for this SEP to change to a plan
of any metal level—that is, simply
exempt the special enrollment periods
at § 155.420(d)(6)(i) and (ii) due to
becoming newly ineligible for APTC
from plan category limitations
altogether. We also requested comment
from all stakeholders, including those
who have or represent individuals with
preexisting conditions, on whether such
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a change would significantly increase
risk for adverse selection.
Finally, we also considered whether
to propose additional flexibility to allow
enrollees and their dependents who
become newly eligible for APTC in
accordance with paragraph (d)(6)(i) or
(ii) to change to a QHP of a higher metal
level, but we did not propose additional
plan flexibility for enrollees who
become newly eligible for APTC. We
invited comment on whether we should
consider additional flexibilities for this
population in the future and the
anticipated impact of such a policy.
We received public comments on the
proposed updates to Exchange enrollees
newly ineligible for APTC. The
following is a summary of the comments
we received and our responses.
Comment: Almost all comments on
this proposal were supportive of this
change, explaining that allowing
enrollees the flexibility to change to a
plan of a lower metal level based on a
loss of APTC would allow more
individuals to maintain coverage. Some
commenters also noted that this
proposal could improve the onExchange risk pool by increasing the
likelihood that individuals would
maintain coverage in spite of losing
financial assistance. One commenter
requested a 2021 effective date for this
proposal instead of 2022, and two
commenters requested that HHS
implement this proposal as soon as
possible. One commenter opposed the
proposal because they preferred that
HHS promote continuous coverage by
making more financial assistance
available to consumers rather than by
providing certain consumers with the
flexibility to change to a lower metal
level plan. One commenter encouraged
HHS to bear in mind the risks of adverse
selection in general, but did not oppose
this proposal and noted that it would
help consumers; this commenter and
several others also misunderstood the
proposal to be for a new special
enrollment period for individuals who
lose financial assistance rather than a
change to plan category limitations that
currently apply to an existing special
enrollment period.
No commenters raised the concern
that this proposal specifically would
increase the risk of adverse selection.
Several commenters supported also
allowing enrollees who newly become
APTC eligible to change to a plan of a
higher metal level. Many commenters
supported allowing individuals who
qualify for a special enrollment period
based on a loss of APTC eligibility to
change to a plan of any metal level,
either to provide enrollees with
flexibility to change to the best plan for
PO 00000
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themselves and their families, to make
implementation easier for State
Exchanges, or both. One of these
commenters requested that instead of
applying plan category limitations, HHS
require Exchange enrollees to provide
documents to confirm their SEP
eligibility. Some commenters supported
allowing individuals who lose APTC
eligibility to change to a plan of a higher
or lower metal level rather than just to
a plan of a lower metal level. Finally,
many commenters disagreed with the
need to require plan category limitations
in general, and requested that HHS
provide Exchanges with flexibility in
terms of when or whether to implement
plan category limitations at all based on
considerations related to their specific
State Exchange’s market.
Response: We are finalizing a
modified version of this policy to permit
Exchange enrollees who lose APTC
eligibility to change to a new plan at any
metal level, and to require that
Exchanges implement this change no
later than January 1, 2024. We agree
with commenters that allowing
enrollees to access a plan at any metal
level through the existing special
enrollment period for those who lose
eligibility for APTC will significantly
decrease Exchange implementation
complexity and cost, and believe that
providing Exchanges with the flexibility
to implement this change no later than
2024 provides Exchanges with sufficient
time to account for this change in their
operational planning. We also agree
with commenters who stated that
providing more flexibility for enrollees
who qualify for a special enrollment
period due to losing APTC will help
consumers who lose eligibility for APTC
during the plan year to stay enrolled in
coverage by switching to a new QHP
that better suits their changed financial
situation. While we understand general
concerns related to adverse selection,
we agree with commenters that this
specific policy does not pose this risk
because enrollees are likely to access it
based on a financial change as opposed
to a change in their health care needs.
We also clarify that this policy does not
create a new special enrollment period
qualifying event, but rather is a change
to limitations on plan selection that
apply to an already-existing special
enrollment period for Exchange
enrollees who become newly ineligible
for APTC per 45 CFR 155.420(d)(6)(i)
and (ii).
Additionally, we do not believe that
it is necessary to require eligible
consumers to submit documentation of
the change that resulted in their loss of
APTC eligibility, in part because this
special enrollment period is triggered
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automatically when consumers attest to
the related income or household change
in the application. That is, there is no
separate question asking consumers to
attest to no longer being APTC eligible.
Further, as discussed in the 2017 Market
Stabilization Rule, we have concerns
about pending a new enrollment until
pre-enrollment verification is conducted
for current Exchange enrollees; because
they would still have an active policy,
the potential overlap of current, active
policies and pended new enrollments
would cause significant confusion for
consumers and create burdens on
issuers with respect to managing
potential operational issues.206
We did not propose removing plan
category limitations; however, we
continue to study potential policies to
promote continuous coverage and
provide consumers with flexibility.
Finally, we acknowledge the potential
benefit of requiring Exchanges to
implement this change quickly, but we
believe that providing Exchanges with
flexibility to implement it no later than
January 1, 2024 strikes an appropriate
balance between allowing early
implementation if possible and
providing Exchanges with necessary
flexibility to plan related system
updates based on Exchange-specific
competing priorities and resources.
While some Exchanges may be able to
implement this new flexibility sooner
than January 1, 2024, in light of
competing priorities such as the need to
implement changes to calculating
financial assistance established in the
American Rescue Plan Act of 2021, we
believe that substantial flexibility for
Exchanges is appropriate.
Comment: Several commenters
supported the proposal but responded
to our request for comment on the risk
that enrollees changing plans midcoverage year might not realize that
their out of pocket costs could increase
if their deductible and other
accumulators are re-set by noting this is
a concern. Some of these commenters
requested that HHS provide additional
education and outreach to help
enrollees to make an informed decision
on whether to change to a less
expensive plan even though it could
require them to meet a new deductible
and out-of-pocket maximum without
taking into account progress they had
made towards these accumulators in
their prior coverage. Specific
suggestions from commenters included
adding pop-up text in the
HealthCare.gov application for enrollees
changing plans through a special
206 82 FR 18359, https://www.federalregister.gov/
d/2017-07712/p-149.
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enrollment period, additional notice
content, including in the form of
infographics, to illustrate the trade-off
between a lower cost plan and re-set
accumulators, and adding help text to
encourage special enrollment periodeligible enrollees to seek out assistance
through Find Local Help for assistance
with understanding their options. One
commenter suggested that related help
text should appear at the time of an
APTC-ineligibility determination and
should also provide these enrollees with
the basis for the determination. One
commenter asked that HHS reiterate in
the final rule that issuers have the
flexibility to waive deductibles for
consumers who change mid-year to a
plan of a different metal level, and one
commenter asked that HHS consider
requiring issuers to transfer progress
toward accumulators for consumers
who change plans through a special
enrollment period.
Response: As discussed in the
proposed rule, HHS acknowledges these
concerns, and will take commenters’
suggestions into consideration in our
efforts to improve the consumer
experience through outreach and
education. We also reiterate here that
Marketplace issuers have the flexibility
to carry over progress towards a
previous plan’s accumulators for
enrollees who change to a different plan
mid-year with the same issuer.
However, HHS does not have the
authority to require that issuers carry
over this progress. Issuers must comply
with any applicable state requirements
regarding accumulators.
Comment: One commenter
recommended continuing to apply plan
category limitations to enrollees who
lose APTC due to a failure to submit
documents to confirm their household
income, but to provide the additional
flexibility to enrollees who lose APTC
eligibility for any other reason, citing
the difficulties of implementing changes
to plan category limitations for different
sub-groups of special enrollment period
eligible consumers. However, several
commenters recommended extending
the new flexibility to all enrollees who
lose APTC eligibility, including to those
who lose APTC due to failure to resolve
an inconsistency related to household
income. One of these commenters noted
that, in addition to a change in
household income or a mid-year
decision to no longer claim a household
member as a tax dependent, enrollees
may lose APTC eligibility if a family
member is offered employer-sponsored
coverage that is considered affordable
and the household loses APTC
eligibility as a result. Commenters did
not express concerns about the
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24219
possibility, as discussed in the proposed
rule, that this policy would allow or
encourage individuals to change to a
plan of a lower metal level instead of
submitting documentation to resolve an
inconsistency to maintain or re-gain
their APTC eligibility. However, several
commenters expressed concerns about
the challenges consumers may face
related to submitting documents to
resolve an inconsistency and provided
recommendations for HHS to improve
education and outreach related to
document submission. One commenter
asked that HHS provide more direct
outreach, such as outbound calls and
referrals to an enrollment assister, to
consumers who fail to resolve
inconsistencies and then select lower
cost plans to ensure that these enrollees
understand their options. Another
commenter stated that individuals who
lose APTC based on incorrect or out-ofdate income information must have a
chance to challenge their determination,
and suggested that their special
enrollment period not expire until 60
days after they receive notice of a final
determination of APTC ineligibility.
One commenter suggested that in
addition to reminding enrollees of the
requirement to update their application
with changes including to household
income, that HHS proactively notify
enrollees whose income may have
changed based on information from a
data source that HHS uses to verify
income information.
Response: We agree with commenters
that limiting this change in plan
category limitations based on reasons
why existing enrollees lose APTC
eligibility would be burdensome to
implement, and may prevent some
enrollees from benefitting from the
ability to change to a new plan based on
a change in their financial situation. We
also agree that individuals who lose
APTC eligibility due to a family
member’s offer of employer-sponsored
coverage may benefit from being able to
change to a plan of a different metal
level if it would be difficult for them to
afford to enroll in the employer
coverage along with their family
member. Further, we believe that for
most enrollees, the benefit of receiving
APTC combined with extensive
outreach that HHS conducts for
individuals who must submit
documentation to confirm their
household income sufficiently
motivates these individuals to submit
necessary documentation. Additionally,
we clarify that applicants to Exchanges
on the Federal platform who must
submit documentation to confirm their
household income are first notified of
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this requirement in the eligibility notice
they receive upon completing their
application, and that individuals who
do not submit documents, or who
submit documents that do not provide
enough information to confirm the
household income that they attested to
on their application, receive a series of
reminder notices, calls, and emails.207
We continue to investigate
opportunities to improve this outreach.
b. Special Enrollment Periods—
Untimely Notice of Triggering Event
We proposed to allow a qualified
individual, enrollee, or dependent who
did not receive timely notice of a
triggering event and was otherwise
reasonably unaware that a triggering
event occurred to select a new plan
within 60 days of the date that he or she
knew, or reasonably should have
known, of the occurrence of the
triggering event. We also proposed to
allow such persons to choose the
earliest effective date that would have
been available if he or she had received
timely notice of the triggering event.
Finally, we proposed conforming
amendments to § 147.104(b)(2)(ii) so
that these proposals would also apply to
off-Exchange individual health
insurance coverage. We are finalizing
this policy as proposed.
In accordance with § 155.410(a)(2), an
Exchange may allow qualified
individuals and enrollees to enroll in or
change coverage only during the annual
open enrollment period as specified in
§ 155.410(e), and during special
enrollment periods as specified in
§ 155.420. An Exchange must allow a
qualified individual or enrollee to enroll
in or change from one qualified health
plan to another if one of the triggering
events described in § 155.420(d) occurs.
Furthermore, under § 155.420(c)(1), a
qualified individual or enrollee
generally has until 60 days after the date
of the triggering event to select a
qualified health plan. Section
155.420(c)(2) and (3), provide
exceptions to this general rule under
which a qualified individual or enrollee
may enroll prior to the date of a
triggering event. Section 155.420(c)(4)
provides a final exception under which
a qualified individual or enrollee may
have less than 60 days to enroll.
Coverage effective dates are outlined in
207 Sample eligibility and reminder notices can be
found at https://marketplace.cms.gov/applicationsand-forms/notices, and an overview of HHS
outreach to individuals who must submit
documentation to confirm their household income
or other information can be found starting on slide
15 of this presentation: https://
marketplace.cms.gov/technical-assistanceresources/complex-cases-data-matching.pdf.
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Jkt 253001
§ 155.420(b) and vary depending on the
special enrollment period triggering
event, but in all cases are either on or
after the date of the triggering event.
Because the time period during which
a qualified individual may enroll
through a special enrollment period is
determined by the triggering event, a
qualified individual who does not know
the triggering event has occurred may
not have sufficient time to enroll in
coverage. Generally, the triggering
events described in § 155.420(d) and
related plan selection timelines under
§ 155.420(c) are premised on the
assumption that an individual will
become aware of a triggering event in
time to make a plan selection within the
time allotted under § 155.420(c). For
example, the rules anticipate that
qualified individuals or enrollees will
receive timely notice of the day they
will lose employer-sponsored coverage
or the day they will gain a dependent
such that 60 days is ample time for the
individual to apply for enrollment
through an applicable special
enrollment period and select a plan.
However, our experience operating the
Federally-facilitated Exchange has
shown that there are circumstances in
which an individual reasonably may not
be aware of an event that triggers special
enrollment period eligibility until after
the triggering event has occurred. This
change will allow a qualified
individual, enrollee, or dependent who
did not receive timely notice of a
triggering event or was otherwise
reasonably unaware that a triggering
event occurred, to qualify for an
applicable special enrollment period
and select a new plan within 60 days of
the date that he or she knew, or
reasonably should have known, of the
occurrence of the triggering event. This
proposal will also allow the qualified
individual, enrollee, or dependent to
choose the earliest effective date that
would have been available if he or she
had received timely notice of the
triggering event.
For example, an employer fails to pay
its share of premium for an insured
employer-sponsored health plan and
enters a grace period beginning April
1st, which will expire on May 31st.
Because the employer intends to satisfy
its premium liability before the end of
the grace period, the employer does not
notify participants and beneficiaries in
the plan of the non-payment or the risk
of termination of its employersponsored coverage retroactive to April
1st. The employer is does not timely
satisfy the premium debt, and the issuer
of the employer-sponsored health
coverage terminates coverage for the
participants and beneficiaries
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Sfmt 4700
retroactively to April 1st. Neither the
employer nor the issuer of the
employer-sponsored health plan notify
the participants and beneficiaries of the
beginning of the grace period or that
coverage would be terminated as of
April 1st. On July 10th, the participants
and beneficiaries first receive notice
from the issuer that their coverage
terminated as of April 1st. In accordance
with the circumstances described in 26
CFR 54.9801–6(a)(3)(i), due to the
employer’s failure to timely pay
premiums, the participants and
beneficiaries of the employer-sponsored
health plan lost eligibility for the
coverage and are eligible for the special
enrollment period provided in
§ 155.420(d)(1)(i). Per paragraph
(d)(1)(i), the triggering event for special
enrollment periods due to loss of
minimum essential coverage is the last
day the consumer would have coverage
under his or her previous plan or
coverage. But in this scenario, affected
participants and beneficiaries, through
no fault of their own, were not aware of
their loss of minimum essential
coverage until more than 60 days
following the last day they had
coverage. Thus, without the measure we
proposed here, the participants and
beneficiaries in this example would not
be able to use the special enrollment
period at paragraph (d)(1)(i), because
more than 60 days had passed since the
relevant triggering event without their
having selected a new plan. Some
participants and beneficiaries of
employer-sponsored health plans are
experiencing similar circumstances
during the COVID–19 public health
emergency and sought or seek
individual health insurance coverage
through the FFEs, exposing a perceived
gap in current special enrollment period
rules.
Another circumstance in which an
individual may not be aware that a
triggering event occurred involves
technical errors that block an individual
from enrolling in coverage through an
Exchange. Section 155.420(d)(4)
specifies that an individual is eligible
for a special enrollment period if,
among other things, their erroneous
non-enrollment in a qualified health
plan was due to an error on the part of
the Exchange or one of its agents. In this
case, the error itself is the triggering
event, and the date it occurs serves as
the beginning of the special enrollment
period. However, as in the case of the
loss of employer-sponsored coverage
discussed above, an individual may not
be aware that an error has occurred. In
some cases, the Exchange may not be
aware that a technical error has
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occurred which prevented individuals
from enrolling until a subsequent
investigation is conducted. This process
may take several weeks, during which
time an impacted individual may not be
aware that they were unable to enroll
due to an error and therefore qualify for
a special enrollment period. There may
even be cases in which an Exchange
does not identify the issue and the
impacted population and notify them
until more than 60 days after the
triggering event occurred.
Therefore we proposed to amend
§ 155.420 by adding paragraph (c)(5) to
specifically provide that if a qualified
individual, enrollee, or dependent does
not receive timely notice of an event
that triggers eligibility for a special
enrollment period under this section,
and otherwise was reasonably unaware
that a triggering event occurred, the
Exchange must allow them to select a
new plan within 60 days of the date that
they knew, or reasonably should have
known, of the occurrence of the
triggering event. Additionally, we
proposed to add paragraph (b)(5) to
clarify that when a qualified individual,
enrollee, or dependent did not receive
timely notice of an event that triggers
eligibility for a special enrollment
period, the Exchange must allow the
such persons the option to choose the
earliest coverage effective date for the
triggering event under paragraph (b) that
would have been available if they had
received timely notice of the triggering
event. In addition, we proposed that the
Exchange must also provide the
qualified individual, enrollee or
dependent the option to choose the
effective date that would otherwise be
available under the other provisions in
paragraph (b).
Lastly, we proposed a conforming edit
to § 147.104(b)(2) that would
incorporate these amendments by
reference in the regulations governing
limited open enrollment periods for offExchange coverage, so that these
proposed special enrollment rules
would apply to issuers of nongrandfathered individual health
insurance, both on and off-Exchange.
We also separately proposed a change to
§ 147.104(b)(2)(ii) to clarify how the
special enrollment period in
§ 155.420(d)(4) applies off-Exchange.
This change is discussed in further
detail in the preamble to part 147.
We sought comment on these
proposals.
We received public comments on the
proposed updates to Special Enrollment
Periods—Untimely Notice of Triggering
Event. The following is a summary of
the comments we received and our
responses.
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Comment: All commenters, except for
one, expressed support for the proposal,
explaining that it provides flexibility for
situations in which a consumer was
reasonably unaware that a special
enrollment period triggering event
occurred. Several commenters stated
that this proposal is especially
appropriate given the ongoing economic
downturn and COVID–19 pandemic,
which will increase the number of
consumers without coverage. Others
stated that it will help promote
continuity of coverage, and reduce the
uninsured population. Several
commenters stated that the proposal
would help reduce challenges with
special enrollment period enrollment,
such as a lack of clear messaging and
insufficient time to select an appropriate
plan. A few commenter stated that the
proposal will allow more people to
enroll in special enrollment periods.
Response: We agree that this proposal
will have a positive impact by providing
consumers who were reasonably
unaware of a special enrollment period
triggering event with an opportunity to
enroll, as well as the other benefits
noted by commenters. As a result, we
are finalizing this policy as proposed.
Comment: One commenter opposed
the proposal, which they characterized
as establishing a new special enrollment
period, absent a requirement that
enrollees provide evidence of the lack of
timely notice of a special enrollment
period triggering event. This commenter
expressed concern that there are
insufficient mechanisms currently to
verify the lack of timely notice, and that
the proposal would create an openended, year-round opportunity to enroll
in coverage, thus increasing the
likelihood of adverse selection.
Response: We clarify that the
proposed rule does not establish new
circumstances through which a special
enrollment period would be available,
but simply provides additional
flexibility regarding when existing
special enrollment periods can be
accessed in the relatively rare
circumstances in which a consumer was
reasonably unaware that a triggering
event occurred. The proposed rule thus
would not create an open-ended special
enrollment period through which
anyone could enroll, and only
consumers who attest to being
reasonably unaware that they
experienced a special enrollment period
triggering event would be eligible to
avail themselves of this opportunity. We
also note that, for Exchanges on the
Federal platform, some enrollments
under this authority will be subject to
special enrollment period verification,
though there may be others that require
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24221
caseworker review. Finally, we note that
we will continue to monitor the
implementation of this provision and
propose additional policy and
operational updates, including
expanding the use of special enrollment
period verification, if necessary.
Comment: A few commenters
expressed support for the proposed rule,
but requested that HHS limit
enrollments under this authority to
prospective coverage effective dates,
and not allow retroactive coverage
effective dates. These commenters
stated that if retroactive coverage
effective dates are permitted, the risk of
adverse selection and higher premiums
for all enrollees will increase. One of
these commenters additionally stated
that allowing retroactive coverage
effective dates makes it more difficult
for issuers to contest improper claims.
Another commenter expressed concern
regarding the burden of providing
retroactive coverage for State Exchanges,
and about whether consumers enrolling
with a retroactive coverage effective
date would be required to pay all past
due premiums at once, and whether this
would lead to a gap in coverage if they
were unable to do so. This commenter
requested that we clarify the options
available to consumers in this scenario
if they are unable to pay all past due
premiums. Several other commenters
expressed support for providing
consumers with the earliest effective
date that would otherwise have been
available to them had they been aware
of the triggering event, stating that this
will help maintain continuity of
coverage.
Response: While we acknowledge the
concerns raised by commenters related
to potential adverse selection and
increased premiums, we believe this
risk to be low due to the rare
circumstances in which a consumer
would not be notified or become
reasonably aware of a triggering event
until after it has occurred. We further
anticipate that instances of consumers
experiencing significant delays in
notification or awareness of a triggering
event are even rarer, thus minimizing
the overall risk of adverse selection and
burden on State Exchanges to
implement. Regarding the concern of
one commenter that consumers may not
be able to afford to pay all past due
premiums if they choose a retroactive
coverage effective date, we note that
consumers have the option of choosing
a prospective coverage effective date
instead.
Comment: Several commenters
expressed support for the proposal, but
requested that, to prevent abuse by
consumers and agents and brokers and
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to avoid establishing an open-ended
opportunity for enrollment, HHS narrow
the scope of the proposal to only cover
certain special enrollment periods. A
few of these commenters requested that
HHS limit the proposal to scenarios in
which an individual with employersponsored coverage was not informed
by their employer of the loss of
coverage, such as the first example
discussed in the preamble of the
proposed rule. These commenters also
stated that HHS already has the
authority to provide flexible effective
dates for special enrollment periods due
to error of the Exchange, and so the
flexibility provided by the proposal rule
is unnecessary for these situations. One
commenter requested that HHS limit the
proposal to situations in which an
individual with employer-sponsored
coverage was not informed by their
employer of the loss of coverage, plus
scenarios in which an individual is
unaware of the date they gained a
dependent. Another commenter
requested that HHS apply parameters to
the proposal, such as limiting the
duration to a specific time period such
as a public health emergency, or
limiting it to the examples discussed in
the preamble of the proposed rule.
Response: Although we appreciate the
concerns raised by commenters, we are
finalizing the rule as proposed.
Although some commenters state that
HHS already has authority under the
exceptional circumstances or error of
Exchange special enrollment periods to
provide enrollees with flexible effective
dates, we note that there are other
special enrollment period triggering
events, not explicitly discussed as
examples in the proposed rule, of which
an enrollee may be reasonably unaware,
and for which there is no current
authority to provide for an enrollment
outside the normal window of
availability. Furthermore, the
exceptional circumstances special
enrollment period authority noted by
commenters is subject to each
Exchange’s reasonable interpretation
regarding what qualifies as
‘‘exceptional.’’ The proposed rule, by
contrast, establishes a clear mandate to
allow enrollees who were reasonably
unaware that a special enrollment
period triggering event occurred to use
the date they became aware as the
triggering event, which will provide
transparency and consistency in
implementation of this rule across
Exchanges and for individual health
insurance coverage. Finally, we note
that, because the proposal was intended
to establish a way to make whole
consumers who have been harmed
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through no fault of their own, limiting
its availability to certain special
enrollment period types would be
inconsistent with the purpose of this
proposed rule.
Comment: A few commenters
expressed support for the proposal, but
requested that enrollments under this
authority be subject to document-based
verification to prevent abuse by
consumers and agents and brokers.
Response: On Exchanges on the
Federal platform, some enrollments
under this authority will be subject to
special enrollment period verification,
though others will likely require
caseworker review. Because many State
Exchanges and off-Exchange issuers
already conduct special enrollment
period verification, HHS did not set
explicit requirements for State
Exchanges or off-Exchange issuers
regarding special enrollment period
verification for enrollments under this
provision. Therefore, we cannot say
with certainty whether these entities
would subject such enrollments to
verification.
Comment: Two commenters requested
that HHS implement this proposal
sooner than the scheduled January 1,
2022 implementation date.
Response: We note that this provision
will become effective on the effective
date of this rule, and thus the proposal
will be implemented sooner than
January 1, 2022.
Comment: Two commenters, noting
the difficulties that some consumers
face in understanding special
enrollment period eligibility and
gathering supporting documentation
within the 60-day window, expressed
support for providing consumers with a
window of 60 days from the date they
are notified of special enrollment period
eligibility to enroll.
Response: Although we appreciate the
concerns raised regarding the ability of
consumers to understand and comply
with the process for enrolling in a
special enrollment period within the 60day window, establishing a policy of
providing consumers with a 60-day
window from the date they become
aware of special enrollment period
eligibility would be inconsistent with
existing rules for special enrollment
period eligibility. Currently, eligibility
for special enrollment periods on
Exchanges on the Federal platform and
many State Exchanges is based on the
occurrence of a triggering event, such as
a loss of minimum essential coverage,
rather than the date an enrollee becomes
aware of their special enrollment period
eligibility. Therefore, to maintain
consistency in special enrollment
period operations across these
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Exchanges, we believe it is appropriate
to establish the date an enrollee
becomes aware of the occurrence of a
triggering event as the triggering event,
rather than the date they become aware
of their eligibility for a special
enrollment period.
Comment: One commenter requested
that HHS broadly interpret the phrase
‘‘reasonably unaware’’ in the regulation
text for this proposed rule, and stated
that HHS should not second-guess a
consumer’s statement that they were
unaware of a special enrollment period
triggering event. Another commenter
requested that HHS explain the meaning
of this phrase, noting that if
interpretation is left up to those
providing enrollment assistance, it
would be burdensome for State
Exchange operations and require
processes to individually advise
consumers on the date that they should
have known about a special enrollment
period triggering event.
Response: HHS appreciates the
concerns raised regarding how the
phrase ‘‘reasonably unaware’’ in the
regulation text will be interpreted.
Although we do not provide an exact
definition of this phrase, we note the
two examples included in the preamble
of the proposed rule, which describe
scenarios in which an individual was
reasonably unaware that a special
enrollment period triggering event had
occurred. In addition, to provide further
clarity we include the following
example, which illustrates a situation in
which a consumer would not have been
reasonably unaware that a special
enrollment period triggering event
occurred. The examples in the preamble
to the proposed rule make clear that
interpretation of the phrase ‘‘reasonably
unaware’’ is not entirely up to
individuals providing enrollment
assistance. In addition, we also note that
the legal standard of what constitutes a
reasonable person provides objectivity
to whether a consumer in this scenario
would be reasonably unaware.
Example: A consumer visits
HealthCare.gov on December 1 (during
the annual open enrollment period), and
while filling out an application, is
informed that they may be eligible for
Medicaid. The consumer then fills out
an application with their state Medicaid
office. On February 3 of the following
year, they receive a letter from the state
Medicaid office informing them that
they are ineligible for Medicaid, but fail
to open the letter. On April 1 the
consumer finds the unopened letter and
reads it, and then attempts to enroll in
a qualified health plan on
HealthCare.gov, attesting to eligibility
for the Medicaid denial special
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enrollment period based on the
February 3 letter informing them of their
ineligibility for Medicaid. The consumer
failed to enroll in the special enrollment
period they would have been eligible for
under 45 CFR 155.420(d)(11)(i) within
the allotted 60-day window because
they were unaware of the triggering
event, in this case the determination of
ineligibility for Medicaid on February 3,
when it occurred. However, they are not
eligible to avail themselves of the
provision in § 155.420(c)(5) because,
had they opened the letter informing
them of their ineligibility for Medicaid
within a reasonable period of time after
receiving it, they would have been made
aware of the occurrence of a special
enrollment period triggering event, and
thus they were not reasonably unaware
that one had occurred.
Comment: One commenter requested
that HHS discuss whether consumers
will be able to access this special
enrollment period through
HealthCare.gov, which they note would
be preferable to enrollments through the
call center.
Response: Although enrollees under
this authority may be able to enroll
using the application on
HealthCare.gov, there are likely to be
cases in which enrollees must access the
special enrollment period they are
eligible for through the Marketplace Call
Center or a caseworker.
Comment: One commenter expressed
support for the proposal, and also asked
that the Department of Labor consider
implementing this proposal for the
group insurance market as well.
Response: HHS does not have the
authority to change Department of Labor
regulations, and so we are unable to
finalize such changes. We note that the
Department of Labor regulates group
health plans under the Employee
Retirement Income Security Act of 1974
(ERISA), and that HHS regulates the
group health insurance market. We did
not propose to apply this provision to
the group health insurance market, and
will therefore not finalize such a
provision here. However, we will
continue to monitor this issue and
propose changes related to HHS
regulations for the group health
insurance market in the future, if
appropriate.
Comment: One commenter expressed
support for the proposal, but also
expressed concern regarding the
potential for unintentional loss of dental
coverage as a result of changes in other
health coverage, for example if a
consumer enrolls in both a qualified
health plan and stand-alone dental plan,
but due to an error of the Exchange was
prevented from enrolling in the stand-
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alone dental plan. They request that
HHS allow consumers enrolling under
the authority in the proposed rule to
also select a dental plan, and suggest
that this could be accomplished by
removing the link between qualified
health plans and stand-alone dental
plans on the Federally-facilitated
Exchanges.
Response: We appreciate the concern
raised regarding the potential impact of
the proposed rule on dental insurance,
and note that nothing would prevent a
consumer from enrolling in a standalone dental plan under the authority in
the proposed rule. For this reason we
believe that removing the link between
qualified health plans and stand-alone
dental plans on the Federally-facilitated
Exchanges is not necessary, but we will
continue to monitor this issue and
propose changes in the future if
necessary.
Following review of the comments,
we are finalizing this policy as
proposed.
c. Cessation of Employer Contributions
or Government Subsidies to COBRA as
Special Enrollment Period Trigger
The Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) 208
(Pub. L. 99–272, April 7, 1986) provides
for a temporary continuation of group
health coverage following, among other
circumstances, employees’ separation
from an employer, for reasons other
than gross misconduct, in instances
where such separation would otherwise
cause termination of coverage. Although
employees who elect to receive COBRA
continuation coverage may be required
by their former employer to pay their
former employer’s share of the
premiums as well as their own,209 some
employers pay all or a portion of their
former employee’s premium for part or
all of the COBRA coverage period. In
addition, government entities will
sometimes subsidize COBRA
continuation coverage premiums,
whether as a direct payment or via a
third party such as an employer.
In accordance with the policy
currently in place on the Exchanges on
the Federal platform, we proposed to
amend § 155.420(d)(1) to state that the
complete cessation of employer
contributions for COBRA continuation
coverage serves as a triggering event for
208 https://www.dol.gov/sites/dolgov/files/EBSA/
about-ebsa/our-activities/resource-center/faqs/
cobra-continuation-health-coverage-consumer.pdf.
209 Individuals electing COBRA may also be
required by their former employer to pay a 2
percent administrative fee. See https://
www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/
our-activities/resource-center/faqs/cobracontinuation-health-coverage-consumer.pdf.
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special enrollment period eligibility. We
are instead finalizing this policy under
new paragraph (d)(15), rather than in
paragraph (d)(1)(v) as we proposed. We
are also finalizing text providing that
the special enrollment period will be
available when subsidies from a
government entity completely cease.210
The triggering event for this special
enrollment period is the last day of the
period for which COBRA continuation
coverage was paid for or subsidized, in
whole or in part, by an employer or a
government entity.
Exchange regulations at
§ 155.420(d)(1)(i) provide that when a
qualified individual or his or her
dependent loses minimum essential
coverage as defined by § 155.20, they
gain eligibility for a special enrollment
period, during which they can enroll in
a qualified health plan. Paragraph (e) of
§ 155.420 states that loss of minimum
essential coverage as described in
paragraph (d)(1) includes the
circumstances listed at 26 CFR 54.9801–
6(a)(3)(i) through (iii). These provisions
describe conditions under which
someone may qualify for a special
enrollment period for group health plan
coverage, including paragraphs (a)(3)(i),
‘‘Loss of eligibility for coverage,’’ and
(a)(3)(iii), ‘‘exhaustion of COBRA
continuation coverage.’’ Exhaustion of
COBRA coverage is defined in 26 CFR
54.9801–2(4) as cessation of COBRA
coverage for reasons other than failure
of the individual to timely pay
premiums, and includes coverage
ceasing due to ‘‘failure of the employer
or other responsible entity to remit
premiums on a timely basis.’’
In implementing special enrollment
periods for Exchanges on the Federal
platform, HHS has provided a loss of
minimum essential coverage special
enrollment period under
§ 155.420(d)(1)(i) for individuals whose
COBRA costs change because their
former employer completely ceases
contributions and as a result they must
pay the full cost of premiums. However,
loss of coverage based on complete
cessation of employer contributions for
COBRA coverage might not have been
treated as a triggering event by issuers
of individual health insurance coverage
off-Exchange or by State Exchanges.
210 Because employers are not required to charge
a 2 percent administrative fee to individuals who
elect COBRA, we do not include this fee in the
definition of ‘‘employer contributions.’’ For
purposes of this section, if an individual enrolled
in COBRA continuation coverage without employer
contributions (so that the individual was
responsible for 100 percent of the premiums) was
not required to pay a 2 percent administrative fee,
this would not be considered an employer
contribution for the purposes of the proposed
special enrollment period.
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HHS believes it is important that
individuals have access to a special
enrollment period in the individual
market when their former employer or
a government entity completely ceases
contributions or subsidies to COBRA
continuation coverage, because the cost
of COBRA continuation coverage
premiums can be substantial, rendering
this type of coverage unaffordable for
many people to whom it would be
available.211 Ensuring that this special
enrollment period is widely available
will help promote continuity of
coverage for those who cannot maintain
their COBRA continuation coverage
without contributions or subsidies from
their employer or a government entity.
HHS therefore proposed to make this
special enrollment period available
throughout the individual market.
We proposed to amend § 155.420 by
adding paragraph (d)(1)(v) stating that a
special enrollment period is triggered
when a qualified individual or his or
her dependent is enrolled in COBRA
continuation coverage for which an
employer is paying all or part of the
premiums, and the employer completely
ceases its contributions, with the
triggering event being the last day of the
period for which COBRA continuation
coverage is paid for, in whole or in part,
by the employer. We are instead
finalizing proposed paragraph (d)(1)(v)
as (d)(15), and in addition we are also
finalizing a change to (e)(1) to explicitly
exclude (d)(15). In the preamble to the
proposed rule, we clarified that the
triggering event for this special
enrollment period would be based on
loss of employer contributions to
COBRA continuation coverage, rather
than the loss of coverage itself. Thus,
eligibility for this special enrollment
period does not depend on loss of
COBRA coverage, as illustrated by the
examples we included. However,
proposed paragraph (d)(1)(v), like the
rest of paragraph (d)(1), would have
been subject to paragraph (e), which
states that loss of coverage excludes
voluntary termination of coverage, and
(e)(1), which states that loss of coverage
does not include failure to pay
premiums on a timely basis, including
COBRA premiums. Although new
paragraph (d)(15) will not be subject to
the provisions in (e), we are concerned
that stakeholders may still be uncertain
about whether individuals who
voluntarily end COBRA continuation
coverage or have such coverage
terminated following a loss of employer
contributions or government subsidies
would still be eligible for this special
211 https://www.kff.org/private-insurance/issue-
brief/key-issues-related-to-cobra-subsidies/.
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enrollment period, given the limitations
imposed by paragraph (e)(1). Therefore,
we are finalizing proposed paragraph
(d)(1)(v) as (d)(15), which is not subject
to paragraph (e). In addition, we are also
finalizing a change to paragraph (e)(1) to
explicitly exclude the special
enrollment period trigger in paragraph
(d)(15), making clear that individuals
who voluntarily end COBRA
continuation coverage or have such
coverage terminated following a loss of
employer contributions or government
subsidies are still eligible for this
special enrollment period, and to use
the term ‘‘COBRA continuation
coverage’’ consistently.
Similar to the special enrollment
period for termination of employer
contributions to employer-sponsored
coverage at 26 CFR 54.9801–6(a)(3)(ii),
we proposed that the triggering event is
the last day of the period for which
COBRA continuation coverage is paid
for, in part or in full, by an employer.
Furthermore, we proposed to clarify that
complete cessation of employer
contributions toward employersponsored continuation coverage under
state mini-COBRA laws 212 also serves
as a special enrollment period triggering
event. These changes would make
explicit HHS’s current policy with
regard to the Exchanges on the Federal
platform, and would ensure that
individual health insurance coverage
sold off-Exchange and through State
Exchanges align with it. In addition,
establishing paragraph (d)(15) to
explicitly include complete cessation of
employer contributions and government
subsidies to COBRA continuation
coverage as a special enrollment period
triggering event will mitigate confusion
among employers and employees, as
well as other stakeholders, about their
options regarding COBRA continuation
coverage and special enrollment period
eligibility.
Similar to other special enrollment
periods based on loss of minimum
essential coverage, in the Exchanges,
this special enrollment period would be
subject to the provisions in paragraph
(a)(4)(iii)(B) and (C), which allow
dependents and non-dependent
qualified individuals who qualify for a
special enrollment period to be added to
the QHP of a household member who is
already enrolled in Exchange coverage,
or to enroll separately in a plan of any
metal level. We also proposed that the
Exchange must provide the qualified
individual, enrollee, or dependent the
effective date that would otherwise be
212 https://www.dol.gov/sites/dolgov/files/EBSA/
about-ebsa/our-activities/resource-center/faqs/
cobra-continuation-health-coverage-consumer.pdf.
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available pursuant to the other
provisions at paragraph (b)(2)(iv). To
ensure that this provision applies to
new paragraph (d)(15), we are also
finalizing changes to paragraph (b)(2)(iv)
to include paragraph (d)(15) in the list
of special enrollment periods that are
subject to the paragraph. In addition, we
proposed that an individual eligible for
this special enrollment period would
have 60 days before or after the
triggering event (in this case, the last
day for which the qualified individual
or dependent has COBRA continuation
coverage to which an employer or
governmental entity is contributing) to
select a qualified health plan. Therefore
we are also finalizing changes to
paragraph (c)(2) to include new
paragraph (d)(15). We also proposed
that this special enrollment period,
which would be incorporated by
reference in the guaranteed availability
regulations at § 147.104(b)(2), apply
with respect to individual health
insurance coverage offered through and
outside of an Exchange.
To help clarify the circumstances that
would trigger the proposed special
enrollment period, we included the
following example:
Example 1: An individual is laid off
from a job on June 1, and 5 days later
enrolls in COBRA continuation coverage
for which the employer pays 100
percent of the premiums (the employer
does not require payment of a 2 percent
administrative fee). On September 3 of
that year, the employer informs the
individual that it is completely
terminating contributions to the
individual’s COBRA continuation
coverage as of September 30, and
beginning on October 1, the individual
will be responsible for 100 percent of
the COBRA continuation coverage
premiums. As a result, the individual
decides to end COBRA coverage
effective October 1. Because September
30 is the last day for which the
individual had COBRA continuation
coverage for which the employer was
contributing, the individual has 60 days
before and after September 30 (in this
case, through November 29) to select an
individual market plan through a
special enrollment period.
In addition to this proposal, HHS also
considered addressing situations in
which an employer reduces, but does
not completely cease, its contributions
for COBRA continuation coverage. In
particular, we considered adding to
proposed paragraph § 155.420(d)(1)(v) a
provision that a reduction of employer
contributions to COBRA continuation
coverage would also serve as a special
enrollment period trigger. We also
sought comment on whether HHS
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should also adopt a threshold for the
level of reduction of employer
contributions to COBRA continuation
coverage that would be necessary to
trigger the special enrollment period.
However, we are not finalizing this
policy.
Lastly, we note that in addition to
employer contributions to COBRA
continuation coverage, COBRA coverage
is sometimes subsidized by government
entities as well, either directly or
through a third party such as an
employer.213 As noted in the preamble
to the proposed rule and earlier in this
preamble, HHS believes it is important
that individuals have access to a special
enrollment period in the individual
market when contributions to COBRA
continuation coverage cease, because
the cost of COBRA continuation
coverage premiums are substantial,
rendering this type of coverage
unaffordable for many people to whom
it would be available. This issue applies
equally to cessation of employer
contributions and cessation of
government subsidies. As with
employer contributions to COBRA
continuation coverage, providing
individuals with a special enrollment
period when subsidies from a
government entity completely cease will
promote continuity of coverage among
those who could not maintain their
coverage without such subsidies.
Therefore, we are also finalizing in new
paragraph § 155.420(d)(15) the provision
that a special enrollment period is
triggered when subsidies from a
governmental entity to COBRA
continuation coverage, whether paid
directly or through a third party,
completely cease. The triggering event is
the last day of the period for which
COBRA continuation coverage is paid
for or subsidized, in whole or in part, by
an employer or government entity.
We also provide the following
example to illustrate how the special
enrollment period would work with
regard to government subsidies of
COBRA continuation coverage
premiums.
Example 2: Same scenario as in the
first example, except that, as under the
American Rescue Plan Act of 2021, the
COBRA continuation coverage the
individual is receiving is fully
subsidized by the federal government,
so that the individual does not have to
pay any portion of the COBRA
premium. The federal subsidy is set to
expire on September 30, and as a result,
213 For example, the American Rescue Plan Act of
2021 provides individuals enrolled in COBRA
continuation coverage with subsidies that cover 100
percent of premiums through September 30, 2021.
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beginning October 1 the individual will
be responsible for the full amount of the
COBRA continuation coverage
premiums. The individual decides to
end their coverage effective October 1,
and as a result will have 60 days before
and after the last day for which they
have COBRA continuation coverage
with federal subsidies (in this case,
through November 29) to enroll in
individual health insurance coverage
through a special enrollment period.
We received public comments on the
proposed updates to cessation of
employer contributions to COBRA as
special enrollment period trigger. The
following is a summary of the comments
we received and our responses.
Comment: No commenters opposed
this proposal, and many supported it,
explaining that codifying this special
enrollment period in regulation would
enhance transparency regarding the
availability of this special enrollment
period on Exchanges on the Federal
platform, and mitigate confusion among
employers and employees about their
options regarding COBRA continuation
coverage and special enrollment period
eligibility. Several commenters agreed
that, since consumers who lose
employer contributions to COBRA
continuation coverage face a financial
calculation that is different than the one
they made when originally enrolling in
COBRA coverage, a special enrollment
period is appropriate. Several others
stated that this proposal is especially
appropriate given the ongoing economic
downturn and COVID–19 pandemic.
Other commenters stated that this
proposal will help promote continuity
of coverage, and noted that this is
especially important given that
individuals with COBRA are more likely
to have higher medical expenses. A few
commenters stated that this special
enrollment period is especially
appropriate given the limited options
faced by consumers who choose to
maintain their COBRA continuation
coverage once employer contributions
end. Another agreed that it is important
to provide flexibility for consumers who
are in a situation over which they have
no control. One commenter stated that
this special enrollment period is
especially important for individuals
with chronic health conditions, such as
HIV. Another commenter noted that
special enrollment periods such as this
provide a critical safety net for
consumers outside of the annual open
enrollment period. Another stated that
the proposed rule would likely
encourage employers to assist laid-off
workers with contributions to COBRA.
Finally, one commenter stated that the
proposal will have the beneficial effect
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24225
of allowing more individuals to enroll
through special enrollment periods.
Response: We agree that the proposed
changes would enhance transparency
and mitigate confusion regarding an
existing policy of the Exchanges on the
Federal platform and options for
consumers regarding special enrollment
period eligibility, in addition to the
other benefits noted by commenters.
Accordingly, we are finalizing this
policy as proposed (but with the
additional provision regarding
government subsidies).
Comment: Several commenters
expressed support for the proposal, and
in addition supported designating
partial reductions in employer
contributions to COBRA continuation
coverage as a special enrollment period
triggering event. These commenters
noted that due to the high cost of
COBRA continuation coverage, even a
partial reduction in employer
contributions could make such coverage
unaffordable for many consumers. In
addition, they noted that including
partial reduction of employer
contributions as a special enrollment
period trigger would promote access to
health insurance by providing another
pathway by which individuals can
enroll in coverage. Several commenters
also expressed support for establishing
a threshold amount by which employer
contributions must decrease in order to
trigger special enrollment period
eligibility. A few of these commenters
expressed support for defining a
threshold based on affordability to the
consumer. One commenter suggested
using a threshold of 10 percent as an
approximation of a material reduction
in employer contributions. Another
commenter noted the IRS’ threshold for
evaluating affordability of employersponsored coverage of 9.83 percent,
which they are concerned may be too
high for the purposes of COBRA
coverage given the financial challenges
faced by consumers following a loss of
employment. Finally, a few other
commenters opposed establishing a
threshold, arguing that it would be
unnecessarily burdensome to consumers
and noting that even partial reductions
can render COBRA coverage
unaffordable. These commenters instead
supported designating a reduction in
employer contributions to COBRA of
any amount as a special enrollment
period triggering event.
Response: HHS recognizes the
concerns raised by commenters
regarding the high cost of COBRA
continuation coverage, even with partial
employer contributions. However,
because the number of COBRA enrollees
with employer subsidies is already low
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relative to the rest of the individual
insurance market,214 we believe it is
likely that situations in which employer
contributions to COBRA continuation
coverage are reduced significantly
enough to render such coverage
unaffordable affect only a very small
number of consumers. Accordingly, we
are not finalizing reduction of employer
contributions to COBRA continuation
coverage as a special enrollment period
trigger, but will continue to monitor this
situation in the future.
Comment: Two commenters requested
that HHS implement this special
enrollment period sooner than the
scheduled 2022 implementation date.
Response: We note that the
requirement to provide this special
enrollment period goes into effect on the
effective date of this rule, which is
sooner than the 2022 implementation
date.
Comment: Two commenters
expressed support for applying this
special enrollment period to offExchange individual health insurance
coverage and on State Exchanges. One
of these commenters noted that
establishing more consistent special
enrollment period rules on and offExchange would help reduce the onExchange disadvantage.
Response: We agree that it is
appropriate to apply this special
enrollment period market-wide to
individual health insurance coverage,
including for coverage offered offExchange and on State Exchanges, and
thus we are finalizing this policy as
proposed (but with the additional
provision regarding government
subsidies).
Comment: Two commenters
expressed support for the proposal, and
also suggested that HHS establish a
special enrollment period for
individuals, and their dependents, who
voluntarily terminate their COBRA
coverage, regardless of whether they are
receiving employer contributions. These
commenters also added that not doing
so would penalize an enrollee who
chooses to enroll in COBRA in an effort
to maintain their coverage. One of the
commenters suggested this policy as a
way of expanding the number of ways
in which consumers can enroll in
Exchange coverage.
Response: Although we appreciate the
concerns raised regarding the
availability of a special enrollment
period for individuals who are not
receiving employer contributions to
COBRA coverage, we do not believe that
establishing such a special enrollment
214 https://www.cbo.gov/system/files/2021-02/
hEdandLaborreconciliationestimate.pdf.
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period is necessary. In general, when a
consumer has the opportunity to elect
COBRA continuation coverage, they also
will have the opportunity to enroll in a
qualified health plan on the Exchanges
on the Federal platform or a State
Exchange as well as off-Exchange, as
they will likely be eligible for a loss of
minimum essential coverage special
enrollment period. In addition, special
enrollment periods are generally based
on triggering events that do not include
voluntary termination of coverage,
which would introduce concerns
regarding adverse selection in the
individual market.
Comment: One commenter expressed
support for the proposal, but requested
that HHS implement stronger
verification mechanisms, such as
provision of a letter indicating the
termination of employer contributions
to COBRA. This commenter also noted
that verification would benefit the
enrollee by ensuring they do not pay
out-of-pocket for coverage already
covered through employer
contributions.
Response: This special enrollment
period has been subject to special
enrollment period verification on
Exchanges on the Federal platform,
subject to the loss of minimum essential
coverage special enrollment period
attestation. Similarly, many State
Exchanges already conduct special
enrollment period verification. With
respect to off-Exchange enrollments
using special enrollment periods,
subject to applicable state law, issuers
may implement reasonable procedures
to verify eligibility for special
enrollment periods, and because these
Exchanges and issuers are able to
determine for themselves whether
verification is needed, we do not believe
it is necessary to require them to
establish specific verification
procedures for this special enrollment
period.
Comment: One commenter requested
that HHS discuss whether consumers
will be able to access this special
enrollment period through
HealthCare.gov, which they note would
be preferable to enrollments through the
call center.
Response: This special enrollment
period has been, and will continue to
be, available to enrollees on Exchanges
on the Federal platform through the
application on HealthCare.gov.
Comment: One commenter expressed
support for the proposal, and requested
that HHS allow enrollees through this
special enrollment period to select a
plan of any metal level when they
enroll.
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Response: Enrollments through this
special enrollment period on Exchanges
on the Federal platform and State
Exchanges are subject to plan category
limitations, including metal level
restrictions, under 45 CFR
155.420(a)(4)(iii). We note, however,
that because plan category limitations
apply only to current Exchange
enrollees, consumers enrolling through
this special enrollment period on an
Exchange would only be subject to them
in situations where they were added to
an existing policy. Although we
appreciate the concern raised regarding
allowing enrollees to select a plan of
any metal level, because we did not
propose to exempt enrollments through
this special enrollment period from plan
category limitations in the proposed
rule, we are not finalizing such a change
here. However, we will continue to
monitor this issue in the future. We also
note that enrollments in off-Exchange
coverage are not subject to plan category
limitations, and thus consumers
enrolling through this special
enrollment period off-Exchange could
select a plan of any metal level.
Comment: One commenter requested
that HHS provide resources to make the
public aware of the opportunity to
enroll during a special enrollment
period when employer contributions to
COBRA coverage cease.
Response: HHS will leverage existing
HealthCare.gov content to ensure that
enrollees are aware of their options
regarding cessation of employer
contributions to COBRA coverage and
special enrollment period eligibility.
Comment: One commenter requested
that HHS also establish a special
enrollment period for enrollees who
experience a decrease in APTC that
renders coverage unaffordable to them.
Response: We appreciate the concerns
raised regarding individuals who
experience a decrease in APTC that
renders their coverage unaffordable. As
described earlier in this section of the
preamble, in this rule we decided not to
finalize a special enrollment period
where employer contributions to or
government subsidies of COBRA
coverage are reduced but do not
completely cease. We will continue to
monitor this situation in the future, and
will consider it for future rulemaking.
As a result of the comments, we are
finalizing this policy as proposed,
except that we are finalizing proposed
paragraph (d)(1)(v) as paragraph (d)(15),
with the additional provision that
cessation of government subsidies to
COBRA continuation coverage will also
result in a special enrollment period
trigger, and with other conforming
changes discussed in this section of the
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preamble. However, we are not
finalizing the proposal to include
reduction of employer contributions to
COBRA continuation coverage as a
special enrollment period trigger.
d. Special Enrollment Period
Verification
In 2017, the HHS Market Stabilization
Rule preamble explained that HHS
would implement pre-enrollment
verification of eligibility for certain
special enrollment periods in all FFEs
and SBE–FPs and encouraged states to
do the same in State Exchanges.
Since 2017, Exchanges on the Federal
platform have implemented preenrollment special enrollment period
verification for special enrollment
period types commonly used by
consumers to enroll in coverage.
Consumers who are not already enrolled
through the Exchange and who apply
for coverage through a special
enrollment period type that requires
pre-enrollment verification by the
Exchange must have their eligibility
electronically verified using available
data sources, or they must submit
supporting documentation to verify
their eligibility for the special
enrollment period before their
enrollment can become effective. As
stated in the HHS Marketplace
Stabilization Rule, special enrollment
period verification is only conducted for
new enrollees due to the potential for
additional burden on issuers and
confusion for consumers if required for
existing enrollees.
In implementing pre-enrollment
verifications for special enrollment
periods in the Market Stabilization Rule,
HHS did not establish a regulatory
requirement that all Exchanges conduct
special enrollment period verifications,
in order to allow State Exchanges with
flexibility to adopt policies that fit the
needs of their state.215 Currently, all
State Exchanges now conduct either
pre- or post-enrollment verification of at
least one special enrollment type.
We proposed to amend § 155.420 to
add paragraph (f) to require all
Exchanges to conduct eligibility
verification for special enrollment
periods. Specifically, we proposed to
require that Exchanges conduct special
enrollment period verification for at
least 75 percent of new enrollments
through special enrollment periods for
consumers not already enrolled in
coverage through the applicable
Exchange.
We also proposed that under
§ 155.315(h), State Exchanges would
have the flexibility to propose
215 82
FR at 18356.
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alternative methods for conducting
required verifications to determine
eligibility for enrollment in a QHP
under subpart D, and to allow State
Exchanges to request HHS approval for
use of alternative processes for verifying
eligibility for special enrollment periods
as part of determining eligibility for
special enrollment periods under
§ 155.305(b).
We sought comment on these
proposals. With respect to Special
Enrollment Period Verification, we
sought comment from States about the
75 percent verification threshold and
whether it should be based on past year
or current year special enrollment
period enrollments, understanding that
unforeseen events may occur that may
drive up or down enrollments from
year-to-year.
We received public comments on the
proposed updates to require Exchanges
to conduct Special Enrollment Period
verification. The following is a summary
of the comments we received and our
responses.
Comment: Several commenters
supported the proposed policy.
However, the majority of commenters
opposed the policy due to the
administrative burden to consumers and
the financial and administrative burden
on State Exchanges. Several commenters
stated that State Exchanges have the
best understanding of their needs
around special enrollment period
verification and are best able to
determine their SEP verification strategy
and thresholds. Several commenters did
not think that CMS provided
justification for the 75 percent threshold
or the policy change by citing evidence
of a negative risk pool impact, abuse of
SEPs, or ongoing problems with
Exchanges’ current practices. A few
commenters expressed concern that the
proposal could negatively affect the risk
pool by deterring younger and healthier
enrollees from completing enrollment.
One commenter asked for further
guidance on the flexibility for states and
what constitutes alternative means. One
commenter suggested to waive this
requirement until additional research
can be conducted to ensure that the
policy does not create an undue burden
on individuals. One commenter noted
that stricter SEP enforcement
mechanisms have the potential to
improve the risk profile, but any
requirements regarding SEP enrollment
should not be onerous enough to reduce
participation among those legitimately
eligible.
Response: We agree with commenters
who expressed concerns about imposing
administrative or financial burden on
State Exchanges or administrative
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24227
burden on consumers at this time with
additional new requirements. We
estimate that there are only four State
Exchanges that conduct more limited
special enrollment period verification
than the Exchanges on the Federal
platform, but these State Exchanges still
conduct some form of special
enrollment period verification. These
also include the 3 smallest State
Exchanges in terms of numbers enrolled
and issuer participation. These State
Exchanges have reported to HHS that,
based on regular communications they
have with their issuers about special
enrollment periods, they do not have
evidence to suggest there is misuse of
special enrollment periods occurring.
Following review of the comments,
we are not finalizing this proposal.
9. Required Contribution Percentage
(§ 155.605(d)(2))
HHS calculates the required
contribution percentage for each benefit
year using the most recent projections
and estimates of premium growth and
income growth over the period from
2013 to the preceding calendar year.
Accordingly, we proposed the required
contribution percentage for the 2022
benefit year, calculated using income
and premium growth data for the 2013
and 2021 calendar years.
Under section 5000A of the Code, an
individual must have MEC for each
month, qualify for an exemption, or
make an individual shared
responsibility payment. Under
§ 155.605(d)(2), an individual is exempt
from the requirement to have MEC if the
amount that he or she would be
required to pay for MEC (the required
contribution) exceeds a particular
percentage (the required contribution
percentage) of his or her projected
household income for a year. Although
the Tax Cuts and Jobs Act reduced the
individual shared responsibility
payment to $0 for months beginning
after December 31, 2018, the required
contribution percentage is still used to
determine whether individuals above
the age of 30 qualify for an affordability
exemption that would enable them to
enroll in catastrophic coverage under
§ 155.305(h).
The initial 2014 required contribution
percentage under section 5000A of the
Code was 8 percent. For plan years after
2014, section 5000A(e)(1)(D) of the Code
and Treasury regulations at 26 CFR
1.5000A–3(e)(2)(ii) provide that the
required contribution percentage is the
percentage determined by the Secretary
of HHS that reflects the excess of the
rate of premium growth between the
preceding calendar year and 2013, over
the rate of income growth for that
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period. The excess of the rate of
premium growth over the rate of income
growth is also used for determining the
applicable percentage in section
36B(b)(3)(A) of the Code and the
required contribution percentage in
section 36B(c)(2)(C) of the Code.
As discussed elsewhere in this
preamble, we are finalizing as the
measure for premium growth the 2022
premium adjustment percentage of
1.3760126457 (or an increase of about
37.6 percent over the period from 2013
to 2021). This reflects an increase of
about 1.6 percent over the 2021
premium adjustment percentage
(1.3760126457/1.3542376277).
As the measure of income growth for
a calendar year, we established in the
2017 Payment Notice that we would use
per capita personal income (PI). Under
the approach finalized in the 2017
Payment Notice and proposed for use in
the 2022 Payment Notice, the rate of
income growth for 2022 is the
percentage (if any) by which the NHEA
Projections 2019–2028 value for per
capita PI for the preceding calendar year
($61,156 for 2021) exceeds the NHEA
Projections 2019–2028 value for per
capita PI for 2013 ($44,948), carried out
to ten significant digits. The ratio of per
capita PI for 2021 over the per capita PI
for 2013 is estimated to be
1.3605944647 (that is, per capita income
growth of about 36.1. percent).216 This
rate of income growth between 2013 and
2021 reflects an increase of
approximately 3.9 percent over the rate
of income growth for 2013 to 2020
(1.3605944647 ÷ 1.3094029651) that was
used in the 2021 Payment Notice. Per
capita PI includes government transfers,
which refers to benefits individuals
receive from federal, state, and local
governments (for example, Social
Security, Medicare, unemployment
insurance, workers’ compensation,
etc.).217
216 The 2013 and 2021 per capita personal income
figures used for this calculation reflect the NHE
Projections 2019–2028, published on March 24,
2020. The series used in the determinations of the
adjustment percentages can be found in Tables 1
and 17 on the CMS website, which can be accessed
by clicking the ‘‘NHE Projections 2019–2028—
Tables’’ link located in the Downloads section at
https://www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/National
HealthExpendData/NationalHealthAccounts
Projected.html. A detailed description of the NHE
projection methodology is available at https://
www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/National
HealthExpendData/Downloads/Projections
Methodology.pdf.
217 U.S. Department of Commerce Bureau of
Economic Analysis (BEA) Table 3.12 Government
Social Benefits. Available at https://apps.bea.gov/
iTable/iTable.cfm?reqid=19&step=3&isuri=
1&categories=survey&nipa_table_list=110.
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Using the 2022 premium adjustment
percentage finalized in this rule, the
excess of the rate of premium growth
over the rate of income growth for 2013
to 2021 is 1.3760126457 ÷
1.3605944647, or 1.0113319445. This
results in the 2022 required contribution
percentage under section 5000A of the
Code of 8.00 × 1.0113319445 or 8.09
percent, when rounded to the nearest
one-hundredth of one percent, a
decrease of 0.18 percentage points from
2021 (8.09066¥8.27392).
Finally, beginning with the 2023
benefit year, we proposed to publish the
required contribution percentage, along
with the premium adjustment
percentage and the annual cost-sharing
limitation parameters, in guidance
separate from the annual notice of
benefit and payment parameters, unless
HHS were to propose a change to the
methodology for calculating the
parameters, in which case, we would do
so through notice-and-comment
rulemaking. For a discussion of that
proposal, please see the preamble for
Publication of the Premium Adjustment
Percentage, Maximum Annual
Limitation on Cost Sharing, Reduced
Maximum Annual Limitation on Cost
Sharing, and Required Contribution
Percentage (§ 156.130).
We received public comments on the
proposed updates to the required
contribution percentage
(§ 155.605(d)(2)) for plan year 2022.
Please see our summary of comments on
the premium adjustment percentage
(§ 156.130(e)) for a summary of
comments on the required contribution
percentage.
10. Excluding the Special Enrollment
Period Trigger in § 155.420(d)(1)(v)
From Applying to SHOP Plans
(§ 155.726)
Special enrollment periods due to
cessation of employer contributions to
COBRA continuation coverage are
generally not available in the group
insurance market. Therefore, to
maintain consistency between SHOP
and the rest of the group insurance
market, we proposed to amend
§ 155.726(c)(2)(i) to exclude the special
enrollment period trigger in proposed
paragraph § 155.420(d)(1)(v) from
applying to SHOP plans. However,
because proposed paragraph (d)(1)(v) is
instead being finalized as paragraph
(d)(15), which is not included in
§ 155.726(c)(2)(i), SHOP plans would no
longer be subject to the requirement to
offer this special enrollment period.
Therefore, there is no need to finalize
this provision.
We sought comment on this proposal.
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We did not receive public comments
on this provision, but are not finalizing
this policy as changes to the final
regulation at § 155.420 make this
unnecessary.
E. 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 (§ 156.50)
The user fee rates for the 2022 benefit
year for issuers on the FFE and SBE–FPs
were initially finalized in the final rule
published on January 19, 2021 (86 FR
6138 at 6152). However, as a result of
a change in administration priorities,
enrollment increases due to legislation
and emergency action, and technical
improvements we expect increases in
the costs of activities related to
consumer outreach and Navigators for
2022. Therefore, upon review, we now
estimate that the user fees rates
established in the January 19, 2021 final
rule (86 FR 6138 at 6152) will need to
be slightly increased to sustain essential
Exchange-related activities and ensure
robust outreach to support long-term
operational health. HHS intends to
propose to increase FFE and SBE–FP
user fee rates for the 2022 benefit year
through future notice-and-comment
rulemaking. HHS intends to propose a
2022 benefit year user fee rate for all
participating FFE issuers at 2.75 percent
of total monthly premiums, and a 2022
benefit year user fee rate for all
participating SBE–FP issuers at 2.25
percent of total monthly premiums.
These user fee rates continue to be
lower than the 2021 user fee rates of 3.0
percent of total monthly premiums for
all participating FFE issuers and 2.5
percent of total monthly premiums for
all participating SBE–FP issuers, but
higher than the recently finalized rates
of 2.25 percent of total monthly
premiums for FFE issuers and 1.75
percent of total monthly premiums for
SBE–FP issuers.
a. State User Fee Collection
Administration (§ 156.50(c)(2))
We proposed to eliminate the state
user fee collection flexibility that HHS
had previously offered to states in the
2017 Payment Notice. We proposed that
HHS would not collect an additional
user fee, if a state so requests, from
issuers at a rate specified by the state to
cover costs incurred by the state for the
functions the state retains. HHS
previously provided this flexibility to
states to help reduce the administrative
burden on states of collecting additional
user fees. However, our subsequent
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internal analysis demonstrated that the
process of collecting the state portion of
the user fee and remitting it to the state,
would increase the operational burden
and cost incurred by HHS and no states
currently rely on this mechanism.
Therefore, we are amending
§ 156.50(c)(2) to remove this alternate
user fee collection mechanism. We
noted that this proposal does not change
the ability of an SBE–FP to request that
HHS collect from the SBE–FP state
regulatory entity the total amount that
would result from the percent of
monthly premiums charged for
enrollment through the Federal
platform, instead of HHS collecting the
fee directly from SBE–FP issuers.
We did not receive public comments
on this provision, and therefore, we are
finalizing it as proposed.
b. Eligibility for User Fee Adjustments
for Issuers Participating Through SBE–
FPs (§ 156.50(d))
We proposed to amend § 156.50(d) to
clarify that issuers participating through
SBE–FPs are eligible to receive
adjustments to their federal user fee
amounts that reflect the value of
contraceptive claims they have
reimbursed to third-party administrators
(TPAs) that have provided contraceptive
coverage on behalf of an eligible
employer. In the final rules ‘‘Coverage of
Certain Preventative Services Under the
Affordable Care Act,’’ 218 these
relationships were established as a
method of both providing
contraceptives for women and
accommodating the religious beliefs of
employers. In the 2017 Payment
Notice,219 we allowed State Exchanges
to enter into agreements to rely on the
Federal platform for certain Exchange
functions to enhance efficiency and
coordination between the state and
federal programs, and to leverage the
systems established by the FFEs to
perform certain Exchange functions.
Although we recognized that issuers
participating in these types of
Exchanges were subject to a federal user
fee, § 156.50(d) was not amended to
reflect the SBE–FP Exchange model. As
such, we proposed to amend § 156.50(d)
to explicitly include the issuers offering
QHPs through SBE–FPs. We also
proposed to make conforming changes
throughout the regulation text at
§ 156.50(d) to reflect the user fees
applicable to FFEs and SBEs that adopt
the DE option, as further discussed
elsewhere in this rulemaking.
218 78 FR 39870 (July 2, 2013); 80 FR 41318 (July
14, 2015).
219 81 FR 12203 at 12293 (March 8, 2016).
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We sought comment on these
proposals.
We received public comments on the
proposed updates to eligibility for user
fee adjustments for issuers participating
through SBE–FPs (§ 156.50(d)). The
following is a summary of the comments
we received and our responses.
Comment: All commenters supported
the proposal for SBE–FP issuers to be
eligible to receive adjustments to their
user fee amounts for contraceptive
claims reimbursed to third-party
administrators. Specifically, a
commenter noted their approval of the
proposed change because it ensures that
issuers in SBE–FP states are not treated
less advantageously than issuers in FFE
states.
Response: We appreciate the
supportive comments on this proposal
and are finalizing the policy to amend
§ 156.50(d) to explicitly include the
issuers offering QHPs through SBE–FPs
as proposed.
c. Request for Comments on
Alternatives to Exchange User Fees
(§ 156.50)
In the proposed 2022 Payment Notice,
we solicited comment on the
appropriateness of an alternative
revenue source to Exchange user fees to
ensure Exchanges can cover the costs of
the Exchange in an effective,
appropriate, and fair manner. We
appreciate the comments received on
this issue, but are not taking any action
at this time in relation to Exchange
revenue sources. Should we propose
future administrative action on this
topic, we will review and consider
responsive comments at that time.
2. State Selection of EHB-Benchmark
Plan for Plan Years Beginning on or
After January 1, 2020 (§ 156.111)
a. Annual Reporting of State-Required
Benefits
We proposed July 1, 2022 as the
deadline for states to submit to HHS
their annual reports on state-required
benefits pursuant to § 156.111(d) and (f).
We are finalizing this deadline as
proposed for 2022.
We also intend to exercise
enforcement discretion with regard to
the first annual reporting submission
deadline of July 1, 2021 under current
regulation. Pursuant to this enforcement
posture, we will not take enforcement
action against states that do not submit
an annual report in 2021. Rather, we
will begin enforcing the annual
reporting requirement on July 1, 2022,
when states must notify HHS in the
manner specified by HHS, of any
benefits in addition to EHB and any
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benefits the state has identified as not in
addition to EHB and not subject to
defrayal, describing the basis for the
state’s determination, that QHPs in the
individual or small group market are
required to cover in plan year 2022 or
after plan year 2022 by state action
taken by May 2, 2022 (60 days prior to
the annual submission deadline).
In the 2021 Payment Notice, we
amended § 156.111(d) and added
paragraph (f) to require states to
annually notify HHS in a form and
manner specified by HHS, and by a date
determined by HHS, of any staterequired benefits applicable to QHPs in
the individual or small group market
that are considered to be ‘‘in addition to
EHB’’ in accordance with § 155.170(a)(3)
and any benefits the state has identified
as not in addition to EHB and not
subject to defrayal, describing the basis
for the state’s determination. Under this
requirement, a state’s submission must
describe all benefits requirements under
state mandates applicable to QHPs in
the individual or small group market
that were imposed on or before
December 31, 2011, and that were not
withdrawn or otherwise no longer
effective before December 31, 2011, as
well as all benefits requirements under
state mandates that were imposed any
time after December 31, 2011,
applicable to the individual or small
group market. The state’s report is also
required to describe whether any of the
state benefit requirements in the report
were amended or repealed after
December 31, 2011. Information in the
state’s report is required to be accurate
as of the day that is at least 60 days prior
to the annual reporting submission
deadline set by HHS.
We also finalized § 156.111(d)(2) to
specify that if the state does not notify
HHS of its required benefits considered
to be in addition to EHB by the annual
reporting submission deadline, or does
not do so in the form and manner
specified by HHS, HHS will identify
which benefits are in addition to EHB
for the state for the applicable plan year.
HHS’s identification of which benefits
are in addition to EHB will become part
of the definition of EHB for the
applicable state for the applicable plan
year. In the 2021 Payment Notice, we
finalized that we would begin
implementation of the annual reporting
policy in 2021. Specifically, we
finalized that states would be required
to notify HHS by July 1, 2021, of any
benefits in addition to EHB and any
benefits the state has identified as not in
addition to EHB and not subject to
defrayal, describing the basis for the
state’s determination, that QHPs in the
individual or small-group market are
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required to cover in plan year 2021 or
after plan year 2021 by state action
taken by May 2, 2021 (60 days prior to
the annual submission deadline).
We are finalizing as proposed a July
1, 2022 deadline for states to submit to
HHS a complete reporting package for
the second year of annual reporting. As
finalized, states are required to notify
HHS in the manner specified by HHS by
July 1, 2022, of any benefits in addition
to EHB and any benefits the state has
identified as not in addition to EHB and
not subject to defrayal, describing the
basis for the state’s determination, that
QHPs are required to cover in plan year
2022 or after plan year 2022 by state
action taken by May 2, 2022 (60 days
prior to the annual submission
deadline). However, as noted earlier in
this section, we also intend to exercise
enforcement discretion with regard to
the first annual reporting submission
deadline of July 1, 2021. Pursuant to
this enforcement posture, we will not be
actively collecting or requiring
submission of annual reports in 2021.
Comment: Many commenters objected
to the proposed reporting deadline and
asked for a delay in implementation of
this policy. Many commenters were
against implementation of the annual
reporting requirement during the
COVID–19 PHE. Commenters explained
that imposing this new reporting
requirement during a time when states
are already required to expend
substantial resources to respond to the
COVID–19 PHE would add unnecessary
burden on states and require states to
divert already limited resources away
from addressing the COVID–19 PHE.
Commenters requested that HHS
eliminate the burdensome reporting
requirement or, at a minimum, delay
reporting until 2023 assuming the end
of the COVID–19 PHE in 2021 and
economic recovery in 2022.
Other commenters also urged HHS to
delay the reporting requirement, arguing
that HHS should not implement the
annual reporting requirement until HHS
releases additional guidance clarifying
its defrayal policies as HHS promised it
would in the 2021 Payment Notice.
These commenters requested that any
implementation of the annual reporting
policy only occur after states have an
opportunity to review the annual
reporting process and associated
templates in more depth that HHS will
be requiring states to use for annually
reporting state mandates to HHS. These
commenters noted that states have not
yet seen or had an opportunity to review
or comment on the proposed annual
reporting templates, reiterating the
request for HHS to specify with more
clarity the reporting and determination
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mechanisms required of states.
Commenters urged HHS to immediately
make available the proposed templates
that states are expected to use when
submitting annual reports.
Commenters also expressed concern
about the lack of transparency around
the annual reporting and review
process, requesting that HHS delay the
reporting requirement until HHS
provides further clarification. These
commenters specifically requested that
HHS clarify whether HHS will accept a
state’s determination as to whether a
state mandate is in addition to EHB,
who will be the final arbiter of such
determinations, and whether there will
be any avenue for states to appeal HHS’s
decisions in situations where there is
disagreement between HHS and a state
surrounding the scope of a benefit
mandate or its status as being in an
addition to EHB.
Response: Section 1311(d)(3)(B) of the
ACA permits a state to require QHPs
offered in the state to cover benefits in
addition to the EHB, but requires the
state to make payments, either to the
individual enrollee or to the issuer on
behalf of the enrollee, to defray the cost
of these additional state-required
benefits. Further, section 36B(b)(3)(D) of
the Code specifies that the portion of the
premium allocable to state-required
benefits in addition to EHB shall not be
taken into account in determining
premium tax credits. We continue to
believe that requiring states to annually
notify HHS of state-required benefits in
the manner specified at § 156.111(d) and
(f) will promote compliance with
section 1311(d)(3)(B) of the ACA and its
implementing regulations at § 155.170.
We also believe it will enhance program
integrity and potentially reduce
improper federal expenditures by
supporting HHS efforts to ensure that
APTC is paid in accordance with federal
law. We also believe the annual
reporting policy will increase
transparency for issuers, enrollees, and
other stakeholders as to which staterequired benefits are in addition to EHB.
We are proceeding with implementation
of the annual reporting policy and
finalizing the second annual reporting
deadline of July 1, 2022 as proposed. As
finalized, states are required to notify
HHS in the manner specified by HHS by
July 1, 2022, of any benefits in addition
to EHB and any benefits the State has
identified as not in addition to EHB and
not subject to defrayal, describing the
basis for the state’s determination, that
QHPs are required to cover in plan year
2022 or after plan year 2022 by state
action taken by May 2, 2022 (60 days
prior to the annual submission
deadline).
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Although we continue to support
implementation of the annual reporting
policy, we also acknowledge the
validity of commenters’ concerns
regarding the timing and
implementation of annual reporting of
state-required benefits as planned in
2021. Therefore, although we are
finalizing the second annual reporting
deadline of July 1, 2022 as proposed, we
also intend to exercise enforcement
discretion in relation to the upcoming
first annual reporting submission
deadline of July 1, 2021. Specifically,
HHS will not take enforcement action
against states that do not submit an
annual report on state-required benefits
by the July 1, 2021 submission deadline;
and HHS will not identify state-required
benefits in addition to EHB for states
that do not submit a report to HHS by
the July 1, 2021 submission deadline.
Accordingly, because HHS is not
enforcing the collection of state-required
benefits reports in 2021, HHS will not
publish on the CMS website in 2021 any
annual reports on state-required
benefits. We note that the obligation for
a state to defray the cost of QHP
coverage of state-required benefits in
addition to EHB is an independent
statutory requirement from the annual
reporting policy finalized at
§ 156.111(d) and (f). Therefore, although
this enforcement posture effectively
relieves states of state-required benefit
reporting requirements until July 1,
2022, it does not pend or otherwise
impact the defrayal requirements under
section 1311(d)(3)(B) of the ACA, as
implemented at § 155.170. Under this
enforcement posture, states remain
responsible for making payments to
defray the cost of additional required
benefits and issuers are still responsible
for quantifying the cost of these benefits
and reporting the cost to the state.
Under this enforcement posture, HHS
will begin enforcing the annual
reporting requirement on states in 2022.
States are required to notify HHS in the
manner specified by HHS by July 1,
2022, of any benefits in addition to EHB
that QHPs are required to cover in plan
year 2022 or after plan year 2022 by
state action taken by May 2, 2022 (60
days prior to the annual submission
deadline). As part of this reporting,
states must also identify which staterequired benefits are not in addition to
EHB and do not require defrayal in
accordance with § 155.170, and provide
the basis for the state’s determination,
by the July 1, 2022 reporting submission
deadline. States are permitted to submit
their annual report at any time during
the May 2–July 1, 2022, submission
window.
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In the 2021 Payment Notice, we
indicated that we would continue
engaging in technical assistance with
states to help ensure state
understanding of when a state-benefit
requirement is in addition to EHB and
requires defrayal. We continue to work
on additional technical assistance that
we believe will further assist states with
their defrayal analyses and believe such
technical assistance will bolster state
compliance with defrayal requirements,
as well as result in a smoother annual
reporting process for states and review
process for HHS. However, we also
believe these additional technical
assistance documents will best serve
state needs if made available to states far
enough in advance of the first annual
reporting deadline. It is important that
states have an opportunity to ask HHS
any clarifying questions after reviewing
these technical assistance documents
and make any necessary adjustments to
state policy. We believe that exercising
enforcement discretion for the first year
of annual reporting in the manner we
described will ensure that states have
these opportunities before the July 1,
2022 submission deadline. We also
believe our enforcement posture will
promote a smoother annual reporting
process overall in 2022 and beyond as
states will be able to utilize the
additional technical assistance
documents as a tool to identify which
state mandates are in addition to EHB in
a manner that reflects federal policy.
We also believe the additional
technical assistance efforts will help
address commenter concerns around
potential disagreements between HHS
and states as to which state-required
benefits are in addition to EHB and
require defrayal. The purpose of this
additional technical assistance and
outreach is to clarify the defrayal policy
more generally and to provide states
with a more precise understanding of
how HHS analyzes and expects states to
analyze whether a state-required benefit
is in addition to EHB pursuant to
§ 155.170. We encourage states to
review state-required benefits in the
context of this additional technical
assistance and take the appropriate
steps to update policy decisions
regarding which state-required benefits
are in addition to EHB and require
defrayal ahead of the July 1, 2022
annual reporting deadline.
We also acknowledge that states
continue to express concern regarding
how HHS plans to enforce § 155.170
after reviewing state reports or
identifying mandates in a non-reporting
state that are in addition to EHB for
which the non-reporting state is not
defraying. We stated in the 2021
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22:49 May 04, 2021
Jkt 253001
Payment Notice that we would not be
adopting any policy with regard to
whether enforcement of the defrayal
requirement will be retrospective or
prospective in relation to the
submission of § 156.111 reports.
However, we are concerned that
declining to adopt an enforcement
policy has caused unnecessary
confusion and concern for states. We are
therefore clarifying that HHS does not
intend to retroactively enforce the
defrayal requirement against states for
plan years prior to 2022 in relation to
the submission of § 156.111 reports.
With regards to resolving any
disagreements that may arise between a
state and HHS as to whether a mandated
benefit is in addition to EHB, we intend
to work closely with the state to address
the disagreement without engaging in a
formal appeals process. We also intend
to provide non-reporting states with an
opportunity to review our
identifications of state-required benefits
that are in addition to EHB prior to
releasing the annual reports on the CMS
website an effort to mitigate the
potential for disagreement between the
state and HHS.
As stated in the 2021 Payment Notice,
HHS will provide the templates that
states are required to use for annually
reporting the information required
pursuant to § 156.111(f)(1) through (6).
We continue to believe that the
descriptions of the required data
elements at § 156.111(f)(1) through (6)
provide sufficient detail to states
regarding the types of information states
will be required to include in the annual
reports. States and other stakeholders
reviewing those requirements should be
able to review § 156.111(f)(1) through (6)
to better understand the scope of the
information states are required to
include in their annual reports without
reviewing the actual reporting
templates. However, we also believe it
is important to provide states with
ample time to review the precise format,
instructions, and content of the annual
reporting templates for state-required
benefits ahead of submission. As stated
in the 2021 Payment Notice, the precise
templates that HHS will require states to
use are available for review as part of
the information collection amended
under OMB control number: 0938–1174
(Essential Health Benefits Benchmark
Plans (CMS–10448)). Although OMB
approved that information collection on
February 25, 2021, this approval took
longer than anticipated and we agree
with commenters that this delay
resulted in increasingly limited time for
states to review the templates ahead of
the July 1, 2021 deadline for the first
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24231
year of annual reporting of staterequired benefits. By exercising
enforcement discretion in the manner
described, we would provide states that
are concerned about having ample time
to review the templates ahead of
submitting an annual report the option
to choose to delay submitting their first
annual report until July 1, 2022 without
HHS identifying which state-required
benefits are in addition to EHB for the
applicable plan year in the state.
We also understand that states have
an immediate need to devote limited
resources to responding to the COVID–
19 PHE and that commenters feel that
preparing an annual report on staterequired benefits in 2021 is competing
with that urgent priority. We continue
to believe that the information we are
requiring that states report to HHS as
part of this annual reporting
requirement should already be readily
accessible to states, as every state
should already be defraying the costs of
state-required benefits in addition to
EHB. Thus, states should already have
ready access to the information the
annual reports require and the reporting
itself should therefore be
complementary to the process the state
already has in place for tracking and
analyzing state-required benefits.
Moreover, states need not report to HHS
if they choose not to. Specifically,
§ 156.111(d)(2) provides that, HHS will
identify the state-required benefits it
believes are in addition to EHB for the
applicable plan year for any state that
does not submit an annual report by the
annual submission deadline, or does not
do so in the form and manner specified
by HHS. However, when coupled with
the delays in finalizing the reporting
templates and issuing additional
technical assistance, we believe the
added burden of the COVID–19 PHE on
states is yet an additional factor that
supports exercising enforcement
discretion. We believe our enforcement
posture for 2021 will allow states that
have concerns about the upcoming July
1, 2021 deadline in the context of the
COVID–19 PHE sufficient time to
prepare their annual reports on staterequired benefits before the July 1, 2022
submission deadline.
Comment: Many commenters
continue to oppose or be concerned
about the annual reporting policy
overall and asked HHS for clarity on
why HHS has placed a burdensome
reporting requirement on states.
Commenters stated that HHS has not
defined the scope of the problem the
reporting seeks to address and asked
HHS to provide additional transparency
regarding the value that HHS seeks to
add in requiring this additional
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reporting, especially given that some
states already conduct defrayal analyses
of their own and posts these publicly.
Commenters again expressed that the
annual reporting requirement is
unnecessary, as existing regulation has
already established robust requirements
for insurers to, in coordination with
states and marketplaces, perform
actuarially sound analyses of costs
associated with state-mandated benefits
for use when calculating federal tax
credits. Commenters also noted the
importance of setting a deadline that
allows issuers time to make changes to
rate filings. For example, one
commenter supported the overall
annual reporting policy but requested
that HHS adjust the timing and
deadlines for the annual reporting to
ensure that issuers are aware of any
state-mandated benefits that states must
defray in advance of rate-setting
timelines. This commenter specifically
noted that requiring states to file reports
by July 1 of the same benefit year does
not provide plans with the time
necessary to work such benefits and
defrayals into premium calculations for
that year.
Response: We disagree with
commenters that we have not yet
provided adequate justification for why
HHS is implementing the annual
reporting requirement. When finalizing
the annual reporting requirement in the
2021 Payment Notice, we explained the
reasoning for the new policy in detail.
We also explained that, although we
acknowledge that some states may
already be appropriately identifying
which state-required benefits are in
addition to EHB and require defrayal,
we believe that many other states may
not be doing so. In such states, QHP
issuers may be covering benefits as EHB
that actually require state defrayal under
federal requirements, but for which the
state is not actively defraying costs,
resulting in improper expenditures of
APTC paid by the federal government.
Furthermore, requiring states to provide
information regarding their state benefit
requirements to HHS properly aligns
with federal requirements for defraying
the cost of state-required benefits;
improves transparency with regard to
the types of benefit requirements states
are enacting; and that it provides the
necessary information to HHS for
increased oversight over whether states
are appropriately identifying which
state-required benefits require defrayal
and whether QHP issuers are properly
allocating the portion of premiums
attributable to EHB for purposes of
calculating PTCs. For a more detailed
discussion of why the annual reporting
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22:49 May 04, 2021
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policy is justified, please refer to the
2021 Payment Notice.
With regards to the timing of the
annual reporting submission deadline,
we acknowledge that a July 1 deadline
of any given reporting year may not
perfectly align with other state and
issuer deadlines, such as issuer ratesetting deadlines. However, we remind
commenters that states must defray
benefits in addition to EHB in
accordance with § 155.170 independent
of any reporting requirement or
reporting timeline and regardless of
whether the state benefit requirement is
included in that plan year’s annual
reporting submission. We therefore also
conclude that states newly identifying
state-required benefits as being in
addition to EHB after rate-setting has
concluded is likely not a new issue. In
the event that a state newly identifies a
state-required benefit as being in
addition to EHB and this determination
affects issuer rates for the plan year
during which the reporting is taking
place or for a future plan year, we will
work with the state on how to address
that situation on a state-by-state basis.
We believe that our additional technical
assistance and outreach to states will
assist in preventing such situations from
arising by ensuring that states can
analyze pending legislation and staterequired benefits in a manner consistent
with federal defrayal policy and in
advance of rate filing deadlines.
However, states that have still concerns
about such a situation arising are
encouraged to ask HHS in advance of
annual reporting submission deadlines
for input on whether a state-required
benefit is in addition to EHB.
b. States’ EHB-Benchmark Plan Options
The 2019 Payment Notice stated that
we would propose EHB-benchmark plan
submission deadlines in the HHS
annual Notice of Benefit and Payment
Parameters. In the proposed 2022
Payment Notice, we proposed May 6,
2022, as the deadline for states to
submit the required documents for the
state’s EHB-benchmark plan selection
for the 2023 plan year and as the
deadline for states to notify HHS that
they wish to permit between-category
substitution for the 2023 plan year. A
typographical error appeared in the
proposed rule related to these deadlines.
Both proposed deadlines should have
read May 6, 2022, for the 2024 plan
year, not for the 2023 plan year. The
correct meaning of the proposed rule as
applying to the 2024 plan year should
have been clear from the context of the
rulemaking, and the prior rulemaking in
the 2021 Payment Notice establishing
deadlines for this purpose.
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We are finalizing these deadlines with
minor revisions to correct the
typographical error such that May 6,
2022, is the deadline for states
submitting EHB-benchmark plan
selections for the 2024 plan year and
May 6, 2022, is the deadline for states
to permit between-category substitution
for the 2024 plan year.
Comment: Commenters requested
clarification regarding the proposed
submission deadlines. These
commenters noted that issuers need
sufficient time to review and respond to
changes a state may make to its EHBbenchmark plan, and expressed concern
that the proposed deadline would occur
when issuers are filing plans for 2023.
One commenter noted that the proposed
reporting deadline is earlier than in
prior years and, out of concern for
public notice, urged CMS to require
states to provide a significant amount of
time for the public to comment on any
changes that states are planning to make
to their EHB-benchmark plans. Another
commenter objected to the proposed
reporting deadline because it permits
EHB-benchmark plan selections to occur
on an annual cycle, arguing that by
granting states expansive power to alter
their EHB-benchmark plans so
dramatically every year, the EHBbenchmark plan selection flexibility
threatens any hope of predictability of
coverage for consumers from year-toyear and state-to-state. We also received
several out of scope comments.
Response: We are finalizing as
proposed May 6, 2022 as the deadline
for states to submit the required
documents for the state’s EHBbenchmark plan selection for the 2024
plan year and as the deadline for states
to notify HHS that they wish to permit
between-category substitution for the
2024 plan year, with minor revisions to
correct the typographical error that
referred to plan year 2023 in the
proposed rule. Fixing this typographical
error aligns the deadlines with those
finalized in prior years and addresses
the concerns commenters raised
regarding providing issuers sufficient
time to review changes states make to
the EHB-benchmark plan and providing
the public advance notice of such
changes. As in prior years, states are
required to provide reasonable public
notice and an opportunity for public
comment on the state’s selection of an
EHB-benchmark plan that includes
posting a notice on its opportunity for
public comment with associated
information on a relevant state website.
As finalized, the deadlines also allow
issuers sufficient time to develop plans
that adhere to their state’s new EHBbenchmark plan.
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As discussed in more detail in the
2019 Payment Notice, the purpose of
this policy is to allow for state flexibility
in selecting an EHB-benchmark plan,
which is why we allow states to make
such changes on an annual basis.
Furthermore, because of the level of
effort needed by the state and its issuers
to make changes to a state’s EHBbenchmark plan, we believe that in only
very limited cases will a state choose to
make EHB-benchmark plan changes on
an annual basis, a scenario that has not
yet occurred since finalizing the EHBbenchmark plan selection flexibility. If
a state does decide to make changes
annually, there may be a specific reason
for needing an annual change such as
for a medical innovation where such
benefits would outweigh any potential
for consumer confusion.
We continue to emphasize that the
deadlines for EHB-benchmark plan
selection and permitting betweencategory substitution are firm, and that
states should optimally have one of
their points of contact who has been
predesignated to use the EHB Plan
Management Community reach out to us
using the EHB Plan Management
Community well in advance of the
deadlines with any questions. Although
not a requirement, we recommend states
submit applications for EHB-benchmark
plan selections at least 30 days prior to
the submission deadline to ensure
completion of their documents by the
proposed deadline. We also remind
states that they must complete the
required public comment period for
EHB-benchmark plan selection and
submit a complete application by the
finalized deadline.
3. Premium Adjustment Percentage
(§ 156.130(e))
We proposed the 2022 benefit year
annual premium adjustment percentage
using the most recent estimates and
projections of per enrollee premiums for
private health insurance (excluding
Medigap and property and casualty
insurance) from the NHEA, which are
calculated by CMS’ Office of the
Actuary. For the 2022 benefit year, the
premium adjustment percentage will
represent the percentage by which this
measure for 2021 exceeds that for 2013.
However, in light of the overwhelming
comments received, we are readopting
as the measure of premium growth for
the 2022 benefit year and beyond the
NHEA projections of average per
enrollee employer-sponsored insurance
(ESI) premium, which was the measure
used for benefit years 2015 through
2019.
Section 1302(c)(4) of the ACA directs
the Secretary to determine an annual
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premium adjustment percentage, a
measure of premium growth that is used
to set three other parameters detailed in
the ACA: (1) The maximum annual
limitation on cost sharing (defined at
§ 156.130(a)); (2) the required
contribution percentage used to
determine eligibility for certain
exemptions under section 5000A of the
Code (defined at § 155.605(d)(2)); and
(3) the employer shared responsibility
payment amounts under section
4980H(a) and (b) of the Code (see
section 4980H(c)(5) of the Code).
Section 1302(c)(4) of the ACA and
§ 156.130(e) provide that the premium
adjustment percentage is the percentage
(if any) by which the average per capita
premium for health insurance coverage
for the preceding calendar year exceeds
such average per capita premium for
health insurance for 2013, and the
regulations provide that this percentage
will be published in the annual HHS
notice of benefit and payment
parameters.
The 2015 Payment Notice final rule
and 2015 Market Standards Rule
established a methodology for
estimating the average per capita
premium for purposes of calculating the
premium adjustment percentage for the
2015 benefit year and beyond. In those
rules, HHS used the NHEA ESI
premium measure to estimate premium
growth. As noted in the 2022 Payment
Notice proposed rule, the 2020 Payment
Notice final rule changed this
methodology and, for benefit years 2020
and 2021, we instead calculated the
average per capita premium as private
health insurance premiums minus
premiums paid for Medicare
supplement (Medigap) insurance and
property and casualty insurance,
divided by the unrounded number of
unique private health insurance
enrollees, excluding all Medigap
enrollees. Additionally, as finalized in
the 2021 Payment Notice final rule, we
finalized that we would calculate the
payment parameters that depend on
NHEA data based on the NHEA data
available at the time of the applicable
proposed rule.
As such, we proposed that the
premium adjustment percentage for
2022 would be the percentage (if any) by
which the most recent NHEA projection
available at the time of the applicable
proposed rule of per enrollee premiums
for private health insurance (excluding
Medigap and property and casualty
insurance) for 2021 ($7,036) exceeds the
most recent NHEA estimate available at
the time of the applicable proposed rule
of per enrollee premiums for private
health insurance (excluding Medigap
and property and casualty insurance) for
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24233
2013 ($4,883).220 Using this formula, the
proposed premium adjustment
percentage for the 2022 benefit year was
1.4409174688 ($7,036/$4,883), which
represents an increase in private health
insurance (excluding Medigap and
property and casualty insurance)
premiums of approximately 44.1
percent over the period from 2013 to
2021.
We received numerous public
comments on the proposed updates to
premium adjustment percentage
(§ 156.130(e)). Many comments on the
premium adjustment percentage were
presented alongside comments on
related parameters such as the required
contribution percentage, maximum
annual limitation on cost sharing, and
reduced annual limitation on cost
sharing. As such, we address comments
on all of these parameters in this
section. The following is a summary of
the comments we received and our
responses.
Comment: As has been typical since
the change to the methodology was
adopted in the 2020 Payment Notice,
the majority of commenters requested
that we not implement the annual
increase to the premium adjustment
percentage, or at least one of the
parameters derived from this value (for
example, the maximum annual
limitation on cost sharing, the reduced
maximum annual limitations on cost
sharing, the required contribution
percentage published by HHS), or that
the IRS not increase the applicable
percentage used to determine premium
tax credits, or required contribution
percentage for purposes of determining
affordability of employer-sponsored
minimum essential coverage for
determining eligibility for premium tax
credits for the 2022 benefit year, and
instead requested that HHS revert to the
use of the NHEA ESI premium measure
to estimate premium growth. Numerous
commenters expressed concern with the
rate of increase in the premium
adjustment percentage and related
payment parameters. These commenters
specifically opposed the changes made
to the premium adjustment percentage
calculation in the 2020 Payment Notice,
which based this parameter and the
maximum annual limitation on cost
sharing, reduced maximum annual
limitations on cost sharing, and required
contribution percentage on a premium
measure that includes individual market
premium changes, instead of
maintaining the methodology
established in the 2015 Payment
Notice 221 and 2015 Market Standards
220 79
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Rule.222 These commenters were
concerned that the use of a measure that
includes individual market premiums
has led to more rapid increases in
consumer costs than would have
occurred had HHS retained the NHEA
ESI-only premium measure utilized to
calculate the premium adjustment
percentage and related parameters prior
to the 2020 benefit year.
Commenters also expressed concerns
that more rapid increases in the
premium adjustment percentage would
lead to higher costs to consumers and
lower enrollment. A significant majority
of these commenters requested that HHS
reverse the policy finalized in the 2020
Payment Notice. A few commenters
suggested alternatives, including a cap
on increases to the maximum annual
limitation on cost sharing of 3 percent
year-to-year, or a hybrid approach
between the pre-2020 and current
methodologies. Under the suggested
hybrid policy, ESI premiums would be
used to calculate the growth in
premiums between 2013 and 2019,
while all private health insurance
premiums minus Medigap and the
medical portion of property and
casualty insurance would be used to
calculate the growth in premiums
between 2019 and the current benefit
year. These two growth estimates would
be multiplied to arrive at the premium
adjustment percentage.
Some of these commenters suggested
that consumer burden connected to the
increases in these parameters has been
exacerbated by the COVID–19 PHE and
its economic implications. These
commenters maintained that these
parameters should not be raised during
the COVID–19 PHE. However, one
commenter specified that they support
the flexibility provided by the increase
in the maximum annual limitation on
cost sharing, which is a result of the
increase in the premium adjustment
percentage.
Response: After considering the
overwhelming comments received, we
are reverting to using the NHEA ESI
premium measure previously used for
the 2015 through 2019 benefit years to
estimate premium growth for the 2022
benefit year and beyond. We believe
using the NHEA ESI premium measure
aligns with the statutory language at
section 1302(c)(4) of the ACA, as ESI
meets the definition of ‘‘health
insurance coverage’’ and represents the
vast majority of the market, overlapping
very significantly with the private
222 79
FR 30240.
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health insurance data used for benefit
years 2020 and 2021.223
With these considerations, we believe
this change is consistent with the will
and interest of stakeholders and will
mitigate the uncertainty regarding
premium growth during the COVID–19
PHE. Reverting to the NHEA ESI
premium measure also aligns with the
policy objectives in the January 28, 2021
Executive Order on Strengthening the
Affordable Care Act and Medicaid 224
and the American Rescue Plan Act of
2021,225 which both emphasize making
health coverage accessible and
affordable for consumers of all income
levels. Moreover, this policy is
consistent with reducing premium
growth so that consumers are not
required to pay high premiums or costsharing that is subsequently rebated
pursuant to MLR requirements,
particularly since we have seen record
high MLR rebates in recent years.226 ESI
premiums have grown at a slower rate
from 2013 through 2019 as compared to
the private insurance premium growth
rate, and when used as a measure of
premium growth, ESI premium growth
will make more individuals eligible for
an affordability exemption that will
enable them to enroll in catastrophic
coverage under § 155.305(h), will
decrease the rate of growth of cost
sharing parameters such as the annual
maximum limitation on cost sharing,
and, if the IRS adopts this measure of
premium growth for purposes of
indexing under the premium tax credit
provision in section 36B of the Code
going forward, also will increase
consumer eligibility for premium tax
credits.227
223 The data used to calculate per capita ESI
premiums overlaps significantly with the data used
to calculate the current measure—according to the
CMS Office of the Actuary, approximately 86
percent of enrollees in 2022 will be covered by
employer-sponsored insurance.
224 86 FR 7793 (February 2, 2021).
225 American Rescue Plan Act of 2021, Public
Law 117–2.
226 See https://www.cms.gov/CCIIO/Resources/
Data-Resources/Downloads/2019-Rebates-byState.pdf.
227 Section 36B(b)(3)(A)(ii) of the Code generally
provides that the applicable percentages are to be
adjusted after 2014 to reflect the excess of the rate
of premium growth over the rate of income growth
for the preceding year. Section 36B(c)(2)(C) of the
Code provides that the required contribution
percentage is to be adjusted after 2014 in the same
manner as the applicable percentages are adjusted
in section 36B(b)(3)(A)(ii) of the Code. Following
HHS’s establishment of the methodology for
calculating premium growth for purposes of the
premium adjustment percentage using NHEA ESI
for benefit years 2015–2019, and NHEA private
health insurance (excluding Medigap and property
and casualty insurance), the Department of the
Treasury and the IRS issued guidance providing
that the rate of premium growth for purposes of the
section 36B provisions would be based on the same
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In addition to aligning with the policy
priorities expressed in the recent
executive order and statute, reverting to
NHEA ESI data as a measure of
premium was an explicit interest
expressed by commenters to the
proposed rule. As noted earlier in this
section, the overwhelming majority of
commenters specifically opposed the
changes made to the premium
adjustment percentage calculation in the
2020 Payment Notice and asked HHS to
revert to the NHEA ESI premium. We
agree with these commenters’ concerns.
Furthermore, reverting to NHEA ESI
premium data is consistent with
changing circumstances related to the
potential uncertainty of the private
health insurance premium measure that
includes the individual market. Private
health insurance premiums are more
likely to be influenced by risk premium
pricing, or premium pricing based on
changes in benefit design and market
composition in the individual market.
Particularly during times of economic
uncertainty, such as that experienced as
a result of the COVID–19 PHE, private
health insurance premium growth could
reflect issuer uncertainty in market
developments and could be reflected in
the NHEA private insurance premium
measure (excluding Medigap and
property and casualty insurance). NHEA
ESI premium data provides a more
stable premium measure because it will
exclude premiums from the individual
market, which are likely to be most
affected by the significant changes in
benefit design, or risk premium pricing.
By using the NHEA ESI premium
measure for the 2022 benefit year and
beyond, we will provide a more
appropriate and fair measure of average
per capita premiums for health
insurance coverage when considering
the goal of consumer protection.
As such, using the NHEA Projections
2019–2028 ESI data available at the time
of the proposed rule, the premium
adjustment percentage for 2022 is the
percentage (if any) by which the NHEA
Projections 2019–2028 value for per
enrollee ESI premiums for 2021 ($6,964)
exceeds the NHEA Projections 2019–
2028 value for per enrollee ESI
measures HHS selected. Following this rulemaking,
we expect the Department of the Treasury and the
IRS to issue additional guidance to adopt the same
premium measure for purposes of future indexing
of the applicable percentage and required
contribution percentage under section 36B of the
Code. The effects of this change would not be seen
in 2022, as the American Rescue Plan Act of 2021
amends the Code to temporarily supersede the
indexing for 2021 and 2022, but if the same
premium measure was adopted in future tax years,
this would result in more individuals being eligible
for premium tax credits than would be the case if
the current premium measure were maintained.
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premiums for 2013 ($5,061). Using this
formula, the premium adjustment
percentage for the 2022 benefit year is
1.3760126457 ($6,964/$5,061) which
represents an increase in ESI premiums
of approximately 37.6 percent over the
period from 2013 to 2021. As described
in further detail elsewhere in this
preamble, this premium adjustment
percentage will be used to index the
maximum annual limitation on cost
sharing and the required contribution
percentage used to determine eligibility
for certain exemptions under section
5000A of the Code. It will also be used
to index the employer shared
responsibility payment amounts under
section 4980H(a) and (b) of the Code.
Comment: A few commenters asked
HHS to coordinate with the Internal
Revenue Service (IRS) in setting the
maximum annual limitation on cost
sharing for high deductible health plans
(HDHPs) that would allow enrollees to
be eligible to contribute to a Health
Savings Account (HSA) so the IRS
values match those set in the annual
HHS notice of benefit and payment
parameters. These commenters were
concerned that the differences in these
values were confusing to consumers and
would lead to an inability for issuers to
offer HSA-eligible plans in the bronze
metal level.
Response: The Department of the
Treasury and the IRS have jurisdiction
over HSAs and HSA-eligible HDHPs and
the applicable maximum out-of-pocket
under section 223 of the Code. Annual
adjustments to the maximum annual
limitation on cost sharing for HSAeligible HDHPs are determined under
section 223(g) of the Code, which by
statute provides for a different annual
adjustment than the premium
adjustment percentage provided under
section 1302(c) of the ACA. As both of
these adjustments are defined in statute,
it is not within the authority of HHS to
align the premium adjustment
percentage with the index used by the
IRS for HSA-eligible HDHPs.
Comment: One commenter requested
that we reverse the policy we finalized
in the 2016 Payment Notice,228 which
clarified that the maximum annual
limitation on cost sharing for self-only
coverage applies to all individuals
regardless of whether the individual is
covered by a self-only plan or is covered
by a plan that is other than self-only.
Response: We did not propose and are
not finalizing any changes to the policy
that the maximum annual limitation on
cost sharing for self-only coverage
applies to all individuals regardless of
whether the individual is covered by a
self-only plan or is covered by a plan
that is other than self-only. As we stated
in the 2016 Payment Notice,229 we
believe that this policy is an important
consumer protection, as we were aware
that some consumers were confused by
the applicability of the annual
limitation on cost sharing in other than
self-only plans. As such, for all benefit
years since 2016, an individual’s cost
sharing for EHB may never exceed the
self-only annual limitation on cost
sharing.
Based on the comments received, we
are finalizing the premium adjustment
percentage for the 2022 benefit year as
1.3760126457 ($6,964/$5,061) which
represents an increase in ESI premiums
of approximately 37.6 percent over the
period from 2013 to 2021.
a. Maximum Annual Limitation on Cost
Sharing for Plan Year 2022
We proposed to increase the
maximum annual limitation on cost
sharing for the 2022 benefit year based
on the proposed value calculated for the
premium adjustment percentage for the
2022 benefit year. As finalized in the
EHB final rule 230 at § 156.130(a)(2), for
the 2022 calendar year, cost sharing for
self-only coverage may not exceed the
dollar limit for calendar year 2014
increased by an amount equal to the
product of that amount and the
premium adjustment percentage for
2022. For other than self-only coverage,
the limit is twice the dollar limit for
self-only coverage. Under § 156.130(d),
these amounts must be rounded down
to the next lowest multiple of $50.
Using the proposed premium
adjustment percentage, and the 2014
maximum annual limitation on cost
sharing of $6,350 for self-only coverage,
which was published by the IRS on May
2, 2013,231 we proposed that the 2022
benefit year maximum annual limitation
on cost sharing would be $9,100 for selfonly coverage and $18,200 for other
than self-only coverage. This would
have represented an approximately 6.4
percent ($9,100 ÷ $8,550) increase above
the 2021 parameters of $8,550 for selfonly coverage and $17,100 for other
than self-only coverage.
We received public comments on the
proposed updates to the maximum
annual limitation on cost sharing for
plan year 2022. Please see our summary
of comments on the premium
adjustment percentage (§ 156.130(e)) for
a summary of comments on the
229 Ibid.
78 FR 12847 through 12848.
Revenue Procedure 2013–25, 2013–21 IRB
1110. https://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
80 FR 10749 at 10824–10825
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maximum annual limitation on cost
sharing.
We are not finalizing the 2022
maximum annual limitation on cost
sharing as proposed. Based on the
comments received and as explained
above, we are finalizing a 2022
maximum annual limitation on cost
sharing of $8,700 for self-only coverage
and $17,400 for other than self-only
coverage. Using the premium
adjustment percentage of 1.3760126457
for 2022 finalized in this rule, and the
2014 maximum annual limitation on
cost sharing of $6,350 for self-only
coverage, which was published by the
IRS on May 2, 2013,232 the 2022
maximum annual limitation on cost
sharing is $8,700 for self-only coverage
and $17,400 for other than self-only
coverage. This represents an
approximately 1.8 percent ($8,700 ÷
$8,550) increase above the 2021
parameters of $8,550 for self-only
coverage and $17,100 for other than selfonly coverage.
b. Reduced Maximum Annual
Limitation on Cost Sharing (§ 156.130)
We proposed for the 2022 benefit year
and beyond, unless changed through
notice-and-comment rulemaking, to use
the reductions in the maximum annual
limitation on cost sharing for costsharing plan variations determined by
the methodology we established
beginning with the 2014 benefit year, as
further described later in this section of
the preamble.
Sections 1402(a) through (c) of the
ACA direct issuers to reduce cost
sharing for EHBs for eligible individuals
enrolled in a silver-level QHP. In the
2014 Payment Notice, we established
standards related to the provision of
these CSRs. Specifically, in part 156
subpart E, we specified that QHP issuers
must provide CSRs by developing plan
variations, which are separate costsharing structures for each eligibility
category that change how the cost
sharing required under the QHP is to be
shared between the enrollee and the
federal government. At § 156.420(a), we
detailed the structure of these plan
variations and specified that QHP
issuers must ensure that each silverplan variation has an annual limitation
on cost sharing no greater than the
applicable reduced maximum annual
limitation on cost sharing specified in
the annual HHS notice of benefit and
payment parameters. Although the
amount of the reduction in the
maximum annual limitation on cost
sharing is specified in section
230 See
231 See
228 See
24235
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232 See Revenue Procedure 2013–25, 2013–21 IRB
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1402(c)(1)(A) of the ACA, section
1402(c)(1)(B)(ii) of the ACA states that
the Secretary may adjust the costsharing limits to ensure that the
resulting limits do not cause the AV of
the health plans to exceed the levels
specified in section 1402(c)(1)(B)(i) of
the ACA (that is, 73 percent, 87 percent,
or 94 percent, depending on the income
of the enrollee).
As we stated earlier in this final rule,
the proposed 2022 maximum annual
limitation on cost sharing was $9,100
for self-only coverage and $18,200 for
other than self-only coverage. We
analyzed the effect on AV of the
reductions in the maximum annual
limitation on cost sharing described in
the statute to determine whether to
adjust the reductions so that the AV of
a silver plan variation will not exceed
the AV specified in the statute. Below,
we describe our analysis for the 2022
plan year and our proposed results.
Consistent with our analysis for the
2014 through 2021 benefit years’
reduced maximum annual limitation on
cost sharing, we developed three test
silver level QHPs, and analyzed the
impact on AV of the reductions
described in the ACA to the proposed
estimated 2022 maximum annual
limitation on cost sharing for self-only
coverage ($9,100). The test plan designs
are based on data collected for 2021
plan year QHP certification to ensure
that they represent a range of plan
designs that we expect issuers to offer
at the silver level of coverage through
the Exchanges. For 2022, the test silver
level QHPs included a PPO with typical
cost-sharing structure ($9,100 annual
limitation on cost sharing, $2,775
deductible, and 20 percent in-network
coinsurance rate); a PPO with a lower
annual limitation on cost sharing
($7,400 annual limitation on cost
sharing, $3,050 deductible, and 20
percent in-network coinsurance rate);
and an HMO ($9,100 annual limitation
on cost sharing, $4,800 deductible, 20
percent in-network coinsurance rate,
and the following services with
copayments that are not subject to the
deductible or coinsurance: $500
inpatient stay per day, $500 emergency
department visit, $30 primary care
office visit, and $55 specialist office
visit). Based on the parameters in the
proposed rule, all three test QHPs meet
the AV requirements for silver level
health plans.
We then entered these test plans into
a draft version of the 2022 benefit year
AV Calculator 233 and observed how the
reductions in the maximum annual
233 Available at https://www.cms.gov/cciio/
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limitation on cost sharing specified in
the ACA affected the AVs of the plans.
As with prior years, we found that the
reduction in the maximum annual
limitation on cost sharing specified in
the ACA for enrollees with a household
income between 100 and 150 percent of
FPL (2⁄3 reduction in the maximum
annual limitation on cost sharing), and
150 and 200 percent of FPL (2⁄3
reduction), would not cause the AV of
any of the model QHPs to exceed the
statutorily specified AV levels (94 and
87 percent, respectively).
However, as with prior years, we
continue to find that the reduction in
the maximum annual limitation on cost
sharing specified in the ACA for
enrollees with a household income
between 200 and 250 percent of FPL (1⁄2
reduction), would cause the AVs of two
of the test QHPs to exceed the specified
AV level of 73 percent. Furthermore, as
with prior years, for individuals with
household incomes of 250 to 400
percent of FPL, without any change in
other forms of cost sharing, the statutory
reductions in the maximum annual
limitation on cost sharing would cause
an increase in AV that exceeds the
maximum 70 percent level in the
statute.
The calculation of the reduced
maximum annual limitation on cost
sharing has remained consistent since
the 2014 Payment Notice due to yearover-year consistency of the results of
our analysis regarding the effects of the
reduced maximum annual limitation on
cost sharing on the AV of silver plan
variations. Therefore, as a result of the
apparent stability of those results, and
consistent with prior Payment Notices,
we proposed to continue to use the
maximum annual limitation on cost
sharing reductions of 2⁄3 for enrollees
with a household income between 100
and 200 percent of FPL, 1⁄5 for enrollees
with a household income between 200
and 250 percent of FPL, and no
reduction for individuals with
household incomes of 250 to 400
percent of FPL for the 2022 benefit year
and beyond. We would continue to
review the effects of these reductions
annually, and should we determine that
this approach should be changed to
better reflect the statutorily specified
AVs for silver plan variations, we would
propose to change these reductions
through notice-and-comment
rulemaking.
Specifically, we proposed to continue
to use the methodology described above
for analyzing the effects of the reduced
maximum annual limitations on cost
sharing on the AV of silver plan
variations to verify that the reductions
do not result in unacceptably high AVs
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before we publish these values in
guidance for a given benefit year.
Subsequently, if a future analysis using
this methodology supports a
modification to the reduced maximum
annual limitation for any of the
household income bands for a future
benefit year, we would propose those
modifications to the reduced maximum
annual limitations through notice-andcomment rulemaking, as appropriate.
We noted that selecting a reduction
for the maximum annual limitation on
cost sharing that is less than the
reduction specified in the statute would
not reduce the benefit afforded to
enrollees in the aggregate. This is
because QHP issuers are required to
meet specified AV levels that require
the plan’s cost-sharing to be within a
limited range.
We sought comment on this analysis
and the proposed reductions in the
maximum annual limitation on cost
sharing calculation methodology for the
2022 benefit year and beyond. We also
sought comment on the proposed
reduced annual limitations on cost
sharing for the 2022 benefit year.
We noted that for 2022, as described
in § 156.135(d), states are permitted to
request HHS’s approval for state-specific
datasets for use as the standard
population to calculate AV. No state
submitted a dataset by the September 1,
2020 deadline.
We received no comments on the
reductions in the maximum limitations
on cost sharing apart from those already
discussed in the preamble to the
premium adjustment percentage
(§ 156.130(e)). In this regard, please see
our summary of comments on the
premium adjustment percentage
(§ 156.130(e)) for a summary of
comments pertaining to the reduced
maximum annual limitation on cost
sharing.
In light of our decision to finalize the
2022 premium adjustment percentage
using the NHEA ESI premium measure
to estimate premium growth, we are not
finalizing the 2022 reduced maximum
annual limitation on cost sharing
parameters as proposed (in Table 9 of
the proposed rule 234).
To confirm consistency with the
analysis for the reduced maximum
annual limitation on cost sharing, we
tested the reductions to the maximum
annual limitation for cost sharing which
we are finalizing in this rule, and we
analyzed the impact on AV of the
reductions described in the ACA to the
2022 maximum annual limitation on
cost sharing that we are finalizing
($8,700). For 2022, the test silver level
234 85
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QHPs included a PPO with typical costsharing structure ($8,700 annual
limitation on cost sharing, $2,600
deductible, and 20 percent in-network
coinsurance rate); a PPO with a lower
annual limitation on cost sharing
($7,700 annual limitation on cost
sharing, $2,800 deductible, and 20
percent in-network coinsurance rate);
and an HMO ($8,700 annual limitation
on cost sharing, $4,100 deductible, 20
percent in-network coinsurance rate,
and the following services with
copayments that are not subject to the
deductible or coinsurance: $1200
inpatient stay per day, $500 emergency
department visit, $30 primary care
office visit, and $60 specialist office
visit). All three test QHPs meet the AV
requirements for silver level health
plans based on the parameters that we
are finalizing in this rule.
We then entered these test plans into
a draft version of the 2022 benefit year
AV Calculator 235 and observed how the
reductions in the maximum annual
limitation on cost sharing specified in
the ACA affected the AVs of the plans.
We found that the reduction in the
maximum annual limitation on cost
sharing specified in the ACA for
enrollees with a household income
between 100 and 150 percent of FPL (2⁄3
reduction in the maximum annual
limitation on cost sharing), and 150 and
200 percent of FPL (2⁄3 reduction),
24237
would not cause the AV of any of the
model QHPs to exceed the statutorily
specified AV levels.
Therefore, we are finalizing as
proposed the reductions of 2⁄3 for
enrollees with a household income
between 100 and 200 percent of FPL, 1⁄5
for enrollees with a household income
between 200 and 250 percent of FPL,
and no reduction for individuals with
household incomes of 250 to 400
percent of FPL for the 2022 benefit year
and beyond, as well as the methodology
we use to ensure that these reductions
do not result in unacceptably high AVs.
The resulting final 2022 reduced
maximum annual limitations on cost
sharing are available in Table 10 below.
Reductions in Maximum Annual Limitation on Cost Sharin
c. Publication of the Premium
Adjustment Percentage, Maximum
Annual Limitation on Cost Sharing,
Reduced Maximum Annual Limitation
on Cost Sharing, and Required
Contribution Percentage (§ 156.130)
Since the 2014 benefit year, HHS has
published the premium adjustment
percentage, maximum annual limitation
on cost sharing, reduced maximum
annual limitation on cost sharing, and
required contribution percentage
parameters through notice-andcomment rulemaking. Beginning with
the 2023 benefit year, we proposed to
publish these parameters in guidance by
January of the year preceding the
applicable benefit year, unless HHS is
changing the methodology for
calculating the parameters, in which
case, we would do so through noticeand-comment rulemaking. We
additionally proposed to publish in
guidance the premium adjustment
percentage and related parameters using
the most recent NHEA income and
premium data that is available at the
time these values are published in
guidance or, if HHS is changing the
methodology for calculating these
parameters, at the time these values are
235 Available at https://www.cms.gov/cciio/
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$2,900
$5,800
$6,950
$13,900
proposed in notice-and-comment
rulemaking. Publication of these
parameters prior to the release of
updates to the NHEA data, which
typically (but not always) occurs in
February or March, is consistent with
the 2021 Payment Notice policy to
finalize the premium adjustment
percentage, maximum limitation on cost
sharing, reduced maximum limitation
on cost sharing, and required
contribution percentage using NHEA
data that would be available at the time
that the proposed rule would have been
published.
In the EHB final rule,236 HHS
established at § 156.130(e) that HHS will
publish the annual premium adjustment
percentage in the annual HHS notice of
benefit and payment parameters.
Additionally, in the 2014 Payment
Notice final rule,237 HHS established at
§ 156.420(a)(1)(i), (2)(i), and (3)(i), that
the reduced annual limitations on cost
sharing would be published in the
applicable benefit year’s annual HHS
notice of benefit and payment
parameters. Due to the timing of
publication of the annual HHS notice of
benefit and payment parameters final
rule in past years, stakeholders have
236 78
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suggested that when HHS is not
changing the calculation methodology
for these parameters, HHS should
publish earlier the premium adjustment
percentage, maximum limitation on cost
sharing, reduced maximum limitation
on cost sharing, and required
contribution percentage. These
stakeholders asserted that an earlier
publication would allow issuers to
incorporate these parameters for rate
setting and the submission of QHP
benefit templates earlier than would be
possible if the parameters were
published in the applicable benefit
year’s notice of benefit and payment
parameters.
In addition, once the methodologies
used to calculate the premium
adjustment percentage, required
contribution percentage, and maximum
annual limitation on cost sharing have
been established through rulemaking,
the calculation of these amounts is a
function of entering the applicable
figures into the established equations,
and therefore, does not require
rulemaking to establish in subsequent
benefit years. Furthermore, the
methodology used to calculate the
reduced maximum annual limitation on
237 78
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cost sharing has remained consistent
since the 2014 Payment Notice final
rule. Therefore, as discussed earlier in
this final rule, we are finalizing for the
2022 benefit year and beyond the
reduction rates for the reduced
maximum annual limitation on cost
sharing as well as the methodology for
determining whether these reductions
raise plan AVs above acceptable levels
for the 2022 benefit year and beyond.
With these methodologies in place we
proposed to amend §§ 156.130(e) and
156.420(a) to reflect that, beginning with
the 2023 benefit year, we would publish
the premium adjustment percentage,
along with the maximum annual
limitation on cost sharing, the reduced
maximum annual limitation on cost
sharing, and the required contribution
percentage, in guidance by January of
the year preceding the applicable
benefit year (for example, the 2023
premium adjustment percentage would
be published in guidance no later than
January 2022), unless HHS is amending
the methodology to calculate these
parameters, in which case HHS would
amend the methodology and publish the
parameters through notice-andcomment rulemaking.
We believed that publishing the final
premium adjustment percentage and
associated final parameters in guidance
annually instead of through notice-andcomment rulemaking is consistent with
our efforts to provide information to
stakeholders in a timely manner.
We received public comments on the
proposal to publish the premium
adjustment percentage, maximum
annual limitation on cost sharing,
reduced maximum annual limitation on
cost sharing (§ 156.130), and required
contribution percentage
(§ 155.605(d)(2)) in guidance. The
following is a summary of the comments
we received and our responses.
Comment: We received multiple
comments expressing general support
for publishing the premium adjustment
percentage, maximum annual limitation
on cost sharing, reduced maximum
annual limitation on cost sharing, and
required contribution percentage in
guidance by January of the year
proceeding the applicable benefit year,
when we are not proposing any changes
to the methodologies used to calculate
these values. Commenters largely agreed
that this publication timeline would
reduce confusion and would provide
information to stakeholders in a more
timely manner.
However, a few commenters
expressed concern that publication in
guidance would reduce their
opportunities to review and comment
on these parameters. Some of these
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commenters pointed out that their
concerns regarding the 2020 Payment
Notice change in the premium
adjustment percentage calculation 238
have not been addressed and feared that
publishing these parameters in guidance
would remove opportunity to comment
on the current methodology. For this
reason, one commenter asked that we
publish the parameters in guidance in
draft form seeking public comment prior
to finalizing the parameters for the
applicable benefit year.
Response: We are finalizing our
ability to publish the premium
adjustment percentage, maximum
annual limitation on cost sharing,
reduced maximum annual limitation on
cost sharing and required contribution
percentage in guidance. Therefore, for
the 2023 benefit year and beyond, the
values calculated based on the
methodologies established in
rulemaking will generally be published
in guidance by January of the year
preceding the benefit year to which they
apply, unless we are proposing changes
to the methodology used to calculate
these values or otherwise wish to
discuss or obtain significant feedback on
the methodology. As a general matter,
we do not believe that comments to
such guidance will be necessary since
the methodology will have been set
pursuant to statute and through noticeand-comment rulemaking, and the
guidance would merely be announcing
the published measures and showing
the calculations based on the
established methodology and published
measures. We reiterate that if we do
propose changes to the methodology, we
will propose the values of these
parameters alongside the changes in
methodology through notice-andcomment rulemaking.
As mentioned in previous sections of
this final rule, we have addressed
comments concerned about the
methodology change for calculating the
premium adjustment percentage that
was finalized in the 2020 Payment
Notice, and are reverting back to the
methodology used prior to 2020
Payment Notice. Therefore, we are
relying on NHEA ESI premium data, not
premium data from other private health
insurance markets, in our calculation of
premium growth and the premium
adjustment percentage, maximum
annual limitation on cost sharing,
reduced maximum annual limitation on
cost sharing, and required contribution
percentage for the 2022 benefit year and
beyond.
238 In the 2020 Payment Notice, HHS changed the
methodology for calculating the premium
adjustment percentage from using ESI premiums to
using all individual health insurance premiums
minus Medigap and the medical portion of property
and casualty insurance. See 84 FR 17454.
239 ‘‘Enforcement Safe Harbor for Qualified Health
Plan Termination Notices During the 2019 Benefit
Year,’’ August 26, 2020. Available at https://
www.cms.gov/CCIIO/Programs-and-Initiatives/
Health-Insurance-Marketplaces/Downloads/
Termination-Notices-Enforcement-Discretion.pdf.
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4. Termination of Coverage or
Enrollment for Qualified Individuals
(§ 156.270)
In the 2021 Payment Notice, we
finalized a requirement that under
§ 156.270(b)(1), QHP issuers must send
termination notices with effective dates
and reason for the termination to
enrollees for all termination events. We
finalized this policy as proposed, noting
that all commenters who weighed in on
this topic supported our proposal. This
policy became effective July 13, 2020. In
the 2022 Payment Notice proposed rule,
we did not propose, and we are not
finalizing, any changes to paragraph
(b)(1) beyond what we finalized in the
2021 Payment Notice for the reasons
discussed below.
In finalizing the change to
§ 156.270(b)(1) in the 2021 Payment
Notice, we inadvertently omitted
discussion of two comments opposing
the proposal. These comments raised
concerns about unnecessary additional
administrative costs and IT builds, and
noted that a termination notice could be
confusing in certain scenarios—for
example, if the enrollee switches
between QHPs offered by the same
issuer, a termination notice from their
issuer could cause confusion. These
commenters proposed instead that
Exchanges should be required to clearly
convey the eligibility termination reason
and effective date in the Exchange’s
own eligibility notices, consistent with
the data conveyed to issuers on 834
termination transactions.
We are sensitive to commenters’
concerns that issuers need sufficient
time to build IT systems to implement
this policy. In response, we issued
guidance allowing issuers using the
Federal platform enforcement discretion
until February 1, 2021 to implement the
new termination notice requirement.239
However, the comments in opposition
to the proposal do not change our policy
goals underlying our decision to finalize
the rule as proposed. FFEs do not send
termination notices for any termination
scenario other than citizenship datamatching issue expirations and
terminations associated with Medicare
PDM when the enrollee has elected at
plan selection to terminate Exchange
coverage when found dually enrolled.
FFEs also do not send termination
notices in enrollee-initiated
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terminations which must be requested
at the Exchange. Similarly, FFEs do not
send termination notices when an
enrollee switches QHPs within the same
issuer. This is all appropriate, because
the issuer is the primary communicator
to the enrollee about their coverage. We
still believe that termination notices
would be helpful in these scenarios,
even in plan selection changes, because
an enrollee switching QHPs could have
their premium, cost sharing, and
provider network affected. As one of the
comments in support of the new
termination notice requirement in the
2021 Payment Notice noted, it is
important for the enrollee to have in
writing the actual termination date for
their records, in case of
miscommunication with the issuer
about the preferred date or to later
dispute an inaccurate Form 1095–A.
Another commenter agreed that issuers
should send termination notices during
voluntary terminations associated with
Medicare PDM as it would help the
enrollee confidently transition to
Medicare.
Complaints about terminations are
one of the largest sources of casework.
More consistent communication is part
of the solution. We believed consumers
should be notified of these changes,
even if they initiated them, so that
enrollees have a record that the issuer
completed the request. Issuers are the
proper messenger of termination
noticing for many reasons. For example,
Exchange issuers historically are the
senders of termination notices, and
some issuers acknowledged in their
comments on the 2021 Payment Notice
that they already do send termination
notices in all scenarios. Furthermore,
the issuer has record of the termination
date needed for the termination notice
before the Exchange in some cases, such
as some retroactive termination requests
handled through casework, and State
Exchange issuer terminations described
in § 155.430(d)(iv). One reason we
regulated in this area is that we were
receiving detailed questions from
issuers about which termination
scenarios required issuer notices; we
believe requiring issuer termination
notices for all scenarios in the long run
makes the requirement simpler.
Therefore, we did not propose, and
are not finalizing, any changes to
§ 156.270(b)(1) beyond what we
finalized in the 2021 Payment Notice.
Comment: One commenter
appreciated that we did not propose any
changes beyond what we finalized in
the 2021 Payment Notice. Another
commenter supported our 2021
Payment Notice provision requiring
issuers to send termination notices to
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consumers in all termination scenarios,
but suggested that HHS work with
consumer advocates to provide simpler,
more easily understandable termination
templates that could help with
readability for individuals with low
literacy.
Response: HHS does not proscribe
language that issuers must use in their
termination notices. We believe that
issuers, as the primary communicators
to enrollees about their coverage, are in
the best position to decide the
appropriate termination notice content
and wording for their enrollees, as long
as they comply with applicable
requirements, including those in
§§ 156.270 and 156.250. Under those
regulations, because issuers are required
to send these termination notices to
enrollees, issuers must use plain
language in any such notices they send
to consumers, so that the information
can easily be understood and is useful
to consumers with low literacy, low
health literacy, or limited English
proficiency.
Comment: One commenter said that
FFEs, as the systems of record, should
be responsible for sending termination
notices, particularly because FFEs
already send eligibility notices, 1095–A
forms, and other documentation.
Response: As we explained in the
preamble to the proposed rule, issuers
are the proper messenger of termination
noticing for many reasons. Exchange
issuers historically are the senders of
termination notices, and some issuers
acknowledged in their comments on the
2021 Payment Notice that they already
do send termination notices in all
scenarios. Furthermore, the issuer has
record of the termination date needed
for the termination notice before the
Exchange in some cases, such as some
retroactive termination requests handled
through casework, and State Exchange
issuer terminations described in
§ 155.430(d)(iv).
5. Prescription Drug Distribution and
Cost Reporting by QHP Issuers
(§ 156.295)
Section 6005 of the ACA added
section 1150A(a)(2) of the Act to require
a PBM under a contract with a Medicare
Part D plan sponsor or Medicare
Advantage plan that offers a Medicare
Part D plan, or with a QHP offered
through an Exchange established by a
state under section 1311 of the ACA 240
to provide certain prescription drug
information to the Secretary, at such
240 This includes an FFE, as a Federal Exchange
may be considered an Exchange established under
section 1311 of the ACA. King v. Burwell, 576 U.S.
988 (2015).
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24239
times, and in such form and manner, as
the Secretary shall specify. Section
1150A(b) of the Act addresses the
information that a QHP issuer or their
PBM must report.241 Section 1150A(c)
of the Act requires the information
reported to be kept confidential and not
to be disclosed by the Secretary or by a
plan receiving the information, except
that the Secretary may disclose the
information in a form which does not
disclose the identity of a specific PBM,
plan, or prices charged for drugs for
certain purposes.242
In the 2012 Exchange Final Rule, we
codified the requirements contained in
section 1150A of the Act with regard to
QHPs at § 156.295. In that rule, we
interpreted section 1150A of the Act to
require QHP issuers to report the
information described in section
1150A(b) of the Act and did not specify
the responsibilities of PBMs that
contract with QHP issuers to report this
information. On January 28, 2020 243
and on September 11, 2020,244 we
published notices in the Federal
Register and solicited public comment
on collection of information
requirements detailing the proposed
collection envisioned by section 1150A
of the Act to HHS.245
241 This information is: The percentage of all
prescriptions that were provided through retail
pharmacies compared to mail order pharmacies,
and the percentage of prescriptions for which a
generic drug was available and dispensed (generic
dispensing rate), by pharmacy type (which includes
an independent pharmacy, chain pharmacy,
supermarket pharmacy, or mass merchandiser
pharmacy that is licensed as a pharmacy by the
state and that dispenses medication to the general
public), that is paid by the health benefits plan or
PBM under the contract; the aggregate amount, and
the type of rebates, discounts, or price concessions
(excluding bona fide service fees, which include but
are not limited to distribution service fees,
inventory management fees, product stocking
allowances, and fees associated with administrative
services agreements and patient care programs
(such as medication compliance programs and
patient education programs)) that the PBM
negotiates that are attributable to patient utilization
under the plan, and the aggregate amount of the
rebates, discounts, or price concessions that are
passed through to the plan sponsor, and the total
number of prescriptions that were dispensed; and,
the aggregate amount of the difference between the
amount the health benefits plan pays the PBM and
the amount that the PBM pays retail pharmacies,
and mail order pharmacies, and the total number
of prescriptions that were dispensed.
242 The purposes are: As the Secretary determines
to be necessary to carry out Section 1150A or part
D of title XVIII; to permit the Comptroller General
to review the information provided; to permit the
Director of the Congressional Budget Office to
review the information provided; and, to States to
carry out section 1311 of the ACA.
243 85 FR 4993 through 4994.
244 85 FR 56227 through 56229.
245 Pharmacy Benefit Manager Transparency.
CMS–10725. Available at https://www.cms.gov/
regulations-and-guidancelegislationpaperwork
reductionactof1995pra-listing/cms-10725.
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a. QHP Issuer Responsibilities
In the proposed rule, we proposed to
add new part 184 to address the
responsibilities of PBMs under the ACA
and to add § 184.50 to codify in
regulation the statutory requirement that
PBMs that are under contract with an
issuer of one or more QHPs report the
data required by section 1150A of the
Act. Accordingly, we proposed to revise
§ 156.295(a) to state that where a QHP
issuer does not contract with a PBM to
administer the prescription drug benefit
for QHPs, the QHP issuer will report the
data required by section 1150A of the
Act to HHS. We proposed
corresponding revisions throughout
§ 156.295 to remove the applicability of
the reporting requirement for PBMs
under this section and propose revising
the title to ‘‘Prescription drug
distribution and cost reporting by QHP
issuers’’.
As explained in the proposed rule and
in the preamble for § 184.50 in this final
rule, we acknowledge that section
1150A places responsibility on both the
QHP issuer and their PBMs to report
this prescription drug data. Generally,
where a QHP issuer contracts with a
PBM, the PBM is more likely to be the
source of the data that must be reported.
Therefore, to reduce overall burden,
rather than requiring the QHP issuer to
serve as a conduit between its PBM and
HHS, or unnecessarily requiring both
the PBM and the QHP issuer to submit
duplicated data, we proposed to
implement section 1150A to make QHP
issuers responsible for reporting this
data directly to the Secretary only when
the QHP issuer does not contract with
a PBM to administer the prescription
drug benefit for their QHPs. Where a
QHP contracts with a PBM, the PBM is
responsible for reporting data to the
Secretary as required by § 184.50.
We stated that although we were
unaware of any QHP issuer that does
not currently utilize a PBM, we believed
that, together, the proposals to revise
§ 156.295 and to add § 184.50 would
ensure the collection of data required by
section 1150A of the Act in all
circumstances, including when a QHP
issuer does not use a PBM to administer
its prescription drug benefit. Retaining
the requirement for QHP issuers to
report data at § 156.295 when they do
not contract with a PBM would ensure
that the data is consistently collected
every plan year.
We also proposed to remove
§ 156.295(a)(3) to remove the
requirement for QHP issuers to report
spread pricing amounts when the QHP
issuer does not contract with a PBM to
administer the prescription drug benefit
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for their QHPs. Spread pricing amounts
are only present where a PBM acts as an
intermediary between the QHP issuer
and a drug manufacturer. If a QHP
issuer does not contract with a PBM, no
such intermediary exists and it is not
possible for QHP issuers to report this
data.
We sought comment on these
proposals.
We received public comments on
these proposals. The following is a
summary of the comments we received
and our responses.
Comment: Many commenters
supported the proposal to collect this
data directly from the PBMs that QHP
issuers contract with to administer the
drug benefit for their QHPs, as PBMs are
best positioned to report the data with
the least amount of burden. A few
commenters asserted that section
1150A(a)(2) of the Act does not grant
HHS the authority to collect this data
directly from PBMs.
Response: We agree with commenters
that where QHP issuers utilize PBMs to
administer their prescription drug
benefit, PBMs are best suited to report
this data. Section 1150A(a)(2) of the Act
grants the Secretary the authority to
specify the time, form, and manner of
this collection. We exercise this
authority to specify the manner of this
collection by finalizing this policy as
proposed: PBMs will submit this data to
HHS when a QHP issuer contracts with
the PBM to administer the drug benefit
for their QHPs. If a QHP issuer does not
contract with a PBM to administer the
drug benefit for their QHPs, the QHP
issuer will submit the data to HHS.
However, given our understanding that
all QHP issuers currently use a PBM,
with the limited exception of QHP
issuers with integrated delivery systems
as discussed below, we believe that it is
reasonable to expect that PBMs are best
suited to report this data given their
contractual role in the primary
administration of prescription drug
benefits.
Comment: Citing the burden to make
contractual modification and
operational upgrades, many commenters
requested that we delay implementation
of the collection until 2022 or later.
Response: We are aware of the timing
concerns expressed by commenters in
response to the policies finalized here
and at part 184 below, as well as those
expressed in response to the collection
of information requirement notices
displayed in 2020. However, this
collection is statutorily required, and, as
noted in the collection of information
requirement notices, we have previously
delayed its implementation in order to
accommodate concerns regarding
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burden. We are sensitive to commenters’
concerns about burden and timing, and,
this data collection is not imposed
lightly; we understand that the
implementation of a new data collection
during a pandemic may impose
additional challenges on the industry.
However, its disclosure has never been
more vital, as all aspects of the
prescription drug delivery chain
continue to contribute to rising
prescription drug costs in this country.
Additionally, we believe that this data
is essential for the implementation of
policies that seek to improve the
coverage landscape of prescription
drugs. We therefore intend to begin
collection as soon as reasonably
possible. However, to minimize burden
during a pandemic, and to allow for
additional time to provide technical
assistance to reporting entities for a new
collection, we do not intend to require
submission sooner than December 31,
2021.
Comment: Multiple commenters
asserted that section 1150A(a)(2) of the
Act does not grant HHS the authority to
collect some of this data at the National
Drug Code (NDC) level of detail.
Commenters also expressed concern
that HHS did not describe the level of
detail for this collection in regulation.
Response: Section 1150A(a)(2) of the
Act grants the Secretary the authority to
specify the time, form, and manner of
this collection. We have specified the
form and manner of this collection as
part of the collection of information
requirement notices displayed in 2020.
In collecting some of this data at the
NDC level of detail, we are interpreting
section 1150A in a manner consistent
with previous rulemaking by CMS.246
Additionally, we sought comment on
the form and manner of the collection
twice in the collection of information
requirement notices displayed in 2020,
246 See ‘‘Medicare Program; Changes to the
Medicare Advantage and the Medicare Prescription
Drug Benefit Programs for Contract Year 2013 and
Other Changes; Final Rule’’ at 77 FR 22094. In that
final rule, CMS interpreted section 1150A of the Act
to impose no additional reporting requirements for
entities subject to Direct and Indirect Remuneration
(DIR) reporting, except for PBM spread amount
aggregated to the plan benefit package level. The
existing DIR reporting required data reporting at the
NDC. As such, CMS has previously interpreted that
section 1150A authorizes collection at an NDC level
of reporting. For consistency with previous
rulemaking by CMS and to reduce the burden of
creating different CMS, collection requirements, we
will collect some of this data at the NDC level. We
recognize that DIR reporting requirements under
Part D are partly based on statutory authority that
is not applicable to this collection, and we do not
claim to rely on any authority other than section
1150A of the Act as the basis for this collection. We
do, however, rely on that final rule insofar as CMS
strives to interpret the same statute consistently.
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including the level of detail of the
collection.
Comment: Some commenters
expressed concern that a federal
requirement to report prescription drug
data for QHPs may conflict or overlap
with state requirements to collect
similar data. One commenter voiced
concern that this collection is unduly
similar to the Transparency in Coverage
final rule,247 a rule for which the
commenter seeks regulatory
clarifications.
Response: While we agree with
commenters that we should endeavor to
minimize burden and avoid conflict or
duplication of efforts with state
reporting requirements, we have
conducted research and held
discussions with states to understand
existing state reporting requirements. In
addition, no state submitted comments
to the collection of information
requirement notices displayed in 2020
or to this proposal indicating any
concern about conflict or overlap with
this reporting requirement. As a result,
we believe that there is no significant
conflict or duplication between this
collection and any state reporting
requirement.
We also note that, after the proposed
rule displayed, Congress passed the
Consolidated Appropriations Act,
2021,248 which includes certain
reporting requirements on pharmacy
benefits and drug costs.249 We are aware
that some of the data envisioned for
reporting under the Consolidated
Appropriations Act may, to an extent,
be similar to some of the data sought by
collection under § 1150A of the Act.
While we are finalizing this collection
as proposed, we, along with the
Departments of Treasury and Labor,
intend to issue future guidance that will
explain the interaction between this
collection and the future collection
envisioned by the Consolidated
Appropriations Act, if necessary.
Comment: One commenter requested
clarification whether the collection
applies to QHP issuers with integrated
delivery systems; that is, QHP issuers
that do not use a network of outside
providers and do not use outside PBMs
to manage their prescription drug
benefits. This commenter asserted that
there is limited rationale to collect data
from such plans, as § 1150A is intended
to increase transparency on
relationships and transactions across the
prescription drug supply chain,
247 85
FR 72158.
Law 116–260, enacted on December 27,
248 Public
2020.
249 See section 2799A–10.
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particularly between health plans,
PBMs, and pharmacies.
Response: We recognize that not all
data elements that must be reported
under this requirement would apply
equally to integrated delivery systems.
Nonetheless, we believe that it is
important for these QHP issuers with
integrated delivery systems to report the
data elements that are applicable, since
these issuers are also part of the drug
supply chain and their different model
provides an important point of
comparison. In this instance, the QHP
issuer would be responsible for
reporting this data, as they do not utilize
a PBM to administer their prescription
drug benefit. We plan to provide
technical assistance to all reporting
entities to minimize the burden of this
collection.
Comment: One commenter requested
clarification regarding the collection’s
applicability to off-Exchange plans.
Response: This collection applies to
QHPs only. We interpret the statute as
requiring reporting for QHPs, regardless
of whether the QHPs are sold onExchange or off-Exchange. The
collection does not apply to any other
plans.
Comment: A few commenters
addressed the confidentiality provision
of section 1150A and their codification
in regulation. A few commenters
requested that the data be released to
the public in Public Use Files (PUFs). A
few commenters noted that we should
share this data with states upon their
request to bolster their transparency
efforts. One commenter asserted that the
confidentiality restrictions required by
statute may be too limiting to have an
appreciable impact on reducing health
care costs for patients, employers and
other purchasers.
Response: Section 1150A of the Code,
codified previously at § 156.295 and
also finalized below at § 184.50 states
that information disclosed by a plan or
PBM under this collection is
confidential and shall not be disclosed
by the Secretary or by a plan receiving
the information, except that the
Secretary may disclose the information
in a form which does not disclose the
identity of a specific PBM, plan, or
prices charged for drugs, for certain
purposes, including to states to carry
out section 1311 of the ACA.250
Comment: We received a number of
comments that were out-of-scope of the
250 The
other purposes described in statute are:
As the Secretary determines to be necessary to carry
out section 1150A or part D of title XVIII; to permit
the Comptroller General to review the information
provided; and, to permit the Director of the
Congressional Budget Office to review the
information provided.
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two specific proposals in the proposed
rule, including suggestions for
improving the definition of ‘‘bona fide
service fees’’ used in the appendices of
the previously posted ICRs, suggestions
on how we might automate the
reporting mechanisms, and comments
regarding the transparency in coverage
requirement under PHS Act section
1311(e)(3).
Response: We appreciate these
suggestions and will consider them for
future action for this collection and its
associated regulations. However, as they
are out-of-scope with regards to these
specific proposals, we decline to
comment further on them at this time.
As a result of the comments, we are
finalizing this policy as proposed.
b. Reporting of Data by Pharmacy Type
Section 1150A(b)(1) of the Act
requires the Secretary to collect certain
QHP prescription drug data 251 by
pharmacy type (which includes an
independent pharmacy, chain
pharmacy, supermarket pharmacy, or
mass merchandiser pharmacy that is
licensed as a pharmacy by the state and
that dispenses medication to the general
public). This requirement was
previously codified at § 156.295(a)(1). In
the Medicare Program; Changes to the
Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for
Contract Year 2013 and Other Changes
final rule, we recognized that it is not
currently possible to report such data by
pharmacy type because pharmacy type
is not a standard classification currently
captured in industry databases or
files.252 We understand that these types
continue not to be standard
classifications currently captured in
industry databases or files, as indicated
by comments submitted in response to
the January 28, 2020 notice in the
Federal Register soliciting public
comment on the collection of
information requirements of this
collection.253 To reduce the burden of
this collection, we proposed to revise
§ 156.295(a)(1) to remove the
requirement to report the data described
at section 1150A(b)(1) of the Act by
pharmacy type. We intended to collect
this information at a time when this
requirement would impose reasonable
burden. We sought comment on ways
that we may collect the data by
pharmacy type without creating
251 Section 1150A(b)(1) requires the reporting of
the percentage of all prescriptions that were
provided through retail pharmacies compared to
mail order pharmacies, and the percentage of
prescriptions for which a generic drug was available
and dispensed.
252 See 77 FR 22072 at 22093.
253 See 85 FR 4993 through 4994.
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unreasonable burden and any existing
definitions that may exist that could be
leveraged for this purpose. We also
sought comment on the time and costs
required for PBMs to begin reporting by
pharmacy type, if definitions were
finalized.
We received public comments on the
proposed updates to reporting of data by
pharmacy type. The following is a
summary of the comments we received
and our responses.
Comment: Nearly all commenters
supported the proposal to remove the
requirement to report the data described
at section 1150A(b)(1) of the Act by
pharmacy type, agreeing that it is not a
data point that is collected on a
widespread basis by the industry and
that the implementation would cause
unreasonable burden. One commenter
disagreed, explaining that that industry
is currently capable of reporting this
data.
Response: We agree with the majority
of commenters that pharmacy type data
is currently not readily collected by
industry. While we will continue to
consider ways to implement its
collection, we agree that removal of this
requirement from the regulation is
warranted at this time.
Following review of the comments,
we are finalizing this policy as
proposed.
6. Oversight of the Administration of the
Advance Payments of the Premium Tax
Credit, Cost-Sharing Reductions, and
User Fee Programs (§ 156.480)
a. Application of Requirements to
Issuers in State Exchanges and SBE–FPs
In the second Program Integrity Rule,
we finalized general provisions related
to the oversight of QHP issuers in
relation to APTC and CSRs.254 We
explained that since APTC and CSR
payments are federal funds which pass
from HHS directly to QHP issuers, it is
necessary for HHS to oversee QHP
issuer compliance in these areas,
regardless of whether the QHP is offered
through a State Exchange or an FFE. As
such, to effectively oversee the payment
of APTC and CSRs by QHP issuers, HHS
established standards in part 156,
subpart E for QHP issuers participating
in FFEs and State Exchanges. We also
noted that in states with State
Exchanges, the state would have
primary enforcement authority over
QHP issuers participating in the state’s
individual market exchange that were
not in compliance with the standards
set forth in part 156, subpart E.255
78 FR 65077 and 65078.
the proposed Program Integrity Rule, 78
FR 37058. Also see 78 FR 65077 and 65078.
However, if the State Exchange does not
enforce such standards, HHS would
enforce compliance with these
requirements, including the imposition
of CMPs on QHP issuers participating in
State Exchanges using the same
standards and processes for QHP issuers
participating in FFEs set forth in part
156, subpart I.256 In the second Program
Integrity Rule, we also finalized general
provisions that require issuers offering
QHPs in an FFE maintain all documents
and records and other evidence of
accounting procedures and practices,
which are critical for HHS to conduct
activities necessary to safeguard the
financial and programmatic integrity of
the FFEs.257 As finalized in 45 CFR
156.705(a)(1), this includes the
authority for HHS to include periodic
auditing of the QHP issuer’s financial
records related to the participation in an
FFE. To date, we have leveraged this
authority to conduct user fee audits of
QHP issuers participating in an FFE.
In the proposed rule, we proposed
amendments to consolidate HHS audit
authority regarding APTC, CSR, and
user fee audits by expanding the audit
authority under § 156.480(c) to also
capture user fees audits by HHS, or its
designee, of QHP issuers participating
in an FFE. Additionally, as part of
determining whether APTC and CSR
amounts were properly paid to issuers,
and whether user fee amounts were
properly collected, we explained that
HHS regularly identifies discrepancies
in issuer records caused by issuer noncompliance with other applicable
Exchange operational standards.
Examples include failure to correctly
effectuate or terminate coverage, or to
correctly calculate premiums. In
addition, we proposed to apply the
same framework to QHP issuers
participating in SBE–FP states. As such,
QHP issuers in SBE–FP states would be
required to comply with HHS audits
under § 156.480(c) to confirm
compliance with the applicable
standards established in part 156,
subpart E for APTC and CSRs and
§ 156.50 for user fees.
We further proposed that in situations
where the state fails to substantially
enforce such standards, HHS would
enforce compliance, including imposing
CMPs using the same standards set forth
in part 156, subpart I. Based on our
experience conducting audits of APTC,
CSRs, and user fees, we also proposed
several amendments to § 156.480(c) to
ensure we can effectively oversee the
payment of these amounts by QHP
issuers, regardless of Exchange type (for
254 See
255 See
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256 Ibid.
257 See
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example, FFE, State Exchange, or SBE–
FP).
As detailed below, to further support
our program integrity efforts in these
areas, we proposed to amend
§ 156.480(c) to codify additional details
regarding HHS audits and to capture
authority for HHS to conduct
compliance reviews of QHP issuer
compliance with the applicable federal
APTC, CSR, and user fee standards,258
including the consequences for the
failure to comply with an audit. In
addition, we proposed amendments to
§§ 156.800 and 156.805 to set forth the
framework for HHS enforcement of the
applicable federal APTC, CSR, and user
fee standards in situations where state
authorities fail to substantially enforce
those standards with respect to the QHP
issuers participating in State Exchanges
and SBE–FPs.
We sought comment on these
proposals, including with respect to
how HHS could coordinate with State
Exchanges and SBE–FPs to address noncompliance by QHP issuers with
applicable federal APTC, CSRs, and user
fee standards. We sought comment on
ways to balance enforcement by State
Exchanges and SBE–FPs and the
protection and oversight of federal
funds by HHS. We are finalizing the
proposal to apply the same audit
requirements to QHP issuers
participating in SBE–FP states as for
QHP issuers participating in FFE states.
As such, QHP issuers in SBE–FP states
will be required to comply with HHS
audits under § 156.480(c) to confirm
compliance with the applicable
standards established in part 156,
subpart E for APTC and CSRs and
§ 156.50 for user fees. We are also
finalizing the APTC, CSR, and user fee
audit requirements at § 156.480(c) with
slight modifications to certain audit
timeframes, as well as HHS’s authority
to impose CMPs on issuers in State
Exchanges and SBE–FPs when the State
Exchange or SBE–FP fails to
substantially enforce the applicable
federal APTC, CSR, and user fee
standards at §§ 156.800 and 156.805. We
are also finalizing the accompanying
amendments to establish authority for
HHS to conduct compliance reviews to
confirm QHP issuer compliance with
the federal APTC, CSR, and user fee
standards.
We received public comments on the
proposed updates and policies regarding
258 The applicable federal standards for APTC and
CSRs are found in part 156, subpart E, which apply
to QHP issuers participating in all Exchanges types
(FFEs, State Exchanges, and SBE–FPs). The
applicable federal standards for user fees are found
in 45 CFR 156.50, which apply to QHP issuers in
FFEs and SBE–FPs.
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the application of federal APTC, CSR,
and user fee requirements to issuers in
State Exchanges and SBE–FPs. The
majority of the comments we received to
this section were also made to the
sections regarding HHS’s enforcement of
the applicable federal APTC, CSR, and
user fee standards if a State Exchange or
SBE–FP is not enforcing or fails to
substantially enforce one or more of
these requirements (§ 156.480(c)(6));
subpart I—enforcement remedies in the
Exchanges, available remedies, and
scope (§ 156.800); and the bases and
process for imposing CMPs in the
Exchanges (§ 156.805).We respond to
these parallel comments in the bases
and process for imposing CMPs in the
Exchanges (§ 156.805) preamble section
below. However, we received some
comments that were specific to this
section, suggesting ways for HHS to
coordinate with State Exchanges and
SBE–FPs to address non-compliance by
QHP issuers with applicable federal
APTC, CSRs, and user fee standards.
The following is a summary of these
comments and our responses.
Comment: Commenters emphasized
that HHS should collaborate with State
Exchanges and SBE–FPs and keep them
informed of and involved in HHS’s
audits of QHP issuers that operate in
their respective State Exchange or SBE–
FP. They noted that State Exchanges
and SBE–FPs should also be informed of
upcoming issuer audits and compliance
reviews, as well as audit and
compliance review findings, including
any amounts recouped by HHS and any
enforcement action taken against issuers
in their states. These commenters
offered specific suggestions for how
HHS could collaborate with State
Exchanges and SBE–FPs. One
commenter stated that HHS should
provide technical assistance to the state
and coordinate with the state on
corrective action required of any issuers
in the state, if necessary. Another
commenter asked that HHS reconsider
the role of State Exchanges in audits and
revise the audit process accordingly.
This commenter suggested creating one
audit process for FFE issuers and a
different one for State Exchange and
SBE–FP issuers, and further suggested
HHS could consider creating different
processes for State Exchange and SBE–
FP issuers, as well as different processes
among State Exchanges, as necessary.
Response: HHS generally intends its
approach to audits, compliance reviews,
and enforcement activities of issuers to
be collaborative processes with issuers,
states, State Exchanges, and SBE–FPs.
HHS will continue to coordinate with
State Exchanges and SBE–FPs,
including notifying State Exchanges and
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SBE–FPs when an audit or compliance
review involves an issuer in their state.
Additionally, HHS will also consider
taking a different approach for
conducting APTC, CSR, and user fee
audits and compliance reviews for State
Exchange issuers, such that HHS more
closely involves State Exchanges in the
process, to the extent possible and
appropriate based on the specific State
Exchange and the circumstances
involved. This includes HHS
considering how best to coordinate
APTC, CSR, and user fee audits for State
Exchange issuers with existing
independent external audit activities
that State Exchanges are required to
conduct annually, under 45 CFR
155.1200, that cover similar or related
Exchange functions such as eligibility
determinations, enrollments, and the
reporting of eligibility and enrollment
data to HHS. State Exchanges are
required to report the results of these
external audits to HHS and establish
corrective action plans for findings,
which are jointly monitored by the State
Exchange and HHS. In addition, HHS
will continue to work with State
Exchanges and SBE–FPs to enforce the
applicable federal APTC, CSR, and user
fee standards, as detailed in the below
section on bases and process for
imposing CMPs in the Exchanges
(§ 156.805).
We appreciate commenters’
suggestions and agree that HHS may
provide technical assistance to the state
and coordinate with the state on
corrective action required of any issuers
in the state, if necessary, to help guide
collaboration efforts with State
Exchanges and SBE–FPs with respect to
ensuring issuer compliance with federal
APTC, CSR, and user fee standards and
audits. We intend to consider the
various recommendations for potential
enhancements to the process for HHS
audits and compliance reviews of
federal APTC, CSR, and user fee
standards, including potential ways to
further enhance the collaboration with
state regulators, State Exchanges, and
SBE–FPs. However, as explained in the
proposed rule, the proposed updates
were intended to build on the existing
framework established in the second
Program Integrity Rule and clarify
HHS’s authority with respect to
oversight and enforcement of
compliance with federal APTC, CSR,
and user fee standards in State
Exchange and SBE–FP states.259 We also
remind stakeholders that the APTC,
CSR,260 and user fee programs are
259 See
78 FR 65077 and 65078.
CSR program was 100 percent federal
funds prior to October 2017, when CSR payments
260 The
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24243
federal funds, and the focus of these
audits will be on issuer compliance
with applicable federal standards.
HHS will consider recommendations
to enhance the QHP issuer audit and
compliance review processes to take
into consideration existing audit
activities that HHS requires State
Exchanges to conduct annually under
§ 155.1200, the variation between FFE,
SBE–FP, and State Exchange issuers, as
well as the variation among issuers
participating in the different State
Exchanges. In all cases, HHS will
continue to collaborate with the State
Exchange or SBE–FP to enforce the
applicable federal APTC, CSR, and user
fee standards. Further, one of the goals
of these amendments is to ensure the
timely and accurate completion of
audits of federal funds under the APTC,
CSR, and user fee programs. Therefore,
based on our experience to date
conducting 2014 benefit year CSR
audits, to ensure the protection of
federal funds and compliance with
applicable federal requirements, HHS
will generally lead the efforts to audit
compliance with federal APTC, CSR,
and user fee standards (where
applicable) under § 156.480(c).
After consideration of the comments
received on these proposals, we are
finalizing the provision to apply the
same audit requirements to QHP issuers
participating in SBE–FP states as for
QHP issuers participating in FFE and
State Exchange states as proposed. As
such, QHP issuers in SBE–FP states will
be required to comply with HHS audits
and compliance reviews under
§ 156.480(c) to confirm compliance with
the applicable standards established in
part 156, subpart E for APTC and CSRs
and § 156.50 for user fees. We are also
finalizing the APTC, CSR, and user fee
audit requirements at § 156.480(c), as
well as HHS’s authority to impose CMPs
on issuers in State Exchanges and SBE–
FPs when the State Exchange or SBE–
FP fails to substantially enforce the
applicable federal APTC, CSR, and user
fee standards at §§ 156.800 and 156.805.
b. Audits and Compliance Reviews of
APTC, CSRs, and User Fees
(§ 156.480(c))
In prior rulemaking, we codified
authority for HHS to audit an issuer that
offers a QHP in the individual market
through an Exchange to assess
compliance with the requirements of
part 156, subpart E.261 We also
previously codified general authority for
HHS to periodically audit a QHP
to issuers were discontinued due to lack of a
Congressional appropriation.
261 78 FR 65077 and 65078.
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issuer’s financial records related to its
participation in an FFE.262 Recently,
HHS completed the audits for the 2014
benefit year CSR payments. During
these audits, HHS encountered
challenges working with some issuers.
Specifically, HHS experienced
difficulties receiving requested audit
data and materials in a timely fashion
and receiving data in a format that is
readily usable for purposes of
conducting the audit. As such, similar
to the proposals related to audits of
issuers of reinsurance-eligible plans and
risk adjustment covered plans discussed
earlier in the proposed rule, we
proposed to amend § 156.480(c) to
provide more clarity around the issuer
requirements for APTC, CSR, and user
fee audits. The proposed amendments
codify more details about the audit
process and clarify issuer obligations
with respect to these audits, including
what it means to comply with an audit
and the consequences for failing to
comply with such requirements.
Additionally, we proposed to amend
§ 156.480(c) to also capture and clarify
HHS’s ability to audit FFE and SBE–FP
user fees and the accompanying issuer
requirements for such audits. As such,
we proposed to rename § 156.480,
‘‘Oversight of the Administration of the
Advance Payments of the Premium Tax
Credit, Cost-sharing Reductions, and
User Fee Programs.’’ HHS currently
reviews compliance with applicable
federal user fee standards when
conducting APTC audits because the
same data is used for both purposes; as
such, we explained, there would be
minimal increased burden as a result of
these proposals.
We also proposed several
amendments to § 156.480(c) to expand
the oversight tools available to HHS
beyond traditional audits to also
provide authority for HHS to conduct
compliance reviews of QHP issuers to
assess compliance with the applicable
federal APTC, CSR, and user fee
standards. We explained that these
proposed HHS compliance reviews
would follow the standards set forth for
compliance review of QHP issuers
participating in FFEs established in 45
CFR 156.715. However, compliance
reviews under this section would be
conducted to confirm QHP issuer
compliance with the federal APTC, CSR,
and user fee standards in subpart E of
part 156 and 45 CFR 156.50 for user
fees, as applicable, and they would
generally extend to QHP issuers
262 See 45 CFR 156.705(a)(1). Also see 78 FR
65078 and 65079.
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participating in all Exchanges.263 A
compliance review may be targeted at a
specific potential error and conducted
on an ad hoc basis.264 For example,
HHS may require an issuer to submit
data pertaining to specific data
submissions. We explained that we
believed this flexibility is necessary and
appropriate to provide HHS a
mechanism to address situations in
which a systematic error or issue is
identified during the random and
targeted auditing of a sample of QHP
issuers, and HHS suspects similarly
situated issuers may have experienced
the same systematic error or issue but
were not selected for audit in the year
in question. We further noted that we
intend to continue our collaborative
oversight approach and coordinate with
State Exchanges and SBE–FPs to ensure
QHP issuer compliance with the
applicable standards in part 156,
subpart E and 45 CFR 156.50.
First, we proposed to rename
§ 156.480(c) to ‘‘Audits and Compliance
Reviews’’ to clarify that the authority
described in this section would apply to
audits and the proposed HHS
compliance reviews to evaluate QHP
issuer compliance with the applicable
federal APTC, CSR, and user fee
standards. We similarly proposed to
update the introductory language in
§ 156.480(c) to incorporate a reference to
HHS compliance reviews. As amended,
§ 156.480(c) would provide that HHS or
its designee may audit and perform
compliance reviews to assess whether
an issuer that offers a QHP in the
individual market through an Exchange
is in compliance with the applicable
requirements of subpart E, part 156, and
45 CFR 156.50. We proposed to capture
in a new sentence in the amended
§ 156.480(c) that HHS would conduct
these compliance reviews consistent
with the standards set forth in 45 CFR
156.715. As detailed earlier in this
preamble, these oversight tools would
be available to HHS to evaluate
compliance by QHP issuers
participating in all Exchanges with the
applicable federal APTC, CSR, and user
fee standards.
Second, we proposed to add new
§ 156.480(c)(1) to establish notice and
conference requirements for these
audits. Proposed new paragraph (c)(1)
states that HHS would provide at least
15 calendar days advance notice of its
intent to conduct an audit of an QHP
issuer under § 156.480(c). Under
263 HHS does not intend to conduct user fee
compliance reviews of QHP issuers participating in
State Exchanges that do not rely on the Federal
platform. Such reviews would be limited to QHP
issuers participating in FFE and SBE–FP states.
264 See 78 FR 65100.
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proposed paragraph (c)(1)(i), HHS
proposed to codify that all audits would
include an entrance conference at which
the scope of the audit would be
presented and an exit conference at
which the initial audit findings would
be discussed.
Third, HHS proposed to add new
paragraph (c)(2) to capture the
requirements issuers must meet to
comply with an audit under this
section. Under the proposed paragraph
(c)(2)(i), we proposed to require the
issuer to ensure that its relevant
employees, agents, contractors,
subcontractors, downstream entities,
and delegated entities cooperate with
any audit or compliance review under
this section. In new proposed paragraph
(c)(2)(ii), we proposed to require issuers
to submit complete and accurate data to
HHS or its designees that is necessary to
complete the audit, in the format and
manner specified by HHS, no later than
30 calendar days after the initial
deadline communicated and established
by HHS at the entrance conference
described in proposed paragraph
(c)(1)(i). For example, for CSR audits,
HHS may request that QHP issuers
provide a re-adjudicated claims data
extract for the selected sample of
policies to verify accuracy of the readjudication process and reported
amounts (this would include
verification of all elements necessary to
perform accurate re-adjudication) and a
data extract containing incurred claims
for the selected sample of policies to
verify accuracy of actual amount the
enrollee(s) paid for EHBs via an
Electronic File Transfer. As another
example, for APTC audits, issuers may
be asked to provide data to validate and
support APTC payments received for
the applicable benefit year.
Fourth, under proposed
§ 156.480(c)(2)(iii), HHS proposed to
require that issuers respond to any audit
notices, letters, and inquires, including
requests for supplemental or supporting
information, no later than 15 calendar
days after the date of the notice, letter,
request, or inquiry. We explained that
we believe that the proposed
requirements in paragraph (c)(2) are
necessary and appropriate to ensure the
timely completion of audits and to
protect the integrity of the APTC, CSR,
and user fee programs and the payments
made thereunder.
Fifth, recognizing that there may be
situations that warrant an extension of
the timeframes under paragraph
(c)(2)(ii) or (iii), as applicable, we
proposed to also add a new paragraph
(c)(2)(iv) to establish a process for an
issuer to request an extension. To
request an extension, we proposed to
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require the issuer to submit a written
request to HHS within the applicable
timeframe established in paragraph
(c)(2)(ii) or (iii). The written request
would have to detail the reasons for the
extension request and the good cause in
support of the request. For example,
good cause may include an inability to
produce information in light of
unforeseen emergencies, natural
disasters, or a lack of resources due to
a PHE. If the extension is granted, the
issuer must respond within the
timeframe specified in HHS’s notice
granting the extension of time.
Sixth, under § 156.480(c)(3), HHS
proposed that it would share its
preliminary audit findings with the
issuer, and further proposed that the
issuer would then have 30 calendar
days to respond to such findings in the
format and manner as specified by HHS.
HHS would describe the process,
format, and manner by which an issuer
can dispute the preliminary audit
findings in the preliminary audit report
sent to the issuer. For example, if the
issuer disagrees with the findings set
forth in the preliminary audit report,
HHS would require the issuer to
respond to such findings by submitting
written explanations that detail its
dispute(s) or additional rebuttal
information via Electronic File Transfer.
HHS proposed under paragraph (c)(3)(i)
that if the issuer does not dispute or
otherwise respond to the preliminary
findings within 30 calendar days, the
audit findings would become final. In
new proposed paragraph (c)(3)(ii), if the
issuer timely responds and disputes the
preliminary audit findings within 30
calendar days, HHS would review and
consider such response and finalize the
audit findings after such review. HHS
would provide contact and other
information necessary for an issuer to
respond to the preliminary audit
findings in the preliminary audit report
sent to the issuer.
Seventh, HHS proposed to add a new
section at § 156.480(c)(4) to capture the
process and requirements related to
final audit findings and reports. If an
audit results in the inclusion of a
finding in the final audit report, the
issuer would be required to comply
with the actions set forth in the final
audit report in the manner and
timeframe established by HHS. We
noted that the actions set forth in the
final audit report could require an issuer
to return APTC or CSRs or make
additional user fee payments. HHS
further proposed that (1) the issuer must
provide a written corrective action plan
to HHS for approval within 30 calendar
days of the issuance of the final audit
report; (2) the issuer must implement
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the corrective action plan; and (3) the
issuer must provide HHS with written
documentation demonstrating the
adoption and completion of the required
corrective actions.
If an issuer fails to comply with the
audit requirements set forth in new
proposed § 156.480(c), HHS proposed in
paragraph (c)(5)(i) that HHS would
notify the issuer of payments received
that the issuer has not adequately
substantiated, and in new proposed
paragraph (c)(5)(ii), HHS would notify
the issuer that HHS may recoup any
payments identified as not adequately
substantiated. Therefore, the continued
failure to respond to or cooperate with
an audit under paragraph (c) and
provide the necessary information to
substantiate the payments made could
result in HHS recouping up to 100
percent of the APTC or CSR payments
made to an issuer for the benefit year(s)
that are the subject of the audit.
We clarified in the proposed rule that
APTC and CSR amounts recovered by
HHS as a result of an audit under
§ 156.480(c) would be paid to the U.S.
Treasury. We further noted that user fee
amounts recovered by HHS as a result
of an audit under § 156.480(c) would be
paid to the ACA Marketplace user fee
program collection account.
Lastly, HHS proposed to add a new
paragraph (c)(6) to § 156.480 to codify
HHS’s ability to enforce the applicable
federal APTC, CSR, and user fee
standards if a State Exchange or SBE–FP
is not enforcing or fails to substantially
enforce one or more of these
requirements. In instances where HHS
enforces compliance with the applicable
APTC, CSR, and user fee standards with
respect to QHP issuers participating in
State Exchanges or SBE–FPs, HHS
proposed to use the same standards and
processes as outlined in §§ 156.805 and
156.806 for QHP issuers participating in
an FFE with respect to the imposition of
CMPs. This would include the proposed
extension of the process outlined in
§ 156.901, et seq., for the QHP issuer to
appeal the imposition of CMPs. For a
discussion of the framework and
proposed accompanying penalties for
non-compliance in situations where
HHS is responsible for enforcement of
these requirements, see the following
discussion of proposed changes to
§§ 156.800 and 156.805.
We sought comment on these
proposals, including HHS’s clarification
of its compliance review authority, the
proposed timeframes and processes for
issuers to respond to audit notices and
requests for information and for issuers
to request extensions of those
timeframes, and the proposals related to
HHS’s authority to enforce compliance
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24245
with the federal APTC, CSR, and user
fee requirements if a State Exchange or
SBE–FP is not enforcing or fails to
substantially enforce one or more of
these requirements. We are finalizing
these provisions as proposed, with
slight modifications to certain audit
timelines in response to comments
stating that issuers need more time
during audits to provide complete and
accurate data. HHS will provide at least
30 calendar days advance notice of its
intent to conduct an audit, rather than
the proposed 15 calendar days. If HHS
determines the need for a corrective
action plan as the result of an audit, the
issuer must provide a written corrective
action plan to HHS for approval within
45 calendar days of the issuance of the
final audit report, rather than the
proposed 30 calendar days. As noted in
the above sections on audits of issuers
of reinsurance-eligible plans and risk
adjustment covered plans (§§ 153.410(d)
and 153.620(c)), these modified
timeframes apply across the parallel
HHS audit provisions for reinsurance,
risk adjustment, ATPC, CSR, and user
fee audits.
We also clarify that we will recoup
monies owed due to a finding as the
result of a reinsurance, risk adjustment,
APTC, CSR, or user fee audit using the
same method with which we collect all
debts. That is, we will first net using the
process set forth in 45 CFR 156.1215,
and we will then invoice issuers for the
remaining debt.
We received public comments on the
proposed updates to audits and
compliance reviews of federal APTC,
CSR, and user fee standards
(§ 156.480(c)). The majority of the
comments we received to the proposed
updates outlined in this section were
also made to the sections regarding
audits and compliance reviews of
issuers of reinsurance-eligible plans
(§ 153.410(d)) and audits and
compliance reviews of issuers of risk
adjustment covered plans (§ 153.620(c)).
We respond to all of these parallel
comments in this section. As noted
above, the comments we received to the
proposed § 156.480(c)(6) were also made
to the sections regarding the application
of requirements to issuers in State
Exchanges and SBE–FPs (§ 156.480),
enforcement remedies in the Exchanges
(§ 156.800), and bases and process for
imposing CMPs in the Exchanges
(§ 156.805). We summarize and respond
to those parallel comments in the
§ 156.805 preamble section below.
The following is a summary of the
parallel general comments we received
to all of the audits and compliance
review proposals in this rule and the
specific comments on the proposed
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updates to § 156.480(c), with the
exception of the comments submitted
on § 156.480(c)(6), and our responses.
Comment: Several commenters
supported the various audit and
compliance review proposals, noting
that they will clarify expectations and
requirements, ensure compliance, and
protect federal funds. Other commenters
opposed the proposals and asked HHS
to put audit standards in guidance,
rather than regulation, as this would
maintain flexibility and make it easier
for HHS to revise requirements and
improve the audit process.
Response: We agree that these
provisions will provide clarity for
issuers and better facilitate compliance
with any HHS audits, as well as enable
HHS to protect federal funds. Many of
the provisions are merely a codification
of the current audit processes that have
been used in prior reinsurance, APTC,
CSR, and user fee audits.265 We
maintain our commitment to working
with issuers to meet these requirements,
and we note that we proposed and are
finalizing a process to allow issuers to
submit written requests to extend
certain audit response deadlines with
good cause.266
We also note that, to provide clear
and enforceable standards, we proposed
and are finalizing the codification of
these procedures in regulation.
Comment: A few commenters
requested more flexibility regarding the
data format issuers must use.
Response: In order for HHS to
complete an audit, we must receive data
from issuers in a set format
communicated to issuers at the audit
entrance conference to be able to
analyze data from all issuers using the
same procedures. As we explained in
the proposed rule, HHS experienced
difficulties receiving requested audit
data in a format that is readily usable for
purposes of conducting the audit.
Therefore, we believe it is appropriate
and necessary to codify in regulation a
requirement that issuers must submit
complete and accurate data to HHS or
its designees that is necessary to
complete the audit, in the format and
manner specified by HHS. For example,
for CSR audits, HHS may request that
QHP issuers provide a re-adjudicated
claims data extract for the selected
sample of policies to verify accuracy of
the re-adjudication process and reported
amounts (this would include
verification of all elements necessary to
265 HHS has not yet conducted any risk
adjustment audits under 45 CFR 153.620(c).
266 See 45 CFR 153.410(d)(2)(iv), 156.620(c)(2)(iv)
and 156.480(c)(2)(iv), which we are finalizing as
proposed.
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perform accurate re-adjudication) and a
data extract containing incurred claims
for the selected sample of policies to
verify accuracy of actual amount the
enrollee(s) paid for EHBs via an
Electronic File Transfer. For APTC
audits, issuers may be asked to provide
data to validate and support APTC
payments received for the applicable
benefit year. To reduce burden on
issuers, we anticipate being able to
continue to review compliance with
applicable federal user fee standards
when conducting APTC audits because
the same data is used for both purposes.
We also note that if more time is needed
to compile the requested data in the
required format, an issuer could request
an extension under §§ 153.410(d)(2)(iv),
156.620(c)(2)(iv), or 156.480(c)(2)(iv), as
applicable.
Comment: Many commenters
requested longer timelines for audit
notice and issuer responses to HHS to
the various audit requests, noting that
issuers would need more time than
what was proposed in order for issuers
to provide complete and accurate data
or otherwise respond to HHS requests.
Some commenters requested that HHS
provide 30 calendar days advance
notice of its intent to conduct an audit,
rather than the proposed 15 calendar
days. Other commenters requested that
HHS set the deadline for issuers to
submit corrective action plans at either
45 or 60 calendar days, rather than the
proposed 30 calendar days. One
commenter requested that HHS set the
initial data submission deadline at 45
calendar days and subsequent request
deadlines at 30 calendar days, rather
than the proposed 30 calendar days and
15 calendar days, respectively. Other
commenters asked that HHS permit
extensions to the timeframes set forth
for these audits. A couple of
commenters asked that HHS be more
timely with respect to performing
audits.
Response: We appreciate these
comments and acknowledge that our
experience with 2014 benefit year CSR
and reinsurance audits demonstrated
that issuers need sufficient time to
provide complete and accurate data for
audits, and we acknowledge that some
issuers will face difficulties in retrieving
and properly formatting data from prior
benefit years. We also recognize that it
would be beneficial for all stakeholders
if issuers could receive more advance
notice of an upcoming audit or
compliance review to allow the issuer
(and HHS or its designee) to begin
preparation and coordination efforts
earlier. Therefore, in response to these
comments, we are modifying the
timeframe in § 156.480(c)(1) to require
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HHS to provide at least 30 calendar days
advance notice of its intent to conduct
an APTC, CSR, or user fee audit rather
than the proposed 15 calendar days.
Similarly, we are modifying the
timeframes in §§ 153.410(d)(1) and
153.620(c)(1) to require HHS to provide
at least 30 calendar days advance notice
of its intent to conduct an audit of a
reinsurance-eligible plan or a risk
adjustment covered plan, respectively,
rather than the proposed 15 calendar
days. As for the time allowed to provide
the initial audit submission, HHS will
continue to maintain the 30 calendar
day deadline. HHS believes that in order
to complete the audit process in a
timely manner and based on prior audit
experience, after giving issuers 30
calendars days advance notice of the
audit, which is 15 days longer than
initially proposed, an additional 30 days
to provide the initial data submission
for the audit is more than reasonable.
We note that as stated in
§§ 153.410(d)(2)(iv), 153.620(c)(2)(iv),
and 156.480(c)(2)(iv), we proposed and
are finalizing the flexibility for issuers
to seek extensions for reinsurance, risk
adjustment, and APTC, CSR, and user
fee audit-related requests from HHS
under §§ 153.410(d)(2)(ii) or (iii),
153.620(c)(2)(ii) or (iii), and
156.480(c)(2)(ii) or (iii), respectively, but
believe the 30 calendar day timeline to
provide the initial audit submission
strikes the appropriate balance and will
allow HHS to work with issuers to
ensure the proper data is provided and
the audit can be conducted and
completed more efficiently. We are also
maintaining the 30 calendar day
timeframe for issuers to respond to
preliminary audit findings.267 We
similarly believe that this timeframe
strikes the appropriate balance and
ensures these audits can be completed
more efficiently.
Additionally, in response to
comments suggesting a 45 calendar day
deadline for issuers to provide written
corrective action plans rather than the
proposed 30 calendar day deadline, we
will finalize a 45 calendar day
timeframe to submit a corrective action
plan if an audit results in the inclusion
of a finding in the final audit report,
rather than a 30 calendar day timeframe,
at § 153.410(d)(4)(i) for reinsurance
program audits, § 153.620(c)(4)(i) for
risk adjustment program audits, and
§ 156.480(c)(4)(i) for APTC, CSR, and
user fee audits. We are persuaded by
these comments and agree that issuers
would benefit from the extension of this
timeframe because the development of a
267 See 45 CFR 153.410(d)(3), 153.620(c)(3), and
156.480(c)(3).
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corrective action plan may require a
significant amount of coordination and
discussion between HHS, the state (if
applicable), and the issuer in order to
finalize the appropriate corrective
action(s) and plan for implementation.
Therefore, as finalized, the issuer must
provide a written corrective action plan
to HHS for approval within 45 calendar
days of the issuance of the final audit
report, rather than the proposed 30
calendar days, for those situations
where one or more findings are
included in the final audit report.268
HHS makes every effort to conduct
audits in an efficient and timely manner
and will continue to do so. The audit
proposals addressed in the proposed
rule and this final rule are aimed at
making the audit process more efficient
so that audits may be completed in a
shorter length of time. However, HHS is
flexible and willing to work with issuers
who keep us informed of their progress
but may need more time. Therefore, as
we proposed, we are also finalizing at
§ 153.410(d)(2)(iv) for reinsurance
program audits, § 153.620(c)(2)(iv) for
risk adjustment program audits and
§ 156.480(c)(2)(iv) for APTC, CSR, and
user fee audits that issuers may request
an extension to certain audit deadlines
by submitting a written request to HHS
within the applicable timeframe(s) 269
for reinsurance program audits, risk
adjustment program audits, and APTC,
CSR, and user fee audits. For all of these
audits, the written request would have
to detail the reasons for the extension
request and the good cause in support
of the request and must be submitted
within the applicable timeframe for
responding to the HHS request.
Comment: A few commenters asked
that HHS avoid audits during the annual
open enrollment period (OEP) to allow
issuers to focus their resources on
enrollment and other OEP activities.
Response: HHS agrees that issuers
should devote their resources to
enrollment during the OEP and will take
this request into consideration in
scheduling the start of future audits.
Because audits are an ongoing process
and the timeline for completion is not
always fixed, it may not be possible to
268 We also reiterate that an issuer, acting in good
faith, can submit an extension request if it finds
additional time is needed to respond to certain HHS
requests stemming from these audits. See 45 CFR
153.410(d)(2)(iv), 156.620(c)(2)(iv) and
156.480(c)(2)(iv).
269 As proposed and finalized, issuers may
request to extend the following timeframes: (1) For
reinsurance program audits, the timeframes under
45 CFR 153.410(d)(2)(ii) or (iii); (2) for risk
adjustment audits, the timeframes under 45 CFR
153.620(c)(2)(ii) or (iii); and (3) for APTC, CSR, and
user fee audits, the timeframes under 45 CFR
156.480(c)(2)(ii) or (iii).
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entirely avoid overlap between audit
activities and OEP, but HHS will work
with issuers to avoid situations where
audit activities could undermine or
otherwise negatively impact issuers’
ability to focus on enrollment during the
annual OEP. For example, we are
finalizing the proposal to permit issuers
to request an extension to certain audit
deadlines at §§ 153.410(d)(2)(iv),
153.620(c)(2)(iv), and 156.480(c)(2)(iv),
for audits of issuers of reinsuranceeligible plans, audits of issuers of risk
adjustment covered plans, and audits of
the APTC, CSR, and user fee programs,
respectively. We clarify that an issuer
who has made good faith efforts to
otherwise comply with HHS audit
requests could submit such an extension
request if it needed more time with
respect to completing its audit activities
under 45 CFR 153.410(d)(2)(ii) or (iii)
for reinsurance program audits, 45 CFR
153.620(c)(2)(ii) or (iii) for risk
adjustment program audits, and 45 CFR
156.480(c)(2)(ii) or (iii) for APTC, CSR,
and user fee audits, due to the overlap
with the annual OEP.
Comment: Some commenters asked
that HHS rely on existing audits rather
than adding new audits and audit
requirements.
Response: In response to these
comments, we clarify that HHS is not
adding new audit authority for
reinsurance-eligible plans, risk
adjustment covered plans, or APTC,
CSRs, and user fees. Rather, we are
expanding the existing authority to
codify more details about audit
activities to set clear expectations,
facilitate compliance and enforcement,
protect federal funds, and maintain
program integrity. The standards being
codified comprise best practices and
procedures that HHS has established in
audit entrance conferences and
incorporates lessons learned from audits
of the reinsurance and CSR programs for
the 2014 benefit year, and audits of the
APTC program for the 2014 through
2017 benefit years. HHS’s audit
regulations in these areas were finalized
in earlier rulemakings.270 We are,
however, finalizing new authority to
permit HHS to conduct compliance
reviews to ensure compliance with
applicable reinsurance, risk adjustment,
and federal APTC, CSR, and user fee
standards. As explained elsewhere in
this rule and in the proposed rule, we
believe this additional authority related
to compliance reviews is necessary and
appropriate in order to provide HHS a
mechanism to address situations in
which a systematic error or issue is
270 See, for example, 78 FR at 65077–65078; 79 FR
at 13770–13771 and 13781–13782.
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24247
identified during the random and
targeted auditing of a sample of QHP
issuers, and HHS suspects similarly
situated issuers may have experienced
the same systematic error or issue but
were not selected for audit in the year
in question.
Comment: A few commenters noted
that the proposed compliance reviews
would place an increased burden on
states and issuers.
Response: We generally disagree that
the proposed compliance review
proposals would place an increased
burned on states. Of particular note,
these proposals, which we are finalizing
in the introductory language to
§§ 153.410(d), 153.620(c), and
156.480(c), involve situations where
HHS—rather than the states—would
conduct a review to confirm an issuer’s
compliance with the applicable federal
program standards and requirements.
While there may be some increased
burden associated with coordination
between HHS and the states, any such
increased burden on states should be
minimal. We further note that the
purpose of the proposed HHS
compliance reviews, as stated in the
preamble section above and in the
proposed rule, is to confirm QHP issuer
compliance with the applicable federal
reinsurance, risk adjustment, or APTC,
CSR, and user fee standards. These
compliance reviews are intended to be
less burdensome than audits of
compliance with requirements under
the applicable programs, and may
further be targeted at a specific potential
error and conducted on an ad hoc
basis.271 For example, HHS may require
an issuer to submit data pertaining to
specific data submissions. We believe
this flexibility is necessary and
appropriate to provide HHS a
mechanism to address situations in
which a systematic error or issue is
identified during the random and
targeted auditing of a sample of QHP
issuers, and HHS suspects similarly
situated issuers may have experienced
the same systematic error or issue but
were not selected for audit in the year
in question. HHS intends to conduct
compliance reviews sparingly and will
provide advance notice of a compliance
review to the issuer being reviewed and
the applicable state regulator(s), State
Exchange, or SBE–FP. Therefore, while
we acknowledge that there will be some
burden on issuers associated with these
compliance reviews, we believe the
benefits for all stakeholders associated
with finalizing this additional oversight
tool outweighs such burdens as it allows
for a more targeted approach to ensure
271 See
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compliance with applicable federal
requirements.
Comment: One commenter asked that
HHS only conduct CSR audits of issuers
for the time during which HHS made
advance CSR payments; that is, the 2014
benefit year through September of the
2017 benefit year.
Response: At this time, HHS is
beginning audits of the 2015 and 2016
benefit year of CSR payments. HHS has
not yet made a determination as to
whether or not CSR audits will be
conducted for the 2017 benefit year and
beyond.
Comment: One commenter supported
HHS recouping up to 100 percent of
applicable APTC or CSR payments.
Another commenter stated that HHS
should use the normal debt collection
process of netting and then invoicing
issuers to collect any remaining debt
amount owed as a result of audit
findings and that the proposed 100
percent recoupment of APTC, CSR,
reinsurance, and risk adjustment
payments was unreasonable.
Response: If an issuer is not able to
adequately substantiate the APTC, CSR,
reinsurance, or risk adjustment
payments it received from HHS during
the course of an audit, HHS has an
obligation to recoup federal funds and
protect the integrity of these programs.
We further note that issuers have
separate record retention requirements
that must be met and the documents
required to be maintained can be
utilized to substantiate payment.272
Therefore, it is appropriate and
necessary for HHS to recoup any APTC,
CSR, reinsurance, or risk adjustment
payments made to issuers that were not
adequately substantiated by the issuer
during the course of an audit. This may
include up to 100 percent recoupment
if the issuer is entirely unable to
substantiate the payments it received
that are the subject of the audit.
However, we anticipate that this
situation would be extremely rare, and
HHS would work with the issuer to
provide reasonable opportunities for the
issuer to substantiate the payments it
received under these programs. As with
all debt collection for the ACA financial
programs, HHS will follow the process
set forth in § 156.1215 to collect any
amounts owed as a result of an audit
under 45 CFR 153.410(d), 153.620(c)
and 156.480(c). We affirm that we
therefore intend to leverage the existing
netting and debt collection process to
recoup monies owed due to a finding as
the result of these audits. That is, to
recoup an amount identified as owed as
272 See §§ 153.410(c), 153.620(b), 156.480(a), and
156.705.
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a result of an audit under 45 CFR
153.410(d), 156.620(c), and 156.480(c),
we will first net using the process set
forth in 45 CFR 156.1215, and will then
invoice issuers for the remaining debt (if
any is owed).
Comment: A couple of commenters
requested more information on the
proposed updates to audits and
compliance reviews of APTC, CSRs, and
user fees under § 156.480(c) and, more
specifically, the proposed inclusion of
user fees as part of the audit framework
in this regulation. One commenter
wanted more information on the user
fee audits referred to in this proposal.
Another commenter wanted HHS to
publish audit protocols with
information on audit requirements, file
layouts, submission requirements, and
source documentation for the
§ 156.480(c) audits.
Response: As stated in the preamble
section above, HHS currently reviews
compliance with applicable federal user
fee standards in 45 CFR 156.50 when
conducting APTC audits, because the
same data is used to audit both APTC
and user fees. Audits of APTC and user
fees are conducted simultaneously using
the same data; as such, there is minimal
increased burden as a result of the
amendments being finalized in this rule
to consolidate the user fee audit
standards alongside the APTC and CSR
audit standards in § 156.480(c).
We further note that HHS currently
provides information on audit
requirements, file layouts, submission
requirements, and source
documentation as part of the applicable
audit entrance conference. Issuers
selected for audit receive this
information at the entrance conference,
which they are required to attend, and
also receive further details on these
requirements from HHS via the audit
contractor. Guidance documents related
to APTC audit requirements are also
available on REGTAP.273
After consideration of the comments
on the audit proposals in §§ 153.410(d),
153.630(c), and 156.480(c), we are
finalizing these provisions as proposed,
with slight modifications to certain
audit timelines in response to comments
stating that issuers need more time
during audits to provide complete and
accurate data and to provide written
corrective action plans. HHS will
provide at least 30 calendar days
advance notice of its intent to conduct
a reinsurance, risk adjustment, APTC,
CSR, or user fee audit, rather than the
273 See, for example, ‘‘CMS Issuer Audits of the
Advance Payments of the Premium Tax Credit,’’
April 1, 2019. Available at (login required): https://
www.regtap.info/uploads/library/CMS_PPFMG_EA_
CMSAPTCAudits_5CR_040119.pdf.
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proposed 15 calendar days. If an audit
results in the inclusion of a finding in
the final audit report, the issuer must
provide a written corrective action plan
to HHS for approval within 45 calendar
days of the issuance of the final audit
report, rather than the proposed 30
calendar days.
We also clarify that we will recoup
monies owed due to a finding as the
result of a reinsurance, risk adjustment,
APTC, CSR, or user fee audit using the
same method with which we collect all
ACA financial program debts. That is,
we will first net using the process set
forth in 45 CFR 156.1215, and we will
then invoice issuers for the remaining
debt.
7. Subpart I—Enforcement Remedies in
Federally-Facilitated Exchanges;
Available Remedies; Scope. (§ 156.800)
We proposed to rename Subpart I to
‘‘Enforcement Remedies in the
Exchanges,’’ and to make other
amendments to clarify that HHS has the
ability to impose CMPs when it is
enforcing the applicable federal
requirements in part 156, subpart E and
45 CFR 156.50 for user fees, regardless
of whether the Exchange is established
and operated by a state (including a
regional Exchange or subsidiary
exchange) or by HHS.274 As explained
in prior rulemaking, in states where
there is a State Exchange, the State
Exchange has primary enforcement
authority over QHP issuers participating
in the Exchange and ensuring
compliance with the applicable federal
APTC, CSR, and user fee standards.275
However, consistent with the framework
established in section 1321(c)(2) of the
ACA, HHS has authority to step in to
enforce requirements related to the
operation of Exchanges and the offering
of QHPs through Exchanges if a state
fails to do so.276 277 As such, in the case
of a determination by the Secretary that
a State Exchange or SBE–FP has failed
to enforce or substantially enforce a
federal requirement (or requirements)
related to QHP issuer participation in
the individual market Exchange, HHS
has authority to step in and enforce
274 Exchange models include State Exchanges,
SBE–FPs, and FFEs. HHS does not intend to use
this authority to impose CMPs related to user fee
standards applicable to QHP issuer participating in
State Exchanges.
275 See the proposed Program Integrity Rule, 78
FR 37058. Also see 78 FR 65077 and 65078.
276 Ibid.
277 Section 1321(c)(2) of the ACA provides that
the enforcement framework established in section
2736(b), which was renumbered 2723(b), of the PHS
Act shall apply to the enforcement of requirements
established in section 1321(a)(1).
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QHP issuer compliance with the
requirement(s).
Through its cross-reference to section
2723(b) of the PHS Act,278 section
1321(c)(2) of the ACA authorizes the
Secretary to impose CMPs for noncompliance with applicable federal
Exchange requirements. In the proposed
rule, we proposed to codify HHS
authority to impose CMPs for noncompliance by QHP issuers that
participate or have participated in a
State Exchange or SBE–FP in situations
where HHS steps in to enforce certain
requirements. Specifically, this proposal
is focused on ensuring compliance with
the standards for APTC, CSR payments,
and user fees captured in part 156,
subpart E and 45 CFR 156.50. Under
this proposal, we would apply the bases
and follow the processes for imposing
CMPs as set forth in § 156.805, would
send a notice of non-compliance as set
forth in § 156.806, and would extend the
administrative review and appeal
process set forth in § 156.901, et seq. to
provide a forum for QHP issuers in State
Exchanges and SBE–FPs to appeal the
imposition of CMPs by HHS. We did not
propose to extend the authority to
decertify a QHP under § 156.800(a)(2)
for non-compliance by QHP issuers in
State Exchanges or SBE–FPs; QHP decertification in State Exchanges or SBE–
FPs would remain an available
enforcement tool for the applicable
Exchange. We explained that this
proposal is not intended to duplicate
state enforcement efforts, as HHS
generally depends on State Exchanges
and SBE–FPs to enforce federal
requirements applicable to QHPs and
QHP issuers participating in the state’s
individual market Exchange. The
proposed amendments are instead
intended to establish an enforcement
framework to capture situations where
HHS is responsible for enforcement if a
State Exchange or SBE–FP fails to do so
and is focused on the federal APTC,
CSR, and user fee requirements in order
to protect federal funds.
We also explained that we expected
that states that established a State
Exchange or SBE–FP will enforce all
applicable federal requirements
applicable to QHPs and QHP issuers
participating in Exchanges, including
the applicable APTC, CSR, and user fee
standards captured in part 156, subpart
E and 45 CFR 156.50. However, to
address situations where a State
Exchange or SBE–FP fails to enforce
278 While the text of section 1321(c)(2) of the ACA
cites to section 2736(b) of the PHS Act, this PHS
Act provision was renumbered a second time to
section 2723(b) as part of the technical and
conforming amendments in the ACA. See section
1562(c)(13)(C) of the ACA.
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these federal Exchange requirements,
consistent with the framework
established in section 2723(b) of the
PHS Act, we proposed that if HHS
determines that a State Exchange or
SBE–FP lacks authority or has otherwise
failed to substantially enforce the
requirements captured in part 156,
subpart E or 45 CFR 156.50, HHS would
step in to enforce these requirements
with respect to QHP issuers
participating in the State Exchange or
SBE–FP. Once this determination is
made, HHS would become responsible
for enforcement of these provisions and
would take appropriate action to ensure
QHP issuer compliance with the
applicable requirement(s),279 and may
impose CMPs, if appropriate. To more
clearly capture HHS’s authority to
impose CMPs in these situations, we
proposed to amend the introductory
sentence to § 156.800(a) to replace the
current references to the ‘‘Federallyfacilitated Exchange’’ with references to
‘‘an Exchange.’’ We also proposed to
amend § 156.800(b) to remove the word
‘‘only’’ from the sentence describing the
scope of HHS sanctions with respect to
QHP issuers participating in FFEs and
to add a new second sentence that
affirms HHS authority to impose CMPs
for non-compliance with the applicable
requirements in part 156, subpart E and
45 CFR 156.50 by QHP issuers
participating in State Exchanges and
SBE–FPs.
We also noted that we intend to
continue our collaborative enforcement
approach and would coordinate our
actions with state efforts to avoid
duplication and to streamline oversight
of the administration of APTC, CSRs,
and user fees. We solicited comments
for how HHS can collaborate with State
Exchanges and SBE–FPs to proactively
address non-compliance with applicable
federal requirements and share
compliance tools regarding APTC, CSRs,
and user fees. We are finalizing the
proposals to (1) amend the introductory
sentence to § 156.800(a) to replace the
current references to the ‘‘Federallyfacilitated Exchange’’ with references to
‘‘an Exchange,’’ and (2) amend
§ 156.800(b) to remove the word ‘‘only’’
from the sentence describing the scope
of HHS sanctions with respect to QHP
issuers participating in FFEs and to add
a new sentence that affirms HHS
279 As detailed earlier, when HHS is responsible
for enforcement of these Exchange requirements, we
are finalizing the proposal to extend authority for
HHS to pursue a compliance review under
§ 156.480(c), consistent with the framework
establish in § 156.715, to confirm compliance with
federal APTC, CSR, and user fee requirements by
a QHP issuer participating in a State Exchange or
SBE–FP.
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24249
authority to impose CMPs for noncompliance with the applicable
requirements in part 156, subpart E and
45 CFR 156.50 by QHP issuers
participating in State Exchanges and
SBE–FPs.
We received public comments on the
proposed updates to Subpart I—
Enforcement Remedies in FederallyFacilitated Exchanges; Available
remedies; Scope (§ 156.800). The
comments we received to this section
were also made to the sections regarding
the application of requirements to
issuers in State Exchanges and SBE–FPs
(§ 156.480), HHS enforcement of the
applicable federal APTC, CSR, and user
fee standards if a State Exchange or
SBE–FP is not enforcing or fails to
substantially enforce one or more of
these requirements (§ 156.480(c)(6)), and
the bases and process for imposing
CMPs in the Exchanges (§ 156.805), and
we responded to all of these parallel
comments in the bases and process for
imposing CMPs in the Exchanges
(§ 156.805) preamble section below.
After consideration of the relevant
comments, we are finalizing the
amendments to § 156.800 as proposed.
As detailed further in the below section
on the bases and process for imposing
CMPs in the FFEs, we also clarify that
we intend to leverage this authority to
pursue enforcement and the imposition
of CMPs in State Exchange and SBE–FP
states where HHS is responsible for
enforcement in a targeted manner with
a focus on egregious or repeated
occurrences of QHP issuer
noncompliance with the applicable
APTC, CSR, and user fee standards that
are discovered as the result of audits
and the State Exchange or SBE–FP fails
to substantially enforce the applicable
standard(s). We further note that we did
not propose and are not finalizing any
substantive changes related to the
enforcement framework applicable to
QHP issuers participating in FFEs. The
below section on bases and process for
imposing CMPs in the Exchanges
discusses this point in further detail.
8. Bases and Process for Imposing Civil
Money Penalties in Federally-Facilitated
Exchanges (§ 156.805)
We also proposed to amend § 156.805
to more clearly reflect HHS’s authority
to impose CMPs due to non-compliance
with respect to the applicable federal
APTC, CSR, and user fee standards
against a QHP issuer participating in a
State Exchange or SBE–FP. Under this
proposal, we would use the same bases
and process currently captured in
§ 156.805 for imposing CMPs on QHP
issuers participating in an FFE. More
specifically, in § 156.805, we proposed
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renaming this section to ‘‘Bases and
process for imposing CMPs in the
Exchanges,’’ and also proposed to
amend the introductory language in
§ 156.805(a) to use the words ‘‘an
Exchange,’’ instead of ‘‘Federallyfacilitated Exchange,’’ to more clearly
capture HHS’s authority to impose
CMPs on QHP issuers participating in
State Exchanges and SBE–FPs who fail
to comply with the applicable
requirements in part 156, subpart E or
§ 156.50 in situations where HHS is
responsible for enforcement. We
similarly proposed to modify
§ 156.805(a)(5)(i) where the reference to
‘‘HHS’’ currently appears to also
incorporate a reference to ‘‘an
Exchange’’ to clarify that all QHP
issuers must avoid intentionally or
recklessly misrepresenting or falsifying
APTC, CSR, and user fee information to
both HHS and Exchanges, regardless of
whether HHS or a state operates the
Exchange. We proposed this
amendment to clarify that HHS has
authority to impose CMPs against QHP
issuers participating in State Exchanges
and SBE–FPs who misrepresent or
falsify APTC, CSR, and user fee
information provided to HHS in
situations where HHS is responsible for
enforcement of the requirements in part
156, subpart E or § 156.50, including
when HHS is performing an audit or
compliance review under § 156.480(c).
If HHS seeks to use this authority to
impose CMPs against a QHP issuer
participating in a State Exchange or
SBE–FP, we proposed the issuer would
have the opportunity to appeal the
CMPs following the existing framework
for administrative hearings in § 156.901,
et seq.
Finally, we proposed to add a new
paragraph (f) to § 156.805 to capture in
this regulation details on the
circumstances requiring HHS
enforcement of the applicable
requirements in part 156, subpart E and
§ 156.50. Consistent with the framework
established in section 2723(b) of the
PHS Act and section 1321(c) of the
ACA, we propose in new § 156.805(f)(1)
that HHS’s authority to enforce in these
situations would be limited to situations
where the State Exchange or SBE–FP
notifies HHS that it is not enforcing
these requirements or if HHS makes a
determination using the process set
forth at 45 CFR 150.201, et seq. that a
State Exchange or SBE–FP is failing to
substantially enforce these
requirements.280 In new proposed
§ 156.805(f)(2), we proposed to affirm
that when HHS is responsible for
enforcement in these circumstances,
280 See,
for example, 45 CFR 150.203.
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HHS may impose CMPs on an issuer in
the State Exchange or SBE–FP, in
accordance with the bases and process
set forth in this section. As noted in the
proposed rule, this includes the ability
for a QHP issuer in a State Exchange or
SBE–FP to appeal the imposition of
CMPs by HHS following the existing
framework for administrative hearings
in § 156.901, et seq.
We proposed that HHS would apply
the same process HHS uses to determine
when a state is failing to substantially
enforce PHS Act requirements in
determining whether a State Exchange
or SBE–FP is substantially enforcing the
applicable federal APTC, CSR, and user
fee standards. More specifically, we
proposed that if an audit of a QHP
issuer in a State Exchange or SBE–FP
demonstrates the State Exchange or
SBE–FP’s failure to enforce the
applicable federal APTC, CSR, and user
fee standards, HHS would investigate
the State Exchange or SBE–FP’s
enforcement and follow the process set
forth in 45 CFR 150.207 if necessary. We
proposed that if HHS receives or obtains
information (including information
discovered through an audit) that a State
Exchange or SBE–FP may not be
enforcing the applicable requirements in
part 156, subpart E, or 45 CFR 156.50,
HHS may initiate the process described
in 45 CFR 150.207 to determine whether
the State Exchange or SBE–FP is failing
to substantially enforce these
requirements. Mirroring the process set
forth in 45 CFR 150.207 for making
determinations regarding substantial
enforcement of PHS Act requirements,
HHS would follow the procedures in
§§ 150.209 through 150.219 to
determine if a State Exchange or SBE–
FP is failing to enforce one or more of
the applicable requirements in part 156,
subpart E or 45 CFR 156.50. If HHS
believes there is a reasonable question
whether there has been a failure to
enforce one or more of the applicable
requirements in part 156, subpart E or
45 CFR 156.50, HHS would send a
notice, as described in 45 CFR 150.213,
identifying the applicable
requirement(s) that allegedly have not
been substantially enforced to the
proper State Exchange or SBE–FP
officials using the process outlined in 45
CFR 150.211. We proposed that,
following the process described in 45
CFR 150.215, HHS may extend, for good
cause, the time the State Exchange or
SBE–FP has for responding to the
notice, such as if there is an agreement
between HHS and the State Exchange or
SBE–FP that there should be a public
hearing on the State Exchange or SBE–
FP’s enforcement, or evidence that the
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State Exchange or SBE–FP is
undertaking expedited enforcement
activities. Using the process described
in 45 CFR 150.217, if at the end of the
extension period HHS determines that
the State Exchange or SBE–FP has not
established to HHS’s satisfaction that it
is substantially enforcing the applicable
requirements, we proposed that HHS
would consult with the appropriate
State Exchange or SBE–FP officials,
notify the State Exchange or SBE–FP of
its preliminary determination that the
State Exchange or SBE–FP has failed to
substantially enforce the requirements
and that the failure is continuing, and
permit the State Exchange or SBE–FP a
reasonable opportunity to show
evidence of substantial enforcement. If,
after providing notice and a reasonable
opportunity for the State Exchange or
SBE–FP to show that it has corrected
any failure to substantially enforce, HHS
finds that the failure to substantially
enforce has not been corrected, HHS
would notify the State Exchange or
SBE–FP of its final determination using
the process described in 45 CFR
150.219. Therefore, we proposed that
after a determination that a State
Exchange or SBE–FP is not or cannot
substantially enforce the applicable
requirements in part 156, subpart E or
§ 156.50, HHS could impose CMPs on
issuers in the State Exchange or SBE–FP
if there is cause for such imposition.
HHS would also provide a notice of
non-compliance, consistent with
§ 156.806, to QHP issuers in State
Exchanges or SBE–FPs prior to
imposing CMPs.
We explained that we sought to work
collaboratively with State Exchanges
and SBE–FPs for any topics of mutual
concern and oversight activities where
possible. We also sought comment to
this proposal, the proposed updates to
§ 156.805, and ways in which HHS and
state authorities can efficiently and
effectively enforce federal standards
related to APTC, CSRs, and user fees.
We also proposed that if the changes
to §§ 156.800 and 156.805 were
finalized as proposed, we would also
amend § 156.903 such that an
administrative law judge’s authority
also extends to CMPs imposed against
QHP issuers in State Exchanges and
SBE–FPs under § 156.805. Specifically,
we proposed to amend § 156.903(a) to
extend the provision to also include
State Exchanges and SBE–FPs so that
the ALJ has the authority, including all
the authority conferred by the
Administrative Procedure Act, to adopt
whatever procedures may be necessary
or proper to carry out in an efficient and
effective manner the ALJ’s duty to
provide a fair and impartial hearing on
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the record and to issue an initial
decision concerning HHS’s imposition
of a CMP on a QHP offered in a FFE,
State Exchange, or SBE–FP.
We received public comments on the
proposed updates to bases and process
for imposing civil money penalties in
Federally-facilitated Exchanges
(§ 156.805). The majority of the
comments we received to this section
were also made to the proposals
regarding HHS enforcement of the
applicable federal APTC, CSR, and user
fee standards if a State Exchange or
SBE–FP is not enforcing or fails to
substantially enforce one or more of
these requirements (§ 156.480(c)(6)), the
application of requirements to issuers in
State Exchanges and SBE–FPs
(§ 156.480), and the enforcement
remedies in the Exchanges, available
remedies, and scope (§ 156.800). The
following is a summary of these
comments and our responses.
Comment: One commenter supported
the proposed updates to the application
of requirements to issuers in State
Exchanges and SBE–FPs (§ 156.480(c)),
the enforcement remedies in the
Exchanges, available remedies, and
scope (§ 156.800), and the bases and
process for imposing CMPs in the
Exchanges and the accompanying
updates to § 156.805. Several
commenters opposed the proposal and
asked for more information on the
process by which HHS would determine
that a State Exchange or SBE–FP is
failing to substantially enforce the
applicable requirements. A few
commenters asked for more information
on the types of issues that would result
in HHS commencing the process to
determine whether a State Exchange or
SBE–FP is failing to substantially
enforce the applicable federal
requirements.
Response: We anticipate that an
imposition of a CMP by HHS on QHP
issuers in State Exchanges and SBE–FPs
through these proposed updates should
be very rare, as we have not yet imposed
a CMP on any QHP issuer in any of the
APTC, CSR, user fee, reinsurance, or
risk adjustment audits we have
conducted to date. We also anticipate
that it would be rare for an issuer to
repeatedly fail to comply with the
applicable federal APTC, CSR, and user
fee standards, as well as for the State
Exchange or SBE–FP to fail to
substantially enforce these standards
after being notified by HHS of such
potential non-compliance as the result
of an audit. We reiterate our
commitment to working with issuers,
State Exchanges, and SBE–FPs to
evaluate issuer non-compliance with the
applicable federal APTC, CSR, and user
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fee standards and intend to resort to
leveraging the authority for HHS to step
in and take the appropriate enforcement
action in State Exchange and SBE–FP
states, including imposing CMPs, in
very limited situations where we have
evidence or information suggesting that
the state is not enforcing and QHP
issuers in that state are not complying
with the applicable federal standard(s)
for APTC, CSRs, and/or user fees. We
did not propose and are not finalizing
any substantive changes related to the
enforcement framework applicable to
QHP issuers participating in FFEs. The
purpose of these proposals is to codify
the authority for HHS to step in and
enforce the applicable standards,
including the ability to impose CMPs, if
necessary should the situation arise. We
emphasize that the amendments to
§§ 156.800 and 156.805 are targeted to
provide HHS authority to step in when
there are egregious or repeated
occurrences of QHP issuer noncompliance with the applicable APTC,
CSR, and user fee standards that are
discovered as the result of multiple
audits and the State Exchange or SBE–
FP is also failing to substantially enforce
the applicable standard(s). We therefore
anticipate such situations will be rare.
In response to comments, we offer the
following example of a situation in
which HHS could begin the process of
making a determination that a State
Exchange or SBE–FP is failing to
substantially enforce the applicable
APTC, CSR, and user fee requirements.
If HHS discovers, as the result of an
audit, that an issuer in a State Exchange
or SBE–FP failed to comply with a
federal APTC requirement, it would
inform the State Exchange or SBE–FP
and the issuer of this finding and set
forth required corrective actions for the
issuer to take. If HHS then discovers in
the following year’s audit of this same
issuer that the issuer has not taken the
corrective actions and is continuing to
fail to comply with the requirement,
HHS would again inform the State
Exchange or SBE–FP and the issuer of
this repeated finding, and ask the State
Exchange or SBE–FP to take the
appropriate enforcement action against
the issuer for noncompliance. If the
State Exchange or SBE–FP repeatedly
fails to enforce the applicable
requirement across multiple benefit
years and the issuer continues to have
an audit finding related to this noncompliance across multiple benefit
years, HHS would begin the process of
making a determination that the State
Exchange or SBE–FP is failing to
substantially enforce that requirement.
We reiterate our commitment to
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24251
working with State Exchanges and SBE–
FPs, and we confirm that this policy is
narrowly targeted at egregious or
repeated occurrences of QHP issuer
non-compliance with the applicable
APTC, CSR, and user fee standards
evaluated through audits of these
programs. We also reiterate that the
above is an illustrative example.
Consistent with the statutory framework
outlined in section 1321(c) of the ACA,
and as reflected in the amendments we
are finalizing to §§ 156.800 and 156.805,
HHS may step in to enforce applicable
federal APTC, CSR, and user fee
standards in other situations where
there is evidence or information
suggesting that the State Exchange or
SBE–FP is failing to do so.281 Once HHS
makes a determination that a State
Exchange or SBE–FP is failing to
substantially enforce the applicable
federal requirements, HHS may pursue
CMPs against issuers for noncompliance under §§ 156.800 and
156.805 in appropriate situations.
The process by which HHS proposed
and is finalizing to determine whether
a State Exchange or SBE–FP is failing to
substantially enforce the applicable
APTC, CSR, and user fee requirements
mirrors the process set forth in 45 CFR
150.207 for making determinations
regarding a state’s substantial
enforcement of PHS Act requirements.
As detailed above, the process involves
HHS sending notice to the proper State
Exchange or SBE–FP officials; permits
extending the time the State Exchange
or SBE–FP has for responding to the
notice; requires consulting with the
appropriate State Exchange or SBE–FP
officials; and mandates that HHS notify
the State Exchange or SBE–FP of HHS’s
preliminary determination that the State
Exchange or SBE–FP has failed to
substantially enforce the requirement(s)
and that the failure is continuing. Only
after HHS goes through the process and
makes a determination that the State
Exchange or SBE–FP is substantially
non-enforcing applicable APTC, CSR,
and user fee requirements, and the State
Exchange or SBE–FP fails to address the
identified concerns, would HHS have
authority to begin the process to impose
a CMP on a QHP issuer in a State
Exchange or SBE–FP state pursuant to
45 CFR 156.805 for their noncompliance.
Comment: Numerous commenters
stated that this proposal would
improperly usurp the role of states in
281 Consistent with the statute, HHS may also
leverage this authority in situations where there is
evidence or information suggesting the State
Exchange or SBE–FP is failing to substantially
enforce other federal Exchange requirements.
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enforcing these requirements in their
own Exchanges.
Response: We disagree that this
approach improperly usurps the role of
states in enforcing requirements within
their own Exchanges, as the process
outlined above provides ample
opportunity for State Exchanges and
SBE–FPs to take action and demonstrate
substantial enforcement at multiple
points in the process before HHS
assumes enforcement authority.
Additionally, pursuant to section
1321(c) of the ACA, HHS has the
statutory authority and responsibility to
enforce federal requirements when the
State Exchange or SBE–FP fails to do so
and is instructed to follow the
framework set forth in section 2723(b) of
the PHS Act when doing so. This
authority necessarily includes the
ability to impose CMPs on issuers for
non-compliance with APTC, CSR, or
user fee requirements in states where
HHS is responsible for enforcement. As
explained above and in the proposed
rule, our experience with APTC, CSR,
and user fee audits led us to propose
these amendments to ensure a
framework is in place for HHS to
address non-compliance and protect
federal funds when a State Exchange or
SBE–FP fails to substantially enforce
federal standards and QHP issuers in
those states are failing to comply with
applicable federal APTC, CSR, and user
fee requirements. We again reiterate our
commitment to working with State
Exchanges and SBE–FPs to address noncompliance by QHP issuers operating in
their respective states with applicable
federal APTC, CSR, and user fee
standards. As noted earlier, the purpose
of these proposals is to codify in
regulation HHS’s authority to step in
and enforce federal requirements and
protect federal funds when the
applicable state authority fails to do so.
Further, we also note that we intend to
focus our enforcement efforts on
egregious or repeated occurrences of
QHP issuer non-compliance with the
applicable APTC, CSR, and user fee
standards evaluated through an audit of
these programs.
Comment: Several commenters
emphasized that HHS should work with
State Exchanges and SBE–FPs to enforce
the applicable federal requirements.
One commenter requested that HHS
monitor State Exchange and SBE–FP
remediation efforts to address issuer
non-compliance before imposing CMPs.
Response: HHS will work with State
Exchanges and SBE–FPs to enforce the
applicable requirements, as set forth
above. We intend for audits, compliance
reviews, and enforcement activities to
be collaborative processes with states,
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State Exchanges, and SBE–FPs, where
possible. For instance, HHS will
consider the recommendations for how
to leverage existing audit activities that
HHS requires State Exchanges to
conduct under § 155.1200 to collaborate
with State Exchanges on identifying
instances of issuer non-compliance or
monitoring State Exchange or issuer
remediation activities. HHS will follow
the process for determining that a State
Exchange or SBE–FP is failing to enforce
or failing to substantially enforce these
requirements, consistent with the
framework set forth in §§ 150.209
through 150.219. As described above,
this process follows a collaborative
approach and permits HHS to monitor
State Exchange and SBE–FP
remediation efforts as the Exchange
works to address issues identified by
HHS. It also provides ample opportunity
for the State Exchange or SBE–FP to
show that it has corrected (or is working
to correct) any failure to substantially
enforce before HHS makes a final
determination about whether a State
Exchange or SBE–FP is failing to enforce
one or more of the applicable
requirements in part 156, subpart E or
45 CFR 156.50. It is only after HHS goes
through the process and makes a
determination that the State Exchange
or SBE–FP is substantially failing to
enforce these requirements, and the
State Exchange or SBE–FP fails to
address the identified concerns, that
HHS would have authority to begin the
process to impose a CMP on a QHP
issuer in a State Exchange or SBE–FP
state pursuant to 45 CFR 156.805 for
their non-compliance.282 As detailed in
the above illustrative example, we
intend to work closely with the
applicable state authorities and monitor
state remediation efforts to address
issuer non-compliance before HHS
starts the process to step in to enforce
the applicable federal requirements or
impose CMPs.
Comment: One commenter requested
that we link the proposed audit
provisions for the APTC, CSR and user
fee programs and HHS’s authority to
recoup payments to the regulations
codified in 45 CFR part 150 to more
directly link this recoupment authority
to the PHS Act.
Response: Consistent with the
authority in section 1321(c) of the ACA,
HHS proposed and is finalizing the
proposals to establish and clarify its
authority to audit and conduct
282 If a State Exchange or SBE–FP notifies HHS
that it has not enacted legislation to enforce or that
it is not otherwise enforcing the applicable federal
requirement(s), HHS may step in to enforce the
requirement(s) in that state at that time. See 45 CFR
150.203(a).
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compliance reviews of all QHP issuers
who receive APTC or CSRs or pay user
fees under § 156.480(c) regardless of
Exchange type. We are also finalizing
provisions that reference the process in
45 CFR 150.201, et seq., so HHS can
leverage the existing, known process in
situations where HHS has evidence or
other information that the State
Exchange or SBE–FP is failing to
substantially enforce the applicable
requirements found at 45 CFR 156,
subpart E for APTC and CSRs and 45
CFR 156.50 for user fees. We believe
this is an appropriate and adequate link
of the audit requirements in § 156.480(c)
to the regulations codified in 45 CFR
part 150, which implement section
2723(b) of the PHS Act.283 We confirm
that our current intention is to apply
this new framework to situations
involving egregious or repeated
occurrences of QHP issuer noncompliance with the applicable APTC,
CSR, and user fee standards evaluated
through the audits of these programs.
However, consistent with the statutory
framework outlined in section 1321(c)
of the ACA, and as reflected in the
amendments we are finalizing to
§§ 156.800 and 156.805, HHS may step
in to enforce applicable federal APTC,
CSR, and user fee standards in
situations where there is evidence or
information suggesting that the State
Exchange or SBE–FP is failing to do
so.284 As detailed above, we believe it
is appropriate and necessary for HHS to
recoup amounts that were not
adequately substantiated by the issuer
during the course of an audit.285
After consideration of the comments
received on these proposals, we are
finalizing the proposed amendments to
§ 156.805 to describe the bases and
process by which HHS may determine
that a State Exchange or SBE–FP is
failing to substantially enforce the
applicable federal APTC, CSR, and user
fee standards and subsequently impose
CMPs on these State Exchange or SBE–
FP issuers as proposed.
283 While the APTC, CSR, and user fee statutory
provisions are codified outside of the PHS Act,
section 1321(c) of the ACA applies the PHS Act
enforcement framework to the enforcement of the
federal Exchange requirements.
284 Consistent with the statute, HHS may also
leverage this authority in situations where there is
evidence or information suggesting the State
Exchange or SBE–FP is failing to substantially
enforce other federal Exchange requirements.
285 Issuers have separate record retention
requirements that must be met and the documents
required to be maintained can be utilized to
substantiate payment. See §§ 153.410(c), 153.620(b),
156.480(a), and 156.705.
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9. Subpart J—Administrative Review of
QHP Issuer Sanctions (§§ 156.901,
156.927, 156.931, 156.947)
We proposed to change the title to
subpart J, removing the reference to ‘‘in
Federally-Facilitated Exchanges’’ to
make clear it applies to QHP issuers
participating in any Exchange type to
align with accompanying proposed
changes outlined above to §§ 156.800
and 156.805. We also proposed several
procedural changes to provisions in
subpart J of part 156 related to
administrative hearings consistent with
the amendments discussed in the
preamble to part 150. These proposed
procedural changes are intended to
align with the Departmental Appeals
Board’s current practices for
administrative hearings to appeal CMPs.
Specifically, we proposed changes that
would remove requirements to file
submissions in triplicate and instead
require electronic filing. This change is
reflected in the proposed amendments
to the definition of ‘‘Filing date’’ in
§ 156.901, to the introductory text in
§ 156.927(a), and to the service of
submission requirements captured in
paragraph (b). We also proposed to
allow for the option of video
conferencing as a form of administrative
hearing by amending the definition of
‘‘Hearing’’ in § 156.901 and to the
requirements outlined in § 156.919(a)
related to the forms for the hearing,
§ 156.941(e) related to prehearing
conferences, and § 156.947(a) related to
the record of the hearing. Finally, we
proposed to update § 156.947 to allow
the ALJ to communicate the next steps
for a hearing in either the
acknowledgement of a request for
hearing or on a later date. We sought
comment on these proposals.
We received the same public
comments on the proposed updates to
Subpart J—Administrative Review of
QHP Issuer Sanctions (§§ 156.901,
156.927, 156.931, 156.947) and the
parallel proposed updates to Part 150,
Administrative Hearings, for the parallel
amendments made to reflect the
Departmental Appeals Board’s current
practices for administrative hearings to
appeal CMPs. We summarized and
responded to these comments in the
above preamble section on Part 150
Administrative Hearings. We did not
receive comments on the proposed
change to the title to subpart J, removing
the reference to ‘‘in FederallyFacilitated Exchanges’’. After
consideration of the comments on the
proposed amendments to §§ 156.901,
156.927, 156.931 and 156.947 and the
title to subpart J, we are finalizing these
amendments as proposed.
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10. Quality Rating System (§ 156.1120)
and Enrollee Satisfaction Survey System
(§ 156.1125)
Section 1311(c)(3) of the ACA directs
the Secretary of HHS to develop a
quality rating for each QHP offered
through an Exchange, based on quality
and price. Section 1311(c)(4) of the ACA
directs the Secretary to establish an
enrollee satisfaction survey that will
assess enrollee satisfaction with each
QHP offered through the Exchanges
with more than 500 enrollees in the
prior year.
Based on this authority, HHS
finalized rules in May 2014 to establish
standards and requirements related to
QHP issuer data collection and public
reporting of quality rating information
in every Exchange.286 To balance HHS’s
strategic goals of empowering
consumers through data, minimizing
cost and burden on QHP issuers, and
supporting state flexibility, HHS
developed a phased-in approach to
establishing quality standards for
Exchanges and QHP issuers, collecting
and reporting quality measure data, and
displaying quality rating information
across the Exchanges. Since 2015, we
have collected clinical quality measure
data and enrollee experience survey
measure data and generated quality
ratings to provide reliable, meaningful
information about QHP quality
performance data across Exchanges. In
addition, since 2016, select states 287
with FFEs and State Exchanges have
displayed QHP quality rating
information as a tool for consumer
decision-making while shopping for
health insurance coverage in an
Exchange. Beginning with the open
enrollment period for plan year 2020,
we displayed the QHP quality rating
information for all Exchanges that used
the HealthCare.gov platform, including
the FFEs and SBE–FPs. State Exchanges
that operated their own eligibility and
enrollment platform were similarly
required to display QHP quality ratings
beginning with the open enrollment
period for plan year 2020, but had some
flexibility to customize the display of
the QHP quality rating information.288
286 See 79 FR 30240 at 30352. Also see 45 CFR
155.1400, 155.1405, 156.1120 and 156.1125.
287 Prior to the PY2020 nationwide display of
quality rating information, states that displayed
QHP quality rating information included California,
Colorado, Connecticut, Maryland, Michigan,
Montana, New Hampshire, New York, Rhode
Island, Virginia, Washington, and Wisconsin.
288 ‘‘CMS Bulletin on display of QRS star ratings
and QHP Enrollee Survey results for QHPs offered
through Exchanges (often called the Health
Insurance Marketplace),’’ August 15, 2019.
Available at https://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/Quality
RatingInformationBulletinforPlanYear2020.pdf.
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Through valuable feedback from the
QRS and QHP Enrollee Survey Call
Letter process and continued
engagement with health plan issuer
organizations, health care quality
measurement experts, state
representatives, consumer advocates
and other stakeholders, we continued to
learn about populations buying
insurance coverage across the
Exchanges and about areas of
improvement for these programs. We
also continued to assess potential
refinements to the QRS rating
methodology and the QHP Enrollee
Survey to prioritize strategies to
improve value for consumers and to
reduce the burden of quality reporting.
As part of the 2020 QRS and QHP
Enrollee Survey Call Letter process, we
received many comments requesting
that we remove levels of the QRS
hierarchy to help streamline and
improve consumer understanding of the
quality rating information. While we did
not propose amendments to the QRS or
to the QHP Enrollee Survey as part of
the proposed rule, we sought comment
on the removal of one or more levels of
the QRS hierarchy, which is a key
element of the QRS framework that
establishes how quality measures are
organized for scoring, rating and
reporting purposes. We previously
described the general overall framework
for the QRS, including details on the
hierarchical structure of the measure set
and the elements of the QRS rating
methodology.289 Currently, the QRS
measures are organized into composites,
domains, and summary indicators that
serve as a foundation for the rating
methodology and scores are calculated
at every level of the hierarchy using
specific scoring and standardization
rules, as described in the annual QRS
and QHP Enrollee Survey Technical
Guidance.290 We noted in the proposed
rule that we believe that a simplified
QRS hierarchy would support alignment
with other CMS quality reporting
programs and help the overall quality
score be more reflective of the
performance of individual survey and
clinical quality measures within the
QRS. For example, the Medicare Part C
& D Star Ratings framework consists of
measures, domains, summary ratings
and an overall rating.291 In addition, we
289 See,
for example, 78 FR 69418.
Quality Rating System and Qualified
Health Plan Enrollee Experience Survey: Technical
Guidance for 2021,’’ September 2020. Available at
https://www.cms.gov/files/document/quality-ratingsystem-and-qualified-health-plan-enrolleeexperience-survey-technical-guidance-2021.pdf.
291 ‘‘Medicare 2019 Part C & D Star Rating
Technical Notes,’’ October 10, 2019. Available at
290 ‘‘The
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noted that we believe a simplified
hierarchy, in combination with
additional methodology modifications
we considered (for example, explicit
weights at the measure level) will help
stabilize ratings across years.292 We
sought comment specifically on which
level or levels of the QRS hierarchy
should be removed (for example, the
composite level or the domain level).
In addition, to further support
transparency of QHP quality data and to
empower stakeholders including
consumers, states, issuers and
researchers with valuable information
related to enrollee experience with
QHPs, we proposed to make the full
QHP Enrollee Survey results publicly
available in an annual PUF. Currently,
we post on HealthCare.gov some
enrollee experience results in the form
of a quality rating for Member
Experience and Plan Administration
that make up part of the overall rating
for QHPs.293 The Member Experience
rating is based on a select number of
survey measures from the QHP Enrollee
Survey. The Plan Administration rating
is based on a select number of survey
measures and clinical quality measures.
To promote transparency of data to the
public, we already post QRS PUFs every
year for QHP issuers operating in all
Exchange types that were eligible to
receive quality ratings. As we stated in
the Exchange and Insurance Market
Standards for 2015 and Beyond Final
Rule, we have been considering
different ways to make QHP quality
data, including QHP Enrollee Survey
results, publicly available and
accessible to researchers, consumer
groups, states and other entities.294
Similar to the QRS PUFs, we proposed
to post a QHP Enrollee Survey PUF
annually, beginning with the 2021 QHP
Enrollee Survey results and during the
2022 open enrollment period, that
would include the score and proportion
of responses (for example, the
percentage of respondents answering
‘‘Never’’ or ‘‘Sometimes’’) for every
survey question and composite as well
as demographic information such as
employment status, race and ethnicity,
and age at the reporting unit and
national level to facilitate data
transparency.
We solicited comment on this
proposal to post a QHP Enrollee Survey
https://www.cms.gov/Medicare/Prescription-DrugCoverage/PrescriptionDrugCovGenIn/Downloads/
Star-Ratings-Technical-Notes-Oct-10-2019.pdf.
292 CMS anticipates continuing to propose
methodology refinements to the QRS and QHP
Enrollee Survey through the Call Letter process.
293 A rating for Medical Care is the other
component of the overall rating.
294 79 FR at 30311.
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PUF annually and on potential changes
to the QRS hierarchy.
The following is a summary of the
comments we received and our
responses.
Comment: Many commenters
supported the removal of levels of the
QRS hierarchy to align with other CMS
quality reporting programs and to
increase the ability for the overall
quality score to be more reflective of the
performance of individual quality
measures in the QRS. Several
commenters specifically supported the
removal of the composite and domain
levels of the QRS hierarchy. Some
commenters requested the timeframe of
when modifications to the QRS
hierarchy would take effect.
Response: We agree that with removal
of levels of the QRS hierarchy, there
will be closer alignment with other CMS
quality reporting programs such as
Medicare Part C & D Star Ratings. We
also agree that by removing the
composite level and domain level from
the QRS hierarchy, we will be
simplifying the hierarchy and the
anticipated, improved understanding of
the overall quality scores will be more
reflective of the individual measures’
performance that contributes to those
scores. Thus, after consideration of the
comments received, we are finalizing
the removal of the composite level and
domain level from the QRS hierarchy.
We intend to clarify the timeframe for
these modifications to the QRS
hierarchy in the QRS and QHP Enrollee
Survey Technical Guidance for 2022,
which would affect the 2022 ratings
year for Plan Year 2023.
Comment: One commenter urged
CMS to route any changes related to the
QRS hierarchy through the QRS
Technical Expert Panel (TEP), which is
comprised of subject matter experts who
will be able to give feedback on the
proposed changes to the methodology
and weigh proposed changes against
any other QRS methodology changes
that are being considered. Another
commenter urged CMS to continue
examining the QRS hierarchy to
understand impact to weight
redistribution before finalization of
removal of a level of the QRS hierarchy
(that is, with either the composite or
domain level removed) and to identify
evidence that the streamlined hierarchy
is effective in mitigating data or
calculation concerns encountered in
other rating systems.
Response: We appreciate the
commenters’ suggestions and requests
for clarification related to the removal of
one or more levels of the QRS hierarchy.
We confirm that we discussed the
potential removal of levels of the QRS
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hierarchy with the QRS TEP in 2017
and based on testing using previous
years’ data, CMS believes that the
removal of the composite and domain
levels and the explicit weights at the
summary indicator will balance the
weight of individual measures on the
global score. In addition, removal of
both the composite and domain levels of
the QRS hierarchy will not result in
issues with weight redistribution
because we intend to retain the explicit
weights at the summary indicator level
to align with the amount of measures
within each summary indicator. CMS
intends to retain the summary
indicators to remain in alignment with
other CMS quality reporting programs
(that is, Medicare Part C & D Star
Ratings) and intends to continue to
assign a weight of 2⁄3 (66.67%) to the
Clinical Quality Management summary
indicator, and a weight of 1⁄6 (16.67%)
to the Enrollee Experience and Plan
Efficiency, Affordability, & Management
summary indicators. This weighting
structure reflects the approximate
percentage of measures in each
summary indicator. CMS believes that
the removal of both the composite and
domain levels of the QRS hierarchy will
mitigate stakeholders’ main concern
with data and calculations in the QRS
(that is, the implicit weighting). We also
clarify that we continue to explore the
potential of introducing new methods of
assessing performance at the measure
level and have proposals available in
the current Draft 2021 Call Letter.295
Comment: A few commenters
requested further clarifications and
considerations including urging CMS to
grant additional flexibility to states in
the display of the star ratings and noted
that technical details around quality
rating information display are provided
to State Exchanges too late for states to
update system requirements.
Response: We clarify that per the 2021
Payment Notice final rule, State
Exchanges have increased flexibility
and can make determinations about
display of quality rating information to
best meet the needs of their population.
As part of the 2021 Payment Notice final
rule, we codified in §§ 155.1400 and
155.1405 the option for State Exchanges
that operate their own eligibility and
enrollment platforms to customize the
display of quality rating information
provided by HHS or to display HHSprovided quality rating information
with certain state-specific
customizations for their QHPs to best
295 ‘‘Draft 2021 Call Letter for the Quality Rating
System and QHP Enrollee Experience Survey,’’
February 2021. Available at https://www.cms.gov/
files/document/draft-2021-call-letter-qrs-qhpenrollee-survey.pdf.
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reflect local priorities or information.296
We also clarify that refinements to the
QRS hierarchy do not change the
display requirements for State
Exchanges that operate their own
eligibility and enrollment platforms.
State Exchanges that operate their own
eligibility and enrollment platforms
continue to have the flexibility to make
certain state-specific customizations
related to the display of quality ratings
or to maintain the display of the overall
rating and three summary indicator
ratings in alignment with
HealthCare.gov. We understand that
guidance posted by CMS related to the
display of quality rating information on
HealthCare.gov may be communicated
too late for states to update their system
requirements. Thus, CMS will continue
to provide flexibility and technical
assistance to State Exchanges as
necessary and appropriate, and will
continue to discuss timelines for
implementation with any State
Exchanges that are unable to meet
applicable quality rating information
display requirements.
Comment: A majority of commenters
strongly agreed with the proposal to
make QHP Enrollee Survey results
publically available in an annual PUF to
increase transparency and consumer
satisfaction and to assist states in
monitoring the quality of insurance
coverage offered through the Exchanges.
One commenter asked for clarification
related to the reasons underlying CMS’
proposal to make QHP Enrollee Survey
results publically available.
Response: We agree that a PUF that
includes results from the full QHP
Enrollee Survey will improve
transparency of enrollee experience
information across Exchanges. We
stated in the Exchange and Insurance
Market Standards for 2015 and Beyond
Final Rule that we have been
considering different ways to make QHP
quality data, including QHP Enrollee
Survey results, publicly available and
accessible to researchers, consumer
groups, states and other entities.297 We
believe that providing this QHP quality
data aligns with other CMS quality
reporting programs, including Medicare
Advantage and Prescription Drug Plan
(PDP) Consumer Assessment of
Healthcare Providers and Systems
(CAHPS) and CAHPS for the Meritbased Incentive Payment System
(MIPS), that publically report survey
scores and help beneficiaries, issuers,
researchers and others better understand
the experiences of the individuals and
296 85
297 79
FR 29214 through 29216.
FR 30311.
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families that are enrolled in different
health plans and programs.
Comment: A few commenters who
supported the proposal to make QHP
Enrollee Survey results publicly
available urged CMS to require
additional information related to quality
measure data submitted to an Exchange
by survey vendors and issuers. One
commenter requested that CMS permit
states to collect a de-identified survey
response file that includes demographic
information needed to appropriately
case-mix adjust the results to facilitate
a better understanding of opportunities
for improvement. Another commenter
urged CMS to require stratification of at
least some quality measures by race,
ethnicity, primary language, and
disability to address highly prevalent
conditions in communities of color.
Response: We appreciate the requests
for CMS to require that additional
quality measure information to be
submitted to an Exchange by survey
vendors and issuers. CMS does permit
HHS-approved survey vendors to share
de-identified person-level data sets of
QHP Enrollee Survey questions with
States, but to protect enrollee
confidentiality, survey vendors are
prohibited from sharing person-level
demographic data. CMS case-mix
adjusts QHP Enrollee Survey response
data using variables including the
following: General health rating, mental
health rating, chronic conditions/
medications, age, education, survey
language, help with the survey, and
survey mode. CMS intends to include
case-mix adjusted scores for QHP
Enrollee Survey questions and
composites at the reporting unit level in
the PUF. In general, CMS is supportive
of stratification of at least some quality
measures by areas such as race,
ethnicity, primary language, disability,
and potentially other social
determinants of health. We intend to
include demographic information such
as age, education level, employment,
race and ethnicity in the QHP Enrollee
Survey PUF to facilitate transparency of
this data at the reporting unit level.
CMS is not requiring additional quality
measure data at this time because we
understand that stratification requires
QHP issuers to have specific memberlevel data and anticipates that the
incorporation of stratification for quality
measures may take time. CMS is
committed to advancing health equity
and addressing health and health care
disparities. As part of this objective,
CMS is exploring the stratification of
measures by sociodemographic factors
including race and ethnicity. CMS will
follow industry standards around the
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type of data needed to report stratified
measure rates.
Comment: A few commenters
mentioned they do not support
publishing QHP Enrollee Survey results
at this time because of a lack of
transparency of the information to be
included in the PUF, explanatory
materials, data definitions and
communication strategy that would
allow consumers to use this information
appropriately in making decisions. One
commenter noted that survey results are
already displayed through star ratings
and that additional results would not be
meaningful without sufficient
explanation, including cut points.
Response: We clarify that CMS will
provide details and materials related to
the QHP Enrollee Survey PUF in
alignment with other Exchange PUFs
and other quality data PUFs, including
a data dictionary, an overview of the
QHP Enrollee Survey, as well as the
definitions of all survey questions and
composites. We agree that there are
already some survey results displayed
on HealthCare.gov in the form of a
quality rating for Member Experience,
which makes up part of the Overall
Rating for QHPs. The Member
Experience rating is based on a select
number of survey measures from the
QHP Enrollee Survey. However, after 4
years of collecting survey measure data,
we believe it is important to facilitate
transparency of QHP enrollee
experience results from the full survey.
Similar to the QRS PUF, CMS intends
to include responses at the reporting
unit level for all survey questions in the
annual QHP Enrollee Survey PUF,
including those not included in the
QRS. The QHP Enrollee Survey PUF
will provide results of scoring the QHP
Enrollee Survey questions and
composites. CMS does not use cut
points to calculate the QHP Enrollee
Survey scores. We agree that including
cut points may provide more meaning to
the QRS results included in the QRS
PUF and will consider adding the cut
points to the QRS PUFs in the future.
Comment: One commenter noted that
the QHP Enrollee Survey results are
proprietary and cannot be shared
publicly.
Response: We disagree with the
assertion that QHP Enrollee Survey
results are proprietary. In accordance
with section 1311(c)(3) and (c)(4) of the
ACA and 45 CFR 155.1400 and
155.1405, all Exchanges have the
authority to publicly report QHP quality
rating information, including survey
results, on their websites to help
consumers compare and shop for QHPs.
QHP issuers are required to collect
survey data and the data is used both by
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CMS and to inform issuers’ internal
quality improvement efforts. Similar to
the QRS PUF and other Exchange PUFs,
CMS will publish the QHP Enrollee
Survey PUF on data.healthcare.gov.
Comment: One commenter expressed
concerns regarding potential negative
impacts on the QHP Enrollee Survey
results due to the COVID–19 pandemic,
including significant membership
fluctuations and membership
composition changes.
Response: We recognize the concern
regarding negative impacts of the
COVID–19 pandemic on the QHP
Enrollee Survey results. We note that
CMS proposed, in the Draft 2021 Call
Letter, temporary QRS methodology
changes to mitigate the impact of
COVID–19 on QRS ratings. We also
clarify that CMS will review all quality
measure data that is submitted for 2021
QRS ratings, including survey measure
data, and make determinations
regarding display of quality rating
information and release of quality data
PUFs after the scoring and rating
process and prior to the 2022 open
enrollment period for the individual
Exchange.
Comment: Some commenters noted
general concerns about the QHP
Enrollee Survey, including burdensome
survey length and appropriate survey
timing resulting in lower response rates
and lower reliability on certain
questions. Before publicly reporting full
survey results, the commenter
recommended that CMS consider
removing questions that have reliability
below 0.70, remove questions outside of
the health plan’s control, remove any
survey questions with less than 100
responses in the denominator from
reporting and remove the demographic
items from the survey that duplicate
information submitted at enrollment
and rely on the 834 enrollment file
instead.
Response: We understand the
commenter’s concerns and provide the
following clarifications about the QHP
Enrollee Survey. CMS aims for
statistically high reliability (generally,
0.70 or above) for the survey questions
and composites. In some cases, there are
topic areas critical to inform consumer
understanding and issuer quality
improvement that may not consistently
meet high reliability thresholds but
remain important indicators of quality
(for example, topics such as enrollee
experience with their provider and
health care). Given the importance of
transparency around these topics, CMS
anticipates including all survey
questions within the PUF. CMS also
anticipates monitoring reliability over
time and will consider refinements to
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this approach, if needed. CMS expects
the PUF will include the number of
responses to each question and the
number of completed surveys to assist
users with analyzing survey data. We
also clarify that we continue to assess
the length and timing of the QHP
Enrollee Survey. We believe that
currently, the QHP Enrollee Survey
generally aligns with the length and
timing of other CAHPS surveys (for
example, Medicare Advantage PDP
CAHPS survey, Medicare Advantage
Only CAHPS) and similarly, posting of
an annual QHP Enrollee Survey PUF
would align with other quality reporting
programs. In addition, we rely on QHP
issuers to populate the sample frame
files used to field the QHP Enrollee
Survey. QHP issuers’ access to
demographic data collected in the 834
enrollment file can vary based on the
type of Exchange in which the issuer
operates (that is, State Exchanges or
Federally-facilitated Exchanges).
Furthermore, CMS collects demographic
data through the QHP Enrollee Survey
that may not be included in the 834
enrollment file.
After consideration of all public
comments received, we are finalizing
the proposal to make the full QHP
Enrollee Survey results publicly
available in an annual PUF, and the
removal of the composite level and
domain level from the QRS hierarchy.
We intend to clarify the timeframe for
the removal of the composite and
domain levels of the QRS hierarchy in
the QRS and QHP Enrollee Survey
Technical Guidance for 2022, which
would affect the 2022 ratings year for
Plan Year 2023.
11. Dispute of HHS Payment and
Collections Reports (§ 156.1210)
In the 2014 Payment Notice, we
established provisions related to the
confirmation and dispute of payment
and collection reports. These policies
were finalized under the assumption
that all issuers that receive APTC would
generally be able to provide these
confirmations or disputes automatically
to HHS. However, HHS has found that
many issuers prefer to research payment
errors and use enrollment reconciliation
and disputes to update their enrollment
and payment data, and may be unable
to complete this research and provide
confirmation or dispute of their
payment and collection reports within
15 days, the timeline established by the
2014 Payment Notice.
In the 2021 Payment Notice, we
amended § 156.1210(a) to lengthen the
time to report payment inaccuracies
from 15 days to 90 days to allow all
issuers who receive APTC more time to
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research, report, and correct
inaccuracies through other channels.
The longer timeframe also allows for the
processing of reconciliation updates,
which may resolve potential disputes.
Additionally, at § 156.1210, we removed
the requirement at paragraph (a) that
issuers actively confirm payment
accuracy to HHS each month, as well as
the language in paragraph (b) regarding
late filed inaccuracies. Instead, we
amended paragraph (b) to require an
annual confirmation from issuers that
the amounts identified in the most
recent payment and collections report
for the coverage year accurately reflect
applicable payments owed by the issuer
to the federal government and the
payments owed to the issuer by the
federal government, or that the issuer
has disputed any identified
inaccuracies, after the end of each
payment year, in a form and manner
specified by HHS.
Since finalizing these changes, HHS’s
experience has shown that some data
inaccuracies reasonably will be
identified after the 90-day reporting
window. For example, issuers might
receive notification of an eligibility
appeal adjudication after the 90-day
submission window. Additionally, some
issuers are directed to update their
enrollment and payment data after an
HHS data review or audit which may
occur after this 90-day window. In such
instances it is in the interest of HHS,
states, issuers, and enrollees to accept
the late reporting of data inaccuracies.
As such, we proposed to amend
§ 156.1210 by redesignating current
§ 156.1210(b) to § 156.1210(d) and
adding new § 156.1210(b) to establish a
process for issuers to report enrollment
or payment data changes in these
situations.
We clarified that this proposed
flexibility would not reduce an issuer’s
obligation to make a good faith effort to
identify and promptly report
discrepancies within the 90-day
reporting window established under
§ 156.1210(a). We further explained that
issuers could demonstrate good faith by
sending regular and accurate enrollment
reconciliation files and timely
enrollment disputes throughout the
applicable enrollment calendar year,
making timely and regular changes to
enrollment reconciliation and dispute
files to correct past errors, and by
reaching out to HHS and responding
timely to HHS outreach to address any
issues identified. With respect to
inaccuracies identified after the end of
the applicable 90-day period, we
proposed to work with the issuer to
resolve the inaccuracy if the issuer
promptly notifies HHS, in a form and
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manner specified by HHS, no later than
15 days after identifying the inaccuracy.
The failure to identify the inaccuracy in
a timely manner in these situations
must not have been due to the issuer’s
misconduct or negligence. For example,
issuers must regularly perform monthly
enrollment reconciliation as required
under § 156.265(f), and should regularly
review monthly enrollment
reconciliation files so that disputes are
submitted in the 90-day reporting
window. Disputes submitted after the
expiration of the reporting window as a
result of an issuer’s failure to conduct
these activities in a timely manner
would not satisfy the good faith
standard. We proposed to codify these
criteria at new proposed
§ 156.1210(b)(1) and (2).
Additionally, we proposed to add
paragraph (c) to allow the reporting of
data inaccuracies after the 90-day period
up to 3 years following the end of the
plan year to which the inaccuracy
relates or the date of the completion of
the HHS audit process for such plan
year, whichever is later. We believe this
deadline will provide issuers with
enough time to report any data
inaccuracies discovered after the 90-day
submission window, while providing a
reasonable end date by which HHS, the
State Exchange, issuer and other
stakeholders can consider the records
for a particular benefit year closed.
We noted that, under section
1313(a)(6) of the ACA, ‘‘payments made
by, through, or in connection with an
Exchange are subject to the False Claims
Act (31 U.S.C. 3729, et seq.) if those
payments include any Federal funds.’’
As such if an issuer has an obligation to
pay back APTC, the issuer could be
liable under the False Claims Act for
knowingly and improperly avoiding the
obligation to pay. We proposed to codify
in § 156.1210(c)(3), that, if a payment
error is discovered after the 3-year or
end of audit reporting deadline, the
issuer is obligated to notify HHS and the
State Exchange, as applicable and repay
any overpayment. However, HHS will
not pay the issuer after the 3-year or end
of audit reporting deadline for any
underpayments discovered.
We further clarified that the
requirements of § 156.1210 apply to all
issuers who receive APTC, including
issuers in State Exchanges. We sought
comment on all aspects of this proposal,
including its impact on the State
Exchanges’ ability to resolve disputes
and report payment adjustments to HHS
in this timeframe. We are finalizing the
amendments to §§ 156.1210(b) and (c),
as proposed, to establish a framework to
permit issuers to report data
inaccuracies after the 90-day window
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up to 3 years following the end of the
plan year to which the inaccuracy
relates or the date of the completion of
the HHS audit process for such plan
year, whichever is later. As detailed
further below, we are also codifying the
clarification we announced in the
proposed rule by finalizing conforming
amendments to section § 156.1210 to
more clearly reflect that these
requirements also apply to issuers in
state Exchanges. We received public
comments on the proposed updates to
dispute of HHS payment and collections
reports (§ 156.1210). The following is a
summary of the comments we received
and our responses.
Comment: Several commenters
supported the amendments to
§ 156.1210 which provide issuers the
flexibility to identify inaccuracies after
the 90-day reporting window within the
3-year or end of audit deadline for
reporting identified inaccuracies
window. Commenters, including those
representing a State Exchange,
appreciated HHS’s interest in removing
unnecessary reporting requirements to
reduce administrative burden for
issuers, and improving data accuracy, as
well as HHS’s expressed intention to
work cooperatively with issuers that
make a good faith effort to comply with
these requirements. These commenters
also supported the proposed change to
reporting timeframes and appreciated
the additional time to report payment
inaccuracies, while highlighting the
importance of maintaining compliance
standards.
Response: We agree with commenters
that finalizing these provisions will
improve data accuracy and reduce
administrative burden on issuers by
allowing more time to address
inaccuracies in enrollment and payment
data, while maintaining compliance
standards. We are committed to
supporting State Exchanges in resolving
disputes and reporting payment
adjustments in an efficient and timely
manner. We are finalizing the proposed
amendments to § 156.1210, which will
allow the identification of inaccuracies
in the monthly payment and collections
reports after the 90-day period if the
late-identification was not due to the
issuer’s misconduct or negligence. We
are also finalizing the provision that
permits the reporting of these
inaccuracies up to 3 years following the
end of the plan year to which the
inaccuracy relates or the date of the
completion of the HHS audit process for
such plan year after which point the
issuer will not be paid for any
underpayments that may be discovered.
However, if any payment errors are
discovered after the applicable deadline,
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the issuer remains obligated to notify
HHS and the State Exchange, or SBE–
FP, as applicable, and will be
responsible for repaying any identified
overpayments. As detailed further
below, we are also codifying the
clarification we announced in the
proposed rule by finalizing conforming
amendments to section § 156.1210 to
more clearly reflect that these
requirements also apply to issuers in
State Exchanges. We clarify that these
conforming amendments are not
intended to change existing
requirements or processes for State
Exchanges or their respective issuers. If
State Exchange issuers currently work
with the State Exchange to review the
amounts identified in the payment and
collection reports and resolve
inaccuracies, they should continue to do
so with any identified overpayments
being repaid to HHS within the
applicable timeframe set forth in
§ 156.1210. State Exchange issuers who
currently work with HHS to review
these reports and resolve any
inaccuracies under § 156.1210, along
with issuers in FFE states, should
continue to work with HHS on these
matters and should also repay any
identified overpayments to HHS within
the applicable timeframe(s) set forth in
§ 156.1210.
Comment: One commenter suggested
that HHS make payments to issuers for
underpayments discovered after the 3year or end of audit deadline proposed
in § 156.1210(c). Another commenter
opposed the 3-year deadline and noted
it would prolong the dispute resolution
process and the time and work that goes
into addressing disputes. This
commenter suggested that HHS shorten
the timeframe for identifying
inaccuracies from 3 years following the
end of a plan year to 1 year following
the end of a plan year.
Response: The 3-year following the
end of the plan year to which the
inaccuracy relates or end of HHS audit
process for such plan year deadline is
intended to provide issuers the
flexibility to resolve data inaccuracies
encountered after the initial 90-day
reporting window, while still
encouraging the timely review of
enrollment and payment data by
providing a date certain for the deadline
for identification of such inaccuracies.
Based on our experience operating the
FFE, we believe shortening this
timeframe to one year following the end
of a plan year would be insufficient to
support the resolution process both for
issuers, States, and HHS. For example,
the one year timeframe would not align
with the submission window for an
issuer in a State Exchange time to
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complete the retroactive State Based
Marketplace Inbound (SBMI) payment
files, which are submitted up to 3 years
after the relevant benefit year. Further,
our changes align with the 3-year
timeframe established by the IRS. More
specifically, 26 U.S.C. 6501 and 26
U.S.C. 6511 state that the amount of any
tax imposed shall be assessed within 3
years after the return was filed. For
example, in both the FFE and State
Exchanges, a consumer may dispute or
amend their insurance coverage by
submitting a 1095A update which
allows them to amend their taxes up to
3 years. We further note that the 3-year
following the end of the plan year to
which the inaccuracy relates or end of
the HHS audit process for such plan
year deadline finalized in this rule does
not reduce the issuer’s obligation to
make a good faith effort to promptly
report discrepancies within the 90-day
reporting window. In order to encourage
all issuers to complete review within
the applicable timeframes, HHS
reaffirms that it will not make
additional payments to issuers for
identified underpayments after 3 years
following the end of the plan year to
which the inaccuracy relates or the date
of the completion of the HHS audit
process for such plan year, whichever is
later.
After consideration of the comments
on these proposals, we are finalizing
amendments to § 156.1210 which will
allow issuers the flexibility to identify
data inaccuracies after the 90-day period
and report inaccuracies up to 3 years
following the end of the plan year to
which the inaccuracy relates or the date
of the completion of the HHS audit
process for such plan year. We are
finalizing these amendments as
proposed and are codifying the
clarification we announced in the
proposed rule by finalizing conforming
amendments to more clearly reflect that
the requirements of § 156.1210 apply to
all issuers who receive APTCs,
including issuers in State Exchanges by
adding a reference to ‘‘or the State
Exchange (as applicable)’’ to paragraph
(a), the introductory sentence to
paragraph (b), paragraphs (b)(1) and
(b)(2), as well as paragraph (c)(3).
12. Payment and Collection Processes
(§ 156.1215)
In the 2015 Payment Notice, HHS
established a monthly payment and
collections cycle for insurance
affordability programs, user fees, and
premium stabilization programs. As
discussed elsewhere in this rule, we
proposed to eliminate state user fee
collection flexibility that HHS had
previously offered to states as part of the
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2017 Payment Notice,298 and proposed
conforming amendments to remove the
reference to ‘‘State’’ governments from
paragraph (b). We sought comment on
these proposed amendments.
We received public comments on the
proposed updates to dispute of HHS
payment and collections processes
(§ 156.1215). The following is a
summary of the comments we received
and our responses.
Comment: The comments received on
the proposed updates to payment and
collection processes (§ 156.1215)
supported the elimination of the state
user fee collection flexibility that HHS
had previously offered to states in the
2017 Payment Notice, and the
conforming amendments to remove the
reference to ‘‘State’’ governments from
§ 156.1215(b).
Response: We believe that updating
the payment and collection processes in
§ 156.1215 to align with the elimination
of the unutilized state user fee
collection flexibility by striking the
reference to ‘‘State’’ will clarify the
policy and is an appropriate amendment
to make at this time. We appreciate the
supportive comments on this proposal.
After consideration of comments
received on this proposal, we are
finalizing the amendment to
§ 156.1215(b) as proposed.
13. Administrative Appeals (§ 156.1220)
As detailed earlier in this preamble,
we previously established a three-level
administrative appeals process for
issuers to seek reconsideration of
amounts under certain ACA programs,
including the calculation of risk
adjustment charges, payments and user
fees. This process also applies to issuer
disputes of the findings of a second
validation audit (if applicable) as a
result of HHS–RADV for the 2016
benefit year and beyond.299 As
explained in the 2020 Payment Notice,
only those issuers who have insufficient
pairwise agreement between the initial
validation audit and second validation
audit will receive a Second Validation
Audit Findings Report and therefore
have the right to appeal the second
validation audit findings. In this rule,
we proposed to amend
§ 156.1220(a)(1)(vii) to add ‘‘if
applicable’’ when discussing an issuer’s
ability to appeal the findings of the
second validation audit to more clearly
capture this limitation as part of the
regulation, consistent with the existing
language at § 153.630(d)(2) and the
previously finalized policy. We
298 See
299 See
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proposed a similar amendment in this
rule to § 153.630(d)(3).
We also proposed amendments to
§ 156.1220(a)(3) to clarify that the 30calendar day timeframe to file a request
for reconsideration of second validation
audit findings (if applicable) or the risk
score error rate calculation would be 30
calendar days from the applicable
benefit year’s Summary Report of
Benefit Year Risk Adjustment Data
Validation Adjustments to Risk
Adjustment Transfers. To capture this
clarification, we proposed to create a
new proposed § 156.1220(a)(3)(ii) to
specify the timeframe for filing a request
for reconsideration for a risk adjustment
payment or charge, including an
assessment of risk adjustment user fees.
This new proposed regulatory provision
maintains the language that establishes
a 30 calendar day window for these
appeals that begin on the date of
notification under § 153.310(e). We also
proposed to create a new proposed
§ 156.1220(a)(3)(iii) to separately
address the timeframe for filing a
request for reconsideration of second
validation audit findings or the risk
score error rate calculation and to add
the phrase ‘‘if applicable’’ to more
clearly capture the limitation on the
ability to appeal second validation audit
findings. To accommodate these two
new proposed paragraphs, we also
proposed to amend § 156.1220 to
redesignate paragraphs (a)(3)(iii)
through (vi) as (a)(3)(iv) through (vii),
respectively. We sought comment on
these proposals.
The only comment received on the
proposed updates to the administrative
appeals regulations (§ 156.1220) noted
general support of the proposed
amendments and accompanying
clarifications.
After consideration of comments
received on these proposals, we are
finalizing the amendments to § 156.1220
as proposed.
F. Part 158—Issuer Use of Premium
Revenue: Reporting and Rebate
Requirements
1. Definitions (§ 158.103)
We proposed to amend § 158.103 to
establish the definition of prescription
drug rebates and other price concessions
that are deducted from incurred claims
for MLR reporting and rebate
calculation purposes.
In the preamble to the proposed rule,
we discussed that HHS received
numerous comments during the
regulatory process of finalizing
amendments to § 158.140(b)(1)(i) in the
2021 Payment Notice final rule with
respect to reporting prescription drug
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rebates and other price concessions.300
The commenters requested HHS to
codify and align the definition of
prescription drug rebates and other
price concessions that are reported by
issuers for MLR purposes with the
definition in section 1150A of the Act,
as added by the ACA,301 which requires
QHP issuers and PBMs to report certain
prescription drug benefit information to
HHS. The reference to rebates,
discounts, and price concessions in
section 1150A(b)(2) of the Act excludes
bona fide service fees paid to PBMs by
drug manufacturers or issuers. Under
section 1150A of the Act, bona fide
service fees are fees negotiated by PBMs
that include but are not limited to
‘‘distribution service fees, inventory
management fees, product stocking
allowances, and fees associated with
administrative services agreements and
patient care programs (such as
medication compliance programs and
patient education programs).’’ Section
156.295, implementing section 1150A of
the Act, defines bona fide services fees
as ‘‘fees paid by a manufacturer to an
entity that represent fair market value
for a bona fide, itemized service actually
performed on behalf of the manufacturer
that the manufacturer would otherwise
perform (or contract for) in the absence
of the service arrangement, and that are
not passed on in whole or in part to a
client or customer of an entity, whether
or not the entity takes title to the drug.’’
In light of the comments that we
previously received during the process
of amending § 158.140(b)(1)(i), we
proposed to further amend the MLR
rules to add the definition for
prescription drug rebates and other
price concessions to § 158.103 and to
clarify that this term excludes bona fide
service fees, consistent with how such
fees are described in § 156.295. We
proposed that this provision become
applicable beginning with the 2022
MLR reporting year (MLR reports filed
in 2023), which aligns with the
applicability date of the amendment to
§ 158.140(b)(1)(i) and should provide
issuers with adequate time to adjust
contracts with entities providing
pharmacy benefit management services
to provide transparency regarding
prescription drug rebates and other
price concessions they receive from
drug manufacturers. We solicited
comment on this proposal.
We received public comments on the
proposed amendment of § 158.103 to
300 See
85 FR at 29240–29241.
requirements of section 1150A with
respect to QHP issuers are codified at § 156.295. In
the proposed rule, we proposed to amend that
regulation and to codify the requirements with
respect to PBMs at a new 45 CFR part 184.
301 The
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establish the definition of prescription
drug rebates and other price concessions
that are deducted from incurred claims
for MLR reporting and rebate
calculation purposes. The following is a
summary of the comments we received
and our responses.
Comment: All of the commenters
generally supported the proposal to
define prescription drug rebates and
other price concessions that issuers
must deduct from incurred claims
because they agreed it would provide
clarity, consistency, transparency, and
accuracy for reporting incurred claims
in the MLR calculation. A few
commenters expressed concern that
excluding bona fide service fees from
the definition of prescription drug
rebates and other price concessions
could facilitate evasion and abuse, and
incentivize greater use of service feegenerating activities focused on
impeding or denying care. These
commenters urged HHS to ensure that
amounts that are treated as bona fide
service fees are in fact bona fide service
fees and that this category is not
inappropriately exploited to obscure the
true cost of prescription drugs.
Response: We agree that including a
definition of prescription drug rebates
and other price concessions will
promote transparency and higherquality reporting of incurred claims. We
also share commenters’ concerns that
the regulated entities may restructure
their contracts in ways that could
circumvent the rules regarding the
exclusion of bona fide service fees and
emphasize that we will only permit as
an exclusion from prescription drug
rebates and other price concessions
bona fide service fees that meet the
definition at § 158.103. We intend to
continue monitoring developments in
the prescription benefit markets in order
to ensure that the MLR rules continue
to appropriately reflect the prevailing
market practices.
Comment: Several commenters
requested that HHS clarify that the
definition of prescription drug rebates
and other price concessions at § 158.103
excludes prescription drug coupons and
similar items that benefit enrollees
directly at the point of sale, since these
items do not reduce issuers’ drug costs
and may not be known to issuers.
Response: We agree with the
commenters and clarify that it was
never our intent to include prescription
drug coupons and similar items that
benefit enrollees directly at the point of
sale in the definition of prescription
drug rebates and other price concessions
at § 158.103. Accordingly, we are
modifying the proposed definition of
prescription drug rebates and other
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price concessions in this final rule to
clarify that this term excludes any
remuneration, coupons, or price
concessions for which the full value is
passed on to the enrollee, such that no
other entity receives any portion of the
coupon payment, remuneration, or price
concession.
Comment: Several commenters
recommended that HHS exclude from
the definition of prescription drug
rebates and other price concessions at
§ 158.103 payments for services related
to quality improvement activities (QIA).
Response: We disagree with this
recommendation. The purpose of the
requirement at § 158.140(b)(1)(i)(B) that
prescription drug rebates and other
price concessions must be subtracted
from an issuer’s incurred claims for
MLR purposes is to accurately capture
issuers’ true expenditures on enrollees’
prescription drugs. Separately, section
158.150 requires reporting of QIA
expenditures. Excluding amounts
attributable to QIA from the definition
of prescription drug rebates and other
prices concessions that must be
subtracted from incurred claims would
improperly inflate incurred claims,
preventing an accurate accounting of
prescription drug costs. Thus, any
portion of prescription drug rebates and
other price concessions that represents
compensation for QIA services should
be reported as QIA for MLR purposes.
Comment: Several commenters
recommended that HHS remove the
term ‘‘direct and indirect remuneration’’
(DIR) from the definition of prescription
drug rebates and other price concessions
at § 158.103. These commenters stated
that this term originated within the
Medicare Part D program and would be
confusing for issuers and PBMs.
Response: We note that in the
preambles to both the 2021 Payment
Notice proposed rule and the 2021
Payment Notice final rule, we explained
that the prescription drug price
concessions that must be subtracted
from an issuer’s incurred claims are
intended to capture ‘‘any time an issuer
or an entity that provides pharmacy
benefit management services to the
issuer receives something of value
related to the provision of a covered
prescription drug (for example,
manufacturer rebate, incentive payment,
direct or indirect remuneration,
etc.).’’ 302 At that time, we did not
receive any comments expressing
concern with inclusion of DIR in the
term price concessions. In addition, we
are not persuaded that the DIR
definitions used in the Medicare Part D
program are inapplicable or
302 85
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inappropriate in the non-Medicare
markets, as it includes the same direct
and indirect remuneration that is
relevant in the commercial markets,
such as PBM-retained rebates, PBM
rebate guarantee amounts, PBM penalty
payments, dispensing incentive
payments, risk-sharing amounts, and
remuneration from pharmaceutical
manufacturers in the form of rebates,
grants, reduced price administrative
services, legal settlement amounts, and
prompt pay discounts from pharmacies
that are not included in the negotiated
price. However, in response to
comments and in order to avoid any
confusion between the Medicare and
non-Medicare markets, we are making a
technical edit to remove the reference to
DIR from the definition of prescription
drug rebates and other price concessions
at § 158.103. Nonetheless, we note that
in the definition of prescription drug
rebates and price concessions at
§ 158.103, we continue to intend to
require issuers to treat both direct and
indirect items of value related to the
provision of a covered prescription
drug, including compensation collected
by an issuer or PBM after the point of
sale, as prescription drug rebates and
other price concessions that must be
subtracted from an issuer’s incurred
claims. Further, HHS intends to
continue to review issues surrounding
the MLR definition and treatment of
prescription drug rebates and other
price concessions, and as more
information and data become available,
HHS may propose revisions in the
future as may be necessary or
appropriate to ensure that consumers
receive value for their premium dollars
pursuant to section 2718 of the PHS Act.
Comment: Several commenters
recommended that HHS remove the
term ‘‘receivable’’ from the definition of
prescription drug rebates and other
price concessions at § 158.103.
Response: In response to these
comments and to preserve consistency
with the language used throughout
§ 158.140, we are making a technical
edit to remove the term ‘‘receivable’’
from the definition of prescription drug
rebates and other price concessions at
§ 158.103. However, we note that,
similar to other components of incurred
claims, prescription drug rebates and
other price concessions attributable to
enrollees’ drug utilization during the
MLR reporting year are not always
settled and received by the time issuers
submit MLR reports to the Secretary.
Consequently, while § 158.140
commonly refers to ‘‘payments’’ and
‘‘receipts’’ as well as amounts ‘‘paid’’
and ‘‘received,’’ the MLR Annual
Reporting Form Filing Instructions
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provide more detailed guidance
specifying where these terms include
amounts that are payable or receivable.
Currently, for MLR purposes, issuers
report the prescription drug rebate
amounts they expect to receive with
respect to the reporting year, and QHP
issuers and PBMs similarly report such
expected amounts for purposes of the
reporting required under section 1150A
of the Act. Therefore, we intend to
clarify in the MLR Annual Reporting
Form Filing Instructions that the
prescription drug rebates and other
price concessions that issuers must
subtract from incurred claims (which for
the 2022 and later MLR reporting years
will include amounts received and
retained by PBMs) include the
receivable amounts.
After consideration of all the
comments received and for the reasons
stated in our responses, we are
finalizing the definition of prescription
drug rebates and price concessions at
§ 158.103 as proposed, with a
modification to clarify that the
definition excludes any remuneration,
coupons, or price concessions for which
the full value is passed on to the
enrollee, and technical edits to replace
the phrase ‘‘direct and indirect
remuneration’’ with ‘‘remuneration,’’
and remove the term ‘‘receivable.’’
2. Premium Revenue (§ 158.130)
We proposed to clarify the MLR
premium reporting requirements under
§ 158.130 for issuers that choose to offer
temporary premium credits during a
public health emergency (PHE) declared
by the Secretary of HHS (declared PHE)
in the 2021 benefit year and beyond,
when such credits are permitted by
HHS. In the August 4, 2020 guidance,
Temporary Policy on 2020 Premium
Credits Associated with the COVID–19
PHE, CMS adopted a temporary policy
of relaxed enforcement to allow issuers
in the individual and small group
markets the flexibility, when consistent
with state law, to temporarily offer
premium credits for 2020 coverage to
support continuity of coverage for
individuals, families and small
employers who may struggle to pay
premiums because of illness or loss of
incomes or revenue resulting from the
COVID–19 PHE.303 On September 2,
2020, HHS issued an interim final rule
on COVID–19 wherein we set forth MLR
data reporting and rebate requirements
for issuers offering temporary premium
303 ‘‘Temporary Policy on 2020 Premium Credits
Associated with the COVID–19 Public Health
Emergency,’’ August 4, 2020. Available at https://
www.cms.gov/CCIIO/Programs-and-Initiatives/
Health-Insurance-Marketplaces/Downloads/
Premium-Credit-Guidance.pdf.
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credits for 2020 coverage.304 For the
2021 MLR reporting year 305 and
beyond, we proposed to adopt these
MLR data reporting and rebate
requirements for all health insurance
issuers in the individual and small
group markets 306 who elect to offer
temporary premium credits during a
declared PHE in situations in which
HHS issues guidance announcing its
adoption of a similar temporary policy
of relaxed enforcement to allow such
issuers to offer temporary premium
credits during the declared PHE.307
We proposed that for purposes of
§ 158.130, issuers must account for
temporary premium credits provided to
enrollees during a declared PHE as
reductions in earned premium for the
applicable MLR reporting years,
consistent with any technical guidance
set forth in the applicable year’s MLR
Annual Reporting Form Instructions,308
when such credits are permitted by
HHS. Specifically, as clarified in the
interim final rule on COVID–19, we
proposed that the amount of temporary
premium credits 309 will constitute
neither collected premium nor due and
unpaid premium described in the MLR
Annual Reporting Form Instructions for
purposes of reporting written premium
(which is a component of earned
premium). Consequently, issuers that
offer temporary premium credits during
a declared PHE will report as earned
premium for MLR and rebate
304 85
FR 54820 (Sept. 2, 2020).
MLR reporting year means a calendar year
during which group or individual health insurance
coverage is provided by an issuer. See 45 CFR
158.103. The 2021 MLR reporting year refers to the
MLR reports that issuers must submit for the 2021
benefit year by July 31, 2022. See 45 CFR
158.110(b).
306 While this final rule, the interim final rule on
COVID–19, and the August 4, 2020 guidance focus
on the individual and small group markets, to
remove the barriers in support of issuers offering
these premium credits to enrollees impacted by a
PHE declared by the Secretary of HHS, we note that
issuers in the large group market may also, when
consistent with state law, offer temporary premium
credits and should similarly report the lower,
adjusted amount that accounts for the premium
credits for MLR purposes.
307 The Secretary of HHS may, under section 319
of the PHS Act, determine that: (a) A disease or
disorder presents a public health emergency; or (b)
that a public health emergency, including
significant outbreaks of infectious disease or
bioterrorist attacks, otherwise exists.
308 Available at https://www.cms.gov/cciio/
Resources/Forms-Reports-and-OtherResources/
index#Medical_Loss_Ratio.
309 MLR rebates provided in the form of premium
credits are different than the temporary premium
credits such as those outlined in the August 4, 2020
guidance issued by CMS. When MLR rebates are
provided in the form of premium credits, issuers
must continue to report the full amount of earned
premium and may not reduce it by the amount of
MLR rebates provided in form of premium credits,
as required by § 158.130(b)(3).
305 The
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calculation purposes the actual, reduced
premium paid when such credits are
permitted by HHS.
We solicited comment on this
proposal.
We received public comments on the
proposal to require issuers for purposes
of § 158.130 to account for temporary
premium credits provided to enrollees
during a declared PHE as reductions in
earned premium for the applicable MLR
reporting years, consistent with any
technical guidance set forth in the
applicable year’s MLR Annual
Reporting Form Instructions, when such
credits are permitted by HHS. The
following is a summary of the comments
we received and our responses.
Comment: Several commenters
supported the proposal to adopt the
MLR data reporting and rebate
requirements for issuers who elect to
offer temporary premium credits during
a declared PHE in future MLR reporting
years. Specifically, these commenters
noted that the proposal ensures
accuracy and consistency in the MLR
reporting and rebate calculation process.
Response: We agree that this proposal
provides accuracy and consistency in
MLR reporting and rebate calculations
and appreciate the comments.
Comment: A few commenters
appeared to assume that this proposal
sought to permanently codify CMS’
temporary policy of relaxed
enforcement that allowed issuers in the
individual and small group markets the
flexibility, when consistent with state
law, to temporarily offer premium
credits for 2020 coverage to support
continuity of coverage for individuals,
families and small employers who may
struggle to pay premiums because of
illness or loss of incomes or revenue
resulting from the COVID–19 PHE and
to extend this policy of relaxed
enforcement to future years. Some
commenters cautioned HHS to ensure
that any such premium credits be
aligned with state regulations and
legislation or be subject to state
regulatory approval.
Response: We note that this proposal
did not seek to extend CMS’ temporary
policy of relaxed enforcement or expand
issuers’ ability to offer temporary
premium credits in future years. Rather,
we proposed that if HHS were to allow
issuers to offer temporary premium
credits during a declared PHE in future
years, then issuers would account for
such temporary premium credits as
reductions in earned premium for the
applicable MLR reporting years. We
continue to be cognizant that state
regulators may have additional
considerations with respect to any
temporary premium credits provided by
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issuers, and note that both the interim
final rule on COVID–19 and the August
4, 2020 guidance required issuers to
receive the applicable insurance
regulator’s permission in advance of
providing temporary premium credits
for 2020 coverage.
After consideration of all of the
comments received and for the reasons
stated in our responses, we are
finalizing as proposed the clarification
that issuers must account for temporary
premium credits provided to enrollees
during a declared PHE as reductions in
earned premium for the applicable MLR
reporting years, when such credits are
permitted by HHS.
3. Formula for Calculating an Issuer’s
Medical Loss Ratio (§ 158.221)
As noted in section IV of the
preamble, on March 4, 2021, the United
States District Court for the District of
Maryland decided City of Columbus, et
al. v. Cochran, No. 18–2364, 2021 WL
825973 (D. Md. Mar. 4, 2021), vacating
45 CFR 158.221(b)(8), which provided
that beginning with the 2017 MLR
reporting year, an issuer had the option
of reporting an amount equal to 0.8
percent of earned premium in the
relevant State and market in lieu of
reporting the issuer’s actual
expenditures for activities that improve
health care quality, as defined in
§§ 158.150 and 158.151. Pursuant to this
provision, issuers who chose this
method of reporting were required to
apply it for a minimum of 3 consecutive
MLR reporting years and for all of their
individual, small group, and large group
markets; and all affiliated issuers were
required to choose the same reporting
method. As a result of the Court’s
decision, we are finalizing the deletion
of § 158.221(b)(8).310
With the deletion of § 158.221(b)(8),
our regulations will no longer provide
issuers the option of reporting an
amount equal to 0.8 percent of earned
premium in the relevant State and
market in lieu of reporting the issuers’
actual expenditures for activities that
improve health care quality. As
discussed in section IV of the preamble
and consistent with the court’s decision,
we are reverting to requiring issuers to
itemize QIA expenditures, on a
prospective basis, beginning with the
2020 MLR reporting year (MLR reports
due by July 31, 2021). However, we are
not requiring issuers to incur the burden
or expense of revising MLR Annual
Reporting Forms from prior years or
otherwise updating QIA expenditure
310 Consistent with the removal of § 158.221(b)(8),
existing paragraph (b)(9) is redesignated as
paragraph (b)(8).
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amounts reported for prior years. In
addition, because MLR calculations are
based on a three-year average,311 there
will be a transition period during which
these averages will continue to reflect
the standardized QIA expenditure
amounts for those issuers that reported
such amounts in the 2017–2019 MLR
reporting years.312
4. Rebating Premium if the Applicable
Medical Loss Ratio Standard Is Not Met
(§ 158.240)
In order to allow enrollees to benefit
from the ability to receive estimated
rebates earlier and to provide MLR
reporting flexibilities to issuers that may
owe rebates, we proposed to amend
§ 158.240 by adding paragraph (g) to
explicitly allow issuers to prepay a
portion or all of their estimated rebates
to enrollees for any MLR reporting year.
We also proposed to require that issuers
that choose to prepay a portion or all of
their estimated rebates do so for all
eligible enrollees in a given state and
market in a non-discriminatory manner.
In the preamble to the proposed rule,
we noted that an issuer that prepays a
portion or all of its estimated rebate and
subsequently determines that such
prepayment is less than the total rebate
owed to an enrollee would have to incur
the costs of disbursing rebates twice:
First to disburse the prepaid rebate
amount, and again to disburse the
remaining rebate amount by the
deadlines set forth in §§ 158.240(e) and
158.241(a)(2). Therefore, in order to
reduce the regulatory burden on issuers
and incentivize issuers to deliver
rebates to enrollees sooner, we proposed
to add to the new § 158.240(g) a safe
harbor under which an issuer that
prepays at least 95 percent of the total
rebate owed to enrollees in a given state
and market for a given MLR reporting
year by the MLR rebate payment
deadlines set forth in §§ 158.240(e) and
158.241(a)(2) may, without penalty or
late payment interest under § 158.240(f),
defer the payment of any remaining
rebate owed to enrollees in that state
and market until the MLR rebate
payment deadlines set forth in
§§ 158.240(e) and 158.241(a)(2) for the
following MLR reporting year. This
would enable such an issuer to maintain
a single rebate disbursement cycle per
year, while ensuring that enrollees
continue to receive most of the rebate
within the regular timeframe. To further
ensure that enrollees do not regularly
receive reduced rebates as a result of
311 See 42 U.S.C. 300gg–18(b)(1)(B)(ii) and 45 CFR
158.220(b).
312 For example, calculations for the 2020 MLR
Reporting Year are based on 2018, 2019 and 2020
data.
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prepayments, we also proposed that
under this safe harbor, the rebate
amount remaining after prepayment
would not be treated as de minimis,
regardless of how small the remaining
amount is. That is, the de minimis
provisions in § 158.243 would continue
to apply only if the total rebate (the sum
of the prepaid amount and any amount
remaining after prepayment) owed to an
enrollee for a given MLR reporting year
is below the applicable threshold.
We noted that § 158.250 requires
issuers to provide a notice of rebates at
the time any rebate is provided, which
includes both rebate prepayments and
payments of rebates remaining after
prepayment. We also noted that we
intend to modify the ICRs approved
under OMB Control Number 0938–1164
to add modified standard notices that
can be used by issuers that elect to
prepay rebates under the proposed new
§ 158.240(g). In addition, we noted that
we intend to revise the MLR Annual
Reporting Form Instructions to clarify
that an issuer that prepays a portion or
all of its estimated rebate and
subsequently determines that the
amount of such prepayment is more
than the total rebate owed to an enrollee
for that MLR reporting year and that
does not recoup the overpayment from
the enrollee, may include the
overpayment in its rebate payments
reported for purposes of calculating the
optional limit on the payable rebates
under § 158.240(d). We also noted that
we intend to revise the MLR Annual
Reporting Form Instructions to clarify
how issuers that prepay estimated
rebates must report such prepayments.
We proposed that the amendment to
create new § 158.240(g) would be
applicable beginning with the 2020
MLR reporting year (MLR reports filed
in 2021). We solicited comment on this
proposal, including the proposed
applicability date.
We received public comments on the
proposed amendments to § 158.240. The
following is a summary of the comments
we received and our responses.
Comment: Most commenters
supported the proposal, stating that it
will benefit consumers, provide
flexibility and relief for enrollees in
future crises, and help consumers
maintain comprehensive health
coverage. Some commenters
recommended that HHS clarify that
rebate prepayment is only permitted if
consistent with state law and provided
statewide in a nondiscriminatory
manner; one commenter requested that
rebate prepayment be subject to state
regulatory approval and only with the
95 percent safe harbor guardrail. Several
commenters opposed the proposal,
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expressing concern with the operational
and administrative burden for State
Exchanges and group health plan rebate
recipients, consumers favoring issuers
that provide prepayments, and the
deferred rebates being less likely to
reach consumers.
Response: We appreciate the
comments in support of this proposal
and generally believe that any potential
disadvantages of rebate prepayment are
outweighed by the benefit of consumers
receiving rebates earlier in the year.
While we recognize that issuers’ ability
to reach the original enrollees to provide
them with any deferred rebates may
diminish as time passes, we believe that
the potential harm to consumers that are
unable to receive the residual amount
remaining after rebate prepayment is
mitigated by the 95 percent safe harbor
threshold and outweighed by the
benefits associated with enrollees’
ability to receive rebates earlier than
September 30, when they are generally
disbursed. We also note that payment of
remaining rebate amounts after
prepayment may only be deferred until
the MLR rebate payment deadlines set
forth in §§ 158.240(e) and 158.241(a)(2)
for the following MLR reporting year.
We further believe that issuers do not
gain a significant advantage by
prepaying rebates other than delivering
a benefit to their enrollees, and we
expect that issuers will consider
whether in the group markets that
benefit exceeds any complexities that it
may create for group policyholders or
any administrative burden or
operational challenges for the issuer,
their enrollees, or the Exchanges.
Because a consumer is unlikely to know
whether an issuer intends to prepay
MLR rebates in any given year prior to
purchasing a policy, and since an issuer
that pre-paid rebates in a previous year
may decide not to pre-pay them in a
future year, we do not believe that
consumers will be more likely to
purchase a policy or enroll in health
insurance coverage from any given
issuer based on the issuer’s prepayment
of MLR rebates. And if consumers are
able to take rebate prepayment into
account when selecting an issuer, we do
not see why they should be prevented
from doing so and selecting an issuer
that they believe provides a valuable
service. We acknowledge the
commenters’ concerns regarding the
potential interaction of rebate
prepayment and state rules or State
Exchange operations, and are modifying
the proposal to clarify that issuers that
choose to prepay a portion or all of their
estimated rebates must do so to the
extent consistent with state law or other
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applicable state authority. This would
include receiving state approval, if
required under state law. Further, we
note that the regulatory text does
provide that any issuer that chooses to
prepay a portion or all of their estimated
rebates must provide the prepayment to
all of the enrollees in that state and
market in a non-discriminatory manner.
Comment: One commenter requested
that the safe harbor threshold either be
lowered to 85 percent or be based on the
estimated MLR falling within 0.5
percent of actual MLR, to make the safe
harbor more attainable for issuers that
owe small rebate amounts and
consequently may estimate rebates more
accurately in dollar terms.
Response: We have considered this
option but concluded that 95 percent is
an appropriate safe harbor threshold.
Reducing the threshold would expand
the safe harbor for all issuers, rather
than only issuers that owe relatively
small rebates per enrollee, which would
result in overall larger rebate amounts
being eligible to be deferred for a year.
Further, we trust that issuers will
evaluate the relative value of prepaying
very small per-enrollee rebate amounts
early versus the associated
administrative costs and the deferral of
a fraction of those small per-enrollee
rebates.
Comment: One commenter suggested
that enrollees should have the option to
choose whether an issuer that chooses
to prepay a portion or all of their
estimated rebates must pay any
remaining rebate amounts in full during
the current year or may defer the
payment of any remaining rebate
amounts until the following year under
the proposed new § 158.240(g) safe
harbor.
Response: We appreciate the
commenter’s suggestion, but believe that
the burden of collecting and
implementing each enrollee’s election
with respect to rebates remaining after
prepayment would be a significant
disincentive for issuers to offer rebate
prepayment, and as stated above, we
generally believe that any potential
disadvantages of rebate prepayment are
outweighed by the benefit of consumers
receiving rebates earlier in the year.
After consideration of all the
comments received and for the reasons
stated in our responses, we are
finalizing the amendments to § 158.240
as proposed, with an additional
clarification that issuers that choose to
prepay a portion or all of their estimated
rebates must do so to the extent
consistent with state law or other
applicable state authority.
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5. Form of Rebate (§ 158.241)
We proposed to amend § 158.241(a)(2)
to allow issuers to provide rebates in the
form of a premium credit prior to the
date that the rules previously provided.
As discussed in the proposed rule,
under § 158.240(e), issuers that choose
to provide a rebate via a lump-sum
check or lump-sum reimbursement to
the account used to pay the premium
must issue the rebate no later than
September 30 following the end of the
MLR reporting year. In contrast,
§ 158.241(a)(2) previously provided that
issuers that elect to provide rebates in
the form of a premium credit must
apply the rebate to the first month’s
premium that is due on or after
September 30 following the MLR
reporting year, and that when the rebate
is provided in the form of a premium
credit and the total amount of the rebate
owed exceeds the premium due in
October, any excess rebate amount must
be applied to succeeding premium
payments until the full amount of the
rebate has been credited.
Given the proposed addition of
§ 158.240(g) discussed in the prior
section, the fact that an issuer may wish
to provide rebates in the form of a
premium credit earlier than October,
and the desire to reduce the regulatory
burden and enable enrollees to receive
the benefit of rebates sooner, we
proposed to amend § 158.241(a)(2) to
allow issuers to provide rebates in the
form of a premium credit prior to
September 30. Specifically, we
proposed to amend § 158.241(a)(2) to
specify that when provided in the form
of premium credits, rebates must be
applied to premium that is due no later
than October 30 following the MLR
reporting year. We proposed that this
amendment would be applicable
beginning with the 2020 MLR reporting
year (rebates due in 2021). We solicited
comment on this proposal, including on
the proposed applicability date.
We received public comments on the
proposal to amend § 158.241(a)(2) to
allow issuers to provide rebates in the
form of a premium credit prior to the
date that the rules previously provided.
The following is a summary of the
comments we received and our
responses.
Comment: All of the commenters
supported the proposal to allow issuers
to provide rebates in the form of a
premium credit before (rather than only
after) September 30 because it would
allow consumers to receive the benefit
of rebates sooner. One commenter
recommended making the amendment
effective beginning with the 2021 MLR
reporting year in order to enable issuers
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to continue relying on the related
guidance issued by HHS in 2020.
Response: We agree with the
commenters that this amendment will
benefit consumers. While we do not
believe that the proposed applicability
date overlaps with previous guidance
regarding the timing of rebates provided
in the form of premium credits, as that
guidance applied to the 2019 MLR
reporting year (rebates paid in 2020),313
we agree that there is a potential for
confusion, and therefore we are adding
a clarification that this amendment will
be applicable beginning with rebates
due for the 2020 MLR reporting year.
After consideration of all the
comments received and for the reasons
stated in our responses, we are
finalizing the amendment to § 158.241
as proposed, with a clarification that the
amendment will be applicable
beginning with rebates due for the 2020
MLR reporting year.
G. Part 184—Pharmacy Benefit Manager
Standards Under the Affordable Care
Act
1. Prescription Drug Distribution and
Cost Reporting by Pharmacy Benefit
Managers (§§ 184.10 and 184.50)
PBMs are third-party administrators
that manage the prescription drug
benefit for a contracted entity.314 This
administration typically involves
processing claims, maintaining drug
formularies, contracting with
pharmacies for reimbursement for drugs
dispensed, and negotiating prices with
drug manufacturers.315
The role of PBMs in the prescription
drug landscape, including any impact
on the rising cost of prescription drugs,
is not well understood.316 For example,
PBMs generate revenue, in part, by
retaining the difference between the
amount paid by the health plan for
prescription drugs and the amount the
313 ‘‘Temporary Period of Relaxed Enforcement
for Submitting the 2019 MLR Annual Reporting
Form and Issuing MLR Rebates in Response to the
Coronavirus Disease 2019 (COVID–19) Public
Health Emergency,’’ June 12, 2020. Available at
https://www.cms.gov/files/document/Issuing-2019MLR-Rebates-in-Response-to-COVID-19.pdf.
314 PBMs contract with a variety of health plans,
including, but not limited to, individual and small
group health plans, large group and self-insured
plans, and Medicare Part D drug plans. In this
section, we only reference PBMs that contract with
a health insurance company to administer the
prescription drug benefit for QHPs.
315 ‘‘Pharmacy Benefit Managers,’’ Health Affairs
Health Policy Brief, September 14, 2017.
Available at https://www.healthaffairs.org/do/
10.1377/hpb20171409.000178/full/.
316 Elizabeth Seeley and Aaron S. Kesselheim.
‘‘Pharmacy Benefit Managers: Practices,
Controversies, and What Lies Ahead,’’
Commonwealth Fund, March 2019. Available at
https://doi.org/10.26099/n60j-0886.
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PBM reimburses pharmacies, a practice
commonly referred to as ‘‘spread
pricing.’’ While estimates report the
increasing prevalence of spread pricing
in private health insurance plans,317
detailed data on the practice has
generally not been collected by plans or
by any state or federal regulatory body.
We proposed to add part 184 to 45
CFR subchapter E to codify in regulation
the statutory requirement that PBMs
under contract with QHP issuers report
the data described at section 1150A(b)
of the Act to the Secretary and to each
QHP for which the PBM administers the
prescription drug benefit.
At proposed § 184.10(a)(1), we
explained that new part 184 is based on
section 1150A of the Act. At proposed
§ 184.10(b), we proposed that the scope
of new part 184 establishes standards
for PBMs that administer prescription
drug benefits for health insurance
issuers which offer QHPs with respect
to the offering of such plans. We also
proposed definitions for part 184 at new
§ 184.20. Except for the definition of
pharmacy benefit manager, these
proposed definitions would codify
terms already in use in parts 144 and
155 of subchapter B of subtitle A of title
45 of the Code of Federal Regulations.
As part of the ACA, Congress passed
section 6005, which added section
1150A to the Act, requiring a PBM
under a contract with a QHP offered
through an Exchange established by a
state under section 1311 of the ACA 318
to provide certain prescription drug
information to the QHP and to Secretary
at such times, and in such form and
manner, as the Secretary shall specify.
Section 1150A(b) of the Act addresses
the information that a QHP issuer and
their PBM must report. Section
1150A(c) of the Act requires the
Secretary to keep the information
reported confidential and specifies that
the information may not be disclosed by
the Secretary or by a plan receiving the
information, except that the Secretary
may disclose the information in a form
which does not disclose the identity of
a specific PBM, plan, or prices charged
for drugs for certain purposes.319
317 See ‘‘The Prescription Drug Landscape,
Explored.’’ Available at https://www.pewtrusts.org/
-/media/assets/2019/03/the_prescription_drug_
landscape-explored.pdf.
318 This includes an FFE, as a Federal Exchange
may be considered an Exchange established under
section 1311 of the ACA. King v. Burwell, 576 U.S.
988 (2015).
319 As noted earlier in this preamble, the purposes
are: As the Secretary determines to be necessary to
carry out Section 1150A or part D of title XVIII; to
permit the Comptroller General to review the
information provided; to permit the Director of the
Congressional Budget Office to review the
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In the 2012 Exchange Final Rule, we
codified the requirements of section
1150A of the Act, as it applies to QHPs,
at § 156.295.320 On January 1, 2020 321
and on September 11, 2020,322 we
published Federal Register notices and
solicited public comment on collection
of information requirements detailing
the proposed collection envisioned by
section 1150A of the Act, as referenced
earlier. As noted earlier in this
preamble, we proposed to revise
§ 156.295 to state that where a QHP
issuer does not contract with a PBM to
administer the prescription drug benefit
for QHPs, the QHP issuer will report the
data required by section 1150A of the
Act to HHS.
We proposed to add § 184.50(a) to
state that where a PBM contracts with
an issuer of QHPs to administer the
prescription drug benefit for their QHPs,
the PBM is required to report the data
required by section 1150A(b) of the Act
to the QHP and to the Secretary, at such
times, and in such form and manner, as
the Secretary shall specify. While we
acknowledge that this section applies to
both the QHP issuer and their PBMs to
report this data, we proposed to
implement section 1150A to require
PBMs to report this data directly to the
Secretary, and only to require the QHP
issuer to report the data only when the
QHP issuer does not contract with a
PBM to administer the prescription drug
benefit for their QHPs, as further
discussed in the preamble to § 156.295
in this final rule.
We proposed to add § 184.50(a)(1)
through (3) to require these PBMs to
report the data described at section
1150A(b) of the Act to the Secretary.
The data proposed to be collected, as
required by section 1150A, are: The
percentage of all prescriptions that were
provided through retail pharmacies
compared to mail order pharmacies, and
the percentage of prescriptions for
which a generic drug was available and
dispensed (generic dispensing rate), that
is paid by the health benefits plan or
PBM under the contract; 323 the
information provided; and, to States to carry out
section 1311 of the ACA.
320 Section 1150A(a)(1) also authorizes the
collection of data from PBMs that manage
prescription drug coverage under contract with a
Prescription Drug Plan sponsor of a prescription
drug plan or a Medicare Advantage organization
offering a Medicare Advantage prescription drug
plan.
321 85 FR 4993 through 4994.
322 85 FR 56227 through 56229.
323 As stated above in the preamble for § 156.295,
section 1150A(b)(1) requires the Secretary to collect
data by pharmacy type. However, we are aware that
it is not currently possible to report such data by
pharmacy type because pharmacy type is a not
standard classification currently captured in
industry databases or files. To reduce burden, we
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aggregate amount, and the type of
rebates, discounts, or price concessions
(excluding bona fide service fees, which
include but are not limited to
distribution service fees, inventory
management fees, product stocking
allowances, and fees associated with
administrative services agreements and
patient care programs (such as
medication compliance programs and
patient education programs 324) that the
PBM negotiates that are attributable to
patient utilization under the plan, and
the aggregate amount of the rebates,
discounts, or price concessions that are
passed through to the plan sponsor, and
the total number of prescriptions that
were dispensed; and the aggregate
amount of the difference between the
amount the health benefits plan pays
the PBM and the amount that the PBM
pays retail pharmacies (spread pricing),
and mail order pharmacies, and the total
number of prescriptions that were
dispensed.
At new § 184.50(b) and (c), we also
proposed to codify the confidentiality
and penalty provisions that appear at
§ 1150A(c) and (d) to PBMs which
administer the prescription drug
benefits for QHP issuers.
We sought comment on these
proposals.
We received public comments on the
proposed updates to prescription drug
distribution and cost reporting by
pharmacy benefit managers (§§ 184.10
and 184.50). We have consolidated the
description of the public comments
received in response to this proposal at
Part 184 as part of the discussion in the
preamble above for § 156.295. Please
refer to that section for our responses to
those comments received.
After consideration of all the
comments received and for the reasons
stated in our responses, we are
finalizing this policy as proposed.
IV. Implementation of the Decision in
City of Columbus, et al. v. Cochran
On March 4, 2021, the United States
District Court for the District of
Maryland decided City of Columbus, et
are not finalizing collecting data by pharmacy type
at this time. We intend to collect this information
at a time when the imposition of such a
requirement would pose reasonable burden. We
seek comment on ways that we may impose the
collection of data by pharmacy type in the future
without imposing unreasonable burden on the
industry.
324 This definition of bona fide service fees was
finalized at § 156.295 in the 2012 Exchange Final
Rule at 77 FR 18432. There, we finalized this
definition to align with the definition of bona fide
service fees finalized in the Medicare Program;
Changes to the Medicare Advantage and the
Medicare Prescription Drug Benefit Programs for
Contract Year 2013 and Other Changes final rule.
See 77 FR 22072 at 22093.
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al. v. Cochran, No. 18–2364, 2021 WL
825973 (D. Md. Mar. 4, 2021). The court
reviewed nine separate policies we had
promulgated in the ‘‘Patient Protection
and Affordable Care Act; HHS Notice of
Benefit and Payment Parameters for
2019’’ (83 FR 16930) published in the
Federal Register on April 17, 2018 (the
2019 Payment Notice). The court upheld
five of the challenged policies but
vacated four others. Specifically, the
court vacated the following portions of
the 2019 Payment Notice:
1. The 2019 Payment Notice’s
extension of the elimination of federal
reviews of network adequacy of
qualified health plans offered through
the FFEs in certain circumstances by
incorporating the results of the states’
reviews, first finalized in rulemaking in
the Market Stabilization final rule 325
(83 FR 17024 through 17026).
2. The 2019 Payment Notice’s
cessation of the practice of designating
some plans in the FFEs as ‘‘standardized
options’’ in an effort to encourage
innovation in the individual market (83
FR 16974 through 16975).
3. The 2019 Payment Notice’s
modification of Exchange income
verification requirements for resolving
data matching issues related to
eligibility for advance payments of
premium tax credits to require an
individual who attests to a household
income within 100 percent to 400
percent of the federal poverty level
(FPL), but whose income according to
trusted electronic data sources is below
100 percent FPL, to submit additional
documentation supporting the attested
to household income (83 FR 16985
through 16987).
4. The 2019 Payment Notice’s
amendment of medical loss ratio
requirements to allow issuers to submit
either a detailed, itemized report of
quality improvement activity (QIA)
expenditures or to report a single, fixed
QIA amount (83 FR 17032 through
17036).
We intend to implement the court’s
decision as soon as possible. However,
we will not be able to fully implement
those aspects of the court’s decision
regarding network adequacy review and
standardized options in time for issuers
to design plans and for Exchanges to be
prepared to certify such plans as QHPs
for the 2022 plan year, and therefore,
intend instead to address these issues in
time for plan design and certification for
plan year 2023. Specifically, in order to
implement the court’s ruling on the
network adequacy provision, HHS will
need to set up a new network adequacy
review process, and issuers will need
325 82
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sufficient time before the applicable
plan year to assess that their networks
meet the new regulatory standard,
submit network information, and have
the information reviewed by applicable
regulatory authorities in order for their
plans to be certified as QHPs. Issuers
might also have to contract with other
providers in order to meet the standard.
This is not feasible for the QHP
certification cycle for the 2022 plan
year, since the annual QHP certification
cycle generally begins in late April of
each year. CMS’ planning for the 2022
plan year had already taken into
account the provisions that the court
vacated before the court issued its
decision, and it is too late now to revisit
those factors if the process is to go
forward in time for plans to be certified
by open enrollment later this year. We
plan to propose specific steps to address
implementation of this aspect of the
court’s decision in future rulemaking.
At that time, we might also address
other aspects of the court’s decision,
including potentially some provisions
that the court upheld.
The same is true for the court’s
decision regarding standardized
options. With the rule removing
standardized options vacated, we need
to design and propose new standardized
options that otherwise meet current
market reform requirements, and we
must also alter the Federal Exchange
eligibility and enrollment platform
system build (HealthCare.gov) to
provide differential display of such
plans. Web-brokers that are direct
enrollment partners in FFE and SBE–FP
states will also need time to adjust their
respective systems to provide
differential display of such plans on
their non-Exchange websites.326 We will
need to design, propose and finalize
such plans in time for issuers to design
their own standardized options in
accord with HHS’s parameters and
submit those plans for approval by
applicable regulatory authorities and for
certification by Exchanges as qualified
health plans. Again, this is not feasible
for the QHP certification cycle for the
2022 plan year, since the annual QHP
certification cycle generally begins in
late April of each year. CMS’ planning
for the 2022 plan year had already taken
into account the provisions that the
court vacated before the court issued its
decision, and it is too late now to revisit
those factors if the process is to go
forward in time for plans to be
developed, reviewed and certified by
open enrollment later this year.
Although standardized options have
been required in the past, we will not
326 See
45 CFR 155.220(c)(3)(i)(H).
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be able to simply reinstate the same
standardized option plans that
previously existed. Specifically, in the
last iteration of standardized options we
finalized in the 2018 Payment Notice,
we created three sets of standardized
options based on FFE and SBE–FP
enrollment data and state cost-sharing
laws. The basis on which we created
these three sets of options as well as a
number of other factors in the
individual market) have changed
considerably since the last iteration of
standardized options in 2018. Several
such changes include modifications in
the most popular plans’ cost-sharing
structures, shifting enrollment trends,
the introduction of new state cost
sharing laws that affect standardized
option plan designs, and states with
FFEs or SBE–FPs transitioning to SBEs
(which affects the number of sets of
options). As a result of these changes,
the sets of standardized options and the
design of the options themselves must
be adjusted accordingly. Further, we do
not have sufficient time prior to the
2022 plan year to conduct a full analysis
of the changes that have occurred in the
last several years in order to design and
propose adequate standardized options
suitable for the current environment.
Additionally, in prior years, we
proposed and finalized standardized
option plan designs prior to the start of
the QHP certification cycle for the
following plan year such that issuers
had sufficient time to assess these
standardized options in order to
determine if they wanted to offer them
and take the steps necessary to do so.
Even if we were able to design
standardized option plans prior to the
2022 plan year, issuers would not have
a sufficient amount of time to
meaningfully assess any standardized
options we might propose and decide
whether or not to offer them.
For these reasons, we intend to
resume the designation of standardized
options and propose specific designs in
more complete detail in the 2023
Payment Notice. As such, we will seek
comment during the corresponding
comment period. In the interim, we
encourage states with FFEs or SBE–FPs
and unique cost-sharing laws that could
affect standardized plan design to
contact us to discuss their
circumstances.
We can take more immediate steps to
begin to implement the court’s holdings
regarding income verification and QIA
reporting. First, as discussed more fully
later in this section, we are exercising
flexibilities under the Administrative
Procedure Act (APA) to rescind or
replace in this final rule relevant parts
of the income verification and MLR
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24265
regulations the court invalidated.
Second, we plan to implement
accompanying operational policies to
begin implementation of the court’s
order with respect to the impacted
income verification regulation.
Specific to income verification, we are
deleting the invalidated provision
requiring certain consumers to provide
information for income verification
purposes. We note that HHS’s systems
automatically generate requests for
income verification information for
those with income data matching issues,
and it will take some time for us to
redesign this function. Until that
redesign is complete, however, HHS
will be able to identify consumers who
receive requests for verification
information and we have established a
manual process to notify those
recipients that they need not provide
the requested information.
As to QIA reporting, we are deleting
the invalidated provision to remove the
option to report the fixed standardized
amount of QIA. The regulation will thus
revert to requiring issuers to itemize
QIA expenditures on a prospective basis
beginning with the 2020 MLR reporting
year (MLR reports due by July 31,
2021).327 However, we are not requiring
issuers to incur the burden or expense
of revising MLR Annual Reporting
Forms from prior years or otherwise
updating QIA expenditure amounts
reported for prior years. In addition,
because MLR calculations are based on
a 3-year average,328 there will be a
transition period during which these
averages will continue to reflect in part
the standardized QIA expenditure
amounts for those issuers that reported
such amounts in the 2017–2019 MLR
reporting years.329
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 the Office of
Management and Budget (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
327 With the removal of § 158.221(b)(8), CMS
regulations require issuers to separately track and
itemize QIA expenditures. See 45 CFR 158.150,
158.151 and 158.221.
328 See 42 U.S.C. 300gg–18(b)(1)(B)(ii) and 45 CFR
158.220(b).
329 For example, calculations for the 2020 MLR
Reporting Year are based on 2018, 2019 and 2020
data.
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paragraphs with an estimate of the
annual burden, summarized in Table 12.
To fairly evaluate whether an
information collection should be
approved by OMB, section 3506(c)(2)(A)
of the PRA requires that we solicit
comment on the following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimate of the
information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
We solicited public comment on each
of the required issues under section
3506(c)(2)(A) of the PRA for the
following ICRs.
A. Wage Estimates
To derive wage estimates, we
generally used data from the Bureau of
Labor Statistics to derive average labor
costs (including a 100 percent increase
for fringe benefits and overhead) for
estimating the burden associated with
the ICRs.330 Table 11 in this final rule
presents the mean hourly wage, the cost
of fringe benefits and overhead, and the
adjusted hourly wage.
As indicated, employee hourly wage
estimates have been adjusted by a factor
of 100 percent. This is necessarily a
rough adjustment, both because fringe
benefits and overhead costs vary
significantly across employers, and
because methods of estimating these
costs vary widely across studies.
Nonetheless, there is no practical
alternative, and we believe that
doubling the hourly wage to estimate
total cost is a reasonably accurate
estimation method.
29-2052
43-6014
alist
ormation Systems
0 erations Mana er
B. ICRs Regarding Submission of
Adjusted Premium Amounts for Risk
Adjustment
45 CFR 153.610 and 153.710 provide
that issuers of a risk adjustment covered
plan must provide HHS with access to
risk adjustment data through a
dedicated distributed data environment
(EDGE server), in a manner and
timeframe specified by HHS. We clarify
that, for purposes of risk adjustment
data submissions in the 2021 benefit
year and beyond when a declared PHE
is in effect and HHS permits temporary
premium credits, issuers that choose to
provide temporary premium credits
must submit the adjusted (that is, lower)
plan premiums for those months,
instead of the unadjusted plan
premiums. HHS is finalizing the
proposal to require issuers to submit
adjusted plan premiums to their EDGE
servers for all enrollees whom the issuer
has actually provided temporary
330 See May 2019 Bureau of Labor Statistics,
Occupational Employment Statistics, National
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43-3021
11-1011
13-1198
15-1121
15-1251
$19.53
$93.20
$38.57
$46.23
$44.53
$19.53
$93.20
$38.57
$46.23
$44.53
$39.06
$186.40
$77.14
$92.46
$89.06
11-3021
$75.19
$75.19
$150.38
11-1021
13-2011
00-0000
$59.15
$38.23
$25.72
$59.15
$38.23
$25.72
$118.30
$76.46
$51.44
premium credits as a reduction to the
corresponding benefit year premiums.
We do not believe that issuers who elect
to provide these temporary premium
credits during a declared PHE will incur
additional operational burden
associated with EDGE server data
submissions as a result of these
requirements because we expect issuers’
premium reporting systems will already
be configured to enable issuers to
upload the billable premiums actually
charged to enrollees for the applicable
benefit year to the EDGE server.
Additionally, the current EDGE server
operational guidance for the risk
adjustment program allows issuers to
submit billable premium changes so
there will be no changes to the data
submission rules. The burden related to
this information collection is currently
approved under OMB control number
0938–1155 (Standards Related to
Reinsurance, Risk Corridors, Risk
Adjustment, and Payment Appeals). The
information collection request expires
on February 23, 2021.
Occupational Employment and Wage Estimates.
Available at https://www.bls.gov/oes/2019/may/
oes_nat.htm#00-0000.
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C. ICRs Regarding Direct Enrollment
(§§ 155.220 and 155.221)
At § 155.220(c)(6), we are finalizing
the proposal that a web-broker must
demonstrate operational readiness and
compliance with applicable
requirements prior to the web-broker’s
non-Exchange website being used to
complete an Exchange eligibility
application or a QHP selection, which
may include submission of a number of
artifacts of documentation or
completion of certain testing processes.
The required documentation may
include operational data including
licensure information, points of contact,
and third-party relationships; security
and privacy assessment documentation,
including penetration testing results,
security and privacy assessment reports,
vulnerability scan results, plans of
action and milestones, and system
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security and privacy plans; and an
agreement between the web-broker and
HHS documenting the requirements for
participating in the applicable direct
enrollment program. We estimate that it
will take up to 2 hours for a Business
Operations Specialist (at an hourly cost
of $77.14) to complete and submit the
required operational data and webbroker agreement to HHS each year. We
estimate that it will take up to 17 hours
for a Business Operations Specialist (at
an hourly cost of $77.14) to complete
and submit the required security and
privacy assessment documentation to
HHS. The total burden for each webbroker would be approximately 19
hours, with an equivalent cost of
approximately $1,466. Based on current
web-broker participation and potential
market size, we estimate that 30 webbrokers will participate. We estimate
that these data collections will have an
annual burden of 570 hours with a cost
of approximately $43,970.
We are finalizing the proposal to add
additional detail to the operational
readiness requirement in § 155.221(b)(4)
for direct enrollment entities. In
§ 155.221(b)(4), we require that a direct
enrollment entity must demonstrate
operational readiness and compliance
with applicable requirements prior to
the direct enrollment entity’s website
being used to complete an Exchange
eligibility application or a QHP
selection, which may include
submission of a number of artifacts of
documentation or completion of various
testing or training processes. The
required documentation may include
business audit documentation
including: Notices of intent to
participate including auditor
information; documentation packages
including privacy questionnaires,
privacy policy statements, and terms of
service; and business audit reports
including testing results. The required
documentation may also include
security and privacy audit
documentation including:
Interconnection security agreements;
security and privacy controls
assessment test plans; security and
privacy assessment reports; plans of
action and milestones; privacy impact
assessments; system security and
privacy plans; incident response plans;
vulnerability scan results; and an
agreement between the direct
enrollment entity and HHS
documenting the requirements for
participating in the applicable direct
enrollment program. We estimate that
for each direct enrollment entity it will
take up to 9 hours for a Business
Operations Specialist (at an hourly cost
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of $77.14) to complete and submit a
typical documentation package and
related information to HHS each year.
Based on current EDE participation and
potential market size, we estimate that
77 EDE entities will participate in a
manner such that they will be required
to submit this type of information, and
therefore, this data collection will have
an annual burden of 693 hours with an
annual cost of approximately $53,458.
In addition, we estimate that it will
take up to 72 hours for an Auditor (at
an hourly cost of $76.46) to complete
and submit a business requirements
audit package for a direct enrollment
entity, including audit report and
testing results, to HHS. Based on current
EDE participation and potential market
size, we estimate that 4 EDE entities will
participate, and therefore this data
collection would have an annual burden
of 288 hours with a cost of
approximately $22,020.
We also estimate that it will take up
to 122 hours for an Auditor (at an
hourly cost of $76.46) to complete and
submit a security and privacy audit
package for a direct enrollment entity to
HHS each year. Based on current EDE
participation and potential market size,
we estimate that 14 EDE entities will
participate, and therefore this data
collection will have an annual burden of
1,708 hours with a cost of
approximately $130,594.
We are finalizing these burden
estimates as proposed.
D. ICRs Regarding Income
Inconsistencies (§ 155.320(c))
We anticipate that removing the
income verification requirements for
resolving data matching issues will
reduce burden on those consumers who
are identified and notified as having this
income inconsistency, saving them
approximately 45 minutes since they
will not be required to complete
associated questions in the application
or submit supporting documentation.
Based on historical data from the FFE,
HHS estimates that approximately
295,000 inconsistencies are generated at
the household level. Therefore,
eliminating these inconsistencies will
reduce burden by approximately
221,250 hours. Using the average hourly
wage for all occupations (at an hourly
cost $51.44 per hour), we estimate that
the annual reduction in cost for each
consumer will be approximately $39,
and the annual cost reduction for all
consumers who would have generated
this income inconsistency will be
approximately $11,381,100.
The burden related to this information
collection is approved under OMB
control number 0938–1191 (Data
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Collection to Support Eligibility
Determinations for Insurance
Affordability Programs and Enrollment
through Health Insurance Marketplaces,
Medicaid and Children’s Health
Insurance Program Agencies), which
will be revised to account for this
reduced burden. The approval for this
information collection expires on
September 30, 2022.
E. ICRs Regarding Prescription Drug
Distribution and Cost Reporting by QHP
Issuers (§ 156.295) and PBMs (§ 184.50)
We are finalizing the proposal to
revise § 156.295 and add § 184.50 to
require QHP issuers or PBMs that
contract with QHP issuers to report the
data envisioned by section 1150A. We
have not previously collected this data;
therefore, the burden associated with
these proposals will reflect the
imposition of the burden for a new
collection, and not merely the burden
created by changes to existing regulatory
text. On January 1, 2020 331 and on
September 11, 2020,332 we published
notices in the Federal Register and
solicited public comment on the burden
related to these ICRs. Here, we
replicated the discussion regarding
burden from the information collection
published in September 2020 and
solicited a third round of public
comment on the burden associated with
this collection.
The burden associated with this
collection is attributed to QHP issuers
and PBMs, and the burden estimates
were developed based on our previous
experience with QHP information
reporting activities. We stated that we
were unaware of any QHP issuer that
does not contract with a PBM to
administer their prescription drug
benefit. While we invited comment on
whether any QHP issuer does not use a
PBM, we did not estimate any burden
for a QHP issuer to submit data directly.
The following burden estimate reflects
our expectation that all data will be
submitted by PBMs.
Across all 50 states and the District of
Columbia, we estimate approximately
40 PBMs will be subject to the reporting
requirement. We further estimate that
these PBMs, taken as a whole, annually
contract with approximately 275 QHP
issuers to administer the prescription
drug benefit for their QHPs. We estimate
that the 275 QHP issuers offer 7,000
total QHPs annually or 25.4 QHPs per
QHP issuer. Thus, we estimate that each
of the 40 PBMs will report data for 175
QHPs on average each year. We
understand that some of these PBMs
331 85
332 85
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will contract with more QHP issuers
than others, and as such, the reporting
requirement will vary per PBM.
Each PBM that administers pharmacy
benefits for a QHP issuer will be
required to complete a web form and a
data collection instrument. The web
form will collect data aggregated at the
QHP issuer level for all plans and
products offered by the QHP issuer
combined. The web form will also
require the reporting of an allocation
methodology that is selected by the
PBM to allocate data, where necessary.
We expect submitters to maintain
internal documentation of the allocation
methodologies chosen, as we may need
to follow-up with the submitter to better
understand the methodology.
PBMs will prepare and submit one
data collection instrument per QHP
issuer by Health Insurance Oversight
System (HIOS) ID. Each data collection
instrument will contain information
regarding each plan the issuer offers. We
estimated that an average PBM will
report information for 5,200 NDCs for
each QHP. The reports must include the
data for all of the plans that the QHP
issuer offered in their QHPs in the
applicable plan year, even if they have
no data to report for that plan year.
Each submitter will also be required
to complete an attestation which
confirms the data submitted is accurate,
complete, and truthful.
We estimate that 40 PBMs will submit
data for this reporting requirement, each
submitting data for 175 QHPs on
average. For each PBM, we estimate that
it will take compliance officers
approximately 570 hours (for an annual
cost of approximately $39,934 at a rate
of $70.06 per hour), pharmacy
technician 350 hours (for an annual cost
of $11,865 at a rate of $33.90 per hour),
secretaries and administrative assistants
175 hours (for an annual cost of $6,594
at a rate of $37.68 per hour), and billing
and posting clerks 175 hours (for an
annual cost of approximately $6,836 at
a rate of $39.06 per hour) to prepare and
submit the information and 8 hours for
a chief executive (for an annual cost of
approximately $1,491.20 at a rate of
$186.40 per hour) to review the
information and complete the
attestation. In total, we estimate it will
take a PBM approximately 1,278 hours
to respond to this reporting requirement
each year on average, for a total annual
cost of approximately $66,719 per PBM
to report data. This estimate will vary by
PBM, since each PBM will report for a
different number of plans, depending on
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the number of QHPs offered by a
particular QHP issuer. Thus, we
estimate the total annual burden for all
40 PBMs combined to be approximately
51,120 hours or $2,668,796.
We estimate that PBMs will incur
burden to complete a one-time technical
build to implement the changes
necessary for this collection, which will
involve activities such as planning,
assessment, budgeting, contracting, and
reconfiguring systems to generate data
extracts that conform to this collection’s
requirements. We expect that this onetime burden will be incurred primarily
in 2021. We estimate that, for each PBM,
on average, it will take project
management specialists and business
operations specialists 500 hours (at
$77.51 per hour), computer system
analysts 1,300 hours (at $92.46 per
hour), computer programmers 2,080
hours (at $89.06 per hour), computer
and information systems managers 40
hours (at $150.38 per hour) and general
and operations managers 50 hours (at
$118.30 per hour) to complete this task.
The total one-time burden for a PBM
would be approximately 3,970 hours on
average, with an equivalent cost of
approximately $356,128. For all 40
PBMs, the total one-time burden will be
158,800 hours for a total cost of
approximately $14.2 million. For all 40
PBMs, the average annual burden in
2021–2023 incurred for implementation
and reporting will be approximately
87,000 hours with an average annual
cost of approximately $6.5 million.
We estimate that 275 QHP issuers will
need to identify for the PBMs each year
which plans are QHPs. For each QHP
issuer, we estimate that it will take
secretaries and administrative assistants
7 hours (for an annual burden of
$263.76 at a rate of $37.68 per hour) to
identify, on average, approximately 25
QHPs offered by a QHP issuer. This
estimate will vary by QHP issuer, since
each QHP issuer would identify a
different number of QHPs, depending
on the number of QHPs offered by a
particular QHP issuer. Thus, we
estimate the total annual burden for all
275 QHP issuers combined to be 1,925
hours or approximately $72,534.
Comment: We received one comment
that inquired whether QHPs that are
part of integrated systems comprised of
health plans that operate their own
pharmacy network are subject to this
reporting requirement, and if so,
whether such a system would qualify as
a PBM or QHP issuer under this burden
estimate.
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Response: While there is nothing in
the statute that would allow exemption
from this reporting requirement based
on the business structure of reporting
entities, we acknowledge that some
entities may have initial difficulty
complying with the instructions and
reporting mechanisms described in the
ICR. We intend to provide robust
technical assistance to all reporting
entities to minimize the upfront burden
created by this collection. For purposes
of this estimate, we consider such a
system a PBM that will report this data.
We are finalizing as proposed.
F. ICRs Regarding Medical Loss Ratio
(§§ 158.103, 158.130, 158.240, 158.241)
We are finalizing our proposal to
amend § 158.103 to establish the
definition of prescription drug rebates
and other price concessions that issuers
must deduct from incurred claims for
MLR reporting and rebate calculation
purposes under § 158.140(b)(1)(i). We
are also finalizing the proposal to add a
new § 158.240(g) to explicitly allow
issuers to prepay a portion or all of their
estimated MLR rebates to enrollees for
a given MLR reporting year, and to
establish a safe harbor allowing such
issuers, under certain conditions, to
defer the payment of rebates remaining
after prepayment until the following
MLR reporting year. In addition, we are
finalizing the proposal to amend
§ 158.241(a)(2) to allow issuers to
provide MLR rebates in the form of a
premium credit prior to the date that the
rules currently provide. Finally, are
finalizing the proposal to clarify MLR
reporting and rebate requirements for
issuers that choose to offer temporary
premium credits during a PHE declared
by the Secretary of HHS in the 2021
benefit year and beyond when such
credits are permitted by HHS. We
anticipate that implementing these
provisions will require minor changes to
the MLR Annual Reporting Form, but
will not significantly increase the
associated burden. The burden related
to this information collection was
approved under OMB control number
0938–1164 (Medical Loss Ratio Annual
Reports, MLR Notices, and
Recordkeeping Requirements (CMS–
10418)). The control number expired on
October 31, 2020. A revised collection
of information seeking OMB approval
for an additional 3 years is currently
under review by OMB.
G. Summary of Annual Burden
Estimates for Requirements
E:\FR\FM\05MYR2.SGM
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TABLE12 A
IR
dk
I
C
dR
I
-
I
rf - R
I
24269
t
I
,
'
H. Submission of PRA-Related
Comments
We have submitted a copy of this final
rule to OMB for its review of the rule’s
information collection 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 (CMS–
9914–F2), please visit the CMS website
at www.cms.hhs.gov/
PaperworkReductionActof1995, or call
the Reports Clearance Office at 410–
786–1326.
VI. Waiver of Proposed Rulemaking
and Delay in Effective Date
We ordinarily publish a notice of
proposed rulemaking in the Federal
Register and invite public comment on
the proposed rule before the provisions
of the rule are finalized, either as
proposed or as amended, in response to
public comments and take effect, in
accordance with the APA (Pub. L. 79–
404), 5 U.S.C. 553 and, where
applicable, section 1871 of the Act.
Specifically, 5 U.S.C. 553 requires the
agency to publish a notice of proposed
rulemaking in the Federal Register that
includes a reference to the legal
authority under which the rule is
proposed, and the terms and substances
of the proposed rule or a description of
the subjects and issues involved.
Section 553(c) of the APA further
requires the agency to give interested
parties the opportunity to participate in
the rulemaking through public comment
before the provisions of the rule take
effect. Section 553(b)(B) of the APA
authorize the agency to waive these
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procedures, however, if the agency finds
good cause that notice and comment
procedures are impracticable,
unnecessary, or contrary to the public
interest and incorporates a statement of
the finding and its reasons in the rule
issued.
Section 553(d) of the APA ordinarily
requires a 30-day delay in the effective
date of a final rule from the date of its
publication in the Federal Register.
This 30-day delay in effective date can
be waived, however, if an agency finds
good cause to support an earlier
effective date. Finally, the Congressional
Review Act (CRA) (Pub. L. 104–121,
Title II) requires a 60-day delay in the
effective date for major rules unless an
agency finds good cause that notice and
public procedure are impracticable,
unnecessary, or contrary to the public
interest, in which case the rule shall
take effect at such time as the agency
determines 5 U.S.C. 801(a)(3) and
808(2).
In City of Columbus, as explained
earlier in the preamble, the district court
vacated four provisions of the 2019
Payment Notice. Implementing the
court’s order as to two of those
provisions, regarding income
verification and QIA expenditure
reporting, can be accomplished
immediately. We find that it is
necessary and in the public interest to
implement these two provisions quickly
to provide immediate notice to the
regulated community on what standards
will apply and to prevent injury to the
public. A delay in implementing the
court’s decision regarding these two
provisions would cause unnecessary
harm. HHS needs to move quickly on
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these two provisions to fill the
regulatory void caused by the court’s
vacatur. Without immediate action,
there will be confusion among issuers
and consumers regarding what is
expected, which we find to be contrary
to the public interest. We find it
impractical to wait months to clarify
what standards apply after the vacatur
of the two policies. In this rule we have
explained the impact of the court’s
decision.
With regard to MLR QIA
expenditures, we need to clarify that
CMS will implement the court’s
decision going forward, that is, as CMS
explained above, issuers will have to
report actual data and cannot report
standardized QIA expenditure amounts
for 2020 and future MLR reporting
years, but issuers will not be required to
go back and correct their MLR Annual
Reporting Forms for 2017–2019. We
find it necessary to immediately clarify
issuer reporting obligations to avoid
issuer confusion regarding how to report
QIA on the 2020 MLR Annual Reporting
Forms (due by July 31, 2021) and to
mitigate the potential of any delay or
inaccuracy in providing consumers
rebates that may be owed for the 2020
MLR reporting year. In vacating the QIA
provision of the 2019 Payment Notice,
the court found that the statute requires
the itemization of QIA expenditures and
does not permit a reporting of such
expenses as a standard percentage of
earned premium. In light of the court’s
decision, additional public comments
could not meaningfully impact whether
CMS is authorized to allow the
standardized reporting of QIA expenses.
For this additional reason, we find good
E:\FR\FM\05MYR2.SGM
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'
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§ 155.220(c)(6)
0938-NEW
19
$43,970
$43,970
30
30
570
§ 155.221(b)(4)
0938-NEW
$53,458
$53,458
77
77
9
693
§ 155.221(b)(4)0938-NEW
4
4
288
$22,020
$22,020
72
Business
Requirements Audit
§ 155.221(b)(4)0938-NEW
14
14
122
1,708
$130,594
$130,594
Security and Privacy
Audit
0938-NEW
156.295 & 184.50
40
40
2,175
87,000
$6,527,571
$6,527,571
(PBM Burden)
0938-NEW
156.295 & 184.50
275
275
7
1,925
$72,534
$72,534
(QHP Issuer Burden)
Total
440
440
92,184
$6,850,147
$6,850,147
Note: There are no capital/maintenance costs associated with the ICRs contained in this rule; therefore, we have
removed the associated column from Table 12.
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cause to dispense with any delay in
implementing the court’s decision on
this issue to allow for a comment
period, because such a delay would be
unnecessary.
With regard to income verification
requirements, in which the court
vacated the requirement imposed on
consumers to provide verification if
certain sources of information indicated
a variance from a consumer’s reported
income, we find it necessary and in the
public interest to immediately suspend
enforcement of these provisions to
ensure that consumers are not
improperly denied advance payments of
premium tax credits. Any delay in
clarifying what is required after the
court’s decision will create confusion
and interfere with consumers’ access to
health coverage. We have concerns that
any delay in implementing clarification
of this rule could lead eligible
consumers to improperly losing
coverage if they are unable to produce
documentation compliant with the
income verification requirements.
Without immediate changes, the public,
and particularly consumers who are
eligible for advance payments of the
premium tax credits, may be deterred in
accessing advance payments of the
premium tax credits that allow them to
afford coverage.
For these reasons, we find it necessary
and in the public interest to move
quickly and without the delay that
would accompany a period for notice
and comment to address the court’s
decision regarding the QIA provisions
and income verification requirements.
We find good cause for waiving noticeand-comment rulemaking and the delay
in effective date given the decision of
the district court and the public interest
in expeditious implementation of the
district court’s ruling. Immediately
taking the steps described in section IV.
of this final rule to implement the
court’s decision regarding income
verification and QIA reporting,
including removing the regulation text
at §§ 155.320(c) and 158.221(b)(8)
directly in this final rule rather than
through the normal notice-and-comment
rulemaking cycle and waiving delay of
the effective date, will ensure an
expeditious implementation of those
aspects of the court’s decision and
remove any doubt about what standards
apply after that decision. We believe
rulemaking without notice and
comment for these limited purposes is
a reasonable response to the court’s
order that will minimize confusion over
the current status of our rules in those
two areas. Therefore, we find good
cause to waive notice-and-comment
rulemaking for the provisions in section
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IV. of this final rule, waive delay of the
effective date, and to issue these
changes as part of this final rule.
VII. Regulatory Impact Analysis
A. Statement of Need
This final rule includes standards
related to the risk adjustment program
and cost sharing parameters for the 2022
benefit year and beyond. It also includes
changes related to special enrollment
periods; direct enrollment entities; the
administrative appeals process with
respect to health insurance issuers and
non-federal governmental group health
plans; and the medical loss ratio
program. In addition, it includes
changes to the regulation to require the
reporting of certain prescription drug
information for QHPs or their PBM.
B. Overall Impact
We have examined the impacts of this
rule as required by Executive Order
12866 on Regulatory Planning and
Review (September 30, 1993), Executive
Order 13563 on Improving Regulation
and Regulatory Review (January 18,
2011), the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96–
354), section 202 of the Unfunded
Mandates Reform Act of 1995 (March
22, 1995, Pub. L. 104–4), Executive
Order 13132 on Federalism (August 4,
1999), and the Congressional Review
Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. A
regulatory impact analysis (RIA) must
be prepared for rules with economically
significant effects ($100 million or more
in any 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
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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. HHS has
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, HHS has 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. They will reduce
regulatory burden, reduce
administrative costs for states, ensure
greater market stability, increase
transparency and availability of QHP
survey data, and increase transparency
on the impact of PBMs on the cost of
prescription drugs for QHPs. Through
the reduction in financial uncertainty
for issuers and increased affordability
for consumers, these provisions are
expected to increase access to affordable
health coverage.
Affected entities, such as Exchanges,
issuers and FFE Classic DE and EDE
partners, will incur costs to implement
new special enrollment period
requirements. Issuers will incur costs to
comply with audits and compliance
reviews of risk adjustment covered
plans, reinsurance-eligible plans, and
APTC, CSRs, and user fees
requirements. Web-brokers and direct
enrollment entities will incur costs to
comply with operational readiness
demonstration requirements. QHP
issuers and PBMs will incur costs to
implement and operationalize drug data
reporting. In accordance with Executive
Order 12866, HHS believes that the
benefits of this regulatory action justify
the costs.
Comment: A few commenters stated
that the RIA in the proposed rule was
inadequate.
Response: As explained in the
proposed rule, we are unable to quantify
all the effects of the provisions of this
rule. Therefore, we have included
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qualitative discussions of costs and
benefits related to the provisions in this
final rule.
C. Impact Estimates of the Payment
Notice Provisions and Accounting Table
In accordance with OMB Circular A–
4, Table 13 depicts an accounting
statement summarizing HHS’s
assessment of the benefits, costs, and
transfers associated with this regulatory
action.
This final rule implements standards
for programs that will have numerous
effects, including allowing consumers to
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have continued access to coverage and
health care, and stabilizing premiums in
the individual and small group health
insurance markets and in an Exchange.
We are unable to quantify all benefits
and costs of this final rule. The effects
in Table 13 reflect non-quantified
impacts and estimated direct monetary
costs and transfers resulting from the
provisions of this final rule for health
insurance issuers and consumers.
We are finalizing the risk adjustment
user fee of $0.25 PMPM for the 2022
benefit year to operate the risk
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24271
adjustment program on behalf of
states,333 which we estimate to cost
approximately $60 million in benefit
year 2022. We expect risk adjustment
user fee transfers from issuers to the
federal government to remain steady at
$60 million, the same as those estimated
for the 2021 benefit year.
BILLING CODE 4150–28–P
333 As noted earlier in this rule, no state has
elected to operate the risk adjustment program for
the 2022 benefit year; therefore, HHS will operate
the program for all 50 states and the District of
Columbia.
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Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
TABLE 13: Accounting Statement
Benefits:
Qualitative:
• Continued access to coverage and health care due to new special enrollment periods, and due to change in measure of
premium growth to calculate the premium adjustment percentage index.
• Increased probability that consumers are able to maintain continuous coverage as a result of receiving MLR rebates
sooner.
• Increased transparency on the impact of PBMs on the cost of prescription drugs for QHPs .
Costs:
Estimate
Annualized Monetized ($/year)
- $ 31.57 million
- $ 30.99 million
Year
Dollar
2020
2020
Discount
Rate
7 percent
3 percent
Period Covered
2021-2025
2021-2025
Quantitative:
• Costs incurred by web-brokers and direct enrollment entities to comply with requirements related to demonstration of
operational readiness and compliance with applicable requirements.
Costs
incurred by issuers and PBMs to implement and operationalize drug data reporting, estimated to be
•
approximately $14.2 million in 2021 and approximately $2.7 million in 2022 onwards.
• Reduction in costs to consumers, since certain consumers will no longer be required to provide information for
income verification purposes, estimated to be approximately $11.38 million annually starting in 2021.
Costs
incurred by State Exchanges to complete the necessary system changes to remove functionality for processing
•
data matching issues, estimated to be approximately $3 .15 million in 2021.
• Reduction in operational costs to FFEs and State Exchanges due to the rescission of the requirement to process data
matching issues, estimated to be approximately $4.57 million annually starting in 2021.
• Costs incurred by issuers for audits and compliance reviews of risk adjustment covered plans, audits and compliance
reviews of reinsurance-eligible plans, and audits and compliance reviews of APTC, CSR, and user fee programs,
estimated to be approximately $2.1 million on average annually in 2021-2025.
• Reduction in potential costs to Exchanges since they would not be required to conduct random sampling as a
verification process for enrollment in or eligibility for employer-based insurance when the Exchange reasonably
expects that it will not obtain sufficient verification data, estimated to be savings of $113 million in 2022.
• Regulatory familiarization costs of approximately $83,000 in 2021 .
Qualitative:
• Increased costs due to increases in providing medical services (if health insurance enrollment increases) .
Transfers:
Estimate
Year
Dollar
Discount
Rate
Period Covered
This RIA expands upon the impact
analyses of previous rules and utilizes
the Congressional Budget Office’s (CBO)
analysis of the ACA’s impact on federal
spending, revenue collection, and
insurance enrollment. The ACA ends
the transitional reinsurance program
and temporary risk corridors program
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after the benefit year 2016. Therefore,
the costs associated with those programs
are not included in Table 13 or 14.
Table 14 summarizes the effects of the
risk adjustment program on the federal
budget from fiscal years 2022 through
2026, with the additional, societal
effects of this final rule discussed in this
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RIA. We do not expect the provisions of
this final rule to significantly alter
CBO’s estimates of the budget impact of
the premium stabilization programs that
are described in Table 14.
In addition to utilizing CBO
projections, HHS conducted an internal
analysis of the effects of its regulations
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ER05MY21.029</GPH>
7 percent
2021-2025
$266.1 million
2020
Federal Annualized Monetized
($/year)
3 percent
$277.3 million
2020
2021-2025
$23 million
2020
7 percent
2021-2025
Other Annualized Monetized
($/year)
$23 million
2020
3 percent
2021-2025
Quantitative:
• Federal Transfers: Increase in premium tax credit payments estimated to be approximately $460 million in 2023, $480
million in 2024, and $490 million in 2025, due to the change in measure of premium growth to calculate the premium
adjustment percentage index.
• Other Transfers: Increase in rebate payments from issuers to consumers due to the removal of the option to report a
single QIA activity expense amount equal to 0.8 percent of earned premium, estimated to be $23 million annually
beginning with the 2020 MLR reporting year (rebates payable in 2021 ).
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
on enrollment and premiums. Based on
these internal analyses, we anticipate
that the quantitative effects of the
provisions in this rule are consistent
with our previous estimates in the 2021
Payment Notice for the impacts
24273
associated with the APTC and the
premium stabilization programs.
TABLE 14: Estimated Federal Government Outlays and Receipts for the Risk Adjustment
and Reinsurance Pro rams from Fiscal Year 2022-2026, in billions of dollars334
Risk Adjustment and Reinsurance
6
6
7
7
8
34
Pro am Pa ments
Risk Adjustment and Reinsurance
7
8
34
6
6
7
Pro am Collections
Note: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over
time.
Source: Congressional Budget Office. Net Federal Subsidies Associated With Health Insurance Coverage, 2020 to
2030. March 6, 2020. Available at https://www.cbo.gov/system/files/2020-03/51298-2020-03-healthinsurance.pdf.
1. Health Insurance Reform
Requirements for the Group and
Individual Health Insurance Markets
(§ 147.104)
The revision to § 147.104(b)(4)(ii) will
allow an individual or dependent who
did not receive timely notice of a
triggering event and otherwise was
reasonably unaware that a triggering
event occurred to use the date the
individual knew, or reasonably should
have known, of the occurrence of the
triggering event as the date of the
triggering event for a special enrollment
period to enroll in individual market
coverage through or outside of an
Exchange. This will enable consumers
to maintain continued access to
coverage and health care.
2. CMS Enforcement in Group and
Individual Markets (Part 150) and
Administrative Review of QHP Issuer
Sanctions (Part 156, Subpart J)
We are removing the requirement to
file submissions to the Departmental
Appeals Board in triplicate and instead
require electronic filing. Based on our
experience, such filings are infrequent,
and this proposed change will not have
a significant impact. An entity filing a
submission will experience a small
reduction in costs related to printing
and mailing the submission.
3. Risk Adjustment (Part 153)
The risk adjustment program is a
permanent program created by section
1343 of the ACA that collects charges
from issuers with lower-than-average
334 Reinsurance collections ended in FY 2018 and
outlays in subsequent years reflect remaining
payments to Treasury under section
1341(b)(3)(B)(iv) of the ACA and to CMS for
administrative expenses under section
1341(b)(3)(B)(ii) of the ACA, refunds, and allowable
activities.
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risk populations and uses those funds to
make payments to issuers with higherthan-average risk populations in the
individual, small group, and merged
markets (as applicable), inside and
outside the Exchanges. We established
standards for the administration of the
risk adjustment program in subparts A,
B, D, G, and H of part 153. If a state is
not approved to operate, or chooses to
forgo operating its own risk adjustment
program, HHS will operate risk
adjustment on its behalf. For the 2022
benefit year, HHS will operate a risk
adjustment program in every state and
the District of Columbia. As described
in the 2014 Payment Notice, HHS’s
operation of risk adjustment on behalf of
states is funded through a risk
adjustment user fee. For the 2022
benefit year, we used the same
methodology that we finalized in the
2020 Payment Notice to estimate our
administrative expenses to operate the
program. Risk adjustment user fee costs
for the 2022 benefit year are expected to
remain steady from the prior 2021
benefit year estimates of approximately
$60 million. We estimate that the total
cost for HHS to operate the risk
adjustment program on behalf of all 50
states and the District of Columbia for
2022 will be approximately $60 million,
and the risk adjustment user fee will be
$0.25 PMPM. Because of the constant
costs estimated for the 2022 benefit
year, we expect the final risk adjustment
user fee for the 2022 benefit year to have
no additional financial impact on
issuers of risk adjustment covered plans
or the federal government.
Additionally, for the risk adjustment
factors, we are finalizing an approach to
recalibrate the HHS risk adjustment
models for the 2022 benefit year by
using the 2016, 2017 and 2018 enrolleelevel EDGE data, the same data years
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used for the 2021 benefit year.335 We are
adopting an approach of using the 3
most recent consecutive years of
available enrollee-level EDGE data that
are available in time for incorporating
the data in the draft recalibrated
coefficients published in the proposed
rule for recalibration of the risk
adjustment models for the 2022 benefit
year and beyond. We believe that the
approach of blending (or averaging) 3
years of separately solved coefficients
will provide stability within the risk
adjustment program and minimize
volatility in changes to risk scores from
the 2021 benefit year to the 2022 benefit
year. We are also finalizing the
continuation of a pricing adjustment for
Hepatitis C drugs for all three models
(adult, child and infant). Overall, these
changes make limited changes to the
number and type of risk adjustment
model factors; therefore, we do not
expect these changes to impact issuer
burden beyond the current burden for
the risk adjustment program.
We are finalizing the requirement that
issuers that choose to offer premium
credits to consumers during a declared
PHE, when HHS permits such credits,
must report the adjusted plan premium
amount, taking into account the credits
provided to consumers as a reduction to
premiums for the applicable months for
risk adjustment data submissions for the
2021 benefit year and beyond. We do
not believe that the clarifications
regarding risk adjustment reporting in
this provision will impose additional
administrative burden on health
insurance issuers beyond the effort
already required to submit data to HHS
for the purposes of operating risk
adjustment, as previously estimated in
335 As discussed earlier, the one exception relates
to RXC 09, which involved the use of only 2016 and
2017 enrollee-level data to develop the applicable
2022 benefit year coefficients and interaction terms.
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BILLING CODE 4150–28–C
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Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
the interim final rule on COVID–19 (85
FR 54820).
In the 2021 Payment Notice, HHS
finalized the risk adjustment state
payment transfer formula under the
HHS risk adjustment methodology for
the 2021 benefit year, and reaffirmed
that HHS will continue to operate the
risk adjustment program in a budget
neutral manner. As finalized in this
rule, we will maintain the same
methodology for the 2022 benefit year
and beyond, unless changed through
notice-and-comment rulemaking.336
Therefore, there is no net aggregate
financial impact on health insurance
issuers or the federal government as a
result of the risk adjustment provisions
with respect to the finalized proposals
regarding the methodology, as well as
the premium credit related provisions.
However, while risk adjustment
transfers are net neutral in aggregate, we
recognize that individual issuers may be
financially impacted by reduced
transfers (either lower risk adjustment
payments or lower risk adjustment
charges) if any issuer in the issuer’s
state market risk pool provides premium
credits to enrollees in future benefit
years during a declared PHE when HHS
permits such credits. The extent of this
impact will vary based on the number
of issuers in a state market risk pool that
elect to provide the temporary premium
credits during a declared PHE, the
amount of these premium credits
provided, as well as the market share of
the issuers that provide these premium
credits.
We do not believe that the impact of
this provision will vary from what was
previously estimated in the interim final
rule on COVID–19 (85 FR 54820).
Similar to our analysis of regulatory
impacts in the interim final rule on
COVID–19, we recognize the potential
for financial impacts for individual
issuers as a result of these clarifications.
We believe that if HHS permitted
issuers that provided premium credits
when permitted by HHS during a
declared PHE to submit unadjusted
premiums for the purposes of
calculating risk adjustment, distortions
could occur which could also
financially impact individual issuers.
For example, absent the requirement
that issuers that offer premium credits
report the adjusted, lower premium
amount for risk adjustment purposes, an
issuer with a large market share with
336 As finalized in the 2020 Payment Notice, we
intend to also maintain the high-cost risk pool
parameters with a threshold of $1 million and a
coinsurance rate of 60 percent for the 2020 benefit
year and beyond unless amended through notice
with comment rulemaking. See 84 FR at 17480
through 17484.
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higher-than-average risk enrollees that
provides temporary premium credits
would inflate the statewide average
premium by submitting the higher,
unadjusted premium amount, thereby
increasing its risk adjustment payment.
In such a scenario, a smaller issuer in
the same state market risk pool that
owes a risk adjustment charge, and also
provides premium credits to enrollees,
would pay a risk adjustment charge that
is relatively higher than it would have
been if it were calculated based on a
statewide average that reflected the
actual, reduced premium charged to
enrollees by issuers in the state market
risk pool.
For all of these reasons, we believe
that requiring issuers that offer
temporary premium credits when
permitted by HHS for 2021 and future
benefit years’ coverage to accurately
report to the EDGE server the adjusted,
lower premium amounts actually
charged to enrollees is most consistent
with existing risk adjustment program
requirements. We also believe this
requirement will mitigate the distortions
that would occur if issuers that offer
these temporary premium credits did
not report the actual amounts charged to
enrollees, while avoiding additional
financial burden on issuers, as
compared to an approach that would
permit issuers to report unadjusted
premium amounts.
We also are providing more clarity
regarding audits and establishing
authority to conduct compliance
reviews of issuers of risk adjustment
covered plans by finalizing amendments
to § 153.620(c), with slight
modifications to certain audit
timeframes in response to comments
requesting issuers be provided more
time to provide the initial audit data
submissions and written corrective
action plans. Issuers being audited
under the risk adjustment program will
be required to comply with audit
requirements including participating in
entrance and exit conferences,
submitting complete and accurate data
to HHS in a timely manner, and
providing responses to additional
requests for information from HHS and
to preliminary audit reports in a timely
manner. If an audit results in a finding,
issuers must also provide written
corrective plans in the time and manner
set forth by HHS. We are also codifying
our authority to recoup risk adjustment
(including high-cost risk pool) payments
if they are not adequately substantiated
by the data and information submitted
by issuers during the course of the
audit.
We anticipate that compliance with
risk adjustment program (including
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high-cost risk pool) audits will take 120
hours by a business operations
specialist (at a rate of $77.14 per hour),
40 hours by a computer systems analyst
(at a rate of $92.46 per hour), and 20
hours by a compliance officer (at a rate
of $70.06 per hour) per issuer per
benefit year. The cost per issuer will be
approximately $14,356. While the
number of issuers participating in the
risk adjustment program varies per
benefit year, (for example, there were
751 issuers participating in the risk
adjustment program for the 2016 benefit
year), HHS only intends to audit a small
percentage of these issuers, roughly 30–
60 issuers per benefit year, and intends
to focus these audits on payments under
the high-cost risk pool.337 Depending on
the number of issuers audited each year,
the total cost to issuers being audited
will be between $430,692 and $861,384,
with an average annual cost of
approximately $646,038.
We anticipate that compliance with
risk adjustment program (including
high-cost risk pool) compliance reviews
will take 30 hours by a business
operations specialist (at a rate of $77.14
per hour), 10 hours by a computer
systems analyst (at a rate of $92.46 per
hour), and 5 hours by a compliance
officer (at a rate of $70.06 per hour) per
issuer per benefit year. The cost per
issuer will be approximately $3,589.
While the number of issuers
participating in the risk adjustment
program varies per benefit year, (for
example, there were 751 issuers
participating in the risk adjustment
program for the 2016 benefit year), HHS
only intends to conduct compliance
reviews for no more than 15 issuers per
benefit year and intends to focus these
reviews on payments under the highcost risk pool.338 The total annual cost
to issuers undergoing compliance
reviews will be approximately $53,836.
We are increasing the materiality
threshold for EDGE discrepancies,
beginning in the 2020 benefit year of
HHS-operated risk adjustment, so that
HHS may only take action if the amount
in dispute is equal to or exceeds
$100,000 or one percent of the total
estimated transfer amount in the
applicable state market risk pool,
whichever is less. As a result of this
change, some discrepant issuers will no
337 Currently, HHS uses HHS–RADV to audit the
actuarial risk reported by issuers to their EDGE
servers that is used for performing calculations
under the state payment transfer formula. See 45
CFR 153.350 and 153.630.
338 Currently, HHS uses HHS–RADV to audit the
actuarial risk reported by issuers to their EDGE
servers that is used for performing calculations
under the state payment transfer formula. See 45
CFR 153.350 and 153.630.
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longer be charged for their EDGE data
error. In addition, issuers in the same
state market risk pool as the discrepant
issuer will not receive positive
adjustments to their risk adjustment
transfers. This is because HHS’s process
for addressing material EDGE data
discrepancies is to recalculate the dollar
value of any difference in risk
adjustment transfers, charge the
discrepant issuer for the difference, and
distribute the amount collected from the
discrepant issuer to the issuers in the
same state market risk pool who were
harmed. Based on analysis of
discrepancies from prior years’ data,
payments to these issuers who were
harmed by the discrepant issuer’s error
are occasionally as low as $1.00 and
typically represent a fraction of one
percent of the issuer’s overall transfers
in the state market risk pool for the
applicable benefit year. We anticipate
that this change will have a minimal
impact on regulatory burden. There
might be a slight reduction in
administrative burden to some issuers
who currently report, and receive
adjustments for, EDGE discrepancies
that are less than a fraction of total state
market risk pool transfers.
4. Audits of Reinsurance-Eligible Plans
(§ 153.410(d))
We are finalizing the amendments to
§ 153.410(d) providing more clarity
regarding audits and establishing
authority to conduct compliance
reviews of reinsurance-eligible plans,
with slight modifications to certain
audit timeframes in response to
comments requesting issuers be
provided more time to provide the
initial audit data submissions and
written corrective action plans. Issuers
of reinsurance-eligible plans being
audited will be required to comply with
audit requirements including
participating in entrance and exit
conferences, submitting complete and
accurate data to HHS in a timely
manner, and providing responses to
additional requests for information from
HHS and to preliminary audit reports in
a timely manner. If an audit results in
a finding, issuers must also provide
written corrective plans in the time and
manner set forth by HHS. We are also
codifying our authority to recoup
reinsurance payments if they are not
adequately substantiated by the data
and information submitted by issuers
during the course of the audit.
We anticipate that compliance with
reinsurance program audits will take
120 hours by a business operations
specialist (at a rate of $77.14 per hour),
40 hours by a computer systems analyst
(at a rate of $92.46 per hour), and 20
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hours by a compliance officer (at a rate
of $70.06 per hour) per issuer per
benefit year. The cost per issuer will be
approximately $14,356. There were 557
issuers participating in the reinsurance
program for the 2015 benefit year and
496 issuers participating in the
reinsurance program for the 2016
benefit year; however, HHS will only
audit a small percentage of these
issuers, roughly 30–60 issuers per
benefit year. As noted above, we also
intend to combine the 2015 and 2016
benefit year reinsurance audits to
reduce the burden on issuers subject to
such audits. Depending on the number
of issuers audited for each benefit year,
the total cost to issuers being audited
will be between $430,692 and $861,384,
with an average annual cost of
approximately $646,038.
We anticipate that compliance with
reinsurance program compliance
reviews will take 30 hours by a business
operations specialist (at a rate of $77.14
per hour), 10 hours by a computer
systems analyst (at a rate of $92.46 per
hour), and 5 hours by a compliance
officer (at a rate of $70.06 per hour) per
issuer per benefit year. The cost per
issuer will be approximately $3,589.
There were 557 issuers participating in
the reinsurance program for the 2015
benefit year and 496 issuers
participating in the reinsurance program
for the 2016 benefit year; however, HHS
only intends to conduct compliance
reviews for no more than 15 issuers per
benefit year and intends to focus these
reviews on payments received by
reinsurance-eligible plans under the
program. The total annual cost to issuers
undergoing compliance reviews will be
approximately $53,836.
5. HHS Risk Adjustment Data Validation
(§ 153.630(g))
We are codifying two previouslyestablished exemptions from HHS–
RADV under § 153.630(g). These
exemptions apply when the issuer only
has small group carryover coverage for
the applicable benefit year or when an
issuer is the sole issuer in the state
market risk pool for the applicable
benefit year (and did not participate in
another risk pool with other issuers for
that benefit year). We further note that
these new regulatory provisions are not
establishing new exemptions; instead,
the amendments to § 153.630(g) merely
codify existing policies and previously
established exemptions from HHS–
RADV for these subsets of issuers. The
impact of the exemption for sole issuers
was addressed in the 2019 Payment
Notice and the discussion of exempting
small group carryover coverage issuers
was set forth in the 2020 Payment
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24275
Notice.339 Under these exemptions,
these issuers are not be required to
complete HHS–RADV for the given
benefit year, and therefore, they will
have a decreased administrative burden.
However, given that these exemptions
are limited to issuers only offering small
group carry-over coverage and issuers
who are sole issuers in all markets in a
state, we estimate that approximately 13
issuers will be exempt from HHS–RADV
for a given benefit year under these
exemptions.
We are also changing the HHS–RADV
collections timeline from the timeline
finalized in the 2020 Payment Notice in
response to stakeholder feedback. Under
the revised timeline, we will implement
the collection of HHS–RADV charges
and disbursement of payments in the
calendar year in which HHS–RADV
results are released. We do not believe
this will change the administrative
burden previously estimated in the 2020
Payment Notice 340 as we understand
that the majority of states and issuers
follow a timeline that aligns more
closely with the one in this rulemaking
and few pursued the flexibility provided
under the timeline finalized in the 2020
Payment Notice.
6. Direct Enrollment (§§ 155.220 and
155.221)
a. QHP Information Display on WebBroker Websites
After consideration of comments
received, we are not finalizing the
proposal to provide flexibility to webbrokers regarding the information they
are required to display on their nonExchange websites for QHPs in certain
circumstances. As explained above, we
intend to further consider these issues
and clarify the display requirements for
web-broker non-Exchange websites in
future rulemaking. Until addressed in
future rulemaking, beginning at the start
of the open enrollment period for plan
year 2022, web-broker non-Exchange
websites will be required to display all
QHP information received from the
Exchange or directly from QHP issuers,
consistent with the requirements of
§ 155.205(b)(1) and (c) for all available
QHPs with the exception of medical loss
ratio information and transparency of
coverage measures under
§ 155.205(b)(1)(vi) and (vii). This
interim approach does not establish new
requirements and instead represents a
change in the exercise of enforcement
discretion regarding the standardized
comparative information web-brokers
are required to display under existing
339 83
FR 17047 and 83 FR 17504.
84 FR 1507.
340 See
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regulations following our consideration
of comments on the proposed changes
to the web-broker QHP display
requirements.341 We previously
estimated the administrative burden
related to the display of QHP
information on web-broker websites in
the 2013 Program Integrity final rule.342
b. Web-Broker and Direct Enrollment
Entity Operational Readiness Review
Requirements
At § 155.220(c)(6), we are finalizing
that a web-broker must demonstrate
operational readiness and compliance
with applicable requirements prior to
the web-broker’s non-Exchange website
being used to complete an Exchange
eligibility application or a QHP
selection. As reflected in
§ 155.220(c)(6)(i) through (iv), HHS may
request a web-broker submit a number
of artifacts or documents or complete
certain testing processes to demonstrate
the operational readiness of its nonExchange website. The required
documentation may include operational
data including licensure information,
points of contact, and third-party
relationships; security and privacy
assessment documentation, including
penetration testing results, security and
privacy assessment reports,
vulnerability scan results, plans of
action and milestones, and system
security and privacy plans; and an
agreement between the web-broker and
HHS documenting the requirements for
participating in the applicable direct
enrollment program. The required
testing processes may include
enrollment testing, prior to approval or
at the time of renewal, and website
reviews performed by HHS to evaluate
prospective web-brokers’ compliance
with applicable website display
requirements prior to approval. To
facilitate testing, prospective and
approved web-brokers will have to
maintain and provide access to testing
environments that reflect their
prospective or actual production
environments. These amendments
codify in regulation existing program
requirements that apply to web-brokers
that participate in the FFE direct
enrollment program and are captured in
the agreements executed with
participating web-broker direct
enrollment entities and related technical
guidance.343 Some of these
341 See
45 CFR 155.220(c)(3)(i)(A) and (D).
78 FR 54128.
343 See, for example, ‘‘Updated Web-broker Direct
Enrollment Program Participation Minimum
Requirements,’’ May 21, 2020. Available at https://
www.cms.gov/CCIIO/Programs-and-Initiatives/
Health-Insurance-Marketplaces/Downloads/2020WB-Program-Guidance-052120-Final.pdf.
342 See
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requirements, such as the collection of
operational data, have effectively
existed for many years, and so they will
impose little to no new burden. The
collection of security and privacy
assessment documentation is a new
requirement, although historically the
web-broker agreement has required webbrokers to attest to the implementation
and assessment of privacy and security
controls. As a result, web-brokers
should have historically completed any
technical implementation of the
controls and should be familiar with
assessment of those controls.
Completion of enrollment testing is also
a new requirement, but use of the direct
enrollment pathways inherently
requires a web-broker’s platform to be
capable of processing enrollments.
Therefore, the burden of testing that
functionality will be very limited.
Website reviews have been conducted
historically and are performed by HHS,
so there will be no burden to webbrokers associated with the completion
of those reviews. The burden related to
these requirements is discussed in the
Collection of Information Requirements
section in this rule.
We are revising § 155.221(b)(4) to add
additional detail on the operational
readiness requirements for direct
enrollment entities. Similar to the
proposed web-broker operational
readiness requirement at new
§ 155.220(c)(6), these amendments
codify in § 155.221(b)(4) additional
details about the existing program
requirements that apply to direct
enrollment entities and are captured in
the agreements executed with
participating web-broker and QHP
issuer direct enrollment entities. We
note that these requirements are in
addition to the operational readiness
requirements at new § 155.220(c)(6) for
web-brokers, although web-brokers may
not be required to submit the
documentation required under this
proposal to revise § 155.221(b)(4) or
they may be permitted to use the same
documentation to satisfy the
requirements of both operational
readiness reviews depending on the
specific circumstances of their
participation in direct enrollment
programs and the source and type of
documentation.
In paragraph (b)(4), we require a
direct enrollment entity to demonstrate
operational readiness and compliance
with applicable requirements prior to
the direct enrollment entity’s website
being used to complete an Exchange
eligibility application or a QHP
selection. We add new paragraphs
(b)(4)(i) through (v) to reflect that direct
enrollment entities may need to submit
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or complete, in the form and manner
specified by HHS, a number of artifacts
of documentation or various testing or
training processes. The documentation
may include business audit
documentation including: Notices of
intent to participate including auditor
information; documentation packages
including privacy questionnaires,
privacy policy statements, and terms of
service; and business audit reports
including testing results. The required
documentation may also include
security and privacy audit
documentation including:
Interconnection security agreements;
security and privacy controls
assessment test plans; security and
privacy assessment reports; plans of
action and milestones; privacy impact
assessments; system security and
privacy plans; incident response plans;
and vulnerability scan results.
Submission of agreements between the
direct enrollment entity and HHS
documenting the requirements for
participating in the applicable direct
enrollment program may also be
required. Required testing may include
eligibility application audits performed
by HHS. The direct enrollment entity
may also be required to complete online
training modules developed by HHS
related to the requirements to
participate in direct enrollment
programs. We expect minimal new
burden associated with this policy as
these requirements have historically
been established through agreements
EDE entities have executed with HHS,
and therefore entities have completed
these tasks in the past to be able to use
the EDE pathway. The burden related to
these requirements is discussed in the
Collection of Information Requirements
section in this final rule.
c. Direct Enrollment Entity Plan Display
Requirements
We are revising § 155.221(b)(1) to
require that direct enrollment entities
display and market QHPs offered
through the Exchange, individual health
insurance coverage as defined in
§ 144.103 offered outside the Exchange
(including QHPs and non-QHPs other
than excepted benefits), and all other
products, such as excepted benefits, on
at least three separate website pages,
with certain exceptions. This change is
a revision of a policy adopted in 2019.
We anticipate this policy will provide
increased flexibility and believe many
direct enrollment entity websites are
already designed in a manner largely
consistent with this proposal, and
therefore the burden associated with it
is minimal.
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7. Verification Process Related to
Eligibility for Insurance Affordability
Programs (§ 155.320)
a. Income Inconsistencies (§ 155.320(c))
In the 2019 Payment Notice we
estimated a one-time burden on
Exchanges for necessary system changes
to meet the requirement related to data
matching issues. The 2019 Payment
Notice estimate did not take into
account the ongoing operational cost for
processing data matching issues from
this requirement, because ongoing
operational costs are dependent on the
Exchange’s number of applicants with
income inconsistencies and the
threshold for setting a data matching
issue which was unknown at the time.
Now that we are changing this
requirement, we expect a cost saving
and burden reduction. We estimate the
amendments to § 155.320(c) will create
a one-time cost for an Exchange of
approximately $450,000 to complete the
necessary system changes to remove
functionality for this policy. We
estimate that approximately half of the
State Exchanges implemented
verification functionality in 2019 or
2020. Therefore, for 7 State Exchanges,
the estimated total cost will be $3.15
million.
Based on plan year 2019 and 2020
data of the volume of income
inconsistencies generated in the FFEs,
we estimate that approximately 295,000
fewer inconsistencies will be generated
annually by FFEs by removing this
requirement and will result in annual
savings of approximately $3,560,650 for
FFEs. We anticipate additional ongoing
annual savings for FFEs estimated at
$242,550 due to the reduction of
approximately 385,000 mailed
consumer notices (approximately $0.63
per notice). We estimate that
approximately 57,361 fewer
inconsistencies will be generated
annually by State Exchanges by
removing this requirement and will
result in annual savings of
approximately $692,349 annually for
State Exchanges. Likewise, we
anticipate additional ongoing annual
savings for State Exchanges estimated at
$74,861 due to the reduction of
approximately 10,694 mailed consumer
notices. Total annual savings for FFEs
and State Exchanges is estimated to be
approximately $4,570,410. We note that
there could also be additional savings in
appeals costs.
b. Employer Sponsored Coverage
(155.320(d))
As discussed previously in the
preamble, as for benefit years 2020 and
2021, we will not take enforcement
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action against Exchanges that do not
perform random sampling as required
by § 155.320(d)(4) for benefit year 2022.
HHS’s experience conducting random
sampling revealed that employer
response rates to HHS’s request for
information were low. The manual
verification process described in
paragraph (d)(4)(i) requires significant
resources and government funds, and
the value of the results ultimately does
not appear to outweigh the costs of
conducting the work because only a
small percentage of sample enrollees
have been determined by HHS to have
received APTC/CSRs inappropriately.
We estimate the annual costs to conduct
sampling on a statistically significant
sample size of approximately 1 million
cases to be approximately $6 million to
$8 million for the Exchanges on the
Federal platform and State Exchanges
that operate their own eligibility and
enrollment platforms. This estimate
includes operational activities such as
noticing, inbound and outbound calls to
the Marketplace call center, and
adjudicating consumer appeals. We
estimate that the total annual cost for
the Exchanges on the Federal platform
and the 15 State Exchanges operating
their own eligibility and enrollment
platform in 2022 would have been
approximately $113 million. Relieving
Exchanges of the requirement to
conduct sampling for benefit year 2022
will therefore result in total savings of
approximately $113 million. We sought
comment on this estimate.
Comment: While we did not receive
specific comments on this estimate, one
commenter did note that they supported
the proposal but encouraged HHS to
consider the costs and benefits of any
new evidence-based alternative
approach for employer-sponsored
coverage verification and to assess
whether any benefits would be
significant enough to warrant future
regulatory action on this issue.
Response: Given HHS’s own findings
that the manual verification process
described in paragraph (d)(4)(i) requires
significant resources and government
funds to fully operationalize, we agree
with the commenter that HHS should
consider all costs and benefits of any
future proposed verification process that
is evidence-based as we do not wish to
increase administrative burden on
states, employers, consumers, and
taxpayers. We will continue to explore
the best approach for employer
sponsored coverage verification, while
taking into consideration the cost and
benefits of such an approach in future
rulemaking.
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8. Special Enrollment Periods
(§ 155.420)
a. Exchange Enrollees Newly Ineligible
for APTC
We are adding a new paragraph at
§ 155.420(a)(4)(ii)(C) to require
Exchanges, no later than January 1,
2024, to allow enrollees and their
dependents who qualify for a special
enrollment period because they become
newly ineligible for APTC in accordance
with paragraph (d)(6)(i) or (ii) of this
section to enroll in a QHP of any metal
level. We anticipate that this change
will help reduce Exchanges’
implementation burden by simplifying
the policy and providing additional
time to operationalize it, which some
Exchanges may need in light of
competing priorities such as the need to
implement changes to calculate
financial assistance established in the
American Rescue Plan Act of 2021. We
also expect that this policy will help
impacted enrollees’ ability to maintain
continuous coverage for themselves and
for their dependents in spite of losing a
potentially significant amount of
financial assistance to help them
purchase coverage. For example, an
enrollee impacted by an increase to his
or her monthly premium payment may
change to a bronze-level plan, or to
catastrophic coverage if they are
otherwise eligible. Relatedly, this
proposal may benefit the individual
market risk pool by encouraging healthy
individuals to maintain continuous
coverage. Previously, an enrollee who
lost APTC eligibility had only two
choices: Paying the full premium or
terminating his or her coverage. Healthy
individuals who lose APTC may be
more likely to terminate coverage due to
increased premium liability, while
enrollees who have one or more medical
conditions will be incentivized to
maintain coverage in spite of the
additional expense. This provision will
serve to facilitate continuous coverage
of healthy individuals by giving them
the ability to enroll in a new plan with
a lower premium, thereby supporting a
healthier risk pool. Finally, the
American Rescue Plan Act of 2021 will
prevent some individuals from losing a
significant amount of APTC based on a
relatively small change in household
income, because it allows individuals
whose household income exceeds 400
percent FPL to qualify for a premium
tax credit if they are otherwise eligible.
However, we believe that some
consumers will still benefit from this
flexibility to plan category limitations,
in part because, as described in
preamble, there are scenarios other than
a household income increase that may
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cause consumers to become ineligible
for APTC.
As discussed in the proposed rule, we
did not believe that this change would
have a negative impact on the
individual market risk pool, because
most applicable enrollees would be
seeking to change coverage based on
financial rather than health needs.
However, we sought comment on
concerns about adverse selection risk
with permitting newly unsubsidized
enrollees to change to any plan of a
lower metal level to help them maintain
coverage (for example, permitting an
individual to change from a gold plan to
a bronze plan), or whether this risk
would be significantly lower if we only
permitted an enrollee to change to a
plan one metal level lower than their
current QHP. We also requested
comment from issuers on whether there
were concerns about impacts such as
experiencing a decrease in premium
receipts from enrollees who opted to
change to a lower-cost plan, or whether
they view adverse selection as a
possibility.
Additionally, we solicited comments
on the extent to which Exchanges would
experience burden due to the proposed
change, and on whether we should
exempt the special enrollment periods
at § 155.420(d)(6)(i) and (ii) due to
becoming newly ineligible for APTC
from plan category limitations
altogether to help to mitigate this
burden, or whether such a change
would significantly increase risk for
adverse selection.
Finally, we solicited comment on
whether this change to current system
logic would impose burden on FFE
Direct Enrollment and Enhanced Direct
Enrollment partners, as well as more
generally, on the impact of this
proposal.
We received public comments on the
potential risk related to the proposed
updates to add new flexibility to allow
current Exchange enrollees and their
dependents to enroll in a new QHP of
a lower metal level if they qualify for a
special enrollment period due to
becoming newly ineligible for APTC.
The following is a summary of the
comments we received and our
responses.
Comment: Almost all comments on
this proposal were supportive of this
change, for the same reasons that HHS
proposed the policy: Allowing enrollees
the flexibility to change to a plan of a
lower metal level based on a loss of
APTC will likely allow more
individuals to maintain continuous
coverage. No commenters raised
concerns that this policy would increase
the risk of adverse selection. One
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commenter encouraged us to bear in
mind the risks of adverse selection in
general, but did not oppose this
proposal and noted that it would help
consumers. Some commenters also
noted that this proposal could improve
the individual market risk pool by
increasing the likelihood that Exchange
enrollees would maintain coverage in
spite of losing financial assistance. No
commenters raised concerns about
receiving lower premium payments
from enrollees who opted to change to
a plan of a lower metal level. Many
commenters supported allowing
individuals who qualify for a special
enrollment period based on a loss of
APTC eligibility to change to a plan of
any metal level, either to provide
enrollees with flexibility to change to
the best plan for themselves and their
families, to make implementation easier
for State Exchanges, or both. One of
these commenters requested that instead
of applying plan category limitations,
HHS require Exchange enrollees to
provide documents to confirm their SEP
eligibility. Some commenters supported
allowing individuals who lose APTC
eligibility to change to a plan of a higher
or lower metal level rather than just to
a plan of a lower metal level. No
commenters raised concerns about this
proposal’s implementation burden on
direct enrollment or enhanced direct
enrollment partners. Finally, many
commenters disagreed with the need to
require plan category limitations in
general, and requested that HHS provide
Exchanges with flexibility in terms of
when or whether to implement plan
category limitations at all based on
considerations related to their specific
State Exchange’s market.
Response: We agree with commenters
that allowing enrollees to access a plan
at any metal level through this existing
special enrollment period, rather than
only allowing them to change to a plan
of a lower metal level, will significantly
decrease Exchange implementation
complexity and cost. As discussed
earlier in the preamble, we also agree
with commenters who suggested that
providing more flexibility for Exchange
enrollees in this situation will help
them to stay enrolled in coverage by
switching to a new QHP that better suits
their changed financial situation. We
also agree with commenters that this
specific policy does not pose adverse
selection risk because enrollees are
likely to access it based on a financial
change as opposed to a change in their
health care needs. Therefore, we are
finalizing a modified version of this
policy to permit Exchange enrollees
who lose APTC eligibility to change to
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a new plan at any metal level, and to
require that Exchanges implement this
change no later than January 1, 2024 to
provide them with potentially necessary
time to account for this change in their
operational planning. While some
Exchanges may be able to implement
this new flexibility sooner than January
1, 2024, in light of competing priorities
such as the need to implement changes
to calculate financial assistance
established in the American Rescue
Plan Act of 2021, we believe that
substantial flexibility for Exchanges is
appropriate.
We also clarify that this policy does
not create a new special enrollment
period qualifying event, but rather is a
change to limitations on plan selection
that apply to an already-existing special
enrollment period for Exchange
enrollees who become newly ineligible
for APTC per 45 CFR 155.420(d)(6)(i)
and (ii).
We did not propose removing plan
category limitations. We will continue
to study potential policies to promote
continuous coverage and provide
consumers with flexibility. Finally, we
acknowledge the potential benefit of
requiring Exchanges to implement this
change quickly, but we believe that
providing Exchanges with flexibility to
implement it no later than January 1,
2024 strikes an appropriate balance
between allowing early implementation
if possible and providing Exchanges
with necessary flexibility to plan related
system updates based on Exchangespecific competing priorities and
resources, such as implementation of
changes to eligibility for advance
payments of the premium tax credit
established by the American Rescue
Plan Act of 2021.
b. Special Enrollment Periods—
Untimely Notice of Triggering Event
We anticipate that the amendments
related to qualified individuals who do
not receive timely notice of a triggering
event and otherwise are reasonably
unaware that a triggering event occurred
will provide certain consumers a
pathway to maintain continuous
coverage, which will have an overall
positive impact on the risk pool and
will benefit consumers. Consumers will
benefit from being able to maintain
continued access to coverage and health
care. We recognize the possibility of
some minor adverse selection risk given
that consumers with known health
issues may be more likely to request a
retroactive effective date than healthy
consumers. However, we expect this
risk to be very limited as the proposal
only permits individuals to request a
retroactive effective date if they did not
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receive timely notice of a triggering
event, and we do not expect this to
happen very often.
We expect that Exchanges and direct
enrollment partners might incur minor
costs to update consumer messaging and
processes to administer this proposal.
State Exchanges that currently do not
have this policy and issuers offering offExchange plans would incur minor
costs to implement this proposal.
We received public comments on the
proposed updates to Special Enrollment
Periods—Untimely Notice of Triggering
Event. See the preamble to this
provision for a summary of the
comments we received and our
responses.
c. Cessation of Employer Contributions
and Government Subsidies to COBRA as
Special Enrollment Period Trigger
We anticipate that the amendments
regarding special enrollment period
eligibility for qualified individuals
whose employers completely cease
payment of their portion of COBRA
continuation coverage premiums will
provide clarity regarding a policy that
has been operationalized on
HealthCare.gov. In addition, we believe
that specifying that cessation of
government subsidies to COBRA is also
a special enrollment period triggering
event will help make stakeholders
aware of the options consumers have for
enrolling through a special enrollment
period. We also believe that these
amendments will benefit direct
enrollment partners and employers by
providing clarity regarding special
enrollment period eligibility. In
addition, consumers who would have
otherwise lost coverage due to an
increase in the cost of their COBRA
continuation coverage will benefit from
continuity of coverage and access to
health care.
Although this special enrollment
period has already been available to
individuals enrolling in a qualified
health plan on Exchanges on the Federal
Platform, because cessation of
government subsidies to COBRA has not
previously been considered a triggering
event, we do anticipate that the
Exchanges on the Federal platform,
direct enrollment partners, State
Exchanges that do not have this policy,
and issuers who operate off-Exchange
plans will incur some costs to
implement this policy, especially in
light of the projected increase in COBRA
enrollments as a result of the subsidies
provided for in the American Rescue
Plan Act of 2021.344 However, due to
344 https://www.cbo.gov/system/files/2021-02/
hEdandLaborreconciliationestimate.pdf. These
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the similarity between cessation of
employer contributions to COBRA,
which has already been a special
enrollment period trigger on Exchanges
on the Federal platform, and
government subsidies, we do not believe
these amendments will have a negative
impact on the risk pool for Federallyfacilitated Exchanges. However, we do
anticipate that there may be some
negative impact to the risk pool in State
Exchanges and in the off-Exchange
individual market where this special
enrollment period has not previously
been available.
We received public comments on the
proposed updates to cessation of
employer contributions to COBRA as
special enrollment period trigger. The
following is a summary of the comment
we received and our response.
Comment: One commenter, while not
opposing the proposal, expressed
concern regarding the potential impact
on adverse selection and premium costs
of providing a pathway for those who
were enrolled in COBRA continuation
coverage to enroll in individual market
coverage, given the likelihood of this
population having increased claims. In
addition, this commenter expressed
concern that the requirements of this
proposal would be burdensome for
employers, as they would need to make
changes to current COBRA
administration procedures in order to be
able to verify eligibility for this special
enrollment period. They also noted that
the existence of this special enrollment
period could reduce the number of
employers willing to provide COBRA
subsidies as part of a severance package.
Another commenter expressed support
for the proposal, and stated that because
the special enrollment period is based
on reduced affordability of coverage
rather than a health condition, it avoids
concerns regarding adverse selection,
and in fact will likely benefit the risk
pool overall by encouraging younger
individuals to enroll. A State Exchange
noted that, because loss of COBRA
coverage is used infrequently as a
triggering event on its State Exchange,
this policy would be unlikely to impact
premium costs or the risk pool.
Response: We note that enrollments
through this special enrollment period
based on cessation of employer
contributions to COBRA has already
been available on Exchanges on the
Federal platform, and thus this policy is
projections from the CBO reference an earlier
version of the legislation in which enrollees would
have been required to pay 15 percent of the COBRA
premium, whereas the final version that was passed
subsidizes COBRA premiums at 100 percent. Thus
these projections may underestimate the increase in
enrollments in COBRA as a result of the subsidies.
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24279
unlikely to result in changes for issuers
on such Exchanges as a result of adverse
selection or for consumers in the form
of premium increases. In addition, for
State Exchanges and off-Exchange
issuers who have not treated cessation
of employer contributions to COBRA
continuation coverage as a special
enrollment period triggering event, we
expect, based on a recent CBO analysis
projecting low overall enrollment in
COBRA among the eligible
population,345 as well as the comment
on this provision from a State Exchange
noting that loss of COBRA coverage is
used infrequently as a triggering event
on its Exchange, that the volume of
enrollments through this special
enrollment period based on cessation of
employer contributions will be low.
However, the inclusion of government
subsidies to COBRA coverage as a
special enrollment period trigger may
lead to an increase in uptake of COBRA
coverage among the eligible population,
and a corresponding increase in
enrollments through this special
enrollment period for Exchanges using
the Federal platform, State Exchanges,
and off-Exchange issuers, and thereby
have a negative impact on these risk
pools and on premiums.
The aforementioned CBO analysis
notes however that many of the
enrollees who are projected to enroll in
COBRA as a result of the federal
subsidies would have otherwise
enrolled in individual market
coverage,346 thus limiting the potential
negative impact. Additionally, because
this provision does not impose any new
requirements on employers or increase
the opportunity to enroll in employersponsored coverage, it is unlikely that it
will discourage them from providing
COBRA subsidies as part of a severance
package, nor is it likely to provide
additional administrative burden.
Because this special enrollment period
provides a pathway to individual health
insurance coverage for individuals
whose employer ceases contributions to
their COBRA coverage, this provision
may, in fact, increase the number of
employers willing to provide
contributions to former employees’
COBRA coverage.
9. Provisions Related to Cost Sharing
(§ 156.130)
As described earlier in the preamble,
we are finalizing a premium adjustment
percentage of 1.3760126457 for the 2022
benefit year. The annual premium
345 https://www.cbo.gov/system/files/2021-02/
hEdandLaborreconciliationestimate.pdf.
346 https://www.cbo.gov/system/files/2021-02/
hEdandLaborreconciliationestimate.pdf.
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adjustment percentage is used to set the
rate of increase for several parameters
detailed in the ACA, including: The
annual limitation on cost sharing
(defined at § 156.130(a)), the required
contribution percentage used to
determine eligibility for certain
exemptions under section 5000A of the
Code (defined at § 155.605(d)(2)), and
the employer shared responsibility
payments under sections 4980H(a) and
4980H(b) of the Code. Additionally, we
finalized other cost-sharing parameters
using an index based on the final
premium adjustment percentage for the
2022 benefit year.
In accordance with § 155.605(d)(2),
we are finalizing a required contribution
of 8.09 percent for the 2022 benefit year,
which reflects the premium adjustment
percentage calculation for the 2022
benefit year detailed in preamble. In
accordance with § 156.130(a)(2), we are
finalizing a maximum annual limitation
on cost sharing of $8,700 for self-only
coverage and $17,400 for other than selfonly for the 2022 benefit year. The CMS
Office of the Actuary estimates that the
change in measure of premium growth
from using private health insurance
(excluding Medigap, and property and
casualty insurance) to ESI to calculate
the premium adjustment percentage
may have the following impacts
between 2022 and 2026.347
TABLE 15: Impacts of Modifications to the 2022 Benefit Year Premium Adjustment
Percentage
Calendar Year
Exchange Enrollment Impact
enrollees, thousands
2022348
0
2023
20
2024
20
2025
20
2026
20
*Note: The federal impact figures are positive to indicate an increase in spending for the federal government.
As noted in Table 15, we expect that
the change in measure of premium
growth used to calculate the premium
adjustment percentage index for the
2022 benefit year and beyond will likely
result in:
• Net premium decreases of
approximately $181 million per year,
which is approximately one percent of
2018 benefit year net premiums, for the
2024 benefit year through the 2026
benefit year.
• An increase in federal premium tax
credit spending of $460 million to $510
million between 2023 and 2026, due to
the decrease in the applicable
percentage table, based on an
assumption that the Department of the
Treasury and the IRS will adopt the use
of the NHEA ESI premium measure
finalized for the calculation of the
premium adjustment percentage in this
rule for the purposes of calculating the
indexing of the premium tax credit
applicable percentage and required
contribution percentage under section
36B of the Code.
We are also finalizing the proposed
rates of reductions to the maximum
annual limitation on cost sharing of 2⁄3
for enrollees with a household income
between 100 and 200 percent of FPL, 1⁄5
for enrollees with a household income
between 200 and 250 percent of FPL,
and no reduction for individuals with
household incomes of 250 to 400
percent of FPL for the 2022 benefit year
and beyond. We are finalizing the
proposed methodology to ensure that
these reductions do not result in
unacceptably high AVs. We do not
anticipate that the rates of reduction and
the methodology will result in
significant economic impact because
these rates of reduction and the AVimpact testing methodology have
remained consistent since the 2014
Payment Notice.
We are also finalizing that beginning
with the 2023 benefit year, we will
publish the premium adjustment
percentage, maximum annual limitation
on cost sharing, reduced maximum
annual limitations on cost sharing, and
required contribution percentage in
10. Prescription Drug Distribution and
Cost Reporting by QHP Issuers
(§ 156.295) and PBMs (§ 184.50)
As part of the ACA, Congress passed
section 6005, which added section
1150A to the Act, requiring a PBM
under a contract with a QHP offered
through an Exchange established by a
state under section 1311 of the ACA 349
to provide certain prescription drug
information to the QHP and to Secretary
at such times, and in such form and
manner, as the Secretary shall specify.
Section 1150A(b) of the Act addresses
the information that a QHP issuer and
their PBM must report. Section
347 CMS Office of the Actuary’s estimates are
based on their health reform model, which is an
amalgam of various estimation approaches
involving federal programs, employer-sponsored
insurance, and individual insurance choice models
that ensure consistent estimates of coverage and
spending in considering legislative changes to
current law.
348 The American Rescue Plan Act of 2021 Public
Law 117–2 (3/11/2021) amends Section
36B(b)(3)(A) of the Internal Revenue Code of 1986
to lower the applicable percentage for taxpayers at
all FPL levels, and includes taxpayers with an
income of 400 percent FPL or higher to be eligible
for premium tax credits. The effects of the
American Rescue Plan Act of 2021 are expected to
supplant the economic impacts of finalizing the
premium adjustment percentage and cost-sharing
parameters using the NHEA ESI premium measure
for the 2022 benefit year.
349 This includes an FFE, as a Federal Exchange
may be considered an Exchange established under
section 1311 of the ACA. King v. Burwell, 576 U.S.
988 (2015).
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VerDate Sep<11>2014
guidance in January of the calendar year
preceding the benefit year to which the
parameters are applicable, unless HHS
is changing the methodology, in which
case we will do so through the
applicable HHS notice of benefit and
payment parameters. This policy change
affects only the timing and method by
which these parameters are released and
will provide issuers with additional
time for plan design and rate setting.
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
1150A(c) of the Act requires the
Secretary to keep the information
reported confidential and specifies that
the information may not be disclosed by
the Secretary or by a plan receiving the
information, except that the Secretary
may disclose the information in a form
which does not disclose the identity of
a specific PBM, plan, or prices charged
for drugs for certain purposes.350
On January 1, 2020 351 and on
September 11, 2020,352 we published
notices in the Federal Register and
solicited public comment on the burden
related to the collection of information
required by section 1150A of the Act. In
those information collections and in this
final rule, we fulfill this statutory
requirement with the goal of imposing
the least amount of burden possible
while collecting data that would be
usable to ensure increased transparency
on prescription drug coverage in QHPs.
For example, to reduce overall
burden, we will collect data directly
from PBMs that contract with QHPs
directly, rather than require QHP issuers
to serve as a go-between their PBM and
CMS.353 This approach will reduce
overall burden on QHP issuers and will
place the onus to report data on those
entities that QHP issuers have already
entrusted to oversee and manage their
prescription drug line of business.
These information collections also
explained how we utilize the reporting
paradigm currently used by CMS’ DIR
reporting requirement which collects, in
part, the data required by section
1150A(a)(1) of the Act from Prescription
Drug Plan sponsors of a prescription
drug plan and Medicare Advantage
organizations offering a Medicare
Advantage Prescription Drug Plan under
part D of title XVII. We noted our
intention to utilize the DIR reporting
mechanisms only to the extent
authorized solely by section
1150A(a)(2), explaining our
understanding that DIR reporting is not
authorized by section 1150A alone.354
Usage of these existing CMS reporting
paradigms ensures minimal impact of a
new data collection on QHP issuers and
350 The purposes are: As the Secretary determines
to be necessary to carry out section 1150A or part
D of title XVIII; to permit the Comptroller General
to review the information provided; to permit the
Director of the Congressional Budget Office to
review the information provided; and, to States to
carry out section 1311 of the ACA.
351 85 FR 4993 through 4994.
352 85 FR 56227 through 56229.
353 Under this interpretation, QHP issuers will be
required to report data directly to CMS only when
the QHP issuer does not contract with a PBM to
administer their drug benefit.
354 Except for PBM spread amount aggregated to
the plan benefit package level, section 1150A
imposes no additional reporting requirements for
entities subject to DIR reporting. See 77 FR 22094.
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PBMs, given the longstanding industry
use of the DIR reporting mechanism.
The payer community is familiar with
fulfilling the DIR reporting requirement.
Therefore, we believe replicating that
collection to the greatest degree will
enable respondents to implement this
data collection with minimal relative
burden.
11. Audits of APTC, CSRs, and User
Fees (§ 156.480(c))
We are providing more clarity around
the APTC, CSR, and user fee program
audits and establishing authority for
HHS to conduct compliance reviews to
assess compliance with federal APTC,
CSR, and user fee standards by
finalizing amendments to § 156.480(c),
with slight modifications to certain
audit timeframes in response to
comments requesting issuers be
provided more time to provide the
initial audit data submissions and
written corrective action plans. QHP
issuers being audited for compliance
with federal APTC, CSR, and user fee
standards will be required to comply
with audit requirements including
participating in entrance and exit
conferences, submitting complete and
accurate data to HHS in a timely
manner, and providing responses to
additional requests for information from
HHS and to preliminary audit reports in
a timely manner. If an audit results in
a finding, issuers must also provide
written corrective plans in the time and
manner set forth by HHS. We are also
codifying our authority to recoup APTC
and CSR payments if they are not
adequately substantiated by the data
and information submitted by issuers
during the course of the audit.
We anticipate that compliance with
APTC, CSR, and user fee program audits
will take 120 hours by a business
operations specialist (at a rate of $77.14
per hour), 40 hours by a computer
systems analyst (at a rate of $92.46 per
hour), and 20 hours by a compliance
officer (at a rate of $70.06 per hour) per
issuer per benefit year. The cost per
issuer will be approximately $14,356.
While the number of QHP issuers
participating in the APTC, CSR, and
user fee programs varies per benefit year
(for example, there were 561 QHP
issuers participating in the programs for
the 2019 benefit year), HHS only
intends to audit a small percentage of
these issuers, roughly 30–60 issuers per
benefit year. Depending on the number
of issuers audited each year, the total
cost to issuers being audited will be
between $430,692 and $861,384, with
an average annual cost of approximately
$646,038.
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We anticipate that APTC, CSR, and
user fee program compliance reviews
will take 30 hours by a business
operations specialist (at a rate of $77.14
per hour), 10 hours by a computer
systems analyst (at a rate of $92.46 per
hour), and 5 hours by a compliance
officer (at a rate of $70.06 per hour) per
issuer per benefit year. The cost per
issuer will be approximately $3,589.
While the number of QHP issuers
participating in the APTC, CSR, and
user fee programs varies per benefit
year, (for example, there were 561 QHP
issuers participating in the programs for
the 2019 benefit year), HHS only
intends to conduct compliance reviews
for no more than 15 issuers per benefit
year. The total annual cost to issuers
undergoing compliance reviews will be
approximately $53,836.
12. Quality Rating System (§ 156.1120)
and Enrollee Satisfaction Survey System
(§ 156.1125)
We are finalizing removal of the
composite level and domain level of the
QRS hierarchy, which is a key element
of the QRS framework that establishes
how quality measures are organized for
scoring, rating and reporting purposes.
We will also make the full QHP Enrollee
Survey results publicly available in an
annual PUF. We anticipate that these
changes will benefit consumers and
QHP issuers by increasing transparency
and availability of QHP survey data
through publication of a nationwide
PUF, and simplifying the QRS scoring
hierarchy to improve understanding of
QRS quality rating information and
alignment with other CMS quality
reporting programs. Neither refinement
will alter the data collection and
reporting requirements for the QRS and
QHP Enrollee Survey because QHP
issuers are already required to report all
data needed to support a QHP Enrollee
Survey PUF and simplified QRS
hierarchy. Therefore, these refinements
will create no additional cost or burden
for QHP issuers.
13. Medical Loss Ratio (§§ 158.103,
158.130, 158.240, and 158.241)
We are finalizing the proposal to
amend § 158.103 to establish the
definition of prescription drug rebates
and other price concessions that issuers
must deduct from incurred claims for
MLR reporting and rebate calculation
purposes pursuant to § 158.140(b)(1)(i).
We do not expect this to change the
result of the regulatory impact analysis
previously conducted for the 2021
Payment Notice with respect to the
requirement that issuers deduct from
MLR incurred claims not only
prescription drug rebates received by
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the issuer, but also any price
concessions received and retained by
the issuer and any prescription drug
rebates and other price concessions
received and retained by a PBM or other
entity providing pharmacy benefit
management services to the issuer.
We are also finalizing the proposal
that issuers that choose to provide
temporary premium credits to
consumers during a declared PHE in
2021 and beyond when permitted by
HHS must account for these credits as
reductions to premium for the
applicable months when reporting
earned premium for the applicable MLR
reporting year. Although we do not
know how many states will permit
issuers to provide temporary credits to
reduce premiums or how many issuers
will elect to do so, for purposes of this
analysis, we previously estimated in the
interim final rule on COVID–19 (85 FR
54820) that approximately 40 percent of
issuers offering individual, small group
or merged market health insurance
coverage will provide these premium
credits to reduce the premiums charged
to enrollees to support continuity of
coverage during the PHE for COVID–19.
We do not estimate a change to the cost
or burden previously estimated in that
final rule, and anticipate that that
regulatory impact estimate would
extend to 2021 and beyond. Although
we do not know the number of issuers
that will provide these temporary
premium credits or the amount of
premium credits that issuers may elect
to provide, for purposes of this estimate
we assume that such premium credits
will on average constitute
approximately 8 percent of total annual
premium (equivalent to one month of
premium), as previously estimated in
that final rule. Because the MLR
calculation uses three consecutive years
of data, there may be additional rebate
decreases in subsequent years, although
the impact on rebates might be smaller
as issuers will likely account for the
premium relief provided to enrollees
through these temporary premiums
credits at the time they develop
premium rates for the 2022 benefit year
and future benefit years.
As noted in section IV of this final
rule, on March 4, 2021, the U.S. District
Court for the District of Maryland, in
City of Columbus, et al. v. Cochran,
vacated 45 CFR 158.221(b)(8). As a
result, we are finalizing the deletion of
§ 158.221(b)(8) and removing the option
that issuers had for the 2017–2019 MLR
reporting years to report a single
standardized QIA expense amount equal
to 0.8 percent of earned premium in lieu
of reporting the issuers’ actual
expenditures for activities that improve
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health care quality. The 0.8 percent QIA
option was added to 45 CFR part 158 in
the 2019 Payment Notice final rule in
order to reduce the burden on issuers
required to accurately identify, track,
and report QIA expenses. In that final
rule, based on MLR data for the 2015
MLR reporting year, HHS estimated that
the amendment would decrease rebate
payments from issuers to consumers by
approximately $23 million.
Accordingly, we estimate that finalizing
the deletion of § 158.221(b)(8) in this
final rule will increase rebate payments
from issuers to consumers by
approximately $23 million annually.
We are also finalizing the proposal to
add a new § 158.240(g) to explicitly
allow issuers to prepay a portion or all
of their estimated MLR rebates to
enrollees for a given MLR reporting
year, and to establish a safe harbor
allowing such issuers, under certain
conditions, to defer the payment of
rebates remaining after prepayment
until the following MLR reporting year.
We are additionally finalizing the
proposal to amend § 158.241(a) to allow
issuers to provide rebates in form of a
premium credit prior to the date that the
rules previously provided. We do not
expect these provisions to have a
significant quantitative impact as they
will not change the rebate amounts
provided by issuers to enrollees. Since
it is easiest and most cost-effective for
issuers to conduct rebate disbursement
activities all at once, the additional
rebates will generally be paid during the
following year’s disbursement cycle—
that is, if 95 percent of rebates for 2020
was prepaid during Jan.–July 2021, the
remainder will be paid no later than
Sept. 2022 (possibly earlier in 2022 if
the issuer decides to prepay again).
However, we note that there may be
some increased administrative burden
on issuers that owe rebates remaining
after prepayment associated with good
faith efforts to locate enrollees, if any,
with whom they no longer have a direct
economic relationship.
14. Regulatory Review Costs
If regulations impose administrative
costs on private entities, such as the
time needed to read and interpret this
final rule, we should estimate the cost
associated with regulatory review. Due
to the uncertainty involved with
accurately quantifying the number of
entities that will review the rule, we
assume that this rule will be reviewed
by all affected issuers, states, PBMs, and
some individuals and other entities that
commented on the proposed rule. We
acknowledge that this assumption may
understate or overstate the costs of
reviewing this rule. It is possible that
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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 we thought that the
number of affected entities and
commenters to be a fair estimate of the
number of reviewers of this rule.
We are required to issue a substantial
portion of this rule each year under our
regulations and we estimate that
approximately half of the remaining
provisions would cause additional
regulatory review burden that
stakeholders do not already anticipate.
We also recognize that different types of
entities are in many cases affected by
mutually exclusive sections of this final
rule, and therefore, for the purposes of
our estimate we assume that each
reviewer reads approximately 50
percent of the rule, excluding the
portion of the rule that we are required
to issue each year.
Using the wage information from the
BLS for medical and health service
managers (Code 11–9111), we estimate
that the cost of reviewing this rule is
$110.74 per hour, including overhead
and fringe benefits.355 Assuming an
average reading speed, we estimate that
it will take approximately 1 hours to
review the relevant portions of this final
rule that causes unanticipated burden.
We assume that 750 entities will review
this final rule. For each entity that
reviews the rule, the estimated cost is
approximately $110.74. Therefore, we
estimate that the total cost of reviewing
this regulation is approximately $83,055
($110.74 × 750 reviewers).
D. Regulatory Alternatives Considered
In developing the policies contained
in this final rule, we considered
numerous alternatives to the presented
proposals. Below we discuss the key
regulatory alternatives that we
considered.
Under part 153 of this final rule, we
are finalizing an approach to recalibrate
the risk adjustment models for the 2022
benefit year using 2016, 2017, and 2018
enrollee-level EDGE data.356 The
purpose of using these data years is to
better ensure that the applicable benefit
year’s risk adjustment model
coefficients can be included in the
applicable benefit year’s proposed
payment notice. As part of our
consideration of proposals to recalibrate
the risk adjustment models for the 2022
benefit year, we also considered
recalibrating the models using the 2017,
355 https://www.bls.gov/oes/current/oes_nat.htm.
356 As detailed above, the one exception relates to
RXC 09, which involved the use of only 2016 and
2017 enrollee-level data to develop the applicable
2022 benefit year coefficients and interaction terms.
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2018, and 2019 benefit year enrolleelevel EDGE data. If we had proposed
that approach, we would not have been
able to provide the proposed
coefficients in the proposed rule and
would have had to instead display draft
coefficients only reflective of the 2017
and 2018 benefit years of enrollee-level
EDGE data. This approach would not
have achieved the desired policy
goals—namely, to respond to
stakeholder requests for HHS to take
steps to provide the draft and final
coefficients at an earlier time.
We also considered alternatives to the
proposed model specification changes
and revised enrollment duration factors
that we are not finalizing in this
rulemaking. For example, we initially
considered adding only a non-linear
term or only adopting new HCC counts
terms for all enrollees to the adult and
child risk adjustment models. As
described earlier in this final rule, we
had convergence issues with the nonlinear model specifications and
concerns that the HCC counts terms
approach posed significant gaming
concerns when pursued separately.
In addition to the non-linear and HCC
counts model specifications, we also
considered alternatives to the two-stage
specification and HCC interacted counts
model. Specifically, we tested various
alternative caps for the weights based on
the distribution of costs, but found the
finalized caps resulted in better
prediction on average. For the
prediction weights, we tested various
alternative forms of weights, including
reciprocals of square root of prediction,
log of prediction, and residuals from
first step estimation, but the reciprocal
of the capped predictions resulted in
better predictive ratios for low-cost
enrollees compared to any of the other
weights.
For the interacted HCC counts factors,
we tested several HCCs and considered
adding and removing certain HCCs from
the list in Table 3 in the proposed rule.
We choose the list of HCCs in Table 3
of the proposed rule because including
those HCCs most improved prediction
for enrollees with the highest costs,
multiple HCCs, and with these specific
HCCs. For the HCC interacted counts,
we also considered various alternatives
to structure the interacted HCC counts,
such as applying individual interacted
HCC counts factors (between 1–10 based
on the number of HCCs an enrollee has)
to each of the selected HCCs included
in the models (instead of combining all
of the selected HCCs into two severity
and transplant indicator groups). We
choose the proposed model
specifications because they would add
fewer additional factors to the models
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without sacrificing any significant
predictive accuracy. However, as noted
above, after consideration of comments,
we are not finalizing the adoption of the
either the proposed two-stage model
specification or interacted HCC counts
factors in the adult and child models or
the accompanying removal of the
existing severity illness indicators from
the adult models.
For the enrollment duration factors in
the adult risk adjustment models, we
proposed modifying the enrollment
duration factors to apply monthly
duration factors of up to 6 months for
those with HCCs. The purpose of this
proposed change was to address the
underprediction of plan liability for
adults with HCCs. As part of this
assessment, we considered whether
enrollment duration factors by market
type may be warranted. However, as
described earlier in this final rule, we
did not find a major distinction in
market-specific incremental monthly
enrollment duration factor risk scores
after isolating the enrollment duration
factors to enrollees with HCCs.
However, as detailed above, after
consideration of comments, we are not
finalizing the adoption of the new
proposed adult model enrollment
duration factors or the accompanying
removal of the current adult model
enrollment duration factors.
In regards to the changes to § 155.320,
we considered taking no action to
modify the requirement that when an
Exchange does not reasonably expect to
obtain sufficient verification data
related to enrollment in or eligibility for
employer sponsored coverage that the
Exchange must select a statistically
significant random sample of applicants
and attempt to verify their attestation
with the employer listed on their
Exchange application. However, based
on HHS’s experience conducting
sampling, this manual verification
process requires significant resources
for a low return on investment, as using
this method HHS identified only a small
population of applicants who received
APTC/CSR payments inappropriately.
We ultimately determined that a
verification process for employersponsored coverage should be one that
is evidence or risk-based and that not
taking enforcement action against
Exchanges that do not conduct random
sampling was appropriate as we
anticipate future rulemaking is
necessary to ensure that Exchanges have
more flexibility for such verifications.
We considered taking no action
regarding our policy to add a new
§ 155.420(a)(4)(iii)(C) to allow enrollees
and their dependents to enroll in a new
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QHP of a lower metal level 357 if they
qualify for a special enrollment period
due to becoming newly ineligible for
APTC. However, based on questions and
concerns from agents and brokers, the
previous policy prevents some enrollees
from maintaining continuous coverage
because they lose a significant amount
of financial assistance that would help
them purchase coverage, and cannot
enroll in a new, less costly QHP of a
lower metal level. HHS believes this
policy is unlikely to result in adverse
selection, and may improve the risk
pool by supporting continued health
insurance enrollment by healthy
individuals who would be forced to end
coverage in response to an increase in
premium.
We also considered whether to
provide additional flexibility to allow
enrollees and their dependents who
become newly eligible for APTC in
accordance with section 155.420(d)(6)(i)
or (ii) to enroll in a QHP of a higher
metal level, because we recognize
becoming newly eligible for APTC may
increase the affordability of higher metal
level plans for some individuals.
However, as discussed in the proposed
rule, we believed including this
flexibility would largely exempt the
special enrollment periods at paragraph
(d)(6)(i) and (ii) from the rules at
155.420(a)(4)(iii), which might make it
likely that more individuals would
change coverage levels in response to
health status changes. More
importantly, while we believe the
flexibilities for individuals who become
newly ineligible for APTC are needed in
order to promote continuous coverage
for individuals who can no longer afford
their original plan choice, no similar
affordability and continuous coverage
concerns exist for enrolled consumers
who gain APTC eligibility during the
coverage year. However, as noted in
preamble, we received several
comments requesting that HHS provide
this flexibility for enrollees who newly
become eligible for APTC. Therefore,
357 Section 1302(d) of the ACA describes the
various metal levels of coverage based on AV, and
section 2707(a) of the PHS Act directs health
insurance issuers that offer non-grandfathered
health insurance coverage in the individual or small
group market to ensure that such coverage includes
the EHB package, which includes the requirement
to offer coverage at the metal levels of coverage
described in section 1302(d) of the ACA. Consumerfacing HealthCare.gov content explains that metal
levels serve as an indicator of ‘‘how you and your
plan split the costs of your health care,’’ noting that
lower levels like bronze plans have lower monthly
premiums but higher out of pocket costs when
consumers access care, while higher levels like gold
have higher monthly premiums but lower out of
pocket costs to access care—see https://
www.healthcare.gov/choose-a-plan/planscategories/.
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while we did not propose additional
plan flexibility for enrollees who
become newly eligible for APTC, we
will continue to study potential policies
to promote continuous coverage and
provide consumers with flexibility.
We considered taking no action
regarding our policy to add a new
§ 155.420(c)(5) to allow a qualified
individual, dependent or enrollee that
did not receive timely notice of a
triggering event or was otherwise
reasonably unaware that a triggering
event described in § 155.420(d) occurred
to select a new plan within 60 days of
the date he or she knew, or reasonably
should have known, of the occurrence
of the triggering event. However, in
some circumstances this would result in
consumers, through no fault of their
own, being unable to access a special
enrollment period for which they were
eligible. Additionally, we considered
not adding new § 155.420(b)(5) to
provide a qualified individual,
dependent, or enrollee described in new
§ 155.420(c)(5) with the option for a
retroactive effective date. Failing to
provide the option for a retroactive
effective date would necessarily result
in a gap in coverage, and therefore
hinder a consumer’s ability to maintain
continuous coverage.
We also considered limiting the
applicability of the policy to add a new
§ 155.420(c)(5) to a qualified individual,
enrollee, or dependent who does not
receive notice or become reasonably
aware of the occurrence of a triggering
event until more than 15 days after the
triggering event. However, failing to
apply the new § 155.420(c)(5) to
qualified individuals, enrollees, or
dependents who receive notice or
become reasonably aware of the
occurrence of a triggering event 15 days
or less after the triggering event and
eliminating the option for a retroactive
effective date for those individuals
would result in a gap in coverage for
such individuals and hinder their
ability to maintain continuous coverage.
We considered taking no action
regarding our policy to add new
paragraph (d)(15) to § 155.420 to specify
that complete cessation of employer
contributions or government subsidies
to COBRA continuation coverage is a
special enrollment period triggering
event. However, codifying this policy in
regulation provides transparency to a
long-standing interpretation of the
Exchanges on the Federal platform.
Additionally, codifying this policy in
regulation ensures alignment across all
Exchanges and in the off-Exchange
individual market.
For the revisions to § 156.295 and
addition of § 184.50 to require certain
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prescription drug reporting, we
considered, but did not yet require, the
reporting of data described in section
1150A(b)(1) broken down by pharmacy
type (which includes an independent
pharmacy, chain pharmacy,
supermarket pharmacy, or mass
merchandiser pharmacy that is licensed
as a pharmacy by the state and that
dispenses medication to the general
public). As mentioned in this final rule,
we are aware that it is not currently
possible to report such data by
pharmacy type because pharmacy type
is not a standard classification currently
captured in industry databases or files.
While we believe the imposition of this
level of reporting would impose
unreasonable burden at this time, we
intend to begin collecting this
information in the future.
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-forprofit organization that is not dominant
in its field, or (3) a small government
jurisdiction with a population of less
than 50,000. States and individuals are
not included in the definition of ‘‘small
entity.’’ HHS uses a change in revenues
of more than 3 to 5 percent as its
measure of significant economic impact
on a substantial number of small
entities.
In this rule, we finalize standards for
the risk adjustment program, which are
intended to stabilize premiums and
reduce incentives for issuers to avoid
higher-risk enrollees. We believe that
health insurance issuers and group
health plans would be classified under
the North American Industry
Classification System code 524114
(Direct Health and Medical Insurance
Carriers). According to SBA size
standards, entities with average annual
receipts of $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.358 We believe that few, if any,
358 https://www.sba.gov/document/support-table-size-standards.
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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 359 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 nonhealth lines of business that will result
in their revenues exceeding $41.5
million. Therefore, we do not expect the
provisions of this rule to affect a
substantial number of small entities.
In this rule, we are requiring certain
QHP issuers or their PBMs to report
certain prescription drug information to
CMS. We are not aware of any QHP
issuer or PBM that contracts with a QHP
issuer to administer their prescription
drug benefit which would be considered
a ‘‘small entity’’ under the RFA.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis 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, we 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, we have
determined that this rule will not affect
small rural hospitals. Therefore, the
Secretary has 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. In 2021 that
threshold is approximately $158
359 Available at https://www.cms.gov/CCIIO/
Resources/Data-Resources/mlr.html.
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million. Although we have not been
able to quantify all costs, we expect the
combined impact on state, local, or
Tribal governments and the private
sector to be below the threshold.
G. Federalism
Executive Order 13132 establishes
certain requirements that an agency
must meet when it issues a final rule
that imposes substantial direct costs on
state and local governments, preempts
state law, or otherwise has federalism
implications. In our 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, we have engaged in efforts to
consult with and work cooperatively
with affected states, including
participating in conference calls with
and attending conferences of the NAIC,
and consulting with state insurance
officials on an individual basis.
While developing this rule, we
attempted to balance the states’ interests
in regulating health insurance issuers
with the need to ensure market stability.
By doing so, we complied with the
requirements of Executive Order 13132.
Because states have flexibility in
designing their Exchange and Exchangerelated programs, state decisions will
ultimately influence both administrative
expenses and overall premiums. States
are not required to establish an
Exchange or risk adjustment program.
For states that elected previously to
operate an Exchange, 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
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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. Pursuant to
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, Elizabeth Richter, Acting
Administrator of the Centers for
Medicare & Medicaid Services,
approved this document on April 21,
2021.
List of Subjects
45 CFR Part 147
Age discrimination, Citizenship and
naturalization, Civil rights, Health care,
Health insurance, Individuals with
disabilities, Intergovernmental relations,
Reporting and recordkeeping
requirements, Sex discrimination.
45 CFR Part 150
Administrative practice and
procedure, Health care, Health
insurance, Penalties, Reporting and
recordkeeping requirements.
45 CFR Part 153
Administrative practice and
procedure, Health care, Health
insurance, Health records,
Intergovernmental relations,
Organization and functions
(Government agencies), Reporting and
recordkeeping requirements.
45 CFR Part 155
Administrative practice and
procedure, Advertising, 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.
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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.
45 CFR Part 158
Administrative practice and
procedure, Claims, Health care, Health
insurance, Penalties, Reporting and
recordkeeping requirements.
45 CFR Part 184
Administrative practice and
procedure, Consumer protection, Health
care, Health insurance, Health
maintenance organization (HMO),
Organization and functions
(Government agencies), Prescription
Drugs, Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, under the authority at 5
U.S.C. 301, the Department of Health
and Human Services proposes to amend
45 CFR subtitle A, subchapter B, as set
forth below.
PART 147—HEALTH INSURANCE
REFORM REQUIREMENTS FOR THE
GROUP AND INDIVIDUAL HEALTH
INSURANCE MARKETS
1. The authority citation for part 147
continues to read as follows:
■
Authority: 42 U.S.C. 300gg through 300gg–
63, 300gg–91, and 300gg–92, as amended,
and section 3203, Pub. L. 116–136, 134 Stat.
281.
2. Section 147.104 is amended by
revising paragraphs (b)(2)(ii) and (4)(ii)
to read as follows:
■
§ 147.104 Guaranteed availability of
coverage.
*
*
*
*
*
(b) * * *
(2) * * *
(ii) In applying this paragraph (b)(2),
a reference in § 155.420 (other than in
§§ 155.420(a)(5) and (d)(4)) of this
subchapter to a ‘‘QHP’’ is deemed to
refer to a plan, a reference to ‘‘the
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Exchange’’ is deemed to refer to the
applicable State authority, and a
reference to a ‘‘qualified individual’’ is
deemed to refer to an individual in the
individual market. For purposes of
§ 155.420(d)(4) of this subchapter, ‘‘the
Exchange’’ is deemed to refer to the
Exchange or the health plan, as
applicable.
*
*
*
*
*
(4) * * *
(ii) In the individual market, subject
to § 155.420(c)(5) of this subchapter,
individuals must be provided 60
calendar days after the date of an event
described in paragraph (b)(2) and (3) of
this section to elect coverage, as well as
60 calendar days before certain
triggering events as provided for in
§ 155.420(c)(2) of this subchapter.
*
*
*
*
*
PART 150—CMS ENFORCEMENT IN
GROUP AND INDIVIDUAL INSURANCE
MARKETS
3. The authority citation for part 150
is revised to read as follows:
■
Authority: 42 U.S.C. 300gg through 300gg–
63, 300gg–91, and 300gg–92, as amended.
§ 150.103
[Amended]
4. In § 150.103, amend the definition
of ‘‘Complaint’’ by removing the word
‘‘HIPAA’’ and adding in its place ‘‘PHS
Act’’.
■
§ 150.205
[Amended]
5. In § 150.205, amend paragraph
(e)(2) by removing the word ‘‘HIPAA’’
and adding in its place ‘‘PHS Act’’.
■
§ 150.213
[Amended]
6. In § 150.213, amend paragraph (b)
by removing the word ‘‘HIPAA’’ and
adding in its place ‘‘PHS Act’’.
■
§ 150.303
7. In § 150.303, amend paragraph (a)
introductory text by removing the word
‘‘HIPAA’’ and adding in its place ‘‘PHS
Act’’.
[Amended]
8. In § 150.305, amend paragraphs
(a)(1), (a)(2), (b)(1), and (c)(1) by
removing the word ‘‘HIPAA’’ each time
it appears and adding in its place ‘‘PHS
Act’’.
■
§ 150.311
[Amended]
9. In § 150.311, amend paragraph (g)
by removing the word ‘‘HIPAA’’ and
adding in its place ‘‘PHS Act’’.
■
§ 150.313
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§ 150.447
Definitions.
*
*
*
*
*
Filing date means the date filed
electronically.
Hearing includes a hearing on a
written record as well as an in-person,
telephone, or video teleconference
hearing.
*
*
*
*
*
§ 150.419
[Amended]
12. In § 150.419, amend paragraph (a)
by removing the phrase ‘‘or by
telephone’’ and adding in its place the
phrase ‘‘by telephone, or by video
teleconference’’.
■ 13. Amend § 150.427 by revising
paragraph (a) introductory text and
paragraph (b) to read as follows:
■
§ 150.427 Form and service of
submissions.
Acknowledgment of request for
After receipt of the request for
hearing, the ALJ assigned to the case or
someone acting on behalf of the ALJ will
send a written notice to the parties that
acknowledges receipt of the request for
hearing, identifies the docket number
assigned to the case, and provides
instructions for filing submissions and
other general information concerning
procedures. The ALJ will set out the
next steps in the case either as part of
the acknowledgement or on a later date.
■ 15. Amend § 150.441 by revising
paragraph (e) to read as follows:
Prehearing conferences.
*
*
*
*
(e) Establishing a schedule for an inperson, telephone, or video
teleconference hearing, including
setting deadlines for the submission of
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[Amended]
16. In § 150.447, amend paragraph (a)
by removing the phrase ‘‘or by
telephone’’ and adding in its place the
phrase ‘‘by telephone, or by video
teleconference’’.
■
PART 153—STANDARDS RELATED TO
REINSURANCE, RISK CORRIDORS,
AND RISK ADJUSTMENT UNDER THE
AFFORDABLE CARE ACT
17. The authority citation for part 153
continues to read as follows:
■
Authority: 42 U.S.C. 18031, 18041, and
18061 through 18063.
18. Section 153.320 is amended by
revising paragraph (c) as follows:
■
§ 153.320 Federally certified risk
adjustment methodology.
*
(a) Every submission filed with the
ALJ must be filed electronically and
include:
*
*
*
*
*
(b) A party filing a submission with
the ALJ must, at the time of filing, serve
a copy of such submission on the
opposing party. An intervenor filing a
submission with the ALJ must, at the
time of filing, serve a copy of the
submission on all parties. If a party is
represented by an attorney, service must
be made on the attorney. An
electronically filed submission is
considered served on all parties using
the electronic filing system.
■ 14. Revise § 150.431 to read as
follows:
*
[Amended]
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§ 150.401
§ 150.441
10. In § 150.313, amend paragraph (b)
by removing the word ‘‘HIPAA’’ and
adding in its place ‘‘PHS Act’’.
■
written direct testimony or for the
written reports of experts.
*
*
*
*
*
§ 150.431
hearing.
[Amended]
■
§ 150.305
11. Amend § 150.401 by revising the
definitions of ‘‘Filing date’’ and
‘‘Hearing’’ to read as follows:
■
*
*
*
*
(c) Use of methodology for States that
do not operate a risk adjustment
program. HHS will specify in noticeand-comment rulemaking by HHS in
advance of the applicable benefit year,
the Federally certified risk adjustment
methodology that will apply in States
that do not operate a risk adjustment
program.
*
*
*
*
*
■ 19. Section 153.410 is amended by
revising paragraph (d) to read as
follows:
§ 153.410 Requests for reinsurance
payment.
*
*
*
*
*
(d) Audits and compliance reviews.
HHS or its designee may audit or
conduct a compliance review of an
issuer of a reinsurance-eligible plan to
assess its compliance with the
applicable requirements of this subpart
and subpart H of this part. Compliance
reviews conducted under this section
will follow the standards set forth in
§ 156.715 of this subchapter.
(1) Notice of audit. HHS will provide
at least 30 calendar days advance notice
of its intent to conduct an audit of an
issuer of a reinsurance-eligible plan.
(i) Conferences. All audits will
include an entrance conference at which
the scope of the audit will be presented
and an exit conference at which the
initial audit findings will be discussed.
(ii) [Reserved]
(2) Compliance with audit activities.
To comply with an audit under this
section, the issuer must:
(i) Ensure that its relevant employees,
agents, contractors, subcontractors,
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downstream entities, and delegated
entities cooperate with any audit or
compliance review under this section;
(ii) Submit complete and accurate
data to HHS or its designees that is
necessary to complete the audit, in the
format and manner specified by HHS,
no later than 30 calendar days after the
initial audit response deadline
established by HHS at the entrance
conference described in paragraph
(d)(1)(i) of this section for the applicable
benefit year;
(iii) Respond to all audit notices,
letters, and inquiries, including requests
for supplemental or supporting
information, as requested by HHS, no
later than 15 calendar days after the date
of the notice, letter, request, or inquiry;
and
(iv) In circumstances in which an
issuer cannot provide the requested data
or response to HHS within the
timeframes under paragraph (d)(2)(ii) or
(iii) of this section, as applicable, the
issuer may make a written request for an
extension to HHS. The extension
request must be submitted within the
timeframe established under paragraph
(d)(2)(ii) or (iii) of this section, as
applicable, and must detail the reason
for the extension request and the good
cause in support of the request. If the
extension is granted, the issuer must
respond within the timeframe specified
in HHS’s notice granting the extension
of time.
(3) Preliminary audit findings. HHS
will share its preliminary audit findings
with the issuer, who will then have 30
calendar days to respond to such
findings in the format and manner
specified by HHS.
(i) If the issuer does not dispute or
otherwise respond to the preliminary
findings, the audit findings will become
final.
(ii) If the issuer responds and disputes
the preliminary findings, HHS will
review and consider such response and
finalize the audit findings after such
review.
(4) Final audit findings. If an audit
results in the inclusion of a finding in
the final audit report, the issuer must
comply with the actions set forth in the
final audit report in the manner and
timeframe established by HHS, and the
issuer must complete all of the
following:
(i) Within 45 calendar days of the
issuance of the final audit report,
provide a written corrective action plan
to HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written
documentation of the corrective actions
once taken.
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(5) Failure to comply with audit
activities. If an issuer fails to comply
with the audit activities set forth in this
subsection in the manner and
timeframes specified by HHS:
(i) HHS will notify the issuer of
reinsurance payments received that the
issuer has not adequately substantiated;
and
(ii) HHS will notify the issuer that
HHS may recoup any payments
identified in paragraph (5)(i) of this
section.
■ 20. Section 153.620 is amended by
revising paragraph (c) to read as follows:
§ 153.620 Compliance with risk adjustment
standards.
*
*
*
*
*
(c) Audits and compliance reviews.
HHS or its designee may audit or
conduct a compliance review of an
issuer of a risk adjustment covered plan
to assess its compliance with respect to
the applicable requirements in this
subpart and subpart H of this part.
Compliance reviews conducted under
this section will follow the standards set
forth in § 156.715 of this subchapter.
(1) Notice of audit. HHS will provide
at least 30 calendar days advance notice
of its intent to conduct an audit of an
issuer of a risk adjustment covered plan.
(i) Conferences. All audits will
include an entrance conference at which
the scope of the audit will be presented
and an exit conference at which the
initial audit findings will be discussed.
(ii) [Reserved]
(2) Compliance with audit activities.
To comply with an audit under this
section, the issuer must:
(i) Ensure that its relevant employees,
agents, contractors, subcontractors,
downstream entities, and delegated
entities cooperate with any audit or
compliance review under this section;
(ii) Submit complete and accurate
data to HHS or its designees that is
necessary to complete the audit, in the
format and manner specified by HHS,
no later than 30 calendar days after the
initial audit response deadline
established by HHS at the audit
entrance conference described in
paragraph (c)(1)(i) of this section for the
applicable benefit year;
(iii) Respond to all audit notices,
letters, and inquiries, including requests
for supplemental or supporting
information, as requested by HHS, no
later than 15 calendar days after the date
of the notice, letter, request, or inquiry;
and
(iv) In circumstances in which an
issuer cannot provide the requested data
or response to HHS within the
timeframes under paragraphs (c)(2)(ii) or
(iii) of this section, as applicable, the
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24287
issuer may make a written request for an
extension to HHS. The extension
request must be submitted within the
timeframe established under paragraphs
(c)(2)(ii) or (iii) of this section, as
applicable, and must detail the reason
for the extension request and the good
cause in support of the request. If the
extension is granted, the issuer must
respond within the timeframe specified
in HHS’s notice granting the extension
of time.
(3) Preliminary audit findings. HHS
will share its preliminary audit findings
with the issuer, who will then have 30
calendar days to respond to such
findings in the format and manner
specified by HHS.
(i) If the issuer does not dispute or
otherwise respond to the preliminary
findings, the audit findings will become
final.
(ii) If the issuer responds and disputes
the preliminary findings, HHS will
review and consider such response and
finalize the audit findings after such
review.
(4) Final audit findings. If an audit
results in the inclusion of a finding in
the final audit report, the issuer must
comply with the actions set forth in the
final audit report in the manner and
timeframe established by HHS, and the
issuer must complete all of the
following:
(i) Within 45 calendar days of the
issuance of the final audit report,
provide a written corrective action plan
to HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written
documentation of the corrective actions
once taken.
(5) Failure to comply with audit
activities. If an issuer fails to comply
with the audit activities set forth in this
subsection in the manner and
timeframes specified by HHS:
(i) HHS will notify the issuer of the
risk adjustment (including high-cost risk
pool) payments that the issuer has not
adequately substantiated; and
(ii) HHS will notify the issuer that
HHS may recoup any risk adjustment
(including high-cost risk pool) payments
identified in paragraph (c)(5)(i) of this
section.
■ 21. Section 153.630 is amended by—
■ a. Revising paragraph (d)(3); and
■ b. Adding paragraphs (g)(4) and (5).
The revisions read as follows:
§ 153.630 Data validation requirements
when HHS operates risk adjustment.
*
*
*
*
*
(d) * * *
(3) An issuer may appeal the findings
of a second validation audit (if
applicable) or the calculation of a risk
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score error rate as result of risk
adjustment data validation, under the
process set forth in § 156.1220 of this
subchapter.
*
*
*
*
*
(g) * * *
(4) The issuer only offered small
group market carryover coverage during
the benefit year that is being audited.
(5) The issuer was the sole issuer in
the state market risk pool during the
benefit year that is being audited and
did not participate in any other market
risk pools in the State during the benefit
year that is being audited.
■ 22. Section 153.710 is amended—
■ a. By redesignating paragraphs (e)
through (g), as paragraphs (f) through
(h), respectively;
■ b. By adding a new paragraph (e); and
■ c. In newly redesignated paragraph (h)
introductory text by removing the
reference ‘‘paragraph (g)(3)’’ and adding
in its place the reference ‘‘paragraph
(h)(3)’’.
The addition reads as follows:
§ 153.710
Data requirements.
*
*
*
*
*
(e) Materiality threshold. HHS will
consider a discrepancy reported under
paragraph (d)(2) of this section to be
material if the amount in dispute is
equal to or exceeds 1 percent of the
applicable payment or charge payable to
or due from the issuer for the benefit
year, or $100,000, whichever is less.
*
*
*
*
*
PART 155—EXCHANGE
ESTABLISHMENT STANDARDS AND
OTHER RELATED STANDARDS
UNDER THE AFFORDABLE CARE ACT
web-broker business entity that is not a
licensed agent or broker under State law
and has been engaged or created by, or
is owned by an agent or broker, to
provide technology services to facilitate
participation in direct enrollment under
§§ 155.220(c)(3) and 155.221.
*
*
*
*
*
Qualified health plan issuer direct
enrollment technology provider means a
business entity that provides technology
services or provides access to an
information technology platform to QHP
issuers to facilitate participation in
direct enrollment under §§ 155.221 or
156.1230, including a web-broker that
provides services as a direct enrollment
technology provider to QHP issuers. A
QHP issuer direct enrollment
technology provider that provides
technology services or provides access
to an information technology platform
to a QHP issuer will be a downstream
or delegated entity of the QHP issuer
that participates or applies to participate
as a direct enrollment entity.
*
*
*
*
*
Web-broker means an individual
agent or broker, group of agents or
brokers, or business entity registered
with an Exchange under § 155.220(d)(1)
that develops and hosts a non-Exchange
website that interfaces with an
Exchange to assist consumers with
direct enrollment in QHPs offered
through the Exchange as described in
§ 155.220(c)(3) or § 155.221. The term
also includes an agent or broker direct
enrollment technology provider.
■ 25. Section 155.205 is amended by
revising paragraphs (c)(2)(i)(B),
(c)(2)(iii)(B), (c)(2)(iv) introductory text,
and (c)(2)(iv)(C) to read as follows:
■
23. The authority citation for part 155
continues to read as follows:
§ 155.205 Consumer assistance tools and
programs of an Exchange.
Authority: 42 U.S.C. 18021–18024, 18031–
18033, 18041–18042, 18051, 18054, 18071,
and 18081–18083.
*
24. Section 155.20 is amended by—
a. Adding, in alphabetical order, the
definition of ‘‘Agent or broker direct
enrollment technology provider’’;
■ b. Removing the definition of ‘‘Direct
enrollment technology provider’’;
■ c. Adding, in alphabetical order, the
definition of ‘‘Qualified health plan
issuer direct enrollment technology
provider’’;
■ d. Revising the definition of ‘‘Webbroker’’.
The additions and revision read as
follows:
■
■
§ 155.20
Definitions.
*
*
*
*
*
Agent or broker direct enrollment
technology provider means a type of
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*
*
*
*
(c) * * *
(2) * * *
(i) * * *
(B) For a web-broker, beginning
November 1, 2015, or when such entity
has been registered with the Exchange
for at least 1 year, whichever is later,
this standard also includes telephonic
interpreter services in at least 150
languages.
*
*
*
*
*
(iii) * * *
(B) For a web-broker, beginning when
such entity has been registered with the
Exchange for at least 1 year, this
standard also includes taglines on
website content and any document that
is critical for obtaining health insurance
coverage or access to health care
services through a QHP for qualified
individuals, applicants, qualified
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employers, qualified employees, or
enrollees. Website content or documents
are deemed to be critical for obtaining
health insurance coverage or access to
health care services through a QHP if
they are required to be provided by law
or regulation to a qualified individual,
applicant, qualified employer, qualified
employee, or enrollee. Such taglines
must indicate the availability of
language services in at least the top 15
languages spoken by the limited English
proficient population of the relevant
State or States, as determined in
guidance published by the Secretary. A
web-broker that is licensed in and
serving multiple States may aggregate
the limited English populations in the
States it serves to determine the top 15
languages required for taglines. A webbroker may satisfy tagline requirements
with respect to website content if it
posts a Web link prominently on its
home page that directs individuals to
the full text of the taglines indicating
how individuals may obtain language
assistance services, and if it also
includes taglines on any critical standalone document linked to or embedded
in the website.
(iv) For Exchanges, QHP issuers, and
web-brokers, website translations.
*
*
*
*
*
(C) For a web-broker, beginning on the
first day of the individual market open
enrollment period for the 2017 benefit
year, or when such entity has been
registered with the Exchange for at least
1 year, whichever is later, content that
is intended for qualified individuals,
applicants, qualified employers,
qualified employees, or enrollees on a
website that is maintained by the webbroker must be translated into any nonEnglish language that is spoken by a
limited English proficient population
that comprises 10 percent or more of the
population of the relevant State, as
determined in guidance published by
the Secretary.
*
*
*
*
*
■ 26. Section 155.220 is amended by
adding paragraph (c)(6) to read as
follows:
§ 155.220 Ability of States to permit agents
and brokers and web-brokers to assist
qualified individuals, qualified employers,
or qualified employees enrolling in QHPs.
*
*
*
*
*
(c) * * *
(6) In addition to applicable
requirements under § 155.221(b)(4), a
web-broker must demonstrate
operational readiness and compliance
with applicable requirements prior to
the web-broker’s internet website being
used to complete an Exchange eligibility
application or a QHP selection, which
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may include submission or completion,
in the form and manner specified by
HHS, of the following:
(i) Operational data including
licensure information, points of contact,
and third-party relationships;
(ii) Enrollment testing, prior to
approval or renewal;
(iii) Website reviews performed by
HHS;
(iv) Security and privacy assessment
documentation, including:
(A) Penetration testing results;
(B) Security and privacy assessment
reports;
(C) Vulnerability scan results;
(D) Plans of action and milestones;
and
(E) System security and privacy plans.
(v) Agreements between the webbroker and HHS.
*
*
*
*
*
■ 27. Section 155.221 is amended—
■ a. By revising paragraphs (b)(1), (3),
and (4);
■ b. By redesignating paragraphs (c)
through (h) as paragraphs (d) through
(i), respectively.
■ c. By adding new paragraph (c); and
■ d. By amending newly redesignated
paragraphs (g) introductory text, (g)(6),
(g)(7), and (h) by removing the reference
to ‘‘paragraph (e)’’ and adding in its
place a reference to ‘‘paragraph (f)’’.
The additions and revisions read as
follows:
§ 155.221 Standards for direct enrollment
entities and for third parties to perform
audits of direct enrollment entities.
*
*
*
*
*
(b) * * *
(1) Display and market QHPs offered
through the Exchange, individual health
insurance coverage as defined in
§ 144.103 of this subchapter offered
outside the Exchange (including QHPs
and non-QHPs other than excepted
benefits), and any other products, such
as excepted benefits, on at least three
separate website pages on its nonExchange website, except as permitted
under paragraph (c) of this section;
*
*
*
*
*
(3) Limit marketing of non-QHPs
during the Exchange eligibility
application and QHP selection process
in a manner that minimizes the
likelihood that consumers will be
confused as to which products and
plans are available through the
Exchange and which products and plans
are not, except as permitted under
paragraph (c)(1) of this section;
(4) Demonstrate operational readiness
and compliance with applicable
requirements prior to the direct
enrollment entity’s internet website
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being used to complete an Exchange
eligibility application or a QHP
selection, which may include
submission or completion, in the form
and manner specified by HHS, of the
following:
(i) Business audit documentation
including:
(A) Notices of intent to participate
including auditor information;
(B) Documentation packages
including privacy questionnaires,
privacy policy statements, and terms of
service; and
(C) Business audit reports including
testing results.
(ii) Security and privacy audit
documentation including:
(A) Interconnection security
agreements;
(B) Security and privacy controls
assessment test plans;
(C) Security and privacy assessment
reports;
(D) Plans of action and milestones;
(E) Privacy impact assessments;
(F) System security and privacy plans;
(G) Incident response plans; and
(H) Vulnerability scan results.
(iii) Eligibility application audits
performed by HHS;
(iv) Online training modules offered
by HHS; and
(v) Agreements between the direct
enrollment entity and HHS.
*
*
*
*
*
(c) Exceptions to direct enrollment
entity display and marketing
requirement. For the Federallyfacilitated Exchanges, a direct
enrollment entity may:
(1) Display and market QHPs offered
through the Exchange and individual
health insurance coverage as defined in
§ 144.103 of this subchapter offered
outside the Exchange (including QHPs
and non-QHPs other than excepted
benefits) on the same website pages
when assisting individuals who have
communicated receipt of an offer of an
individual coverage health
reimbursement arrangement as
described in § 146.123(c) of this
subchapter, as a standalone benefit, or
in addition to an offer of an arrangement
under which the individual may pay the
portion of the premium for individual
health insurance coverage that is not
covered by an individual coverage
health reimbursement arrangement
using a salary reduction arrangement
pursuant to a cafeteria plan under
section 125 of the Internal Revenue
Code, but must clearly distinguish
between the QHPs offered through the
Exchange and individual health
insurance coverage offered outside the
Exchange (including QHPs and non-
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24289
QHPs other than excepted benefits), and
prominently communicate that advance
payments of the premium tax credit and
cost-sharing reductions are available
only for QHPs purchased through the
Exchange, that advance payments of the
premium tax credit are not available to
individuals who accept an offer of an
individual coverage health
reimbursement arrangement or who opt
out of an individual coverage health
reimbursement arrangement that is
considered affordable, and that a salary
reduction arrangement under a cafeteria
plan may only be used toward the cost
of premiums for plans purchased
outside the Exchange; and
(2) Display and market Exchangecertified stand-alone dental plans
offered outside the Exchange and noncertified stand-alone dental plans on the
same website pages.
*
*
*
*
*
■ 28. Effective May 5, 2021 amend
§ 155.320 by—
■ a. Revising paragraph (c)(3)(iii)(A);
and
■ b. Removing and reserving paragraphs
(c)(3)(iii)(D) and (vi)(C)(2).
The revision read as follows:
§ 155.320 Verification process related to
eligibility for insurance affordability
programs.
*
*
*
*
*
(c) * * *
(3) * * *
(iii) * * *
(A) Except as specified in paragraph
(c)(3)(iii)(B) and (C) of this section, if an
applicant’s attestation, in accordance
with paragraph (c)(3)(ii)(B) of this
section, indicates that a tax filer’s
annual household income has increased
or is reasonably expected to increase
from the data described in paragraph
(c)(3)(ii)(A) of this section for the benefit
year for which the applicant(s) in the
tax filer’s family are requesting coverage
and the Exchange has not verified the
applicant’s MAGI-based income through
the process specified in paragraph
(c)(2)(ii) of this section to be within the
applicable Medicaid or CHIP MAGIbased income standard, the Exchange
must accept the applicant’s attestation
regarding a tax filer’s annual household
income without further verification.
*
*
*
*
*
■ 29. Section 155.420 is amended by—
■ a. Revising paragraph (a)(4)(ii)(B);
■ b. Adding paragraph (a)(4)(ii)(C);
■ c. Revising paragraphs (a)(4)(iii)
introductory text and (b)(2)(iv);
■ d. Adding paragraph (b)(5);
■ e. Revising paragraph (c)(2);
■ f. Adding paragraphs (c)(5) and
(d)(15); and
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g. Revising paragraph (e)(1).
The revisions and additions read as
follows:
■
§ 155.420
Special enrollment periods.
(a) * * *
(4) * * *
(ii) * * *
(B) Beginning January 2022, if an
enrollee and his or her dependents
become newly ineligible for cost-sharing
reductions in accordance with
paragraph (d)(6)(i) or (ii) of this section
and are enrolled in a silver-level QHP,
the Exchange must allow the enrollee
and his or her dependents to change to
a QHP one metal level higher or lower,
if they elect to change their QHP
enrollment; or
(C) No later than January 1, 2024, if
an enrollee and his or her dependents
become newly ineligible for advance
payments of the premium tax credit in
accordance with paragraph (d)(6)(i) or
(ii) of this section, the Exchange must
allow the enrollee and his or her
dependents to change to a QHP of any
metal level, if they elect to change their
QHP enrollment;
(iii) For the other triggering events
specified in paragraph (d) of this
section, except for paragraphs (d)(2)(i),
(4), (6)(i) and (6)(ii) of this section for
becoming newly eligible or ineligible for
CSRs or, no later than January 1, 2024
newly ineligible for APTC, (d)(8), (9),
(10) and (12) of this section:
*
*
*
*
*
(b) * * *
(2) * * *
(iv) If a qualified individual, enrollee,
or dependent, as applicable, loses
coverage as described in paragraph
(d)(1) or (d)(6)(iii) of this section, gains
access to a new QHP as described in
paragraph (d)(7) of this section, becomes
newly eligible for enrollment in a QHP
through the Exchange in accordance
with § 155.305(a)(2) as described in
paragraph (d)(3) of this section, becomes
newly eligible for advance payments of
the premium tax credit in conjunction
with a permanent move as described in
paragraph (d)(6)(iv) of this section, or is
enrolled in COBRA continuation
coverage and employer contributions to
or government subsidies of this coverage
completely cease as described in
paragraph (d)(15) of this section, and if
the plan selection is made on or before
the day of the triggering event, the
Exchange must ensure that the coverage
effective date is the first day of the
month following the date of the
triggering event. If the plan selection is
made after the date of the triggering
event, the Exchange must ensure that
coverage is effective in accordance with
paragraph (b)(1) of this section or on the
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first day of the following month, at the
option of the Exchange.
*
*
*
*
*
(5) Option for earlier effective dates
due to untimely notice of triggering
event. At the option of a qualified
individual, enrollee or dependent who
is eligible to select a plan during a
period provided for under paragraph
(c)(5) of this section, the Exchange must
provide the earliest effective date that
would have been available under
paragraph (b) of this section, based on
the applicable triggering event under
paragraph (d) of this section.
(c) * * *
(2) Advanced availability. A qualified
individual or his or her dependent who
is described in paragraph (d)(1),
(d)(6)(iii), or (d)(15) of this section has
60 days before or after the triggering
event to select a QHP. At the option of
the Exchange, a qualified individual or
his or her dependent who is described
in paragraph (d)(7) of this section; who
is described in paragraph (d)(6)(iv) of
this section and becomes newly eligible
for advance payments of the premium
tax credit as a result of a permanent
move to a new State; or who is
described in paragraph (d)(3) of this
section and becomes newly eligible for
enrollment in a QHP through the
Exchange because he or she newly
satisfies the requirements under
§ 155.305(a)(2), has 60 days before or
after the triggering event to select a
QHP.
*
*
*
*
*
(5) Availability for individuals who
did not receive timely notice of
triggering events. If a qualified
individual, enrollee, or dependent did
not receive timely notice of an event
that triggers eligibility for a special
enrollment period under this section,
and otherwise was reasonably unaware
that a triggering event described in
paragraph (d) of this section occurred,
the Exchange must allow the qualified
individual, enrollee, or when
applicable, his or her dependent to
select a new plan within 60 days of the
date that he or she knew, or reasonably
should have known, of the occurrence
of the triggering event.
*
*
*
*
*
(d) * * *
(15) The qualified individual or his or
her dependent is enrolled in COBRA
continuation coverage for which an
employer is paying all or part of the
premiums, or for which a government
entity is providing subsidies, and the
employer completely ceases its
contributions to the qualified
individual’s or dependent’s COBRA
continuation coverage or government
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subsidies completely cease. The
triggering event is the last day of the
period for which COBRA continuation
coverage is paid for or subsidized, in
whole or in part, by an employer or
government entity. For purposes of this
paragraph, ‘‘COBRA continuation
coverage’’ has the meaning provided for
in § 144.103 of this subchapter and
includes coverage under a similar State
program.
(e) * * *
(1) Failure to pay premiums on a
timely basis, including COBRA
continuation coverage premiums prior
to expiration of COBRA continuation
coverage, except for circumstances in
which an employer completely ceases
its contributions to COBRA
continuation coverage, or government
subsidies of COBRA continuation
coverage completely cease as described
in paragraph (d)(15) of this section, or
*
*
*
*
*
PART 156—HEALTH INSURANCE
ISSUER STANDARDS UNDER THE
AFFORDABLE CARE ACT, INCLUDING
STANDARDS RELATED TO
EXCHANGES
30. The authority citation for part 156
is revised to read as follows:
■
Authority: 42 U.S.C. 18021–18024, 18031–
18032, 18041–18042, 18044, 18054, 18061,
18063, 18071, 18082, and 26 U.S.C. 36B.
31. Section 156.50 is amended by—
a. Revising the heading for paragraph
(c);
■ b. Revising paragraph (c)(2);
■ c. Adding paragraph (c)(3);
■ d. Revising the heading for paragraph
(d); and
■ e. Revising paragraphs (d)(1)
introductory text, (d)(2) introductory
text, (d)(2)(i)(A), (B), (d)(2)(ii),
(d)(2)(iii)(B), (d)(3) introductory text,
(d)(4) through (6), and (d)(7)
introductory text.
The revisions and addition read as
follows:
■
■
§ 156.50
Financial support.
*
*
*
*
*
(c) Requirement for Exchange user
fees. * * *
*
*
*
*
*
(2) To support the functions of State
Exchanges on the Federal platform,
unless the State Exchange and HHS
agree on an alternative mechanism to
collect the funds, a participating issuer
offering a plan through a State Exchange
on the Federal Exchange platform for
certain Exchange functions described in
§ 155.200 of this subchapter, as
specified in a Federal platform
agreement, must remit a user fee to
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HHS, in the timeframe and manner
established by HHS, equal to the
product of the sum of the monthly user
fee rate specified in the annual HHS
notice of benefit and payment
parameters for State Exchanges on the
Federal platform for the applicable
benefit year, multiplied by the monthly
premium charged by the issuer for each
policy under the plan where enrollment
is through the State-based Exchange on
the Federal platform.
(3) A participating issuer offering a
plan through an State-based Exchange
on the Federal platform that has
adopted the Direct Enrollment option or
Federally-facilitated Exchange that has
adopted the direct enrollment option as
described in § 155.221(j) of this
subchapter, as specified in a Federal
agreement with HHS, must remit a user
fee to HHS each month, in the
timeframe and manner established by
HHS, equal to the product of the
monthly user fee rate for the applicable
benefit year specified in an annual HHS
notice of benefit and payment
parameters published in advance of the
applicable benefit year and the monthly
premium charged by the issuer for each
policy under the plan where enrollment
is through the State-based Exchange on
the Federal platform that has adopted
the Direct Enrollment option or
Federally-facilitated Exchange that has
adopted the direct enrollment option.
(d) Adjustment of Exchange user fees.
(1) A participating issuer offering a plan
through a Federally-facilitated Exchange
or State Exchange on the Federal
platform may qualify for an adjustment
of the Federally-facilitated Exchange
user fee specified in paragraph (c)(1) of
this section, the State Exchange on the
Federal platform user fee specified in
paragraph (c)(2) of this section, or the
user fee specified in paragraph (c)(3) of
this section, applicable to issuers
participating in a State Exchange on the
Federal platform or a Federallyfacilitated Exchange that has adopted
the direct enrollment option under
§ 155.221(j) of this subchapter, the
extent that the participating issuer—
*
*
*
*
*
(2) For a participating issuer
described in paragraph (d)(1) of this
section to receive an adjustment of a
user fee under this section—
(i) * * *
(A) Identifying information for the
participating issuer and each third party
administrator that received a copy of the
self-certification referenced in 26 CFR
54.9815–2713A(a)(4) or 29 CFR
2590.715–2713A(a)(4) with respect to
which the participating issuer seeks an
adjustment of the user fee specified in
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paragraph (c)(1), (2), or (3) of this
section, as applicable, whether or not
the participating issuer was the entity
that made the payments for
contraceptive services;
(B) Identifying information for each
self-insured group health plan with
respect to which a copy of the selfcertification referenced in 26 CFR
54.9815–2713A(a)(4) or 29 CFR
2590.715–2713A(a)(4) was received by a
third party administrator and with
respect to which the participating issuer
seeks an adjustment of the user fee
specified in paragraph (c)(1), (2), or (3)
of this section, as applicable; and
*
*
*
*
*
(ii) Each third party administrator that
intends to seek an adjustment on behalf
of a participating issuer of the Federallyfacilitated Exchange user fee, the Statebased Exchange on the Federal platform
user fee, or the user fee applicable to
issuers participating in a State-based
Exchange on the Federal platform or a
Federally-facilitated Exchange that has
adopted the direct enrollment option
§ 155.221(j) of this subchapter based on
payments for contraceptive services,
must submit to HHS a notification of
such intent, in a manner specified by
HHS, by the 60th calendar day
following the date on which the third
party administrator receives the
applicable copy of the self-certification
referenced in 26 CFR 54.9815–
2713A(a)(4) or 29 CFR 2590.715–
2713A(a)(4).
(iii) * * *
(B) Identifying information for each
self-insured group health plan with
respect to which a copy of the selfcertification referenced in 26 CFR
54.9815–2713A(a)(4) or 29 CFR
2590.715–2713A(a)(4) was received by
the third party administrator and with
respect to which the participating issuer
seeks an adjustment of the user fee
specified in paragraph (c)(1), (2), or (3)
of this section, as applicable;
*
*
*
*
*
(3) If the requirements set forth in
paragraph (d)(2) of this section are met,
the participating issuer will be provided
a reduction in its obligation to pay the
user fee specified in paragraph (c)(1),
(2), or (3) of this section, as applicable,
equal in value to the sum of the
following:
*
*
*
*
*
(4) If the amount of the adjustment
under paragraph (d)(3) of this section is
greater than the amount of the
participating issuer’s obligation to pay
the user fee specified in paragraph
(c)(1), (2), or (3) of this section, as
applicable, in a particular month, the
participating issuer will be provided a
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24291
credit in succeeding months in the
amount of the excess.
(5) Within 60 days of receipt of any
adjustment of a user fee under this
section, a participating issuer must pay
each third party administrator with
respect to which it received any portion
of such adjustment an amount that is no
less than the portion of the adjustment
attributable to the total dollar amount of
the payments for contraceptive services
submitted by the third party
administrator, as described in paragraph
(d)(2)(iii)(D) of this section. No such
payment is required with respect to the
allowance for administrative costs and
margin described in paragraph (d)(3)(ii)
of this section. This paragraph does not
apply if the participating issuer made
the payments for contraceptive services
on behalf of the third party
administrator, as described in paragraph
(d)(1)(i) of this section, or is in the same
issuer group as the third party
administrator.
(6) A participating issuer that receives
an adjustment in the user fee specified
in paragraph (c)(1), (2), or (3) of this
section for a particular calendar year
must maintain for 10 years following
that year, and make available upon
request to HHS, the Office of the
Inspector General, the Comptroller
General, and their designees,
documentation demonstrating that it
timely paid each third party
administrator with respect to which it
received any such adjustment any
amount required to be paid to the third
party administrator under paragraph
(d)(5) of this section.
(7) A third party administrator of a
plan with respect to which an
adjustment of the user fee specified in
paragraph (c)(1), (2), or (3) of this
section is received under this section for
a particular calendar year must maintain
for 10 years following that year, and
make available upon request to HHS,
the Office of the Inspector General, the
Comptroller General, and their
designees, all of the following
documentation:
*
*
*
*
*
■ 32. Section 156.130 is amended by
revising paragraph (e) to read as follows:
§ 156.130
Cost-sharing requirements.
*
*
*
*
*
(e) Premium adjustment percentage.
The premium adjustment percentage is
the percentage (if any) by which the
average per capita premium for health
insurance coverage for the preceding
calendar year exceeds such average per
capita premium for health insurance for
2013. HHS may publish the annual
premium adjustment percentage in
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guidance in January of the calendar year
preceding the benefit year for which the
premium adjustment percentage is
applicable, unless HHS proposes
changes to the methodology, in which
case, HHS will publish the annual
premium adjustment percentage in an
annual HHS notice of benefit and
payment parameters or another
appropriate rulemaking.
*
*
*
*
*
■ 33. Section 156.295 is amended by—
■ a. Revising the section heading and
paragraphs (a) introductory text, (a)(1)
and (a)(2) introductory text,
■ b. Removing paragraph (a)(3); and
■ c. Revising paragraph (b) introductory
text.
The revisions read as follows:
§ 156.295 Prescription drug distribution
and cost reporting by QHP issuers.
(a) General requirement. In a form,
manner, and at such times specified by
HHS, a QHP issuer that administers a
prescription drug benefit without the
use of a pharmacy benefit manager must
provide to HHS the following
information:
(1) The percentage of all prescriptions
that were provided under the QHP
through retail pharmacies compared to
mail order pharmacies, and the
percentage of prescriptions for which a
generic drug was available and
dispensed compared to all drugs
dispensed;
(2) The aggregate amount, and the
type of rebates, discounts or price
concessions (excluding bona fide
service fees) that the QHP issuer
negotiates that are attributable to patient
utilization under the QHP, and the
aggregate amount of the rebates,
discounts, or price concessions that are
passed through to the QHP issuer, and
the total number of prescriptions that
were dispensed.
*
*
*
*
*
(b) Limitation on disclosure.
Information disclosed by a QHP issuer
under this section shall not be disclosed
by HHS, except that HHS may disclose
the information in a form which does
not disclose the identity of a specific
QHP or prices charged for specific
drugs, for the following purposes:
*
*
*
*
*
■ 34. Section 156.420 is amended by
revising paragraphs (a)(1)(i), (a)(2)(i) and
(a)(3)(i) to read as follows:
§ 156.420
Plan variations.
(a) * * *
(1) * * *
(i) An annual limitation on cost
sharing no greater than the reduced
maximum annual limitation on cost
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sharing specified in the annual HHS
guidance or notice of benefit and
payment parameters for such
individuals, and
*
*
*
*
*
(2) * * *
(i) An annual limitation on cost
sharing no greater than the reduced
maximum annual limitation on cost
sharing specified in the annual HHS
guidance or notice of benefit and
payment parameters for such
individuals, and
*
*
*
*
*
(3) * * *
(i) An annual limitation on cost
sharing no greater than the reduced
maximum annual limitation on cost
sharing specified in the annual HHS
guidance or notice of benefit and
payment parameters for such
individuals, and
*
*
*
*
*
■ 35. Section 156.480 is amended by
revising the section heading and
paragraph (c) to read as follows:
§ 156.480 Oversight of the administration
of the advance payments of the premium
tax credit, cost-sharing reductions, and
user fee programs.
*
*
*
*
*
(c) Audits and compliance reviews.
HHS or its designee may audit or
conduct a compliance review of an
issuer offering a QHP through an
Exchange to assess its compliance with
the applicable requirements of this
subpart and 45 CFR 156.50. Compliance
reviews conducted under this section
will follow the standards set forth in
§ 156.715.
(1) Notice of audit. HHS will provide
at least 30 calendar days advance notice
of its intent to conduct an audit of an
issuer under this section.
(i) Conferences. All audits will
include an entrance conference at which
the scope of the audit will be presented
and an exit conference at which the
initial audit findings will be discussed.
(ii) [Reserved]
(2) Compliance with audit activities.
To comply with an audit under this
section, the issuer must:
(i) Ensure that its relevant employees,
agents, contractors, subcontractors,
downstream entities, and delegated
entities cooperate with any audit or
compliance review under this section;
(ii) Submit complete and accurate
data to HHS or its designees that is
necessary to complete the audit, in the
format and manner specified by HHS,
no later than 30 calendar days after the
initial audit response deadline
established by HHS at the entrance
conference described under paragraph
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(c)(1)(i) of this section for the applicable
benefit year;
(iii) Respond to all audit notices,
letters, and inquiries, including requests
for supplemental or supporting
information, as requested by HHS, no
later than 15 calendar days after the date
of the notice, letter, request, or inquiry;
and
(iv) In circumstances in which an
issuer cannot provide the requested data
or response to HHS within the
timeframes under paragraph (c)(2)(ii) or
(iii) of this section, as applicable, the
issuer may make a written request for an
extension to HHS. The extension
request must be submitted within the
timeframe established under paragraph
(c)(2)(ii) or (iii), as applicable, and must
detail the reason for the extension
request and the good cause in support
of the request. If the extension is
granted, the issuer must respond within
the timeframe specified in HHS’s notice
granting the extension of time.
(3) Preliminary audit findings. HHS
will share its preliminary audit findings
with the issuer, who will then have 30
calendar days to respond to such
findings in the format and manner
specified by HHS.
(i) If the issuer does not dispute or
otherwise respond to the preliminary
findings, the audit findings will become
final.
(ii) If the issuer responds and disputes
the preliminary findings, HHS will
review and consider such response and
finalize the audit findings after such
review.
(4) Final audit findings. If an audit
results in the inclusion of a finding in
the final audit report, the issuer must
comply with the actions set forth in the
final audit report in the manner and
timeframe established by HHS, and the
issuer must complete all of the
following:
(i) Within 45 calendar days of the
issuance of the final audit or
compliance review report, provide a
written corrective action plan to HHS
for approval.
(ii) Implement that plan.
(iii) Provide to HHS written
documentation of the corrective actions
once taken.
(5) Failure to comply with audit
activities. If an issuer fails to comply
with the audit activities set forth in this
section in the manner and timeframes
specified by HHS:
(i) HHS will notify the issuer of
payments received under this subpart
that the issuer has not adequately
substantiated; and
(ii) HHS will notify the issuer that
HHS may recoup any payments
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identified in paragraph (c)(5)(i) of this
section.
(6) Circumstances requiring HHS
enforcement. If HHS determines that the
State Exchange or State-based Exchange
on the Federal platform is not enforcing
or fails to substantially enforce the
requirements of this subpart or § 156.50,
then HHS may do so and may pursue
the imposition of civil money penalties
as specified in § 156.805 for noncompliance by QHP issuers
participating in the State Exchange or
State Exchange on the Federal platform.
Subpart I—Enforcement Remedies in
the Exchanges
36. Subpart I is amended by revising
the heading as set forth above.
■ 37. Section 156.800 is amended by
revising paragraphs (a) introductory
text, and (b) as follows:
■
§ 156.800
Available remedies; Scope.
(a) Kinds of sanctions. HHS may
impose the following types of sanctions
on QHP issuers in an Exchange that are
not in compliance with Exchange
standards applicable to issuers offering
QHPs in an Exchange:
*
*
*
*
*
(b) Scope. Sanctions under subpart I
are applicable for non-compliance with
QHP issuer participation standards and
other standards applicable to issuers
offering QHPs in a Federally-facilitated
Exchange. Sanctions under paragraph
(a)(1) of this section are also applicable
for non-compliance by QHP issuers
participating in State Exchanges and
State-based Exchanges on the Federal
platform when HHS is responsible for
enforcement of the requirements in
subpart E of this part and 45 CFR
156.50.
*
*
*
*
*
■ 38. Section 156.805 is amended by—
■ a. Revising paragraphs (a)
introductory text and (a)(5)(i); and
■ b. Adding paragraph (f).
The revisions and addition read as
follows:
§ 156.805 Bases and process for imposing
civil money penalties in Federally-facilitated
Exchanges.
(a) Grounds for imposing civil money
penalties. Civil money penalties may be
imposed on an issuer in an Exchange if,
based on credible evidence, HHS has
reasonably determined that the issuer
has engaged in one or more of the
following actions:
*
*
*
*
*
(5) * * *
(i) To HHS or an Exchange; or
*
*
*
*
*
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(f) Circumstances requiring HHS
enforcement in State Exchanges and
State-based Exchanges on the Federal
platform. (1) HHS will enforce the
requirements of subpart E of this part
and 45 CFR 156.50 if a State Exchange
or State-based Exchange on the Federal
platform notifies HHS that it is not
enforcing these requirements or if HHS
makes a determination using the process
set forth at 45 CFR 150.201, et seq. that
a State Exchange or State-based
Exchange on the Federal platform is
failing to substantially enforce these
requirements.
(2) If HHS is responsible under
paragraph (f)(1) of this section for
enforcement of the requirements set
forth in subpart E of this part or 45 CFR
156.50, HHS may impose civil money
penalties on an issuer in a State
Exchange or State-based Exchange on
the Federal platform, in accordance
with the bases and process for imposing
civil money penalties set forth in this
section.
Subpart J—Administrative Review of
QHP Issuer Sanctions
39. Amend Subpart J by revising the
heading to read as set forth above.
■ 40. Section 156.901 is amended by
revising the definitions of ‘‘Filing date’’
and ‘‘Hearing’’ to read as follows.
■
§ 156.901
Definitions.
*
*
*
*
*
Filing date means the date filed
electronically.
Hearing includes a hearing on a
written record as well as an in-person,
telephone, or video teleconference
hearing.
*
*
*
*
*
■ 41. Section 156.903 is amended by
revising paragraph (a) as follows:
§ 156.903 Scope of Administrative Law
Judge’s (ALJ) authority.
(a) The ALJ has the authority,
including all of the authority conferred
by the Administrative Procedure Act (5
U.S.C. 554a), to adopt whatever
procedures may be necessary or proper
to carry out in an efficient and effective
manner the ALJ’s duty to provide a fair
and impartial hearing on the record and
to issue an initial decision concerning
the imposition of a civil money penalty
of a QHP offered in a Federallyfacilitated Exchange, State Exchange,
and State-based Exchange on the
Federal platform, or the decertification
of a QHP offered in a Federallyfacilitated Exchange.
*
*
*
*
*
■ 42. Section 156.919 is amended by
revising paragraph (a) to read as follows:
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§ 156.919
24293
Forms of hearing.
(a) All hearings before an ALJ are on
the record. The ALJ may receive
argument or testimony in writing, in
person, by telephone, or by video
teleconference. The ALJ may receive
testimony by telephone only if the ALJ
determines that doing so is in the
interest of justice and economy and that
no party will be unduly prejudiced. The
ALJ may require submission of a
witness’ direct testimony in writing
only if the witness is available for crossexamination.
*
*
*
*
*
■ 43. Section 156.927 is amended by
revising paragraphs (a) introductory text
and (b) to read as follows:
§ 156.927 Form and service of
submissions.
(a) Every submission filed with the
ALJ must be filed electronically and
include:
*
*
*
*
*
(b) A party filing a submission with
the ALJ must, at the time of filing, serve
a copy of such submission on the
opposing party. An intervenor filing a
submission with the ALJ must, at the
time of filing, serve a copy of the
submission on all parties. If a party is
represented by an attorney, service must
be made on the attorney. An
electronically filed submission is
considered served on all parties using
the electronic filing system.
■ 44. Section 156.931 is revised to read
as follows:
§ 156.931
hearing.
Acknowledgement of request for
After receipt of the request for
hearing, the ALJ assigned to the case or
someone acting on behalf of the ALJ will
send a written notice to the parties that
acknowledges receipt of the request for
hearing, identifies the docket number
assigned to the case, and provides
instructions for filing submissions and
other general information concerning
procedures. The ALJ will set out the
next steps in the case either as part of
the acknowledgement or on a later date.
■ 45. Section 156.941 is amended by
revising paragraph (e) to read as follows:
§ 156.941
Prehearing conferences.
*
*
*
*
*
(e) Establishing a schedule for an inperson, telephone, or video
teleconference hearing, including
setting deadlines for the submission of
written direct testimony or for the
written reports of experts.
*
*
*
*
*
■ 46. Section 156.947 is amended by
revising paragraph (a) to read as follows:
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The record.
§ 156.1210
Dispute submission.
(a) Responses to reports. Within 90
calendar days of the date of a payment
and collections report from HHS, the
issuer must, in a form and manner
specified by HHS or the State Exchange
describe to HHS or the State Exchange
(as applicable) any inaccuracies it
identifies in the report.
(b) Inaccuracies identified after 90day period. With respect to an
inaccuracy described under paragraph
(a) of this section that is identified and
submitted to HHS or the State Exchange
(as applicable) by the issuer after the
end of the 90-day period described in
such paragraph, HHS will consider and
work with the issuer or the State
Exchange (as applicable) to resolve the
inaccuracy so long as—
(1) The issuer promptly notifies HHS
or the State Exchange (as applicable)
upon identifying the inaccuracy, but in
no case later than 15 calendar days after
identifying the inaccuracy; and
(2) The failure to identify the
inaccuracy and submit it to HHS or the
State Exchange (as applicable) in a
timely manner was not unreasonable or
due to the issuer’s misconduct or
negligence.
(c) Deadline for describing
inaccuracies. To be eligible for
resolution under paragraph (b) of this
section, an issuer must describe all
inaccuracies identified in a payment
and collections report before the later
of—
(1) The end of the 3-year period
beginning at the end of the plan year to
which the inaccuracy relates; or
(2) The date by which HHS notifies
issuers that the HHS audit process with
respect to the plan year to which such
inaccuracy relates has been completed.
(3) If a payment error is discovered
after the timeframes set forth in
paragraph (c)(1) and (2) of this section,
the issuer must notify HHS, the State
Exchange, or SBE–FP (as applicable)
and repay any overpayments to HHS.
*
*
*
*
*
VerDate Sep<11>2014
22:49 May 04, 2021
48. Section 156.1215 is amended by
revising paragraph (b) to read as follows:
Authority: 42 U.S.C. 300gg–18.
■
(a) Any testimony that is taken inperson, by telephone, or by video
teleconference is recorded and
transcribed. The ALJ may order that
other proceedings in a case, such as a
prehearing conference or oral argument
of a motion, be recorded and
transcribed.
*
*
*
*
*
■ 47. Section 156.1210 is amended by—
■ a. Revising paragraph (a);
■ b. Redesignating paragraph (b) as
paragraph (d); and
■ c. Adding new paragraphs (b) and (c).
The additions read as follows:
Jkt 253001
§ 156.1215 Payment and collections
processes.
*
*
*
*
*
(b) Netting of payments and charges
for later years. As part of its payment
and collections process, HHS may net
payments owed to issuers and their
affiliates operating under the same tax
identification number against amounts
due to the Federal government from the
issuers and their affiliates under the
same taxpayer identification number for
advance payments of the premium tax
credit, advance payments of and
reconciliation of cost-sharing
reductions, payment of Federallyfacilitated Exchange user fees, payment
of State Exchanges utilizing the Federal
platform user fees, and risk adjustment,
reinsurance, and risk corridors
payments and charges.
*
*
*
*
*
■ 49. Section 156.1220 is amended by—
■ a. Revising paragraphs (a)(1)(vii) and
(a)(3)(ii);
■ b. Redesignating paragraphs (a)(3)(iii)
through (vi) as (a)(3)(iv) through (vii),
respectively; and
■ c. Adding new paragraph (a)(3)(iii).
The revision and addition reads as
follows:
§ 156.1220
Administrative appeals.
(a) * * *
(1) * * *
(vii) The findings of a second
validation audit as a result of risk
adjustment data validation (if
applicable) with respect to risk
adjustment data for the 2016 benefit
year and beyond; or
*
*
*
*
*
(3) * * *
(ii) For a risk adjustment payment or
charge, including an assessment of risk
adjustment user fees, within 30 calendar
days of the date of the notification
under § 153.310(e) of this subchapter;
(iii) For the findings of a second
validation audit (if applicable), or the
calculation of a risk score error rate as
a result of risk adjustment data
validation, within 30 calendar days of
publication of the applicable benefit
year’s Summary Report of Benefit Year
Risk Adjustment Data Validation
Adjustments to Risk Adjustment
Transfers;
*
*
*
*
*
PART 158—ISSUER USE OF PREMIUM
REVENUE: REPORTING AND REBATE
REQUIREMENTS
50. The authority citation for part 158
continues to read as follows:
■
PO 00000
Frm 00156
Fmt 4701
Sfmt 4700
51. Section 158.103 is amended by
adding the definition for ‘‘Prescription
drug rebates and other price
concessions’’ in alphabetical order to
read as follows:
■
§ 158.103
Definitions.
*
*
*
*
*
Prescription drug rebates and other
price concessions means all
remuneration received by or on behalf
of an issuer, including remuneration
received by and on behalf of entities
providing pharmacy benefit
management services to the issuer, that
decrease the costs of a prescription drug
covered by the issuer, regardless from
whom the remuneration is received (for
example, pharmaceutical manufacturer,
wholesaler, retail pharmacy, or vendor).
Prescription drug rebates and other
price concessions include discounts,
charge backs or rebates, cash discounts,
free goods contingent on a purchase
agreement, up-front payments, coupons,
goods in kind, free or reduced-price
services, grants, or other price
concessions or similar benefits to the
extent the value of these items reduce
costs for the issuer, and excluding bona
fide service fees. Prescription drug
rebates and other price concessions
exclude any remuneration, coupons, or
price concessions for which the full
value is passed on to the enrollee. Bona
fide service fees mean fees paid by a
drug manufacturer to an entity
providing pharmacy benefit
management services to the issuer that
represent fair market value for a bona
fide, itemized service actually
performed on behalf of the manufacturer
that the manufacturer would otherwise
perform (or contract for) in the absence
of the service arrangement, and that are
not passed on in whole or in part to a
client or customer of an entity, whether
or not the entity takes title to the drug.
*
*
*
*
*
§ 158.221
[Amended]
52. Effective May 5, 2021 amend
§ 158.221 by removing paragraph (b)(8)
and redesignating paragraph (b)(9) as
paragraph (b)(8).
■ 53. Section 158.240 is amended by
adding paragraph (g) to read as follows:
■
§ 158.240 Rebating premium if the
applicable medical loss ratio standard is
not met.
*
*
*
*
*
(g) Rebate prepayment and safe
harbor. An issuer may choose to pay a
portion or all of its estimated rebate
amount for a given MLR reporting year
to enrollees in any form specified in
§ 158.241 prior to the rebate payment
E:\FR\FM\05MYR2.SGM
05MYR2
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules and Regulations
deadlines set forth in §§ 158.240(e) and
158.241(a)(2) and in advance of
submitting the MLR report required in
§ 158.110 to the Secretary. Issuers that
choose to prepay a portion or all of their
rebates must do so for all eligible
enrollees in a given state and market in
a non-discriminatory manner, and
consistently with State law or other
applicable state authority. If, after
submitting the MLR report required in
§ 158.110, an issuer determines that its
rebate prepayment amount in a given
state and market is at least 95 percent,
but less than 100 percent, of the total
rebate amount owed for the applicable
MLR reporting year to enrollees in that
state and market, the issuer may,
without penalty or late payment interest
under paragraph (f) of this section,
provide the remaining rebate amount to
those enrollees no later than the rebate
deadlines in §§ 158.240(e) and
158.241(a)(2) applicable to the following
MLR reporting year. If the total rebate
owed to an enrollee for the MLR
reporting year is above the de minimis
threshold established in § 158.243(a),
the issuer cannot treat the remaining
rebate owed to an enrollee after
prepayment as de minimis, even if the
remaining rebate is below the de
minimis threshold.
■ 54. Section 158.241 is amended by
revising paragraph (a)(2) to read as
follows:
§ 158.241
Form of rebate.
(a) * * *
(2) For each of the 2011, 2012, and
2013 MLR reporting years, any rebate
provided in the form of a premium
credit must be provided by applying the
full amount due to the first month’s
premium that is due on or after August
1 following the MLR reporting year. If
the amount of the rebate exceeds the
premium due for August, then any
overage shall be applied to succeeding
premium payments until the full
amount of the rebate has been credited.
Beginning with the 2014 MLR reporting
year, any rebate provided in the form of
a premium credit must be provided by
applying the full amount due to the first
month’s premium that is due on or after
September 30 following the MLR
reporting year. If the amount of the
rebate exceeds the premium due for
October, then any overage shall be
applied to succeeding premium
payments until the full amount of the
rebate has been credited. Beginning
with rebates due for the 2020 MLR
reporting year, any rebate provided in
the form of a premium credit must be
provided by applying the full amount
due to the monthly premium that is due
no later than October 30 following the
VerDate Sep<11>2014
22:49 May 04, 2021
Jkt 253001
MLR reporting year. If the amount of the
rebate exceeds the monthly premium,
then any overage shall be applied to
succeeding premium payments until the
full amount of the rebate has been
credited.
*
*
*
*
*
■ 55. Subchapter E as added in final
rule published on November 27, 2019
(84 FR 65524) and effective on January
1, 2021 is amended by adding part 184
to read as follows:
PART 184—PHARMACY BENEFIT
MANAGER STANDARDS UNDER THE
AFFORDABLE CARE ACT
Sec.
184.10 Basis and scope.
184.20 Definitions.
184.50 Prescription drug distribution and
cost reporting by pharmacy benefit
managers.
Authority: 42 U.S.C. 1302, 1320b–23.
§ 184.10
Basis and scope.
(a) Basis. (1) This part implements
section 1150A, Pharmacy Benefit
Managers Transparency Requirements,
of title XI of the Social Security Act.
(2) [Reserved]
(b) Scope. This part establishes
standards for Pharmacy Benefit
Managers that administer prescription
drug benefits for health insurance
issuers that offer Qualified Health Plans
with respect to the offering of such
plans.
§ 184.20
Definitions.
The following definitions apply to
this part, unless the context indicates
otherwise:
Health insurance issuer has the
meaning given to the term in § 144.103
of this subtitle.
Plan year has the meaning given to
the term in § 156.20 of this subchapter.
Qualified health plan has the meaning
given to the term in § 156.20 of this
subchapter.
Qualified health plan issuer has the
meaning given to the term in § 156.20 of
this subchapter.
§ 184.50 Prescription drug distribution and
cost reporting by pharmacy benefit
managers.
(a) General requirement. In a form,
manner, and at such times specified by
HHS, any entity that provides pharmacy
benefits management services on behalf
of a qualified health plan (QHP) issuer
must provide to HHS the following
information:
(1) The percentage of all prescriptions
that were provided under the QHP
through retail pharmacies compared to
mail order pharmacies, and the
percentage of prescriptions for which a
PO 00000
Frm 00157
Fmt 4701
Sfmt 9990
24295
generic drug was available and
dispensed compared to all drugs
dispensed;
(2) The aggregate amount, and the
type of rebates, discounts or price
concessions (excluding bona fide
service fees) that the pharmacy benefits
manager (PBM) negotiates that are
attributable to patient utilization under
the QHP, and the aggregate amount of
the rebates, discounts, or price
concessions that are passed through to
the QHP issuer, and the total number of
prescriptions that were dispensed.
(i) Bona fide service fees means fees
paid by a manufacturer to an entity that
represent fair market value for a bona
fide, itemized service actually
performed on behalf of the manufacturer
that the manufacturer would otherwise
perform (or contract for) in the absence
of the service arrangement, and that are
not passed on in whole or in part to a
client or customer of an entity, whether
or not the entity takes title to the drug.
(ii) [Reserved]
(3) The aggregate amount of the
difference between the amount the QHP
issuer pays its contracted PBM and the
amounts that the PBM pays retail
pharmacies, and mail order pharmacies,
and the total number of prescriptions
that were dispensed.
(b) Limitations on disclosure.
Information disclosed by a PBM under
this section shall not be disclosed by
HHS or by a QHP receiving the
information, except that HHS may
disclose the information in a form
which does not disclose the identity of
a specific PBM, QHP, or prices charged
for drugs, for the following purposes:
(1) As HHS determines to be
necessary to carry out section 1150A or
part D of title XVIII of the Act;
(2) To permit the Comptroller General
to review the information provided;
(3) To permit the Director of the
Congressional Budget Office to review
the information provided; or
(4) To States to carry out section 1311
of the Affordable Care Act.
(c) Penalties. A PBM that fails to
report the information described in
paragraph (a) of this section to HHS on
a timely basis or knowingly provides
false information will be subject to the
provisions of section 1927(b)(3)(C) of
the Act.
Dated: April 27, 2021.
Xavier Becerra,
Secretary, Department of Health and Human
Services.
[FR Doc. 2021–09102 Filed 4–30–21; 8:45 am]
BILLING CODE 4150–28–P
E:\FR\FM\05MYR2.SGM
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]]>Agencies
[Federal Register Volume 86, Number 85 (Wednesday, May 5, 2021)]
[Rules and Regulations]
[Pages 24140-24295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09102]
[[Page 24139]]
Vol. 86
Wednesday,
No. 85
May 5, 2021
Part II
Department of Health and Human Services
-----------------------------------------------------------------------
45 CFR Parts 147, 150, 153, et al.
Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2022 and Pharmacy Benefit Manager Standards;
Final Rule
Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules
and Regulations
[[Page 24140]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 147, 150, 153, 155, 156, 158, and 184
[CMS-9914-F2]
RIN 0938-AU18
Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2022 and Pharmacy Benefit Manager Standards
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health & Human Services (HHS).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule sets forth payment parameters and provisions
related to the risk adjustment program and cost-sharing parameters. It
includes changes related to special enrollment periods; direct
enrollment entities; the administrative appeals processes with respect
to health insurance issuers and non-federal governmental group health
plans; the medical loss ratio program; income verification by
Exchanges; and other related topics. It also revises the regulation
requiring the reporting of certain prescription drug information by
qualified health plans or their pharmacy benefit managers.
DATES: These regulations are effective on July 6, 2021, with the
exception of the amendments to Sec. Sec. 155.320(c) and 158.221(b)
which are effective May 5, 2021.
FOR FURTHER INFORMATION CONTACT:
Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace
Bristol, (410) 786-8437, Kiahana Brooks, (301) 492-5229, or Sara Rosta,
(301) 492-4223 for general information.
Cam Clemmons, (206) 615-2338, for matters related to health
insurance reform requirements for the group and individual insurance
markets and administrative appeals for health insurance issuers and
non-federal governmental group health plans.
Allison Yadsko, (410) 786-1740, or Jacquelyn Rudich, (301) 492-
5211, for matters related to risk adjustment.
Isadora Gil, (410) 786-4532, or Colleen Gravens, (301) 492-4107,
for matters related to EDGE discrepancies.
Joshua Paul, (301) 492-4347, for matters related to risk adjustment
data validation.
Dan Brown, (301) 492-5146, for matters related to web-brokers or
direct enrollment, other than the direct enrollment option for
Federally-facilitated and State Exchanges.
Nicholas Eckart, (301) 492-4452, for matters related to termination
notices.
Amanda Brander, (202) 690-7892, for matters related to income
inconsistencies.
Marisa Beatley, (301) 492-4307, for matters related to employer-
sponsored coverage verification.
Carolyn Kraemer, (301) 492-4197, for matters related to special
enrollment periods for Exchange enrollment under part 155.
Katherine Bentley, (301) 492-5209, for matters related to special
enrollment period verification.
Rebecca Bucchieri, (301) 492-4400, for matters related to EHB-
benchmark plans and defrayal of state-required benefits.
Aaron Franz, (410) 786-8027, for matters related to user fees.
Joshua Paul, (301) 492-4347 or Nora Simmons, (410-786-1981), for
matters related to the premium adjustment percentage.
Ken Buerger, (410) 786-1190, for matters related to PBM
transparency reporting requirements.
Nora Simmons, (410-786-1981), Adrianne Carter, (303) 844-5810, or
Amber Bellsdale, (301) 492-4411, for matters related to disputes under
45 CFR 156.1210.
Nidhi Singh Shah, (301) 492-5110, for matters related to the
Quality Rating System and the Qualified Health Plan Enrollee Experience
Survey.
Alper Ozinal, (301) 492-4178, or Jacquelyn Rudich, (301) 492-5211,
for matters related to financial program audits and civil money
penalties.
Adrianne Patterson, 410-786-0696, or Nora Simmons, (410-786-1981),
for matters related to netting of payments under 45 CFR 156.1215 and
administrative appeals under 45 CFR 156.1220.
Christina Whitefield, (301) 492-4172, for matters related to the
MLR program.
SUPPLEMENTARY INFORMATION:
Future Rulemaking on Benefit and Payment Parameters for the 2022 Plan
Year
In the December 4, 2020 Federal Register, we 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 rule'' or ``proposed 2022 Payment Notice'') that
proposed to reduce fiscal and regulatory burdens across different
program areas and to provide stakeholders with greater flexibility. In
the January 19, 2021 Federal Register (86 FR 6138), we published a
final rule that addressed a subset of the policies proposed in the
proposed rule. That final rule, among other things, finalized the user
fee rates for issuers offering qualified health plans through the
Federally-facilitated Exchanges (FFEs) at 2.25 percent of total monthly
premiums, and the user fee rate for issuers offering qualified health
plans (QHPs) through State-based Exchanges on the Federal platform
((SBE-FPs) at 1.75 percent of total monthly premiums. The final rule
also codified a new direct enrollment option for states served by any
Exchange model 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. The final rule also finalized changes to
regulations governing State Innovation Waivers under section 1332 of
the Affordable Care Act (ACA) that specifically incorporate policies
announced in guidance in 2018.
On January 28, 2021, President Biden issued Executive Order 14009,
``Strengthening Medicaid and the Affordable Care Act,'' \1\ directing
HHS, and the heads of all other executive departments and agencies with
authorities and responsibilities related to the ACA, to review all
existing regulations, orders, guidance documents, policies, and any
other similar agency actions to determine whether such agency actions
are inconsistent with this Administration's policy to protect and
strengthen the ACA and to make high-quality health care accessible and
affordable for every American. As part of this review, HHS examined
policies and requirements under the proposed 2022 Payment Notice and
the January 19, 2021 final 2022 Payment Notice to analyze whether the
policies under these rulemakings might undermine the Health Benefits
Exchanges or the health insurance markets, and whether they may present
unnecessary barriers to individuals and families attempting to access
health coverage. HHS also considered whether to suspend, revise, or
rescind any such actions through appropriate administrative action.
---------------------------------------------------------------------------
\1\ 86 FR 7793 (February 2, 2021).
---------------------------------------------------------------------------
In compliance with Executive Order (E.O.) 14009 and as a result of
HHS's review of the proposed 2022 Payment Notice and the January 19,
2021 final 2022 Payment Notice, HHS intends to issue rulemaking this
spring to address policies finalized in the final 2022 Payment Notice
published on January 19, 2021. Specifically, in future rulemaking, HHS
intends to propose
[[Page 24141]]
new QHP issuer user fees rates for the 2022 plan year: A new FFE user
fee rate of 2.75 percent of total monthly premiums; and a new SBE-FP
user fee rate of 2.25 percent of monthly premiums. We also intend to
revisit the Exchange Direct Enrollment (DE) option for states and the
changes to regulations governing State Innovation Waivers under section
1332 of the ACA. HHS is of the view that pursuit of these proposals is
consistent with E.O. 14009, and this Administration's goal of
protecting and strengthening the ACA and making high-quality health
care accessible and affordable for every American.
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 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
B. Part 150--CMS Enforcement in Group and Individual Markets
C. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
E. Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
F. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
G. Part 184--Pharmacy Benefit Manager Standards Under the
Affordable Care Act
IV. Implementation of the Decision in City of Columbus, et al. v.
Cochran
V. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding Submission of Adjusted Premium Amounts for
Risk Adjustment
C. ICRs Regarding Direct Enrollment Agents and Brokers
D. ICRs Regarding Prescription Drug Distribution and Cost
Reporting by QHP Issuers and PBMs
E. ICRs Regarding Medical Loss Ratio
F. Summary of Annual Burden Estimates for Proposed Requirements
G. Submission of PRA Related Comments
VI. Waiver of Proposed Rulemaking and Delay in Effective Date
VII. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice Provisions and
Accounting Table
D. Regulatory Alternatives Considered
E. Regulatory Flexibility Act
F. Unfunded Mandates
G. Federalism
H. Congressional Review Act
I. Executive Summary
American Health Benefit Exchanges, or ``Exchanges,'' are entities
established under the Affordable Care Act (ACA) \2\ through which
qualified individuals and qualified employers can purchase health
insurance coverage in 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. The ACA also established the
risk adjustment program, which is intended to increase the workability
of the ACA regulatory changes in the individual and small group
markets, both on- and off-Exchange.
---------------------------------------------------------------------------
\2\ The Patient Protection and Affordable Care Act (Pub. L. 111-
148) was enacted on March 23, 2010. The Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and
revised several provisions of the ACA, was enacted on March 30,
2010. In this final rule, we refer to the two statutes collectively
as the ``Affordable Care Act'' or ``ACA.''
---------------------------------------------------------------------------
In the December 4, 2020 Federal Register, we 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 rule'' or ``proposed 2022 Payment Notice'') that
proposed to reduce fiscal and regulatory burdens across different
program areas and to provide stakeholders with greater flexibility. In
the proposed rule, we proposed to amend provisions and parameters to
implement many ACA programs and requirements, with a focus on
maintaining a stable regulatory environment. As proposed, the changes
would provide issuers with greater predictability for upcoming plan
years, while simultaneously enhancing the role of states in these
programs. The proposals would also provide states with additional
flexibilities, reduce unnecessary regulatory burdens on stakeholders,
empower consumers, ensure program integrity, and improve affordability.
Risk adjustment continues to be a core program in the individual
and small group markets both on and off Exchanges, and some of the
major proposals from the proposed rule included recalibrated parameters
for the HHS-operated risk adjustment methodology. We also proposed
changes to the risk adjustment models to include a two-stage
specification in the adult and child models, add severity and
transplant indicators interacted with hierarchical condition category
(HCC) counts factors to the adult and child models, and proposed to
modify the enrollment duration factors in the adult models.
Additionally, we proposed clarifications to the process for HHS to
audit issuers of risk adjustment covered plans and reinsurance-eligible
plans and also proposed to establish authority for HHS to conduct
compliance review of these issuers.
As we do every year in the HHS notice of benefit and payment
parameters, we proposed updated parameters applicable in the individual
and small group markets (including merged markets). We proposed the
2022 benefit year user fee rates for issuers offering plans through the
Exchanges on the Federal platform. We proposed lowering the Federally-
facilitated Exchange (FFE) and State-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 also proposed user fee
rates of 1.5 percent of total monthly premiums for FFE and SBE-FP
states that elect the Exchange DE option.\3\ These user fee proposals
were finalized in the final rule published on January 19, 2021 (86 FR
6138).
---------------------------------------------------------------------------
\3\ As noted below, the proposals to establish the Exchange DE
option were finalized, with modifications, in the final rule
published on January 19, 2021 (86 FR 6138).
---------------------------------------------------------------------------
We proposed the 2022 benefit year premium adjustment percentage,
required contribution percentage, and maximum annual limitations on
cost sharing, including those for cost-sharing reduction (CSR) plan
variations. For the 2023 benefit year and beyond, we proposed to
publish these parameters in guidance annually, and if not in guidance,
in the annual notice of benefit and payment parameters or another
appropriate rulemaking. Additionally, we proposed clarifications to the
process under which HHS conducts audits of QHP issuers to ensure
compliance with federal requirements related to advance payments of the
premium tax credit (APTC), CSRs, and user fees. We also proposed to
establish authority for HHS to conduct compliance reviews of QHP
issuers to ensure compliance with federal APTC, CSR and user fee
requirements.
We proposed changes to the information that FFE-registered web-
[[Page 24142]]
brokers are required to display on their websites. In addition, we
proposed amendments to codify more detail describing the operational
readiness reviews that must be successfully completed as a prerequisite
to a web-broker's non-Exchange website being approved for use by
consumers to complete an Exchange eligibility application or a QHP
selection. We similarly proposed to add additional detail about the
operational readiness reviews applicable to direct enrollment entities.
Stable and affordable Exchanges with healthy risk pools are
necessary for ensuring consumers maintain stable access to health
insurance options. In order to minimize the potential for adverse
selection in the Exchanges, we shared our future plans for rulemaking
under which we will propose requirements related to Exchange
verifications of whether applicants for QHP coverage with APTC or CSR
have access to employer sponsored coverage that is affordable and
offers minimum value. We proposed to extend our current enforcement
posture under which Exchanges may exercise flexibility not to implement
risk-based employer sponsored coverage verification and to remove the
requirement that Exchanges select a statistically random sample of
applicants when no electronic data sources are available.
We proposed new rules related to special enrollment periods. In
addition, we proposed to require Exchanges to conduct special
enrollment period verification for at least 75 percent of new
enrollments through special enrollment periods granted to consumers not
already enrolled in coverage through the applicable Exchange.
We also proposed minor procedural changes to provisions regarding
administrative hearings in parts 150 and 156 to align with the
Departmental Appeals Board's current practices for administrative
hearings to appeal civil money penalties (CMPs).
We proposed to release additional data from the QHP Enrollee
Experience Survey (QHP Enrollee Survey). We also solicited comments on
potential changes to the framework for the Quality Rating System (QRS)
to support alignment with other CMS quality reporting programs and to
further balance the individual survey and clinical quality measures on
the overall quality scores. We noted that we were considering ways to
modify the hierarchical structure for the QRS, which is how the
measures are organized together for maximum simplicity and
understanding of the quality rating information provided by the QRS.
We proposed revisions to the regulations requiring the collection
of certain prescription drug data from QHP issuers, and proposed to
implement a requirement for the reporting of this data from pharmacy
benefit managers (PBMs) when a QHP issuer contracts with a PBM to
administer its prescription drug benefit.
We proposed to further regulate the standards related to QHP
issuers' acceptance of payments for premiums and cost sharing. We also
proposed to make clarifications to the network adequacy rules to
reflect that Sec. 156.230 does not apply to indemnity plans seeking
QHP certification. These proposals were finalized in the final rule
published on January 19, 2021 (86 FR 6138).
We proposed to establish a new Exchange DE option under which a
State Exchange, State-based Exchange on the Federal platform or an FFE
state (through an agreement with HHS) can leverage the potential of
direct enrollment to offer consumers an enhanced QHP shopping
experience. As proposed, instead of operating a centralized enrollment
website, states could use direct enrollment technology to establish
direct pathways to QHP issuers, web-brokers, and agents and brokers
through which consumers would apply for and enroll in a QHP and receive
a determination of eligibility for APTC and CSRs. The proposals for the
Exchange DE option were finalized, with modifications, in the final
rule published on January 19, 2021 (86 FR 6138).
We proposed to establish the definition of prescription drug
rebates and other price concessions that issuers must deduct from
incurred claims for medical loss ratio (MLR) reporting and rebate
calculation purposes. We additionally proposed to explicitly allow
issuers the option to prepay a portion or all of the estimated MLR
rebate for a given MLR reporting year in advance of the deadlines set
forth in Sec. Sec. 158.240(e) and 158.241(a)(2) and the filing of the
MLR Annual Reporting Form, and proposed to establish a safe harbor
allowing such issuers, under certain conditions, to defer the payment
of any remaining rebates owed after prepayment until the following MLR
reporting year. We also proposed to allow issuers to provide MLR
rebates in the form of a premium credit prior to the date that the
rules previously provided. Lastly, we proposed to clarify MLR reporting
and rebate requirements for issuers that choose to offer temporary
premium credits during a public health emergency (PHE) declared by the
Secretary of HHS in the 2021 benefit year and beyond, when such credits
are permitted by HHS.
In the proposed rule, the Secretaries of HHS and the Department of
the Treasury proposed to reference and incorporate specific guidance
published in the Federal Register in order to give states certainty
regarding the requirements to receive and maintain approval by the
Departments for State Innovation Waivers under section 1332 of the ACA.
This proposal and the accompanying regulatory updates were finalized in
the final rule published on January 19, 2021 (86 FR 6138).
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 the ACA. Subtitles A and C of title I of the ACA 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 ACA. The term ``health plan'' does
not include self-insured group health plans.
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Section 2702 of the PHS Act, as added by the ACA, establishes
requirements for guaranteed availability of coverage in the group and
individual markets, including qualifying events that trigger special
enrollment periods under section 2702(b) of the PHS Act.\5\
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\5\ Before enactment of the ACA, HIPAA amended the PHS Act
(formerly section 2711) to generally require guaranteed availability
of coverage for employers in the small group market.
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Section 2718 of the PHS Act, as added by the ACA, generally
requires health insurance issuers to submit an annual MLR report to
HHS, and provide rebates to enrollees if the issuers do not achieve
specified MLR thresholds.
Section 2723(b) of the PHS Act authorizes the Secretary to impose
CMPs as a means of enforcing the individual and group insurance market
requirements contained in Part A of title XXVII of the PHS Act with
respect to health insurance issuers when a state does not have
authority to enforce or
[[Page 24143]]
fails to substantially enforce these provisions and with respect to
group health plans that are non-federal governmental plans. Section
1301(a)(1)(B) of the ACA directs all issuers of QHPs to cover the
Essential Health Benefit (EHB) package described in section 1302(a) of
the ACA, including coverage of the services described in section
1302(b) of the ACA, adherence to the cost-sharing limits described in
section 1302(c) of the ACA, and meeting the actuarial value (AV) levels
established in section 1302(d) of the ACA. Section 2707(a) of the PHS
Act, which is effective for plan or policy years beginning on or after
January 1, 2014, extends the requirement to cover the EHB package to
non-grandfathered individual and small group health insurance coverage,
irrespective of whether such coverage is offered through an Exchange.
In addition, section 2707(b) of the PHS Act directs non-grandfathered
group health plans to ensure that cost sharing under the plan does not
exceed the limitations described in sections 1302(c)(1) of the ACA.
Section 1302 of the ACA provides for the establishment of an EHB
package that includes coverage of EHBs (as defined by the Secretary),
cost-sharing limits, and AV requirements. Section 1302(b) of the ACA
directs that EHBs be equal in scope to the benefits provided under a
typical employer plan, and that they cover at least the following 10
general categories: Ambulatory patient services; emergency services;
hospitalization; maternity and newborn care; mental health and
substance use disorder services, including behavioral health treatment;
prescription drugs; rehabilitative and habilitative services and
devices; laboratory services; preventive and wellness services and
chronic disease management; and pediatric services, including oral and
vision care.
To set cost-sharing limits, section 1302(c)(4) of the ACA directs
the Secretary to determine an annual premium adjustment percentage, a
measure of premium growth that is used to set the rate of increase for
three parameters: (1) The maximum annual limitation on cost sharing
(section 1302(c)(1) of the ACA); (2) the required contribution
percentage used to determine whether an individual can afford minimum
essential coverage (MEC) (section 5000A of the Internal Revenue Code of
1986 (the Code), as enacted by section 1501 of the ACA); and (3) the
employer shared responsibility payment amounts (section 4980H of the
Code, as enacted by section 1513 of the ACA).
Section 1302(d) of the ACA describes the various levels of coverage
based on their AV. Consistent with section 1302(d)(2)(A) of the ACA, AV
is calculated based on the provision of EHB to a standard population.
Section 1302(d)(3) of the ACA directs the Secretary to develop
guidelines that allow for de minimis variation in AV calculations.
Sections 1311(b) and 1321(b) of the ACA 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 the ACA. Section
1321(c)(1) of the ACA 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 the ACA 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
the ACA. Section 1311(d) of the ACA describes the minimum functions of
an Exchange. Section 1311(e)(1) of the ACA 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 the ACA, 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 1311(c)(6)(C)
of the ACA establishes special enrollment periods and section
1311(c)(6)(D) of the ACA establishes the monthly enrollment period for
Indians, as defined by section 4 of the Indian Health Care Improvement
Act.\6\
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\6\ The Indian Health Care Improvement Act (IHCIA), the
cornerstone legal authority for the provision of health care to
American Indians and Alaska Natives, was made permanent when
President Obama signed the bill on March 23, 2010, as part of the
ACA.
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Section 1311(c)(3) of the ACA directs the Secretary to develop a
system to rate QHPs offered through an Exchange, based on relative
quality and price. Section 1311(c)(4) of the ACA requires the Secretary
to establish an enrollee satisfaction survey that evaluates the level
of enrollee satisfaction of members with QHPs offered through an
Exchange, for each QHP with more than 500 enrollees in the prior year.
Further, sections 1311(c)(3) and 1311(c)(4) of the ACA require
Exchanges to provide this quality rating information \7\ to individuals
and employers on the Exchange's website.
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\7\ The term ``quality rating information'' includes the QRS
scores and ratings and the results of the enrollee satisfaction
survey (which is also known as the ``Qualified Health Plan (QHP)
Enrollee Experience Survey'').
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Section 1312(c) of the ACA generally requires a health insurance
issuer to consider all enrollees in all health plans (except
grandfathered health plans) offered by such issuer to be members of a
single risk pool for each of its individual and small group markets.
States have the option to merge the individual and small group market
risk pools under section 1312(c)(3) of the ACA.
Section 1312(e) of the ACA 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 the ACA provide the Secretary with the
authority to oversee the financial integrity of State Exchanges, their
compliance with HHS standards, and the efficient and non-discriminatory
administration of State Exchange activities. Section 1321 of the ACA
provides for state flexibility in the operation and enforcement of
Exchanges and related requirements.
Section 1321(a) of the ACA provides broad authority for the
Secretary to establish standards and regulations to implement the
statutory requirements related to Exchanges, QHPs and other components
of title I of the ACA. Section 1321(a)(1) of the ACA directs the
Secretary to issue regulations that set standards for meeting the
requirements of title I of the ACA for, among other things, the
establishment and operation of Exchanges. When operating an FFE under
section 1321(c)(1) of the ACA, HHS has the authority under sections
1321(c)(1) and 1311(d)(5)(A) of the ACA 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(c)(2) of the ACA provides that the provisions of
section 2723(b) of the PHS Act shall apply to the enforcement of the
Federal Exchange standards and authorizes the Secretary to enforce the
Exchange standards using CMPs on the same basis
[[Page 24144]]
as detailed in section 2723(b) of the PHS Act.
Section 1321(d) of the ACA provides that nothing in title I of the
ACA must be construed to preempt any state law that does not prevent
the application of title I of the ACA. Section 1311(k) of the ACA
specifies that Exchanges may not establish rules that conflict with or
prevent the application of regulations issued by the Secretary.
Section 1332 of the ACA provides the Secretary of HHS and the
Secretary of the Treasury (collectively, the Secretaries) with the
discretion to approve a state's proposal to waive specific provisions
of the ACA, provided the state's section 1332 waiver plan meets certain
requirements. The Department of Health and Human Services and the
Department of the Treasury (collectively, the Departments) finalized
implementing regulations on February 27, 2012 (76 FR 13553) and
published detailed guidance on the Department's application of section
1332 to proposed state waivers on October 24, 2018 (83 FR 53575).
Section 1341 of the ACA provides for the establishment of a
transitional reinsurance program in each state to help pay the cost of
treating high-cost enrollees in the individual market in the 2014
through 2016 benefit years.
Section 1343 of the ACA establishes a permanent risk adjustment
program to provide payments to health insurance issuers that attract
higher-than-average risk populations, such as those with chronic
conditions, funded by payments from those that attract lower-than-
average risk populations, thereby reducing incentives for issuers to
avoid higher-risk enrollees.
Section 1402 of the ACA provides for, among other things,
reductions in cost sharing for EHB for qualified low- and moderate-
income enrollees in silver level QHPs offered through the individual
market Exchanges. This section also provides for reductions in cost
sharing for American Indians enrolled in QHPs at any metal level.
Section 1411(c) of the ACA requires the Secretary to submit certain
information provided by applicants under section 1411(b) of the ACA to
other federal officials for verification, including income and family
size information to the Secretary of the Treasury.
Section 1411(d) of the ACA provides that the Secretary must verify
the accuracy of information provided by applicants under section
1411(b) of the ACA for which section 1411(c) of the ACA does not
prescribe a specific verification procedure, in such manner as the
Secretary determines appropriate.
Section 1411(f) of the ACA requires the Secretary, in consultation
with the Secretary of the Treasury, the Secretary of Homeland Security,
and the Commissioner of Social Security, to establish procedures for
hearing and making decisions governing appeals of Exchange eligibility
determinations.
Section 1411(f)(1)(B) of the ACA requires the Secretary to
establish procedures to redetermine eligibility on a periodic basis, in
appropriate circumstances, including eligibility to purchase a QHP
through the Exchange and for APTC and CSRs.
Section 1411(g) of the ACA allows the use or disclosure of
applicant information only for the limited purposes of, and to the
extent necessary to, ensure the efficient operation of the Exchange,
including by verifying eligibility to enroll through the Exchange and
for APTC and CSRs.
Section 5000A of the Code, as added by section 1501(b) of the ACA,
requires individuals to have MEC for each month, qualify for an
exemption, or make an individual shared responsibility payment. Under
the Tax Cuts and Jobs Act (Pub. L. 115-97, December 22, 2017) the
individual shared responsibility payment has been reduced to $0,
effective for months beginning after December 31, 2018. Notwithstanding
that reduction, certain exemptions are still relevant to determine
whether individuals age 30 and above qualify to enroll in catastrophic
coverage under 45 CFR 155.305(h) or 45 CFR 156.155.
Section 1150A(a) of the Social Security Act (the Act) requires a
health benefits plan or PBM that manages prescription drug coverage
under a contract with a QHP issuer to provide certain prescription drug
information to the Secretary at such times, and in such form and
manner, as the Secretary shall specify. HHS will limit disclosure of
the information disclosed by a health benefits plan or PBM under this
section as required by section 1150A of the Act and may only disclose
the information in a form which does not disclose the identity of a
specific PBM or plan, or prices charged for specific drugs, except that
for limited purposes, HHS may disclose the information to states to
carry out section 1311 of the ACA. An issuer or PBM that fails to
provide the information on a timely basis or that knowingly provides
false information may be subject to a civil monetary penalty under
section 1927(b)(3)(C) of the Act in the same manner as such provisions
apply to a manufacturer with an agreement under that section.
1. Premium Stabilization Programs \8\
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\8\ The term ``premium stabilization programs'' refers to the
risk adjustment, risk corridors, and reinsurance programs
established by the ACA. See 42 U.S.C. 18061, 18062, and 18063.
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In the July 15, 2011 Federal Register (76 FR 41929), we published a
proposed rule outlining the framework for the premium stabilization
programs. We implemented the premium stabilization programs in a final
rule published in the March 23, 2012 Federal Register (77 FR 17219)
(Premium Stabilization Rule). In the December 7, 2012 Federal Register
(77 FR 73117), we published a proposed rule outlining the benefit and
payment parameters for the 2014 benefit year to expand the provisions
related to the premium stabilization programs and set forth payment
parameters in those programs (proposed 2014 Payment Notice). We
published the 2014 Payment Notice final rule in the March 11, 2013
Federal Register (78 FR 15409). In the June 19, 2013 Federal Register
(78 FR 37032), we proposed a modification to the HHS-operated
methodology related to community rating states. In the October 30, 2013
Federal Register (78 FR 65046), we finalized the proposed modification
to the HHS-operated methodology related to community rating states. We
published a correcting amendment to the 2014 Payment Notice final rule
in the November 6, 2013 Federal Register (78 FR 66653) to address how
an enrollee's age for the risk score calculation would be determined
under the HHS-operated risk adjustment methodology.
In the December 2, 2013 Federal Register (78 FR 72321), we
published a proposed rule outlining the benefit and payment parameters
for the 2015 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2015 Payment Notice). We published the 2015 Payment Notice
final rule in the March 11, 2014 Federal Register (79 FR 13743). In the
May 27, 2014 Federal Register (79 FR 30240), the 2015 fiscal year
sequestration rate for the risk adjustment program was announced.
In the November 26, 2014 Federal Register (79 FR 70673), we
published a proposed rule outlining the benefit and payment parameters
for the 2016 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2016 Payment Notice). We published the 2016 Payment Notice
final rule in
[[Page 24145]]
the February 27, 2015 Federal Register (80 FR 10749).
In the December 2, 2015 Federal Register (80 FR 75487), we
published a proposed rule outlining the benefit and payment parameters
for the 2017 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2017 Payment Notice). We published the 2017 Payment Notice
final rule in the March 8, 2016 Federal Register (81 FR 12203).
In the September 6, 2016 Federal Register (81 FR 61455), we
published a proposed rule outlining the benefit and payment parameters
for the 2018 benefit year and to further promote stable premiums in the
individual and small group markets. We proposed updates to the risk
adjustment methodology, new policies around the use of external data
for recalibration of our risk adjustment models, and amendments to the
Department of Health and Human Services' Risk Adjustment Data
Validation (HHS-RADV) process (proposed 2018 Payment Notice). We
published the 2018 Payment Notice final rule in the December 22, 2016
Federal Register (81 FR 94058).
In the November 2, 2017 Federal Register (82 FR 51042), we
published a proposed rule outlining the benefit and payment parameters
for the 2019 benefit year, and to further promote stable premiums in
the individual and small group markets. We proposed updates to the risk
adjustment methodology and amendments to the HHS-RADV process (proposed
2019 Payment Notice). We published the 2019 Payment Notice final rule
in the April 17, 2018 Federal Register (83 FR 16930). We published a
correction to the 2019 risk adjustment coefficients in the 2019 Payment
Notice final rule in the May 11, 2018 Federal Register (83 FR 21925).
On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i), we updated
the 2019 benefit year final risk adjustment model coefficients to
reflect an additional recalibration related to an update to the 2016
enrollee-level External Data Gathering Environment (EDGE) dataset.\9\
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\9\ ``Updated 2019 Benefit Year Final HHS Risk Adjustment Model
Coefficients,'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.
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In the July 30, 2018 Federal Register (83 FR 36456), we published a
final rule that adopted the 2017 benefit year risk adjustment
methodology as established in the final rules published in the March
23, 2012 Federal Register (77 FR 17220 through 17252) and in the March
8, 2016 Federal Register (81 FR 12204 through 12352). This final rule
set forth additional explanation of the rationale supporting use of
statewide average premium in the HHS-operated risk adjustment state
payment transfer formula for the 2017 benefit year, including the
reasons why the program is operated in a budget-neutral manner. This
final rule permitted HHS to resume 2017 benefit year risk adjustment
payments and charges. HHS also provided guidance as to the operation of
the HHS-operated risk adjustment program for the 2017 benefit year in
light of publication of this final rule.\10\
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\10\ ``Update on the HHS-operated Risk Adjustment Program for
the 2017 Benefit Year,'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf.
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In the August 10, 2018 Federal Register (83 FR 39644), we published
a proposed rule seeking comment on adopting the 2018 benefit year risk
adjustment methodology in the final rules published in the March 23,
2012 Federal Register (77 FR 17219) and in the December 22, 2016
Federal Register (81 FR 94058). The proposed rule set forth additional
explanation of the rationale supporting use of statewide average
premium in the HHS-operated risk adjustment state payment transfer
formula for the 2018 benefit year, including the reasons why the
program is operated in a budget-neutral manner. In the December 10,
2018 Federal Register (83 FR 63419), we issued a final rule adopting
the 2018 benefit year HHS-operated risk adjustment methodology as
established in the final rules published in the March 23, 2012 Federal
Register (77 FR 17219) and the December 22, 2016 Federal Register (81
FR 94058). This final rule sets forth additional explanation of the
rationale supporting use of statewide average premium in the HHS-
operated risk adjustment state payment transfer formula for the 2018
benefit year, including the reasons why the program is operated in a
budget-neutral manner.
In the January 24, 2019 Federal Register (84 FR 227), we published
a proposed rule outlining updates to the calibration of the risk
adjustment methodology, the use of EDGE data for research purposes, and
updates to HHS-RADV audits. We published the 2020 Payment Notice final
rule in the April 25, 2019 Federal Register (84 FR 17454).
In the February 6, 2020 Federal Register (85 FR 7088), we published
a proposed rule that included updates to the risk adjustment models'
HCCs and a modification HHS-RADV error rate calculation methodology. We
published the 2021 Payment Notice final rule in the May 14, 2020
Federal Register (85 FR 29164).
In the June 2, 2020 Federal Register (85 FR 33595), we published a
proposed rule that proposed updates to various aspects of the HHS-RADV
methodologies and processes. We published the 2020 HHS-RADV Amendments
final rule in the December 1, 2020 Federal Register (85 FR 76979). This
final rule made revisions to the HCC failure rate grouping algorithm,
finalized a sliding scale adjustment in HHS-RADV error rate
calculation, and a constraint on risk score adjustments for low-side
failure rate outliers. The final rule also established a transition
from the prospective application of HHS-RADV adjustments to apply HHS-
RADV results to risk scores from the same benefit year as that being
audited.
In the September 2, 2020 Federal Register (85 FR 54820), HHS issued
an interim final rule containing certain policy and regulatory
revisions in response to the COVID-19 PHE, wherein we set forth risk
adjustment reporting requirements for issuers offering temporary
premium credits in the 2020 benefit year (interim final rule on COVID-
19).
In the December 4, 2020 Federal Register (85 FR 78572), HHS issued
a proposed rule containing certain policy and regulatory revisions
related to the risk adjustment program (proposed 2022 Payment Notice).
2. Program Integrity
In the June 19, 2013 Federal Register (78 FR 37031), we published a
proposed rule that proposed certain program integrity standards related
to Exchanges and the premium stabilization programs (proposed Program
Integrity Rule). The provisions of that proposed rule were finalized in
two rules, the ``first Program Integrity Rule'' published in the August
30, 2013 Federal Register (78 FR 54069) and the ``second Program
Integrity Rule'' published in the October 30, 2013 Federal Register (78
FR 65045). In the December 27, 2019 Federal Register (84 FR 71674), we
published a final rule that revised standards relating to oversight of
Exchanges established by states and periodic data matching frequency.
3. Market Rules
An interim final rule relating to the HIPAA health insurance
reforms was published in the April 8, 1997 Federal Register (62 FR
16894). A proposed rule relating to ACA health insurance market reforms
that became effective in 2014 was published in the November 26, 2012
Federal Register (77 FR 70584). A
[[Page 24146]]
final rule implementing those provisions was published in the February
27, 2013 Federal Register (78 FR 13406) (2014 Market Rules).
A proposed rule relating to Exchanges and Insurance Market
Standards for 2015 and beyond was published in the March 21, 2014
Federal Register (79 FR 15808) (2015 Market Standards Proposed Rule). A
final rule implementing the Exchange and Insurance Market Standards for
2015 and Beyond was published in the May 27, 2014 Federal Register (79
FR 30240) (2015 Market Standards Rule). The 2018 Payment Notice final
rule in the December 22, 2016 Federal Register (81 FR 94058) provided
additional guidance on guaranteed availability and guaranteed
renewability. In the Market Stabilization final rule that was published
in the April 18, 2017 Federal Register (82 FR 18346), we released
further guidance related to guaranteed availability. In the 2019
Payment Notice final rule in the April 17, 2018 Federal Register (83 FR
17058), we clarified that certain exceptions to the special enrollment
periods only apply with respect to coverage offered outside of the
Exchange in the individual market.
4. Administrative Appeals Process Related to Federal Enforcement in
Group and Individual Health Insurance Markets and Non-Federal
Governmental Group Health Plans
On April 8, 1997 an interim final rule with comment period was
published in the Federal Register (62 FR 16894) that implemented the
HIPAA health insurance reforms by adding 45 CFR parts 144, 146, and
148. Included in those regulations were enforcement provisions. In the
June 10, 1997 Federal Register (62 FR 31669), we published technical
corrections to these interim final rules. After gaining some experience
with direct federal enforcement in some states, we determined that it
was necessary to provide more detail on the procedures that will be
used to enforce HIPAA when a state does not do so. On August 20, 1999,
an interim final rule with comment period was published in the Federal
Register (64 FR 45786) that provided more detail on the procedures for
enforcing title XXVII of the PHS Act, as added by HIPAA, and as amended
by the Mental Health Parity Act of 1996 (Pub. L. 104-204, September 26,
1996), the Newborns' and Mothers' Health Protection Act of 1996 (Pub.
L. 104-204, September 26, 1996), and the Women's Health and Cancer
Rights Act of 1998 (Pub. L. 105-277, October 21, 1998), when a state
does not enforce such laws. We published a final rule on November 25,
2005 in the Federal Register (70 FR 71020) that finalized this interim
final rule, and made non-substantive amendments to the regulations
detailing procedures for enforcing title XXVII of the PHS Act.
5. 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).
In the May 11, 2016 Federal Register (81 FR 29146), we published an
interim final rule with amendments to the parameters of certain special
enrollment periods (2016 Interim Final Rule). We finalized these in the
2018 Payment Notice final rule, published in the December 22, 2016
Federal Register (81 FR 94058). In the March 8, 2016 Federal Register
(81 FR 12203), the final 2017 Payment Notice codified State Exchanges
on the Federal platform along with relevant requirements. In the April
18, 2017 Market Stabilization final rule Federal Register (82 FR
18346), we amended standards relating to special enrollment periods and
QHP certification. In the 2019 Payment Notice final rule, published in
the April 17, 2018 Federal Register (83 FR 16930), we modified
parameters around certain special enrollment periods. In the April 25,
2019 Federal Register (84 FR 17454), the final 2020 Payment Notice
established a new special enrollment period. In the May 14, 2020
Federal Register (85 FR 29204), the 2021 Payment Notice final rule made
certain changes to plan category limitations and special enrollment
period coverage effective date rules, allowed individuals provided a
non-calendar year qualified small employer health reimbursement
arrangement (QSEHRA) to qualify for an existing special enrollment
period, and discussed plans for future rulemaking for employer-
sponsored coverage verification and non-enforcement discretion for
Exchanges that do not conduct random sampling until plan year 2021.
In the December 4, 2020 Federal Register (85 FR 78572), HHS issued
a proposed rule containing certain policy and regulatory revisions
related to user fees, Exchanges, and section 1332 State Innovation
Waivers (proposed 2022 Payment Notice). A final rule was published in
the Federal Register (86 FR 6138) on January 19, 2021, that addressed a
subset of the policies proposed in the proposed rule. That final rule
set forth provisions related to user fees for FFEs and SBE-FPs. It
finalized the proposed 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 finalized a new
direct enrollment option for Federally-facilitated Exchanges and State
Exchanges and implemented changes to codify in regulations certain
policies related to section 1332 State Innovation Waivers.
6. Essential Health Benefits
On December 16, 2011, HHS released a bulletin \11\ that outlined an
intended regulatory approach for defining EHB, including a benchmark-
based framework. A proposed rule relating to EHBs was published in the
November 26, 2012 Federal Register (77 FR 70643). We established
requirements relating to EHBs in the Standards Related to Essential
Health Benefits, Actuarial Value, and Accreditation Final Rule, which
was published in the February 25, 2013 Federal Register (78 FR 12833)
(EHB Rule). In the 2019 Payment Notice, published in the April 17, 2018
Federal Register (83 FR 16930), we added Sec. 156.111 to provide
states with additional options from which to select an EHB-benchmark
plan for plan years 2020 and beyond.
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\11\ ``Essential Health Benefits Bulletin,'' December 16, 2011.
Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
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[[Page 24147]]
The 2015 Payment Notice final rule, established a methodology for
estimating the average per capita premium for purposes of calculating
the premium adjustment percentage. Beginning with the 2015 benefit
year, the premium adjustment percentage was calculated based on the
estimates and projections of average per enrollee employer-sponsored
insurance premiums from the National Health Expenditure Accounts
(NHEA), which are calculated by the CMS Office of the Actuary. In the
2020 Payment Notice final rule, we amended the methodology for
calculating the premium adjustment percentage by estimating per capita
insurance premiums as private health insurance premiums, minus premiums
paid for Medigap insurance and property and casualty insurance, divided
by the unrounded number of unique private health insurance enrollees,
excluding all Medigap enrollees. Additionally, in response to public
comments to the proposed 2021 Payment Notice, the 2021 Payment Notice
final rule included a policy stating that we will finalize payment
parameters that depend on NHEA data, including the premium adjustment
percentage, based on the data that are available as of the publication
of the proposed rule for that benefit year, even if NHEA data are
updated between the proposed and final rules.
In the December 15, 2020 Federal Register (85 FR 81097), HHS
published the final rule, along with the Departments of Labor and the
Treasury, that finalized using the premium adjustment percentage as one
alternative in setting the parameters for permissible increases in
fixed-amount cost-sharing requirements for grandfathered group health
plans.
7. Medical Loss Ratio (MLR)
We published a request for comment on section 2718 of the PHS Act
in the April 14, 2010 Federal Register (75 FR 19297), and published an
interim final rule with a 60-day comment period relating to the MLR
program on December 1, 2010 (75 FR 74863). A final rule with a 30-day
comment period was published in the December 7, 2011 Federal Register
(76 FR 76573). An interim final rule with a 60-day comment period was
published in the December 7, 2011 Federal Register (76 FR 76595). A
final rule was published in the Federal Register on May 16, 2012 (77 FR
28790). The MLR program requirements were amended in final rules
published in the March 11, 2014 Federal Register (79 FR 13743), the May
27, 2014 Federal Register (79 FR 30339), the February 27, 2015 Federal
Register (80 FR 10749), the March 8, 2016 Federal Register (81 FR
12203), the December 22, 2016 Federal Register (81 FR 94183), the April
17, 2018 Federal Register (83 FR 16930), the May 14, 2020 Federal
Register (85 FR 29164) and an interim final rule was published in the
September 2, 2020 Federal Register (85 FR 54820).
8. Quality Rating System and Enrollee Satisfaction Survey
The overall framework and elements of the rating methodology for
the QRS were published in the November 19, 2013 Federal Register (78 FR
69418). Consistent with statutory provisions, in May 2014, HHS issued
regulations at Sec. Sec. 155.1400 and 155.1405 to establish the QRS
and the QHP Enrollee Experience Survey display requirements for
Exchanges and has worked towards requiring nationwide the prominent
display of quality rating information on Exchange websites.\12\ As a
condition of certification and participation in the Exchanges, HHS
requires that QHP issuers submit QRS clinical measure data and QHP
Enrollee Survey response data for their respective QHPs offered through
an Exchange in accordance with HHS guidance, which has been issued
annually for each forthcoming plan year.\13\
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\12\ ACA; Exchange and Insurance Market Standards for 2015 and
Beyond, Final Rule, 79 FR 30240 at 30352 (May 27, 2014). Also see
the ``CMS Bulletin on display of QRS star ratings and QHP Enrollee
Survey results for QHPs offered through Exchanges,'' August 15,
2019. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QualityRatingInformationBulletinforPlanYear2020.pdf.
\13\ See, for example, ``Center for Clinical Standards &
Quality, CMS, The Quality Rating System and Qualified Health Plan
Enrollee Experience Survey: Technical Guidance for 2021,'' September
2020. Available at https://www.cms.gov/files/document/quality-rating-system-and-qualified-health-plan-enrollee-experience-survey-technical-guidance-2021.pdf.
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9. State Innovation Waivers
Section 1332(a)(4)(B) of the ACA 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 \14\
in the Federal Register (76 FR 13553) to implement section
1332(a)(4)(B) of the ACA. On February 27, 2012, the Departments
published the ``Application, Review, and Reporting Process for Waivers
for State Innovation'' final rule \15\ in the Federal Register (77 FR
11700) (hereinafter referred to as the ``2012 Final Rule''). On October
24, 2018, the Departments issued the ``State Relief and Empowerment
Waivers'' guidance \16\ in the Federal Register (83 FR 53575)
(hereinafter referred to as the ``2018 Guidance''), which superseded
the previous guidance \17\ 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 \18\ in the Federal Register (85 FR 71142), which revises
regulations to set forth flexibilities in the public notice
requirements and post-award public participation requirements for State
Innovation Waivers under section 1332 of the ACA during the COVID-19
PHE.
---------------------------------------------------------------------------
\14\ https://www.govinfo.gov/content/pkg/FR-2011-03-14/pdf/2011-5583.pdf.
\15\ https://www.govinfo.gov/content/pkg/FR-2012-02-27/pdf/2012-4395.pdf.
\16\ https://www.govinfo.gov/content/pkg/FR-2018-10-24/pdf/2018-23182.pdf.
\17\ https://www.govinfo.gov/content/pkg/FR-2015-12-16/pdf/2015-31563.pdf.
\18\ 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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In the December 4, 2020 Federal Register (85 FR 78572), HHS issued
a proposed rule under which policies announced under the 2018 Guidance
would be incorporated into regulations governing State Innovation
Waivers. A final rule was published in the Federal Register (86 FR
6138) on January 19, 2021, which adopted final regulations to
incorporate certain policies announced in the 2018 Guidance regarding
State Innovation Waivers.
B. Stakeholder Consultation and Input
HHS has consulted with stakeholders on policies related to the
operation of Exchanges and the risk adjustment and HHS-RADV programs.
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 risk adjustment and the direct
enrollment option for FFEs and State Exchanges.
We consulted with stakeholders through regular meetings with the
National Association of Insurance Commissioners (NAIC), regular contact
with states, and health insurance issuers, trade groups, consumer
advocates, employers, and other interested parties. We considered all
[[Page 24148]]
public input we received as we developed the policies in this final
rule.
C. Structure of Final Rule
The regulations outlined in this final rule are codified in 45 CFR
parts 147, 150, 153, 155, 156, 158, and 184.
The changes to 45 CFR part 147 make technical and conforming
amendments regarding limited and special enrollment periods in the
individual market.
The changes to 45 CFR part 150 make minor procedural changes to the
requirements for administrative appeals of CMPs by health insurance
issuers and non-federal governmental group health plans to align with
current practices for the Departmental Appeals Board. We are finalizing
parallel changes to the requirements for administrative appeals of CMPs
by QHP issuers under 45 CFR part 156, subpart J.
The changes to 45 CFR part 153 recalibrate the HHS risk adjustment
models consistent with the approach outlined in the 2020 Payment Notice
to transition away from the use of MarketScan[supreg] data. However, we
are finalizing the policy to use the 3 most recent consecutive years of
enrollee-level EDGE data that are available in time for incorporating
into the coefficients in the proposed rule, which would utilize
enrollee-level EDGE data from 2016, 2017 and 2018 for the 2022 model
recalibration, the same data years used for the 2021 model
recalibration.\19\
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\19\ As detailed below, the one exception relates to RXC 09,
which involved the use of only 2016 and 2017 enrollee-level data to
develop the applicable 2022 benefit year coefficients and
interaction terms.
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We are clarifying risk adjustment reporting requirements for
issuers that choose to offer premium credits, if such credits are
permitted by HHS for future benefit years. In this final rule, we are
also approving the requests from Alabama to reduce risk adjustment
transfers by 50 percent in the individual (including catastrophic and
non-catastrophic risk pools) and small group markets for the 2022
benefit year. Additionally, we clarify the process for HHS to audit
issuers of risk adjustment covered plans and reinsurance-eligible plans
and establish the authority for HHS to conduct compliance reviews of
these issuers.
The provisions in part 153 also relate to the risk adjustment user
fee for the 2022 benefit year. In this final rule, we revise the
schedule for the collection of HHS-RADV charges and disbursement of
payments such that these charges and disbursements will occur in the
same calendar year in which HHS-RADV results are released. We also
finalize provisions under part 153 to update the applicable regulations
to reflect the previously established framework regarding when second
validation audit (SVA) findings can be disputed or appealed, expand the
conflict of interest standard for initial validation audit (IVA)
Entities, and codify two previously established exemptions from the
requirement to participate in HHS-RADV.
In part 155, we finalize the required contribution percentage for
the 2022 benefit year. We amend the definition of direct enrollment
technology provider and add a definition of QHP issuer direct
enrollment technology provider in part 155 to recognize that QHP
issuers may also use QHP issuer direct enrollment technology providers
to facilitate participation in direct enrollment under Sec. Sec.
155.221 and 156.1230, and make conforming amendments to the definition
of web-broker. We also codify more specific operational readiness
review requirements for web-brokers and direct enrollment entities. We
also amend the marketing and display requirements for direct enrollment
entities, and rescind text contained in Sec. 155.320 to implement a
federal court order invalidating certain requirements in the section.
We also finalize several amendments to special enrollment period
policy. Specifically, we add new flexibility to allow current Exchange
enrollees and their dependents to change to a QHP of a lower metal
level if they qualify for a special enrollment period due to becoming
newly ineligible for APTC; allow a qualified individual, enrollee, or
dependent who did not receive timely notice of a triggering event and
otherwise was reasonably unaware that a triggering event occurred to
select a plan within 60 days of the date that he or she knew, or
reasonably should have known, of the occurrence of the triggering
event; and clarify that a special enrollment period will be available
when a qualified individual or his or her dependent is enrolled in
COBRA continuation coverage, and the employer contributions or
government subsidies for such coverage completely cease.
In part 156, we set forth the premium adjustment percentage,
maximum annual limitation on cost sharing and reduced maximum annual
limitation on cost sharing for the 2022 benefit year. We also amend
part 156 to establish that for the 2023 benefit year and beyond, we
will publish the annual updates to the premium adjustment percentage,
maximum annual limitation on cost sharing, reduced maximum annual
limitation on cost sharing and required contribution percentage in
guidance in January of the benefit year prior to the applicable benefit
year, rather than in the applicable benefit year's annual HHS notice of
benefit and payment parameters, as long as no change to the
methodologies to calculate these amounts are proposed. We finalize a
methodology for analyzing the impact of preliminary values of the
reduced annual maximum limitations on cost sharing on the AVs of silver
plan variations. Additionally, we clarify the process for HHS to audit
QHP issuers related to compliance with federal requirements for APTC,
CSRs, and user fees and establish authority for HHS to conduct
compliance reviews of QHP issuers to ensure compliance with federal
requirements for APTC, CSRs, and user fee standards.
The changes to part 158 establish the definition of prescription
drug rebates and other price concessions that issuers must deduct from
incurred claims for MLR reporting and rebate calculation purposes. The
changes to part 158 also remove the option for issuers to report an
amount equal to 0.8 percent of earned premium in the relevant State and
market in lieu of reporting the issuer's actual expenditures for
activities that improve health care quality for MLR reporting and
rebate calculation purposes to implement a federal court order
invalidating this provision. The changes to part 158 additionally
explicitly allow issuers the option to prepay a portion or all of the
estimated MLR rebate for a given MLR reporting year in advance of the
deadlines set forth in Sec. Sec. 158.240(e) and 158.241(a)(2) and
filing the MLR Annual Reporting Form, and establish a safe harbor
allowing such issuers, under certain conditions, to defer the payment
of rebates remaining after prepayment until the following MLR reporting
year. In addition, the changes to part 158 allow issuers to provide MLR
rebates in the form of a premium credit prior to the date that the
rules previously provided. Lastly, we clarify MLR reporting and rebate
requirements for issuers that choose to offer temporary premium credits
during a PHE declared by the Secretary of HHS in the 2021 benefit year
and beyond when such credits are permitted by HHS.
The addition of part 184 requires PBMs under contract with an
issuer of QHPs to report prescription drug data required by section
1150A of the Act.
[[Page 24149]]
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
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 Pharmacy Benefit Manager
Standards; Updates To State Innovation Waiver (Section 1332 Waiver)
Implementing Regulations'' proposed rule. We received a total of 542
comments in response to the proposed 2022 Payment Notice. Comments were
received from state entities, such as departments of insurance and
State Exchanges, health insurance issuers, providers and provider
groups, consumer groups, industry groups, national interest groups, and
other stakeholders. The comments ranged from general support of, or
opposition to, the proposed provisions to specific questions or
comments regarding proposed changes. We received a number of comments
and suggestions that were outside the scope of the proposed rule that
are not addressed in this final rule.
In this final rule, we provide a summary of proposed provisions, a
summary of the public comments received that directly related 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 the proposed
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 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. The
comment period for the proposed rule closed on December 30, 2020. HHS
has had ample time to review and fully consider comments relevant to
the rules and policies finalized under this final rule.
We also disagree that the rules and policies in this final rule
will hamper access to Exchange coverage. First, based on a review of
the comments as a whole, we believe comments that asserted the policies
in the proposed 2022 Payment Notice would hamper access to Exchange
coverage were largely relevant to proposals that were finalized in the
January 19, 2021 final Payment Notice, including the Exchange DE option
finalized under 45 CFR 155.221(j), and the changes to the regulations
governing State Innovation Waivers under 31 CFR part 33 and 45 CFR part
155.\20\ Such comments were not focused on policies that we are
finalizing in this final rule, and for reasons more fully reviewed in
the preamble discussions related to specific policies in this final
rule, we disagree that the rules and policies finalized in this final
rule will hamper access to Exchange coverage. Further, as noted above,
HHS reviewed the proposed 2022 Payment Notice and the January 19, 2021
final 2022 Payment Notice in compliance with E.O. 14009 and intends to
issue a proposed rule this spring to address certain polices, including
the Exchange DE option and the changes to the State Innovation Waivers
regulations.
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\20\ These comments were addressed in the January 19, 2021 final
2022 Payment Notice. See 86 FR 6138.
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A. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Guaranteed Availability of Coverage (Sec. 147.104)
Section 147.104(b)(2) incorporates by reference certain Exchange
special enrollment periods described in Sec. 155.420, making those
special enrollment periods applicable to non-grandfathered coverage
offered in the individual market through or outside of an Exchange. We
proposed amendments to Sec. 147.104(b)(2) to clarify that paragraph
(b)(2)(ii) does not apply to references in Sec. 155.420(d)(4)
(relating to errors of the Exchange), and to make a conforming
amendment consistent with the proposal in Sec. 155.420(c)(5) relating
to special enrollment period availability for individuals who do not
receive timely notice of a triggering event. We are finalizing these
amendments as proposed.
Section 155.420(d)(4) establishes an Exchange special enrollment
period for a qualified individual or their dependent if his or her
enrollment or non-enrollment in a QHP is unintentional, inadvertent, or
erroneous and is the result of the error, misrepresentation,
misconduct, or inaction of an officer, employee, or agent of the
Exchange or HHS, its instrumentalities, or a non-Exchange entity
providing enrollment assistance or conducting enrollment activities.
Section 147.104(b)(2)(ii) states that, when determining the application
of a special enrollment period for individual market coverage offered
outside the Exchange, a reference in Sec. 155.420 to a ``QHP'' is
deemed to refer to a plan, a reference to ``the Exchange'' is deemed to
refer to the applicable state authority, and a reference to a
``qualified individual'' is deemed to refer to an individual in the
individual market.
However, this paragraph was not intended to change the application
of Sec. 155.420(d)(4), which is specific to errors of the Exchange,
not those of the applicable state authority. It would be inappropriate
for the triggering event in this case to apply to errors of the
applicable state authority because the state does not perform the same
functions as the Exchange. For example, the state authority does not
perform an enrollment function. Thus, basing the triggering event on
errors of the state is inappropriate and could create different special
enrollment periods in the individual market on and off of the Exchange.
Therefore, we proposed to clarify that Sec. 147.104(b)(2)(ii) does
not apply to references in Sec. 155.420(d)(4). As a result, issuers
offering health insurance coverage in the individual market must
provide a limited open enrollment period under the same circumstances
as described in Sec. 155.420(d)(4).
In addition, we proposed a conforming amendment to Sec.
147.104(b)(4)(ii), consistent with the proposal in Sec. 155.420(c)(5),
to establish that if an individual did not receive timely notice of a
triggering event described in paragraph (b)(2) or (3) of Sec. 147.104,
and otherwise was reasonably unaware that such a triggering event
occurred, an issuer of non-grandfathered
[[Page 24150]]
coverage in the individual market, whether inside or outside an
Exchange, must assign the date the individual knew, or reasonably
should have known, of the occurrence of the triggering event as the
date of the triggering event for a special enrollment period.
Consistent with Sec. Sec. 147.104(b)(5) and 155.420(b), the proposed
provision would allow the individual or dependent to choose the
earliest effective date that would have been available if he or she had
received timely notice of the triggering event or another effective
date that would otherwise be available pursuant to Sec. 155.420(b). We
solicited comments on this approach. We noted that this provision would
not apply for special enrollment periods in the group market, and
sought comment on whether we should exclude the reference to the
triggering events in Sec. 147.104(b)(3) in the amended Sec.
147.104(b)(4)(ii) to retain alignment of the individual and group
market special enrollment periods required under Sec. 147.104(b)(3).
We received public comments on the proposed amendments to Sec.
147.104. Comments related to the proposal in Sec. 155.420(c)(5)
regarding when an individual does not receive timely notice of a
triggering event and otherwise was reasonably unaware that a triggering
event occurred are summarized and addressed in the preamble to Sec.
155.420. The following is a summary of and our response to the comments
we received related to the proposal to clarify that paragraph
(b)(2)(ii) does not apply to references in Sec. 155.420(d)(4)
(relating to errors of the Exchange).
Comment: A commenter generally supported clarifying that the
special enrollment period for an error of the Exchange does not extend
to errors of the applicable state authority when applied market-wide in
the individual market.
Response: We appreciate this comment, and we are finalizing the
amendment as proposed.
B. Part 150--CMS Enforcement in Group and Individual Markets
1. Technical Corrections
Part 150 sets forth our enforcement processes for all the
requirements of title XXVII of the PHS Act with respect to health
insurance issuers and non-federal governmental group health plans. We
proposed to make technical corrections to multiple sections of part
150. Specifically, we proposed to remove all references to ``HIPAA''
and replacing them with ``PHS Act'' to clarify that the part 150
processes are used for enforcing not only the requirements emanating
from HIPAA, but also the ACA and other legislation enacted subsequent
to HIPAA. These proposed wording changes were made in the February 27,
2013 Federal Register final rule entitled ``Patient Protection and
Affordable Care Act; Health Insurance Market Rules; Rate Review'' (78
FR 13406). However, because of an oversight, some references were not
updated at that time. In the proposed rule, we proposed this change to
the definition of ``Complaint'' in Sec. 150.103; the introductory text
to Sec. 150.303(a), as well as to Sec. Sec. 150.205(e)(2);
150.213(b); 150.305(a)(1), (a)(2), (b)(1) and (c)(1); 150.311(g) and
150.313(b).
We received one comment that acknowledged these technical
corrections but made no other statement about them, and we are
finalizing the clarifying amendments as proposed.
2. Administrative Hearings
Additionally, we proposed certain procedural changes to part 150
sections regarding administrative hearings. The proposed changes are
intended to align with the Departmental Appeals Board's (DAB's) current
practices for administrative hearings to appeal CMPs. Specifically, we
proposed changes to remove requirements to file submissions in
triplicate and instead require electronic filing. This change is
reflected in the proposed amendments to the definition of ``Filing
date'' in Sec. 150.401, to the introductory text in Sec. 150.427(a),
and to the service of submission requirements captured in Sec.
150.427(b). We also proposed amendments to several provisions in part
150 to allow for the option of video conferencing as a form of
administrative hearing in part 150 in addition to the forms already
allowed. To capture this flexibility, we proposed amendments to the
definition of ``Hearing'' in Sec. 150.401 and to the requirements
outlined in Sec. 150.419(a) related to the forms for the hearing,
Sec. 150.441(e) related to prehearing conferences, and Sec.
150.447(a) related to the record of the hearing. Finally, we proposed
to update Sec. 150.431 to allow the Administrative Law Judge (ALJ) to
communicate the next steps for a hearing in either the acknowledgement
of a request for hearing or on a later date. We proposed parallel
amendments to the administrative hearings requirements under subpart J
of part 156.
We received a small number of public comments on the proposed
revisions to the administrative hearing requirements captured in part
150--CMS Enforcement in Group and Individual Markets and subpart J--
Administrative Review of QHP Issuer Sanctions (Sec. Sec. 156.901,
156.927, 156.931, 156.947). The following is a summary of the comments
we received and our responses.
Comment: All commenters supported the availability of electronic
filing for administrative appeals. However, two commenters opposed the
elimination of the option to submit paper files. Those commenters
specifically noted that consumers might not be comfortable with
technology or have access to electronic means to file administrative
appeals.
Response: We appreciate the commenters' concerns about eliminating
paper filing as an option. However, the administrative appeals
procedures in part 150 apply to plans and issuers; they are separate
and apart from consumer appeals processes.\21\ In addition, the
proposed changes were intended to update the administrative hearing
regulations in order to align with the DAB's current practices and did
not make changes to existing practices.
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\21\ See, for example, 45 CFR 155.355.
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The DAB's Civil Remedies Division, which handles the administrative
hearings on CMPs under part 150 and subpart J of part 156, fully
transitioned from paper to electronic filing to increase administrative
efficiency and provide greater access and convenience to parties.
However, a party may request a written waiver from the requirement of
using DAB E-File. See Civil Remedies Division Procedures Sec. 6,
available at https://www.hhs.gov/about/agencies/dab/different-appeals-at-dab/appeals-to-alj/procedures/filing-and-service-of-written-material. If a waiver is granted, the party may file documents by U.S.
mail or an express delivery service. Id.
Therefore, because the changes were intended to reflect the DAB's
current practices that incorporate a written waiver process, and
because these changes do not affect the consumer appeals processes, we
are finalizing the revisions as proposed.
Comment: All commenters supported allowing video conferencing as a
form of hearing. One commenter also noted that the system should
include third party interpreters, whether foreign language or sign
language.
Response: We appreciate the commenter's accessibility concerns
regarding the video conferencing system. While it is not specifically
noted in the administrative hearing regulations in part 150 and subpart
J of part 156 language, the DAB complies with applicable Federal civil
rights laws and does not discriminate on the basis of race, color,
national origin, age,
[[Page 24151]]
disability, or sex. The DAB provides free aids and services to people
with disabilities, including sign language interpreters, and provides
free language services to people whose primary language is not English,
including qualified interpreters. Instructions for requesting these
services are available here: https://www.hhs.gov/about/agencies/dab/about-dab/nondiscrimination-notice/. The DAB's Civil Remedies
Division also provides a written nondiscrimination notice with similar
instructions to individual parties in every case.
Because DAB's current system already allows for these means of
access and these changes align our regulations with the DAB's current
practices, we are finalizing the revisions as proposed.
Comment: Two commenters requested that HHS adopt specific
timeframes for the ALJ to communicate next steps for an administrative
hearing in order for consumers to better prepare for the hearing and to
avoid delays in the process. The regulation, as proposed, allows the
ALJ to communicate next steps either in the acknowledgement of a
request for a hearing or on a later date.
Response: We understand commenters' concerns that the lack of a
specified time period for response from the ALJ may allow for some
uncertainty related to the timing for the proceedings. However, as
previously noted, the administrative appeals procedures in part 150 and
subpart J of part 156 apply to plans and issuers; they are separate and
apart from consumer appeals processes. Further, the proposed changes
were intended to update the regulations in order to reflect the DAB's
current practices and did not make changes to existing practices for
administrative appeals by plans and issuers. Therefore, we are
finalizing the revisions as proposed.
C. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment
Subparts A, B, D, G, and H of part 153, provide standards for
administering the risk adjustment program. The risk adjustment program
is a permanent program created by section 1343 of the ACA that
transfers funds from lower-than-average risk, risk adjustment covered
plans to higher-than-average risk, risk adjustment covered plans in the
individual and small group markets (including merged markets), inside
and outside the Exchanges.\22\ In accordance with Sec. 153.310(a), a
state that is approved or conditionally approved by the Secretary to
operate an Exchange may establish a risk adjustment program, or have
HHS do so on its behalf.\23\ We did not receive any requests from
states to operate risk adjustment for the 2022 benefit year; therefore,
HHS will operate risk adjustment in every state and the District of
Columbia for the 2022 benefit year.
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\22\ 42 U.S.C. 18063.
\23\ Also see 42 U.S.C. 18041(c)(1).
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We proposed changes to our approach for identifying the 3 benefit
years of enrollee-level EDGE data that would be used for purposes of
the annual recalibration of the HHS risk adjustment models. We also
proposed modeling updates to improve the models' predictive power for
certain subgroups of enrollees, as well as proposed changes to the
enrollment duration factors for the adult models, and we proposed to
continue a pricing adjustment related to Hepatitis C drugs. We proposed
to allow states to submit multi-year requests for reductions to
transfer calculations under the state payment transfer formula and we
outlined the 2022 benefit year reduction requests submitted by Alabama.
Additionally, we proposed to clarify risk adjustment reporting
requirements for issuers that choose to offer premium credits, if
permitted by HHS for future benefit years, and to codify a materiality
threshold for EDGE discrepancies. We proposed the risk adjustment user
fee for the 2022 benefit year and to codify in regulation the
previously established exemptions from HHS-RADV requirements for
issuers with only small group market carryover coverage in the benefit
year being audited and for sole issuers in a state market risk pool
during the benefit year being audited. We also proposed to revise the
schedule for the collection of HHS-RADV charges and disbursement of
payments such that these charges and disbursements would occur in the
same calendar year in which HHS-RADV results are released. Finally, we
proposed to shorten the discrepancy reporting windows during HHS-RADV,
clarify and expand the conflict of interest standards applicable to
initial validation audit (IVA) entities, and update the risk adjustment
regulations to more clearly reflect the previously established
limitations on the ability to dispute or appeal SVA findings and
clarify the timeframe for HHS-RADV appeals.
1. HHS Risk Adjustment (Sec. 153.320)
The HHS risk adjustment models predict plan liability for an
average enrollee based on that person's age, sex, and diagnoses (also
referred to as hierarchical condition categories (HCCs)), producing a
risk score. The HHS risk adjustment methodology utilizes separate
models for adults, children, and infants to account for clinical and
cost differences in each age group. In the adult and child models, the
relative risk assigned to an individual's age, sex, and diagnoses are
added together to produce an individual risk score. Additionally, to
calculate enrollee risk scores in the adult models, we added enrollment
duration factors beginning with the 2017 benefit year, and prescription
drug categories (RXCs) beginning with the 2018 benefit year.\24\ Infant
risk scores are determined by inclusion in one of 25 mutually exclusive
groups, based on the infant's maturity and the severity of diagnoses.
If applicable, the risk score for adults, children, or infants is
multiplied by a CSR adjustment that accounts for differences in induced
demand at various levels of cost sharing.
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\24\ For the 2018 benefit year, there were 12 RXCs, but starting
with the 2019 benefit year, the two severity-only RXCs were removed
from the adult risk adjustment models. See, for example, 83 FR
16941.
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The enrollment-weighted average risk score of all enrollees in a
particular risk adjustment covered plan (also referred to as the plan
liability risk score) within a geographic rating area is one of the
inputs into the risk adjustment state payment transfer formula, which
determines the state transfer payment or charge that an issuer will
receive or be required to pay for that plan for the applicable state
market risk pool. Thus, the HHS risk adjustment models predict average
group costs to account for risk across plans, in keeping with the
Actuarial Standards Board's Actuarial Standards of Practice for risk
classification.
a. Updates to Data Used for Risk Adjustment Model Recalibration
Consistent with the approach outlined in the 2020 Payment Notice to
no longer rely upon MarketScan[supreg] data \25\ for recalibrating the
risk adjustment models, we proposed to continue to recalibrate the risk
adjustment models for the 2022 benefit year using only enrollee-level
EDGE data. However, rather than using 2017, 2018 and 2019 enrollee-
level EDGE data, we proposed to use the 2016, 2017, and 2018 enrollee-
level EDGE data (the same years' data used to recalibrate the 2021 risk
adjustment models) to recalibrate the risk adjustment models for the
2022 benefit year. We also proposed to continue to use blended, or
averaged, coefficients from the 3 years of separately solved models for
the 2022
[[Page 24152]]
benefit year model recalibration. We are finalizing these policies as
proposed.
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\25\ 84 FR 17463 through 17466.
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Previously, we used the three most recent years of
MarketScan[supreg] data available to recalibrate the 2016, 2017, and
2018 benefit year risk adjustment models. Then, starting with the 2019
benefit year, we began transitioning from using the MarketScan[supreg]
data to using the enrollee-level EDGE data to recalibrate the risk
adjustment models. The 2021 benefit year was the first year that we
recalibrated the risk adjustment models using 3 years of enrollee-level
EDGE data.\26\ Specifically, for the 2021 benefit year, we used the
2016, 2017, and 2018 benefit years of enrollee-level EDGE data to
recalibrate the risk adjustment models. During prior recalibrations, we
implemented an approach that used blended, or averaged, coefficients
from 3 years of separately solved models to provide stability for the
risk adjustment coefficients year-to-year, while reflecting the most
recent years' claims experience available. In some prior years, this
approach resulted in reliance on data that could not be incorporated
into the coefficients until after the publication of the applicable
benefit year's Payment Notice, because the associated data was not
available in time to incorporate into the models in time for
publication in the Payment Notice.\27\ For example, due to the timing
of the proposed 2021 Payment Notice, we were unable to incorporate the
2018 benefit year enrollee-level EDGE data into the proposed
coefficients in the proposed 2021 Payment Notice, and instead included
draft coefficients in the proposed rule reflecting only 2016 and 2017
benefit years' enrollee-level EDGE data.\28\ We were also unable to
incorporate the 2018 benefit year enrollee-level EDGE data in the final
coefficients in the 2021 Payment Notice; therefore, consistent with
Sec. 153.320(b)(1)(i), we released the final 2021 benefit year
coefficients in guidance after publication of the 2021 Payment
Notice.\29\ We followed a similar approach in other benefit years when
we were unable to incorporate the most recent year of available data in
the applicable benefit year's Payment Notice.\30\
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\26\ 85 FR 29173 through 29175.
\27\ See, for example, the 2018 Payment Notice final rule, 81 FR
94058; and the 2021 Payment Notice final rule, 85 FR 29173 through
29175.
\28\ See 85 FR 7097 through 7098 and 7104 through 7112.
\29\ See 85 FR 29173 through 29175. Also see https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
\30\ See, for example, the 2018 Payment Notice rule, 81 FR
94084. Also see https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/2018-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/2018-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
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Some commenters to the proposed 2021 Payment Notice expressed
concern about when the final blended coefficients would be available,
asking that final coefficients be made available earlier. Having the
risk adjustment coefficients for the upcoming benefit year available
earlier allows issuers more time to incorporate this information when
pricing their plans for the upcoming benefit year. Commenters offered
suggestions for ways HHS could provide final coefficients sooner.
Stakeholders submitted similar comments in prior years when the final
coefficients were released in guidance after publication of the
applicable benefit year's Payment Notice.\31\ While in the initial
years of risk adjustment and implementation of the 2014 federal market
reforms (such as guaranteed availability and community rating), the
markets underwent rapid changes in which the relative impact of using
the most recent available data for recalibrating the risk adjustment
models may have been more pronounced. However, in recent years, HHS has
shifted from recalibrating the risk adjustment models using a blend of
the three most recent years of large group market data to using data
collected entirely from the risk adjustment population (enrollee-level
EDGE data). This change has resulted in coefficients that better
reflect underlying market conditions, and the markets have continued to
mature and stabilize in the years following implementation of the risk
adjustment program and other 2014 federal ACA reforms, thereby reducing
the relative impact of the most recent data year on model coefficients.
As a result, we continued to consider these comments and we proposed to
change our approach for identifying the 3 most recent years of
enrollee-level EDGE data that would be used to recalibrate the risk
adjustment models. Previously, we used the 3 most recent years of data
that were available in time for publication in the final rule or soon
thereafter in guidance. However, beginning with the 2022 benefit year,
we proposed to use the 3 most recent consecutive years of enrollee-
level EDGE data that are available in time for incorporating the data
in the draft recalibrated coefficients published in the proposed rule
and we proposed to not update the coefficients for additional years of
data between the proposed and final rules if an additional year of
enrollee-level EDGE data became available for incorporation. The
purpose of the proposed change was to respond to stakeholders' request
to provide the proposed coefficients in the proposed rule and to
release the final coefficients earlier, while continuing to use the 3
most recent consecutive years of enrollee-level EDGE data available to
recalibrate the risk adjustment models. We explained that we believe
this approach promotes stability and avoids the delays in publication
of the coefficients while continuing to develop blended, or averaged,
coefficients from the 3 years of separately solved models for model
recalibration. As proposed, the approach also would continue to use
actual data from issuers' individual and small group (or merged) market
populations, as well as maintain year-to-year stability in risk scores
as the recalibration would continue to use at least 2 years of
enrollee-level EDGE data that were used in the previous year's
models.\32\
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\31\ See, for example, 81 FR 94084 through 94085.
\32\ As detailed earlier, the 2022 benefit year recalibration
would rely on the same 3 years of enrollee-level EDGE data that were
used in the 2021 benefit year. For the 2023 benefit year and beyond,
the recalibration would rely on 2 years of the enrollee-level data
that were used in the prior year.
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For these reasons, we proposed to use 2016, 2017, and 2018 benefit
years' enrollee-level EDGE data for the 2022 benefit year model
recalibration. We sought comment on our proposal to determine
coefficients for the 2022 benefit year based on a blend of separately
solved coefficients from the 2016, 2017, and 2018 benefit years'
enrollee-level EDGE data and our proposed approach to identify the 3
most recent years of data available for the annual recalibration of the
risk adjustment models moving forward. Additionally, we sought comment
on whether we should instead maintain the approach that would use the
2017, 2018, and 2019 benefit years' data to recalibrate the risk
adjustment models for the 2022 benefit year.
We also noted that the coefficients could change if the proposed
recalibration policies, or other proposed modeling parameters, were not
finalized or were modified in response to comments. In addition, we
explained that, consistent with Sec. 153.320(b)(1)(i), if we were
unable to finalize the final coefficients in time for the final rule,
we would publish the final coefficients for the 2022 benefit year in
guidance soon after the publication of the final rule.
[[Page 24153]]
We received public comments on the proposed updates to data used
for risk adjustment model recalibration and the proposed 2022 benefit
year model recalibration approach. The following is a summary of these
comments and our responses.
Comment: Many commenters supported the inclusion of the actual
coefficients that would apply to risk adjustment models for that
benefit year in the applicable benefit year's payment notice. Some
commenters supported the proposal to use the 3 most recent consecutive
years of enrollee-level EDGE data that are available in time for
incorporating in the proposed recalibrated coefficients published in
the proposed rule and to not update the coefficients for additional
years of data between the proposed and final rules if an additional
year of enrollee-level EDGE data becomes available for incorporation.
Some of these commenters stated that providing the recalibrated
coefficients earlier in the process will promote stability, better meet
the goals of the risk adjustment program, and more closely align with
issuer pricing cycles for individual and small group health insurance
coverage.
Other commenters did not support the proposed approach and
recommended instead to maintain the approach used in previous years,
which would lead to the use of the 2017, 2018, and 2019 benefit years
enrollee-level EDGE data for model recalibration for the 2022 benefit
year. These commenters stated that incorporating newer data was more
important than having the model coefficients earlier, with several
commenters expressing concern that the proposed approach would rely on
older data that would not include the most up-to-date experience and
would not accurately reflect the reality and actuarial risk of the
applicable benefit year.
One commenter that opposed the proposed approach stated that
because issuers are required to submit all claims information to their
respective EDGE servers by April 30th following the end of a benefit
year, there should be enough time to include the most recent year's
enrollee-level EDGE data in the applicable benefit year's proposed
payment notice. The commenter expressed the view that if the final
coefficients are known by the end of March, issuers can properly
incorporate risk adjustment coefficients for rate-setting for the
following year. However, another commenter stated that they preferred
having the final coefficients sooner, by the end of January, and
expressed support for the proposed approach if the final coefficients
incorporating the most recent year of data that becomes available are
not expected to be ready within that timeframe.
Response: We are finalizing the proposals to use the 3 most recent
consecutive years of enrollee-level EDGE data that are available in
time for incorporating the data in the recalibrated coefficients
published in the proposed rule and that we will not update the
coefficients for additional years of data between the proposed and
final rules if an additional year of enrollee-level EDGE data becomes
available. We agree with commenters that this approach promotes
stability and avoids the delays in publication of the coefficients
while continuing to develop blended, or averaged, coefficients from the
3 years of separately solved models for model recalibration using
actual data from issuers' individual and small group (or merged) market
populations.
Additionally, we clarify that while we may collect the most recent
plan year's EDGE data prior to the publication of the proposed rule,
the data are often not available in time for incorporation into the
proposed coefficients until much later. This is because the process to
prepare enrollee-level EDGE data for incorporation into risk adjustment
model recalibration is rigorous and requires time for analysis and data
quality checks. Therefore, we believe utilizing the 3 most recent
consecutive years of enrollee-level EDGE data that are available in
time for inclusion in the coefficients in the proposed rule promotes
stability while ensuring data quality and avoids the delays in
publication of the coefficients that stakeholders have continued to
raise concerns about in comments on the annual payment notices. This
policy will allow HHS to provide proposed coefficients in the proposed
rule that reflects the same underlying data as will be utilized for the
final rule. This approach will minimize changes between the proposed
and final coefficients that result from differences in data years,
particularly in cases where the risk adjustment models and any
accompanying proposed updates are finalized without changes. As noted
earlier, in the initial years of risk adjustment and implementation of
the 2014 federal market reforms, the markets underwent rapid changes in
which the relative impact of using the most recent data for
recalibrating the risk adjustment models may have been more pronounced.
However, in recent years, HHS has shifted from recalibrating the risk
adjustment models using a blend of the three most recent years of large
group market data to using data collected entirely from the risk
adjustment population (enrollee-level EDGE data). This change has
resulted in coefficients that better reflect underlying market
conditions, and the markets have continued to mature and stabilize,
thereby reducing the relative impact of the most recent data year on
model coefficients.
This policy will also allow us to continue to use the 3 most recent
consecutive years of enrollee-level EDGE data available to recalibrate
the risk adjustment models. It also continues to use actual data from
issuers' individual and small group (or merged) market populations and
maintains year-to-year stability in risk scores as the recalibration
would continue to use at least 2 years of enrollee-level EDGE data that
were used in the previous year's models. Finally, since this approach
could allow us to finalize the coefficients earlier, it could allow
issuers more time to incorporate this information when pricing their
plans for the upcoming benefit year.
The proposed coefficients that were published in the proposed rule
reflected the other proposed risk adjustment model specification
changes (that is, inclusion of a two-stage model specification in the
adult and child models; addition of severity and transplant indicators
interacted with HCC counts factors in the adult and child models;
modification to the enrollment duration factors in the adult models;
and removal of the current severity indicator and enrollment duration
factors in the adult models). However, based on our decision to not
finalize those proposed model specification changes at this time as
described below, the proposed coefficients outlined in the proposed
rule are not being finalized. Instead, as discussed in more detail
below, we will continue to apply the current risk adjustment model
specifications (that is, the enrollment duration factors for the adult
models and the severity illness indicators in the adult models that
were finalized in the 2021 Payment Notice will continue to apply for
the 2022 benefit year, with trending adjustments made to project the
data used to develop the factors forward to reflect the 2022 benefit
year). The final coefficients outlined below reflect the use of the
2016, 2017, and 2018 benefit years enrollee-level EDGE data to develop
blended, or averaged, coefficients from the 3 years of separately
solved models, as proposed, and the maintenance of the current adult
model severity indicators and enrollment duration factors, with
trending adjustments made to reflect the
[[Page 24154]]
2022 benefit year.\33\ In response to comments expressing concern about
the use of older years of data, we note that, similar to previous
years, we used 3 years of blended data to develop the 2022 risk
adjustment models with certain adjustments to that data, such as
trending the data to reflect the applicable benefit year.\34\ These
adjustments are necessary because recalibration efforts have always
used data from prior benefit years to project a future benefit year. As
such, even if we adopted the alternative approach suggested by some
commenters and used the 2017, 2018 and 2019 data for the 2022 benefit
year recalibration, the recalibration data would still need to be
trended forward to project for the applicable benefit year. We believe
this approach of incorporating adjustments to the enrollee-level EDGE
data to project the coefficients for the applicable benefit year is
appropriate and consistent with the use of prior benefit years data for
model recalibration, and strikes the appropriate balance between the
policy desire to provide the coefficients earlier in the pricing cycle
for the upcoming plan year and the concerns about recalibration data
not reflecting the most up-to-date experience. After our continued
consideration of stakeholder requests for earlier release of the risk
adjustment coefficients, along with the comments on the proposed 2022
Payment Notice, we are finalizing the proposals to use the 3 most
recent consecutive years of enrollee-level EDGE data available in time
for incorporating the data in the recalibrated coefficients published
in the proposed rule and that we will not update the coefficients for
additional years of data between the proposed and final rules if an
additional year of enrollee-level EDGE data becomes available. The
final coefficients outlined below for the 2022 benefit year reflect the
use of the 2016, 2017, and 2018 benefit years enrollee-level EDGE data
for recalibration purposes.\35\
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\33\ As detailed later in the preamble, the one exception
relates to RXC 09, which involved the use of only 2016 and 2017
enrollee-level data to develop the applicable 2022 benefit year
coefficients and interaction terms.
\34\ We previously discussed trending and standardized benefit
design parameters in the risk adjustment models in the ``March 31,
2016, HHS-Operated Risk Adjustment Methodology Meeting Discussion
Paper,'' March 24, 2016, available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
\35\ As detailed later in the preamble, the one exception
relates to RXC 09, which involved the use of only 2016 and 2017
enrollee-level data to develop the applicable 2022 benefit year
coefficients and interaction terms.
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Comment: One commenter sought clarification on the reasoning and
implications for using the 2016, 2017, and 2018 enrollee-level EDGE
data.
Response: We proposed changes to how we identify the 3 most recent
consecutive years of enrollee-level EDGE data for the annual
recalibration of the HHS risk adjustment models to respond to
stakeholders' request to provide the coefficients earlier. This
approach allows HHS to avoid delays in publication of the coefficients,
which will allow issuers more time to incorporate this information when
pricing their plans for the upcoming benefit years. While this approach
will utilize a set of data that is one year older than what we have
used in previous years, we will continue to project the coefficients to
reflect estimated costs for the applicable benefit year. We believe
that this approach will promote stability while ensuring data quality
and avoid the delays in publication of the coefficients. It also
continues to use actual data from issuers' individual and small group
(or merged) market populations and maintains year-to-year stability in
risk scores as the recalibration would continue to use at least 2 years
of enrollee-level EDGE data that were used in the previous year's
models. Therefore, we are finalizing the use of the 3 most recent
consecutive years of enrollee-level EDGE data that is available to HHS
in time for incorporation in the proposed coefficients in the annual
proposed payment notice.
Comment: One commenter noted that the stated advantages for
publishing final coefficients earlier has similarly applied in prior
years as well, and HHS could always publish the final Payment Notice
earlier. This commenter also stated that the changed approach in the
proposed rule disrupts issuers' settled expectations, namely, that
issuers had assumed a continuation of past practice, through which the
proposed rule's coefficients are updated in the final rule to include
new data.
Response: As stated in the proposed rule, we proposed changes to
our approach to identify the 3 most recent consecutive years of
enrollee-level EDGE data that would be used for the annual
recalibration of the risk adjustment models in response to stakeholder
feedback. HHS has continued to receive numerous comments from
stakeholders that expressed concerns about the timing for release of
the model coefficients and asked that final coefficients be made
available earlier. The approach we used in previous benefit years
sometimes resulted in delays in publication of the final coefficients
until after the publication of the applicable benefit year's Payment
Notice,\36\ because the associated data was not available in time to
incorporate into the models in time for publication in the Payment
Notice.
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\36\ For example, the final 2021 benefit year risk adjustment
model coefficients were published in guidance after the final annual
benefit and payment parameters. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
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We considered the potential disruption to issuers' settled
expectations and we explicitly sought comments from stakeholders on
whether to finalize the proposed approach, or whether we should instead
maintain the approach of using the 2017, 2018, and 2019 benefit years'
data to recalibrate the risk adjustment models for the 2022 benefit
year. As part of our analysis, we considered that it is appropriate for
HHS to consider changes to program parameters through notice-and-
comment rulemaking, including the proposed changes to the approach for
the annual model recalibration. We further note that even if we were to
maintain the approach suggested by commenters to utilize the 2017,
2018, and 2019 benefit years, changes in the underlying data would
attenuate the relative impact of the most recent benefit year data on
risk adjustment coefficients. This is because the coefficients also
incorporate changes to the risk adjustment methodology for the
applicable benefit year, updated plan design parameters, and certain
other adjustments to the data, such as trending the data to reflect the
applicable benefit year. Finally, as noted above, in the initial years
of risk adjustment and implementation of the 2014 federal market
reforms, the markets underwent rapid changes, however, in recent years
the markets have continued to mature and stabilize. We believe the
approach finalized in this rule will provide stability and easier price
prediction for issuers for the 2022 benefit year and beyond. It is an
appropriate and reasonable response to comments submitted by
stakeholders over the years asking HHS to reevaluate these issues and
find a way to release the coefficients earlier to align with issuer
pricing cycles.
Comment: One commenter who supported the proposed approach noted
that there may be circumstances that result in changes to the risk
adjustment models between the date the proposed rule is published and
the date the final rule is published, and recommended that if HHS makes
any final
[[Page 24155]]
modifications to the coefficients, they should be issued no later than
the release of the final payment notice for the applicable benefit
year.
Response: We agree that the coefficients could still change between
the proposed and final rules. There are various reasons that this could
happen, such as the proposed recalibration policies (or other proposed
modeling parameters) not being finalized, or those parameters are
modified in response to comments. As stated above and described more
fully below, our decision not to finalize the proposed changes to the
risk adjustment model specifications and other proposed model updates
demonstrates how changes between the proposed and final rule can impact
the risk adjustment coefficients.
While we intend to make the proposed and final coefficients
available as early as possible, we did not propose to delete and are
still retaining the flexibility under Sec. 153.320(b)(1)(i) that
permits HHS to release the final coefficients in guidance after
publication of the final rule. Consistent with prior years where we
have invoked this flexibility, we intend any subsequent publication of
final coefficients would occur either in the final rule or in guidance
published soon after the publication of the final rule.
Comment: Several commenters recommended that we consider whether
utilizing the 2020 benefit year enrollee-level EDGE data for future
years' risk adjustment model calibration would be appropriate in light
of the COVID-19 pandemic.
Response: We did not propose to use 2020 benefit year enrollee-
level EDGE data as part of the annual recalibration of the risk
adjustment models for the 2022 benefit year. However, we understand
commenters' questions about the 2020 benefit year enrollee-level EDGE
data and its use for recalibration of future benefit years' risk
adjustment models. We intend to carefully review the 2020 benefit year
enrollee-level EDGE data as it becomes available to assess the
potential impact of the COVID-19 pandemic and consider whether it
should be used for recalibration of the HHS risk adjustment models in
future benefit years. Additionally, we note that our decision to use
the 2016, 2017, and 2018 benefit years data for the 2022 benefit year
model recalibration provides an additional year to evaluate the 2020
benefit year enrollee-level EDGE data and assess the implications for
using 2020 benefit year enrollee-level EDGE data for risk adjustment
model recalibration.\37\ If necessary, we will propose any needed
changes related to risk adjustment model recalibration through
rulemaking published in advance of the applicable benefit year.
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\37\ Consistent with the approach finalized in this rulemaking,
the earliest the 2020 enrollee-level EDGE data would be used for
model recalibration is the 2024 benefit year.
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After consideration of the comments on these proposals, we are
finalizing the approach to use the 3 most recent consecutive years of
enrollee-level EDGE data that are available in time for incorporating
the data in the recalibrated coefficients published in the proposed
rule and to not update the coefficients for additional years of data
between the proposed and final rules if an additional year of enrollee-
level EDGE data becomes available. As a result, we will use 2016, 2017,
and 2018 enrollee-level EDGE data to recalibrate the 2022 risk
adjustment models.\38\
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\38\ As detailed later in the preamble, the one exception
relates to RXC 09, which involved the use of only 2016 and 2017
enrollee-level data to develop the applicable 2022 benefit year
coefficients and interaction terms.
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b. Risk Adjustment Model Updates
Beginning with the 2022 benefit year, we proposed several updates
to the risk adjustment models. These proposed updates include changes
to the specifications for the adult and child models and updates to the
enrollment duration factors in the adult models to improve the models'
predictions. We also proposed to continue the market pricing adjustment
for Hepatitis C drugs that has been in place since the 2020 benefit
year.
We are not finalizing the proposed model specification changes and
enrollment duration factor updates or the accompanying removal of the
current severity illness indicators and enrollment duration factors in
the adult models at this time. Therefore, the current adult model
severity illness indicators and enrollment duration factors, with
trending adjustments made to reflect the 2022 benefit year, will apply
for the 2022 benefit year without the proposed specification changes.
We are finalizing and will continue the market pricing adjustment for
the Hepatitis C drugs that has been in place since the 2020 benefit
year.
(1) Changes to the Model Specifications
Beginning with the 2022 benefit year, we proposed to modify the
adult and child models specifications to improve prediction for
enrollees at both the low and highest ends of expected expenditures.
The current HHS-HCC models are estimated by a weighted least squares
regression.\39\ The dependent variable is annualized simulated plan
liability expenditures, and the weight is the person-specific sample
eligibility fraction. The effective outcome is that the models predict
per member per month (PMPM) expenditures.
---------------------------------------------------------------------------
\39\ See, for example, 78 FR 15420 and Section 3.7 of the
``March 31, 2016 HHS-Operated Risk Adjustment Methodology Meeting
Discussion Paper,'' March 24, 2016. Available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------
As described in the 2021 Payment Notice, the current HHS-HCC
models, which are linear models, underpredict plan liability for
enrollees without HCCs (enrollees with low expected expenditures) and
underpredict plan liability for enrollees with the highest HCC counts
(enrollees with high expected expenditures).\40\ In the 2021 Payment
Notice, we described options that we were considering to address these
issues, such as adding a non-linear term or HCC counts factors to the
risk adjustment models.\41\ For the non-linear model option, we
considered adding a coefficient-weighted sum of payment HCCs raised to
a power that could be interpreted as a measure of overall disease
burden. For the HCC counts model option, we considered adding eight
indicator variables corresponding to 1 to 8-or-more payment HCCs,
similar to the CMS-HCC risk adjustment counts models used for Medicare
Advantage.\42\ We have further evaluated the performance of these
options, their potential for improved prediction, and considered other
alternatives to improve the HHS risk adjustment models' prediction.
---------------------------------------------------------------------------
\40\ 85 FR 29188 and 29189.
\41\ Ibid.
\42\ ``Advance Notice of Methodological Changes for Calendar
Year (CY) 2020 for the Medicare Advantage (MA) CMS-HCC Risk
Adjustment Model,'' December 20, 2018. Available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2020Part1.pdf.
---------------------------------------------------------------------------
Our initial analyses showed that the non-linear and HCC counts
models would yield considerable gains in predictive accuracy in the
adult models across several subgroups when compared to the current
linear models.\43\ We tested both the HCC counts and non-linear models'
impact on the adult silver risk adjustment models and found that the
enrollees in the lowest cost deciles had better predictive ratios under
either the HCC counts or non-linear model specification than under the
current linear model specification. However, both models had
shortcomings that prompted us to
[[Page 24156]]
consider alternate model options to improve the predictive power of the
current HHS risk adjustment models. For the HCC counts model, we noted
that we were concerned that the presence of counts across all HCCs may
promote gaming in coding practices. We explored ways to assure modeling
convergence across all metals and data years, and found that the non-
linear models did not consistently converge in all testing scenarios,
and that convergence could not reliably be assured without constraining
model factors and revising those techniques with each metal and data
year model run. Therefore, we continued to explore additional types of
model specifications refinements that could balance the goals of
improving the models' prediction with mitigating modeling complexity
and gaming concerns. Specifically, as described later in this section,
we explored a two-stage specification with additional weighting in the
second stage based on the inverse capped prediction from the first
stage (``two-stage specification''), a specification with HCC counts
included for a small number of severity and transplant HCCs
(``interacted HCC counts factors''), and an approach combining the two-
stage specification with the interacted HCC counts factors.
---------------------------------------------------------------------------
\43\ 85 FR 7101 through 7104.
---------------------------------------------------------------------------
For the two-stage specification, we explored calibrating the adult
and child models in two stages: In the first-stage estimation, the
model coefficients would be estimated using the current model
specifications; and in the second stage, we would re-estimate the model
weighted by the reciprocal of the predicted values of relative
expenditures from the first step estimation with the same model
specification.\44\ The first stage of the weighted estimation method
involved a linear regression (weighted by the person-specific
eligibility fraction of the number of months enrolled divided by 12) of
simulated plan liability on age-sex factors, payment HCC factors, the
enrollment duration factors,\45\ and RXCs for the adult models. For the
child models, the first stage of the weighted estimation method
involved a linear regression of simulated plan liability on age-sex
factors and payment HCC factors. The second stage involved using the
reciprocal of first-stage predictions as weights for a second linear
regression.\46\ To stabilize the weights for the second stage
estimation, we imposed lower and upper bound caps on the first-stage
predictions at the 2.5th and 97.5th percentiles in the adult models,
and the 2.5th and 99.5th percentiles in the child models. We tested
various caps for the weights based on the distribution of costs, and
found these lower and upper bound caps achieved better prediction on
average. This approach has the material effect of weighting the
healthier enrollees, who represent a majority of enrollees in the
individual and small group (including merged) markets but who are
underpredicted by the current models, more heavily so that the
statistical model predicts their expenditures more accurately. On the
other hand, this approach systematically underweights, and therefore
underpredicts, very expensive enrollees. However, the capped weighting
approach would mitigate the potential to underpredict at the high end
for expensive enrollees, as well as any possible low-end
overprediction. In our consideration of this option, we tested various
weights, including reciprocals of the square root of prediction, log of
prediction, and residuals from first step estimation, but the
reciprocal of the capped predictions resulted in better predictive
ratios for low-cost enrollees compared to any of these alternative
weighting functions.
---------------------------------------------------------------------------
\44\ This weighted approach is similar to the weighted least
squares approach with the weight equal to the reciprocal of the
estimated variance that is often used to correct for
heteroskedasticity. However, in our proposed approach, we would use
the reciprocal of predictions from the first step as weights to
correct for underprediction of low-valued coefficients.
\45\ We proposed to remove and replace the enrollment duration
factors in the adult models in the proposed rule, but we are not
finalizing the proposed changes to the enrollment duration factors
in this final rule and will apply the current enrollment duration
factors of up to 11 months, with trending adjustments made to
reflect the 2022 benefit year, in the adult models for the 2022
benefit year.
\46\ Under the proposed two-stage specification and interacted
HCC counts model described later in this section, we proposed to
remove and replace the severity illness indicators in the adult risk
adjustment models with the proposed interacted HCC counts factors in
the adult and child models. However, we not are finalizing these
proposed model specification changes in this final rule and will
continue to apply the current severity illness indicators in the
adult models for the 2022 benefit year.
---------------------------------------------------------------------------
We also explored how the addition of severity and transplant
indicators interacted with HCC counts, wherein an indicator flagging
the presence of at least one severity or transplant payment HCC is
being interacted with counts of the enrollee's payment HCCs.\47\ The
goals for this approach were to: (1) Address the non-linearity in costs
between enrollees with no or very low costs and enrollees with high
costs; (2) empirically incorporate the cost impact of multiple complex
diseases; and (3) mitigate the gaming concerns with the HCC counts
model. We tested different types of severity and transplant indicators
interacted with HCC counts with the goal of improving prediction for
enrollees with the highest costs and multiple HCCs to counter balance
the reciprocal prediction weights that relatively underpredicted costs
for these enrollees. For this approach, we assessed the HCCs for
enrollees with extremely high costs, and HCCs that were being
underpredicted in the current risk adjustment models. We found that
many of the HCCs that were flagged as being under-predicted were those
HCCs that indicated severe illness, such as the transplant HCCs, and
other HCCs related to severity of disease; therefore, we considered
dropping the current severity illness indicators in the adult models
and replacing them with severity and transplant indicators interacted
with HCC counts factors in the adult and child models. Table 3 in the
proposed rule \48\ listed the HCCs that were selected for the severity
and transplant indicators for the adult and child models for purposes
of exploring this option. The severity and transplant indicators were
then interacted with HCC counts factors, which are described below.
---------------------------------------------------------------------------
\47\ For HCCs in a group, the group is counted at most once.
These groups of HCCs in the risk adjustment models are typically
detailed in the Tables 6 and 7 of the HHS-Developed Risk Adjustment
Model Algorithm ``Do It Yourself (DIY)'' Software.
\48\ See 85 FR at 78593.
---------------------------------------------------------------------------
The purpose of adding severity and transplant indicators interacted
with HCC counts factors is to account for the fact that costs of
certain HCCs rise significantly when they occur with multiple other
HCCs. To mitigate the incentive to upcode multiple HCCs, we only
increased incremental risk scores in the presence of at least one of
the selected HCCs in the severity or transplant indicator groups in
Table 3 in the proposed rule. That is, an adult or child enrollee would
have to have at least one HCC in the ``severity'' or ``transplant''
indicator groups in Table 3 in the proposed rule to receive the
interacted HCC counts coefficient toward their risk score.
Under this approach, when an adult or child enrollee has a severity
indicator HCC in Table 3 in the proposed rule, the enrollee's risk
score would include the sum of: (1) Severity HCC variable coefficient;
\49\ and (2) applicable severity HCC counts variable coefficient. The
HCC counts factors, which indicate the
[[Page 24157]]
counts of all payment HCCs for an enrollee with at least one HCC,
interacted with the severity indicator in Table 3 in the proposed rule,
range from one, two, to 10+ payment HCCs (1, 2, . . . , 10+) for the
adult models, and from one, two, to 5, then 6 or 7, and 8+ payment HCCs
for the child models. To implement the severity indicator HCC counts
factors and further explore this option, we removed the current
severity illness indicators in the adult models, and added severity
indicator interacted HCC counts variables for the adult and child
models.
---------------------------------------------------------------------------
\49\ This is in addition to the HCC coefficients for any other
HCCs that the enrollee has, as well other risk adjustment factors
that the enrollee has (such as demographic factors). If an enrollee
has no severity HCCs the severity count interaction term
coefficients are not applicable.
---------------------------------------------------------------------------
For the transplant-related HCCs within the severity indicator HCC
counts in Table 3 in the proposed rule, we found separating out
transplant HCCs into their own additional indicator to interact HCC
counts factors improved prediction for these high-cost enrollees.
Therefore, for the transplant HCCs, we created a separate transplant
indicator to interact with payment HCC counts of 4, 5, 6, 7, or 8+ for
the adult models, and a single indicator variable of payment HCC counts
of 4+ for the child models. For example, an adult enrollee with a
transplant HCC 34 ``Liver Transplant Status/Complications'' in the
transplant indicator group and three other payment HCCs received the
following factors toward their risk score in the adult models: (1) The
four coefficients for their individual HCCs (the three non-transplant
HCCs and the HCC 34 transplant HCC coefficient), (2) severity
interacted HCC counts of 4 coefficient, and (3) transplant interacted
HCC counts of 4 coefficient.\50\ The child model operated similarly.
For a child enrollee with a transplant HCC in the transplant indicator
group and three other payment HCCs, the following was used to calculate
the enrollee's risk score: (1) Coefficients for all four HCCs,
(including the transplant HCC coefficient), (2) severity interacted HCC
counts of 4 coefficient, and (3) transplant interacted HCC counts of 4
coefficient.
---------------------------------------------------------------------------
\50\ This is in addition to other risk adjustment factors that
the enrollee has (such as demographic factors).
---------------------------------------------------------------------------
As an alternative, we explored interacting the HCC counts factors
with each selected severity and transplant HCC, but found it was
sufficient to interact the HCC counts factors with a variable
indicating the presence of at least one of the selected HCCs in each
group to improve prediction for enrollees with these HCCs. We also
explored different combinations of HCC counts to identify the counts
factors for both indicator groups in the adult and child models that
provided the best balance of reasonable sample sizes and relative cost
differences between each counts factor. More specifically, in the adult
models, we found that starting with 4+ HCCs for the transplant
interacted factors improved predictions of enrollees at the very high
end in terms of risk and cost and ending at 8+ HCCs instead of 10+ HCCs
addressed the small sample sizes of enrollees with a transplant and 9
or more payment HCCs. For the child models, we found having one
variable for 4+ payment HCCs provided more stable estimates as compared
to separate variable for each payment HCC above that number, given the
smaller sample sizes for children than those for adults.
Lastly, we tested combining these specifications into an
alternative approach that incorporated both the two-stage specification
and the severity and transplant indicators interacted HCC counts
factors described above for the HHS adult and child models. We found
this combined approach generally improved prediction for enrollees at
both the low and highest ends of expected expenditures. Specifically,
even though we found that the age-sex factors and some HCCs might have
slightly worse predictive ratios under the proposed combined approach
than the current linear models, we found that this combined approach
improves predictive ratios in comparison to the current models in each
decile of predicted plan liability. We also found that this combined
approach improves R-squared in comparison to the current model and that
even though the coefficients for the model factors that are most
impacted by the combined approach (the age-sex factors and the severity
and transplant HCCs) would be changing under the 2022 benefit year
models compared to the 2021 benefit year models, the average enrollee's
adult risk score in the recalibration sample in the silver metal level
only increased slightly between 2021 benefit year models to 2022
benefit year models. Therefore, we proposed to modify the HHS risk
adjustment model specifications for the adult and child models by
combining a two-stage specification and adding interacted HCC counts
factors beginning with the 2022 benefit year. For the two-stage
specification, we proposed calibrating the adult and child models in
two stages. The first stage of the weighted estimation method would
involve a linear regression of simulated plan liability on age-sex
factors and payment HCC factors for the adult and child models, with
the addition of the enrollment duration and RXCs factors for the adult
models. The second stage would use the reciprocal of prediction as
weights from the first step as a second stage linear regression. To
stabilize the weights from the first stage predictions, we proposed
lower and upper bound caps on the predictions at the 2.5th and 97.5th
percentiles in the adult models, and the 2.5th and 99.5th percentiles
in the child models. This two-stage specification would be combined
with the severity and transplant indicators from the interacted HCC
counts factors. For the severity indicator group, we proposed to add
separate count factors for one to 10+ payment HCCs counts factors (1,
2, . . ., 10+) for the adult models and one to 5, 6 or 7, and 8+
payment HCCs (1, 2, . . . . 5, 6 or 7, 8+) for the child models. The
proposed HCCs that would flag the severity indicator are listed in
Table 3 of the proposed rule.\51\ For the transplant HCCs, we proposed
to incorporate variables for 4 to 8+ payment HCCs (4, 5, 6, 7, 8+) for
the adult models and one variable for 4+ payment HCCs for the child
models. All variables, including the severity and transplant indicators
interacted in the interacted HCC counts factors, would be included in
both stages of the regressions. We proposed to incorporate these model
specification updates beginning with the 2022 benefit year HHS risk
adjustment adult and child models. We also proposed to remove the
current severity illness indicators in the adult models beginning with
the 2022 benefit year.
---------------------------------------------------------------------------
\51\ See 85 FR at 78593.
---------------------------------------------------------------------------
We sought comment on these proposals, including on the HCCs
selected for flagging as severity and transplant indicators listed in
Table 3 of the proposed rule such as whether we should include HCC 18
Pancreas Transplant in the transplant indicator group, and the
alternatives described above. We also requested comment on whether we
should pursue both the interacted HCC counts factors and the two-stage
specification beginning with the 2022 benefit year (as proposed), if we
should implement one of the two approaches beginning with the 2022
benefit year (and if so, which one), or if we should wait to implement
the proposed changes that combines the proposed model specification
updates until the 2023 benefit year.
We are not finalizing the risk adjustment model specification
changes as proposed at this time, but will further consider potential
changes that could increase the predictive power of the HHS risk
adjustment models. We also
[[Page 24158]]
are not finalizing the accompanying proposals to remove the current
severity illness indicators in the adult models; those factors, as
finalized in the 2021 Payment Notice, will continue to apply to the
2022 benefit year adult models with trending adjustments made to
project the data used to develop the factors forward to reflect the
2022 benefit year.\52\
---------------------------------------------------------------------------
\52\ See the Severity Factors listed in Table 1.
---------------------------------------------------------------------------
We received public comments on the proposed updates to the model
specification changes. The following is a summary of these comments and
our responses.
Comment: Many commenters opposed the proposed risk adjustment model
specification changes and wanted to know more about the specific
impacts of the proposed risk adjustment model specification changes.
Many of these commenters were concerned that HHS did not give
stakeholders adequate information or time to assess the model
specification changes, while some stated that the model specification
changes were unexpected and not fully reviewed with stakeholders in
advance of them being proposed for implementation. These commenters
suggested that, consistent with recent efforts to update risk
adjustment data validation, HHS should release a White Paper and
conduct listening sessions to provide stakeholders with the opportunity
to evaluate the impact of the changes and provide HHS with feedback in
advance of pursuing such changes through rulemaking. Some commenters
generally wanted additional analyses or more specificity about the
model changes while others requested specific types of analyses.
Some commenters that opposed the proposed model specification
changes were concerned the changes added complexity to the models and
would hinder issuers' ability to price accurately, resulting in higher
premiums. Other commenters recommended that HHS collect data to
estimate the impact of the proposed model specification changes on risk
adjustment transfers before finalizing them. Another commenter
recommended evaluating model performance at the plan level instead of
the enrollee level using the plan liability risk score predictive
ratios because the transfer formula operates at the plan and rating
level, wanting HHS to collect data to do this type of analysis.
A few commenters were concerned that the proposed model
specification changes would reduce the quality of coverage available to
consumers and would threaten the market's ability to support robust
competition. One of these commenters recommended that we reconsider the
goal of reducing under prediction for enrollees with low spending,
because this commenter believed that plans that disproportionately
attract sick enrollees tend to attract enrollees who are higher-than-
average risk based on characteristics not captured in risk adjustment,
and that therefore risk adjustment should underpay for low spending
enrollees relative to payment for higher-risk enrollees.
However, other commenters supported our proposed model
specifications changes. These commenters tended to support improving
the predictive power of the risk adjustment models and were concerned
about the potential for plans to lose money on enrollees with no HCCs
under the current model specifications, discouraging issuers from
enrolling healthier enrollees and resulting in excessive risk
adjustment payments. One of these commenters reported engaging in their
own analysis of the proposed model specification changes and found that
they achieved HHS's goals of improving the models' prediction while
mitigating modeling complexity and gaming concerns.
Response: After consideration of comments on these proposals, we
are not finalizing the proposed model specifications changes at this
time and will retain the existing severity illness indicators in the
adult models. We intend to continue to consider potential changes that
could increase the predictive power of the HHS risk adjustment models
in future rulemaking for future benefit years. While we believe
stakeholders had sufficient time and adequate information to evaluate
these model specifications, as reflected in the detailed comments
received on these proposals, we understand stakeholders' desire for
additional analyses on these types of model specification changes prior
to implementing them in the risk adjustment models. We also appreciate
issuers' desire for additional time to prepare for these types of model
specification changes and to consider how to price for these model
specification changes. While we are limited in our ability to evaluate
model performance at the plan level because the enrollee-level EDGE
data does not include plan level information, to test the performance
of the risk adjustment models for subgroups, we calculate the
expenditure ratio of predicted to actual weighted mean plan liability
expenditures by subgroup, also referred as the predictive ratios.\53\
Regardless, we agree that more time, and some additional analysis,
would help stakeholders further review these changes, help issuers
price more accurately, and prevent the introduction of inadvertent
volatility in the market(s) as a result of new model specifications. It
will also help inform whether refinements to these proposals or other
options would be appropriate to meet the overall policy goal of
improving the models' predictive power for the lowest cost and highest
cost enrollees and developing a model that most accurately captures
risk for those with and without HCCs. For these reasons, we are
considering releasing a technical paper to provide further assessment
of potential changes to the risk adjustment models and additional
analysis of options to improve the prediction of the risk adjustment
models. In addition, if we decide to pursue these changes, or other
options, to improve the predictive power of the models for future
benefit years, we would propose such updates through notice-and-comment
rulemaking.
---------------------------------------------------------------------------
\53\ March 31, 2016, HHS-Operated Risk Adjustment Methodology
Meeting. Discussion Paper. March 24, 2016. https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------
Comment: Some commenters were concerned that the two-stage
specification would over-fit the model or would worsen the fit along
other dimensions. One of these commenters questioned the basis for the
weighting function chosen in the two-stage specification noting that it
appeared to be arbitrary and recommended that HHS consider using
industry-standard methods to test modeling choices for overfitting and
then publish the results of these tests when explaining modeling
decisions. This commenter cautioned against an overemphasis on
improving model performance in the absence of both a sound theoretical
basis for changes and an independent data set to confirm an increase in
accuracy. Another commenter recommended that HHS not finalize the
proposed risk adjustment model specifications since the two-stage
specification does not mitigate the under-prediction of health care
costs for enrollees with the highest number of HCCs. One commenter was
concerned that the proposed two-stage specification would not predict
future costs.
Response: We are not implementing the proposed model specifications
at this time. However, in response to comments, we note that as part of
our assessment of the proposed model specification changes we tested
for
[[Page 24159]]
overfitting of the models by running predictive ratios on the separate
validation samples for both the child and adult models. While the
sample sizes are smaller in the child models than the adult models,
leading to greater fluctuations for the child models, we found that the
predictive ratios in the separate validation samples showed no material
difference relative to predictive ratios in the estimation sample.
Thus, we did not find empirical concerns with respect to overfitting of
the models with the proposed model specification changes.
As previously mentioned, we believe it is appropriate to continue
to analyze the two-stage specification and interacted HCC counts
factors and are considering releasing a technical paper to provide our
further assessment of potential changes to the risk adjustment models
that could include these model specification changes or other options.
In addition, we would pursue adoption of any of these model
specification changes, or other options, for future benefit years
through notice-and-comment rulemaking.
Comment: Some commenters were concerned about the potential for
small sample sizes for the interacted HCC counts model specification.
These commenters tended to be concerned that the number of enrollees
could drop significantly as the interacted HCC counts go up, which
could lead to erratic interacted HCC counts factors coefficients, and
had concerns that the proposed rule had some large changes between
coefficients and coefficients going from negative to positive for a
given count across metal levels. One commenter was concerned that the
low sample sizes at higher HCC counts associated with larger
coefficients could increase the models' volatility, making it more
difficult for issuers to price coverage. Other commenters were
concerned that the interacted HCC counts model specification could
incentivize unwanted gaming in coding practices by issuers. One
commenter that supported the adoption of the interacted HCC counts
model specification was concerned that the interacted HCC count model
change would encourage issuers to invest additional resources in
diagnosis coding. Another commenter did not believe that using
interacted HCC counts factors would create an opportunity for gaming,
and did not understand how using a full HCC counts model specification
would result in gaming opportunities either.
Response: As noted previously, after consideration of comments, we
are not finalizing the proposed model specification updates, including
the interacted HCC counts factors, at this time. While we believe that
the proposed rule provided stakeholders with adequate information to
evaluate these model specifications, we recognize that stakeholders
could benefit from further analysis and additional time to analyze the
structure of the proposed interacted HCC counts factors. In response to
the commenters expressing concerns about negative coefficients under
the proposed interacted HCC counts factors, we note that when an
enrollee has a severity indicator HCC, the enrollee's risk score would
include the sum of: (1) Severity HCC variable coefficient; \54\ and (2)
applicable severity HCC counts variable coefficient. This means that
even though many of the interacted HCC counts factors outlined in the
proposed rule were negative coefficients, the net combined impact of
the HCC coefficients and the interacted ``severity'' or ``transplant''
HCC counts coefficient, to the enrollee's risk score would be
positive.\55\
---------------------------------------------------------------------------
\54\ This is in addition to the HCC coefficients for any other
HCCs that the enrollee has, as well other risk adjustment factors
that the enrollee has (such as demographic factors). If an enrollee
has no severity HCCs the severity count interaction term
coefficients would not be applicable.
\55\ To further illustrate, we can consider a male enrollee age
63 in silver metal level who has diabetes but no other risk markers.
Using the proposed coefficients in the proposed rule, his proposed
model predicted cost would be: 0.343 (age-sex estimate) + 0.262
(diabetes HCC estimate) = 0.605.
If he develops sepsis, which is an interacted ``severity'' HCC,
his predicted cost would be: 0.605 + 9.394 (sepsis HCC) + -5.824
(interacted severity HCC counts factor for 2 total HCCs estimate) =
4.175.
If this enrollee also develops heart failure, his predicted cost
would further rises: 0.605 + 9.394 + 1.874 (heart failure HCC) + -
4.526 (interacted severity HCC counts factor for 3 total HCCs) =
7.347. As can be seen in these illustrative examples, although the
interacted ``severity'' HCC counts factors are negative, the
interacted ``severity'' HCC counts factor rise with the enrollee's
total number of HCCs, increasing the enrollee's total predicted cost
as his number of HCC diagnoses increases. In fact, the increasing
risk scores with each additional HCC is consistent with the current
models and predictions are higher for enrollees with many HCCs under
the interacted counts specification than under the current model
specification.
---------------------------------------------------------------------------
In developing the proposed interacted HCC counts factors, we also
considered sample sizes of the various interacted HCC counts factors.
We analyzed multiple years of enrollee-level EDGE data and we chose the
model specifications that grouped all of the HCC counts interacted with
individual severity and transplant HCCs into two sets of aggregated
factors to maximize sample size, reduce concerns of overfitting the
model, and reduce the number of factors being added to the models. The
resulting sample size for the proposed interacted HCC counts factors
were consistent with the sample size for individual HCCs in the risk
adjustment models. Furthermore, by limiting the proposed interacted HCC
counts factors to certain severity and transplant HCCs, we believe that
the interacted HCC counts factors would restrict the scope for coding
proliferation in accordance with the principles of risk adjustment.\56\
---------------------------------------------------------------------------
\56\ We have described our principles for risk adjustment in
various documents, but a complete list of them is available in the
March 31, 2016, HHS-Operated Risk Adjustment Methodology Meeting
Discussion Paper. March 24, 2016. Pages 12-13, https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------
As discussed in the 2021 Payment Notice, we considered using a
counts model specification where all HCCs were subject to the counts
model specifications, but, as stated in the proposed rule, we were
concerned that the presence of counts across all HCCs may promote
gaming in coding practices. This was our reasoning for investigating an
interacted HCC counts model specification to find a way to get the
benefits afforded by the HCC counts model while mitigating the
potential for gaming. The proposed interacted HCC counts factors would
have made changes primarily to the HCCs most associated with
underprediction of high-cost cases in the model and would have only
applied to less than two percent of the population thereby reducing the
concern about additional coding incentives in comparison to a general
HCC counts model.
We agree that stakeholders will benefit from additional time to
analyze the proposed factors that we presented in the proposed rule to
understand the incremental effects of the interacted HCC counts factors
and consider the associated coding incentives. After consideration of
comments received on these proposals, we are not finalizing the
proposed model specification changes or the removal of the current
severity illness indicator factors in the adult models at this time.
However, we intend to continue to consider changes that can increase
the predictive power of the HHS risk adjustment models in rulemaking
for future benefit years and also intend to provide stakeholders with
further information and additional analysis on potential model
specifications changes.
Comment: One commenter believed that inclusion of the interacted
HCC counts factors appears to be a discriminatory practice.
[[Page 24160]]
Response: We are not finalizing the policy at this time, but we
disagree. The interacted HCC counts factors proposed to be added to the
HHS risk adjustment models are not discriminatory. HHS takes very
seriously our obligation to protect individuals from discrimination.
Consistent with section 1343 of ACA, the HHS-operated risk adjustment
program reduces the incentives for issuers to avoid higher-than-average
risk enrollees, such as those with chronic conditions, by using charges
collected from issuers that attract lower-than-average risk enrollees
to provide payments to health insurance issuers that attract higher-
than-average risk enrollees. The proposed interacted HCC counts factors
would help predict enrollee risk better for certain subpopulations.
Therefore, we do not believe the inclusion of the interacted HCC counts
factors is a discriminatory practice and as stated above, the proposed
inclusion of interacted HCC counts would reduce the under-prediction of
the highest cost cases and the under-prediction of the low-risk
enrollees, thereby helping to mitigate the potential for adverse
selection by improving the predictive power of the HHS risk adjustment
models for these enrollees.
Comment: One commenter wanted HHS to consider using more metrics
than R-squared statistics to assess the proposed model specification
changes, such as mean absolute prediction error or predictive ratios
for subsets of the population. Another commenter was concerned that the
proposed revisions to incorporate interacted HCC counts factors and
modify the enrollment duration factors alone would result in worse
model performance among lower-cost deciles even if they result in
higher R-squared values overall. Another commenter wanted to ensure
that HHS's modeling was taking into account the high-cost risk pool
component of the HHS risk adjustment methodology.
Response: While we did assess R-squared statistics for the
performance of our proposed model specification changes, our primary
metric to evaluate performance and the proposed changes was predictive
ratios by subgroup. We found that the proposed interacted HCC counts
and the proposed revised enrollment duration factors (discussed in the
below section) improved the model performance for the low-end deciles
even without the inclusion of the proposed two-stage specifications. We
intend to continue to assess model performance in future benefit years,
and we will also consider assessing the mean absolute prediction error
along with predictive ratios and R-squared statistics as we continue to
assess potential model specification changes in the future. We also
confirm that the annual recalibration of the HHS risk adjustment
models, including both the development of final coefficients listed in
this rule and the proposed coefficients reflecting the proposed model
specification changes in the proposed rule, accounts for the costs
covered by the high-cost risk pool component of the HHS risk adjustment
methodology.57 58
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\57\ Beginning with the 2018 benefit year risk adjustment
recalibration, we incorporated the high-cost risk pool parameters in
our recalibration of the models by truncating 40 percent of costs
above $1 million in our dataset used to simulate plan liability.
See, for example, 81 FR 94058 at 94082.
\58\ See, for example, the proposed 2022 Payment Notice, 85 FR
at 78586 (In announcing the proposed coefficients, noting that
``(t)he adult, child, and infant models have been truncated to
account for the high-cost risk pool payment parameters by removing
60 percent of costs above the $1 million threshold.'')
---------------------------------------------------------------------------
Comment: Some commenters focused on the proposed timeline for
implementation of the proposed model specification changes. Some of
these comments were opposed to implementing the model specification
changes in 2022 and some supported delaying implementation to the 2023
benefit year (or beyond). One commenter wanted all model specification
changes completed within one benefit year and then recommended limiting
model changes in future benefit years to provide year-to-year
stability. Another commenter supported applying the proposed model
specification changes beginning with the 2022 benefit year risk
adjustment models.
Response: As noted previously in this rule, after consideration of
comments on these proposals, we are not finalizing the proposed model
specifications at this time and are retaining the current severity
illness indicator factors in the adult models. We agree that
stakeholders would benefit from having additional analysis and time to
consider these changes. Therefore, we intend to provide stakeholders
with additional analysis and further information about potential model
specification changes and will continue to consider changes that can
increase the predictive power of the HHS risk adjustment models. Any
such changes would be pursued through rulemaking for future benefit
years. As part of our continued analysis of potential future changes,
we intend to consider ways to balance the desire to adopt refinements
to improve the predictive power of the models with the need to promote
stability.
c. Changes to the Enrollment Duration Factors
In the proposed rule, we proposed changes to the enrollment
duration factors in the adult risk adjustment models to improve the
prediction for partial year enrollees with HCCs. After consideration of
comments received, we are not finalizing the proposal to remove the
current 11 enrollment duration factors of up to 11 months for all
enrollees in the adult models, or the addition of new monthly
enrollment duration factors of up to 6 months that would only apply for
enrollees with payment HCCs in the adult models. For the 2022 benefit
year, we will continue to apply the current 11 enrollment duration
factors of up to 11 months for all enrollees in the adult models, with
trending adjustments made to project the data used to develop the
factors forward to reflect the 2022 benefit year. See Table 1. Similar
to the other proposed model specification changes outlined elsewhere in
this rule that we are not finalizing in this rule, we intend to
continue to analyze potential changes to the enrollment duration
factors to improve model prediction for partial year enrollees with
HCCs.
As described in the proposed 2021 Payment Notice, we have been
considering potential adjustments to the enrollment duration factors
and previously analyzed the current factors using the 2016 and 2017
enrollee-level EDGE data.\59\ We explored heterogeneity (variations) of
costs for partial year enrollees in the presence of certain diagnosis
codes, by market (individual or small group),\60\ and under various
enrollment circumstances, such as enrollment beginning later in the
year or ending before the end of the year. Our preliminary analysis of
2017 enrollee-level EDGE data found that the current enrollment
duration factors are driven by enrollees with HCCs. That is, partial
year enrollees with HCCs had higher PMPM expenditures on average as
compared to full year enrollees with HCCs. On the other hand, partial
year enrollees without HCCs were not significantly different in PMPM
expenditures compared to full year enrollees without HCCs. In the 2021
Payment Notice, we also explained that our preliminary analysis found
that, in comparison to the effect of the presence of HCCs on enrollment
duration factors, enrollment timing (for example, enrollment at the
beginning of the year compared to enrollment after open
[[Page 24161]]
enrollment period, or drop in enrollment before the end of the year)
did not appear to affect PMPM expenditures on average. While we did not
make changes to the enrollment duration factors in the 2021 Payment
Notice, we stated that we were considering eliminating the monthly
enrollment duration factors up to 11 months and replacing them with
monthly enrollment duration factors up to 6 months for enrollees with
HCCs. We also stated that we intended to review the trends observed in
our preliminary analysis using an additional year's data before
proposing changes.
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\59\ See 85 FR 7103 and 7104.
\60\ In the enrollee-level EDGE data, merged market enrollees
are assigned to the individual or small group market indicator based
on their plan.
---------------------------------------------------------------------------
Since the publication of the 2021 Payment Notice, we have
reassessed enrollment duration factors for adults using the 2018
benefit year enrollee-level EDGE data. The additional data year's
findings were consistent with our prior finding that partial year
enrollees without HCCs do not have PMPM expenditures that are
significantly different compared to full year enrollees without HCCs.
Therefore, beginning with the 2022 benefit year, we proposed to remove
the current 11 enrollment duration factors of up to 11 months for all
enrollees in the adult models, and add new monthly enrollment duration
factors of up to 6 months to the adult models that would only apply for
enrollees with payment HCCs. Under the proposal, there would be no
enrollment duration factors for adult enrollees without payment HCCs
starting with the 2022 benefit year adult models. As part of this
analysis, we also considered adoption of enrollment duration factors by
market, but we did not find a meaningful distinction in relative costs
between markets on average once we implemented the proposed enrollment
duration factors of up to 6 months for adult enrollees with payment
HCCs. Therefore, we did not propose enrollment duration factors for the
adult models by market type at this time. We also proposed to continue
to incorporate enrollment duration factors only in the adult
models.\61\ We solicited comment on the changes to the enrollment
duration factors for the adult models. We also sought comment on
whether we should implement these model changes starting with the 2022
benefit year, whether we should delay implementation until the 2023
benefit year, or whether we should create the enrollment duration
factors for different lengths, such as up to 9 months of enrollment,
instead of up to 6 months.
---------------------------------------------------------------------------
\61\ As explained in the 2021 Payment Notice proposed rule, we
found that partial year enrollees in the child models did not have
the same risk differences as partial year enrollees in the adult
models and they tended to have similar risk to full year enrollees
in the child models. In the infant models, we found that partial
year infants had higher expenditures on average compared to their
full year counterparts; however, the incorporation of enrollment
duration factors created interaction issues with the current
severity and maturity factors and did not have a meaningful impact
on the general predictive power of the infant models. See 85 FR 7103
and 7104.
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We are not finalizing the proposal to remove the current 11
enrollment duration factors of up to 11 months for all enrollees in the
adult models, or to add new monthly enrollment duration factors of up
to 6 months that would only apply for enrollees with payment HCCs in
the adult models. We intend to consider proposing changes that increase
the predictive power of the HHS risk adjustment models model in the
future, including with respect to improving model prediction for
partial year enrollees with HCCs. We received public comments on the
proposed changes to the adult model enrollment duration factors. The
following is a summary of the comments we received on these proposals
and our responses.
Comment: Many commenters were opposed to the new enrollment
duration factors for up to 6 months for adult enrollees with a payment
HCC. These commenters wanted additional analysis on the new enrollment
duration factors, such as further evaluation of the new enrollment
duration factors in a White Paper or dialogue during stakeholder
listening sessions. Other commenters supported the new enrollment
duration factors (of up to 6 months for adult enrollees with a payment
HCC). These commenters believed that the new enrollment duration
factors would capture adverse selection related to partial year
enrollment and were concerned that plans are unable to recover premiums
for the foreseeable additional costs that result from partial year
enrollees.
A few commenters opposed the new enrollment duration factors
because they believed that the current enrollment duration factors that
apply to all adult enrollees help to offset under-prediction of healthy
enrollees in the risk adjustment models and that the proposed
enrollment duration factors would undermine this offset by only
applying to adult enrollees with an HCC. Other commenters believed that
the current enrollment duration factors helped mitigate some potential
under-prediction issues in the small group market.
Some commenters wanted HHS to implement the proposed enrollment
duration factors changes beginning with the 2022 benefit year. Other
commenters recommended delaying implementation of the proposed
enrollment duration factor changes to the 2023 benefit year, asking
that HHS provide additional analysis on the enrollment duration factor
changes in the interim to assist issuers with pricing their plans to
reflect these changes. One commenter wanted HHS to implement the
proposed enrollment duration factor changes now so that carriers are
not deterred from enrolling people seeking coverage during special
enrollment periods with millions of people losing employer-sponsored
insurance due to COVID-19.
Response: Similar to the other proposed model specification
changes, we are not finalizing the revisions to the enrollment duration
factors at this time and will consider proposing changes that increase
the predictive power of the HHS risk adjustment models in the future.
For the 2022 benefit year, we will continue to apply the current 11
enrollment duration factors of up to 11 months for all enrollees in the
adult models with trending adjustments made to project the data used to
develop the factors forward to reflect the 2022 benefit year. We
recognize that stakeholders would benefit from additional analysis and
time to assess these or other potential changes to the enrollment
duration factors. We also see value in making any changes to the
enrollment duration factors at the same time as other model
specification changes under consideration to address the under-
prediction of no HCC enrollees. This approach to aligning the
enrollment duration factors changes with the timing of other potential
model specification changes targeted to improve the predictive power of
the models would support a balanced approach to addressing the over-
prediction of no HCC enrollees with partial year enrollment at the same
time that we address the under-prediction of no HCC enrollees (with
full or close to full year enrollment) in the risk adjustment models.
We note that the current enrollment duration factors still compensate
plans for partial year enrollees, and therefore, already help mitigate
any disincentive to enroll partial-year enrollees.
Therefore, we are also not finalizing the proposed changes to the
enrollment duration factors at this time and will continue to apply the
current 11 enrollment duration factors of up to 11 months, with
trending adjustments made to reflect the 2022 benefit year, for all
enrollees in the adult models. In addition, we are considering
releasing a further analysis of potential changes to the risk
adjustment models that could include updates to the adult model
enrollment duration factors.
[[Page 24162]]
Comment: Some commenters wanted HHS to consider whether enrollment
duration factors should be tied to certain HCCs, believing that not all
HCCs contribute equally to the coefficient for enrollees with the one
month enrollment duration factor and wanting us to constrain the
enrollment duration factor to a subset of HCCs driving the high one-
month enrollment duration factor coefficient value. One commenter
recommended HCC specific enrollment duration factors for maternity HCCs
be finalized for the 2022 benefit year. Another commenter recommended
the creation of enrollment duration factors up to 9 months of
enrollment for adult enrollees with HCCs (instead of up to 6 months for
enrollees with HCCs, as proposed).
Response: While we are not finalizing changes to the adult model
enrollment duration factors at this time, as part of our analysis of
the enrollment duration factors, we did review the most common HCCs in
the 2018 enrollee-level EDGE data for one month enrollees. We found
that the most common HCCs for one month adult enrollees are also common
HCCs in the enrollee-level EDGE data. However, our main concern with
the suggestion to tie enrollment duration factors to certain HCCs or
specific to maternity HCCs is that many new factors would have to be
added to the models to create HCC-specific enrollment duration factors,
adding an additional level of complexity and potential instability to
the models.
We also note that as part of our analysis of potential changes to
the adult model enrollment duration factors, we considered creating
factors for adult enrollees with HCCs for up to 9 months and tested
this alternative model specification using 2018 enrollee-level EDGE
data. We found that the estimated coefficients for the factors between
6 and 9 months were small and in some cases negative. We also did not
find meaningful improvement in the predictive ratios when using
enrollment duration factors up to 9 months. For these reasons, we
proposed using enrollment duration factors of up to 6 months for
enrollees with HCCs. However, as detailed above, we are not finalizing
the proposed changes to the enrollment duration factors or the
accompanying removal of the current enrollment duration factors in the
adult models at this time.
Comment: Some commenters wanted enrollment duration factors by
market type or wanted HHS to consider whether the individual and small
group markets should have market specific risk adjustment model
coefficients. Some of these commenters were concerned that the proposed
enrollment duration factors were created to address a partial year
enrollment issue that primarily exists in the individual market and had
concerns about making changes to the enrollment duration factors in the
small group market which has non-calendar coverage that can somewhat
artificially create partial year enrollees. Other commenters had
concerns about removing the previous enrollment duration factors for
the small group market, believing that the previous enrollment duration
factors mitigate the disconnect between the calendar year for EDGE
claims and the renewal year for the small group market, which is often
not on the calendar year. One commenter was concerned that eliminating
the existing enrollment duration factors would be destabilizing for any
market where an issuer may obtain a higher percentage of new small
employer business relative to other competitors. Other commenters were
concerned about issuers' ability to capture HCCs in the small group
market, especially when plan renewal can occur in December, limiting
the amount of time that issuers would have to collect diagnosis codes
for the applicable benefit year of risk adjustment even though the
issuer would have claims for December. Another commenter was concerned
about small issuers and Medicaid issuers being able to effectively
capture HCCs from churning enrollees.
Response: As discussed in the proposed rule, we considered adoption
of enrollment duration factors by market, but we did not find a
meaningful distinction in relative costs between markets on average
once we implemented the proposed enrollment duration factors of up to 6
months for adult enrollees with payment HCCs. Therefore, we did not
propose and are not finalizing market-specific enrollment duration
factors. Furthermore, we are not aware of any evidence that would
indicate that various types of issuers (for example, issuers of various
sizes, Medicaid issuers, private market issuers) are unable to capture
HCCs for partial year enrollees.
After consideration of the comments received, we are not finalizing
the proposed revisions to the enrollment duration factors at this time.
For the 2022 benefit year, we will continue to apply the current 11
enrollment duration factors of up to 11 months, with trending
adjustments made to reflect the 2022 benefit year, for all enrollees in
the adult models.
d. Pricing Adjustment for the Hepatitis C Drugs
For the 2022 benefit year models, we proposed to continue applying
the market pricing adjustment to the plan liability associated with
Hepatitis C drugs that has been in place beginning with the 2020
benefit year final risk adjustment models.\62\ We are finalizing the
pricing adjustment for Hepatitis C drugs as proposed.
---------------------------------------------------------------------------
\62\ 84 FR 17463 through 17466.
---------------------------------------------------------------------------
As explained in the proposed rule, we continue to believe this
market pricing adjustment is necessary and appropriate to account for
the significant pricing changes associated with the introduction of new
and generic Hepatitis C drugs between the data years used for
recalibrating the models and the applicable recalibration benefit year.
We also continue to be cognizant that issuers might seek to influence
provider prescribing patterns if a drug claim can trigger a large
increase in an enrollee's risk score that is higher than the actual
plan liability of the drug claim, and therefore, make the risk
adjustment transfer results more favorable for the issuer. We
previously stated that we intended to reassess this pricing adjustment
with future benefit years' enrollee-level EDGE data.\63\ However, in
alignment with the proposal to use the same 3 years of enrollee-level
EDGE data for the 2022 benefit year model recalibration as those used
for the 2021 benefit year, we proposed to continue making a market
pricing adjustment to the plan liability associated with Hepatitis C
drugs to reflect future market pricing prior to solving for
coefficients for the 2022 benefit year models.\64\ We noted that we
intend to reassess this pricing adjustment in future recalibrations
with additional years of enrollee-level EDGE data. We sought comment on
this proposal.
---------------------------------------------------------------------------
\63\ 85 FR 29185.
\64\ The Hepatitis C drugs market pricing adjustment to plan
liability is applied for all enrollees taking Hepatitis C drugs in
the data used for recalibration.
---------------------------------------------------------------------------
We received public comments on the proposed continuation of the
market pricing adjustment for Hepatitis C drugs for the 2022 benefit
year. The following is a summary of the comments we received and our
responses.
Comment: Most commenters supported the continuation of the pricing
adjustment for Hepatitis C drugs stating that it would more accurately
reflect the average cost of treatment in the risk adjustment models,
ensure enrollees can continue to receive incremental credit for having
both the Hepatitis C RXC and HCC, and account
[[Page 24163]]
for the introduction of new Hepatitis C drugs. One commenter
recommended HHS clarify the data source and approach used to constrain
the Hepatitis C RXC coefficient, and cautioned against reducing the
coefficient more than the expected decrease in cost. One commenter
similarly recommended HHS reassess this adjustment on an ongoing basis
to ensure the coefficient is not constrained beyond the expected
decrease in the cost of the drugs.
Response: In response to comments, we note that we continue to
assess trends in the enrollee-level EDGE data as well as monitor for
developments that would impact expectations for pricing for Hepatitis C
drugs to ensure that the adjustments are reasonable and are not reduced
below the expected decrease in cost. We reassessed the pricing
adjustment for Hepatitis C drugs for the 2022 benefit year model
recalibration using the most recent year of data (2019 enrollee-level
EDGE data) and found the costs for Hepatitis C drugs continued to show
a significant decline when compared to the costs in the 2018 enrollee-
level EDGE data. Therefore, we continue to believe that it is necessary
and appropriate to use a pricing adjustment for Hepatitis C drugs for
the 2022 benefit year since the data used to recalibrate the risk
adjustment models, which does not include the 2019 enrollee-level EDGE
data, does not reflect the average cost of Hepatitis C treatments
applicable to the 2022 benefit year when newer and cheaper Hepatitis C
drugs will be available. Because the cost of these drugs were reflected
in the 2016, 2017 and 2018 enrollee-level EDGE datasets without a
pricing adjustment to plan liability, the Hepatitis C RXC in the 2022
benefit year based on this data could overcompensate issuers and
incentivize them to encourage overprescribing practices to favorably
impact their risk adjustment transfers (increase their payment or
decrease their charge). The pricing adjustment finalized here helps
avoid perverse incentives, and leads to Hepatitis C RXC coefficients
that better reflect anticipated actual 2022 benefit year plan liability
associated with Hepatitis C drugs. We intend to continue to reassess
this pricing adjustment in future benefit years' model recalibrations
using additional years of available enrollee-level EDGE data.
Comment: One commenter agreed with HHS's stated concern that
issuers might seek to influence provider prescribing patterns if a drug
claim can trigger a large increase in an enrollee's risk score that is
higher than the actual plan liability of the drug claim. In contrast,
another commenter questioned the view that issuers are gaming risk
adjustment by encouraging providers to prescribe particular treatments
when they are unnecessary.
Response: Due to the changing cost of these drugs reflected in the
data used for recalibration purposes (that is, the 2016, 2017 and 2018
enrollee-level EDGE data), without a pricing adjustment to plan
liability, issuers could be overcompensated for the Hepatitis C RXC in
the 2022 benefit year and could be incentivized to ``game'' risk
adjustment or encourage overprescribing practices. More specifically,
the absence of a pricing adjustment could incentivize some issuers to
influence provider prescribing patterns because the drug claim could
trigger a large increase in an enrollee's risk score that is higher
than the actual plan liability of the drug claim. This would lead to
the calculation of inflated risk scores and would make the risk
adjustment transfer results more favorable for the issuer (that is,
increase a payment or decrease a charge). To avoid perverse incentives
to influence overprescribing behavior, we are finalizing a market
pricing adjustment for Hepatitis C drugs. It is an appropriate and
necessary adjustment in light of the cost of the drugs reflected in the
2016 through 2018 enrollee-level EDGE data and the introduction of
newer and lower cost Hepatitis C drugs that will be available in the
2022 benefit year. We intend to continue to reassess whether this
pricing adjustment is needed for future benefit years.
Comment: One commenter expressed concern about issuers potentially
gaming risk adjustment based on when the Hepatitis C drug prescription
is filled. The commenter noted that because HHS-operated risk
adjustment operates on a calendar year basis an issuer could receive
credit for a prescription filled in December of Year 1 and receive
credit for the same individual for a prescription filled in January of
Year 2, potentially double-dipping in risk adjustment. The commenter
recommended we modify the EDGE server requirements to mandate the
tracking of the days supply of each prescription fill and scale the
coefficient by the percentage of a recommended therapeutic regime
supplied over the course of the year to reduce the possibility of
gaming.
Response: While some stakeholders have expressed concern about
timing for filling Hepatitis C prescriptions, we have previously
analyzed the potential for issuers to game HHS-operated risk adjustment
by encouraging consumers to refill prescriptions for the treatment for
Hepatitis C in December and January and have not found clear evidence
that this type of behavior is occurring. However, as part of our
consideration of the comments received on this proposal, we revisited
this analysis using more recent data and found similar results.
Therefore, based on our analysis and continued study of this issue, we
do not believe modifications to HHS-operated risk adjustment program or
EDGE server requirements are needed at this time. However, we will
continue to monitor usage trends to assess whether modifications to the
Hepatitis C pricing adjustment or the adoption of other safeguards to
prevent potential double-dipping are warranted in the future. We
further note that the proposed suggestions by the commenter--to modify
EDGE server requirements or scale the coefficient--would introduce
burden and complexity to the HHS-operated risk adjustment program. If
we determine pursuit of these types of measures is warranted for future
benefit years, we would need to weigh these disadvantages against any
potential benefits.
Comment: Some commenters asked HHS to monitor the market and
introduction of new expensive therapies and treatments, such as gene
therapy drugs, and incorporate them into the risk adjustment model
factors due to the anticipated high costs of these drugs and associated
services. The comments noted that the costs of very new, high cost
treatments will not be reflected in prior year enrollee-level EDGE
data. One commenter noted that that while the high-cost risk pool,
which compensates plans for enrollees with claims over $1 million, is
helpful, there may be a need for something more specific in the risk
adjustment model to account for these costs.
Response: We did not propose to update the risk adjustment model
factors to reflect the costs of gene therapy drugs in the proposed rule
and are not finalizing such updates in this rule. We recognize that the
data used to recalibrate the risk adjustment models are lagged by
several benefit years and cannot account for the costs of new,
expensive gene therapy drugs that are expected to be available by the
2022 benefit year. Thus, we considered whether to include any gene
therapy drugs in the risk adjustment models for the 2022 benefit year
as a separate RXC or an additive HCC. In considering these options, our
primary concern was that we do not have adequate data on these drugs to
create a separate RXC or an additive HCC for the 2022 benefit year and
we are concerned with the ability
[[Page 24164]]
to obtain data of an adequate population size given the limited use of
these drugs.
We note that if an enrollee in an issuer's risk adjustment covered
plan has claims for gene therapy or other expensive treatments, that
enrollee would be eligible for the high-cost risk pool payments if
claims for that enrollee are over $1 million. We intend to assess the
use of gene therapy drugs as additional data become available and
consider whether model updates are warranted to address their
anticipated costs in the future.
Comment: One commenter wanted to ensure the required ancillary
services associated with pre-exposure prophylaxis (PrEP) use were being
incorporated into risk adjustment. Another commenter expressed concern
that some prescription drug codes (Descovy[supreg]) that are used for
PrEP would map to an RXC in the risk adjustment models while others
prescription drug codes used for PrEP would not.
Response: In the 2021 Payment Notice, we incorporated PrEP as a
preventive service in the simulation of plan liability in the risk
adjustment adult and child models with zero cost sharing after careful
analysis of preventive drugs that are recommended at grade A or B by
the United States Preventive Services Task Force (USPSTF). We are again
incorporating the costs of PrEP in this same manner in the 2022 risk
adjustment models to give issuers credit at the preventive services
level for the costs of these drugs. We also considered treating
ancillary services for PrEP as preventive services in risk adjustment
model recalibration. However, we found that many of the recommended
PrEP ancillary services (such as, HIV screenings) already qualify as
preventive services and as such are already calibrated at 100 percent
plan liability; therefore, no updates were made to capture these
services in the simulation of plan liability in the adult and child
models. However, we will continue to consider whether additional PrEP
ancillary services should be treated as preventive services for risk
adjustment model recalibration for future benefit years.
We further note that we also continuously assess the availability
of drugs in the market and the associated mapping of those drugs to
RXCs in the adult risk adjustment models. As a result of this on-going
assessment, we make quarterly updates to the RXC Crosswalk to ensure
drugs are being mapped to RXCs where appropriate, including adding and
removing new and old drugs. In response to the comments regarding the
potential different treatment of PrEP drugs in risk adjustment, we note
that in January 2021, we announced that consistent with our treatment
of other PrEP drugs, Descovy[supreg] would be removed from RXC 1 in the
final Benefit Year (BY) 2020 Do it Yourself (DIY) update, released in
April 2021, since it can be used as a preventive drug.\65\ Enrollees
that use Descovy[supreg] (or other PrEP drugs) in combination with
other HIV treatment drugs will still receive credit for RXC 1. We will
continue these types of reviews in the future.
---------------------------------------------------------------------------
\65\ HHS-Developed Risk Adjustment Model Algorithm ``Do It
Yourself (DIY)'' Software Instructions for the 2020 Benefit Year
(April 15, 2021 Update), available at https://www.cms.gov/files/document/cy2020-diy-instructions04132021.pdf.
---------------------------------------------------------------------------
After consideration of the comments we received on this proposal,
we are finalizing the proposal to continue the market pricing
adjustment for Hepatitis C drugs.
e. List of Factors To Be Employed in the Risk Adjustment Models (Sec.
153.320)
The final 2022 benefit year risk adjustment model factors resulting
from the equally weighted (averaged) blended factors from separately
solved models using the 2016, 2017, and 2018 enrollee-level EDGE data,
consistent with the policies finalized in this rulemaking, are shown in
Tables 1 through 6.\66\ The adult, child, and infant models have been
truncated to account for the high-cost risk pool payment parameters by
removing 60 percent of costs above the $1 million threshold.\67\ Table
1 contains factors for each adult model, including the age-sex, HCCs,
RXCs, RXC-HCC interactions, severity interactions, and enrollment
duration coefficients. Table 2 contains the HCCs in the severity
illness indicator variable. Table 3 contains the factors for each child
model. Table 4 contains the factors for each infant model. Tables 5 and
6 contain the HCCs included in the infant models' maturity and severity
categories, respectively.
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\66\ As detailed below, the one exception relates to RXC 09,
which involved the use of only 2016 and 2017 enrollee-level data to
develop the applicable 2022 benefit year coefficients and
interaction terms.
\67\ As detailed below, we did not propose and are finalizing
any changes to the high-cost risk pool parameters for the 2022
benefit year. Therefore, we are maintaining the $1 million threshold
and 60 percent coinsurance rate.
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BILLING CODE 4150-28-C
We received public comments on the proposed list of factors to be
employed in the 2022 benefit year risk adjustment models (Sec.
153.320). The following is a summary of the comments on these proposals
and our responses.
Comment: A few commenters expressed concerns that the HCC
coefficients in the list of factors would adversely affect individuals
with preexisting conditions or diagnosed disabilities. One of these
commenters was also concerned with the gender differences in the list
of factors.
Response: The list of factors for the adult, child, and infant risk
adjustment models include the coefficients in the statistical models
developed by HHS to predict the plan liability for an average enrollee
based on demographics, diagnosed conditions (grouped into HCCs),
enrollment duration (for the adult models), and prescription drugs (for
the adult models). The list of factors represents the different levels
of risk plans take on in providing health coverage to enrollees. These
factors do not affect enrollee costs and therefore do not adversely
affect any consumers, including individuals with preexisting conditions
or diagnosed disabilities or based on gender. Rather, the purpose of
the risk adjustment program is to transfer funds from risk adjustment
covered plans with lower than average risk to risk adjustment covered
plans with higher than average risk, with the goal of minimizing
adverse selection and providing coverage to all consumers. Therefore,
these factors actually help individuals with preexisting conditions or
diagnosed disabilities through compensating plans more for more severe
conditions, incentivizing plans to cover such individuals rather than
avoid covering them. In addition, gender differences in the list of
factors that will be used for the HHS risk adjustment models do not
result in differences in premium paid by male and female enrollees.\68\
Rather, the different age-sex factors represent differences in the
level of risk plans take on in providing coverage to men and women; for
example, adult women within childbearing years tend to cost more than
men of the same age due to pregnancy and childbirth.
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\68\ Section 2701 of the PHS Act prohibits issuers of non-
grandfathered coverage in the individual and small group markets
from varying rates with respect to any characteristic aside from
whether the plan covers an individual or a family, rating area, age,
and tobacco use. Therefore, those four factors held constant, female
enrollees cannot be charged higher premiums than male enrollees, and
vice versa, for the same plan.
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Comment: A few commenters made suggestions for additions to or
deletions from the list of factors. These commenters asked that HHS not
include acute, unpredictable HCCs in the list of factors, such as the
severe head injury and extensive third degree burns HCCs, as these
conditions do not differentiate adverse selection risk. One of these
commenters asked that HHS bifurcate transplant status codes into a set
of coefficients for transplant procedure codes and another set of
coefficients for transplant history or status. Another commenter
suggested that HHS simplify the risk adjustment models by combining
coefficients for HCCs where similar risk selection patterns would
result in minimal member-level prediction improvements when risk scores
are averaged at the plan level to calculate the plan liability risk
score.
Response: We continue to believe that the acute conditions
identified by these commenters (severe head injury and extensive third
degree burns) should be included in the risk adjustment models. We
detailed our consideration of incorporating these HCCs in the risk
adjustment models in the paper on the Potential Updates to HHS-HCCs for
the HHS-operated Risk Adjustment Program.\69\ For example, we explained
that severe head injury represents a condition with ongoing care costs,
similar to other injury HCCs currently included in the V05 models \70\
(for example, hip fractures and vertebral fractures). Stakeholders also
had an opportunity to comment on the addition of these HCCs as part of
the 2021 Payment Notice rulemaking.\71\ Based on our analysis, these
conditions indicate the presence of underlying chronic conditions and
frailty, were underpredicted in the risk adjustment models, and have
high costs in the year after the diagnosis.\72\ Therefore, we do not
agree that the HCCs for severe head injury and extensive third degree
burns do not differentiate adverse selection risk, and we believe they
are appropriate to include in the risk adjustment models, as previously
stated in the 2021 Payment Notice final rule.\73\ There is evidence of
ongoing chronic costs associated with these conditions, and issuers can
potentially adversely select against enrollees with a higher risk of
incurring costs related to these conditions in a given benefit year.
Isolating and omitting the near-term ongoing costs for these conditions
would reduce the predictive accuracy of the model without any benefit
in reduced model complexity, as the costs for the excluded near-term
codes would end up in the associated longer term HCCs. The ability to
separate costs associated with the acute event and chronic conditions
can be complex for certain HCCs, including severe head injury,
extensive third degree burns, and transplants. We also believe that by
including the acute costs for these conditions, we are also accounting
for the ongoing costs of care during the first year. The continued
inclusion of these HCCs in the risk adjustment models, as proposed, is
consistent with our goals to improve model prediction and identify
chronic or systematic conditions that represent insurance risk
selection or risk
[[Page 24180]]
segmentation. In addition, both of these HCCs--extensive third degree
burns and severe head injury--are also payment HCCs in Medicare's CMS-
HCC models. As for transplant procedure versus transplant status, we do
not currently use procedure codes to define any HCCs, but we are
interested in analyzing this topic for further consideration for
potential model changes in future benefit years.
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\69\ Potential Updates to HHS-HCCs for the HHS-operated Risk
Adjustment Program. June 17, 2019. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Potential-Updates-to-HHS-HCCs-HHS-operated-Risk-Adjustment-Program.pdf.
\70\ The shorthand ``V05'' refers to the HHS-HCC classification
for the HHS risk adjustment models that applies through the 2020
benefit year.
\71\ 85 FR 7088 at 7098 through 7101. Also see 85 FR 29164 at
29181.
\72\ 85 FR 29164 at 29181.
\73\ 85 FR 29164 at 29181.
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Consistent with the risk adjustment principles described
previously,\74\ the HHS-operated risk adjustment models exclude HCCs
containing diagnoses that are vague or nonspecific (for example,
cough), discretionary in medical treatment or coding (for example,
attention deficit disorder), or not medically significant (for example,
heartburn). The payment models also exclude HCCs that do not add
empirically to costs (for example, non-melanoma forms of skin cancer).
We did not propose to combine HCCs and are not finalizing combining
HCCs in the 2022 risk adjustment models. At this time, we do not
believe that combining HCCs for reasons stated by the commenter is
necessary, as we have already analyzed and selected HCCs for inclusion
in the models that capture the largest risk differences. However, in
our efforts to continuously improve the risk adjustment models, we will
continue to analyze the risk adjustment model factors for future
benefit years and consider whether changes are needed.
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\74\ See, for example, the 2021 Payment Notice, and Section 2.1
of the ``March 31, 2016 HHS-Operated Risk Adjustment Methodology
Meeting Discussion Paper,'' March 24, 2016. Available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
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For all these reasons, we believe the proposed and final list of
factors applicable to the 2022 benefit year includes the appropriate
HCCs.
Comment: One commenter suggested creating separate models for the
individual and small group markets, using only individual market
enrollee-level EDGE data for the individual market models but
supplementing small group market enrollee-level EDGE data with
MarketScan[supreg] data for the small group market models.
Response: We did not propose and are not finalizing separate
individual and small group market models. At this time, we are
concerned that creating two separate risk adjustment models for the
individual and small group markets for each of the age groups (adult,
child, and infant) would result in significantly increased complexity
of the risk adjustment program. For example, this would double the
number of risk adjustment models, complicating rate setting for issuers
and destabilizing the child and infant models due to small sample
sizes. However, we intend to continue to analyze the differences in
costs and utilization between the individual and small group markets to
consider whether these types of changes would be necessary or
appropriate in future benefit years. A more detailed discussion of our
current analysis of these issues based on our review of the 2016, 2017
and 2018 enrollee-level EDGE data appears in the proposed rule as part
of the discussion of the proposed changes to the adult model enrollment
duration factors.\75\
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\75\ See 85 FR at 78585.
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After consideration of comments on the proposed factors, we are
finalizing the above list of final coefficients for the 2022 benefit
year.
As noted above in the Pricing Adjustment for the Hepatitis C Drugs
preamble, we continuously assess the availability of drugs in the
market and the associated mapping of those drugs to RXCs in the adult
risk adjustment models. As a result of this ongoing assessment, we make
quarterly updates to the RXC Crosswalk to ensure drugs are being mapped
to RXCs where appropriate, including adding and removing new and old
drugs based on approval status, prescribing patterns, and expenditure
data. In a recent update, HHS removed hydroxychloroquine from RXC 09
effective March 24, 2021, due to concerns regarding unrepresentative
expenditures and off-label prescribing during the COVID-19 public
health emergency.\76\ Additionally, based on pre-2020 data, HHS's
analysis showed that the costs of hydroxychloroquine are much lower
than the costs of other drugs that one with HCC 048, 056, or 057 may
take. However, hydroxychloroquine still appears in the 2018 enrollee-
level EDGE data we are otherwise finalizing for use for 2022 benefit
year model recalibration. Therefore, we only used 2016 and 2017
enrollee-level EDGE data for the limited purpose of developing the RXC
09 coefficients, RXC 09 HCC related coefficients, and RXC 09
interaction term coefficients for the 2022 benefit year adult
models.\77\ This approach best aligns the 2022 benefit year adult model
coefficients with the removal of hydroxychloroquine from RXC 09 and
avoids the undesired impact of diluting the coefficient values for RXC
09 (including the associated interactions). As seen in Table 1, the
coefficients for RXC 09 Immune Suppressants and Immunomodulators, the
HCC factors relevant for RXC 09 (HCC41, HCC48, HCC56, HCC57), and the
related RXC 09 interactions (RXC 09 x HCC056 or 057 and 048 or 041; RXC
09 x HCC056; RXC 09 x HCC057; RXC 09 x HCC048, 041) result from the
equally weighted (averaged) blended factors from separately solved
models using only the 2016 and 2017 enrollee-level EDGE data.
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\76\ See HHS-Developed Risk Adjustment Model Algorithm ``Do It
Yourself (DIY)'' Software Instructions for the 2020 Benefit Year,
April 15, 2021 Update, available at https://www.cms.gov/files/document/cy2020-diy-instructions04132021.pdf.
\77\ The same concern was not present for the 2016 and 2017
enrollee-level EDGE data because hydroxychloroquine was not included
in the crosswalk until 2018.
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f. Cost-Sharing Reduction Adjustments
We proposed to continue including an adjustment for the receipt of
CSRs in the risk adjustment models to account for increased plan
liability due to increased utilization of health care services by
enrollees receiving CSRs in all 50 states and the District of Columbia.
For the 2022 benefit year, to maintain stability and certainty for
issuers, we proposed to maintain the CSR factors finalized in the 2019,
2020, and 2021 Payment Notices.\78\
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\78\ See 83 FR 16930 at 16953; 84 FR 17454 at 17478 through
17479; and 85 FR 29164 at 29190.
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Consistent with the approach finalized in the 2017 Payment
Notice,\79\ we also proposed to continue to use a CSR adjustment factor
of 1.12 for all Massachusetts wrap-around plans in the risk adjustment
plan liability risk score calculation, as all of Massachusetts' cost-
sharing plan variations have AVs above 94 percent.
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\79\ See 81 FR 12203 at 12228.
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We are finalizing the CSR adjustment factors as proposed, including
the CSR adjustment factor of 1.12 for all Massachusetts wrap-around
plans.
We received public comments on the proposed cost-sharing reduction
adjustments. The following is a summary of the comments we received and
our responses.
Comment: Many commenters supported the proposed CSR adjustment
factors for the 2022 benefit year and continuing the CSR adjustment
factor of 1.12 for all Massachusetts wrap-around plans. Some of these
commenters stated that the current CSR adjustment factors will ensure
stability and that the CSR adjustment factor of 1.12 for all
Massachusetts wrap-around plans appropriately accounts for the
different market dynamics and the level of wrapped benefits in
Massachusetts.
Response: We are finalizing the CSR adjustment factors as proposed.
[[Page 24181]]
Consistent with the approach finalized in the 2017 Payment Notice,\80\
we will continue to use a CSR adjustment factor of 1.12 for all
Massachusetts wrap-around plans in the risk adjustment plan liability
risk score calculation for the 2022 benefit year, as all of
Massachusetts' cost-sharing plan variations have AVs above 94 percent.
We agree that the CSR adjustment factor of 1.12 for all Massachusetts
wrap-around plans accounts for the state's unique market dynamics, and
that the continuation of the current CSR adjustment factors for all
states and the District of Columbia lend stability to the markets.
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\80\ Ibid.
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Comment: Some commenters wanted HHS to analyze the CSR adjustment
factors for future benefit years to consider whether changes are
needed. These commenters specifically asked HHS to consider factors
like whether or not the state expanded Medicaid or offers a Basic
Health Program, as well as the impact of the discontinuation of CSR
payments and implementation of silver loading, in analyzing the CSR
adjustment factors for future benefit years. One commenter opposed the
CSR adjustment factors and stated that, as a result of these factors,
the risk adjustment models overcompensate issuers for those enrolled in
silver plans and undercompensate issuers for other metal level
enrollees.
Response: We will continue to examine whether changes to the CSR
adjustment factors are warranted in the future as more enrollee-level
EDGE data becomes available. We appreciate the suggestions for analysis
from commenters and may consider these and other elements in our future
analysis. We note that the current CSR adjustment factors are set at a
national level and do not vary by state, while the suggested analysis
on the effect of expanded Medicaid or presence of a Basic Health
Program would vary by state. Adopting an approach that would require
further variation by state would introduce a level of complexity to the
risk adjustment program, which is another factor we would consider as
part of any such analysis.
Furthermore, notwithstanding the cessation of federal CSR payments
to issuers in October 2017, section 1402 of the ACA requires Exchange
plans to provide CSRs for eligible enrollees, and plans face increased
liability for silver plan enrollees receiving CSRs. As such, the CSR
adjustment factors account for the higher plan liability of CSR plans,
which is not experienced by other metal level plans. Therefore, we do
not believe that the presence of CSR multipliers for CSR-eligible
enrollees in silver plans automatically creates inaccurate risk
differentials between CSR eligible and non-CSR eligible enrollees.
Regardless, any refinements to the HHS-operated risk adjustment
methodology, including any potential changes to the CSR adjustment
factors for future benefit years, would be proposed through notice-and-
comment rulemaking.
After consideration of the comments received, we are finalizing the
CSR adjustment factors as proposed.
[GRAPHIC] [TIFF OMITTED] TR05MY21.022
g. Model Performance Statistics
To evaluate risk adjustment model performance, we examined each
model's R-squared statistic and predictive ratios. The R-squared
statistic, which calculates the percentage of individual variation
explained by a model, measures the predictive accuracy of the model
overall. The predictive ratio for each of the HHS risk adjustment
models is the ratio of the weighted mean predicted plan liability for
the model sample population to the weighted mean actual plan liability
for the model sample population. The predictive ratio represents how
well the model does on average at predicting plan liability for that
subpopulation.
A subpopulation that is predicted perfectly would have a predictive
ratio of 1.0. For each of the HHS risk adjustment models, the R-squared
statistic and the predictive ratios are in the range of published
estimates for concurrent risk adjustment models.\81\ The final R-
squared statistic for each model that is shown in Table 8 reflects the
results from each dataset used. Because we are finalizing the 2022
benefit year coefficients from separately solved models based on
blended data
[[Page 24182]]
from the 2016, 2017, and 2018 benefit years' enrollee-level EDGE data,
we are publishing the R-squared statistic for each model separately to
verify their statistical validity. The R-squared statistic for each
model is shown in Table 8.
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\81\ Hileman, Geof and Spenser Steele. ``Accuracy of Claims-
Based Risk Scoring Models.'' Society of Actuaries. October 2016.
[GRAPHIC] [TIFF OMITTED] TR05MY21.023
We received comments on the model performance statistics outlined
in the proposed rule. The following is a summary of the comments we
received and our responses.
Comment: One commenter requested more information on blending the
coefficients from separately solved models based on the 2016, 2017, and
2018 benefit years' enrollee-level EDGE data and publishing the R-
squared statistic for each model separately to verify their statistical
validity.
Response: The final R-squared statistic for each model that is
shown in Table 8 reflects the results from each dataset used in the
separately solved models that are used to recalibrate the models for
the 2022 benefit year, namely the 2016, 2017, and 2018 benefit years'
enrollee-level EDGE data.\82\ As stated in the proposed rule and the
preamble section above, because we blended the coefficients from
separately solved models based on these 3 years of enrollee-level EDGE
data that were available at the time of the proposed rule, we publish
the R-squared statistic for each model separately to verify their
statistical validity.
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\82\ Our approach to recalibration involves using blended, or
averaged, coefficients from three years of separately solved models,
which promotes stability for the risk adjustment coefficients year
over year, particularly for conditions with small sample sizes. For
more details, see ``March 31, 2016, HHS-Operated Risk Adjustment
Methodology Meeting Discussion Paper,'' March 24, 2016, available at
https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
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After consideration of the comments received on the model
performance statistics and for the reasons stated in our responses, we
are publishing the final R-squared statistic for each model above in
Table 8.
h. Calculation of Plan Average Premium and State Average Premium
Requirements for Extending Future Premium Credits (Sec. 153.320)
On August 4, 2020, HHS adopted temporary policies of relaxed
enforcement for the premium rules set forth at 45 CFR 147.102,
155.200(f)(4), 155.400(e) and (g), 155.706(b)(6)(1)(A), 156.80(d),
156.210(a), and 156.286(a)(2) through (4) to allow issuers in the
individual and small group markets the flexibility, when consistent
with state law, to temporarily offer premium credits for 2020
coverage.\83\ HHS provided this flexibility with the intent of
supporting continuity of coverage for individuals, families, and small
employers who may struggle to pay premiums because of illness or loss
of incomes or revenue resulting from the COVID-19 PHE.
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\83\ ``Temporary Policy on 2020 Premium Credits Associated with
the COVID-19 Public Health Emergency,'' August 4, 2020, https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
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In prior rulemaking,\84\ HHS finalized the calculation of plan
average premium in the risk adjustment state payment transfer formula
as equal to the actual premiums charged to plan enrollees, weighted by
the number of months enrolled, and finalized the calculation of the
state average premium as equal to the average of individual plan
average premiums, weighted by each plan's share of statewide enrollment
in the risk pool market, based on billable member months. In the
interim final rule on COVID-19, HHS set forth risk adjustment reporting
requirements for issuers offering temporary premium credits in the 2020
benefit year. In the proposed rule, we proposed how HHS would treat
temporary premium credits provided for purposes of applying the state
payment transfer formula for the 2021 benefit year and beyond should
HHS adopt a similar relaxed enforcement stance and permit such
temporary premium credits in future benefit years during a PHE declared
by the Secretary of HHS (declared PHE).\85\ For states where issuers of
risk adjustment covered plans provide temporary premium credits during
a declared PHE when permitted by HHS,
[[Page 24183]]
the plan average premium and statewide average premium used in the
state payment transfer formula would be calculated using issuers'
adjusted premium amounts. Thus, the actual premiums billed to plan
enrollees would be the amounts used in the calculations under the state
payment transfer formula. This is consistent with the general approach
adopted in the interim final rule on COVID-19 for temporary premium
credits in the 2020 benefit year.
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\84\ 2014 Payment Notice final rule, 78 FR 15409. Also see the
2020 Payment Notice final rule, 84 FR 17454.
\85\ The Secretary of the Department of HHS may, under section
319 of the PHS Act determine that: (a) A disease or disorder
presents a public health emergency; or (b) that a public health
emergency, including significant outbreaks of infectious disease or
bioterrorist attacks, otherwise exists.
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We further proposed that HHS would use adjusted plan premiums for
all enrollees to whom the issuer has actually provided premium credits
as a reduction to the applicable benefit year premiums, when
calculating transfers under the state payment transfer formula for the
2021 benefit year and beyond. This approach would also extend to the
calculation of transfers under the state payment transfer formula in
states that receive approval for a request to reduce transfers under
Sec. 153.320(d)--that is, the lower actual premiums for which plan
enrollees would be responsible would be the amounts used in the
calculations under the state payment transfer formula to reflect these
temporary premium credits. As such, if an issuer in a state with an
approved 50 percent small group market reduction request for a given
benefit year chooses to provide temporary premium credits, the state
average premium will decrease, and HHS would apply the 50 percent
transfer reduction to the lower PMPM payment or charge transfer amount
calculated under the state payment transfer formula for that state's
small group market for that benefit year. As detailed further later in
this preamble, we also proposed that issuers providing these temporary
premium credits must report the lower, actual premium amounts billed to
plan enrollees to their respective EDGE servers. We explained that we
believe that the applicable definitions of plan average premium and
state average premium retain the meaning previously finalized by
reflecting the actual monthly premium billed to enrollees. The proposal
would build on lessons learned from the COVID-19 PHE and would
establish a framework to recognize premium credits as a reduction in
premium for purposes of the HHS-operated risk adjustment program to
align risk adjustment charges and payments under the state payment
transfer formula with flexibilities HHS may provide to issuers and
states in future benefit years during a declared PHE. The proposal
would not change any other aspect of the state payment transfer formula
or the method for calculating payments and charges under the HHS risk
adjustment methodology (inclusive of the state payment transfer formula
and high-cost risk pool parameters). We are finalizing this policy as
proposed.
We summarize and address all the comments received on this proposal
in the Risk Adjustment Data Requirements for Future Premium Credits
(Sec. 153.710) preamble section below.
2. Overview of the HHS Risk Adjustment Methodology (Sec. 153.320)
We proposed to continue to use the HHS state payment transfer
formula that was finalized in the 2021 Payment Notice.\86\ Although the
proposed HHS state payment transfer formula for the 2022 benefit year
was unchanged from what was finalized for the previous benefit year, we
republished it in the proposed rule. Additionally, we republished the
description of the administrative cost reduction to the statewide
average premium and high-cost risk pool factors, although this
reduction and the factors and terms also remain unchanged from what was
finalized for the previous benefit year.\87\ We also proposed to apply
this state payment transfer formula, including the administrative cost
reduction, for the 2022 benefit year and beyond, unless changed through
notice-and-comment rulemaking. Under this proposal, we would no longer
republish these formulas in future annual HHS notice of benefit and
payment parameter rules unless changes are being proposed. To align
with this proposal, we proposed to update Sec. 153.320(c) to replace
the current language that refers to HHS specifying the applicable
federally-certified risk adjustment methodology in the annual HHS
notice of benefit and payment parameters for the applicable year, to
instead require HHS to specify the applicable federally-certified risk
adjustment methodology in notice-and-comment rulemaking that is
published in advance of the applicable benefit year. We are finalizing
these policies as proposed and will apply the proposed HHS risk
adjustment methodology outlined in the proposed rule for the 2022
benefit year and beyond. The published methodology will remain in
effect unless it is changed through future notice-and-comment
rulemaking. We are also finalizing the update to Sec. 153.320(c) as
proposed.
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\86\ 84 FR 17454 at 17480 and 17485; and 85 FR 29164 at 29191.
\87\ Ibid.
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We previously defined the calculation of plan average actuarial
risk and the calculation of payments and charges in the Premium
Stabilization Rule.\88\ In the 2014 Payment Notice, we combined those
concepts into a risk adjustment state payment transfer formula.\89\
This formula generally calculates the difference between the revenues
required by a plan, based on the health risk of the plan's enrollees,
and the revenues that the plan can generate for those enrollees. These
differences are then compared across plans in the state market risk
pool and converted to a dollar amount via a cost scaling factor. In the
absence of additional funding, we established, through notice-and-
comment rulemaking,\90\ the HHS-operated risk adjustment program as a
budget-neutral program to provide certainty to issuers regarding risk
adjustment payments and charges, which allows issuers to set rates
based on those expectations. In light of the budget-neutral framework,
HHS uses statewide average premium as the cost-scaling factor in the
state payment transfer formula in the HHS-operated risk adjustment
methodology, rather than a different parameter, such as each plan's own
premium, which would not have automatically achieved equality between
risk adjustment payments and charges in each benefit year.\91\
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\88\ 77 FR 17220 at 17246.
\89\ The state payment transfer formula refers to the part of
the HHS risk adjustment methodology that calculates payments and
charges at the state market risk pool level prior to the calculation
of the high-cost risk pool payment and charge terms that apply
beginning with the 2018 benefit year.
\90\ For example, see Standards Related to Reinsurance, Risk
Corridors, and Risk Adjustment, Proposed Rule, 76 FR 41938 (July 15,
2011); Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment, Final Rule, 77 FR 17232 (March 23, 2012); and the 2014
Payment Notice, Final Rule, 78 FR 15441 (March 11, 2013). Also see
the 2018 Payment Notice, Final Rule, 81 FR 94058 (December 22,
2016); and the 2019 Payment Notice, Final Rule, 83 FR 16930 (April
17, 2018). Also see the Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program Under the Patient
Protection and Affordable Care Act for the 2017 Benefit Year, Final
Rule, 83 FR 36456 (July 30, 2018) and the Patient Protection and
Affordable Care Act; and Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program for the 2018 Benefit Year
Final Rule, 83 FR 63419 (December 10, 2018).
\91\ See the 2020 Payment Notice final rule for further details
on why statewide average premium is the cost-scaling factor in the
state payment transfer formula. See 84 FR 17454 at 17480 through
17484.
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Risk adjustment transfers (total payments and charges, including
high-cost risk pool payments and charges) are calculated after issuers
have completed their risk adjustment EDGE data submissions for the
applicable benefit year. Transfers (payments and charges) under the
state payment transfer formula are calculated as the difference
[[Page 24184]]
between the plan premium estimate reflecting risk selection and the
plan premium estimate not reflecting risk selection. The state payment
transfer calculation that is part of the HHS risk adjustment
methodology follows the formula:
[GRAPHIC] [TIFF OMITTED] TR05MY21.024
The denominators are summed across all risk adjustment covered
plans in the risk pool in the market in the state.
The difference between the two premium estimates in the state
payment transfer formula determines whether a plan pays a risk
adjustment charge or receives a risk adjustment payment. The value of
the plan average risk score by itself does not determine whether a plan
would be assessed a charge or receive a payment-even if the risk score
is greater than 1.0, it is possible that the plan would be assessed a
charge if the premium compensation that the plan may receive through
its rating (as measured through the combination of metal level AV,
allowable rating factor, induced demand factor, and geographic cost
factor) exceeds the plan's predicted liability associated with risk
selection. Risk adjustment transfers under the state payment transfer
formula are calculated at the risk pool level, and catastrophic plans
are treated as a separate risk pool for purposes of the risk adjustment
state payment transfer calculations.\92\ This resulting PMPM plan
payment or charge is multiplied by the number of billable member months
to determine the plan payment or charge based on plan liability risk
scores for a plan's geographic rating area for the risk pool market
within the state. The payment or charge under the state payment
transfer formula is thus calculated to balance the state market risk
pool in question.
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\92\ As detailed elsewhere in this final rule, catastrophic
plans are considered part of the individual market for purposes of
the national high-cost risk pool payment and charge calculations.
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We previously defined the cost scaling factor, or the statewide
average premium term, as the sum of the average premium per member
month of each plan i (Pi) multiplied by plan i's share of
statewide enrollment in the market risk pool (si). We also
previously adopted a 14 percent administrative cost reduction to the
statewide average premium \93\ and proposed maintaining it for the 2022
benefit year and beyond, unless amended through notice-and-comment
rulemaking. The following formula shows the calculation of the
statewide average premium and the adjustment to remove a portion of the
administrative costs that do not vary with claims (14 percent):
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\93\ See 84 FR 17454 at 17486.
= ([Sigma]i (si [middot] Pi)) * (1
- 0.14) = ([Sigma]i (si [middot]
Pi)) * 0.86
Where:
si = plan i's share of statewide enrollment in the market
in the risk pool;
Pi = average premium per member month of plan i.
To account for costs associated with exceptionally high-risk
enrollees, we previously added a high-cost risk pool adjustment to the
HHS risk adjustment methodology. As finalized in the 2020 Payment
Notice,\94\ we intend to maintain the high-cost risk pool parameters
with a threshold of $1 million and a coinsurance rate of 60 percent for
benefit years 2020 and onward, unless amended through notice-and-
comment rulemaking. We did not propose any changes to the high-cost
risk pool parameters as part of the proposed rule; therefore, we would
maintain the threshold of $1 million and coinsurance rate of 60 percent
for the 2022 benefit year.
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\94\ 84 FR 17466 through 17468.
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The high-cost risk pool adjustment amount is added to the state
payment transfer formula to account for: (1) The payment term,
representing the portion of costs above the threshold reimbursed to the
issuer for high-cost risk pool payments (HRPi), if
applicable; and (2) the charge term, representing a percentage of
premium adjustment, which is the product of the high-cost risk pool
adjustment factor (HRPCm) for the respective national high-
cost risk pool m (one for the individual market, including
catastrophic, non-catastrophic and merged market plans, and another for
the small group market), and the plan's total premiums
(TPi). For this calculation, we use a percent of premium
adjustment factor that is applied to each plan's total premium amount.
The total plan transfers for a
[[Page 24185]]
given benefit year are calculated as the product of the plan's PMPM
transfer amount (Ti) multiplied by the plan's billable
member months (Mi), plus the high-cost risk pool
adjustments. The total plan transfer (payment or charge) amounts under
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the HHS risk adjustment methodology formula are calculated as follows:
Total transferi = (Ti [middot] Mi) +
HRPi - (HRPCm [middot] TPi)
Where:
Total Transferi = Plan i's total HHS risk adjustment
program transfer amount;
Ti = Plan i's PMPM transfer amount based on the state
transfer calculation;
Mi= Plan i's billable member months;
HRPi= Plan i's total high-cost risk pool payment;
HRPCm = High-cost risk pool percent of premium adjustment
factor for the respective national high-cost risk pool m; and
TPi = Plan i's total premium amounts.
We sought comment on the proposed HHS risk adjustment methodology
for the 2022 benefit year and beyond and the proposed updates to Sec.
153.320(c). We are finalizing these policies as proposed and will apply
the proposed HHS risk adjustment methodology outlined in the proposed
rule for the 2022 benefit year and beyond. We are also finalizing the
update to Sec. 153.320(c) as proposed.
We received public comments on the proposed 2022 benefit year HHS
risk adjustment methodology, the proposal to apply the same methodology
to future benefit years unless changed through notice-and-comment
rulemaking, and the proposed updates to Sec. 153.320(c). The following
is a summary of the comments we received and our responses.
Comment: Several commenters supported the proposed HHS risk
adjustment methodology. One commenter asked HHS to continue to publish
the methodology in the annual Payment Notice to prevent issuers from
having to reference previous rulemakings.
Response: We appreciate the support for the state payment transfer
formula and believe that maintaining the HHS risk adjustment
methodology for the 2022 benefit year and beyond, unless changed
through notice-and-comment rulemaking, will result in stability in the
markets by making it easier for issuers to set rates because of the
predictability and consistency of the methodology. We do not believe it
is necessary to continue to publish the methodology in the annual
Payment Notice, as we will cite to the version of the Payment Notice
where the current methodology appears in subsequent Payment Notices. We
are therefore finalizing the HHS risk adjustment methodology and this
policy as proposed. As a result, for the 2023 benefit year and beyond,
we will not republish the HHS risk adjustment methodology in the annual
Payment Notice, unless we are proposing to make changes to the
methodology. We are also finalizing the proposed update to Sec.
153.320(c) to reflect this approach.
Comment: A few commenters opposed certain aspects of the state
payment transfer formula, such as the use of the statewide average
premium and the 14 percent administrative cost reduction. One commenter
suggested that HHS use statewide average claims rather than statewide
average premium as the scaling factor in the state payment transfer
formula, and further suggested that if HHS continues to use statewide
average premium, HHS should increase the administrative cost reduction
to 20 percent. A few commenters wanted HHS to reevaluate the state
payment transfer formula, suggesting a focus on the level of the
administrative cost reduction and an inquiry into whether the
administrative cost reduction and the induced utilization factors
should differ between the individual and small group markets. One
commenter asked for more information on the administrative cost
reduction, specifically what information HHS would find helpful in
evaluating the sufficiency of the existing administrative cost
reduction.
Response: We did not propose and are not finalizing changes to the
use of the statewide average premium in the state payment transfer
formula. As detailed in prior rulemakings,\95\ in light of the
program's budget neutral framework, HHS chose to use statewide average
premium to convert required revenue and allowable premium state average
factors in the state payment transfer formula from relative factors to
dollar amounts so that the total calculated payment amounts equal total
calculated charges in each state market risk pool. Thus, each plan in
the state market risk pool receives a risk adjustment state transfer
payment or charge that is scaled based on the determination of plan
average risk within a state market risk pool, resulting in balanced,
budget-neutral transfers. This approach supports the overall goal of
the risk adjustment program to encourage issuers to rate for average
risk and mitigates incentives for issuers to operate less efficiently,
or to develop benefit designs or create marketing strategies to avoid
high-risk enrollees. In addition, our analysis shows that statewide
average claims is a volatile measure, both across states within a year
and across years within a state, and would be sensitive to unexpected
claims experience. Furthermore, unexpected claims experience could
particularly cause instability for smaller issuers, thereby reducing
the predictability of risk adjustment transfers. For these reasons, we
are not proposing or otherwise considering the use of statewide average
claims in the state payment transfer formula.
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\95\ See, for example, the Adoption of the Methodology for the
HHS-operated Risk Adjustment Program under the Patient Protection
and Affordable Care Act for the 2017 Benefit Year; Final Rule, 83 FR
36456 (July 31, 2018); and the Adoption of the Methodology for the
HHS-operated Risk Adjustment Program for the 2018 Benefit Year;
Final Rule, 83 FR 63419 (December 10, 2018).
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We also did not propose and are not finalizing changes to the 14
percent administrative cost reduction in the risk adjustment state
payment transfer formula. As we noted in the 2018 Payment Notice,\96\
we analyzed administrative and other non-claims expenses, including
quality improvement expenses, in the MLR Annual Reporting Form, and
estimated, by category, the extent to which administrative expenses
varied with claims.\97\ We compared those expenses to the total costs
that issuers finance through premiums, including claims, administrative
expenses, and taxes, to ensure that the estimated administrative cost
percentage was not distorted by under- or over-pricing during the years
for which MLR data were available. Using this methodology, we
determined the mean administrative expense in both the individual and
small group markets was 14 percent. For the 2022 benefit year, we
engaged in the same analysis and arrived at the same conclusion. We set
the administrative cost adjustment based on our estimate of the
percentage of total costs that did not vary by risk, so that issuers
with higher risk enrollees would still receive credit through risk
adjustment for the cost of administrative activities that varied based
on the risk of the population (for examples, discharge planning or
preventing facility-acquired infections and reducing clinical errors).
At this time, we have not found evidence that
[[Page 24186]]
demonstrates that a higher percentage is necessary.
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\96\ 81 FR 94099 through 94100.
\97\ In 2016 and 2017, we removed the impact of the reconciled
amount of CSRs on claims costs as part of this calculation. Payments
through the CSR program were discontinued in October 2017 due to
lack of a Congressional appropriation. As such, although this line
item still exists in the MLR Annual Reporting Form, the amount
entered by issuers for the CSR line item should be zero dollars, and
it therefore should no longer impact the administrative cost
reduction calculation.
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In response to comments, we further clarify that the MLR Annual
Reporting Form provides all the information we use to analyze the
sufficiency of the 14 percent administrative cost reduction, including
administrative and other non-claims expenses like quality improvement
activity expenses, and taxes and fees that do not vary based on
enrollee health risk. We believe that this is a sufficient and
reasonable source for data to calculate and analyze the administrative
cost reduction to the statewide average premium in the risk adjustment
state payment transfer formula.
Furthermore, we did not propose and are not finalizing induced
utilization factors that vary by market. We are concerned that adding
different utilization factors based on market to the state payment
transfer formula would make the formula much more complex, as this
would double the number of induced utilization factors in the formula
and make it more difficult for issuers to price for. We note that we
intend to further consider the differences between markets and
implications for risk adjustment, and that any related changes to the
risk adjustment program would be proposed in notice-and-comment
rulemaking.
Comment: One commenter asked HHS to study the correlation between
risk adjustment transfers and MLR rebates, stating that it appears that
transfers are too high because a number of issuers receiving risk
adjustment payments must pay MLR rebates to their enrollees.
Response: While risk adjustment payments reduce the numerator of
the MLR calculation,\98\ whether an issuer will owe MLR rebates is
influenced by a number of factors that are unrelated to risk adjustment
transfers. For example, an issuer's MLR and rebate position is heavily
influenced by the degree to which its pricing assumptions accurately
accounted for realized claims costs for the applicable benefit year. As
such, issuers may owe MLR rebates to consumers while either receiving
risk adjustment payments or owing risk adjustment charges for the
applicable benefit year. Additionally, our examination of the HHS risk
adjustment methodology and risk adjustment data for recent benefit
years has shown the program mitigates the influence of risk selection
on premiums and the incentive for plans to avoid sicker enrollees.\99\
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\98\ See 45 CFR 158.130(b)(5).
\99\ See, for example, the Summary Report on Permanent Risk
Adjustment Transfers for the 2019 Benefit Year (July 17, 2020),
available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2019.pdf; the
Summary Report on Permanent Risk Adjustment Transfers for the 2018
Benefit Year (June 28, 2019), available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/Summary-Report-Risk-Adjustment-2018.pdf; and the Summary
Report on Permanent Risk Adjustment Transfers for the 2017 Benefit
Year (July 9, 2018), available at https://downloads.cms.gov/cciio/Summary-Report-Risk-Adjustment-2017.pdf.
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Comment: One commenter asked that HHS reevaluate the state payment
transfer formula and stated that it favors larger issuers over smaller
issuers because larger issuers have the ability to dedicate resources
to enable more robust coding practices.
Response: We disagree that the state payment transfer formula
favors larger issuers over small issuers. The risk adjustment program
transfers funds from plans with lower-than-average risk enrollees to
plans with higher-than-average risk enrollees in accordance with
section 1343 of the ACA, and our internal analysis has found that
smaller plans that enroll sicker than average enrollees have also
received high payments as a percent of their premiums. Further, HHS
conducts HHS-RADV in any state where HHS operates the risk adjustment
program to validate the accuracy of the data submitted by issuers to
their EDGE servers.\100\ EDGE server data are used to calculate
issuers' plan liability risk scores for use in the state payment
transfer formula as a part of the risk adjustment program. HHS-RADV
establishes uniform audit standards to ensure that actuarial risk is
accurately and consistently measured, thereby strengthening the
integrity of the risk adjustment program.\101\ Therefore, any potential
coding differences between plans of any size should not inappropriately
impact risk adjustment, and to the extent there is any impact, it
should be significantly mitigated through HHS-RADV.
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\100\ See 45 CFR 153.350 and 153.630.
\101\ See, for example, the 2014 Payment Notice final rule, 78
FR 15409 at 15436-15438; and the 2018 Benefit Year Protocols ACA HHS
Risk Adjustment Data Validation, released June 24, 2019, available
at https://www.regtap.info/uploads/library/HRADV_2018Protocols_070319_5CR_070519.pdf.
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Comment: One commenter requested that HHS adjust the state payment
transfer formula applicable in states where HHS operates the program to
ensure that charges for enrollees with no HCCs do not exceed premium.
Response: We do not believe that adjusting the state payment
transfer formula to cap or otherwise limit charges to the level of
premiums for enrollees is appropriate. We are concerned that, given the
budget-neutral nature of the HHS program, a cap on charges would result
in lower payments to issuers with plans with higher-than-average
actuarial risk.\102\ The cap may also incentivize small issuers with
plans that attract healthier-than-average enrollees to underprice
premiums because they would know their charges would be capped to a
percentage of premium. Furthermore, consistent with the framework set
forth in section 1343 of the ACA, the HHS-operated risk adjustment
program focuses on risk differentials at the plan level, not the
enrollee level.\103\ Risk adjustment transfers under the state payment
transfer formula are therefore calculated based on the plan liability
risk score and the statewide average premium, not based on individual
enrollees' premiums. As described in a previous section of this
rulemaking, we continue to consider future policy options to improve
the predictive power of the risk adjustment models for certain
subpopulations (including enrollees with no HCCs).
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\102\ Congress did not authorize or appropriate additional
funding for risk adjustment beyond the amount of charges paid in,
and did not authorize HHS to obligate itself for risk adjustment
payments in excess of charges collected. In the absence of
additional, independent funding or the creation of budget authority
in advance of an appropriation, the introduction of a cap on charges
would mean that payments would have to be reduced by a similar
amount because HHS cannot make payments in excess of charges
collected consistent with binding appropriations law. See New Mexico
Health Connections v. United States Department of Health and Human
Services, 946 F.3d 1138 (10th Cir. 2019).
\103\ Compare 42 U.S.C. 18063 (establishing the permanent risk
adjustment program, which involves an assessment and comparison of
the actuarial risk in each issuer's plans in a state market risk
pool with the average actuarial risk of all plans in the applicable
state market risk pool) with 42 U.S.C. 18061 (establishing the
transitional reinsurance program, which involves an assessment of
actuarial risk of individual enrollees to identify those that
qualify as ``high risk.'')
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After consideration of the comments received on these proposals, we
are finalizing the proposed HHS risk adjustment methodology for the
2022 benefit year and beyond, unless changed through notice-and-comment
rulemaking. We are also finalizing the accompanying proposed update to
Sec. 153.320(c).
3. State Flexibility Requests (Sec. 153.320(d))
In the 2019 Payment Notice, we provided states the flexibility to
request a reduction to the otherwise applicable risk adjustment state
transfers calculated by HHS under the state payment transfer formula,
which is calibrated on a national dataset, for the
[[Page 24187]]
state's individual (catastrophic or non-catastrophic risk pools), small
group, or merged markets by up to 50 percent to more precisely account
for differences in actuarial risk in the applicable state's
markets.\104\ We proposed that any requests received would be published
in the applicable benefit year's proposed HHS notice of benefit and
payment parameters, and the supporting evidence provided by the state
in support of its request would be made available for public
comment.\105\
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\104\ 83 FR 16955 through 16960.
\105\ 45 CFR 153.320(d)(3).
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If the state requests that HHS not make publicly available certain
supporting evidence and analysis because it contains trade secrets or
confidential commercial or financial information within the meaning of
the HHS Freedom of Information Act (FOIA) regulations at 45 CFR
5.31(d), HHS will only make available on the CMS website the supporting
evidence submitted by the state that is not a trade secret or
confidential commercial or financial information by posting a redacted
version of the state's supporting evidence.\106\ In accordance with
Sec. 153.320(d)(2), beginning with the 2020 benefit year, states must
submit such requests with the supporting evidence and analysis outlined
under Sec. 153.320(d)(1) by August 1st of the calendar year that is 2
calendar years prior to the beginning of the applicable benefit year.
If approved by HHS, state reduction requests will be applied to the
plan PMPM payment or charge state payment transfer amount
(Ti in the state payment transfer formula above). For the
2020 and 2021 benefit years, the state of Alabama submitted a 50
percent risk adjustment transfer reduction request for its small group
market and HHS approved both requests.\107\
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\106\ See 45 CFR 153.320(d)(3).
\107\ See 84 FR 17484 through 17485 and 85 FR 29193 through
29194.
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We received several general comments on the state flexibility
request framework outlined in Sec. 153.320(d). However, we did not
propose any changes to that framework other than the proposal to allow
multi-year state flexibility requests as explained below. As such,
these general comments on the state flexibility request framework are
out of scope of this rulemaking and will not be addressed in this rule.
a. Requests To Reduce Risk Adjustment Transfers for the 2022 Benefit
Year
For the 2022 benefit year, HHS received a request to reduce risk
adjustment transfers calculated under the state payment transfer
formula for the Alabama individual \108\ and small group markets by 50
percent.\109\ Alabama's request states that the presence of a dominant
carrier in the individual and small group markets precludes the HHS-
operated risk adjustment program from working as precisely as it would
with a more balanced distribution of market share. The state regulators
stated that their review of the risk adjustment payment issuers'
financial data suggested that any premium increase resulting from a
reduction to risk adjustment payments of 50 percent in the individual
and small group markets for the 2022 benefit year would not exceed 1
percent, the de minimis premium increase threshold set forth in Sec.
153.320(d)(1)(iii) and (d)(4)(i)(B). We sought comment on this request
to reduce risk adjustment state transfers in the Alabama individual and
small group markets by 50 percent for the 2022 benefit year. The
request and additional documentation submitted by Alabama was posted
under the ``State Flexibility Requests'' heading at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/. We are approving Alabama's requested reductions to
2022 benefit year transfers calculated under the state payment transfer
formula for its individual and small group markets.
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\108\ Alabama's individual market request is for a 50 percent
reduction to risk adjustment transfers for its individual market
non-catastrophic and catastrophic risk pools.
\109\ Due to the COVID-19 PHE, we permitted states seeking to
request a reduction in risk adjustment transfers for the 2022
benefit year an extension until September 1, 2020 to submit such
request.
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We received public comments on Alabama's requests to reduce risk
adjustment transfers for the 2022 benefit year. The following is a
summary of the comments we received and our responses.
Comment: Multiple commenters supported Alabama's request to reduce
risk adjustment transfers in its individual and small group markets for
the 2022 benefit year, stating that the HHS-operated risk adjustment
program has not worked properly in Alabama's markets and that states
are best suited to decide whether an adjustment is necessary in their
market risk pools. Several other commenters opposed Alabama's request,
stating that the state did not meet its burden to substantiate such
request, that state flexibility should not be permitted, and that
states seeking a reduction in risk adjustment state transfers should
operate their own risk adjustment program. Many commenters opposed to
Alabama's request expressed more concern with the transfer reduction
request for the individual market compared to the small group market.
One commenter stated that there was no mathematical reason why the
presence of one large issuer would preclude HHS-operated risk
adjustment from functioning appropriately in Alabama.
Response: In the 2019 Payment Notice, HHS provided the flexibility
for states to request a reduction in risk adjustment state transfers
calculated by HHS under the state payment transfer formula when a state
elects not to operate the risk adjustment program. We reviewed
Alabama's requests and supporting documentation regarding the state's
individual and small group market dynamics that it believes warrant an
adjustment to the HHS-calculated risk adjustment individual (including
catastrophic and non-catastrophic) and small group market transfers
under the state payment transfer formula for the 2022 benefit year.
Alabama state regulators noted they do not assert that the HHS risk
adjustment formula is flawed, only that it results in imprecise results
in Alabama's markets that could further reduce competition and increase
costs for consumers. The state regulators provided information
demonstrating that the request would have a de minimis impact on
necessary premium increases in both the individual and small group
markets for payment issuers, consistent with Sec. 153.320(d)(1)(iii)
and (d)(4)(i)(B). HHS analyzed the information provided by the state in
support of its request, along with additional data and information
available to HHS and the public comments submitted during the comment
period on the proposed rule, separately by market and found that the
request meets de minimis regulatory standard in both markets. While we
recognize the comments expressing more concern with the reduction
request for the individual market and questioning how the presence of
one large issuer would impact how the HHS-operated risk adjustment
program functions in Alabama, we did not propose and are not finalizing
any changes to the general framework or review standards under Sec.
153.320(d). As such, a state is permitted to pursue these reduction
requests for the individual, small group, or merged market risk pools
if the applicable regulatory requirements are met. In this instance,
Alabama's individual and small group market requests both met the
applicable regulatory requirements; therefore, HHS is approving
Alabama's requested reductions to 2022 benefit
[[Page 24188]]
year transfers calculated under the state payment transfer formula.
Comment: Some commenters asserted that the evidence provided by
Alabama does not substantiate the individual market request. One
commenter requested that HHS conduct its own comprehensive actuarial
analysis of the evidence provided by Alabama and further noted that the
2018 and 2019 risk adjustment results provided by Alabama in support of
the request may not be indicative of 2022 transfers, as the past
results do not take into account the changes to the HHS risk adjustment
models applicable beginning with the 2020 and 2021 benefit years or the
proposed changes outlined in the 2022 Payment Notice proposed rule.
Another commenter stated that Alabama's suggestion that transfers were
difficult to predict is inaccurate.
Response: The evidence provided by Alabama in support of its
requests to reduce risk adjustment state transfers by 50 percent in its
individual and small group markets was sufficient to justify its
request under the de minimis requirement for HHS approval under 45 CFR
153.320(d)(4)(i)(B). We further note that Alabama requested that,
consistent with 45 CFR 153.320(d), HHS not publish certain information
in support of its request because it contained trade secrets or
confidential commercial or financial information. If the state requests
that HHS not make publicly available certain supporting evidence and
analysis because it contains trade secrets or confidential commercial
or financial information within the meaning of the HHS Freedom of
Information Act (FOIA) regulations at 45 CFR 5.31(d), HHS will only
make available on the CMS website the supporting evidence submitted by
the state that is not a trade secret or confidential commercial or
financial information by posting a redacted version of the state's
supporting evidence.\110\ Consistent with the state's request, we
therefore posted a redacted version of the supporting evidence for
Alabama's request. However, we note that HHS reviewed the state's un-
redacted supporting analysis in evaluating Alabama's request, along
with other plan-level data available to HHS and the relevant public
comments submitted within the applicable comment period for the
proposed rule. We conducted a comprehensive analysis of the available
information and found the supporting evidence submitted by Alabama to
be sufficient for us to determine the validity of Alabama's 2022
benefit year requests. We also evaluated the comments timely submitted,
and determined whether the state's requests met the applicable criteria
for approval.
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\110\ See 45 CFR 153.320(d)(3).
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We recognize there is some level of uncertainty regarding future
market dynamics, including their potential impact on future benefit
year transfers. However, to align with the annual pricing cycle for
health insurance coverage, the applicable risk adjustment parameters
(including approval or denial of state flexibility reduction requests)
must generally be finalized sufficiently in advance of the applicable
benefit year to allow issuers to consider such information when setting
rates. As such, there will always be an opportunity for some
uncertainty regarding the precise impact of future methodological
changes (such as the risk adjustment model changes applicable beginning
with the 2020 and 2021 benefit years) or unforeseen events (such as the
COVID-19 PHE and its impact on enrollment and utilization). With
respect to Alabama's 2022 benefit year requests, HHS believes that the
evidence submitted by Alabama in support of its transfer reduction
requests was sufficient, along with other information available to HHS
and timely submitted comments, for HHS to review and confirm that the
requests meet the criteria for approval set forth in Sec.
153.320(d)(4)(i)(B).
Comment: Some commenters stated that the reduction requests would
diminish the effectiveness of the HHS-operated risk adjustment program
and suggested that Alabama set up its own risk adjustment program if it
does not believe the HHS-operated risk adjustment program is
appropriate for its markets.
Response: We agree that states that do not believe the HHS program
is appropriate for its markets can and should consider operating their
own state risk adjustment program with a federally-certified alternate
risk adjustment methodology tailored to their market risk pools.
However, as detailed in the proposed rule and the 2019 Payment Notice,
we adopted the state flexibility reduction request regulations in
response to specific feedback from certain states, and under our
current regulations, it is appropriate to extend this flexibility for
the 2022 benefit year. In addition, the approval criteria codified in
45 CFR 153.320(d)(4) are intended to ensure that approved adjustments
do not diminish the effectiveness of the HHS-operated risk adjustment
program. As part of our assessment of state flexibility requests, we
consider the potential impact on the effectiveness of the HHS-operated
risk adjustment program for the applicable state market risk pools. We
also intend to continue to analyze the impact of state flexibility
requests and may propose changes or solicit comments on potential
changes for future benefit years.
Comment: A few commenters stated that the approval of the requests
would result in increased adverse selection, especially in the
individual market. One of these commenters asserted that the reduction
request in the individual market would result in a premium increase of
more than 1 percent. This commenter also asserted that approval of the
reduction request in the individual market would make it difficult for
issuers to offer individual market plans with broad networks.
Response: We appreciate commenters' concerns and generally agree
that adverse selection concerns are heightened in the individual
market, as enrollees typically have higher actuarial risk, risk
selection, and risk segmentation in plan selection than those enrolled
in the small group market. However, in this case, Alabama has met the
criteria for approval at 45 CFR 153.320(d)(4)(i)(B) for both its
individual and small group market requests.
In addition, these commenters did not provide any data or
supporting evidence during the public comment period to support their
assertions. Our analysis of the information submitted as part of the
state's request, along with other relevant factors, including the
premium impact of the transfer reduction for the state market risk
pool, showed that the transfer reduction requested by Alabama would
have de minimis impact on the premiums to cover the difference in
transfers for issuers that would receive reduced transfer payments.
That is, approval of the request would not result in an increase in
premiums of more than 1 percent. HHS does not believe that a change in
transfers small enough to have a de minimis impact on premiums should
affect issuers' operations, such as changes to its provider networks.
Therefore, after consideration of the information submitted in support
of the state's request and other data and information available to HHS,
we find that the evidence provided substantiates the reduction request
in both the individual and small group markets and meets the regulatory
requirements for HHS approval under 45 CFR 153.320(d)(4)(i)(B).
Based on our review of the comments received on the proposed state
flexibility reduction requests within the comment period and HHS's
analysis of the requests submitted by Alabama,
[[Page 24189]]
HHS is granting Alabama's requests to reduce risk adjustment transfers
in the individual (including catastrophic and non-catastrophic risk
pools) and small group markets by 50 percent for the 2022 benefit year.
Therefore, the 50 percent reduction will be applied to the 2022 benefit
year plan PMPM payment or charge transfer amount (Ti in the
state payment transfer calculation above) for the Alabama individual
and small group markets.
b. Multi-Year State Flexibility Requests
We proposed several amendments to Sec. 153.320(d) to allow states
to request a reduction to otherwise applicable risk adjustment
calculations under the state payment transfer formula for up to 3
years, beginning with the 2023 benefit year. Under current policy,
states seeking to reduce risk adjustment state transfers in one or more
of their market risk pools must submit a request to HHS each year
describing the nature of their request and providing supporting
documentation. HHS then reviews the request, sets forth the request in
the applicable benefit year's HHS notice of benefit and payment
parameters, and approves or denies it based on the evidence and
analysis provided by the state in the request and the comments received
to the applicable benefit year's proposed HHS notice of benefit and
payment parameters.
Under Sec. 153.320(d)(1), states must submit this request
annually, and HHS publishes state requests in the applicable benefit
year's proposed and final annual HHS notice of benefit and payment
parameters. Stakeholders have requested that HHS allow states to
request multi-year risk adjustment flexibility reductions. In
recognition of these comments, we proposed to provide the flexibility
for states to request a reduction to otherwise applicable risk
adjustment state transfers under the HHS-operated risk adjustment
methodology's state payment transfer formula for up to 3 years
beginning with the 2023 benefit year.\111\
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\111\ See 85 FR at 78599-78601 for details on the proposed
updates to Sec. 153.320(d) to permit states to seek multi-year
state flexibility requests for up to 3 years.
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We are not finalizing the proposed policies or accompanying
proposed updates to Sec. 153.320(d) to permit states to pursue multi-
year state flexibility reduction requests. We are maintaining the
existing language and framework, which permits states to submit annual
requests to reduce the otherwise applicable risk adjustment
calculations under the state payment transfer formula for its
individual and small group (or merged) markets for a given benefit year
to more precisely account for state-specific factors or other unique
market characteristics.
We received public comments on the proposed policies and updates to
Sec. 153.320(d) to permit states to seek multi-year state flexibility
requests for up to 3 years. The following is a summary of the comments
we received and our responses.
Comment: Some commenters supported our proposal to permit states to
request reductions in otherwise applicable risk adjustment state
transfers for up to three benefit years, stating that multi-year state
flexibility requests would promote stability and competition in the
affected state market risk pool(s) and would reduce burden on states
and HHS. However, several other commenters opposed this proposal,
asserting that states would not be able to accurately or reliably
anticipate state market risk pool conditions or market dynamics that
far into the future in order for HHS to provide sufficient support for
multi-year reduction requests. These commenters also raised the same
concerns raised to the Alabama request above, including that the
proposal would undermine the effectiveness of the HHS-operated risk
adjustment program and result in risk selection, market
destabilization, higher premiums, and narrow or restricted provider
networks. These commenters noted that states can run their own risk
adjustment program if they believe the HHS-operated program does not
function properly in their market risk pool(s). One commenter also
noted that inadequate advance notice of HHS's decision to terminate or
modify the request based on new available information could disrupt
rate setting.
Response: We are not finalizing these proposed policies or the
updates to Sec. 153.320(d), as we agree with commenters that there are
concerns and barriers to multi-year state flexibility reduction
requests. We agree that state market conditions, including enrollment
and new entrants and exits to the market, can change significantly over
3 years, and three-year reduction requests could destabilize the market
if conditions significantly change during the request's approval
period. While our proposed framework included mechanisms to address
such situations (for example, the proposed process and authority for
HHS to terminate or modify a previously approved multi-year request
during any one of the subsequent years during the approval period if
additional data or new information did not support the continuation of
the state's reduction request and the state did not provide sufficient
supplemental evidence to rebut such data or information), we agree that
further consideration of these types of issues is warranted before
pursuing these proposals to permit multi-year state flexibility
reduction requests. We are maintaining the existing language and
framework in Sec. 153.320(d), which currently permits states to submit
annual requests to reduce the otherwise applicable risk adjustment
calculations under the state payment transfer formula for its
individual and small group (including merged) markets for a given
benefit year to more precisely account for state-specific factors or
other unique market characteristics.
After consideration of the comments on the policies and changes
related to the multi-year state flexibility reduction requests, we are
not finalizing the proposals or changes to Sec. 153.320(d) related to
such requests.
4. Audits and Compliance Reviews of Issuers of Reinsurance-Eligible
Plans (Sec. 153.410(d)) and Audits and Compliance Reviews of Issuers
of Risk Adjustment Covered Plans (Sec. 153.620(c))
a. Audits and Compliance Reviews of Issuers of Reinsurance-Eligible
Plans (Sec. 153.410(d))
HHS recently completed the 2014 benefit year audits of a sample of
issuers of ACA transitional reinsurance-eligible plans. During this
process, HHS encountered significant challenges that impeded its
ability to efficiently administer and complete the audits. More
specifically, HHS experienced difficulties receiving requested audit
data and materials in a timely fashion from some issuers, and had
difficulty obtaining data from these issuers in a format that was
usable by HHS. HHS is of the view that codifying additional audit
requirements and parameters is an appropriate and necessary measure to
ensure that 2015 and 2016 benefit year audits of ACA transitional
reinsurance-eligible plans appropriately function to protect the
integrity of our programs.
We proposed several amendments to Sec. 153.410(d) to provide more
clarity around the audit requirements for issuers of reinsurance-
eligible plans. As proposed, the amendments explain the audit process,
including what it means to properly comply with an audit and the
consequences for failing to comply with audit requirements. We also
proposed to expand the oversight tools available to HHS to also provide
authority for HHS to conduct compliance reviews of issuers of
[[Page 24190]]
reinsurance-eligible plans to assess compliance with the applicable
requirements of subparts E and H of part 153. We explained that the
proposed HHS compliance reviews would follow the standards set forth
for compliance review of QHP issuers participating in FFEs established
in 45 CFR 156.715. However, compliance reviews under this section would
only be conducted in connection with confirming reinsurance-eligible
plans' compliance with the standards related to reinsurance payments in
subparts E and H of part 153. A compliance review may be targeted at a
specific potential error and conducted on an ad hoc basis.\112\ For
example, HHS may require an issuer to submit data pertaining to a
specific data submission (for example, capitated claims). Unlike the
compliance review authority established in Sec. 156.715, which is
limited to QHP issuers participating in FFEs, the compliance review
authority we proposed to codify in the amendments to Sec. 153.410(d)
would apply to all issuers of reinsurance-eligible plans. We believe
this flexibility is necessary and appropriate to provide a mechanism
for HHS to address situations in which a systematic error or issue is
identified during the random and targeted auditing of issuers of
reinsurance-eligible plans, and HHS suspects similarly situated issuers
may have experienced the same systematic error or issue, but were not
selected for audit in the year in question.
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\112\ For further details, please see 78 FR 65100.
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Specifically, we proposed to rename Sec. 153.410(d) to ``Audits
and Compliance Reviews'' in order to clarify that the authority
described in this section would apply to audits and the proposed HHS
compliance reviews to evaluate issuers of reinsurance-eligible plans'
compliance with the applicable requirements in subparts E and H of part
153. We similarly proposed to update the introductory language in Sec.
153.410(d) to incorporate a reference to HHS compliance reviews and to
note that we would conduct these compliance reviews consistent with the
standards set forth in Sec. 156.715.
We also proposed to amend the existing introductory language in
Sec. 153.410(d) to remove the last sentence that discusses audit
results and the accompanying requirements that an issuer must follow if
an audit results in a finding of material weakness or significant
deficiency. Additionally, as detailed further below, we proposed to
replace this with a new proposed framework that captures more details
on the audit process and requirements for reinsurance-eligible plans.
As amended, the introductory language at Sec. 153.410(d) would reflect
the authority for HHS, or its designee, to audit or conduct a
compliance review of an issuer of a reinsurance-eligible plan to assess
its compliance with the applicable requirements of subparts E and H of
part 153. We also proposed to move the existing introductory language
in paragraph (d) requiring an issuer to ensure its relevant
contractors, subcontractors, and agents cooperate with audits to a new
proposed section, as detailed further below.
Also at Sec. 153.410, we proposed to add new paragraph (d)(1) to
establish notice and conference requirements for these audits. The
introductory language in proposed paragraph (d)(1) reflects that HHS
would provide at least 15 calendar days advance notice of its intent to
conduct an audit of an issuer of a reinsurance-eligible plan. In
proposed paragraph (d)(1)(i), we proposed to codify that all audits
under this section would include an entrance conference at which the
scope of the audit would be presented and an exit conference at which
the initial audit findings would be discussed.
Further, we proposed to amend Sec. 153.410(d) to add a new
paragraph (d)(2) to capture the requirements issuers must meet to
comply with an audit under this section. In proposed paragraph
(d)(2)(i), we proposed to capture the requirement that currently
appears in the introductory text of paragraph (d) for the issuer to
ensure that its relevant contractors, subcontractors, and agents
cooperate with any audit or compliance review under this section and
also proposed to expand it to similarly require the issuer to ensure
its relevant employees, downstream entities and delegated entities also
cooperate with any audit or compliance review under this section. In
new proposed paragraph (d)(2)(ii), we proposed to require issuers to
submit complete and accurate data to HHS or its designees that is
necessary to complete the audit. We explained that such data would need
to support the appropriateness and accuracy of the reinsurance payments
under review as part of the audit. For example, HHS may request that
issuers of reinsurance-eligible plans provide enrollment and claims
files, plan reference data, and associated enrollee data sufficient to
show that reinsurance payments received were appropriate.
HHS encountered significant challenges in the 2014 benefit year
audits when some issuers submitted data in a format that was not
readable by HHS. To address this issue, we proposed in new paragraph
(d)(2)(ii) that issuers must submit audit data in the format and manner
specified by HHS no later than 30 calendar days after the initial
deadline communicated and established by HHS at the entrance conference
described in proposed paragraph (d)(1)(i). For example, HHS may require
issuers to submit the requested audit data via Electronic File
Transfer. Additionally, under proposed paragraph (d)(2)(iii), HHS
proposed to require that issuers respond to any audit notices, letters,
request, and inquiries, including requests for supplemental or
supporting information, no later than 15 calendar days after the date
of the notice, letter, request, or inquiry. We noted that we believe
that the proposed requirements in paragraph (d)(2) are necessary and
appropriate to ensure the timely completion of audits and to prevent
waste that results from repeated, fruitless attempts by HHS to obtain
data.
Recognizing that there may be situations that warrant an extension
of the timeframes under Sec. 153.410(d)(2)(ii) or (iii), as
applicable, we proposed to also add a new paragraph (d)(2)(iv) to
establish a process for issuers to request an extension for good cause.
To request an extension, we proposed to require the issuer to submit a
written request to HHS within the applicable timeframe established in
paragraphs (d)(2)(ii) or (iii). The written request would have to
detail the reasons for the extension request and good cause in support
of the request. For example, good cause may include an inability to
produce information in light of unforeseen emergencies, natural
disasters, or a lack of resources due to a PHE. If the extension is
granted, the issuer must respond within the timeframe specified in
HHS's notice granting the extension of time.
Under Sec. 153.410(d)(3), HHS proposed it would share its
preliminary audit findings with the issuer, and further proposed that
the issuer would then have 30 calendar days to respond to such findings
in the format and manner specified by HHS. HHS would describe the
process, format, and manner by which an issuer can dispute the
preliminary findings in the preliminary audit report sent to the
issuer. For example, if the issuer disagrees with the findings set
forth in the preliminary audit report, HHS would require the issuer to
respond to such findings by submitting written explanations that detail
its dispute(s) or additional rebuttal information via Electronic File
Transfer. Additionally, we proposed at paragraph (d)(3)(i) that if the
issuer does not dispute or otherwise respond to the
[[Page 24191]]
preliminary findings within 30 calendar days, the audit findings would
become final. We proposed in paragraph (d)(3)(ii) that if the issuer
timely responds and disputes any audit finding within 30 calendar days,
HHS would review and consider such response and finalize the audit
findings after such review. HHS would provide contact and other
information necessary for an issuer to respond to the preliminary audit
findings in the preliminary audit report sent to the issuer.
We proposed to add a new paragraph Sec. 153.410(d)(4) to capture
the process and requirements related to final audit findings and
reports. If an audit results in the inclusion of a finding in the final
audit report, the issuer must comply with the actions set forth in the
final audit report in the manner and timeframe established by HHS. We
noted that the actions set forth in the final audit report could
require an issuer to return reinsurance payments. We maintained the
regulatory requirements related to corrective action plans for
reinsurance audits that currently appear in paragraph (d) in proposed
paragraph (d)(4), which stated that (1) the issuer must provide a
written corrective action plan to HHS for approval within 30 calendar
days of the issuance of the final audit report; (2) the issuer must
implement the corrective action plan; and (3) the issuer must provide
HHS with written documentation demonstrating the adoption and
completion of the required corrective actions.
Lastly, if an issuer fails to comply with the audit requirements
set forth in proposed Sec. 153.410(d), HHS proposed in paragraph
(d)(5)(i) that HHS would notify the issuer of reinsurance payments
received that the issuer has not adequately substantiated, and under
proposed paragraph (d)(5)(ii), HHS would notify the issuer that HHS may
recoup any payments identified as not adequately substantiated. We
explained that under this framework, the continued failure to comply
with the audit requirements and provide the necessary information to
substantiate the payments made could result in HHS recouping up to 100
percent of the reinsurance payments made to an issuer for the
applicable benefit year(s) that are the subject of the audit.
We also clarified that reinsurance payment amounts recovered by HHS
as a result of an audit under Sec. 153.410(d) would be allocated, on a
pro rata basis, as further payments to the U.S. Treasury under section
1341(b)(3)(B)(iv) of the ACA and further reimbursement of
administrative expenses related to operating the reinsurance program
under section 1341(b)(3)(B)(ii) of the ACA.\113\
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\113\ See the Patient Protection and Affordable Care Act;
Exchange and Insurance Market Standards for 2015 and Beyond, Final
Rule, 79 FR 30240 at 30257 through 30259 (May 27, 2014).
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We sought comment on these proposals, including HHS's clarification
of its compliance review authority, the proposed timeframes for issuers
to respond to audit notices, reports, inquiries, and requests for
supplemental information, and the process for issuers to request an
extension to respond to such requests. We are finalizing the proposed
updates to the audit and compliance reviews of issuers of reinsurance
eligible plans in Sec. 153.410(d), with modifications to certain audit
timelines in response to comments stating that issuers would need more
time to provide complete and accurate data for an audit and respond to
HHS requests.
We received public comments on the proposed updates to audits and
compliance reviews of issuers of reinsurance-eligible plans (Sec.
153.410(d)). The majority of the comments we received to this section
were general comments that were also applicable to the similar
amendments proposed in the below sections regarding audits and
compliance reviews of issuers of risk adjustment covered plans (Sec.
153.620(c)) and audits and compliance reviews of APTC, CSRs, and user
fees (Sec. 156.480(c)). We responded to these generally applicable
comments in the below section on audits and compliance reviews of APTC,
CSRs, and user fees (Sec. 156.480(c)). What follows is a summary and
our responses to the comments we received that were specific to audits
and compliance reviews of issuers of reinsurance-eligible plans.
Comment: A few commenters were concerned that HHS is still
conducting audits of issuers of reinsurance-eligible plans for monies
received more than 5 years ago for a program that ended after the 2016
benefit year. These commenters asked that HHS reconsider the overall
approach and need for conducting audits of issuers of reinsurance-
eligible plans.
Response: HHS has the authority \114\ and the responsibility to
audit issuers of reinsurance-eligible plans to protect the integrity of
the reinsurance program and ensure issuers received the appropriate
reinsurance payments during the 2014 through 2016 benefit years. We
recognize that the program ended with the 2016 benefit year, but
activities related to the operation of the program continued for
several years. For example, the final deadline for remittance of 2016
benefit year reinsurance contributions was not until November 2017
\115\ and the last payments to issuers of reinsurance eligible plans
were made in Spring 2018. Activities, such as these audits, continue as
HHS closes out the program. We are planning to combine reinsurance
program audits for the 2015 and 2016 benefit years, which will help
facilitate a more efficient audit process and allow HHS to end the
audits of reinsurance-eligible plans more quickly. We will similarly
look for ways to combine efforts for compliance reviews of reinsurance-
eligible plans, should we determine it is necessary or appropriate to
pursue those additional oversight measures.
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\114\ 45 CFR 153.410(d).
\115\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/The-Transitional-Reinsurance-Program/2016-Benefit-Year-Page.
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After consideration of the comments related to the proposals
regarding audits and compliance review of reinsurance-eligible plans,
we are finalizing these provisions as proposed, with slight
modifications to certain audit timelines in response to comments \116\
stating that issuers need more time during audits to provide complete
and accurate data and respond to HHS requests. As finalized at Sec.
153.410(d)(1), HHS will provide at least 30 calendar days advance
notice of its intent to conduct an audit of an issuer of a reinsurance-
eligible plan, rather than the proposed 15 calendar days. Additionally,
as finalized at Sec. 153.410(d)(4)(i), if HHS determines the need for
a corrective action plan as the result of an audit, issuers must
provide a written corrective action plan to HHS for approval within 45
calendar days of the issuance of the final audit report, rather than
the proposed 30 calendar days.
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\116\ These comments, along with the other general comments
submitted on the parallel amendments to the sections on audits and
compliance reviews of reinsurance-eligible plans, risk adjustment
covered plans, and QHP issuer compliance with federal standards for
APTC, CSRs, and user fees, are summarized and responded to in the
below preamble section on audits and compliance reviews of APTC,
CSRs, and user fees (Sec. 156.480(c)).
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We also clarify that we will recoup monies owed due to a finding as
the result of an audit of a reinsurance-eligible plan using the same
method with which we collect all debts. That is, to recoup the amount
identified in Sec. 153.410(d)(5)(i), we will first net using the
process set forth in 45 CFR 156.1215, and we will then invoice issuers
for the remaining debt (if any was owed).
[[Page 24192]]
b. Audits and Compliance Reviews of Issuers of Risk Adjustment Covered
Plans (Sec. 153.620(c))
Although currently HHS primarily uses the HHS-RADV process to audit
issuers of risk adjustment covered plans, Sec. 153.620(c) provides HHS
with the authority to conduct audits of issuers of risk adjustment-
covered plans outside of the HHS-RADV process. HHS intends to begin
audits of issuers of risk adjustment covered plans to ensure the proper
payment of high-cost risk pool payments and confirm compliance with
applicable requirements. As such, similar to the proposals related to
audits and compliance reviews of issuers of reinsurance-eligible plans
and learning from our experience with those 2014 benefit year audits,
we proposed to provide more clarity around the audit requirements for
issuers of risk adjustment covered plans. These proposals sought to
explain the audit process, including what it means to properly comply
with an audit and the consequences for failing to comply with such
requirements.
We also proposed to expand the oversight tools available to HHS
beyond traditional audits to also provide authority for HHS to conduct
compliance reviews of risk adjustment covered plans to assess
compliance with the applicable requirements of subparts G and H of part
153. We explained that the proposed HHS compliance reviews would follow
the standards set forth for compliance review of QHP issuers
participating in FFEs established in 45 CFR 156.715. However,
compliance reviews under this section would only be conducted in
connection with confirming risk adjustment covered plans' compliance
with the applicable requirements related to the risk adjustment program
in subparts G and H of part 153. A compliance review may be targeted at
a specific potential error and conducted on an ad hoc basis.\117\ For
example, HHS may require an issuer to submit data pertaining to a
specific data submission (for example, capitated claims). Unlike the
compliance review authority established in Sec. 156.715, which is
limited to QHP issuers participating in FFEs, the compliance review
authority we proposed to codify in the amendments to Sec. 153.620(c)
would apply to all issuers of risk adjustment covered plans. We
explained that we believe this flexibility is necessary and appropriate
to provide a mechanism for HHS to address situations in which a
systematic error or issue is identified during the random and targeted
auditing of a sample of issuers of risk adjustment covered plans, and
HHS suspects similarly situated issuers may have experienced the same
systematic error or issue but were not selected for audit in the year
in question. As noted in the proposed rule, we anticipate focusing our
audit and compliance review activities under Sec. 153.620(c) on
ensuring compliance with requirements applicable to the high-cost risk
pool payments under the HHS risk adjustment methodology.
---------------------------------------------------------------------------
\117\ For further details, please see 78 FR 65100.
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Specifically, we proposed to rename Sec. 153.620(c) to ``Audits
and Compliance Reviews'' to clarify that the authority described in
this section would apply to audits and the proposed HHS compliance
reviews to evaluate risk adjustment covered plans' compliance with the
applicable requirements in subparts G and H of part 153. We similarly
proposed to update the introductory language in paragraph (c) to
incorporate a reference to HHS compliance reviews and to note that we
would conduct these compliance reviews consistent with the standards
set forth in 45 CFR 156.715.
We also proposed to amend the existing introductory language in
Sec. 153.620(c) to remove the last sentence that discusses audit
results and the accompanying requirements that an issuer must follow if
an audit results in a finding of material weakness or significant
deficiency. As detailed further below, we proposed to replace this with
a new proposed framework that captures more details on the audit
process and requirements for risk adjustment covered plans. As amended,
the introductory language at paragraph (c) would reflect the authority
for HHS or its designee to audit or conduct a compliance review of an
issuer of a risk adjustment covered plan to assess its compliance with
the applicable requirements of subparts G and H of part 153. We also
proposed to move the existing introductory language in paragraph (c)
requiring an issuer to ensure its relevant contractors, subcontractors,
and agents cooperate with audits to a new proposed section, as
described further below.
We proposed to add new paragraph (c)(1) to establish notice and
conference requirements for these audits. The introductory language in
proposed paragraph (c)(1) reflects that HHS would provide at least 15
calendar days advance notice of its intent to conduct an audit of an
issuer of a risk adjustment covered plan. In proposed paragraph
(c)(1)(i), we proposed to codify that all audits under this section
would include an entrance conference at which the scope of the audit
would be presented and an exit conference at which the initial audit
findings would be discussed.
Further, we proposed to amend Sec. 153.620(c) to add paragraph
(c)(2) to capture the requirements issuers must meet to comply with an
audit under this section. In proposed paragraph (c)(2)(i), we would
capture the requirement that currently appears in the introductory text
of paragraph (c) for the issuer to ensure that its relevant agents,
contractors, and subcontractors cooperate with any audit or compliance
review under this section and also proposed to expand it to similarly
require the issuer to ensure its relevant employees, downstream
entities and delegated entities also cooperate with any audit or
compliance review under this section. In proposed paragraph (c)(2)(ii),
we proposed to require issuers to submit complete and accurate data to
HHS or its designees that is necessary to complete the audit. We
explained that such data would need to support the appropriateness and
accuracy of the risk adjustment transfers (including high-cost risk
pool payments and charges) under review as part of the audit. For
example, HHS may request that issuers of risk adjustment covered plans
provide enrollment and claims files and plan reference data and
associated enrollee data.
In new paragraph (c)(2)(ii), we proposed that issuers must submit
audit data, in the format and manner specified by HHS, no later than 30
calendar days after the initial deadline communicated and established
by HHS at the entrance conference described in proposed paragraph
(c)(1)(i). For example, HHS may require issuers to submit the requested
audit data via Electronic File Transfer. Additionally, under proposed
paragraph (c)(2)(iii), HHS proposed to require that issuers respond to
any audit notices, letters, and inquires, including requests for
supplemental or supporting information, no later than 15 calendar days
after the date of the notice, letter, request, or inquiry. We noted
that we believe that the proposed requirements in paragraph (c)(2) are
necessary and appropriate to ensure the timely completion of audits and
to prevent waste that results from repeated, fruitless attempts by HHS
to obtain necessary data.
Recognizing that there may be situations that warrant an extension
of the timeframes under Sec. 153.620(c)(2)(ii) or (iii), as
applicable, we proposed to also add a new paragraph (c)(2)(iv) to
establish a process for issuers to request an extension for good cause.
To request an extension, we proposed to require the issuer to submit a
written request to
[[Page 24193]]
HHS within the applicable timeframe established in paragraph (c)(2)(ii)
or (iii). The written request would be required to detail the reasons
for the extension request and the good cause in support of the request.
For example, good cause may include an inability to produce information
in light of unforeseen emergencies, natural disasters, or a lack of
resources due to a PHE. If the extension is granted, the issuer must
respond within the timeframe specified in HHS's notice granting the
extension of time.
Under Sec. 153.620(c)(3), HHS proposed that it would share its
preliminary audit findings with the issuer, and further proposed that
the issuer would then have 30 calendar days to respond to such findings
in the format and manner specified by HHS. HHS would describe the
process, format, and manner by which an issuer can dispute the
preliminary findings in the preliminary audit report sent to the
issuer. For example, if the issuer disagrees with the findings set
forth in the preliminary audit report, HHS would require the issuer to
respond to such findings by submitting written explanations that detail
its dispute(s) or additional rebuttal information via Electronic File
Transfer. Additionally, we proposed under paragraph (c)(3)(i) that if
the issuer does not dispute or otherwise respond to the preliminary
findings within 30 calendar days, the audit findings would become
final. We proposed under paragraph (c)(3)(ii) that if the issuer timely
responds and disputes any audit finding within 30 calendar days, HHS
would review and consider such response and finalize the audit findings
after such review. HHS would provide contact and other information
necessary for an issuer to respond to the preliminary audit findings in
the preliminary audit report sent to the issuer.
HHS proposed to add a new Sec. 153.620(c)(4) to capture the
process and requirements related to final audit findings and reports.
If an audit results in the inclusion of a finding in the final audit
report, the issuer must comply with the actions set forth in the final
audit report in the manner and timeframe established by HHS. We noted
that the actions set forth in the final audit reports could require an
issuer to return risk adjustment (including high-cost risk pool)
payments, or pay increased risk adjustment (including high-cost risk
pool) charges. We maintained the regulatory requirements for corrective
action plans for risk adjustment (including high-cost risk pool) audits
that currently appear in Sec. 153.620(c) in proposed paragraph (c)(4),
which stated that (1) the issuer must provide a written corrective
action plan to HHS for approval within 30 calendar days of the issuance
of the final audit report; (2) the issuer must implement the corrective
action plan; and (3) the issuer must provide HHS with written
documentation demonstrating the adoption and completion of the required
corrective actions.
Lastly, if an issuer fails to comply with the audit requirements
set forth in proposed Sec. 153.620(c)(2), HHS proposed in paragraph
(c)(5)(i) that HHS would notify the issuer of payments received that
the issuer has not adequately substantiated, and in proposed paragraph
(c)(5)(ii), HHS would notify the issuer that HHS may recoup any
payments identified as not adequately substantiated. We explained that
under this framework, the continued failure to comply with the audit
requirements and provide the necessary information to substantiate the
transfer amounts under review could result in HHS recouping up to 100
percent of the risk adjustment (including high-cost risk pool)
payments, or increased risk adjustment (including high-cost risk pool)
charges, made to an issuer for the applicable benefit year(s) that are
the subject of the audit.
We noted that any risk adjustment payments or charges recovered by
HHS during an audit of a risk adjustment covered plan would be paid on
a pro rata basis similar to the process for risk adjustment default
charge allocations to the other issuers participating in the applicable
state market risk pool in the applicable benefit year.\118\ We noted
that any high-cost risk pool payments or charges recovered by HHS
during an audit of a risk adjustment covered plan would be paid on a
pro rata basis to other issuers in the relevant national market in the
form of a reduced high-cost risk pool charge in the applicable benefit
year. HHS would not, however, re-run or otherwise recalculate transfers
for the applicable benefit year if monies are recouped as a result of
an audit under Sec. 153.620(c).
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\118\ See the 2016 Payment Notice final rule, 80 FR 10780-10781.
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We sought comment on these proposals, including HHS's clarification
of its compliance review authority, the proposed timeframes for issuers
to respond to audit notices, reports, and requests for supplemental
information, and the process for issuers to request an extension to
respond to such requests. We are finalizing the proposed updates to the
audit and compliance reviews of issuers of risk adjustment covered
plans in Sec. 153.620(c), with modifications to certain audit
timelines in response to comments stating that issuers would need more
time to provide complete and accurate data for an audit and respond to
HHS requests. We will also adopt the approach outlined for distribution
of risk adjustment payments or charges under the state payment transfer
formula recovered by HHS during an audit of a risk adjustment covered
plan would be paid on a pro rata basis similar to the process for risk
adjustment default charge allocations to the other issuers
participating in the applicable state market risk pool in the
applicable benefit year.\119\ We also reaffirm that HHS would not re-
run or otherwise recalculate transfers for the applicable benefit year
if monies are recouped as a result of an audit under Sec. 153.620(c).
However, after consideration of comments and further evaluation, we are
not finalizing our proposal to disburse high-cost risk pool payments or
charges recovered by HHS during an audit of a risk adjustment covered
plan on a pro rata basis to other issuers in the relevant national
market in the form of a reduced high-cost risk pool charge for the same
applicable benefit year. We are continuing to consider options and the
best possible process to disburse such amounts and will set forth any
proposed process in future notice-and-comment rulemaking.
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\119\ Ibid.
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We received public comments on the proposed updates to audits and
compliance reviews of issuers of risk adjustment covered plans (Sec.
153.620(c)). The majority of the comments we received to this section
were general comments that were also applicable to the similar
amendments proposed in the sections regarding audits and compliance
reviews of issuers of reinsurance-eligible plans (Sec. 153.410(d)) and
audits and compliance reviews of APTC, CSRs, and user fees (Sec.
156.480(c)). We responded to these generally applicable comments in the
below section regarding audits and compliance reviews of APTC, CSRs,
and user fees (Sec. 156.480(c)). We received one comment specific to
audits and compliance reviews of issuers of risk adjustment covered
plans, and the following is a summary of this comment and our response.
Comment: One commenter asked for clarification on the distribution
of risk adjustment amounts that are recovered as the result of an audit
and may be due to an issuer that is no longer in business.
Response: As noted above, we will disburse risk adjustment payments
or
[[Page 24194]]
charges under the state payment transfer formula recovered by HHS
during a risk adjustment audit on a pro rata basis similar to the
process for risk adjustment default charge allocations to the other
issuers participating in the applicable state market risk pool benefit
year. As such, we will allocate state payment transfer amounts
(payments or charges) recovered by HHS during an audit under Sec.
153.620(c) among the other plans in the impacted state market risk
pool(s) proportional to each plan's relative revenue requirement as
calculated under the state payment transfer formula relative to the
market average of these products.\120\ HHS will pursue options to make
payments to all of the appropriate issuers, including those that may no
longer be operating in the relevant market. As for disbursing high-cost
risk pool payments or charges recovered by HHS during an audit of a
risk adjustment covered plan, we are continuing to consider options and
the best possible process to disburse high-cost risk pool payments or
charges and will set forth any proposed process in future notice-and-
comment rulemaking. For example, we may propose in future notice-and-
comment rulemaking a recoupment disbursement methodology that provides
eligible issuers participating in the current benefit year with a
reduction in high-cost risk pool charges.
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\120\ See the 2016 Payment Notice final rule, 80 FR 10780-10781.
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After consideration of comments on these proposals, we are
finalizing the majority of the audit and compliance review provisions
as proposed, with slight modifications to certain audits timelines in
response to comments \121\ stating that issuers need more time during
audits to provide complete and accurate data and respond to HHS
requests. As finalized at Sec. 153.620(c)(1), HHS will provide at
least 30 calendar days advance notice of its intent to conduct an audit
of an issuer of a risk adjustment covered plan, rather than the
proposed 15 calendar days. Additionally, HHS is finalizing at Sec.
153.620(c)(4)(i) that if HHS determines the need for a corrective
action plan as the result of an audit, issuers must provide a written
corrective action plan to HHS for approval within 45 calendar days of
the issuance of the final audit report, rather than the 30 calendar
days that currently appears at Sec. 153.620(c)(1) and was proposed at
Sec. 153.620(c)(4)(i). We adopt the proposed approach for distribution
of risk adjustment payments or charges under the state payment transfer
formula recovered by HHS during an audit of a risk adjustment covered
plan and will pay those amounts on a pro rata basis similar to the
process for risk adjustment default charge allocations to the other
issuers participating in the applicable state market risk pool in the
applicable benefit year.\122\ We reaffirm that HHS will not re-run or
otherwise recalculate transfers for the applicable benefit year if
monies are recouped as a result of an audit under Sec. 153.620(c). As
stated above, based on comments received and after further evaluation,
we are not finalizing our disbursement proposal for high-cost risk pool
payments or charges recovered by HHS during an audit of a risk
adjustment covered plan and intend to address this issue in future
rulemaking.
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\121\ These comments, along with the other general comments
submitted on the parallel amendments to the sections on audits and
compliance reviews of reinsurance-eligible plans, risk adjustment
covered plans, and QHP issuer compliance with federal standards for
APTC, CSRs, and user fees, are summarized and responded to in the
below preamble section on audits and compliance reviews of APTC,
CSRs, and user fees (Sec. 156.480(c)).
\122\ See the 2016 Payment Notice final rule, 80 FR 10780-10781.
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Finally, we clarify that we will recoup monies owed due to a
finding as the result of an audit of a risk adjustment covered plan
using the same method with which we collect all debts. That is, to
recoup the amount identified in Sec. 153.620(d)(5)(i), we will first
net using the process set forth in 45 CFR 156.1215, and we will then
invoice issuers for the remaining debt (if any is owed).
5. EDGE Discrepancy Materiality Threshold
As stated in Sec. 153.710(a) through (c), an issuer of a risk
adjustment covered plan must provide to HHS, through their EDGE
server,\123\ access to enrollee-level plan enrollment data, enrollee
claims data, and enrollee encounter data as specified by HHS for a
benefit year. Consistent with Sec. 153.730, to be considered for risk
adjustment payments and charges, issuers of risk adjustment covered
plans must submit their respective EDGE data by April 30 of the year
following the applicable benefit year. At the end of the EDGE data
submission process, HHS issues final EDGE server reports \124\ which
reflect an issuer's data that was successfully submitted by the data
submission deadline. Within 15 calendar days of the date of these final
EDGE server reports, the issuer must confirm to HHS that the
information in the final EDGE server reports accurately reflect the
data to which the issuer has provided access to HHS through its EDGE
server for the applicable benefit year by submitting an attestation; or
the issuer must describe to HHS any discrepancies it identifies in the
final EDGE server reports.
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\123\ This is also known as the dedicated distributed data
collection environment.
\124\ These reports are: Enrollee (Without) Claims Summary
(ECS), Enrollee (Without) Claims Detail (ECD), Frequency Report by
Data Element for Medical Accepted Files (FDEMAF), Frequency Report
by Data Element for Pharmacy Accepted Files (FDEPAF), Frequency
Report by Data Element for Supplemental Accepted Files (FDESAF),
Frequency Report by Data Element for Enrollment Accepted Files
(FDEEAF), Claim and Enrollee Frequency Report (CEFR), High Cost Risk
Pool Summary (HCRPS), High Cost Risk Pool Detail Enrollee (HCRPDE),
Risk Adjustment Claims Selection Summary (RACSS), Risk Adjustment
Claims Selection Detail (RACSD), Risk Adjustment Transfer Elements
Extract (RATEE), Risk Adjustment Risk Score Summary (RARSS), Risk
Adjustment Risk Score Detail (RARSD), Risk Adjustment Data
Validation Population Summary Statistics (RADVPS), Risk Adjustment
Payment Hierarchical Condition Category Enrollee (RAPHCCER), Risk
Adjustment User Fee (RAUF).
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HHS reviews all reported EDGE discrepancies to evaluate the
implications of each incorrect data submission for risk adjustment
transfers and risk adjustment data validation. For risk adjustment
transfers calculated under the state payment transfer formula, HHS
evaluates whether the reported EDGE discrepancy is material and has a
process to address incorrect EDGE data submissions that have a material
impact on risk adjustment transfers for a state market risk
pool.125 126 Currently, HHS uses the same materiality
threshold for reconsideration requests set forth in Sec.
156.1220(a)(2) for determining whether the EDGE discrepancy has a
material impact on the risk adjustment transfers calculated under the
state payment transfer formula. Consequently, the reported EDGE
discrepancy is considered material if the amount in dispute is equal to
or exceeds the lower of either $10,000 or one percent of the total
estimated transfers in the applicable state market risk pool. After
analyzing reported EDGE discrepancies in prior benefit years, we
proposed to codify a materiality threshold for EDGE discrepancies and
also proposed to establish a higher materiality threshold for EDGE
discrepancies. More specifically, we proposed the following materiality
threshold for EDGE discrepancies: The
[[Page 24195]]
amount in dispute must equal or exceed $100,000 or one percent of the
total estimated transfer amount in the applicable state market risk
pool, whichever is less.\127\ Where an identified material EDGE
discrepancy negatively affects the issuer without having a negative
effect on other issuers within the state market risk pool, issuers
would be required to adhere to the initial data submission and accept
the consequences of the data submission, even when the monetary impact
of the inaccuracy on the issuer submitting incorrect data is
potentially substantial. Therefore, HHS would generally only take
action on material discrepancies that harm other issuers in the same
state market risk pool.\128\ In general we expect about half of
discrepancies that are material under previous criteria would no longer
be material under the new criteria.
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\125\ See, for example, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2019-QQ-Guidance.pdf. Also
see 83 FR 16970 through 16971.
\126\ HHS may also take action on reported material EDGE
discrepancy if the discrepancy involved a processing error by HHS,
HHS's incorrect application of the relevant methodology, or a HHS
mathematical error, consistent with the bases upon which an issuer
may request reconsideration under Sec. 156.1220.
\127\ We are not proposing any changes to the materiality
threshold for reconsideration requests in Sec. 156.1220(a)(2).
\128\ Consistent with the current process, HHS may also take
action on reported material EDGE discrepancies if the discrepancy
involved a processing error by HHS, HHS's incorrect application of
the relevant methodology, or a HHS mathematical error, consistent
with the bases upon which an issuer may request reconsideration
under Sec. 156.1220.
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We proposed to amend Sec. 153.710, by creating new paragraph (e)
and redesignating paragraphs (e), (f) and (g), as (f), (g) and (h)
respectively, to capture the proposed EDGE discrepancy materiality
threshold and proposed to apply it beginning with the 2020 benefit
year.\129\ We explained that we believe this increased materiality
threshold will reduce burden on issuers having to submit additional
data to HHS when a discrepancy is determined to be potentially material
and allow more certainty and stability for risk adjustment transfers.
If a reported EDGE discrepancy is determined to not meet the
materiality threshold, HHS would take no action on the discrepancy and
the issuer's data submission would remain as submitted by the data
submission deadline for the applicable benefit year.
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\129\ The deadline for submission of 2020 benefit year risk
adjustment data is April 30, 2021. See 45 CFR 153.730. As such, the
EDGE discrepancy reporting process for the 2020 benefit year will
not begin until May 2021.
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We also explained that while HHS generally only takes action on
reported material EDGE discrepancies that are determined to harm other
issuers, issuers must continue to report and describe any identified
EDGE discrepancy to HHS in a format specified by HHS for each benefit
year. Issuers must report all data discrepancies in order to permit HHS
to determine whether such an error is material and actionable and to
evaluate the impact on other issuers in the state market risk pool. We
sought comment on the proposed EDGE discrepancy materiality threshold
and the accompanying amendments to Sec. 153.710. We are finalizing the
EDGE discrepancy materiality threshold and the amendments to Sec.
153.710 as proposed.
We received public comments on the proposed updates to the EDGE
discrepancy materiality threshold. The following is a summary of the
comments we received and our responses.
Comment: Most commenters supported the proposed increase to the
EDGE discrepancy materiality threshold. These commenters noted the
increased threshold amount would enhance program integrity by focusing
efforts on discrepancies that negatively impact other issuers in the
applicable market risk pool, reduce the administrative burden
associated with these data requests, and allow more certainty and
stability for risk adjustment transfers. A few commenters expressed the
belief that the previous threshold had been too low. One commenter
agreed with increasing the threshold but noted they lacked the data to
confirm the proposed threshold was appropriate.
Response: We appreciate the support for increasing the EDGE
discrepancy materiality threshold. We agree with commenters that the
increased discrepancy materiality threshold will reduce issuer burden
and allow for more certainty and stability for risk adjustment
transfers. We also agree that the current threshold, which was
established to be consistent with the materiality threshold for
reconsideration requests set forth in 45 CFR 156.1220(a)(2), is too low
for discrepancies and most of the time required HHS to reallocate
minimal amounts of risk adjustment monies. As such, we are finalizing
the EDGE materiality threshold as proposed.
In assessing different EDGE discrepancy materiality thresholds, HHS
analyzed the 2017 benefit year EDGE discrepancies. Specifically, we
reviewed the discrepancy amounts and impacts on affected issuers in the
impacted state market risk pools and considered a variety of threshold
amounts. We found that $100,000 or one percent of the total estimated
transfer amount in the applicable state market risk pool balanced
reducing the number of reallocations involving small amounts with
maintaining data integrity and confidence in the risk adjustment
program.
After consideration of the comments on these proposals, for the
2020 benefit year and beyond, we are finalizing the EDGE discrepancy
materiality threshold as proposed, including the accompanying proposed
amendments to Sec. 153.710, to reflect the amount in dispute must
equal or exceed $100,000 or one percent of the total estimated transfer
amount in the applicable state market risk pool, whichever is less.
Where an identified material EDGE discrepancy negatively affects the
issuer without having a negative effect on other issuers within the
state market risk pool, issuers will be required to adhere to the
initial data submission and accept the consequences of their data
submission, even when the negative financial impact of the inaccuracy
on the issuer submitting incorrect data is above this materiality
threshold. Therefore, HHS will only take action on material
discrepancies that harm other issuers in the same state market risk
pool.\130\
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\130\ Consistent with the current process, HHS may also take
action on reported material EDGE discrepancies if the discrepancy
involved a processing error by HHS, HHS's incorrect application of
the relevant methodology, or a HHS mathematical error, consistent
with the bases upon which an issuer may request reconsideration
under Sec. 156.1220.
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6. Risk Adjustment User Fee for 2022 Benefit Year (Sec. 153.610(f))
If a state is not approved to operate, or chooses to forgo
operating, its own risk adjustment program, HHS will operate risk
adjustment on its behalf. As noted previously in this final rule, for
the 2022 benefit year, HHS will be operating the risk adjustment
program in every state and the District of Columbia. As described in
the 2014 Payment Notice, HHS's operation of risk adjustment on behalf
of states is funded through a risk adjustment user fee.\131\ Section
153.610(f)(2) provides that, where HHS operates a risk adjustment
program on behalf of a state, an issuer of a risk adjustment covered
plan must remit a user fee to HHS equal to the product of its monthly
billable member enrollment in the plan and the PMPM risk adjustment
user fee specified in the annual HHS notice of benefit and payment
parameters for the applicable benefit year.
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\131\ 78 FR 15416 through 15417.
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OMB Circular No. A-25 established federal policy regarding user
fees, and specifies that a user charge will be assessed against each
identifiable recipient for special benefits derived from federal
activities beyond those received by the general public. The risk
adjustment program will provide special
[[Page 24196]]
benefits as defined in section 6(a)(1)(B) of Circular No. A-25 to
issuers of risk adjustment covered plans because it mitigates the
financial instability associated with potential adverse risk selection.
The risk adjustment program also contributes to consumer confidence in
the health insurance industry by helping to stabilize premiums across
the individual, merged, and small group markets.
In the 2021 Payment Notice, HHS calculated the federal
administrative expenses of operating the risk adjustment program for
the 2021 benefit year to result in a risk adjustment user fee rate of
$0.25 PMPM based on our estimated costs for risk adjustment operations
and estimated billable member months for individuals enrolled in risk
adjustment covered plans. For the 2022 benefit year, we proposed to use
the same methodology to estimate our administrative expenses to operate
the program. These costs cover development of the model and
methodology, collections, payments, account management, data
collection, data validation, program integrity and audit functions,
operational and fraud analytics, stakeholder training, operational
support, and administrative and personnel costs dedicated to risk
adjustment program activities. To calculate the user fee, we divided
HHS's projected total costs for administering the risk adjustment
programs on behalf of states by the expected number of billable member
months in risk adjustment covered plans in states where the HHS-
operated risk adjustment program will apply in the 2022 benefit year.
We estimate that the total cost for HHS to operate the risk
adjustment program on behalf of states for the 2022 benefit year will
be approximately $60 million, and the risk adjustment user fee would be
$0.25 PMPM. The risk adjustment user fee costs for the 2022 benefit
year are expected to remain steady from the prior 2021 benefit year
estimates. However, we project a small decline in billable member
months in the individual and small group markets overall in the 2022
benefit year based on the declines observed in the 2019 benefit year.
We sought comment on the proposed risk adjustment user fee for the 2022
benefit year. We also explained that we would continue to examine the
costs and enrollment projections for the 2022 benefit year,
particularly as we receive more information on the impact of the
coronavirus disease 2019 (COVID-19) PHE, and proposed to incorporate
any such newly available data to update the final 2022 benefit year
risk adjustment user fee rate that we would announce in the final rule.
We sought comment on these estimates and the use of any newly available
data to update the estimates to reflect any emerging cost or enrollment
trends for the final 2022 benefit year user fee. We are finalizing the
2022 benefit year risk adjustment user fee as proposed.
We received public comments on the proposed risk adjustment user
fee for 2022 benefit year (Sec. 153.610(f)) and accompanying
solicitation of comments. The following is a summary of the comments we
received on the proposed 2022 benefit year user fee and our responses.
Comment: One commenter expressed concern regarding HHS's assumption
that overall enrollment would decline in the 2022 benefit year, which
would result in an increased risk adjustment user fee amount. This
commenter requested additional detail on the projected decrease in
billable member months.
Response: Our methodology for calculating the 2022 benefit year
risk adjustment user fee was the same as the one used for 2021 benefit
year. But as the commenter noted, when we proposed the rule, we
anticipated a small decline in billable member months in the individual
and small group markets overall based on the declines observed in 2019
benefit year. We continue to believe that the finalized rate will
ensure adequate funding for HHS to operate the risk adjustment program
in all 50 states and the District of Columbia for 2022. Importantly, we
also note that our assumption of a small decline in billable member
months did not actually result in any increase in the risk adjustment
user fee from the previous 2021 benefit year amount.\132\
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\132\ The 2021 benefit year risk adjustment user fee amount is
also $0.25 PMPM. See 85 FR at 29194-29195.
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After consideration of the comments on this proposal, we are
finalizing the risk adjustment user fee for the 2022 benefit year as
$0.25 PMPM as proposed.
7. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (HHS-RADV) (Sec. 153.630)
To ensure the integrity of the HHS-operated risk adjustment
program, HHS conducts risk adjustment data validation (HHS-RADV) under
Sec. Sec. 153.350 and 153.630 in any state where HHS is operating risk
adjustment on a state's behalf. The purpose of HHS-RADV is to ensure
issuers are providing accurate and complete risk adjustment data to
HHS, which is crucial to the purpose and proper functioning of the HHS-
operated risk adjustment program. HHS-RADV also ensures that risk
adjustment transfers reflect verifiable actuarial risk differences
among issuers, rather than risk score calculations that are based on
poor data quality, thereby helping to ensure that the HHS-operated risk
adjustment program assess charges to issuers with plans with lower-
than-average actuarial risk while making payments to issuer with plans
with higher-than-average actuarial risk. HHS-RADV consists of an
initial validation audit and a second validation audit.\133\ Under
Sec. 153.630, each issuer of a risk adjustment covered plan must
engage an independent initial validation audit entity. The issuer
provides demographic, enrollment, and medical record documentation for
a sample of enrollees selected by HHS to the issuer's initial
validation auditor for data validation. Each issuer's initial
validation audit is followed by a second validation audit, which is
conducted by an entity HHS retains to verify the accuracy of the
findings of the initial validation audit.
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\133\ 45 CFR 153.630(a) through (c).
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a. Exemptions From HHS-RADV (Sec. 153.630(g))
In 2020 Payment Notice, we codified several exemptions from the
HHS-RADV requirements. In this rule, we proposed to codify the
previously established exemption \134\ for issuers who only offer
small-group carryover coverage in the state during the benefit year
being audited at new proposed Sec. 153.630(g)(4). As we discussed in
the 2020 Payment Notice, under this policy, a small group market issuer
with off-calendar year coverage who exits the market but has only
carry-over coverage that ends in the next benefit year (that is, carry-
over of run out claims for individuals enrolled in the previous benefit
year, with no new coverage being offered or sold in the state) would be
considered an exiting issuer and would be exempt from HHS-RADV for the
benefit year with the carry-over coverage.\135\
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\134\ 84 FR 17503 through 17504.
\135\ Ibid.
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We also proposed to codify the previously established exemption
\136\ for issuers who are the sole issuer in a state market risk pool
during the benefit year that is being audited at new proposed Sec.
153.630(g)(5). As we discussed in the 2020 Payment Notice, for single
issuer market risk pool(s), there are no risk adjustment transfers
calculated under the state payment transfer formula and thus, no
payment or financial
[[Page 24197]]
accountability to other issuers for that risk pool.\137\ As such, a
sole issuer in a state market risk pool is not required to participate
in the HHS-operated risk adjustment program (except for purposes of
high-cost risk pool payments and charges) for that state market risk
pool. However, if the sole issuer was participating in multiple risk
pools in the state during the year that is being audited, that issuer
will be subject to HHS-RADV for those risk pools with other issuers
that had risk adjustment transfers calculated under the state payment
transfer formula.
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\136\ 84 FR 17504.
\137\ Ibid.
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We noted that these exemptions do not introduce new policies;
instead, the proposed amendments to Sec. 153.630(g) were simply to
codify these previously established exemptions in regulation. We also
clarified that any issuer that qualifies for the small group carryover
coverage exemption in new proposed paragraph (g)(4) would not have its
risk score and its associated risk adjustment transfers adjusted due to
its own risk score error rate, as the issuer would not have
participated in HHS-RADV for the benefit year in which it only offered
the small group carryover coverage. However, that issuer's risk score
and resulting risk adjustment transfers could be subject to HHS-RADV
adjustments if other issuers in that state market risk pool were
outliers and received HHS-RADV risk score error rates for that benefit
year.
We solicited comments on these proposals.
We only received comments in support of codifying the HHS-RADV
exemption for issuers who are the sole issuer in a state market risk
pool during the benefit year being audited and are finalizing the
amendment to Sec. 153.630(g)(5) to codify that exemption as proposed.
We received several public comments on the codification of the HHS-RADV
exemption for issuers providing only small group carryover coverage in
the benefit year being audited at Sec. 153.630(g)(4), some of these
comments restated the proposal without providing an opinion while
others expressed opposition to the proposal. After consideration of the
comments received, we are also finalizing the amendment to Sec.
153.630(g)(4) to codify this exemption as proposed.
The following is a summary of the comments we received on the
codification of the exemption for issuers providing only small group
carryover coverage and our responses.
Comment: Some commenters asked HHS to reconsider the HHS-RADV
exemption for issuers providing only small group carryover coverage in
the benefit year being audited. These commenters expressed concern that
an exiting issuer with only small group carryover coverage may
potentially make up a large portion of the market for that calendar
year. The commenters also stated that issuers providing only small
group carryover coverage, who have not undergone HHS-RADV in the
previous 2 years, should still be subject to HHS-RADV requirements for
that year.
Response: After reviewing the comments on the proposed amendments
to Sec. 153.630(g)(4), we are finalizing, as proposed, the
codification of the exemption from HHS-RADV for issuers providing only
small group carryover coverage in the benefit year being audited. As
discussed above and in the proposed rule, neither of these exemptions
are new \138\ and the proposals were to codify the previously
established exemptions in regulation. We continue to believe that both
exemptions are appropriate.
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\138\ See 84 FR 17503 through 17504.
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With respect to the exemption for sole issuers, we believe it is
appropriate because we do not calculate risk adjustment transfers for a
benefit year in a state market risk pool in which there is only one
issuer and thus, there is no payment or financial accountability to
other issuers for that risk pool. With respect to the small group
carryover coverage exemption, we believe that this exemption ensures
that such small group carryover only issuers (who are considered
exiting issuers) are treated the same as other exiting issuers with
regards to HHS-RADV requirements.
With respect to concerns that issuers seeking to use the small
group carryover coverage exemption might make up a large portion of the
market, based on our past experience operating HHS-RADV for the 2017
and 2018 benefit years, we found that issuers that would qualify for
this exemption criteria are typically very small issuers, with the
majority having fewer than 500 billable member months statewide or
below $15 million in total premium. As a result, we do not believe
issuers that would qualify for this exemption would make up a large
portion of a state's market risk pool and these issuers have generally
had a reasonable chance of being exempted under other exemption
categories.\139\
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\139\ See 45 CFR 153.630(g)(1) and (g)(2).
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With respect to the comment on issuers being subject to HHS-RADV
requirements if they have not participated in HHS-RADV in the previous
2 years, we note that generally all issuers of risk adjustment covered
plans in a state market risk pool must participate in HHS-RADV unless
they qualify for an exemption specified in 153.630(g). As established
at 153.630(g)(2), it is only issuers at or below the materiality
threshold that are subject to random and targeted sampling for HHS-RADV
participation approximately every 3 years (barring any risk-based
triggers based on experience that will warrant more frequent audits).
This exemption for issuers at or below materiality threshold was
created in response to stakeholder requests to ease the burden of
annual audit requirements for smaller issuers of risk adjustment
covered plans. We maintain that this exemption for issuers at or below
materiality threshold is important given the fixed costs associated
with hiring an initial validation auditor and submitting results to HHS
on an annual basis; therefore, we do not intend to make changes to it
at this time.
After consideration of the comments received on these proposals, we
are finalizing the codification of the sole issuer and small group
carryover coverage issuer exemptions from HHS-RADV and the amendments
to Sec. 153.630(g) as proposed.
b. IVA Requirements (Sec. 153.630(b)(3))
In accordance with Sec. 153.630(b)(3), an issuer must ensure that
its IVA Entity is reasonably free of conflicts of interest, such that
it is able to conduct the IVA in an impartial manner and its
impartiality is not reasonably open to question. In prior rulemaking,
we explained that to meet this standard, the IVA Entity, among other
things, may not have had a role in establishing any relevant internal
controls of the issuer related to the risk adjustment data validation
process when HHS is operating risk adjustment on behalf of a state, or
serve in any capacity as an advisor to the issuer regarding the
IVA.\140\ In the proposed rule, we proposed to amend this standard and
clarify that to demonstrate that the IVA Entity is reasonably free of
conflicts, the IVA Entity must also not have or previously have had a
role in establishing any relevant internal controls of the issuer
related to risk adjustment or the EDGE server data submission process
for the applicable benefit year for which the IVA Entity is performing
the IVA on behalf of the issuer. Additionally, the IVA Entity must also
not have served in any capacity as an advisor to the issuer regarding
the risk adjustment or EDGE server data submission for the
[[Page 24198]]
applicable benefit year. For example, the IVA Entity cannot serve as
the issuer's third party administrator (TPA) for purposes of the EDGE
data submission for HHS-operated risk adjustment in the 2020 benefit
year and serve as the IVA Entity for that issuer for the 2020 benefit
year. We proposed these changes because we are concerned about
conflicts of interest that could arise if the same entity assists or
completes the EDGE data submissions for an issuer for an applicable
benefit year, and then also serves as the IVA Entity auditing the
submission of that data in HHS-RADV. This proposal was in addition to
the requirements set forth in 2014 and 2015 Payment Notices.\141\ We
sought comment on this proposal.
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\140\ See 79 FR 13758.
\141\ The 2014 Payment Notice final rule required that that
issuers ensure that IVA Entities are reasonably capable of
performing the audit, the audit is completed, the auditor is free
from conflicts of interest, and the auditor submits information
regarding the IVA to HHS in the manner and timeframe specified by
HHS. 78 FR 15410 at 15437. The 2015 Payment Notice final rule
established standards and guidelines regarding the qualifications of
the IVA Entity, including further details on the conflict of
interest standards. 79 FR 13744 at 13758-13759.
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The only comments we received on the proposed updates to IVA
requirements (Sec. 153.630(b)(3)) supported the proposal noting that
there is a potential conflict of interest if an IVA Entity for a
company also served as the company's TPA for purposes of EDGE data
submission or risk adjustment. These commenters were in support of the
regulatory change. After consideration of comments on these proposals,
we are finalizing this policy and the accompanying amendment to Sec.
153.630(b)(3) as proposed.
c. HHS-RADV Administrative Appeals
In the 2015 Payment Notice, we established a three-level
administrative appeals process for issuers to seek reconsideration of
amounts under certain ACA programs, including the calculation of risk
adjustment charges, payments and user fees.\142\ In the 2018 Payment
Notice final rule, we extended this three-level administrative appeal
process to permit issuers to dispute the findings of a second
validation audit with respect to the 2016 benefit year HHS-RADV and
beyond.\143\ As previously explained, issuers are not permitted to use
the discrepancy reporting or administrative appeal processes under
Sec. Sec. 153.630(d)(2) and 156.1220, respectively, to contest the IVA
findings, because HHS does not conduct the IVA or produce those
results.\144\ Instead, issuers should review their IVA findings and
discuss any concerns with its IVA Entity prior to attesting to and
submitting those results to HHS.\145\ As explained in the 2020 Payment
Notice, only those issuers who have insufficient pairwise agreement
between the IVA and second validation audit will receive a Second
Validation Audit Findings Report, and therefore, have the right to
appeal the second validation audit findings.\146\ The existing
regulation at Sec. 153.630(d)(2) captures this policy. In the proposed
rule, we proposed conforming amendments to paragraph (d)(3) to
similarly add ``if applicable'' to the reference to an issuer's ability
to appeal the findings of the second validation audit to ensure these
regulatory provisions also appropriately capture this limitation.\147\
We sought comment on these proposed amendments.
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\142\ 78 FR 13818 through 13820.
\143\ 81 FR 94106.
\144\ Ibid.
\145\ See, for example, Sections 9.1, 9.5 and 9.7 of the ``2017
Benefit Year Protocols ACA HHS Risk Adjustment Data Validation,
Version 2.0,'' August 10, 2018.
\146\ 84 FR 17495. If the pairwise means test results conclude
there is sufficient agreement between the IVA and SVA findings, the
IVA findings are used to adjust risk scores. Issuers with sufficient
pairwise agreement do not receive a Second Validation Audit Findings
Report and there are no SVA findings to appeal. See 84 FR at 17495.
\147\ As detailed further below, we propose similar conforming
amendments to the references to an issuer's ability to appeal the
findings of the second validation audit in 45 CFR 156.1220(a)(1) and
(a)(3).
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The only comment we received on the proposal to codify the
previously established limits on the ability to appeal SVA findings as
part of the HHS-RADV administrative appeals process was in support of
the proposed clarifications. After consideration of the comments on
this proposal, we are finalizing the conforming amendments to Sec.
153.630(d)(3) as proposed.
d. Timeline for Collection of HHS-RADV Payments and Charges
In the 2020 Payment Notice,\148\ we finalized an updated timeline
for the publication, collection, and distribution of HHS-RADV
adjustments to transfers. This timeline was adopted to allow issuers to
report HHS-RADV adjustments in a later MLR reporting year and to
consider, in accordance with any guidance from the state DOIs, these
adjustments in rate setting during a later benefit year (specifically,
the year in which the HHS-RADV adjustments are collected and paid). We
proposed, beginning with 2019 benefit year HHS-RADV, to revert to the
previous schedule \149\ for the collection of HHS-RADV charges and
disbursement of payments in the calendar year in which HHS-RADV results
are released (for example, collection and disbursement of 2021 benefit
year HHS-RADV adjustments would begin in summer or fall of 2023). We
are finalizing the change in the HHS-RADV adjustment timeline as
proposed.
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\148\ 84 FR 17506 through 17507.
\149\ See 79 FR 13768 and 13769. Also see, for example, Table 3
in the document entitled ``Proposed Key Dates for Calendar Year
2019: Qualified Health Plan (QHP) Certification in the Federally-
facilitated Exchanges (FFEs); Rate Review; and Risk Adjustment.''
Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Key-Dates-Table-for-CY2019.pdf.
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HHS publishes the final summary report of risk adjustment transfers
(without HHS-RADV adjustments) and information on risk adjustment
default charges for the applicable benefit year in the summer of the
year after the applicable benefit year (typically June 30th of the year
after the applicable benefit year), and issuers report those risk
adjustment amounts in their MLR reports by July 31st of the year after
the applicable benefit year.\150\ Payment and collection of these risk
adjustment transfer and default charge amounts generally occurs in
August and September of the year after the applicable benefit year. We
separately report the HHS-RADV adjustments and information on default
data validation charges for the applicable benefit year approximately
one year after the final summary report of risk adjustment transfers
for that benefit year is published (typically 2 years after the
applicable benefit year in August \151\).
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\150\ The one exception is for the rare circumstances that HHS
is unable to collect full risk adjustment charges in a state market
risk pool or high-cost risk pool charges in a national market risk
pool. In such situations, issuers receiving lesser payments can
reflect the reductions in their MLR reports.
\151\ HHS-RADV adjustments for the 2019 benefit year will be
published under a different timeline due to the COVID-19-related
delay in HHS-RADV activities for the 2019 benefit year. See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
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Under the HHS-RADV timeline effective prior to the publication of
this rule, HHS begins collection and disbursement of HHS-RADV
adjustments and default data validation charges and allocations 2 years
after announcing the HHS-RADV adjustments (for example, collection and
disbursement of 2017 benefit year HHS-RADV adjustments will begin in
2021 \152\). For MLR reporting purposes, under the 2020 Payment Notice
approach applicable through 2018 benefit year HHS-RADV, issuers will
[[Page 24199]]
reflect the HHS-RADV adjustment amounts and default data validation
charges and allocations in the MLR reporting year in which collections
and payments of those amounts occur. Subject to approval by state DOIs,
issuers are also permitted to reflect these amounts in rate setting for
the same benefit year in which those amounts are paid or collected. For
example, 2017 benefit year HHS-RADV adjustments and default data
validation charges and allocations were announced in August 2019 and
issuers will report these amounts in the 2021 MLR reporting year (MLR
reports filed in 2022), the same year that the adjustments and default
data validation charges will be collected and paid. Additionally,
subject to permission by state DOIs, issuers were permitted to account
for the impacts of those 2017 benefit year HHS-RADV adjustments in rate
setting for the 2021 benefit year.
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\152\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/BY2017-HHSRADV-Adjustments-to-RA-Transfers-Summary-Report.pdf.
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The 2020 Payment Notice timeline was intended to address
stakeholder concerns regarding the predictability of HHS-RADV
adjustments, especially for the initial payment year. However, since
the publication of the 2020 Payment Notice, we have received feedback
stating that the extended timeline has not provided the increased
flexibility intended by the policy and instead has introduced undue
complexity. Specifically, stakeholders have expressed concern that this
policy conflicts with state requirements for financial accounting, and
can negatively impact their MLR rebate position, particularly if the
issuer experiences substantial changes in enrollment over the 3-year
MLR calculation period.\153\ Additionally, in the 2020 HHS-RADV
Amendments Rule, we finalized a transition from the prospective
application of HHS-RADV adjustments \154\ to a concurrent application
beginning with 2020 benefit year HHS-RADV.\155\ More specifically, we
finalized a policy to transition to applying HHS-RADV adjustments to
the risk scores and transfers of the same benefit year being audited
for all issuers (for example, 2021 benefit year HHS-RADV adjustments
will apply to 2021 benefit year risk scores and risk adjustment
transfers, rather than to 2022 benefit year risk scores and risk
adjustment transfers, as would have taken place prior to the
finalization of the 2020 HHS-RADV Amendments Rule).\156\ To transition
to this policy, HHS will average the 2019 and 2020 benefit year HHS-
RADV results of non-exiting issuers who participated in risk adjustment
for both benefit years \157\ to calculate the HHS-RADV adjustment to
2020 benefit year risk scores and transfers, and will publish the HHS-
RADV adjustments to transfers along with information on any default
data validation charges imposed for both benefit years.\158\ Beginning
with the 2021 benefit year of HHS-RADV, risk scores and transfers will
only be adjusted once based on the same benefit year's HHS-RADV results
(that is, 2021 benefit year HHS-RADV results would adjust 2021 benefit
year plan liability risk scores).
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\153\ Issuer MLRs are calculated using a 3-year average. See
section 2718(b)(1)(B)(ii) of the Act and 45 CFR 158.220(b).
\154\ The exception to the prospective application of HHS-RADV
adjustments is for exiting issuers, whose HHS-RADV results are
currently used to adjust risk scores and transfers for the benefit
year being audited (rather than the following benefit year's
transfers). See 83 FR 16965 through 16966 and 84 FR 17503 through
17504.
\155\ 85 FR 77002-77005.
\156\ Ibid.
\157\ Exiting and new issuers who participate in only one of the
two benefit years will not have their results for 2019 and 2020
averaged before being applied to the relevant benefit year's
transfers. For exiting issuers, positive error rate outlier issuers'
2019 and 2020 HHS-RADV results will be applied to the risk scores
and risk adjustment transfers for the benefit year being audited. If
a new issuer entered a state market risk pool in 2020, its plan
liability risk score(s) and risk adjustment transfer for the 2020
benefit year could be impacted by the new issuer's own 2020 HHS-RADV
results, the combined 2019 and 2020 HHS-RADV results of other non-
exiting issuers in the same state market risk pool, as well as the
2020 HHS-RADV results of exiting positive error rate outlier issuers
in the same state market risk pool.
\158\ We note that we intend to publish a separate 2019 benefit
year HHS-RADV results memo that will provide an overview of the 2019
benefit year error rate results. We also plan to release a separate
2019 benefit year HHS-RADV Summary Report that details adjustments
to 2019 benefit year risk scores and transfers if there are any
exiting positive error rate outlier issuers in the 2019 benefit year
of HHS-RADV. The average error rate approach is not applicable for
these issuers because exiting issuers who participated in 2019 HHS-
RADV will not have 2020 benefit year risk scores or transfers to
adjust.
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Although the operational timelines of the risk adjustment program
and the nature of HHS-RADV causes HHS-RADV results to always be at
least a year behind the associated risk adjustment transfers report, we
have continued to consider these issues. The above referenced changes
to the benefit year to which HHS-RADV adjustments are applied also lead
us to revisit these issues. We adopted the 2020 Payment Notice timeline
to provide issuers (and states) with more options on how and when to
account for the financial impacts from HHS-RADV. However, as noted
above, stakeholder feedback has indicated that the approach did not
achieve its policy goal and instead introduced unnecessary complexity.
Therefore, we proposed to revert to the previous schedule for
collection and disbursement of HHS-RADV adjustments and default data
validation charges and begin such activities in the summer or fall of
the calendar year in which HHS-RADV results are released. For example,
collection of 2021 benefit year HHS-RADV adjustments and default data
validation charges and disbursement of such amounts would begin in
summer or fall of 2023. In support of the new proposed timeline for
collection and disbursement of HHS-RADV adjustments and default data
validation charges, we explained that HHS would need to release the
applicable benefit year's report on HHS-RADV adjustments and default
data validation charges earlier in the year so the amounts are
available for issuers to use for MLR reporting purposes. We therefore
also proposed to release the applicable benefit year's HHS-RADV summary
report no later than early summer, and require issuers to report those
amounts in the MLR reports submitted by July 31st of the same calendar
year in which the results are released. For example, as proposed, the
summary report on 2021 benefit year HHS-RADV adjustments and default
data validation charges and allocations would be released no later than
early summer 2023, and issuers would be instructed to report these
amounts in the 2022 MLR reporting year (MLR reports that include 2022
benefit year data that are submitted by July 31, 2023; See Table 9). We
would then collect and disburse HHS-RADV adjustments and default data
validation charges and allocations in summer or fall of the calendar
year in which HHS-RADV results are released (for example, collection
and disbursement of 2021 benefit year HHS-RADV adjustments and default
data validation charges would begin in summer or fall of 2023). We
noted that the Unified Rate Review Template (URRT) instructions
currently permit issuers and states to consider HHS-RADV impacts in
rates for the year when these amounts will be collected and disbursed
and specified, as an example, that as 2017 RADV adjustments will be
collected in the 2021 calendar year, a state may allow issuers to
consider these adjustments in their 2021 rate setting. Therefore, in
the proposed rule, we proposed to remove this flexibility from the URRT
instructions.
We further explained that the proposed timeline would help mitigate
concerns regarding the incongruity with state financial accounting
requirements, as well as potential undue impacts of HHS-RADV
adjustments on MLR rebate liability, which could result from the
[[Page 24200]]
HHS-RADV adjustments being reported outside the 3-year MLR aggregation
window and thus potentially distorting the MLR experience of the
benefit year to which HHS-RADV adjustments apply. Additionally, we
noted this proposed change may also help mitigate the impact of any
substantial changes in enrollment between benefit years.
We proposed to begin this policy with the collection and
disbursement of HHS-RADV adjustments and default data validation
charges for the 2019 benefit year and noted that due to the delay in
the 2019 benefit year HHS-RADV,\159\ the timing of collections and
disbursements is different for the 2019 benefit year. We sought comment
on this proposal and whether any consideration should be made in the
transition to this policy to account for 2017 and 2018 benefit year
HHS-RADV collection and disbursement of payments and charges (under the
2020 Payment Notice timeline) also occurring in 2021 and 2022.
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\159\ HHS-RADV adjustments for the 2019 benefit year will be
published under a different timeline due to the COVID-19-related
delay in HHS-RADV activities for the 2019 benefit year. See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
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We are finalizing the updates to the timeline for collection of
HHS-RADV payments and charges, as proposed. As such, HHS will publish
the 2019 and 2020 benefit year HHS-RADV Summary Report for non-exiting
issuers in early summer of 2022.160 161 Issuers will also be
required to include any payments and charges reflected on this report,
along with risk adjustment transfers for the 2021 benefit year, in
their 2021 MLR reports, which must be filed by July 31, 2022. Issuers
will be required to report the 2019 and 2020 benefit year HHS-RADV
adjustments to transfers (including default data validation charge and
allocation amounts) in their MLR reports for the 2021 MLR reporting
year (MLR reports that include 2021 benefit year data that are
submitted by July 31, 2022). Finally, HHS will begin collecting both
2019 \162\ and 2020 HHS-RADV adjustments to transfers for non-exiting
issuers along with any default data validation charges imposed for
these 2 benefit years and disbursing related payments in late summer or
early fall of 2022.
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\160\ In the proposed rule, we proposed to publish separate 2019
and 2020 summary reports in early summer of 2022. However, as noted
earlier in this preamble, in the 2020 HHS-RADV Amendments Rule (85
FR 77002-77005), we finalized a transition from the prospective
application of HHS-RADV adjustments to a concurrent application
beginning with 2020 benefit year HHS-RADV. To effectuate this
transition, HHS-RADV adjustments for issuers who participated in
both the 2019 and 2020 benefit years will be averaged together and
applied to 2020 risk adjustment risk scores. As a result, we will be
publishing a single HHS-RADV summary report in calendar year 2022
that details transfer information from both the 2019 and 2020
benefit years of HHS-RADV.
\161\ Consistent with the current application of HHS-RADV
results for exiting issuers identified as positive error rate
outliers, issuers who fit this description for 2019 HHS-RADV will
have their results applied to the risk scores and transfer amounts
for the benefit year being audited, that is, the 2019 benefit year.
See the 2020 Payment Notice, 84 FR at 17503-17504. We will publish
the 2019 HHS-RADV Summary Report for these issuers (if any) in the
2022 calendar year. Additionally, as finalized in the 2020 Payment
Notice, for HHS-RADV benefit years beginning with 2018, HHS only
adjusts exiting issuers if they are positive error rate outliers.
This policy remains unchanged for the 2019 benefit year and beyond.
See the 2020 HHS-RADV Amendments Rule (85 FR at 77003).
\162\ See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.
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We received public comments on the proposed updates to the timeline
for collection of HHS-RADV payments and charges. The following is a
summary of the comments we received on the proposed updated timeline
and our responses.
Comment: Many commenters expressed general support for reverting to
the original schedule for the collection and disbursement of HHS-RADV
payments and charges. Commenters largely concurred with HHS that these
changes would help resolve incongruities with state financial
accounting requirements and potential undue impacts of HHS-RADV
adjustments on MLR rebate liability for issuers whose enrollment
experiences substantially change over a 3-year period. However, other
commenters were concerned about the overlap that would occur during the
transition period as issuers would be required to report 2017 benefit
year HHS-RADV impacts alongside 2019 and 2020 benefit years HHS-RADV
impacts \163\ during 2021 MLR reports (filed in summer 2022) and would
be required to report 2018 and 2021 HHS-RADV impacts in their 2022 MLR
reports (filed in summer 2023). Some of these commenters requested
clarification about how the proposed policy affects reporting of 2017
and 2018 HHS-RADV adjustments, while one commenter suggested that 2017
HHS-RADV be reported in 2020 MLR filings and 2018 HHS-RADV adjustments
be reported in 2021 filings. Another commenter noted the overlap in
timelines, but did not see the need to account for 2017 and 2018 HHS-
RADV adjustments differently than was proposed.
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\163\ 2019 HHS-RADV is delayed due to COVID-19 and, as such,
results are scheduled to be released in late spring/early summer
2022 (See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf). Furthermore, we finalized in the 2020 RADV
Amendments Rule (85 FR 77002-77005) that 2019 and 2020 error rates
for non-exiting issuers will be averaged together at the issuer
level and will be applied to 2020 risk adjustment transfers.
Positive error rate exiting issuer HHS-RADV adjustments for the 2019
and 2020 benefit years will continue to be applied separately to the
risk scores and transfers for the respective benefit year being
audited.
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Finally, we received a few comments requesting that we retain the
allowance in the URRT for states to determine whether an adjustment for
HHS-RADV in the URRT would be reasonable and justifiable in any
particular benefit year.
Response: After considering all comments on the proposed updated
timeline, we are finalizing the changes to the timeline for collection
and disbursement of HHS-RADV results as proposed, beginning with the
2019 benefit year of HHS-RADV.\164\ In response to comments concerning
the transition period between the current HHS-RADV timeline (applicable
for the 2017 and 2018 benefit years) and the timeline finalized in this
rule (applicable beginning with the 2019 benefit year), we considered
whether accommodations would be needed during the transition period as
we recognize that the transition years will result in 2 years of HHS-
RADV being reported during one MLR reporting period.
---------------------------------------------------------------------------
\164\ Ibid.
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This included consideration of the options from the commenter
suggesting that 2017 HHS-RADV be reported in 2020 MLR filings and 2018
HHS-RADV adjustments be reported in 2021 filings. However, we did not
propose and are not making any changes with respect to the timeline for
collection and disbursement of HHS-RADV results for the 2017 or 2018
benefit year of HHS-RADV. We also do not believe these alternative
options would appropriately address 2017 and 2018 HHS-RADV for MLR
reporting purposes. First, the current timeline for 2017 and 2018 HHS-
RADV were established in notice-and-comment rulemaking,\165\ and as
such, issuers have expected and are preparing to report these amounts
on their 2021 and 2022 MLR reports, respectively, since the
finalization of the 2020 Payment Notice. Second, we note that the
suggested option would require that 2018 HHS-RADV be reported alongside
the combined results for 2019 and 2020 RADV, which would create--rather
than eliminate or mitigate--the same concerns the commenter was trying
to address through their alternative suggestions. The alternative would
just shift the overlap to a different MLR reporting year. We further
note this type of overlap during a transition period is a natural
result of
[[Page 24201]]
implementing this type of policy change.
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\165\ 84 FR 17454 at 17506-17507.
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As outlined elsewhere in this rule and in the proposed rule, after
further consideration of stakeholder concerns regarding the timeline
established in the 2020 Payment Notice, we proposed and are finalizing
the proposed update to revert to the prior schedule for collection and
disbursement of HHS-RADV results beginning with the 2019 benefit year.
This update responds to stakeholder concerns about the potential
conflicts with certain state accounting requirements and the potential
negative impact on certain issuers' MLR rebate position. It also aligns
with other recently finalized changes to HHS-RADV program requirements.
We intend to monitor implementation of the collection and disbursement
of HHS-RADV payments and charges, including feedback on lessons learned
from stakeholders, and will consider whether further guidance or
consideration of these issues is warranted.
To assist stakeholders in understanding the MLR reporting period
associated with each benefit year of risk adjustment and HHS-RADV,
incorporating the updated timeline that is finalized in this rule, we
have created the following table that explains which benefit years of
risk adjustment and HHS-RADV adjustments should be reported in which
MLR reporting years for the 2020-2025 MLR Reporting Years:
[GRAPHIC] [TIFF OMITTED] TR05MY21.025
Finally, we disagree with commenters who suggest retaining portions
of the URRT instructions pertaining to reporting HHS-RADV adjustments
that allowed states the option to allow issuers to take into
consideration the impact of HHS-RADV from another benefit year in
rating for the upcoming benefit year. Without the 2-year delay between
the release of HHS-RADV results and the collections of HHS-RADV
adjustments, we are concerned that the continued inclusion of these
instructions would be confusing. Further, there is no longer a
connection between the collection and disbursement of HHS-RADV
adjustments and the applicable upcoming benefit year to support
continuing to provide the flexibility in the URRT instructions. We
intend to monitor implementation of the collection and disbursement of
HHS-RADV payments and charges and will consider whether further
guidance is needed.
e. Second Validation Audit and Error Rate Discrepancy Reporting Windows
Under Sec. 153.630(d)(2), issuers have 30 calendar days to confirm
the findings of the SVA (if applicable) or the calculation of the risk
score error rate, or file a discrepancy report, in the manner set forth
by HHS, to dispute the foregoing. As explained in the 2020 Payment
Notice, only those issuers who have insufficient pairwise agreement
between the IVA and SVA receive SVA findings.\166\ We proposed to amend
paragraph (d)(2) to shorten the window to confirm the findings of the
SVA (if applicable) or the calculation of the risk score error rate, or
file a discrepancy, to within 15 calendar days of the notification by
HHS, beginning with the 2020 benefit year HHS-RADV. The proposed
shorter discrepancy reporting timeframes were intended to ensure that
we can resolve as many issues as possible in advance of publication of
the Summary Report of Risk Adjustment Data Validation Adjustments to
Risk Adjustment Transfers for the applicable benefit year. Based on the
first 2 payment years of HHS-RADV, we explained that HHS believes that
this shortened window would not be overly burdensome to issuers, and
that any disadvantages of this shortened window would be outweighed by
the benefits of timely resolution of as many discrepancies as possible
prior to the release of the Summary Report of Risk Adjustment Data
Validation Adjustments to Risk Adjustment Transfers for the applicable
benefit year. We further noted that a 15 calendar day discrepancy
reporting window is consistent with the IVA sample and EDGE discrepancy
reporting windows at Sec. Sec. 153.630(d)(1) and 153.710(d),
respectively. We proposed shortening the discrepancy window in the 2020
Payment Notice, but did not finalize the proposal in response to
comments suggesting that we revisit this proposal once we had completed
a payment year of HHS-RADV.
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\166\ 84 FR 17495.
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We are not finalizing the proposal to shorten the discrepancy
reporting windows under Sec. 153.630(d)(2) for issuers to confirm the
findings of the
[[Page 24202]]
SVA (if applicable) or the calculation of the risk score error rate, or
file a discrepancy report to dispute the foregoing from 30 to 15
calendar days and will instead maintain the existing 30 calendar day
discrepancy reporting windows.
We received public comments on the proposed updates to the SVA and
error rate discrepancy reporting windows. The following is a summary of
the comments we received and our responses.
Comment: Commenters were opposed to the proposal to shorten the SVA
and risk score error rate attestation and discrepancy reporting
timeframe from 30 to 15 days and instead recommended maintaining the
existing 30 calendar day reporting window. Several commenters stated
that they believed that the proposed 15-day timeline would not provide
adequate time for issuers to complete a thorough review of the SVA
findings or the calculation of the risk score error rate. Another
commenter suggested that the timeframes could be shortened elsewhere in
the HHS-RADV process in order to keep the 30-day reporting timeframes,
noting that it would be helpful for issuers to receive their HHS-RADV
error rates sooner for use in pricing.
Response: After consideration of the comments received, we are not
finalizing the proposal to shorten the attestation and discrepancy
reporting window under Sec. 153.630(d)(2) from 30 to 15 calendar days
and will instead maintain the existing 30 day attestation and
discrepancy reporting window. Issuers will continue to have 30 calendar
days to confirm the findings of the SVA (if applicable) or the
calculation of the risk score error rate, or file a discrepancy report.
As a result of these comments, we are not finalizing the proposal
to shorten the SVA and risk score error rate attestation and
discrepancy reporting timeframes from 30 calendar days to 15 calendar
days.
8. Risk Adjustment Data Reporting Requirements for Future Premium
Credits (Sec. 153.710)
As detailed earlier in this preamble, on September 2, 2020, we
issued an interim final rule (IFR) on COVID-19 wherein we set forth
risk adjustment reporting requirements for issuers offering temporary
premium credits in the 2020 benefit year to align with the relaxed
enforcement policy announced in guidance.\167\ For the 2021 benefit
year and beyond, we proposed to permanently adopt these risk adjustment
reporting requirements for all health insurance issuers in the
individual and small group markets who elect to offer premium credits
during a public health emergency declared by the Secretary of HHS
(declared PHE) \168\ if the premium credits are permitted by HHS in
future benefit years. Specifically, we proposed that issuers of risk
adjustment covered plans that provide temporary premium credits during
a declared PHE when permitted by HHS in future benefit years must
report to their EDGE servers adjusted plan premiums that reflect actual
premiums billed to enrollees, taking the premium credits into account
as a reduction in premiums. In the proposed rule, we also proposed to
clarify that HHS's calculation of risk adjustment payment and charges
for the 2021 benefit year and beyond under the state payment transfer
formula would be calculated using the statewide average premium
reflecting actual premiums billed, which takes into account any
temporary premium credits provided as a reduction in premium for the
applicable months of coverage during a declared PHE when permitted by
HHS in future benefit years.\169\
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\167\ See, for example, ``Temporary Policy on 2020 Premium
Credits Associated with the COVID-19 Public Health Emergency,''
August 4, 2020. Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
\168\ The Secretary of the Department of HHS may, under section
319 of the PHS Act determine that: (a) A disease or disorder
presents a public health emergency; or (b) that a public health
emergency, including significant outbreaks of infectious disease or
bioterrorist attacks, otherwise exists.
\169\ As noted above, we are finalizing this clarification and
will calculate transfers under the state payment transfer for the
2021 benefit year and beyond using the statewide average premium,
reflecting actual premiums billed, taking into account any temporary
premium credits provided during a declared PHE when permitted by
HHS.
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As noted in the September 2020 IFR on COVID-19, we believe that
these requirements are necessary and appropriate because if HHS
permitted issuers that provided premium credits to submit unadjusted
premiums for the purposes of calculating risk adjustment, distortions
could occur that financially impact individual issuers. For example,
absent the requirement that issuers offering premium credits report the
adjusted, lower premium amount for risk adjustment purposes, an issuer
with a large market share with higher-than-average risk enrollees that
provides temporary premium credits would inflate the statewide average
premium by submitting the higher, unadjusted premium amount, thereby
increasing its risk adjustment payment. In such a scenario, a smaller
issuer in the same state market risk pool that owes a risk adjustment
charge, and also provides premium credits to enrollees, would pay a
risk adjustment charge that is relatively higher than it would have
been if it were calculated based on a statewide average that reflected
the actual, reduced premium charged to enrollees by issuers in the
state market risk pool.
Therefore, we believe that requiring issuers that offer temporary
premium credits during a declared PHE, when permitted by HHS, to
accurately report to the EDGE server the adjusted, lower premium
amounts actually billed to enrollees is most consistent with existing
risk adjustment program requirements and mitigates the distortions that
would occur if issuers that offer these temporary premium credits did
not report the actual amounts billed to enrollees, while not imposing
additional financial burdens on issuers, as compared to an approach
that would permit issuers to report unadjusted premium amounts. We
requested comment on this proposal. We are finalizing this policy as
proposed. Issuers of risk adjustment covered plans that provide
temporary premium credits when permitted by HHS in the 2021 benefit
year and beyond during a declared PHE must report to their EDGE servers
adjusted plan premiums that reflect actual premiums billed to
enrollees, taking the premium credits into account as a reduction in
premiums for the applicable months of coverage.
We received public comments on the proposals related to risk
adjustment data reporting requirements for future premium credits
(Sec. 153.710) and the accompanying proposed policies related to the
calculation of plan average premium and state average premium
requirements for extending future premium credits (Sec. 153.320). The
following is a summary of the comments we received and our responses.
Comment: Several commenters stated that they supported the policies
related to the adoption of the flexibility to allow issuers to grant
temporary premium credits to beneficiaries should a future PHE be
declared as this supports beneficiary access to care. One commenter
expressed concern that allowing plans to change their premiums with
knowledge of their competitors' premiums in the state market risk pool
gives them an unfair advantage in risk adjustment. This commenter was
concerned that a plan that initially offered too high a premium
relative to its risk could offer a premium reduction to lower its risk
adjustment
[[Page 24203]]
payout after knowing its competitors pricing structure.
Response: We believe that it is important to require issuers that
choose to offer temporary premium credits during a declared PHE to
report the actual reduced amount of premium billed to enrollees in the
state market risk pool. If HHS permitted issuers that provided premium
credits to submit unadjusted premiums for the purposes of calculating
risk adjustment, distortions could occur that financially impact other
issuers. For example, absent the requirement that issuers that offer
premium credits report the adjusted, lower premium amount for risk
adjustment purposes, an issuer with a large market share with higher-
than-average risk enrollees that provides temporary premium credits
would inflate the statewide average premium by submitting the higher,
unadjusted premium amount, thereby increasing its risk adjustment
payment. In such a scenario, a smaller issuer in the same state market
risk pool that owes a risk adjustment charge, would pay a risk
adjustment charge that is relatively higher than it would have been if
it were calculated based on a statewide average that reflected the
actual, reduced premium billed to enrollees by the issuer in the state
market risk pool. Therefore, the finalized approach is most consistent
with existing risk adjustment program requirements and mitigates the
distortions that would occur if issuers that offer these temporary
premium credits did not report the actual amounts billed to enrollees,
while not imposing additional financial burdens on issuers, as compared
to an approach that would permit issuers to report unadjusted premium
amounts.
We also note that this proposal does not seek to extend or expand
issuer ability to offer temporary premium credits. Rather, we proposed
to permanently adopt policies to guide risk adjustment calculations and
reporting if issuers of risk adjustment covered plans elect to offer
premium credits during a declared PHE when permitted by HHS in future
benefit years. By limiting this policy to future declared PHEs, the
potential creation of incentives for issuers to adjust premiums with
knowledge of their competitors' premiums in an attempt to achieve a
more favorable risk adjustment transfer (that is, a higher payment or
lower charge) is limited. Further, we believe the benefits associated
with encouraging issuers to provide temporary premium credits to help
consumers maintain continuous health coverage during a declared PHE
outweigh these potential risks and is an appropriate approach to
balancing the different equities involved during declared PHEs.
Comment: A few commenters expressed concern as to how small group
market plans will be able submit the actual premium amount billed to
plan enrollees through EDGE data, as small group market premium
reporting is completed at a subscriber level. These commenters
requested that HHS clarify the intended approach for issuers facing
this operational challenge.
Response: We understand the importance of clarifying this process
for all issuers in the individual and small group markets (including
merged markets) who offer temporary premium credits during a declared
PHE, when permitted by HHS for future benefit years, may fulfill the
data reporting requirements to offer premium credits during a declared
PHE if the premium credits are permitted by HHS in future benefit
years. Issuers of small group plans should apply the premium credit or
discount provided in the small group market uniformly to all enrollees
in the policy eligible for the credit for the applicable month,
ensuring that the aggregate premium reflected in their internal system
and EDGE is the lower, reduced amount for that month, including any
premium changes that result from retro-active enrollment changes. If
these premium credits are permitted in the 2021 benefit year or beyond,
we intend to continue to work closely with issuers to implement this
policy and will consider whether further guidance is warranted.
Comment: Several commenters supported the proposed approach to use
the actual premium amount billed to enrollees, reflective of permitted
temporary premium credits, when calculating the plan average premium
and statewide average premium for their application in the risk
adjustment program. A few of these commenters also mentioned that they
supported our proposal to follow this approach when calculating the
plan average premium and state average premium calculation in states
with approved state flexibility requests under Sec. 153.320(d).
Response: We appreciate these comments and agree with commenters.
We are finalizing this policy as proposed. This policy ensures that the
plan average premium and statewide average premium used in the state
payment transfer formula is calculated using the actual premiums billed
to plan enrollees, and also applies this methodology to the calculation
of transfers under the state payment transfer formula in states that
receive approval for a request to reduce transfers under Sec.
153.320(d).
After consideration of comments on these proposals, we are
finalizing as proposed the policy to permanently adopt these risk
adjustment reporting requirements for the 2021 benefit year and beyond,
for all issuers of risk adjustment covered plans who elect to offer
premium credits during a PHE declared by the Secretary of HHS (declared
PHE) if the premium credits are permitted by HHS in future benefit
years. We are also finalizing, as proposed, the permanent adoption of
the accompanying policy for HHS to calculate the plan average premium
and statewide average premium under the state payment transfer formula
using issuers' adjusted premium amounts, reflective of temporary
premium credits provided by issuers during a declared PHE when such
credits are permitted by HHS. That is, the lower actual premiums for
which plan enrollees would be responsible would be the amounts used in
the calculations under the state payment transfer formula to reflect
these temporary premium credits. This approach will also extend to
calculations under the state payment transfer formula in states that
receive approval for a request to reduce transfers under Sec.
153.320(d).
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
1. Definitions (Sec. 155.20)
a. Definitions of QHP Issuer Direct Enrollment Technology Provider and
Agent or Broker Direct Enrollment Technology Provider
We proposed to amend Sec. 155.20 to add a definition of QHP issuer
direct enrollment technology provider, which we proposed to mean a
business entity that provides technology services or provides access to
an information technology platform to QHP issuers to facilitate
participation in direct enrollment under Sec. Sec. 155.221 and
156.1230. We also proposed that this definition of QHP issuer direct
enrollment technology provider explicitly acknowledge that a web-broker
may also provide services to QHP issuers as a QHP issuer direct
enrollment technology provider to clarify that being a web-broker does
not preclude that entity from providing technology services or an
information technology platform to QHP issuers to facilitate QHP
issuers' participation in direct enrollment. In addition, we proposed
to modify the current definition of direct enrollment technology
provider in Sec. 155.20 to
[[Page 24204]]
distinguish it from the new proposed definition of QHP issuer direct
enrollment technology provider by renaming the term agent or broker
direct enrollment technology provider. We proposed these new and
modified definitions to capture the full array of potential
arrangements between technology companies and entities seeking to use
the direct enrollment pathways to facilitate enrollments in QHPs
offered in an FFE or SBE-FP in a manner that constitutes enrollment in
the Exchange. To align with these proposed new and modified
definitions, we further proposed to modify the definition of web-broker
to replace the last sentence, which stated that the term includes a
direct enrollment technology provider, to instead indicate that the
term web-broker includes an agent or broker direct enrollment
technology provider.
In the 2020 Payment Notice final rule, we amended Sec. 155.20 to
define ``direct enrollment technology provider'' to mean ``a type of
web-broker business entity that is not a licensed agent, broker, or
producer under [s]tate law and has been engaged or created by, or is
owned by an agent or broker, to provide technology services to
facilitate participation in direct enrollment under Sec. Sec.
155.220(c)(3) and 155.221.'' \170\ This definition captures instances
in which an individual agent or broker, a group of agents or brokers,
or an agent or broker business entity, engages the services of or
creates a technology company that is not licensed as an agent, broker,
or producer to assist with the development and maintenance of a non-
Exchange website that interfaces with an Exchange to assist consumers
with direct enrollment in QHPs offered through the Exchanges as
described in Sec. Sec. 155.220(c)(3) and 155.221. When the technology
company is not itself licensed as an insurance agency or brokerage, the
current framework establishes that these technology companies are a
type of web-broker that must comply with applicable web-broker
requirements under Sec. Sec. 155.220 and 155.221, unless indicated
otherwise.\171\
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\170\ See Patient Protection and Affordable Care Act; HHS Notice
of Benefit and Payment Parameters; Final rule, 84 FR 17454 at 17562
(April 25, 2019).
\171\ For example, Sec. 155.220(d)(2) exempts direct enrollment
technology providers from the training requirement that is part of
the annual FFE registration process for agents and brokers.
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As the FFE direct enrollment program has evolved, particularly with
the introduction and increased utilization of the enhanced direct
enrollment (EDE) pathway, the technical requirements and expertise
needed to participate in direct enrollment have become substantially
more complex. As a result, technology companies are increasingly relied
upon to develop, host, manage, and customize the technical platforms
that underpin direct enrollment entity non-Exchange websites.
Technology companies have emerged to support the participation of QHP
issuers in direct enrollment, as well as agents, brokers, and web-
brokers. In the context of EDE, some of these technology companies
build technical platforms prior to finalizing contractual relationships
with agents, brokers, web-brokers, or QHP issuers and some of these
technology companies provide platforms that are used to host direct
enrollment websites for both QHP issuers and agents, brokers, or web-
brokers. Under the current framework, the technology company is itself
a web-broker and often provides direct enrollment services under its
own branding while also wanting to offer its technology platform and
accompanying services to other agents, brokers, web-brokers, or QHP
issuers to facilitate their respective participation in direct
enrollment. As part of the services it provides as a technology
company, it may offer customized direct enrollment websites that
leverage its technical platform to other entities that allows for
additional systems or functionality or the use of the other entity's
branding. Because the current regulatory definition does not include a
reference to QHP issuers, questions have arisen regarding the ability
and accompanying requirements for QHP issuers to engage such entities
to assist with the development and hosting of a non-Exchange website to
facilitate the QHP issuer's participation in direct enrollment. For
these reasons we proposed to create a new definition of QHP issuer
direct enrollment technology provider and update the definitions of
direct enrollment technology provider and web-broker as described
above, to clarify that QHP issuers can also engage the services of
these technology companies and better align with the evolving business
models of entities involved in the FFE direct enrollment program. We
also proposed to include language in the new definition of QHP issuer
direct enrollment technology provider to clarify that when such
entities partner with QHP issuers, they are downstream or delegated
entities of the QHP issuer. This is similar to the approach adopted in
Sec. 155.221(e) for third-party auditors hired by QHP issuers or web-
brokers to perform operational readiness audits. By including this
language, we intended to clarify and ensure that these QHP issuer
direct enrollment technology providers would be subject to HHS
oversight as the delegated or downstream entity of the QHP issuer, and
the QHP issuer would be responsible for compliance with all applicable
requirements. This approach was also intended to clarify that when
providing its technology services and support, or providing access to
an information technology platform, to a QHP issuer, QHP issuer direct
enrollment technology providers would be subject to the rules
applicable to the QHP issuer with whom they are partnering to the
extent they are performing activities on behalf of the QHP issuer
implicating those rules. For example, if a QHP issuer direct enrollment
technology provider is assisting with the development of a non-Exchange
website for a QHP issuer, the QHP issuer display requirements captured
at Sec. 156.1230(a)(1)(ii) would apply.
We sought comment on this proposal.
We did not receive public comments on the proposal to update the
definition of web-broker, and are finalizing that proposal as proposed.
We received public comments on the proposed addition of a definition of
QHP issuer direct enrollment technology provider and updates to the
definition of direct enrollment technology provider. The following is a
summary of the comments we received and our responses.
Comment: Several commenters supported the proposal to define QHP
issuer direct enrollment technology provider and agent or broker direct
enrollment technology provider. One commenter noted that technology
providers play an important role in shaping the experience of consumers
and supported making regulations more clearly applicable to them.
Another commenter supported the proposed definitions, but requested
clarification that a single entity could serve as both types of
technology provider and as a web-broker.
Response: We appreciate the comments in support of this proposal
and are finalizing the proposal as proposed. To clarify, a single
entity may serve as a QHP issuer direct enrollment technology provider,
an agent or broker direct enrollment technology provider, and as a web-
broker. However, we note that an entity that functions in multiple
capacities must comply with the applicable rules for the context in
which they are operating. For example, if a web-broker is hosting a
direct enrollment website for a QHP issuer and therefore is operating
as a QHP issuer direct enrollment technology provider, the QHP issuer
display requirements
[[Page 24205]]
captured at Sec. 156.1230(a)(1)(ii) would apply to the website the
web-broker is hosting on behalf of the QHP issuer while the web-broker
display requirements in Sec. 155.220 would remain applicable to the
website the web-broker is hosting with its own branding.
2. Consumer Assistance Tools and Programs of an Exchange (Sec.
155.205)
To continue our efforts to standardize regulatory references to
web-brokers, we proposed to replace all references in Sec. 155.205(c)
to ``an agent or broker subject to Sec. 155.220(c)(3)(i)'' with the
term ``web-broker.'' In the 2020 Payment Notice final rule, we amended
Sec. 155.20 to define the term ``web-broker'' \172\ to mean an
individual agent or broker, a group of agents or brokers, or an agent
or broker business entity, that is registered with an Exchange under
Sec. 155.220(d)(1) and develops and hosts a non-Exchange website that
interfaces with an Exchange to assist consumers with the selection of
and enrollment in QHPs offered through the Exchange (a process referred
to as direct enrollment). We also amended Sec. Sec. 155.220 and
155.221 to incorporate the term web-broker as newly defined, where
applicable. However, at the time, we overlooked the fact that Sec.
155.205(c) also contains several of these general references to agents
and brokers subject to Sec. 155.220(c)(3)(i) that should have been
updated as part of this earlier effort to use the term web-broker as
newly defined. Such references appear in Sec. 155.205 paragraphs
(c)(2)(i)(B), (c)(2)(iii)(B), (c)(2)(iv) introductory text, and
(c)(2)(iv)(C). To avoid confusion and correct this oversight, we
proposed to standardize regulatory references to web-brokers by
replacing all references in Sec. 155.205(c) to ``an agent or broker
subject to Sec. 155.220(c)(3)(i)'' with the term ``web-broker.'' We
sought comment on this proposal.
---------------------------------------------------------------------------
\172\ See 84 FR 17563.
---------------------------------------------------------------------------
In addition, we proposed to revise a requirement related to website
content translations for QHP issuers and web-brokers participating in
the FFE EDE program that are subject to Sec. Sec. 155.205(c)(2)(iv)(B)
and 155.205(c)(2)(iv)(C) respectively. Currently under Sec. Sec.
155.205(c)(2)(iv)(B) and (C), QHP issuers and web-brokers are required
to translate website content into any non-English language that is
spoken by a limited English proficient (LEP) population that makes up
10 percent or more of the total population of the relevant state. Web-
brokers are currently required to translate website content within 1
year of registering with the Exchange, while QHP issuers are currently
required to translate website content beginning no later than the first
day of the individual market open enrollment period for the 2017
benefit year.
In the proposed rule, we proposed to allow QHP issuers and web-
brokers participating in the FFE EDE program additional time to come
into compliance with the website content translation requirements.
Specifically, we proposed that a QHP issuer or web-broker participating
in the FFE EDE program would have 12 months from the date the QHP
issuer or web-broker begins operating its FFE-approved EDE website in
the relevant state to comply with website content translation
requirements under Sec. Sec. 155.205(c)(2)(iv)(B) and (C) for website
content added to their websites as a condition of participation in the
FFE EDE program. We noted this proposed flexibility would not absolve
QHP issuers and web-brokers from complying with website content
translation requirements under paragraphs (c)(2)(iv)(B) and (C) that
are unrelated to their participation in the FFE EDE program within the
applicable timeframes.\173\
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\173\ See also ``Guidance and Population Data for Exchange,
Qualified Health Plan Issuers, and Web-Brokers to Ensure Meaningful
Access by Limited-English Proficient Speakers Under 45 CFR
155.205(c) and Sec. 156.250,'' March 30, 2016. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Language-access-guidance.pdf.
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We sought comment on whether this proposed flexibility for QHP
issuers and web-brokers participating in the FFE EDE program in
relevant states would have impacted accessibility to Exchange coverage
for LEP communities, or otherwise would have negatively impacted the
operation of and consumer access to Exchanges. In addition, we sought
comment from QHP issuers and web-brokers as to whether this proposed
change would have fostered investment in states where there is a
significant LEP community and provide additional incentives for such
entities to expand into relevant states. Lastly, we sought comment from
assisters about any impacts this proposed change would have had on
their proposed ability to work with web-brokers and use EDE websites as
described in the proposed rule (and below) when assisting members of
the LEP community with Exchange enrollment.
We did not receive public comments on the proposal to replace all
references in Sec. 155.205(c) to ``an agent or broker subject to Sec.
155.220(c)(3)(i)'' with the term ``web-broker.'' We are finalizing that
proposal as proposed. We did receive public comments on the proposal to
provide additional time to entities participating in EDE to translate
website content added to their websites as a condition of participation
in the FFE EDE program. The following is a summary of the comments we
received and our responses.
Comment: The vast majority of comments received opposed finalizing
the proposal to provide EDE entities up to 12 months to translate EDE-
specific website content. Generally, commenters expressed concerns
about possible conflicts between the proposal and statutory non-
discrimination requirements or asserted that the proposal would create
or exacerbate racial or ethnic disparities. Some commenters stated that
allowing EDE entities to delay the translation of their website content
could deprive LEP populations of meaningful access in violation of the
non-discrimination provisions in Section 1557 of the ACA. One commenter
pointed out this could allow an EDE entity to go through an entire open
enrollment period without translating its website content, potentially
leaving significant numbers of LEP consumers without information in
their languages. The same commenter acknowledged the significant
resources involved in developing an EDE website, but did not believe it
should take 12 more months to have it translated. Another commenter
stated this proposal would limit coverage received by LEP populations,
creating racial and ethnic disparities that raise serious concerns
under both the ACA and broader federal civil rights laws. Another
commenter stated the existing translation requirements are already
inadequate and should not be weakened at the expense of LEP consumers.
Two commenters supported the proposal. One stated the proposed rule
struck an appropriate balance between affording EDE entities additional
implementation flexibility and maintaining the language accessibility
standards.
Response: While we appreciate the comments in support of this
proposal, we are not finalizing this proposal given the concerns
expressed by the majority of commenters, and the fact that no QHP
issuers or web-brokers (small or otherwise) commented to specifically
indicate this proposal would incentivize their participation in states
where there is a significant LEP population and where translation of
their websites would have eventually been required. Almost all
commenters stated that this proposal could reduce access to coverage
for LEP populations, create further health inequities among this
population, or possibly violate statutory
[[Page 24206]]
non-discrimination requirements. We acknowledge these concerns are
worth careful consideration and outweigh any argument to finalize this
proposal at this time.
3. Navigator Program Standards (Sec. 155.210)
Sections 1311(d)(4)(K) and 1311(i) of the ACA require the Secretary
to establish a Navigator program under which HHS awards grants to
entities to conduct public education activities to raise awareness of
the availability of QHPs, distribute fair and impartial information
concerning enrollment in QHPs and the availability of APTC and CSRs,
and facilitate enrollment in QHPs; provide referrals to any applicable
office of health insurance consumer assistance or health insurance
ombudsman established under section 2793 of the PHS Act, or any other
appropriate state agency or agencies for any enrollee with a grievance,
complaint, or question regarding their health plan, coverage, or a
determination under such plan or coverage; and provide information in a
manner that is culturally and linguistically appropriate to the needs
of the population being served by the Exchange. The statute also
requires the Secretary, in collaboration with states, to develop
standards to ensure that information made available by Navigators is
fair, accurate, and impartial. We have implemented the statutorily
required Navigator duties through regulations at Sec. Sec. 155.210
(for all Exchanges) and 155.215 (for Navigators in FFEs). Certified
Application Counselors (CACs) duties have been implemented through
regulations at Sec. 155.225.
We proposed allowing, but not requiring, Navigators and CACs in
FFEs and SBE-FPs to use web-broker non-Exchange websites to assist
consumers with applying for insurance affordability programs and QHP
enrollment under certain circumstances and to the extent permitted by
state law. For a discussion of the proposal to allow Navigators and
CACs to use web-broker non-Exchange websites to assist consumers with
applying for insurance affordability programs and QHP enrollment, along
with a summary of comments received and our responses to these
comments, please see the preamble to Sec. 155.220.
4. Ability of States To Permit Agents and Brokers To Assist Qualified
Individuals, Qualified Employers, or Qualified Employees Enrolling in
QHPs (Sec. 155.220)
a. Navigator and Certified Application Counselor Use of Web-Broker
Websites
In the 2020 Payment Notice, we proposed, but did not finalize, a
modification of our policy that prohibits Navigators and CACs (together
referred to here as ``assisters'') from using web-broker websites to
assist with QHP selection and enrollment.\174\ At the time, adoption of
EDE functionality by web-brokers was still limited, and we decided to
focus on the implementation and oversight of the EDE pathway before
revisiting the current policy regarding assister use of web-broker
websites. Since then, EDE functionality has become more user-friendly
and increasingly more consumers are using the EDE pathway to enroll in
Exchange coverage.
---------------------------------------------------------------------------
\174\ See 84 FR 17515 through 17521.
---------------------------------------------------------------------------
In the proposed rule, we proposed permitting but not requiring,
assisters in FFEs and SBE-FPs to use web-broker non-Exchange websites
to assist consumers with QHP selection and enrollment, provided the
non-Exchange website met certain conditions. We proposed to provide
states with a State Exchange that does not rely on HealthCare.gov the
discretion to permit their assisters to use web-broker non-Exchange
websites.
We proposed several amendments to Sec. 155.220 to capture this
flexibility for assisters in FFE and SBE-FP states to use web-broker
non-Exchange websites to assist consumers and sought comment on all of
these proposals.
We received public comments on the proposal to allow, but not
require, Navigators and CACs in FFEs and SBE-FPs to use web-broker non-
Exchange websites to assist consumers with applying for insurance
affordability programs and QHP enrollment under certain circumstances
and to the extent permitted by state law. The following is a summary of
the comments we received and our responses.
Comment: The majority of commenters opposed the proposal to allow
assisters to use web-broker non-Exchange websites to assist consumers
with applying for insurance affordability programs and QHP enrollment.
Commenters were concerned about whether assisters could remain fair and
impartial if they were assisting consumers using web-broker non-
Exchange websites that did not offer enrollment into all QHPs offered
through the Exchange, or that included QHP recommendations. Some
commenters highlighted the confusion assisters and consumers may
encounter when using web-broker non-Exchange websites that include
marketing for non-QHP products. Several commenters also expressed
concerns regarding the cost of providing adequate training to assisters
to understand multiple platforms for enrollment. They noted that this
may take critical time away from assisters serving consumers. Many
commenters expressed concern that assister use of web-broker non-
Exchange websites to assist with QHP selection and enrollment would
reduce or not facilitate enrollment in Medicaid and CHIP. Also, many
commenters suggested that CMS invest resources to improve and expand
the functionality of HealthCare.gov and expand assister programs
instead of dedicating resources to implement this proposal.
Response: After consideration of the comments received in response
to this proposal, we agree with the commenters that there are concerns
related to assister use of web-broker non-Exchange websites to assist
with QHP selection and enrollment that warrant further consideration.
Therefore, we are not finalizing the proposed modification to the
current policy that prohibits assisters from using web-broker non-
Exchange websites to assist with QHP selection and enrollment or the
accompanying proposals to amend and replace Sec. 155.220(c)(3)(i)(D).
The current policy, which prohibits the use of web-broker non-Exchange
websites by assisters to assist with QHP selection and enrollment,
remains in effect.
b. QHP Information Display on Web-Broker Websites
We proposed to provide flexibility to web-brokers regarding the
information they are required to display on their non-Exchange websites
for QHPs in certain circumstances. Currently, Sec. 155.220(c)(3)(i)(A)
requires that a web-broker non-Exchange website must disclose and
display all QHP information provided by the Exchange or directly by QHP
issuers consistent with the requirements of Sec. 155.205(b)(1) and
(c). To the extent that not all information required under Sec.
155.205(b)(1) is displayed on the web-broker's website for a QHP, the
web-broker's website must prominently display a standardized disclaimer
provided by HHS stating that information required under Sec.
155.205(b)(1) for the QHP is available on the Exchange website, and
provide a link to the Exchange website. The preamble in the proposed
and final
[[Page 24207]]
rules that established the current text in Sec. 155.220(c)(3)(i)(A)
explained the intent of this requirement was that a web-broker website
must display all information required under Sec. 155.205(b)(1) unless
the information was not available to the web-broker, in which case the
web-broker website must display the standardized disclaimer.\175\
Section 155.220(c)(3)(i)(D) similarly currently requires web-brokers to
display all QHP data provided by an Exchange on its non-Exchange
website used to participate in the FFE direct enrollment program
(whether Classic DE or EDE). In the early years of Exchange operations,
we released a data file with limited QHP details (the QHP limited file)
that provided web-brokers with a basic set of QHP data that could be
used to satisfy the display requirements. Display of the data elements
from the QHP limited file data, in combination with a standardized
disclaimer (the plan detail disclaimer), became the de facto minimum
required to satisfy the web-broker's obligation to display QHP
information on its non-Exchange website. In adopting this approach, we
recognized that the Exchange may not have been able to provide web-
brokers with certain data elements necessary to meet the Sec.
155.205(b)(1) requirements, such as premium information, due to
confidentiality requirements, web-broker appointments with QHP issuers,
and state law. We also recognized some of the data elements, such as
quality rating information, were not going to be available in the
initial years of the Exchanges' operation.\176\
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\175\ See 78 FR at 37046 and 78 FR at 54077.
\176\ See Patient Protection and Affordable Care Act; Program
Integrity: Exchange, SHOP, and Eligibility Appeals; Final Rule, 78
FR 54069 at 54077 (August 30, 2013).
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In new proposed Sec. 155.220(n), we proposed to establish an
exception to the web-broker display requirements captured at paragraphs
(c)(3)(i)(A) and (D). We proposed to revise paragraph (c)(3)(i)(A) to
require a web-broker non-Exchange website to disclose and display all
QHP information provided by the Exchange or directly by QHP issuers
consistent with the requirements of Sec. 155.205(b)(1) and (c), except
as permitted under Sec. 155.220(n). We proposed a similar revision to
Sec. 155.220(c)(3)(i)(D). At new proposed paragraph (n), we proposed
certain flexibilities regarding display of QHP information if a web-
broker's non-Exchange website does not support enrollment in a QHP,
except in cases where the web-broker's website is intended to be
available for use by assisters consistent with proposed paragraph
(c)(3)(iii)(A). In that case, the flexibility at new proposed paragraph
(n) would not be available. A web-broker's non-Exchange website may not
support enrollment in a QHP if the web-broker does not have an
appointment with a QHP issuer and therefore is not permitted under
state law to enroll consumers in the coverage offered by that QHP
issuer. In such circumstances, we proposed that the web-broker's non-
Exchange website would not be required to provide all the information
identified under Sec. 155.205(b)(1). Instead, web-brokers would be
required to display the following limited, minimum information for such
QHPs: Issuer marketing name, plan marketing name, plan type, metal
level, and premium and cost-sharing information. To take advantage of
this new proposed flexibility, we also proposed that the web-broker's
non-Exchange website would be required to identify to consumers the
QHPs, if any, for which the web-broker's website does not facilitate
enrollment by prominently displaying the plan detail disclaimer
provided by the Exchange. The plan detail disclaimer explains that the
consumer can get more information about such QHPs on the Exchange
website, and includes a link to the Exchange website. We noted that we
believed this proposal struck an appropriate balance by recognizing
that web-brokers may not be permitted to assist with enrollments in
QHPs for which they do not have an appointment while still providing
key information about all QHPs on web-broker non-Exchange websites to
allow consumers to window shop and identify whether they may want to
explore other QHP options. It also would minimize burdens for web-
brokers by not requiring them to build functionality and processes to
display all of the required comparative information listed in Sec.
155.205(b)(1) for those QHPs for which they do not have an appointment
to sell.
To more closely align the plan detail disclaimer text \177\ with
the intent of this proposal, we noted that we planned to issue further
guidance revising the text of the disclaimer so that it can be clearly
associated with any QHPs for which the web-broker website does not
facilitate enrollment. For example, the current disclaimer text states,
in relevant part, the web-broker ``isn't able to display all required
plan information about this Qualified Health Plan at this time.'' We
noted that we were considering modifying this text so that it states,
in relevant part, the web-broker ``doesn't display all plan information
about, and doesn't facilitate enrollment in, this Qualified Health Plan
at this time.''
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\177\ The current plan detail disclaimer states: ``[Name of
Company] isn't able to display all required plan information about
this Qualified Health Plan at this time. To get more information
about this Qualified Health Plan, visit the Health Insurance
Marketplace[supreg] website at HealthCare.gov.'' See also Section
5.3.2 of the ``Federally-Facilitated Exchanges (FFEs) and Federally-
Facilitated Small Business Health Options Program (FF-SHOP)
Enrollment Manual.'' Available at https://www.regtap.info/uploads/library/ENR_FFEFFSHOPEnrollmentManual2020_5CR_090220.pdf.
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We invited comments on the proposed required limited, minimum QHP
details that must be displayed for those QHPs that the web-broker does
not facilitate enrollment in through its non-Exchange website and the
proposed edits to the plan detail disclaimer text. We also sought
comment on whether to require display of any additional elements
identified under Sec. 155.205(b)(1) among the limited, minimum
information, such as summaries of benefits and coverage.\178\
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\178\ Section 155.205(b)(1) references the following comparative
QHP information: Premium and cost-sharing information, the summary
of benefits and coverage, metal level, results of enrollee
satisfaction surveys, quality ratings, medical loss ratio
information, transparency of coverage measures, and the provider
directory.
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We received public comments on the proposed updates to requirements
regarding QHP information display on web-broker non-Exchange websites.
The following is a summary of the comments we received and our
responses.
Comment: Almost all commenters advocated for requiring that web-
broker non-Exchange websites display more QHP information than the
proposed rule proposed to require, even in cases when the web-broker
non-Exchange website does not support enrollment in a QHP. The vast
majority of commenters either advocated for requiring web-broker non-
Exchange websites to display all available QHP information for all
available QHPs, or generally supported making it easier for consumers
to obtain comparative information for all available QHPs when consumers
are using web-broker non-Exchange websites. One commenter acknowledged
that the proposal (including the proposed updates to the plan detail
disclaimer) represented a significant improvement over the status quo
and would allow consumers to make more educated comparisons between
QHPs when using web-broker non-Exchange websites, but still expressed a
preference for requiring that all information for all available QHPs be
displayed. Another commenter stated that the ``no wrong door'' intent
of the ACA would be best met by requiring the display of all available
QHP information
[[Page 24208]]
for all available QHPs on web-broker non-Exchange websites. Another
commenter asserted that there is no consumer-oriented rationale for
web-broker non-Exchange websites to display limited QHP information now
that there is access to APIs that provide the information. One
commenter specifically noted that the proposal did not require display
of summaries of benefits and coverage and quality information when a
web-broker non-Exchange website does not support enrollment in a
particular QHP, and that that information is critical for consumers to
evaluate and compare QHP options. Two commenters supported the proposal
as proposed.
Response: After consideration of the comments received, we are not
finalizing the proposed amendments to Sec. 155.220(c)(3)(i)(A),
(c)(3)(i)(D), or (n). We agree that the display of more QHP information
on web-broker non-Exchange websites is in the best interest of
consumers to aid them in comparing QHP options without having to
potentially navigate to multiple websites, and understand why the
majority of commenters advocated for web-broker non-Exchange websites
displaying all of the comparative information listed in Sec.
155.205(b)(1), including summaries of benefits and coverage and quality
information. We also believe requiring web-broker non-Exchange websites
to display additional QHP information is reasonable given that QHP
information has been more readily accessible for some time, both
through public use files and the Marketplace API. In addition, we note
that the specific suggestions made by commenters regarding some of the
QHP information that should be displayed on web-broker non-Exchange
websites (that is, summaries of benefits and coverage and quality
information) are part of the QHP information display requirements in
Sec. 155.220(c)(3)(i)(A) through its cross-reference to Sec.
155.205(b)(1).\179\
---------------------------------------------------------------------------
\179\ See 45 CFR 155.205(b)(1)(ii), (iv), and (v).
---------------------------------------------------------------------------
Thus, we intend to further consider these issues and clarify the
display requirements for web-broker non-Exchange websites in future
rulemaking. In the interim, we also intend to limit our current use of
enforcement discretion that permits web-brokers to only display issuer
marketing name, plan marketing name, plan type, and metal level for all
available QHPs,\180\ so that web-broker non-Exchange websites will be
required to display all QHP information consistent with Sec.
155.205(b)(1) and (c), with the exception of medical loss ratio
information and transparency of coverage measures under Sec.
155.205(b)(1)(vi) and (vii), for all available QHPs. As such, until
these issues are addressed in future rulemaking, beginning at the start
of the open enrollment period for plan year 2022, web-broker non-
Exchange websites will be required to display all QHP information
received from the Exchange or directly from QHP issuers, consistent
with the requirements of Sec. 155.205(b)(1) and (c).\181\ During this
time, we will exercise enforcement discretion and not deem a web-broker
non-Exchange website out of compliance with Sec. 155.220(c)(3)(i)(A)
and (D) with respect to the display of medical loss ratio information
and transparency of coverage measures if the web-broker non-Exchange
website displays the other required standardized comparative
information consistent with Sec. 155.205(b)(1) and (c). Prior to the
start of the open enrollment period for plan year 2022, if a web-
broker's non-Exchange website does not display all QHP information
consistent with the requirements of Sec. 155.205(b)(1) and (c), other
than medical loss ratio information and transparency of coverage
measures, it must prominently display the standardized disclaimer
provided by HHS and provide a link to the Exchange website. We note
that this interim approach applicable beginning with the start of the
plan year 2022 open enrollment period does not establish new
requirements and instead represents a change in the exercise of
enforcement discretion regarding the standardized comparative
information web-brokers are required to display under existing
regulations following our consideration of comments on the proposed
changes to the web-broker QHP display requirements.\182\ We intend to
continue our collaborative approach of working with web-broker and
other enrollment partners to ensure consumers have information to make
informed coverage choices while balancing the burdens and costs imposed
on our partners.
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\180\ ``Processes and Guidelines for Becoming a Web-broker in
the Federally-facilitated Exchanges: An Overview for New and
Existing Web-brokers,'' October 2017, available at https://www.cms.gov/files/document/processes-becoming-web-broker.pdf.
\181\ HHS makes QHP information available, including the
standardized comparative information under Sec. 155.205(b)(1)(i)--
(v) and (viii), through public use files and the Marketplace API.
\182\ See 45 CFR 155.220(c)(3)(i)(A) and (D).
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c. Web-Broker Operational Readiness Review Requirements
We proposed amendments to further clarify the operational readiness
requirements applicable to web-brokers by adding a new proposed Sec.
155.220(c)(6). In the 2018 Payment Notice final rule, we adopted rules
to require web-brokers to demonstrate operational readiness, including
compliance with applicable privacy and security requirements, prior to
participating in the FFE direct enrollment program.\183\ Our intent in
codifying this requirement was to build on the onboarding and testing
processes for a web-broker to be approved to use the direct enrollment
pathways. We noted the expectation that additional operational
readiness requirements would be established specific to EDE to account
for the additional functionality associated with that pathway.\184\ At
the same time, we established similar requirements for QHP issuers to
demonstrate operational readiness and compliance with applicable
requirements prior to their use of the direct enrollment pathway.\185\
In the 2020 Payment Notice final rule, we consolidated these similar
requirements from their prior locations at Sec. Sec.
155.220(c)(3)(i)(K) and 156.1230(b)(2) into Sec. 155.221(b)(4) as part
of our effort to streamline requirements applicable to all direct
enrollment entities.\186\ In the proposed rule, we proposed to create a
new Sec. 155.220(c)(6) to capture operational readiness requirements
applicable to web-brokers that host non-Exchange websites to complete
QHP selection or the Exchange eligibility application. In proposed
paragraph (c)(6), we proposed to include introductory language that
reflects the requirement for a web-broker to demonstrate operational
readiness and compliance with applicable requirements prior to the web-
broker's non-Exchange website being used to complete an Exchange
eligibility application or a QHP selection, which may include
submission or completion, in a form and manner specified by HHS, of
certain information or testing processes. As reflected in proposed
paragraphs (c)(6)(i) through (v), HHS may request a web-broker submit a
number of artifacts or documents or complete certain testing processes
to demonstrate the operational readiness of its non-Exchange website.
The required documentation may include operational data including
licensure information, points of contact, and third-party
relationships; security and privacy assessment documentation, including
penetration testing results, security and privacy assessment reports,
[[Page 24209]]
vulnerability scan results, plans of action and milestones, and system
security and privacy plans; and an agreement between the web-broker and
HHS documenting the requirements for participating in the applicable
direct enrollment program. The required testing processes may include
enrollment testing, prior to approval or at the time of renewal, and
website reviews performed by HHS to evaluate prospective web-brokers'
compliance with applicable website display requirements prior to
approval. To facilitate testing, prospective and approved web-brokers
would have to maintain and provide access to testing environments that
reflect their prospective or actual production environments. We
proposed these amendments to codify in regulation existing program
requirements that apply to web-brokers that participate in the FFE
direct enrollment program and are captured in the agreements executed
with participating web-broker direct enrollment entities and related
technical guidance.\187\ We did not propose to extend the same
requirements to QHP issuers participating in the FFE direct enrollment
program, because QHP issuers, as HIPAA-covered entities, are subject to
longstanding federal requirements and oversight related to the
protection of PII and PHI that are not necessarily applicable to web-
brokers. With HIPAA privacy and security regulations and oversight in
place and applicable to QHP issuers, HHS has adopted a risk acceptance
approach for QHP issuers allowing them to participate in the FFE direct
enrollment program, in some cases, without imposing certain
requirements that are in place for web-brokers. In addition, QHP
issuers are subject to more extensive oversight by state regulators
than web-brokers.
---------------------------------------------------------------------------
\183\ See 81 FR 94176.
\184\ See 81 FR 94120.
\185\ See 81 FR 94152.
\186\ See 84 FR 17524.
\187\ See, for example, ``Updated Web-broker Direct Enrollment
Program Participation Minimum Requirements,'' May 21, 2020.
Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2020-WB-Program-Guidance-052120-Final.pdf.
---------------------------------------------------------------------------
We sought comment on this proposal.
We received one public comment on the proposed updates to web-
broker operational readiness review requirements. The following is a
summary of the comment we received and our response.
Comment: One commenter indicated they did not object to this
proposal because it primarily codifies existing guidelines to which
web-brokers are already subject. While acknowledging that similar
requirements may not apply to QHP issuers, based in part on their
status as HIPAA-covered entities, the commenter recommended similar
requirements apply to non-web-broker QHP issuer direct enrollment
technology providers. The commenter went on to state that though these
entities may also be subject to HIPAA as issuers' business associates,
issuers may not apply the same type of security and privacy oversight
that HHS applies to web-brokers.
Response: We are finalizing this proposal as proposed. We
appreciate the recommendation to extend similar or identical
requirements to non-web-broker QHP issuer direct enrollment technology
providers, and may consider proposing such requirements in the future.
However, we did not propose and are not finalizing the extension of the
same additional operational readiness review requirements to QHP
issuers participating in the FFE direct enrollment program. As noted
above and explained in the proposed rule, we did not propose to extend
the same requirements to QHP issuers because, as HIPAA-covered
entities, issuers are subject to longstanding federal privacy and
security requirements that are not necessarily applicable to all web-
brokers. In recognition of the applicability of the HIPAA privacy and
security framework and extensive oversight of issuers by state
regulators, HHS adopted a different approach for QHP issuer operational
readiness reviews, which includes not imposing certain requirements
applicable to web-broker direct enrollment entities. While we
continuously review our approach and regularly evaluate whether to
enhance program requirements for all direct enrollment entities, we
believe the current approach strikes the appropriate balance between
the burden associated with program requirements for different types of
direct enrollment entities and the risks posed by those entities'
participation in the program. In addition, our experience to date has
shown that most direct enrollment technology providers that develop
technology platforms for purposes of facilitating QHP issuer use of
direct enrollment are either facilitating participation in the EDE
program or are also web-brokers, and therefore would be subject to the
more rigorous EDE operational readiness review requirements or the
operational readiness review requirements applicable to web-brokers. To
the extent a small number of QHP issuer direct enrollment technology
providers are not also web-brokers and are not subject to the more
rigorous EDE operational readiness review requirements, those entities
are likely subject to HIPAA as issuers' business associates as the
commenter acknowledged. As part of our continuous review and evaluation
of direct enrollment requirements, we intend to monitor the types of
entities QHP issuers engage with as direct enrollment technology
providers and may propose changes to the operational readiness review
requirements for QHP issuer direct enrollment technology providers in
future rulemaking.
5. Standards for Direct Enrollment Entities and for Third Parties To
Perform Audits of Direct Enrollment Entities (Sec. 155.221)
a. Direct Enrollment Entity Plan Display Requirements
We proposed to revise Sec. 155.221(b)(1) to clarify the
requirements that apply when direct enrollment entities want to display
and market QHPs \188\ and non-QHPs. We proposed that in such
circumstances, the web-broker or QHP issuer must display and market
QHPs offered through the Exchange, individual health insurance coverage
as defined in Sec. 144.103 offered outside the Exchange (including
QHPs and non-QHPs other than excepted benefits), and all other
products, such as excepted benefits, on at least three separate website
pages, with certain proposed exceptions described below.
---------------------------------------------------------------------------
\188\ As detailed in prior rulemaking, with some limited
exceptions, stand-alone dental plans certified for sale on an
Exchange are considered a type of QHP. See 77 FR 18315. CMS expects
direct enrollment entities to follow the same requirements for
stand-alone dental plan QHPs as for medical QHPs, including the
applicable display and marketing requirements captured in Sec. Sec.
155.220, 155.221, and 156.1230, except as proposed and finalized at
new Sec. 155.221(c)(2) in the context of off-Exchange stand-alone
dental plan shopping.
---------------------------------------------------------------------------
In the 2020 Payment Notice final rule, we amended Sec.
155.221(b)(1) to require direct enrollment entities to display and
market QHPs and non-QHPs on separate website pages on their respective
non-Exchange websites.\189\ Similarly, we amended paragraph (b)(3) to
require direct enrollment entities to limit the marketing of non-QHPs
during the Exchange eligibility application and QHP selection process
in a manner that will minimize the likelihood that consumers will be
confused as to what products are available through the Exchange and
what products are not.\190\ Under the existing display standards
captured at paragraphs (b)(1) and (3), direct enrollment entities are
required to offer an Exchange eligibility application and QHP selection
process that is free from advertisements or information about non-QHPs
and sponsored links promoting health insurance related
[[Page 24210]]
products. However, under the current framework, it is permissible for a
direct enrollment entity to market or display non-QHP health plans and
other off-Exchange products in a section of the entity's website that
is separate from the QHP web pages if the entity otherwise complies
with the applicable requirements. We explained in the 2020 Payment
Notice that we believe marketing some products in conjunction with QHPs
may cause consumer confusion, especially as it relates to the
availability of financial assistance for QHPs purchased through the
Exchanges.\191\ We acknowledged at that time that we may need to update
these standards as new products come to market and as technologies
evolve that can assist with differentiating between QHPs offered
through the Exchange and other products consumers may be interested in.
We also noted our belief that the convenience of being able to purchase
additional products as part of a single shopping experience outweighs
potential consumer confusion, if proper safeguards are in place.\192\
---------------------------------------------------------------------------
\189\ See 84 FR 17523 and 17524.
\190\ Id.
\191\ Id.
\192\ Id.
---------------------------------------------------------------------------
In the proposed rule, we proposed to amend paragraph (b)(1) to
refine the previously adopted policy, consistent with the original
intent of minimizing consumer confusion about distinct products with
substantially different characteristics, while providing direct
enrollment entities with more marketing flexibility and opportunities
for innovation. QHPs are required to be offered on- and off-Exchange
under the guaranteed availability requirements at Sec. 147.104. The
current framework allows for direct enrollment entities to display on-
and off-Exchange QHPs on the same website pages, as long as the direct
enrollment entity's website makes clear that APTC and CSRs are only
available for QHPs offered through the Exchange.\193\ We noted that we
have observed various attempts by direct enrollment entities to
distinguish between on- and off-Exchange QHPs displayed on the same
website pages, but believed that even good faith efforts to inform
consumers about this distinction have the potential to cause confusion
about which QHP a consumer should select if APTC-eligible when two
instances of otherwise identical plans (that is, the on- and off-
Exchange versions of the QHP) are displayed on a single website page,
but only one is available with APTC. In addition, paragraph (b)(1)
currently prohibits the display of off-Exchange QHPs on the same
website pages as comparable non-QHP individual health insurance
coverage. This creates a segmented off-Exchange plan shopping
experience on direct enrollment entity websites that does not allow
consumers to easily comparison shop among comparable major medical
health insurance products. As described in the proposed rule and
further below, the recent introduction of individual coverage health
reimbursement arrangements (HRAs) increases the importance of
individual health insurance coverage offered outside of the Exchange
for employees whose employers offer such arrangements and also offer
the opportunity to make salary reduction contributions through a
cafeteria plan under section 125 of the Code, and this is part of the
reason we proposed to amend the current display requirements for direct
enrollment entities.
---------------------------------------------------------------------------
\193\ See, for example, 45 CFR 155.220(j)(2)(i) and
156.1230(a)(1)(iii).
---------------------------------------------------------------------------
We proposed to revise Sec. 155.221(b)(1) to require that direct
enrollment entities display and market QHPs offered through the
Exchange, individual health insurance coverage as defined in Sec.
144.103 offered outside the Exchange (including QHPs and non-QHPs other
than excepted benefits), and all other products, such as excepted
benefits, on at least three separate website pages, with certain
exceptions. Requiring that these three categories of products be
displayed and marketed on separate website pages provides a more
precise delineation between the three categories of products with
substantially different characteristics, either in the way they can be
purchased or the types of benefits they offer, while still allowing
substantial flexibility in website design to facilitate the consumer's
shopping experience. We proposed the first product category, QHPs
offered through the Exchange, must be isolated from the other
categories of products to distinguish for consumers the products for
which APTC and CSRs are available (if eligible). We proposed the second
product category, individual health insurance coverage offered outside
the Exchange (including QHPs and non-QHPs other than excepted
benefits), must be similarly distinguished from other products, because
those plans represent major medical coverage that is subject to the
same ACA market-wide requirements as QHPs offered through the Exchange,
but that is not available with APTC and CSRs. Therefore, distinguishing
between these two categories of products by requiring that they be
displayed and marketed on separate website pages would allow consumers
to more easily shop for comparable major medical insurance subject to
ACA market-wide rules while maintaining the clear distinction between
plans for which APTC and CSRs are and are not available. We proposed
that the third product category, which encompasses types of products
not in the first two categories, including excepted benefits, must be
displayed and marketed on one or more website pages separate from the
website pages used for displaying and marketing the first two
categories of products to assist consumers in distinguishing them from
major medical plans. The range of products in the third category are
not subject to ACA market-wide rules and APTC and CSRs are not
available for such products, and therefore they are substantially
different from the plans that fall into the first two categories.
We also proposed to amend Sec. 155.221(b)(3) to include clarifying
edits and to include the same exceptions detailed in this final rule as
we proposed for paragraph (b)(1). We proposed to revise paragraph
(b)(3) to limit marketing of non-QHPs during the Exchange eligibility
application and QHP selection process in a manner that minimizes the
likelihood that consumers would be confused as to which products and
plans are available through the Exchange and which products and plans
are not, except as permitted under new proposed paragraph (c)(1). The
proposal also removed a redundant reference to ``plan'' that was
included after ``QHP,'' and added references to ``plans'' after the
references to ``products'' to use consistent language throughout
paragraphs (b)(1) and (3). We proposed the same exceptions for
paragraph (b)(3) to align with the proposed changes to paragraph (b)(1)
to clarify that displaying QHPs and non-QHPs on the same website page,
as would be permitted under the proposed exceptions in certain
circumstances, would not constitute a violation of paragraphs (b)(1) or
(3).
We proposed certain exceptions in new Sec. 155.221(c) to the
proposed updates to paragraphs (b)(1) and (3), because we recognized
that, in some limited scenarios, consumers may be best served by being
able to directly and easily compare plans offered on- and off-Exchange.
As of January 1, 2020, employers may offer employees an individual
coverage HRA instead of offering traditional group health
coverage.\194\ An individual coverage HRA may reimburse employees for
medical expenses, including monthly
[[Page 24211]]
health insurance premiums. To use the individual coverage HRA, an
employee (and any eligible household members) must enroll in individual
health insurance coverage, other than excepted benefits, or Medicare
parts A and B or C. To satisfy this requirement, employees (and any
eligible household members) can enroll in individual health insurance
coverage through the Exchange or outside the Exchange. An employee and
any household members offered an individual coverage HRA will be
ineligible for APTC if the individual coverage HRA is affordable or if
the employee and household members accept the individual coverage HRA
even if it is unaffordable. If an employee and any household members
offered an individual coverage HRA that is unaffordable decline the
individual coverage HRA benefit, they may qualify for APTC (if
otherwise eligible) if they enroll in a QHP through the Exchange. Some
employees who are offered an individual coverage HRA may also be
eligible, through a cafeteria plan under section 125 of the Code, to
pay a portion of their health insurance premiums through tax-preferred
salary reduction contributions. This type of cafeteria plan benefit may
only be used in combination with off-Exchange individual health
insurance coverage. Employers have flexibility to offer an employee
both the individual coverage HRA and the cafeteria plan benefit instead
of providing traditional tax-preferred group health coverage. However,
employers may not offer employees a choice of an individual coverage
HRA or traditional group health coverage.
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\194\ See Health Reimbursement Arrangements and Other Account-
Based Group Health Plans; Final rule, 84 FR 28888 (June 20, 2019).
---------------------------------------------------------------------------
Consumers shopping and enrolling in coverage through direct
enrollment entity websites may therefore wish to see and consider
additional non-QHP individual health insurance coverage (other than
excepted benefits) options that are only available off-Exchange. We
also noted that we believed consumers may find it difficult to
determine their best option, especially when they are part of a tax
household with members that may have varying eligibility for APTC,
CSRs, Medicaid, CHIP, individual coverage HRAs, and cafeteria plans.
For this reason, we proposed to provide an exception to the new
proposed display standards in Sec. 155.221(b)(1) and (b)(3) to support
the development of innovative and consumer-friendly plan comparison
tools by direct enrollment entities to assist consumers in making the
best choices among individual health insurance coverage options subject
to ACA market-wide rules for themselves and their families in these
complex situations.
In proposed new paragraph (c)(1), we proposed to allow direct
enrollment entities to display and market QHPs offered through the
Exchange and individual health insurance coverage offered outside the
Exchange (including QHPs and non-QHPs other than excepted benefits) on
the same website pages when assisting individuals who have
communicated, within the website user interface or by communicating to
an agent or broker assisting them, they have received an offer of an
individual coverage HRA, as a standalone benefit or in addition to an
offer of an arrangement under which the individual may pay the portion
of the premium for individual health insurance coverage that is not
covered by an individual coverage HRA using a salary reduction
arrangement under a cafeteria plan, so long as certain conditions are
met. As reflected in the new proposed Sec. 155.221(c)(1), the
conditions we proposed to adopt included clearly distinguishing between
the QHPs offered through the Exchange and the individual health
insurance coverage offered outside the Exchange (including QHPs and
non-QHPs other than excepted benefits), and prominently communicating
that APTC and CSRs are available only for QHPs purchased through the
Exchange, that APTC is not available to an individual who accepts an
offer of an individual coverage HRA or who opts out of an affordable
individual coverage HRA, and that a salary reduction arrangement under
a cafeteria plan may only be used toward the cost of premiums for plans
purchased outside the Exchange.
We noted that we wished to reduce incentives that may lead to
routing consumer households to off-Exchange plan shopping experiences
based on overly simplistic factors such as a single member of a multi-
member household having an individual coverage HRA and a cafeteria plan
offer. Instead we sought to encourage direct enrollment entities to
develop blended plan selection user interfaces that incorporate on- and
off-Exchange plan options when assisting consumers who have
communicated receipt of an offer of an individual coverage HRA while
incorporating the proposed conditions that are designed to minimize the
chance for consumer confusion about the differences between the
different coverage options. For example, a direct enrollment entity
exercising the flexibility under the proposed exception in Sec.
155.221(c)(1) could clearly distinguish between on- and off-Exchange
plan options by using frames, columns, different color schemes,
prominent headings, icons, help text, and other visual aids to increase
the chance that consumers are aware of the distinctions between the
plan options. We emphasized the proposal's intent was to distinguish
and clarify user interface elements to be clear, prominent, and
difficult to ignore, and therefore the use of an obscure disclaimer in
small text at the bottom of the page or behind a link would not be
sufficient, for example. We noted that in addition to the safeguards
proposed in the proposed rule, direct enrollment entities in the FFEs
are subject to standards of conduct that require they provide consumers
with correct information, without omission of material fact, regarding
QHPs and insurance affordability programs, and refrain from marketing
or conduct that is misleading.\195\ We solicited comment on these
proposals, as well as comments on alternative approaches through which
direct enrollment entities may assist consumers with individual
coverage enrollment when they have an offer of an individual coverage
HRA.
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\195\ See 45 CFR 155.220(j)(2)(i), applicable to web-brokers,
and 156.1230(b)(2), applicable to QHP issuers participating in
direct enrollment. Also see ``Guidance Regarding website Display for
Direct Enrollment (DE) Entities Assisting Consumers in States with
Federally-facilitated Exchanges (FFEs) and State Exchanges on the
Federal platform (SBE-FPs).'' Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/DE-Entity-Standards-of-Conduct-website-Display.pdf.
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We proposed an additional exception to Sec. 155.221(b)(1) at
proposed paragraph (c)(2) to allow direct enrollment entities to
display and market stand-alone dental plans certified by an Exchange
but offered outside the Exchange and non-certified stand-alone dental
plans on the same off-Exchange dental plan shopping website pages.
Stand-alone dental plans certified by an Exchange and non-certified
stand-alone dental plans should be largely comparable products among
which consumers looking for dental coverage off-Exchange may wish to
comparison shop. Since the proposed change at paragraph (b)(1) to allow
display of all individual health insurance coverage offered outside the
Exchange on the same website pages (including QHPs and non-QHPs other
than excepted benefits) excludes stand-alone dental plans (since stand-
alone dental plans are excepted benefits), we proposed this additional
exception to allow direct enrollment entities to provide a consumer-
friendly off-Exchange stand-alone dental plan shopping experience where
consumers can compare the full range of stand-alone dental plans on a
single website page.
[[Page 24212]]
We proposed conforming amendments to redesignate paragraphs (c)
through (h) in Sec. 155.221 as paragraphs (d) through (i) and related
updates to internal cross references. As detailed in the proposed rule
and this final rule, we also proposed certain amendments to the direct
enrollment entity operational readiness review requirements in Sec.
155.221(b)(4).
We requested comment on these proposals.
We received numerous public comments on the proposed amendments to
the direct enrollment entity plan display requirements. The following
is a summary of the comments we received and our responses.
Comment: Most commenters supported the proposal to require direct
enrollment entities to display and market QHPs offered through the
Exchange, individual health insurance coverage as defined in Sec.
144.103 offered outside the Exchange (including QHPs and non-QHPs other
than excepted benefits), and all other products, such as excepted
benefits, on at least three separate website pages. One commenter
stated that guardrails should limit opportunities for consumers to
accidentally enroll in or be steered toward a non-subsidized QHP or
non-QHP; and therefore, at a minimum, substantially different coverage
types should be listed on separate website pages (as proposed) to
ensure consumers compare apples-to-apples. Other commenters expressed
similar sentiments, and in some cases advocated for the inclusion of
additional safeguards to help consumers understand the different
products that might be displayed to them (for example, requiring that
different products be clearly labeled to aid in differentiation). A few
commenters requested clarification about which of the categories would
include products or services such as health care sharing ministries,
direct primary care arrangements, group association plans, and short-
term limited duration insurance, or requested confirmation that such
products or services would have to be displayed on the one or more
website pages that included excepted benefits and not on the website
pages that display on- or off-Exchange QHPs and non-QHPs other than
excepted benefits. Several commenters expressed opposition to the
proposal. Generally these commenters cited concerns about consumer
confusion if and when consumers are presented with numerous
substantially different product options, regardless of how those
products are displayed and even if they are displayed on separate
website pages.
Response: We are finalizing the proposal as proposed, but hope to
clarify several issues raised by commenters. We intend to carefully
monitor how direct enrollment entities modify their websites in
accordance with these requirements and anticipate making updates in
future rulemaking if we believe such updates are necessary to mitigate
the risk that consumers are confused by how different products are
being displayed or marketed to them on direct enrollment entity
websites. We agree that guardrails are necessary to help consumers
understand their options and minimize the chance they inadvertently
choose to enroll in a plan or product that they did not intend to
enroll in or that does not meet their needs. As we monitor direct
enrollment websites, we will evaluate whether the user interface
options direct enrollment entities choose (for example, how they convey
to consumers the characteristics of different products or services on
different website pages) are adequate in terms of helping consumers
distinguish between and understand the advantages and disadvantages of
different products or services. When designing their websites, we
encourage direct enrollment entities to incorporate clear labels or
descriptions of different products or services they offer to assist
consumers, and we may require specific labeling or description
requirements in future rulemaking if we determine such standardization
would be helpful for consumers or if we identify other opportunities to
improve the consumer experience and better inform consumers about the
important differences between substantially different products or
services marketed or displayed on direct enrollment entity websites. We
also clarify and confirm that, as applied to the other non-QHP products
and services identified by commenters, Sec. 155.221(b)(1) requires
that any marketing or display of health care sharing ministries, direct
primary care arrangements, group association plans, and short-term
limited duration insurance not occur on the same website pages as on-
or off-Exchange QHPs and non-QHPs other than excepted benefits. When
marketed or displayed on direct enrollment entity websites, those
products and services should instead be displayed on the separate
website page or pages reserved for all other products, such as excepted
benefits. The intent of these amendments is to provide additional
clarity to direct enrollment entities regarding the display and
marketing of products or services that are not subject to ACA market-
wide rules and on- and off-Exchange QHPs, as well as non-QHP major
medical coverage that is subject to ACA market-wide rules. We
appreciate the concerns expressed by some commenters that consumers may
still be confused when presented with numerous substantially different
options for products or services, even if those products or services
are displayed on separate website pages in a clear manner. As described
in the proposed rule and the preamble above, a significant motivation
for adopting this policy was to reduce consumer confusion about
distinct products with substantially different characteristics. We
acknowledge that this approach may not eliminate all consumer confusion
or other risks that may exist for consumers when they use direct
enrollment and other non-Exchange websites. We intend to carefully
monitor direct enrollment websites and may pursue refinements to these
website display requirements in future rulemaking. We are also broadly
considering options for future rulemaking intended to address risks to
consumers that use direct enrollment websites not addressed by this
policy, including evaluating consumer protections adopted by State
Exchanges.
Comment: There were several comments received related specifically
to the portion of the proposed rule that would allow direct enrollment
entities to display and market QHPs offered through the Exchange and
individual health insurance coverage offered outside the Exchange
(including QHPs and non-QHPs other than excepted benefits) on the same
website pages when assisting individuals who have communicated they
have received an offer of an individual coverage HRA. Several
commenters supported the flexibility provided by this exception. One
commenter recognized the need to provide consumers with individual
coverage HRA offers information about all relevant coverage options,
but expressed concern about consumers being misled or confused about
those options and urged HHS to strictly enforce requirements related to
the proposed exception. Another commenter acknowledged that consumers
offered individual coverage HRAs will need access to information for
both on- and off-Exchange options, but opposed the proposed exception,
stating that allowing on- and off-Exchange options to be commingled on
the same website page would lead to substantial confusion, even with
smart design choices to differentiate the plans. One commenter
recommended that the exception be modified so that it is available
generally (without respect to
[[Page 24213]]
whether a specific consumer the entity is assisting has been offered an
individual coverage HRA) to entities approved to use EDE that have
implemented eligibility application functionality supporting individual
coverage HRA offers. The commenter stated this alternative approach
would be less burdensome to implement than accounting for specific
consumers' situations. One commenter noted this exception as proposed
does not apply to consumers provided QSEHRAs, and that if it is
modified to account for such plans, a requirement should be included
that direct enrollment entities communicate to consumers the need to
reduce APTC by any employer contribution.
Response: We appreciate the comments and are finalizing this
exception as proposed. We note that the individual coverage HRA market
is relatively new and still evolving, and recognize that the
flexibility and requirements associated with this exception should be
monitored closely and evaluated regularly for potential modifications
in future rulemaking. We further recognize there is the potential for
confusion, even with strict compliance with the safeguards we are
finalizing. We believe this exception and the other related direct
enrollment entity plan display requirement proposals finalized in this
rule represent a reasonable balance at this time and appropriately take
into account the need to also support consumers who may be offered new
types of coverage arrangements (for example, individual coverage HRAs).
Additionally, we intend to closely monitor implementation of the
exception and the accompanying display requirement proposals finalized
in this rule through website reviews and will strictly enforce the
limitations and requirements related to leveraging this exception, and
will make adjustments through future rulemaking if deemed necessary. We
further note that most consumers using direct enrollment websites are
assisted by agents or brokers who can help their clients understand
their options. To help consumers offered individual coverage HRAs
navigate their different options and to support agents and brokers
providing assistance to these consumers, HHS has developed various
education, training, and other materials on individual coverage
HRAs.\196\ As stated in the proposed rule, we hope that this exception
will lead direct enrollment entities to design and implement innovative
and consumer-friendly plan comparison tools to assist consumers offered
individual coverage HRAs in making the best choices for themselves and
their families in these complex situations. In addition, we sought to
reduce incentives that may lead direct enrollment entities to route
consumer households to off-Exchange plan shopping experiences based on
overly simplistic factors such as a single member of a multi-member
household having an individual coverage HRA and a cafeteria plan
offer.\197\ As a result of the comments received expressing concerns
about consumer confusion due to this exception, we encourage any direct
enrollment entity considering updates to its website design to leverage
this exception to contact us before implementing any updates (by
emailing [email protected]). We are interested in working
collaboratively with direct enrollment entities to ensure their planned
website designs meet applicable regulatory requirements and intend to
carefully monitor implementation under this exception. We would pursue
any refinements through rulemaking, and if we deem necessary or
appropriate may also consider adopting a mandatory review and approval
process before direct enrollment entities could leverage this exception
in a future rulemaking.
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\196\ See, for example, https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Health-Reimbursement-Arrangements.
\197\ There are additional complexities for APTC-eligible
consumers who receive an offer of an individual coverage HRA that is
unaffordable in addition to a salary reduction arrangement under a
cafeteria plan. See, for example, 85 FR at 78617.
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We do not agree with the one commenter that suggested this
exception be made broadly available to EDE entities, without respect to
whether a specific consumer the entity is assisting has been offered an
individual coverage HRA. This exception is intended to be a targeted
measure focused on supporting consumers offered individual coverage
HRAs who use direct enrollment entity websites to shop for
coverage.\198\ In those instances, it would be appropriate to inform
consumers about the broader range of individual health insurance
coverage options. The same considerations do not exist for consumers
who do not receive individual coverage HRA offers. Direct enrollment
entities already design different plan shopping interfaces for their
websites and route consumers to them based on screening questions
intended to evaluate specific consumers' needs and circumstances. For
entities assisting consumers with individual coverage HRA offers,
leveraging the flexibility afforded by the exception finalized in this
rule could be accomplished using a similar approach of asking consumers
questions about whether they have received an individual coverage HRA
offer and routing them to different website pages based on their
responses. Finally, we note that we did not propose and are not
finalizing an extension of the proposed exception to consumers provided
QSEHRAs at this time, in part because we have not noted the same
interest in serving such consumers from direct enrollment entities. We
may consider creating such an exception in a future rulemaking if
necessary or appropriate.
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\198\ As detailed in the proposed rule, the recent introduction
of individual coverage HRAs increases the importance of individual
health insurance coverage offered outside of the Exchange for
employees offered such arrangements alongside the opportunity to
make salary reduction contributions through a cafeteria plan under
section 125 of the Code. See 85 FR 78616.
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Comment: We received a small number of comments related to the
proposed exception to Sec. 155.221(b)(1) at proposed paragraph (c)(2)
to allow direct enrollment entities to display and market stand-alone
dental plans certified by an Exchange but offered outside the Exchange
and non-certified stand-alone dental plans on the same off-Exchange
dental plan shopping website pages. One commenter stated that dental
plans offer a wide variety of plan designs, and suggested that if the
proposed stand-alone dental plan exception is finalized, it should
include a requirement that direct enrollment entities clearly label
different types of dental plans. The commenter also expressed concern
that consumers may not be able to differentiate between stand-alone
dental plans for which APTC may be used and stand-alone dental plans
only available off-Exchange. Another commenter requested implementation
of the proposed stand-alone dental plan exception be delayed until
testing the approach with consumer focus groups and evaluating its
impact based on that testing.
Response: We appreciate the comments and are finalizing this
proposal as proposed. As mentioned above, when designing their
websites, we encourage direct enrollment entities to incorporate clear
labels or descriptions of different plans, products, or services they
offer to assist consumers, whether major medical or stand-alone dental
plans. We may require specific labeling or description requirements in
future rulemaking if we determine such standardization would be helpful
for consumers or if we identify other opportunities to improve the
consumer experience and better inform consumers about the important
differences between substantially
[[Page 24214]]
different plans, products, or services. We also clarify that since the
stand-alone dental plan exception is only available to direct
enrollment entities with regard to their off-Exchange stand-alone
dental plan shopping websites, the risk that a consumer may
inadvertently choose a stand-alone dental plan for which APTC is not
available is not relevant since APTC is not available for any off-
Exchange stand-alone dental plans. Stated differently, an APTC-eligible
consumer seeking to enroll in a stand-alone dental plan on-Exchange
that has wound up shopping for stand-alone dental plans on an off-
Exchange website has encountered a problem unrelated to the stand-alone
dental plan exception in this rule. While we understand the request to
delay implementation of the stand-alone dental plan exception until
consumer focus group testing can be conducted, we consider multiple
factors when developing rules, including risk of consumer harm, impact
to the operations of the private business entities we are regulating,
and the availability of government resources to conduct testing and
oversight, among other factors. We also believe this exception is
sufficiently narrow for the proposal to be finalized as part of this
rule because it is limited to website pages marketing and facilitating
enrollment in off-Exchange plans, products, and services. In addition,
until the current rule at Sec. 155.221(b)(1) was finalized in 2019,
this exception would not have been required for entities to display
stand-alone dental plans in this manner and we suspect many entities
were doing so at the time. As mentioned above, we will be closely
monitoring and evaluating how direct enrollment entities modify their
websites based on these updated rules and will pursue future rulemaking
if we believe that is necessary or appropriate. We may also engage in
consumer focus group testing in the future, if deemed necessary or
appropriate.
b. Direct Enrollment Entity Operational Readiness Review Requirements
We proposed to revise Sec. 155.221(b)(4) to add additional detail
on the operational readiness requirements for direct enrollment
entities. Similar to the proposed web-broker operational readiness
requirement at new proposed Sec. 155.220(c)(6), we proposed these
amendments to codify in Sec. 155.221(b)(4) more details about the
existing program requirements that apply to direct enrollment entities
and are captured in the agreements executed with participating web-
broker and QHP issuer direct enrollment entities. We noted that these
proposed requirements are in addition to the operational readiness
requirements for web-brokers at new proposed Sec. 155.220(c)(6),
although web-brokers may not be required to submit the documentation
required under this proposal to revise Sec. 155.221(b)(4) or they may
be permitted to use the same documentation to satisfy the requirements
of both operational readiness reviews depending on the specific
circumstances of their participation in the direct enrollment program
and the source and type of documentation. For example, a web-broker
seeking to participate only in the Classic DE program would only be
required to meet the operational readiness requirements at new proposed
Sec. 155.220(c)(6), whereas a web-broker seeking to participate in the
EDE program may be permitted to use its third-party security and
privacy audit documentation for EDE to satisfy the security and privacy
audit documentation requirements of Sec. Sec. 155.220(c)(6) and
155.221(b)(4) assuming the Classic DE and EDE systems and functionality
were hosted in the same environments subject to the third-party audit.
In paragraph (b)(4), we proposed to continue to require a direct
enrollment entity to demonstrate operational readiness and compliance
with applicable requirements prior to the direct enrollment entity's
website being used to complete an Exchange eligibility application or a
QHP selection. We added new proposed paragraphs (b)(4)(i) through (v)
to reflect that direct enrollment entities may need to submit or
complete, in the form and manner specified by HHS, a number of
artifacts, documentation, or various testing or training processes. The
documentation may include business audit documentation, including:
Notices of intent to participate including auditor information;
documentation packages including privacy questionnaires, privacy policy
statements, and terms of service; and business audit reports including
testing results. The required documentation may also include security
and privacy audit documentation including: Interconnection security
agreements; security and privacy controls assessment test plans;
security and privacy assessment reports; plans of action and
milestones; privacy impact assessments; system security and privacy
plans; incident response plans; and vulnerability scan results.
Submission of agreements between the direct enrollment entity and HHS
documenting the requirements for participating in the applicable direct
enrollment program may also be required. Required testing may include
eligibility application audits performed by HHS. The direct enrollment
entity may also be required to complete online training modules
developed by HHS related to the requirements to participate in the
direct enrollment program.
We requested comment on this proposal.
We received one public comment on the proposed updates to direct
enrollment entity operational readiness review requirements. The
following is a summary of the comment we received and our response.
Comment: One commenter expressed support for the proposed updates
to the direct enrollment entity operational readiness review
requirements.
Response: We appreciate the commenter's support of the proposed
updates to the direct enrollment entity operational readiness review
requirements and are finalizing this proposal as proposed.
6. Certified Applications Counselors (Sec. 155.225)
In the proposed rule, we proposed to allow, but not require, CACs
to assist consumers with applying for insurance affordability programs
and QHP enrollment through web-broker non-Exchange websites under
certain circumstances and to the extent permitted by state law. For a
discussion of this proposal, along with a summary of comments received
and our responses to these comments, please see the preamble for Sec.
155.220.
7. Verification Process Related to Eligibility for Insurance
Affordability Programs (Sec. 155.320)
a. Verification of Eligibility for Employer Sponsored Coverage
Exchanges must verify whether an applicant is eligible for or
enrolled in an eligible employer sponsored plan for the benefit year
for which coverage and premium assistance (APTC or CSR) are requested
using available data sources, if applicable, as described in Sec.
155.320(d)(2). For any coverage year that an Exchange does not
reasonably expect to obtain sufficient verification data as described
in paragraph (d)(2)(i) through (iii), an alternate procedure applies.
Specifically, Exchanges must select a statistically significant random
sample of applicants and meet the requirements under paragraph
(d)(4)(i). For benefit years 2016 through 2019, Exchanges also could
use an alternative process approved by HHS. We are
[[Page 24215]]
continuing to explore a new alternative approach to replace the current
procedures in paragraph (d)(4)(i), under which an Exchange may design
its verification process to confirm that qualified individuals are not
eligible for or enrolled in an eligible employer sponsored plan,
disqualifying them from receiving APTC or CSRs.
HHS's experience conducting random sampling revealed that employer
response rates to HHS's request for information were low. The manual
verification process described in Sec. 155.320(d)(4)(i) requires
significant resources and government funds, and the value of the
results ultimately does not appear to outweigh the costs of conducting
the work because only a small percentage of sample enrollees have been
determined by HHS to have received APTC or CSRs inappropriately. We
believe an approach to verifying an applicant's attestation regarding
access to eligible employer sponsored coverage should be rigorous,
while posing the least amount of burden on states, employers,
consumers, and taxpayers. Based on our experiences with random sampling
methodology under paragraph (d)(4)(i), HHS is of the view that this
methodology may not be the best approach for all Exchanges to assess
the associated risk for inappropriate payment of APTC and CSRs. As
such, in 2019, HHS conducted a study to (1) determine the unique
characteristics of the population with offers of employer-sponsored
coverage that meets minimum value and affordability standards, (2)
compare premium and out-of-pocket costs for consumers enrolled in
affordable employer-sponsored coverage to Exchange coverage, and (3)
identify the incentives, if any, that drive consumers to enroll in
Exchange coverage rather than coverage offered through their current
employer. We are still evaluating the results of this study to ensure
the best verification process to ensure that consumers with offers of
affordable coverage that meets affordability and minimum value
standards through their employer are identified and do not receive APTC
or CSRs inappropriately. HHS will consider changes to the verification
process outlined under paragraph (d)(4) as part of future rulemaking.
As HHS continues to explore the best options for verification of
employer sponsored coverage, we proposed that HHS will continue to
refrain from taking enforcement action against Exchanges that do not
perform random sampling as required by paragraph (d)(4), as an
alternative to performing this verification against the data sources
required under Sec. 155.320(d)(2)(i) through (iii), and will extend
this non-enforcement posture from plan year 2021 through plan year
2022. We also proposed that HHS will continue to exercise such
discretion as HHS continues to evaluate the results of the employer
verification study described in the proposed rule and of the futures
changes also discussed.
Comment: The majority of commenters on this topic agreed with HHS's
proposal to refrain from taking enforcement action against Exchanges
that do not conduct random sampling to verify whether an applicant has
access to or received an offer of affordable coverage that meets the
minimum value standard through their employer. The commenters agreed
with HHS's prior study findings that the random sampling process
requires significant resources with little return on investment.
Commenters also agreed with HHS that an employer-sponsored coverage
verification approach should provide State Exchanges with flexibility
and more opportunities to use verification processes that are evidence-
based, while imposing the least amount of burden on consumers, states,
employers, and taxpayers and ensures that only consumers who are
eligible for APTC/CSRs continue to receive them; commenters noted that
this is especially important during the current COVID-19 public health
emergency and allows states to shift resources to help consumers retain
or enroll in QHP coverage. One commenter further noted that an
efficient verification process to verify whether an applicant has an
offer of affordable coverage through their employer also provided an
added benefit as it reduces the employer shared responsibility payment
(ESRP) burden for both the Internal Revenue Service (IRS) and employers
nationwide. One commenter supported the proposal, but proposed that HHS
allow State Exchanges to select their own verification method that
would not add significant administrative burden on states and stated
that the current proposal does not provide State Exchanges with enough
flexibility to make any necessary changes that may result from future
rulemaking.
Finally, another commenter suggested that, as HHS reviews the
results of the study discussed in the preamble to the proposed rule, we
should consider releasing the results of the 2019 study in an effort to
provide transparency regarding the demographic patterns that HHS
discovered as a result of this research.
Response: We agree that the current random sampling process
required under Sec. 155.320(d)(4)(i) is not only burdensome for
states, employers, consumers, and taxpayers, but it also does not
provide enough flexibility to all Exchanges to develop a process for
employer-sponsored coverage verification that more accurately reflects
their respective enrolled Exchange populations. As discussed in the
preamble above and in the proposed rule, HHS shares the same concerns
regarding the feasibility and effectiveness of random sampling,
including the effectiveness of employer and employee notices, and the
impact that such a verification process has on Exchanges' appeals
processes. We also agree that a verification process should be
evidence-based and informed by certain risk-factors for inappropriate
payment of APTC/CSRs and that additional flexibilities are important to
help states better serve their populations during the current COVID-19
public health emergency. Finally, as HHS continues to evaluate the
results of the 2019 study, we will explore the possibility of releasing
the results of the study at a later date.
We disagree with the comment that the proposal to extend
enforcement discretion to plan year 2022 provides State Exchanges with
less flexibility to implement any future process changes for employer-
sponsored coverage verification. State Exchanges have existing
flexibility under Sec. Sec. 155.320(a)(2) and 155.315(h) to propose an
alternative approach to using the verification procedures under Sec.
155.320(d)(2), or an alternative to using the random sampling process
described under Sec. 155.320(d)(4), in order to verify whether
applicants have received an offer of affordable coverage. We continue
to encourage states to use this flexibility to explore evidence or
risk-based approaches to conducting this verification. Finally, these
changes do not impact State Exchanges that currently verify offers of
employer-sponsored coverage using approved data sources under Sec.
155.320(d)(2)(i) through (iii) or use the random sampling procedures
under Sec. 155.320(d)(4), and have determined these methods are the
appropriate approaches for their Exchanges to meet requirements under
Sec. 155.320(d).
Comment: Two commenters supported the proposal but expressed their
ongoing concerns regarding employer-sponsored verification,
specifically that the lack of a centralized website or database for
employers to provide contact information and other information
Exchanges would need to verify whether an employer offers coverage that
meets minimum value standards is problematic and has led to
[[Page 24216]]
many of the ongoing challenges Exchanges have experienced. These
commenters suggested that HHS and IRS should work together to develop a
single, streamlined verification process that could be achieved in one
of two ways: (1) By establishing a simple, web-based platform or
database where employers could provide Exchanges with their contact
information which Exchanges could query as part of their verification
attempts or (2) provide employers with the option to report their
information to IRS well in advance of Open Enrollment so that Exchanges
could query this information to verify whether that employer offers
coverage that meets the employer shared responsibility affordability
and minimum value tests. Commenters also urged IRS and Treasury to
allow employers to provide real-time employer coverage data on
HealthCare.gov to help consumers compare coverage offered through their
employers with options offered on Exchanges to make the best coverage
decisions based on their needs and budgets.
Response: We did not propose policies or requirements related to
future verification processes as HHS is still evaluating the results of
the 2019 study to determine the best path forward. HHS appreciates the
suggested approaches for consideration and agrees with the commenters
that having accurate, up-to-date contact information for employers
presents a significant challenge for Exchanges attempting to verify an
applicant's attestation that they do not have access to affordable
coverage through their employer as outlined under Sec.
155.320(d)(4)(i)(D). HHS will continue to explore all options to
implement a verification process for employer-sponsored coverage that
is evidence-based and will continue to work with our federal partners
to assess the feasibility of creating such a web-based platform or
database to collect employer contact information as outlined above.
b. Verification Process Related to Eligibility for Insurance
Affordability Programs
As noted in section IV of the preamble, on March 4, 2021, the
United States District Court for the District of Maryland decided City
of Columbus, et al. v. Cochran, No. 18-2364, 2021 WL 825973 (D. Md.
Mar. 4, 2021), vacating certain requirements under 45 CFR 155.320,
which provides Exchange income verification requirements for resolving
data matching issues related to eligibility for advance payments of
premium tax credits. Under the current regulation, an individual who
attests to a household income within 100 percent to 400 percent of the
federal poverty level (FPL), but whose income according to trusted
electronic data sources is below 100 percent FPL, must submit
additional documentation supporting the attested to household
income.\199\ Given the court's order invalidating this policy, we are
finalizing revisions to Sec. 155.320 in this final rule to rescind
text implementing the policy.
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\199\ See 83 FR 16985-16987 (discussing finalization of new
paragraphs Sec. 155.320(c)(3)(iii)(D) and (E), and modifications to
paragraphs (c)(3)(vi)(C), (D), (F), and (G)).
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As explained below in the Implementation of the Decision in City of
Columbus, et al. v. Cochran section, HHS's systems automatically
generate requests for income verification information for those with
income data matching issues, and it will take some time to redesign
this function. Until that redesign is complete and implemented,
however, HHS will be able to identify consumers who receive requests
for income verification information as a result of current system
logic. We have established a manual process to notify those consumers
that they need not provide the requested information.
8. Special Enrollment Periods (Sec. 155.420)
a. Exchange Enrollees Newly Ineligible for APTC
We proposed to add new flexibility to allow current Exchange
enrollees and their dependents to enroll in a new QHP of a lower metal
level \200\ if they qualify for a special enrollment period due to
becoming newly ineligible for APTC. We are finalizing a modified
version of this policy to permit Exchange enrollees who qualify for a
special enrollment period based on a loss of APTC eligibility to change
to a new plan at any metal level, and to require that Exchanges
implement this change no later than January 1, 2024.
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\200\ Section 1302(d) of the ACA describes the various metal
levels of coverage based on AV, and section 2707(a) of the PHS Act
directs health insurance issuers that offer non-grandfathered health
insurance coverage in the individual or small group market to ensure
that such coverage includes the EHB package, which includes the
requirement to offer coverage at the metal levels of coverage
described in section 1302(d) of the ACA. Consumer-facing
HealthCare.gov content explains that metal levels serve as an
indicator of ``how you and your plan split the costs of your health
care,'' noting that lower levels such as bronze plans have lower
monthly premiums but higher out of pocket costs, while higher levels
such as gold plans have higher monthly premiums but lower out of
pocket costs. See https://www.healthcare.gov/choose-a-plan/plans-categories/.
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In 2017, the Market Stabilization Rule addressed concerns that
Exchange enrollees were utilizing special enrollment periods to change
plan metal levels based on ongoing health needs during the coverage
year, negatively affecting the individual market risk pool. The Market
Stabilization Rule set forth requirements at Sec. 155.420(a)(4) to
limit Exchange enrollees' ability to change to a QHP of a different
metal level when they qualify for, or when a dependent(s) newly enrolls
in Exchange coverage through, most types of special enrollment
periods.\201\
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\201\ These limitations do not apply to enrollees who qualify
for certain types of special enrollment periods, including those
under Sec. 155.420(d)(4), (8), (9), (10), (12), and (14). While
special enrollment periods under paragraphs (d)(2)(i) and (d)(6)(i)
and (ii) are excepted from Sec. 155.420(a)(4)(iii), Sec.
155.420(a)(4)(i) and (ii) apply other plan category limitations to
them.
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Generally, Sec. 155.420(a)(4) provides that enrollees who newly
add a household member through most types of special enrollment periods
may add the household member to their current QHP or enroll them in a
separate QHP,\202\ and that if an enrollee qualifies for certain
special enrollment periods, the Exchange must allow the enrollee and
his or her dependents to change to another QHP within the same level of
coverage (or one metal level higher or lower, if no such QHP is
available), as outlined in Sec. 156.140(b). However, even prior to the
change that we are finalizing in this rule, Sec. 155.420(a)(4)
included certain flexibilities to permit enrollees to change metal
levels through a special enrollment period related to a change in
financial assistance for coverage through the Exchange. For example,
Sec. 155.420(a)(4)(ii)(B) provides that beginning January 2022, if an
enrollee and his or her dependents become newly ineligible for cost-
sharing reductions in accordance with paragraph (d)(6)(i) or (ii) of
this section and are enrolled in a silver-level QHP, the Exchange must
allow the enrollee and his or her dependents to change to a QHP one
metal level higher or lower, if they elect to change their QHP
enrollment, which they may wish to do based on loss of previously-
available financial assistance.
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\202\ Section 155.420(a)(4)(i), (a)(4)(iii)(B), and
(a)(4)(iii)(C) also provide that alternatively, if the QHP's
business rules do not allow the newly-enrolling household member to
enroll, the Exchange must allow the enrollee and his or her
dependents to change to another QHP within the same level of
coverage (or one metal level higher or lower, if no such QHP is
available), as outlined in Sec. 156.140(b).
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Similarly, we proposed to add a new flexibility at Sec.
155.420(a)(4)(ii)(C) to allow enrollees and their dependents who become
newly ineligible for APTC in accordance with paragraph (d)(6)(i) or
(ii) of this section to enroll in a QHP of
[[Page 24217]]
a lower metal level. Under this proposal, these special enrollment
periods in paragraph (d)(6)(i) and (ii) for becoming newly ineligible
for APTC would be addressed in paragraph (a)(4)(ii)(C), and so they
will no longer be subject to the separate rules in paragraph
(a)(4)(iii). Therefore, we further proposed to revise paragraph
(a)(4)(iii) to include them in the list of triggering events excepted
from the limitations at paragraph (a)(4)(iii). We are finalizing a
modified version of this policy to permit Exchange enrollees who
qualify for a special enrollment period based on a loss of APTC
eligibility to change to a new plan at any metal level, and to require
that Exchanges implement this change no later than January 1, 2024. We
expect that that providing Exchanges with more time to implement the
change and exempting this special enrollment period from limitations
entirely will reduce Exchanges' implementation burden and that this
policy will help impacted enrollees' ability to maintain continuous
coverage for themselves and for their dependents in spite of a
potentially significant change to their out of pocket costs.
We proposed this new flexibility in part because of concerns from
agents and brokers that some consumers who qualify for the special
enrollment period in accordance with Sec. 155.420(d)(6)(i) or (ii)
because they lose eligibility for APTC based on an income increase may
lose a significant amount of financial assistance without having gained
enough income to continue to afford the coverage they selected when
APTC was available to them. In the proposed rule, we provided an
example of a qualified individual whose estimated annual household
income increases to more than 400 percent FPL due to an income increase
of less than $2,000.\203\ In this example, the individual's loss of
APTC would require them to pay over $7,000 more annually for their
current plan.\204\ While this individual would qualify for a special
enrollment period due to a loss of eligibility for APTC per paragraph
(d)(6)(i), under the previous rule they would not be able to change
from a gold plan to a silver or bronze plan (or to a catastrophic plan,
if they were eligible) to pay a lower monthly premium, because
paragraph (a)(4)(iii)(A) provided that these enrollees may only change
to another QHP within their current plan's metal level. The American
Rescue Plan Act of 2021 will help some individuals in the situation
described above because it allows individuals whose household income
exceeds 400 percent FPL to qualify for a premium tax credit if they are
otherwise eligible. The new law will make premium tax credits available
to these families and caps the amount of household income the family is
expected to contribute to their premiums for purposes of calculating
the credit at 8.5 percent, based on the cost of their second lowest
cost silver benchmark plan. However, this flexibility is also necessary
to ensure access to coverage by those who experience circumstances
other than a household income increase that may cause consumers to
become ineligible for APTC. For example, in the proposed rule, we also
noted that Exchange enrollees can lose eligibility for APTC due to a
change in tax household size, without experiencing any change in
income, and we provided an example of a family of two parents and a 20-
year old child with no income and who is not a full-time student. We
are updating the example to reflect the changes made for 2021 and 2022
by the American Rescue Plan Act of 2021. If the family applies during
open enrollment in 2022 and qualifies for APTC based on a household of
three, and during 2023 the child becomes employed and earns enough
income so that the parents no longer plan to claim the child as a tax
dependent for 2023, their decrease in household size could cause them
to lose eligibility for APTC. Loss of eligibility for APTC based on not
being permitted to claim as a tax dependent an individual projected at
open enrollment to be a tax dependent (loss of a projected tax
dependent) is likely a less common challenge, because loss of a
projected tax dependent who was previously enrolled in the same plan as
other household members may also result in a lower premium for
remaining household members. However, in some cases the decrease in
premium may not be enough to make up for the loss of APTC.
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\203\ See 85 FR 78623.
\204\ 26 CFR 1.36B-2(b)(1) provides that to be eligible for a
premium tax credit, the taxpayer's household income must be at least
100 percent but not more than 400 percent of the FPL for the
taxpayer's family size for the taxable year. Per the HHS Poverty
Guidelines for 2020, 400 percent of the FPL for 2020 for an
individual in the contiguous 48 states and DC is $51,040. However,
under the American Rescue Plan Act of 2021, for taxable years 2021
and 2022, the upper limit on household income at 400 percent of the
FPL has been removed.
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As discussed in the proposed rule, in many cases individuals
enrolling in Exchange coverage during open enrollment will not
anticipate experiencing a situation in the middle of the plan year like
those described in this final rule. Even if they are aware that they
could have a small increase in household income or lose a projected tax
dependent, they may not realize that these changes could make them
newly ineligible for APTC. Furthermore, sometimes these changes are not
foreseeable. Additionally, it is reasonable for individuals who
complete an application and then shop for coverage on HealthCare.gov to
select a QHP based on premiums that are reduced by the APTC amount for
which they are eligible at the time of plan selection, particularly if
they do not realize that their financial assistance could change based
on loss of a projected tax dependent or a small household income change
during the coming year.
While this proposal was designed to provide Exchange enrollees who
lose APTC with the chance to select lower-cost coverage, we recognized
that changing to a new QHP mid-plan year may cause enrollees to incur
additional out of pocket costs as a new QHP selection typically resets
the deductible and other accumulators. We believe that Exchange
enrollees who lose APTC eligibility are best able to weigh the trade-
off between reset accumulators or maintaining an affordable monthly
premium. As discussed in the proposed rule, a change may benefit some
consumers because price differences between QHPs of different metal
levels can be significant. For example, in states using the federal
enrollment platform, on average, silver plan premiums are 34 percent
more expensive than bronze plan premiums, and gold plan premiums are 14
percent more expensive than silver plan premiums.\205\ Further,
enrollees who qualify to make a new plan selection for an applicable
special enrollment period already must consider this question.
---------------------------------------------------------------------------
\205\ Calculated based on information in the ``Plan Year 2020
Qualified Health Plan Choice and Premiums in HealthCare.gov States''
report. Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/2020QHPPremiumsChoiceReport.pdf.
---------------------------------------------------------------------------
Finally, in the proposed rule we acknowledged that enrollees may
lose APTC eligibility and qualify for a special enrollment period due
to their APTC loss for a reason other than a change in household income
or tax family size. For example, a currently-enrolled individual or
household could lose APTC and qualify for the related special
enrollment period due to an expired inconsistency regarding projected
annual household income, or because the Exchange has information that
they are eligible for or enrolled in other qualifying coverage that is
considered MEC such as most Medicaid coverage, CHIP, or the Basic
Health
[[Page 24218]]
Program (BHP), through the periodic data matching process described in
Sec. 155.330(d), and therefore are ineligible for APTC. We sought
comment on whether stakeholders had concerns with this possibility, and
on how HHS can help ensure that enrollees who lose eligibility for APTC
because of failure to provide information to the Exchange to confirm
their APTC eligibility can understand and take action on steps needed
to do so. Relatedly, we sought comment on whether Exchanges should
limit the flexibility proposed in this rule only to enrollees who
qualify for a special enrollment period because they lost APTC
eligibility due to a change in household income or tax family size, and
continue to apply the current rule at 155.420(a)(4)(iii)(A) to
enrollees who qualify for a special enrollment period because they lost
APTC for any other reason. We also sought comment on whether such a
policy would impose significant additional burdens on Exchanges.
HHS believed that this proposal is unlikely to result in adverse
selection, and may improve the risk pool by supporting continued health
insurance enrollment by healthy individuals who would be forced to end
coverage in response to an increase in premium. However, we requested
comment on whether there are concerns with permitting newly
unsubsidized enrollees to change to any plan of a lower metal level to
help them maintain coverage (for example, permitting an individual to
change from a gold plan to a bronze plan), or whether we should instead
only permit an enrollee to change to a plan one metal level lower than
their current QHP. We also requested comment from issuers on whether
there are concerns about impacts such as experiencing a decrease in
premium receipt from enrollees who opt to change to a lower-cost plan,
or whether they view adverse selection as a possibility. We requested
comment from Exchanges, in particular, on implementation burden
associated with this change to current plan category limitations rules,
including on whether we should instead, to reduce this burden, permit
current enrollees and currently enrolled dependents who qualify for
this SEP to change to a plan of any metal level--that is, simply exempt
the special enrollment periods at Sec. 155.420(d)(6)(i) and (ii) due
to becoming newly ineligible for APTC from plan category limitations
altogether. We also requested comment from all stakeholders, including
those who have or represent individuals with preexisting conditions, on
whether such a change would significantly increase risk for adverse
selection.
Finally, we also considered whether to propose additional
flexibility to allow enrollees and their dependents who become newly
eligible for APTC in accordance with paragraph (d)(6)(i) or (ii) to
change to a QHP of a higher metal level, but we did not propose
additional plan flexibility for enrollees who become newly eligible for
APTC. We invited comment on whether we should consider additional
flexibilities for this population in the future and the anticipated
impact of such a policy.
We received public comments on the proposed updates to Exchange
enrollees newly ineligible for APTC. The following is a summary of the
comments we received and our responses.
Comment: Almost all comments on this proposal were supportive of
this change, explaining that allowing enrollees the flexibility to
change to a plan of a lower metal level based on a loss of APTC would
allow more individuals to maintain coverage. Some commenters also noted
that this proposal could improve the on-Exchange risk pool by
increasing the likelihood that individuals would maintain coverage in
spite of losing financial assistance. One commenter requested a 2021
effective date for this proposal instead of 2022, and two commenters
requested that HHS implement this proposal as soon as possible. One
commenter opposed the proposal because they preferred that HHS promote
continuous coverage by making more financial assistance available to
consumers rather than by providing certain consumers with the
flexibility to change to a lower metal level plan. One commenter
encouraged HHS to bear in mind the risks of adverse selection in
general, but did not oppose this proposal and noted that it would help
consumers; this commenter and several others also misunderstood the
proposal to be for a new special enrollment period for individuals who
lose financial assistance rather than a change to plan category
limitations that currently apply to an existing special enrollment
period.
No commenters raised the concern that this proposal specifically
would increase the risk of adverse selection. Several commenters
supported also allowing enrollees who newly become APTC eligible to
change to a plan of a higher metal level. Many commenters supported
allowing individuals who qualify for a special enrollment period based
on a loss of APTC eligibility to change to a plan of any metal level,
either to provide enrollees with flexibility to change to the best plan
for themselves and their families, to make implementation easier for
State Exchanges, or both. One of these commenters requested that
instead of applying plan category limitations, HHS require Exchange
enrollees to provide documents to confirm their SEP eligibility. Some
commenters supported allowing individuals who lose APTC eligibility to
change to a plan of a higher or lower metal level rather than just to a
plan of a lower metal level. Finally, many commenters disagreed with
the need to require plan category limitations in general, and requested
that HHS provide Exchanges with flexibility in terms of when or whether
to implement plan category limitations at all based on considerations
related to their specific State Exchange's market.
Response: We are finalizing a modified version of this policy to
permit Exchange enrollees who lose APTC eligibility to change to a new
plan at any metal level, and to require that Exchanges implement this
change no later than January 1, 2024. We agree with commenters that
allowing enrollees to access a plan at any metal level through the
existing special enrollment period for those who lose eligibility for
APTC will significantly decrease Exchange implementation complexity and
cost, and believe that providing Exchanges with the flexibility to
implement this change no later than 2024 provides Exchanges with
sufficient time to account for this change in their operational
planning. We also agree with commenters who stated that providing more
flexibility for enrollees who qualify for a special enrollment period
due to losing APTC will help consumers who lose eligibility for APTC
during the plan year to stay enrolled in coverage by switching to a new
QHP that better suits their changed financial situation. While we
understand general concerns related to adverse selection, we agree with
commenters that this specific policy does not pose this risk because
enrollees are likely to access it based on a financial change as
opposed to a change in their health care needs. We also clarify that
this policy does not create a new special enrollment period qualifying
event, but rather is a change to limitations on plan selection that
apply to an already-existing special enrollment period for Exchange
enrollees who become newly ineligible for APTC per 45 CFR
155.420(d)(6)(i) and (ii).
Additionally, we do not believe that it is necessary to require
eligible consumers to submit documentation of the change that resulted
in their loss of APTC eligibility, in part because this special
enrollment period is triggered
[[Page 24219]]
automatically when consumers attest to the related income or household
change in the application. That is, there is no separate question
asking consumers to attest to no longer being APTC eligible. Further,
as discussed in the 2017 Market Stabilization Rule, we have concerns
about pending a new enrollment until pre-enrollment verification is
conducted for current Exchange enrollees; because they would still have
an active policy, the potential overlap of current, active policies and
pended new enrollments would cause significant confusion for consumers
and create burdens on issuers with respect to managing potential
operational issues.\206\
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\206\ 82 FR 18359, https://www.federalregister.gov/d/2017-07712/p-149.
---------------------------------------------------------------------------
We did not propose removing plan category limitations; however, we
continue to study potential policies to promote continuous coverage and
provide consumers with flexibility. Finally, we acknowledge the
potential benefit of requiring Exchanges to implement this change
quickly, but we believe that providing Exchanges with flexibility to
implement it no later than January 1, 2024 strikes an appropriate
balance between allowing early implementation if possible and providing
Exchanges with necessary flexibility to plan related system updates
based on Exchange-specific competing priorities and resources. While
some Exchanges may be able to implement this new flexibility sooner
than January 1, 2024, in light of competing priorities such as the need
to implement changes to calculating financial assistance established in
the American Rescue Plan Act of 2021, we believe that substantial
flexibility for Exchanges is appropriate.
Comment: Several commenters supported the proposal but responded to
our request for comment on the risk that enrollees changing plans mid-
coverage year might not realize that their out of pocket costs could
increase if their deductible and other accumulators are re-set by
noting this is a concern. Some of these commenters requested that HHS
provide additional education and outreach to help enrollees to make an
informed decision on whether to change to a less expensive plan even
though it could require them to meet a new deductible and out-of-pocket
maximum without taking into account progress they had made towards
these accumulators in their prior coverage. Specific suggestions from
commenters included adding pop-up text in the HealthCare.gov
application for enrollees changing plans through a special enrollment
period, additional notice content, including in the form of
infographics, to illustrate the trade-off between a lower cost plan and
re-set accumulators, and adding help text to encourage special
enrollment period-eligible enrollees to seek out assistance through
Find Local Help for assistance with understanding their options. One
commenter suggested that related help text should appear at the time of
an APTC-ineligibility determination and should also provide these
enrollees with the basis for the determination. One commenter asked
that HHS reiterate in the final rule that issuers have the flexibility
to waive deductibles for consumers who change mid-year to a plan of a
different metal level, and one commenter asked that HHS consider
requiring issuers to transfer progress toward accumulators for
consumers who change plans through a special enrollment period.
Response: As discussed in the proposed rule, HHS acknowledges these
concerns, and will take commenters' suggestions into consideration in
our efforts to improve the consumer experience through outreach and
education. We also reiterate here that Marketplace issuers have the
flexibility to carry over progress towards a previous plan's
accumulators for enrollees who change to a different plan mid-year with
the same issuer. However, HHS does not have the authority to require
that issuers carry over this progress. Issuers must comply with any
applicable state requirements regarding accumulators.
Comment: One commenter recommended continuing to apply plan
category limitations to enrollees who lose APTC due to a failure to
submit documents to confirm their household income, but to provide the
additional flexibility to enrollees who lose APTC eligibility for any
other reason, citing the difficulties of implementing changes to plan
category limitations for different sub-groups of special enrollment
period eligible consumers. However, several commenters recommended
extending the new flexibility to all enrollees who lose APTC
eligibility, including to those who lose APTC due to failure to resolve
an inconsistency related to household income. One of these commenters
noted that, in addition to a change in household income or a mid-year
decision to no longer claim a household member as a tax dependent,
enrollees may lose APTC eligibility if a family member is offered
employer-sponsored coverage that is considered affordable and the
household loses APTC eligibility as a result. Commenters did not
express concerns about the possibility, as discussed in the proposed
rule, that this policy would allow or encourage individuals to change
to a plan of a lower metal level instead of submitting documentation to
resolve an inconsistency to maintain or re-gain their APTC eligibility.
However, several commenters expressed concerns about the challenges
consumers may face related to submitting documents to resolve an
inconsistency and provided recommendations for HHS to improve education
and outreach related to document submission. One commenter asked that
HHS provide more direct outreach, such as outbound calls and referrals
to an enrollment assister, to consumers who fail to resolve
inconsistencies and then select lower cost plans to ensure that these
enrollees understand their options. Another commenter stated that
individuals who lose APTC based on incorrect or out-of-date income
information must have a chance to challenge their determination, and
suggested that their special enrollment period not expire until 60 days
after they receive notice of a final determination of APTC
ineligibility. One commenter suggested that in addition to reminding
enrollees of the requirement to update their application with changes
including to household income, that HHS proactively notify enrollees
whose income may have changed based on information from a data source
that HHS uses to verify income information.
Response: We agree with commenters that limiting this change in
plan category limitations based on reasons why existing enrollees lose
APTC eligibility would be burdensome to implement, and may prevent some
enrollees from benefitting from the ability to change to a new plan
based on a change in their financial situation. We also agree that
individuals who lose APTC eligibility due to a family member's offer of
employer-sponsored coverage may benefit from being able to change to a
plan of a different metal level if it would be difficult for them to
afford to enroll in the employer coverage along with their family
member. Further, we believe that for most enrollees, the benefit of
receiving APTC combined with extensive outreach that HHS conducts for
individuals who must submit documentation to confirm their household
income sufficiently motivates these individuals to submit necessary
documentation. Additionally, we clarify that applicants to Exchanges on
the Federal platform who must submit documentation to confirm their
household income are first notified of
[[Page 24220]]
this requirement in the eligibility notice they receive upon completing
their application, and that individuals who do not submit documents, or
who submit documents that do not provide enough information to confirm
the household income that they attested to on their application,
receive a series of reminder notices, calls, and emails.\207\ We
continue to investigate opportunities to improve this outreach.
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\207\ Sample eligibility and reminder notices can be found at
https://marketplace.cms.gov/applications-and-forms/notices, and an
overview of HHS outreach to individuals who must submit
documentation to confirm their household income or other information
can be found starting on slide 15 of this presentation: https://marketplace.cms.gov/technical-assistance-resources/complex-cases-data-matching.pdf.
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b. Special Enrollment Periods--Untimely Notice of Triggering Event
We proposed to allow a qualified individual, enrollee, or dependent
who did not receive timely notice of a triggering event and was
otherwise reasonably unaware that a triggering event occurred to select
a new plan within 60 days of the date that he or she knew, or
reasonably should have known, of the occurrence of the triggering
event. We also proposed to allow such persons to choose the earliest
effective date that would have been available if he or she had received
timely notice of the triggering event. Finally, we proposed conforming
amendments to Sec. 147.104(b)(2)(ii) so that these proposals would
also apply to off-Exchange individual health insurance coverage. We are
finalizing this policy as proposed.
In accordance with Sec. 155.410(a)(2), an Exchange may allow
qualified individuals and enrollees to enroll in or change coverage
only during the annual open enrollment period as specified in Sec.
155.410(e), and during special enrollment periods as specified in Sec.
155.420. An Exchange must allow a qualified individual or enrollee to
enroll in or change from one qualified health plan to another if one of
the triggering events described in Sec. 155.420(d) occurs.
Furthermore, under Sec. 155.420(c)(1), a qualified individual or
enrollee generally has until 60 days after the date of the triggering
event to select a qualified health plan. Section 155.420(c)(2) and (3),
provide exceptions to this general rule under which a qualified
individual or enrollee may enroll prior to the date of a triggering
event. Section 155.420(c)(4) provides a final exception under which a
qualified individual or enrollee may have less than 60 days to enroll.
Coverage effective dates are outlined in Sec. 155.420(b) and vary
depending on the special enrollment period triggering event, but in all
cases are either on or after the date of the triggering event.
Because the time period during which a qualified individual may
enroll through a special enrollment period is determined by the
triggering event, a qualified individual who does not know the
triggering event has occurred may not have sufficient time to enroll in
coverage. Generally, the triggering events described in Sec.
155.420(d) and related plan selection timelines under Sec. 155.420(c)
are premised on the assumption that an individual will become aware of
a triggering event in time to make a plan selection within the time
allotted under Sec. 155.420(c). For example, the rules anticipate that
qualified individuals or enrollees will receive timely notice of the
day they will lose employer-sponsored coverage or the day they will
gain a dependent such that 60 days is ample time for the individual to
apply for enrollment through an applicable special enrollment period
and select a plan. However, our experience operating the Federally-
facilitated Exchange has shown that there are circumstances in which an
individual reasonably may not be aware of an event that triggers
special enrollment period eligibility until after the triggering event
has occurred. This change will allow a qualified individual, enrollee,
or dependent who did not receive timely notice of a triggering event or
was otherwise reasonably unaware that a triggering event occurred, to
qualify for an applicable special enrollment period and select a new
plan within 60 days of the date that he or she knew, or reasonably
should have known, of the occurrence of the triggering event. This
proposal will also allow the qualified individual, enrollee, or
dependent to choose the earliest effective date that would have been
available if he or she had received timely notice of the triggering
event.
For example, an employer fails to pay its share of premium for an
insured employer-sponsored health plan and enters a grace period
beginning April 1st, which will expire on May 31st. Because the
employer intends to satisfy its premium liability before the end of the
grace period, the employer does not notify participants and
beneficiaries in the plan of the non-payment or the risk of termination
of its employer-sponsored coverage retroactive to April 1st. The
employer is does not timely satisfy the premium debt, and the issuer of
the employer-sponsored health coverage terminates coverage for the
participants and beneficiaries retroactively to April 1st. Neither the
employer nor the issuer of the employer-sponsored health plan notify
the participants and beneficiaries of the beginning of the grace period
or that coverage would be terminated as of April 1st. On July 10th, the
participants and beneficiaries first receive notice from the issuer
that their coverage terminated as of April 1st. In accordance with the
circumstances described in 26 CFR 54.9801-6(a)(3)(i), due to the
employer's failure to timely pay premiums, the participants and
beneficiaries of the employer-sponsored health plan lost eligibility
for the coverage and are eligible for the special enrollment period
provided in Sec. 155.420(d)(1)(i). Per paragraph (d)(1)(i), the
triggering event for special enrollment periods due to loss of minimum
essential coverage is the last day the consumer would have coverage
under his or her previous plan or coverage. But in this scenario,
affected participants and beneficiaries, through no fault of their own,
were not aware of their loss of minimum essential coverage until more
than 60 days following the last day they had coverage. Thus, without
the measure we proposed here, the participants and beneficiaries in
this example would not be able to use the special enrollment period at
paragraph (d)(1)(i), because more than 60 days had passed since the
relevant triggering event without their having selected a new plan.
Some participants and beneficiaries of employer-sponsored health plans
are experiencing similar circumstances during the COVID-19 public
health emergency and sought or seek individual health insurance
coverage through the FFEs, exposing a perceived gap in current special
enrollment period rules.
Another circumstance in which an individual may not be aware that a
triggering event occurred involves technical errors that block an
individual from enrolling in coverage through an Exchange. Section
155.420(d)(4) specifies that an individual is eligible for a special
enrollment period if, among other things, their erroneous non-
enrollment in a qualified health plan was due to an error on the part
of the Exchange or one of its agents. In this case, the error itself is
the triggering event, and the date it occurs serves as the beginning of
the special enrollment period. However, as in the case of the loss of
employer-sponsored coverage discussed above, an individual may not be
aware that an error has occurred. In some cases, the Exchange may not
be aware that a technical error has
[[Page 24221]]
occurred which prevented individuals from enrolling until a subsequent
investigation is conducted. This process may take several weeks, during
which time an impacted individual may not be aware that they were
unable to enroll due to an error and therefore qualify for a special
enrollment period. There may even be cases in which an Exchange does
not identify the issue and the impacted population and notify them
until more than 60 days after the triggering event occurred.
Therefore we proposed to amend Sec. 155.420 by adding paragraph
(c)(5) to specifically provide that if a qualified individual,
enrollee, or dependent does not receive timely notice of an event that
triggers eligibility for a special enrollment period under this
section, and otherwise was reasonably unaware that a triggering event
occurred, the Exchange must allow them to select a new plan within 60
days of the date that they knew, or reasonably should have known, of
the occurrence of the triggering event. Additionally, we proposed to
add paragraph (b)(5) to clarify that when a qualified individual,
enrollee, or dependent did not receive timely notice of an event that
triggers eligibility for a special enrollment period, the Exchange must
allow the such persons the option to choose the earliest coverage
effective date for the triggering event under paragraph (b) that would
have been available if they had received timely notice of the
triggering event. In addition, we proposed that the Exchange must also
provide the qualified individual, enrollee or dependent the option to
choose the effective date that would otherwise be available under the
other provisions in paragraph (b).
Lastly, we proposed a conforming edit to Sec. 147.104(b)(2) that
would incorporate these amendments by reference in the regulations
governing limited open enrollment periods for off-Exchange coverage, so
that these proposed special enrollment rules would apply to issuers of
non-grandfathered individual health insurance, both on and off-
Exchange. We also separately proposed a change to Sec.
147.104(b)(2)(ii) to clarify how the special enrollment period in Sec.
155.420(d)(4) applies off-Exchange. This change is discussed in further
detail in the preamble to part 147.
We sought comment on these proposals.
We received public comments on the proposed updates to Special
Enrollment Periods--Untimely Notice of Triggering Event. The following
is a summary of the comments we received and our responses.
Comment: All commenters, except for one, expressed support for the
proposal, explaining that it provides flexibility for situations in
which a consumer was reasonably unaware that a special enrollment
period triggering event occurred. Several commenters stated that this
proposal is especially appropriate given the ongoing economic downturn
and COVID-19 pandemic, which will increase the number of consumers
without coverage. Others stated that it will help promote continuity of
coverage, and reduce the uninsured population. Several commenters
stated that the proposal would help reduce challenges with special
enrollment period enrollment, such as a lack of clear messaging and
insufficient time to select an appropriate plan. A few commenter stated
that the proposal will allow more people to enroll in special
enrollment periods.
Response: We agree that this proposal will have a positive impact
by providing consumers who were reasonably unaware of a special
enrollment period triggering event with an opportunity to enroll, as
well as the other benefits noted by commenters. As a result, we are
finalizing this policy as proposed.
Comment: One commenter opposed the proposal, which they
characterized as establishing a new special enrollment period, absent a
requirement that enrollees provide evidence of the lack of timely
notice of a special enrollment period triggering event. This commenter
expressed concern that there are insufficient mechanisms currently to
verify the lack of timely notice, and that the proposal would create an
open-ended, year-round opportunity to enroll in coverage, thus
increasing the likelihood of adverse selection.
Response: We clarify that the proposed rule does not establish new
circumstances through which a special enrollment period would be
available, but simply provides additional flexibility regarding when
existing special enrollment periods can be accessed in the relatively
rare circumstances in which a consumer was reasonably unaware that a
triggering event occurred. The proposed rule thus would not create an
open-ended special enrollment period through which anyone could enroll,
and only consumers who attest to being reasonably unaware that they
experienced a special enrollment period triggering event would be
eligible to avail themselves of this opportunity. We also note that,
for Exchanges on the Federal platform, some enrollments under this
authority will be subject to special enrollment period verification,
though there may be others that require caseworker review. Finally, we
note that we will continue to monitor the implementation of this
provision and propose additional policy and operational updates,
including expanding the use of special enrollment period verification,
if necessary.
Comment: A few commenters expressed support for the proposed rule,
but requested that HHS limit enrollments under this authority to
prospective coverage effective dates, and not allow retroactive
coverage effective dates. These commenters stated that if retroactive
coverage effective dates are permitted, the risk of adverse selection
and higher premiums for all enrollees will increase. One of these
commenters additionally stated that allowing retroactive coverage
effective dates makes it more difficult for issuers to contest improper
claims. Another commenter expressed concern regarding the burden of
providing retroactive coverage for State Exchanges, and about whether
consumers enrolling with a retroactive coverage effective date would be
required to pay all past due premiums at once, and whether this would
lead to a gap in coverage if they were unable to do so. This commenter
requested that we clarify the options available to consumers in this
scenario if they are unable to pay all past due premiums. Several other
commenters expressed support for providing consumers with the earliest
effective date that would otherwise have been available to them had
they been aware of the triggering event, stating that this will help
maintain continuity of coverage.
Response: While we acknowledge the concerns raised by commenters
related to potential adverse selection and increased premiums, we
believe this risk to be low due to the rare circumstances in which a
consumer would not be notified or become reasonably aware of a
triggering event until after it has occurred. We further anticipate
that instances of consumers experiencing significant delays in
notification or awareness of a triggering event are even rarer, thus
minimizing the overall risk of adverse selection and burden on State
Exchanges to implement. Regarding the concern of one commenter that
consumers may not be able to afford to pay all past due premiums if
they choose a retroactive coverage effective date, we note that
consumers have the option of choosing a prospective coverage effective
date instead.
Comment: Several commenters expressed support for the proposal, but
requested that, to prevent abuse by consumers and agents and brokers
and
[[Page 24222]]
to avoid establishing an open-ended opportunity for enrollment, HHS
narrow the scope of the proposal to only cover certain special
enrollment periods. A few of these commenters requested that HHS limit
the proposal to scenarios in which an individual with employer-
sponsored coverage was not informed by their employer of the loss of
coverage, such as the first example discussed in the preamble of the
proposed rule. These commenters also stated that HHS already has the
authority to provide flexible effective dates for special enrollment
periods due to error of the Exchange, and so the flexibility provided
by the proposal rule is unnecessary for these situations. One commenter
requested that HHS limit the proposal to situations in which an
individual with employer-sponsored coverage was not informed by their
employer of the loss of coverage, plus scenarios in which an individual
is unaware of the date they gained a dependent. Another commenter
requested that HHS apply parameters to the proposal, such as limiting
the duration to a specific time period such as a public health
emergency, or limiting it to the examples discussed in the preamble of
the proposed rule.
Response: Although we appreciate the concerns raised by commenters,
we are finalizing the rule as proposed. Although some commenters state
that HHS already has authority under the exceptional circumstances or
error of Exchange special enrollment periods to provide enrollees with
flexible effective dates, we note that there are other special
enrollment period triggering events, not explicitly discussed as
examples in the proposed rule, of which an enrollee may be reasonably
unaware, and for which there is no current authority to provide for an
enrollment outside the normal window of availability. Furthermore, the
exceptional circumstances special enrollment period authority noted by
commenters is subject to each Exchange's reasonable interpretation
regarding what qualifies as ``exceptional.'' The proposed rule, by
contrast, establishes a clear mandate to allow enrollees who were
reasonably unaware that a special enrollment period triggering event
occurred to use the date they became aware as the triggering event,
which will provide transparency and consistency in implementation of
this rule across Exchanges and for individual health insurance
coverage. Finally, we note that, because the proposal was intended to
establish a way to make whole consumers who have been harmed through no
fault of their own, limiting its availability to certain special
enrollment period types would be inconsistent with the purpose of this
proposed rule.
Comment: A few commenters expressed support for the proposal, but
requested that enrollments under this authority be subject to document-
based verification to prevent abuse by consumers and agents and
brokers.
Response: On Exchanges on the Federal platform, some enrollments
under this authority will be subject to special enrollment period
verification, though others will likely require caseworker review.
Because many State Exchanges and off-Exchange issuers already conduct
special enrollment period verification, HHS did not set explicit
requirements for State Exchanges or off-Exchange issuers regarding
special enrollment period verification for enrollments under this
provision. Therefore, we cannot say with certainty whether these
entities would subject such enrollments to verification.
Comment: Two commenters requested that HHS implement this proposal
sooner than the scheduled January 1, 2022 implementation date.
Response: We note that this provision will become effective on the
effective date of this rule, and thus the proposal will be implemented
sooner than January 1, 2022.
Comment: Two commenters, noting the difficulties that some
consumers face in understanding special enrollment period eligibility
and gathering supporting documentation within the 60-day window,
expressed support for providing consumers with a window of 60 days from
the date they are notified of special enrollment period eligibility to
enroll.
Response: Although we appreciate the concerns raised regarding the
ability of consumers to understand and comply with the process for
enrolling in a special enrollment period within the 60-day window,
establishing a policy of providing consumers with a 60-day window from
the date they become aware of special enrollment period eligibility
would be inconsistent with existing rules for special enrollment period
eligibility. Currently, eligibility for special enrollment periods on
Exchanges on the Federal platform and many State Exchanges is based on
the occurrence of a triggering event, such as a loss of minimum
essential coverage, rather than the date an enrollee becomes aware of
their special enrollment period eligibility. Therefore, to maintain
consistency in special enrollment period operations across these
Exchanges, we believe it is appropriate to establish the date an
enrollee becomes aware of the occurrence of a triggering event as the
triggering event, rather than the date they become aware of their
eligibility for a special enrollment period.
Comment: One commenter requested that HHS broadly interpret the
phrase ``reasonably unaware'' in the regulation text for this proposed
rule, and stated that HHS should not second-guess a consumer's
statement that they were unaware of a special enrollment period
triggering event. Another commenter requested that HHS explain the
meaning of this phrase, noting that if interpretation is left up to
those providing enrollment assistance, it would be burdensome for State
Exchange operations and require processes to individually advise
consumers on the date that they should have known about a special
enrollment period triggering event.
Response: HHS appreciates the concerns raised regarding how the
phrase ``reasonably unaware'' in the regulation text will be
interpreted. Although we do not provide an exact definition of this
phrase, we note the two examples included in the preamble of the
proposed rule, which describe scenarios in which an individual was
reasonably unaware that a special enrollment period triggering event
had occurred. In addition, to provide further clarity we include the
following example, which illustrates a situation in which a consumer
would not have been reasonably unaware that a special enrollment period
triggering event occurred. The examples in the preamble to the proposed
rule make clear that interpretation of the phrase ``reasonably
unaware'' is not entirely up to individuals providing enrollment
assistance. In addition, we also note that the legal standard of what
constitutes a reasonable person provides objectivity to whether a
consumer in this scenario would be reasonably unaware.
Example: A consumer visits HealthCare.gov on December 1 (during the
annual open enrollment period), and while filling out an application,
is informed that they may be eligible for Medicaid. The consumer then
fills out an application with their state Medicaid office. On February
3 of the following year, they receive a letter from the state Medicaid
office informing them that they are ineligible for Medicaid, but fail
to open the letter. On April 1 the consumer finds the unopened letter
and reads it, and then attempts to enroll in a qualified health plan on
HealthCare.gov, attesting to eligibility for the Medicaid denial
special
[[Page 24223]]
enrollment period based on the February 3 letter informing them of
their ineligibility for Medicaid. The consumer failed to enroll in the
special enrollment period they would have been eligible for under 45
CFR 155.420(d)(11)(i) within the allotted 60-day window because they
were unaware of the triggering event, in this case the determination of
ineligibility for Medicaid on February 3, when it occurred. However,
they are not eligible to avail themselves of the provision in Sec.
155.420(c)(5) because, had they opened the letter informing them of
their ineligibility for Medicaid within a reasonable period of time
after receiving it, they would have been made aware of the occurrence
of a special enrollment period triggering event, and thus they were not
reasonably unaware that one had occurred.
Comment: One commenter requested that HHS discuss whether consumers
will be able to access this special enrollment period through
HealthCare.gov, which they note would be preferable to enrollments
through the call center.
Response: Although enrollees under this authority may be able to
enroll using the application on HealthCare.gov, there are likely to be
cases in which enrollees must access the special enrollment period they
are eligible for through the Marketplace Call Center or a caseworker.
Comment: One commenter expressed support for the proposal, and also
asked that the Department of Labor consider implementing this proposal
for the group insurance market as well.
Response: HHS does not have the authority to change Department of
Labor regulations, and so we are unable to finalize such changes. We
note that the Department of Labor regulates group health plans under
the Employee Retirement Income Security Act of 1974 (ERISA), and that
HHS regulates the group health insurance market. We did not propose to
apply this provision to the group health insurance market, and will
therefore not finalize such a provision here. However, we will continue
to monitor this issue and propose changes related to HHS regulations
for the group health insurance market in the future, if appropriate.
Comment: One commenter expressed support for the proposal, but also
expressed concern regarding the potential for unintentional loss of
dental coverage as a result of changes in other health coverage, for
example if a consumer enrolls in both a qualified health plan and
stand-alone dental plan, but due to an error of the Exchange was
prevented from enrolling in the stand-alone dental plan. They request
that HHS allow consumers enrolling under the authority in the proposed
rule to also select a dental plan, and suggest that this could be
accomplished by removing the link between qualified health plans and
stand-alone dental plans on the Federally-facilitated Exchanges.
Response: We appreciate the concern raised regarding the potential
impact of the proposed rule on dental insurance, and note that nothing
would prevent a consumer from enrolling in a stand-alone dental plan
under the authority in the proposed rule. For this reason we believe
that removing the link between qualified health plans and stand-alone
dental plans on the Federally-facilitated Exchanges is not necessary,
but we will continue to monitor this issue and propose changes in the
future if necessary.
Following review of the comments, we are finalizing this policy as
proposed.
c. Cessation of Employer Contributions or Government Subsidies to COBRA
as Special Enrollment Period Trigger
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
\208\ (Pub. L. 99-272, April 7, 1986) provides for a temporary
continuation of group health coverage following, among other
circumstances, employees' separation from an employer, for reasons
other than gross misconduct, in instances where such separation would
otherwise cause termination of coverage. Although employees who elect
to receive COBRA continuation coverage may be required by their former
employer to pay their former employer's share of the premiums as well
as their own,\209\ some employers pay all or a portion of their former
employee's premium for part or all of the COBRA coverage period. In
addition, government entities will sometimes subsidize COBRA
continuation coverage premiums, whether as a direct payment or via a
third party such as an employer.
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\208\ https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
\209\ Individuals electing COBRA may also be required by their
former employer to pay a 2 percent administrative fee. See https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
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In accordance with the policy currently in place on the Exchanges
on the Federal platform, we proposed to amend Sec. 155.420(d)(1) to
state that the complete cessation of employer contributions for COBRA
continuation coverage serves as a triggering event for special
enrollment period eligibility. We are instead finalizing this policy
under new paragraph (d)(15), rather than in paragraph (d)(1)(v) as we
proposed. We are also finalizing text providing that the special
enrollment period will be available when subsidies from a government
entity completely cease.\210\ The triggering event for this special
enrollment period is the last day of the period for which COBRA
continuation coverage was paid for or subsidized, in whole or in part,
by an employer or a government entity.
---------------------------------------------------------------------------
\210\ Because employers are not required to charge a 2 percent
administrative fee to individuals who elect COBRA, we do not include
this fee in the definition of ``employer contributions.'' For
purposes of this section, if an individual enrolled in COBRA
continuation coverage without employer contributions (so that the
individual was responsible for 100 percent of the premiums) was not
required to pay a 2 percent administrative fee, this would not be
considered an employer contribution for the purposes of the proposed
special enrollment period.
---------------------------------------------------------------------------
Exchange regulations at Sec. 155.420(d)(1)(i) provide that when a
qualified individual or his or her dependent loses minimum essential
coverage as defined by Sec. 155.20, they gain eligibility for a
special enrollment period, during which they can enroll in a qualified
health plan. Paragraph (e) of Sec. 155.420 states that loss of minimum
essential coverage as described in paragraph (d)(1) includes the
circumstances listed at 26 CFR 54.9801-6(a)(3)(i) through (iii). These
provisions describe conditions under which someone may qualify for a
special enrollment period for group health plan coverage, including
paragraphs (a)(3)(i), ``Loss of eligibility for coverage,'' and
(a)(3)(iii), ``exhaustion of COBRA continuation coverage.'' Exhaustion
of COBRA coverage is defined in 26 CFR 54.9801-2(4) as cessation of
COBRA coverage for reasons other than failure of the individual to
timely pay premiums, and includes coverage ceasing due to ``failure of
the employer or other responsible entity to remit premiums on a timely
basis.''
In implementing special enrollment periods for Exchanges on the
Federal platform, HHS has provided a loss of minimum essential coverage
special enrollment period under Sec. 155.420(d)(1)(i) for individuals
whose COBRA costs change because their former employer completely
ceases contributions and as a result they must pay the full cost of
premiums. However, loss of coverage based on complete cessation of
employer contributions for COBRA coverage might not have been treated
as a triggering event by issuers of individual health insurance
coverage off-Exchange or by State Exchanges.
[[Page 24224]]
HHS believes it is important that individuals have access to a special
enrollment period in the individual market when their former employer
or a government entity completely ceases contributions or subsidies to
COBRA continuation coverage, because the cost of COBRA continuation
coverage premiums can be substantial, rendering this type of coverage
unaffordable for many people to whom it would be available.\211\
Ensuring that this special enrollment period is widely available will
help promote continuity of coverage for those who cannot maintain their
COBRA continuation coverage without contributions or subsidies from
their employer or a government entity. HHS therefore proposed to make
this special enrollment period available throughout the individual
market.
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\211\ https://www.kff.org/private-insurance/issue-brief/key-issues-related-to-cobra-subsidies/.
---------------------------------------------------------------------------
We proposed to amend Sec. 155.420 by adding paragraph (d)(1)(v)
stating that a special enrollment period is triggered when a qualified
individual or his or her dependent is enrolled in COBRA continuation
coverage for which an employer is paying all or part of the premiums,
and the employer completely ceases its contributions, with the
triggering event being the last day of the period for which COBRA
continuation coverage is paid for, in whole or in part, by the
employer. We are instead finalizing proposed paragraph (d)(1)(v) as
(d)(15), and in addition we are also finalizing a change to (e)(1) to
explicitly exclude (d)(15). In the preamble to the proposed rule, we
clarified that the triggering event for this special enrollment period
would be based on loss of employer contributions to COBRA continuation
coverage, rather than the loss of coverage itself. Thus, eligibility
for this special enrollment period does not depend on loss of COBRA
coverage, as illustrated by the examples we included. However, proposed
paragraph (d)(1)(v), like the rest of paragraph (d)(1), would have been
subject to paragraph (e), which states that loss of coverage excludes
voluntary termination of coverage, and (e)(1), which states that loss
of coverage does not include failure to pay premiums on a timely basis,
including COBRA premiums. Although new paragraph (d)(15) will not be
subject to the provisions in (e), we are concerned that stakeholders
may still be uncertain about whether individuals who voluntarily end
COBRA continuation coverage or have such coverage terminated following
a loss of employer contributions or government subsidies would still be
eligible for this special enrollment period, given the limitations
imposed by paragraph (e)(1). Therefore, we are finalizing proposed
paragraph (d)(1)(v) as (d)(15), which is not subject to paragraph (e).
In addition, we are also finalizing a change to paragraph (e)(1) to
explicitly exclude the special enrollment period trigger in paragraph
(d)(15), making clear that individuals who voluntarily end COBRA
continuation coverage or have such coverage terminated following a loss
of employer contributions or government subsidies are still eligible
for this special enrollment period, and to use the term ``COBRA
continuation coverage'' consistently.
Similar to the special enrollment period for termination of
employer contributions to employer-sponsored coverage at 26 CFR
54.9801-6(a)(3)(ii), we proposed that the triggering event is the last
day of the period for which COBRA continuation coverage is paid for, in
part or in full, by an employer. Furthermore, we proposed to clarify
that complete cessation of employer contributions toward employer-
sponsored continuation coverage under state mini-COBRA laws \212\ also
serves as a special enrollment period triggering event. These changes
would make explicit HHS's current policy with regard to the Exchanges
on the Federal platform, and would ensure that individual health
insurance coverage sold off-Exchange and through State Exchanges align
with it. In addition, establishing paragraph (d)(15) to explicitly
include complete cessation of employer contributions and government
subsidies to COBRA continuation coverage as a special enrollment period
triggering event will mitigate confusion among employers and employees,
as well as other stakeholders, about their options regarding COBRA
continuation coverage and special enrollment period eligibility.
---------------------------------------------------------------------------
\212\ https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
---------------------------------------------------------------------------
Similar to other special enrollment periods based on loss of
minimum essential coverage, in the Exchanges, this special enrollment
period would be subject to the provisions in paragraph (a)(4)(iii)(B)
and (C), which allow dependents and non-dependent qualified individuals
who qualify for a special enrollment period to be added to the QHP of a
household member who is already enrolled in Exchange coverage, or to
enroll separately in a plan of any metal level. We also proposed that
the Exchange must provide the qualified individual, enrollee, or
dependent the effective date that would otherwise be available pursuant
to the other provisions at paragraph (b)(2)(iv). To ensure that this
provision applies to new paragraph (d)(15), we are also finalizing
changes to paragraph (b)(2)(iv) to include paragraph (d)(15) in the
list of special enrollment periods that are subject to the paragraph.
In addition, we proposed that an individual eligible for this special
enrollment period would have 60 days before or after the triggering
event (in this case, the last day for which the qualified individual or
dependent has COBRA continuation coverage to which an employer or
governmental entity is contributing) to select a qualified health plan.
Therefore we are also finalizing changes to paragraph (c)(2) to include
new paragraph (d)(15). We also proposed that this special enrollment
period, which would be incorporated by reference in the guaranteed
availability regulations at Sec. 147.104(b)(2), apply with respect to
individual health insurance coverage offered through and outside of an
Exchange.
To help clarify the circumstances that would trigger the proposed
special enrollment period, we included the following example:
Example 1: An individual is laid off from a job on June 1, and 5
days later enrolls in COBRA continuation coverage for which the
employer pays 100 percent of the premiums (the employer does not
require payment of a 2 percent administrative fee). On September 3 of
that year, the employer informs the individual that it is completely
terminating contributions to the individual's COBRA continuation
coverage as of September 30, and beginning on October 1, the individual
will be responsible for 100 percent of the COBRA continuation coverage
premiums. As a result, the individual decides to end COBRA coverage
effective October 1. Because September 30 is the last day for which the
individual had COBRA continuation coverage for which the employer was
contributing, the individual has 60 days before and after September 30
(in this case, through November 29) to select an individual market plan
through a special enrollment period.
In addition to this proposal, HHS also considered addressing
situations in which an employer reduces, but does not completely cease,
its contributions for COBRA continuation coverage. In particular, we
considered adding to proposed paragraph Sec. 155.420(d)(1)(v) a
provision that a reduction of employer contributions to COBRA
continuation coverage would also serve as a special enrollment period
trigger. We also sought comment on whether HHS
[[Page 24225]]
should also adopt a threshold for the level of reduction of employer
contributions to COBRA continuation coverage that would be necessary to
trigger the special enrollment period. However, we are not finalizing
this policy.
Lastly, we note that in addition to employer contributions to COBRA
continuation coverage, COBRA coverage is sometimes subsidized by
government entities as well, either directly or through a third party
such as an employer.\213\ As noted in the preamble to the proposed rule
and earlier in this preamble, HHS believes it is important that
individuals have access to a special enrollment period in the
individual market when contributions to COBRA continuation coverage
cease, because the cost of COBRA continuation coverage premiums are
substantial, rendering this type of coverage unaffordable for many
people to whom it would be available. This issue applies equally to
cessation of employer contributions and cessation of government
subsidies. As with employer contributions to COBRA continuation
coverage, providing individuals with a special enrollment period when
subsidies from a government entity completely cease will promote
continuity of coverage among those who could not maintain their
coverage without such subsidies. Therefore, we are also finalizing in
new paragraph Sec. 155.420(d)(15) the provision that a special
enrollment period is triggered when subsidies from a governmental
entity to COBRA continuation coverage, whether paid directly or through
a third party, completely cease. The triggering event is the last day
of the period for which COBRA continuation coverage is paid for or
subsidized, in whole or in part, by an employer or government entity.
---------------------------------------------------------------------------
\213\ For example, the American Rescue Plan Act of 2021 provides
individuals enrolled in COBRA continuation coverage with subsidies
that cover 100 percent of premiums through September 30, 2021.
---------------------------------------------------------------------------
We also provide the following example to illustrate how the special
enrollment period would work with regard to government subsidies of
COBRA continuation coverage premiums.
Example 2: Same scenario as in the first example, except that, as
under the American Rescue Plan Act of 2021, the COBRA continuation
coverage the individual is receiving is fully subsidized by the federal
government, so that the individual does not have to pay any portion of
the COBRA premium. The federal subsidy is set to expire on September
30, and as a result, beginning October 1 the individual will be
responsible for the full amount of the COBRA continuation coverage
premiums. The individual decides to end their coverage effective
October 1, and as a result will have 60 days before and after the last
day for which they have COBRA continuation coverage with federal
subsidies (in this case, through November 29) to enroll in individual
health insurance coverage through a special enrollment period.
We received public comments on the proposed updates to cessation of
employer contributions to COBRA as special enrollment period trigger.
The following is a summary of the comments we received and our
responses.
Comment: No commenters opposed this proposal, and many supported
it, explaining that codifying this special enrollment period in
regulation would enhance transparency regarding the availability of
this special enrollment period on Exchanges on the Federal platform,
and mitigate confusion among employers and employees about their
options regarding COBRA continuation coverage and special enrollment
period eligibility. Several commenters agreed that, since consumers who
lose employer contributions to COBRA continuation coverage face a
financial calculation that is different than the one they made when
originally enrolling in COBRA coverage, a special enrollment period is
appropriate. Several others stated that this proposal is especially
appropriate given the ongoing economic downturn and COVID-19 pandemic.
Other commenters stated that this proposal will help promote continuity
of coverage, and noted that this is especially important given that
individuals with COBRA are more likely to have higher medical expenses.
A few commenters stated that this special enrollment period is
especially appropriate given the limited options faced by consumers who
choose to maintain their COBRA continuation coverage once employer
contributions end. Another agreed that it is important to provide
flexibility for consumers who are in a situation over which they have
no control. One commenter stated that this special enrollment period is
especially important for individuals with chronic health conditions,
such as HIV. Another commenter noted that special enrollment periods
such as this provide a critical safety net for consumers outside of the
annual open enrollment period. Another stated that the proposed rule
would likely encourage employers to assist laid-off workers with
contributions to COBRA. Finally, one commenter stated that the proposal
will have the beneficial effect of allowing more individuals to enroll
through special enrollment periods.
Response: We agree that the proposed changes would enhance
transparency and mitigate confusion regarding an existing policy of the
Exchanges on the Federal platform and options for consumers regarding
special enrollment period eligibility, in addition to the other
benefits noted by commenters. Accordingly, we are finalizing this
policy as proposed (but with the additional provision regarding
government subsidies).
Comment: Several commenters expressed support for the proposal, and
in addition supported designating partial reductions in employer
contributions to COBRA continuation coverage as a special enrollment
period triggering event. These commenters noted that due to the high
cost of COBRA continuation coverage, even a partial reduction in
employer contributions could make such coverage unaffordable for many
consumers. In addition, they noted that including partial reduction of
employer contributions as a special enrollment period trigger would
promote access to health insurance by providing another pathway by
which individuals can enroll in coverage. Several commenters also
expressed support for establishing a threshold amount by which employer
contributions must decrease in order to trigger special enrollment
period eligibility. A few of these commenters expressed support for
defining a threshold based on affordability to the consumer. One
commenter suggested using a threshold of 10 percent as an approximation
of a material reduction in employer contributions. Another commenter
noted the IRS' threshold for evaluating affordability of employer-
sponsored coverage of 9.83 percent, which they are concerned may be too
high for the purposes of COBRA coverage given the financial challenges
faced by consumers following a loss of employment. Finally, a few other
commenters opposed establishing a threshold, arguing that it would be
unnecessarily burdensome to consumers and noting that even partial
reductions can render COBRA coverage unaffordable. These commenters
instead supported designating a reduction in employer contributions to
COBRA of any amount as a special enrollment period triggering event.
Response: HHS recognizes the concerns raised by commenters
regarding the high cost of COBRA continuation coverage, even with
partial employer contributions. However, because the number of COBRA
enrollees with employer subsidies is already low
[[Page 24226]]
relative to the rest of the individual insurance market,\214\ we
believe it is likely that situations in which employer contributions to
COBRA continuation coverage are reduced significantly enough to render
such coverage unaffordable affect only a very small number of
consumers. Accordingly, we are not finalizing reduction of employer
contributions to COBRA continuation coverage as a special enrollment
period trigger, but will continue to monitor this situation in the
future.
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\214\ https://www.cbo.gov/system/files/2021-02/hEdandLaborreconciliationestimate.pdf.
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Comment: Two commenters requested that HHS implement this special
enrollment period sooner than the scheduled 2022 implementation date.
Response: We note that the requirement to provide this special
enrollment period goes into effect on the effective date of this rule,
which is sooner than the 2022 implementation date.
Comment: Two commenters expressed support for applying this special
enrollment period to off-Exchange individual health insurance coverage
and on State Exchanges. One of these commenters noted that establishing
more consistent special enrollment period rules on and off-Exchange
would help reduce the on-Exchange disadvantage.
Response: We agree that it is appropriate to apply this special
enrollment period market-wide to individual health insurance coverage,
including for coverage offered off-Exchange and on State Exchanges, and
thus we are finalizing this policy as proposed (but with the additional
provision regarding government subsidies).
Comment: Two commenters expressed support for the proposal, and
also suggested that HHS establish a special enrollment period for
individuals, and their dependents, who voluntarily terminate their
COBRA coverage, regardless of whether they are receiving employer
contributions. These commenters also added that not doing so would
penalize an enrollee who chooses to enroll in COBRA in an effort to
maintain their coverage. One of the commenters suggested this policy as
a way of expanding the number of ways in which consumers can enroll in
Exchange coverage.
Response: Although we appreciate the concerns raised regarding the
availability of a special enrollment period for individuals who are not
receiving employer contributions to COBRA coverage, we do not believe
that establishing such a special enrollment period is necessary. In
general, when a consumer has the opportunity to elect COBRA
continuation coverage, they also will have the opportunity to enroll in
a qualified health plan on the Exchanges on the Federal platform or a
State Exchange as well as off-Exchange, as they will likely be eligible
for a loss of minimum essential coverage special enrollment period. In
addition, special enrollment periods are generally based on triggering
events that do not include voluntary termination of coverage, which
would introduce concerns regarding adverse selection in the individual
market.
Comment: One commenter expressed support for the proposal, but
requested that HHS implement stronger verification mechanisms, such as
provision of a letter indicating the termination of employer
contributions to COBRA. This commenter also noted that verification
would benefit the enrollee by ensuring they do not pay out-of-pocket
for coverage already covered through employer contributions.
Response: This special enrollment period has been subject to
special enrollment period verification on Exchanges on the Federal
platform, subject to the loss of minimum essential coverage special
enrollment period attestation. Similarly, many State Exchanges already
conduct special enrollment period verification. With respect to off-
Exchange enrollments using special enrollment periods, subject to
applicable state law, issuers may implement reasonable procedures to
verify eligibility for special enrollment periods, and because these
Exchanges and issuers are able to determine for themselves whether
verification is needed, we do not believe it is necessary to require
them to establish specific verification procedures for this special
enrollment period.
Comment: One commenter requested that HHS discuss whether consumers
will be able to access this special enrollment period through
HealthCare.gov, which they note would be preferable to enrollments
through the call center.
Response: This special enrollment period has been, and will
continue to be, available to enrollees on Exchanges on the Federal
platform through the application on HealthCare.gov.
Comment: One commenter expressed support for the proposal, and
requested that HHS allow enrollees through this special enrollment
period to select a plan of any metal level when they enroll.
Response: Enrollments through this special enrollment period on
Exchanges on the Federal platform and State Exchanges are subject to
plan category limitations, including metal level restrictions, under 45
CFR 155.420(a)(4)(iii). We note, however, that because plan category
limitations apply only to current Exchange enrollees, consumers
enrolling through this special enrollment period on an Exchange would
only be subject to them in situations where they were added to an
existing policy. Although we appreciate the concern raised regarding
allowing enrollees to select a plan of any metal level, because we did
not propose to exempt enrollments through this special enrollment
period from plan category limitations in the proposed rule, we are not
finalizing such a change here. However, we will continue to monitor
this issue in the future. We also note that enrollments in off-Exchange
coverage are not subject to plan category limitations, and thus
consumers enrolling through this special enrollment period off-Exchange
could select a plan of any metal level.
Comment: One commenter requested that HHS provide resources to make
the public aware of the opportunity to enroll during a special
enrollment period when employer contributions to COBRA coverage cease.
Response: HHS will leverage existing HealthCare.gov content to
ensure that enrollees are aware of their options regarding cessation of
employer contributions to COBRA coverage and special enrollment period
eligibility.
Comment: One commenter requested that HHS also establish a special
enrollment period for enrollees who experience a decrease in APTC that
renders coverage unaffordable to them.
Response: We appreciate the concerns raised regarding individuals
who experience a decrease in APTC that renders their coverage
unaffordable. As described earlier in this section of the preamble, in
this rule we decided not to finalize a special enrollment period where
employer contributions to or government subsidies of COBRA coverage are
reduced but do not completely cease. We will continue to monitor this
situation in the future, and will consider it for future rulemaking.
As a result of the comments, we are finalizing this policy as
proposed, except that we are finalizing proposed paragraph (d)(1)(v) as
paragraph (d)(15), with the additional provision that cessation of
government subsidies to COBRA continuation coverage will also result in
a special enrollment period trigger, and with other conforming changes
discussed in this section of the
[[Page 24227]]
preamble. However, we are not finalizing the proposal to include
reduction of employer contributions to COBRA continuation coverage as a
special enrollment period trigger.
d. Special Enrollment Period Verification
In 2017, the HHS Market Stabilization Rule preamble explained that
HHS would implement pre-enrollment verification of eligibility for
certain special enrollment periods in all FFEs and SBE-FPs and
encouraged states to do the same in State Exchanges.
Since 2017, Exchanges on the Federal platform have implemented pre-
enrollment special enrollment period verification for special
enrollment period types commonly used by consumers to enroll in
coverage. Consumers who are not already enrolled through the Exchange
and who apply for coverage through a special enrollment period type
that requires pre-enrollment verification by the Exchange must have
their eligibility electronically verified using available data sources,
or they must submit supporting documentation to verify their
eligibility for the special enrollment period before their enrollment
can become effective. As stated in the HHS Marketplace Stabilization
Rule, special enrollment period verification is only conducted for new
enrollees due to the potential for additional burden on issuers and
confusion for consumers if required for existing enrollees.
In implementing pre-enrollment verifications for special enrollment
periods in the Market Stabilization Rule, HHS did not establish a
regulatory requirement that all Exchanges conduct special enrollment
period verifications, in order to allow State Exchanges with
flexibility to adopt policies that fit the needs of their state.\215\
Currently, all State Exchanges now conduct either pre- or post-
enrollment verification of at least one special enrollment type.
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\215\ 82 FR at 18356.
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We proposed to amend Sec. 155.420 to add paragraph (f) to require
all Exchanges to conduct eligibility verification for special
enrollment periods. Specifically, we proposed to require that Exchanges
conduct special enrollment period verification for at least 75 percent
of new enrollments through special enrollment periods for consumers not
already enrolled in coverage through the applicable Exchange.
We also proposed that under Sec. 155.315(h), State Exchanges would
have the flexibility to propose alternative methods for conducting
required verifications to determine eligibility for enrollment in a QHP
under subpart D, and to allow State Exchanges to request HHS approval
for use of alternative processes for verifying eligibility for special
enrollment periods as part of determining eligibility for special
enrollment periods under Sec. 155.305(b).
We sought comment on these proposals. With respect to Special
Enrollment Period Verification, we sought comment from States about the
75 percent verification threshold and whether it should be based on
past year or current year special enrollment period enrollments,
understanding that unforeseen events may occur that may drive up or
down enrollments from year-to-year.
We received public comments on the proposed updates to require
Exchanges to conduct Special Enrollment Period verification. The
following is a summary of the comments we received and our responses.
Comment: Several commenters supported the proposed policy. However,
the majority of commenters opposed the policy due to the administrative
burden to consumers and the financial and administrative burden on
State Exchanges. Several commenters stated that State Exchanges have
the best understanding of their needs around special enrollment period
verification and are best able to determine their SEP verification
strategy and thresholds. Several commenters did not think that CMS
provided justification for the 75 percent threshold or the policy
change by citing evidence of a negative risk pool impact, abuse of
SEPs, or ongoing problems with Exchanges' current practices. A few
commenters expressed concern that the proposal could negatively affect
the risk pool by deterring younger and healthier enrollees from
completing enrollment. One commenter asked for further guidance on the
flexibility for states and what constitutes alternative means. One
commenter suggested to waive this requirement until additional research
can be conducted to ensure that the policy does not create an undue
burden on individuals. One commenter noted that stricter SEP
enforcement mechanisms have the potential to improve the risk profile,
but any requirements regarding SEP enrollment should not be onerous
enough to reduce participation among those legitimately eligible.
Response: We agree with commenters who expressed concerns about
imposing administrative or financial burden on State Exchanges or
administrative burden on consumers at this time with additional new
requirements. We estimate that there are only four State Exchanges that
conduct more limited special enrollment period verification than the
Exchanges on the Federal platform, but these State Exchanges still
conduct some form of special enrollment period verification. These also
include the 3 smallest State Exchanges in terms of numbers enrolled and
issuer participation. These State Exchanges have reported to HHS that,
based on regular communications they have with their issuers about
special enrollment periods, they do not have evidence to suggest there
is misuse of special enrollment periods occurring.
Following review of the comments, we are not finalizing this
proposal.
9. Required Contribution Percentage (Sec. 155.605(d)(2))
HHS calculates the required contribution percentage for each
benefit year using the most recent projections and estimates of premium
growth and income growth over the period from 2013 to the preceding
calendar year. Accordingly, we proposed the required contribution
percentage for the 2022 benefit year, calculated using income and
premium growth data for the 2013 and 2021 calendar years.
Under section 5000A of the Code, an individual must have MEC for
each month, qualify for an exemption, or make an individual shared
responsibility payment. Under Sec. 155.605(d)(2), an individual is
exempt from the requirement to have MEC if the amount that he or she
would be required to pay for MEC (the required contribution) exceeds a
particular percentage (the required contribution percentage) of his or
her projected household income for a year. Although the Tax Cuts and
Jobs Act reduced the individual shared responsibility payment to $0 for
months beginning after December 31, 2018, the required contribution
percentage is still used to determine whether individuals above the age
of 30 qualify for an affordability exemption that would enable them to
enroll in catastrophic coverage under Sec. 155.305(h).
The initial 2014 required contribution percentage under section
5000A of the Code was 8 percent. For plan years after 2014, section
5000A(e)(1)(D) of the Code and Treasury regulations at 26 CFR 1.5000A-
3(e)(2)(ii) provide that the required contribution percentage is the
percentage determined by the Secretary of HHS that reflects the excess
of the rate of premium growth between the preceding calendar year and
2013, over the rate of income growth for that
[[Page 24228]]
period. The excess of the rate of premium growth over the rate of
income growth is also used for determining the applicable percentage in
section 36B(b)(3)(A) of the Code and the required contribution
percentage in section 36B(c)(2)(C) of the Code.
As discussed elsewhere in this preamble, we are finalizing as the
measure for premium growth the 2022 premium adjustment percentage of
1.3760126457 (or an increase of about 37.6 percent over the period from
2013 to 2021). This reflects an increase of about 1.6 percent over the
2021 premium adjustment percentage (1.3760126457/1.3542376277).
As the measure of income growth for a calendar year, we established
in the 2017 Payment Notice that we would use per capita personal income
(PI). Under the approach finalized in the 2017 Payment Notice and
proposed for use in the 2022 Payment Notice, the rate of income growth
for 2022 is the percentage (if any) by which the NHEA Projections 2019-
2028 value for per capita PI for the preceding calendar year ($61,156
for 2021) exceeds the NHEA Projections 2019-2028 value for per capita
PI for 2013 ($44,948), carried out to ten significant digits. The ratio
of per capita PI for 2021 over the per capita PI for 2013 is estimated
to be 1.3605944647 (that is, per capita income growth of about 36.1.
percent).\216\ This rate of income growth between 2013 and 2021
reflects an increase of approximately 3.9 percent over the rate of
income growth for 2013 to 2020 (1.3605944647 / 1.3094029651) that was
used in the 2021 Payment Notice. Per capita PI includes government
transfers, which refers to benefits individuals receive from federal,
state, and local governments (for example, Social Security, Medicare,
unemployment insurance, workers' compensation, etc.).\217\
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\216\ The 2013 and 2021 per capita personal income figures used
for this calculation reflect the NHE Projections 2019-2028,
published on March 24, 2020. The series used in the determinations
of the adjustment percentages can be found in Tables 1 and 17 on the
CMS website, which can be accessed by clicking the ``NHE Projections
2019-2028--Tables'' link located in the Downloads section at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. A detailed description of the
NHE projection methodology is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
\217\ U.S. Department of Commerce Bureau of Economic Analysis
(BEA) Table 3.12 Government Social Benefits. Available at https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&categories=survey&nipa_table_list=110.
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Using the 2022 premium adjustment percentage finalized in this
rule, the excess of the rate of premium growth over the rate of income
growth for 2013 to 2021 is 1.3760126457 / 1.3605944647, or
1.0113319445. This results in the 2022 required contribution percentage
under section 5000A of the Code of 8.00 x 1.0113319445 or 8.09 percent,
when rounded to the nearest one-hundredth of one percent, a decrease of
0.18 percentage points from 2021 (8.09066-8.27392).
Finally, beginning with the 2023 benefit year, we proposed to
publish the required contribution percentage, along with the premium
adjustment percentage and the annual cost-sharing limitation
parameters, in guidance separate from the annual notice of benefit and
payment parameters, unless HHS were to propose a change to the
methodology for calculating the parameters, in which case, we would do
so through notice-and-comment rulemaking. For a discussion of that
proposal, please see the preamble for Publication of the Premium
Adjustment Percentage, Maximum Annual Limitation on Cost Sharing,
Reduced Maximum Annual Limitation on Cost Sharing, and Required
Contribution Percentage (Sec. 156.130).
We received public comments on the proposed updates to the required
contribution percentage (Sec. 155.605(d)(2)) for plan year 2022.
Please see our summary of comments on the premium adjustment percentage
(Sec. 156.130(e)) for a summary of comments on the required
contribution percentage.
10. Excluding the Special Enrollment Period Trigger in Sec.
155.420(d)(1)(v) From Applying to SHOP Plans (Sec. 155.726)
Special enrollment periods due to cessation of employer
contributions to COBRA continuation coverage are generally not
available in the group insurance market. Therefore, to maintain
consistency between SHOP and the rest of the group insurance market, we
proposed to amend Sec. 155.726(c)(2)(i) to exclude the special
enrollment period trigger in proposed paragraph Sec. 155.420(d)(1)(v)
from applying to SHOP plans. However, because proposed paragraph
(d)(1)(v) is instead being finalized as paragraph (d)(15), which is not
included in Sec. 155.726(c)(2)(i), SHOP plans would no longer be
subject to the requirement to offer this special enrollment period.
Therefore, there is no need to finalize this provision.
We sought comment on this proposal.
We did not receive public comments on this provision, but are not
finalizing this policy as changes to the final regulation at Sec.
155.420 make this unnecessary.
E. 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)
The user fee rates for the 2022 benefit year for issuers on the FFE
and SBE-FPs were initially finalized in the final rule published on
January 19, 2021 (86 FR 6138 at 6152). However, as a result of a change
in administration priorities, enrollment increases due to legislation
and emergency action, and technical improvements we expect increases in
the costs of activities related to consumer outreach and Navigators for
2022. Therefore, upon review, we now estimate that the user fees rates
established in the January 19, 2021 final rule (86 FR 6138 at 6152)
will need to be slightly increased to sustain essential Exchange-
related activities and ensure robust outreach to support long-term
operational health. HHS intends to propose to increase FFE and SBE-FP
user fee rates for the 2022 benefit year through future notice-and-
comment rulemaking. HHS intends to propose a 2022 benefit year user fee
rate for all participating FFE issuers at 2.75 percent of total monthly
premiums, and a 2022 benefit year user fee rate for all participating
SBE-FP issuers at 2.25 percent of total monthly premiums. These user
fee rates continue to be lower than the 2021 user fee rates of 3.0
percent of total monthly premiums for all participating FFE issuers and
2.5 percent of total monthly premiums for all participating SBE-FP
issuers, but higher than the recently finalized rates of 2.25 percent
of total monthly premiums for FFE issuers and 1.75 percent of total
monthly premiums for SBE-FP issuers.
a. State User Fee Collection Administration (Sec. 156.50(c)(2))
We proposed to eliminate the state user fee collection flexibility
that HHS had previously offered to states in the 2017 Payment Notice.
We proposed that HHS would not collect an additional user fee, if a
state so requests, from issuers at a rate specified by the state to
cover costs incurred by the state for the functions the state retains.
HHS previously provided this flexibility to states to help reduce the
administrative burden on states of collecting additional user fees.
However, our subsequent
[[Page 24229]]
internal analysis demonstrated that the process of collecting the state
portion of the user fee and remitting it to the state, would increase
the operational burden and cost incurred by HHS and no states currently
rely on this mechanism. Therefore, we are amending Sec. 156.50(c)(2)
to remove this alternate user fee collection mechanism. We noted that
this proposal does not change the ability of an SBE-FP to request that
HHS collect from the SBE-FP state regulatory entity the total amount
that would result from the percent of monthly premiums charged for
enrollment through the Federal platform, instead of HHS collecting the
fee directly from SBE-FP issuers.
We did not receive public comments on this provision, and
therefore, we are finalizing it as proposed.
b. Eligibility for User Fee Adjustments for Issuers Participating
Through SBE-FPs (Sec. 156.50(d))
We proposed to amend Sec. 156.50(d) to clarify that issuers
participating through SBE-FPs are eligible to receive adjustments to
their federal user fee amounts that reflect the value of contraceptive
claims they have reimbursed to third-party administrators (TPAs) that
have provided contraceptive coverage on behalf of an eligible employer.
In the final rules ``Coverage of Certain Preventative Services Under
the Affordable Care Act,'' \218\ these relationships were established
as a method of both providing contraceptives for women and
accommodating the religious beliefs of employers. In the 2017 Payment
Notice,\219\ we allowed State Exchanges to enter into agreements to
rely on the Federal platform for certain Exchange functions to enhance
efficiency and coordination between the state and federal programs, and
to leverage the systems established by the FFEs to perform certain
Exchange functions. Although we recognized that issuers participating
in these types of Exchanges were subject to a federal user fee, Sec.
156.50(d) was not amended to reflect the SBE-FP Exchange model. As
such, we proposed to amend Sec. 156.50(d) to explicitly include the
issuers offering QHPs through SBE-FPs. We also proposed to make
conforming changes throughout the regulation text at Sec. 156.50(d) to
reflect the user fees applicable to FFEs and SBEs that adopt the DE
option, as further discussed elsewhere in this rulemaking.
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\218\ 78 FR 39870 (July 2, 2013); 80 FR 41318 (July 14, 2015).
\219\ 81 FR 12203 at 12293 (March 8, 2016).
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We sought comment on these proposals.
We received public comments on the proposed updates to eligibility
for user fee adjustments for issuers participating through SBE-FPs
(Sec. 156.50(d)). The following is a summary of the comments we
received and our responses.
Comment: All commenters supported the proposal for SBE-FP issuers
to be eligible to receive adjustments to their user fee amounts for
contraceptive claims reimbursed to third-party administrators.
Specifically, a commenter noted their approval of the proposed change
because it ensures that issuers in SBE-FP states are not treated less
advantageously than issuers in FFE states.
Response: We appreciate the supportive comments on this proposal
and are finalizing the policy to amend Sec. 156.50(d) to explicitly
include the issuers offering QHPs through SBE-FPs as proposed.
c. Request for Comments on Alternatives to Exchange User Fees (Sec.
156.50)
In the proposed 2022 Payment Notice, we solicited comment on the
appropriateness of an alternative revenue source to Exchange user fees
to ensure Exchanges can cover the costs of the Exchange in an
effective, appropriate, and fair manner. We appreciate the comments
received on this issue, but are not taking any action at this time in
relation to Exchange revenue sources. Should we propose future
administrative action on this topic, we will review and consider
responsive comments at that time.
2. State Selection of EHB-Benchmark Plan for Plan Years Beginning on or
After January 1, 2020 (Sec. 156.111)
a. Annual Reporting of State-Required Benefits
We proposed July 1, 2022 as the deadline for states to submit to
HHS their annual reports on state-required benefits pursuant to Sec.
156.111(d) and (f). We are finalizing this deadline as proposed for
2022.
We also intend to exercise enforcement discretion with regard to
the first annual reporting submission deadline of July 1, 2021 under
current regulation. Pursuant to this enforcement posture, we will not
take enforcement action against states that do not submit an annual
report in 2021. Rather, we will begin enforcing the annual reporting
requirement on July 1, 2022, when states must notify HHS in the manner
specified by HHS, of any benefits in addition to EHB and any benefits
the state has identified as not in addition to EHB and not subject to
defrayal, describing the basis for the state's determination, that QHPs
in the individual or small group market are required to cover in plan
year 2022 or after plan year 2022 by state action taken by May 2, 2022
(60 days prior to the annual submission deadline).
In the 2021 Payment Notice, we amended Sec. 156.111(d) and added
paragraph (f) to require states to annually notify HHS in a form and
manner specified by HHS, and by a date determined by HHS, of any state-
required benefits applicable to QHPs in the individual or small group
market that are considered to be ``in addition to EHB'' in accordance
with Sec. 155.170(a)(3) and any benefits the state has identified as
not in addition to EHB and not subject to defrayal, describing the
basis for the state's determination. Under this requirement, a state's
submission must describe all benefits requirements under state mandates
applicable to QHPs in the individual or small group market that were
imposed on or before December 31, 2011, and that were not withdrawn or
otherwise no longer effective before December 31, 2011, as well as all
benefits requirements under state mandates that were imposed any time
after December 31, 2011, applicable to the individual or small group
market. The state's report is also required to describe whether any of
the state benefit requirements in the report were amended or repealed
after December 31, 2011. Information in the state's report is required
to be accurate as of the day that is at least 60 days prior to the
annual reporting submission deadline set by HHS.
We also finalized Sec. 156.111(d)(2) to specify that if the state
does not notify HHS of its required benefits considered to be in
addition to EHB by the annual reporting submission deadline, or does
not do so in the form and manner specified by HHS, HHS will identify
which benefits are in addition to EHB for the state for the applicable
plan year. HHS's identification of which benefits are in addition to
EHB will become part of the definition of EHB for the applicable state
for the applicable plan year. In the 2021 Payment Notice, we finalized
that we would begin implementation of the annual reporting policy in
2021. Specifically, we finalized that states would be required to
notify HHS by July 1, 2021, of any benefits in addition to EHB and any
benefits the state has identified as not in addition to EHB and not
subject to defrayal, describing the basis for the state's
determination, that QHPs in the individual or small-group market are
[[Page 24230]]
required to cover in plan year 2021 or after plan year 2021 by state
action taken by May 2, 2021 (60 days prior to the annual submission
deadline).
We are finalizing as proposed a July 1, 2022 deadline for states to
submit to HHS a complete reporting package for the second year of
annual reporting. As finalized, states are required to notify HHS in
the manner specified by HHS by July 1, 2022, of any benefits in
addition to EHB and any benefits the state has identified as not in
addition to EHB and not subject to defrayal, describing the basis for
the state's determination, that QHPs are required to cover in plan year
2022 or after plan year 2022 by state action taken by May 2, 2022 (60
days prior to the annual submission deadline). However, as noted
earlier in this section, we also intend to exercise enforcement
discretion with regard to the first annual reporting submission
deadline of July 1, 2021. Pursuant to this enforcement posture, we will
not be actively collecting or requiring submission of annual reports in
2021.
Comment: Many commenters objected to the proposed reporting
deadline and asked for a delay in implementation of this policy. Many
commenters were against implementation of the annual reporting
requirement during the COVID-19 PHE. Commenters explained that imposing
this new reporting requirement during a time when states are already
required to expend substantial resources to respond to the COVID-19 PHE
would add unnecessary burden on states and require states to divert
already limited resources away from addressing the COVID-19 PHE.
Commenters requested that HHS eliminate the burdensome reporting
requirement or, at a minimum, delay reporting until 2023 assuming the
end of the COVID-19 PHE in 2021 and economic recovery in 2022.
Other commenters also urged HHS to delay the reporting requirement,
arguing that HHS should not implement the annual reporting requirement
until HHS releases additional guidance clarifying its defrayal policies
as HHS promised it would in the 2021 Payment Notice. These commenters
requested that any implementation of the annual reporting policy only
occur after states have an opportunity to review the annual reporting
process and associated templates in more depth that HHS will be
requiring states to use for annually reporting state mandates to HHS.
These commenters noted that states have not yet seen or had an
opportunity to review or comment on the proposed annual reporting
templates, reiterating the request for HHS to specify with more clarity
the reporting and determination mechanisms required of states.
Commenters urged HHS to immediately make available the proposed
templates that states are expected to use when submitting annual
reports.
Commenters also expressed concern about the lack of transparency
around the annual reporting and review process, requesting that HHS
delay the reporting requirement until HHS provides further
clarification. These commenters specifically requested that HHS clarify
whether HHS will accept a state's determination as to whether a state
mandate is in addition to EHB, who will be the final arbiter of such
determinations, and whether there will be any avenue for states to
appeal HHS's decisions in situations where there is disagreement
between HHS and a state surrounding the scope of a benefit mandate or
its status as being in an addition to EHB.
Response: Section 1311(d)(3)(B) of the ACA permits a state to
require QHPs offered in the state to cover benefits in addition to the
EHB, but requires the state to make payments, either to the individual
enrollee or to the issuer on behalf of the enrollee, to defray the cost
of these additional state-required benefits. Further, section
36B(b)(3)(D) of the Code specifies that the portion of the premium
allocable to state-required benefits in addition to EHB shall not be
taken into account in determining premium tax credits. We continue to
believe that requiring states to annually notify HHS of state-required
benefits in the manner specified at Sec. 156.111(d) and (f) will
promote compliance with section 1311(d)(3)(B) of the ACA and its
implementing regulations at Sec. 155.170. We also believe it will
enhance program integrity and potentially reduce improper federal
expenditures by supporting HHS efforts to ensure that APTC is paid in
accordance with federal law. We also believe the annual reporting
policy will increase transparency for issuers, enrollees, and other
stakeholders as to which state-required benefits are in addition to
EHB. We are proceeding with implementation of the annual reporting
policy and finalizing the second annual reporting deadline of July 1,
2022 as proposed. As finalized, states are required to notify HHS in
the manner specified by HHS by July 1, 2022, of any benefits in
addition to EHB and any benefits the State has identified as not in
addition to EHB and not subject to defrayal, describing the basis for
the state's determination, that QHPs are required to cover in plan year
2022 or after plan year 2022 by state action taken by May 2, 2022 (60
days prior to the annual submission deadline).
Although we continue to support implementation of the annual
reporting policy, we also acknowledge the validity of commenters'
concerns regarding the timing and implementation of annual reporting of
state-required benefits as planned in 2021. Therefore, although we are
finalizing the second annual reporting deadline of July 1, 2022 as
proposed, we also intend to exercise enforcement discretion in relation
to the upcoming first annual reporting submission deadline of July 1,
2021. Specifically, HHS will not take enforcement action against states
that do not submit an annual report on state-required benefits by the
July 1, 2021 submission deadline; and HHS will not identify state-
required benefits in addition to EHB for states that do not submit a
report to HHS by the July 1, 2021 submission deadline. Accordingly,
because HHS is not enforcing the collection of state-required benefits
reports in 2021, HHS will not publish on the CMS website in 2021 any
annual reports on state-required benefits. We note that the obligation
for a state to defray the cost of QHP coverage of state-required
benefits in addition to EHB is an independent statutory requirement
from the annual reporting policy finalized at Sec. 156.111(d) and (f).
Therefore, although this enforcement posture effectively relieves
states of state-required benefit reporting requirements until July 1,
2022, it does not pend or otherwise impact the defrayal requirements
under section 1311(d)(3)(B) of the ACA, as implemented at Sec.
155.170. Under this enforcement posture, states remain responsible for
making payments to defray the cost of additional required benefits and
issuers are still responsible for quantifying the cost of these
benefits and reporting the cost to the state.
Under this enforcement posture, HHS will begin enforcing the annual
reporting requirement on states in 2022. States are required to notify
HHS in the manner specified by HHS by July 1, 2022, of any benefits in
addition to EHB that QHPs are required to cover in plan year 2022 or
after plan year 2022 by state action taken by May 2, 2022 (60 days
prior to the annual submission deadline). As part of this reporting,
states must also identify which state-required benefits are not in
addition to EHB and do not require defrayal in accordance with Sec.
155.170, and provide the basis for the state's determination, by the
July 1, 2022 reporting submission deadline. States are permitted to
submit their annual report at any time during the May 2-July 1, 2022,
submission window.
[[Page 24231]]
In the 2021 Payment Notice, we indicated that we would continue
engaging in technical assistance with states to help ensure state
understanding of when a state-benefit requirement is in addition to EHB
and requires defrayal. We continue to work on additional technical
assistance that we believe will further assist states with their
defrayal analyses and believe such technical assistance will bolster
state compliance with defrayal requirements, as well as result in a
smoother annual reporting process for states and review process for
HHS. However, we also believe these additional technical assistance
documents will best serve state needs if made available to states far
enough in advance of the first annual reporting deadline. It is
important that states have an opportunity to ask HHS any clarifying
questions after reviewing these technical assistance documents and make
any necessary adjustments to state policy. We believe that exercising
enforcement discretion for the first year of annual reporting in the
manner we described will ensure that states have these opportunities
before the July 1, 2022 submission deadline. We also believe our
enforcement posture will promote a smoother annual reporting process
overall in 2022 and beyond as states will be able to utilize the
additional technical assistance documents as a tool to identify which
state mandates are in addition to EHB in a manner that reflects federal
policy.
We also believe the additional technical assistance efforts will
help address commenter concerns around potential disagreements between
HHS and states as to which state-required benefits are in addition to
EHB and require defrayal. The purpose of this additional technical
assistance and outreach is to clarify the defrayal policy more
generally and to provide states with a more precise understanding of
how HHS analyzes and expects states to analyze whether a state-required
benefit is in addition to EHB pursuant to Sec. 155.170. We encourage
states to review state-required benefits in the context of this
additional technical assistance and take the appropriate steps to
update policy decisions regarding which state-required benefits are in
addition to EHB and require defrayal ahead of the July 1, 2022 annual
reporting deadline.
We also acknowledge that states continue to express concern
regarding how HHS plans to enforce Sec. 155.170 after reviewing state
reports or identifying mandates in a non-reporting state that are in
addition to EHB for which the non-reporting state is not defraying. We
stated in the 2021 Payment Notice that we would not be adopting any
policy with regard to whether enforcement of the defrayal requirement
will be retrospective or prospective in relation to the submission of
Sec. 156.111 reports. However, we are concerned that declining to
adopt an enforcement policy has caused unnecessary confusion and
concern for states. We are therefore clarifying that HHS does not
intend to retroactively enforce the defrayal requirement against states
for plan years prior to 2022 in relation to the submission of Sec.
156.111 reports. With regards to resolving any disagreements that may
arise between a state and HHS as to whether a mandated benefit is in
addition to EHB, we intend to work closely with the state to address
the disagreement without engaging in a formal appeals process. We also
intend to provide non-reporting states with an opportunity to review
our identifications of state-required benefits that are in addition to
EHB prior to releasing the annual reports on the CMS website an effort
to mitigate the potential for disagreement between the state and HHS.
As stated in the 2021 Payment Notice, HHS will provide the
templates that states are required to use for annually reporting the
information required pursuant to Sec. 156.111(f)(1) through (6). We
continue to believe that the descriptions of the required data elements
at Sec. 156.111(f)(1) through (6) provide sufficient detail to states
regarding the types of information states will be required to include
in the annual reports. States and other stakeholders reviewing those
requirements should be able to review Sec. 156.111(f)(1) through (6)
to better understand the scope of the information states are required
to include in their annual reports without reviewing the actual
reporting templates. However, we also believe it is important to
provide states with ample time to review the precise format,
instructions, and content of the annual reporting templates for state-
required benefits ahead of submission. As stated in the 2021 Payment
Notice, the precise templates that HHS will require states to use are
available for review as part of the information collection amended
under OMB control number: 0938-1174 (Essential Health Benefits
Benchmark Plans (CMS-10448)). Although OMB approved that information
collection on February 25, 2021, this approval took longer than
anticipated and we agree with commenters that this delay resulted in
increasingly limited time for states to review the templates ahead of
the July 1, 2021 deadline for the first year of annual reporting of
state-required benefits. By exercising enforcement discretion in the
manner described, we would provide states that are concerned about
having ample time to review the templates ahead of submitting an annual
report the option to choose to delay submitting their first annual
report until July 1, 2022 without HHS identifying which state-required
benefits are in addition to EHB for the applicable plan year in the
state.
We also understand that states have an immediate need to devote
limited resources to responding to the COVID-19 PHE and that commenters
feel that preparing an annual report on state-required benefits in 2021
is competing with that urgent priority. We continue to believe that the
information we are requiring that states report to HHS as part of this
annual reporting requirement should already be readily accessible to
states, as every state should already be defraying the costs of state-
required benefits in addition to EHB. Thus, states should already have
ready access to the information the annual reports require and the
reporting itself should therefore be complementary to the process the
state already has in place for tracking and analyzing state-required
benefits. Moreover, states need not report to HHS if they choose not
to. Specifically, Sec. 156.111(d)(2) provides that, HHS will identify
the state-required benefits it believes are in addition to EHB for the
applicable plan year for any state that does not submit an annual
report by the annual submission deadline, or does not do so in the form
and manner specified by HHS. However, when coupled with the delays in
finalizing the reporting templates and issuing additional technical
assistance, we believe the added burden of the COVID-19 PHE on states
is yet an additional factor that supports exercising enforcement
discretion. We believe our enforcement posture for 2021 will allow
states that have concerns about the upcoming July 1, 2021 deadline in
the context of the COVID-19 PHE sufficient time to prepare their annual
reports on state-required benefits before the July 1, 2022 submission
deadline.
Comment: Many commenters continue to oppose or be concerned about
the annual reporting policy overall and asked HHS for clarity on why
HHS has placed a burdensome reporting requirement on states. Commenters
stated that HHS has not defined the scope of the problem the reporting
seeks to address and asked HHS to provide additional transparency
regarding the value that HHS seeks to add in requiring this additional
[[Page 24232]]
reporting, especially given that some states already conduct defrayal
analyses of their own and posts these publicly. Commenters again
expressed that the annual reporting requirement is unnecessary, as
existing regulation has already established robust requirements for
insurers to, in coordination with states and marketplaces, perform
actuarially sound analyses of costs associated with state-mandated
benefits for use when calculating federal tax credits. Commenters also
noted the importance of setting a deadline that allows issuers time to
make changes to rate filings. For example, one commenter supported the
overall annual reporting policy but requested that HHS adjust the
timing and deadlines for the annual reporting to ensure that issuers
are aware of any state-mandated benefits that states must defray in
advance of rate-setting timelines. This commenter specifically noted
that requiring states to file reports by July 1 of the same benefit
year does not provide plans with the time necessary to work such
benefits and defrayals into premium calculations for that year.
Response: We disagree with commenters that we have not yet provided
adequate justification for why HHS is implementing the annual reporting
requirement. When finalizing the annual reporting requirement in the
2021 Payment Notice, we explained the reasoning for the new policy in
detail. We also explained that, although we acknowledge that some
states may already be appropriately identifying which state-required
benefits are in addition to EHB and require defrayal, we believe that
many other states may not be doing so. In such states, QHP issuers may
be covering benefits as EHB that actually require state defrayal under
federal requirements, but for which the state is not actively defraying
costs, resulting in improper expenditures of APTC paid by the federal
government. Furthermore, requiring states to provide information
regarding their state benefit requirements to HHS properly aligns with
federal requirements for defraying the cost of state-required benefits;
improves transparency with regard to the types of benefit requirements
states are enacting; and that it provides the necessary information to
HHS for increased oversight over whether states are appropriately
identifying which state-required benefits require defrayal and whether
QHP issuers are properly allocating the portion of premiums
attributable to EHB for purposes of calculating PTCs. For a more
detailed discussion of why the annual reporting policy is justified,
please refer to the 2021 Payment Notice.
With regards to the timing of the annual reporting submission
deadline, we acknowledge that a July 1 deadline of any given reporting
year may not perfectly align with other state and issuer deadlines,
such as issuer rate-setting deadlines. However, we remind commenters
that states must defray benefits in addition to EHB in accordance with
Sec. 155.170 independent of any reporting requirement or reporting
timeline and regardless of whether the state benefit requirement is
included in that plan year's annual reporting submission. We therefore
also conclude that states newly identifying state-required benefits as
being in addition to EHB after rate-setting has concluded is likely not
a new issue. In the event that a state newly identifies a state-
required benefit as being in addition to EHB and this determination
affects issuer rates for the plan year during which the reporting is
taking place or for a future plan year, we will work with the state on
how to address that situation on a state-by-state basis. We believe
that our additional technical assistance and outreach to states will
assist in preventing such situations from arising by ensuring that
states can analyze pending legislation and state-required benefits in a
manner consistent with federal defrayal policy and in advance of rate
filing deadlines. However, states that have still concerns about such a
situation arising are encouraged to ask HHS in advance of annual
reporting submission deadlines for input on whether a state-required
benefit is in addition to EHB.
b. States' EHB-Benchmark Plan Options
The 2019 Payment Notice stated that we would propose EHB-benchmark
plan submission deadlines in the HHS annual Notice of Benefit and
Payment Parameters. In the proposed 2022 Payment Notice, we proposed
May 6, 2022, as the deadline for states to submit the required
documents for the state's EHB-benchmark plan selection for the 2023
plan year and as the deadline for states to notify HHS that they wish
to permit between-category substitution for the 2023 plan year. A
typographical error appeared in the proposed rule related to these
deadlines. Both proposed deadlines should have read May 6, 2022, for
the 2024 plan year, not for the 2023 plan year. The correct meaning of
the proposed rule as applying to the 2024 plan year should have been
clear from the context of the rulemaking, and the prior rulemaking in
the 2021 Payment Notice establishing deadlines for this purpose.
We are finalizing these deadlines with minor revisions to correct
the typographical error such that May 6, 2022, is the deadline for
states submitting EHB-benchmark plan selections for the 2024 plan year
and May 6, 2022, is the deadline for states to permit between-category
substitution for the 2024 plan year.
Comment: Commenters requested clarification regarding the proposed
submission deadlines. These commenters noted that issuers need
sufficient time to review and respond to changes a state may make to
its EHB-benchmark plan, and expressed concern that the proposed
deadline would occur when issuers are filing plans for 2023. One
commenter noted that the proposed reporting deadline is earlier than in
prior years and, out of concern for public notice, urged CMS to require
states to provide a significant amount of time for the public to
comment on any changes that states are planning to make to their EHB-
benchmark plans. Another commenter objected to the proposed reporting
deadline because it permits EHB-benchmark plan selections to occur on
an annual cycle, arguing that by granting states expansive power to
alter their EHB-benchmark plans so dramatically every year, the EHB-
benchmark plan selection flexibility threatens any hope of
predictability of coverage for consumers from year-to-year and state-
to-state. We also received several out of scope comments.
Response: We are finalizing as proposed May 6, 2022 as the deadline
for states to submit the required documents for the state's EHB-
benchmark plan selection for the 2024 plan year and as the deadline for
states to notify HHS that they wish to permit between-category
substitution for the 2024 plan year, with minor revisions to correct
the typographical error that referred to plan year 2023 in the proposed
rule. Fixing this typographical error aligns the deadlines with those
finalized in prior years and addresses the concerns commenters raised
regarding providing issuers sufficient time to review changes states
make to the EHB-benchmark plan and providing the public advance notice
of such changes. As in prior years, states are required to provide
reasonable public notice and an opportunity for public comment on the
state's selection of an EHB-benchmark plan that includes posting a
notice on its opportunity for public comment with associated
information on a relevant state website. As finalized, the deadlines
also allow issuers sufficient time to develop plans that adhere to
their state's new EHB-benchmark plan.
[[Page 24233]]
As discussed in more detail in the 2019 Payment Notice, the purpose
of this policy is to allow for state flexibility in selecting an EHB-
benchmark plan, which is why we allow states to make such changes on an
annual basis. Furthermore, because of the level of effort needed by the
state and its issuers to make changes to a state's EHB-benchmark plan,
we believe that in only very limited cases will a state choose to make
EHB-benchmark plan changes on an annual basis, a scenario that has not
yet occurred since finalizing the EHB-benchmark plan selection
flexibility. If a state does decide to make changes annually, there may
be a specific reason for needing an annual change such as for a medical
innovation where such benefits would outweigh any potential for
consumer confusion.
We continue to emphasize that the deadlines for EHB-benchmark plan
selection and permitting between-category substitution are firm, and
that states should optimally have one of their points of contact who
has been predesignated to use the EHB Plan Management Community reach
out to us using the EHB Plan Management Community well in advance of
the deadlines with any questions. Although not a requirement, we
recommend states submit applications for EHB-benchmark plan selections
at least 30 days prior to the submission deadline to ensure completion
of their documents by the proposed deadline. We also remind states that
they must complete the required public comment period for EHB-benchmark
plan selection and submit a complete application by the finalized
deadline.
3. Premium Adjustment Percentage (Sec. 156.130(e))
We proposed the 2022 benefit year annual premium adjustment
percentage using the most recent estimates and projections of per
enrollee premiums for private health insurance (excluding Medigap and
property and casualty insurance) from the NHEA, which are calculated by
CMS' Office of the Actuary. For the 2022 benefit year, the premium
adjustment percentage will represent the percentage by which this
measure for 2021 exceeds that for 2013. However, in light of the
overwhelming comments received, we are readopting as the measure of
premium growth for the 2022 benefit year and beyond the NHEA
projections of average per enrollee employer-sponsored insurance (ESI)
premium, which was the measure used for benefit years 2015 through
2019.
Section 1302(c)(4) of the ACA directs the Secretary to determine an
annual premium adjustment percentage, a measure of premium growth that
is used to set three other parameters detailed in the ACA: (1) The
maximum annual limitation on cost sharing (defined at Sec.
156.130(a)); (2) the required contribution percentage used to determine
eligibility for certain exemptions under section 5000A of the Code
(defined at Sec. 155.605(d)(2)); and (3) the employer shared
responsibility payment amounts under section 4980H(a) and (b) of the
Code (see section 4980H(c)(5) of the Code). Section 1302(c)(4) of the
ACA and Sec. 156.130(e) provide that the premium adjustment percentage
is the percentage (if any) by which the average per capita premium for
health insurance coverage for the preceding calendar year exceeds such
average per capita premium for health insurance for 2013, and the
regulations provide that this percentage will be published in the
annual HHS notice of benefit and payment parameters.
The 2015 Payment Notice final rule and 2015 Market Standards Rule
established a methodology for estimating the average per capita premium
for purposes of calculating the premium adjustment percentage for the
2015 benefit year and beyond. In those rules, HHS used the NHEA ESI
premium measure to estimate premium growth. As noted in the 2022
Payment Notice proposed rule, the 2020 Payment Notice final rule
changed this methodology and, for benefit years 2020 and 2021, we
instead calculated the average per capita premium as private health
insurance premiums minus premiums paid for Medicare supplement
(Medigap) insurance and property and casualty insurance, divided by the
unrounded number of unique private health insurance enrollees,
excluding all Medigap enrollees. Additionally, as finalized in the 2021
Payment Notice final rule, we finalized that we would calculate the
payment parameters that depend on NHEA data based on the NHEA data
available at the time of the applicable proposed rule.
As such, we proposed that the premium adjustment percentage for
2022 would be the percentage (if any) by which the most recent NHEA
projection available at the time of the applicable proposed rule of per
enrollee premiums for private health insurance (excluding Medigap and
property and casualty insurance) for 2021 ($7,036) exceeds the most
recent NHEA estimate available at the time of the applicable proposed
rule of per enrollee premiums for private health insurance (excluding
Medigap and property and casualty insurance) for 2013 ($4,883).\220\
Using this formula, the proposed premium adjustment percentage for the
2022 benefit year was 1.4409174688 ($7,036/$4,883), which represents an
increase in private health insurance (excluding Medigap and property
and casualty insurance) premiums of approximately 44.1 percent over the
period from 2013 to 2021.
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\220\ 79 FR 13743.
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We received numerous public comments on the proposed updates to
premium adjustment percentage (Sec. 156.130(e)). Many comments on the
premium adjustment percentage were presented alongside comments on
related parameters such as the required contribution percentage,
maximum annual limitation on cost sharing, and reduced annual
limitation on cost sharing. As such, we address comments on all of
these parameters in this section. The following is a summary of the
comments we received and our responses.
Comment: As has been typical since the change to the methodology
was adopted in the 2020 Payment Notice, the majority of commenters
requested that we not implement the annual increase to the premium
adjustment percentage, or at least one of the parameters derived from
this value (for example, the maximum annual limitation on cost sharing,
the reduced maximum annual limitations on cost sharing, the required
contribution percentage published by HHS), or that the IRS not increase
the applicable percentage used to determine premium tax credits, or
required contribution percentage for purposes of determining
affordability of employer-sponsored minimum essential coverage for
determining eligibility for premium tax credits for the 2022 benefit
year, and instead requested that HHS revert to the use of the NHEA ESI
premium measure to estimate premium growth. Numerous commenters
expressed concern with the rate of increase in the premium adjustment
percentage and related payment parameters. These commenters
specifically opposed the changes made to the premium adjustment
percentage calculation in the 2020 Payment Notice, which based this
parameter and the maximum annual limitation on cost sharing, reduced
maximum annual limitations on cost sharing, and required contribution
percentage on a premium measure that includes individual market premium
changes, instead of maintaining the methodology established in the 2015
Payment Notice \221\ and 2015 Market Standards
[[Page 24234]]
Rule.\222\ These commenters were concerned that the use of a measure
that includes individual market premiums has led to more rapid
increases in consumer costs than would have occurred had HHS retained
the NHEA ESI-only premium measure utilized to calculate the premium
adjustment percentage and related parameters prior to the 2020 benefit
year.
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\222\ 79 FR 30240.
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Commenters also expressed concerns that more rapid increases in the
premium adjustment percentage would lead to higher costs to consumers
and lower enrollment. A significant majority of these commenters
requested that HHS reverse the policy finalized in the 2020 Payment
Notice. A few commenters suggested alternatives, including a cap on
increases to the maximum annual limitation on cost sharing of 3 percent
year-to-year, or a hybrid approach between the pre-2020 and current
methodologies. Under the suggested hybrid policy, ESI premiums would be
used to calculate the growth in premiums between 2013 and 2019, while
all private health insurance premiums minus Medigap and the medical
portion of property and casualty insurance would be used to calculate
the growth in premiums between 2019 and the current benefit year. These
two growth estimates would be multiplied to arrive at the premium
adjustment percentage.
Some of these commenters suggested that consumer burden connected
to the increases in these parameters has been exacerbated by the COVID-
19 PHE and its economic implications. These commenters maintained that
these parameters should not be raised during the COVID-19 PHE. However,
one commenter specified that they support the flexibility provided by
the increase in the maximum annual limitation on cost sharing, which is
a result of the increase in the premium adjustment percentage.
Response: After considering the overwhelming comments received, we
are reverting to using the NHEA ESI premium measure previously used for
the 2015 through 2019 benefit years to estimate premium growth for the
2022 benefit year and beyond. We believe using the NHEA ESI premium
measure aligns with the statutory language at section 1302(c)(4) of the
ACA, as ESI meets the definition of ``health insurance coverage'' and
represents the vast majority of the market, overlapping very
significantly with the private health insurance data used for benefit
years 2020 and 2021.\223\
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\223\ The data used to calculate per capita ESI premiums
overlaps significantly with the data used to calculate the current
measure--according to the CMS Office of the Actuary, approximately
86 percent of enrollees in 2022 will be covered by employer-
sponsored insurance.
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With these considerations, we believe this change is consistent
with the will and interest of stakeholders and will mitigate the
uncertainty regarding premium growth during the COVID-19 PHE. Reverting
to the NHEA ESI premium measure also aligns with the policy objectives
in the January 28, 2021 Executive Order on Strengthening the Affordable
Care Act and Medicaid \224\ and the American Rescue Plan Act of
2021,\225\ which both emphasize making health coverage accessible and
affordable for consumers of all income levels. Moreover, this policy is
consistent with reducing premium growth so that consumers are not
required to pay high premiums or cost-sharing that is subsequently
rebated pursuant to MLR requirements, particularly since we have seen
record high MLR rebates in recent years.\226\ ESI premiums have grown
at a slower rate from 2013 through 2019 as compared to the private
insurance premium growth rate, and when used as a measure of premium
growth, ESI premium growth will make more individuals eligible for an
affordability exemption that will enable them to enroll in catastrophic
coverage under Sec. 155.305(h), will decrease the rate of growth of
cost sharing parameters such as the annual maximum limitation on cost
sharing, and, if the IRS adopts this measure of premium growth for
purposes of indexing under the premium tax credit provision in section
36B of the Code going forward, also will increase consumer eligibility
for premium tax credits.\227\
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\224\ 86 FR 7793 (February 2, 2021).
\225\ American Rescue Plan Act of 2021, Public Law 117-2.
\226\ See https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/2019-Rebates-by-State.pdf.
\227\ Section 36B(b)(3)(A)(ii) of the Code generally provides
that the applicable percentages are to be adjusted after 2014 to
reflect the excess of the rate of premium growth over the rate of
income growth for the preceding year. Section 36B(c)(2)(C) of the
Code provides that the required contribution percentage is to be
adjusted after 2014 in the same manner as the applicable percentages
are adjusted in section 36B(b)(3)(A)(ii) of the Code. Following
HHS's establishment of the methodology for calculating premium
growth for purposes of the premium adjustment percentage using NHEA
ESI for benefit years 2015-2019, and NHEA private health insurance
(excluding Medigap and property and casualty insurance), the
Department of the Treasury and the IRS issued guidance providing
that the rate of premium growth for purposes of the section 36B
provisions would be based on the same measures HHS selected.
Following this rulemaking, we expect the Department of the Treasury
and the IRS to issue additional guidance to adopt the same premium
measure for purposes of future indexing of the applicable percentage
and required contribution percentage under section 36B of the Code.
The effects of this change would not be seen in 2022, as the
American Rescue Plan Act of 2021 amends the Code to temporarily
supersede the indexing for 2021 and 2022, but if the same premium
measure was adopted in future tax years, this would result in more
individuals being eligible for premium tax credits than would be the
case if the current premium measure were maintained.
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In addition to aligning with the policy priorities expressed in the
recent executive order and statute, reverting to NHEA ESI data as a
measure of premium was an explicit interest expressed by commenters to
the proposed rule. As noted earlier in this section, the overwhelming
majority of commenters specifically opposed the changes made to the
premium adjustment percentage calculation in the 2020 Payment Notice
and asked HHS to revert to the NHEA ESI premium. We agree with these
commenters' concerns.
Furthermore, reverting to NHEA ESI premium data is consistent with
changing circumstances related to the potential uncertainty of the
private health insurance premium measure that includes the individual
market. Private health insurance premiums are more likely to be
influenced by risk premium pricing, or premium pricing based on changes
in benefit design and market composition in the individual market.
Particularly during times of economic uncertainty, such as that
experienced as a result of the COVID-19 PHE, private health insurance
premium growth could reflect issuer uncertainty in market developments
and could be reflected in the NHEA private insurance premium measure
(excluding Medigap and property and casualty insurance). NHEA ESI
premium data provides a more stable premium measure because it will
exclude premiums from the individual market, which are likely to be
most affected by the significant changes in benefit design, or risk
premium pricing. By using the NHEA ESI premium measure for the 2022
benefit year and beyond, we will provide a more appropriate and fair
measure of average per capita premiums for health insurance coverage
when considering the goal of consumer protection.
As such, using the NHEA Projections 2019-2028 ESI data available at
the time of the proposed rule, the premium adjustment percentage for
2022 is the percentage (if any) by which the NHEA Projections 2019-2028
value for per enrollee ESI premiums for 2021 ($6,964) exceeds the NHEA
Projections 2019-2028 value for per enrollee ESI
[[Page 24235]]
premiums for 2013 ($5,061). Using this formula, the premium adjustment
percentage for the 2022 benefit year is 1.3760126457 ($6,964/$5,061)
which represents an increase in ESI premiums of approximately 37.6
percent over the period from 2013 to 2021. As described in further
detail elsewhere in this preamble, this premium adjustment percentage
will be used to index the maximum annual limitation on cost sharing and
the required contribution percentage used to determine eligibility for
certain exemptions under section 5000A of the Code. It will also be
used to index the employer shared responsibility payment amounts under
section 4980H(a) and (b) of the Code.
Comment: A few commenters asked HHS to coordinate with the Internal
Revenue Service (IRS) in setting the maximum annual limitation on cost
sharing for high deductible health plans (HDHPs) that would allow
enrollees to be eligible to contribute to a Health Savings Account
(HSA) so the IRS values match those set in the annual HHS notice of
benefit and payment parameters. These commenters were concerned that
the differences in these values were confusing to consumers and would
lead to an inability for issuers to offer HSA-eligible plans in the
bronze metal level.
Response: The Department of the Treasury and the IRS have
jurisdiction over HSAs and HSA-eligible HDHPs and the applicable
maximum out-of-pocket under section 223 of the Code. Annual adjustments
to the maximum annual limitation on cost sharing for HSA-eligible HDHPs
are determined under section 223(g) of the Code, which by statute
provides for a different annual adjustment than the premium adjustment
percentage provided under section 1302(c) of the ACA. As both of these
adjustments are defined in statute, it is not within the authority of
HHS to align the premium adjustment percentage with the index used by
the IRS for HSA-eligible HDHPs.
Comment: One commenter requested that we reverse the policy we
finalized in the 2016 Payment Notice,\228\ which clarified that the
maximum annual limitation on cost sharing for self-only coverage
applies to all individuals regardless of whether the individual is
covered by a self-only plan or is covered by a plan that is other than
self-only.
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\228\ See 80 FR 10749 at 10824-10825
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Response: We did not propose and are not finalizing any changes to
the policy that the maximum annual limitation on cost sharing for self-
only coverage applies to all individuals regardless of whether the
individual is covered by a self-only plan or is covered by a plan that
is other than self-only. As we stated in the 2016 Payment Notice,\229\
we believe that this policy is an important consumer protection, as we
were aware that some consumers were confused by the applicability of
the annual limitation on cost sharing in other than self-only plans. As
such, for all benefit years since 2016, an individual's cost sharing
for EHB may never exceed the self-only annual limitation on cost
sharing.
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\229\ Ibid.
---------------------------------------------------------------------------
Based on the comments received, we are finalizing the premium
adjustment percentage for the 2022 benefit year as 1.3760126457
($6,964/$5,061) which represents an increase in ESI premiums of
approximately 37.6 percent over the period from 2013 to 2021.
a. Maximum Annual Limitation on Cost Sharing for Plan Year 2022
We proposed to increase the maximum annual limitation on cost
sharing for the 2022 benefit year based on the proposed value
calculated for the premium adjustment percentage for the 2022 benefit
year. As finalized in the EHB final rule \230\ at Sec. 156.130(a)(2),
for the 2022 calendar year, cost sharing for self-only coverage may not
exceed the dollar limit for calendar year 2014 increased by an amount
equal to the product of that amount and the premium adjustment
percentage for 2022. For other than self-only coverage, the limit is
twice the dollar limit for self-only coverage. Under Sec. 156.130(d),
these amounts must be rounded down to the next lowest multiple of $50.
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\230\ See 78 FR 12847 through 12848.
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Using the proposed premium adjustment percentage, and the 2014
maximum annual limitation on cost sharing of $6,350 for self-only
coverage, which was published by the IRS on May 2, 2013,\231\ we
proposed that the 2022 benefit year maximum annual limitation on cost
sharing would be $9,100 for self-only coverage and $18,200 for other
than self-only coverage. This would have represented an approximately
6.4 percent ($9,100 / $8,550) increase above the 2021 parameters of
$8,550 for self-only coverage and $17,100 for other than self-only
coverage.
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\231\ See Revenue Procedure 2013-25, 2013-21 IRB 1110. https://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
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We received public comments on the proposed updates to the maximum
annual limitation on cost sharing for plan year 2022. Please see our
summary of comments on the premium adjustment percentage (Sec.
156.130(e)) for a summary of comments on the maximum annual limitation
on cost sharing.
We are not finalizing the 2022 maximum annual limitation on cost
sharing as proposed. Based on the comments received and as explained
above, we are finalizing a 2022 maximum annual limitation on cost
sharing of $8,700 for self-only coverage and $17,400 for other than
self-only coverage. Using the premium adjustment percentage of
1.3760126457 for 2022 finalized in this rule, and the 2014 maximum
annual limitation on cost sharing of $6,350 for self-only coverage,
which was published by the IRS on May 2, 2013,\232\ the 2022 maximum
annual limitation on cost sharing is $8,700 for self-only coverage and
$17,400 for other than self-only coverage. This represents an
approximately 1.8 percent ($8,700 / $8,550) increase above the 2021
parameters of $8,550 for self-only coverage and $17,100 for other than
self-only coverage.
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\232\ See Revenue Procedure 2013-25, 2013-21 IRB 1110. https://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
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b. Reduced Maximum Annual Limitation on Cost Sharing (Sec. 156.130)
We proposed for the 2022 benefit year and beyond, unless changed
through notice-and-comment rulemaking, to use the reductions in the
maximum annual limitation on cost sharing for cost-sharing plan
variations determined by the methodology we established beginning with
the 2014 benefit year, as further described later in this section of
the preamble.
Sections 1402(a) through (c) of the ACA direct issuers to reduce
cost sharing for EHBs for eligible individuals enrolled in a silver-
level QHP. In the 2014 Payment Notice, we established standards related
to the provision of these CSRs. Specifically, in part 156 subpart E, we
specified that QHP issuers must provide CSRs by developing plan
variations, which are separate cost-sharing structures for each
eligibility category that change how the cost sharing required under
the QHP is to be shared between the enrollee and the federal
government. At Sec. 156.420(a), we detailed the structure of these
plan variations and specified that QHP issuers must ensure that each
silver-plan variation has an annual limitation on cost sharing no
greater than the applicable reduced maximum annual limitation on cost
sharing specified in the annual HHS notice of benefit and payment
parameters. Although the amount of the reduction in the maximum annual
limitation on cost sharing is specified in section
[[Page 24236]]
1402(c)(1)(A) of the ACA, section 1402(c)(1)(B)(ii) of the ACA states
that the Secretary may adjust the cost-sharing limits to ensure that
the resulting limits do not cause the AV of the health plans to exceed
the levels specified in section 1402(c)(1)(B)(i) of the ACA (that is,
73 percent, 87 percent, or 94 percent, depending on the income of the
enrollee).
As we stated earlier in this final rule, the proposed 2022 maximum
annual limitation on cost sharing was $9,100 for self-only coverage and
$18,200 for other than self-only coverage. We analyzed the effect on AV
of the reductions in the maximum annual limitation on cost sharing
described in the statute to determine whether to adjust the reductions
so that the AV of a silver plan variation will not exceed the AV
specified in the statute. Below, we describe our analysis for the 2022
plan year and our proposed results.
Consistent with our analysis for the 2014 through 2021 benefit
years' reduced maximum annual limitation on cost sharing, we developed
three test silver level QHPs, and analyzed the impact on AV of the
reductions described in the ACA to the proposed estimated 2022 maximum
annual limitation on cost sharing for self-only coverage ($9,100). The
test plan designs are based on data collected for 2021 plan year QHP
certification to ensure that they represent a range of plan designs
that we expect issuers to offer at the silver level of coverage through
the Exchanges. For 2022, the test silver level QHPs included a PPO with
typical cost-sharing structure ($9,100 annual limitation on cost
sharing, $2,775 deductible, and 20 percent in-network coinsurance
rate); a PPO with a lower annual limitation on cost sharing ($7,400
annual limitation on cost sharing, $3,050 deductible, and 20 percent
in-network coinsurance rate); and an HMO ($9,100 annual limitation on
cost sharing, $4,800 deductible, 20 percent in-network coinsurance
rate, and the following services with copayments that are not subject
to the deductible or coinsurance: $500 inpatient stay per day, $500
emergency department visit, $30 primary care office visit, and $55
specialist office visit). Based on the parameters in the proposed rule,
all three test QHPs meet the AV requirements for silver level health
plans.
We then entered these test plans into a draft version of the 2022
benefit year AV Calculator \233\ and observed how the reductions in the
maximum annual limitation on cost sharing specified in the ACA affected
the AVs of the plans. As with prior years, we found that the reduction
in the maximum annual limitation on cost sharing specified in the ACA
for enrollees with a household income between 100 and 150 percent of
FPL (\2/3\ reduction in the maximum annual limitation on cost sharing),
and 150 and 200 percent of FPL (\2/3\ reduction), would not cause the
AV of any of the model QHPs to exceed the statutorily specified AV
levels (94 and 87 percent, respectively).
---------------------------------------------------------------------------
\233\ Available at https://www.cms.gov/cciio/resources/regulations-and-guidance/index.
---------------------------------------------------------------------------
However, as with prior years, we continue to find that the
reduction in the maximum annual limitation on cost sharing specified in
the ACA for enrollees with a household income between 200 and 250
percent of FPL (\1/2\ reduction), would cause the AVs of two of the
test QHPs to exceed the specified AV level of 73 percent. Furthermore,
as with prior years, for individuals with household incomes of 250 to
400 percent of FPL, without any change in other forms of cost sharing,
the statutory reductions in the maximum annual limitation on cost
sharing would cause an increase in AV that exceeds the maximum 70
percent level in the statute.
The calculation of the reduced maximum annual limitation on cost
sharing has remained consistent since the 2014 Payment Notice due to
year-over-year consistency of the results of our analysis regarding the
effects of the reduced maximum annual limitation on cost sharing on the
AV of silver plan variations. Therefore, as a result of the apparent
stability of those results, and consistent with prior Payment Notices,
we proposed to continue to use the maximum annual limitation on cost
sharing reductions of \2/3\ for enrollees with a household income
between 100 and 200 percent of FPL, \1/5\ for enrollees with a
household income between 200 and 250 percent of FPL, and no reduction
for individuals with household incomes of 250 to 400 percent of FPL for
the 2022 benefit year and beyond. We would continue to review the
effects of these reductions annually, and should we determine that this
approach should be changed to better reflect the statutorily specified
AVs for silver plan variations, we would propose to change these
reductions through notice-and-comment rulemaking.
Specifically, we proposed to continue to use the methodology
described above for analyzing the effects of the reduced maximum annual
limitations on cost sharing on the AV of silver plan variations to
verify that the reductions do not result in unacceptably high AVs
before we publish these values in guidance for a given benefit year.
Subsequently, if a future analysis using this methodology supports a
modification to the reduced maximum annual limitation for any of the
household income bands for a future benefit year, we would propose
those modifications to the reduced maximum annual limitations through
notice-and-comment rulemaking, as appropriate.
We noted that selecting a reduction for the maximum annual
limitation on cost sharing that is less than the reduction specified in
the statute would not reduce the benefit afforded to enrollees in the
aggregate. This is because QHP issuers are required to meet specified
AV levels that require the plan's cost-sharing to be within a limited
range.
We sought comment on this analysis and the proposed reductions in
the maximum annual limitation on cost sharing calculation methodology
for the 2022 benefit year and beyond. We also sought comment on the
proposed reduced annual limitations on cost sharing for the 2022
benefit year.
We noted that for 2022, as described in Sec. 156.135(d), states
are permitted to request HHS's approval for state-specific datasets for
use as the standard population to calculate AV. No state submitted a
dataset by the September 1, 2020 deadline.
We received no comments on the reductions in the maximum
limitations on cost sharing apart from those already discussed in the
preamble to the premium adjustment percentage (Sec. 156.130(e)). In
this regard, please see our summary of comments on the premium
adjustment percentage (Sec. 156.130(e)) for a summary of comments
pertaining to the reduced maximum annual limitation on cost sharing.
In light of our decision to finalize the 2022 premium adjustment
percentage using the NHEA ESI premium measure to estimate premium
growth, we are not finalizing the 2022 reduced maximum annual
limitation on cost sharing parameters as proposed (in Table 9 of the
proposed rule \234\).
---------------------------------------------------------------------------
\234\ 85 FR 78572 at 78635.
---------------------------------------------------------------------------
To confirm consistency with the analysis for the reduced maximum
annual limitation on cost sharing, we tested the reductions to the
maximum annual limitation for cost sharing which we are finalizing in
this rule, and we analyzed the impact on AV of the reductions described
in the ACA to the 2022 maximum annual limitation on cost sharing that
we are finalizing ($8,700). For 2022, the test silver level
[[Page 24237]]
QHPs included a PPO with typical cost-sharing structure ($8,700 annual
limitation on cost sharing, $2,600 deductible, and 20 percent in-
network coinsurance rate); a PPO with a lower annual limitation on cost
sharing ($7,700 annual limitation on cost sharing, $2,800 deductible,
and 20 percent in-network coinsurance rate); and an HMO ($8,700 annual
limitation on cost sharing, $4,100 deductible, 20 percent in-network
coinsurance rate, and the following services with copayments that are
not subject to the deductible or coinsurance: $1200 inpatient stay per
day, $500 emergency department visit, $30 primary care office visit,
and $60 specialist office visit). All three test QHPs meet the AV
requirements for silver level health plans based on the parameters that
we are finalizing in this rule.
We then entered these test plans into a draft version of the 2022
benefit year AV Calculator \235\ and observed how the reductions in the
maximum annual limitation on cost sharing specified in the ACA affected
the AVs of the plans. We found that the reduction in the maximum annual
limitation on cost sharing specified in the ACA for enrollees with a
household income between 100 and 150 percent of FPL (\2/3\ reduction in
the maximum annual limitation on cost sharing), and 150 and 200 percent
of FPL (\2/3\ reduction), would not cause the AV of any of the model
QHPs to exceed the statutorily specified AV levels.
---------------------------------------------------------------------------
\235\ Available at https://www.cms.gov/cciio/resources/regulations-and-guidance/index.
---------------------------------------------------------------------------
Therefore, we are finalizing as proposed the reductions of \2/3\
for enrollees with a household income between 100 and 200 percent of
FPL, \1/5\ for enrollees with a household income between 200 and 250
percent of FPL, and no reduction for individuals with household incomes
of 250 to 400 percent of FPL for the 2022 benefit year and beyond, as
well as the methodology we use to ensure that these reductions do not
result in unacceptably high AVs. The resulting final 2022 reduced
maximum annual limitations on cost sharing are available in Table 10
below.
[GRAPHIC] [TIFF OMITTED] TR05MY21.026
c. Publication of the Premium Adjustment Percentage, Maximum Annual
Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost
Sharing, and Required Contribution Percentage (Sec. 156.130)
Since the 2014 benefit year, HHS has published the premium
adjustment percentage, maximum annual limitation on cost sharing,
reduced maximum annual limitation on cost sharing, and required
contribution percentage parameters through notice-and-comment
rulemaking. Beginning with the 2023 benefit year, we proposed to
publish these parameters in guidance by January of the year preceding
the applicable benefit year, unless HHS is changing the methodology for
calculating the parameters, in which case, we would do so through
notice-and-comment rulemaking. We additionally proposed to publish in
guidance the premium adjustment percentage and related parameters using
the most recent NHEA income and premium data that is available at the
time these values are published in guidance or, if HHS is changing the
methodology for calculating these parameters, at the time these values
are proposed in notice-and-comment rulemaking. Publication of these
parameters prior to the release of updates to the NHEA data, which
typically (but not always) occurs in February or March, is consistent
with the 2021 Payment Notice policy to finalize the premium adjustment
percentage, maximum limitation on cost sharing, reduced maximum
limitation on cost sharing, and required contribution percentage using
NHEA data that would be available at the time that the proposed rule
would have been published.
In the EHB final rule,\236\ HHS established at Sec. 156.130(e)
that HHS will publish the annual premium adjustment percentage in the
annual HHS notice of benefit and payment parameters. Additionally, in
the 2014 Payment Notice final rule,\237\ HHS established at Sec.
156.420(a)(1)(i), (2)(i), and (3)(i), that the reduced annual
limitations on cost sharing would be published in the applicable
benefit year's annual HHS notice of benefit and payment parameters. Due
to the timing of publication of the annual HHS notice of benefit and
payment parameters final rule in past years, stakeholders have
suggested that when HHS is not changing the calculation methodology for
these parameters, HHS should publish earlier the premium adjustment
percentage, maximum limitation on cost sharing, reduced maximum
limitation on cost sharing, and required contribution percentage. These
stakeholders asserted that an earlier publication would allow issuers
to incorporate these parameters for rate setting and the submission of
QHP benefit templates earlier than would be possible if the parameters
were published in the applicable benefit year's notice of benefit and
payment parameters.
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\236\ 78 FR 12834 through 12833.
\237\ 78 FR 15409.
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In addition, once the methodologies used to calculate the premium
adjustment percentage, required contribution percentage, and maximum
annual limitation on cost sharing have been established through
rulemaking, the calculation of these amounts is a function of entering
the applicable figures into the established equations, and therefore,
does not require rulemaking to establish in subsequent benefit years.
Furthermore, the methodology used to calculate the reduced maximum
annual limitation on
[[Page 24238]]
cost sharing has remained consistent since the 2014 Payment Notice
final rule. Therefore, as discussed earlier in this final rule, we are
finalizing for the 2022 benefit year and beyond the reduction rates for
the reduced maximum annual limitation on cost sharing as well as the
methodology for determining whether these reductions raise plan AVs
above acceptable levels for the 2022 benefit year and beyond.
With these methodologies in place we proposed to amend Sec. Sec.
156.130(e) and 156.420(a) to reflect that, beginning with the 2023
benefit year, we would publish the premium adjustment percentage, along
with the maximum annual limitation on cost sharing, the reduced maximum
annual limitation on cost sharing, and the required contribution
percentage, in guidance by January of the year preceding the applicable
benefit year (for example, the 2023 premium adjustment percentage would
be published in guidance no later than January 2022), unless HHS is
amending the methodology to calculate these parameters, in which case
HHS would amend the methodology and publish the parameters through
notice-and-comment rulemaking.
We believed that publishing the final premium adjustment percentage
and associated final parameters in guidance annually instead of through
notice-and-comment rulemaking is consistent with our efforts to provide
information to stakeholders in a timely manner.
We received public comments on the proposal to publish the premium
adjustment percentage, maximum annual limitation on cost sharing,
reduced maximum annual limitation on cost sharing (Sec. 156.130), and
required contribution percentage (Sec. 155.605(d)(2)) in guidance. The
following is a summary of the comments we received and our responses.
Comment: We received multiple comments expressing general support
for publishing the premium adjustment percentage, maximum annual
limitation on cost sharing, reduced maximum annual limitation on cost
sharing, and required contribution percentage in guidance by January of
the year proceeding the applicable benefit year, when we are not
proposing any changes to the methodologies used to calculate these
values. Commenters largely agreed that this publication timeline would
reduce confusion and would provide information to stakeholders in a
more timely manner.
However, a few commenters expressed concern that publication in
guidance would reduce their opportunities to review and comment on
these parameters. Some of these commenters pointed out that their
concerns regarding the 2020 Payment Notice change in the premium
adjustment percentage calculation \238\ have not been addressed and
feared that publishing these parameters in guidance would remove
opportunity to comment on the current methodology. For this reason, one
commenter asked that we publish the parameters in guidance in draft
form seeking public comment prior to finalizing the parameters for the
applicable benefit year.
---------------------------------------------------------------------------
\238\ In the 2020 Payment Notice, HHS changed the methodology
for calculating the premium adjustment percentage from using ESI
premiums to using all individual health insurance premiums minus
Medigap and the medical portion of property and casualty insurance.
See 84 FR 17454.
---------------------------------------------------------------------------
Response: We are finalizing our ability to publish the premium
adjustment percentage, maximum annual limitation on cost sharing,
reduced maximum annual limitation on cost sharing and required
contribution percentage in guidance. Therefore, for the 2023 benefit
year and beyond, the values calculated based on the methodologies
established in rulemaking will generally be published in guidance by
January of the year preceding the benefit year to which they apply,
unless we are proposing changes to the methodology used to calculate
these values or otherwise wish to discuss or obtain significant
feedback on the methodology. As a general matter, we do not believe
that comments to such guidance will be necessary since the methodology
will have been set pursuant to statute and through notice-and-comment
rulemaking, and the guidance would merely be announcing the published
measures and showing the calculations based on the established
methodology and published measures. We reiterate that if we do propose
changes to the methodology, we will propose the values of these
parameters alongside the changes in methodology through notice-and-
comment rulemaking.
As mentioned in previous sections of this final rule, we have
addressed comments concerned about the methodology change for
calculating the premium adjustment percentage that was finalized in the
2020 Payment Notice, and are reverting back to the methodology used
prior to 2020 Payment Notice. Therefore, we are relying on NHEA ESI
premium data, not premium data from other private health insurance
markets, in our calculation of premium growth and the premium
adjustment percentage, maximum annual limitation on cost sharing,
reduced maximum annual limitation on cost sharing, and required
contribution percentage for the 2022 benefit year and beyond.
4. Termination of Coverage or Enrollment for Qualified Individuals
(Sec. 156.270)
In the 2021 Payment Notice, we finalized a requirement that under
Sec. 156.270(b)(1), QHP issuers must send termination notices with
effective dates and reason for the termination to enrollees for all
termination events. We finalized this policy as proposed, noting that
all commenters who weighed in on this topic supported our proposal.
This policy became effective July 13, 2020. In the 2022 Payment Notice
proposed rule, we did not propose, and we are not finalizing, any
changes to paragraph (b)(1) beyond what we finalized in the 2021
Payment Notice for the reasons discussed below.
In finalizing the change to Sec. 156.270(b)(1) in the 2021 Payment
Notice, we inadvertently omitted discussion of two comments opposing
the proposal. These comments raised concerns about unnecessary
additional administrative costs and IT builds, and noted that a
termination notice could be confusing in certain scenarios--for
example, if the enrollee switches between QHPs offered by the same
issuer, a termination notice from their issuer could cause confusion.
These commenters proposed instead that Exchanges should be required to
clearly convey the eligibility termination reason and effective date in
the Exchange's own eligibility notices, consistent with the data
conveyed to issuers on 834 termination transactions.
We are sensitive to commenters' concerns that issuers need
sufficient time to build IT systems to implement this policy. In
response, we issued guidance allowing issuers using the Federal
platform enforcement discretion until February 1, 2021 to implement the
new termination notice requirement.\239\
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\239\ ``Enforcement Safe Harbor for Qualified Health Plan
Termination Notices During the 2019 Benefit Year,'' August 26, 2020.
Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Termination-Notices-Enforcement-Discretion.pdf.
---------------------------------------------------------------------------
However, the comments in opposition to the proposal do not change
our policy goals underlying our decision to finalize the rule as
proposed. FFEs do not send termination notices for any termination
scenario other than citizenship data-matching issue expirations and
terminations associated with Medicare PDM when the enrollee has elected
at plan selection to terminate Exchange coverage when found dually
enrolled. FFEs also do not send termination notices in enrollee-
initiated
[[Page 24239]]
terminations which must be requested at the Exchange. Similarly, FFEs
do not send termination notices when an enrollee switches QHPs within
the same issuer. This is all appropriate, because the issuer is the
primary communicator to the enrollee about their coverage. We still
believe that termination notices would be helpful in these scenarios,
even in plan selection changes, because an enrollee switching QHPs
could have their premium, cost sharing, and provider network affected.
As one of the comments in support of the new termination notice
requirement in the 2021 Payment Notice noted, it is important for the
enrollee to have in writing the actual termination date for their
records, in case of miscommunication with the issuer about the
preferred date or to later dispute an inaccurate Form 1095-A. Another
commenter agreed that issuers should send termination notices during
voluntary terminations associated with Medicare PDM as it would help
the enrollee confidently transition to Medicare.
Complaints about terminations are one of the largest sources of
casework. More consistent communication is part of the solution. We
believed consumers should be notified of these changes, even if they
initiated them, so that enrollees have a record that the issuer
completed the request. Issuers are the proper messenger of termination
noticing for many reasons. For example, Exchange issuers historically
are the senders of termination notices, and some issuers acknowledged
in their comments on the 2021 Payment Notice that they already do send
termination notices in all scenarios. Furthermore, the issuer has
record of the termination date needed for the termination notice before
the Exchange in some cases, such as some retroactive termination
requests handled through casework, and State Exchange issuer
terminations described in Sec. 155.430(d)(iv). One reason we regulated
in this area is that we were receiving detailed questions from issuers
about which termination scenarios required issuer notices; we believe
requiring issuer termination notices for all scenarios in the long run
makes the requirement simpler.
Therefore, we did not propose, and are not finalizing, any changes
to Sec. 156.270(b)(1) beyond what we finalized in the 2021 Payment
Notice.
Comment: One commenter appreciated that we did not propose any
changes beyond what we finalized in the 2021 Payment Notice. Another
commenter supported our 2021 Payment Notice provision requiring issuers
to send termination notices to consumers in all termination scenarios,
but suggested that HHS work with consumer advocates to provide simpler,
more easily understandable termination templates that could help with
readability for individuals with low literacy.
Response: HHS does not proscribe language that issuers must use in
their termination notices. We believe that issuers, as the primary
communicators to enrollees about their coverage, are in the best
position to decide the appropriate termination notice content and
wording for their enrollees, as long as they comply with applicable
requirements, including those in Sec. Sec. 156.270 and 156.250. Under
those regulations, because issuers are required to send these
termination notices to enrollees, issuers must use plain language in
any such notices they send to consumers, so that the information can
easily be understood and is useful to consumers with low literacy, low
health literacy, or limited English proficiency.
Comment: One commenter said that FFEs, as the systems of record,
should be responsible for sending termination notices, particularly
because FFEs already send eligibility notices, 1095-A forms, and other
documentation.
Response: As we explained in the preamble to the proposed rule,
issuers are the proper messenger of termination noticing for many
reasons. Exchange issuers historically are the senders of termination
notices, and some issuers acknowledged in their comments on the 2021
Payment Notice that they already do send termination notices in all
scenarios. Furthermore, the issuer has record of the termination date
needed for the termination notice before the Exchange in some cases,
such as some retroactive termination requests handled through casework,
and State Exchange issuer terminations described in Sec.
155.430(d)(iv).
5. Prescription Drug Distribution and Cost Reporting by QHP Issuers
(Sec. 156.295)
Section 6005 of the ACA added section 1150A(a)(2) of the Act to
require a PBM under a contract with a Medicare Part D plan sponsor or
Medicare Advantage plan that offers a Medicare Part D plan, or with a
QHP offered through an Exchange established by a state under section
1311 of the ACA \240\ to provide certain prescription drug information
to the Secretary, at such times, and in such form and manner, as the
Secretary shall specify. Section 1150A(b) of the Act addresses the
information that a QHP issuer or their PBM must report.\241\ Section
1150A(c) of the Act requires the information reported to be kept
confidential and not to be disclosed by the Secretary or by a plan
receiving the information, except that the Secretary may disclose the
information in a form which does not disclose the identity of a
specific PBM, plan, or prices charged for drugs for certain
purposes.\242\
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\240\ This includes an FFE, as a Federal Exchange may be
considered an Exchange established under section 1311 of the ACA.
King v. Burwell, 576 U.S. 988 (2015).
\241\ This information is: The percentage of all prescriptions
that were provided through retail pharmacies compared to mail order
pharmacies, and the percentage of prescriptions for which a generic
drug was available and dispensed (generic dispensing rate), by
pharmacy type (which includes an independent pharmacy, chain
pharmacy, supermarket pharmacy, or mass merchandiser pharmacy that
is licensed as a pharmacy by the state and that dispenses medication
to the general public), that is paid by the health benefits plan or
PBM under the contract; the aggregate amount, and the type of
rebates, discounts, or price concessions (excluding bona fide
service fees, which include but are not limited to distribution
service fees, inventory management fees, product stocking
allowances, and fees associated with administrative services
agreements and patient care programs (such as medication compliance
programs and patient education programs)) that the PBM negotiates
that are attributable to patient utilization under the plan, and the
aggregate amount of the rebates, discounts, or price concessions
that are passed through to the plan sponsor, and the total number of
prescriptions that were dispensed; and, the aggregate amount of the
difference between the amount the health benefits plan pays the PBM
and the amount that the PBM pays retail pharmacies, and mail order
pharmacies, and the total number of prescriptions that were
dispensed.
\242\ The purposes are: As the Secretary determines to be
necessary to carry out Section 1150A or part D of title XVIII; to
permit the Comptroller General to review the information provided;
to permit the Director of the Congressional Budget Office to review
the information provided; and, to States to carry out section 1311
of the ACA.
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In the 2012 Exchange Final Rule, we codified the requirements
contained in section 1150A of the Act with regard to QHPs at Sec.
156.295. In that rule, we interpreted section 1150A of the Act to
require QHP issuers to report the information described in section
1150A(b) of the Act and did not specify the responsibilities of PBMs
that contract with QHP issuers to report this information. On January
28, 2020 \243\ and on September 11, 2020,\244\ we published notices in
the Federal Register and solicited public comment on collection of
information requirements detailing the proposed collection envisioned
by section 1150A of the Act to HHS.\245\
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\243\ 85 FR 4993 through 4994.
\244\ 85 FR 56227 through 56229.
\245\ Pharmacy Benefit Manager Transparency. CMS-10725.
Available at https://www.cms.gov/regulations-and-guidancelegislationpaperworkreductionactof1995pra-listing/cms-10725.
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[[Page 24240]]
a. QHP Issuer Responsibilities
In the proposed rule, we proposed to add new part 184 to address
the responsibilities of PBMs under the ACA and to add Sec. 184.50 to
codify in regulation the statutory requirement that PBMs that are under
contract with an issuer of one or more QHPs report the data required by
section 1150A of the Act. Accordingly, we proposed to revise Sec.
156.295(a) to state that where a QHP issuer does not contract with a
PBM to administer the prescription drug benefit for QHPs, the QHP
issuer will report the data required by section 1150A of the Act to
HHS. We proposed corresponding revisions throughout Sec. 156.295 to
remove the applicability of the reporting requirement for PBMs under
this section and propose revising the title to ``Prescription drug
distribution and cost reporting by QHP issuers''.
As explained in the proposed rule and in the preamble for Sec.
184.50 in this final rule, we acknowledge that section 1150A places
responsibility on both the QHP issuer and their PBMs to report this
prescription drug data. Generally, where a QHP issuer contracts with a
PBM, the PBM is more likely to be the source of the data that must be
reported. Therefore, to reduce overall burden, rather than requiring
the QHP issuer to serve as a conduit between its PBM and HHS, or
unnecessarily requiring both the PBM and the QHP issuer to submit
duplicated data, we proposed to implement section 1150A to make QHP
issuers responsible for reporting this data directly to the Secretary
only when the QHP issuer does not contract with a PBM to administer the
prescription drug benefit for their QHPs. Where a QHP contracts with a
PBM, the PBM is responsible for reporting data to the Secretary as
required by Sec. 184.50.
We stated that although we were unaware of any QHP issuer that does
not currently utilize a PBM, we believed that, together, the proposals
to revise Sec. 156.295 and to add Sec. 184.50 would ensure the
collection of data required by section 1150A of the Act in all
circumstances, including when a QHP issuer does not use a PBM to
administer its prescription drug benefit. Retaining the requirement for
QHP issuers to report data at Sec. 156.295 when they do not contract
with a PBM would ensure that the data is consistently collected every
plan year.
We also proposed to remove Sec. 156.295(a)(3) to remove the
requirement for QHP issuers to report spread pricing amounts when the
QHP issuer does not contract with a PBM to administer the prescription
drug benefit for their QHPs. Spread pricing amounts are only present
where a PBM acts as an intermediary between the QHP issuer and a drug
manufacturer. If a QHP issuer does not contract with a PBM, no such
intermediary exists and it is not possible for QHP issuers to report
this data.
We sought comment on these proposals.
We received public comments on these proposals. The following is a
summary of the comments we received and our responses.
Comment: Many commenters supported the proposal to collect this
data directly from the PBMs that QHP issuers contract with to
administer the drug benefit for their QHPs, as PBMs are best positioned
to report the data with the least amount of burden. A few commenters
asserted that section 1150A(a)(2) of the Act does not grant HHS the
authority to collect this data directly from PBMs.
Response: We agree with commenters that where QHP issuers utilize
PBMs to administer their prescription drug benefit, PBMs are best
suited to report this data. Section 1150A(a)(2) of the Act grants the
Secretary the authority to specify the time, form, and manner of this
collection. We exercise this authority to specify the manner of this
collection by finalizing this policy as proposed: PBMs will submit this
data to HHS when a QHP issuer contracts with the PBM to administer the
drug benefit for their QHPs. If a QHP issuer does not contract with a
PBM to administer the drug benefit for their QHPs, the QHP issuer will
submit the data to HHS. However, given our understanding that all QHP
issuers currently use a PBM, with the limited exception of QHP issuers
with integrated delivery systems as discussed below, we believe that it
is reasonable to expect that PBMs are best suited to report this data
given their contractual role in the primary administration of
prescription drug benefits.
Comment: Citing the burden to make contractual modification and
operational upgrades, many commenters requested that we delay
implementation of the collection until 2022 or later.
Response: We are aware of the timing concerns expressed by
commenters in response to the policies finalized here and at part 184
below, as well as those expressed in response to the collection of
information requirement notices displayed in 2020. However, this
collection is statutorily required, and, as noted in the collection of
information requirement notices, we have previously delayed its
implementation in order to accommodate concerns regarding burden. We
are sensitive to commenters' concerns about burden and timing, and,
this data collection is not imposed lightly; we understand that the
implementation of a new data collection during a pandemic may impose
additional challenges on the industry. However, its disclosure has
never been more vital, as all aspects of the prescription drug delivery
chain continue to contribute to rising prescription drug costs in this
country. Additionally, we believe that this data is essential for the
implementation of policies that seek to improve the coverage landscape
of prescription drugs. We therefore intend to begin collection as soon
as reasonably possible. However, to minimize burden during a pandemic,
and to allow for additional time to provide technical assistance to
reporting entities for a new collection, we do not intend to require
submission sooner than December 31, 2021.
Comment: Multiple commenters asserted that section 1150A(a)(2) of
the Act does not grant HHS the authority to collect some of this data
at the National Drug Code (NDC) level of detail. Commenters also
expressed concern that HHS did not describe the level of detail for
this collection in regulation.
Response: Section 1150A(a)(2) of the Act grants the Secretary the
authority to specify the time, form, and manner of this collection. We
have specified the form and manner of this collection as part of the
collection of information requirement notices displayed in 2020. In
collecting some of this data at the NDC level of detail, we are
interpreting section 1150A in a manner consistent with previous
rulemaking by CMS.\246\ Additionally, we sought comment on the form and
manner of the collection twice in the collection of information
requirement notices displayed in 2020,
[[Page 24241]]
including the level of detail of the collection.
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\246\ See ``Medicare Program; Changes to the Medicare Advantage
and the Medicare Prescription Drug Benefit Programs for Contract
Year 2013 and Other Changes; Final Rule'' at 77 FR 22094. In that
final rule, CMS interpreted section 1150A of the Act to impose no
additional reporting requirements for entities subject to Direct and
Indirect Remuneration (DIR) reporting, except for PBM spread amount
aggregated to the plan benefit package level. The existing DIR
reporting required data reporting at the NDC. As such, CMS has
previously interpreted that section 1150A authorizes collection at
an NDC level of reporting. For consistency with previous rulemaking
by CMS and to reduce the burden of creating different CMS,
collection requirements, we will collect some of this data at the
NDC level. We recognize that DIR reporting requirements under Part D
are partly based on statutory authority that is not applicable to
this collection, and we do not claim to rely on any authority other
than section 1150A of the Act as the basis for this collection. We
do, however, rely on that final rule insofar as CMS strives to
interpret the same statute consistently.
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Comment: Some commenters expressed concern that a federal
requirement to report prescription drug data for QHPs may conflict or
overlap with state requirements to collect similar data. One commenter
voiced concern that this collection is unduly similar to the
Transparency in Coverage final rule,\247\ a rule for which the
commenter seeks regulatory clarifications.
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\247\ 85 FR 72158.
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Response: While we agree with commenters that we should endeavor to
minimize burden and avoid conflict or duplication of efforts with state
reporting requirements, we have conducted research and held discussions
with states to understand existing state reporting requirements. In
addition, no state submitted comments to the collection of information
requirement notices displayed in 2020 or to this proposal indicating
any concern about conflict or overlap with this reporting requirement.
As a result, we believe that there is no significant conflict or
duplication between this collection and any state reporting
requirement.
We also note that, after the proposed rule displayed, Congress
passed the Consolidated Appropriations Act, 2021,\248\ which includes
certain reporting requirements on pharmacy benefits and drug
costs.\249\ We are aware that some of the data envisioned for reporting
under the Consolidated Appropriations Act may, to an extent, be similar
to some of the data sought by collection under Sec. 1150A of the Act.
While we are finalizing this collection as proposed, we, along with the
Departments of Treasury and Labor, intend to issue future guidance that
will explain the interaction between this collection and the future
collection envisioned by the Consolidated Appropriations Act, if
necessary.
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\248\ Public Law 116-260, enacted on December 27, 2020.
\249\ See section 2799A-10.
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Comment: One commenter requested clarification whether the
collection applies to QHP issuers with integrated delivery systems;
that is, QHP issuers that do not use a network of outside providers and
do not use outside PBMs to manage their prescription drug benefits.
This commenter asserted that there is limited rationale to collect data
from such plans, as Sec. 1150A is intended to increase transparency on
relationships and transactions across the prescription drug supply
chain, particularly between health plans, PBMs, and pharmacies.
Response: We recognize that not all data elements that must be
reported under this requirement would apply equally to integrated
delivery systems. Nonetheless, we believe that it is important for
these QHP issuers with integrated delivery systems to report the data
elements that are applicable, since these issuers are also part of the
drug supply chain and their different model provides an important point
of comparison. In this instance, the QHP issuer would be responsible
for reporting this data, as they do not utilize a PBM to administer
their prescription drug benefit. We plan to provide technical
assistance to all reporting entities to minimize the burden of this
collection.
Comment: One commenter requested clarification regarding the
collection's applicability to off-Exchange plans.
Response: This collection applies to QHPs only. We interpret the
statute as requiring reporting for QHPs, regardless of whether the QHPs
are sold on-Exchange or off-Exchange. The collection does not apply to
any other plans.
Comment: A few commenters addressed the confidentiality provision
of section 1150A and their codification in regulation. A few commenters
requested that the data be released to the public in Public Use Files
(PUFs). A few commenters noted that we should share this data with
states upon their request to bolster their transparency efforts. One
commenter asserted that the confidentiality restrictions required by
statute may be too limiting to have an appreciable impact on reducing
health care costs for patients, employers and other purchasers.
Response: Section 1150A of the Code, codified previously at Sec.
156.295 and also finalized below at Sec. 184.50 states that
information disclosed by a plan or PBM under this collection is
confidential and shall not be disclosed by the Secretary or by a plan
receiving the information, except that the Secretary may disclose the
information in a form which does not disclose the identity of a
specific PBM, plan, or prices charged for drugs, for certain purposes,
including to states to carry out section 1311 of the ACA.\250\
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\250\ The other purposes described in statute are: As the
Secretary determines to be necessary to carry out section 1150A or
part D of title XVIII; to permit the Comptroller General to review
the information provided; and, to permit the Director of the
Congressional Budget Office to review the information provided.
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Comment: We received a number of comments that were out-of-scope of
the two specific proposals in the proposed rule, including suggestions
for improving the definition of ``bona fide service fees'' used in the
appendices of the previously posted ICRs, suggestions on how we might
automate the reporting mechanisms, and comments regarding the
transparency in coverage requirement under PHS Act section 1311(e)(3).
Response: We appreciate these suggestions and will consider them
for future action for this collection and its associated regulations.
However, as they are out-of-scope with regards to these specific
proposals, we decline to comment further on them at this time.
As a result of the comments, we are finalizing this policy as
proposed.
b. Reporting of Data by Pharmacy Type
Section 1150A(b)(1) of the Act requires the Secretary to collect
certain QHP prescription drug data \251\ by pharmacy type (which
includes an independent pharmacy, chain pharmacy, supermarket pharmacy,
or mass merchandiser pharmacy that is licensed as a pharmacy by the
state and that dispenses medication to the general public). This
requirement was previously codified at Sec. 156.295(a)(1). In the
Medicare Program; Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for Contract Year 2013 and Other
Changes final rule, we recognized that it is not currently possible to
report such data by pharmacy type because pharmacy type is not a
standard classification currently captured in industry databases or
files.\252\ We understand that these types continue not to be standard
classifications currently captured in industry databases or files, as
indicated by comments submitted in response to the January 28, 2020
notice in the Federal Register soliciting public comment on the
collection of information requirements of this collection.\253\ To
reduce the burden of this collection, we proposed to revise Sec.
156.295(a)(1) to remove the requirement to report the data described at
section 1150A(b)(1) of the Act by pharmacy type. We intended to collect
this information at a time when this requirement would impose
reasonable burden. We sought comment on ways that we may collect the
data by pharmacy type without creating
[[Page 24242]]
unreasonable burden and any existing definitions that may exist that
could be leveraged for this purpose. We also sought comment on the time
and costs required for PBMs to begin reporting by pharmacy type, if
definitions were finalized.
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\251\ Section 1150A(b)(1) requires the reporting of the
percentage of all prescriptions that were provided through retail
pharmacies compared to mail order pharmacies, and the percentage of
prescriptions for which a generic drug was available and dispensed.
\252\ See 77 FR 22072 at 22093.
\253\ See 85 FR 4993 through 4994.
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We received public comments on the proposed updates to reporting of
data by pharmacy type. The following is a summary of the comments we
received and our responses.
Comment: Nearly all commenters supported the proposal to remove the
requirement to report the data described at section 1150A(b)(1) of the
Act by pharmacy type, agreeing that it is not a data point that is
collected on a widespread basis by the industry and that the
implementation would cause unreasonable burden. One commenter
disagreed, explaining that that industry is currently capable of
reporting this data.
Response: We agree with the majority of commenters that pharmacy
type data is currently not readily collected by industry. While we will
continue to consider ways to implement its collection, we agree that
removal of this requirement from the regulation is warranted at this
time.
Following review of the comments, we are finalizing this policy as
proposed.
6. Oversight of the Administration of the Advance Payments of the
Premium Tax Credit, Cost-Sharing Reductions, and User Fee Programs
(Sec. 156.480)
a. Application of Requirements to Issuers in State Exchanges and SBE-
FPs
In the second Program Integrity Rule, we finalized general
provisions related to the oversight of QHP issuers in relation to APTC
and CSRs.\254\ We explained that since APTC and CSR payments are
federal funds which pass from HHS directly to QHP issuers, it is
necessary for HHS to oversee QHP issuer compliance in these areas,
regardless of whether the QHP is offered through a State Exchange or an
FFE. As such, to effectively oversee the payment of APTC and CSRs by
QHP issuers, HHS established standards in part 156, subpart E for QHP
issuers participating in FFEs and State Exchanges. We also noted that
in states with State Exchanges, the state would have primary
enforcement authority over QHP issuers participating in the state's
individual market exchange that were not in compliance with the
standards set forth in part 156, subpart E.\255\ However, if the State
Exchange does not enforce such standards, HHS would enforce compliance
with these requirements, including the imposition of CMPs on QHP
issuers participating in State Exchanges using the same standards and
processes for QHP issuers participating in FFEs set forth in part 156,
subpart I.\256\ In the second Program Integrity Rule, we also finalized
general provisions that require issuers offering QHPs in an FFE
maintain all documents and records and other evidence of accounting
procedures and practices, which are critical for HHS to conduct
activities necessary to safeguard the financial and programmatic
integrity of the FFEs.\257\ As finalized in 45 CFR 156.705(a)(1), this
includes the authority for HHS to include periodic auditing of the QHP
issuer's financial records related to the participation in an FFE. To
date, we have leveraged this authority to conduct user fee audits of
QHP issuers participating in an FFE.
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\254\ See 78 FR 65077 and 65078.
\255\ See the proposed Program Integrity Rule, 78 FR 37058. Also
see 78 FR 65077 and 65078.
\256\ Ibid.
\257\ See 78 FR 65078 and 65079.
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In the proposed rule, we proposed amendments to consolidate HHS
audit authority regarding APTC, CSR, and user fee audits by expanding
the audit authority under Sec. 156.480(c) to also capture user fees
audits by HHS, or its designee, of QHP issuers participating in an FFE.
Additionally, as part of determining whether APTC and CSR amounts were
properly paid to issuers, and whether user fee amounts were properly
collected, we explained that HHS regularly identifies discrepancies in
issuer records caused by issuer non-compliance with other applicable
Exchange operational standards. Examples include failure to correctly
effectuate or terminate coverage, or to correctly calculate premiums.
In addition, we proposed to apply the same framework to QHP issuers
participating in SBE-FP states. As such, QHP issuers in SBE-FP states
would be required to comply with HHS audits under Sec. 156.480(c) to
confirm compliance with the applicable standards established in part
156, subpart E for APTC and CSRs and Sec. 156.50 for user fees.
We further proposed that in situations where the state fails to
substantially enforce such standards, HHS would enforce compliance,
including imposing CMPs using the same standards set forth in part 156,
subpart I. Based on our experience conducting audits of APTC, CSRs, and
user fees, we also proposed several amendments to Sec. 156.480(c) to
ensure we can effectively oversee the payment of these amounts by QHP
issuers, regardless of Exchange type (for example, FFE, State Exchange,
or SBE-FP).
As detailed below, to further support our program integrity efforts
in these areas, we proposed to amend Sec. 156.480(c) to codify
additional details regarding HHS audits and to capture authority for
HHS to conduct compliance reviews of QHP issuer compliance with the
applicable federal APTC, CSR, and user fee standards,\258\ including
the consequences for the failure to comply with an audit. In addition,
we proposed amendments to Sec. Sec. 156.800 and 156.805 to set forth
the framework for HHS enforcement of the applicable federal APTC, CSR,
and user fee standards in situations where state authorities fail to
substantially enforce those standards with respect to the QHP issuers
participating in State Exchanges and SBE-FPs.
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\258\ The applicable federal standards for APTC and CSRs are
found in part 156, subpart E, which apply to QHP issuers
participating in all Exchanges types (FFEs, State Exchanges, and
SBE-FPs). The applicable federal standards for user fees are found
in 45 CFR 156.50, which apply to QHP issuers in FFEs and SBE-FPs.
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We sought comment on these proposals, including with respect to how
HHS could coordinate with State Exchanges and SBE-FPs to address non-
compliance by QHP issuers with applicable federal APTC, CSRs, and user
fee standards. We sought comment on ways to balance enforcement by
State Exchanges and SBE-FPs and the protection and oversight of federal
funds by HHS. We are finalizing the proposal to apply the same audit
requirements to QHP issuers participating in SBE-FP states as for QHP
issuers participating in FFE states. As such, QHP issuers in SBE-FP
states will be required to comply with HHS audits under Sec.
156.480(c) to confirm compliance with the applicable standards
established in part 156, subpart E for APTC and CSRs and Sec. 156.50
for user fees. We are also finalizing the APTC, CSR, and user fee audit
requirements at Sec. 156.480(c) with slight modifications to certain
audit timeframes, as well as HHS's authority to impose CMPs on issuers
in State Exchanges and SBE-FPs when the State Exchange or SBE-FP fails
to substantially enforce the applicable federal APTC, CSR, and user fee
standards at Sec. Sec. 156.800 and 156.805. We are also finalizing the
accompanying amendments to establish authority for HHS to conduct
compliance reviews to confirm QHP issuer compliance with the federal
APTC, CSR, and user fee standards.
We received public comments on the proposed updates and policies
regarding
[[Page 24243]]
the application of federal APTC, CSR, and user fee requirements to
issuers in State Exchanges and SBE-FPs. The majority of the comments we
received to this section were also made to the sections regarding HHS's
enforcement of the applicable federal APTC, CSR, and user fee standards
if a State Exchange or SBE-FP is not enforcing or fails to
substantially enforce one or more of these requirements (Sec.
156.480(c)(6)); subpart I--enforcement remedies in the Exchanges,
available remedies, and scope (Sec. 156.800); and the bases and
process for imposing CMPs in the Exchanges (Sec. 156.805).We respond
to these parallel comments in the bases and process for imposing CMPs
in the Exchanges (Sec. 156.805) preamble section below. However, we
received some comments that were specific to this section, suggesting
ways for HHS to coordinate with State Exchanges and SBE-FPs to address
non-compliance by QHP issuers with applicable federal APTC, CSRs, and
user fee standards. The following is a summary of these comments and
our responses.
Comment: Commenters emphasized that HHS should collaborate with
State Exchanges and SBE-FPs and keep them informed of and involved in
HHS's audits of QHP issuers that operate in their respective State
Exchange or SBE-FP. They noted that State Exchanges and SBE-FPs should
also be informed of upcoming issuer audits and compliance reviews, as
well as audit and compliance review findings, including any amounts
recouped by HHS and any enforcement action taken against issuers in
their states. These commenters offered specific suggestions for how HHS
could collaborate with State Exchanges and SBE-FPs. One commenter
stated that HHS should provide technical assistance to the state and
coordinate with the state on corrective action required of any issuers
in the state, if necessary. Another commenter asked that HHS reconsider
the role of State Exchanges in audits and revise the audit process
accordingly. This commenter suggested creating one audit process for
FFE issuers and a different one for State Exchange and SBE-FP issuers,
and further suggested HHS could consider creating different processes
for State Exchange and SBE-FP issuers, as well as different processes
among State Exchanges, as necessary.
Response: HHS generally intends its approach to audits, compliance
reviews, and enforcement activities of issuers to be collaborative
processes with issuers, states, State Exchanges, and SBE-FPs. HHS will
continue to coordinate with State Exchanges and SBE-FPs, including
notifying State Exchanges and SBE-FPs when an audit or compliance
review involves an issuer in their state. Additionally, HHS will also
consider taking a different approach for conducting APTC, CSR, and user
fee audits and compliance reviews for State Exchange issuers, such that
HHS more closely involves State Exchanges in the process, to the extent
possible and appropriate based on the specific State Exchange and the
circumstances involved. This includes HHS considering how best to
coordinate APTC, CSR, and user fee audits for State Exchange issuers
with existing independent external audit activities that State
Exchanges are required to conduct annually, under 45 CFR 155.1200, that
cover similar or related Exchange functions such as eligibility
determinations, enrollments, and the reporting of eligibility and
enrollment data to HHS. State Exchanges are required to report the
results of these external audits to HHS and establish corrective action
plans for findings, which are jointly monitored by the State Exchange
and HHS. In addition, HHS will continue to work with State Exchanges
and SBE-FPs to enforce the applicable federal APTC, CSR, and user fee
standards, as detailed in the below section on bases and process for
imposing CMPs in the Exchanges (Sec. 156.805).
We appreciate commenters' suggestions and agree that HHS may
provide technical assistance to the state and coordinate with the state
on corrective action required of any issuers in the state, if
necessary, to help guide collaboration efforts with State Exchanges and
SBE-FPs with respect to ensuring issuer compliance with federal APTC,
CSR, and user fee standards and audits. We intend to consider the
various recommendations for potential enhancements to the process for
HHS audits and compliance reviews of federal APTC, CSR, and user fee
standards, including potential ways to further enhance the
collaboration with state regulators, State Exchanges, and SBE-FPs.
However, as explained in the proposed rule, the proposed updates were
intended to build on the existing framework established in the second
Program Integrity Rule and clarify HHS's authority with respect to
oversight and enforcement of compliance with federal APTC, CSR, and
user fee standards in State Exchange and SBE-FP states.\259\ We also
remind stakeholders that the APTC, CSR,\260\ and user fee programs are
federal funds, and the focus of these audits will be on issuer
compliance with applicable federal standards.
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\259\ See 78 FR 65077 and 65078.
\260\ The CSR program was 100 percent federal funds prior to
October 2017, when CSR payments to issuers were discontinued due to
lack of a Congressional appropriation.
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HHS will consider recommendations to enhance the QHP issuer audit
and compliance review processes to take into consideration existing
audit activities that HHS requires State Exchanges to conduct annually
under Sec. 155.1200, the variation between FFE, SBE-FP, and State
Exchange issuers, as well as the variation among issuers participating
in the different State Exchanges. In all cases, HHS will continue to
collaborate with the State Exchange or SBE-FP to enforce the applicable
federal APTC, CSR, and user fee standards. Further, one of the goals of
these amendments is to ensure the timely and accurate completion of
audits of federal funds under the APTC, CSR, and user fee programs.
Therefore, based on our experience to date conducting 2014 benefit year
CSR audits, to ensure the protection of federal funds and compliance
with applicable federal requirements, HHS will generally lead the
efforts to audit compliance with federal APTC, CSR, and user fee
standards (where applicable) under Sec. 156.480(c).
After consideration of the comments received on these proposals, we
are finalizing the provision to apply the same audit requirements to
QHP issuers participating in SBE-FP states as for QHP issuers
participating in FFE and State Exchange states as proposed. As such,
QHP issuers in SBE-FP states will be required to comply with HHS audits
and compliance reviews under Sec. 156.480(c) to confirm compliance
with the applicable standards established in part 156, subpart E for
APTC and CSRs and Sec. 156.50 for user fees. We are also finalizing
the APTC, CSR, and user fee audit requirements at Sec. 156.480(c), as
well as HHS's authority to impose CMPs on issuers in State Exchanges
and SBE-FPs when the State Exchange or SBE-FP fails to substantially
enforce the applicable federal APTC, CSR, and user fee standards at
Sec. Sec. 156.800 and 156.805.
b. Audits and Compliance Reviews of APTC, CSRs, and User Fees (Sec.
156.480(c))
In prior rulemaking, we codified authority for HHS to audit an
issuer that offers a QHP in the individual market through an Exchange
to assess compliance with the requirements of part 156, subpart E.\261\
We also previously codified general authority for HHS to periodically
audit a QHP
[[Page 24244]]
issuer's financial records related to its participation in an FFE.\262\
Recently, HHS completed the audits for the 2014 benefit year CSR
payments. During these audits, HHS encountered challenges working with
some issuers. Specifically, HHS experienced difficulties receiving
requested audit data and materials in a timely fashion and receiving
data in a format that is readily usable for purposes of conducting the
audit. As such, similar to the proposals related to audits of issuers
of reinsurance-eligible plans and risk adjustment covered plans
discussed earlier in the proposed rule, we proposed to amend Sec.
156.480(c) to provide more clarity around the issuer requirements for
APTC, CSR, and user fee audits. The proposed amendments codify more
details about the audit process and clarify issuer obligations with
respect to these audits, including what it means to comply with an
audit and the consequences for failing to comply with such
requirements. Additionally, we proposed to amend Sec. 156.480(c) to
also capture and clarify HHS's ability to audit FFE and SBE-FP user
fees and the accompanying issuer requirements for such audits. As such,
we proposed to rename Sec. 156.480, ``Oversight of the Administration
of the Advance Payments of the Premium Tax Credit, Cost-sharing
Reductions, and User Fee Programs.'' HHS currently reviews compliance
with applicable federal user fee standards when conducting APTC audits
because the same data is used for both purposes; as such, we explained,
there would be minimal increased burden as a result of these proposals.
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\261\ 78 FR 65077 and 65078.
\262\ See 45 CFR 156.705(a)(1). Also see 78 FR 65078 and 65079.
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We also proposed several amendments to Sec. 156.480(c) to expand
the oversight tools available to HHS beyond traditional audits to also
provide authority for HHS to conduct compliance reviews of QHP issuers
to assess compliance with the applicable federal APTC, CSR, and user
fee standards. We explained that these proposed HHS compliance reviews
would follow the standards set forth for compliance review of QHP
issuers participating in FFEs established in 45 CFR 156.715. However,
compliance reviews under this section would be conducted to confirm QHP
issuer compliance with the federal APTC, CSR, and user fee standards in
subpart E of part 156 and 45 CFR 156.50 for user fees, as applicable,
and they would generally extend to QHP issuers participating in all
Exchanges.\263\ A compliance review may be targeted at a specific
potential error and conducted on an ad hoc basis.\264\ For example, HHS
may require an issuer to submit data pertaining to specific data
submissions. We explained that we believed this flexibility is
necessary and appropriate to provide HHS a mechanism to address
situations in which a systematic error or issue is identified during
the random and targeted auditing of a sample of QHP issuers, and HHS
suspects similarly situated issuers may have experienced the same
systematic error or issue but were not selected for audit in the year
in question. We further noted that we intend to continue our
collaborative oversight approach and coordinate with State Exchanges
and SBE-FPs to ensure QHP issuer compliance with the applicable
standards in part 156, subpart E and 45 CFR 156.50.
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\263\ HHS does not intend to conduct user fee compliance reviews
of QHP issuers participating in State Exchanges that do not rely on
the Federal platform. Such reviews would be limited to QHP issuers
participating in FFE and SBE-FP states.
\264\ See 78 FR 65100.
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First, we proposed to rename Sec. 156.480(c) to ``Audits and
Compliance Reviews'' to clarify that the authority described in this
section would apply to audits and the proposed HHS compliance reviews
to evaluate QHP issuer compliance with the applicable federal APTC,
CSR, and user fee standards. We similarly proposed to update the
introductory language in Sec. 156.480(c) to incorporate a reference to
HHS compliance reviews. As amended, Sec. 156.480(c) would provide that
HHS or its designee may audit and perform compliance reviews to assess
whether an issuer that offers a QHP in the individual market through an
Exchange is in compliance with the applicable requirements of subpart
E, part 156, and 45 CFR 156.50. We proposed to capture in a new
sentence in the amended Sec. 156.480(c) that HHS would conduct these
compliance reviews consistent with the standards set forth in 45 CFR
156.715. As detailed earlier in this preamble, these oversight tools
would be available to HHS to evaluate compliance by QHP issuers
participating in all Exchanges with the applicable federal APTC, CSR,
and user fee standards.
Second, we proposed to add new Sec. 156.480(c)(1) to establish
notice and conference requirements for these audits. Proposed new
paragraph (c)(1) states that HHS would provide at least 15 calendar
days advance notice of its intent to conduct an audit of an QHP issuer
under Sec. 156.480(c). Under proposed paragraph (c)(1)(i), HHS
proposed to codify that all audits would include an entrance conference
at which the scope of the audit would be presented and an exit
conference at which the initial audit findings would be discussed.
Third, HHS proposed to add new paragraph (c)(2) to capture the
requirements issuers must meet to comply with an audit under this
section. Under the proposed paragraph (c)(2)(i), we proposed to require
the issuer to ensure that its relevant employees, agents, contractors,
subcontractors, downstream entities, and delegated entities cooperate
with any audit or compliance review under this section. In new proposed
paragraph (c)(2)(ii), we proposed to require issuers to submit complete
and accurate data to HHS or its designees that is necessary to complete
the audit, in the format and manner specified by HHS, no later than 30
calendar days after the initial deadline communicated and established
by HHS at the entrance conference described in proposed paragraph
(c)(1)(i). For example, for CSR audits, HHS may request that QHP
issuers provide a re-adjudicated claims data extract for the selected
sample of policies to verify accuracy of the re-adjudication process
and reported amounts (this would include verification of all elements
necessary to perform accurate re-adjudication) and a data extract
containing incurred claims for the selected sample of policies to
verify accuracy of actual amount the enrollee(s) paid for EHBs via an
Electronic File Transfer. As another example, for APTC audits, issuers
may be asked to provide data to validate and support APTC payments
received for the applicable benefit year.
Fourth, under proposed Sec. 156.480(c)(2)(iii), HHS proposed to
require that issuers respond to any audit notices, letters, and
inquires, including requests for supplemental or supporting
information, no later than 15 calendar days after the date of the
notice, letter, request, or inquiry. We explained that we believe that
the proposed requirements in paragraph (c)(2) are necessary and
appropriate to ensure the timely completion of audits and to protect
the integrity of the APTC, CSR, and user fee programs and the payments
made thereunder.
Fifth, recognizing that there may be situations that warrant an
extension of the timeframes under paragraph (c)(2)(ii) or (iii), as
applicable, we proposed to also add a new paragraph (c)(2)(iv) to
establish a process for an issuer to request an extension. To request
an extension, we proposed to
[[Page 24245]]
require the issuer to submit a written request to HHS within the
applicable timeframe established in paragraph (c)(2)(ii) or (iii). The
written request would have to detail the reasons for the extension
request and the good cause in support of the request. For example, good
cause may include an inability to produce information in light of
unforeseen emergencies, natural disasters, or a lack of resources due
to a PHE. If the extension is granted, the issuer must respond within
the timeframe specified in HHS's notice granting the extension of time.
Sixth, under Sec. 156.480(c)(3), HHS proposed that it would share
its preliminary audit findings with the issuer, and further proposed
that the issuer would then have 30 calendar days to respond to such
findings in the format and manner as specified by HHS. HHS would
describe the process, format, and manner by which an issuer can dispute
the preliminary audit findings in the preliminary audit report sent to
the issuer. For example, if the issuer disagrees with the findings set
forth in the preliminary audit report, HHS would require the issuer to
respond to such findings by submitting written explanations that detail
its dispute(s) or additional rebuttal information via Electronic File
Transfer. HHS proposed under paragraph (c)(3)(i) that if the issuer
does not dispute or otherwise respond to the preliminary findings
within 30 calendar days, the audit findings would become final. In new
proposed paragraph (c)(3)(ii), if the issuer timely responds and
disputes the preliminary audit findings within 30 calendar days, HHS
would review and consider such response and finalize the audit findings
after such review. HHS would provide contact and other information
necessary for an issuer to respond to the preliminary audit findings in
the preliminary audit report sent to the issuer.
Seventh, HHS proposed to add a new section at Sec. 156.480(c)(4)
to capture the process and requirements related to final audit findings
and reports. If an audit results in the inclusion of a finding in the
final audit report, the issuer would be required to comply with the
actions set forth in the final audit report in the manner and timeframe
established by HHS. We noted that the actions set forth in the final
audit report could require an issuer to return APTC or CSRs or make
additional user fee payments. HHS further proposed that (1) the issuer
must provide a written corrective action plan to HHS for approval
within 30 calendar days of the issuance of the final audit report; (2)
the issuer must implement the corrective action plan; and (3) the
issuer must provide HHS with written documentation demonstrating the
adoption and completion of the required corrective actions.
If an issuer fails to comply with the audit requirements set forth
in new proposed Sec. 156.480(c), HHS proposed in paragraph (c)(5)(i)
that HHS would notify the issuer of payments received that the issuer
has not adequately substantiated, and in new proposed paragraph
(c)(5)(ii), HHS would notify the issuer that HHS may recoup any
payments identified as not adequately substantiated. Therefore, the
continued failure to respond to or cooperate with an audit under
paragraph (c) and provide the necessary information to substantiate the
payments made could result in HHS recouping up to 100 percent of the
APTC or CSR payments made to an issuer for the benefit year(s) that are
the subject of the audit.
We clarified in the proposed rule that APTC and CSR amounts
recovered by HHS as a result of an audit under Sec. 156.480(c) would
be paid to the U.S. Treasury. We further noted that user fee amounts
recovered by HHS as a result of an audit under Sec. 156.480(c) would
be paid to the ACA Marketplace user fee program collection account.
Lastly, HHS proposed to add a new paragraph (c)(6) to Sec. 156.480
to codify HHS's ability to enforce the applicable federal APTC, CSR,
and user fee standards if a State Exchange or SBE-FP is not enforcing
or fails to substantially enforce one or more of these requirements. In
instances where HHS enforces compliance with the applicable APTC, CSR,
and user fee standards with respect to QHP issuers participating in
State Exchanges or SBE-FPs, HHS proposed to use the same standards and
processes as outlined in Sec. Sec. 156.805 and 156.806 for QHP issuers
participating in an FFE with respect to the imposition of CMPs. This
would include the proposed extension of the process outlined in Sec.
156.901, et seq., for the QHP issuer to appeal the imposition of CMPs.
For a discussion of the framework and proposed accompanying penalties
for non-compliance in situations where HHS is responsible for
enforcement of these requirements, see the following discussion of
proposed changes to Sec. Sec. 156.800 and 156.805.
We sought comment on these proposals, including HHS's clarification
of its compliance review authority, the proposed timeframes and
processes for issuers to respond to audit notices and requests for
information and for issuers to request extensions of those timeframes,
and the proposals related to HHS's authority to enforce compliance with
the federal APTC, CSR, and user fee requirements if a State Exchange or
SBE-FP is not enforcing or fails to substantially enforce one or more
of these requirements. We are finalizing these provisions as proposed,
with slight modifications to certain audit timelines in response to
comments stating that issuers need more time during audits to provide
complete and accurate data. HHS will provide at least 30 calendar days
advance notice of its intent to conduct an audit, rather than the
proposed 15 calendar days. If HHS determines the need for a corrective
action plan as the result of an audit, the issuer must provide a
written corrective action plan to HHS for approval within 45 calendar
days of the issuance of the final audit report, rather than the
proposed 30 calendar days. As noted in the above sections on audits of
issuers of reinsurance-eligible plans and risk adjustment covered plans
(Sec. Sec. 153.410(d) and 153.620(c)), these modified timeframes apply
across the parallel HHS audit provisions for reinsurance, risk
adjustment, ATPC, CSR, and user fee audits.
We also clarify that we will recoup monies owed due to a finding as
the result of a reinsurance, risk adjustment, APTC, CSR, or user fee
audit using the same method with which we collect all debts. That is,
we will first net using the process set forth in 45 CFR 156.1215, and
we will then invoice issuers for the remaining debt.
We received public comments on the proposed updates to audits and
compliance reviews of federal APTC, CSR, and user fee standards (Sec.
156.480(c)). The majority of the comments we received to the proposed
updates outlined in this section were also made to the sections
regarding audits and compliance reviews of issuers of reinsurance-
eligible plans (Sec. 153.410(d)) and audits and compliance reviews of
issuers of risk adjustment covered plans (Sec. 153.620(c)). We respond
to all of these parallel comments in this section. As noted above, the
comments we received to the proposed Sec. 156.480(c)(6) were also made
to the sections regarding the application of requirements to issuers in
State Exchanges and SBE-FPs (Sec. 156.480), enforcement remedies in
the Exchanges (Sec. 156.800), and bases and process for imposing CMPs
in the Exchanges (Sec. 156.805). We summarize and respond to those
parallel comments in the Sec. 156.805 preamble section below.
The following is a summary of the parallel general comments we
received to all of the audits and compliance review proposals in this
rule and the specific comments on the proposed
[[Page 24246]]
updates to Sec. 156.480(c), with the exception of the comments
submitted on Sec. 156.480(c)(6), and our responses.
Comment: Several commenters supported the various audit and
compliance review proposals, noting that they will clarify expectations
and requirements, ensure compliance, and protect federal funds. Other
commenters opposed the proposals and asked HHS to put audit standards
in guidance, rather than regulation, as this would maintain flexibility
and make it easier for HHS to revise requirements and improve the audit
process.
Response: We agree that these provisions will provide clarity for
issuers and better facilitate compliance with any HHS audits, as well
as enable HHS to protect federal funds. Many of the provisions are
merely a codification of the current audit processes that have been
used in prior reinsurance, APTC, CSR, and user fee audits.\265\ We
maintain our commitment to working with issuers to meet these
requirements, and we note that we proposed and are finalizing a process
to allow issuers to submit written requests to extend certain audit
response deadlines with good cause.\266\
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\265\ HHS has not yet conducted any risk adjustment audits under
45 CFR 153.620(c).
\266\ See 45 CFR 153.410(d)(2)(iv), 156.620(c)(2)(iv) and
156.480(c)(2)(iv), which we are finalizing as proposed.
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We also note that, to provide clear and enforceable standards, we
proposed and are finalizing the codification of these procedures in
regulation.
Comment: A few commenters requested more flexibility regarding the
data format issuers must use.
Response: In order for HHS to complete an audit, we must receive
data from issuers in a set format communicated to issuers at the audit
entrance conference to be able to analyze data from all issuers using
the same procedures. As we explained in the proposed rule, HHS
experienced difficulties receiving requested audit data in a format
that is readily usable for purposes of conducting the audit. Therefore,
we believe it is appropriate and necessary to codify in regulation a
requirement that issuers must submit complete and accurate data to HHS
or its designees that is necessary to complete the audit, in the format
and manner specified by HHS. For example, for CSR audits, HHS may
request that QHP issuers provide a re-adjudicated claims data extract
for the selected sample of policies to verify accuracy of the re-
adjudication process and reported amounts (this would include
verification of all elements necessary to perform accurate re-
adjudication) and a data extract containing incurred claims for the
selected sample of policies to verify accuracy of actual amount the
enrollee(s) paid for EHBs via an Electronic File Transfer. For APTC
audits, issuers may be asked to provide data to validate and support
APTC payments received for the applicable benefit year. To reduce
burden on issuers, we anticipate being able to continue to review
compliance with applicable federal user fee standards when conducting
APTC audits because the same data is used for both purposes. We also
note that if more time is needed to compile the requested data in the
required format, an issuer could request an extension under Sec. Sec.
153.410(d)(2)(iv), 156.620(c)(2)(iv), or 156.480(c)(2)(iv), as
applicable.
Comment: Many commenters requested longer timelines for audit
notice and issuer responses to HHS to the various audit requests,
noting that issuers would need more time than what was proposed in
order for issuers to provide complete and accurate data or otherwise
respond to HHS requests. Some commenters requested that HHS provide 30
calendar days advance notice of its intent to conduct an audit, rather
than the proposed 15 calendar days. Other commenters requested that HHS
set the deadline for issuers to submit corrective action plans at
either 45 or 60 calendar days, rather than the proposed 30 calendar
days. One commenter requested that HHS set the initial data submission
deadline at 45 calendar days and subsequent request deadlines at 30
calendar days, rather than the proposed 30 calendar days and 15
calendar days, respectively. Other commenters asked that HHS permit
extensions to the timeframes set forth for these audits. A couple of
commenters asked that HHS be more timely with respect to performing
audits.
Response: We appreciate these comments and acknowledge that our
experience with 2014 benefit year CSR and reinsurance audits
demonstrated that issuers need sufficient time to provide complete and
accurate data for audits, and we acknowledge that some issuers will
face difficulties in retrieving and properly formatting data from prior
benefit years. We also recognize that it would be beneficial for all
stakeholders if issuers could receive more advance notice of an
upcoming audit or compliance review to allow the issuer (and HHS or its
designee) to begin preparation and coordination efforts earlier.
Therefore, in response to these comments, we are modifying the
timeframe in Sec. 156.480(c)(1) to require HHS to provide at least 30
calendar days advance notice of its intent to conduct an APTC, CSR, or
user fee audit rather than the proposed 15 calendar days. Similarly, we
are modifying the timeframes in Sec. Sec. 153.410(d)(1) and
153.620(c)(1) to require HHS to provide at least 30 calendar days
advance notice of its intent to conduct an audit of a reinsurance-
eligible plan or a risk adjustment covered plan, respectively, rather
than the proposed 15 calendar days. As for the time allowed to provide
the initial audit submission, HHS will continue to maintain the 30
calendar day deadline. HHS believes that in order to complete the audit
process in a timely manner and based on prior audit experience, after
giving issuers 30 calendars days advance notice of the audit, which is
15 days longer than initially proposed, an additional 30 days to
provide the initial data submission for the audit is more than
reasonable. We note that as stated in Sec. Sec. 153.410(d)(2)(iv),
153.620(c)(2)(iv), and 156.480(c)(2)(iv), we proposed and are
finalizing the flexibility for issuers to seek extensions for
reinsurance, risk adjustment, and APTC, CSR, and user fee audit-related
requests from HHS under Sec. Sec. 153.410(d)(2)(ii) or (iii),
153.620(c)(2)(ii) or (iii), and 156.480(c)(2)(ii) or (iii),
respectively, but believe the 30 calendar day timeline to provide the
initial audit submission strikes the appropriate balance and will allow
HHS to work with issuers to ensure the proper data is provided and the
audit can be conducted and completed more efficiently. We are also
maintaining the 30 calendar day timeframe for issuers to respond to
preliminary audit findings.\267\ We similarly believe that this
timeframe strikes the appropriate balance and ensures these audits can
be completed more efficiently.
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\267\ See 45 CFR 153.410(d)(3), 153.620(c)(3), and
156.480(c)(3).
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Additionally, in response to comments suggesting a 45 calendar day
deadline for issuers to provide written corrective action plans rather
than the proposed 30 calendar day deadline, we will finalize a 45
calendar day timeframe to submit a corrective action plan if an audit
results in the inclusion of a finding in the final audit report, rather
than a 30 calendar day timeframe, at Sec. 153.410(d)(4)(i) for
reinsurance program audits, Sec. 153.620(c)(4)(i) for risk adjustment
program audits, and Sec. 156.480(c)(4)(i) for APTC, CSR, and user fee
audits. We are persuaded by these comments and agree that issuers would
benefit from the extension of this timeframe because the development of
a
[[Page 24247]]
corrective action plan may require a significant amount of coordination
and discussion between HHS, the state (if applicable), and the issuer
in order to finalize the appropriate corrective action(s) and plan for
implementation. Therefore, as finalized, the issuer must provide a
written corrective action plan to HHS for approval within 45 calendar
days of the issuance of the final audit report, rather than the
proposed 30 calendar days, for those situations where one or more
findings are included in the final audit report.\268\
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\268\ We also reiterate that an issuer, acting in good faith,
can submit an extension request if it finds additional time is
needed to respond to certain HHS requests stemming from these
audits. See 45 CFR 153.410(d)(2)(iv), 156.620(c)(2)(iv) and
156.480(c)(2)(iv).
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HHS makes every effort to conduct audits in an efficient and timely
manner and will continue to do so. The audit proposals addressed in the
proposed rule and this final rule are aimed at making the audit process
more efficient so that audits may be completed in a shorter length of
time. However, HHS is flexible and willing to work with issuers who
keep us informed of their progress but may need more time. Therefore,
as we proposed, we are also finalizing at Sec. 153.410(d)(2)(iv) for
reinsurance program audits, Sec. 153.620(c)(2)(iv) for risk adjustment
program audits and Sec. 156.480(c)(2)(iv) for APTC, CSR, and user fee
audits that issuers may request an extension to certain audit deadlines
by submitting a written request to HHS within the applicable
timeframe(s) \269\ for reinsurance program audits, risk adjustment
program audits, and APTC, CSR, and user fee audits. For all of these
audits, the written request would have to detail the reasons for the
extension request and the good cause in support of the request and must
be submitted within the applicable timeframe for responding to the HHS
request.
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\269\ As proposed and finalized, issuers may request to extend
the following timeframes: (1) For reinsurance program audits, the
timeframes under 45 CFR 153.410(d)(2)(ii) or (iii); (2) for risk
adjustment audits, the timeframes under 45 CFR 153.620(c)(2)(ii) or
(iii); and (3) for APTC, CSR, and user fee audits, the timeframes
under 45 CFR 156.480(c)(2)(ii) or (iii).
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Comment: A few commenters asked that HHS avoid audits during the
annual open enrollment period (OEP) to allow issuers to focus their
resources on enrollment and other OEP activities.
Response: HHS agrees that issuers should devote their resources to
enrollment during the OEP and will take this request into consideration
in scheduling the start of future audits. Because audits are an ongoing
process and the timeline for completion is not always fixed, it may not
be possible to entirely avoid overlap between audit activities and OEP,
but HHS will work with issuers to avoid situations where audit
activities could undermine or otherwise negatively impact issuers'
ability to focus on enrollment during the annual OEP. For example, we
are finalizing the proposal to permit issuers to request an extension
to certain audit deadlines at Sec. Sec. 153.410(d)(2)(iv),
153.620(c)(2)(iv), and 156.480(c)(2)(iv), for audits of issuers of
reinsurance-eligible plans, audits of issuers of risk adjustment
covered plans, and audits of the APTC, CSR, and user fee programs,
respectively. We clarify that an issuer who has made good faith efforts
to otherwise comply with HHS audit requests could submit such an
extension request if it needed more time with respect to completing its
audit activities under 45 CFR 153.410(d)(2)(ii) or (iii) for
reinsurance program audits, 45 CFR 153.620(c)(2)(ii) or (iii) for risk
adjustment program audits, and 45 CFR 156.480(c)(2)(ii) or (iii) for
APTC, CSR, and user fee audits, due to the overlap with the annual OEP.
Comment: Some commenters asked that HHS rely on existing audits
rather than adding new audits and audit requirements.
Response: In response to these comments, we clarify that HHS is not
adding new audit authority for reinsurance-eligible plans, risk
adjustment covered plans, or APTC, CSRs, and user fees. Rather, we are
expanding the existing authority to codify more details about audit
activities to set clear expectations, facilitate compliance and
enforcement, protect federal funds, and maintain program integrity. The
standards being codified comprise best practices and procedures that
HHS has established in audit entrance conferences and incorporates
lessons learned from audits of the reinsurance and CSR programs for the
2014 benefit year, and audits of the APTC program for the 2014 through
2017 benefit years. HHS's audit regulations in these areas were
finalized in earlier rulemakings.\270\ We are, however, finalizing new
authority to permit HHS to conduct compliance reviews to ensure
compliance with applicable reinsurance, risk adjustment, and federal
APTC, CSR, and user fee standards. As explained elsewhere in this rule
and in the proposed rule, we believe this additional authority related
to compliance reviews is necessary and appropriate in order to provide
HHS a mechanism to address situations in which a systematic error or
issue is identified during the random and targeted auditing of a sample
of QHP issuers, and HHS suspects similarly situated issuers may have
experienced the same systematic error or issue but were not selected
for audit in the year in question.
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\270\ See, for example, 78 FR at 65077-65078; 79 FR at 13770-
13771 and 13781-13782.
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Comment: A few commenters noted that the proposed compliance
reviews would place an increased burden on states and issuers.
Response: We generally disagree that the proposed compliance review
proposals would place an increased burned on states. Of particular
note, these proposals, which we are finalizing in the introductory
language to Sec. Sec. 153.410(d), 153.620(c), and 156.480(c), involve
situations where HHS--rather than the states--would conduct a review to
confirm an issuer's compliance with the applicable federal program
standards and requirements. While there may be some increased burden
associated with coordination between HHS and the states, any such
increased burden on states should be minimal. We further note that the
purpose of the proposed HHS compliance reviews, as stated in the
preamble section above and in the proposed rule, is to confirm QHP
issuer compliance with the applicable federal reinsurance, risk
adjustment, or APTC, CSR, and user fee standards. These compliance
reviews are intended to be less burdensome than audits of compliance
with requirements under the applicable programs, and may further be
targeted at a specific potential error and conducted on an ad hoc
basis.\271\ For example, HHS may require an issuer to submit data
pertaining to specific data submissions. We believe this flexibility is
necessary and appropriate to provide HHS a mechanism to address
situations in which a systematic error or issue is identified during
the random and targeted auditing of a sample of QHP issuers, and HHS
suspects similarly situated issuers may have experienced the same
systematic error or issue but were not selected for audit in the year
in question. HHS intends to conduct compliance reviews sparingly and
will provide advance notice of a compliance review to the issuer being
reviewed and the applicable state regulator(s), State Exchange, or SBE-
FP. Therefore, while we acknowledge that there will be some burden on
issuers associated with these compliance reviews, we believe the
benefits for all stakeholders associated with finalizing this
additional oversight tool outweighs such burdens as it allows for a
more targeted approach to ensure
[[Page 24248]]
compliance with applicable federal requirements.
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\271\ See 78 FR 65100.
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Comment: One commenter asked that HHS only conduct CSR audits of
issuers for the time during which HHS made advance CSR payments; that
is, the 2014 benefit year through September of the 2017 benefit year.
Response: At this time, HHS is beginning audits of the 2015 and
2016 benefit year of CSR payments. HHS has not yet made a determination
as to whether or not CSR audits will be conducted for the 2017 benefit
year and beyond.
Comment: One commenter supported HHS recouping up to 100 percent of
applicable APTC or CSR payments. Another commenter stated that HHS
should use the normal debt collection process of netting and then
invoicing issuers to collect any remaining debt amount owed as a result
of audit findings and that the proposed 100 percent recoupment of APTC,
CSR, reinsurance, and risk adjustment payments was unreasonable.
Response: If an issuer is not able to adequately substantiate the
APTC, CSR, reinsurance, or risk adjustment payments it received from
HHS during the course of an audit, HHS has an obligation to recoup
federal funds and protect the integrity of these programs. We further
note that issuers have separate record retention requirements that must
be met and the documents required to be maintained can be utilized to
substantiate payment.\272\ Therefore, it is appropriate and necessary
for HHS to recoup any APTC, CSR, reinsurance, or risk adjustment
payments made to issuers that were not adequately substantiated by the
issuer during the course of an audit. This may include up to 100
percent recoupment if the issuer is entirely unable to substantiate the
payments it received that are the subject of the audit. However, we
anticipate that this situation would be extremely rare, and HHS would
work with the issuer to provide reasonable opportunities for the issuer
to substantiate the payments it received under these programs. As with
all debt collection for the ACA financial programs, HHS will follow the
process set forth in Sec. 156.1215 to collect any amounts owed as a
result of an audit under 45 CFR 153.410(d), 153.620(c) and 156.480(c).
We affirm that we therefore intend to leverage the existing netting and
debt collection process to recoup monies owed due to a finding as the
result of these audits. That is, to recoup an amount identified as owed
as a result of an audit under 45 CFR 153.410(d), 156.620(c), and
156.480(c), we will first net using the process set forth in 45 CFR
156.1215, and will then invoice issuers for the remaining debt (if any
is owed).
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\272\ See Sec. Sec. 153.410(c), 153.620(b), 156.480(a), and
156.705.
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Comment: A couple of commenters requested more information on the
proposed updates to audits and compliance reviews of APTC, CSRs, and
user fees under Sec. 156.480(c) and, more specifically, the proposed
inclusion of user fees as part of the audit framework in this
regulation. One commenter wanted more information on the user fee
audits referred to in this proposal. Another commenter wanted HHS to
publish audit protocols with information on audit requirements, file
layouts, submission requirements, and source documentation for the
Sec. 156.480(c) audits.
Response: As stated in the preamble section above, HHS currently
reviews compliance with applicable federal user fee standards in 45 CFR
156.50 when conducting APTC audits, because the same data is used to
audit both APTC and user fees. Audits of APTC and user fees are
conducted simultaneously using the same data; as such, there is minimal
increased burden as a result of the amendments being finalized in this
rule to consolidate the user fee audit standards alongside the APTC and
CSR audit standards in Sec. 156.480(c).
We further note that HHS currently provides information on audit
requirements, file layouts, submission requirements, and source
documentation as part of the applicable audit entrance conference.
Issuers selected for audit receive this information at the entrance
conference, which they are required to attend, and also receive further
details on these requirements from HHS via the audit contractor.
Guidance documents related to APTC audit requirements are also
available on REGTAP.\273\
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\273\ See, for example, ``CMS Issuer Audits of the Advance
Payments of the Premium Tax Credit,'' April 1, 2019. Available at
(login required): https://www.regtap.info/uploads/library/CMS_PPFMG_EA_CMSAPTCAudits_5CR_040119.pdf.
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After consideration of the comments on the audit proposals in
Sec. Sec. 153.410(d), 153.630(c), and 156.480(c), we are finalizing
these provisions as proposed, with slight modifications to certain
audit timelines in response to comments stating that issuers need more
time during audits to provide complete and accurate data and to provide
written corrective action plans. HHS will provide at least 30 calendar
days advance notice of its intent to conduct a reinsurance, risk
adjustment, APTC, CSR, or user fee audit, rather than the proposed 15
calendar days. If an audit results in the inclusion of a finding in the
final audit report, the issuer must provide a written corrective action
plan to HHS for approval within 45 calendar days of the issuance of the
final audit report, rather than the proposed 30 calendar days.
We also clarify that we will recoup monies owed due to a finding as
the result of a reinsurance, risk adjustment, APTC, CSR, or user fee
audit using the same method with which we collect all ACA financial
program debts. That is, we will first net using the process set forth
in 45 CFR 156.1215, and we will then invoice issuers for the remaining
debt.
7. Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges;
Available Remedies; Scope. (Sec. 156.800)
We proposed to rename Subpart I to ``Enforcement Remedies in the
Exchanges,'' and to make other amendments to clarify that HHS has the
ability to impose CMPs when it is enforcing the applicable federal
requirements in part 156, subpart E and 45 CFR 156.50 for user fees,
regardless of whether the Exchange is established and operated by a
state (including a regional Exchange or subsidiary exchange) or by
HHS.\274\ As explained in prior rulemaking, in states where there is a
State Exchange, the State Exchange has primary enforcement authority
over QHP issuers participating in the Exchange and ensuring compliance
with the applicable federal APTC, CSR, and user fee standards.\275\
However, consistent with the framework established in section
1321(c)(2) of the ACA, HHS has authority to step in to enforce
requirements related to the operation of Exchanges and the offering of
QHPs through Exchanges if a state fails to do so.276 277 As
such, in the case of a determination by the Secretary that a State
Exchange or SBE-FP has failed to enforce or substantially enforce a
federal requirement (or requirements) related to QHP issuer
participation in the individual market Exchange, HHS has authority to
step in and enforce
[[Page 24249]]
QHP issuer compliance with the requirement(s).
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\274\ Exchange models include State Exchanges, SBE-FPs, and
FFEs. HHS does not intend to use this authority to impose CMPs
related to user fee standards applicable to QHP issuer participating
in State Exchanges.
\275\ See the proposed Program Integrity Rule, 78 FR 37058. Also
see 78 FR 65077 and 65078.
\276\ Ibid.
\277\ Section 1321(c)(2) of the ACA provides that the
enforcement framework established in section 2736(b), which was
renumbered 2723(b), of the PHS Act shall apply to the enforcement of
requirements established in section 1321(a)(1).
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Through its cross-reference to section 2723(b) of the PHS Act,\278\
section 1321(c)(2) of the ACA authorizes the Secretary to impose CMPs
for non-compliance with applicable federal Exchange requirements. In
the proposed rule, we proposed to codify HHS authority to impose CMPs
for non-compliance by QHP issuers that participate or have participated
in a State Exchange or SBE-FP in situations where HHS steps in to
enforce certain requirements. Specifically, this proposal is focused on
ensuring compliance with the standards for APTC, CSR payments, and user
fees captured in part 156, subpart E and 45 CFR 156.50. Under this
proposal, we would apply the bases and follow the processes for
imposing CMPs as set forth in Sec. 156.805, would send a notice of
non-compliance as set forth in Sec. 156.806, and would extend the
administrative review and appeal process set forth in Sec. 156.901, et
seq. to provide a forum for QHP issuers in State Exchanges and SBE-FPs
to appeal the imposition of CMPs by HHS. We did not propose to extend
the authority to decertify a QHP under Sec. 156.800(a)(2) for non-
compliance by QHP issuers in State Exchanges or SBE-FPs; QHP de-
certification in State Exchanges or SBE-FPs would remain an available
enforcement tool for the applicable Exchange. We explained that this
proposal is not intended to duplicate state enforcement efforts, as HHS
generally depends on State Exchanges and SBE-FPs to enforce federal
requirements applicable to QHPs and QHP issuers participating in the
state's individual market Exchange. The proposed amendments are instead
intended to establish an enforcement framework to capture situations
where HHS is responsible for enforcement if a State Exchange or SBE-FP
fails to do so and is focused on the federal APTC, CSR, and user fee
requirements in order to protect federal funds.
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\278\ While the text of section 1321(c)(2) of the ACA cites to
section 2736(b) of the PHS Act, this PHS Act provision was
renumbered a second time to section 2723(b) as part of the technical
and conforming amendments in the ACA. See section 1562(c)(13)(C) of
the ACA.
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We also explained that we expected that states that established a
State Exchange or SBE-FP will enforce all applicable federal
requirements applicable to QHPs and QHP issuers participating in
Exchanges, including the applicable APTC, CSR, and user fee standards
captured in part 156, subpart E and 45 CFR 156.50. However, to address
situations where a State Exchange or SBE-FP fails to enforce these
federal Exchange requirements, consistent with the framework
established in section 2723(b) of the PHS Act, we proposed that if HHS
determines that a State Exchange or SBE-FP lacks authority or has
otherwise failed to substantially enforce the requirements captured in
part 156, subpart E or 45 CFR 156.50, HHS would step in to enforce
these requirements with respect to QHP issuers participating in the
State Exchange or SBE-FP. Once this determination is made, HHS would
become responsible for enforcement of these provisions and would take
appropriate action to ensure QHP issuer compliance with the applicable
requirement(s),\279\ and may impose CMPs, if appropriate. To more
clearly capture HHS's authority to impose CMPs in these situations, we
proposed to amend the introductory sentence to Sec. 156.800(a) to
replace the current references to the ``Federally-facilitated
Exchange'' with references to ``an Exchange.'' We also proposed to
amend Sec. 156.800(b) to remove the word ``only'' from the sentence
describing the scope of HHS sanctions with respect to QHP issuers
participating in FFEs and to add a new second sentence that affirms HHS
authority to impose CMPs for non-compliance with the applicable
requirements in part 156, subpart E and 45 CFR 156.50 by QHP issuers
participating in State Exchanges and SBE-FPs.
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\279\ As detailed earlier, when HHS is responsible for
enforcement of these Exchange requirements, we are finalizing the
proposal to extend authority for HHS to pursue a compliance review
under Sec. 156.480(c), consistent with the framework establish in
Sec. 156.715, to confirm compliance with federal APTC, CSR, and
user fee requirements by a QHP issuer participating in a State
Exchange or SBE-FP.
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We also noted that we intend to continue our collaborative
enforcement approach and would coordinate our actions with state
efforts to avoid duplication and to streamline oversight of the
administration of APTC, CSRs, and user fees. We solicited comments for
how HHS can collaborate with State Exchanges and SBE-FPs to proactively
address non-compliance with applicable federal requirements and share
compliance tools regarding APTC, CSRs, and user fees. We are finalizing
the proposals to (1) amend the introductory sentence to Sec.
156.800(a) to replace the current references to the ``Federally-
facilitated Exchange'' with references to ``an Exchange,'' and (2)
amend Sec. 156.800(b) to remove the word ``only'' from the sentence
describing the scope of HHS sanctions with respect to QHP issuers
participating in FFEs and to add a new sentence that affirms HHS
authority to impose CMPs for non-compliance with the applicable
requirements in part 156, subpart E and 45 CFR 156.50 by QHP issuers
participating in State Exchanges and SBE-FPs.
We received public comments on the proposed updates to Subpart I--
Enforcement Remedies in Federally-Facilitated Exchanges; Available
remedies; Scope (Sec. 156.800). The comments we received to this
section were also made to the sections regarding the application of
requirements to issuers in State Exchanges and SBE-FPs (Sec. 156.480),
HHS enforcement of the applicable federal APTC, CSR, and user fee
standards if a State Exchange or SBE-FP is not enforcing or fails to
substantially enforce one or more of these requirements (Sec.
156.480(c)(6)), and the bases and process for imposing CMPs in the
Exchanges (Sec. 156.805), and we responded to all of these parallel
comments in the bases and process for imposing CMPs in the Exchanges
(Sec. 156.805) preamble section below.
After consideration of the relevant comments, we are finalizing the
amendments to Sec. 156.800 as proposed. As detailed further in the
below section on the bases and process for imposing CMPs in the FFEs,
we also clarify that we intend to leverage this authority to pursue
enforcement and the imposition of CMPs in State Exchange and SBE-FP
states where HHS is responsible for enforcement in a targeted manner
with a focus on egregious or repeated occurrences of QHP issuer
noncompliance with the applicable APTC, CSR, and user fee standards
that are discovered as the result of audits and the State Exchange or
SBE-FP fails to substantially enforce the applicable standard(s). We
further note that we did not propose and are not finalizing any
substantive changes related to the enforcement framework applicable to
QHP issuers participating in FFEs. The below section on bases and
process for imposing CMPs in the Exchanges discusses this point in
further detail.
8. Bases and Process for Imposing Civil Money Penalties in Federally-
Facilitated Exchanges (Sec. 156.805)
We also proposed to amend Sec. 156.805 to more clearly reflect
HHS's authority to impose CMPs due to non-compliance with respect to
the applicable federal APTC, CSR, and user fee standards against a QHP
issuer participating in a State Exchange or SBE-FP. Under this
proposal, we would use the same bases and process currently captured in
Sec. 156.805 for imposing CMPs on QHP issuers participating in an FFE.
More specifically, in Sec. 156.805, we proposed
[[Page 24250]]
renaming this section to ``Bases and process for imposing CMPs in the
Exchanges,'' and also proposed to amend the introductory language in
Sec. 156.805(a) to use the words ``an Exchange,'' instead of
``Federally-facilitated Exchange,'' to more clearly capture HHS's
authority to impose CMPs on QHP issuers participating in State
Exchanges and SBE-FPs who fail to comply with the applicable
requirements in part 156, subpart E or Sec. 156.50 in situations where
HHS is responsible for enforcement. We similarly proposed to modify
Sec. 156.805(a)(5)(i) where the reference to ``HHS'' currently appears
to also incorporate a reference to ``an Exchange'' to clarify that all
QHP issuers must avoid intentionally or recklessly misrepresenting or
falsifying APTC, CSR, and user fee information to both HHS and
Exchanges, regardless of whether HHS or a state operates the Exchange.
We proposed this amendment to clarify that HHS has authority to impose
CMPs against QHP issuers participating in State Exchanges and SBE-FPs
who misrepresent or falsify APTC, CSR, and user fee information
provided to HHS in situations where HHS is responsible for enforcement
of the requirements in part 156, subpart E or Sec. 156.50, including
when HHS is performing an audit or compliance review under Sec.
156.480(c). If HHS seeks to use this authority to impose CMPs against a
QHP issuer participating in a State Exchange or SBE-FP, we proposed the
issuer would have the opportunity to appeal the CMPs following the
existing framework for administrative hearings in Sec. 156.901, et
seq.
Finally, we proposed to add a new paragraph (f) to Sec. 156.805 to
capture in this regulation details on the circumstances requiring HHS
enforcement of the applicable requirements in part 156, subpart E and
Sec. 156.50. Consistent with the framework established in section
2723(b) of the PHS Act and section 1321(c) of the ACA, we propose in
new Sec. 156.805(f)(1) that HHS's authority to enforce in these
situations would be limited to situations where the State Exchange or
SBE-FP notifies HHS that it is not enforcing these requirements or if
HHS makes a determination using the process set forth at 45 CFR
150.201, et seq. that a State Exchange or SBE-FP is failing to
substantially enforce these requirements.\280\ In new proposed Sec.
156.805(f)(2), we proposed to affirm that when HHS is responsible for
enforcement in these circumstances, HHS may impose CMPs on an issuer in
the State Exchange or SBE-FP, in accordance with the bases and process
set forth in this section. As noted in the proposed rule, this includes
the ability for a QHP issuer in a State Exchange or SBE-FP to appeal
the imposition of CMPs by HHS following the existing framework for
administrative hearings in Sec. 156.901, et seq.
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\280\ See, for example, 45 CFR 150.203.
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We proposed that HHS would apply the same process HHS uses to
determine when a state is failing to substantially enforce PHS Act
requirements in determining whether a State Exchange or SBE-FP is
substantially enforcing the applicable federal APTC, CSR, and user fee
standards. More specifically, we proposed that if an audit of a QHP
issuer in a State Exchange or SBE-FP demonstrates the State Exchange or
SBE-FP's failure to enforce the applicable federal APTC, CSR, and user
fee standards, HHS would investigate the State Exchange or SBE-FP's
enforcement and follow the process set forth in 45 CFR 150.207 if
necessary. We proposed that if HHS receives or obtains information
(including information discovered through an audit) that a State
Exchange or SBE-FP may not be enforcing the applicable requirements in
part 156, subpart E, or 45 CFR 156.50, HHS may initiate the process
described in 45 CFR 150.207 to determine whether the State Exchange or
SBE-FP is failing to substantially enforce these requirements.
Mirroring the process set forth in 45 CFR 150.207 for making
determinations regarding substantial enforcement of PHS Act
requirements, HHS would follow the procedures in Sec. Sec. 150.209
through 150.219 to determine if a State Exchange or SBE-FP is failing
to enforce one or more of the applicable requirements in part 156,
subpart E or 45 CFR 156.50. If HHS believes there is a reasonable
question whether there has been a failure to enforce one or more of the
applicable requirements in part 156, subpart E or 45 CFR 156.50, HHS
would send a notice, as described in 45 CFR 150.213, identifying the
applicable requirement(s) that allegedly have not been substantially
enforced to the proper State Exchange or SBE-FP officials using the
process outlined in 45 CFR 150.211. We proposed that, following the
process described in 45 CFR 150.215, HHS may extend, for good cause,
the time the State Exchange or SBE-FP has for responding to the notice,
such as if there is an agreement between HHS and the State Exchange or
SBE-FP that there should be a public hearing on the State Exchange or
SBE-FP's enforcement, or evidence that the State Exchange or SBE-FP is
undertaking expedited enforcement activities. Using the process
described in 45 CFR 150.217, if at the end of the extension period HHS
determines that the State Exchange or SBE-FP has not established to
HHS's satisfaction that it is substantially enforcing the applicable
requirements, we proposed that HHS would consult with the appropriate
State Exchange or SBE-FP officials, notify the State Exchange or SBE-FP
of its preliminary determination that the State Exchange or SBE-FP has
failed to substantially enforce the requirements and that the failure
is continuing, and permit the State Exchange or SBE-FP a reasonable
opportunity to show evidence of substantial enforcement. If, after
providing notice and a reasonable opportunity for the State Exchange or
SBE-FP to show that it has corrected any failure to substantially
enforce, HHS finds that the failure to substantially enforce has not
been corrected, HHS would notify the State Exchange or SBE-FP of its
final determination using the process described in 45 CFR 150.219.
Therefore, we proposed that after a determination that a State Exchange
or SBE-FP is not or cannot substantially enforce the applicable
requirements in part 156, subpart E or Sec. 156.50, HHS could impose
CMPs on issuers in the State Exchange or SBE-FP if there is cause for
such imposition. HHS would also provide a notice of non-compliance,
consistent with Sec. 156.806, to QHP issuers in State Exchanges or
SBE-FPs prior to imposing CMPs.
We explained that we sought to work collaboratively with State
Exchanges and SBE-FPs for any topics of mutual concern and oversight
activities where possible. We also sought comment to this proposal, the
proposed updates to Sec. 156.805, and ways in which HHS and state
authorities can efficiently and effectively enforce federal standards
related to APTC, CSRs, and user fees.
We also proposed that if the changes to Sec. Sec. 156.800 and
156.805 were finalized as proposed, we would also amend Sec. 156.903
such that an administrative law judge's authority also extends to CMPs
imposed against QHP issuers in State Exchanges and SBE-FPs under Sec.
156.805. Specifically, we proposed to amend Sec. 156.903(a) to extend
the provision to also include State Exchanges and SBE-FPs so that the
ALJ has the authority, including all the authority conferred by the
Administrative Procedure Act, to adopt whatever procedures may be
necessary or proper to carry out in an efficient and effective manner
the ALJ's duty to provide a fair and impartial hearing on
[[Page 24251]]
the record and to issue an initial decision concerning HHS's imposition
of a CMP on a QHP offered in a FFE, State Exchange, or SBE-FP.
We received public comments on the proposed updates to bases and
process for imposing civil money penalties in Federally-facilitated
Exchanges (Sec. 156.805). The majority of the comments we received to
this section were also made to the proposals regarding HHS enforcement
of the applicable federal APTC, CSR, and user fee standards if a State
Exchange or SBE-FP is not enforcing or fails to substantially enforce
one or more of these requirements (Sec. 156.480(c)(6)), the
application of requirements to issuers in State Exchanges and SBE-FPs
(Sec. 156.480), and the enforcement remedies in the Exchanges,
available remedies, and scope (Sec. 156.800). The following is a
summary of these comments and our responses.
Comment: One commenter supported the proposed updates to the
application of requirements to issuers in State Exchanges and SBE-FPs
(Sec. 156.480(c)), the enforcement remedies in the Exchanges,
available remedies, and scope (Sec. 156.800), and the bases and
process for imposing CMPs in the Exchanges and the accompanying updates
to Sec. 156.805. Several commenters opposed the proposal and asked for
more information on the process by which HHS would determine that a
State Exchange or SBE-FP is failing to substantially enforce the
applicable requirements. A few commenters asked for more information on
the types of issues that would result in HHS commencing the process to
determine whether a State Exchange or SBE-FP is failing to
substantially enforce the applicable federal requirements.
Response: We anticipate that an imposition of a CMP by HHS on QHP
issuers in State Exchanges and SBE-FPs through these proposed updates
should be very rare, as we have not yet imposed a CMP on any QHP issuer
in any of the APTC, CSR, user fee, reinsurance, or risk adjustment
audits we have conducted to date. We also anticipate that it would be
rare for an issuer to repeatedly fail to comply with the applicable
federal APTC, CSR, and user fee standards, as well as for the State
Exchange or SBE-FP to fail to substantially enforce these standards
after being notified by HHS of such potential non-compliance as the
result of an audit. We reiterate our commitment to working with
issuers, State Exchanges, and SBE-FPs to evaluate issuer non-compliance
with the applicable federal APTC, CSR, and user fee standards and
intend to resort to leveraging the authority for HHS to step in and
take the appropriate enforcement action in State Exchange and SBE-FP
states, including imposing CMPs, in very limited situations where we
have evidence or information suggesting that the state is not enforcing
and QHP issuers in that state are not complying with the applicable
federal standard(s) for APTC, CSRs, and/or user fees. We did not
propose and are not finalizing any substantive changes related to the
enforcement framework applicable to QHP issuers participating in FFEs.
The purpose of these proposals is to codify the authority for HHS to
step in and enforce the applicable standards, including the ability to
impose CMPs, if necessary should the situation arise. We emphasize that
the amendments to Sec. Sec. 156.800 and 156.805 are targeted to
provide HHS authority to step in when there are egregious or repeated
occurrences of QHP issuer non-compliance with the applicable APTC, CSR,
and user fee standards that are discovered as the result of multiple
audits and the State Exchange or SBE-FP is also failing to
substantially enforce the applicable standard(s). We therefore
anticipate such situations will be rare.
In response to comments, we offer the following example of a
situation in which HHS could begin the process of making a
determination that a State Exchange or SBE-FP is failing to
substantially enforce the applicable APTC, CSR, and user fee
requirements. If HHS discovers, as the result of an audit, that an
issuer in a State Exchange or SBE-FP failed to comply with a federal
APTC requirement, it would inform the State Exchange or SBE-FP and the
issuer of this finding and set forth required corrective actions for
the issuer to take. If HHS then discovers in the following year's audit
of this same issuer that the issuer has not taken the corrective
actions and is continuing to fail to comply with the requirement, HHS
would again inform the State Exchange or SBE-FP and the issuer of this
repeated finding, and ask the State Exchange or SBE-FP to take the
appropriate enforcement action against the issuer for noncompliance. If
the State Exchange or SBE-FP repeatedly fails to enforce the applicable
requirement across multiple benefit years and the issuer continues to
have an audit finding related to this non-compliance across multiple
benefit years, HHS would begin the process of making a determination
that the State Exchange or SBE-FP is failing to substantially enforce
that requirement. We reiterate our commitment to working with State
Exchanges and SBE-FPs, and we confirm that this policy is narrowly
targeted at egregious or repeated occurrences of QHP issuer non-
compliance with the applicable APTC, CSR, and user fee standards
evaluated through audits of these programs. We also reiterate that the
above is an illustrative example. Consistent with the statutory
framework outlined in section 1321(c) of the ACA, and as reflected in
the amendments we are finalizing to Sec. Sec. 156.800 and 156.805, HHS
may step in to enforce applicable federal APTC, CSR, and user fee
standards in other situations where there is evidence or information
suggesting that the State Exchange or SBE-FP is failing to do so.\281\
Once HHS makes a determination that a State Exchange or SBE-FP is
failing to substantially enforce the applicable federal requirements,
HHS may pursue CMPs against issuers for non-compliance under Sec. Sec.
156.800 and 156.805 in appropriate situations.
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\281\ Consistent with the statute, HHS may also leverage this
authority in situations where there is evidence or information
suggesting the State Exchange or SBE-FP is failing to substantially
enforce other federal Exchange requirements.
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The process by which HHS proposed and is finalizing to determine
whether a State Exchange or SBE-FP is failing to substantially enforce
the applicable APTC, CSR, and user fee requirements mirrors the process
set forth in 45 CFR 150.207 for making determinations regarding a
state's substantial enforcement of PHS Act requirements. As detailed
above, the process involves HHS sending notice to the proper State
Exchange or SBE-FP officials; permits extending the time the State
Exchange or SBE-FP has for responding to the notice; requires
consulting with the appropriate State Exchange or SBE-FP officials; and
mandates that HHS notify the State Exchange or SBE-FP of HHS's
preliminary determination that the State Exchange or SBE-FP has failed
to substantially enforce the requirement(s) and that the failure is
continuing. Only after HHS goes through the process and makes a
determination that the State Exchange or SBE-FP is substantially non-
enforcing applicable APTC, CSR, and user fee requirements, and the
State Exchange or SBE-FP fails to address the identified concerns,
would HHS have authority to begin the process to impose a CMP on a QHP
issuer in a State Exchange or SBE-FP state pursuant to 45 CFR 156.805
for their non-compliance.
Comment: Numerous commenters stated that this proposal would
improperly usurp the role of states in
[[Page 24252]]
enforcing these requirements in their own Exchanges.
Response: We disagree that this approach improperly usurps the role
of states in enforcing requirements within their own Exchanges, as the
process outlined above provides ample opportunity for State Exchanges
and SBE-FPs to take action and demonstrate substantial enforcement at
multiple points in the process before HHS assumes enforcement
authority. Additionally, pursuant to section 1321(c) of the ACA, HHS
has the statutory authority and responsibility to enforce federal
requirements when the State Exchange or SBE-FP fails to do so and is
instructed to follow the framework set forth in section 2723(b) of the
PHS Act when doing so. This authority necessarily includes the ability
to impose CMPs on issuers for non-compliance with APTC, CSR, or user
fee requirements in states where HHS is responsible for enforcement. As
explained above and in the proposed rule, our experience with APTC,
CSR, and user fee audits led us to propose these amendments to ensure a
framework is in place for HHS to address non-compliance and protect
federal funds when a State Exchange or SBE-FP fails to substantially
enforce federal standards and QHP issuers in those states are failing
to comply with applicable federal APTC, CSR, and user fee requirements.
We again reiterate our commitment to working with State Exchanges and
SBE-FPs to address non-compliance by QHP issuers operating in their
respective states with applicable federal APTC, CSR, and user fee
standards. As noted earlier, the purpose of these proposals is to
codify in regulation HHS's authority to step in and enforce federal
requirements and protect federal funds when the applicable state
authority fails to do so. Further, we also note that we intend to focus
our enforcement efforts on egregious or repeated occurrences of QHP
issuer non-compliance with the applicable APTC, CSR, and user fee
standards evaluated through an audit of these programs.
Comment: Several commenters emphasized that HHS should work with
State Exchanges and SBE-FPs to enforce the applicable federal
requirements. One commenter requested that HHS monitor State Exchange
and SBE-FP remediation efforts to address issuer non-compliance before
imposing CMPs.
Response: HHS will work with State Exchanges and SBE-FPs to enforce
the applicable requirements, as set forth above. We intend for audits,
compliance reviews, and enforcement activities to be collaborative
processes with states, State Exchanges, and SBE-FPs, where possible.
For instance, HHS will consider the recommendations for how to leverage
existing audit activities that HHS requires State Exchanges to conduct
under Sec. 155.1200 to collaborate with State Exchanges on identifying
instances of issuer non-compliance or monitoring State Exchange or
issuer remediation activities. HHS will follow the process for
determining that a State Exchange or SBE-FP is failing to enforce or
failing to substantially enforce these requirements, consistent with
the framework set forth in Sec. Sec. 150.209 through 150.219. As
described above, this process follows a collaborative approach and
permits HHS to monitor State Exchange and SBE-FP remediation efforts as
the Exchange works to address issues identified by HHS. It also
provides ample opportunity for the State Exchange or SBE-FP to show
that it has corrected (or is working to correct) any failure to
substantially enforce before HHS makes a final determination about
whether a State Exchange or SBE-FP is failing to enforce one or more of
the applicable requirements in part 156, subpart E or 45 CFR 156.50. It
is only after HHS goes through the process and makes a determination
that the State Exchange or SBE-FP is substantially failing to enforce
these requirements, and the State Exchange or SBE-FP fails to address
the identified concerns, that HHS would have authority to begin the
process to impose a CMP on a QHP issuer in a State Exchange or SBE-FP
state pursuant to 45 CFR 156.805 for their non-compliance.\282\ As
detailed in the above illustrative example, we intend to work closely
with the applicable state authorities and monitor state remediation
efforts to address issuer non-compliance before HHS starts the process
to step in to enforce the applicable federal requirements or impose
CMPs.
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\282\ If a State Exchange or SBE-FP notifies HHS that it has not
enacted legislation to enforce or that it is not otherwise enforcing
the applicable federal requirement(s), HHS may step in to enforce
the requirement(s) in that state at that time. See 45 CFR
150.203(a).
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Comment: One commenter requested that we link the proposed audit
provisions for the APTC, CSR and user fee programs and HHS's authority
to recoup payments to the regulations codified in 45 CFR part 150 to
more directly link this recoupment authority to the PHS Act.
Response: Consistent with the authority in section 1321(c) of the
ACA, HHS proposed and is finalizing the proposals to establish and
clarify its authority to audit and conduct compliance reviews of all
QHP issuers who receive APTC or CSRs or pay user fees under Sec.
156.480(c) regardless of Exchange type. We are also finalizing
provisions that reference the process in 45 CFR 150.201, et seq., so
HHS can leverage the existing, known process in situations where HHS
has evidence or other information that the State Exchange or SBE-FP is
failing to substantially enforce the applicable requirements found at
45 CFR 156, subpart E for APTC and CSRs and 45 CFR 156.50 for user
fees. We believe this is an appropriate and adequate link of the audit
requirements in Sec. 156.480(c) to the regulations codified in 45 CFR
part 150, which implement section 2723(b) of the PHS Act.\283\ We
confirm that our current intention is to apply this new framework to
situations involving egregious or repeated occurrences of QHP issuer
non-compliance with the applicable APTC, CSR, and user fee standards
evaluated through the audits of these programs. However, consistent
with the statutory framework outlined in section 1321(c) of the ACA,
and as reflected in the amendments we are finalizing to Sec. Sec.
156.800 and 156.805, HHS may step in to enforce applicable federal
APTC, CSR, and user fee standards in situations where there is evidence
or information suggesting that the State Exchange or SBE-FP is failing
to do so.\284\ As detailed above, we believe it is appropriate and
necessary for HHS to recoup amounts that were not adequately
substantiated by the issuer during the course of an audit.\285\
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\283\ While the APTC, CSR, and user fee statutory provisions are
codified outside of the PHS Act, section 1321(c) of the ACA applies
the PHS Act enforcement framework to the enforcement of the federal
Exchange requirements.
\284\ Consistent with the statute, HHS may also leverage this
authority in situations where there is evidence or information
suggesting the State Exchange or SBE-FP is failing to substantially
enforce other federal Exchange requirements.
\285\ Issuers have separate record retention requirements that
must be met and the documents required to be maintained can be
utilized to substantiate payment. See Sec. Sec. 153.410(c),
153.620(b), 156.480(a), and 156.705.
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After consideration of the comments received on these proposals, we
are finalizing the proposed amendments to Sec. 156.805 to describe the
bases and process by which HHS may determine that a State Exchange or
SBE-FP is failing to substantially enforce the applicable federal APTC,
CSR, and user fee standards and subsequently impose CMPs on these State
Exchange or SBE-FP issuers as proposed.
[[Page 24253]]
9. Subpart J--Administrative Review of QHP Issuer Sanctions (Sec. Sec.
156.901, 156.927, 156.931, 156.947)
We proposed to change the title to subpart J, removing the
reference to ``in Federally-Facilitated Exchanges'' to make clear it
applies to QHP issuers participating in any Exchange type to align with
accompanying proposed changes outlined above to Sec. Sec. 156.800 and
156.805. We also proposed several procedural changes to provisions in
subpart J of part 156 related to administrative hearings consistent
with the amendments discussed in the preamble to part 150. These
proposed procedural changes are intended to align with the Departmental
Appeals Board's current practices for administrative hearings to appeal
CMPs. Specifically, we proposed changes that would remove requirements
to file submissions in triplicate and instead require electronic
filing. This change is reflected in the proposed amendments to the
definition of ``Filing date'' in Sec. 156.901, to the introductory
text in Sec. 156.927(a), and to the service of submission requirements
captured in paragraph (b). We also proposed to allow for the option of
video conferencing as a form of administrative hearing by amending the
definition of ``Hearing'' in Sec. 156.901 and to the requirements
outlined in Sec. 156.919(a) related to the forms for the hearing,
Sec. 156.941(e) related to prehearing conferences, and Sec.
156.947(a) related to the record of the hearing. Finally, we proposed
to update Sec. 156.947 to allow the ALJ to communicate the next steps
for a hearing in either the acknowledgement of a request for hearing or
on a later date. We sought comment on these proposals.
We received the same public comments on the proposed updates to
Subpart J--Administrative Review of QHP Issuer Sanctions (Sec. Sec.
156.901, 156.927, 156.931, 156.947) and the parallel proposed updates
to Part 150, Administrative Hearings, for the parallel amendments made
to reflect the Departmental Appeals Board's current practices for
administrative hearings to appeal CMPs. We summarized and responded to
these comments in the above preamble section on Part 150 Administrative
Hearings. We did not receive comments on the proposed change to the
title to subpart J, removing the reference to ``in Federally-
Facilitated Exchanges''. After consideration of the comments on the
proposed amendments to Sec. Sec. 156.901, 156.927, 156.931 and 156.947
and the title to subpart J, we are finalizing these amendments as
proposed.
10. Quality Rating System (Sec. 156.1120) and Enrollee Satisfaction
Survey System (Sec. 156.1125)
Section 1311(c)(3) of the ACA directs the Secretary of HHS to
develop a quality rating for each QHP offered through an Exchange,
based on quality and price. Section 1311(c)(4) of the ACA directs the
Secretary to establish an enrollee satisfaction survey that will assess
enrollee satisfaction with each QHP offered through the Exchanges with
more than 500 enrollees in the prior year.
Based on this authority, HHS finalized rules in May 2014 to
establish standards and requirements related to QHP issuer data
collection and public reporting of quality rating information in every
Exchange.\286\ To balance HHS's strategic goals of empowering consumers
through data, minimizing cost and burden on QHP issuers, and supporting
state flexibility, HHS developed a phased-in approach to establishing
quality standards for Exchanges and QHP issuers, collecting and
reporting quality measure data, and displaying quality rating
information across the Exchanges. Since 2015, we have collected
clinical quality measure data and enrollee experience survey measure
data and generated quality ratings to provide reliable, meaningful
information about QHP quality performance data across Exchanges. In
addition, since 2016, select states \287\ with FFEs and State Exchanges
have displayed QHP quality rating information as a tool for consumer
decision-making while shopping for health insurance coverage in an
Exchange. Beginning with the open enrollment period for plan year 2020,
we displayed the QHP quality rating information for all Exchanges that
used the HealthCare.gov platform, including the FFEs and SBE-FPs. State
Exchanges that operated their own eligibility and enrollment platform
were similarly required to display QHP quality ratings beginning with
the open enrollment period for plan year 2020, but had some flexibility
to customize the display of the QHP quality rating information.\288\
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\286\ See 79 FR 30240 at 30352. Also see 45 CFR 155.1400,
155.1405, 156.1120 and 156.1125.
\287\ Prior to the PY2020 nationwide display of quality rating
information, states that displayed QHP quality rating information
included California, Colorado, Connecticut, Maryland, Michigan,
Montana, New Hampshire, New York, Rhode Island, Virginia,
Washington, and Wisconsin.
\288\ ``CMS Bulletin on display of QRS star ratings and QHP
Enrollee Survey results for QHPs offered through Exchanges (often
called the Health Insurance Marketplace),'' August 15, 2019.
Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QualityRatingInformationBulletinforPlanYear2020.pdf.
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Through valuable feedback from the QRS and QHP Enrollee Survey Call
Letter process and continued engagement with health plan issuer
organizations, health care quality measurement experts, state
representatives, consumer advocates and other stakeholders, we
continued to learn about populations buying insurance coverage across
the Exchanges and about areas of improvement for these programs. We
also continued to assess potential refinements to the QRS rating
methodology and the QHP Enrollee Survey to prioritize strategies to
improve value for consumers and to reduce the burden of quality
reporting.
As part of the 2020 QRS and QHP Enrollee Survey Call Letter
process, we received many comments requesting that we remove levels of
the QRS hierarchy to help streamline and improve consumer understanding
of the quality rating information. While we did not propose amendments
to the QRS or to the QHP Enrollee Survey as part of the proposed rule,
we sought comment on the removal of one or more levels of the QRS
hierarchy, which is a key element of the QRS framework that establishes
how quality measures are organized for scoring, rating and reporting
purposes. We previously described the general overall framework for the
QRS, including details on the hierarchical structure of the measure set
and the elements of the QRS rating methodology.\289\ Currently, the QRS
measures are organized into composites, domains, and summary indicators
that serve as a foundation for the rating methodology and scores are
calculated at every level of the hierarchy using specific scoring and
standardization rules, as described in the annual QRS and QHP Enrollee
Survey Technical Guidance.\290\ We noted in the proposed rule that we
believe that a simplified QRS hierarchy would support alignment with
other CMS quality reporting programs and help the overall quality score
be more reflective of the performance of individual survey and clinical
quality measures within the QRS. For example, the Medicare Part C & D
Star Ratings framework consists of measures, domains, summary ratings
and an overall rating.\291\ In addition, we
[[Page 24254]]
noted that we believe a simplified hierarchy, in combination with
additional methodology modifications we considered (for example,
explicit weights at the measure level) will help stabilize ratings
across years.\292\ We sought comment specifically on which level or
levels of the QRS hierarchy should be removed (for example, the
composite level or the domain level).
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\289\ See, for example, 78 FR 69418.
\290\ ``The Quality Rating System and Qualified Health Plan
Enrollee Experience Survey: Technical Guidance for 2021,'' September
2020. Available at https://www.cms.gov/files/document/quality-rating-system-and-qualified-health-plan-enrollee-experience-survey-technical-guidance-2021.pdf.
\291\ ``Medicare 2019 Part C & D Star Rating Technical Notes,''
October 10, 2019. Available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Star-Ratings-Technical-Notes-Oct-10-2019.pdf.
\292\ CMS anticipates continuing to propose methodology
refinements to the QRS and QHP Enrollee Survey through the Call
Letter process.
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In addition, to further support transparency of QHP quality data
and to empower stakeholders including consumers, states, issuers and
researchers with valuable information related to enrollee experience
with QHPs, we proposed to make the full QHP Enrollee Survey results
publicly available in an annual PUF. Currently, we post on
HealthCare.gov some enrollee experience results in the form of a
quality rating for Member Experience and Plan Administration that make
up part of the overall rating for QHPs.\293\ The Member Experience
rating is based on a select number of survey measures from the QHP
Enrollee Survey. The Plan Administration rating is based on a select
number of survey measures and clinical quality measures. To promote
transparency of data to the public, we already post QRS PUFs every year
for QHP issuers operating in all Exchange types that were eligible to
receive quality ratings. As we stated in the Exchange and Insurance
Market Standards for 2015 and Beyond Final Rule, we have been
considering different ways to make QHP quality data, including QHP
Enrollee Survey results, publicly available and accessible to
researchers, consumer groups, states and other entities.\294\ Similar
to the QRS PUFs, we proposed to post a QHP Enrollee Survey PUF
annually, beginning with the 2021 QHP Enrollee Survey results and
during the 2022 open enrollment period, that would include the score
and proportion of responses (for example, the percentage of respondents
answering ``Never'' or ``Sometimes'') for every survey question and
composite as well as demographic information such as employment status,
race and ethnicity, and age at the reporting unit and national level to
facilitate data transparency.
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\293\ A rating for Medical Care is the other component of the
overall rating.
\294\ 79 FR at 30311.
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We solicited comment on this proposal to post a QHP Enrollee Survey
PUF annually and on potential changes to the QRS hierarchy.
The following is a summary of the comments we received and our
responses.
Comment: Many commenters supported the removal of levels of the QRS
hierarchy to align with other CMS quality reporting programs and to
increase the ability for the overall quality score to be more
reflective of the performance of individual quality measures in the
QRS. Several commenters specifically supported the removal of the
composite and domain levels of the QRS hierarchy. Some commenters
requested the timeframe of when modifications to the QRS hierarchy
would take effect.
Response: We agree that with removal of levels of the QRS
hierarchy, there will be closer alignment with other CMS quality
reporting programs such as Medicare Part C & D Star Ratings. We also
agree that by removing the composite level and domain level from the
QRS hierarchy, we will be simplifying the hierarchy and the
anticipated, improved understanding of the overall quality scores will
be more reflective of the individual measures' performance that
contributes to those scores. Thus, after consideration of the comments
received, we are finalizing the removal of the composite level and
domain level from the QRS hierarchy. We intend to clarify the timeframe
for these modifications to the QRS hierarchy in the QRS and QHP
Enrollee Survey Technical Guidance for 2022, which would affect the
2022 ratings year for Plan Year 2023.
Comment: One commenter urged CMS to route any changes related to
the QRS hierarchy through the QRS Technical Expert Panel (TEP), which
is comprised of subject matter experts who will be able to give
feedback on the proposed changes to the methodology and weigh proposed
changes against any other QRS methodology changes that are being
considered. Another commenter urged CMS to continue examining the QRS
hierarchy to understand impact to weight redistribution before
finalization of removal of a level of the QRS hierarchy (that is, with
either the composite or domain level removed) and to identify evidence
that the streamlined hierarchy is effective in mitigating data or
calculation concerns encountered in other rating systems.
Response: We appreciate the commenters' suggestions and requests
for clarification related to the removal of one or more levels of the
QRS hierarchy. We confirm that we discussed the potential removal of
levels of the QRS hierarchy with the QRS TEP in 2017 and based on
testing using previous years' data, CMS believes that the removal of
the composite and domain levels and the explicit weights at the summary
indicator will balance the weight of individual measures on the global
score. In addition, removal of both the composite and domain levels of
the QRS hierarchy will not result in issues with weight redistribution
because we intend to retain the explicit weights at the summary
indicator level to align with the amount of measures within each
summary indicator. CMS intends to retain the summary indicators to
remain in alignment with other CMS quality reporting programs (that is,
Medicare Part C & D Star Ratings) and intends to continue to assign a
weight of \2/3\ (66.67%) to the Clinical Quality Management summary
indicator, and a weight of \1/6\ (16.67%) to the Enrollee Experience
and Plan Efficiency, Affordability, & Management summary indicators.
This weighting structure reflects the approximate percentage of
measures in each summary indicator. CMS believes that the removal of
both the composite and domain levels of the QRS hierarchy will mitigate
stakeholders' main concern with data and calculations in the QRS (that
is, the implicit weighting). We also clarify that we continue to
explore the potential of introducing new methods of assessing
performance at the measure level and have proposals available in the
current Draft 2021 Call Letter.\295\
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\295\ ``Draft 2021 Call Letter for the Quality Rating System and
QHP Enrollee Experience Survey,'' February 2021. Available at
https://www.cms.gov/files/document/draft-2021-call-letter-qrs-qhp-enrollee-survey.pdf.
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Comment: A few commenters requested further clarifications and
considerations including urging CMS to grant additional flexibility to
states in the display of the star ratings and noted that technical
details around quality rating information display are provided to State
Exchanges too late for states to update system requirements.
Response: We clarify that per the 2021 Payment Notice final rule,
State Exchanges have increased flexibility and can make determinations
about display of quality rating information to best meet the needs of
their population. As part of the 2021 Payment Notice final rule, we
codified in Sec. Sec. 155.1400 and 155.1405 the option for State
Exchanges that operate their own eligibility and enrollment platforms
to customize the display of quality rating information provided by HHS
or to display HHS-provided quality rating information with certain
state-specific customizations for their QHPs to best
[[Page 24255]]
reflect local priorities or information.\296\ We also clarify that
refinements to the QRS hierarchy do not change the display requirements
for State Exchanges that operate their own eligibility and enrollment
platforms. State Exchanges that operate their own eligibility and
enrollment platforms continue to have the flexibility to make certain
state-specific customizations related to the display of quality ratings
or to maintain the display of the overall rating and three summary
indicator ratings in alignment with HealthCare.gov. We understand that
guidance posted by CMS related to the display of quality rating
information on HealthCare.gov may be communicated too late for states
to update their system requirements. Thus, CMS will continue to provide
flexibility and technical assistance to State Exchanges as necessary
and appropriate, and will continue to discuss timelines for
implementation with any State Exchanges that are unable to meet
applicable quality rating information display requirements.
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\296\ 85 FR 29214 through 29216.
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Comment: A majority of commenters strongly agreed with the proposal
to make QHP Enrollee Survey results publically available in an annual
PUF to increase transparency and consumer satisfaction and to assist
states in monitoring the quality of insurance coverage offered through
the Exchanges. One commenter asked for clarification related to the
reasons underlying CMS' proposal to make QHP Enrollee Survey results
publically available.
Response: We agree that a PUF that includes results from the full
QHP Enrollee Survey will improve transparency of enrollee experience
information across Exchanges. We stated in the Exchange and Insurance
Market Standards for 2015 and Beyond Final Rule that we have been
considering different ways to make QHP quality data, including QHP
Enrollee Survey results, publicly available and accessible to
researchers, consumer groups, states and other entities.\297\ We
believe that providing this QHP quality data aligns with other CMS
quality reporting programs, including Medicare Advantage and
Prescription Drug Plan (PDP) Consumer Assessment of Healthcare
Providers and Systems (CAHPS) and CAHPS for the Merit-based Incentive
Payment System (MIPS), that publically report survey scores and help
beneficiaries, issuers, researchers and others better understand the
experiences of the individuals and families that are enrolled in
different health plans and programs.
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\297\ 79 FR 30311.
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Comment: A few commenters who supported the proposal to make QHP
Enrollee Survey results publicly available urged CMS to require
additional information related to quality measure data submitted to an
Exchange by survey vendors and issuers. One commenter requested that
CMS permit states to collect a de-identified survey response file that
includes demographic information needed to appropriately case-mix
adjust the results to facilitate a better understanding of
opportunities for improvement. Another commenter urged CMS to require
stratification of at least some quality measures by race, ethnicity,
primary language, and disability to address highly prevalent conditions
in communities of color.
Response: We appreciate the requests for CMS to require that
additional quality measure information to be submitted to an Exchange
by survey vendors and issuers. CMS does permit HHS-approved survey
vendors to share de-identified person-level data sets of QHP Enrollee
Survey questions with States, but to protect enrollee confidentiality,
survey vendors are prohibited from sharing person-level demographic
data. CMS case-mix adjusts QHP Enrollee Survey response data using
variables including the following: General health rating, mental health
rating, chronic conditions/medications, age, education, survey
language, help with the survey, and survey mode. CMS intends to include
case-mix adjusted scores for QHP Enrollee Survey questions and
composites at the reporting unit level in the PUF. In general, CMS is
supportive of stratification of at least some quality measures by areas
such as race, ethnicity, primary language, disability, and potentially
other social determinants of health. We intend to include demographic
information such as age, education level, employment, race and
ethnicity in the QHP Enrollee Survey PUF to facilitate transparency of
this data at the reporting unit level. CMS is not requiring additional
quality measure data at this time because we understand that
stratification requires QHP issuers to have specific member-level data
and anticipates that the incorporation of stratification for quality
measures may take time. CMS is committed to advancing health equity and
addressing health and health care disparities. As part of this
objective, CMS is exploring the stratification of measures by
sociodemographic factors including race and ethnicity. CMS will follow
industry standards around the type of data needed to report stratified
measure rates.
Comment: A few commenters mentioned they do not support publishing
QHP Enrollee Survey results at this time because of a lack of
transparency of the information to be included in the PUF, explanatory
materials, data definitions and communication strategy that would allow
consumers to use this information appropriately in making decisions.
One commenter noted that survey results are already displayed through
star ratings and that additional results would not be meaningful
without sufficient explanation, including cut points.
Response: We clarify that CMS will provide details and materials
related to the QHP Enrollee Survey PUF in alignment with other Exchange
PUFs and other quality data PUFs, including a data dictionary, an
overview of the QHP Enrollee Survey, as well as the definitions of all
survey questions and composites. We agree that there are already some
survey results displayed on HealthCare.gov in the form of a quality
rating for Member Experience, which makes up part of the Overall Rating
for QHPs. The Member Experience rating is based on a select number of
survey measures from the QHP Enrollee Survey. However, after 4 years of
collecting survey measure data, we believe it is important to
facilitate transparency of QHP enrollee experience results from the
full survey. Similar to the QRS PUF, CMS intends to include responses
at the reporting unit level for all survey questions in the annual QHP
Enrollee Survey PUF, including those not included in the QRS. The QHP
Enrollee Survey PUF will provide results of scoring the QHP Enrollee
Survey questions and composites. CMS does not use cut points to
calculate the QHP Enrollee Survey scores. We agree that including cut
points may provide more meaning to the QRS results included in the QRS
PUF and will consider adding the cut points to the QRS PUFs in the
future.
Comment: One commenter noted that the QHP Enrollee Survey results
are proprietary and cannot be shared publicly.
Response: We disagree with the assertion that QHP Enrollee Survey
results are proprietary. In accordance with section 1311(c)(3) and
(c)(4) of the ACA and 45 CFR 155.1400 and 155.1405, all Exchanges have
the authority to publicly report QHP quality rating information,
including survey results, on their websites to help consumers compare
and shop for QHPs. QHP issuers are required to collect survey data and
the data is used both by
[[Page 24256]]
CMS and to inform issuers' internal quality improvement efforts.
Similar to the QRS PUF and other Exchange PUFs, CMS will publish the
QHP Enrollee Survey PUF on data.healthcare.gov.
Comment: One commenter expressed concerns regarding potential
negative impacts on the QHP Enrollee Survey results due to the COVID-19
pandemic, including significant membership fluctuations and membership
composition changes.
Response: We recognize the concern regarding negative impacts of
the COVID-19 pandemic on the QHP Enrollee Survey results. We note that
CMS proposed, in the Draft 2021 Call Letter, temporary QRS methodology
changes to mitigate the impact of COVID-19 on QRS ratings. We also
clarify that CMS will review all quality measure data that is submitted
for 2021 QRS ratings, including survey measure data, and make
determinations regarding display of quality rating information and
release of quality data PUFs after the scoring and rating process and
prior to the 2022 open enrollment period for the individual Exchange.
Comment: Some commenters noted general concerns about the QHP
Enrollee Survey, including burdensome survey length and appropriate
survey timing resulting in lower response rates and lower reliability
on certain questions. Before publicly reporting full survey results,
the commenter recommended that CMS consider removing questions that
have reliability below 0.70, remove questions outside of the health
plan's control, remove any survey questions with less than 100
responses in the denominator from reporting and remove the demographic
items from the survey that duplicate information submitted at
enrollment and rely on the 834 enrollment file instead.
Response: We understand the commenter's concerns and provide the
following clarifications about the QHP Enrollee Survey. CMS aims for
statistically high reliability (generally, 0.70 or above) for the
survey questions and composites. In some cases, there are topic areas
critical to inform consumer understanding and issuer quality
improvement that may not consistently meet high reliability thresholds
but remain important indicators of quality (for example, topics such as
enrollee experience with their provider and health care). Given the
importance of transparency around these topics, CMS anticipates
including all survey questions within the PUF. CMS also anticipates
monitoring reliability over time and will consider refinements to this
approach, if needed. CMS expects the PUF will include the number of
responses to each question and the number of completed surveys to
assist users with analyzing survey data. We also clarify that we
continue to assess the length and timing of the QHP Enrollee Survey. We
believe that currently, the QHP Enrollee Survey generally aligns with
the length and timing of other CAHPS surveys (for example, Medicare
Advantage PDP CAHPS survey, Medicare Advantage Only CAHPS) and
similarly, posting of an annual QHP Enrollee Survey PUF would align
with other quality reporting programs. In addition, we rely on QHP
issuers to populate the sample frame files used to field the QHP
Enrollee Survey. QHP issuers' access to demographic data collected in
the 834 enrollment file can vary based on the type of Exchange in which
the issuer operates (that is, State Exchanges or Federally-facilitated
Exchanges). Furthermore, CMS collects demographic data through the QHP
Enrollee Survey that may not be included in the 834 enrollment file.
After consideration of all public comments received, we are
finalizing the proposal to make the full QHP Enrollee Survey results
publicly available in an annual PUF, and the removal of the composite
level and domain level from the QRS hierarchy. We intend to clarify the
timeframe for the removal of the composite and domain levels of the QRS
hierarchy in the QRS and QHP Enrollee Survey Technical Guidance for
2022, which would affect the 2022 ratings year for Plan Year 2023.
11. Dispute of HHS Payment and Collections Reports (Sec. 156.1210)
In the 2014 Payment Notice, we established provisions related to
the confirmation and dispute of payment and collection reports. These
policies were finalized under the assumption that all issuers that
receive APTC would generally be able to provide these confirmations or
disputes automatically to HHS. However, HHS has found that many issuers
prefer to research payment errors and use enrollment reconciliation and
disputes to update their enrollment and payment data, and may be unable
to complete this research and provide confirmation or dispute of their
payment and collection reports within 15 days, the timeline established
by the 2014 Payment Notice.
In the 2021 Payment Notice, we amended Sec. 156.1210(a) to
lengthen the time to report payment inaccuracies from 15 days to 90
days to allow all issuers who receive APTC more time to research,
report, and correct inaccuracies through other channels. The longer
timeframe also allows for the processing of reconciliation updates,
which may resolve potential disputes. Additionally, at Sec. 156.1210,
we removed the requirement at paragraph (a) that issuers actively
confirm payment accuracy to HHS each month, as well as the language in
paragraph (b) regarding late filed inaccuracies. Instead, we amended
paragraph (b) to require an annual confirmation from issuers that the
amounts identified in the most recent payment and collections report
for the coverage year accurately reflect applicable payments owed by
the issuer to the federal government and the payments owed to the
issuer by the federal government, or that the issuer has disputed any
identified inaccuracies, after the end of each payment year, in a form
and manner specified by HHS.
Since finalizing these changes, HHS's experience has shown that
some data inaccuracies reasonably will be identified after the 90-day
reporting window. For example, issuers might receive notification of an
eligibility appeal adjudication after the 90-day submission window.
Additionally, some issuers are directed to update their enrollment and
payment data after an HHS data review or audit which may occur after
this 90-day window. In such instances it is in the interest of HHS,
states, issuers, and enrollees to accept the late reporting of data
inaccuracies. As such, we proposed to amend Sec. 156.1210 by
redesignating current Sec. 156.1210(b) to Sec. 156.1210(d) and adding
new Sec. 156.1210(b) to establish a process for issuers to report
enrollment or payment data changes in these situations.
We clarified that this proposed flexibility would not reduce an
issuer's obligation to make a good faith effort to identify and
promptly report discrepancies within the 90-day reporting window
established under Sec. 156.1210(a). We further explained that issuers
could demonstrate good faith by sending regular and accurate enrollment
reconciliation files and timely enrollment disputes throughout the
applicable enrollment calendar year, making timely and regular changes
to enrollment reconciliation and dispute files to correct past errors,
and by reaching out to HHS and responding timely to HHS outreach to
address any issues identified. With respect to inaccuracies identified
after the end of the applicable 90-day period, we proposed to work with
the issuer to resolve the inaccuracy if the issuer promptly notifies
HHS, in a form and
[[Page 24257]]
manner specified by HHS, no later than 15 days after identifying the
inaccuracy. The failure to identify the inaccuracy in a timely manner
in these situations must not have been due to the issuer's misconduct
or negligence. For example, issuers must regularly perform monthly
enrollment reconciliation as required under Sec. 156.265(f), and
should regularly review monthly enrollment reconciliation files so that
disputes are submitted in the 90-day reporting window. Disputes
submitted after the expiration of the reporting window as a result of
an issuer's failure to conduct these activities in a timely manner
would not satisfy the good faith standard. We proposed to codify these
criteria at new proposed Sec. 156.1210(b)(1) and (2).
Additionally, we proposed to add paragraph (c) to allow the
reporting of data inaccuracies after the 90-day period up to 3 years
following the end of the plan year to which the inaccuracy relates or
the date of the completion of the HHS audit process for such plan year,
whichever is later. We believe this deadline will provide issuers with
enough time to report any data inaccuracies discovered after the 90-day
submission window, while providing a reasonable end date by which HHS,
the State Exchange, issuer and other stakeholders can consider the
records for a particular benefit year closed.
We noted that, under section 1313(a)(6) of the ACA, ``payments made
by, through, or in connection with an Exchange are subject to the False
Claims Act (31 U.S.C. 3729, et seq.) if those payments include any
Federal funds.'' As such if an issuer has an obligation to pay back
APTC, the issuer could be liable under the False Claims Act for
knowingly and improperly avoiding the obligation to pay. We proposed to
codify in Sec. 156.1210(c)(3), that, if a payment error is discovered
after the 3-year or end of audit reporting deadline, the issuer is
obligated to notify HHS and the State Exchange, as applicable and repay
any overpayment. However, HHS will not pay the issuer after the 3-year
or end of audit reporting deadline for any underpayments discovered.
We further clarified that the requirements of Sec. 156.1210 apply
to all issuers who receive APTC, including issuers in State Exchanges.
We sought comment on all aspects of this proposal, including its impact
on the State Exchanges' ability to resolve disputes and report payment
adjustments to HHS in this timeframe. We are finalizing the amendments
to Sec. Sec. 156.1210(b) and (c), as proposed, to establish a
framework to permit issuers to report data inaccuracies after the 90-
day window up to 3 years following the end of the plan year to which
the inaccuracy relates or the date of the completion of the HHS audit
process for such plan year, whichever is later. As detailed further
below, we are also codifying the clarification we announced in the
proposed rule by finalizing conforming amendments to section Sec.
156.1210 to more clearly reflect that these requirements also apply to
issuers in state Exchanges. We received public comments on the proposed
updates to dispute of HHS payment and collections reports (Sec.
156.1210). The following is a summary of the comments we received and
our responses.
Comment: Several commenters supported the amendments to Sec.
156.1210 which provide issuers the flexibility to identify inaccuracies
after the 90-day reporting window within the 3-year or end of audit
deadline for reporting identified inaccuracies window. Commenters,
including those representing a State Exchange, appreciated HHS's
interest in removing unnecessary reporting requirements to reduce
administrative burden for issuers, and improving data accuracy, as well
as HHS's expressed intention to work cooperatively with issuers that
make a good faith effort to comply with these requirements. These
commenters also supported the proposed change to reporting timeframes
and appreciated the additional time to report payment inaccuracies,
while highlighting the importance of maintaining compliance standards.
Response: We agree with commenters that finalizing these provisions
will improve data accuracy and reduce administrative burden on issuers
by allowing more time to address inaccuracies in enrollment and payment
data, while maintaining compliance standards. We are committed to
supporting State Exchanges in resolving disputes and reporting payment
adjustments in an efficient and timely manner. We are finalizing the
proposed amendments to Sec. 156.1210, which will allow the
identification of inaccuracies in the monthly payment and collections
reports after the 90-day period if the late-identification was not due
to the issuer's misconduct or negligence. We are also finalizing the
provision that permits the reporting of these inaccuracies up to 3
years following the end of the plan year to which the inaccuracy
relates or the date of the completion of the HHS audit process for such
plan year after which point the issuer will not be paid for any
underpayments that may be discovered. However, if any payment errors
are discovered after the applicable deadline, the issuer remains
obligated to notify HHS and the State Exchange, or SBE-FP, as
applicable, and will be responsible for repaying any identified
overpayments. As detailed further below, we are also codifying the
clarification we announced in the proposed rule by finalizing
conforming amendments to section Sec. 156.1210 to more clearly reflect
that these requirements also apply to issuers in State Exchanges. We
clarify that these conforming amendments are not intended to change
existing requirements or processes for State Exchanges or their
respective issuers. If State Exchange issuers currently work with the
State Exchange to review the amounts identified in the payment and
collection reports and resolve inaccuracies, they should continue to do
so with any identified overpayments being repaid to HHS within the
applicable timeframe set forth in Sec. 156.1210. State Exchange
issuers who currently work with HHS to review these reports and resolve
any inaccuracies under Sec. 156.1210, along with issuers in FFE
states, should continue to work with HHS on these matters and should
also repay any identified overpayments to HHS within the applicable
timeframe(s) set forth in Sec. 156.1210.
Comment: One commenter suggested that HHS make payments to issuers
for underpayments discovered after the 3-year or end of audit deadline
proposed in Sec. 156.1210(c). Another commenter opposed the 3-year
deadline and noted it would prolong the dispute resolution process and
the time and work that goes into addressing disputes. This commenter
suggested that HHS shorten the timeframe for identifying inaccuracies
from 3 years following the end of a plan year to 1 year following the
end of a plan year.
Response: The 3-year following the end of the plan year to which
the inaccuracy relates or end of HHS audit process for such plan year
deadline is intended to provide issuers the flexibility to resolve data
inaccuracies encountered after the initial 90-day reporting window,
while still encouraging the timely review of enrollment and payment
data by providing a date certain for the deadline for identification of
such inaccuracies. Based on our experience operating the FFE, we
believe shortening this timeframe to one year following the end of a
plan year would be insufficient to support the resolution process both
for issuers, States, and HHS. For example, the one year timeframe would
not align with the submission window for an issuer in a State Exchange
time to
[[Page 24258]]
complete the retroactive State Based Marketplace Inbound (SBMI) payment
files, which are submitted up to 3 years after the relevant benefit
year. Further, our changes align with the 3-year timeframe established
by the IRS. More specifically, 26 U.S.C. 6501 and 26 U.S.C. 6511 state
that the amount of any tax imposed shall be assessed within 3 years
after the return was filed. For example, in both the FFE and State
Exchanges, a consumer may dispute or amend their insurance coverage by
submitting a 1095A update which allows them to amend their taxes up to
3 years. We further note that the 3-year following the end of the plan
year to which the inaccuracy relates or end of the HHS audit process
for such plan year deadline finalized in this rule does not reduce the
issuer's obligation to make a good faith effort to promptly report
discrepancies within the 90-day reporting window. In order to encourage
all issuers to complete review within the applicable timeframes, HHS
reaffirms that it will not make additional payments to issuers for
identified underpayments after 3 years following the end of the plan
year to which the inaccuracy relates or the date of the completion of
the HHS audit process for such plan year, whichever is later.
After consideration of the comments on these proposals, we are
finalizing amendments to Sec. 156.1210 which will allow issuers the
flexibility to identify data inaccuracies after the 90-day period and
report inaccuracies up to 3 years following the end of the plan year to
which the inaccuracy relates or the date of the completion of the HHS
audit process for such plan year. We are finalizing these amendments as
proposed and are codifying the clarification we announced in the
proposed rule by finalizing conforming amendments to more clearly
reflect that the requirements of Sec. 156.1210 apply to all issuers
who receive APTCs, including issuers in State Exchanges by adding a
reference to ``or the State Exchange (as applicable)'' to paragraph
(a), the introductory sentence to paragraph (b), paragraphs (b)(1) and
(b)(2), as well as paragraph (c)(3).
12. Payment and Collection Processes (Sec. 156.1215)
In the 2015 Payment Notice, HHS established a monthly payment and
collections cycle for insurance affordability programs, user fees, and
premium stabilization programs. As discussed elsewhere in this rule, we
proposed to eliminate state user fee collection flexibility that HHS
had previously offered to states as part of the 2017 Payment
Notice,\298\ and proposed conforming amendments to remove the reference
to ``State'' governments from paragraph (b). We sought comment on these
proposed amendments.
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\298\ See 81 FR at 12317-12318.
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We received public comments on the proposed updates to dispute of
HHS payment and collections processes (Sec. 156.1215). The following
is a summary of the comments we received and our responses.
Comment: The comments received on the proposed updates to payment
and collection processes (Sec. 156.1215) supported the elimination of
the state user fee collection flexibility that HHS had previously
offered to states in the 2017 Payment Notice, and the conforming
amendments to remove the reference to ``State'' governments from Sec.
156.1215(b).
Response: We believe that updating the payment and collection
processes in Sec. 156.1215 to align with the elimination of the
unutilized state user fee collection flexibility by striking the
reference to ``State'' will clarify the policy and is an appropriate
amendment to make at this time. We appreciate the supportive comments
on this proposal.
After consideration of comments received on this proposal, we are
finalizing the amendment to Sec. 156.1215(b) as proposed.
13. Administrative Appeals (Sec. 156.1220)
As detailed earlier in this preamble, we previously established a
three-level administrative appeals process for issuers to seek
reconsideration of amounts under certain ACA programs, including the
calculation of risk adjustment charges, payments and user fees. This
process also applies to issuer disputes of the findings of a second
validation audit (if applicable) as a result of HHS-RADV for the 2016
benefit year and beyond.\299\ As explained in the 2020 Payment Notice,
only those issuers who have insufficient pairwise agreement between the
initial validation audit and second validation audit will receive a
Second Validation Audit Findings Report and therefore have the right to
appeal the second validation audit findings. In this rule, we proposed
to amend Sec. 156.1220(a)(1)(vii) to add ``if applicable'' when
discussing an issuer's ability to appeal the findings of the second
validation audit to more clearly capture this limitation as part of the
regulation, consistent with the existing language at Sec.
153.630(d)(2) and the previously finalized policy. We proposed a
similar amendment in this rule to Sec. 153.630(d)(3).
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\299\ See 45 CFR 156.1220(a)(1)(vii).
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We also proposed amendments to Sec. 156.1220(a)(3) to clarify that
the 30-calendar day timeframe to file a request for reconsideration of
second validation audit findings (if applicable) or the risk score
error rate calculation would be 30 calendar days from the applicable
benefit year's Summary Report of Benefit Year Risk Adjustment Data
Validation Adjustments to Risk Adjustment Transfers. To capture this
clarification, we proposed to create a new proposed Sec.
156.1220(a)(3)(ii) to specify the timeframe for filing a request for
reconsideration for a risk adjustment payment or charge, including an
assessment of risk adjustment user fees. This new proposed regulatory
provision maintains the language that establishes a 30 calendar day
window for these appeals that begin on the date of notification under
Sec. 153.310(e). We also proposed to create a new proposed Sec.
156.1220(a)(3)(iii) to separately address the timeframe for filing a
request for reconsideration of second validation audit findings or the
risk score error rate calculation and to add the phrase ``if
applicable'' to more clearly capture the limitation on the ability to
appeal second validation audit findings. To accommodate these two new
proposed paragraphs, we also proposed to amend Sec. 156.1220 to
redesignate paragraphs (a)(3)(iii) through (vi) as (a)(3)(iv) through
(vii), respectively. We sought comment on these proposals.
The only comment received on the proposed updates to the
administrative appeals regulations (Sec. 156.1220) noted general
support of the proposed amendments and accompanying clarifications.
After consideration of comments received on these proposals, we are
finalizing the amendments to Sec. 156.1220 as proposed.
F. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
1. Definitions (Sec. 158.103)
We proposed to amend Sec. 158.103 to establish the definition of
prescription drug rebates and other price concessions that are deducted
from incurred claims for MLR reporting and rebate calculation purposes.
In the preamble to the proposed rule, we discussed that HHS
received numerous comments during the regulatory process of finalizing
amendments to Sec. 158.140(b)(1)(i) in the 2021 Payment Notice final
rule with respect to reporting prescription drug
[[Page 24259]]
rebates and other price concessions.\300\ The commenters requested HHS
to codify and align the definition of prescription drug rebates and
other price concessions that are reported by issuers for MLR purposes
with the definition in section 1150A of the Act, as added by the
ACA,\301\ which requires QHP issuers and PBMs to report certain
prescription drug benefit information to HHS. The reference to rebates,
discounts, and price concessions in section 1150A(b)(2) of the Act
excludes bona fide service fees paid to PBMs by drug manufacturers or
issuers. Under section 1150A of the Act, bona fide service fees are
fees negotiated by PBMs that include but are not limited to
``distribution service fees, inventory management fees, product
stocking allowances, and fees associated with administrative services
agreements and patient care programs (such as medication compliance
programs and patient education programs).'' Section 156.295,
implementing section 1150A of the Act, defines bona fide services fees
as ``fees paid by a manufacturer to an entity that represent fair
market value for a bona fide, itemized service actually performed on
behalf of the manufacturer that the manufacturer would otherwise
perform (or contract for) in the absence of the service arrangement,
and that are not passed on in whole or in part to a client or customer
of an entity, whether or not the entity takes title to the drug.''
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\300\ See 85 FR at 29240-29241.
\301\ The requirements of section 1150A with respect to QHP
issuers are codified at Sec. 156.295. In the proposed rule, we
proposed to amend that regulation and to codify the requirements
with respect to PBMs at a new 45 CFR part 184.
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In light of the comments that we previously received during the
process of amending Sec. 158.140(b)(1)(i), we proposed to further
amend the MLR rules to add the definition for prescription drug rebates
and other price concessions to Sec. 158.103 and to clarify that this
term excludes bona fide service fees, consistent with how such fees are
described in Sec. 156.295. We proposed that this provision become
applicable beginning with the 2022 MLR reporting year (MLR reports
filed in 2023), which aligns with the applicability date of the
amendment to Sec. 158.140(b)(1)(i) and should provide issuers with
adequate time to adjust contracts with entities providing pharmacy
benefit management services to provide transparency regarding
prescription drug rebates and other price concessions they receive from
drug manufacturers. We solicited comment on this proposal.
We received public comments on the proposed amendment of Sec.
158.103 to establish the definition of prescription drug rebates and
other price concessions that are deducted from incurred claims for MLR
reporting and rebate calculation purposes. The following is a summary
of the comments we received and our responses.
Comment: All of the commenters generally supported the proposal to
define prescription drug rebates and other price concessions that
issuers must deduct from incurred claims because they agreed it would
provide clarity, consistency, transparency, and accuracy for reporting
incurred claims in the MLR calculation. A few commenters expressed
concern that excluding bona fide service fees from the definition of
prescription drug rebates and other price concessions could facilitate
evasion and abuse, and incentivize greater use of service fee-
generating activities focused on impeding or denying care. These
commenters urged HHS to ensure that amounts that are treated as bona
fide service fees are in fact bona fide service fees and that this
category is not inappropriately exploited to obscure the true cost of
prescription drugs.
Response: We agree that including a definition of prescription drug
rebates and other price concessions will promote transparency and
higher-quality reporting of incurred claims. We also share commenters'
concerns that the regulated entities may restructure their contracts in
ways that could circumvent the rules regarding the exclusion of bona
fide service fees and emphasize that we will only permit as an
exclusion from prescription drug rebates and other price concessions
bona fide service fees that meet the definition at Sec. 158.103. We
intend to continue monitoring developments in the prescription benefit
markets in order to ensure that the MLR rules continue to appropriately
reflect the prevailing market practices.
Comment: Several commenters requested that HHS clarify that the
definition of prescription drug rebates and other price concessions at
Sec. 158.103 excludes prescription drug coupons and similar items that
benefit enrollees directly at the point of sale, since these items do
not reduce issuers' drug costs and may not be known to issuers.
Response: We agree with the commenters and clarify that it was
never our intent to include prescription drug coupons and similar items
that benefit enrollees directly at the point of sale in the definition
of prescription drug rebates and other price concessions at Sec.
158.103. Accordingly, we are modifying the proposed definition of
prescription drug rebates and other price concessions in this final
rule to clarify that this term excludes any remuneration, coupons, or
price concessions for which the full value is passed on to the
enrollee, such that no other entity receives any portion of the coupon
payment, remuneration, or price concession.
Comment: Several commenters recommended that HHS exclude from the
definition of prescription drug rebates and other price concessions at
Sec. 158.103 payments for services related to quality improvement
activities (QIA).
Response: We disagree with this recommendation. The purpose of the
requirement at Sec. 158.140(b)(1)(i)(B) that prescription drug rebates
and other price concessions must be subtracted from an issuer's
incurred claims for MLR purposes is to accurately capture issuers' true
expenditures on enrollees' prescription drugs. Separately, section
158.150 requires reporting of QIA expenditures. Excluding amounts
attributable to QIA from the definition of prescription drug rebates
and other prices concessions that must be subtracted from incurred
claims would improperly inflate incurred claims, preventing an accurate
accounting of prescription drug costs. Thus, any portion of
prescription drug rebates and other price concessions that represents
compensation for QIA services should be reported as QIA for MLR
purposes.
Comment: Several commenters recommended that HHS remove the term
``direct and indirect remuneration'' (DIR) from the definition of
prescription drug rebates and other price concessions at Sec. 158.103.
These commenters stated that this term originated within the Medicare
Part D program and would be confusing for issuers and PBMs.
Response: We note that in the preambles to both the 2021 Payment
Notice proposed rule and the 2021 Payment Notice final rule, we
explained that the prescription drug price concessions that must be
subtracted from an issuer's incurred claims are intended to capture
``any time an issuer or an entity that provides pharmacy benefit
management services to the issuer receives something of value related
to the provision of a covered prescription drug (for example,
manufacturer rebate, incentive payment, direct or indirect
remuneration, etc.).'' \302\ At that time, we did not receive any
comments expressing concern with inclusion of DIR in the term price
concessions. In addition, we are not persuaded that the DIR definitions
used in the Medicare Part D program are inapplicable or
[[Page 24260]]
inappropriate in the non-Medicare markets, as it includes the same
direct and indirect remuneration that is relevant in the commercial
markets, such as PBM-retained rebates, PBM rebate guarantee amounts,
PBM penalty payments, dispensing incentive payments, risk-sharing
amounts, and remuneration from pharmaceutical manufacturers in the form
of rebates, grants, reduced price administrative services, legal
settlement amounts, and prompt pay discounts from pharmacies that are
not included in the negotiated price. However, in response to comments
and in order to avoid any confusion between the Medicare and non-
Medicare markets, we are making a technical edit to remove the
reference to DIR from the definition of prescription drug rebates and
other price concessions at Sec. 158.103. Nonetheless, we note that in
the definition of prescription drug rebates and price concessions at
Sec. 158.103, we continue to intend to require issuers to treat both
direct and indirect items of value related to the provision of a
covered prescription drug, including compensation collected by an
issuer or PBM after the point of sale, as prescription drug rebates and
other price concessions that must be subtracted from an issuer's
incurred claims. Further, HHS intends to continue to review issues
surrounding the MLR definition and treatment of prescription drug
rebates and other price concessions, and as more information and data
become available, HHS may propose revisions in the future as may be
necessary or appropriate to ensure that consumers receive value for
their premium dollars pursuant to section 2718 of the PHS Act.
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\302\ 85 FR 7139 and 85 FR 29240.
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Comment: Several commenters recommended that HHS remove the term
``receivable'' from the definition of prescription drug rebates and
other price concessions at Sec. 158.103.
Response: In response to these comments and to preserve consistency
with the language used throughout Sec. 158.140, we are making a
technical edit to remove the term ``receivable'' from the definition of
prescription drug rebates and other price concessions at Sec. 158.103.
However, we note that, similar to other components of incurred claims,
prescription drug rebates and other price concessions attributable to
enrollees' drug utilization during the MLR reporting year are not
always settled and received by the time issuers submit MLR reports to
the Secretary. Consequently, while Sec. 158.140 commonly refers to
``payments'' and ``receipts'' as well as amounts ``paid'' and
``received,'' the MLR Annual Reporting Form Filing Instructions provide
more detailed guidance specifying where these terms include amounts
that are payable or receivable. Currently, for MLR purposes, issuers
report the prescription drug rebate amounts they expect to receive with
respect to the reporting year, and QHP issuers and PBMs similarly
report such expected amounts for purposes of the reporting required
under section 1150A of the Act. Therefore, we intend to clarify in the
MLR Annual Reporting Form Filing Instructions that the prescription
drug rebates and other price concessions that issuers must subtract
from incurred claims (which for the 2022 and later MLR reporting years
will include amounts received and retained by PBMs) include the
receivable amounts.
After consideration of all the comments received and for the
reasons stated in our responses, we are finalizing the definition of
prescription drug rebates and price concessions at Sec. 158.103 as
proposed, with a modification to clarify that the definition excludes
any remuneration, coupons, or price concessions for which the full
value is passed on to the enrollee, and technical edits to replace the
phrase ``direct and indirect remuneration'' with ``remuneration,'' and
remove the term ``receivable.''
2. Premium Revenue (Sec. 158.130)
We proposed to clarify the MLR premium reporting requirements under
Sec. 158.130 for issuers that choose to offer temporary premium
credits during a public health emergency (PHE) declared by the
Secretary of HHS (declared PHE) in the 2021 benefit year and beyond,
when such credits are permitted by HHS. In the August 4, 2020 guidance,
Temporary Policy on 2020 Premium Credits Associated with the COVID-19
PHE, CMS adopted a temporary policy of relaxed enforcement to allow
issuers in the individual and small group markets the flexibility, when
consistent with state law, to temporarily offer premium credits for
2020 coverage to support continuity of coverage for individuals,
families and small employers who may struggle to pay premiums because
of illness or loss of incomes or revenue resulting from the COVID-19
PHE.\303\ On September 2, 2020, HHS issued an interim final rule on
COVID-19 wherein we set forth MLR data reporting and rebate
requirements for issuers offering temporary premium credits for 2020
coverage.\304\ For the 2021 MLR reporting year \305\ and beyond, we
proposed to adopt these MLR data reporting and rebate requirements for
all health insurance issuers in the individual and small group markets
\306\ who elect to offer temporary premium credits during a declared
PHE in situations in which HHS issues guidance announcing its adoption
of a similar temporary policy of relaxed enforcement to allow such
issuers to offer temporary premium credits during the declared
PHE.\307\
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\303\ ``Temporary Policy on 2020 Premium Credits Associated with
the COVID-19 Public Health Emergency,'' August 4, 2020. Available at
https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
\304\ 85 FR 54820 (Sept. 2, 2020).
\305\ The MLR reporting year means a calendar year during which
group or individual health insurance coverage is provided by an
issuer. See 45 CFR 158.103. The 2021 MLR reporting year refers to
the MLR reports that issuers must submit for the 2021 benefit year
by July 31, 2022. See 45 CFR 158.110(b).
\306\ While this final rule, the interim final rule on COVID-19,
and the August 4, 2020 guidance focus on the individual and small
group markets, to remove the barriers in support of issuers offering
these premium credits to enrollees impacted by a PHE declared by the
Secretary of HHS, we note that issuers in the large group market may
also, when consistent with state law, offer temporary premium
credits and should similarly report the lower, adjusted amount that
accounts for the premium credits for MLR purposes.
\307\ The Secretary of HHS may, under section 319 of the PHS
Act, determine that: (a) A disease or disorder presents a public
health emergency; or (b) that a public health emergency, including
significant outbreaks of infectious disease or bioterrorist attacks,
otherwise exists.
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We proposed that for purposes of Sec. 158.130, issuers must
account for temporary premium credits provided to enrollees during a
declared PHE as reductions in earned premium for the applicable MLR
reporting years, consistent with any technical guidance set forth in
the applicable year's MLR Annual Reporting Form Instructions,\308\ when
such credits are permitted by HHS. Specifically, as clarified in the
interim final rule on COVID-19, we proposed that the amount of
temporary premium credits \309\ will constitute neither collected
premium nor due and unpaid premium described in the MLR Annual
Reporting Form Instructions for purposes of reporting written premium
(which is a component of earned premium). Consequently, issuers that
offer temporary premium credits during a declared PHE will report as
earned premium for MLR and rebate
[[Page 24261]]
calculation purposes the actual, reduced premium paid when such credits
are permitted by HHS.
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\308\ Available at https://www.cms.gov/cciio/Resources/Forms-Reports-and-OtherResources/index#Medical_Loss_Ratio.
\309\ MLR rebates provided in the form of premium credits are
different than the temporary premium credits such as those outlined
in the August 4, 2020 guidance issued by CMS. When MLR rebates are
provided in the form of premium credits, issuers must continue to
report the full amount of earned premium and may not reduce it by
the amount of MLR rebates provided in form of premium credits, as
required by Sec. 158.130(b)(3).
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We solicited comment on this proposal.
We received public comments on the proposal to require issuers for
purposes of Sec. 158.130 to account for temporary premium credits
provided to enrollees during a declared PHE as reductions in earned
premium for the applicable MLR reporting years, consistent with any
technical guidance set forth in the applicable year's MLR Annual
Reporting Form Instructions, when such credits are permitted by HHS.
The following is a summary of the comments we received and our
responses.
Comment: Several commenters supported the proposal to adopt the MLR
data reporting and rebate requirements for issuers who elect to offer
temporary premium credits during a declared PHE in future MLR reporting
years. Specifically, these commenters noted that the proposal ensures
accuracy and consistency in the MLR reporting and rebate calculation
process.
Response: We agree that this proposal provides accuracy and
consistency in MLR reporting and rebate calculations and appreciate the
comments.
Comment: A few commenters appeared to assume that this proposal
sought to permanently codify CMS' temporary policy of relaxed
enforcement that allowed issuers in the individual and small group
markets the flexibility, when consistent with state law, to temporarily
offer premium credits for 2020 coverage to support continuity of
coverage for individuals, families and small employers who may struggle
to pay premiums because of illness or loss of incomes or revenue
resulting from the COVID-19 PHE and to extend this policy of relaxed
enforcement to future years. Some commenters cautioned HHS to ensure
that any such premium credits be aligned with state regulations and
legislation or be subject to state regulatory approval.
Response: We note that this proposal did not seek to extend CMS'
temporary policy of relaxed enforcement or expand issuers' ability to
offer temporary premium credits in future years. Rather, we proposed
that if HHS were to allow issuers to offer temporary premium credits
during a declared PHE in future years, then issuers would account for
such temporary premium credits as reductions in earned premium for the
applicable MLR reporting years. We continue to be cognizant that state
regulators may have additional considerations with respect to any
temporary premium credits provided by issuers, and note that both the
interim final rule on COVID-19 and the August 4, 2020 guidance required
issuers to receive the applicable insurance regulator's permission in
advance of providing temporary premium credits for 2020 coverage.
After consideration of all of the comments received and for the
reasons stated in our responses, we are finalizing as proposed the
clarification that issuers must account for temporary premium credits
provided to enrollees during a declared PHE as reductions in earned
premium for the applicable MLR reporting years, when such credits are
permitted by HHS.
3. Formula for Calculating an Issuer's Medical Loss Ratio (Sec.
158.221)
As noted in section IV of the preamble, on March 4, 2021, the
United States District Court for the District of Maryland decided City
of Columbus, et al. v. Cochran, No. 18-2364, 2021 WL 825973 (D. Md.
Mar. 4, 2021), vacating 45 CFR 158.221(b)(8), which provided that
beginning with the 2017 MLR reporting year, an issuer had the option of
reporting an amount equal to 0.8 percent of earned premium in the
relevant State and market in lieu of reporting the issuer's actual
expenditures for activities that improve health care quality, as
defined in Sec. Sec. 158.150 and 158.151. Pursuant to this provision,
issuers who chose this method of reporting were required to apply it
for a minimum of 3 consecutive MLR reporting years and for all of their
individual, small group, and large group markets; and all affiliated
issuers were required to choose the same reporting method. As a result
of the Court's decision, we are finalizing the deletion of Sec.
158.221(b)(8).\310\
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\310\ Consistent with the removal of Sec. 158.221(b)(8),
existing paragraph (b)(9) is redesignated as paragraph (b)(8).
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With the deletion of Sec. 158.221(b)(8), our regulations will no
longer provide issuers the option of reporting an amount equal to 0.8
percent of earned premium in the relevant State and market in lieu of
reporting the issuers' actual expenditures for activities that improve
health care quality. As discussed in section IV of the preamble and
consistent with the court's decision, we are reverting to requiring
issuers to itemize QIA expenditures, on a prospective basis, beginning
with the 2020 MLR reporting year (MLR reports due by July 31, 2021).
However, we are not requiring issuers to incur the burden or expense of
revising MLR Annual Reporting Forms from prior years or otherwise
updating QIA expenditure amounts reported for prior years. In addition,
because MLR calculations are based on a three-year average,\311\ there
will be a transition period during which these averages will continue
to reflect the standardized QIA expenditure amounts for those issuers
that reported such amounts in the 2017-2019 MLR reporting years.\312\
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\311\ See 42 U.S.C. 300gg-18(b)(1)(B)(ii) and 45 CFR 158.220(b).
\312\ For example, calculations for the 2020 MLR Reporting Year
are based on 2018, 2019 and 2020 data.
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4. Rebating Premium if the Applicable Medical Loss Ratio Standard Is
Not Met (Sec. 158.240)
In order to allow enrollees to benefit from the ability to receive
estimated rebates earlier and to provide MLR reporting flexibilities to
issuers that may owe rebates, we proposed to amend Sec. 158.240 by
adding paragraph (g) to explicitly allow issuers to prepay a portion or
all of their estimated rebates to enrollees for any MLR reporting year.
We also proposed to require that issuers that choose to prepay a
portion or all of their estimated rebates do so for all eligible
enrollees in a given state and market in a non-discriminatory manner.
In the preamble to the proposed rule, we noted that an issuer that
prepays a portion or all of its estimated rebate and subsequently
determines that such prepayment is less than the total rebate owed to
an enrollee would have to incur the costs of disbursing rebates twice:
First to disburse the prepaid rebate amount, and again to disburse the
remaining rebate amount by the deadlines set forth in Sec. Sec.
158.240(e) and 158.241(a)(2). Therefore, in order to reduce the
regulatory burden on issuers and incentivize issuers to deliver rebates
to enrollees sooner, we proposed to add to the new Sec. 158.240(g) a
safe harbor under which an issuer that prepays at least 95 percent of
the total rebate owed to enrollees in a given state and market for a
given MLR reporting year by the MLR rebate payment deadlines set forth
in Sec. Sec. 158.240(e) and 158.241(a)(2) may, without penalty or late
payment interest under Sec. 158.240(f), defer the payment of any
remaining rebate owed to enrollees in that state and market until the
MLR rebate payment deadlines set forth in Sec. Sec. 158.240(e) and
158.241(a)(2) for the following MLR reporting year. This would enable
such an issuer to maintain a single rebate disbursement cycle per year,
while ensuring that enrollees continue to receive most of the rebate
within the regular timeframe. To further ensure that enrollees do not
regularly receive reduced rebates as a result of
[[Page 24262]]
prepayments, we also proposed that under this safe harbor, the rebate
amount remaining after prepayment would not be treated as de minimis,
regardless of how small the remaining amount is. That is, the de
minimis provisions in Sec. 158.243 would continue to apply only if the
total rebate (the sum of the prepaid amount and any amount remaining
after prepayment) owed to an enrollee for a given MLR reporting year is
below the applicable threshold.
We noted that Sec. 158.250 requires issuers to provide a notice of
rebates at the time any rebate is provided, which includes both rebate
prepayments and payments of rebates remaining after prepayment. We also
noted that we intend to modify the ICRs approved under OMB Control
Number 0938-1164 to add modified standard notices that can be used by
issuers that elect to prepay rebates under the proposed new Sec.
158.240(g). In addition, we noted that we intend to revise the MLR
Annual Reporting Form Instructions to clarify that an issuer that
prepays a portion or all of its estimated rebate and subsequently
determines that the amount of such prepayment is more than the total
rebate owed to an enrollee for that MLR reporting year and that does
not recoup the overpayment from the enrollee, may include the
overpayment in its rebate payments reported for purposes of calculating
the optional limit on the payable rebates under Sec. 158.240(d). We
also noted that we intend to revise the MLR Annual Reporting Form
Instructions to clarify how issuers that prepay estimated rebates must
report such prepayments.
We proposed that the amendment to create new Sec. 158.240(g) would
be applicable beginning with the 2020 MLR reporting year (MLR reports
filed in 2021). We solicited comment on this proposal, including the
proposed applicability date.
We received public comments on the proposed amendments to Sec.
158.240. The following is a summary of the comments we received and our
responses.
Comment: Most commenters supported the proposal, stating that it
will benefit consumers, provide flexibility and relief for enrollees in
future crises, and help consumers maintain comprehensive health
coverage. Some commenters recommended that HHS clarify that rebate
prepayment is only permitted if consistent with state law and provided
statewide in a nondiscriminatory manner; one commenter requested that
rebate prepayment be subject to state regulatory approval and only with
the 95 percent safe harbor guardrail. Several commenters opposed the
proposal, expressing concern with the operational and administrative
burden for State Exchanges and group health plan rebate recipients,
consumers favoring issuers that provide prepayments, and the deferred
rebates being less likely to reach consumers.
Response: We appreciate the comments in support of this proposal
and generally believe that any potential disadvantages of rebate
prepayment are outweighed by the benefit of consumers receiving rebates
earlier in the year. While we recognize that issuers' ability to reach
the original enrollees to provide them with any deferred rebates may
diminish as time passes, we believe that the potential harm to
consumers that are unable to receive the residual amount remaining
after rebate prepayment is mitigated by the 95 percent safe harbor
threshold and outweighed by the benefits associated with enrollees'
ability to receive rebates earlier than September 30, when they are
generally disbursed. We also note that payment of remaining rebate
amounts after prepayment may only be deferred until the MLR rebate
payment deadlines set forth in Sec. Sec. 158.240(e) and 158.241(a)(2)
for the following MLR reporting year. We further believe that issuers
do not gain a significant advantage by prepaying rebates other than
delivering a benefit to their enrollees, and we expect that issuers
will consider whether in the group markets that benefit exceeds any
complexities that it may create for group policyholders or any
administrative burden or operational challenges for the issuer, their
enrollees, or the Exchanges. Because a consumer is unlikely to know
whether an issuer intends to prepay MLR rebates in any given year prior
to purchasing a policy, and since an issuer that pre-paid rebates in a
previous year may decide not to pre-pay them in a future year, we do
not believe that consumers will be more likely to purchase a policy or
enroll in health insurance coverage from any given issuer based on the
issuer's prepayment of MLR rebates. And if consumers are able to take
rebate prepayment into account when selecting an issuer, we do not see
why they should be prevented from doing so and selecting an issuer that
they believe provides a valuable service. We acknowledge the
commenters' concerns regarding the potential interaction of rebate
prepayment and state rules or State Exchange operations, and are
modifying the proposal to clarify that issuers that choose to prepay a
portion or all of their estimated rebates must do so to the extent
consistent with state law or other applicable state authority. This
would include receiving state approval, if required under state law.
Further, we note that the regulatory text does provide that any issuer
that chooses to prepay a portion or all of their estimated rebates must
provide the prepayment to all of the enrollees in that state and market
in a non-discriminatory manner.
Comment: One commenter requested that the safe harbor threshold
either be lowered to 85 percent or be based on the estimated MLR
falling within 0.5 percent of actual MLR, to make the safe harbor more
attainable for issuers that owe small rebate amounts and consequently
may estimate rebates more accurately in dollar terms.
Response: We have considered this option but concluded that 95
percent is an appropriate safe harbor threshold. Reducing the threshold
would expand the safe harbor for all issuers, rather than only issuers
that owe relatively small rebates per enrollee, which would result in
overall larger rebate amounts being eligible to be deferred for a year.
Further, we trust that issuers will evaluate the relative value of
prepaying very small per-enrollee rebate amounts early versus the
associated administrative costs and the deferral of a fraction of those
small per-enrollee rebates.
Comment: One commenter suggested that enrollees should have the
option to choose whether an issuer that chooses to prepay a portion or
all of their estimated rebates must pay any remaining rebate amounts in
full during the current year or may defer the payment of any remaining
rebate amounts until the following year under the proposed new Sec.
158.240(g) safe harbor.
Response: We appreciate the commenter's suggestion, but believe
that the burden of collecting and implementing each enrollee's election
with respect to rebates remaining after prepayment would be a
significant disincentive for issuers to offer rebate prepayment, and as
stated above, we generally believe that any potential disadvantages of
rebate prepayment are outweighed by the benefit of consumers receiving
rebates earlier in the year.
After consideration of all the comments received and for the
reasons stated in our responses, we are finalizing the amendments to
Sec. 158.240 as proposed, with an additional clarification that
issuers that choose to prepay a portion or all of their estimated
rebates must do so to the extent consistent with state law or other
applicable state authority.
[[Page 24263]]
5. Form of Rebate (Sec. 158.241)
We proposed to amend Sec. 158.241(a)(2) to allow issuers to
provide rebates in the form of a premium credit prior to the date that
the rules previously provided.
As discussed in the proposed rule, under Sec. 158.240(e), issuers
that choose to provide a rebate via a lump-sum check or lump-sum
reimbursement to the account used to pay the premium must issue the
rebate no later than September 30 following the end of the MLR
reporting year. In contrast, Sec. 158.241(a)(2) previously provided
that issuers that elect to provide rebates in the form of a premium
credit must apply the rebate to the first month's premium that is due
on or after September 30 following the MLR reporting year, and that
when the rebate is provided in the form of a premium credit and the
total amount of the rebate owed exceeds the premium due in October, any
excess rebate amount must be applied to succeeding premium payments
until the full amount of the rebate has been credited.
Given the proposed addition of Sec. 158.240(g) discussed in the
prior section, the fact that an issuer may wish to provide rebates in
the form of a premium credit earlier than October, and the desire to
reduce the regulatory burden and enable enrollees to receive the
benefit of rebates sooner, we proposed to amend Sec. 158.241(a)(2) to
allow issuers to provide rebates in the form of a premium credit prior
to September 30. Specifically, we proposed to amend Sec. 158.241(a)(2)
to specify that when provided in the form of premium credits, rebates
must be applied to premium that is due no later than October 30
following the MLR reporting year. We proposed that this amendment would
be applicable beginning with the 2020 MLR reporting year (rebates due
in 2021). We solicited comment on this proposal, including on the
proposed applicability date.
We received public comments on the proposal to amend Sec.
158.241(a)(2) to allow issuers to provide rebates in the form of a
premium credit prior to the date that the rules previously provided.
The following is a summary of the comments we received and our
responses.
Comment: All of the commenters supported the proposal to allow
issuers to provide rebates in the form of a premium credit before
(rather than only after) September 30 because it would allow consumers
to receive the benefit of rebates sooner. One commenter recommended
making the amendment effective beginning with the 2021 MLR reporting
year in order to enable issuers to continue relying on the related
guidance issued by HHS in 2020.
Response: We agree with the commenters that this amendment will
benefit consumers. While we do not believe that the proposed
applicability date overlaps with previous guidance regarding the timing
of rebates provided in the form of premium credits, as that guidance
applied to the 2019 MLR reporting year (rebates paid in 2020),\313\ we
agree that there is a potential for confusion, and therefore we are
adding a clarification that this amendment will be applicable beginning
with rebates due for the 2020 MLR reporting year.
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\313\ ``Temporary Period of Relaxed Enforcement for Submitting
the 2019 MLR Annual Reporting Form and Issuing MLR Rebates in
Response to the Coronavirus Disease 2019 (COVID-19) Public Health
Emergency,'' June 12, 2020. Available at https://www.cms.gov/files/document/Issuing-2019-MLR-Rebates-in-Response-to-COVID-19.pdf.
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After consideration of all the comments received and for the
reasons stated in our responses, we are finalizing the amendment to
Sec. 158.241 as proposed, with a clarification that the amendment will
be applicable beginning with rebates due for the 2020 MLR reporting
year.
G. Part 184--Pharmacy Benefit Manager Standards Under the Affordable
Care Act
1. Prescription Drug Distribution and Cost Reporting by Pharmacy
Benefit Managers (Sec. Sec. 184.10 and 184.50)
PBMs are third-party administrators that manage the prescription
drug benefit for a contracted entity.\314\ This administration
typically involves processing claims, maintaining drug formularies,
contracting with pharmacies for reimbursement for drugs dispensed, and
negotiating prices with drug manufacturers.\315\
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\314\ PBMs contract with a variety of health plans, including,
but not limited to, individual and small group health plans, large
group and self-insured plans, and Medicare Part D drug plans. In
this section, we only reference PBMs that contract with a health
insurance company to administer the prescription drug benefit for
QHPs.
\315\ ``Pharmacy Benefit Managers,'' Health Affairs Health
Policy Brief, September 14, 2017.
Available at https://www.healthaffairs.org/do/10.1377/hpb20171409.000178/full/.
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The role of PBMs in the prescription drug landscape, including any
impact on the rising cost of prescription drugs, is not well
understood.\316\ For example, PBMs generate revenue, in part, by
retaining the difference between the amount paid by the health plan for
prescription drugs and the amount the PBM reimburses pharmacies, a
practice commonly referred to as ``spread pricing.'' While estimates
report the increasing prevalence of spread pricing in private health
insurance plans,\317\ detailed data on the practice has generally not
been collected by plans or by any state or federal regulatory body.
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\316\ Elizabeth Seeley and Aaron S. Kesselheim. ``Pharmacy
Benefit Managers: Practices, Controversies, and What Lies Ahead,''
Commonwealth Fund, March 2019. Available at https://doi.org/10.26099/n60j-0886.
\317\ See ``The Prescription Drug Landscape, Explored.''
Available at https://www.pewtrusts.org/-/media/assets/2019/03/the_prescription_drug_landscape-explored.pdf.
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We proposed to add part 184 to 45 CFR subchapter E to codify in
regulation the statutory requirement that PBMs under contract with QHP
issuers report the data described at section 1150A(b) of the Act to the
Secretary and to each QHP for which the PBM administers the
prescription drug benefit.
At proposed Sec. 184.10(a)(1), we explained that new part 184 is
based on section 1150A of the Act. At proposed Sec. 184.10(b), we
proposed that the scope of new part 184 establishes standards for PBMs
that administer prescription drug benefits for health insurance issuers
which offer QHPs with respect to the offering of such plans. We also
proposed definitions for part 184 at new Sec. 184.20. Except for the
definition of pharmacy benefit manager, these proposed definitions
would codify terms already in use in parts 144 and 155 of subchapter B
of subtitle A of title 45 of the Code of Federal Regulations.
As part of the ACA, Congress passed section 6005, which added
section 1150A to the Act, requiring a PBM under a contract with a QHP
offered through an Exchange established by a state under section 1311
of the ACA \318\ to provide certain prescription drug information to
the QHP and to Secretary at such times, and in such form and manner, as
the Secretary shall specify. Section 1150A(b) of the Act addresses the
information that a QHP issuer and their PBM must report. Section
1150A(c) of the Act requires the Secretary to keep the information
reported confidential and specifies that the information may not be
disclosed by the Secretary or by a plan receiving the information,
except that the Secretary may disclose the information in a form which
does not disclose the identity of a specific PBM, plan, or prices
charged for drugs for certain purposes.\319\
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\318\ This includes an FFE, as a Federal Exchange may be
considered an Exchange established under section 1311 of the ACA.
King v. Burwell, 576 U.S. 988 (2015).
\319\ As noted earlier in this preamble, the purposes are: As
the Secretary determines to be necessary to carry out Section 1150A
or part D of title XVIII; to permit the Comptroller General to
review the information provided; to permit the Director of the
Congressional Budget Office to review the information provided; and,
to States to carry out section 1311 of the ACA.
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[[Page 24264]]
In the 2012 Exchange Final Rule, we codified the requirements of
section 1150A of the Act, as it applies to QHPs, at Sec. 156.295.\320\
On January 1, 2020 \321\ and on September 11, 2020,\322\ we published
Federal Register notices and solicited public comment on collection of
information requirements detailing the proposed collection envisioned
by section 1150A of the Act, as referenced earlier. As noted earlier in
this preamble, we proposed to revise Sec. 156.295 to state that where
a QHP issuer does not contract with a PBM to administer the
prescription drug benefit for QHPs, the QHP issuer will report the data
required by section 1150A of the Act to HHS.
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\320\ Section 1150A(a)(1) also authorizes the collection of data
from PBMs that manage prescription drug coverage under contract with
a Prescription Drug Plan sponsor of a prescription drug plan or a
Medicare Advantage organization offering a Medicare Advantage
prescription drug plan.
\321\ 85 FR 4993 through 4994.
\322\ 85 FR 56227 through 56229.
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We proposed to add Sec. 184.50(a) to state that where a PBM
contracts with an issuer of QHPs to administer the prescription drug
benefit for their QHPs, the PBM is required to report the data required
by section 1150A(b) of the Act to the QHP and to the Secretary, at such
times, and in such form and manner, as the Secretary shall specify.
While we acknowledge that this section applies to both the QHP issuer
and their PBMs to report this data, we proposed to implement section
1150A to require PBMs to report this data directly to the Secretary,
and only to require the QHP issuer to report the data only when the QHP
issuer does not contract with a PBM to administer the prescription drug
benefit for their QHPs, as further discussed in the preamble to Sec.
156.295 in this final rule.
We proposed to add Sec. 184.50(a)(1) through (3) to require these
PBMs to report the data described at section 1150A(b) of the Act to the
Secretary. The data proposed to be collected, as required by section
1150A, are: The percentage of all prescriptions that were provided
through retail pharmacies compared to mail order pharmacies, and the
percentage of prescriptions for which a generic drug was available and
dispensed (generic dispensing rate), that is paid by the health
benefits plan or PBM under the contract; \323\ the aggregate amount,
and the type of rebates, discounts, or price concessions (excluding
bona fide service fees, which include but are not limited to
distribution service fees, inventory management fees, product stocking
allowances, and fees associated with administrative services agreements
and patient care programs (such as medication compliance programs and
patient education programs \324\) that the PBM negotiates that are
attributable to patient utilization under the plan, and the aggregate
amount of the rebates, discounts, or price concessions that are passed
through to the plan sponsor, and the total number of prescriptions that
were dispensed; and the aggregate amount of the difference between the
amount the health benefits plan pays the PBM and the amount that the
PBM pays retail pharmacies (spread pricing), and mail order pharmacies,
and the total number of prescriptions that were dispensed.
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\323\ As stated above in the preamble for Sec. 156.295, section
1150A(b)(1) requires the Secretary to collect data by pharmacy type.
However, we are aware that it is not currently possible to report
such data by pharmacy type because pharmacy type is a not standard
classification currently captured in industry databases or files. To
reduce burden, we are not finalizing collecting data by pharmacy
type at this time. We intend to collect this information at a time
when the imposition of such a requirement would pose reasonable
burden. We seek comment on ways that we may impose the collection of
data by pharmacy type in the future without imposing unreasonable
burden on the industry.
\324\ This definition of bona fide service fees was finalized at
Sec. 156.295 in the 2012 Exchange Final Rule at 77 FR 18432. There,
we finalized this definition to align with the definition of bona
fide service fees finalized in the Medicare Program; Changes to the
Medicare Advantage and the Medicare Prescription Drug Benefit
Programs for Contract Year 2013 and Other Changes final rule. See 77
FR 22072 at 22093.
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At new Sec. 184.50(b) and (c), we also proposed to codify the
confidentiality and penalty provisions that appear at Sec. 1150A(c)
and (d) to PBMs which administer the prescription drug benefits for QHP
issuers.
We sought comment on these proposals.
We received public comments on the proposed updates to prescription
drug distribution and cost reporting by pharmacy benefit managers
(Sec. Sec. 184.10 and 184.50). We have consolidated the description of
the public comments received in response to this proposal at Part 184
as part of the discussion in the preamble above for Sec. 156.295.
Please refer to that section for our responses to those comments
received.
After consideration of all the comments received and for the
reasons stated in our responses, we are finalizing this policy as
proposed.
IV. Implementation of the Decision in City of Columbus, et al. v.
Cochran
On March 4, 2021, the United States District Court for the District
of Maryland decided City of Columbus, et al. v. Cochran, No. 18-2364,
2021 WL 825973 (D. Md. Mar. 4, 2021). The court reviewed nine separate
policies we had promulgated in the ``Patient Protection and Affordable
Care Act; HHS Notice of Benefit and Payment Parameters for 2019'' (83
FR 16930) published in the Federal Register on April 17, 2018 (the 2019
Payment Notice). The court upheld five of the challenged policies but
vacated four others. Specifically, the court vacated the following
portions of the 2019 Payment Notice:
1. The 2019 Payment Notice's extension of the elimination of
federal reviews of network adequacy of qualified health plans offered
through the FFEs in certain circumstances by incorporating the results
of the states' reviews, first finalized in rulemaking in the Market
Stabilization final rule \325\ (83 FR 17024 through 17026).
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\325\ 82 FR 18346, 18371-18372 (April 18, 2017).
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2. The 2019 Payment Notice's cessation of the practice of
designating some plans in the FFEs as ``standardized options'' in an
effort to encourage innovation in the individual market (83 FR 16974
through 16975).
3. The 2019 Payment Notice's modification of Exchange income
verification requirements for resolving data matching issues related to
eligibility for advance payments of premium tax credits to require an
individual who attests to a household income within 100 percent to 400
percent of the federal poverty level (FPL), but whose income according
to trusted electronic data sources is below 100 percent FPL, to submit
additional documentation supporting the attested to household income
(83 FR 16985 through 16987).
4. The 2019 Payment Notice's amendment of medical loss ratio
requirements to allow issuers to submit either a detailed, itemized
report of quality improvement activity (QIA) expenditures or to report
a single, fixed QIA amount (83 FR 17032 through 17036).
We intend to implement the court's decision as soon as possible.
However, we will not be able to fully implement those aspects of the
court's decision regarding network adequacy review and standardized
options in time for issuers to design plans and for Exchanges to be
prepared to certify such plans as QHPs for the 2022 plan year, and
therefore, intend instead to address these issues in time for plan
design and certification for plan year 2023. Specifically, in order to
implement the court's ruling on the network adequacy provision, HHS
will need to set up a new network adequacy review process, and issuers
will need
[[Page 24265]]
sufficient time before the applicable plan year to assess that their
networks meet the new regulatory standard, submit network information,
and have the information reviewed by applicable regulatory authorities
in order for their plans to be certified as QHPs. Issuers might also
have to contract with other providers in order to meet the standard.
This is not feasible for the QHP certification cycle for the 2022 plan
year, since the annual QHP certification cycle generally begins in late
April of each year. CMS' planning for the 2022 plan year had already
taken into account the provisions that the court vacated before the
court issued its decision, and it is too late now to revisit those
factors if the process is to go forward in time for plans to be
certified by open enrollment later this year. We plan to propose
specific steps to address implementation of this aspect of the court's
decision in future rulemaking. At that time, we might also address
other aspects of the court's decision, including potentially some
provisions that the court upheld.
The same is true for the court's decision regarding standardized
options. With the rule removing standardized options vacated, we need
to design and propose new standardized options that otherwise meet
current market reform requirements, and we must also alter the Federal
Exchange eligibility and enrollment platform system build
(HealthCare.gov) to provide differential display of such plans. Web-
brokers that are direct enrollment partners in FFE and SBE-FP states
will also need time to adjust their respective systems to provide
differential display of such plans on their non-Exchange websites.\326\
We will need to design, propose and finalize such plans in time for
issuers to design their own standardized options in accord with HHS's
parameters and submit those plans for approval by applicable regulatory
authorities and for certification by Exchanges as qualified health
plans. Again, this is not feasible for the QHP certification cycle for
the 2022 plan year, since the annual QHP certification cycle generally
begins in late April of each year. CMS' planning for the 2022 plan year
had already taken into account the provisions that the court vacated
before the court issued its decision, and it is too late now to revisit
those factors if the process is to go forward in time for plans to be
developed, reviewed and certified by open enrollment later this year.
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\326\ See 45 CFR 155.220(c)(3)(i)(H).
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Although standardized options have been required in the past, we
will not be able to simply reinstate the same standardized option plans
that previously existed. Specifically, in the last iteration of
standardized options we finalized in the 2018 Payment Notice, we
created three sets of standardized options based on FFE and SBE-FP
enrollment data and state cost-sharing laws. The basis on which we
created these three sets of options as well as a number of other
factors in the individual market) have changed considerably since the
last iteration of standardized options in 2018. Several such changes
include modifications in the most popular plans' cost-sharing
structures, shifting enrollment trends, the introduction of new state
cost sharing laws that affect standardized option plan designs, and
states with FFEs or SBE-FPs transitioning to SBEs (which affects the
number of sets of options). As a result of these changes, the sets of
standardized options and the design of the options themselves must be
adjusted accordingly. Further, we do not have sufficient time prior to
the 2022 plan year to conduct a full analysis of the changes that have
occurred in the last several years in order to design and propose
adequate standardized options suitable for the current environment.
Additionally, in prior years, we proposed and finalized standardized
option plan designs prior to the start of the QHP certification cycle
for the following plan year such that issuers had sufficient time to
assess these standardized options in order to determine if they wanted
to offer them and take the steps necessary to do so. Even if we were
able to design standardized option plans prior to the 2022 plan year,
issuers would not have a sufficient amount of time to meaningfully
assess any standardized options we might propose and decide whether or
not to offer them.
For these reasons, we intend to resume the designation of
standardized options and propose specific designs in more complete
detail in the 2023 Payment Notice. As such, we will seek comment during
the corresponding comment period. In the interim, we encourage states
with FFEs or SBE-FPs and unique cost-sharing laws that could affect
standardized plan design to contact us to discuss their circumstances.
We can take more immediate steps to begin to implement the court's
holdings regarding income verification and QIA reporting. First, as
discussed more fully later in this section, we are exercising
flexibilities under the Administrative Procedure Act (APA) to rescind
or replace in this final rule relevant parts of the income verification
and MLR regulations the court invalidated. Second, we plan to implement
accompanying operational policies to begin implementation of the
court's order with respect to the impacted income verification
regulation.
Specific to income verification, we are deleting the invalidated
provision requiring certain consumers to provide information for income
verification purposes. We note that HHS's systems automatically
generate requests for income verification information for those with
income data matching issues, and it will take some time for us to
redesign this function. Until that redesign is complete, however, HHS
will be able to identify consumers who receive requests for
verification information and we have established a manual process to
notify those recipients that they need not provide the requested
information.
As to QIA reporting, we are deleting the invalidated provision to
remove the option to report the fixed standardized amount of QIA. The
regulation will thus revert to requiring issuers to itemize QIA
expenditures on a prospective basis beginning with the 2020 MLR
reporting year (MLR reports due by July 31, 2021).\327\ However, we are
not requiring issuers to incur the burden or expense of revising MLR
Annual Reporting Forms from prior years or otherwise updating QIA
expenditure amounts reported for prior years. In addition, because MLR
calculations are based on a 3-year average,\328\ there will be a
transition period during which these averages will continue to reflect
in part the standardized QIA expenditure amounts for those issuers that
reported such amounts in the 2017-2019 MLR reporting years.\329\
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\327\ With the removal of Sec. 158.221(b)(8), CMS regulations
require issuers to separately track and itemize QIA expenditures.
See 45 CFR 158.150, 158.151 and 158.221.
\328\ See 42 U.S.C. 300gg-18(b)(1)(B)(ii) and 45 CFR 158.220(b).
\329\ For example, calculations for the 2020 MLR Reporting Year
are based on 2018, 2019 and 2020 data.
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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
the Office of Management and Budget (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
[[Page 24266]]
paragraphs with an estimate of the annual burden, summarized in Table
12. To fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We solicited public comment on each of the required issues under
section 3506(c)(2)(A) of the PRA for the following ICRs.
A. Wage Estimates
To derive wage estimates, we generally used data from the Bureau of
Labor Statistics to derive average labor costs (including a 100 percent
increase for fringe benefits and overhead) for estimating the burden
associated with the ICRs.\330\ Table 11 in this final rule presents the
mean hourly wage, the cost of fringe benefits and overhead, and the
adjusted hourly wage.
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\330\ See May 2019 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates. Available at https://www.bls.gov/oes/2019/may/oes_nat.htm#00-0000.
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As indicated, employee hourly wage estimates have been adjusted by
a factor of 100 percent. This is necessarily a rough adjustment, both
because fringe benefits and overhead costs vary significantly across
employers, and because methods of estimating these costs vary widely
across studies. Nonetheless, there is no practical alternative, and we
believe that doubling the hourly wage to estimate total cost is a
reasonably accurate estimation method.
[GRAPHIC] [TIFF OMITTED] TR05MY21.027
B. ICRs Regarding Submission of Adjusted Premium Amounts for Risk
Adjustment
45 CFR 153.610 and 153.710 provide that issuers of a risk
adjustment covered plan must provide HHS with access to risk adjustment
data through a dedicated distributed data environment (EDGE server), in
a manner and timeframe specified by HHS. We clarify that, for purposes
of risk adjustment data submissions in the 2021 benefit year and beyond
when a declared PHE is in effect and HHS permits temporary premium
credits, issuers that choose to provide temporary premium credits must
submit the adjusted (that is, lower) plan premiums for those months,
instead of the unadjusted plan premiums. HHS is finalizing the proposal
to require issuers to submit adjusted plan premiums to their EDGE
servers for all enrollees whom the issuer has actually provided
temporary premium credits as a reduction to the corresponding benefit
year premiums. We do not believe that issuers who elect to provide
these temporary premium credits during a declared PHE will incur
additional operational burden associated with EDGE server data
submissions as a result of these requirements because we expect
issuers' premium reporting systems will already be configured to enable
issuers to upload the billable premiums actually charged to enrollees
for the applicable benefit year to the EDGE server. Additionally, the
current EDGE server operational guidance for the risk adjustment
program allows issuers to submit billable premium changes so there will
be no changes to the data submission rules. The burden related to this
information collection is currently approved under OMB control number
0938-1155 (Standards Related to Reinsurance, Risk Corridors, Risk
Adjustment, and Payment Appeals). The information collection request
expires on February 23, 2021.
C. ICRs Regarding Direct Enrollment (Sec. Sec. 155.220 and 155.221)
At Sec. 155.220(c)(6), we are finalizing the proposal that a web-
broker must demonstrate operational readiness and compliance with
applicable requirements prior to the web-broker's non-Exchange website
being used to complete an Exchange eligibility application or a QHP
selection, which may include submission of a number of artifacts of
documentation or completion of certain testing processes. The required
documentation may include operational data including licensure
information, points of contact, and third-party relationships; security
and privacy assessment documentation, including penetration testing
results, security and privacy assessment reports, vulnerability scan
results, plans of action and milestones, and system
[[Page 24267]]
security and privacy plans; and an agreement between the web-broker and
HHS documenting the requirements for participating in the applicable
direct enrollment program. We estimate that it will take up to 2 hours
for a Business Operations Specialist (at an hourly cost of $77.14) to
complete and submit the required operational data and web-broker
agreement to HHS each year. We estimate that it will take up to 17
hours for a Business Operations Specialist (at an hourly cost of
$77.14) to complete and submit the required security and privacy
assessment documentation to HHS. The total burden for each web-broker
would be approximately 19 hours, with an equivalent cost of
approximately $1,466. Based on current web-broker participation and
potential market size, we estimate that 30 web-brokers will
participate. We estimate that these data collections will have an
annual burden of 570 hours with a cost of approximately $43,970.
We are finalizing the proposal to add additional detail to the
operational readiness requirement in Sec. 155.221(b)(4) for direct
enrollment entities. In Sec. 155.221(b)(4), we require that a direct
enrollment entity must demonstrate operational readiness and compliance
with applicable requirements prior to the direct enrollment entity's
website being used to complete an Exchange eligibility application or a
QHP selection, which may include submission of a number of artifacts of
documentation or completion of various testing or training processes.
The required documentation may include business audit documentation
including: Notices of intent to participate including auditor
information; documentation packages including privacy questionnaires,
privacy policy statements, and terms of service; and business audit
reports including testing results. The required documentation may also
include security and privacy audit documentation including:
Interconnection security agreements; security and privacy controls
assessment test plans; security and privacy assessment reports; plans
of action and milestones; privacy impact assessments; system security
and privacy plans; incident response plans; vulnerability scan results;
and an agreement between the direct enrollment entity and HHS
documenting the requirements for participating in the applicable direct
enrollment program. We estimate that for each direct enrollment entity
it will take up to 9 hours for a Business Operations Specialist (at an
hourly cost of $77.14) to complete and submit a typical documentation
package and related information to HHS each year. Based on current EDE
participation and potential market size, we estimate that 77 EDE
entities will participate in a manner such that they will be required
to submit this type of information, and therefore, this data collection
will have an annual burden of 693 hours with an annual cost of
approximately $53,458.
In addition, we estimate that it will take up to 72 hours for an
Auditor (at an hourly cost of $76.46) to complete and submit a business
requirements audit package for a direct enrollment entity, including
audit report and testing results, to HHS. Based on current EDE
participation and potential market size, we estimate that 4 EDE
entities will participate, and therefore this data collection would
have an annual burden of 288 hours with a cost of approximately
$22,020.
We also estimate that it will take up to 122 hours for an Auditor
(at an hourly cost of $76.46) to complete and submit a security and
privacy audit package for a direct enrollment entity to HHS each year.
Based on current EDE participation and potential market size, we
estimate that 14 EDE entities will participate, and therefore this data
collection will have an annual burden of 1,708 hours with a cost of
approximately $130,594.
We are finalizing these burden estimates as proposed.
D. ICRs Regarding Income Inconsistencies (Sec. 155.320(c))
We anticipate that removing the income verification requirements
for resolving data matching issues will reduce burden on those
consumers who are identified and notified as having this income
inconsistency, saving them approximately 45 minutes since they will not
be required to complete associated questions in the application or
submit supporting documentation. Based on historical data from the FFE,
HHS estimates that approximately 295,000 inconsistencies are generated
at the household level. Therefore, eliminating these inconsistencies
will reduce burden by approximately 221,250 hours. Using the average
hourly wage for all occupations (at an hourly cost $51.44 per hour), we
estimate that the annual reduction in cost for each consumer will be
approximately $39, and the annual cost reduction for all consumers who
would have generated this income inconsistency will be approximately
$11,381,100.
The burden related to this information collection is approved under
OMB control number 0938-1191 (Data Collection to Support Eligibility
Determinations for Insurance Affordability Programs and Enrollment
through Health Insurance Marketplaces, Medicaid and Children's Health
Insurance Program Agencies), which will be revised to account for this
reduced burden. The approval for this information collection expires on
September 30, 2022.
E. ICRs Regarding Prescription Drug Distribution and Cost Reporting by
QHP Issuers (Sec. 156.295) and PBMs (Sec. 184.50)
We are finalizing the proposal to revise Sec. 156.295 and add
Sec. 184.50 to require QHP issuers or PBMs that contract with QHP
issuers to report the data envisioned by section 1150A. We have not
previously collected this data; therefore, the burden associated with
these proposals will reflect the imposition of the burden for a new
collection, and not merely the burden created by changes to existing
regulatory text. On January 1, 2020 \331\ and on September 11,
2020,\332\ we published notices in the Federal Register and solicited
public comment on the burden related to these ICRs. Here, we replicated
the discussion regarding burden from the information collection
published in September 2020 and solicited a third round of public
comment on the burden associated with this collection.
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\331\ 85 FR 4993 through 4994.
\332\ 85 FR 56227 through 56229.
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The burden associated with this collection is attributed to QHP
issuers and PBMs, and the burden estimates were developed based on our
previous experience with QHP information reporting activities. We
stated that we were unaware of any QHP issuer that does not contract
with a PBM to administer their prescription drug benefit. While we
invited comment on whether any QHP issuer does not use a PBM, we did
not estimate any burden for a QHP issuer to submit data directly. The
following burden estimate reflects our expectation that all data will
be submitted by PBMs.
Across all 50 states and the District of Columbia, we estimate
approximately 40 PBMs will be subject to the reporting requirement. We
further estimate that these PBMs, taken as a whole, annually contract
with approximately 275 QHP issuers to administer the prescription drug
benefit for their QHPs. We estimate that the 275 QHP issuers offer
7,000 total QHPs annually or 25.4 QHPs per QHP issuer. Thus, we
estimate that each of the 40 PBMs will report data for 175 QHPs on
average each year. We understand that some of these PBMs
[[Page 24268]]
will contract with more QHP issuers than others, and as such, the
reporting requirement will vary per PBM.
Each PBM that administers pharmacy benefits for a QHP issuer will
be required to complete a web form and a data collection instrument.
The web form will collect data aggregated at the QHP issuer level for
all plans and products offered by the QHP issuer combined. The web form
will also require the reporting of an allocation methodology that is
selected by the PBM to allocate data, where necessary. We expect
submitters to maintain internal documentation of the allocation
methodologies chosen, as we may need to follow-up with the submitter to
better understand the methodology.
PBMs will prepare and submit one data collection instrument per QHP
issuer by Health Insurance Oversight System (HIOS) ID. Each data
collection instrument will contain information regarding each plan the
issuer offers. We estimated that an average PBM will report information
for 5,200 NDCs for each QHP. The reports must include the data for all
of the plans that the QHP issuer offered in their QHPs in the
applicable plan year, even if they have no data to report for that plan
year.
Each submitter will also be required to complete an attestation
which confirms the data submitted is accurate, complete, and truthful.
We estimate that 40 PBMs will submit data for this reporting
requirement, each submitting data for 175 QHPs on average. For each
PBM, we estimate that it will take compliance officers approximately
570 hours (for an annual cost of approximately $39,934 at a rate of
$70.06 per hour), pharmacy technician 350 hours (for an annual cost of
$11,865 at a rate of $33.90 per hour), secretaries and administrative
assistants 175 hours (for an annual cost of $6,594 at a rate of $37.68
per hour), and billing and posting clerks 175 hours (for an annual cost
of approximately $6,836 at a rate of $39.06 per hour) to prepare and
submit the information and 8 hours for a chief executive (for an annual
cost of approximately $1,491.20 at a rate of $186.40 per hour) to
review the information and complete the attestation. In total, we
estimate it will take a PBM approximately 1,278 hours to respond to
this reporting requirement each year on average, for a total annual
cost of approximately $66,719 per PBM to report data. This estimate
will vary by PBM, since each PBM will report for a different number of
plans, depending on the number of QHPs offered by a particular QHP
issuer. Thus, we estimate the total annual burden for all 40 PBMs
combined to be approximately 51,120 hours or $2,668,796.
We estimate that PBMs will incur burden to complete a one-time
technical build to implement the changes necessary for this collection,
which will involve activities such as planning, assessment, budgeting,
contracting, and reconfiguring systems to generate data extracts that
conform to this collection's requirements. We expect that this one-time
burden will be incurred primarily in 2021. We estimate that, for each
PBM, on average, it will take project management specialists and
business operations specialists 500 hours (at $77.51 per hour),
computer system analysts 1,300 hours (at $92.46 per hour), computer
programmers 2,080 hours (at $89.06 per hour), computer and information
systems managers 40 hours (at $150.38 per hour) and general and
operations managers 50 hours (at $118.30 per hour) to complete this
task. The total one-time burden for a PBM would be approximately 3,970
hours on average, with an equivalent cost of approximately $356,128.
For all 40 PBMs, the total one-time burden will be 158,800 hours for a
total cost of approximately $14.2 million. For all 40 PBMs, the average
annual burden in 2021-2023 incurred for implementation and reporting
will be approximately 87,000 hours with an average annual cost of
approximately $6.5 million.
We estimate that 275 QHP issuers will need to identify for the PBMs
each year which plans are QHPs. For each QHP issuer, we estimate that
it will take secretaries and administrative assistants 7 hours (for an
annual burden of $263.76 at a rate of $37.68 per hour) to identify, on
average, approximately 25 QHPs offered by a QHP issuer. This estimate
will vary by QHP issuer, since each QHP issuer would identify a
different number of QHPs, depending on the number of QHPs offered by a
particular QHP issuer. Thus, we estimate the total annual burden for
all 275 QHP issuers combined to be 1,925 hours or approximately
$72,534.
Comment: We received one comment that inquired whether QHPs that
are part of integrated systems comprised of health plans that operate
their own pharmacy network are subject to this reporting requirement,
and if so, whether such a system would qualify as a PBM or QHP issuer
under this burden estimate.
Response: While there is nothing in the statute that would allow
exemption from this reporting requirement based on the business
structure of reporting entities, we acknowledge that some entities may
have initial difficulty complying with the instructions and reporting
mechanisms described in the ICR. We intend to provide robust technical
assistance to all reporting entities to minimize the upfront burden
created by this collection. For purposes of this estimate, we consider
such a system a PBM that will report this data.
We are finalizing as proposed.
F. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.103, 158.130,
158.240, 158.241)
We are finalizing our proposal to amend Sec. 158.103 to establish
the definition of prescription drug rebates and other price concessions
that issuers must deduct from incurred claims for MLR reporting and
rebate calculation purposes under Sec. 158.140(b)(1)(i). We are also
finalizing the proposal to add a new Sec. 158.240(g) to explicitly
allow issuers to prepay a portion or all of their estimated MLR rebates
to enrollees for a given MLR reporting year, and to establish a safe
harbor allowing such issuers, under certain conditions, to defer the
payment of rebates remaining after prepayment until the following MLR
reporting year. In addition, we are finalizing the proposal to amend
Sec. 158.241(a)(2) to allow issuers to provide MLR rebates in the form
of a premium credit prior to the date that the rules currently provide.
Finally, are finalizing the proposal to clarify MLR reporting and
rebate requirements for issuers that choose to offer temporary premium
credits during a PHE declared by the Secretary of HHS in the 2021
benefit year and beyond when such credits are permitted by HHS. We
anticipate that implementing these provisions will require minor
changes to the MLR Annual Reporting Form, but will not significantly
increase the associated burden. The burden related to this information
collection was approved under OMB control number 0938-1164 (Medical
Loss Ratio Annual Reports, MLR Notices, and Recordkeeping Requirements
(CMS-10418)). The control number expired on October 31, 2020. A revised
collection of information seeking OMB approval for an additional 3
years is currently under review by OMB.
G. Summary of Annual Burden Estimates for Requirements
[[Page 24269]]
[GRAPHIC] [TIFF OMITTED] TR05MY21.028
H. Submission of PRA-Related Comments
We have submitted a copy of this final rule to OMB for its review
of the rule's information collection 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 (CMS-9914-F2), please visit
the CMS website at www.cms.hhs.gov/PaperworkReductionActof1995, or call
the Reports Clearance Office at 410-786-1326.
VI. Waiver of Proposed Rulemaking and Delay in Effective Date
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule before
the provisions of the rule are finalized, either as proposed or as
amended, in response to public comments and take effect, in accordance
with the APA (Pub. L. 79-404), 5 U.S.C. 553 and, where applicable,
section 1871 of the Act. Specifically, 5 U.S.C. 553 requires the agency
to publish a notice of proposed rulemaking in the Federal Register that
includes a reference to the legal authority under which the rule is
proposed, and the terms and substances of the proposed rule or a
description of the subjects and issues involved. Section 553(c) of the
APA further requires the agency to give interested parties the
opportunity to participate in the rulemaking through public comment
before the provisions of the rule take effect. Section 553(b)(B) of the
APA authorize the agency to waive these procedures, however, if the
agency finds good cause that notice and comment procedures are
impracticable, unnecessary, or contrary to the public interest and
incorporates a statement of the finding and its reasons in the rule
issued.
Section 553(d) of the APA ordinarily requires a 30-day delay in the
effective date of a final rule from the date of its publication in the
Federal Register. This 30-day delay in effective date can be waived,
however, if an agency finds good cause to support an earlier effective
date. Finally, the Congressional Review Act (CRA) (Pub. L. 104-121,
Title II) requires a 60-day delay in the effective date for major rules
unless an agency finds good cause that notice and public procedure are
impracticable, unnecessary, or contrary to the public interest, in
which case the rule shall take effect at such time as the agency
determines 5 U.S.C. 801(a)(3) and 808(2).
In City of Columbus, as explained earlier in the preamble, the
district court vacated four provisions of the 2019 Payment Notice.
Implementing the court's order as to two of those provisions, regarding
income verification and QIA expenditure reporting, can be accomplished
immediately. We find that it is necessary and in the public interest to
implement these two provisions quickly to provide immediate notice to
the regulated community on what standards will apply and to prevent
injury to the public. A delay in implementing the court's decision
regarding these two provisions would cause unnecessary harm. HHS needs
to move quickly on these two provisions to fill the regulatory void
caused by the court's vacatur. Without immediate action, there will be
confusion among issuers and consumers regarding what is expected, which
we find to be contrary to the public interest. We find it impractical
to wait months to clarify what standards apply after the vacatur of the
two policies. In this rule we have explained the impact of the court's
decision.
With regard to MLR QIA expenditures, we need to clarify that CMS
will implement the court's decision going forward, that is, as CMS
explained above, issuers will have to report actual data and cannot
report standardized QIA expenditure amounts for 2020 and future MLR
reporting years, but issuers will not be required to go back and
correct their MLR Annual Reporting Forms for 2017-2019. We find it
necessary to immediately clarify issuer reporting obligations to avoid
issuer confusion regarding how to report QIA on the 2020 MLR Annual
Reporting Forms (due by July 31, 2021) and to mitigate the potential of
any delay or inaccuracy in providing consumers rebates that may be owed
for the 2020 MLR reporting year. In vacating the QIA provision of the
2019 Payment Notice, the court found that the statute requires the
itemization of QIA expenditures and does not permit a reporting of such
expenses as a standard percentage of earned premium. In light of the
court's decision, additional public comments could not meaningfully
impact whether CMS is authorized to allow the standardized reporting of
QIA expenses. For this additional reason, we find good
[[Page 24270]]
cause to dispense with any delay in implementing the court's decision
on this issue to allow for a comment period, because such a delay would
be unnecessary.
With regard to income verification requirements, in which the court
vacated the requirement imposed on consumers to provide verification if
certain sources of information indicated a variance from a consumer's
reported income, we find it necessary and in the public interest to
immediately suspend enforcement of these provisions to ensure that
consumers are not improperly denied advance payments of premium tax
credits. Any delay in clarifying what is required after the court's
decision will create confusion and interfere with consumers' access to
health coverage. We have concerns that any delay in implementing
clarification of this rule could lead eligible consumers to improperly
losing coverage if they are unable to produce documentation compliant
with the income verification requirements. Without immediate changes,
the public, and particularly consumers who are eligible for advance
payments of the premium tax credits, may be deterred in accessing
advance payments of the premium tax credits that allow them to afford
coverage.
For these reasons, we find it necessary and in the public interest
to move quickly and without the delay that would accompany a period for
notice and comment to address the court's decision regarding the QIA
provisions and income verification requirements. We find good cause for
waiving notice-and-comment rulemaking and the delay in effective date
given the decision of the district court and the public interest in
expeditious implementation of the district court's ruling. Immediately
taking the steps described in section IV. of this final rule to
implement the court's decision regarding income verification and QIA
reporting, including removing the regulation text at Sec. Sec.
155.320(c) and 158.221(b)(8) directly in this final rule rather than
through the normal notice-and-comment rulemaking cycle and waiving
delay of the effective date, will ensure an expeditious implementation
of those aspects of the court's decision and remove any doubt about
what standards apply after that decision. We believe rulemaking without
notice and comment for these limited purposes is a reasonable response
to the court's order that will minimize confusion over the current
status of our rules in those two areas. Therefore, we find good cause
to waive notice-and-comment rulemaking for the provisions in section
IV. of this final rule, waive delay of the effective date, and to issue
these changes as part of this final rule.
VII. Regulatory Impact Analysis
A. Statement of Need
This final rule includes standards related to the risk adjustment
program and cost sharing parameters for the 2022 benefit year and
beyond. It also includes changes related to special enrollment periods;
direct enrollment entities; the administrative appeals process with
respect to health insurance issuers and non-federal governmental group
health plans; and the medical loss ratio program. In addition, it
includes changes to the regulation to require the reporting of certain
prescription drug information for QHPs or their PBM.
B. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 202 of the Unfunded Mandates Reform Act
of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. A regulatory impact analysis (RIA) must be prepared for
rules with economically significant effects ($100 million or more in
any 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. HHS has 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, HHS has 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.
They will reduce regulatory burden, reduce administrative costs for
states, ensure greater market stability, increase transparency and
availability of QHP survey data, and increase transparency on the
impact of PBMs on the cost of prescription drugs for QHPs. Through the
reduction in financial uncertainty for issuers and increased
affordability for consumers, these provisions are expected to increase
access to affordable health coverage.
Affected entities, such as Exchanges, issuers and FFE Classic DE
and EDE partners, will incur costs to implement new special enrollment
period requirements. Issuers will incur costs to comply with audits and
compliance reviews of risk adjustment covered plans, reinsurance-
eligible plans, and APTC, CSRs, and user fees requirements. Web-brokers
and direct enrollment entities will incur costs to comply with
operational readiness demonstration requirements. QHP issuers and PBMs
will incur costs to implement and operationalize drug data reporting.
In accordance with Executive Order 12866, HHS believes that the
benefits of this regulatory action justify the costs.
Comment: A few commenters stated that the RIA in the proposed rule
was inadequate.
Response: As explained in the proposed rule, we are unable to
quantify all the effects of the provisions of this rule. Therefore, we
have included
[[Page 24271]]
qualitative discussions of costs and benefits related to the provisions
in this final rule.
C. Impact Estimates of the Payment Notice Provisions and Accounting
Table
In accordance with OMB Circular A-4, Table 13 depicts an accounting
statement summarizing HHS's assessment of the benefits, costs, and
transfers associated with this regulatory action.
This 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. We are
unable to quantify all benefits and costs of this final rule. The
effects in Table 13 reflect non-quantified impacts and estimated direct
monetary costs and transfers resulting from the provisions of this
final rule for health insurance issuers and consumers.
We are finalizing the risk adjustment user fee of $0.25 PMPM for
the 2022 benefit year to operate the risk adjustment program on behalf
of states,\333\ which we estimate to cost approximately $60 million in
benefit year 2022. We expect risk adjustment user fee transfers from
issuers to the federal government to remain steady at $60 million, the
same as those estimated for the 2021 benefit year.
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\333\ As noted earlier in this rule, no state has elected to
operate the risk adjustment program for the 2022 benefit year;
therefore, HHS will operate the program for all 50 states and the
District of Columbia.
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BILLING CODE 4150-28-P
[[Page 24272]]
[GRAPHIC] [TIFF OMITTED] TR05MY21.029
This RIA expands upon the impact analyses of previous rules and
utilizes the Congressional Budget Office's (CBO) analysis of the ACA's
impact on federal spending, revenue collection, and insurance
enrollment. The ACA ends the transitional reinsurance program and
temporary risk corridors program after the benefit year 2016.
Therefore, the costs associated with those programs are not included in
Table 13 or 14. Table 14 summarizes the effects of the risk adjustment
program on the federal budget from fiscal years 2022 through 2026, with
the additional, societal effects of this final rule discussed in this
RIA. We do not expect the provisions of this final rule to
significantly alter CBO's estimates of the budget impact of the premium
stabilization programs that are described in Table 14.
In addition to utilizing CBO projections, HHS conducted an internal
analysis of the effects of its regulations
[[Page 24273]]
on enrollment and premiums. Based on these internal analyses, we
anticipate that the quantitative effects of the provisions in this rule
are consistent with our previous estimates in the 2021 Payment Notice
for the impacts associated with the APTC and the premium stabilization
programs.
[GRAPHIC] [TIFF OMITTED] TR05MY21.030
BILLING CODE 4150-28-C
1. Health Insurance Reform Requirements for the Group and Individual
Health Insurance Markets (Sec. 147.104)
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\334\ Reinsurance collections ended in FY 2018 and outlays in
subsequent years reflect remaining payments to Treasury under
section 1341(b)(3)(B)(iv) of the ACA and to CMS for administrative
expenses under section 1341(b)(3)(B)(ii) of the ACA, refunds, and
allowable activities.
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The revision to Sec. 147.104(b)(4)(ii) will allow an individual or
dependent who did not receive timely notice of a triggering event and
otherwise was reasonably unaware that a triggering event occurred to
use the date the individual knew, or reasonably should have known, of
the occurrence of the triggering event as the date of the triggering
event for a special enrollment period to enroll in individual market
coverage through or outside of an Exchange. This will enable consumers
to maintain continued access to coverage and health care.
2. CMS Enforcement in Group and Individual Markets (Part 150) and
Administrative Review of QHP Issuer Sanctions (Part 156, Subpart J)
We are removing the requirement to file submissions to the
Departmental Appeals Board in triplicate and instead require electronic
filing. Based on our experience, such filings are infrequent, and this
proposed change will not have a significant impact. An entity filing a
submission will experience a small reduction in costs related to
printing and mailing the submission.
3. Risk Adjustment (Part 153)
The risk adjustment program is a permanent program created by
section 1343 of the ACA that collects charges from issuers with lower-
than-average risk populations and uses those funds to make payments to
issuers with higher-than-average risk populations in the individual,
small group, and merged markets (as applicable), inside and outside the
Exchanges. We established standards for the administration of the risk
adjustment program in subparts A, B, D, G, and H of part 153. If a
state is not approved to operate, or chooses to forgo operating its own
risk adjustment program, HHS will operate risk adjustment on its
behalf. For the 2022 benefit year, HHS will operate a risk adjustment
program in every state and the District of Columbia. As described in
the 2014 Payment Notice, HHS's operation of risk adjustment on behalf
of states is funded through a risk adjustment user fee. For the 2022
benefit year, we used the same methodology that we finalized in the
2020 Payment Notice to estimate our administrative expenses to operate
the program. Risk adjustment user fee costs for the 2022 benefit year
are expected to remain steady from the prior 2021 benefit year
estimates of approximately $60 million. We estimate that the total cost
for HHS to operate the risk adjustment program on behalf of all 50
states and the District of Columbia for 2022 will be approximately $60
million, and the risk adjustment user fee will be $0.25 PMPM. Because
of the constant costs estimated for the 2022 benefit year, we expect
the final risk adjustment user fee for the 2022 benefit year to have no
additional financial impact on issuers of risk adjustment covered plans
or the federal government.
Additionally, for the risk adjustment factors, we are finalizing an
approach to recalibrate the HHS risk adjustment models for the 2022
benefit year by using the 2016, 2017 and 2018 enrollee-level EDGE data,
the same data years used for the 2021 benefit year.\335\ We are
adopting an approach of using the 3 most recent consecutive years of
available enrollee-level EDGE data that are available in time for
incorporating the data in the draft recalibrated coefficients published
in the proposed rule for recalibration of the risk adjustment models
for the 2022 benefit year and beyond. We believe that the approach of
blending (or averaging) 3 years of separately solved coefficients will
provide stability within the risk adjustment program and minimize
volatility in changes to risk scores from the 2021 benefit year to the
2022 benefit year. We are also finalizing the continuation of a pricing
adjustment for Hepatitis C drugs for all three models (adult, child and
infant). Overall, these changes make limited changes to the number and
type of risk adjustment model factors; therefore, we do not expect
these changes to impact issuer burden beyond the current burden for the
risk adjustment program.
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\335\ As discussed earlier, the one exception relates to RXC 09,
which involved the use of only 2016 and 2017 enrollee-level data to
develop the applicable 2022 benefit year coefficients and
interaction terms.
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We are finalizing the requirement that issuers that choose to offer
premium credits to consumers during a declared PHE, when HHS permits
such credits, must report the adjusted plan premium amount, taking into
account the credits provided to consumers as a reduction to premiums
for the applicable months for risk adjustment data submissions for the
2021 benefit year and beyond. We do not believe that the clarifications
regarding risk adjustment reporting in this provision will impose
additional administrative burden on health insurance issuers beyond the
effort already required to submit data to HHS for the purposes of
operating risk adjustment, as previously estimated in
[[Page 24274]]
the interim final rule on COVID-19 (85 FR 54820).
In the 2021 Payment Notice, HHS finalized the risk adjustment state
payment transfer formula under the HHS risk adjustment methodology for
the 2021 benefit year, and reaffirmed that HHS will continue to operate
the risk adjustment program in a budget neutral manner. As finalized in
this rule, we will maintain the same methodology for the 2022 benefit
year and beyond, unless changed through notice-and-comment
rulemaking.\336\ Therefore, there is no net aggregate financial impact
on health insurance issuers or the federal government as a result of
the risk adjustment provisions with respect to the finalized proposals
regarding the methodology, as well as the premium credit related
provisions. However, while risk adjustment transfers are net neutral in
aggregate, we recognize that individual issuers may be financially
impacted by reduced transfers (either lower risk adjustment payments or
lower risk adjustment charges) if any issuer in the issuer's state
market risk pool provides premium credits to enrollees in future
benefit years during a declared PHE when HHS permits such credits. The
extent of this impact will vary based on the number of issuers in a
state market risk pool that elect to provide the temporary premium
credits during a declared PHE, the amount of these premium credits
provided, as well as the market share of the issuers that provide these
premium credits.
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\336\ As finalized in the 2020 Payment Notice, we intend to also
maintain the high-cost risk pool parameters with a threshold of $1
million and a coinsurance rate of 60 percent for the 2020 benefit
year and beyond unless amended through notice with comment
rulemaking. See 84 FR at 17480 through 17484.
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We do not believe that the impact of this provision will vary from
what was previously estimated in the interim final rule on COVID-19 (85
FR 54820). Similar to our analysis of regulatory impacts in the interim
final rule on COVID-19, we recognize the potential for financial
impacts for individual issuers as a result of these clarifications. We
believe that if HHS permitted issuers that provided premium credits
when permitted by HHS during a declared PHE to submit unadjusted
premiums for the purposes of calculating risk adjustment, distortions
could occur which could also financially impact individual issuers. For
example, absent the requirement that issuers that offer premium credits
report the adjusted, lower premium amount for risk adjustment purposes,
an issuer with a large market share with higher-than-average risk
enrollees that provides temporary premium credits would inflate the
statewide average premium by submitting the higher, unadjusted premium
amount, thereby increasing its risk adjustment payment. In such a
scenario, a smaller issuer in the same state market risk pool that owes
a risk adjustment charge, and also provides premium credits to
enrollees, would pay a risk adjustment charge that is relatively higher
than it would have been if it were calculated based on a statewide
average that reflected the actual, reduced premium charged to enrollees
by issuers in the state market risk pool.
For all of these reasons, we believe that requiring issuers that
offer temporary premium credits when permitted by HHS for 2021 and
future benefit years' coverage to accurately report to the EDGE server
the adjusted, lower premium amounts actually charged to enrollees is
most consistent with existing risk adjustment program requirements. We
also believe this requirement will mitigate the distortions that would
occur if issuers that offer these temporary premium credits did not
report the actual amounts charged to enrollees, while avoiding
additional financial burden on issuers, as compared to an approach that
would permit issuers to report unadjusted premium amounts.
We also are providing more clarity regarding audits and
establishing authority to conduct compliance reviews of issuers of risk
adjustment covered plans by finalizing amendments to Sec. 153.620(c),
with slight modifications to certain audit timeframes in response to
comments requesting issuers be provided more time to provide the
initial audit data submissions and written corrective action plans.
Issuers being audited under the risk adjustment program will be
required to comply with audit requirements including participating in
entrance and exit conferences, submitting complete and accurate data to
HHS in a timely manner, and providing responses to additional requests
for information from HHS and to preliminary audit reports in a timely
manner. If an audit results in a finding, issuers must also provide
written corrective plans in the time and manner set forth by HHS. We
are also codifying our authority to recoup risk adjustment (including
high-cost risk pool) payments if they are not adequately substantiated
by the data and information submitted by issuers during the course of
the audit.
We anticipate that compliance with risk adjustment program
(including high-cost risk pool) audits will take 120 hours by a
business operations specialist (at a rate of $77.14 per hour), 40 hours
by a computer systems analyst (at a rate of $92.46 per hour), and 20
hours by a compliance officer (at a rate of $70.06 per hour) per issuer
per benefit year. The cost per issuer will be approximately $14,356.
While the number of issuers participating in the risk adjustment
program varies per benefit year, (for example, there were 751 issuers
participating in the risk adjustment program for the 2016 benefit
year), HHS only intends to audit a small percentage of these issuers,
roughly 30-60 issuers per benefit year, and intends to focus these
audits on payments under the high-cost risk pool.\337\ Depending on the
number of issuers audited each year, the total cost to issuers being
audited will be between $430,692 and $861,384, with an average annual
cost of approximately $646,038.
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\337\ Currently, HHS uses HHS-RADV to audit the actuarial risk
reported by issuers to their EDGE servers that is used for
performing calculations under the state payment transfer formula.
See 45 CFR 153.350 and 153.630.
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We anticipate that compliance with risk adjustment program
(including high-cost risk pool) compliance reviews will take 30 hours
by a business operations specialist (at a rate of $77.14 per hour), 10
hours by a computer systems analyst (at a rate of $92.46 per hour), and
5 hours by a compliance officer (at a rate of $70.06 per hour) per
issuer per benefit year. The cost per issuer will be approximately
$3,589. While the number of issuers participating in the risk
adjustment program varies per benefit year, (for example, there were
751 issuers participating in the risk adjustment program for the 2016
benefit year), HHS only intends to conduct compliance reviews for no
more than 15 issuers per benefit year and intends to focus these
reviews on payments under the high-cost risk pool.\338\ The total
annual cost to issuers undergoing compliance reviews will be
approximately $53,836.
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\338\ Currently, HHS uses HHS-RADV to audit the actuarial risk
reported by issuers to their EDGE servers that is used for
performing calculations under the state payment transfer formula.
See 45 CFR 153.350 and 153.630.
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We are increasing the materiality threshold for EDGE discrepancies,
beginning in the 2020 benefit year of HHS-operated risk adjustment, so
that HHS may only take action if the amount in dispute is equal to or
exceeds $100,000 or one percent of the total estimated transfer amount
in the applicable state market risk pool, whichever is less. As a
result of this change, some discrepant issuers will no
[[Page 24275]]
longer be charged for their EDGE data error. In addition, issuers in
the same state market risk pool as the discrepant issuer will not
receive positive adjustments to their risk adjustment transfers. This
is because HHS's process for addressing material EDGE data
discrepancies is to recalculate the dollar value of any difference in
risk adjustment transfers, charge the discrepant issuer for the
difference, and distribute the amount collected from the discrepant
issuer to the issuers in the same state market risk pool who were
harmed. Based on analysis of discrepancies from prior years' data,
payments to these issuers who were harmed by the discrepant issuer's
error are occasionally as low as $1.00 and typically represent a
fraction of one percent of the issuer's overall transfers in the state
market risk pool for the applicable benefit year. We anticipate that
this change will have a minimal impact on regulatory burden. There
might be a slight reduction in administrative burden to some issuers
who currently report, and receive adjustments for, EDGE discrepancies
that are less than a fraction of total state market risk pool
transfers.
4. Audits of Reinsurance-Eligible Plans (Sec. 153.410(d))
We are finalizing the amendments to Sec. 153.410(d) providing more
clarity regarding audits and establishing authority to conduct
compliance reviews of reinsurance-eligible plans, with slight
modifications to certain audit timeframes in response to comments
requesting issuers be provided more time to provide the initial audit
data submissions and written corrective action plans. Issuers of
reinsurance-eligible plans being audited will be required to comply
with audit requirements including participating in entrance and exit
conferences, submitting complete and accurate data to HHS in a timely
manner, and providing responses to additional requests for information
from HHS and to preliminary audit reports in a timely manner. If an
audit results in a finding, issuers must also provide written
corrective plans in the time and manner set forth by HHS. We are also
codifying our authority to recoup reinsurance payments if they are not
adequately substantiated by the data and information submitted by
issuers during the course of the audit.
We anticipate that compliance with reinsurance program audits will
take 120 hours by a business operations specialist (at a rate of $77.14
per hour), 40 hours by a computer systems analyst (at a rate of $92.46
per hour), and 20 hours by a compliance officer (at a rate of $70.06
per hour) per issuer per benefit year. The cost per issuer will be
approximately $14,356. There were 557 issuers participating in the
reinsurance program for the 2015 benefit year and 496 issuers
participating in the reinsurance program for the 2016 benefit year;
however, HHS will only audit a small percentage of these issuers,
roughly 30-60 issuers per benefit year. As noted above, we also intend
to combine the 2015 and 2016 benefit year reinsurance audits to reduce
the burden on issuers subject to such audits. Depending on the number
of issuers audited for each benefit year, the total cost to issuers
being audited will be between $430,692 and $861,384, with an average
annual cost of approximately $646,038.
We anticipate that compliance with reinsurance program compliance
reviews will take 30 hours by a business operations specialist (at a
rate of $77.14 per hour), 10 hours by a computer systems analyst (at a
rate of $92.46 per hour), and 5 hours by a compliance officer (at a
rate of $70.06 per hour) per issuer per benefit year. The cost per
issuer will be approximately $3,589. There were 557 issuers
participating in the reinsurance program for the 2015 benefit year and
496 issuers participating in the reinsurance program for the 2016
benefit year; however, HHS only intends to conduct compliance reviews
for no more than 15 issuers per benefit year and intends to focus these
reviews on payments received by reinsurance-eligible plans under the
program. The total annual cost to issuers undergoing compliance reviews
will be approximately $53,836.
5. HHS Risk Adjustment Data Validation (Sec. 153.630(g))
We are codifying two previously-established exemptions from HHS-
RADV under Sec. 153.630(g). These exemptions apply when the issuer
only has small group carryover coverage for the applicable benefit year
or when an issuer is the sole issuer in the state market risk pool for
the applicable benefit year (and did not participate in another risk
pool with other issuers for that benefit year). We further note that
these new regulatory provisions are not establishing new exemptions;
instead, the amendments to Sec. 153.630(g) merely codify existing
policies and previously established exemptions from HHS-RADV for these
subsets of issuers. The impact of the exemption for sole issuers was
addressed in the 2019 Payment Notice and the discussion of exempting
small group carryover coverage issuers was set forth in the 2020
Payment Notice.\339\ Under these exemptions, these issuers are not be
required to complete HHS-RADV for the given benefit year, and
therefore, they will have a decreased administrative burden. However,
given that these exemptions are limited to issuers only offering small
group carry-over coverage and issuers who are sole issuers in all
markets in a state, we estimate that approximately 13 issuers will be
exempt from HHS-RADV for a given benefit year under these exemptions.
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\339\ 83 FR 17047 and 83 FR 17504.
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We are also changing the HHS-RADV collections timeline from the
timeline finalized in the 2020 Payment Notice in response to
stakeholder feedback. Under the revised timeline, we will implement the
collection of HHS-RADV charges and disbursement of payments in the
calendar year in which HHS-RADV results are released. We do not believe
this will change the administrative burden previously estimated in the
2020 Payment Notice \340\ as we understand that the majority of states
and issuers follow a timeline that aligns more closely with the one in
this rulemaking and few pursued the flexibility provided under the
timeline finalized in the 2020 Payment Notice.
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\340\ See 84 FR 1507.
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6. Direct Enrollment (Sec. Sec. 155.220 and 155.221)
a. QHP Information Display on Web-Broker Websites
After consideration of comments received, we are not finalizing the
proposal to provide flexibility to web-brokers regarding the
information they are required to display on their non-Exchange websites
for QHPs in certain circumstances. As explained above, we intend to
further consider these issues and clarify the display requirements for
web-broker non-Exchange websites in future rulemaking. Until addressed
in future rulemaking, beginning at the start of the open enrollment
period for plan year 2022, web-broker non-Exchange websites will be
required to display all QHP information received from the Exchange or
directly from QHP issuers, consistent with the requirements of Sec.
155.205(b)(1) and (c) for all available QHPs with the exception of
medical loss ratio information and transparency of coverage measures
under Sec. 155.205(b)(1)(vi) and (vii). This interim approach does not
establish new requirements and instead represents a change in the
exercise of enforcement discretion regarding the standardized
comparative information web-brokers are required to display under
existing
[[Page 24276]]
regulations following our consideration of comments on the proposed
changes to the web-broker QHP display requirements.\341\ We previously
estimated the administrative burden related to the display of QHP
information on web-broker websites in the 2013 Program Integrity final
rule.\342\
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\341\ See 45 CFR 155.220(c)(3)(i)(A) and (D).
\342\ See 78 FR 54128.
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b. Web-Broker and Direct Enrollment Entity Operational Readiness Review
Requirements
At Sec. 155.220(c)(6), we are finalizing that a web-broker must
demonstrate operational readiness and compliance with applicable
requirements prior to the web-broker's non-Exchange website being used
to complete an Exchange eligibility application or a QHP selection. As
reflected in Sec. 155.220(c)(6)(i) through (iv), HHS may request a
web-broker submit a number of artifacts or documents or complete
certain testing processes to demonstrate the operational readiness of
its non-Exchange website. The required documentation may include
operational data including licensure information, points of contact,
and third-party relationships; security and privacy assessment
documentation, including penetration testing results, security and
privacy assessment reports, vulnerability scan results, plans of action
and milestones, and system security and privacy plans; and an agreement
between the web-broker and HHS documenting the requirements for
participating in the applicable direct enrollment program. The required
testing processes may include enrollment testing, prior to approval or
at the time of renewal, and website reviews performed by HHS to
evaluate prospective web-brokers' compliance with applicable website
display requirements prior to approval. To facilitate testing,
prospective and approved web-brokers will have to maintain and provide
access to testing environments that reflect their prospective or actual
production environments. These amendments codify in regulation existing
program requirements that apply to web-brokers that participate in the
FFE direct enrollment program and are captured in the agreements
executed with participating web-broker direct enrollment entities and
related technical guidance.\343\ Some of these requirements, such as
the collection of operational data, have effectively existed for many
years, and so they will impose little to no new burden. The collection
of security and privacy assessment documentation is a new requirement,
although historically the web-broker agreement has required web-brokers
to attest to the implementation and assessment of privacy and security
controls. As a result, web-brokers should have historically completed
any technical implementation of the controls and should be familiar
with assessment of those controls. Completion of enrollment testing is
also a new requirement, but use of the direct enrollment pathways
inherently requires a web-broker's platform to be capable of processing
enrollments. Therefore, the burden of testing that functionality will
be very limited. Website reviews have been conducted historically and
are performed by HHS, so there will be no burden to web-brokers
associated with the completion of those reviews. The burden related to
these requirements is discussed in the Collection of Information
Requirements section in this rule.
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\343\ See, for example, ``Updated Web-broker Direct Enrollment
Program Participation Minimum Requirements,'' May 21, 2020.
Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2020-WB-Program-Guidance-052120-Final.pdf.
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We are revising Sec. 155.221(b)(4) to add additional detail on the
operational readiness requirements for direct enrollment entities.
Similar to the proposed web-broker operational readiness requirement at
new Sec. 155.220(c)(6), these amendments codify in Sec. 155.221(b)(4)
additional details about the existing program requirements that apply
to direct enrollment entities and are captured in the agreements
executed with participating web-broker and QHP issuer direct enrollment
entities. We note that these requirements are in addition to the
operational readiness requirements at new Sec. 155.220(c)(6) for web-
brokers, although web-brokers may not be required to submit the
documentation required under this proposal to revise Sec.
155.221(b)(4) or they may be permitted to use the same documentation to
satisfy the requirements of both operational readiness reviews
depending on the specific circumstances of their participation in
direct enrollment programs and the source and type of documentation.
In paragraph (b)(4), we require a direct enrollment entity to
demonstrate operational readiness and compliance with applicable
requirements prior to the direct enrollment entity's website being used
to complete an Exchange eligibility application or a QHP selection. We
add new paragraphs (b)(4)(i) through (v) to reflect that direct
enrollment entities may need to submit or complete, in the form and
manner specified by HHS, a number of artifacts of documentation or
various testing or training processes. The documentation may include
business audit documentation including: Notices of intent to
participate including auditor information; documentation packages
including privacy questionnaires, privacy policy statements, and terms
of service; and business audit reports including testing results. The
required documentation may also include security and privacy audit
documentation including: Interconnection security agreements; security
and privacy controls assessment test plans; security and privacy
assessment reports; plans of action and milestones; privacy impact
assessments; system security and privacy plans; incident response
plans; and vulnerability scan results. Submission of agreements between
the direct enrollment entity and HHS documenting the requirements for
participating in the applicable direct enrollment program may also be
required. Required testing may include eligibility application audits
performed by HHS. The direct enrollment entity may also be required to
complete online training modules developed by HHS related to the
requirements to participate in direct enrollment programs. We expect
minimal new burden associated with this policy as these requirements
have historically been established through agreements EDE entities have
executed with HHS, and therefore entities have completed these tasks in
the past to be able to use the EDE pathway. The burden related to these
requirements is discussed in the Collection of Information Requirements
section in this final rule.
c. Direct Enrollment Entity Plan Display Requirements
We are revising Sec. 155.221(b)(1) to require that direct
enrollment entities display and market QHPs offered through the
Exchange, individual health insurance coverage as defined in Sec.
144.103 offered outside the Exchange (including QHPs and non-QHPs other
than excepted benefits), and all other products, such as excepted
benefits, on at least three separate website pages, with certain
exceptions. This change is a revision of a policy adopted in 2019. We
anticipate this policy will provide increased flexibility and believe
many direct enrollment entity websites are already designed in a manner
largely consistent with this proposal, and therefore the burden
associated with it is minimal.
[[Page 24277]]
7. Verification Process Related to Eligibility for Insurance
Affordability Programs (Sec. 155.320)
a. Income Inconsistencies (Sec. 155.320(c))
In the 2019 Payment Notice we estimated a one-time burden on
Exchanges for necessary system changes to meet the requirement related
to data matching issues. The 2019 Payment Notice estimate did not take
into account the ongoing operational cost for processing data matching
issues from this requirement, because ongoing operational costs are
dependent on the Exchange's number of applicants with income
inconsistencies and the threshold for setting a data matching issue
which was unknown at the time.
Now that we are changing this requirement, we expect a cost saving
and burden reduction. We estimate the amendments to Sec. 155.320(c)
will create a one-time cost for an Exchange of approximately $450,000
to complete the necessary system changes to remove functionality for
this policy. We estimate that approximately half of the State Exchanges
implemented verification functionality in 2019 or 2020. Therefore, for
7 State Exchanges, the estimated total cost will be $3.15 million.
Based on plan year 2019 and 2020 data of the volume of income
inconsistencies generated in the FFEs, we estimate that approximately
295,000 fewer inconsistencies will be generated annually by FFEs by
removing this requirement and will result in annual savings of
approximately $3,560,650 for FFEs. We anticipate additional ongoing
annual savings for FFEs estimated at $242,550 due to the reduction of
approximately 385,000 mailed consumer notices (approximately $0.63 per
notice). We estimate that approximately 57,361 fewer inconsistencies
will be generated annually by State Exchanges by removing this
requirement and will result in annual savings of approximately $692,349
annually for State Exchanges. Likewise, we anticipate additional
ongoing annual savings for State Exchanges estimated at $74,861 due to
the reduction of approximately 10,694 mailed consumer notices. Total
annual savings for FFEs and State Exchanges is estimated to be
approximately $4,570,410. We note that there could also be additional
savings in appeals costs.
b. Employer Sponsored Coverage (155.320(d))
As discussed previously in the preamble, as for benefit years 2020
and 2021, we will not take enforcement action against Exchanges that do
not perform random sampling as required by Sec. 155.320(d)(4) for
benefit year 2022. HHS's experience conducting random sampling revealed
that employer response rates to HHS's request for information were low.
The manual verification process described in paragraph (d)(4)(i)
requires significant resources and government funds, and the value of
the results ultimately does not appear to outweigh the costs of
conducting the work because only a small percentage of sample enrollees
have been determined by HHS to have received APTC/CSRs inappropriately.
We estimate the annual costs to conduct sampling on a statistically
significant sample size of approximately 1 million cases to be
approximately $6 million to $8 million for the Exchanges on the Federal
platform and State Exchanges that operate their own eligibility and
enrollment platforms. This estimate includes operational activities
such as noticing, inbound and outbound calls to the Marketplace call
center, and adjudicating consumer appeals. We estimate that the total
annual cost for the Exchanges on the Federal platform and the 15 State
Exchanges operating their own eligibility and enrollment platform in
2022 would have been approximately $113 million. Relieving Exchanges of
the requirement to conduct sampling for benefit year 2022 will
therefore result in total savings of approximately $113 million. We
sought comment on this estimate.
Comment: While we did not receive specific comments on this
estimate, one commenter did note that they supported the proposal but
encouraged HHS to consider the costs and benefits of any new evidence-
based alternative approach for employer-sponsored coverage verification
and to assess whether any benefits would be significant enough to
warrant future regulatory action on this issue.
Response: Given HHS's own findings that the manual verification
process described in paragraph (d)(4)(i) requires significant resources
and government funds to fully operationalize, we agree with the
commenter that HHS should consider all costs and benefits of any future
proposed verification process that is evidence-based as we do not wish
to increase administrative burden on states, employers, consumers, and
taxpayers. We will continue to explore the best approach for employer
sponsored coverage verification, while taking into consideration the
cost and benefits of such an approach in future rulemaking.
8. Special Enrollment Periods (Sec. 155.420)
a. Exchange Enrollees Newly Ineligible for APTC
We are adding a new paragraph at Sec. 155.420(a)(4)(ii)(C) to
require Exchanges, no later than January 1, 2024, to allow enrollees
and their dependents who qualify for a special enrollment period
because they become newly ineligible for APTC in accordance with
paragraph (d)(6)(i) or (ii) of this section to enroll in a QHP of any
metal level. We anticipate that this change will help reduce Exchanges'
implementation burden by simplifying the policy and providing
additional time to operationalize it, which some Exchanges may need in
light of competing priorities such as the need to implement changes to
calculate financial assistance established in the American Rescue Plan
Act of 2021. We also expect that this policy will help impacted
enrollees' ability to maintain continuous coverage for themselves and
for their dependents in spite of losing a potentially significant
amount of financial assistance to help them purchase coverage. For
example, an enrollee impacted by an increase to his or her monthly
premium payment may change to a bronze-level plan, or to catastrophic
coverage if they are otherwise eligible. Relatedly, this proposal may
benefit the individual market risk pool by encouraging healthy
individuals to maintain continuous coverage. Previously, an enrollee
who lost APTC eligibility had only two choices: Paying the full premium
or terminating his or her coverage. Healthy individuals who lose APTC
may be more likely to terminate coverage due to increased premium
liability, while enrollees who have one or more medical conditions will
be incentivized to maintain coverage in spite of the additional
expense. This provision will serve to facilitate continuous coverage of
healthy individuals by giving them the ability to enroll in a new plan
with a lower premium, thereby supporting a healthier risk pool.
Finally, the American Rescue Plan Act of 2021 will prevent some
individuals from losing a significant amount of APTC based on a
relatively small change in household income, because it allows
individuals whose household income exceeds 400 percent FPL to qualify
for a premium tax credit if they are otherwise eligible. However, we
believe that some consumers will still benefit from this flexibility to
plan category limitations, in part because, as described in preamble,
there are scenarios other than a household income increase that may
[[Page 24278]]
cause consumers to become ineligible for APTC.
As discussed in the proposed rule, we did not believe that this
change would have a negative impact on the individual market risk pool,
because most applicable enrollees would be seeking to change coverage
based on financial rather than health needs. However, we sought comment
on concerns about adverse selection risk with permitting newly
unsubsidized enrollees to change to any plan of a lower metal level to
help them maintain coverage (for example, permitting an individual to
change from a gold plan to a bronze plan), or whether this risk would
be significantly lower if we only permitted an enrollee to change to a
plan one metal level lower than their current QHP. We also requested
comment from issuers on whether there were concerns about impacts such
as experiencing a decrease in premium receipts from enrollees who opted
to change to a lower-cost plan, or whether they view adverse selection
as a possibility.
Additionally, we solicited comments on the extent to which
Exchanges would experience burden due to the proposed change, and on
whether we should exempt the special enrollment periods at Sec.
155.420(d)(6)(i) and (ii) due to becoming newly ineligible for APTC
from plan category limitations altogether to help to mitigate this
burden, or whether such a change would significantly increase risk for
adverse selection.
Finally, we solicited comment on whether this change to current
system logic would impose burden on FFE Direct Enrollment and Enhanced
Direct Enrollment partners, as well as more generally, on the impact of
this proposal.
We received public comments on the potential risk related to the
proposed updates to add new flexibility to allow current Exchange
enrollees and their dependents to enroll in a new QHP of a lower metal
level if they qualify for a special enrollment period due to becoming
newly ineligible for APTC. The following is a summary of the comments
we received and our responses.
Comment: Almost all comments on this proposal were supportive of
this change, for the same reasons that HHS proposed the policy:
Allowing enrollees the flexibility to change to a plan of a lower metal
level based on a loss of APTC will likely allow more individuals to
maintain continuous coverage. No commenters raised concerns that this
policy would increase the risk of adverse selection. One commenter
encouraged us to bear in mind the risks of adverse selection in
general, but did not oppose this proposal and noted that it would help
consumers. Some commenters also noted that this proposal could improve
the individual market risk pool by increasing the likelihood that
Exchange enrollees would maintain coverage in spite of losing financial
assistance. No commenters raised concerns about receiving lower premium
payments from enrollees who opted to change to a plan of a lower metal
level. Many commenters supported allowing individuals who qualify for a
special enrollment period based on a loss of APTC eligibility to change
to a plan of any metal level, either to provide enrollees with
flexibility to change to the best plan for themselves and their
families, to make implementation easier for State Exchanges, or both.
One of these commenters requested that instead of applying plan
category limitations, HHS require Exchange enrollees to provide
documents to confirm their SEP eligibility. Some commenters supported
allowing individuals who lose APTC eligibility to change to a plan of a
higher or lower metal level rather than just to a plan of a lower metal
level. No commenters raised concerns about this proposal's
implementation burden on direct enrollment or enhanced direct
enrollment partners. Finally, many commenters disagreed with the need
to require plan category limitations in general, and requested that HHS
provide Exchanges with flexibility in terms of when or whether to
implement plan category limitations at all based on considerations
related to their specific State Exchange's market.
Response: We agree with commenters that allowing enrollees to
access a plan at any metal level through this existing special
enrollment period, rather than only allowing them to change to a plan
of a lower metal level, will significantly decrease Exchange
implementation complexity and cost. As discussed earlier in the
preamble, we also agree with commenters who suggested that providing
more flexibility for Exchange enrollees in this situation will help
them to stay enrolled in coverage by switching to a new QHP that better
suits their changed financial situation. We also agree with commenters
that this specific policy does not pose adverse selection risk because
enrollees are likely to access it based on a financial change as
opposed to a change in their health care needs. Therefore, we are
finalizing a modified version of this policy to permit Exchange
enrollees who lose APTC eligibility to change to a new plan at any
metal level, and to require that Exchanges implement this change no
later than January 1, 2024 to provide them with potentially necessary
time to account for this change in their operational planning. While
some Exchanges may be able to implement this new flexibility sooner
than January 1, 2024, in light of competing priorities such as the need
to implement changes to calculate financial assistance established in
the American Rescue Plan Act of 2021, we believe that substantial
flexibility for Exchanges is appropriate.
We also clarify that this policy does not create a new special
enrollment period qualifying event, but rather is a change to
limitations on plan selection that apply to an already-existing special
enrollment period for Exchange enrollees who become newly ineligible
for APTC per 45 CFR 155.420(d)(6)(i) and (ii).
We did not propose removing plan category limitations. We will
continue to study potential policies to promote continuous coverage and
provide consumers with flexibility. Finally, we acknowledge the
potential benefit of requiring Exchanges to implement this change
quickly, but we believe that providing Exchanges with flexibility to
implement it no later than January 1, 2024 strikes an appropriate
balance between allowing early implementation if possible and providing
Exchanges with necessary flexibility to plan related system updates
based on Exchange-specific competing priorities and resources, such as
implementation of changes to eligibility for advance payments of the
premium tax credit established by the American Rescue Plan Act of 2021.
b. Special Enrollment Periods--Untimely Notice of Triggering Event
We anticipate that the amendments related to qualified individuals
who do not receive timely notice of a triggering event and otherwise
are reasonably unaware that a triggering event occurred will provide
certain consumers a pathway to maintain continuous coverage, which will
have an overall positive impact on the risk pool and will benefit
consumers. Consumers will benefit from being able to maintain continued
access to coverage and health care. We recognize the possibility of
some minor adverse selection risk given that consumers with known
health issues may be more likely to request a retroactive effective
date than healthy consumers. However, we expect this risk to be very
limited as the proposal only permits individuals to request a
retroactive effective date if they did not
[[Page 24279]]
receive timely notice of a triggering event, and we do not expect this
to happen very often.
We expect that Exchanges and direct enrollment partners might incur
minor costs to update consumer messaging and processes to administer
this proposal. State Exchanges that currently do not have this policy
and issuers offering off-Exchange plans would incur minor costs to
implement this proposal.
We received public comments on the proposed updates to Special
Enrollment Periods--Untimely Notice of Triggering Event. See the
preamble to this provision for a summary of the comments we received
and our responses.
c. Cessation of Employer Contributions and Government Subsidies to
COBRA as Special Enrollment Period Trigger
We anticipate that the amendments regarding special enrollment
period eligibility for qualified individuals whose employers completely
cease payment of their portion of COBRA continuation coverage premiums
will provide clarity regarding a policy that has been operationalized
on HealthCare.gov. In addition, we believe that specifying that
cessation of government subsidies to COBRA is also a special enrollment
period triggering event will help make stakeholders aware of the
options consumers have for enrolling through a special enrollment
period. We also believe that these amendments will benefit direct
enrollment partners and employers by providing clarity regarding
special enrollment period eligibility. In addition, consumers who would
have otherwise lost coverage due to an increase in the cost of their
COBRA continuation coverage will benefit from continuity of coverage
and access to health care.
Although this special enrollment period has already been available
to individuals enrolling in a qualified health plan on Exchanges on the
Federal Platform, because cessation of government subsidies to COBRA
has not previously been considered a triggering event, we do anticipate
that the Exchanges on the Federal platform, direct enrollment partners,
State Exchanges that do not have this policy, and issuers who operate
off-Exchange plans will incur some costs to implement this policy,
especially in light of the projected increase in COBRA enrollments as a
result of the subsidies provided for in the American Rescue Plan Act of
2021.\344\ However, due to the similarity between cessation of employer
contributions to COBRA, which has already been a special enrollment
period trigger on Exchanges on the Federal platform, and government
subsidies, we do not believe these amendments will have a negative
impact on the risk pool for Federally-facilitated Exchanges. However,
we do anticipate that there may be some negative impact to the risk
pool in State Exchanges and in the off-Exchange individual market where
this special enrollment period has not previously been available.
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\344\ https://www.cbo.gov/system/files/2021-02/hEdandLaborreconciliationestimate.pdf. These projections from the
CBO reference an earlier version of the legislation in which
enrollees would have been required to pay 15 percent of the COBRA
premium, whereas the final version that was passed subsidizes COBRA
premiums at 100 percent. Thus these projections may underestimate
the increase in enrollments in COBRA as a result of the subsidies.
---------------------------------------------------------------------------
We received public comments on the proposed updates to cessation of
employer contributions to COBRA as special enrollment period trigger.
The following is a summary of the comment we received and our response.
Comment: One commenter, while not opposing the proposal, expressed
concern regarding the potential impact on adverse selection and premium
costs of providing a pathway for those who were enrolled in COBRA
continuation coverage to enroll in individual market coverage, given
the likelihood of this population having increased claims. In addition,
this commenter expressed concern that the requirements of this proposal
would be burdensome for employers, as they would need to make changes
to current COBRA administration procedures in order to be able to
verify eligibility for this special enrollment period. They also noted
that the existence of this special enrollment period could reduce the
number of employers willing to provide COBRA subsidies as part of a
severance package. Another commenter expressed support for the
proposal, and stated that because the special enrollment period is
based on reduced affordability of coverage rather than a health
condition, it avoids concerns regarding adverse selection, and in fact
will likely benefit the risk pool overall by encouraging younger
individuals to enroll. A State Exchange noted that, because loss of
COBRA coverage is used infrequently as a triggering event on its State
Exchange, this policy would be unlikely to impact premium costs or the
risk pool.
Response: We note that enrollments through this special enrollment
period based on cessation of employer contributions to COBRA has
already been available on Exchanges on the Federal platform, and thus
this policy is unlikely to result in changes for issuers on such
Exchanges as a result of adverse selection or for consumers in the form
of premium increases. In addition, for State Exchanges and off-Exchange
issuers who have not treated cessation of employer contributions to
COBRA continuation coverage as a special enrollment period triggering
event, we expect, based on a recent CBO analysis projecting low overall
enrollment in COBRA among the eligible population,\345\ as well as the
comment on this provision from a State Exchange noting that loss of
COBRA coverage is used infrequently as a triggering event on its
Exchange, that the volume of enrollments through this special
enrollment period based on cessation of employer contributions will be
low. However, the inclusion of government subsidies to COBRA coverage
as a special enrollment period trigger may lead to an increase in
uptake of COBRA coverage among the eligible population, and a
corresponding increase in enrollments through this special enrollment
period for Exchanges using the Federal platform, State Exchanges, and
off-Exchange issuers, and thereby have a negative impact on these risk
pools and on premiums.
---------------------------------------------------------------------------
\345\ https://www.cbo.gov/system/files/2021-02/hEdandLaborreconciliationestimate.pdf.
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The aforementioned CBO analysis notes however that many of the
enrollees who are projected to enroll in COBRA as a result of the
federal subsidies would have otherwise enrolled in individual market
coverage,\346\ thus limiting the potential negative impact.
Additionally, because this provision does not impose any new
requirements on employers or increase the opportunity to enroll in
employer-sponsored coverage, it is unlikely that it will discourage
them from providing COBRA subsidies as part of a severance package, nor
is it likely to provide additional administrative burden. Because this
special enrollment period provides a pathway to individual health
insurance coverage for individuals whose employer ceases contributions
to their COBRA coverage, this provision may, in fact, increase the
number of employers willing to provide contributions to former
employees' COBRA coverage.
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\346\ https://www.cbo.gov/system/files/2021-02/hEdandLaborreconciliationestimate.pdf.
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9. Provisions Related to Cost Sharing (Sec. 156.130)
As described earlier in the preamble, we are finalizing a premium
adjustment percentage of 1.3760126457 for the 2022 benefit year. The
annual premium
[[Page 24280]]
adjustment percentage is used to set the rate of increase for several
parameters detailed in the ACA, including: The annual limitation on
cost sharing (defined at Sec. 156.130(a)), the required contribution
percentage used to determine eligibility for certain exemptions under
section 5000A of the Code (defined at Sec. 155.605(d)(2)), and the
employer shared responsibility payments under sections 4980H(a) and
4980H(b) of the Code. Additionally, we finalized other cost-sharing
parameters using an index based on the final premium adjustment
percentage for the 2022 benefit year.
In accordance with Sec. 155.605(d)(2), we are finalizing a
required contribution of 8.09 percent for the 2022 benefit year, which
reflects the premium adjustment percentage calculation for the 2022
benefit year detailed in preamble. In accordance with Sec.
156.130(a)(2), we are finalizing a maximum annual limitation on cost
sharing of $8,700 for self-only coverage and $17,400 for other than
self-only for the 2022 benefit year. The CMS Office of the Actuary
estimates that the change in measure of premium growth from using
private health insurance (excluding Medigap, and property and casualty
insurance) to ESI to calculate the premium adjustment percentage may
have the following impacts between 2022 and 2026.\347\
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\347\ CMS Office of the Actuary's estimates are based on their
health reform model, which is an amalgam of various estimation
approaches involving federal programs, employer-sponsored insurance,
and individual insurance choice models that ensure consistent
estimates of coverage and spending in considering legislative
changes to current law.
[GRAPHIC] [TIFF OMITTED] TR05MY21.031
As noted in Table 15, we expect that the change in measure of
premium growth used to calculate the premium adjustment percentage
index for the 2022 benefit year and beyond will likely result in:
---------------------------------------------------------------------------
\348\ The American Rescue Plan Act of 2021 Public Law 117-2 (3/
11/2021) amends Section 36B(b)(3)(A) of the Internal Revenue Code of
1986 to lower the applicable percentage for taxpayers at all FPL
levels, and includes taxpayers with an income of 400 percent FPL or
higher to be eligible for premium tax credits. The effects of the
American Rescue Plan Act of 2021 are expected to supplant the
economic impacts of finalizing the premium adjustment percentage and
cost-sharing parameters using the NHEA ESI premium measure for the
2022 benefit year.
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Net premium decreases of approximately $181 million per
year, which is approximately one percent of 2018 benefit year net
premiums, for the 2024 benefit year through the 2026 benefit year.
An increase in federal premium tax credit spending of $460
million to $510 million between 2023 and 2026, due to the decrease in
the applicable percentage table, based on an assumption that the
Department of the Treasury and the IRS will adopt the use of the NHEA
ESI premium measure finalized for the calculation of the premium
adjustment percentage in this rule for the purposes of calculating the
indexing of the premium tax credit applicable percentage and required
contribution percentage under section 36B of the Code.
We are also finalizing the proposed rates of reductions to the
maximum annual limitation on cost sharing of \2/3\ for enrollees with a
household income between 100 and 200 percent of FPL, \1/5\ for
enrollees with a household income between 200 and 250 percent of FPL,
and no reduction for individuals with household incomes of 250 to 400
percent of FPL for the 2022 benefit year and beyond. We are finalizing
the proposed methodology to ensure that these reductions do not result
in unacceptably high AVs. We do not anticipate that the rates of
reduction and the methodology will result in significant economic
impact because these rates of reduction and the AV-impact testing
methodology have remained consistent since the 2014 Payment Notice.
We are also finalizing that beginning with the 2023 benefit year,
we will publish the premium adjustment percentage, maximum annual
limitation on cost sharing, reduced maximum annual limitations on cost
sharing, and required contribution percentage in guidance in January of
the calendar year preceding the benefit year to which the parameters
are applicable, unless HHS is changing the methodology, in which case
we will do so through the applicable HHS notice of benefit and payment
parameters. This policy change affects only the timing and method by
which these parameters are released and will provide issuers with
additional time for plan design and rate setting.
10. Prescription Drug Distribution and Cost Reporting by QHP Issuers
(Sec. 156.295) and PBMs (Sec. 184.50)
As part of the ACA, Congress passed section 6005, which added
section 1150A to the Act, requiring a PBM under a contract with a QHP
offered through an Exchange established by a state under section 1311
of the ACA \349\ to provide certain prescription drug information to
the QHP and to Secretary at such times, and in such form and manner, as
the Secretary shall specify. Section 1150A(b) of the Act addresses the
information that a QHP issuer and their PBM must report. Section
[[Page 24281]]
1150A(c) of the Act requires the Secretary to keep the information
reported confidential and specifies that the information may not be
disclosed by the Secretary or by a plan receiving the information,
except that the Secretary may disclose the information in a form which
does not disclose the identity of a specific PBM, plan, or prices
charged for drugs for certain purposes.\350\
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\349\ This includes an FFE, as a Federal Exchange may be
considered an Exchange established under section 1311 of the ACA.
King v. Burwell, 576 U.S. 988 (2015).
\350\ The purposes are: As the Secretary determines to be
necessary to carry out section 1150A or part D of title XVIII; to
permit the Comptroller General to review the information provided;
to permit the Director of the Congressional Budget Office to review
the information provided; and, to States to carry out section 1311
of the ACA.
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On January 1, 2020 \351\ and on September 11, 2020,\352\ we
published notices in the Federal Register and solicited public comment
on the burden related to the collection of information required by
section 1150A of the Act. In those information collections and in this
final rule, we fulfill this statutory requirement with the goal of
imposing the least amount of burden possible while collecting data that
would be usable to ensure increased transparency on prescription drug
coverage in QHPs.
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\351\ 85 FR 4993 through 4994.
\352\ 85 FR 56227 through 56229.
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For example, to reduce overall burden, we will collect data
directly from PBMs that contract with QHPs directly, rather than
require QHP issuers to serve as a go-between their PBM and CMS.\353\
This approach will reduce overall burden on QHP issuers and will place
the onus to report data on those entities that QHP issuers have already
entrusted to oversee and manage their prescription drug line of
business.
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\353\ Under this interpretation, QHP issuers will be required to
report data directly to CMS only when the QHP issuer does not
contract with a PBM to administer their drug benefit.
---------------------------------------------------------------------------
These information collections also explained how we utilize the
reporting paradigm currently used by CMS' DIR reporting requirement
which collects, in part, the data required by section 1150A(a)(1) of
the Act from Prescription Drug Plan sponsors of a prescription drug
plan and Medicare Advantage organizations offering a Medicare Advantage
Prescription Drug Plan under part D of title XVII. We noted our
intention to utilize the DIR reporting mechanisms only to the extent
authorized solely by section 1150A(a)(2), explaining our understanding
that DIR reporting is not authorized by section 1150A alone.\354\ Usage
of these existing CMS reporting paradigms ensures minimal impact of a
new data collection on QHP issuers and PBMs, given the longstanding
industry use of the DIR reporting mechanism. The payer community is
familiar with fulfilling the DIR reporting requirement. Therefore, we
believe replicating that collection to the greatest degree will enable
respondents to implement this data collection with minimal relative
burden.
---------------------------------------------------------------------------
\354\ Except for PBM spread amount aggregated to the plan
benefit package level, section 1150A imposes no additional reporting
requirements for entities subject to DIR reporting. See 77 FR 22094.
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11. Audits of APTC, CSRs, and User Fees (Sec. 156.480(c))
We are providing more clarity around the APTC, CSR, and user fee
program audits and establishing authority for HHS to conduct compliance
reviews to assess compliance with federal APTC, CSR, and user fee
standards by finalizing amendments to Sec. 156.480(c), with slight
modifications to certain audit timeframes in response to comments
requesting issuers be provided more time to provide the initial audit
data submissions and written corrective action plans. QHP issuers being
audited for compliance with federal APTC, CSR, and user fee standards
will be required to comply with audit requirements including
participating in entrance and exit conferences, submitting complete and
accurate data to HHS in a timely manner, and providing responses to
additional requests for information from HHS and to preliminary audit
reports in a timely manner. If an audit results in a finding, issuers
must also provide written corrective plans in the time and manner set
forth by HHS. We are also codifying our authority to recoup APTC and
CSR payments if they are not adequately substantiated by the data and
information submitted by issuers during the course of the audit.
We anticipate that compliance with APTC, CSR, and user fee program
audits will take 120 hours by a business operations specialist (at a
rate of $77.14 per hour), 40 hours by a computer systems analyst (at a
rate of $92.46 per hour), and 20 hours by a compliance officer (at a
rate of $70.06 per hour) per issuer per benefit year. The cost per
issuer will be approximately $14,356. While the number of QHP issuers
participating in the APTC, CSR, and user fee programs varies per
benefit year (for example, there were 561 QHP issuers participating in
the programs for the 2019 benefit year), HHS only intends to audit a
small percentage of these issuers, roughly 30-60 issuers per benefit
year. Depending on the number of issuers audited each year, the total
cost to issuers being audited will be between $430,692 and $861,384,
with an average annual cost of approximately $646,038.
We anticipate that APTC, CSR, and user fee program compliance
reviews will take 30 hours by a business operations specialist (at a
rate of $77.14 per hour), 10 hours by a computer systems analyst (at a
rate of $92.46 per hour), and 5 hours by a compliance officer (at a
rate of $70.06 per hour) per issuer per benefit year. The cost per
issuer will be approximately $3,589. While the number of QHP issuers
participating in the APTC, CSR, and user fee programs varies per
benefit year, (for example, there were 561 QHP issuers participating in
the programs for the 2019 benefit year), HHS only intends to conduct
compliance reviews for no more than 15 issuers per benefit year. The
total annual cost to issuers undergoing compliance reviews will be
approximately $53,836.
12. Quality Rating System (Sec. 156.1120) and Enrollee Satisfaction
Survey System (Sec. 156.1125)
We are finalizing removal of the composite level and domain level
of the QRS hierarchy, which is a key element of the QRS framework that
establishes how quality measures are organized for scoring, rating and
reporting purposes. We will also make the full QHP Enrollee Survey
results publicly available in an annual PUF. We anticipate that these
changes will benefit consumers and QHP issuers by increasing
transparency and availability of QHP survey data through publication of
a nationwide PUF, and simplifying the QRS scoring hierarchy to improve
understanding of QRS quality rating information and alignment with
other CMS quality reporting programs. Neither refinement will alter the
data collection and reporting requirements for the QRS and QHP Enrollee
Survey because QHP issuers are already required to report all data
needed to support a QHP Enrollee Survey PUF and simplified QRS
hierarchy. Therefore, these refinements will create no additional cost
or burden for QHP issuers.
13. Medical Loss Ratio (Sec. Sec. 158.103, 158.130, 158.240, and
158.241)
We are finalizing the proposal to amend Sec. 158.103 to establish
the definition of prescription drug rebates and other price concessions
that issuers must deduct from incurred claims for MLR reporting and
rebate calculation purposes pursuant to Sec. 158.140(b)(1)(i). We do
not expect this to change the result of the regulatory impact analysis
previously conducted for the 2021 Payment Notice with respect to the
requirement that issuers deduct from MLR incurred claims not only
prescription drug rebates received by
[[Page 24282]]
the issuer, but also any price concessions received and retained by the
issuer and any prescription drug rebates and other price concessions
received and retained by a PBM or other entity providing pharmacy
benefit management services to the issuer.
We are also finalizing the proposal that issuers that choose to
provide temporary premium credits to consumers during a declared PHE in
2021 and beyond when permitted by HHS must account for these credits as
reductions to premium for the applicable months when reporting earned
premium for the applicable MLR reporting year. Although we do not know
how many states will permit issuers to provide temporary credits to
reduce premiums or how many issuers will elect to do so, for purposes
of this analysis, we previously estimated in the interim final rule on
COVID-19 (85 FR 54820) that approximately 40 percent of issuers
offering individual, small group or merged market health insurance
coverage will provide these premium credits to reduce the premiums
charged to enrollees to support continuity of coverage during the PHE
for COVID-19. We do not estimate a change to the cost or burden
previously estimated in that final rule, and anticipate that that
regulatory impact estimate would extend to 2021 and beyond. Although we
do not know the number of issuers that will provide these temporary
premium credits or the amount of premium credits that issuers may elect
to provide, for purposes of this estimate we assume that such premium
credits will on average constitute approximately 8 percent of total
annual premium (equivalent to one month of premium), as previously
estimated in that final rule. Because the MLR calculation uses three
consecutive years of data, there may be additional rebate decreases in
subsequent years, although the impact on rebates might be smaller as
issuers will likely account for the premium relief provided to
enrollees through these temporary premiums credits at the time they
develop premium rates for the 2022 benefit year and future benefit
years.
As noted in section IV of this final rule, on March 4, 2021, the
U.S. District Court for the District of Maryland, in City of Columbus,
et al. v. Cochran, vacated 45 CFR 158.221(b)(8). As a result, we are
finalizing the deletion of Sec. 158.221(b)(8) and removing the option
that issuers had for the 2017-2019 MLR reporting years to report a
single standardized QIA expense amount equal to 0.8 percent of earned
premium in lieu of reporting the issuers' actual expenditures for
activities that improve health care quality. The 0.8 percent QIA option
was added to 45 CFR part 158 in the 2019 Payment Notice final rule in
order to reduce the burden on issuers required to accurately identify,
track, and report QIA expenses. In that final rule, based on MLR data
for the 2015 MLR reporting year, HHS estimated that the amendment would
decrease rebate payments from issuers to consumers by approximately $23
million. Accordingly, we estimate that finalizing the deletion of Sec.
158.221(b)(8) in this final rule will increase rebate payments from
issuers to consumers by approximately $23 million annually.
We are also finalizing the proposal to add a new Sec. 158.240(g)
to explicitly allow issuers to prepay a portion or all of their
estimated MLR rebates to enrollees for a given MLR reporting year, and
to establish a safe harbor allowing such issuers, under certain
conditions, to defer the payment of rebates remaining after prepayment
until the following MLR reporting year. We are additionally finalizing
the proposal to amend Sec. 158.241(a) to allow issuers to provide
rebates in form of a premium credit prior to the date that the rules
previously provided. We do not expect these provisions to have a
significant quantitative impact as they will not change the rebate
amounts provided by issuers to enrollees. Since it is easiest and most
cost-effective for issuers to conduct rebate disbursement activities
all at once, the additional rebates will generally be paid during the
following year's disbursement cycle--that is, if 95 percent of rebates
for 2020 was prepaid during Jan.-July 2021, the remainder will be paid
no later than Sept. 2022 (possibly earlier in 2022 if the issuer
decides to prepay again). However, we note that there may be some
increased administrative burden on issuers that owe rebates remaining
after prepayment associated with good faith efforts to locate
enrollees, if any, with whom they no longer have a direct economic
relationship.
14. Regulatory Review Costs
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this final rule, we
should estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the rule, we assume that this rule will be reviewed by
all affected issuers, states, PBMs, and some individuals and other
entities that commented on the proposed rule. We acknowledge that this
assumption may understate or overstate the costs of reviewing this
rule. It is possible that not all commenters reviewed the proposed rule
in detail, and it is also possible that some reviewers chose not to
comment on the proposed rule. For these reasons we thought that the
number of affected entities and commenters to be a fair estimate of the
number of reviewers of this rule.
We are required to issue a substantial portion of this rule each
year under our regulations and we estimate that approximately half of
the remaining provisions would cause additional regulatory review
burden that stakeholders do not already anticipate. We also recognize
that different types of entities are in many cases affected by mutually
exclusive sections of this final rule, and therefore, for the purposes
of our estimate we assume that each reviewer reads approximately 50
percent of the rule, excluding the portion of the rule that we are
required to issue each year.
Using the wage information from the BLS for medical and health
service managers (Code 11-9111), we estimate that the cost of reviewing
this rule is $110.74 per hour, including overhead and fringe
benefits.\355\ Assuming an average reading speed, we estimate that it
will take approximately 1 hours to review the relevant portions of this
final rule that causes unanticipated burden. We assume that 750
entities will review this final rule. For each entity that reviews the
rule, the estimated cost is approximately $110.74. Therefore, we
estimate that the total cost of reviewing this regulation is
approximately $83,055 ($110.74 x 750 reviewers).
---------------------------------------------------------------------------
\355\ https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------
D. Regulatory Alternatives Considered
In developing the policies contained in this final rule, we
considered numerous alternatives to the presented proposals. Below we
discuss the key regulatory alternatives that we considered.
Under part 153 of this final rule, we are finalizing an approach to
recalibrate the risk adjustment models for the 2022 benefit year using
2016, 2017, and 2018 enrollee-level EDGE data.\356\ The purpose of
using these data years is to better ensure that the applicable benefit
year's risk adjustment model coefficients can be included in the
applicable benefit year's proposed payment notice. As part of our
consideration of proposals to recalibrate the risk adjustment models
for the 2022 benefit year, we also considered recalibrating the models
using the 2017,
[[Page 24283]]
2018, and 2019 benefit year enrollee-level EDGE data. If we had
proposed that approach, we would not have been able to provide the
proposed coefficients in the proposed rule and would have had to
instead display draft coefficients only reflective of the 2017 and 2018
benefit years of enrollee-level EDGE data. This approach would not have
achieved the desired policy goals--namely, to respond to stakeholder
requests for HHS to take steps to provide the draft and final
coefficients at an earlier time.
---------------------------------------------------------------------------
\356\ As detailed above, the one exception relates to RXC 09,
which involved the use of only 2016 and 2017 enrollee-level data to
develop the applicable 2022 benefit year coefficients and
interaction terms.
---------------------------------------------------------------------------
We also considered alternatives to the proposed model specification
changes and revised enrollment duration factors that we are not
finalizing in this rulemaking. For example, we initially considered
adding only a non-linear term or only adopting new HCC counts terms for
all enrollees to the adult and child risk adjustment models. As
described earlier in this final rule, we had convergence issues with
the non-linear model specifications and concerns that the HCC counts
terms approach posed significant gaming concerns when pursued
separately.
In addition to the non-linear and HCC counts model specifications,
we also considered alternatives to the two-stage specification and HCC
interacted counts model. Specifically, we tested various alternative
caps for the weights based on the distribution of costs, but found the
finalized caps resulted in better prediction on average. For the
prediction weights, we tested various alternative forms of weights,
including reciprocals of square root of prediction, log of prediction,
and residuals from first step estimation, but the reciprocal of the
capped predictions resulted in better predictive ratios for low-cost
enrollees compared to any of the other weights.
For the interacted HCC counts factors, we tested several HCCs and
considered adding and removing certain HCCs from the list in Table 3 in
the proposed rule. We choose the list of HCCs in Table 3 of the
proposed rule because including those HCCs most improved prediction for
enrollees with the highest costs, multiple HCCs, and with these
specific HCCs. For the HCC interacted counts, we also considered
various alternatives to structure the interacted HCC counts, such as
applying individual interacted HCC counts factors (between 1-10 based
on the number of HCCs an enrollee has) to each of the selected HCCs
included in the models (instead of combining all of the selected HCCs
into two severity and transplant indicator groups). We choose the
proposed model specifications because they would add fewer additional
factors to the models without sacrificing any significant predictive
accuracy. However, as noted above, after consideration of comments, we
are not finalizing the adoption of the either the proposed two-stage
model specification or interacted HCC counts factors in the adult and
child models or the accompanying removal of the existing severity
illness indicators from the adult models.
For the enrollment duration factors in the adult risk adjustment
models, we proposed modifying the enrollment duration factors to apply
monthly duration factors of up to 6 months for those with HCCs. The
purpose of this proposed change was to address the underprediction of
plan liability for adults with HCCs. As part of this assessment, we
considered whether enrollment duration factors by market type may be
warranted. However, as described earlier in this final rule, we did not
find a major distinction in market-specific incremental monthly
enrollment duration factor risk scores after isolating the enrollment
duration factors to enrollees with HCCs. However, as detailed above,
after consideration of comments, we are not finalizing the adoption of
the new proposed adult model enrollment duration factors or the
accompanying removal of the current adult model enrollment duration
factors.
In regards to the changes to Sec. 155.320, we considered taking no
action to modify the requirement that when an Exchange does not
reasonably expect to obtain sufficient verification data related to
enrollment in or eligibility for employer sponsored coverage that the
Exchange must select a statistically significant random sample of
applicants and attempt to verify their attestation with the employer
listed on their Exchange application. However, based on HHS's
experience conducting sampling, this manual verification process
requires significant resources for a low return on investment, as using
this method HHS identified only a small population of applicants who
received APTC/CSR payments inappropriately. We ultimately determined
that a verification process for employer-sponsored coverage should be
one that is evidence or risk-based and that not taking enforcement
action against Exchanges that do not conduct random sampling was
appropriate as we anticipate future rulemaking is necessary to ensure
that Exchanges have more flexibility for such verifications.
We considered taking no action regarding our policy to add a new
Sec. 155.420(a)(4)(iii)(C) to allow enrollees and their dependents to
enroll in a new QHP of a lower metal level \357\ if they qualify for a
special enrollment period due to becoming newly ineligible for APTC.
However, based on questions and concerns from agents and brokers, the
previous policy prevents some enrollees from maintaining continuous
coverage because they lose a significant amount of financial assistance
that would help them purchase coverage, and cannot enroll in a new,
less costly QHP of a lower metal level. HHS believes this policy is
unlikely to result in adverse selection, and may improve the risk pool
by supporting continued health insurance enrollment by healthy
individuals who would be forced to end coverage in response to an
increase in premium.
---------------------------------------------------------------------------
\357\ Section 1302(d) of the ACA describes the various metal
levels of coverage based on AV, and section 2707(a) of the PHS Act
directs health insurance issuers that offer non-grandfathered health
insurance coverage in the individual or small group market to ensure
that such coverage includes the EHB package, which includes the
requirement to offer coverage at the metal levels of coverage
described in section 1302(d) of the ACA. Consumer-facing
HealthCare.gov content explains that metal levels serve as an
indicator of ``how you and your plan split the costs of your health
care,'' noting that lower levels like bronze plans have lower
monthly premiums but higher out of pocket costs when consumers
access care, while higher levels like gold have higher monthly
premiums but lower out of pocket costs to access care--see https://www.healthcare.gov/choose-a-plan/plans-categories/.
---------------------------------------------------------------------------
We also considered whether to provide additional flexibility to
allow enrollees and their dependents who become newly eligible for APTC
in accordance with section 155.420(d)(6)(i) or (ii) to enroll in a QHP
of a higher metal level, because we recognize becoming newly eligible
for APTC may increase the affordability of higher metal level plans for
some individuals. However, as discussed in the proposed rule, we
believed including this flexibility would largely exempt the special
enrollment periods at paragraph (d)(6)(i) and (ii) from the rules at
155.420(a)(4)(iii), which might make it likely that more individuals
would change coverage levels in response to health status changes. More
importantly, while we believe the flexibilities for individuals who
become newly ineligible for APTC are needed in order to promote
continuous coverage for individuals who can no longer afford their
original plan choice, no similar affordability and continuous coverage
concerns exist for enrolled consumers who gain APTC eligibility during
the coverage year. However, as noted in preamble, we received several
comments requesting that HHS provide this flexibility for enrollees who
newly become eligible for APTC. Therefore,
[[Page 24284]]
while we did not propose additional plan flexibility for enrollees who
become newly eligible for APTC, we will continue to study potential
policies to promote continuous coverage and provide consumers with
flexibility.
We considered taking no action regarding our policy to add a new
Sec. 155.420(c)(5) to allow a qualified individual, dependent or
enrollee that did not receive timely notice of a triggering event or
was otherwise reasonably unaware that a triggering event described in
Sec. 155.420(d) occurred to select a new plan within 60 days of the
date he or she knew, or reasonably should have known, of the occurrence
of the triggering event. However, in some circumstances this would
result in consumers, through no fault of their own, being unable to
access a special enrollment period for which they were eligible.
Additionally, we considered not adding new Sec. 155.420(b)(5) to
provide a qualified individual, dependent, or enrollee described in new
Sec. 155.420(c)(5) with the option for a retroactive effective date.
Failing to provide the option for a retroactive effective date would
necessarily result in a gap in coverage, and therefore hinder a
consumer's ability to maintain continuous coverage.
We also considered limiting the applicability of the policy to add
a new Sec. 155.420(c)(5) to a qualified individual, enrollee, or
dependent who does not receive notice or become reasonably aware of the
occurrence of a triggering event until more than 15 days after the
triggering event. However, failing to apply the new Sec. 155.420(c)(5)
to qualified individuals, enrollees, or dependents who receive notice
or become reasonably aware of the occurrence of a triggering event 15
days or less after the triggering event and eliminating the option for
a retroactive effective date for those individuals would result in a
gap in coverage for such individuals and hinder their ability to
maintain continuous coverage.
We considered taking no action regarding our policy to add new
paragraph (d)(15) to Sec. 155.420 to specify that complete cessation
of employer contributions or government subsidies to COBRA continuation
coverage is a special enrollment period triggering event. However,
codifying this policy in regulation provides transparency to a long-
standing interpretation of the Exchanges on the Federal platform.
Additionally, codifying this policy in regulation ensures alignment
across all Exchanges and in the off-Exchange individual market.
For the revisions to Sec. 156.295 and addition of Sec. 184.50 to
require certain prescription drug reporting, we considered, but did not
yet require, the reporting of data described in section 1150A(b)(1)
broken down by pharmacy type (which includes an independent pharmacy,
chain pharmacy, supermarket pharmacy, or mass merchandiser pharmacy
that is licensed as a pharmacy by the state and that dispenses
medication to the general public). As mentioned in this final rule, we
are aware that it is not currently possible to report such data by
pharmacy type because pharmacy type is not a standard classification
currently captured in industry databases or files. While we believe the
imposition of this level of reporting would impose unreasonable burden
at this time, we intend to begin collecting this information in the
future.
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.
In this rule, we finalize standards for the risk adjustment
program, which are intended to stabilize premiums and reduce incentives
for issuers to avoid higher-risk enrollees. We believe that health
insurance issuers and group health plans would be classified under the
North American Industry Classification System code 524114 (Direct
Health and Medical Insurance Carriers). According to SBA size
standards, entities with average annual receipts of $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.\358\ We believe that few, if
any, insurance companies underwriting comprehensive health insurance
policies (in contrast, for example, to travel insurance policies or
dental discount policies) fall below these size thresholds. Based on
data from MLR annual report \359\ 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,
we do not expect the provisions of this rule to affect a substantial
number of small entities.
---------------------------------------------------------------------------
\358\ https://www.sba.gov/document/support--table-size-standards.
\359\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------
In this rule, we are requiring certain QHP issuers or their PBMs to
report certain prescription drug information to CMS. We are not aware
of any QHP issuer or PBM that contracts with a QHP issuer to administer
their prescription drug benefit which would be considered a ``small
entity'' under the RFA.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis 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, we 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, we have determined that this rule
will not affect small rural hospitals. Therefore, the Secretary has
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. In 2021 that threshold is approximately $158
[[Page 24285]]
million. Although we have not been able to quantify all costs, we
expect the combined impact on state, local, or Tribal governments and
the private sector to be below the threshold.
G. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a final rule that imposes substantial
direct costs on state and local governments, preempts state law, or
otherwise has federalism implications. In our 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, we
have engaged in efforts to consult with and work cooperatively with
affected states, including participating in conference calls with and
attending conferences of the NAIC, and consulting with state insurance
officials on an individual basis.
While developing this rule, we attempted to balance the states'
interests in regulating health insurance issuers with the need to
ensure market stability. By doing so, we complied with the requirements
of Executive Order 13132.
Because states have flexibility in designing their Exchange and
Exchange-related programs, state decisions will ultimately influence
both administrative expenses and overall premiums. States are not
required to establish an Exchange or risk adjustment program. For
states that elected previously to operate an Exchange, 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. Pursuant to 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, Elizabeth Richter, Acting Administrator of the Centers for
Medicare & Medicaid Services, approved this document on April 21, 2021.
List of Subjects
45 CFR Part 147
Age discrimination, Citizenship and naturalization, Civil rights,
Health care, Health insurance, Individuals with disabilities,
Intergovernmental relations, Reporting and recordkeeping requirements,
Sex discrimination.
45 CFR Part 150
Administrative practice and procedure, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.
45 CFR Part 153
Administrative practice and procedure, Health care, Health
insurance, Health records, Intergovernmental relations, Organization
and functions (Government agencies), Reporting and recordkeeping
requirements.
45 CFR Part 155
Administrative practice and procedure, Advertising, 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.
45 CFR Part 158
Administrative practice and procedure, Claims, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.
45 CFR Part 184
Administrative practice and procedure, Consumer protection, Health
care, Health insurance, Health maintenance organization (HMO),
Organization and functions (Government agencies), Prescription Drugs,
Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, under the authority at 5
U.S.C. 301, the Department of Health and Human Services proposes to
amend 45 CFR subtitle A, subchapter B, as set forth below.
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
1. The authority citation for part 147 continues to read as follows:
Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92, as amended, and section 3203, Pub. L. 116-136, 134 Stat.
281.
0
2. Section 147.104 is amended by revising paragraphs (b)(2)(ii) and
(4)(ii) to read as follows:
Sec. 147.104 Guaranteed availability of coverage.
* * * * *
(b) * * *
(2) * * *
(ii) In applying this paragraph (b)(2), a reference in Sec.
155.420 (other than in Sec. Sec. 155.420(a)(5) and (d)(4)) of this
subchapter to a ``QHP'' is deemed to refer to a plan, a reference to
``the
[[Page 24286]]
Exchange'' is deemed to refer to the applicable State authority, and a
reference to a ``qualified individual'' is deemed to refer to an
individual in the individual market. For purposes of Sec.
155.420(d)(4) of this subchapter, ``the Exchange'' is deemed to refer
to the Exchange or the health plan, as applicable.
* * * * *
(4) * * *
(ii) In the individual market, subject to Sec. 155.420(c)(5) of
this subchapter, individuals must be provided 60 calendar days after
the date of an event described in paragraph (b)(2) and (3) of this
section to elect coverage, as well as 60 calendar days before certain
triggering events as provided for in Sec. 155.420(c)(2) of this
subchapter.
* * * * *
PART 150--CMS ENFORCEMENT IN GROUP AND INDIVIDUAL INSURANCE MARKETS
0
3. The authority citation for part 150 is revised to read as follows:
Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92, as amended.
Sec. 150.103 [Amended]
0
4. In Sec. 150.103, amend the definition of ``Complaint'' by removing
the word ``HIPAA'' and adding in its place ``PHS Act''.
Sec. 150.205 [Amended]
0
5. In Sec. 150.205, amend paragraph (e)(2) by removing the word
``HIPAA'' and adding in its place ``PHS Act''.
Sec. 150.213 [Amended]
0
6. In Sec. 150.213, amend paragraph (b) by removing the word ``HIPAA''
and adding in its place ``PHS Act''.
Sec. 150.303 [Amended]
0
7. In Sec. 150.303, amend paragraph (a) introductory text by removing
the word ``HIPAA'' and adding in its place ``PHS Act''.
Sec. 150.305 [Amended]
0
8. In Sec. 150.305, amend paragraphs (a)(1), (a)(2), (b)(1), and
(c)(1) by removing the word ``HIPAA'' each time it appears and adding
in its place ``PHS Act''.
Sec. 150.311 [Amended]
0
9. In Sec. 150.311, amend paragraph (g) by removing the word ``HIPAA''
and adding in its place ``PHS Act''.
Sec. 150.313 [Amended]
0
10. In Sec. 150.313, amend paragraph (b) by removing the word
``HIPAA'' and adding in its place ``PHS Act''.
0
11. Amend Sec. 150.401 by revising the definitions of ``Filing date''
and ``Hearing'' to read as follows:
Sec. 150.401 Definitions.
* * * * *
Filing date means the date filed electronically.
Hearing includes a hearing on a written record as well as an in-
person, telephone, or video teleconference hearing.
* * * * *
Sec. 150.419 [Amended]
0
12. In Sec. 150.419, amend paragraph (a) by removing the phrase ``or
by telephone'' and adding in its place the phrase ``by telephone, or by
video teleconference''.
0
13. Amend Sec. 150.427 by revising paragraph (a) introductory text and
paragraph (b) to read as follows:
Sec. 150.427 Form and service of submissions.
(a) Every submission filed with the ALJ must be filed
electronically and include:
* * * * *
(b) A party filing a submission with the ALJ must, at the time of
filing, serve a copy of such submission on the opposing party. An
intervenor filing a submission with the ALJ must, at the time of
filing, serve a copy of the submission on all parties. If a party is
represented by an attorney, service must be made on the attorney. An
electronically filed submission is considered served on all parties
using the electronic filing system.
0
14. Revise Sec. 150.431 to read as follows:
Sec. 150.431 Acknowledgment of request for hearing.
After receipt of the request for hearing, the ALJ assigned to the
case or someone acting on behalf of the ALJ will send a written notice
to the parties that acknowledges receipt of the request for hearing,
identifies the docket number assigned to the case, and provides
instructions for filing submissions and other general information
concerning procedures. The ALJ will set out the next steps in the case
either as part of the acknowledgement or on a later date.
0
15. Amend Sec. 150.441 by revising paragraph (e) to read as follows:
Sec. 150.441 Prehearing conferences.
* * * * *
(e) Establishing a schedule for an in-person, telephone, or video
teleconference hearing, including setting deadlines for the submission
of written direct testimony or for the written reports of experts.
* * * * *
Sec. 150.447 [Amended]
0
16. In Sec. 150.447, amend paragraph (a) by removing the phrase ``or
by telephone'' and adding in its place the phrase ``by telephone, or by
video teleconference''.
PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT
0
17. The authority citation for part 153 continues to read as follows:
Authority: 42 U.S.C. 18031, 18041, and 18061 through 18063.
0
18. Section 153.320 is amended by revising paragraph (c) as follows:
Sec. 153.320 Federally certified risk adjustment methodology.
* * * * *
(c) Use of methodology for States that do not operate a risk
adjustment program. HHS will specify in notice-and-comment rulemaking
by HHS in advance of the applicable benefit year, the Federally
certified risk adjustment methodology that will apply in States that do
not operate a risk adjustment program.
* * * * *
0
19. Section 153.410 is amended by revising paragraph (d) to read as
follows:
Sec. 153.410 Requests for reinsurance payment.
* * * * *
(d) Audits and compliance reviews. HHS or its designee may audit or
conduct a compliance review of an issuer of a reinsurance-eligible plan
to assess its compliance with the applicable requirements of this
subpart and subpart H of this part. Compliance reviews conducted under
this section will follow the standards set forth in Sec. 156.715 of
this subchapter.
(1) Notice of audit. HHS will provide at least 30 calendar days
advance notice of its intent to conduct an audit of an issuer of a
reinsurance-eligible plan.
(i) Conferences. All audits will include an entrance conference at
which the scope of the audit will be presented and an exit conference
at which the initial audit findings will be discussed.
(ii) [Reserved]
(2) Compliance with audit activities. To comply with an audit under
this section, the issuer must:
(i) Ensure that its relevant employees, agents, contractors,
subcontractors,
[[Page 24287]]
downstream entities, and delegated entities cooperate with any audit or
compliance review under this section;
(ii) Submit complete and accurate data to HHS or its designees that
is necessary to complete the audit, in the format and manner specified
by HHS, no later than 30 calendar days after the initial audit response
deadline established by HHS at the entrance conference described in
paragraph (d)(1)(i) of this section for the applicable benefit year;
(iii) Respond to all audit notices, letters, and inquiries,
including requests for supplemental or supporting information, as
requested by HHS, no later than 15 calendar days after the date of the
notice, letter, request, or inquiry; and
(iv) In circumstances in which an issuer cannot provide the
requested data or response to HHS within the timeframes under paragraph
(d)(2)(ii) or (iii) of this section, as applicable, the issuer may make
a written request for an extension to HHS. The extension request must
be submitted within the timeframe established under paragraph
(d)(2)(ii) or (iii) of this section, as applicable, and must detail the
reason for the extension request and the good cause in support of the
request. If the extension is granted, the issuer must respond within
the timeframe specified in HHS's notice granting the extension of time.
(3) Preliminary audit findings. HHS will share its preliminary
audit findings with the issuer, who will then have 30 calendar days to
respond to such findings in the format and manner specified by HHS.
(i) If the issuer does not dispute or otherwise respond to the
preliminary findings, the audit findings will become final.
(ii) If the issuer responds and disputes the preliminary findings,
HHS will review and consider such response and finalize the audit
findings after such review.
(4) Final audit findings. If an audit results in the inclusion of a
finding in the final audit report, the issuer must comply with the
actions set forth in the final audit report in the manner and timeframe
established by HHS, and the issuer must complete all of the following:
(i) Within 45 calendar days of the issuance of the final audit
report, provide a written corrective action plan to HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written documentation of the corrective
actions once taken.
(5) Failure to comply with audit activities. If an issuer fails to
comply with the audit activities set forth in this subsection in the
manner and timeframes specified by HHS:
(i) HHS will notify the issuer of reinsurance payments received
that the issuer has not adequately substantiated; and
(ii) HHS will notify the issuer that HHS may recoup any payments
identified in paragraph (5)(i) of this section.
0
20. Section 153.620 is amended by revising paragraph (c) to read as
follows:
Sec. 153.620 Compliance with risk adjustment standards.
* * * * *
(c) Audits and compliance reviews. HHS or its designee may audit or
conduct a compliance review of an issuer of a risk adjustment covered
plan to assess its compliance with respect to the applicable
requirements in this subpart and subpart H of this part. Compliance
reviews conducted under this section will follow the standards set
forth in Sec. 156.715 of this subchapter.
(1) Notice of audit. HHS will provide at least 30 calendar days
advance notice of its intent to conduct an audit of an issuer of a risk
adjustment covered plan.
(i) Conferences. All audits will include an entrance conference at
which the scope of the audit will be presented and an exit conference
at which the initial audit findings will be discussed.
(ii) [Reserved]
(2) Compliance with audit activities. To comply with an audit under
this section, the issuer must:
(i) Ensure that its relevant employees, agents, contractors,
subcontractors, downstream entities, and delegated entities cooperate
with any audit or compliance review under this section;
(ii) Submit complete and accurate data to HHS or its designees that
is necessary to complete the audit, in the format and manner specified
by HHS, no later than 30 calendar days after the initial audit response
deadline established by HHS at the audit entrance conference described
in paragraph (c)(1)(i) of this section for the applicable benefit year;
(iii) Respond to all audit notices, letters, and inquiries,
including requests for supplemental or supporting information, as
requested by HHS, no later than 15 calendar days after the date of the
notice, letter, request, or inquiry; and
(iv) In circumstances in which an issuer cannot provide the
requested data or response to HHS within the timeframes under
paragraphs (c)(2)(ii) or (iii) of this section, as applicable, the
issuer may make a written request for an extension to HHS. The
extension request must be submitted within the timeframe established
under paragraphs (c)(2)(ii) or (iii) of this section, as applicable,
and must detail the reason for the extension request and the good cause
in support of the request. If the extension is granted, the issuer must
respond within the timeframe specified in HHS's notice granting the
extension of time.
(3) Preliminary audit findings. HHS will share its preliminary
audit findings with the issuer, who will then have 30 calendar days to
respond to such findings in the format and manner specified by HHS.
(i) If the issuer does not dispute or otherwise respond to the
preliminary findings, the audit findings will become final.
(ii) If the issuer responds and disputes the preliminary findings,
HHS will review and consider such response and finalize the audit
findings after such review.
(4) Final audit findings. If an audit results in the inclusion of a
finding in the final audit report, the issuer must comply with the
actions set forth in the final audit report in the manner and timeframe
established by HHS, and the issuer must complete all of the following:
(i) Within 45 calendar days of the issuance of the final audit
report, provide a written corrective action plan to HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written documentation of the corrective
actions once taken.
(5) Failure to comply with audit activities. If an issuer fails to
comply with the audit activities set forth in this subsection in the
manner and timeframes specified by HHS:
(i) HHS will notify the issuer of the risk adjustment (including
high-cost risk pool) payments that the issuer has not adequately
substantiated; and
(ii) HHS will notify the issuer that HHS may recoup any risk
adjustment (including high-cost risk pool) payments identified in
paragraph (c)(5)(i) of this section.
0
21. Section 153.630 is amended by--
0
a. Revising paragraph (d)(3); and
0
b. Adding paragraphs (g)(4) and (5).
The revisions read as follows:
Sec. 153.630 Data validation requirements when HHS operates risk
adjustment.
* * * * *
(d) * * *
(3) An issuer may appeal the findings of a second validation audit
(if applicable) or the calculation of a risk
[[Page 24288]]
score error rate as result of risk adjustment data validation, under
the process set forth in Sec. 156.1220 of this subchapter.
* * * * *
(g) * * *
(4) The issuer only offered small group market carryover coverage
during the benefit year that is being audited.
(5) The issuer was the sole issuer in the state market risk pool
during the benefit year that is being audited and did not participate
in any other market risk pools in the State during the benefit year
that is being audited.
0
22. Section 153.710 is amended--
0
a. By redesignating paragraphs (e) through (g), as paragraphs (f)
through (h), respectively;
0
b. By adding a new paragraph (e); and
0
c. In newly redesignated paragraph (h) introductory text by removing
the reference ``paragraph (g)(3)'' and adding in its place the
reference ``paragraph (h)(3)''.
The addition reads as follows:
Sec. 153.710 Data requirements.
* * * * *
(e) Materiality threshold. HHS will consider a discrepancy reported
under paragraph (d)(2) of this section to be material if the amount in
dispute is equal to or exceeds 1 percent of the applicable payment or
charge payable to or due from the issuer for the benefit year, or
$100,000, whichever is less.
* * * * *
PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT
0
23. 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
24. Section 155.20 is amended by--
0
a. Adding, in alphabetical order, the definition of ``Agent or broker
direct enrollment technology provider'';
0
b. Removing the definition of ``Direct enrollment technology
provider'';
0
c. Adding, in alphabetical order, the definition of ``Qualified health
plan issuer direct enrollment technology provider'';
0
d. Revising the definition of ``Web-broker''.
The additions and revision read as follows:
Sec. 155.20 Definitions.
* * * * *
Agent or broker direct enrollment technology provider means a type
of web-broker business entity that is not a licensed agent or broker
under State law and has been engaged or created by, or is owned by an
agent or broker, to provide technology services to facilitate
participation in direct enrollment under Sec. Sec. 155.220(c)(3) and
155.221.
* * * * *
Qualified health plan issuer direct enrollment technology provider
means a business entity that provides technology services or provides
access to an information technology platform to QHP issuers to
facilitate participation in direct enrollment under Sec. Sec. 155.221
or 156.1230, including a web-broker that provides services as a direct
enrollment technology provider to QHP issuers. A QHP issuer direct
enrollment technology provider that provides technology services or
provides access to an information technology platform to a QHP issuer
will be a downstream or delegated entity of the QHP issuer that
participates or applies to participate as a direct enrollment entity.
* * * * *
Web-broker means an individual agent or broker, group of agents or
brokers, or business entity registered with an Exchange under Sec.
155.220(d)(1) that develops and hosts a non-Exchange website that
interfaces with an Exchange to assist consumers with direct enrollment
in QHPs offered through the Exchange as described in Sec.
155.220(c)(3) or Sec. 155.221. The term also includes an agent or
broker direct enrollment technology provider.
0
25. Section 155.205 is amended by revising paragraphs (c)(2)(i)(B),
(c)(2)(iii)(B), (c)(2)(iv) introductory text, and (c)(2)(iv)(C) to read
as follows:
Sec. 155.205 Consumer assistance tools and programs of an Exchange.
* * * * *
(c) * * *
(2) * * *
(i) * * *
(B) For a web-broker, beginning November 1, 2015, or when such
entity has been registered with the Exchange for at least 1 year,
whichever is later, this standard also includes telephonic interpreter
services in at least 150 languages.
* * * * *
(iii) * * *
(B) For a web-broker, beginning when such entity has been
registered with the Exchange for at least 1 year, this standard also
includes taglines on website content and any document that is critical
for obtaining health insurance coverage or access to health care
services through a QHP for qualified individuals, applicants, qualified
employers, qualified employees, or enrollees. Website content or
documents are deemed to be critical for obtaining health insurance
coverage or access to health care services through a QHP if they are
required to be provided by law or regulation to a qualified individual,
applicant, qualified employer, qualified employee, or enrollee. Such
taglines must indicate the availability of language services in at
least the top 15 languages spoken by the limited English proficient
population of the relevant State or States, as determined in guidance
published by the Secretary. A web-broker that is licensed in and
serving multiple States may aggregate the limited English populations
in the States it serves to determine the top 15 languages required for
taglines. A web-broker may satisfy tagline requirements with respect to
website content if it posts a Web link prominently on its home page
that directs individuals to the full text of the taglines indicating
how individuals may obtain language assistance services, and if it also
includes taglines on any critical stand-alone document linked to or
embedded in the website.
(iv) For Exchanges, QHP issuers, and web-brokers, website
translations.
* * * * *
(C) For a web-broker, beginning on the first day of the individual
market open enrollment period for the 2017 benefit year, or when such
entity has been registered with the Exchange for at least 1 year,
whichever is later, content that is intended for qualified individuals,
applicants, qualified employers, qualified employees, or enrollees on a
website that is maintained by the web-broker must be translated into
any non-English language that is spoken by a limited English proficient
population that comprises 10 percent or more of the population of the
relevant State, as determined in guidance published by the Secretary.
* * * * *
0
26. Section 155.220 is amended by adding paragraph (c)(6) to read as
follows:
Sec. 155.220 Ability of States to permit agents and brokers and web-
brokers to assist qualified individuals, qualified employers, or
qualified employees enrolling in QHPs.
* * * * *
(c) * * *
(6) In addition to applicable requirements under Sec.
155.221(b)(4), a web-broker must demonstrate operational readiness and
compliance with applicable requirements prior to the web-broker's
internet website being used to complete an Exchange eligibility
application or a QHP selection, which
[[Page 24289]]
may include submission or completion, in the form and manner specified
by HHS, of the following:
(i) Operational data including licensure information, points of
contact, and third-party relationships;
(ii) Enrollment testing, prior to approval or renewal;
(iii) Website reviews performed by HHS;
(iv) Security and privacy assessment documentation, including:
(A) Penetration testing results;
(B) Security and privacy assessment reports;
(C) Vulnerability scan results;
(D) Plans of action and milestones; and
(E) System security and privacy plans.
(v) Agreements between the web-broker and HHS.
* * * * *
0
27. Section 155.221 is amended--
0
a. By revising paragraphs (b)(1), (3), and (4);
0
b. By redesignating paragraphs (c) through (h) as paragraphs (d)
through (i), respectively.
0
c. By adding new paragraph (c); and
0
d. By amending newly redesignated paragraphs (g) introductory text,
(g)(6), (g)(7), and (h) by removing the reference to ``paragraph (e)''
and adding in its place a reference to ``paragraph (f)''.
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.
* * * * *
(b) * * *
(1) Display and market QHPs offered through the Exchange,
individual health insurance coverage as defined in Sec. 144.103 of
this subchapter offered outside the Exchange (including QHPs and non-
QHPs other than excepted benefits), and any other products, such as
excepted benefits, on at least three separate website pages on its non-
Exchange website, except as permitted under paragraph (c) of this
section;
* * * * *
(3) Limit marketing of non-QHPs during the Exchange eligibility
application and QHP selection process in a manner that minimizes the
likelihood that consumers will be confused as to which products and
plans are available through the Exchange and which products and plans
are not, except as permitted under paragraph (c)(1) of this section;
(4) Demonstrate operational readiness and compliance with
applicable requirements prior to the direct enrollment entity's
internet website being used to complete an Exchange eligibility
application or a QHP selection, which may include submission or
completion, in the form and manner specified by HHS, of the following:
(i) Business audit documentation including:
(A) Notices of intent to participate including auditor information;
(B) Documentation packages including privacy questionnaires,
privacy policy statements, and terms of service; and
(C) Business audit reports including testing results.
(ii) Security and privacy audit documentation including:
(A) Interconnection security agreements;
(B) Security and privacy controls assessment test plans;
(C) Security and privacy assessment reports;
(D) Plans of action and milestones;
(E) Privacy impact assessments;
(F) System security and privacy plans;
(G) Incident response plans; and
(H) Vulnerability scan results.
(iii) Eligibility application audits performed by HHS;
(iv) Online training modules offered by HHS; and
(v) Agreements between the direct enrollment entity and HHS.
* * * * *
(c) Exceptions to direct enrollment entity display and marketing
requirement. For the Federally-facilitated Exchanges, a direct
enrollment entity may:
(1) Display and market QHPs offered through the Exchange and
individual health insurance coverage as defined in Sec. 144.103 of
this subchapter offered outside the Exchange (including QHPs and non-
QHPs other than excepted benefits) on the same website pages when
assisting individuals who have communicated receipt of an offer of an
individual coverage health reimbursement arrangement as described in
Sec. 146.123(c) of this subchapter, as a standalone benefit, or in
addition to an offer of an arrangement under which the individual may
pay the portion of the premium for individual health insurance coverage
that is not covered by an individual coverage health reimbursement
arrangement using a salary reduction arrangement pursuant to a
cafeteria plan under section 125 of the Internal Revenue Code, but must
clearly distinguish between the QHPs offered through the Exchange and
individual health insurance coverage offered outside the Exchange
(including QHPs and non-QHPs other than excepted benefits), and
prominently communicate that advance payments of the premium tax credit
and cost-sharing reductions are available only for QHPs purchased
through the Exchange, that advance payments of the premium tax credit
are not available to individuals who accept an offer of an individual
coverage health reimbursement arrangement or who opt out of an
individual coverage health reimbursement arrangement that is considered
affordable, and that a salary reduction arrangement under a cafeteria
plan may only be used toward the cost of premiums for plans purchased
outside the Exchange; and
(2) Display and market Exchange-certified stand-alone dental plans
offered outside the Exchange and non-certified stand-alone dental plans
on the same website pages.
* * * * *
0
28. Effective May 5, 2021 amend Sec. 155.320 by--
0
a. Revising paragraph (c)(3)(iii)(A); and
0
b. Removing and reserving paragraphs (c)(3)(iii)(D) and (vi)(C)(2).
The revision read as follows:
Sec. 155.320 Verification process related to eligibility for
insurance affordability programs.
* * * * *
(c) * * *
(3) * * *
(iii) * * *
(A) Except as specified in paragraph (c)(3)(iii)(B) and (C) of this
section, if an applicant's attestation, in accordance with paragraph
(c)(3)(ii)(B) of this section, indicates that a tax filer's annual
household income has increased or is reasonably expected to increase
from the data described in paragraph (c)(3)(ii)(A) of this section for
the benefit year for which the applicant(s) in the tax filer's family
are requesting coverage and the Exchange has not verified the
applicant's MAGI-based income through the process specified in
paragraph (c)(2)(ii) of this section to be within the applicable
Medicaid or CHIP MAGI-based income standard, the Exchange must accept
the applicant's attestation regarding a tax filer's annual household
income without further verification.
* * * * *
0
29. Section 155.420 is amended by--
0
a. Revising paragraph (a)(4)(ii)(B);
0
b. Adding paragraph (a)(4)(ii)(C);
0
c. Revising paragraphs (a)(4)(iii) introductory text and (b)(2)(iv);
0
d. Adding paragraph (b)(5);
0
e. Revising paragraph (c)(2);
0
f. Adding paragraphs (c)(5) and (d)(15); and
[[Page 24290]]
0
g. Revising paragraph (e)(1).
The revisions and additions read as follows:
Sec. 155.420 Special enrollment periods.
(a) * * *
(4) * * *
(ii) * * *
(B) Beginning January 2022, if an enrollee and his or her
dependents become newly ineligible for cost-sharing reductions in
accordance with paragraph (d)(6)(i) or (ii) of this section and are
enrolled in a silver-level QHP, the Exchange must allow the enrollee
and his or her dependents to change to a QHP one metal level higher or
lower, if they elect to change their QHP enrollment; or
(C) No later than January 1, 2024, if an enrollee and his or her
dependents become newly ineligible for advance payments of the premium
tax credit in accordance with paragraph (d)(6)(i) or (ii) of this
section, the Exchange must allow the enrollee and his or her dependents
to change to a QHP of any metal level, if they elect to change their
QHP enrollment;
(iii) For the other triggering events specified in paragraph (d) of
this section, except for paragraphs (d)(2)(i), (4), (6)(i) and (6)(ii)
of this section for becoming newly eligible or ineligible for CSRs or,
no later than January 1, 2024 newly ineligible for APTC, (d)(8), (9),
(10) and (12) of this section:
* * * * *
(b) * * *
(2) * * *
(iv) If a qualified individual, enrollee, or dependent, as
applicable, loses coverage as described in paragraph (d)(1) or
(d)(6)(iii) of this section, gains access to a new QHP as described in
paragraph (d)(7) of this section, becomes newly eligible for enrollment
in a QHP through the Exchange in accordance with Sec. 155.305(a)(2) as
described in paragraph (d)(3) of this section, becomes newly eligible
for advance payments of the premium tax credit in conjunction with a
permanent move as described in paragraph (d)(6)(iv) of this section, or
is enrolled in COBRA continuation coverage and employer contributions
to or government subsidies of this coverage completely cease as
described in paragraph (d)(15) of this section, and if the plan
selection is made on or before the day of the triggering event, the
Exchange must ensure that the coverage effective date is the first day
of the month following the date of the triggering event. If the plan
selection is made after the date of the triggering event, the Exchange
must ensure that coverage is effective in accordance with paragraph
(b)(1) of this section or on the first day of the following month, at
the option of the Exchange.
* * * * *
(5) Option for earlier effective dates due to untimely notice of
triggering event. At the option of a qualified individual, enrollee or
dependent who is eligible to select a plan during a period provided for
under paragraph (c)(5) of this section, the Exchange must provide the
earliest effective date that would have been available under paragraph
(b) of this section, based on the applicable triggering event under
paragraph (d) of this section.
(c) * * *
(2) Advanced availability. A qualified individual or his or her
dependent who is described in paragraph (d)(1), (d)(6)(iii), or (d)(15)
of this section has 60 days before or after the triggering event to
select a QHP. At the option of the Exchange, a qualified individual or
his or her dependent who is described in paragraph (d)(7) of this
section; who is described in paragraph (d)(6)(iv) of this section and
becomes newly eligible for advance payments of the premium tax credit
as a result of a permanent move to a new State; or who is described in
paragraph (d)(3) of this section and becomes newly eligible for
enrollment in a QHP through the Exchange because he or she newly
satisfies the requirements under Sec. 155.305(a)(2), has 60 days
before or after the triggering event to select a QHP.
* * * * *
(5) Availability for individuals who did not receive timely notice
of triggering events. If a qualified individual, enrollee, or dependent
did not receive timely notice of an event that triggers eligibility for
a special enrollment period under this section, and otherwise was
reasonably unaware that a triggering event described in paragraph (d)
of this section occurred, the Exchange must allow the qualified
individual, enrollee, or when applicable, his or her dependent to
select a new plan within 60 days of the date that he or she knew, or
reasonably should have known, of the occurrence of the triggering
event.
* * * * *
(d) * * *
(15) The qualified individual or his or her dependent is enrolled
in COBRA continuation coverage for which an employer is paying all or
part of the premiums, or for which a government entity is providing
subsidies, and the employer completely ceases its contributions to the
qualified individual's or dependent's COBRA continuation coverage or
government subsidies completely cease. The triggering event is the last
day of the period for which COBRA continuation coverage is paid for or
subsidized, in whole or in part, by an employer or government entity.
For purposes of this paragraph, ``COBRA continuation coverage'' has the
meaning provided for in Sec. 144.103 of this subchapter and includes
coverage under a similar State program.
(e) * * *
(1) Failure to pay premiums on a timely basis, including COBRA
continuation coverage premiums prior to expiration of COBRA
continuation coverage, except for circumstances in which an employer
completely ceases its contributions to COBRA continuation coverage, or
government subsidies of COBRA continuation coverage completely cease as
described in paragraph (d)(15) of this section, or
* * * * *
PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES
0
30. The authority citation for part 156 is revised to read as follows:
Authority: 42 U.S.C. 18021-18024, 18031-18032, 18041-18042,
18044, 18054, 18061, 18063, 18071, 18082, and 26 U.S.C. 36B.
0
31. Section 156.50 is amended by--
0
a. Revising the heading for paragraph (c);
0
b. Revising paragraph (c)(2);
0
c. Adding paragraph (c)(3);
0
d. Revising the heading for paragraph (d); and
0
e. Revising paragraphs (d)(1) introductory text, (d)(2) introductory
text, (d)(2)(i)(A), (B), (d)(2)(ii), (d)(2)(iii)(B), (d)(3)
introductory text, (d)(4) through (6), and (d)(7) introductory text.
The revisions and addition read as follows:
Sec. 156.50 Financial support.
* * * * *
(c) Requirement for Exchange user fees. * * *
* * * * *
(2) To support the functions of State Exchanges on the Federal
platform, unless the State Exchange and HHS agree on an alternative
mechanism to collect the funds, a participating issuer offering a plan
through a State Exchange on the Federal Exchange platform for certain
Exchange functions described in Sec. 155.200 of this subchapter, as
specified in a Federal platform agreement, must remit a user fee to
[[Page 24291]]
HHS, in the timeframe and manner established by HHS, equal to the
product of the sum of the monthly user fee rate specified in the annual
HHS notice of benefit and payment parameters for State Exchanges on the
Federal platform for the applicable benefit year, multiplied by the
monthly premium charged by the issuer for each policy under the plan
where enrollment is through the State-based Exchange on the Federal
platform.
(3) A participating issuer offering a plan through an State-based
Exchange on the Federal platform that has adopted the Direct Enrollment
option or Federally-facilitated Exchange that has adopted the direct
enrollment option as described in Sec. 155.221(j) of this subchapter,
as specified in a Federal agreement with HHS, must remit a user fee to
HHS each month, in the timeframe and manner established by HHS, equal
to the product of the monthly user fee rate for the applicable benefit
year specified in an annual HHS notice of benefit and payment
parameters published in advance of the applicable benefit year and the
monthly premium charged by the issuer for each policy under the plan
where enrollment is through the State-based Exchange on the Federal
platform that has adopted the Direct Enrollment option or Federally-
facilitated Exchange that has adopted the direct enrollment option.
(d) Adjustment of Exchange user fees. (1) A participating issuer
offering a plan through a Federally-facilitated Exchange or State
Exchange on the Federal platform may qualify for an adjustment of the
Federally-facilitated Exchange user fee specified in paragraph (c)(1)
of this section, the State Exchange on the Federal platform user fee
specified in paragraph (c)(2) of this section, or the user fee
specified in paragraph (c)(3) of this section, applicable to issuers
participating in a State Exchange on the Federal platform or a
Federally-facilitated Exchange that has adopted the direct enrollment
option under Sec. 155.221(j) of this subchapter, the extent that the
participating issuer--
* * * * *
(2) For a participating issuer described in paragraph (d)(1) of
this section to receive an adjustment of a user fee under this
section--
(i) * * *
(A) Identifying information for the participating issuer and each
third party administrator that received a copy of the self-
certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR
2590.715-2713A(a)(4) with respect to which the participating issuer
seeks an adjustment of the user fee specified in paragraph (c)(1), (2),
or (3) of this section, as applicable, whether or not the participating
issuer was the entity that made the payments for contraceptive
services;
(B) Identifying information for each self-insured group health plan
with respect to which a copy of the self-certification referenced in 26
CFR 54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4) was received by
a third party administrator and with respect to which the participating
issuer seeks an adjustment of the user fee specified in paragraph
(c)(1), (2), or (3) of this section, as applicable; and
* * * * *
(ii) Each third party administrator that intends to seek an
adjustment on behalf of a participating issuer of the Federally-
facilitated Exchange user fee, the State-based Exchange on the Federal
platform user fee, or the user fee applicable to issuers participating
in a State-based Exchange on the Federal platform or a Federally-
facilitated Exchange that has adopted the direct enrollment option
Sec. 155.221(j) of this subchapter based on payments for contraceptive
services, must submit to HHS a notification of such intent, in a manner
specified by HHS, by the 60th calendar day following the date on which
the third party administrator receives the applicable copy of the self-
certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR
2590.715-2713A(a)(4).
(iii) * * *
(B) Identifying information for each self-insured group health plan
with respect to which a copy of the self-certification referenced in 26
CFR 54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4) was received by
the third party administrator and with respect to which the
participating issuer seeks an adjustment of the user fee specified in
paragraph (c)(1), (2), or (3) of this section, as applicable;
* * * * *
(3) If the requirements set forth in paragraph (d)(2) of this
section are met, the participating issuer will be provided a reduction
in its obligation to pay the user fee specified in paragraph (c)(1),
(2), or (3) of this section, as applicable, equal in value to the sum
of the following:
* * * * *
(4) If the amount of the adjustment under paragraph (d)(3) of this
section is greater than the amount of the participating issuer's
obligation to pay the user fee specified in paragraph (c)(1), (2), or
(3) of this section, as applicable, in a particular month, the
participating issuer will be provided a credit in succeeding months in
the amount of the excess.
(5) Within 60 days of receipt of any adjustment of a user fee under
this section, a participating issuer must pay each third party
administrator with respect to which it received any portion of such
adjustment an amount that is no less than the portion of the adjustment
attributable to the total dollar amount of the payments for
contraceptive services submitted by the third party administrator, as
described in paragraph (d)(2)(iii)(D) of this section. No such payment
is required with respect to the allowance for administrative costs and
margin described in paragraph (d)(3)(ii) of this section. This
paragraph does not apply if the participating issuer made the payments
for contraceptive services on behalf of the third party administrator,
as described in paragraph (d)(1)(i) of this section, or is in the same
issuer group as the third party administrator.
(6) A participating issuer that receives an adjustment in the user
fee specified in paragraph (c)(1), (2), or (3) of this section for a
particular calendar year must maintain for 10 years following that
year, and make available upon request to HHS, the Office of the
Inspector General, the Comptroller General, and their designees,
documentation demonstrating that it timely paid each third party
administrator with respect to which it received any such adjustment any
amount required to be paid to the third party administrator under
paragraph (d)(5) of this section.
(7) A third party administrator of a plan with respect to which an
adjustment of the user fee specified in paragraph (c)(1), (2), or (3)
of this section is received under this section for a particular
calendar year must maintain for 10 years following that year, and make
available upon request to HHS, the Office of the Inspector General, the
Comptroller General, and their designees, all of the following
documentation:
* * * * *
0
32. Section 156.130 is amended by revising paragraph (e) to read as
follows:
Sec. 156.130 Cost-sharing requirements.
* * * * *
(e) Premium adjustment percentage. The premium adjustment
percentage is the percentage (if any) by which the average per capita
premium for health insurance coverage for the preceding calendar year
exceeds such average per capita premium for health insurance for 2013.
HHS may publish the annual premium adjustment percentage in
[[Page 24292]]
guidance in January of the calendar year preceding the benefit year for
which the premium adjustment percentage is applicable, unless HHS
proposes changes to the methodology, in which case, HHS will publish
the annual premium adjustment percentage in an annual HHS notice of
benefit and payment parameters or another appropriate rulemaking.
* * * * *
0
33. Section 156.295 is amended by--
0
a. Revising the section heading and paragraphs (a) introductory text,
(a)(1) and (a)(2) introductory text,
0
b. Removing paragraph (a)(3); and
0
c. Revising paragraph (b) introductory text.
The revisions read as follows:
Sec. 156.295 Prescription drug distribution and cost reporting by QHP
issuers.
(a) General requirement. In a form, manner, and at such times
specified by HHS, a QHP issuer that administers a prescription drug
benefit without the use of a pharmacy benefit manager must provide to
HHS the following information:
(1) The percentage of all prescriptions that were provided under
the QHP through retail pharmacies compared to mail order pharmacies,
and the percentage of prescriptions for which a generic drug was
available and dispensed compared to all drugs dispensed;
(2) The aggregate amount, and the type of rebates, discounts or
price concessions (excluding bona fide service fees) that the QHP
issuer negotiates that are attributable to patient utilization under
the QHP, and the aggregate amount of the rebates, discounts, or price
concessions that are passed through to the QHP issuer, and the total
number of prescriptions that were dispensed.
* * * * *
(b) Limitation on disclosure. Information disclosed by a QHP issuer
under this section shall not be disclosed by HHS, except that HHS may
disclose the information in a form which does not disclose the identity
of a specific QHP or prices charged for specific drugs, for the
following purposes:
* * * * *
0
34. Section 156.420 is amended by revising paragraphs (a)(1)(i),
(a)(2)(i) and (a)(3)(i) to read as follows:
Sec. 156.420 Plan variations.
(a) * * *
(1) * * *
(i) An annual limitation on cost sharing no greater than the
reduced maximum annual limitation on cost sharing specified in the
annual HHS guidance or notice of benefit and payment parameters for
such individuals, and
* * * * *
(2) * * *
(i) An annual limitation on cost sharing no greater than the
reduced maximum annual limitation on cost sharing specified in the
annual HHS guidance or notice of benefit and payment parameters for
such individuals, and
* * * * *
(3) * * *
(i) An annual limitation on cost sharing no greater than the
reduced maximum annual limitation on cost sharing specified in the
annual HHS guidance or notice of benefit and payment parameters for
such individuals, and
* * * * *
0
35. Section 156.480 is amended by revising the section heading and
paragraph (c) to read as follows:
Sec. 156.480 Oversight of the administration of the advance payments
of the premium tax credit, cost-sharing reductions, and user fee
programs.
* * * * *
(c) Audits and compliance reviews. HHS or its designee may audit or
conduct a compliance review of an issuer offering a QHP through an
Exchange to assess its compliance with the applicable requirements of
this subpart and 45 CFR 156.50. Compliance reviews conducted under this
section will follow the standards set forth in Sec. 156.715.
(1) Notice of audit. HHS will provide at least 30 calendar days
advance notice of its intent to conduct an audit of an issuer under
this section.
(i) Conferences. All audits will include an entrance conference at
which the scope of the audit will be presented and an exit conference
at which the initial audit findings will be discussed.
(ii) [Reserved]
(2) Compliance with audit activities. To comply with an audit under
this section, the issuer must:
(i) Ensure that its relevant employees, agents, contractors,
subcontractors, downstream entities, and delegated entities cooperate
with any audit or compliance review under this section;
(ii) Submit complete and accurate data to HHS or its designees that
is necessary to complete the audit, in the format and manner specified
by HHS, no later than 30 calendar days after the initial audit response
deadline established by HHS at the entrance conference described under
paragraph (c)(1)(i) of this section for the applicable benefit year;
(iii) Respond to all audit notices, letters, and inquiries,
including requests for supplemental or supporting information, as
requested by HHS, no later than 15 calendar days after the date of the
notice, letter, request, or inquiry; and
(iv) In circumstances in which an issuer cannot provide the
requested data or response to HHS within the timeframes under paragraph
(c)(2)(ii) or (iii) of this section, as applicable, the issuer may make
a written request for an extension to HHS. The extension request must
be submitted within the timeframe established under paragraph
(c)(2)(ii) or (iii), as applicable, and must detail the reason for the
extension request and the good cause in support of the request. If the
extension is granted, the issuer must respond within the timeframe
specified in HHS's notice granting the extension of time.
(3) Preliminary audit findings. HHS will share its preliminary
audit findings with the issuer, who will then have 30 calendar days to
respond to such findings in the format and manner specified by HHS.
(i) If the issuer does not dispute or otherwise respond to the
preliminary findings, the audit findings will become final.
(ii) If the issuer responds and disputes the preliminary findings,
HHS will review and consider such response and finalize the audit
findings after such review.
(4) Final audit findings. If an audit results in the inclusion of a
finding in the final audit report, the issuer must comply with the
actions set forth in the final audit report in the manner and timeframe
established by HHS, and the issuer must complete all of the following:
(i) Within 45 calendar days of the issuance of the final audit or
compliance review report, provide a written corrective action plan to
HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written documentation of the corrective
actions once taken.
(5) Failure to comply with audit activities. If an issuer fails to
comply with the audit activities set forth in this section in the
manner and timeframes specified by HHS:
(i) HHS will notify the issuer of payments received under this
subpart that the issuer has not adequately substantiated; and
(ii) HHS will notify the issuer that HHS may recoup any payments
[[Page 24293]]
identified in paragraph (c)(5)(i) of this section.
(6) Circumstances requiring HHS enforcement. If HHS determines that
the State Exchange or State-based Exchange on the Federal platform is
not enforcing or fails to substantially enforce the requirements of
this subpart or Sec. 156.50, then HHS may do so and may pursue the
imposition of civil money penalties as specified in Sec. 156.805 for
non-compliance by QHP issuers participating in the State Exchange or
State Exchange on the Federal platform.
Subpart I--Enforcement Remedies in the Exchanges
0
36. Subpart I is amended by revising the heading as set forth above.
0
37. Section 156.800 is amended by revising paragraphs (a) introductory
text, and (b) as follows:
Sec. 156.800 Available remedies; Scope.
(a) Kinds of sanctions. HHS may impose the following types of
sanctions on QHP issuers in an Exchange that are not in compliance with
Exchange standards applicable to issuers offering QHPs in an Exchange:
* * * * *
(b) Scope. Sanctions under subpart I are applicable for non-
compliance with QHP issuer participation standards and other standards
applicable to issuers offering QHPs in a Federally-facilitated
Exchange. Sanctions under paragraph (a)(1) of this section are also
applicable for non-compliance by QHP issuers participating in State
Exchanges and State-based Exchanges on the Federal platform when HHS is
responsible for enforcement of the requirements in subpart E of this
part and 45 CFR 156.50.
* * * * *
0
38. Section 156.805 is amended by--
0
a. Revising paragraphs (a) introductory text and (a)(5)(i); and
0
b. Adding paragraph (f).
The revisions and addition read as follows:
Sec. 156.805 Bases and process for imposing civil money penalties in
Federally-facilitated Exchanges.
(a) Grounds for imposing civil money penalties. Civil money
penalties may be imposed on an issuer in an Exchange if, based on
credible evidence, HHS has reasonably determined that the issuer has
engaged in one or more of the following actions:
* * * * *
(5) * * *
(i) To HHS or an Exchange; or
* * * * *
(f) Circumstances requiring HHS enforcement in State Exchanges and
State-based Exchanges on the Federal platform. (1) HHS will enforce the
requirements of subpart E of this part and 45 CFR 156.50 if a State
Exchange or State-based Exchange on the Federal platform notifies HHS
that it is not enforcing these requirements or if HHS makes a
determination using the process set forth at 45 CFR 150.201, et seq.
that a State Exchange or State-based Exchange on the Federal platform
is failing to substantially enforce these requirements.
(2) If HHS is responsible under paragraph (f)(1) of this section
for enforcement of the requirements set forth in subpart E of this part
or 45 CFR 156.50, HHS may impose civil money penalties on an issuer in
a State Exchange or State-based Exchange on the Federal platform, in
accordance with the bases and process for imposing civil money
penalties set forth in this section.
Subpart J--Administrative Review of QHP Issuer Sanctions
0
39. Amend Subpart J by revising the heading to read as set forth above.
0
40. Section 156.901 is amended by revising the definitions of ``Filing
date'' and ``Hearing'' to read as follows.
Sec. 156.901 Definitions.
* * * * *
Filing date means the date filed electronically.
Hearing includes a hearing on a written record as well as an in-
person, telephone, or video teleconference hearing.
* * * * *
0
41. Section 156.903 is amended by revising paragraph (a) as follows:
Sec. 156.903 Scope of Administrative Law Judge's (ALJ) authority.
(a) The ALJ has the authority, including all of the authority
conferred by the Administrative Procedure Act (5 U.S.C. 554a), to adopt
whatever procedures may be necessary or proper to carry out in an
efficient and effective manner the ALJ's duty to provide a fair and
impartial hearing on the record and to issue an initial decision
concerning the imposition of a civil money penalty of a QHP offered in
a Federally-facilitated Exchange, State Exchange, and State-based
Exchange on the Federal platform, or the decertification of a QHP
offered in a Federally-facilitated Exchange.
* * * * *
0
42. Section 156.919 is amended by revising paragraph (a) to read as
follows:
Sec. 156.919 Forms of hearing.
(a) All hearings before an ALJ are on the record. The ALJ may
receive argument or testimony in writing, in person, by telephone, or
by video teleconference. The ALJ may receive testimony by telephone
only if the ALJ determines that doing so is in the interest of justice
and economy and that no party will be unduly prejudiced. The ALJ may
require submission of a witness' direct testimony in writing only if
the witness is available for cross-examination.
* * * * *
0
43. Section 156.927 is amended by revising paragraphs (a) introductory
text and (b) to read as follows:
Sec. 156.927 Form and service of submissions.
(a) Every submission filed with the ALJ must be filed
electronically and include:
* * * * *
(b) A party filing a submission with the ALJ must, at the time of
filing, serve a copy of such submission on the opposing party. An
intervenor filing a submission with the ALJ must, at the time of
filing, serve a copy of the submission on all parties. If a party is
represented by an attorney, service must be made on the attorney. An
electronically filed submission is considered served on all parties
using the electronic filing system.
0
44. Section 156.931 is revised to read as follows:
Sec. 156.931 Acknowledgement of request for hearing.
After receipt of the request for hearing, the ALJ assigned to the
case or someone acting on behalf of the ALJ will send a written notice
to the parties that acknowledges receipt of the request for hearing,
identifies the docket number assigned to the case, and provides
instructions for filing submissions and other general information
concerning procedures. The ALJ will set out the next steps in the case
either as part of the acknowledgement or on a later date.
0
45. Section 156.941 is amended by revising paragraph (e) to read as
follows:
Sec. 156.941 Prehearing conferences.
* * * * *
(e) Establishing a schedule for an in-person, telephone, or video
teleconference hearing, including setting deadlines for the submission
of written direct testimony or for the written reports of experts.
* * * * *
0
46. Section 156.947 is amended by revising paragraph (a) to read as
follows:
[[Page 24294]]
Sec. 156.947 The record.
(a) Any testimony that is taken in-person, by telephone, or by
video teleconference is recorded and transcribed. The ALJ may order
that other proceedings in a case, such as a prehearing conference or
oral argument of a motion, be recorded and transcribed.
* * * * *
0
47. Section 156.1210 is amended by--
0
a. Revising paragraph (a);
0
b. Redesignating paragraph (b) as paragraph (d); and
0
c. Adding new paragraphs (b) and (c).
The additions read as follows:
Sec. 156.1210 Dispute submission.
(a) Responses to reports. Within 90 calendar days of the date of a
payment and collections report from HHS, the issuer must, in a form and
manner specified by HHS or the State Exchange describe to HHS or the
State Exchange (as applicable) any inaccuracies it identifies in the
report.
(b) Inaccuracies identified after 90-day period. With respect to an
inaccuracy described under paragraph (a) of this section that is
identified and submitted to HHS or the State Exchange (as applicable)
by the issuer after the end of the 90-day period described in such
paragraph, HHS will consider and work with the issuer or the State
Exchange (as applicable) to resolve the inaccuracy so long as--
(1) The issuer promptly notifies HHS or the State Exchange (as
applicable) upon identifying the inaccuracy, but in no case later than
15 calendar days after identifying the inaccuracy; and
(2) The failure to identify the inaccuracy and submit it to HHS or
the State Exchange (as applicable) in a timely manner was not
unreasonable or due to the issuer's misconduct or negligence.
(c) Deadline for describing inaccuracies. To be eligible for
resolution under paragraph (b) of this section, an issuer must describe
all inaccuracies identified in a payment and collections report before
the later of--
(1) The end of the 3-year period beginning at the end of the plan
year to which the inaccuracy relates; or
(2) The date by which HHS notifies issuers that the HHS audit
process with respect to the plan year to which such inaccuracy relates
has been completed.
(3) If a payment error is discovered after the timeframes set forth
in paragraph (c)(1) and (2) of this section, the issuer must notify
HHS, the State Exchange, or SBE-FP (as applicable) and repay any
overpayments to HHS.
* * * * *
0
48. Section 156.1215 is amended by revising paragraph (b) to read as
follows:
Sec. 156.1215 Payment and collections processes.
* * * * *
(b) Netting of payments and charges for later years. As part of its
payment and collections process, HHS may net payments owed to issuers
and their affiliates operating under the same tax identification number
against amounts due to the Federal government from the issuers and
their affiliates under the same taxpayer identification number for
advance payments of the premium tax credit, advance payments of and
reconciliation of cost-sharing reductions, payment of Federally-
facilitated Exchange user fees, payment of State Exchanges utilizing
the Federal platform user fees, and risk adjustment, reinsurance, and
risk corridors payments and charges.
* * * * *
0
49. Section 156.1220 is amended by--
0
a. Revising paragraphs (a)(1)(vii) and (a)(3)(ii);
0
b. Redesignating paragraphs (a)(3)(iii) through (vi) as (a)(3)(iv)
through (vii), respectively; and
0
c. Adding new paragraph (a)(3)(iii).
The revision and addition reads as follows:
Sec. 156.1220 Administrative appeals.
(a) * * *
(1) * * *
(vii) The findings of a second validation audit as a result of risk
adjustment data validation (if applicable) with respect to risk
adjustment data for the 2016 benefit year and beyond; or
* * * * *
(3) * * *
(ii) For a risk adjustment payment or charge, including an
assessment of risk adjustment user fees, within 30 calendar days of the
date of the notification under Sec. 153.310(e) of this subchapter;
(iii) For the findings of a second validation audit (if
applicable), or the calculation of a risk score error rate as a result
of risk adjustment data validation, within 30 calendar days of
publication of the applicable benefit year's Summary Report of Benefit
Year Risk Adjustment Data Validation Adjustments to Risk Adjustment
Transfers;
* * * * *
PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE
REQUIREMENTS
0
50. The authority citation for part 158 continues to read as follows:
Authority: 42 U.S.C. 300gg-18.
0
51. Section 158.103 is amended by adding the definition for
``Prescription drug rebates and other price concessions'' in
alphabetical order to read as follows:
Sec. 158.103 Definitions.
* * * * *
Prescription drug rebates and other price concessions means all
remuneration received by or on behalf of an issuer, including
remuneration received by and on behalf of entities providing pharmacy
benefit management services to the issuer, that decrease the costs of a
prescription drug covered by the issuer, regardless from whom the
remuneration is received (for example, pharmaceutical manufacturer,
wholesaler, retail pharmacy, or vendor). Prescription drug rebates and
other price concessions include discounts, charge backs or rebates,
cash discounts, free goods contingent on a purchase agreement, up-front
payments, coupons, goods in kind, free or reduced-price services,
grants, or other price concessions or similar benefits to the extent
the value of these items reduce costs for the issuer, and excluding
bona fide service fees. Prescription drug rebates and other price
concessions exclude any remuneration, coupons, or price concessions for
which the full value is passed on to the enrollee. Bona fide service
fees mean fees paid by a drug manufacturer to an entity providing
pharmacy benefit management services to the issuer that represent fair
market value for a bona fide, itemized service actually performed on
behalf of the manufacturer that the manufacturer would otherwise
perform (or contract for) in the absence of the service arrangement,
and that are not passed on in whole or in part to a client or customer
of an entity, whether or not the entity takes title to the drug.
* * * * *
Sec. 158.221 [Amended]
0
52. Effective May 5, 2021 amend Sec. 158.221 by removing paragraph
(b)(8) and redesignating paragraph (b)(9) as paragraph (b)(8).
0
53. Section 158.240 is amended by adding paragraph (g) to read as
follows:
Sec. 158.240 Rebating premium if the applicable medical loss ratio
standard is not met.
* * * * *
(g) Rebate prepayment and safe harbor. An issuer may choose to pay
a portion or all of its estimated rebate amount for a given MLR
reporting year to enrollees in any form specified in Sec. 158.241
prior to the rebate payment
[[Page 24295]]
deadlines set forth in Sec. Sec. 158.240(e) and 158.241(a)(2) and in
advance of submitting the MLR report required in Sec. 158.110 to the
Secretary. Issuers that choose to prepay a portion or all of their
rebates must do so for all eligible enrollees in a given state and
market in a non-discriminatory manner, and consistently with State law
or other applicable state authority. If, after submitting the MLR
report required in Sec. 158.110, an issuer determines that its rebate
prepayment amount in a given state and market is at least 95 percent,
but less than 100 percent, of the total rebate amount owed for the
applicable MLR reporting year to enrollees in that state and market,
the issuer may, without penalty or late payment interest under
paragraph (f) of this section, provide the remaining rebate amount to
those enrollees no later than the rebate deadlines in Sec. Sec.
158.240(e) and 158.241(a)(2) applicable to the following MLR reporting
year. If the total rebate owed to an enrollee for the MLR reporting
year is above the de minimis threshold established in Sec. 158.243(a),
the issuer cannot treat the remaining rebate owed to an enrollee after
prepayment as de minimis, even if the remaining rebate is below the de
minimis threshold.
0
54. Section 158.241 is amended by revising paragraph (a)(2) to read as
follows:
Sec. 158.241 Form of rebate.
(a) * * *
(2) For each of the 2011, 2012, and 2013 MLR reporting years, any
rebate provided in the form of a premium credit must be provided by
applying the full amount due to the first month's premium that is due
on or after August 1 following the MLR reporting year. If the amount of
the rebate exceeds the premium due for August, then any overage shall
be applied to succeeding premium payments until the full amount of the
rebate has been credited. Beginning with the 2014 MLR reporting year,
any rebate provided in the form of a premium credit must be provided by
applying the full amount due to the first month's premium that is due
on or after September 30 following the MLR reporting year. If the
amount of the rebate exceeds the premium due for October, then any
overage shall be applied to succeeding premium payments until the full
amount of the rebate has been credited. Beginning with rebates due for
the 2020 MLR reporting year, any rebate provided in the form of a
premium credit must be provided by applying the full amount due to the
monthly premium that is due no later than October 30 following the MLR
reporting year. If the amount of the rebate exceeds the monthly
premium, then any overage shall be applied to succeeding premium
payments until the full amount of the rebate has been credited.
* * * * *
0
55. Subchapter E as added in final rule published on November 27, 2019
(84 FR 65524) and effective on January 1, 2021 is amended by adding
part 184 to read as follows:
PART 184--PHARMACY BENEFIT MANAGER STANDARDS UNDER THE AFFORDABLE
CARE ACT
Sec.
184.10 Basis and scope.
184.20 Definitions.
184.50 Prescription drug distribution and cost reporting by pharmacy
benefit managers.
Authority: 42 U.S.C. 1302, 1320b-23.
Sec. 184.10 Basis and scope.
(a) Basis. (1) This part implements section 1150A, Pharmacy Benefit
Managers Transparency Requirements, of title XI of the Social Security
Act.
(2) [Reserved]
(b) Scope. This part establishes standards for Pharmacy Benefit
Managers that administer prescription drug benefits for health
insurance issuers that offer Qualified Health Plans with respect to the
offering of such plans.
Sec. 184.20 Definitions.
The following definitions apply to this part, unless the context
indicates otherwise:
Health insurance issuer has the meaning given to the term in Sec.
144.103 of this subtitle.
Plan year has the meaning given to the term in Sec. 156.20 of this
subchapter.
Qualified health plan has the meaning given to the term in Sec.
156.20 of this subchapter.
Qualified health plan issuer has the meaning given to the term in
Sec. 156.20 of this subchapter.
Sec. 184.50 Prescription drug distribution and cost reporting by
pharmacy benefit managers.
(a) General requirement. In a form, manner, and at such times
specified by HHS, any entity that provides pharmacy benefits management
services on behalf of a qualified health plan (QHP) issuer must provide
to HHS the following information:
(1) The percentage of all prescriptions that were provided under
the QHP through retail pharmacies compared to mail order pharmacies,
and the percentage of prescriptions for which a generic drug was
available and dispensed compared to all drugs dispensed;
(2) The aggregate amount, and the type of rebates, discounts or
price concessions (excluding bona fide service fees) that the pharmacy
benefits manager (PBM) negotiates that are attributable to patient
utilization under the QHP, and the aggregate amount of the rebates,
discounts, or price concessions that are passed through to the QHP
issuer, and the total number of prescriptions that were dispensed.
(i) Bona fide service fees means fees paid by a manufacturer to an
entity that represent fair market value for a bona fide, itemized
service actually performed on behalf of the manufacturer that the
manufacturer would otherwise perform (or contract for) in the absence
of the service arrangement, and that are not passed on in whole or in
part to a client or customer of an entity, whether or not the entity
takes title to the drug.
(ii) [Reserved]
(3) The aggregate amount of the difference between the amount the
QHP issuer pays its contracted PBM and the amounts that the PBM pays
retail pharmacies, and mail order pharmacies, and the total number of
prescriptions that were dispensed.
(b) Limitations on disclosure. Information disclosed by a PBM under
this section shall not be disclosed by HHS or by a QHP receiving the
information, except that HHS may disclose the information in a form
which does not disclose the identity of a specific PBM, QHP, or prices
charged for drugs, for the following purposes:
(1) As HHS determines to be necessary to carry out section 1150A or
part D of title XVIII of the Act;
(2) To permit the Comptroller General to review the information
provided;
(3) To permit the Director of the Congressional Budget Office to
review the information provided; or
(4) To States to carry out section 1311 of the Affordable Care Act.
(c) Penalties. A PBM that fails to report the information described
in paragraph (a) of this section to HHS on a timely basis or knowingly
provides false information will be subject to the provisions of section
1927(b)(3)(C) of the Act.
Dated: April 27, 2021.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2021-09102 Filed 4-30-21; 8:45 am]
BILLING CODE 4150-28-P
