[Federal Register Volume 70, Number 53 (Monday, March 21, 2005)]
[Rules and Regulations]
[Pages 13401-13402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-5591]



[[Page 13401]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 417 and 422

[CMS-4069-F2]
RIN 0938-AN06


Medicare Program; Establishment of the Medicare Advantage 
Program; Interpretation

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

ACTION: Final rule; interpretation.

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SUMMARY: This final rule clarifies our interpretation of the meaning of 
``entity'' in the final rule titled ``Medicare Program; Establishment 
of the Medicare Advantage Program'' published in the Federal Register 
on January 28, 2005 (70 FR 4588). Subsequent to the publication of the 
Medicare Advantage (MA) final rule on January 28, 2005, we have 
received inquiries from parties interested in offering an MA Regional 
Plan concerning whether they could jointly enter into a contract with 
us to offer a single MA Regional Plan in a multistate region. The 
participating health plans wish to contract with each other to create a 
single ``joint enterprise.'' They have asked us whether such a joint 
enterprise could be considered an ``entity'' under sections 1859(a)(1) 
and 1855(a)(1) of the Social Security Act, for purposes of offering an 
MA Regional Plan. The MA final rule is scheduled to take effect on 
March 22, 2005. Our interpretation of the word ``entity'' that follows 
in the ``Supplementary Information'' section of this final rule is 
deemed to be included in that final rule.

DATES: Effective Date: This regulation is effective on March 22, 2005.

FOR FURTHER INFORMATION CONTACT: Jane Andrews, (410) 786-3133.

SUPPLEMENTARY INFORMATION:

I. Background and Clarification of ``Entity''

    Subsequent to the publication of the Medicare Advantage (MA) final 
rule in the Federal Register on January 28, 2005 (70 FR 4588), we have 
received inquiries from parties interested in offering an MA Regional 
Plan concerning what organizational requirements they must meet in 
order to be eligible to offer such a plan. Several health plans, each 
licensed by a State as a risk-bearing entity, have inquired as to 
whether they could jointly enter into a contract with us to offer an MA 
Regional Plan in a multistate region. The participating health plans 
wish to contract with each other to create a single ``joint 
enterprise.'' They have asked us whether such a joint enterprise could 
be considered an ``entity'' under sections 1859(a)(1) and 1855(a)(1) of 
the Social Security Act, for purposes of offering an MA plan.
    The statute generally requires that the ``entity'' be licensed by 
the State as a risk bearing entity where it offers benefits. The health 
plans seeking jointly to offer an MA Regional Plan propose to meet this 
requirement through the State license that each participating health 
plan holds in the State in which it does business. Each plan would be 
at risk for, and fully responsible for, each MA plan enrollee in its 
State, or a portion of a State in which it is licensed and operating. 
Together, the entire region would be covered by an insurer licensed by 
the State to bear risk where the enrollee lives.
    In considering this proposal, we have determined that such a joint 
enterprise could be treated as a single ``entity'' for purposes of 
offering an MA Regional Plan, as long as the enterprise as a whole 
meets all applicable Medicare requirements, and there is no substantive 
difference between this arrangement and a traditional entity from a 
Medicare enrollee's perspective. This means that the joint enterprise 
must, at a minimum--(1) enter into a single contract under which it was 
accountable, through its participants individually or in the aggregate, 
for meeting all applicable Medicare requirements, including, since a 
regional entity cannot continue to operate in a service area that is 
less than the entire region, providing us with a description of the 
contracting entity's plan in the event that one or more parties in the 
joint enterprise terminates their participation (or are terminated by 
another party) in the enterprise in a contract year; (2) submit a 
single bid covering the entire MA Region, which would include a uniform 
benefit, uniform cost-sharing, as well as a uniform premium, and 
information about how the joint enterprise will allocate risk among the 
multiple parties in the region; (3) offer a region-wide network of 
providers that is accessible to all enrollees in the plan, regardless 
of where in the region they live; (4) market the plan under a single 
name throughout the region; and (5) provide uniform enrollee customer 
service and appeal and grievance rights throughout the region. In 
addition, where the regulations specifically govern the activities of 
the entity, such as the requirement for fidelity bonds for officers, or 
certifications associated with receipt of payment, each State-licensed 
plan comprising the joint enterprise would be required to meet such 
requirements individually. We will issue operational guidance 
concerning the process by which we will make payment to these joint 
enterprise entities. The preamble to the January 28, 2005 MA final rule 
scheduled to take effect on March 22, 2005 is deemed to include the 
foregoing clarification concerning our interpretation of the word 
``entity.'' We may also issue further guidance on how individual 
requirements (such as, for example, those related to termination, 
apportionment of liability, and the imposition of sanctions) will apply 
to joint enterprises and the plans participating in such enterprises.

Requirements for Issuance of Regulations

    Section 902 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and 
requires the Secretary, in consultation with the Director of the Office 
of Management and Budget, to establish and publish timelines for the 
publication of Medicare final regulations based on the previous 
publication of a Medicare proposed or interim final regulation. Section 
902 of the MMA also states that the timelines for these regulations may 
vary but shall not exceed 3 years after publication of the preceding 
proposed or interim final regulation except under exceptional 
circumstances.
    This final rule interprets provisions set forth in the January 28, 
2005 final regulation. In addition, this final rule has been published 
within the 3-year time limit imposed by section 902 of the MMA. 
Therefore, we believe that the final rule is in accordance with the 
Congress' intent to ensure timely publication of final regulations.

II. Waiver of 30-Day Delay in Effective Date

    We ordinarily provide an effective date 30 days after the 
publication of a final rule in the Federal Register. We can waive this 
delay, however, if we find good cause that it is impracticable, 
unnecessary, or contrary to the public interest, and we incorporate a 
statement of this finding and the reasons for it in the rule issued. 
The MA final rule sets forth requirements for offering a regional MA 
plan beginning on January 1, 2006.
    Therefore, those wishing to offer a regional MA plan must submit an

[[Page 13402]]

application, receive CMS approval, and comply with all applicable 
requirements in time to offer the plan on January 1, 2006. We believe 
that delaying the effective date of this interpretation would be 
contrary to the public interest because it would shorten the already 
tight time frame for implementing a regional MA plan for some potential 
applicants. Therefore, we believe it is necessary to have this 
interpretation of our existing policy take effect at the time as the MA 
final rule.
    Accordingly, we believe there is good cause to waive the 30-day 
delay in effective date, and this interpretation will be effective on 
the effective date of the MA final rule, March 22, 2005.

III. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

IV. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs 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). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). This rule 
does not reach the economic threshold and thus is not considered a 
major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million in any 1 year. Individuals and States are not 
included in the definition of a small entity. We are not preparing an 
analysis for the RFA because we have determined that this rule will not 
have a significant economic impact on a substantial number of small 
entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. We are not preparing an 
analysis for section 1102(b) of the Act because we have determined that 
this rule will not have a significant impact on the operations of a 
substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This rule will have no consequential effect on 
the governments mentioned or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of E.O. 13132 are not 
applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

    Authority: Sections 1851 through 1859 of the Social Security Act 
(42 U.S.C. 1395w-21 through 1395w-28).

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: March 2, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: March 16, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-5591 Filed 3-18-05; 8:45 am]
BILLING CODE 4120-01-P