[Federal Register Volume 78, Number 14 (Tuesday, January 22, 2013)]
[Proposed Rules]
[Pages 4594-4724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00659]



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Vol. 78

Tuesday,

No. 14

January 22, 2013

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 430, 431, 433, et al.

45 CFR Part 155





Medicaid, Children's Health Insurance Programs, and Exchanges: 
Essential Health Benefits in Alternative Benefit Plans, Eligibility 
Notices, Fair Hearing and Appeal Processes for Medicaid and Exchange 
Eligibility Appeals and Other Provisions Related to Eligibility and 
Enrollment for Exchanges, Medicaid and CHIP, and Medicaid Premiums and 
Cost Sharing; Proposed Rule

  Federal Register / Vol. 78 , No. 14 / Tuesday, January 22, 2013 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 430, 431, 433, 435, 440, 447, and 457

Office of the Secretary

45 CFR Part 155

[CMS-2334-P]
RIN 0938-AR04


Medicaid, Children's Health Insurance Programs, and Exchanges: 
Essential Health Benefits in Alternative Benefit Plans, Eligibility 
Notices, Fair Hearing and Appeal Processes for Medicaid and Exchange 
Eligibility Appeals and Other Provisions Related to Eligibility and 
Enrollment for Exchanges, Medicaid and CHIP, and Medicaid Premiums and 
Cost Sharing

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement provisions of the Patient 
Protection and Affordable Care Act of 2010 and the Health Care and 
Education Reconciliation Act of 2010 (collectively referred to as the 
Affordable Care Act), and the Children's Health Insurance Program 
Reauthorization Act of 2009 (CHIPRA). This proposed rule reflects new 
statutory eligibility provisions; proposes changes to provide states 
more flexibility to coordinate Medicaid and the Children's Health 
Insurance Program (CHIP) eligibility notices, appeals, and other 
related administrative procedures with similar procedures used by other 
health coverage programs authorized under the Affordable Care Act; 
modernizes and streamlines existing rules, eliminates obsolete rules, 
and updates provisions to reflect Medicaid eligibility pathways; 
revises the rules relating to the substitution of coverage to improve 
the coordination of CHIP coverage with other coverage; implements other 
CHIPRA eligibility-related provisions, including eligibility for 
newborns whose mothers were eligible for and receiving Medicaid or CHIP 
coverage at the time of birth; amends certain provisions included in 
the ``State Flexibility for Medicaid Benefit Packages'' final rule 
published on April 30, 2010; and implements specific provisions 
including eligibility appeals, notices, and verification of eligibility 
for qualifying coverage in an eligible employer-sponsored plan for 
Affordable Insurance Exchanges. This rule also proposes to update and 
simplify the complex Medicaid premiums and cost sharing requirements, 
to promote the most effective use of services, and to assist states in 
identifying cost sharing flexibilities.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on February 13, 
2013.

ADDRESSES: In commenting, please refer to file code CMS-2334-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-2334-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2334-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) 786-7195 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.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
    Sarah deLone, (410) 786-0615, or Stephanie Kaminsky, (410) 786-
4653, for provisions related to revisions to eligibility notice and 
fair hearing appeal processes and additional eligibility changes for 
Medicaid and CHIP.
    Melissa Harris, (410)786-3397, for provisions related to essential 
health benefits.
    Leigha Basini, (301) 492-4307, for provisions related to Affordable 
Insurance Exchanges.

SUPPLEMENTARY INFORMATION:

Executive Summary

    This proposed rule would implement provisions of the Patient 
Protection and Affordable Care Act of 2010 and the Health Care and 
Education Reconciliation Act of 2010 (collectively referred to as the 
Affordable Care Act), and the Children's Health Insurance Program 
Reauthorization Act of 2009 (CHIPRA). This rule reflects new statutory 
eligibility provisions, proposes changes to provide states more 
flexibility to coordinate Medicaid and CHIP eligibility notices, 
appeals, and other related administrative procedures with similar 
procedures used by other health coverage programs authorized under the 
Affordable Care Act. This proposed rule also modernizes and streamlines 
existing rules, eliminates obsolete rules, and updates provisions to 
reflect new or revised Medicaid eligibility pathways. This rule also 
implements CHIPRA eligibility-related provisions, including eligibility 
for newborns whose mothers were eligible for and receiving Medicaid or 
CHIP coverage at the time of birth.
    This proposed rule amends the final rule published on April 30, 
2010, titled ``State Flexibility for Medicaid Benefit Packages,'' which 
implemented the provisions of section 1937 of the Social Security Act 
(the Act), and established a state option to provide Medicaid benefits 
using benchmark or benchmark-equivalent coverage. In an

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effort to bring consistency and clarity to part 440, we are removing 
the terms ``benchmark and benchmark-equivalent plan'' where they appear 
together and are replacing these terms with ``Alternative Benefit 
Plan.''
    Beginning in 2014, individuals and small businesses will be able to 
purchase private health insurance through competitive marketplaces 
called Affordable Insurance Exchanges, or ``Exchanges.'' This proposed 
rule would: (1) Set forth standards for adjudicating appeals of 
individual eligibility determinations and exemptions from the 
individual responsibility requirements, as well as determinations of 
employer-sponsored coverage, and determinations of SHOP employer and 
employee eligibility for purposes of implementing section 1411(f) of 
the Affordable Care Act, (2) set forth standards for adjudicating 
appeals of employer and employee eligibility to participate in the 
SHOP, (3) outline criteria related to the verification of enrollment in 
and eligibility for minimum essential coverage through an eligible 
employer-sponsored plan, and (4) further specify or amend standards 
related to other eligibility and enrollment provisions. The intent of 
this rule is to afford states substantial discretion in the design and 
operation of an Exchange, with greater standardization provided where 
directed by the statute or where there are compelling practical, 
efficiency or consumer protection reasons.
    This rule also proposes to update and simplify the complex Medicaid 
premiums and cost sharing requirements to promote the most effective 
use of services and to assist states in identifying cost sharing 
flexibilities. To that end, we propose to update the maximum allowable 
cost sharing levels, in particular expanding upon the flexibilities 
related to drugs and emergency department (ED) usage. We propose new 
options for states to establish higher cost sharing for non-preferred 
drugs, and to impose higher cost sharing for non-emergency use of the 
ED.
    Besides the specific updates to nominal amounts, we propose to 
greatly simplify and streamline the entire premiums and cost sharing 
regulation ``in a manner that is consistent with simplicity of 
administration and the best interests of the recipients,'' in 
accordance with section 1902(a)(19) of the Act. This proposed rule 
would no longer distinguish between the two statutory authorities for 
premiums and cost sharing (sections 1916 and 1916A of the Act) and 
instead would simply lay out the parameters under which premiums and 
cost sharing are permitted.
    Finally, this rulemaking provides notice that we are considering, 
for purposes of the initial open enrollment period for enrollment in a 
Qualified Health Plan through the Exchange, whether various provisions 
of the Medicaid and CHIP regulations should be effective October 1, 
2013, or whether a later effective date is appropriate.

Table of Contents

    To assist readers in referencing sections contained in this 
document, we are providing the following table of contents.

Executive Summary
I. Medicaid Eligibility Expansion Part II
    A. Background
    1. Introduction
    2. Legislative Overview
    3. Overview of the Proposed Rule
    B. Provision of the Proposed Rule
    1. Appeals
    2. Notices
    3. Medicaid Eligibility Changes under the Affordable Care Act
    4. Medicaid Enrollment Changes under the Affordable Care Act 
needed to achieve coordination with the Exchange
    5. Medicaid Eligibility Requirements and Coverage Options 
established by other Federal Statutes
    6. Verification Exceptions for Special Circumstances
    7. Verification Procedures for Individuals Attesting to 
Citizenship or Satisfactory Immigration Status
    8. Elimination or Changes to Unnecessary and Obsolete 
Regulations
    9. Coordinated Medicaid/CHIP Open Enrollment Process
    10. Children's Health Insurance Program Changes
    11. Premium Assistance
    12. Electronic Submission of the Medicaid and CHIP State Plan
    13. Changes to Modified Adjusted Gross Income and MAGI Screen
    14. Single State Agency: Delegation of eligibility determination 
to Exchanges
    15. Medical Support and Payments
    16. Conversion of Federal Minimum Income Standards for Section 
1931
II. Essential Health Benefits in Alternative Benefit Plans
    A. Background
    B. Provision of the Proposed Rule: Part 440--Medicaid Program; 
State Flexibility for Medicaid Benefit Packages
    1. Subpart C--Benchmark Benefit and Benchmark-Equivalent 
Coverage
    2. Other Changes to Simplify, Modernize and Clarify Medicaid 
Benchmark Requirements and Make Technical Corrections to Coverage 
Requirements
III. Eligibility Appeals and Other Provisions Related to Eligibility 
and Enrollment for Exchanges
    A. Background
    1. Legislative Overview
    2. Stakeholder Consultation and Input
    3. Structure of the Proposed Rule
    4. Alignment with Related Rules and Published Information
    B. Provisions of the Proposed Regulations: Part 155--Exchange 
Establishment Standards and Other Related Standards Under the 
Affordable Care Act
    1. Definitions
    2. Approval of a State Exchange
    3. Functions of an Exchange
    4. Consumer Assistance Tools and Programs of an Exchange
    5. Certified Application Counselors
    6. Authorized Representatives
    7. General standards for Exchange notices
    8. Definitions and general standards for eligibility 
determinations
    9. Options for conducting eligibility determinations
    10. Eligibility standards
    11. Eligibility process
    12. Verification process related to eligibility for enrollment 
in a QHP through the Exchange
    13. Verifications related to eligibility for insurance 
affordability programs
    14. Eligibility redetermination during a benefit year
    15. Annual eligibility redetermination
    16. Administration of advance payments of the premium tax credit 
and cost-sharing reductions
    17. Coordination with Medicaid, CHIP, the Basic Health Program, 
and the Pre-existing Condition Insurance Plan
    18. Special eligibility standards and process for Indians
    19. Enrollment of qualified individuals into QHP's
    20. Special enrollment periods
    21. Termination of coverage
    22. Subpart F--Appeals of Eligibility Determinations for 
Exchange Participation and Insurance Affordability Programs
    23. Definitions
    24. General Eligibility Appeals Requirements
    25. Appeals Coordination
    26. Notice of Appeal Procedures
    27. Appeal Requests
    28. Eligibility Pending Appeal
    29. Dismissals
    30. Informal Resolution and Hearing Requirements
    31. Expedited Appeals
    32. Appeal Decisions
    33. Appeal Record
    34. Employer Appeals Process
    35. Functions of a SHOP
    36. SHOP Employer and Employee Eligibility Appeals
IV. Medicaid Premiums and Cost Sharing
    A. Background
    B. Provisions of Proposed Rule
V. Collection of Information Requirements
VI. Response to comments
VII. Summary of Preliminary Regulatory Impact Analysis

Acronyms

    Because of the many organizations and terms to which we refer by 
acronym in this proposed rule, we are listing these acronyms and their 
corresponding terms in alphabetical order below:

[the] Act Social Security Act

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Affordable Care Act The Affordable Care Act of 2010 (which is the 
collective term for the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) and the Health Care and Education Reconciliation 
Act (Pub. L. 111-152))
AFDC Aid to Families with Dependent Children
BBA Balanced Budget Act of 1997
BHP Basic Health Program
CHIP Children's Health Insurance Program
CHIPRA Children's Health Insurance Program Reauthorization Act of 
2009
CMS Centers for Medicare & Medicaid Services
[the] Code Internal Revenue Code of 1986
DHS Department of Homeland Security
DOL U.S. Department of Labor
DRA Deficit Reduction Act of 2005
EITC Earned Income Tax Credit
EPSDT Early and periodic screening, diagnosis, and treatment
FEHBP Federal Employees Health Benefits Program (5 U.S.C 8901, et 
seq.)
FFE Federally-facilitated Exchange
FFP Federal financial participation
FMAP Federal medical assistance percentage
FPL Federal poverty level
HCERA Health Care and Education Reconciliation Act of 2010 (Pub. L. 
111-152, enacted March 30, 2010)
HHS [U.S. Department of] Health and Human Services
IHS Indian Health Service
INA Immigration and Nationality Act
IRA Individual Retirement Account
IRC Internal Revenue Code of 1986
IRS Internal Revenue Service
MAGI Modified adjusted gross income
OMB Office of Management and Budget
OPM U.S. Office of Personnel Management
PHS Act Public Health Service Act
PRA Paperwork Reduction Act of 1985
PRWORA Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996
QHP Qualified Health Plan
SHOP Small Business Health Options Program
SMD State Medicaid Director
SNAP Supplemental Nutrition Assistance Program
SPA State Plan Amendment
SSA Social Security Administration
SSI Supplemental Security Income
SSN Social Security number
TANF Temporary Assistance for Needy Families

I. Medicaid Eligibility Expansion Part II

A. Background

1. Introduction
    The Patient Protection and Affordable Care Act (Pub. L. 111-148, 
enacted on March 23, 2010), was amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted on March 
30, 2010). These laws are collectively referred to as the Affordable 
Care Act. In addition, section 205 of the Medicare & Medicaid Extenders 
Act of 2010 (Pub. L. 111-309, enacted December 15, 2010) (MMEA) and the 
Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. No. 112-
96, enacted February 22, 2012) made additional amendments to the Social 
Security Act (the Act) provisions affected by the Affordable Care Act.
    The Affordable Care Act extends and simplifies Medicaid eligibility 
and on March 23, 2012, we issued a final rule (referred to as the 
``Medicaid eligibility final rule'') addressing certain key Medicaid 
eligibility issues.
    This proposed rule provides states with additional flexibility in 
beneficiary appeals, notices and related procedures, updates CMS 
regulations to fully reflect changes in Medicaid eligibility created 
under the Affordable Care Act and existing legislations, and modernizes 
administrative procedures to further promote coordination across 
multiple health coverage programs, including purchase of coverage 
through the Exchange with advance payments of the premium tax credits 
and cost sharing reductions, as authorized by the Affordable Care Act, 
Medicaid and the Children's Health Insurance Program (CHIP). These 
coverage programs are collectively referred to as ``insurance 
affordability programs.''
2. Legislative Overview
    This proposed rule reflects and implements Medicaid and CHIP 
eligibility and enrollment provisions of the Affordable Care Act 
including:
     Sections 1411 and 1413, which ensure coordination in the 
eligibility, verification, and enrollment systems for Medicaid, CHIP, 
Basic Health Programs, and Exchanges. This includes ensuring 
verification of individuals' citizenship status.
     Section 2001, which provides for expanded Medicaid 
eligibility for adults under age 65.
     Section 2002, which sets out new financial eligibility 
methodologies for Medicaid for certain populations.
     Sections 2004 and 10201, which expand Medicaid coverage 
for individuals under age 26 who were receiving Medicaid when they aged 
out of foster care.
     Section 2101, which sets new financial eligibility 
methodologies for CHIP.
     Sections 2201 and 1413, which simplify and coordinate 
eligibility and enrollment systems across insurance affordability 
programs.
     Section 2202, which permits hospitals to make presumptive 
eligibility determinations for all Medicaid eligible populations.
     Section 2303, which provides a state option for Medicaid 
coverage limited to family planning or family planning related services 
under the state plan.
    This proposed rule also makes changes to the Children's Health 
Insurance Program (CHIP) that reflect and implement certain provisions 
of the Social Security Act, Affordable Care Act and the Children's 
Health Insurance Program Reauthorization Act of 2009 (Pub. L 111-3, 
enacted on February 4, 2009) (CHIPRA) including:
     Sections 111, 113, and 211 of CHIPRA, which require 
automatic eligibility for newborns whose mothers were receiving medical 
assistance at the time of birth.
     Section 2105(c)(10) of the Social Security Act, as well as 
sections 1906 and 1906A of the Social Security Act, which apply a cost-
effectiveness test to premium assistance set forth at Section 10203(b) 
of the Affordable Care Act.
3. Overview of the Proposed Rule
    The proposed amendments to 42 CFR parts 430, 431, 435, and 457 in 
this rule propose the following policies:
     Amendments to part 430 subpart B propose electronic 
submission of state plans and plan amendments.
     Amendments to part 431 subpart A and part 433 subpart D 
propose updated, streamlined, and coordinated eligibility, beneficiary 
notice and appeal functions for Medicaid and CHIP.
     Amendments to part 435 subparts A, B, C and D reflect 
statutory changes to Medicaid eligibility. These amendments also add 
new or revised definitions and delete existing regulations that are 
rendered obsolete.
     Amendments to part 435 subparts E and F reflect 
statutorily-required changes to state procedures to verify citizenship 
or non-citizen status.
     Amendments to part 435 subpart G reflect the statutorily-
required shift to MAGI-based financial eligibility methods for most 
populations, as set forth in the final Medicaid eligibility final rule 
issued on March 23, 2012 at (77 FR 17144).
     Amendment to part 435 subparts J and K and the addition of 
a new subpart M propose standards to promote the establishment by 
states of a seamless and coordinated system to determine eligibility of 
individuals seeking assistance and to enroll them in the appropriate 
insurance affordability program. Subpart M would delineate the 
responsibilities of the state Medicaid agency in the coordinated system 
of eligibility and enrollment established under the Affordable Care 
Act. Comparable amendments would be made to CHIP requirements at part 
457.
    The proposed amendments to 45 CFR part 155 in this rule also 
propose

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requirements necessary to facilitate the creation of the Affordable 
Insurance Exchange eligibility and enrollment system established by the 
Affordable Care Act.

B. Provisions of the Proposed Rule

    The following descriptions are structured to explain the provisions 
being proposed and do not necessarily follow the order of the 
regulation's text.
1. Appeals
(a) Generally (Sec. Sec.  431.10, 431.205, 431.206, 431.221, 431.242, 
431.244, 435.4, 435.907, 435.1200 and 45 CFR 155.302)
    The Medicaid eligibility final rule published on March 23, 2012 at 
(77 FR 17144) (``Medicaid eligibility final rule''), along with the 
Exchange eligibility final rule published on March 27, 2012 (77 FR 
18310), established a coordinated system of eligibility and enrollment 
in a QHP through the Exchange and for all insurance affordability 
programs, consistent with the Affordable Care Act. In this proposed 
rule, we propose modifications to Medicaid procedures, similar to those 
finalized in the Medicaid eligibility final rule, to promote 
coordination of notices and appeals of eligibility determinations. 
Consistent with sections 1413 and 2201 of the Affordable Care Act, the 
proposed revisions aim to coordinate Medicaid fair hearings under 
section 1902(a)(3) of the Act with appeals of eligibility 
determinations for enrollment in a QHP and for advance payment of the 
premium tax credit and cost-sharing reductions under section 1411(f) of 
the Affordable Care Act. Under the authority of section 1943(b)(3) of 
the Act, we propose to provide states with options for coordinating 
appeals to align with the options they have for eligibility 
determinations.
    To promote coordination of appeals when there are appeals of both 
the level of advance payment of the premium tax credit or cost-sharing 
reductions granted for enrollment in a QHP through the Exchange and a 
denial of Medicaid, we propose at Sec.  431.10(c)(1)(ii) to permit 
Medicaid agencies to delegate authority to conduct fair hearings of 
eligibility denials based on the applicable modified adjusted gross 
income (MAGI) standard to an Exchange or Exchange appeals entity 
(hereinafter, when we refer to a delegation of authority to conduct 
Medicaid fair hearings to an Exchange, we also intend this reference to 
include delegation to an Exchange appeals entity), provided that 
individuals are given the option to have the fair hearing on the 
Medicaid denial conducted instead by the Medicaid agency. Proposed 
Sec.  431.206(d) directs that states delegating authority to conduct 
fair hearings to an Exchange must inform individuals of their right to 
opt instead for a fair hearing before the Medicaid agency and the 
method by which the individual may do so. Individuals would be informed 
of the option to opt into having the appeal heard by the Medicaid 
agency at the time the appeal is filed, prior to either entity 
conducting a hearing, and the notice provided would need to be 
sufficient to enable an informed choice.
    The beneficiary option is required by statute, but we expect that 
most individuals will not opt out of having a consolidated appeal of 
both Medicaid and Exchange-related issues before the Exchange appeal 
entity, to choose instead to have two separate hearings (one before the 
Exchange appeals entity and one before the Medicaid agency). If the 
Exchange appeals entity conducts the hearing on the Medicaid denial, 
that hearing decision would be final under the proposed rule, subject 
to the state's option, proposed at Sec.  431.10(c)(3)(iii) and 
discussed further below, to review conclusions of law made by the 
hearing officer.
    An Exchange appeals entity, defined at proposed Sec.  431.10(a)(2), 
would include a State-based Exchange appeals entity, as well as the HHS 
appeals entity, responsible for adjudicating appeals of determinations 
of eligibility to enroll in a QHP and for advance payment of the 
premium tax credit and cost-sharing reductions under section 1411(f) of 
the Affordable Care Act. Per proposed Sec.  431.10(c)(2), delegation is 
permitted only to an Exchange that is a governmental agency that 
maintains merit protections for its employees. Delegation to a 
governmental agency is discussed in more detail at section I.B.12 of 
this proposed regulation, related to delegation of authority to conduct 
eligibility determinations. State Medicaid agencies may not delegate 
authority to conduct fair hearings to other state agencies, such as a 
sister human services agency or independent state appeals agency, under 
Sec.  431.10(c)(1)(ii). States may, however, request a waiver under the 
Intergovernmental Cooperation Act of 1968, as codified at 31 U.S.C. 
6504, as some states have done in the past. We note that these waivers, 
which may be requested by submitting a State Plan Amendment (SPA), are 
subject to the state establishing clear oversight over the agency 
conducting the fair hearings, similar to the standards set forth in 
Sec.  431.10(c) and (d).
    Medicaid agencies may delegate authority to conduct fair hearings 
to a State-Based Exchange that is also a state agency either under the 
proposed regulations or by requesting a waiver under the 
Intergovernmental Cooperation Act of 1968. The primary difference would 
be that, under the waiver approach, the state would not be required to 
provide individuals with the option to have the Medicaid agency conduct 
their fair hearing. We seek comments on whether Medicaid agencies 
should have authority under the regulations to delegate fair hearing 
authority to any state agency, subject to the same limitations as those 
proposed for delegations to a state-based Exchange.
    For states choosing to delegate Medicaid fair hearing authority to 
the Exchange, we propose at Sec.  431.10(c)(3)(iii) to provide states 
with an additional option under which the Medicaid agency would review 
decisions made by the Exchange with respect to Medicaid-related 
conclusions of law, including interpretations of state or federal 
policies. This option would not extend to reviewing factual 
determinations made by the Exchange appeals entity's hearing officer. 
Any such review by the Medicaid agency would need to be accomplished in 
time for a final decision to be made in accordance with Sec.  431.244 
of this part.
    Under proposed Sec.  431.10(c)(1)(ii), the agency must specify in 
the state plan whether it is delegating authority to conduct fair 
hearings to the Exchange and the scope of the delegated authority (for 
example, if delegation is limited to fair hearings for individuals 
determined ineligible for Medicaid by the Exchange or whether the 
delegation includes individuals determined ineligible by the Medicaid 
agency). We note that an Exchange must agree to any delegation of 
authority and we do not expect that either the federally-facilitated 
Exchange (FFE) or the HHS appeals entity will accept delegated 
authority to adjudicate appeals of any Medicaid eligibility 
determinations which were not made by the FFE due to resource 
constraints.
    We propose at Sec.  431.10(c)(3) that any delegation of fair 
hearing authority to the Exchange would be subject to safeguards to 
protect the integrity of the appeals process, such that beneficiaries 
receive the same due process rights and substantive review of their 
case as is provided in hearings conducted by the Medicaid agency. The 
Medicaid agency also would exercise appropriate oversight over the 
delegated hearing process, and take corrective action if necessary. We 
propose at Sec.  431.10(d) that a delegation of fair hearing

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authority would be effectuated through a written agreement specifying 
the respective roles and responsibilities of the Medicaid agency and 
Exchange to ensure compliance with the fair hearing requirements in 
subpart E, quality control and oversight by the Medicaid agency, 
including any reporting requirements to support the Medicaid agency's 
oversight, as well as assurances that the Exchange will comply with the 
terms of the delegation required under the proposed regulation.
    In support of the proposed policy, we also propose to revise Sec.  
431.10(a) to add definitions of ``Medicaid agency,'' ``appeals 
decision,'' ``Exchange'' and ``Exchange appeals entity'' at Sec.  
431.10(a)(2), and to make conforming changes to existing regulations at 
Sec.  431.205(b)(1) to reflect the possibility of delegated appeals 
authority to an Exchange. We propose to delete the requirements 
currently at Sec.  431.10(e)(2) and Sec.  431.10(e)(3), as these 
provisions are not consistent with the option to delegate appeals. 
However, we are retaining the current requirement at Sec.  
431.10(e)(1), redesignated at proposed Sec.  431.10(e), that only the 
single state agency may supervise the plan and/or issue policies, rules 
and regulations on program matters.
    We note that we also have streamlined and reorganized the text of 
the paragraphs concerning the procedures and safeguards required to 
permit delegation of eligibility determinations at Sec.  431.10 in this 
proposed rule. These revisions, promulgated in the Medicaid eligibility 
final rule to strengthen the authority and oversight of the Medicaid 
agency, are not intended to substantively change the policy adopted in 
that final rule.
    In order to maximize coordination of appeals involving different 
insurance affordability programs and minimize burden on consumers and 
states, regardless of whether the Medicaid agency has retained the 
authority to conduct Medicaid appeals or delegated such authority to an 
Exchange, we propose revisions to existing regulations at Sec.  431.221 
(relating to requests for a hearing), Sec.  431.244 (relating to 
hearing decisions) as well as to Sec.  435.4 (modifying the definition 
of ``electronic account'') and Sec.  435.1200 (relating to the Medicaid 
agencies' responsibility to ensure a seamless and coordinated system of 
eligibility and enrollment between all insurance affordability 
programs).
    Specifically, we propose to add new paragraph (e) to Sec.  431.221 
to provide that the Medicaid agency treat an appeal of a determination 
of eligibility for enrollment in a QHP in the Exchange and for advance 
payment of the premium tax credit or cost-sharing reductions, as a 
request for a fair hearing of the denial of Medicaid. This revision is 
intended to avoid the need for an individual to request multiple 
appeals. For example, an individual who is denied Medicaid and 
determined eligible for enrollment in a QHP with a certain level of 
advance payment of the premium tax credit and cost-sharing reductions 
may believe she should receive more assistance, but may not know in 
which program she belongs. So that individuals in this situation do not 
have to submit two appeals or hearing requests--one to the Exchange 
appeals entity and one to the Medicaid agency--we propose in Sec.  
431.221(e) that if such individual appeals the advance payment of the 
premium tax credit or cost-sharing reductions level, this appeal will 
automatically be treated as an appeal of the Medicaid denial, without 
the individual having to file a separate fair hearing request with the 
Medicaid agency. We are considering whether a later effective date of 
this provision, such as January 1, 2015, is appropriate to provide 
states with sufficient time to operationalize the proposed policy.
    When the Medicaid agency has delegated the authority to conduct 
fair hearings to the Exchange and the individual does not opt to have 
the Medicaid hearing conducted by the Medicaid agency, this appeal of 
the Medicaid denial will be adjudicated by the Exchange appeal entity. 
However, where the Exchange appeal entity is not adjudicating the 
Medicaid appeal either because the individual opts to have a hearing at 
the Medicaid agency or the state has not delegated to the Exchange the 
authority to conduct hearings, we propose at Sec.  431.244(f)(2) that a 
decision of the Medicaid fair hearing may be issued within 45 days from 
the date the Exchange appeals entity issues its decision relating to 
eligibility to enroll in a QHP and for advance payment of the premium 
tax credit and cost-sharing reductions.
    In making this proposal, we are attempting to balance the interest 
of the individual in receiving a timely Medicaid hearing decision with 
the recognition that, in many cases, Medicaid fair hearings triggered 
automatically by appeals related to advance payment of the premium tax 
credit and cost-sharing reductions will involve individuals with income 
significantly over the applicable Medicaid income standard, who are 
unlikely to be found eligible for Medicaid as a result of the appeal. 
In states that have not delegated authority to the Exchange to conduct 
fair hearings, or for individuals who opt to have a fair hearing before 
the Medicaid agency, waiting to conduct the Medicaid fair hearing until 
the Exchange appeals entity has concluded its hearing may reduce burden 
on all parties in these cases. Doing so will give the Medicaid agency 
the benefit of the factual record developed by the Exchange appeals 
entity, avoiding the potential for duplicative, overlapping requests 
for additional information from the individual. In addition, permitting 
the appeals to be sequenced in this way will enable individuals 
satisfied with the adjudication their Exchange appeal, as well as those 
with income significantly above the Medicaid income standard, to 
withdraw their Medicaid fair hearing request. This is similar to how an 
individual may withdraw their application for Medicaid when accepting 
an advance payment of the premium tax credit under 45 CFR 155.302(b)(4) 
during an initial eligibility determination. We envision that the 
withdrawal of the appeal would be permitted in all modalities listed in 
Sec.  435.907(a). Withdrawal of a Medicaid fair hearing request could 
be effectuated through a simple process, for example by checking a box 
on information provided with the Exchange appeals decision or in 
connection with the steps the individual needs to take to accept 
advance payment of the premium tax credit and effectuate enrollment in 
a QHP. If the opportunity for withdrawal of the Medicaid fair hearing 
is not provided electronically initially due to operational 
constraints, it could be provided by telephone, through paper 
notification, or other commonly available electronic means, such as 
email.
    We recognize that there will be situations in which consumers' 
interests would be better served by the Medicaid agency initiating the 
Medicaid fair hearing process simultaneously with the Exchange appeal--
such as in the case of an individual determined eligible for advance 
payment of the premium tax credit and cost-sharing reductions at an 
income level relatively close to the applicable Medicaid income 
standard--and, while this would be permitted, it would not be required, 
under the proposed rule. Recognizing the different interests of states 
and consumers in different situations, we considered a number of 
approaches to striking the optimal balance, including allowing 30 or 60 
days, instead of the proposed 45 days, from the date the Exchange 
appeals entity makes its decision for the Medicaid agency to render its 
fair hearing decision; extending the 90 day

[[Page 4599]]

timeframe generally permitted for fair hearing decisions to 120 days 
from the date the fair hearing was requested; allowing for a decision 
45 days from the date of the Exchange appeals decision or 120 days from 
the date the individual requested a fair hearing, whichever is earlier; 
and not modifying the 90-day timeframe at all. We solicit comments on 
the different approaches.
    Finally, we anticipate that the HHS appeals entity will have an 
informal resolution process that will serve as a first level of review 
prior to the Exchange appeals entity engaging in a formal hearing 
process, and State-based Exchange appeals entities will have the option 
to adopt such a process, as well. See 45 CFR 155.535, discussed in 
section III.A. of the preamble of this proposed rule. During this 
process, a review of the initial eligibility determination made by the 
Exchange will take place, and the individual will have the opportunity 
to submit additional evidence related to his or her appeal. States that 
do not delegate authority to conduct Medicaid fair hearings to the 
Exchange, will be able to utilize the informal resolution process at 
the Exchange, provided that if an individual has requested a fair 
hearing, including a fair hearing triggered automatically to the 
Medicaid agency as a result of an appeal related to advance payment of 
the premium tax credit and cost-sharing reductions, the fair hearing 
before the agency also proceeds automatically if the informal process 
does not result in an approval of Medicaid eligibility. An informal 
resolution process at the Exchange could resolve a number of 
individual's appeals without conducting a fair hearing at the Medicaid 
agency, even if a state has not delegated authority to have fair 
hearings conducted at an Exchange. Use of the informal resolution 
process, which would be specified in the agreement between the Medicaid 
agency and the Exchange consummated in accordance with Sec.  
435.1200(b)(3), would not affect the timeliness requirements for a 
final hearing decision in Sec.  431.244.
    We propose to revise the definition of ``electronic account'' in 
Sec.  435.4 of the Medicaid eligibility final rule to include 
information collected or generated as part of a Medicaid fair hearing 
process or Exchange appeals process, so that information generated or 
collected during an appeal and any appeals decisions will be 
transferred between programs as part of the individual's electronic 
account. To align with that new definition, we modify Sec.  
431.242(a)(1)(i) by adding that individuals have access to an 
electronic account, as they currently have access to a ``case file.''
    In situations in which the Medicaid agency has delegated to the 
Exchange authority to make eligibility determinations and to conduct 
Medicaid fair hearings, we propose revisions at Sec.  435.1200(c) to 
clarify that the Medicaid agency must receive and accept a decision of 
the Exchange appeals entity finding an individual eligible for Medicaid 
just as it accepts determination of Medicaid eligibility made by the 
Exchange. Moreover, as provided in the proposed revisions to Sec.  
435.1200(c), if the Exchange appeals entity to which Medicaid fair 
hearing authority has been delegated has adjudicated both an appeal of 
advance payment of the premium tax credit and cost-sharing reductions 
as well as a Medicaid denial, a combined appeals decision will be 
required.
    We also propose modifications to Sec.  435.1200(d) originally added 
by the Medicaid eligibility final rule to streamline and coordinate 
processes when the Exchange does not determine but conducts an 
assessment of, potential Medicaid eligibility. Under 45 CFR 
155.302(b)(4)(i)(A), when the Exchange conducts an assessment, and 
finds an individual potentially ineligible for Medicaid and eligible 
for advance payment of the premium tax credit, the Exchange will 
provide the individual with an opportunity to withdraw the Medicaid 
application. To ensure coordination across the entire eligibility, 
enrollment and appeals process, we propose to modify Sec.  435.907 by 
adding a new paragraph (h) to automatically reinstate the Medicaid 
application if the individual subsequently files an appeal related to 
the determination of their eligibility for enrollment in a QHP or for 
advance payment of the premium tax credit or cost-sharing reductions, 
and the Exchange appeals entity assesses the individual potentially 
eligible for Medicaid. Reinstatement of the application for Medicaid 
would be effective as of the date the application was initially 
received by the Exchange. Once assessed as potentially Medicaid 
eligible by the Exchange appeals entity, the individual's electronic 
account would be transferred to the Medicaid agency per Sec.  
435.1200(d) and the Medicaid agency would make a final determination. 
If the agency denies Medicaid, the individual would have the right to 
request a Medicaid fair hearing at that time. We note that this 
scenario would only arise in states that have not delegated to the 
Exchange the ability to conduct eligibility determinations under Sec.  
431.10(c)(1)(i). (Revisions to 45 CFR 155.302(b)(4)(A) related to 
reinstatement of a withdrawn application are also proposed in this 
rulemaking and are discussed in section III.A. of the preamble.) We 
also note that, under the proposed Exchange regulation at 45 CFR 
155.510(b), discussed in section III.A of the preamble, the assessment 
of Medicaid eligibility conducted by an Exchange appeals entity will be 
as comprehensive as that performed by the Exchange when making the 
underlying assessment of Medicaid eligibility under Sec.  155.302(b).
    Under the proposed revisions to Sec.  435.1200(d)(2), we clarify 
that when a Medicaid agency is determining the eligibility of an 
individual who has been assessed as potentially eligible for Medicaid 
by an Exchange appeals entity, the Medicaid agency may not request 
information or documentation from the individual already provided in 
the electronic account, or to the applicable insurance affordability 
program or appeals entity; similarly, as clarified in Sec.  
435.1200(d)(4), the agency must accept any finding relating to a 
criterion of eligibility made by another insurance affordability 
program's appeals entity if such finding was made in accordance with 
the same policies and procedures as those applied by or approved by the 
Medicaid agency. These procedures parallel those adopted in the 
Medicaid eligibility final rule with respect to eligibility 
determinations.
    Similar to the revisions proposed at Sec.  435.1200(d), we also 
propose revisions to Sec.  435.1200(e)(1) to provide that when an 
individual has been determined ineligible for Medicaid pursuant to a 
fair hearing conducted by the Medicaid agency, the agency must assess 
the individual for potential eligibility for other insurance 
affordability programs, just as it must do under Sec.  435.1200(e), as 
originally set forth in the Medicaid eligibility final rule for 
individuals determined ineligible for Medicaid by the agency at initial 
application or renewal.
    Finally, we propose to add a new paragraph (g) to Sec.  435.1200, 
to ensure coordination between appeals entities. Proposed paragraph 
(g)(1), which would apply regardless of whether the Medicaid agency 
delegates authority to conduct any fair hearings to the Exchange, 
directs the Medicaid agency to establish a secure electronic interface 
through which:
     The Exchange appeals entity can notify the Medicaid agency 
that an appeal has been filed related to eligibility to enroll in a QHP 
and for advance payment of the premium tax credit and cost-sharing 
reductions when

[[Page 4600]]

such appeal triggers an automatic Medicaid fair hearing request; and
     The individual's electronic account, including information 
provided by the individual to the Medicaid agency during the fair 
hearing process or the Exchange appeals entity can be transferred 
between programs or appeals entity.
    Under proposed Sec.  435.1200(g)(1), the secure electronic 
interface established between the Medicaid agency and Exchange may be 
used for these purposes, or a separate secure interface directly 
between the Medicaid agency and Exchange appeals entity may be 
established; therefore this provision does not propose any new 
requirements on Medicaid agencies. When the Exchange appeals entity 
conducts a Medicaid fair hearing on an individual's Medicaid denial, no 
notification or transfer of information through such interface would be 
needed at the point the individual files the appeal.
    Under proposed Sec.  435.1200(g)(2), the Medicaid agency must 
ensure that, as part of a Medicaid fair hearing conducted under part 
431 subpart E, the Medicaid agency does not request information or 
documentation from the individual already included in the individual's 
electronic account or provided to the Exchange or Exchange appeals 
entity. We propose in Sec.  435.1200(g)(3) that the Medicaid agency 
transmit its Medicaid fair hearing decision to the Exchange in two 
situations: (1) When an individual had been initially determined 
ineligible for Medicaid by the Exchange, in accordance with a 
delegation of authority under Sec.  431.10(c)(i); and (2) when an 
individual who was initially determined to be ineligible for Medicaid 
by the Medicaid agency had his or her account transferred to the 
Exchange under Sec.  435.1200(e) for evaluation of eligibility and 
financial assistance through the Exchange and the individual had a fair 
hearing conducted by the Medicaid agency. Because such individuals may 
have enrolled in a QHP through the Exchange and be receiving advance 
payment of the premium tax credit and/or cost-sharing reductions 
pending the outcome of the Medicaid fair hearing, the Exchange will 
need to know the outcome of the Medicaid fair hearing so that it will 
know whether to terminate or continue advance payment of the premium 
tax credit and cost-sharing reductions.
    We also make conforming amendments to Sec.  435.1200(b) related to 
the coordination of appeals between the Medicaid agency and the 
Exchange and Exchange appeals entity. We propose to modify Sec.  
435.1200(b)(1) to incorporate new paragraph (g) in the delineation of 
general requirements that the Medicaid agency must meet to effectuate a 
coordinated eligibility system and to revise Sec.  435.1200(b)(3)(i) to 
clarify that the goal of minimizing burden on consumers through 
coordination of insurance affordability programs also relates to 
coordination of appeals processes. Proposed revisions to Sec.  
435.1200(b)(3)(ii) provide that the agreement entered into between the 
Medicaid agency and the Exchange must ensure compliance with new 
paragraph (g).
    Finally, it is important to note that under the proposed Exchange 
regulations at 45 CFR 155.302(b)(5), if the decision made by the 
Exchange appeals entity conflicts with a decision made by the Medicaid 
agency regarding an individual's Medicaid eligibility, the decision of 
the Medicaid agency takes precedence and is binding on the Exchange, 
just as a determination of eligibility or ineligibility made by the 
Medicaid agency takes precedence over an assessment made by the 
Exchange.
(b) Related Changes to the Medicaid Appeals Process (Sec. Sec.  
431.200, 431.201, 431.205, 431.206, 431.211, 431.213, 431.220, 431.221, 
431.224, 431.230, 431.231, 431.232, 431.240, 431.241, 431.242, and 
431.244)
    We propose the following modifications to our current fair hearing 
regulations at Sec.  431.200, et seq., to align with the changes 
described above, to modernize our regulations, and to clarify certain 
provisions consistent with the Medicaid eligibility final rule. We 
propose to:
     Revise Sec.  431.200 to list sections 1943(b)(3) of the 
Act and 1413 of the Affordable Care Act as statutory authority for 
establishing a system and procedures to coordinate eligibility, 
including eligibility appeals that result in a final decision about an 
individual's eligibility.
     Add a definition for ``local evidentiary hearing'' to 
Sec.  431.201 to clarify terminology in our regulations.
     Modify Sec.  431.220(a)(1) to clarify that a hearing is 
required when an applicant requests it because the Medicaid agency has 
denied the individual's eligibility, level of benefits, services, or 
claim or if the Medicaid agency has failed to act with reasonable 
promptness, as required by section 1902(a)(3) of the Act. We specify 
that a determination of eligibility would include, if applicable, a 
determination of a spend down liability or a determination of income 
used to impose any premiums, enrollment fees, or cost sharing under 
part 447 of this subchapter. We intend these modifications as 
clarifications and do not believe they reflect a change in policy. We 
modify the definition of action at Sec.  431.201, when information be 
provided at Sec.  431.206, and the issues to be considered at a hearing 
at Sec.  431.241(a) and (b) to align with the modification of Sec.  
431.220 and do not believe that these changes reflect a change in 
policy.
     Modify Sec.  431.221 to allow an individual to request a 
hearing consistent with the ways in which an application may be filed: 
(1) By telephone; (2) by mail; (3) in person; (4) through other 
commonly available electronic means; and (5) at state option, via the 
Internet Web site at Sec.  435.1200(f). We expect other commonly 
available electronic means to include requesting a fair hearing by 
email, and could include facsimile or other electronic systems commonly 
available. In contrast to the final Medicaid eligibility rule policy 
related to filing applications and renewal forms at Sec. Sec.  435.907 
and 435.916, we have proposed using the Internet Web site at Sec.  
435.1200(f) as a state option in light of the operations implications 
of requiring this method for requesting a hearing. We are considering 
instead making this option a requirement at a date sometime after 
January 2014 to allow time for implementation and we solicit comments 
on this proposal.
     Add Sec.  431.224, ``Expedited Appeals'' to align our fair 
hearing process at Sec.  431.200, et seq, with that already established 
for appeals in managed care at Sec.  438.410, to permit an individual 
who has an urgent health need to have their appeal addressed under 
expedited timeframes. We do not anticipate that this will be difficult 
to administer or significantly add to state costs as states can use 
existing mechanisms such as notices they are already issuing to 
individuals to implement this provision.
     Modify Sec.  431.231 to align the date an individual is 
considered to receive notice under this section with that proposed for 
the notice of reasonable opportunity period in proposed Sec.  435.956, 
discussed in section I.B.7 of the preamble, to promote consistency and 
ease of administration. We propose that the date on which the notice is 
received is considered to be 5 days after the date on the notice, 
unless the individual shows that he or she did not receive the notice 
within the 5-day period. Five days from the date of notice is the 
standard period used by Social Security Administration for the 
Supplemental Security Income (SSI) (Title XVI) and Old Age and 
Disability

[[Page 4601]]

(Title II) programs to account for mailing a notice and receipt by the 
individual (see 20 CFR 416.1401, 20 CFR 404.901, respectively). This is 
also the standard used by the Exchange in 45 CFR 155.315(c)(3) 
regarding notices sent to resolve inconsistencies during the 
verification process for citizenship, status as a national, and lawful 
presence.
     Modify Sec.  431.232 to clarify that the agency will 
inform an applicant or beneficiary that he or she has 10 days from the 
notice of an adverse decision of a local evidentiary hearing to appeal 
that decision. We also adopt in proposed Sec.  431.232 the language 
discussed above related to the date an individual is considered to 
receive notice.
     Modify Sec.  431.240 to specify that a hearing officer 
must have access to the agency's information, such as state policies 
and regulations necessary to issue a proper hearing decision, 
consistent with our proposed regulation to permit delegation of 
authority to the Exchange to conduct fair hearings at Sec.  431.10(c) 
and (e).
     Modify Sec.  431.242 to align our regulations related to 
an individual's ability to review an individual case file, to include 
an individual's ability to review his or her electronic account, as 
defined at Sec.  435.4.
     Modify existing regulations at Sec.  431.244(f)(1) to 
clarify that the 90-day timeframe to issue a decision after an 
individual files an appeal applies broadly to appeals decisions, not 
only to managed care appeals decisions. This text was inadvertently 
deleted in a previous rulemaking. This codifies this long-standing 
policy and does not reflect a change in policy.
     Revise Sec.  431.244(f)(2) to modify the appeals decision 
timeframe to account for the expedited appeals process being proposed 
at Sec.  431.224, aligning with the existing expedited decision process 
for managed care appeals decisions at Sec.  431.244(f)(2) and (f)(3).
(c) Applicability to CHIP (Sec. Sec.  457.10, 457.340, 457.348, 
457.350, 457.1180, 457.351)
    Revisions to the regulations for CHIP are proposed to achieve 
similar coordination of appeals among insurance affordability programs 
and to minimize burden on consumers. Regulations governing the CHIP 
appeals, or ``review'' process, are set forth at subpart K of part 457 
of the current regulations. Under Sec.  457.1120, states currently have 
broad flexibility to delegate the CHIP review process, and no revision 
to permit delegation of review authority to the Exchange or Exchange 
appeals entity is needed. To effectuate the same coordination of CHIP 
appeals with other insurance affordability programs, as is proposed 
with respect to Medicaid fair hearings, a new Sec.  457.351 
(Coordination involving appeals entities for different insurance 
affordability programs) is proposed. Conforming changes to existing 
CHIP regulations are also proposed.
     Under Sec.  457.10, we propose to revise the definition of 
electronic account to include any information collected or generated as 
part of a review, and to add the definition of exchange appeals entity, 
similar to the revision to the definition in the Medicaid regulations 
at Sec.  435.4.
     Section 457.340 (Application for and enrollment in CHIP) 
is revised to include provision of notice of an individual's right to 
review, consistent with Sec.  457.1180 and to apply Sec.  435.907(h), 
proposed for addition to the Medicaid regulation in this rulemaking 
(Reinstatement of withdrawn applications) to CHIP.
     Section 457.348, related to the provision of CHIP for 
individuals found eligible by other insurance affordability programs, 
is revised to include individuals found eligible as a result of a 
decision made by the Exchange appeals entity authorized by the state to 
adjudicate reviews of CHIP eligibility determinations, similar to the 
revisions proposed for the Medicaid regulations at Sec.  435.1200(c) 
and to apply the provisions for transfer of information via secure 
electronic interface, similar to the revisions proposed for Medicaid 
regulations at Sec.  435.1200 (d).
     Proposed revisions to Sec.  457.350 apply the rules for 
eligibility screening and enrollment in other insurance affordability 
programs to individuals determined not eligible for CHIP pursuant to a 
review conducted in accordance with subpart K of this part, similar to 
the revisions proposed for the Medicaid regulations at Sec.  
435.1200(e).
     Section 457.1180 is revised to propose that states treat 
an appeal to the Exchange appeals entity of a determination of 
eligibility for advanced payments of the premium tax credit or cost-
sharing reductions as a request for a review of a denial of CHIP 
eligibility, if the individual was denied eligibility for CHIP by the 
state or other entity authorized to make such determination, similar to 
the revisions proposed for the Medicaid regulations at Sec.  
431.221(e).
2. Notices
    An effective notification process is important to a high quality 
consumer experience and a coordinated eligibility and enrollment 
system, as provided for under section 1413 of the Affordable Care Act 
and section 1943 of the Act. Without revisions to current regulations, 
many individuals could receive multiple, uncoordinated notices from the 
different programs. Someone applying through the Exchange who is 
assessed as potentially eligible for Medicaid, for example, could 
receive a notice from both Medicaid (approving Medicaid) and the 
Exchange (denying advance payment of the premium tax credit and cost-
sharing reductions). Under current rules, if the Medicaid agency 
disapproves rather than approves eligibility for an individual assessed 
by the Exchange as potentially Medicaid eligible, the individual could 
receive 3 notices (from the Exchange denying advance payment of the 
premium tax credit and cost sharing reductions, from the Medicaid 
agency denying Medicaid, and subsequently from the Exchange reversing 
its earlier denial of advance payment of the premium tax credit and 
cost sharing reductions).
    To avoid confusion for consumers and duplicative administrative 
activity we propose that, to the maximum extent feasible, state 
Medicaid and CHIP agencies and the Exchange produce a single combined 
notice after all MAGI-based eligibility determinations have been made. 
We are also proposing to add basic content and accessibility standards 
for all eligibility notices, and to ensure that electronic eligibility 
notices are available as an option for applicants and beneficiaries. To 
ensure that the federal rules for all programs are aligned, we are 
proposing similar regulations for the Exchange. See Sec.  155.230 and 
Sec.  155.345, discussed in section III of the preamble. However, as 
described below, given the time needed to allow for systems builds, the 
requirement to provide a combined eligibility notice will not be 
effective until January 1, 2015.
(a) Content and Accessibility Standards (Sec.  435.917 and Sec.  
435.918)
    We are proposing to redesignate and revise Sec.  435.913 at 
proposed Sec.  435.917 to clarify the state agency's responsibilities 
to communicate specific content in a clear and timely manner to 
applicants and beneficiaries when issuing either a notice of approved 
eligibility or a notice of denial or other adverse action. We also 
propose to delete Sec.  435.919 and to move the provisions now 
contained therein to proposed Sec.  435.917.
    Per proposed Sec.  435.917(a), eligibility notices must be written 
in plain language and be accessible to individuals who are limited 
English

[[Page 4602]]

proficient and individuals with disabilities and comply with 
regulations relating to notices in part 431 subpart E and, if provided 
in electronic format, with Sec.  435.918, newly proposed in this 
rulemaking. Notices of an approval of Medicaid eligibility must include 
clear and specific content, as specified in proposed Sec.  
435.917(b)(1).
    Proposed Sec.  435.917(b)(2) cross references Sec.  431.210 for the 
specific notice content required for an adverse action--including a 
denial, termination, suspension of or change in eligibility, or a 
change in benefits or services. Revisions to Sec.  431.210 are proposed 
to achieve similar clarity and transparency for notices of adverse 
actions as are proposed for notices of an approval of Medicaid 
eligibility. We note that a citation of the specific regulation(s) that 
support the action, as required by Sec.  431.210(c), does not satisfy 
the requirement to provide ``a clear statement'' explaining the adverse 
action under Sec.  431.210(a), as revised in this proposed rulemaking. 
CMS will work with states and other stakeholders to develop model 
notices meeting the requirements of the regulations.
    Proposed Sec.  435.917(c) directs that all eligibility notices 
relating to a determination of eligibility based on the applicable MAGI 
standard include a plain language description of other bases of 
eligibility (such as disability, long-term care services need, or 
incurred medical expenses for medically needy coverage) as well as the 
level of benefits and services to which someone eligible on such other 
bases is entitled. The information provided must be sufficient to 
enable individuals to make an informed decision as to whether or not to 
seek a determination of eligibility on a MAGI-excepted basis. We note 
that both individuals who are approved for, as well as those who are 
denied, Medicaid on the basis of the applicable MAGI standard should be 
provided the information specified, as eligibility on another basis may 
better meet the individual's needs. We solicit comments on the level of 
detail which should be required for inclusion in the notice under Sec.  
435.917(c).
    Current notice regulations require paper-based, written notices. 
New proposed Sec.  435.918 would maintain the requirement for paper-
based written notices, but would also require states to provide 
individuals with the option to receive notices through a secure 
electronic format in lieu of written notice by regular mail, which 
remains the default method of notice provision. Per proposed Sec.  
435.918, after an individual elects electronic notification, the agency 
would send a paper notification informing the individual of his or her 
election to receive eligibility notices electronically. The agency 
would post notices to the individual's secure electronic account, 
notifying the individual by text message, email, or other electronic 
communication that a notice had been posted and directing the 
individual to check his or her account. We considered permitting 
individuals applying on-line to provide electronic confirmation of 
their election, but believe that confirmation via regular mail provides 
stronger consumer protection. We welcome comment on this, and other 
consumer safeguards for electronic notification. Also, we recognize 
that in addition to eligibility notices, there are other communications 
that occur between the applicant/beneficiary and the Medicaid or CHIP 
agency. These communications include requests for additional 
information, annual renewal forms and reminders, premium payment 
information, changes in benefits or covered services, etc. We are 
considering whether all or some of these should be available to the 
consumer electronically by posting to the electronic account and seek 
comment.
    As described above, newly proposed Sec.  435.917(a), which 
establishes content and accessibility standards for Medicaid notices, 
requires that notices comply with the provisions in Sec.  435.918, if 
provided in electronic format. In addition, paragraph (c)(5), which is 
proposed for addition to Sec.  431.206, relating to the agency's 
responsibility to inform applicants and beneficiaries of adverse 
actions, includes a provision to permit electronic notices consistent 
with Sec.  435.918. We have also modified Sec. Sec.  431.211, 431.213, 
431.230, and 431.231 to update and modernize the language in the 
regulation to remove the term ``mail'' and instead use ``send,'' which 
will still require states to provide paper-based written notices, but 
also permit states to offer beneficiaries the option of receiving 
notices electronically, after obtaining consent from the individual, 
consistent with the consumer protections in proposed Sec.  435.918.
(b) Provision of Coordinated Notice--Medicaid Agency Responsibilities 
(Sec.  435.1200)
    We propose revisions to the Medicaid eligibility final rule to 
provide for a coordinated system of notices across all insurance 
affordability programs based on MAGI, regardless of where the 
individual initially submits an application or whether the Exchange is 
authorized to make Medicaid and CHIP eligibility determinations. Under 
the proposed rule, to the maximum extent feasible, individuals will 
receive a single notice communicating the determination or denial of 
eligibility for all applicable insurance affordability programs and for 
enrollment in a QHP through the Exchange, rather than separate notices 
from the Medicaid and/or CHIP agencies and the Exchange.
    Our proposal is effectuated primarily in revisions to Sec.  
435.1200, as published in the Medicaid eligibility final rule. In 
support of our proposed policy, we also propose to add definitions of 
``combined eligibility notice'' and ``coordinated content,'' in Sec.  
435.4. ``Combined eligibility notice'' is an eligibility notice that 
informs an individual, or household when appropriate, of his or her 
eligibility for multiple insurance affordability programs, including 
all or most of the information required for inclusion per proposed 
Sec.  435.917 and Sec.  431.210, as revised in this proposed rule. 
``Coordinated content'' refers to information included in an 
eligibility notice relating to the transfer of the individual's 
electronic account to another program, and the status of that other 
program's review of the account. Coordinated content will be important 
when the eligibility determination for all programs cannot be finalized 
for inclusion in a single coordinated notice.
    In Sec.  435.1200, we propose adding sub paragraph (b)(3)(iv) to 
provide that the agreements between the Medicaid agency and other 
insurance affordability programs delineate the responsibilities of each 
program to provide combined eligibility notices and coordinated 
content, as appropriate. We note that under these agreements, the 
Medicaid and CHIP agencies and the Exchange must work together to 
provide, to the maximum extent possible, a single combined notice of 
eligibility that includes all family members of the same household 
applying for coverage together. We include at paragraph (d) of proposed 
Sec.  435.917, discussed generally in section I.B.2.a of the preamble, 
above, that the agency's responsibility to provide an eligibility 
notice is satisfied by a combined notice provided by the Exchange or 
another insurance affordability program pursuant to an agreement 
between the agency and the Exchange or such program.
    We propose to add sub paragraph (3) to Sec.  435.1200(c) to provide 
that when the Exchange or other agency administering an insurance 
affordability program is authorized to, and does make, a determination 
of Medicaid eligibility, the agreement described in paragraph (b)(3) 
stipulates that the Exchange or other agency will provide the applicant 
with a combined

[[Page 4603]]

eligibility notice including information about the individual's 
Medicaid eligibility (approval or denial). For example, if the Exchange 
receives an application and determines the applicant eligible for 
Medicaid, the Exchange will issue a combined notice including 
information related both to the approval of Medicaid eligibility and 
the denial of eligibility for advanced payments of the premium tax 
credit and cost-sharing reductions.
    We propose for clarity to redesignate paragraph Sec.  
435.1200(d)(5) at paragraph (d)(2) and to redesignate the other 
paragraphs of paragraph (d) accordingly. We further propose to revise 
redesignated Sec.  435.1200(d)(4) to add new language at clause 
(d)(4)(i) to specify that, when an individual is assessed by the 
Exchange or other program as potentially Medicaid eligible and is 
transferred to the Medicaid agency for a final determination, if the 
Medicaid agency approves eligibility, the Medicaid agency will provide 
the combined eligibility notice for all applicable programs. For 
example, if the Exchange assesses an individual as potentially Medicaid 
eligible and transfers the individual's electronic account to the 
Medicaid agency, and the agency approves eligibility, the agency would 
issue a combined notice, including information related to the approval 
of Medicaid eligibility as well as the denial of eligibility for 
advance payment of the premium tax credit and cost-sharing reductions.
    Finally, we propose revisions to Sec.  435.1200(e) to provide at 
new paragraph (e)(1)(ii) that the Medicaid agency include in the 
agreement consummated under Sec.  435.1200(b)(3) that the Exchange or 
other program will issue a combined eligibility notice, including the 
Medicaid agency's denial of Medicaid eligibility, for individuals 
denied eligibility by the agency at initial application (or terminated 
at renewal) and assessed and transferred to the Exchange or other 
insurance affordability program as potentially eligible for such 
program. For example, if the Medicaid agency determines that an 
individual is not Medicaid eligible, but transfers the individual's 
account to the Exchange as potentially eligible for enrollment in a 
QHP, the Exchange would issue a combined notice of the individual's 
eligibility for enrollment in a QHP, advance payment of the premium tax 
credit, cost-sharing reductions, and the denial of Medicaid.
    Our proposed policy of a single combined eligibility notice does 
not apply in the case of individuals determined eligible on a basis 
other than MAGI, because the Medicaid agency may be continuing its 
evaluation of an individual's eligibility on such other bases at the 
same time that the individual is being evaluated for, or is enrolled 
in, another insurance affordability program pursuant to Sec.  
435.911(c)(2) of the Medicaid eligibility final rule. In such cases, 
while a single, combined notice containing the agency's final 
determination on all bases would not be required, per proposed Sec.  
435.1200(e)(2)(ii), the Medicaid agency would provide notice to the 
individual, in accordance with Sec.  431.210(a) and Sec.  435.917, that 
the agency has determined the individual ineligible for Medicaid on the 
basis of MAGI, and that the agency is continuing to evaluate Medicaid 
eligibility on other bases. Under the proposed regulation, this notice 
also would contain coordinated content advising the applicant that the 
agency has assessed the individual as potentially eligible for, and 
transferred the individual's electronic account to, another program. 
Proposed Sec.  435.1200(e)(2)(iii) requires the agency to provide the 
individual with notice of the final eligibility determination on the 
non-MAGI bases considered. If the individual is later determined 
eligible for Medicaid on a basis other than MAGI, the individual would 
receive a combined notice that includes information of the approval of 
Medicaid eligibility and ineligibility for advance payment of the 
premium tax credit and cost-sharing reductions.
    There are a few additional situations we have identified under the 
proposed regulation in which a single notice will not be required--in 
such situations notices would include coordinated content appropriate 
to the situation. First, when an individual who is assessed by the 
Exchange as not potentially Medicaid eligible based on MAGI and 
determined eligible for advance payment of the premium tax credit and 
cost-sharing reductions, a notice of eligibility for advance payment of 
the premium tax credit and cost-sharing reductions (issued by the 
Exchange) will be needed. If the individual requests a full 
determination of Medicaid or CHIP eligibility by the state agency, as 
permitted under the Exchange final regulation at Sec.  
155.302(b)(4)(B), a second notice will be needed once the Medicaid or 
CHIP agency has made a decision on the application. Depending on 
whether the state agency approves or denies Medicaid or CHIP, either a 
coordinated notice or coordinated content with information relating to 
the individual's eligibility for advance payment of the premium tax 
credit and cost-sharing reductions will be needed.
    Second, when different members of the same household are determined 
eligible for different programs, a single combined notice for all 
members of the household may not be feasible. In such situations, as 
described in Sec.  435.1200(b)(4), notices would include appropriate 
coordinated content related to the status of other members of the 
individual's household. We welcome comments as to whether there are 
other situations, besides the two situations identified, when a 
combined eligibility notice is not feasible.
    We also note that, in consultation with states, consumer groups and 
plain-language experts, we intend to develop language to be released in 
2013, which could be adapted by states as a model for delivering 
combined eligibility notices. Because some states have specific content 
which will need to be included in notices issued by an Exchange in 
their state, state Medicaid and CHIP agencies will work with the 
Exchange on any state-specific content to be included in a combined 
notice and/or may issue supplementary notices if the Exchange is unable 
to deliver all required state-specific content.
    Finally, given the time needed to allow for systems builds, we are 
proposing that the policy to provide a combined eligibility notice will 
not be effective until January 1, 2015. At state option, based on the 
operational readiness of all programs, combined eligibility notices may 
be implemented earlier. States with an FFE will only be able to provide 
a combined eligibility notice prior to January 1, 2015 for eligibility 
determinations made by the FFE. In the absence of a combined 
eligibility notice, coordinated content ensures that applicants and 
beneficiaries are informed of the status of their application with 
respect to other insurance affordability programs. We also considered a 
later effective date of October 15, 2015 for the requirement to provide 
a combined eligibility notice in all circumstances provided for in the 
proposed rule, which would coincide with the beginning of open 
enrollment for January 2016. We welcome comments on the proposed 
effective date of January 1, 2015 and the later effective date of 
October 15, 2015.
    We also make a technical correction to Sec.  435.1200. We update 
paragraph (a) to correct an erroneous statutory citation.

[[Page 4604]]

(c) CHIP Eligibility Notices and Information Requirements (Sec. Sec.  
457.10, 457.110, Sec.  457.340, 457.348 and 457.350)
    We propose to modernize and amend the existing CHIP regulations 
pertaining to notices at Sec.  457.110 and Sec.  457.340(e) to 
correspond to the regulation changes and additions proposed for 
Medicaid at Sec.  435.917, and Sec.  435.918. We also propose to add a 
definition of ``combined notice'' and ``coordinated content'' in Sec.  
457.10 and to revise paragraphs (a), (b), (c) and (d) of Sec.  457.348 
and paragraphs (f) and (i) in Sec.  457.350 to mirror the proposed 
revisions to the Medicaid regulations in Sec.  435.1200 (b), (c), (d), 
and (e) to maximize achievement of a system of coordinated notices 
across all insurance affordability programs, including CHIP.
    Per proposed Sec.  457.350(f)(3), we seek to clarify that the 
requirement that a state find an individual ineligible, provisionally 
ineligible, or suspend the individual's application for CHIP unless and 
until the Medicaid application for the individual is denied applies 
only at application. We propose to clarify this provision in response 
to concerns expressed by states that if this provision is applied to 
CHIP enrollees at redetermination, a gap in coverage could result.
    We also propose to update Sec.  457.350(g), relating to the states' 
responsibility to provide information to CHIP applicants regarding the 
Medicaid program, to extend to all insurance affordability programs. We 
also propose to update Sec.  457.350(h)(2), which describes the state's 
responsibility to inform a CHIP applicant on a waiting list that if 
circumstances change, the applicant may be eligible for other insurance 
affordability programs, in addition to Medicaid, so that the Exchange, 
Medicaid, and CHIP can work together to ensure that eligible applicants 
are enrolled in the appropriate program.
    A technical correction is made to Sec.  457.350(b). We update 
paragraph (b) to clarify that the requirement to screen for potential 
eligibility for other insurance affordability programs applies to any 
applicant or enrollee who submits an application or renewal form to the 
state which included sufficient information to determine CHIP 
eligibility. This includes not only those determined ineligible for 
CHIP but also individuals subject to a waiting period or those screened 
as not potentially eligible for Medicaid based on MAGI and enrolled in 
CHIP but also assessed as potentially eligible for Medicaid on another 
basis and referred to the Medicaid agency for a full Medicaid 
determination.
3. Medicaid Eligibility Changes Under the Affordable Care Act
(a) Former Foster Care Children (Sec.  435.150)
    Sections 2004 and 10201(a) and (c) of the Affordable Care Act add a 
new section 1902(a)(10)(A)(i)(IX) of the Act, under which states must 
provide Medicaid coverage starting in 2014 for individuals under age 26 
who were in foster care and receiving Medicaid. Note that states still 
have the option to cover a similar eligibility group for independent 
foster care adolescents, which has slightly different requirements (see 
Sec.  435.226 of this proposed rule).
    Consistent with the statute, we propose to add Sec.  435.150 
establishing this new mandatory eligibility group for individuals who:
     Are under age 26;
     Are not eligible for and enrolled in mandatory Medicaid 
coverage under sections 1902(a)(10)(A)(i)(I) through (VII) of the Act, 
eligibility under which is codified in Sec. Sec.  435.110 through 
435.118 and Sec. Sec.  435.120 through 435.145 of subpart B of the 
regulations; and
     Were in foster care under the state's or tribe's 
responsibility (whether or not under title IV-E of the Act) and also 
enrolled in Medicaid under the state's Medicaid state plan or 1115 
demonstration (or at state option were in foster care and Medicaid in 
any state rather than ``the'' state where the individual is now 
residing and applying for Medicaid) when the individual attained age 18 
or such higher age at which the state's federal foster care assistance 
ends under title IV-E of the Act.
    We are proposing an interpretation of the statute that an 
individual qualifies for this mandatory Medicaid coverage if the 
individual was concurrently enrolled in foster care and Medicaid either 
when attaining age 18 or at the point of ``aging out'' of foster care. 
This interpretation is based on the statute's use of the word ``or'' to 
permit either alternative. We considered a different interpretation 
that would limit eligibility to individuals who ``age out'' of foster 
care. Among the states that have extended foster care programs beyond 
age 18, all but two states end foster care at age 21.
    The statute requires that an individual be in foster care under the 
responsibility of ``the state'' and be enrolled in Medicaid under ``the 
state plan'' or an 1115 demonstration. In this proposed rule, we are 
interpreting that requirement as meaning that the individual was in 
foster care and enrolled in Medicaid in the same state in which 
coverage under this eligibility group is sought. However, we are 
proposing to give states the option to cover individuals under this 
group who were in foster care and Medicaid in any state at the relevant 
point in time. We request comments on this interpretation of the 
statute.
    In accordance with the statute, there is no income or resource test 
for this group. Individuals may apply and be determined eligible at any 
time between attaining age 18 and losing eligibility under this group 
upon attaining age 26. In accordance with longstanding general Medicaid 
policy clarified at Sec.  435.916(f) of the Medicaid eligibility final 
rule, when an individual loses eligibility under this group, coverage 
shall not be terminated unless the individual is not eligible under any 
other group (for example, the new adult group at Sec.  435.119 of the 
Medicaid eligibility final rule.)
    Eligibility under the adult group at Sec.  435.119 of the 
regulations (as specified in the March 23, 2012 Medicaid eligibility 
final rule) will not take precedence over coverage under the mandatory 
group of former foster care children. In accordance with the second 
subclause (XVI) in the matter following subparagraph (G) of section 
1902(a)(10) of the Act, as added by section 10201(a)(2) of the 
Affordable Care Act, individuals eligible for both the former foster 
care group and the adult group should be enrolled in the former foster 
care group.
(b) Financial Methodologies for Individuals Excepted From Application 
of MAGI-Based Methodologies (Sec.  435.601 and Sec.  435.602)
    Due to changes in the Affordable Care Act, we propose technical 
amendments to Sec.  435.601(b) and Sec.  435.602(a) to specify that 
these sections, related to general application of financial eligibility 
methodologies and financial responsibility of relatives and other 
individuals, only apply to individuals excepted from application of the 
MAGI-based methodologies in accordance with Sec.  435.603(j). Also, as 
required by section 1902(e)(14)(B) of the Act, which prohibits income 
disregards other than those expressly included in MAGI methodologies 
for the MAGI-related populations, we propose to amend paragraph (d) of 
Sec.  435.601 to remove ``MAGI-related'' eligibility groups (financial 
eligibility for which will be determined using MAGI-based methodologies 
set forth in Sec.  435.603) from the groups to which a state may

[[Page 4605]]

use the authority of section 1902(r)(2) of the Act to adopt less 
restrictive income and resource methodologies than those under the 
most-closely related cash assistance program.
(c) Family Planning (Sec.  435.214)
    Section 2303 of the Affordable Care Act adds new sections 
1902(a)(10)(A)(ii)(XXI) and 1902(ii) of the Act, as well as the first 
new clause (XVI) in the matter following 1902(a)(10)(G) (there are two 
paragraph (XVI)s; the first is the one related to family planning), 
under which states have the option to provide Medicaid coverage to 
women and men that is limited to family planning or family planning 
related services under the state plan.
    Consistent with the statute, we propose to add Sec.  435.214 
establishing this new eligibility group for individuals who:
     Are not pregnant;
     Have income that does not exceed the income eligibility 
level established by the state, as discussed below. Section 1902(ii)(1) 
specifically allows for income eligibility up to the highest income 
eligibility level established by the state for pregnant women in the 
Medicaid or CHIP state plan. We have interpreted this to also include 
the income level established by the state for pregnant women under the 
state's Medicaid or CHIP demonstration approved under the authority of 
section 1115 of the Act.
    Because section 1902(e)(14) applies a ``notwithstanding any other 
provision of Title XIX,'' and individuals eligible for family planning 
are not an exempt group listed at 1902(e)(14)(D), beginning January 1, 
2014, financial eligibility for this group will be determined using the 
MAGI-based methodologies set forth at Sec.  435.603 of the regulations. 
However, section 1902(ii)(3) of the Act, permits states to consider 
only the income of the individual applying for family planning benefits 
in determining eligibility under this section. Accordingly, at Sec.  
435.603 we are proposing to codify the current policy outlined in the 
July 2, 2010 state Medicaid Director Letter (http://downloads.cms.gov/cmsgov/archived-downloads/SMDL/downloads/SMD10013.pdfError! Bookmark 
not defined.). Under this policy about determining financial 
eligibility for the new eligibility group at proposed Sec.  435.214, 
states may consider the individual's household to consist only of the 
individual, may consider only the income of the individual applying for 
coverage (while retaining other members of the household for purposes 
of determining family size), and may increase the family size used for 
determining eligibility for coverage under this group by one, similar 
to the increase in family size for pregnant women.
    Finally, we are proposing to amend the definition of a targeted low 
income child at Sec.  457.310(b)(2) to indicate that eligibility for 
limited coverage of family planning services under Sec.  435.214 does 
not preclude an individual from being eligible for CHIP. In 
circumstances where an individual is enrolled in both CHIP and Medicaid 
family planning coverage, Medicaid would be secondary payer to CHIP in 
accordance with 1902(a)(25) of the Act and 42 CFR 433 Subpart D.
4. Medicaid Enrollment Changes Under the Affordable Care Act Needed to 
Achieve Coordination With the Exchange
(a) Certified Application Counselors (Sec.  435.908 and Sec.  457.330)
    Some individuals require assistance with completing an application, 
enrolling in coverage or with ongoing communications with the agency 
once determined eligible. While many may seek informal assistance with 
applications from friends or relatives, others may seek assistance from 
trusted community-based organizations, providers, or other 
organizations with expertise in social service programs. Staff and 
volunteers from such organizations provide important assistance in 
completing application and renewal forms, and in explaining and helping 
individuals to meet any documentation requirements, but do not sign 
forms, receive notices or other communications, or otherwise act on 
behalf of the individual being assisted. Individuals able to perform 
those types of functions (often a family member, legal guardian, or 
attorney) are referred to as ``authorized representatives'' and are 
discussed in the next section, below.
    Many state Medicaid and CHIP agencies have a long history of 
enabling providers and other organizations to serve as ``application 
assisters,'' which we refer to in this proposed rulemaking as 
``application counselors'' to provide such direct assistance to 
individuals seeking coverage, and these counselors play a key role in 
promoting enrollment among low-income individuals. These proposed 
regulations seek to ensure that application counselors, who we expect 
to continue to play an essential role in many states, will have the 
training and skills necessary to provide reliable, effective assistance 
to consumers, and that they will meet the confidentiality requirements 
that apply to the data they will be able to access in their role as 
assisters, including those established in accordance with section 6103 
of the Internal Revenue Code and section 1902(a)(7) of the Act.
    We anticipate that, beginning with the initial open enrollment 
period, an increasing number of individuals will seek to apply for 
coverage on line, and while some states already have web infrastructure 
which allows application counselors to track their clients' 
applications and manage caseloads, we expect that practice to increase 
as states improve their electronic application systems. Other 
applicants may still submit applications on paper. The proposed 
regulation recognizes the role that may be played by application 
counselors in helping individuals with the process through either the 
paper or online channels.
    To effectively provide application assistance, counselors may have 
access to personal data, including tax data from the Internal Revenue 
Service that is subject to the confidentiality rules established under 
section 6103 of the Internal Revenue Code (``Code''). State Medicaid 
agencies will need to ensure that their application counselors, and any 
web infrastructure used by them, comply with applicable privacy and 
security rules associated with the disclosure and receipt of this data 
and other personal information as well as with the overall eligibility 
and enrollment process. Accordingly, we propose to add a new paragraph 
(c) to Sec.  435.908, as published in the Medicaid eligibility final 
rule, to establish standards for authorizing application counselors to 
assist individuals with the application and renewal process, including 
use of a dedicated web portal, as well as with managing their case 
between the eligibility determination and regularly scheduled renewals. 
We apply these provisions to state CHIP agencies through the addition 
of a cross-reference in Sec.  457.340, and propose similar regulations 
for certification of application counselors for the Exchange (see 
proposed Sec.  155.225 and section III.B.4 of this rulemaking). As 
recipients of federal financial participation, state Medicaid and CHIP 
agencies are reminded of their obligation to ensure that their 
programs, including their application counselor programs, provide equal 
access to individuals with limited English proficiency and individuals 
with disabilities under applicable federal civil rights laws. As part 
of this obligation, state Medicaid and CHIP agencies should ensure the 
availability and provision of appropriate application assistance 
services, such as language assistance services and auxiliary aids

[[Page 4606]]

and services, to meet the needs of these populations. Sometimes this 
obligation can be met by referral of individuals with limited English 
proficiency or individuals with disabilities to appropriate counselors 
participating in the agency's program. Many people applying for 
coverage also seek informal help from family, friends and local 
community-based organizations not identified on the application or 
authorized to communicate with the agency about the application. The 
proposed regulations do not pertain to such informal assistance.
    We note that similar regulations for certified application 
counselors are proposed for the Exchange at Sec.  155.225. See 
discussion in section III.B.4. of the preamble. Application counselors 
would not need to go through two different certification processes. 
State Medicaid and CHIP agencies and the Exchange generally are charged 
under the Sec.  435.1200 and Sec.  457.348 of the Medicaid eligibility 
final rule and Sec.  155.345 of the Exchange final rule to work 
together to create a seamless and coordinated application and 
enrollment process for individuals applying for all insurance 
affordability programs. To achieve this in the case of certified 
application counselors, states could elect, for example, to create a 
single certification process for all insurance affordability programs, 
or each program could accept application counselors certified by 
another program.
(b) Authorized Representatives (Sec.  435.923 and Sec.  457.340)
    Authorized representatives have historically helped ensure access 
to coverage for vulnerable individuals, such as seniors and those with 
disabilities. Although there is no formal limit on the number of 
individuals an authorized representative may assist--for example, at 
some institutions or an attorney may serve as such a representative for 
several clients--most authorized representatives serve in that capacity 
for one individual, for example for a parent or incapacitated relative. 
Under current regulations at 42 CFR 435.907, retained in the Medicaid 
eligibility final rule, states must accept applications from authorized 
representatives acting on behalf of an applicant. In this rulemaking, 
we propose to add Sec.  435.923 establishing minimum requirements for 
the designation of authorized representatives. Proposed Sec.  435.923, 
which is applied to state CHIP agencies through the addition of a cross 
reference in proposed Sec.  457.340, is intended to ensure a consistent 
set of rules and standards for authorized representatives across all 
insurance affordability programs. We believe the proposed regulation is 
consistent with current policies and practice in most states today and 
therefore will not substantially affect state programs.
    Specifically, we propose that, consistent with longstanding 
practice, applicants and beneficiaries may choose to designate an 
individual or organization to act on the applicant or beneficiary's 
behalf, or may have such a representative through operation of state 
law (for example, through a legal guardianship arrangement). The state 
may not restrict the ability of applicants and beneficiaries to have an 
authorized representative to only certain groups of applicants and 
beneficiaries.
    Under proposed paragraph Sec.  435.923(a), applicants and 
beneficiaries who do not designate an authorized representative on 
their application must be able subsequently to do so, through both 
electronic and paper formats, as well as the other modalities described 
in Sec.  435.907(a). Legal documentation of authority to act on behalf 
of an applicant or beneficiary under state law, such as a court order 
establishing legal guardianship or a power of attorney may serve in the 
place of the applicant or beneficiary's designation. The option to 
submit such documentation is intended to enable applicants who do not 
have the capacity to provide a signature to authorize representation. 
Authorized representatives must agree, or be bound by requirements, to 
maintain the confidentiality of any information regarding the applicant 
or beneficiary provided by the agency. An applicant or beneficiary may 
authorize the representative to act on his or her behalf in the 
activities set forth in proposed Sec.  435.923(b). In accordance with 
proposed paragraph (c), the applicant or beneficiary may change or 
withdraw his or her authorization at any time. The authorized 
representative also may withdraw his or her authorization of 
representation by notifying the agency. Under proposed Sec.  
435.923(d), authorized representatives are responsible for fulfilling 
the responsibilities encompassed within the scope of the representation 
to the same extent as the individual he or she represents and must 
agree to maintain the confidentiality of information provided by the 
agency. Under proposed paragraph (e), providers and staff members or 
volunteers of other organizations serving as authorized representatives 
must agree to adhere to relevant confidentiality and conflict of 
interest protections, similar to the rules applied to eligibility 
workers at outstation locations set forth in Sec.  435.904(e) of the 
regulations. We note that, before data can be released to an authorized 
representative, the representative must meet the authentication and 
data security standards of the releasing entity. For example, 
information relating to an applicant's modified adjusted gross income 
from the Internal Revenue Service cannot be requested by or released to 
an authorized representative unless the representative meets the 
authentication and security standards established by the IRS under 
section 6103 of the Code. In the event that such authentication or 
security standards are not met, the agency would need to continue to 
process the individual's application to the extent possible without use 
of the data at issue.
    We intend that the single streamlined application described in 
Sec.  435.907(b)(1) of the regulations will provide applicants the 
opportunity to designate an authorized representative and will collect 
the information necessary for such representative to enter into any 
associated agreements with the agency as part of the application 
process. States developing alternative applications under Sec.  
435.907(b)(2) must collect the same information through their 
alternative applications or supplemental forms. Per proposed Sec.  
435.923(f), the agency must accept electronic, including telephonically 
recorded, signatures authorizing representation as well as handwritten 
signatures transmitted by facsimile or other electronic transmission. 
Designations of authorized representatives under the proposed 
regulation must be accepted through all of the modalities described in 
Sec.  435.907(a).
(c) Accessibility for Individuals Who Are Limited English Proficient 
(Sec.  435.905)
    We are proposing to clarify regulations at Sec.  435.905(b) 
relating to the provision of information to persons who are limited 
English proficient in order to assure access to coverage for eligible 
individuals and to achieve alignment between the regulations governing 
Medicaid and CHIP with existing Exchange regulations at 45 CFR 
155.205(c), issued in the Exchange eligibility final rule on March 27, 
2012. We propose that providing language services means providing oral 
interpretation, written translations, and taglines (which are brief 
statements in a non-English language that inform individuals how to 
obtain information in their language). These language services will 
allow individuals who are

[[Page 4607]]

limited English proficient to obtain information accessibly.
    Longstanding Sec.  435.901 directs states to comply with the Civil 
Rights Act of 1964, as well as section 504 of the Rehabilitation Act of 
1973, and all other relevant provisions of federal and state laws. 
Guidance published on August 8, 2003 (68 FR 47311) provides some 
parameters on language assistance services for persons who are limited 
English proficient, including oral interpretation and written 
translation services; this guidance is located at http://www.justice.gov/crt/about/cor/lep/hhsrevisedlepguidance.pdf. Guidance 
was subsequently released on the availability of enhanced federal 
matching funds available for translation and interpretation services in 
connection with improving outreach to, enrollment of, retention of, and 
use of services by children in Medicaid and CHIP. Federal Medicaid 
reimbursement is available for the provision of oral and written 
translation and interpretation services provided to Medicaid and CHIP 
beneficiaries as either administration or a medical-assistance related 
expenditure, at varying matching rates, depending on the specific 
circumstances involved. (For more information, see our letter to State 
Health Officials (SHO) dated July 1, 2010, available at http://www.cms.gov/smdl/downloads/SHO10006.pdf and the CMCS Information 
Bulletin on translation services dated April 26, 2011, available at 
https://www.cms.gov/CMCSBulletins/downloads/Info-Bulletin-4-26-11.pdf.)
    These proposed policies are consistent with sections 1413 and 2201 
of the Affordable Care Act, sections 1902(a)(8), 1902(a)(19) and 
1943(b)(1)(F) of the Act and Sec.  435.902 and Sec.  435.906 of the 
regulations. The proposed regulation at Sec.  435.905(b)(1) is designed 
to provide flexibility to states and to accommodate differences in 
populations and languages spoken in a state. As stated in our Medicaid 
eligibility final rule, after consultation with states and 
stakeholders, future sub-regulatory guidance will implement the 
regulatory standards proposed as well as coordinate our accessibility 
standards with those applied to other insurance affordability programs 
and other programs overseen by HHS, as appropriate. We also propose at 
Sec.  435.905(b)(3) to require the state to inform individuals of 
availability of these services, and how to access them. Proposed 
paragraph (b)(3) would apply to informing individuals of accessibility 
services described in Sec.  435.905(b)(2) of the Medicaid eligibility 
final rule (relating to services available to individuals with 
disabilities).
    We note that under regulations adopted in the Medicaid eligibility 
final rule, application and renewal forms, Web sites and other 
electronic systems used to enroll individuals, and assistance provided 
to individuals must meet the accessibility standard in proposed Sec.  
435.905(b) (see Sec. Sec.  435.907(g), 435.916(g), 435.908, 435.1200(f) 
of the Medicaid eligibility final rule). Thus, to align with the 
current Exchange regulations issued in the Exchange Eligibility final 
rule at Sec.  155.205(c) and amending the accessibility standards in 
this proposed rule, we would also be modifying the standards for such 
forms, Web sites, and systems. In Sec. Sec.  435.917(a)(2), 431.205(e), 
431.206(d), and 435.956(g), we propose to apply these accessibility 
standards at Sec.  435.905(b) to notices and appeals procedures. We 
note that the proposed modification of Sec.  431.206 is intended to 
provide that all notices and communications across our regulation at 
part 431, subpart E be accessible to people who are limited English 
proficient and with disabilities, including but not limited to 
references to notices in Sec. Sec.  431.211, 431.224, and 431.245. We 
also propose to modify Sec.  457.110(a) and Sec.  457.340(e) to apply 
these accessibility standards to the CHIP program.
5. Medicaid Eligibility Requirements and Coverage Options Established 
by Other Federal Statutes
    To facilitate development of the streamlined eligibility and 
enrollment system envisioned under the Affordable Care Act, we propose 
new or amended regulations to simplify several eligibility pathways 
established by other federal statutes, as follows:
(a) Coverage of Children and Families
(i) Mandatory Coverage of Children With Title IV-E Adoption Assistance, 
Foster Care, or Guardianship Care Under Title IV-E (Sec.  435.145)
    Section 471(a)(28) of title IV-E of the Act, as added by the 
Fostering Connections to Success and Increasing Adoptions Act of 2008 
(Pub. L. 110-351), gives states and federally-recognized Tribes the 
option to provide kinship guardianship assistance payments on behalf of 
children placed with family members under certain conditions. Under 
section 473(b)(3)(C) of the Act, children on whose behalf such payments 
are made are mandatorily eligible for Medicaid to the same extent as 
children for whom federal foster care maintenance payments are made 
under title IV-E. Revisions to current regulations at Sec.  435.145 are 
proposed to implement these statutory provisions. Also, we are 
proposing to eliminate a duplicative rule at Sec.  435.115(e) for this 
group and to include in Sec.  435.145 certain provisions from Sec.  
435.115(e) that are consistent with the statutory requirements, namely 
that an adoption assistance agreement is considered to be in effect 
regardless of whether adoption assistance is being provided or an 
interlocutory or other judicial decree of adoption has been issued. 
These proposed changes clarify current policy and have no meaningful 
impact on state programs.
(ii) Extended Eligibility for Low-Income Families (Sec.  435.112 and 
Sec.  435.115)
(1) Families With Medicaid Eligibility Extended Because of Increased 
Earnings or Hours of Employment (Sec.  435.112)
    Sections 408(a)(11)(A), 1902(e)(1)(A), and 1931(c)(2) of the Act, 
implemented at existing Sec.  435.112, require a 4-month Medicaid 
extension for low-income families (including pregnant women without 
other children) eligible under section 1931 of the Act (because they 
met prior AFDC income eligibility requirements as modified at state 
option under section 1931(b)(2) of the Act) who otherwise would lose 
coverage due to a household member's increased earnings or a parent's 
increased working hours. This section applies if a Medicaid extension 
for at most 12 months under Transitional Medical Assistance (TMA) in 
accordance with section 1925 of the Act is not available (for example, 
because the federal authority for TMA has sunset). We propose revisions 
to Sec.  435.112 to align with the implementation of section 1931 of 
the Act in the Medicaid eligibility final rule for parents and other 
caretaker relatives at Sec.  435.110, pregnant women at Sec.  435.116, 
and children at Sec.  435.118.
(2) Families With Medicaid Eligibility Extended Because of Increased 
Collection of Spousal Support (Sec.  435.115)
    Sections 408(a)(11)(B) and 1931(c)(1) of the Act, implemented at 
existing Sec.  435.115(f)-(h), require a 4-month Medicaid extension for 
low-income families eligible under section 1931 of the Act who 
otherwise would lose coverage due to increased income from collection 
of child or spousal support under title IV-D of the Act. We propose to 
revise Sec.  435.115 to limit this requirement to spousal support 
because, while spousal support is counted as income under the MAGI-
based methodologies described in Sec.  435.603,

[[Page 4608]]

child support is not. Therefore, increased collection of child support 
will not affect Medicaid eligibility for parents or children once MAGI-
based methodologies take effect in 2014. Also, we propose to delete the 
obsolete paragraphs (a) through (d) of Sec.  435.115 relating to 
individuals ``deemed to be receiving AFDC'' and to delete paragraph (e) 
relating to eligibility for children receiving assistance under title 
IV-E of the Act as duplicative of Sec.  435.145.
(iii) Extended and Continuous Eligibility for Pregnant Women (Sec.  
435.170) and Hospitalized Children (Sec.  435.172)
(1) Pregnant Women Eligible for Extended or Continuous Eligibility 
(Sec.  435.170)
    Section 435.170 of the existing regulations implements section 
1902(e)(5) of the Act, requiring extended Medicaid eligibility through 
the last day of the month in which the 60-day post-partum period ends 
for women who were covered while pregnant. Section 1902(e)(6) of the 
Act requires states to provide ``continuous eligibility'' to pregnant 
women, once determined eligible under any eligibility group, regardless 
of changes in household income through the last day of the month in 
which the post-partum period ends. Pregnant women eligible for extended 
coverage under either provision are entitled to receive pregnancy-
related services covered under the state plan in accordance with Sec.  
435.116(d)(3) of the Medicaid eligibility final rule. We further 
clarify in a proposed new paragraph (d) of Sec.  435.170, consistent 
with section 1902(e)(6) of the Act, that extended or continuous 
eligibility does not apply to pregnant women only covered during a 
period of presumptive eligibility. These changes clarify current policy 
and have no meaningful impact on state programs.
(2) Continuous Eligibility for Hospitalized Children (Sec.  435.172)
    Section 1902(e)(7) of the Act requires that infants and children 
under age 19 eligible under sections 1902(a)(10)(A)(i)(III), (IV), 
(VI), and (VII) and (ii)(IX) of the Act remain eligible for Medicaid 
until the end of a Medicaid-covered inpatient stay, if they otherwise 
would lose eligibility because of attaining the maximum age for 
coverage under the applicable section of the Act. We propose to add a 
new section Sec.  435.172 implementing this requirement for children 
eligible under Sec.  435.118 of the Medicaid eligibility final rule. 
This section clarifies current policy and has no meaningful impact on 
state programs.
(iv) Optional Eligibility Groups and Coverage Options
(1) Optional Eligibility for Parents and Other Caretaker Relatives 
(Sec.  435.220)
    Optional eligibility for pregnant women and parents or other 
caretaker relatives under section 1902(a)(10)(A)(ii)(I) of the Act is 
currently implemented at Sec.  435.210. Optional eligibility for 
pregnant women, effective January 1, 2014, is implemented at Sec.  
435.116 of the Medicaid eligibility final rule. Optional eligibility 
for most parents and other caretaker relatives now covered under Sec.  
435.210 (those with MAGI-based income at or below 133 percent FPL) will 
be subsumed under the adult group at Sec.  435.119, if they are not 
elderly and not Medicare eligible. Eligibility for parents and other 
caretaker relatives with MAGI-based income above the limits for 
mandatory coverage under Sec.  435.110 and Sec.  435.119 will remain an 
option under Sec.  435.220 as proposed in this rule. The eligibility 
group defined in the existing regulations at Sec.  435.220 (for 
individuals who would meet the income and resource requirements under 
AFDC if child care costs were paid from earnings) will be rendered 
obsolete with the prohibition against income disregards under MAGI-
based methods per Sec.  435.603(g).
    Consistent with our efforts to streamline and simplify eligibility 
in the Medicaid eligibility final rule, we propose in this rulemaking 
to delete pregnant women and parents or other caretaker relatives from 
the scope of the current regulation at Sec.  435.210 and to replace the 
obsolete provision currently provided for in Sec.  435.220 with 
optional eligibility of parents and other caretaker relatives based on 
MAGI. A state may cover parents and other caretaker relatives under 
this section, including individuals who are elderly or Medicare 
eligible, if their household income does not exceed the income standard 
established by the state for this group. The income standard may not 
exceed the higher of the state's AFDC payment standard in effect as of 
July 16, 1996 or the state's highest effective income level for 
optionally eligible parents and other caretaker relatives under the 
state plan or 1115 demonstration as of March 23, 2010 or December 31, 
2013, if higher, converted to a MAGI-equivalent standard per section 
1902(e)(14)(A) and (E) of the Act, in accordance with guidance as 
issued by the Secretary. States will also have the option to provide 
Medicaid to parents and other caretaker relatives, along with other 
individuals under age 65, with income above 133 percent FPL under the 
new optional eligibility group codified at Sec.  435.218 of the 
Medicaid eligibility final rule.
(2) Optional Coverage for Reasonable Classifications of Individuals 
Under Age 21 (Sec.  435.222)
    The existing regulation at Sec.  435.222 implements sections 
1902(a)(10)(A)(ii)(I) and (IV) of the Act to give states the option to 
cover all individuals under age 21 (or, at state option, under age 20, 
19, or 18) or reasonable classifications of such individuals, who 
either meet the state's AFDC income and resource requirements or would 
meet them if not institutionalized. We propose revisions to Sec.  
435.222 to reflect the need for states to convert their current AFDC-
based net income standard to an equivalent MAGI-based standard, unless 
the state currently disregards all income for a reasonable 
classification under this group. The income standard, if any, 
established by the state for all individuals or each reasonable 
classification under this group which may not exceed the higher of the 
state's AFDC payment standard in effect as of July 16, 1996 or the 
state's highest effective income level for the group or reasonable 
classification under the state plan or 1115 demonstration as of March 
23, 2010 or December 31, 2013, if higher, converted to a MAGI-
equivalent standard.
(3) Optional Eligibility for Individuals Needing Treatment for Breast 
or Cervical Cancer (Sec.  435.213)
    We propose to add a new Sec.  435.213 to codify section 
1902(a)(10)(A)(ii)(XVIII) of the Act, consistent with existing 
guidance, which provides states with the option to cover individuals 
needing treatment for breast or cervical cancer. The eligibility 
criteria for this optional eligibility group are set forth at section 
1902(aa) of the Act. Guidance on this group was provided in a state 
Health Official letter (SHO) dated January 4, 2001, http://downloads.cms.gov/cmsgov/archived-downloads/SMDL/downloads/sho010401.pdf. Inasmuch as the proposed regulation codifies this 
guidance, which remains effective, this section should not have any 
meaningful impact on state programs.
    This optional eligibility group covers individuals under age 65 who 
are not eligible and enrolled for mandatory coverage under the Medicaid 
state plan; do not otherwise have creditable coverage for treatment of 
their breast or cervical cancer; and have been screened

[[Page 4609]]

as needing treatment for breast or cervical cancer under a state's 
Centers for Disease Control and Prevention (CDC) breast and cervical 
cancer early detection program (BCCEDP). This may include any men 
screened under the state's screening program for breast cancer. The 
state entity administering the BCCEDP, not the state Medicaid agency, 
determines who is considered to have been ``screened under the 
program'' and establishes the scope of screening provided, regardless 
of funding source, so that if the state entity considers a man to have 
been screened under the BCCEDP program, a state electing to cover this 
Medicaid eligibility must cover such man under this group.
(4) Optional Eligibility for Independent Foster Care Adolescents (Sec.  
435.226)
    We propose to add a new Sec.  435.226 to codify section 
1902(a)(10)(A)(ii)(XVII) of the Act, which provides states with the 
option to cover ``independent foster care adolescents'' as described at 
section 1905(w) of the Act. This existing optional eligibility group 
covers individuals who are under age 21 (or, at state option, under age 
20 or 19) and were in foster care under the responsibility of a state 
or Tribe on the individual's 18th birthday. As with reasonable 
classifications of individuals under Sec.  435.222, states which 
covered such group under the Medicaid state plan or an 1115 
demonstration as of March 23, 2010 or December 31, 2013 will need to 
convert the effective income level, if any, to a MAGI-based standard. 
The income standard may not exceed the higher of the state's AFDC 
payment standard in effect as of July 16, 1996 or the state's highest 
effective income level for this population under the state plan or 1115 
demonstration as of March 23, 2010 or December 31, 2013, if higher, 
converted to a MAGI-equivalent standard. Many individuals now covered 
under this optional group will be eligible for coverage as of 2014 
under either the new group for former foster care children at the 
proposed Sec.  435.150 or the adult group at Sec.  435.119, both of 
which are mandatory eligibility groups under the statute. Unlike the 
group at Sec.  435.150, this optional group at Sec.  435.226 does not 
require enrollment in Medicaid upon attaining age 18 in foster care, 
but coverage in this group ends upon attaining age 21 rather than age 
26.
(5) Optional Eligibility for Individuals Under Age 21 Who Are Under 
State Adoption Assistance Agreements (Sec.  435.227)
    We propose to amend Sec.  435.227 for children with a state 
adoption assistance agreement in effect (other than an agreement under 
title IV-E of the Act) to reflect the need for states to convert the 
current AFDC-based net income standard, if any, to an equivalent MAGI-
based standard. If the state covered this group under the Medicaid 
state plan or an 1115 demonstration as of March 23, 2010 or December 
31, 2013 with no income test or MAGI-based effective income level, 
converted to a MAGI-equivalent standard, exceeding the state's income 
standards for Sec.  435.118 and Sec.  435.119, that policy may remain 
in effect. Otherwise, consistent with the existing regulation at Sec.  
435.227(a)(3)(i) and retained at proposed Sec.  435.227(b)(3)(i) of 
this rulemaking, an individual must have been eligible under the 
Medicaid state plan prior to the adoption agreement being entered into. 
We request comments on our proposal to delete the alternative 
eligibility requirement in existing regulations at Sec.  
435.227(a)(3)(ii) that the individual would have been eligible if the 
state's title IV-E foster care financial eligibility standards and 
methodologies were used, because the Medicaid eligibility requirements 
at Sec.  435.118 of the Medicaid eligibility final rule are more 
expansive. Also, we propose language at Sec.  435.227(b)(2), revising 
the language in existing regulations at Sec.  435.227(a)(2), to clarify 
that it is the state agency which entered into the adoption agreement 
with the adoptive parents, which is not necessarily the state 
determining the child's Medicaid eligibility, that determines whether 
those eligibility requirements are met.
(6) Optional Targeted Low-Income Children (Sec.  435.229)
    We propose to amend Sec.  435.229 for optional targeted low-income 
children, as defined at Sec.  435.4, for whom states may claim enhanced 
match under section 1905(b) and title XXI of the Act, in order to 
reflect the need for states to convert the current AFDC-based net 
income standard to an equivalent MAGI-based standard. A state's income 
standard may not exceed the higher of 200 percent FPL; an FPL 
percentage which exceeds the state's Medicaid applicable income level, 
defined at Sec.  457.10, by no more than 50 percentage points; or the 
highest effective income level for this group in effect under the 
Medicaid state plan or an 1115 demonstration as of March 23, 2010 or 
December 31, 2013, if higher, converted to a MAGI-equivalent standard.
(7) Optional Continuous Eligibility for Children (Sec.  435.926 and 
Sec.  457.342)
    We propose to add a new Sec.  435.926 codifying section 1902(e)(12) 
of the Act, which provides states with the option to provide up to 12 
months of continuous eligibility for children under age 19, or a 
younger age selected by the state, once determined eligible for 
Medicaid, regardless of changes in income or most other circumstances 
which otherwise would render the child ineligible for Medicaid. These 
proposed standards codify and clarify past guidance on the continuous 
eligibility options and have no meaningful impact on state programs. 
Under the option, continuous eligibility is provided to all children 
younger than the state's specified age who are covered under subpart B 
or C of this part, but not those covered as medically needy under 
subpart D, those eligible only for emergency medical services for non-
citizens, or those eligible during a period of presumptive eligibility. 
Thus, consistent with the statute, states electing the option for 
continuous eligibility under proposed Sec.  435.926 must provide such 
coverage to children eligible under Sec.  435.118 as well as all 
children covered under any other mandatory or optional group covered by 
the state, including children eligible based on receipt of SSI, 
disability, institutionalization, or enrollment in a section 1915(c) 
home and community-based services waiver. Also proposed is Sec.  
457.342 for continuous eligibility of children under a state's separate 
CHIP.
    Under proposed Sec.  435.926(c), the state would specify in its 
state plan the length of a continuous eligibility period, not to exceed 
12 months. A continuous eligibility period begins on the effective date 
of the individual's most recent determination or renewal of eligibility 
and ends at the end of the length of the continuous eligibility period 
specified by the state. Under proposed paragraph (d), children remain 
eligible during a continuous eligibility period regardless of any 
change in circumstances except attaining the maximum age elected by the 
state for this option, death, voluntary disenrollment, change in state 
residence, state error in the eligibility determination, or fraud, 
abuse, or perjury attributed to the child or the child's 
representative.
(8) Optional Tuberculosis Eligibility Group (Sec.  435.215)
    We propose to add a new Sec.  435.215 for optional tuberculosis 
(TB)-infected individuals to codify section

[[Page 4610]]

1902(a)(10)(A)(ii)(XII) and (z)(1) of the Act. These provisions provide 
states with the option to provide Medicaid to TB-infected individuals 
who are not eligible for Medicaid under subpart B of this part 
(relating to Mandatory Coverage of the Categorically Needy) and meet 
certain income and resource requirements. The medical assistance 
available to individuals eligible in this category is limited to TB-
related services, which are defined in section 1902(z) of the Act as: 
prescribed drugs; physicians' services and services described in 
section 1905(a)(2); laboratory and X-ray services (including services 
to confirm the presence of infection); clinic services and federally-
qualified health center services; case management services (as defined 
in section 1915(g)(2)); and services (other than room and board) 
designed to encourage completion of regimens of prescribed drugs by 
outpatients, including services to observe directly the intake of 
prescribed drugs.
    The statute limits eligibility in this group to TB-infected 
individuals whose incomes and resources do not exceed the maximum 
amount a disabled individual described in subpart B of this part may 
have and obtain medical assistance under the state plan. The income and 
resource tests are both based on SSI standards and methodologies, and 
these rules remain in effect until January 1, 2014.
    However, except as provided in section 1902(e)(14)(D) of the Act, 
section 1902(e)(14)(A) of the Act provides that notwithstanding any 
other provision of title XIX, financial eligibility for Medicaid for 
all individuals effective January 1, 2014, will be based on the MAGI-
based methodologies set forth in section 1902(e)(14) of the Act. 
Because TB-infected individuals who qualify for Medicaid on that basis 
do not meet any of the exceptions from the MAGI-based income rules 
listed in section 1902(e)(14)(D) of the Act, implemented in Sec.  
435.603(j) of the Medicaid eligibility final rule, we propose that, 
effective January 1, 2014, income eligibility for this group must be 
determined in accordance with the MAGI rules in Sec.  435.603. States 
electing to cover this eligibility group need to establish an income 
standard in their state plan. Under proposed Sec.  435.215(b)(3), the 
income standard must not exceed the higher of the maximum income 
standard applicable to disabled individuals for mandatory coverage 
under subpart B of part 435 of the regulations, or the effective income 
level for coverage of TB-infected individuals under the state plan in 
effect as of March 23, 2010 or December 31, 2013, if higher, converted, 
at state option, to a MAGI-equivalent standard in accordance with 
guidance issued by the Secretary under section 1902(e)(14)(A) and (E) 
of the Act. Per Sec.  435.603(g) of the Medicaid eligibility final 
rule, there will be no resource test for eligibility under this section 
effective January 1, 2014.
    We considered an interpretation of the statute under which, because 
section 1902(z) of the Act currently provides for application of the 
financial standards and methods generally used to determine eligibility 
based on disability, individuals infected with TB and eligible for 
coverage on such basis would be considered to ``qualify for medical 
assistance * * * on the basis of being blind or disabled'' for purposes 
of the exception from application of MAGI methodologies set forth in 
section 1902(e)(14)(D)(i)(III) of the Act. Under this interpretation, 
application of the income standards and methodologies applied to 
coverage of disabled individuals, as provided in with section 1902(z) 
of Act, would continue to be applied to coverage under this eligibility 
group after January 1, 2014. We solicit comments on this alternative 
interpretation.
b. Presumptive Eligibility
(i) Proposed Amendments to Medicaid Regulations for Presumptive 
Eligibility
    We propose to revise Medicaid regulations for children's 
presumptive eligibility and to add regulations for presumptive 
eligibility for pregnant women and individuals needing treatment for 
breast or cervical cancer as well as for the six new options for 
Medicaid presumptive eligibility provided by the Affordable Care Act. 
The new options become available on January 1, 2014, except that 
presumptive eligibility for the family planning option became available 
on March 23, 2010.
(1) FFP for Administration (Sec.  435.1001)
    We propose to revise paragraph (a)(2) of Sec.  435.1001 to clarify, 
consistent with current policy, that federal financial participation 
(FFP) is available for the necessary administrative costs a state 
incurs in administering all types of presumptive eligibility, not just 
presumptive eligibility for children as now specified in this section.
(2) FFP for Services (Sec.  435.1002)
    We propose to revise paragraph (c) of Sec.  435.1002 to clarify 
that FFP is available for services covered for all individuals 
determined presumptively eligible in accordance with the statute and 
implementing regulations, rather than just for children as now 
specified in this section.
(3) Basis for Presumptive Eligibility (Sec.  435.1100)
    We propose to revise Sec.  435.1100 to address the statutory basis 
of presumptive eligibility under sections 1920, 1920A, 1920B, 1920C, 
and 1902(a)(47)(B) of the Act for children, pregnant women, and other 
individuals under subpart L, including the six new options provided by 
the Affordable Care Act.
(4) Definitions (Sec.  435.1101)
    We propose to revise Sec.  435.1101 to replace the definition of 
``application form'' with ``application'' to reflect current practices 
and to clarify that the definition of ``qualified entity'' includes a 
health facility operated by the Indian Health Service, a Tribe or 
Tribal organization, or an Urban Indian Organization.
(5) Presumptive Eligibility for Children (Sec.  435.1102)
    We propose to revise existing regulations at Sec.  435.1102, under 
which states may select qualified entities to determine presumptive 
eligibility for children under age 19 or a younger age selected by the 
state. A qualified entity determines, based on preliminary information, 
that the child's gross income (or at state option, MAGI household 
income as defined at Sec.  435.603 or a reasonable estimate using 
simplified methods prescribed by the state) meets the income 
requirements at Sec.  435.118(c) of the Medicaid eligibility final 
rule. The proposed changes, which are consistent with current policy 
and practice in states, are needed to align with the adoption of MAGI-
based methodologies in 2014 and to ensure consistency between the 
policies governing the existing and new presumptive eligibility 
options.
    We propose to amend Sec.  435.1102(b) to clarify that a qualified 
entity may not delegate to another entity its authority to determine 
presumptive eligibility and that the state must establish oversight 
mechanisms to ensure the integrity of presumptive eligibility 
determinations. We propose at Sec.  435.1102(d) that a state may 
require, as a condition of presumptive eligibility, that an individual, 
or another person who attests to having reasonable basis to know the 
status of the individual seeking a presumptive eligibility 
determination, attests that the individual is a citizen or a national 
of the United States or is in satisfactory immigration status. We seek 
comment

[[Page 4611]]

on whether this should be a state option or a requirement. A state may 
also require similar attestation that the individual is a state 
resident. Because the statute requires qualified entities to determine 
presumptive eligibility ``on the basis of preliminary information,'' 
under the proposed regulations states would be prohibited from 
requiring verification of the conditions for presumptive eligibility 
and from imposing additional conditions for presumptive eligibility. 
Proposed paragraph (e) clarifies that a presumptive eligibility 
determination by a qualified entity is not subject to fair hearing 
rights under subpart E of 42 CFR part 431.
(6) Presumptive Eligibility for Other Individuals (Sec.  435.1103)
    We propose to add Sec.  435.1103 to implement the presumptive 
eligibility for other populations permitted under sections 1920, 1920A, 
1920B, and 1920C of the Act. At paragraph (a), we propose, consistent 
with section 1920 of the Act and current policy, that a state may elect 
to provide presumptive eligibility for pregnant women in the same 
manner as described for children at the proposed Sec.  435.1101 and 
Sec.  435.1102, except that pregnant women are only covered for 
ambulatory prenatal care during a presumptive eligibility period. We 
also propose that pregnant women are limited to one presumptive 
eligibility period per pregnancy. As prescribed in the statute, if the 
state has elected to provide presumptive eligibility for children or 
pregnant women, the state may also elect to provide presumptive 
eligibility for the additional populations provided for in the 
Affordable Care Act--that is,--parents and other caretaker relatives 
(described in Sec.  435.110, adults described in Sec.  435.119, and 
individuals under age 65 described in Sec.  435.218 of the Medicaid 
eligibility final rule, as well as former foster care children 
described in Sec.  435.150 of this proposed rulemaking. We propose at 
paragraph (c) that a state may cover presumptive eligibility for 
individuals needing treatment for breast or cervical cancer as 
described at proposed Sec.  435.213 of this rulemaking; and at 
paragraph (d) that a state may provide family planning services on a 
presumptive eligibility basis for individuals who may be eligible for 
such services under proposed Sec.  435.214 of this rulemaking.
(7) Presumptive Eligibility Determined by Hospitals (Sec.  435.1110)
    We propose to add Sec.  435.1110 for hospitals electing to 
determine presumptive eligibility. The Affordable Care Act added 
section 1902(a)(47)(B) of the Act to give hospitals the option (not at 
state option like for the other types of presumptive eligibility), as 
of January 1, 2014, to determine presumptive eligibility for Medicaid. 
The Act provides hospitals participating in Medicaid with this option 
whether or not the state has elected to permit qualified entities to 
make presumptive eligibility determinations under other sections of the 
statute.
    At paragraph (a) of Sec.  435.1110, we propose that a qualified 
hospital may elect to make presumptive eligibility determinations, on 
the basis of preliminary information and according to policies and 
procedures established by the state Medicaid agency. Proposed paragraph 
(b) establishes the basic criteria which a hospital must meet to be a 
qualified hospital authorized to make presumptive eligibility 
determinations, including that the hospital (1) participate as a 
Medicaid provider, (2) notify the agency of its decision to make 
presumptive eligibility determinations, (3) agree to make 
determinations consistent with state policies and procedures, (4) at 
state option, assist individuals in completing and submitting the full 
application and in understanding any documentation requirements, and 
(5) not be disqualified by the agency under proposed paragraph (d) 
(discussed below).
    At paragraph (c) of this section, we specify that a state Medicaid 
agency may limit presumptive eligibility determinations by qualified 
hospitals to the types of presumptive eligibility that the agency may 
elect to cover, as described at proposed Sec.  435.1101 through Sec.  
435.1103. In addition, qualified hospitals may be permitted by the 
agency to determine presumptive eligibility on other bases under the 
state plan or 1115 demonstration (for example, based on disability).
    We propose at paragraph (d) that the agency may establish standards 
for qualified hospitals making presumptive eligibility determinations 
related to the proportion of individuals determined presumptively 
eligible for Medicaid by the hospital that submit a regular application 
before the end of the presumptive eligibility period and/or are 
determined eligible for Medicaid based on such application. We request 
comments on whether this should be a federal requirement, a state 
option, or neither, and what such reasonable standards would be. The 
agency must take action as necessary if a hospital does not meet the 
standards established by the agency or is not making determinations in 
accordance with applicable state policies and procedures.
(ii) Proposed Amendments to CHIP Regulations for Presumptive 
Eligibility (Sec.  457.355)
    In order to align the regulations governing presumptive eligibility 
for children under CHIP with Medicaid, we revise current regulations at 
Sec.  457.355 to incorporate by cross reference the terms of Sec.  
435.1101 and Sec.  435.1102 (relating to presumptive eligibility for 
children in Medicaid) into our CHIP regulations. In addition, prior to 
passage of CHIPRA, states were permitted to claim enhanced federal 
matching funds under their CHIP title XXI allotment for coverage of 
children during a Medicaid presumptive eligibility period; this 
authority is implemented in the current regulations at Sec.  457.355 
and Sec.  457.616(a)(3). Section 113(a) of CHIPRA, however, amended 
section 2105(a)(1) of the Act to eliminate this authority, so that, 
effective April 1, 2009, states must claim their regular federal 
financial participation under title XIX for services provided to 
children during a Medicaid presumptive eligibility period. This change 
is implemented through the proposed revisions to Sec.  457.355 and by 
deleting Sec.  457.616(a)(3).
2. Medically Needy (Sec. Sec.  435.301, 435.310, 435.831)
    Under section 1902(e)(14)(D)(i)(IV) to the Act, as added by section 
2002(a) of the Affordable Care Act and codified at Sec.  435.603(j)(6), 
the determination of eligibility for medically needy individuals is 
excepted from application of MAGI-based financial methodologies set 
forth at Sec.  435.603. Under section 1902(a)(10)(C)(i)(III) of the 
Act, financial eligibility under a medically-needy group for children, 
pregnant women, parents, and other caretaker relatives ``shall be no 
more restrictive than the methodology that would be employed under the 
appropriate state plan described in [section 1902(a)(10)(A)(i) of the 
Act] to which such group is most closely categorically related.'' 
Currently, for pregnant women, parents, children, and other caretaker 
relatives the methods of the former AFDC program are applied. For aged, 
blind, and disabled individuals, section 1902(a)(10)(C)(i)(III) of the 
Act requires the use of a methodology that is no more restrictive than 
the methods applied under the SSI program.
    As the former AFDC program has now been eliminated, there is no 
state plan described in section 1902(a)(10)(A)(i) of the Act that is 
``most closely categorically related'' to pregnant women, parents, 
children, and other

[[Page 4612]]

caretaker relatives. In addition, retaining the AFDC methodologies for 
the purpose of determining countable income for medically needy 
coverage could be burdensome for states and consumers, and could 
undermine the simple streamlined eligibility process required under 
section 1943 of the Act and section 1413 of the Affordable Care Act, as 
well as the requirements under section 1902(a)(19) of the Act to 
administer the program in a simple and efficient manner and in the best 
interest of beneficiaries. Therefore, we are proposing to revise Sec.  
435.831 to provide states with flexibility to apply, at state option, 
either AFDC-based methods or MAGI-based methods for determining income 
eligibility for medically needy children, pregnant woman, and parents 
and other caretaker relatives--individuals whose financial eligibility 
generally will be determined using MAGI-based methods. Although section 
1902(e)(14)(A) and 1902(e)(14)(D)(i)(IV) of the Act indicates that 
states cannot be required to apply MAGI-based methods in determining 
financial eligibility for medically needy individuals, we believe that 
this does not preclude us from permitting states to apply MAGI-based 
income methodologies in determining medically needy eligibility for 
these populations.
    However, we also recognize that section 1902(a)(17)(D) of the Act 
prohibits state plans from taking into account the ``financial 
responsibility of any individual for any applicant or recipient of 
assistance under the plan unless such applicant or recipient * * * is 
such individual's spouse or such individual's child who is under age 
21, * * * or is blind or disabled.''
    Thus, states may use a MAGI-based methodology in determining 
household income using MAGI-based methods, but in doing so, must ensure 
that there is no deeming of income or attribution of financial 
responsibility that would conflict with the requirements of section 
1902(a)(17)(D). States could, for example, apply the methodology set 
forth in Sec.  435.603 of the Medicaid eligibility final rule, and, in 
cases involving impermissible deeming, subtract the income of the 
individual whose income may not be counted under Sec.  1902(a)(17)(D). 
States may also, but would not be required to, remove such individual 
from the household size. We note also that section 1902(r)(2) of the 
Act and Sec.  435.601(d) of the current regulations provide states with 
an option to adopt other reasonable methodologies, provided that such 
methods are less restrictive than the SSI, AFDC or the MAGI-based 
methods permitted under this proposed rule.
    Furthermore, in order to meet the maintenance of effort 
requirements (MOE) in section 1902(gg) of the Act, states would have to 
ensure that the adoption of MAGI methodologies is no more restrictive 
than the methodology currently used by the state in determining the 
eligibility of children as medically needy until the MOE expires in 
2019. For purposes of this section, states may replace current 
disregards applied to medically needy individuals, some of which may 
benefit only part of its medically needy population (such as a 
disregard for amounts for child care), with a single block-of-income 
disregard made available to all medically needy individuals such that 
in the aggregate the MOE is satisfied.
    In addition, we are removing the reference to ``family'' in Sec.  
435.831(c) to be consistent with the implementation of eligibility for 
low-income families under section 1931 of the Act in the final 
Eligibility Rule. Since eligibility under section 1931 of the Act, like 
all other bases of eligibility, will be determined on an individual 
basis, parents and other caretaker relatives will be evaluated for 
medically needy eligibility as individuals, as currently is the case of 
pregnant women and children.
d. Optional Eligibility of Lawfully-Residing Non-Citizen Children and 
Pregnant Women (Sec. Sec.  435.4, 435.406, 457.320)
    Section 214 of CHIPRA amended section 1903(v)(4) of the Act to 
permit states to provide Medicaid coverage to children, pregnant women, 
or both who are lawfully residing in the United States, and otherwise 
eligible for Medicaid. We are proposing to amend Sec.  435.406 by 
revising paragraph (b) to implement this option. Section 214 of CHIPRA 
also amended section 2107 of the Act similarly to allow states to cover 
such lawfully residing children and pregnant women under CHIP. We also 
propose at 45 CFR 155.20 to align the Exchange definition of ``lawfully 
present'' with the Medicaid/CHIP definition in Sec.  435.4. Individuals 
who meet this definition could be eligible for enrollment in a QHP 
through the Exchange.
    On July 1, 2010, we issued a State Health Official (SHO) letter 
providing guidance implementing section 214 of CHIPRA. In the SHO, we 
interpreted ``lawfully residing'' to mean individuals who are lawfully 
present in the United States and who are residents of the state in 
which they are applying under the state's Medicaid or CHIP residency 
rules. Because state residency is a separate eligibility criteria which 
must be established independent of an individual's immigration status 
as a lawfully present non-citizen, we are proposing to use the term 
``lawfully present'' in Sec.  435.406(b), without need to include a 
definition of ``lawfully residing'' in these proposed regulations. 
Eligibility for Medicaid under Sec.  435.406(b) cannot be approved for 
an individual who is lawfully present in the United States, if the 
individual is not also a resident of the state under the state's 
residency rules. For example, a nonimmigrant visitor for business or 
pleasure may be lawfully present under immigration regulations, but not 
meet Medicaid or CHIP residency requirements, and therefore will not be 
able to qualify for Medicaid or CHIP based on residency.
    Current paragraph (b) of Sec.  435.406 is re-designated and revised 
at proposed paragraph (c) and we propose to add a new paragraph (b). We 
also propose new definitions of ``lawfully present,'' ``non-citizen,'' 
``qualified non-citizen'' at Sec.  435.4. Policies consistent with our 
already-issued July 1, 2010 SHO letter, are only briefly discussed and 
we refer readers to the letter for a more in-depth discussion (at 
http://downloads.cms.gov/cmsgov/archived-downloads/SMDL/downloads/SHO10006.pdf). Explained in more depth herein are several modest 
proposed changes in policy as compared to the SHO.
    Consistent with the SHO, under proposed Sec.  435.406(b)(1), if a 
state elects the CHIPRA 214 option for pregnant women and/or children, 
then it must elect the option for all children and/or pregnant women 
who are lawfully present, as defined in Sec.  435.4; in other words, 
the state cannot choose among ``lawfully present'' children or pregnant 
women and offer Medicaid to some, but not others. We propose in Sec.  
435.406(c) consistent with our current policy, that if a state elects 
to cover lawfully present children and/or pregnant women under Sec.  
435.406(b), such individuals may be eligible for any Medicaid 
eligibility group covered under the state plan for which he or she 
meets all other eligibility requirements.
    In accordance with section 1903(v)(4)(A) and (B) of the Act, 
proposed Sec.  435.406(b)(2) provides that various limitations 
otherwise applicable to non-citizen eligibility do not apply to 
lawfully present non-citizens covered pursuant to a state's election of 
the option provided at paragraph (b)(1). The restrictions that do not 
apply to individuals under 21 or pregnant women covered under this 
option include, the 5-year waiting period described in section 403 of 
PRWORA, 8

[[Page 4613]]

U.S.C. 1613; the restriction relating to the limitation on payment 
services for individuals who are not qualified non-citizens under 
section 401(a) of PRWORA, 8 U.S.C. 1611(a); deeming of sponsor income 
under section 421 of PRWORA, 8 U.S.C. 1631; and the state option to 
require Lawful Permanent Residents to be credited with 40 qualifying 
quarters of work or limitation of coverage to seven years, permitted 
under section 402(b) of PRWORA, 8 U.S.C. 1612(b). We propose a new 
paragraph (c) of Sec.  435.406, revising and redesignating current 
paragraph (b) clarifying which non-citizens would be eligible to 
receive coverage of services of an emergency medical condition 
including in states that elect to cover children and pregnant women 
under the option in paragraph (b)(1).
    The definition of ``lawfully present'' proposed at Sec.  435.4 is 
substantially the same as that contained in our July 1, 2010 guidance 
and at 45 CFR 152.2 (the current definition used for Exchange 
eligibility) with some minor modifications to further simplify the 
rules as well as ensure alignment with the eligibility of lawfully 
present non-citizens for advance payment of the premium tax credit, 
cost-sharing reductions, and enrollment in a QHP through the Exchange. 
As these modifications do not substantially affect eligibility, we do 
not anticipate an impact on state costs. As explained in the SHO, our 
policy is based on the definition provided in Department of Homeland 
Security (DHS) regulations at 8 CFR 1.3, used for purposes of Social 
Security benefits, with some modification appropriate to the Medicaid 
and CHIP programs.
    We propose the following limited differences in the definition of 
``lawfully present'' in this proposed rulemaking as compared to our 
July 1, 2010 SHO.
    We propose inclusion of victims of trafficking, at paragraph (9) 
whose eligibility for Medicaid is mandatory under federal law under 
section 107 of the Victims of Trafficking and Violence Protection Act 
of 2000 (Pub. L. 106-386) as amended 22 U.S.C. 7105). Inclusion of 
victims of trafficking in the definition of ``lawfully present'' is 
needed to ensure alignment of current Medicaid rules with eligibility 
for advance payment of the premium tax credit, cost-sharing reductions, 
and enrollment through the Exchange. We note that these individuals are 
required to be covered in Medicaid, through the Victims of Trafficking 
Act. Thus, regardless of whether a state elects to cover lawfully 
residing children or pregnant women under the option codified at 
proposed Sec.  435.406(b), coverage of these individuals is required if 
they meet all other eligibility requirements.
    In the definition of lawfully present proposed at Sec.  435.4, with 
respect to non-citizens with a valid non-immigrant status, we propose 
in paragraph (2) to include all non-immigrants who have a valid status, 
rather than limiting inclusion to such individuals who also have not 
violated the terms of their status, as specified in the SHO. This 
allows coverage to non-immigrants who have valid and unexpired status, 
without requiring state Medicaid agencies to understand all the terms 
of such status, and to determine whether any terms have been violated. 
This, in turn, will enable agencies to verify this non-citizen status 
through a data match with DHS through the federal data services hub 
(using that Department's Systematic Alien Verification for Entitlements 
(SAVE) system), for virtually all non-immigrant applicants or 
beneficiaries without further investigation.
    With respect to individuals granted an employment authorization 
document (EAD) under 8 CFR 274a.12(c), we propose in the definition of 
lawfully present at paragraph (4)(iii) to include most non-citizens 
granted such document, instead of limiting inclusion only to specified 
groups of individuals granted an EAD, as was done in the SHO, thereby 
enabling verification of satisfactory immigration status through SAVE, 
which typically can verify a grant of EAD in three to five seconds. We 
note that this proposed modification should not result in an expansion 
of eligibility, but only a simplification of verification processes for 
these individuals. It is our understanding that all individuals granted 
an EAD under Sec.  274a.12(c), are already considered lawfully present 
under another category under our SHO, with the exception provided in 
the proposed regulation at paragraph (10).
    We propose in the definition of lawfully present at Sec.  435.4 to 
add two additional categories of non-citizens not included in the 
definition of ``lawfully present'' in the SHO. First, we propose in 
Sec.  435.4 at paragraph (4)(vii) inclusion of individuals who have 
been granted an administrative stay of removal by DHS. We seek comments 
on whether we should include individuals granted an administrative stay 
by U.S. Department of Justice. Such stays provide non-citizens with 
permission to remain living in the United States. We considered also 
adding individuals who have been granted stays by a court (as opposed 
to administratively issued by DHS). We understand some court stays are 
effective without any consideration of the filing, merely by the 
individual filing for such a stay. We seek comments on this provision 
and alternative ways to address those for whom a court has considered 
an individual's situation and granted a stay.
    Second, at paragraph (10) of the definition, we propose to add an 
exception to the lawfully present definition to specify that 
individuals with deferred action under the Deferred Action for 
Childhood Arrivals (DACA) process shall not be eligible for Medicaid 
and CHIP under the CHIPRA state option with respect to any of the 
categories (1) through (9), in accordance with and based on the 
rationales included in the interpretative guidance set forth in a SHO 
letter, 12-002 issued August 28, 2012, available at 
www.medicaid.gov/Federal-Policy-Guidance/downloads/SHO-12-002.pdf and 
in the interim final rule with request for comments to the Pre-Existing 
Condition Insurance Plan (PCIP) Program (77 FR 52614, Aug. 30, 2012). 
We propose that the ``lawfully present'' definition in the Exchange 
rules would also incorporate this exception.
    We note that we propose to remove the language contained in our SHO 
specifically related to individuals who are lawfully present in the 
Commonwealth of the Northern Mariana Islands (CNMI) under 48 U.S.C. 
1806(e) from our definition of lawfully present at Sec.  435.4. We 
understand this statutory provision expired on November 28, 2011, which 
was two years after the transition program to extend U.S. immigration 
laws to the CNMI's immigration system began. We believe that most of 
these individuals will continue to be covered under our definition of 
lawfully present at Sec.  435.4 in other categories, including as non-
immigrants or parolees.
    We solicit comments on the definition of lawfully present in this 
proposed regulation. Codification of other statutes relating to 
categories of non-citizens who are eligible for Medicaid (including 
under title IV of PRWORA and subsequent federal legislation) that are 
not reflected in our current regulations are not included in this 
proposed rulemaking.
    We also propose to amend Sec.  457.320(c) to implement section 
2107(e)(1) of the Act, to permit a separate CHIP program to cover 
``lawfully residing'' children or pregnant women otherwise eligible for 
CHIP. We propose to align the terminology and the option to provide 
coverage for ``lawfully present'' children and pregnant women in CHIP 
under Sec.  457.320(c) with policy for Medicaid in proposed Sec.  
435.406(b).

[[Page 4614]]

The same definition of ``lawfully present'' proposed for Medicaid also 
is proposed for CHIP. Consistent with the statute, states may not 
choose to cover these new groups only in CHIP, without also having 
extended the option to Medicaid. As section 1903(v)(4)(A) of the Act 
merely lifts restrictions for lawfully residing, otherwise eligible 
individuals, a state must have coverage that would otherwise include 
the individual. Thus, lawfully present pregnant women could be covered 
under CHIP only if the CHIP program has elected to cover pregnant women 
generally, either under a waiver or demonstration or under the option 
provided under section 2112 of the Act to cover pregnant women under 
its CHIP state plan.
e. Deemed Newborn Eligibility (Sec.  435.117 and Sec.  457.360)
(i). Medicaid Deemed Newborn Eligibility (Sec.  435.117)
    Section 1902(e)(4) of the Act and existing Sec.  435.117 require 
that babies born to mothers covered under the Medicaid state plan for 
benefits on the date of birth, including during a period of retroactive 
eligibility, be automatically deemed eligible for Medicaid for one year 
from birth. The provision is intended to ensure coverage of the newborn 
without any gaps; no application is required. In accordance with 
section 1903(x)(5) of the Act, as added by section 211(b)(3)(A)(ii) of 
CHIPRA and consistent with previous guidance, we clarify at proposed 
paragraph (b)(1)(i) of Sec.  435.117 that a child born to a mother 
covered by Medicaid for labor and delivery as an emergency medical 
service pursuant to section 1903(v)(3) of the Act shall be deemed 
eligible for Medicaid during the child's first year of life.
    Section 113(b)(1) of CHIPRA amended section 1902(e)(4) of the Act 
effective April 1, 2009 to eliminate the previous statutory requirement 
that eligibility under this section continue only so long as the baby 
was a member of the mother's household and the mother either remained 
eligible for Medicaid or would remain eligible if still pregnant. We 
propose revisions to Sec.  435.117(b) to implement this change in the 
statute. Previous guidance was provided in SHO letter 09-009 
dated August 31, 2009, http://downloads.cms.gov/cmsgov/archived-downloads/SMDL/downloads/SHO083109b.pdf.
    Section 111 of CHIPRA added a new section 2112 to title XXI of the 
Act, giving states the option to cover targeted low-income pregnant 
women under a separate CHIP state plan. Section 2112(e) of the Act 
requires that babies born to such pregnant women covered under the CHIP 
state plan for benefits for the date of birth are deemed to have 
applied and been determined eligible for Medicaid or CHIP, as 
appropriate, and remain eligible for one year. At Sec.  
435.117(b)(1)(ii), we interpret this to mean that babies born to 
pregnant women on CHIP with household income at or below the applicable 
Medicaid income standard for infants under Sec.  435.118 of the 
Medicaid eligibility final rule must be automatically enrolled in 
Medicaid, and those born to pregnant women with income above the 
applicable Medicaid income standard must be automatically enrolled in 
CHIP.
    To promote simplicity of administration and the best interest of 
beneficiaries, consistent with section 1902(a)(19) of the Act, we also 
propose at Sec.  435.117(b)(1)(iii) that states be provided with the 
option to treat as deemed newborns in Medicaid the babies born to 
mothers covered as a child under a separate CHIP for benefits for the 
date of birth. We solicit comments on whether states should have the 
option to extend automatic Medicaid enrollment to the extent that the 
state determines that, under normal circumstances, such babies would be 
likely to meet requirements for Medicaid eligibility: (1) To all babies 
born to mothers covered as a targeted low-income child under a separate 
CHIP, (2) only to such babies if the state has elected the option to 
cover targeted low income pregnant women under its CHIP state plan, 
even if the mother does not qualify as a targeted low-income pregnant 
woman, or (3) to no such babies born to mothers covered as a targeted 
low-income child under a separate CHIP who do not qualify as a targeted 
low-income pregnant woman. Also consistent with section 1902(a)(19) of 
the Act, we propose at Sec.  435.117(b)(1)(iv) that states be provided 
with the option to treat as deemed newborns in Medicaid the babies born 
to mothers covered under a Medicaid or CHIP demonstration under section 
1115 of the Act, unless the demonstration's special terms and 
conditions (STCs) specifically address this issue.
    We also propose a new paragraph (c) to give states the option of 
recognizing the deemed newborn status from another state for purposes 
of enrolling babies born in another state without need for a new 
application. Although the statutory language refers to deemed 
eligibility under ``such state plan'' referring back to the state plan 
under which the mother was covered by Medicaid, to read this language 
so narrowly would restrict the rights of mothers and children to travel 
among states, similar to a durational residency requirement.
    Section 1902(e)(4) of the Act provides that for the year of deemed 
eligibility, the Medicaid identification number of the mother serves as 
the identification number of the child for Medicaid claims purposes, 
unless the state issues the child a separate identification number. For 
babies eligible under proposed Sec.  435.117, proposed paragraph (d)(2) 
directs the agency to promptly issue a separate Medicaid identification 
number for the child prior to the date of the child's first birthday or 
the termination of the mother's Medicaid eligibility, whichever is 
sooner, unless the child is determined to be ineligible (such as, the 
child is not a state resident).
    Finally, section 1902(e)(4) of the Act does not distinguish between 
babies born to pregnant women eligible for Medicaid as medically needy 
under section 1902(a)(10)(C) of the Act and those born to pregnant 
women eligible for Medicaid as categorically needy under section 
1902(a)(10)(A) of the Act. We propose to revise existing regulations at 
Sec.  435.301 by removing paragraph (b)(1)(iii), which provided that 
babies born to medically needy pregnant women receive deemed newborn 
eligibility as a medically needy child. Under revised Sec.  435.117, as 
proposed in this rulemaking, babies born to pregnant women eligible as 
medically needy and receiving covered benefits for the date the child 
is born are covered as deemed newborns under Sec.  435.117. These 
proposed changes are consistent with current policy, clarifying and 
simplifying them, and should have no meaningful impact on state 
programs.
(ii) CHIP Deemed Newborn Eligibility (Sec.  457.360)
    As discussed in the previous section of this preamble, section 
111(a) of CHIPRA gives states the option to cover pregnant women under 
a separate CHIP and also adds section 2112(e) of the Act, requiring 
states to provide deemed newborn eligibility under Medicaid or CHIP, as 
appropriate based on income, to newborns of those mothers. Consistent 
with the proposed regulations at Sec.  435.117 for Medicaid deemed 
newborn eligibility discussed above, we propose a new Sec.  457.360 to 
extend deemed newborn eligibility under CHIP to babies born to mothers 
covered as targeted low-income pregnant women under a separate CHIP for 
the date of birth, to the extent that the state has not extended 
Medicaid

[[Page 4615]]

eligibility to the babies. We are also proposing a state option to 
extend deemed newborn eligibility to babies of mothers covered as 
targeted low-income children under a separate CHIP (not as targeted 
low-income pregnant women) for the date of birth, to the extent that 
the state has not extended Medicaid eligibility to the babies. This 
option would relieve the state from any need to shift children from one 
category to another, ensuring that benefits are delivered in the 
children's best interests and thus promoting the effective and 
efficient delivery of coverage as required by section 2101(a) of the 
Act. Also, we are proposing a state option to provide CHIP deemed 
newborn eligibility to babies of mothers who were receiving CHIP 
coverage in another state for the date of the child's birth or to 
babies of mothers covered by Medicaid or CHIP under an 1115 
demonstration. As discussed above in this preamble, if the mother's 
household income is no more than the income standard for infants in 
Medicaid, the baby will be deemed eligible and enrolled in Medicaid; 
otherwise, the baby will be deemed eligible and enrolled in a separate 
CHIP.
6. Verification Exceptions for Special Circumstances (Sec.  435.952)
    Under the final eligibility rule at Sec.  435.952(c), states are 
permitted to request additional information from individuals, including 
documentation, to verify most eligibility criteria if data obtained 
electronically by the state is not reasonably compatible with attested 
information or electronic data is not available, as specified in Sec.  
435.952(c)(2)(ii) of the regulation. There are, however, individuals 
for whom providing documentation even in such limited circumstances 
would create an insurmountable procedural barrier to accessing 
coverage, while serving little evidentiary value. To ensure that 
verification procedures are consistent with simplicity of 
administration and in the best interest of individuals in accordance 
with section 1902(a)(19), we are proposing to add an exception at Sec.  
435.952(c)(3) to an otherwise permissible requirement to provide 
documentation in such circumstances. Under paragraph (c)(3), except as 
specifically required under the Act (for example, with respect to 
citizenship and immigration status if electronic verification is not 
successful), states may not require documentation from individuals for 
whom documentation does not exist or is not reasonably available at the 
time of application or renewal. Such circumstances include, but are not 
limited to, individuals who are homeless and victims of domestic 
violence or natural disasters.
7. Verification Procedures for Individuals Attesting to Citizenship or 
Satisfactory Immigration Status
    Verification of citizenship and immigration status is governed by 
sections 1137, 1902(a)(46)(B), 1902(ee), and 1903(x) of the Act, and by 
section 1943 of the Act, which cites to section1413(c) of the 
Affordable Care Act. Implemented in current regulations at Sec.  
435.406, section 1137 of the Act requires that individuals seeking an 
eligibility determination make a declaration of citizenship or 
immigration status, and that the status of non-citizens be verified 
with the Department of Homeland Security (DHS). Under section 
1902(a)(46)(B), states must verify citizenship status of applicants 
either by use of documentary evidence in accordance with section 
1903(x) of the Act or through an electronic data match with the Social 
Security Administration (SSA) under section 1902(ee) of the Act, as 
added by section 211 of CHIPRA. Documentation of citizenship status 
under section 1903(x) is implemented in current regulations at Sec.  
435.407. Section 211 of CHIPRA also made other changes to section 
1903(x), for example, exempting infants deemed eligible for Medicaid 
under section 1902(e)(4) of the Act from the requirement to verify 
citizenship, and adding a statutory requirement to provide for a 
``reasonable opportunity'' period for individuals declaring U.S. 
citizenship to provide verification, similar to the ``reasonable 
opportunity'' afforded individuals declaring satisfactory immigration 
status under section 1137(d) of the Act. We propose revisions to Sec.  
435.406 and Sec.  435.407 of the current regulations and Sec.  435.956 
of the Medicaid eligibility final rule in order to implement section 
1902(ee) of the Act and other revisions to section 1903(x) of the Act 
made by CHIPRA, as discussed below and note that we redesignate the 
definition of ``citizenship'' from the introductory paragraph at Sec.  
435.407 to a definition at Sec.  435.4.
a. Electronic Verification of Citizenship and Immigration Status (Sec.  
435.940 and Sec.  435.956)
    Under Sec.  435.949 of final Medicaid Eligibility Rule, the 
Secretary will establish an electronic service (referred to as the 
``federal data services hub'') through which all insurance 
affordability programs can access specified data from pertinent federal 
agencies needed to verify eligibility. Per Sec.  435.949, if 
information related to verifying Medicaid eligibility--including 
information to verify citizenship from SSA and information to verify 
immigration status from DHS--is available through the federal data 
services hub described in Sec.  435.949, states will be required to 
obtain such information through that service. We therefore clarify at 
proposed Sec.  435.956(a)(1) that states will be required to verify 
citizenship and immigration status through the federal data services 
hub if available.
    Prior to passage of the Affordable Care Act, section 211 of CHIPRA, 
which added section 1902(ee) to the Act, has provided states with an 
option to conduct an electronic data match directly with SSA to satisfy 
the citizenship verification requirements in lieu of requiring 
documentation in accordance with section1903(x) of the Act. To date, 44 
states have adopted this option in their Medicaid and CHIP programs. 
Although states will be required to conduct electronic verification of 
citizenship primarily through the federal data services hub, if such 
verification is not available, the option under section 1902(ee) of the 
Act will remain in effect.
    If the agency is unable to verify such status through the hub, 
proposed Sec.  435.956(a)(2) directs the agency to verify citizenship 
by conducting an electronic data match directly with SSA or by 
obtaining documentation in accordance with Sec.  435.407 of the 
regulations, as modified in this proposed rulemaking, and to verify 
immigration status by conducting a match directly with DHS' SAVE system 
in accordance with section 1137 of the Act and Sec.  435.406. In such 
instances, verification of citizenship and immigration status should be 
conducted in a manner consistent with the requirements of Sec.  
435.952(c)(2)(ii) of the final eligibility rule (permitting states to 
require documentation to verify an eligibility criterion only if 
electronic data is not available, as defined in the regulation). Note 
that some of the documentary evidence permitted under section 1903(x) 
of the Act and Sec.  435.407 to verify citizenship may be available 
electronically, such as a match with a state's vital statistics agency, 
and such data also must be accessed when available under the standard 
established in Sec.  435.952(c)(2)(ii) before paper documentation of 
citizenship is requested.
    Under 8 U.S.C. 1613(b)(2), qualified non-citizens who are veterans 
with a discharge characterized as a honorable discharge and not on 
account of alienage and who fulfill the minimum active-duty service 
requirements of

[[Page 4616]]

section 5303A of Title 38 or are in active military duty status (other 
than active duty for training), or the spouse or dependent child of 
such a veteran or individual in active duty status, are exempt from the 
5-year waiting period applicable to certain qualified non-citizens. We 
seek comment on appropriate verification procedures for veteran status.
    In proposed Sec.  435.956(a)(3), we move and revise current 
language at Sec.  435.407(i)(5), which provides that verification of 
citizenship (whether through documentation submitted by the applicant 
or through an electronic data match) is a one-time activity that should 
be recorded in the individual's file. At a regular eligibility renewal 
or as part of a future application for Medicaid, the agency may not re-
verify citizenship, but must only check its records to confirm that the 
individual's citizenship has already been verified. We expect that 
states will re-verify an individual's immigration status if the status 
is temporary in nature, such as for individuals in Temporary Protected 
Status. We solicit comments on whether, consistent with existing 
regulations at Sec.  431.17(c), Medicaid agencies should be expected to 
retain such records indefinitely or for a more limited period of time, 
such as 5 or 10 years.
b. Reasonable Opportunity To Verify Citizenship or Immigration Status
    We anticipate that electronic verification with SSA or DHS 
generally will occur in real or near-real time. In the event that 
electronic verification through the hub or another source is delayed or 
fails, sections 1903(x) and 1902(ee) of the Act require that states 
provide applicants declaring U.S. citizenship with a ``reasonable 
opportunity period'' to verify their citizenship. During the reasonable 
opportunity period, states must try to resolve with SSA or the 
applicant inconsistencies that arise from the data match, and request 
additional documentation from the applicant if the inconsistencies 
cannot be resolved. Under sections 1902(ee) and 1903(x) of the Act, 
states also must furnish Medicaid to otherwise eligible individuals 
during the reasonable opportunity period. As noted, section 1137(d)(4) 
of the Act similarly requires states to provide individuals with a 
``reasonable opportunity'' to establish satisfactory immigration status 
if documentation is not provided or verification of satisfactory 
immigration status with DHS fails, and to receive benefits if otherwise 
eligible during such time. Section 1411(e)(3) of the Affordable Care 
Act requires Exchanges to verify an individual's attestation of 
citizenship and lawful presence in the same manner as Medicaid in 
accordance with section 1902(ee) of the Act when inconsistencies arise. 
We anticipate that in many cases states may be able to resolve 
inconsistencies in real-time or near real-time, in which cases the 
reasonable opportunity period would not need to be triggered.
    In accordance with sections 1137, 1902(ee), and 1903(x) of the Act, 
we propose to add a new paragraph (g) to Sec.  435.956 to implement the 
reasonable opportunity period afforded to individuals who declare U.S. 
citizenship or satisfactory immigration status. Under Sec.  435.911(c) 
of the final Medicaid Eligibility Rule (revised to update a cross 
reference in this proposed rule), states must provide benefits to 
otherwise eligible individuals during such reasonable opportunity 
period. Situations which may trigger the reasonable opportunity period 
include the following:
     The individual is unable to provide a SSN, needed for 
electronic verification with SSA;
     Either the federal data services hub or SSA or DHS 
databases are temporarily down for maintenance or otherwise 
unavailable, thereby delaying electronic verification;
     There is an inconsistency between the data available from 
an electronic source and the individual's declaration of citizenship or 
immigration status which the agency must attempt to resolve, including 
by identifying typographical or clerical errors; or
     Electronic verification is unsuccessful, even after agency 
efforts to resolve any inconsistencies, and additional information, 
including documentation, is needed.
    Recognizing that electronic verification of citizenship and 
immigration status generally will be accomplished in real-time, we 
further propose that the reasonable opportunity period is triggered if 
verification of citizenship or immigration status cannot be concluded 
``promptly.'' This standard is consistent with the standard applied to 
the provision of benefits generally under Sec.  435.911(c) of the final 
Medicaid Eligibility Rule, pursuant to which individuals must be 
furnished benefits ``promptly and without undue delay.'' We expressly 
apply the standard in Sec.  435.911(c) to the provision of benefits to 
individuals during a reasonable opportunity period by including a cross 
reference to Sec.  435.911(c) at proposed Sec.  435.956(a)(2)(ii). 
Thus, if the agency cannot resolve inconsistencies in a data match with 
SSA or DHS (performed either in accordance with Sec.  435.949 of the 
final Medicaid eligibility final rule or proposed Sec.  435.956(a)(1) 
or (2)) in a prompt manner, such that eligibility would be determined 
and benefits provided with the same promptness as if the agency were 
able to verify citizenship or immigration status in real-time, the 
agency must begin the reasonable opportunity period, and benefits must 
be furnished as soon as other eligibility criteria are verified, in the 
same manner and as promptly as such criteria are verified for 
applicants generally. In the case of an individual with respect to whom 
a temporary immigration status was verified at application and with 
respect to whom the agency is re-verifying satisfactory status, 
regulations at Sec.  435.911(c) in the Medicaid eligibility final rule 
similarly require that benefits be furnished during the reasonable 
opportunity period afforded under Sec.  435.956(g). We note that in the 
case of a reasonable opportunity period triggered because the applicant 
is unable to provide an SSN, resulting in the state's inability to 
initiate electronic verification of citizenship with SSA, states must 
comply with the regulations at Sec.  435.910, relating to assisting 
individuals with obtaining and verifying SSNs. We also note that we are 
making a technical correction to Sec.  435.910(g) to put back the 
reference to the verification of SSNs with SSA, which was inadvertently 
deleted in the Medicaid eligibility final rule.
    We propose a conforming amendment to Sec.  435.911(c) of the final 
Medicaid eligibility final rule to clarify that the reasonable 
opportunity period encompasses all aspects of the process to verify 
citizenship immigration status, including not only time for an 
individual to provide documentation but also time for the agency to 
resolve inconsistencies or conclude the electronic verification 
process. This proposed rulemaking also replaces the cross reference in 
Sec.  435.911(c) of the Medicaid eligibility final rule to the 
statutory provisions governing the reasonable opportunity period with a 
cross reference to Sec.  435.956(g), as proposed in this rulemaking.
    The proposed rule seeks to balance individuals' ability to access 
coverage in a timely manner and states' administrative interests in not 
being required to take steps to enroll someone in the program 
immediately whenever electronic verification is not accomplished in 
real time, if inconsistencies can be resolved quickly. We note that 
section 1137(d)(4) of the Act seems to require a reasonable

[[Page 4617]]

opportunity period only in cases where the individual has either not 
provided documentation or where verification with DHS has failed. This 
seems to indicate that states have at least the option of some 
reasonable time during which they can attempt to resolve 
inconsistencies and verify immigration status prior to providing the 
reasonable opportunity period, including the provision of benefits. 
Similarly, section 1902(ee)(1)(B)(ii) discusses the reasonable 
opportunity period only once an inconsistency in verification cannot be 
resolved, which is consistent with the proposed policy. We also are 
considering a policy--either instead of or in addition to the policy 
described above--under which the reasonable opportunity period, 
including provision of benefits during such period, would be triggered 
if the agency cannot resolve any inconsistencies with the electronic 
match with SSA or DHS within a specified number of business days. We 
seek comments on both approaches.
    We propose to apply the same reasonable opportunity period of 90 
days that is required under section 1902(ee) of the Act, and which also 
is required for Exchanges, to all citizenship verification procedures, 
whether conducted in accordance with Sec.  435.949, section 1902(ee) of 
the Act, or Sec.  435.407. We are also proposing this same 90-day 
timeframe to verifying an individual's satisfactory immigration status 
in accordance with Sec.  435.949, Sec.  435.406 or section 1137(d) of 
the Act. This will provide for consistency and ease of administration 
and coordination between insurance affordability programs and better 
understanding by the public.
    Proposed Sec.  435.956(g)(1) establishes the basic requirement to 
provide a reasonable opportunity to individuals to verify citizenship 
or immigration status as well as notice of such opportunity. We propose 
in paragraph (g)(2) that the reasonable opportunity period extends 90 
days from the date on which such notice is received by the individual. 
We are proposing to define the date the individual receives the notice 
to mean 5 days after the date on the notice, unless the individual 
shows that he or she did not receive the notice within the 5-day 
period, consistent with the proposed revision to Sec.  431.231 
(relating to receipt of notice of an individual's right to appeal). We 
also propose (1) to codify current policy, outlined in previous CMS 
guidance (SHO-09-016, SMD 06-012), to permit states to extend the 
reasonable opportunity period if the agency needs more time to complete 
the verification process, or the individual requests more time and is 
acting in good faith to obtain the necessary documentation; and (2) to 
permit states to begin furnishing benefits during the reasonable 
opportunity period as early as the later of the date of application or 
declaration of status; however, the 90-day period provided to the 
individual to furnish necessary evidence must always be counted from 
the date notice of the reasonable opportunity period is received.
    As noted, during the reasonable opportunity period, if electronic 
verification directly with SSA or DHS is not successful, the agency 
must first utilize other available data sources (for example, a data 
match with vital statistic records of birth or the Office of Refugee 
Resettlement telephone line) to verify citizenship or immigration 
status, in accordance with Sec.  435.952(c)(2)(ii), prior to seeking 
additional information or documentation from an individual. If 
citizenship or immigration status has not been verified through efforts 
by the agency and satisfactory documentation has not been provided by 
the individual by the end of the reasonable opportunity period, the 
agency must take action to terminate benefits. The agency must provide 
timely notice and fair hearing rights in accordance with part 431 
subpart E, except we are proposing that the provisions at Sec.  431.230 
and Sec.  431.231 relating to maintaining and reinstating services may 
be applied at state option. We believe making these provisions 
applicable at state option is legally permissible under section 
1902(a)(3) of the Act, as well as relevant case law on the procedural 
rights associated with denials or terminations. Thus, once the 
individual has been provided benefits during a reasonable opportunity, 
the state may consider the individual to be a beneficiary, eligible for 
continued benefits pending the outcome of an appeal denying 
eligibility. On the other hand, individuals provided benefits during a 
reasonable opportunity period have not actually been determined 
eligible for Medicaid, as their citizenship or immigration status has 
not been established. Therefore, once the reasonable opportunity period 
is over, we believe the state can treat such individuals the same as 
those denied eligibility for any other reason, which are not eligible 
for benefits pending the outcome of a fair hearing. Further, the 
availability of the reasonable opportunity period, and the fact that an 
otherwise eligible individual is provided eligibility during such 
period, reduces risk of error that eligible individuals will be denied 
or delayed benefits, as well as the probable value of additional 
procedural safeguards of maintaining services pending the outcome of a 
fair hearing. Thus, once a state has (a) already attempted to resolve 
discrepancies associated with verification, (b) turned to other 
electronic data sources if verification with DHS or SSA is 
unsuccessful, (c) offered an opportunity for the individual to resolve 
discrepancies or provide alternative documentation of status, including 
(d) during a reasonable opportunity period during which benefits are 
furnished as long as the individual meets all other eligibility 
criteria, the state may legitimately conclude that the marginal value 
of providing continued benefits to the individual pending appeal does 
not outweigh the cost to the state associated with maintaining services 
and reinstating services retroactive to the date or termination if the 
individual should prevail on his or her appeal.
    We note that the requirement to provide a reasonable opportunity 
period for citizens and nationals under CHIPRA took effect on July 1, 
2006, however our proposal to define the length of such period--other 
than those done through the process described in section 1902(ee) of 
the Act, for which the 90-day timeframe also went into effect in 
January 1, 2010 with the passage of CHIPRA--will take effect in January 
2014.
    Finally, we propose to amend Sec.  435.1008 to reflect the 
statutory requirement that states are entitled to receive federal 
financial participation (FFP) for benefits provided to individuals 
declaring U.S. citizenship or satisfactory immigration status during 
the reasonable opportunity period, regardless of whether eligibility 
ultimately is approved for such period.
c. Changes to and Clarification of Current Policy (Sec.  435.3, Sec.  
435.406, and Sec.  435.407)
    Section 211 of CHIPRA also made several technical corrections and 
amendments to section 1903(x) of the Act. On December 28, 2009, CMS 
issued a state Health Official Letter, SHO : 09-016, providing 
guidance regarding section 211 of CHIPRA (http://www.cms.gov/smdl/downloads/SHO122809corrected.pdf). We propose to codify key aspects of 
that guidance in this rulemaking, as described below. These proposed 
changes clarify current policy and will not significantly impact 
current state programs.

[[Page 4618]]

(i) Exemption From Citizenship Verification Requirement for Deemed 
Newborns (Sec.  435.406, Sec.  457.380)
    Section 211(b)(3) of CHIPRA amends section 1903(x) of the Act to 
exempt from the citizenship verification requirement children eligible 
for Medicaid under 1902(e)(4) of the Act and Sec.  435.117 because 
their mothers are covered for the child's birth under Medicaid. Such 
children (often referred to as ``deemed newborns'') are not required to 
document or verify citizenship at birth or at any subsequent 
determination or redetermination of eligibility, including after a 
break in coverage. As allowed by section 1903(x)(2)(E) of the Act, 
under 435.406(a)(1)(iv)(E), we propose that information from the 
state's separate CHIP as well as information from another state that 
the individual was deemed eligible as a newborn under either Medicaid 
or CHIP in that state also serves to exempt the individual from the 
requirement to document citizenship. This policy satisfies the intent 
of section 211(b)(3) of CHIPRA that evidence of deemed newborn 
eligibility for Medicaid is sufficient evidence of citizenship. Under 
section 1903(x)(5) of the Act, proposed Sec.  435.406(a)(1)(iv)(E) 
applies equally to children born to non-citizen mothers covered only 
for labor and delivery or other emergency services. We propose at Sec.  
457.380 also to apply this exemption to CHIP based on the authority 
given the Secretary under section 1903(x)(2)(E) of the Act (as 
incorporated in CHIP under section 2105(c)(9)) to specify the bases 
under which satisfactory documentary evidence of citizenship or 
nationality previously has been presented.
(ii) Types of Acceptable Documentary Evidence of Citizenship and 
Identity (Sec.  435.407)
    The current regulations implementing section 1903(x) of the Act, as 
in effect prior to CHIPRA were designed to reduce Medicaid costs and 
prevent coverage of individuals who were in the country illegally (72 
FR 38688 through 38689). A report by the Government Accountability 
Office (GAO) indicates that state experience since the regulations were 
published has demonstrated that very few undocumented individuals apply 
for Medicaid or falsely claim U.S. citizenship (June 2007, GAO-07-889). 
The report and other reports from government and non-profit 
organizations and on state experiences confirms, that, as implemented, 
the current regulations have resulted in an increase in administrative 
costs as well as in large numbers of eligible citizens, especially 
children, being inappropriately denied coverage, or their enrollment in 
Medicaid delayed.
    In light of these findings, we are proposing to modify the 
regulations governing the verification of citizenship and identity 
under section 1903(x) of the Act in the event citizenship cannot be 
verified through the federal data services hub or an electronic data 
match directly with SSA, by eliminating non-statutory requirements in 
the current regulations that increase administrative burden and create 
unnecessary barriers to successful documentation, without compromising 
program integrity.
    We are eliminating the 4-tier structure in the current regulation 
and instead propose an approach that is consistent with section 1903(x) 
of the Act, which establishes 2 tiers of documents: (1) Those that 
provide evidence of citizenship; and (2) those that provide evidence of 
citizenship but require an additional identity document.
    In Sec.  435.406 of the current regulations, we propose to:
     Revise the introductory paragraph (a) to replace the 
phrase ``residents of the United States'' with ``individuals'' to 
clarify that Sec.  435.406(a) pertains to an individual's eligibility 
based on citizenship or non-citizen status, not residency (standards 
regarding state residency are at Sec.  435.403);
     Revise paragraphs (a)(1)(i) and (ii) to replace the 
reference to section 1137 of the Act with a cross reference to Sec.  
435.956(a), as proposed in this rulemaking.
     Add a new paragraph (a)(3) to revise who is permitted to 
make the declaration of citizenship or immigration status required 
under section 1137 of the Act to include: the individual, or an adult 
member of the individual's family or household; an authorized 
representative; and, if the applicant is a minor or incapacitated, 
someone acting responsibly for the applicant. The proposed revisions 
aim to align with the regulation at Sec.  435.907 of the Medicaid 
eligibility final rule regarding who is permitted to submit an 
application on behalf of another individual. Under proposed Sec.  
435.406(a)(3), in order for another person to declare citizenship or 
immigration status on behalf of the applicant, the person must attest 
to having a reasonable basis for making such declaration, such as 
personal knowledge that the individual is a citizen or national or in 
satisfactory immigration status.
     Delete the word ``recipients'' from paragraph (a)(1)(iii) 
to reflect the policy, discussed above, that verification of 
citizenship is a one-time activity and therefore only applies to first 
time applicants.
     Delete paragraph (a)(1)(iv) and redesignate paragraph 
(a)(1)(v) at (a)(1)(iv) because we have moved the requirement to 
document the verification of citizenship in the individuals file to 
Sec.  435.956, and as noted existing regulations provide that re-
verification of citizenship at regular renewals is not needed.
    In Sec.  435.407(f) of the revised regulations, we propose to 
remove the requirement that individuals must provide an original copy 
of documents, and replace it with a requirement that states accept 
photocopies, facsimiles, scanned or other copies of documents, unless 
information on the copy is inconsistent with information available to 
the agency, or the agency otherwise has reason to question the validity 
of the information on the document. Originals are not required under 
the statute, have not been shown to enhance program integrity, 
undermine potential for a real-time online user experience involving 
electronic submission of documents as well as submission of complete 
applications by mail, and lead to increased administrative costs since 
states must return the originals. We also propose to eliminate the 
requirement that records--such as medical, school or religious 
records--containing information regarding an individual's place of 
birth be created within a certain period of time before the date of 
application, and to permit states to maintain a record (including an 
electronic record) of a successful verification in lieu of maintaining 
paper copies of proof of citizenship, consistent with section 1943 of 
the Act and section 1413 of the Affordable Care Act. These, and other 
proposed revisions to simplify the existing regulations in accordance 
with Executive Order 13563's call for streamlining and updating 
regulations to reduce administrative burden on states and consumers, in 
order of paragraph letter, are as follows.
    In paragraphs (a) through (e) of Sec.  435.407, we remove all 
references in Sec.  435.407 to forms and form numbers and who can issue 
certain forms, all of which are subject to change, for example, the 
Immigration and Naturalization Services (INS) is now part of the 
Department of Homeland Security (DHS), and such information is not 
relevant to the probative value of the documents as evidence of 
citizenship; delete from the list of acceptable documents passports 
issued through 1980 that may have included several members of the 
family, as such passport has not been issued for over 30 years;

[[Page 4619]]

delete repetitive, extraneous or obsolete language, including reference 
to individuals born in Guam on or after April 10, 1899 since that would 
encompass everyone at this time, and the delayed effective date for 
reliance on Enhanced Driver's Licenses, which some states have begun to 
issue, and references to tribal documents in paragraphs (b), (d) and 
(e) which will be encompassed under a new paragraph (a)(5), discussed 
below.
    In Sec.  435.407(a) we also propose revisions to the list of 
documents that can be used to prove citizenship without separate proof 
of identity to add:
     At paragraph (a)(1), a U.S. Passport Card, which is issued 
to U.S. citizens for travel across land or sea borders to Canada, 
Mexico, the Caribbean, and Bermuda, and delete language discussing 
certain passports issued through 1980 since such passports have not 
been issued for over 30 years; and
     At paragraph (a)(5)(i), add documents issued by a 
federally-recognized Indian tribe showing membership, enrollment or 
affiliation with such tribe to the list of primary evidence of 
citizenship and identity, as required under the amendments to 
section1903(x) of the Act made by section 211 of CHIPRA (effective July 
1, 2006, as if included in the Deficit Reduction Act of 2005) and 
consistent with the policy set forth in the December 28, 2009 SHO 
Letter (SHO 09-016). We propose at Sec.  435.407(a)(5)(ii) 
that such documents include, but are not limited to, those identified 
in SHO 09-016. We note that this list is not exclusive of 
other tribal documents and, as tribes are individual independent 
governments which may not have uniform methods of documenting 
membership, enrollment, or affiliation with a particular tribe, we 
encourage states to work with tribes located within their borders to 
identify additional documents used by those tribes to establish tribal 
membership.
    Section 1903(x)(3)(B)(v)(II) of the Act directs the Secretary, 
after consultation with the tribes, to determine the documentation 
necessary for federally recognized Indian tribes located within states 
having an international border and whose members include individuals 
who are not U.S. citizens. Under section 402 of PRWORA, 8 U.S.C. 1612, 
individuals who can demonstrate that they are members of an Indian 
Tribe, as defined in 25 U.S.C. 450b(e), and are not citizens, are 
eligible for Medicaid without being subject to the 5-year waiting 
period. Section 402 of PRWORA does not distinguish between cross-border 
and intra-border tribes. Accordingly, we propose in Sec.  435.407(a)(5) 
to permit individuals who declare they are citizens and also members of 
an Indian tribe to rely on the same tribal documents discussed above, 
regardless of whether the tribe is located in a state with an 
international border. In making this proposal, we have engaged in the 
consultation discussed above but invite further comment on this 
proposal.
    We reorganize the list of documents in current paragraph (b) and 
consolidate and streamline the regulation text currently at Sec.  
435.407(c) and (d) in the revised paragraph (b). We propose that 
revised paragraph (b) would reflect all documents that may be used, 
along with proof of identity, to verify citizenship and we eliminate 
the tiered levels of documents in the current regulations. We also 
eliminate the requirement that, to rely on a document listed in 
paragraph (b), an applicant must first show that no document listed in 
paragraph (a) is available. Other changes to paragraph (b) are as 
follows:
    We add a new paragraph (b)(2) to move current language in (b)(1) 
that states may use a cross match with a state vital statistics agency 
to document a birth record. Reference to original documents in 
paragraph (b)(8) also is removed, as is the requirement in redesignated 
paragraph (b)(13) that a hospital record of birth be on hospital 
letterhead, as electronic hospital records may not contain letterhead. 
In redesignated paragraph (b)(15), we eliminate the ``caution'' 
regarding ``questionable cases'' as such cases will now be addressed in 
revised paragraph (f), discussed above, as well as the requirement that 
the religious record has to show the applicant's date of the birth or 
age at the time the record was made, since this detail is not required 
for other acceptable documents. We revise redesignated paragraph 
(b)(16) to remove the requirement that a school record be an ``early'' 
record, and contain the date of admission to the school, date of birth, 
and names of parent's and places of the parent's births. A school 
record need only contain information of place of U.S. birth. We remove 
from redesignated paragraph (b)(17) the requirement that a census 
record must show the applicant's age. Section 435.407(d)(2)(v) of the 
current regulations is deleted because a statement signed by a 
physician or midwife who was in attendance at the time of the birth 
would be encompassed under the new proposed paragraph (b)(18) described 
below, which would allow for signed statements or affidavits.
    New paragraph (b)(18) replaces current paragraphs (d)(2)(v) and 
(d)(5) to simplify the requirements governing use of affidavits to 
document citizenship. Under proposed paragraph (b)(18), an individual 
who does not have one of the documents listed in paragraph (a) or 
paragraphs (b)(1) through (17) may submit an affidavit, containing the 
individual's name, date of birth, and place of U.S. birth by someone 
who can reasonably attest to the individual's citizenship. Other 
restrictions on the use of affidavits, such as there needing to be two 
affidavits signed by two individuals who have personal knowledge of the 
individual's birth, and that individual signing the affidavit must 
prove their citizenship, are eliminated as creating unnecessary 
barriers to enrollment for eligible applicants and not required under 
the statute. However, we seek comment on whether two rather than one 
affidavit is warranted. We are maintaining the current policy that the 
affidavit does not need to be notarized.
    Section 435.407(e), relating to documentation of identity, is 
redesignated at paragraph (c). We propose language in paragraph (c)(1) 
that the documents to prove identity must contain a photograph or other 
identifying information including, but not limited to, name, age, sex, 
race, height, weight, eye color, or address. With this statement we are 
deleting all references currently in Sec.  435.407(c) that specific 
documents must include this information. We clarify at redesignated 
(c)(1)(i) that a driver's license issued by a Canadian government 
authority is not a satisfactory document for proving identity in the 
U.S. We also delete the current language related to tribal documents, 
which now serve as acceptable evidence of citizenship under paragraph 
(a)(5). Use of medical and school records to establish a child's 
identity is moved to paragraph (c)(2), where we also propose to change 
the age limit applicable to use of such records from under age 16 to 
age 19 to align the age limit used in CHIP, and to remove the 
requirement on states to independently verify such records. In 
redesignated paragraph (c)(3), we propose to reduce the number of 
corroborating documents from three (in existing paragraph (e)(3)) to 2, 
and require states to accept them if presented by an applicant based on 
the authority of section 1903(x)(3)(B)(vi) of the Act for the Secretary 
to prescribe other documents for verifying citizenship and identity. We 
streamline the language in redesignated paragraph (c)(4), relating to 
the permissibility of

[[Page 4620]]

states' relying on a finding of identity by another federal or state 
agency, and add a new paragraph (c)(5) to permit reliance on a finding 
of identity from an Express Lane agency, as defined in section 
1902(e)(13)(F) of the Act, regardless of whether or not the state 
otherwise has exercised the option under section 1902(e)(13) of the Act 
to rely on any findings of such agency in determining Medicaid 
eligibility. We also propose to remove the sentence requiring the 
Medicaid agency to assure the accuracy of the identity determinations 
since this provision allows the Medicaid agency to rely on the findings 
of another state agency. We also consolidate at redesignated paragraph 
(c)(6), the permissible use of affidavits to establish identity in the 
current regulations at Sec.  435.407(f) and (g) to apply more broadly 
to anyone unable to produce other identity documentation, provided that 
the affiant can reasonably attest to the applicant's identity, 
consistent with our proposal for affidavits demonstrating citizenship. 
Because we propose to move the current content of paragraphs (f) and 
(g) of existing Sec.  435.407 to other sections, current Sec.  
435.407(f) and (g) are deleted in this proposed rulemaking.
    To further expand the options states have to verify citizenship, we 
add a new paragraph (d) to Sec.  435.407 to permit reliance on 
verification of citizenship by another state, provided such 
verification was made on or after July 1, 2006, when the requirement to 
verify citizenship under section 1903(x) of the Act went into effect.
    Building on previous policy outlined in the June 9, 2006 State 
Medicaid Directors Letter, (06-012), and the 2007 final rule regarding 
Medicaid citizenship documentation requirements (72 FR 38662, Sec.  
435.407(e) (redesignated from paragraph (h) of the current regulations) 
is revised to clarify that states must provide individuals needing 
assistance in obtaining required documentation. The language in the 
current regulation at Sec.  435.407(h) provides that assistance be 
available to individuals who are unable to secure documentation due to 
``incapacity of mind or body'' and who do not have a representative of 
their own to provide the help needed. This language is simplified in 
this proposed rule at Sec.  435.407(e) to reflect that various types of 
individuals may need assistance in obtaining documentation of their 
citizenship, even if not ``incapacitated'' (for example, disabled, 
limited English proficient and homeless individuals and victims of 
natural disaster). This simplification also removes the requirement 
that someone needing assistance to first demonstrate that they are 
mentally or physically incapacitated. We also note that, due to the 
increased use of electronic data sources to verify citizenship, we 
anticipate the number of individuals needing assistance in obtaining 
documentation to be minimal.
    As discussed above, we are revising Sec.  435.956 (f) (redesignated 
from paragraph (i)) to direct states to accept photocopies, facsimile, 
scanned or other copies of documents to the same extent as original 
documents, except when the documentation is inconsistent with other 
information available to the agency or the agency has reason to 
question the validity of the copy or information provided. We moved the 
language in Sec.  435.956 (i)(2) to Sec.  435.956(a)(3) related to 
maintaining copies of documents and revised it to permit states to 
maintain a record (including an electronic record) of verified 
citizenship in lieu of retaining paper copies in the individual's 
record. We propose to delete paragraph (i)(3) related to how 
individuals can submit citizenship documentation and that states must 
not require an individual to appear in person because it is redundant 
with language in Sec.  435.907(a) of the final eligibility rule. 
Section 435.907(a) allows individuals to submit all documents that are 
required to establish eligibility, including any documents necessary 
for verification of citizenship, through various modalities, including 
online or by mail. We also propose to remove the language in paragraph 
(i)(4), related to the integrity of documents presented, because it is 
duplicative of the program integrity requirements in Part 455 or this 
title governing how Medicaid agencies deal with possible incidences of 
fraud. Paragraph (i)(6) of the current regulations is deleted as 
superseded by the electronic verification processes established under 
section 211 of CHIPRA and through the data services hub established per 
sections 1412 and 1413 of the Affordable Care Act and described in 
Sec.  435.949 of the final eligibility rule. We propose to delete 
current paragraph (j) of Sec.  435.407 because 45 CFR 74.53 is not 
relevant to the retention of citizenship records. Finally, Sec.  
435.407 (k) is deleted because we have revised and moved regulations 
relating to the reasonable opportunity period to verify citizenship to 
Sec.  435.956(g) of this proposed rule.
f. Requirement To Verify Citizenship or Nationality and Immigration 
Status Applied to CHIP (Sec.  457.320 and Sec.  457.380)
    Section 211(c)(1) of CHIPRA amends section 2105(c) of the Act to 
extend the Medicaid requirement for verifying citizenship to separate 
CHIP programs. To codify this requirement, we propose to amend Sec.  
457.320(b) and redesignated paragraph (d) of Sec.  457.380. We are also 
codifying previous guidance published by the Department of Justice (62 
FR 61344, 63 FR 41662), the Department of Health and Human Services (63 
FR 41658), and CMS (SHO January 14, 1998) that requires states to 
verify immigration status for any federal public benefit, which 
includes CHIP. We are proposing to amend Sec.  457.320 (b)(6) to 
indicate that a state cannot exclude otherwise eligible individuals 
from coverage if they are U.S. citizens or nationals, or qualified non-
citizens as long as they have been verified in accordance with Sec.  
457.380.
    As required by CHIPRA, we are proposing to amend Sec.  457.320 to 
remove the option for states to accept self-attestation of citizenship 
to establish eligibility for CHIP. We are also proposing to revise the 
individuals who may declare citizenship or immigration status in the 
same manner that is being proposed for Medicaid at Sec.  435.406.
    We propose to amend Sec.  457.380(b) to indicate that except for 
those populations exempt from the citizenship documentation requirement 
under Medicaid, states must follow the rules for verifying citizenship 
and immigration status in accordance with Sec.  435.956, including 
providing such reasonable opportunity period in accordance with Sec.  
435.956(g). This change is necessary to achieve alignment between 
Medicaid, CHIP, and the Exchange.
8. Elimination or Changes to Unnecessary and Obsolete Regulations 
(Sec. Sec.  435.113, 435.114, 435.201, 435.210, 435.211, 435.220, 
435.223, 435.401, 435.510, 435.522, 435.909, 435.1004)
    In response to the President's directive, outlined in Executive 
Order 13563, that agencies streamline and simplify federal regulations, 
we propose to revise or eliminate various current regulations, in whole 
or in part, as obsolete or no longer applicable. The following sections 
are proposed for deletion because they have been rendered obsolete due 
to the expansion of Medicaid coverage under the Affordable Care Act to 
most individuals at or below 133 percent FPL, the de-linkage of 
Medicaid eligibility from receipt of AFDC, the replacement of AFDC with 
MAGI-based financial methodologies in CY 2014, or the proposed 
simplification of multiple eligibility groups:
     Sec.  435.113 (individuals who are ineligible for AFDC 
because of

[[Page 4621]]

requirements that do not apply under title XIX of the Act);
     Sec.  435.114 (individuals who would be eligible for AFDC 
except for increased OASDI income under Pub. L. 92-336);
     Sec.  435.220 (individuals who would meet the income and 
resource requirements under AFDC if child care costs were paid from 
earnings) which we propose to replace with a new Sec.  435.220 for 
optional eligibility of parents and other caretaker relatives;
     Sec.  435.223 (individuals who would be eligible for AFDC 
if coverage under the state's AFDC plan were as broad as allowed under 
title IV-A of the Act);
     Sec.  435.510 (determination of dependency); and
     Sec.  435.522 (determination of age).
    We propose to replace reference to ``specified relatives'' as used 
and defined in the current regulations at Sec.  435.201(a)(5), Sec.  
435.301(b)(2)(ii), and Sec.  435.310 with references to ``parents and 
other caretaker relatives,'' as defined at Sec.  435.4 of the Medicaid 
eligibility final rule. We also propose to revise Sec.  435.201 
(individuals included in optional groups) to delete the reference to 
pregnant women, because optional groups for pregnant women will be 
consolidated under Sec.  435.116 in accordance with the Medicaid 
eligibility final rule. We propose to delete references to AFDC and to 
pregnant women and parents and other caretaker relatives in Sec.  
435.210 (individuals who meet the income and resource requirements of 
the cash assistance programs), Sec.  435.211 (individuals who would be 
eligible for cash assistance if they were not in medical institutions), 
Sec.  435.401 (general eligibility requirements), Sec.  435.909 
(automatic entitlement to Medicaid following a determination of 
eligibility under other programs), and Sec.  435.1004 (beneficiaries 
overcoming certain conditions of eligibility).
9. Coordinated Medicaid/CHIP Open Enrollment Process (Sec.  435.1205 
and Sec.  457.370)
    Under regulations at 45 CFR 155.410, during the initial open 
enrollment period starting on October 1, 2013, the Exchange will begin 
accepting a single streamlined application for enrollment in a QHP 
through the Exchange and for insurance affordability programs, with 
enrollment effective January 1, 2014. We are proposing a new Sec.  
435.1205 to similarly provide that Medicaid and CHIP agencies begin 
accepting the single streamlined application during the initial open 
enrollment period to ensure a coordinated transition to new coverage 
that will become available in Medicaid and through the Exchange in 
2014. Proposed Sec.  435.1205 implements several provisions of the 
Medicaid eligibility final rule effective October 1, 2013, and ensures 
the coordinated and simplified enrollment system for all insurance 
affordability programs envisioned in section 1943 of the Act and 
section 1413 of the Affordable Care Act. Our proposed rule seeks to 
ensure that no matter where applicants submit the single, streamlined 
application during the initial open enrollment period, they will 
receive an eligibility determination for all insurance affordability 
programs and be able to enroll in appropriate coverage for 2014, if 
eligible, without delay. In addition, under the proposed rule, states 
will need during the initial open enrollment period to facilitate a 
determination of Medicaid and CHIP eligibility based on the rules in 
effect in 2013 when a single streamlined application is filed. We 
provide states with several options to ensure that individuals can be 
properly evaluated for eligibility under the 2013 rules, to the extent 
applicable, as described below.
    Proposed Sec.  435.1205 (a) incorporates certain definitions and 
references from the Medicaid eligibility final rule which are pertinent 
to proposed Sec.  435.1205. Proposed Sec.  435.1205 (b) provides that 
pertinent provisions of the Medicaid eligibility final rule, as 
modified in this proposed rulemaking, are effective as of October 1, 
2013 for purposes of achieving alignment with the Exchange during the 
open enrollment period.
    Under proposed Sec.  435.1205(c)(1), beginning October 1, 2013, 
state Medicaid agencies will accept (i) the single streamlined 
application used to make determinations for eligibility for enrollment 
in a QHP through the Exchange and all insurance affordability programs, 
or an alternative application developed by the state and approved by 
the Secretary per Sec.  435.907(b)(2) of the Medicaid eligibility final 
rule, and (ii) electronic accounts transferred from an agency 
administering another insurance affordability program, in accordance 
with 42 CFR 435.1200. We expect that utilization of the new single 
streamlined application will be in addition to, not in lieu of any 
applications currently in use by the state Medicaid and CHIP agency to 
determine eligibility based on 2013 eligibility rules, but are open to 
discussion with states on transition options, discussed below.
    In proposed Sec.  435.1205(c)(2)(i), we clarify that, beginning 
October 1, 2013, states must begin either (I) accepting determinations 
based on MAGI made by the Exchange for eligibility effective January 1, 
2014 or (II) receiving electronic accounts of applicants assessed as 
potentially Medicaid eligible by, and transferred from, the Exchange, 
and determine eligibility for such applicants based on MAGI and the 
eligibility requirements to be in effect on that date. Whether the 
agency begins accepting Medicaid eligibility determinations made by the 
Exchange or receives the electronic accounts of individuals assessed by 
the Exchange as potentially Medicaid eligible will depend on whether 
the agency has elected to delegate authority to the Exchange to make 
eligibility determinations under Sec.  431.10(c) of this rulemaking.
    Per paragraph (c)(2)(ii), on October 1, 2013, state Medicaid 
agencies also will begin (I) making eligibility determinations for 
applicants submitting the single streamlined application to the agency, 
based on MAGI and eligibility criteria which will be in effect as of 
January 1, 2014, for coverage effective on that date and (II) assessing 
potential eligibility for enrollment in a QHP through the Exchange and 
for other insurance affordability programs for individuals determined 
not Medicaid eligible by the agency, and transfer the electronic 
account, including the application, to such other program, as 
appropriate. This ensures that electronic accounts for individuals 
determined potentially eligible for enrollment in a qualified health 
plan will be transferred to the Exchange in a timely manner so that 
eligibility for such enrollment as well as for advance payment of the 
premium tax credit and cost-sharing reductions can be determined by the 
Exchange and plan selection and enrollment can occur in time for 
January 1, 2014. Per proposed paragraph (c)(2)(iii), states also will 
need to provide notice and fair hearing rights consistent with part 431 
subpart E of the regulations, as revised in this rulemaking, and Sec.  
435.1200 of the Medicaid eligibility final rule, as also revised in 
this proposed rulemaking, regarding coordination of eligibility 
determinations, notice and appeals with the Exchange and with agencies 
administering other insurance affordability programs.
    Proposed Sec.  435.1205 (c)(3)(i) provides that, for each 
individual determined eligible for Medicaid by the agency or the 
Exchange per proposed paragraph (c)(2)(i) or (ii), the agency must 
furnish Medicaid effective January 1, 2014. Per proposed paragraph 
(c)(3)(ii), the terms of Sec.  435.916 of the Medicaid eligibility 
final rule (relating to beneficiary responsibility to inform the agency 
of any changes in circumstances that may affect eligibility) and Sec.  
435.952 of the

[[Page 4622]]

Medicaid eligibility final rule (regarding use of information received 
by the agency) apply such that individuals determined eligible during 
the initial open enrollment period for coverage effective January 1, 
2014 must report changes in circumstances that may affect their 
eligibility, and the agency must evaluate the impact of such changes on 
eligibility, consistent with Sec.  435.952. Under the proposed 
regulation, the agency has the option to schedule the first regular 
renewal under Sec.  435.916 for individuals applying during the open 
enrollment period and determined eligible effective January 1, 2014, to 
occur anytime between 12 months from the date of application and 
January 1, 2015. States may also conduct post-eligibility data matching 
to ensure continued eligibility as of January 1, 2014 and/or through 
the first regularly-scheduled renewal.
    Given the outreach efforts anticipated around the single, 
streamlined application and the initial open enrollment period, some 
people who are eligible for Medicaid under 2013 rules can be expected 
to apply using the single, streamlined application. While Medicaid 
agencies are not required to adjudicate 2013 eligibility for applicants 
who apply using the single, streamlined application, we propose at 
Sec.  435.1205(c)(4) that states establish a process to ensure that 
individuals submitting the single streamlined application can be 
evaluated and determined eligible for coverage effective in 2013. 
States are encouraged, but not required, to determine eligibility 
effective in 2013 based on the information provided on a single 
streamlined application, or to adopt a supplemental form or questions 
to obtain any additional information needed to do so. Specifically, we 
propose in Sec.  435.1205(c)(4)(i) that the agency may determine an 
applicant's eligibility for 2013 based on the information gathered as 
part of the single streamlined application if the agency has sufficient 
information to make such a determination, or request any additional 
information (through, for example, use of a supplemental form) needed 
to do so, providing notice and appeal rights in accordance with the 
regulations. Alternatively, per proposed Sec.  435.1205(c)(4)(ii), the 
agency may notify individuals submitting the single streamlined 
application during the initial enrollment period that to be considered 
for eligibility in 2013 they must submit a separate application for 
coverage and provide information on how to obtain and submit such 
application. We request comment on whether states should only notify a 
subset of applicants about the process to apply for coverage with an 
effective date in 2013--for example only those applicants who appear, 
on the basis of available information provided on the single 
streamlined application, to be potentially eligible under 2013 rules.
    Given the value of implementing a coordinated the eligibility and 
enrollment process for enrollment in a QHP through the Exchange and all 
insurance affordability programs during the initial open enrollment 
period, we are considering, for purposes of the initial open enrollment 
period, whether, in addition to proposed Sec.  435.1205 and Sec.  
457.370, to make some or all of the following sections of the 
regulations, as promulgated or revised in the Medicaid eligibility 
final rule or as proposed or revised in this rulemaking, effective 
October 1, 2013, or whether an effective date of January 1, 2014 for 
some or all of these sections is appropriate: Sec.  431.10 and Sec.  
431.11 (relating to the delegation of authority to the Exchange or 
Exchange appeals entity to determine eligibility and conduct fair 
hearings); Sec.  435.603 (MAGI-based methodologies) and Sec.  435.911 
(MAGI screen) for purposes of making eligibility determinations 
effective prior to January 1, 2014 prior to that date; Sec.  435.907 
(use of the single streamlined application); Sec.  435.908(c) (use of 
application assisters) and Sec.  435.923 (use of authorized 
representatives); Sec. Sec.  435.940 et seq. (verification of 
eligibility criteria); Sec. Sec.  431.200 et seq., Sec.  435.917 Sec.  
435.918 and Sec.  435.1200 (coordination of eligibility and enrollment, 
notices and appeals between the Exchange, Medicaid and CHIP); and 
corresponding CHIP regulations in part 457 (Sec. Sec.  457.315, 
457.330, 457.340, 457.348, 457.350, 457.351, 457.380 and 457.1180). We 
solicit comments on the appropriate effective date for these sections 
to ensure a smooth initial open enrollment period.
    We will also work with states interested in not having to assess 
eligibility during this limited time period based on two different sets 
of rules. For example, some states have expressed interest in using the 
authority of section 1115 of the Act to apply MAGI-based methods to 
determinations of Medicaid eligibility effective with the 2013 open 
enrollment period, or in more closely aligning current financial 
methodologies with MAGI-based methods through adoption of less 
restrictive methods under their state plan. CMS is open to working with 
states to effectuate these or other ideas states or other stakeholders 
may have to achieve coordination with the Exchange and minimize 
administrative and consumer burden during the 2013 open enrollment 
period.
    Finally, during the initial open enrollment period and likely at 
least through 2014, some individuals may submit the application used by 
the state to determine eligibility using 2013 rules. We seek comment on 
the best ways for states to ensure that individuals submitting such 
applications during the initial open enrollment period are evaluated 
for coverage effective January 1, 2014, and thereafter, to ensure that 
state Medicaid agencies obtain such additional information as is 
necessary to determine whether such individuals are eligible for 
Medicaid using the MAGI-based standards, methodologies and eligibility 
categories for coverage effective on January 1, 2014.
    Like Medicaid, a separate CHIP program will need to align with the 
Exchange's initial open enrollment period. We propose a new Sec.  
457.370 to apply the same provisions to states administering a separate 
CHIP as proposed for Medicaid at Sec.  435.1205.
10. Children's Health Insurance Program Changes
a. CHIP Waiting Periods (Sec.  457.805)
    The Affordable Care Act promotes enrollment in and continuity of 
coverage. CHIP was created in the absence of the Affordable Care Act 
and allows states to require periods of uninsurance between 
disenrollment from private group health coverage and the beginning of 
enrollment in CHIP (often referred to as ``waiting periods''). Waiting 
periods have been permitted, although are not required, under section 
2102(b)(3)(C) of the Act, which requires states to ensure that coverage 
provided under CHIP does not substitute for (or ``crowd out'') coverage 
under group health plans. Implementing regulations at Sec.  457.805 
specify that CHIP state plans must include a description of 
``reasonable procedures'' to prevent substitution. Some 38 states 
currently employ waiting periods--ranging from one to twelve months in 
duration, with various state-specified exceptions--as a mechanism for 
preventing such substitution.
    While not directly addressed in our earlier regulations, we 
received a number of comments suggesting that CHIP waiting period 
policies should be revised. Although waiting periods are a common 
strategy in CHIP, states have other options to prevent substitution of 
coverage. CHIP waiting periods create gaps in coverage that exceed 
standards established under the Affordable Care Act. Section 1201 of 
the Affordable Care

[[Page 4623]]

Act amends section 2708 of the Public Health Service Act to prohibit 
waiting periods exceeding 90 days for health plans and health insurance 
issuers offering group or individual coverage, a standard which, though 
not directly applicable to CHIP, is exceeded in roughly half of the 
states with a CHIP waiting period. If permitted to continue, children 
eligible for a separate CHIP program would be the only population 
subject to waiting periods that exceed 90 days starting in 2014. In 
addition, section 5000A of the Internal Revenue Code, as added by 
section 1501 of the Affordable Care Act, applies the requirement to 
maintain ``minimum essential coverage'' to both adults and dependents. 
In families that choose to enroll children in coverage through the 
Exchange during a waiting period, the child may experience disruption 
of care when the waiting period, and therefore, availability of the 
premium tax credit ends and enrollment in CHIP occurs. Coordination 
between the CHIP agency and the Exchange will be needed. To effectuate 
this transition, we propose revising Sec.  457.350(i) to include those 
individuals subject to a waiting period within the requirement to 
screen for potential eligibility for other insurance affordability 
programs. For individuals subject to a waiting period, under proposed 
revisions at Sec.  457.350(i)(3), states also would need to notify such 
program of the date on which such period ends and the individual is 
eligible to enroll in CHIP. In an effort to balance the goals of 
permitting states flexibility to employ waiting periods to prevent 
substitution of coverage and eliminating barriers and promoting 
continuity of coverage, and based on the authority provided in sections 
2102(b)(3)(E) and 2102(c)(2) of the Act (requiring that states 
institute procedures to ensure coordination between CHIP and other 
public and private coverage programs for low-income children) and 
sections 1943 and 2107(e)(1)(O) of the Act and section 1413 of the 
Affordable Care Act (requiring coordination of eligibility and 
enrollment between all insurance affordability programs), we are 
proposing to allow waiting periods in CHIP with limitations effective 
January 1, 2014.
    Specifically, we propose revisions to existing regulations 
regarding prevention of substitution of coverage at Sec.  457.805 to 
retain the ability of states to impose a waiting period, but limit any 
waiting period to a maximum of 90 days. States would retain the ability 
to grant state-defined exemptions to the imposition of a waiting 
period. In conducting research on the use of state-defined exemptions, 
we found several common exemptions which we propose that all states use 
to waive imposition of any such period in the following situations:
    (1) The cost of the discontinued coverage for the child exceeded 5 
percent of household income;
    (2) The cost of family coverage that includes the child exceeds 9.5 
percent of the household income.
    (3) The employer stopped offering coverage of dependents;
    (4) A change in employment, including involuntary separation, 
resulted in loss of access to employer-sponsored insurance (ESI) (other 
than through payment of the full premium by the parent under COBRA);
    (5) The child has special health care needs; and
    (6) The child lost coverage due to the death or divorce of a 
parent.
    In addition, we clarify that waiting periods may not be applied to 
children losing eligibility for other insurance affordability programs. 
Further, we are considering whether to add an additional affordability 
exemption when the child's parent is determined eligible for advance 
payment of the premium tax credit for enrollment in a QHP through the 
Exchange because the ESI in which the family was enrolled is determined 
unaffordable in accordance with 26 CFR 1.36B-2(c)(3)(v).
    We note that, because of the difficulty in verifying the variety of 
exemptions from waiting periods currently applied by states (including 
those described under this proposed regulation) the FFE will not be 
able to make final determinations of CHIP eligibility in states 
choosing to impose a CHIP waiting period in 2014. Instead, the FFE 
would conduct an assessment of CHIP eligibility, transferring all 
individuals assessed as likely CHIP eligible to the CHIP agency to 
determine if the child meets an exemption and to make a final 
determination of eligibility.
    We also considered proposing to limit the application of waiting 
periods to only children with family incomes above 200 or 250 percent 
of the federal poverty level, as some states currently do, as this is 
the population more likely to have access to affordable coverage 
through an employer, or only allowing waiting periods based on evidence 
of substitution of coverage in a state. Finally, we also considered 
proposing to eliminate the permissibility of waiting periods in 2014 
for CHIP-eligible children. We invite comments on our proposal to allow 
CHIP waiting periods of up to 90 days as well as other options 
considered. We also solicit comments on the viability of alternative 
strategies to reduce substitution of coverage to best balance the goal 
of preventing coverage gaps for children while ensuring that CHIP 
coverage does not substitute for coverage available under group health 
plans.
    Finally, we propose revising Sec.  457.810 to eliminate the 
required six month waiting period if a state elects to provide premium 
assistance through section 2105(c)(3) of the Act. Instead, we propose 
that any waiting period imposed under the CHIP state plan for direct 
coverage must apply to the same extent to the state's premium 
assistance program. This provision would align the rules relating to 
the application of waiting periods for premium assistance with those 
proposed for direct coverage of CHIP-eligible children at Sec.  457.805 
and is consistent with the application of waiting periods in the option 
for premium assistance established in section 2105(c)(10) of the Act as 
amended by section 301 of CHIPRA. Revisions are proposed to Sec.  
457.810(a)(1) and (2) and Sec.  457.810(a)(3) and (4) are deleted.
b. Limiting CHIP Premium Lock-Out Periods (Sec.  457.570)
    The majority (approximately 29) of states operating separate CHIPs 
require families to pay premiums, or enrollment fees. Over the years, 
states have established different disenrollment policies for non-
payment of premiums and enrollment fees in CHIP.
    Approximately 14 states impose a ``lock-out period;'' that is, a 
specified period of time, that a child will have to wait until being 
allowed to reenroll in the CHIP program after termination as a result 
of non-payment of premiums. In some states, this period can be until 
the unpaid premiums or enrollment fees are paid. In other states, the 
child is barred from enrollment for a period of time even if the family 
pays the unpaid premiums or enrollment fees. Other states require 
individuals to go without CHIP coverage during the premium lock-out 
period, but do not require families to pay their premium back at the 
end of the specified time. Lock-out periods currently range from 1 to 6 
months. An additional 14 states require individuals to reapply for 
coverage and/or repay outstanding premiums in order to re-enroll in 
CHIP (the majority of these states require both, but a few require only 
one or the other), but do not characterize their programs as having 
lock-out periods.
    We considered the impact of the use of premium lock-out periods 
relative to the objectives of the Affordable Care Act to promote 
enrollment in and continuity

[[Page 4624]]

of coverage. Prohibiting a child from enrollment after the family pays 
the unpaid premium or enrollment fee is counter to promoting enrollment 
in and continual coverage through a streamlined eligibility process and 
is inconsistent with how the Exchange will address nonpayment of 
premiums. However, in an effort to achieve a balance between states' 
ability to collect premium payments and manage program costs, and the 
goal of removing barriers to coverage, we propose to define a premium 
lock-out at Sec.  457.10 as a period not exceeding 90 days when, at 
state option, a CHIP eligible child may not be permitted to reenroll in 
coverage if they have unpaid premiums or enrollment fees. We also 
propose at Sec.  457.570 to permit states to continue to impose premium 
lock-out periods only for families that have not paid outstanding 
premiums or enrollment fees, and only up to a 90-day period. A 90-day 
premium lock-out maximum aligns with section 1201 of the Affordable 
Care Act, which prohibits periods without insurance exceeding 90 days 
for health plans and health insurance issuers offering group or 
individual coverage. We also specify that past due premiums or 
enrollment fees must be forgiven if a child has been subject to a lock-
out period, regardless of length of the lock -out period. The majority 
of states with premium lock-out periods in place do not currently 
exceed 90 days and some states that have premium lock-out periods do 
not require the family to pay outstanding premiums in order to reenroll 
in the CHIP.
    Under federal regulations, states have broad flexibility in 
determining how to notify and collect premiums and enrollment fees from 
families. We recognize that most states make efforts to facilitate 
payment of premiums and enrollment fees, easing the process for CHIP 
families. We invite comments from states on any alternative late 
payment policies to encourage families to make their CHIP premium 
payments in a timely manner in order to avoid gaps in coverage.
11. Premium Assistance (Sec.  435.1015)
    Premium assistance programs use federal and state Medicaid and CHIP 
funds to help subsidize the purchase of coverage for Medicaid and CHIP-
eligible individuals who have access to private coverage, but may need 
assistance in paying for their premiums. Premium assistance can provide 
a mechanism for facilitating the coordinated system of coverage between 
Medicaid, CHIP, and the Exchange in 2014. It will provide an option for 
states to assist families who wish to enroll in the same health plan 
when some family members are eligible for either Medicaid or CHIP while 
other family members obtain coverage on the Exchange with advance 
payments of the premium tax credit. Premium assistance provides an 
opportunity for state Medicaid and CHIP programs to offer coverage to 
such families through the same coverage source, even if supported by 
different payers. States can use federal and state Medicaid and CHIP 
funds to deliver Medicaid and CHIP coverage through the purchase of 
private health insurance through plans in the individual market, which 
in 2014, would include QHPs available through the Exchange.
    Premium assistance is authorized for group coverage in Medicaid 
under sections 1906 or 1906A of the Act, and in CHIP, under sections 
2105(c)(3) or 2105(c)(10) of the Act. Based on authority in sections 
1905(a) and 2105(c)(3) of the Act, we propose at Sec.  435.1015 also to 
authorize premium assistance programs to support enrollment of 
individuals eligible for Medicaid and CHIP in plans in the individual 
market, including enrollment in QHPs in the Exchange.
    Thus, a state Medicaid or CHIP program could use existing premium 
assistance authority to purchase coverage for a Medicaid or CHIP-
eligible individual through a QHP, while other family members would 
receive advance payment of the premium tax credit. However, APTC would 
not be provided for the Medicaid or CHIP-eligible family members. 
Premium assistance could help increase the likelihood that individuals 
moving from Exchange coverage into Medicaid or CHIP may remain in the 
same QHP in which they had been enrolled through the Exchange. We 
invite comments on how the state Medicaid and CHIP agency can 
coordinate with the Exchange to establish and simplify premium 
assistance arrangements and how these arrangements will be 
operationalized.
    In the matter following section 1905(a)(29) of the Act, ``medical 
assistance'' is defined to include payment of part or all of the cost 
of ``other insurance premiums for medical or any other type of remedial 
care or cost thereof.'' We interpret this provision to permit payment 
of FFP for premiums for individual health plans for Medicaid-eligible 
individuals, provided the state determines it cost-effective to do so, 
similar to the requirement for payment of premiums for enrollment in a 
group health plan under sections 1906, 1906A or 2105 of the Act.
    Under section 1902(a)(25) of the Act, codified in subpart D of part 
433 of the regulations, the insurer would be obligated to be primary 
payer relative to Medicaid for all health care items and services for 
which the insurer is legally and contractually responsible under its 
insurance policy. The matter following section 1905(a)(29) of the Act 
does not limit the benefits or services to which an individual 
otherwise is eligible. Thus, Medicaid-eligible individuals enrolled in 
a private health plan would remain qualified for all benefits for which 
the individual is covered under the state plan, regardless of whether 
or not the state is providing payment for enrollment in the private 
plan, and a state opting to provide premium assistance support for 
enrollment in an individual health plan would have to provide covered 
benefits not covered under the private policy. In addition, the state 
would need to ensure that individuals do not incur cost sharing charges 
in excess of amounts imposed by the state under sections 1916, 1916A, 
or 2103(e) of the Act.
    Under proposed Sec.  435.1015, states will be expected to 
demonstrate cost-effectiveness in the same manner as is required under 
the sections 1906, 1906A, 2105(c)(3), and 2105(c)(10) of the Act. We 
believe this is consistent with section 10203(b) of the Affordable Care 
Act, which aligned requirements for cost-effectiveness for premium 
assistance programs under the authorities of sections 1906, 1906A, 
2105(c)(3), and 2105(c)(10), but was silent with respect to premium 
assistance under section 1905(a) authority.
    To be ``cost-effective'' under proposed Sec.  435.1015, the cost of 
purchasing coverage under an individual health plan for a Medicaid-
eligible individual in the private market, including coverage in a QHP 
in the Exchange, must be comparable to the cost of providing direct 
coverage under the state plan (or waiver of the state plan). We propose 
that the test for cost-effectiveness includes administrative 
expenditures and the costs of providing wraparound benefits for items 
and services otherwise covered under the Medicaid state plan.
    In addition, under the sections 1906 and 1906A premium assistance 
authorities, states may claim FFP for payment of premiums for non-
Medicaid-eligible family members if enrollment in a group health plan 
of such family members is necessary for the enrollment of the Medicaid-
eligible individual, as long as the cost-effectiveness test is met. We 
do not anticipate that such arrangements

[[Page 4625]]

would be necessary to support enrollment of a Medicaid-eligible 
individual in a health plan in the individual market, and therefore do 
not include provision for payment of premiums for non-Medicaid-eligible 
family members under proposed Sec.  435.1015. However, we seek comments 
on this provision.
12. Electronic Submission of the Medicaid and CHIP State Plan 
(Sec. Sec.  430.12, 457.50, and 457.60)
    We are proposing to revise sections Sec. Sec.  430.12, 457.50, and 
457.60 to reflect our implementation of an automated transmission 
process for the Medicaid and CHIP business process. Historically, we 
have accepted state plan amendments on paper following paper-based 
templates. These are submitted to the CMS Regional Offices and Central 
office, and adjudicated using a manual transmission process, resulting 
in lengthy review times. Additionally, this process was not transparent 
to states or other stakeholders. To move to a more efficient and 
transparent business process, in consultation with states, we are 
developing the MACPro (Medicaid and CHIP Program) system to 
electronically receive and manage state plan amendments as well as 
other Medicaid and CHIP business documents. The proposed revisions 
direct states to use the automated format for submission of state plan 
amendments, replacing previous paper based documents, and gives states 
a period of time to make the transition to the new system with 
technical support from CMS.
13. Changes to Modified Adjusted Gross Income and MAGI Screen
a. Changes for Modified Adjusted Gross Income
    We propose several revisions to the Medicaid eligibility final rule 
regarding the household composition of individuals whose financial 
eligibility is determined using the MAGI-based methodologies set forth 
at Sec.  435.603, which implement section 1902(e)(14) of the Act, as 
added by section 2002 of the Affordable Care Act.
    First, in accordance with sections 1902(e)(14)(A) and 1943 of the 
Act and section 1413 of the Affordable Care Act, we intended in the 
March 23, 2012 Medicaid eligibility final rule to apply the definitions 
of ``modified adjusted gross income'' and ``household income'' in 
section 36B(d)(2) of the Internal Revenue Code of 1986 (``36B 
definitions'') to treat stepparents the same as natural and adopted 
parents, and stepchildren and stepsiblings the same as biological and 
adopted children and siblings, for purposes of determining household 
composition and household income. However, whereas virtually everywhere 
that reference in Sec.  435.603 to ``parents'' is made, the Medicaid 
eligibility final rule explicitly refers to ``natural, adopted or 
stepparents,'' we inadvertently did not include such reference in Sec.  
435.603(f)(2)(ii), referring instead only to children claimed by one 
``parent'' who are living with ``both parents.'' We propose to remedy 
this technical error, and simultaneously further streamline the 
regulation text, by adding a definition of ``parent'' in paragraph (b) 
to include natural, adopted and stepparents, and to replace all 
references elsewhere throughout Sec.  435.603 to ``natural, adopted or 
stepparents'' with a reference to ``parents,'' as newly defined. We 
propose adding a similar definition and to make similar streamlining 
revisions in the case of references in the Medicaid eligibility final 
rule to ``natural, adopted and step children'' and ``natural, adopted, 
half or step siblings.'' We considered ``half siblings'' to be included 
within the meaning of natural and adopted siblings in the Medicaid 
eligibility final rule, but are including such siblings explicitly in 
the definition proposed here.
    Second, section 1902(e)(14)(I) of the Act requires the application 
of a 5 percent disregard for purposes of determining the income 
eligibility of an individual for medical assistance whose eligibility 
is determined based on MAGI. In the Medicaid eligibility final rule, we 
defined household income in Sec.  435.603(d)(1) with certain exceptions 
as the sum of the MAGI-based income of every individual in the 
individual's household, minus an amount equivalent to 5 percentage 
points of the federal poverty level for the applicable family size. The 
result of this disregard policy is that individuals determined for 
eligibility under MAGI have a 5 percent disregard applied to their 
income, when their eligibility under a particular eligibility category 
is being determined, and that disregard can impact the group for which 
such individual is found eligible.
    For example, if the income standard for eligibility under section 
1931 in a state were 90 percent of the FPL and a parent with 95 percent 
of the FPL who met the categorical requirements for coverage applied, 
the 5 percent disregard would apply to that parent resulting in 
eligibility for the section 1931 category. If the state had expanded 
coverage to the new adult group, such that the adult group covered 
parents with income greater than 90 percent of the FPL to 133 percent 
of the FPL, a parent with 95 percent FPL would still be determined 
eligible for the section 1931 category. This would impact the Federal 
Medical Assistance Percentage that the state could claim for this 
individual and could impact the benefits the individual received. As 
set forth in Sec.  433.10 of our Medicaid Eligibility proposed rule, 
the rate of federal financial participation is increased for newly 
eligible individuals, provided they are in the adult group. An 
individual cannot meet the definition of a newly eligible individual 
for whom the state may claim enhanced FMAP unless, at a minimum, that 
individual qualifies for eligibility in the adult group. It could also 
impact the benefits available to that parent, because states are 
required to provide benchmark benefits for individuals in the adult 
group.
    Since the publication of our Medicaid eligibility final rule, we 
have considered an alternative interpretation for section 
1902(e)(14)(I) of the Act. Section 1902(e)(14)(I) states that the 5 
percent disregard should be applied, ``for purposes of determining the 
income eligibility of an individual for medical assistance whose 
eligibility is determined based on the application of MAGI''. Instead 
of applying the five percent disregard to determine eligibility for a 
particular eligibility category, we are proposing a policy under which 
the five percent disregard should be applied when its application 
affects eligibility on the basis of MAGI. Thus the five percent 
disregard would be applied not when eligibility for any Medicaid 
eligibility group is being determined but, rather, when an applicant or 
beneficiary would otherwise be ineligible for any medical assistance 
(under any MAGI-based eligibility category in the program). The impact 
of this change would be that the five percent disregard would apply 
only to the highest income threshold under a MAGI-based group available 
for that person.
    In the example above, the application of the five percent disregard 
to the 1931 group would be contingent on whether the section 1931 group 
was the highest income threshold available to that parent or caretaker 
relative in the Medicaid program. If so--for example, in a state that 
did not expand eligibility to the adult group--the five percent 
disregard would be applied, and the individual with household income 
equaling 95 percent FPL would be determined eligible for the 1931 
group. If, in the example above, the state did expand eligibility to 
the new adult

[[Page 4626]]

group, the five percent disregard would not be applied to the parent 
with income at 95 percent FPL, because the highest income standard for 
the parent would be the income standard for the new adult group (133 
percent FPL), and the individual would be determined eligible for the 
adult group. If the parent met the definition of a newly eligible 
individual, the state could then claim the enhanced FMAP for this 
individual. The five percent disregard would, however, be applied to a 
parent with income at 138 percent of the FPL, because 133 percent FPL 
would be the highest eligibility category for which the parent could 
qualify in the Medicaid program. To implement this policy, we propose 
to delete the across-the-board application of the deduction of five 
percent FPL from the calculation of every household income in Sec.  
435.603(d)(1) and to add a new sub paragraph Sec.  435.603(d)(4) to 
apply the five percent disregard only when determining an individual 
for the eligibility group with the highest income standard, using MAGI-
based methodologies, under which the individual may be determined 
eligible.
    Third, we propose to clarify the regulatory exception from 
application of MAGI-based financial methodologies for individuals 
needing long-term care services in paragraph (j)(4) of Sec.  435.603 of 
the Medicaid eligibility final rule, because it could be interpreted in 
a manner to extend the reach of the exception beyond that intended 
either under section 1902(e)(14)(D)(iv) of the Act, as added by section 
2002 of the Affordable Care Act, or the Medicaid eligibility final 
rule. As promulgated, paragraph (j)(4) could be interpreted to except 
from MAGI-based methods individuals requesting long-term care services 
that are covered under an eligibility group otherwise subject to MAGI-
based methodologies, such as those for pregnant women and children at 
Sec. Sec.  435.116 and 435.118, respectively. This was not our 
intention in the Medicaid eligibility final rule. Revisions to Sec.  
435.603(j)(4) therefore are proposed to clarify that the exception from 
application of MAGI-based methods applies only in the case of 
individuals who request coverage for long-term care services and 
supports for the purpose of being evaluated for an eligibility group 
for which meeting a level-of-care need is a condition of eligibility or 
under which long-term care services not covered for individuals 
determined eligible using MAGI-based financial methods are covered. The 
exception does not apply to someone eligible using MAGI-based 
methodologies under a MAGI-based eligibility group which covers the 
needed long-term care services, simply because the individual requests 
such services.
    We also are considering for comment, but have not included here, a 
couple other revisions to the regulations at Sec.  435.603 to address 
issues stakeholders have raised as a result of the Medicaid eligibility 
final rule. First, there are situations in which an individual is 
counted as part of two households for purposes of determining each 
household's Medicaid eligibility and that individual's entire income is 
counted as available to each household, when, in reality, only a 
portion of the individual's income may actually be available to each 
household. For example, we believe this could occur when one or both 
spouses in a married couple not filing jointly claims one or more tax 
dependents, when one or both members of an unmarried couple with a 
child in common have tax dependents of their own, and in some three-
generation households, depending on the tax filing status of the 
household members. Based on the authority provided in section 
1902(e)(14)(H)(ii) of the Act, we are considering revisions to Sec.  
435.603 to avoid these results. We are seeking comments on this and 
other situations in which this might occur, and on revisions that would 
address this issue.
b. MAGI Screen (Sec.  435.911)
    Consistent with sections 1902(a)(4), (a)(8), (a)(10)(A), (a)(19), 
and (e)(14) and section 1943 of the Act, in Sec.  435.911, we 
established at Sec.  435.911 of the Medicaid eligibility final rule a 
simplified test for determining eligibility based on MAGI. To 
effectuate this test, we provided a definition of ``applicable MAGI 
standard,'' which will be at least 133 percent of the FPL, but in some 
states, based on state-established standards, may be higher for 
pregnant women, children, or in a few states, parents and caretaker 
relatives. We propose two minor revisions to the definition of 
``applicable MAGI standard'' at Sec.  435.911(b), and to extend use of 
the MAGI screen to elderly and disabled adults who may be eligible as a 
parent or caretaker relative based on MAGI, but who are not included in 
the MAGI screen established in the Medicaid eligibility final rule.
    The applicable MAGI standard for parents and caretaker relatives 
should be the highest income standard which can be applied to 
determining eligibility for a parent or caretaker relative under any 
eligibility group using MAGI-based household income, as defined in 
Sec.  435.603 of the Medicaid eligibility final rule. Section 
435.911(b)(1)(i) of the Medicaid eligibility final rule provides that 
this applicable MAGI standard is the higher of 133 percent FPL (the 
income standard for the new adult group at Sec.  435.119 of the 
Medicaid eligibility final rule) and the income standard established by 
the state for mandatory coverage of parents and caretaker relatives 
under section 1931(b) of the Act, implemented at Sec.  435.110 of the 
final Eligibility Rule. Because some states have expanded coverage to 
parents and caretaker relatives at higher income levels through the 
adoption of an optional group for parents and caretaker relatives under 
section 1902(a)(10)(A)(ii)(I) of the Act, implemented at Sec.  435.220 
of this proposed rulemaking, the income standard applied by the state 
to this optional group in accordance with proposed Sec.  435.220(c), if 
higher than both 133 percent FPL and the standard for coverage under 
Sec.  435.110, should serve as the applicable MAGI standard for parents 
and caretaker relatives. We propose revisions at Sec.  
435.911(b)(1)(i), accordingly, to accurately reflect the applicable 
MAGI standard for parents and caretaker relatives. As provided at Sec.  
435.911(b)(1)(iv) of the Medicaid eligibility final rule, if the state 
has adopted, and phased in coverage of parents and caretaker relatives 
under, the optional eligibility group for individuals with MAGI-based 
household income over 133 percent FPL, the applicable MAGI standard 
under paragraph (b)(1) will be the income standard adopted by the state 
for that optional eligibility group in accordance with Sec.  
435.218(b)(1)(iv).
    Paragraph (c)(1) of Sec.  435.911 of the Medicaid eligibility final 
rule excluded from the simplified MAGI screen all individuals who are 
excluded from the new adult group because they have attained at least 
age 65 or are entitled to or enrolled for Medicare. Such individuals 
may be eligible based on MAGI, however, if they also are a parent or 
caretaker relative or are pregnant. We therefore clarify at proposed 
Sec.  435.911(b)(2) that there generally is no applicable MAGI standard 
for individuals who have attained at least age 65 and individuals ages 
19-64 who are entitled to or enrolled for Medicare, unless such 
individual also is pregnant or is a parent or caretaker relative. For 
such individuals, proposed Sec.  435.911(b)(2) defines the applicable 
MAGI standard, in the case of such individuals who are pregnant as the 
applicable MAGI standard established for pregnant women under paragraph 
(b)(1) and, for elderly or Medicare-

[[Page 4627]]

eligible parents and caretaker relatives, the higher of the income 
standards established by the state under the mandatory and optional 
eligibility groups for parents and caretaker relatives.
14. Single State Agency--Delegation of Eligibility Determination to 
Exchanges (Sec. Sec.  155.110, 431.10, and 431.11)
    In the Medicaid Eligibility proposed rule, published on August 17, 
2011 (76 FR 51148), we proposed to allow Medicaid agencies to delegate 
eligibility determinations to Exchanges that are public agencies 
authority to make Medicaid eligibility determinations as long as the 
single state Medicaid agency retained authority to issue policies, 
rules and regulations on program matters and to exercise discretion in 
the administration or supervision of the plan. We also noted that if 
Exchanges were established as non-governmental entities as allowed by 
the Affordable Care Act, the coordination provisions in the law may be 
more challenging and, for example, could require the co-location of 
Medicaid state workers at Exchanges or other accommodations to ensure 
coordination is accomplished. We solicited comment on approaches to 
accommodate the statutory option for a state to operate an Exchange 
through a private entity, including whether such entities should be 
permitted to conduct Medicaid eligibility determinations consistent 
with the law.
    Based on comments we received to our proposal, in the Medicaid 
eligibility final rule, we permitted a broader delegation of Medicaid 
eligibility determinations that we initially proposed, permitting 
delegation of eligibility determinations to any Exchange, whether a 
governmental or non-governmental organizations, to promote coordination 
and ensure that Exchanges could make Medicaid eligibility 
determinations, even when non-governmental. We limited the eligibility 
determination authority of an Exchange operated by a non-governmental 
entity or that contracted with private entities to MAGI-based 
determinations only, provided that the single state agency retained its 
responsibilities for supervising the administration of the plan and for 
making the rules and regulations for administering the plan, and that 
it remained accountable for the proper administration of the program 
exercising appropriate control and oversight over any entity making 
final eligibility determinations on its behalf.
    Several provisions of the Medicaid eligibility final rule were 
issued on an interim final basis. Though the single state agency 
provisions were not issued as interim final rules open for comment, we 
received public comments on them because they were closely related to 
the interim final regulatory provision at Sec.  435.1200(c) that was 
subject to comment. That provision referred to treatment of individuals 
determined eligible for Medicaid by a final determination of another 
insurance affordability program. Numerous commenters requested that CMS 
reconsider our policy permitting delegation of eligibility 
determinations to nongovernmental entities. They expressed multiple 
concerns including their belief that determining Medicaid eligibility 
is an inherently governmental function that should not be delegated to 
a nongovernmental entity. Some argued that even with the stronger 
standards in the Medicaid eligibility final rule, Medicaid's oversight 
of Exchanges run by or contracting with private entities would be 
limited by the lack of a contractual relationship between the Medicaid 
agency and the private entity.
    In light of these public comments, we are proposing to revert to 
the policy proposed in the Medicaid eligibility proposed rule, that 
state Medicaid agencies would be limited to delegating eligibility 
determinations to Exchanges that are government agencies maintaining 
personnel standards on a merit basis. For purposes of delegation, we 
would treat a public authority running an Exchange and employing merit 
system protection principles as a government agency such that 
delegation to it would be permitted. We would retain many of the 
provisions strengthening the control and oversight responsibilities of 
the single state agency. We seek comment to this proposed change 
regarding permissible delegations of final Medicaid eligibility 
determinations. In addition, we are seeking further comment regarding 
ways states can ensure a coordinated system by engaging non-profits and 
private contractors in the process of supporting Medicaid and the CHIP 
eligibility determinations while ensuring that any final Medicaid 
eligibility determination is made by a government agency. We believe 
this potential change is consistent with current state practices and 
plans.
    Thus, we are proposing at 42 CFR 431.10 to delete the provision at 
(c)(3) added by the Medicaid eligibility final rule which provided that 
Exchanges operated as nongovernmental entities as permitted under 45 
CFR 155.110(c), or contracting with a private entity for eligibility 
services, as permitted under 1311(f)(3) of the Affordable Care Act and 
45 CFR 155.110(a) are permitted to make final determinations of 
eligibility limited to determinations using MAGI-based methods as set 
forth in Sec.  435.603 of this subchapter. We propose instead to add 
explicit language to: implement 1902(a)(3) and (a)(5) of the Act by 
requiring the Medicaid agency remain responsible for determining 
eligibility for all individuals applying for or receiving benefits and 
for conducting fair hearings; consolidate Sec.  431.10(c)(1) and (c)(2) 
(regarding the other state or federal agencies to which the single 
state agency currently is permitted to delegate authority to determine 
Medicaid eligibility) into a new paragraph (c)(1)(i); and add an 
Exchange established under sections 1311(b)(1) or 1321(c)(1) of the 
Affordable Care Act to the list of permissible agencies. We further 
propose at Sec.  431.10(c)(2) to require that any entity to which such 
authority is delegated be a governmental agency which maintains 
personnel standards on a merit basis consistent with section 1902(a)(4) 
of the Act, which we add as a basis in Sec.  431.10(a)(1).
    Consistent with the statutory authority at 1902(a)(5), we are 
retaining the requirements added in the Medicaid eligibility final rule 
which strengthened the controls and oversight of the single state 
agency, but as noted in section II.A of the preamble, we have 
streamlined and reorganized the text of those paragraphs in this 
proposed rulemaking. We believe that such strengthened controls are 
appropriate for a single state agency that delegates eligibility, even 
to another government agency. We are also proposing conforming changes 
to Sec.  431.10(d) regarding agreements with federal or state and local 
entities for eligibility determinations.
    We note that because delegation will only be permitted to an 
Exchange to the extent that the eligibility determinations are made by 
a government agency maintaining personnel standards on a merit basis 
consistent with requirements set forth in section 1902(a)(4) of the 
Act, the single state agency will be allowed to delegate authority for 
an eligibility determination to the Exchange, including an eligibility 
determination for MAGI-excepted individuals. Alternatively, the single 
state agency may arrange to have the Exchange screen for possible 
Medicaid eligibility for MAGI-excepted individuals as set forth in 
Sec.  435.911 and coordinate the transfer of the application to the 
Medicaid agency, as set forth in Sec.  435.1200. Because the single 
state agency may delegate eligibility determination authority for 
different populations to more than one agency (for example, to the 
Social Security

[[Page 4628]]

Administration, the agency administering the state's program under 
title IV-A of the Act, and/or the Exchange), we further propose at 
Sec.  431.10(c)(1)(i) to require that the state plan reflect both the 
agency to which authority is delegated as well as the individuals whose 
eligibility can be determined by such delegee.
    Finally, we are proposing to make changes to Sec.  431.11 regarding 
state organization. We are proposing to delete the requirement at Sec.  
431.11(b) for the state plan to provide for a medical assistance unit 
within the Medicaid agency. Similarly, we are proposing to delete the 
requirement at Sec.  431.11(c), redesignated as Sec.  431.11(b), for 
the state plan to provide a description of the organization and 
functions of the medical assistance unit and an organization chart, as 
well as a description of the kinds and numbers of professional medical 
personnel and supporting staff used in the administration of the plan 
and their responsibilities. We believe that states should have maximum 
flexibility to organize themselves however they choose, but seek public 
comment on this proposal regarding any reasons we should retain this 
requirement. Finally, we are proposing conforming changes to Sec.  
431.10(d), redesignated as Sec.  431.10(c) to delete the references to 
nongovernmental entities conducting eligibility determinations or 
Exchange contractors performing eligibility functions.
15. Medical Support and Payments (Sec. Sec.  433.138, 433.145, 433.147, 
433.148, 433.152 and 435.610)
    Section 1912 of the Act requires, as a condition of eligibility for 
Medicaid, that parents seeking coverage cooperate with the state in 
establishing paternity and in obtaining medical support and payments. 
These requirements can be waived for good cause. While parents can be 
denied Medicaid eligibility or terminated from coverage for failure to 
cooperate, children cannot be denied Medicaid eligibility or terminated 
from coverage due to a parent's failure to do so. State Medicaid 
agencies must enter into agreements with the child support agency in 
the state, or another appropriate state agency, to effectuate section 
1912 of the Act and the collection of medical child support. Section 
1912 of the Act is implemented at Sec.  433.135 through Sec.  433.154 
and Sec.  435.610 of the current regulations.
    We propose to revise of Sec.  433.148(a)(2) and Sec.  435.610(a)(2) 
to provide that, consistent with the practice in many states today, 
individuals (unless exempt per existing regulations) must agree to 
cooperate in establishing paternity and obtaining medical support at 
application, but that enforcement of actual measures to cooperate 
happen following enrollment in coverage. As discussed in the Medicaid 
eligibility final rule, states must align the eligibility rules for all 
insurance affordability programs to the maximum extent possible, to 
achieve a highly coordinated and streamlined eligibility and enrollment 
system. Important to the achievement of such a system is that 
individuals are enrolled in coverage in as close to real time as 
possible. However, in some cases today, enrollment in Medicaid for 
parents who are subject to these cooperation requirements is often 
delayed until the parent can show that he or she has cooperated with 
the child support agency, undermining the goal of real-time processing 
of applications. Cooperation with establishing paternity and obtaining 
medical support is not required for purposes of eligibility for other 
insurance affordability programs. Because all insurance affordability 
programs will use the same streamlined application and eligibility 
determinations and enrollment will be coordinated, an eligibility 
determination for Medicaid should not be delayed by the cooperation 
requirements. Further, in states which authorize the Exchange to make 
Medicaid eligibility determinations, it would not be realistic to 
expect the Exchange to implement this Medicaid requirement prior to 
making a determination. Post-enrollment enforcement allows the Exchange 
to make Medicaid determinations, facilitates coordination among the 
programs, and ensures individuals have access to coverage in a timely 
manner.
    Under the proposed revisions, individuals must attest on the 
application that they agree to cooperate with the state in establishing 
paternity and obtaining medical support payments. However, the state 
should not wait until otherwise eligible individuals actually begin 
cooperating before finalizing the eligibility determination and 
furnishing benefits. If the individual does not cooperate, consistent 
with the requirements described in Sec.  433.147 of the regulations, 
the Medicaid agency must take action to terminate eligibility in 
accordance with part 431 subpart E (relating to notice and fair hearing 
rights). In addition to the change described above, we are making 
technical corrections to Sec. Sec.  433.138, 433.145, 433.147 and 
435.610 to update references to pregnant women eligibility under 
section 1902(a)(10)(A)(i) of the Act to a reference to Sec.  435.116, 
as promulgated in the Medicaid eligibility final rule, and to update or 
eliminate references to verification regulations in subpart J of part 
435 of the regulations which were eliminated or revised in the Medicaid 
eligibility final rule. We also propose to delete Sec.  433.152(b)(1) 
because 45 CFR part 306 no longer exists. Section 433.147(c)(1) is 
revised and Sec.  433.147(d) is deleted to eliminate references to 
factors applicable to waiving the cooperation requirement contained in 
45 CFR part 232 because part 232 of 45 CFR was removed from the 
regulations following with the passage of the Personal Responsibility 
and Work Opportunity Reconciliation Act (PRWORA). Finally, we propose 
to delete Sec.  435.610(c) as no longer relevant since the effective 
dates referenced were at least 25 years ago.
16. Conversion of Federal Minimum Income Standards for Section 1931 
(Sec. Sec.  435.110 and 435.116)
    Section 1902(e)(14)(A) and (E) of the Act, as added by section 2002 
of the Affordable Care Act, provides for the conversion of the income 
standards in effect in the state prior to the Affordable Care Act to 
thresholds that are not less than the levels that applied on the date 
of enactment. In our Medicaid Eligibility proposed rule published in 
the Federal Register on August 17, 2011, we proposed to retain the 
minimum income standards specified in federal statute for each 
eligibility group, while giving states flexibility to set new standards 
using Modified Adjusted Gross Income (MAGI) at a level that would take 
into account a state's current rules regarding how income is counted. 
We discussed that we considered whether or not states should convert 
the federal minimum income standards prescribed in statute--for 
example, the minimum standard for pregnant women and children specified 
in section 1902(l) and for parents and other caretaker relatives in 
section 1931(b) of the Act--to a MAGI-equivalent minimum income 
standard based on the income disregards currently used by the state. We 
explained that while doing so could result in maintaining eligibility 
for individuals who might otherwise lose Medicaid due to the 
elimination of income exclusions and disregards under MAGI, if a state 
were to reduce its income standard to the minimum permitted, it also 
would result in different minimum income eligibility standards being 
applied across states and reduce the amount of eligibility 
simplification that could be achieved. We finalized the policy in our 
Medicaid

[[Page 4629]]

eligibility final rule, and further noted that the effect of the 
statute's requirement to raise the statutory minimum standards for 
children ages 6 to 18 to 133 percent of the FPL under section 
1902(a)(10)(A)(i)(VII) of the Act was to align all age groups of 
children at 133 percent of the FPL, along with adults under age 65, and 
that a policy that required conversion of federal minimums for younger 
children would defeat such alignment and result in children in the same 
family potentially being eligible for different insurance affordability 
programs depending on their age.
    Since the publication of the Medicaid eligibility final rule, the 
Supreme Court decided in National Federation of Independent Business v. 
Sebelius, ---- U.S. ----; 132 S. Ct. 2566; 183 L.Ed. 2d 450 (2012) that 
the Secretary does not have authority to penalize a state for not 
adopting the new adult group, resulting in uncertainty regarding 
whether the new adult group coverage will be available for parents and 
other caretaker relatives with income at or below 133 percent FPL who 
do not meet the financial eligibility requirements of section 1931 of 
the Act. We also issued a Solicitation of Public Input on the 
Conversion of Net Income Standards to Equivalent MAGI Standards 
(Solicitation) and received numerous comments on this issue. Commenters 
noted that in states that do not expand coverage to the new adult 
group, and who reduce coverage for parents to statutory federal minimum 
thresholds (the AFDC standard in effect as of May 1, 1988 for the 
applicable family size), eligibility for coverage for these parents 
could be restricted if minimum eligibility thresholds are not 
converted. They noted that if the federal minimum thresholds are less 
than 100 percent of the FPL, parents in a state that does not expand 
may not even have the opportunity to receive an advance payment of a 
premium tax credit to purchase coverage on the Exchange.
    In light of the comments received to our Solicitation, we are 
proposing to require conversion of the federal minimum income standard 
for section 1931 of the Act. Although the statute is silent with 
respect to conversion of federal minimum income standards, the intent 
of sections 1902(e)(14)(A) and (E) of the Act is to ensure that in the 
aggregate individuals that would have been eligible under Medicaid 
rules in effect prior to the Affordable Care Act remain eligible once 
the new MAGI-based methodologies go into effect. Our proposal to direct 
conversion of the federal minimum standard for section 1931 would 
implement the conversion requirements in the statute more consistently, 
which is particularly important in light of the voluntary nature of the 
low income adult expansion under the Supreme Court's decision. In 
addition, because pregnancy benefits for pregnant women under Sec.  
435.116(d)(4)(i) are tied to the same May 1, 1988 AFDC income standard 
for the applicable family size, we are proposing that this income limit 
should also be converted. However, for the reasons stated in the 
Medicaid Eligibility proposed and final rules, we are not revisiting 
our policy with respect to the conversion of federal minimum income 
standards and limits for all other eligibility groups and covered 
services, which are not required to be converted under the Medicaid 
eligibility final rule.

II. Essential Health Benefits in Alternative Benefit Plans

A. Background

    Beginning in 2014, all non-grandfathered health insurance coverage 
\1\ in the individual and small group markets, Medicaid benchmark and 
benchmark-equivalent plans (now also known as Alternative Benefit 
Plans), and Basic Health Programs (if applicable) will cover essential 
health benefits (EHBs), which include items and services in 10 
statutory benefit categories, such as hospitalization, prescription 
drugs, and maternity and newborn care, and are equal in scope to a 
typical employer health plan.
---------------------------------------------------------------------------

    \1\ For more information on status as a grandfathered health 
plans under the Affordable Care Act, please see Interim Final Rule, 
``Group Health Plans and Health Insurance Coverage Relating to 
Status as a Grandfathered Health Plan Under the Patient Protection 
and Affordable Care Act.'' Available at: http://cciio.cms.gov/resources/regulations/index.html#gp.
---------------------------------------------------------------------------

B. Provision of the Proposed Rule: Part 440--Medicaid Program; State 
Flexibility for Medicaid Benefit Packages

1. Subpart C--Benchmark Benefit and Benchmark-Equivalent Coverage
a. Conforming Changes to Medicaid To Align With Essential Health 
Benefits
    Section 1937 of the Act provides states with the flexibility to 
amend their Medicaid state plans to provide for the use of benefit 
packages other than the standard Medicaid state plan benefit package 
offered in that state, for certain populations as defined by the state. 
These ``Alternative Benefit Plans'' are based on benchmark or 
benchmark-equivalent packages. There are four benchmark packages 
described in section 1937 of the Act:
     The benefit package provided by the Federal Employees 
Health Insurance Benefit plan (FEHB) Standard Blue Cross/Blue Shield 
Preferred Provider Option;
     State employee health coverage that is offered and 
generally available to state employees;
     The health insurance plan offered through the Health 
Maintenance Organization (HMO) with the largest insured commercial non-
Medicaid enrollment in the state; and
     Secretary-approved coverage, which is a benefit package 
the Secretary has determined to provide coverage appropriate to meet 
the needs of the population provided that coverage.
    Under the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171, 
enacted on February 8, 2006), benchmark-equivalent coverage is provided 
when the aggregate actuarial value of the proposed benefit package is 
at least actuarially equivalent to the coverage provided by one of the 
benefit packages described above, for the identified Medicaid 
population to which it will be offered. Section 1937 of the Act further 
provides that certain categories of benefits must be provided in any 
benchmark-equivalent plan, and other categories of benefits must 
include ``substantial actuarial value'' compared to the benchmark 
package.
    Section 2001(c) of the Affordable Care Act modified the benefit 
provisions of section 1937. Specifically, section 2001(c) added mental 
health benefits and prescription drug coverage to the list of benefits 
that must be included in benchmark-equivalent coverage; required the 
inclusion of Essential Health Benefits (EHBs) beginning in 2014; and 
directed that section 1937 benefit plans that include medical/surgical 
benefits and mental health and/or substance use disorder benefits 
comply with the Mental Health Parity and Addiction Equity Act of 2008 
(MHPAEA).
    In addition, section 2001(a)(1) of the Affordable Care Act 
established a new adult eligibility group for low-income adults age 19 
to 64 effective January 1, 2014. States that implement this new 
eligibility group shall provide medical assistance for that group 
through an Alternative Benefit Plan (which must include EHBs as of the 
same date) subject to the requirements of section 1937 of the Act.
    Finally, section 2004 of the Affordable Care Act, as amended by 
section 10201(a) of the Affordable Care Act, added a new optional 
eligibility group for ``former foster care children'' under age 26 that 
provides that these individuals will not be included in the

[[Page 4630]]

new adult eligibility group and exempts these individuals from 
mandatory enrollment in an Alternative Benefit Plan. Section 2303(c) of 
the Affordable Care Act provides that medical assistance to individuals 
described in 1905(a)(4)(C) of the Act (individuals of child bearing 
age), through enrollment in an Alternative Benefit Plan, shall include 
family planning services and supplies.
    This proposed rule revises current Medicaid regulations to conform 
to these statutory changes; provides further interpretation of how EHBs 
apply to Medicaid; and makes other changes to further simplify, clarify 
and align regulatory requirements between Medicaid and the private 
insurance market, where appropriate. We issued a State Medicaid 
Director letter on the above topics on November 20, 2012.
    We propose to make the following changes in Medicaid regulations to 
implement new statutory or regulatory requirements flowing from these 
provisions. These proposed changes are meant to codify statutory 
requirements or to align Medicaid regulations to the policies discussed 
earlier in this proposed rule. The proposed changes to the regulation 
are as follows:
     Amend Sec.  440.305 by re-designating the current 
paragraph (d) as Sec.  440.386 and to revise sections (a) and (b) to 
address the addition of the new adult eligibility group as being 
eligible for coverage under an Alternative Benefit Plan.
     Amend Sec.  440.315(h) to codify the provision that, while 
a new eligibility group, former foster care children are statutorily 
exempt from mandatory enrollment in an Alternative Benefit Plan.
     Add to Sec.  440.335 Benchmark-equivalent health benefits 
coverage, new paragraphs (b)(7) and (b)(8) to include benchmark-
equivalent health benefits coverage for prescription drugs and mental 
health benefits in accordance with section 2001(c) of the Affordable 
Care Act.
     Add paragraph (b) to Sec.  440.345 to codify section 
2303(c) of the Affordable Care Act to provide that Alternative Benefit 
Plan coverage provided to individuals described in section 
1905(a)(4)(C) of the Act (individuals of child bearing age), include 
family planning services and supplies.
     Add a new paragraph Sec.  440.345(c), to incorporate 
section 2001(c)(6) of the Affordable Care Act.
     In Sec.  440.345(d), codify the requirement that 
Alternative Benefit Plans provide EHBs and include all updates or 
modifications made thereafter by the Secretary to the definition of 
EHBs.
     In Sec.  440.345(e), allow Alternative Benefit Plans that 
are determined to include EHBs as of January 1, 2014 to remain 
effective through December 31, 2015 without need for updating, at the 
state's option. We will consult with states and stakeholders and 
evaluate the process to determine how often states would need to update 
these types of Alternative Benefit Plans after that date.
     Add a new Sec.  440.347 titled ``Essential Health 
Benefits'' to incorporate section 2001(c)(5) of the Affordable Care 
Act.
     In Sec.  440.347(e), codify section 1302(b)(4) of the 
Affordable Care Act provides that benefit design cannot discriminate 
``on the basis of an individual's age, expected length of life, or of 
an individual's present or predicted disability, degree of medical 
dependency, or quality of life or other health conditions''. Benefit 
design non-discrimination policies do not prevent states from 
exercising Section 1937 targeting criteria.
b. Modifications in Applying the Provisions of This Proposed Rule to 
Medicaid
    As reflected above, the definition and coverage provisions for EHBs 
described in the ``Standards Related to Essential Health Benefits, 
Actuarial Value, and Accreditation'' proposed rule published on 
November 20, 2012, apply to Medicaid except in specific circumstances. 
The conforming changes we propose to existing regulations, together 
with the statutory and regulatory requirements already existing in 
title XIX and the Federal Register, form the basis for how the Medicaid 
program will implement these benefit options.
    Given the intersection of section 1937 of the Act and the 
provisions in the Affordable Care Act relating to EHBs, there would be 
a two-step process in Medicaid for designing Alternative Benefit Plans. 
The Affordable Care Act modified section 1937 of the Act to implement 
two standards for minimum coverage provision; not only must EHBs as 
defined by the Secretary be provided, but all requirements of section 
1937 of the Act continue to apply. States will first select a coverage 
option from the choices found in section 1937 of the Act. The next step 
is determining whether that coverage option is also one of the base-
benchmark plan options identified by the Secretary as an option for 
defining EHBs.
     If so, the standards for the provision of coverage, 
including EHBs, would be met, as long as all EHB categories are 
covered, including through any necessary supplementation of missing EHB 
categories.
     If not, states will additionally select one of the base-
benchmark plan options identified as defining EHBs. This means that 
states will compare the coverage between the 1937 of the Act coverage 
option and the selected base-benchmark plan for defining EHBs and if 
the 1937 of the Act coverage is missing a category of EHB, supplement 
accordingly.
    In keeping with section 1937 of the Act's waiver of comparability, 
states may choose to target populations for receipt of specialized 
benefit packages, allowing for different Alternative Benefit Plans to 
apply to different populations. Furthermore, we propose at a new Sec.  
440.347(c) that a state has the option to select a different base-
benchmark plan to establish EHBs for each Alternative Benefit Plan.
    As described in the ``Standards Related to Essential Health 
Benefits, Actuarial Value, and Accreditation'' proposed rule published 
on November 20, 2012, the state has the opportunity to define 
habilitative benefits using a transitional approach in which states may 
either define the habilitative services category or leave it to 
issuers. In Sec.  156.115(a)(4), it was proposed that if the EHB-
benchmark plan does not include coverage for habilitative services and 
the state does not determine habilitative benefits, a health insurance 
issuer must select from two options: (1) provide parity by covering 
habilitative services benefits that are similar in scope, amount, and 
duration to benefits covered for rehabilitative services; or (2) decide 
which habilitative services to cover and report on that coverage to 
HHS. The issuer only has to supplement habilitative services when there 
are no habilitative services offered in in the base benchmark plan or 
the state has not exercised its option to define habilitative services 
under Sec.  156.110(f). We propose that states define this benefit for 
Medicaid. We are seeking comments regarding whether the state defined 
habilitative benefit definition for the Exchanges should apply to 
Medicaid or whether states should be allowed to separately define 
habilitative services for Medicaid. We are soliciting comments on the 
option for states to fully define the benefit and various approaches 
for doing so and whether the habilitative benefit should be offered in 
parity with the rehabilitative benefit as was contemplated in the 
``Standards Related to Essential Health Benefits, Actuarial Value, and 
Accreditation'' proposed rule published on November 20, 2012. Thus, we 
reserved Sec.  440.347(d) to

[[Page 4631]]

incorporate an approach after comments are received for states to 
define the Medicaid habilitative services EHB.
    We also note two areas where states have questioned application of 
proposed rules for EHBs with respect to Medicaid, and wish to clarify. 
Neither requires any regulatory change. First, for Medicaid, medically 
necessary services, including pediatric oral and vision services, must 
be provided to eligible individuals under the age of 21 under the 
Medicaid Early Periodic Screening, Diagnostic and Testing (EPSDT) 
benefit. As a result, any limitation relating to pediatric services 
that may apply in a base benchmark plan in the context of the 
individual or small group market does not apply to Medicaid. Second, 
section 1927 of the Act sets forth requirements for covered outpatient 
drugs, whereby drug manufacturers must pay statutorily-defined rebates 
to the states through the Medicaid drug rebate program. In return, any 
state that provides payment for drugs must cover all covered outpatient 
drugs, which may include appropriate limitations on amount, duration, 
and scope, for the drug manufacturers that participate in the Medicaid 
drug rebate program. Section 1927 of the Act also applies to 
Alternative Benefit Plans. Consistent with the current law, states have 
the flexibility within those statutory and regulatory constructs to 
adopt prior authorization and other utilization control measures, as 
well as policies that promote the use of generic drugs.
    All other provisions under title XIX of the Act apply, unless, as 
spelled out in section 1937 of the Act, a state can satisfactorily 
demonstrate that implementing such other provisions would be directly 
contrary to their ability to implement Alternative Benefit Plans under 
section 1937 of the Act.
    We also clarify that preventive services as established in November 
20, 2012 Patient Protection and Affordable Care Act; Standards Related 
to Essential Health Benefits, Actuarial Value, and Accreditation apply. 
Specifically, the proposed rule requires that all EHB Benchmark plans 
cover a broad range of preventive services including: ``A'' or ``B'' 
services recommended by the United States Preventive Services Task 
Force; Advisory Committee for Immunization Practices (ACIP) recommended 
vaccines; preventive care and screening for infants, children and 
adults recommended by HRSA's Bright Futures program/project; and 
additional preventive services for women recommended by Institute of 
Medicine (IOM).Title XIX premium and cost-sharing provisions apply to 
preventive services.
2. Other Changes To Simplify, Modernize and Clarify Medicaid Benchmark 
Requirements and Make Technical Corrections to Coverage Requirements
    We also propose to make certain changes to the regulations in order 
to promote simplification and clarification where needed, and provide 
some additional flexibilities to states regarding benefit options. The 
proposed changes to the regulations are as follows:
     In Sec.  440.130, conform our regulatory definition 
relating to who can provide preventive services with the statute. Our 
current regulation, Sec.  440.130, states that preventive services must 
be provided by a physician or licensed practitioner. This is not in 
alignment with the statutory provision at 1905(a)(13) of the Act that 
defines ``services * * * recommended by a physician or other licensed 
practitioner of healing arts within the scope of their practice under 
State law''.
     Add Sec.  440.386 to allow states greater flexibility when 
required to publish public notice. We propose modifying the public 
notice requirement for Alternative Benefit Plans to require that such 
notice be given prior to implementing a state plan amendment (SPA) when 
the new Alternative Benefit Plan provides individuals with a benefit 
package equal to or enhanced beyond the state's approved state plan, or 
adds additional services to an existing Alternative Benefit Plan. We 
also propose to retain the requirement to publish public notice prior 
to submitting a SPA that establishes an Alternative Benefit Plan which 
provides less benefits than the state's approved state plan, which 
includes or increases cost sharing of any type, or which amends an 
approved Alternative Benefit Plan by adding cost sharing or reducing 
benefits.
     Revise Sec.  440.315(f) by modifying the definition of 
``medically frail'' to specifically include individuals with disabling 
mental disorders (to include children with serious emotional 
disturbances and adults with serious mental illness), individuals with 
serious and complex medical conditions, individuals with a physical, 
intellectual or developmental disability that significantly impairs 
their ability to perform one or more activities of daily living, or 
individuals with a disability determination, based on Social Security 
criteria, or in states that apply more restrictive criteria than the 
Supplemental Security Income (SSI) program, as the state plan criteria. 
We are clarifying this language to ensure that all people with 
disabilities are included in the medically frail definition. We are 
specifically soliciting comments on whether individuals with a 
substance use disorder should be added to the definition of ``medically 
frail'' and therefore exempted from mandatory enrollment in an 
Alternative Benefit Plan.
     Amend Sec.  440.330(d) by replacing the phrase ``benefits 
within the scope of the categories available under a benchmark coverage 
package'' with ``benefits of the type, which are covered in one or more 
of section 1937 of the Act benchmark coverage packages described in 
Sec.  440.330(a) through (c)'' in order to clarify that Secretary-
approved coverage may include benefits of the type which are covered in 
1 or more of the section 1937 of the Act commercial coverage packages. 
We are also clarifying Sec.  440.335(c) and Sec.  440.360 in the same 
way.
     Revise Sec.  440.330(d), Sec.  440.335(c) and Sec.  
440.360 to indicate that such coverage may, at state option, include 
the benefits described in sections 1915(i), 1915(j), 1915(k) and 1945 
of the Act, and any other Medicaid state plan benefits enacted under 
title XIX, or benefits available under base benchmark plans described 
in section 45 CFR 156.100, along with the benefits described in 1905(a) 
of the Act. When including these benefits, the state must comply with 
all provisions of these sections. And, consistent with the provisions 
of sections 1902(k)(1) and 1903(i)(36) of the Act, we provide that the 
coverage for individuals eligible only through section 
1902(a)(10)(A)(i)(VIII) is limited to benchmark or benchmark equivalent 
coverage, except that we propose that exemptions from mandatory 
enrollment in such coverage would still be applicable for individuals 
eligible on that basis consistent with our understanding of 
congressional intent.

III. Eligibility Appeals and Other Provisions Related to Eligibility 
and Enrollment for Exchanges

A. Background

    This proposed rule supplements and, in some respects, amends 
provisions originally published as the March 27, 2012 rule titled 
Patient Protection and Affordable Care Act; Establishment of Exchanges 
and Qualified Health Plans; Exchange Standards for Employers 
(``Exchange Final Rule'') (77 FR 18310). The provisions contained in 
this proposed rule encompass key functions of Exchanges related to 
eligibility and enrollment. Given that states have relied on the 
provisions of the Exchange final

[[Page 4632]]

rule to plan their systems for 2014, we intend whenever possible, when 
we finalize this rule, to provide some type of transition for such 
states, and welcome comments on its design and the length of the 
transition.
1. Legislative Overview
    Section 1311(b) and section 1321(b) of the Affordable Care Act 
provide that each state has the opportunity to establish an Exchange 
that: (1) Facilitates the purchase of insurance coverage by qualified 
individuals through qualified health plans (QHPs); (2) assists 
qualified employers in the enrollment of their employees in QHPs; and 
(3) meets other standards specified in the Affordable Care Act. Section 
1311(k) of the Affordable Care Act specifies that Exchanges may not 
establish rules that conflict with or prevent the application of 
regulations promulgated by the Secretary. Section 1311(d) of the 
Affordable Care Act describes the minimum functions of an Exchange, 
including the certification of QHPs.
    Section 1321 of the Affordable Care Act discusses state flexibility 
in the operation and enforcement of Exchanges and related policies. 
Section 1321(c)(1) directs the Secretary to establish and operate such 
Exchanges within states that either: (1) do not elect to establish an 
Exchange, or (2) as determined by the Secretary on or before January 1, 
2013, will not have an Exchange operable by January 1, 2014. Section 
1321(a) also provides broad authority for the Secretary to establish 
standards and regulations to implement the statutory standards related 
to Exchanges, QHPs, and other standards of title I of the Affordable 
Care Act.
    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 of the Affordable Care Act establishes 
provisions to reduce the cost-sharing obligation of certain eligible 
individuals enrolled in a QHP through an Exchange, including standards 
for determining whether Indians are eligible for certain categories of 
cost-sharing reductions.
    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 shared responsibility payment under section 5000A 
of the Code.
    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.
    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.
2. Stakeholder Consultation and Input
    HHS has consulted with interested stakeholders on policies related 
to the eligibility provisions and Exchange functions. HHS held a number 
of listening sessions with consumers, providers, employers, health 
plans, and state representatives to gather public input, and released 
several documents for public review and comment. HHS also released a 
bulletin that outlined our intended regulatory approach to verifying 
access to employer-sponsored coverage and sought public comment on the 
specific approaches.
    Finally, HHS consulted with stakeholders through regular meetings 
with the National Association of Insurance Commissioners (NAIC), 
regular contact with states through the Exchange grant process, 
Medicaid consultation, and meetings with tribal leaders and 
representatives, health insurance issuers, trade groups, consumer 
advocates, employers, and other interested parties.
    We considered all of these comments as we developed the policies in 
this proposed rule.
3. Structure of the Proposed Rule
    The proposed amendments to 45 CFR part 155 in this rule propose 
standards related to eligibility appeals, notices, and other 
eligibility standards for insurance affordability programs to 
facilitate a streamlined process for eligibility for enrollment in a 
QHP through the Exchange and insurance affordability programs.
    Amendments to 45 CFR part 155 subpart A revise existing definitions 
and propose new definitions.
    A technical correction is made to 45 CFR part 155 subpart B.
    Amendments to 45 CFR part 155 subpart C provide for standards 
related to application counselors and authorized representatives.
    Amendments to 45 CFR part 155 subpart D propose standards related 
to eligibility determinations for enrollment in a QHP and for insurance 
affordability programs.
    Amendments to 45 CFR part 155 subpart E propose standards related 
to enrollment-related transactions, special enrollment periods, and 
terminations.
    The addition of 45 CFR part 155 subpart F proposes standards 
related to the eligibility appeals process.
    Amendments to 45 CFR part 155 subpart H propose standards related 
to eligibility appeals related to the SHOP.
4. Alignment With Related Rules and Published Information
    As outlined previously in this proposed rule, this rule proposes 
Medicaid provisions associated with the eligibility changes under the 
Affordable Care Act of 2010. We refer to these provisions throughout 
this section as the ``Medicaid proposed provisions.''

B. Provisions of the Proposed Regulations: Part 155--Exchange 
Establishment Standards and Other Related Standards Under the 
Affordable Care Act

    Throughout this proposed rule, we propose technical corrections to 
regulation sections in part 155 to replace references to section 36B of 
the Code with the corresponding sections to the Department of 
Treasury's final rule, Health Insurance Premium Tax Credit (26 CFR 
1.36B), published in the May 23, 2012 Federal Register (77 FR 30377).
1. Definitions (Sec.  155.20)
    We propose to make a technical correction to the definition of the 
term ``advance payments of the premium tax credit.'' We note that 
advance payments of the premium tax credit means the advance payment of 
the tax credits authorized by section 36B of the Code as well as its 
implementing regulations. We also propose to remove the reference to 
section 1402 of the Affordable Care Act, as it concerns cost-sharing 
reductions as opposed to the premium tax credit.
    We propose to make a technical correction to the term ``application 
filer.'' We clarify that our previous inclusion of an authorized 
representative in the definition refers to the authorized 
representative of an applicant. We also cite to the applicable Treasury 
regulation instead of section 36B of the Code.
    We propose to define the term ``catastrophic plan'' by reference to 
section 1302(e) of the Affordable Care Act.

[[Page 4633]]

    We propose to amend the term ``lawfully present.'' As discussed in 
preamble to 45 CFR 155.20, the definition of ``lawfully present'' 
included in the Exchange final rule is intended to align with the 
definition of ``lawfully residing'' as used in section 214 of the 
Children's Health Insurance Program Reauthorization Act (Pub. L. 111-3, 
enacted on February 4, 2009) (CHIPRA). As 42 CFR 435.4 of the Medicaid 
proposed provisions implements the CHIPRA definition by defining the 
term, ``lawfully present'', we are proposing to adjust our definition 
to define ``lawfully present'' through reference to the Medicaid 
proposed provisions. The definition used in 42 CFR 435.4 of the 
Medicaid proposed provisions is substantially the same as the 
definition used in 45 CFR 152.2, with minor modifications, described in 
more detail in the preamble associated with 42 CFR 435.4, 435.406, and 
457.320 of the Medicaid proposed provisions. Generally, these 
modifications are made in order to achieve greater operational 
simplification and to align with current policies, including a 
clarification regarding eligibility for individuals with deferred 
action under the Deferred Action for Childhood Arrivals (DACA) process.
2. Approval of a State Exchange (Sec.  155.105)
    We propose to make a technical correction in paragraph (b)(2) to 
cite to the applicable Treasury regulation instead of section 36B of 
the Code.
3. Functions of an Exchange (Sec.  155.200)
    We propose to revise paragraph (a) to clarify that the Exchange 
must also perform the minimum functions described in subpart F.
4. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    We propose to split paragraph (d) into paragraphs (d)(1) and 
(d)(2), and revise the text to clarify that prior to providing the 
consumer assistance specified in paragraph (d)(1) of this section, an 
individual must be trained regarding QHP options, insurance 
affordability programs, eligibility, and benefits rules and regulations 
governing all insurance affordability programs operated in the state, 
as implemented in the state. This is consistent with proposed Sec.  
155.225(b)(2), and is designed to ensure that all types of assistance 
provided by the Exchange are provided by individuals who are 
appropriately trained, in order to ensure quality.
5. Certified Application Counselors (Sec.  155.225)
    Section 1413 of the Affordable Care Act directs the Secretary to 
establish, subject to minimum requirements, a streamlined enrollment 
system for QHPs and all insurance affordability programs. State 
Medicaid and CHIP agencies have a long history of offering application 
assistance programs through which application counselors have had a key 
role in promoting enrollment for low-income individuals seeking 
coverage, and we believe that making such assistance available for the 
Exchange will be critical to achieving a high rate of enrollment. 
Accordingly, the proposed regulation seeks to ensure that application 
counselors will also be available in the Exchange to help individuals 
and employees apply for enrollment in a QHP and for insurance 
affordability programs by adding Sec.  155.225 to establish the 
standards for Exchange certification of such application counselors. 
This language specifies that each Exchange will establish an 
application counselor program. The proposed standards closely track 
those for Medicaid application counselors so that the training can be 
streamlined.
    In essence, application counselors will provide the same core 
application assistance service that is also available directly through 
the Exchange, as well as through Navigators and licensed agents and 
brokers; the distinction between these entities is that application 
counselors are not funded through the Exchange, through grants or 
directly, or licensed by states as agents or brokers. We believe that 
this separate class of application counselors is important to ensure 
that skilled application assistance is available from entities like 
community health centers and community-based organizations that may not 
fit in to the other categories. We are proposing a certification 
process so that individuals and employees will have assurance of the 
quality and privacy and security of the assistance available through 
these certified application counselors understanding that individuals 
may receive some level of informal assistance from family members and 
others who are not officially certified by the Exchange. We are 
proposing that certified application counselors would have a 
relationship with the Exchange so that they could officially support 
the process while ensuring the privacy and security of personal 
information. Given the overlap in the scope of responsibilities between 
application counselors, Navigators, agents and brokers, and other 
entities that provide help to consumers, we believe a state can develop 
a single set of core training materials that can be utilized by 
Navigators, agents and brokers, and application counselors. 
Additionally, we plan to make selected federal training and support 
materials available that can be used by states, without the need to 
develop their own, to the extent that the state uses the model 
application established by HHS.
    In paragraph (a), we propose that staff and volunteers of both 
Exchange-designated organizations and organizations designated by state 
Medicaid and CHIP agencies as it is defined in proposed Sec.  435.908 
will be certified by the Exchange to act as application counselors, 
subject to the conditions in paragraphs (b) and (c). The Exchange will 
certify employees and volunteers of organizations as application 
counselors, which may include health care providers and entities, as 
well as community-based organizations, among other organizations. The 
designation of organizations by state Medicaid and CHIP agencies is 
subject to proposed Sec.  435.908.
    We propose that certified application counselors: (1) Provide 
information to individuals and employees on insurance affordability 
programs and coverage options; (2) assist individuals and employees in 
applying for coverage in a QHP through the Exchange and for insurance 
affordability programs; and (3) help facilitate enrollment in QHPs and 
insurance affordability programs. We acknowledge that certified 
application counselors will not be able to sign the application or make 
any attestations on behalf of the individual. In contrast, we propose 
in Sec.  155.227 that an authorized representative can perform that 
function.
    In paragraph (b), we propose standards for certification of 
individuals seeking to become application counselors. These standards 
will serve to ensure that application counselors will have the training 
and skills necessary to provide reliable assistance to consumers, that 
they disclose to the Exchange and applicant any financial or other 
relationships (either of the application counselor personally or of the 
sponsoring organization), that they will comply with the 
confidentiality requirements that apply to the data they will access in 
their role as application counselors, including section 6103 of the 
Internal Revenue Code and section 1902(a)(7) of the Act. Accordingly, 
we propose that the Exchange will certify as an application counselor 
any individual who: registers with Exchange; is trained

[[Page 4634]]

prior to providing application assistance; complies with applicable 
authentication and data security standards, and with the Exchange's 
privacy and security standards adopted consistent with 45 CFR 155.260; 
provides application assistance in the best interest of applicants; 
complies with any applicable state law related to application 
counselors, including state law related to conflicts of interests; 
provides information with reasonable accommodations for those with 
disabilities, if providing in-person assistance; and enters into an 
agreement with the Exchange. We seek comment on whether the Exchange 
should have the authority to create additional standards for 
certification or otherwise limit eligibility of certified application 
counselors beyond what is proposed here.
    In paragraph (c) we provide that the Exchange will establish 
procedures to withdraw certification from individual application 
counselors, or from all application counselors associated with a 
particular organization, when it finds noncompliance with the terms and 
conditions of the application counselor agreement.
    In paragraph (d), we propose that the Exchange establish procedures 
that ensure that applicants are informed of the functions and 
responsibilities of certified application counselors and provide 
authorization for the disclosure of his or her information to an 
application counselor prior to a counselor helping the applicant with 
submitting an application.
    In paragraph (e), we propose that certified application counselors 
may not impose any charge on applicants for application assistance in 
order to support access for low-income individuals.
6. Authorized Representatives (Sec.  155.227)
    Under 45 CFR 155.405(c)(1), the Exchange must accept applications 
from application filers which includes authorized representatives 
acting on behalf of an applicant. The proposed rules for authorized 
representatives for Exchanges closely track those for Medicaid. We 
propose to add a new Sec.  155.227 establishing minimum requirements 
for the designation of authorized representatives who may act on an 
individual's or employee's behalf.
    In Sec.  155.227(a), we propose that, subject to applicable privacy 
and security requirements, the Exchange must permit individuals and 
employees to designate an individual or organization to act on that 
individual or employee's behalf, or may have such a representative 
through operation of state law (for example, through a legal 
guardianship arrangement). The Exchange must not restrict the option to 
designate an authorized representative to only certain groups of 
individuals or employees. We propose the Exchange ensures the 
authorized representative agrees to maintain, or be legally bound to 
maintain, the confidentiality of any information regarding the 
individual or employee provided by the Exchange, and that authorized 
representatives adhere to applicable authentication and data security 
standards. Additionally, we propose the Exchange ensures the authorized 
representative is responsible for fulfilling all responsibilities 
encompassed within the scope of the authorized representation, as 
described in this section, to the same extent as the individual he or 
she represents.
    In Sec.  155.227(b), we propose the times during which the Exchange 
must permit an individual or employee may choose to designate an 
authorized representative. We intend that the single, streamlined 
application described in 45 CFR 155.405 will provide applicants the 
opportunity to designate an authorized representative and will collect 
the information necessary for such representative to enter into any 
associated agreements with the Exchange as part of the application 
process, and any alternative application developed by a state under 45 
CFR 155.405(b) must do so as well. Individuals and employees who do not 
designate an authorized representative on their applications will 
subsequently be able to do so through electronic, paper formats and 
other modalities as described in 45 CFR 155.405(c)(2). Legal 
documentation of authority to act on behalf of an individual under 
state law, such as a court order establishing legal guardianship or a 
power of attorney, may serve in the place of the individual or 
employee's designation. The option to submit such documentation is 
intended to enable these applicants to have authorized representation 
without requiring duplicate authorization.
    In Sec.  155.227(c), we propose that the Exchange must permit an 
individual to authorize a representative to--(1) Sign the application 
on the individual's behalf; (2) submit an update or respond to a 
redetermination for the individual; (3) receive copies of the 
individual's notices and other communications from the Exchange; and 
(4) act on behalf of the individual in all other matters with the 
Exchange. Unlike a certified application counselor, the authorized 
representative has the ability to sign the application and make 
attestations on behalf of an individual.
    In Sec.  155.227(d), we propose that the Exchange must permit an 
individual or employee to change or withdraw their authorization at any 
time. The authorized representative also may withdraw his or her 
representation by notifying the Exchange and the individual.
    In Sec.  155.227(e), we propose that an authorized representative 
acting as either a staff member or volunteer of an organization and the 
organization itself must sign an agreement meeting the requirements in 
Sec.  155.225(b) of this part. While important in instances where an 
authorized representative is a member or volunteer of an organization, 
we believe that the protections afforded by the agreement are not 
logical in cases where an authorized representative is not acting on 
behalf of an organization. For example, a friend or family member who 
is authorized to represent an applicant would not be legally obliged to 
keep the applicant or enrollee's eligibility status confidential. We 
seek comments on applying the protections in paragraph (e) to 
authorized representatives more broadly.
    In Sec.  155.227(f), we propose that the Exchange require 
authorized representatives to comply with any applicable state and 
federal laws concerning conflicts of interest and confidentiality of 
information.
    In Sec.  155.227(g),we propose that designation of an authorized 
representative must be in writing including a signature or through 
another legally binding format and be accepted through all of the 
modalities described in 45 CFR 155.405(c) of this part.
7. General Standards for Exchange Notices (Sec.  155.230)
    We propose to make a technical correction in paragraph (a) to 
clarify that the general standards for notices apply to all notices 
sent by the Exchange to individuals or employers. The goal of this 
change is to eliminate any confusion that may have resulted from the 
multiple categories of individuals, employees, and employers that were 
previously listed.
    We also propose to revise paragraph (a) by redesignating paragraph 
(a)(1) as paragraph (a)(4) and redesignating paragraph (a)(2) as 
paragraph (a)(5). We revise redesignated (a)(2) to change ``; and'' to 
``.'' We propose to add new paragraph (a)(1) to indicate that any 
notice required to be sent by the Exchange to individuals or employers 
must be written and include an explanation of the action that is 
reflected in the notice, including the effective date of the action, 
and we propose to add new paragraph (a)(2) to

[[Page 4635]]

require the notice to include any factual findings relevant to the 
action. We revise paragraph (a)(3) to clarify that the notice must 
include the citation to, or identification of, the relevant regulations 
that supports the action.
    We propose to add paragraph (d) to allow the Exchange to provide 
notices either through standard mail, or if an individual or employer 
elects, electronically, provided that standards for use of electronic 
notices are met as set forth in Sec.  435.918, which contains a 
parallel provision. These standards ensure that individuals have the 
ability to control their preferences regarding how they receive 
notices; additionally, since notices will include personally 
identifiable information, these standards ensure that proper safeguards 
for the generation and distribution of notices are met. Providing an 
option for individuals and employers to receive notices electronically 
allows the Exchange to leverage available technology to reduce 
administrative costs and improve communication. This provision is 
discussed further in the preamble to Sec.  435.918. We note that the 
notice standards described in this section apply to notices required 
throughout 45 CFR part 155, including notices sent by the SHOP 
Exchange. We propose that the standards specifically described under 
proposed paragraph (d) do not apply to the SHOP Exchange, because of 
the distinct nature of the relationship between the SHOP Exchange, 
employers, and employees. However, we also considered adopting an 
alternative approach whereby we would propose the same standard for the 
SHOP Exchange that we propose adopting for the individual market 
Exchange under paragraph (d), except that the SHOP Exchange would have 
more flexibility to adopt an all-electronic approach. We note that we 
expect that the SHOP Exchange may rely more heavily on electronic 
notices than the individual market Exchange. We seek comment on the 
approach we have proposed, and whether we should adopt the alternative 
approach.
8. Definitions and General Standards for Eligibility Determinations 
(Sec.  155.300)
    We propose to make a technical correction to remove the definition 
of ``adoption taxpayer identification number'' from paragraph (a), as 
it will not be used in the income verification process for advance 
payments of the premium tax credit and cost-sharing reductions, in 
accordance with proposed rules issued by the Secretary of the Treasury 
at 77 FR 25381.
    We propose to make a technical correction to the definition of, 
``minimum value'', to add ``employer-sponsored'' before the words 
``plan meets the,'' replace the word ``requirements'' with 
``standards'' and cite to applicable Treasury regulations instead of 
section 36B of the Code. We also propose corrections to the definition 
of ``modified adjusted gross income'' and ``qualifying coverage in an 
eligible employer-sponsored plan'' to cite to the applicable Treasury 
regulation implementing section 36B of the Code.
9. Options for Conducting Eligibility Determinations (Sec.  155.302)
    In Sec.  155.302, we propose to amend paragraphs (a)(1), (b)(4), 
and (5). We note that this section is currently an interim final rule 
(77 FR 18451-52). With our proposals below, we intend to modify the 
interim final rule without finalizing it at this time.
    We propose to make a technical correction in paragraph (a)(1) to 
align the language regarding the Exchange's ability to make eligibility 
determinations for Medicaid and CHIP with language proposed in Sec.  
431.10(c)(2), which specifies that Medicaid eligibility determinations 
may only be made by a government agency that maintains personnel 
standards on a merit basis.
    We propose to amend paragraph (b)(4)(i)(A), adding language which 
provides that the withdrawal opportunity is not applicable in cases in 
which the Exchange has assessed that the applicant is potentially 
eligible for Medicaid based on factors other than MAGI, in accordance 
with 45 CFR 155.345(b). In this situation, the application will already 
be sent to Medicaid for a full determination that includes a 
determination based on criteria identified in 45 CFR 155.305(c) and (d) 
and other eligibility criteria not generally considered by an Exchange, 
such as disability. Therefore, withdrawal of the application in this 
instance is not applicable. We also propose that an individual's 
application not be considered withdrawn if the individual appeals his 
or her eligibility determination for advance payments of the premium 
tax credit or cost-sharing reductions and the Exchange appeals entity 
finds that the individual is potentially eligible for Medicaid or CHIP. 
The added language preserves an individual's right to a Medicaid or 
CHIP eligibility determination based on the initial date of 
application, as well as any appeal rights related to that 
determination.
    We propose to amend paragraph (b)(5) to specify that the Exchange 
also will adhere to the appeals decision for Medicaid or CHIP made by 
the state Medicaid or CHIP agency, or the appeals entity for such 
program. The previous language only specified that the Exchange adhere 
to the initial eligibility determination for Medicaid or CHIP made by 
the state Medicaid or CHIP agency.
10. Eligibility Standards (Sec.  155.305)
    We propose to amend paragraph (a)(3) to add paragraph (a)(3)(v) 
concerning the eligibility standards for residency for enrollment in a 
QHP through the Exchange. We propose to specify that the Exchange may 
not deny or terminate an individual's eligibility for enrollment in a 
QHP through the Exchange if the individual meets the standards in 
paragraph (a)(3) but for a temporary absence from the service area of 
the Exchange and the individual intends to return when the purpose of 
the absence has been accomplished, unless another Exchange verifies 
that the individual meets the residency standard of such Exchange. This 
proposal is designed to align the Exchange eligibility standards 
regarding residency with the Medicaid eligibility standards described 
in 42 CFR 435.403(j)(3). Both this provision and the parallel provision 
in 42 CFR 435.403(j)(3) are designed to ensure that an individual is 
not ruled ineligible during a period of temporary absence, which could 
create significant issues with respect to access to health care, as 
well as administrative burden associated with termination and 
reenrollment.
    We propose to make technical corrections in paragraphs (f)(1), 
(f)(2), and (f)(5) to cite to the applicable Treasury regulation 
instead of section 36B of the Code.
    We propose to amend paragraph (f)(3) to clarify that advance 
payments of the premium tax credit and cost-sharing reductions are 
available on behalf of a tax filer only if one or more applicants for 
whom the tax filer attests that he or she expects to claim a personal 
exemption deduction for the benefit year, including the tax filer and 
his or her spouse, is enrolled in a QHP, that is not a catastrophic 
plan, through the Exchange. This proposal aligns with the definition of 
QHP as provided in section 36B of the Code.
    We propose to add paragraph (h) to outline the eligibility 
standards for enrollment through the Exchange in a QHP that is a 
catastrophic plan, as specified in section 1302(e) of the Affordable 
Care Act. We note that premium tax credits are not available to support 
enrollment in a catastrophic plan. In paragraph (h)(1), we propose to 
add language that an Exchange will

[[Page 4636]]

determine a qualified individual eligible for enrollment through the 
Exchange in a QHP that is a catastrophic plan if he or she has not 
attained the age of 30 before the beginning of the plan year, in 
accordance with section 1302(e)(2)(A) of the Affordable Care Act. In 
paragraph (h)(2), we propose to add language specifying that the 
Exchange will determine a qualified individual eligible for enrollment 
through the Exchange in a QHP that is a catastrophic plan if he or she 
has a certification that he or she is exempt from the shared 
responsibility payment under section 5000A of the Code based on a lack 
of affordable coverage or hardship. These standards reflect that the 
Exchange will only make eligibility determinations for enrollment 
through the Exchange in a QHP that is a catastrophic plan, as opposed 
to enrollment in catastrophic plans outside of the Exchange. The 
eligibility standards for exemptions under section 5000A of the Code 
will be discussed in future regulations.
11. Eligibility Process (Sec.  155.310)
    In accordance with section 1411(e)(4)(B)(iii) of the Affordable 
Care Act, section 155.310(h) specifies that the Exchange shall provide 
a notice to an employer if one of the employer's employees has been 
determined eligible for advance payments of the premium tax credit or 
cost-sharing reductions. Sections 1411(e)(4)(B)(iii) and 1411(f)(2) of 
the Affordable Care Act establish a system of notice to employers and 
an employer appeal when an employee's eligibility for advance payments 
of the premium tax credit is based on either the employer's decision 
not to offer minimum essential coverage to that employee or the plan 
sponsored by the employer does not meet the minimum value standard or 
is unaffordable.
    Section 4980H of the Code limits the employer's liability for 
payment under that provision when the employer offers coverage to one 
or more full-time employees who are ``certified to the employer under 
section 1411'' as having enrolled in a QHP through the Exchange and for 
whom an applicable premium tax credit or cost-sharing reduction is 
allowed or paid. We propose to add new paragraph (i) regarding a 
certification program pursuant to the Secretary's program for 
determining eligibility for advance payments of the premium tax credit 
and cost-sharing reductions in accordance with section 1411(a) of the 
Affordable Care Act. This certification program is distinct from the 
notification specified in section 1411(e)(4)(B)(iii) and paragraph (h).
    In new Sec.  155.310(i), we propose that the certification to the 
employer will consist of methods adopted by the Secretary of Treasury 
as part of the determination of potential employer liability under 
section 4980H of the Code. In this manner, the certification program 
will address not only individuals on whose behalf advance payments of 
the premium tax credit and cost-sharing reductions are provided, but 
also individuals claiming the premium tax credit only on their tax 
returns. We welcome comments on this proposal.
    We also propose to combine previous paragraphs (i) and (i)(1) into 
new paragraph (j). We propose to amend paragraph (j) in order to align 
with proposed revised language in Sec.  155.335, which specifies that 
the Exchange will redetermine eligibility on an annual basis for all 
qualified individuals, not only enrollees. This is discussed further in 
the preamble associated with Sec.  155.335(a). We propose to remove the 
previous paragraph (i)(2), as it addressed situations in which a 
qualified individual did not select a plan before the date on which his 
or her eligibility would have been redetermined as a part of the annual 
redetermination process. Since the proposed change to Sec.  155.335(a) 
specifies that all qualified individuals will be redetermined on an 
annual basis, including paragraph (i)(2) in redesignated paragraph (j) 
would be unnecessary.
12. Verification Process Related to Eligibility for Enrollment in a QHP 
Through the Exchange (Sec.  155.315)
    We propose a technical correction in paragraph (b)(2) to clarify 
that the procedures specified for situations in which the Exchange is 
unable to validate an individual's Social Security number through the 
Social Security Administration (SSA) also address situations in which 
SSA indicates an individual is deceased.
    In paragraph (f), we propose to clarify the circumstances that will 
trigger the inconsistency process described in paragraphs (f)(1) and 
(2). We clarify that when electronic data are required but data on an 
individual that is relevant to the eligibility determination is not 
contained in the electronic data source, the Exchange will follow 
procedures in paragraphs (f)(1) and (2). Additionally, if electronic 
data are required but it is not reasonably expected that such data 
sources will be available within two days of the initial attempt to 
reach the data source, we clarify that the Exchange will follow 
procedures in paragraphs (f)(1) and (2), if applicable. We propose this 
change to clarify that if the Exchange is unable to reach a required 
electronic data source upon initial attempts, the Exchange may continue 
to attempt to reach this electronic data source prior to providing an 
eligibility determination. While we expect that in the majority of 
cases, such information will be available the next day (for example, 
when data sources are unavailable very late at night), we include an 
extra day just to ensure that inconsistency processes are not triggered 
unnecessarily in order to minimize confusion for individuals and 
administrative burden for the Exchange. This proposal will ensure that 
the Exchange completes all possible electronic verifications after the 
two-day period before requesting additional information from an 
individual.
    We propose to revise paragraph (f)(4), which addresses eligibility 
for enrollment in a QHP and for advance payments of the premium tax 
credit and cost-sharing reductions, to clarify that the Exchange will 
determine eligibility during the period of time described in paragraph 
(f)(1) of this section based on the information provided by the 
applicant along with any information that has been verified. Paragraph 
(f)(1) describes the period during which the Exchange is required to 
make a reasonable effort to identify and address the causes of an 
inconsistency including through typographical or other clerical errors, 
such as by contacting the application filer to confirm the accuracy of 
the information submitted by the application filer. This effort to 
resolve the inconsistency without documentation is required by section 
1411(c)(3) of the Affordable Care Act, referencing section 
1902(ee)(1)(B)(i) of the Act, and section 1411(c)(4)(A)(i) of the 
Affordable Care Act. We also clarify that we expect that contact made 
with the individual to resolve typographical or other clerical errors 
under paragraph (f)(1) will occur primarily in a real-time fashion 
through the dynamic online application or through the call center as an 
application is submitted via phone. Therefore, we expect that the 
initial eligibility determination provided to the individual who is 
otherwise eligible but for whom inconsistencies are outstanding, will 
occur, for the most part, after typographical and clerical errors have 
been addressed. Lastly, we note that to the extent that the effort in 
paragraph (f)(1) is unsuccessful, existing paragraph (f)(2)(ii) 
specifies that the Exchange will maintain the eligibility determination 
during the 90-day period that is provided for an individual to provide 
satisfactory documentation or otherwise resolve an inconsistency.
    We propose to add paragraph (j) concerning the verification process

[[Page 4637]]

related to eligibility for enrollment through the Exchange in a QHP 
that is a catastrophic plan. As noted above, we propose to add language 
at Sec.  155.305(h) to establish the eligibility standards for 
enrollment through the Exchange in a QHP that is a catastrophic plan; 
paragraph (j) provides the corresponding Exchange verification 
procedures. In paragraph (j)(1), we propose to add language concerning 
the verification of the applicant's age. We propose two options for 
this verification. First, the Exchange may accept the applicant's 
attestation of age without further verification, unless information 
provided by the applicant is not reasonably compatible with other 
information previously provided by the individual or otherwise 
available to the Exchange. Second, the Exchange may examine available 
electronic data sources that have been approved by HHS for this 
purpose, based on evidence showing that such data sources are 
sufficiently current and accurate, and minimize administrative costs 
and burdens.
    In paragraph (j)(2), we propose to add language specifying that the 
Exchange will verify that an applicant for enrollment through the 
Exchange in a QHP that is a catastrophic plan based on an exemption 
from the shared responsibility payment under section 5000A of the Code 
due to lack of affordable coverage or hardship has a certificate of 
such an exemption issued by an Exchange. We anticipate that this will 
be accomplished either through use of the Exchange's records, if the 
exemption was issued by that Exchange, or through verification of paper 
documentation if the certificate was issued by a different Exchange. We 
also note in paragraph (j)(3) that in the event that the Exchange is 
unable to verify information necessary to determine an applicant's 
eligibility for enrollment through the Exchange in a QHP that is a 
catastrophic plan, the Exchange will follow the inconsistency process 
described in Sec.  155.315(f), except for Sec.  155.315(f)(4), which 
does not apply to the eligibility criteria for enrollment through the 
Exchange in a QHP that is a catastrophic plan. That is, an applicant 
will not be determined eligible through the Exchange in a QHP that is a 
catastrophic plan until verification of necessary information can be 
completed. We welcome comments on these provisions.
13. Verifications Related to Eligibility for Insurance Affordability 
Programs (Sec.  155.320)
    We propose to make a technical correction in paragraph (c)(1)(i) to 
change ``tax return data'' to ``data regarding annual household 
income.'' We amend paragraph (c)(1)(i)(A) to include data regarding 
Social Security benefits as defined in 26 CFR 1.36B-1(e)(2)(iii). This 
reflects the legislative change made by Public Law 112-56 concerning 
the treatment of Social Security benefits related to MAGI. 
Specifically, in some situations, IRS will be unable to calculate MAGI 
for certain relevant taxpayers who have nontaxable Social Security 
benefits; the proposed new language in this paragraph reflects the need 
to obtain this data from the Social Security Administration to support 
the verification of annual household income. Section 155.320(c)(1)(i) 
establishes a system through which the Exchange contacts HHS and HHS 
secures the annual household income data available from IRS and Social 
Security Administration, for purposes of determining MAGI. We 
anticipate that the Social Security Administration will provide the 
full amount of Social Security benefits to HHS for disclosure to the 
Exchange as part of the verification process described in Sec.  
155.320(c).
    We propose to make a technical correction in paragraph (c)(1)(i)(A) 
to remove the language concerning an adoption taxpayer identification 
number, as it will not be used in the income verification process for 
advance payments of the premium tax credit and cost-sharing reductions, 
in accordance with proposed rules issued by the Secretary of the 
Treasury at 77 FR 25381. We also propose to make a technical correction 
to cite to the applicable Treasury regulation instead of section 36B of 
the Code.
    We propose to make a technical correction in paragraph (c)(1)(ii) 
to add the word ``calculated'' prior to ``in accordance with 42 CFR 
435.603(d).'' We also propose to make a technical correction to cite to 
the applicable Treasury regulation instead of section 36B of the Code.
    We propose to make a technical correction in paragraph (c)(3)(i)(D) 
by adding the word ``the'' after the first word, ``If,'' in the 
paragraph such that it now reads ``If the Exchange finds that * * *.''
    We propose to add paragraph (c)(3)(i)(E) to specify that the 
Exchange verify that neither advance payments of the premium tax credit 
nor cost-sharing reductions are already being provided on behalf of an 
individual, which is an important program integrity measure. As 
proposed, the language specifies that the Exchange will use information 
from HHS to support this verification.
    We propose to make a technical correction to paragraph 
(c)(3)(ii)(A) to reflect the amendment made to paragraph (c)(1)(i)(A) 
of this section, reflecting the legislative change made by Public Law 
112-56 concerning the treatment of Social Security benefits related to 
MAGI.
    We propose to amend paragraph (c)(3)(iii) to clarify procedures 
that the Exchange will follow when an applicant attests that his or her 
annual household income has increased or is reasonably expected to 
increase from the annual household income computed based on available 
data. In general, the proposed language does not modify the general 
approach of accepting an applicant's attestation to projected annual 
household income when it exceeds the amount indicated by available data 
regarding annual household income; however, it provides additional 
detail regarding the Exchange's procedures to ensure that such an 
attestation does not dramatically understate income, by checking 
whether available data regarding current household income indicates 
that his or her projected annual household income may exceed his or her 
attestation by a significant amount, and if so, proceeding in 
accordance with paragraphs (f)(1) through (4) of Sec.  155.315 to 
verify the applicant's attestation. We have developed these procedures 
in conjunction with states to clarify an existing provision such that 
it can be effectively implemented, and solicit comment regarding 
whether there are ways to further simplify the process.
    We propose to amend paragraph (c)(3)(iii)(A) to reflect the 
proposed amendments to paragraphs (c)(3)(iii)(B) and (C), which are 
described in more detail below.
    We are proposing to redesignate current paragraph (c)(3)(iii)(B) as 
paragraph (c)(3)(iii)(C). In new paragraph (c)(3)(iii)(B), we propose 
that if the applicant attests that a tax filer's annual household 
income has increased or is reasonably expected to increase from annual 
household income computed based on available data, but available data 
regarding current household income indicates that his or her projected 
annual household income may exceed his or her attestation by a 
significant amount, the Exchange will proceed in accordance with 
paragraphs (f)(1) through (4) of Sec.  155.315 to verify the 
applicant's attestation. In newly redesignated paragraph 
(c)(3)(iii)(C), we propose to add to the prior language of paragraph 
(c)(3)(iii)(B) such that if other information provided by the 
application filer (for example, an attestation of current monthly 
income) indicates that

[[Page 4638]]

the applicant's projected annual household income is in excess of his 
or her attestation by a significant amount, the Exchange will utilize 
current income data to verify the applicant's attestation. In the event 
that such data are not available or is not reasonably compatible with 
the applicant's attestation, we propose that the Exchange follow 
procedures described in paragraphs (f)(1) through (f)(4) of Sec.  
155.315 to verify the attestation. Together, these procedures are 
designed to provide a common-sense approach to ensuring that the 
Exchange will complete additional verification for the very limited 
number of situations in which an attestation to projected annual 
household income that is in excess of annual household income data may 
still be understated by a significant margin.
    We propose to amend paragraph (c)(3)(vi) to provide more 
specificity regarding when electronic data other than tax data and 
information regarding Social Security benefits is sufficient to verify 
an applicant's attestation of annual income. Based on consultation with 
a number of states, we propose revisions to paragraphs (c)(3)(vi)(A) 
through (F), and add paragraph (c)(3)(vi)(G) to better describe the 
process that the Exchange will follow in situations in which the 
applicant's attestation to projected annual household income, as 
described in paragraph (c)(3)(ii)(B) of this section, is greater than 
ten percent below the annual household income computed in accordance 
with paragraph (c)(3)(ii)(A), or if data described in paragraph 
(c)(1)(i) of this section is unavailable when comparing an applicant's 
attestation to annualized data from MAGI-based income sources. With the 
proposed text, the process follows the same standards that the Exchange 
will use for comparisons with annual income data, which is why states 
recommended that we take this approach.
    Specifically, we propose that the Exchange consider an applicant's 
attestation to projected annual household income as verified if it is 
no more than ten percent below annual household income computed from 
the data sources described in paragraph (c)(3)(vi)(A) of this section, 
which are annualized data from MAGI-based income sources and any other 
electronic data sources approved by HHS, respectively. We believe that 
this is a reasonable threshold given that it is the same threshold as 
is used in comparing an applicant's attestation to tax data and 
information regarding Social Security benefits, which are the primary 
sources of verification specified in paragraph (c)(3) of this section.
    Consistent with the final rule, the Exchange will follow the 
procedures specified in Sec.  155.315(f)(1) through (4) for situations 
in which an applicant's attestation is more than ten percent below 
annual household income computed from the data sources described in 
paragraph (c)(3)(vi)(A) of this section, or when such data are 
unavailable. Taken together, these proposed clarifications are designed 
to provide operational specificity to states that are developing 
Exchanges. We solicit comment regarding whether we can provide 
additional clarification to further support the design of state 
systems. We propose to make a technical correction to paragraph 
(c)(3)(vii) to remove the word ``this'' prior to ``paragraph (c)(3),'' 
and clarify that we are referring to paragraph (c)(3) of this section. 
We also propose to make a technical correction to cite to the 
applicable Treasury regulation instead of section 36B of the Code.
    We propose to make a technical correction in paragraph (c)(3)(viii) 
to cite to the applicable Treasury regulation instead of section 36B of 
the Code.
    We propose to consolidate paragraphs (d) and (e), currently 
entitled ``Verification related to enrollment in an eligible employer-
sponsored plan'' and ``Verification related to eligibility for 
qualifying coverage in an eligible employer-sponsored plan,'' 
respectively, into new paragraph (d). The new proposed paragraph (d) 
sets forth the rules for verifying enrollment in an eligible employer-
sponsored plan and eligibility for qualifying coverage in an eligible 
employer-sponsored plan. The consolidated paragraph, entitled 
``Verifications related to enrollment in an eligible employer-sponsored 
plan and eligibility for qualifying coverage in an eligible employer-
sponsored plan'' streamlines the process, provides further detail 
regarding the standards for these verification procedures, and proposes 
a process under which an Exchange may rely on HHS to complete this 
verification.
    HHS performed a comprehensive search to identify potential 
electronic resources to support a real-time verification of eligibility 
for qualifying coverage in an eligible employer-sponsored plan, which 
involves verifying whether an individual has access to health coverage 
through his or her employer, as well as information regarding the 
employee's share of the premium amount for and minimum value of that 
health coverage. We explored existing data resources at the state and 
federal level, and in the private sector, in an effort to pursue a 
strategy that minimizes burden for Exchanges, employers, and consumers. 
HHS also published a Request for Information on April 30, 2012, 
requesting input from potential vendors who might be able to produce a 
resource that comprehensively supports this verification (https://www.fbo.gov/?s=opportunity&mode=form&id=96c35957187f37da97e40d2c384b666c&tab=core&_cview=0. Based on the results of these efforts, HHS determined that a 
comprehensive data set that could assist in verification for the entire 
Exchange population will not be available from a single source by 
October 1, 2013. Information released to employees under section 18B of 
the Fair Labor Standards Act and the through the Summary of Benefits 
and Coverage document specified in section 2715 of the Public Health 
Service Act is not sufficient because, among other issues, it only 
requires the disclosure of information regarding whether the employer 
provides minimum essential coverage, and not whether such coverage is 
affordable as defined in 26 CFR 1.36B-2(c)(3)(v). Further, the 
information in these disclosures is reported directly to employees and 
not reported to the Exchange. Additionally, the limited information 
such as the Employer Identification Number and aggregate cost of 
coverage in an eligible employer-sponsored plan that will be available 
on the W-2, and reporting required under sections 6055 and 6056 of the 
Code, is retrospective in nature. Since the Exchange must verify 
whether the applicant reasonably expects to have access to qualifying 
coverage prospectively at the time of open enrollment, this information 
is not useful. Reporting under sections 6055 and 6056 of the Code will 
not begin until 2015, although it is anticipated that this reporting 
could greatly contribute to the integrity of employer verification in 
the future. In response to the April 26, 2012 bulletin outlining an 
interim solution for Exchanges to meet the standards for verifying 
eligibility for qualifying coverage in an eligible employer-sponsored 
plan (http://cciio.cms.gov/resources/files/exc-verification-guidance-vach.pdf, commenters also suggested that HHS seek information to 
support this verification from insurers. However, insurers are not 
typically privy to the relevant data elements needed as part of the 
eligibility determination for advance payments of premium tax credit. 
The Administration continues to examine ways, both administrative and 
legislative, by which employer reporting under the Affordable Care Act 
can be streamlined

[[Page 4639]]

both in timeframe and in the number of elements to prevent inefficient 
or duplicative reporting. We seek comment on policies to promote these 
goals.
    We identified a limited number of data sources to verify enrollment 
in or eligibility for employer-sponsored coverage at the federal level. 
HHS will make available data regarding eligibility and enrollment for 
coverage under the Federal Employee Health Benefit Program (FEHBP) for 
verification purposes through HHS. This data will only assist in 
verification for federal employees and their dependents. We also 
propose that an Exchange use SHOP records to verify enrollment in an 
eligible employer-sponsored plan and eligibility for qualifying 
coverage in an eligible employer-sponsored plan.
    We propose to amend Sec.  155.320(d) consistent with the interim 
strategy outlined in the April 26, 2012 bulletin, with one modification 
that is described in the preamble associated with paragraph 
(d)(3)(iii). It is anticipated that the strategy proposed below will 
evolve as additional data and data sources will become available; for 
this reason, this verification strategy is subject to change in later 
years. The approach for plan years 2016 and beyond will depend on the 
identification and or development of one or more data sources to 
promote a more comprehensive and automated pre-enrollment verification 
process.
    In paragraph (d), we propose the process for verification related 
to enrollment in an eligible employer-sponsored plan and eligibility 
for qualifying coverage in an eligible employer-sponsored plan. In 
paragraph (d)(1), we propose that the Exchange must verify whether an 
applicant reasonably expects to be enrolled in an eligible employer-
sponsored plan or is eligible for qualifying coverage in an eligible 
employer-sponsored plan for the benefit year for which coverage is 
requested. In the following paragraphs, we detail a series of data 
sources that we propose the Exchange will check as a component of this 
verification, the verification procedures for situations in which data 
is unavailable or inconsistent with an individual's attestation, and an 
option for the Exchange to rely on HHS to complete this verification.
    In paragraph (d)(2), we propose the data sources the Exchange will 
use to verify access to employer-sponsored coverage. We also note that 
consistent with proposed paragraph (d)(4), an Exchange can elect to 
have HHS conduct the entire verification process described under 
paragraph (d), including obtaining data from the proposed data sources. 
In paragraph (d)(2)(i), we propose that the Exchange will obtain data 
about enrollment in an eligible employer-sponsored plan and eligibility 
for qualifying coverage in an eligible employer-sponsored plan from 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 minimize 
administrative burden. This provision is designed to support the use of 
state-based data sources that exist or may be developed by states (for 
example, those that support CHIP premium assistance programs).
    In paragraph (d)(2)(ii), we specify that the Exchange must obtain 
any available data regarding enrollment in an eligible employer-
sponsored plan or eligibility for qualifying coverage in an eligible 
employer-sponsored plan based on federal employment by transmitting 
identifying information specified by HHS to HHS. HHS will then match 
this request to data maintained by the Office of Personnel Management 
regarding the Federal Employees Health Benefits Program. Further, in 
paragraph (d)(2)(iii), we propose that the Exchange must obtain data 
from the SHOP that operates in the state in which the Exchange is 
operating, which will provide a readily available source of information 
with minimal administrative burden.
    Finally, in paragraph (d)(2)(iv), we specify that the Exchange must 
obtain any available data regarding the employment of an applicant and 
the members of his or her household, as defined in 26 CFR 1.36B-1(d), 
from any electronic data sources that are available to the Exchange and 
have been approved by HHS for this purpose, based on evidence showing 
that such data sources are sufficiently current, accurate, and minimize 
administrative burden. We anticipate that data sources in this category 
will include state quarterly wage data, as well as commercial sources 
of current wage data, which we intend to approve for these purposes. 
These existing data sources provide information regarding employment, 
which is a basic element of verifying information provided by an 
individual regarding access to employer-sponsored coverage. Although 
these data sources, which are also used by the Exchange to verify 
household income, will only reflect whether an individual is employed 
and with which employer, and not whether the employer provides health 
insurance or the characteristics of such health insurance, they can be 
used as prompts or helpful hints to support accurate attestations, or 
identify situations in which employment information is inconsistent 
with an applicant's attestation. Since these data sources do not 
directly address enrollment in an eligible employer-sponsored plan or 
eligibility for qualifying coverage in an eligible employer-sponsored 
plan, we seek comment on whether they should only be used as a point of 
information for applicants, and not as a point of comparison for the 
purposes of identifying inconsistencies as part of the verification 
described in this paragraph.
    We believe that the connection to the data sources described in 
paragraph (d)(2) will be minimally burdensome for Exchanges, 
considering that data under paragraph (d)(2)(i) will not be available 
for the first year of operations unless an Exchange proposes an 
acceptable data source to HHS; data under paragraph (d)(2)(ii) will be 
available through HHS; data under paragraph (d)(2)(iii) will be 
internal to the Exchange; and data under paragraph (d)(2)(iv) will 
already be used to verify current income. We solicit comment regarding 
the feasibility of making the necessary connections by October 1, 2013, 
and whether alternative approaches should be considered for the first 
year of operations.
    In paragraph (d)(3), we propose procedures for verifying enrollment 
in an eligible employer-sponsored plan and eligibility for qualifying 
coverage in an eligible employer-sponsored plan. In paragraph 
(d)(3)(i), we propose that except as specified in paragraphs (d)(3)(ii) 
or (iii) of this section, the Exchange must accept an applicant's 
attestation regarding the verification specified in paragraph (d) 
without further verification.
    In paragraph (d)(3)(ii), we propose, if an applicant's attestation 
is not reasonably compatible with the information specified in 
paragraphs (d)(2)(i) through (d)(2)(iii) of this section, other 
information provided by the application filer, or other information in 
the records of the Exchange, the Exchange will follow the procedures 
specified in Sec.  155.315(f) of this subpart, which are used 
throughout this subpart to address inconsistencies. We note that this 
process involves providing a period of time for an applicant to provide 
satisfactory documentation, or otherwise resolve the inconsistency, and 
we solicit comment regarding whether we should take this approach of 
relying on the applicant, or instead request information directly from 
his or her employer.
    Finally, we propose in paragraph (d)(3)(iii) that if the Exchange 
does not

[[Page 4640]]

have any of the information specified in paragraphs (d)(2)(i) through 
(d)(2)(iii) for an applicant, and either does not have the information 
specified in paragraph (d)(2)(iv) for an applicant or an applicant's 
attestation is not reasonably compatible with the information specified 
in (d)(2)(iv) of this section, the Exchange must select a statistically 
significant random sample of such applicants and follow the procedures 
proposed in paragraphs (d)(3)(iii)(A) through (d)(3)(iii)(G), which are 
described below, and are generally consistent with the process 
specified in Sec.  155.315(f), with modifications to ensure that it 
suits this verification. The April 26, 2012 bulletin discussed 
initiating and conducting this review later in the benefit year; 
however, we have proposed that the Exchange initiate the review at the 
point of eligibility determination and conduct it within the 90-day 
period that is also used for other verification requests, in order to 
allow the Exchange to reuse components of the inconsistency process to 
the maximum extent possible, streamline communications with applicants, 
and ensure that any changes that need to be made are made as quickly as 
possible after initial enrollment, and not significantly later in the 
year after advance payment of the premium tax credit and CSR have been 
provided for many months. We also note that to the extent that multiple 
members of a single tax household are selected for the sample, we 
expect that the Exchange will consolidate the activities under this 
section, including communications with employers.
    We propose to handle inconsistencies with the information specified 
in paragraph (d)(2)(iv) through the sampling process, rather than 
through the procedures specified in Sec.  155.315(f) because the 
information specified in paragraph (d)(2)(iv) only reflects employment, 
and does not provide comprehensive information regarding enrollment in 
an eligible employer-sponsored plan or eligibility for qualifying 
coverage in an eligible employer-sponsored plan; further, we anticipate 
that information that is available under paragraph (d)(2)(iv) may be 
somewhat dated. We solicit comments regarding whether this is a 
suitable approach, whether the information in paragraph (d)(2)(iv) 
should only be used as a point of information for applicants and not as 
a point of comparison for the purposes of identifying inconsistencies 
as part of the verification described in this paragraph, or if we 
should treat any inconsistency regarding an employer as an 
inconsistency that must be resolved in order to continue eligibility.
    We believe that requesting and reviewing documentation for a 
statistically significant random sample of individuals for whom no 
inconsistencies are identified based on the data in paragraph (d)(2) is 
appropriate to ensure program integrity while minimizing administrative 
burden, and also may inform future verification approaches. We request 
comments on a methodology by which an Exchange could generate a 
statistically significant sample of applicants and whether there are 
ways to focus the sample on individuals who are most likely to have 
access to affordable, minimum value coverage. By using a process that 
maintains the policy and operational framework of the inconsistency 
process for these individuals, we leverage existing Exchange processes 
and also provide an option for advance payments of the premium tax 
credit and cost-sharing reductions during the period in which the 
Exchange is working to obtain additional information.
    First, in paragraph (d)(3)(iii)(A), we propose that the Exchange 
will provide notice to an applicant who is selected as part of the 
sample indicating that the Exchange will be contacting any employer 
identified on the application for the applicant and the members of his 
or her household, as defined in 26 CFR 1.36B-1(d) to verify whether the 
applicant is enrolled in an eligible employer-sponsored plan or is 
eligible for qualifying coverage in an eligible employer-sponsored plan 
for the benefit year for which coverage is requested. We expect that 
this notice will not specify a time period for the completion of these 
activities, and will notify the applicant that the Exchange will 
provide an additional communication only if information gathered will 
change anything regarding his or her eligibility. We seek comment on 
ways the Exchange may communicate this sampling process to consumers 
with the intention of minimizing confusion.
    In paragraph (d)(3)(iii)(B), we propose that the Exchange proceed 
with all other elements of eligibility determination using the 
applicant's attestation, and provide eligibility for enrollment in a 
QHP to the extent that an applicant is otherwise qualified. And in 
paragraph (d)(3)(iii)(C), we propose that the Exchange ensure that 
advance payments of the premium tax credit and cost-sharing reductions 
are provided on behalf of an applicant who is otherwise qualified for 
such payments and reductions, as described in Sec.  155.305 of this 
subpart, if the tax filer attests to the Exchange that he or she 
understands that any advance payments of the premium tax credit paid on 
his or her behalf are subject to reconciliation. The provisions in 
paragraphs (d)(3)(iii)(B) and (C) are identical to those in Sec.  
155.315(f), based on the principle that an individual should be 
determined eligible based on his or her attestation during the period 
in which the Exchange is seeking additional information.
    Next, in paragraph (d)(3)(iii)(D), we propose that the Exchange 
make reasonable attempts to contact any employer identified on the 
application for the applicant and the members of his or her household, 
as defined in 26 CFR 1.36B-1(d) to verify whether the applicant is 
enrolled in an eligible employer-sponsored plan or is eligible for 
qualifying coverage in an eligible employer-sponsored plan for the 
benefit year for which coverage is requested. We expect that this will 
involve the Exchange using the employment information provided by an 
applicant and contacting employers via phone or mail.
    One alternative we considered was to rely on consumers to obtain 
information from their employer or employers. We chose not to take this 
approach since the application will already solicit all necessary 
information from consumers, and so it is unclear what would be gained 
through a second information request to consumers. We seek comment on 
this alternative and others to implement this process while minimizing 
burden on consumers, employers, and Exchanges. We also seek comment on 
ways the Exchange can most efficiently interact with employers, 
including other entities that employers may rely upon to support this 
process, such as third-party administrators.
    In paragraph (d)(3)(iii)(E), we propose that if the Exchange 
receives any information from an employer relevant to the applicant's 
enrollment in an eligible employer-sponsored plan or eligibility for 
qualifying coverage in an eligible employer-sponsored plan, the 
Exchange will determine the applicant's eligibility based on such 
information and in accordance with the effective dates specified in 
Sec.  155.330(f) of this subpart and if such information changes his or 
her eligibility determination, notify the applicant and his or her 
employer or employers of such determination in accordance with the 
notice requirements specified in 155.310(g) and (h) of this part. We 
propose to limit notifications to situations in which the information 
provided by an employer changes an applicant's eligibility 
determination, as

[[Page 4641]]

notifying an applicant that his or her eligibility is unchanged 
requires additional effort and could be confusing. We anticipate that 
as an alternative, the initial notice that indicates that the Exchange 
will be requesting additional information from an applicant's employer 
will state that the Exchange will notify him or her if anything changes 
based on additional information received by the Exchange. We solicit 
comments on this approach.
    In paragraph (d)(3)(iii)(F), we propose that if, after a period of 
90 days from the date on which the notice described in paragraph 
(d)(3)(iii)(A) of this section is sent to the applicant, the Exchange 
is unable to obtain the necessary information from an employer, the 
Exchange will determine the applicant's eligibility based on his or her 
attestation regarding that employer. If an individual has multiple 
employers, and not all employers provide information, the Exchange 
would determine eligibility based on the information provided by the 
employers that did respond, along with the information submitted by the 
applicant with respect to the employers that did not respond. We note 
that we do not propose that the Exchange provide an additional notice 
to the applicant and his or her employer based on the actions specified 
in paragraph (d)(3)(iii)(F), as using the applicant's attestation at 
the close of the 90-day period would by definition mean that his or her 
eligibility is unchanged. This is consistent with our approach in 
paragraph (d)(3)(iii)(E). As with that approach, we seek comment on 
this proposal and whether it is preferable to include an additional 
notice to the applicant and employer at the end of the 90-day period.
    Finally, in paragraph (d)(3)(iii)(G), we propose that in order to 
carry out the process described in paragraph (d)(3)(iii) of this 
section, the Exchange must only disclose an individual's information to 
an employer to the extent necessary for the employer to identify the 
employee. This is the only disclosure that we believe is necessary to 
support this verification process. An employer will receive separate 
notice from the Exchange regarding an employee who is eligible for 
advance payments of the premium tax credit and cost-sharing reductions, 
as well as the employer's right to appeal.
    We seek comments on this proposed approach and whether there are 
ways these procedures can further minimize burden on the Exchange, 
employers, and consumers. We also note that consistent with proposed 
paragraph (d)(4), an Exchange can elect to have HHS conduct the entire 
verification process described under paragraph (d), including sampling 
and inconsistency resolution.
    We note that other sections of the Exchange final rule and the 
proposed regulation ensure that eligibility determinations are being 
made based on the most accurate information available regarding 
enrollment in an eligible employer-sponsored plan and eligibility for 
qualifying coverage in an eligible employer-sponsored plan. 
Specifically, in Sec.  155.310(h), we specify standards for providing 
employers with a notice alerting them of their employee's eligibility 
for advance payments of the premium tax credit or cost-sharing 
reductions. Further, in Sec.  155.555, we propose a process through 
which employers can appeal the finding that an employee's coverage is 
unaffordable or does not meet minimum value. The verification 
procedures presented in this section along with these notice and 
appeals provisions will ensure that employers can challenge eligibility 
determinations for advance payments of the premium tax credit that are 
made based on the Exchange's findings about the coverage they offer to 
their employees. This entire system, taken together, ensures that 
consumers and employers are protected from adverse consequences of 
inaccurate determinations.
    In addition to the verification procedures proposed this section, 
we are taking steps to help consumers with providing information 
related to access to employer-sponsored coverage on the application. We 
suggest the use of a voluntary pre-enrollment template to assist 
applicants in gathering the information about access to coverage 
through an eligible employer-sponsored plan as required by the Exchange 
to determine eligibility for advance payments of the premium tax credit 
and cost-sharing reductions. We envision that an applicant would 
download a one-page template from the Exchange web site and present the 
document to his or her employer (or the employer of his or her spouse 
or parent). This template would enable the applicant to gather the 
information necessary from the relevant employer regarding the 
employer's coverage offerings.
    Alternatively, an employer could voluntarily download and populate 
the template with information regarding its coverage offerings and 
distribute to employees at hiring, upon request, on the employer 
intranet or benefit site, or in conjunction with other information 
about employer-sponsored coverage provided by the employer to 
employees. When an individual completes his or her Exchange 
application, he or she would provide the information from the completed 
template in response to relevant questions on the single, streamlined 
application. We seek comments on the use of this pre-enrollment 
template and ways it can be used to assist consumers with providing the 
necessary information to complete the verification described in this 
paragraph while minimizing burden on employers. Elements of this tool 
can be commented upon as part of the information collection request 
related to the Supporting Statement for Data Collection to Support 
Eligibility Determinations for Insurance Affordability Programs and 
Enrollment through Health Benefits Exchanges, Medicaid, and Children's 
Health Insurance Program Agencies (CMS-10440). We intend to release the 
template for comment in the near future.
    We also propose, pursuant to authority under section 1411(d) of the 
Affordable Care Act, that an Exchange may rely on HHS to complete this 
verification. We first indicated that we were exploring this in a set 
of questions and answers released on November 29, 2011,\2\ and we 
received a significant amount of feedback from states indicating that 
this would be useful. As outlined in paragraph (d)(4), we propose that 
the Exchange may satisfy the provisions of this paragraph by 
implementing a verification process performed by HHS, provided that the 
Exchange sends the notices described in 45 CFR 155.310(g) and (h) of 
this part; other activities required in connection with the 
verifications described are performed by the Exchange in accordance 
with the standards identified in this subpart or by HHS in accordance 
with the agreement described in paragraph (d)(4)(iv) or this section; 
the Exchange provides all relevant application information to HHS 
through a secure, electronic interface, promptly and without undue 
delay; and the Exchange and HHS enter into an agreement specifying 
their respective responsibilities in connection with the verifications 
described in this paragraph. We anticipate that under this option, the 
Exchange would collect an individual's attestations regarding 
eligibility for qualifying coverage in an eligible employer-sponsored 
plan and integrate the verification outcome in to the eligibility 
determination for advance payments of the premium tax credit and cost-
sharing reductions, and HHS would provide the other components of the

[[Page 4642]]

process. We welcome comments on this proposed option.
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    \2\ http://cciio.cms.gov/resources/files/Files2/11282011/exchange_q_and_a.pdf.pdf.
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    We propose to remove paragraph (e) as it has been incorporated into 
Sec.  155.320(d). Due to removing this paragraph, we propose to 
redesignate paragraph (f) as paragraph (e).
14. Eligibility Redetermination During a Benefit Year (Sec.  155.330)
    We propose to amend paragraph (d)(1)(ii) to clarify that the 
Exchange will conduct periodic examination of data sources to identify 
eligibility determinations for Medicare, Medicaid, CHIP, or the BHP, if 
a BHP is operating in the service area of the Exchange, only for 
enrollees on whose behalf advance payments of the premium tax credit or 
cost-sharing reductions are being provided, as opposed to all QHP 
enrollees, since this information is not relevant to eligibility for 
enrollment in a QHP without advance payments and cost-sharing 
reductions.
    In 45 CFR 155.330(e)(1)(ii) and 155.335(c) of the Exchange final 
rule, we describe how the Exchange must notify an enrollee of his or 
her redetermination as the result of situations in which an enrollee 
reports a change in circumstance, or the Exchange conducts limited 
periodic data matching or an annual redetermination. We seek comment on 
adding a provision such that if an enrollee experiences a change in his 
or her level of cost-sharing reductions as a result of a 
redetermination occurring under 45 CFR 155.330(e)(1) or 155.335(c), the 
notice issued by the Exchange will describe how the enrollee's amount 
of deductibles, co-pays, coinsurance, and other forms of cost sharing 
would change as a result of the change in level of cost-sharing 
reductions if the enrollee stays in the same QHP (and only changes plan 
variations). We note that an enrollee who experiences a change in the 
level of cost-sharing reductions as a result of a redetermination will 
qualify for a special enrollment period to change QHPs, in accordance 
with Sec.  155.420(d)(6). We believe that including this information in 
the notice describing how the enrollee's amount of deductibles, co-
pays, coinsurance, and other forms of cost sharing would change as a 
result of the change in level of cost-sharing reductions if the 
enrollee stays in the same QHP (and only changes plan variations) will 
be particularly important in the event an individual does not decide to 
change QHPs during the special enrollment period. We solicit comment on 
whether HHS should adopt this approach.
    We propose to consolidate and revise existing paragraphs (e)(2) and 
(e)(3) into new paragraph (e)(2) to clarify how the Exchange should 
proceed when data matching indicates that an individual is deceased. In 
paragraph (e)(2)(i), we clarify the procedures that the Exchange will 
follow for data matches that indicate that an individual is deceased. 
Clarifying the application of these procedures permits the Exchange to 
properly effectuate an eligibility redetermination based on death 
without a response from the individual who data indicates is deceased, 
as the deceased enrollee will not be able to respond and confirm the 
updated information. We also note that the procedures in paragraph 
(e)(2)(i) provide an opportunity for an individual to address incorrect 
data matches in the extremely limited situations in which they may 
occur.
    In revised paragraph (e)(2)(ii), we propose the process the 
Exchange follows after identifying updated information regarding 
income, family size, or family composition through data matching; we 
reiterate that information regarding death does not require the 
Exchange to follow these procedures. The only difference between this 
proposal for paragraph (e)(2)(ii)(B) and new paragraph (e)(2)(ii)(D) 
and the regulation text in its current form is to clarify that if an 
enrollee provides more up-to-date information in response to the notice 
regarding the information identified through periodic data matching, 
the Exchange will proceed in accordance with paragraph (c)(1), which 
provides procedures for verification of enrollee-reported changes. The 
prior language did not specify that enrollee-reported information would 
be subject to verification, which was an oversight we propose to 
rectify here.
    We propose to amend paragraph (f) to incorporate changes as a 
result of eligibility appeals decisions, as well as changes that affect 
only enrollment or premiums, but do not affect eligibility. Changes 
affecting only enrollment or premiums include those changes that must 
be submitted to health insurance issuers as part of an enrollment 
transaction, but do not require an eligibility redetermination. 
Examples include name changes, phone number changes, or changes to the 
amount of tax credit a household elects to apply to its premium. 
Incorporating concerns from states, the proposed changes to paragraph 
(f) are designed to bring the effective dates under this section in 
line with the effective dates for enrollment, as specified in subpart 
E, which are aligned with the typical QHP billing cycle. In particular, 
we note that the process used to provide initial enrollment information 
to QHP issuers will be the same as the process used to provide updates, 
and so the ability to create parallel timing should support efficient 
operations. The modified effective dates are also designed to 
accommodate the limited situations in which retroactive eligibility may 
be necessary. We note that advance payments of the premium tax credit 
and cost-sharing reductions may only be provided for a ``coverage 
month'' as defined in 26 CFR 1.36B-3(c).
    First, in paragraph (f)(1), we propose that, except as specified in 
paragraphs (f)(2) through (f)(7), the Exchange must implement the 
changes as described in paragraph (f)(1). As proposed here, paragraph 
(f)(1)(i) provides that changes resulting from a redetermination under 
this section must be implemented on the first day of the month 
following the date of the notice described in paragraph (e)(1)(ii) of 
this section. We propose in paragraph (f)(1)(ii) that changes resulting 
from an appeal decision under subpart F must be implemented on the 
first day of the month following the date of the notices described in 
Sec. Sec.  155.545(b) and 155.555(k), or on the date specified in the 
appeal decision pursuant to Sec.  155.545(c)(1). As the Exchange will 
not be required to provide a notice for changes affecting only 
enrollment through the Exchange or premiums, the Exchange must 
implement the changes as described in paragraph (f)(1)(iii) based 
instead on when the Exchange is notified of the change. We anticipate 
that this notice may come from the enrollee or the QHP issuer, 
depending on the nature of the change. We propose to amend paragraph 
(f)(2) to clarify that except as specified in paragraphs (f)(3) through 
(f)(7) of this section, the Exchange may determine a reasonable point 
in a month, no earlier than the 15th of the month, after which a change 
as described in paragraph (f)(1) of this section will not be effective 
until the first day of the month after the month specified in paragraph 
(f)(1) of this section. This proposal is designed to align the 
effective dates for redeterminations to align with the effective dates 
for enrollment, as specified in subpart E of this part, which provide 
that in general, a QHP selection will be effective on the first of the 
month following the selection only if the selection is made by the 15th 
of the month.
    We propose to redesignate current paragraph (f)(3) as paragraph 
(f)(7), and propose a new paragraph (f)(3) to provide that except as 
specified in paragraph (f)(7) of this section, the

[[Page 4643]]

Exchange must implement a change described in paragraph (f)(1) of this 
section resulting in a decreased amount of advance payments of the 
premium tax credit or cost-sharing reductions, including when an 
individual becomes newly ineligible for advance payments of the premium 
tax credit or cost-sharing reductions, and for which the date of the 
notices described in paragraphs (f)(1)(i) and (ii) of this section, or 
the date on which the Exchange is notified in accordance with paragraph 
(f)(1)(iii) of this section is after the 15th of the month, on the 
first day of the month after the month specified in paragraph (f)(1) of 
this section. We provide this exception to paragraph (f)(1) because a 
decrease in the amount of cost-sharing reductions effectuated after the 
15th of the month results in operational challenges for issuers due to 
the nature of QHP billing cycles. We understand that cost-sharing 
reductions will be applied at the point-in-time in which an enrollee 
pays for their services, and thus the potential for a retroactive 
decrease in cost-sharing reductions will pose complications regarding 
services for which the enrollee has already paid. Similarly a 
retroactive decrease in advance payments of the premium tax credit will 
also create problems for issuers regarding the billing of previous 
premiums. Thus, we propose that they also be effectuated on the first 
day of the month after the month specified in paragraph (f)(1) of this 
section.
    We propose to add paragraph (f)(4) to provide that except as 
specified in paragraph (f)(7) of this section, the Exchange must 
implement changes that result in an increased level of cost-sharing 
reductions and for which the date of the notices described in 
paragraphs (f)(1)(i) and (ii) of this section, or the date on which the 
Exchange is notified in accordance with paragraph (f)(1)(iii) of this 
section is after the 15th of the month, on the first day of the month 
after the month specified in paragraph (f)(1) of this section. As 
discussed above concerning paragraph (f)(3) of this section, a 
retroactive increase in the level of cost-sharing reductions will pose 
complications for issuers regarding those services that the enrollee 
has already paid for. As such, we also propose that the changes in 
paragraph (f)(4) be implemented effective the first day of the month 
after the month specified in paragraph (f)(1) of this section.
    We propose to add paragraph (f)(5) to provide that the Exchange may 
implement a change associated with the events specified in Sec.  
155.420(b)(2)(i) and (ii) (birth, adoption, placement for adoption, 
marriage, and loss of minimum essential coverage) on the coverage 
effective dates described in Sec.  155.420(b)(2)(i) and (ii) 
respectively, and will ensure that advance payments of the premium tax 
credit and cost-sharing reductions are effective on the first day of 
the month following such events, unless the event occurs on the first 
day of the month. These changes are to align the effective dates for 
eligibility with those specified in Sec.  155.420. We also considered 
whether to adjust eligibility effective dates for the purposes of 
advance payments of the premium tax credit and cost-sharing reductions 
in cases of birth, adoption, or placement for adoption such that 
eligibility for APTC and CSR would be effective on the date of birth, 
adoption, or placement for adoption. However, we do not believe that 
current regulations under section 36B of the Code address this 
situation. We expect that the Secretary of the Treasury will provide 
through subsequent guidance that a child may be eligible for the 
premium tax credit for the month the child is born or is adopted, 
placed for adoption, or placed in foster care. We expect to amend our 
regulations as necessary in final rulemaking to match the guidance from 
the Secretary of the Treasury. We note that the special enrollment 
period described in Sec.  155.420(b)(2)(i) does not currently address 
children placed in foster care, and we solicit comments regarding 
whether we should expand it to cover children placed in foster care, 
and then make a corresponding change to eligibility effective dates in 
this paragraph.
    We propose to add paragraph (f)(6) specifying that notwithstanding 
paragraphs (f)(1) through (f)(5) of this section, the Exchange may 
implement a change associated with the events described in Sec.  
155.420(d)(4), (5), and (9) based on the specific circumstances of each 
situation. We seek to provide flexibility for the Exchange to respond 
to these potential errors, violations, or exceptional circumstances as 
needed to effectuate the appropriate eligibility date for enrollees, 
including those situations that impact the amount of advance payments 
of the premium tax credit and cost-sharing reductions, while also 
minimizing operational complications for issuers associated with the 
QHP billing cycle. We reiterate here that advance payments of the 
premium tax credit and cost-sharing reductions may only be provided for 
a ``coverage month'' as defined in 26 CFR 1.36B-3(c), which requires 
coverage to be in place on the first of the month; we note that the 
Exchange may not authorize these benefits for periods other than when 
an individual is in a coverage month. In redesignated paragraph (f)(7), 
we propose to maintain the existing language of paragraph (f)(3) in 
accordance with the proposed changes throughout paragraph (f).
    We welcome comments on these changes.
15. Annual Eligibility Redetermination (Sec.  155.335)
    We propose to amend paragraphs (a), (b), (c), (e), (f), (g), (h), 
(k), and (l) of this section to specify that subject to the limitations 
specified in paragraph (l) and new paragraph (m), the Exchange will 
conduct an annual eligibility redetermination for all qualified 
individuals, not only those who are enrolled in a QHP. Our proposal 
thus replaces the word ``enrollee'' with the term ``qualified 
individual'' in these paragraphs. This change accommodates situations 
in which an individual submitted an application prior to the annual 
open enrollment period, was determined eligible for enrollment in a QHP 
with or without advance payments of the premium tax credit and cost-
sharing reductions, and did not meet the criteria for a special 
enrollment period. In such situations, this change will mean that the 
Exchange will provide such an individual with an annual eligibility 
redetermination notice, which means that he or she will not have to 
submit a new application to obtain coverage for the following benefit 
year. The annual eligibility determination notice projects eligibility 
for the upcoming benefit year, and provides a streamlined process for 
individuals to select a QHP for the upcoming year during the annual 
open enrollment period.
    We propose to amend paragraph (b) to include data regarding Social 
Security benefits as defined under 26 CFR 1.36B-1(e)(2)(ii). This 
reflects the revision we propose to make in Sec.  155.320(c)(1)(i)(A).
    We also propose to make technical corrections to paragraph (l) to 
specify that if the Exchange does not have authorization to use such 
qualified individual's tax information, the Exchange will redetermine 
the qualified individual's eligibility only for enrollment in a QHP, 
and will notify the enrollee in accordance with the timing described in 
paragraph (d) of this section. This proposed correction aligns with the 
preamble from the Exchange final rule at 77 FR 18376.
    Lastly, we propose to add new paragraph (m), which provides that if 
a qualified individual does not select a QHP before the redetermination

[[Page 4644]]

described in this section, and is not enrolled in a QHP through the 
Exchange at any time during the benefit year for which such 
redetermination is made, the Exchange must not conduct a subsequent 
redetermination of his or her eligibility for a future benefit year. 
This proposal is designed to ensure that a qualified individual who 
never selects a QHP is not redetermined every year, which minimizes 
burden on the Exchange. For example, if a qualified individual seeks to 
enroll in a QHP in July, 2014, is determined eligible for a QHP but not 
a special enrollment period, and then following an annual 
redetermination in late 2014 for the 2015 benefit year is again 
determined eligible in a QHP but decides not to enroll at any time up 
to the point at which the Exchange would conduct his or her next annual 
redetermination (late 2015), the Exchange will not conduct another 
annual redetermination in late 2015.
16. Administration of Advance Payments of the Premium Tax Credit and 
Cost-Sharing Reductions (Sec.  155.340)
    We propose to make technical corrections in paragraphs (b) and (c) 
to cite to the applicable Treasury regulation instead of Section 36B of 
the Code.
17. Coordination With Medicaid, CHIP, the Basic Health Program, and the 
Pre-Existing Condition Insurance Plan (Sec.  155.345)
    We propose to make a technical correction to paragraph (a) to 
clarify that the agreements that the Exchange enters into with the 
agencies administering Medicaid, CHIP, and the BHP, if the BHP is 
operating in the service area of the Exchange, must include a clear 
delineation of the responsibilities of each ``agency'' as opposed to 
each ``program.'' We propose to amend paragraph (a)(2) to specify that 
the agreement the Exchange enters into with other agencies 
administering insurance affordability programs addresses the 
responsibilities of each agency to ensure prompt determinations of 
eligibility and enrollment in the appropriate program without undue 
delay, based on the date the application is submitted to, or 
redetermination is initiated by, the Exchange or another agency 
administering an insurance affordability program. We propose to change 
the ordering of agencies listed for purposes of clarity. We also 
propose to redesignate paragraph (a)(3) as paragraph (a)(4), and add a 
new paragraph (a)(3) to ensure that, as of January 1, 2015, the 
agreement provides for a combined eligibility notice, as defined in 
Sec.  435.4, to individuals and members of the same household, to the 
extent feasible, for enrollment in a QHP through the Exchange and for 
all insurance affordability programs. Section 155.345(a)(3)(i) includes 
that prior to January 1, 2015, the notice include coordinated content, 
as defined in 42 CFR 435.4, while Sec.  155.345(a)(3)(ii) addresses the 
combined eligibility notice requirement as of January 1, 2015. As 
defined in Sec.  435.4, a combined eligibility notice is an eligibility 
notice that informs an individual, or household when appropriate, of 
his or her eligibility for eligibility for enrollment in a QHP and each 
of the insurance affordability programs. We are proposing that in most 
cases the combined notice is issued by the last agency to determine the 
individual's eligibility, not taking into account eligibility 
determinations for Medicaid on a non-MAGI basis, and regardless of 
which agency initially received the application. Providing a combined 
eligibility notice for eligibility determinations for enrollment in a 
QHP and for insurance affordability programs, with the exception of 
eligibility determinations for Medicaid on a non-MAGI basis, would 
reduce the occurrence of an individual receiving multiple eligibility 
notices from agencies administering insurance affordability programs 
based on a single application. To the extent that the eligibility 
determinations reflected in a combined notice are not made by the 
agency issuing the notice, the notice should identify the agency that 
made each eligibility determination that is reflected in the combined 
notice.
    We acknowledge that there are situations in which the provision of 
a combined eligibility notice may not be appropriate, and expect that 
agencies administering insurance affordability programs will limit the 
use of combined eligibility notices to only those situations in which 
it is beneficial to the applicant. The preamble associated with Sec.  
435.1200 describes situations in which the combined eligibility notice 
may not be appropriate. We request comments on situations in which the 
combined eligibility notice may or may not be particularly appropriate.
    We understand that it may not be operationally feasible for the 
Exchange and state agencies administering Medicaid, CHIP, and the BHP, 
if the BHP is operating in the service area of the Exchange, to deliver 
combined eligibility notices by October, 1, 2013, particularly in cases 
where the Exchange is performing assessments of eligibility for 
Medicaid and CHIP based on MAGI in accordance with Sec.  155.302(b). 
Accordingly, we are proposing a phased-in approach for the provision of 
a combined eligibility notice in cases where the Exchange is performing 
assessments of eligibility for Medicaid and CHIP based on MAGI. We 
propose that the agreements between the Exchange and other agencies 
administering insurance affordability programs provide for provision of 
combined eligibility notices by January 1, 2015.
    For the period prior to January 1, 2015, when an individual submits 
an application to the state Medicaid agency, is denied eligibility for 
Medicaid, found not potentially eligible for CHIP, and is transferred 
to the Exchange, the state Medicaid agency would send a first notice to 
an individual, explaining that the individual is denied eligibility for 
Medicaid, and that the individual's information is being transferred to 
the Exchange for a determination of eligibility for enrollment in a QHP 
and for advance payments of the premium tax credit and cost-sharing 
reductions. The Exchange would then send a second notice explaining the 
individual's eligibility for enrollment in a QHP and for advance 
payments of the premium tax credit and cost-sharing reductions. 
However, after January 1, 2015 and to the extent feasible--when sending 
a combined notice is part of the agreement among the relevant 
agencies--in the same scenario, the Exchange would provide a combined 
eligibility notice that includes information about the individual's 
denial of eligibility for Medicaid and eligibility for enrollment in a 
QHP and for advance payments of the premium tax credit and cost-sharing 
reductions because the Exchange is the last agency to make an 
eligibility determination. The provision of a combined eligibility 
notice would also mean that if the Exchange is transferring an 
individual's information to the state Medicaid or CHIP agency and the 
individual is Medicaid or CHIP eligible, the Medicaid or CHIP agency 
would issue the combined eligibility notice that reflects both the 
findings of the Exchange (not eligible for enrollment in a QHP or 
advance payments of the premium tax credit or cost-sharing reductions) 
and of the Medicaid and CHIP agencies (eligible for Medicaid or CHIP).
    Under Sec.  155.345(a)(3) and (g)(7) of this proposal, we propose 
that the Exchange implement the use of a combined eligibility notice as 
of January 1, 2015, to the extent feasible, and in the interim, provide 
for the use of coordinated content in the eligibility notice. The 
Exchange will work with

[[Page 4645]]

agencies administering other insurance affordability programs to ensure 
the inclusion of coordinated content, including coordinated language, 
in eligibility determination notices. An example of coordinated content 
would include information about the Exchange and about insurance 
affordability programs, including specific program names and customer 
service information for each program, as applicable. Based on the 
operational readiness of the Exchange and other agencies administering 
insurance affordability programs, combined eligibility notices may be 
implemented earlier. However, we note that in states where the FFE is 
conducting assessments rather than final determinations of eligibility, 
the FFE will only be able to provide an eligibility notice prior to 
January 1, 2015 for eligibility determinations made by the FFE.
    We request comments on the phased-in approach and the standards 
proposed related to the provision of a combined eligibility notice and 
the use of coordinated content for eligibility notices by the Exchange 
and agencies administering insurance affordability programs, which 
would include information about the Exchange and about insurance 
affordability programs, including specific program names and customer 
service information for each program, as applicable. We have been 
working in consultation with relevant stakeholders on model notices, 
and intend to release model notices in early 2013 for use by states 
that want to rely on HHS' templates for notices instead of developing 
their own. We also request comments regarding how to assess when 
provision of a combined eligibility notice is feasible.
    We propose to make a technical correction in paragraph (f) to cite 
to the applicable Treasury regulation instead of Section 36B of the 
Code.
    We propose to make a technical correction to paragraph (g) to 
change ``or'' to ``and'' and add ``agency or.''
    We propose to add new language at paragraph (g)(2) to specify that 
the Exchange will notify the transmitting agency of the receipt of an 
electronic account when another agency is transmitting the account to 
the Exchange in the situation in which an application is submitted 
directly to the transmitting agency, and a determination of eligibility 
is needed for enrollment in a QHP, advance payments of the premium tax 
credit, and cost-sharing reductions. Additionally, we propose in (g)(2) 
that the Exchange notify the transmitting agency of an individual's 
eligibility determination for enrollment in a QHP, advance payments of 
the premium tax credit, and cost-sharing reductions. This aims to 
ensure that the Exchange can provide effective customer service, while 
also aligning with proposed Sec.  435.1200(d)(5).
    As such, we propose to make technical corrections to redesignate 
the paragraphs following paragraph (g)(2). We redesignate paragraph 
(g)(2) to (g)(3), (g)(3) to (g)(4), (g)(4) to (g)(5), and (g)(5) to 
(g)(6).
    We propose to make a technical correction in paragraph (g)(3) to 
change ``program'' to ``agency.''
    We propose to make technical corrections to paragraph (g)(4) to 
change ``of'' to ``or,'' and to clarify that the rule is referring to 
an agency administering an insurance affordability program.
    We propose to make a technical correction to remove ``and'' at the 
end of paragraph (g)(5) and add it at the end of paragraph (g)(6) to 
provide for the appropriate transition to paragraph (g)(7).
    We propose to add paragraph (g)(7) to direct that the Exchange 
provide the combined eligibility notice, as defined in Sec.  435.4, for 
eligibility determinations for enrollment in a QHP and for insurance 
affordability programs, effective on January 1, 2015.
    We propose to add paragraph (g)(8) to direct that prior to January 
1, 2015, the Exchange include coordinated content, as defined in 42 CFR 
435.4, into the notice of eligibility determination provided to the 
individual when another agency administering an insurance affordability 
program transfers an individual's account to the Exchange, or that the 
Exchange issue a combined eligibility notice when the Exchange is the 
last agency to make an eligibility determination, except for an 
eligibility determination for Medicaid on a non-MAGI basis. The intent 
of this provision is to allow the Exchange flexibility to provide 
coordinated content or a combined eligibility notice, in the event an 
Exchange is able to provide a combined eligibility notice, prior to 
January 1, 2015. As noted previously, we understand that the Exchange 
may not be operationally ready to issue a combined eligibility notice 
prior to 2015, and so have designed this proposal to allow an 
appropriate phase-in period.
18. Special Eligibility Standards and Process for Indians (Sec.  
155.350)
    We propose to make a technical correction in paragraph (a)(1)(ii) 
to cite to the applicable Treasury regulation instead of section 36B of 
the Code.
19. Enrollment of Qualified Individuals Into QHPs (Sec.  155.400)
    We propose to add paragraph (b)(3) to clarify the earlier 
requirement in 45 CFR 155.400(b)(1) that the Exchange send eligibility 
and enrollment information to QHP issuers and HHS promptly and without 
undue delay. In this section, we propose that the Exchange send HHS 
updated eligibility and enrollment information. We interpret the 
requirement concerning ``updated eligibility and enrollment 
information'' to mean all enrollment-related transactions, including, 
but not limited to, enrollments sent to issuers for which the qualified 
individual has not yet remitted premiums, enrollments for which payment 
has been made on any applicable enrollee premium, cancellations of 
enrollment prior to coverage becoming effective, terminations of 
enrollment, and enrollment changes (to include terminations and 
cancellations initiated by issuers).
20. Special Enrollment Periods (Sec.  155.420)
    Section 1311(c)(6)(C) of the Affordable Care Act specifies that the 
Secretary shall require Exchanges to provide for special enrollment 
periods, which allow a qualified individual to enroll in a QHP, add or 
drop dependents enrolled with the qualified individual, or change from 
one QHP to another outside of the annual open enrollment period. We 
implemented this provision in section 155.420 of the Exchange final 
rule published March 27, 2012 (77 FR 18310). The statute further 
specifies that such periods should be those specified in section 9801 
of the Code, as well as other special enrollment periods under 
circumstances similar to such periods under part D of title XVIII of 
the Act. Section 155.420 is structured such that the special enrollment 
periods are listed in paragraph (d), while the effective dates for 
these special enrollment periods are described in paragraph (b).
    In order to clarify the scope of the special enrollment periods 
described in paragraph (d), we propose to redesignate existing 
paragraph (a) as paragraph (a)(1) and to add paragraph (a)(2) to define 
``dependent'' such that it aligns with the meaning provided in 26 CFR 
54.9801-2, a regulation implementing section 9801(f) of the Code.\3\ 
Under this

[[Page 4646]]

proposal, a dependent would include any individual who is or who may 
become eligible for coverage under the terms of a QHP because of a 
relationship to a qualified individual or enrollee. This proposal does 
not broaden our existing use of dependent throughout this section; 
rather, it clarifies our existing interpretation such that the 
availability of special enrollment periods to dependents is limited to 
those dependents for whom the selected QHP would provide coverage. We 
propose to apply this definition throughout this section, including for 
the special enrollment periods not specified in section 9801(f) of the 
Code, in order to promote efficient operations and uniform standards to 
guide QHP issuers and Exchanges. We note that this proposal means that 
those special enrollment periods that specifically mention dependents 
will be evaluated on a plan-by-plan basis for a given set of 
individuals, and that a special enrollment period may be available for 
an individual in some plans but not in other plans.
---------------------------------------------------------------------------

    \3\ Note that the special enrollment periods specified in 
section 9801(f) of the Code are also required in section 701 of the 
Employee Retirement Income Security Act of 1974 (ERISA) and section 
2704 of the PHS Act. (Before the amendments made by the Affordable 
Care Act, the special enrollment provisions were located in section 
2701(f) of the PHS Act; after the amendments made by the Affordable 
Care Act, these requirements are found in PHS Act section 2704(f).) 
Similarly, the special enrollment periods specified 26 CFR 54.9801-2 
are also found in 29 CFR 2590.701-6 and 45 CFR 146.117.
---------------------------------------------------------------------------

    We also propose to amend paragraph (b)(2)(i), which addresses 
birth, adoption, or placement for adoption, to clarify that this 
special enrollment period is applicable for either ``a qualified 
individual or an enrollee.'' This revision clarifies the existing 
language in the Exchange final rule, which could have been 
misinterpreted. We also propose to remove language from paragraph 
(b)(2)(i) concerning the effective dates for advance payments of the 
premium tax credit and cost-sharing reductions, which we propose to 
move to Sec.  155.330(f). We solicit comments regarding whether we 
should also expand this special enrollment period to cover children 
placed in foster care. Similarly, we propose to amend paragraph 
(b)(2)(ii) to clarify that the special enrollment period for marriage 
and loss of minimum essential coverage is applicable for either a 
qualified individual or an enrollee.
    We propose to add new paragraph (b)(2)(iii) regarding effective 
dates for qualified individuals or enrollees eligible for a special 
enrollment period under paragraphs (d)(4), (d)(5) or (d)(9) 
(respectively the special enrollment period for ``error, 
misrepresentation, or inaction of an officer, employee, or agent of the 
Exchange, HHS, or its instrumentalities''; the special enrollment 
period for when ``the QHP * * * substantially violated a material 
provision of its contract in relation to the enrollee''; and the 
special enrollment period for ``exceptional circumstances''). Under 
this proposal, the Exchange will ensure an effective date that is 
tailored based on the circumstances around the specific events. This 
will include, in accordance with any guidelines issued by HHS, 
providing, when applicable and on a case-by-case basis, that coverage 
will be effective in accordance with the regular effective dates 
specified in paragraph (b)(1) or on the date of the event that 
triggered the special enrollment period under paragraphs (d)(4), 
(d)(5), or (d)(9) of this section. We believe the nature of the 
circumstances that will trigger these special enrollment periods make 
it necessary to provide the Exchange with appropriate flexibility 
regarding coverage effective dates. We have proposed a similar 
provision in Sec.  155.330(f), and welcome comments on standards for 
effective dates in such situations.
    We propose to add paragraph (b)(4) to specify that notwithstanding 
the standards otherwise provided in this section, the Exchange must 
ensure that the effective dates concerning advance payments of the 
premium tax credit and cost-sharing reductions adhere to the modified 
effective dates we have proposed in Sec.  155.330(f). This is designed 
to bring the effective dates under this section, which are aligned with 
the typical QHP billing cycle, in line with the effective dates for 
eligibility, as specified in subpart D. While Sec.  155.330(f) concerns 
redeterminations and other changes during the benefit year, we clarify 
that the effective enrollment dates concerning Sec.  155.420(b) apply 
to both qualified individuals first enrolling in a QHP through the 
Exchange via a special enrollment period, as well as to current 
enrollees. We also note that as in existing regulations, there are 
situations in which eligibility and enrollment effective dates will not 
perfectly align, such that an enrollment effective date might be 
immediate, but advance payments of the premium tax credit and cost-
sharing reductions might not be effective until the first of a future 
month.
    Accordingly, as noted above, we propose to make a technical 
correction to remove part of paragraph (b)(2)(i), as well as paragraphs 
(b)(3)(i)(A) and (B) to remove language concerning advance payments of 
the premium tax credit and cost-sharing reductions and propose to make 
a technical correction in paragraph (b)(3)(i) to remove the words 
``provided that either'' at the end of the paragraph to reflect this 
change.
    We next propose to amend paragraph (d) to specify that the Exchange 
must allow, when specified in the paragraphs therein, for a dependent 
of a qualified individual or enrollee to qualify for a special 
enrollment period. The previous language allowed a qualified individual 
or enrollee to qualify for the listed special enrollment periods. The 
proposed language allows that for certain triggering events specified 
in paragraph (d), the Exchange will determine a qualified individual or 
enrollee, as well as his or her dependents, eligible for a special 
enrollment period, subject to whether the QHP that such individuals 
wish to select covers the dependents. Therefore, for specified special 
enrollment periods, a qualified individual or enrollee who experiences 
the triggering event will be eligible for the special enrollment 
period, along with any dependents able to enroll in the plan selected 
for the qualified individual or enrollee. For example, if a 25 year old 
loses access to minimum essential coverage, he will qualify for a 
special enrollment period, along with his parents and any other 
dependents who may enroll in the plan selected.
    We propose amending this language in order to accommodate 
situations in which all members of a household would likely need to 
enroll in or change QHPs in response to an event experienced by one 
member of the household. We also propose to make technical corrections 
to each paragraph within paragraph (d) to replace the introductory word 
``A'' with ``The'' in order to reflect that in response to each 
triggering event, the Exchange will allow a qualified individual or 
enrollee, and when specified, his or her dependent to qualify for a 
special enrollment period, subject to whether the QHP covers the 
dependent.
    We also propose to make a technical change to paragraph (d)(1) to 
add the words ``his or her'' after ``The qualified individual or''. We 
also propose to clarify the triggering events associated with a 
qualified individual or his or her dependent losing minimum essential 
coverage. We propose to add paragraph (d)(1)(i) to specify that the 
triggering event in the case of a QHP decertification is the date of 
the notice of decertification as described in Sec.  155.1080(e)(2). We 
also propose to add paragraph (d)(1)(ii) to specify that the triggering 
event in all other cases is the date the individual or dependent loses 
eligibility for minimum essential coverage. This proposal adds 
specificity

[[Page 4647]]

regarding these triggering events in order to minimize gaps in coverage 
for a qualified individual or his or her dependent.
    We propose to amend paragraphs (d)(3) through (d)(7), as well as 
(d)(9), to clarify the specific individuals that are affected by the 
eligibility of a qualified individual for each special enrollment 
period. In paragraph (d)(3), we make a technical correction to add the 
word, ``qualified'', before ``individual'', to specify that only a 
qualified individual may be eligible for the special enrollment period 
for an individual who was not previously a citizen, national, or 
lawfully present gaining such status. In paragraphs (d)(4), (d)(5), 
(d)(7), and (d)(9) (concerning errors in enrollment, contract 
violations, permanent relocations, and exceptional circumstances), we 
specify that these special enrollment periods apply to a qualified 
individual or enrollee, as well as to his or her dependent. This is 
because errors in enrollment, contract violations, permanent 
relocations, and exceptional circumstances that affect only one 
individual, to the extent that this occurs, will likely result in him 
or her needing to change QHPs for his or her entire family. We 
considered similar amendments for other special enrollment periods, but 
decided not to revise them, as we do not believe that the circumstances 
of other special enrollment periods warrant movement of related 
individuals. However, we solicit comment regarding whether we should 
permit such movement of related individuals for other special 
enrollment periods.
    We further propose to amend paragraph (d)(6) to specify that the 
Exchange will provide a special enrollment period for (i) An enrollee 
in a QHP who is determined newly eligible or newly ineligible for 
advance payments of the premium tax credit or experiences a change in 
eligibility for cost-sharing reductions, (ii) his or her dependent who 
is an enrollee in the same QHP and who is determined newly eligible or 
newly ineligible for advance payments of the premium tax credit or has 
a change in eligibility for cost sharing reductions, or (iii) a 
qualified individual or his or her dependent enrolled in qualifying 
coverage in an eligible employer-sponsored plan who are determined 
newly eligible for advance payments of the premium tax credit based in 
part on a finding that such individual will cease to be eligible for 
qualifying coverage in an eligible-employer sponsored plan in the next 
60 days, and is allowed to terminate existing coverage. Proposed 
paragraph (d)(6)(iii) differs from paragraphs (d)(6)(i) and (ii) in 
that it allows the qualified individual or his or her dependent to be 
determined eligible for this special enrollment period and the 
opportunity to enroll in a new QHP prior to the end of his or her 
employer-sponsored coverage. However, he or she is not eligible to 
receive advance payments of the premium tax credit until the end of his 
or her coverage through such eligible employer-sponsored plan. The 
existing language provided this special enrollment period regardless of 
an individual's current coverage status, which could have resulted in 
any individual who did not apply during the initial annual open 
enrollment period being able to receive a special enrollment period. 
This could have been disruptive to the market, because the potential 
for an individual to be eligible for this special enrollment period 
regardless of his or her coverage status could heighten adverse 
selection by dissuading more healthy individuals from enrolling in a 
QHP during the initial annual open enrollment period. We provide this 
special enrollment period for the dependent of an enrollee determined 
newly eligible or newly ineligible for advance payments of the premium 
tax credit or an enrollee experiencing a change in eligibility for 
cost-sharing reductions to account for situations where members of 
different tax households are enrolled together in the same plan and 
otherwise would be prevented from enrolling together in a new plan 
during the special enrollment period.
    We also specify in paragraph (d)(6) that the Exchange must permit a 
qualified individual, or his or her dependent, enrolled in qualifying 
coverage in an eligible employer-sponsored plan who are eligible for 
this special enrollment period due to their plan no longer being 
affordable or providing minimum value within the next 60 days prior to 
the end of his or her coverage, to access this special enrollment 
period prior to the end of his or her coverage through such an eligible 
employer-sponsored plan if he or she is allowed to terminate existing 
coverage. This protects those qualified individuals from potential gaps 
in coverage, while also outlining a reasonable period of time in which 
they are eligible for this special enrollment period such that it does 
not pose significant operational complications for the Exchange.
    We propose to make a technical correction to paragraph (d)(8) such 
that the beginning of the paragraph now reads, ``The qualified 
individual who is an Indian''. The previous language did not specify 
that this special enrollment period was limited to a qualified 
individual.
    Finally, we propose to add a new paragraph (d)(10) to provide a 
special enrollment period for a qualified individual or his or her 
dependent, who is enrolled in an eligible employer-sponsored plan that 
does not provide qualifying coverage, as the term is defined in Sec.  
155.300 of this part, and is allowed to terminate his or her existing 
coverage. Under this proposal, the Exchange would permit such an 
individual to access this special enrollment period 60 days prior to 
the end of his or her coverage in an eligible employer-sponsored plan. 
This protects those qualified individuals from potential gaps in 
coverage and ensures that a qualified individual and his or her 
dependent would not be prevented from enrolling together in a QHP 
during the special enrollment period; we note that an individual's 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions will still be subject to termination of existing 
enrollment in an eligible employer-sponsored plan.
21. Termination of Coverage (Sec.  155.430)
    We propose to amend paragraph (b)(1) to clarify that it 
specifically refers to enrollee-initiated terminations. We further 
propose to divide paragraph (b)(1) into two paragraphs. We propose to 
add paragraph (b)(1)(i) to account for circumstances in which, through 
periodic data matching, an Exchange finds an enrollee eligible for 
other minimum essential coverage, thus resulting in the enrollee's 
ineligibility for advance payments of the premium tax credit. The 
Exchange final rule currently provides that enrollees must actively 
terminate their enrollment in a QHP after losing eligibility for 
advance payments of the premium tax credit and cost-sharing reductions, 
or otherwise the enrollee will remain enrolled in multiple plans, since 
gaining other minimum essential coverage does not affect eligibility 
for enrollment in a QHP. Under the existing rule, enrollees who did not 
initiate a termination upon gaining other minimum essential coverage 
would maintain coverage in a QHP without advance payments of the 
premium tax credit. HHS believes that the majority of individuals who 
gain other minimum essential coverage will not want to maintain 
coverage in a QHP without advance payments of the premium tax credit 
and cost-sharing reductions. To accommodate this anticipated 
preference, and allow individuals to maintain enrollment in a QHP in 
the limited number of situations in which they want to do so, we 
propose

[[Page 4648]]

in paragraph (b)(1)(ii) that at the time of plan selection, the 
Exchange will provide a qualified individual with the opportunity to 
choose to remain enrolled in a QHP if the Exchange identifies that they 
have become eligible for other minimum essential coverage through data 
matching and the enrollee does not request a termination in accordance 
with paragraph (b)(1)(i). We solicit comment on this proposal.
    We propose to amend paragraph (d)(1) to specify that changes in 
advance payments of the premium tax credit and cost-sharing reductions, 
including terminations, adhere to the effective dates specified in 
Sec.  155.330(f), which ensures alignment of processes.
22. Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs
    This subpart is proposed to provide standards for eligibility 
appeals, including appeals of individual eligibility determinations and 
employer determinations as required by section 1411(f) of the 
Affordable Care Act, which makes clear that the Secretary will provide 
for an appeals process. We propose to provide Exchanges with options 
for coordinated appeals to align with the options for eligibility 
determinations. In addition, the following sections propose standards 
for appeal requests, eligibility pending appeal, dismissals, informal 
resolution and hearing requirements, expedited appeals, appeal 
decisions, the appeal record, and corresponding provisions for employer 
appeals.
23. Definitions (Sec.  155.500)
    In this section, we propose definitions for this subpart, in 
addition to incorporating the definitions previously established in 
Sec.  155.20 and Sec.  155.300.
    We propose the term ``appeal record'' to mean the appeal decision, 
all papers and requests filed in the proceeding, and, if a hearing was 
held, the transcript or recording of hearing testimony or an official 
report containing the substance of what happened at the hearing, and 
any exhibits introduced at hearing.
    We propose the term ``appeal request'' to mean a clear expression, 
made either orally or in writing, by an applicant, enrollee, employer, 
or small business employer or employee to have any eligibility 
determination or redetermination contained in a notice issued in 
accordance with Sec. Sec.  155.310(g), 155.330(e)(1)(ii), 
155.335(h)(1)(ii), 155.715(e) or (f), or pursuant to future guidance on 
section 1311(d)(4)(H) of the Affordable Care Act adjudicated by an 
appeals entity.
    We propose the term ``appeals entity'' to mean a body designated to 
hear appeals of eligibility determinations or redeterminations 
contained in notices issued in accordance with Sec. Sec.  155.310(g), 
155.330(e)(1)(ii), 155.335(h)(1)(ii), 155.715(e) or (f), or notices 
issued in accordance with future guidance on exemptions pursuant to 
section 1311(d)(4)(H).
    We propose the term ``appellant'' to mean the applicant or 
enrollee, the employer, or the small business employer or employee who 
is requesting an appeal.
    We propose the term ``de novo review'' to mean a review of an 
appeal without deference to prior decisions in the case.
    We propose the term ``evidentiary hearing'' to mean a hearing 
conducted where new evidence may be presented.
    We propose the term ``vacate'' to mean to set aside a previous 
action.
    We seek comment on these definitions.
24. General Eligibility Appeals Requirements (Sec.  155.505)
    In Sec.  155.505, we propose the general eligibility appeals 
standards as well as the options for an Exchange to conduct eligibility 
appeals. In paragraph (a), we propose that, unless otherwise specified, 
the provisions of subpart F apply to Exchange eligibility appeals 
processes, regardless of whether the appeals process is provided by a 
state-based Exchange appeals entity or by HHS. We seek comment on this 
provision.
    In paragraph (b), we propose to define the scope of those 
determinations that an applicant or enrollee may appeal, pursuant to 
Sec.  155.355 and forthcoming guidance on exemptions under section 
1311(d)(4)(H) of the Affordable Care Act. Specifically, we propose that 
applicants and enrollees have the right to appeal eligibility 
determinations made in accordance with subpart D. This includes initial 
eligibility determinations made pursuant to Sec.  155.305(a) through 
(h) (eligibility for enrollment in a QHP, Medicaid, CHIP, and the BHP, 
if applicable, and for advance payments of the premium tax credit, and 
cost-sharing reductions as well as eligibility for QHP enrollment 
periods and eligibility for enrollment in a catastrophic plan), and 
redeterminations made pursuant to Sec. Sec.  155.330 and 155.335. 
Applicants and enrollees may also appeal the amount of advance payments 
of the premium tax credit and level of cost-sharing reductions for 
which they are eligible. In paragraph (b)(2), we propose that 
applicants and enrollees may appeal an eligibility determination for an 
exemption made in accordance with future guidance on exemptions 
pursuant to 1311(d)(4)(H) of the Affordable Care Act. Finally, in 
paragraph (b)(3), we propose that if the Exchange fails to provide 
timely notice of an eligibility determination or redetermination under 
Sec. Sec.  155.310(g), 155.330(e)(1)(ii), or 155.335(h)(1)(ii), such 
failure is appealable. We seek comment on these provisions.
    In paragraph (c), we propose the options for Exchange appeals. 
Specifically, we propose that final eligibility determinations, after 
exhaustion of any inconsistency period under Sec.  155.315(f), may be 
appealed through the Exchange appeals process, if the Exchange elects 
to establish such a process, or to HHS. In addition, pursuant to the 
requirements of section 1411(f)(1) of the Affordable Care Act, all 
Exchange appellants may have their appeal reviewed by HHS upon 
exhaustion of the Exchange appeals process. Thus, we expect that, where 
a state-based Exchange is operating and has established an appeals 
process, appellants will first appeal through the state-based process 
and then, if dissatisfied with the outcome, have the opportunity to 
elevate the appeal to the HHS appeals process. We anticipate that a 
state-based Exchange may elect to establish the appeals function within 
the Exchange or to authorize an eligible state entity to carry out the 
appeals function.
    We anticipate that states will have an interest in adjudicating 
appeals of eligibility determinations made by their state-based 
Exchanges; therefore, we propose to provide flexibility for states to 
provide an appeals process while respecting the requirement in section 
1411(f)(1) of the Affordable Care Act that a federal appeals process be 
available to appellants in the individual market. We seek comment on 
this provision.
    In paragraph (d), we propose that appeals entities must comply with 
the standards set forth for providing fair hearings established by 
Medicaid at 42 CFR 431.10(c)(2). Meeting Medicaid due process 
requirements is part of the minimum standard an entity must meet to be 
eligible to process Medicaid appeals, which we propose may be delegated 
to Exchange appeals entities. We seek comment on this provision.
    In paragraph (e), we propose that an appellant may designate an 
authorized representative to act on his or her behalf, including making 
an appeal request, as provided in Sec.  155.227. We anticipate that 
many appellants will need to or will prefer to rely on an

[[Page 4649]]

authorized representative to assist them with the appellate process. 
Such assistance and representation is common in other public benefit 
appeals processes and we seek to offer similar accommodation to 
Exchange appellants. We seek comment on this provision.
    In paragraph (f), we propose that appeals processes must be 
accessible to appellants who are limited English proficient, or who are 
living with disabilities, consistent with the requirements in 
Sec. Sec.  155.205(c). We solicit comments on this provision.
    In paragraph (g), we propose that an appellant may seek judicial 
review to the extent allowable by law. We anticipate that some 
appellants may wish to pursue legal recourse beyond the administrative 
appeals proposed here. We seek comment on this provision.
25. Appeals Coordination (Sec.  155.510)
    In Sec.  155.510, we propose the general coordination requirements 
for the appeals entities and the agencies administering insurance 
affordability programs. Similar to the flexibility offered to states in 
choosing an eligibility determination process, the corresponding 
flexibility for eligibility appeals can ensure that appeals are managed 
in a seamless, consumer-friendly manner.
    In paragraph (a), we propose that the appeals entity or the 
Exchange must enter into agreements with the agencies administering 
insurance affordability programs regarding the appeals processes for 
such programs as are necessary to fulfill the requirements of this 
subpart. The agreements will clearly outline the responsibilities of 
each entity to support the eligibility appeals process. In paragraph 
(a)(1), we propose the agreements must seek to minimize burden on 
appellants, including not requesting the appellant provide information 
previously provided in the process. However, we note that in the case 
where the appellant has provided information but the information cannot 
be located after a careful review of the appellant's file, including 
all information transmitted from other entities, we anticipate that it 
may be reasonable for the receiving entity to request the previously 
submitted documentation from the appellant. In paragraph (a)(2), we 
propose the agreements must ensure prompt issuance of appeal decisions. 
Finally, in paragraph (a)(3), we propose the agreements must comply 
with the coordination requirements established by Medicaid under 42 CFR 
431.10(d). We seek comment on these provisions.
    In paragraph (b), we propose coordination standards for Medicaid 
and CHIP appeals. In paragraph (b)(1), we propose that consistent with 
42 CFR 431.10(c)(1)(ii) (the proposed Medicaid rule regarding 
delegations of authority to conduct fair hearings) and Sec.  457.1120, 
the appellant must be informed of the option to opt into pursuing his 
or her appeal of an adverse Medicaid or CHIP determination made by the 
Exchange directly with the Medicaid or CHIP agency, and if the 
appellant elects to do so, the appeals entity transmits the eligibility 
determination and all information provided via secure electronic 
interface, promptly and without undue delay, to the Medicaid or CHIP 
agency, as applicable. Our goal is to achieve a coordinated and 
integrated eligibility and appeals process that limits the burden on 
the appellant, the Exchange appeals entity, and the state Medicaid and 
CHIP agencies. The proposed regulatory language in paragraph (b)(1) 
provides a general requirement that the appellant be notified of the 
option to opt into appealing a Medicaid or CHIP denial to the Medicaid 
or CHIP agency rather than to the Exchange appeals entity. We are also 
considering a more specific requirement to align with the preamble 
proposed by Medicaid in which the appellant would be informed at the 
time of the eligibility determination made by the Exchange of his or 
her right to opt into an appeal of the denial of Medicaid or CHIP 
eligibility with the state Medicaid or CHIP agency. Under this 
approach, we assume that most appellants will not opt into having his 
or her appeal heard by the Medicaid agency, which would result in two 
separate appeals (one before the Exchange appeals entity and one before 
the Medicaid or CHIP agency) and will instead choose to have both 
Medicaid or CHIP and Exchange-related issues heard before the Exchange 
appeal entity. If the Exchange appeals entity conducts the hearing on 
the Medicaid or CHIP denial that hearing decision would be final under 
the proposed rule. We seek comment on the proposed provision and the 
alternative for this proposed provision.
    In paragraph (b)(2), we propose that where the Medicaid or CHIP 
agency has delegated appeals authority to the Exchange appeals entity 
consistent with 42 CFR 431.10(c)(1)(ii) and the appellant has elected 
to have the Exchange appeals entity hear the appeal, the appeals entity 
may include in the appeals decision a determination of Medicaid and 
CHIP eligibility. In addition, we propose in paragraph (b)(2)(i) that 
the appeals entity must apply MAGI-based income standards and standards 
for citizenship and immigration status using verification rules and 
procedures consistent with Medicaid and CHIP requirements under 42 CFR 
parts 435 and 457. In paragraph (b)(2)(ii), we propose that notices 
required in connection with an eligibility determination for Medicaid 
or CHIP be performed by the appeals entity consistent with standards 
set forth by this subpart, subpart D, and by the state Medicaid or CHIP 
agency, consistent with applicable law. We seek comment on these 
provisions.
    In paragraph (b)(3), we propose that where a state Medicaid or CHIP 
agency has not delegated appeals authority to an appeals entity and the 
appellant seeks review of a denial of Medicaid or CHIP eligibility, the 
appeals entity must transmit the eligibility determination and all 
information provided as part of the appeal via secure electronic 
interface, promptly and without undue delay, to the Medicaid or CHIP 
agency, as applicable. We seek comment on this provision.
    In paragraph (b)(4), we propose the Exchange must consider an 
appellant determined or assessed by the appeals entity as not 
potentially eligible for Medicaid or CHIP as ineligible for Medicaid 
and CHIP based on the applicable Medicaid and CHIP MAGI-based income 
standards for the purposes of determining eligibility for advance 
payments of the premium tax credit and cost-sharing reductions. We seek 
comment on this provision.
    In paragraph (c), we propose that appeals entities must ensure that 
all data exchanges that are part of the appeals process comply with the 
requirements of Sec.  155.260, Sec.  155.270 and Sec.  155.345(h) and 
comply with all data sharing requests from HHS. We anticipate that 
appeals-related data will need to be passed between the Exchange, 
Medicaid, CHIP, and the state-based Exchange and HHS appeals entities 
in order to process appeal requests and implement appeal decisions. In 
addition, specific appeals-related information will be shared with the 
Internal Revenue Service via HHS in order to facilitate the tax 
reconciliation process under 26 CFR 1.36B-4.
    We solicit comments on the provisions regarding appeals 
coordination between the Exchange, the appeals entities, and the 
Medicaid and CHIP agencies, where applicable.
25. Notice of Appeal Procedures (Sec.  155.515)
    In paragraph (a) of this section, we propose that an Exchange must 
provide

[[Page 4650]]

notice of appeal procedures at the time of the application and again 
when the eligibility determination notice is sent under Sec.  
155.310(g), Sec.  155.330(e)(1)(ii), Sec.  155.335(h)(1)(ii), or future 
guidance on exemptions pursuant to Sec.  1311(d)(4)(H) of the 
Affordable Care Act. We anticipate that Exchanges can meet this 
requirement by including a reference to the appeals process in the 
single streamlined application required under Sec.  155.405 and in the 
eligibility determination notices required under Sec. Sec.  155.310(g), 
155.330(e)(1)(ii), and 155.335(h)(1)(ii) and future guidance on 
exemptions under section 1311(d)(4)(H) of the Affordable Care Act.
    We also propose, in paragraph (b), the general content for notices 
on the right to appeal and on appeal procedures. Specifically, we 
propose content including an explanation of the applicant or enrollee's 
appeal rights, procedures for requesting an appeal, right of 
representation, and an explanation of the circumstances under which 
eligibility may be maintained or reinstated pending an appeal. We note 
that the right of representation includes both legal counsel and 
authorized representatives. As defined in Sec.  155.227, an authorized 
representative can be anyone designated as such by the appellant. We 
also propose that notice content should include an explanation that the 
outcome of an appeal decision for one household member may result in a 
change in eligibility for other household members and that such a 
change may be handled as a redetermination in accordance with the 
standards specified in Sec.  155.305. We solicit comments on the 
proposed publication of appellate procedures.
27. Appeal Requests (Sec.  155.520)
    In paragraph (a) of Sec.  155.520, we propose that the Exchange and 
the appeals entity must accept appeal requests submitted by telephone, 
via mail, in person (if the Exchange or appeals entity is capable of 
receiving in-person appeal requests), or via the Internet. We believe 
that this is the appropriate policy to propose in order to provide 
appellants greater flexibility and access to the process. We propose 
that the Exchange and the appeals entity may assist the applicant or 
enrollee in making the appeal request. In addition, we propose that the 
appeals entity must not limit or interfere with an applicant or 
enrollee's right to make an appeal request. Finally, we propose that an 
appeal request must be considered valid for the purposes of this 
subpart if it is submitted in accordance with the requirements of 
paragraphs (b) and (c) of this section and Sec.  155.505(b). We seek 
comment on these provisions.
    In paragraph (b), we propose that the Exchange or appeals entity 
must allow an applicant or enrollee to request an appeal within 90 days 
of the date of the eligibility determination notice. In paragraph (c), 
we propose that appellants who disagree with a state-based Exchange 
appeals entity decision may appeal to HHS for further administrative 
review within 30 days of the date of the state-based Exchange appeals 
entity's notice of appeal decision. We seek comment on these 
provisions.
    In paragraph (d), we propose standards for acknowledging an appeal 
request. In paragraph (d)(1), we propose that upon receipt of a valid 
appeal request, the appeals entity must send timely acknowledgement to 
the appellant of the receipt of his or her valid appeal request, 
including information regarding the appellant's eligibility pending 
appeal pursuant to Sec.  155.525 and an explanation that any advance 
payments of the premium tax credit paid on behalf of the tax filer 
pending appeal are subject to reconciliation under 26 CFR 1.36B-4. We 
note that we use the term ``tax filer'' in this instance because the 
appellant may not be the household tax filer; therefore, the tax filer 
will be the recipient of the advance payments of the premium tax credit 
on behalf of the appellant. In paragraph (d)(1)(ii), we propose that 
the appeal entity must send timely notice via secure electronic 
interface of the appeal request and, if applicable, instructions to 
provide eligibility pending appeal pursuant to Sec.  155.525 to the 
Exchange and to the agencies administering Medicaid and CHIP, where 
applicable. We anticipate that this proposed standard will facilitate 
coordination between the appeals entity and the Exchange, Medicaid, and 
CHIP, where applicable, so that appellants who qualify for continuing 
eligibility during an appeal will not experience a gap in coverage. In 
paragraph (d)(1)(iii), we propose that if the appeal request is made 
pursuant to paragraph (c) of this section, the appeals entity must send 
timely notice via secure electronic interface of the appeal request to 
the state-based Exchange appeals entity. In paragraph (d)(1)(iv), we 
propose that the appeals entity must promptly confirm receipt of the 
records transferred pursuant to paragraph (d)(3) or (4) of this section 
to the Exchange or the state-based Exchange appeals entity, as 
applicable.
    In paragraph (d)(2), we propose that, upon receipt of an appeal 
request that is not valid under Sec.  155.520 or Sec.  155.505(b), the 
appeals entity must, promptly and without undue delay, send written 
notice, either electronically or in hard copy, to the applicant or 
enrollee that the appeal request has not been accepted and the reason 
why, so that the applicant or enrollee may have the opportunity to cure 
a defect in the appeal request. We propose that the appeals entity must 
accepted an amended appeal request that meets the requirements of Sec.  
155.520 and Sec.  155.505(b), including standards for timeliness.
    In paragraph (d)(3), we propose that, upon receipt of a valid 
appeal request pursuant to paragraph (b) of this section, or upon 
receipt of the notice under paragraph (d)(1)(ii) of this section, the 
Exchange must transmit via secure electronic interface to the appeals 
entity the appeal request, if the appeal request was initially made to 
the Exchange, and the appellant's eligibility record. Because we have 
provided flexibility for the appellant to request an appeal at the 
Exchange or at the appeals entity under Sec.  155.520(a), we anticipate 
that in some cases the Exchange will be the initial receiver of the 
appeal request and, therefore, must transmit this information to the 
appeals entity for review. However, regardless of whether the Exchange 
receives the appeal request first or is notified by the appeals entity 
of such a request, the Exchange must transmit the appellant's 
eligibility record to the appeals entity to use in the adjudication of 
the appeal. In paragraph (d)(4), we propose that upon receipt of the 
notice pursuant to paragraph (d)(1)(iii), the state-based Exchange 
appeals entity must transmit via secure electronic interface the 
appellant's appeal record, including the appellant's eligibility record 
as received from the Exchange, to HHS.
    We seek comment on the appeal acknowledgement and notification 
provisions in Sec.  155.520(d).
28. Eligibility Pending Appeal (Sec.  155.525)
    In Sec.  155.525, we propose the process by which an appellant may 
receive benefits while his or her appeal is pending in specific 
circumstances. In paragraph (a), we propose that upon receipt of a 
valid appeal request or notice under Sec.  155.520(d)(1)(ii) that 
concerns an appeal of a mid-year or annual redetermination, the 
Exchange, or the Medicaid or CHIP agency as applicable, must continue 
to consider the appellant eligible while the appeal is pending in 
accordance with the standards in paragraph (b) or as determined by 
Medicaid or CHIP, as applicable, under 42 CFR parts 435 and

[[Page 4651]]

457. In paragraph (b), we propose that the Exchange must continue the 
appellant's eligibility for enrollment in a QHP, advance payments of 
the premium tax credit, and cost-sharing reductions, as applicable, in 
accordance with the level of eligibility immediately before the 
redetermination being appealed. For example, if the appellant had been 
eligible for advance payments of the premium tax credit in the previous 
coverage year but, upon annual redetermination, was denied advance 
payments of premium tax credit, the Exchange would consider the 
appellant eligible to continue to receive advance payments of premium 
tax credit at the level of the appellant's prior eligibility while the 
appeal is pending. As stated in subpart D of this part, receipt of 
advance payments of the premium tax credit may be waived by the tax 
filer. In addition, the continued receipt of advance payments of the 
premium tax credit during the appeal may impact the amount owed or due 
at the IRS reconciliation process, depending upon the appeal decision.
    As is standard in many public programs, including Medicaid and the 
private market, we propose that a continuation of benefits should be 
available to individuals already enrolled in coverage while appealing a 
change in current eligibility. This approach ensures continuity of 
coverage and care during an appeal as well as minimizes the impact of 
eligibility errors on beneficiaries. Eligibility pending appeal will 
not be offered to appellants who are appealing their initial denial of 
eligibility because of the unique challenges in identifying the 
appropriate pended benefit (if any) for such an appellant. It should be 
noted that while applicants and enrollees may receive coverage during 
the inconsistency period prior to receiving their final 
redetermination, as set forth in Sec.  155.315, coverage during this 
period is based on a different standard than eligibility received while 
an appeal is pending. Specifically, under Sec. Sec.  155.315(f)(4)(i) 
and (ii), an applicant or enrollee in an inconsistency period receives 
the eligibility based on the information to which he or she attested. 
However, we propose that during an appeal, qualified appellants receive 
eligibility that corresponds to that which they had immediately before 
the redetermination being appealed. Because of the differences in 
calculating eligibility during these two processes, we anticipate that 
an individual who appeals a redetermination following an inconsistency 
period may not receive the same eligibility during the appeal as during 
the inconsistency period. Finally, we note that for an applicant who 
receives an initial eligibility determination that is not a denial and 
requests an appeal, he or she will receive eligibility per the original 
determination during the course of his or her appeal. We solicit 
comments on the proposed approach, including our proposal to not pend 
benefits to new applicants who are denied eligibility.
29. Dismissals (Sec.  155.530)
    In paragraph (a) of Sec.  155.530, we propose the circumstances 
under which an appeals entity must dismiss the appeal. We propose 
paragraphs (1) through (4) that the appeals entity must dismiss an 
appeal if the appellant withdraws the appeal request in writing, either 
electronically or in hard copy; fails to appear at a scheduled hearing; 
fails to submit a valid appeal request as defined in Sec.  
155.520(a)(4); or dies while the appeal is pending. We note that 
paragraph (a)(4) is only intended to exclude those appeal requests 
which fail to meet timeliness standards or are clearly requesting an 
appeal for something unrelated to the eligibility determinations 
relevant to this subpart. This provision is not intended to exclude 
appeal requests that may have other minor deficiencies or are submitted 
without complete information. In paragraph (b), we propose that an 
appellant whose appeal is dismissed must be provided a timely notice by 
the appeals entity that includes the reason for dismissal, an 
explanation of the dismissal's effect on the appellant's eligibility, 
and an explanation of how the appellant may show good cause why the 
dismissal should be vacated in accordance with paragraph (d) of this 
section. In paragraph (c), we propose that, if an appeal is dismissed, 
the appeals entity must provide timely notice to the Exchange and to 
the agency administering Medicaid or CHIP, as applicable, which must 
include instructions regarding the appropriate eligibility 
determination to implement and the discontinuation of pended 
eligibility provided under Sec.  155.525. Finally, in paragraph (d), we 
that propose the appeals entity may vacate a dismissal if the appellant 
makes a written request, either electronically or in hard copy, within 
30 days of the date of the notice of dismissal, showing good cause why 
the dismissal should be vacated. The option for the appeals entity to 
vacate dismissals allows for programmatic flexibility. For example, if 
the appellant can prove that he or she was incapacitated and therefore 
could not attend his or her scheduled hearing, the appeals entity may 
vacate a dismissal that was based upon the appellant's failure to 
appear at a scheduled hearing. We solicit comments on the proposed 
approach for appeal dismissals and vacating an appeal dismissal.
30. Informal Resolution and Hearing Requirements (Sec.  155.535)
    In Sec.  155.535, we propose standards for adjudicating eligibility 
appeals. We provide the option for informal resolution of appeals as 
well as hearings. In paragraph (a), we propose that the HHS appeals 
process will provide an opportunity for informal resolution and a 
hearing, and that a state-based Exchange appeals entity may also 
provide an informal resolution process prior to a hearing. We 
anticipate that this process will provide appellants the opportunity to 
work with appeals staff to try to resolve the appeal pre-hearing 
through a review of case documents, verification of the accuracy of 
submitted documents, and the opportunity for the appellant to submit 
updated information or provide further explanation of previously 
submitted documents. Although this subpart does not require state-based 
Exchange appeals entities to provide an informal resolution process, 
HHS will provide an informal resolution process to all appellants who 
use the HHS appeals process.
    In paragraph (a), we propose that informal resolution will be 
offered to appellants in the HHS appeals process, and may be offered to 
appellants in a state-based Exchange appeals process, provided that the 
process is limited in scope to what would be considered at hearing, 
including the information used to determine the appellant's eligibility 
as well as any additional relevant evidence provided by the appellant 
during the course of the appeal. In addition, the provision of, or an 
appellant's participation in, an informal resolution process must not 
impair the appellant's right to hearing, where the appellant remains 
dissatisfied with the outcome of the informal resolution process. We 
consider that the appellant is in the best position to determine 
whether he or she is satisfied with the outcome of an informal 
resolution and, therefore, must be afforded a hearing if he or she is 
dissatisfied with the outcome of the informal resolution process. For 
example, an appellant may continue to be dissatisfied with the level of 
advance payments of the premium tax credits for which he or she is 
determined eligible following informal resolution and seek to pursue 
the issue at hearing. Furthermore, this parallels

[[Page 4652]]

the Medicaid fair hearing requirement that an appellant must be 
provided a hearing where he or she believes the agency has taken an 
erroneous action. We also propose that an appeals entity whose process 
includes an informal resolution component must minimize the burden on 
the appellant by not requesting that he or she provide duplicative 
information at various stages of appeal. We expect a significant 
portion of appeals may be resolved through informal resolution. For 
example, some applicants will fail to submit all required information 
or documentation during the application process (or information or 
documentation submitted will not be verified), and will fail to rectify 
this during the statutory inconsistency period, but will present such 
information during an appeal. However, some appellants will remain 
dissatisfied with the eligibility determination that results from the 
informal resolution process, and these appellants must be afforded the 
opportunity for a hearing. We note that unless an appellant requests a 
hearing, the decision reached through informal resolution by the 
appeals entity is considered final and binding.
    In paragraph (b), we propose that when a hearing is scheduled the 
appeals entity must send written notice, electronically or in hard 
copy, to the appellant of the date, time, and location or format of the 
hearing no later than 15 days prior to the date of hearing. We 
anticipate that 15 days will provide the appellant enough time to 
contact the appeals entity if the date and time are prohibitive of 
participation. If the appellant informs the appeals entity that the 
designated date and time are prohibitive of participation, we expect 
that the appeals entity will work with the appellant to set a 
reasonable and mutually convenient date and time. In addition, the 
format of a hearing encompasses telephonic hearings and hearings held 
by video teleconference. Again, if an appeal is resolved to the 
appellant's satisfaction through informal resolution, a hearing will 
not be necessary and will not need to be scheduled. We do not expect 
the appeals entity to schedule a hearing until the appellant has 
indicated that he or she is dissatisfied with the outcome of the 
informal resolution process, if such a process is in place; however, if 
the appeals entity does not provide an informal resolution process, we 
expect that the appeals entity will schedule a hearing upon receipt of 
the appeal request.
    In paragraph (c), we propose requirements for conducting hearings, 
including that hearings must be conducted at a reasonable date, time, 
and location or format; after notice of the hearing has been issued to 
the appellant; as an evidentiary hearing where appellants may present 
evidence; and by one or more impartial officials who have not been 
directly involved in the eligibility determination or any prior 
Exchange appeal decision in the same matter. These requirements are 
modeled off Medicaid's fair hearing requirements and aim to provide the 
appellant with sufficient notice and opportunity to participate in the 
hearing as well as ensure the hearing decision is issued by an 
impartial hearing officer.
    In paragraph (d), we propose the procedural rights afforded to an 
appellant. These rights are based on those provided in Medicaid fair 
hearings under 42 CFR 431.242. In paragraph (d)(1), we propose that the 
appeals entity must provide the appellant with the opportunity to 
review his or her appeal record and all the documents to be used by the 
appeals entity at the hearing, at a reasonable time before the date of 
the hearing as well as during the hearing. In paragraph (d)(2), we 
propose that the appellant have the ability to bring witnesses to 
testify. In paragraph (d)(3), we propose that the appellant have the 
opportunity to establish all relevant facts and circumstances. In 
paragraph, (d)(4), we propose that the appellant may present arguments 
without undue interference. Finally, in paragraph (d)(5), we propose 
that the appellant may question or refute any testimony or evidence, 
including the opportunity to confront and cross-examine adverse 
witnesses. Although we have included the ability to cross-examine 
adverse witnesses, we anticipate that most hearings will be held in a 
non-adversarial manner without an adverse party or representative from 
the agency determining eligibility present during appeal. However, we 
understand that eligibility representatives are occasionally part of 
Medicaid fair hearings, and we do not want to foreclose the possibility 
of cross examination for such cases where an adverse witness is 
present. The procedural rights we outline correspond to those afforded 
to Medicaid appellants.
    In paragraph (e), we propose that the appeals entity must consider 
the information used to determine the appellant's eligibility and any 
relevant evidence presented during the course of the appeal, including 
at the hearing. This provision will allow the appellant to bring 
forward information at multiple points in the process. We seek comment 
on this provision.
    In paragraph (f), we propose that the appeals entity review appeals 
de novo. We consider this standard of review critical to allow the 
appellant the opportunity for a fresh review at each stage of appeal 
and the opportunity to bring new relevant evidence throughout the 
process.
    We seek comment on our informal resolution and hearing requirements 
and standards.
31. Expedited Appeals (Sec.  155.540)
    In Sec.  155.540, we propose the standards for expedited appeals. 
In paragraph (a), we propose that the appeals entity must establish and 
maintain an expedited appeals process for an appellant to request an 
expedited process where there is an immediate need for health services 
because a standard appeal could seriously jeopardize the appellant's 
life or health or ability to attain, maintain, or regain maximum 
function. In paragraph (b), we propose that if an appeal entity denies 
a request for an expedited appeal, it must handle the appeal under the 
standard process and issue the appeal decision in accordance with Sec.  
155.545(b)(1) and make reasonable efforts to inform the appellant 
through electronic or oral notification of the denial and, if notified 
orally, follow up with the appellant by written notice, either 
electronically or in hard copy, within two days of the denial. The 
standards proposed for expedited appeals parallel those contained in 
the proposed Medicaid regulations in this proposed rule at Sec.  
431.224 and Sec.  431.244. We seek comment on this provision and the 
timelines associated with it.
32. Appeal Decisions (Sec.  155.545)
    In section 155.545, we propose requirements for the content and 
issuance of appeal decisions. In paragraph (a)(1), we propose that 
appeal decisions be based exclusively on the application of the 
eligibility rules established in subpart D of this part or pursuant to 
future guidance on section 1311(d)(4)(H) of the Affordable Care Act, as 
applicable, to the information used to make the eligibility 
determination as well as any relevant evidence provided by the 
appellant during the course of the appeal. In paragraphs (a)(2) through 
(a)(5), we propose that the content of the appeal decision must include 
the decision with a plain language description of the effect of the 
decision on the appellant's eligibility, a summary of the facts 
relevant to the appeal, an identification

[[Page 4653]]

of the legal basis for the decision, and the effective date of the 
decision. The above requirements are based on Medicaid's fair hearing 
standards, and we intend each piece to assist the appellant in 
understanding how the eligibility standards, applied to the facts of 
his or her case, resulted in the appeal decision.
    Finally, in paragraph (a)(6), we propose that, if the appeals 
entity is a state-based Exchange appeals entity, the appeal decision 
must include an explanation of the appellant's right to pursue an 
appeal at HHS if the appellant remains dissatisfied with the post-
hearing eligibility determination. We seek comment on these provisions 
for the appeal decision.
    In paragraph (b)(1), we propose the standards for the appeals 
entity to issue written notice of the appeal decision, either 
electronically or in hard copy, to the appellant. We propose that such 
notice to the appellant be issued within 90 days of the date an appeal 
request under Sec.  155.520(b) or (c) is received, as administratively 
feasible. We anticipate the appeals entity may, at times, experience 
significant increases in appeals volume, such as during open enrollment 
or high-volume redetermination periods, and may also require additional 
time due to coordination requirements with Medicaid and other agencies 
and appeals entities. In paragraph (b)(2), we propose that, in the case 
of an appeal request submitted under Sec.  155.540 that the appeals 
entity determines meets the criteria for an expedited appeal, the 
appeals entity must issue notice of the appeal decision as 
expeditiously as the appellant's health condition requires, but no 
later than three working days after the appeals entity receives the 
request for an expedited appeal. Finally, in paragraph (b)(3), we 
propose that the appeals entity send notice of the appeal decision via 
secure electronic interface to the Exchange or the Medicaid or CHIP 
agency, as applicable. This notice requirement seeks to connect the 
appeals decision with the entity responsible for implementing the 
appeal decision. In addition, the Exchange or the Medicaid or CHIP 
agency, as applicable, will need to be notified that the appellant no 
longer should receive pended eligibility. We seek comment on these 
proposed appeal decision notice requirements.
    In paragraph (c), we propose that the Exchange or the Medicaid or 
CHIP agency, as applicable, must promptly implement appeal decisions 
upon receiving the notice described in paragraph (b). In paragraph 
(c)(1), we propose that the effective dates of the changes resulting 
from an appeal correspond with existing timeframes established under 
Sec.  155.330(f) or, where applicable, retroactively to the eligibility 
determination date that was the subject of the appeal, or in accordance 
with standards set forth by Medicaid or CHIP, in 42 CFR parts 435 or 
457, as applicable. The purpose of an appeal is to ensure that the 
appellant receives the appropriate benefit determination. Therefore, 
appeal decisions that overturn the original eligibility determination 
commonly seek to ``right the wrong'' by making the appellant whole, 
which we believe includes retroactive eligibility. In the Medicaid 
context (as with the majority of public benefit programs), 42 CFR 
431.246 directs state agencies to ``promptly make corrective payments, 
retroactive to the date an incorrect action was taken.''
    We seek comment regarding the operational considerations associated 
with retroactive eligibility as a result of an appeal, and whether 
potential operational difficulties, if any, could be alleviated by 
limiting the policy on retroactive eligibility. For example, we 
considered limiting retroactive eligibility to those already enrolled 
in coverage. In addition, we note that an individual who is not 
enrolled and receives retroactive eligibility could always choose not 
to enroll retroactively. We believe this choice might be desirable if 
an appellant did not wish to obtain the retroactive coverage, which 
could involve the payment of premiums. We also considered specifically 
limiting the scope of retroactive eligibility with respect to advance 
payments of the premium tax credit or cost-sharing reductions, 
consistent with our approach in 155.330(f)(2)-(7). Finally, we note 
that the inconsistency period under Sec.  155.315(f) may mitigate many 
of these operational concerns by allowing the resolution of eligibility 
issues pre-appeal. We seek comment on the retroactive implementation of 
appeal decisions, and specifically on whether the ability to enroll in 
coverage retroactively should be optional or limited, and if so, in 
what way.
    In paragraph (c)(2), we propose that the Exchange or the Medicaid 
or CHIP agency, as applicable, must promptly redetermine the 
eligibility of other members of the appellant's household who have not 
appealed their own eligibility determinations but whose eligibility may 
be affected by the appeal decision, in accordance with the standards 
specified in Sec.  155.305. We anticipate that evidence received during 
the course of an appeal, for example updated income information, may 
indicate that a redetermination is required for household members who 
have not appealed their own eligibility determinations. For such 
household members, the Exchange, or the Medicaid or CHIP agency, as 
applicable, must undertake a redetermination. We seek comment on these 
provisions.
33. Appeal Record (Sec.  155.550)
    In Sec.  155.550, we propose requirements for accessing the appeal 
record. In paragraph (a), we propose the appeal record be made 
accessible to the appellant at a convenient place and time subject to 
the requirements of all applicable federal and state laws regarding 
privacy, confidentiality, disclosure, and personally identifiable 
information. In paragraph (b), we propose the appeals entity must 
provide public access to all appeal records, subject to all applicable 
federal and state laws regarding privacy, confidentiality, disclosure, 
and personally identifiable information. The requirement for access to 
the appeal record by the appellant corresponds to a similar Medicaid 
fair hearing requirements under 42 CFR 431.244(c) and 431.244(g). We 
seek comment on this provision.
34. Employer Appeals Process (Sec.  155.555)
    In paragraph (a), pursuant to section 1411(f)(2) of the Affordable 
Care Act, we propose that an appeals process shall be established 
through which an employer may appeal, in response to a notice under 
Sec.  155.310(h) regarding an employer's potential tax liability, a 
determination that the employer does not provide minimum essential 
coverage through an employer-sponsored plan or that the employer does 
provide such coverage but it is not affordable coverage with respect to 
the employee referenced in the notice. We note that the employer appeal 
is the opportunity for the employer to correct any information the 
Exchange received from an employee's application regarding the 
employer's offering of coverage. The appeals entity is responsible for 
a de novo review of whether the employer's offer of coverage is 
sufficient such that the employee at issue is not entitled to advance 
payments of the premium tax credit or other cost-sharing reductions 
under section 1402.
    The employer appeals process is separate and distinct from the 
IRS's process determining whether an employer is liable for a tax 
penalty under section 4980H of the Code and any appeal rights the 
employer may

[[Page 4654]]

have under subtitle F of the Code. We anticipate that some employers 
will receive a notice of potential tax liability from the Exchange even 
though the employer may not in fact have any tax liability under 
section 4980H. For example, notices under Sec.  155.310(h) must be 
issued to employers without regard to their size, yet tax liability 
under section 4980H arises only against applicable large employers, 
that is, generally, those employers with more than 50 full-time 
equivalent employees. Our goal is to work closely with the IRS to 
educate and develop notices that help employers understand their 
potential tax liabilities and the consequences of a successful appeal. 
We seek comment on these provisions.
    In paragraph (b), we propose that Exchanges have the flexibility to 
establish an employer appeals process in accordance with the 
requirements of Sec.  155.505(e) through (g), and Sec.  155.510(a)(1), 
(a)(2), and (c). We further propose that, where an Exchange has not 
established an employer appeals process, HHS will provide an employer 
appeals process that meets the requirements of this section, Sec.  
155.505(e) through (g), and Sec.  155.510(a)(1), (a)(2), and (c).
    In paragraph (c), we propose the process and standards for 
requesting an appeal. In paragraph (c)(1), we propose that an Exchange 
or appeals entity must allow an employer to request an appeal within 90 
days from the date of the notice of the employee's eligibility for 
advance payments of the premium tax credit or cost-sharing reductions 
is sent. In paragraph (c)(2), we propose that the Exchange or appeals 
entity must allow an employer to submit relevant evidence to support 
the appeal request. We anticipate only a limited set of evidence 
(information already possessed by the employer) will be relevant to 
this appeal. For example, employers might submit information pertaining 
to whether coverage is offered by the employer, whether the employee 
has taken up such coverage, the employee's portion of the lowest cost 
plan offered, and whether or not the employee is in fact employed by 
the employer. In paragraph (c)(3), we propose that an Exchange or 
appeals entity must allow an employer to submit an appeal request to 
the Exchange or the state-based Exchange appeals entity, if the 
Exchange establishes an employer appeals process, or to HHS, if the 
Exchange does not offer an employer appeals process. This option for 
filing an appeal request reflects the flexibility described in 
paragraph (b) of this section that states have to establish an employer 
appeal process. In addition, unlike the appeals process for individual 
eligibility determinations, section 1411(f)(2) of the Affordable Care 
Act does not require employer appeals to be reviewed by a federal 
officer; therefore, an employer does not have the right to elevate an 
appeal decision made by a state-based Exchange appeals entity to HHS. 
However, employer appeals may be appealed to HHS where no appeals 
process is established by the Exchange for employers. We seek comment 
on these provisions.
    In paragraph (c)(4), we propose that the Exchange and the appeals 
entity must comply with the requirements of Sec.  155.520(a)(1) through 
(3), such that an employer appeal may be submitted by telephone, mail, 
in person where available, or by Internet, and the appeals entity may 
assist the employer with making the appeal request and must not limit 
or interfere with the employer's right to request an appeal. We seek 
comment on these provisions.
    In paragraph (c)(5), we propose that an appeals entity must 
consider an appeal request valid if it is submitted within 90 days of 
the notice to the employer of a determination that the employer does 
not provide minimum essential coverage through am employer-sponsored 
plan or that the employer does provide that coverage but it is not 
affordable coverage with respect to an employee. We seek comment on 
this provision.
    We propose in paragraph (d)(1) that, upon receipt of a valid appeal 
request, the appeals entity must send timely acknowledgement of the 
receipt of the appeal request to the employer, including an explanation 
of the appeals process. We propose in paragraph (d)(2), that, upon 
receipt of a valid appeal request, the appeals entity must send notice 
of the request to the employee, including an explanation of the appeals 
process, instructions for submitting additional evidence for 
consideration by the appeals entity, and an explanation of the 
potential effect of the employer's appeal on the employee's 
eligibility. We anticipate that the notice to the employee under 
paragraph (d)(2) will be the primary means through which the employee 
will learn about the employer's appeal. Just as the employer will have 
the opportunity to submit information in support of the appeal to the 
appeals entity, the employee's notice will describe the employee's 
opportunity to participate in the employer appeal process Furthermore, 
we note that the explanation of the potential effect of the employer's 
appeal on the employee's eligibility proposed in (d)(2)(iii) must 
explain that the employer appeal process may result in a 
redetermination that the employee is not eligible for advance payments 
of the premium tax credit or cost sharing reductions. For example, a 
redetermination may occur if the employee attested that he or she was 
not offered employer sponsored coverage but the employer establishes 
the offering of coverage through the appeal; the employee would be 
redetermined as ineligible for advance payments of the premium tax 
credit and cost sharing reductions.
    In paragraph (d)(3), we propose that the appeals entity must 
promptly notify the Exchange of the employers' appeal request, if the 
employer did not initially make the appeal request to the Exchange. In 
paragraph (d)(4), we propose that, upon receipt of an appeal request 
that is not valid under the same section, the appeals entity must, 
promptly and without undue delay, send written notice, either 
electronically or in hard copy, to the employer that the appeal request 
has not been accepted and the reason why, so that the employer may have 
the opportunity to cure a defect in the appeal request. We propose that 
the appeals entity must accept an amended appeal request that meets the 
requirements of the same section, including standards for timeliness. 
We seek comment on these provisions.
    In paragraph (e), we propose that upon receipt of a valid appeal 
request or the notice described in paragraph (d)(3) of the same 
section, the Exchange must promptly transmit via secure electronic 
interface the employee's eligibility record and the appeals entity must 
also promptly confirm receipt of the records transferred by the 
Exchange. We did not propose specified timelines for ``promptly'' 
within this section and seek comment on these provisions, including on 
appropriate standards for promptness in this context.
    In paragraph (f), we propose the process for the dismissal of an 
employer appeal. In paragraph (f)(1), we propose that the appeals 
entity must dismiss an appeal under the circumstances described in 
Sec.  155.530(a)(1) or if the request fails to comply with the 
standards in paragraph (c)(4) of this section. Specifically, this 
standard requires dismissal where the employer withdraws the request in 
writing, either electronically or in hard copy, or fails to submit a 
valid appeal request. We note that paragraph (f)(1) is only intended to 
exclude those appeal requests which fail to meet timeliness standards 
or are clearly requesting an appeal for something unrelated to the 
employer determination relevant to this section. This provision is not 
intended to

[[Page 4655]]

exclude appeal requests that may have other minor deficiencies or are 
submitted without complete information. In paragraph (f)(2), we propose 
that the appeals entity must provide timely notice of the dismissal to 
the employer, employee, and Exchange, including the reason for 
dismissal. In paragraph (f)(3), we propose that the appeals entity may 
vacate a dismissal if the employer makes a written request, either 
electronically or in hard copy, within 30 days of the date of the 
notice of dismissal showing good cause why the dismissal should be 
vacated. We seek comment on the provisions regarding dismissal and 
vacatur of a dismissal.
    In paragraph (g), we propose the procedural rights of the employer 
requesting the appeal. In paragraph (g)(1), we propose that the 
employer must have the opportunity to provide relevant evidence to the 
appeals entity for review as part of the appeal. In paragraph (g)(2), 
we propose that the employer must be able to review the information 
included in the statute and described in Sec.  155.310(h) and 26 CFR 
1.36B, which includes the identity of the employee, information 
regarding whether the employee has been determined eligible for advance 
payments of the premium tax credit, and an explanation that the 
employer may be liable for the payment assessed under section 4980(H) 
of the Code. In addition, the employer may request information 
regarding whether the employee's income is above or below the threshold 
by which the affordability of employer-sponsored minimum essential 
coverage is measured. Finally, the employer may have access to other 
data used to determine the employee's eligibility to the extent 
allowable by law, except the information described in paragraph (h) of 
this section. We seek comment on these proposed procedural rights.
    We propose in paragraph (h) that neither the Exchange nor the 
appeals entity may make available to an employer any tax return 
information with respect to an employee in relation to his or her 
eligibility for advance payments of the premium tax credit or cost 
sharing reductions. We seek comment on the employers' right to review 
data and information used to make the employee's eligibility 
determination.
    In paragraph (i), we propose the process and standards for 
adjudication of employer appeals. Specifically, we propose that the 
appeal must be reviewed by one or more impartial officials not directly 
involved in the employee eligibility determination implicated in the 
appeal, and that the appeal must include consideration of the 
information used to determine the employee's eligibility as well as any 
additional relevant evidence provided by the employer or the employee 
during the course of the appeal. Additionally, we propose that the 
appeal be reviewed de novo. We seek comment on this proposed approach.
    In paragraph (j), we propose the standards for employer appeal 
decisions. Specifically, we propose that the appeal decision must be 
based exclusively on the information used to determine the employee's 
eligibility as well as any relevant evidence provided by the employer 
or the employee during the course of the appeal, and on the standards 
for an employer to provide minimum essential coverage that meets both 
affordability and minimum value standards through an employer-sponsored 
plan as stated in 45 CFR part 155, subpart D. Additionally, we propose 
that the appeal decision must state the decision, including a plain 
language description of the effect of the decision on the employee's 
eligibility, and must comply with the requirements of Sec.  
155.545(a)(3) through (5). We seek comment on the proposed approach.
    In paragraph (k), we propose the requirements for the content and 
issuance of the notice of the employer appeal decision. We propose that 
the appeals entity must provide written notice, electronically or in 
hard copy, of the appeal decision within 90 days of the date the appeal 
request is received, as administratively feasible, to the employer, 
employee, and the Exchange. In paragraph (k)(1), we propose the 
employer's notice must include the appeal decision and an explanation 
that the appeal decision does not foreclose any appeal rights the 
employer may have under subtitle F of the Code. In paragraph (k)(2), we 
propose the employee's notice must include the appeal decision. Lastly, 
in paragraph (k)(3), we propose the appeals entity must provide written 
notice of the appeal decision, either electronically or in hard copy, 
to the Exchange. We seek comment on the proposed content of and 
timelines for issuing the notice of appeal decision.
    In paragraph (l), we propose the requirements for implementation of 
the appeal decision. We propose that, after receipt of the notice under 
paragraph (k)(3) of this section, if the appeal decision affects the 
employee's eligibility, the Exchange must promptly redetermine the 
employee's eligibility in accordance with the standards specified in 
Sec.  155.305. We are considering, and we solicit comments on, two 
alternative options regarding whether the employee may appeal the 
results from this redetermination. Under the first option, the employee 
would be permitted to appeal a change in eligibility reflected in the 
redetermination notice generated after an employer appeal. However, if 
the employee were subsequently determined to be eligible for advance 
payments of the premium tax credit or cost-sharing reductions as a 
result of such an appeal, the employer would not be able to again 
appeal that determination to the Exchange. We believe that this 
approach would protect the interests of both the employee, whose appeal 
rights are determined by section 1411(f)(1) of the Affordable Care Act, 
and the employer, whose appeal rights are determined by section 
1411(f)(2). Although the employer would not have the option to appeal 
to the Exchange a second time, this would not foreclose any appeal 
rights still available under subtitle F of the Code.
    Under the second option, the employee would not be permitted to 
appeal a change in eligibility reflected in the redetermination notice 
generated after an employer appeal. Instead, the employee would be 
issued a redetermination notice under this section which would not be 
appealable under Sec.  155.505(b)(1)(ii). For example, if the employer 
were able to establish during the appeal that it does provide coverage 
that is both affordable and meets minimum value standards, the employee 
would be redetermined as ineligible for advance payments of the premium 
tax credit and cost-sharing reductions. Because the redetermination 
would be the result of an employer appeal under this section, the 
employee would not have the appeal rights associated with 
redetermination notices, generally. However, under this option, the 
employee's interests would be protected by the opportunity to submit 
information to support his or her eligibility determination during the 
employer's appeal. Moreover, if the employee's circumstances were to 
change following the employer appeal decision and redetermination 
notice, the employee could submit information to the Exchange as a mid-
year update under Sec.  155.330 and any resulting redetermination would 
be appealable.
    We believe that either of these two approaches would be effective 
in limiting recurring appeals among the employee and employer. We seek 
comment on paragraph (l) and, specifically, on the two alternative 
options discussed above.
    In paragraph (m), we propose that the appeal record be accessible 
to the employer and the employee in a

[[Page 4656]]

convenient format and at a convenient time in accordance all applicable 
laws regarding privacy, confidentiality, disclosure, and personally 
identifiable information and the prohibition on sharing confidential 
employee information in paragraph (h) of this section. We seek comment 
on paragraph (m).
35. Functions of a SHOP (Sec.  155.705)
    In accordance with the Secretary's authority in section 
1321(A)(1)(A) of the Affordable Care Act to establish standards related 
to requirements of the Exchange and the SHOP Exchange, we propose 
standards for the SHOP to coordinate with the functions of the 
individual market Exchange for determining eligibility for insurance 
affordability programs. In paragraph (c) we specify that the SHOP will 
provide data to the individual market Exchange that corresponds to the 
service area in which the SHOP is operating related to eligibility and 
enrollment for a qualified employee, that is, an employee who is 
enrolled in a QHP through the SHOP or is eligible to enroll in coverage 
through a SHOP because of an offer of coverage from a qualified 
employer. We propose these standards to ensure that the Exchange can 
use SHOP data for purposes of verifying enrollment in an eligible 
employer-sponsored plan and eligibility for qualifying coverage in an 
eligible employer-sponsored plan as specified in Sec.  155.320(d). We 
expect that this will not create significant administrative burden 
since the SHOP and individual market Exchange may share core 
information technology systems and other supporting functionality. We 
note that like all information collected or maintained by the 
individual market Exchange or SHOP, this information is subject to the 
privacy and security standards of 45 CFR 155.260. We seek comment on 
the feasibility of sharing this data and the usefulness of this data in 
determining eligibility for advance payments of the premium tax credit 
and cost-sharing reductions.
36. SHOP Employer and Employee Eligibility Appeals (Sec.  155.740)
    We propose to amend subpart H by adding proposed Sec.  155.740 to 
define the standards for SHOP employer and employee eligibility 
appeals, pursuant to our broad authority to establish standards for 
operating SHOP Exchanges under section 1321(a)(1)(A) of the Affordable 
Care Act. Although not expressly required by the Affordable Care Act, 
we believe that SHOP employers and employees should have the 
opportunity to appeal determinations of ineligibility to participate in 
the SHOP.
    In paragraph (a), we propose applying the definitions in Sec.  
155.20, Sec.  155.300, and Sec.  155.500 to this section.
    In paragraph (b), we propose the general requirements for 
establishing a SHOP appeals process for both employer and employee 
eligibility. First, in paragraph (b)(1), we propose that a state, 
establishing an Exchange pursuant to Sec.  155.100 must provide an 
eligibility appeals process for the SHOP. Because the SHOP was designed 
with flexibility to meet the individual needs of states, we anticipate 
that each SHOP will be in the best position to adjudicate SHOP 
eligibility appeals. The SHOP eligibility standards allow for a state 
to require additional verification before providing the employer or 
employee with an eligibility determination. We propose that, where a 
state has not established an Exchange pursuant to Sec.  155.100, HHS 
will provide an eligibility appeals process for the SHOP. In paragraph 
(b)(2), we propose that SHOP appeals entities comply with the 
requirements set forth in this section; Sec.  155.505(e) through (g); 
and Sec.  155.510(a)(1)-(2) and (c). We seek comment on these 
provisions.
    In paragraph (c), we propose that an employer may appeal a notice 
of denial of eligibility under Sec.  155.715(e), or the failure of the 
SHOP to make an eligibility determination in a timely manner.
    In paragraph (d), we propose an employee may appeal a notice of 
denial of eligibility under Sec.  155.715(f), or a failure of the SHOP 
to make an eligibility determination in a timely manner. We note that, 
although the employer has the option to provide information during an 
employee appeal (as stated below in paragraph (g) of this section), the 
employer is not required to participate in an employee's appeal and 
need not submit additional information beyond what the employer 
submitted at the time of application.
    In paragraph (e), we propose that the SHOP provide notice of the 
employer or employee's right to appeal a determination of denial of 
eligibility in the written notice of eligibility provided under Sec.  
155.715(e) or (f). We propose in paragraph (e)(1) that notice of this 
right must include the reason for the denial of eligibility along with 
a citation to the applicable regulations. In paragraph (e)(2), we 
propose that the notice must also include an explanation of the 
procedure by which the employer or the employee may request an appeal 
of the denial of eligibility. We seek comment on these provisions.
    In paragraph (f), we propose the standards through which a SHOP 
appeal may be requested. In paragraph (f)(1), we propose the SHOP and 
appeals entity allow an employer or employee a 90-day window from the 
date of the notice of the denial of eligibility to request an appeal. 
Because the eligibility criteria for the SHOP are minimal and 
straightforward, we believe that 90 days to request an appeal provides 
ample time for an employer or employee to review the determination, 
gather any evidence that he or she may want considered in the appeal, 
and submit the appeal. In addition, we propose in (f)(1)(i) that 
employers and employees may submit their appeal requests to the SHOP or 
directly to the SHOP appeals entity established by the Exchange. In 
(f)(1)(ii), we propose that where a state has not established an 
Exchange, employers and employees may submit appeal requests to HHS. We 
seek comment on this timeframe.
    In paragraph (f)(2), we propose that the SHOP and appeals entity 
accept appeal requests made by telephone, by mail, in person where 
available, or via the Internet. This requirement mirrors the methods to 
request an appeal in the individual market as provided in Sec.  
155.520(a)(1). We seek comment on these appeal request methods.
    In paragraph (f)(3), we propose that the SHOP and appeals entity 
comply with the requirements of Sec.  155.520(a)(2)-(3), which state 
that the SHOP or appeals entity may assist the employer or employee 
with the submission and processing of the appeal request and must not 
limit or interfere with an employer or employee's right to request an 
appeal. These provisions ensure the accessibility of the process and 
prohibit appeals entities from dissuading an employer or employee who 
wishes to pursue the appeal rights provided under this section. We seek 
comment on these provisions.
    In paragraph (f)(4), we propose that the SHOP and appeals entity 
must consider an appeal request valid if it is submitted within the 90-
day timeframe described in paragraph (f)(1) of this section. We propose 
these requirements so that an appeals entity may dismiss appeal 
requests that do not meet these baseline standards. We seek comment on 
this provision.
    We propose in paragraph (g)(1) that upon receipt of a valid appeal 
request, the appeals entity must send timely acknowledgement to the 
employer, or the employer and employee if an employee is appealing, of 
the receipt of the appeal request, including an explanation of the 
appeals process as well as instructions for submitting

[[Page 4657]]

additional evidence for consideration by the appeals entity. In the 
case of an appeal by an employee, the employer may be able to take 
action to facilitate the employee's eligibility for coverage through 
the SHOP; accordingly, we propose to require that employers be notified 
of employee appeals so that employers may assess whether action on 
their part would be helpful. However, we note that the employer is not 
required to participate in the employee's appeal and need not submit 
additional information for an employee's appeal beyond what the 
employer submitted at the time of application. In paragraph (g)(2), we 
propose that the appeals entity must promptly notify the SHOP of the 
appeal, if the appeal request was not initially made to the SHOP. In 
paragraph (g)(3), we propose to require that the appeals entity must 
promptly and without undue delay, notify the employer or employee in 
writing upon receipt of an invalid appeal request, so that the employer 
or employee may have an opportunity to cure the defect, and the appeals 
entity must treat as valid an amended appeal request meeting all 
applicable requirements. We seek comment on these provisions.
    In paragraph (h), we propose that upon receipt of a valid appeal 
request or the notice described in paragraph (g)(2) of the same 
section, the SHOP must promptly transmit via secure electronic 
interface to the appeals entity the appeal request and the eligibility 
record of the employer or employee that is appealing, and the appeals 
entity must also promptly confirm receipt of the records transferred by 
the SHOP. We did not propose specified timelines for ``promptly'' 
within this section and seek comment on the timelines standard in 
paragraph (h).
    In paragraph (i), we propose the standards for the dismissal of an 
appeal request. In paragraph (i)(1)(i), we propose that the appeals 
entity must dismiss an appeal if the employer or employee that is 
appealing, or the employer or employee's authorized representative, 
withdraws the request in writing, either electronically or in hard 
copy. In paragraph (i)(1)(ii), we propose that the appeals entity must 
dismiss an appeal if the request does not meet the standards for a 
valid appeal outlined in paragraph (f)(4). We note that paragraph 
(f)(4) is only intended to exclude those appeal requests which fail to 
meet timeliness standards or are clearly requesting an appeal for 
something unrelated to SHOP eligibility determinations. This provision 
is not intended to exclude appeal requests that may have other minor 
deficiencies or are submitted without complete information. In 
paragraph (i)(2), we propose that the appeals entity must provide 
timely notice of a dismissal to the employer or employee that is 
appealing, including the reason for the dismissal, and must notify the 
SHOP of the dismissal. Finally, in paragraph (i)(3), we propose that 
the appeals entity may vacate a dismissal if the employer or employee 
demonstrates good cause to overturn the dismissal in writing within 30 
days of the date of the notice of dismissal. We seek comment on these 
provisions and timeframes.
    In paragraph (j), we propose the procedural rights of a SHOP 
appellant; specifically, we propose that the employer, or the employer 
and employee if an employee is appealing, must have the opportunity to 
submit relevant evidence for review of the eligibility determination by 
the appeals entity as part of a desk review. We anticipate that 
eligibility for SHOP participation can be proven through documentary 
evidence. The proposed approach differs from the individual market 
because of the less complex nature of the SHOP eligibility criteria. We 
seek comment on this approach.
    In paragraph (k), we propose the requirements for adjudicating a 
SHOP appeal. In paragraph (k)(1), we state that the appeal must comply 
with the requirements proposed in Sec.  155.555(i)(1) and (3), which 
state that an appeal must be reviewed by an impartial official who has 
not been directly involved in the eligibility determination subject to 
the appeal, and that appeals must be reviewed de novo. In paragraph 
(k)(2), we propose that the information considered in the appeal 
include the information used to determine the employer or employee's 
eligibility as well as any additional relevant evidence submitted 
during the appeal by the employer or employee. We intend this provision 
to allow employers and employees to submit evidence in support of their 
own appeal as well as allowing an employer to submit evidence during an 
employee's appeal. We seek comment on these provisions.
    In paragraph (l), we propose SHOP appeal decision standards. In 
paragraph (l)(1), we propose that the appeal decision must be based 
solely on the evidence referenced in paragraph (k)(2) of this section, 
and the eligibility criteria established in Sec.  155.710(b) or (e), as 
applicable. In paragraph (l)(2), we propose that the appeal decision 
must comply with the requirements of Sec. Sec.  155.545(a)(2) through 
(5), which state that a decision must be explained clearly and in plain 
language, and must summarize the facts relevant to the appeal, identify 
the legal basis for the decision, and provide the effective date for 
the decision. These requirements are based on common fair hearing 
standards, and we intend each piece to assist the employer or employee 
in understanding how the rules of eligibility and the facts of the case 
result in the appeal decision. Finally, in paragraph (l)(3), we propose 
that SHOP appeal decisions be effective retroactive to the date the 
incorrect eligibility determination was made, if the decision finds the 
employer or employee eligible, or effective as of the date of the 
notice of the appeal decision, if eligibility is denied. We seek 
comment on these provisions pertaining to the appeal decision.
    In paragraph (m), we propose requirements for issuing notice of the 
SHOP appeals decision. We propose that the appeals entity issue written 
notice, electronically or in hard copy within 90 days of the receipt of 
the appeal request to the employer, or to the employer and employee if 
an employee is appealing, and to the SHOP. The notice must include the 
contents of the decision described in paragraph (l). Administrative 
appeal processes within public programs allow a broad range of 
timeframes (for example, 30-365 days) for submitting appeal requests 
and adjudicating decisions. We anticipate that 90 days for resolution 
will be sufficient given the limited criteria involved in SHOP 
eligibility determinations. We seek comment on these provisions and 
timeframes.
    In paragraph (n), we propose that the SHOP must promptly implement 
the appeal decision upon receiving notice under paragraph (m) of this 
section. We did not include a specific timeliness requirement for 
implementation of the decision in order to provide flexibility for 
SHOPs, which may vary in their capacity for turnaround times. We seek 
comment on this provision.
    In paragraph (o), we propose that, subject to the requirements in 
Sec.  155.550, the appeal record must be made accessible to the 
employer, or to the employer and employee if an employee is appealing, 
in a convenient format and at a convenient time. We anticipate that 
many employers and employees will be able to access their appeal 
records electronically through the SHOP. We seek comment on these 
provisions.

IV. Medicaid Premiums and Cost Sharing

A. Background

    Section 1916 of the Act describes long-standing requirements for 
cost sharing, which apply broadly to all individuals who are not 
specifically

[[Page 4658]]

exempted. Such cost sharing is limited to ``nominal'' amounts. Section 
1916 of the Act also establishes authority for states to impose 
premiums on specific groups of beneficiaries with family income above 
150 percent of the federal poverty level (FPL). The Deficit Reduction 
Act of 2005 (DRA) established a new section 1916A of the Act, which 
gives states additional flexibility, allowing for alternative premiums 
and cost sharing, beyond what is allowed under section 1916 of the Act, 
for somewhat higher income beneficiaries. Such alternative cost sharing 
may be targeted to specific groups of beneficiaries and payment may be 
required as a condition of providing services. Alternative premiums and 
cost sharing imposed under section 1916A of the Act, cannot exceed five 
percent of family income.
    The current regulations for Medicaid premiums and cost sharing are 
at 42 CFR 447.50 through 447.82. The first 11 provisions apply 
primarily to premiums and cost sharing established under the authority 
of section 1916 of the Act, while the remaining provisions apply 
primarily to the authority established by section 1916A of the Act. 
However, some provisions apply to all premiums and cost sharing 
regardless of the statutory authority, leading to confusion about what 
is permitted for individuals at various income limits. The proposed 
regulations make it clear what cost sharing is allowed for individuals 
with income under 100 percent of the FPL and what flexibilities exist 
for imposing premiums and cost sharing on individuals with higher 
income. This proposed rule would eliminate redundant provisions and 
create consistency between the two statutory authorities where 
appropriate and consistent with the law. To that effect, we propose to 
delete in its entirety the current Medicaid premiums and cost sharing 
rules at Sec.  447.50 through Sec.  447.82 and to replace them with new 
Sec.  447.50 through Sec.  447.57. Sections 447.58 through 447.82 will 
be reserved.
    While this streamlined and simplified approach generally retains 
current options and limitations consistent with the statute, we are 
proposing some changes to increase state flexibility. For example, we 
propose to update the maximum nominal cost sharing amounts, provide new 
flexibility to impose higher cost sharing for non-preferred drugs and 
for non-emergency use of the ED, change the exemption for Indians to 
ensure that these protections are implemented effectively, and modify 
the public notice provisions. We seek comment on any element of the 
proposed rule, which aims to significantly streamline and expand 
flexibility regarding premiums and cost sharing.

B. Provisions of Proposed Rule

1. Definitions (Sec.  447.51)
    At Sec.  447.51, we propose to add a definition for premiums, which 
includes enrollment fees and other similar charges. We also propose to 
add a definition for cost sharing to encompass deductibles, copayments, 
coinsurance, and other similar charges. Because each of these charges 
would now be included within cost sharing, we have removed separate 
requirements related to deductibles, copayments, and coinsurance; all 
cost sharing would be subject to a single set of parameters as 
discussed below. We also propose new definitions specific to the 
premiums and cost sharing rules, for preferred drugs, emergency and 
non-emergency services, as well as alternative non-emergency service 
provider, since the cost sharing rules vary for these items and 
services. We are considering adding definitions of ``inpatient stay'' 
and ``outpatient services'' for purposes of cost sharing to take into 
account situations where an individual might return to an inpatient 
institution after a brief period when the return is for treatment of a 
condition that was present in the initial period. We solicit comments 
as to the utility of such a definition. Finally we propose a technical 
correction to the Indian definition to correct the citation to 25 
U.S.C. 1603.
2. Update to Maximum Nominal Cost Sharing (Sec.  447.52)
    Under the authority granted under sections 1916(a)(3) and (b)(3) of 
the Act for the Secretary to define nominal cost sharing, at Sec.  
447.52(b) we propose to revise the maximum amount of nominal cost 
sharing for outpatient services, which may be imposed on beneficiaries 
with incomes below 100 percent of the FPL. Currently, maximum allowable 
cost sharing is tied to what the agency pays for the service. This can 
be confusing and burdensome for states, providers, and beneficiaries. 
For example, for fiscal year 2013, states may charge up to $1.30 for 
outpatient services, if the agency pays $10.01 to $25, and up to $3.90 
if the agency pays more than $50.
    To simplify the rules, we propose to remove the state payment as 
the basis for the cost sharing charge and replace it with a flat $4 
maximum allowable charge for outpatient services. The $4 maximum for 
outpatient services is comparable to the amount, states may charge 
under current rules ($3.90) for services for which the state pays more 
than $50. Because the majority of state services are reimbursed at more 
than $50, we believe a flat $4 cost sharing maximum is reasonable. We 
seek comment on this amount as well as the proposed approach in 
general, including the impact on individuals with significant service 
needs, such as those with disabilities who are residing in the 
community.
    At Sec.  447.52(b)(3), we propose that the maximum cost sharing 
established by the agency should not be equal to or exceed the amount 
the agency pays for the service. In accordance with the statute, we 
also propose that these proposed nominal amounts continue to be 
updated; however, since we are proposing to increase the nominal 
amounts, effective in fiscal year 2014, we propose to freeze the next 
CPI-U increase until October 2015. This increase is also applied to the 
nominal amounts for drugs and non-emergency use of the emergency 
department in Sec.  447.53 and Sec.  447.54, respectively.
    Current rules permit cost sharing for institutional care, up to 50 
percent of the cost for the first day of care, for individuals with 
incomes below 100 percent of the FPL. We are not proposing a change but 
are considering alternatives for the maximum allowable cost sharing 
related to an inpatient stay because this is a relatively high cost for 
very low income people and not a service that consumers have the 
ability to avoid or prevent. Options under consideration include the $4 
maximum applied to outpatient services, $50, or $100, which would 
encompass the majority of hospital cost sharing currently in effect. If 
we were to revise the maximum allowable cost sharing for an inpatient 
stay, we are considering a transition period, for example, through 
October 1, 2015, to permit states time to make adjustments to their 
cost sharing and payment rate schedules. We seek comment on the best 
approach to cost sharing for an inpatient stay for very low-income 
individuals.
    Beyond the differentiation between inpatient and outpatient care 
for purposes of establishing nominal levels of permissible cost 
sharing, we are also considering a separate distinction for nominal 
levels of cost sharing for community-based long-term services and 
supports. Community-based long-term services and supports may include 
services such as personal care, home health, and rehabilitative 
services that are furnished over an extended period of time pursuant to 
a coordinated plan of care. The delivery of these services differs from 
other outpatient services that are furnished in finite increments.

[[Page 4659]]

As a result, we are considering whether it may be more appropriate to 
define nominal cost sharing differently for community-based long-term 
services and supports, or perhaps to refine the treatment of nominal 
cost sharing generally for a continuous coordinated course of care. We 
seek comment on these approaches, including how we would define long-
term services and supports and the unit of service for which separate 
cost sharing could be charged. As states exercise their options with 
respect to cost sharing, they should continue to be aware of their 
independent obligations under the Americans with Disabilities Act and 
the Supreme Court's Olmstead decision.
3. Higher Cost Sharing Permitted for Individuals With Incomes Above 100 
Percent of the FPL (Sec.  447.52)
    Proposed Sec.  447.52 consolidates the requirements for cost 
sharing established under sections 1916 and 1916A of the Act. Under the 
statute, states may impose cost sharing at higher than nominal levels 
for nonexempt individuals with incomes at or above 100 percent of the 
FPL. Section 1916A provides that states may establish cost sharing for 
nonexempt services, other than drugs and ED services, up to 10 percent 
of the cost paid by the state for such services, for individuals with 
incomes between 100 and 150 percent of the FPL. This option is 
described in the newly proposed Sec.  447.52; cost sharing for drugs 
and emergency department services are separately addressed. At Sec.  
447.52(c), we clarify that states may target cost sharing for 
individuals with family income above 100 percent of the FPL, meaning 
they may have differential cost sharing levels for different groups of 
individuals. We seek comment on whether the regulations should 
specifically address the types of targeting that would be allowed, 
keeping in mind that such targeting must be based on reasonable 
categories of beneficiaries, such as a specific income group or 
population. In addition, we seek comment on state methodologies or 
administrative processes that would make such targeting easier to 
implement.
4. Cost Sharing for Drugs (Sec.  447.53)
    At Sec.  447.53, we propose to establish a single provision 
specific to cost sharing for drugs so that the policies related to 
drugs can be clearly referenced. Building on current policy allowed by 
statute, proposed Sec.  447.53 would specifically authorize states to 
establish differential cost sharing for preferred and non-preferred 
drugs, limited to the maximum amounts proposed at Sec.  447.53(b). This 
cost sharing flexibility applies to individuals at all income levels.
    Section 1916A(c) of the Act limits cost sharing for preferred drugs 
to nominal amounts (at all income levels). Section 1916A(c) also limits 
cost sharing for non-preferred drugs to nominal amounts, for 
individuals with family income at or below 150 percent of the FPL and 
individuals who are otherwise exempt from cost sharing. To provide 
additional flexibility to states, and to further encourage the use of 
preferred drugs, we are proposing to define nominal for this purpose so 
as to allow cost sharing of up to $8 for non-preferred drugs for 
individuals with income equal to or less than 150 percent of the FPL or 
who are otherwise exempt from cost sharing. States will have the 
flexibility to apply differential cost sharing for preferred and non-
preferred drugs in whatever manner they consider most effective. For 
example, a state may charge $2 for preferred and $6 for non-preferred 
drugs or $0 for preferred and $8 for non-preferred drugs.
    For individuals with family income above 150 percent of the FPL, 
per section 1916A(c) of the Act, cost sharing for non-preferred drugs 
may not exceed 20 percent of the cost the agency pays for the drug.
    At Sec.  447.53(a), we clarify our existing policy that all drugs 
will be considered preferred drugs if so identified or if the agency 
does not differentiate between preferred and non-preferred drugs.
5. Cost Sharing for Emergency Department Services (Sec.  447.54)
    At Sec.  447.54, we propose a new regulatory provision specific to 
non-emergency services furnished in a hospital emergency department 
(ED). Sections 1916(a)(3) and 1916(b)(3) of the Act allow states to 
establish cost sharing for non-emergency use of the ED of up to twice 
the nominal amount for outpatient services with a waiver. In addition, 
section 1916A(e)(2)(A) of the Act allows states to establish targeted 
cost sharing for individuals with family income above 100 and at or 
below 150 percent of the FPL in an amount not to exceed twice the 
nominal amount for such services. In order to make it easier for states 
to utilize existing flexibilities to reduce non-emergency use of the 
ED, at Sec.  447.54(a) we propose to allow cost sharing of up to $8 for 
non-emergency use of the ED no waiver will be required. We seek comment 
on this approach, which can complement a range of other strategies 
available to states to reduce nonemergency use of the ED. For 
individuals with family income above 150 percent of the FPL, per 
section 1916A(e) of the Act, there is no limit on the cost sharing that 
may be imposed for non-emergency use of the ED.
    If an emergency condition does not exist, Sec.  447.54(d) includes 
the requirements for hospital screening and referral currently codified 
at Sec.  447.80(b)(2), to ensure that beneficiaries have appropriate 
access to other sources of care, before cost sharing is imposed. 
Hospitals must assess the individual clinically, identify an accessible 
and available alternative provider with lesser cost sharing, and 
establish a referral to coordinate scheduling. Examples of accessible 
alternative providers are those that are located within close 
proximity, accessible via public transportation, open extended hours, 
and able to serve individuals with LEP and disabilities. (Note that for 
exempt populations, there must be access to an alternative provider 
with no cost sharing). For any individual who presents with an 
emergency medical condition, the hospital must provide stabilizing 
treatment per the Emergency Medical Treatment and Active Labor Act 
(EMTALA), as codified at Sec.  489.24. An emergency medical condition 
is currently defined at Sec.  438.114 as having ``acute symptoms of 
sufficient severity (including severe pain) that a prudent layperson, 
who possesses an average knowledge of health and medicine, could 
reasonably expect the absence of immediate medical attention'' to 
seriously jeopardize or impair the individual's health. The EMTALA 
screening requirements combined with the prudent layperson standard for 
an emergency medical condition make it difficult to determine a service 
as non-emergency just based on CPT code. Chest pains, for example, 
could easily be considered an emergency condition under the prudent 
layperson standard, though a medical screening may indicate that the 
individual is suffering from heartburn or anxiety, which may not 
otherwise be considered emergency medical conditions. While the 
applicable CPT code might indicate a non-emergency condition, such 
chest pains would meet the definition of emergency medical condition 
and therefore may not be assessed a copayment. States have flexibility 
to consider how best to address some of these logistical and clinical 
challenges that exist when applying cost sharing to non-emergency use 
of the ED. To better understand the approaches used by states, at 
proposed 447.52(f)(5), we would request that states describe the 
process by which non-emergency

[[Page 4660]]

services are identified, when submitting a state plan amendment to 
implement such cost sharing. As successful approaches are identified, 
CMS will make that information available to states.
    We seek comment on these standards and procedures, on ways to make 
this provision a viable option for states and hospitals, and in 
particular approaches to successfully distinguish between emergency and 
non-emergency services.
5. Premiums (Sec.  447.55)
    At proposed Sec.  447.55, we consolidate and simplify the 
requirements for premiums established under sections 1916 and 1916A of 
the Act. Proposed Sec.  447.56(a) describes the option to impose 
premiums on individuals with family income above 150 percent of the 
FPL, as established under section 1916A of the Act, while paragraphs 
(a)(1) through (a)(5) describe the options to impose premiums for 
specific populations as established under section 1916 of the Act. 
Except for the minor revisions described below, we are not seeking to 
change current policy related to premiums.
    At Sec.  447.56(a)(1), we propose to modify slightly the option 
under section 1916 of the Act, which allows states to impose premiums 
on pregnant women described in 1902(l)(1)(A) of the Act. This option 
currently applies to individuals whose family income equals or exceeds 
150 percent of the FPL and we propose to revise the option to apply 
only to those with family income that exceeds 150 percent of the FPL to 
align with other allowable premiums. In addition we are removing the 
reference to infants under age one described in 1902(l)(1)(B) on whom 
the state may impose premiums under 1916 because they are included in 
the group of children who may be charged premiums under 1916A of the 
Act. In so doing, as with pregnant women, premiums would be allowed for 
infants with family income exceeding 150 percent of the FPL rather than 
those with income equal to or exceeding 150 percent of the FPL. In 
addition, with this change, consistent with current state practice, all 
premiums imposed on infants will be subject to the aggregate limit of 5 
percent of family income. We recognize that the statutory citations for 
the pregnant women who can be charged premiums do not line up with the 
streamlining and collapsing of eligibility groups in Medicaid 
eligibility final rule. We are exploring the options we have to cite to 
the new regulation rather than the statute.
    To provide clarity and ensure a comprehensive policy, at Sec.  
447.55 paragraphs (a)(2) through (4) we add language from section 1916 
describing the basis for charging premiums to working disabled 
individuals described at sections 1905(p)(3)(A)(i) and 
1902(a)(10)(A)(ii)(XVI) of the Act and disabled children provided 
medical assistance under section 1902(a)(10)(A)(ii)(XIX) of the Act in 
accordance with the Family Opportunity Act.
    At Sec.  447.55(a)(5), we propose to revise requirements related to 
premiums imposed on medically needy individuals whose income is under 
150 percent of the FPL. We removed the current income-related scale 
currently at Sec.  447.52(b) and instead would provide states with the 
flexibility to determine their own sliding scale for establishing 
premiums for the medically needy up to maximum of $20 instead of the 
$19 in current regulation. We also propose to remove the requirement 
that premiums must be based on gross income, since starting in 2014, 
all income for purposes of determining premiums will be based on 
modified adjusted gross income (MAGI).
6. Limitations on Premiums and Cost Sharing (Sec.  447.56)
    At Sec.  447.56, we propose one single section that describes the 
general premium and cost sharing limitations. The current regulations 
have duplicative provisions specific to sections 1916 and 1916A of the 
Act and we propose a single streamlined approach wherever the policies 
align. We do not believe that the proposed change would have a 
meaningful impact on current state programs.
    Sections 1916(a), (b), and (j), and 1916A(b)(3) of the Act specify 
certain groups of individuals exempt from premiums and/or cost sharing, 
including certain children, pregnant women, American Indians and Alaska 
Natives (Indians), individuals residing in an institution, individuals 
receiving hospice care and women eligible through the Breast and 
Cervical Cancer Treatment and Prevention Program. Proposed 447.56(a) 
would align all of these statutory exemptions.
    At Sec.  447.56(a)(1)(v), we propose to revise the current 
exemption at Sec.  447.53(b)(3) and Sec.  447.70(a)(5) for individuals 
in an institution who are required to spend all but a minimal amount of 
their income for personal needs, to allow a state option to include 
individuals under this exemption who are receiving services in a home 
and community-based setting. Since these individuals are only allowed 
to keep a personal needs allowance, similar to those residing in an 
institution, we propose to allow states to exempt these individuals 
from cost sharing in the same manner as those residing in an 
institution in accordance with the comparability requirements under 
section 1902(a)(19) of the Act.
    At Sec.  447.56(a)(1)(vii), we propose to clarify the exemption of 
Indians currently at Sec.  447.53(b)(6) and Sec.  447.70(a)(10) from 
cost sharing to ensure that Indians are not charged cost sharing 
inappropriately. Section 1916(j) of the Act requires that no cost 
sharing ``shall be imposed against an Indian who is furnished an item 
or service directly by the Indian Health Service, an Indian Tribe, 
Tribal Organization, or Urban Indian Organization or through referral 
under contract health services.'' Section 4 of the Indian Health Care 
Improvement Act (25 U.S.C. 1603), as amended by the Affordable Care 
Act, further clarified these requirements by defining contract health 
services as any health service that is ``delivered based on a referral 
by, or at the expense of, an Indian Health Program.'' Because no formal 
paper trail may occur for the Medicaid agency to establish that a 
service has been delivered based on a referral under contract health 
services, we propose a broad definition of the cost sharing exemption 
for Indians. We propose that those Indians who are currently receiving 
or have ever received an item or service furnished by the Indian Health 
Service, an Indian Tribe, Tribal Organization, or Urban Indian 
Organization (I/T/U) or through referral under contract health services 
are exempt from all cost sharing. With this clarification the Medicaid 
agency would not have to know if a particular service was provided 
based on contract health service referral and would ensure that Indians 
who should be exempt on such bases will not be inadvertently charged 
cost sharing. States could implement this exemption by using claims 
payment data to identify Indians who have accessed services from an I/
T/U, or as many states have done, by requesting that eligible Indians 
submit a letter, available through the Indian Health Service, 
designating them as Indians who have utilized such services and are, 
therefore, exempt from Medicaid cost sharing. We note that this 
provision would not impact contract health services eligibility or 
payment regulations. Authorization for payment by a contract health 
service program remains subject to all requirements of 42 CFR part 136.
    We are considering requiring that states apply a periodic renewal 
process for exempting Indians from cost sharing, such that the 
exemption would not be indefinite, but would instead be limited

[[Page 4661]]

to a certain period of time following utilization of services at an I/
T/U or under a contract health services referral. This would be 
consistent with a reading that the exemption applies for Indians who 
are currently receiving services through an I/T/U or contract health 
services referral, to eliminate any burden the absence of cost sharing 
would impose on those providers, who are not permitted to collect any 
payment from an eligible Indian. We seek comment on the feasibility of 
initiating a periodic renewal process for the Indian exemption, as well 
as an appropriate time frame for such renewals.
    At Sec.  447.56(a)(1)(viii), we propose to extend the existing 
exemption for individuals needing treatment for breast or cervical 
cancer, currently applied only to alternative cost sharing under 
section 1916A of the Act, to all cost sharing, and to cite to Sec.  
435.213, as added in this proposed rule. With this modification, this 
exemption is extended to apply to men as well since they are 
encompassed under Sec.  435.213.
    Consistent with Sec.  435.116(d), which describes covered services 
for pregnant women as laid out in the Medicaid eligibility final rule 
(77 FR 17204), at Sec.  447.56(a)(2)(iv) we propose to revise the 
exemption for pregnancy-related services so that all services provided 
to pregnant women shall be considered pregnancy-related unless 
specifically identified in the state plan as not pregnancy-related. We 
are also codifying the requirement in the Affordable Care Act to exempt 
smoking cessation counseling and drugs for pregnant women from cost 
sharing.
    We recognize that the statutory citations for children who are 
exempt from premiums and cost sharing do not line up with the 
streamlining and collapsing of eligibility groups in Medicaid 
eligibility final rule. We are exploring the options we have to cite to 
the new regulation rather than the statute.
    At Sec.  447.56(b), we propose to codify the existing statutory 
requirement to ensure comparability, such that states may not exempt 
additional populations from cost sharing, except in the case of 
targeted cost sharing. Any cost sharing included in the state plan 
would be applied equally to services provided under fee-for-service, 
managed care, or benchmark coverage. At proposed Sec.  447.56(c)(2), we 
move existing regulations at Sec.  447.57 and Sec.  447.82 requiring 
the agency to reduce the payment it makes to providers by the amount of 
a beneficiary's cost sharing obligation.
    At Sec.  447.56(f) we update the requirements around aggregate 
limits for premiums and cost sharing to be based on the Medicaid 
household as defined in Sec.  435.603(f) of the Medicaid eligibility 
final rule and revised in this proposed rule. Existing regulations at 
Sec. Sec.  447.64(d)(2) and 447.68(d) provide that an agency cannot 
rely solely on families who are risk of reaching the aggregate limit to 
track their own premiums and cost sharing, we clarify that this means 
that the agency must have an automated system in place to do such 
tracking. At Sec.  447.56(f)(6), we indicate that the agency may 
establish additional aggregate limits, including but not limited to a 
monthly limit on cost sharing charges for a particular service. This 
new paragraph replaces the paragraph related to cumulative maximums at 
Sec.  447.54(d) of the current regulations. We seek comment on whether 
there are efficient alternatives to using an automated system to 
conduct this tracking.
7. Beneficiary and Public Notice Requirements (Sec.  447.57)
    At Sec.  447.57 we have included the existing requirements for 
notice regarding current premiums and cost sharing and changes to such 
premiums and cost sharing, as currently described at Sec.  447.76. At 
proposed 447.57(b) we codify existing policy that requires that notice 
be provided in a manner ensuring that affected beneficiaries, 
providers, and the general public have access to the notice. 
Appropriate formats for providing notice might include, the agency Web 
site, newspapers with wide circulation, web and print media reaching 
racial, ethnic, and linguistic minorities, stakeholder meetings, and 
formal notice and comment in accordance with the state's administrative 
procedures. With this proposed revision, we would no longer consider 
state legislation discussed at a public hearing or posted on a Web site 
to be sufficient notice that a beneficiary or provider would likely 
have been made aware of the premium or cost sharing changes. At 
proposed Sec.  447.57(c) we clarify that prior to submitting to CMS any 
state plan amendment that establishes or significantly modifies 
existing premiums or cost sharing, or changes the consequences for non-
payment of cost sharing, the agency must provide the public with 
advance notice of the amendment and opportunity to comment. We are 
considering a policy that if cost sharing is substantially modified 
during the SPA approval process, the agency must provide additional 
public notice and seek comment on this approach.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    This proposed rule continues to implement key provisions of the 
Affordable Care Act including the appeals process for the Medicaid and 
Children's Health Insurance Program (CHIP) applicants and 
beneficiaries; requirements for combined eligibility notices; and 
completion of the streamlining of eligibility for children, pregnant 
women, and adults that was initiated in the Medicaid eligibility final 
rule published on March 23, 2012. This rule also proposes to streamline 
the citizenship documentation requirement rules consistent with the 
statute and proposes a revision regarding Medicaid eligibility 
determinations made by Exchanges. The rule proposes to implement 
provisions of the Children's Health Insurance Program Reauthorization 
Act of 2009 (CHIPRA), such as those related to deemed newborn 
eligibility, and modifies CHIP rules relating to substitution of 
coverage and premium lock-out periods, which are important to a 
coordinated system of coverage across programs.
    The policies proposed in this rule will result in a reduction in 
burden for individuals applying for and renewing coverage, as well as 
for states. The Medicaid program and CHIP will be made easier for 
states to administer and for individuals to navigate by streamlining 
Medicaid eligibility and simplifying Medicaid and CHIP eligibility 
rules for most individuals, Even though there are short-term burdens 
associated with the implementation of the proposed rule,

[[Page 4662]]

the Medicaid program and CHIP will be easier for states to administer 
over time due to the streamlined eligibility and coordinated efforts 
for Medicaid, CHIP, and the new affordable insurance exchanges.
    The proposed rule also continues to implement provisions related to 
the establishment of Exchanges. This proposed rule would: (1) Set forth 
standards for adjudicating appeals of individual eligibility 
determinations and exemptions from the individual responsibility 
requirements, as well as determinations of employer-sponsored coverage, 
and determinations of SHOP employer and employee eligibility for 
purposes of implementing section 1411(f) of the Affordable Care Act, 
(2) set forth standards for adjudicating appeals of employer and 
employee eligibility to participate in the SHOP, (3) outline criteria 
related to the verification of enrollment in and eligibility for 
minimum essential coverage through an eligible employer-sponsored plan, 
and (4) further specify or amend standards related to other eligibility 
and enrollment provisions. The description of the burden estimates 
associated with these provisions is included in the information 
collection requirements outlined in section D.
    Section A outlines the information collection requirements in this 
proposed regulation that will be addressed through a separate notice 
and comment process under the Paperwork Reduction Act (PRA). Section B 
outlines the information collection requirements that involve Medicaid 
and CHIP eligibility and enrollment. We are soliciting public comment 
on each of these issues for the following sections of the proposed rule 
that contain information collection requirements (ICRs). We used data 
from the Bureau of Labor Statistics to derive average costs for all 
estimates of salary in establishing the information collection 
requirements. Salary estimates include the cost of fringe benefits, 
calculated at 35 percent of salary, which is based on the June 2012 
Employer Costs for Employee Compensation report by the U.S. Bureau of 
Labor Statistics.

A. Medicaid and CHIP Information Collection Requirements (ICRs) To Be 
Addressed Through Separate Notices and Comment Process Under the 
Paperwork Reduction Act

1. ICRs Regarding State Plan Amendments
    1a. (Sec. Sec.  430.12, 431.10, 431.11, 433.138, 433.145, 433.147, 
433.148, 435.110, 435.112, 435.115, 435.116, 435.117, 435.139, 435.145, 
435.150, 435.170, 435.172, 435.201, 435.210, 435.211, 435.213, 435.214, 
435.215, 435.220, 435.222, 435.226, 435.227, 435.229, 435.301, 435.310, 
435.406, 435.407, 435.601, 435.602, 435.603, 435.610, 435.831, 435.905, 
435.910, 435.917, 435.918, 435.926, 435.952, 435.955, 435.956, 
435.1100-1110, 435.1200, 440.130, 440.210, 440.220, 440.305, 440.315, 
440.330, 440.335, 440.345, 457.50, 447.52, 447.55, 447.56, 457.320, 
457.342, 457.348, 457.355, 457.360, 457.455, 457.460, 457.465, 457.805, 
457.495, and 457.1120).
    These amendments to the Medicaid and CHIP state plans are necessary 
to reflect changes in statute and federal policy. We are aware of the 
need to estimate the PRA burden associated with the submission of state 
plan amendments related to the provisions described in the preceding 
sections of the preamble. The state plan amendments will be addressed 
as part of the electronic state plan being developed by CMS as part of 
the MACPro system. The MACPro system will be made available for public 
comment through a separate PRA process, along with the estimated 
burden.
1b. (Sec. Sec.  435.113, 435.114, 435.223, and 435.510)
    We are proposing to eliminate the following provisions of existing 
regulation: Sec. Sec.  435.113, 435.114, 435.223, and 435.510. Because 
we are eliminating these regulations, states will not be required to 
submit state plan amendments related to them. Therefore, there is no 
burden associated with these provisions of the proposed rule.
2. ICRs Regarding Authorized Representatives (Sec.  435.923, Sec.  
457.340), Verification Exception for Special Circumstances (Sec.  
435.952, Sec.  457.320) and Verification Requirements Regarding 
Citizenship and Immigration Status (Sec. Sec.  435.3, 435.4, 435.406, 
435.407, 435.940, 435.952, 435.956, 435.1008, 457.320, and 457.380)
    In this rulemaking, we propose to add a new Sec.  435.923 
establishing minimum requirements for the designation of authorized 
representatives. We are also applying these provisions to state CHIP 
agencies through the addition of a cross reference in Sec.  457.340. At 
Sec.  435.952 and Sec.  457.320 we are proposing to permit self-
attestation on a case by case basis in special circumstances for 
individuals who do not have access to documentation (for example, 
victims of natural disasters). The provisions at Sec. Sec.  435.3, 
435.4, 435.406, 435.407, 435.940, 435.952, 435.956, 435.1008, 457.320, 
and 457.380 propose guidelines for verification of Medicaid and CHIP 
eligibility based on citizenship or immigration status.
    We are aware of the need to estimate the PRA burden associated with 
the collection of information related to authorizing an individual to 
act as a representative of an applicant, to permit self-attestation for 
individuals who do not have access to documentation, and the 
citizenship and immigration verification requirements. These 
requirements will be addressed as part of the single, streamlined 
application developed by the Secretary. The application will be made 
available for public comment through a separate PRA process, along with 
the estimated burden.

B. ICRs Regarding Medicaid Eligibility and Enrollment

1. ICRs Regarding Delegation of Eligibility Determinations and Appeals 
(Sec. Sec.  431.10, 431.11, and 457.1120)
    According to Sec. Sec.  431.10, 431.11, and 457.1120 as proposed in 
this rule, a state may delegate authority to make eligibility 
determinations and to conduct fair hearings. States generally have 
written agreements with various entities for similar purposes. Under 
the proposed rule, agreements may need to be modified or new agreements 
established. However, states that use the same agency to administer 
more than one program (for example, Medicaid and the Exchange) will not 
need an agreement for the determination of eligibility by that agency.
    Delegation of eligibility determinations was approved under OMB 
control number 0938-1147. This rule is proposing minor changes in the 
existing requirement related to the type of agencies that can make 
Medicaid and CHIP eligibility determinations. These proposed amendments 
do not change the burden associated with the requirement and, 
therefore, are not subject to additional OMB review. Medicaid and CHIP 
agencies will need to establish new agreements in order to delegate 
authority to conduct eligibility appeals. The burden associated with 
the delegation of appeals is the time and effort necessary for the 
Medicaid and CHIP agencies to create and execute the agreements with 
the organization to which they are delegating authority.
    There are 53 Medicaid agencies (the 50 states, the District of 
Columbia, Northern Mariana Islands, and American Samoa) and 43 CHIP 
agencies, for a total of 96 agencies. For the purpose of developing the 
cost burden, we estimate that half of these agencies will establish an 
agreement with an

[[Page 4663]]

organization to conduct fair hearings. We estimate a one-time burden of 
50 hours to develop an agreement that can be used with the 
organization. It will take an additional 10 hours for Medicaid and 10 
hours for a separate CHIP agency to negotiate and execute the agreement 
with the organization for a total time burden of 2,880 hours across all 
agreements. For the purpose of the cost burden, we estimate it will 
take a health policy analyst 40 hours at $49.35 an hour and a senior 
manager 10 hours at $79.08 an hour to complete the model agreement (for 
a total of $2,764.80) plus 10 additional hours ($493.50) for a health 
policy analyst to execute a completed agreement with each organization. 
The estimated cost burden for each agreement is $3,258.30 for a total 
cost burden of $156,398.40.
2. ICRs Regarding Fair Hearing Processes (Sec. Sec.  431.205(e), 
431.206(b)(4) and (c)(5), 431.210, 431.221(a), 431.224(a), 431.232(b), 
and 431.240(c))
    In Sec. Sec.  431.205(e) and 431.206(c)(5), we propose to require 
that the hearing system and information must be accessible to persons 
who are limited English proficient and persons with disabilities. While 
states would be required to make the hearing system accessible, we 
believe the associated burden is exempt from the PRA in accordance with 
5 CFR 1320.3(b)(2). We believe that the time, effort, and financial 
resources necessary to comply with this requirement would be incurred 
by persons during the normal course of their activities and should, 
therefore, be considered as a usual and customary business practice.
    In Sec.  431.206(b)(4), states would be required to give 
individuals the choice of where to have their hearing held. There are 
53 Medicaid agencies (the 50 states, the District of Columbia, Northern 
Mariana Islands, and American Samoa) and 43 CHIP agencies for a total 
of 96 agencies that will be subject to this requirement. The burden 
associated with providing this choice is developing the process and 
workflow to enable the choice and sending the request for the fair 
hearing to the appropriate agency. We estimate it will take each agency 
an average of 70 hours to create the process and workflow required in 
providing the choice. For the purpose of the cost burden, we estimate 
it will take a health policy analyst 40 hours at $49.35 an hour, a 
senior manager 10 hours at $79.08 an hour, and a computer programmer 20 
hours at $52.50 to complete the process and workflow. The estimated 
cost burden for each agency is $3,814.80. The total estimated cost 
burden is $366,220.80.
    In Sec. Sec.  431.210 and 431.232(b), we are clarifying the type of 
information that must be included in the fair hearing notices. While 
states will need to provide additional explanation of the reason for 
their action and the right and timeframe for appealing the decision, we 
believe the associated burden is exempt from the PRA in accordance with 
5 CFR 1320.3(b)(2). We believe that the time, effort, and financial 
resources necessary to comply with this requirement would be incurred 
by persons during the normal course of their activities and should, 
therefore, be considered as a usual and customary business practice.
    In Sec.  431.221(a), states would be required to establish 
procedures that permit an individual or an authorized representative to 
submit a hearing request by telephone, by mail, in person, or by the 
Internet. While states would be required to permit an individual to 
submit the request through these various means, we believe the 
associated burden is exempt from the PRA in accordance with 5 CFR 
1320.3(b)(2). We believe that the time, effort, and financial resources 
necessary to comply with this requirement would be incurred by persons 
during the normal course of their activities and should, therefore, be 
considered as a usual and customary business practice.
    In Sec.  431.224(a), states would be required to establish and 
maintain an expedited review process for hearings for individuals for 
whom taking the time for a standard hearing could seriously jeopardize 
the individual's life or health. While states would be required to have 
an expedited review process for hearings, we believe the associated 
burden is exempt from the PRA in accordance with 5 CFR 1320.3(b)(2). We 
believe that the time, effort, and financial resources necessary to 
comply with this requirement would be incurred by persons during the 
normal course of their activities and should, therefore, be considered 
as a usual and customary business practice.
    In Sec.  431.240(c), states would be required to ensure that a 
hearing office has access to the information necessary to issue a 
proper hearing decision, including access to the agency's policies and 
regulation. While the agency would be required to make this information 
available, we believe the associated burden is exempt from the PRA in 
accordance with 5 CFR 1320.3(b)(2). We believe that the time, effort, 
and financial resources necessary to comply with this requirement would 
be incurred by persons during the normal course of their activities and 
should, therefore, be considered as a usual and customary business 
practice.
3. ICRs Regarding Eligibility Determination Notices (Sec. Sec.  
435.917, 435.918, 435.1200, 457.110, 457.340, 457.348, and 457.350)
    In Sec.  435.917 and Sec.  457.340, the agency would be required to 
provide a timely combined notice to individuals regarding their 
eligibility determination. The notice is to include reasons for the 
action, the specific supporting action, and an explanation of hearing 
rights. We expect that the eligibility determination notice will be 
dynamic and include information tailored to all possible outcomes of an 
application or renewal. In Sec.  435.918 and Sec.  457.110, states must 
provide electronic notices to individuals when elected.
    The burden associated with the requirements to deliver notices is 
the time necessary for the state staff to understand the requirements 
related to notices; to develop the language for approval, denial, 
termination, suspension, and change of benefits notices; and to program 
the language in the Medicaid and CHIP notice systems so that the notice 
can be populated and generated based on the outcome of the eligibility 
determination.
    We estimate 53 state Medicaid agencies (the 50 states, the District 
of Columbia, Northern Mariana Islands, and American Samoa) and 43 CHIP 
agencies (in states that have a separate or combination CHIP), totaling 
96 agencies, will be subject to this requirement. We estimate that it 
will take each Medicaid and CHIP agency 194 hours annually to develop, 
automate, and distribute the notice of eligibility determination. For 
the purpose of the cost burden, we estimate it will take a health 
policy analyst 138 hours at $49.35 an hour, a senior manager 4 hours at 
$79.08, an attorney 20 hours at $90.14, and a computer programmer 32 
hours at $52.50 to complete the notices. The estimated cost burden for 
each agency is $10,609.42. The total estimated cost burden is 
$1,018,504.30, and the total annual hour burden is 18,624 hours.
    In Sec. Sec.  435.1200, 457.348, and 457.350, we propose to permit 
state Medicaid and CHIP agencies to include the provision of combined 
notices or notices with coordinated content in the agreement 
established with the Exchange or other insurance affordability 
programs. These agreements were approved under OMB control number 098-
1147. This rule is proposing only minor changes in the existing 
requirement related to the

[[Page 4664]]

agreements. These proposed amendments do not change the burden 
associated with the requirement and, therefore, are not subject to 
additional OMB review.
4. ICRs Regarding Application Assistors (Sec. Sec.  435.909 and 
457.340)
    In Sec.  435.909(a) and Sec.  457.340, states would have the option 
to authorize certain staff and volunteers of organizations to act as 
certified application assistors. The burden associated with the 
requirements to assist individuals with the application process is the 
time and effort necessary for the state to create agreements with these 
organizations, to create a registration process for assistors, and to 
train staff on the eligibility and confidentiality rules and 
requirements and how to assist applicants with the completing the 
application.
    We estimate the 50 states, the District of Columbia, Northern 
Mariana Islands, and American Samoa will establish agreements with on 
average 20 organizations in their state or territory for a total of 
1,060 agreements related to application assistance. As part of this 
estimate, we assumed that state Medicaid and CHIP agencies will be 
party to the same agreements and, therefore, will not establish 
separate agreements. The first burden associated with this provision is 
the time and effort necessary for the state Medicaid and CHIP agencies 
to establish an agreement.
    We assume that each state will establish an agreement with the 
organization to fulfill the requirements of Sec.  435.908 and Sec.  
457.340. To develop an agreement, we estimate 53 states Medicaid 
agencies (the 50 states, the District of Columbia, Northern Mariana 
Islands, and American Samoa) would be subject to this requirement. We 
estimate that it would take each state and territory 50 hours to 
develop a model agreement. For the purpose of the cost burden, we 
estimate it would take a health policy analyst 40 hours at $49.35 an 
hour and a senior manager 10 hours at $79.08 to develop an agreement. 
The estimated cost burden would be $2,764.80 (per state) or $146,534.40 
(total) while the total annual hour burden would be 2,650 hours.
    To negotiate and complete the agreement, we estimate that each of 
the 53 states/territories would execute 20 agreements. For the purpose 
of the cost burden, we estimate it would take a health policy analyst 
10 hours at $49.35 an hour to execute each agreement. The estimated 
cost burden would be $9,870 (per state) or $523,110 (total) while the 
total annual hour burden would be 10,600 hours.
    To develop and execute the model agreements, the total cost would 
be $669,644.40 for 13,250 hours of labor.
    The next burden associated with this provision is the time and 
effort necessary for the states and territories to establish the 
registration process and workflow for the application assistors. We 
estimate that the 50 states, the District of Columbia, Northern Mariana 
Islands, and American Samoa) will be subject to this requirement.
    We estimate it will take each state or territory an average of 70 
hours to create the registration process and workflow for the 
application assistors. For the purpose of the cost burden, we estimate 
it will take a health policy analyst 40 hours, at $49.35 an hour, a 
senior manager 10 hours, at $79.08 an hour, and a computer programmer 
20 hours at $52.50 to complete the registration process and workflow. 
The estimated cost burden for each state or territory is $3814.80. The 
total estimated cost burden is $202,184.40.
    The next burden associated with this provision is the time and 
effort necessary for the state Medicaid and CHIP agencies to provide 
training to the application assistors. We estimate 50 states, the 
District of Columbia, Northern Mariana Islands, and American Samoa will 
be subject to this requirement.
    For the purpose of the cost burden, we estimate it will take a 
training specialist 40 hours at $26.64 an hour and a training and 
development manager 10 hours at $64.43 an hour to develop training 
materials for the application assistors, for a total time burden of 
2,650 hours. The estimated cost burden for each state or territory is 
$1,709.90. The total estimated cost burden is $90,624.70.
    Lastly, we estimate that each state or territory will offer 50 
hours of training sessions to train individuals to assist applicants 
with Medicaid and CHIP applications for a total time burden of 2650 
hours. For the purpose of the cost burden, we estimate it will take a 
training specialist 50 hours at $26.64 an hour to train the application 
assistors. The estimated cost burden for each agency is $1,332. The 
total estimated cost burden is $70,596.
5. ICRs Regarding the Availability of Program Information for 
Individuals who are Limited English Proficient (Sec. Sec.  431.205(e) 
and 435.905(b))
    While states would be required to provide language services to 
individuals who are limited English proficient, we believe the 
associated burden is exempt from the PRA in accordance with 5 CFR 
1320.3(b)(2). We believe that the time, effort, and financial resources 
necessary to comply with this requirement would be incurred by persons 
during the normal course of their activities and should, therefore, be 
considered as a usual and customary business practice.
6. ICRs Regarding Presumptive Eligibility (Sec. Sec.  435.1101(b) and 
457.355)
    In Sec.  435.1101(b) and Sec.  457.355 by reference to Sec.  
435.1101, states would be required to provide qualified entities with 
training in all applicable policies and procedures related to 
presumptive eligibility. The burden associated with this provision is 
the time and effort necessary for the states and territories to provide 
training to the application assistors. We estimate 50 states, the 
District of Columbia, Northern Mariana Islands, and American Samoa will 
be subject to this requirement. As part of this estimate, we assumed 
that state Medicaid agencies and CHIP agencies, where there are 
separate agencies, will develop and use the same training.
    For the purpose of the cost burden, we estimate it will take a 
training specialist 40 hours at $26.64 an hour and a training and 
development manager 10 hours at $64.43 an hour to develop training 
materials for the qualified entities, for a total time burden of 2,650 
hours. The estimated cost burden for each state or territory is 
$1,709.90. The total estimated cost burden is $90,624.70. We estimate 
that each state or territory will offer 50 hours of training sessions 
to qualified entities, for a total time burden of 2,650 hours. For the 
purpose of the cost burden, we estimate it will take a training 
specialist 50 hours at $26.64 an hour to train the application 
assistors. The estimated cost burden for each agency is $1,332. The 
total estimated cost burden is $70,596.
7. ICRs Regarding Deemed Newborn Children (Sec. Sec.  435.117(d) and 
457.360(d))
    In Sec.  435.117(d) and Sec.  457.360(d), states would be required 
issue separate Medicaid identification numbers to babies covered by 
Medicaid as ``deemed newborns'' if the mother for the date of the 
child's birth was receiving Medicaid in another state, covered in the 
state's separate CHIP, or covered for only emergency medical services. 
Also, the state must issue a separate Medicaid identification number to 
a deemed newborn prior to the effective date of any termination of the 
mother's eligibility or prior to the date of the child's first 
birthday, whichever is sooner. Under such circumstances, a separate 
Medicaid identification number must be assigned to the infant

[[Page 4665]]

so the state may reimburse providers for covered services, document the 
state's expenditures, and request federal financial participation.
    While states are required to issue Medicaid identification numbers 
to these children, we believe the associated burden is exempt from the 
PRA in accordance with 5 CFR 1320.3(b)(2). We believe that the time, 
effort, and financial resources necessary to comply with this 
requirement would be incurred by persons during the normal course of 
their activities and should, therefore, be considered as a usual and 
customary business practice.
8. ICRs Regarding Adoption Assistance Agreements (Sec. Sec.  435.145 
and 435.227)
    At Sec. Sec.  435.145 and 435.227, we are proposing to amend 
current regulations for these Medicaid eligibility groups for 
consistency with federal statutory requirements. Among the eligibility 
requirements and alternatives for these groups is that an adoption 
assistance agreement be in effect. As noted in section A, Medicaid 
state plan amendments for these and other eligibility groups will be 
addressed through a separate notice and comment process under PRA. This 
proposed rule is not making any revision to states' adoption assistance 
agreements. These agreements are between state agencies and the 
adoptive parents and are specific to the rules and laws in place in 
each state. We do not govern these agreements; therefore, there is no 
burden associated with these provisions of the proposed rule.
9. ICRs Regarding Enrollment Assistance and Information Requirements 
(Sec.  457.110)
    While states would be required to provide accurate and easily 
understood information and to provide assistance to help families make 
informed decisions about their health plans, professionals, and 
facilities, we believe the associated burden is exempt from the PRA in 
accordance with 5 CFR 1320.3(b)(2). We believe that the time, effort, 
and financial resources necessary to comply with this requirement would 
be incurred by persons during the normal course of their activities and 
should, therefore, be considered as a usual and customary business 
practice.
10. ICRs Regarding Medicaid and CHIP Agency Responsibilities Related to 
Coordination Involving an Appeals Entity (Sec. Sec.  435.1200(g) and 
457.348(d))
    In Sec.  435.1200(g) and Sec.  457.348(d), the state Medicaid and 
CHIP agencies would be required to establish a secure electronic 
interface to enable communications when an appeal is filed. 
Transmission of the electronic account would contain the outcome of the 
appeal among the data elements. The requirement for a secure electronic 
interface, creation of an electronic account and transmission of 
information in the account was addressed under OMB control number 0938-
1147. We are only minimally changing this requirement to include 
information on eligibility appeals. The inclusion of this information 
does not change the burden estimate therefore this provision is not 
subject to further OMB review.
11. ICRs Regarding Beneficiary and Public Notice Requirements (Sec.  
447.57)
    In Sec.  447.57(a), the agency would be required to make available 
a public schedule describing current premiums and cost sharing 
requirements containing the information in paragraphs (a)(1) through 
(6). In Sec.  447.57(b), the agency would be required to make the 
public schedule available to those identified in paragraphs (b)(1) 
through (4).
    Prior to submitting a SPA for Secretary approval to establish or 
modify existing premiums or cost sharing or change the consequences for 
non-payment, Sec.  447.57(c), would require that the state provide the 
public with advance notice of the SPA (specifying the amount of 
premiums or cost sharing and who is subject to the charges); provide a 
reasonable opportunity to comment on SPAs that propose to substantially 
modify premiums and cost sharing; submit documentation to demonstrate 
that these requirements were met; and provide additional public notice 
if cost sharing is modified during the SPA approval process.
    In Sec.  447.57(d), the information must be provided in a manner 
that ensures that affected beneficiaries and providers are likely to 
have access to the notice and be able to provide comments on proposed 
state plan amendments.
    The burden associated with this requirement is the time and effort 
it would take for a state to provide advance notice to the public and 
prepare and submit documentation with the state plan amendment. We 
estimate it would take 1 state or territory approximately 6 hours to 
meet this requirement; we believe 53 states will be affected by this 
requirement for an annual burden of 30 hours.

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

    It is important to note that these regulations involve several 
information collections that will occur through the single, streamlined 
application for enrollment in a QHP and for insurance affordability 
programs described in 45 CFR 155.405. We have accounted for the burden 
associated with these collections in the Supporting Statement for Data 
Collection to Support Eligibility Determinations for Insurance 
Affordability Programs and Enrollment through Health Benefits 
Exchanges, Medicaid, and Children's Health Insurance Program Agencies 
(CMS-10440).
    We would also like to highlight that this supporting statement 
includes several information collections from regulatory provisions 
finalized in the Exchange final rule. We have included these 
information collections in this PRA package to address PRA requirements 
related to those provisions as they were not included in the 
information collection section of the Exchange final rule.
1. ICRs Regarding Appeals (Sec. Sec.  155.505, 155.510, 155.520, 
155.530, 155.535, 155.540, 155.545, 155.550, 155.555, 155.740)
    The eligibility appeals provisions in subparts F and H include 
requirements for the collection of information that will support 
processing and adjudicating appeals for individuals, employers facing 
potential tax liability, and SHOP employers and employees. The 
information collection will be largely the same for each type of appeal 
and includes the appeal request, expedited appeal request, appeal 
withdrawal, request to vacate, request for additional information, 
hearing request form, special considerations form, and appointment of 
authorized representative. We anticipate most appellants will opt to 
accept and respond to these forms and notices electronically; however, 
appeals entities will be equipped to handle the sending and submission 
of paper forms and documents. Appellants providing information to the 
appeals entity will likely need to search their personal files at home 
or obtain documentation from employers or government entities to 
support their appeal. If the appellant is an employer, it is likely 
that the employer may rely on human resources personnel or an attorney 
to provide information during the appeal. Appeal entities will rely on 
office clerks and paralegals or legal assistants to process the 
information submitted. Finally, the use of many of these forms and 
notices is dependent on the trajectory of each appeal; therefore, not 
every form will be implicated in each appeal.
    The appeal request form will be available to each appellant type in 
hard

[[Page 4666]]

copy and electronically but appellants may also request an appeal 
telephonically. Regardless of the mode of transmission, some basic 
information will be required to initiate an appeal, including the 
identity of the appellant and the appellant's contact information. 
Appellants are encouraged, but not required, to also submit information 
detailing why they are appealing and evidence to support their appeal. 
We anticipate that most appellants will choose to submit more than the 
base-level of information. We estimate that most appellants will 
complete the form within one hour and that the appeals entity will 
require up to 1.5 hours to process the form, which includes 0.5 hours 
for an office clerk, at an hourly cost of $19.97, to digitize and link 
the form to the appellant's account, and one hour for a paralegal or 
legal assistant, at an hourly cost of $34.51, to review the information 
submitted, and notify the appropriate appeals workers of a new appeal 
request. Across all types of appeals, we estimate a total of 279,055 
appeals requests for each year, which will require 418,582 hours, at a 
total cost of $12,416,553.
    Appellants will receive an acknowledgement of his or her appeal 
request that includes the invitation to submit evidence to support the 
appeal in the form of the Request for Additional Information Form. 
Completing this form is optional for all appellants. However, we 
anticipate that many appellants will use the opportunity to send 
additional information to the appeals entity. Much like the appeal 
request, the appeals entity will be responsible for digitizing the 
submitted information, placing it in the proper account, and reviewing 
it. The burden on the appellant is dependent on how easily he or she 
can access information relevant eligibility. We estimate this may 
require up to two hours for the appellant. To process additional 
information submitted, we estimate that the appeals entity will require 
0.5 hours for an office clerk, at an hourly cost of $19.97, to digitize 
and link the form to the appellant's account, and 0.5 hours for a 
paralegal or legal assistant, at an hourly cost of $34.51, to review 
the information submitted, and notify the appropriate appeals workers 
of the updated information, for a total cost of about $27 per 
appellant.
    Other forms the appellant may encounter during the appeals process 
include the appeal withdrawal form, request to vacate a dismissal, 
special considerations form, hearing request form, and appointment of 
authorized representative form. Each of these include information 
collections that are initiated by the appellant when he or she, for 
example, wishes to withdraw an appeal or intends to have another person 
act on his or her behalf. In most cases, the information submitted for 
these actions will require little more than acknowledging the 
appellant's intentions and including contact information. The Request 
to Vacate a Dismissal will entail slightly more effort because, to 
successfully vacate a dismissal, the appellant must show good cause. We 
anticipate that these forms may require as little as 15 minutes or up 
to 2 hours for the appellant to complete and approximately 30 minutes 
to 1.5 hours for the appeals entity to process for a cost of 
approximately $10-$45 per submission.
    The appeals process also includes several instances where notice of 
appeals actions must be sent to the Exchange, the SHOP, or Medicaid or 
CHIP agencies. For example, the appeals entity is required to notify 
the Exchange or the SHOP when an appeal request has been submitted and 
when an appeal decision has been issued. This notice will be sent via 
secure electronic interface. In addition, eligibility records and, in 
some instances, appeals records must be transmitted electronically to 
the appeals entity from the Exchange, the SHOP, or the Medicaid or CHIP 
agency. To accommodate these electronic notifications and transfers of 
records, we estimate the Exchange will need to include language in 
agreements with other agencies administering insurance affordability 
programs. We estimate that the creation of the necessary agreements 
will necessitate 35 hours from a health policy analyst at an hourly 
cost of $49.35, and 35 hours from an operations analyst at an hourly 
cost of $54.45 to develop the agreement; and 30 hours from an attorney 
at an hourly cost of $90.14 and five hours from a senior manager at an 
hourly cost of $79.14 to review the agreement. Accordingly, the total 
burden on the Exchange associated with the creation of the necessary 
agreements will be approximately 105 hours and $6,733 per Exchange, for 
a total cost of $343,382 for 51 Exchanges.
    We also propose that appeals entities maintain appeals records and 
provide the appellant and the public access to those records, subject 
to applicable state and federal privacy and confidentiality laws. We 
estimate that an individual requesting access to appeal records may 
require up to 30 minutes to submit the request form. An employer 
submitting a similar request may require up to an hour to complete the 
form at a maximum cost of $62.65, which includes 0.5 hours of time from 
a human resources specialist at an hourly cost of $40.68 to complete 
the record request; and 0.25 hours of time from an attorney at an 
hourly cost of $90.14 and 0.25 hours from a senior manager at an hourly 
cost of $79.08 to review the request before submission. In order to 
process record requests, we anticipate the appeals entity will require 
two hours for a total cost of $42.98 with an additional dollar for the 
cost of printing and mailing hard copy records. We estimate that the 
development of the records storage system will necessitate 15 hours 
from a health policy analyst at an hourly cost of $49.35, and 20 hours 
from an operations analyst at an hourly cost of $54.45 to provide 
specifications for the records that need to be maintained; 20 hours 
from an attorney at an hourly cost of $90.14 and five hours from a 
senior manager at an hourly cost of $79.14 to provide oversight and 
supervision; and 120 hours from a computer programmer at an hourly cost 
of $52.50 to conduct the necessary system development. Accordingly, the 
total burden on the Exchange associated with the development of the 
records storage system will be 159 labor hours with a cost of 
approximately $9,159 per Exchange and a total cost of $467,131 for 51 
Exchanges.
    Finally, the appeals process will require the sending of notices to 
the appellant and other parties throughout the process. Notices include 
notice of dismissal, notice of hearing, notice of denial of an 
expedited hearing request, and notice of appeals decision. We expect 
that the appeal decision notice will be dynamic and include information 
tailored to the appellant's case. We estimate that the development of 
each of the necessary notices will necessitate 44 hours from a health 
policy analyst at an hourly cost of $49.35 to learn appeals rules and 
draft notice text; 20 hours from an attorney at an hourly cost of 
$90.14 and four hours from a senior manager at an hourly cost of $79.08 
to review the notice; and 32 hours from a computer programmer at an 
hourly cost of $52.50 to conduct the necessary development. In total, 
we estimate that the development of each notice specified as part of 
the appeals process will require 100 hours to complete in the first 
year, at a cost of $5,971 per Exchange, for a total of $304,497 for 51 
Exchanges.
2. ICRs Regarding Notices (Sec. Sec.  155.302, 155.310, 155.315, 
155.320, 155.330, 155.335, 155.345, 155.410, 155.715, 155.722, 155.725, 
155.1080)
    Several provisions in subparts D and E outline specific notices 
that the Exchange will send to individuals and

[[Page 4667]]

employers throughout the eligibility and enrollment process. The 
purpose of these notices is to alert the individuals and employers of 
actions taken by the Exchange. When possible, we anticipate that the 
Exchange will consolidate this notice when multiple members of a 
household are applying together and receive an eligibility 
determination at the same time. The notice may be in paper or 
electronic format but must be in writing and will be sent after an 
eligibility determination has been made by the Exchange. We anticipate 
that a large volume of enrollees will request electronic notification 
while others will opt to receive the notice by mail. As a result of 
certain enrollees opting to receiving the notice by mail in some 
instances, we estimated the associated mailing costs for the time and 
effort needed to mail notices in bulk to enrollees as appropriate.
    We expect that the electronic eligibility determination notice will 
be dynamic and include information tailored to all possible outcomes of 
an application throughout the eligibility determination process. To 
develop the paper and electronic notices, Exchange staff would need to 
learn eligibility rules and draft notice text for various decision 
points, follow up, referrals, and appeals procedures. A peer analyst, 
manager, and legal counsel would review the notice. The Exchange would 
then engage in review and editing to incorporate changes from the 
consultation and user testing including review to ensure compliance 
with plain writing, translation, and readability standards. The 
Exchange will also consult with the state Medicaid or CHIP agency in 
order to develop coordinated notices. Finally, a developer would 
program the template notice into the eligibility system so that the 
notice may be populated and generated in the correct format according 
to an individual's preference to receive notices, via paper or 
electronically, as the applicant moves through the eligibility process.
    HHS is currently developing model eligibility determination notices 
and several other models for notices described in this subpart which 
will also decrease the burden on Exchanges to establish such notices. 
If a state opts to use the model notices provided by HHS, we estimate 
that the Exchange effort related to the development and implementation 
of the eligibility notice will necessitate 44 hours from a health 
policy analyst at an hourly cost of $49.35 to learn appeals rules and 
draft notice text; 20 hours from an attorney at an hourly cost of 
$90.14 and four hours from a senior manager at an hourly cost of $79.08 
to review the notice; and 32 hours from a computer programmer at an 
hourly cost of $52.50 to conduct the necessary development. In total, 
we estimate that this will take a total of 100 hours for each Exchange, 
at a cost of approximately $5,971 per Exchange and a total cost of 
$304,497 for 51 Exchanges. We expect that the burden on the Exchange to 
maintain this notice will be significantly lower than to develop it.
    Section 155.310(h) specifies that the Exchange will notify an 
enrollee's employer that an employee has been determined eligible for 
advance payments of the premium tax credits and/or cost-sharing 
reductions. Upon making such an eligibility determination, the Exchange 
will send a notice to the employer with information identifying the 
employee, along with a notification that the employer may be liable for 
the payment under section 4980H of the Code, and that the employer has 
a right to appeal this determination. Because this notice will be sent 
to an employer at the address as provided by an application filer on 
the application, we anticipate all of these notices will be sent by 
mail. As a result, we estimated the associated mailing costs for the 
time and effort needed to mail notices in bulk to employers. Like the 
eligibility notice, the employer notice above will be developed and 
programmed into the eligibility system. However, unlike the eligibility 
notice, we expect the information on the employer notice to be minimal 
in comparison to the eligibility notice and therefore the burden on the 
Exchange to develop the notice to be substantially less. Further, as 
with the individual eligibility notice, HHS will provide model notice 
text for Exchanges to use in developing this notice.
3. ICRs Regarding Verification of Enrollment in an Eligible Employer-
Sponsored Plan and Eligibility for Qualifying Coverage in an Eligible 
Employer-Sponsored Plan (Sec.  155.320)
    Section 155.320(d) proposes the process for the verification of 
enrollment in an eligible employer-sponsored plan and eligibility for 
qualifying coverage in an eligible employer-sponsored plan. Paragraph 
(d)(2) specifies that the Exchange will obtain relevant data from any 
electronic data source available to the Exchange which has been 
approved by HHS, as well as data from certain specified electronic data 
sources. This will involve the development and execution of data 
sharing agreements; however, this burden is already captured in the 
data sharing agreements described in Sec.  155.315. As these 
verification activities will all be electronic, we do not expect for 
there to be any additional burden than that which is required to design 
the overall eligibility and enrollment system.
    Paragraph (d)(3)(iii)(A) proposes that the Exchange provide notice 
to the applicant indicating that the Exchange will be contacting any 
employer identified on the application to verify whether the applicant 
is enrolled in an eligible employer-sponsored plan or is eligible for 
qualifying coverage in an eligible employer-sponsored plan for the 
benefit year for which coverage is requested. The burden associated 
with this notice is addressed in 155.310(g) as this will not be a 
separate notice, but incorporated into the eligibility determination 
notice described in the above paragraph.
    In paragraph (d)(3)(iii)(D), we propose that the Exchange make 
reasonable attempts to contact any employer to which the applicant 
attested employment to verify whether the applicant is enrolled in an 
eligible employer-sponsored plan or is eligible for qualifying coverage 
in an eligible employer-sponsored plan for the benefit year for which 
coverage is requested. It is difficult to estimate the burden 
associated with this information collection as the calculation involves 
identifying the number of individuals for whom employer-sponsored 
coverage information will be unavailable. As such, below, we estimate 
the time and cost associated with the Exchange making a reasonable 
attempt to contact one employer. We estimate the time associated with 
this information collection to be a total of 2.2 hours per employer at 
a total cost of $34.
    Section 155.320(d)(4) proposes that Exchange may satisfy the 
provisions in this paragraph by relying on a verification process 
performed by HHS. The burden associated with this provision is the time 
and effort necessary for the Exchange to establish or modify an 
agreement for eligibility determinations and coordination of 
eligibility functions. The burden associated with this provision is 
included in Sec.  155.345.
4. ICRs Regarding Application Counselors and Authorized Representatives 
(Sec.  155.225 and Sec.  155.227)
    Section 155.225 of the regulation provides the standards on which 
an Exchange will certify application counselors to facilitate 
enrollment in the Exchange. Section 155.225(b) outlines the standards 
for certification of individuals seeking to become

[[Page 4668]]

application counselors. Section 155.227 of the regulation gives an 
individual or employee the ability to designate an authorized 
representative to act on the individual or employee's behalf. Section 
155.227(e) outlines the standards for certification if the authorized 
representative is acting as either a staff member or volunteer of an 
organization. The burden associated with these provisions is the time 
and effort necessary for the Exchange to develop and execute agreements 
with applicable application counselors. For each provision we estimate 
that it will take 105 hours per Exchange to meet these reporting 
requirements. This includes a mid-level health policy analyst drafting 
the agreement with managerial oversight and comprehensive review of the 
agreement. The estimated cost for each Exchange is $6,733 and a total 
cost of $343,383 for 51 Exchanges.
5. ICRs Regarding Electronic Transmissions (Sec. Sec.  155.310, 
155.315, 155.320, 155.330, 155.340, 155.705)
    Sections 155.310, 155.315, 155.320, 155.330, 155.340, and 155.705 
involve the electronic transmission of data in order to determine 
eligibility for enrollment in a QHP and for insurance affordability 
programs. Section 155.310(d)(3) specifies that the Exchange must notify 
the state Medicaid or CHIP agency and transmit all information from the 
records of the Exchange to the Medicaid or CHIP agency to ensure that 
the Medicaid or CHIP agency can provide the applicant with coverage 
promptly and without undue delay. This applicant information will be 
transmitted electronically from the Exchange to the agency 
administering Medicaid or CHIP upon receiving an indication that the 
Exchange has determined an applicant eligible for such program. The 
purpose of this data transmission is to notify the agency administering 
Medicaid or CHIP that an individual is newly eligible and thus the 
agency should facilitate enrollment in a plan or delivery system. Data 
will be transmitted through a secure electronic interface.
    Sections 155.315 and 155.320 include transactions necessary to 
verify applicant information. We expect there to be no transactional 
burden associated with the electronic transactions needed to implement 
Sec.  155.315 and Sec.  155.320. As these transmission functions will 
all be electronic, we do not expect for there to be any additional 
burden than that which is required to design the overall eligibility 
and enrollment system.
    In section 155.340, the Exchange must provide the relevant 
information, such as the dollar amount of the advance payment and the 
cost-sharing reductions eligibility category, to enable advance 
payments of the premium tax credit and cost-sharing reductions, 
reconciliation of the advance payments of the premium tax credit, and 
employer responsibility. As we hope that these transmissions of 
information will all be electronic, we do not expect for there to be 
any additional burden than that which is required to design the overall 
eligibility and enrollment system.
6. ICRs Regarding Reporting Changes (Sec. Sec.  155.315, 155. 330, 
155.335)
    Section 155.315(f) outlines the process for resolving 
inconsistencies identified through the verification process. In Sec.  
155.330(c)(1), we state that the Exchange will verify any information 
reported by an enrollee in accordance with the processes specified in 
Sec. Sec.  155.315 and 155.320 prior to using such information in an 
eligibility redetermination. Section 155.335(e) provides that the 
Exchange will require a qualified individual to report any changes with 
respect to the information listed in the notice described in paragraph 
(c) of this section within 30 days from the date of the notice. It is 
not possible at this time to provide estimates for the number of 
applicants for whom a reported change will necessitate the adjudication 
of documentation, but we anticipate that this number will decrease as 
applicants become more familiar with the eligibility process and as 
more data become available. As such, for now, we note that the burden 
associated with this provision is one hour for an individual to collect 
and submit documentation, and 12 minutes for eligibility support staff 
to review the documentation.
7. ICRs Regarding Enrollment and Termination (Sec. Sec.  155.400, 
155.405, 155.430)
    In Part 155, subpart E of the Exchange final rule, we describe the 
requirements for Exchanges in connection with enrollment and 
disenrollment of qualified individuals through the Exchange. These 
information collections are associated with sending eligibility and 
enrollment information to QHP issuers and to HHS, maintaining records 
of all enrollments in QHPs through the Exchange, reconciling enrollment 
information with QHP issuers and HHS, and retaining and tracking 
coverage termination information. The burden estimates associated with 
these provisions include the time and cost to meet these record 
requirements. We estimate that it will take 142 hours for an Exchange 
to meet these recordkeeping requirements for a total of 7,242 hours.
    In the case of the requirement related to termination standards, 
the burden includes estimates related to the maintenance and 
transmission of coverage termination information, as well as the time 
and effort needed to develop the system to collect and store the 
information. We estimate that it will take approximately 70 hours 
annually for the time and effort to meet this requirement for a total 
of 3,570 hours.
8. ICRs Regarding Agreements (Sec. Sec.  155. 302, 155.225, 155.227, 
155.345, 155.510)
    These provisions propose that Exchanges and appeals entities will 
enter into written agreements with agencies administering other 
insurance affordability programs. These agreements are necessary to 
minimize burden on individuals, ensure prompt determinations of 
eligibility and enrollment in the appropriate program without undue 
delay, prompt issuance of appeal decisions, and to provide standards 
for transferring an application from an insurance affordability program 
to the Exchange. Agencies will also develop agreements to share data 
between insurance affordability programs. The specific number of 
agreements needed may vary depending on how states choose to divide 
responsibilities regarding eligibility determinations.
    The burden associated with this provision is the time and effort 
necessary for the Exchange to establish or modify an agreement for 
eligibility determinations and coordination of eligibility and 
enrollment functions. If an Exchange chooses to draft separate 
agreements for each insurance affordability program or a subset of 
insurance affordability programs, then the estimate would likely 
increase. We estimate it will take each Exchange an average of 105 
hours to create a new agreement, although we assume that such 
agreements will be largely standardized across states, and that HHS 
will provide initial drafts. This includes a mid-level health policy 
analyst and an operations analyst reviewing the agreement with 
managerial oversight and comprehensive review of the agreement an 
operations analyst. We estimate a cost burden of $6,733 per Exchange.
9. ICRs Regarding Notices to QHP Issuers (Sec. Sec.  156.260, 156.265, 
156.270, 156.290)
    First, section 156.260(b) provides that QHP issuers will notify a 
qualified individual of his or her effective date of coverage, in 
accordance with the

[[Page 4669]]

effective dates of coverage established by the Exchange in accordance 
with Sec.  155.410(c) and (f). Second, under Sec.  156.270(b), QHP 
issuers will send a notice of termination of coverage to an enrollee if 
the enrollee's coverage in the QHP is being terminated for any reason. 
Third, section 156.270(f) provides that QHP issuers will provide 
enrollees with a notice about the grace period for non-payment of 
premiums. QHP issuers will send this notice to enrollees who are 
delinquent on premium payments. Fourth, section 156.265(e) provides 
that QHP issuers will provide new enrollees with an enrollment 
information package, which we anticipate that issuers may combine with 
the notification of coverage effective date described in Sec.  
156.260(b). Lastly, under Sec.  156.290(b), QHP issuers will provide a 
notice to enrollees if the issuer elects not to seek recertification of 
a QHP.
    We anticipate that some of the above QHP issuer required notices 
are similar in nature to the notices that issuers currently send to 
enrollees. For example, it is standard practice for issuers to provide 
new enrollees with information about their enrollment in a plan, their 
effective date of coverage, and if and when their coverage is 
terminating. Accordingly, we anticipate that QHP issuers will review, 
update, and revise notice templates that they utilize currently as they 
work to address the notice requirements described below and to ensure 
that the notices include the appropriate information. Similar to 
notices that will be issued by the Exchange, we expect that for QHP-
issued notices, an analyst will develop text, and a peer analyst, 
manager, and legal counsel for the issuer will review the notices, 
including a review to ensure compliance with plain writing, language 
access, and readability standards as required under Sec.  156.250(c). 
Finally, a developer will need to incorporate programming changes into 
the issuer's noticing system to account for the changes and updates 
that will be necessary to ensure that the QHP issuer is in compliance 
with the notice standards set forth in this rule and to ensure the 
notice can be populated and generated according to an individual's 
preference to receive notices. We estimate that the burden related to 
the development and implementation of this notice will necessitate 44 
hours from a health policy analyst at an hourly cost of $49.35 to learn 
appeals rules and draft notice text; 20 hours from an attorney at an 
hourly cost of $90.14 and four hours from a senior manager at an hourly 
cost of $79.08 to review the notice; and 32 hours from a computer 
programmer at an hourly cost of $52.50 to conduct the necessary 
development. In total, we estimate that this will take a total of 100 
hours for each QHP issuer, at a cost of approximately $5,971 per 
issuer. We expect that the burden on QHP issuers to maintain this 
notice will be significantly lower than to develop it.
    However, we believe that the burden estimate described under Sec.  
155.310(g) likely represents an upper bound estimate of the burden on 
issuers to develop each of these notices as in some cases the notice 
described under Sec.  155.310(g) will be somewhat more dynamic in order 
to address the additional information we expect to be included in that 
notice.
    Since the above estimate applies to one notice, and we described 
five notices under part 156, the total burden estimate is $40,710. Due 
to uncertainty regarding the number of individuals who will choose to 
receive paper notices, as well as some uncertainty regarding the 
frequency of circumstances that will trigger notices in accordance with 
this part, we have only included an estimate of the printing and 
mailing costs for a QHP issuer to send one notice to a qualified 
individual or enrollee.
    We have submitted a copy of this proposed rule to the OMB for its 
review of the rule's information collection and recordkeeping 
requirements. These requirements are not effective until they have been 
approved by the OMB.
10. ICRs Regarding Notices and Third-Party Disclosures in the SHOP 
(Sec. Sec.  157.205(e), 157.205(f))
    45 CFR part 157 includes several instances in which qualified 
employers participating in the SHOP Exchange will need to provide 
information to employees or to the SHOP Exchange. We include the data 
elements for these notifications in appendix A of this PRA package. For 
the individual market Exchange, we anticipate that a large share of 
enrollees will elect to receive electronic notices while the rest will 
receive notices by mail. We do not make this assumption for notices 
described here as we expect that qualified employers will provide 
notices to employees in whatever format the qualified employer usually 
provides notices to employees; in paper, electronically, or in a 
combination of both formats. We estimate that the associated printing 
costs for paper notices will be approximately $0.10 per notice. We do 
not take mailing costs into consideration for notices provided by 
qualified employers, as we expect that if qualified employers provide 
notices in paper format, the employer may provide the employee with the 
notice in person, as opposed to mailing the notice. We do not have a 
reasonable way to estimate total printing costs for notices provided by 
qualified employers in the SHOP Exchange due to uncertainty regarding 
the number of employees who will choose to receive paper notices, as 
well as some uncertainty regarding the frequency of circumstances that 
will trigger notices in accordance with this part.
    First, Sec.  157.205(e) specifies that a qualified employer provide 
an employee with information about the enrollment process. A qualified 
employer will inform each employee that he or she has an offer of 
coverage through the SHOP Exchange, and instructions for how the 
employee can apply for and enroll in coverage. We anticipate that the 
qualified employer will also provide information about the acceptable 
formats in which an employee may submit an application; online, on 
paper, or by phone, as described under Sec.  157.205(c). If the 
employee being offered coverage was hired outside an initial or annual 
enrollment period, the notice will also inform the employee if he or 
she is qualified for a special enrollment period. Second, in Sec.  
157.205(f) we provide that a qualified employer will notify the SHOP 
Exchange regarding an employee's change in eligibility for enrollment 
in a QHP through the SHOP Exchange, including when a dependent or 
employee is newly eligible, or is no longer eligible.
    We expect that the information that qualified employers will 
provide to employees and the SHOP Exchange, as described above, will be 
somewhat standardized. Additionally, we anticipate that qualified 
employers may be more likely to manually develop the notices described 
in this part, as compared to the other notices described in part 155 
and 156 which we anticipate are more likely to be automatically 
generated. We expect that in order for a qualified employer to 
establish a notice, the qualified employer will need 20 hours from a 
human resources specialist at an hourly cost of $40.68 to develop the 
text; and four hours from a human resources manager at an hourly cost 
of $75.01 and ten hours from an attorney at an hourly cost of $90.14 to 
review the notices. We do not anticipate that a developer will be 
needed to develop the notices described in this part since we expect 
that in most cases, these notices will be manually generated on demand. 
Accordingly, we expect that the burden hours for developing each of the 
notices will be approximately 34 hours, for a total of 68 hours per 
qualified employer,

[[Page 4670]]

at a total cost of $4,030. We expect that the burden on the qualified 
employer to maintain the notices will be significantly lower than to 
develop the notices.

D. Summary of Annual Burden Estimates for Proposed Requirements

[[Page 4671]]



                                            Table 1--Proposed Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Total
                                                                           Responses    Burden per     annual      Labor cost of reporting    Total cost
       Regulation section(s)          OMB & CMS ID Nos.     Respondents     (total)      response      burden                ($)                 ($)
                                                                                         (hours)      (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
42 CFR 431.10, 431.11, and          OCN 0938-New; CMS-                48           48           60        2,880      3,258 (per respondent)      156,398
 457.1120.                           10456.
Sec.   431.206(b)(4)..............  OCN 0938-New; CMS-                96           96           70        6,720      3,815 (per respondent)      366,221
                                     10456.
Sec.  Sec.   435.917, 435.918,      OCN 0938-New; CMS-                96           96          194       18,624     10,609 (per respondent)    1,018,504
 457.110, and 457.340.               10456.
Sec.  Sec.   435.923 and 457.340    OCN 0938-New; CMS-                53         1060         12.5       13,250     12,635 (per respondent)      669,644
 (develop and execute agreements).   10456.
Sec.  Sec.   435.923 and 457.340    OCN 0938-New; CMS-                53           53           70        3,710      3,815 (per respondent)      202,184
 (create registration process and    10456.
 work flow).
Sec.  Sec.   435.923 and 457.340    OCN 0938-New; CMS-                53           53           50        2,650      1,710 (per respondent)       90,625
 (develop training materials).       10456.
Sec.  Sec.   435.923 and 457.340    OCN 0938-New; CMS-                53           53           50        2,650      1,332 (per respondent)       70,596
 (train application assistors).      10456.
Sec.  Sec.   435.1101(b) and        OCN 0938-New; CMS-                53           53           50        2,650      1,710 (per respondent)       90,625
 457.355.                            10456.
447.57............................  0938-New; CMS-10456.              53           53            6          318        210 (per respondent)       11,130
Sec.  Sec.   155.225 and 155.227..  OCN 0938-New; CMS-                51           51          105        5,355      6,733 (per respondent)      343,382
                                     10400.
Sec.  Sec.   155.302, 155.225,      OCN 0938-New; CMS-                51           51          105        5,355      6,733 (per respondent)      343,382
 155.227, 155.345, 155.510.          10400.
Sec.  Sec.   155.302, 155.310,      OCN 0938-New; CMS-                51           51          100        5,100      5,971 (per respondent)      304,497
 155.315, 155.320, 155.330,          10400.
 155.335, 155.345, 155.410,
 155.715, 155.722, 155.725, and
 155.1080.
Sec.  Sec.   155.315, 155. 330,     OCN 0938-New; CMS-                51           51           .2  ...........     29 (for one respondent)         5.73
 155.335.                            10400.
Sec.   155.320....................  OCN 0938-New; CMS-                 1  ...........          2.2  ...........     34 (for one respondent)  ...........
                                     10400.
Sec.  Sec.   155.400, 405, and 430  OCN 0938-New; CMS-                51           51          142         7242      7,254 (per respondent)      369,958
                                     10400.
Sec.  Sec.   155.505, 155.510,      OCN 0938-New; CMS-                51      279,055          1.5      418,582    243,461 (per respondent)   12,416,553
 155.520, 155.530, 155.535,          10400.
 155.540, 155.545, 155.550,
 155.555, 155.740 (Processing
 Appeal Request Forms).
Sec.  Sec.   155.505, 155.510,      OCN 0938-New; CMS-                51  ...........            1  ...........          27 (per appellant)  ...........
 155.520, 155.530, 155.535,          10400.
 155.540, 155.545, 155.550,
 155.555, 155.740 (Processing
 Request for Additional
 Information Forms).
Sec.  Sec.   155.505, 155.510,      OCN 0938-New; CMS-                51  ...........      0.5-1.5  ...........       10-45 (per appellant)  ...........
 155.520, 155.530, 155.535,          10400.
 155.540, 155.545, 155.550,
 155.555, 155.740 (Processing
 Other Appeals-Related Forms).
Sec.  Sec.   155.505, 155.510,      OCN 0938-New; CMS-                51           51          105        5,355      6,733 (per respondent)      343,382
 155.520, 155.530, 155.535,          10400.
 155.540, 155.545, 155.550,
 155.555, 155.740 (Creating
 Agreements (Medicaid, CHIP) for
 Appeals).
Sec.  Sec.   155.505, 155.510,      OCN 0938-New; CMS-                51           51          159        8,109      9,159 (per respondent)      467,131
 155.520, 155.530, 155.535,          10400.
 155.540, 155.545, 155.550,
 155.555, 155.740 (Developing
 Records Storage System for
 Appeals).
Sec.  Sec.   155.505, 155.510,      OCN 0938-New; CMS-                51           51          100        5,100      5,971 (per respondent)      304,497
 155.520, 155.530, 155.535,          10400.
 155.540, 155.545, 155.550,
 155.555, 155.740 (Developing
 Appeals-Related Notices).
Sec.  Sec.   156.260, 156.265,      OCN 0938-New; CMS-                51           51          100        5,100      5,971 (per respondent)      304,497
 156.270, and 156.290.               10400.
Sec.   157.205(e) and (f).........  OCN 0938-New; CMS-    ..............  ...........           68  ...........      4,030 (per respondent)  ...........
                                     10400.
                                   ---------------------------------------------------------------------------------------------------------------------
    Total.........................  ....................  ..............  ...........  ...........      518,432  ..........................   17,862,082
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 4672]]

E. Submission of PRA-Related Comments

    We have submitted a copy of this proposed rule to OMB for its 
review of the rule's information collection and recordkeeping 
requirements. These requirements are not effective until they have been 
approved by the OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collections referenced above, access the CMS 
Web site at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html or call the Reports 
Clearance Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements. If you comment on these information collection and 
recordkeeping requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
(CMS-2334-P) Fax: (202) 395-6974; or Email: [email protected]. PRA-specific comments must be received by March 
15, 2013.

VI. Response to Comments

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

VII. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993) and 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011). Executive Orders 12866 and 13563 direct agencies to 
assess all costs and benefits of available regulatory alternatives and, 
if regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for rules with 
economically significant effects ($100 million or more in any 1 year). 
The Office of Management and Budget has determined that this rulemaking 
is ``economically significant'' within the meaning of section 3(f)(1) 
of Executive Order 12866, because it is likely to have an annual effect 
of $100 million in any one year. Accordingly, we have prepared a 
Regulatory Impact Analysis that presents the costs and benefits of this 
rulemaking. The Department invites comments on this assessment and its 
conclusions.
    In the April 30, 2010, final rule on State Flexibility for Medicaid 
Benefit Packages, the assumptions utilized in modeling the estimated 
economic impact of the associated provisions took into perspective the 
costs of the benefit package for the new adult group. Coverage of these 
benefits was already accounted for in the April 30, 2010, final rule, 
and therefore, does not need to be repeated here. 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 creation of 
Affordable Insurance Exchanges.
    Beginning in 2014, individuals and small businesses will be able to 
purchase private health insurance--known as qualified health plans--
through competitive marketplaces called Affordable Insurance Exchanges, 
or ``Exchanges.'' This proposed rule would: (1) Set forth standards for 
adjudicating appeals of eligibility determinations, including 
eligibility for enrollment in a qualified health plan through the 
Exchange and insurance affordability programs, certificates of 
exemption from the shared responsibility payment, and SHOP eligibility, 
for purposes of implementing section 1411(f) of the Affordable Care 
Act; (2) outline criteria related to the verification of enrollment in 
an eligible employer-sponsored plan and eligibility for qualifying 
coverage in an eligible employer-sponsored plan; and (3) further 
specify or amend other eligibility and enrollment provisions to provide 
detail necessary for state implementation. This rule continues to 
afford states substantial discretion in the design and operation of an 
Exchange, with greater standardization provided where directed by the 
statute or where there are compelling practical, efficiency or consumer 
protection reasons.

B. Estimated Impact of the Medicaid and CHIP Eligibility Provisions

    The RIA published with the March 2012 Medicaid eligibility final 
rule detailed the impact of the Medicaid eligibility changes related to 
implementation of the Affordable Care Act. The majority of provisions 
included in this proposed rule were described in that detailed RIA.
1. Anticipated Effects on Medicaid Enrollment
    The Affordable Care Act's anticipated effects on Medicaid 
enrollment were described in the March 2012 RIA, with the exception of 
the new eligibility group for former foster care children. The former 
foster care group was not covered in the March 2012 rule and therefore 
was not included in the RIA for that rule. Estimates for this new group 
are provided below. We note that the estimates included in the March 
2012 RIA, and those for the former foster care group, reference the 
Medicaid baseline for the FY 2013 President's Budget.
    As described in Table 2, the CMS Office of the Actuary (OACT) 
estimates that by 2017, an additional 74,000 individuals will be 
enrolled in Medicaid under the new eligibility group for former foster 
care children.

[[Page 4673]]



                                   Table 2--Estimated Effects of This Proposed Rule on Medicaid Enrollment, 2013-2017
                                                                     [In thousands]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           2013             2014             2015             2016             2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
Enrollment.........................................................               0               55               72               73               74
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: CMS Office of the Actuary.

    OACT prepared this estimate using data on individuals, together 
with their income levels and insured status, from the Current 
Population Survey and the Medical Expenditure Panel Survey. In 
addition, they made assumptions as to the actions of individuals in 
response to the new coverage options under the Affordable Care Act and 
the operations of the new enrollment processes and the Exchanges. OACT 
notes that such estimates are inherently uncertain, since they depend 
on future economic, demographic, and other factors that cannot be 
precisely determined in advance. Moreover, the actual behavior of 
individuals and the actual operation of the new enrollment processes 
and Exchanges could differ from OACT's assumptions.
    The net increase in enrollment in the Medicaid program and the 
resulting reduction in the number of uninsured individuals will produce 
several benefits. For new enrollees, eligibility for Medicaid will 
improve access to medical care. Evidence suggests that improved access 
to medical care will result in improved health outcomes and greater 
financial security for these individuals and families. Evidence on how 
Medicaid coverage affects medical care utilization, health, and 
financial security comes from a recent evaluation of an expansion of 
Oregon's Medicaid program.\4\ In 2008, Oregon conducted a lottery to 
expanded access to uninsured adults with incomes below 100 percent of 
the FPL. Approximately 10,000 low-income adults were newly enrolled in 
Medicaid as a result. The evaluation is particularly strong because it 
was able to compare outcomes for those who won the lottery with 
outcomes for those who did not win, and contains an estimate of the 
benefits of Medicaid coverage. The evaluation concluded that for low-
income uninsured adults, Medicaid coverage has the following effects:
---------------------------------------------------------------------------

    \4\ Amy Finkelstein, et al, ``The Oregon Health Insurance 
Experiment: Evidence from the First Year,'' National Bureau of 
Economic Research Working Paper No. 17190, July 2011.
---------------------------------------------------------------------------

     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.
    While there are limitations on the ability to extrapolate from 
these results to the likely impacts of the Affordable Care Act's 
expansion of Medicaid coverage, these results provide evidence of 
health and financial benefits associated with coverage expansions for a 
population of non-elderly adults.
    The results of the Oregon study are consistent with prior research, 
which has found that health insurance coverage improves health 
outcomes. The Institute of Medicine (2002) analyzed several population 
studies and found that people under the age 65 who were uninsured faced 
a 25 percent higher risk of mortality than those with private coverage. 
This pattern was found when comparing deaths of uninsured and insured 
patients from heart attack, cancer, traumatic injury, and HIV 
infection.\5\ The Institute of Medicine also concluded that having 
insurance leads to better clinical outcomes for diabetes, 
cardiovascular disease, end-stage renal disease, HIV infection and 
mental illness, and that uninsured adults were less likely to have 
regular checkups, recommended health screening services and a usual 
source of care to help manage their disease than a person with 
coverage. Other research has found that birth outcomes for women 
covered by Medicaid are not different than those achieved for privately 
insured patients, adjusting for risk variables.\6\
---------------------------------------------------------------------------

    \5\ Institute of Medicine, Care without coverage: too little, 
too late (National Academies Press, 2002).
    \6\ E.A. Anum, et al, ``Medicaid and Preterm Birth and Low Birth 
Weight: The Last Two Decades'' Journal of Women's Health Vol. 19 
(November 2010).
---------------------------------------------------------------------------

    In addition to being able to seek treatment for illnesses when they 
arise, Medicaid beneficiaries will be able to more easily obtain 
preventive care, which will help maintain and improve their health. 
Research demonstrates that when uninsured individuals obtain coverage 
(including Medicaid), the rate at which they obtain needed care 
increases substantially.7 8 9 Having health insurance also 
provides significant financial security. Comprehensive health insurance 
coverage provides a safety net against the potentially high cost of 
medical care, and the presence of health insurance can mitigate 
financial risk. The Oregon study found people who gained coverage were 
less likely to have unpaid medical bills referred to a collection 
agency. Again, this study is consistent with prior research showing the 
high level of financial insecurity associated with lack of insurance 
coverage. Some recent research indicates that illness and medical bills 
contribute to a large and increasing share of bankruptcies in the 
United States.\10\ Another recent analysis found that more than 30 
percent of the uninsured report having zero (or negative) financial 
assets and uninsured families at the 90th percentile of the asset 
distribution report having total financial assets below $13,000--an 
amount that can be quickly depleted with a single hospitalization.\11\ 
Other research indicates that uninsured individuals who experience 
illness suffer on average a loss of 30 to 50 percent of assets relative 
to households with insured individuals.\12\
---------------------------------------------------------------------------

    \7\ S.K. Long, et al., ``How well does Medicaid work in 
improving access to care?'' HSR: Health Services Research 40:1 
(February 2005).
    \8\ Henry J. Kaiser Family Foundation, ``Children's Health--Why 
Health Insurance Matters.'' Washington, DC: KFF, 2002.
    \9\ C. Keane, et al., ``The impact of Children's Health 
Insurance Program by age,'' Pediatrics 104:5 (1999).
    \10\ D.U. Himmelstein, et al., ``Medical bankruptcy in the 
United States, 2007: Results of a National Study,'' The American 
Journal of Medicine 122 no. 8, (2009).
    \11\ ASPE. The Value of Health Insurance: Few of the Uninsured 
Have Adequate Resources to Pay Potential Hospital Bills. (2011).
    \12\ Cook, K. et al., ``Does major illness cause financial 
catastrophe?,'' Health Services Research 45, no. 2 (2010).
---------------------------------------------------------------------------

2. Anticipated Effects on States
    The major state impacts from this proposed rule were covered in the 
RIA of the March 2012 Medicaid eligibility final rule. However, OACT 
estimates that state expenditures on behalf of the additional 
individuals gaining Medicaid coverage as a result of the establishment 
of the new eligibility group for former foster care children will total 
$72 million in FY 2014 and $399 million over five years (2013-2017), as 
described in Table 3. These estimates do not consider offsetting 
savings that will result, to a varying degree depending on

[[Page 4674]]

the state, from less uncompensated care, less need for state-financed 
health services and coverage programs, and greater efficiencies in the 
delivery of care.

                             Table 3--Estimated State Budgetary Effects of Increased Medicaid Benefit Spending FY 2013-2017
                                                                [In millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2013             2014             2015             2016             2017          2013-2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Effect on Medicaid Benefit Spending...........               0               72              101              109              117              399
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Office of the Actuary.

    Simplifying Medicaid and CHIP eligibility policies, such as by 
eliminating obsolete and unnecessary eligibility groups and 
establishing streamlined verification procedures and notice and appeals 
processes, would reduce administrative burdens for states and for 
individuals. Medicaid's current patchwork of eligibility rules is 
complex for states to administer, requiring significant state resources 
and staff attention. The coordination of Medicaid and CHIP eligibility 
policy and processes with those of the new Exchanges, including 
processes to allow for consistency in the provision of notices and 
appeal rights, and the movement to simplify verification processes with 
less reliance on paper documentation should all result in a Medicaid 
eligibility system that is far easier for states to administer than 
Medicaid's current, more complex system. These changes could generate 
administrative savings and increase efficiency. The new system through 
which states will verify certain information with other federal 
agencies, such as income data from the IRS, will also relieve state 
Medicaid agencies of some current responsibilities, creating further 
efficiencies for the states. Currently more than 40 states use an 
electronic data match with the Social Security Administration in lieu 
of requiring paper documentation, and many states have found savings 
from this electronic verification process. In addition, the option to 
provide electronic notices, combined with coordination of notice 
processes among all insurance affordability programs, may improve 
consumer access to information while decreasing burden and costs to the 
states.
    These administrative simplifications are expected to lower state 
administrative costs, although we expect that states may incur short 
term increases in administrative costs (depending on their current 
systems and practices) as they implement these changes. The extent of 
these initial costs will depend on current state policy and practices. 
Federal support is available to help states finance these system 
modifications. Notably, in previous rulemaking, CMS increased federal 
funding to states to better support state efforts to develop 
significantly upgraded eligibility and enrollment systems. To 
anticipate and support these efforts, CMS published the Federal Funding 
for Medicaid Eligibility Determination and Enrollment Activities final 
rule (75 FR 21950) in the April 19, 2011 Federal Register. That rule 
amended the definition of Mechanized Claims Processing and Information 
Retrieval Systems to include systems used for eligibility 
determination, enrollment, and eligibility reporting activities by 
Medicaid, and made this work eligible for enhanced funding with a 
federal matching rate of 90 percent for development through 2015 and 75 
percent for ongoing maintenance and operations costs. Systems must meet 
certain standards and conditions in order to qualify for the enhanced 
match.
3. Anticipated Effects on Providers
    As expansion and simplification of Medicaid and CHIP eligibility 
could result in more individuals obtaining health insurance coverage, 
health centers, hospitals, clinics, physicians, and other providers are 
likely to experience a significant increase in their insured patient 
volume. We expect providers that serve a substantial share of the low-
income population to realize the most substantial increase in insured 
patients. Providers, such as hospitals that serve a low-income 
population, may financially benefit from having a higher insured 
patient population and providing less uncompensated care, and the 
establishment of a presumptive eligibility option for hospitals will 
further simplify access to coverage for patients. In addition, we 
expect continuity of coverage to improve providers' ability to maintain 
their relationship with patients and to reduce provider administrative 
burdens such as time spent helping patients to access information on 
coverage options and to apply for Medicaid or CHIP.
    The improved financial security provided by health insurance also 
helps ensure that patients can pay their medical bills. The Oregon 
study found that coverage significantly reduces the level of unpaid 
medical bills sent to a collection agency.\13\ Most of these bills are 
never paid, so this reduction in unpaid bills means that one of the 
important effects of expanded health insurance coverage, such as the 
coverage that will be provided through the Exchanges, is a reduction in 
the level of uncompensated care provided.
---------------------------------------------------------------------------

    \13\ A Finkelstein, et al., ``The Oregon Health Insurance 
Experiment: Evidence from the First Year,'' National Bureau of 
Economic Research Working Paper Series No. 17190 (2011).
---------------------------------------------------------------------------

    Because the majority of individuals gaining coverage under this 
provision are likely to have been previously uninsured, we do not 
anticipate that the provisions of this proposed rule will impose new 
costs on providers. Medicaid generally reimburses providers at a lower 
rate than employer-sponsored health insurance or other forms of private 
health insurance. For the minority of individuals who become eligible 
for Medicaid under this provision who are currently covered by 
employer-sponsored health insurance, there is thus a possibility that 
their providers may experience lower payment rates. Conversely, 
Medicaid generally reimburses federally qualified health centers at a 
higher rate than employer-sponsored insurance and many new Medicaid 
enrollees may seek treatment in this setting, which would increase 
payment to these providers. At the same time, the increased federal 
financial support for Medicaid, the growth in Medicaid enrollment, and 
the potential that many plans will operate in both the Exchange and in 
Medicaid may result in states electing to increase Medicaid payment 
rates to providers.\14\
---------------------------------------------------------------------------

    \14\ D. Bachrach, et al., ``Medicaid's role in the Health 
Benefits Exchange: A road map for States,'' A Maximizing Enrollment 
Report, National Academy for State Health Policy and Robert Wood 
Johnson Foundation (March 2011). Available online at http://www.nashp.org/sites/default/files/maxenroll%20Bachrach%20033011.pdf.
---------------------------------------------------------------------------

4. Anticipated Effects on Federal Budget
    Table 4 presents estimates of the federal budget effect of this 
rule beyond

[[Page 4675]]

the impact provided in the March 2012 Medicaid eligibility final rule 
RIA. The federal financial impact of proposed changes to CHIP will be 
small; as CHIP expenditures are capped under current law, any increases 
in spending could be expected to be offset by less available funding in 
the future. The costs provided below are primarily attributable to the 
impact of the eligibility group for former foster care children on net 
federal spending for Medicaid benefits. The impact of other Affordable 
Care Act provisions was detailed in the prior Medicaid eligibility 
final rule RIA. As a result of the establishment of the eligibility 
group for former foster care children, OACT estimates an increase in 
net federal spending on Medicaid benefits for the period FY 2014 and 
later, with the increase estimated to be about $95 million in 2014 and 
about $528 million over the 4-year period from FY 2014 through 2017.

                                   Table 4--Estimated Net Increase in Federal Medicaid Benefit Spending, FY 2013-2017
                                                                [In millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2013             2014             2015             2016             2017          2013-2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Effect on Medicaid Benefit Spending...........               0               95              134              144              155              528
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Office of the Actuary.

C. Estimated Impact of the Medicaid Premiums and Cost Sharing 
Provisions

1. Overall Impact
    The changes proposed to Medicaid premiums and cost sharing clarify 
and update existing flexibilities and provide new flexibility for 
states to increase beneficiaries' cost sharing obligations. The DRA 
provided states new authority to implement increased cost sharing and 
premiums for beneficiaries with incomes above 100 percent of the 
federal poverty line, but to date, most states have not taken advantage 
of these flexibilities. As states contemplate the changes required 
under the Affordable Care Act, more states may consider these 
authorities, as well as the new flexibility proposed by these 
regulations to impose higher copayments for non-preferred drugs and 
non-emergency use of emergency department services. Based on our policy 
analysis, we do not anticipate significant costs or savings from these 
proposed changes at the program level given the targeted nature of the 
cost sharing. We believe these proposed policies would encourage less 
costly care and decreased use of unnecessary services, which may reduce 
state and federal costs for the specified services. In addition, any 
nominal increase in the beneficiary share of costs would result in a 
small reduction in the state and federal share of costs. A full 
analysis by OACT is currently under development.
2. Anticipated Effects
    As states better understand their options for imposing premiums and 
cost sharing, more states may take advantage of existing flexibilities, 
such as cost sharing of up to 20 percent of the cost of the service, 
and the option of allowing providers to deny services for unpaid cost 
sharing, both of which are targeted to somewhat higher income 
beneficiaries. Research has shown that higher-than-nominal cost sharing 
on very low-income individuals can have an adverse impact on access to 
services by discouraging or preventing such individuals from seeking 
needed care. However, such impacts are not likely to result from the 
changes proposed here as they are largely focused on services where 
there are more appropriate and less costly alternatives. Increased cost 
sharing may have a negative impact on providers, as uncollected cost 
sharing reduces provider reimbursement, to the extent that the 
beneficiary cannot or does not pay the cost sharing and services are 
nonetheless provided. Under the DRA provisions and this proposed rule, 
however, states may minimize this impact by allowing providers to deny 
services for failure to pay the required cost sharing in certain 
circumstances.

D. Estimated Impact of Exchange Provisions

    The provisions in this proposed rule amend certain provisions of 
the Exchange final rule as well as add new provisions, mainly those 
related to eligibility appeals. Our approach in this regulatory impact 
analysis was to build off of the analysis conducted as part of the 
Exchange final rule, available at http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf as we do not believe this proposed 
rule significantly alters the estimates of the impact of Exchanges on 
the budget or on enrollment in health insurance and therefore does not 
significantly alter the regulatory impact analysis drafted as part of 
such rulemaking. This section summarizes benefits and costs of this 
proposed rule.
1. Methods of Analysis
    The estimates in this analysis reflect estimates from the FY 2013 
President's Budget for State Planning and Establishment Grants, which 
incorporate the costs associated with state implementation of the 
provisions proposed in this rule.
2. Benefits of the Proposed Regulation
    This RIA focuses on the effects of the proposed standards 
implementing the provisions in the Affordable Care Act related to 
eligibility appeals and other elements of the eligibility and 
enrollment process. It is difficult to isolate the benefits of these 
provisions from other provisions related to the establishment and 
operations of Exchanges and the Affordable Care Act more generally. 
Moreover, the benefits and costs of the proposed regulation are 
affected by the other elements of the Exchange Establishment final rule 
and related policies in the Affordable Care Act. Accordingly, in this 
section, we provide a discussion of the benefits of increased health 
coverage, which is the primary impact of the creation of Affordable 
Insurance Exchanges.
    Exchanges are expected to reduce the complexity of information 
regarding available choices and increase the ability of consumers to 
easily access insurance. Therefore, we believe, for example, that the 
eligibility appeals process and the streamlined notice standards 
included in this proposed rule will support the development and 
implementation of a streamlined eligibility process, and in doing so, 
increase enrollment in health insurance.
    As discussed in full above regarding the anticipated effect on 
Medicaid enrollment, the best available evidence on how health 
insurance affects medical care utilization, health, and financial 
security comes from a recent evaluation of an expansion of Oregon's 
Medicaid program.\15\ These same benefits apply to

[[Page 4676]]

the proposed Exchange provisions which, when taken together with the 
provisions in the Exchange final rule, will increase access to health 
coverage. The benefits concluded in the study included significantly 
better self-reported health.
---------------------------------------------------------------------------

    \15\ Finkelstein, A., et al., ``The Oregon Health Insurance 
Experiment: Evidence from First Year,'' National Bureau of Economic 
Research Working Paper Series No. 17190 (2011).''
---------------------------------------------------------------------------

    The regulations proposed here in subparts D and E are consistent 
with the overall theme of the entire Exchange rule adopted in March 
2012, in that they continue to rely on the use of information 
technology and data matching to minimize administrative burden on 
applicants, states, and plans. For example, section 155.320(d) of the 
proposed rule outlines the process to verify enrollment in an eligible 
employer-sponsored plan and eligibility for qualifying coverage in an 
eligible employer-sponsored plan. In this section, we specify that the 
Exchange must first rely on electronic data sources wherever possible, 
using paper documentation only in situations in which electronic data 
is unavailable or is not reasonably compatible with the applicant's 
attestation. Further, in Sec.  155.230(d), we propose that the Exchange 
will provide eligibility notices electronically to the extent that the 
recipient elects electronic notices. Together, this emphasis on the use 
of technology in place of paper-driven processes minimizes costs for 
all involved parties.
    Subpart F of the proposed rule outlines standards and processes for 
Exchange eligibility appeals. For individual eligibility 
determinations, applicants and enrollees may appeal eligibility 
determinations made through the eligibility process at the state level, 
if the state opts to establish an appeals process, or at the federal 
level, if the state opts not to establish an appeals process or upon 
exhaustion of a state-based appeals process. An effective eligibility 
appeals process improves access to health insurance, by providing 
recourse for issues that arise in the eligibility process that can 
disrupt coverage, and also reduces administrative costs, by providing 
resolution options that enable the vast majority of issues to be 
resolved by lower-level staff.
    The Exchange appeals entity may provide an opportunity for an 
informal resolution process prior to a hearing, where appellants work 
with appeals staff to resolve issues, and the proposed appeals process 
for individuals conducted by HHS will be handled initially through an 
informal process. If the appellant is not satisfied with the outcome of 
the informal resolution, he or she has the right to a hearing. The 
proposed appeals process is based on best practices to provide 
flexible, transparent, and consumer-centric appeals review and 
resolution. By providing an efficient, but comprehensive appeals 
process, the provisions of this proposed rule will ensure accurate and 
fair appeals of eligibility determinations.
    Subpart F of the proposed rule also includes standards for 
employers related to notices and appeals. Employers will receive notice 
when an employee is determined eligible for advance payments of the 
premium tax credit or cost-sharing reductions. This notice indicates 
that the employer may be liable for a penalty through the IRS because 
the employee has been determined eligible for advance payments of the 
premium tax credit based, in part, on a determination that the employer 
does not provide qualifying coverage. Employers may appeal the 
determination about the nature of the coverage they offer to employees 
to the Exchange before the penalty is imposed by the IRS. We propose 
that employer appeals will be conducted through a record review. States 
may choose to establish an employer appeals process, or HHS will 
provide such a process if a state fails to do so. However, unlike the 
individual appeals process, we propose that employers will not elevate 
an appeal decision by a state-based Exchange appeals entity to the HHS 
process.
    Subpart H includes standards for SHOP eligibility appeals. We 
propose that employers and employees will have a similar system for 
appealing denials of eligibility by the SHOP. These appeals will be 
conducted through a record review by the appeals entity. Any state that 
chooses to operate an Exchange will also operate a SHOP and provide a 
SHOP eligibility appeals process. HHS will handle SHOP eligibility 
appeals in the federally facilitated SHOP. SHOP appellants do not have 
the option to elevate state-based SHOP appeal decisions to HHS. By 
providing a separate appeals process for small businesses, the 
provisions of this proposed rule will help ensure accurate and 
satisfactory determinations are made for small businesses complying 
with their responsibilities as defined in the Affordable Care Act.
3. Costs of the Proposed Regulation
    The Affordable Care Act and the implementing regulations found in 
subpart D of the proposed rule provide for a streamlined system based 
on simplified eligibility rules, and an expedited process that will 
enhance enrollment of eligible individuals and minimize costs to 
states, Exchanges and to the federal government. To support this new 
eligibility structure, states seeking to operate Exchanges are expected 
to build new or modify existing information technology (IT) systems. We 
believe that 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. It is 
important to note that, although states have the option to establish 
and operate an Exchange, there is no federal requirement that each 
state establish an Exchange. We believe the proposed provisions provide 
options and flexibility to states that minimize costs and burden on 
Exchanges, consumers, employers and other entities. We also believe 
that overall administrative costs may increase in the short term as 
states build IT systems; however, in the long term, states may see 
savings through the use of more efficient systems.
    Any administrative costs incurred in the development of IT 
infrastructure to support the Exchange may be funded through Exchange 
Planning and Establishment Grants to states. The federal government 
expects that these grants will fund the development of IT systems that 
can be used by many states who either develop their own Exchanges or 
who partner with the federal government to provide a subset of Exchage 
services.\16\ Costs for IT 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.\17\
---------------------------------------------------------------------------

    \16\ For example, CMS has awarded a number of Early Innovator 
grants to develop efficient and replicable IT systems that can 
provide the foundation for other states' work in this area. These 
amounts vary from $6 million to $48 million per state.
    \17\ Federal Funding for Medicaid Eligibility Determination and 
Enrollment Activities. Final Rule. April 19, 2011 [42 CFR Part 433, 
75 FR 68583, pg 21950].
---------------------------------------------------------------------------

    In addition to costs associated with IT infrastructure, potential 
costs associated with this proposed rule relate to the appeals process. 
States that form their own appeals entities will incur costs of staff 
labor to conduct informal resolution proceedings, if a state 
voluntarily takes up the option to offer informal resolution, and to 
conduct hearings. Other costs will be borne by HHS when hearing appeals 
for states without a state-based appeals entity, or when hearing 
secondary appeals from individuals who have exhausted their state-based 
appeals process. In addition,

[[Page 4677]]

costs will be borne by HHS and state-based Exchange appeals entities 
when adjudicating employer and SHOP appeals. However, the proposed rule 
is designed to facilitate the ability of states to choose to 
consolidate appeals operations with similar functions that exist today 
for Medicaid and CHIP, which could reduce one-time and ongoing costs.
    In general, as noted in our discussion of benefits, we anticipate 
that the proposed rule would increase take-up of health insurance; 
therefore, one type of rule-induced cost would be associated with 
providing additional medical services to newly enrolled individuals. A 
recent study found that insured individuals received more hospital care 
and more outpatient care than their uninsured counterparts.\18\
---------------------------------------------------------------------------

    \18\ Finkelstein, A. et al., (2011). The Oregon Health Insurance 
Experiment: Evidence from the First Year,'' National Bureau of 
Economic Research Working Paper Series, 17190.
---------------------------------------------------------------------------

    Below we include estimated federal government payments related to 
grants for Exchange startup. States' initial costs due to the creation 
of Exchanges will be funded by these grants. Eligibility determination 
is a minimum function of the Exchange; therefore the Exchange costs to 
develop the infrastructure for the provisions included in this proposed 
rule are covered by these grant outlays.

              Table 5--Estimated Federal Government Outlays for the Affordable Insurance Exchanges
                                     FY 2013-FY2017, in Billions of Dollars
----------------------------------------------------------------------------------------------------------------
            Year                  2013          2014          2015          2016          2017        2013-2017
----------------------------------------------------------------------------------------------------------------
Grant Authority for Exchange          1.1           0.8           0.4           0.1          0.01          2.41
 Start up \a\...............
----------------------------------------------------------------------------------------------------------------
\a\ FY 2013 President's Budget

E. Alternatives Considered

    The majority of Medicaid and CHIP eligibility provisions proposed 
in this rule serve to implement the Affordable Care Act. All of the 
provisions in this final rule are a result of the recent passage of the 
Affordable Care Act and are largely self-implementing. Therefore, 
alternatives considered for this proposed rule were constrained due to 
the statutory provisions. With publication of this proposed rule, we 
desire to make our implementing regulations available to states and the 
public as soon as possible to facilitate continued efficient operation 
of the state flexibility authorized under section 1937 of the Act.
    In developing this rule, we considered alternatives to some of the 
simplified eligibility policies proposed here, as well as to the 
streamlined, coordinated process and eligibility policies this rule 
established between Medicaid, the Exchange, and other insurance 
affordability programs. One alternative would be to allow Medicaid 
agencies to provide notices to individuals independently of the notices 
provided by other insurance affordability programs. This option would 
allow states to maintain current Medicaid notice practices, but could 
result in multiple communications from different entities regarding 
each individual's eligibility determination process. This could create 
significant confusion for applicants and beneficiaries. Another 
alternative would be to consolidate all notice responsibilities within 
the Exchanges and require one clear line of communication between 
applicants and the entities determining eligibility for insurance 
affordability programs. However, this would reduce state flexibility 
relative to the flexibility already offered in the prior Medicaid 
eligibility rule and would mandate significant coordination among 
insurance affordability programs that could stretch beyond just the 
provision of notices.
    In developing the provisions related to Medicaid premiums and cost 
sharing, we considered maintaining the current structure of the 
regulations and limiting proposed changes to simple updates of maximum 
nominal cost sharing amounts. However, the current structure, with its 
duplicative and sometimes overlapping provisions, makes it much more 
difficult for states to establish a simple, straightforward cost 
sharing policy. We believe the proposed approach will assist states, 
providers, and beneficiaries in understanding their obligations.
    We considered three alternatives on Exchange provisions.
     Alternative #1: Establish only a federal appeals process
    States are not required to establish an Exchange, and those that do 
not will rely on a federally facilitated Exchange. States that do form 
a state-based Exchange likewise have the option to establish a state-
based Exchange appeals entity; however, states without an appeals 
process may rely on the HHS appeals process for individual and employer 
appeals. If states do form a state-based appeals entity, HHS will serve 
as a second level of appeal for individuals unsatisfied with the 
outcome of their state-based Exchange appeal. All state-based Exchanges 
must establish an appeals process for employers and employees in the 
SHOP. One alternative considered was to establish only a federal 
appeals process, as prescribed in statute, and not to offer state-based 
Exchanges the option to establish their own appeal programs. However, 
this alternative was not selected because it would limit state 
flexibility, and negate the administrative efficiencies available 
through the use of existing appeals processes.
     Alternative #2: Require paper documentation to verify 
access to employer-sponsored coverage.
    Section 155.320(d) of the proposed rule provides a process for 
verification related to enrollment in an eligible employer-sponsored 
plan and eligibility for qualifying coverage in an eligible employer-
sponsored plan. The proposed process relies on available electronic 
data sources, with the use of paper documentation in situations in 
which information submitted by an applicant is not reasonably 
compatible with information in electronic data sources, along with a 
sample-based review for situations in which no data is available.
    The alternative model would require the Exchange to require 
individuals to submit paper documentation to verify this information. 
This would not only increase the burden on individuals to identify and 
collect this information, which may not be readily available to the 
applicant, but on employers, who would have to produce this information 
at the request of applicants, and would also require additional time 
and resources for Exchanges to accept and process the paper 
documentation needed for an eligibility determination. In addition, it 
could ultimately increase the amount of time it would take for an 
individual to receive health coverage through the Exchange or an 
insurance affordability program, would reduce the

[[Page 4678]]

number of states likely to operate an Exchange due to increased 
administrative costs, and would dissuade individuals from seeking 
coverage through the Exchange.
     Alternative #3: Require Paper Notices
    In Sec.  155.230(d), we provide that the Exchange will provide the 
option to an individual or employer to receive notices electronically. 
We anticipate that this will be accommodated by the Exchange generating 
electronic notices, storing them on a secure Web site, and notifying 
individuals and employers through a generic email or text message 
communication that a notice is available for review.
    The alternative model would require the Exchange to send all 
notices via U.S. mail. This would significantly increase administrative 
costs for printing and mailing, and also generate significant volumes 
of undeliverable mail which would be returned to the Exchange.
Summary of Costs for Each Alternative
    Alternative 1 would add additional costs as it does not allow the 
use of existing state resources to administer appeals. The paper-driven 
process outlined under alternatives 2 and 3 would ultimately increase 
the amount of time it would take for an individual to receive health 
coverage through the Exchange or an insurance affordability program, 
would increase administrative costs, and would dissuade individuals 
from seeking coverage through the Exchange.

F. Limitations of the Analysis

    A number of challenges face estimators in projecting Medicaid and 
CHIP benefits and costs under the Affordable Care Act and the proposed 
rule. Health care cost growth is difficult to project, especially for 
people who are currently not in the health care system--the population 
targeted for the Medicaid eligibility changes. Such individuals could 
have pent-up demand and thus have costs that may be initially higher 
than other Medicaid enrollees, while they might also have better health 
status than those who have found a way (for example, ``spent down'') to 
enroll in Medicaid.
    There is also considerable uncertainty about behavioral responses 
to the Medicaid and CHIP changes. Individuals' participation rates are 
particularly uncertain. Medicaid participation rates for people already 
eligible tend to be relatively low (estimates range from 75 to 86 
percent), despite the fact that there are typically no premiums and low 
to no cost sharing for comprehensive services. It is not clear how the 
proposed changes will affect those already eligible, or the interest in 
participating for those newly eligible, as previously described.

G. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4/), in Table 6 we have 
prepared an accounting statement table showing the classification of 
the impacts associated with implementation of this proposed rule.

          Table 6--Accounting Statement: Classification of Estimated Net Costs, From FY 2013 to FY 2017
                                                  [In millions]
----------------------------------------------------------------------------------------------------------------
                                                                                       Units
                                                                 -----------------------------------------------
               Category                         Estimates                          Discount rate      Period
                                                                    Year dollar      (Percent)        covered
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/year)..  Not Estimated...........            2012               7       2013-2017
                                       -------------------------------------------------------------------------
                                        Not Estimated...........            2012               3       2013-2017
----------------------------------------------------------------------------------------------------------------
Qualitative...........................   The Exchanges, combined with other actions being taken to implement the
                                            Affordable Care Act, will improve access to health insurance, with
                                             numerous positive effects, including reduced morbidity and fewer
                                           bankruptcies. The Exchange will also serve as a distribution channel
                                          for insurance reducing administrative costs as a part of premiums and
                                           providing comparable information on health plans to allow for a more
                                                              efficient shopping experience.
----------------------------------------------------------------------------------------------------------------
                                                     Costs*
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/year)..  521.....................            2012               7       2013-2017
                                       -------------------------------------------------------------------------
                                        499.....................            2012               3       2013-2017
----------------------------------------------------------------------------------------------------------------
Qualitative...........................   Unquantified costs include State implementation costs above the amount
                                              covered by Federal grants, costs associated with hearings, and
                                          increased medical costs associated with more widespread enrollment in
                                                                    health insurance.
----------------------------------------------------------------------------------------------------------------
                                                   Transfers**
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/year)..  101.....................            2012               7       2013-2017
                                       -------------------------------------------------------------------------
                                        103.....................            2012               3       2013-2017
----------------------------------------------------------------------------------------------------------------
From Whom to Whom.....................       The transfer is from Federal Government to States on Behalf of
                                                                      Beneficiaries.
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/year)..  76......................            2012               7       2013-2017
                                       -------------------------------------------------------------------------
                                        78......................            2012               3       2013-2017
----------------------------------------------------------------------------------------------------------------

[[Page 4679]]

 
From Whom to Whom.....................           The transfer is from States on Behalf of Beneficiaries.
----------------------------------------------------------------------------------------------------------------
* These costs include grant outlays to States to establish Exchanges; most of these Exchange-establishment costs
  have been included in the accounting statement for the Exchange final rule.
** Source: Office of the Actuary.

H. Regulatory Flexibility Analysis

    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 
proposed rule would: (1) Set forth standards for adjudicating appeals 
of eligibility determinations, including eligibility for enrollment in 
a QHP through the Exchange and insurance affordability programs, 
certificates of exemption from the shared responsibility payment, and 
SHOP eligibility, for purposes of implementing section 1411(f) of the 
Affordable Care Act, (2) outline criteria related to the verification 
of enrollment in an eligible employer-sponsored plan and eligibility 
for qualifying coverage in an eligible employer-sponsored plan, and (3) 
further specify or amend standards related to other eligibility and 
enrollment provisions to provide detail necessary for state 
implementation.
    The intent of this rule is to continue to afford states substantial 
discretion in the design and operation of an Exchange, with greater 
standardization provided where directed by the statute or where there 
are compelling practical, efficiency or consumer protection reasons.
    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 also 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 for Exchanges that affect 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 in order to enable the QHP issuer to 
provide the correct level of advance payments of the premium tax credit 
and 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).\16\
---------------------------------------------------------------------------

    \16\ ``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 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 RIA for the Exchange final rule,

[[Page 4680]]

available at http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
    Subpart F of part 155 proposes to establish an appeals process 
through which an employer may appeal a determination that the employer 
does not provide qualifying coverage in an eligible employer-sponsored 
plan with respect to the employee referenced in the notice pursuant to 
section 1411(f)(2) of the Affordable Care Act, or an eligibility 
determination for 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. However, 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.
    Except in the Exchange provisions, few of the entities that meet 
the definition of a small entity as that term is used in the RFA (for 
example, small businesses, nonprofit organization, and small 
governmental jurisdictions with a population of less than 50,000) would 
be impacted directly by this proposed rule. Individuals and states are 
not included in the definition of a small entity. In addition, the 
impact of the majority of this rule was addressed in the RIA 
accompanying the March 2012 Medicaid eligibility rule. Therefore, the 
Secretary has determined that this final rule will not have a 
significant economic impact on a substantial number of small entities, 
and we have not prepared a regulatory flexibility analysis.
    Additionally, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a proposed rule may have a significant 
economic impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 603. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
metropolitan statistical area and has fewer than 100 beds. We are not 
preparing an analysis for section 1102(b) of the Act because the 
Secretary has determined that this proposed rule would not have a 
direct economic impact on the operations of a substantial number of 
small rural hospitals.

I. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation, by state, 
local, or tribal governments, in the aggregate, or by the private 
sector. Currently, that threshold is approximately $139 million. This 
final rule does not mandate expenditures by state governments, local 
governments, tribal governments, in the aggregate, or the private 
sector, of $139 million. The majority of state, local, and private 
sector costs related to implementation of the Affordable Care Act were 
described in the RIA accompanying the March 2012 Medicaid eligibility 
rule. Furthermore, the proposed rule does not set any mandate on states 
to set up an Exchange.

J. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule that imposes 
substantial direct effects on states, preempts state law, or otherwise 
has federalism implications. We wish to note again that the impact of 
changes related to implementation of the Affordable Care Act were 
described in the RIA of the March 2012 Medicaid eligibility rule. As 
discussed in the March 2012 RIA, we have consulted with states to 
receive input on how the various Affordable Care Act provisions 
codified in this proposed rule would affect states. We continue to 
engage in ongoing consultations with Medicaid and CHIP Technical 
Advisory Groups (TAGs), which have been in place for many years and 
serve as a staff level policy and technical exchange of information 
between CMS and the states. Through consultations with these TAGs, we 
have been able to get input from states specific to issues surrounding 
the changes in eligibility groups and rules that will become effective 
in 2014.
    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, will establish 
and operate an Exchange in that state. Additionally, states will have 
the opportunity to participate in state Partnership Exchanges that 
would allow states to leverage work done by other states and the 
federal government.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have federalism 
implications or limit the policy making discretion of the states, the 
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 
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.

K. Congressional Review Act

    This proposed rule is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can 
take effect, the federal agency promulgating the rule shall submit to 
each House of the Congress and to the Comptroller General a report 
containing a copy of the rule along with other specified information, 
and has

[[Page 4681]]

been transmitted to Congress and the Comptroller General for review.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 430

    Administrative practice and procedure, Grant programs--health, 
Medicaid, Reporting and recordkeeping requirements.

42 CFR Part 431

    Grant programs--health, Health facilities, Medicaid, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 433

    Administrative practice and procedure, Child support Claims, Grant 
programs--health, Medicaid, Reporting and recordkeeping requirements.

42 CFR Part 435

    Aid to Families with Dependent Children, Grant programs--health, 
Medicaid, Reporting and recordkeeping requirements, Supplemental 
Security Income (SSI), Wages.

42 CFR Part 440

    Grant programs-health, Medicaid.

42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs--health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.

42 CFR Part 457

    Administrative practice and procedure, Grant programs--health, 
Health insurance, Reporting and recordkeeping requirements.

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.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:

PART 430--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

0
1. The authority citation for part 430 continues to read as follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

0
2. Section 430.12 is amended by revising paragraph (a) to read as 
follows:


Sec.  430.12  Submittal of State plans and plan amendments.

    (a) Format. A State plan for Medicaid consists of a standardized 
automated template, issued and periodically updated by CMS, that 
includes both basic requirements and individualized content that 
reflects the characteristics of the State's program.
    (1) States with approved paper State plans shall submit plans to 
comply with the required automated format with full compliance not 
later than one year following the availability of the automated 
template.
    (2) Thereafter, approved paper State plans or plan amendments shall 
be valid only temporarily to the extent specifically authorized and 
incorporated by reference under the approved automated State plan.
* * * * *

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

0
3. The authority citation for part 431 continues to read as follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

0
4. Section 431.10 is amended by--
0
A. Revising paragraphs (a), (c), (d), and (e).
0
B. Adding paragraph (b)(3).
    The revisions and additions read as follows:


Sec.  431.10  Single State agency.

    (a) Basis, purpose, and definitions. (1) This section implements 
section 1902(a)(4) and (5) of the Act.
    (2) For purposes of this part--
    Appeals decision means a decision made by a hearing officer 
adjudicating a fair hearing under subpart E of this part, including by 
a hearing officer employed an Exchange appeals entity to which the 
agency has delegated authority to conduct such hearings under this 
section.
    Exchange has the meaning given to the term in 45 CFR 155.20.
    Exchange appeals entity has the meaning given to the term ``appeals 
entity,'' as defined in 45 CFR 155.500.
    Medicaid agency is the single State agency for the Medicaid 
program.
    (b) * * *
    (3) The single State agency is responsible for determining 
eligibility for all individuals applying for or receiving benefits in 
accordance with regulations in part 435 of this chapter and for fair 
hearings filed in accordance with subpart E of this part.
    (c) Delegations. (1) Subject to the requirement in paragraph (c)(2) 
of this section, the Medicaid agency may, in the approved state plan--
    (i)(A) Delegate authority to determine eligibility for all or a 
defined subset of individuals to--
    (1) The single State agency for the financial assistance program 
under title IV-A (in the 50 States or the District of Columbia), or 
under title I or XVI (AABD), in Guam, Puerto Rico, or the Virgin 
Islands;
    (2) The Federal agency administering the supplemental security 
income program under title XVI of the Act; or
    (3) The Exchange.
    (B) The plan must specify to which agency or public authority and 
the individuals with respect to which, authority to determine 
eligibility is delegated.
    (ii) Delegate authority to conduct fair hearings in accordance with 
subpart E of this part for denials of eligibility based on the 
applicable modified adjusted gross income standard, as described in 
Sec.  435.911 of this chapter, to an Exchange or Exchange appeals 
entity, provided that individuals who have requested a fair hearing of 
such a denial are given the choice to have their fair hearing conducted 
by the Medicaid agency or the Exchange or Exchange appeals entity.
    (2) The Medicaid agency may delegate authority to make eligibility 
determinations or to conduct fair hearings under this section only to a 
government agency or public authority which maintains personnel 
standards on a merit basis.
    (3) The Medicaid agency--
    (i) Must ensure that any agency or public authority to which 
eligibility determinations or appeals decisions are delegated--
    (A) Complies with all relevant Federal and State law, regulations 
and policies, including, but not limited to, those related to the 
eligibility criteria applied by the agency under part 435 of this 
chapter; prohibitions against conflicts of interest and improper 
incentives; and safeguarding confidentiality, including regulations set 
forth at subpart F of this part.
    (B) Informs applicants and beneficiaries how they can directly 
contact and obtain information from the agency; and

[[Page 4682]]

    (ii) Must exercise appropriate oversight over the eligibility 
determinations and appeals decisions made by such agencies to ensure 
compliance with paragraphs (c)(2) and (c)(3)(i) of this section and 
institute corrective action as needed, including, but not limited to, 
rescission of the authority delegated under this section.
    (iii) If authority to conduct fair hearings is delegated to the 
Exchange or Exchange appeals entity under paragraph (c)(1)(ii) of this 
section, the agency may establish a review process whereby the agency 
reviews appeals decisions made by the Exchange or Exchange appeals 
entity, but only with respect to conclusions of law, including 
interpretations of State or Federal requirements.
    (d) Agreement with Federal, State or local entities making 
eligibility determinations or appeals decisions. The plan must provide 
for written agreements between the Medicaid agency and the Exchange or 
any other State or local agency that has been delegated authority under 
paragraph (c)(1)(i) of this section to determine Medicaid eligibility 
and for written agreements between the agency and the Exchange or 
Exchange appeals entity that has been delegated authority to conduct 
Medicaid fair hearings under paragraph (c)(1)(ii) of this section. Such 
agreements must be available to the Secretary upon request and must 
include provisions for:
    (1) The relationships and respective responsibilities of the 
parties, including but not limited to the respective responsibilities 
to effectuate the fair hearing rules in subpart E of this part;
    (2) Quality control and oversight by the Medicaid agency, including 
any reporting requirements needed to facilitate such control and 
oversight;
    (3) Assurances that the entity to which authority to determine 
eligibility or conduct fair hearings will comply with the provisions 
set forth in paragraph (c)(3) of this section.
    (4) For appeals, procedures to ensure that individuals have notice 
and a full opportunity to have their fair hearing conducted by either 
the Exchange or Exchange appeals entity or the Medicaid agency.
    (e) Authority of the single State agency. The Medicaid agency may 
not delegate, to other than its own officials, the authority to 
supervise the plan or to develop or issue policies, rules, and 
regulations on program matters.
0
5. Section 431.11 is amended by--
0
A. Removing paragraph (b).
0
B. Redesignating paragraphs (c) and (d), as paragraphs (b) and (c), 
respectively.
0
C. Revising newly redesignated paragraphs (b) and (c).
    The revisions read as follows:


Sec.  431.11  Organization for administration.

* * * * *
    (b) Description of organization. The plan must include a 
description of the organization and functions of the Medicaid agency.
    (c) Eligibility determined or appeals decided by other entities. If 
eligibility is determined or appeals decided by Federal or State 
entities other than the Medicaid agency or by local agencies under the 
supervision of other State agencies, the plan must include a 
description of the staff designated by those other entities and the 
functions they perform in carrying out their responsibilities.
0
6. Section 431.200 is amended by adding paragraph (d) to read as 
follows:


Sec.  431.200  Basic and scope.

* * * * *
    (d) Implements section 1943(b)(3) of the Act and section 1413 of 
the Affordable Care Act to permit coordinated hearings and appeals 
among insurance affordability programs.
0
7. Section 431.201 is amended by --
0
A. Revising the definition of ``Action.''
0
B. Adding the definition of ``Local evidentiary hearing'' in 
alphabetical order
    The revisions and addition to read as follows:


Sec.  431.201  Definitions.

* * * * *
    Action means a termination, suspension, or reduction of Medicaid 
eligibility or a reduction in the level of benefits and services, 
including a determination of the amount of medical expenses which must 
be incurred to establish income eligibility in accordance with Sec.  
435.121(e)(4) or Sec.  435.831 of this chapter, or a determination of 
income for the purposes of imposing any premiums, enrollment fees, or 
cost-sharing under subpart A of part 447 of this chapter. It also means 
determinations by skilled nursing facilities and nursing facilities to 
transfer or discharge residents and adverse determinations made by a 
State with regard to the preadmission screening and resident review 
requirements of section 1919(e)(7) of the Act.
* * * * *
    Local evidentiary hearing means a hearing held on the local or 
county level serving a specified portion of the State.
* * * * *
0
8. Section 431.205 is amended by--
0
A. Revising paragraphs (b)(1)and (b)(2).
0
B. Adding paragraph (e).
    The revisions and additions read as follows:


Sec.  431.205  Provision of hearing system.

* * * * *
    (b) * * *
    (1) A hearing before--
    (i) The Medicaid agency; or
    (ii) For the denial of eligibility based on the applicable modified 
adjusted gross income standard, the Exchange or Exchange appeals entity 
to which authority to conduct fair hearings under this subpart has been 
delegated under Sec.  431.10(c)(1)(ii) of this subpart, provided that 
individuals who have requested a fair hearing are given the choice to 
have their fair hearing conducted by the agency or the Exchange or 
Exchange appeals; or
    (2) An evidentiary hearing at the local level, with a right of 
appeal to the Medicaid agency.
* * * * *
    (e) The hearing system must be accessible to persons who are 
limited English proficient and persons who have disabilities, 
consistent with Sec.  435.905(b) of this chapter.
0
9. Section 431.206 is amended by--
0
A. Revising paragraph (b) introductory text and paragraph (c)(2).
0
B. Adding paragraphs (d) and (e).
    The revisions and additions read as follows:


Sec.  431.206  Informing applicants and beneficiaries.

* * * * *
    (b) The agency or entity taking action must, at the time specified 
in paragraph (c) of this section, inform every applicant or beneficiary 
in writing--
* * * * *
    (c) * * *
    (2) At the time the agency or entity denies eligibility or 
services, or takes other action affecting the individual's eligibility, 
level of benefits and services, or claims;
* * * * *
    (d) If, in accordance with Sec.  431.10(c)(1)(ii) of this part, the 
agency has delegated authority to the Exchange or Exchange appeals 
entity to conduct the fair hearing, that the individual has the right 
to have his or her hearing before the agency, Exchange or the Exchange 
appeals entity, and the method by which the individual may make such 
election.
    (e) The information required under this section must be accessible 
to individuals who are limited English proficient and to individuals 
with disabilities, consistent with Sec.  435.905(b)

[[Page 4683]]

of this chapter, and may be provided in electronic format in accordance 
with Sec.  435.918 of this chapter.
0
10. Section 431.210 is amended by revising paragraphs (a), (b), and 
(d)(1) to read as follows:


Sec.  431.210  Content of notice.

* * * * *
    (a) A Statement of what action the agency, skilled nursing 
facility, or nursing facility intends to take and the effective date of 
such action;
    (b) A clear Statement of the specific reasons supporting the 
intended action;
* * * * *
    (d) * * *
    (1) The individual's right to request a local evidentiary hearing 
if one is available, or a State agency hearing; or
* * * * *
0
11. Section 431.211 is revised to read as follows:


Sec.  431.211  Advance notice.

    The State or local agency must send a notice at least 10 days 
before the date of action, except as permitted under Sec.  431.213 and 
Sec.  431.214 of this part.
0
12. Section 431.213 is amended by revising the introductory text to 
read as follows:


Sec.  431.213  Exceptions from advance notice.

    The agency may send a notice not later than the date of action if 
--
* * * * *
0
13. Section 431.220 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  431.220  When a hearing is required.

    (a) * * *
    (1) Any applicant who requests it because the agency denies his or 
her eligibility, level of benefits, services or claims, or such claim 
is not acted upon with reasonable promptness including, if applicable 
--
    (i) A determination of the amount of medical expenses which must be 
incurred to establish eligibility in accordance with Sec.  
435.121(e)(4) or Sec.  435.831 of this part; or
    (ii) A determination of income for the purposes of imposing any 
premiums, enrollment fees, and cost sharing under subpart A of part 447 
of this chapter.
* * * * *
0
14. Section 431.221 is amended by --
0
A. Revising paragraph (a).
0
B. Adding paragraph (e).
    The revisions and additions read as follows:


Sec.  431.221  Request for hearing.

    (a) The agency must establish procedures that permit an individual, 
or an authorized representative acting on behalf of an individual to 
submit a hearing request:
    (1) By telephone;
    (2) Via mail;
    (3) In person;
    (4) Through other commonly available electronic means; and
    (5) Via the internet Web site described in Sec.  435.1200(f) of 
this chapter, at State option.
* * * * *
    (e) If an individual has been denied eligibility for Medicaid by 
the agency or other entity authorized, in accordance with Sec.  
431.10(c)(1) of this part, to make such determination, the agency must 
treat an appeal to the Exchange appeals entity of a determination of 
eligibility for advanced payments of the premium tax credit or cost-
sharing reduction, as a request for a hearing, under this section.
0
15. Section 431.224 is added to read as follows:


Sec.  431.224  Expedited appeals.

    (a) General rule. The agency must establish and maintain an 
expedited review process for hearings, when an individual requests or a 
provider requests, or supports the individual's request, that the time 
otherwise permitted for a hearing could jeopardize the individual's 
life or health or ability to attain, maintain, or regain maximum 
function.
    (b) Action following denial of a request for expedited hearing. If 
the agency denies a request for an expedited appeal, it must--
    (1) Use the standard appeal timeframe, in accordance with Sec.  
431.244(f)(1) of this part.
    (2) Notify the individual orally or through electronic means of the 
denial and, if oral notification is provided, follow up with written 
notice within 2 calendar days of the denial. Provision of electronic 
notice must be consistent with Sec.  435.918 of this subchapter.


Sec.  431.230  [Amended]

0
16. In Sec.  431.230, amend paragraph (a) by removing the term 
``mails'' and adding in its place the term ``sends.''
0
17. Section 431.231 is amended by revising the section heading and 
paragraph (c)(2) to read as follows:


Sec.  431.231  Reinstating services.

* * * * *
    (c) * * *
    (2) The beneficiary requests a hearing within 10 days that the 
individual receives the notice of action. The date on which the notice 
is received is considered to be 5 days after the date on the notice, 
unless the beneficiary shows that he or she did not receive the notice 
within the 5-day period; and
* * * * *
0
18. Section 431.232 is amended by revising the introductory language 
and paragraph (b) to read as follows:


Sec.  431.232  Adverse decision of local evidentiary hearing.

    If the decision of a local evidentiary hearing is adverse to the 
applicant or beneficiary, the agency must--
* * * * *
    (b) Inform the applicant or beneficiary that he or she has a right 
to appeal the decision to the State agency, in writing, within 10 days 
after the individual receives the notice of the adverse decision. The 
date on which the notice is received is considered to be 5 days after 
the date on the notice, unless the individual shows that he or she 
received the notice at a later date; and
* * * * *
0
19. Section 431.240 is amended by adding paragraph (c) to read as 
follows.


Sec.  431.240  Conducting the hearing.

* * * * *
    (c) A hearing officer must have access to agency information 
necessary to issue a proper hearing decision, including information 
concerning State policies and regulations.
0
20. Section 431.241 is amended by revising paragraphs (a) and (b) to 
read as follows:


Sec.  431.241  Matters to be considered at the hearing.

* * * * *
    (a) An Agency denial of, or action affecting, a claim for 
eligibility or services, or failure to act with reasonable promptness 
on such claim, including:
    (1) An initial and subsequent decision regarding eligibility;
    (2) A determination of the amount of medical expenses which must be 
incurred to establish income eligibility in accordance with Sec.  
435.121(e)(4) or Sec.  435.821 of this part; or
    (3) A determination of income for the purposes of imposing any 
premiums, enrollment fees, deductibles, copayments, coinsurance or 
other cost sharing under subpart A of part 447 of this subchapter.
    (b) An Agency decision regarding changes in the type or level of 
benefits and services;
* * * * *
0
21. Section 431.242 is amended by--
0
A. Revising paragraph (a)(1).
0
B. Adding paragraph (f).
    The revisions and additions read as follows:

[[Page 4684]]

Sec.  431.242  Procedural rights of the applicant or beneficiary.

* * * * *
    (a) * * *
    (1) The content of the applicant's or beneficiary's case file and 
electronic account, as defined in Sec.  435.4 of this part; and
* * * * *
    (f) Request an expedited hearing, if appropriate.
0
22. Section 431.244 is amended by--
0
A. Revising paragraph (f)(1)(ii).
0
B. Redesignating paragraphs (f)(2) and (f)(3) as paragraphs (f)(4) and 
(f)(5), respectively.
0
C. Adding new paragraphs (f)(2) and (f)(3).
    The revisions and additions read as follows:


Sec.  431.244  Hearing decisions.

* * * * *
    (f) * * *
    (1) * * *
    (ii) The date the applicant, beneficiary, or enrollee (in a State 
that permits an MCO or PIHP enrollee direct access to a State fair 
hearing) requests a State fair hearing.
    (2) Within 45 days from the date of the appeal decision issued by 
the Exchange appeals entity if--
    (i) The individual's appeal to the Exchange appeals entity of a 
determination of eligibility for advanced payments of the premium tax 
credit or cost-sharing reductions is treated as a request for a fair 
hearing in accordance with Sec.  431.221(e) of this part, or the 
individual otherwise has both requested a fair hearing of an adverse 
Medicaid determination and appealed a determination of eligibility for 
advance payment of the premium tax credit or cost-sharing reductions; 
and
    (ii) The Exchange appeals entity is not conducting the fair hearing 
for the individual, in accordance with Sec.  431.10(c)(1)(ii) of this 
part.
    (3) As expeditiously as the individual's health condition requires, 
but no later than 3 working days after the agency receives a request 
from an individual or provider for an expedited hearing under Sec.  
431.221 of this subpart, unless the agency determines that the request 
does not meet the criteria for expedited appeals and notifies the 
individual of such determination in accordance with Sec.  431.224(b)(2) 
of this part; or
* * * * *

PART 433--STATE FISCAL ADMINISTRATION

0
23. The authority citation for part 433 continues to read as follows:

    Authority:  Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

0
24. Section 433.138 is amended by revising paragraphs (d)(1) 
introductory text, (d)(3), (f), and (g)(1)(i) to read as follows:


Sec.  433.138  Identifying liable third parties.

* * * * *
    (d) * * *
    (1) Except as specified in paragraph (d)(2) of this section, as 
part of the data exchange requirements under Sec.  435.945 of this 
chapter, from the State wage information collection agency (SWICA) 
defined in Sec.  435.4 of this chapter and from the SSA wage and 
earnings files data as specified in Sec.  435.948(a)(1) of this 
chapter, the agency must--
* * * * *
    (3) The agency must request, as required under Sec.  435.948(a)(2), 
from the State title IV-A agency, information not previously reported 
that identifies those Medicaid beneficiaries that are employed and 
their employer(s).
* * * * *
    (f) Data exchanges and trauma code edits: Frequency. Except as 
provided in paragraph (l) of this section, the agency must conduct the 
data exchanges required in paragraphs (d)(1) and (d)(3) of this 
section, and diagnosis and trauma edits required in paragraphs (d)(4) 
and (e) of this section on a routine and timely basis. The State plan 
must specify the frequency of these activities.
    (g) * * *
    (1) * * *
    (i) Within 45 days, the agency must follow up (if appropriate) on 
such information in order to identify legally liable third party 
resources and incorporate such information into the eligibility case 
file and into its third party data base and third party recovery unit 
so the agency may process claims under the third party liability 
payment procedures specified in Sec.  433.139 (b) through (f); and
* * * * *
0
25. Section Sec.  433.145 is amended by revising paragraph (a)(2) to 
read as follows:


Sec.  433.145  Assignment of rights to benefits--State plan 
requirements.

    (a) * * *
    (2) Cooperate with the agency in establishing paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in Sec.  435.116 (pregnant women), who are exempt from 
cooperating in establishing paternity and obtaining medical support and 
payments from, or derived from, the father of the child born out of 
wedlock; and
* * * * *
0
26. Section Sec.  433.147 is amended by--
0
A. Revising paragraph (a)(1), paragraph (c) introductory text, and 
paragraph (c)(1).
0
B. Removing paragraph (d).
    The revisions read as follows:


Sec.  433.147  Cooperation in establishing paternity and in obtaining 
medical support and payments and in identifying and providing 
information to assist in pursuing third parties who may be liable to 
pay.

    (a) * * *
    (1) Except as exempt under Sec.  433.145(a)(2), establishing 
paternity of a child born out of wedlock and obtaining medical support 
and payments for himself or herself and any other person for whom the 
individual can legally assign rights; and
* * * * *
    (c) Waiver of cooperation for good cause. (1) With respect to 
establishing paternity of a child born out of wedlock or obtaining 
medical care support and payments, or identifying or providing 
information to assist the State in pursuing any liable third party for 
a child for whom the individual can legally assign rights, the agency 
must find the cooperation is against the best interests of the child.
* * * * *
0
27. Section 433.148 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  433.148  Denial or termination of eligibility.

* * * * *
    (a) * * *
    (2) In the case of an applicant, does not attest to willingness to 
cooperate, and in the case of a beneficiary, refuses to cooperate in 
establishing paternity, obtaining medical child support and pursuing 
liable third parties, as required under Sec.  433.147(a) of this part 
unless cooperation has been waived;
* * * * *
0
28. Section 433.152 is amended by revising paragraph (b) to read as 
follows:


Sec.  433.152  Requirements for cooperative agreements for third party 
collections.

* * * * *
    (b) Agreements with title IV-D agencies must specify that the 
Medicaid agency will provide reimbursement to the IV-D agency only for 
those child support services performed that are not reimbursable by the 
Office of Child Support Enforcement under title IV-D of the Act and 
that are necessary for the collection of amounts for the Medicaid 
program.

[[Page 4685]]

PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE 
NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA

0
29. The authority citation for part 435 continues to read as follows:

    Authority:  Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

0
30. Section 435.3 is amended by -
0
A. In paragraph (a), adding section 1902(a)(46)(B), 1902(ee) and 
1905(a) in numerical order.
0
B. Revising section 1903(v).
    The revisions and additions read as follows:


Sec.  435.3  Basis.

    (a) * * *
    1902(a)(46)(B) Requirement to verify citizenship.
* * * * *
    1902(ee) Option to verify citizenship through electronic data 
sharing with the Social Security Administration.
* * * * *
    1903(v) Optional coverage of lawfully residing children and 
pregnant women in Medicaid and payment for emergency services under 
Medicaid provided to certain non-citizens.
* * * * *
    1905(a) (third sentence; text below paragraph (29) Payment of other 
insurance premiums for medical or any other type of remedial care.
* * * * *
0
31. Section 435.4 is amended by--
0
A. Revising the definition of ``Electronic account''
0
B. Adding the definitions of ``Citizenship,'' ``Combined eligibility 
notice,'' ``Coordinated content,'' ``Lawfully present,'' ``Non-
citizen,'' and ``Qualified non-citizen'' in alphabetical order.
    The revision and additions read as follows:


Sec.  435.4  Definitions and use of terms.

* * * * *
    Citizenship includes status as a ``national of the United States'' 
defined in 8 U.S.C. 1101(a)(22) that includes both citizens of the 
United States and non-citizen nationals of the United States.
    Combined eligibility notice means an eligibility notice that 
informs an individual, or multiple family members of a household when 
feasible, of eligibility for each of the insurance affordability 
programs and enrollment in a qualified health plan through the 
Exchange, for which a determination or denial was made. A combined 
eligibility notice shall be issued by the last agency to make a 
determination of eligibility, regardless of which entity received the 
application. A combined notice must meet the requirements of Sec.  
435.917(a) of this part and contain the content described in Sec.  
435.917(b) and (c) of this part, except that information described in 
Sec.  435.917(b)(1)(iii)(D) of this part must be included in a combined 
notice issued by another insurance affordability program only if known 
to that program.
    Coordinated content means information included in an eligibility 
notice regarding the transfer of the individual's or households' 
electronic account to another insurance affordability program for a 
determination of eligibility.
* * * * *
    Electronic account means an electronic file that includes all 
information collected and generated by the agency regarding each 
individual's Medicaid eligibility and enrollment, including all 
documentation required under Sec.  435.914 of this part and including 
any information collected or generated as part of a fair hearing 
process conducted under subpart E of this chapter or through the 
Exchange appeals process conducted under 45 CFR part 155, Subpart F.
* * * * *
    Lawfully present means an individual who is a non-citizen and who--
    (1) Is a qualified non-citizen, as defined in this section;
    (2) Is in a valid nonimmigrant status, as defined in 8 U.S.C. 
1101(a)(15) or otherwise under the immigration laws (as defined in 8 
U.S.C. 1101(a)(17));
    (3) Is paroled into the United States in accordance with 8 U.S.C. 
1182(d)(5) for less than 1 year, except for an individual paroled for 
prosecution, for deferred inspection or pending removal proceedings;
    (4) Belongs to one of the following classes:
    (i) Granted temporary resident status in accordance with 8 U.S.C. 
1160 or 1255a, respectively;
    (ii) Granted Temporary Protected Status (TPS) in accordance with 8 
U.S.C. 1254a, and individuals with pending applications for TPS who 
have been granted employment authorization;
    (iii) Granted employment authorization under 8 CFR 274a.12(c);
    (iv) Family Unity beneficiaries in accordance with section 301 of 
Public Law 101-649, as amended;
    (v) Under Deferred Enforced Departure (DED) in accordance with a 
decision made by the President;
    (vi) Granted Deferred Action status;
    (vii) Granted an administrative stay of removal under 8 CFR part 
241;
    (viii) Beneficiary of approved visa petition who has a pending 
application for adjustment of status;
    (5) Is an individual with a pending application for asylum under 8 
U.S.C. 1158, or for withholding of removal under 8 U.S.C. 1231, or 
under the Convention Against Torture who--
    (i) Has been granted employment authorization; or
    (ii) Is under the age of 14 and has had an application pending for 
at least 180 days;
    (6) Has been granted withholding of removal under the Convention 
Against Torture;
    (7) Is a child who has a pending application for Special Immigrant 
Juvenile status as described in 8 U.S.C. 1101(a)(27)(J);
    (8) Is lawfully present in American Samoa under the immigration 
laws of American Samoa;
    (9) Is a victim of a severe form of trafficking in persons, in 
accordance with the Victims of Trafficking and Violence Protection Act 
of 2000, Public Law 106-386, as amended (22 U.S.C. 7105(b)); or
    (10) Exception. An individual with deferred action under the 
Department of Homeland Security's deferred action for childhood 
arrivals process, as described in the Secretary of Homeland Security's 
June 15, 2012 memorandum, shall not be considered to be lawfully 
present with respect to any of the above categories in paragraphs (1) 
through (9) of this definition.
* * * * *
    Non-citizen has the same meaning as the term ``alien,'' as defined 
in section 101(a)(3) of the Immigration and Nationality Act (INA), (8 
U.S.C. 1101(a)(3)) and includes any individual who is not a citizen or 
national of the United States, defined at 8 U.S.C. 1101(a)(22).
* * * * *
    Qualified non-citizen has the same meaning as the term ``qualified 
alien'' as defined at 8 U.S.C. 1641(b) and (c).
* * * * *
0
32. Section 435.110 is amended by--
0
A. Republishing paragraph (c) introductory text.
0
B. Revising paragraph (c)(1).
    The revisions read as follows:


Sec.  435.110  Parents and other caretaker relatives.

* * * * *
    (c) Income standard. The agency must establish in its State plan 
the income standard as follows:
    (1) The minimum income standard is a State's AFDC income standard 
in effect as of May 1, 1988 for the

[[Page 4686]]

applicable family size converted to a MAGI-equivalent standard in 
accordance with guidance issued by the Secretary under section 
1902(e)(14)(A) and (E) of the Act.
* * * * *
0
33. Section 435.112 is revised to read as follows:


Sec.  435.112  Families with Medicaid eligibility extended because of 
increased earnings or hours of employment.

    (a) Basis and scope. (1) This section implements sections 
408(a)(11)(A), 1902(e)(1)(A), and 1931(c)(2) of the Act.
    (2) If Transitional Medical Assistance under section 1925 of the 
Act is not available or applicable, extended eligibility must be 
provided in accordance with this section, if applicable.
    (b) Eligibility. (1) The extended eligibility period is for 4 
months.
    (2) The agency must provide coverage during an extended eligibility 
period to--
    (i) A pregnant woman who was eligible and enrolled for Medicaid 
under Sec.  435.116 of this part with household income at or below the 
income limit described in paragraph (c) of this section in at least 3 
out of the 6 months immediately preceding the month that eligibility 
under such section was lost due to increased earnings; and
    (ii) A parent or other caretaker relative who was eligible and 
enrolled for Medicaid under Sec.  435.110 of this part, and any 
dependent child of such parent or other caretaker relative who was 
eligible and enrolled under Sec.  435.118 of this part, in at least 3 
out of the 6 months immediately preceding the month that eligibility 
for the parent or other caretaker relative under Sec.  435.110 of this 
part is lost due to--
    (A) Increased earnings; or
    (B) Increased hours from a parent's employment resulting in the 
parent no longer having a ``dependent child,'' as defined at Sec.  
435.4 of this part, living in his or her home.
    (c) Income limit for potential extended eligibility is a State's 
income standard for coverage of parents and other caretaker relatives 
under Sec.  435.110(c) of this part.


Sec.  435.113  [Removed]

0
34. Section 435.113 is removed.


Sec.  435.114  [Removed]

0
35. Section 435.114 is removed.
0
36. Section 435.115 is revised to read as follows:


Sec.  435.115  Families with Medicaid eligibility extended because of 
increased collection of spousal support.

    (a) Basis. This section implements sections 408(a)(11)(B) and 
1931(c)(1) of the Act.
    (b) Eligibility. (1) The extended eligibility period is for 4 
months.
    (2) The agency must provide coverage during an extended eligibility 
period to--
    (i) A pregnant woman who was eligible and enrolled for Medicaid 
under Sec.  435.116 of this part with household income at or below the 
income limit described in paragraph (c) of this section in at least 3 
out of the 6 months immediately preceding the month that eligibility 
under such section was lost due to increased income from collection of 
spousal support under title IV-D of the Act; and
    (ii) A parent or other caretaker relative who was eligible and 
enrolled for Medicaid under Sec.  435.110 of this part, and any 
dependent child of such parent or other caretaker relative who was 
eligible and enrolled under Sec.  435.118 of this part, in at least 3 
out of the 6 months immediately preceding the month that eligibility 
for the parent or other caretaker relative under Sec.  435.110 of this 
part is lost due to increased collection of spousal support under title 
IV-D of the Act.
    (c) Income limit for potential extended eligibility is a State's 
income standard for coverage of parents and other caretaker relatives 
under Sec.  435.110(c) of this part.
0
37. Section 435.116 is amended by--
    A. Republishing paragraph (d)(4) introductory text.
    B. Revising paragraph (d)(4)(i).
    The revisions read as follows:


Sec.  435.116  Pregnant women.

* * * * *
    (d) * * *
    (4) Applicable income limit for full Medicaid coverage of pregnant 
women. For purposes of paragraph (d)(1) of this section--
    (i) The minimum applicable income limit is the State's AFDC income 
standard in effect as of May 1, 1988 for the applicable family size 
converted to a MAGI-equivalent standard in accordance with guidance 
issued by the Secretary under section 1902(e)(14)(A) and (E) of the 
Act.
* * * * *
0
38. Section 435.117 is revised to read as follows:


Sec.  435.117  Deemed newborn children.

    (a) Basis. This section implements sections 1902(e)(4) and 2112(e) 
of the Act.
    (b) Eligibility. (1) The agency must provide Medicaid to children 
from birth until the child's first birthday without application if, for 
the date of the child's birth, the child's mother was eligible for and 
received covered services under--
    (i) The Medicaid State plan (including during a period of 
eligibility under Sec.  435.914) regardless of whether payment for 
services for the mother is limited to services necessary to treat an 
emergency medical condition, as defined in section 1903(v)(3) of the 
Act;
    (ii) The State's separate CHIP State plan as a targeted low-income 
pregnant woman in accordance with section 2112 of the Act, with 
household income at or below the income standard established by the 
agency under Sec.  435.118 of this part for infants under age 1;
    (iii) At State option, the State's separate CHIP State plan as a 
targeted low-income child with household income at or below the income 
standard established by the agency under Sec.  435.118 for infants 
under age 1; or
    (iv) At State option, the State's demonstration under section 1115 
of the Act as a Medicaid or CHIP population, with household income at 
or below the income standard established by the agency under Sec.  
435.118 for infants under age 1.
    (2) The child is deemed to have applied and been determined 
eligible under the Medicaid State plan effective as of the date of 
birth, and remains eligible regardless of changes in circumstances 
(except if the child dies or ceases to be a resident of the State or 
the child's representative requests a voluntary termination of the 
child's eligibility) until the child's first birthday.
    (c) At State option, the agency may provide deemed newborn 
eligibility under this section to a child if the child's mother was 
eligible for and receiving Medicaid in another State for the date of 
the child's birth.
    (d) Medicaid identification number. (1) The Medicaid identification 
number of the mother serves as the child's identification number, and 
all claims for covered services provided to the child may be submitted 
and paid under such number, unless and until the State issues the child 
a separate identification number in accordance with paragraph (d)(2) of 
this section.
    (2) The State must issue a separate Medicaid identification number 
for the child prior to the effective date of any termination of the 
mother's eligibility or prior to the date of the child's first 
birthday, whichever is sooner, unless the child is determined to be 
ineligible (such as, because the child is not a State resident), except 
that the State must

[[Page 4687]]

issue a separate Medicaid identification number for the child promptly 
after the agency is notified of a child under 1 year of age, residing 
in the State and born to a mother:
    (i) Whose coverage is limited to services necessary for the 
treatment of an emergency medical condition, consistent with Sec.  
435.139 or Sec.  435.350 of this part;
    (ii) Covered under the State's separate CHIP; or
    (iii) Who received Medicaid in another State on the date of birth.
0
39. Section 435.145 is revised to read as follows:


Sec.  435.145  Children with adoption assistance, foster care, or 
guardianship care under title IV-E.

    (a) Basis. This section implements sections 1902(a)(10)(A)(i)(I) 
and 473(b)(3) of the Act.
    (b) Eligibility. The agency must provide Medicaid to individuals 
for whom--
    (1) An adoption assistance agreement is in effect with a State or 
tribe under title IV-E of the Act, regardless of whether adoption 
assistance is being provided or an interlocutory or other judicial 
decree of adoption has been issued; or
    (2) Foster care or kinship guardianship assistance maintenance 
payments are being made by a State or Tribe under title IV-E of the 
Act.
0
40. Section 435.150 is added to read as follows:


Sec.  435.150  Former foster care children.

    (a) Basis. This section implements section 1902(a)(10)(A)(i)(IX) of 
the Act.
    (b) Eligibility. The agency must provide Medicaid to individuals 
who:
    (1) Are under age 26;
    (2) Are not eligible and enrolled for mandatory coverage under 
Sec. Sec.  435.110 through 435.118 or Sec. Sec.  435.120 through 
435.145 of this part; and
    (3) Were in foster care under the responsibility of the State or 
Tribe and enrolled in Medicaid under the State's Medicaid State plan or 
1115 demonstration (or at State option were in foster care and Medicaid 
in any State) upon attaining:
    (i) Age 18; or
    (ii) Such higher age at which the State's or Tribe's foster care 
assistance ends under title IV-E of the Act.
0
41. Section 435.170 is revised to read as follows:


Sec.  435.170  Pregnant women eligible for extended or continuous 
eligibility.

    (a) Basis. This section implements sections 1902(e)(5) and 
1902(e)(6) of the Act.
    (b) Extended eligibility for pregnant women. For a pregnant woman 
who was eligible and enrolled under subpart B, C, or D of this part on 
the date her pregnancy ends, the agency must provide coverage for 
pregnancy-related services in accordance with Sec.  435.116(d)(3) of 
this part through the last day of the month in which the 60-day post-
partum period ends.
    (c) Continuous eligibility for pregnant women. For a pregnant woman 
who was eligible and enrolled under subpart B, C, or D of this part and 
who, because of a change in household income, would not otherwise 
remain eligible, the agency must provide coverage for pregnancy-related 
services in accordance with Sec.  435.116(d)(3) of this part through 
the last day of the month in which the 60-day post-partum period ends.
    (d) This section does not apply to--
    (1) Pregnant women covered during a presumptive eligibility period 
under section 1920 of the Act.
    (2) [Reserved]
0
42. Section 435.172 is added to read as follows:


Sec.  435.172  Continuous eligibility for hospitalized children.

    (a) Basis. This section implements section 1902(e)(7) of the Act.
    (b) The agency must provide Medicaid to a child eligible and 
enrolled under Sec.  435.118 until the end of an inpatient stay for 
which inpatient services are furnished, if the child:
    (1) Was receiving inpatient services covered by Medicaid on the 
date the child is no longer eligible under Sec.  435.118 of this part 
based on the child's age or household income; and
    (2) Would remain eligible but for attaining such age.
0
43. Section 435.201 is amended by--
    A. Revising paragraph (a) introductory text and paragraph (a)(5).
    B. Removing paragraph (a)(6).
    The revisions read as follows:


Sec.  435.201  Individuals included in optional groups.

    (a) The agency may choose to cover an optional group or groups of 
individuals who are not eligible and enrolled for mandatory coverage 
under the State's Medicaid State plan in accordance with subpart B of 
this part and who meet the appropriate eligibility criteria for groups 
specified in the separate sections of this subpart:
* * * * *
    (5) Parents and other caretaker relatives (as defined in Sec.  
435.4 of this part).
* * * * *
0
44. The undesignated center heading immediately preceding Sec.  435.210 
is revised to read as follows:

Options for Coverage of Families, Children, Adults, and the Aged, 
Blind, or Disabled

0
45. Section 435.210 is revised to read as follows:


Sec.  435.210  Optional eligibility for individuals who meet the income 
and resource requirements of the cash assistance programs.

    (a) Basis. This section implements section 1902(a)(10)(A)(ii)(I) of 
the Act.
    (b) Eligibility. The agency may provide Medicaid to any group or 
groups of individuals specified in Sec.  435.201(a)(1) through (a)(3) 
of this part who meet the income and resource requirements of SSI or an 
optional State supplement program in States that provide Medicaid to 
optional State supplement recipients.
0
46. Section 435.211 is revised to read as follows:


Sec.  435.211  Optional eligibility for individuals who would be 
eligible for cash assistance if they were not in medical institutions.

    (a) Basis. This section implements section 1902(a)(10)(A)(ii)(IV) 
of the Act.
    (b) Eligibility. The agency may provide Medicaid to any group or 
groups of individuals specified in Sec.  435.201(a)(1) through (a)(3) 
of this part who are institutionalized in a title XIX reimbursable 
medical institution and who:
    (1) Are ineligible for the SSI or an optional State supplement 
program in States that provide Medicaid to optional State supplement 
recipients, because of lower income standards used under the program to 
determine eligibility for institutionalized individuals; but
    (2) Would be eligible for aid or assistance under SSI or an 
optional State supplement program (as specified in Sec.  435.232 or 
Sec.  435.234 of this part) if they were not institutionalized.
0
47. Section 435.213 is added to read as follows:


Sec.  435.213  Optional eligibility for individuals needing treatment 
for breast or cervical cancer.

    (a) Basis. This section implements sections 
1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act.
    (b) Eligibility. The agency may provide Medicaid to individuals 
who--
    (1) Are under age 65;
    (2) Are not eligible and enrolled for mandatory coverage under the 
State's Medicaid State plan in accordance with subpart B of this part;
    (3) Have been screened under the Centers for Disease Control and 
Prevention (CDC) breast and cervical cancer early detection program 
(BCCEDP), established in accordance

[[Page 4688]]

with the requirements of section 1504 of the Public Health Service Act, 
and determined by such screen to need treatment for breast or cervical 
cancer; and
    (4) Do not otherwise have creditable coverage, as defined in 
section 2704(c) of the Public Health Service Act, for treatment of 
their breast or cervical cancer, but creditable coverage is not 
considered to be available just because the individual may:
    (i) Receive medical services provided by the Indian Health Service, 
a tribal organization, or an Urban Indian organization; or
    (ii) Obtain health insurance coverage only after a waiting period 
of uninsurance.
    (c) An individual is considered to need treatment for breast or 
cervical cancer if the screen determines that:
    (1) Definitive treatment for breast or cervical cancer is needed, 
including a precancerous condition or early stage cancer, and which may 
include diagnostic services as necessary to determine the extent and 
proper course of treatment; and
    (2) More than routine diagnostic services or monitoring services 
for a precancerous breast or cervical condition are needed.
0
48. Section 435.214 is added to read as follows:


Sec.  435.214  Eligibility for family planning services.

    (a) Basis. This section implements section 1902(a)(10)(A)(ii)(XXI) 
and 1902(ii) and clause (XVI) in the matter following 1902(a)(10)(G) of 
the Act.
    (b) Eligibility. The agency may provide Medicaid to individuals 
(male and female) who meet all of the following requirements:
    (1) Are not pregnant.
    (2) Meet the income eligibility requirements at paragraph (c) of 
this section.
    (c) Income standard. (1) The income standard established in the 
State plan may not exceed the higher of the income standard for 
pregnant women in effect under--
    (i) The Medicaid State plan in accordance with Sec.  435.116 of 
this part.
    (ii) A Medicaid demonstration under section 1115 of the Act.
    (iii) The CHIP State plan under section 2112 of the Act
    (iv) A CHIP demonstration under section 1115 of the Act.
    (2) The individual's household income is determined in accordance 
with Sec.  435.603 of this part. The agency must indicate in its state 
plan the options selected by it under paragraph (k) of that section.
    (d) Covered services. Individuals eligible under this section are 
covered for family planning and family planning-related benefits as 
described in clause (XVI) of the matter following 1902(a)(10)(G) of the 
Act.
0
49. Section 435.215 is added to read as follows:


Sec.  435.215  Individuals infected with tuberculosis.

    (a) Basis. This section implements sections 1902(a)(10)(A)(XII) and 
1902(z)(1) of the Act.
    (b) Eligibility. The agency may provide Medicaid to individuals 
who--
    (1) Are infected with tuberculosis;
    (2) Are not otherwise eligible for mandatory coverage under the 
State's Medicaid plan;
    (3) Have household income that does not exceed the income standard 
established by the state in its State plan, which standard must not 
exceed the higher of--
    (i) The maximum income standard applicable to disabled individuals 
for mandatory coverage under subpart B of this part; or
    (ii) The effective income level for coverage of individuals 
infected with tuberculosis under the state plan in effect as of March 
23, 2010 or December 31, 2013, if higher, converted, at State option, 
to a MAGI-equivalent standard in accordance with guidance issued by the 
Secretary under section 1902(e)(14)(A) and (E) of the Act; and
    (c) Individuals eligible under this section are covered for the 
following services related to the treatment of infection with 
tuberculosis:
    (1) Prescribed drugs, described in Sec.  440.120 of this 
subchapter;
    (2) Physician's services, described in Sec.  440.50 of this 
subchapter;
    (3) Outpatient hospital and rural health clinic described in Sec.  
440.20 of this subchapter, and Federally-qualified health center 
services;
    (4) Laboratory and x-ray services (including services to confirm 
the presence of the infection), described in Sec.  440.30 of this 
subchapter;
    (5) Clinic Services, described in Sec.  440.90 of this subchapter;
    (6) Case management services defined in Sec.  440.169 of this 
subchapter; and
    (7) Services other than room and board designated to encourage 
completion of regimens of prescribed drugs by outpatients including 
services to observe directly the intake of prescription drugs.
0
50. Section 435.220 is revised to read as follows:


Sec.  435.220  Optional eligibility for parents and other caretaker 
relatives.

    (a) Basis. This section implements section 1902(a)(10)(A)(ii)(I) of 
the Act for optional eligibility of parents and other caretaker 
relatives.
    (b) Eligibility. The agency may provide Medicaid to parents and 
other caretaker relatives defined in Sec.  435.4 of this part and, if 
living with such parent or other caretaker relative, his or her spouse, 
whose household income is at or below the income standard established 
by the agency in its State plan, in accordance with paragraph (c) of 
this section.
    (c) Income standard. The income standard under this section--
    (1) Must exceed the income standard established by the agency under 
Sec.  435.110(c) of this part; and
    (2) May not exceed the higher of the State's AFDC payment standard 
in effect as of July 16, 1996, or the State's highest effective income 
level for optional eligibility of parents and other caretaker relatives 
in effect under the Medicaid State plan or demonstration program under 
section 1115 of the Act as of March 23, 2010 or December 31, 2013, if 
higher, converted to a MAGI-equivalent standard in accordance with 
guidance issued by the Secretary under section 1902(e)(14)(A) and (E) 
of the Act.
0
51. Section 435.222 is revised to read as follows:


Sec.  435.222  Optional eligibility for reasonable classifications of 
individuals under age 21.

    (a) Basis. This section implements sections 1902(a)(10)(A)(ii)(I) 
and (IV) of the Act for optional eligibility of individuals under age 
21.
    (b) Eligibility. The agency may provide Medicaid to all--or to one 
or more reasonable classifications, as defined in the State plan, of--
individuals under age 21 (or, at State option, under age 20, 19 or 18) 
who have household income at or below the income standard established 
by the agency in its State plan in accordance with paragraph (c) of 
this section.
    (c) Income standard. The income standard established under this 
section may not exceed the higher of the State's AFDC payment standard 
in effect as of July 16, 1996 or the State's highest effective income 
level, if any, for such individuals under the Medicaid State plan or a 
demonstration program under section 1115 of the Act as of March 23, 
2010 or December 31, 2013, if higher, converted to a MAGI-equivalent 
standard in accordance with guidance issued by the Secretary under 
section 1902(e)(14)(A) and (E) of the Act.

[[Page 4689]]

Sec.  435.223  [Removed]

0
52. Section 435.223 is removed.
0
53. Section 435.226 is added to read as follows:


Sec.  435.226  Optional eligibility for independent foster care 
adolescents.

    (a) Basis. This section implements section 1902(a)(10)(A)(ii)(XVII) 
of the Act.
    (b) Eligibility. The agency may provide Medicaid to individuals 
under age 21 (or, at State option, under age 20 or 19) who were in 
foster care under the responsibility of a State or Tribe (or, at State 
or Tribe option, only with respect to whom assistance under title IV-E 
of the Act was being provided) on the individual's 18th birthday and 
have household income at or below the income standard established by 
the agency in its State plan in accordance with paragraph (c) of this 
section.
    (c) Income standard. The income standard established under this 
section may not exceed the higher of the State's AFDC payment standard 
in effect as of July 16, 1996 or the State's highest effective income 
level, if any, for such individuals under the Medicaid State plan or a 
demonstration program under section 1115 of the Act as of March 23, 
2010 or December 31, 2013, if higher, converted to a MAGI-equivalent 
standard in accordance with guidance issued by the Secretary under 
section 1902(e)(14)(A) and (E) of the Act.
0
54. Section 435.227 is revised to read as follows:


Sec.  435.227  Optional eligibility for individuals under age 21 who 
are under State adoption assistance agreements.

    (a) Basis. This section implements section 1902(a)(10)(A)(ii)(VIII) 
of the Act.
    (b) Eligibility. The agency may provide Medicaid to individuals 
under age 21 (or, at State option, under age 20, 19, or 18):
    (1) For whom an adoption assistance agreement (other than an 
agreement under title IV-E of the Act) between a State and the adoptive 
parent or parents is in effect;
    (2) Who the State agency which entered into the adoption agreement 
determined could not be placed for adoption without Medicaid coverage 
because the child has special needs for medical or rehabilitative care; 
and
    (3) Who, prior to the adoption agreement being entered into--
    (i) Were eligible under the Medicaid State plan; or
    (ii) Had household income at or below the income standard 
established by the agency in its State plan in accordance with 
paragraph (c) of this section.
    (c) Income standard. The income standard established under this 
section may not exceed the higher of the State's AFDC payment standard 
in effect as of July 16, 1996 or the State's highest effective income 
level, if any, for such individuals under the Medicaid State plan or a 
demonstration program under section 1115 of the Act as of March 23, 
2010 or December 31, 2013, if higher, converted to a MAGI-equivalent 
standard in accordance with guidance issued by the Secretary under 
section 1902(e)(14)(A) and (E) of the Act.
    (d) The agency may limit eligibility under this section to children 
with respect to whom the State and such other States as are identified 
in the State plan have entered into an adoption assistance agreement.
0
55. Section 435.229 is revised to read as follows:


Sec.  435.229  Optional targeted low-income children.

    (a) Basis. This section implements section 1902(a)(10)(A)(ii)(XIV) 
of the Act.
    (b) Eligibility. The agency may provide Medicaid to individuals 
under age 19, or at State option within a range of ages under age 19 
established in the State plan, who meet the definition of an optional 
targeted low-income child in Sec.  435.4 of this part and have 
household income at or below the income standard established by the 
agency in its State plan in accordance with paragraph (c) of this 
section.
    (c) Income standard. The income standard established under this 
section may not exceed the higher of--
    (1) 200 percent FPL;
    (2) A percentage of the Federal poverty level which exceeds the 
State's Medicaid applicable income level, defined at Sec.  457.10 of 
this chapter, by no more than 50 percentage points; and
    (3) The highest effective income level for such individuals under 
the Medicaid State plan or a demonstration program under section 1115 
of the Act as of March 23, 2010 or December 31, 2013, if higher, 
converted to a MAGI-equivalent standard in accordance with guidance 
issued by the Secretary under section 1902(e)(14)(A) and (E) of the 
Act.
0
56. Section 435.301 is amended by--
0
A. Removing paragraph (b)(1)(iii).
0
B. Redesignating paragraph (b)(1)(iv) as paragraph (b)(1)(iii).
0
C. Republishing paragraph (b)(2) introductory text.
0
D. Revising paragraph (b)(2)(ii).
    The revisions read as follows:


Sec.  435.301  General rules.

* * * * *
    (b) * * *
    (2) The agency may provide Medicaid to any of the following groups 
of individuals:
* * * * *
    (ii) Parents and other caretaker relatives (Sec.  435.310 of this 
part).
* * * * *
0
57. Section 435.310 is amended by revising the section heading and 
paragraph (a) to read as follows:


Sec.  435.310  Medically needy coverage of parents and other caretaker 
relatives.

    (a) If the agency provides Medicaid for the medically needy, it may 
provide Medicaid to parents and other caretaker relatives who meet:
    (1) The definition of ``caretaker relative'' at Sec.  435.4 of the 
part, or are the spouse of a parent or caretaker relative; and
    (2) The medically needy income and resource requirements at subpart 
I of this part.
* * * * *


Sec.  435.401  [Amended]

0
58. Section 435.401 is amended by removing and reserving paragraph 
(c)(1).
0
59. Section 435.406 is amended by--
0
A. Revising the section heading.
0
B. Revising paragraph (a) introductory text, and paragraphs (a)(1) 
introductory text, (a)(1)(i), (a)(1)(ii), (a)(1)(iii).
0
C. Removing paragraph (a)(1)(iv) and redesignating paragraph (a)(1)(v) 
as paragraph (a)(1)(iv).
0
D. Republishing newly redesignated paragraph (a)(1)(iv) introductory 
text.
0
E. Adding newly redesignated paragraph (a)(1)(iv)(E).
0
F. In paragraph (a)(2), removing the terms ``alien'' or ``aliens'' and 
adding in their place the terms, ``non-citizen'' or ``non-citizens'' 
respectively.
0
G. In paragraph (a)(2)(ii), removing the reference to paragraph ``(b)'' 
and adding in its place a reference to paragraph ``(c)''.
0
H. Adding a new paragraph (a)(3).
0
I. Revising paragraph (b).
0
J. Adding paragraph (c).
    The revisions read as follows:


Sec.  435.406  Citizenship and non-citizen eligibility.

    (a) The agency must provide Medicaid to otherwise eligible 
individuals who are--
    (1) Citizens, provided that--
    (i) The individual has declared that he or she is a citizen or 
national of the United States; and
    (ii) The agency has verified such declaration in accordance with 
Sec.  435.956(a) of this part.
    (iii) For purposes of the declaration and citizenship verification

[[Page 4690]]

requirements discussed in paragraphs (a)(1)(i) and (a)(1)(ii) of this 
section, an individual includes applicants under a section 1115 
demonstration (including a family planning demonstration project) for 
which a State receives Federal financial participation in its 
expenditures.
    (iv) The following groups of individuals are exempt from the 
requirements in paragraph (a)(1)(ii) of this section:
* * * * *
    (E) Newborns who are eligible for coverage under Sec.  435.117 or 
Sec.  457.360, and individuals who received medical assistance on such 
basis in any State on or after July 1, 2006.
* * * * *
    (3) For purposes of paragraphs (a)(1) and (a)(2) of this section, 
the declaration of citizenship or immigration status may be provided by 
the individual, or an adult member of the individual's family or 
household, an authorized representative, or if the applicant is a minor 
or incapacitated, someone acting responsibly for the applicant provided 
that such individual attests to having a reasonable basis to make a 
declaration of such status.
    (b) State option to provide Medicaid to Lawfully Residing Non-
Citizen Children or Pregnant Women.
    (1) Basic Rule. The agency may provide Medicaid to all individuals 
under 21 and/or all pregnant women who are lawfully present, as defined 
in Sec.  435.4 of this part, and who otherwise meet the eligibility 
requirements under this part;
    (2) 5-Year Waiting Period and Other Restrictions Do Not Apply. The 
following restrictions on the provision of Medicaid do not apply to 
lawfully present non-citizen individuals under age 21 or pregnant women 
in States electing to provide eligibility in accordance with this 
paragraph: 8 U.S.C. 1611(a) (relating to the limitation on payment 
services for individuals who are not qualified non-citizens, 8 U.S.C. 
1612(b) (relating to state option to limit eligibility of certain 
Lawful Permanent Residents to those credited with 40 qualifying 
quarters of work or seven year limitation), and 8 U.S.C. 1613 (relating 
to the 5-year waiting period), as implemented at paragraph (a)(2) of 
this section; and 8 U.S.C. 1631 (relating to sponsor deeming).
    (c) Non-citizens whom the agency elects to cover under paragraph 
(b)(1) of this section and non-citizens whose eligibility is not 
restricted, as described in paragraph (b)(2) of this section, are 
covered for the same benefits as citizens who are eligible under the 
same section of subpart B, C or D of this part under which the non-
citizen is eligible. For all other non-citizens who otherwise meet the 
eligibility requirements in this part, provisions of sections 
1903(v)(2) and 1903(v)(3) of the Act, implemented at Sec.  440.255 of 
this subchapter, apply,
0
60. Section 435.407 is revised to read as follows:


Sec.  435.407  Types of acceptable documentary evidence of citizenship.

    (a) Stand-alone evidence of citizenship. The following must be 
accepted as satisfactory documentary evidence of citizenship:
    (1) A U.S. passport, including a U.S. Passport Card issued by the 
Department of State, without regard to any expiration date as long as 
such passport or Card was issued without limitation.
    (2) A Certificate of Naturalization.
    (3) A Certificate of U.S. Citizenship.
    (4) A valid State-issued driver's license if the State issuing the 
license requires proof of U.S. citizenship, or obtains and verifies a 
social security number from the applicant who is a citizen before 
issuing such license.
    (5)(i) Documentary evidence issued by a Federally recognized Indian 
Tribe, as published in the Federal Register by the Bureau of Indian 
Affairs within the U.S. Department of the Interior, and including 
Tribes located in a State that has an international border, which--
    (A) Identifies the Federally recognized Indian Tribe that issued 
the document;
    (B) Identifies the individual by name; and
    (C) Confirms the individual's membership, enrollment, or 
affiliation with the Tribe.
    (ii) Documents described in paragraph (a)(5)(i) of this section 
include, but are not limited to:
    (A) A Tribal enrollment card;
    (B) A Certificate of Degree of Indian Blood;
    (C) A Tribal census document;
    (D) Documents on Tribal letterhead, issued under the signature of 
the appropriate Tribal official, that meet the requirements of 
paragraph (a)(5)(i) of this section.
    (b) Evidence of citizenship. If an applicant does not provide 
documentary evidence from the list in paragraph (a) of this section, 
the following must be accepted as satisfactory evidence to establish 
citizenship if also accompanied by an identity document listed in 
paragraph (c) of this section--
    (1) A U.S. public birth certificate showing birth in one of the 50 
States, the District of Columbia, Puerto Rico (if born on or after 
January 13, 1941), Guam, the Virgin Islands of the U.S. (on or after 
January 17, 1917), American Samoa, Swain's Island, or the Commonwealth 
of the Northern Mariana Islands (CNMI) (after November 4, 1986 (CNMI 
local time)). The birth record document may be issued by the State, 
Commonwealth, Territory, or local jurisdiction. If the document shows 
the individual was born in Puerto Rico, the Virgin Islands of the U.S., 
or the CNMI before these areas became part of the U.S., the individual 
may be a collectively naturalized citizen.
    (2) At State option, a cross match with a State vital statistics 
agency documenting a record of birth.
    (3) A Certification of Report of Birth, issued to U.S. citizens who 
were born outside the U.S.
    (4) A Report of Birth Abroad of a U.S. Citizen.
    (5) A Certification of birth.
    (6) A U.S. Citizen I.D. card.
    (7) A Northern Marianas Identification Card, issued to a 
collectively naturalized citizen, who was born in the CNMI before 
November 4, 1986.
    (8) A final adoption decree showing the child's name and U.S. place 
of birth, or if an adoption is not final, a Statement from a State-
approved adoption agency that shows the child's name and U.S. place of 
birth.
    (9) Evidence of U.S. Civil Service employment before June 1, 1976.
    (10) U.S. Military Record showing a U.S. place of birth.
    (11) A data match with the Systematic Alien Verification for 
Entitlements (SAVE) Program or any other process established by the 
Department of Homeland Security to verify that an individual is a 
citizen.
    (12) Documentation that a child meets the requirements of section 
101 of the Child Citizenship Act of 2000 (8 U.S.C. 1431).
    (13) Medical records, including, but not limited to, hospital, 
clinic, or doctor records or admission papers from a nursing facility, 
skilled care facility, or other institution that indicate a U.S. place 
of birth.
    (14) Life, health, or other insurance record that indicates a U.S. 
place of birth.
    (15) Official religious record recorded in the U.S. showing that 
the birth occurred in the U.S.
    (16) School records, including pre-school, Head Start and daycare, 
showing the child's name and U.S. place of birth.
    (17) Federal or State census record showing U.S. citizenship or a 
U.S. place of birth.
    (18) If the applicant does not have one of the documents listed in 
paragraphs (a) or (b)(1) through (17) of this section, he or she may 
submit an affidavit signed

[[Page 4691]]

by another individual under penalty of perjury who can reasonably 
attest to the applicant's citizenship, and that contains the 
applicant's name, date of birth, and place of U.S. birth. The affidavit 
does not have to be notarized.
    (c) Evidence of identity. (1) The agency must accept the following 
as proof of identity, provided such document has a photograph or other 
identifying information including, but not limited to, name, age, sex, 
race, height, weight, eye color, or address:
    (i) Identity documents listed at 8 CFR 274a.2(b)(1)(v)(B)(1), 
except a driver's license issued by a Canadian government authority.
    (ii) Driver's license issued by a State or Territory.
    (iii) School identification card.
    (iv) U.S. military card or draft record.
    (v) Identification card issued by the Federal, State, or local 
government.
    (vi) Military dependent's identification card.
    (vii) U.S. Coast Guard Merchant Mariner card.
    (2) For children under age 19, a clinic, doctor, hospital, or 
school record, including preschool or day care records.
    (3) Two documents containing consistent information that 
corroborates an applicant's identity. Such documents include, but are 
not limited to, employer identification cards, high school and college 
diplomas (including high school equivalency diplomas), marriage 
certificates, divorce decrees, and property deeds or titles.
    (4) Finding of identity from a Federal or State governmental 
agency. The agency may accept as proof of identity--
    (i) A finding of identity from a Federal agency or another State 
agency, including but not limited to a public assistance, law 
enforcement, internal revenue or tax bureau, or corrections agency, if 
the agency has verified and certified the identity of the individual.
    (ii) [Reserved]
    (5) A finding of identity from an Express Lane agency, as defined 
in section 1902(e)(13)(F) of the Act.
    (6) If the applicant does not have any document specified in 
paragraphs (c)(1) through (c)(3) of this section and identity is not 
verified under paragraph (c)(4) or (c)(5) of this section, the 
applicant may submit an affidavit signed, under penalty of perjury, by 
another person who can reasonably attest to the applicant's identity. 
Such affidavit must contain the applicant's name and other identifying 
information establishing identity, as describe in paragraph (c)(1) of 
this section. The affidavit does not have to be notarized.
    (d) Verification of citizenship by a Federal agency or another 
State. (1) The agency may rely, without further documentation of 
citizenship or identity, on a verification of citizenship made by a 
Federal agency or another State agency, if such verification was done 
on or after July 1, 2006.
    (2) [Reserved]
    (e) Assistance with obtaining documentation. States must provide 
assistance to individuals who need assistance in securing satisfactory 
documentary evidence of citizenship in a timely manner.
    (f) Documentary evidence. A photocopy, facsimile, scanned or other 
copy of a document must be accepted to the same extent as an original 
document under this section, unless information on the submitted 
document is inconsistent with other information available to the agency 
or the agency otherwise has reason to question the validity of the 
document or the information on the document.


Sec.  435.510  [Removed]

0
61. Remove Sec.  435.510 and the undesignated center heading of 
``Dependency.''


Sec.  435.522  [Removed]

0
62. Remove Sec.  435.522 and the undesignated center heading of 
``Age.''
0
63. Section 435.601 is amended by--
0
A. Revising paragraph (b).
0
B. Removing paragraphs (d)(1)(i) and (d)(1)(ii).
0
C. Redesignating paragraphs (d)(1)(iii) through (d)(1)(vi) as 
paragraphs (d)(1)(i) through (d)(1)(iv), respectively.
    The revision reads as follows:


Sec.  435.601  Application of financial eligibility methodologies.

* * * * *
    (b) Basic rule for use of cash assistance methodologies. (1) This 
section only applies to individuals excepted from application of MAGI-
based methods in accordance with Sec.  435.603(j) of this subpart.
    (2) Except as specified in paragraphs (c) and (d) of this section 
or in Sec.  435.121 of this part in determining financial eligibility 
of individuals as categorically or medically needy, the agency must 
apply the financial methodologies and requirements of the cash 
assistance program that is most closely categorically related to the 
individual's status.
* * * * *
0
64. Section 435.602 is amended by revising paragraph (a) to read as 
follows:
0
A. Redesignating and republishing the introductory language in 
paragraph (a) as introductory language in paragraph (a)(2).
0
B. Redesignating paragraphs (a)(1) through (a)(4) as paragraphs 
(a)(2)(i) through (a)(2)(iv).
0
C. Adding paragraphs (a) introductory text and (a)(1).
    The addition reads as follows:


Sec.  435.602  Financial responsibility of relatives and other 
individuals.

    (a) Basic requirements. (1) This section only applies to 
individuals excepted from application of MAGI-based methods in 
accordance with Sec.  435.603(j) of this part.
    (2) Subject to the provisions of paragraphs (b) and (c) of this 
section, in determining financial responsibility of relatives and other 
persons for individuals under Medicaid, the agency must apply the 
following requirements and methodologies:
    (i) Except for a spouse of an individual or a parent for a child 
who is under age 21 or blind or disabled, the agency must not consider 
income and resources of any relative as available to an individual.
    (ii) In relation to individuals under age 21 (as described in 
section 1905(a)(i) of the Act), the financial responsibility 
requirements and methodologies that apply include considering the 
income and resources of parents or spouses whose income and resources 
would be considered if the individual under age 21 were dependent under 
the State's approved AFDC plan, whether or not they are actually 
contributed, except as specified under paragraphs (c) and (d) of this 
section. These requirements and methodologies must be applied in 
accordance with the provisions of the State's approved AFDC plan.
    (iii) When a couple ceases to live together, the agency must count 
only the income of the individual spouse in determining his or her 
eligibility, beginning the first month following the month the couple 
ceases to live together.
    (iv) In the case of eligible institutionalized spouses who are 
aged, blind, and disabled and who have shared the same room in a title 
XIX Medicaid institution, the agency has the option of considering 
these couples as eligible couples for purposes of counting income and 
resources or as eligible individuals, whichever is more advantageous to 
the couple.
* * * * *
0
65. Section 435.603 is amended by--
0
A. In paragraph (b), adding the definitions of ``Child,'' ``Parent,'' 
and ``Sibling'' in alphabetical order.
0
B. Adding paragraphs (d)(4) and (k).
0
C. Revising paragraphs (c), (d)(1), (f)(2)(i), (f)(3)(ii) and (iii), 
and (j)(4).

[[Page 4692]]

    The revisions and additions read as follows:


Sec.  435.603  Application of modified adjusted gross income (MAGI).

* * * * *
    (b) Definitions. For purposes of this section--
    Child means a natural or biological, adopted or step child.
* * * * *
    Parent means a natural or biological, adopted or step parent.
    Sibling means natural or biological, adopted, half or step sibling.
* * * * *
    (c) Basic rule. Except as specified in paragraph (i), (j) and (k) 
of this section, the agency must determine financial eligibility for 
Medicaid based on ``household income'' as defined in paragraph (d) of 
this section.
    (d) * * *
    (1) General rule. Except as provided in paragraphs (d)(2) through 
(d)(4) of this section, household income is the sum of the MAGI-based 
income, as defined in paragraph (e) of this section, of every 
individual included in the individual's household.
* * * * *
    (4) In determining the eligibility of an individual for medical 
assistance under the eligibility group with the highest income standard 
under which the individual may be determined eligible using MAGI-based 
methodologies, an amount equivalent to 5 percentage points of the 
Federal poverty level for the applicable family size is deducted from 
household income.
* * * * *
    (f)
* * * * *
    (2)
* * * * *
    (i) Individuals other than a spouse or child who expect to be 
claimed as a tax dependent by another taxpayer; and
* * * * *
    (3) Rules for individuals who neither file a tax return nor are 
claimed as a tax dependent.
* * * * *
    (ii) The individual's children under the age specified in paragraph 
(f)(3)(iv) of this section; and
    (iii) In the case of individuals under the age specified in 
paragraph (f)(3)(iv) of this section, the individual's parents and 
siblings under the age specified in paragraph (f)(3)(iv) of this 
section.
* * * * *
    (j) * * *
    (4) Individuals who request coverage for long-term care services 
and supports for the purpose of being evaluated for an eligibility 
group for which meeting a level-of-care need is a condition of 
eligibility or under which long-term care services not covered for 
individuals determined eligible using MAGI-based financial methods are 
covered. ``Long-term care services'' include nursing facility services, 
a level of care in any institution equivalent to nursing facility 
services; home and community-based services furnished under a waiver or 
State plan under sections 1915 or 1115 of the Act; home health services 
as described in sections 1905(a)(7) of the Act and personal care 
services described in sections 1905(a)(24) of the Act.
* * * * *
    (k) In the case of an individual whose eligibility is being 
determined under Sec.  435.214 of this part, the agency may--
    (1) Consider the household to consist of only the individual for 
purposes of paragraph (f) of this section.);
    (2) Count only the MAGI-based income of the individual for purposes 
of paragraph (d) of this section.).
    (3) Increase the family size of the individual, as defined in 
paragraph (b) of the section, by one.
0
66. Section 435.610 is amended by--
0
A. Revising paragraph (a) introductory text and paragraph (a)(2).
0
B. Removing paragraph (c).
    The revisions read as follows:


Sec.  435.610  Assignment of rights to benefits.

    (a) Consistent with Sec.  433.145 through Sec.  433.148 of this 
chapter, as a condition of eligibility, the agency must require legally 
able applicants and beneficiaries to:
* * * * *
    (2) In the case of applicants, attest that they will cooperate, 
and, in the case of beneficiaries, cooperate with the agency in--
    (i) Establishing paternity and in obtaining medical support and 
payments, unless the individual establishes good cause for not 
cooperating or is a pregnant woman described in Sec.  435.116; and
    (ii) Identifying and providing information to assist the Medicaid 
agency in pursuing third parties who may be liable to pay for care and 
services under the plan, unless the individual establishes good cause 
for not cooperating.
* * * * *
0
67. Section 435.831 is amended by revising paragraph (b) introductory 
text, (b)(1), and (c) to read as follows:


Sec.  435.831  Income eligibility.

* * * * *
    (b) Determining countable income. For purposes of determining 
medically needy eligibility under this part, the agency must determine 
an individual's countable income as follows:
    (1) For individuals under age 21, pregnant women, and parents and 
other caretaker relatives, the agency may apply the AFDC methodologies 
in effect in the State as of August 16, 1996 or the MAGI-based 
methodologies defined in Sec.  435.603(e) of this part; except that, 
the agency must comply with the terms of Sec.  435.602 of this part 
(relating to the financial responsibility of relatives and other 
individuals).
* * * * *
    (c) Eligibility based on countable income. If countable income 
determined under paragraph (b) of this section is equal to or less than 
that applicable income standard under Sec.  435.814 of this part, the 
individual is eligible for Medicaid.
* * * * *
0
68. Section 435.905 is amended by--
0
A. Revising paragraph (b)(1).
0
B. Adding paragraph (b)(3).
    The revisions and additions read as follows:


Sec.  435.905  Availability of program information.

* * * * *
    (b) * * *
    (1) Individuals who are limited English proficient through the 
provision of language services at no cost to the individual including, 
oral interpretation, written translations, and taglines in non-English 
languages indicating the availability of language services.
* * * * *
    (3) Individuals must be informed of the availability of the 
services described in paragraph (b) of this section and how to access 
such services.
0
69. Section 435.907 is amended by adding paragraph (h) to read as 
follows.


Sec.  435.907  Application.

* * * * *
    (h) Reinstatement of withdrawn applications. (1) In the case of 
individuals described in paragraph (h)(2) of this section, the agency 
must reinstate the application submitted by the individual, effective 
as of the date the application was first received by the Exchange.
    (2) Individuals described in this paragraph are individuals who--
    (i) Submitted an application described in paragraph (b) of this 
section to the Exchange;
    (ii) Withdrew their application for Medicaid in accordance with 45 
CFR 155.302(b)(4)(A);

[[Page 4693]]

    (iii) Are assessed as potentially eligible for Medicaid by the 
Exchange appeals entity.
0
70. Section 435.908 is amended by adding paragraph (c) to read as 
follows:


Sec.  435.908  Assistance with application and renewal.

* * * * *
    (c) Certified Application Assisters. (1) At State option, the 
agency may certify staff and volunteers of State-designated 
organizations to act as application assisters, authorized to provide 
assistance to applicants and beneficiaries with the application process 
and during renewal of eligibility. To be certified, application 
assisters must be--
    (i) Authorized and registered by the agency to provide assistance 
at application and renewal;
    (ii) Effectively trained in the eligibility and benefits rules and 
regulations governing enrollment in a QHP through the Exchange and all 
insurance affordability programs operated in the State, as implemented 
in the State; and
    (iii) Trained in and subject to regulations relating to the 
safeguarding and confidentiality of information and conflict of 
interest, including regulations set forth at part 431, subpart F of 
this chapter, and at 45 CFR 155.260(f), regulations relating to the 
prohibition against reassignment of provider claims specified in Sec.  
447.10 of this chapter, and all other State and Federal laws concerning 
conflicts of interest and confidentiality of information.
    (2) For purposes of this section, assistance includes providing 
information on insurance affordability programs and coverage options, 
helping individuals complete an application or renewal, gathering 
required documentation, submitting applications and renewals to the 
agency, interacting with the agency on the status of such applications 
and renewals, assisting individuals with responding to any requests 
from the agency, and managing their case between the eligibility 
determination and regularly scheduled renewals. Application assisters 
may be certified by the agency to act on behalf of applicants and 
beneficiaries with respect to one, some or all of the permitted 
assistance activities.
    (3) If the agency elects to certify application assisters, it must 
establish--
    (i) A designated web portal to which only certified application 
assisters have access and through which the assisters may provide the 
assistance described in paragraph (c)(2) of this section. The agency 
must develop a secure mechanism to ensure that certified application 
assisters are able to perform only those activities for which they are 
certified.
    (ii) Procedures to ensure that--
    (A) Applicants and beneficiaries are informed of the functions and 
responsibilities of certified application assisters;
    (B) Individuals are able to authorize application assisters to 
receive confidential information about the individual related to the 
individual's application for or renewal of Medicaid; and
    (C) The agency does not disclose confidential applicant or 
beneficiary information to an application assister unless the applicant 
or beneficiary has authorized the application assister to receive such 
information.
    (4) Application assisters may not impose any charge on applicants 
or beneficiaries for application assistance.


Sec.  435.909  [Amended]

0
71. Paragraph (a) is removed and reserved.
0
72. Section 435.910 is amended by revising paragraph (g) to read as 
follows:


Sec.  435.910  Use of social security number.

* * * * *
    (g) The agency must verify the SSN furnished by an applicant or 
beneficiary with SSA to insure the SSN was issued to that individual, 
and to determine whether any other SSNs were issued to that individual.
* * * * *
0
73. Section Sec.  435.911 is amended by--
0
A. Revising paragraph (b)(1) introductory text, paragraph (b)(1)(i), 
paragraph (c) introductory text, and paragraph (c)(1).
0
B. Adding paragraph (b)(2).
    The revisions and addition read as follows:


Sec.  435.911  Determination of eligibility.

* * * * *
    (b)(1) Except as provided in paragraph (b)(2) of this section, 
applicable modified adjusted gross income standard means 133 percent of 
the Federal poverty level or, if higher--
    (i) In the case of parents and other caretaker relatives described 
in Sec.  435.110(b) of this part, the income standard established in 
accordance with Sec.  435.110(c) or Sec.  435.220(c) of this part;
* * * * *
    (2) In the case of individuals who have attained at least age 65 
and individuals who have attained at least age 19 and who are entitled 
to or enrolled for Medicare benefits under part A or B or title XVIII 
of the Act, there is no applicable modified adjusted gross income 
standard, except that in the case of such individuals--
    (i) Who are also pregnant, the applicable modified adjusted gross 
income standard is the standard established under paragraph (b)(1) of 
this section; and
    (ii) Who are also a parent or caretaker relative, as described in 
Sec.  435.4 of this part, the applicable modified adjusted gross income 
standard is the higher of the income standard established in accordance 
with Sec.  435.110(c) or Sec.  435.220(c) of this part.
    (c) For each individual who has submitted an application described 
in Sec.  435.907 or whose eligibility is being renewed in accordance 
with Sec.  435.916 and who meets the non-financial requirements for 
eligibility (or for whom the agency is providing a reasonable 
opportunity to verify citizenship or immigration status in accordance 
with Sec.  435.956(g) of this part), the state Medicaid agency must 
comply with the following--
    (1) The agency must, promptly and without undue delay consistent 
with timeliness standards established under Sec.  435.912, furnish 
Medicaid to each such individual whose household income is at or below 
the applicable modified adjusted gross income standard.
* * * * *


Sec.  435.913  [Removed]

0
74. Section 435.913 is removed.
0
75. Section Sec.  435.917 is added to read as follows.


Sec.  435.917  Notice of agency's decision concerning eligibility.

    (a) Notice of eligibility determinations. Consistent with 
Sec. Sec.  431.206 through 431.214 of this chapter, the agency must 
provide all applicants and beneficiaries with timely and adequate 
written notice of any decision affecting their eligibility, including a 
denial, termination or suspension of eligibility, or a denial or change 
in benefits and services. Such notice must--
    (1) Be written in plain language;
    (2) Be accessible to persons who are limited English proficient and 
individuals with disabilities, consistent with Sec.  435.905(b) of this 
subpart, and
    (3) If provided in electronic format, comply with Sec.  435.918 of 
this subpart.
    (b) Content of eligibility notice.
    (1) Notice of approved eligibility. Any notice of an approval of 
Medicaid eligibility must include, but is not limited to, the following 
information--
    (i) The basis and effective date of eligibility;
    (ii) The circumstances under which the individual must report, and

[[Page 4694]]

procedures for reporting, any changes that may affect the individual's 
eligibility;
    (iii) If applicable, the amount of medical expenses which must be 
incurred to establish eligibility in accordance with Sec.  435.121 or 
Sec.  435.831 of this part.
    (iv) Information on the level of benefits and services approved, 
including, if applicable, the notice relating to any premiums, 
enrollment fees, and cost sharing required under Part 447 Subpart A of 
this chapter, and the right to appeal the level of benefits and 
services approved.
    (2) Notice of adverse action including denial, termination or 
suspension of eligibility or change in benefits or services. Any notice 
of denial, termination or suspension of Medicaid eligibility or change 
in benefits or services must be consistent Sec.  431.210 of this 
chapter.
    (c) Whenever an approval, denial, or termination of eligibility is 
based on an applicant's or beneficiary's having household income at or 
below the applicable modified adjusted gross income standard in 
accordance with Sec.  435.911 of this subpart, the eligibility notice 
must contain--
    (1) Information regarding bases of eligibility other than the 
applicable modified adjusted gross income standard and the benefits and 
services afforded to individuals eligible on such other bases, 
sufficient to enable the individual to make an informed choice as to 
whether to request a determination on such other bases; and
    (2) Information on how to request a determination on such other 
bases;
    (d) The agency's responsibility to provide notice under this 
section is satisfied by a combined eligibility notice, as defined in 
Sec.  435.4 of this chapter, provided by the Exchange or other 
insurance affordability program in accordance with an agreement between 
the agency and such program consummated in accordance with Sec.  
435.1200(b)(3) of this chapter, except that, if the information 
described in paragraph (b)(1)(iii) through (iv) of this section is not 
included in such combined eligibility notice, the agency must provide 
the individual with a supplemental notice of such information, 
consistent with this section.
0
76. Section 435.918 is added to read as follows:


Sec.  435.918  Use of electronic notices.

    (a) The agency must provide individuals with a choice to receive 
notices and information required under this part or subpart E of part 
431 of this chapter in electronic format or by regular mail. If the 
individual elects to receive communications from the agency 
electronically, the agency must--
    (1) Confirm by regular mail the individual's election to receive 
notices electronically;
    (2) Inform the individual of his or her right to change such 
election, at any time, to receive notices through regular mail;
    (3) Post notices to the individual's electronic account within 1 
business day of notice generation;
    (4) Send an email or other electronic communication alerting the 
individual that a notice has been posted to his or her account. The 
agency may not include confidential information in the email or 
electronic alert.
    (5) If an electronic communication is undeliverable, send any 
notice by regular mail within three business days of the date of the 
failed electronic communication;
    (6) At the individual's request, provides through regular mail any 
notice posted to the individual's electronic account.
    (b) The agency may provide notice or other communications 
electronically only if the individual--
    (1) Has affirmatively elected to receive electronic communications 
in accordance with paragraph (a) of this section; and
    (2) Is permitted to change such election at any time.


Sec.  435.919  [Removed]

0
77. Section 435.919 is removed.
0
78. Section 435.923 is added to read as follows:


Sec.  435.923  Authorized Representatives.

    (a) The agency must permit applicants and beneficiaries to 
designate an individual or organization to act responsibly on their 
behalf in assisting with the individual's application and renewal of 
eligibility and other ongoing communications with the agency. Such a 
designation must be in writing including the applicant's signature, and 
must be permitted at the time of application and at other times. Legal 
documentation of authority to act on behalf of an applicant or 
beneficiary under state law, such as a court order establishing legal 
guardianship or a power of attorney, shall serve in the place of 
written authorization by the applicant or beneficiary.
    (b) Representatives may be authorized to--
    (1) Sign an application on the applicant's behalf;
    (2) Complete and submit a renewal form;
    (3) Receive copies of the applicant or beneficiary's notices and 
other communications from the agency;
    (4) Act on behalf of the applicant or beneficiary in all other 
matters with the agency.
    (c) The power to act as an authorized representative is valid until 
the applicant or beneficiary modifies the authorization or notifies the 
agency that the representative is no longer authorized to act on his or 
her behalf, or the authorized representative informs the agency that he 
or she no longer is acting in such capacity, or there is a change in 
the legal authority upon which the individual or organization's 
authority was based. Such notice must be in writing and should include 
the applicant or authorized representative's signature as appropriate.
    (d) The authorized representative--
    (1) Is responsible for fulfilling all responsibilities encompassed 
within the scope of the authorized representation, as described in 
paragraph (b)(2) of this section, to the same extent as the individual 
he or she represents;
    (2) Must agree to maintain, or be legally bound to maintain, the 
confidentiality of any information regarding the applicant or 
beneficiary provided by the agency.
    (e) The agency must require that, as a condition of serving as an 
authorized representative, a provider or staff member or volunteer of 
an organization must sign an agreement that he or she will adhere to 
the regulations in part 431, subpart F of this chapter and at 45 CFR 
155.260(f) (relating to confidentiality of information), Sec.  447.10 
of this chapter (relating to the prohibition against reassignment of 
provider claims as appropriate for a health facility or an organization 
acting on the facility's behalf), as well as other relevant State and 
Federal laws concerning conflicts of interest and confidentiality of 
information.
    (f) For purposes of this section, the agency must accept 
electronic, including telephonically recorded, signatures and 
handwritten signatures transmitted by facsimile or other electronic 
transmission. Designations of authorized representatives must be 
accepted through all of the modalities described in Sec.  435.907(a) of 
this part.
0
79. Section 435.926 is added to read as follows:


Sec.  435.926  Continuous eligibility for children.

    (a) Basis. This section implements section 1902(e)(12) of the Act.
    (b) Eligibility. The agency may provide continuous eligibility for 
the length of a continuous eligibility period

[[Page 4695]]

specified in paragraph (c) of this section for an individual who is:
    (1) Under age 19 or under a younger age specified by the agency in 
its State plan; and
    (2) Eligible and enrolled for mandatory or optional coverage under 
the State plan in accordance with subpart B or C of this part.
    (c) Continuous eligibility period. (1) The agency must specify in 
the State plan the length of the continuous eligibility period, not to 
exceed 12 months.
    (2) A continuous eligibility period begins on the effective date of 
the individual's most recent determination or renewal of eligibility at 
the end of the length of the continuous eligibility period specified in 
the State plan.
    (d) Applicability. A child's eligibility may not be terminated 
during a continuous eligibility period, regardless of any changes in 
circumstances, unless:
    (1) The child attains the maximum age specified in accordance with 
paragraph (b)(1) of this section;
    (2) The child or child's representative requests a voluntary 
termination of eligibility;
    (3) The child ceases to be a resident of the State;
    (4) The agency determines that eligibility was erroneously granted 
at the most recent determination or renewal of eligibility because of 
agency error or fraud, abuse, or perjury attributed to the child or the 
child's representative; or
    (5) The child dies.
0
80. Section 435.940 is amended by revising the first sentence to read 
as follows:


Sec.  435.940  Basis and scope.

    The income and eligibility verification requirements set forth at 
Sec.  435.940 through Sec.  435.960 of this part are based on sections 
1137, 1902(a)(4), 1902(a)(19), 1902(a)(46)(B), 1902(ee), 1903(r)(3), 
1903(x), and 1943(b)(3) of the Act, and section 1413 of the Affordable 
Care Act. * * *
0
81. Section 435.952 is amended by adding paragraph (c)(3) to read as 
follows:


Sec.  435.952  Use of information and requests of additional 
information from individuals.

* * * * *
    (c) * * *
    (3) Exception for Special Circumstances: The agency must establish 
an exception to permit, on a case-by-case basis, self-attestation of 
individuals for all eligibility criteria when documentation does not 
exist at the time of application or is not reasonably available, such 
as for individuals who are homeless or have experienced domestic 
violence or a natural disaster. Except that this does not apply if 
documentation is specifically required under title XIX, such as is the 
case of verifying citizenship and immigration status, as implemented at 
Sec.  435.956(a) of this part.
* * * * *
0
82. Section 435.956 is amended by--
0
A. Adding paragraph (a).
0
B. Adding paragraph (g).
    The revision and addition read as follows:


Sec.  435.956  Verification of other non-financial information.

    (a) Citizens and Non-citizens. (1) The agency must verify 
citizenship and immigration status through the electronic service 
established in Sec.  435.949 if available. If the agency is unable to 
verify citizenship or immigration status through such service the 
agency must--
    (i) Verify citizenship in accordance with section 1902(ee) of the 
Act or Sec.  435.407 of this part consistent with the requirements of 
Sec.  435.952(c)(2)(ii) of this part.
    (ii) Verify immigration status in accordance with section 1137(d) 
of the Act and Sec.  435.406 of this part, consistent with the 
requirements of Sec.  435.952(c)(2)(ii) of this part.
    (2) If the agency cannot promptly verify the citizenship or 
immigration status of an individual in accordance with paragraph (a)(1) 
of this section, the agency--
    (i) Must comply with paragraph (g) of this section; and
    (ii) May not delay, deny, reduce or terminate benefits for an 
individual who is otherwise eligible for Medicaid during the reasonable 
opportunity period described in paragraph (g) of this section, in 
accordance with Sec.  435.911(c) of this part.
    (3) The agency must maintain a record of having verified 
citizenship or immigration status for each individual, in a case record 
or electronic database. The agency may not re-verify or require an 
individual to re-verify citizenship at a renewal of eligibility or 
subsequent application following a break in coverage.
* * * * *
    (g) Reasonable opportunity period. (1) The agency must provide a 
reasonable opportunity period to individuals for whom the agency is 
unable to promptly verify citizenship or satisfactory immigration 
status in accordance with paragraph (a) of this section, as well as 
notice of such opportunity. Such notice must be accessible to persons 
who are limited English proficient and individuals with disabilities, 
consistent with Sec.  435.905(b) of this chapter. During such 
reasonable opportunity period, the agency must, if relevant to 
verification of the individual's status--
    (i) Assist the individual in obtaining an SSN, in accordance with 
Sec.  435.910;
    (ii) Attempt to resolve any inconsistencies, including 
typographical or other clerical errors, between information provided by 
the individual and data from an electronic data source, and resubmit 
corrected information to the electronic data source.
    (iii) Provide the individual with information on how to contact the 
source of the electronic data so he or she can attempt to resolve such 
inconsistencies directly with such source; and
    (iv) Permit the individual to provide other documentation of 
citizenship or immigration status, in accordance with section 1137(d) 
of the Act and Sec.  435.406 and Sec.  435.407 of this part.
    (2) The reasonable opportunity period--
    (i) Begins on, and must extend 90 days from, the date on which the 
notice described in paragraph (g)(1) of this section is received by the 
individual. The date on which the notice is received is considered to 
be 5 days after the date on the notice, unless the individual shows 
that he or she did not receive the notice within the 5-day period.
    (ii) At state option, may be extended beyond 90 days if the 
individual is making a good faith effort to resolve any inconsistencies 
or obtain any necessary documentation in accordance with paragraph 
(g)(1) of this section or the agency needs more time to complete the 
verification process.
    (3) At State option, the agency may begin to furnish benefits to 
otherwise eligible individuals during the reasonable opportunity period 
under paragraph (a)(2)(ii) of this section on an earlier date, up to 
and including the date the notice is sent or the date of application 
containing the declaration of citizenship or immigration status by or 
on behalf of the individual.
    (4) If, by the end of the reasonable opportunity period, the 
individual's citizenship or immigration status has not been verified in 
accordance with paragraph (a) of this section, the agency must take 
action within 30 days to terminate eligibility in accordance with part 
431 subpart E (relating to notice and appeal rights), except that Sec.  
431.230 and Sec.  431.231 of this part (relating to maintaining and 
reinstating services) may be applied at State option.
0
83. Section 435.1001 is amended by--
0
A. Republishing paragraph (a) introductory language.

[[Page 4696]]

0
B. Revising paragraph (a)(2).
    The revisions read as follows:


Sec.  435.1001  FFP for administration.

    (a) FFP is available in the necessary administrative costs the 
State incurs in--
* * * * *
    (2) Administering presumptive eligibility.
* * * * *
0
84. Section 435.1002 is amended by--
0
A. Republishing paragraph (c) introductory language.
0
B. Revising paragraphs (c)(1) and (c)(4).
    The revisions read as follows:


Sec.  435.1002  FFP for services.

* * * * *
    (c) FFP is available in expenditures for services covered under the 
plan that are furnished--
    (1) During a presumptive eligibility period to individuals who are 
determined to be presumptively eligible for Medicaid in accordance with 
subpart L of this part;
* * * * *
    (4) Regardless of whether such individuals file an application for 
a full eligibility determination or are determined eligible for 
Medicaid following the presumptive eligibility period.
0
85. Section 435.1004 is amended by revising paragraph (b) to read as 
follows:


Sec.  435.1004  Beneficiaries overcoming certain conditions of 
eligibility.

* * * * *
    (b) FFP is available for a period not to exceed--
    (1) The period during which a recipient of SSI or an optional State 
supplement continues to receive cash payments while these conditions 
are being overcome; or
    (2) For beneficiaries, eligible for Medicaid only and recipients of 
SSI or an optional State supplement who do not continue to receive cash 
payments, the second month following the month in which the 
beneficiary's Medicaid coverage would have been terminated.
0
86. Section 435.1008 is revised to read as follows:


Sec.  435.1008  FFP in expenditures for medical assistance for 
individuals who have declared citizenship or nationality or 
satisfactory immigration status.

    (a) This section implements sections 1137 and 1902(a)(46)(B)of the 
Act.
    (b) Except as provided in paragraph (c) of this section, FFP is not 
available to a State for expenditures for medical assistance furnished 
to individuals unless the State has verified citizenship or immigration 
status in accordance with Sec.  435.956 of this part.
    (c) FFP is available to States for otherwise eligible individuals 
whose declaration of U.S. citizenship or satisfactory immigration 
status in accordance with section 1137(d) of the Act and Sec.  
435.406(a)(1)(i) of this part has been verified in accordance with 
Sec.  435.956, or for whom benefits are provided during a reasonable 
opportunity period to verify citizenship, nationality, or immigration 
status in accordance with section Sec.  435.956(a)(2) of this part.

FFP for Premium Assistance

0
87. Add a new undesignated center heading immediately following Sec.  
435.1012 as set forth above.
0
88. Section 435.1015 is added to read as follows:


Sec.  435.1015  FFP for premium assistance for plans in the individual 
market.

    (a) FFP is available for payment of the costs of insurance premiums 
for an individual health plan on behalf of an individual who is 
eligible for Medicaid under this part, subject to the following 
conditions:
    (1) The insurer is obligated to pay primary to Medicaid for all 
health care items and services for which the insurer is legally and 
contractually responsible under the individual health plan, as required 
under part 433 subpart D of this chapter;
    (2) The agency furnishes all benefits for which the individual is 
covered under the State plan that are not available through the 
individual health plan;
    (3) The individual does not incur any cost sharing charges in 
excess of any amounts imposed by the agency under subpart A of part 
447; and
    (4) The cost of purchasing such coverage, including administrative 
expenditures and the costs of providing wraparound benefits for items 
and services covered under the Medicaid State plan, but not covered 
under the individual health plan, must be comparable to the cost of 
providing direct coverage under the State plan.
    (b) A State may not require an individual who is eligible for 
services under the Medicaid State plan to enroll in premium assistance 
under this section as a condition of eligibility under this part.

Subpart L--Options for Coverage of Special Groups Under Presumptive 
Eligibility

0
89. The heading for subpart L is revised as set forth above.
0
90. Section 435.1100 is revised to read as follows:


Sec.  435.1100  Basis for presumptive eligibility.

    This subpart implements sections 1920, 1920A, 1920B, 1920C, and 
1902(a)(47)(B) of the Act.
0
91. Remove the undesignated center heading ``Presumptive Eligibility 
for Children'' that is immediately before Sec.  435.1101.
0
92. Section 435.1101 is amended by--
0
A. Removing the definition of ``Application form.''
0
C. Adding the definition of ``Application.''
0
D. Amending the definition of ``Qualified entity'' by redesignating 
paragraph (10) as paragraph (11), and adding a new paragraph (10).
    The additions read as follows:


Sec.  435.1101  Definitions related to presumptive eligibility for 
children.

    Application means, consistent with the definition at Sec.  435.4 of 
this part, the single streamlined application adopted by the agency 
under Sec.  435.907(a) of this part.
* * * * *
    Qualified entity * * *
    (10) Is a health facility operated by the Indian Health Service, a 
Tribe or Tribal organization under the Indian Self Determination and 
Education Assistance Act (25 U.S.C. 450 et seq.), or an Urban Indian 
Organization under title V of the Indian Health Care Improvement Act 
(25 U.S.C. 1651 et seq.).
* * * * *
0
93. Section 435.1102 is amended by--
0
A. Revising the section heading.
0
B. Revising paragraphs (a) and (b)(3).
0
C. Removing ``and'' at the end of paragraph (b)(2)(iv)(B) and adding 
``and'' at the end of paragraph (b)(2)(v)(B);
0
D. Adding paragraphs (b)(2)(vi), (d) and (e).
0
E. Removing paragraph (b)(4).
    The revisions and additions read as follows:


Sec.  435.1102  Children covered under presumptive eligibility.

    (a) The agency may elect to provide Medicaid services for children 
under age 19 or a younger age specified by the State during a 
presumptive eligibility period following a determination by a qualified 
entity, on the basis of preliminary information, that the individual 
has gross income (or, at state option, a reasonable estimate of 
household income, as defined in Sec.  435.603 of this part, determined 
using simplified methods prescribed by the

[[Page 4697]]

agency) at or below the income standard established by the State for 
the age of the child under Sec.  435.118(c) or under Sec.  435.229 if 
applicable and higher.
    (b) * * *
    (2) * * *
    (vi) Do not delegate the authority to determine presumptive 
eligibility to another entity.
    (3) Establish oversight mechanisms to ensure that presumptive 
eligibility determinations are being made consistent with the statute 
and regulations.
* * * * *
    (d) The agency--
    (1) May require, for purposes of making a presumptive eligibility 
determination under this section, that the individual has attested to 
being, or another person who attests to having reasonable knowledge of 
the individual's status has attested to the individual being, a--
    (i) Citizen or national of the United States or in satisfactory 
immigration status; or
    (ii) Resident of the State; and
    (2) May not--
    (i) Impose other conditions for presumptive eligibility not 
specified in this section; or
    (ii) Require verification of the conditions for presumptive 
eligibility.
    (e) Notice and fair hearing regulations in subpart E of part 431 of 
this chapter do not apply to determinations of presumptive eligibility 
under this section.
0
94. Section 435.1103 is added to read as follows:


Sec.  435.1103  Presumptive eligibility for other individuals.

    (a) The terms of Sec.  435.1101 and Sec.  435.1102 of this subpart 
apply to pregnant women such that the agency may provide Medicaid to 
pregnant women during a presumptive eligibility period following a 
determination by a qualified entity that the pregnant woman has income 
at or below the income standard established by the State under Sec.  
435.116(c), except that coverage of services provided to such women are 
limited to ambulatory prenatal care and the number of presumptive 
eligibility periods that may be authorized for pregnant women is one 
per pregnancy.
    (b) If the agency provides Medicaid during a presumptive 
eligibility period to children under Sec.  435.1102 of this subpart or 
to pregnant women under paragraph (a) of this section, the agency may 
also apply the terms of Sec.  435.1101 and Sec.  435.1102 of this 
subpart to the individuals described in one or more of the following 
sections of this part, based on the income standard established by the 
state for such individuals and providing the benefits covered under 
that section: Sec. Sec.  435.110 (parents and caretaker relatives), 
435.119 (individuals aged 19 or older and under age 65), 435.150 
(former foster care children), and 435.218 (individuals under age 65 
with income above 133 percent FPL).
    (c)(1) The terms of Sec.  435.1101 and Sec.  435.1102 of this 
subpart apply to individuals who may be eligible under Sec.  435.213 of 
this part (relating to individuals with breast or cervical cancer) or 
Sec.  435.214 of this part (relating to eligibility for limited family 
planning benefits) such that the agency may provide Medicaid during a 
presumptive eligibility period following a determination by a qualified 
entity described in paragraph (c)(2) of this section that--
    (i) The individual meets the eligibility requirements of Sec.  
435.213; or
    (ii) The individual meets the eligibility requirements of Sec.  
435.214, except that coverage provided during a presumptive eligibility 
period to such individuals is limited to the services described in 
Sec.  435.214(d).
    (2) Qualified entities described in this paragraph include 
qualified entities which participate as a provider under the State plan 
and which the agency determines are capable of making presumptive 
eligibility determinations.
0
95. Section 435.1110 is added to read as follows:


Sec.  435.1110  Presumptive eligibility determined by hospitals.

    (a) Basic rule. The agency must provide Medicaid during a 
presumptive eligibility period to individuals who are determined by a 
qualified hospital, on the basis of preliminary information, to be 
presumptively eligible in accordance with the policies and procedures 
established by the State consistent with this section and Sec. Sec.  
435.1102 and 435.1103 of this part, but regardless of whether the 
agency provides Medicaid during a presumptive eligibility period under 
such sections.
    (b) Qualified hospitals. A qualified hospital is a hospital that--
    (1) Participates as a provider under the State plan or a 
demonstration under section 1115 of the Act, notifies the agency of its 
election to make presumptive eligibility determinations under this 
section, and agrees to make presumptive eligibility determinations 
consistent with State policies and procedures;
    (2) At State option, assists individuals in completing and 
submitting the full application and understanding any documentation 
requirements; and
    (3) Has not been disqualified by the agency in accordance with 
paragraph (d) of this section.
    (c) State options for bases of presumptive eligibility. The agency 
may--
    (1) Limit the determinations of presumptive eligibility which 
hospitals may elect to make under this section to determinations based 
on income for children, pregnant women, parents and caretaker 
relatives, and other adults, consistent with Sec.  435.1102 and Sec.  
435.1103 of this subpart; or
    (2) Permit hospitals to elect to make presumptive eligibility 
determinations on additional bases under the State plan or an 1115 
demonstration.
    (d) Disqualification of hospitals. (1) The agency may establish 
standards for qualified hospitals related to the proportion of 
individuals determined presumptively eligible for Medicaid by the 
hospital who:
    (i) Submit a regular application, as described in Sec.  435.907 of 
this part, before the end of the presumptive eligibility period; or
    (ii) Are determined eligible for Medicaid by the agency based on 
such application.
    (2) The agency must take action, including, but not limited to, 
disqualification of a hospital as a qualified hospital under this 
section, if the agency determines that the hospital is not--
    (i) Making, or is not capable of making, presumptive eligibility 
determinations in accordance with applicable state policies and 
procedures; or
    (ii) Meeting the standard or standards established by the agency 
under paragraph (d)(1) of this section.
0
96. Section 435.1200 is amended by--
0
A. Revising the section heading.
0
B. Revising paragraphs (a), (b), (c) introductory text, (c)(3), (d), 
and (e).
0
C. Adding paragraphs (g).
    The revisions and additions read as follows.


Sec.  435.1200  Medicaid agency responsibilities for a coordinated 
eligibility and enrollment process with other insurance affordability 
programs.

    (a) Statutory basis, purpose, and definitions. (1) Statutory basis 
and purpose. This section implements sections 1943(b)(3) and 
2201(b)(3)(B) of the Affordable Care Act to ensure coordinated 
eligibility and enrollment among insurance affordability programs.
    (2) Definitions.
    (i) Combined eligibility notice has the meaning as provided in 
Sec.  435.4 of this part.

[[Page 4698]]

    (ii) Coordinated content has the meaning as provided in Sec.  435.4 
of this part.
    (b) General requirements and definitions. The State Medicaid agency 
must--
    (1) Fulfill the responsibilities set forth in paragraphs (d) 
through (g) and, if applicable, paragraph (c) of this section.
    (2) Certify for the Exchange and other insurance affordability 
programs the criteria applied in determining Medicaid eligibility.
    (3) Enter into and, upon request, provide to the Secretary one or 
more agreements with the Exchange, Exchange appeals entity and the 
agencies administering other insurance affordability programs as are 
necessary to fulfill the requirements of this section, including a 
clear delineation of the responsibilities of each program to--
    (i) Minimize burden on individuals seeking to obtain or renew 
eligibility or to appeal a determination of eligibility for enrollment 
in a QHP or with respect to one or more insurance affordability 
program;
    (ii) Ensure compliance with paragraphs (d) through (g) of this 
section and, if applicable, paragraph (c) of this section;
    (iii) Ensure prompt determinations of eligibility and enrollment in 
the appropriate program without undue delay, consistent with timeliness 
standards established under Sec.  435.912, based on the date the 
application is submitted to any insurance affordability program.
    (iv) Provide for a combined eligibility notice to individuals, as 
well as multiple members of the same household applying on the same 
application to the maximum extent feasible, for enrollment in a QHP 
through the Exchange and all insurance affordability programs.
    (4) To the extent to which a combined eligibility notice is not 
feasible for all members of the same household, applying on the same 
application, coordinated content must be provided for those household 
members whose eligibility status is not yet determined.
    (c) Provision of Medicaid for individuals found eligible for 
Medicaid by another insurance affordability program. If the agency has 
entered into an agreement in accordance with Sec.  431.10(d) of this 
chapter under which the Exchange or other insurance affordability 
program makes final determinations of Medicaid eligibility, for each 
individual determined so eligible by the Exchange (including as a 
result of a decision made by the Exchange or Exchange appeals entity 
authorized under Sec.  431.10(c) of this chapter to adjudicate appeals 
of Medicaid eligibility determinations) or other program, the agency 
must--
* * * * *
    (3) Include in the agreement into which the agency has entered 
under paragraph (b)(3) of this section that the Exchange or other 
insurance affordability program will provide combined eligibility 
notice of final eligibility determinations and appeals decisions made 
by it; and
    (d) Transfer from other insurance affordability programs to the 
State Medicaid agency. For individuals for whom another insurance 
affordability program has not made a determination of Medicaid 
eligibility, but who have been assessed by such program (including as a 
result of a decision made by the Exchange appeals entity) as 
potentially Medicaid eligible, and for individuals not so assessed, but 
who otherwise request a full determination by the Medicaid agency, the 
agency must--
    (1) Accept, via secure electronic interface, the electronic account 
for the individual and notify such program of the receipt of the 
electronic account.
    (2) Not request information or documentation from the individual 
provided in the individual's electronic account, or to another 
insurance affordability program or appeals entity.
    (3) Promptly and without undue delay, consistent with timeliness 
standards established under Sec.  435.912, determine the Medicaid 
eligibility of the individual, in accordance with Sec.  435.911 of this 
part, without requiring submission of another application, and--
    (i) Effective January 1, 2015, for individuals determined eligible 
for Medicaid, provide combined eligibility notice, including notice of 
a denial or termination of the individual's eligibility for enrollment 
in a QHP through the Exchange or other insurance affordability 
programs, as applicable.
    (ii) For individuals determined not eligible for Medicaid, comply 
with paragraph (e) of this section as if the individual had submitted 
an application to the agency.
    (4) Accept any finding relating to a criterion of eligibility made 
by such program or appeals entity, without further verification, if 
such finding was made in accordance with policies and procedures which 
are the same as those applied by the agency or approved by it in the 
agreement described in paragraph (b)(3) of this section; and
    (5) Notify such program of the final determination of the 
individual's eligibility or ineligibility for Medicaid.
    (e) Evaluation of eligibility for other insurance affordability 
programs.
    (1) Individuals determined not eligible for Medicaid. For 
individuals who submit an application or return a renewal form to the 
agency which includes sufficient information to determine Medicaid 
eligibility, or whose eligibility is being renewed pursuant to a change 
in circumstance in accordance with Sec.  435.916(d) of this part, and 
whom the agency determines are not eligible for Medicaid, and for 
individuals determined ineligible for Medicaid pursuant to fair hearing 
under subpart E of part 431 of this chapter, the agency must--
    (i) Promptly and without undue delay, consistent with timeliness 
standards established under Sec.  435.912 of this part, determine 
potential eligibility for, and, as appropriate, transfer via a secure 
electronic interface the individual's electronic account to, other 
insurance affordability programs;
    (ii) Include in any agreement into which the agency enters in 
accordance with paragraph (b)(3) of this section, that, effective 
January 1, 2015, such other program will issue a combined eligibility 
notice, including the agency's denial of Medicaid eligibility.
    (iii) Prior to January 1, 2015--
    (A) Include coordinated content, as defined in Sec.  435.4 of the 
part, in the notice of Medicaid denial or termination, provided to the 
individual in accordance with Sec.  435.917 of this part, relating to 
the transfer of the individual's account; or
    (B) Include in the agreement into which the agency enters in 
accordance with (b)(3) of this section, that such other program will 
issue a combined eligibility notice, including the agency's denial of 
Medicaid eligibility.
    (2) Individuals undergoing a Medicaid eligibility determination on 
a basis other than MAGI. In the case of an individual with household 
income greater than the applicable MAGI standard and for whom the 
agency is determining eligibility on another basis in accordance with 
Sec.  435.911(c)(2) of this part, the agency must promptly and without 
undue delay, consistent with timeliness standards established under 
Sec.  435.912 of this part--
    (i) Determine potential eligibility for, and as appropriate, 
transfer via secure electronic interface the individual's electronic 
account to, other insurance affordability programs and provide timely 
notice to such other program--
    (A) That the individual is not Medicaid eligible on the basis of 
the applicable MAGI standard, but that a final determination of 
Medicaid

[[Page 4699]]

eligibility on other bases is still pending; and
    (B) Of the agency's final determination of eligibility or 
ineligibility for Medicaid.
    (ii) Provide notice to the individual, consistent with Sec.  
435.917 of this part, that the agency--
    (A) Has determined the individual ineligible for Medicaid on the 
basis of having household income at or below the applicable MAGI 
standard; and
    (B) Is continuing to evaluate Medicaid eligibility on other bases, 
including a plain language explanation of the other bases being 
considered.
    (C) Such notice must include coordinated content relating to the 
transfer of the individual's electronic account to the other insurance 
affordability program and explanation that eligibility for or 
enrollment in such program will not affect the determination of 
Medicaid eligibility on other bases; and
    (iii) Provide the individual with notice, consistent with Sec.  
435.917 of this part, of the final determination of eligibility on the 
other bases. In the case of individuals determined eligible for 
Medicaid on a basis other than having income at or below the applicable 
modified adjusted gross income standard, such notice also must contain 
coordinated content informing the individual of the notice provided to 
the Exchange or other program in accordance with paragraph 
(e)(2)(i)(II) of this section and that approval of Medicaid eligibility 
will result in termination of eligibility for and by the other program 
if the individual is enrolled in such program.
    (3) The agency may enter into an agreement with the Exchange to 
make determinations of eligibility for enrollment in a QHP through the 
Exchange, advance payments of the premium tax credit and cost-sharing 
reductions, consistent with 45 CFR 155.110(a)(2).
* * * * *
    (g) Coordination involving appeals entities. The agency must--
    (1) Establish a secure electronic interface the through which--
    (i) The Exchange can notify the agency that an appeal of 
eligibility for enrollment in a QHP through the Exchange, advance 
payments of the premium tax credit, or cost-sharing reductions, has 
been filed; and
    (ii) The individual's electronic account, including any information 
provided by the individual as part of an appeal to either the agency or 
Exchange appeals entity, can be transferred from one program or appeals 
entity to the other.
    (2) In conducting a fair hearing in accordance with subpart E or 
part 431 of this chapter, not request information or documentation from 
the individual included in the individual's electronic account or 
provided to the Exchange or Exchange appeals entity.
    (3)(i) In the case of individuals described in paragraph (g)(3)(ii) 
of this section, transmit to the Exchange, through the electronic 
interface established under paragraph (g)(1)(i) of this section, the 
hearing decision made by the agency under part 431 subpart E;
    (ii) Individuals described in this paragraph include individuals 
determined ineligible for Medicaid--
    (A) By the Exchange; or
    (B) By the agency and transferred to the Exchange in accordance 
with paragraph (e)(1) or (2) of this section.
0
97. Section 435.1205 is added to read as follows:


Sec.  435.1205  Alignment with exchange initial open enrollment period.

    (a) References and definitions. For purposes of this section--
    (1) March 23, 2012 final rule refers to the Final rule; Interim 
final rule published on March 23, 2012 at 77 Federal Register 17144.
    (2) Eligibility based on MAGI means Medicaid eligibility based on 
the eligibility requirements which will be effective under the State 
plan, or waiver of such plan, as of January 1, 2014, consistent with 
Sec. Sec.  435.110--435.119, 435.218 and 435.603 of the March 23, 2012 
final rule, as revised in subsequent rulemaking.
    (3) Electronic account, insurance affordability program and secure 
electronic interface have the meanings provided in Sec.  435.4 of the 
March 23, 2012 final rule, as revised in subsequent rulemaking.
    (b) The following are effective for purposes of this section as of 
October 1, 2013:
    (1) Provisions of Sec.  431.10(c) of this chapter, as revised in 
the March 23, 2012 rule and subsequent rulemaking, relating to the 
agency's ability to delegate authority to make eligibility 
determinations to the Exchange;
    (2) Sections 435.916 and 435.952 of the March 23, 2012 final rule, 
as revised in subsequent rulemaking.
    (c) Medicaid agency responsibilities to achieve coordinated open 
enrollment. For the period beginning October 1, 2013 through December 
31, 2013, the agency must
    (1) Accept--
    (i) The single streamlined application described in Sec.  435.907 
of the March 23, 2012 final rule, as revised in subsequent rulemaking; 
and
    (ii) Via secure electronic interface, an electronic account 
transferred from another insurance affordability program.
    (2) With respect to eligibility based on MAGI effective January 1, 
2014, comply with the terms of Sec.  435.1200 of this part, such that--
    (i) For each electronic account transferred to the agency under 
paragraph (c)(1)(ii) of this section, the agency either--
    (A) Consistent with Sec.  435.1200(c), accepts a determination of 
Medicaid eligibility based on MAGI, effective January 1, 2014, made by 
another insurance affordability program; or
    (B) Consistent with Sec.  435.1200(d), determines eligibility for 
Medicaid based on MAGI, effective January 1, 2014.
    (ii) Consistent with Sec.  435.1200(e), for each single streamlined 
application submitted directly to the agency under paragraph (b)(1)(i) 
of this section--
    (A) Determine eligibility based on MAGI effective January 1, 2014; 
and
    (B) For each individual determined not Medicaid eligible based on 
MAGI, determine potential eligibility for other insurance affordability 
programs, based on the requirements which will be effective for each 
program as of January 1, 2014, and transfer the individual's electronic 
account to such program via secure electronic interface.
    (iii) Provide notice and fair hearing rights, in accordance with 
Sec.  435.917 of this part, part 431 subpart E of this chapter, and 
Sec.  435.1200 for those determined ineligible for Medicaid effective 
January 1, 2014.
    (3) For each individual determined eligible based on MAGI in 
accordance with paragraph (c)(2) of this section--
    (i) Provide notice, including the effective date of eligibility, to 
such individual, consistent with Sec.  435.917 of this part, and 
furnish Medicaid effective January 1, 2014.
    (ii) Apply the terms of Sec.  435.916 (relating to beneficiary 
responsibility to inform the agency of any changes in circumstances 
that may affect eligibility) and Sec.  435.952 (regarding use of 
information received by the agency) of the March 23, 2012 final rule, 
as revised in subsequent rulemaking. The first renewal under Sec.  
435.916 of this part may, at State option, be scheduled to occur 
anytime between 12 months from the date of application and 12 months 
from January 1, 2014.
    (4) With respect to eligibility effective in 2013, for all 
applicants--
    (i) Consistent with the requirements of subpart J of this part, and 
applying the eligibility requirements in effect under the State plan, 
or waiver of such plan, as of the date the individual

[[Page 4700]]

submits an application to any insurance affordability program--
    (A) Determine the individual's eligibility based on the information 
provided on the application or in the electronic account; or
    (B) Request additional information from the individual needed by 
the agency to determine eligibility based on the eligibility 
requirements in effect on such date, including on a basis excepted from 
application of MAGI-based methods, as described in Sec.  435.603 of the 
March 23, 2012 final rule, as revised in subsequent rulemaking, and 
determine such eligibility if such information is provided; and
    (C) Furnish Medicaid to individuals determined eligible pursuant to 
this clause or provide notice and fair hearing rights in accordance 
with part 431 subpart E of this part if eligibility effective in 2013 
is denied; or
    (ii) Notify the individual of the opportunity to submit a separate 
application for coverage effective in 2013 and information on how to 
obtain and submit such application.

PART 440--SERVICES: GENERAL PROVISIONS

0
98. The authority citation for part 440 continues to read as follows:

    Authority:  Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

0
99. Section 440.130 is amended by revising paragraph (c) to read as 
follows:


Sec.  440.130  Diagnostic, screening, preventive, and rehabilitative 
services.

* * * * *
    (c) Preventive services means services recommended by a physician 
or other licensed practitioner of the healing arts acting within the 
scope of authorized practice under State law.
0
100. Section 440.305 is amended by revising paragraphs (a) and (b) to 
reads as follows:


Sec.  440.305  Scope.

    (a) General. This subpart sets out requirements for States that 
elect to provide medical assistance to certain Medicaid eligible 
individuals within one or more groups of individuals specified by the 
State, through enrollment of the individuals in coverage, identified as 
``benchmark'' or ``benchmark-equivalent.'' Groups must be identified by 
characteristics of individuals rather than the amount or level of 
Federal matching funding.
    (b) Limitations. A State may only apply the option in paragraph (a) 
of this section for an individual whose eligibility is based on an 
eligibility category under section 1905(a) of the Act that could have 
been covered under the State's plan on or before February 8, 2006, 
except that individuals who are eligible under 1902(a)(10)(A)(i)(VIII) 
must enroll in an Alternative Benefit Plan, unless meeting one of the 
exemptions listed in Sec.  440.315.
* * * * *
0
101. Section 440.315 is amended by revising the introductory text and 
paragraphs (f) and (h) to read as follows:


Sec.  440.315  Exempt individuals.

    Individuals within one (or more) of the following categories are 
exempt from mandatory enrollment in an Alternative Benefit Plan.
* * * * *
    (f) The individual is medically frail or otherwise an individual 
with special medical needs. For these purposes, the State's definition 
of individuals who are medically frail or otherwise have special 
medical needs must at least include those individuals described in 
Sec.  438.50(d)(3) of this chapter, individuals with disabling mental 
disorders (including children with serious emotional disturbances and 
adults with serious mental illness), individuals with serious and 
complex medical conditions, individuals with a physical, intellectual 
or developmental disability that significantly impairs their ability to 
perform 1 or more activities of daily living, or individuals with a 
disability determination based on Social Security criteria or in States 
that apply more restrictive criteria than the Supplemental Security 
Income program, the State plan criteria.
* * * * *
    (h) The individual is eligible and enrolled for Medicaid under 
Sec.  435.145 of this title based on current eligibility for assistance 
under title IV-E of the Act or under Sec.  435.150 of this title based 
on current status as a former foster care child.
* * * * *
0
102. Section 440.330 is amended by revising paragraph (d) to read as 
follows:


Sec.  440.330  Benchmark health benefits coverage.

* * * * *
    (d) Secretary-approved coverage. Any other health benefits coverage 
that the Secretary determines, upon application by a State, provides 
appropriate coverage to meet the needs of the population provided that 
coverage. Secretarial coverage may include benefits of the type that 
are available under 1 or more of the standard benchmark coverage 
packages defined in Sec.  440.330(a) through (c) of this chapter, State 
plan benefits described in section 1905(a), 1915(i), 1915(j), 1915(k) 
or section 1945 of the Act, any other Medicaid State plan benefits 
enacted under title XIX, or benefits available under base benchmark 
plans described in 45 CFR 156.100.
    (1) States wishing to elect Secretarial approved coverage should 
submit a full description of the proposed coverage (including a 
benefit-by-benefit comparison of the proposed plan to one or more of 
the three other benchmark plans specified above or to the State's 
standard full Medicaid coverage package), and of the population to 
which coverage would be offered. In addition, the State should submit 
any other information that would be relevant to a determination that 
the proposed health benefits coverage would be appropriate for the 
proposed population.
    (2) [Reserved]
0
103. Section 440.335 is amended by--
0
A. Adding paragraphs (b)(7)and (b)(8).
0
B. Revising paragraph (c)(1).
    The revisions and additions read as follows:


Sec.  440.335  Benchmark-equivalent health benefits coverage.

* * * * *
    (b) * * *
    (7) Prescription drugs.
    (8) Mental health benefits.
    (c)(1) Additional Coverage. In addition to the types of benefits of 
this section, benchmark-equivalent coverage may include coverage for 
any additional benefits of the type which are covered in 2 or more of 
the standard benchmark coverage packages described in Sec.  440.330(a 
through c) of this part or State plan benefits, described in section 
1905(a), 1915(i), 1915(j), 1915(k) and 1945 of the Act, any other 
Medicaid State plan benefits enacted under title XIX, or benefits 
available under base benchmark plans described in Sec.  156.100.
* * * * *
0
104. Section 440.345 is amended by--
0
A. Revising the section heading.
0
B. Adding paragraphs (b) through (e).
    The revision and additions read as follows:


Sec.  440.345  EPSDT and other required benefits.

* * * * *
    (b) Family planning. Alternative Benefit Plans must include 
coverage for family planning services and supplies.
    (c) Mental health parity. Alternative Benefit Plans that provide 
both medical and surgical benefits, and mental health or substance use 
disorder benefits, must comply with the Mental Health Parity and 
Addiction Equity Act.

[[Page 4701]]

    (d) Essential health benefits. Alternative Benefit Plans must 
include at least the essential health benefits described in Sec.  
440.347, and include all updates or modifications made thereafter by 
the Secretary to the definition of essential health benefits.
    (e) Updating of benefits. States are not required to update 
Alternative Benefit Plans that have been determined to include 
essential health benefits as of January 1, 2014, until December 31, 
2015. States will adhere to future guidance for updating benefits 
beyond that date, as described by the Secretary.
0
105. Section 440.347 is added to read as follows:


Sec.  440.347  Essential health benefits.

    (a) Alternative benefit plans must contain essential health 
benefits coverage, including benefits in each of the following ten 
categories, consistent with the requirements set forth in 45 CFR Part 
156:
    (1) Ambulatory patient services;
    (2) Emergency services;
    (3) Hospitalization;
    (4) Maternity and newborn care;
    (5) Mental health and substance use disorders, including behavioral 
health treatment;
    (6) Prescription drugs;
    (7) Rehabilitative and habilitative services and devices;
    (8) Laboratory services;
    (9) Preventive and wellness services and chronic disease 
management; and
    (10) Pediatric services, including oral and vision care.
    (b) Alternative benefit plans must include at least the essential 
health benefits included in one of the state options for establishing 
essential health benefits described in 45 CFR part 156.
    (c) States may select more than one option for establishing 
essential health benefits in keeping with the flexibility for States to 
implement more than one alternative benefit plan for targeted 
populations.
    (d) [Reserved]
    (e) Essential health benefits cannot be based on a benefit design 
or implementation of a benefit design that discriminates on the basis 
of an individual's age, expected length of life, or of an individual's 
present or predicted disability, degree of medical dependency, or 
quality of life or other health conditions.
0
106. Section 440.360 is revised to read as follows:


Sec.  440.360  State plan requirements for providing additional 
services.

    In addition to the requirements of Sec.  440.345, the State may 
elect to provide additional coverage to individuals enrolled in 
alternative benefit plans, except that the coverage for individuals 
eligible only through section 1902(a)(10)(A)(i)(VIII) of the Act who 
are not exempt is limited to benchmark or benchmark equivalent 
coverage. The State must describe the populations covered and the 
payment methodology for these benefits. Additional benefits must be 
benefits of the type, which are covered in one or more of the standard 
benchmark coverage packages described in Sec.  440.330(a) through (c) 
or State plan benefits including those described in sections 1905(a), 
1915(i), 1915(j), 1915(k) and 1945 of the Act and any other Medicaid 
State plan benefits enacted under title XIX, or benefits available 
under base benchmark plans described in section Sec.  156.100.
0
107. Section 440.386 is added to read as follows:


Sec.  440.386  Public notice.

    States submitting to a State plan amendment to establish an 
alternative benefit plan, or an amendment to modify an existing 
alternative benefit plan, must provide the public with notification of 
such an amendment and reasonable opportunity to comment with respect to 
such amendment, have included in the notice a description of the method 
of assuring compliance with Sec.  440.345 of this part related to full 
access to EPSDT services and the method for complying with the 
provisions of section 5006(e) of the American Recovery and Reinvestment 
Act of 2009.
    (a) Public notice must take place no less than 2 weeks prior to 
submission of any SPA that seeks to:
    (1) Establish an alternative benefit plan that would provide 
coverage that is less than the coverage provided by the State's 
approved State plan or includes cost sharing of any type.
    (2) Modify an approved alternative benefit plan by adding or 
increasing cost-sharing, or reducing benefits.
    (b) Public notice must take place prior to the implementation of 
any SPA that seeks to:
    (1) Establish an alternative benefit plan that provides the same or 
more benefits than currently are provided in the State's approved State 
plan.
    (2) Modify an approved alternative benefit plan by reducing cost-
sharing or adding additional benefits.

PART 447--PAYMENTS FOR SERVICES

0
108. The authority citation for part 447 continues to read as follows:

    Authority:  Section 1102 of the Social Security Act (42 U.S.C. 
1302).

0
109. Section 447.50 is revised to read as follows:


Sec.  447.50  Premiums and cost sharing: Basis and purpose

    Sections 1902(a)(14), 1916 and 1916A of the Act permit states to 
require certain beneficiaries to share in the costs of providing 
medical assistance through premiums and cost sharing. Sections 447.52 
through 447.56 specify the standards and conditions under which states 
may impose such premiums and or cost sharing.
0
110. Section 447.51 is revised to read as follows:


Sec.  447.51  Definitions

    As used in this part--
    Alternative non-emergency services provider means a Medicaid 
provider, such as a physician's office, health care clinic, community 
health center, hospital outpatient department, or similar provider that 
can provide clinically appropriate services in a timely manner.
    Cost sharing means any copayment, coinsurance, deductible, or other 
similar charge.
    Emergency services has the same meaning as in Sec.  438.114 of this 
part.
    Indian means any individual defined at 25 U.S.C. 1603 or 1679(b), 
or who has been determined eligible as an Indian, pursuant to Sec.  
136.12 of this part, or meets any of the following criteria:
    (1) Is a member of a Federally-recognized Indian tribe;
    (2) Resides in an urban center and meets one or more of the 
following four criteria:
    (i) Is a member of a tribe, band, or other organized group of 
Indians, including those tribes, bands, or groups terminated since 1940 
and those recognized now or in the future by the State in which they 
reside, or who is a descendant, in the first or second degree, of any 
such member;
    (ii) Is an Eskimo or Aleut or other Alaska Native;
    (iii) Is considered by the Secretary of the Interior to be an 
Indian for any purpose; or
    (iv) Is determined to be an Indian under regulations promulgated by 
the Secretary;
    (3) Is considered by the Secretary of the Interior to be an Indian 
for any purpose; or
    (4) Is considered by the Secretary of Health and Human Services to 
be an Indian for purposes of eligibility for Indian health care 
services, including as a California Indian, Eskimo, Aleut, or other 
Alaska Native.
    Indian health care provider means a health care program operated by 
the

[[Page 4702]]

Indian Health Service (IHS) or by an Indian Tribe, Tribal Organization, 
or Urban Indian Organization (otherwise known as an I/T/U) as those 
terms are defined in section 4 of the Indian Health Care Improvement 
Act (25 U.S.C. 1603).
    Non-emergency services means any care or services that are not 
considered emergency services as defined in this section and any 
services furnished in a hospital emergency department that do not 
constitute an appropriate medical screening examination or stabilizing 
examination and treatment required to be provided by the hospital under 
section 1867 of the Act.
    Preferred drugs means drugs that the state has identified on a 
publicly available schedule as being determined by a pharmacy and 
therapeutics committee for clinical efficacy as the most cost effective 
drugs within each therapeutically equivalent or therapeutically similar 
class of drugs, or all drugs if the agency does not differentiate 
between preferred and non-preferred drugs.
    Premium means any enrollment fee, premium, or other similar charge.
0
111. Section 447.52 is revised to read as follows:


Sec.  447.52  Cost sharing.

    (a) Except as provided in Sec.  447.56 of this part, the agency may 
impose cost sharing for any service under the state plan.
    (b) Maximum Allowable Cost Sharing. (1) At State option, cost 
sharing imposed for any service (other than for drugs and emergency 
department services, as described in Sec. Sec.  447.53 and 447.54 
respectively) may be established at or below the amounts shown in the 
following table (except that the maximum allowable cost for individuals 
with family income at or below 100 percent of the FPL shall be 
increased each year, beginning October 1, 2015, by the percentage 
increase in the medical care component of the CPI-U for the period of 
September to September of the preceding calendar year, rounded to the 
next higher 5-cent increment):

----------------------------------------------------------------------------------------------------------------
                                       Individuals with family  Individuals with family  Individuals with family
                                          income <=100% FPL       income 101-150% FPL        income >150% FPL
----------------------------------------------------------------------------------------------------------------
Outpatient Services (physician visit,  $4.....................  10% of cost the agency   20% of cost the agency
 physical therapy, etc.).                                        pays.                    pays.
Inpatient Stay.......................  50% of cost the agency   50% of cost the agency   50% of cost the agency
                                        pays for the first day   pays for the first day   pays for the first day
                                        of care.                 of care or 10% of        of care or 20% of
                                                                 total cost the agency    total cost the agency
                                                                 pays for the entire      pays for the entire
                                                                 stay.                    stay.
----------------------------------------------------------------------------------------------------------------

     (2) In states that do not have fee-for-service payment rates, any 
cost sharing imposed may not exceed the maximum amount established in 
paragraph (b)(1) of this section, for individuals with income at or 
below 100 percent of the applicable Federal Poverty Guidelines.
    (3) In no case shall the maximum cost sharing established by the 
agency be equal to or exceed the amount the agency pays for the 
service.
    (c) Targeted cost sharing. For individuals with family income above 
100 percent of the applicable Federal Poverty Guidelines, cost sharing 
may be targeted to specified groups of individuals within the 
applicable income group.
    (d) Denial of service for nonpayment. (1) The agency may permit a 
provider, including a pharmacy or hospital, to require an individual to 
pay cost sharing as a condition for receiving the item or service if--
    (i) The individual has family income above 100 percent of the 
applicable Federal Poverty Guidelines,
    (ii) The individual is not part of an exempted group under Sec.  
447.56(a) of this part, and
    (iii) With respect to cost sharing imposed for non-emergency 
services furnished in an emergency department, the conditions under 
Sec.  447.54(d) have been satisfied.
    (2) Except as provided under paragraph (d)(1) of this section, the 
state plan must specify that no provider may deny services to an 
eligible individual on account of the individual's inability to pay the 
cost sharing.
    (3) Nothing in this section shall be construed as prohibiting a 
provider from choosing to reduce or waive such cost sharing on a case-
by-case basis.
    (e) Prohibition against multiple charges. For any service, the 
agency may not impose more than one type of cost sharing.
    (f) State Plan Specifications. For each cost sharing charge imposed 
under this section, the state plan must specify--
    (1) The service for which the charge is made;
    (2) The group or groups of individuals that may be subject to the 
charge;
    (3) The amount of the charge;
    (4) The process used by the state to identify which beneficiaries 
are subject to cost sharing and to ensure individuals exempt from cost 
sharing are not charged, including the process used by the state to 
identify for providers whether cost sharing for a specific item or 
service may be imposed on an individual beneficiary and whether the 
provider may require the beneficiary, as a condition for receiving the 
item or service, to pay the cost sharing charge; and
    (5) If the agency imposes cost sharing under Sec.  447.54, the 
process by which services are identified as non-emergent.
0
112. Section 447.53 is revised to read as follows:


Sec.  447.53  Cost sharing for drugs.

    (a) The agency may establish differential cost sharing for 
preferred and non-preferred drugs. The provisions in Sec.  447.56(a) 
shall apply except as the agency exercises the option under paragraph 
(d) of this section. All drugs will be considered preferred drugs if so 
identified or if the agency does not differentiate between preferred 
and non-preferred drugs.
    (b) At state option, cost sharing for drugs may be established at 
or below the amounts shown in the following table (except that the 
maximum allowable cost sharing shall be increased each year, beginning 
October 1, 2015, by the percentage increase in the medical care 
component of the CPI-U for the period of September to September of the 
preceding calendar year, rounded to the next higher 5-cent increment. 
Such increase shall not be applied to any cost sharing that is based on 
the amount the agency pays for the service):

------------------------------------------------------------------------
                                     Individuals
                                     with family      Individuals with
                                   income <= 150%   family income >150%
                                         FPL                FPL
------------------------------------------------------------------------
Preferred Drugs..................              $4  $4.
Non-Preferred Drugs..............               8  20% of cost the
                                                    agency pays.
------------------------------------------------------------------------

     (c) In states that do not have fee-for-service payment rates upon 
which to base the payment, cost sharing may not

[[Page 4703]]

exceed the maximum amount established under paragraph (b) of this 
section for individuals with income at or below 150 percent of the FPL.
    (d) For individuals otherwise exempt from cost sharing under Sec.  
447.56(a), the agency may impose cost sharing for non-preferred drugs, 
not to exceed the maximum amount established in paragraph (b) of this 
section for preferred drugs.
    (e) In the case of a drug that is identified by the agency as a 
non-preferred drug within a therapeutically equivalent or 
therapeutically similar class of drugs, the agency must have a process 
in place so that cost sharing is limited to the amount imposed for a 
preferred drug if the individual's prescribing physician determines 
that the preferred drug for treatment of the same condition either 
would be less effective for the individual or would have adverse 
effects for the individual or both. In such cases the agency must 
ensure that reimbursement to the pharmacy is based on the appropriate 
cost sharing amount.
0
113. Section 447.54 is revised to read as follows:


Sec.  447.54  Cost sharing for services furnished in a hospital 
emergency department.

    (a) The agency may impose cost sharing for non-emergency services 
provided in a hospital emergency department (ED). The provisions in 
Sec.  447.56(a) shall apply except as the agency exercises the option 
under paragraph (c) of this section.
    (b) At state option, cost sharing for non-emergency services 
provided in an ED may be established at or below the amounts shown in 
the following table (except that the maximum allowable cost sharing 
identified for individuals with family income at or below 150 percent 
of the FPL shall be increased each year, beginning October 1, 2015, by 
the percentage increase in the medical care component of the CPI-U for 
the period of September to September of the preceding calendar year, 
rounded to the next higher 5-cent increment):

------------------------------------------------------------------------
                                     Individuals
                                     with family      Individuals with
                                   income  <=150%   family income >150%
                                         FPL                FPL
------------------------------------------------------------------------
Non-emergency Use of the                       $8  No Limit.
 Emergency Department.
------------------------------------------------------------------------

     (c) For individuals otherwise exempt from cost sharing under Sec.  
447.56(a), the agency may impose cost sharing for non-emergency use of 
the ED, not to exceed the maximum amount established in paragraph (a) 
of this section for individuals with income at or below 150 percent of 
the FPL.
    (d) In order for the agency to impose cost sharing under paragraph 
(a) or (c) of this section for non-emergency use of the ED, the 
hospital providing the care must--
    (1) Conduct an appropriate medical screening pursuant to Sec.  
489.24 of this chapter to determine that the individual does not need 
emergency services.
    (2) Before providing treatment and imposing cost sharing on an 
individual:
    (i) Provide the individual with the name and location of an 
available and accessible alternative non-emergency services provider;
    (ii) Ensure that the alternative provider can provide services to 
the individual in a timely manner with the imposition of a lesser cost 
sharing amount or no cost sharing if the individual is otherwise exempt 
from cost sharing; and
    (iii) Coordinate scheduling and provide a referral for treatment by 
this provider.
    (e) Nothing in this section shall be construed to:
    (1) Limit a hospital's obligations with respect to screening and 
stabilizing treatment of an emergency medical condition under section 
1867 of the Act; or
    (2) Modify any obligations under either state or federal standards 
relating to the application of a prudent-layperson standard with 
respect to payment or coverage of emergency medical services by any 
managed care organization.
0
114. Section 447.55 is revised to read as follows:


Sec.  447.55  Premiums.

    (a) The agency may impose premiums upon individuals whose income 
exceeds 150 percent of the FPL, subject to the exemptions set forth in 
Sec.  447.56(a) and the aggregate limitations set forth in Sec.  
447.56(f), except that:
    (1) Pregnant women described in subparagraph (A) of section 
1902(l)(1) of the Act who are receiving medical assistance on the basis 
of section 1902(a)(10)(A)(ii)(IX) of the Act, whose income exceeds 150 
percent of the FPL, may be charged premiums that do not exceed 10 
percent of the amount by which their family income exceeds 150 percent 
of the FPL after deducting expenses for care of a dependent child.
    (2) Individuals provided medical assistance only under section 
1902(a)(10)(A)(ii)(XV) or section 1902(a)(10)(A)(ii)(XVI) of the Act 
and the Ticket to Work and Work Incentives Improvement Act of 1999 
(TWWIIA), may be charged premiums on a sliding scale based on income.
    (3) Disabled children provided medical assistance under section 
1902(a)(10)(A)(ii)(XIX) of the Act in accordance with the Family 
Opportunity Act, may be charged premiums on a sliding scale based on 
income. The aggregate amount of the child's premium imposed under this 
paragraph and any premium that the parent is required to pay for family 
coverage under section 1902(cc)(2)(A)(i) of the Act, and other cost 
sharing charges may not exceed:
    (i) 5 percent of the family's income if the family's income is no 
more than 200 percent of the FPL.
    (ii) 7.5 percent of the family's income if the family's income 
exceeds 200 percent of the FPL but does not exceed 300 percent of the 
FPL.
    (4) Qualified disabled and working individuals described in section 
1905(s) of the Act, may be charged premiums on a sliding scale based on 
income, expressed as a percentage of Medicare cost sharing described at 
section 1905(p)(3)(A)(i) of the Act.
    (5) Medically needy individuals, as defined in Sec. Sec.  435.4 and 
436.3 of this subchapter, may be charged on a sliding scale not to 
exceed $20 per month.
    (b) State plan specifications. For each premium, enrollment fee, or 
similar charge imposed under paragraph (a) or (b) of this section, the 
plan must specify--
    (1) The group or groups of individuals that may be subject to the 
charge;
    (2) The amount and frequency of the charge;
    (3) The process used by the state to identify which beneficiaries 
are subject to premiums and to ensure individuals exempt from premiums 
are not charged; and
    (4) The consequences for an individual or family who does not pay.
    (c) Consequences for non-payment. (1) With respect to premiums 
imposed under paragraph (a) (1) of this section, the agency may--
    (i) Require a group or groups of individuals to prepay; and
    (ii) Terminate an individual from medical assistance on the basis 
of failure to pay for 60 days or more.
    (2) With respect to premiums imposed under paragraphs (a)(2) and 
(4), the agency--
    (i) May not require prepayment;
    (ii) May terminate an individual from medical assistance on the 
basis of failure to pay the premium for 60 days or more; and
    (iii) Specific to premiums imposed under paragraph (a)(2) of this 
section,

[[Page 4704]]

permit state or local funds available under other programs to be used 
for payment of a premium. Such funds shall not be counted as income to 
the individual with respect to whom such payment is made.
    (3) With respect to premiums imposed under paragraph (a)(3) of this 
section--
    (i) For individuals with annual income exceeding 250 percent of the 
FPL, the agency may require payment of 100 percent of the premiums 
imposed under this paragraph for a year, such that payment is only 
required up to 7.5 percent of annual income for individuals whose 
annual income does not exceed 450 percent of the FPL.
    (ii) For individuals whose annual adjusted gross income (as defined 
in section 62 of the Internal Revenue Code of 1986) exceeds $75,000, 
increased by inflation each calendar year after 2000, the agency must 
require payment of 100 percent of the premiums for a year, except that 
the agency may choose to subsidize the premiums using state funds which 
may not be federally matched by Medicaid.
    (4) With respect to any premiums imposed under this section, the 
agency may waive payment of a premium in any case where the agency 
determines that requiring the payment would create an undue hardship 
for the individual or family.
0
115. Section 447.56 is revised to read as follows:


Sec.  447.56  Limitations on premiums and cost sharing.

    (a) Exemptions. (1) The agency may not impose premiums or cost 
sharing upon the following groups of individuals:
    (i) Children under 18 years of age (and, at the option of the 
State, individuals under 21, 20, or 19 years of age, or any reasonable 
category of individuals 18 years of age or over but under 21) who 
either have family income at or below 100 percent of the FPL or are 
described in section 1902(a)(10)(A)(i) of the Act.
    (ii) Children for whom child welfare services are made available 
under Part B of title IV of the Act on the basis of being a child in 
foster care and individuals with respect to whom adoption or foster 
care assistance is made available under Part E of that title, without 
regard to age.
    (iii) Disabled children, except as provided at Sec.  
447.55(a)(4)(premiums), who are receiving medical assistance by virtue 
of the application of the Family Opportunity Act in accordance with 
sections 1902(a)(10)(A)(ii)(XIX) and 1902(cc) of the Act.
    (iv) Pregnant women, except as provided in paragraph (2)(cost 
sharing) and Sec.  447.55(a)(2)(premiums), during the pregnancy and 
through the postpartum period which begins on the last day of pregnancy 
and extends through the end of the month in which the 60-day period 
following termination of pregnancy ends.
    (v) Any individual who, as a condition of receiving services in an 
institution is required to spend all but a minimal amount of the 
individual's income required for personal needs. At state option, this 
exemption may be applied to individuals receiving services in a home 
and community-based setting if they are required to contribute to the 
cost of their care.
    (vi) An individual receiving hospice care, as defined in section 
1905(o) of the Act.
    (vii) An Indian who is eligible to receive or has received an item 
or service furnished by an Indian health care provider or through 
referral under contract health services is exempt from premiums. 
Indians who are currently receiving or have ever received an item or 
service furnished by an Indian health care provider or through referral 
under contract health services are exempt from all cost sharing.
    (viii) Individuals who are receiving Medicaid because of the 
state's election to extend coverage as authorized by Sec.  435.213 
(Breast and Cervical Cancer).
    (2) The agency may not impose cost sharing for the following 
services:
    (i) Emergency services as defined at section 1932(b)(2) of the Act 
and Sec.  438.114(a);
    (ii) Family planning services and supplies described in section 
1905(a)(4)(C) of the Act, including contraceptives and pharmaceuticals 
for which the State claims or could claim Federal match at the enhanced 
rate under section 1903(a)(5) of the Act for family planning services 
and supplies;
    (iii) Preventive services, at a minimum the services specified at 
Sec.  457.520, provided to children under 18 years of age regardless of 
family income, which reflect the well-baby and well child care and 
immunizations in the Bright Futures guidelines issued by the American 
Academy of Pediatrics; and
    (iv) Pregnancy-related services, including those defined at 
Sec. Sec.  440.210(a)(2) and 440.250(p), and counseling and drugs for 
cessation of tobacco use All services provided to pregnant women will 
be considered as pregnancy-related, except those services specifically 
identified in the state plan as not being related to the pregnancy.
    (b) Applicability. Except as permitted under Sec.  447.52(c) 
(targeted cost sharing), the agency may not exempt additional 
individuals from cost sharing obligations that apply generally to the 
population at issue.
    (c) Payments to providers. (1) Except as provided under paragraphs 
(c)(2) and (c)(3) of this section, the agency must reduce the payment 
it makes to a provider by the amount of a beneficiary's cost sharing 
obligation, regardless of whether the provider has collected the 
payment or waived the cost sharing.
    (2) For items and services provided to Indians who are exempt from 
cost sharing under paragraph (a)(1)(vii) of this section, the agency 
may not reduce the payment it makes to a provider, including an Indian 
health care provider, by the amount of cost sharing that would 
otherwise be due from the Indian.
    (3) For those providers that the agency reimburses under Medicare 
reasonable cost reimbursement principles, in accordance with subpart B 
of this part, an agency may increase its payment to offset uncollected 
deductible, coinsurance, copayment, or similar charges that are bad 
debts of providers.
    (d) Payments to managed care organizations. If the agency contracts 
with a managed care organization, the agency must calculate its 
payments to the organization to include cost sharing established under 
the state plan, for beneficiaries not exempt from cost sharing under 
paragraph (a) of this section, regardless of whether the organization 
imposes the cost sharing on its recipient members or the cost sharing 
is collected.
    (e) Payments to states. No FFP in the state's expenditures for 
services is available for--
    (1) Any premiums or cost sharing amounts that recipients should 
have paid under Sec. Sec.  447.52 through 447.55 (except for amounts 
that the agency pays as bad debts of providers under paragraph (a)(3) 
of this section; and
    (2) Any amounts paid by the agency on behalf of ineligible 
individuals, whether or not the individual had paid any required 
premium, except for amounts for premium assistance to obtain coverage 
for eligible individuals through family coverage that may include 
ineligible individuals when authorized in the approved state plan.
    (f) Aggregate limits. (1) Subject to paragraph (f)(2) of this 
section, any Medicaid premiums and cost sharing incurred by all 
individuals in the Medicaid household may not exceed an aggregate limit 
of 5 percent of the family's income applied on either a

[[Page 4705]]

quarterly or monthly basis, as specified by the agency.
    (2) The aggregate limit in paragraph (f)(1) of this section shall 
apply when premiums and cost sharing are imposed on any of the 
following individuals:
    (i) Individuals who are subject to targeted cost sharing under 
Sec.  447.52(c);
    (ii) Individuals who are subject to enforceable cost sharing under 
Sec.  447.52(d);
    (iii) Individuals who are subject to premiums under Sec.  
447.55(a)(1); and
    (iv) Individuals exempt from premiums and cost sharing under 
paragraph (a) of this section who are subject to cost sharing for non-
preferred drugs under Sec.  447.53 or non-emergency services furnished 
in an emergency department under Sec.  447.54.
    (3) If the state adopts premiums or cost sharing rules that could 
place beneficiaries at risk of reaching the aggregate family limit, the 
state plan must indicate a process to track each family's incurred 
premiums and cost sharing through an automated mechanism that does not 
rely solely on beneficiary documentation.
    (4) The agency must notify beneficiaries and providers when a 
beneficiary has incurred out-of-pocket expenses up to the aggregate 
family limit and individual family members are no longer subject to 
cost sharing for the remainder of the family's current monthly or 
quarterly cap period.
    (5) The agency must have a process in place for beneficiaries to 
request a reassessment of their family aggregate limit if they have a 
change in circumstances or if they are being terminated for failure to 
pay a premium.
    (6) Nothing in this paragraph shall preclude the agency from 
establishing additional aggregate limits, including but not limited to 
a monthly limit on cost sharing charges for a particular service.
0
116. Section 447.57 is revised to read as follows:


Sec.  447.57  Beneficiary and public notice requirements.

    (a) The agency must make available a public schedule describing 
current premiums and cost sharing requirements containing the following 
information:
    (1) The group or groups of individuals who are subject to premiums 
and/or cost sharing and the current amounts;
    (2) Mechanisms for making payments for required premiums and cost 
sharing charges;
    (3) The consequences for an applicant or recipient who does not pay 
a premium or cost sharing charge;
    (4) A list of hospitals charging cost sharing for non-emergency use 
of the emergency department; and
    (5) A list of preferred drugs or a mechanism to access such a list, 
including the agency Web site.
    (b) The agency must make the public schedule available to the 
following in a manner that ensures that affected applicants, 
beneficiaries, and providers are likely to have access to the notice:
    (1) Beneficiaries, at the time of their enrollment and reenrollment 
after a redetermination of eligibility, and when premiums, cost sharing 
charges, or aggregate limits are revised, notice to beneficiaries must 
be in accordance with Sec.  435.905(b);
    (2) Applicants, at the time of application;
    (3) All participating providers; and
    (4) The general public.
    (c) Prior to submitting to the Centers for Medicare & Medicaid 
Services for approval a state plan amendment (SPA) to establish or 
substantially modify existing premiums or cost sharing, or change the 
consequences for non-payment, the agency must provide the public with 
advance notice of the SPA, specifying the amount of premiums or cost 
sharing and who is subject to the charges. The agency must provide a 
reasonable opportunity to comment on such SPAs. The agency must submit 
documentation with the SPA to demonstrate that these requirements were 
met.


Sec.  447.58  [Removed and Reserved]

0
117. Section 447.58 is removed and reserved.


Sec.  447.59  [Removed and Reserved]

0
118. Section 447.59 is removed and reserved.


Sec.  447.60  [Removed and Reserved]

0
119. Section 447.60 is removed and reserved.


Sec.  447.62  [Removed and Reserved]

0
120. Section 447.62 is removed and reserved.


Sec.  447.64  [Removed and Reserved]

0
121. Section 447.64 is removed and reserved.

PART 457--ALLOTMENTS AND GRANTS TO STATES

0
122. The authority citation for part 457 continues to read as follows:

    Authority: Section 1102 of the Social Security Act (42 U.S.C. 
1302).
0
123. Section 457.10 is amended by--
0
A. Revising the definition of ``electronic account.''
0
B. Adding the definitions of ``Combined eligibility notice,'' 
``Coordinated content,'' ``Exchange appeals entity,'' and ``Premium 
Lock Out'' in alphabetical order.
    The additions and revisions read as follows:


Sec.  457.10  Definitions and use of terms.

* * * * *
    Combined eligibility notice means an eligibility notice that 
informs an individual, or multiple family members of a household when 
feasible, of eligibility for each of the insurance affordability 
programs and enrollment in a qualified health plan through the 
Exchange, for which a determination or denial was made. A combined 
eligibility notice shall be issued by the last agency to make a 
determination of eligibility, regardless of which entity received the 
application. A combined notice must meet the requirements of Sec.  
457.340(e) of this part and contain the content described in Sec.  
457.340(e)(1) of this part, except that information described in Sec.  
457.340(e)(1)(i)(C) must be included in a combined notice issued by 
another insurance affordability program only if known to that program.
    Coordinated content means information included in an eligibility 
notice regarding the transfer of the individual's or households' 
electronic account to another insurance affordability program for a 
determination of eligibility.
* * * * *
    Electronic account means an electronic file that includes all 
information collected and generated by the State regarding each 
individual's CHIP eligibility and enrollment, including all 
documentation required under Sec.  457.380 of this part and including 
any information collected or generated as part of a review conducted in 
accordance with subpart K of this part.
* * * * *
    Exchange appeals entity has the meaning given to the term ``appeals 
entity,'' as defined in 45 CFR 155.500.
* * * * *
    Premium Lock-Out is defined as a State-specified period of time not 
to exceed 90 days that a CHIP eligible child who has an unpaid premium 
or enrollment fee (as applicable) will not be permitted to reenroll for 
coverage in CHIP. Premium lock-out periods are not applicable to 
children who have paid outstanding premiums or enrollment fees.
* * * * *
0
124. Section 457.50 is revised to read as follows:

[[Page 4706]]

Sec.  457.50  State plan.

    The State plan is a comprehensive Statement, submitted using an 
automated process by the State to CMS.
    (a) States with approved paper State plans shall submit conversion 
plans to comply with the required automated format, with full 
compliance not later than 1 year following the availability of the 
automated template.
    (b) Thereafter, approved paper State plans or plan amendments shall 
be valid only temporarily to the extent specifically authorized and 
incorporated by reference under the approved automated State plan.
0
125. Section 457.60 is amended by revising the introductory text to 
read as follows:


Sec.  457.60  Amendments.

    A State may seek to amend its approved State plan in whole or in 
part at any time through the automated submission of an amendment to 
CMS.
* * * * *
0
126. Section 457.110 is amended by revising paragraph (a) to read as 
follows:


Sec.  457.110  Enrollment assistance and information requirements.

    (a) Information disclosure. The State must make accurate, easily 
understood, information available to families of potential applicants, 
applicants and enrollees, and provide assistance to these families in 
making informed decisions about their health plans, professionals, and 
facilities. This information shall be provided in plain language and is 
accessible to individuals with disabilities and persons who are limited 
English proficient, consistent with Sec.  435.905(b) of this part.
    (1) The State may provide notices to applicants and beneficiaries 
in electronic format, provided that the State establish safeguards in 
accordance with Sec.  435.918 of this chapter.
    (2) [Reserved]
* * * * *
0
127. Section Sec.  457.310 is amended by revising paragraph (b)(2)(i) 
to read as follows:


Sec.  457.310  Targeted low-income child.

* * * * *
    (b) * * *
    (2) * * *
    (i) Found eligible or potentially eligible for Medicaid under 
policies of the State plan (determined through either the Medicaid 
application process or the screening process described at Sec.  457.350 
of this part), except for eligibility under Sec.  435.214 of this 
chapter (related to coverage for family planning services).
* * * * *
0
128. Section 457.320 is amended by--
0
A. Republishing paragraph (b) introductory text.
0
B. Revising paragraph (b)(6).
0
C. Redesignating paragraphs (c), (d), and (e) as paragraphs (d), (e), 
and (f), respectively.
0
D. Adding paragraph (c).
0
E. Revising newly redesignated paragraph (d).
    The addition and revisions read as follows:


Sec.  457.320  Other eligibility standards.

* * * * *
    (b) Prohibited eligibility standards. In establishing eligibility 
standards and methodologies, a State may not--
* * * * *
    (6) Exclude individuals based on citizenship or nationality, to the 
extent that the children are U.S. citizens or U.S. nationals, or 
qualified non-citizens as defined in Sec.  435.4 of this chapter, 
(except to the extent that 8 U.S.C. sections 1611, 1613, and 1641 
precludes them from receiving Federal means-tested public benefits), as 
verified in accordance with Sec.  457.380 of this part.
* * * * *
    (c) Option to Cover Non-citizen Children and/or Pregnant Women. The 
State may cover non-citizen children or pregnant women who are lawfully 
present in the United States, as defined in Sec.  435.4 of this 
chapter, but whose CHIP eligibility would otherwise be prohibited under 
Sec.  457.320(b)(6) of this part, and otherwise meet the eligibility 
requirements for the CHIP program under this part or section 2112 of 
the Act, provided that the State has elected to provide Medicaid to the 
same population.
    (d) Citizenship and immigration status. All individuals, themselves 
or an adult member of the individual's family or household, an 
authorized representative, or if the individual is a minor or 
incapacitated, someone acting responsibly for the individual, provided 
that such individual attests to having reasonable basis to make a 
declaration of such status, seeking coverage under a separate child 
health plan, must declare to be a citizen or national of the United 
States or a non-citizen in a satisfactory immigration status.
* * * * *
0
129. Section 457.340 is amended by revising paragraphs (a) and (e) to 
read as follows:


Sec.  457.340  Application for and enrollment in CHIP.

    (a) Application and renewal assistance, availability of program 
information, and Internet Web site. The terms of Sec.  435.905, Sec.  
435.906, Sec.  435.907(h), Sec.  435.908, 435.909, and Sec.  
435.1200(f) of this chapter apply equally to the State in administering 
a separate CHIP.
* * * * *
    (e) Notice of eligibility determinations. The State must provide 
each applicant or enrollee with timely and adequate written notice of 
any decision affecting their eligibility, including denial or 
termination, or suspension of eligibility, consistent with Sec.  
457.315, 457.348, and 457.350 of this part. The notice must be written 
in plain language; and accessible to persons who are limited English 
proficient and individuals with disabilities, consistent with Sec.  
435.905(b) of this chapter and Sec.  457.110 of this part.
    (1) Content of eligibility notice.
    (i) Notice of approved eligibility. Any notice of an approval of 
CHIP eligibility must include, but is not limited to the following 
information--
    (A) The basis and effective date of eligibility;
    (B) The circumstances under which the individual must report, and 
procedures for reporting, any changes that may affect the individual's 
eligibility;
    (C) Information on benefits and services and if applicable, 
information relating to any premiums, enrollment fees, and cost sharing 
required, and information on the enrollee's right and responsibilities, 
including the opportunity for review of matters described in Sec.  
457.1130 of this part.
    (ii) Notice of adverse action including denial, termination or 
suspension of eligibility. Any notice of denial, termination, or 
suspension of CHIP eligibility must contain----
    (A) The basis supporting the action and the effective date,
    (B) Information on the individual's right to a review process, in 
accordance with Sec.  457.1180 of this part;
    (iii) In the case of a suspension or termination of eligibility, 
the State must provide sufficient notice to enable the child's parent 
or other caretaker to take any appropriate actions that may be required 
to allow coverage to continue without interruption.
* * * * *
0
130. Section 457.342 is added to read as follows:

[[Page 4707]]

Sec.  457.342  Continuous eligibility for children.

    (a) A State may provide continuous eligibility for children under 
CHIP consistent with Sec.  435.926.
    (b) Besides as provided in Sec.  435.926(d) of this chapter, 
continuous eligibility may also be terminated for failure to pay 
required premiums or enrollment fees as provided for in the CHIP State 
plan.
0
131. Section 457.348 is amended by--
    A. Redesignating paragraphs (a) through (d) as paragraphs (b) 
through (e), respectively.
    B. Adding new paragraph (a).
    C. Revising newly redesignated paragraphs (b), (c) and (d).
    The revisions and additions read as follows:


Sec.  457.348  Determinations of Children's Health Insurance Program 
eligibility by other insurance affordability programs.

    (a) Definitions.
    Combined eligibility notice has the meaning as provided in Sec.  
457.10 of this part.
    Coordinated content has the meaning as provided in Sec.  457.10 of 
this part.
    (b) Agreements with other insurance affordability programs. The 
State must enter into and, upon request, provide to the Secretary one 
or more agreements with the Exchange and the agencies administering 
other insurance affordability programs as are necessary to fulfill the 
requirements of this section, including a clear delineation of the 
responsibilities of each program to--
    (1) Minimize burden on individuals seeking to obtain or renew 
eligibility or to appeal a determination of eligibility with respect to 
one or more insurance affordability program;
    (2) Ensure compliance with paragraph (c) of this section, Sec.  
457.350 of this part, and if applicable, paragraph (d) of this section;
    (3) Ensure prompt determination of eligibility and enrollment in 
the appropriate program without undue delay, consistent with the 
timeliness standards established under Sec.  457.340(d) of this part, 
based on the date the application is submitted to any insurance 
affordability program, and
    (i) Provide for a combined notice to individuals, as well as 
multiple members of the same households applying on the same 
application to the maximum extent feasible and as expressly required in 
this section, for all insurance affordability programs.
    (ii) To the extent to which a combined eligibility notice is not 
feasible for all members of the same household, applying on the same 
application, coordinated content must be provided for those household 
members whose eligibility status is not yet determined.
    (c) Provision of CHIP for individuals found eligible for CHIP by 
another insurance affordability program. If a State accepts final 
determinations of CHIP eligibility made by another insurance 
affordability program, for each individual determined so eligible by 
the other insurance affordability program (including as a result of a 
decision made by the Exchange appeals entity authorized by the State to 
adjudicate reviews of CHIP eligibility determinations), the State 
must--
    (1) Establish procedures to receive, via secure electronic 
interface, the electronic account containing the determination of CHIP 
eligibility;
    (2) Comply with the provisions of Sec.  457.340 of this part to the 
same extent as if the application had been submitted to the State.
    (3) Include in the agreement into which the State has entered under 
paragraph (b) of this section that the Exchange or other insurance 
affordability program will provide combined eligibility notice of final 
eligibility determinations made by it; and
    (4) Maintain proper oversight of the eligibility determinations 
made by the other program.
    (d) Transfer from other insurance affordability programs to CHIP. 
For individuals for whom another insurance affordability program has 
not made a determination of CHIP eligibility, but who have been 
screened as potentially CHIP eligible by such program (including as a 
result of a decision made by the Exchange appeals entity), the State 
must--
    (1) Accept, via secure electronic interface, the electronic account 
for the individual and notify such program of the receipt of the 
electronic account.
    (2) Not request information or documentation from the individual 
already provided to the other insurance affordability program and 
included in the individual's electronic account or other transmission 
from the other program or appeals entity;
    (3) Promptly and without undue delay, consistent with the 
timeliness standards established under Sec.  457.340(d) of this part, 
determine the CHIP eligibility of the individual, in accordance with 
Sec.  457.340 of this part, without requiring submission of another 
application;
    (i) Effective January 1, 2015, for individuals determined eligible 
for CHIP, provide combined eligibility notice, including of a denial or 
termination of eligibility for other insurance affordability programs, 
as applicable.
    (ii) For individuals determined not eligible for CHIP, comply with 
Sec.  457.350(i) of this section.
    (4) Accept any finding relating to a criterion of eligibility made 
by such program or appeals entity, without further verification, if 
such finding was made in accordance with policies and procedures which 
are the same as those applied by the State in accordance with Sec.  
457.380 of this part or approved by it in the agreement described in 
paragraph (a) of this section;
    (5) Notify such program of the final determination of the 
individual's eligibility or ineligibility for CHIP.
* * * * *
    132. Section 457.350 is amended by revising paragraph (b) 
introductory text and paragraphs (f), (g), (h), (i), and (j) to read as 
follows:


Sec.  457.350  Eligibility screening and enrollment in other insurance 
affordability programs.

* * * * *
    (b) A State must, promptly and without undue delay, consistent with 
the timeliness standards established under Sec.  457.340(d) of this 
subpart, identify potential eligibility for other insurance 
affordability programs of any applicant, enrollee, or other individual 
who submits an application or renewal form to the State which includes 
sufficient information to determine CHIP eligibility, or whose 
eligibility is being renewed under a change in circumstance in 
accordance with Sec.  457.343 of this subpart or who is determined not 
eligible for CHIP pursuant to a review conducted in accordance with 
subpart K of this part, as follows:
* * * * *
    (f) Applicants found potentially eligible for Medicaid based on 
modified adjusted gross income. For individuals identified in paragraph 
(b)(1), the State must--
    (1) Promptly and without undue delay, consistent with the 
timeliness standards established under Sec.  457.340(d) of this part, 
transfer the individual's electronic account to the Medicaid agency via 
a secure electronic interface;
    (2) Include in any agreement into which the agency enters in 
accordance with paragraph Sec.  457.348(a) of this section, that, 
effective January 1, 2015, such other program will issue a combined 
eligibility notice, including the State's denial of CHIP eligibility;
    (3) Except as provided in Sec.  457.355 of this subpart, find the 
individual at application ineligible, provisionally

[[Page 4708]]

ineligible, or suspend the individual's application for CHIP unless and 
until the Medicaid application for the individual is denied; and
    (4) Determine or redetermine eligibility for CHIP, consistent with 
the timeliness standards established under Sec.  457.340(d) of this 
part, if--
    (i) The State is notified, in accordance with Sec.  435.1200(d)(5) 
of this chapter that the applicant has been found ineligible for 
Medicaid; or
    (ii) The State is notified prior to the final Medicaid eligibility 
determination that the applicant's circumstances have changed and 
another screening shows that the applicant is no longer potentially 
eligible for Medicaid.
    (g) Informed application decisions. To enable a family to make an 
informed decision about applying or completing the application process 
for Medicaid, or other insurance affordability programs, a State must 
provide the child's family with information, in writing, about--
    (1) The State's Medicaid program and other insurance affordability 
programs, including the benefits covered, and restrictions on cost 
sharing; and
    (2) Eligibility rules that prohibit children who have been screened 
eligible for Medicaid from being enrolled in a separate child health 
program, other than provisional temporary enrollment while a final 
Medicaid eligibility determination is being made.
    (3) The State will determine the written format and timing of the 
information regarding Medicaid, or other insurance affordability 
program, eligibility, benefits, and the application processes required 
under this paragraph (g) of this section.
    (h) Waiting lists, enrollment caps and closed enrollment. The State 
must establish procedures to ensure that--
    (1) The procedures developed in accordance with this section have 
been followed for each child applying for a separate child health 
program before placing the child on a waiting list or otherwise 
deferring action on the child's application for the separate child 
health program; and
    (2) Families are informed that a child may be eligible for 
Medicaid, or other insurance affordability programs, if circumstances 
change while the child is on a waiting list for separate child health 
program.
    (i) Applicants found potentially eligible for other insurance 
affordability programs. For individuals identified in paragraph (b)(3) 
of this section, including during a period of uninsurance imposed by 
the State under Sec.  457.805 of this part, the State must--
    (1) Promptly and without undue delay, consistent with the 
timeliness standards established under Sec.  457.340(d) of this part, 
transfer the electronic account to the applicable program via a secure 
electronic interfaces.
    (2) Include in any agreement into which the agency enters in 
accordance with paragraph Sec.  457.348(a) of this section, that, 
effective January 1, 2015, such other program will issue a combined 
eligibility notice, including the State's denial of CHIP eligibility.
    (3) In the case of individuals subject to a period of uninsurance 
under this part, the State must notify such program of the date on 
which such period ends and the individual is eligible to enroll in 
CHIP.
    (i) Prior to January 1, 2015--
    (A) Include coordinated content, as defined in Sec.  457.104 of the 
part, in the notice of CHIP denial or termination, provided to the 
individual in accordance with Sec.  457.340 of this part, relating to 
the transfer of the individual's account; or
    (B) Include in the agreement into which the agency enters in 
accordance with 457.348(a) of this section, that such other program 
will issue a combined eligibility notice, including the State's denial 
of CHIP eligibility.
    (ii) [Reserved]
    (j) Applicants potentially eligible for Medicaid on a basis other 
than modified adjusted gross income. For individuals identified in 
paragraph (b)(2) of this section, the State must--
    (1) Promptly and without undue delay, consistent with the 
timeliness standards established under Sec.  457.340(d) of this 
section, transfer the electronic account to the Medicaid agency via a 
secure electronic interface;
    (2) Complete the determination of eligibility for CHIP in 
accordance with Sec.  457.340 of this part;
    (3) Include in any agreement into which the agency enters in 
accordance with paragraph Sec.  457.348(a) of this section, that, 
effective January 1, 2015, such other program will issue a combined 
eligibility notice, including the State's denial of CHIP eligibility.
    (i) Prior to January 1, 2015--
    (A) Include coordinated content, as defined in Sec.  457.104 of the 
part, in the notice of CHIP denial or termination, provided to the 
individual in accordance with Sec.  457.340 of this part, relating to 
the transfer of the individual's account; or
    (B) Include in the agreement into which the agency enters in 
accordance with 457.348(a) of this section, that such other program 
will issue a combined eligibility notice, including the State's denial 
of CHIP eligibility.
    (ii) [Reserved]
    (4) Dis-enroll the enrollee from CHIP if the State is notified in 
accordance with Sec.  435.1200(d)(5) of this chapter that the applicant 
has been determined eligible for Medicaid.
* * * * *
0
133. Section 457.351 is added to read as follows:


Sec.  457.351  Coordination involving appeals entities for different 
insurance affordability programs.

    The State must--
    (a) Establish a secure electronic interface the through which--
    (1) The Exchange can notify the State that an appeal of eligibility 
for enrollment in a QHP through the Exchange, advance payments of the 
premium tax credit, or cost-sharing reductions, has been filed; and
    (2) An individual's electronic account, including any information 
provided by the individual as part of review under subpart K of this 
part or an appeal to the Exchange appeals entity, can be transferred 
from one program or appeals entity or review body to the other.
    (b) In conducting review in accordance with subpart K of this part, 
not request information or documentation from the individual included 
in the individual's electronic account or provided to the Exchange or 
Exchange appeals entity.
    (c)(1) In the case of individuals described in paragraph (c)(2) of 
this section, transmit to the Exchange, through the electronic 
interface established under paragraph (a) of this section, a review 
decision issued per subpart K of this part;
    (2) Individuals described in this paragraph include individuals 
determined ineligible for CHIP.
    (i) By the Exchange or
    (ii) By the State and transferred to the Exchange in accordance 
with Sec.  457.350(i) of this part.
0
134. Section 457.355 is revised to read as follows:


Sec.  457.355  Presumptive eligibility for children.

    The State may pay costs of coverage under a separate child health 
program during a presumptive eligibility period, determined in the same 
manner as Medicaid presumptive eligibility at Sec.  435.1102 of this 
chapter, for children applying for coverage under the separate child 
health program.
0
135. Section 457.360 is added to read as follows:

[[Page 4709]]

Sec.  457.360  Deemed newborn children.

    (a) Basis. This section implements section 2112(e) of the Act.
    (b) Eligibility. (1) The agency must provide CHIP to children from 
birth until the child's first birthday without application if--
    (i) The child's mother was eligible for and received covered 
services for the date of the child's birth under the State's separate 
CHIP State plan as a targeted low-income pregnant woman in accordance 
with section 2112 of the Act, or at State option as a targeted low-
income child; and
    (ii) The child is not eligible for Medicaid under Sec.  435.117 of 
this chapter.
    (2) The child is deemed to have applied and been determined 
eligible under the State's separate CHIP State plan effective as of the 
date of birth, and remains eligible regardless of changes in 
circumstances (except if the child dies or ceases to be a resident of 
the State or the child's representative requests a voluntary 
termination of the child's eligibility) until the child's first 
birthday.
    (c) At State option, the agency may provide deemed newborn 
eligibility under CHIP to a child whose mother for the date of the 
child's birth was eligible for and receiving:
    (1) CHIP coverage in another State; or
    (2) Coverage under the State's demonstration under section 1115 of 
the Act as a Medicaid or CHIP population.
    (d) CHIP identification number. (1) The CHIP identification number 
of the mother serves as the child's identification number, and all 
claims for covered services provided to the child may be submitted and 
paid under such number, unless and until the State issues a separate 
identification number for the child in accordance with paragraph (d)(2) 
of this section.
    (2) The State must issue a separate CHIP identification number for 
the child prior to the effective date of any termination of the 
mother's CHIP eligibility or prior to the date of the child's first 
birthday, whichever is sooner, unless the child is determined to be 
ineligible, except that the State must issue a separate CHIP 
identification number for the child if the mother was covered in 
another State at the time of birth.
0
136. Section 457.370 is added to read as follows:


Sec.  457.370  Alignment with Exchange initial open enrollment period.

    The terms of Sec.  435.1205 apply equally to the State in 
administering a separate CHIP, except that the State shall make 
available and accept the application described in Sec.  457.330 of this 
part, shall accept electronic accounts as described in Sec.  457.348 of 
this part, and furnish coverage in accordance with Sec.  457.340 of 
this part.
0
137. Section 457.380 is amended by revising paragraph (b) to read as 
follows:


Sec.  457.380  Eligibility verification.

* * * * *
    (b) Status as a citizen or a non-citizen. (1) Except with respect 
to newborns identified in Sec.  435.406(a)(1)(iv) of this chapter who 
are exempt from any requirement to verify citizenship, States must 
verify citizenship or immigration status in accordance with Sec.  
435.956(a) and provide a reasonable opportunity to verify such status 
in accordance Sec.  435.956(g) of this chapter.
    (2) [Reserved]
0
138. Section Sec.  457.570 is revised as follows:


Sec.  457.570  Disenrollment protections.

    (a) The State must give enrollees reasonable notice of and an 
opportunity to pay past due premiums, copayments, coinsurance, 
deductibles, or similar fees prior to disenrollment.
    (b) The disenrollment process must afford the enrollee an 
opportunity to show that the enrollee's family income has declined 
prior to disenrollment for non-payment of cost-sharing charges, and in 
the event that such a showing indicates that the enrollee may have 
become eligible for Medicaid or for a lower level of cost sharing, the 
State must facilitate enrolling the child in Medicaid or adjust the 
child's cost-sharing category as appropriate.
    (c) The State must ensure that disenrollment policies, such as 
policies related to non-payment of premiums, do not present barriers to 
the timely determination of eligibility and enrollment in coverage of 
an eligible child in the appropriate insurance affordability program. A 
State may not--
    (1) Establish a premium lock-out period that exceeds 90-days in 
accordance with Sec.  457.10 of this part.
    (2) Require the collection of past due premiums or enrollment fees 
as a condition of eligibility for reenrollment once the State-defined 
lock out period has expired, regardless of the length of the lock out 
period.
    (d) The State must provide the enrollee with an opportunity for an 
impartial review to address disenrollment from the program in 
accordance with Sec.  457.1130(a)(3) of this part.


Sec.  457.616  [Amended]

0
139. Section 457.616 is amended by removing and reserving paragraph 
(a)(3).
0
140. Section 457.805 is revised to read as follows:


Sec.  457.805  State plan requirement: Procedures to address 
substitution under group health plans.

    (a) State plan requirements. The State plan must include a 
description of reasonable procedures to ensure that health benefits 
coverage provided under the State plan does not substitute for coverage 
provided under group health plans as defined at Sec.  457.10 of this 
part.
    (b) Limitations. (1) A state may not, under this section, impose a 
period of uninsurance which exceeds 90 days from date a child otherwise 
eligible for CHIP is disenrolled from coverage under a group health 
plan.
    (2) A waiting period may not be applied to a child following the 
loss of eligibility for and enrollment in Medicaid or another insurance 
affordability program.
    (3) If a state elects to impose a period of uninsurance following 
the loss of coverage under a group health plan under this section, such 
period may not be imposed in the case of any child if:
    (i) The premium paid by the family for coverage of the child under 
the group health plan exceeded 5 percent of household income;
    (ii) The cost of family coverage that includes the child exceeds 
9.5 percent of the household income.
    (iii) The employer stopped offering coverage of dependents (or any 
coverage) under an employer-sponsored health insurance plan;
    (iv) A change in employment, including involuntary separation, 
resulted in the child's loss of employer-sponsored insurance (other 
than through full payment of the premium by the parent under COBRA);
    (v) The child has special health care needs; and
    (vi) The child lost coverage due to the death or divorce of a 
parent.
0
141. Section 457.810 is amended by revising paragraph (a) to read as 
follows:


Sec.  457.810  Premium assistance programs: Required protections 
against substitution.

* * * * *
    (a) Minimum period without coverage under a group health plan. For 
health benefits coverage provided through premium assistance for group 
health plans, the following rules apply:
    (1) Any waiting period imposed under the state child health plan 
prior to the provision of child health assistance to a targeted low-
income child under the state plan shall apply to the same extent to the 
provision of a premium assistance subsidy for the child.
    (2) States must permit the same exemptions to the required waiting

[[Page 4710]]

period for premium assistance as are permitted under the state plan for 
the provision of child health assistance to a targeted low-income 
child.
* * * * *
0
142. Section 457.1180 is revised to read as follows:


Sec.  457.1180  Program specific review process: Notice.

    (a) A State must provide enrollees and applicants timely written 
notice of any determinations required to be subject to review under 
Sec.  457.1130 that includes the reasons for the determination, an 
explanation of the applicable rights to review of that determination, 
the standard and expedited time frames for review, the manner in which 
a review can be requested, and the circumstances under which enrollment 
may continue pending review. If an individual has been denied 
eligibility for CHIP by the State or other entity authorized to make 
such determination, the State must treat an appeal to the Exchange 
appeals entity of a determination of eligibility for advanced payments 
of the premium tax credit or cost-sharing reductions, as a request for 
a review of a denial of CHIP eligibility under this subpart.
    (b) [Reserved]
    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR subtitle A, subchapter B, as set forth 
below:

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

0
143. The authority citation for part 155 is revised to read as follows:

    Authority:  Sections 1301, 1302, 1303, 1304, 1311, 1312, 1313, 
1321, 1322, 1331, 1332, 1334, 1402, 1413, 1321, 1322, 1331, 1332, 
1334, 1402, 1411, 1412, 1413 of the Affordable Care Act, Pub. L. 
111-148, 124 Stat 199.
0
144. Section 155.20 is amended by:
0
A. Revising the definitions of ``Advance payments of the premium tax 
credit,'' ``Application filer,'' and ``Lawfully present''
0
B. Adding a new definition of ``Catastrophic plan,''
    The revisions and addition read as follows:


Sec.  155.20  Definitions.

* * * * *
    Advance payments of the premium tax credit means payment of the tax 
credits authorized by 26 U.S.C. 36B and its implementing regulations, 
which are provided on an advance basis to an eligible individual 
enrolled in a QHP through an Exchange in accordance with section 1412 
of the Affordable Care Act.
* * * * *
    Application filer means an applicant, an adult who is in the 
applicant's household, as defined in 42 CFR 435.603(f), or family, as 
defined in 26 CFR 1.36B-1(d); an authorized representative of an 
applicant; or if the applicant is a minor or incapacitated, someone 
acting responsibly for an applicant.
* * * * *
    Catastrophic plan means a health plan described in section 1302(e) 
of the Affordable Care Act.
* * * * *
    Lawfully present has the meaning given the term in 42 CFR 435.4.
* * * * *
0
145. Section 155.105 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  155.105  Approval of a State Exchange.

* * * * *
    (b) * * *
    (2) The Exchange is capable of carrying out the information 
reporting requirements of 26 CFR 1.36B-5;
* * * * *
0
146. Section 155.200 is amended by revising paragraph (a) to read as 
follows:


Sec.  155.200  Functions of an Exchange.

    (a) General requirements. The Exchange must perform the minimum 
functions described in this subpart and in subparts D, E, F, H, and K 
of this part.
* * * * *
0
147. Section 155.205 is amended by revising paragraph (d) to read as 
follows:


Sec.  155.205  Consumer assistance tools and programs of an Exchange.

* * * * *
    (d) Consumer assistance. (1) The Exchange must have a consumer 
assistance function that meets the standards in paragraph (c) of this 
section, including the Navigator program described in Sec.  155.210. 
Any individual providing such consumer assistance must be trained 
regarding QHP options, insurance affordability programs, eligibility, 
and benefits rules and regulations governing all insurance 
affordability programs operated in the state, as implemented in the 
state, prior to providing such assistance.
    (2) The Exchange must refer consumers to consumer assistance 
programs in the state when available and appropriate.
0
148. Section 155.225 is added to read as follows:


Sec.  155.225  Certified application counselors.

    (a) General rule. The Exchange must certify staff and volunteers of 
Exchange-designated organizations and organizations designated by state 
Medicaid and CHIP agencies pursuant to 42 CFR 435.908 to act as 
application counselors to--
    (1) Provide information about insurance affordability programs and 
coverage options;
    (2) Assist individuals and employees to apply for coverage in a QHP 
through the Exchange and for insurance affordability programs; and
    (3) Help to facilitate enrollment of eligible individuals in QHPs 
and insurance affordability programs.
    (b) Standards of certification. The Exchange must certify an 
individual to become an application counselor if he or she:
    (1) Registers with the Exchange;
    (2) Is trained regarding QHP options, insurance affordability 
programs, eligibility, and benefits rules and regulations governing all 
insurance affordability programs operated in the state, as implemented 
in the state, prior to functioning as an application counselor;
    (3) Discloses to the Exchange and potential applicants any 
relationships the application assister or sponsoring agency has with 
QHPs or insurance affordability programs, or other potential conflicts 
of interest;
    (4) Complies with the Exchange's privacy and security standards 
adopted consistent with 45 CFR 155.260, and applicable authentication 
and data security standards;
    (5) Agrees to act in the best interest of the applicants assisted;
    (6) Complies with applicable state law related to application 
counselors, including but not limited to state law related to conflicts 
of interest;
    (7) Provides information with reasonable accommodations for those 
with disabilities, as defined by the Americans with Disabilities Act, 
if providing in-person assistance; and
    (8) Enters into an agreement with the Exchange regarding compliance 
with the standards specified in this paragraph.
    (c) Withdrawal of certification. The Exchange must establish 
procedures to withdraw certification from individual application 
counselors, or from all application counselors associated with a 
particular organization, when it finds noncompliance with the terms and 
conditions of the application counselor agreement.
    (d) Availability of information; authorization. The Exchange must

[[Page 4711]]

establish procedures to ensure that applicants--
    (1) Are informed of the functions and responsibilities of certified 
application counselors; and
    (2) Provide authorization for the disclosure of applicant 
information to an application counselor prior to a counselor helping 
the applicant with submitting an application.
    (e) Fees. Certified application counselors may not impose any 
charge on applicants for application assistance.
0
149. Section 155.227 is added to read as follows:


Sec.  155.227  Authorized representatives.

    (a) General rule. (1) The Exchange must permit an individual or 
employee, subject to applicable privacy and security requirements, to 
designate an individual or organization to act on his or her behalf in 
applying for an eligibility determination or redetermination, under 
subpart D of this part, and in carrying out other ongoing 
communications with the Exchange.
    (2) Designation of an authorized representative must be in writing, 
including a signature or through another legally binding format subject 
to applicable authentication and data security standards. If submitted, 
legal documentation of authority to act on behalf of an individual 
under state law, such as a court order establishing legal guardianship 
or a power of attorney for, shall serve in the place of the applicant's 
signature.
    (3) The Exchange ensures the authorized representative agrees to 
maintain, or be legally bound to maintain, the confidentiality of any 
information regarding the individual or employee provided by the 
Exchange.
    (4) The Exchange ensures the authorized representative is 
responsible for fulfilling all responsibilities encompassed within the 
scope of the authorized representation, as described in this section, 
to the same extent as the individual he or she represents.
    (b) Timing of designation. The Exchange must permit an individual 
or employee to designate an authorized representative:
    (1) At the time of application.
    (2) At other times and through methods as described in 45 CFR 
155.405(c)(2).
    (c) Duties. The Exchange must permit an individual to authorize 
their representative to:
    (1) Sign an application on the individual's behalf;
    (2) Submit an update or respond to a redetermination for the 
individual in accordance with Sec.  155.330 or Sec.  155.335;
    (3) Receive copies of the individual's notices and other 
communications from the Exchange; and
    (4) Act on behalf of the individual in all other matters with the 
Exchange.
    (d) Duration. The Exchange must consider an authorized 
representative valid until the applicant or enrollee:
    (1) Modifies the authorization;
    (2) Notifies the Exchange and the representative that the 
representative is no longer authorized to act on his or her behalf 
using one of the methods available for the submission of an 
application, as described in 45 CFR 155.405(c); or
    (3) The authorized representative informs the Exchange and the 
individual that he or she no longer is acting in such capacity.
    (e) Agreement. When an organization is designated as an authorized 
representative, staff or volunteers of that organization that exercise 
that capacity for an applicant before the Exchange and the organization 
itself must enter into an agreement with the Exchange to comply with 
the requirements set forth at Sec.  155.225(b).
    (f) Compliance with State and federal law. The Exchange require an 
authorized representative to comply with applicable state and federal 
laws concerning conflicts of interest and confidentiality of 
information.
    (g) Signature. For purposes of this section, designation of an 
authorized representative must be in writing including a signature or 
through another legally binding format and be accepted through all of 
the modalities described in 45 CFR 155.405(c) of this part.
0
150. Section 155.230 is amended by--
0
A. Revising paragraph (a).
0
B. Adding paragraph (d).
    The revision and addition read as follows:


Sec.  155.230  General standards for Exchange notices.

    (a) General requirement. Any notice required to be sent by the 
Exchange to individuals or employers must be written and include:
    (1) An explanation of the action reflected in the notice, including 
the effective date of the action.
    (2) Any factual findings relevant to the action.
    (3) Citations to, or identification of, the relevant regulations 
supporting the action.
    (4) Contact information for available customer service resources.
    (5) An explanation of appeal rights, if applicable.
* * * * *
    (d) Electronic notices. The Exchange, with the exception of the 
SHOP Exchange, must provide required notices either through standard 
mail, or if an individual or employer elects, electronically, provided 
that the requirements for electronic notices in 42 CFR 435.918 are met.
0
151. Section 155.300(a) is amended by--
0
A. Removing the definition of ``Adoption taxpayer identification 
number.''
0
B. Revising the definitions of ``Minimum value,'' ``Modified Adjusted 
Gross Income (MAGI),'' and ``Qualifying coverage in an eligible 
employer-sponsored plan.''
    The revisions read as follows:


Sec.  155.300  Definitions and general standards for eligibility 
determinations.

    (a) * * *
    Minimum value when used to describe coverage in an eligible 
employer-sponsored plan, means that the employer-sponsored plan meets 
the standards with respect to coverage of the total allowed costs of 
benefits set forth in 26 CFR 1.36B-2(c)(3)(vi).
    Modified Adjusted Gross Income (MAGI) has the same meaning as it 
does in 26 CFR 1.36B-1(e)(2).
* * * * *
    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).
* * * * *
0
152. Section 155.302 is amended by revising paragraphs (a)(1), 
(b)(4)(i)(A) and (b)(5) to read as follows:


Sec.  155.302  Options for conducting eligibility determinations.

    (a) * * *
    (1) Directly or through contracting arrangements in accordance with 
Sec.  155.110(a), provided that the standards in 42 CFR 431.10(c)(2) 
are met; or
* * * * *
    (b) * * *
    (4) * * *
    (i) * * *
    (A) Withdraw his or her application for Medicaid and CHIP, unless 
the Exchange has assessed the applicant as potentially eligible for 
Medicaid based on factors not otherwise considered in this subpart, in 
accordance with Sec.  155.345(b), and provided that the application 
will not be considered withdrawn if he or she appeals his or her 
eligibility determination for advance payments of the premium tax 
credit or cost-sharing reductions and the appeals entity described in 
Sec.  155.500(a) finds

[[Page 4712]]

that the individual is potentially eligible for Medicaid or CHIP; or
* * * * *
    (5) The Exchange adheres to the eligibility determination or 
appeals decision for Medicaid or CHIP made by the State Medicaid or 
CHIP agency, or the appeals entity for such agency.
* * * * *
0
153. Section 155.305 is amended by--
0
A. Revising paragraphs (f)(1)(i), (f)(1)(ii)(B), (f)(2)(ii), 
(f)(2)(iii), (f)(3), and (f)(5).
0
B. Adding paragraphs (a)(3)(v), and (h).
    The revisions and additions read as follows:


Sec.  155.305  Eligibility standards.

    (a) * * *
    (3) * * *
    (v) Temporary absence. The Exchange may not deny or terminate an 
individual's eligibility for enrollment in a QHP through the Exchange 
if the individual meets the standards in paragraph (a)(3) of this 
section but for a temporary absence from the service area of the 
Exchange and intends to return when the purpose of the absence has been 
accomplished, unless another Exchange verifies that the individual 
meets the residency standard of such Exchange.
* * * * *
    (f) * * *
    (1) * * *
    (i) He or she is expected to have a household income, as defined in 
26 CFR 1.36B-1(e), of greater than or equal to 100 percent but not more 
than 400 percent of the FPL for the benefit year for which coverage is 
requested; and
    (ii) * * *
    (B) Is not eligible for minimum essential coverage, with the 
exception of coverage in the individual market, in accordance with 
section 26 CFR 1.36B-2(a)(2) and (c).
    (2) * * *
    (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 for the 
benefit year for which coverage is requested; and
    (iii) One or more applicants for whom the tax filer expects to 
claim a personal exemption deduction on his or her tax return for the 
benefit year, including the tax filer and his or her spouse, is a non-
citizen who is lawfully present and ineligible for Medicaid by reason 
of immigration status, in accordance with 26 CFR 1.36B-2(b)(5).
    (3) Enrollment required. The Exchange may provide advance payments 
of the premium tax credit on behalf of a tax filer only if one or more 
applicants for whom the tax filer attests that he or she expects to 
claim a personal exemption deduction for the benefit year, including 
the tax filer and his or her spouse, is enrolled in a QHP that is not a 
catastrophic plan, through the Exchange.
* * * * *
    (5) Calculation of advance payments of the premium tax credit. The 
Exchange must calculate advance payments of the premium tax credit in 
accordance with 26 CFR 1.36B-3.
* * * * *
    (h) Eligibility for enrollment through the Exchange in a QHP that 
is a catastrophic plan. The Exchange must determine an applicant 
eligible for enrollment in a QHP through the Exchange in a QHP that is 
a catastrophic plan as defined by section 1302(e) of the Affordable 
Care Act, if he or she--
    (1) Has not attained the age of 30 before the beginning of the plan 
year; or
    (2) Has a certification in effect for any plan year that he or she 
is exempt from the requirement to maintain minimum essential coverage 
under section 5000A of the Code by reason of--
    (i) Section 5000A(e)(1) of the Code (relating to individuals 
without affordable coverage); or
    (ii) Section 5000A(e)(5) of the Code (relating to individuals with 
hardships).
0
154. Section 155.310 is amended by--
0
A. Redesignating paragraph (i) as paragraph (j).
0
B. Adding new paragraph (i).
0
C. Revising newly redesignated paragraph (j).
    The addition reads as follows:


Sec.  155.310  Eligibility process.

* * * * *
    (i) Certification program for employers. As part of its 
determination of whether an employer has a liability under section 
4980H of the Code, the Internal Revenue Service will adopt methods to 
certify to an employer that one or more employees has enrolled for one 
or more months during a year in a QHP with respect to which a premium 
tax credit or cost-sharing reduction is allowed or paid.
    (j) 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, or 
is not eligible for an enrollment period, in accordance with subpart E, 
and seeks a new enrollment period prior to the date on which his or her 
eligibility is redetermined in accordance with Sec.  155.335 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 a special enrollment period, and must process any 
changes reported in accordance with the procedures specified in Sec.  
155.330.
0
155. Section 155.315 is amended by--
0
A. Revising paragraph (b)(2), paragraph (f) introductory text, and 
paragraph (f)(4).
0
B. Adding paragraph (j).
    The revisions and addition read as follows:


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

* * * * *
    (b) * * *
    (2) To the extent that the Exchange is unable to validate an 
individual's Social Security number through the Social Security 
Administration, or the Social Security Administration indicates that 
the individual is deceased, the Exchange must follow the procedures 
specified in paragraph (f) of this section, except that the Exchange 
must provide the individual with a period of 90 days from the date on 
which the notice described in paragraph (f)(2)(i) of this section is 
received for the applicant to provide satisfactory documentary evidence 
or resolve the inconsistency with the Social Security Administration. 
The date on which the notice is received means 5 days after the date on 
the notice, unless the individual demonstrates that he or she did not 
receive the notice within the 5 day period.
* * * * *
    (f) 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 through the 
Exchange, advance payments of the premium tax credit, and cost-sharing 
reductions, including when electronic data is required in accordance 
with this subpart but data for individuals relevant to the eligibility 
determination are not included in such data sources or when electronic 
data is required but it is not reasonably expected that data sources 
will be available within 2 days of the initial request to the data 
source, the Exchange:
* * * * *
    (4) During the periods described in paragraphs (f)(1) and 
(f)(2)(ii) of this section, must:
* * * * *
    (j) Verification related to eligibility for enrollment through the 
Exchange in a

[[Page 4713]]

QHP that is a catastrophic plan. The Exchange must verify an 
applicant's attestation that he or she meets the requirements of Sec.  
155.305(h) by--
    (1) Verifying the applicant's attestation of age as follows--
    (i) Except as provided in paragraph (j)(1)(iii) of this section, 
accepting his or her attestation without further verification; or
    (ii) Examining 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 and 
accurate, and minimize administrative costs and burdens.
    (iii) If information regarding age is not reasonably compatible 
with other information provided by the individual or in the records of 
the Exchange, the Exchange must examine information in 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 and accurate.
    (2) Verifying that an applicant has received a certificate of 
exemption as described in Sec.  155.305(h)(2).
    (3) To the extent that the Exchange is unable to verify the 
information required to determine eligibility for enrollment through 
the Exchange in a QHP that is a catastrophic plan as described in 
paragraphs (j)(1) and (j)(2) of this section, the Exchange must follow 
the procedures specified in Sec.  155.315(f), except for Sec.  
155.315(f)(4).
0
156. Section 155.320 is amended by--
0
A. Revising the introductory text of paragraph (c)(1)(i).
0
B. Revising paragraphs (c)(1)(i)(A), (c)(1)(ii), (c)(3)(i)(D), 
(c)(3)(ii)(A), (c)(3)(iii)(A) and (B), (c)(3)(vi), (c)(3)(vii), 
(c)(3)(viii), and (d).
0
C. Adding paragraphs (c)(3)(i)(E) and (c)(3)(iii)(C).
0
D. Removing paragraph (e).
0
E. Redesignating paragraph (f) as paragraph (e).
    The revisions and additions read as follows:


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

* * * * *
    (c) * * *
    (1) * * *
    (i) Data regarding annual household income.
    (A) For all individuals whose income is counted in calculating a 
tax filer's household income, as defined in 26 CFR 1.36B-1(e), or an 
applicant's household income, calculated in accordance with 42 CFR 
435.603(d), and for whom the Exchange has a Social Security number, the 
Exchange must request tax return data regarding MAGI and family size 
from the Secretary of the Treasury and data regarding Social security 
benefits described in 26 CFR 1.36B-1(e)(2)(iii) from the Commissioner 
of Social Security by transmitting identifying information specified by 
HHS to HHS.
* * * * *
    (ii) Data regarding MAGI-based income. For all individuals whose 
income is counted in calculating a tax filer's household income, as 
defined in 26 CFR 1.36B-1(e), or an applicant's household income, 
calculated 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).
* * * * *
    (3) * * *
    (i) * * *
    (D) If the Exchange finds that an applicant's attestation of a tax 
filer's family size is not reasonably compatible with other information 
provided by the application filer for the family or in the records of 
the Exchange, with the exception of the data described in paragraph 
(c)(1)(i) of this section, the Exchange must utilize data obtained 
through other 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 applicant's attestation, the 
Exchange must request additional documentation to support the 
attestation within the procedures specified in Sec.  155.315(f) of this 
part.
    (E) The Exchange must verify that neither advance payments of the 
premium tax credit nor cost-sharing reductions are being provided on 
behalf of an individual using information obtained by transmitting 
identifying information specified by HHS to HHS.
* * * * *
    (ii) * * *
    (A) The Exchange must compute annual household income for the 
family described in paragraph (c)(3)(i)(A) of this section based on the 
data described in paragraph (c)(1)(i) of this section;
* * * * *
    (iii) * * *
    (A) Except as specified in paragraph (c)(3)(iii)(B) and (C) of this 
section, if an applicant's attestation, in accordance with paragraph 
(c)(3)(ii)(B) of this section, indicates that a tax filer's annual 
household income has increased or is reasonably expected to increase 
from the data described in paragraph (c)(3)(ii)(A) of this section for 
the benefit year for which the applicant(s) in the tax filer's family 
are requesting coverage and the Exchange has not verified the 
applicant's MAGI-based income through the process specified in 
paragraph (c)(2)(ii) of this section to be within the applicable 
Medicaid or CHIP MAGI-based income standard, the Exchange must accept 
the applicant's attestation regarding a tax filer's annual household 
income without further verification.
    (B) If data available to the Exchange in accordance with paragraph 
(c)(1)(ii) of this section indicate that a tax filer's projected annual 
household income is in excess of his or her attestation by a 
significant amount, the Exchange must proceed in accordance with Sec.  
155.315(f)(1) through (4) of this part.
    (C) If other information provided by the application filer 
indicates that a tax filer's projected annual household income is in 
excess of his or her attestation by a significant amount, the Exchange 
must utilize data available to the Exchange in accordance with 
paragraph (c)(1)(ii) of this section to verify the attestation. If such 
data is unavailable or are not reasonably compatible with the 
applicant's attestation, the Exchange must proceed in accordance with 
Sec.  155.315(f)(1) through (4) of this part.
    (vi) Alternate verification process for decreases in annual 
household income and situations in which tax return data is 
unavailable. If a tax filer qualifies for an alternate verification 
process based on the requirements specified in paragraph (c)(3)(iv) of 
this section and the applicant's attestation to projected annual 
household income, as described in paragraph (c)(3)(ii)(B) of this 
section, is greater than ten percent below the annual household income 
computed in accordance with paragraph (c)(3)(ii)(A), or if data 
described in paragraph (c)(1)(i) of this section is unavailable, the 
Exchange must attempt to verify the applicant's attestation of the tax 
filer's projected annual household income by following the procedures 
specified in paragraph (c)(3)(vi)(A) through (G).
    (A) Data. The Exchange must annualize data from the MAGI-based 
income sources specified in paragraph (c)(1)(ii) of this section, and 
obtain any data available from 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.
    (B) To the extent that the applicant's attestation indicates that 
the information described in paragraph (c)(3)(vi)(A) of this section 
represents an accurate projection of the tax filer's household income 
for the benefit year for which coverage is requested, the

[[Page 4714]]

Exchange must determine the tax filer's eligibility for advance 
payments of the premium tax credit and cost-sharing reductions based on 
the household income data in paragraph (c)(3)(vi)(A) of this section.
    (C) Increases in annual household income. If an applicant's 
attestation, in accordance with paragraph (c)(3)(ii)(B) of this 
section, indicates that a tax filer's annual household income has 
increased or is reasonably expected to increase from the data described 
in paragraph (c)(3)(vi)(A) of this section to the benefit year for 
which the applicant(s) in the tax filer's family are requesting 
coverage and the Exchange has not verified the applicant's MAGI-based 
income through the process specified in paragraph (c)(2)(ii) of this 
section to be within the applicable Medicaid or CHIP MAGI-based income 
standard, the Exchange must accept the applicant's attestation for the 
tax filer's family without further verification, unless the Exchange 
finds that an applicant's attestation of a tax filer's 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, in which case the Exchange must 
request additional documentation using the procedures specified in 
Sec.  155.315(f).
    (D) Decreases in annual household income and situations in which 
electronic data is unavailable. If electronic data are unavailable or 
an applicant's attestation to projected annual household income, as 
described in paragraph (c)(3)(ii)(B) of this section, is more than ten 
percent below the annual household income as computed using data 
sources described in paragraphs (c)(3)(vi)(A) of this section, the 
Exchange must follow the procedures specified in Sec.  155.315(f)(1) 
through (4).
    (E) If, following the 90-day period described in paragraph 
(c)(3)(vi)(D) of this section, an applicant 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 tax filer'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 BHP, if a BHP is operating in the service area of 
the Exchange.
    (F) If, at the conclusion of the period specified in paragraph 
(c)(3)(vi)(D) of this section, the Exchange remains unable to verify 
the applicant's attestation, the Exchange must determine the 
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(g), and implement such determination in accordance with 
the effective dates specified in Sec.  155.330(f).
    (G) If, at the conclusion of the period specified in paragraph 
(c)(3)(vi)(D) of this section, the Exchange remains unable to verify 
the applicant's attestation for the tax filer and the information 
described in paragraph (c)(3)(ii)(A) of this section is unavailable, 
the Exchange must determine the tax filer ineligible for advance 
payments of the premium tax credit and cost-sharing reductions, notify 
the applicant of such determination in accordance with the notice 
requirement specified in Sec.  155.310(g), and discontinue any advance 
payments of the premium tax credit and cost-sharing reductions in 
accordance with the effective dates specified in Sec.  155.330(f).
    (vii) For the purposes of paragraph (c)(3) of this section, 
``household income'' means household income as specified in 26 CFR 
1.36B-1(e).
    (viii) For the purposes of paragraph (c)(3) of this section, 
``family size'' means family size as specified in 26 CFR 1.36B-1(d).
    (d) Verification related to enrollment in an eligible employer-
sponsored plan and eligibility for qualifying coverage in an eligible 
employer-sponsored plan.
    (1) General requirement. The Exchange must verify whether an 
applicant reasonably expects to be enrolled in an eligible employer-
sponsored plan or is eligible for qualifying coverage in an eligible 
employer-sponsored plan for the benefit year for which coverage is 
requested.
    (2) Data. The Exchange must--
    (i) Obtain data about enrollment in and eligibility for an eligible 
employer-sponsored plan from any electronic data sources that are 
available to the Exchange and which have been approved by HHS, based on 
evidence showing that such data sources are sufficiently current, 
accurate, and minimize administrative burden.
    (ii) Obtain any available data regarding enrollment in employer-
sponsored coverage or eligibility for qualifying coverage in an 
eligible employer-sponsored plan based on federal employment by 
transmitting identifying information specified by HHS to HHS.
    (iii) Obtain data from the SHOP that corresponds to the State in 
which the Exchange is operating.
    (iv) Obtain any available data regarding the employment of an 
applicant and the members of his or her household, as defined in 26 CFR 
1.36B-1(d), from any electronic data sources that are available to the 
Exchange and have been approved by HHS for this purpose, based on 
evidence showing that such data sources are sufficiently current, 
accurate, and minimize administrative burden.
    (3) Verification procedures. (i) Except as specified in paragraphs 
(d)(3)(ii) or (iii) of this section, the Exchange must accept an 
applicant's attestation regarding the verification specified in 
paragraph (d) without further verification.
    (ii) If an applicant's attestation is not reasonably compatible 
with the information specified in paragraphs (d)(2)(i) through 
(d)(2)(iii) of this section, other information provided by the 
application filer, or other information in the records of the Exchange, 
the Exchange must follow the procedures specified in Sec.  155.315(f) 
of this subpart.
    (iii) If the Exchange does not have any of the information 
specified in paragraphs (d)(2)(i) through (d)(2)(iii) for an applicant, 
and either does not have the information specified in paragraph 
(d)(2)(iv) for an applicant or an applicant's attestation is not 
reasonably compatible with the information specified in (d)(2)(iv) of 
this section, the Exchange must select a statistically significant 
random sample of such applicants and--
    (A) Provide notice to the applicant indicating that the Exchange 
will be contacting any employer identified on the application for the 
applicant and the members of his or her household, as defined in 26 CFR 
1.36B-1(d), to verify whether the applicant is enrolled in an eligible 
employer-sponsored plan or is eligible for qualifying coverage in an 
eligible employer-sponsored plan for the benefit year for which 
coverage is requested;
    (B) Proceed with all other elements of eligibility determination 
using the applicant's attestation, and provide eligibility for 
enrollment in a QHP to the extent that an applicant is otherwise 
qualified;
    (C) Ensure that advance payments of the premium tax credit and 
cost-sharing reductions are provided on behalf of an applicant who is 
otherwise qualified for such payments and reductions, as described in 
Sec.  155.305 of this subpart, if the tax filer attests to the Exchange 
that he or she understands that any advance payments of the premium tax 
credit paid on his or her behalf are subject to reconciliation;

[[Page 4715]]

    (D) Make reasonable attempts to contact any employer identified on 
the application for the applicant and the members of his or her 
household, as defined in 26 CFR 1.36B-1(d), to verify whether the 
applicant is enrolled in an eligible employer-sponsored plan or is 
eligible for qualifying coverage in an eligible employer-sponsored plan 
for the benefit year for which coverage is requested;
    (E) If the Exchange receives any information from an employer 
relevant to the applicant's enrollment in an eligible employer-
sponsored plan or eligibility for qualifying coverage in an eligible 
employer-sponsored plan, the Exchange must determine the applicant's 
eligibility based on such information and in accordance with the 
effective dates specified in 155.330(f) of this subpart, and if such 
information changes his or her eligibility determination, notify the 
applicant and his or her employer or employers of such determination in 
accordance with the notice requirements specified in Sec.  155.310(g) 
and (h) of this part;
    (F) If, after a period of 90 days from the date on which the notice 
described in paragraph (d)(3)(iii)(A) of this section is sent to the 
applicant, the Exchange is unable to obtain the necessary information 
from an employer, the Exchange must determine the applicant's 
eligibility based on his or her attestation regarding that employer.
    (G) In order to carry out the process described in paragraph 
(d)(3)(iii) of this section, the Exchange must only disclose an 
individual's information to an employer to the extent necessary for the 
employer to identify the employee.
    (4) Option to rely on verification performed by HHS. The Exchange 
may satisfy the provisions of this paragraph by relying on a 
verification process performed by HHS, provided that--
    (i) The Exchange sends the notices described in Sec.  155.310(g) 
and (h) of this part;
    (ii) Other activities required in connection with the verifications 
described in this paragraph are performed by the Exchange in accordance 
with the standards identified in this subpart or by HHS in accordance 
with the agreement described in paragraph (d)(4)(iv) of this section;
    (iii) The Exchange provides all relevant application information to 
HHS through a secure, electronic interface, promptly and without undue 
delay; and
    (iv) The Exchange and HHS enter into an agreement specifying their 
respective responsibilities in connection with the verifications 
described in this paragraph.
* * * * *
0
157. Section 155.330 is amended by--
0
A. Revising paragraphs (d)(1)(ii), (e)(2), (f).
0
D. Removing paragraph (e)(3).
    The revisions and additions read as follows:


Sec.  155.330  Eligibility redetermination during a benefit year.

* * * * *
    (d) * * *
    (1) * * *
    (ii) For an enrollee on whose behalf advance payments of the 
premium tax credit or cost-sharing reductions are being provided, 
eligibility determinations for Medicare, Medicaid, CHIP, or the BHP, if 
a BHP is operating in the service area of the Exchange.
* * * * *
    (e) * * *
    (2) Data matching.
    (i) If the Exchange identifies updated information regarding death, 
in accordance with paragraph (d)(1)(i) of this section, or regarding 
any factor of eligibility not regarding income, family size, or family 
composition, the Exchange must--
    (A) Notify the enrollee regarding the updated information, as well 
as the enrollee's projected eligibility determination after considering 
such information.
    (B) Allow an enrollee 30 days from the date of the notice to notify 
the Exchange that such information is inaccurate.
    (C) If the enrollee responds contesting the updated information, 
proceed in accordance with Sec.  155.315(f) of this part.
    (D) If the enrollee does not respond within the 30-day period 
specified in paragraph (e)(2)(i)(B) proceed in accordance with 
paragraphs (e)(1)(i) and (ii) of this section.
    (ii) If the Exchange identifies updated information regarding 
income, family size, or family composition, with the exception of 
information regarding death, the Exchange must--
    (A) Follow procedures described in paragraph (e)(2)(i)(A) and (B) 
of this section; and
    (B) If the enrollee responds confirming the updated information, 
proceed in accordance with paragraphs (e)(1)(i) and (ii) of this 
section.
    (C) If the enrollee does not respond within the 30-day period 
specified in paragraph (e)(2)(i)(B) of this section, maintain the 
enrollee's existing eligibility determination without considering the 
updated information.
    (D) If the enrollee provides more up-to-date information, proceed 
in accordance with paragraph (c)(1) of this section.
* * * * *
    (f) Effective dates. (1) Except as specified in paragraphs (f)(2) 
through (f)(7) of this section, the Exchange must implement changes--
    (i) Resulting from a redetermination under this section on the 
first day of the month following the date of the notice described in 
paragraph (e)(1)(ii) of this section; or
    (ii) Resulting from an appeal decision, on the first day of the 
month following the date of the notices described in Sec. Sec.  
155.545(b) and 155.555(k), or on the date specified in the appeal 
decision pursuant to Sec.  155.545(c)(1), as applicable; or
    (iii) Affecting enrollment or premiums only, on the first day of 
the month following the date on which the Exchange is notified of the 
change;
    (2) Except as specified in paragraphs (f)(3) through (f)(7) of this 
section, the Exchange may determine a reasonable point in a month after 
which a change described in paragraph (f)(1) of this section will not 
be effective until the first day of the month after the month specified 
in paragraph (f)(1) of this section. Such reasonable point in a month 
must be no earlier than the 15th of the month.
    (3) Except as specified in paragraphs (f)(6) and (f)(7) of this 
section, the Exchange must implement a change described in paragraph 
(f)(1) of this section that results in a decreased amount of advance 
payments of the premium tax credit or level of cost-sharing reductions, 
and for which the date of the notices described in paragraphs (f)(1)(i) 
and (ii) of this section, or the date on which the Exchange is notified 
in accordance with paragraph (f)(1)(iii) of this section is after the 
15th of the month, on the first day of the month after the month 
specified in paragraph (f)(1) of this section.
    (4) Except as specified in paragraph (f)(6) of this section, the 
Exchange must implement a change described in paragraph (f)(1) of this 
section that results in an increased level of cost-sharing reductions, 
including when an individual becomes newly eligible for cost-sharing 
reductions, and for which the date of the notices described in 
paragraphs (f)(1)(i) and (ii) of this section, or the date on which the 
Exchange is notified in accordance with paragraph (f)(1)(iii) of this 
section is after the 15th of the month, on the first day of the month 
after the month specified in paragraph (f)(1) of this section.

[[Page 4716]]

    (5) The Exchange must implement a change associated with the events 
described in Sec.  155.420(b)(2)(i) and (ii) of this part on the 
coverage effective dates described in Sec.  155.420(b)(2)(i) and (ii) 
of this part respectively, and ensure that advance payments of the 
premium tax credit and cost-sharing reductions are effective on the 
first day of the month following such events, unless the event occurs 
on the first day of the month.
    (6) Notwithstanding paragraphs (f)(1) through (f)(5) of this 
section, the Exchange may provide the effective date of a change 
associated with the events described in Sec.  155.420(d)(4), (d)(5) of 
this part, and (d)(9) based on the specific circumstances of each 
situation.
    (7) Notwithstanding paragraphs (f)(1) through (f)(6) of this 
section, when a change described in paragraph (f)(1) 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, in accordance with the effective 
dates described in Sec.  155.430(d)(3) of this part.
0
158. Section 155.335 is amended by--
0
A. Revising paragraphs (a), (b), (c), (e), (f), (g), (h), (k)(1), and 
(l).
0
B. Adding paragraph (m).
    The revisions and addition read as follows:


Sec.  155.335  Annual eligibility redetermination.

    (a) General requirement. Except as specified in paragraphs (l) and 
(m) of this section, the Exchange must redetermine the eligibility of a 
qualified individual on an annual basis.
    (b) Updated income and family size information. In the case of a 
qualified individual who requested an eligibility determination for 
insurance affordability programs in accordance with Sec.  155.310(b) of 
this part, the Exchange must request updated tax return information, if 
the qualified individual has authorized the request of such tax return 
information, data regarding Social Security benefits, and data 
regarding MAGI-based income as described in Sec.  155.320(c)(1) of this 
part for use in the qualified individual's eligibility redetermination.
    (c) Notice to qualified individual. The Exchange must provide a 
qualified individual with an annual redetermination notice including 
the following:
    (1) The data obtained under paragraph (b) of this section, if 
applicable.
    (2) The data used in the qualified individual's most recent 
eligibility determination.
    (3) The qualified individual'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 the level of any cost-sharing reductions or eligibility for 
Medicaid, CHIP or BHP.
* * * * *
    (e) Changes reported by qualified individuals. (1) The Exchange 
must require a qualified individual to report any changes with respect 
to the information listed in the notice described in paragraph (c) of 
this section within 30 days from the date of the notice.
    (2) The Exchange must allow a qualified individual, or an 
application filer, on behalf of the qualified individual, to report 
changes via the channels available for the submission of an 
application, as described in Sec.  155.405(c)(2).
    (f) Verification of reported changes. The Exchange must verify any 
information reported by a qualified individual under paragraph (e) of 
this section using the processes specified in Sec.  155.315 and Sec.  
155.320, including the relevant provisions in those sections regarding 
inconsistencies, prior to using such information to determine 
eligibility.
    (g) Response to redetermination notice. (1) The Exchange must 
require a qualified individual, or an application filer, on behalf of 
the qualified individual, to sign and return the notice described in 
paragraph (c) of this section.
    (2) To the extent that a qualified individual does not sign and 
return the notice described in paragraph (c) of this section within the 
30-day period specified in paragraph (e) of this section, the Exchange 
must proceed in accordance with the procedures specified in paragraph 
(h)(1) of this section.
    (h) Redetermination and notification of eligibility. (1) After the 
30-day period specified in paragraph (e) of this section has elapsed, 
the Exchange must--
    (i) Redetermine the qualified individual's eligibility in 
accordance with the standards specified in Sec.  155.305 using the 
information provided to the qualified individual in the notice 
specified in paragraph (c) of this section, as supplemented with any 
information reported by the qualified individual and verified by the 
Exchange in accordance with paragraphs (e) and (f) of this section.
    (ii) Notify the qualified individual in accordance with the 
requirements specified in Sec.  155.310(g).
    (iii) If applicable, notify the qualified individual employer, in 
accordance with the requirements specified in Sec.  155.310(h).
    (2) If a qualified individual 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 (e) of this section, the Exchange must 
redetermine the qualified individual's eligibility after completing 
verification, as specified in paragraph (f) of this section.
* * * * *
    (k) Authorization of the release of tax data to support annual 
redetermination. (1) The Exchange must have authorization from a 
qualified individual to obtain updated tax return information described 
in paragraph (b) of this section for purposes of conducting an annual 
redetermination.
* * * * *
    (l) Limitation on redetermination. To the extent that a qualified 
individual has requested an eligibility determination for insurance 
affordability programs in accordance with Sec.  155.310(b) and the 
Exchange does not have an active authorization to obtain tax data as a 
part of the annual redetermination process, the Exchange must 
redetermine the qualified individual's eligibility only for enrollment 
in a QHP and notify the enrollee in accordance with the timing 
described in paragraph (d) of this section. The Exchange may not 
proceed with a redetermination for insurance affordability programs 
until such authorization has been obtained or the qualified individual 
continues his or her request for an eligibility determination for 
insurance affordability programs in accordance with Sec.  155.310(b).
    (m) Special rule. The Exchange must not redetermine a qualified 
individual's eligibility in accordance with this section if the 
qualified individual's eligibility was redetermined under this section 
during the prior year, and the qualified individual was not enrolled in 
a QHP through the Exchange at the time of such redetermination, and has 
not enrolled in a QHP through the Exchange since such redetermination.
0
159. Section 155.340 is amended by revising paragraphs (b) introductory 
text, (b)(1) and (c) to read as follows:


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

* * * * *

[[Page 4717]]

    (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, within the 
standard of 26 CFR 1.36B-2(c)(3)(v)(A)(1), or provide minimum essential 
coverage that does not meet the minimum value standard of 26 CFR 1.36B-
2(c)(3)(vi), the Exchange must transmit the individual's name and 
taxpayer identification number to HHS.
* * * * *
    (c) Requirement to provide information related to reconciliation of 
advance payments of the premium tax credit. The Exchange must comply 
with the requirements of 26 CFR 1.36B-5 regarding reporting to the IRS 
and to taxpayers.
* * * * *
0
160. Section 155.345 is amended by--
0
A. Revising paragraphs (a) introductory text, (a)(2), (f), (g) 
introductory text and (g)(2) hrough (g)(5).
0
B. Redesignating paragraph (a)(3) as paragraph (a)(5).
0
C. Adding new paragraphs (a)(3), (a)(4), g)(6), (g)(7).
    The revisions and addition read as follows:


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

    (a) Agreements. The Exchange must enter into agreements with 
agencies administering Medicaid, CHIP, and the BHP, if a BHP is 
operating in the service area of the Exchange, as are necessary to 
fulfill the requirements of this subpart and provide copies of any such 
agreements to HHS upon request. Such agreements must include a clear 
delineation of the responsibilities of each agency to--
* * * * *
    (2) Ensure prompt determinations of eligibility and enrollment in 
the appropriate program without undue delay, based on the date the 
application is submitted to or redetermination is initiated by the 
Exchange or the agency administering Medicaid, CHIP, or the BHP;
    (3) Notices. (i) Prior to January 1, 2015, include coordinated 
content, as defined in 42 CFR 435.4, in the notice of eligibility 
determination provided to the individual in accordance with Sec.  
155.310(g) of this part;
    (ii) As of January 1, 2015 and to the extent feasible, provide for 
a combined eligibility notice, as defined in 42 CFR 435.4 and which 
meets the requirements of Sec.  155.230(a) and (b), promptly and 
without undue delay, to an applicant and the members of his or her 
household, as defined in 42 CFR 435.603(f) and 26 CFR 1.36B-1(d), who 
apply together, for enrollment in a qualified health plan through the 
Exchange and for all insurance affordability programs. To the extent 
appropriate, such a notice will be issued by the last agency to 
determine the individual's eligibility except for eligibility for 
Medicaid based on standards other than those specified in Sec.  
155.305(c), regardless of which agency receives the application, and 
must specify the agency which actually made each included eligibility 
determination.
    (4) Ensure compliance with paragraphs (c), (d), (e), and (g) of 
this section.
* * * * *
    (f) Special rule. If the Exchange verifies that a tax filer's 
household income, as defined in 26 CFR 1.36B-1(e), is less than 100 
percent of the FPL for the benefit year for which coverage is 
requested, determines that the tax filer is not eligible for advance 
payments of the premium tax credit based on Sec.  155.305(f)(2), and 
one or more applicants in the tax filer's household has been determined 
ineligible for Medicaid and CHIP based on income, the Exchange must--
* * * * *
    (g) Determination of eligibility for individuals submitting 
applications directly to an agency administering Medicaid, CHIP, or the 
BHP. The Exchange, in consultation with the agency or agencies 
administering Medicaid, CHIP, and the BHP if a BHP 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 BHP if a BHP is operating in the service area of 
the Exchange. Under such procedures, the Exchange must--
* * * * *
    (2) Notify such agency of the receipt of the information described 
in paragraph (g)(1) of this section and final eligibility determination 
for enrollment in a QHP, advance payments of the premium tax credit, 
and cost-sharing reductions;
    (3) Not duplicate any eligibility and verification findings already 
made by the transmitting agency, to the extent such findings are made 
in accordance with this subpart;
    (4) Not request information or documentation from the individual 
already provided to another agency administering an insurance 
affordability program and included in the transmission of information 
provided on the application or other information transmitted from the 
other agency;
    (5) Determine the individual's eligibility for enrollment in a QHP, 
advance payments of the premium tax credit, and cost-sharing 
reductions, promptly and without undue delay, and in accordance with 
this subpart;
    (6) Follow a streamlined process for eligibility determinations 
regardless of the agency that initially received an application; and
    (7) Effective January 1, 2015, provide a combined eligibility 
notice, as defined in 42 CFR 435.4, for eligibility determinations for 
enrollment in a QHP and for insurance affordability programs, except 
for eligibility for Medicaid based on standards other than those 
specified in Sec.  155.305(c), when another agency administering an 
insurance affordability program transfers the information described in 
paragraph (g)(1) of this section to the Exchange.
* * * * *
0
161. Section 155.350 is amended by revising paragraph (a)(1)(ii) to 
read as follows:


Sec.  155.350  Special eligibility standards and process for Indians.

    (a) * * *
    (1) * * *
    (ii) Is expected to have a household income, as defined in 26 CFR 
1.36B-1(e) that does not exceed 300 percent of the FPL for the benefit 
year for which coverage is requested.
* * * * *
0
162. Section 155.400 is amended by adding paragraph (b)(3) to read as 
follows:


Sec.  155.400  Enrollment of qualified individuals into QHPs.

* * * * *
    (b) * * *
    (3) Send updated eligibility and enrollment information to HHS 
promptly and without undue delay, in a manner and timeframe as 
specified by HHS.
* * * * *
0
163. Section 155.420 is amended by--
0
A. Revising paragraphs (a), (b)(2), (b)(3), and (d)(1) through (d)(9).

[[Page 4718]]

0
B. Adding paragraphs (b)(4) and (d)(10).
    The revisions and additions read as follows:


Sec.  155.420  Special enrollment periods.

* * * * *
    (a) General requirements. (1) The Exchange must provide special 
enrollment periods consistent with this section, during which qualified 
individuals may enroll in QHPs and enrollees may change QHPs.
    (2) For the purpose of this section, ``dependent'', has the same 
meaning as it does in 26 CFR 54.9801-2, referring to any individual who 
is or who may become eligible for coverage under the terms of a QHP 
because of a relationship to a qualified individual or enrollee.
    (b) * * *
    (2) Special effective dates. (i) In the case of birth, adoption, or 
placement for adoption, the Exchange must ensure that coverage is 
effective for a qualified individual or enrollee on the date of birth, 
adoption, or placement for adoption.
    (ii) In the case of marriage, or in the case where a qualified 
individual loses minimum essential coverage, as described in paragraph 
(d)(1) of this section, the Exchange must ensure that coverage is 
effective for a qualified individual or enrollee on the first day of 
the following month.
    (iii) In the case of a qualified individual or enrollee eligible 
for a special enrollment period as described in paragraphs (d)(4), 
(d)(5), or (d)(9) of this section, the Exchange must ensure that 
coverage is effective on an appropriate date based on the circumstances 
of the special enrollment period, in accordance with guidelines issued 
by HHS. Such date much be either--
    (A) The date of the event that triggered the special enrollment 
period under (d)(4), (d)(5), or (d)(9) of this section; or
    (B) In accordance with the regular effective dates specified in 
paragraph (b)(1) of this section.
    (3) Option for earlier effective dates. Subject to the Exchange 
demonstrating to HHS that all of its participating QHP issuers agree to 
effectuate coverage in a timeframe shorter than discussed in paragraph 
(b)(1) or (b)(2)(ii) of this section, the Exchange may do one or both 
of the following for all applicable individuals:
    (i) For a QHP selection received by the Exchange from a qualified 
individual in accordance with the dates specified in paragraph (b)(1) 
or (b)(2)(ii) of this section, the Exchange may provide a coverage 
effective date for a qualified individual earlier than specified in 
such paragraphs.
    (ii) For a QHP selection received by the Exchange from a qualified 
individual on a date set by the Exchange after the fifteenth of the 
month, the Exchange may provide a coverage effective date of the first 
of the following month.
    (4) Advance payments of the premium tax credit and cost-sharing 
reductions. Notwithstanding the standards of this section, the Exchange 
must ensure that advance payments of the premium tax credit and cost-
sharing reductions adhere to the effective dates specified in Sec.  
155.330(f).
* * * * *
    (d) The Exchange must allow a qualified individual or enrollee, 
and, when specified below, his or her dependent, to enroll in or change 
from one QHP to another if one of the following triggering events 
occur:
    (1) The qualified individual or his or her dependent loses minimum 
essential coverage:
    (i) In the case of a QHP decertification, the triggering event is 
the date of the notice of decertification as described in Sec.  
155.1080(e)(2); or
    (ii) In all other cases, the triggering event is the date the 
individual or dependent loses eligibility for minimum essential 
coverage;
    (2) The qualified individual gains a dependent or becomes a 
dependent through marriage, birth, adoption or placement for adoption;
    (3) The qualified individual, who was not previously a citizen, 
national, or lawfully present individual gains such status;
    (4) The qualified individual's or his or her dependent's, 
enrollment or non-enrollment in a QHP is unintentional, inadvertent, or 
erroneous and is the result of the error, misrepresentation, or 
inaction of an officer, employee, or agent of the Exchange or HHS, or 
its instrumentalities as evaluated and determined by the Exchange. In 
such cases, the Exchange may take such action as may be necessary to 
correct or eliminate the effects of such error, misrepresentation, or 
inaction;
    (5) The enrollee or, his or her dependent adequately demonstrates 
to the Exchange that the QHP in which he or she is enrolled 
substantially violated a material provision of its contract in relation 
to the enrollee;
    (6) Newly eligible or ineligible for advance payments of the 
premium tax credit, or change in eligibility for cost-sharing 
reductions. (i) The enrollee is determined newly eligible or newly 
ineligible for advance payments of the premium tax credit or has a 
change in eligibility for cost-sharing reductions;
    (ii) The enrollee's dependent enrolled in the same QHP is 
determined newly eligible or newly ineligible for advance payments of 
the premium tax credit or has a change in eligibility for cost-sharing 
reductions; or
    (iii) A qualified individual or his or her dependent who is 
enrolled in qualifying coverage in an eligible employer-sponsored plan 
is determined newly eligible for advance payments of the premium tax 
credit based in part on a finding that such individual will cease to be 
eligible for qualifying coverage in an eligible-employer sponsored plan 
in the next 60 days and is allowed to terminate existing coverage. The 
Exchange must permit an individual whose existing coverage through an 
eligible employer-sponsored plan will no longer be affordable or 
provide minimum value to access this special enrollment period prior to 
the end of his or her coverage through such eligible employer-sponsored 
plan, although he or she is not eligible for advance payments of the 
premium tax credit until the end of his or her coverage through such 
eligible employer-sponsored plan;
    (7) The qualified individual or enrollee, or his or her dependent, 
gains access to new QHPs as a result of a permanent move;
    (8) The qualified individual who is an Indian, as defined by 
section 4 of the Indian Health Care Improvement Act, may enroll in a 
QHP or change from one QHP to another one time per month; and
    (9) The qualified individual or enrollee, or his or her dependent, 
demonstrates to the Exchange, in accordance with guidelines issued by 
HHS, that the individual meets other exceptional circumstances as the 
Exchange may provide.
    (10) The qualified individual or his or her dependent is enrolled 
in an eligible employer-sponsored plan that is not qualifying coverage 
in an eligible employer-sponsored plan, as the term is defined in Sec.  
155.300 of this part, and is allowed to terminate existing coverage. 
The Exchange must permit such an individual to access this special 
enrollment period 60 days prior to the end of his or her coverage 
through such eligible employer-sponsored plan.
0
164. Section 155.430 is amended by revising paragraphs (b)(1) and 
(d)(1) to read as follows:


Sec.  155.430  Termination of coverage.

* * * * *
    (b) * * *

[[Page 4719]]

    (1) Enrollee-initiated terminations. (i) The Exchange must permit 
an enrollee to terminate his or her coverage in a QHP, including as a 
result of the enrollee obtaining other minimum essential coverage, with 
appropriate notice to the Exchange or the QHP.
    (ii) The Exchange must provide an opportunity at the time of plan 
selection for an enrollee to choose to remain enrolled in a QHP if the 
Exchange identifies that he or she has become eligible for other 
minimum essential coverage through the data matching described in Sec.  
155.330(d) and the enrollee does not request termination in accordance 
with paragraph (b)(1)(i) of this section. If an enrollee does not 
choose to remain enrolled in a QHP in such a situation, the Exchange 
must initiate termination of his or her coverage upon completion of the 
redetermination process specified in Sec.  155.330.
* * * * *
    (d) * * *
    (1) For purposes of this section--
    (i) Reasonable notice is defined as fourteen days from the 
requested effective date of termination; and
    (ii) Changes in eligibility for advance payments of the premium tax 
credit and cost sharing reductions, including terminations, must adhere 
to the effective dates specified in Sec.  155.330(f).
* * * * *
0
165. Add Subpart F to read as follows:
Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs
Sec.
155.500 Definitions.
155.505 General eligibility appeals requirements.
155.510 Appeals coordination.
155.515 Notice of appeal procedures.
155.520 Appeal requests.
155.525 Eligibility pending appeal.
155.530 Dismissals.
155.535 Informal resolution and hearing requirements.
155.540 Expedited appeals.
155.545 Appeal decisions.
155.550 Appeal record.
155.555 Employer appeals process.

Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs


Sec.  155.500  Definitions.

    In addition to those definitions in Sec.  155.20 and Sec.  155.300, 
for purposes of this subpart and Sec.  155.740 of subpart H, the 
following terms have the following meanings:
    Appeal record means the appeal decision, all papers and requests 
filed in the proceeding, and, if a hearing was held, the transcript or 
recording of hearing testimony or an official report containing the 
substance of what happened at the hearing, and any exhibits introduced 
at the hearing.
    Appeal request means a clear expression, either orally or in 
writing, by an applicant, enrollee, employer, or small business 
employer or employee to have any eligibility determination or 
redetermination contained in a notice issued in accordance with Sec.  
155.310(g), Sec.  155.330(e)(1)(ii), Sec.  155.335(h)(1)(ii), Sec.  
155.715(e) or (f), or pursuant to future guidance on section 
1311(d)(4)(H) of the Affordable Care Act, reviewed by an appeals 
entity.
    Appeals entity means a body designated to hear appeals of 
eligibility determinations or redeterminations contained in notices 
issued in accordance with Sec. Sec.  155.310(g), 155.330(e)(1)(ii), 
155.335(h)(1)(ii), 155.715(e) and (f), or notices issued in accordance 
with future guidance on exemptions pursuant to section 1311(d)(4)(H).
    Appellant means the applicant or enrollee, the employer, or the 
small business employer or employee who is requesting an appeal.
    De novo review means a review of an appeal without deference to 
prior decisions in the case.
    Evidentiary hearing means a hearing conducted where new evidence 
may be presented.
    Vacate means to set aside a previous action.


Sec.  155.505  General eligibility appeals requirements.

    (a) General requirements. Unless otherwise specified, the 
provisions of this subpart apply to Exchange eligibility appeals 
processes, regardless of whether the appeals process is provided by a 
state-based Exchange appeals entity or by HHS.
    (b) Right to appeal. In accordance with Sec.  155.355 and future 
guidance on section 1311(d)(4)(H) of the Affordable Care Act, an 
applicant or enrollee must have the right to appeal--
    (1) An eligibility determination made in accordance with subpart D, 
including--
    (i) An initial determination of eligibility, including the amount 
of advance payments of the premium tax credit and level of cost-sharing 
reductions, made in accordance with the standards specified in 45 CFR 
155.305(a) through (h); and
    (ii) A redetermination of eligibility, including the amount of 
advance payments of the premium tax credit and level of cost-sharing 
reductions, made in accordance with 45 CFR 155.330 and Sec.  155.335;
    (2) An eligibility determination for an exemption made in 
accordance with future guidance on exemptions pursuant to section 
1311(d)(4)(H) of the Affordable Care Act; and
    (3) A failure by the Exchange to provide timely notice of an 
eligibility determination in accordance with Sec.  155.310(g), Sec.  
155.330(e)(1)(ii), or Sec.  155.335(h)(1)(ii).
    (c) Options for Exchange appeals. Exchange eligibility appeals may 
be conducted by--
    (1) The Exchange, if the Exchange establishes an appeals process in 
accordance with the requirements of this subpart; or
    (2) HHS, upon exhaustion of the state-based Exchange appeals 
process, or if the Exchange has not established an appeals process in 
accordance with the requirements of this subpart.
    (d) Eligible entities. An appeals process established under this 
subpart must comply with the requirements of 42 CFR 431.10(c)(2).
    (e) Authorized representatives. An appellant may designate an 
authorized representative to act on his or her behalf, including in 
making an appeal request, as provided in Sec.  155.227.
    (f) Accessibility requirements. Appeals processes established under 
this subpart must comply with the accessibility requirements in Sec.  
155.205(c).
    (g) Judicial review. An appellant may seek judicial review to the 
extent it is available by law.


Sec.  155.510  Appeals coordination.

    (a) Agreements. The appeals entity or the Exchange must enter into 
agreements with the agencies administering insurance affordability 
programs regarding the appeals processes for such programs as are 
necessary to fulfill the requirements of this subpart. Such agreements 
will include a clear delineation of the responsibilities of each entity 
to support the eligibility appeals process, and must--
    (1) Minimize burden on appellants, including not asking the 
appellant to provide duplicative information or documentation that he 
or she already provided to an agency administering an insurance 
affordability program or eligibility appeals process;
    (2) Ensure prompt issuance of appeal decisions consistent with 
timeliness standards established under this subpart; and
    (3) Comply with the requirements set forth in 42 CFR 431.10(d).
    (b) Coordination for Medicaid and CHIP appeals. (1) Consistent with 
42

[[Page 4720]]

CFR 431.10(c)(1)(ii) and Sec.  457.1120, the appellant must be informed 
of the option to opt into pursuing his or her appeal of an adverse 
Medicaid or CHIP determination made by the Exchange directly with the 
Medicaid or CHIP agency, and if the appellant elects to do so, the 
appeals entity transmits the eligibility determination and all 
information provided via secure electronic interface, promptly and 
without undue delay, to the Medicaid or CHIP agency, as applicable.
    (2) Where the Medicaid or CHIP agency has delegated appeals 
authority to the Exchange appeals entity consistent with 42 CFR 
431.10(c)(1)(ii) and the appellant has elected to have the Exchange 
appeals entity hear the appeal, the appeals entity may include in the 
appeal decision a determination of Medicaid and CHIP eligibility, 
provided that--
    (i) The appeals entity applies Medicaid and CHIP MAGI-based income 
standards and standards for citizenship and immigration status, using 
verification rules and procedures consistent with 42 CFR parts 435 and 
457.
    (ii) Notices required in connection with an eligibility 
determination for Medicaid or CHIP are performed by the appeals entity 
consistent with the standards identified in this subpart, subpart D, 
and the State Medicaid or CHIP agency consistent with applicable law.
    (3) Where the Medicaid or CHIP agency has not delegated appeals 
authority to the appeals entity and the appellant seeks review of a 
denial of Medicaid or CHIP eligibility, the appeals entity must 
transmit the eligibility determination and all information provided as 
part of the appeal via secure electronic interface, promptly and 
without undue delay, to the Medicaid or CHIP agency, as applicable.
    (4) The Exchange must consider an appellant determined or assessed 
by the appeals entity as not potentially eligible for Medicaid or CHIP 
as ineligible for Medicaid and CHIP based on the applicable Medicaid 
and CHIP MAGI-based income standards for purposes of determining 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions.
    (c) Data exchange. The appeals entity must--
    (1) Ensure that all data exchanges that are part of the appeals 
process, comply with the data exchange requirements in Sec.  155.260, 
Sec.  155.270, and Sec.  155.345(h); and
    (2) Comply with all data sharing requests made by HHS.


Sec.  155.515  Notice of appeal procedures.

    (a) Requirement to provide notice of appeal procedures. The 
Exchange must provide notice of appeal procedures at the time that 
the--
    (1) Applicant submits an application; and
    (2) Notice of eligibility determination is sent under Sec.  
155.310(g), Sec.  155.330(e)(1)(ii), Sec.  155.335(h)(1)(ii), or future 
guidance on exemptions pursuant to section 1311(d)(4)(H) of the 
Affordable Care Act.
    (b) General content on right to appeal and appeal procedures. 
Notices described in paragraph (a) of this section must contain--
    (1) An explanation of the applicant or enrollee's appeal rights 
under this subpart;
    (2) A description of the procedures by which the applicant or 
enrollee may request an appeal;
    (3) Information on the applicant or enrollee's right to represent 
himself or herself, or to be represented by legal counsel or an 
authorized representative;
    (4) An explanation of the circumstances under which the appellant's 
eligibility may be maintained or reinstated pending an appeal decision, 
as described in Sec.  155.525; and
    (5) An explanation that an appeal decision for one household member 
may result in a change in eligibility for other household members and 
may be handled as a redetermination in accordance with the standards 
specified in Sec.  155.305.


Sec.  155.520  Appeal requests.

    (a) General standards for appeal requests. The Exchange and the 
appeals entity--
    (1) Must accept appeal requests submitted--
    (i) By telephone;
    (ii) By mail;
    (iii) In person, if the Exchange or the appeals entity, as 
applicable, is capable of receiving in-person appeal requests; or
    (iv) Via the Internet.
    (2) May assist the applicant or enrollee in making the appeal 
request;
    (3) Must not limit or interfere with the applicant or enrollee's 
right to make an appeal request; and
    (4) Must consider an appeal request to be valid for the purpose of 
this subpart, if it is submitted in accordance with the requirements of 
paragraphs (b) and (c) of this section and Sec.  155.505(b).
    (b) Appeal request. The Exchange and the appeals entity must allow 
an applicant or enrollee to request an appeal within 90 days of the 
date of the notice of eligibility determination.
    (c) Appeal of a state-based Exchange appeals entity decision to 
HHS. If the appellant disagrees with the appeal decision of a state-
based Exchange appeals entity, he or she may make an appeal request to 
HHS within 30 days of the date of the state-based Exchange appeals 
entity's notice of appeal decision through any of the methods described 
in paragraph (a)(1) of this section.
    (d) Acknowledgement of appeal request. (1) Upon receipt of a valid 
appeal request pursuant to paragraph (b), (c), or (d)(3)(i) of this 
section, the appeals entity--
    (i) Must send timely acknowledgment to the appellant of the receipt 
of his or her valid appeal request, including--
    (A) Information regarding the appellant's eligibility pending 
appeal pursuant to Sec.  155.525; and
    (B) An explanation that any advance payments of the premium tax 
credit paid on behalf of the tax filer pending appeal are subject to 
reconciliation under 26 CFR 1.36B-4.
    (ii) Must send timely notice via secure electronic interface of the 
appeal request and, if applicable, instructions to provide eligibility 
pending appeal pursuant to Sec.  155.525, to the Exchange and to the 
agencies administering Medicaid or CHIP, where applicable.
    (iii) If the appeal request is made pursuant to paragraph (c) of 
this section, must send timely notice via secure electronic interface 
of the appeal request to the state-based Exchange appeals entity.
    (iv) Must promptly confirm receipt of the records transferred 
pursuant to paragraph (d)(3) or (4) of this section to the Exchange or 
the state-based Exchange appeals entity, as applicable.
    (2) Upon receipt of an appeal request that is not valid because it 
fails to meet the requirements of this section or Sec.  155.505(b), the 
appeals entity must--
    (i) Promptly and without undue delay, send written notice to the 
applicant or enrollee that the appeal request has not been accepted and 
of the nature of the defect in the appeal request; and
    (ii) Treat as valid an amended appeal request that meets the 
requirements of this section and of Sec.  155.505(b).
    (3) Upon receipt of a valid appeal request pursuant to paragraph 
(b) of this section, or upon receipt of the notice under paragraph 
(d)(1)(ii) of this section, the Exchange must transmit via secure 
electronic interface to the appeals entity--
    (i) The appeal request, if the appeal request was initially made to 
the Exchange; and
    (ii) The appellant's eligibility record.

[[Page 4721]]

    (4) Upon receipt of the notice pursuant to paragraph (d)(1)(iii) of 
this section, the state-based Exchange appeals entity must transmit via 
secure electronic interface the appellant's appeal record, including 
the appellant's eligibility record as received from the Exchange, to 
HHS.


Sec.  155.525  Eligibility pending appeal.

    (a) General standards. After receipt of a valid appeal request or 
notice under Sec.  155.520(d)(1)(ii) that concerns an appeal of a 
redetermination under Sec.  155.330(e) or Sec.  155.335(h), the 
Exchange or the Medicaid or CHIP agency, as applicable, must continue 
to consider the appellant eligible while the appeal is pending in 
accordance with standards set forth in paragraph (b) of this section or 
as determined by the Medicaid or CHIP agency consistent with 42 CFR 
parts 435 and 457, as applicable.
    (b) Implementation. The Exchange must continue the appellant's 
eligibility for enrollment in a QHP, advance payments of the premium 
tax credit, and cost-sharing reductions, as applicable, in accordance 
with the level of eligibility immediately before the redetermination 
being appealed.


Sec.  155.530  Dismissals.

    (a) Dismissal of appeal. The appeals entity must dismiss an appeal 
if the appellant--
    (1) Withdraws the appeal request in writing;
    (2) Fails to appear at a scheduled hearing;
    (3) Fails to submit a valid appeal request as specified in Sec.  
155.520(a)(4); or
    (4) Dies while the appeal is pending.
    (b) Notice of dismissal to the appellant. If an appeal is dismissed 
under paragraph (a) of this section, the appeals entity must provide 
timely notice to the appellant, including--
    (1) The reason for dismissal;
    (2) An explanation of the dismissal's effect on the appellant's 
eligibility; and
    (3) An explanation of how the appellant may show good cause why the 
dismissal should be vacated in accordance with paragraph (d) of this 
section.
    (c) Notice of the dismissal to the Exchange, Medicaid, or CHIP. If 
an appeal is dismissed under paragraph (a) of this section, the appeals 
entity must provide timely notice to the Exchange, and to the agency 
administering Medicaid or CHIP, as applicable, including instruction 
regarding--
    (1) The eligibility determination to implement; and
    (2) Discontinuing eligibility provided under Sec.  155.525.
    (d) Vacating a dismissal. The appeals entity may vacate a dismissal 
if the appellant makes a written request within 30 days of the date of 
the notice of dismissal showing good cause why the dismissal should be 
vacated.


Sec.  155.535  Informal resolution and hearing requirements.

    (a) Informal resolution. The HHS appeals process will provide an 
opportunity for informal resolution and a hearing in accordance with 
the requirements of this section. A state-based Exchange appeals entity 
may also provide an informal resolution process prior to a hearing, 
provided that--
    (1) The process complies with the scope of review specified in 
paragraph (e) of this section;
    (2) The appellant's right to a hearing is preserved in any case in 
which the appellant remains dissatisfied with the outcome of the 
informal resolution process;
    (3) If the appeal advances to hearing, the appellant is not asked 
to provide duplicative information or documentation that he or she 
previously provided during the application or informal resolution 
process; and
    (4) If the appeal does not advance to hearing, the informal 
resolution decision is final and binding.
    (b) Notice of hearing. When a hearing is scheduled, the appeals 
entity must send written notice to the appellant of the date, time, and 
location or format of the hearing no later than 15 days prior to the 
hearing date.
    (c) Conducting the hearing. All hearings under this subpart must be 
conducted--
    (1) At a reasonable date, time, and location or format;
    (2) After notice of the hearing, pursuant to paragraph (b) of this 
section;
    (3) As an evidentiary hearing, consistent with paragraph (e) of 
this section; and
    (4) By one or more impartial officials who have not been directly 
involved in the eligibility determination or any prior Exchange appeal 
decisions in the same matter.
    (d) Procedural rights of an appellant. The appeals entity must 
provide the appellant with the opportunity to--
    (1) Review his or her appeal record, including all documents and 
records to be used by the appeals entity at the hearing, at a 
reasonable time before the date of the hearing as well as during the 
hearing;
    (2) Bring witnesses to testify;
    (3) Establish all relevant facts and circumstances;
    (4) Present an argument without undue interference; and
    (5) Question or refute any testimony or evidence, including the 
opportunity to confront and cross-examine adverse witnesses.
    (e) Information and evidence to be considered. The appeals entity 
must consider the information used to determine the appellant's 
eligibility as well as any additional relevant evidence presented 
during the course of the appeal, including at the hearing.
    (f) Standard of review. The appeals entity will review the appeal 
de novo and will consider all relevant facts and evidence adduced 
during the appeal.


Sec.  155.540  Expedited appeals.

    (a) Expedited appeals. The appeals entity must establish and 
maintain an expedited appeals process for an appellant to request an 
expedited process where there is an immediate need for health services 
because a standard appeal could seriously jeopardize the appellant's 
life or health or ability to attain, maintain, or regain maximum 
function.
    (b) Denial of a request for expedited appeal. If the appeals entity 
denies a request for an expedited appeal, it must--
    (1) Handle the appeal request under the standard process and issue 
the appeal decision in accordance with Sec.  155.545(b)(1); and
    (2) Make reasonable efforts to inform the appellant through 
electronic or oral notification of the denial and, if notified orally, 
follow up with the appellant by written notice within 2 days of the 
denial.


Sec.  155.545  Appeal decisions.

    (a) Appeal decisions. Appeal decisions must--
    (1) Be based exclusively on the information and evidence specified 
in Sec.  155.535(e) and the eligibility requirements under subpart D of 
this part or pursuant to future guidance on section 1311(d)(4)(H) of 
the Affordable Care Act, as applicable;
    (2) State the decision, including a plain language description of 
the effect of the decision on the appellant's eligibility;
    (3) Summarize the facts relevant to the appeal;
    (4) Identify the legal basis, including the regulations that 
support the decision;
    (5) State the effective date of the decision; and
    (6) If the appeals entity is a state-based Exchange appeals entity, 
provide an explanation of the appellant's right to pursue the appeal at 
HHS, if the appellant remains dissatisfied with the eligibility 
determination.

[[Page 4722]]

    (b) Notice of appeal decision. The appeals entity--
    (1) Must issue written notice of the appeal decision to the 
appellant within 90 days of the date an appeal request under Sec.  
155.520(b) or (c) is received, as administratively feasible.
    (2) In the case of an appeal request submitted under Sec.  155.540 
that the appeals entity determines meets the criteria for an expedited 
appeal, must issue the notice as expeditiously as the appellant's 
health condition requires, but no later than 3 working days after the 
appeals entity receives the request for an expedited appeal.
    (3) Must provide notice of the appeal decision and instructions to 
cease pended eligibility to the appellant, if applicable, via secure 
electronic interface, to the Exchange or the Medicaid or CHIP agency, 
as applicable.
    (c) Implementation of appeal decisions. The Exchange or the 
Medicaid or CHIP agency, as applicable, upon receiving the notice 
described in paragraph (b) of this section, must promptly--
    (1) Implement the appeal decision retroactive to the date the 
incorrect eligibility determination was made or at a time determined 
under Sec.  155.330(f), as applicable, or in accordance with the 
applicable Medicaid or CHIP standards in 42 CFR parts 435 or 457; and
    (2) Redetermine the eligibility of household members who have not 
appealed their own eligibility determinations but whose eligibility may 
be affected by the appeal decision, in accordance with the standards 
specified in Sec.  155.305.


Sec.  155.550  Appeal record.

    (a) Appellant access to the appeal record. Subject to the 
requirements of all applicable federal and state laws regarding 
privacy, confidentiality, disclosure, and personally identifiable 
information, the appeals entity must make the appeal record accessible 
to the appellant at a convenient place and time.
    (b) Public access to the appeal record. The appeals entity must 
provide public access to all appeal records, subject to all applicable 
federal and state laws regarding privacy, confidentiality, disclosure, 
and personally identifiable information.


Sec.  155.555  Employer appeals process.

    (a) General requirements. The provisions of this section apply to 
employer appeals processes through which an employer may, in response 
to a notice under Sec.  155.310(h), appeal a determination that the 
employer does not provide minimum essential coverage through an 
employer-sponsored plan or that the employer does provide that coverage 
but it is not affordable coverage with respect to an employee.
    (b) Exchange employer appeals process. An Exchange may establish an 
employer appeals process in accordance with the requirements of this 
section, Sec.  155.505(e) through (g), and Sec.  155.510(a)(1), (a)(2), 
and (c). Where an Exchange has not established an employer appeals 
process, HHS will provide an employer appeals process that meets the 
requirements of this section, Sec.  155.505(e) through (g), and Sec.  
155.510(a)(1), (a)(2), and (c).
    (c) Appeal request. The Exchange and appeals entity, as applicable, 
must--
    (1) Allow an employer to request an appeal within 90 days from the 
date the notice described under Sec.  155.310(h) is sent;
    (2) Allow an employer to submit relevant evidence to support the 
appeal;
    (3) Allow an employer to submit an appeal request to--
    (i) The Exchange or the Exchange appeals entity, if the Exchange 
establishes an employer appeals process; or
    (ii) HHS, if the Exchange has not established an employer appeals 
process;
    (4) Comply with the requirements of Sec.  155.520(a)(1) through 
(3); and
    (5) Consider an appeal request valid if it is submitted in 
accordance with paragraph (c)(1) of this section and with the purpose 
of appealing the determination identified in the notice specified in 
Sec.  155.310(h).
    (d) Notice of appeal request. Upon receipt of a valid appeal 
request, the appeals entity must--
    (1) Send timely acknowledgement of the receipt of the appeal 
request to the employer, including an explanation of the appeals 
process;
    (2) Send timely notice to the employee of the receipt of the appeal 
request, including--
    (i) An explanation of the appeals process;
    (ii) Instructions for submitting additional evidence for 
consideration by the appeals entity; and
    (iii) An explanation of the potential effect of the employer's 
appeal on the employee's eligibility.
    (3) Promptly notify the Exchange of the appeal, if the employer did 
not initially make the appeal request to the Exchange.
    (4) Upon receipt of an appeal request that is not valid because it 
fails to meet the requirements of this section, the appeals entity 
must--
    (i) Promptly and without undue delay, send written notice to the 
employer that the appeal request has not been accepted and of the 
nature of the defect in the appeal request; and
    (ii) Treat as valid an amended appeal request that meets the 
requirements of this section, including standards for timeliness.
    (e) Transmittal and receipt of records. (1) Upon receipt of a valid 
appeal request under this section, or upon receipt of the notice under 
paragraph (d)(3) of this section, the Exchange must promptly transmit 
via secure electronic interface to the appeal entity--
    (i) The appeal request, if the appeal request was initially made to 
the Exchange; and
    (ii) The employee's eligibility record.
    (2) The appeals entity must promptly confirm receipt of records 
transmitted pursuant to paragraph (e)(1) of this section to the entity 
that transmitted the records.
    (f) Dismissal of appeal. The appeals entity--
    (1) Must dismiss an appeal under the circumstances specified in 
Sec.  155.530(a)(1) or if the request fails to comply with the 
standards in paragraph (c)(4) of this section.
    (2) Must provide timely notice of the dismissal to the employer, 
employee, and Exchange including the reason for dismissal; and
    (3) May vacate a dismissal if the employer makes a written request 
within 30 days of the date of the notice of dismissal showing good 
cause why the dismissal should be vacated.
    (g) Procedural rights of the employer. The appeals entity must 
provide the employer the opportunity to--
    (1) Provide relevant evidence for review of the determination of an 
employee's eligibility for advance payments of the premium tax credit 
or cost-sharing reductions;
    (2) Review--
    (i) The information described in Sec.  155.310(h)(1);
    (ii) Information regarding whether the employee's income is above 
or below the threshold by which the affordability of employer-sponsored 
minimum essential coverage is measured, as set forth by standards 
described in 26 CFR 1.36B; and
    (iii) Other data used to make the determination described in Sec.  
155.305(f) or (g), to the extent allowable by law, except the 
information described in paragraph (h) of this section.
    (h) Confidentiality of employee information. Neither the Exchange 
nor the appeals entity may make available to an employer any tax return 
information of an employee as prohibited by Sec.  6103 of the Code.
    (i) Adjudication of employer appeals. Employer appeals must--

[[Page 4723]]

    (1) Be reviewed by one or more impartial officials who have not 
been directly involved in the employee eligibility determination 
implicated in the appeal;
    (2) Consider the information used to determine the employee's 
eligibility as well as any additional relevant evidence provided by the 
employer or the employee during the course of the appeal; and
    (3) Be reviewed de novo.
    (j) Appeal decisions. Employer appeal decisions must--
    (1) Be based exclusively on the information and evidence described 
in paragraph (i)(2) and the eligibility standards in 45 CFR part 155, 
subpart D;
    (2) State the decision, including a plain language description of 
the effect of the decision on the employee's eligibility; and
    (3) Comply with the requirements set forth in Sec.  155.545(a)(3) 
through (5).
    (k) Notice of appeal decision. The appeals entity must provide 
written notice of the appeal decision within 90 days of the date the 
appeal request is received, as administratively feasible, to--
    (1) The employer. Such notice must include--
    (i) The appeal decision; and
    (ii) An explanation that the appeal decision does not foreclose any 
appeal rights the employer may have under subtitle F of the Code.
    (2) The employee. Such notice must include the appeal decision.
    (3) The Exchange.
    (l) Implementation of the appeal decision. After receipt of the 
notice under paragraph (k)(3) of this section, if the appeal decision 
affects the employee's eligibility, the Exchange must promptly 
redetermine the employee's eligibility in accordance with the standards 
specified in Sec.  155.305.
    (m) Appeal record. Subject to the requirements of Sec.  155.550 and 
paragraph (h) of this section, the appeal record must be accessible to 
the employer and to the employee in a convenient format and at a 
convenient time.

Subpart H--Exchange Functions: Small Business Health Options 
Program (SHOP)

0
166. Section 155.705 is amended by adding paragraph (c) to read as 
follows:


Sec.  155.705  Functions of a SHOP.

* * * * *
    (c) Coordination with individual market Exchange for eligibility 
determinations. A SHOP must provide data to the individual market 
Exchange that corresponds to the service area of the SHOP related to 
eligibility and enrollment of a qualified employee.
* * * * *
0
167. Section 155.740 is added to Subpart H to read as follows:


Sec.  155.740  SHOP employer and employee eligibility appeals 
requirements.

    (a) Definitions. The definitions in Sec.  155.20, Sec.  155.300, 
and Sec.  155.500 apply to this section.
    (b) General requirements. (1) A state, establishing an Exchange 
pursuant to Sec.  155.100, must provide an eligibility appeals process 
for the SHOP. Where a state has not established an Exchange pursuant to 
Sec.  155.100, HHS will provide an eligibility appeals process for the 
SHOP that meets the requirements of this section and the requirements 
in paragraph (b)(2) of this section.
    (2) The SHOP appeals entity must conduct appeals in accordance with 
the requirements established in this section, Sec.  155.505(e) through 
(g), and Sec.  155.510(a)(1), (a)(2), and (c).
    (c) Employer right to appeal. An employer may appeal--
    (1) A notice of denial of eligibility under Sec.  155.715(e); or
    (2) A failure of the SHOP to make an eligibility determination in a 
timely manner.
    (d) Employee right to appeal. An employee may appeal--
    (1) A notice of denial of eligibility under Sec.  155.715(f); or
    (2) A failure of the SHOP to make an eligibility determination in a 
timely manner.
    (e) Appeals notice requirement. Notices of the right to appeal a 
denial of eligibility under Sec.  155.715(e) or (f) must be written and 
include--
    (1) The reason for the denial of eligibility, including a citation 
to the applicable regulations; and
    (2) The procedure by which the employer or employee may request an 
appeal of the denial of eligibility.
    (f) Appeal request. The SHOP and appeals entity must--
    (1) Allow an employer or employee to request an appeal within 90 
days from the date of the notice of denial of eligibility to--
    (i) The SHOP or the appeals entity; or
    (ii) HHS, if no State-based Exchange has been established.
    (2) Accept appeal requests submitted through any of the methods 
described in Sec.  155.520(a)(1);
    (3) Comply with the requirements of Sec.  155.520(a)(2) and (3); 
and
    (4) Consider an appeal request valid if it is submitted in 
accordance with paragraph (f)(1) of this section.
    (g) Notice of appeal request. Upon receipt of a valid appeal 
request, the appeals entity must--
    (1) Send timely acknowledgement to the employer, or employer and 
employee if an employee is appealing, of the receipt of the appeal 
request, including--
    (i) An explanation of the appeals process; and
    (ii) Instructions for submitting additional evidence for 
consideration by the appeals entity.
    (2) Promptly notify the SHOP of the appeal, if the appeal request 
was not initially made to the SHOP.
    (3) Upon receipt of an appeal request that is not valid because it 
fails to meet the requirements of this section, the appeals entity 
must--
    (i) Promptly and without undue delay, send written notice to the 
employer or employee that is appealing that the appeal request has not 
been accepted and of the nature of the defect in the appeal request; 
and
    (ii) Treat as valid an amended appeal request that meets the 
requirements of this section.
    (h) Transmittal and receipt of records. (1) Upon receipt of a valid 
appeal request under this section, or upon receipt of the notice under 
paragraph (g)(2) of this section, the SHOP must promptly transmit, via 
secure electronic interface, to the appeals entity--
    (i) The appeal request, if the appeal request was initially made to 
the SHOP; and
    (ii) The eligibility record of the employer or employee that is 
appealing.
    (2) The appeals entity must promptly confirm receipt of records 
transmitted pursuant to paragraph (h)(1) of this section to the SHOP 
that transmitted the records.
    (i) Dismissal of appeal. The appeals entity--
    (1) Must dismiss an appeal if the employer or employee that is 
appealing--
    (i) Withdraws the request in writing; or
    (ii) Fails to submit an appeal request meeting the standards 
specified in paragraph (f)(4) of this section.
    (2) Must provide timely notice to the employer or employee that is 
appealing of the dismissal of the appeal request, including the reason 
for dismissal, and must notify the SHOP of the dismissal.
    (3) May vacate a dismissal if the employer or employee makes a 
written request within 30 days of the date of the notice of dismissal 
showing good cause why the dismissal should be vacated.
    (j) Procedural rights of the employer or employee. The appeals 
entity must provide the employer, or the employer

[[Page 4724]]

and employee if an employee is appealing, the opportunity to submit 
relevant evidence for review of the eligibility determination.
    (k) Adjudication of SHOP appeals. SHOP appeals must--
    (1) Comply with the standards set forth in Sec.  155.555(i)(1) and 
(3); and
    (2) Consider the information used to determine the employer or 
employee's eligibility as well as any additional relevant evidence 
submitted during the course of the appeal by the employer or employee.
    (l) Appeal decisions. Appeal decisions must--
    (1) Be based solely on--
    (i) The evidence referenced in paragraph (k)(2) of this section;
    (ii) The eligibility requirements for the SHOP under Sec.  
155.710(b) or (e), as applicable.
    (2) Comply with the standards set forth in Sec.  155.545(a)(2) 
through (5); and
    (3) Be effective retroactive to the date the incorrect eligibility 
determination was made, if the decision finds the employer or employee 
eligible, or effective as of the date of the notice of the appeal 
decision, if eligibility is denied.
    (m) Notice of appeal decision. The appeals entity must issue 
written notice of the appeal decision to the employer, or to the 
employer and employee if an employee is appealing, and to the SHOP 
within 90 days of the date the appeal request is received.
    (n) Implementation of SHOP appeal decisions. The SHOP must promptly 
implement the appeal decision upon receiving the notice under paragraph 
(m) of this section.
    (o) Appeal record. Subject to the requirements of Sec.  155.550, 
the appeal record must be accessible to the employer, or employer and 
employee if an employee is appealing, in a convenient format and at a 
convenient time.

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

    Dated: December 6, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: December 19, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-00659 Filed 1-14-13; 11:15 am]
BILLING CODE 4120-01-P