[Federal Register Volume 72, Number 144 (Friday, July 27, 2007)]
[Rules and Regulations]
[Pages 41232-41238]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14361]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 148

[CMS-2260-IFC]
RIN 0938-A046


High Risk Pools

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

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period will amend our 
regulations regarding grants to States for operation of qualified high 
risk pools to conform to provisions of the Deficit Reduction Act of 
2005 and the State High Risk Pool Funding Extension Act of 2006. Those 
provisions extended funding for seed and operational grants for State 
High Risk Pools and amended section 2745 of the Public Health Service 
Act.

DATES: Effective date: These regulations are effective on August 27, 
2007.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on August 27, 2007.

ADDRESSES: In commenting, please refer to file code CMS-2260-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click 
on the link ``Submit electronic comments on CMS regulations with an 
open comment period.'' (Attachments should be in Microsoft Word, 
WordPerfect, or Excel; however, we prefer Microsoft Word.)
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-2260-IFC, P.O. Box 8016, Baltimore, MD 
21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-2260-IFC, Mail Stop C4-26-05,00, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-7195 in advance to schedule your arrival 
with one of our staff members.
    Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, 
SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 
21244-1850.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Paul Youket, (410) 786-7528, or John 
Young, (410) 786-0505.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. You can assist us by referencing the file code 
CMS-2260-IFC and the specific ``issue identifier'' that precedes the 
section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on 
CMS Regulations'' on that Web site to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

    The Trade Adjustment Assistance Reform Act of 2002 (Pub. L. 107-
210) added section 2745 of the Public Health Service Act (PHS Act) to 
provide for two types of grants to States for the promotion of 
``qualified high risk pools.'' These pools provide health coverage to 
high-risk individuals who may find private health insurance unavailable 
or unaffordable. Under this provision, a pool could meet the definition 
of a ``qualified'' high risk pool for purposes of section 2745 only if 
it met the definition of a qualified high risk pool in section 
2744(c)(2) of the PHS Act. Section 2744 deals with how States can 
satisfy the requirement of section 2741 of the PHS Act to guarantee 
access to health coverage for individuals who meet the definition of an 
``eligible individual'' under section 2741, as added by the Health 
Insurance Portability and Accountability Act of 1996 (HIPAA). These 
individuals are commonly referred to as ``HIPAA-eligible'' individuals.
    Under section 2744(c)(2) of the PHS Act, a qualified high risk pool 
must provide health coverage without a pre-existing condition exclusion 
to ``all'' HIPAA-eligible individuals. This meant that State high risk 
pools that did not allow all HIPAA-eligible individuals into the pool 
without a pre-existing condition exclusion could not meet the 
definition of a ``qualified'' risk pool.

[[Page 41233]]

    The two types of grants authorized by the legislation were ``seed 
grants'' for States that had not yet created a high risk pool, and 
``operational'' grants to offset losses incurred by States that operate 
a qualified high risk pool. Under the prior law, in order for a risk 
pool to qualify for an operational grant, it could not charge premiums 
that exceeded 150 percent of the premium for applicable standard risk 
rates. Moreover, the amount of the grants was limited to 50 percent of 
the losses incurred by a State.
    Section 6202 of the Deficit Reduction Act of 2005 (Pub. L. 109-171) 
(DRA) and the State High Risk Pool Funding Extension Act of 2006 (Pub. 
L. 109-172) (Extension Act) extended funding for seed and operational 
grants for State High Risk Pools and amended section 2745 of the PHS 
Act.
    The Extension Act made the following changes:
    1. Expanded the definition of a ``qualified high risk pool.'' As 
noted above, section 2745(d) of the PHS Act previously defined the term 
to have the same meaning as in section 2744(c)(2) of the PHS Act, which 
required that the risk pool provide coverage to ``all'' HIPAA-eligible 
individuals (as defined in Sec.  148.103), without any pre-existing 
condition exclusion. The revised definition specifies that, for 
purposes of grants under section 2745, a risk pool can be qualified 
even if the State uses other mechanisms beyond the risk pool to ensure 
that health coverage is provided to all HIPAA-eligibles.
    2. Expanded the definition of ``State.'' Section 2745 of the PHS 
Act previously defined this term to include only the 50 States and the 
District of Columbia, but has now been amended to include U.S. 
Territories.
    3. Increased the amount of premiums that a risk pool can charge and 
still qualify for an operational grant. Section 2745 of the PHS Act 
previously required that the premiums charged under the pool not exceed 
150 percent of the premium for applicable standard risk rates. As 
amended, it permits grants to States with premiums of up to 200 percent 
of the standard risk rates, as long as States with premiums greater 
than 150 percent of the standard rate use at least half of the grant 
funds to reduce high risk pool premiums for enrollees.
    4. Removed the limitation that a State's grant not exceed 50 
percent of its operating losses.
    5. Changed the funding allotment formula. Previously, the grant 
funds were to be allotted to States under a relatively simple formula 
based on the number of uninsured individuals in the State. Under the 
new legislation, the allotment formula is more complex. Of the total 
appropriation for a given year--if money is appropriated--two-thirds 
would be available for grants to cover operational losses. Of these 
funds, 40 percent is to be equally divided among any of the 50 States 
and the District of Columbia that apply. Another 30 percent of that 
amount is allotted among all States that apply for grants based on the 
ratio of uninsured individuals in the State to uninsured individuals in 
all States that apply. The final 30 percent is to be allotted based on 
the ratio of the number of individuals enrolled in a State's risk pool 
to the number enrolled through the risk pools of all the qualifying 
States that apply. (Territories are eligible for the proportional 
allotments, but only up to a total of $1 million for all Territories 
combined.)
    6. Provided authority for ``bonus grants'' to States (not including 
Territories) that qualify for operational grants. One-third of a total 
yearly appropriation will be used to provide grants to enable States to 
provide specified supplemental consumer benefits to enrollees or 
potential enrollees of the qualified high risk pool. (A bonus grant is 
not to exceed 10 percent of the total for any one State.)
    This interim final rule with comment period updates our regulations 
at 45 CFR part 148, subpart E, Grants to States for Operation of 
Qualified High Risk Pools, to implement the changes made by the Deficit 
Reduction Act of 2005 and the State High Risk Pool Funding Extension 
Act of 2006.

II. Provisions of This Interim Final Rule

    [If you choose to comment on issues in this section, please include 
the caption ``Provisions of this Interim Final Rule'' at the beginning 
of your comments.]
    We are revising the regulation text in 45 CFR part 148 to conform 
with the State High Risk Pool Funding Extension Act of 2006 and the 
DRA. These revisions are discussed in detail below.

A. Definitions (Sec.  148.308)

    We are amending Sec.  148.308 (Definitions) to
     Add a definition of ``bonus grants.''
     Revise the definition of ``qualified high risk pool;'' and
     Revise the definition of ``State.''
1. Bonus Grant
    We are adding the following definition for Bonus Grants--Funds that 
the Secretary provides from the appropriated grant funds to be used to 
provide supplemental consumer benefits to enrollees or potential 
enrollees in qualified high risk pools.
2. Qualified High Risk Pool
    We are amending the definition at Sec.  148.308 to reflect the 
exception added by the Extension Act in section 2745(g)(1)(A) of the 
PHS Act. Specifically, a State may elect to meet the definition of a 
qualified high risk pool under Sec.  148.128(a)(2)(ii)(A) by providing 
for enrollment of eligible individuals through an acceptable 
alternative mechanism (as defined for purposes of section 2744 of the 
PHS) that includes a high risk pool as a component.
3. State
    In accordance with the Extension Act, we are amending the 
definition to include any of the 50 States and the District of 
Columbia, and the U.S. Territories of Puerto Rico, the Virgin Islands, 
Guam, American Samoa and the Northern Mariana Islands.

B. Grants for Operational Losses (Sec.  148.310)

1. Eligibility Requirements for an Operational Grant
    This section specifies the eligibility requirements for operational 
grants. A State must meet all of the following requirements to be 
eligible for a grant:
    a. Maximum premium. We are amending Sec.  148.310 to reflect that 
the statute has increased the maximum premium that a risk pool can 
charge and still qualify for a grant. The maximum has been changed from 
150 percent to 200 percent of the premium for applicable standard risk 
rates for the State.
    b. Continued funding. The statute previously required that the pool 
have in effect a mechanism reasonably designed to ensure continued 
funding of losses incurred by the State after the end of fiscal year 
2004, which was the last year that grants were authorized under the 
prior appropriation. The statute, as revised by the Extension Act, now 
requires that a risk pool have such a mechanism to ensure funding after 
the end of the last fiscal year for which a grant is provided. We 
interpret this to mean that the pool has capacity or mechanisms in 
place that can reasonably be expected to ensure that it may operate in 
the future without the benefit of Federal funding.
    In the case of a qualified high risk pool of a State that charges 
premiums that exceed 150 percent of the premium for applicable standard 
risks, the State must use at least 50 percent of the amount of the 
grant provided to the

[[Page 41234]]

State to reduce premiums for enrollees. The application should 
demonstrate/attest that the funds will be used this way.

2. Amount of Grant Payment (Sec.  148.312)

    Two-thirds of any amounts appropriated are made available for 
operational grants. An eligible State may receive a grant to fund up to 
100 percent of the losses incurred in the operation of its qualified 
high risk pool during the fiscal year for which it is applying. The 
grant may be less than 100 percent after the allotment limits are 
applied, but in no case will it be more than 100 percent.
    Funds will be allocated in accordance with Sec.  148.312 to each 
State that meets the eligibility requirements of Sec.  148.310 and 
files an application in accordance with Sec.  148.316. Specifically:
     Forty percent of funds made available under that section 
will be equally divided among any of the 50 States and the District of 
Columbia that meet the eligibility criteria for an operational grant;
     Thirty percent of funds made available will be divided 
among States (including territories) based on the number of uninsured 
residents in the State during the specified year as compared to the 
total number of uninsured residents in all States that apply for 
grants;
     Thirty percent will be divided among States (including 
territories) based on the number of people in State high risk pools 
during the specified year as compared to all States that apply.
    In accordance with the statute, in no case will the aggregate 
amount allotted and made available to the U.S. Territories for a fiscal 
year exceed $1 million.
    We will calculate the number of uninsured individuals for each 
eligible State by taking a 3-year average of the number of uninsured 
individuals in that State in the Current Population Survey (CPS) of the 
Census Bureau. The 3-year average will be calculated using numbers 
available as of March 1 of each year for the preceding 3-year period.

C. Bonus Grants

    One-third of the total appropriation will be available for the 
bonus grants. These grants will be available to any one of the 50 
States and the District of Columbia that receives an operational grant 
under Sec.  148.310. The grants must be used to provide one or more of 
the following benefits:
    (1) Low income premium subsidies;
    (2) Reduction in premium trends, actual premium or other cost-
sharing requirements;
    (3) An expansion or broadening of the pool of individuals eligible 
for coverage, such as through eliminating waiting lists, increasing 
enrollment caps, or providing flexibility in enrollment rules;
    (4) Less stringent rules or additional waiver authority with 
respect to coverage of pre-existing conditions;
    (5) Increased benefits; and
    (6) The establishment of disease management programs. In no case 
will a State receive bonus grants that exceed 10 percent of the total 
funds allotted for bonus grants in that fiscal year.

D. Periods During Which Eligible States May Apply for a Grant (Sec.  
148.314)

    Funds are currently appropriated for Federal fiscal year 2006 and 
authorized for fiscal years 2007 through 2010. Funding for FY 2007 
through 2010 under Pub. L. 109-172 requires subsequent enactment of 
appropriations authority. States will be unable to apply for grants 
unless and until such funding becomes available. A State that meets the 
eligibility requirements in Sec.  148.310 may apply for a grant to fund 
losses that were incurred during the State's or pool's fiscal year 
ending prior to or during any federal fiscal year, 2007 through 2010 
for which authorized funds are appropriated, in connection with the 
operation of its qualified high risk pool. Grant funding is 
administered on a retrospective basis (for example, pools with losses 
incurred in 2005 may apply for Federal Fiscal Year 2006 grant funds). 
If a State becomes eligible for a grant in the middle of its fiscal 
year, a State may apply for losses incurred in a partial fiscal year if 
a partial year audit is done. Only losses that are incurred after it is 
established that a pool is eligible (i.e., that it is a qualified high 
risk pool as defined by Sec.  148.128(a)(2)(ii)) will qualify for a 
grant. An eligible State must apply for a grant no later than June 30 
following the end of the State fiscal year during which it incurred 
losses. Each State may only be awarded one grant per fiscal year. A 
grant for a partial fiscal year counts as a full grant.
    States that meet all of the eligibility requirements in Sec.  
148.310 and submit timely requests in accordance with paragraph (c) of 
Sec.  148.314 will receive distribution of grant funds using the 
following methodology:
     Grant applications for losses will be on a retrospective 
basis. For example, grant applications for 2006 funds are based on the 
State's fiscal year 2005 incurred losses.
     Grant allocations for each fiscal year will be determined 
by taking all grant applications received by June 30 of the Federal 
fiscal year and allocating grant funds in accordance with Sec.  
148.312. In no case will a State receive funds greater than 100 percent 
of its losses.
    If any excess funds remain after the initial calculation, these 
excess funds will be proportionately redistributed to the States whose 
allocations have not exceeded 100 percent of their losses. This process 
will occur at the time of the initial calculation and there will be one 
annual allocation and distribution by September 30 of each year.
Grant Application Instructions (Sec.  148.316)
    We are amending Sec.  148.316 to reflect the addition of 
application requirements for bonus grants. We are changing the heading 
of Sec.  148.316(a), ``Application package,'' to ``Application for 
operational losses.'' We are inserting a bonus grants section by 
redesignating Sec.  148.316(a)(3) as Sec.  148.316(a)(4) and adding new 
paragraph (a)(3), the bonus grants requirements. The individual State 
applying for a bonus grant must provide:
    (i) A narrative description with detailed information about each 
one of the following supplemental consumer benefits to be provided to 
enrollees and/or potential enrollees in the high risk pool:
    (A) Low income premium subsidies;
    (B) Reduction in premium trends, actual premium or other cost-
sharing requirements;
    (C) An expansion or broadening of the pool of individuals eligible 
for coverage, such as through eliminating waiting lists, increasing 
enrollment caps, or providing flexibility in enrollment;
    (D) Less stringent rules, or additional waiver authority with 
respect to coverage of pre-existing conditions;
    (E) Increased benefits; and
    (F) The establishment of disease management programs.
    (ii) A description of the population or subset population that will 
be eligible for the supplemental consumer benefits.
    (iii) A projected budget for the use of bonus grant funds using the 
SF 424 and SF 424 A.
    We are revising the ``Standard forms application kit'' in Sec.  
148.316(b). We are eliminating the text ``Additional Assurances'' in 
``Standard forms application kit,'' paragraph (b)(1)(i).
    We are also changing the Web site URL address for the ``Standard 
forms kit'' download at paragraph (b)(1)(ii) to http://www.grants.gov.
    There are no other changes to the content of the ``Standard forms 
application kit.''
    In Sec.  148.316(c), ``Submission of application package,'' we are 
deleting

[[Page 41235]]

paragraphs (c)(1) and (c)(2) and replacing with text that will read: 
All applications should be submitted electronically via http://www.grants.gov.
    In Sec.  148.316(d), ``Application deadlines,'' we are changing the 
applications deadlines text to read: The deadline for States to submit 
an application for losses incurred in a State fiscal year is June 30 of 
the next Federal fiscal year that begins after the end of the State 
fiscal year.
    In Sec.  148.316(e), ``Where to submit an application,'' we are 
changing the text to read: Applications must be submitted to http://www.grants.gov.
Funding Mechanism (Sec.  148.318)
    We are amending Sec.  148.318, dealing with continued funding of a 
risk pool. The State must outline funding sources, such as assessments 
and State general revenues, which can cover the projected costs and are 
reasonably designed to ensure continued funding of losses a State 
incurs in connection with the operation of the qualified high risk pool 
after the last fiscal year for which it is applying for grant funds.
Grant Awards (Sec.  148.320)
    We are amending this section to specify that the grantee will be 
required to submit quarterly progress and financial reports under part 
92 of this title and in accordance with section 2745(f) of the Public 
Health Service Act, requiring the Secretary to make an annual report to 
Congress that includes information on the use of these grant funds by 
the States.

III. Collection of Information Requirement

    Under the Paperwork Reduction Act of 1995, 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. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 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 are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):

Section 148.316 Grant Application Instructions

    Section 148.316(a) requires each State to compile an application 
package that documents that it has met the requirements for a grant. If 
a risk pool entity applies on behalf of a State, it must provide 
documentation that it has been delegated appropriate authority by the 
State.
    The burden associated with this requirement is subject to the PRA; 
however, the structure of the application collection and grant 
monitoring reporting requirements of the grants has not been changed 
from the original grants program and is currently approved under OMB 
control number 0938-0887 ``Matching Grants to States for the Operation 
of High Risk Pools and Supporting Regulations at 42 CFR 148.316, 
148.318, and 148.320'' with a current expiration date of 01/31/2010. We 
are, however, revising this package to include the additional request 
under 148.316(a)(3) for (1) description of Type of Consumer Benefits; 
(2) Description of the Eligible Population for the consumer benefits; 
and, (3) Projected Budget for the use of Bonus Grants. We believe the 
burden associated with the additional information is already captured 
in the currently approved OMB package (0938-0887).

Section 148.320 Grant Awards

    Section 148.320(a)(2)(iii) states that a grantee is required to 
submit quarterly progress and financial reports under part 92 of this 
title and in accordance with section 2745(f) of the Public Health 
Service Act, requiring the Secretary to make an annual report to 
Congress that includes information on the use of these grant funds by 
States.
    The burden associated with this requirement is the time it would 
take for a grantee to submit quarterly progress and financial reports. 
We estimate it will take one grantee 1 hour per quarter to comply with 
this requirement.
    If you comment on these information collection and record keeping 
requirements, please mail copies directly to the following:
    Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs Division of Regulations Development, 
Attn.: Melissa Musotto, CMS-2260-IFC, Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    Office of Information and Regulatory Affairs, Office of Management 
and Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Katherine Astrich, CMS Desk Officer, CMS-2260-IFC, 
[email protected]. Fax (202) 395-6974.

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Waiver of Notice of Proposed Rulemaking and the 60-Day Delay in the 
Effective Date

    [If you choose to comment on issues in this section, please include 
the caption ``Waiver of Notice of Proposed Rulemaking and the 60-Day 
Delay in the Effective Date'' at the beginning of your comments.]
    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule in 
accordance with 5 U.S.C. section 553(b) of the Administrative Procedure 
Act (APA). The notice of proposed rulemaking includes a reference to 
the legal authority under which the rule is proposed, and the terms and 
substance of the proposed rule or a description of the subjects and 
issues involved. This procedure can be waived, however, if an agency 
finds good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    In this case, we believe that a notice-and-comment procedure is 
unnecessary because the regulation is only being amended to conform 
directly to the provisions of the Deficit Reduction Act of 2005 and the 
State High Risk Pool Funding Extension Act of 2006. The statutory 
effective date was the date of enactment, February 10, 2006. The law 
amends section 2745 of the Public Health Service Act, and the rule 
updates 45 CFR Subchapter B, Part 148, Subpart E--Grants to States for 
Operation of Qualified High Risk Pools to conform to the new and 
changed provisions of the law.
    In addition, we ordinarily provide a 30-day delay in the effective 
date of the provisions of an interim final rule.

[[Page 41236]]

Section 553(d) of the APA (5 U.S.C. section 553(d)) ordinarily requires 
a 30-day delay in the effective date of final rules after the date of 
their publication in the Federal Register. This 30-day delay in 
effective date can be waived, however, if an agency finds for good 
cause that the delay is impracticable, unnecessary, or contrary to the 
public interest, and the agency incorporates a statement of the finding 
and its reasons in the rule issued.
    All revisions are to update the current sections of the regulation. 
The only new section added is Sec.  148.316(a)(3), bonus grants for 
supplement consumer benefits, which is a new provision of the Extension 
Act. Other revisions include an expanded definition of ``qualified high 
risk pool,'' an updated definition of ``States'' to include U.S. 
Territories, and changes to the funding formula and updating dates to 
reflect new census measure periods and application deadlines. Although 
the grant solicitation clearly conforms to the provisions of the law 
and a grant cycle has already been completed under the provisions of 
this law, we believe that this action will better accommodate the 
implementation of the statute before the end of the second funding 
cycle.

VI. Regulatory Impact Statement

    [If you choose to comment on issues in this section, please include 
the caption ``Regulatory Impact Statement'' at the beginning of your 
comments.]
    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), 
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 small governmental 
jurisdictions. 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.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $120 million. This rule will have no 
consequential effect on State, local, or tribal governments 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.

List of Subjects in 45 CFR Part 148

    Administrative practice and procedure, Health care, Health 
insurance, Penalties, Reporting and recordkeeping requirements.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 45 CFR chapter IV as set forth below:

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

0
1. The authority citation for part 148 continues to read as follows:

    Authority: Secs. 2741 through 2763, 2791, and 2792 of the Public 
Health Service Act (42 U.S.C. 300gg-41 through 300gg-63, 300gg-91, 
and 300gg-92).

Subpart E--Grants to States for Operation of Qualified High Risk 
Pools

0
2. Section 148.306 is revised to read as follows:


Sec.  148.306  Basis and scope.

    This subpart implements section 2745 of the Public Health Service 
Act (PHS Act). It extends grants to States that have qualified high 
risk pools that meet the specific requirements described in Sec.  
148.310. It also provides specific instructions on how to apply for the 
grants and outlines the grant review and grant award processes.

0
3. Section 148.308 is amended by--
0
A. Adding the definition for ``bonus grants.''
0
B. Revising the definition of ``qualified high risk pool.''
0
C. Revising the definition of ``State.''
    The addition and revisions read as follows:


Sec.  148.308  Definitions.

* * * * *
    Bonus grants means funds that the Secretary provides from the 
appropriated grant funds to be used to provide supplemental consumer 
benefits to enrollees or potential enrollees in qualified high risk 
pools.
* * * * *
    Qualified high risk pool as defined in sections 2744(c)(2) and 
2745(g) of the PHS Act means a risk pool that--
    (1) Provides to all eligible individuals health insurance coverage 
(or comparable coverage) that does not impose any preexisting condition 
exclusion with respect to such coverage for all eligible individuals, 
except that it may provide for enrollment of eligible individuals 
through an acceptable alternative mechanism (as defined for purposes of 
section 2744 of the PHS Act) that includes a high risk pool as a 
component; and
    (2) Provides for premium rates and covered benefits for such 
coverage consistent with standards included in the NAIC Model Health 
Plan for Uninsurable Individuals Act that was in effect at the time of 
the enactment of the Health Insurance Portability and Accountability 
Act of 1996 (August 21, 1996) but only if the model has been revised in 
State regulations to meet all of the requirements of this part and 
title 27 of the PHS Act.
* * * * *
    State means any of the 50 States and the District of Columbia and 
includes the U.S. Territories of Puerto Rico, the Virgin Islands, Guam, 
American Samoa and the Northern Mariana Islands.
* * * * *

0
4. Section 148.310 is amended by--
0
A. Republishing the introductory text to the section.
0
B. Revising paragraph (b).
0
C. Revising paragraph (d).
0
D. Adding paragraphs (f), (g), and (h).
    The republication, revisions, and additions read as follows:

[[Page 41237]]

Sec.  148.310  Eligibility requirements for a grant.

    A State must meet all of the following requirements to be eligible 
for a grant:
* * * * *
    (b) The pool restricts premiums charged under the pool to no more 
than 200 percent of the premium for applicable standard risk rates for 
the State.
* * * * *
    (d) The pool has in effect a mechanism reasonably designed to 
ensure continued funding of losses incurred by the State after the end 
of each fiscal year for which the State applies for Federal Funding in 
fiscal years 2005-2010 in connection with the operation of the pool.
* * * * *
    (f) In the case of a qualified high risk pool in a State that 
charges premiums that exceed 150 percent of the premium for applicable 
standard risks, the State will use at least 50 percent of the amount of 
the grant provided to the State to reduce premiums for enrollees.
    (g) In no case will the aggregate amount allotted and made 
available to the U.S. Territories for a fiscal year exceed $1,000,000 
in total.
    (h) Bonus grant funding must be used for one or more of the 
following benefits:
    (1) Low income premium subsidies;
    (2) Reduction in premium trends, actual premium or other cost-
sharing requirements;
    (3) An expansion or broadening of the pool of individuals eligible 
for coverage, such as through eliminating waiting lists, increasing 
enrollment caps, or providing flexibility in enrolment rules;
    (4) Less stringent rules or additional waiver authority with 
respect to coverage of pre-existing conditions;
    (5) Increased benefits; and
    (6) The establishment of disease management programs.

0
5. Section 148.312 is amended by--
0
A. Revising paragraph (a).
0
B. Revising paragraph (b).
0
C. Adding a new paragraph (d).
    The revisions and addition read as follows:


Sec.  148.312  Amount of grant payment.

    (a) An eligible State may receive a grant to fund up to 100 percent 
of the losses incurred in the operation of its qualified high risk pool 
during the period for which it is applying or a lesser amount based on 
the limits of the allotment under the formula.
    (b) Funds will be allocated in accordance with this paragraph to 
each State that meets the eligibility requirements of Sec.  148.310 and 
files an application in accordance with Sec.  148.316. The amount will 
be divided among the States that apply and are awarded grants according 
to the allotment rules that generally provide that: 40 percent will be 
equally divided among those States; 30 percent will be divided among 
States and territories based on their number of uninsured residents in 
the State during the specified year as compared to all States that 
apply; and 30 percent will be divided among States and territories 
based on the number of people in State high risk pools during the 
specified year as compared to all States that apply. For the purposes 
of this paragraph:
    (1) The number of uninsured individuals is calculated for each 
eligible State by taking a 3-year average of the number of uninsured 
individuals in that State in the Current Population Survey (CPS) of the 
Census Bureau during the period for which it is applying. The 3-year 
average will be calculated using numbers available as of March 1 of 
each year.
    (2) The number of individuals enrolled in health care coverage 
through the qualified high risk pool of the State will be determined by 
attestation by the State in its grant application and verified for 
reasonability by the Secretary through acceptable industry data 
sources.
* * * * *
    (d) One-third of the total appropriation will be available for the 
bonus grants. In no case will a State for a fiscal year receive bonus 
grants that exceed 10 percent of the total allotted funds for bonus 
grants.

0
6. Section 148.314 is revised to read as follows:


Sec.  148.314  Periods during which eligible States may apply for a 
grant.

    (a) General rule. A State that meets the eligibility requirements 
in Sec.  148.310 may apply for a grant to fund losses that were 
incurred during the State's fiscal year 2005, 2006, 2007, 2008 and 2009 
in connection with the operation of its qualified high risk pool. 
Funding for FY 2007 through 2010 under Pub. L. 109-172 requires 
subsequent enactment of appropriations authority. States will be unable 
to apply for grants unless and until such funding becomes available. 
Grants funding is on a retrospective basis and applies to the States 
previous fiscal year. If a State becomes eligible for a grant in the 
middle of its fiscal year, a State may apply for losses incurred in a 
partial fiscal year if a partial year audit is done. Only losses that 
are incurred after eligibility is established will qualify for a grant.
    (b) Maximum number of grants. An eligible State may only be awarded 
a maximum of five grants, with one grant per fiscal year. A grant for a 
partial fiscal year counts as a full grant.
    (c) Deadline for submitting grant applications. The deadlines for 
submitting grant applications are stated in Sec.  148.316(d).
    (d) Distribution of grant funds. States that meet all of the 
eligibility requirements in Sec.  148.310 and submit timely requests in 
accordance with paragraph (c) of this section will receive an initial 
distribution of grant funds using the following methodology: Grant 
applications for losses will be on a retrospective basis. For example, 
grant applications for 2006 funds are based on the State's fiscal year 
2005 incurred losses. Grant funding is appropriated for Federal fiscal 
year 2006 and authorized to be appropriated for Federal fiscal years 
2007 through 2010.
    (e) Grant allocations. Grant allocations for each fiscal year will 
be determined by taking all grant applications during the period for 
which States are applying and allocating the funds in accordance with 
Sec.  148.312.
    (1) In no case will a State receive funds greater than 100 percent 
of their losses.
    (2) If any excess funds remain after the initial calculation, these 
excess funds will be proportionately redistributed to the States whose 
allocations have not exceeded 100 percent of their losses.

0
7. Section 148.316 is amended by--
0
A. Adding new introductory text to the section.
0
B. Amending paragraph (a) introductory text by revising the heading.
0
C. Redesignating paragraph (a)(3) as paragraph (a)(4).
0
D. Adding a new paragraph (a)(3).
0
E. Revising paragraph (b).
0
F. Revising paragraph (c).
0
G. Revising paragraph (d).
0
H. Revising paragraph (e).
    The republication, revisions, and addition read as follows:


Sec.  148.316  Grant application instructions.

    Funding for FY 2007 through FY 2010 under Pub. L. 109-172 requires 
the subsequent enactment of appropriations. States will be unable to 
apply for grants unless and until such funding becomes available.
    (a) Application for operational losses. * * *
* * * * *
    (3) Bonus grants for supplemental consumer benefits. Provide 
detailed information about the following

[[Page 41238]]

supplemental consumer benefits for which the entity is applying:
    (i) A narrative description of one or more of the following of the 
supplemental consumer benefits to be provided to enrollees and/or 
potential enrollees in the high risk pool:
    (A) Low income premium subsidies;
    (B) Reduction in premium trends, actual premium or other cost-
sharing requirements;
    (C) An expansion or broadening of the pool of individuals eligible 
for coverage, such as through eliminating waiting lists, increasing 
enrollment caps, or providing flexibility in enrollment;
    (D) Less stringent rules, or additional waiver authority with 
respect to coverage of pre-existing conditions;
    (E) Increased benefits; and
    (F) The establishment of disease management programs.
    (ii) A description of the population or subset population that will 
be eligible for the supplemental consumer benefits.
    (iii) A projected budget for the use of bonus grant funds using the 
SF 424 A.
* * * * *
    (b) Standard form application kit--(1) Forms. (i) The following 
standard forms must be completed with an original signature and 
enclosed as part of the application package:

SF-424 Application for Federal Assistance.
SF-424A Budget Information.
SF-424B Assurances Non-Construction Program.
SF-LLL Disclosure of Lobbying Activities Biographical Sketch.

    (ii) These forms can be accessed from the following Web site: 
http://www.grants.gov.
    (2) Other narrative. All other narrative in the application must be 
submitted on 8\1/2\ x 11 inch white paper.
    (c) Application submission. Submission of application package is 
through http://www.grants.gov. Submissions by facsimile (fax) 
transmissions will not be accepted.
    (d) Application deadlines. (1) The deadline for States to submit an 
application for losses incurred in a State fiscal year is June 30 of 
the next Federal fiscal year that begins after the end of the State 
fiscal year. Funding for FY 2007 through 2010 under Pub. L. 109-172 
requires subsequent enactment of appropriations authority. States will 
be unable to apply for grants unless and until such funding becomes 
available.
    (2) Deadline for States to submit an application for losses 
incurred in their fiscal year 2005. States had to submit an application 
to CMS no later than June 30, 2006.
    (3) Deadline for States to submit an application for losses 
incurred in their fiscal year 2006. States must submit an application 
to CMS by no later than June 30, 2007.
    (4) Deadline for States to submit an application for losses 
incurred in their fiscal year 2007. States must submit an application 
to CMS by no later than June 30, 2008.
    (5) Deadline for States to submit an application for losses 
incurred in their fiscal year 2008. States must submit an application 
to CMS by no later than June 30, 2009.
    (6) Deadline for States to submit an application for losses 
incurred in their fiscal year 2009. States must submit an application 
to CMS by no later than June 30, 2010.
    (e) Where to submit an application. Applications must be submitted 
to http://www.grants.gov. Submissions by facsimile (fax) transmissions 
will not be accepted.
0
8. Section 148.318 is amended by revising paragraph (d)(2) to read as 
follows:


Sec.  148.318  Grant application review.

* * * * *
    (d) * * *
    (2) Funding mechanism. The State has outlined funding sources, such 
as assessments and State general revenues, which can cover the 
projected costs and are reasonably designed to ensure continued funding 
of losses a State incurs in connection with the operation of the 
qualified high risk pool after each fiscal year for which it is 
applying for grant funds.

0
9. Section 148.320 is amended by revising paragraph (a)(2)(iii) to read 
as follows:


Sec.  148.320  Grant awards.

    (a) * * *
    (2) * * *
    (iii) The grantee will be required to submit quarterly progress and 
financial reports under part 92 of this title and in accordance with 
section 2745(f) of the Public Health Service Act, requiring the 
Secretary to make an annual report to Congress that includes 
information on the use of these grant funds by States.
* * * * *

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: March 22, 2007.
Leslie V. Norwalk,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 17, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. E7-14361 Filed 7-26-07; 8:45 am]
BILLING CODE 4120-01-P