[Federal Register Volume 78, Number 126 (Monday, July 1, 2013)]
[Rules and Regulations]
[Pages 39494-39529]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15530]



[[Page 39493]]

Vol. 78

Monday,

No. 126

July 1, 2013

Part IV





Department of Health and Human Services





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45 CFR Parts 155 and 156





Patient Protection and Affordable Care Act; Exchange Functions: 
Eligibility for Exemptions; Miscellaneous Minimum Essential Coverage 
Provisions; Final Rule

  Federal Register / Vol. 78 , No. 126 / Monday, July 1, 2013 / Rules 
and Regulations  

[[Page 39494]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 155 and 156

[CMS-9958-F]
RIN 0938-AR68


Patient Protection and Affordable Care Act; Exchange Functions: 
Eligibility for Exemptions; Miscellaneous Minimum Essential Coverage 
Provisions

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

ACTION: Final rule.

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SUMMARY: This final rule implements certain functions of the Affordable 
Insurance Exchanges (``Exchanges''). These specific statutory functions 
include determining eligibility for and granting certificates of 
exemption from the individual shared responsibility payment described 
in section 5000A of the Internal Revenue Code. Additionally, this final 
rule implements the responsibilities of the Secretary of Health and 
Human Services, in coordination with the Secretary of the Treasury, to 
designate other health benefits coverage as minimum essential coverage 
by providing that certain coverage be designated as minimum essential 
coverage. It also outlines substantive and procedural requirements that 
other types of individual coverage must fulfill in order to be 
certified as minimum essential coverage.

DATES: Effective Date: These regulations are effective on August 26, 
2013.

FOR FURTHER INFORMATION CONTACT: Zachary L. Baron, (301) 492-4478, for 
provisions related to exemptions from the individual shared 
responsibility payment. Cam Moultrie Clemmons, (410) 786-1565, for 
provisions related to minimum essential coverage.

SUPPLEMENTARY INFORMATION:

Executive Summary

    To ensure effective and efficient implementation of the insurance 
market reforms, the Affordable Care Act requires a nonexempt individual 
to maintain minimum essential coverage or make a shared responsibility 
payment. The Affordable Care Act specifies the categories of 
individuals who are eligible to receive exemptions from the individual 
shared responsibility payment under section 5000A of the Internal 
Revenue Code (the Code), which provides nonexempt individuals with a 
choice: maintain minimum essential coverage for themselves and any 
nonexempt family members or include an additional payment with their 
federal income tax return. Some individuals are exempt from the shared 
responsibility payment, including members of recognized religious sects 
whose tenets conflict with acceptance of the benefits of private or 
public insurance and those who do not have an affordable health 
insurance coverage option available. Section 1311(d)(4)(H) of the 
Affordable Care Act (42 U.S.C. 18031(d)(4)(H)) directs the new health 
insurance marketplaces, called Affordable Insurance Exchanges 
(Exchanges), to issue certifications of exemption from the individual 
shared responsibility payment to eligible individuals. Section 1411 of 
the Affordable Care Act (42 U.S.C. 18081) generally provides procedures 
for determining an individual's eligibility for various benefits 
relating to health coverage, including exemptions from the application 
of section 5000A of the Code.
    This final rule sets forth standards and processes under which the 
Exchange will conduct eligibility determinations for, and grant 
certificates of exemption from, the individual shared responsibility 
payment. Furthermore, it supports and complements rulemaking conducted 
by the Secretary of the Treasury with respect to section 5000A of the 
Code, as added by section 1501(b) of the Affordable Care Act. The 
intent of this rule is to implement the relevant provisions while 
continuing to afford states substantial discretion in the design and 
operation of an Exchange, with greater standardization provided where 
directed by the statute or where there are compelling practical, 
efficiency, or consumer protection reasons.
    Under section 5000A(f)(1)(E) of the Code, the Secretary of the 
Department of Health and Human Services (the Secretary), in 
coordination with the Secretary of the Treasury, may designate other 
health benefits coverage as minimum essential coverage. This final rule 
provides standards for determining whether certain other types of 
health insurance coverage constitute minimum essential coverage and 
procedures for plan sponsors to follow for a plan to be identified as 
minimum essential coverage under section 5000A of the Code. This rule 
also designates certain types of existing health coverage as minimum 
essential coverage. Other types of coverage, not statutorily specified 
and not designated as minimum essential coverage in this regulation, 
may be recognized as minimum essential coverage if certain substantive 
and procedural requirements are met as set forth in this rule. These 
additional categories of minimum essential coverage, both those 
designated per se and those that may apply for recognition are neither 
group health insurance coverage nor individual health insurance. 
Consumers with types of coverage that are recognized as minimum 
essential coverage in accordance with this rule would be determined to 
have minimum essential coverage if the coverage is certified to be 
substantially compliant with the requirements of title I of the 
Affordable Care Act that apply to non-grandfathered plans in the 
individual market.

Table of Contents

Executive Summary
I. Background
    A. Legislative Overview
    B. Stakeholder Consultation and Input
    C. Alignment With Related Rules and Published Information
II. Provisions of the Regulation and Analysis of and Responses to 
Public Comments
    A. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. Subpart A--General Provisions
    a. Definitions (Sec.  155.20)
    2. Subpart C--General Functions of an Exchange
    a. Functions of an Exchange (Sec.  155.200)
    3. Subpart G--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exemptions
    a. Definitions and General Requirements (Sec.  155.600)
    b. Eligibility Standards for Exemptions (Sec.  155.605)
    c. Eligibility Process for Exemptions (Sec.  155.610)
    d. Verification Process Related to Eligibility for Exemptions 
(Sec.  155.615)
    e. Eligibility Redeterminations for Exemptions During a Calendar 
Year (Sec.  155.620)
    f. Options for Conducting Eligibility Determinations for 
Exemptions (Sec.  155.625)
    g. Reporting (Sec.  155.630)
    h. Right To Appeal (Sec.  155.635)
    B. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    a. Definition of Minimum Essential Coverage (Sec.  156.600)
    b. Other Types of Coverage That Qualify as Minimum Essential 
Coverage (Sec.  156.602)
    c. Requirements for Recognition as Minimum Essential Coverage 
for Coverage Not Otherwise Designated Minimum Essential Coverage in 
the Statute or This Regulation (Sec.  156.604)
    d. HHS Audit Authority (Sec.  156.606)
III. Provisions of the Final Regulation
IV. Collection of Information Requirements
V. Summary of Regulatory Impact Statement
VI. Regulatory Flexibility Act
VII. Unfunded Mandates
VIII. Federalism

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IX. Congressional Review Act
Regulation Text

Abbreviations

Affordable Care Act--the Affordable Care Act of 2010 (which is the 
collective term for the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) and the Health Care and Education Reconciliation 
Act (Pub. L. 111-152))
BHP Basic Health Program
CHIP Children's Health Insurance Program
CMS Centers for Medicare & Medicaid Services
FPL Federal Poverty Level
HHS Department of Health and Human Services
IRS Internal Revenue Service
NAIC National Association of Insurance Commissioners
QHP Qualified Health Plan
SSA Social Security Administration
SSN Social Security Number
Code Internal Revenue Code of 1986, as Amended

I. Background

A. Legislative Overview

    Section 1501(b) of the Affordable Care Act added section 5000A of 
the Internal Revenue Code (the Code) to a new chapter 48 of subtitle D 
(Miscellaneous Excise Taxes) of the Code effective for months beginning 
after December 31, 2013. Section 5000A of the Code, which was 
subsequently amended by the TRICARE Affirmation Act of 2010, Public Law 
111-159 (124 Stat. 1123) and Public Law 111-173 (124 Stat. 1215), 
requires that nonexempt individuals either maintain minimum essential 
coverage or make a shared responsibility payment. It also describes 
categories of individuals who may qualify for an exemption from the 
individual shared responsibility payment, and provides the definition 
of minimum essential coverage.
    Section 1311(d)(4)(H) of the Affordable Care Act specifies that the 
Exchange will, subject to section 1411 of the Affordable Care Act, 
grant certifications of exemption from the individual shared 
responsibility payment specified in section 5000A of the Code. Section 
1311(d)(4)(I)(i) of the Affordable Care Act specifies that the Exchange 
will transfer to the Secretary of the Treasury a list of the 
individuals to whom the Exchange provided such a certification. Section 
1411(a)(4) of the Affordable Care Act provides that the Secretary of 
Health and Human Services (the Secretary) will establish a program for 
determining whether a certification of exemption from the individual 
shared responsibility requirement and penalty will be issued by an 
Exchange under section 1311(d)(4)(H) of the Affordable Care Act. We 
interpret this provision as authorizing the Secretary to determine 
``whether,'' with respect to the nine exemptions provided for under 
section 5000A of the Code, Exchanges would perform the role of issuing 
certifications of exemption under section 1311(d)(4)(H) of the 
Affordable Care Act, whether eligibility for the exemption would be 
claimed solely through tax filing, or whether both processes would be 
available. Under this interpretation, the responsibility under section 
1311(d)(4)(H) of the Affordable Care Act to issue certifications of 
exemption is ``subject to'' these determinations by the Secretary under 
section 1411(a)(4) of the Affordable Care Act, and Exchanges are thus 
only required to issue certifications of exemption with respect to 
exemptions not exclusively assigned to the Internal Revenue Service 
(IRS).
    Section 1321 of the Affordable Care Act discusses state flexibility 
in the operation and enforcement of Exchanges and related requirements. 
Section 1321(a) of the Affordable Care Act provides broad authority for 
the Secretary to establish standards and regulations to implement the 
statutory requirements related to Exchanges and other components of 
title I of the Affordable Care Act as amended by the Health Care and 
Education Reconciliation Act of 2010. Section 1311(k) of the Affordable 
Care Act specifies that Exchanges may not establish rules that conflict 
with or prevent the application of regulations promulgated by the 
Secretary under Subtitle D of title I of the Affordable Care Act.
    In accordance with our interpretation of these sections of the 
Affordable Care Act, and the authority provided by, inter alia, section 
1321(a) of the Affordable Care Act, we specify that under the program 
established under section 1411(a)(4) of the Affordable Care Act, the 
Exchange will determine eligibility for and grant certificates of 
exemption as described below. We also note that consistent with prior 
guidance, in the State Exchange Implementation Questions and Answers 
released by HHS on November 29, 2011,\1\ and the Frequently Asked 
Questions on Exchanges, Market Reforms, and Medicaid released by HHS on 
December 10, 2012,\2\ a state-based Exchange can be approved to operate 
by the Department of Health and Human Services (HHS) if it uses a 
federally-managed service to make eligibility determinations for 
exemptions.
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    \1\ State Exchange Implementation Questions and Answers, 
published November 29, 2011: http://cciio.cms.gov/resources/files/Files2/11282011/exchange_q_and_a.pdf.pdf.
    \2\ Frequently Asked Questions on Exchanges, Market Reforms, and 
Medicaid, published December 10, 2012: http://cciio.cms.gov/resources/files/exchanges-faqs-12-10-2012.pdf.
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    On March 27, 2012, HHS published the final rule entitled ``Patient 
Protection and Affordable Care Act; Establishment of Exchanges and 
Qualified Health Plans; Exchange Standards for Employers'' (77 FR 
18309). The provisions of the final rule, herein referred to as the 
Exchange final rule, encompass the key functions of Exchanges related 
to eligibility, enrollment, and plan participation and management. In 
the Exchange final rule, 45 CFR 155.200(b) provided that a minimum 
function of an Exchange is to grant certificates of exemption 
consistent with sections 1311(d)(4)(H) and 1411 of the Affordable Care 
Act. This final rule cross-references several provisions in the 
Exchange final rule, notably the limited situations where eligibility 
and verification processes used in determining eligibility for 
enrollment in a qualified health plan (QHP) through the Exchange and 
for insurance affordability programs can also be used by Exchanges for 
the purpose of determining whether an individual is eligible for an 
exemption from the individual shared responsibility payment.
    Section 5000A(f) of the Code designates certain types of coverage 
as minimum essential coverage. The term ``minimum essential coverage'' 
includes all of the following under the statute: Government sponsored 
programs (the Medicare program under part A of title XVIII of the 
Social Security Act (the Act); the Medicaid program under title XIX of 
the Act; the Children's Health Insurance Program (CHIP) program under 
title XXI of the Act; medical coverage under chapter 55 of title 10, 
United States Code, including the TRICARE program; a health care 
program under chapter 17 or 18 of title 38, United States Code, as 
determined by the Secretary of Veterans Affairs, in coordination with 
the Secretaries of the Department of Health and Human Services and 
Treasury; a health plan under section 2504(e) of title 22, United 
States Code (relating to Peace Corps volunteers); or the 
Nonappropriated Fund Health Benefits Program of the Department of 
Defense (established under section 349 of the National Defense 
Authorization Act for Fiscal Year 1995); coverage under an eligible 
employer-sponsored plan; coverage under a health plan offered in the 
individual market within a State; and coverage under a grandfathered 
health plan. In addition, section 5000A(f)(1)(E) of the Code directs 
the Secretary, in coordination with the Secretary of

[[Page 39496]]

Treasury, to designate other health benefits coverage, such as a state 
health benefits risk pool, as minimum essential coverage. This final 
rule designates certain additional types of coverage qualify as minimum 
essential coverage and also provides a process by which other types of 
coverage could be recognized as minimum essential coverage.

B. Stakeholder Consultation and Input

    On August 3, 2010, HHS published a request for comment (the RFC) 
inviting the public to provide input regarding the rules that will 
govern the Exchanges. In particular, HHS asked states, tribal 
representatives, consumer advocates, employers, insurers, and other 
interested stakeholders to comment on the standards Exchanges should 
meet. The comment period closed on October 4, 2010.
    The public response to the RFC yielded comment submissions from 
consumer advocacy organizations, medical and health care professional 
trade associations and societies, medical and health care professional 
entities, health insurers, insurance trade associations, members of the 
general public, and employer organizations. The majority of the 
comments were related to the general functions and standards for 
Exchanges, qualified health plans (QHPs), eligibility and enrollment, 
and coordination with Medicaid. While this final rule does not directly 
respond to comments from the RFC, the comments received are described, 
where applicable, in discussing specific regulatory proposals. These 
comments are not separately identified, but instead are incorporated 
into each substantive section of this final rule as appropriate.
    In addition to the RFC, HHS received comments on the proposed rule 
titled ``Patient Protection and Affordable Care Act; Exchange 
Functions: Eligibility for Exemptions; Miscellaneous Minimum Essential 
Coverage Provisions'' (78 FR 7348) that are, similarly not separately 
identified, but incorporated into each substantive section of this 
final rule. HHS has also consulted with stakeholders through regular 
meetings with the National Association of Insurance Commissioners 
(NAIC), regular contact with states through the Exchange grant process, 
and meetings with tribal representatives, health insurance issuers, 
trade groups, consumer advocates, employers, and other interested 
parties. HHS initiated and hosted a tribal consultation on February 21, 
2013, where we allowed federally-recognized tribal leaders and 
representatives from tribal health organizations the opportunity to 
discuss and provide feedback regarding the provisions within the 
proposed rule. Furthermore, we also received feedback from health care 
sharing ministries about the process for how individual members can 
obtain certificates of exemption based on their membership in a health 
care sharing ministry, and an expression of interest in a process for 
allowing health care sharing ministries to obtain recognition that they 
meet the standards under section 5000A(d)(2)(B) of the Code. We also 
received information from various stakeholder groups regarding types of 
``other coverage'' as described in section 5000A(f)(1)(E) of the Code.

C. Alignment With Related Rules and Published Information

    The proposed rule, titled ``Patient Protection and Affordable Care 
Act; Exchange Functions: Eligibility for Exemptions; Miscellaneous 
Minimum Essential Coverage Provisions'' (78 FR 7348), was published in 
the Federal Register on February 1, 2013 in coordination with the 
Department of Treasury's proposed rule, ``Shared Responsibility Payment 
for Not Maintaining Minimum Essential Coverage'' (78 FR 7314) 
(hereinafter referred to as ``the Treasury proposed rule''). The 
Department of the Treasury's proposed rule will be finalized at a later 
date. Accordingly, in this final rule, we have removed cross-references 
to the Treasury proposed rule and replaced them with cross-references 
to the applicable language in the Affordable Care Act. Upon publication 
of the Treasury final rule, we intend to replace the statutory 
references with the appropriate regulatory references.

II. Provisions of the Regulation and Analysis of and Responses to 
Public Comments

    On February 1, 2013, we published a proposed rule, titled ``Patient 
Protection and Affordable Care Act; Exchange Functions: Eligibility for 
Exemptions; Miscellaneous Minimum Essential Coverage Provisions'' (78 
FR 7348), in which we proposed to add subpart G to 45 CFR part 155, 
which includes standards for Exchanges related to conducting 
eligibility determinations for and granting certificates of exemption 
from the individual shared responsibility payment. We also proposed to 
amend Sec.  155.200(a) to add a reference to indicate that, consistent 
with existing language in Sec.  155.200(b), granting certificates of 
exemption is a minimum function of the Exchange. Furthermore, we 
proposed to add subpart G to 45 CFR part 156, which set forth standards 
under which the Secretary would designate certain types of existing 
coverage, not specified under section 5000A, as minimum essential 
coverage. Additionally, under the proposed regulation, other types of 
coverage that were neither statutorily nor regulatory designated as 
minimum essential coverage, may be recognized as minimum essential 
coverage if certain substantive and procedural requirements are met. 
These types of coverage, both those designated per se and those 
recognized by application, are neither group health insurance coverage 
nor individual health insurance. Consumers with coverage recognized as 
minimum essential coverage in accordance with this regulation would be 
determined to have minimum essential coverage for purposes of the 
individual shared responsibility provision.
    We received approximately 220 public comments from state agencies, 
advocacy groups, health care providers, employers, health insurers, 
health care associations, and others. The comments ranged from general 
support or opposition to the proposed provisions to very specific 
questions or comments regarding the proposed rules.
    Some comments were outside the scope of the proposed rule, and 
therefore are not addressed in this final rule. In some instances, 
commenters raised policy or operational issues, such as those related 
to certified application counselors, authorized representatives, and 
eligibility appeals, that will be addressed through forthcoming 
regulatory and subregulatory guidance to be provided subsequent to this 
final rule; therefore, some, but not all comments are addressed in the 
preamble to this final rule.
    Brief summaries of each proposed provision, a summary of the public 
comments we received (with the exception of specific comments on the 
paperwork burden or the regulatory impact analysis), and our responses 
to the comments are below. Comments related to the paperwork burden are 
addressed in the ``Collection of Information Requirements'' and section 
in this final rule. We did not receive comments related to the impact 
analysis.

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

1. Subpart A--General Provisions
a. Definitions (Sec.  155.20)
    We proposed to make a technical correction to the definitions of 
``applicant'' and ``application filer'' to note that they do not apply 
to an

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applicant or application filer seeking an exemption pursuant to 
proposed subpart G. We proposed separate definitions specific to 
exemptions for these terms in Sec.  155.600.
    Comment: Several commenters expressed concerns about HHS' pre-
existing definition of ``application filer'' in Sec.  155.20 based on 
its cross-reference to the definition of ``family'' within the Code and 
the inclusion of this definition as proposed in Sec.  155.600(a). 
Commenters believed the inclusion of the definition of ``family'' 
within the Code would limit the flexibility of an applicant to include 
people who would have relationships that may otherwise be included on 
an exemption application. Commenters believed that these cross-
references were inconsistent with other provisions, as they noted that 
subject to state rules, QHP issuers can allow individuals in multiple 
tax households to enroll in a QHP together, and that HHS has proposed 
to define ``dependent'' in 78 FR 4718 for purposes of eligibility for 
special enrollment periods based on whether a QHP issuer will allow 
individuals to enroll in a QHP together. As such, they urged HHS to 
remove the references to the definition of family within the Code and 
its implementing regulation.
    Response: The commenters correctly describe different situations in 
which recognition of relationships is determined by who can enroll in a 
QHP together. In proposing to amend the definition of ``application 
filer'' in Sec.  155.20 to exclude those individuals seeking 
eligibility for an exemption pursuant to subpart G, we otherwise 
maintained the definition from the Exchange final rule regarding the 
coverage application process at 77 FR 18445 with a few minor technical 
corrections. Further, we note that comments regarding eligibility for 
enrollment in a QHP and insurance affordability programs are beyond the 
scope of this regulation. Since the relevant family unit for the 
individual shared responsibility provision is the tax filing unit, our 
proposed language defining ``application filer'' at Sec.  155.600(a) 
specific to subpart G cross-references section 5000A(a) of the Code 
regarding the individual shared responsibility provision. Because the 
individual shared responsibility provision will be administered by the 
Internal Revenue Service on a tax-return-by-tax-return basis, we 
believe it is appropriate to provide that only members of the same tax 
filing unit may file an exemption application together.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.20 of the 
proposed rule with a few technical corrections. We clarify that the 
term ``applicant'' in this provision excludes those individuals seeking 
eligibility for an exemption from the individual shared responsibility 
payment pursuant to subpart G. We also clarify that our previous 
inclusion of an authorized representative in the definition refers to 
the authorized representative of an applicant. We also cite to the 
applicable Treasury regulation instead of section 36B of the Code.
2. Subpart C--General Functions of an Exchange
a. Functions of an Exchange (Sec.  155.200)
    In paragraph (a), we proposed to add that the Exchange would also 
perform the minimum functions described in subpart G of this part 
related to eligibility determinations for exemptions.
    Comment: Commenters generally supported our proposal that the 
Exchange would also perform the minimum functions described in subpart 
G of this part related to eligibility determinations for exemptions. 
Some commenters raised concerns that the HHS proposed rule and the 
Treasury proposed rule discussed different issues, and wanted to ensure 
that both agencies were working in close coordination. Other commenters 
expressed opposition to Exchanges determining eligibility for 
exemptions based on overarching philosophical complaints regarding this 
proposed rule and this provision of the Affordable Care Act. One 
commenter wanted HHS to reduce the number of exemptions available to 
individuals. Lastly, another commenter believed that HHS was providing 
too much latitude to states in determining the basic framework for 
Exchanges, and rather should set more strict guidelines to prevent 
confusion for Exchanges and consumers.
    Response: We continue to coordinate closely with the Department of 
Treasury and a range of stakeholders to ensure that we provide 
sufficient guidance to Exchanges, while also ensuring the appropriate 
level of operational flexibility to allow for effective implementation. 
We note that the categories of exemptions proposed were based on the 
definitions provided within the Affordable Care Act, which added 
section 5000A of the Code. As we discuss further below, the Secretary 
of HHS has exercised careful discretion in specifying criteria for the 
hardship exemption in accordance with section 5000A(e)(5) of the Code, 
to ensure that a hardship exemption is only available in limited 
circumstances in which an individual has suffered a hardship with 
respect to the capability to obtain coverage under a QHP.
Summary of Regulatory Changes
    We are finalizing the provision proposed in Sec.  155.200 of the 
proposed rule without modification.
3. Subpart G--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
a. Definitions and General Requirements (Sec.  155.600)
    In paragraph (a) of Sec.  155.600, we proposed definitions and 
sought comments for terms that apply throughout subpart G. First, we 
proposed to define ``applicant'' as an individual who is seeking an 
exemption from the individual shared responsibility payment for him or 
herself through an application submitted to the Exchange. We proposed 
to define ``application filer'' as an applicant; an individual who is 
liable for the individual shared responsibility payment (in accordance 
with 26 CFR 1.5000A-1(c) of the Treasury proposed rule) for an 
applicant; an authorized representative; or if the applicant is a minor 
or incapacitated, someone acting responsibly for an applicant. We noted 
that we intended to modify the proposed language in Sec.  155.227 (78 
FR 4711) and Sec.  155.225 (78 FR 4710) to clarify that authorized 
representatives and certified application counselors can assist 
individuals seeking exemptions, and sought comments about how 
authorized representatives and certified application counselors could 
best support individuals seeking certificates of exemption from the 
Exchange.
    We proposed to define ``exemption'' as an exemption from the 
individual shared responsibility payment, noting that there is no 
meaningful distinction between individuals exempt from the shared 
responsibility payment and individuals who are not ``applicable 
individuals'' for purposes of the requirement to maintain minimum 
essential coverage in section 5000A of the Code.
    We proposed to define ``health care sharing ministry'' in the same 
manner as provided in 26 CFR 1.5000A-3(b) of the Treasury proposed 
rule.
    We proposed to define ``required contribution'' in the same manner 
as provided in 26 CFR 1.5000A-3(e) of the Treasury proposed rule.
    We proposed to define ``Indian tribe'' in the same manner as in 26 
CFR

[[Page 39498]]

1.5000A-3(g) of the Treasury proposed rule, which in turn references 
the definition in section 45A(c)(6) of the Code.
    In paragraph (b), we proposed that for purposes of this subpart, 
any attestation that an applicant is to provide under this subpart may 
also be provided by an application filer on behalf of the applicant.
    In paragraph (c) of Sec.  155.600, we proposed that for the 
purposes of this subpart, the Exchange must consider information 
through electronic data sources, other information provided by the 
applicant, or other information as available in the records of the 
Exchange to be reasonably compatible with an applicant's attestation if 
the difference or discrepancy does not impact the eligibility for the 
relevant exemption or exemptions for which the applicant requested.
    We also proposed to add paragraphs (d) and (e) in order to specify 
that the accessibility and notice requirements in Sec.  155.205(c) and 
Sec.  155.230, respectively, apply to exemptions as well, given that 
the definition of applicant in this subpart is otherwise specific to 
exemptions.
    Comment: One commenter raised concerns about health care sharing 
ministries. The commenter noted that health care sharing ministries are 
not subject to state insurance laws, and as such, the statutory 
exemption for members of health care sharing ministries may create 
circumstances in which an individual who is a member of a health care 
sharing ministry does not benefit from the Affordable Care Act's 
broader consumer protections. The commenter believed that this might 
motivate organizations to seek to establish standing as a health care 
sharing ministry in order to evade consumer protections and market 
reforms enacted by the Affordable Care Act. The commenter advised HHS 
and IRS to carefully monitor applications from entities seeking 
recognition as a health care sharing ministry for the purpose of 
exemptions.
    Response: The Affordable Care Act defines health care sharing 
ministry for purposes of an exemption in section 5000A(d)(2)(B) of the 
Code. We appreciate the concerns raised regarding organizations that 
may improperly seek standing as a health care sharing ministry. As we 
discuss further below, we believe that the process discussed in Sec.  
155.615(c) will ensure that HHS only provides exemptions based on 
membership in a health care sharing ministry for individuals who are 
members of health care sharing ministries that meet the standards in 
the statute, which specify that a health care sharing ministry or its 
predecessor must have been in existence at all times since December 31, 
1999.
    Comment: Commenters generally supported allowing an application 
filer to attest for an applicant on the exemptions application. 
However, one commenter believed that ``attestation'' was not defined 
clearly enough in Sec.  155.600(b), and as such recommended that HHS 
revise this provision to more clearly specific the acceptable form and 
manner of an attestation.
    Response: The proposed language regarding attestations in Sec.  
155.600(b) mirrors the language in 45 CFR 155.300(c), which is used in 
the coverage process. As we believe this definition provides sufficient 
flexibility and clarity for Exchanges, we do not deviate from the 
language used in the coverage process to describe an attestation.
    Comment: Several commenters requested that HHS ensure that the 
application process, including eligibility notices, be accessible to 
individuals with limited English proficiency (LEP) as well as those 
individuals with disabilities. Commenters also urged HHS to include 
clearer guidelines regarding the exemption eligibility process in order 
to ensure that the processes do not discriminate against individuals, 
particularly LEP individuals. Commenters requested translation of the 
requisite materials in non-English languages, and suggested that HHS 
refer to LEP guidance adopted by the HHS Office of Civil Rights.
    Response: We appreciate commenters' concerns regarding ensuring 
that the application process and eligibility notices are accessible to 
individuals with LEP as well as those individuals with disabilities. In 
proposed Sec.  155.600(d) and (e), we cross-referenced Sec.  155.205(c) 
and Sec.  155.230 respectively, which provide standards to ensure the 
suggested protections are in place. As such, we do not believe that 
additional standards are necessary in subpart G to ensure the 
application process and eligibility notices are accessible to 
individuals with LEP as well as those individuals with disabilities.
Summary of Regulatory Changes
    We finalize the provisions proposed in Sec.  155.600 of the 
proposed rule with one modification and a few non-substantive technical 
corrections for clarity. We finalize the definition of ``Indian tribe'' 
as proposed, but move the definition earlier in paragraph (a). We make 
a technical correction for the purpose of clarity in finalizing the 
definition of ``shared responsibility payment'' to specify that it 
means the payment imposed with respect to a non-exempt individual. We 
also include the definition of ``tax filer'' in paragraph (a) to 
specify that it has the same meaning in subpart G as it does in Sec.  
155.300(a).
b. Eligibility Standards for Exemptions (Sec.  155.605)
    Under the program established in accordance with section 1411(a)(4) 
of the Affordable Care Act for determining whether certificates of 
exemption are to be issued by Exchanges under section 1311(d)(4)(H) of 
the Affordable Care Act, we proposed that Exchanges would issue 
certificates of exemption in the categories of religious conscience and 
hardship. With respect to the other seven exemptions, for reasons set 
forth below, we proposed that under the program provided for in section 
1411(a)(4) of the Affordable Care Act, Exchanges would also issue 
certificates of exemption with respect to three additional categories 
(with exemptions also available through the tax filing process) based 
on membership in a health care sharing ministry, membership in an 
Indian tribe, and incarceration. In the four remaining exemption 
categories, however, we proposed that under the program established 
under section 1411(a)(4) of the Affordable Care Act, certificates would 
not be issued by Exchanges under section 1311(d)(4)(H) of the 
Affordable Care Act, and instead individuals would claim an exemption 
in one of those categories exclusively through the tax return filing 
process with the IRS.
    In paragraph (a) of Sec.  155.605, we proposed that except as 
specified in paragraph (g), the Exchange would determine an applicant 
eligible for and grant a certificate of exemption for a month if the 
Exchange determines that he or she meets the requirements for one of 
the categories of exemptions described in this section for at least one 
day in the month, consistent with 26 CFR 1.5000A-3 of the Treasury 
proposed rule. We noted that depending on the circumstances for each 
specific proposed hardship exemption category, the certificate may be 
provided for an entire calendar year or instead for a specific month or 
period of months, including periods of time that stretch across more 
than one calendar year.
    We noted that an applicant could apply for multiple exemptions 
simultaneously in case some are denied, and also receive any exemptions 
for which he or she is eligible. We solicited comments on this 
approach.

[[Page 39499]]

    In paragraph (b), we proposed that except as specified, an 
applicant is required to submit a new application for each year for 
which an applicant wants to be considered for an exemption through the 
Exchange, and that an exemption will only be provided for a calendar 
year in which the applicant submitted an application for an exemption. 
We provided exceptions for exemptions provided based on membership in 
an Indian tribe and for religious conscience, in recognition that an 
individual's qualification for these exemptions is expected to remain 
the same from year to year. We also specified an exception for 
hardship, since some categories of hardship will be provided for one or 
more months and may be provided for periods of time that stretch across 
more than one calendar year, and some categories of hardship can only 
be provided after the close of a calendar year. We welcomed comments on 
this approach and how the Exchange could expedite and streamline the 
process.
    We considered whether to specify that the Exchange send a notice to 
each individual who had an exemption certificate from the Exchange for 
a calendar year, in order to remind him or her about the opportunity to 
apply to for an exemption for the following calendar year, and whether 
this notice could be sent only at the individual's direction. We 
solicited comments regarding the use of such a reminder and on a 
renewal process more generally.
    In paragraph (c), we proposed to codify the statutory eligibility 
standards for the exemption based on religious conscience. In paragraph 
(c)(1), we proposed that the Exchange would determine an applicant 
eligible for an exemption for a month if he or she is a member of a 
recognized religious sect or division described in section 1402(g)(1) 
of the Code, and an adherent of established tenets or teachings of such 
sect or division for such month, in accordance with 26 CFR 1.5000A-3(a) 
of the Treasury proposed rule.
    In paragraph (c)(2), we proposed eligibility standards regarding 
the duration of the exemption for religious conscience. In paragraph 
(c)(2)(i), we proposed that the Exchange grant the exemption for 
religious conscience to an applicant that meets the standards of 
paragraph (c)(1) of this section for a month on a continuing basis, 
until such time that the applicant either reaches the age of 18, or 
reports that he or she no longer meets the standards provided in (c)(1) 
of this section.
    We proposed to add paragraph (c)(2)(ii) to specify how the Exchange 
should handle a situation in which an individual who has a certificate 
of exemption based on religious conscience that was granted prior to 
the individual reaching the age of 18. We proposed that the Exchange 
send such an individual a notice when he or she reaches the age of 18 
that informs the individual that he or she needs to submit a new 
exemption application if he or she would like to maintain the 
certificate of exemption.
    We proposed to add paragraph (c)(3) to specify that the Exchange 
will grant an exemption in this category prospectively or 
retrospectively.
    In paragraph (d), we proposed that the Exchange determine an 
applicant eligible for an exemption for a month if the applicant is a 
member of a health care sharing ministry for such month in accordance 
with 26 CFR 1.5000A-3(b) of the Treasury proposed rule. We proposed 
that an applicant who wanted to retain this exemption for an additional 
calendar year would re-apply for this exemption each calendar year, and 
that the Exchange may only provide an exemption in this category 
retrospectively.
    In paragraph (e), we proposed the eligibility standards for the 
exemption based on incarceration. We specified that the Exchange would 
determine an individual eligible for an exemption for a month that he 
or she meets the definition specified in 26 CFR 1.5000A-3(d) of the 
Treasury proposed rule. We proposed that the Exchange would only 
provide this exemption for months in which an individual was 
incarcerated, since there is no assurance that an incarcerated 
individual will be released on the expected date.
    In paragraph (f), we proposed eligibility standards for the 
exemption based on membership in an Indian tribe. In paragraph (f)(1), 
we proposed to codify that the Exchange would determine an applicant 
eligible for an exemption for a month if he or she is a member of an 
Indian tribe for such month, in accordance with 26 CFR 1.5000A-3(g) of 
the Treasury proposed rule.
    In paragraph (f)(2), we proposed eligibility standards regarding 
the duration of the exemption for membership in an Indian tribe, such 
that the Exchange would grant the exemption for membership in an Indian 
tribe to an applicant who meets the standards of paragraph (f)(1) of 
this section for a month on a continuing basis, until such time that 
the individual reports that he or she no longer meets the standards 
provided in (f)(1) of this section.
    We proposed to add paragraph (f)(3) to specify that the Exchange 
will grant an exemption in this category during the year prospectively 
or retrospectively.
    In paragraph (g), we proposed eligibility standards for the 
exemption based on hardship, which is defined in section 5000A(e)(5) of 
the Code as applying to ``any applicable individual who for any month 
is determined by the Secretary under section 1311(d)(4)(H) of the 
Affordable Care Act to have suffered a hardship with respect to the 
capability to obtain coverage under a qualified health plan.'' In 
developing some of these standards, we considered the standards 
established by the Commonwealth of Massachusetts. We proposed some 
specific time standards for each category of hardship, but we solicited 
comments regarding whether these are appropriate, or if we should adopt 
a more uniform approach across the category.
    In paragraph (g)(1) of Sec.  155.605, we proposed that the Exchange 
provide an exemption for hardship for a month or months in which an 
applicant experienced financial or domestic circumstances, including an 
unexpected natural or human-caused event, such that he or she has a 
significant, unexpected increase in essential expenses; the expense of 
purchasing minimum essential coverage would have caused him or her to 
experience serious deprivation of food, shelter, clothing or other 
necessities; or he or she has experienced other factors similar to 
those described in paragraphs (g)(1)(i) and (ii) of this section that 
prevented him or her from obtaining minimum essential coverage. We 
proposed broad language to include a range of personal scenarios that 
could negatively impact an applicant such that he or she would be 
eligible for this exemption, and noted that we expected to clarify 
these criteria in future guidance. We listed expected standards and 
solicited comments on these criteria, including on whether additional 
criteria should be established in regulation or guidance. We also 
solicited comments regarding whether the proposed time standard could 
be effectively implemented, or whether we should take a different 
approach.
    In paragraph (g)(2), we proposed that the Exchange provide an 
exemption for hardship for a calendar year if an applicant, or another 
individual for whom the applicant attests will be included in the 
applicant's family (as defined in 26 CFR 1.5000A-1(d)(6) of the 
Treasury proposed rule), is unable to afford coverage for such calendar 
year in accordance with 26 CFR 1.5000A-3(e) of the Treasury proposed 
rule, calculated using projected annual household income. We proposed

[[Page 39500]]

identical standards to those defined for the lack of affordable 
coverage exemption in 26 CFR 1.5000A-3(e) of the Treasury proposed 
rule, except that the Exchange would use projected household income to 
determine whether coverage is affordable under this exemption, instead 
of actual household income from the tax return for the year for which 
the exemption is requested. We solicited comments regarding whether the 
approach in paragraph (g)(5) of this section regarding the aggregate 
cost of employer-sponsored coverage for all the employed members of the 
family should also be applied in determining eligibility for this 
hardship category.
    We proposed that this exemption is not available for an application 
that is submitted after the last date on which an applicant could 
enroll in a QHP through the Exchange for a calendar year for which the 
exemption is requested to ensure that an applicant can obtain the 
information needed to make a purchasing decision, including for a 
catastrophic plan, which is not applicable after the last date on which 
enrollment would be possible.
    We proposed in paragraph (g)(3) of Sec.  155.605 that the Exchange 
provide an exemption for hardship for a calendar year if an individual 
taxpayer who was not required to file an income tax return for such 
calendar year because his or her gross income was below the filing 
threshold, but who nevertheless filed to receive a tax benefit, claimed 
a dependent who was required to file a tax return, and as a result had 
household income exceeding the applicable return filing threshold 
outlined in 26 CFR 1.5000A-3(f)(2) of the Treasury proposed rule.
    We proposed to add paragraph (g)(4) to specify that the Exchange 
provide an exemption for hardship for a calendar year for an individual 
who has been determined ineligible for Medicaid for one or more months 
during the benefit year solely as a result of a State not implementing 
section 2001(a) of the Affordable Care Act. We sought comments on 
whether this exemption should be limited to such individuals who are 
also not eligible for advance payments of the premium tax credit (that 
is, with projected household income below 100% of the poverty 
threshold).
    We proposed to add paragraph (g)(5) of Sec.  155.605 to specify 
that the Exchange provide an exemption for hardship for a calendar year 
if an applicant and one or more employed members of his or her family, 
as defined in 26 CFR 1.5000A-1(d)(6) of the Treasury proposed rule, are 
each determined eligible for self-only coverage in separate eligible 
employer-sponsored plans that are affordable, pursuant to 26 CFR 
1.5000A-3(e) of the Treasury proposed rule for one or more months 
during the calendar year, but for whom the aggregate cost of employer-
sponsored coverage for all the employed members of the family exceeds 8 
percent of the household income for that month or those months.
    Lastly, as noted above, we proposed under our authority in section 
1411(d)(4) of the Affordable Care Act that the Exchange would not issue 
certifications of exemption with respect to household income below the 
filing threshold (other than the limited hardship exemption proposed in 
Sec.  155.605(g)(3) and described above); not being lawfully present; 
short coverage gaps; and inability to afford coverage (other than the 
limited hardship exemption proposed in Sec.  155.605(g)(2) and 
described above). We specified that these exemptions would be available 
solely through the tax filing process. We solicited comments on this 
approach and if there were alternative approaches that HHS should 
consider.
    Comment: Multiple commenters expressed support for HHS' proposal to 
allow an individual to apply for and enable the Exchange to grant 
multiple exemptions, as well as the provision specifying that an 
individual eligible for an exemption for at least one day of the month 
receive the exemption for a full month. Another commenter expressed 
broad support for the proposed exemptions process, but wanted HHS to 
maintain its focus on ensuring individuals receive coverage through the 
Exchange.
    Response: In fulfilling the goals of the Affordable Care Act, we 
are committed to ensuring that all individuals have access to quality, 
affordable health coverage. Furthermore, as specified in the statute, 
we are also committed to providing access to exemptions from the shared 
responsibility payment to those individuals who meet specified 
standards.
    Comment: Commenters expressed differing opinions regarding whether 
the Exchange should send notices to individuals in possession of 
certain certificates of exemption at the end of a calendar year to 
remind them of the need to submit an application for the same exemption 
for the next calendar year. Several commenters wanted HHS to specify 
that the Exchange send such a reminder notice that would arrive during 
open enrollment, to allow an individual to make the appropriate 
purchasing decision. Another commenter opposed specifying that the 
Exchange send such a reminder notice, noting that most exemptions are 
meant to be temporary, and that the primary goal of the Exchange should 
be ensuring that individuals have access to coverage.
    Response: We will maintain the language as proposed, which does not 
specify that Exchanges will send an additional reminder notice to an 
individual at the end of a calendar year. Pursuant to the eligibility 
standards for exemptions described throughout Sec.  155.605, 
individuals have broad flexibility in terms of the time periods which 
Exchanges will grant exemptions, and thus we do not believe the 
corresponding administrative burden on Exchanges to send an additional 
notice is outweighed by the benefits of such a notice for individuals. 
We note that an Exchange also has the flexibility to send such a notice 
at its discretion.
    Comment: Several commenters raised concerns regarding our proposed 
codification of the eligibility standards for the religious conscience 
exemption specified in the Affordable Care Act. Some commenters 
expressed philosophical opposition to the notion that the government 
would exempt individuals for religious purposes. Other commenters 
opposed our proposal to allow children of individuals in recognized 
religious sects or divisions to be exempt in addition to their parents. 
Commenters believed that as a result, parents would not have to 
maintain minimum essential coverage for their dependent children, which 
they feared would permit parents to avoid caring for their children's 
health.
    Response: Section 5000A(d)(2) of the Code, as added by section 
1501(b) of the Affordable Care Act, establishes the religious 
conscience exemption. We note that state laws governing domestic 
relations allow parents to attest on behalf of minor children, which 
was the basis of our proposal. We note that we do not intend this 
provision to modify or supersede any other laws regarding health 
responsibility for children.
    Comment: One commenter suggested the IRS or the Social Security 
Administration (SSA) is better positioned to determine eligibility for 
the religious conscience exemption. Furthermore, the commenter 
expressed concerns about how the Exchange should handle an appeal when 
a religious sect is not recognized by the SSA. The commenter indicated 
that it would be more appropriate for an individual to instead appeal 
to IRS or SSA in this situation as opposed to the Exchange.
    Response: As noted above, the statute specifies that the religious 
conscience

[[Page 39501]]

exemption may only be granted by the Exchange. We are working closely 
with the SSA to define an appropriate process to address religious 
sects that are not yet recognized, and we clarify in Sec.  
155.615(b)(4) that if an applicant attests to membership in a religious 
sect or division that is not recognized by the Social Security 
Administration as an approved religious sect or division under section 
1402(g)(1) of the Code, the Exchange must provide the applicant with 
information regarding how his or her religious sect or division can 
pursue recognition under section 1402(g)(1) of the Code, and determine 
the applicant ineligible for this exemption until such time as the 
Exchange obtains information indicating that the religious sect or 
division has been approved. We agree with the commenter that the 
Exchange is not an ideal venue for an appeal of a denial that was based 
on a finding that a sect or division did not meet the statutory 
requirements. We intend to provide further guidance on this process in 
collaboration with the SSA.
    Comment: One commenter requested that HHS expand the religious 
sects and divisions whose members qualify for the religious conscience 
exemption.
    Response: HHS does not have the authority to expand the criteria 
set in the statute, which reference section 1402(g)(1) of the Code, and 
so we are finalizing the cross-reference to the statutory criteria as 
proposed.
    Comment: Commenters expressed differing opinions regarding our 
proposal that when an individual who has a religious conscience 
exemption turns 18, he or she must re-apply for the exemption in order 
to maintain it. One commenter opposed specifying that the Exchange send 
a notice, instead arguing that the individual turning 18 should be 
responsible for reapplying without a prompt. Another commenter noted 
that based on the practices of the religious sects and divisions that 
this exemption covers, HHS should modify this provision such that the 
age standard is 21.
    Response: In response to comments, to align with other Affordable 
Care Act definitions of children, and to reduce burden on individuals 
under the age of 21, we are modifying this provision in the final rule 
to specify that individuals receiving the religious conscience 
exemption will have to re-apply for the exemption upon turning 21. We 
will maintain the provision specifying that the Exchange send a notice 
prompting an individual to reapply upon turning 21, since this notice 
is needed to notify him or her that his or her exemption will end 
absent a new application. Nothing precludes individuals affected by 
this change from obtaining coverage on their own.
    Comment: One commenter suggested that the Exchange should have the 
flexibility not to grant exemptions based on membership in a health 
care sharing ministry or incarceration. The commenter noted the limited 
benefit for individuals in having an Exchange grant such exemptions 
since the proposed rule specifies that they are only available through 
the Exchange retrospectively within a calendar year, and are otherwise 
available through the tax filing process.
    Response: We believe that individuals will benefit from the 
opportunity to receive the exemptions based on membership in a health 
care sharing ministry or incarceration through the Exchange in addition 
to through the tax filing process, and as such, are finalizing the 
provision as proposed.
    Comment: One commenter suggested that HHS clarify the language used 
in Sec.  155.605(c)(3) and (f)(3) such that the text of the regulation 
appropriately describe the flexibility for Exchanges to grant an 
exemption in these categories retrospectively or prospectively.
    Response: In proposed Sec.  155.605(c)(3) and (f)(3), we specified 
that the Exchange ``must provide an exemption in this category 
prospectively or retrospectively.'' The intent of this provision was 
not to allow flexibility to the Exchange whether or not to grant the 
exemption but, rather, to specify that the Exchange will provide an 
exemption in these categories retrospectively, prospectively, or both, 
depending on the period of time for which such an exemption is 
requested and the period of time for which an applicant meets the 
criteria for such an exemption. Accordingly, we have modified the 
language in paragraphs (c), (d), (e), (f), and (g) to specify as 
appropriate when the Exchange must make the various categories of 
exemptions available prospectively or retrospectively.
    Comment: One commenter expressed support for HHS' proposal that the 
Exchange grant the exemption based on membership in an Indian tribe as 
long as individuals still maintained the opportunity to file for this 
exemption through the tax filing process. Another commenter suggested 
that Exchanges should not grant exemptions based on membership in an 
Indian tribe, but that rather such exemption should only be available 
through the tax filing process. Alternatively, this commenter said that 
if the Exchange does grant this exemption, it should only do so 
prospectively.
    Response: We believe that individuals will benefit from the 
opportunity to receive the exemption based on membership in an Indian 
tribe through the Exchange in addition to through the tax filing 
process. Furthermore, we do not believe that granting this 
retrospectively and prospectively will result in significant burden for 
the Exchange, since no work is necessary to determine eligibility for 
this exemption retrospectively beyond what would be necessary to 
determine eligibility for it prospectively. Accordingly, we are 
finalizing this provision as proposed.
    Comment: Some commenters expressed concerns about the definition of 
Indian tribe proposed in Sec.  155.600(a), which referred to section 
45A(c)(6) of the Code. These commenters recommended a broader 
definition of Indian for purposes of an exemption. Several commenters 
recommended that HHS add a hardship exemption category for Indians as 
defined in 42 CFR 447.50, and another commenter suggested that 
Exchanges add a hardship exemption category for individuals who are 
eligible to receive services provided by the Indian Health Service 
(IHS) pursuant to 25 U.S.C. 1680c(a) or (b). A commenter asked HHS to 
specify that the duration for these hardship exemptions would parallel 
the duration of the exemption for a member of an Indian tribe.
    Response: We have thoroughly reviewed the definitions of the term 
``Indian'' in the Affordable Care Act. HHS does not have the legal 
authority to modify through regulation the statutory definitions of 
``Indian'' as referenced in the Affordable Care Act. There is no 
administrative flexibility to align these definitions. Any changes to 
the definition must be legislative. In response to comments, we added a 
category of hardship exemption in Sec.  155.605(g)(6) for an individual 
who is not a member of a federally-recognized tribe, and is an Indian 
eligible for services through an Indian health care provider, as 
defined in 42 CFR 447.50, or an individual eligible for services 
through IHS in accordance with 25 U.S.C. 1680c(a), (b), or (d)(3). We 
also redesignate proposed Sec.  155.615(f)(3) as Sec.  155.615(f)(4), 
and add new Sec.  155.615 to specify that the Exchange will use the 
same verification procedures for this exemption as it will use for the 
exemption for members of a federally-recognized tribe. We also note 
that the duration of this exemption mirrors that as provided for 
members of federally-recognized tribes, such that whether it is granted 
prospectively or retrospectively, it is granted for a month on a 
continuing basis until the individuals specified above report a

[[Page 39502]]

change in their eligibility status for this exemption. This ensures 
that the individuals specified above who have access to health care 
through the IHS, Tribes and Tribal organizations, and urban Indian 
organizations (I/T/U) are treated in the same manner as members of 
federally-recognized tribes for purposes of the individual shared 
responsibility payment.
    Comment: Multiple commenters expressed overall support for our 
proposal in Sec.  155.605(g)(1), whereby the Exchange would determine 
an individual eligible for a hardship exemption based on circumstances 
that resulted in an unexpected increase in essential expenses that 
prevented an individual from obtaining coverage under a qualified 
health plan. One commenter suggested that HHS should provide further 
flexibility to allow Exchanges to define additional eligibility 
criteria for this exemption. Another commenter expressed support for 
HHS providing minimum standards for hardship. While we mentioned 
several examples of events that would qualify as hardships in preamble, 
based on standards used for similar purposes in the Commonwealth of 
Massachusetts, some commenters wanted HHS to clarify in the final text 
of the regulation that an applicant who met the circumstances discussed 
in the preamble as well as other circumstances used in Massachusetts 
but not specifically mentioned in preamble would qualify for a hardship 
exemption.
    Response: In preamble to the proposed rule, we noted that we 
expected to clarify detailed hardship criteria in future guidance. 
Accordingly, to assist Exchanges in determining eligibility for a 
hardship exemption for an individual who experienced circumstances that 
prevented him or her from obtaining coverage under a QHP, we are 
publishing guidance simultaneously with this rule that provides 
detailed criteria for this exemption.
    Comment: One commenter recommended that Exchanges have greater 
flexibility in determining the duration of a single exemption, 
particularly due to the many circumstances that could be covered by the 
hardship exemption. Several commenters recommended that HHS provide 
Exchanges with clearer guidance regarding the duration of hardship 
exemptions that could be granted according to Sec.  155.605(g)(1), 
including events that may span multiple calendar years. Some commenters 
urged that in particular situations, such as those where victims suffer 
natural and human-caused disasters, Exchanges should grant exemptions 
that last 2 years. Other commenters suggested that any hardship 
exemption be provided for a minimum of 6 months or a year. One 
commenter recommended that the Exchange grant a hardship exemption for 
more than a calendar year if an individual experiences an event that 
occurs across 2-calendar years. Another commenter requested 
clarification regarding the language in Sec.  155.605(a) specifying 
that the Exchange would provide an exemption for a month if the 
Exchange determines that an individual meets the requirements for an 
exemption for at least one day of the month, with the exception of 
Sec.  155.605(g).
    Response: In response to comments, we clarify that a hardship 
exemption granted under Sec.  155.605(g)(1) will at minimum be provided 
for the month before the hardship, the month or months of the hardship, 
and the month after the hardship, and that Exchanges have flexibility 
to provide it for additional months after the hardship, consistent with 
the circumstances of the hardship. This ensures that such a hardship 
exemption addresses the time period where an individual actually 
experienced the hardship, while also providing flexibility for 
Exchanges to evaluate the particular circumstances of an event that may 
necessitate an extended duration of an exemption. As such, the hardship 
exemptions provided under Sec.  155.605(g)(1), which will be provided 
before and after the occurrence of when the individual actually 
experienced the hardship, necessitate an exception in regards to the 
general provision of Sec.  155.605(a).
    Comment: Numerous commenters urged HHS to specify additional 
categories of hardship exemptions outside of those proposed or to 
expand the scope of certain categories of hardship exemptions as 
proposed. These suggestions include providing hardship exemptions for: 
Employees who have an offer of self-only employer-sponsored coverage 
that costs less than 8 percent of household income, but for whom family 
coverage costs more than 8 percent of household income; individuals 
with income less than 150 percent of the FPL; individuals for whom the 
aggregate cost of employer-sponsored coverage (not only employed 
members) exceeds 8 percent of household income for that month(s); 
individuals and families with household income below 250 percent of the 
FPL that are offered affordable employer-sponsored coverage (less than 
8 percent of household income), but the amount that the individual or 
family would have to pay for the lowest-cost bronze plan on the 
Exchange exceeds 8 percent of household income; individuals and their 
dependents who have an offer of employer-sponsored coverage that is 
affordable but that does not provide minimum value; individuals 
participating in special non-minimum essential coverage programs that 
already require financial determinations by a state; individuals who 
already receive certain kinds of public assistance benefits; or 
individuals who in good faith attempted to purchase insurance but were 
unable to do so based on limited enrollment opportunities.
    Response: As specified in guidance published simultaneously with 
this final rule, we have identified several events that Exchanges can 
refer to in order to help them in determining eligibility for hardship 
exemptions. These will also be the detailed criteria used by the 
Federally-facilitated Exchange. Due to the broad range of circumstances 
that will qualify an individual for a hardship exemption, we do not 
believe that further categories of exemptions need to be added to the 
text of the regulation. However, as discussed further below, we have 
modified the eligibility standards for the hardship exemption for 
situations in which coverage is unaffordable based on projected income 
such that if an individual and his or her dependents have an offer of 
employer-sponsored coverage that does not meet the minimum value 
standard, the Exchange will not consider this offer in determining 
affordability. Rather, in such a situation, the Exchange will consider 
affordability based on the lowest-cost offer of employer-sponsored 
coverage that does meet the minimum value standard, and if no such 
offer exists, on the cost of the applicable lowest cost bronze plan in 
the relevant rating area of the Exchange, reduced by any available 
advance payments of the premium tax credit. This is similar to the 
considerations for eligibility for advance payments of the premium tax 
credit based on eligibility for coverage in an eligible employer-
sponsored plan, which take into account both cost and minimum value.
    Comment: One commenter expressed concerns about the burden on 
Exchanges to handle eligibility determinations for exemptions, 
including the hardship exemption, as they viewed the eligibility 
determination process for exemptions as more appropriately handled 
through the tax filing process, particularly when exemptions are not 
available prospectively through the Exchange. Some commenters supported 
the

[[Page 39503]]

proposed hardship exemption at Sec.  155.605(g)(3) (related to the tax 
filing threshold), while another commenter stated that the proposed 
hardship exemption at Sec.  155.605(g)(3) should not be granted by the 
Exchange as it concerned tax filing. Other commenters generally 
supported the hardship exemption proposed at Sec.  155.605(g)(5) 
(related to affordable self-only coverage), even if suggesting 
modifications as noted above, for employed members determined eligible 
for affordable self-only insurance, but for whom the aggregate cost of 
employer-sponsored coverage for all the employed members of the family 
exceeds 8 percent of household income.
    Response: Based on comments received, and in order to minimize 
burden on Exchanges while ensuring efficient processing of exemptions 
applications, we will modify Sec.  155.605(g) such that the hardship 
exemptions proposed at Sec.  155.605(g)(3) and (5) will be provided 
exclusively through the tax filing process, and not by the Exchange. 
These exemptions necessitate information that will only be available at 
the time of tax filing, such that if they were exclusively available 
through the Exchange, an individual would need to file a tax return, 
request an exemption from the Exchange, receive a determination from 
the Exchange, and depending on the determination, potentially amend his 
or her return. Accordingly, to streamline the process for consumers, we 
grant limited authority to the IRS to administer these two hardship 
exemptions. We note that we will continue to consider the 
administrative feasibility of Exchanges granting the hardship exemption 
under Sec.  155.605(g)(5) after the conclusion of the first year of 
operations.
    Comment: Commenters expressed broad support for our proposal at 
Sec.  155.605(g)(4) to provide a hardship exemption for individuals 
ineligible for Medicaid in states that chose not to expand Medicaid 
under the Affordable Care Act, but expressed differing opinions 
regarding whether such a hardship exemption should be limited to those 
individuals who are not determined eligible for advance payments of the 
premium tax credit. Some commenters supported the policy as proposed 
based on affordability concerns even for those individuals eligible for 
advance payments of the premium tax credit, while others suggested that 
the individuals who are eligible for advance payments of the premium 
tax credit should not be eligible to receive a hardship exemption.
    Response: We appreciate the concerns raised by commenters arguing 
both for and against maintaining this hardship exemption as proposed. 
We continue to believe that it is appropriate that individuals, even 
those eligible for advance payments of the premium tax credit, to be 
eligible for this hardship exemption if ineligible for Medicaid solely 
as a result of a state that chose not to expand Medicaid eligibility 
under the Affordable Care Act. We expect that these exemptions will be 
provided through the eligibility process for coverage, and note that 
notwithstanding receiving a hardship exemption, such individuals may 
still decide to enroll in a QHP and receive advance payments of the 
premium tax credit in this situation. We also note that these 
exemptions will be available retrospectively following the close of a 
coverage year.
    Comment: Several commenters expressed general support for Sec.  
155.605(g)(2), which provides a hardship exemption based on projected 
annual household income. However, some commenters believed that this 
still did not fully address the consequences of 26 CFR 1.36B-
2(c)(3)(v)(A)(2) concerning the affordability of an eligible employer-
sponsored plan for a related individual. One commenter requested 
clarification as to whether this hardship exemption applied to the 
individual or the entire tax filing unit. Another commenter did not 
support limiting the availability of this hardship exemption only 
within open enrollment periods.
    Response: We note that while the lack of affordable coverage based 
on projected income hardship exemption and the lack of affordable 
coverage exemption described in section 5000A(e)(1) of the Code address 
certain situations where a related individual is ineligible for advance 
payments of the premium tax credit based on 26 CFR 1.36B-
2(c)(3)(v)(A)(2), these provisions are not intended to provide an 
exemption in all cases in which an individual may be ineligible for 
advance payments of the premium tax credit.
    We finalize this exemption to generally follow the standards in 
section 5000A(e)(1) of the Code. As in the proposed rule, we specify in 
paragraph (g)(2)(i) of the final rule that this exemption differs from 
the exemption described in section 5000A(e)(1) of the Code in that it 
relies on projected household income. In order to facilitate 
implementation of this exemption, we add paragraphs (g)(2)(ii), (iii), 
and (iv) to clarify the applicable standards. First, in paragraph 
(g)(2)(ii), we clarify that as described above, the Exchange will only 
consider the affordability of an eligible employer-sponsored plan for 
this exemption if it meets the minimum value standard. Second, in 
paragraph (g)(2)(iii), we describe how the Exchange will determine the 
cost of coverage for an individual who is eligible to purchase coverage 
under an eligible employer-sponsored plan.
    We note that, under the Treasury proposed rule, the standards for 
determining the required contribution for coverage through an eligible 
employer-sponsored plan vary depending on whether an individual is an 
employee eligible to purchase coverage under an eligible employer-
sponsored plan through the employee's employer, or is eligible to 
purchase coverage under an eligible employer-sponsored plan because of 
a relationship to an employee, with respect to eligibility for an 
exemption. For an individual employee who is eligible through his or 
her own employer, the affordability calculation is based on the lowest 
cost option for self-only coverage. For all other individuals eligible 
to purchase coverage under an eligible employer-sponsored plan, the 
required contribution is the portion of the annual premium that the 
employee would pay for the lowest cost option for family coverage that 
would cover the employee and all individuals who are included in the 
employee's family and are not otherwise exempt. We note that the 
Exchange will only know whether an individual within the employee's 
family has been granted an exemption by that Exchange. Accordingly, we 
specify in paragraph (g)(2)(iii)(C) that the Exchange will consider the 
lowest cost family coverage that meets the minimum value standard and 
would cover the employee and all other individuals who are included in 
the employee's family who have not otherwise been granted an exemption 
through the Exchange.
    We also note that proposed 26 CFR 1.36B-2(c)(3)(v)(A)(4) (78 FR 
25914), provides that for purposes of determining eligibility for the 
premium tax credit, the affordability of coverage in an eligible 
employer-sponsored plan is determined by assuming that each employee 
satisfies the requirements of available nondiscriminatory wellness 
programs related to tobacco use, and does not satisfy the requirements 
of any available wellness programs that are not related to tobacco use. 
That is, if a plan includes a nondiscriminatory wellness program for 
tobacco users, such as smoking cessation classes, the affordability of 
coverage under that plan will be determined based on the premium that 
is charged to tobacco

[[Page 39504]]

users who complete this program. In the preamble to proposed 26 CFR 
1.36B-2(c)(3)(v)(4) (78 FR 25911), Treasury also noted that it expects 
to specify that this treatment of nondiscriminatory wellness programs 
will also be used in determining the required contribution for purposes 
of the lack of affordable coverage exemption under section 5000A(e)(1) 
of the Code.
    Accordingly, in order to ensure that an individual is not liable 
for the shared responsibility payment if he or she is ineligible for 
advance payments of the premium tax credit and cost-sharing reductions 
as a result of a finding by the Exchange that he or she is eligible for 
qualifying coverage in an eligible employer-sponsored plan based on 
incorporating the completion of a tobacco-related wellness program, we 
specify in paragraph (g)(2)(iii)(A) that the Exchange will determine 
eligibility for the exemption specified in paragraph (g)(2) for an 
individual who uses tobacco without incorporating any discount 
resulting from the completion of a wellness program designed to prevent 
or reduce tobacco use. We also specify in paragraph (g)(2)(iii)(B) that 
discounts from wellness incentives offered by an eligible employer-
sponsored plan that do not relate to tobacco use are treated as not 
earned.
    In paragraph (g)(2)(iv), we clarify that in the case of an 
individual who is ineligible to purchase coverage under an eligible 
employer-sponsored plan, or only eligible to purchase coverage under an 
eligible employer-sponsored plan that does not meet the minimum value 
standard, the Exchange will determine the required contribution for 
coverage in accordance with section 5000A(e)(1)(B)(ii) of the Code, 
inclusive of all members of the individual's family who have not 
otherwise been granted an exemption through the Exchange, and who are 
not treated as eligible to purchase coverage under an eligible 
employer-sponsored plan that meets the minimum value standard. This 
determination is based on the premium for the single lowest cost bronze 
plan available, less any credit allowable under section 36B of the 
Code, in the individual market through the Exchange serving the rating 
area in which the individual resides.
    Furthermore, we clarify that in finalizing this provision, we 
specify in paragraphs (g)(2)(v) and (g)(2)(vi) that this exemption will 
be available throughout the calendar year prospectively for a month or 
months until the last date on which an individual could enroll in a QHP 
through the calendar year for which the exemption is requested. This 
refers not only to the open enrollment period, but to any special 
enrollment period, notwithstanding special effective dates, for which 
an individual may potentially be determined eligible during the 
calendar year under 45 CFR 155.420(b). As such, an individual may be 
determined eligible for this exemption for the remaining month or 
months of a calendar year as late as November of that calendar year, as 
the effective dates for a special enrollment period under Sec.  
155.420(b) would still allow such an individual to enroll in a QHP by 
December of that calendar year. Lastly, in order to reduce 
administrative burden, we also specify in paragraph (g)(2)(vi) that an 
exemption in this category will be provided for all remaining months in 
a coverage year, notwithstanding any change in an individual's 
circumstances.
    Comment: Some commenters wanted to ensure that Exchanges would 
provide clear and easily understandable information to explain 
different exemptions available to individuals, including the steps 
needed to apply for an exemption.
    Response: We recognize the need for consumer information that 
explains the available exemptions as well as the necessary 
documentation and steps needed for individuals to apply. We expect to 
work with states and other stakeholders to ensure that individuals are 
properly educated about the exemption eligibility process.
    Comment: One commenter wanted to ensure that the Exchange would 
issue a certificate of exemption to any individual who is qualified and 
not limit the availability of certificates to only those individuals 
who are seeking coverage through the Exchange.
    Response: We agree with the commenter that the Exchange will not 
limit certificates of exemption to individuals who are seeking coverage 
through the Exchange. We note that a hardship exemption will allow an 
individual to enroll in a catastrophic plan, both inside and outside 
the Exchange, and the Exchange may not limit the availability of an 
exemption contingent on an individual seeking coverage through the 
Exchange or elsewhere. Further, while a portion of the eligibility 
process for the hardship exemption proposed in Sec.  155.605(g)(4) for 
individuals who are determined ineligible for Medicaid based on a 
state's choice not to expand Medicaid eligibility under the Affordable 
Care Act relies on the eligibility process for Medicaid, proposed Sec.  
155.610(a) specifies that the Exchange will generally use a separate 
application for exemptions. We finalize this provision as proposed.
    Comment: One commenter was supportive of HHS' decision not to 
specify that the Exchange would grant the exemption specified in 
section 5000A(d)(3) of the Code for individuals who are not lawfully 
present, but also recommended clear guidance and instructions regarding 
individuals who nevertheless attempt to apply for this exemption 
through the Exchange to ensure that the Exchange will follow the 
appropriate privacy and confidentiality protections, and also to direct 
individuals to claim this exemption through the tax filing process.
    Response: We note that the privacy and confidentiality protections 
in 45 CFR 155.260 apply to the exemption eligibility process, and are 
sufficient to address these concerns. Furthermore, we expect that the 
Exchange will provide clear guidance regarding the exemptions available 
through the Exchange as well as the exemptions that can be claimed 
solely through the tax filing process, in order to appropriately direct 
individuals.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.605 of the 
proposed rule with the following modifications: We make technical 
corrections in paragraphs (c) through (g) for the purpose of clarity to 
specify when the Exchange must make different exemptions available, 
whether prospectively or retrospectively. In paragraph (c)(2) 
concerning the duration of the exemption for religious conscience, we 
specify that an exemption in this category will be provided on a 
continuing basis until the month after the month of the individual's 
21st birthday, and as such if an Exchange granted such an individual an 
exemption prior to the age of 21, would have to send the applicant a 
notice at that point to remind him or her to submit a new application 
to maintain the certificate of exemption. We make revisions throughout 
paragraph (g) to specify which hardship exemptions must be granted by 
the Exchange, and which can be claimed only through the tax filing 
process. We clarify that an Exchange will determine an applicant 
eligible for an exemption under paragraph (g)(1) of this section for 
the month before, a month or months during which they experience the 
circumstances that qualify as a hardship, and the month after. We make 
a technical correction in paragraph (g)(1)(i) to clarify that the 
financial or domestic circumstances caused a significant and unexpected 
increase in

[[Page 39505]]

essential expenses that prevented the individual from obtaining 
coverage under a QHP. We make a technical correction in paragraphs 
(g)(1)(ii) to replace ``minimum essential coverage'' with ``qualified 
health plan'' to align with the statutory language describing the 
hardship exemption, and modify paragraph (g)(1)(iii) to clarify that 
Exchange will determine an individual eligible for a hardship exemption 
if he or she experienced circumstances that prevented him or her from 
obtaining coverage under a QHP in accordance with the statute.
    We add paragraph (g)(2)(ii) to clarify that the Exchange will only 
consider the affordability of an eligible employer-sponsored plan for 
the exemption described in paragraph (g)(2) if the eligible employer-
sponsored plan meets the minimum value standard. We add paragraph 
(g)(2)(iii) to clarify the applicable standards if an individual is 
eligible for coverage through an eligible employer-sponsored plan that 
meets the minimum value standard, and note in paragraph (g)(2)(iii)(A) 
that an individual who uses tobacco is treated as not earning any 
premium incentive related to participation in a wellness program 
designed to prevent or reduce tobacco use that is offered by an 
eligible employer-sponsored plan, and in paragraph (g)(2)(iii)(B) that 
discounts from wellness incentives offered by an eligible employer-
sponsored plan that do not relate to tobacco use are treated as not 
earned. That is, for purposes of this exemption, the cost of an 
eligible employer-sponsored plan that includes a premium differential 
for smokers and non-smokers is calculated using the non-smoker premium 
for non-smokers, and the smoker premium for smokers, without any 
discounts that may be available through smoking cessation programs. We 
outline the appropriate methods to determine the required contribution 
for coverage through an eligible employer-sponsored plan that meets the 
minimum value standard in paragraphs (g)(2)(iii)(C) and (D), depending 
on whether an individual is an employee eligible to purchase coverage 
under an eligible employer-sponsored plan through the employee's 
employer, or is eligible to purchase coverage under an eligible 
employer-sponsored plan by reason of a relationship to an employee. We 
specify in paragraph (g)(2)(iii)(D) that the Exchange will consider the 
lowest cost family coverage that meets the minimum value standard that 
would cover the employee and all other individuals who are included in 
the employee's family who have not otherwise been granted an exemption 
through the Exchange. We specify in paragraph (g)(2)(iv) that the 
Exchange will determine the required contribution for coverage in the 
individual market in the case of an individual who is ineligible to 
purchase coverage under an eligible employer-sponsored plan in 
accordance with section 5000A(e)(1)(B)(i) of the Code, or eligible only 
to purchase coverage under an eligible employer-sponsored plan that 
does not meet the minimum value standard, inclusive of all members of 
the individual's family who have not otherwise been granted an 
exemption through the Exchange, or are treated as eligible to purchase 
coverage under an eligible employer-sponsored plan that meets the 
minimum value standard. We also clarify in paragraphs (g)(2)(v) and 
(g)(2)(vi) that this exemption will be available throughout the 
calendar year prospectively for a month or months until the last date 
on which an individual could enroll in a QHP through the calendar year 
for which the exemption is requested, and that the Exchange will 
provide an exemption in this category for all remaining months in a 
coverage year, notwithstanding any change in an individual's 
circumstances.
    We clarify that the Exchange may not grant the hardship exemptions 
under paragraph (g)(3) and (5) of this section, but rather only the IRS 
will allow an applicant to claim these exemptions. We add paragraph 
(g)(6) to provide that an Exchange will determine an applicant eligible 
for a hardship exemption for any month for which he or she is an Indian 
eligible for services through an Indian health care provider, as 
defined in 42 CFR 447.50, or an individual eligible for services 
through the Indian Health Service in accordance with 25 U.S.C. 
1680c(a), (b), or (d)(3). We clarify that the duration for the 
exemption provided under paragraph (g)(6) of this section is the same 
as specified in paragraph (f)(2) of this section.
c. Eligibility Process for Exemptions (Sec.  155.610)
    In Sec.  155.610, we proposed the process by which the Exchange 
would determine an applicant's eligibility for exemptions. In paragraph 
(a), we proposed to specify that the Exchange would use an application 
established by HHS in order to collect the information necessary to 
determine eligibility and grant a certificate of exemption for an 
applicant, unless the Exchange receives approval to use an alternative 
application. We also clarified that in cases in which relevant 
information has already been collected through the eligibility process 
for enrollment in a QHP and for insurance affordability programs, the 
Exchange would use this information for the purpose of eligibility for 
an exemption to the maximum extent possible.
    In paragraph (b), we proposed that the Exchange may seek approval 
from HHS for an alternative application. We further specified that such 
alternative application must only request the minimum information 
necessary for the purposes identified in paragraph (a) of this section.
    In noting that there are exemptions that share common data and 
verifications with the eligibility process for enrollment in a QHP and 
for insurance affordability programs, in paragraph (c) we proposed that 
if an individual submits the application in 45 CFR 155.405 and then 
requests an exemption, the Exchange would use the information collected 
on the application for coverage and not duplicate any verification 
processes that share the standards specified in this subpart. We 
solicited comments on how best to coordinate these processes to ensure 
maximum administrative simplicity for all involved parties.
    In paragraph (d), we proposed the Exchange would accept the 
application for an exemption from an application filer, and provide 
tools for the submission of an application. We did not specify 
particular channels for application acceptance, but we solicited 
comments regarding whether we should specify some or all of the 
channels included in 45 CFR 155.405.
    In paragraph (e), we proposed that the Exchange would specify that 
an applicant who has a social security number (SSN) will provide such 
number to the Exchange in order to coordinate information in the tax 
filing process and provide the Exchange with additional information 
with which to ensure program integrity. However, we proposed to clarify 
in paragraphs (e)(2) and (e)(3) that the Exchange may not require an 
individual who is not seeking an exemption for him or herself to 
provide a SSN, except that the Exchange would require an application 
filer to provide the SSN for a non-applicant tax filer only if the 
applicant attests that the tax filer has a SSN and filed a tax return 
for the year for which tax data would be utilized to verify household 
income and family size for a hardship exemption. We solicited comments 
on the applicability of this provision in the context of the exemption 
eligibility process.
    In paragraph (f), we proposed that the Exchange would grant a 
certificate of exemption to any applicant determined

[[Page 39506]]

eligible in accordance with the standards for exemptions provided in 
Sec.  155.605.
    In paragraph (g)(1), we proposed that the Exchange determine 
eligibility for exemptions promptly and without undue delay, which is 
the same timing threshold used throughout subpart D of this part, 
including in 45 CFR 155.310(e)(1), with respect to eligibility 
determinations for enrollment in a QHP and for insurance affordability 
programs. In paragraph (g)(2), we proposed that the assessment of 
timeliness of eligibility determinations by the Exchange is based on 
the period from the date of the application until the date on which the 
Exchange notifies the applicant of its decision. We solicited comments 
regarding specific performance standards for the eligibility process 
described in this subpart, and whether we should define an outer bound 
in which an eligibility determination will be made.
    In paragraph (h), we proposed to clarify that except for the 
exemptions for religious conscience and membership in an Indian tribe 
proposed in Sec.  155.605(c) and Sec.  155.605(f), respectively, after 
December 31 of a given calendar year, the Exchange will not accept an 
application for an exemption for months for such calendar year. We 
intended to specify that this provision also apply to the hardship 
exemption under Sec.  155.605(g), but inadvertently did not include 
such language in the text of the regulation. We solicited comments 
regarding this approach, and whether there should be additional 
categories of exemptions for which the Exchange would grant exemptions 
after the close of a calendar year.
    In paragraph (i), we proposed that the Exchange provide timely 
written notice to an applicant of any eligibility determination for an 
exemption made in accordance with this subpart, which could be provided 
through electronic means, consistent with Sec.  155.230(d).
    In paragraph (j), we proposed that an individual who has been 
certified by an Exchange as qualifying for an exemption retain the 
records that demonstrate not only receipt of the certificate of 
exemption but also qualification for the underlying exemption. We noted 
that to the extent that the Exchange provides a certificate of 
exemption for which the underlying verification is based in part on the 
special circumstances exception proposed in Sec.  155.615(h), an 
individual would retain records that demonstrate receipt of the 
certificate of exemption, as well as the circumstances that warranted 
the use of the special circumstances exception.
    Comment: Commenters were generally supportive of our proposals 
throughout this section. One commenter suggested that HHS codify the 
preamble language specifying that individuals could apply for multiple 
exemptions simultaneously. Another commenter sought clearer standards 
regarding the eligibility process for exemptions in order to limit 
administrative burden.
    Response: We believe that the language proposed in this section 
provides the appropriate amount of detail to guide the Exchange in 
establishing an efficient process for exemptions, while also allowing 
for the Exchange to have the necessary flexibility to administer these 
processes effectively. We clarify that while we believe individuals 
will benefit from the opportunity to seek multiple exemptions 
simultaneously, we feel that the existing regulation text is 
sufficient, and so are finalizing it as proposed.
    Comment: One commenter recommended that HHS revise the language in 
Sec.  155.610(a) to clarify that except as specified, the Exchange must 
use an application established by HHS to collect only the information 
that is ``strictly'' necessary for determining eligibility for an 
exemption. Another commenter wanted HHS to cross-reference to Sec.  
155.260 so that information collected on the exemption application was 
subject to the appropriate security and privacy protections.
    Response: We share the commenter's concern regarding Exchanges 
using an exemptions application that minimizes the information 
individuals must provide to receive an eligibility determination for an 
exemption, and is subject to robust privacy and security protections. 
We believe that the comment regarding limiting requests for information 
to only what is necessary is addressed in proposed Sec.  155.615(j), 
which limits the ability of the Exchange to require the provision of 
information by an applicant to support the eligibility process for 
exemptions to the minimum necessary, and is finalized as proposed. We 
also note that Sec.  155.260(a) already includes language specifying 
that the provisions of Sec.  155.260 apply to the exemptions process. 
Accordingly, we are not including additional language in this final 
regulation.
    Comment: Commenters made several suggestions with the goal of 
enhancing the efficiency of the coverage and exemptions application 
processes. Several commenters supported our proposals to re-use 
information from the coverage application for the purposes of 
exemptions eligibility determinations when possible in order to prevent 
collecting duplicate information. One commenter recommended combining 
the coverage application and exemptions application in order to 
streamline the eligibility determination process for both enrollment in 
a QHP and exemptions, reduce burden on individuals and Exchanges, and 
inform an applicant of all potential coverage or exemptions options 
based on his or her particular circumstances.
    Response: As noted in our proposed rule, we continue to believe 
that where possible, individuals who apply for coverage should not have 
to provide duplicate information to the Exchange if they subsequently 
decide to apply for an exemption. We also believe that it is important 
to have separate applications for coverage and exemptions to avoid 
creating burden on those individuals who are only seeking coverage or 
exemptions. Accordingly, we are finalizing these provisions as 
proposed.
    Comment: One commenter viewed the language in Sec.  155.610(c) 
regarding the reuse of information collected through the eligibility 
process for enrollment in a QHP through the Exchange and for insurance 
affordability programs as confusing, and recommended the phrase ``that 
adhere to the standards specified in this subpart'' be eliminated.
    Response: We are modifying this language to clarify that when an 
Exchange has verified information through the eligibility process for 
enrollment in a QHP through the Exchange and for insurance 
affordability programs, and such verifications occur in accordance with 
the standards specified in this subpart, the Exchange may not repeat 
the verification for purposes of determining eligibility for an 
exemption. For example, we note that the verification procedures for 
the exemption for members of an Indian tribe cross-references the 
verification procedures in subpart D of this part; accordingly, if the 
Exchange verified that an individual meets the standards through the 
eligibility process for enrollment in a QHP and for insurance 
affordability programs, and such an individual subsequently requests an 
exemption based on membership in an Indian tribe, the Exchange will not 
repeat the verification.
    Comment: Commenters urged that the Exchange allow individuals to 
apply for an exemption via the same channels as the coverage 
application, including online, by telephone, by mail, and in person. 
One commenter raised particular concerns in terms of allowing 
individuals to have the full range of options to apply for a religious 
conscience exemption.

[[Page 39507]]

    Response: We are committed to providing an efficient and consumer-
friendly application process for exemptions. In Sec.  155.610(d)(3), we 
specify that for applications submitted before October 15, 2014, the 
Exchange must, at a minimum, accept such applications in paper, via 
mail. We believe that this will ensure the availability of an effective 
process within the time constraints that the Exchange is facing for 
implementation, while allowing for state flexibility to utilize other 
channels sooner than October 15, 2014. We intend to discuss the 
availability of applications through other channels beginning on or 
after October 15, 2014 in a future regulation.
    Comment: Several commenters appreciated HHS' proposal in Sec.  
155.610(e)(2) that the Exchange may not require an individual who is 
seeking an exemption on behalf of someone else other than himself or 
herself to provide a SSN. However, another commenter expressed concerns 
that the broad language used here would prevent the collection of a SSN 
who are not seeking an exemption, but rather are applying for 
enrollment in a QHP.
    Response: We appreciate the commenter's concerns, and note that 
Sec.  155.610(e)(2) only applies to subpart G regarding eligibility 
determinations for exemptions, whereas 45 CFR 155.310(a)(3) provides 
the standards for collecting Social Security numbers as part of the 
eligibility process for enrollment in a QHP through the Exchange and 
for insurance affordability programs. Accordingly, we are finalizing 
the language as proposed.
    Comment: Several commenters were generally supportive of HHS 
specifying that Exchanges determine individuals eligible for an 
exemption ``promptly and without undue delay,'' but also raised 
concerns about the lack of clear timeliness standards proposed at Sec.  
155.605(g). One commenter noted that due to the lack of specificity, an 
applicant for an exemption should not be considered uninsured for the 
time it takes to evaluate whether he or she is qualified for an 
exemption. Other commenters urged HHS to set more clear timeliness 
standards. Another commenter suggested that HHS specify that Exchanges 
will grant an exemption in real time when all documentation is 
available electronically, and where an applicant must submit paper 
documentation, suggested specific timeliness standards. A commenter 
recommended that HHS more clearly specify the meaning of the ``date of 
the application'' in terms of the procedures that Exchanges will use to 
log or stamp an application date, and wanted to ensure that the date of 
the application would be based on when an individual submitted the 
application regardless of when it is received by the Exchange. The 
commenter also wanted to make sure an individual receives the 
appropriate notice and appeals rights if the Exchange fails to promptly 
determine eligibility.
    Response: We drafted this provision based on the timeliness 
standards for the coverage process and believe that the current 
language is appropriate. Accordingly, we are finalizing this provision 
as proposed. We are also finalizing proposed paragraph (g)(2), which 
specifies that the Exchange will assess the timeliness of eligibility 
determinations. As with the coverage process, we intend to work closely 
with Exchanges to monitor timeliness and identify opportunities to 
improve performance. We note that HHS does not have authority to 
determine whether an individual is liable for the shared responsibility 
payment, as such authority belongs to the Internal Revenue Service. 
Comments addressing the appeals process will be discussed in a future 
regulation.
    Comment: One commenter noticed a discrepancy between the preamble 
associated with Sec.  155.610(h) and the corresponding regulation text, 
whereby the preamble mentioned that after December 31 of a given 
calendar year, the Exchange will not accept an application for an 
exemption except for the exemptions described in Sec.  155.605(c) 
(religious conscience) and (g) (hardship), but the regulation text 
referenced Sec.  155.605(c) and (f) (membership in an Indian tribe). 
Another commenter noted that the preamble language associated with this 
provision only allows an individual to receive an exemption 
retrospectively through the Exchange until an individual could file an 
income tax return, and asked whether HHS intended to limit this to the 
regular tax filing due date or to a potentially later date if a 
taxpayer applies for an extension or amends a previously filed return. 
If HHS intended to limit this to the regular tax filing date, the 
commenter asked that HHS modify this provision to clarify that the 
Exchange will provide a retrospective exemption for a calendar year up 
to the extended filing date or amended filing date for such year, 
should a taxpayer request an extension or amend a return.
    Response: We believe that it is appropriate to provide exemptions 
based on religious conscience and membership in a federally-recognized 
Indian tribe retrospectively, without a time limit for filing. We note 
that as a result of a drafting oversight, we did not include a 
reference to the hardship exemption in the regulation text to specify 
that this should also be treated differently than under the general 
rule, and we correct this in the final regulation. We also provide for 
further special treatment for hardship exemptions; specifically, that 
the Exchange will only accept an application for the hardship exemption 
under paragraph Sec.  155.605(g)(1) for a month or months during a 
calendar year when the application is filed during one of the 3 
calendar years after the month or months during which the applicant 
attests that the hardship occurred. We believe that the circumstances 
of a hardship exemption will motivate an individual to seek such an 
exemption in a timely manner, and also recognize the need to balance 
the availability of this exemption for an individual who amends his or 
her tax return with the administrative burden associated with 
processing requests for prior years. We further note that section 6511 
of the Code provides the period of limitations on filing a claim for 
refund or credit with the IRS. A taxpayer generally must file an 
amended tax return by the later of three years from the filing of the 
original tax return or two years from the time the tax was paid. 
Taxpayers need to file amended returns within these timeframes to 
ensure the receipt of a refund of the shared responsibility payment for 
a prior year through the IRS, even though the Exchange may 
appropriately grant a hardship exemption anytime during the period 
specified in Sec.  155.605(g)(1). We maintain the general rule 
regarding exemptions for incarcerated individuals and individuals who 
are members of a health care sharing ministry, since these will also be 
available through the tax filing process, which should facilitate 
access to these exemptions in the case of amended returns.
    Comment: Based on HHS' proposal to allow individuals to apply for 
multiple exemptions, one commenter worried about the potential that 
individuals would be confused if receiving multiple notices as a 
result. The commenter requested that once an exemption is granted for a 
period, HHS specify that the Exchange would not provide a notice 
regarding any further exemptions for which an individual applied for 
the same time period. The commenter suggested that an individual should 
only receive a denial notice for a month or months where he or she does 
not already have a certificate of exemption in effect.
    Response: We share the commenter's concerns regarding limiting 
potential

[[Page 39508]]

confusion for a consumer who applies for multiple exemptions 
simultaneously. Accordingly, we clarify that in a situation in which an 
individual applies for multiple exemptions, we expect the Exchange will 
provide the appropriate notice regarding each exemption for which an 
individual applied, as we believe that not providing feedback for all 
requested exemptions could create additional confusion for consumers. 
We also expect that if an applicant is approved for an exemption, and 
then is later denied for a different exemption for the same period of 
time, the notice describing the denial will clearly state that the 
applicant's prior exemption remains in effect.
    Comment: Regarding the proposed recordkeeping provision at Sec.  
155.610(j), commenters expressed concern that an individual might think 
he or she only needs to retain the exemption certificate, and not 
records that demonstrate his or her qualification for the underlying 
exemption, and recommended that HHS specify that the Exchange notify 
individuals of their obligation to retain the underlying records as 
well. Another commenter recommended deleting this paragraph from the 
regulation, as they felt the responsibility should rest on the IRS as 
opposed to the Exchange.
    Response: We agree with the commenters' suggestion to clarify that 
the Exchange will notify individuals to retain both the certificate of 
exemption as well as records that demonstrate the underlying 
qualification for the exemption. We are maintaining this paragraph with 
that clarification in the final regulation, since the Exchange is 
providing the certificate of exemption and is thus ideally positioned 
to notify individuals of this issue.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.610 of the 
proposed rule with a few slight modifications: We clarify that the 
Exchange must use information collected for purposes of the eligibility 
determination for enrollment in a QHP and for insurance affordability 
programs in making the exemption eligibility determination to the 
extent that the Exchange finds that such information is still 
applicable. In Sec.  155.610(d)(3), we specify that until October 15, 
2014, the Exchange must, at a minimum, permit an individual to apply 
for an exemption via mail, using a paper application. We correct the 
oversight in paragraph Sec.  155.610(h) by providing that an applicable 
exemption that is available retrospectively and described in Sec.  
155.605(g) can also be provided for previous tax years based on an 
application that is submitted after December 31 of a given calendar 
year, except for Sec.  155.605(g)(1), which may only be provided during 
one of the 3 calendar years after the month or months during which the 
applicant attests that the hardship occurred. Due to the range of 
hardship exemptions available, we redesignate paragraph (h) as 
paragraph (h)(1), make a technical correction for clarity in paragraph 
(h)(1), and add paragraph (h)(2) to specify that the Exchange will only 
accept an application for a hardship exemption specified in Sec.  
155.605(g)(1) for a month or months during a calendar year when the 
application is filed during one of the 3 calendar years after the month 
or months during which the applicant attests that the hardship 
occurred. We also modify paragraph (j)(1) to specify that an Exchange 
will also notify an individual who is determined eligible for an 
exemption to retain the certificate of exemption, and also records 
demonstrating his or her qualification for the underlying exemption.
d. Verification Process Related to Eligibility For Exemptions (Sec.  
155.615)
    In this section, we proposed language regarding the verification 
process related to eligibility for exemptions. These processes were 
designed not only to minimize the burden on applicants, but also to 
serve a valuable program integrity function in order to assure that 
applicants are only deemed eligible for exemptions if they meet the 
standards specified in Sec.  155.605.
    In paragraph (a), we proposed that unless HHS grants a request for 
modification under paragraph (i) of this section, the Exchange will 
verify or obtain information as provided in this section in order to 
determine that the applicant is eligible for an exemption.
    In paragraph (b), we proposed the verification process concerning 
the exemption for religious conscience. We specified that for any 
applicant requesting this exemption, the Exchange will verify that he 
or she meets the standards as outlined in Sec.  155.605(c). First, in 
paragraph (b)(1), we proposed that except as specified in paragraph 
(b)(2) of this section, the Exchange will accept a Form 4029 that 
reflects that an applicant has been approved for an exemption from 
Social Security and Medicare taxes under section 1402(g)(1) of the Code 
by the IRS. Second, in paragraph (b)(2), we proposed that except as 
specified in paragraphs (b)(3) and (4) of this section, the Exchange 
will accept an applicant's attestation that he or she is a member of a 
recognized religious sect or division described in section 1402(g)(1) 
of the Code, and an adherent of established tenets or teachings of such 
sect or division. Next, the Exchange will verify that the religious 
sect or division to which the applicant attests membership is 
recognized by SSA as a religious sect or division under section 
1402(g)(1) of the Code.
    Third, in paragraph (b)(3), we proposed that if the information 
provided by an applicant regarding his or her membership in a 
recognized religious sect or division is not reasonably compatible with 
other information provided by the individual or the records of the 
Exchange, the Exchange will follow the procedures specified in 
paragraph (g) of this section concerning situations in which the 
Exchange is unable to verify information.
    Fourth, in paragraph (b)(4), we proposed that if an applicant 
attests to membership in a religious sect or division that is not 
recognized by SSA as a religious sect or division under section 
1402(g)(1) of the Code, the Exchange must provide the applicant with 
information regarding how his or her religious sect or division can 
pursue recognition under section 1402(g)(1) of the Code, and determine 
the applicant ineligible for this exemption until such time as the 
Exchange obtains information indicating that the religious sect or 
division has been approved.
    In paragraph (c), we proposed the verification process concerning 
the exemption for membership in a health care sharing ministry. We 
specified that for any applicant requesting this exemption, the 
Exchange will verify whether he or she meets the standards in Sec.  
155.605(d). First, in paragraph (c)(1), we proposed that except as 
specified in paragraphs (c)(2) and (3) of this section, the Exchange 
will first accept an attestation from an applicant that he or she is a 
member of a health care sharing ministry. Next, we proposed that the 
Exchange will verify that the health care sharing ministry to which the 
applicant attests membership is known to the Exchange as a health care 
sharing ministry, based on a list that would be developed by HHS based 
on outreach to heath care sharing ministries, which HHS would then make 
available to Exchanges.
    In paragraph (c)(2), we proposed that if the information provided 
by an applicant regarding his or her membership in a health care 
sharing ministry is not reasonably compatible with other information 
provided by the individual or the records of the Exchange, the Exchange 
will follow the procedures specified in paragraph (g) of

[[Page 39509]]

this section concerning situations in which the Exchange is unable to 
verify information.
    In paragraph (c)(3), we proposed that if an applicant attests to 
membership in a health care sharing ministry that is unknown to the 
Exchange as a health care sharing ministry according to the standards 
in Sec.  155.605(d), the Exchange will then notify HHS and not 
determine an applicant eligible or ineligible for this exemption until 
HHS informs the Exchange regarding the attested health care sharing 
ministry's status with respect to the standards specified in 26 CFR 
1.5000A-3(b) of the Treasury proposed rule.
    In paragraph (d), we proposed the verification process concerning 
the exemption for incarceration. We specified that for any applicant 
requesting this exemption, the Exchange will verify, through the 
process described in 45 CFR 155.315(e), that he or she was 
incarcerated. In paragraph (d)(2), we proposed that if the Exchange is 
unable to verify an applicant's incarceration status through the 
verification process outlined, the Exchange will follow the procedures 
in paragraph (g) of this section concerning situations in which the 
Exchange is unable to verify information.
    In paragraph (e), we proposed the verification process concerning 
the exemption for members of Indian tribes. We specified in paragraph 
(e)(1) that for any applicant requesting this exemption, the Exchange 
will verify his or her membership in an Indian tribe through the 
process outlined in 45 CFR 155.350(c). In paragraph (e)(2), we also 
proposed that the Exchange follow the procedures specified in paragraph 
(g) of this section if it is unable to verify an applicant's tribal 
membership.
    In paragraph (f), we proposed the verification process concerning 
exemptions for hardship. In paragraph (f)(2), we proposed that for an 
applicant applying for a hardship exemption prospectively based on an 
inability to afford coverage, as described in Sec.  155.605(g)(2), the 
Exchange use procedures established under subpart D of this part to 
verify the availability of affordable coverage through the Exchange 
based on projected income and eligibility for advance payments of the 
premium tax credit, as specified in subpart D of this part, which 
involves verifying several attestations by the applicant, including an 
attestation related to citizenship, as well as the procedures described 
in Sec.  155.320(e) to verify eligibility for qualifying coverage in an 
eligible employer-sponsored plan. We solicited comments regarding 
appropriate verification procedures for other categories of hardship 
that will ensure a high degree of program integrity while minimizing 
administrative burden.
    In paragraph (g), we proposed procedures for the Exchange to follow 
in the event the Exchange is unable to verify information necessary to 
make an eligibility determination for an exemption, including 
situations in which an applicant's attestation is not reasonably 
compatible with information in electronic data sources or other 
information in the records of the Exchange, or when electronic data are 
required but unavailable. These procedures mirror those provided in 
Sec.  155.315(f), with modifications to preclude eligibility pending 
the outcome of the verification process, made in accordance with the 
Secretary's authority under section 1411 of the Affordable Care Act.
    First, under paragraph (g)(1), we proposed that the Exchange will 
make a reasonable effort to identify and address the causes of the 
issue, including through typographical or other clerical errors, by 
contacting the application filer to confirm the accuracy of the 
information submitted by the application filer. Second, in paragraph 
(g)(2)(i), we proposed that if the Exchange is unable to resolve the 
issue, the Exchange will notify the applicant of the issue. After 
providing this notice, in paragraph (g)(2)(ii), we proposed that the 
Exchange will provide 30 days from the date on which the notice is sent 
for the applicant to present satisfactory documentary evidence via the 
channels available for the submission of an application, except by 
telephone, or otherwise resolve the issues. In paragraph (g)(3), we 
proposed that the Exchange may extend the period for an applicant to 
resolve the issue if the applicant can provide evidence that a good 
faith effort has been made to obtain the necessary documentation. And 
in paragraph (g)(4), we proposed that the Exchange will not grant a 
certificate of exemption during this period based on the information 
that is the subject of the request under this paragraph.
    In paragraph (g)(5), we proposed that, if after the conclusion of 
the period described in paragraph (g)(2)(ii) of this section, the 
Exchange is unable to verify the applicant's attestation, the Exchange 
will determine the applicant's eligibility based on the information 
available from the data sources specified in this subpart, as 
applicable, unless such applicant qualifies for the exception provided 
under paragraph (h) of this section, and notify the applicant in 
accordance with the procedures described under Sec.  155.610(i), 
including the inability to verify the applicant's attestation.
    In paragraph (h), we proposed a provision under which the Exchange 
would provide a case-by-case exception for applicants for whom 
documentation does not exist or is not reasonably available to account 
for situations in which documentation cannot be obtained.
    In paragraph (i), we proposed that HHS have the flexibility to 
approve an Exchange Blueprint or a significant change to an Exchange 
Blueprint to modify the methods for the collection and verification of 
information as described in this subpart, as well as the specific 
information to be collected, based on a finding by HHS that the 
requested modification would reduce the administrative costs and 
burdens on individuals while maintaining accuracy and minimizing delay, 
and that any applicable requirements under 45 CFR 155.260, 45 CFR 
155.270, paragraph (j) of this section, and section 6103 of the Code 
with respect to the confidentiality, disclosure, maintenance, or use of 
information will be met.
    In paragraph (j), we proposed that the Exchange will not require an 
applicant to provide information beyond what is necessary to support 
the process of the Exchange for eligibility determinations for 
exemptions, including the process for resolving inconsistencies 
described in paragraph (g) of this section.
    Comment: One commenter raised broad concerns about potential 
challenges for consumers regarding verification, and requested that HHS 
specify a 1-year transition period during which the Exchange would rely 
primarily on self-attestation, using a form signed under penalty of 
perjury, or auditing a portion of applications submitted by 
individuals.
    Response: We share the commenter's desire for a good consumer 
experience for those individuals who are seeking an exemption. However, 
we believe that statutory and program integrity concerns argue in favor 
of the Exchange applying a more comprehensive verification process than 
self-attestation. We expect to learn from the initial months and years 
of operations, and to work with states to achieve continuous 
improvement, with a particular focus on the consumer experience.
    Comment: One commenter recommended that a taxpayer who already has 
an approved IRS Form 4029 should not have to request an exemption 
through the Exchange, and instead should be able to write ``Exempt Form 
4029'' on his or her tax return.

[[Page 39510]]

    Response: We strive to establish an Exchange exemption process that 
minimizes the burden on individuals to the extent possible. We note 
that section 5000A(d)(2) of the Code specifies that the religious 
conscience exemption is available only through the Exchange. However, 
we note that we are finalizing proposed Sec.  155.615(b)(1), which 
specifies that the verification process for this exemption will include 
the Exchange accepting an approved IRS Form 4029 for any individual who 
has one.
    Comment: One commenter recommended that in situations in which the 
health care sharing ministry to which an individual attests membership 
is not included on the list provided to the Exchange by HHS, HHS should 
issue the eligibility determination notice denying the exemption as 
opposed to the Exchange.
    Response: If an Exchange accepts the original exemption application 
from an individual, we continue to believe that it is appropriate for 
the Exchange to issue the corresponding eligibility determination 
notice in order to prevent confusion that individuals may experience if 
receiving a separate notice from HHS. We note that nothing precludes an 
Exchange from notifying such an individual that the determination is 
based on a list provided by HHS.
    Comment: One commenter requested further specificity about the 
process and standards HHS will use in developing the list of health 
care sharing ministries that meet the standards specified in the 
statute.
    Response: We recognize the importance of providing a clear process 
for establishing the list of health care sharing ministries that meet 
the statutory standards. Accordingly, we are renumbering proposed Sec.  
155.615(c) as Sec.  155.615(c)(1)(i) through (iii), and adding Sec.  
155.615(c)(2) to specify a process that is substantially similar to the 
approach discussed in Sec.  155.604(c) regarding how HHS will determine 
that certain types of coverage meet the substantive and procedural 
requirements for consideration as minimum essential coverage. 
Specifically, we note that to be considered a health care sharing 
ministry for the purposes of this subpart, an organization will submit 
information to HHS that substantiates the organization's compliance 
with the standards specified in section 5000A(d)(2)(B)(ii) of the Code. 
We also note that if at any time HHS determines that an organization 
previously considered a health care sharing ministry for the purposes 
of this subpart no longer meets the standards specified in section 
5000A(d)(2)(B)(ii) of the Code, HHS may revoke its earlier decision. 
This revocation refers to the status of the health care sharing 
ministry, and not to the status of an individual's exemption related to 
membership in a health care sharing ministry. As such, while the 
Exchange would not grant an exemption to an individual attesting 
membership in such a health care sharing ministry after revoking its 
status, the Exchange would not revoke a prior exemption granted to an 
individual based on the status of a health care sharing ministry. We 
discuss this information collection in the Information Collection 
Requirements section of this final rule.
    We also clarify in paragraph (c)(1)(iii) that if an applicant 
attests to membership in a health care sharing ministry that is not 
known to the Exchange as a health care sharing ministry based on 
information provided by HHS, the Exchange must provide the applicant 
with information regarding how an organization can pursue recognition 
under Sec.  155.615(c)(2), and determine the applicant ineligible for 
this exemption until such time as HHS notifies the Exchange that the 
health care sharing ministry's meets the standards specified in section 
5000A(d)(2)(B)(ii) of the Code. We note that individual members cannot 
seek recognition under Sec.  155.615(c)(2) on behalf of their health 
care sharing ministry, as HHS will only review information submitted by 
the health care sharing ministry itself.
    Comment: One commenter urged HHS to remove the reference to 
reasonable compatibility as part of verifying membership in a health 
care sharing ministry, or to clarify that an individual could still 
receive an exemption based on membership in a health care sharing 
ministry if he or she had been enrolled in health insurance in the past 
or was currently enrolled in health insurance.
    Response: In response to the commenter, we will clarify that the 
Exchange will not consider an individual's current or previous health 
coverage as reasonably incompatible with membership in a health care 
sharing ministry, since nothing in the statute limits the availability 
of such an exemption to an individual who was or is uninsured.
    Comment: One commenter suggested that for purposes of the 
Federally-Facilitated Exchange, HHS work with local tribes and the 
Bureau of Indian Affairs to contract for the verification of membership 
in an Indian tribe.
    Response: We appreciate this comment, and are committed to creating 
an efficient eligibility process for all applicants. In proposed Sec.  
155.615(e), we specified that the Exchange would use the same 
verification process that is used for the verification of Indian status 
for purposes of special cost-sharing provisions and special enrollment 
periods for enrollment in a QHP through the Exchange. The cross-
referenced section allows an Exchange to rely on any electronic data 
sources that have been approved by HHS for this purpose, including 
electronic data acquired from tribes. Based on the short timeline for 
implementation, for October 1, 2013, the Federally-facilitated Exchange 
will be unable to collect data from individual tribes, and so will rely 
on a paper documentation process. State-based Exchanges may have 
additional opportunities for October 1, 2013.
    Comment: One commenter recommended that HHS should specify that an 
individual renew an exemption based on membership in an Indian tribe on 
an annual basis. Other commenters urged HHS to use electronic data 
matching with the Indian Health Service (IHS) as one tool to verify 
membership in an Indian tribe as well as the suggested hardship 
exemptions discussed above. Commenters asked HHS to specify that the 
Exchange first consult all available electronic data sources; second, 
if electronic data sources do not support an applicant's attestation, 
seek paper documentation; and third, and if individuals lack the 
appropriate documentation, call the listed tribe's Contract Health 
Services Officer or tribal enrollment office.
    Response: We modeled the verification process for the exemption 
based on an individual's membership in an Indian tribe on the 
verification process that will be used for individuals seeking coverage 
at 45 CFR 155.350(c). We appreciate the suggestions from commenters, as 
they generally follow our approach in 45 CFR 155.350(c). Specifically, 
in 45 CFR 155.350(c), we specify that the Exchange will first use any 
approved electronic data sources, and only request paper documentation 
when electronic data sources are unavailable or do not support an 
applicant's attestation. 45 CFR 155.350(c) does not specify that the 
Exchange will contact a tribe's Contract Health Services Officer or 
tribal enrollment office when documentation is unavailable. Rather, in 
Sec.  155.615(h), we proposed that when documentation does not exist or 
is not reasonably available, the Exchange will provide an exception on 
a case-by-case basis and accept an applicant's attestation. We also 
note that Exchanges have flexibility to work with local tribes to gain

[[Page 39511]]

information that could be used on an electronic basis.
    Comment: One commenter worried that the proposed verifications 
process placed too much burden on individuals as opposed to the 
Exchange, and urged HHS to shift this burden in the future.
    Response: We have attempted to limit burden on individuals as much 
as possible in the proposed and final regulations. We intend to work 
with all relevant stakeholders in the future to identify opportunities 
to increase the efficiency and integrity of the verification process.
    Comment: Commenters expressed concerns regarding proposed Sec.  
155.615(g) and situations where the Exchange is unable to verify the 
necessary information to determine eligibility for an exemption. Some 
commenters requested greater clarification to limit any possible 
confusion about when attestations should be accepted, when attestations 
must be verified, when documents must be provided, and what type of 
documents would be sufficient. Additionally commenters expressed 
concerns about the 30-day time period for individuals to present 
satisfactory documentary evidence to the Exchange in order to resolve 
an inconsistency, and urged extending this time period, or providing 
flexibility for the Exchange to ensure that individuals have a 
``reasonable opportunity'' to submit documentation.
    Response: In response to comments, we will modify proposed Sec.  
155.615(g)(2)(ii) to allow an individual 90 days to present 
satisfactory documentary evidence to the Exchange, which is the time 
period used in the eligibility process for enrollment in a QHP, advance 
payments of the premium tax credit, and cost-sharing reductions. We 
will maintain the proposed language specifying that an individual is 
not eligible for an exemption during this time period. As the language 
from paragraph (g) is modeled after the inconsistency process from 
Sec.  155.315(f), we believe that this provision already describes the 
process concerning an Exchange's inability to verify necessary 
information with sufficient clarity to limit confusion. The notices 
that the Exchange provides to an individual for whom the Exchange is 
unable to verify necessary information will specify the documentation 
that such an individual can submit to resolve an inconsistency.
    Comment: Multiple commenters expressed support for our proposal at 
Sec.  155.615(h) to provide an exception on a case-by-case basis for 
individuals who lack certain documentation, although some sought 
further clarification to prevent confusion. One commenter suggested 
that paragraph (h) of this section should extend not only to 
circumstances when the Exchange has information that is inconsistent 
with an individual's attestation but also to circumstances when the 
attestation itself cannot be verified through other data sources.
    Response: As this exception for special circumstances mirrors 
similar language used in regards to the coverage process at Sec.  
155.315(g), we maintain the language as proposed. We clarify that this 
provision is designed to address any situation in which documentation 
is needed, but does not exist or is not reasonably available.
    Comment: One commenter expressed support for Sec.  155.615(j), 
which limits the collection of application information to the minimum 
amount necessary, while also recommending that HHS amend this provision 
to ensure alignment with section 1411(g) of the Affordable Care Act.
    Response: We affirm that the Exchange should collect only the 
minimum information necessary to support the eligibility process for 
exemptions. The proposed language mirrors that used in 45 CFR 
155.315(i), which is designed to implement section 1411(g)(1) of the 
Affordable Care Act. We also note that the overarching privacy and 
security protections specified in 45 CFR 155.260 apply to the 
exemptions process. Together, we believe that these sections already 
appropriately address the commenter's concerns regarding information 
collection and privacy.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.615 of the 
proposed rule with several modifications, as follows. First, we make a 
technical correction in paragraph (b)(1) to specify that the Exchange 
must accept a form that reflects he or she is exempt from Social 
Security and Medicare taxes under section 1402(g)(1) of the Code. 
Second, we clarify that if an applicant attests to membership in a 
religious sect or division that is not recognized by the SSA as an 
approved religious sect or division under section 1402(g)(1) of the 
Code, the Exchange will provide the applicant with information 
regarding how his or her religious sect or division can pursue 
recognition under section 1402(g)(1) of the Code, and determine the 
applicant ineligible for this exemption until such time as the Exchange 
obtains information indicating that the religious sect or division has 
been approved. Third, we renumber proposed Sec.  155.615(c), move the 
language from previous paragraph (c)(1) into paragraph (c), 
redesignating paragraphs (c)(2) and (c)(3) as paragraphs (c)(1)(i) and 
(ii), and add Sec.  155.615(c)(2) to specify a process for establishing 
the list of health care sharing ministries that meet the statutory 
standards that is substantially similar to the approach discussed in 
Sec.  155.604(c) regarding how HHS will determine that certain types of 
coverage meet the substantive and procedural requirements for 
consideration as minimum essential coverage. We also specify in 
paragraph (c)(1)(i) that the Exchange may not consider an applicant's 
prior or current enrollment in health coverage as not reasonably 
compatible with an applicant's attestation of membership in a health 
care sharing ministry, and we specify in paragraph (c)(1)(ii) that if 
an applicant attests to membership in a health care sharing ministry 
that is not known to the Exchange as a health care sharing ministry 
based on information provided by HHS, the Exchange will provide the 
applicant with information regarding how an organization can pursue 
recognition under Sec.  155.615(c)(2), and determine the applicant 
ineligible for this exemption until such time as HHS notifies the 
Exchange that the health care sharing ministry's meets the standards 
specified in section 5000A(d)(2)(B)(ii) of the Code.
    We specify in paragraph (f)(1) that the Exchange will not verify 
whether an applicant experienced a hardship under Sec.  155.605(g)(3) 
or (5); rather, these exemptions will be claimed directly with the IRS 
at tax filing. We redesignate paragraph (f)(2) as paragraph (f)(2)(i), 
make a technical correction in redesignated paragraph (f)(2)(i) to 
clarify that the procedures used to determine eligibility for advance 
payments of the premium tax credit in subpart D include Sec.  
155.315(c)(1). We note that at 78 FR 4638, we proposed to consolidate 
Sec.  155.320(d) and (e) into Sec.  155.320(d). To the extent that we 
finalize this redesignation, we intend to make a simultaneous technical 
correction to this cross-reference. We add new paragraph (f)(2)(ii) to 
clarify that in determining eligibility for the lack of affordable 
coverage based on projected income hardship exemption, the Exchange 
will accept an application filer's attestation for an applicant 
regarding eligibility for minimum essential coverage other than through 
an eligible employer-sponsored plan. We redesignate paragraph (f)(3) as 
paragraph (f)(4), and add new paragraph (f)(3) to specify that the 
Exchange will use the same verification procedures for

[[Page 39512]]

the exemption for an individual who is eligible for services through an 
Indian health care provider as it will use for the exemption for 
members of a federally-recognized tribe.
    In 78 FR 4636, we proposed to modify Sec.  155.315(f) to specify 
that the Exchange would trigger an inconsistency when electronic data 
is required but not reasonably expected to be available within 2 days. 
To ensure alignment across the eligibility process for enrollment in a 
QHP through the Exchange and insurance affordability programs with the 
eligibility process for exemptions, we make a technical correction to 
specify that the Exchange will trigger the process under Sec.  
155.615(g) when electronic data is required but not reasonably expected 
to be available within the time period specified as Sec.  155.315(f). 
We modify Sec.  155.615(g)(2)(ii) to allow an applicant 90 days to 
present satisfactory documentary evidence to resolve an inconsistency. 
Lastly, we add paragraph (k) to mirror the Exchange's requirement 
regarding the validation of a Social Security number for an individual 
applying for an exemption from the shared responsibility payment with 
the same validation process for purposes of individual seeking coverage 
as described in Sec.  155.315(b).
e. Eligibility Redeterminations for Exemptions During a Calendar Year 
(Sec.  155.620)
    In Sec.  155.620, we proposed in paragraph (a) to implement section 
1411(f) of the Affordable Care Act by providing that the Exchange will 
redetermine an individual's eligibility for an exemption if the 
Exchange receives and verifies new information as reported by an 
individual. In paragraph (b)(1), we proposed that the Exchange will 
require an individual with a certificate of exemption to report any 
changes related to the eligibility standards described in Sec.  
155.605. We solicited comments as to whether we should provide 
flexibility such that the Exchange may establish a reasonable threshold 
for changes in income, such that an individual who experiences a change 
in income that is below the threshold is not required to report such 
change.
    In paragraph (b)(2), we proposed that the Exchange would allow an 
individual to report changes through the channels acceptable for the 
submission of an exemption application.
    In paragraph (c), we proposed that the Exchange use the 
verification processes used at the point of initial application, as 
described in Sec.  155.615, in order to verify any changes reported by 
an individual prior to using the self-reported information in an 
eligibility determination for an exemption. In paragraph (c)(2), we 
proposed that the Exchange notify an individual in accordance with 
Sec.  155.610(i) after re-determining his or her eligibility based on a 
reported change. Lastly, in paragraph (c)(3), we proposed that the 
Exchange provide periodic electronic notifications regarding the 
requirements for reporting changes and an individual's opportunity to 
report any changes, to an individual who has a certificate of exemption 
and who has elected to receive electronic notifications, unless he or 
she has declined to receive such notifications. We noted that unlike 
Sec.  155.330, we did not propose that the Exchange conduct periodic 
data matching regarding an individual's eligibility for an exemption. 
We solicited comments as to whether we should establish similar data 
matching provisions, and if so, whether we should specify that the 
Exchange should handle changes identified through the matching process 
in a similar manner as to that specified in Sec.  155.330, or take a 
different approach.
    Also unlike the eligibility process for enrollment in a QHP and for 
insurance affordability programs, we did not propose an annual Exchange 
redetermination process for exemptions. We solicited comments regarding 
how the Exchange could expedite and streamline the process for 
individuals with a certificate of exemption that is not approved 
indefinitely who wish to maintain the exemption for a subsequent year.
    Comment: One commenter stated that individuals should not have to 
report changes in religious status or their status as a member of an 
Indian tribe, but rather the religious sect or tribe should report such 
a change in status to the Exchange or HHS in order to prevent fraud.
    Response: We share the commenter's program integrity concerns, but 
continue to believe that the responsibility to report changes remains 
appropriately on the individual who has received an exemption. As 
Exchanges start to grant exemptions, we will work with states to 
monitor the process and determine whether changes would be appropriate.
    Comment: One commenter sought clarification as to whether 
redeterminations only occur when an individual reports a change or 
whether the Exchange has the authority to cancel an exemption it 
previously granted on its own.
    Response: We clarify that redeterminations under this section can 
only occur when an individual reports a change that impacts his or her 
eligibility determination for an exemption.
    Comment: Several commenters expressed concerns regarding the burden 
involved in requiring an individual to report changes that would impact 
his or her eligibility for an exemption. One commenter inquired about 
how HHS would enforce the regulatory reporting requirements.
    Response: The proposed approach is identical to the approach taken 
in Sec.  155.330(b), and we believe that it is generally appropriate 
for eligibility for enrollment in a QHP through the Exchange, advance 
payments of the premium tax credit, cost-sharing reductions, and 
exemptions. With that said, as noted above, we have modified the 
eligibility standards, in order to reduce administrative burden, for 
the hardship exemption specified in Sec.  155.605(g)(2), which covers 
situations in which an individual lacks affordable coverage based on 
projected household income, such that the Exchange will provide this 
exemption for all remaining months in a coverage year, notwithstanding 
any change in an individual's circumstances. Accordingly, we modify 
paragraphs (a), (b), and (c)(3) to conform to this change by clarifying 
that the Exchange will not conduct mid-year redeterminations for this 
exemption, will not require individuals receiving this exemption to 
report changes, and will not send periodic reminders to report changes 
to individuals who have this exemption. As Exchanges start to grant 
exemptions, we will work with states to monitor the process and 
determine whether other changes would be appropriate.
    Comment: Commenters raised concerns about requiring individuals to 
report changes, and suggested that if HHS maintains these requirements, 
they should provide a special enrollment period for an individual who 
loses their exemption in the middle of a calendar year as a result of a 
redetermination and who has no opportunity to enroll in coverage, which 
would leave them potentially liable for the shared responsibility 
payment.
    Response: We do not want to create an incentive for an individual 
who has an exemption to not report changes in their eligibility. We 
also do not want to create a situation in which an individual who has 
followed procedures and wants to enroll in health coverage is instead 
liable for the shared responsibility payment. We are adding paragraph 
(d) to clarify that the Exchange will implement a change resulting from 
a redetermination under

[[Page 39513]]

this section for the month or months after the month in which the 
redetermination occurs such that a certificate that was provided for 
the month in which the redetermination occurs, and for prior months, 
remains effective. We address the ability of an individual who loses 
eligibility for an exemption following a redetermination to enroll in a 
QHP in the guidance published simultaneously with this final 
regulation.
    Comment: One commenter suggested that the Exchange provide periodic 
electronic notifications regarding reporting changes to individuals 
only if they decide to receive such notifications as opposed to 
providing individuals periodic electronic notifications regarding 
reporting changes unless they affirmatively decline to receive such 
notifications.
    Response: As we proposed this provision to mirror a similar 
provision concerning the coverage process at Sec.  155.330(c)(2), we 
maintain the provision as proposed, with the modification discussed 
above to eliminate this notification for individuals who have the 
exemption specified in Sec.  155.605(g)(2).
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.620 of the 
proposed rule with a few slight modifications. We clarify in paragraph 
(a) that the Exchange only must redetermine the eligibility of an 
individual with an exemption granted by the Exchange, and that it will 
not conduct redeterminations for the exemption described in Sec.  
155.605(g)(2). In paragraph (b), we specify that the Exchange will not 
require an individual who has an exemption under Sec.  155.605(g)(2) to 
report changes with respect to his or her eligibility for this 
exemption; accordingly, in paragraph (c)(3), we clarify that the 
Exchange will not provide periodic reminders to report changes to this 
group of individuals. We also add paragraph (d) to specify that the 
Exchange will implement a change resulting from a redetermination under 
this section for the month or months after the month in which the 
redetermination occurs, such that a certificate that was provided for 
the month in which the redetermination occurs, and for prior months, 
remains effective.
f. Options for Conducting Eligibility Determinations for Exemptions 
(Sec.  155.625)
    In Sec.  155.625, we proposed that a state-based Exchange can 
satisfy the requirements of subpart G if it uses a federally-managed 
service to make eligibility determinations for exemptions, and we 
solicited comments regarding the specific configuration of a service 
that would be useful for states and also feasible within the time 
remaining for implementation.
    First, in paragraph (a), we proposed that the Exchange may satisfy 
the requirements of this subpart by either executing all eligibility 
functions, directly or through contracting arrangements described in 45 
CFR 155.110(a), or through the use of a federally-managed service 
described in paragraph (b) of Sec.  155.625.
    Second, in paragraph (b), we proposed that the Exchange may 
implement an eligibility determination for an exemption made by HHS, 
provided that the Exchange accepts the application, as specified in 
Sec.  155.610(d), and issues the eligibility notice, as specified in 
Sec.  155.610(i), and that verifications and other activities required 
in connection with eligibility determinations for exemptions are 
performed by the Exchange in accordance with the standards identified 
in this subpart or by HHS in accordance with the agreement described in 
paragraph (b)(4) of this section. We also proposed that under this 
option, the Exchange will transmit all applicant information and other 
information obtained by the Exchange to HHS, and adhere to HHS' 
determination. Lastly, in paragraph (b)(4), we proposed that the 
Exchange and HHS enter into an agreement specifying their respective 
responsibilities in connection with eligibility determinations for 
exemptions.
    In paragraph (c), we proposed the standards to which the Exchange 
will adhere when eligibility determinations are made in accordance with 
paragraph (b) of this section. Such standards included that the 
arrangement does not increase administrative costs and burdens on 
individuals, or increase delay, and that applicable requirements under 
Sec.  155.260, Sec.  155.270, and Sec.  155.315(i), and section 6103 of 
the Code are met with respect to the confidentiality, disclosure, 
maintenance or use of information.
    Comment: Commenters expressed general support for the proposals in 
Sec.  155.625 in regards to the ability for a state-based Exchange to 
satisfy the requirements of this subpart by either executing all 
eligibility functions directly, through contracting arrangements, or 
through the use of a federally-managed service described in paragraph 
(b). Commenters urged HHS to further help reduce the burden on 
Exchanges developing the operational capacity needed to conduct 
eligibility determinations for exemptions. Another commenter wanted to 
clarify that an Exchange relying on HHS to make an eligibility 
determination for an exemption could also rely on HHS to administer the 
exemptions appeals process.
    Response: In response to comments seeking to limit the burden on 
Exchanges, and based on the operational capacity of the Exchange and 
HHS being able to comply with the statutory requirements to accept 
exemptions applications and issue eligibility determination notices for 
the first year of operations, we are modifying the proposed language 
regarding how the Exchange may rely on the use of an HHS service.
    We specify that for an application submitted prior to October 15, 
2014, the Exchange may rely on HHS to process exemptions applications, 
complete the necessary verifications, determine eligibility, and issue 
notices, including any certificates of exemption. Exchanges will still 
assist individuals seeking a lack of affordable coverage based on 
projected income hardship exemption by providing an individual with the 
resulting cost of his or her lowest-cost bronze plan that incorporates 
any advance payments of the premium tax credit allowable under section 
36B of the Code. Additionally, the Exchange call center and Internet 
Web site as specified in 45 CFR 155.205(a) and (b) respectively, must 
be responsible for providing information to consumers regarding the 
exemption eligibility process.
    For an application submitted on or after October 15, 2014, the 
Exchange may adopt an exemption eligibility determination made by HHS 
provided that the Exchange accepts the application and issues the 
eligibility notice in the same manner as discussed in the proposed 
rule. As a result of clarifying the flexibility for Exchanges prior to 
October 15, 2014, we accordingly remove paragraph (c).
    We also note that comments regarding the appeals process for 
exemptions will be addressed in a future regulation. We expect that 
future rulemaking will clarify that if an Exchange relies on HHS to 
make an eligibility determination for an exemption, the Exchange may 
also rely on HHS to administer the exemptions appeals process as well, 
provided that any underlying decisions made by the Exchange are 
addressed through the appropriate Exchange appeals process.

[[Page 39514]]

Summary of Regulatory Changes
    We are modifying the provisions proposed in Sec.  155.625 to 
eliminate proposed paragraph (c). We redesignate paragraphs (b)(1) 
through (b)(5) as (b)(2)(i) through (b)(2)(v) to clarify that the 
standards discussed therein apply to an Exchange seeking to rely on an 
exemption eligibility determination made by HHS on or after October 15, 
2014. We add (b)(1) to reflect that HHS will administer the entire 
eligibility process for exemptions for Exchanges that decide to rely on 
HHS to conduct eligibility determinations for an application submitted 
before October 15, 2014, provided that the Exchange adheres to the 
eligibility determination made by HHS furnishes any information 
available through the Exchange that is necessary for an applicant to 
utilize the process administered by HHS, and the Exchange call center 
and Internet Web site provide information to assist consumers regarding 
the exemption eligibility process.
g. Reporting (Sec.  155.630)
    In Sec.  155.630, we proposed to codify the provisions specified in 
section 1311(d)(4)(I)(i) of the Affordable Care Act regarding reporting 
by the Exchange to IRS regarding eligibility determinations for 
exemptions. If the Exchange grants an individual a certificate of 
exemption in accordance with Sec.  155.610(i), we proposed that the 
Exchange will transmit to IRS the individual's name and SSN, exemption 
certificate number, and any additional information specified in 
additional guidance published by IRS in accordance with 26 CFR 
601.601(d)(2). We solicited comments as to how this interaction could 
work as smoothly as possible.
    Comment: One commenter raised concerns about the lack of an IRS 
interface to report exemptions, and wanted HHS to ensure that Exchanges 
will be provided sufficient time to implement such an interface.
    Response: We recognize the commenter's concerns regarding the 
reporting process for exemptions. HHS continues to work closely with 
the IRS to ensure an efficient interface to report exemptions, and 
anticipates releasing technical guidance on this shortly. We also 
anticipate that this reporting will be accomplished through a monthly 
file, which will be sent to IRS for the first time in February, 2014, 
and will also incorporate information regarding enrollment in a QHP 
through the Exchange and advance payments of the premium tax credit, 
based on other provisions.
    Comment: One commenter recommended that HHS provide Exchanges 
flexibility to obtain and report taxpayer identification numbers, if 
relevant, rather than only SSNs as proposed. The commenter also wanted 
to ensure that this provision explicitly specifies that Exchanges will 
comply with existing confidentiality protections for individual tax 
information under the Affordable Care Act and section 6103 of the Code.
    Response: We maintain the language of the proposed regulation. We 
also note that in response to this comment, in order to limit the 
administrative burden on Exchanges associated with reporting to IRS, we 
have clarified in Sec.  155.615(k) that similar to the coverage 
process, the Exchange will validate application SSNs that are included 
on an exemptions application. Similar to eligibility for enrollment in 
a QHP, having a SSN is not a requirement to receiving an exemption, and 
as such the inability to validate a SSN will not preclude an 
eligibility determination for an exemption. However, the successful 
validation of a SSN will help in the efficient administration of the 
tax filing process. Furthermore, we note that 45 CFR 155.260 specifies 
that tax information will be protected in accordance with section 6103 
of the Code.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.630 of the 
proposed rule without modification.
h. Right To Appeal (Sec.  155.635)
    In Sec.  155.635, we proposed that the Exchange will include notice 
of the right to appeal and instructions for how to appeal in any 
notification issued in accordance with Sec.  155.610(i) and Sec.  
155.625(b)(1). We proposed that an individual may appeal any 
eligibility determination or redetermination made by the Exchange in 
relation to an exemption. Additional detail about the appeal process is 
described in subpart F of the proposed rule titled, ``Medicaid, 
Children's Health Insurance Programs, and Exchanges: Essential Health 
Benefits in Alternative Benefit Plans, Eligibility Notices, Fair 
Hearing and Appeal Processes for Medicaid and Exchange Eligibility 
Appeals and Other Provisions Related to Eligibility and Enrollment for 
Exchanges, Medicaid and CHIP, and Medicaid Premiums and Cost Sharing'' 
(78 FR 4719).
    Comment: One commenter expressed concerns about individuals with 
access to eligible employer-sponsored coverage that would prevent an 
individual from receiving advance payments of the premium tax credit, 
while still leaving them subject to the shared responsibility payment. 
The commenter wanted the Exchange to have discretion through the 
appeals process to consider the totality of an applicant's 
circumstances. Another commenter urged HHS to specify that translation 
services are available for LEP individuals to ensure they have 
appropriate access to the appeals process, including the content of 
notices and requests for hearings.
    Response: Comments concerning the appeals process for exemptions 
will be addressed in future rulemaking.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.635 of the 
proposed rule with three modifications. First, we are deleting the 
reference to Sec.  155.625(b)(1), as we are modifying proposed Sec.  
155.625 to specify that an Exchange that relies on HHS to make 
eligibility determinations for exemptions will not issue the 
eligibility notice. Second, we also make a technical correction in 
paragraph (b) to replace the reference to the Commissioner of the IRS 
with the Secretary of the Treasury. Third, we make a technical 
correction to remove the introductory text, which is not substantive.

B. Part 156--Health Insurance Issuer Standards Under the Affordable 
Care Act, Including Standards Related to Exchanges

a. Definition of Minimum Essential Coverage (Sec.  156.600)
    The proposed rule cross referenced the Treasury regulation under 
section 5000A of the Code for the definition of minimum essential 
coverage.
Summary of Regulatory Changes
    We made minor changes to the provisions of Sec.  156.600 to clarify 
the meaning of the final rule.
b. Other Types of Coverage That Qualify as Minimum Essential Coverage 
(Sec.  156.602)
    The proposed rule specifically designated the following types of 
coverage as minimum essential coverage for purposes of the Code: Self-
funded student health insurance plans; foreign health coverage; Refugee 
Medical Assistance supported by the Administration for Children and 
Families (45 CFR Part 400 Subpart G); Medicare advantage plans; 
AmeriCorps coverage (45 CFR 2522.10 through 2522.950), and state high 
risk pools (as defined in Sec.  2744 of the Public Health Service Act 
(PHS Act)). We solicited comments on these types of coverage

[[Page 39515]]

and whether there are other existing categories of coverage that should 
be recognized as minimum essential coverage. We also solicited comments 
regarding whether self-funded student health coverage should be limited 
to institutions of higher education, as defined by the Higher Education 
Act of 1965, or if coverage offered by other institutions, such as 
primary or secondary educational institution, or unaccredited 
educational institutions, should be included. Lastly, we solicited 
comments on the inclusion of AmeriCorps coverage in the designated 
list.
    Under the proposed rule, state high risk pools were designated as 
minimum essential coverage for a period of time to be determined by the 
Secretary. We reserved the right to review and monitor the extent and 
quality of coverage, and in the future to reassess whether they should 
be designated minimum essential coverage or should be required to go 
through the process outlined in Sec.  156.604 of this proposed rule. We 
solicited comments on whether state high risk pools should 
automatically be designated as minimum essential coverage or whether 
they should be required to follow the process outlined in Sec.  156.604 
of this proposed rule.
    The comments and our responses are set forth below.
    Comment: Many commenters were concerned that the unregulated status 
of self-funded student health coverage may leave students unable to 
benefit from the protections of the Affordable Care Act, and that 
students who are offered a self-funded plan through their college or 
university may find it difficult or impossible to obtain coverage 
through the Exchanges and to access the Affordable Care Act premium and 
cost-sharing subsidies. These commenters conceded that some self-funded 
student health coverage is good coverage, but other plans do not 
provide adequate coverage. These commenters specifically cited annual 
and lifetime limits, prescription drug limits, pre-existing condition 
exclusions and rescissions as reasons that some self-funded student 
health coverage is not satisfactory coverage for many students. In 
contrast, other commenters stated their support for designating self-
funded student health coverage as minimum essential coverage, citing 
the ACHA guidelines document, Standards for Student Health Insurance/
Benefits Programs, which will ``encourage provision of benefits in 
self-funded plans that are consistent with Affordable Care Act 
requirements that have been established for student insured plans.''
    Response: After reviewing the comments regarding designating self-
funded student health plans as minimum essential coverage for purposes 
of the Code, we agree that because self-funded student health plans can 
be varied in the types of benefits being provided, these plans should 
not be permanently designated as minimum essential coverage. In this 
final rule we designate self-funded student health coverage as minimum 
essential coverage for plan or policy years beginning on or before 
December 31, 2014. For coverage beginning after December 31, 2014, 
sponsors of self-funded student health plans may apply to be recognized 
as minimum essential coverage through the process outlined in Sec.  
156.604 of the final rule. In addition, the Department of the Treasury 
intends to publish guidance under section 36B of the Code about whether 
individuals who are eligible to enroll in self-funded student health 
plans will be treated as eligible for qualified health plan coverage 
subsidized by the premium tax credit.
    In the proposed rule we designated state high risk pools as minimum 
essential coverage for a transition period and solicited comments on 
whether state high risk pools should be recognized as minimum essential 
coverage. We did not receive any comments on state high risk pools and 
we are finalizing the proposed rule. To be consistent with the 
treatment of self-funded student health plans which under the final 
rule are designated as minimum essential coverage for plan or policy 
years beginning on or before December 31, 2014, we are applying the 
same one-year transitional period to state high risk pools. For 
coverage beginning after December 31, 2014, sponsors of state high risk 
pools may apply to be recognized as minimum essential coverage through 
the process outlined in Sec.  156.604 of the final rule. In addition, 
the Department of the Treasury intends to publish guidance under 
section 36B of the Code about whether individuals who are eligible to 
enroll in state high risk pools will be treated as eligible for 
qualified health plan coverage subsidized by the premium tax credit.
    Comment: Some commenters supported the designation of foreign 
health coverage as minimum essential coverage because foreign health 
coverage provides meaningful health care benefits to, legally admitted, 
non-citizens temporarily working in the United States. Other commenters 
expressed concern that foreign health coverage, which is generally 
provided to non-citizens by a foreign home country or through foreign 
commercial health coverage, provides limited or no out-of-country 
benefits to such persons while legally in the United States.
    Response: We agree that the health care benefits provided by 
foreign governments or through foreign insurance for legally admitted 
non-citizens of the United States vary from country to country and may 
create a barrier to care if health care providers in the United States 
do not accept payment from such coverage. Therefore, foreign health 
coverage is not designated as minimum essential coverage in this final 
rule. However, sponsors of foreign health coverage may apply for their 
coverage to be recognized as minimum essential coverage in the process 
outlined in Sec.  156.604 of this final rule.
    Comment: Some commenters supported the designation of coverage 
provided by AmeriCorps programs to their AmeriCorps members as minimum 
essential coverage. They stated that the lack of an employer/employee 
relationship creates difficulties for programs seeking insurance on 
their own through traditional group insurance markets. Further, 
coverage provided by AmeriCorps programs to their AmeriCorps members 
has produced economies of scale and a solution to the accessibility 
challenges particular to smaller programs. Commenters also stated that 
the demographics and full funding of premiums by the program has led to 
stable claims experience.
    Other commenters opposed designating the coverage provided by 
AmeriCorps programs to AmeriCorps volunteers as minimum essential 
coverage because some of the provided benefits fall below the minimal 
coverage requirements required by the Affordable Care Act. In addition, 
commenters noted that stipends for most volunteers are between 100-200 
percent FPL, meaning that they may either qualify for a premium 
assistance program or a hardship exemption.
    Response: In response to these comments concerning consumer 
protections, the final rule does not automatically designate coverage 
provided by AmeriCorps programs to AmeriCorps volunteers as minimum 
essential coverage. However, AmeriCorps coverage provided to volunteers 
may be recognized as minimum essential coverage through the 
certification process outlined in Sec.  156.604 of this final rule.
    Comment: Several commenters urged HHS to recognize multi-share 
plans as minimum essential coverage. These commenters also requested 
that if multi-share plans were not designated as

[[Page 39516]]

minimum essential coverage, that they be eligible to apply for 
recognition as minimum essential coverage. These commenters described 
the unique structure of multi-share plans, stating that these programs 
already meet the community needs of affordable health insurance; multi-
share programs often focus on specific geographic areas or populations; 
and that multi-share plans are community funded, receive no federal 
subsidies and are a demonstrated alternative to traditional health 
insurance. Multi-share plans are designed to be coverage of last resort 
for low-income small businesses, students and individuals when other 
programs are unavailable.
    Response: While multi-share plans are not designated as minimum 
essential coverage in this final rule, HHS invites all multi-share 
organizations to apply for their coverage to be recognized as minimum 
essential coverage in the process outlined in Sec.  156.604 of this 
final rule.
Summary of Regulatory Changes
    As proposed in the proposed rule, in Sec.  156.602 we designate 
Medicare Advantage, and Refugee Medical Assistance supported by the 
Administration for Children and Families (45 CFR Subpart G), as minimum 
essential coverage. We also designate self-funded student health plans 
and state high risk pools as minimum essential coverage for plan or 
policy years beginning on or before December 31, 2014. For coverage 
beginning after December 31, 2014, sponsors of self-funded student 
health plans and state high risk pools may apply to be recognized as 
minimum essential coverage through the process outlined in Sec.  
156.604 of the final rule. Section 156.602 no longer specifically 
designates foreign health coverage or coverage provided by AmeriCorps 
programs to AmeriCorps volunteers as minimum essential coverage. 
However, plans that provide coverage to AmeriCorps volunteers as well 
as coverage provided by foreign governments may receive designation as 
minimum essential coverage by following the process for recognition 
explained in Sec.  156.604.
c. Requirements for Recognition as Minimum Essential Coverage for Types 
of Coverage Not Otherwise Designated Minimum Essential Coverage in the 
Statute or This Regulation (Sec.  156.604)
    The proposed rule outlined a process by which other types of 
coverage could seek to be recognized as minimum essential coverage. 
Coverage recognized as minimum essential coverage through this process 
would need to offer substantially the same consumer protections as 
those enumerated in the Title I of Affordable Care Act relating to non-
grandfathered, individual coverage to ensure consumers are receiving 
the protections of the Affordable Care Act. We solicited comments on 
the proposed ``substantially comply'' standard as it applies to other 
types of individual coverage. We also solicited comments on the process 
for recognizing other coverage as minimum essential coverage.
    In the proposed regulation, sponsors of minimum essential coverage 
must also meet other criteria specified by the Secretary. We solicited 
comments on the types of criteria the Secretary should consider in this 
process as well as whether they should be added to the final rule. We 
proposed that sponsors of a plan that seeks to have such coverage 
recognized as minimum essential coverage adhere to certain procedures. 
Sponsors would submit to HHS electronically the following information: 
(1) Name of the organization sponsoring the plan; (2) name and title of 
the individual who is authorized to make, and makes, this certification 
on behalf of the organization; (3) address of the individual named 
above; (4) phone number of the individual named above; (5) number of 
enrollees; (6) eligibility criteria; (7) cost sharing requirements, 
including deductible and out-of-pocket maximum; (8) essential health 
benefits covered (as defined in Sec.  1302(b) of the Affordable Care 
Act and its implementing regulations); and (9) a certification that the 
plan substantially complies with the provisions of Title I of the 
Affordable Care Act as applicable to non-grandfathered individual 
health insurance coverage. If at any time HHS determines that a type of 
coverage previously recognized as minimum essential coverage no longer 
meets the coverage requirements, HHS may revoke the recognition of such 
coverage. We solicited comments on whether there should be an appeal 
process for sponsors of coverage that had the minimum essential 
coverage status revoked by the Secretary. We also solicited comment on 
whether this appeal process should be available to sponsors whose 
initial request for recognition of minimal essential coverage status 
for their coverage was denied by HHS.
    The comment and our response are set forth below.
    Comment: A commenter suggested that the process for designating 
coverage not otherwise designated as minimum essential coverage should 
include definitive timelines for the submission and consideration of 
each plan applying to be designated at minimum essential coverage, 
opportunities for such plans to exchange ideas with HHS, and an appeals 
process for plans that are denied.
    Response: We appreciate the commenter's suggestions regarding this 
process and we will take them under further consideration while 
developing this administrative process.
    As previously stated, we solicited comments on the types of 
criteria that the Secretary should require a sponsor to meet in order 
for HHS to recognize the coverage of the organization as minimum 
essential coverage and indicated that we might specify criteria for 
sponsoring organizations. We did not get any comments specifically 
addressing this issue, and we have decided that the focus of the CMS 
review of applications for health coverage to be recognized as minimum 
essential coverage will not be on the type of organization providing 
coverage but on the extent of the coverage itself and the protections 
provided in the coverage. We made minor changes to certification 
requirement to clarify that the organization must certify that the 
coverage substantially complies with the requirements of title I of the 
Affordable Care Act that apply to non-grandfathered plans in the 
individual market and the organization must submit any plan 
documentation or other information that demonstrate that the coverage 
substantially comply with these requirements.
Summary of Regulatory Changes
    We made minor changes to the provisions of Sec.  156.604 to clarify 
that, in addition to the organization certifying that the coverage 
substantially complies with the requirements of title I of the 
Affordable Care Act that apply to non-grandfathered plans in the 
individual market, the organization must submit any plan documentation 
or other information that demonstrates that the coverage substantially 
complies with these requirements.
d. HHS Audit Authority (Sec.  156.606)
    Under this proposed rule, HHS would have the ability to audit plans 
to ensure the accuracy of the certification either randomly or when 
triggered by certain information. We solicited comments on the proposed 
procedures and if and when audits should be conducted. We also 
solicited comments on whether sponsors of the types of coverage that 
have been designated as minimum essential coverage in the proposed rule 
should also submit the above information required to HHS.

[[Page 39517]]

    Under the proposed rule, once recognized as minimum essential 
coverage, a plan would have to provide notice to its enrollees, 
specifying that the plan has been recognized as minimum essential 
coverage for the purposes of the individual shared responsibility 
provision. The sponsor of any plan recognized as minimum essential 
coverage would also be required to provide the annual information 
reporting to the IRS specified in section 6055 of the Code and 
implementing regulations and furnish statements to individuals enrolled 
in such coverage to assist them in establishing that they are not 
liable for the shared responsibility payment under section 5000A of the 
Code. We requested comments on whether all plans and programs 
designated as minimum essential coverage under this regulation must 
provide notice to enrollees, or only plans recognized through the 
process in Sec.  156.604 of this regulation.
    Comment: A commenter suggested that the process for designating 
coverage not otherwise designated as minimum essential coverage should 
include definitive timelines for the submission and consideration of 
each plan applying to be designated at minimum essential coverage, 
opportunities for such plans to exchange ideas with HHS, and an appeals 
process for plans that are denied.
    Response: We appreciate the commenter's suggestions regarding this 
process and we will take them under further consideration while 
developing this administrative process.
Summary of Regulatory Changes
    We made minor changes to the provisions of section 156.606 to 
clarify the meaning of the final regulation.

III. Provisions of the Final Regulation

    For the most part, this final rule incorporates the provisions of 
the proposed rule. Those provisions of this final rule that differ 
substantively from the proposed rule are as follows:
Changes to Sec.  155.605
     Modifies eligibility standards for the religious 
conscience exemption such that if an exemption is provided to an 
individual under the age of 21, an exemption will be provided on a 
continuing basis until the month after the individual's 21st birthday, 
which triggers a corresponding notice and opportunity for the 
individual turning 21 to file another application to maintain this 
exemption.
     Clarifies which hardship exemptions must be granted by the 
Exchange and which are available solely through the tax filing process.
     Clarifies that hardship exemption under paragraph (g)(1) 
of this section must be granted for the month before, the month or 
months during which an individual experiences the circumstances that 
qualify as a hardship preventing him or her from purchasing a qualified 
health plan, and the month after.
     Clarifies that an eligible employer-sponsored plan is only 
considered for the lack of affordable coverage based on projected 
income hardship exemption if it meets the minimum value standard.
     Specifies how the Exchange will determine the required 
contribution to purchase coverage under an eligible employer-sponsored 
plan or in the individual market for the lack of affordable coverage 
based on projected income hardship exemption, including clarifying that 
in determining the required contribution for an eligible employer-
sponsored plan, an individual who uses tobacco is treated as not 
earning any premium incentive related to participation in a wellness 
program designed to prevent or reduce tobacco use that is offered by an 
eligible employer-sponsored plan, and wellness incentives offered by an 
eligible employer-sponsored plan that do not relate to tobacco use are 
treated as not earned.
     Clarifies that the lack of affordable coverage based on 
projected income hardship exemption is only available prospectively for 
the month or months of a calendar year after which the exemption is 
requested, and that it will be provided for all remaining months in a 
coverage year, notwithstanding any change in an individual's 
circumstances.
     Adds a hardship exemption for any month in which an 
individual is an Indian eligible for services through an Indian health 
care provider, as defined in 42 CFR 447.50, or an individual eligible 
for services through the Indian Health Service in accordance with 25 
USC 1680c(a), (b), or (d)(3), and specifies that the duration of this 
exemption is the same as that for a member of an Indian tribe.
Changes to Sec.  155.610
     Clarifies that the Exchange must use information collected 
for purposes of the eligibility determination for enrollment in a QHP 
and for insurance affordability programs in making the exemption 
eligibility determination to the extent that the Exchange finds that 
such information is still applicable.
     Specifies that at a minimum, the Exchange must provide a 
paper application process for applications submitted prior to October 
15, 2014.
     Clarifies that hardship exemptions can also be provided 
for previous tax years after December 31 of a given calendar year, 
noting that the Exchange will only accept an application for an 
exemption described in Sec.  155.605(g)(1) during one of the 3-calendar 
years after the month or months during which the applicant attests that 
the hardship occurred.
     Clarifies that the Exchange will notify an individual to 
retain records that demonstrate the receipt of a certificate of 
exemption, as well as records demonstrating his or her qualification 
for the underlying exemption.

Changes to Sec.  155.615

     Clarifies how the Exchange will address a situation in 
which an applicant attests to membership in a religious sect or 
division that is not recognized under section 1402(g)(1) of the Code.
     Clarifies how the Exchange will address a situation in 
which an applicant attests to membership in an organization that is not 
known to the Exchange as a health care sharing ministry based on 
information provided by HHS.
     Provides a process for establishing the list of health 
care sharing ministries that meet the statutory standards.
     Clarifies that the Exchange will not find that an 
applicant's previous or current enrollment in health coverage is not 
reasonably compatible with his or her attestation of membership in a 
health care sharing ministry.
     Clarifies that the Secretary of the Treasury will 
administer the exemptions specified in Sec.  155.605(g)(3) and (5).
     Clarifies the applicability of verification procedures 
specified in 45 CFR subpart D to the lack of affordable coverage based 
on projected income hardship exemption.
     Specifies that the Exchange will use the same verification 
procedures for the exemption for an individual who is eligible for 
services through an Indian health care provider as it will use for the 
exemption for members of a federally-recognized tribe.
     Clarifies when an inconsistency process should be 
triggered when certain data sources are not reasonably expected to be 
available.
     Allows an applicant 90 days to present satisfactory 
documentary evidence to resolve an inconsistency.
     Specifies how an Exchange must validate a Social Security 
number for an individual seeking an exemption.

[[Page 39518]]

Changes to Sec.  155.620

     Specifies that the Exchange will not conduct mid-year 
redeterminations for the hardship exemption for an individual who has a 
lack of affordable coverage based on projected household income, will 
not require individuals receiving this exemption to report changes, and 
will not send periodic reminders to report changes to individuals who 
have this exemption.
     Specifies that the Exchange will implement a change 
resulting from a redetermination under this section for the month or 
months after the month in which the redetermination occurs, such that a 
certificate that was provided for the month in which the 
redetermination occurs, and for prior months remains effective.

Changes to Sec.  155.625

     Specifies that for applications submitted before October 
15, 2014, a state-based Exchange can be approved if relying on HHS to 
administer the entire eligibility process for exemptions, provided that 
the Exchange furnishes any information available through the Exchange 
that is necessary for an applicant to utilize the process administered 
by HHS, and the Exchange call center and Internet Web site assist 
consumers seeking exemptions.

Changes to Sec.  155.635

     Clarifies that an Exchange relying on HHS to make 
eligibility determinations for exemptions will not issue the 
eligibility notice for applications submitted prior to October 15, 
2014.

Changes to Sec.  156.600

     Makes minor changes to the provisions of 45 CFR Sec.  
156.600 to clarify the meaning of the regulation.

Changes to Sec.  156.602

     Designates self-funded student health plans and state high 
risk pools as minimum essential coverage for a one year transitional 
period, and allows self-funded student health plans and state high risk 
pools to apply to be recognized as minimum essential coverage through 
the process outlined in Sec.  156.604 of the final rule after January 
1, 2015.
     Removes the designation of foreign health coverage and 
AmeriCorps as minimum essential coverage. In order to be recognized as 
minimum essential coverage, foreign health coverage and coverage for 
AmeriCorps must follow the process for recognition explained in Sec.  
156.604.

Changes to Sec.  156.604

     Makes minor changes to the provisions of Sec.  156.604 to 
clarify the meaning of the regulation.

Changes to Sec.  156.606

     Makes minor changes to the provisions of 45 CFR Sec.  
156.606 to clarify the meaning of the regulation.

IV. Collection of Information Requirements

    The final rule entitled ``Exchange Functions: Eligibility for 
Exemptions; Miscellaneous Minimum Essential Coverage Provisions'' 
finalizes standards with regard to the minimum function of an Exchange 
to perform eligibility determinations and issue certificates of 
exemption from the individual shared responsibility payment. The rule 
also finalizes standards related to eligibility for exemptions, 
including the verification and eligibility determination process, 
eligibility redeterminations, options for conducting eligibility 
determinations, and reporting related to exemptions. In addition, the 
rule finalizes rules designating certain types of coverage as minimum 
essential coverage and outlining substantive and procedural 
requirements that other types of coverage must fulfill in order to be 
recognized as minimum essential coverage under section 5000A(f)(5) of 
the Code.
    This section outlines the information collection requirements in 
the proposed regulation on which we solicited public comment in the 
exemptions proposed rule. We used data from the Bureau of Labor 
Statistics to derive average costs for all estimates of salary in 
establishing the information collection requirements. Salary estimates 
included the cost of fringe benefits, calculated at 30.4 percent of 
salary, which is based on the June 2012 Employer Costs for Employee 
Compensation report by the U.S. Bureau of Labor Statistics. 
Additionally, we used estimates from the Congressional Budget Office to 
derive estimates of the number of exemption applications we anticipate 
Exchanges to receive, and the number of exemption eligibility 
determination notifications we anticipate Exchanges to generate.
    Finally, this final rule describes an information collection 
requirement for which we did not solicit public comment in the 
exemptions proposed rule. The information collection requirement 
related to Health Care Sharing Ministries will be addressed through a 
separate notice and comment process under the Paperwork Reduction Act 
(PRA).

1. Exemption Application (Sec.  155.610)

    Throughout this subpart, we specify that the Exchange will collect 
attestations from applicants for a certificate of exemption. These 
attestations will be collected using the application described in Sec.  
155.610(a). In Sec.  155.610(a), we provide that the Exchange use an 
application created by HHS to collect the information necessary for 
determining eligibility for and granting certificates of exemption from 
the individual shared responsibility payment. The burden associated 
with this requirement is the time and effort estimated for an applicant 
to complete an application. The exemption application may be available 
in both paper and electronic formats. An electronic application process 
would vary depending on each applicant's circumstances and which 
exemption an applicant is applying for, such that an applicant is only 
presented with questions relevant to the exemption for which he or she 
is applying. The goal is to solicit sufficient information so that in 
most cases no further inquiry will be needed. We estimate that on 
average, it will take .27 hours (16 minutes) for an application filer 
to complete an application, which is based on the estimates created for 
the single, streamlined application for enrollment in a QHP \3\, with a 
90 percent electronic/10 percent paper mix (noting that no specific 
application channel is specified in this proposed rule). While the 
Congressional Budget Office \4\ estimates that 24 million individuals 
would be exempt from the individual shared responsibility payment in 
2016, it is unclear how many individuals will seek these exemptions 
from an Exchange. Some of these individuals will claim an exemption 
through the tax filing process, others will be exempt but not need to 
file for an exemption (for example those below the filing threshold), 
while others will apply for and receive an exemption through the 
Exchange. Therefore, of the 24 million individuals, we conservatively 
anticipate that up to half will apply for an exemption through the 
Exchange. We specifically sought comment on this assumption. 
Accordingly, we estimate that approximately 12 million

[[Page 39519]]

applications for exemptions will be submitted to the Exchange for 
calendar year 2016, for a total of 3.2 million burden hours. We note, 
however, that the Commonwealth of Massachusetts saw a very small number 
of individuals apply for exemptions from a similar individual shared 
responsibility payment \5\. We also note that some individuals will 
apply for an exemption but be determined ineligible for an exemption, 
but it is difficult for us to estimate this number, and that in an 
unknown number of cases, multiple individuals in a single household may 
submit a single application.
---------------------------------------------------------------------------

    \3\ The estimates may be found in the information collection 
request entitled, ``Data Collection to Support Eligibility 
Determinations for Insurance Affordability Programs and Enrollment 
through Affordable Insurance Exchanges, Medicaid and Children's 
Health Insurance Program Agencies.''
    \4\ Congressional Budget Office, ``Payments of Penalties for 
Being Uninsured Under the Affordable Care Act,'' September 2012 
http://cbo.gov/sites/default/files/cbofiles/attachments/09-19-12-Indiv_Mandate_Penalty.pdf.
    \5\ Massachusetts Health Connector and Department of Revenue, 
``Data on the Individual Mandate, Tax Year 2010'', June, 2012. 
Retrieved from http://www.mahealthconnector.org.
---------------------------------------------------------------------------

    We do not estimate any cost to the Exchanges of evaluating the 
exemption applications. For the purposes of this estimate, we expect 
all applications to be submitted electronically and processed through 
the system, which would result in no additional labor costs to evaluate 
and review the exemption applications. We requested comment on this 
assumption.
    We estimate that the cost to develop the exemption application will 
be significantly less than the estimated cost of developing the 
coverage application because the coverage application takes into 
account additional factors necessary in order to perform eligibility 
determinations for insurance affordability programs. We also note that 
as with the coverage application, HHS will be releasing a model 
application for use by Exchanges, which will significantly decrease the 
burden associated with the implementation of the application. On 
average, we estimate that the implementation of the exemption 
application will take approximately 1,059 hours of software development 
at a labor cost of $98.50 per hour, for a total cost of $104,312 per 
Exchange and a total cost of $1,877,607 for 18 state-based Exchanges.

2. Notices (Sec. Sec.  155.610, 155.615, 155.620)

    Several provisions in subpart G outline specific notices that the 
Exchange will send to individuals during the exemption eligibility 
determination process, including the notice of eligibility 
determination described in Sec.  155.610(i). The purpose of these 
notices is to alert an applicant of his or her eligibility 
determination for an exemption and related actions taken by the 
Exchange. To the extent that an applicant is determined eligible for an 
exemption, the notice of eligibility determination described in Sec.  
155.610(i) will serve as the certificate of exemption. Accordingly, we 
do not provide a separate burden estimate for the certificates of 
exemption described throughout this subpart. When possible, we 
anticipate that the Exchange will consolidate notices when multiple 
members of a household are applying together and receive an eligibility 
determination at the same time. Consistent with 45 CFR 155.230(d), the 
notice may be in paper or electronic format, based on the election of 
an individual, will be in writing, and will be sent after an 
eligibility determination has been made by the Exchange; these are the 
same standards that are used for eligibility notices for enrollment in 
a QHP through the Exchange and for insurance affordability programs, as 
described in 45 CFR 155.310(g). It is difficult to estimate the number 
of applicants that will opt for electronic versus paper notices, 
although we anticipate that a large volume of applicants will request 
electronic notification. We estimated the associated mailing costs for 
the time and effort needed to mail notices in bulk to applicants who 
request paper notices.
    We expect that the exemption eligibility determination notice will 
be dynamic and include information tailored to all possible outcomes of 
an application throughout the eligibility determination process. A 
health policy analyst, senior manager, and an attorney would review the 
notice. HHS is currently developing model notices, which will decrease 
the burden on Exchanges associated with developing such notices. If a 
state opts to use the model notices provided by HHS, we estimate that 
the Exchange effort related to the development and implementation of 
the exemption eligibility determination notice will necessitate 44 
hours from a health policy analyst at an hourly cost of $49.35 to learn 
exemptions rules and draft notice text; 20 hours from an attorney at an 
hourly cost of $90.14, and four hours from a senior manager at an 
hourly cost of $79.08 to review the notice; and 32 hours from a 
computer programmer at an hourly cost of $52.50 to conduct the 
necessary development. In total, we estimate that this will take a 
total of 100 hours for each Exchange, at a cost of approximately $5,971 
per Exchange and a total cost of $107,469 for 18 state-based Exchanges. 
For most notices outlined in subpart G of this proposed rule, we 
estimate that the notice development as outlined in the paragraph 
above, including the systems programming, would take each Exchange an 
estimated 100 hours to complete in the first year.
    We expect that the burden on the Exchange to maintain this notice 
will be significantly lower than to develop it. We estimate that it 
will take each professional approximately a quarter of the time to 
maintain the notice as compared to developing the notice. Accordingly, 
we estimate the maintenance of the eligibility determination notice in 
subsequent years will necessitate 11 hours from a health policy analyst 
at an hourly cost of $49.35; 5 hours from an attorney at an hourly cost 
of $90.14; one hour from a senior manager at an hourly cost of $79.08 
and eight hours from a computer programmer at an hourly cost of $52.50. 
In total, we estimate that this will take a total of 25 hours for each 
Exchange, at a cost of approximately $1,492 per Exchange and a total 
cost of $26,856 for 18 state-based Exchanges.
    Pursuant to section 5000A of the Code, the IRS must collect the 
necessary data from QHP issuers to determine the national average 
bronze monthly premiums in order to assist in the computation of the 
shared responsibility payment. To assist the IRS, HHS must request the 
monthly premium for all bronze level QHP's through all 51 Exchanges 
from QHP issuers. The burden associated on states and QHP issuers is 
already included in the information collection request entitled, 
``Initial Plan Data Collection to Support QHP Certification and other 
Financial Management and Exchange Operations,'' and as such, we do not 
include a separate burden estimate here. As this information is already 
being collected for another purpose, there will be no additional burden 
on QHP issuers or states.

3. Electronic Transmissions (Sec. Sec.  155.615, 155.630)

    Section 155.615 specifies that the Exchange will utilize applicable 
procedures established under subpart D of the Exchange final rule in 
order to obtain data through electronic data sources for purposes of 
determining eligibility for and granting certificates of exemption. 
This involves the electronic transmission of data through procedures 
established under subpart D in order to verify an applicant's 
incarceration status, to verify eligibility for qualifying coverage in 
an eligible employer-sponsored plan, and to determine eligibility for 
advance payments of the premium tax credit. Section 155.615 also 
includes additional electronic transmissions that are specific to the 
eligibility process for exemptions, including those related to health 
care

[[Page 39520]]

sharing ministries and religious conscience. In section 155.630, we 
proposed that the Exchange will provide relevant information to IRS 
regarding certificates of exemption for the purposes of tax 
administration, such as the name and other identifying information for 
the individual who received the exemption. As we expect that these 
transmissions of information will all be electronic, and through the 
same channels used for reporting to IRS established in Sec.  155.340, 
we do not anticipate for there to be any additional burden other than 
that which is required to design the overall eligibility and enrollment 
system. We do not provide a burden estimate for the electronic 
transmissions, as the cost is incorporated into the development of the 
IT system for the Exchange eligibility and enrollment system.

4. Verification and Change Reporting (Sec. Sec.  155.615, 155.620)

    The Exchange will use the same verification processes for new 
applications and for changes that are reported during the year. This 
includes the process for situations in which the Exchange is unable to 
verify the information necessary to determine an applicant's 
eligibility, which is described in section 155.615(g). It is not 
possible at this time to provide estimates for the number of applicants 
for whom additional information will be required to complete an 
eligibility determination, but we anticipate that this number will 
decrease as applicants become more familiar with the eligibility 
process for exemptions and as more data become available 
electronically. As such, for now, we estimate the burden associated 
with the processing of documentation for one submission from an 
applicant. We note that the burden associated with this provision is 
one hour for an individual to collect and submit documentation, and 12 
minutes for eligibility support staff at an hourly cost of $28.66 to 
review the documentation, for a total cost of $6 per document 
submission.

5. ICRs Regarding Health Care Sharing Ministries (Sec.  155.615)

    In order to facilitate the provision of an exemption for membership 
in a health care sharing ministry to the members of such ministry, we 
specify in Sec.  155.615(c)(2) that an organization that believes that 
it meets the statutory standards to be considered a health care sharing 
ministry will submit certain information to HHS. We are aware of four 
organizations that have made public statements regarding their status 
as a health care sharing ministry. We note that we will account for the 
additional burden associated with healthcare sharing ministries in a 
future information collection request that will go through the 
requisite notice and comment period and subsequent OMB review and 
approval process.

6. ICRs Regarding Agreements (Sec.  155.625)

    These provisions specify that an Exchange that decides to utilize 
the HHS service for making eligibility determinations for exemptions 
for application submitted on or after October 15, 2014, will enter into 
a written agreement with HHS. These agreements are necessary to ensure 
that the use of the service will minimize burden on individuals, ensure 
prompt determinations of eligibility without undue delay, and provide 
for secure, timely transfers of application information.
    The burden associated with these provisions is the time and effort 
necessary for the Exchange to establish an agreement with HHS. We 
estimate that the creation of the necessary agreement will necessitate 
35 hours from a health policy analyst at an hourly cost of $49.35, and 
35 hours from an operations analyst at an hourly cost of $54.45 to 
develop the agreement; and 30 hours from an attorney at an hourly cost 
of $90.14 and five hours from a senior manager at an hourly cost of 
$79.14 to review the agreement. For the purpose of this estimate, we 
assume that the 18 state-based Exchanges will utilize the HHS service 
for exemptions. Accordingly, the total burden on the Exchange 
associated with the creation of the necessary agreement will be 
approximately 105 hours and $6,733 per Exchange, for a total cost of 
$121,194 for 18 Exchanges.

7. ICRs Regarding Minimum Essential Coverage (Sec. Sec.  156.604(a)(3), 
156.604(d))

    Organizations that currently provide health coverage that are not 
statutorily specified and not designated as minimum essential coverage 
in this regulation may submit a request to CMS that their coverage be 
recognized as minimum essential coverage. As described in Sec.  
156.604(a)(3), sponsoring organizations would have to electronically 
submit to CMS information regarding their plans and certify that their 
plans meet substantially all of the requirements in the Title I of 
Affordable Care Act, as applicable to non-grandfathered, individual 
coverage. Some commenters suggested that organizations submitting such 
requests provide more information regarding their plans rather than 
simply certifying that their plans meet substantially all of the 
requirements in the Title I of Affordable Care Act. We have revised the 
certification to request plan documentation or other information that 
demonstrate that the coverage sponsored by the organization 
substantially complies with the provisions of Title I of the Affordable 
Care Act applicable to non-grandfathered individual health insurance 
coverage.
    We sought comments on how many organizations are likely to submit 
such requests but did not receive any information that would allow us 
to estimate the number of requests. We assume that at least 10 
organizations will submit such a request. The burden associated with 
this certification includes the time needed to collect and input the 
necessary plan information, and maintain a copy for recordkeeping by 
clerical staff and for a manager and legal counsel to review it and for 
a senior executive to review and sign it. The certification and 
attachments will be submitted to CMS electronically at minimal cost. We 
estimate that it will take a combined total of 5.25 hours (4 hours for 
clerical staff at an hourly cost of $30.64, 0.5 hours for a manager at 
an hourly cost of $55.22, 0.5 hours for legal counsel at an hourly cost 
of $83.10 and 0.25 hours for a senior executive at an hourly cost of 
$112.43) to prepare and submit the information and certification to CMS 
and to retain a copy for recordkeeping purposes. The total cost for one 
organization is estimated to be approximately $220. Therefore, the 
total burden for 10 organizations will be 52.5 hours, with an 
equivalent cost of $2,200.
    Section 156.604(d) specifies that sponsoring organizations whose 
health coverage are recognized as minimum essential coverage will have 
to provide a notice to enrollees informing them that the plan has been 
recognized as minimum essential coverage for the purposes of the Code. 
The notice requirement may be satisfied by inserting a statement into 
existing plan documents. Plan documents are usually reviewed and 
updated annually before a new plan year begins. Sponsoring 
organizations may insert the statement in their plan documents at that 
time at minimal cost. Once the notice is included in the plan documents 
the first year, no additional cost will be incurred in future years. 
Therefore this notice is not subject to the Paperwork Reduction Act of 
1995. Commenters suggested that a sponsoring organization should be 
required to provide a notice to enrollees if its request is denied and 
its plan is not recognized as minimum essential coverage. To minimize 
the burden on

[[Page 39521]]

sponsoring organizations, we are not requiring such a notice.
    The sponsor of any type of coverage recognized as minimum essential 
coverage is also required to provide the annual information reporting 
to the IRS specified in section 6055 of the Code and furnish statements 
to individuals enrolled in such coverage to assist them in establishing 
that they are not liable for the shared responsibility payment under 
section 5000A of the Code. The Department of Treasury plans to publish 
for public comment, in accordance with the Paperwork Reduction Act of 
1995 (44 U.S.C. Chapter 35), the required ICRs in the near future.

                               Table 1--Annual Information Collection Requirements
----------------------------------------------------------------------------------------------------------------
                                                                                   Burden per
    Regulation section(s)         Description       Number of       Number of       response       Total annual
                                                   respondents      responses        (hours)      burden (hours)
----------------------------------------------------------------------------------------------------------------
Sec.   155.610...............  Application                   18              18        1,059            19,062
                                Development.
Sec.   155.610...............  Application           12,000,000      12,000,000            0.27      3,200,000
                                Completion.
Sec.  Sec.   155.610, 155.620  Notice                        18              18          125             2,250
                                Development and
                                Maintenance.
Sec.   155.620...............  Change Reporting               1               1            0.2               0.2
Sec.   155.625...............  Agreements......              18              18          105             1,890
Sec.  Sec.   156.604(a)(3)...  Minimum                       10              10            5.25             52.5
                                Essential
                                Coverage
                                Certification.
                                                ----------------------------------------------------------------
    Total....................  ................  ..............  ..............  ..............      3,223,255
----------------------------------------------------------------------------------------------------------------

C. Submission of PRA-Related Comments

    We have submitted a copy of this final rule to OMB for its review 
of the rule's information collection and recordkeeping requirements. 
These requirements are not effective until they have been approved by 
OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collections referenced above, access the CMS 
Web site at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html, or call the Reports 
Clearance Office at 410-786-1326.

V. Summary of Regulatory Impact Statement

A. Summary

    As stated earlier in this preamble, this final rule implements 
certain functions of the Exchanges. These specific statutory functions 
include determining eligibility for and granting certificates of 
exemption from the individual shared responsibility payment described 
in section 5000A of the Internal Revenue Code. Additionally, this final 
rule implements the responsibility of the Secretary of Health and Human 
Services, in coordination with the Secretary of the Treasury, to 
designate other health benefits coverage as minimum essential coverage 
by designating certain coverage as minimum essential coverage. It also 
outlines substantive and procedural requirements that other types of 
individual coverage must fulfill in order to be recognized as minimum 
essential coverage under the Internal Revenue Code.
    HHS has crafted this rule to implement the protections intended by 
Congress in an economically efficient manner. We have examined the 
effects of this rule as required by Executive Order 12866 (58 FR 51735, 
September 1993, Regulatory Planning and Review), the Regulatory 
Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 
1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 
1995 (Pub. L. 104-4), Executive Order 13132 on Federalism, and the 
Congressional Review Act (5 U.S.C. 804(2)). In accordance with OMB 
Circular A-4, CMS has quantified the benefits, costs and transfers 
where possible, and has also provided a qualitative discussion of some 
of the benefits, costs and transfers that may stem from this final 
rule.

B. Executive Orders 13563 and 12866

    Executive Order 12866 (58 FR 51735) directs agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects; distributive impacts; and equity). Executive 
Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and 
reaffirms the principles, structures, and definitions governing 
regulatory review as established in Executive Order 12866.
    Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a final 
rule--(1) having an annual effect on the economy of $100 million or 
more in any one year, or adversely and materially affecting a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities 
(also referred to as ``economically significant''); (2) creating a 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year), and a ``significant'' regulatory action is subject to review by 
the OMB. This rule has been designated a ``significant regulatory 
action'' under Executive Order 12866. Accordingly, OMB has reviewed 
this final regulation pursuant to the Executive Order.
1. Need for Regulatory Action
    This final rule sets forth standards and processes under which the 
Exchange will conduct eligibility determinations for and grant 
certificates of exemption from the individual shared responsibility 
payment. Furthermore, it supports and complements rulemaking conducted 
by the Secretary of the Treasury with respect to section 5000A of the 
Code, as added by section 1501(b) of the Affordable Care Act. The 
intent of this rule is to implement the relevant provisions while 
continuing to afford states substantial discretion in the design and 
operation of an Exchange, with greater standardization provided where 
directed by the statute or where

[[Page 39522]]

there are compelling practical, efficiency, or consumer protection 
reasons. In addition, this final rule provides standards for 
determining whether certain other types of health insurance coverage 
constitute minimum essential coverage and procedures for sponsors to 
follow for a plan to be identified as minimum essential coverage under 
section 5000A of the Code. This rule also designates certain types of 
existing health coverage as minimum essential coverage. Other types of 
coverage, not statutorily specified and not designated as minimum 
essential coverage in this regulation, may be recognized as minimum 
essential coverage if certain substantive and procedural requirements 
are met as set forth in this rule.
2. Summary of Impacts
    In developing this final rule, HHS carefully considered its 
potential effects including costs and benefits. Because of data 
limitations, HHS did not attempt to quantify the benefits, costs and 
transfers resulting from this final rule. Nonetheless, HHS was able to 
identify several potential impacts which are discussed qualitatively 
below.
    The exemption provisions of this final rule set forth how and what 
exemptions can be received through the Exchange. Given the statute, 
these rules would generate exemption request activity; the final rules 
could also potentially affect the amount of shared responsibility 
payments made in a given year and the number of individuals who would 
enroll in health insurance plans to avoid shared responsibility 
payments. The impact of the minimum essential coverage provisions would 
be similar; individuals whose coverage would be designated minimum 
essential coverage, under the authority of the Secretary of Health and 
Human Services to designate other health benefit coverage as minimum 
essential coverage, would, in the absence of the rule, pay shared 
responsibility payments or switch health insurance coverage so as not 
to incur those penalties.
    As noted in our discussion, above, of information collection 
requirements, while CBO estimates that 24 million individuals would be 
exempt from the penalty in 2016, it is unclear how many individuals 
will seek these exemptions from an Exchange. These submissions would be 
associated with a variety of effects, including: costs to Exchanges to 
review the exemption requests; costs to applicants to request 
exemptions and retain documents; potential effects on enrollment in 
health coverage and its benefits; and a transfer from the federal 
government to individuals receiving exemptions in cases in which there 
is a foregone shared responsibility payment.
    We note that the cost to an applicant of submitting a request and 
retaining documents is bounded by the expected shared responsibility 
payment; otherwise, he or she would not necessarily apply for the 
exemption. Though we lack data to precisely characterize the effects of 
these provisions, we note that the potential number of individuals 
seeking exemptions through the Exchange could place the overall impact 
of the final rule over the $100 million threshold for economic 
significance, even at a low economic cost per individual.
    The minimum essential coverage provisions included in this final 
rule could lead to transfers from the federal government to affected 
individuals (in this case, individuals whose coverage is designated to 
be minimum essential coverage) and have effects on health coverage 
enrollment (for example, decreased switching between plans). Decreased 
switching between plans would entail time savings for affected 
individuals and uncertain effects on premium payments and use of 
medical services and products. We currently lack data to estimate the 
number of individuals whose coverage would be designated minimum 
essential coverage by this rule.

C. Alternatives Considered

    Under the Executive Order, HHS is required to consider alternatives 
to issuing rules and alternative regulatory approaches. HHS considered 
the regulatory alternatives below:
1. Grant Certificates for All Categories of Exemptions
    Section 155.605 provides the eligibility standards for exemptions 
that will be granted by the Exchange. The preamble to this section 
notes that Exchanges will not grant certificates of exemption in four 
categories: (1) Lack of affordable coverage; (2) household income below 
the filing threshold; (3) not lawfully present; and (4) short coverage 
gaps. Also, Exchanges will not grant certificates of exemptions for 
certain hardship exemptions, specifically Sec.  155.605(g)(3) and (5). 
These exemptions instead are solely available during the tax filing 
process, as we believe that the IRS is in a better position to issue 
these exemptions.
    The alternative model would specify that the Exchange would provide 
certificates of exemption in all nine categories described in section 
5000A of the Code. This alternative model was not selected for 
practical and administrative reasons; the specific reasons for taking 
this approach are discussed in the preamble associated with this 
section of the final regulation. For example, for certain categories of 
exemptions, the information needed will only be available on a 
retrospective basis, and is most efficiently available through the tax 
filing process. Thus, we believe that the least burdensome approach for 
individuals and Exchanges is to make these exemptions available only 
through the tax filing process.
2. Designation of State High Risk Pools, Self-Funded Student Health 
Plans and AmeriCorps as Minimum Essential Coverage
    We considered designating state high risk pools, self-funded 
student health plans, foreign health coverage and AmeriCorps as minimum 
essential coverage in section 156.602. After careful review of comments 
received, state high risk pools and self-funded student health plans 
will be designated as minimum essential coverage for plan or policy 
years beginning on or before December 31, 2014. For coverage beginning 
after December 31, self-funded student health plans and state high risk 
pools may apply to be recognized as minimum essential coverage. HHS 
hopes that during this transitional year, such plans will voluntarily 
adopt Affordable Care Act consumer protections to ensure their 
qualification as minimum essential coverage. We also considered 
automatically designating AmeriCorps and foreign health coverage as 
minimum essential coverage but did not adopt that policy in this final 
rule. These types of coverage may be recognized as minimum essential 
coverage through the certification process outlined in Sec.  156.604 of 
this final rule. We believe that the options adopted in this final rule 
provide the best balance between allowing individuals to retain their 
current coverage and ensuring that they receive the consumer 
protections in the Affordable Care Act.

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to prepare an initial regulatory flexibility analysis 
to describe the impact of the rule on small entities, unless the head 
of the agency can certify that the rule will not have a significant 
economic impact on a substantial number of small entities. The Act 
generally defines a ``small entity'' as (1) a proprietary firm meeting 
the size standards of the Small Business Administration (SBA); (2) a 
not-for-

[[Page 39523]]

profit organization that is not dominant in its field; or (3) a small 
government jurisdiction with a population of less than 50,000. States 
and individuals are not included in the definition of ``small entity.'' 
HHS uses as its measure of significant economic impact on a substantial 
number of small entities a change in revenues of more than 3 to 5 
percent. As the burden for this final regulation falls on either 
Exchanges or individuals, the finalized regulations will not have a 
significant economic impact on a substantial number of small entities, 
and therefore, a regulatory flexibility analysis is not required.

VII. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation, by state, 
local, or tribal governments, in the aggregate, or by the private 
sector. In 2013, that threshold is approximately $141 million. This 
final rule does not mandate expenditures by state governments, local 
governments, tribal governments, in the aggregate, or the private 
sector, of $141 million. The majority of state, local, and private 
sector costs related to implementation of the Affordable Care Act were 
described in the RIA accompanying the March 2012 Medicaid eligibility 
rule. Furthermore, this final rule does not set any mandate on states 
to set up an Exchange.

VIII. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct effects on states, preempts state law, or otherwise 
has federalism implications. We note again that the impact of changes 
related to implementation of the Affordable Care Act was described in 
the RIA associated with the Exchange final rule. As discussed in the 
Exchange final rule RIA, we have consulted with states to receive input 
on how the various Affordable Care Act provisions codified in this 
proposed rule would affect states.
    Because states have flexibility in designing their Exchange, state 
decisions will ultimately influence both administrative expenses and 
overall premiums. However, because states are not required to create an 
Exchange, these costs are not mandatory. For states electing to create 
an Exchange, the initial costs of the creation of the Exchange will be 
funded by Exchange Planning and Establishment Grants. After this time, 
Exchanges will be financially self-sustaining with revenue sources left 
to the discretion of the state. In the Department's view, while this 
proposed rule does not impose substantial direct costs on state and 
local governments, it has federalism implications due to direct effects 
on the distribution of power and responsibilities among the state and 
federal governments relating to determining standards relating to 
health insurance coverage (that is, for QHPs) that is offered in the 
individual and small group markets. Each state electing to establish a 
state-based Exchange must adopt the federal standards contained in the 
Affordable Care Act and in this proposed rule, or have in effect a 
state law or regulation that implements these federal standards. 
However, the Department anticipates that the federalism implications 
(if any) are substantially mitigated because states have choices 
regarding the structure and governance of their Exchanges. 
Additionally, the Affordable Care Act does not require states to 
establish an Exchange; but if a state elects not to establish an 
Exchange or the state's Exchange is not approved, HHS, will establish 
and operate an Exchange in that state. Additionally, states will have 
the opportunity to participate in state Partnership Exchanges that 
would allow states to leverage work done by other states and the 
federal government, and will be able to leverage a federally-managed 
service for eligibility determination for exemptions.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have federalism 
implications or limit the policy making discretion of the states, the 
Department has engaged in efforts to consult with and work 
cooperatively with affected states, including participating in 
conference calls with and attending conferences of the National 
Association of Insurance Commissioners, and consulting with state 
officials on an individual basis.
    Pursuant to the requirements set forth in section 8(a) of Executive 
Order 13132, and by the signatures affixed to this regulation, the 
Department certifies that CMS has complied with the requirements of 
Executive Order 13132 for the attached final regulation in a meaningful 
and timely manner.

IX. Congressional Review Act

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

List of Subjects

45 CFR Part 155

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

45 CFR Part 156

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

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

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

0
1. The authority citation for part 155 continues to read as follows:

    Authority: Title I of the Affordable Care Act, sections 1301, 
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1334, 1402, 
1411, 1412, 1413, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-
18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and 18081-
18083.


0
2. Amend Sec.  155.20 by revising the introductory text to paragraph 
(1) for the definition of ``Applicant'' and revising the definition of 
``Application filer'' to read as follows:

[[Page 39524]]

Sec.  155.20  Definitions.

* * * * *
    Applicant means:
    (1) An individual who is seeking eligibility for him or herself 
through an application submitted to the Exchange, excluding those 
individuals seeking eligibility for an exemption from the individual 
shared responsibility payment pursuant to subpart G of this part, or 
transmitted to the Exchange by an agency administering an insurance 
affordability program for at least one of the following:
* * * * *
    Application filer means an applicant, an adult who is in the 
applicant's household, as defined in 42 CFR 435.603(f), or family, as 
defined in 26 CFR 1.36B-1(d), an authorized representative of an 
applicant, or if the applicant is a minor or incapacitated, someone 
acting responsibly for an applicant, excluding those individuals 
seeking eligibility for an exemption from the individual shared 
responsibility payment pursuant to subpart G of this part.
* * * * *

0
3. In Sec.  155.200, revise paragraph (a) to read as follows:


Sec.  155.200  Functions of an Exchange.

    (a) General requirements. The Exchange must perform the minimum 
functions described in this subpart and in subparts D, E, G, H, and K 
of this part.
* * * * *

0
4. Add subpart G to part 155 to read as follows:
Subpart G--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions.
Sec.
155.600 Definitions and general requirements.
155.605 Eligibility standards for exemptions.
155.610 Eligibility process for exemptions.
155.615 Verification process related to eligibility for exemptions.
155.620 Eligibility redeterminations for exemptions during a 
calendar year.
155.625 Options for conducting eligibility determinations for 
exemptions.
155.630 Reporting.
155.635 Right to appeal.

Subpart G--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions


Sec.  155.600  Definitions and general requirements.

    (a) Definitions. For purposes of this subpart, the following terms 
have the following meaning:
    Applicant means an individual who is seeking an exemption for him 
or herself through an application submitted to the Exchange.
    Application filer means an applicant, an individual who is liable 
for the shared responsibility payment in accordance with section 5000A 
of the Code for an applicant, an authorized representative, or if the 
applicant is a minor or incapacitated, someone acting responsibly for 
an applicant.
    Exemption means an exemption from the shared responsibility 
payment.
    Health care sharing ministry has the same meaning as it does in 
section 5000A(d)(2)(B)(ii) of the Code.
    Indian tribe has the same meaning as it does in section 45A(c)(6) 
of the Code.
    Required contribution has the same meaning as it does in section 
5000A(e)(1)(B) of the Code.
    Shared responsibility payment means the payment imposed with 
respect to a non-exempt individual who does not maintain minimum 
essential coverage in accordance with section 5000A(b) of the Code.
    Tax filer has the same meaning as it does in Sec.  155.300(a).
    (b) Attestation. For the purposes of this subpart, any attestation 
that an applicant is to provide under this subpart may be made by the 
application filer on behalf of the applicant.
    (c) Reasonably compatible. For purposes of this subpart, the 
Exchange must consider information through electronic data sources, 
other information provided by the applicant, or other information in 
the records of the Exchange to be reasonably compatible with an 
applicant's attestation if the difference or discrepancy does not 
impact the eligibility of the applicant for the exemption or exemptions 
for which he or she applied.
    (d) Accessibility. Information, including notices, forms, and 
applications, must be provided to applicants in accordance with the 
standards specified in Sec.  155.205(c).
    (e) Notices. Any notice required to be sent by the Exchange to an 
individual in accordance with this subpart must be provided in 
accordance with the standards specified in Sec.  155.230.


Sec.  155.605  Eligibility standards for exemptions.

    (a) Eligibility for an exemption through the Exchange. Except as 
specified in paragraph (g) of this section, the Exchange must determine 
an applicant eligible for and issue a certificate of exemption for any 
month if the Exchange determines that he or she meets the requirements 
for one or more of the categories of exemptions described in this 
section for at least one day of the month.
    (b) Duration of single exemption. Except as specified in paragraphs 
(c)(2), (f)(2), and (g) of this section, the Exchange may provide a 
certificate of exemption only for the calendar year in which an 
applicant submitted an application for such exemption.
    (c) Religious conscience. (1) The Exchange must determine an 
applicant eligible for an exemption for any month if the applicant is a 
member of a recognized religious sect or division described in section 
1402(g)(1) of the Code, and an adherent of established tenets or 
teachings of such sect or division, for such month in accordance with 
section 5000A(d)(2)(A) of the Code.
    (2) Duration of exemption for religious conscience. (i) The 
Exchange must grant the certificate of exemption specified in this 
paragraph to an applicant who meets the standards provided in paragraph 
(c)(1) of this section for a month on a continuing basis, until the 
month after the month of the individual's 21st birthday, or until such 
time that an individual reports that he or she no longer meets the 
standards provided in paragraph (c)(1) of this section.
    (ii) If the Exchange granted a certificate of exemption in this 
category to an applicant prior to his or her reaching the age of 21, 
the Exchange must send the applicant a notice upon reaching the age of 
21 informing the applicant that he or she must submit a new exemption 
application to maintain the certificate of exemption.
    (3) The Exchange must make an exemption in this category available 
prospectively or retrospectively.
    (d) Membership in a health care sharing ministry. (1) The Exchange 
must determine an applicant eligible for an exemption for a month if 
for such month the applicant is a member of a health care sharing 
ministry as defined in section 5000A(d)(2)(B)(ii) of the Code.
    (2) The Exchange must make an exemption in this category available 
only retrospectively.
    (e) Incarceration. (1) The Exchange must determine an applicant 
eligible for an exemption for a month if he or she meets the standards 
in section 5000A(d)(4) of the Code for such month.
    (2) The Exchange must make an exemption in this category available 
only retrospectively.
    (f) Membership in an Indian tribe. (1) The Exchange must determine 
an applicant eligible for an exemption for any month if he or she is a 
member of an Indian tribe, as defined in section 45A(c)(6) of the Code, 
for such month, as provided in section 5000A(e)(3) of the Code.

[[Page 39525]]

    (2) Duration of exemption for membership in an Indian tribe. The 
Exchange must grant the exemption specified in this paragraph to an 
applicant who meets the standards specified in paragraph (f)(1) of this 
section for a month on a continuing basis, until such time that the 
applicant reports that he or she no longer meets the standards provided 
in paragraph (f)(1) of this section.
    (3) The Exchange must make an exemption available in this category 
prospectively or retrospectively.
    (g) Hardship--(1) General. The Exchange must grant a hardship 
exemption to an applicant eligible for an exemption for at least the 
month before, a month or months during which, and the month after, if 
the Exchange determines that--
    (i) He or she experienced financial or domestic circumstances, 
including an unexpected natural or human-caused event, such that he or 
she had a significant, unexpected increase in essential expenses that 
prevented him or her from obtaining coverage under a qualified health 
plan;
    (ii) The expense of purchasing a qualified health plan would have 
caused him or her to experience serious deprivation of food, shelter, 
clothing or other necessities; or
    (iii) He or she has experienced other circumstances that prevented 
him or her from obtaining coverage under a qualified health plan.
    (2) Lack of affordable coverage based on projected income. The 
Exchange must determine an applicant eligible for an exemption for a 
month or months during which he or she, or another individual the 
applicant attests will be included in the applicant's family, as 
defined in 26 CFR 1.36B-1(d), is unable to afford coverage in 
accordance with the standards specified in section 5000A(e)(1) of the 
Code, provided that--
    (i) Eligibility for this exemption is based on projected annual 
household income;
    (ii) An eligible employer-sponsored plan is only considered under 
paragraphs (g)(2)(iii) and (iv) of this section if it meets the minimum 
value standard described in Sec.  156.145 of this subchapter.
    (iii) For an individual who is eligible to purchase coverage under 
an eligible employer-sponsored plan, the Exchange determines the 
required contribution for coverage such that--
    (A) An individual who uses tobacco is treated as not earning any 
premium incentive related to participation in a wellness program 
designed to prevent or reduce tobacco use that is offered by an 
eligible employer-sponsored plan;
    (B) Wellness incentives offered by an eligible employer-sponsored 
plan that do not relate to tobacco use are treated as not earned;
    (C) In the case of an employee who is eligible to purchase coverage 
under an eligible employer-sponsored plan sponsored by the employee's 
employer, the required contribution is the portion of the annual 
premium that the employee would pay (whether through salary reduction 
or otherwise) for the lowest cost self-only coverage.
    (D) In the case of an individual who is eligible to purchase 
coverage under an eligible employer-sponsored plan as a member of the 
employee's family, as defined in 26 CFR 1.36B-1(d), the required 
contribution is the portion of the annual premium that the employee 
would pay (whether through salary reduction or otherwise) for the 
lowest cost family coverage that would cover the employee and all other 
individuals who are included in the employee's family who have not 
otherwise been granted an exemption through the Exchange.
    (iv) For an individual who is ineligible to purchase coverage under 
an eligible employer-sponsored plan, the Exchange determines the 
required contribution for coverage in accordance with section 
5000A(e)(1)(B)(ii) of the Code, inclusive of all members of the family, 
as defined in 26 CFR 1.36B-1(d), who have not otherwise been granted an 
exemption through the Exchange and who are not treated as eligible to 
purchase coverage under an eligible employer-sponsored plan, in 
accordance with paragraph (g)(2)(ii) of this section; and
    (v) The applicant applies for this exemption prior to the last date 
on which he or she could enroll in a QHP through the Exchange for the 
month or months of a calendar year for which the exemption is 
requested.
    (vi) The Exchange must make an exemption in this category available 
prospectively, and provide it for all remaining months in a coverage 
year, notwithstanding any change in an individual's circumstances.
    (3) Filing threshold. The IRS may allow an applicant to claim an 
exemption for a calendar year if he or she was not required to file an 
income tax return for such calendar year because his or her gross 
income was below the filing threshold, but who nevertheless filed, 
claimed a dependent with a filing requirement, and as a result, had 
household income exceeding the applicable return filing threshold 
described in section 5000A(e)(2) of the Code;
    (4) Ineligible for Medicaid based on a state's decision not to 
expand. The Exchange must determine an applicant eligible for an 
exemption for a calendar year if he or she has been determined 
ineligible for Medicaid for one or more months during the benefit year 
solely as a result of a State not implementing section 2001(a) of the 
Affordable Care Act;
    (5) Self-only coverage in an eligible employer-sponsored plan. The 
IRS may allow an applicant to claim an exemption for a calendar year if 
he or she, as well as one or more employed members of his or her 
family, as defined in 26 CFR 1.36B-1(d), has been determined eligible 
for affordable self-only employer-sponsored coverage pursuant to 
section 5000A(e)(1) of the Code through their respective employers for 
one or more months during the calendar year, but the aggregate cost of 
employer-sponsored coverage for all the employed members of the family 
exceeds 8 percent of household income for that calendar year; or
    (6) Eligible for services through an Indian health care provider. 
(i) The Exchange must determine an applicant eligible for an exemption 
for any month if he or she is an Indian eligible for services through 
an Indian health care provider, as defined in 42 CFR 447.50 and not 
otherwise eligible for an exemption under paragraph (f) of this 
section, or an individual eligible for services through the Indian 
Health Service in accordance with 25 USC 1680c(a), (b), or (d)(3).
    (ii) The Exchange must grant the exemption specified in paragraph 
(g)(6) of this section to an applicant who meets the standards 
specified in paragraph (g)(6) of this section for a month on a 
continuing basis, until such time that the applicant reports that he or 
she no longer meets the standards provided in paragraph (g)(6) of this 
section.


Sec.  155.610  Eligibility process for exemptions.

    (a) Application. Except as specified in paragraphs (b) and (c) of 
this section, the Exchange must use an application established by HHS 
to collect information necessary for determining eligibility for and 
granting certificates of exemption as described in Sec.  155.605.
    (b) Alternative application. If the Exchange seeks to use an 
alternative application, such application, as approved by HHS, must 
request the minimum information necessary for the purposes identified 
in paragraph (a) of this section.
    (c) Exemptions through the eligibility process for coverage. If an 
individual

[[Page 39526]]

submits the application described in Sec.  155.405 and then requests an 
exemption, the Exchange must use information collected for purposes of 
the eligibility determination for enrollment in a QHP and for insurance 
affordability programs in making the exemption eligibility 
determination, and must not request duplicate information or conduct 
repeat verifications to the extent that the Exchange finds that such 
information is still applicable, where the standards for such 
verifications adhere to the standards specified in this subpart.
    (d) Filing the exemption application. The Exchange must--
    (1) Accept the application from an application filer; and
    (2) Provide the tools to file an application.
    (3) For applications submitted before October 15, 2014, the 
Exchange must, at a minimum, accept the application by mail.
    (e) Collection of Social Security Numbers. (1) The Exchange must 
require an applicant who has a Social Security number to provide such 
number to the Exchange.
    (2) The Exchange may not require an individual who is not seeking 
an exemption for himself or herself to provide a Social Security 
number, except as specified in paragraph (e)(3) of this section.
    (3) The Exchange must require an application filer to provide the 
Social Security number of a tax filer who is not an applicant only if 
an applicant attests that the tax filer has a Social Security number 
and filed a tax return for the year for which tax data would be 
utilized for verification of household income and family size for an 
exemption under Sec.  155.605(g)(2) that requires such verification.
    (f) Determination of eligibility; granting of certificates. The 
Exchange must determine an applicant's eligibility for an exemption in 
accordance with the standards specified in Sec.  155.605, and grant a 
certificate of exemption to any applicant determined eligible.
    (g) Timeliness standards. (1) The Exchange must determine 
eligibility for exemption promptly and without undue delay.
    (2) The Exchange must assess the timeliness of eligibility 
determinations made under this subpart based on the period from the 
date of application to the date the Exchange notifies the applicant of 
its decision.
    (h) Exemptions for previous tax years. (1) Except for the 
exemptions described in Sec.  155.605(c), (f), and (g), after December 
31 of a given calendar year, the Exchange will not accept an 
application for an exemption that is available retrospectively for 
months for such calendar year, and must provide information to 
individuals regarding how to claim an exemption through the tax filing 
process.
    (2) The Exchange will only accept an application for an exemption 
described in Sec.  155.605(g)(1) during one of the 3 calendar years 
after the month or months during which the applicant attests that the 
hardship occurred.
    (i) Notification of eligibility determination for exemptions. The 
Exchange must provide timely written notice to an applicant of any 
eligibility determination made in accordance with this subpart. In the 
case of a determination that an applicant is eligible for an exemption, 
this notification must include the exemption certificate number for the 
purposes of tax administration.
    (j) Retention of records for tax compliance. (1) An Exchange must 
notify an individual to retain the records that demonstrate receipt of 
the certificate of exemption and qualification for the underlying 
exemption.
    (2) In the case of any factor of eligibility that is verified 
through use of the special circumstances exception described in Sec.  
155.615(h), the records that demonstrate qualification for the 
underlying exemption are the information submitted to the Exchange 
regarding the circumstances that warranted the use of the exception, as 
well as records of the Exchange decision to allow such exception.


Sec.  155.615  Verification process related to eligibility for 
exemptions.

    (a) General rule. Unless a request for modification is granted 
under paragraph (i) of this section, the Exchange must verify or obtain 
information as provided in this section in order to determine that an 
applicant is eligible for an exemption.
    (b) Verification related to exemption for religious conscience. For 
any applicant who requests an exemption based on religious conscience, 
the Exchange must verify that he or she meets the standards specified 
in Sec.  155.605(c) by--
    (1) Except as specified in paragraph (b)(2) of this section, 
accepting a form that reflects that he or she is exempt from Social 
Security and Medicare taxes under section 1402(g)(1) of the Code;
    (2) Except as specified in paragraphs (b)(3) and (4) of this 
section, accepting his or her attestation of membership in a religious 
sect or division, and verifying that the religious sect or division to 
which the applicant attests membership is recognized by the Social 
Security Administration as an approved religious sect or division under 
section 1402(g)(1) of the Code.
    (3) If information provided by an applicant regarding his or her 
membership in a religious sect or division is not reasonably compatible 
with other information provided by the individual or in the records of 
the Exchange, the Exchange must follow the procedures specified in 
paragraph (g) of this section.
    (4) If an applicant attests to membership in a religious sect or 
division that is not recognized by the Social Security Administration 
as an approved religious sect or division under section 1402(g)(1) of 
the Code, the Exchange must provide the applicant with information 
regarding how his or her religious sect or division can pursue 
recognition under section 1402(g)(1) of the Code, and determine the 
applicant ineligible for this exemption until such time as the Exchange 
obtains information indicating that the religious sect or division has 
been approved.
    (c) Verification related to exemption for membership in a health 
care sharing ministry. (1) For any applicant who requests an exemption 
based on membership in a health care sharing ministry, the Exchange 
must verify that the applicant meets the standards specified in Sec.  
155.605(d) by, except as provided in paragraphs (c)(1)(i) and 
(c)(1)(ii) of this section, accepting his or her attestation; and 
verifying that the health care sharing ministry to which the applicant 
attests membership is known to the Exchange as a valid health care 
sharing ministry based on data provided by HHS--
    (i) If information provided by an applicant regarding his or her 
membership in a health care sharing ministry is not reasonably 
compatible with other information provided by the individual or in the 
records of the Exchange, the Exchange must follow the procedures 
specified in paragraph (g) of this section. The Exchange may not 
consider an applicant's prior or current enrollment in health coverage 
as not reasonably compatible with an applicant's attestation of 
membership in a health care sharing ministry.
    (ii) If an applicant attests to membership in a health care sharing 
ministry that is not known to the Exchange as a health care sharing 
ministry based on information provided by HHS, the Exchange must 
provide the applicant with information regarding how an organization 
can pursue recognition under Sec.  155.615(c)(2), and determine the 
applicant ineligible for this exemption until such time as HHS

[[Page 39527]]

notifies the Exchange that the health care sharing ministry's meets the 
standards specified in section 5000A(d)(2)(B)(ii) of the Code.
    (2) To be considered a health care sharing ministry for the 
purposes of this subpart, an organization must submit information to 
HHS that substantiates the organization's compliance with the standards 
specified in section 5000A(d)(2)(B)(ii) of the Code. If at any time HHS 
determines that an organization previously considered a health care 
sharing ministry for the purposes of this subpart no longer meets the 
standards specified in section 5000A(d)(2)(B)(ii) of the Code, HHS may 
revoke its earlier decision regarding the status of the health care 
sharing ministry.
    (d) Verification related to exemption for incarceration. (1) For 
any applicant who provides information attesting that he or she was 
incarcerated for a given month in accordance with the standards 
specified in Sec.  155.605(e), the Exchange must verify his or her 
attestation through the same process as described in Sec.  155.315(e).
    (2) To the extent that the Exchange is unable to verify an 
applicant's attestation that he or she was incarcerated for a given 
month in accordance with the standards specified in Sec.  155.605(e) 
through the process described in Sec.  155.315(e), the Exchange must 
follow the procedures specified in paragraph (g) of this section.
    (e) Verification related to exemption for members of Indian tribes. 
(1) For any applicant who provides information attesting that he or she 
is a member of an Indian tribe, the Exchange must use the process 
outlined in Sec.  155.350(c) to verify that the applicant is a member 
of an Indian tribe.
    (2) To the extent that the Exchange is unable to verify an 
applicant's status as a member of an Indian tribe through the process 
described in Sec.  155.350(c), the Exchange must follow the procedures 
specified in paragraph (g) of this section.
    (f) Verification related to exemption for hardshi--(1) In general. 
For any applicant who requests an exemption based on hardship, except 
for the hardship exemptions described in Sec.  155.605(g)(3) and (5), 
the Exchange must verify whether he or she has experienced the hardship 
to which he or she is attesting.
    (2) Lack of affordable coverage based on projected income. (i) For 
any applicant who requests an exemption based on the hardship described 
in Sec.  155.605(g)(2), the Exchange must verify the unavailability of 
affordable coverage through the procedures used to determine 
eligibility for advance payments of the premium tax credit, as 
specified in subpart D of this part, including the procedures described 
in Sec.  155.315(c)(1), and the procedures used to verify eligibility 
for qualifying coverage in an eligible employer-sponsored plan, as 
specified in Sec.  155.320(e), except as specified in Sec.  
155.615(f)(2)(ii).
    (ii) The Exchange must accept an application filer's attestation 
for an applicant regarding eligibility for minimum essential coverage 
other than through an eligible employer-sponsored plan, instead of 
following the procedures specified in Sec.  155.320(b).
    (3) Eligible for services through an Indian health care provider. 
For any applicant who requests an exemption based on the hardship 
described in Sec.  155.605(g)(6), the Exchange must verify whether he 
or she meets the standards specified in Sec.  155.605(g)(6) through the 
same process described in Sec.  155.615(e).
    (4) To the extent that the Exchange is unable to verify any of the 
information needed to determine an applicant's eligibility for an 
exemption based on hardship, the Exchange must follow the procedures 
specified in paragraph (g) of this section.
    (g) Inability to verify necessary information. Except as otherwise 
specified in this subpart, for an applicant for whom the Exchange 
cannot verify information required to determine eligibility for an 
exemption, including but not limited to when electronic data is 
required in accordance with this subpart but data for individuals 
relevant to the eligibility determination for an exemption are not 
included in such data sources or when electronic data is required but 
it is not reasonably expected that data sources will be available 
within the time period as specified in Sec.  155.315(f), the Exchange--
    (1) Must make a reasonable effort to identify and address the 
causes of such inconsistency, including typographical or other clerical 
errors, by contacting the application filer to confirm the accuracy of 
the information submitted by the application filer;
    (2) If unable to resolve the inconsistency through the process 
described in paragraph (g)(1) of this section, must--
    (i) Provide notice to the applicant regarding the inconsistency; 
and
    (ii) Provide the applicant with a period of 90 days from the date 
on which the notice described in paragraph (g)(2)(i) of this section is 
sent to the applicant to either present satisfactory documentary 
evidence via the channels available for the submission of an 
application, as described in Sec.  155.610(d), except for by telephone, 
or otherwise to resolve the inconsistency.
    (3) May extend the period described in paragraph (g)(2)(ii) of this 
section for an applicant if the applicant demonstrates that a good 
faith effort has been made to obtain the required documentation during 
the period.
    (4) During the period described in paragraph (g)(1) and (g)(2)(ii) 
of this section, must not grant a certificate of exemption based on the 
information subject to this paragraph.
    (5) If, after the period described in paragraph (g)(2)(ii) of this 
section, the Exchange remains unable to verify the attestation, the 
Exchange must determine the applicant's eligibility for an exemption 
based on any information available from the data sources used in 
accordance with this subpart, if applicable, unless such applicant 
qualifies for the exception provided under paragraph (h) of this 
section, and notify the applicant of such determination in accordance 
with the notice requirements specified in Sec.  155.610(i), including 
notice that the Exchange is unable to verify the attestation.
    (h) Exception for special circumstances. For an applicant who does 
not have documentation with which to resolve the inconsistency through 
the process described in paragraph (g)(2) of this section because such 
documentation does not exist or is not reasonably available and for 
whom the Exchange is unable to otherwise resolve the inconsistency, the 
Exchange must provide an exception, on a case-by-case basis, to accept 
an applicant's attestation as to the information which cannot otherwise 
be verified along with an explanation of circumstances as to why the 
applicant does not have documentation.
    (i) Flexibility in information collection and verification. HHS may 
approve an Exchange Blueprint in accordance with Sec.  155.105(d) or a 
significant change to the Exchange Blueprint in accordance with Sec.  
155.105(e) to modify the methods to be used for collection of 
information and verification as set forth in this subpart, as well as 
the specific information required to be collected, provided that HHS 
finds that such modification would reduce the administrative costs and 
burdens on individuals while maintaining accuracy and minimizing delay, 
and that applicable requirements under Sec. Sec.  155.260, 155.270, and 
paragraph (j) of this section, and section 6103 of the Code with 
respect to the confidentiality,

[[Page 39528]]

disclosure, maintenance, or use of such information will be met.
    (j) Applicant information. The Exchange may not require an 
applicant to provide information beyond the minimum necessary to 
support the eligibility process for exemptions as described in this 
subpart.
    (k) Validation of Social Security number. (1) For any individual 
who provides his or her Social Security number to the Exchange, the 
Exchange must transmit the Social Security number and other identifying 
information to HHS, which will submit it to the Social Security 
Administration.
    (2) To the extent that the Exchange is unable to validate an 
individual's Social Security number through the Social Security 
Administration, or the Social Security Administration indicates that 
the individual is deceased, the Exchange must follow the procedures 
specified in paragraph (g) of this section, except that the Exchange 
must provide the individual with a period of 90 days from the date on 
which the notice described in paragraph (g)(2)(i) of this section is 
received for the applicant to provide satisfactory documentary evidence 
or resolve the inconsistency with the Social Security Administration. 
The date on which the notice is received means 5 days after the date on 
the notice, unless the individual demonstrates that he or she did not 
receive the notice within the 5 day period.


Sec.  155.620  Eligibility redeterminations for exemptions during a 
calendar year.

    (a) General requirement. The Exchange must redetermine the 
eligibility of an individual with an exemption granted by the Exchange 
if it receives and verifies new information reported by such an 
individual, except for the exemption described in Sec.  155.605(g)(2).
    (b) Requirement for individuals to report changes. (1) Except as 
specified in paragraph (b)(2) of this section, the Exchange must 
require an individual who has a certificate of exemption from the 
Exchange to report any change with respect to the eligibility standards 
for the exemption as specified in Sec.  155.605, except for the 
exemption described in Sec.  155.605(g)(2), within 30 days of such 
change.
    (2) The Exchange must allow an individual with a certificate of 
exemption to report changes via the channels available for the 
submission of an application, as described in Sec.  155.610(d).
    (c) Verification of reported changes. The Exchange must--
    (1) Verify any information reported by an individual with a 
certificate of exemption in accordance with the processes specified in 
Sec.  155.615 prior to using such information in an eligibility 
redetermination.
    (2) Notify an individual in accordance with Sec.  155.610(i) after 
redetermining his or her eligibility based on a reported change.
    (3) Provide periodic electronic notifications regarding the 
requirements for reporting changes and an individual's opportunity to 
report any changes, to an individual who has a certificate of exemption 
for which changes must be reported in accordance with Sec.  155.620(b) 
and who has elected to receive electronic notifications, unless he or 
she has declined to receive such notifications.
    (d) Effective date of changes. The Exchange must implement a change 
resulting from a redetermination under this section for the month or 
months after the month in which the redetermination occurs, such that a 
certificate that was provided for the month in which the 
redetermination occurs, and for prior months remains effective.


Sec.  155.625  Options for conducting eligibility determinations for 
exemptions.

    (a) Options for conducting eligibility determinations. The Exchange 
may satisfy the requirements of this subpart--
    (1) Directly or through contracting arrangements in accordance with 
Sec.  155.110(a); or (2) Through the approach described in paragraph 
(b) of this section.
    (b) Use of HHS service. Notwithstanding the requirements of this 
subpart--
    (1) For an application submitted before October 15, 2014, the 
Exchange may adopt an exemption eligibility determination made by HHS, 
provided that--
    (i) The Exchange adheres to the eligibility determination made by 
HHS;
    (ii) The Exchange furnishes to HHS any information available 
through the Exchange that is necessary for an applicant to utilize the 
process administered by HHS; and
    (iii) The Exchange call center and Internet Web site specified in 
Sec.  155.205(a) and (b), respectively, provide information to 
consumers regarding the exemption eligibility process.
    (2) For an application submitted on or after October 15, 2014, the 
Exchange may adopt an exemption eligibility determination made by HHS, 
provided that--
    (i) The Exchange accepts the application, as specified in Sec.  
155.610(c), and issues the eligibility notice, as specified in Sec.  
155.610(i);
    (ii) Verifications and other activities required in connection with 
eligibility determinations for exemptions are performed by the Exchange 
in accordance with the standards identified in this subpart or by HHS 
in accordance with the agreement described in paragraph (b)(2)(v) of 
this section;
    (iii) The Exchange transmits to HHS promptly and without undue 
delay and via secure electronic interface, all information provided as 
a part of the application or update that initiated the eligibility 
determination, and any information obtained or verified by the 
Exchange;
    (iv) The Exchange adheres to the eligibility determination made by 
HHS; and
    (v) The Exchange and HHS enter into an agreement specifying their 
respective responsibilities in connection with eligibility 
determinations for exemptions.


Sec.  155.630  Reporting.

    Requirement to provide information related to tax administration. 
If the Exchange grants an individual a certificate of exemption in 
accordance with Sec.  155.610(i), the Exchange must transmit to the IRS 
at such time and in such manner as the IRS may specify--
    (a) The individual's name, Social Security number, and exemption 
certificate number;
    (b) Any other information required in guidance published by the 
Secretary of the Treasury in accordance with 26 CFR 601.601(d)(2).


Sec.  155.635  Right to appeal.

    (a) For an application submitted before October 15, 2014, the 
Exchange must include the notice of the right to appeal and 
instructions regarding how to file an appeal in any notification issued 
in accordance with Sec.  155.610(i).
    (b) For an application submitted on or after October 15, 2014, the 
Exchange must include the notice of the right to appeal and 
instructions regarding how to file an appeal in any notification issued 
in accordance with Sec.  155.610(i) and Sec.  155.625(b)(2)(i).

PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE 
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES

0
5. The authority citation for part 156 is revised to read as follows:


[[Page 39529]]


    Authority:  Title I of the Affordable Care Act, Sections 1301-
1304, 1311-1312, 1321, 1322, 1324, 1334, 1341-1343, and 1401-1402, 
1501, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18042).


0
6. Add subpart G to part 156 to read as follows:
Subpart G--Minimum Essential Coverage
Sec.
156.600 The definition of minimum essential coverage.
156.602 Other coverage that qualifies as minimum essential coverage.
156.604 Requirements for recognition as minimum essential coverage 
for types of coverage not otherwise designated minimum essential 
coverage in the statute or this subpart.
156.606 HHS audit authority.

Subpart G--Minimum Essential Coverage


Sec.  156.600  The definition of minimum essential coverage.

    The term minimum essential coverage has the same meaning as 
provided in section 5000A(f) of the Code and its implementing 
regulations for purposes of this subpart.


Sec.  156.602  Other coverage that qualifies as minimum essential 
coverage.

    The following types of coverage are designated by the Secretary as 
minimum essential coverage for purposes of section 5000A(f)(1)(E) of 
the Code:
    (a) Self-funded student health coverage. Coverage offered to 
students by an institution of higher education (as defined in the 
Higher Education Act of 1965), where the institution assumes the risk 
for payment of claims, are designated as minimum essential coverage for 
plan or policy years beginning on or before December 31, 2014. For 
coverage beginning after December 31, 2014, sponsors of self-funded 
student health coverage may apply to be recognized as minimum essential 
coverage pursuant to the process provided under 45 CFR 156.604.
    (b) Refugee Medical Assistance supported by the Administration for 
Children and Families. Coverage under Refugee Medical Assistance, 
authorized under section 412(e)(7)(A) of The Immigration and 
Nationality Act, provides up to eight months of coverage to certain 
noncitizens who are considered Refugees, as defined in section 
101(a)(42) of the Act.
    (c) Medicare advantage plans. Coverage under the Medicare program 
pursuant to Part C of title XVIII of the Social Security Act, which 
provides Medicare Parts A and B benefits through a private insurer.
    (d) State high risk pool coverage. State high risk pools are 
designated as minimum essential coverage for plan or policy years 
beginning on or before December 31, 2014. For coverage beginning after 
December 31, 2014, sponsors of high risk pool coverage may apply to be 
recognized as minimum essential coverage pursuant to the process 
provided under Sec.  156.604.
    (e) Other coverage. Other coverage that qualifies pursuant to Sec.  
156.604.


Sec.  156.604  Requirements for recognition as minimum essential 
coverage for types of coverage not otherwise designated minimum 
essential coverage in the statute or this subpart.

    (a) The Secretary may recognize ``other coverage'' as minimum 
essential coverage provided HHS determines that the coverage meets the 
following substantive and procedural requirements:
    (1) Coverage requirements. A plan must meet substantially all the 
requirements of title I of the Affordable Care Act pertaining to non-
grandfathered, individual health insurance coverage.
    (2) Procedural requirements. Procedural requirements for 
recognition as minimum essential coverage. To be considered for 
recognition as minimum essential coverage, the sponsor of the coverage, 
or government agency, must submit the following information to HHS:
    (i) Identity of the plan sponsor and appropriate contact persons;
    (ii) Basic information about the plan, including:
    (A) Name of the organization sponsoring the plan;
    (B) Name and title of the individual who is authorized to make, and 
makes, this certification on behalf of the organization;
    (C) Address of the individual named above;
    (D) Phone number of the individual named above;
    (E) Number of enrollees;
    (F) Eligibility criteria;
    (G) Cost sharing requirements, including deductible and out-of-
pocket maximum limit;
    (H) Essential health benefits covered; and
    (I) A certification by the appropriate individual, named pursuant 
to paragraph (a)(3)(ii)(b), that the organization substantially 
complies with the requirements of title I of the Affordable Care Act 
that apply to non-grandfathered plans in the individual market and any 
plan documentation or other information that demonstrate that the 
coverage substantially comply with these requirements.
    (b) CMS will publish a list of types of coverage that the Secretary 
has recognized as minimum essential coverage pursuant to this 
provision.
    (c) If at any time the Secretary determines that a type of coverage 
previously recognized as minimum essential coverage no longer meets the 
coverage requirements of paragraph (a)(1) of this section, the 
Secretary may revoke the recognition of such coverage.
    (d) Notice. Once recognized as minimum essential coverage, a plan 
must provide notice to all enrollees of its minimum essential coverage 
status and must comply with the information reporting requirements of 
section 6055 of the Code and implementing regulations.


Sec.  156.606  HHS audit authority.

    The Secretary may audit a plan or program recognized as minimum 
essential coverage under Sec.  156.604 at any time to ensure compliance 
with the requirements of Sec.  156.604(a).

    Dated: June 7, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services
    Approved: June 11, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-15530 Filed 6-26-13; 11:15 am]
BILLING CODE 4120-01-P