[Federal Register Volume 76, Number 159 (Wednesday, August 17, 2011)]
[Proposed Rules]
[Pages 51201-51237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20776]



[[Page 51201]]

Vol. 76

Wednesday,

No. 159

August 17, 2011

Part III





Department of Health and Human Services





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45 CFR Parts 155 and 157





Patient Protection and Affordable Care Act; Exchange Functions in the 
Individual Market: Eligibility Determinations; Exchange Standards for 
Employers; Proposed Rule

Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / 
Proposed Rules

[[Page 51202]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 155 and 157

[CMS-9974-P]
RIN 0938-AR25


Patient Protection and Affordable Care Act; Exchange Functions in 
the Individual Market: Eligibility Determinations; Exchange Standards 
for Employers

AGENCY: Department of Health and Human Services.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement certain functions of the 
new Affordable Insurance Exchanges (``Exchanges''), consistent with 
title I of the Patient Protection and Affordable Care Act of 2010, as 
amended by the Health Care and Education Reconciliation Act of 2010, 
referred to collectively as the Affordable Care Act. The Exchanges will 
provide competitive marketplaces for individuals and small employers to 
directly compare available private health insurance options on the 
basis of price, quality, and other factors. The Exchanges, which will 
become operational by January 1, 2014, will help enhance competition in 
the health insurance market, improve choice of affordable health 
insurance, and give small businesses the same purchasing clout as large 
businesses. The specific Exchange functions proposed in this rule 
include: Eligibility determinations for Exchange participation and 
insurance affordability programs and standards for employer 
participation in SHOP.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. Eastern Standard 
Time (EST) on October 31, 2011.

ADDRESSES: In commenting, please refer to file code CMS-9974-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9974-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    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 to 
the following address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-9974-P, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey 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.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously 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 following the 
instructions 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: 
    Laurie McWright at (301) 492-4372 for general information matters.
    Alissa DeBoy at (301) 492-4428 for general information and matters 
related to part 155.
    Michelle Strollo at (301) 492-4429 for matters related to 
eligibility.
    Naomi Senkeeto at (301) 492-4419 for matters related to part 157.

SUPPLEMENTARY INFORMATION: A detailed Preliminary Regulatory Impact 
Analysis associated with this proposed rule is available at http://cciio.cms.gov under ``Regulations and Guidance.'' A summary of the 
aforementioned analysis is included as part of this proposed rule.

Abbreviations

CHIP Children's Health Insurance Program
CMS Centers for Medicare & Medicaid Services
DOL U.S. Department of Labor
ERISA Employee Retirement Income Security Act (29 U.S.C. section 
1001, et seq.)
FPL Federal Poverty Level
HHS U.S. Department of Health and Human Services
HMO Health Maintenance Organization
IHS Indian Health Service
IRS Internal Revenue Service
NAIC National Association of Insurance Commissioners
OMB Office of Management and Budget
OPM Office of Personnel Management
PHS Act Public Health Service Act
QHP Qualified Health Plan
SHOP Small Business Health Options Program
SSA Social Security Administration
The Act Social Security Act
The Code Internal Revenue Code of 1986

    Executive Summary: Starting in 2014, individuals and small 
businesses will be able to purchase private health insurance through 
State-based competitive marketplaces called Affordable Insurance 
Exchanges, or ``Exchanges.'' Exchanges will offer Americans 
competition, choice, and clout. Insurance companies will compete for 
business on a level playing field, driving down costs. Consumers will 
have a choice of health plans to fit their needs. And Exchanges will 
give individuals and small businesses the same purchasing clout as big 
businesses. The Departments of Health and Human Services, Labor and the 
Treasury (the Departments) are working in close coordination to release 
guidance related to Exchanges. The first in this series was a Request 
for Comment relating to Exchanges, published in the Federal Register on 
August 3, 2010 (75 FR 45584). Second, Initial Guidance to States on 
Exchanges was issued on November 18, 2010. Third, a proposed rule for 
the application, review, and reporting process for waivers for State 
innovation was published in the Federal Register on March 14, 2011 (76 
FR 13553). Fourth, two proposed regulations were published in the 
Federal Register on July 15, 2011 (76 FR 41866 and 76 FR 41930) to 
implement components of the Exchange and health insurance premium 
stabilization policies in the Affordable Care Act. Fifth, a proposed 
regulation for the

[[Page 51203]]

establishment of the Consumer Operated and Oriented Plan (CO-OP) 
Program under section 1322 of the Affordable Care Act was published in 
the Federal Register on July 20, 2011 (76 FR 43237). Sixth, three 
proposed rules, including this one, are being published in the Federal 
Register on August 17, 2011 to provide guidance on the eligibility 
determination process related to enrollment in a qualified health plan, 
advance payments of the premium tax credit, cost-sharing reductions, 
Medicaid, the Children's Health Insurance Program (CHIP), and 
participation in SHOP.
    45 CFR 155.200(c) proposes that the Exchange perform eligibility 
determinations. This rule proposes the specific standards for the 
Exchange eligibility process, in order to implement sections 1311, 
1312, 1411, 1412, and 1413 of the Affordable Care Act. Further, it 
supports and complements rulemaking conducted by the Secretary of the 
Treasury with respect to section 36B of the Internal Revenue Code (the 
Code), as added by section 1401(a) of the Affordable Care Act, and by 
the Secretary of HHS with respect to several sections of the Affordable 
Care Act regarding Medicaid and CHIP. This proposed rule also contains 
standards for employers with respect to participation in the Small 
Business Health Options Program (SHOP), paralleling the Exchange 
standards for SHOP set forth in the previous Exchange rule.
    The aforementioned sections of the Affordable Care Act create a 
central role for the Exchange in the process of determining an 
individual's eligibility for enrollment in a qualified health plan 
(QHP), as well as for ``insurance affordability programs.'' In this 
proposed rule, ``insurance affordability programs'' is used to refer to 
advance payments of the premium tax credit, cost-sharing reductions, 
Medicaid, CHIP, and any State-established Basic Health Program, if 
applicable, as defined in 42 CFR 435.4 of the Medicaid proposed rule. 
We interpret Affordable Care Act sections 1311(d)(4)(F), and 1413, and 
section 1943 of the Act, as added by section 2201 of the Affordable 
Care Act, to establish a system of streamlined and coordinated 
eligibility and enrollment through which an individual may apply for 
enrollment in a QHP and insurance affordability programs and receive a 
determination of eligibility for such programs. We also interpret 
section 1413(b)(2) to mean that the eligibility and enrollment function 
should be consumer-oriented, minimizing administrative hurdles and 
unnecessary paperwork for applicants.
    Submitting Comments: We welcome comments from the public on issues 
set forth in this proposed rule to assist us in fully considering 
issues and developing policies. Comments will be most useful if they 
are organized by the section of the proposed rule to which they apply. 
You can assist us by referencing the file code [CMS-9974-P] 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 electronic 
comments received before the close of the comment period on the 
following public Web site as soon as possible after they have been 
received at http://www.regulations.gov. Follow the search instructions 
on that Web site to view public comments. Comments received timely will 
be available for public inspection as they are received, generally 
beginning approximately 3 weeks after publication of a document, at 
Room 445-G, Department of Health and Human Services, Hubert H. Humphrey 
Building, 200 Independence Avenue, SW., Washington, DC 20201, Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an 
appointment to view public comments, call 1-800-743-3951.

Table of Contents

I. Background
    A. Legislative Overview
    B. Request for Comment
    C. Structure of the Proposed Rule
II. Provisions of the Proposed Regulation
    A. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. Subpart D--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exchange Participation and Insurance 
Affordability Programs
    B. Part 157--Employer Interactions With Exchanges and SHOP 
Participation
    1. Subpart A--General Provisions
    2. Subpart B--Reserved
    3. Subpart C--Standards for Qualified Employers
III. Collection of Information Requirements
IV. Summary of Regulatory Impact Analysis
V. Regulatory Flexibility Act
VI. Unfunded Mandates
VII. Federalism

I. Background

A. Legislative Overview

    Section 1311(b) and section 1321 of the Affordable Care Act outline 
provisions for the establishment of Exchanges that will facilitate the 
purchase of insurance coverage by qualified individuals through 
qualified health plans (QHPs).
    Section 1401 of the Affordable Care Act creates new section 36B of 
the Internal Revenue Code (the Code), which provides for a premium tax 
credit for eligible individuals who enroll in a QHP through an 
Exchange. Section 1402 establishes provisions to reduce the cost-
sharing obligation of certain eligible individuals enrolled in a QHP 
offered through an Exchange.
    Under section 1411 of the Affordable Care Act, the Secretary is 
directed to establish a program for determining whether an individual 
meets the eligibility standards for Exchange participation, advance 
payments of the premium tax credit, cost-sharing reductions, and 
exemptions from the individual responsibility provision.
    Sections 1412 and 1413 of the Affordable Care Act and section 1943 
of the Social Security Act (the Act), as added by section 2201 of the 
Affordable Care Act, contain additional provisions regarding 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions, as well as provisions regarding simplification and 
coordination of eligibility determinations and enrollment with other 
health programs. These provisions of the Affordable Care Act are 
addressed in subpart D of part 155 in this rule.
    Section 1402 of the Affordable Care Act outlines standards for 
determining Indians eligible for certain categories of cost-sharing 
reductions.
    Unless otherwise specified, the provisions in this proposed rule 
related to the establishment of minimum functions of an Exchange are 
based on the general authority of the Secretary under section 
1321(a)(1) of the Affordable Care Act.

B. Stakeholder Consultation and Input

    On August 3, 2010, HHS published a Request for Comment (the RFC) 
inviting the public to provide input regarding the rules that will 
govern the Exchanges. In particular, HHS asked States, tribal 
representatives, consumer advocates, employers, insurers, and other 
interested stakeholders to comment on the types of standards Exchanges 
should meet. The comment period closed on October 4, 2010. While this 
proposed rule does not directly respond to comments from the RFC, the 
comments received are described, where applicable, in discussing 
specific regulatory proposals.
    The public response to the RFC yielded comment submissions from 
consumer advocacy organizations, medical and health care professional

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trade associations and societies, medical and health care professional 
entities, health insurers, insurance trade associations, members of the 
general public, and employer organizations. The majority of the 
comments were related to the general functions and standards for 
Exchanges, QHPs, eligibility and enrollment, and coordination with 
Medicaid. We intend to respond to comments from the RFC, along with 
comments received on this proposed rule, as part of the final rule.
    In addition to the RFC, HHS has consulted with stakeholders through 
regular meetings with the National Association of Insurance 
Commissioners (NAIC), regular contact with States through the Exchange 
grant process, and meetings with tribal representatives, health 
insurance issuers, trade groups, consumer advocates, employers, and 
other interested parties. This consultation will continue throughout 
the development of Exchange guidance.

C. Structure of the Proposed Rule

    The regulations outlined in this notice of proposed rulemaking will 
be codified in 45 CFR part 155 and new part 157. Part 155 outlines the 
proposed standards for States relative to the establishment of 
Exchanges and outlines the proposed standards for Exchanges related to 
minimum Exchange functions. Part 157 outlines the basic standards that 
employers must meet to voluntarily participate in the Small Business 
Health Options Program (SHOP).
    Subjects included in the Affordable Care Act addressed in prior 
proposed rulemaking include but are not limited to: (1) Federal 
standards for States that elect to establish and operate an Exchange; 
(2) minimum standards for health insurance issuers to participate in an 
Exchange and offer qualified health plans (QHPs); and (3) basic 
standards related to the establishment of the Small Business Health 
Options Program (SHOP).
    Subjects included in the Affordable Care Act to be addressed in 
future separate rulemaking include but are not limited to: (1) 
Standards outlining the Exchange process for issuing certificates of 
exemption from the individual responsibility provision and payment 
under section 1411(a)(4); (2) defining essential health benefits, 
actuarial value and other benefit design standards; and (3) standards 
for Exchanges and QHP issuers related to quality.

II. Provisions of the Proposed Regulation

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

1. Subpart D--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
    Under the Affordable Care Act, Exchanges will make QHPs available 
to qualified individuals. In accordance with our interpretation of the 
sections of the Affordable Care Act described below; the authority 
provided by, inter alia, section 1321(a); and 45 CFR 155.200(c), which 
specifies that the Exchange will perform eligibility determinations; we 
propose that the Exchange will determine eligibility for Exchange 
participation, as well as for insurance affordability programs. 
Sections 1312, 1331, 1401, 1402, 2001, 2002, and 2201 of the Affordable 
Care Act, by creating new law and amending existing law, in conjunction 
with titles XIX and XXI of the Act, set forth eligibility standards for 
these programs and benefits; and sections 1311, 1411, 1412, and 1413 of 
the Affordable Care Act create a central role for the Exchange in the 
process of determining an individual's eligibility based on those 
standards. In subpart D, we propose standards related to eligibility 
determinations for enrollment in a QHP and for insurance affordability 
programs. Throughout this subpart, we refer to Medicaid and CHIP, but 
we note that for those States that choose to establish a Basic Health 
Program, all provisions applicable to Medicaid and CHIP will also be 
generally applicable to the Basic Health Program. We also note that 
references in this subpart to ``Exchange'' refer specifically to 
functions in connection with the purchase of individual market coverage 
through the Exchange.
    In 45 CFR 155.200(c) (76 FR 41866), we proposed that the Exchange 
perform eligibility determinations. We interpret Affordable Care Act 
sections 1311(d)(4)(F) and 1413, and section 1943 of the Act, as added 
by section 2201 of the Affordable Care Act, to provide for the 
establishment of a system of streamlined and coordinated eligibility 
and enrollment through which an individual may apply for insurance 
affordability programs and receive a determination of eligibility for 
any such program. Section 1413(b)(2) provides that an individual's 
eligibility be determined without unduly burdening the individual with 
unnecessary paperwork. We note that these approaches were supported by 
comments that we received in response to the RFC. One option that we 
considered was whether to establish a system in which the Secretary of 
HHS would determine eligibility for advance payments of the premium tax 
credit, with other eligibility and enrollment functions remaining as 
the responsibility of the Exchange, since premium tax credits are fully 
Federally-funded and the rules are the same across all States. However, 
we chose not to take this approach, because isolating one component of 
the eligibility determination process from the remaining eligibility 
and enrollment functions would pose significant challenges to ensuring 
a seamless experience for applicants. It would also limit the role of 
State Exchanges in this process. We note that States may also work with 
HHS to leverage technological and operational capabilities provided by 
HHS to execute Exchange functions in a way that will meet the needs of 
individuals. We solicit comments on this approach and alternatives.
    We also note that throughout this subpart, we propose several 
transmissions of data, which we intend to occur electronically, using 
secure interfaces. We note that the standards specified in Sec.  
155.260 and Sec.  155.270 regarding privacy and security apply to any 
data sharing processes and agreements under this subpart.
    The proposed eligibility process is designed to minimize 
opportunities for fraud and abuse, including the use of clear 
eligibility standards and processes that rely on data sources in an 
electronic environment. We solicit comments regarding strategies to 
further limit the risk for fraud and abuse, and we look forward to 
working with States toward this goal.
    Consistent with this streamlined, seamless eligibility and 
enrollment system, the Affordable Care Act requires a simplification of 
Medicaid and CHIP eligibility policy and rules, which is in 42 CFR 
435.603 and 42 CFR 457.315, proposed by the Secretary of HHS in the 
Medicaid Program; Eligibility Changes under the Affordable Care Act of 
2010 rule, published in this issue of the Federal Register (the 
Medicaid proposed rule). Pursuant to the Affordable Care Act, this 
simplification aligns most of the rules under which individuals will be 
determined eligible for Medicaid and CHIP with those for advance 
payments of the premium tax credit and cost-sharing reductions, by 
generally using modified adjusted gross income (MAGI) as the basis for 
income

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eligibility, effective January 1, 2014. While the use of this standard 
is referenced throughout this subpart, the use of a MAGI-based standard 
for Medicaid and CHIP is proposed in the Medicaid proposed rule, 
pursuant to section 2002 of the Affordable Care Act, and the definition 
of MAGI will be proposed by the Department of the Treasury in the 
Health Insurance Premium Tax Credit rule, scheduled for publication in 
this issue of the Federal Register.\1\
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    \1\ Section 3308 of the Affordable Care Act also defines 
``modified adjusted gross income''; this definition is different 
from the definitions that are applicable to advance payments of the 
premium tax credit, cost-sharing reductions, Medicaid, and CHIP.
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    In this subpart, we have organized the standards we propose for the 
Exchange in determining eligibility as follows: Eligibility standards, 
eligibility determination process, and applicant information 
verification process.
a. Definitions and General Standards for Eligibility Determinations 
(Sec.  155.300)
    In this section, we propose definitions for this subpart. We note 
that virtually all of the definitions in this section are from other 
proposed regulations, including many proposed in the Establishment of 
Exchanges and Qualified Health Plans rule, published at 76 FR 41866 
(July 15, 2011), (Exchange proposed rule).
    In paragraph (a), we propose the definition for ``adoption taxpayer 
identification number'' to have the same meaning as it does in 26 CFR 
301.6109-3(a).
    We propose the definition for ``applicable Medicaid modified 
adjusted gross income (MAGI)-based income standard'' to have the same 
meaning as ``applicable Medicaid modified adjusted gross income 
standard'' as defined in 42 CFR 435.911(b), applied under the State 
Medicaid plan or waiver of such plan, and as certified by the State 
Medicaid agency pursuant to 42 CFR 435.1200(c)(2), for determining 
Medicaid eligibility. Both 42 CFR 435.911(b) and 435.1200(c)(2) are 
proposed in the Medicaid proposed rule.
    In support of our proposal that the Exchange determine an 
applicant's eligibility for CHIP, we propose to define ``applicable 
CHIP modified adjusted gross income (MAGI)-based income standard'' as 
the income standard applied under the State plan under Title XXI of the 
Act, or waiver of such plan, as defined at 42 CFR 457.305(a), and as 
certified by the State CHIP Agency pursuant to 42 CFR 457.348(d), for 
determining eligibility for child health assistance and enrollment in a 
separate child health program. The applicable CHIP MAGI-based standard 
will also vary from State to State depending on the threshold 
established by the State CHIP agency. Both 42 CFR 457.305 and 
457.348(d) are proposed in the Medicaid proposed rule.
    We propose to define ``application filer'' to mean an individual 
who submits an application for health insurance coverage to the 
Exchange and responds to inquiries about the application. An 
application filer may be an applicant or a non-applicant, and may or 
may not be a primary taxpayer.
    We propose to define ``Federal Poverty Level'' (FPL) to mean the 
most recently published FPL, updated periodically in the Federal 
Register by the Secretary of Health and Human Services under the 
authority of 42 U.S.C. 9902(2), as of the first day of the annual open 
enrollment period for coverage in a qualified health plan through the 
Exchange; the open enrollment period is specified in 45 CFR 155.410. 
This definition is used for eligibility for advance payments of the 
premium tax credit and cost-sharing reductions, and matches the 
definition in the Treasury proposed rule. We note that the Medicaid 
proposed rule does not specify that FPL is based on the data published 
as of the first day of the Exchange open enrollment period, which means 
that the FPL table used in eligibility determinations for Medicaid and 
CHIP may be different from that used for advance payments of the 
premium tax credit and cost-sharing reductions, depending on the date 
of the eligibility determination. However, we note that for the annual 
open enrollment period for coverage, the FPL tables for Medicaid, CHIP, 
and advance payments of the premium tax credit and cost-sharing 
reductions should be the same.
    For purposes of determining eligibility for cost-sharing 
provisions, we propose to codify the definition of ``Indian'' to mean 
any individual defined in section 4(d) of the Indian Self-Determination 
and Education Assistance Act (ISDEAA) (Pub. L. 93-638, 88 Stat. 2203), 
in accordance with section 1402(d)(1) of the Affordable Care Act. This 
definition means an individual who is a member of a Federally-
recognized tribe. Applicants meeting this definition are eligible for 
cost-sharing reductions or special cost-sharing rules on the basis of 
Indian status, which are described in Sec.  155.350 of this subpart.
    We propose to define ``insurance affordability programs'' as 
described earlier in this section.
    We propose that the definition of the term ``minimum value'' has 
the meaning given to the term in section 36B(c)(2)(C) of the Code.
    We propose to define ``non-citizen'' to mean any individual who is 
not a citizen or national of the United States, which is the same 
meaning as the term alien as defined in section 101(a)(3) of the 
Immigration and Nationality Act.
    We propose to define ``primary taxpayer'' to mean an individual who 
(1) attests that he or she will file a tax return for the benefit year, 
in accordance with 26 CFR 1.6011-8; (2) if married (within the meaning 
of 26 CFR 1.7703-1), attests that he or she expects to file a joint tax 
return for the benefit year; (3) attests that he or she expects that no 
other taxpayer will be able to claim him or her as a tax dependent for 
the benefit year; and (4) attests that he or she expects to claim a 
personal exemption deduction on his or her tax return for the family 
members listed on his or her application, including the primary 
taxpayer and his or her spouse. We use this term in Sec.  155.305 and 
Sec.  155.320(c) of this subpart to describe the individual who would 
receive advance payments of the premium tax credit and would file a tax 
return to reconcile such advance payments.
    We propose to define ``State CHIP Agency'' to mean the agency that 
administers a separate child health program established by the State 
under Title XXI of the Act in accordance with implementing regulations 
at 42 CFR part 457.
    We propose to define ``State Medicaid Agency'' to mean the agency 
that administers a Medicaid program established by the State under 
Title XIX of the Act in accordance with implementing regulations at 42 
CFR 430.
    We propose to define ``tax dependent'' to mean a dependent in 
accordance with section 152 of the Code.
    In paragraph (b), we propose to clarify that, in general, 
references to Medicaid and CHIP regulations in this subpart refer to 
Medicaid and CHIP State plan provisions implementing those regulations. 
To the extent that the regulations outlined in this section refer to 
Medicaid and CHIP regulations, the Exchange would adhere to the rules 
of the Medicaid and CHIP agencies operating within the service area of 
the Exchange.
    Lastly, in paragraph (c)(1), we propose that except as specified in 
paragraph (c)(2), for purposes of this subpart, an attestation may be 
made by the applicant (self-attestation), an application filer, or in 
cases in which an

[[Page 51206]]

individual cannot attest, the attestation of a parent, caretaker, or 
someone acting responsibly on behalf of such an individual. In 
paragraph (c)(2), we propose that the attestations specified in Sec.  
155.310(d)(2)(ii) and Sec.  155.315(e)(4)(ii), which result in the 
authorization of advance payments of the premium tax credit, must be 
made by the primary taxpayer. This is because these attestations are 
designed to ensure that the primary taxpayer appreciates and accepts 
the tax consequences that follow from receipt of advance payments.
b. Eligibility Standards (Sec.  155.305)
    In Sec.  155.305, we propose to codify the eligibility standards 
for enrollment in a QHP and for insurance affordability programs.
    In paragraph (a), we propose that the Exchange determine an 
applicant eligible for enrollment in a QHP if he or she meets the basic 
standards for enrollment in a QHP, which are taken from section 1312(f) 
of the Affordable Care Act. First, in paragraph (a)(1), we propose to 
codify section 1312(f)(3) that in order to be eligible for enrollment 
in a QHP, an individual must be a citizen, national, or a non-citizen 
lawfully present, and be reasonably expected to remain so for the 
entire period for which enrollment is sought. In proposed Sec.  155.20, 
the term ``lawfully present'' is adopted as defined in 45 CFR 152.2. 
Since the Exchange will also be determining eligibility for Medicaid 
and CHIP, we intend to align the requirements for lawful presence with 
that of the State option for Medicaid and CHIP under section 1903(v)(4) 
of the Act, as added by section 214 of the Children's Health Insurance 
Program Reauthorization Act (Pub. L. 111-3, 123 Stat. 8); to the extent 
that the Secretary amends the definition for Medicaid and CHIP in 
future rulemaking, we intend to adjust the Exchange rules accordingly.
    We solicit comments regarding the codified language in paragraph 
(a)(1) that an individual be ``reasonably expected,'' for the entire 
period for which enrollment is sought, to be a citizen, national, or 
non-citizen lawfully present, which comes directly from section 
1312(f)(3) of the Affordable Care Act. We clarify that the period for 
which enrollment is sought does not have to be an entire benefit year. 
In particular, we seek comment on how this policy can be implemented in 
a way that is straightforward for individuals to understand and for the 
Exchange to implement.
    In paragraph (a)(2), we propose to codify section 1312(f)(1)(B) 
that in order to be eligible for enrollment in a QHP, an individual 
must not be incarcerated, with the exception of incarceration pending 
the disposition of charges.
    In paragraph (a)(3), we propose the standard regarding residency. 
Section 1312(f) of the Affordable Care Act provides that in order to 
enroll in a QHP, an individual must reside in the State that 
established the Exchange. When discussing the residency standard for 
the Exchange, we use the term ``service area of the Exchange'' to 
account for regional or subsidiary Exchanges that serve broader or 
narrower geographic areas than a single State, as well as for 
situations in which a Federally-facilitated Exchange is operating in a 
State. We clarify that this residency standard is designed to apply to 
all Exchanges, including regional and subsidiary Exchanges. In order to 
codify the residency standard of section 1312(f) to take account of the 
options under sections 1311(f)(1) and 1311(f)(2), in paragraph 
(a)(3)(i), we propose that an individual aged 21 or older who is not 
institutionalized, is capable of indicating intent, and is not 
receiving a State supplementary payment (State-funded cash assistance 
for certain individuals receiving SSI) meets the residency standard for 
enrollment in a QHP if the applicant intends to reside in the State 
within the service area of the Exchange through which the individual is 
requesting coverage.
    In general, we propose to align the Exchange residency standard 
with the residency standards proposed for Medicaid, which are proposed 
in 42 CFR 435.403 of the Medicaid proposed rule. Such Medicaid 
residency standards include an ``intent to reside'' standard. This 
``intent to reside'' standard applies to individuals 21 and over who 
are seeking coverage through the Exchange and who intend to reside 
within the service area of the Exchange provided that an individual 
does not fall into special residency categories described in paragraph 
(a)(3)(iii). This phrase precludes visitors to the service area of an 
Exchange from meeting the residency standard, but accommodates those 
individuals who may transition between service areas of different 
Exchanges, such as seasonal workers and individuals seeking employment 
in the State or service area of the Exchange. This also allows 
individuals who are absent temporarily from the service area of an 
Exchange to remain within the same Exchange during the temporary 
absence. Furthermore, while we do not include the words ``live'' or 
``living'' in the proposed residency requirements, we will interpret 
these proposed regulations such that an adult's residency will be based 
on where he or she is living, and expect that he or she must also 
maintain the present intent to reside in the State within the service 
area of the Exchange that is being claimed. Along these lines and in 
accordance with the language in section 1312(f)(3) of the Affordable 
Care Act, which we interpret to allow an applicant to request coverage 
for less than a full calendar year, we clarify that this residency 
standard does not require an individual to intend to reside for the 
entire benefit year. In paragraph (a)(3)(ii), we propose that an 
individual under age 21 who is not institutionalized, is not receiving 
payments under Title IV-E of the Act (such as foster care assistance 
and adoption assistance), is not emancipated, and is not receiving a 
State supplementary payment, meets the residency standard for 
enrollment in a QHP if he or she resides within the service area of the 
Exchange through which he or she is requesting coverage, to account for 
situations in which an individual under age 21 is unable to express 
intent.
    We note that Medicaid has adopted a number of additional rules 
regarding residency for special populations, including 
institutionalized individuals, individuals receiving Title IV-E 
payments, individuals receiving State supplementary payments, 
individuals incapable of expressing intent, and emancipated minors. In 
paragraph (a)(3)(iii) of this section, we propose that the Exchange 
follow these Medicaid residency standards (which are proposed in the 
Medicaid proposed rule at 42 CFR 435.403) and the policy of the State 
Medicaid or CHIP agency to the extent that an individual is 
specifically described in that section and not in paragraphs (a)(3)(i) 
or (ii). We continue to work across HHS to ensure that the Exchange, 
Medicaid, and CHIP can reach a definition or set of definitions of 
residency that will enable a uniform eligibility determination process 
for the vast majority of individuals to reduce complexity and confusion 
for all involved parties; we solicit comments on this topic.
    We also recognize that there are a number of situations in which a 
tax household may include members residing in different service areas 
served by different Exchanges. In paragraph (a)(3)(iv) of this section, 
we propose that for a spouse or a tax dependent who resides outside the 
service area of the primary taxpayer's Exchange, such as when a non-
custodial parent claims a child as a tax dependent, the spouse or tax 
dependent will be permitted to either: (1) Enroll in a QHP through the 
Exchange that services the area in which

[[Page 51207]]

he or she resides or intends to reside; or (2) enroll in a QHP through 
the Exchange that services the area in which his or her primary 
taxpayer intends to reside or resides, as applicable. In either case, 
if the spouse or tax dependent is covered, he or she will still count 
as part of the tax household and the advance payment calculation will 
take account of the policy or policies needed to cover the tax 
household consistent with the rules proposed in the Treasury proposed 
rule. We believe that this will provide flexibility to an individual 
who does not live in the service area of the Exchange in which his or 
her primary taxpayer lives but want to remain in the same Exchange as 
the primary taxpayer, including but not limited to students attending 
out-of-State schools or tax dependents who do not live with their 
primary taxpayer.
    We note that section 1334 of the Affordable Care Act directs the 
Office of Personnel Management to contract with health insurance 
issuers to offer at least two private multi-State plans in each 
Exchange, which we believe may create opportunities for households with 
members in multiple States to remain covered by the same QHP. We also 
solicit comment as to whether there are any standards regarding in-
network adequacy for out-of-State dependents we should consider.\2\ We 
also note that the preamble to 42 CFR 435.403, proposed in the Medicaid 
proposed rule, clarifies that HHS intends to allow State Medicaid 
agencies to continue to have State-specific rules with respect to 
residency for students under the Medicaid program, which is not 
consistent with our approach for the Exchange. We recognize that under 
the Medicaid proposed rule, State Medicaid agencies will continue to 
have flexibility with regard to residency for students and we solicit 
comments on whether different rules should be maintained or whether a 
unified approach should be adopted.
---------------------------------------------------------------------------

    \2\ Network adequacy is addressed in the Exchange proposed rule 
at 76 FR 41866, 41893-94.
---------------------------------------------------------------------------

    In paragraph (b), we propose that the Exchange determine an 
applicant eligible for an enrollment period if he or she meets the 
criteria for an enrollment period, as specified in Sec.  155.410 and 
Sec.  155.420 of this part. The purpose of this provision is to clarify 
that in addition to determining whether an applicant meets the 
eligibility standards for enrollment in a QHP specified in paragraph 
(a) of this section, the Exchange will determine whether or not the 
applicant is permitted to enroll in a QHP at the time the applicant 
actually seeks coverage.
    Based on sections 1311(d)(4)(F) and 1413 of the Affordable Care Act 
and section 1943(b)(1)(B) of the Act, we propose that the Exchange 
determine applicants' eligibility for Medicaid and CHIP, and enroll 
eligible applicants into these programs. In paragraph (c), we propose 
the criteria under which the Exchange will determine eligibility for 
Medicaid for an applicant seeking an eligibility determination for 
insurance affordability programs as described in Sec.  155.310(b). We 
propose that the Exchange determine an applicant's eligibility for 
Medicaid for eligibility categories that use the applicable Medicaid 
MAGI-based income standard defined in Sec.  155.300.
    Specifically, we propose that the Exchange determine an applicant 
eligible for Medicaid if he or she: (1) Meets the citizenship and 
immigration requirements described in 42 CFR 435.406 and 1903(v)(4) of 
the Social Security Act, as certified by the State Medicaid agency 
under 435.1200(c)(3); (2) meets the proposed requirements described in 
42 CFR 435.403 regarding residency; (3) has a household income, as 
defined in proposed 42 CFR 435.911(b), that is at or below the 
applicable Medicaid MAGI-based income standard; and (4) falls into one 
of the categories described in the definition of ``applicable Medicaid 
MAGI-based income standard'' in Sec.  155.300(a). We note that 42 CFR 
435.406(a), 435.403, and 435.911(b) are proposed in the Medicaid 
proposed rule and we intend to fully align the standards to which the 
Exchange will adhere for purposes of Medicaid eligibility with those 
standards as implemented in the State Medicaid plan.
    In paragraph (d), we propose that the Exchange determine an 
applicant eligible for CHIP if he or she meets the requirements of 42 
CFR 457.310 through 457.320 and has a household income within the 
applicable CHIP MAGI-based income standard.
    Section 1331 of the Affordable Care Act provides a State with the 
option to create a Basic Health Program to provide coverage to some 
qualified individuals in lieu of Exchange coverage. In paragraph (e), 
we propose to codify that if a Basic Health Program is operating in the 
service area of the Exchange, the Exchange will determine an 
individual's eligibility for the Basic Health Program. We intend to 
address policies for the Basic Health Program in future rulemaking.
    Sections 1401, which creates a new section 36B of the Code, and 
1402 of the Affordable Care Act establish a premium tax credit and 
cost-sharing reductions that are available to certain individuals, and 
section 1412 of the Affordable Care Act provides that advance payments 
of the premium tax credit may be made to QHP issuers on behalf of 
eligible individuals. In paragraph (f), we propose the eligibility 
standards for advance payments of the premium tax credit. These 
provisions are drawn from the standards in section 36B of the Code and 
implementing regulations at 26 CFR 1.36B-1 through 1.36B-5, in the 
Treasury proposed rule.
    First, in paragraph (f)(1), we propose the eligibility standards 
for a primary taxpayer, as defined in Sec.  155.300(a), to receive 
advance payments of the premium tax credit on behalf of him or herself, 
for his or her spouse, or for one or more of his or her tax dependents. 
We clarify that while these standards are described in terms of a 
primary taxpayer, because the primary taxpayer actually receives the 
premium tax credit on his or her tax return for the benefit year, an 
individual who is not a primary taxpayer may apply for coverage without 
the presence of a primary taxpayer throughout the application process. 
The primary taxpayer's involvement is necessary only at the point at 
which the Exchange will authorize an advance payment, which is 
discussed in Sec.  155.310(d)(2)(ii).
    We propose that the Exchange determine a primary taxpayer eligible 
to receive advance payments if the Exchange determines that he or she 
is expected to have a household income, as defined in proposed 26 CFR 
1.36B-1(e), of at least 100 percent but not more than 400 percent of 
the FPL, as specified in proposed 26 CFR 1.36B-2(b)(1), for the benefit 
year for which coverage is requested, and one or more applicants for 
whom the primary taxpayer expects to claim a personal exemption 
deduction on his or her tax return for the benefit year, including the 
primary taxpayer and his or her spouse (1) meets the standards for 
eligibility for enrollment in a QHP through the Exchange; and (2) is 
not eligible for minimum essential coverage, in accordance with 
proposed 26 CFR 1.36B-2(a)(2) (which excludes coverage purchased 
through the individual market, as well as employer-sponsored minimum 
essential coverage for which the employee's contribution exceeds 9.5 
percent (in 2014, and indexed in future years) of household income or 
for which the plan's share of the total allowed costs of benefits 
provided under the plan is less than 60 percent of such costs, unless 
an individual is enrolled in such employer-sponsored minimum essential 
coverage). We clarify that the definition of household income in 26

[[Page 51208]]

CFR 1.36B-1(e) of the Treasury proposed rule does not include the 
income of an individual in a primary taxpayer's family who is not 
required to file.
    In addition, in paragraph (f)(2), we propose that the Exchange 
determine a primary taxpayer eligible for advance payments of the 
premium tax credit if the Exchange determines that (1) he or she meets 
the standards specified in paragraph (f)(1) (regarding eligibility for 
advance payments of the premium tax credit) except for paragraph 
(f)(1)(i) (household income of at least 100 percent but not more than 
400 percent of the FPL); (2) he or she is expected to have a household 
income of less than 100 percent of the FPL; and (3) one or more 
applicants, including the primary taxpayer and his or her spouse, for 
whom the primary taxpayer expects to claim a personal exemption 
deduction on his or her tax return for the benefit year, including the 
primary taxpayer and his or her spouse, is a non-citizen who is 
lawfully present and ineligible for Medicaid by reason of immigration 
status.
    In paragraph (f)(3), we propose that the Exchange may provide 
advance payments of the premium tax credit only for an applicant who is 
enrolled in a QHP through the Exchange. The intent of this provision is 
to clarify that an applicant does not need to be enrolled in a QHP to 
be determined eligible for advance payments of the premium tax credit; 
however, an applicant must be enrolled prior to advance payments being 
made to a QHP issuer.
    In paragraph (f)(4), we propose that the Exchange determine a 
primary taxpayer ineligible to receive advance payments of the premium 
tax credit if HHS notifies the Exchange that the primary taxpayer or 
his or her spouse received advance payments for a prior year for which 
tax data would be utilized for income verification and did not comply 
with the requirement to file a tax return for such year, as proposed in 
26 CFR 1.6011-8. For example, this requirement means that for open 
enrollment for coverage in calendar year 2016, which will take place in 
the fall of 2015, a primary taxpayer on whose behalf advance payments 
were made for calendar year 2014 must have filed a tax return for 2014. 
This proposal is intended to prevent a primary taxpayer or spouse who 
has failed to comply with tax filing rules from accumulating additional 
Federal tax liabilities due to advance payments of the premium tax 
credit. An individual may remove this restriction by filing a tax 
return for the year in question.
    In paragraph (f)(5), we propose that in the event the Exchange 
determines that a primary taxpayer is eligible to receive advance 
payments of the premium tax credit, the Exchange will calculate advance 
payments of the premium tax credit in accordance with 26 CFR 1.36B-3 of 
the Treasury proposed rule. Our proposal to adopt the IRS premium tax 
credit rules for advance payments ensures that, to the extent the 
information used to calculate a primary taxpayer's advance payments is 
consistent with the information reporting on the primary taxpayer's 
income tax return at the end of the taxable year, the advance payment 
calculation will be consistent with the ultimate premium tax credit 
calculation, reducing the potential for differences at the time of 
reconciliation. We also note that in Sec.  155.310(d)(2), we propose 
the Exchange permit a primary taxpayer to accept less than the full 
amount of advance payments of the premium tax credit for which he or 
she is determined eligible.
    Lastly, in paragraph (f)(6), we propose that the Exchange must 
require an application filer to provide the Social Security number 
(SSN) of the primary taxpayer if an application filer attests that the 
primary taxpayer has a SSN and filed a tax return for the year for 
which tax data would be utilized for verification of household income 
and family size. Sections 1412(b)(1) and 1411(b)(3) of the Affordable 
Care Act together provide that eligibility determinations for advance 
payments of the premium tax credit are to be made based on tax return 
data, to the extent that reasonably recent and representative tax 
return data is available; the Secretary of the Treasury is only able to 
provide tax data for primary taxpayers for whom the Exchange provides a 
SSN or an adoption taxpayer identification number (ATIN). We clarify 
that taxpayers who have SSNs and who have tax data available that would 
be used for verification of household income and family size must 
provide them to the Exchange for purposes of eligibility for advance 
payments of the premium tax credit. We note that, because the 
eligibility standards for cost-sharing reductions proposed at Sec.  
155.305(g) incorporate the eligibility standards for advance payments 
of the premium tax credit, this standard also applies for the purposes 
of eligibility for cost-sharing reductions. Like all other data 
collections, the use and disclosure of SSNs is subject to the privacy 
and security safeguards proposed in Sec.  155.260 and Sec.  155.270.
    We highlight two key differences between Medicaid and CHIP and 
advance payments of the premium tax credit. First, while eligibility 
for Medicaid and CHIP is based on current income, eligibility for 
advance payments of the premium tax credit is based on annual income. 
Second, unlike Medicaid and CHIP, the premium tax credit is paid on an 
advance basis and then reconciled based on information reported on an 
individual's tax return for the entire year. That is, to the extent 
that an individual receives advance payments of the premium tax credit 
based on an initial eligibility determination at 150 percent of the FPL 
and his or her actual annual household income as reported on his or her 
tax return is 300 percent of the FPL, he or she will be liable to repay 
advance payments of the premium tax credit to reduce the credit to the 
300 percent level, subject to the statutory caps on repayment proposed 
in 26 CFR 1.36B-4 of the Treasury proposed rule.
    Commenters to the RFC raised concerns regarding the potential for 
the statutory reconciliation process, in combination with the annual 
basis of household income for advance payments of the premium tax 
credit, to render coverage unaffordable for individuals who have 
substantial decreases in income during the benefit year. A related 
concern is that the fear of large repayments due to reconciliation 
after an increase in income could deter enrollment. Both effects could 
result in a lower participation and a negative impact on the Exchange 
risk pool. To address these concerns, the Exchange can decrease the 
difference between the amount of advance payments and the premium tax 
credit amount based on actual income at the end of the year through a 
strong initial eligibility process that maximizes accuracy and a strong 
process by which individuals can report changes that occur during the 
year. We solicit comments on ways of achieving this outcome.
    In paragraph (g), we propose that the Exchange determine an 
applicant eligible for cost-sharing reductions if he or she meets 
eligibility standards that we propose to codify from section 1402 of 
the Affordable Care Act. In accordance with sections 1402(b) and (c) of 
the Affordable Care Act, in paragraph (g)(1) of this section, we 
propose that the Exchange must determine an applicant eligible for 
cost-sharing reductions if he or she is (i) eligible for enrollment in 
a QHP in accordance with paragraph (a) of this section; (ii) is 
eligible for advance payments of the premium tax credit in

[[Page 51209]]

accordance with paragraph (f) of this section; and (iii) has household 
income for the taxable year that does not exceed 250 percent of the 
FPL. We note that there are also special eligibility standards for 
cost-sharing reductions based on Indian status, which are described in 
Sec.  155.350 of this subpart.
    Section 1402(b) of the Affordable Care Act explicitly provides that 
an individual is eligible for reduced cost-sharing if his or her 
household income exceeds 100 percent of the FPL, but does not exceed 
400 percent of the FPL. However, section 1402(c)(1)(B)(i)(IV) specifies 
that cost-sharing reductions for an individual with household income 
that exceeds 250 percent of the FPL but does not exceed 400 percent of 
the FPL may not result in the QHP's share of costs exceeding 70 
percent, which is the actuarial value standard for a silver-level QHP 
pursuant to section 1302(d)(1)(B) of the Affordable Care Act, 
regardless of cost-sharing reductions. Since an individual has to 
enroll in a silver-level QHP in order to receive cost-sharing 
reductions, and the actuarial value of a silver-level QHP without cost-
sharing reductions is 70 percent, an individual with household income 
that exceeds 250 percent of the FPL who is not an Indian is not 
eligible for cost-sharing reductions, which is reflected in paragraph 
(g)(1)(iii).
    Lastly, in paragraph (g)(2), we propose to codify section 
1402(b)(1) of the Affordable Care Act, which specifies that an 
applicant must be enrolled in a QHP in the silver level of coverage in 
order to receive cost-sharing reductions.
    In paragraph (h), we propose three eligibility categories for cost-
sharing reductions in accordance with paragraph (g) and section 1402 of 
the Affordable Care Act. In Sec.  155.340, we propose that the Exchange 
transmit information about an enrollee's category to his or her QHP 
issuer in order to enable the QHP issuer to provide the correct level 
of reductions. The proposed categories are as follows: In paragraph 
(h)(1), an individual who has household income greater than 100 percent 
of the FPL and less than or equal to 150 percent of the FPL; in 
paragraph (h)(2), an individual who has household income greater than 
150 percent of the FPL and less than or equal to 200 percent of the 
FPL; and in paragraph (h)(3), an individual who has household income 
greater than 200 percent of the FPL and less than or equal to 250 
percent of the FPL. Additional information regarding the implementation 
of cost-sharing reductions will be provided in the future. Eligibility 
standards for cost-sharing provisions that are based in whole and in 
part on whether an individual is an Indian are described in Sec.  
155.350 of this subpart.
c. Eligibility Determination Process (Sec.  155.310)
    In Sec.  155.310, consistent with sections 1411-1413 of the 
Affordable Care Act, we propose the process by which the Exchange will 
determine an individual's eligibility for enrollment in a QHP and for 
insurance affordability programs.
    In paragraph (a)(1), we propose that the Exchange accept 
applications from individuals in the form and manner described in 
proposed 45 CFR Sec.  155.405, published in the Exchange proposed rule 
at 76 FR 41866. Furthermore, in paragraph (a)(2), we propose to 
prohibit the Exchange from requiring an individual who is not seeking 
coverage for himself or herself (a `non-applicant'), including an 
individual who is applying for coverage on behalf of another party, to 
provide information regarding the non-applicant's citizenship, status 
as a national, or immigration status on any application or supplemental 
form. We also propose that the Exchange may not require such an 
individual to provide a SSN, except as specified in Sec.  
155.305(f)(6), which addresses, for the purposes of eligibility for 
advance payments of the premium tax credit, primary taxpayers who have 
SSNs and have tax data on file with the IRS that would be used in the 
verification of household income and family size. This exception is 
based on sections 1412(b)(1) and 1411(b)(3) of the Affordable Care Act 
and is discussed further above.
    In paragraph (b), we propose that the Exchange permit an individual 
to decline an eligibility determination for insurance affordability 
programs. This proposal is designed to ensure that an individual can 
bypass the additional steps required for such screening and proceed 
directly to selecting and enrolling in a QHP. We clarify that this 
proposal does not allow an applicant to choose to seek a determination 
only for advance payments of the premium tax credit and cost-sharing 
reductions (and not for Medicaid and CHIP) or vice versa. Section 
36B(c)(2)(B) of the Code states that an applicant is ineligible for 
advance payments of the premium tax credit to the extent that he or she 
is eligible for other minimum essential coverage, which includes 
Medicaid and CHIP. This provision means that the Exchange will consider 
an applicant's eligibility for Medicaid and CHIP as part of an 
eligibility determination for advance payments of the premium tax 
credit.
    In paragraph (c), we propose that the Exchange accept an 
application and make an eligibility determination for an applicant 
seeking an eligibility determination at any point in time during a 
benefit year. An eligibility determination is a necessary precursor to 
enrollment; after an applicant is determined eligible for enrollment in 
a QHP, he or she may select a QHP and will then be able to receive 
covered health care services. We clarify that this does not supersede 
the limited enrollment periods in 45 CFR subpart E. In addition, 
subpart E does not limit an applicant's ability to request and receive 
an eligibility determination, including an eligibility determination 
for advance payments of the premium tax credit or cost-sharing 
reductions, if he or she has previously declined such a determination. 
We also note that Sec.  155.330 directs the Exchange to accept and 
process changes reported by enrollees during the benefit year as well.
    In paragraph (d)(1), we propose that after the Exchange has 
collected and verified all necessary data, the Exchange conduct an 
eligibility determination in accordance with the standards described in 
Sec.  155.305 of this part.
    In paragraph (d)(2)(i), we propose that the Exchange allow an 
applicant who is determined eligible for advance payments of the 
premium tax credit to accept less than the expected annual amount of 
advance payments authorized. This proposal is designed to reduce the 
enrollee's risk of repayment at the point of reconciliation.
    In paragraph (d)(2)(ii), we propose to clarify that the Exchange 
may provide advance payments on behalf of a primary taxpayer only if 
the primary taxpayer first attests that he or she will meet the tax-
related provisions discussed in the definition of primary taxpayer, 
including that he or she will claim a personal exemption deduction on 
his or her tax return for the applicants identified as members of his 
or her tax family. In a scenario in which more than one tax household 
is covered through a single policy, 26 CFR 1.36B-3 of the Treasury 
proposed rule proposes that advance payments will be split between the 
two primary taxpayers; that is, a primary taxpayer may not receive 
advance payments for which another primary taxpayer is eligible. This 
proposal also clarifies that while an application filer who is not the 
primary taxpayer may complete the application process on the primary 
taxpayer's behalf, the primary taxpayer must actively attest that he or 
she will comply with the standards for advance payments that are 
related to tax filing prior to advance payments being made

[[Page 51210]]

for his or her family. This is designed to ensure that the primary 
taxpayer appreciates and accepts the tax consequences that follow from 
receipt of advance payments.
    In paragraph (d)(3), we propose that if the Exchange determines an 
applicant is eligible for Medicaid or CHIP, the Exchange will notify 
the State Medicaid or CHIP agency and transmit relevant information, 
including information from the application and the results of 
verifications, to such agency promptly and without undue delay in order 
to enable the applicant to receive benefits.
    In paragraph (e), we clarify that upon making eligibility 
determinations for enrollment in a QHP, advance payments of the premium 
tax credit, and cost-sharing reductions, the Exchange will implement 
the eligibility determinations in accordance with the coverage 
effective dates specified in subpart E, which are found at 45 CFR 
155.410(c) and (f), and 45 CFR 155.420(b). This is designed to ensure 
that an applicant's entire eligibility determination and any financial 
assistance to support the purchase of coverage are effective 
simultaneously.
    After the Exchange determines eligibility, in paragraph (f) we 
propose that the Exchange provide an applicant with a timely, written 
notice of his or her eligibility determination. For an applicant who 
requests an eligibility determination for insurance affordability 
programs, the Exchange will provide information in the notice regarding 
the applicant's eligibility for all such programs. While we expect that 
the Exchange will provide an applicant who is applying online with 
information regarding his or her eligibility determination as the 
process progresses, we clarify that the Exchange must provide a single 
written notice to each applicant when the eligibility determination is 
final. The written notice of eligibility is intended to provide an 
individual with a record of the steps taken and remaining actions 
needed to complete the eligibility and enrollment process, as well as 
information regarding his or her right to appeal. We note that written 
notice is not necessary at every step of the eligibility process; 
rather, the Exchange will provide a single notice at the conclusion of 
the determination, as well as notices when additional information is 
required. We note that in Sec.  155.230, we proposed general rules 
regarding notices under this part, which include provisions regarding 
ensuring that notices be written in plain language and in a manner that 
meets the needs of diverse populations by providing meaningful access 
to limited English proficient individuals and ensure effective 
communication for people with disabilities. We anticipate proposing 
additional information to be included in notices in future rulemaking.
    In paragraph (g), we propose to codify the reporting rules in 
section 1411(e)(4)(B)(iii) of the Affordable Care Act, which support 
the employer responsibility provisions of the Affordable Care Act. We 
propose that when the Exchange determines an applicant is eligible to 
receive advance payments of the premium tax credit or cost-sharing 
reductions based in part on a finding that his or her employer does not 
provide minimum essential coverage, or provides coverage that is not 
affordable, as specified in section 36B(c)(2)(C)(i) of the Code, or 
does not meet the minimum value standard as specified in section 
36B(c)(2)(C)(ii) of the Code, the Exchange will notify the employer and 
identify the employee. We anticipate providing additional information 
on the content of this notice in future rulemaking.
    In paragraph (h), we propose rules regarding the duration of an 
eligibility determination for an applicant who is determined eligible 
for enrollment in a QHP but does not select a QHP within his or her 
enrollment period in accordance with subpart E of this part. The 
purpose of these proposed rules is to ensure that the information used 
to support an eligibility determination remains accurate, while 
limiting burden and creating consistency with the rules for the 
population that selects a QHP. First, in paragraph (h)(1), we propose 
that to the extent that such an individual seeks a new enrollment 
period prior to the date on which he or she would have been subject to 
an annual redetermination in accordance with Sec.  155.335, the 
Exchange must receive an attestation from him or her as to whether 
information affecting his or her eligibility has changed prior to 
accepting such selection. Second, in paragraph (h)(2), we propose that 
to the extent than an applicant who is determined eligible for 
enrollment in a QHP does not select a QHP within his or her enrollment 
period, and seeks a new enrollment period on or after the date on which 
he or she would have been subject to an annual redetermination, the 
Exchange will conduct an annual redetermination in accordance with 
Sec.  155.335 prior to determining the applicant's eligibility for an 
enrollment period.
    We considered requiring a new determination after a specific period 
of time, but opted for the proposed language in order to create 
consistency with the process for an individual who has been determined 
eligible for enrollment in a QHP and who actually enrolls during an 
authorized enrollment period, and to minimize burden on applicants and 
the Exchange. We solicit comments on this approach, and whether the 
application process should begin anew in some or all of these 
situations.
d. Verification Process Related to Eligibility for Enrollment in a QHP 
(Sec.  155.315)
    Sections 1411(c) and (d) of the Affordable Care Act require the 
verification of applicant information prior to using such information 
to determine eligibility. The statute is specific with regard to the 
verification process for some, but not all, information needed to 
determine eligibility. Section 1411(d) of the Affordable Care Act 
provides authority for the Secretary to establish verification 
procedures for certain categories of information described in section 
1411 without a specific process established by the statute. In 
addition, section 1411(c)(4)(B) of the Affordable Care Act provides 
authority to the Secretary to modify the statutory verification methods 
in certain cases.
    We propose to split the verification process of the Exchange into 
two main sections within this subpart: Sec.  155.315, which contains 
the verification process related to eligibility for enrollment in a 
QHP, and Sec.  155.320, which contains the verification process related 
to insurance affordability programs. We also note that Sec.  155.350 
contains a process for verification of whether an applicant is an 
Indian.
    In general, the verification processes proposed in this subpart 
would have the Exchange first rely on sources of electronic data and, 
to the extent that the Exchange is unable to verify information through 
such sources, follow specific procedures that include requesting 
documentation from applicants. Data sources described in this section 
may include the records of the Social Security Administration (SSA), 
the Department of Homeland Security (DHS), and the Internal Revenue 
Service (IRS), as well as data sources maintained by other entities.
    We also note that we propose to include authority for the Exchange 
to request documentation from an applicant when information provided by 
the applicant is not reasonably compatible with other information 
provided for an applicant or in the records of the Exchange for the 
applicant; this proposal is designed to enhance program integrity while

[[Page 51211]]

limiting additional requests to only those situations in which there is 
good cause for such requests. The preamble discussion associated with 
proposed 42 CFR 435.952(b) of the Medicaid proposed rule addresses the 
``reasonably compatible'' standard, which is used throughout the 
Medicaid proposed rule as well. We intend to interpret this standard 
the same way here (in the context of the Exchange) as it is interpreted 
and applied in the context of Medicaid and CHIP.
    In paragraph (a), we propose that the Exchange verify or obtain 
information to determine that an applicant is eligible for enrollment 
in a QHP as provided in this section, unless an Exchange's request for 
modification of the methods used for collection and verification of 
information is granted pursuant to paragraph (e). Under paragraph (e), 
described later, we propose the flexibility to develop alternative 
verification processes that achieve the same goals as those proposed 
for general use.
    In paragraph (b), we propose the process that the Exchange follows 
to ensure that an individual is a citizen, national, or otherwise 
lawfully present individual in accordance with sections 1312(f)(3) and 
1411(c) of the Affordable Care Act, respectively. This is the first of 
several proposals regarding verification with the records of Federal 
officials. For such verifications, we propose to codify the role of the 
Secretary (through HHS) as an intermediary between the Exchange and 
other Federal officials, as described in section 1411(c). This proposal 
is designed to simplify the process for the Exchange as well as for 
involved Federal agencies.
    In paragraph (b)(1), we propose that for an applicant who attests 
to citizenship and has a Social Security number, the Exchange will 
transmit the applicant's Social Security number and other identifying 
information needed by the Social Security Administration (SSA) to SSA 
via HHS to verify whether the information matches SSA's records. We 
anticipate that SSA may revise its information requirements and that a 
level of flexibility will be necessary to efficiently use this process. 
If the information needed to perform this verification with SSA 
changes, HHS will issue guidance to Exchanges. We anticipate that the 
single, streamlined application proposed in 45 CFR Sec.  155.405 will 
contain the necessary information. If SSA can match the individual's 
basic identifying information to an SSA record, HHS will notify the 
Exchange as to whether SSA can substantiate the applicant's 
citizenship. If SSA is unable to match the individual's basic 
identifying information to an SSA record, HHS will notify the Exchange 
regarding the inconsistency.
    In paragraph (b)(2), and consistent with section 1411(c)(2)(B) of 
the Affordable Care Act, we propose that for an applicant who has 
documentation that can be verified through the Department of Homeland 
Security (DHS) and who attests to lawful presence, or who attests to 
citizenship and for whom the Exchange cannot substantiate citizenship 
through SSA, including an applicant who does not attest to citizenship 
or does not have a Social Security number, the Exchange will transmit 
information from the applicant's documentation and basic identifying 
information to HHS, which will submit a request to DHS and return the 
response to the Exchange. Several commenters to the RFC recommended 
that we utilize the DHS Systematic Alien Verification for Entitlements 
(SAVE) system to satisfy this standard. The proposed language supports 
the use of SAVE, and we are working closely with DHS to identify the 
best technological option available to maximize accuracy and minimize 
delay.
    Section 1411(e)(3) of the Affordable Care Act specifies that in a 
situation in which the Exchange is unable to verify an applicant's 
claim of citizenship, status as a national, or lawful presence through 
either SSA or DHS, the applicant's eligibility must be determined in 
the same manner as an applicant's eligibility under the Medicaid 
program under section 1902(ee) of the Act. Section 1902(ee) of the Act 
includes a number of provisions related to the verification of 
citizenship, including a process by which a Medicaid agency can request 
that SSA verify whether an applicant's attestation of citizenship 
matches SSA's records. If such substantiation is unsuccessful, section 
1902(ee) of the Act directs the Medicaid agency to: (1) Make a 
reasonable effort to identify and address the causes of the 
inconsistency; (2) notify the applicant of the inconsistency if the 
inconsistency cannot be resolved through this step, provide the 
applicant with a period of 90 days from receipt of the notice to 
present satisfactory documentation of citizenship or resolve the 
inconsistency with SSA, and provide Medicaid coverage during this 
period; and (3) if the inconsistency is not resolved after the close of 
the period, disenroll the individual. Section 1902(ee) of the Act also 
includes details of the relationship between a State Medicaid agency 
and SSA, as well as the calculation of a payment to the Secretary 
related to how often eligibility is provided to applicants who are 
ultimately determined ineligible, when a State is not using the option 
to communicate with SSA on a real-time basis. We intend for the process 
proposed under this section to be near real-time, and therefore, we 
believe that this calculation does not apply to the Exchange. Further, 
unlike the choice provided to a State Medicaid agency pursuant to 
section 1902 of the Act, the Exchange will not automatically have the 
ability to implement a different verification process; therefore, the 
use of a penalty provision appears inappropriate here.
    This inconsistency process is substantially similar to the 
inconsistency process for information not related to citizenship, 
status as a national, or lawful presence, which is described in section 
1411(e)(4) of the Affordable Care Act, codified in paragraph (e) of 
this section, and discussed below. As such, in paragraph (b)(3), we 
specify that in the case of an inconsistency related to citizenship, 
status as a national, or lawful presence, the Exchange will follow the 
procedures specified in paragraph (e), except that the time period for 
the resolution of inconsistencies related to citizenship, status as a 
national, or lawful presence is 90 days from the date on which the 
notice of inconsistency is received, rather that the date on which it 
is sent, as required by the law. We clarify that the date on which the 
notice is received means 5 days after the date on the notice, unless 
the applicant shows that he or she did not receive the notice within 
the 5-day period. This 5-day period is the standard period used by SSA 
for the Supplemental Security Income (Title XVI) and Old Age and 
Disability (Title II) programs to account for mailing a notice and 
receipt by the individual, and we believe this reasonable standard to 
adopt for the inconsistency process. We note that this process covers 
situations in which an applicant has neither a Social Security number 
nor documentation that can be verified with DHS. Future rulemaking will 
address the standards that the Exchange will use to adjudicate 
documentary evidence of citizenship provided by an applicant within 
this inconsistency process.
    In paragraph (c), we propose the verification process to be used by 
the Exchange to ensure that an individual meets the residency standard 
specified in Sec.  155.305(a)(3) of this part. This process is parallel 
to that proposed for Medicaid.
    In paragraph (c)(1), to verify residency, we propose that the

[[Page 51212]]

Exchange accept an applicant's attestation as to residency without 
further verification unless, as described in paragraph (c)(2), the 
State Medicaid or CHIP agency operating in the State in which the 
Exchange operates chooses not to allow verification of residency based 
solely on attestation, in which case the Exchange will verify residency 
in accordance with 42 CFR 435.956(c) and 42 CFR 457.380(c), which are 
proposed in the Medicaid proposed rule.
    Furthermore, in paragraph (c)(3), we propose that the Exchange may 
examine data sources regarding residency to the extent that information 
provided for an applicant regarding residency is not reasonably 
compatible with other information provided for the applicant or in the 
records of the Exchange. Examples of such data sources include State 
tax returns, Supplemental Nutrition Assistance Program or Temporary 
Assistance for Needy Families eligibility information, motor vehicles 
administration information, or other local, State or Federal sources of 
information.
    In paragraph (c)(4), we propose that to the extent information in 
the data sources examined by the Exchange in accordance with paragraph 
(c)(3) of this section is not reasonably compatible with information 
provided for the applicant, the Exchange will request additional 
documentation in accordance with Sec.  155.315(e) of this section. We 
also propose that a document that provides evidence of immigration 
status may not be used alone to determine State residency. As discussed 
in the preamble to proposed 42 CFR 435.956(c) of the Medicaid proposed 
rule, this provision is intended to ensure that while documents which 
provide information regarding immigration status should be used as a 
source of evidence to verify satisfactory immigration status, they may 
not, by themselves, be used to demonstrate a lack of residency.
    In paragraph (d), we propose that the Exchange verify an 
applicant's attestation that he or she is not incarcerated, with the 
exception of incarceration pending the disposition of charges. In 
paragraph (d)(1), we propose that the Exchange implement this policy by 
first relying on any electronic data sources that are available to the 
Exchange and which have been authorized by HHS for verification of 
incarceration. HHS will approve electronic data sources based on 
evidence showing that such data sources are sufficiently accurate and 
offer less administrative complexity than paper verification; we note 
that this allows for the possibility that no electronic data source 
will be authorized. In paragraph (d)(2), we propose that to the extent 
that approved electronic data sources are unavailable, the Exchange 
accept the applicant's attestation without further verification, except 
as provided in paragraph (d)(3). In paragraph (d)(3), we propose that 
in the event that an applicant's attestation is not reasonably 
compatible with information from the data sources specified in 
paragraph (d)(1) or with other information provided by the applicant or 
in the records of the Exchange, the Exchange follow the inconsistency 
procedures described in Sec.  155.315(e) of this section, in accordance 
with section 1411(e)(4)(A)(ii)(II) of the Affordable Care Act.
    We solicit comment as to what electronic data sources are available 
and should be authorized by HHS for Exchange purposes, including 
whether access to such data sources should be provided as a Federally-
managed service like citizenship and immigration status information 
from SSA and DHS. We also note that the proposal regarding 
documentation is designed only to account for situations in which an 
attestation is not reasonably compatible with information contained in 
approved electronic data sources.
    In paragraph (e), we propose to codify sections 1411(e)(3) and 
1411(e)(4) of the Affordable Care Act to address situations in which an 
applicant attests to information needed to determine eligibility, and 
such attestation is inconsistent with other information in the records 
of the Exchange, including information maintained in the records of 
applicable Federal officials. As such, we cross-reference this 
paragraph for a number of verifications within Sec.  155.315 and Sec.  
155.320 of this subpart. Such sections may also have specific standards 
for the adjudication of relevant documentation by the Exchange that are 
tailored to specific inconsistencies. We also note that given that the 
process in this paragraph is applied to more than one piece of 
information, it is possible for an applicant to have multiple 
inconsistencies simultaneously. In such a situation, the Exchange will 
continue to use an applicant's attestations for any information that is 
subject to the inconsistency process in accordance with paragraph 
(e)(4)(ii) of this section.
    Section 1411(e)(3) of the Affordable Care Act, which covers 
inconsistencies related to citizenship, status as a national, and 
lawful presence, is substantially similar to section 1411(e)(4) of the 
Affordable Care Act, which covers other inconsistencies. The process 
described in this paragraph is the process under section 1411(e)(4) of 
the Affordable Care Act; as noted above, paragraph (b)(3) of this 
section details the modifications required to the procedures described 
in this section to accommodate the process for inconsistencies related 
to citizenship, status as a national, and lawful presence.
    First, under paragraph (e)(1), the Exchange will make a reasonable 
effort to identify and resolve the issues. Second, in paragraph 
(e)(2)(i), if the Exchange is unable to resolve the inconsistencies, 
the Exchange will notify the applicant of the inconsistency. After 
providing this notice, in paragraph (e)(2)(ii), the Exchange will 
provide 90 days from the date on which the notice is sent for the 
applicant to resolve the issues, either with the Exchange or with the 
agency or office that maintains the data source that is inconsistent 
with the attestation.
    In paragraph (e)(3), we propose that the period during which an 
applicant may resolve the inconsistency may be extended by the Exchange 
if the applicant can provide evidence that a good faith effort has been 
made to obtain additional documentation. We are adopting this provision 
in order to align with current Medicaid policy which offers States the 
flexibility to allow for a good faith extension for individuals to 
provide documentary evidence of citizenship or immigration status.
    In paragraph (e)(4), we propose to codify the provision of sections 
1411(e)(3) and 1411(e)(4) of the Affordable Care Act that the Exchange 
must allow an individual who is otherwise eligible for enrollment in a 
QHP, advance payments of the premium tax credit or cost-sharing 
reductions to receive such coverage and financial assistance during the 
resolution period. However, in paragraph (e)(4)(ii), we clarify that 
the Exchange will ensure that the primary taxpayer attests to the 
Exchange that he or she understands that any advance payments of the 
premium tax credit received during the resolution period are subject to 
reconciliation in order to receive such advance payments of the premium 
tax credit.
    Lastly, in paragraph (e)(5), we propose that if after the 
conclusion of the resolution period, the Exchange is unable to verify 
the applicant's attestation, the Exchange will determine the 
applicant's eligibility based on the information available from the 
data sources specified in this subpart, and notify the applicant of 
such

[[Page 51213]]

determination in accordance with the notice standards in Sec.  
155.310(f) of this subpart, including notice that the Exchange is 
unable to resolve the inconsistency. We further propose that the 
Exchange then implement this eligibility determination no earlier than 
10 days after and no later than 30 days after the date on which such 
notice is sent. We note that we intend to address in the future the 
timing of notices, including standards related to the time between a 
notice of an adverse action and the effective date of such action, and 
we intend to coordinate such requirements with Medicaid. We note that 
like all other eligibility determinations, an eligibility determination 
in accordance with paragraph (e)(5)(i) of this section is subject to 
appeal.
    In addition to the authority proposed for the Exchange in paragraph 
(e)(3), section 1411(b)(4)(A)(ii)(II) of the Affordable Care Act also 
provides HHS with the authority to extend the resolution period for 
inconsistencies not involving citizenship, status as a national, or 
lawful presence for coverage in 2014. We are considering whether and 
how to implement this authority, such as whether to create a uniform 
standard or a rule to be applied on a case-by-case basis; we solicit 
comments on these alternatives to inform our final adoption of these 
rules.
    Lastly, we note that this paragraph does not apply in the event 
that an application filer attests to household income for an applicant 
that is at or below the applicable Medicaid or CHIP MAGI-based income 
standards. Rather, the Exchange will follow the process described in 
paragraph (c)(2)(ii)(C) for such individuals.
    In paragraph (f), we propose to codify section 1411(c)(4)(B) of the 
Affordable Care Act regarding flexibility in verification methods. We 
propose that HHS may approve an Exchange plan or a significant change 
to an Exchange plan to modify the methods for the collection and 
verification of information as described in this subpart, as well as 
the specific information to be collected, based on a finding by HHS 
that the requested modification would reduce the administrative costs 
and burdens on individuals while maintaining accuracy and minimizing 
delay, that it would not undermine coordination with Medicaid and CHIP, 
and that any applicable requirements under this subpart and section 
6103 of the Code with respect to the confidentiality, disclosure, 
maintenance, or use of information will be met. We also note that all 
information exchanges specified in this section must comply with Sec.  
155.260 and Sec.  155.270. We solicit comment regarding likely 
proposals from Exchanges that would meet these criteria.
    Section 1411(g)(1) and 1413(b)(2) of the Affordable Care Act direct 
the Secretary to ensure that an applicant be asked only to provide the 
minimum amount of information and paperwork needed for purposes of 
making an eligibility determination. In paragraph (g), we propose to 
codify section 1411(g)(1) of the Affordable Care Act by specifying that 
the Exchange must not require an applicant to provide information 
beyond what is necessary to support the eligibility and enrollment 
processes of the Exchange, Medicaid, and CHIP, including the process 
for resolving inconsistencies described in Sec.  155.315(e).
e. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  155.320)
    In Sec.  155.320, we outline the verification process that supports 
eligibility determinations for insurance affordability programs. To 
implement section 1411 of the Affordable Care Act, we propose a general 
policy in paragraph (a)(1), that the Exchange verify information in 
accordance with this section only for an applicant who is requesting an 
eligibility determination for insurance affordability programs. In this 
section, we propose standards related to the verification of 
eligibility for minimum essential coverage other than through an 
eligible employer-sponsored plan; household income and household size; 
enrollment in or eligibility for qualifying coverage in an eligible 
employer-sponsored plan; and Medicaid and CHIP immigration status 
requirements. These verification processes apply to eligibility 
determinations for insurance affordability programs. These verification 
processes do not apply to eligibility determinations solely for the 
purpose of enrollment or to eligibility determinations for benefits 
provided to Indians based on status as an Indian, which are addressed 
elsewhere.
    Section 36B(c)(2)(B) of the Code specifies that an individual who 
is eligible for minimum essential coverage through sources other than 
the Exchange and the individual market is ineligible for advance 
payments of the premium tax credit. Therefore, in order to accurately 
determine eligibility for advance payments of the premium tax credit, 
the Exchange needs to rule out eligibility for other minimum essential 
coverage. We propose paragraphs (b), (d), and (e) of this section to 
meet this standard. First, in paragraph (b)(1), we propose that the 
Exchange verify whether an individual is eligible for minimum essential 
coverage other than through an eligible employer-sponsored plan or 
Medicaid, CHIP, or the Basic Health Program within the State in which 
the Exchange operates using information obtained from HHS, which will 
obtain relevant information from selected Federal offices. We are 
currently working with other Federal agencies to determine where 
relevant records are maintained, and we solicit comments about specific 
data sources that HHS should integrate in to this process, as well as 
data sources that should be utilized directly by the Exchange, keeping 
in mind the direction from section 1413(c) of the Affordable Care Act 
regarding the use of data currently authorized for use in Medicaid and 
CHIP determinations.
    In paragraph (b)(2), we propose that the Exchange verify whether an 
applicant has already been determined eligible for coverage through 
Medicaid, CHIP, or a Basic Health Program, if applicable, within the 
State in which the Exchange operates. We believe that this will result 
in limited, if any additional burden on the Exchange given the high 
degree of coordination between the Exchange, Medicaid, and CHIP. We 
also solicit comments as to options for supporting verification across 
States with the goal of crafting a solution that maximizes accuracy 
while minimizing administrative burden for applicants and Exchanges.
    In paragraph (c), we propose the verification process related to 
income and family/household size. As discussed earlier, while the 
statute specifies that income for advance payments of the premium tax 
credit and cost-sharing reductions is calculated on an annual basis, 
section 1902(e)(14)(H) of the Act, as added by section 2002(a) of the 
Affordable Care Act, provides that income for Medicaid is calculated on 
a current basis. Consequently, in this section, we propose to require 
the Exchange to verify both annual household income information and 
current household income information. We also note that the Medicaid 
proposed rule proposes certain variations from the methodology used for 
advance payments of the premium tax credit and cost-sharing reductions 
for both income and household size, which are discussed further in the 
preamble to 42 CFR 435.603. These differences include the treatment of 
qualifying relatives claimed as tax dependents by another taxpayer; 
children claimed as tax dependents by non-custodial parents; pregnant 
women; lump sum payments; scholarships or

[[Page 51214]]

fellowship grants that are used for educational purposes; and certain 
American Indian/Alaska Native income. We solicit comments regarding how 
best to ensure a streamlined eligibility process given these underlying 
differences.
    In this section we use the term, application filer, as defined in 
Sec.  155.300(a). We note that the application filer does not 
necessarily have to be the primary taxpayer. We believe that the 
proposed process will support applications received through all 
channels, including electronically and on paper, although we discuss 
certain modifications that may be needed to accommodate paper 
applications later in this section.
    First, in paragraph (c)(1)(i)(A), we propose that for all 
individuals whose income is counted in calculating a primary taxpayer's 
household income, in accordance with 26 CFR 1.36B-1(e) of the Treasury 
proposed rule, or an applicant's household income, in accordance with 
42 CFR 435.603(d) of the Medicaid proposed rule, and for whom the 
Exchange has a Social Security number or an adoption taxpayer 
identification number, the Exchange will request tax return data from 
the Secretary of the Treasury by submitting identifying information to 
HHS, which will in turn submit it to the Secretary of the Treasury. 
This identifying information will include name, Social Security number, 
and relationship to the primary taxpayer (filer, spouse, dependent), 
and like all other information submissions, will only include the 
minimum information needed to complete the verification. In paragraph 
(c)(1)(i)(B), we propose that in the event that the identifying 
information for one or more individuals does not match a tax record on 
file with the Secretary of the Treasury that may be disclosed pursuant 
to the Code, HHS will notify the Exchange, and the Exchange must make a 
reasonable effort to confirm that the lack of a match is not due to an 
error in individual identifying information. This proposal is 
consistent with our proposal in Sec.  155.315(e)(1) and is designed to 
ensure that the Exchange can maximize the use of available electronic 
data sources in order to facilitate a streamlined eligibility process.
    We solicit comments regarding how the Exchange can best use 
available data to assist an application filer in navigating the 
components of the eligibility process related to household income and 
family/household size. We are particularly interested in comments 
regarding how to help an application filer determine whether available 
tax information is representative of a primary taxpayer's likely 
situation for the year for which coverage is requested.
    We note that this proposal represents a modification of the 
statutory verification process, based on the authority granted to the 
Secretary in section 1411(c)(4)(B) to modify the methods for obtaining 
data, including allowing an applicant to request that the Secretary of 
the Treasury provide return information directly to the Exchange 
through the Secretary of HHS. We believe that this approach will be far 
more efficient for applicants, the Exchange, and the Federal government 
than the basic procedure described in the statute, which would require 
an application filer to state MAGI and then have the Exchange check 
with the Secretary of the Treasury through HHS to see if this was 
consistent with the records of the Secretary of the Treasury. We 
believe that requiring an application filer to state MAGI would deter 
applications by essentially requiring an application filer to possess a 
copy of the relevant tax return at the point of application, and would 
also reduce sharply the ability of the Exchange to assist application 
filers in completing the eligibility process. Further, without the 
proposed modification, we believe that a large number of applicants 
would be subject to the inconsistency process for income and household 
size, which would then drive a rise in the amount of paper 
documentation required, slowing down the overall eligibility process.
    In accordance with the statute, we propose this modification after 
determining that any applicable requirements under section 1411 of the 
Affordable Care Act and section 6103 of the Code with respect to the 
confidentiality, disclosure, maintenance, and use of information can 
and will be met. To this end, we are already working with the Secretary 
of the Treasury and States to ensure that Treasury-required safeguards 
for tax information will be met across the Exchange information 
technology architecture, as specified in 45 CFR 155.260(d).
    In order to incorporate Medicaid and CHIP into the streamlined 
eligibility process, it is necessary to have readily available current 
income data to fill a similar role to that proposed for Treasury data 
in paragraph (c)(1)(i) of this section. Medicaid regulations at 42 CFR 
435.948(a), proposed in the Medicaid NPRM, specify that a State 
Medicaid agency must request State quarterly wage information, as well 
as other sources of current income, for use in verifying an 
individual's MAGI-based income information, to the extent that such 
information is useful in conducting this verification. In this rule, we 
propose that the Exchange utilize this data for purposes of Exchange 
determinations of eligibility for Medicaid and CHIP in a similar manner 
to how we propose the Exchange use tax data for purposes of Exchange 
determinations of eligibility for advance payments of the premium tax 
credit and cost-sharing reductions. That is, consistent with Medicaid 
regulations, we propose that the Exchange treat the list of current 
data sources described in 42 CFR 435.948(a), proposed in the Medicaid 
NPRM, as primary sources of MAGI-based income data for purposes of 
verification.
    In paragraph (c)(1)(ii), we propose that the Exchange obtain the 
most recent income information for all individuals whose income is 
counted in calculating a primary taxpayer's household income, in 
accordance with 26 CFR 1.36B-1(e), or an applicant's household income, 
in accordance with 42 CFR 435.603(d), from the data sources described 
in 42 CFR 435.948(a) of the Medicaid proposed rule, which lists the 
data sources for Medicaid eligibility determinations. We believe that 
this step is necessary to implement our interpretation of the 
Affordable Care Act regarding the Exchange's role in determining 
Medicaid eligibility, and does not create significant additional burden 
as it is an existing procedure in Medicaid programs. We recognize that 
42 CFR 435.948(a) includes multiple data sources, and we intend to 
provide subregulatory guidance regarding how such information can be 
utilized in a manner that is straightforward and helpful to application 
filers. We also solicit comment on this topic.
    In paragraphs (c)(2) and (c)(3) of this section, we propose the 
verification process for Medicaid and CHIP and for advance payments of 
the premium tax credit and cost-sharing reductions, respectively. We 
note that while we have drafted these sections separately, we expect 
the Exchange to implement them in an integrated, streamlined process 
that will avoid redundancy and minimize confusion for applicants.
    We also note that the proposed process in these paragraphs are 
designed to minimize burden on application filers by only requiring an 
applicant to provide an attestation regarding income if he or she 
attests that available data sources are not representative of an 
applicant or primary taxpayer's current or projected financial 
situation, as applicable. For an electronic application, we believe 
that

[[Page 51215]]

the attestations required can be part of a real-time process, in which 
an application filer would be shown information computed by the 
Exchange regarding MAGI-based income and annual household income and 
then offered the opportunity to affirm it or provide different 
information. For a paper application, this approach will not be 
possible, and so the Exchange will instead check the information 
provided by an application filer on a paper application against data 
regarding MAGI-based income and annual household income or provide the 
information computed based on data from sources to the application 
filer on paper and request confirmation. We solicit comments as to how 
this process can work most smoothly for both electronic and paper 
applications.
    First, in paragraph (c)(2)(i), we propose the Exchange direct an 
application filer to attest to the specific individuals who comprise an 
applicant's household for Medicaid and CHIP, within the meaning 
proposed in 42 CFR 435.603(f) of the Medicaid NPRM. This provision is 
designed to define the relevant Medicaid and CHIP household, which is 
necessary to determine income. We also propose that Exchange accept an 
application filer's attestation regarding the members of his or her 
household without further verification, unless the Exchange finds that 
the attestation is not reasonably compatible with other information 
provided by the application filer for the applicant or in the records 
of the Exchange, in which case the Exchange may utilize data obtained 
through electronic data sources to verify the attestation. If such data 
sources are unavailable or information in such data sources is not 
reasonably compatible with the application filer's attestation, the 
Exchange may request additional documentation to support the 
attestation within the procedures specified in 45 CFR 435.952.
    Second, in paragraph (c)(2)(ii), we propose that the Exchange 
verify MAGI-based income for purposes of determining eligibility for 
Medicaid and CHIP by following the procedures described in 42 CFR 
435.948 and 42 CFR 435.952. We solicit comments as to how the Exchange 
process and the Medicaid and CHIP processes can be streamlined to 
ensure consistency and maximize the portion of eligibility 
determinations that can be completed in a single session.
    In paragraph (c)(3), we propose the verification process for 
advance payments of the premium tax credit and cost-sharing reductions, 
First, in paragraph (c)(3)(i), we propose the Exchange direct an 
application filer to attest to the specific individuals who comprise an 
applicant's family for advance payments of the premium tax credit and 
cost-sharing reductions, within the meaning proposed in 26 CFR 1.36B-
1(d) of the Treasury proposed rule. This provision is designed to 
define the relevant primary taxpayer's family, which is necessary to 
determine income. We also propose the Exchange accept an application 
filer's attestation of family size without further verification, except 
as provided in cases in which information is not reasonably compatible 
with other data. We anticipate that the Exchange will provide education 
and assistance to an application filer such that attestations will be 
as close as possible to the ultimate tax filing family. We believe that 
requiring further verification of this is extremely difficult and may 
not be possible and that any verification would be of limited use while 
adding significant burden and delay to the process. We also propose 
that to the extent the Exchange finds that an application filer's 
attestation of family size is not reasonably compatible with other 
information provided by the application filer for the family, the 
Exchange may utilize data obtained through electronic data sources to 
verify the attestation. We also propose that if such data sources are 
unavailable or not reasonably compatible with the attestation, the 
Exchange will follow the procedures specified in Sec.  155.315(e) of 
this subpart.
    In paragraphs (c)(3)(ii)-(vi), we propose the verification process 
for income for purposes of advance payments of the premium tax credit 
and cost-sharing reductions. In paragraph (c)(3)(ii)(A), we propose the 
Exchange compute annual household income for the family defined by the 
application filer, based on the electronic data acquired pursuant to 
paragraph (c)(1)(i) of this section, and that the application filer 
validate this information by attesting whether it represents an 
accurate projection of the family's household income for the benefit 
year for which coverage is requested.
    In paragraph (c)(3)(ii)(B), we propose that if tax data are 
unavailable, or if an application filer attests that the Exchange's 
computation does not represent an accurate projection of the family's 
household income for the benefit year for which coverage is requested, 
the Exchange will direct the application filer to attest to the 
family's projected household income for the benefit year for which 
coverage is requested. Lastly, in paragraph (c)(3)(ii)(C), we propose 
that if the Exchange finds that an application filer's attestation to a 
family's projected annual household income is not reasonably compatible 
with the information regarding projected annual household income 
computed by the Exchange, including as a result of tax return data 
being unavailable, the Exchange will proceed in accordance with 
paragraphs (c)(3)(iii), (c)(3)(iv), and (c)(3)(vi), as applicable, 
which describe alternate verification processes. Section 1412(b)(2) of 
the Affordable Care Act provides that the Secretary provide procedures 
for making advance determinations for advance payments of the premium 
tax credit and cost-sharing reductions on the basis of information 
other than a primary taxpayer's most recent tax return, ``in cases 
where information included with an application form demonstrates 
substantial changes in income, changes in family size or other 
household circumstances, change in filing status, the filing of an 
application for unemployment benefits, or other significant changes 
affecting eligibility.'' The statute specifies that these alternate 
procedures should apply to a primary taxpayer whose income has 
decreased by at least 20 percent, is filing an application for 
unemployment benefits, or is not required to file a tax return, as well 
as to other primary taxpayers specified by the Secretary.
    In paragraphs (c)(3)(iii) and (c)(3)(iv), we propose to codify this 
provision of the statute by directing that the Exchange use an 
alternate process for determining income for purposes of advance 
payments of the premium tax credit and cost-sharing reductions for 
primary taxpayers in certain situations. In both (c)(3)(iii) and 
(c)(3)(iv), as section 1412(b)(2) specifies that the alternate process 
is limited to eligibility determinations for advance payments of the 
premium tax credit and cost-sharing reductions, we propose that the 
alternate processes are only available to a primary taxpayer for whom 
an application filer (who can be the primary taxpayer) has not 
established MAGI-based household income that is at or below the 
applicable Medicaid or CHIP MAGI-based income standard. That is, if an 
individual is or may be eligible for Medicaid or CHIP, this step in the 
verification process is not applicable because the applicant will not 
be eligible for advance payments of the premium tax credit or cost-
sharing reductions.
    First, in paragraph (c)(3)(iii), we propose procedures for 
situations in which an application filer attests that a primary 
taxpayer's annual household income has increased or is reasonably

[[Page 51216]]

expected to increase from the information obtained from his or her tax 
return. In such a situation, we propose the Exchange accept the 
application filer's attestation without further verification, except as 
provided in paragraph (c)(3)(iii)(B). This approach to verification is 
proposed because such attestation would result in the Federal 
government providing a lower advance payment than would otherwise be 
provided based on the primary taxpayer's most recent available tax 
return.
    However, in order to ensure that such an attestation does not 
understate income, in paragraph (c)(3)(iii)(B), we propose that if the 
Exchange finds that the application filer's attestation is not 
reasonably compatible with other information provided by the 
application filer or the MAGI-based income information acquired by the 
Exchange pursuant to paragraph (c)(1)(ii), the Exchange may utilize 
data obtained through electronic data sources to verify the 
attestation. If this approach is unsuccessful, the Exchange may request 
additional information in accordance with the procedures specified in 
Sec.  155.315(e) of this subpart.
    In paragraph (c)(3)(iv), we propose to codify the minimum 
requirements of section 1412(b)(2) of the Affordable Care Act, 
described above, regarding the circumstances under which an application 
filer who is attesting to a decrease in income for a primary taxpayer, 
or is attesting to income because tax return data is unavailable, may 
utilize an alternate income verification process. We clarify that this 
provision does not supersede Sec.  155.305(f)(4), which prohibits the 
Exchange from determining a primary taxpayer eligible for advance 
payments of the premium tax credit if advance payments were made on 
behalf of the primary taxpayer or his or her spouse for a year for 
which tax data would be utilized for verification of household income 
and family size and the primary taxpayer or his or her spouse did not 
comply with the requirement to file a tax return for that year as 
required by 26 CFR 1.6011-8 (proposed in the Treasury proposed rule).
    We anticipate that this alternate process may also accommodate a 
situation in which an applicant does not have a Social Security number 
or a non-applicant who is listed on an application as a family member 
does not have or does not provide a Social Security number. We solicit 
comment on what other situations should justify use of the alternate 
process. One potential approach is to allow a primary taxpayer with a 
decrease in income that does not meet the 20 percent threshold offered 
in the statute, but meets some other threshold, to use the alternate 
process. This would create a greater possibility that a primary 
taxpayer with a fairly significant decrease in income would be able to 
purchase coverage.
    In paragraph (c)(3)(v), we propose the alternative process for 
verifying income for primary taxpayers for whom an application filer 
attested to a decrease in household income or for whom tax return data 
is unavailable, as described in paragraph (c)(3)(iv) of this section. 
Under these proposed procedures, the Exchange will first attempt to 
verify the application filer's attestation of projected annual 
household income for the primary taxpayer by using an annualized 
version of the MAGI-based income data obtained in accordance with 
paragraph (c)(1)(ii). In the event that this is unsuccessful, we 
propose that the Exchange attempt to verify the application filer's 
attestation using any other electronic data sources that have been 
approved by HHS. HHS will approve other electronic data sources based 
on evidence showing that such data sources are sufficiently accurate 
and offer less administrative complexity than paper verification. In 
paragraph (c)(3)(v)(C), if such steps are unsuccessful, we propose the 
Exchange follow the procedures specified in Sec.  155.315(e) of this 
subpart.
    In paragraph (c)(3)(v)(D), we propose to clarify that if at the 
conclusion of the 90-day period, an application filer has not responded 
to a request for additional information from the Exchange in accordance 
with this section and the data sources specified in paragraph (c)(1) 
indicate that an applicant in the primary taxpayer's family is eligible 
for Medicaid or CHIP, the Exchange will not provide the applicant with 
eligibility for advance payments of the premium tax credit or cost-
sharing reductions based on the application, in order to ensure that 
applicants who are eligible for Medicaid or CHIP are not determined 
eligible for advance payments or cost-sharing reductions as a result of 
non-compliance. In paragraph (c)(3)(v)(E), we propose that in other 
situations in which the Exchange remains unable to verify an 
application filer's attestation, it will determine an applicant's 
eligibility based on the information described in paragraph 
(c)(3)(ii)(A). In paragraph (c)(3)(vi), we propose to codify section 
1412(b)(1)(B) of the Affordable Care Act regarding primary taxpayers 
who do not meet the criteria specified in paragraph (c)(3)(iii) or 
(c)(3)(iv) for use of an alternate income verification process. We 
propose the Exchange determine eligibility for these primary taxpayers 
for advance payments of the premium tax credit and cost-sharing 
reductions based on the income from the primary taxpayer's tax data. At 
a minimum, the tax return data used for this purpose should be from the 
taxable year ending with or within the second calendar year preceding 
the calendar year in which the benefit year begins.
    In paragraph (c)(4), we propose the Exchange provide education and 
assistance to an application filer regarding the verification process 
for income and family/household size. We solicit comments as to 
strategies that the Exchange can employ to ensure that application 
filers understand the validation process and provide well-informed 
validations and attestations, including, but not limited to, developing 
ways to best display the data acquired from data sources and 
potentially accessing other data sources that might be informative. We 
intend to provide subregulatory guidance on this topic.
    In paragraph (d), we propose that the Exchange verify whether an 
applicant is enrolled in an eligible employer-sponsored plan by 
accepting his or her attestation without further verification, except 
as provided in paragraph (d)(2) in cases in which information is not 
reasonably compatible with other data. Although section 36B(c)(2)(C) of 
the Code provides that an individual is eligible for the premium tax 
credit provided that his or her coverage through an eligible employer-
sponsored plan is not affordable or does not provide minimum value, 
clause (iii) of that subparagraph prohibits eligibility for the premium 
tax credit if the individual is enrolled in an eligible employer-
sponsored plan, regardless of the cost or value of that plan. We 
propose that the Exchange accept an applicant's attestation without 
further verification, with provisions in cases in which the attestation 
is not reasonably compatible with other data, because we believe that 
an applicant generally understands whether or not he or she is enrolled 
in an eligible employer-sponsored plan. We solicit comments as to 
whether this is a reasonable assumption. Similar to the provisions 
regarding residency and income verification, we propose to allow the 
Exchange to request additional information regarding whether an 
applicant is enrolled in an eligible employer-sponsored plan if an 
applicant's attestation is not reasonably compatible with other 
information provided by the applicant or in the records of the 
Exchange. We solicit

[[Page 51217]]

comments regarding the best data sources for this element of the 
process.
    In paragraph (e)(1), we propose that the Exchange require an 
applicant to attest to his or her eligibility for qualifying coverage 
in an eligible employer-sponsored plan for the purposes of eligibility 
for advance payments of the premium tax credit and cost-sharing 
reductions.
    In paragraph (e)(2), we propose that the Exchange verify this 
information. We solicit comments regarding how the Exchange may handle 
a situation in which it is unable to gain access to authoritative 
information regarding an applicant's eligibility for qualifying 
coverage in an eligible employer-sponsored plan.
    Exchanges will interact with employees and their employers in order 
to make a determination of eligibility for advance payments of the 
premium tax credit and cost-sharing reductions. Specifically sections 
1401 and 1402 of the Affordable Care Act establish that an applicant is 
eligible for advance payments of the premium tax credit or cost-sharing 
reductions only if he or she is not eligible for qualifying coverage in 
an eligible employer-sponsored plan that meets a minimum value standard 
and is affordable under section 36B(c)(2)(C) of the Code, as added by 
the Affordable Care Act. Section 1411(b) of the Affordable Care Act 
directs an applicant seeking advance payments of the premium tax credit 
and cost-sharing reductions through the Exchange to provide to the 
Exchange specific information for purposes of determining eligibility, 
including (1) The name, address and Employer Identification Number (if 
available) of the employer; (2) whether the applicant is a full-time 
employee and whether the employer provides minimum essential coverage; 
and (3) if the employer provides minimum essential coverage, the lowest 
cost option for the applicant's enrollment status and the applicant's 
contribution under the employer-sponsored plan. Additionally, we 
recognize that Exchanges may need additional information about 
employer-sponsored health plans to complete eligibility determinations 
such as information about whether such plans are available to spouses 
and dependents and whether they meet the minimum value standard.
    Under several statutory reporting provisions, employers already 
will provide much, if not all, of the information the Exchanges will 
need to determine eligibility for advance payments of the premium tax 
credit and cost-sharing reductions. Under these provisions, employers 
will provide information either directly to their employees, to the IRS 
and/or to the Department of Labor. These provisions include, but are 
not limited to, section 6056 of the Code, as added by section 1514 of 
the Affordable Care Act (requiring employers to report to the IRS 
specific information related to employer-sponsored health coverage 
provided to employees); section 2715 of the PHS Act, as amended by 
section 1001 of the Affordable Care Act (requiring group health plans 
and health insurance issuers to disclose to eligible individuals 
information about the employer-sponsored health plan(s) or coverage 
option(s) available to them); and section 18B of the Fair Labor 
Standards Act, as added by section 1512 of the Affordable Care Act 
(requiring employers to disclose to employees information regarding 
Exchange coverage options).
    In developing the standards for Exchange verification of 
eligibility for qualifying coverage in an eligible employer-sponsored 
plan, HHS and the Departments of the Treasury and Labor are working 
together to coordinate how needed information could be reported in 
order to make it efficient and easy for employees to access it and to 
minimize burden on employers. For example, consideration is being given 
to whether Exchanges could provide a template that both employers and 
employees could use to capture information already reported under the 
provisions cited above. A template might help employees to have ready-
access to the plan-level information they need for the Exchange 
application process, and for employers, it might support a uniform 
verification process that would simplify employers' interactions with 
the Exchanges.
    We are also considering the feasibility of a central database that 
employers voluntarily could populate as a potential resource for the 
verification process. A consolidated database could be drawn upon for 
the purposes of verifying the information provided by applicants 
seeking eligibility for advance payments of the premium tax credit and 
cost-sharing reduction. Such database would include the appropriate 
privacy and security safeguards necessary to protect the information 
provided. We recognize that employers will need to accumulate both 
plan-level and employee-level information for purposes of reporting 
under section 6056 of the Code (as added by section 1514 of the 
Affordable Care Act). We are considering whether and how the same plan-
level information could be incorporated into such a database.
    We invite comment on the timing and reporting of information needed 
to verify whether an employed applicant is eligible for an advance 
payment of the premium tax credit and cost-sharing reductions and how 
best for Exchanges to interact and communicate with employers to verify 
information regarding employer-sponsored coverage. Specifically, we 
invite comment on (1) whether a template would be helpful and, if so, 
how it could be designed to capture plan-level information that is 
already reported to employees, the IRS and/or the Department of Labor, 
and (2) whether the development of a central database is an attractive 
option for employers to provide information about the coverage offered 
under eligible employer-sponsored plans. We note that the Treasury 
Department and the IRS also intend to request comments on the employer 
information reporting required under section 6056 of the Code.
    In paragraph (f), we propose a process regarding the verification 
of specific immigration status standards for Medicaid and CHIP. The 
immigration status standards for eligibility for enrollment in a QHP 
differ from those for Medicaid and CHIP, with the exception of the 
standard for pregnant women and children in certain States that have 
adopted the State option under section 1903(v)(4) of the Act, as added 
by section 214 of the Children's Health Insurance Program 
Reauthorization Act (Pub. L. 111-3, 123 Stat. 8), further, the 
`reasonably expected' element discussed in Sec.  155.305(a)(1) does not 
apply to any population in Medicaid or CHIP. In paragraph (f), we 
propose that the Exchange verify whether an applicant requesting an 
eligibility determination for insurance affordability programs under 
Sec.  155.310(b) who is not a citizen or national meets the immigration 
status and five-year waiting period for Medicaid and CHIP as specified 
under 42 CFR 435.406, 42 CFR 457.320, 1903(v)(4) of the Act, section 
2107(e)(1)(J) of the Act, and section 403 of the Personal 
Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 
(Pub. L. 104-493, 110 Stat. 2105), as applicable. We clarify that we do 
not consider eligibility for Medicaid coverage that is restricted to 
emergency services to qualify an individual as eligible for Medicaid. 
We anticipate that the Exchange will determine whether an individual 
meets this standard while verifying the individual's citizenship, 
status as a national, or lawful presence as required in Sec.  
155.315(b).

[[Page 51218]]

    As section 36B(c)(1)(B) of the Code, which is also referenced in 
section 1402 of the Affordable Care Act in defining eligibility for 
cost-sharing reduction, provides that an applicant who is lawfully 
present in the United States, has household income below 100 percent of 
the FPL, and is not eligible for Medicaid based on immigration status 
is eligible for the premium tax credit, we believe that 42 CFR 
435.406(a)(2) and section 403 of PRWORA do not apply to advance 
payments of the premium tax credit and cost-sharing reductions. 
Therefore, we propose a definition of ``lawfully present'' that is not 
limited to ``qualified alien'' as defined in PRWORA.
f. Eligibility Redetermination During a Benefit Year (Sec.  155.330)
    Section 1411(f)(1)(B) of the Affordable Care Act specifies that the 
Secretary shall establish procedures by which the Secretary or another 
Federal official redetermines an individual's eligibility on a periodic 
basis. Consistent with our proposal that the Exchange conduct initial 
eligibility determinations, in Sec.  155.330, we outline procedures for 
redeterminations during a benefit year consistent with section 
1411(f)(1)(B) of the Affordable Care Act. We note that the goal of the 
eligibility redetermination process is to ensure that an individual's 
eligibility reflects his or her circumstances with respect to the 
eligibility standards specified in Sec.  155.305, while minimizing 
administrative complexity for enrollees and the Exchange.
    The redetermination process that we propose in this section relies 
primarily on the individual to provide the Exchange with updated 
information during the benefit year, as opposed to having the Exchange 
examine electronic data sources and/or contact the individual in order 
to determine whether a change has occurred during the year. This 
primary reliance on individuals would eliminate much of the 
administrative burden associated with periodic electronic data matching 
and any follow-up with individuals. That said, we have included a 
provision for State flexibility in this area, and we solicit comments 
as to whether there should be an ongoing role for Exchange-initiated 
data matching beyond what is proposed in this rule and the allowance 
for flexibility. We also solicit comments as to whether the Exchange 
should offer an enrollee an option to be periodically reminded to 
report any changes that have occurred.
    In paragraph (a), we propose that the Exchange redetermine the 
eligibility of an enrollee in a QHP during the benefit year in two 
situations: first, if an enrollee reports updated information and the 
Exchange verifies it; and second, if the Exchange identifies updated 
information through the limited data matching to identify individuals 
who have died or gained eligibility for a public health insurance 
program, as described in paragraph (c) of this section.
    In paragraph (b)(1), we propose that an individual who enrolls in a 
QHP with or without advance payments of the premium tax credit or cost-
sharing reductions must report any changes to the Exchange with respect 
to the eligibility standards specified in Sec.  155.305 within 30 days 
of such change. In paragraph (b)(2), we propose that the Exchange use 
the verification procedures at the point of initial application for any 
changes reported by an individual prior to using the self-reported data 
in an eligibility determination. These changes could include, but are 
not limited to, changes in incarceration status, residency, immigration 
status, household income or household size, or in the availability of 
qualifying coverage in an eligible employer-sponsored plan, which could 
be driven by changes in employment.
    We solicit comments regarding whether we should require or allow 
the Exchange to limit the requirement on an individual to report 
changes in income to changes of a certain magnitude. For example, one 
alternative would be for the Exchange to require an individual to 
report all changes to non-income information that affect his or her 
eligibility within 30 days of a change, but only require an individual 
to report changes of greater than five, ten, or 15 percent of income. 
This could limit the number of changes reported, but also could add to 
enrollee confusion regarding when a change is required to be reported. 
We also note that this provision would have no effect on whether an 
individual was liable for repayment of excess advance payments of the 
premium tax credit.
    In paragraph (c), we propose that the Exchange periodically examine 
certain data sources used to support the initial eligibility process, 
specifically those data sources described in Sec.  155.315(b)(1) and 
Sec.  155.320(b) of this part, to identify death and eligibility 
determinations for Medicare, Medicaid, or CHIP. We propose to limit 
proactive examination to these pieces of information as they come from 
these data sources and provide clear-cut indications of eligibility for 
enrollment in a QHP and advance payments of the premium tax credit and 
cost-sharing reductions. Consequently, in paragraph (d), we do not 
propose to require the Exchange to seek or receive an affirmation from 
an enrollee that such information is accurate prior to using it in an 
eligibility determination. We note, however, that like all eligibility 
determinations, such a determination would result in a notice to an 
enrollee and would be subject to appeal.
    In paragraph (c)(2), we propose to allow the Exchange to make 
additional efforts to identify and act on changes that may affect an 
enrollee's eligibility to the extent that HHS approves an Exchange Plan 
in accordance with Sec.  155.105(d) or a significant change to the 
Exchange Plan in accordance with Sec.  155.105(e) to modify the 
process.\3\ We propose that such approval would be granted if HHS finds 
that such a modification would reduce the administrative costs and 
burdens on individuals while maintaining accuracy and minimizing delay, 
that such changes would not undermine coordination with Medicaid and 
CHIP, and that any applicable provisions under Sec.  155.260, Sec.  
155.270, Sec.  155.310(f), and section 6103 of the Code with respect to 
the confidentiality, disclosure, maintenance, or use of information 
will be met. This provision is consistent with our proposal in Sec.  
155.315(e).
---------------------------------------------------------------------------

    \3\ This provision is proposed in the Exchange NPRM at 76 FR 
41866 (July 15, 2011).
---------------------------------------------------------------------------

    As an alternative, we also considered directing the Exchange to use 
electronic data sources to determine whether other pieces of 
information regarding an enrollee's eligibility have changed from the 
prior eligibility determination in any way that would affect his or her 
eligibility, or to allow this without the process described in 
paragraph (c)(2). Under such a scenario, the Exchange could either take 
action without seeking the enrollee's confirmation or notify the 
enrollee of the change and provide him or her with an opportunity to 
affirm the information. We solicit comments regarding whether and how 
we should approach additional data matching, whether the Exchange 
should modify an enrollee's eligibility based on electronic data in the 
event that he or she did not respond to a notice regarding the updated 
information, and whether there are other procedures that could support 
the goals of the redetermination process for changes during the benefit 
year.
    In paragraph (d), we propose that to the extent that the Exchange 
verifies updated information reported by an enrollee or identifies 
updated information through data matching in accordance with paragraph 
(c), the Exchange determine the enrollee's

[[Page 51219]]

eligibility and provide an eligibility notice in accordance with the 
process described in Sec.  155.305 and Sec.  155.310(f), respectively. 
We also note that in accordance with Sec.  155.340(a), the Exchange 
will notify an enrollee's QHP if it determines that his or her 
eligibility has changed.
    In paragraph (e)(1), we propose that changes resulting from a 
redetermination during the benefit year be effective for the first day 
of the month following the notice of eligibility determination 
described in paragraph (d)(2). In paragraph (e)(2), we allow an 
exception, subject to the authorization of HHS, in which the Exchange 
could establish a ``cut-off date'' for changes resulting from a 
redetermination during the coverage year to be considered effective for 
the first day of the month following the month in which changes would 
otherwise be effective, if not for the existence of the cut-off date. 
For example, under this proposal, the Exchange could determine that in 
order to be effective on October 1, a redetermination would have to be 
completed by September 15th. We solicit comment as to whether this 
should or should not necessitate an authorization from HHS, and if 
there should be a uniform timeframe across all Exchanges. In addition, 
we solicit comment as to whether this is the appropriate policy for the 
effective date for changes.
    In paragraph (e)(3), we propose that if the eligibility 
determination results in an individual being ineligible to continue his 
or her enrollment in a QHP, the Exchange will maintain his or her 
eligibility for enrollment in a QHP for a full month after the month in 
which the determination notice described in paragraph (d) is sent by 
the Exchange, although it will discontinue advance payments of the 
premium tax credit and cost-sharing reductions in accordance with the 
effective dates specified in paragraphs (e)(1) and (e)(2). We believe 
that allowing for this continuity of coverage allows for adequate time 
for an enrollee to conduct necessary follow-up with the Exchange 
without providing financial assistance that would later have to be 
recouped at the point of reconciliation. We note that this does not 
preclude an enrollee from terminating coverage prior to the termination 
of his or her eligibility, provided that the termination is permissible 
under Sec.  155.430. Alternative options could include a shorter or 
longer time period, or different time periods for specific types of 
changes. We solicit comment on this topic, as well as on approaches to 
ensuring that transitions between insurance affordability programs do 
not create coverage gaps for individuals.
g. Annual Eligibility Redetermination (Sec.  155.335)
    In Sec.  155.335, we outline procedures for annual 
redeterminations, consistent with section 1411(f)(1)(B) of the 
Affordable Care Act. Similar to our rationale for redeterminations 
during the coverage year, we believe that conducting annual 
redeterminations at the Exchange level would ensure that the 
eligibility process for the Exchange, Medicaid, and CHIP is streamlined 
and seamless.
    In paragraph (a), we propose that the Exchange redetermine the 
eligibility of an enrollee in a QHP on an annual basis, which would 
ensure that eligibility determinations remain current and follow the 
process proposed for the Medicaid program in 42 CFR 435.916. We clarify 
that this redetermination will consider eligibility for enrollment in a 
QHP, and to the extent that an enrollee has a request for an 
eligibility determination for insurance affordability programs on file 
with the Exchange, as described in Sec.  155.310(b), consider his or 
her eligibility for such programs. We solicit comments on whether the 
procedures proposed in Sec.  155.330 should satisfy the annual 
redetermination as well, and if so, whether this should be a Federal 
standard or an Exchange option. Permitting or requiring a 
redetermination that occurs during the coverage year to take the place 
of the annual redetermination could spread some of the eligibility 
workload for the Exchange across the year and reduce the number of 
times when an individual has to review and potentially affirm or update 
eligibility information but might take away from the simplicity offered 
by a process that occurs at a consistent point in the year for all 
individuals. Furthermore, determinations of eligibility for advance 
payments of the premium tax credit and cost-sharing reductions are 
based on the most recent tax data available, so these determinations 
need to be made on an annual basis as more recent information becomes 
available. We solicit comment on how this interaction can be 
streamlined, and at what point annual redeterminations should occur.
    In paragraph (b), we propose that in the case of an annual 
redetermination for an enrollee who has a request for an eligibility 
determination for insurance affordability programs on file with the 
Exchange, the Exchange conduct electronic data matching to obtain 
updated tax return information and current household income information 
from the Secretary of Treasury and other data sources as described in 
Sec.  155.320(c)(1), and provide such updated information to the 
enrollee in the notice described in Sec.  155.335(c). We solicit 
comment regarding whether and how we should approach additional data 
matching, and whether there are alternatives that could support the 
goals of the redetermination process.
    In paragraph (c), we propose that the Exchange provide an enrollee 
with an annual redetermination notice. Such notice will include: any 
updated tax return data and current household income data obtained by 
the Exchange, if the enrollee requested an eligibility determination 
for insurance affordability programs; the data used in the enrollee's 
most recent eligibility determination; and the enrollee's ``projected 
eligibility determination'' incorporating any updated income 
information obtained under paragraph (b), and including, if applicable, 
the amount of the advance payments of the premium tax credit or level 
of any cost-sharing reductions for which he or she would be eligible. 
We solicit comment regarding the contents of the notice and whether 
additional information should be provided.
    In paragraph (d), we propose that the Exchange direct an individual 
to report any changes relative to the information listed on the 
redetermination notice within 30 days of the date of the notice. Our 
goal is to ensure that the timeframe is long enough for individuals to 
reply, but short enough to serve the purpose of timely 
redeterminations; we solicit comments as to whether this is an 
appropriate timeframe. In paragraph (e), we propose that the Exchange 
verify any changes reported by the individual under paragraph (d) using 
the same verification procedures used at the point of initial 
application, including the provisions regarding inconsistencies, with 
the procedures modified for the specific type of information subject to 
the inconsistency process.
    In paragraph (f)(1), we propose that the Exchange require an 
enrollee to sign and return the notice specified in paragraph (c). 
However, in paragraph (f)(2), we propose that if an enrollee does not 
sign and return the notice, the Exchange will proceed in accordance 
with the procedures specified in paragraph (g)(1) of this section, 
meaning that it will redetermine his or her eligibility based on the 
information provided in the notice. This proposal is designed to 
minimize the risk of individuals losing coverage when they remain 
eligible. It is one strategy that has been proven to increase retention 
rates, and would reduce the

[[Page 51220]]

administrative burden and associated costs for the Exchange, as is 
outlined in several studies that found a majority of individuals were 
disenrolled based on a failure to return requests for information 
rather than for no longer meeting the substantive eligibility 
standards.\4\
---------------------------------------------------------------------------

    \4\ ``MaxEnroll Minute: Cutting Red Tape to Keep Eligible 
Families Enrolled in Massachusetts''. Maximizing Enrollment for 
Kids. http://www.maxenroll.org/resource/maxenroll-minute-cutting-red-tape-keep-eligible-families-enrolled-massachusetts. Also see, 
``Stability and Churning in Medi-Cal and Healthy Families''. 
Fairbrother and Schucter, Child Policy Research Center, Cincinnati 
Children's Hospital Medical Center. http://www.cincinnatichildrens.org/assets/0/78/1067/1395/1833/1835/9811/9813/9819/48b3047a-79ac-4e52-9ed8-b7824db1cec3.pdf; ``Instability of 
Public Health Insurance Coverage for Children and Their Families: 
Causes, Consequences, and Remedies''. Summer, Laura, and Mann, 
Cindy. The Commonwealth Fund. http://www.commonwealthfund.org/
Content/Publications/Fund-Reports/2006/Jun/Instability-of-Public-
Health-Insurance-Coverage-for-Children-and-Their-Families_Causes_
Consequence.aspx), and (``Enrollment and Disenrollment in MassHealth 
and Commonwealth Care''. Seifert, Robert, Kirk, Garrett, and Oakes, 
Margaret. Massachusetts Medicaid Policy Institute. http://
www.massmedicaid.org/~/media/MMPI/Files/2010--4--21--disenrollment--
mh--cc.pdf.
---------------------------------------------------------------------------

    We recognize that advance payments of the premium tax credit are 
subject to reconciliation by the Treasury. If advance payments are made 
where an enrollee does not respond to a notice to tell the Exchange 
that he or she will no longer be eligible for advance payments for the 
coming year (such as where the enrollee has new employment that will 
provide minimum essential coverage), the enrollee may have to repay 
some or all of the advance payments as additional tax. Thus, an 
enrollee has an interest in actively reviewing his or her annual 
redetermination notice and managing his or her eligibility information 
to ensure that his or her eligibility for advance payments of the 
premium tax credit is updated as quickly as possible after a change 
occurs. We solicit comment on policy and operational strategies to 
improve the accuracy of determinations and policy options that could 
allow an individual the choice to opt out of having his or her 
eligibility redetermined based on the information contained in the 
annual redetermination notice. We also solicit comment as to what steps 
the Exchange could take to ensure that redetermination minimizes burden 
on individuals, QHPs, and the Exchange without increasing inaccuracies.
    In paragraph (g)(1), we propose that after the 30-day period 
specified in paragraph (c) of Sec.  155.335 concludes, the Exchange (i) 
determine an enrollee's eligibility based on the information provided 
to the enrollee in the redetermination notice, along with any 
information that an enrollee has provided in response to such notice 
that the Exchange has verified; (ii) notify the enrollee in accordance 
with the procedures in Sec.  155.310(f); and (iii) if applicable, 
notify the enrollee's employer, in accordance with the procedures in 
Sec.  155.310(g). In paragraph (g)(2), we propose that to the extent 
that the Exchange is unable to verify a change reported by an enrollee 
as of the close of the 30-day period, the Exchange redetermine the 
enrollee's eligibility after completing verification. We expect that 
this redetermination would occur as soon as the verification process is 
completed.
    In paragraph (h), we propose that changes resulting from an 
enrollee's annual eligibility redetermination follow the same rules 
regarding effective dates as those proposed in Sec.  155.330. We 
solicit comment as to whether the effective dates for changes made as a 
result of an annual redetermination should be different from the 
effective dates for changes made as a result of a redetermination that 
occurs during the coverage year.
    In paragraph (i), we propose that if an enrollee remains eligible 
for coverage in a QHP upon annual redetermination, the enrollee will 
remain in the QHP selected the previous year unless the enrollee takes 
action to select a new QHP within an enrollment period or terminate 
coverage in accordance with 45 CFR 155.430, as proposed at 76 FR 41866.
h. Administration of Advance Payments of the Premium Tax Credit and 
Cost-Sharing Reductions (Sec.  155.340)
    Sections 1412(a) and (c) of the Affordable Care Act direct the 
Secretary to notify the Secretary of the Treasury of advance 
determinations for advance payments of the premium tax credit and cost-
sharing reductions so that the Secretary of the Treasury may make 
advance payments of such credit or reductions to the issuer of the QHP 
selected by an individual. Sections 1311(d)(4)(I)-(J) of the Affordable 
Care Act also direct that the Exchange report certain information to 
the Secretary of the Treasury and to employers to facilitate the 
employer responsibility provisions in the Affordable Care Act. In Sec.  
155.340, we propose to codify these reporting provisions for the 
Exchange, consistent with our proposal that the Exchange conduct 
eligibility determinations. We also propose that the Exchange 
simultaneously provide relevant information to the issuer of the QHP 
selected by an applicant in order to ensure that the issuer can 
effectuate any required changes within the effective dates specified in 
Sec.  155.330 and Sec.  155.335.
    In paragraph (a)(1), we propose that in the event of a 
determination of an individual's eligibility or ineligibility for 
advance payments of the premium tax credit or cost-sharing reductions, 
including a change in the level of advance payments of the premium tax 
credit or cost-sharing reductions for which he or she is eligible, the 
Exchange provide information to the issuer of the QHP selected by the 
individual or in which the individual is enrolled.
    In paragraph (a)(2), we propose that the Exchange provide 
eligibility and enrollment information to HHS to enable HHS to begin, 
end, or adjust advance payments of the premium tax credit and cost-
sharing reductions. We solicit comment on whether the information could 
be used by HHS to support any reporting necessary for monitoring, 
evaluation, and program integrity. We solicit comment as to how this 
interaction can work as smoothly as possible and the scope of 
information that should be transmitted among the relevant agencies.
    In paragraph (a)(3), we propose that the notification specified in 
paragraph (a) include the information necessary to enable the issuer of 
the QHP to implement or discontinue the implementation of an 
individual's advance payments of the premium tax credit or cost-sharing 
reductions, or modify the level of an individual's advance payments of 
the premium tax credit or cost-sharing reductions. By implementing, we 
mean that the issuer of the QHP will adjust an enrollee's net premium 
to reflect the advance payments of the premium tax credit, as well as 
make any changes needed to ensure that cost-sharing reflects the 
appropriate level of reductions.
    In paragraph (b), we propose to codify the reporting rules in 
sections 1311(d)(4)(I)(ii)-(iii) and 1311(d)(4)(J), which support the 
employer responsibility provisions of the Affordable Care Act. Each of 
the proposed standards in paragraph (b) relates to information about 
enrollees who are receiving advance payments of the premium tax credit 
and cost-sharing reductions.
    In paragraph (b)(1), we propose that when the Exchange determines 
that an applicant is eligible to receive advance payments of the 
premium tax credit based in part on a finding that his or her employer 
does not provide minimum essential coverage, or provides minimum 
essential coverage that is unaffordable, as described in 26 CFR

[[Page 51221]]

1.36B-2(c)(3)(v) of the Treasury proposed rule, or does not meet the 
minimum value standard, as described in 26 CFR 1.36B-2(c)(3)(vi) of the 
Treasury proposed rule, the Exchange will provide this information to 
the Secretary of the Treasury. In paragraph (b)(1), we propose that the 
Exchange transmit such applicant's name and Social Security number to 
HHS, which will transmit it to the Secretary of the Treasury. This 
proposed pathway is consistent with our proposals throughout this part 
that HHS serve as an intermediary between the Exchange and the various 
Federal agencies with which the Exchange communicates. We note that 
Sec.  155.310(g) specifies that the Exchange notify the employer of 
certain information regarding an employee's eligibility for advance 
payments of the premium tax credit.
    In paragraph (b)(2), we propose that in the event that an enrollee 
for whom advance payments of the premium tax credit are made or who is 
receiving cost-sharing reductions notifies the Exchange that he or she 
has changed employers, the Exchange transmit the enrollee's name and 
Social Security number to HHS, which will transmit it to Treasury. We 
note that such a change may also trigger a redetermination of 
eligibility during the benefit year for advance payments of the premium 
tax credit and cost-sharing reductions pursuant to Sec.  155.330.
    In paragraph (b)(3), we propose that in the event an enrollee for 
whom advance payments of the premium tax credit are made or who is 
receiving cost-sharing reductions terminates coverage in a QHP during a 
benefit year, the Exchange transmit his or her name and Social Security 
number and the effective date of the termination of coverage to HHS, 
which will transmit it to Treasury, and transmit his or her name and 
the effective date of the termination of coverage to his or her 
employer.
    Section 36B(f) of the Code directs the Secretary of the Treasury 
reconcile the amount of advance payments of the premium tax credit 
received by an individual with the amount allowed based on his or her 
tax return for the tax year that includes the benefit year. In order to 
support this reconciliation, section 1412(c)(1) of the Affordable Care 
Act directs the Secretary to provide information to the Secretary of 
the Treasury regarding advance determinations. In addition, section 
36B(f)(3) of the Code requires the Exchange to provide information to 
the Treasury Secretary, including an identification of coverage 
provided, QHP premiums, aggregate amounts of the premium tax credit 
provided during the tax year, identifying information, information 
supporting eligibility determinations, and any information necessary to 
determine whether excess advance payments of the premium tax credit 
have been made. The Treasury Secretary is proposing to implement this 
provision in 26 CFR 1.36B-5 of the Treasury proposed rule; to reinforce 
this provision and clarify it as a standard for approval of an 
Exchange, in paragraph (c), we propose that the Exchange comply with 
the Treasury regulation.
i. Coordination With Medicaid, CHIP, the Basic Health Program, and the 
Pre-Existing Conditions Insurance Program (Sec.  155.345)
    In Sec.  155.345, we propose standards for coordination across the 
Exchange, Medicaid, and CHIP in order to implement a streamlined, 
simplified system for eligibility determinations and enrollment. In 
this section, we also propose standards for coordination between the 
Exchange and the Pre-Existing Conditions Insurance Program (PCIP), 
established pursuant to section 1101 of the Affordable Care Act.
    In paragraph (a) of this section, we propose that the Exchange 
enter into agreements with the Medicaid or CHIP agencies as necessary 
to fulfill this subpart. Such agreements could support ensuring that 
Exchange determinations of eligibility for Medicaid and CHIP are 
consistent with the methods, standards and procedures set forth in the 
approved State plan and the interpretive policies and procedures of the 
State agency or agencies administering the Medicaid or CHIP programs. 
We anticipate that Medicaid and CHIP eligibility determination 
activities conducted by the Exchange will be conducted in cooperation 
and coordination with the agency or agencies administering those 
programs, and will utilize the single eligibility system or shared 
eligibility service discussed later in this section.
    In paragraph (d)(1) of Sec.  155.310 of this subpart, we propose 
that as part of the eligibility determination process, the Exchange 
determine an applicant eligibility for Medicaid and CHIP, in accordance 
with standards described in Sec.  155.305 of this subpart, and as 
described in (d)(3), notify the State agency administering Medicaid or 
CHIP and transmit relevant information. Upon making a determination of 
eligibility for Medicaid or CHIP, the Exchange will also notify the 
applicant of the determination, as described in Sec.  155.310(f). The 
agency administering Medicaid or CHIP would then provide the individual 
with his or her choices of available delivery systems (such as a 
managed care organization, a primary care case management program, or 
other option) and notify the chosen health plan or delivery system of 
the individual's selection.
    The Exchange may also facilitate delivery system and health plan 
selection, including transmitting enrollment transactions to health 
plans, if applicable, for individuals determined eligible for Medicaid 
or CHIP, if the agencies administering Medicaid or CHIP enter into an 
agreement authorizing the Exchange to perform this function. A greater 
level of integration in this area could offer an opportunity to reduce 
administrative costs associated with a two-step process for applicants 
who are determined eligible for Medicaid or CHIP, particularly because 
the Exchange will already have the capacity to allow delivery system 
selection for individuals determined eligible to enroll in a QHP. We 
solicit comments regarding whether and how this integration could best 
work for the Exchange, Medicaid, and CHIP.
    In paragraph (b)(1), we propose that the Exchange perform a 
``screen and refer'' function for those applicants who may be eligible 
for Medicaid in a MAGI-exempt category, as described in section 
1902(e)(14)(D) of the Act or an applicant that is potentially eligible 
for Medicaid based on factors not otherwise considered in this subpart. 
We propose that the Exchange transmit eligibility information related 
to such applications to the applicable State agency(ies) promptly and 
without undue delay to complete the remainder of the eligibility 
determination process.
    We also note that a State may choose to establish an eligibility 
system that conducts all eligibility determinations for the Exchange, 
Medicaid, and CHIP, including those Medicaid determinations that are 
based on factors beyond the MAGI-based income standard.
    We note that section 36B(c)(2)(B)(i) of the Code provides that an 
applicant is not eligible for advance payments of the premium tax 
credit or cost-sharing reductions to the extent that he or she is 
eligible for other minimum essential coverage, including coverage under 
Medicaid. We do not believe this provision is intended to exclude an 
applicant who is otherwise eligible for advance payments of the premium 
tax credit or cost-sharing reductions from receiving such advance 
payments or reductions during the time needed for Medicaid or CHIP to 
complete and effectuate an eligibility determination, particularly an 
eligibility determination that may involve the review of clinical

[[Page 51222]]

information. As such, in paragraph (b)(2), we propose that the Exchange 
provide advance payments of the premium tax credit and cost-sharing 
reductions to an individual who is found to be otherwise eligible for 
advance payments of the premium tax credit and cost-sharing reductions 
while the agency administering Medicaid completes a more detailed 
determination. We note that 26 CFR 1.36B-2(c)(2) of the Treasury 
proposed rule, specifies that if an individual receiving advance 
payments is approved for government-sponsored minimum essential 
coverage (including Medicaid), the individual is treated as eligible 
for minimum essential coverage no earlier than the first day of the 
first calendar month after approval; that is, an applicant who is 
referred to the Medicaid agency for additional screening and provided 
with advance payments in the interim while he or she is enrolled in a 
QHP would be eligible for the premium tax credit for such months and 
therefore, would not be liable to repay advance payments upon 
retroactive eligibility for Medicaid for the period of retroactive 
eligibility.
    In paragraph (c) we propose the Exchange provide an opportunity for 
an applicant who is not automatically referred to the State Medicaid 
agency for an eligibility determination under paragraph (b) of this 
section to request a full screening of eligibility for Medicaid by such 
agency. Because Medicaid may provide different benefits or greater 
protections for certain individuals, those applicants who believe they 
may be eligible for such programs should have the opportunity to 
receive a conclusive determination of eligibility based on all 
available eligibility criteria. In paragraph (c)(2), we propose that to 
the extent that an applicant requests such a determination, the 
Exchange transmit the applicant's information to the State Medicaid 
agency promptly and without undue delay. We note that 26 CFR 1.36B-
2(c)(2) of the Treasury proposed rule, discussed above, applies to 
applicants who are determined eligible for retroactive Medicaid 
coverage.
    In order to implement section 1413 of the Affordable Care Act, in 
paragraph (d), we propose that the Exchange work with the agencies 
administering Medicaid and CHIP, to establish procedures through which 
an application that is submitted directly to an agency administering 
Medicaid or CHIP initiates an eligibility determination for enrollment 
in a QHP, advance payments of the premium tax credit, and cost-sharing 
reductions. This is designed to ensure that an application that is 
submitted to an agency administering Medicaid or CHIP follows the same 
processes for a complete MAGI-based determination of eligibility for 
enrollment in a QHP, advance payments of the premium tax credit, and 
cost-sharing reductions, in a manner identical to that of an 
application submitted directly to the Exchange.
    We encourage States to develop integrated IT systems across the 
Exchange, Medicaid, and CHIP, which could allow States to leverage 
administrative functions and resources across coverage programs and 
ensure a consistent, seamless experience for consumers. We also expect 
that States will utilize a common or shared eligibility system or 
service across the Exchange and Medicaid.
    Section 1413(c) of the Affordable Care Act provides for secure 
interfaces and standards for data matching arrangements between the 
Exchange and the agencies administering Medicaid, and CHIP. In 
paragraph (e)(1), we propose to codify that the Exchange must utilize a 
secure, electronic interface for the exchange of data for the purpose 
of determining eligibility, including verifying whether an applicant 
requesting an eligibility determination for advance payments of the 
premium tax credit and cost-sharing reductions has been determined 
eligible for Medicaid or CHIP, and other functions specified under this 
subpart. We also note that the standards specified in Sec.  155.260 and 
Sec.  155.270 regarding privacy and security apply to any data sharing 
agreements under this section. Lastly, in paragraph (e)(2), we propose 
that the Exchange utilize any model agreements established by HHS for 
the purpose of sharing data as described in this section. We solicit 
comment as to the content of these model agreements.
    We propose in paragraph (f), standards for coordination between the 
Exchange and the Pre-Existing Conditions Insurance Program (PCIP), 
established pursuant to section 1101 of the Affordable Care Act, which 
will end coverage for its enrolled population effective January 1, 
2014. In accordance with 45 CFR 152.45, we propose to develop 
procedures for the transition of PCIP enrollees to coverage in QHPs 
offered through the Exchanges to ensure that PCIP enrollees do not 
experience a lapse in coverage. We solicit comment on additional 
responsibilities that should be assigned to Exchanges as part of this 
process, such as providing dedicated customer service staff for PCIP 
enrollees or actions that may accelerate or further streamline 
eligibility determinations for PCIP enrollees.
j. Special Eligibility Standards and Process for Indians (Sec.  
155.350)
    Section 1402(d) of the Affordable Care Act includes special rules 
regarding cost-sharing for Indians. First, section 1402(d)(1) of the 
Affordable Care Act specifies that a QHP issuer may not impose any 
cost-sharing on an Indian who has household income at or below 300 
percent of the FPL and is enrolled in a QHP at any level of coverage. 
We note that this is different from the cost-sharing rules for non-
Indians, which specifies that an individual be enrolled in a silver-
level plan in order to receive cost-sharing reductions. Second, section 
1402(d)(2) of the Affordable Care Act specifies that a QHP may not 
impose any cost-sharing on an Indian for services furnished directly by 
the Indian Health Service, an Indian tribe, tribal Organization, or 
Urban Indian Organization, or through referral under contract health 
services. This provision applies regardless of an Indian's income or 
plan level. We note that as defined in Sec.  155.300(a), for the 
purposes of this section, ``Indian'' means any individual defined in 
section 4(d) of the Indian Self-Determination and Education Assistance 
Act (ISDEAA) (Pub. L. 93-638, 88 Stat. 2203), in accordance with 
section 1402(d)(1) of the Affordable Care Act.
    In paragraph (a), we propose to codify section 1402(d)(1) of the 
Affordable Care Act by requiring the Exchange to determine an applicant 
who is an Indian eligible for cost-sharing reductions if he or she (i) 
meets the standards of Sec.  155.305 (related to eligibility for 
enrollment in a QHP) and (ii) has household income that does not exceed 
300 percent of the FPL. We also propose in paragraph (a)(2) to clarify 
that the Exchange may only provide cost-sharing reductions to an 
individual who is an Indian if he or she is enrolled in a QHP.
    In paragraph (b), we propose to codify section 1402(d)(2) of the 
Affordable Care Act by requiring the Exchange to determine an applicant 
eligible for the special cost-sharing rule described in that section if 
he or she is an Indian, without requiring the applicant to request an 
eligibility determination that requires collection or verification of 
income. This special cost-sharing reduction rule is not tied to income.
    In paragraph (c), we propose that the Exchange verify an 
individual's attestation that he or she is an Indian for purposes of 
determining whether he or she qualifies for the cost-sharing rules 
described in paragraphs (a) and (b) of this section. We propose that 
this

[[Page 51223]]

process consist of two phases. First, in paragraph (c)(1), we propose 
that the Exchange use any relevant documentation verified to support an 
attestation of citizenship or lawful presence in accordance with Sec.  
155.315(e) of this subpart. This is designed to ensure that the 
Exchange and an application filer will not duplicate the effort related 
to collecting and processing documentation if an application filer 
submitted documentation to support an applicant's attestation to 
citizenship or lawful presence that also satisfies the requirement of 
this paragraph.
    Second, in paragraph (c)(2), we propose that the Exchange rely on 
any electronic data sources that are available and have been authorized 
by HHS. HHS will approve electronic data sources based on evidence 
showing that such data sources are sufficiently accurate and offer less 
administrative complexity than paper verification.
    If an applicant has not submitted satisfactory documentation in 
accordance with paragraph (c)(1) and the verification process described 
in paragraph (c)(2) is not applicable (such as because the data are 
unavailable, do not contain an applicant's information, or are not 
reasonably compatible with an applicant's attestation), we propose that 
the Exchange follow the standard inconsistency procedures proposed in 
Sec.  155.315(e) of this subpart. Within these procedures, we propose 
that the Exchange follow the standards for acceptable documentation 
provided in section 1903(x)(3)(B)(v) of the Act. We note that to the 
extent that the Exchange is unable to verify an applicant's attestation 
that he or she is an Indian, and the applicant is otherwise eligible 
for enrollment in a QHP or insurance affordability programs, the 
Exchange determine the applicant eligible accordingly.
    We solicit comment on the availability and usability of electronic 
data sources, as well as best practices for accepting and verifying 
documentation related to Indian status. We note that this provision is 
also intended to facilitate data sharing between tribes and the 
Exchange for the purposes of this section, to the extent that tribes 
are willing and able to engage in such data sharing.
k. Right to Appeal (Sec.  155.355)
    Section 1411(f) of the Affordable Care Act directs the Secretary to 
establish a process for a Federal official to hear and make decisions 
on appeals of eligibility determinations. Section 1411(e)(4)(C) of the 
Affordable Care Act also provides that the Exchange notify applicants 
and employers of appeal processes when notifying the applicant or 
employer of an eligibility determination. As described in Sec.  
155.200(d) of the Exchange NPRM, published at 76 FR 41866, the Exchange 
will establish a process to hear individual appeals of eligibility 
determinations. We propose that an individual may appeal any 
eligibility determination or redetermination made by the Exchange under 
subpart D, including determinations of eligibility for enrollment in a 
QHP, advance payments of the premium tax credit, and cost-sharing 
reductions. We intend to propose the details of the individual 
eligibility appeals processes, including standards for the Federal 
appeals process, in future rulemaking.
    Pursuant to 1411(f)(2) of the Affordable Care Act, we intend to 
propose through future rulemaking standards for a process through which 
an employer would be able to appeal a determination that an employee of 
the employer is eligible for advance payments of the premium tax credit 
or cost-sharing reductions based in part on a finding that the employer 
did not offer qualifying coverage to the employee.

C. Part 157--Employer Interactions With Exchange and SHOP Participation

1. Subpart A--General Provisions
    The Affordable Care Act contains a number of provisions related to 
employers with respect to employee health coverage. While a number of 
them are incorporated into the Code, at sections 4980H and 6056, 
several are to be implemented by the Secretary. In part 157, we propose 
standards that address qualified employer participation in SHOP. Also, 
in the preamble, we briefly discuss employer interactions with 
Exchanges related to the verification of employees' eligibility for 
qualifying coverage in an eligible employer-sponsored plan. Subpart A 
outlines the basis and scope for part 157 and defines terms used 
throughout part 157.
a. Basis and Scope (Sec.  157.10)
    Section 157.10 of subpart A specifies the general statutory 
authority for the proposed regulations and indicates that the scope of 
part 157 is to establish the standards for employers in connection with 
Exchanges.
b. Definitions (Sec.  157.20)
    Under Sec.  157.20, we propose definitions for terms used in part 
157 that require clarification. The definitions presented in Sec.  
157.20 are taken directly from the statute or based on definitions we 
propose in other parts of this proposed rule. The terms ``qualified 
employer,'' ``qualified employee'' and ``small employer'' have the 
meaning given to the terms in Sec.  155.20.
    We recognize that employers may need to interact with Exchanges for 
the express purpose of verifying employees' eligibility for qualifying 
coverage in an eligible employer-sponsored plan for those employees who 
seek eligibility determinations for advance payments of the premium tax 
credit and cost-sharing reductions, as described in Sec.  155.320(e). 
We solicit comment earlier in the preamble on the timing of the 
interactions between employers and Exchanges and how these interactions 
might be structured.
2. Subpart B--Reserved
3. Subpart C--Standards for Qualified Employers
    Section 1311(b)(1)(B) of the Affordable Care Act directs each State 
that operates an Exchange to provide for the establishment of a Small 
Business Health Options Program (SHOP), which we describe in subpart H 
of part 155. Subpart C of this part outlines the general provisions for 
employer participation in SHOPs. To a significant extent, the proposal 
for this subpart mirrors and complements subpart H of part 155, 
proposed in the Exchange NPRM, published at 76 FR 41866.
a. Eligibility of Qualified Employers to Participate in SHOP (Sec.  
157.200)
    In Sec.  157.200, we propose the standards for an employer that 
seeks to offer health coverage to its employees through a SHOP. In 
paragraph (a), we propose that only qualified employers may participate 
in a SHOP. SHOP eligibility standards for qualified employers are 
proposed in 45 CFR 155.710.
    In paragraph (b), as proposed in 45 CFR 155.710, a qualified 
employer participating in the SHOP may continue to participate if it 
ceases to be a small employer solely because of an increase in the 
number of employees. In such instances, the employer will continue to 
be treated as a qualified employer and may continue its participation 
until the employer either fails to meet the other eligibility criteria 
or elects to no longer participate in the SHOP.
    We note that some small employers may have employees in multiple 
States or SHOP service areas. In 45 CFR 155.710, we proposed to allow 
multi-State employers flexibility in offering coverage to their 
employees. While large employers are more likely than small

[[Page 51224]]

employers to have employees in multiple States or SHOP jurisdictions, 
it is important that the health insurance options available to small 
employers participating in the SHOP are not limited by the SHOP's 
geographic location. We note that this does not exempt an employer from 
the size standard of the SHOP. If an employer has more than 100 
employees divided among multiple SHOP service areas, such an employer 
is still a large employer.
    Unlike the individual market, in the SHOP there are no statutory 
residency standards for either the qualified employer or qualified 
employee. However, in 45 CFR 155.710, we proposed that small employers 
either offer employees coverage through the SHOP serving the employer's 
principle business address or offer coverage to an employee through the 
SHOP serving the employee's primary worksite. We propose parallel 
standards here to coordinate with that proposal.
b. Employer Participation Process in the SHOP (Sec.  157.205)
    We propose the process for employer participation in the SHOP in 
Sec.  157.205. Paragraph (a), directs an employer to adhere to the 
standards, process, and deadlines set by this part and by the SHOP to 
maintain eligibility as a qualified employer and have employees enroll 
in QHPs. As proposed in 45 CFR 155.720, the SHOP will set a uniform 
process and timeline for each employer seeking to become a qualified 
employer through the SHOP.
    In paragraph (b), we propose that a qualified employer make 
available QHPs to employees in accordance with the process developed by 
the SHOP pursuant to 45 CFR 155.705.
    In paragraph (c), we propose that a qualified employer 
participating in SHOP disseminate information to its employees about 
the methods for selecting and enrolling in a QHP. To address the needs 
of qualified employees seeking assistance, the information disseminated 
by qualified employers should include at least the timeframes for 
enrollment, instructions for how to access the SHOP Web site and other 
tools to compare QHPs, and the SHOP toll-free hotline. We propose to 
establish this as a responsibility of the qualified employer because 
the SHOP will not have employee contact information until employees 
apply for coverage. However, the SHOP may assist qualified employers, 
for example by providing an easy to use toolkit to qualified employers 
explaining the key pieces of information to disseminate to its 
employees.
    In paragraph (d), we propose that a qualified employer submit 
premium payments according to the process proposed in 45 CFR 155.705. 
In paragraph (e), we propose that qualified employers provide an 
employee hired outside of the initial enrollment or annual open 
enrollment period with information described in paragraph (c). As 
proposed in 45 CFR 155.725(g), the SHOP will establish a window of time 
in which a newly hired employee may select coverage through a QHP.
    In paragraph (f), we propose that qualified employers provide the 
SHOP with information about individuals or employees whose eligibility 
to purchase coverage through the employer has changed. This notice 
would apply both to newly eligible employees and dependents as well as 
those no longer eligible for coverage. This includes a COBRA qualifying 
event, as described in 29 U.S.C. 1163. The SHOP may in turn notify the 
QHP to process the change in enrollment. The employer retains all 
notice responsibilities under Federal and State law. We suggest that 
SHOPs direct employers to provide such notices within thirty (30) days 
of the change in eligibility.
    In paragraph (g), we propose that a qualified employer adhere to 
the annual employer election period to change program participation for 
the next plan year. As proposed in 45 CFR 155.725, an employer may 
begin participating in the SHOP at any time. However, once an employer 
begins participating, it will adhere to an annual employer election 
period during which it may change employee offerings.
    In paragraph (h), we propose that if an employer remains eligible 
for coverage and does not take action during the annual employer 
election period, such employer would continue to offer the same plan, 
coverage level or plans selected the previous year for the next plan 
year unless the QHP or QHPs are no longer available. We invite comments 
regarding the feasibility of the processes established in this section 
and the implications for small employers and their employees.

III. Collection of Information Requirements

    We recognize that this proposed rule contains items that are 
subject to the Paperwork Reduction Act of 1995. We intend to estimate 
the burden of complying with the provisions of this rule as part of 
future rulemaking, per the Paperwork Reduction Act.

IV. Summary of Preliminary Regulatory Impact Analysis

    The summary analysis of benefits and costs included in this 
proposed rule is drawn from the detailed Preliminary Regulatory Impact 
Analysis (PRIA) that evaluates the impacts of the Exchange proposed 
rule and the related Patient Protection and Affordable Care Act; 
Standards Related to Reinsurance, Risk Corridors and Risk Adjustment 
(Premium Stabilization) proposed rule, available at http://cciio.cms.gov under ``Regulations and Guidance.'' This proposed rule 
proposes the specific standards for the Exchange eligibility process in 
order to implement the sections related to eligibility in the 
Affordable Care Act. As performing eligibility determinations is a 
minimum function of the Exchange, the costs and benefits of these 
eligibility provisions are inherently tied to the costs and benefits of 
the Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans (Exchange) proposed rule.

A. Introduction

    HHS has examined the impact of the proposed rule under Executive 
Orders 12866 and 13563, the Regulatory Flexibility Act (5 U.S.C. 601-
612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). 
Executive Orders 13563 and 12866 direct agencies to assess all costs 
and benefits (both quantitative and qualitative) 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. This rule has been 
designated an ``economically'' significant rule, under section 3(f)(1) 
of Executive Order 12866. Accordingly, the rule has been reviewed by 
the Office of Management and Budget.
    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. Using the Small Business Administration (SBA) 
definitions of small entities for agents and brokers, providers, QHPs, 
and employers--HHS tentatively concludes that a significant number of 
firms affected by this proposed rule are not small businesses.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written

[[Page 51225]]

statement, which includes an assessment of anticipated costs and 
benefits, before proposing ``any rule that includes any Federal mandate 
that may result in the expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector, of 
$100,000,000 or more (adjusted annually for inflation) in any one 
year.'' The current threshold after adjustment for inflation is 
approximately $136 million, using the most current (2011) Implicit 
Price Deflator for the Gross Domestic Product.\5\ HHS does not expect 
this proposed rule to result in one-year expenditures that would meet 
or exceed this amount.
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    \5\ http://research.stlouisfed.org/fred2/data/GDPDEF.txt. 
Accessed on 7/26/2011.
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B. Need for This Regulation

    A central aim of Title I of the Affordable Care Act is to expand 
access to health insurance coverage through the establishment of 
Exchanges. The number of uninsured Americans is rising due to lack 
affordable insurance, barriers to insurance for people with pre-
existing conditions, and high prices due to limited competition and 
market failures. Millions of people without health insurance use health 
care services for which they do not pay, shifting the uncompensated 
cost of their care to health care providers. Providers pass much of 
this cost to insurance companies, resulting in higher premiums that 
make insurance unaffordable to even more people. The Affordable Care 
Act includes a number of policies to address these problems, including 
the creating of Affordable Insurance Exchanges.
    Starting in 2014, individuals and small businesses will be able to 
purchase private health insurance through State-based competitive 
marketplaces called Affordable Insurance Exchanges, or ``Exchanges.'' 
Exchanges will offer Americans competition, choice, and clout. 
Insurance companies will compete for business on a level playing field, 
driving down costs. Consumers will have a choice of health plans to fit 
their needs. And Exchanges will give individuals and small businesses 
the same purchasing clout as big businesses.
    This proposed rule provides standards for the Exchange eligibility 
process, in order to implement sections 1311, 1411, 1412, and 1413 of 
the Affordable Care Act. Further, it supports and complements 
rulemaking conducted by the Secretary of the Treasury with respect to 
section 36B of the Code, as added by section 1401(a) of the Affordable 
Care Act, and by the Secretary of HHS with respect to several sections 
of the Affordable Care Act that create new law and amend existing law 
regarding Medicaid and CHIP. This proposed rule also contains standards 
for employers with respect to participation in the Small Business 
Health Options Program.

C. Summary of Costs and Benefits

    This proposed regulation is being published to provide the specific 
standards for the Exchange eligibility process in order to implement 
the sections related to eligibility in the Affordable Care Act. As 
performing eligibility determinations is a minimum function of the 
Exchange, the costs and benefits of these eligibility provisions are 
inherently tied to the costs and benefits of the Establishment of 
Exchanges and Qualified Health Plans (Exchange) proposed rule. A 
detailed PRIA, available at http://cciio.cms.gov under ``Regulations 
and Guidance,'' evaluates the impacts of the Exchange proposed rule and 
the related Premium Stabilization proposed rule. This section 
summarizes benefits and costs of this proposed rule.
Methods of Analysis
    The detailed PRIA references the estimates of the CMS Office of the 
Actuary (OACT) (CMS, April 22, 2010),\6\ but primarily uses the 
underlying assumptions and analysis done by the Congressional Budget 
Office (CBO) and the staff of the Joint Committee on Taxation. Their 
modeling effort accounts for all of the interactions among the 
interlocking pieces of the Affordable Care Act including its tax 
policies, and estimates premium effects that are important to assessing 
the benefits of the proposed rule. A description of CBO's methods used 
to estimate budget and enrollment impacts is available.\7\ The CBO 
estimates of enrollment in Exchanges are not significantly different 
than the comparable estimate produced by OACT. Based on our review, we 
expect that the provisions of these proposed rules will not 
substantially alter CBO's estimates of the budget impact of Exchanges 
or enrollment. The proposed provisions are well within the parameters 
used in the CBO modeling of the Affordable Care Act and do not diverge 
from assumptions embedded in the CBO model. Our review and analysis of 
the proposed provisions indicate that the impacts are within the 
model's margin of error.
---------------------------------------------------------------------------

    \6\ Foster, Richard ``Estimated Financial Effects of the Patient 
Protection and Affordable Care Act as Amended ``April 2011. CMS''.
    \7\ Congressional Budget Office. (2007) ``CBO's Health Insurance 
Simulation Model: A Technical Description.'' October.
---------------------------------------------------------------------------

Benefits in Response to the Proposed Regulation
    This summary focuses on the effects of implementing the provisions 
of the Affordable Care Act related to eligibility. In this section, we 
provide evidence on the benefits of increased health insurance coverage 
and reduced transaction costs. Simple eligibility processes will 
increase take-up of health insurance leading to improved health. In a 
recent study, compared to the uninsured group, the insured received 
more hospital care, more outpatient care, had lower medical debt, 
better self-reported health, and other health related benefits.\8\ The 
evaluation concluded that for low-income uninsured adults, coverage has 
the following benefits:
---------------------------------------------------------------------------

    \8\ Finkelstein, A. et al., (2011). The Oregon Health Insurance 
Experiment: Evidence from the First Year,'' National Bureau of 
Economic Research Working Paper Series, 17190.
---------------------------------------------------------------------------

     Significantly higher utilization of preventive care 
(mammograms, cholesterol monitoring, etc.),
     A significant increase in the probability of having a 
regular office or clinic for primary care, and
     Significantly better self-reported health.
    In addition, the use of electronic records among State and Federal 
agencies with information to verify eligibility will minimize the 
transaction costs of purchasing health insurance improving market 
efficiency and minimizing time cost for enrollees on enrollment.
Costs in Response to the Proposed Regulation
    To support this new eligibility structure, States are expected to 
build new or modify existing information technology systems. How each 
State constructs and assembles the components necessary to support its 
Exchange and Medicaid infrastructure will vary and depend on the level 
of maturity of current systems, current governance and business models, 
size, and other factors. Administrative costs to support the vision for 
a streamlined and coordinated eligibility and enrollment process will 
also vary for each State depending on the specific approaches taken 
regarding the integration between programs and its decision to build a 
new system or use existing systems; while the Affordable Care Act 
requires a high level of integration, States have the option to go 
beyond the requirements of the Act. We also believe that overall 
administrative costs may increase in the short term as

[[Page 51226]]

States build information technology systems; however, in the long-term 
States will see savings through the use of more efficient systems.
    As noted in the preamble, we believe the approach we are taking to 
supporting the verification of applicant information with SSA, IRS, and 
DHS reduces administrative complexity and associated costs. 
Administrative costs incurred in the development of information 
technology infrastructure to support the Exchange are funded wholly 
through State Exchange Planning and Establishment Grants. Costs for 
information technology infrastructure that will also support Medicaid 
must be allocated to Medicaid, but are eligible for a 90 percent 
Federal matching rate to assist in development.\9\
---------------------------------------------------------------------------

    \9\ Federal Funding for Medicaid Eligibility Determination and 
Enrollment Activities; Final Rule, April 19, 2011 [42 CFR part 433 
page 21950].
---------------------------------------------------------------------------

Summary of Costs and Benefits
    CBO estimated program payments and receipts for outlays related to 
grants for Exchange startup. States' initial costs to the creation of 
Exchanges will be funded by these grants. Eligibility determination is 
a minimum function of the Exchange, therefore the Exchange costs 
related to develop the infrastructure for this function these 
eligibility provisions are covered by these grant outlays.

    Table 1--Estimated Outlays for the Affordable Insurance Exchanges FY 2012-FY 2016, in Billions of Dollars
----------------------------------------------------------------------------------------------------------------
                   Year                         2012          2013          2014          2015          2016
----------------------------------------------------------------------------------------------------------------
Grant Authority for Exchange Start up \10\          0.6           0.8           0.4           0.2           0.0
----------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office. (2011). Cost Estimate of H.R. 1213 A bill to repeal mandatory funding
  provided to states in the Patient Protection and Affordable Care Act to establish American Health Benefit
  Exchanges. April 27, 2011. http://www.cbo.gov/ftpdocs/121xx/doc12158/hr1213.pdf.

Regulatory Options Considered
    In addition to a baseline, HHS has identified two regulatory 
options for this propose rule as required by Executive Order 12866.
---------------------------------------------------------------------------

    \10\ OACT estimates that the initial start-up costs for 
Exchanges will be $4.4 billion for 2011-2013 (Sisko, A.M., et al., 
``National Health Spending Projections: The Estimated Impact of 
Reform through 2019,'' Health Affairs, 29, no. 10 (2010): 1933-1941.
---------------------------------------------------------------------------

(1) Require Exchanges To Conduct Eligibility Determinations for the 
MAGI-Exempt Population
    Under the proposed rule, the Exchange will determine eligibility 
for Medicaid and CHIP for eligibility categories that use a MAGI-based 
income standard. In this NPRM, we propose the Exchange perform a 
``screen and refer'' function for those applicants who may be eligible 
for Medicaid in a category that does not use a MAGI-based income 
standard. For these applicants, we propose that the Exchange transmit 
eligibility information to the State Medicaid agency to complete the 
remainder of the eligibility determination process.
    This alternative would require the Exchange to determine 
eligibility for applicants that may fall into Medicaid eligibility 
categories that do not use a MAGI-based income standard. It would 
require Exchanges to conduct lengthier investigations of these 
applications than what is required for eligibility determinations for 
applicants eligible based on MAGI. It would also require Exchanges 
develop the capability to evaluate this information and other income 
information not required for MAGI-based eligibility determinations. 
This would require additional resources and increase costs to Exchanges 
and Federal agencies.
(2) Require a Paper-Driven Process for Conducting Eligibility 
Determinations
    In the proposed rule, to verify applicant information used to 
support an eligibility determination, we generally propose the Exchange 
first use electronic data, where available, prior to requesting paper 
documentation. Under this proposal, individuals will be asked to 
provide only the minimum amount of information necessary to complete an 
eligibility determination, and will only be required to submit paper if 
electronic data cannot be used to complete the verification process.
    We believe using technology to minimize burden on individuals and 
States will help increase access to coverage by streamlining the 
eligibility process, and will reduce administrative burden on 
Exchanges, while increasing accuracy by relying on trusted data for 
eligibility.
    Under this alternative, the Exchange would require individuals to 
submit paper documentation to verify information necessary for an 
eligibility determination. This would not only increase the amount of 
burden placed on individuals to identify and collect this information, 
which may not be readily available to the applicant, but would also 
necessitate additional time and resources for Exchanges to accept and 
verify the paper documentation needed for an eligibility determination.
Summary of Costs for Each Option
    While it would extend a more streamlined eligibility process to 
individuals ineligible for a MAGI-based eligibility determination, 
option 1 would require the Exchange to generate additional resources 
and funds to be able to determine eligibility for applicants that may 
fall into an eligibility category that does not use a MAGI-based income 
standard, including one that involves the consideration of clinical or 
other income information. The paper-driven process outlined under 
option 2 would ultimately increase the amount of time it would take for 
an individual to receive health coverage, would reduce the number of 
States likely to operate an Exchange due to increased administrative 
costs, and would dissuade individuals from seeking coverage through the 
Exchange.

D. Accounting Statement

    For full documentation and discussion of these estimated costs and 
benefits, see the detailed Exchange PRIA, available at http://cciio.cms.gov under ``Regulations and Guidance.'' Since eligibility 
determination is a minimum function of the Exchange, the costs and 
benefits of these eligibility provisions are included in the costs and 
benefits of Exchange establishment. Therefore, this accounting 
statement is identical to the one published in the Establishment of 
Exchanges and Qualified Health Plans (Exchange) proposed rule.

[[Page 51227]]



----------------------------------------------------------------------------------------------------------------
                                                      Primary                     Units discount      Period
                    Category                         estimate       Year dollar        rate           covered
----------------------------------------------------------------------------------------------------------------
Benefits:
                                                 ---------------------------------------------------------------
Annualized Monetized ($millions/year)...........   Not estimated            2011              7%       2012-2016
                                                 ---------------------------------------------------------------
                                                   Not estimated            2011              3%       2012-2016
----------------------------------------------------------------------------------------------------------------
Qualitative.....................................  The Exchanges, combined with other actions being taken to
                                                  implement the Affordable Care Act, will improve access to
                                                  health insurance, with numerous positive effects, including
                                                  earlier treatment and improved morbidity, fewer bankruptcies
                                                  and decreased use of uncompensated care. The Exchange will
                                                  also serve as a distribution channel for insurance reducing
                                                  administrative costs as a part of premiums and providing
                                                  comparable information on health plans to allow for a more
                                                  efficient shopping experience.
----------------------------------------------------------------------------------------------------------------
Costs:
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/year)...........             424            2011              7%       2012-2016
                                                 ---------------------------------------------------------------
                                                             410            2011              3%       2012-2016
----------------------------------------------------------------------------------------------------------------
Qualitative.....................................  These costs include grant outlays to States to establish
                                                  Exchanges.
----------------------------------------------------------------------------------------------------------------

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to prepare an initial regulatory flexibility analysis 
to describe the impact of the proposed 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 Act 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 as its measure of significant economic 
impact on a substantial number of small entities a change in revenues 
of more than 3 to 5 percent.
    As discussed above, this proposed rule is necessary to implement 
certain standards related to the establishment and operation of 
Exchanges as authorized by the Affordable Care Act. Specifically, this 
rule proposes standards for Exchanges related to eligibility 
determinations for enrollment in a QHP, advance payments of the premium 
tax credit, cost-sharing reductions, Medicaid, and CHIP; and qualified 
employer participation in SHOP.
    For the purposes of the regulatory flexibility analysis, we expect 
the following types of entities to be affected by this proposed rule--
(1) QHP issuers; and (2) employers. We believe that health insurers 
would be classified under the North American Industry Classification 
System (NAICS) Code 524114 (Direct Health and CMS-9989-P 166 Medical 
Insurance Carriers). According to SBA size standards, entities with 
average annual receipts of $7 million or less would be considered small 
entities this NAICS code. Health issuers could possibly be classified 
in 621491 (HMO Medical Centers) and, if this is the case, the SBA size 
standard would be $10 million or less.

QHP Issuers

    This rule proposes standards on Exchanges that address eligibility 
determinations for enrollment in a QHP, advance payments of the premium 
tax credit, cost-sharing reductions, Medicaid, and CHIP. Although these 
standards are for Exchanges, they also affect health plan issuers that 
choose to participate in an Exchange. QHP issuers receive information 
from an Exchange about an enrollee's category in order to enable the 
QHP issuer to provide the correct level of cost-sharing reductions. The 
issuer of the QHP will adjust an enrollee's net premium to reflect the 
advance payments of the premium tax credit, as well as make any changes 
required to ensure that cost-sharing reflects the appropriate level of 
reductions. Issuers benefit significantly from advance payments of the 
premium tax credit and cost-sharing reductions, but may face some 
administrative costs relating to receiving enrollee information from an 
Exchange.
    As discussed in the Web Portal interim final rule (75 FR 24481), 
HHS examined the health insurance industry in depth in the Regulatory 
Impact Analysis we prepared for the proposed rule on establishment of 
the Medicare Advantage program (69 FR 46866, August 3, 2004). In that 
analysis we determined that there were few, if any, insurance firms 
underwriting comprehensive health insurance policies (in contrast, for 
example, to travel insurance policies or dental discount policies) that 
fell below the size thresholds for ``small'' business established by 
the SBA (currently $7 million in annual receipts for health insurers, 
based on North American Industry Classification System Code 
524114).\11\
---------------------------------------------------------------------------

    \11\ ``Table of Size Standards Matched To North American 
Industry Classification System Codes,'' effective November 5, 2010, 
U.S. Small Business Administration, available at http://www.sba.gov.
---------------------------------------------------------------------------

    Additionally, as discussed in the Medical Loss Ratio interim final 
rule (75 FR 74918), the Department used a data set created from 2009 
National Association of Insurance Commissioners (NAIC) Health and Life 
Blank annual financial statement data to develop an updated estimate of 
the number of small entities that offer comprehensive major medical 
coverage in the individual and group markets. For purposes of that 
analysis, the Department used total Accident and Health (A&H) earned 
premiums as a proxy for annual receipts. The Department estimated that 
there were 28 small entities with less than $7 million in accident and 
health earned premiums offering individual or group comprehensive major 
medical coverage; however, this estimate may

[[Page 51228]]

overstate the actual number of small health insurance issuers offering 
such coverage, because it does not include receipts from these 
companies' other lines of business.

Employers

    The establishment of SHOP in conjunction with tax incentives for 
some employers will provide new opportunities for employers to offer 
affordable health insurance to their employees. A detailed discussion 
of the impact on employers related to the establishment of the SHOP is 
found in the PRIA, available at http://cciio.cms.gov under 
``Regulations and Guidance.''
    Subpart D of part 157 proposes standards that address qualified 
employer participation in SHOP. This rule proposes standards for 
employers that choose to participate in a SHOP. The SHOP is limited by 
statute to employers with at least one but not more than 100 employees. 
For this reason, we expect that many employers would meet the SBA 
Standard for small entities. Since participation in the SHOP is 
voluntary, this proposed rule does not place any requirements on small 
employers.
    We request comment on whether the small entities affected by this 
rule have been fully identified. We also request comment and 
information on potential costs for these entities and on any 
alternatives that we should consider.

VI. 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 proposed rule (and subsequent 
final rule) that includes any Federal mandate that may result in 
expenditures in any one year by State, local, or tribal governments, in 
the aggregate, or by the private sector, of $100 million in 1995 
dollars, updated annually for inflation. In 2011, that threshold is 
approximately $136 million. Because States are not required to set up 
an Exchange, and because grants are available for funding of the 
establishment of an Exchange by a State, we anticipate that this 
proposed rule would not impose costs above that $136 million UMRA 
threshold on State, local, or tribal governments.

VII. Federalism

    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 costs on State and local 
governments, pre-empts State law, or otherwise has Federalism 
implications. Because States have flexibility in designing their 
Exchange, State decisions will ultimately influence both administrative 
expenses and overall premiums. However, because States are not required 
to create an Exchange, these costs are not mandatory. For States 
electing to create an Exchange, the initial costs of the creation of 
the Exchange will be funded by Exchange Planning and Establishment 
Grants. After this time, Exchanges will be financially self-sustaining 
with revenue sources left to the discretion of the State. In the 
Department's view, while this proposed rule does not impose substantial 
direct on State and local governments, it has Federalism implications 
due to direct effects on the distribution of power and responsibilities 
among the State and Federal governments relating to determining 
standards relating to health insurance coverage (that is, for QHPs) 
that is offered in the individual and small group markets. Each State 
electing to establish a State-based Exchange must adopt the Federal 
standards contained in the Affordable Care Act and in this proposed 
rule, or have in effect a State law or regulation that implements these 
Federal standards. However, the Department anticipates that the 
Federalism implications (if any) are substantially mitigated because 
States have choices regarding the structure and governance of their 
Exchanges. Additionally, the Affordable Care Act does not require 
States to establish an Exchange; but if a State elects not to establish 
an Exchange or the State's Exchange is not approved, HHS must establish 
and facilitate an Exchange in that State. Additionally, States will 
have the opportunity to participate in State Partnership Exchanges.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have Federalism 
implications or limit the policymaking discretion of the States, the 
Department has engaged in efforts to consult with and work 
cooperatively with affected States, including participating in 
conference calls with and attending conferences of the National 
Association of Insurance Commissioners, and consulting with State 
insurance officials on an individual basis.
    Pursuant to the requirements set forth in section 8(a) of Executive 
Order 13132, and by the signatures affixed to this regulation, the 
Department certifies that CMS has complied with the requirements of 
Executive Order 13132 for the attached proposed regulation in a 
meaningful and timely manner.

List of Subjects

45 CFR Part 155

    Administrative practice and procedure, Advertising, Brokers, 
Conflict of interest, Consumer protection, Grant programs--health, 
Grants administration, Health care, Health insurance, Health 
maintenance organization (HMO), Health records, Hospitals, Indians, 
Individuals with disabilities, Loan programs-health, Organization and 
functions (Government agencies), Medicaid, Public assistance programs, 
Reporting and recordkeeping requirements, Safety, State and local 
governments, Technical assistance, Women, and Youth.

45 CFR Part 157

    Employee benefit plans, Health insurance, Health maintenance 
organization (HMO), Health records, Hospitals, Indians, Individuals 
with disabilities, Organization and functions (Government agencies), 
Medicaid, Public assistance programs, Reporting and recordkeeping 
requirements, Safety, State and local governments, Sunshine Act, 
Technical Assistance, Women, and Youth.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services proposes to amend 45 CFR subtitle A, subchapter B, 
as set forth below:

SUBTITLE A--DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUBCHAPTER B--REQUIREMENTS RELATING TO HEALTH CARE ACCESS

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

    1. Part 155, as proposed to be added at 76 FR 13564, March 14, 2011 
is amended by adding subpart D to read as follows:
Subpart D--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
Sec.
155.300 Definitions and general standards for eligibility 
determinations.
155.305 Eligibility standards.
155.310 Eligibility determination process.
155.315 Verification process related to eligibility to enroll in a 
QHP through the Exchange.
155.320 Verification process related to eligibility for insurance 
affordability programs.
155.330 Eligibility redetermination during a benefit year.

[[Page 51229]]

155.335 Annual eligibility redetermination.
155.340 Administration of advance payments of the premium tax credit 
and cost-sharing reductions.
155.345 Coordination with Medicaid, CHIP, the Basic Health Program, 
and the Pre-existing Condition Insurance Program.
155.350 Special eligibility standards and process for Indians.
155.355 Right to appeal.

Subpart D--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance 
Affordability Programs


Sec.  155.300  Definitions and General Standards for Eligibility 
Determinations

    (a) Definitions. In addition to those definitions proposed in 45 
CFR 155.20, for purposes of this subpart, the following terms have the 
following meaning:
    Adoption taxpayer identification number has the same meaning as it 
does in 26 CFR 301.6109-3(a).
    Applicable Children's Health Insurance Program (CHIP) MAGI-based 
income standard means the applicable income standard applied under the 
State plan under title XXI of the Act, or waiver of such plan, as 
defined at 42 CFR 457.305(a), and as certified by the State CHIP Agency 
pursuant to 42 CFR 457.348(d), for determining eligibility for child 
health assistance and enrollment in a separate child health program.
    Applicable Medicaid modified adjusted gross income (MAGI)-based 
income standard has the same meaning as ``applicable modified adjusted 
gross income standard,'' as defined at 42 CFR 435.911(b), applied under 
the State Medicaid plan or waiver of such plan, and as certified by the 
State Medicaid agency pursuant to 42 CFR 435.1200(c)(3) for determining 
eligibility for Medicaid.
    Application filer means an individual who submits an application 
for health insurance coverage to the Exchange and responds to inquiries 
about the application, regardless of whether he or she is seeking 
health insurance coverage for him or herself.
    Federal poverty level means the most recently published federal 
poverty level, updated periodically in the Federal Register by the 
Secretary of Health and Human Services under the authority of 42 U.S.C. 
9902(2), as of the first day of the annual open enrollment period for 
coverage in a qualified health plan through the Exchange, as specified 
in 45 CFR 155.410.
    Indian means any individual as defined in section 4(d) of the 
Indian Self-Determination and Education Assistance Act (Pub. L. 93-638, 
88 Stat. 2203).
    Insurance affordability programs means advance payments of the 
premium tax credit, cost-sharing reductions, Medicaid, CHIP, and the 
Basic Health Program, as applicable, in accordance with 42 CFR 435.4.
    Minimum value, in connection with an eligible employer-sponsored 
plan, has the meaning given to the term in section 36B(c)(2)(C) of the 
Code.
    Non-citizen means an individual who is not a citizen or national of 
the United States, in accordance with section 101(a)(3) of the 
Immigration and Nationality Act.
    Primary taxpayer. (1) Primary taxpayer means an individual who 
indicates that he or she expects--
    (i) To file a tax return for the benefit year, in accordance with 
26 CFR 1.6011-8;
    (ii) If married (within the meaning of 26 CFR 1.7703-1), to file a 
joint tax return for the benefit year;
    (iii) That no other taxpayer will be able to claim him or her as a 
tax dependent for the benefit year; and
    (iv) That he or she expects to claim a personal exemption deduction 
under section 151 of the Code on his or her tax return for one or more 
applicants, including himself or herself and his or her spouse.
    (2) This term can mean either spouse within a married couple.
    Qualifying coverage in an eligible employer-sponsored plan means 
coverage in an eligible employer-sponsored plan that meets the 
affordability and minimum value standards specified in 26 CFR 1.36B-
2(c)(3).
    State CHIP Agency means the agency that administers a separate 
child health program established by the State under title XXI of the 
Act in accordance with implementing regulations at 42 CFR 457.
    State Medicaid Agency means the agency established by the State 
under title XIX of the Act that administers the Medicaid program in 
accordance with implementing regulations at 42 CFR parts 430 through 
456.
    Tax dependent has the same meaning as the term dependent under 
section 152 of the Code.
    (b) Medicaid and CHIP. In general, references to Medicaid and CHIP 
regulations in this subpart refer to those regulations as implemented 
by the State Medicaid or CHIP agency.
    (c) Attestation.
    (1) Except as specified in paragraph (c)(2) of this section, for 
the purposes of this subpart, an attestation may be made by the 
applicant (self-attestation), an application filer, or in cases in 
which an individual cannot attest, the attestation of a parent, 
caretaker, or someone acting responsibly on behalf of such an 
individual.
    (2) The attestations specified in Sec.  155.310(d)(2)(ii) and Sec.  
155.315(e)(4)(ii) of this subpart must be provided by a primary 
taxpayer.


Sec.  155.305  Eligibility standards.

    (a) Eligibility for enrollment in a QHP through the Exchange. The 
Exchange must determine an applicant eligible for enrollment in a QHP 
through the Exchange if he or she meets the following requirements:
    (1) Citizenship, status as a national, or lawful presence. Is a 
citizen or national of the United States or a non-citizen lawfully 
present in the United States, and is reasonably expected to be a 
citizen, national, or a non-citizen who is lawfully present for the 
entire period for which enrollment is sought;
    (2) Incarceration. Is not incarcerated, other than incarceration 
pending the disposition of charges; and
    (3) Residency.
    (i) In the case of an individual age 21 and over who is not 
institutionalized, is capable of indicating intent, and is not 
receiving an optional State supplementary payment, intends to reside in 
the State within the service area of the Exchange, including without a 
fixed address, in which the applicant is requesting coverage.
    (ii) In the case of an individual under the age of 21, who is not 
institutionalized, is not receiving assistance pursuant to Title IV-E 
of the Social Security Act, is not emancipated, and is not receiving an 
optional State supplementary payment, resides in the State within the 
service area of the Exchange in which he or she is requesting coverage, 
including with a parent or caretaker or without a fixed address.
    (iii) Other special circumstances. In the case of an individual who 
is not described in paragraphs (a)(3)(i) or (ii) of this section, the 
Exchange must apply the residency requirements described in 42 CFR 
435.403 with respect to the service area of the Exchange.
    (iv) Special rule for family members living outside the service 
area of the Exchange of the primary taxpayer. A tax dependent or spouse 
who lives outside the service area of the Exchange of the primary 
taxpayer may request coverage through either the Exchange that services 
the area in which the spouse or tax dependent resides or intends to 
reside, as applicable pursuant to the standard identified in paragraphs 
(a)(3)(i), (ii), or (iii) of this section, or the

[[Page 51230]]

Exchange that services the area in which the primary taxpayer resides 
or intends to reside, as applicable pursuant to the standard identified 
in subparagraphs (a)(3)(i), (ii), or (iii).
    (b) Eligibility for QHP enrollment periods. The Exchange must 
determine an applicant eligible for an enrollment period if he or she 
meets the criteria for an enrollment period, as specified in Sec.  
155.410 and Sec.  155.420 of this part.
    (c) Eligibility for Medicaid. The Exchange must determine an 
applicant eligible for Medicaid if he or she meets the citizenship and 
satisfactory immigration status requirements of 42 CFR 435.406, the 
residency requirements of 42 CFR 435.403, has a household income, as 
defined in 42 CFR 435.911(b), that is at or below the applicable 
Medicaid MAGI-based income standard and--
    (1) Is pregnant, as defined in the Medicaid State Plan pursuant to 
42 CFR 435.4;
    (2) Is under age 19;
    (3) Is a parent or caretaker relative of a dependent child, as 
defined in the Medicaid State plan pursuant to 42 CFR 435.4; or
    (4) Is not described in paragraph (b)(1), (b)(2), or (b)(3) of this 
section, is under age 65 and is not entitled to or enrolled for 
benefits under part A of title XVIII of the Social Security Act, or 
enrolled for benefits under part B of title XVIII of the Social 
Security Act.
    (d) Eligibility for CHIP. The Exchange must determine an applicant 
eligible for CHIP if he or she meets the requirements of 42 CFR 457.310 
through 457.320 and has a household income within the applicable CHIP 
MAGI-based income standard.
    (e) Eligibility for Basic Health Program. If a Basic Health Program 
is operating in the service area of the Exchange, the Exchange must 
determine an applicant eligible for the Basic Health Program if he or 
she meets the requirements specified in section 1331(e) of the 
Affordable Care Act and regulations implementing that section.
    (f) Eligibility for advance payments of the premium tax credit.
    (1) In general. The Exchange must determine a primary taxpayer 
eligible for advance payments of the premium tax credit if the Exchange 
determines that--
    (i) He or she is expected to have a household income, as defined in 
26 CFR 1.36B-1(e), of at least 100 percent but not more than 400 
percent of the FPL, as specified in 26 CFR 1.36B-2(b)(1), for the 
benefit year for which coverage is requested; and
    (ii) One or more applicants for whom the primary taxpayer expects 
to claim a personal exemption deduction on his or her tax return for 
the benefit year, including the primary taxpayer and his or her 
spouse--
    (A) Meets the requirements for eligibility for enrollment in a QHP 
through the Exchange, as specified in paragraph (a) of this section; 
and
    (B) Is not eligible for minimum essential coverage, in accordance 
with 26 CFR 1.36B-2(a)(2).
    (2) Special rule for non-citizens lawfully present who are 
ineligible for Medicaid. The Exchange must determine a primary taxpayer 
eligible for advance payments of the premium tax credit if the Exchange 
determines that--
    (i) He or she meets the requirements specified in paragraph (f)(1) 
of this section, except for paragraph (f)(1)(i);
    (ii) He or she is expected to have a household income, as defined 
in 26 CFR 1.36B-1(e), of less than 100 percent of the FPL, as specified 
in 26 CFR 1.36B-2(b)(5), for the benefit year for which coverage is 
requested; and
    (iii) One or more applicants for whom the primary taxpayer expects 
to claim a personal exemption deduction on his or her tax return for 
the benefit year, including the primary taxpayer and his or her spouse, 
is a non-citizen who is lawfully present and ineligible for Medicaid, 
as specified in 26 CFR 1.36B-2(b)(5)(i), by reason of immigration 
status.
    (3) Enrollment required. The Exchange may provide advance payments 
of the premium tax credit only on behalf of a primary taxpayer if one 
or more applicants for whom the primary taxpayer attests that he or she 
expects to claim a personal exemption deduction for the benefit year, 
including the primary taxpayer and his or her spouse, is enrolled in a 
QHP through the Exchange.
    (4) Compliance with filing requirement. The Exchange may not 
determine a primary taxpayer eligible for advance payments of the 
premium tax credit if HHS notifies the Exchange as part of the process 
described in Sec.  155.320(c)(4) of this subpart that advance payments 
of the premium tax credit were made on behalf of the primary taxpayer 
or his or her spouse for a year for which tax data would be utilized 
for verification of household income and family size and the primary 
taxpayer or his or her spouse did not comply with the requirement to 
file a tax return for that year as required by 26 CFR 1.6011-8.
    (5) Calculation of advance payments of the premium tax credit. The 
Exchange must calculate advance payments of the premium tax credit in 
accordance with the rules specified in 26 CFR 1.36B-3.
    (6) Collection of Social Security numbers. The Exchange must 
require an application filer to provide the Social Security number of 
the primary taxpayer if an application filer attests that the primary 
taxpayer has a Social Security number and filed a tax return for the 
year for which tax data would be utilized for verification of household 
income and family size.
    (g) Eligibility for cost-sharing reductions.
    (1) The Exchange must determine an applicant eligible for cost-
sharing reductions if he or she--
    (i) Meets the requirements for eligibility for enrollment in a QHP 
through the Exchange, as specified in paragraph (a) of this section;
    (ii) Meets the requirements for advance payments of the premium tax 
credit, as specified in paragraph (f) of this section; and
    (iii) Has household income for the taxable year that does not 
exceed 250 percent of the Federal Poverty Level (FPL).
    (2) The Exchange may only provide cost-sharing reductions to an 
enrollee who is not an Indian if he or she is enrolled in a silver-
level QHP, as defined by section 1302(d)(1)(B) of the Affordable Care 
Act, purchased through the Exchange.
    (h) Eligibility categories for cost-sharing reductions. The 
Exchange must use the following eligibility categories for cost-sharing 
reductions when making eligibility determinations under this section--
    (1) An individual who has household income greater than 100 percent 
of the FPL and less than or equal to 150 percent of the FPL;
    (2) An individual who has household income greater than 150 percent 
of the FPL and less than or equal to 200 percent of the FPL; and
    (3) An individual who has household income greater than 200 percent 
of the FPL and less than or equal to 250 percent of the FPL.


Sec.  155.310  Eligibility determination process.

    (a) Application.
    (1) The Exchange must accept applications from individuals in the 
form and manner proposed in 45 CFR 155.405.
    (2) Information collection from non-applicants. The Exchange may 
not require an individual who is not seeking coverage for himself or 
herself to provide information regarding his or her citizenship, status 
as a national, or immigration status on any application

[[Page 51231]]

or supplemental form. The Exchange may not require such an individual 
to provide a Social Security number, except as described in Sec.  
155.305(f)(6) of this subpart.
    (b) Choice to request determination of eligibility for insurance 
affordability programs. The Exchange must permit an applicant to 
decline an eligibility determination for the programs described in 
paragraphs (c) through (g) of Sec.  155.305 of this subpart; however, 
the Exchange may not permit an applicant to decline an eligibility 
determination for a subset of the programs listed in those paragraphs.
    (c) Timing. The Exchange must accept an application and make an 
eligibility determination for an applicant seeking an eligibility 
determination at any point in time during the year.
    (d) Determination of eligibility.
    (1) The Exchange must determine an applicant's eligibility in 
accordance with the standards specified in Sec.  155.305 of this 
subpart.
    (2) Special rules relating to advance payments of the premium tax 
credit.
    (i) The Exchange must permit an enrollee to accept less than the 
full amount of advance payments of the premium tax credit for which he 
or she is determined eligible.
    (ii) The Exchange may authorize advance payments of the premium tax 
credit on behalf of a primary taxpayer only if the primary taxpayer 
first attests that--
    (A) He or she will file a tax return for the benefit year, in 
accordance with 26 CFR 1.6011-8;
    (B) If married (within the meaning of 26 CFR 1.7703-1), he or she 
will file a joint tax return for the benefit year;
    (C) No other taxpayer will be able to claim him or her as a tax 
dependent for the benefit year; and
    (D) He or she will claim a personal exemption deduction on his or 
her tax return for the applicants identified as members of his or her 
family, including the primary taxpayer and his or her spouse, in 
accordance with Sec.  155.320(c)(3)(i).
    (3) Special rule relating to Medicaid and CHIP. To the extent that 
the Exchange determines an applicant eligible for Medicaid or CHIP, the 
Exchange must notify the State Medicaid or CHIP agency and transmit 
relevant information to such agency promptly and without undue delay.
    (e) Effective dates. Upon making an eligibility determination, the 
Exchange must implement the eligibility determination under this 
section for enrollment in a QHP through the Exchange, advance payments 
of the premium tax credit, and cost-sharing reductions in accordance 
with the dates specified in 45 CFR 155.410(c) and (f), and 45 CFR 
155.420(b).
    (f) Notification of eligibility determination. The Exchange must 
provide timely notice to an applicant of any eligibility determination 
made in accordance with this subpart.
    (g) Notice of an employee's eligibility for advance payments of the 
premium tax credit and cost-sharing reductions to an employer. The 
Exchange must notify an employer that an employee has been determined 
eligible for advance payments of the premium tax credit or cost-sharing 
reductions upon determination that an employee is eligible for advance 
payments of the premium tax credit or cost-sharing reductions. Such 
notice must identify the employee.
    (h) Duration of eligibility determinations without enrollment. To 
the extent that an applicant who is determined eligible for enrollment 
in a QHP does not select a QHP within his or her enrollment period in 
accordance with subpart E of this part, and seeks a new enrollment 
period--
    (1) Prior to the date on which he or she would have been 
redetermined in accordance with Sec.  155.335 of this subpart had he or 
she enrolled in a QHP, the Exchange must require the applicant to 
attest as to whether information affecting his or her eligibility has 
changed since his or her most recent eligibility determination before 
determining his or her eligibility for an enrollment period, and must 
process any changes reported in accordance with the procedures 
specified in Sec.  155.330 of this subpart.
    (2) On or after the date on which he or she would have been 
redetermined in accordance with Sec.  155.335 of this subpart had he or 
she enrolled in a QHP, the Exchange must apply the procedures specified 
in Sec.  155.335 of this subpart before determining his or her 
eligibility for an enrollment period.


Sec.  155.315  Verification process related to eligibility for 
enrollment in a QHP through the Exchange.

    (a) General requirement. Unless a request for modification is 
granted pursuant to paragraph (e) of this section, the Exchange must 
verify or obtain information as provided in this section in order to 
determine that an applicant is eligible for enrollment in a QHP through 
the Exchange.
    (b) Verification of citizenship, status as a national, or lawful 
presence.
    (1) Verification with records from the Social Security 
Administration. For an applicant who attests to citizenship and has a 
Social Security number, the Exchange must transmit the applicant's 
Social Security number and other identifying information to HHS, which 
will submit it to the Social Security Administration.
    (2) Verification with the records of the Department of Homeland 
Security. For an applicant who has documentation that can be verified 
through the Department of Homeland Security and who attests to lawful 
presence, or who attests to citizenship and for whom the Exchange 
cannot substantiate a claim of citizenship through the Social Security 
Administration, the Exchange must transmit information from the 
applicant's documentation and other identifying information to HHS, 
which will submit necessary information to the Department of Homeland 
Security.
    (3) Inconsistencies and inability to verify information. For an 
applicant who attests to citizenship, status as a national, or lawful 
presence, and for whom the Exchange cannot verify such attestation 
through the Social Security Administration or the Department of 
Homeland Security, the Exchange must follow the procedures specified in 
paragraph (e) of this section, except that the Exchange must provide 
the applicant with a period of 90 days from the date on which the 
notice described in Sec.  155.315(e)(2)(i) of this section is received 
for the application filer to provide satisfactory documentary evidence 
or resolve the inconsistency with the Social Security Administration or 
the Department of Homeland Security, as applicable. The date on which 
the notice is received means 5 days after the date on the notice, 
unless the applicant shows that he or she did not receive the notice 
within the 5-day period.
    (c) Verification of residency.
    (1) Except as provided in paragraphs (c)(2) through (c)(4) of this 
section, the Exchange must verify an applicant's residency in the 
service area of the Exchange by accepting his or her attestation 
without further verification.
    (2) If the State Medicaid or CHIP agency operating in the State in 
which the Exchange operates elects to examine electronic data sources 
for all applicants to verify residency, the Exchange must proceed in 
accordance with 42 CFR 435.956(c) and 42 CFR 457.380(c), and the policy 
of the State Medicaid or CHIP agency.
    (3) If information provided by an applicant regarding residency is 
not reasonably compatible with other information provided by the 
individual or in the records of the Exchange the Exchange may examine 
information in data sources.

[[Page 51232]]

    (4) If the information in such data sources is not reasonably 
compatible with the information provided by the applicant, the Exchange 
must follow the procedures specified in Sec.  155.315(e) of this 
section. A document that provides evidence of immigration status may 
not be used alone to determine State residency.
    (d) Verification of incarceration status. The Exchange must verify 
an applicant's attestation that he or she meets the requirements of 
Sec.  155.305(a)(2) of this subpart by--
    (1) Relying on any electronic data sources that are available to 
the Exchange and which have been approved by HHS for this purpose, 
based on evidence showing that such data sources are sufficiently 
current, accurate, and offer less administrative complexity than paper 
verification; or
    (2) Except as provided in paragraph (d)(3) of this section, if an 
approved data source is unavailable, accepting his or her attestation 
without further verification.
    (3) To the extent that an applicant's attestation is not reasonably 
compatible with information from approved data sources described in 
paragraph (d)(1) of this section or other information provided by the 
applicant or in the records of the Exchange, the Exchange must follow 
the procedures specified in Sec.  155.315(e) of this subpart.
    (e) Inconsistencies. Except as otherwise specified in this subpart, 
for an applicant for whom the Exchange cannot verify information 
required to determine eligibility for enrollment in a QHP, advance 
payments of the premium tax credit, and cost-sharing reductions, the 
Exchange--
    (1) Must make a reasonable effort to identify and address the 
causes of such inconsistency, such as by contacting the application 
filer to confirm the accuracy of the information submitted by the 
application filer;
    (2) If the Exchange is unable to resolve the inconsistency through 
the process described in paragraph (e)(1) of this section, must--
    (i) Notify the applicant of the inconsistency; and
    (ii) Provide the applicant with a period of 90 days from the date 
on which the notice described in paragraph (e)(2)(i) of this section is 
sent to the applicant to either present satisfactory documentary 
evidence or otherwise resolve the inconsistency.
    (3) The Exchange may extend the period described in paragraph 
(e)(3) for an applicant if the applicant demonstrates that a good faith 
effort has been made to obtain the required documentation during the 
period.
    (4) During the period described in paragraph (e)(2)(ii) of this 
section, must--
    (i) Proceed with all other elements of eligibility determination 
using the application filer's attestation for the applicant, and 
provide eligibility for enrollment in a QHP to the extent that an 
applicant is otherwise qualified; and
    (ii) Ensure that advance payments of the premium tax credit and 
cost-sharing reductions are provided on behalf of an applicant within 
this period who is otherwise qualified for such payments and 
reductions, as described in Sec.  155.305 of this subpart, if the 
primary taxpayer attests to the Exchange that he or she understands 
that any advance payments of the premium tax credit received are 
subject to reconciliation.
    (5) If, after the period described in paragraph (e)(2)(ii) of this 
section, the Exchange remains unable to verify the attestation, the 
Exchange must--
    (i) Determine the applicant's eligibility based on the information 
available from the data sources specified in this subpart, and notify 
the applicant of such determination in accordance with the notice 
requirements specified in Sec.  155.310(f) of this subpart, including 
notice that the Exchange is unable to verify the attestation; and
    (ii) Implement the determination specified in paragraph (e)(5)(i) 
of this section no earlier than 10 days after and no later than 30 days 
after the date on which the notice in paragraph (e)(5)(i) of this 
section is sent.
    (f) Flexibility in information collection and verification. HHS may 
approve an Exchange Plan in accordance with Sec.  155.105(d) or a 
significant change to the Exchange Plan in accordance with Sec.  
155.105(e) of this part to modify the methods to be used for collection 
of information and verification of information as set forth in this 
subpart, as well as the specific information required to be collected, 
provided that HHS finds that such modification would reduce the 
administrative costs and burdens on individuals while maintaining 
accuracy and minimizing delay, that it would not undermine coordination 
with Medicaid and CHIP, and that any applicable requirements under 
Sec.  155.260, Sec.  155.270, paragraph (g) of this section, and 
section 6103 of the Code with respect to the confidentiality, 
disclosure, maintenance, or use of information will be met.
    (g) Applicant information. The Exchange must not require an 
applicant to provide information beyond the minimum necessary to 
support the eligibility and enrollment processes of the Exchange, 
Medicaid, CHIP, and the Basic Health Program, if a Basic Health Program 
is operating in the service area of the Exchange, described in this 
subpart.


Sec.  155.320  Verification process related to eligibility for 
insurance affordability programs.

    (a) General requirements.
    (1) The Exchange must verify information in accordance with this 
section only for an applicant who is requesting an eligibility 
determination for insurance affordability programs in accordance with 
Sec.  155.310(b) of this subpart.
    (2) Unless a request for modification is granted pursuant to Sec.  
155.315(e) of this subpart, the Exchange must verify or obtain 
information in accordance with this section before making an 
eligibility determination for insurance affordability programs, and 
must use such information in such determination.
    (b) Verification of eligibility for minimum essential coverage 
other than through an eligible employer-sponsored plan.
    (1) The Exchange must verify whether an applicant is eligible for 
minimum essential coverage other than through an eligible employer-
sponsored plan, Medicaid, CHIP, or the Basic Health Program, using 
information obtained by transmitting identifying information specified 
by HHS to HHS.
    (2) The Exchange must verify whether an applicant has already been 
determined eligible for coverage through Medicaid, CHIP, or the Basic 
Health Program, if a Basic Health Program is operating in the service 
area of the Exchange, within the State or States in which the Exchange 
operates using information obtained from the agencies administering 
such programs.
    (c) Verification of household income and family/household size.
    (1) Data.
    (i) Tax return data.
    (A) For all individuals whose income is counted in calculating a 
primary taxpayer's household income, in accordance with 26 CFR 1.36B-
1(e), or an applicant's household income, in accordance with 42 CFR 
435.603(d), and for whom the Exchange has a Social Security number or 
an adoption taxpayer identification number, the Exchange must request 
tax return data regarding MAGI and family size from the Secretary of 
the Treasury by transmitting identifying information specified by HHS 
to HHS.
    (B) If the identifying information for one or more individuals does 
not match a tax record on file with the Secretary of the Treasury that 
may be disclosed pursuant to section 6103(l)(21) of the

[[Page 51233]]

Code and its accompanying regulations, the Exchange must proceed in 
accordance with Sec.  155.315(e)(1) of this subpart.
    (ii) Data regarding MAGI-based income. For all individuals whose 
income is counted in calculating a primary taxpayer's household income, 
in accordance with 26 CFR 1.36B-1(e), or an applicant's household 
income, in accordance with 42 CFR 435.603(d), the Exchange must request 
data regarding MAGI-based income in accordance with 42 CFR 435.948(a).
    (2) Verification process for Medicaid and CHIP.
    (i) Household size.
    (A) The Exchange must require an application filer to attest to the 
individuals that comprise an applicant's household for Medicaid and 
CHIP, within the meaning of 42 CFR 435.603(f).
    (B) The Exchange must verify the information in paragraph 
(c)(2)(i)(A) of this section by accepting an application filer's 
attestation without further verification, unless the Exchange finds 
that an application filer's attestation to the individuals that 
comprise an applicant's household for Medicaid and CHIP is not 
reasonably compatible with other information provided by the 
application filer for the applicant or in the records of the Exchange, 
in which case the Exchange may utilize data obtained through electronic 
data sources to verify the attestation. If such data sources are 
unavailable or information in such data sources is not reasonably 
compatible with the application filer's attestation, the Exchange may 
request additional documentation to support the attestation within the 
procedures specified in 45 CFR 435.952.
    (ii) Verification process for MAGI-based household income. The 
Exchange must verify MAGI-based income, within the meaning of 42 CFR 
435.603(d), for the household described in paragraph (c)(2)(i)(A) of 
this section in accordance with the procedures specified in 42 CFR 
435.948 and 42 CFR 435.952.
    (3) Verification process for advance payments of the premium tax 
credit and cost-sharing reductions.
    (i) Family size.
    (A) The Exchange must require an application filer to attest to the 
individuals that comprise an applicant's family for advance payments of 
the premium tax credit and cost-sharing reductions, within the meaning 
of 26 CFR 1.36B-1(d).
    (B) The Exchange must verify an applicant's family size for advance 
payments of the premium tax credit and cost-sharing reductions by 
accepting an application filer's attestation without further 
verification, unless the Exchange finds that an application filer's 
attestation of family size is not reasonably compatible with other 
information provided by the application filer for the family or in the 
records of the Exchange, in which case the Exchange may utilize data 
obtained through electronic data sources to verify the attestation. If 
such data sources are unavailable or information in such data sources 
is not reasonably compatible with the application filer's attestation, 
the Exchange may request additional documentation to support the 
attestation within the procedures specified in Sec.  155.315(e) of this 
subpart.
    (ii) Basic verification process for annual household income.
    (A) The Exchange must compute annual household income for the 
family described in paragraph (c)(3)(i)(A) of this section based on the 
tax return data described in paragraph (c)(1)(i) of this section, and 
require the application filer to validate this information, by 
attesting whether it represents an accurate projection of the family's 
household income for the benefit year for which coverage is requested.
    (B) To the extent that the data described in paragraph (c)(1)(i) of 
this section is unavailable, or an application filer attests that it 
does not represent an accurate projection of the family's household 
income for the benefit year for which coverage is requested, the 
Exchange must require the application filer to attest to the family's 
projected household income for the benefit year for which coverage is 
requested and accept the application filer's attestation without 
further verification, except as provided in paragraph (c)(3)(ii)(C) of 
this section.
    (C) If the Exchange finds that an application filer's attestation 
to the family's projected household income for the benefit year for 
which coverage is requested is not reasonably compatible with the 
information described in paragraph (c)(3)(ii)(A) of this section, 
including as a result of data under paragraph (c)(1)(i) of this section 
being unavailable, the Exchange must proceed in accordance with 
paragraphs (c)(3)(iii), (c)(3)(iv), and (c)(3)(vi) of this section, as 
applicable.
    (iii) Verification process for increases in household income.
    (A) If an application filer attests that a primary taxpayer'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 to the benefit year for which the applicant(s) in the primary 
taxpayer's family are requesting coverage and have not established 
MAGI-based income through the process specified in paragraph (c)(2)(ii) 
of this section that is within the applicable Medicaid or CHIP MAGI-
based income standard, the Exchange must accept the application filer's 
attestation for the primary taxpayer's family without further 
verification, except as provided in paragraph (c)(3)(iii)(B) of this 
section.
    (B) If the Exchange finds that an application filer's attestation 
of annual household income is not reasonably compatible with other 
information provided by the application filer or available to the 
Exchange in accordance with paragraph (c)(1)(ii) of this section, the 
Exchange may utilize data obtained through electronic data sources to 
verify the attestation. If such data sources are unavailable or 
information in such data sources is not reasonably compatible with the 
application filer's attestation, the Exchange must request additional 
documentation using the procedures specified in Sec.  155.315(e) of 
this subpart.
    (iv) Eligibility for alternate verification process for decreases 
in annual household income and situations in which tax return data is 
unavailable. The Exchange must determine a primary taxpayer's annual 
household income for advance payments of the premium tax credit and 
cost-sharing reductions based on the alternate verification procedures 
described in paragraph (c)(3)(v) of this section, if an application 
filer attests to projected annual household income in accordance with 
paragraph (c)(3)(ii)(B) of this section, the primary taxpayer does not 
meet the criteria specified in paragraph (c)(3)(iii) of this section, 
the applicants in the primary taxpayer's family have not established 
MAGI-based income through the process specified in paragraph (c)(2)(ii) 
of this section that is within the applicable Medicaid or CHIP MAGI-
based income standard, and
    (A) The Secretary of the Treasury does not have tax return data for 
the primary taxpayer that is at least as recent as the calendar year 
two years prior to the calendar year for which advance payments of the 
premium tax credit or cost-sharing reductions would be effective, 
including a situation in which this is as a result of an individual not 
being required to file;
    (B) The application filer attests that the primary taxpayer's 
applicable family size has changed or is reasonably expected to change 
for the benefit year for which the applicants in his or her family are 
requesting coverage;
    (C) The application filer attests that the primary taxpayer's 
annual household income has decreased or is reasonably expected to 
decrease from the data described in paragraph (c)(1)(i)

[[Page 51234]]

of this section by 20 percent or more to the benefit year for which the 
applicants in his or her family are requesting coverage; or
    (D) An applicant in the primary taxpayer's family has filed an 
application for unemployment benefits.
    (v) Alternate verification process for decreases in annual 
household income and situations in which tax return data is 
unavailable. If a primary taxpayer qualifies for an alternate 
verification process based on the requirements specified in paragraph 
(c)(3)(iv) of this section, the Exchange must attempt to verify the 
application filer's attestation of projected annual household income 
for the primary taxpayer by--
    (A) Using annualized data from the MAGI-based income sources 
specified in paragraph (c)(1)(ii) of this section;
    (B) Using other electronic data sources that have been approved by 
HHS, based on evidence showing that such data sources are sufficiently 
accurate and offer less administrative complexity than paper 
verification; or
    (C) If electronic data are unavailable or do not support an 
application filer's attestation, the Exchange must follow the 
procedures specified in Sec.  155.315(e) of this subpart.
    (D) If, following the 90-day period described in paragraph 
(c)(3)(v)(C) of this section, an application filer has not responded to 
a request for additional information from the Exchange and the data 
sources specified in paragraph (c)(1) of this section indicate that an 
applicant in the primary taxpayer's family is eligible for Medicaid or 
CHIP, the Exchange must not provide the applicant with eligibility for 
advance payments of the premium tax credit, cost-sharing reductions, 
Medicaid, CHIP or the Basic Health Program, if a Basic Health Program 
is operating in the service area of the Exchange.
    (E) If, at the conclusion of the period specified in paragraph 
(c)(3)(v)(C) of this section, the Exchange remains unable to verify the 
application filer's attestation, the Exchange must determine an 
applicant's eligibility based on the information described in paragraph 
(c)(3)(ii)(A) of this section, notify the applicant of such 
determination in accordance with the notice requirements specified in 
Sec.  155.310(f) of this subpart, and implement such determination in 
accordance with the effective dates specified in Sec.  155.330(e)(1)-
(2) of this subpart.
    (vi) Primary taxpayers not meeting criteria for use of the 
alternate verification process. For a primary taxpayer who does not 
qualify for the alternate verification process based on the 
requirements specified in paragraph (c)(3)(iv) of this section, the 
Exchange must determine household income for purposes of advance 
payments of the premium tax credit and cost-sharing reductions based on 
the information specified in paragraph (c)(3)(ii)(A) of this section.
    (4) The Exchange must provide education and assistance to an 
application filer regarding the process specified in this paragraph.
    (d) Verification related to enrollment in an eligible employer-
sponsored plan.
    (1) Except as provided in paragraph (d)(2) of this section, the 
Exchange must verify whether an applicant requesting an eligibility 
determination for advance payments of the premium tax credit or cost-
sharing reductions is enrolled in an eligible employer-sponsored plan 
by accepting his or her attestation without further verification.
    (2) If the Exchange finds that an applicant's attestation of 
enrollment in an eligible employer-sponsored plan is not reasonably 
compatible with other information provided by the applicant or in the 
records of the Exchange, the Exchange may utilize data obtained through 
data sources to verify the attestation. If such data sources are 
unavailable or information in such data sources is not reasonably 
compatible with the individual's attestation, the Exchange may request 
additional documentation to support the attestation within the 
procedures specified in paragraph (g) of this subpart.
    (e) Verification related to eligibility for qualifying coverage in 
an eligible employer-sponsored plan.
    (1) The Exchange must require an applicant to attest to his or her 
eligibility for qualifying coverage in an eligible employer-sponsored 
plan for the purposes of eligibility for advance payments of the 
premium tax credit and cost-sharing reductions, and to provide 
information identified in section 1411(b)(4) of the Affordable Care 
Act.
    (2) The Exchange must verify whether an applicant is eligible for 
qualifying coverage in an eligible employer-sponsored plan for the 
purposes of eligibility for advance payments of the premium tax credit 
and cost-sharing reductions.
    (f) Additional verification related to immigration status for 
Medicaid and CHIP.
    (1) For purposes of determining eligibility for Medicaid, the 
Exchange must verify whether an applicant who is not a citizen or a 
national meets the requirements of 42 CFR 435.406 and section 
1903(v)(4) of the Social Security Act, in accordance with the Medicaid 
State Plan.
    (2) For purposes of determining eligibility for CHIP, the Exchange 
must verify whether an applicant who is not a citizen or a national 
meets the requirements of 42 CFR 457.320(d) and section 2107(e)(1)(J) 
of the Social Security Act, in accordance with the State Child Health 
Plan.


Sec.  155.330  Eligibility redetermination during a benefit year.

    (a) General requirement. The Exchange must redetermine the 
eligibility of an enrollee in a QHP through the Exchange during the 
benefit year if it receives and verifies new information reported by an 
enrollee or identifies updated information through the data matching 
described in paragraph (c) of this section.
    (b) Requirement for individuals to report changes. The Exchange 
must--
    (1) Require an enrollee to report changes with respect to the 
eligibility standards specified in Sec.  155.305 of this subpart within 
30 days of such change; and
    (2) Verify any information reported by an enrollee in accordance 
with the processes specified in Sec.  155.315 and Sec.  155.320 of this 
subpart prior to using such information in an eligibility 
redetermination.
    (c) Requirement for Exchange to periodically examine certain data 
sources.
    (1) The Exchange must periodically examine available data sources 
described in Sec.  155.315(b)(1) and Sec.  155.320(b) of this subpart 
to identify the following changes:
    (i) Death; and
    (ii) Eligibility determinations for Medicare, Medicaid, CHIP, or 
the Basic Health Program, if a Basic Health Program is operating in the 
service area of the Exchange.
    (2) Flexibility. The Exchange may make additional efforts to 
identify and act on changes that may affect an enrollee's eligibility 
for enrollment in a QHP through the Exchange if HHS approves an 
Exchange Plan in accordance with Sec.  155.105(d) or a significant 
change to the Exchange Plan in accordance with Sec.  155.105(e) of this 
part to modify the requirements, based on the criteria specified in 
Sec.  155.315(e) of this subpart.
    (d) Redetermination and notification of eligibility. If the 
Exchange verifies updated information reported by an enrollee or 
identifies updated information through the data matching described in 
paragraph (c) of this section, the Exchange must:
    (1) Redetermine the enrollee's eligibility in accordance with the

[[Page 51235]]

standards specified in Sec.  155.305 of this subpart, and
    (2) Notify the enrollee regarding the determination in accordance 
with the requirements specified in Sec.  155.310(f) of this subpart and 
notify the enrollee's employer, as applicable, in accordance with the 
requirements specified in Sec.  155.310(g) of this subpart.
    (e) Effective dates.
    (1) In general, changes resulting from a redetermination under this 
section are effective on the first day of the month following the date 
of the notice described in paragraph (d)(2) of this section.
    (2) Subject to the authorization of HHS, the Exchange may determine 
a reasonable point in a month after which a change captured through a 
redetermination will not be effective until the first day of the month 
after the month specified in paragraph (e)(1) of this section.
    (3) In the case of a redetermination that results in an enrollee 
being ineligible to continue his or her enrollment in a QHP through the 
Exchange, the Exchange must maintain his or her eligibility for 
enrollment in a QHP without advance payments of the premium tax credit 
and cost-sharing reductions, for a full month following the month in 
which the notice described in paragraph (d)(2) of this section is sent.


Sec.  155.335  Annual eligibility redetermination.

    (a) General requirement. The Exchange must redetermine the 
eligibility of an enrollee in a QHP through the Exchange on an annual 
basis.
    (b) Updated income and family size information. In the case of an 
enrollee who requests an eligibility determination for insurance 
affordability programs in accordance with Sec.  155.310(b) of this 
subpart, the Exchange must request updated tax return information and 
data regarding MAGI-based income as described in paragraph (c)(1) of 
Sec.  155.320 of this subpart for use in the enrollee's eligibility 
redetermination.
    (c) Notice to enrollee. The Exchange must provide an enrollee with 
an annual redetermination notice including the following:
    (1) The data obtained under paragraph (b) of this section, if 
applicable; and
    (2) The data used in the enrollee's most recent eligibility 
determination; and
    (3) The enrollee's projected eligibility determination for the 
following year, after considering any updated information described in 
paragraph (c)(1) of this section, including, if applicable, the amount 
of any advance payments of the premium tax credit and level of cost-
sharing reductions.
    (d) Changes reported by enrollees. The Exchange must require an 
enrollee to report any changes with respect to the information listed 
in the notice within 30 days from the date of the notice.
    (e) Verification of reported changes. The Exchange must verify any 
information reported by an enrollee under paragraph (d) of this section 
in accordance with Sec.  155.315 and Sec.  155.320 of this subpart, 
including the relevant provisions in those sections regarding 
inconsistencies, before using such information to determine 
eligibility.
    (f) Response to redetermination notice.
    (1) The Exchange must require an enrollee to sign and return the 
notice described in paragraph (c) of this section.
    (2) To the extent that an enrollee does not sign and return the 
notice described in paragraph (c) of this section within the 30-day 
period specified in paragraph (d) of this section, the Exchange must 
proceed in accordance with the procedures specified in paragraph (h)(1) 
of this section.
    (g) Redetermination and notification of eligibility.
    (1) After the 30-day period specified in paragraph (d) of this 
section has elapsed, the Exchange must--
    (i) Redetermine the enrollee's eligibility in accordance with the 
standards specified in Sec.  155.305 of this subpart using the 
information provided to the individual in the notice specified in 
paragraph (c) of this section, as supplemented with any information 
reported by the enrollee and verified by the Exchange pursuant to 
paragraphs (d) and (e) of this section;
    (ii) Notify the enrollee in accordance with the requirements 
specified in Sec.  155.310(f) of this subpart; and
    (iii) If applicable, notify the enrollee's employer, in accordance 
with the requirements specified in Sec.  155.310(g) of this subpart.
    (2) If an enrollee reports a change with respect to the information 
provided in the notice specified in paragraph (c) of this section that 
the Exchange has not verified as of the end of the 30-day period 
specified in paragraph (d) of this section, the Exchange must 
redetermine the enrollee's eligibility after completing verification.
    (h) Effective dates. The rules specified in Sec.  155.330(e) of 
this part regarding effective dates apply to changes resulting from a 
redetermination under this section.
    (i) Renewal of coverage. If an enrollee remains eligible for 
coverage in a QHP upon annual redetermination, such enrollee will 
remain in the QHP selected the previous year unless such enrollee 
terminates coverage from such plan, including termination of coverage 
in connection with enrollment in a different QHP, in accordance with 45 
CFR Sec.  155.430.


Sec.  155.340  Administration of advance payments of the premium tax 
credit and cost-sharing reductions.

    (a) Requirement to provide information to enable advance payments 
of the premium tax credit and cost-sharing reductions. In the event 
that the Exchange determines that an applicant is eligible for advance 
payments of the premium tax credit or cost-sharing reductions or that 
an enrollee's eligibility has changed, the Exchange must, 
simultaneously and at such time and in such manner as HHS may specify--
    (1) Notify the issuer of the applicable QHP;
    (2) Transmit eligibility and enrollment information to HHS 
necessary to enable HHS to begin, end, or change the individual's 
advance payments of the premium tax credit or cost-sharing reductions;
    (3) Transmit information necessary to enable the issuer of the QHP 
to implement, discontinue the implementation, or modify the level of an 
individual's advance payments of the premium tax credit or cost-sharing 
reductions, as applicable, including:
    (i) The dollar amount of the individual's advance payment; and
    (ii) The individual's cost-sharing reductions eligibility category.
    (b) Requirement to provide information related to employer 
responsibility.
    (1) In the event that the Exchange determines that an individual is 
eligible for advance payments of the premium tax credit or cost-sharing 
reductions based in part on a finding that an individual's employer 
does not provide minimum essential coverage, or provides minimum 
essential coverage that is unaffordable, as specified in 26 CFR 1.36B-
2(c)(3)(v), or does not meet the minimum value requirement specified in 
26 CFR 1.36B-2(c)(3)(vi), the Exchange must transmit the individual's 
name and taxpayer identification number to HHS.
    (2) If an enrollee for whom advance payments of the premium tax 
credit are made or who is receiving cost-sharing reductions notifies 
the Exchange that he

[[Page 51236]]

or she has changed employers, the Exchange must transmit the enrollee's 
name and Social Security number to HHS.
    (3) In the event that an individual for whom advance payments of 
the premium tax credit are made or who is receiving cost-sharing 
reductions disenrolls from a QHP through the Exchange during a benefit 
year, the Exchange must--
    (i) Transmit the individual's name and Social Security number, and 
the effective date of coverage termination, to HHS, which will transmit 
it to the Secretary of the Treasury; and
    (ii) Transmit the individual's name and the effective date of the 
termination of coverage to his or her employer.
    (c) Requirement to provide information related to reconciliation of 
advance payments of the premium tax credit. The Exchange must comply 
with the requirements specified in section 36B(f)(3) of the Code and 26 
CFR 1.36B-5 regarding reporting to the IRS and to taxpayers.


Sec.  155.345  Coordination with Medicaid, CHIP, the Basic Health 
Program, and the Pre-existing Condition Insurance Program.

    (a) Agreements. The Exchange must enter into agreements with 
Medicaid or CHIP agencies as are necessary to fulfill the requirements 
of this subpart.
    (b) Responsibilities related to individuals potentially eligible 
for Medicaid based on other information or through other coverage 
groups.
    (1) The Exchange must conduct basic screening for an applicant 
requesting an eligibility determination for insurance affordability 
programs under Sec.  155.310(b) of this subpart to determine if an 
applicant is potentially eligible for Medicaid based on factors not 
otherwise considered in this subpart, including disability, and must 
transmit to the State Medicaid agency promptly and without undue delay 
the name of such applicant, other identifying information, and all 
other information provided on the application submitted by or on behalf 
of such applicant to, and obtained and verified by, the Exchange.
    (2) If the applicant is otherwise eligible for advance payments of 
the premium tax credit and cost-sharing reductions, the Exchange must 
provide the applicant with such advance payments of the premium tax 
credit or cost-sharing reductions until the other program notifies the 
Exchange that the applicant is eligible for such program.
    (c) Individuals requesting additional screening. The Exchange 
must--
    (1) Provide an opportunity for an applicant to request a full 
determination of eligibility for Medicaid based on eligibility criteria 
that are not described in Sec.  155.305.
    (2) If an applicant requests such a determination, transmit 
promptly and without undue delay the applicant's name, other 
identifying information, and all other information provided on the 
application submitted by or on behalf of such applicant to, and 
obtained and verified by, the Exchange to the State Medicaid agency.
    (d) Determination of eligibility for individuals submitting 
applications directly to an agency administering Medicaid, CHIP, or the 
Basic Health Program. The Exchange, in consultation with the agencies 
administering Medicaid, CHIP, and the Basic Health Program, if a Basic 
Health Program is operating in the service area of the Exchange, must 
establish procedures to ensure that an eligibility determination for 
enrollment in a QHP, advance payments of the premium tax credit and 
cost-sharing reductions is performed when an application is submitted 
directly to an agency administering Medicaid, CHIP, or the Basic Health 
Program, if a Basic Health Program is operating in the service area of 
the Exchange, and the applicant is determined ineligible for such 
programs based on the applicable MAGI. Such procedures must--
    (1) Not require the Exchange to duplicate any eligibility and 
verification findings already made by the agency administering 
Medicaid, CHIP, or the Basic Health Program, if a Basic Health Program 
is operating in the service area of the Exchange, for enrollment in a 
QHP through the Exchange, advance payments of the premium tax credit, 
or cost-sharing reductions; and
    (2) Provide for following the same eligibility determination 
processes for eligibility determinations regardless of the agency that 
initially receives an application.
    (e) Standards for sharing information between the Exchange and the 
agencies administering Medicaid, CHIP, and the Basic Health Program.
    (1) The Exchange must utilize a secure electronic interface to 
exchange data with the agencies administering Medicaid, CHIP, and the 
Basic Health Program, if a Basic Health Program is operating in the 
service area of the Exchange, for the purpose of determining 
eligibility, including verification as to whether an applicant for 
advance payments of the premium tax credit or cost-sharing reductions 
has been determined eligible for Medicaid, CHIP, or the Basic Health 
Program as specified in Sec.  155.320(b)(2) of this subpart and other 
functions required under this subpart.
    (2) Model agreements. The Exchange may utilize any model agreements 
as established by HHS for the purpose of sharing data as described in 
this section.
    (f) Transition from the Pre-existing Condition Insurance Program 
(PCIP). The Exchange must follow procedures established in accordance 
with 45 CFR 152.45 to transition PCIP enrollees to the Exchange to 
ensure that there are no lapses in health coverage.


Sec.  155.350  Special eligibility standards and process for Indians.

    (a) Eligibility for cost-sharing reductions.
    (1) The Exchange must determine an applicant who is an Indian 
eligible for cost-sharing reductions if he or she--
    (i) Meets the requirements specified in Sec.  155.305(a) of this 
subpart; and
    (ii) Has household income for the taxable year that does not exceed 
300 percent of the FPL.
    (2) The Exchange may only provide cost-sharing reductions to an 
individual who is an Indian if he or she is enrolled in a QHP through 
the Exchange.
    (b) Special cost-sharing rule for Indians regardless of income. The 
Exchange must determine an applicant eligible for the special cost-
sharing rule described in section 1402(d)(2) of the Affordable Care Act 
if he or she is an Indian, without requiring the applicant to request 
an eligibility determination for cost-sharing reductions in accordance 
with Sec.  155.310(b) of this subpart in order to qualify for this 
rule.
    (c) Verification related to Indian status. To the extent that an 
applicant attests that he or she is an Indian, the Exchange must verify 
such attestation by--
    (1) Utilizing any relevant documentation verified in accordance 
with Sec.  155.315(e) of this subpart;
    (2) Relying on any electronic data sources that are available to 
the Exchange and which have been approved by HHS for this purpose, 
based on evidence showing that such data sources are sufficiently 
accurate and offer less administrative complexity than paper 
verification; or
    (3) To the extent that approved data sources are unavailable, an 
individual is not represented in available data sources, or data 
sources conflict with an applicant's attestation, the Exchange must 
follow the procedures specified in Sec.  155.315(e) of this subpart and 
verify documentation provided by the applicant in accordance with the 
standards for acceptable documentation provided in section 
1903(x)(3)(B)(v) of the Social Security Act.

[[Page 51237]]

Sec.  155.355  Right to appeal.

    (a) Individual appeals. The Exchange must include the notice of the 
right to appeal and instructions regarding how to file an appeal in any 
determination notice issued to the applicant pursuant to Sec.  
155.310(f), Sec.  155.330(d), or Sec.  155.335(h) of this subpart.
    (b) [Reserved]
    2. Part 157 is added as follows:

PART 157--EMPLOYER INTERACTIONS WITH EXCHANGES AND SHOP 
PARTICIPATION

Subpart A--General Provisions
Sec.
157.10 Basis and scope.
157.20 Definitions.
Subpart B--[Reserved]
Subpart C--Standards for Qualified Employers
157.200 Eligibility of qualified employers to participate in a SHOP.
157.205 Qualified employer participation process in a SHOP.

    Authority: Title I of the Affordable Care Act, Sections 1311, 
1312, 1321, 1411, 1412.

Subpart A--General Provisions


Sec.  157.10  Basis and scope.

    (a) Basis. This part is based on the following sections of title I 
of the Affordable Care Act:
    1311. Affordable choices of health benefits plans.
    1312. Consumer Choice.
    1321. State flexibility in operation and enforcement of Exchanges 
and related requirements.
    1411. Procedures for determining eligibility for Exchange 
participation, advance payments of the premium tax credit and cost-
sharing reductions, and individual responsibility exemptions.
    1412. Advance determination and payment of the premium tax credit 
and cost-sharing reductions.
    (b) Scope. This part establishes the requirements for employers in 
connection with the operation of Exchanges.


Sec.  157.20  Definitions.

    The following definitions apply to this part, unless otherwise 
indicated:
    Qualified employee has the meaning given to the term in Sec.  
155.20.
    Qualified employer has the meaning given to the term in Sec.  
156.20.
    Small employer has the meaning given to the term in Sec.  155.20.

Subpart B--[Reserved]

Subpart C--Standards for Qualified Employers


Sec.  157.200  Eligibility of qualified employers to participate in a 
SHOP.

    (a) General requirement. Only a qualified employer may participate 
in the SHOP in accordance with 45 CFR 155.710.
    (b) Continuing participation for growing small employers. A 
qualified employer may continue to participate in the SHOP if it ceases 
to be a small employer pursuant to 45 CFR 155.710.
    (c) Participation in multiple SHOPs. A qualified employer may 
participate in multiple SHOPs pursuant to 45 CFR 155.710.


Sec.  157.205  Qualified employer participation process in a SHOP.

    (a) General requirements. When joining the SHOP, a qualified 
employer must comply with the requirements, processes, and timelines 
set forth by this part and must remain in compliance for the duration 
of the employer's participation in the SHOP.
    (b) Selecting QHPs. During an election period, a qualified employer 
may make coverage in a QHP available through the SHOP in accordance 
with the processes developed by the SHOP pursuant to 45 CFR 155.705.
    (c) Information dissemination to employees. A qualified employer 
participating in the SHOP must disseminate information to its qualified 
employees about the process to enroll in a QHP through the SHOP.
    (d) Payment. A qualified employer must submit any contribution 
towards the premiums of any qualified employee according to the 
standards and processes described in 45 CFR 155.705.
    (e) Employees hired outside of the initial or annual open 
enrollment period. Qualified employers must provide employees hired 
outside of the initial or annual open enrollment period with a 
specified period to seek coverage in a QHP beginning on the first day 
of employment and information about the enrollment process pursuant to 
45 CFR 155.725.
    (f) New employees and changes in employee eligibility. Qualified 
employers participating in the SHOP must provide the SHOP with 
information about individuals or employees whose eligibility status for 
coverage purchased through the employer in the SHOP has changed, 
including:
    (1) Newly eligible individuals and employees; and
    (2) Loss of qualified employee status.
    (g) Annual employer election period. Qualified employers must 
adhere to the annual employer election period to change the program 
participation for the next plan year described in 45 CFR 155.725(c).
    (h) Employer participation renewal. If a qualified employer does 
not take action during the annual employer election period, and remains 
eligible to continue participating in the SHOP, such qualified employer 
will, for the next plan year, continue to offer the same plan, coverage 
level (as defined by section 1302(d)(1) of the Affordable Care Act), or 
combination of plans at the same contribution level as selected during 
the previous year, if such options remain available.

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

    Dated: August 4, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: August 9, 2011
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2011-20776 Filed 8-12-11; 8:45 am]
BILLING CODE 4120-01-P