[Federal Register Volume 78, Number 47 (Monday, March 11, 2013)]
[Rules and Regulations]
[Pages 15560-15596]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-04954]



[[Page 15559]]

Vol. 78

Monday,

No. 47

March 11, 2013

Part III





Office of Personnel Management





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45 CFR Part 800





 Patient Protection and Affordable Care Act; Establishment of the 
Multi-State Plan Program for the Affordable Insurance Exchanges; Final 
Rule

  Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules 
and Regulations  

[[Page 15560]]


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OFFICE OF PERSONNEL MANAGEMENT

45 CFR Part 800

RIN 3206-AM47


Patient Protection and Affordable Care Act; Establishment of the 
Multi-State Plan Program for the Affordable Insurance Exchanges

AGENCY: U.S. Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The U.S. Office of Personnel Management (OPM) is issuing a 
final regulation establishing the Multi-State Plan Program (MSPP) 
pursuant to the Patient Protection and Affordable Care Act, as amended 
by the Health Care and Education Reconciliation Act of 2010, referred 
to collectively as the Affordable Care Act. Through contracts with OPM, 
health insurance issuers will offer at least two multi-State plans 
(MSPs) on each of the Affordable Insurance Exchanges (Exchanges). One 
of the issuers must be non-profit. Under the law, an MSPP issuer may 
phase in the States in which it offers coverage over 4 years, but it 
must offer MSPs on Exchanges in all States and the District of Columbia 
by the fourth year in which the MSPP issuer participates in the MSPP. 
This rule aims to balance adhering to the statutory goals of MSPP while 
aligning its standards to those applying to qualified health plans to 
promote a level playing field across health plans.

DATES: Effective May 10, 2013, except for Sec.  800.503. OPM will 
publish a document announcing the effective date of Sec.  800.503 in 
the Federal Register.

    Note:  Section 2719 of the Public Health Service Act and its 
implementing regulations apply to all non-grandfathered group health 
plans and health insurance issuers, including MSPP issuers, with 
respect to internal claims and appeals and external review. Because 
rulemaking implementing section 2719 has not yet been completed, the 
provisions of this regulation relating to external review (Sec.  
800.503) will take effect on the effective date of those 
regulations.


FOR FURTHER INFORMATION CONTACT: Julia Elam by telephone at (202) 606-
2128, by FAX at (202) 606-0033, or by email at [email protected].

SUPPLEMENTARY INFORMATION: The Patient Protection and Affordable Care 
Act (Pub. L. 111-148), as amended by the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), together known as the 
Affordable Care Act, provides for the establishment of Health Insurance 
Marketplaces, or Exchanges, in each State, where individuals and small 
businesses can purchase qualified coverage. The Exchanges will provide 
competitive marketplaces for individuals and small employers to 
directly compare available private health insurance options on the 
basis of price, quality, and other factors. The Exchanges will enhance 
competition in the health insurance market, improve choice of 
affordable health insurance, and give individuals and small businesses 
purchasing power comparable to that of large businesses. The U.S. 
Office of Personnel Management is issuing this final regulation to 
implement section 1334 of the Affordable Care Act by establishing the 
Multi-State Plan Program, as described below.

Abbreviations

FEHBA Federal Employees Health Benefits Act (5 U.S.C. 8901 et seq.)
FEHBP Federal Employees Health Benefits Program
HHS U.S. Department of Health and Human Services
HMO Health Maintenance Organization
I/T/Us Indian Health Service, tribes and tribal organizations, and 
urban Indian organizations
MSP Multi-State Plan
MSPP Multi-State Plan Program
NAIC National Association of Insurance Commissioners
OPM U.S. Office of Personnel Management
PHS Act Public Health Service Act
QHP Qualified Health Plan
SHOP Small Business Health Options Program

    Pursuant to its responsibilities under the Affordable Care Act, the 
U.S. Department of Health and Human Services (HHS) issued regulations 
outlining standards to certify Exchanges and qualified health plans 
(QHPs) that will be offered on Exchanges. If a State does not elect to 
operate an Exchange or is not certified (or conditionally approved) to 
operate one, HHS will operate the Exchange in that State.
    Section 1334 of the Affordable Care Act directs the U.S. Office of 
Personnel Management (OPM) to establish the Multi-State Plan Program 
(MSPP) to foster competition among plans competing in the individual 
and small group health insurance markets on the Exchanges. 
Specifically, section 1334 directs OPM to contract with private health 
insurance issuers (one of which must be non-profit) to offer at least 
two multi-State plans (MSPs) on each of the Exchanges in each State. 
The law allows MSPP issuers to phase in coverage, but coverage must be 
offered on Exchanges in all States and the District of Columbia by the 
fourth year in which the MSPP issuer participates in the MSPP. The 
first open enrollment period for plans offered through Exchanges will 
begin on October 1, 2013, for coverage starting January 1, 2014.
    The purpose of this regulation is to outline the process by which 
OPM will establish and administer the MSPP, as well as to establish 
standards and requirements for MSPs and MSPP issuers.

Summary of Comments

    On December 5, 2012, OPM published proposed regulations (77 FR 
72582) establishing the MSPP at part 800 of title 45, Code of Federal 
Regulations. The comment period for the proposed rule closed on January 
4, 2013. OPM received about 350 comments from a wide variety of 
entities and individuals. A summary of the comments we received 
follows, along with our responses to the comments and changes we are 
making to the proposed regulations in light of the comments. In 
addition, we are making some minor technical and editorial changes to 
the proposed regulations to correct errors and improve clarity and 
readability.

Responses to Overarching Comments

    Of the approximately 350 comments we received on the proposed rule, 
about 105 were unique comment letters. Many of the others were form 
letters, including letters requesting an extension of the comment 
period.
    A broad range of stakeholders commented on the proposed regulation, 
including 14 States and the National Association of Insurance 
Commissioners (NAIC). We also received comments from about a dozen 
health insurance issuers, group health plans, and their associations. 
Most of the remaining comments came from health care providers, 
pharmaceutical companies, business groups, labor unions, and consumer 
groups.

Length of the Comment Period

    We received many comments about the 30-day comment period and 
whether we would extend it. Some commenters contended that the 30-day 
comment period did not provide sufficient time to provide feedback.
    Our comment period is consistent with the Administrative Procedure 
Act and Executive Orders 12866 and 13563. OPM values the participation 
of a broad array of diverse stakeholders, and we have succeeded in 
obtaining that participation, as evidenced by the volume of comments as 
well as the diversity of viewpoints offered in response to our proposed 
regulation. Moreover, OPM has provided several other opportunities for 
public input on policies relating to the MSPP. On June

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16, 2011, OPM issued a Request for Information (RFI) to solicit 
feedback from stakeholders about the program. On September 21, 2012, 
OPM issued a draft MSPP application and received public comments over a 
30-day period. OPM has also held meetings and phone calls with numerous 
stakeholders to seek input and guidance, including from the NAIC, 
States, tribal governments, consumer advocates, health insurance 
issuers, labor organizations, provider associations, and trade groups.

Church Plans

    One commenter urged OPM to consider entering into an MSPP contract 
with a church plan. The commenter explained that church plans are 
defined in various sections of the law, including section 414(e) of the 
Internal Revenue Code and section 3(33) of the Employee Retirement 
Income Security Act (ERISA). A church plan does not, by itself, meet 
the definition of health insurance issuer in section 2791(b)(2) of the 
PHS Act; in addition, enrollment is limited to church employees and 
members of the clergy. The commenter interpreted section 1334 of the 
Affordable Care Act as allowing OPM to contract with church plans to 
offer coverage through the MSPP. First, the commenter stated that, 
while section 1334(a)(1) provides that the Director shall enter into 
contracts for MSPs with health insurance issuers, it does not expressly 
preclude OPM from entering into contracts with entities other than 
issuers. The commenter asserted that church plans should be considered 
eligible to contract for an MSP because OPM can treat a church plan as 
equivalent to an issuer under the Church Parity and Entanglement 
Protections Act, Public Law 106-244 (``Parity Act''). The commenter 
recommended that OPM could exercise its discretion to exempt church 
plans from a number of requirements for MSPs, including permitting a 
church plan MSP to limit enrollment to members of the clergy and church 
employees.
    We disagree with the commenter's interpretation of section 1334 and 
do not believe that a church plan meets the requirements necessary for 
OPM to offer such a plan under an MSPP contract. Section 1334(a)(1) 
explicitly requires OPM to enter into contracts for MSPs with ``health 
insurance issuers,'' and we do not agree that the statute authorizes 
OPM to enter into contracts with entities other than health insurance 
issuers. Because church plans, by themselves, do not meet the 
definition of health insurance issuers as described above, OPM does not 
have the authority to contract for them under Sec.  1334.

Responses to Comments on the Regulations

Subpart A--General Provisions and Definitions

Basis and Scope (Sec.  800.10)
    OPM proposed this section to define the basis and scope of part 
800, which establishes the primary authority for the establishment of 
the MSPP under the Affordable Care Act. Other relevant statutory 
provisions MSPP issuers and MSPs must comply with include all 
provisions of part A of title XXVII of the Public Health Service (PHS) 
Act. Section 800.10 also sets forth the scope of this regulation, which 
establishes standards for health insurance issuers wishing to contract 
with OPM to participate in the MSPP and for the appeals processes for 
both MSPP issuers and enrollees.
    We received no comments on Sec.  800.10 as proposed. Accordingly, 
we are adopting it as final, with no changes.
Definitions (Sec.  800.20)
    In Sec.  800.20, OPM proposed definitions for terms that are used 
throughout part 800. In general, the definitions contained in Sec.  
800.20 come from the following sources: title I of the Affordable Care 
Act and the final Exchange regulation at 45 CFR parts 155, 156, and 
157; title XXVII of the PHS Act and the regulations at 45 CFR part 144; 
and the Federal Employees Health Benefits Act (FEHBA) at chapter 89 of 
title 5, United States Code, and the regulations governing the Federal 
Employees Health Benefits Program (FEHBP) at 5 CFR part 890 and 48 CFR 
1609.70. Some new definitions were created for the purpose of 
implementing the MSPP. The application of the terms defined in this 
section is limited to this final rule.
    OPM proposes definitions for several terms based on three HHS 
regulations. First, HHS published an Essential Health Benefits (EHB) 
final rule in the Federal Register on February 25, 2013, to provide 
standards related to EHB, actuarial value (AV), and accreditation. 
Second, HHS published a final rule in the Federal Register on February 
27, 2013, to provide standards related to fair health insurance 
premiums, guaranteed availability, guaranteed renewability, risk pools, 
and rate review (the health insurance market rules). Third, HHS 
published a final rule elsewhere in today's edition of the Federal 
Register, to provide notice of standards relating to benefit and 
payment parameters for 2014, including standards related to advance 
payments of the premium tax credit and cost-sharing reductions (the 
payment rule). OPM is using the definitions promulgated by HHS.
    Comments: OPM received several comments recommending changes in the 
definitions in proposed Sec.  800.20. A few commenters expressed 
concern with how OPM plans to operationalize the definition of 
``Indian.'' Specifically, the commenters suggested that OPM adopt the 
definition at 42 CFR 447.50 and not use the definition at 45 CFR 
155.300(a) as we proposed. OPM was also asked to correct the definition 
of ``Indian Plan Variation,'' which currently cross references 45 CFR 
156.400, so that there is no confusion regarding eligibility of Indians 
for zero-cost-sharing and variable cost-sharing plan variations.
    Response: While the terms ``Indian'' and ``Indian Plan Variation'' 
were introduced in the proposed rule, referencing 45 CFR 155.300(a) and 
45 CFR 155.400, respectively, we are removing them from the final rule, 
as they are not used elsewhere in the rule.
    Comments: A few commenters noted that OPM should not exclude 
policies and contracts from the ``benefit plan material or 
information'' definition. Two commenters said that we should not 
exclude policies and contracts from the definition, because including 
them in the scope of the regulation could be helpful to limited-
English-proficient (LEP) individuals in making effective decisions.
    One commenter wanted us to clarify that a provider directory falls 
within the definition of ``benefit plan material or information.''
    Response: We are adopting the proposed definition of ``benefit plan 
material or information.'' The term, as defined, includes explanations 
or descriptions, whether printed or electronic, that describe a health 
insurance issuer's products. The term does not include a policy or 
contract for health insurance coverage. As it does in the FEHBP, OPM 
will review and approve the policy or contract for health insurance 
coverage. Such approval is necessary for effective contract 
administration and oversight. We agree that a provider directory does 
fall within the scope of the definition.
    Comment: One commenter suggested that introducing a second prong to 
the definition of ``group of issuers''--to include ``an affiliation of 
health insurance issuers and an entity who is not an issuer but who 
owns a nationally licensed service mark''--would expand the authority 
granted under section 1334 of the Affordable Care Act. The commenter 
recommended that we not

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expand the definition of ``group of issuers'' to include entities not 
identified in the Affordable Care Act as potential participants in the 
MSPP.
    Response: Section 1334 does not define ``group of issuers,'' but 
only provides examples of affiliations of health insurance issuers that 
may be considered health insurance issuers. Thus, OPM, in the exercise 
of its discretion, and within the parameters set by section 1334, has 
established a definition that we believe affords flexibility in terms 
of the types of entities with which OPM may contract. In addition, this 
definition, which attempts to encompass a diversity of contractual 
arrangements similarly available to OPM under the FEHBP, promotes the 
goals of section 1334(a) of the Affordable Care Act, which directs OPM 
to implement the MSPP in a manner similar to the manner in which we 
implement the contracting provisions with respect to carriers under the 
FEHBP. As we noted in the proposed rule, this definition of ``group of 
issuers'' is applicable only for the purposes of section 1334.
    Comment: One commenter recommended that OPM revise the definition 
of ``non-profit entity'' to exclude the portion of the definition that 
states a non-profit entity may also be, for purposes of the MSPP, ``a 
group of health insurance issuers licensed under State law a 
substantial portion of which are incorporated under State law as non-
profit entities,'' as this would further reduce competition in a State 
where a ``for-profit'' issuer may already have a significant market 
share.
    Response: We are adopting the proposed definition of ``non-profit 
entity.'' This definition is consistent with the manner in which OPM 
implements the contracting provisions with respect to carriers under 
the FEHBP and builds on our significant experience in contracting with 
and overseeing carriers under that program.
    Comment: Another commenter recommended amending the definitions of 
``multi-State plan (MSP)'' and ``Multi-State Plan Program issuer (MSPP 
issuer)'' to clarify whether each MSP will be under separate contract 
with OPM or will contract through the MSPP issuer.
    Response: OPM is revising the definition of ``MSP'' to clarify that 
an MSP is offered under contract with OPM via an MSPP issuer.
    Comment: A commenter suggested that OPM broaden the definition of 
``State Insurance Commissioner'' to acknowledge the potential for 
multiple regulatory roles in a State.
    Response: We understand the commenter's concern and acknowledge the 
possibility of multiple regulatory roles in some States, but we are 
retaining the proposed definition. This term is a standard term that is 
understood in the industry; therefore, we decline to amend the 
definition. Our definition of ``State Insurance Commissioner'' aligns 
with the definition used in many of the model acts issued by the 
National Association of Insurance Commissioners (NAIC) to ensure 
consistency with definitions widely used by State insurance regulatory 
entities.

Subpart B--Multi-State Plan Program Issuer Requirements

General Requirements (Sec.  800.101)
    Section 800.101 of the proposed rule sets forth standards to 
implement Sec.  1334(b) of the Affordable Care Act. The general 
requirements include licensure, a contract with OPM, required levels of 
coverage, eligibility and enrollment, compliance with OPM direction and 
other legal requirements. In Sec.  800.101(i), we also proposed that an 
MSPP issuer must comply with applicable non-discrimination statutes and 
ensure that their MSPs do not discriminate based on race, color, 
national origin, disability, age, sex, gender identity, or sexual 
orientation. We sought comment on any unique enrollment and eligibility 
issues that might affect MSPs. A broad spectrum of consumer and 
professional organizations commented on this provision.
    Comments: Many commenters support OPM's intent to include non-
discrimination provisions, but recommended adding specific additional 
language to strengthen these protections, including clarifying non-
discrimination based on sex or gender identity.
    Some commenters requested that OPM add specific non-discrimination 
language in Sec.  800.101(d) that describes the MSP and MSPP issuer 
responsibilities for eligibility and enrollment. The specific 
suggestion was to notify MSPP issuers that benefit packages must be 
``substantially equal'' to EHB benchmarks and not include any 
discriminatory benefit design elements as defined under 45 CFR 156.125.
    Response: In response to comments, we are revising Sec.  800.101(i) 
of this final rule to ensure consistency with the prohibition on 
discrimination with respect to EHB in 45 CFR 156.125 and the non-
discrimination standards applicable to QHPs under 45 CFR 156.200(e). 
With regard to defining EHB benchmarks, we have determined that these 
comments are outside the scope of this rule. These standards are 
governed by HHS regulations.
    Comments: Some commenters suggested that certain health care 
providers be included as protected categories for non-discrimination, 
and one commenter wanted MSPP issuers and MSPs to align their payment 
systems to comply with State and Federal non-discrimination provisions.
    Response: The broad prohibition on discrimination in Sec.  
800.101(i) clearly bars discrimination against certain health care 
providers of the MSPP issuer. Similar comments were addressed in Sec.  
800.109, concerning health providers and network adequacy. We are 
concerned that specifying types of providers who are protected from 
discrimination would detract from the larger issue of broadly ensuring 
access to the full range of covered services. Accordingly, no further 
change in proposed Sec.  800.101(i) is needed to address this concern.
    Comments: A few commenters recommended that OPM expressly clarify 
in Sec.  800.101(i) that the Indian Health Service, tribes and tribal 
organizations, and urban Indian organizations (collectively, I/T/Us) 
are not violating the non-discrimination requirements if they limit 
their services, in whole or part, to American Indians/Alaska Natives.
    Response: An MSPP issuer would not violate the non-discrimination 
requirements by contracting with health care providers who are 
authorized or directed by law to serve specific populations, such as 
Indian health providers. We note that an MSPP issuer must meet all 
standards related to network adequacy and essential community providers 
specified in Sec.  800.109 and 45 CFR 156.235, respectively.
    Comments: A few commenters stated that OPM should clarify that MSPs 
and MSPP issuers must comply with any consumer protections and 
regulatory procedures a State or Exchange has put in place.
    Response: As explained in our proposed regulation, MSPs and MSPP 
issuers are generally required to comply with applicable State law. 
This would include the application of stronger protections in the 
Exchange provided by State law, as long as application of those 
provisions to the MSPP is consistent with the Affordable Care Act. We 
received no comments to indicate that the consumer protections 
applicable to the MSPP are any weaker than those required by any State 
or Exchange. On the contrary, OPM intends to protect

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consumers through its administration of the MSPP in a manner similar to 
the manner in which it has protected enrollees in the FEHBP for more 
than 50 years. In any event, if there are specific consumer protections 
and regulatory procedures that go above and beyond Federal standards, 
OPM encourages States to identify them so OPM can consider and address 
them through a memorandum of understanding (MOU) with the State and, if 
appropriate, in its contracts with issuers.
    Comments: A few commenters asked how OPM will work with active 
purchasing Exchanges and recommended that OPM incorporate a ``do no 
harm'' objective in the preamble.
    Response: We will retain our current language and decline to 
incorporate a ``do no harm'' provision, as such a provision would be 
vague and ambiguous. Instead, we will maintain our approach of applying 
standards that neither competitively advantage nor disadvantage MSPs 
and MSPP issuers.
    Comment: One commenter stated that OPM should require MSPP issuers 
to meet standards for certification and licensing prior to signing a 
contract with OPM for MSPs in the State.
    Response: Section 800.101 clearly provides that an MSPP issuer must 
be licensed as a health insurance issuer in each State where it offers 
health insurance coverage, and it is deemed certified by OPM when it 
signs a contract with OPM.
Compliance With Federal law (Sec.  800.102)
    Proposed Sec.  800.102 specifies the Federal laws with which MSPP 
issuers must comply as a condition of participation in the MSPP. 
Paragraph (a) refers to applicable provisions of title XXVII of the PHS 
Act, while paragraph (b) refers to applicable provisions of title I of 
the Affordable Care Act.
    In this final rule, paragraphs (a) and (b) no longer refer to 
Appendix A and B, respectively, which in the proposed rule listed 
specific provisions of title XXVII of the PHS Act and title I of the 
Affordable Care Act. We are omitting these appendices because, although 
the statutes listed in those appendices do apply to MSPP issuers, they 
may not necessarily be a comprehensive list of all applicable statutes. 
Also, it is possible that the list of statutes in the appendices may 
change over time.
    We are also omitting Appendix C in this final rule, because Sec.  
36B of the Internal Revenue Code does not set forth responsibilities of 
issuers.
    Comments: Commenters suggested that OPM had erroneously neglected 
to include section 2716 of the PHS Act and section 1312 of the 
Affordable Care Act.
    Response: MSPP issuers that choose to participate in the Small 
Business Health Options Program (SHOP) will operate under the same 
rules as issuers of health insurance coverage in the small group market 
generally. OPM agrees that section 1312 of the Affordable Care Act 
applies to MSPP issuers.
    Comments: A few commenters noted that we listed section 2707 of the 
PHS Act in Appendix A to the proposed rule, which listed PHS Act 
provisions applicable to MSPs, and asked OPM to clarify that the PHS 
Act requirements were applicable solely to the off-Exchange markets and 
would not apply to MSPP issuers for products sold through an Exchange.
    Response: While all the requirements applicable to QHP issuers 
contained in section 2707 are also contained in requirements applicable 
to QHPs, they also apply directly.
Authority To Contract With Issuers (Sec.  800.103)
    As provided in section 1334(a)(1) of the Affordable Care Act, OPM 
proposed in Sec.  800.103 that it may enter into an MSPP contract with 
a group of issuers affiliated either by common ownership and control or 
by the use of a nationally licensed service mark, or an affiliation of 
health insurance issuers and an entity that is not an issuer but that 
owns a nationally licensed service mark.
    We received no substantive comments on this section. Accordingly, 
we are adopting proposed Sec.  800.103 as final, with no changes.
Phased Expansion (Sec.  800.104)
    In Sec.  800.104, we proposed phased expansion of the MSPP into 
States and that MSPP issuers may provide partial coverage within a 
State. We also proposed that MSPP issuers must be licensed in the State 
where they offer coverage and OPM may enter into a contract with an 
issuer that is not licensed in all States. We stated in the preamble of 
the proposed regulation that Sec.  800.104 implements provisions of 
section 1334(e) of the Affordable Care Act regarding the phase-in of 
multi-State plans. OPM proposed in Sec.  800.104(b) that MSPP issuers 
offering MSPs can offer coverage in part of a State, and do not have to 
offer coverage throughout the entire State. We also solicited comment 
on whether an MSPP issuer should be required to offer coverage 
statewide by the fourth year of participation in the MSPP, when 
coverage must be offered in each Exchange in all States and the 
District of Columbia.
    Comments: Several commenters expressed support for phased expansion 
into States. Another commenter stated that a multi-year phase-in 
process will allow MSPs to build appropriate networks and partnerships 
to satisfy the requirements of the Affordable Care Act and satisfy the 
needs of the citizens of each State. One commenter stated that MSPP 
issuers should be required to offer coverage on each Exchange in all 
States and the District of Columbia as soon as possible or in as many 
States as possible. Another commenter recommended an extension of the 
phase-in period to 6 years instead of a 4-year phase-in.
    Response: We are retaining the standards that are outlined in 
section 1334(e) of the Affordable Care Act. However, we have removed 
from the regulatory text the number of States that an issuer must phase 
into because section 1334(e) refers to percentages and not specific 
numbers. We believe the phased expansion approach into States will 
encourage MSPP issuers to expand MSPs to provide more consumer choice 
throughout the country. It is our intention to ensure that MSPP issuers 
have appropriate networks to adequately serve MSP enrollees, and we 
will take these comments into consideration when we are evaluating 
potential MSPP issuers.
    Comment: One commenter was concerned that MSPP issuers will 
subcontract to meet the phase-in requirements and that these will 
encourage ``marriages of convenience.''
    Response: Section 1334 permits OPM to contract with health 
insurance issuers and entities that come together in order to apply as 
an MSP issuer. We encourage any such new entities to give careful 
thought and planning to their strategies for phasing in coverage to the 
States and the District of Columbia, and we will ensure through our 
application review and contracting process that these entities are 
prepared to offer quality health insurance options in the States for 
which they are applying.
    Comment: One commenter recommended that OPM should require 
licensure in all jurisdictions by the end of the phase-in.
    Response: We have adequately addressed the licensure requirement in 
Sec.  800.104(c). As stated in that section, OPM may enter into a 
contract with an MSPP issuer that is not licensed in every State, 
provided that the issuer is licensed in every State where it offers MSP 
coverage through any Exchanges in that State and demonstrates to OPM 
that it is making a good-faith effort to

[[Page 15564]]

become licensed in every State, consistent with the timeframe for the 
phase-in.
    Comments: We received many comments on whether OPM should have a 
role in selecting the States in which MSPP issuers should or should not 
offer coverage during phased expansion. Several commenters recommended 
that OPM not specify which States an MSPP issuer must cover in the 
first year. Other commenters recommended that OPM should consider slow-
tracking implementation of the MSPP in certain States and granting 
these States waivers from participation. Another commenter suggested 
that OPM limit MSPP issuers to offering MSPs in States that will have 
Federally-facilitated Exchanges or State Partnership Exchanges in 2014. 
One commenter suggested that OPM focus the phase-in on States where 
consumers lack viable coverage options.
    Response: OPM declines to identify specific States that MSPP 
issuers should cover during phased expansion. We recognize the 
importance of providing consumers with more health insurance coverage 
options and, while we will not choose specific States where MSPP 
issuers must provide coverage during the phase-in, we will use our 
oversight and contract negotiation roles to provide consumers with the 
additional choice of two high-quality health insurance plans and 
promote competition on the Exchanges.
    Comments: One commenter supported OPM's proposal that OPM may enter 
into contracts with issuers that cannot provide statewide coverage and 
stated that it will give MSPP issuers time to develop the capacity to 
offer coverage throughout a service area, which will enhance 
competition in the MSPP. Several commenters appreciated that issuers 
failing to offer statewide coverage must propose a plan for becoming 
statewide, but expressed that without more specificity American 
Indians/Alaska Natives will not be able to access MSPs.
    Response: We acknowledge the importance of access to health 
coverage and MSPs, especially in rural and underserved areas. However, 
we are providing in the final regulation that OPM may enter into a 
contract with an MSPP issuer that will provide partial coverage within 
a State. We recognize the challenges that issuers would face if there 
were a requirement to offer coverage statewide, and we were made aware 
of these challenges from issuers in the MSPP Request for Information as 
well as comments on the proposed rule. However, we are maintaining in 
the final rule our proposed requirement for MSPP issuers who are 
offering partial coverage in a State to supply a plan for offering 
coverage throughout the State. As we review MSPP issuer applications, 
we will pay special attention to service areas that are medically 
underserved, such as rural areas and American Indian/Alaska Native 
populations. We intend to encourage issuers to offer coverage statewide 
where they have capacity to do so, and will take these comments into 
consideration when negotiating MSPP contracts.
    Comments: Several commenters wanted clarification of phased 
expansion in terms of MSPs being able to meet network adequacy 
standards. One commenter recommended that MSPP issuers not be permitted 
to offer MSPs in a State unless the plan is capable of offering 
coverage to all residents of a State, including meeting network 
adequacy standards throughout the State, to avoid selective coverage by 
issuers.
    Response: While we appreciate the concern for network adequacy, we 
decline to set a standard of phased expansion and statewide coverage in 
terms of network adequacy. We believe that network adequacy is 
sufficiently addressed in Sec.  800.109 to ensure that an MSP's 
services are available to all enrollees.
    Comments: Many commenters were concerned by our proposal to allow 
partial coverage within a State. Some stated that MSPP issuers should 
be required to comply with all State requirements regarding geographic 
scope of coverage that apply to QHPs. One commenter recommended that 
MSPs follow specific State standards for statewideness. Some commenters 
stated that, without a requirement of statewideness, there is a 
possibility of red-lining by MSPP issuers or adverse selection 
resulting in MSPP issuers avoiding certain populations. Commenters were 
also concerned about market dislocation. One commenter stated that MSPP 
issuers would be able to avoid offering coverage in rural and other 
high-cost areas, which would give them a competitive advantage over 
both QHP issuers and issuers not offering on an Exchange. Lastly, one 
commenter stated that a core purpose of the MSPP is to benefit 
individuals who lack options, and allowing issuers to avoid certain 
difficult areas in a State contradicts this basic purpose. One 
commenter suggested that we include language indicating that we will 
consult with State regulators and the State Exchange in determining 
that MSP coverage does not exclude specific high-utilizing, high-cost, 
or medically-underserved populations.
    Response: We are not prohibiting MSPP issuers from being statewide; 
on the contrary, we encourage them to do so from the start if they have 
the capacity. MSPP issuers should follow State laws regarding 
statewideness to the extent it is within their capability to do so. In 
addition, we are finalizing this regulation with the requirement for an 
MSPP issuer to provide a plan for expanding coverage statewide. 
Furthermore, we intend to address an MSPP issuer's ability to expand 
coverage statewide as part of the MSPP application and contract 
negotiation processes. We acknowledge the commenters' concern for red-
lining and other ``cherry-picking'' practices where an issuer might 
offer plans only in geographic areas that are expected to have lower 
risk. Therefore, we will evaluate MSPP issuers to ensure that the 
locations in which they propose to offer MSP coverage have been 
established without regard to racial, ethnic, language, health-status-
related factors listed in section 2705(a) of the PHS Act, or other 
factors that exclude specific high-utilizing, high-cost, or medically-
underserved populations. We agree that a core purpose of the MSPP is to 
provide additional choice of health insurance plans and promote 
competition on the Exchanges, and MSPP issuers should not be permitted 
to avoid areas in a State that are difficult to serve. We are aware of 
these concerns and are committed to MSPP issuers being neither 
competitively advantaged nor disadvantaged, compared to QHP issuers.
    OPM proposed that, by the end of the phase-in period, MSPP issuers 
should be required to offer coverage on the SHOP in addition to the 
individual Exchange. We solicited comments on this approach to SHOP 
participation, including on whether participation in SHOP should be 
required from the outset or whether we should allow MSPP issuers to 
provide a plan that requires a period longer than the phase-in period 
to fully participate in the SHOP. We received comments on the phase-in 
to SHOPs from States, an issuer association, and professional 
organizations.
    Comments: Several commenters supported our approach of allowing 
MSPP issuers the flexibility to phase-in to SHOPs. One commenter asked 
that OPM clarify whether the statement in the preamble that the ``MSPP 
issuer may choose to participate in the SHOP'' is a proposal to phase-
in MSPP issuer coverage in the SHOP. Some commenters were concerned 
that MSPs will have a competitive advantage if they are not required to 
follow the same

[[Page 15565]]

rules as the Federally-facilitated Exchange and State requirements for 
QHPs to offer coverage in both the individual and SHOP markets. One 
commenter noted that OPM's approach presents a significant challenge, 
since it has merged markets. Some commenters would like OPM to require 
participation in the SHOP from the outset or require full participation 
in the SHOP at the fourth year of phase-in.
    Response: We appreciate the support for our approach of allowing 
MSPP issuers the flexibility to phase-in coverage to the SHOPs, which 
was discussed in the preamble of the proposed rule, though not 
addressed in the regulatory text. Based on the policy for Federally-
facilitated SHOP participation published in the HHS Payment Notice, we 
are finalizing our regulation to require MSPP issuers to comply with 45 
CFR 156.200(g). In the HHS Payment Notice, HHS adopted a provision 
stating that a QHP issuer applicant will participate in a Federally-
facilitated SHOP based on an issuer applicant's current small group 
market share. The provision uses a threshold of 20 percent market share 
to determine whether a small group market issuer is subject to the 
tying provision for QHPs in the Federally-facilitated SHOPs. For the 
MSPP, we believe this standard for the Federally-facilitated SHOP can 
be met if a State-level MSPP issuer or any other issuer in the same 
issuer group affiliated with an MSPP issuer provides coverage on the 
Federally-facilitated SHOP.
    In this final rule, we adopt a policy for the MSPP that mirrors the 
standard set by HHS for the Federally-facilitated SHOP. We also adopt a 
policy for SHOP participation on State-based Exchanges that is 
consistent with our approach to State law under Sec.  800.114 while 
retaining OPM discretion on timing of MSPP issuers to participate in 
the SHOP. For State-based SHOPs, we will permit an MSPP issuer 
flexibility to phase-in participation in the SHOP if the State has set 
a standard that requires QHPs to participate. We understand the burden 
of building capacity and network in order to offer in the SHOPs and 
want to balance the needs of small employers, MSPP issuers, and States. 
We believe section 1334(e) provides OPM discretion to allow an MSPP 
issuer to phase-in SHOP participation in States that require 
participation and this flexibility meets the needs of many 
stakeholders. Therefore, we are finalizing regulatory text in Sec.  
800.104(c) that requires MSPP issuers to comply with standards in 45 
CFR 156.200(g) and with State standards for SHOP participation, subject 
to Sec.  800.114, and gives OPM discretion to provide MSPP issuers 
flexibility during the initial years of the program to phase into the 
SHOP in a State-based Exchange. We also clarify that an MSPP issuer 
must offer coverage for both individuals and small groups in a State 
with a merged individual and small group market. We encourage MSPP 
issuers to expand coverage in States and SHOPs when they have adequate 
capacity to accept enrollees.
Benefits (Sec.  800.105)
    In Sec.  800.105, OPM proposed to implement section 1334(c)(1)(A) 
of the Affordable Care Act, which directs an MSP to offer a benefits 
package that is uniform in each State and consists of the EHB described 
in section 1302 of the Affordable Care Act. OPM developed its benefits 
policy in coordination with HHS, which promulgated the EHB rule. 
Generally, under that rule, EHB would be defined by a benchmark plan 
selected by each State or, in the absence of a State benchmark 
designation, a default benchmark. However, the EHB rule also states at 
45 CFR 156.105 that MSPs must meet benchmark standards set by OPM.
    In Sec.  800.105(a)(1), OPM proposed that an MSPP issuer must offer 
a uniform benefits package for each MSP and that the benefits for each 
MSP must be uniform within a State, but not necessarily uniform among 
States. In Sec.  800.105(a)(2), OPM proposed that the benefits package 
referred to in Sec.  800.105(a)(1) must comply with section 1302 of the 
Affordable Care Act, as well as any applicable standards set by OPM or 
HHS in regulations. Together, these provisions clarify that MSPP 
issuers must comply with applicable HHS requirements and that OPM may 
issue additional guidance regarding any issues unique to MSPs.
    In Sec.  800.105(b)(1), OPM proposed allowing MSPP issuers to offer 
a benefits package, in all States, that is substantially equal to 
either (1) each State's EHB-benchmark plan in each State in which it 
operates; or (2) any EHB-benchmark plan selected by OPM. The second 
option offers administrative efficiencies for MSPP issuers, who face a 
number of challenges in being able to offer MSPs on each Exchange in 
all States and the District of Columbia. We also noted in our proposed 
rule that MSPP issuers could potentially achieve a similar consistency 
in their benefits offerings by adhering to State EHB-benchmark plans 
and applying the EHB substitution rules at 45 CFR 156.115.
    Comments: We received many comments on the proposed EHB-benchmark 
policy from a broad range of stakeholders. Many commenters argued that 
the proposed policy would lead to adverse selection or consumer 
confusion. Some commenters argued that the proposed policy would also 
constitute Federal preemption of State authority to regulate insurance. 
At least one commenter said that the proposed policy would lead to 
administrative complexities and inefficiencies. Finally, some 
commenters preferred to have only a national benchmark.
    Some commenters noted that differences between an OPM-selected 
benchmark and State-selected benchmark are unlikely to be actuarially 
significant. Some commenters also noted that the proposed policy would 
encourage issuers to participate in the MSPP. Other commenters also 
noted that OPM-selected benchmarks would provide robust prescription 
drug coverage, obesity treatment services, medical nutrition therapy, 
pediatric services, and chiropractic care.
    Response: We agree with commenters who noted that the differences 
between an OPM-selected benchmark and State-selected benchmark are 
unlikely to be actuarially significant. We are not aware of any 
compelling evidence that multiple benchmarks would lead to adverse 
selection or consumer confusion, nor did the commenters produce any 
evidence of adverse selection or consumer confusion. Accordingly, we 
are adopting as final the proposed provision to allow an MSPP issuer to 
offer a benefits package in all States that is substantially equal to 
either the EHB-benchmark plan in each State in which it proposes to 
offer an MSP or any EHB-benchmark plan selected by OPM.
    Comments: Several commenters discussed the need for national MSPs 
for American Indians/Alaska Natives.
    Response: We acknowledge that consistency among States would be 
helpful for I/T/Us that may consider purchasing plans for tribes that 
are in multiple States. Members of tribes would still need to access 
the Exchanges in their States to determine their eligibility and 
enrollment for products available through the Exchange, including an 
MSP. While the MSPP is not a national plan, reciprocity of coverage 
among MSPs in States is an issue we intend to take up in contract 
negotiations with MSPP issuers. We look forward to conferring with 
tribes on this approach and engaging them in how the MSPP may best meet 
their needs.
    Comments: Several commenters asked us to eliminate or provide 
additional guidance regarding the ``substantially equal'' standard.

[[Page 15566]]

    Response: Because HHS is defining the standard for the term 
``substantially equal,'' we expect MSPP issuers to follow HHS guidance 
relating to this term.
    OPM also proposed that even if an MSPP issuer chooses to use an 
EHB-benchmark plan selected by OPM in all States, the MSPP issuer must 
still use a State-selected benchmark in States that do not allow any 
substitution for services within the benchmark benefits. The reason for 
this is if an MSPP issuer were to use an OPM-selected benchmark in 
States that require all plans to offer the same set of benefits, then 
the MSP in that State would be different from all of the other plans 
offered on the market, which could potentially lead to market 
disruption, adverse selection, or consumer confusion could occur.
    Comments: Many commenters supported the policy that OPM-selected 
benchmarks and substitutions not be allowed in States having standard 
benefit designs.
    Response: We are adding a paragraph (b)(3) to Sec.  800.105 to 
clarify that an MSPP issuer must comply with any State standards 
relating to substitution of benchmark benefits or standard benefit 
designs. Accordingly, in a State that does not allow substitution of 
benchmark benefits, or that has standard benefit designs, an MSPP 
issuer that has chosen to use an OPM-selected EHB-benchmark plan under 
paragraph (b)(2)(ii) must use the State's EHB-benchmark plan.
    No matter which option an MSPP issuer chooses, it must apply that 
option uniformly in each State in which the MSPP issuer proposes to 
offer MSPs. This means that, except as discussed above, our approach 
will not permit an issuer to use a State benchmark plan in some States 
in which it operates and an OPM-chosen benchmark plan in others.
    In Sec.  800.105(c)(1), OPM proposed selecting, as EHB-benchmark 
plans, the three largest FEHBP plan options by enrollment that are open 
to Federal employees and annuitants, which were identified by HHS 
pursuant to section 1302(b) of the Affordable Care Act. On July 3, 
2012, HHS identified the three largest FEHBP plan options (as of March 
31, 2012) as Blue Cross Blue Shield (BCBS) Standard Option; BCBS Basic 
Option; and Government Employees Health Association (GEHA) Standard 
Option.\1\ An MSPP issuer that selects one of these benchmarks must 
offer this benefits package in all States in which it operates an MSP.
---------------------------------------------------------------------------

    \1\ Centers for Medicare and Medicaid Services, Essential Health 
Benefits: List of the Largest Three Small Group Products by State, 
available at  http://cciio.cms.gov/resources/files/largest-smgroup-products-7-2-2012.pdf.PDF (July 3, 2012).
---------------------------------------------------------------------------

    Several commenters urged OPM to be judicious in evaluating all 
proposed benchmarks. Based on initial comparative research, it appears 
that the proposed OPM-selected EHB-benchmark plans are largely similar 
in scope of benefits covered to those benchmark-eligible plans in the 
small group markets.\2\ This research also indicates that the OPM-
selected EHB-benchmark plans, like other benchmark-eligible plans, may 
lack coverage for pediatric oral services, pediatric vision services, 
and habilitative services and devices. Moreover, the EHB-benchmark may 
also lack State-required benefits. Accordingly, OPM proposed standards 
to supplement the OPM-selected EHB-benchmark plans in Sec.  
800.105(c)(2)-(c)(4).
---------------------------------------------------------------------------

    \2\ U.S. Department of Health and Human Services, Office of the 
Assistant Secretary for Planning and Evaluation, ASPE Research 
Brief, Essential Health Benefits: Comparing Benefits in Small Group 
Products and State and Federal Employee Plans, available at http://aspe.hhs.gov/health/reports/2011/MarketComparison/rb.pdf (December 
2011).
---------------------------------------------------------------------------

    In Sec.  800.105(c)(2), we proposed that any OPM-selected EHB-
benchmark plan lacking coverage of pediatric oral services or pediatric 
vision services must be supplemented by the addition of the entire 
category of benefits from the largest Federal Employee Dental and 
Vision Insurance Program (FEDVIP) dental or vision plan option, 
respectively, pursuant to 45 CFR 156.110(b) and section 1302(b) of the 
Affordable Care Act. On July 3, 2012, HHS identified the largest FEDVIP 
dental and vision plan options, as of March 31, 2012, to be, 
respectively, MetLife Federal Dental Plan High Option and FEP 
BlueVision High Option.
    We also solicited comments on the provision of pediatric oral 
services by MSPs in order to meet the requirements of section 
1302(b)(1)(J) of the Affordable Care Act. Under one proposed approach, 
an MSP would include pediatric oral services in its benefit package. 
Finally, we solicited comments on how stand-alone dental plans offered 
on the Exchanges should affect this requirement, if at all.
    Comments: While some commenters favored offering stand-alone dental 
plans, others expressed concern that the expense of separate out-of-
pocket maximums might discourage families from purchasing separate 
coverage for pediatric oral services. Some commenters proposed to 
require all MSPs to offer both a complete medical package and an 
identical plan without pediatric oral services in areas where stand-
alone pediatric dental coverage is available.
    Response: Given the range of possible benefit designs, we are not 
promulgating any further regulatory provisions regarding coverage of 
pediatric oral services. Instead, we will keep these comments in mind 
during MSPP contract negotiations, which would allow greater 
flexibility on benefit designs.
    In Sec.  800.105(c)(3), we proposed that an MSPP issuer must follow 
State definitions for habilitative services and devices where the State 
chooses to specifically define this category pursuant to 45 CFR 
156.110(f). When a State chooses not to define this category and any 
OPM-selected EHB-benchmark plan lacks coverage of habilitative services 
and devices, OPM may determine what to include in this category.
    Comments: All commenters supported OPM's intention to include 
habilitative services and devices in the MSPs. However, they disagreed 
on whether we should defer to State definitions or have OPM define a 
specific set of habilitative services and devices that each MSP must 
cover. Some asked that we require parity in scope, amount, and duration 
for habilitative and rehabilitative services. Other commenters 
supported our proposed approach for when a State chooses not to define 
the category of habilitation. When this happens, we will determine what 
habilitative services and devices must be included in an OPM-selected 
EHB-benchmark plan. One commenter suggested that we refer to both 
habilitative ``services and devices'' in Sec.  800.105(c)(3) as we do 
in Sec.  800.105(c)(4).
    Response: Based on the comments, we will direct MSPP issuers to 
follow State definitions of habilitative services and devices where 
they exist and, where they do not exist, OPM will consider these 
comments during MSPP contract negotiation. We are adopting proposed 
Sec.  800.105(c)(3) as final, with the one technical correction 
mentioned above.
    In Sec.  800.105(c)(4), OPM proposed that, at least for years 2014 
and 2015, OPM's EHB-benchmark plans would also include, for each State, 
any State-required benefits enacted by December 31, 2011, that are 
included in a State's EHB-benchmark plan or specific to the market in 
which the MSPP issuer offers coverage. Accordingly, these State-
required benefits would be treated as part of the EHB. However, 
consistent with 45 CFR 155.170, OPM proposed that State-required 
benefits enacted after December 31, 2011, would be in addition to the 
EHB. Under section

[[Page 15567]]

1334(c)(4) of the Affordable Care Act, a State must assume the cost of 
such additional benefits over the EHB by making payments either to the 
enrollee or on behalf of the enrollee to the MSPP issuer, if 
applicable. An MSPP issuer must calculate and report the costs of 
additional State-required benefits pursuant to Sec.  800.105(e). This 
standard is also consistent with 45 CFR 155.170.
    Comments: Most commenters supported the inclusion of State-required 
benefits before December 31, 2011. However, one commenter opposed the 
inclusion of State-required benefits. Another commenter stated that the 
cutoff date for inclusion of State-required benefits should be November 
26, 2012, the date when the proposed EHB rule was published.
    Response: We are making no changes to Sec.  800.105(c)(4), because 
it is consistent with standards applicable to QHPs at 45 CFR 155.170.
    Comments: Several commenters recommended that State payments for 
State-required benefits above the EHB benchmark be made only to issuers 
instead of allowing States the option of making payments to either 
issuers or enrollees.
    Response: We are making no changes to proposed Sec.  800.105(e), 
because it is consistent with section 1334(c)(4) of the Affordable Care 
Act, as well as standards applicable to QHPs at 45 CFR 155.170.
    In Sec.  800.105(d), OPM proposed that an MSPP issuer's benefits 
package, including its prescription drug list, must be submitted to and 
approved by OPM, which will determine whether a benefits package 
proposed by an MSPP issuer is substantially equal to an EHB-benchmark 
plan, in accordance with the requirements set forth by HHS in the 
proposed EHB rule. In determining whether an MSPP issuer's benefits 
package should be approved, OPM proposed to follow the HHS approach set 
forth at 45 CFR 156.115, 156.122, and 156.125. Section 156.115(b) of 
title 45, Code of Federal Regulations, allows issuers to make benefit 
substitutions within each EHB category and directs issuers to submit 
evidence of actuarial equivalence of substituted benefits to a State. 
We requested comments on whether MSPP issuers should submit evidence of 
actuarial equivalence of substituted benefits to OPM in addition to, or 
in lieu of, their submission to a State.
    Comments: Many commenters recommended that, if MSPP issuers are 
allowed to make actuarially equivalent substitutions, evidence should 
be submitted to both States and OPM.
    Response: We are adopting the proposed Sec.  800.105(d), and we 
will work collaboratively with State regulatory officials during the 
MSPP application process to ensure they receive evidence of actuarial 
equivalence of substituted benefits.
    In reviewing an MSPP issuer's proposed benefit design, OPM plans to 
review an MSPP issuer's benefits package for discriminatory benefit 
design, consistent with section 1302(b)(4) of the Affordable Care Act 
and 45 CFR 156.110(d), 156.110(e), and 156.125, and will work closely 
with States and HHS to identify and investigate any potentially 
discriminatory benefit design in MSPs.
    In summary, we are adopting proposed Sec.  800.105 as final, with 
the change described above relating to standardized benefit designs. We 
also are making minor technical corrections, including by inserting a 
reference to both habilitative ``services and devices'' in Sec.  
800.105(c)(3) to be consistent with Sec.  800.105(c)(4).
Cost-Sharing Limits, Premium Tax Credits, and Cost-Sharing Reductions 
(Sec.  800.106)
    In Sec.  800.106(a), OPM proposed that, for each MSP it offers, an 
MSPP issuer must ensure that the cost-sharing provisions of the MSP 
comply with section 1302(c) of the Affordable Care Act as well as any 
applicable standards set by OPM or HHS in regulations. The HHS 
standards are set forth in 45 CFR 156.130. In Sec.  800.106(b), OPM 
proposed that an MSPP issuer, for each MSP it offers, must ensure that 
an eligible individual receives advance payments of premium tax credits 
under section 36B of the Internal Revenue Code (the Code) and cost-
sharing reductions under section 1402 of the Affordable Care Act. This 
provision would establish MSPP issuer responsibilities under section 
1334(c)(3)(A) of the Affordable Care Act, which specifies that an 
individual enrolled in an MSP is eligible for the premium tax credits 
and cost-sharing reductions in the same manner as an individual who is 
enrolled in a QHP. We clarify that under Sec.  800.106(b), MSPP issuers 
must comply with the same standards as QHP issuers, including 
applicable provisions of sections 1402(a)(2) and 1412(c)(2)(B) of the 
Affordable Care Act and 45 CFR part 156, subpart E. OPM may issue 
additional guidance regarding any unique issues faced by MSPs.
    We received comments on this section from a broad spectrum of 
consumer and professional organizations and a few individual States. In 
general, our intention is to require MSPP issuers to comply with 
Exchange rules to ensure that MSPs operate on a level playing field 
with other issuers operating in the Exchanges. To the extent any rules 
governing MSPs differ from those governing QHPs, OPM will design them 
to afford the MSPs and MSPP issuers neither a competitive advantage nor 
a disadvantage with respect to other plans offered on the Exchange.
    Comments: Some commenters requested that OPM clarify its 
requirement that MSPPs must comply with State cost-sharing 
restrictions.
    Response: It is our intention to require MSPP issuers to follow HHS 
rules regarding cost-sharing except when State laws impose stricter 
requirements for their Exchanges. In the event a State standardizes 
cost-sharing arrangements and these standards comply with HHS 
regulations, an MSPP issuer will also be required to comply with State 
standards for cost-sharing.
    Comments: One group of commenters suggested that OPM require an MSP 
to cover out-of-network subspecialty care with the same cost-sharing 
arrangements as in-network.
    Response: As acknowledged in our final application for the MSPP, we 
may, in some circumstances, also require MSPP issuers to provide in-
network benefits for services from certain out-of-network providers; 
however, this would not be done through rulemaking. We will take these 
comments under consideration during our contract negotiation with MSPP 
issuers.
    Concerns about the cost-sharing variation for American Indian/
Alaska Native families who want to purchase child-only coverage are not 
within the scope of OPM's rulemaking authority. The Exchanges and HHS 
will facilitate all plan variations between MSPP issuers and potential 
enrollees just as they will do for families participating in the QHPs. 
However, where appropriate, OPM will coordinate closely with HHS on 
areas of special concern for American Indian/Alaska Native adults and 
children.
    We are adopting proposed Sec.  800.106(a) as final, with no 
changes, and we are making technical changes to Sec.  800.106(b).
Levels of Coverage (Sec.  800.107)
    In Sec.  800.107, we proposed that an MSPP issuer, like a QHP 
issuer participating in Exchanges, must offer at least one plan at the 
silver level of coverage and one plan at the gold level of coverage in 
each Exchange in which the issuer is certified to offer an MSP pursuant 
to a contract with OPM. OPM will use its discretion about whether an 
MSPP issuer may offer products in

[[Page 15568]]

addition to the required gold and silver products.
    We also proposed that an MSPP issuer must offer a child-only plan 
at the same level of coverage as any health insurance coverage offered 
to individuals who, as of the beginning of the plan year, have not 
attained the age of 21. OPM proposed that MSPP issuers must comply with 
applicable HHS requirements to offer plan variations that will reduce 
or eliminate cost-sharing for eligible enrollees pursuant to section 
1402 of the Affordable Care Act. Any MSP plan variations will be 
submitted to OPM for review and approval, and OPM will coordinate its 
approach to them with the final HHS notice of benefit and payment 
parameters for 2014. OPM will exercise this discretion to promote the 
best interests of enrollees and potential enrollees in the MSPP and to 
ensure adequate administrative oversight of each MSP and MSPP issuer.
    A number of comments, although informative, relate to issues that 
do not fall within the scope of OPM's rulemaking. In general, our 
intention is to direct MSPP issuers to comply with State requirements 
related to the offering of levels of coverage, including but not 
limited to standardized benefit designs and tiers.
    Comments: Some commenters recommended that OPM require or encourage 
MSPP issuers to offer coverage beyond gold and silver plans. The 
suggestions included requiring MSPP issuers to offer one or more of the 
following: At least one bronze plan; a plan in both the MSP and State 
Medicaid program; and catastrophic coverage.
    Response: The Affordable Care Act requires each MSPP issuer to 
offer both a gold and silver plan. OPM will not require bronze coverage 
through this regulation, but has the discretion to approve other levels 
of coverage through contract negotiation with issuers. Therefore, where 
a State allows it, we will consider plans that offer catastrophic or 
bronze levels of coverage. We will also consider applicants to the MSPP 
that propose to offer an MSP in the Exchange and simultaneously provide 
coverage through a State Medicaid program. We agree with commenters 
that this would reduce the potential for gaps as consumers transition 
between Medicaid and Exchange eligibility. However, we do not have 
authority to require MSPP issuers to participate in Medicaid.
    No changes are needed in Sec.  800.107 in light of the comments we 
received. Therefore, we are adopting proposed Sec.  800.107 as final, 
with no changes.
Assessments and User Fees (Sec.  800.108)
    The proposed rule provides OPM discretion to collect an assessment 
or user fee from MSPP issuers as a condition of participating in the 
MSPP. The proposed rule also describes, generally, that any OPM-
collected assessments and user fees would be to cover the 
administrative costs of performing the contracting and certification of 
MSPs and of operating the program, functions typically conducted 
through an Exchange for QHPs.
    Comments: Some commenters asked OPM to confirm that MSPP issuers 
would pay any State-based Exchange user fees in addition to the MSPP-
specific assessments or user fees. These commenters were concerned that 
any administrative fee above and beyond the Exchange fee charged to QHP 
issuers is duplicative and could lead to a competitive disadvantage for 
MSPP issuers. One commenter asked how the process for paying 
assessments and user fees to OPM would work.
    Response: In this final rule, OPM is preserving its discretion to 
collect an MSPP assessment or user fee, and clarifies that it may begin 
collecting the fee in 2015; OPM does not intend to collect an 
assessment or user fee in 2014. The user fee could be used to fund OPM 
activities directly related to MSPP certification and administration. 
We currently estimate that any future assessment or fee would be no 
more than 0.2 percent of premiums.
    The MSPP user fee would not be a substitute for any user fee or 
assessment imposed by a State-based Exchange or Federally-facilitated 
Exchange. Rather, OPM intends for any MSPP user fee it collects to be 
offset against any State-based Exchange or Federally-facilitated 
Exchange user fee that the MSPP issuer must pay. This offset would 
preserve a level playing field for MSPP issuers. Under this approach, 
the MSPP issuers would pay the same total assessment or user fee to 
participate in an Exchange as all other QHPs participating in that 
Exchange. In addition, this process would allow the Exchanges to 
receive the bulk of the user fee from MSPP issuers to cover the 
Exchange costs, while also providing a marginal amount to fund the 
certification activities that OPM will perform in the place of an 
Exchange with respect to the MSPs.
    OPM would issue further guidance in advance of collecting any user 
fees in 2015. For example, OPM would provide instructions on whether 
MSPP issuers should pay the MSPP portion of the user fee to OPM and pay 
separately the balance of the State-based or Federally-facilitated 
Exchange user fee to the State or HHS, as appropriate.
    Comments: Several commenters wanted more detail about OPM's costs 
for certifying and administering the MSPP and to what use the 
assessment or user fee would be put. One commenter suggested 
eliminating the assessment or user fee since MSPP administration is a 
function of OPM.
    Response: As stated in the proposed rule, the MSPP assessment or 
user fee would be used for OPM's MSPP functions for administration, 
including entering into contracts with, certifying, recertifying, 
decertifying, and overseeing MSPs and MSPP issuers for that plan year. 
OPM will communicate such costs to MSPP issuers and Exchanges when 
available. The MSPP user fee is similar to a fee that OPM collects and 
uses to administer contracts for the FEHBP and will only be used to 
administer the MSPP as it performs plan management functions similar to 
State-based and Federally-facilitated Exchanges.
Network Adequacy (Sec.  800.109)
    OPM proposed, in Sec.  800.109, a standard for network adequacy for 
the MSPP that mirrors the HHS standard set forth in 45 CFR 156.230 and 
is intended to ensure that an MSP's services are available to all 
enrollees. Consistent with the Exchange final rule's alignment with the 
NAIC Model Act, OPM proposed directing an MSPP issuer to (1) maintain a 
network that is sufficient in the number and types of providers to 
ensure that all services will be accessible without reasonable delay 
for enrollees; (2) offer a provider network that is consistent with 
network adequacy provisions set forth in section 2702(c) of the PHS 
Act; and (3) offer a provider network that includes essential community 
providers in compliance with 45 CFR 156.235. OPM intends for an MSPP 
issuer to make its provider directory available to the Exchange for 
online publication and to potential enrollees in hard copy, upon 
request. The proposed regulation stated that OPM would issue guidance 
containing the criteria and standards that OPM will use to determine 
the adequacy of a provider network. In addition, we solicited comment 
on State licensure and any issues for MSPs with respect to State-
specific network adequacy requirements.
    Comments: Some commenters recommended that network adequacy 
provisions include specific provider types, such as certified 
registered nurse anesthetists, tribal health care providers, 
chiropractic physicians, optometrists, and Christian Science providers. 
Some

[[Page 15569]]

commenters also stated that OPM should prohibit discrimination against 
specific provider types. A few commenters recommended that OPM require 
MSPP issuers to adopt a standard Indian Addendum for contracting with 
tribal health care providers.
    Response: While the MSP network adequacy standard should provide 
access to a range of health care providers, specifying the inclusion of 
specified provider types, beyond what is required under the Affordable 
Care Act for QHPs (e.g., essential community providers), would detract 
from the larger issue of broadly ensuring affordable access to the full 
range of covered services. Accordingly, the final rule retains the 
language in proposed Sec.  800.109(a) that requires MSPP issuers to 
maintain networks that include sufficient numbers and types of 
providers to ensure all services will be accessible without 
unreasonable delay. This includes providers representing medical, 
surgical, pediatric, mental health, and allied health disciplines to 
meet the anticipated health care needs of a diverse patient population. 
We acknowledge the importance of having standards in place to prevent 
discrimination against specific provider types, because a variety of 
providers is important for accessing services. However, we believe that 
the non-discrimination standards set forth in Sec. Sec.  800.101 and 
800.102 adequately prohibit discrimination against specific provider 
types. OPM will reinforce these protections through its contract 
negotiations with MSPP issuers.
    With regard to the comments on the standard Indian Addendum, OPM 
recognizes that furnishing MSPP issuers with a standard Indian Addendum 
to a provider contract may make it easier for MSPP issuers to contract 
with Indian providers. We are aware that the Centers for Medicare and 
Medicaid Services (CMS) has partnered with the Indian Health Service to 
develop a Draft Model Qualified Health Program Addendum for contracting 
between QHP issuers and tribal health care providers. However, CMS has 
not required that QHP issuers use the Addendum in the Exchange rule. We 
think it more appropriate to address this issue in our contract 
negotiations. We will continue to coordinate closely with CMS on the 
use of the standard Indian Addendum by MSPP issuers when contracting 
with Indian providers.
    Comments: A few commenters recommended that OPM require MSPP 
issuers to contract with ``any willing essential community provider.'' 
Similarly, a few commenters suggested that OPM require MSPP issuers to 
comply with any State laws concerning ``any willing provider'' or ``any 
willing pharmacy.''
    Response: In proposed Sec.  800.109(a)(3), OPM adopted an approach 
that mirrors that of HHS regarding inclusion of essential community 
providers for QHPs. OPM intends for MSPP issuers to contract with 
essential community providers. We do not intend to change this 
provision of the proposed regulation, but we wish to assure commenters 
that we consider Sec. Sec.  800.109(a) and 800.114 to require MSPP 
issuers to comply with State ``any willing provider'' laws.
    Comments: We received some comments related to standards for 
provider directories under proposed Sec.  800.109(b). Overall, 
commenters supported the proposed standards, which mirrored the HHS 
standards in the Exchange final rule. However, one commenter suggested 
that OPM require MSPP issuers to maintain a dedicated email address 
that providers and consumers could use to submit inaccurate provider 
directory information for correction. In addition, another commenter 
requested that OPM streamline requirements for provider directories by 
allowing downloadable electronic versions in place of hard copy and 
avoiding requiring regular updates of providers accepting new patients.
    Response: The proposed Sec.  800.109(c) mirrors the HHS approach to 
provider directories for QHPs. We will consider, during the MSPP 
contract negotiations, the comment on an MSPP issuer maintaining a 
dedicated email address for changes in provider directory information. 
With regard to the commenter who suggested that MSPP issuers not be 
required to provide a hard copy of the provider directory to potential 
enrollees upon request, this suggestion conflicts with HHS standards.
    Comments: We received numerous comments related to establishing a 
uniform MSPP network adequacy standard. Many commenters did not support 
OPM developing a uniform standard for the MSPP. These commenters 
suggested that not applying the same standards to all QHPs and MSPs 
within a State would lead to adverse selection and market dislocation, 
and would not be in the best interests of consumers, though they did 
not submit any evidence to support these contentions. Specifically, two 
commenters identified States that had existing network adequacy 
standards for managed care products and recommended that an MSPP issuer 
comply with those standards. Conversely, many other commenters 
recommended that OPM establish a national, uniform standard for network 
adequacy for the MSPP. These commenters indicated that a uniform 
standard would be considered a critical component of the MSPP and is 
especially important in ensuring that MSPs provide reasonable and 
timely access to health care.
    Response: OPM recognizes that many, though not all, States direct 
health insurance issuers to evaluate the adequacy of their provider 
networks on an ongoing basis and monitor network adequacy in their 
traditional role of regulating health insurance. Based on comments 
received on the proposed rule, and informed by previous comments 
concerning the RFI and the draft application, we have adopted an 
approach under which the MSPP will establish a uniform standard for 
network adequacy using time and distance standards that are based on 
those published by CMS for Medicare Advantage plans (for providers and 
facilities) and Medicare Part D (for retail pharmacies), which we note 
meet the QHP network standards in 45 CFR 156.230. For 2014, we will 
assess MSPP issuers' compliance with these time and distance standards 
for a broad, diverse list of provider types and facility types, which 
we believe adequately reflects the ability of an MSPP issuer to assure 
that all services will be accessible without unreasonable delay for 
enrollees. More information is available in our final MSPP application 
that was published on January 18, 2013, on the Federal Business 
Opportunities Web site at www.FBO.gov under solicitation number OPM35-
12-R-0006, Multi-State Plan Program.
    In the first year of the MSPP, we will apply only the MSPP standard 
for MSPP issuer networks, and in future years may require an MSPP 
issuer to meet State network standards, if appropriate and in the best 
interest of MSP enrollees. Accordingly, we are adopting proposed Sec.  
800.109 as final, with no changes; however, we will continue to 
consider these comments during the MSPP contract negotiations.
Service Area (Sec.  800.110)
    In Sec.  800.110, OPM proposed that MSPP issuers comply with the 
service areas defined by Exchanges, but this does not necessarily 
require that an MSP be offered in all defined service areas. We also 
proposed that for each State in which the MSPP issuer does not offer 
coverage in all service areas, the MSPP issuer's application for 
participation in the MSPP and the information it submits to support

[[Page 15570]]

renewal of a contract must include a plan for offering coverage 
throughout the State. We sought comment on whether MSPP issuers should 
be required to offer MSPs in all service areas by the fourth year of 
participation in the MSPP.
    Comments: We received some support for our proposal on service 
areas from a commenter stating that our policy allows MSPP issuers time 
to develop the capacity to offer coverage throughout a service area and 
this will enhance competition. Several commenters were concerned about 
MSPP issuers' ability to cherry-pick the areas where they offer plans. 
Some commenters recommended that MSP service and rating areas be 
aligned to prevent issuers from cherry-picking. Another commenter 
recommended that MSPs be required to comply with the service area 
requirements applicable to all other issuers in a State. One commenter 
recommended that MSPs be required to cover geographic service areas in 
a particular State where they are licensed if their license is other 
than statewide, and the commenter also recommended that MSPs should 
follow the same rules as QHPs, concerning partial rating regions. 
Finally, several commenters were concerned that our proposed policy may 
not ensure access in a meaningful way or promote competition.
    Response: Similar to our response to comments on Sec.  800.104, we 
are not prohibiting MSPP issuers from offering coverage in all service 
areas; on the contrary, we encourage them to do so if they have the 
capacity. We are clarifying in the final rule that MSPs will be 
required to comply with the service area requirements applicable to all 
QHPs in a State. We are not making any additional requirements 
regarding partial rating regions or geographic service areas in States 
with certain licensure laws that determine service area. We acknowledge 
the commenters' concern that issuers may cherry-pick certain service 
areas. However, we believe that requiring that MSPs be subject to the 
same service area requirements as QHPs will create a level playing 
field and prevent issuers from cherry-picking. In addition, we intend 
to pay special attention to whether service areas include rural areas 
and American Indian/Alaska Natives during MSPP contract negotiations. 
We will evaluate the service area of an MSP to ensure that it has been 
established without regard to racial, ethnic, language, health status-
related factors specified under section 2705(a) of the PHS Act, or 
other factors that exclude specific high-utilizing, high-cost or 
medically-underserved populations.
    Similar to our changes under Sec.  800.104, we are removing the 
requirement in the proposed rule that, for each State in which the MSPP 
issuer does not offer coverage in all service areas, the MSPP issuer 
would submit a plan on expanding coverage throughout the State. For 
reasons described in our responses to comments on Sec.  800.104 related 
to statewide coverage, we intend to encourage MSPP issuers to expand 
coverage and will assess their capacity to do so through the MSPP 
contract negotiations.
Accreditation Requirement (Sec.  800.111)
    In Sec.  800.111, OPM proposed a requirement that MSPP issuers be 
or become accredited consistent with the HHS standards for QHP issuers. 
We also proposed that the MSPP issuer must authorize the accrediting 
entity to release to OPM and to Exchanges a copy of the MSPP issuer's 
most recent accreditation survey, along with any survey-related 
information that OPM or an Exchange may require. OPM also proposed that 
an issuer that is not accredited as of the date that it enters into a 
contract with OPM must become accredited within the timeframe 
established by OPM in accordance with 45 CFR 155.1045.
    Comments: Several commenters recommended that OPM set a timeframe 
for accreditation that meets the accreditation timeframe set for QHP 
issuers either participating in Federally-facilitated Exchanges or in 
State-based Exchanges. Some commenters supported a unique timeline for 
MSPP issuer accreditation.
    Response: OPM intends to follow the timeframe for accreditation in 
45 CFR 155.1045 and similar provisions adopted by State-based 
Exchanges, though we are reserving the authority to set our own 
timeframe under narrow circumstances that take into account the unique 
nature of the MSPP. Due to the broad geographic coverage required for 
the MSPP, MSPP issuers may need additional time to collect data on 
local performance for accreditation. Similarly, a group of issuers 
coming together to contract as an MSPP issuer under a common service 
mark may need additional time to coordinate between accrediting 
entities or among component plans. Additional time may also be required 
if a component plan has previously been accredited by an entity other 
than the accrediting entities recognized by the Secretary. Therefore, 
in accordance with our authority under 45 CFR 155.1045, we are adopting 
our proposed approach in the final regulation, with no changes.
    Comment: One commenter recommended that the MSPP issuer must have a 
schedule for a review of policies and procedures with a recognized 
accrediting agency during that initial year and have documentation that 
a readiness review for accreditation has been completed.
    Response: OPM will consider this comment in creating contract 
language for MSPP issuers who are obtaining accreditation in accordance 
with Sec.  800.111(c).
    Comment: One commenter asked OPM to clarify how consumers will be 
educated about the differences between an accredited and unaccredited 
plan; another commenter requested that accreditation surveys be made 
public.
    Response: Accreditation status of MSPP issuers (as well as all QHP 
issuers) will be made available to consumers through Exchange systems. 
No change in the regulation is needed.
    Comment: One commenter suggested that to allow a group of 
independent insurance issuers to jointly offer an MSP, accreditation 
must be required at the State level rather than at a national level.
    Response: MSPP issuers will be accredited on the basis of local 
performance in accordance with the requirements for QHP issuers 
specified in section 1311 of the Affordable Care Act and 45 CFR 
156.275(a). No change is required in the proposed rule.
Reporting Requirements (Sec.  800.112)
    The proposed Sec.  800.112(a) specified that OPM may collect such 
data and information as are permitted or required by the Affordable 
Care Act to be collected from an MSPP issuer. OPM has also proposed to 
collect such other data and information as it determines necessary for 
the oversight and administration of the MSPP.
    OPM will use its FEHBP contract administration as a model for 
reporting requirements. Examples of reporting that is currently 
required for FEHBP carriers and that may be required for the MSPP 
include financial reports, premium payment information, enrollment 
reporting, and quality assurance information.\3\ OPM will determine the 
data and information that MSPP issuers report and the frequency and 
process for submitting such reports to be published in future guidance. 
Reporting of certain types of information is critical for OPM to

[[Page 15571]]

implement and administer the MSPP. To oversee MSPP contracts, OPM will 
need to collect certain information to ensure the integrity of the 
MSPP, to protect enrollees, to prevent fraud and abuse, to monitor 
quality and quality improvement, and for other purposes.
---------------------------------------------------------------------------

    \3\ OPM's Routine Reports and Submissions required for FEHB 
carriers is available at http://www.opm.gov/carrier/reports/index.asp.
---------------------------------------------------------------------------

    Comments: Commenters raised several issues with regard to MSPP 
reporting requirements. Many commenters noted that MSPP issuers should 
comply with applicable State and Exchange standards.
    Response: We note that Sec.  800.115(e) requires MSPP issuers to 
comply with all Federal and State quality improvement and reporting 
requirements.
    Comments: Many commenters also urged that we coordinate with States 
on data collection to avoid duplicative efforts. Some also asked us to 
share data with the public. A couple of commenters stated that OPM 
should not use a centralized health claims data warehouse for the MSPP, 
but adopt a decentralized approach.
    Response: We agree with commenters that our approach to data 
collection should be coordinated with States. OPM intends to enter into 
MOUs with States to streamline data collection and reduce duplicate 
reporting requirements. This rule does not address specifics of how OPM 
will collect data, and our method for data collection will be developed 
in future policy guidance, in consultation with HHS.
    Comment: One commenter stated that the MSPP should adopt the 
pharmacy benefit manager (PBM) transparency standards that OPM has 
established for the FEHBP, while another commenter opposed such an 
approach.
    Response: PBM transparency standards will be established through 
the MSPP contract, and we will consider these comments in developing 
contract language.
    Comments: Several commenters urged us to adopt specific data 
collection requirements, such as annual reports on each health plan, 
including data on the number of enrollees receiving treatment for drug 
and alcohol abuse and MSPP issuer definitions of medical necessity and 
rider policies.
    Response: Specific reporting requirements may change from year to 
year based on the needs of the program. Accordingly, such issues are 
more appropriately addressed through contract negotiations, rather than 
this regulation.
    Comments: The preamble of the proposed rule also suggested that OPM 
may collect demographic data. Several commenters supported data 
collection on demographics. A couple of commenters noted that issuers 
may not currently collect demographic data and, in some States, 
demographic data collection could be prohibited by law. One commenter 
opposed all demographic data collection.
    Response: Although we are not finalizing any specific demographic 
data collection in this rule, our authority to administer MSPP 
contracts includes collection of demographic data, if we decide to do 
so in the future. In that event, we will consult with any States that 
have laws prohibiting collection of demographic data.
    Section 800.112(b) specifies quality and quality improvement 
standards. With respect to quality reporting, under the FEHBP, OPM 
requires all health plans to report their performance through 
Healthcare Effectiveness Data and Information Set (HEDIS) metrics and 
Consumer Assessment of Healthcare Providers and Systems (CAHPS) 
surveys, independent of the source of plan accreditation. This allows 
for comparison among plans in a consistent manner. OPM expects to begin 
with a similar approach to performance measurement in MSPs to 
facilitate oversight. We expect our approach to evolve as HHS sets 
forth further guidance on quality reporting standards for QHPs.
    Comments: Several commenters supported our proposed approach 
regarding quality and quality improvement standards. One commenter was 
concerned that requiring HEDIS reporting, which is proprietary to one 
accrediting entity, would be an undue burden to other accrediting 
entities. One commenter recommended that we immediately use the eValue8 
quality reporting tool. Another commenter noted that we include 
measures applicable to children, including specific modules for 
children with special health care needs across the entire breadth of 
conditions and domains (preventive care, mental health, and chronic 
care).
    Response: We are adopting in this final regulation our proposed 
approach to quality and quality improvement standards, because it 
reflects current FEHBP policies and Federal standards for QHPs. We 
anticipate that quality reporting standards will evolve over time, and 
we will consider these comments as the standards develop.
Benefit Plan Material or Information (Sec.  800.113)
    In proposed Sec.  800.20, OPM defined the term ``benefit plan 
material or information'' to include explanations or descriptions, 
whether printed or electronic, that describe a health insurance 
issuer's products. The term does not include a policy or contract for 
health insurance coverage. As it does in the FEHBP, OPM will review and 
approve the policy or contract for health insurance coverage. We view 
oversight of such contractual documents as uniquely within OPM's 
responsibilities under section 1334(a)(4) to implement the MSPP in a 
manner similar to the manner in which we implement the contracting 
provisions with respect to carriers under the FEHBP. OPM cannot manage 
MSPP contracts similarly to FEHBP contracts without the authority to 
review and revise these documents. See the discussion of Sec.  800.20 
for our responses to comments on the definition of ``benefit plan 
material or information.''
    Section 800.113(a) states that MSPP issuers must comply with 
Federal and State laws related to benefit plan material or information. 
An MSPP issuer must also comply with OPM guidance specifying OPM 
standards, process, and timeline for approval of benefit plan material 
or information.
    Comments: We received many comments about the proposed policy on 
compliance with Federal and State law. Several commenters supported the 
requirement that MSPP issuers comply with both Federal and State laws 
relating to benefit plan material or information. Several commenters 
wanted OPM to clarify that State approval of a policy form is a 
precondition of OPM approval. One commenter wanted OPM to defer to 
States for approval of policy forms, except where a State's action or 
inaction prevents an MSP from being offered on an exchange.
    Response: While OPM intends to review and approve policy forms for 
health insurance coverage, OPM expects MSPP issuers to comply with 
related State law requirements for form review. Accordingly, an MSPP 
issuer's requirement to comply with State law includes the requirement 
to comply with form review laws. However, State approval of a policy 
form is not a precondition of OPM approval. OPM expects that few 
disagreements will arise between OPM and a State regarding form review 
and, if they do, we will work with the State to successfully resolve 
the discrepancy in a manner that is acceptable to both OPM and the 
particular State.
    Proposed Sec.  800.113(b) states that all MSP enrollee notices must 
meet minimum access standards for individuals with limited English 
proficiency (LEP) and for individuals with disabilities as described in 
45 CFR 155.205(c). As stated in the final

[[Page 15572]]

Exchange rule, HHS intends to issue further guidance on minimum 
standards to address language access and coordinate HHS accessibility 
standards with insurance affordability programs, and across HHS 
programs, as appropriate. OPM expects MSPP issuers to comply with these 
minimum access standards once HHS publishes this guidance. OPM may also 
establish additional standards for MSPP applications and notices.
    Comments: Several commenters wanted OPM to clarify that obligations 
to provide materials in different languages be calculated by State or 
service area, not nationwide. Two commenters wanted us to provide 
clearer guidance on our language access policies. They suggested that, 
to start with, OPM clarify that LEP guidance set forth by HHS' Office 
of Civil Rights, which is referenced in footnote 48 of the HHS proposed 
rule with respect to appeals, will also apply to other benefit material 
or information.
    Response: Such guidance will be addressed through the contract 
negotiation process.
    Section 800.113(c) states that an MSPP issuer is responsible for 
the accuracy of its benefit plan material or information. Section 
800.113(d) states that benefit plan material or information must also 
be in plain language, be truthful, not be misleading, and have no 
material omissions.
    QHPs must comply with the provisions of section 2715 of the PHS Act 
and its implementing regulations at 45 CFR 147.200 on Summary of 
Benefit and Coverage and Uniform Glossary requirements. Under Sec.  
800.113(e), OPM also will require MSPs to comply with the statute and 
regulations. Additionally, OPM expects that MSPP issuers will meet any 
requirements that allow standardized benefit information to be 
displayed on HHS or Exchange web portals.
    Section 800.113(f) states that OPM will review and approve certain 
benefit plan material or information as defined in Sec.  800.20 of the 
proposed regulation. OPM may not necessarily review all benefit plan 
material or information. It may request from MSPP issuers those 
materials that it wishes to review and approve. OPM's review will focus 
on the MSPP issuer's compliance with the standards promulgated by OPM 
with respect to benefit plan material or information.
    Comments: One commenter did not want OPM to review and approve 
benefit plan material or information. One commenter was concerned about 
the practical difficulties for both issuers and regulators with respect 
to the dual requirement that OPM review and approve policy forms and 
that issuers also comply with State requirements. One commenter wanted 
more clarity on the interplay between Federal and State review. One 
commenter stated that OPM review of communication materials, and its 
discussion with States, should be concluded no later than 90 days prior 
to the beginning of the annual enrollment period.
    Response: OPM cannot entirely cede responsibility for the review of 
benefit plan material or information since such review is important to 
oversight. Nonetheless, in order to avoid unnecessary duplication and 
burden, OPM will work with States concerning the review of benefit plan 
material or information and may work with States to define respective 
roles through MOUs. OPM will also aim for prompt review of benefit plan 
material or information.
    Section 800.113(g) states that OPM will allow an MSPP issuer to 
state that OPM has certified a plan as an MSP and will oversee its 
administration. OPM is aware that many States have adopted laws or 
regulations prohibiting issuers from using advertisements that ``may 
lead the public to believe that the advertised coverages are somehow 
provided by or endorsed by [a] governmental agenc[y].'' \4\ However, 
because OPM will have certified an MSPP issuer and an MSP as meeting 
certain standards, potential issuers may wish to include this fact in 
materials they distribute to the public subject to review by OPM. OPM 
does not view this as a violation of State law anti-endorsement 
provisions because it is not misleading, but rather a recitation of the 
fact that the issuer is providing coverage pursuant to a contract with 
OPM.
---------------------------------------------------------------------------

    \4\ These State law prohibitions derive from the NAIC's 
Advertisements of Accident and Sickness Insurance Model Regulation 
Sec.  13.C. (Apr. 1999).
---------------------------------------------------------------------------

    Comment: One commenter did not want MSPP issuers to include a 
statement on certification by OPM.
    Response: For the reasons set forth above, we are adopting the 
proposed policy regarding statement of certification.
    Comments: Several commenters stated that it is critical that the 
information about the special protections for American Indians/Alaska 
Natives be clearly stated in all plan materials so that they are 
informed about the cost-sharing plan variations that may apply to them 
so they can enroll in the correct plan. The commenters also stated that 
American Indians/Alaska Natives should know whether a plan network 
includes their I/T/U provider.
    Response: We acknowledge that certain American Indians/Alaska 
Natives should be made aware of special protections and whether a plan 
includes I/T/U providers. We encourage MSPP issuers to make this 
information available to MSPP plan participants. We will continue to 
work with CMS and the Indian Health Service to make sure American 
Indians/Alaska Natives are informed about the cost-sharing plan 
variations.
    Because no changes are required based on the comments received, OPM 
is adopting proposed Sec.  800.113 as final, with no changes.
Compliance With Applicable State Law (Sec.  800.114)
    As proposed, Sec.  800.114 would require MSPP issuers generally to 
comply with State law. Paragraph (a) of the proposed regulation 
restated the requirement set forth in section 1334(b)(2) of the 
Affordable Care Act, including the three categories of State laws with 
which MSPP issuers need not comply: (1) State laws that are 
inconsistent with section 1334; (2) State laws that prevent the 
application of a requirement of part A of title XXVII of the PHS Act; 
and (3) State laws that prevent the application of a requirement of 
title I of the Affordable Care Act. We have made a technical edit in 
paragraph (a) to make it more consistent with Sec.  800.116.
    In paragraph (b) of proposed Sec.  800.114, we provided greater 
detail on the methods OPM would use to determine whether a State law 
fits into one of the above categories. Specifically, we proposed that 
OPM would use a list of four factors: (1) Whether the law in question 
imposes a requirement that differs from those applicable to QHPs and 
QHP issuers on one or more Exchanges in the State; (2) whether the law 
creates responsibilities, administrative burdens, or costs that would 
significantly deter or impede the MSPP issuer from offering a viable 
product on one or more Exchanges; (3) whether the law creates 
responsibilities, administrative burdens, or costs that significantly 
deter or impede OPM's effective implementation of the MSPP; or (4) 
whether the law prevents an MSPP issuer from offering an MSP on one or 
more Exchanges in the State.
    Comments: Many commenters found the factors listed in paragraph (b) 
to be too broad and vague. A few commenters noted that paragraph (b)(1) 
compares MSP requirements to QHP requirements, whereas (b)(2) appears 
to lack an analog against which to measure responsibilities, 
administrative burdens,

[[Page 15573]]

or costs that apply to MSPs and MSPP issuers. A few commenters 
expressed specific concern about the use of the words ``significantly 
deter or impede'' in paragraphs (b)(2) and (b)(3). A few commenters 
requested that the word ``unreasonable'' be added to paragraph (b)(2) 
to modify ``responsibilities, administrative burdens, or costs.'' A few 
commenters generally opposed OPM's authority to find that a State law 
is inconsistent with Federal law, and one commenter questioned OPM's 
legal authority to preempt State law through a determination of 
inconsistency.
    Response: At proposed Sec.  800.114(a), we listed the 
justifications for nonapplicability of a State law to the MSPP, as set 
forth at section 1334(b)(2) of the Affordable Care Act, which provides 
that an MSPP issuer must be ``subject to all requirements of State law 
not inconsistent with this section, including the standards and 
requirements that a State imposes that do not prevent the application 
of a requirement of part A of title XXVII of the [PHS] Act, or a 
requirement of this title [I of the Affordable Care Act.]'' In proposed 
paragraph (b), we listed factors that may inform OPM's analysis under 
paragraph (a). Although these listed elements would be considered 
relevant to the analysis, OPM would only be authorized to excuse an 
MSPP issuer from compliance with a State law that is inconsistent with 
section 1334 of the Affordable Care Act, prevents the application of a 
provision of part A of title XXVII of the PHS Act, or prevents the 
application of a requirement of title I of the Affordable Care Act.
    In light of the concerns expressed concerning the regulatory 
factors identified in the proposed regulation, we have amended the 
regulatory text to remove the list of factors. By removing these 
factors from the regulation, we do not disavow them as relevant 
considerations in evaluating whether the statutory standard for 
preemption has been satisfied. Rather, we do not wish to give the 
impression that they are any more or less important than any other 
factors that may be relevant in a specific circumstance to a 
determination of whether a State law should be preempted.
    Comment: One commenter recommended that OPM consider the 
seamlessness of a consumer's experience purchasing health insurance on 
an Exchange and the avoidance of consumer confusion in evaluating State 
laws under this section.
    Response: We will consider all relevant information, including 
consumers' experiences in shopping on Exchanges, when determining 
whether a State law must be preempted under the statutory standards 
listed in paragraph (a). Each determination under this section will 
depend on specific facts and circumstances.
    Comments: A few commenters recommended that OPM consult with States 
and Exchanges prior to making a determination of inconsistency under 
this section.
    Response: We agree that OPM should work collaboratively with 
States, particularly in making determinations regarding State laws. OPM 
intends to continue to establish and cultivate working relationships 
with officials in State regulatory agencies and Exchanges. Such 
relationships may exist informally, or may eventually be reflected in 
MOUs, as OPM intends to pursue MOUs with each State in which the MSPs 
are being offered. In either case, OPM would consult with States during 
the process of making a determination of inconsistency regarding a 
State law. We have changed paragraph (b) to state expressly our 
intention to engage in such consultation.
    Comments: Some commenters expect that OPM's ability to render a 
determination of inconsistency under this section will create 
competitive advantages for MSPs over QHPs. A few commenters stated that 
``double regulation,'' by both OPM and each State, will competitively 
disadvantage MSPs.
    Response: We are sensitive to concerns that the MSPP will create 
disruptions in different markets, and this regulation has been designed 
to comply with the statutory directives of the Affordable Care Act 
while minimizing any such disruptions. The proposed rule reflects a 
balanced approach under which an MSPP issuer will comply with all State 
laws except any with respect to which OPM has determined that such 
State law is contrary to Federal law. This approach will keep each MSP 
in relative balance with QHPs offered on the same Exchange. No evidence 
has been offered to support the commenters' assertion that OPM's 
reservation and potential exercise of this authority creates a 
competitive advantage for the MSPs or MSPP issuers.
    Moreover, OPM's proposed framework for MSPP compliance incorporates 
State law and sets standards and requirements similar to those used 
successfully under the FEHBP. We designed this regulatory framework to 
ensure that the program is capable of sufficient flexibility to 
facilitate its implementation. We intend to employ that flexibility to 
take any appropriate action to ensure that MSPs are neither 
unreasonably competitively advantaged nor disadvantaged.
    Comments: Some commenters recommended that we require compliance 
not only with State law but also with QHP standards set by States and 
Exchange authorities. A few commenters recommended that OPM require 
MSPP issuers to enter into contracts with Exchanges that will actively 
or selectively contract with QHP issuers. One commenter requested 
clarification that MSPP issuers would be required to comply with 
technical requirements for QHPs, such as data submission formatting.
    Response: As noted in the preamble to the proposed rule, we intend 
that MSPs and MSPP issuers be subject to all of the same standards and 
requirements as QHPs and QHP issuers, except where deviations are 
authorized by law. We look forward to working collaboratively with 
States to ensure that we are aware of all relevant standards, including 
those of a technical nature, to ensure that MSPs and MSPP issuers 
comply with such standards.
    Requiring MSPP issuers to enter into a contract with Exchanges 
would circumvent section 1334(d) of the Affordable Care Act, which 
vests certification authority for MSPs in OPM rather than Exchanges by 
providing that MSPs offered under a contract with OPM are deemed to be 
certified by an Exchange. We consider active or selective contracting 
models employed by Exchanges to be operational processes rather than 
QHP standards, and we will not direct MSPP issuers to participate in 
such processes, consistent with statute.
    Comment: One commenter requested clarification that OPM's 
determination of inconsistency under this section would only apply to 
MSPs and MSPP issuers in Exchanges in one State, as opposed to 
throughout all States.
    Response: A determination of inconsistency under this section would 
be limited to the State in which the State law in question exists. OPM 
recognizes that some State laws are based on model acts, and that 
several States may employ the same or similar language in State laws. 
However, we also realize that the facts and circumstances that give 
rise to a determination of inconsistency may vary from one State to 
another. OPM will evaluate State laws carefully, and will refer to 
previous determinations as precedent when determining the applicability 
of a State law, but will not automatically apply a determination of 
inconsistency to more than one State law without consulting with the 
State

[[Page 15574]]

regulatory agencies and Exchange(s), and thoroughly evaluating the 
unique facts and circumstances in each State.
    Comment: One commenter requested clarification as to whether OPM 
would conduct independent research or rely on a complaint-driven 
process to select which State laws may be subject to a determination of 
inconsistency under this section.
    Response: We intend to use all available information to assess the 
compatibility of State laws with the MSPP, including complaints from 
enrollees, communication with issuers, collaboration with States, and 
additional research.
    Comment: One commenter recommended that OPM adopt a standard for 
noncompliance with State law where only a ``compelling national goal'' 
would justify a finding that a State law does not apply to MSPP 
issuers.
    Response: The standards we have adopted are those set forth in the 
statute.
    Comment: One commenter supported the proposed approach, but 
requested acknowledgement that OPM would assume responsibility for 
enforcement of State law with respect to MSPP issuers.
    Response: Although we intend to communicate closely with States to 
ensure compliance with State and Federal laws, OPM is not authorized to 
assume responsibility for enforcement of State law. The same vehicles 
available to States to enforce their laws against QHPs would also be 
available to enforce them against MSPs. As noted above, we look forward 
to working collaboratively with States to ensure that consumers receive 
high-quality coverage.
    Comment: One commenter supported our proposal, but requested 
clarification that OPM would decide whether a State law applies, as 
opposed to an issuer or another party.
    Response: As reflected in the proposed regulatory text, we agree 
that OPM should decide whether a State law meets one of the three 
standards in paragraph (a). This responsibility flows from the 
statutory authority granted to OPM by section 1334 of the Affordable 
Care Act to implement and administer the MSPP.
    Comments: A few commenters recommended that Federal Indian law be 
recognized separately from State law.
    Response: The requirement for MSPP issuer compliance with State law 
set forth in Sec.  800.114 is included in the final regulation to 
implement section 1334(b)(2) of the Affordable Care Act, which 
specifies that an MSPP issuer ``is subject to all requirements of State 
law not inconsistent with this section [1334], including the standards 
and requirements that a State imposes that do not prevent the 
application of a requirement of'' part A of title 27 of the PHS Act or 
title I of the Affordable Care Act. We acknowledge the unique concerns 
of I/T/Us, including concerns that involve the interaction of State law 
and Federal Indian law, and we intend to address them, to the extent 
practicable, through contractual terms.
Level Playing Field (Sec.  800.115)
    In Sec.  800.115, we proposed that an MSPP issuer would comply with 
Federal and State laws involving guaranteed renewal, rating, 
preexisting conditions, non-discrimination, quality improvement and 
reporting, fraud and abuse, licensure, solvency and financial 
requirements, market conduct, prompt payment, appeals and grievances, 
privacy and confidentiality, and benefit plan material or information. 
This section addresses compliance directly involving these areas of 
law, which are expressly listed at section 1324 of the Affordable Care 
Act. Section 1324 states that, if an MSP is not subject to a Federal or 
State law that falls into one of the 13 categories listed, no private 
health insurance coverage would be subject to such law. We received 
comments from States, Exchanges, consumer groups, providers and 
provider groups, pharmaceutical companies, and professional 
associations.
    Comments: A few commenters, while generally supporting OPM's 
proposed approach, expressed concern that our approaches to rate 
review, benefit plan material and information, and external review may 
trigger section 1324 (i.e., that they would cause private insurance 
plans to be exempt from laws listed in that section).
    Response: As explained in the preamble to the proposed rule and in 
the responses to comments regarding Sec. Sec.  800.201, 800.501-504, 
and 800.113, our approach to rate review, benefit plan material or 
information, and external review would not excuse private health 
insurance coverage from compliance under section 1324. First, laws 
involving rate review do not fall within a category listed in section 
1324 of the Affordable Care Act.
    Second, our proposed rule explicitly requires MSPP issuers to 
comply with Federal and State laws related to benefit plan material or 
information. As set forth in Sec.  800.20, and as discussed in 
responses to comments regarding that section and Sec.  800.113, the 
definition of ``benefit plan material and information'' does not 
include a policy or contract for health insurance coverage.
    Finally, as we indicated in the proposed rule, we believe that our 
approach to external review is required by section 1334 of the 
Affordable Care Act and does not trigger the level playing field 
provisions of section 1324 because our approach will comply with 
external review requirements.
    Specifically, we believe our approach to external review is 
required by section 1334(a)(4), which directs OPM to implement the MSPP 
in a manner similar to the manner in which we implement the contracting 
provisions with respect to carriers under the FEHBP. External review is 
part of the contracting process. Through the external review process, 
matters of contract coverage are resolved.
    As noted in the proposed rule, section 2719 of the PHS Act and its 
implementing regulations apply to all non-grandfathered group health 
plans and health insurance issuers, including MSPP issuers, with 
respect to internal claims and appeals and external review. We 
understand that the Departments of HHS, Labor, and the Treasury (the 
tri-Departments) intend to amend those regulations at 45 CFR 147.136 to 
clarify that the MSPP external review process is governed by section 
2719(b)(2)(B). Under section 2719(b)(2), the external review 
requirements that must be met are established by the tri-Departments, 
which have made the judgment that the external review process adopted 
in this rule satisfies the requirements under that section. Thus, the 
level playing field provisions of section 1324 of the Affordable Care 
Act would not be triggered because MSPs and MSPP issuers would comply 
with the external review requirements in section 2719(b) of the PHS 
Act, just as other health insurance issuers in the group and individual 
markets are required to do. As noted in the DATES section of this 
notice of final rulemaking, rulemaking by the tri-Departments 
interpreting section 2719 in this manner has not yet been completed. We 
are making the provisions of this regulation on external review 
effective on the date that such tri-Department regulations become 
effective.
    In addition, our approach to external review does not afford the 
MSPs any competitive advantage. Although OPM--instead of the States--
will administer the external review process for MSPs, that process 
provides for application of the standards and requirements with which 
other issuers must comply under section 2719(b)(2) of the PHS Act. 
Thus, MSPs will in fact be

[[Page 15575]]

subject to, and comply with, the same law on external review as other 
issuers.
    No commenter identified any State external review law that imposes 
higher standards than does the Federal external review law proposed for 
the MSPP. Based on our experience with the disputed claims process 
under the FEHBP, we believe that our external review process is 
comparable to any State external review process. We look forward to 
working collaboratively with States to ensure that our external review 
process is no less protective than the most protective State standards.
    Comment: One commenter recommended the expansion of the scope of 
``licensure'' under this section.
    Response: We recognize that licensure laws in some States may 
impose varying requirements on health insurance issuers. Compliance 
with a broader range of State laws that may be conditions of licensure 
would be required under Sec.  800.114 of this regulation, subject to 
the exceptions listed there. However, for purposes of analysis under 
this section, an MSPP issuer complies with laws ``relating to'' 
licensure by being licensed in each State in which the issuer offers an 
MSP.
    Comment: One commenter requested clarification as to whether the 
inverse of section 1324 would also be required, i.e., whether the other 
private health insurance coverage in a State would be subject to a 
State law to which an MSP is subject.
    Response: States typically regulate health insurance markets, and 
the MSPs will operate within those markets. As set forth in Sec.  
800.114, MSPs and MSPP issuers generally are subject to the same laws 
to which the rest of the health insurance market is subject.
    Comments: A few commenters expressed concern that OPM would prompt 
a ``race to the bottom'' by circumventing, through the MSPP, consumer 
protections provided by State laws.
    Response: The MSPP will promote uniformly high standards for MSPs 
to be made available to consumers. As noted in the proposed rule, we 
will deviate from State standards only when the standards are 
inconsistent with the implementation of OPM's statutory directive to 
implement this program. Like plans offered through the FEHBP, MSPs will 
be high-quality products that are subject to the experienced oversight 
of OPM.
    We are adopting proposed Sec.  800.115 as final, with no changes.
Process for Dispute Resolution (Sec.  800.116)
    In Sec.  800.116, we proposed a process by which a State may 
request that OPM reconsider a determination under Sec.  800.114 that a 
State law does not apply to MSPs or MSPP issuers. The proposed process 
calls for a State to demonstrate that the State law at issue is not 
inconsistent with section 1334 of the Affordable Care Act, does not 
prevent the application of a requirement of part A of title XXVII of 
the PHS Act, and does not prevent the application of a requirement of 
title I of the Affordable Care Act. This section goes on to set forth 
the procedural framework for the process, including the form of the 
request, permissible supporting information and documentation, the 
timeframe for resolution, and the nature of OPM's written decision as 
final agency action. Most of the comments we received regarding this 
section were from States and Exchanges, and a few additional comments 
were submitted by consumer groups, issuers, and professional 
organizations.
    Comments: A few commenters recommended that this process be 
conducted by a third party outside of OPM. One commenter suggested that 
disputes over the applicability of State law be conducted through State 
administrative and judicial processes.
    Response: OPM cannot cede authority to make these determinations to 
an outside entity, because Congress directed OPM to implement and 
administer the MSPP.
    The process outlined in this section offers a formal route to seek 
resolution of a complaint without having to initiate costly, 
contentious litigation over the applicability of State laws under the 
MSPP. Thus, review under this section would be conducted by a different 
official within OPM than the official who made an initial determination 
under Sec.  800.114. Similar review is conducted under certain 
circumstances in the FEHBP when a dispute arises between OPM and a 
carrier. OPM's experience with such review has shown that it is an 
effective means of resolving disputes.
    Comments: One commenter requested a shorter timeframe than the 60 
days proposed in paragraph (c)(3). Another commenter recommended that 
OPM ensure the resolution of all potential disputes involving a State's 
law prior to an MSP being offered on an Exchange within that State.
    Response: Sixty days is an appropriate period within which written 
decisions must be issued, but we intend to resolve each dispute under 
this section as quickly as possible after it arises.
    We have attempted, through the provisions of this regulation, to 
anticipate potential Exchange approaches to substantive standards and 
requirements. However, we are aware that new State laws may be enacted 
or QHP standards established subsequent to the promulgation of this 
regulation. This process is necessitated in part by the evolving nature 
of health insurance regulation and QHP standards. In addition, we 
anticipate that any inconsistencies between State laws and section 1334 
of the Affordable Care Act may not become apparent until after MSPP 
operations have begun. We intend to work collaboratively with States to 
mitigate or avoid any potential disruptions that may result from the 
ongoing nature of this process.
    Comments: A few commenters recommended that a de novo review be 
conducted under this section, that State law applicability be presumed, 
or that OPM bear the ``burden'' of demonstrating that a determination 
of inconsistency is supported.
    Response: This process is designed to create an avenue for a State 
to show that OPM's considered determination under Sec.  800.114 was 
made in error, which would present an opportunity to avoid potential 
litigation that could arise from such a determination. As such, the 
State is responsible for demonstrating consistency between Federal and 
State law.
    Comments: A few commenters recommended that determinations 
regarding laws under both Sec. Sec.  800.114 and 800.115 be subject to 
the process for dispute resolution under this section. Other commenters 
requested clarification as to whether the dispute resolution applied to 
all State laws or only to State laws that do not fit into the list of 
categories under section 1324(b) of the Affordable Care Act.
    Response: We agree that a State should have an opportunity to 
request reconsideration of a determination of inconsistency regarding 
any State law and we are revising paragraph (a) accordingly.
    Comment: One commenter recommended that the record for judicial 
review under paragraph (c)(4) include all relevant information, not 
only the record that was before OPM when a decision was rendered.
    Response: The Administrative Procedure Act permits judicial review 
of final agency action, and limits such review to the record that was 
before the agency when it took the action being reviewed. This 
regulation neither restricts nor expands that limitation.

[[Page 15576]]

    Comments: A few commenters recommended that parties other than 
States be permitted to seek dispute resolution under this section. One 
commenter recommended that MSPP issuers bear the burden of 
demonstrating that State laws should not apply to them.
    Response: This process is designed to assist States in working with 
OPM to prevent and mitigate market disruptions. State health insurance 
laws are regulatory by nature; the most expert entities to address them 
are therefore the regulatory agency and/or Exchange charged with their 
implementation. Regulatory agencies and Exchanges are well-equipped to 
represent the interests of the issuers with which they work and the 
consumers they serve.
    We are amending paragraph (a) of Sec.  800.116 as indicated above, 
to reflect that a determination of inconsistency involving any State 
law may be the subject of the process outlined in this section. We are 
also making a technical correction in paragraph (b) and inserting a 
technical amendment in paragraph (c)(3) for greater clarity.

Subpart C--Premiums, Rating Factors, Medical Loss Ratios, and Risk 
Adjustment

General Requirements (Sec.  800.201)
    Under Sec.  800.201, OPM proposed a number of standards for setting 
rates in the MSPP. First, we proposed that OPM would negotiate 
premiums, as provided in section 1334(a)(4) of the Affordable Care Act, 
in a similar manner to the way we negotiate with FEHBP carriers each 
year.
    Second, the proposed rule included a provision that required MSPP 
rates to remain in effect for the 12-month plan year.
    Third, OPM proposed to issue rating guidance for the MSPP, similar 
to the way OPM communicates with FEHBP carriers.
    Fourth, we proposed that MSPP issuers comply with standards in HHS 
guidance for calculating actuarial value (AV), specifically those 
standards proposed in 45 CFR 156.135.
    Fifth, OPM proposed a process for rate setting and review that 
requires an MSPP issuer to follow State rating standards with respect 
to rating factors generally applicable in a State. With respect to rate 
review, OPM's proposal reflected that some States have a prior approval 
process for rates and the authority to reject rates. Therefore, we 
proposed to work closely with each State in approving a rate for the 
MSPs in that State and to consult with that State about patterns in its 
markets and about other rates that an MSPP issuer might be proposing in 
that State for non-MSPs. In doing so, MSPP issuers would be required to 
file rates with a State, but the final decision regarding rates for 
MSPs would rest with OPM, as required by the statute. As described in 
proposed Sec.  800.201(e) and (f), with respect to rate review, OPM's 
rate process and analysis will be transparent to States in which the 
MSP is operating. MSPP issuers will be subject to a State's rate review 
process, including a State's Effective Rate Review Program established 
by HHS pursuant to section 2794 of the PHS Act and 45 CFR part 154. OPM 
proposed that, for States with Effective Rate Review Programs under 
section 2794 of the PHS Act, the MSPP issuer would comply with the 
State standards. In addition, OPM proposed that in States where HHS is 
reviewing rates, HHS would accept the judgment of OPM for MSP rates. 
Furthermore, MSPP issuers must comply with the reporting and disclosure 
requirements for all rate justifications to HHS, States, and Exchanges, 
such as the requirements set forth in 42 CFR 156.210(c). In the event 
that a State withholds approval of an MSP rate for reasons that OPM 
determines, in its discretion, to be arbitrary, capricious, or an abuse 
of discretion, the Act authorizes the Director to make the final 
decision to approve rates for participation in the MSPP, 
notwithstanding the absence of State approval.
    Finally, OPM proposed that MSPP issuers must comply with section 
1312(c)(1) and (2) of the Affordable Care Act and implementing 
regulations, which provide that a health insurance issuer consider all 
enrollees in all non-grandfathered health plans in the individual 
market to be members of a single risk pool and all enrollees in non-
grandfathered health plans in the small group market to be members of a 
single risk pool within a State. With proposed Sec.  800.201(g), OPM 
clarified that an MSPP issuer must consider MSP enrollees to be members 
of the same risk pool as all other enrollees of the issuer in non-
grandfathered health plans in the individual and small group markets, 
respectively. OPM received several comments on our general standards 
related to MSPP rate setting and review policies applicable to an MSPP 
issuer and related to compliance with sections 2701 and 2794 of the PHS 
Act.
    Comments: Many commenters supported the general rate review 
approach set out for the MSPP, such as compliance with State rate 
review processes, single risk pool, calculation of AV, and State-based 
rating. Most of these commenters were concerned about OPM retaining 
discretion to negotiate premiums and having final approval of rates. A 
few commenters noted that there are administrative and judicial 
remedies available under State law for issuers who believe that rate 
approval has been withheld for reasons that are ``arbitrary, 
capricious, or an abuse of discretion'' and generally a State would be 
violating its own laws if it were to withhold for reasons that are 
``arbitrary, capricious, or an abuse of discretion.'' The commenters 
also noted that this standard is broad and asked OPM to narrow its 
scope. One commenter suggested that if OPM were to bypass these 
remedies, MSPs would be given an unfair advantage over QHPs and would 
be violating State law. A few commenters recommended that OPM not 
reserve discretion in States with Effective Rate Review Programs. One 
commenter believed OPM's authority to negotiate rates in section 1334 
of the Affordable Care Act is constrained by sections 1324 and 1252.
    Response: Based on support from some commenters on our proposed 
approach, we are adopting this section as final, with modifications. 
Section 1334(a)(4) of the Affordable Care Act explicitly authorizes the 
Director to make the final decision to approve rates for participation 
in the MSPP, notwithstanding the existence or absence of State 
approval. We are fully aware of the complexities of rate review in 2014 
and subsequent years, and we intend to collaborate closely with HHS and 
States on MSP rates. We agree with comments that MSPP issuers should 
use the remedies available under State laws related to rate review 
decisions. OPM will require MSPP issuers to allow the rate review 
process in States, including administrative and judicial remedies, to 
proceed unless the timeline for administration of the MSPP is 
threatened. In order to give MSPP issuers adequate time to prepare for 
open enrollment periods, we maintain our discretion to issue final 
decisions on MSP rates. For this reason, we are revising Sec.  
800.201(f) to clarify that OPM would exercise its discretion only in 
the event that the State's action would impede the Federal objective by 
preventing OPM from operating the MSPP. In addition, we are removing 
from the final regulation the ``arbitrary, capricious, or an abuse of 
discretion'' language, based on the comments we received. We expect 
that the Director will rarely, if ever, have to exercise this authority 
to disapprove or approve MSP rates over the approval or non-approval of 
a State.
    We disagree with the interpretation that sections 1324 and 1252 
constrain

[[Page 15577]]

OPM's authority to negotiate premiums. Were we to interpret these 
sections in the manner suggested by the commenter, section 1334(a)(4) 
of the Affordable Care Act, which requires the Director to 
``negotiate[] * * * with each multi-state plan * * * the premiums to be 
charged,'' would be rendered inoperative. Section 1324(b)(2) refers to 
``rating.'' OPM has defined ``rating'' for purposes of section 
1324(b)(2) to require compliance with the rating factors permitted by 
the PHS Act as detailed in Sec.  800.202. Rating factors refer to the 
factors issuers must use to develop their premiums. With regard to the 
MSPP, we do not consider ``rating'' to be the same as ``rate review.'' 
Rate review is a broader concept and is a necessary component of 
premium negotiation. As mentioned above, we intend to conduct our own 
process to review rates, and each State will have the opportunity to 
review the MSP rates under its own procedures. We intend to work 
cooperatively with the States, and have coordinated our policy with 
HHS.
    In addition, the MSPP will comply with section 1252 of the 
Affordable Care Act. That section, entitled ``Rating Reforms Must Apply 
Uniformly * * *'' requires rating reforms adopted by a State pursuant 
to title I of the Affordable Care Act to apply uniformly within a 
market. Rating reforms, again, do not equate to ``rate review'' 
processes. Rather, consistent with OPM's interpretation of ``rating'' 
for purposes of section 1324(b)(2), rating reforms refer to reforms 
that constrain the factors upon which issuers rely to develop their 
premiums. Section 1252 does not constrain the Director's power to 
negotiate rates with MSP issuers under section 1334(a)(4).
    Comment: In addition, the same commenter indicated its view that 
section 1252 constrains network adequacy rules.
    Response: OPM does not agree with this comment, as section 1252 is 
limited in its scope to rating reforms.
    Comment: This commenter further indicated that section 1301(a)(2) 
applies with ``equal force'' to MSPP issuers.
    Response: While OPM acknowledges that QHP standards generally apply 
to the MSPP, section 1334(c) specifically reserves to the Director the 
discretion to determine whether QHP rules are satisfied in the context 
of the MSPP. Therefore, OPM does not agree that section 1301(a)(2) 
causes QHP rules to apply to MSPP ``with equal force,'' as they do not 
apply in the same manner with respect to enforcement.
    Comment: One commenter asked OPM to clarify that the single risk 
pool standard proposed in the rule applies to MSPP issuers' pools 
within a State and not across States.
    Response: Our intent was for an MSPP issuer to consider all 
enrollees in an MSP to be in the same risk pool as all enrollees in all 
other non-grandfathered health plans in the individual market or small 
group market, respectively, in compliance with section 1312(c) of the 
Affordable Care Act as well as HHS regulations implementing that 
section. Consistent with HHS guidance, we affirm that MSPP issuers will 
pool risk within a State and not across States, but we do not believe a 
change in the regulatory text is needed.
    Comments: Some commenters suggested that OPM establish rules and 
conditions that will facilitate tribal sponsorship, to allow tribes to 
perform premium aggregation for individuals to enroll in MSPs.
    Response: We are exploring whether potential issuers have the 
capacity to perform premium aggregation and/or accept aggregated 
premiums. In the MSPP issuer application, OPM will ask applicants to 
indicate whether they have this capacity and will take the applicants' 
responses into consideration when negotiating contracts.
Rating Factors (Sec.  800.202)
    The proposed Sec.  800.202 required MSPP issuers to comply with 
section 2701 of the PHS Act, as amended by the Affordable Care Act. We 
proposed in Sec.  800.202(a) that MSPP issuers must comply with 
requirements setting standards for fair health insurance premiums 
appearing in HHS regulations. In addition, we proposed that MSPP 
issuers must follow standards set for rating areas in a State 
established under any HHS or State regulations implementing section 
2701 of the PHS Act. OPM received numerous comments related to rating 
standards and factors from States, consumer organizations, and issuers.
    Comments: Many commenters supported the general approach we 
proposed that MSPP issuers must comply with Federal standards and more 
narrow State standards for rating factors. A few commenters asked OPM 
to clarify the requirement that MSPP issuers use the age curves 
established under Federal regulations implementing section 2701(a), 
including that an MSPP issuer must also use any age curve established 
by a State pursuant to 45 CFR 147.103(e).
    Response: We clarify that our intent is for an MSPP issuer to use 
any age curve established by a State pursuant to 45 CFR 147.103(e). In 
the event that a State does not establish an age curve, the MSPP issuer 
would use the standard age curve established by HHS. We are amending 
proposed Sec.  800.202(c)(2) to reference State-established age curves.
    Comments: A few commenters requested that OPM have MSPP issuers 
comply with PHS Act section 2705 and its implementing regulations on 
incentives for nondiscriminatory wellness programs in group health 
plans pursuant to 45 CFR parts 146 and 147, 29 CFR part 2590, and 26 
CFR part 54.
    Response: We agree with the commenters and their suggestion. 
Accordingly, we have added a paragraph (f) to Sec.  800.202 to require 
MSPP issuers offering group health plans to comply with section 2705 of 
the PHS Act and any implementing Federal or State regulations. We 
believe this appropriately resolves the concerns of commenters.
    Comments: Some commenters urged OPM to clarify how MSPP issuers 
will define ``family'' as it applies to coverage and rating. 
Specifically, commenters recommended OPM coordinate with HHS to ensure 
that the coverage and rating requirements established by HHS under 
section 2701 clearly apply to MSPs, adopt broad definitions for minimum 
categories for family policies, and adopt four types of family coverage 
categories: Individual; two adults; adult plus child(ren); and two-
adult with child(ren) or other family composition.
    Response: The proposed rule did not require specific standards 
around categories of family members, and intended to coordinate MSPP 
standards with HHS standards published at 45 CFR part 147. Therefore, 
the final rule does not specify the minimum categories of family 
members that must be rated in a family policy.
    However, we encourage MSPs to provide the same benefits for all 
family compositions, including but not limited to same-sex domestic 
partners and their children. We note that individuals not eligible for 
family coverage will be able to purchase individual coverage on a 
guaranteed issue basis.
    While we intend to administer the MSPP in a manner that supports a 
broad definition of family coverage categories, we are finalizing the 
proposed provision without a change. We must coordinate our approach in 
applying rating factors consistent with HHS guidance and State law, and 
as a result will implement the policy for extending coverage rules so 
that they apply to a broad definition of family coverage categories 
through the MSPP contract negotiation process.
Medical Loss Ratio (Sec.  800.203)
    The proposed rule requires MSPP issuers to attain the medical loss 
ratio

[[Page 15578]]

(MLR) in section 2718 of the PHS Act. The proposed rule also codifies 
section 1334(a)(4) of the Affordable Care Act, which gives OPM the 
explicit authority to negotiate premiums, profit margins, and an MLR by 
allowing OPM to set an MSP-specific MLR that is either in the interest 
of MSP enrollees or conforms to State MLR standards. Failure to attain 
the MLR could result in intermediate sanctions, which include, but are 
not limited to, suspension of marketing, decertification in one or more 
States, or termination of an MSPP issuer's contract.
    Comments: Several commenters expressed support for OPM's approach. 
Commenters supported an MLR calculation that was State-based, rather 
than nationwide. Commenters also supported pooling MSP and non-MSP 
experience in MLR calculation.
    Response: OPM is retaining in the final rule its approach to have 
MSPP issuers calculate MLR on a State-by-State basis as well as pool 
MSP and non-MSP experience within a State.
    Comments: Several commenters expressed concern that OPM having 
authority to set an MSP-specific MLR different from the State or 
Federal standard could give MSPs an advantage over QHPs.
    Response: OPM recognizes the concerns of States and other 
stakeholders regarding authority to set an MLR standard for the MSPP. 
However, section 1334(a)(4)(B) of the Affordable Care Act explicitly 
grants OPM legal authority to negotiate an MLR with each MSP. As a 
matter of policy, however, OPM does not foresee exercising the 
authority to set an MSP-specific MLR. If OPM were to consider 
implementing an MSP-specific MLR, it would only be under extraordinary 
and rare circumstances, and after consulting with the State.
    Comment: A commenter was concerned that OPM may decertify an MSP 
mid-year for failing to meet the applicable MLR standard.
    Response: While OPM has the authority to decertify an MSP at any 
time, we do not want to disrupt State insurance markets or harm 
consumers. Decertifying an MSP is one of many compliance actions OPM 
proposed in the rule. We want to clarify that OPM would only decertify 
an MSP mid-year under unusual circumstances, such as widespread and 
repeated failure to comply with the legal or MSPP contractual 
requirements. Before decertifying an MSP, we would consult with a State 
and/or HHS, as appropriate, to avoid market disruption and protect 
consumers. Our approach to compliance actions is discussed in more 
detail in relation to Sec.  800.404.
    Comment: One commenter requested that MSPP issuers pay a rebate in 
addition to other MLR sanctions.
    Response: MSPP issuers, like all health insurance issuers regulated 
by HHS, are subject to the MLR rebate requirements under the Affordable 
Care Act, and OPM will not require additional rebates.
    Comment: One commenter wants MSPP user fees to qualify for MLR 
inclusion.
    Response: This final rule clarifies in Sec.  800.108 that MSPP user 
fees will be part of the State-based Exchange or Federally-facilitated 
Exchange user fee. According to technical guidance document CCIIO 2012-
002, released April 20, 2012, by HHS, Exchange user fees are subtracted 
from premiums in the MLR calculation, as are all other Federal and 
State regulatory and licensing fees. MSPP user fees, therefore, will 
not be included in the MLR calculation.
    We are adopting Sec.  800.203 of the proposed rule as final, with 
one technical correction in paragraph (b), relating to the sanctions 
for not attaining the required medical loss ratio.
Reinsurance, Risk Corridors, and Risk Adjustment (Sec.  800.204)
    The proposed Sec.  800.204 would require MSPP issuer participation 
in the transitional reinsurance program in the individual market, risk 
adjustment program, and temporary risk corridors program to ensure that 
all issuers have the same fiscal responsibilities and protections. OPM 
proposed that MSPP issuers be required to participate in the 
transitional reinsurance program for the individual market established 
pursuant to section 1341 of the Affordable Care Act, and comply with 
HHS standards set forth in 45 CFR part 153 and, if applicable, any 
State regulations implementing the program. OPM also proposed that an 
MSPP issuer must participate in the temporary risk corridors program 
established pursuant to section 1342 of the Affordable Care Act and 
comply with 45 CFR part 153, as well as any additional HHS standards 
implementing the program. Finally, OPM proposed that an MSPP issuer 
must participate in the risk adjustment program established pursuant to 
section 1343 of the Affordable Care Act and comply with HHS standards 
set forth in 45 CFR part 153 and, if applicable, any State standards 
implementing the program.
    Comments: The majority of the comments we received supported OPM's 
approach to requiring MSPP issuers to participate, like QHP issuers, in 
the transitional reinsurance program, risk adjustment program, and 
temporary risk corridors program. States, consumer organizations, and 
issuers supported the general approach OPM proposed that MSPP issuers 
must comply with Federal standards and State standards, if applicable, 
in the administration of the reinsurance program and risk adjustment 
program. One commenter suggested OPM has legal discretion to allow a 
church health plan offered through the MSPP to vary premiums to adjust 
for risk across its enrollees, using risk adjustment criteria related 
to Medicare Part D and Medicare Advantage plans.
    Response: OPM appreciates the comments and is adopting the proposed 
regulation as final, with two technical corrections. First, in Sec.  
800.204(b), we are changing ``any applicable Federal or State 
regulations under that section'' to ``any applicable Federal 
regulations under that section'' because HHS will be operating the 
temporary risk corridors program. Second, we are correcting an 
editorial error in paragraph (c) of Sec.  800.204 by changing ``An MSPP 
issuer must comply with participate in the risk adjustment program 
established pursuant to section 1343 of the Affordable Care Act'' to 
``An MSPP issuer must comply with section 1343 of the Affordable Care 
Act''.
    Finally, we do not agree with the commenter's analysis that OPM 
would have legal discretion to allow a church health plan offered 
through the MSPP to vary premiums to adjust for risk across its 
enrollees, using risk adjustment criteria related to Medicare Part D 
and Medicare Advantage plans. Therefore, we are not adopting this 
suggestion.

Subpart D--Application and Contracting Procedures

    In subpart D of proposed 45 CFR part 800, OPM set forth proposed 
processes for accepting and evaluating applications to participate in 
the MSPP and for executing contracts to offer coverage under the MSPP. 
In general, these processes were designed based on OPM's experience in 
the operation of the FEHBP while reflecting the unique aspects of the 
MSPP, as directed in section 1334 of the Affordable Care Act. Subpart D 
includes sections relating to an application process, review of 
applications, MSPP contracting, term of the contract, contract renewal 
process, and nonrenewal. OPM received both general comments on this 
subpart and specific comments on several sections. We address first the 
general comments on the subpart, followed by comments on specific 
sections within the subpart.

[[Page 15579]]

Any regulatory changes are noted within the discussion of each section.
    Comment: One commenter requested additional information on the 
application and contracting procedures, including form, manner, and 
timeline for submission and review of applications, contracting, and 
renewal of contracts.
    Response: OPM has released a final paper application setting forth 
the information that we will collect from health insurance issuers that 
apply to become MSPP issuers, available on the Federal Business 
Opportunities Web site at www.FBO.gov under solicitation number OPM35-
12-R-0006, Multi-State Plan Program. The final paper application was 
posted on January 18, 2013. The solicitation notes that OPM expects to 
begin receiving application material from issuers in February 2013, and 
instructs issuers to submit a notice of intent to apply to receive 
access to the MSPP Portal, through which issuers will submit the 
requested information to OPM electronically.
    Due to the generally compressed deadlines for the first year of 
this program and the first years of operation of many Exchanges, 
timelines may vary from one year to the next. We therefore will not 
establish rigid timelines in this regulation, but will evaluate MSPP 
timelines and address them through guidance. Similarly, we intend to 
share additional information on initial execution and renewal of 
contracts through guidance.
    Comments: A few commenters recommended that OPM incorporate States 
and Exchanges into the process of evaluating applicants and negotiating 
contracts with issuers. Specifically, commenters noted that some 
Exchanges will employ an ``active purchaser'' model, whereby QHP 
certification will depend on a contract between a QHP issuer and the 
Exchange, and recommended that OPM address this model in its 
application and contracting procedures. Other commenters voiced concern 
that the absence of State representation in application and contracting 
procedures, including evaluation of rate and benefit proposals, would 
result in inconsistent application of State insurance laws and 
regulations.
    Response: OPM is directed by section 1334 of the Affordable Care 
Act to enter into contracts with health insurance issuers, and to do so 
in a manner similar to the manner in which contracting provisions under 
the FEHBP are implemented. The Affordable Care Act also provides for 
deemed certification of MSPs by virtue of an MSPP contract. We 
acknowledge that States will retain responsibility for the enforcement 
of their insurance laws and regulations, and we will continue to 
develop relationships with States' Departments of Insurance and 
Exchange authorities to collaborate to ensure that MSPs may be offered 
on Exchanges without creating market disruptions.
    Based on the phased expansion provisions of section 1334 of the 
Affordable Care Act and of Sec.  800.104 of this regulation, we do not 
expect each MSPP issuer to offer an MSP on each Exchange in 2014. We 
will communicate with appropriate State officials on an ongoing basis 
regarding the MSPs that we expect to certify.
Application and Contracting Procedures (Sec.  800.301)
    In Sec.  800.301, we proposed that a health insurance issuer may 
submit an application to OPM to participate in the MSPP. We specified 
that such applications would meet guidelines to be released regarding 
the form and manner of applications, and the timeline for submission. 
OPM received a few comments specifically addressing this section.
    Comment: One commenter noted the absence of specific timeframes in 
the proposed regulation and requested that such timeframes allow each 
State to perform its ``traditional role'' in regulating health 
insurance products.
    Response: As discussed in greater depth regarding subpart C of this 
regulation, OPM intends to collaborate with appropriate State officials 
regarding the review and approval of rates and benefits. We intend to 
be as flexible as possible to ensure that each State has adequate 
opportunity to review MSP documentation as appropriate.
    Comment: One commenter recommended that OPM ensure that issuers' 
proprietary information be protected from information requests, 
including under the Freedom of Information Act (FOIA).
    Response: We acknowledge that certain information given to OPM by 
applicant issuers may be proprietary, and should therefore not be 
subject to public inspection. Applicants will be given an opportunity 
to mark submitted information as confidential, pursuant to instructions 
that will accompany the application in the MSPP Portal, subject to the 
limits of FOIA and its implementing regulations.
    OPM does not believe that any of these comments require any changes 
in the regulatory text. Therefore, we are adopting proposed Sec.  
800.301 as final, with no changes.
Review of Applications (Sec.  800.302)
    Proposed Sec.  800.302 provided that an issuer that has applied 
under Sec.  800.301 may be accepted to enter into contract negotiations 
if OPM determines that the applicant meets the requirements of part 
800; that OPM may request additional information from issuers in making 
such a determination; that OPM will inform the applicant in writing if 
OPM declines to enter into contract negotiations with the applicant; 
that OPM alone may determine whether an application is to be accepted 
or declined; and that a declined applicant may apply for a subsequent 
year. OPM received no specific comments on this section. Therefore, we 
are adopting proposed Sec.  800.302 as final, with no changes.
MSPP Contracting (Sec.  800.303)
    In proposed Sec.  800.303, OPM provided that, to become an MSPP 
issuer, an applicant must execute a contract with OPM; that OPM would 
establish a standard contract for the MSPP; that OPM and an applicant 
would negotiate premiums for each plan year; that OPM would review for 
approval an applicant's benefit packages; that OPM may negotiate 
additional contractual terms and conditions; and that MSPP issuers 
would be certified to offer MSP coverage on Exchanges.
    Comments: Several commenters recommended that I/T/Us be 
contractually allowed to participate in MSP networks as providers, and 
that MSPP issuers comply with Federal laws governing I/T/Us.
    Response: OPM will address the specific terms of the MSPP standard 
contract through a development process following the publication of 
this final rule. We acknowledge the unique concerns of I/T/Us, and we 
intend to address them, to the extent practicable, through contractual 
terms.
    Comment: One commenter recommended that OPM adopt for the MSPP the 
same transparency and pass-through pricing standards and requirements 
that exist under the FEHBP for PBMs.
    Response: As noted above, OPM will address specific contract terms 
through a process following the publication of this rule. Such terms 
will include standards and requirements for PBMs.
    Comments: A few commenters suggested that OPM's proposed 
contracting process would be duplicative of State regulatory or 
Exchange processes or would circumvent such processes. One commenter 
recommended that MSPP issuers be required to attest to compliance with 
all State laws as a

[[Page 15580]]

condition of certification. Another commenter recommended that issuers 
be required to attest to understanding and compliance with a specific 
State law as a condition of contracting. One commenter recommended that 
MSPP contracts incorporate consultation with State-based Exchanges to 
measure performance and compliance.
    Response: In general, MSPP issuers will be expected to comply with 
State laws and regulations. Although we intend to monitor such 
compliance and to evaluate contract performance in part on such 
compliance, we decline to specifically list State laws with which 
issuers must comply. Specifically listing laws with which an issuer 
must comply may have the unintended result of implying that an issuer 
need not comply with unlisted laws and regulations, and OPM cannot list 
every relevant State law with which an MSPP issuer must comply.
    We intend to promote information sharing between OPM and States, 
and OPM will measure MSP performance using standards similar to those 
measured under the FEHBP. Sharing information with States will help 
ensure that MSPs meet comparable standards to QHPs in the same markets 
and that issuers comply with State laws. By measuring contract quality 
assurance standards across MSPs, OPM will be able to ensure that MSPs 
are of comparably high quality across States. We will set forth the 
specific standards that MSPs will be expected to meet in the model MSPP 
contract.
    We are adopting proposed Sec.  800.303 as final, with the inclusion 
of a minor editorial correction.
Term of the Contract (Sec.  800.304)
    In Sec.  800.304, we proposed that the term of an MSPP contract be 
for a period of at least 12 consecutive months, as set forth in the 
MSPP contract; that a plan year be a consecutive 12-month period during 
which an MSP provides coverage for health benefits; and that a plan 
year may be a calendar year or other 12-month period.
    Comment: One commenter recommended that the term of the MSPP 
contract coincide with the calendar year so that MSP plan years and 
open enrollment periods would coincide with those of QHPs, which would 
preserve a level playing field.
    Response: In Sec.  800.20, we are adopting the definition of ``plan 
year'' established by HHS at 45 CFR 155.20. Section 800.101 states that 
MSPs will comply with the same standards for eligibility, enrollment, 
and termination of coverage as QHPs on the same Exchange. Open 
enrollment periods for MSPs, therefore, will coincide with those of 
QHPs.
    Comment: One commenter recommended that OPM adopt an initial 
contract term of 3 to 5 years, rather than 1 year.
    Response: We acknowledge that participation in the MSPP may require 
significant initial investment on the part of MSPP issuers, and that a 
longer contract term may assure issuers that such investment may 
require several years of participation in the program to become cost-
effective. OPM has modeled the application and contracting procedures 
in subpart D after those used in the FEHBP, including the automatically 
renewable nature of contracts. We anticipate that all MSPP issuers will 
participate in the program for many contract terms. However, rates and 
benefits will be revised each year, and some terms of the MSPP contract 
may need to be updated from one term to the next. Therefore, the 
contract term will be 1 year.
    We are adopting proposed Sec.  800.304 as final, with no changes.
Contract Renewal Process (Sec.  800.305)
    In proposed Sec.  800.305, we set forth a process by which OPM and 
an MSPP issuer would renew an MSPP contract, including the issuer's 
submission of information to OPM and criteria for a determination by 
OPM of whether to renew the contract. This section also provides that 
if OPM and the issuer fail to agree to premiums and/or benefits with 
respect to an MSP on an Exchange, the contract may nevertheless be 
renewed with the same premiums and benefits in effect for the previous 
term. OPM received no comments directly addressing this section. 
Therefore, we are adopting proposed Sec.  800.305 as final, with no 
changes.
Nonrenewal (Sec.  800.306)
    In Sec.  800.306, we proposed that either OPM or an issuer could 
decline to renew an MSPP contract at the end of a plan year by timely 
notifying the other party and MSP enrollees.
    Comments: Some commenters recommended lengthening the period of 
notice to enrollees of nonrenewal from 90 days to 180 days.
    Response: OPM proposed that issuers would be required to notify 
enrollees of nonrenewal of an MSPP contract no fewer than 90 days prior 
to the date on which coverage would end. The proposed 90-day period was 
taken from the same requirement in the FEHBP. Conversely, Exchanges may 
have notice periods as short as 30 days. As noted at Sec.  800.306(c), 
the 90-day requirement would only take effect in the absence of an 
Exchange rule requiring a different notice period.
    Comments: Some commenters recommended that OPM require issuers to 
assist MSP enrollees who will lose their coverage to find new coverage. 
One commenter recommended that OPM defer to a determination by the 
Centers for Medicare and Medicaid Services that a QHP issuer must 
continue to offer coverage outside of an Exchange.
    Response: Enrollment of individuals in QHPs following nonrenewal of 
an MSPP contract falls outside of the responsibilities set forth at 
section 1334 of the Affordable Care Act. However, as noted throughout 
this regulation, we look forward to working collaboratively with States 
and Exchanges to best serve consumers, including by ensuring 
cooperation with efforts to assist enrollees who lose MSP coverage.
    Comments: A few commenters recommended that OPM clarify the 
language of paragraph (c) to require issuers to comply with any State 
law requirements relating to nonrenewal of coverage and withdrawal from 
an Exchange market.
    Response: Proposed Sec.  800.306(c) states that an MSPP issuer must 
comply with ``any requirements imposed by an Exchange with respect to 
the termination of a QHP * * *'' Such requirements would include a 
State law requirement relating to nonrenewal of coverage or withdrawal 
from an Exchange market. Therefore, no change to Sec.  800.306 is 
necessary.
    Comment: One commenter noted that Sec.  800.404(d), like Sec.  
800.306(c), addresses notice to enrollees who will lose coverage due to 
an MSP ceasing to be offered on an Exchange, and recommended using the 
same language in both sections.
    Response: We agree that the language should be the same in both 
sections.
    OPM is adopting proposed Sec.  800.306 as final, with one change. 
Paragraph (c) will be revised as follows, to include a technical, 
clarifying edit: ``The MSPP issuer's written notice of nonrenewal must 
be made in accordance with its MSPP contract with OPM. The MSPP issuer 
also must comply with any requirements regarding the termination of a 
plan that are applicable to a QHP offered on an Exchange on which the 
MSP was offered, including a requirement to provide advance written 
notice of termination to enrollees. If an Exchange does not have 
requirements about advance written notice of termination to enrollees, 
the MSPP issuer must inform current MSP enrollees in writing of the 
nonrenewal of the MSP no later than 90 days prior

[[Page 15581]]

to termination of coverage, unless OPM determines that good cause 
justifies less than 90 days' notice.'' We will also revise Sec.  
800.404(d) to mirror this language.

Subpart E--Compliance

    In subpart E of the proposed rule, OPM set forth standards and 
requirements with which MSPP issuers must comply and a non-exhaustive 
list of actions OPM may take to enforce provisions of an MSPP contract. 
Like subpart D, these standards, requirements, and compliance actions 
have been designed based on OPM's experience in the operation of the 
FEHBP, while reflecting the unique aspects of the MSPP, as required by 
section 1334 of the Affordable Care Act. Subpart E addresses contract 
performance, contract quality assurance, fraud and abuse, compliance 
actions, and a process for reconsideration of compliance actions. OPM 
received both general comments on this subpart and specific comments on 
several sections. We address first the general comments on this 
subpart, followed by comments on specific sections within this subpart. 
Any regulatory changes are noted within the discussion of each 
individual section.
    Commenters on this subpart included States and State Exchange 
authorities, plan/issuer associations, consumer advocacy organizations, 
and a public policy advocacy organization. Comments on this subpart 
generally supported the overall structure of contract compliance under 
the MSPP, and several offered specific suggestions for improvement. We 
received one comment regarding cost accounting systems that is outside 
the scope of this rulemaking.
    Comments: Some commenters recommended adding specific requirements, 
such as network adequacy, to one of the sections of this subpart as a 
contract performance standard, a contract quality assurance standard, 
or a basis for a compliance action.
    Response: OPM acknowledges the importance of requirements and 
consumer protections like network adequacy, and addressed network 
adequacy in Sec.  800.109 of the proposed rule. We have set forth other 
provisions in this regulation that we intend to enforce through 
contractual measures and compliance actions; this subpart is structured 
to provide OPM the authority to do so in a manner similar to the 
administration of the FEHBP. In particular, Sec.  800.404(a)(1) lists 
as a cause for OPM to impose a compliance action a failure by the MSPP 
issuer to meet the requirements of Sec.  800.401(a), which includes any 
violation of section 1334 of the Affordable Care Act or these 
regulations. Therefore, a violation of network adequacy standards, or 
any other MSPP standard or requirement, would constitute cause for a 
compliance action.
    Comments: A few commenters recommended that review of financial 
resources, records, novation and change of name agreements, and claims 
processing practices be left solely to States, and that OPM rely on 
States to communicate findings regarding these matters. One commenter 
noted States' experience in measurements of these kinds. Another 
commenter recommended establishing a notice and communication process 
between OPM and the States and Exchanges to ensure MSPP issuers comply 
with State laws as well as OPM's standards and requirements.
    Response: We acknowledge States' expertise in measuring performance 
and compliance, and, as noted above in our responses to comments on 
subpart D, we look forward to working with States to ensure compliance 
and comparability within States as well as across States. We also note 
that OPM has more than 50 years of experience administering the FEHBP, 
which includes measurement of numerous performance standards, contract 
quality assurance measures, and compliance actions. Section 1334 of the 
Affordable Care Act directs OPM to implement this program in a manner 
similar to the manner in which the contracting provisions of the FEHBP 
are implemented, which includes the compliance measures set forth in 
subpart E.
Contract Performance (Sec.  800.401)
    In proposed Sec.  800.401, we set forth requirements for MSPP 
issuers, including that the issuer must comply with section 1334 of the 
Affordable Care Act and with the provisions of this regulation; that it 
must meet minimum threshold issuer standards; that it must demonstrate 
specified prudent business practices; that it must not engage in 
specified poor business practices; and that OPM may collect an 
assessment to a performance escrow account. OPM received several 
comments specifically addressing this section.
    Comment: One commenter recommended that these regulations reflect 
OPM's commitment to the protection of enrollees' private and 
confidential information. Specifically, the commenter recommended that 
we require issuers to comply with Fair Information Practice Principles 
by listing failure to comply with such Principles as a poor business 
practice.
    Response: We appreciate the need to protect private and 
confidential information in the MSPP. Personally identifiable 
information (PII) and protected health information (PHI) are protected 
by the Health Insurance Portability and Accountability Act (HIPAA) and 
the Privacy Act of 1974, as well as contractual provisions that will 
mirror those used under the FEHBP. By ensuring compliance with these 
laws and provisions, OPM will adequately protect PII and PHI.
    Comments: Several commenters recommended adding to the list of 
``poor business practices'' failure to properly pay I/T/Us in 
compliance with 25 U.S.C. 1621e and the cost-sharing protections under 
section 1402 of the Affordable Care Act.
    Response: The list of ``poor business practices'' does not include 
failures to comply with specific laws. This regulation, at Sec.  
800.102, addresses compliance with Federal and State laws. Section 
800.404(a)(4) permits OPM to impose a compliance action for any 
violation of law or regulation. We will address compliance more 
specifically in the terms of MSPP contracts.
    Comment: One commenter interpreted the list of ``poor business 
practices'' to include innovative payment arrangements or delivery 
models such as Accountable Care Organizations (ACOs) or Patient-
Centered Medical Homes (PCMHs), and recommended that such models not be 
prohibited.
    Response: The list of ``poor business practices'' does not address 
health care delivery models. The list includes ``[e]ntering into 
contracts or employment agreements * * * that include provisions or 
financial incentives that directly or indirectly create an inducement 
to limit or restrict communication about medically necessary services 
to any individual covered under the MSPP.'' Limitation of communication 
about medically necessary services to enrollees is not an innovative 
payment arrangement or delivery model, and is not a feature of an ACO 
or PCMH.
    Comments: A few commenters recommended against requiring issuers to 
contribute to a performance escrow account. One commenter requested 
clarification that OPM's proposal to reserve authority to require MSPP 
issuers to contribute to a performance escrow account is limited to 
MSPP issuers, presumably as opposed to QHP issuers; that contributions 
would be based on premiums rather than a flat fee; that contributions 
be assessed at the

[[Page 15582]]

beginning of the year; and that any refunds be remitted to consumers 
similarly to MLR rebates.
    Response: We continue to explore establishing a performance escrow 
account to use in enforcement of MSPP contracts. OPM may develop more 
specific policies to begin using such an account no sooner than 2015. 
We will issue specific guidance on the operations of a performance 
escrow account well in advance of the date on which it takes effect.
    We are adopting proposed Sec.  800.401 as final, with no changes 
except for minor technical edits.
Contract Quality Assurance (Sec.  800.402)
    In proposed Sec.  800.402, we set forth general policies and 
procedures to ensure that MSPP contracts conform to quality standards 
and requirements, specifically with respect to the issuer's internal 
controls and performance standards to be set by OPM.
    Comment: One commenter recommended that OPM require MSPP issuers to 
meet and comply with States' quality assurance standards and 
requirements. The commenter suggested that OPM ensure such compliance 
by requiring MSPP issuers to contract with each State, in addition to 
contracting with OPM, or by inserting regulatory text.
    Response: As noted throughout our responses to comments, we 
appreciate the need for coordination with States to ensure that MSPs 
are comparable to a QHP offered on the same Exchange. Requiring MSPP 
issuers to enter into a contract with Exchanges would circumvent 
section 1334(d) of the Affordable Care Act, which vests certification 
authority for MSPs in OPM rather than State Exchanges by providing that 
MSPs offered under a contract with OPM are deemed to be certified by an 
Exchange. We intend to hold MSPs to performance standards that are 
comparable to those set for QHPs by States and Exchanges. OPM will 
establish and enforce these standards through contractual negotiation 
and compliance.
    We are adopting proposed Sec.  800.402 as final, with no changes.
Fraud and Abuse (Sec.  800.403)
    In proposed Sec.  800.403, we required MSPP issuers to maintain a 
program to assess and address vulnerabilities to fraud and abuse, to 
maintain a system to detect and eliminate fraud and abuse, and to 
provide certain information to OPM. One commenter specifically 
addressed this section, requesting further information on the required 
fraud detection system. We intend to set forth specific standards and 
requirements for systems to detect and eliminate fraud and abuse in the 
model MSPP contract. This does not require a change in the proposed 
rule; therefore, we are adopting Sec.  800.403 of the proposed 
regulation as final, with no changes.
Compliance Actions (Sec.  800.404)
    In Sec.  800.404 of the proposed rule, we set forth the bases for 
OPM to impose a compliance action; the compliance actions that OPM may 
impose; the notices that OPM will send to issuers upon imposition of a 
compliance action; and the notices that issuers must send to enrollees 
upon imposition of certain compliance actions.
    Comment: One commenter noted that mid-year decertification of MSPs 
may disrupt markets and harm consumers and recommended that OPM clarify 
that such a compliance action would be used only when it is strictly 
necessary.
    Response: We agree that mid-year decertification creates potential 
for disruption, and OPM would only terminate or decertify an MSP if, in 
the discretion of the Director, such action was necessary. However, 
compliance actions are discretionary, so the regulatory text need not 
be modified to reflect that those particular compliance actions would 
not be routinely imposed.
    Comment: One commenter recommended using State performance 
evaluations in reviewing MSP performance and developing processes to 
communicate with States and Exchanges regarding compliance actions.
    Response: As noted above, we look forward to working with States 
and Exchanges to ensure that MSPs meet appropriate standards within 
States and across States. Because some compliance actions directly 
affect Exchange markets, we agree that Exchanges should receive notice 
of such compliance actions. Specifically, regulatory text will be 
amended to provide that OPM will notify State and/or Exchange officials 
when we reduce the service area or areas of an MSP in the State, 
withdraw certification for an MSP in the State, decline to renew the 
MSPP contract under which an MSP is offered in the State, or terminate 
the MSPP contract under which an MSP is offered in the State.
    Section 800.404 of the proposed rule is adopted as final, with two 
changes:
    First, the following new paragraph will be added after paragraph 
(c)(2): ``(3) Upon imposition of a compliance action listed in 
paragraphs (b)(2)(iv) through (b)(2)(vii) of this section, OPM must 
notify the State Insurance Commissioner(s) and Exchange officials in 
the State or States in which the compliance action is effective.''
    Second, pursuant to a comment on subpart D of this regulation, we 
are inserting language in paragraph (d) of this section to add clarity 
and to conform to the wording of Sec.  800.306(c), which sets forth a 
similar notice requirement. The revised paragraph (d) will read as 
follows: ``If OPM terminates an MSPP issuer's MSPP contract with OPM, 
or OPM withdraws the MSPP issuer's certification to offer the MSP on an 
Exchange, the MSPP issuer must comply with any requirements regarding 
the termination of a plan that are applicable to a QHP offered on an 
Exchange on which the MSP was offered, including a requirement to 
provide advance written notice of termination to enrollees. If an 
Exchange does not have requirements about advance written notice of 
termination to enrollees, the MSPP issuer must inform current MSP 
enrollees in writing of the nonrenewal of the MSP no later than 90 days 
prior to termination of coverage, unless OPM determines that good cause 
justifies less than 90 days' notice.''
Reconsideration of Compliance Actions (Sec.  800.405)
    In proposed Sec.  800.405, we set forth the right of an MSPP issuer 
to request reconsideration of the imposition of certain compliance 
actions, the form and manner of such a request, and OPM's notice to the 
issuer of a decision upon reconsideration. One commenter specifically 
addressed this section, recommending that OPM notify States of requests 
for reconsideration under this section. As noted above, we intend to 
communicate extensively with States and Exchanges to ensure that MSPs 
meet appropriate standards. No change is needed in the wording of 
proposed Sec.  800.405; therefore, we are adopting it as final, with no 
changes.

Subpart F--Appeals by Enrollees for Denials of Claims for Payment or 
Service

    In subpart F, we proposed a process by which MSP enrollees (and 
individuals acting on behalf of enrollees) could seek an internal 
appeal and external review of an adverse benefit determination. The 
proposed subpart included sections on general requirements, MSPP issuer 
internal claims and appeals processes, MSPP issuer internal claims and 
appeals timeframes and notice of determination, external review, and 
judicial review. The proposed regulation adopted the standards and 
timeframes established under section 2719 of the PHS Act, and

[[Page 15583]]

will be administratively similar to the disputed claims process 
employed within the FEHBP. By adopting the standards and timeframes 
applicable to health insurance issuers under the PHS Act, we proposed 
to provide MSP enrollees with comparable processes to those that will 
apply to QHPs and other coverage. In particular, the MSPP external 
review process will include binding final decisions by independent 
review organizations (IRO) on enrollee disputes that involve medical 
judgment (including, but not limited to, those based on medical 
necessity, appropriateness, health care setting, level of care, or 
effectiveness of a covered benefit). The preamble to our proposed rule 
noted that we intend to issue further guidance explaining the details 
of these processes.
    As indicated in the proposed rule, OPM has considerable experience 
in resolving disputed claims pursuant to OPM's statutory authority 
under 5 U.S.C. 8902(j). Claims disputed by FEHBP enrollees, generally 
governed by 5 CFR 890.105, are first submitted to FEHBP carriers for an 
internal level of reconsideration, and FEHBP carriers are required to 
comply with the same timeframes that are contained in section 2719 of 
the PHS Act. OPM then externally reviews any FEHBP carrier 
reconsideration decisions that enrollees submit for OPM's review--
including decisions related to medical judgment, as well as decision 
related to interpretation of contract coverage. This process is central 
to OPM's contractual oversight of FEHBP carriers, allowing OPM to 
determine whether the health plan's daily operations are functioning 
appropriately and whether the plan's benefits are meeting enrollees' 
needs, which informs the following benefit negotiation cycle. OPM 
reviews claims efficiently; in 2012, 97 percent of all FEHB disputed 
claims reviewed by OPM were resolved by OPM within 60 days of being 
received.
    Accordingly, in addition to engaging an independent review 
organization for final, binding decisions on MSPP claims disputes 
involving medical judgments, we have designed the external review 
process for the MSPP to accommodate final, binding decisions by OPM on 
claims disputes involving interpretation of contract coverage that does 
not involve medical judgments.
    Commenters on this subpart included States, Exchanges, State 
associations, consumer groups, provider groups, pharmaceutical 
companies, and plan and issuer groups. Several comments were generally 
supportive of the proposed approach, whereas some commenters generally 
preferred specific compliance with each separate State process in each 
State. Some commenters expressed support for the adoption of the 
standards and timeframes applicable under section 2719 of the PHS Act. 
A few commenters recommended specific changes. Below, we address first 
the general comments on the approach proposed in this subpart, followed 
by the specific content of each section of the final regulation.
    Comments: Some commenters suggested that consumers would be 
confused by OPM's approach, noting that MSPs in some States would seek 
an internal appeal or external review by following a different process 
than a QHP on the same Exchange. A few commenters recommended that 
notices to enrollees include contact information for Consumer 
Assistance Programs (CAPs) or Ombudsman offices available to assist 
consumers in filing appeals.
    Response: We believe the proposed process adequately addresses the 
potential for confusion in several ways. First, MSP issuers must comply 
with the internal claims and appeals process under 45 CFR 147.136(b). 
Regarding external review, MSP enrollees would send any request for 
external review, whether of a determination based on medical judgment 
or otherwise, to OPM. Some processes may call for resolution of medical 
judgment determinations separately from, for example, determinations of 
whether a benefit is covered under a plan. OPM plans to ensure that 
this process will be explained clearly in plan documents and enrollee 
notices. Second, the process will be administratively operated based on 
the existing disputed claims process under the FEHBP. We have operated 
this process for more than 35 years across the country, alongside 
health coverage that has been subject to different appeals processes, 
(for example, separate processes applicable to ERISA plans, commercial 
insurance products, non-Federal governmental plans, or church plans). 
OPM has nevertheless guided consumers through the disputed claims 
process. Finally, we will ensure that notices to enrollees are 
accessible and meet the standards established under section 2719 of the 
PHS Act and its implementing regulations.
    We agree that notices should include contact information for CAPs 
and Ombudsman offices. Proposed Sec. Sec.  800.502 and 800.503 state 
that MSPP issuers must comply with 45 CFR 147.136(b), which includes 
the following provision at Sec.  147.136(b)(2)(ii)(E)(4): issuers 
``must disclose the availability of, and contact information for, any 
applicable office of health insurance consumer assistance or ombudsman 
established under PHS Act section 2793 to assist individuals with the 
internal claims and appeals and external review processes.''
    Comments: Some commenters objected to the proposed process in 
general, preferring instead that MSP enrollees be limited to the 
processes available in their State. A few of those commenters suggested 
that the proposed approach may trigger the ``level playing field'' 
provision at section 1324 of the Affordable Care Act, as discussed 
under Sec.  800.115 of this regulation.
    Response: As noted in the preamble to the proposed rule, our 
primary objectives in establishing the internal appeals and external 
review processes are to ensure that (1) enrollees have adequate access 
to review of adverse benefit determinations and (2) OPM collects the 
information necessary for the enforcement of MSPP contracts and 
implementation of the program. We consider both objectives integral to 
the implementation of the MSPP, and therefore required under section 
1334 of the Affordable Care Act.
    We have addressed the applicability of the ``level playing field'' 
provision in our responses to comments relating to Sec.  800.115 of 
this regulation. As explained in that discussion, our approach to 
external appeals will not trigger the level playing field provision 
because MSPP issuers will be subject to the same rules as other 
issuers: Section 2719 of the PHS Act and its implementing regulations.
    Comments: A few commenters recommended that OPM require MSPP 
issuers to comply with our proposed process unless a State's process is 
more protective, in which case the more protective State provisions 
would take effect for MSP enrollees.
    Response: Our proposed process protects consumers by allowing us to 
ensure that all MSP enrollees are able to seek review of a broad range 
of determinations, and that requests for external review are resolved 
consistently across the States. Although States' appeals processes, in 
many cases, offer a different approach to consumer protection, we 
believe that our processes provide a comparable or greater degree of 
protection, which would apply uniformly across the States for MSP 
enrollees.
    Comments: A few commenters noted that State regulatory agencies 
often use external review as a means of ascertaining information 
regarding compliance with laws and regulations, and recommended that we 
therefore decline to establish a process that would preclude States' 
collection of such

[[Page 15584]]

information. Of those commenters, two suggested that States provide OPM 
with data and information to use for the MSPP, and one requested that 
OPM develop a process to share information with States and Exchanges to 
facilitate enforcement of State laws and standards.
    Response: As noted above, OPM intends to use these processes to 
monitor and enforce MSPP contracts. We consider our ability to resolve 
disputes arising under MSPP contracts integral to our implementation of 
this program. However, we recognize that external review data and 
information may also be important to State regulatory agencies and 
Exchanges, and we intend to share information collected through this 
process, to the extent that it is legally and operationally feasible, 
with States and Exchanges. We look forward to working in collaboration 
with States and Exchanges to ensure that the appropriate information is 
shared seamlessly.
General Requirements (Sec.  800.501)
    In this section, we set forth definitions, and provide that an MSP 
enrollee or a person acting on behalf of an MSP enrollee may seek 
review of an adverse determination under this program. We are adopting 
proposed Sec.  800.501 as final, with no changes.
MSPP Issuer Internal Claims and Appeals Processes (Sec.  800.502) and 
MSPP Issuer Internal Claims and Appeals Timeframes and Notice of 
Determination (Sec.  800.503)
    In Sec.  800.502, we provided that an MSPP issuer must comply with 
internal claims and appeals processes applicable under 45 CFR 
147.136(b). In Sec.  800.503, we provide that an MSPP issuer must 
comply with notice requirements under 45 CFR 147.136(b) and (e) upon 
rendering a determination on a claim under Sec.  800.502. We are not 
making any substantive changes in these sections; however, because they 
are so closely related, we have decided to combine Sec. Sec.  800.502 
and 800.503 into a single section numbered 800.502, with paragraph (a) 
of Sec.  800.502 containing the content of proposed Sec.  800.502, and 
paragraph (b) of Sec.  800.502 containing the content of proposed Sec.  
800.503.
External Review (Sec.  800.504)
    In Sec.  800.504, we proposed an external review process under 
which OPM would conduct external review of adverse benefit 
determinations under the MSPP, enrollees would receive notices pursuant 
to 45 CFR 147.136(e), and MSPP issuers would be required to pay a claim 
or provide a service pursuant to a final decision by OPM or an IRO. In 
the proposed rule, we referred to the State external review process 
under standards in paragraph (c)(2) of the appeals regulation, 45 CFR 
147.136(c)(2). The standards outlined in paragraph (c)(2), however, 
expressly apply only to a State external review process, and would be 
inconsistent with the national approach OPM was proposing. OPM's 
national approach more appropriately falls under 45 CFR 147.136(d). We 
therefore wish to clarify that we intended the State external review 
standards in paragraph (c)(2) to serve as a model for the consumer 
protections that OPM would incorporate into its proposed external 
review process. Accordingly, the change in citation from 45 CFR 
147.136(c)(2) to 45 CFR 147.136(d) has been made.
Judicial Review (Sec.  800.505)
    In proposed Sec.  800.505, we provided that OPM's written decision 
pursuant to completed external review of an adverse benefit 
determination would constitute final agency action under the 
Administrative Procedure Act, and that review of such a decision in the 
appropriate U.S. district court would be limited to the record that was 
before OPM when it made its decision. We are adopting proposed Sec.  
800.505 as final, with one change, and renumbering it as Sec.  800.504. 
Although OPM will conduct external review under the MSPP, final 
decisions on adverse benefit determinations related to medical judgment 
will be made by IROs, in accordance with section 2719 of the PHS Act. 
Decisions made by IROs will be final, and OPM will not be responsible 
for their approval. Such decisions therefore cannot be considered final 
agency action. The regulation will provide that a decision by an IRO on 
external review of an adverse benefit determination related to medical 
judgment will not be considered final agency action.

Subpart G--Miscellaneous

Reservation of Authority (Sec.  800.601)
    We received no comment on this section of the proposed rule, which 
simply provides that OPM reserves the right to implement and supplement 
its regulations with written operational guidelines. Therefore, we are 
adopting this section as final, with no changes.
Consumer Choice With Respect to Certain Services (Sec.  800.602)
    Section 800.602 of the proposed rule requires that at least one MSP 
on each Exchange not offer services described at section 
1303(b)(1)(B)(i) of the Affordable Care Act. Further, MSPs in States 
that prohibit these services must comply with State law.
    Comments: Several commenters expressed concern that OPM is 
proposing to preempt State law regarding coverage of services described 
in section 1303(b)(1)(B)(i) of the Affordable Care Act. Some commenters 
expressed a preference that at least one MSP in each Exchange be 
required to provide coverage for these services. In particular, there 
was concern that, since FEHBP plans do not generally cover services 
described at section 1303(b)(1)(B)(i), the FEHBP benchmark plan would 
exclude these services for an MSP. One commenter was concerned that 
requiring enrollees to make separate payments for these services would 
be burdensome.
    Response: OPM is complying with section 1334(a)(6) of the 
Affordable Care Act, which directs that at least one of the MSPs in a 
State not offer services described in section 1303(b)(1)(B)(i). If an 
MSP is offered in a State that requires coverage of the services 
described in section 1303(b)(1)(B)(i), OPM will discuss options for 
compliance with State and Federal laws in contract negotiations with 
MSPP applicants. Although an FEHBP benchmark would not include services 
described in section 1303(b)(1)(B)(i), MSPP issuers can include 
services permitted by law as long as the EHB benefits are substantially 
equal. OPM will require MSPs to comply with HHS rules about segregation 
of funds as described in 45 CFR part 156.
    We are adopting as final proposed subpart G, with a technical 
correction to Sec.  800.602, which included an incorrect reference to 
the Affordable Care Act provision describing the services in section 
1303(b)(1)(B)(i).

Executive Orders 13563 and 12866; Regulatory Review

    OPM has 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 must be prepared for major rules with 
economically significant effects ($100 million or more in any one year,

[[Page 15585]]

adjusted for inflation). Section 3(f) of Executive Order 12866 defines 
a ``significant regulatory action'' as an action that is likely to 
result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more in 
any one year or adversely affect in a material way a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal government or communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs, or the rights and obligations of 
recipients thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
Executive Order 12866.
    The economic impact of this rule may exceed the $100 million 
threshold for at least one year; we therefore assess costs and benefits 
as required by the Executive order.
    This rule gives health insurance issuers the opportunity to 
contract with OPM to offer a product on the Affordable Insurance 
Exchanges, but does not require those issuers to outlay funds. In 2013, 
the Congressional Budget Office (CBO) and the Joint Committee on 
Taxation (JCT) estimated the effects of the Affordable Care Act on 
nationwide insurance enrollment and on the Federal budget.\5\ CBO and 
JCT estimated that from 2016 on, between 24 million and 27 million 
people will receive individually purchased coverage through the 
Exchanges, and another 3-4 million people will receive employment-based 
coverage through the Exchanges. In the preamble to the proposed rule, 
we noted that OPM lacks the information necessary to make assumptions 
about the potential enrollment penetration for MSPs on the Exchanges. 
We sought comments on the number of States where MSPs will participate 
and the influence of current market dynamics on enrollment in MSPs, but 
received none. As we have not yet begun contract negotiations or closed 
the application process, we do not have any more information on 
projected enrollment than we had at the time of the proposed rule. As 
such, this analysis will continue to largely reflect qualitative 
analysis, with quantitative analysis where possible.
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    \5\ Congressional Budget Office, Effects of the Affordable Care 
Act on Health Insurance Coverage--February 2013 Baseline, available 
at http://www.cbo.gov/publication/43900 (February 5, 2013).
---------------------------------------------------------------------------

    One primary benefit of health insurance coverage would be an 
increase in longevity or health for newly-enrolled individuals. 
Improved access to health care services has been shown to lead to 
higher use of preventive services and health improvements, such as 
reduced hypertension, improved vision and better self-reported health 
status, as well as better clinical outcomes and lower 
mortality.6 7
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    \6\ Brook, Robert H., John E. Ware, William H. Rogers, Emmett B. 
Keeler, Allyson Ross Davies, Cathy D. Sherbourne, George A. 
Goldberg, Kathleen N. Lohr, Patricia Camp and Joseph P. Newhouse. 
The Effect of Coinsurance on the Health of Adults: Results from the 
RAND Health Insurance Experiment. Santa Monica, CA: RAND 
Corporation, 1984. Finkelstein, A. et al. ``The Oregon Health 
Insurance Experiment: Evidence from the First Year.'' NBER Working 
Paper No. 17190, July 2011. Doyle, J.J. ``Health Insurance, 
Treatment and Outcomes: Using Auto Accidents and Health Shocks.'' 
National Bureau of Economic Research. NBER Working Paper No. 11099, 
February 2005.
    \7\ See the regulatory impact analysis developed by HHS for the 
Exchange Establishment final rule, available at http://cciio.cms.gov 
under ``Regulations and Guidance'', for a comprehensive overview of 
the empirical evidence on the benefits of enhanced availability of 
quality, affordable health insurance, which to great extent applies 
to the MSPP program and this proposed rule as well.
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    Additional benefits would be generated for newly-enrolled 
individuals in the form of improved financial security. There is 
evidence that bankruptcy filings, for instance, decrease in response to 
increases in Medicaid eligibility.\8\ Furthermore, a 2011 analysis by 
the Office of the Assistant Secretary for Planning and Evaluation 
(ASPE) found that most of the uninsured were unable to afford a single 
hospitalization, because 90 percent of the uninsured reported having 
total financial assets below $13,000.\9\ A related benefit would be 
generated by increased access to non-employment-based health insurance, 
which can give individuals greater flexibility to take positions that 
better match their skills or interests.
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    \8\ Gross, T., Notowidigdo, M. ``Health Insurance and the 
Consumer Bankruptcy Decision: Evidence from Medicaid Expansions.'' 
Journal of Public Economics 95 (7-8): 2011.
    \9\ Assistant Secretary for Planning and Evaluation The Value of 
Health Insurance: Few of the Uninsured Have Adequate Resources to 
Pay Potential Hospital Bills: 2011. Washington, DC: U.S. Department 
of Health and Human Services.
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    Expansion of health insurance coverage leads to many benefits, such 
as improved access to health care and improved financial security for 
the newly insured. However, insurance coverage can lead to increased 
utilization of health services for individuals who become newly 
insured. While a portion of this increased utilization may be 
economically inefficient, studies that estimated the effects of 
Medicare found that the cost of this inefficiency is likely more than 
offset by the benefit of risk reduction.10 11
---------------------------------------------------------------------------

    \10\ Finkelstein, A, McKnight R: ``What Did Medicare Do? The 
Initial Impact of Medicare on Mortality and Out Of Pocket Medical 
Spending '' Journal of Public Economics 2008, 92:1644-1668.
    \11\ Finkelstein, A., ``The Aggregate Effects of Health 
Insurance: Evidence from the Introduction of Medicare,'' National 
Bureau of Economic Research. Working Paper No. 11619, Sept, 2005.
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    Administrative costs of the rule would be generated both within OPM 
and by issuers deciding to offer MSPs. The costs that MSPP issuers may 
incur are the same as those of QHPs and, as stated in 45 CFR part 157, 
will include accreditation, network adequacy standards, and quality 
improvement strategy reporting. The costs associated with MSP 
certification offset the costs that issuers would face were they to be 
certified by the State, or HHS on behalf of the State, to offer QHPs 
through the Exchange.
    Finally, some of the most notable effects of Exchanges in general, 
and MSPs in particular, may not be net social costs or benefits, but 
would instead be transfers between members of society--in particular, 
decreases in uncompensated care.
    OPM lacks data to quantify most of these benefits, costs and 
transfers. Perhaps most notably, OPM cannot isolate the effects of MSPs 
from forecasts of the overall effects of the Affordable Care Act 
coverage provisions. We requested comments on our cost-benefit 
analysis, but received no comments.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35; see 5 
CFR part 1320) requires that OMB approve all collections of information 
by a Federal agency from the public before they can be implemented. 
Respondents are not required to respond to any collection of 
information unless it displays a current valid OMB control number. OPM 
will have several collections from MSPP issuers or applicants seeking 
to become MSPP issuers, but we have determined that they are exempt 
from the requirements of the Paperwork Reduction Act. For example, we 
seek to collect information in connection with the MSPP application 
process and reporting requirements under Sec.  800.112. We are also 
requiring issuers to authorize accrediting entities to send 
documentation to OPM under Sec.  800.111. We are setting up a process 
under

[[Page 15586]]

Sec.  800.116 for States to request that OPM reconsider a standard 
applicable to MSPs or MSPP issuers that does not comply with that 
State's laws for QHPs. Under Sec.  800.503, MSPP issuers are directed 
to provide certain written notices, which are third-party disclosures 
under the Paperwork Reduction Act. These collections would generally be 
considered reporting requirements under the Paperwork Reduction Act. 
Moreover, based on responses to the RFI, subsequent conversations with 
both responding health insurance issuers and other health insurance 
issuers subsequent to the RFI, and other practical considerations, OPM 
expects fewer than ten responsible entities to respond to all of the 
collections noted above. For that reason alone, the collections are 
exempt from the Paperwork Reduction Act under 44 U.S.C. 3502(3)(A)(i). 
There may also be other reasons why these collections are exempt from 
these requirements. We sought comments on these assumptions but 
received none.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \12\ requires agencies to 
prepare an initial regulatory flexibility analysis to describe the 
impact of the final rule on small entities, unless the head of the 
agency can certify that the rule would not have a significant economic 
impact on a substantial number of small entities. The RFA generally 
defines a ``small entity'' as (1) a proprietary firm meeting the size 
standards of the Small Business Administration (SBA); (2) a not-for-
profit organization that is not dominant in its field; or (3) a small 
government jurisdiction with a population of less than 50,000. States 
and individuals are not included in the definition of ``small entity.''
---------------------------------------------------------------------------

    \12\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has a significant impact on a 
substantial number of small entities. For purposes of the RFA, small 
entities include small businesses, small non-profit organizations, and 
small government jurisdictions. Small businesses are those with sizes 
below thresholds established by the SBA. With respect to health 
insurers, the SBA size standard is $7.0 million in annual receipts.\13\
---------------------------------------------------------------------------

    \13\ According to the SBA size standards, entities with average 
annual receipts of $7 million or less would be considered small 
entities for North American Industry Classification System (NAICS) 
Code 524114 (Direct Health and Medical Insurance Carriers) (for more 
information, see ``Table of Size Standards Matched To North American 
Industry Classification System Codes,'' effective March 26, 2012, 
U.S. Small Business Administration, available at http://www.sba.gov).
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    OPM does not think that small businesses with annual receipts less 
than $7.0 million would likely have sufficient economies of scale to 
become MSPP issuers or be part of a group of MSPP issuers. Similarly, 
while the Director must enter into an MSPP contract with at least one 
non-profit entity, OPM does not think that small non-profit 
organizations would likely have sufficient economies of scale to become 
MSPP issuers or be part of a group of MSPP issuers.
    OPM does not think that these regulations will have a significant 
economic impact on a substantial number of small businesses with annual 
receipts less than $7.0 million, because there are only a few health 
insurance issuers that could be considered small businesses. Moreover, 
while the Director must enter into an MSPP contract with at least one 
non-profit entity, OPM does not think that these regulations will have 
a significant economic impact on a substantial number of small non-
profit organizations, because few health insurance issuers are small 
non-profit organizations.
    OPM incorporates by reference previous analysis by HHS, which 
provides some insight into the number of health insurance issuers that 
could be small entities. Particularly, as discussed by HHS in the 
Medical Loss Ratio interim final rule (75 FR 74918), few, if any, 
issuers are small enough to fall below the size thresholds for small 
business established by the SBA. In that rule, HHS used a data set 
created from 2009 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, HHS used total Accident 
and Health earned premiums as a proxy for annual receipts. HHS 
estimated that there are 28 small entities with less than $7 million in 
accident and health earned premiums offering individual or group 
comprehensive major medical coverage. OPM concurs with this HHS 
analysis, and, thus, does not think that these regulations will have a 
significant economic impact on a substantial number of small entities.
    Based on the foregoing, OPM is not preparing an analysis for the 
RFA because OPM has determined, and the Director certifies, that these 
regulations will not have a significant economic impact on a 
substantial number of small entities.

Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) \14\ 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a final rule that includes any 
Federal mandate that may result in expenditures in any one year by a 
State, local, or tribal government, in the aggregate, or by the private 
sector, of $100 million in 1995 dollars, updated annually for 
inflation. In 2013, that threshold is approximately $150 million. UMRA 
does not address the total cost of a rule. Rather, it focuses on 
certain categories of costs, mainly those ``Federal mandate'' costs 
resulting from (1) imposing enforceable duties on State, local, or 
tribal governments, or on the private sector; or (2) increasing the 
stringency of conditions in, or decreasing the funding of, State, 
local, or tribal governments under entitlement programs.
---------------------------------------------------------------------------

    \14\ Public Law 104-4.
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    These regulations do not place any Federal mandates on State, 
local, or tribal governments, or on the private sector. This final rule 
would establish the MSPP, a voluntary Federal program that provides 
health insurance issuers the opportunity to contract with OPM to offer 
MSPs on the Exchanges. Section 3 of UMRA excludes from the definition 
of ``Federal mandate'' duties that arise from participation in a 
voluntary Federal program. Accordingly, no analysis under UMRA is 
required.

Federalism

    Executive Order 13132 outlines fundamental principles of 
federalism, and requires the adherence to specific criteria by Federal 
agencies in the process of their formulation and implementation of 
policies that have ``substantial direct effects'' on the States, the 
relationship between the national government and States, or on the 
distribution of power and responsibilities among the various levels of 
government. Federal agencies promulgating regulations that have these 
federalism implications must consult with State and local officials, 
and describe the extent of their consultation and the nature of the 
concerns of State and local officials in the preamble to the 
regulation.
    These regulations have federalism implications, because they have 
direct effects on the States, the relationship between the national 
government and States, or on the distribution of power

[[Page 15587]]

and responsibilities among various levels of government. In particular, 
under Sec.  800.114, OPM may deem a State law to be inconsistent with 
section 1334 of the Affordable Care Act, and, thus, inapplicable to an 
MSP or MSPP issuer. However, in OPM's view, the federalism implications 
of these regulations are substantially mitigated because OPM expects 
that the vast majority of States have laws that are consistent with 
section 1334 of the Affordable Care Act. Furthermore, Sec.  800.116 
sets forth a process for dispute resolution if a State seeks to 
challenge OPM's determination that a State law is inapplicable to an 
MSP or MSPP issuer.
    We received one comment that OPM is not in compliance with 
Executive Order 13132, because we do not defer to more consumer-
protective State standards. However, we respectfully disagree because, 
as noted throughout this rule, OPM defers to more consumer-protective 
State standards. Moreover, 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, OPM has engaged in efforts to consult with and work 
cooperatively with affected State and local officials, including 
attending meetings of the NAIC and consulting with State insurance 
officials on an individual basis. OPM expects to act in a similar 
fashion in enforcing the Affordable Care Act requirements. Throughout 
the process of developing these final regulations, OPM has attempted to 
balance the States' interests in regulating health insurance issuers, 
and the statutory requirement to provide two MSPs in all Exchanges in 
the 50 States and the District of Columbia. By doing so, it is OPM's 
view that it has complied with the requirements of Executive Order 
13132.
    Pursuant to the requirements set forth in section 8(a) of Executive 
Order 13132, and by the signature affixed to these regulations, OPM 
certifies that it has complied with the requirements of Executive Order 
13132 for the attached regulations in a meaningful and timely manner.

Congressional Review Act

    This final rule is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801, et seq.), which specifies that before a rule can 
take effect, the Federal agency promulgating the rule must submit to 
each House of Congress and to the Comptroller General a report 
containing a copy of the rule along with other specified information. 
In accordance with this requirement, OPM has transmitted this rule to 
Congress and the Comptroller General for review.

List of Subjects in 5 CFR Part 800

    Administrative practice and procedure, Health facilities, Health 
insurance, Health professions, Reporting and recordkeeping 
requirements.

U.S. Office of Personnel Management.
John Berry,
Director.
    Accordingly, the U.S. Office of Personnel Management is adding part 
800 to title 45, chapter VIII, Code of Federal Regulations, as follows:

PART 800--MULTI-STATE PLAN PROGRAM

Subpart A--General Provisions and Definitions
Sec.
800.10 Basis and scope.
800.20 Definitions.
Subpart B--Multi-State Plan Program Issuer Requirements
800.101 General requirements.
800.102 Compliance with Federal law.
800.103 Authority to contract with issuers.
800.104 Phased expansion.
800.105 Benefits.
800.106 Cost-sharing limits, advance payments of premium tax 
credits, and cost-sharing reductions.
800.107 Levels of coverage.
800.108 Assessments and user fees.
800.109 Network adequacy.
800.110 Service area.
800.111 Accreditation requirement.
800.112 Reporting requirements.
800.113 Benefit plan material or information.
800.114 Compliance with applicable State law.
800.115 Level playing field.
800.116 Process for dispute resolution.
Subpart C--Premiums Rating Factors, Medical Loss Ratios, and Risk 
Adjustment
800.201 General requirements.
800.202 Rating factors.
800.203 Medical loss ratio.
800.204 Reinsurance, risk corridors, and risk adjustment.
Subpart D--Application and Contracting Procedures
800.301 Application process.
800.302 Review of applications.
800.303 MSPP contracting.
800.304 Term of the contract.
800.305 Contract renewal process.
800.306 Nonrenewal.
Subpart E--Compliance
800.401 Contract performance.
800.402 Contract quality assurance.
800.403 Fraud and abuse.
800.404 Compliance actions.
800.405 Reconsideration of compliance actions.
Subpart F--Appeals by Enrollees of Denials of Claims for Payment or 
Service
800.501 General requirements.
800.502 MSPP issuer internal claims and appeals.
800.503 External review.
800.504 Judicial review.
Subpart G--Miscellaneous
800.601 Reservation of authority.
800.602 Consumer choice with respect to certain services.

    Authority: Sec. 1334 of Pub. L. 111-148, 124 Stat. 119; Pub. L. 
111-152, 124 Stat. 1029.

Subpart A--General Provisions and Definitions


Sec.  800.10  Basis and scope.

    (a) Basis. This part is based on the following sections of title I 
of the Affordable Care Act:
    1001. Amendments to the Public Health Service Act.
    1302. Essential Health Benefits Requirements.
    1311. Affordable Choices of Health Benefit Plans.
    1324. Level Playing Field.
    1334. Multi-State Plans.
    1341. Transitional Reinsurance Program for Individual Market in 
Each State.
    1342. Establishment of Risk Corridors for Plans in Individual and 
Small Group Markets.
    1343. Risk Adjustment.
    (b) Scope. This part establishes standards for health insurance 
issuers to contract with the United States Office of Personnel 
Management (OPM) to offer multi-State plans to provide health insurance 
coverage on Exchanges for each State. It also establishes standards for 
appeal of a decision by OPM affecting the issuer's participation in the 
Multi-State Plan Program (MSPP) and standards for an enrollee in a 
multi-State plan (MSP) to appeal denials of payment or services by an 
MSPP issuer.


Sec.  800.20  Definitions.

    For purposes of this part:
    Actuarial value (AV) has the meaning given that term in 45 CFR 
156.20.
    Affordable Care Act means the Patient Protection and Affordable 
Care Act (Pub. L. 111-148), as amended by the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152).
    Applicant means an issuer or group of issuers that has submitted an 
application to OPM to be considered for participation in the Multi-
State Plan Program.
    Benefit plan material or information means explanations or 
descriptions, whether printed or electronic, that

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describe a health insurance issuer's products. The term does not 
include a policy or contract for health insurance coverage.
    Cost sharing has the meaning given that term in 45 CFR 155.20.
    Director means the Director of the United States Office of 
Personnel Management.
    EHB-benchmark plan has the meaning given that term in 45 CFR 
156.20.
    Exchange means a governmental agency or non-profit entity that 
meets the applicable requirements of 45 CFR part 155 and makes 
qualified health plans (QHPs) and MSPs available to qualified 
individuals and qualified employers. Unless otherwise identified, this 
term refers to State Exchanges, regional Exchanges, subsidiary 
Exchanges, and a Federally-facilitated Exchange.
    Federal Employees Health Benefits Program or FEHBP means the health 
benefits program administered by the United States Office of Personnel 
Management pursuant to chapter 89 of title 5, United States Code.
    Group of issuers means:
    (1) A group of health insurance issuers who are affiliated either 
by common ownership and control or by common use of a nationally 
licensed service mark (as defined in this paragraph); or
    (2) An affiliation of health insurance issuers and an entity that 
is not an issuer but that owns a nationally licensed service mark (as 
defined in this paragraph).
    Health insurance coverage means benefits consisting of medical care 
(provided directly, through insurance or reimbursement, or otherwise) 
under any hospital or medical service policy or certificate, hospital 
or medical service plan contract, or HMO contract offered by a health 
insurance issuer. Health insurance coverage includes group health 
insurance coverage, individual health insurance coverage, and short-
term, limited duration insurance.
    Health insurance issuer or issuer means an insurance company, 
insurance service, or insurance organization (including an HMO) that is 
required to be licensed to engage in the business of insurance in a 
State and that is subject to State law that regulates insurance (within 
the meaning of section 514(b)(2) of the Employee Retirement Income 
Security Act (ERISA)). This term does not include a group health plan 
as defined in 45 CFR 146.145(a).
    HHS means the United States Department of Health and Human 
Services.
    Level of coverage means one of four standardized actuarial values 
of plan coverage as defined by section 1302(d)(1) of the Affordable 
Care Act.
    Licensure means the authorization obtained from the appropriate 
State official or regulatory authority to offer health insurance 
coverage in the State.
    Multi-State Plan or MSP means a health plan that is offered under a 
contract between OPM and the MSPP issuer pursuant to section 1334 of 
the Affordable Care Act and that meets the requirements of this part.
    Multi-State Plan Program or MSPP means the program administered by 
OPM pursuant to section 1334 of the Affordable Care Act.
    Multi-State Plan Program issuer or MSPP issuer means a health 
insurance issuer or group of issuers (as defined in this section) that 
has a contract with OPM to offer health plans pursuant to section 1334 
of the Affordable Care Act and meets the requirements of this part.
    Nationally licensed service mark means a word, name, symbol, or 
device, or any combination thereof, that an issuer or group of issuers 
uses consistently nationwide to identify itself.
    Non-profit entity means:
    (1) An organization that is incorporated under State law as a non-
profit entity and licensed under State law as a health insurance 
issuer; or
    (2) A group of health insurance issuers licensed under State law, a 
substantial portion of which are incorporated under State law as non-
profit entities.
    OPM means the United States Office of Personnel Management.
    Percentage of total allowed cost of benefits has the meaning given 
that term in 45 CFR 156.20.
    Plan year means a consecutive 12-month period during which a health 
plan provides coverage for health benefits. A plan year may be a 
calendar year or otherwise.
    Prompt payment means a requirement imposed on a health insurance 
issuer to pay a provider or enrollee for a claimed benefit or service 
within a defined time period, including the penalty or consequence 
imposed on the issuer for failure to meet the requirement.
    Qualified Health Plan or QHP means a health plan that has in effect 
a certification that it meets the standards described in subpart C of 
45 CFR part 156 issued or recognized by each Exchange through which 
such plan is offered pursuant to the process described in subpart K of 
45 CFR part 155.
    Rating means the process, including rating factors, numbers, 
formulas, methodologies, and actuarial assumptions, used to set 
premiums for a health plan.
    Secretary means the Secretary of the Department of Health and Human 
Services.
    SHOP means a Small Business Health Options Program operated by an 
Exchange through which a qualified employer can provide its employees 
and their dependents with access to one or more qualified health plans 
(QHPs).
    Silver plan variation has the meaning given that term in 45 CFR 
156.400.
    Small employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least one but not more than 100 employees on business 
days during the preceding calendar year and who employs at least one 
employee on the first day of the plan year. In the case of plan years 
beginning before January 1, 2016, a State may elect to define small 
employer by substituting ``50 employees'' for ``100 employees.''
    Standard plan has the meaning given that term in 45 CFR 156.400.
    State means each of the 50 States or the District of Columbia.
    State Insurance Commissioner means the commissioner or other chief 
insurance regulatory official of a State.

Subpart B--Multi-State Plan Program Issuer Requirements


Sec.  800.101  General requirements.

    An MSPP issuer must:
    (a) Licensed. Be licensed as a health insurance issuer in each 
State where it offers health insurance coverage;
    (b) Contract with OPM. Have a contract with OPM pursuant to this 
part;
    (c) Required levels of coverage. Offer levels of coverage as 
required by Sec.  800.107;
    (d) Eligibility and enrollment. MSPs and MSPP issuers must meet the 
same requirements for eligibility, enrollment, and termination of 
coverage as those that apply to QHPs and QHP issuers pursuant to 45 CFR 
part 155, subparts D, E, and H, and 45 CFR 156.250, 156.260, 156.265, 
156.270, and 156.285;
    (e) Applicable to each MSP. Ensure that each of its MSPs meets the 
requirements of this part;
    (f) Compliance. Comply with all standards set forth in this part;
    (g) OPM direction and other legal requirements. Timely comply with 
OPM instructions and directions and with other applicable law; and
    (h) Other requirements. Meet such other requirements as determined 
appropriate by OPM, in consultation with HHS, pursuant to section 
1334(b)(4) of the Affordable Care Act.

[[Page 15589]]

    (i) Non-discrimination. MSPs and MSPP issuers must comply with 
applicable Federal and State non-discrimination laws, including the 
standards set forth in 45 CFR 156.125 and 156.200(e).


Sec.  800.102  Compliance with Federal law.

    (a) Public Health Service Act. As a condition of participation in 
the MSPP, an MSPP issuer must comply with applicable provisions of part 
A of title XXVII of the PHS Act. Compliance shall be determined by the 
Director.
    (b) Affordable Care Act. As a condition of participation in the 
MSPP, an MSPP issuer must comply with applicable provisions of title I 
of the Affordable Care Act. Compliance shall be determined by the 
Director.


Sec.  800.103  Authority to contract with issuers.

    (a) General. OPM may enter into contracts with health insurance 
issuers to offer at least two MSPs on Exchanges and SHOPs in each 
State, without regard to any statutes that would otherwise require 
competitive bidding.
    (b) Non-profit entity. In entering into contracts with health 
insurance issuers to offer MSPs, OPM will enter into a contract with at 
least one non-profit entity as defined in Sec.  800.20 of this part.
    (c) Group of issuers. Any contract to offer an MSP may be with a 
group of issuers as defined in Sec.  800.20.
    (d) Individual and group coverage. The contracts will provide for 
individual health insurance coverage and for group health insurance 
coverage for small employers.


Sec.  800.104  Phased expansion.

    (a) Phase-in. OPM may enter into a contract with a health insurance 
issuer to offer an MSP if the health insurance issuer agrees that:
    (1) With respect to the first year for which the health insurance 
issuer offers an MSP, the health insurance issuer will offer the MSP in 
at least 60 percent of the States;
    (2) With respect to the second such year, the health insurance 
issuer will offer the MSP in at least 70 percent of the States;
    (3) With respect to the third such year, the health insurance 
issuer will offer the MSP in at least 85 percent of the States; and
    (4) With respect to each subsequent year, the health insurance 
issuer will offer the MSP in all States.
    (b) Partial coverage within a State. OPM may enter into a contract 
with an MSPP issuer even if the MSPP issuer's MSPs for a State cover 
fewer than all the service areas specified for that State pursuant to 
Sec.  800.110. For each State in which the MSPP issuer offers partial 
coverage, the MSPP issuer must submit a plan for offering coverage 
throughout the State. OPM will monitor the MSPP issuer's progress in 
implementing the plan as part of its contract compliance activities 
under subpart E of this part.
    (c) Participation in SHOPs. (1) An MSPP issuer's participation in 
the Federally-facilitated SHOP must be consistent with the requirements 
for QHP issuers specified in 45 CFR 156.200(g).
    (2) An MSPP issuer must comply with State standards governing 
participation in State-based SHOPs, consistent with Sec.  800.114. For 
these State-based SHOP standards, OPM retains discretion to allow an 
MSPP issuer to phase-in SHOP participation in States pursuant to 
section 1334(e) of the Affordable Care Act.
    (d) Licensed where offered. OPM may enter into a contract with an 
MSPP issuer who is not licensed in every State, provided that the 
issuer is licensed in every State where it offers MSP coverage through 
any Exchanges in that State and demonstrates to OPM that it is making a 
good faith effort to become licensed in every State consistent with the 
timeframe in paragraph (a) of this section.


Sec.  800.105  Benefits.

    (a) Benefits package. (1) An MSPP issuer must offer a uniform 
benefits package, including the essential health benefits (EHB) 
described in section 1302 of the Affordable Care Act, for each MSP 
within a State.
    (2) The benefits package referred to in paragraph (a)(1) of this 
section must comply with section 1302 of the Affordable Care Act, as 
well as any applicable standards set by OPM or HHS.
    (b) Benefits package options. (1) An MSPP issuer must offer a 
benefits package, in all States, that is substantially equal to:
    (i) The EHB-benchmark plan in each State in which it operates; or
    (ii) Any EHB-benchmark plan selected by OPM under paragraph (c) of 
this section.
    (2) An issuer applying to participate in the MSPP must select one 
of the two benefits package options described in paragraph (b)(1) of 
this section in its application.
    (3) An issuer must comply with any State standards relating to 
substitution of benchmark benefits or standard benefit designs.
    (c) OPM selection of benchmark plans. (1) The OPM-selected EHB-
benchmark plans are the three largest Federal Employees Health Benefits 
Program (FEHBP) plan options, as identified by HHS pursuant to section 
1302(b) of the Affordable Care Act, and as supplemented pursuant to 
paragraphs (c)(2) through (c)(4) of this section.
    (2) Any EHB-benchmark plan selected by OPM under paragraph (c)(1) 
of this section lacking coverage of pediatric oral services or 
pediatric vision services must be supplemented by the addition of the 
entire category of benefits from the largest Federal Employee Dental 
and Vision Insurance Program (FEDVIP) dental or vision plan options, 
respectively, pursuant to 45 CFR 156.110(b) and section 1302(b) of the 
Affordable Care Act.
    (3) An MSPP issuer must follow State definitions where the State 
chooses to specifically define the habilitative services and devices 
category pursuant to 45 CFR 156.110(f). In the case of any State that 
chooses not to define this category, if any OPM-selected EHB-benchmark 
plan lacks coverage of habilitative services and devices, OPM may 
determine what habilitative service and devices are to be included in 
that EHB-benchmark plan.
    (4) Any EHB-benchmark plan selected by OPM under paragraph (c)(1) 
of this section must include, for each State, any State-required 
benefits enacted before December 31, 2011, that are included in the 
State's EHB-benchmark plan as described in paragraph (b)(1)(i) of this 
section, or specific to the market in which the plan is offered.
    (d) OPM approval. An MSPP issuer's benefits package, including its 
prescription drug list, must be submitted for approval by OPM, which 
will review a benefits package proposed by an MSPP issuer and determine 
if it is substantially equal to an EHB-benchmark plan described in 
paragraph (b)(1) of this section, pursuant to standards set forth by 
OPM or HHS, including 45 CFR 156.115, 156.122, and 156.125.
    (e) State payments for additional State-required benefits. If a 
State requires that benefits in addition to the benchmark package be 
offered to MSP enrollees in that State, then pursuant to section 
1334(c)(2) of the Affordable Care Act, the State must assume the cost 
of such additional benefits by making payments either to the enrollee 
or on behalf of the enrollee to the MSPP issuer.


Sec.  800.106  Cost-sharing limits, advance payments of premium tax 
credits, and cost-sharing reductions.

    (a) Cost-sharing limits. For each MSP it offers, an MSPP issuer 
must ensure that the cost-sharing provisions of the

[[Page 15590]]

MSP comply with section 1302(c) of the Affordable Care Act, as well as 
any applicable standards set by OPM or HHS.
    (b) Advance payments of premium tax credits and cost-sharing 
reductions. For each MSP it offers, an MSPP issuer must ensure that an 
eligible individual receives the benefit of advance payments of premium 
tax credits under section 36B of the Internal Revenue Code and the 
cost-sharing reductions under section 1402 of the Affordable Care Act. 
An MSPP issuer must also comply with any applicable standards set by 
OPM or HHS.


Sec.  800.107  Levels of coverage.

    (a) Silver and gold levels of coverage required. An MSPP issuer 
must offer at least one MSP at the silver level of coverage and at 
least one MSP at the gold level of coverage on each Exchange in which 
the issuer is certified to offer an MSP pursuant to a contract with 
OPM.
    (b) Bronze or platinum metal levels of coverage permitted. Pursuant 
to a contract with OPM, an MSPP issuer may offer one or more MSPs at 
the bronze level of coverage or the platinum level of coverage, or 
both, on any Exchange or SHOP in any State.
    (c) Child-only plans. For each level of coverage, the MSPP issuer 
must offer a child-only plan at the same level of coverage as any 
health insurance coverage offered to individuals who, as of the 
beginning of the plan year, have not attained the age of 21.
    (d) Plan variations for the reduction or elimination of cost-
sharing. An MSPP issuer must comply with section 1402 of the Affordable 
Care Act, as well as any applicable standards set by OPM or HHS.
    (e) OPM approval. An MSPP issuer must submit the levels of coverage 
plans and plan variations to OPM for review and approval by OPM.


Sec.  800.108  Assessments and user fees.

    (a) Discretion to charge assessment and user fees. Beginning in 
2015, OPM may require an MSPP issuer to pay an assessment or user fee 
as a condition of participating in the MSPP.
    (b) Determination of amount. The amount of the assessment or user 
fee charged by OPM for a plan year is the amount determined necessary 
by OPM to meet the costs of OPM's functions under the Affordable Care 
Act for a plan year, including but not limited to such functions as 
entering into contracts with, certifying, recertifying, decertifying, 
and overseeing MSPs and MSPP issuers for that plan year. The amount of 
the assessment or user fee charged by OPM will be offset against the 
assessment or user fee amount required by any State-based Exchange or 
Federally-facilitated Exchange such that the total of all assessments 
and user fees paid by the MSPP issuer for the year for the MSP shall be 
no greater than nor less than the amount of the assessment or user fee 
paid by QHP issuers in that State-based Exchange or Federally-
facilitated Exchange for that year.
    (c) Process for collecting MSPP assessment or user fees. OPM may 
require an MSPP issuer to make payment of the MSPP assessment or user 
fee amount directly to OPM, and the MSPP issuer will deduct the MSPP 
assessment or user fee required under paragraph (a) of this section 
from the amount for any State-based Exchange or Federally-facilitated 
Exchange and the MSPP issuer would forward the remainder of the payment 
to the State or to HHS, as appropriate.


Sec.  800.109  Network adequacy.

    (a) General requirement. An MSPP issuer must ensure that the 
provider network of each of its MSPs, as available to all enrollees, 
meets the following standards:
    (1) Maintains a network that is sufficient in number and types of 
providers to assure that all services will be accessible without 
unreasonable delay;
    (2) Is consistent with the network adequacy provisions of section 
2702(c) of the Public Health Service Act; and
    (3) Includes essential community providers in compliance with 45 
CFR 156.235.
    (b) Provider directory. An MSPP issuer must make its provider 
directory for an MSP available to the Exchange for publication online 
pursuant to guidance from the Exchange and to potential enrollees in 
hard copy, upon request. In the provider directory, an MSPP issuer must 
identify providers that are not accepting new patients.
    (c) OPM guidance. OPM will issue guidance containing the criteria 
and standards that it will use to determine the adequacy of a provider 
network.


Sec.  800.110  Service area.

    An MSPP issuer must offer an MSP within one or more service areas 
in a State defined by each Exchange pursuant to 45 CFR 155.1055. If an 
Exchange permits issuers to define their service areas, an MSPP issuer 
must obtain OPM's approval for its proposed service areas. Pursuant to 
Sec.  800.104, OPM may enter into a contract with an MSPP issuer even 
if the MSPP issuer's MSPs for a State cover fewer than all the service 
areas specified for that State. MSPs will follow the same standards for 
service areas for QHPs pursuant to 45 CFR 155.1055. As part of its 
contract compliance activities under subpart E of this part, OPM will 
consult with State regulators and the State Exchange to monitor the 
MSPP issuer's progress expanding coverage statewide and will ensure 
that MSPs meet QHP requirements in 45 CFR 155.1055(b).


Sec.  800.111  Accreditation requirement.

    (a) General requirement. An MSPP issuer must be or become 
accredited consistent with the requirements for QHP issuers specified 
in section 1311 of the Affordable Care Act and 45 CFR 156.275(a).
    (b) Release of survey. An MSPP issuer must authorize the 
accrediting entity that accredits the MSPP issuer to release to OPM and 
to the Exchange a copy of its most recent accreditation survey, 
together with any survey-related information that OPM or an Exchange 
may require, such as corrective action plans and summaries of findings.
    (c) Timeframe for accreditation. An MSPP issuer that is not 
accredited as of the date that it enters into a contract with OPM must 
become accredited within the timeframe established by OPM as authorized 
by 45 CFR 155.1045.


Sec.  800.112  Reporting requirements.

    (a) OPM specification of reporting requirements. OPM will specify 
the data and information that must be reported by an MSPP issuer, 
including data permitted or required by the Affordable Care Act and 
such other data as OPM may determine necessary for the oversight and 
administration of the MSPP. OPM will also specify the form, manner, 
processes, and frequency for the reporting of data and information. The 
Director may require that MSPP issuers submit claims payment and 
enrollment data to facilitate OPM's oversight and administration of the 
MSPP in a manner similar to the FEHBP.
    (b) Quality and quality improvement standards. An MSPP issuer must 
comply with any standards required by OPM for reporting quality and 
quality improvement activities, including but not limited to 
implementation of a quality improvement strategy, disclosure of quality 
measures to enrollees and prospective enrollees, reporting of pediatric 
quality measures, and implementation of rating and enrollee 
satisfaction surveys, which will be similar to standards under section 
1311(c)(1)(E), (H), and (I), (c)(3), and (c)(4) of the Affordable Care 
Act.

[[Page 15591]]

Sec.  800.113  Benefit plan material or information.

    (a) Compliance with Federal and State law. An MSPP issuer must 
comply with Federal and State laws relating to benefit plan material or 
information, including the provisions of this section and guidance 
issued by OPM specifying its standards, process, and timeline for 
approval of benefit plan material or information.
    (b) General standards for MSP applications and notices. An MSPP 
issuer must provide all applications and notices to enrollees in 
accordance with the standards described in 45 CFR 155.205(c). OPM may 
establish additional standards to meet the needs of MSP enrollees.
    (c) Accuracy. An MSPP issuer is responsible for the accuracy of its 
benefit plan material or information.
    (d) Truthful, not misleading, no material omissions, and plain 
language. All benefit plan material or information must be:
    (1) Truthful, not misleading, and without material omissions; and
    (2) Written in plain language, as defined in section 1311(e)(3)(B) 
of the Affordable Care Act.
    (e) Uniform explanation of coverage documents and standardized 
definitions. An MSPP issuer must comply with the provisions of section 
2715 of the PHS Act and regulations issued to implement that section.
    (f) OPM review and approval of benefit plan material or 
information. OPM may request an MSPP issuer to submit to OPM benefit 
plan material or information, as defined in Sec.  800.20. OPM reserves 
the right to review and approve benefit plan material or information to 
ensure that an MSPP issuer complies with Federal and State laws, and 
the standards prescribed by OPM with respect to benefit plan material 
or information.
    (g) Statement on certification by OPM. An MSPP issuer may include a 
statement in its benefit plan material or information that:
    (1) OPM has certified the MSP as eligible to be offered on the 
Exchange; and
    (2) OPM monitors the MSP for compliance with all applicable law.


Sec.  800.114  Compliance with applicable State law.

    (a) Compliance with State law. An MSPP issuer must, with respect to 
each of its MSPs, generally comply with State law pursuant to section 
1334(b)(2) of the Affordable Care Act. However, the MSPs and MSPP 
issuers are not subject to State laws that:
    (1) Are inconsistent with section 1334 of the Affordable Care Act 
or this part;
    (2) Prevent the application of a requirement of part A of title 
XXVII of the PHS Act; or
    (3) Prevent the application of a requirement of title I of the 
Affordable Care Act.
    (b) Determination of inconsistency. After consultation with the 
State and HHS, OPM reserves the right to determine, in its judgment, as 
effectuated through an MSPP contract, these regulations, or OPM 
guidance, whether the standards set forth in paragraph (a) of this 
section are satisfied with respect to particular State laws.


Sec.  800.115  Level playing field.

    An MSPP issuer must, with respect to each of its MSPs, meet the 
following requirements in order to ensure a level playing field:
    (a) Guaranteed renewal. Guarantee that an enrollee can renew 
enrollment in an MSP in compliance with sections 2703 and 2742 of the 
PHS Act;
    (b) Rating. In proposing premiums for OPM approval, use only the 
rating factors permitted under section 2701 of the PHS Act and State 
law;
    (c) Preexisting conditions. Not impose any preexisting condition 
exclusion and comply with section 2704 of the PHS Act;
    (d) Non-discrimination. Comply with section 2705 of the PHS Act;
    (e) Quality improvement and reporting. Comply with all Federal and 
State quality improvement and reporting requirements. Quality 
improvement and reporting means quality improvement as defined in 
section 1311(h) of the Affordable Care Act and quality improvement 
plans or strategies required under State law, and quality reporting as 
defined in section 2717 of the PHS Act and section 1311(g) of the 
Affordable Care Act. Quality improvement also includes activities such 
as, but not limited to, implementation of a quality improvement 
strategy, disclosure of quality measures to enrollees and prospective 
enrollees, and reporting of pediatric quality measures, which will be 
similar to standards under section 1311(c)(1)(E), (H), and (I) of the 
Affordable Care Act;
    (f) Fraud and abuse. Comply with all Federal and State fraud and 
abuse laws;
    (g) Licensure. Be licensed in every State in which it offers an 
MSP;
    (h) Solvency and financial requirements. Comply with the solvency 
standards set by each State in which it offers an MSP;
    (i) Market conduct. Comply with the market conduct standards of 
each State in which it offers an MSP;
    (j) Prompt payment. Comply with applicable State law in negotiating 
the terms of payment in contracts with its providers and in making 
payments to claimants and providers;
    (k) Appeals and grievances. Comply with Federal standards under 
section 2719 of the PHS Act for appeals and grievances relating to 
adverse benefit determinations, as described in subpart F of this part;
    (l) Privacy and confidentiality. Comply with all Federal and State 
privacy and security laws and requirements, including any standards 
required by OPM in guidance or contract, which will be similar to the 
standards contained in 45 CFR part 162 and applicable State law; and
    (m) Benefit plan material or information. Comply with Federal and 
State law, including Sec.  800.113.


Sec.  800.116  Process for dispute resolution.

    (a) Determinations about applicability of State law under section 
1334(b)(2) of the Affordable Care Act. In the event of a dispute about 
the applicability to an MSP or MSPP issuer of a State law, the State 
may request that OPM reconsider a determination that an MSP or MSPP 
issuer is not subject to such State law.
    (b) Required demonstration. A State making a request under 
paragraph (a) of this section must demonstrate that the State law at 
issue:
    (1) Is not inconsistent with section 1334 of the Affordable Care 
Act or this part;
    (2) Does not prevent the application of a requirement of part A of 
title XXVII of the PHS Act; and
    (3) Does not prevent the application of a requirement of title I of 
the Affordable Care Act.
    (c) Request for review. The request must be in writing and include 
contact information, including the name, telephone number, email 
address, and mailing address of the person or persons whom OPM may 
contact regarding the request for review. The request must be in such 
form, contain such information, and be submitted in such manner and 
within such timeframe as OPM may prescribe.
    (1) The requester may submit to OPM any relevant information to 
support its request.
    (2) OPM may obtain additional information relevant to the request 
from any source as it may, in its judgment, deem necessary. OPM will 
provide the requester with a copy of any additional information it 
obtains and provide an opportunity for the requester to respond 
(including by submission of additional information or explanation).
    (3) OPM will issue a written decision within 60 calendar days after 
receiving the written request, or after the due date

[[Page 15592]]

for a response under paragraph (c)(2) of this section, whichever is 
later, unless a different timeframe is agreed upon.
    (4) OPM's written decision will constitute final agency action that 
is subject to review under the Administrative Procedure Act in the 
appropriate U.S. district court. Such review is limited to the record 
that was before OPM when OPM made its decision.

Subpart C--Premiums, Rating Factors, Medical Loss Ratios, and Risk 
Adjustment


Sec.  800.201  General requirements.

    (a) Premium negotiation. OPM will negotiate annually with an MSPP 
issuer, on a State by State basis, the premiums for each MSP offered by 
that issuer in that State. Such negotiations may include negotiations 
about the cost-sharing provisions of an MSP.
    (b) Duration. Premiums will remain in effect for the plan year.
    (c) Guidance on rate development. OPM will issue guidance 
addressing methods for the development of premiums for the MSPP. That 
guidance will follow State rating standards generally applicable in a 
State, to the greatest extent practicable.
    (d) Calculation of actuarial value. An MSPP issuer must calculate 
actuarial value in the same manner as QHP issuers under section 1302(d) 
of the Affordable Care Act, as well as any applicable standards set by 
OPM or HHS.
    (e) OPM rate review process. An MSPP issuer must participate in the 
rate review process established by OPM to negotiate rates for MSPs. The 
rate review process established by OPM will be similar to the process 
established by HHS pursuant to section 2794 of the PHS Act and 
disclosure and review standards established under 45 CFR part 154.
    (f) State Effective Rate Review. With respect to its MSPs, an MSPP 
issuer is subject to a State's rate review process, including a State's 
Effective Rate Review Program established by HHS pursuant to section 
2794 of the PHS Act and 45 CFR part 154. In the event HHS is reviewing 
rates for a State pursuant to section 2794 of the PHS Act, HHS will 
defer to OPM's judgment regarding the MSPs' proposed rate increase. If 
a State withholds approval of an MSP and OPM determines, in its 
discretion, that the State's action would prevent OPM from operating 
the MSPP, OPM retains authority to make the final decision to approve 
rates for participation in the MSPP, notwithstanding the absence of 
State approval.
    (g) Single risk pool. An MSPP issuer must consider all enrollees in 
an MSP to be in the same risk pool as all enrollees in all other health 
plans in the individual market or the small group market, respectively, 
in compliance with section 1312(c) of the Affordable Care Act, 45 CFR 
156.80, and any applicable Federal or State laws and regulations 
implementing that section.


Sec.  800.202  Rating factors.

    (a) Permissible rating factors. In proposing premiums for each MSP, 
an MSPP issuer must use only the rating factors permitted under section 
2701 of the PHS Act.
    (b) Application of variations based on age or tobacco use. Rating 
variations permitted under section 2701 of the PHS Act must be applied 
by an MSPP issuer based on the portion of the premium attributable to 
each family member covered under the coverage in accordance with any 
applicable Federal or State laws and regulations implementing section 
2701(a) of the PHS Act.
    (c) Age rating. For age rating, an MSPP issuer must use the ratio 
established by the State in which the MSP is offered, if it is less 
than 3:1.
    (1) Age bands. An MSPP issuer must use the uniform age bands 
established under HHS regulations implementing section 2701(a) of the 
PHS Act.
    (2) Age curves. An MSPP issuer must use the age curves established 
under HHS regulations implementing section 2701(a) of the PHS Act, or 
age curves established by a State pursuant to HHS regulations.
    (d) Rating areas. An MSP must use the rating areas appropriate to 
the State in which the MSP is offered and established under HHS 
regulations implementing section 2701(a) if the PHS Act.
    (e) Tobacco rating. An MSPP issuer must apply tobacco use as a 
rating factor in accordance with any applicable Federal or State laws 
and regulations implementing section 2701(a) of the PHS Act.
    (f) Wellness programs. An MSPP issuer must comply with any 
applicable Federal or State laws and regulations implementing section 
2702 of the PHS Act.


Sec.  800.203  Medical loss ratio.

    (a) Required medical loss ratio. An MSPP issuer must attain:
    (1) The medical loss ratio (MLR) required under section 2718 of the 
PHS Act and regulations promulgated by HHS; and
    (2) Any MSP-specific MLR that OPM may set in the best interests of 
MSP enrollees or that is necessary to be consistent with a State's 
requirements with respect to MLR.
    (b) Consequences of not attaining required medical loss ratio. If 
an MSPP issuer fails to attain an MLR set forth in paragraph (a) of 
this section, OPM may take any appropriate action, including but not 
limited to intermediate sanctions, such as suspension of marketing, 
decertifying an MSP in one or more States, or terminating an MSPP 
issuer's contract pursuant to Sec.  800.404.


Sec.  800.204  Reinsurance, risk corridors, and risk adjustment.

    (a) Transitional reinsurance program. An MSPP issuer must comply 
with section 1341 of the Affordable Care Act, 45 CFR part 153, and any 
applicable Federal or State regulations under section 1341 that set 
forth requirements to implement the transitional reinsurance program 
for the individual market.
    (b) Temporary risk corridors program. An MSPP issuer must comply 
with section 1342 of the Affordable Care Act, 45 CFR part 153, and any 
applicable Federal regulations under section 1342 that set forth 
requirements to implement the risk corridor program.
    (c) Risk adjustment program. An MSPP issuer must comply with 
section 1343 of the Affordable Care Act, 45 CFR part 153, and any 
applicable Federal or State regulations under section 1343 that set 
forth requirements to implement the risk adjustment program.

Subpart D--Application and Contracting Procedures


Sec.  800.301  Application process.

    (a) Acceptance of applications. Without regard to section 6101(b)-
(d) of title 41, United States Code, or any other statute requiring 
competitive bidding, OPM may consider annually applications from health 
insurance issuers, including groups of health insurance issuers as 
defined in Sec.  800.20, to participate in the MSPP. If OPM determines 
that it is not beneficial for the MSPP to consider new applications for 
an upcoming year, OPM will issue a notice to that effect.
    (b) Form and manner of applications. An applicant must submit to 
OPM, in the form and manner and in accordance with the timeline 
specified by OPM, the information requested by OPM for determining 
whether an applicant meets the requirements of this part.


Sec.  800.302  Review of applications.

    (a) Determinations. OPM will determine if an applicant meets the 
requirements of this part. If OPM determines that an applicant meets 
the

[[Page 15593]]

requirements of this part, OPM may accept the applicant to enter into 
contract negotiations with OPM to participate in the MSPP.
    (b) Requests for additional information. OPM may request additional 
information from an applicant before making a decision about whether to 
enter into contract negotiations with that applicant to participate in 
the MSPP.
    (c) Declination of application. If, after reviewing an application 
to participate in the MSPP, OPM declines to enter into contract 
negotiations with the applicant, OPM will inform the applicant in 
writing of the reasons for that decision.
    (d) Discretion. The decision whether to enter into contract 
negotiations with a health insurance issuer who has applied to 
participate in the MSPP is committed to OPM's discretion.
    (e) Impact on future applications. OPM's declination of an 
application to participate in the MSPP will not preclude the applicant 
from submitting an application for a subsequent year to participate in 
the MSPP.


Sec.  800.303  MSPP contracting.

    (a) Participation in MSPP. To become an MSPP issuer, the applicant 
and the Director or the Director's designee must sign a contract that 
meets the requirements of this part.
    (b) Standard contract. OPM will establish a standard contract for 
the MSPP.
    (c) Premiums. OPM and the applicant will negotiate the premiums for 
an MSPP for each plan year in accordance with the provisions of subpart 
C of this part.
    (d) Benefit packages. OPM must approve the applicant's benefit 
packages for an MSP.
    (e) Additional terms and conditions. OPM may elect to negotiate 
with an applicant such additional terms, conditions, and requirements 
that:
    (1) Are in the interests of MSP enrollees; or
    (2) OPM determines to be appropriate.
    (f) Certification to offer health insurance coverage.
    (1) For each plan year, an MSPP contract will contain a 
certification that specifies the Exchanges in which the MSPP issuer is 
authorized to offer an MSP, as well as the specific benefit packages 
authorized to be offered on each Exchange and the premiums to be 
charged for each benefit package on each Exchange.
    (2) An MSPP issuer may not offer an MSP on an Exchange unless its 
MSPP contract with OPM includes a certification authorizing the MSPP 
issuer to offer the MSP on that Exchange in accordance with paragraph 
(f)(1) of this section.


Sec.  800.304  Term of the contract.

    (a) Term of a contract. The term of the contract will be specified 
in the MSPP contract and must be for a period of at least the 12 
consecutive months defined as the plan year.
    (b) Plan year. The plan year is a consecutive 12-month period 
during which an MSP provides coverage for health benefits. A plan year 
may be a calendar year or otherwise.


Sec.  800.305  Contract renewal process.

    (a) Renewal. To continue participating in the MSPP, an MSPP issuer 
must provide to OPM, in the form and manner and in accordance with the 
timeline prescribed by OPM, the information requested by OPM for 
determining whether the MSPP issuer continues to meet the requirements 
of this part.
    (b) OPM decision. Subject to paragraph (c) of this section, OPM 
will renew the MSPP contract of an MSPP issuer who timely submits the 
information described in paragraph (a).
    (c) OPM discretion not to renew. OPM may decline to renew the 
contract of an MSPP issuer if:
    (1) OPM and the MSPP issuer fail to agree on premiums and benefits 
for an MSP for the subsequent plan year;
    (2) The MSPP issuer has engaged in conduct described in Sec.  
800.404(a) of this part; or
    (3) OPM determines that the MSPP issuer will be unable to comply 
with a material provision of section 1334 of the Affordable Care Act or 
this part.
    (d) Failure to agree on premiums and benefits. Except as otherwise 
provided in this part, if an MSPP issuer has complied with paragraph 
(a) of this section and OPM and the MSPP issuer fail to agree on 
premiums and benefits for an MSP on one or more Exchanges for the 
subsequent plan year by the date required by OPM, either party may 
provide notice of nonrenewal pursuant to Sec.  800.306, or OPM may in 
its discretion withdraw the certification of that MSP on the Exchange 
or Exchanges for that plan year. In addition, if OPM and the MSPP 
issuer fail to agree on benefits and premiums for an MSP on one or more 
Exchanges by the date set by OPM and in the event of no action (no 
notice of nonrenewal or renewal) by either party, the MSPP contract 
will be renewed and the existing premiums and benefits for that MSP on 
that Exchange or Exchanges will remain in effect for the subsequent 
plan year.


Sec.  800.306  Nonrenewal.

    (a) Definition of nonrenewal. As used in this subpart and subpart E 
of this part, ``nonrenewal'' means a decision by either OPM or an MSPP 
issuer not to renew an MSPP contract.
    (b) Notice required. Either OPM or an MSPP issuer may decline to 
renew an MSPP contract by providing a written notice of nonrenewal to 
the other party.
    (c) MSPP issuer responsibilities. The MSPP issuer's written notice 
of nonrenewal must be made in accordance with its MSPP contract with 
OPM. The MSPP issuer also must comply with any requirements regarding 
the termination of a plan that are applicable to a QHP offered on an 
Exchange on which the MSP was offered, including a requirement to 
provide advance written notice of termination to enrollees. If an 
Exchange does not have requirements about advance written notice of 
termination to enrollees, the MSPP issuer must inform current MSP 
enrollees in writing of the nonrenewal of the MSP no later than 90 days 
prior to termination of coverage, unless OPM determines that good cause 
justifies less than 90 days' notice.

Subpart E--Compliance


Sec.  800.401  Contract performance.

    (a) General. An MSPP issuer must perform an MSPP contract with OPM 
in accordance with the requirements of section 1334 of the Affordable 
Care Act and this part. The MSPP issuer must continue to meet such 
requirements while under an MSPP contract with OPM.
    (b) Specific requirements for issuers. In addition to the 
requirements described in paragraph (a) of this section, the following 
requirements apply to each MSPP issuer:
    (1) It must have, in the judgment of OPM, the financial resources 
to carry out its obligations under the MSPP;
    (2) It must keep such reasonable financial and statistical records, 
and furnish to OPM such reasonable financial and statistical reports 
with respect to the MSP or the MSPP, as may be requested by OPM;
    (3) It must permit representatives of OPM (including the OPM Office 
of Inspector General), the U.S. Government Accountability Office, and 
any other applicable Federal Government auditing entities to audit and 
examine its records and accounts that pertain, directly or indirectly, 
to the MSP at such reasonable times and places as may be designated by 
OPM or the U.S. Government Accountability Office;
    (4) It must timely submit to OPM a properly completed and signed 
novation

[[Page 15594]]

or change-of-name agreement in accordance with subpart 42.12 of 48 CFR 
part 42;
    (5) It must perform the MSPP contract in accordance with prudent 
business practices, as described in paragraph (c) of this section; and
    (6) It must not perform the MSPP contract in accordance with poor 
business practices, as described in paragraph (d) of this section.
    (c) Prudent business practices. For purposes of paragraph (b)(5) of 
this section, prudent business practices include, but are not limited 
to, the following:
    (1) Timely compliance with OPM instructions and directives;
    (2) Legal and ethical business and health care practices;
    (3) Compliance with the terms of the MSPP contract, regulations, 
and statutes;
    (4) Timely and accurate adjudication of claims or rendering of 
medical services;
    (5) Operating a system for accounting for costs incurred under the 
MSPP contract, which includes segregating and pricing MSP medical 
utilization and allocating indirect and administrative costs in a 
reasonable and equitable manner;
    (6) Maintaining accurate accounting reports of costs incurred in 
the administration of the MSPP contract;
    (7) Applying performance standards for assuring contract quality as 
outlined at Sec.  800.402; and
    (8) Establishing and maintaining a system of internal controls that 
provides reasonable assurance that:
    (i) The provision and payments of benefits and other expenses 
comply with legal, regulatory, and contractual guidelines;
    (ii) MSP funds, property, and other assets are safeguarded against 
waste, loss, unauthorized use, or misappropriation; and
    (iii) Data are accurately and fairly disclosed in all reports 
required by OPM.
    (d) Poor business practices. For purposes of paragraph (b)(6) of 
this section, poor business practices include, but are not limited to, 
the following:
    (1) Using fraudulent or unethical business or health care practices 
or otherwise displaying a lack of business integrity or honesty;
    (2) Repeatedly or knowingly providing false or misleading 
information in the rate setting process;
    (3) Failing to comply with OPM instructions and directives;
    (4) Having an accounting system that is incapable of separately 
accounting for costs incurred under the contract and/or that lacks the 
internal controls necessary to fulfill the terms of the contract;
    (5) Failing to assure that the MSP properly pays or denies claims, 
or, if applicable, provides medical services that are inconsistent with 
standards of good medical practice; and
    (6) Entering into contracts or employment agreements with 
providers, provider groups, or health care workers that include 
provisions or financial incentives that directly or indirectly create 
an inducement to limit or restrict communication about medically 
necessary services to any individual covered under the MSPP. Financial 
incentives are defined as bonuses, withholds, commissions, profit 
sharing or other similar adjustments to basic compensation (e.g., 
service fee, capitation, salary) which have the effect of limiting or 
reducing communication about appropriate medically necessary services.
    (e) Performance escrow account. OPM may require MSPP issuers to pay 
an assessment into an escrow account to ensure contract compliance and 
benefit MSP enrollees.


Sec.  800.402  Contract quality assurance.

    (a) General. This section prescribes general policies and 
procedures to ensure that services acquired under MSPP contracts 
conform to the contract's quality requirements.
    (b) Internal controls. OPM will periodically evaluate the 
contractor's system of internal controls under the quality assurance 
program required by the contract and will acknowledge in writing 
whether or not the system is consistent with the requirements set forth 
in the contract. OPM's reviews do not diminish the contractor's 
obligation to implement and maintain an effective and efficient system 
to apply the internal controls.
    (c) Performance standards. (1) OPM will issue specific performance 
standards for MSPP contracts and will inform MSPP issuers of the 
applicable performance standards prior to negotiations for the contract 
year. OPM may benchmark its standards against standards generally 
accepted in the insurance industry. OPM may authorize nationally 
recognized standards to be used to fulfill this requirement.
    (2) MSPP issuers must comply with the performance standards issued 
under this section.


Sec.  800.403  Fraud and abuse.

    (a) Program required. An MSPP issuer must conduct a program to 
assess its vulnerability to fraud and abuse as well as to address such 
vulnerabilities.
    (b) Fraud detection system. An MSPP issuer must operate a system 
designed to detect and eliminate fraud and abuse by employees and 
subcontractors of the MSPP issuer, by providers furnishing goods or 
services to MSP enrollees, and by MSP enrollees.
    (c) Submission of information. An MSPP issuer must provide to OPM 
such information or assistance as may be necessary for the agency to 
carry out the duties and responsibilities, including those of the 
Office of Inspector General as specified in sections 4 and 6 of the 
Inspector General Act of 1978 (5 U.S.C. App.). An MSPP issuer must 
provide any requested information in the form, manner, and timeline 
prescribed by OPM.


Sec.  800.404  Compliance actions.

    (a) Causes for OPM compliance actions. The following constitute 
cause for OPM to impose a compliance action described in paragraph (b) 
of this section against an MSPP issuer:
    (1) Failure by the MSPP issuer to meet the requirements set forth 
in Sec.  800.401(a) and (b);
    (2) An MSPP issuer's sustained failure to perform the MSPP contract 
in accordance with prudent business practices, as described in Sec.  
800.401(c);
    (3) A pattern of poor conduct or evidence of poor business 
practices such as those described in Sec.  800.401(d); or
    (4) Such other violations of law or regulation as OPM may 
determine.
    (b) Compliance actions. (1) OPM may impose a compliance action 
against an MSPP issuer at any time during the contract term if it 
determines that the MSPP issuer is not in compliance with applicable 
law, this part, or the terms of its contract with OPM.
    (2) Compliance actions may include, but are not limited to:
    (i) Establishment and implementation of a corrective action plan;
    (ii) Imposition of intermediate sanctions, such as suspensions of 
marketing;
    (iii) Performance incentives;
    (iv) Reduction of service area or areas;
    (v) Withdrawal of the certification of the MSPP issuer to offer the 
MSP on one or more Exchanges;
    (vi) Nonrenewal of the MSPP contract; and
    (vii) Withdrawal of approval or termination of the MSPP contract.
    (c) Notice of compliance action. (1) OPM must notify an MSPP issuer 
in writing of a compliance action under this section. Such notice must 
indicate the specific compliance action undertaken and the reason for 
the compliance action.

[[Page 15595]]

    (2) For compliance actions listed in paragraphs (b)(2)(v) through 
(b)(2)(vii) of this section, such notice must include a statement that 
the MSPP issuer is entitled to request a reconsideration of OPM's 
determination to impose a compliance action pursuant to Sec.  800.405.
    (3) Upon imposition of a compliance action listed in paragraphs 
(b)(2)(iv) through (b)(2)(vii) of this section, OPM must notify the 
State Insurance Commissioner(s) and Exchange officials in the State or 
States in which the compliance action is effective.
    (d) Notice to enrollees. If OPM terminates an MSPP issuer's MSPP 
contract with OPM, or OPM withdraws the MSPP issuer's certification to 
offer the MSP on an Exchange, the MSPP issuer must comply with any 
requirements regarding the termination of a plan that are applicable to 
a QHP offered on an Exchange on which the MSP was offered, including a 
requirement to provide advance written notice of termination to 
enrollees. If an Exchange does not have requirements about advance 
written notice of termination to enrollees, the MSPP issuer must inform 
current MSP enrollees in writing of the nonrenewal of the MSP no later 
than 90 days prior to termination of coverage, unless OPM determines 
that good cause justifies less than 90 days' notice.
    (e) Definition. As used in this subpart, ``termination'' means a 
decision by OPM to cancel an MSPP contract prior to the end of its 
contract term. The term includes OPM's withdrawal of approval of an 
MSPP contract.


Sec.  800.405  Reconsideration of compliance actions.

    (a) Right to request reconsideration. An MSPP issuer may request 
that OPM reconsider a determination to impose one of the following 
compliance actions:
    (1) Withdrawal of the certification of the MSPP issuer to offer the 
MSP on one or more Exchanges;
    (2) Nonrenewal of the MSPP contract; or
    (3) Termination of the MSPP contract.
    (b) Request for reconsideration and/or hearing. (1) An MSPP issuer 
with a right to request reconsideration specified in paragraph (a) of 
this section may request a hearing in which OPM will reconsider its 
determination to impose a compliance action.
    (2) A request under this section must be in writing and contain 
contact information, including the name, telephone number, email 
address, and mailing address of the person or persons whom OPM may 
contact regarding a request for a hearing with respect to the 
reconsideration. The request must be in such form, contain such 
information, and be submitted in such manner as OPM may prescribe.
    (3) The request must be received by OPM within 15 calendar days 
after the date of the MSPP issuer's receipt of the notice of compliance 
action. The MSPP issuer may request that OPM's reconsideration allow a 
representative of the MSPP issuer to appear personally before OPM.
    (4) A request under this section must include a detailed statement 
of the reasons that the MSPP issuer disagrees with OPM's imposition of 
the compliance action, and may include any additional information that 
will assist OPM in rendering a final decision under this section.
    (5) OPM may obtain additional information relevant to the request 
from any source as it may, in its judgment, deem necessary. OPM will 
provide the MSPP issuer with a copy of any additional information it 
obtains and provide an opportunity for the MSPP issuer to respond 
(including by submitting additional information or explanation).
    (6) OPM's reconsideration and hearing, if requested, may be 
conducted by the Director or a representative designated by the 
Director who did not participate in the initial decision that is the 
subject of the request for review.
    (c) Notice of final decision. OPM will notify the MSPP issuer, in 
writing, of OPM's final decision on the MSPP issuer's request for 
reconsideration and the specific reasons for that final decision. OPM's 
written decision will constitute final agency action that is subject to 
review under the Administrative Procedure Act in the appropriate U.S. 
district court. Such review is limited to the record that was before 
OPM when it made its decision.

Subpart F--Appeals by Enrollees of Denials of Claims for Payment or 
Service


Sec.  800.501  General requirements.

    (a) Definitions. For purposes of this subpart:
    (1) Adverse benefit determination has the meaning given that term 
in 45 CFR 147.136(a)(2)(i).
    (2) Claim means a request for:
    (i) Payment of a health-related bill; or
    (ii) Provision of a health-related service or supply.
    (b) Applicability. This subpart applies to enrollees and to other 
individuals or entities who are acting on behalf of an enrollee and who 
have the enrollee's specific written consent to pursue a remedy of an 
adverse benefit determination.


Sec.  800.502  MSPP issuer internal claims and appeals.

    (a) Processes. MSPP issuers must comply with the internal claims 
and appeals processes applicable to group health plans and health 
insurance issuers under 45 CFR 147.136(b).
    (b) Timeframes and notice of determination. An MSPP issuer must 
provide written notice to an enrollee of its determination on a claim 
brought under paragraph (a) of this section according to the timeframes 
and notification rules under 45 CFR 147.136(b) and (e), including the 
timeframes for urgent claims. If the MSPP issuer denies a claim (or a 
portion of the claim), the enrollee may appeal the adverse benefit 
determination to the MSPP issuer in accordance with 45 CFR 147.136(b).


Sec.  800.503  External review.

    (a) External review by OPM. OPM will conduct external review of 
adverse benefit determinations using a process similar to OPM review of 
disputed claims under 5 CFR 890.105(e), subject to the standards and 
timeframes set forth in 45 CFR 147.136(d).
    (b) Notice. Notices to MSP enrollees regarding external review 
under paragraph (a) of this section must comply with 45 CFR 147.136(e), 
and are subject to review and approval by OPM.
    (c) Issuer obligation. An MSPP issuer must pay a claim or provide a 
health-related service or supply pursuant to OPM's final decision or 
the final decision of an independent review organization without delay, 
regardless of whether the plan or issuer intends to seek judicial 
review of the external review decision and unless or until there is a 
judicial decision otherwise.


Sec.  800.504  Judicial review.

    (a) OPM's written decision under the external review process 
established under Sec.  800.503(a) will constitute final agency action 
that is subject to review under the Administrative Procedure Act in the 
appropriate U.S. district court. A decision made by an independent 
review organization under the process established under Sec.  
800.503(a) is not within OPM's discretion and therefore is not final 
agency action.
    (b) Judicial review under paragraph (a) of this section is limited 
to the record that was before OPM when OPM made its decision.

Subpart G--Miscellaneous


Sec.  800.601  Reservation of authority.

    OPM reserves the right to implement and supplement these 
regulations with written operational guidelines.

[[Page 15596]]

Sec.  800.602  Consumer choice with respect to certain services.

    (a) Assured availability of varied coverage. Consistent with Sec.  
800.104, OPM will ensure that at least one of the MSPP issuers on each 
Exchange in each State offers at least one MSP that does not provide 
coverage of services described in section 1303(b)(1)(B)(i) of the 
Affordable Care Act.
    (b) State opt-out. An MSP may not offer abortion coverage in any 
State where such coverage of abortion services is prohibited by State 
law.

[FR Doc. 2013-04954 Filed 3-1-13; 11:15 am]
BILLING CODE 6325-64-P