Federal Register, Volume 78 Issue 135 (Monday, July 15, 2013)

[Federal Register Volume 78, Number 135 (Monday, July 15, 2013)]
[Rules and Regulations]
[Pages 42160-42322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-16271]

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Vol. 78

Monday,

No. 135

July 15, 2013

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

42 CFR Parts 431, 435, 436, et al.

Office of the Secretary

45 CFR Parts 155 and 156

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Medicaid and Children's Health Insurance Programs: Essential Health
Benefits in Alternative Benefit Plans, Eligibility Notices, Fair
Hearing and Appeal Processes, and Premiums and Cost Sharing; Exchanges:
Eligibility and Enrollment; Final Rule

Federal Register / Vol. 78 , No. 135 / Monday, July 15, 2013 / Rules
and Regulations

[[Page 42160]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 431, 435, 436, 438, 440, 447, and 457

Office of the Secretary

45 CFR Parts 155 and 156

[CMS-2334-F]
RIN 0938-AR04

Medicaid and Children's Health Insurance Programs: Essential
Health Benefits in Alternative Benefit Plans, Eligibility Notices, Fair
Hearing and Appeal Processes, and Premiums and Cost Sharing; Exchanges:
Eligibility and Enrollment

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

ACTION: Final rule.

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SUMMARY: This final rule implements provisions of the Patient
Protection and Affordable Care Act and the Health Care and Education
Reconciliation Act of 2010 (collectively referred to as the Affordable
Care Act. This final rule finalizes new Medicaid eligibility
provisions; finalizes changes related to electronic Medicaid and the
Children's Health Insurance Program (CHIP) eligibility notices and
delegation of appeals; modernizes and streamlines existing Medicaid
eligibility rules; revises CHIP rules relating to the substitution of
coverage to improve the coordination of CHIP coverage with other
coverage; and amends requirements for benchmark and benchmark-
equivalent benefit packages consistent with sections 1937 of the Social
Security Act (which we refer to as ``alternative benefit plans'') to
ensure that these benefit packages include essential health benefits
and meet certain other minimum standards. This rule also implements
specific provisions including those related to authorized
representatives, notices, and verification of eligibility for
qualifying coverage in an eligible employer-sponsored plan for
Affordable Insurance Exchanges. This rule also updates and simplifies
the complex Medicaid premium and cost sharing requirements, to promote
the most effective use of services, and to assist states in identifying
cost sharing flexibilities. It includes transition policies for 2014 as
applicable.

DATES: The effective date for the additions of 42 CFR 435.118, 435.603,
435.911, 435.949, 435.956, 435.1200, 457.315, 457.330 and 457.348;
amendments to 42 CFR 431.10, 431.11, 435.110, 435.116, 435.119,
435.907, 435.916, 435.940, 435.945, 435.948, 435.952, 457.340 and
457.350; the removal of 42 CFR 435.953 and 435.955; and the
redesignation of 42 CFR 435.911 through 435.914 as 42 CFR 435.912
through 435.915 in CMS-2349 (FR Doc. 2012-6560) published on March 23,
2012, which were to become effective in January 1, 2014 are now
effective October 1, 2013.
Other provisions of this final rule that are codified in title 42
of the Code of Federal Regulations are effective January 1, 2014 with
the exception of amendments to the following which are effective on
October 1, 2013: 42 CFR 431.10, 431.11, 431.201, 431.205, 431.206,
431.211, 431.213, 431.230, 431.231, 431.240, 435.119, 435.603, 435.907,
435.918, 435.1200, 457.110, 457.348, and 457.350; and the addition of
42 CFR 435.1205 and 457.370, which are effective on October 1, 2013.
Regulations in this final rule that are codified in title 45 of
Code of Federal Regulations are effective on September 13, 2013.

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

SUPPLEMENTARY INFORMATION:

Executive Summary

This final rule implements provisions of the Patient Protection and
Affordable Care Act and the Health Care and Education Reconciliation
Act of 2010 (collectively referred to as the Affordable Care Act). This
rule reflects new statutory eligibility provisions, implements changes
related to Medicaid and the Children's Health Insurance Program (CHIP)
eligibility notices, delegation of appeals, and other related
administrative procedures with similar procedures used by other health
coverage programs authorized under the Affordable Care Act. This final
rule also modernizes and streamlines existing rules.
This final rule amends the requirements applicable to Medicaid
benefit packages that provide benchmark or benchmark-equivalent
coverage, to include requirements to meet new minimum standards,
including the provision of essential health benefits, as required by
the Affordable Care Act. In an effort to bring consistency and clarity
to part 440, we are removing the terms ``benchmark and benchmark-
equivalent plan'' where they appear together and are replacing these
terms with ``Alternative Benefit Plan'' (ABP).
Beginning in calendar year 2014, individuals and small businesses
will be able to purchase private health insurance through competitive
marketplaces called Affordable Insurance Exchanges, or ``Exchanges.''
This final rule: (1) Specifies standards related to authorized
representatives, (2) outlines criteria related to the verification of
enrollment in and eligibility for minimum essential coverage through an
eligible employer-sponsored plan, and (3) further specifies or amends
other eligibility and enrollment provisions. This final rule does not
address proposed provisions regarding Exchange eligibility appeals, to
provide additional time for the careful development of standards that
can be effectively implemented, particularly for those regarding
coordination with Medicaid and CHIP. Additionally, this final rule does
not address proposed provisions regarding the Children's Health
Insurance Program Reauthorization Act of 2009 (CHIPRA), certified
application counselors in an Exchange and SHOP coordination with
individual market Exchanges. We intend to address these provisions in a
future issuance. The intent of this final rule is to afford each state
substantial discretion in the design and operation of the Exchange
established by the state, with greater standardization provided where
directed by the statute or where there are compelling practical,
efficiency or consumer protection reasons.
This final rule also updates and simplifies the complex Medicaid
premium and cost sharing requirements to promote the most effective use
of services and to assist states in identifying cost sharing
flexibilities.
Finally, this final rule provides notice that we are considering,
for purposes of the initial open enrollment period for enrollment in a
Qualified Health Plan through the Exchange, whether various provisions
of the Medicaid and CHIP regulations should be effective October 1,
2013, or whether a later effective date is appropriate.
In this final rule, we do not address all of the proposed
regulatory changes to 42 CFR parts 431, 435 and 457. We are focusing on
those changes that are most

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needed to implement the changes made by the Affordable Care Act
starting in 2014. We intend to address certain of the other provisions
in future rulemaking.

Table of Contents

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

Executive Summary

I. Background
A. Medicaid Eligibility Final Rule Part II
B. Essential Health Benefits in Alternative Benefit Plans
C. Exchanges: Eligibility and Enrollment
D. Medicaid Premiums and Cost Sharing
II. Provisions of the Proposed Regulations and Analysis of and
Responses to Public Comments
A. Medicaid Eligibility Expansion Part II
1. Responses to General Comments
2. Appeals--Delegation of Authority To Conduct Medicaid Fair
Hearings
3. Notices
4. Medicaid Enrollment Changes Under the Affordable Care Act
Needed to Achieve Coordination with the Exchange
5. Medicaid Eligibility Requirements and Coverage Options
Established by Other Federal Statutes
6. Coordinated Medicaid/CHIP Open Enrollment Process
7. Children's Health Insurance Program Changes
8. Premium Assistance
9. Changes to Modified Adjusted Gross Income and MAGI Screen
10. Single State Agency--Delegation of Eligibility
Determinations to Exchanges
11. Conversion of Federal Minimum Income Standards for Section
1931 of the Act
B. Essential Health Benefits in Alternative Benefit Plans
1. General Comments
2. Alignment With Essential Health Benefits Provisions
3. Modifications in Applying the Provisions of This Final Rule
to Medicaid
4. All Other Title XIX Provisions Apply
5. Preventive Services as an EHB
6. Other Changes To Simplify, Modernize, and Clarify Medicaid
Benchmark Requirements and Coverage Requirements
7. Summary
C. Exchanges: Eligibility and Enrollment
1. Definitions
2. Approval of a State Exchange
3. Functions of an Exchange
4. Authorized Representatives
5. General Standards for Exchange Notices
6. Definitions and General Standards for Eligibility
Determinations
7. Options for Conducting Eligibility Determinations
8. Eligibility Standards
9. Eligibility Process
10. Verification Process Related to Eligibility for Enrollment
in a QHP Through the Exchange
11. Verifications Related to Eligibility for Insurance
Affordability Programs
12. Eligibility Redetermination During a Benefit Year
13. Annual Eligibility Redetermination
14. Administration of Advance Payments of the Premium Tax Credit
and Cost-Sharing Reductions
15. Coordination With Medicaid, CHIP, the Basic Health Program,
and the Pre-Existing Condition Insurance Plan
16. Special Eligibility Standards and Process for Indians
17. Enrollment of Qualified Individuals Into QHP's
18. Special Enrollment Periods
19. Termination of Coverage
D. Medicaid Premiums and Cost Sharing
1. Responses to General Comments
2. Definitions
3. Update to Maximum Nominal Cost Sharing
4. Higher Cost Sharing Permitted for Individuals With Incomes
Above 100 Percent of the FPL
5. Cost Sharing for Drugs
6. Cost Sharing for Emergency Department (ED) Services
7. Premiums
8. Limitations on Premiums and Cost Sharing
9. Beneficiary and Public Notice Requirements
III. Provisions of the Final Regulations
IV. Collection of Information Requirements
V. Regulatory Impact Analysis

Regulations Text

Acronyms and Terms

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

[the] Act Social Security Act
Affordable Care Act The Affordable Care Act of 2010 (which is
the collective term for the Patient Protection and Affordable Care
Act (Pub. L. 111-148) and the Health Care and Education
Reconciliation Act (Pub. L. 111-152))
AFDC Aid to Families with Dependent Children
BBA Balanced Budget Act of 1997
BHP Basic Health Program
CHIP Children's Health Insurance Program
CHIPRA Children's Health Insurance Program Reauthorization Act of
2009
CMS Centers for Medicare & Medicaid Services
[the]Code Internal Revenue Code of 1986
DHS Department of Homeland Security
DOL U.S. Department of Labor
DRA Deficit Reduction Act of 2005
EITC Earned Income Tax Credit
EPSDT Early and periodic screening, diagnosis, and treatment
FEHBP Federal Employees Health Benefits Program (5 U.S.C. 8901, et
seq.)
FFE Federally-facilitated Exchange
FFP Federal financial participation
FMAP Federal medical assistance percentage
FPL Federal poverty level
HCERA Health Care and Education Reconciliation Act of 2010 (Pub. L.
111-152, enacted March 30, 2010)
HHS [U.S. Department of] Health and Human Services
IHS Indian Health Service
INA Immigration and Nationality Act
IRA Individual Retirement Account
IRC Internal Revenue Code of 1986
IRS Internal Revenue Service
MAGI Modified adjusted gross income
MEC Minimum Essential Coverage
MMEA Medicare & Medicaid Extenders Act of 2010 (Pub. L. 111-309,
enacted December 15, 2010)
OMB Office of Management and Budget
OPM U.S. Office of Personnel Management
PHS Act Public Health Service Act
PRA Paperwork Reduction Act of 1995
PRWORA Personal Responsibility and Work Opportunity Reconciliation
Act of 1996
QHP Qualified Health Plan
Secretary Secretary of HHS
SEP Special enrollment period
SHOP Small Business Health Options Program
SMD State Medicaid Director
SNAP Supplemental Nutrition Assistance Program
SPA State Plan Amendment
SSA Social Security Administration
SSI Supplemental Security Income
SSN Social Security number
TANF Temporary Assistance for Needy Families

I. Background

A. Medicaid Eligibility Final Rule Part II

The Patient Protection and Affordable Care Act (Pub. L. 111-148,
enacted on March 23, 2010), was amended by the Health Care and
Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted on March
30, 2010). These laws are collectively referred to as the Affordable
Care Act. In addition, section 205 of the Medicare & Medicaid Extenders
Act of 2010 (Pub. L. 111-309, enacted December 15, 2010) (MMEA) and the
Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96,
enacted February 22, 2012) made additional amendments to the Social
Security Act (the Act) provisions affected by the Affordable Care Act.
The Affordable Care Act extends and simplifies Medicaid
eligibility, and on March 23, 2012, we issued a final rule (referred to
as the ``Medicaid Eligibility final rule'') addressing certain key
Medicaid and CHIP eligibility, enrollment, and renewal issues.
This final rule provides states with additional flexibility and
guidance for delegation of appeals and implementation of electronic
notices, and modernizes administrative procedures to further promote
coordination across multiple health coverage programs, including
enrollment in a qualified health plan

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through the Exchange with advance payments of the premium tax credits
and cost-sharing reductions, as authorized by the Affordable Care Act,
Medicaid and the Children's Health Insurance Program (CHIP). These
coverage programs are collectively referred to as ``insurance
affordability programs.'' For more information on the legislative
overview, please refer to the Medicaid, CHIP, and Exchanges proposed
rule (78 FR 4594).

B. Essential Health Benefits in Alternative Benefit Plans

For plan, policy, or coverage years (as applicable) beginning in
2014, most health insurance coverage \1\ in the individual and small
group markets, Medicaid benchmark and benchmark-equivalent plans (now
also known as Alternative Benefit Plans (ABPs)), and Basic Health
Programs (if applicable) will be required to cover essential health
benefits (EHBs), consistent with the definition under section 1302 of
the Affordable Care Act and implementing regulations at 45 CFR Parts
147, 155, and 156, Patient Protection and Affordable Care Act;
Standards Related to Essential Health Benefits, Actuarial Value, and
Accreditation; Final Rule. Under that definition, EHBs include items
and services in 10 statutory benefit categories, such as
hospitalization, prescription drugs, and maternity and newborn care,
and are equal in scope of benefits to a typical employer plan, which
will constitute minimum coverage in an ABP.
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\1\ For more information on status as a grandfathered health
plans under the Affordable Care Act, please see Interim Final Rule,
``Group Health Plans and Health Insurance Coverage Relating to
Status as a Grandfathered Health Plan Under the Patient Protection
and Affordable Care Act.'' Available at http://cciio.cms.gov/resources/regulations/index.html#gp.
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C. Exchanges: Eligibility and Enrollment

1. Legislative Overview
Section 1311(b) and section 1321(b) of the Affordable Care Act
provide that each state has the opportunity to establish an Exchange
that: (1) Facilitates the purchase of insurance coverage by qualified
individuals through qualified health plans (QHPs); (2) assists
qualified employers with the enrollment of their employees in QHPs; and
(3) meets other standards specified in the Affordable Care Act. Section
1311(k) of the Affordable Care Act specifies that Exchanges may not
establish rules that conflict with or prevent the application of
regulations promulgated by the Secretary under subtitle D of title I of
the Affordable Care Act. Section 1311(d) of the Affordable Care Act
describes the minimum functions of an Exchange, including the
certification of QHPs.
Section 1321 of the Affordable Care Act discusses state flexibility
in the operation and enforcement of Exchanges and related requirements.
Section 1321(c)(1) directs the Secretary to establish and operate an
Exchange within each state that either: (1) does not elect to establish
an Exchange, or (2) as determined by the Secretary on or before January
1, 2013, will not have an Exchange operational by January 1, 2014.
Section 1321(a) also provides broad authority for the Secretary to
issue regulations setting standards to implement the statutory
requirements related to Exchanges, QHPs, and other standards under
title I of the Affordable Care Act.
Section 1401 of the Affordable Care Act creates new section 36B of
the Internal Revenue Code of 1986 (the Code), which provides for a
premium tax credit for eligible individuals who enroll in a QHP through
an Exchange. Section 1402 of the Affordable Care Act establishes
requirements for reducing the cost-sharing obligations of eligible
individuals who enroll in a QHP through an Exchange, including special
cost-sharing rules for certain Indians.
Under section 1411 of the Affordable Care Act, the Secretary is
directed to establish a program for determining whether an individual
meets the eligibility standards for enrollment in QHPs through the
Exchange, advance payments of the premium tax credit, cost-sharing
reductions, and exemptions from the shared responsibility payment under
section 5000A of the Code.
Sections 1412 and 1413 of the Affordable Care Act and section 1943
of the Social Security Act (the Act), as added by section 2201 of the
Affordable Care Act, contain additional provisions regarding
eligibility for advance payments of the premium tax credit and cost-
sharing reductions, as well as provisions regarding simplification and
coordination of eligibility determinations and enrollment with other
insurance affordability programs.
This final rule supplements and amends provisions originally
published as the March 27, 2012 rule titled ``Patient Protection and
Affordable Care Act; Establishment of Exchanges and Qualified Health
Plans; Exchange Standards for Employers'' (hereafter referred to as
``Exchange Final Rule'') (77 FR 18310) which encompasses key functions
of Exchanges related to eligibility and enrollment.
Unless otherwise specified, the provisions in this final rule
related to the establishment of minimum functions of an Exchange are
based on the general authority of the Secretary under section
1321(a)(1) of the Affordable Care Act.
2. Stakeholder Consultation and Input
HHS has consulted with interested stakeholders on policies related
to the eligibility provisions and Exchange functions. HHS held a number
of listening sessions with consumers, providers, employers, health
plans, and state representatives to gather public input, and released
several documents for public review and comment. HHS also released a
bulletin that outlined our intended regulatory approach to verifying
access to employer-sponsored coverage and sought public comment on the
specific approaches.
Finally, HHS consulted with stakeholders through regular meetings
with the National Association of Insurance Commissioners (NAIC),
regular contact with states through the Exchange grant process,
consultation with Medicaid directors, and meetings with tribal leaders
and representatives, health insurance issuers, trade groups, consumer
advocates, employers, and other interested parties.
We considered input from these stakeholder meetings and in response
to the bulletin on verifying access to employer-sponsored coverage, as
well as comments provided in response to the proposed rule as we
developed the policies in this final rule.
3. Structure of the Final Rule
The regulations related to Exchanges and QHPs outlined in this
final rule are codified at 45 CFR parts 155 and 156. Part 155 outlines
the standards related to eligibility for insurance affordability
programs to facilitate a streamlined process for eligibility for
enrollment in a QHP through the Exchange and in insurance affordability
programs. Part 156 outlines the standards for health insurance issuers
for participation in an Exchange. This final rule:
Revises existing definitions and finalizes new definitions
to 45 CFR part 155 subpart A.
Provides a technical correction to 45 CFR part 155 subpart
B.
Finalizes standards related to authorized representatives
under 45 CFR part 155 subpart C.
Finalizes standards related to eligibility determinations
for enrollment in a QHP and for insurance affordability programs under
45 CFR part 155 subpart D.
Finalizes standards related to enrollment-related
transactions, special enrollment periods, and terminations under 45 CFR
part 155 subpart E.

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Finalizes standards related to termination of coverage
under 45 CFR part 156 subpart C.
4. Alignment With Related Rules and Published Information
As noted above, on March 27, 2012, we published the Exchange final
rule. This final rule revises and supplements the Exchange final rule,
including by finalizing Exchange and Medicaid provisions associated
with the eligibility changes under the Affordable Care Act of 2010.

D. Medicaid Premiums and Cost Sharing

Section 1916 of the Act describes long-standing limitations and
requirements applicable in states that elect to provide for premiums
and other cost sharing under Medicaid. Under section 1916 of the Act,
certain individuals are protected from premiums and cost sharing, and
cost sharing cannot be imposed on certain services. Permissible cost
sharing under section 1916 of the Act is limited to ``nominal'' amounts
(except in some circumstances for non-emergency use of a hospital
emergency room). Section 1916 of the Act also establishes authority for
states to impose premiums on medically needy beneficiaries and specific
groups of individuals with family incomes above 150 percent of the
federal poverty level (FPL). The Deficit Reduction Act of 2005 (DRA)
established a new section 1916A of the Act, which gives states
additional flexibility, allowing for alternative premiums and cost
sharing beyond what is permitted under section 1916 of the Act for
somewhat higher income beneficiaries. Such alternative cost-sharing
approaches may be targeted to specific groups of individuals and
payment may be required as a condition of providing services. All
premiums and cost sharing imposed under sections 1916 and 1916A of the
Act cannot exceed 5 percent of a family's income. For more background
information on the streamlined and expanded flexibility regarding
premiums and cost sharing, please refer to (78 FR 4657 and 78 FR 4658).
We initially implemented the DRA authorities through regulations
that mirrored the dual statutory provisions by adding a set of
additional regulations on alternative cost sharing under section 1916A
of the Act to existing regulations setting forth the framework for cost
sharing under section 1916 of the Act. We believe states found this
duality confusing and, in this final rule, we have integrated the two
statutory authorities for premiums and cost sharing (sections 1916 and
1916A of the Act) into a unified framework.

II. Provisions of the Proposed Rule and Analysis of and Responses to
Public Comments

A. Medicaid Eligibility Part II Final Rule

In the January 22, 2013 Federal Register (78 FR 4594), we published
the proposed rule entitled ``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.''
We received a total of 741 timely comments from individuals, state
Medicaid and CHIP agencies, advocacy groups, tribes and tribal
organizations, policy and research organizations, health care
providers, employers, insurers, and health care associations. The
comments ranged from general support or opposition to the proposed
provisions to very specific questions or comments regarding the
proposed changes.
In this final rule, we are only addressing some of the provisions
of the proposed rule. We are reserving action on other provisions and
intend to address those provisions in a subsequent final rule. We
discuss below only those public comments associated with provisions
addressed in this final rule.
We have revised some of the proposed regulations after careful
consideration of the comments received. 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 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 the proposed provisions that are being finalized
in this rule, a summary of the public comments we received on those
provisions (except specific comments on the paperwork burden or the
economic impact analysis), and our responses to the comments are as
follows. Comments related to the paperwork burden and the impact
analyses are addressed in the ``Collection of Information
Requirements'' and ``Regulatory Impact Analysis'' sections in this
final rule.
The following sections summarize comments about the rule in
general, as well as specific comments about certain policies. It should
be noted that the summarized comments are structured to explain the
provisions being finalized and do not necessarily follow the order of
the regulation text:
1. Responses to General Comments
Generally, commenters were supportive of the policies in the
proposed rule to continue the process of streamlining Medicaid and CHIP
eligibility rules, policies and procedures; to support a consumer
friendly approach, and provide increased flexibility for states.
Comment: Several commenters were concerned about the complexity of
the proposed rules and the significance of the changes that need to be
made to fully implement the provisions of the Affordable Care Act. Many
commenters were concerned about the short timeframes for implementation
and about states' ability to make needed changes to policy, operations,
and information technology systems.
Response: We recognize that the timing of this final rule may
result in implementation challenges, especially from a systems
perspective. As such, we have evaluated the provisions of the January
proposed rule and are finalizing in this rule only those provisions
that we believe states are already in the process of implementing or
must be finalized to meet statutory deadlines. The remaining provisions
of the proposed rule will be addressed at a later date.
We will continue to work with states to support their
implementation efforts, ensure successful partnerships between states
and the federal government. We will also continue to offer intensive
technical assistance and support to states, and facilitate sharing of
experience and knowledge across states. Consistent with one commenter's
recommendation, we will also utilize other tools, including
subregulatory guidance and the State Operations and Technical
Assistance (SOTA) initiative to address additional state questions that
arise.
2. Appeals--Delegation of Authority To Conduct Medicaid Fair Hearings
We proposed to implement sections 1413 and 2201 of the Affordable
Care Act in part through procedures to coordinate Medicaid fair
hearings under section 1902(a)(3) of the Act concerning eligibility for
populations whose income is determined using modified adjusted gross
income (MAGI)-based methodologies of the Act with appeals

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of eligibility determinations that are made using MAGI-based
methodologies by Exchanges for advance payment of premium tax credits
and cost-sharing reductions under section 1411(f) of the Affordable
Care Act. Consistent with the requirements to streamline and coordinate
eligibility determinations, under section 1943(b)(3) of the Act, as
added by section 2201 of the Affordable Care Act, we proposed to
provide states with an option to delegate the authority to conduct
appeals to an Exchange or Exchange appeals entity. The option is
similar to the option states have to delegate Medicaid eligibility
determinations to an Exchange under Sec. 431.10. We also proposed
changes to existing regulations at part 431 subpart E to support
further modernization and streamlining of the Medicaid fair hearing
process.
In this final rule, we are finalizing the provisions of our
proposed rule related to delegation of authority to conduct Medicaid
fair hearings to an Exchange and an Exchange appeals entity at sections
Sec. Sec. 431.10, 431.205(b), 431.206(d) and (e), 431.240 and the
proposed rule related to reinstatement of an application at Sec. Sec.
435.907(h) and 457.340(a). As discussed in section II.A.3. of this
final rule (relating to notices), we also are adopting proposed
revisions to the current regulations at sections Sec. Sec. 431.211,
431.213, 431.230, and 431.231, related to modernizing the process of
providing notices to applicants and beneficiaries of their fair hearing
rights and decisions. In addition to providing substantive comments on
the proposed regulations related to coordination of appeals across the
Exchange, Medicaid and CHIP, a number of commenters requested delayed
implementation of those provisions. To provide states with additional
time to consider and effectuate implementation of such coordination, as
well as to provide us with additional time to consider the comments
received, we are not addressing proposed provisions at Sec. Sec.
431.200, 431, 201, 431.205(e), 431.206(b), (c)(2), (e) as it relates to
accessibility under Sec. 435.905(b), 431.210, 431.220, 431.221,
431.224, 431.232, 431.241, 431.242, or 431.244. Further, we are not
addressing the definitions related to appeals proposed in 435.4, nor
the provisions related to coordination of appeals in Sec. 435.1200. We
expect to address these proposed provisions in a subsequent rulemaking.
Until final regulations are released, current rules in part 431,
subpart E continue to apply. We note that while we are not finalizing
our proposed rules relating to accessibility in the fair hearing
process or as it relates appeals and notices at Sec. 431.205(e) and
Sec. 431.206(e) at this time, fair hearing processes and notices must
continue to be provided in an accessible manner in accordance with
relevant federal statutes, including the Americans with Disabilities
Act and Title VI of the Civil Rights Act of 1964, as well as any
applicable state laws.
We received the following comments regarding the proposed
regulations related to delegation of fair hearings and reinstatement of
applications in certain circumstances, which we are addressing in this
rulemaking:
Comment: Many commenters supported our approach to permit
delegation of fair hearings to an Exchange or Exchange appeals entity
so that an integrated hearing could be conducted to address Medicaid
and Exchange-related eligibility issues together. We also received
comments supporting the proposals to streamline and simplify our
current fair hearings rules. While not providing specific
recommendations, the commenters asked that we consider additional
measures to coordinate Medicaid and Exchange eligibility appeals even
more effectively. A few commenters requested that the final rule
maintain state flexibility for states to retain the Medicaid appeals
function within the Medicaid agency.
Several commenters were concerned that our proposed rules require
duplicative processes because states must maintain the infrastructure
and capacity to hear MAGI-based appeals, even if the state delegates
the authority to conduct fair hearings to an Exchange. One commenter
requested that we eliminate the requirement at proposed Sec.
431.10(c)(1)(ii) and Sec. 431.205(b)(1)(ii) that an individual be
provided an opportunity to request a fair hearing before the Medicaid
agency when the state has otherwise delegated authority to conduct the
individual's fair hearing to the Exchange, and instead make this
provision a state option. The commenter believed that this requirement
would undermine the efficiencies achieved through delegation. Another
commenter recommended that only one hearing opportunity be made
available to individuals, instead of requiring a hearing if determined
ineligible for Medicaid and a hearing related to the eligibility for
advance payment of premium tax credits and cost-sharing reductions.
Response: We appreciate the support for the proposal to permit
states to delegate MAGI-based eligibility appeals to an Exchange or
Exchange appeals entity. We note that such delegation is at state
option. States are not required to delegate such authority, but may
continue to have the Medicaid agency conduct all Medicaid fair
hearings.
We understand commenters' concern about duplication of effort in
requiring that Medicaid agencies retain an infrastructure independent
of the Exchange appeals process to conduct MAGI-based Medicaid
eligibility appeals when the state has delegated authority for MAGI-
based eligibility appeals to an Exchange. There are two key reasons why
the Medicaid agency must maintain its own appeals infrastructure.
First, an individual whose application for Medicaid is denied or not
acted upon with reasonable promptness has a right under section
1902(a)(3) of the Act to an opportunity for a fair hearing before the
Medicaid agency. We do not anticipate that individuals will necessarily
prefer to have their appeal heard by the Medicaid agency, but the
statute requires that the option be provided in such delegation through
our regulations. Second, in a state where the Federally-facilitated
Exchange (FFE) is operating, the HHS appeals entity will only conduct
appeals related to MAGI-based eligibility determinations made by the
FFE. Thus, in states where the FFE is operating, the Medicaid agency
will need to conduct all Medicaid fair hearings related to MAGI-based
eligibility determinations made by the Medicaid agency. For these
reasons, we are finalizing the requirement as proposed.
States have options to streamline the appeals infrastructure and
reduce the number of appeals that will come before the Medicaid agency,
in addition to the options to delegate Medicaid appeals authority under
this final rule as discussed above. In a state that has established a
state-based Exchange, the state Medicaid agency may delegate authority
to conduct fair hearings of MAGI-based determinations to the state-
based Exchange by requesting a waiver under the Intergovernmental
Cooperation Act of 1968 (ICA), as long as the state-based Exchange is a
state agency and the state can assure sufficient oversight of the
delegated fair hearing process. As we noted in the preamble to the
proposed rule, when a state has an ICA waiver permitting delegation of
fair hearings to another state agency, the state is not required to
offer individuals an option to have their hearing conducted by the
Medicaid agency.
In states where the FFE is operating, a state Medicaid agency that
allows the FFE to make a Medicaid eligibility

[[Page 42165]]

determination delegating such authority under Sec. 431.10(c)(1)(i) has
appeal delegation options not available to a State that proceeds with
the assessment model. If the Medicaid agency authorizes the FFE to make
MAGI-based eligibility determinations, the agency may also delegate
authority to the HHS appeals entity to conduct fair hearings related to
determinations of Medicaid ineligibility made by the FFE, establishing
an integrated appeals process with simultaneous appeals related to a
determination of advance payments of the premium tax credits or cost-
sharing reductions. The Medicaid agency would still need to maintain
the ability to conduct fair hearings for eligibility determinations and
denials made by the Medicaid agency, as well as when delegations are
made under these regulations for individuals who opt out of a
coordinated appeal before the Exchange or Exchange appeals entity, and
specifically request a hearing before the Medicaid agency. States will
also need to continue to conduct fair hearings related to non-MAGI
based eligibility determinations, as well as fair hearings related to
termination, suspension, or reduction of covered benefits and other
adverse determinations.
Finally, with respect to the recommendation that a right to only
one hearing be made available, we note that there are two separate
statutory authorities for appeals related to Medicaid and enrollment in
a QHP and eligibility for APTC and cost sharing reductions, at section
1902(a)(3) of the Act and section 1411(f) of the Affordable Care Act,
respectively. While we permit states to integrate these hearings and
processes as much as possible, both state Medicaid agencies and the
Exchange have distinct responsibilities to provide for such hearings,
and we do not have authority to eliminate individuals' statutory
rights, or a Medicaid agency's or Exchange's statutory responsibility.
We note that we are not addressing in this final rule the proposed
requirements relating to coordination of notices. Those proposed rules
will be addressed in future rulemaking.
Comment: Several commenters requested clarification of our
proposals on delegation of Medicaid appeals to the FFE, a state-based
Exchange, or a state with a partnership with the FFE. In addition,
commenters sought clarification regarding when an individual's appeals
rights are triggered in states which have delegated authority to make
Medicaid eligibility determinations to the Exchange versus states in
which the Exchange will make only an assessment of potential Medicaid
eligibility. A few commenters requested clarification about whether a
delegation of authority to conduct Medicaid fair hearings to a state-
based Exchange would extend to an appeal to the HHS appeals entity. The
commenters were concerned that appeals could not be coordinated at the
HHS appeals entity, rendering meaningless any efforts to achieve
coordination at the state level.
Response: States may choose to delegate authority to conduct
Medicaid fair hearings for MAGI-based eligibility determinations to the
Exchange operating in the state regardless of whether the Exchange is
the FFE, the state-based Exchange or a partnership between the state
and the FFE in accordance with the final rules at Sec. 431.10(c) and
(d). There is no difference in the delegation authority under the
regulations, as proposed or as finalized, based on the type of
Exchange. In accordance with such delegation, the Exchange or Exchange
appeals entity may provide a fair hearing on Medicaid issues, but
individuals must have the option to have their Medicaid fair hearing
heard directly before the single state agency. As discussed below,
states with state-based Exchanges that are state governmental agencies
also have an additional way to coordinate appeals, beyond delegation
under our rules, through a waiver granted under the Intergovernmental
Cooperation Act. Under such a waiver, individuals would not have a
right to have their Medicaid appeal heard by the single state agency.
In a state that has delegated authority to the Exchange to make
Medicaid eligibility determinations based on MAGI, individuals have the
right to request a fair hearing when the Exchange has determined the
individual ineligible for Medicaid based on MAGI. Thus, the
determination of ineligibility by the Exchange will trigger the
individual's appeal rights. If the state has delegated authority to the
Exchange to conduct fair hearings under these regulations, such an
individual found ineligible for Medicaid by the Exchange could request
a fair hearing at the Exchange or Exchange appeals entity so that there
would be one integrated hearing conducting the Exchange-related and
Medicaid appeals at the same time, or the individual may instead
request his or her Medicaid issue be heard at the Medicaid agency. If,
an individual who is found by the Exchange to be not eligible for
Medicaid based on MAGI seeks a determination based on non-MAGI
criteria, the individual's electronic account is transferred to the
Medicaid agency for a full evaluation by the agency in accordance with
Sec. 155.345(b) or (c) of the March 2012 Exchange eligibility final
rule. If the Medicaid agency still determines the individual
ineligible, he or she would be able to appeal that decision using the
Medicaid agency's fair hearing process.
In states in which the Exchange will make an assessment of Medicaid
eligibility, and will not make final Medicaid eligibility
determinations or denials, an assessment of ineligibility for Medicaid
based on MAGI will not trigger Medicaid appeal rights. This is because
an assessment is not a final Medicaid eligibility determination. As
indicated in Sec. 155.302(b)(4) of the March 2012 Exchange rule, as
revised in this rulemaking, applicants assessed by the Exchange as not
potentially eligible for Medicaid based on MAGI but as potentially
eligible for Medicaid on another basis will be transferred to the
Medicaid agency for a full Medicaid determination; for these
applicants, Medicaid appeal rights will be triggered when the Medicaid
agency makes a final eligibility determination. Under Sec.
155.302(b)(4), applicants assessed as not potentially eligible for
Medicaid on any basis will have a choice whether to withdraw their
Medicaid application or obtain a full determination by the Medicaid
agency. If the applicant withdraws his or her Medicaid application, a
final determination or denial of Medicaid will not be made, and
therefore no appeal rights arise at that point. (The applicant will
have the ability to reinstate their Medicaid application in certain
circumstances, discussed more fully below). When an applicant obtains a
formal determination by the Medicaid agency, the Medicaid agency's
determination will trigger appeal rights, if applicable.
Finally, if a state agency delegates authority to conduct MAGI-
based eligibility appeals to an Exchange, including a state-based
Exchange, in accordance with Sec. 431.10(c) and (d) of this final
rule, such a delegation would extend to any government agency
adjudicating an Exchange appeal, including the HHS appeals entity. We
note, however, that if a state delegates authority to conduct fair
hearings through an ICA waiver to another state agency, including a
state-based Exchange or state-based Exchange appeals entity, Medicaid
decisions made by that entity could not be appealed to the HHS appeals
entity. The ICA waiver is a waiver of single state agency requirements
that permits alternative arrangements of state agency functions to
another state agency. Once

[[Page 42166]]

such an agency has issued a decision after a Medicaid fair hearing,
that Medicaid decision would be the final decision of the Medicaid
agency and thus no further right of appeal would be available to the
individual. If the individual decided to appeal his or her advance
payment of premium tax credit, cost-sharing reduction or Exchange
eligibility decision to the HHS appeals entity, that entity would need
to adhere to the Medicaid appeals entity decision under Sec.
155.302(b)(5), as revised in this final rule, and Sec. 155.345(h)
which will prevent inconsistent decisions between the HHS appeals
entity and the state-based Exchange or Exchange appeals entity.
Comment: Many commenters requested clarification on the scope of
fair hearings that may be delegated from a Medicaid agency to an
Exchange or Exchange appeals entity. Commenters specifically requested
clarification regarding whether fair hearings of eligibility
determinations on bases other than MAGI may be delegated to an Exchange
or Exchange appeals entity, and whether findings other than MAGI-based
income determinations may be delegated to an Exchange or Exchange
appeals entity.
Response: The term ``MAGI-based determinations'' is used to refer
to determinations in which financial eligibility is determined using
the MAGI-based methods described in Sec. 435.603 of the March 2012
final Medicaid eligibility rule. However, in accordance with Sec.
435.911(c) of the March 2012 final Medicaid eligibility rule, a
determination of eligibility based on MAGI also entails a determination
that an individual meets the non-financial conditions of eligibility,
including state residency and citizenship or satisfactory immigration
status, and the denial of eligibility for an individual considered for
coverage under a MAGI-based eligibility group may be based on failure
to meet any of the financial or non-financial conditions of
eligibility. A delegation of fair hearing authority under Sec.
431.10(c)(1)(ii) to an Exchange or Exchange appeals entity regarding a
denial of MAGI-based eligibility will need to address any or all of the
bases of denial, just as a fair hearing conducted by the Medicaid
agency would. We note that we have made some technical modifications to
the regulation text at Sec. 431.10(c)(1)(ii) to help clarify this
point. As also noted in the preamble to the proposed rule, we remind
states that while all appeals for an individual with a MAGI-based
eligibility determination may be delegated to an Exchange or Exchange
appeals entity under the regulation at Sec. 431.10(c)(1)(ii), the FFE
will only accept a delegation of appeals involving determinations
rendered by the FFE.
The permissible scope of delegation under Sec. 431.10(c)(1)(ii) to
an Exchange or Exchange appeals entity is limited to appeals of MAGI-
based eligibility determinations. Appeals related to denials of
eligibility for individuals excepted from application of MAGI-based
methodologies (for example, eligibility based on disability) may not be
delegated under the regulation. As discussed above, states may delegate
such appeals to another state agency, including a state-based Exchange,
by requesting an ICA waiver.
Comment: One commenter asked whether there is a timeframe under
which the individual must request a fair hearing before the Medicaid
agency to effectuate the requirement under Sec. 431.10(c)(1)(ii) that
the state agency must provide an individual an option to have his or
her Medicaid appeal conducted at the Medicaid agency when delegating
authority to conduct fair hearings to an Exchange or Exchange appeals
entity.
Response: An individual must be provided the opportunity to opt to
have his or her Medicaid appeal adjudicated at a hearing conducted at
the Medicaid agency, instead of having his or her appeal for both
enrollment in a QHP and eligibility for APTC and CSR and eligibility
for Medicaid addressed at an integrated hearing at the Exchange or
Exchange appeals entity. Section 431.206(d) specifies that the
individual must be informed of how to exercise this right. We note that
we clarify our proposed regulation at Sec. 431.206(d) to require that
individuals must be informed of this option in writing. We are revising
the regulation text at Sec. 431.10(c)(1)(ii) to clarify that the
request for a hearing before the Medicaid agency would need to be
requested instead of the Exchange hearing. While we are not specifying
a specific timeframe, we would expect that if an individual was opting
for a hearing before the Medicaid agency, that request would be made at
the time that the individual is requesting a hearing. Thus, we finalize
these proposed regulations with these minor modifications.
Comment: Many commenters believed that delegation of fair hearing
authority under the regulation should be permitted. Some of the
commenters emphasized the need to permit delegation only in the
simplest manner reducing burden to the consumer, and without any
duplication of appeals processes. A few commenters suggested we permit
delegation under the regulation only to an independent state agency
employing Administrative Law Judges, and that delegation to any other
state agency still require an ICA waiver to ensure transparency and
opportunity for stakeholder input. A few commenters asked for
clarification of the conditions and process required when requesting an
ICA waiver. One commenter opposed delegation of authority to conduct
fair hearings to any other state or Exchange entity stating that any
delegation is duplicative, as state agencies still will be required to
conduct Medicaid MAGI-based hearings.
Response: Under proposed Sec. 431.10(c)(1)(ii), states would be
able to delegate authority to conduct MAGI-based fair hearings to an
Exchange or Exchange appeals entity, but to delegate Medicaid fair
hearings to another state agency, states would need to request an ICA
waiver. We sought comment on whether states also should be permitted to
delegate authority to conduct fair hearings to another state agency
under the regulation.
The purpose of the proposed rule is to promote coordination of
appeals and simplification of the appeals process by permitting
delegation of Medicaid appeals to the Exchange or Exchange appeals
entity. Because coordination between insurance affordability programs
is a key goal of the Affordable Care Act, we are finalizing, with minor
modifications, the proposed regulations at Sec. 431.10(c)(1)(ii) and
at Sec. 431.205(b)(1)(ii) to permit delegation of authority to conduct
Medicaid fair hearings for denials of MAGI-based eligibility to the
Exchange or Exchange appeals entity, including the FFE, state-based
Exchange or HHS or state-based Exchange appeals entity, provided these
entities are government agencies or public authorities that maintain
personnel standards on a merit basis. After consideration of the
comments, we have determined not to extend authority to delegate
Medicaid fair hearings to state agencies other than a state-based
Exchange or an Exchange appeals entity under the regulations because it
is already allowed through an ICA waiver. We note that the main goal
and justification for the delegation of fair hearings under the
regulation is to achieve coordination across insurance affordability
programs, something which would not be served by delegation to another
state agency. Furthermore, Medicaid agencies already can delegate
conduct of fair hearings to other state agencies through an ICA waiver,
and there is nothing additional that states would be able to accomplish

[[Page 42167]]

through delegation under the regulation as opposed to an ICA waiver.
Indeed, the flexibility available to states under an ICA waiver is
greater than that which is available under the regulation since
delegation of fair hearings under an ICA waiver does not require that
states provide individuals a right to opt for a hearing before the
Medicaid agency, nor would the delegation be limited to MAGI-related
appeals.
We have and will continue to apply similar conditions to the
delegation of fair hearings under an ICA waiver as those we require
under Sec. 431.10(c) and (d). As explained in the proposed rule, an
ICA waiver may be requested through a straightforward process using a
state plan amendment (SPA), and CMS staff is available to provide
technical assistance to states in completing that process. We note that
our rules relating to hearing officers do not require that hearing
officers be Administrative Law Judges or set any particular
qualifications for hearing officers other than impartiality. States
have flexibility to set such requirements in implementing fair hearings
as they see appropriate. Thus, we do not set standards regarding the
qualifications of hearing officers for states that delegate authority
to conduct fair hearings or specify rules if the state agency employs
Administrative Law Judges in this final rule.
Comment: One commenter expressed concern that the proposal to
remove Sec. 431.10(e)(2) and (e)(3) weakens the single state agency
authority when delegating authority to conduct appeals to another
agency. Other commenters supported the removal of those paragraphs
because they are inconsistent with the goals of delegation of authority
of appeals.
Response: We are finalizing our proposal to remove paragraphs Sec.
431.10(e)(2) and (e)(3) as they are inconsistent with the option to
delegate the authority to conduct fair hearings to an Exchange. We
believe that the proposed language in Sec. 431.10(e), which we are
finalizing without modification, clearly provides that only the
Medicaid agency may develop and issue rules and policy related to the
Medicaid program.
Comment: Several commenters requested clarification of the kinds of
conclusions of law that could be subject to review by the agency under
Sec. 431.10(c)(3)(iii). They also asked how the agency review process
a state may establish to decisions made by an Exchange or Exchange
appeals entity conducting Medicaid fair hearings under this provision
relates to the ``trumping rule'' at Sec. 155.302(b)(5), which provides
that if an appeals decision rendered by the Exchange or Exchange
appeals entity conflicts with a fair hearing decision concerning the
same individual rendered by the Medicaid agency, the Exchange must
adhere to the Medicaid fair hearing decision. A number of commenters
supported the limitation of the agency review process to conclusions of
law. One commenter requested that the option be extended to findings of
fact. Others recommend that the option be eliminated altogether. These
commenters discussed that any review by the state agency of a hearing
officer's legal or factual conclusions would violate the due process
protections afforded under Goldberg v. Kelly to have the appeal decided
by a neutral arbiter. One commenter suggested that the regulation at
Sec. 431.10(c) specify the timeframe in which the Exchange or Exchange
appeals entity be required to issue a decision for the state agency to
complete its review within the time limits set forth in Sec. 431.244.
Response: We are finalizing this provision as proposed with minor
revisions to clarify the scope of the review process. We note the
provision at Sec. 431.10(c)(3)(iii) is a state option for Medicaid
agencies to establish a process that permits a limited review of the
decisions made by the Exchange or Exchange appeals entity to ensure
Medicaid fair hearings are made with the proper application of federal
and state Medicaid law and regulations, including subregulatory
guidance and written interpretive policies. The proposed regulation
text is being revised to clarify the scope of what the agency may
review would be limited to the legal conclusions made during the fair
hearing to ensure that they appropriately apply federal and state
Medicaid law and regulations, including subregulatory guidance and
written interpretive policies properly and that the review process be
conducted by an impartial official who was not directly involved in the
initial determination.
By way of example, suppose that the Exchange hearing officer finds
that an individual has $800 in wages and $200 in child support income
each month and, based on these amounts, concludes that the individual's
MAGI-based household income is $1,000 per month. Suppose also that the
applicable income standard for the applicable household size for this
individual is $900 per month, and that the hearing officer upholds the
initial denial of eligibility. The findings of $800 in wages and $200
of child support per month would be factual findings, which the
Medicaid agency could not review under the option provided at Sec.
431.10(c)(3)(iii). However, the hearing officer's inclusion of the
wages and child support income in total MAGI-based household income
involves an application of MAGI-based methodologies, described in Sec.
435.603 of the March 2012 Medicaid eligibility final rule, as
implemented by the state, which would be reviewable as a conclusion of
law. In this case, the inclusion of wages would be correct, but the
inclusion of child support income would be incorrect, and the agency
upon finding such an erroneous application of state or federal rules
could reverse the hearing officer's decision to conclude that, based on
household income of $800, the individual is Medicaid eligible.
Because of the important role that an impartial hearing officer
plays in evaluating evidence and weighing credibility in making
findings of fact, we are not extending the option at Sec.
431.10(c)(3)(iii) to include agency review of findings of fact. We note
that fair hearings conducted under a delegation of authority in
accordance with Sec. 431.10(c)(1)(ii) must be conducted in accordance
with Sec. 431.10(d)(1), which requires that the delegation agreement
between the agency and the Exchange or Exchange appeals entity must set
forth the responsibilities of each party to effectuate the provisions
of part 431 subpart E of the regulations. Section 431.205(d) provides
that the fair hearing process under subpart E must meet the due process
standards set forth in Goldberg v. Kelly, 397 U.S. 254 (1970), which
requires that any review process be conducted by an impartial official,
and be based solely on the information and evidence in the record. We
have made a minor modification to Sec. 431.205(b)(1)(ii) to clarify
that the hearing process provided through delegation of authority to
conduct a fair hearing to an Exchange or Exchange appeals entity would
include the review by the agency of the Exchange or Exchange appeal
entity's application of federal and state Medicaid law and regulations,
if such review is elected by the state under Sec. 431.10(c)(3)(iii)
and conducted by an impartial official who was not directly involved in
the initial determination. We note also that the state's election under
Sec. 435.10(c)(3)(iii) to conduct this limited review does not create
a right for the individual to request or receive a de novo hearing
before the agency.
The review process that can be established under Sec.
431.10(c)(3)(iii) functions completely independently from the
``trumping rule'' at Sec. 155.302(b)(5) of the Exchange proposed rule.
The former comes into

[[Page 42168]]

play when an individual's fair hearing has been delegated to, and is
heard by, the Exchange or Exchange appeals entity. The ``trumping
rule'' at Sec. 155.302(b)(5) as modified by this rulemaking and at
Sec. 155.345(h) is invoked when the Medicaid agency has conducted the
Medicaid fair hearing relating to the appeal of a denial of Medicaid
eligibility and the Exchange or Exchange appeals entity also has
conducted a hearing related to an appeal of an award of advance
payments of premium tax credits. Similar to the ``trumping rule'' at
Sec. 155.302(b)(5) of the March 2012 Exchange final rule relating to
initial eligibility determinations, if the Medicaid agency's fair
hearing decision conflicts with the Exchange appeals decision, the
Exchange must adhere to the Medicaid agency or fair hearing decision
for Medicaid eligibility under Sec. 155.302(b)(5) and Sec.
155.345(h).
Finally, we do not believe it is necessary to require in the
Medicaid regulations specified timeframes within which an Exchange, in
conducting a delegated fair hearing, must transmit a decision to the
Medicaid agency. Instead, as part of the agreement required under Sec.
431.10(d), in delegating the fair hearing authority to the Exchange or
Exchange appeals entity, the parties will need to stipulate each
party's responsibilities to ensure that the time frames established
under Sec. 431.244(f) are met.
Comment: One commenter sought clarification of whether the review
process of appeal decisions made by the Exchange which the commenter
expressed as ``required'' at Sec. 431.10(c)(3)(iii) is considered in
the agency's quality assurance Payment Error Rate Measurement (PERM)
sampling.
Response: The regulation at Sec. 431.10(c)(3)(iii) does not set a
requirement, but provides states an option to establish a review
process of appeal decisions as a part of its oversight of the
delegation of authority to conduct fair hearings to an Exchange or
Exchange appeals entity. We note the agency has other means to oversee
its delegation of authority to conduct hearings. Implications for PERM
are beyond the scope of this regulation; we intend to issue additional
guidance on PERM.
Comment: Many commenters supported the reinstatement of an
individual's Medicaid application at Sec. 435.907(h) when the
individual had withdrawn his or her application after an assessment of
Medicaid ineligibility by the Exchange, appealed the level of APTC and
CSR awarded by the Exchange, and the Exchange or Exchange appeals
entity reversed the initial assessment and found the individual to be
potentially eligible for Medicaid. A few commenters sought
clarification regarding the retroactive nature of the reinstatement
effective as of the date the individual submitted the application to
the Exchange. Another commenter asked how this provision relates to the
timeliness requirements for Medicaid agencies to process an application
under Sec. 435.912 of the March 2012 Medicaid eligibility final rule.
A few commenters raised a concern that if an Exchange appeals entity
hearing officer upholds the finding of eligibility for advance payment
for premium tax credit, the reinstatement would not take effect. These
commenters recommended that the Medicaid application be reinstated
whenever an individual files an appeal with the Exchange or Exchange
appeals entity to capture a broader set of individuals who may be
eligible for Medicaid or CHIP.
Response: We appreciate the support for the provision at Sec.
435.907(h) to reinstate the Medicaid application of an individual who
has withdrawn his or her Medicaid application upon initial assessment
of Medicaid ineligibility by the Exchange, but who is subsequently
assessed as potentially Medicaid eligible following an appeal related
to an award of advance payments of the premium tax credits or cost
sharing reductions. We are finalizing this provision as proposed,
except to clarify that the 45-day or 90-day timeliness standards do not
apply to these reinstated applications. By the time the Exchange appeal
decision is rendered, 45 or 90 days from the date of application may
already have elapsed, making compliance by the Medicaid agency
unrealistic. Instead we clarify that the timeliness standards required
under Sec. 435.912 of the March 2012 Medicaid eligibility final rule
apply based on the date the application is reinstated. However, we note
that the 45 and 90 days prescribed in the regulation represent the
outer limit for all applications. In the case of a reinstated
application which has been the subject of an Exchange appeal, we would
expect that the individual's electronic account would be comprehensive,
and that considerably less time would be needed for the Medicaid agency
to act on the case. We would expect states to take this into account in
establishing timeliness standards for prompt determinations on
reinstated applications under Sec. 435.911(c) and Sec. 435.912 of the
March 2012 Medicaid eligibility final rule. The reinstated application
must be made effective retroactive to the date the individual submitted
his or her application to the Exchange (not the date the application is
reinstated) to protect the effective date of coverage required under
Sec. 435.914 of the current regulations (redesignated at Sec. 435.915
in the March 2012 Medicaid eligibility final rule). We also proposed a
similar application reinstatement provision for CHIP at Sec.
457.340(a), which we are finalizing as proposed with a minor
modification to remove the reference to Sec. 435.909 which was
inadvertently inserted in the proposed rule and has no relationship to
CHIP. We note that states also will need to develop reasonable
timeliness standards for such reinstated applications in accordance
with Sec. 457.340(d) of the March 2012 Medicaid eligibility final
rule.
We have not modified the proposed regulation text to reinstate the
Medicaid or CHIP application of every individual who has withdrawn his
or her Medicaid or CHIP application in accordance with Sec.
155.302(b)(4) of the March 2012 Exchange final eligibility rule and who
then subsequently appeals the determination of eligibility for advance
payments of the premium tax credits or cost-sharing reductions at Sec.
435.907(h) and Sec. 457.340(a). We believe that the interests of
individuals filing an Exchange appeal who should have been assessed as
potentially Medicaid eligible by the Exchange, but who nonetheless
withdrew their Medicaid application following the Exchange's
assessment, will be protected through the Exchange appeals process
because the Medicaid application for those assessed potentially
Medicaid eligible will be reinstated, and their account transferred to
the Medicaid agency for a full determination. On the other hand, to
reinstate the Medicaid application of every applicant for whom the
Exchange appeals processes ultimately confirms the initial assessment
of Medicaid ineligibility made by the Exchange--regardless of how high
above the Medicaid income standard the individual's income may be--
would create confusion for individuals and impose, we believe,
unnecessary administrative burden on state Medicaid agencies. We expect
to work closely with Exchanges to ensure accurate assessments of
Medicaid and CHIP eligibility in accordance with federal regulations.
Comment: One commenter sought clarification of when Medicaid
agencies will have to decide whether or not to delegate eligibility
determinations or fair hearings to the Exchange, and whether there will
be additional

[[Page 42169]]

requirements if the agency chooses not to delegate such responsibility.
Response: There is no deadline to elect to delegate eligibility
determinations or appeals to an Exchange or Exchange appeals entity. As
discussed in section II.A.6. of preamble, the regulation permitting
delegation of eligibility and fair hearings goes into effect on October
1, 2013. Once a state decides to delegate authority to conduct
eligibility or appeals, it must indicate such an election through the
state plan, establish a written agreement with the Exchange or Exchange
appeals entity, and otherwise comply with the provisions set forth in
the regulation. A state may revoke its delegation at a later time
through the same process. Whether or not a state chooses to delegate
authority, it must comply with the provisions of Sec. 435.1200, Sec.
457.348 and Sec. 457.350, issued in the March 2012 Medicaid
eligibility final rule, to ensure coordination across all insurance
affordability programs and a seamless consumer experience. We proposed
revisions to these provisions in the January 2013 proposed rule to
address the agencies' responsibilities to coordinate notices and
appeals, but are not finalizing them in this final rule.
Comment: One commenter questioned whether a state might be able to
obtain the enhanced matching funds for systems enhancement at a 90/10
match for enhancement of their appeals systems. Another commenter asked
for clarification as to whether federal financial participation (FFP)
would be available for appeals delegated to an Exchange.
Response: The enhanced FFP match rate of 90/10 for the design,
development, and installation of eligibility systems is available only
for components of the Medicaid Management Information System (MMIS),
including eligibility and enrollment systems through the end of 2015,
subject to meeting the seven conditions and standards outlined in the
April 19, 2011 final rule at 74 FR 21950. A 75/25 match rate is
available for operations and maintenance of these systems. Appeals
systems do not qualify for enhanced funding under these rules. Instead,
FFP at a 50/50 rate is available. For more details on 75/25 match rate
discussion, see http://www.medicaid.gov/State-Resource-Center/FAQ-Medicaid-and-CHIP-Affordable-Care-Act-ACA-Implementation/Downloads/Affordable-Care-Act_-Newest-Version.pdf. The availability of FFP and
responsibility for funding subject to cost allocation rules applies to
administration of fair hearings in the same manner as any other context
and is not affected by the state's delegation decision.
Comment: A few commenters suggested that we revise Sec. 431.240 to
require that hearing officers who adjudicate Medicaid fair hearings
abide by specific ethical standards, either the National Association of
Hearing Officials' Model Code of Ethics or the National Association of
Administrative Law Judiciary's Model Code of Judicial Conduct for State
Administrative Law Judges. We did not receive any comments related to
our proposed modification of Sec. 431.240 related to access to
information.
Response: As discussed above, existing regulation at Sec. 431.240
require hearing officers to be impartial. Additionally, existing
regulations at Sec. 431.205 require hearing systems to comport with
due process standards of Goldberg v. Kelly, 397 U.S. 254 (1970).
Current regulations do not require hearing officers to belong to a
particular profession, and we did not propose to modify this policy in
the proposed rule. Therefore, we are not making any changes to Sec.
431.240 in response to this comment. However, as noted above, we are
addressing this comment, in part, by including that an impartial
decision-maker must be used if a state is electing to establish a
review process of legal conclusions made by hearing officers operating
under delegated fair hearing authority. We also encourage states to
examine this issue further and to ensure that the requirement to
utilize impartial hearing officers at Sec. 431.240 are adhered to when
conducting fair hearings. We finalize Sec. 431.240(c) without
modification.
3. Notices
a. Electronic Notices (Sec. 435.918)
Current notice regulations require paper-based, written notices. To
establish a more timely and effective notification process, proposed
Sec. 435.918 would direct states to provide individuals with the
option to receive notices through a secure, electronic format in lieu
of written notice by regular mail. Consumer safeguards were proposed to
ensure that individuals make a conscious choice to receive notices in
electronic format, and would be able to opt-in and opt-out of their
election. We solicited comments regarding the proposed consumer
safeguards. In addition, we requested comments on whether other types
of communications, in addition to eligibility notices, should be
offered in electronic format. We are finalizing Sec. 431.206(e), to
permit beneficiaries to receive notices regarding fair hearings
electronically, consistent with proposed Sec. 435.918. We note that we
are not addressing in this final rule comments related to accessibility
of fair hearing notices. We will consider these comments and this
portion of Sec. 431.206(e) when we finalize our rules related to
accessibility for individuals who are limited English proficient and
individuals with disabilities in a future rulemaking. We also proposed
modifications to Sec. Sec. 431.211, 431.213, 431.230, and 431.231 to
update and modernize the language in the regulation to remove the term
``mail'' and instead use ``send,'' to reflect the option for
beneficiaries to receive notices electronically, consistent with the
consumer protections in proposed Sec. 435.918. We proposed in Sec.
457.110(a)(1) the same consumer option and protections for electronic
notices in CHIP, and we are making technical changes in the final rule
to better align the provisions. A modification was also proposed to
paragraph (a) in Sec. 457.110 regarding the accessibility of
information for individuals who are limited English proficient and
individuals with disabilities. However, we will finalize this provision
in future rulemaking.
We received many comments regarding the requirement to provide
individuals with the option to receive notices electronically, the
majority of which supported this option as an important part of
modernizing the notification process provided that strong consumer
protections are in place.
Comment: We received many comments regarding proposed Sec.
435.918(a)(1), which would require the agency to confirm by regular
mail the individual's election to receive notices electronically. Some
commenters recommended, instead, allowing electronic confirmation for
individuals applying on-line. One commenter suggested that in states
with a FFE, the FFE should be responsible for issuing all mailed
confirmations. Also, several commenters were concerned that the
proposed written confirmation actually required individuals to choose
receipt of electronic notices twice, and that this would be confusing
and burdensome for the agency and these consumers. Many other
commenters encouraged CMS to maintain the requirement to confirm an
individual's election through regular mail to ensure that individuals
have made an informed decision, and to provide them with an opportunity
to change their election. One commenter suggested that the mailed
confirmation include a list of the types of notices that

[[Page 42170]]

the agency will send in electronic format.
Response: Proposed section Sec. 435.918(a)(1), redesignated Sec.
435.918(b)(1) in our final rule, requires the agency to send, via
regular mail, written confirmation that an individual has elected to
receive electronic notices and that forthcoming notices will be
delivered electronically. This communication must also instruct the
individual on how to change this election if the individual made the
initial choice inadvertently or wishes to change his or her mind. The
purpose of the mailed communication is to affirm the individual's
choice and allow the individual an early opportunity to opt-out of
receiving notices in electronic format. The individual does not have to
respond to this written notice to complete his or her election to
receive electronic notices; he or she need only respond if he or she
wanted to change the initial election. Therefore, there will not be any
need for individuals to request electronic notices twice, as some
commenters thought. We are clarifying at Sec. 435.918(b)(1) of the
final regulation that it is the agency's responsibility to ensure that
the individual's election to receive notices electronically is
confirmed by regular mail, since the individual will receive all future
communication from the Medicaid agency including information on how to
establish an electronic account with the state, if he or she has not
already done so. If a different arrangement makes more sense in a given
state, the Medicaid agency and Exchange can delegate this
responsibility to the other agency in the agreement entered into under
Sec. 435.1200(b)(3). We are not requiring that this communication
specify which types of notices will be delivered in electronic format,
but suggest that states take this under consideration as it would
enable individuals to better anticipate the type of notices that will
be posted to an electronic account. We anticipate, based on one state's
experience piloting electronic notices, few individuals will revert
back to paper notices. However, given that electronic notification will
be a new approach for many individuals, we believe this is an important
consumer protection to ensure that individuals make a deliberate choice
regarding the format in which they receive information. In future
years, when electronic notices are more prevalent, we will revisit
whether written confirmation of the individuals choice to receive
notices in electronic format is still a relevant consumer protection.
Comment: Several commenters requested that electronic notices be
the default method for notice delivery such that if an individual fails
to indicate whether he or she prefers an electronic or paper format for
notices, notices would automatically be provided electronically. One
commenter suggested that electronic notices should be the default for
specific populations, such as those individuals determined eligible
through an Exchange Web site.
Response: We maintain that electronic notices should be provided
only if the individual affirmatively opts for such notices. The default
approach makes an assumption that the individual has the technology to
regularly retrieve notices posted to his or her electronic account.
Even if an individual applies through an Exchange Web site, the
individual may not have regular access to technology to enable ongoing
retrieval of electronic notices. Consequently, we do not believe this
change is appropriate at this time as it could pose a barrier to
applicants and beneficiaries with limited access to technology.
Comment: Several commenters recommended that Medicaid and CHIP
eligibility notices be provided in both electronic and in paper format
until an individual indicates in writing that they no longer wish to
receive such notices by regular mail. Some commenters also recommended
that all notices regarding adverse actions always be sent in paper
format via regular mail to allow for additional protection against
delivery error. One commenter recommended that hearing scheduling
notices should always be sent via regular mail to ensure adequate
hearing slot availability.
Response: We are concerned that requiring agencies to provide dual
electronic and paper notices may pose an administrative burden for some
states. While we require that agencies provide individuals with a
choice to receive notices in electronic format in lieu of paper format,
at state option, all notices or a subset of notices, such as those
relating to adverse actions, could be provided in dual formats. We
appreciate the concern expressed for ensuring consumer protections
against delivery error. In Sec. 435.918(a)(4), the agency is required
to send an email or other electronic communication alerting the
individual that a notice has been posted to his or her account. To
guard against delivery error, if the required alert is returned as
undeliverable, the agency must send such notice by regular mail within
three business days of the date of the failed electronic communication.
This requirement has been further clarified by a revision to Sec.
435.918(a)(5). We believe that electronic notices are likely to
increase receipt of important eligibility information, as individuals
will have greater flexibility to access notices regardless of changes
to their postal address.
Comment: We received a few comments that recommended we amend Sec.
435.918 to include specific language noting the importance of ensuring
that the notice must be accessible to persons who are limited English
proficient and individuals with disabilities.
Response: We agree that all eligibility notices must be accessible
to persons who are limited English proficient and individuals with
disabilities, and we will be addressing such rules in future
rulemaking.
Comment: One commenter requested clarification on what constitutes
an ``undeliverable'' communication in Sec. 435.918(a)(5).
Response: ``Non-delivery reports'' are system messages that report
the delivery status to the sender. We expect that if the agency
receives a non-delivery report, this constitutes an undeliverable
communication.
Comment: One commenter requested clarification regarding how to
date a paper version of an electronic notice. When an electronic
communication is undeliverable, indicating an individual may not be
aware of an electronic notice posted to his or her account, Sec.
435.918(a)(5) requires that the agency send a paper version of the
electronic notice within three business days. The commenter, noting the
ability to send the paper version of the electronic notice within 24
hours, supported maintaining the same date on both notices.
Response: It is important for the date of the paper notice to
reflect the date it is sent, not the date of the undelivered electronic
notice. We anticipate that while some states may be able to issue a
paper version of the electronic notice within 24 hours, other states
may take up to the required limit of 3 days. Individuals are given a
limited time to take action, such as requesting a date for a hearing,
and this is based on the date the notice is sent to the individual.
Comment: One commenter requested clarification as to whether
agencies are required to monitor an individual's account to determine
if a notice was accessed.
Response: We are not requiring that agencies monitor accounts to
determine whether notices are accessed. If the electronic alert is not
undeliverable, the agency should assume an individual is able to access
his or her notice.
Comment: One commenter recommended that we include a

[[Page 42171]]

requirement that allows the agency to limit the number of times an
individual can request that an electronic notice be provided in paper
format.
Response: We believe that it is an important consumer protection to
allow individuals to request notices in a paper format. Some
individuals may not have the technology available to readily print
notices from an electronic account.
Comment: A number of commenters supported offering additional types
of communications through an electronic format. In addition to
eligibility notices and information specified in subpart E of part 431,
there are other communications that occur between an individual and the
Medicaid or CHIP agency. Some of these communications include requests
for additional information, annual renewal forms and reminders, premium
payment information, and information on covered services.
Response: We do not believe it is necessary to amend Sec.
435.918(a) to include other types of communications. In Sec.
435.918(a), we specify that eligibility notices and information in part
435, and notices and information required under subpart E of part 431,
be provided in electronic format. For example, information on covered
services must be available electronically in addition to paper format,
as required by Sec. 435.905(a). Annual renewal forms must also be
offered in electronic format in accordance with Sec. 435.916. We do
not think it is appropriate or operationally feasible to require other
types of communications to be provided electronically. We encourage
states with the capacity to provide additional communications
electronically, and with beneficiaries preferring that mode of
communication, to do so, as long as in compliance with any existing
regulations that govern the type of communication.
Comment: One commenter asked whether proposed Sec. 435.918(b),
which asserts that the agency may only provide electronic notices if
the individual elected to receive electronic notices and must be
permitted to change such election at any time, is duplicative of
paragraph Sec. 435.918(a).
Response: We agree with the commenter, and the provision has been
amended by removing redundant language in Sec. 435.918(b)(1) and Sec.
435.918(b)(2).
Comment: A number of commenters requested a later effective date
for implementing electronic notices.
Response: We recognize that states are at different places in the
development of their eligibility and enrollment systems, and that the
technology needs to be in place to offer beneficiaries and applicants
the option to receive notices electronically. We have amended Sec.
435.918(a) to delay the requirement to provide notices electronically
until January 1, 2015, but permit states to implement October 1, 2013
if their systems are ready.
Comment: One commenter suggested that we clarify whether ``send''
in Sec. 431.230 means send by mail or in electronic format consistent
with Sec. 435.918.
Response: Under proposed Sec. 431.206(e), all information required
under subpart E of part 431 must be provided in electronic format in
accordance with Sec. 435.918, if an individual elects to receive such
information in electronic format. To further clarify, we have added to
Sec. 431.201, that the definition of ``send'' means deliver by mail or
in electronic format consistent with Sec. 435.918.
Comment: One commenter requested clarification regarding Sec.
431.231(c)(2), which provides beneficiaries 10 days to request a
hearing from receipt of the notice of action. The date on which the
notice is received is considered to be 5 days after the date on the
notice, unless the beneficiary shows that he or she did not receive the
notice within the 5-day period. The commenter specifically requested
clarification regarding how an individual might show proof that they
did not receive an electronic notice within the 5-day time period.
Response: We understand the concern expressed by the commenter, but
do not believe that this issue is specific to the receipt of electronic
notices, but receipt of notices in general. It is challenging for an
individual to provide proof of a negative, however, it is important to
provide individuals with the opportunity to demonstrate that they did
not receive notices. One example of how an individual might demonstrate
that he did not receive an electronic eligibility notice is by
providing documentation that he closed the email account on record with
the agency. If an individual cannot receive the emailed alert that a
notice is posted to the electronic account, the individual is not in
receipt of the notice.
Comment: A few commenters requested that we define whether the ``5
days'' Sec. 431.231(c)(2) refers to calendar days or business days.
Response: We are not defining whether the ``5 days'' refers to
calendar days or business days, but allow states the flexibility to
define this in their operating procedures.
b. Coordinated Notices (Sec. 435.1200)
For individuals whose electronic account is transferred to the
Medicaid agency for a determination of eligibility from another
insurance affordability program, Sec. 435.1200(d)(6) of the March 2012
Medicaid eligibility final rule directs that the Medicaid agency notify
such other program of its final determination of eligibility or
ineligibility only for individuals who have enrolled in the other
program pending completion of the agency's final determination. We
proposed to redesignate and modify this requirement at Sec.
435.1200(d)(5) to require that the Medicaid agency notify the other
program of the final determination of Medicaid eligibility or
ineligibility for all individuals whose electronic account was
transferred from another insurance affordability program. The same
requirement was proposed for CHIP at Sec. 457.348(d)(5). No comments
were received regarding these specific provisions. We also proposed a
number of other changes to Sec. 435.1200 and Sec. 457.348 relating to
coordination of notices and appeals. In this final rule, we are
codifying Sec. 435.1200(d)(5) of the proposed rule at paragraph Sec.
435.1200(d)(6). Other proposed changes to Sec. 435.1200 of the March
2012 Medicaid final eligibility rule, including the redesignation of
paragraph (d)(6), as appropriate, will be addressed in subsequent
rulemaking. We are also finalizing proposed Sec. 457.348(d)(5) as
Sec. 457.348(c)(6), but other proposed changes to Sec. 457.348 will
be addressed in subsequent rulemaking.
4. Medicaid Enrollment Changes Under the Affordable Care Act Needed To
Achieve Coordination With the Exchange
a. Certified Application Counselors (Sec. 435.908 and Sec. 457.340)
Many state Medicaid and CHIP agencies have a long history of
supporting providers and other organizations to assist individuals in
applying for and maintaining coverage. Commonly referred to as
``application assisters'' and referred to in this rulemaking as
``certified application counselors,'' these organizations and
individuals provide direct assistance to individuals seeking coverage,
and can play a key role in promoting enrollment among low-income
individuals. The proposed regulations at Sec. 435.908(c) sought to
ensure that certified application counselors, whom we expect to
continue to play an important role in facilitating enrollment in the
expanded coverage options available under the Affordable Care Act, will
have

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the training and skills necessary to provide reliable, effective
assistance to consumers. We proposed basic standards for states to
certify application counselors, which we believe are consistent with
the practice in many states today. These standards include proposed
procedures to ensure that these trained certified application
counselors have clear authority to access and protect confidential
information about individuals they serve, and with that authority have
a special relationship with the Medicaid agency that enables the
counselors to track and monitor applications. The proposed regulations
at Sec. 435.908(c), as finalized in this rulemaking, are applicable to
CHIP, as well under Sec. 457.340(a) of the March 2012 Medicaid
eligibility final rule; no revisions are needed or made to Sec.
457.340(a). We received the following comments concerning the proposed
certified application counselor provisions:
Comment: We received a few comments expressing support for the
proposed requirement that states have a designated web portal for use
by certified application counselors that has a secure mechanism for
granting rights for only those activities the certified application
counselor is certified to perform. Commenters stated that such a portal
will increase the proportion of applications that are submitted
electronically, thereby providing more applicants with access to
electronic verification and real-time eligibility while increasing the
state's administrative efficiency. Other commenters also recommended a
clarification that states may use the same portal for Navigators and
non-Navigator assistance personnel authorized under 45 CFR 155.205(d)
and (e) with proper assignment of rights and functionality.
Response: We appreciate the support for the establishment of a
designated web portal for use only by properly trained and certified
application counselors. However, given the systems challenges states
face in preparing for the initial open enrollment period and starting
up the new system of insurance affordability programs, we are concerned
that requiring such a portal could disrupt well-functioning application
counselor programs that exist today. Therefore, while we encourage
states to consider such portals as an effective vehicle for
administering and overseeing certified application counselor programs,
we are removing from the final rule the requirement that such portals
be established as proposed at Sec. 435.908(c)(3)(i). Although not
required, states may elect to develop these portals to support the work
of certified application counselors.
Comment: One commenter requested that we issue guidance on the
availability of federal funding to help support grants or payments to
certified application counselors--in particular information about how
Medicaid administrative claiming can be used to match community-based
investments in application assistance.
Response: FFP is available for state expenditures to certify and
support certified application counselors, but, since community-based
application counselors are not state or local employees, FFP is not
available for salaries or other direct costs of certified application
counselors.
Comment: Many commenters requested that we require that certified
application counselors be trained to provide culturally and
linguistically competent services. They believed that it is not
sufficient to remind Medicaid and CHIP agencies of their responsibility
to ensure access to individuals with limited English proficiency and
those living with disabilities, and urged us to provide states with
specific guidance and examples of how to fulfill this responsibility.
Some commenters recommended that to be certified, application
counselors must be trained in providing culturally and linguistically
appropriate services. Some commenters recommended that we require
training for application counselors include accommodating the health
care needs of specific populations, such as children.
Response: Consistent with title VI of the Civil Rights Act of 1964,
the Americans with Disabilities Act, and other civil rights laws, state
Medicaid and CHIP agencies must ensure that their programs are
accessible to individuals with limited English proficiency and
individuals with disabilities. This responsibility is codified, in
part, at Sec. 435.905(b), Sec. 435.907(g), Sec. 435.908(a), and
Sec. 457.330 (incorporating by reference the requirements of Sec.
435.907) of the March 2012 Medicaid eligibility final rule, and is also
contained in non-Medicaid specific regulations implementing the
Americans with Disabilities Act and other civil rights laws. Note that
clarifying changes were proposed in the January 2013 proposed rule to
the accessibility standard in Sec. 435.905(b); those proposed changes
are not addressed in this final rule, but we intend to address them in
subsequent rulemaking. State agencies can use certified application
counselors as a tool in meeting their responsibilities to make their
programs accessible to individuals with limited English proficiency and
individuals with disabilities. But, while some organizations providing
application assistance to individuals applying for coverage under an
insurance affordability program may be subject to civil rights laws
independent of the fact that they are serving as a certified
application assistor (for example, as a condition of accepting federal
funding), we do not believe it appropriate to hold them responsible for
meeting the accessibility standards established for state Medicaid and
CHIP agencies under our regulations.
Moreover, to require a community organization or provider with a
mission to provide targeted assistance to one segment of the population
to also be able to provide assistance to all others, would threaten the
participation of valuable state partners in maximizing enrollment
across the state's entire population.
Comment: Some commenters supported the option provided to states to
certify application counselors. These commenters pointed to existing
programs in which states work with community organizations to expand
enrollment, and that state flexibility to continue current, successful
programs is important. Other commenters recommended that certification
of application counselors be required for all Medicaid and CHIP
agencies. These commenters discussed that there will be organizations
providing application assistance in every state, that these
organizations need to be trained, and that consumers need to know who
is available to provide competent assistance.
Response: We agree that a network of application counselors can be
a valuable asset and can support states' outreach and enrollment
efforts. We urge all states to consider working with interested
organizations and providers in creating an application counselor
program. However, we believe states are best able to determine the need
for such a program, and we do not believe it is necessary to require
that state Medicaid programs create such programs.
Comment: We received a number of comments on certified application
counselors and requirements related to conflicts of interest. Some
commenters stated that in addition to receiving training on conflict of
interests, certified application counselors should be contractually
required to serve in the best interests of clients and to disclose any
existing relationships with qualified health plans or insurance
affordability

[[Page 42173]]

programs to consumers. Some commenters recommended that health
insurance issuers, their subsidiaries and licensed insurance brokers
and agents be explicitly excluded from being certified as certified
application counselors given their inherent financial conflict of
interest.
Response: We are clarifying the language in Sec.
435.908(c)(1)(iii) to make clear that certified application counselors
must adhere to all rules prohibiting conflicts of interest. States may
not certify any organization or individual who does not meet this
standard, or who may be motivated to act in a manner contrary to best
interest of the individual being helped. Thus, any organization that
the state finds to have an inherent conflict could not, under the
proposed regulation, be certified as an application counselor. We do
not believe it necessary or appropriate to identify specific types of
organizations as categorically barred from serving as application
counselors and are finalizing this regulation as proposed.
Comment: A few commenters requested that we require states to
maintain a current list of certified application counselors on the
agency Web site, and the list should include any limitations on
services that they are certified to provide. Commenters suggested that
it will be important for consumers to not only be informed of the
functions and responsibilities of certified application assisters, as
required in Sec. 435.908(c)(3)(i), but to also know who is certified
and whether there are any limitations on the services each certified
application counselor is certified to provide.
Response: We encourage states to adopt the practice recommended by
the commenter, as an effective mechanism to connect consumers with
needed assistance. However, utilization of certified application
counselors is at state option, and while we believe such a mechanism
will enhance consumers' ability to identify resources available to help
with applications we do not think it appropriate to require states to
post a current list of counselors on their Web site. We note that such
a requirement could deter some states from creating or expanding their
application counselor program if they do not have the resources to
create and maintain such a list.
Comment: A commenter asked CMS to clarify that states can meet
their outstationing requirements under Sec. 435.904 with application
counselors at the appropriate locations. They suggested that given the
overlap of functions described it would seem inefficient to maintain
separate systems of assistance.
Response: States may be able to use certified application
counselors to help meet the outstationing requirements set forth in
current regulations at Sec. 435.904, under which state Medicaid
agencies are required to provide pregnant women and children an
opportunity to apply for coverage at designated ``outstation
locations.'' Section 435.904(e) requires that, except for outstation
locations that are infrequently used by the pregnant women and children
targeted under the regulation, the state agency must have staff
available at each outstation location. Under paragraph (e)(3) of that
section, properly trained provider or contractor staff or volunteers--
which could include organizations, staff and volunteers certified as
application counselors--may be used in lieu of, or as a supplement to,
agency staff to meet this requirement, subject to certain conditions
set forth in the regulation.
Comment: Commenters asked for clarification on the overlap of
functions and certification requirements between certified application
counselors in Medicaid and application counselors as proposed for the
Exchange at Sec. 155.225.
Response: Although the exact language of the Exchange application
counselor regulation at proposed 45 CFR 155.225 (which is not being
finalized in this rulemaking) and that of the Medicaid regulation at
Sec. 435.908(c) differ, the policies reflected are consistent. The
main substantive difference is that the Exchange regulation at proposed
45 CFR 155.225 would not permit certified application counselors to
limit the activities that they agree to perform, but instead would
require them to perform all assistance activities identified in the
regulation, whereas states can permit Medicaid and CHIP application
counselors to elect to limit the activities which they will perform for
applicants.
As noted in the preamble to the proposed rule, we remind the
commenters that state Medicaid and CHIP agencies and the Exchange are
charged under Sec. 435.1200 and Sec. 457.348 of the Medicaid
eligibility final rule and proposed Sec. 155.345 of the Exchange rule
to enter into agreements with each other to create a seamless and
coordinated application and enrollment process across all insurance
affordability programs, and the state agencies and the Exchange should
consider such coordination in developing their application counselor
programs. States could elect, for example, to create a single
certification process for all insurance affordability programs, or each
program could accept application counselors certified by another
program. To the extent to which an application counselor is certified
by one program but not the other, the counselor would assist the
individual in submitting the single streamlined application for all
insurance affordability programs to the entity by which they are
certified. It is important to note that regardless of the entity to
which the application counselor submits the application, the
application will be evaluated for eligibility in QHPs and all insurance
affordability programs.
Comment: One commenter requested more information about the
development and review of training materials for certified application
counselors. This commenter stated that although the regulations provide
that any individual providing customer service must be trained in a
host of areas related to the insurance affordability programs, no
specificity is provided about the development and review of the
materials, and they requested clarification on whether states will have
the opportunity to review and comment on materials prior to their use.
We also received comments that recommended we require certified
application counselors to apply for recertification annually or
biannually to ensure that they are qualified and up to date on changes
in policy and procedures.
Response: Under Sec. 435.908(c)(1)(ii) and (iii), states must
ensure that application counselors are properly trained prior to
certification, and we expect states will need to develop training and
any training materials to be used to satisfy this requirement. We note
that materials will be developed by HHS for use by certified
application counselors registered with an FFE, including State
Partnership Exchanges, and state Medicaid and CHIP agencies may adapt
such materials to support their training efforts. FFP is available for
costs to the state of conducting training or testing of certified
application counselors, including any costs to the state for
preparation and assembly of training materials. Being effectively
trained in the rules and regulations of the different insurance
affordability programs in accordance with Sec. 435.908(c)(1)(ii)
necessarily requires keeping abreast of any pertinent changes in those
rules, and under these regulations states will need to ensure that
application counselors are kept up-to-date. However, there are
different ways to accomplish this goal--annual or periodic
recertification is one-way, refresher trainings or written
communications may be another--and we believe states should have
flexibility

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in determining the process that best works in each state.
Comment: A few commenters recommended that applicants and enrollees
be able to opt to designate their certified application counselor to
receive copies of notices, or to access electronic notices in the
client account.
Response: As discussed in the preamble of the proposed rule, the
certified application counselor program is not designed to provide the
level of personal assistance to applicants and beneficiaries that is
provided by an authorized representative, discussed in the next section
in the preamble. However, there is nothing to prevent an applicant or
beneficiary from designating a certified application counselor to also
serve as his or her authorized representative, and for such counselor
to assume that function, in accordance with Sec. 435.923, as finalized
in this rulemaking.
Comment: One commenter suggested that regulations governing
application assistance are not necessary. The commenter believed that,
absent any evidence that application counselors currently working in
states to help individuals apply for Medicaid do not have the training
and skills necessary to provide reliable, effective assistance to
consumers, or would not meet confidentiality requirements, there is no
reason to regulate state practices in this area.
Response: We recognize the successful development of application
assistor, or application counselor, programs by many states without the
existence of federal regulations, and have aimed to develop regulations
that will not disrupt existing, successful programs and practice.
However, given the significant changes to the availability of and
access to affordable health coverage created under the Affordable Care
Act--including the advent of coverage in a QHP through the Exchange,
with premium tax credits and cost sharing reductions available to
qualifying individuals, the coordinated eligibility and enrollment
process required across all insurance affordability programs, and the
expansion in use of online applications, with the possibility
confidential information being returned to consumers in real time
through an electronic interface--we believe that establishment of
baseline federal standards, to be applied consistently across states
and programs, is important to safeguarding consumer interests and
ensuring the integrity of the assistance provided.
b. Authorized Representatives (Sec. 435.923)
We proposed regulations intended to be consistent with current
state policy and practice, regarding the definition, designation, and
responsibilities of ``authorized representatives'' to act on behalf of
applicants and beneficiaries in applying for and maintaining coverage.
Authorized representatives have historically provided valuable support
to individuals needing help navigating the application and enrollment
process, as well as ongoing communications with the agency,
particularly to seniors and individuals with disabilities, and we
expect their role to continue. We proposed to define the term
``authorized representative'' as an individual or organization that
acts responsibly on behalf of an applicant or beneficiary in assisting
with the individual's application and renewal of eligibility and other
ongoing communications with the Medicaid or CHIP agency. Under current
regulations at Sec. 435.907, retained in the March 2012 Medicaid
eligibility final rule, states must accept applications from authorized
representatives acting on behalf of an applicant. We received the
following comments concerning proposed provisions relating to
authorized representatives:
Comment: One commenter requested clarification on whether states
may enforce additional requirements not specifically listed in the
federal regulations on authorized representatives. An example of this
would be state specific regulations governing who may serve as an
authorized representative for individuals who are not medically or
legally competent.
Response: Under proposed Sec. 435.923(a), legal documentation of
authority to act on behalf of an applicant or beneficiary under state
law, such as a court order establishing legal guardianship or power of
attorney may serve in place of a written designation from the applicant
or beneficiary, signed and submitted in accordance with Sec.
435.923(f). Under the regulation, however, states may not limit
authorized representatives to individuals identified in such a legal
document or granted authorization under operation of state law or
otherwise impose requirements other than those listed in Sec. 435.923
on other individuals whom an applicant or beneficiary wishes to have
serve as his or her authorized representative. We have separated the
regulation text as proposed at Sec. 435.923(a) at Sec. 435.923(a)(1)
and Sec. 435.923(a)(2).
Comment: We received a number of comments regarding who may serve
as an authorized representative. One commenter recommended that
organizations should not be permitted to be designated as authorized
representatives. Another commenter recommended that we allow states to
decide whether to permit organizations to be authorized
representatives. The commenter suggested that by permitting only
individuals to serve as authorized representatives, states will be
better able to ensure transparency and accountability of the authorized
representative. Another commenter recommended that we add a definition
of organization to Sec. 435.923(e) to clarify what types of
organizations may act as authorized representatives, for example, only
non-profit organizations.
Response: We believe that there are situations in which an
individual may need an organization to serve as his or her authorized
representative and it is appropriate for an organization to serve in
this capacity, such as for individuals residing in a nursing home who
do not have family available to assist them. We are finalizing the
regulation as proposed in this regard. Protections at proposed Sec.
435.923(e), finalized in this rulemaking, are designed to ensure that
organizations serving as an authorized representative adhere to laws
and regulations relating to conflicts of interest and act in the best
interest of the individual.
Comment: We received a number of comments related to the timeframe
for designation of authorized representatives. One commenter
recommended that states be given options or flexibility in this area,
explaining that states may wish to make the designation of the
authorized representative last for 12 months by default, for example,
unless the applicant or beneficiary designates otherwise. Another
commenter recommended that we add that the authorization is valid until
the application is denied or benefits are terminated and the appeal
process is completed.
Response: Our regulations clearly state that applicants and
beneficiaries are able to change authorized representatives at any
time. States may not make a designation automatically expire such that
an individual would need to redesignate an authorized representative
after a given period of time. However, they are allowed to provide
beneficiaries with the opportunity to change their authorized
representative at the renewal point. For example, states can indicate
that a beneficiary has an authorized

[[Page 42175]]

representative and remind the individual that they may keep or change
the representative on the renewal document.
Comment: One commenter asked for clarification on whether the scope
of the authorization is defined by the beneficiary or applicant, or
whether, once invoked, the representative assumes all of the duties
named in the regulations, including ``all other matters'' with either
agency.
Response: We clarify that the scope of the authorization is defined
by the Medicaid applicant or beneficiary.
Comment: We received a number of comments on Sec. 435.923(c),
specifically related to the fact that the designation of an authorized
representative can only be revoked in writing. Commenters suggested
that it would be more appropriate and efficient to allow the
designation to be revoked by all of the modalities by which it can be
made in the first place.
Response: We agree with the commenter's suggestion and have revised
the regulation text accordingly.
Comment: One commenter requested clarification on whether the
permissions given the authorized representative may be granted in part,
for example in tiers, if an applicant so chooses. The commenter
suggested that an applicant may wish to authorize someone to sign his
or her application, but not to receive his or her notices, for example.
Response: We are clarifying that the permissions given to the
authorized representative may be granted in part. The proposed
regulation allows applicants and beneficiaries to designate an
individual or organization to act on their behalf and that the scope of
authorization is defined by the applicant or beneficiary.
Comment: One commenter asked us to confirm that the definition
provided for authorized representatives is the same definition that the
Social Security Administration uses.
Response: We clarify that the definition is not the same.
Comment: A few commenters requested additional clarification
regarding situations in which an individual is unable to personally
elect an authorized representative due to medical incapacity. One
commenter agreed that written designation by the individual or legal
documentation should be obtained in most instances, but the proposed
rule may be overly restrictive in that it could result in unreasonable
delay in determining some individuals' eligibility for Medicaid. The
commenter recommends that states be given the authority to waive this
regulation in instances when obtaining legal documentation to allow
individuals or organizations to act as authorized representatives would
be difficult. Another commenter suggested that legal documentation of
authority to act on behalf of an application or beneficiary under state
law, such as court order establishing legal guardianship or a power of
attorney, should serve in place of written authorizations by the
applicant or beneficiary.
Response: Under section Sec. 435.923(a), legal documentation of
authority to act on behalf of an applicant or beneficiary under state
law, such as a court order establishing legal guardianship or power of
attorney may serve in place of the applicant or beneficiary's
designation. The option to submit such documentation is intended to
enable applicants who do not have the capacity to provide a signature
to authorize representation.
5. Medicaid Eligibility Requirements and Coverage Options Established
by Other Federal Statutes
a. Presumptive Eligibility for Children (Sec. 435.1102)
We proposed to revise existing regulations to align with the
adoption of MAGI-based methodologies.
Comment: One commenter suggested that presumptive eligibility could
be better streamlined by using only a gross income standard for
eligibility determinations.
Response: Current regulations allow states to use either gross
income or to have qualified entities make a closer approximation of the
countable family income, which would be used for a regular
determination by the state agency, by applying simple disregards. We
believe it is appropriate to retain this flexibility for states once
MAGI-based methodologies are in place. Therefore, we are codifying the
flexibility of states in Sec. 435.1102(a), as proposed, to direct
qualified entities to use either gross income or to apply simplified
methods, as prescribed by the state, to better approximate MAGI-based
household income, as defined in Sec. 435.603 of the March 2012 final
rule.
Comment: Many commenters objected to the state option to obtain an
attestation of citizenship or satisfactory immigration status, or state
residency as part of a presumptive eligibility determination. They
suggested that requiring an attestation of immigration status would
likely deter some potentially eligible individuals who often need
urgent access to health care services from receiving care. Further the
commenters suggested that the rules on immigration status are detailed
and complex, and qualified entities cannot reasonably be expected to
understand or explain them to individuals being asked to attest their
status. Some commenters stated that states should have the option to
request self-attestation of citizenship.
Response: We clarify that our proposed rule gave states the option
to require qualified entities or qualified hospitals to request this
information but did not require it. We believe that this option is
important in the context of extending the ability to conduct
presumptive eligibility determinations to hospitals because it limits
the possibility that individuals who are not citizens or qualified
immigrants or residents of the state are found eligible on a
presumptive basis, receive expensive services, only ultimately to be
determined ineligible for Medicaid. Therefore, we are retaining the
language as proposed and maintain this provision as a state option.
Comment: One commenter requested that we add current foster care
children as a presumptive eligibility group in our final regulation.
Response: We clarify that former foster children are already a
population that is eligible to be determined presumptively eligible. We
do not currently have the authority to add current foster care children
as a presumptive eligibility group, but this is unnecessary because
current foster children are automatically eligible for Medicaid and do
not need to be determined presumptively eligible.
b. Presumptive Eligibility for Other Individuals (Sec. 435.1103)
Comment: Some commenters stated that states should have the option
to elect how many presumptive eligibility periods should be allowed for
each pregnancy. Others supported our proposed rule to permit only one
presumptive eligibility period per pregnancy.
Response: We believe that providing pregnant women with one
presumptive eligibility period per pregnancy is reasonable in
accordance with section 1920 of the Act, under which pregnant women may
receive ambulatory prenatal care during a presumptive eligibility
period, defined as continuing through the date a full Medicaid
determination is made under the State plan, or, if a woman does not
submit a regular application through the end of the month following the
month during which the presumptive eligibility determination was made.
Therefore, we are finalizing the regulation as proposed to provide one
presumptive eligibility

[[Page 42176]]

period for pregnant women per pregnancy.
c. Presumptive Eligibility Determined by Hospitals (Sec. 435.1110)
We proposed to add Sec. 435.1110 to implement section
1902(a)(47)(B) of the Act, added by the Affordable Care Act, to give
hospitals the option to determine presumptive eligibility for Medicaid.
The statute provides hospitals participating in Medicaid with this
option whether or not the state has elected to permit qualified
entities of the state's selection to make presumptive eligibility
determinations for children, pregnant women or other specific
populations under other sections of the statute.
We received the following comments concerning the hospital
presumptive eligibility provisions:
Comment: We received many comments related to the establishment of
standards under proposed Sec. 435.1110(d)(1) for hospitals that opt to
make presumptive eligibility determinations. Some commenters encouraged
CMS to provide states with maximum flexibility to implement presumptive
eligibility standards for hospitals, while other commenters stated that
the Secretary should establish federal standards applicable to
hospitals making presumptive eligibility determinations in all states.
Other commenters supported the flexibility given to state agencies to
establish standards, and some stated that states should have even
broader authority to establish clear criteria and qualifications which
hospitals would have to meet to make presumptive eligibility
determinations. Some believe that the Secretary should establish
minimum federal standards and qualifications, with the state option to
impose additional standards. Commenters generally requested additional
guidance to states on how they must work with hospitals that elect to
make presumptive eligibility determinations. Finally, some commenters
stated that the Secretary should establish federal standards for
hospitals that opt to make presumptive eligibility determinations under
Sec. 435.1110 of the regulations, related to the proportion of
individuals determined presumptively eligible by the hospital that
submits a regular application and the percent of such individuals who
are ultimately determined eligible by the agency. Commenters suggested
that states should use the federal standards to determine which
hospitals are capable of making presumptive eligibility determinations.
Response: We are finalizing Sec. 435.1110(d)(1) as proposed.
Oversight of qualified entities making presumptive eligibility
determinations, including qualified hospitals under Sec. 435.1110, is
a state responsibility. Under Sec. 435.1110(d)(1), states may
establish state-specific standards for qualified hospitals that conduct
presumptive eligibility determinations related to the success of
assisting individuals determined presumptively eligible who submit a
regular application and/or are approved for eligibility by the agency.
We believe this is an area more appropriate for state flexibility, than
for imposition of a uniform federal standard for all participating
hospitals across all states. Therefore, we are finalizing Sec.
435.1110(d), as proposed. We will monitor implementation and consider
whether further guidance is warranted.
Per Sec. 435.1110(d)(2), which we also are finalizing as proposed,
state agencies are required to take appropriate correction action for
any hospital that does not meet the standards established by the state
or which the state otherwise determines is not making, or is not
capable or making, presumptive eligibility determinations in accordance
with state policies and procedures. In fulfilling their responsibility
under Sec. 435.1110(d)(2), states may develop other proficiency
standards, training and audits, with which hospitals would need to
comply, to be authorized to make presumptive eligibility determinations
in the state.
Comment: We received many comments on the populations for which
hospitals can make presumptive eligibility determinations. Some
commenters stated that hospitals should be allowed to make presumptive
eligibility determinations for all of the patient populations they
serve. Some commenters recommended that states be given the option to
elect and limit the populations that may be determined presumptively
eligible by hospitals. Some commenters stated that the preamble did not
align with the regulation text relating to this issue in the proposed
rule. Many commenters requested additional clarification on the
populations for which hospitals may make presumptive eligibility
determinations.
Response: We intended to propose that qualified hospitals must be
permitted to make presumptive eligibility determinations based on
income for all of the populations for which presumptive eligibility may
be available in accordance with Sec. 435.1102 and Sec. 435.1103. The
specific reference to children, pregnant women, parents and caretaker
relatives, and other adults in proposed Sec. 435.1110(c)(1) was not
intended to eliminate presumptive eligibility determinations by
hospitals for other populations included in Sec. 435.1103 (that is,
former foster care recipients or women with breast or cervical cancer
or individuals seeking coverage of family planning services). We are
revising the regulation text at Sec. 435.1110(c)(1) to clarify that
states electing to limit the presumptive eligibility determinations
which hospitals can make must permit the hospitals to make presumptive
eligibility determinations based on income for all of the populations
included in Sec. 435.1102 and Sec. 435.1103. Under Sec.
435.1110(c)(2), which we finalize as proposed in this rulemaking,
states may also permit hospitals to make presumptive eligibility
determinations for populations for which income is not the only factor
of eligibility (for example, for individuals who may be eligible under
an eligibility group based on disability, or individuals eligible under
a demonstration project approved under section 1115 of the Act).
Comment: A commenter expressed that hospitals wishing to make
presumptive eligibility determinations should be required to attend
training on policies and procedures established by the states. The
commenter suggested that this was important to maximize the likelihood
that eligible individuals complete the full Medicaid eligibility
process. They supported the proposed rule that states may require
hospitals electing to make presumptive eligibility determinations to
assist individuals in completing and submitting the full application
and understanding any documentation requirements.
Response: In accordance with Sec. 435.1110(a) of the proposed
rule, finalized as proposed in this rulemaking, states are required to
provide Medicaid during a presumptive eligibility period, to
individuals who are determined to be presumptively eligible by a
qualified hospital, subject to the same requirements as apply to the
State options under Sec. Sec. 435.1102 and 435.1103 regardless of
whether the state otherwise has opted to provide Medicaid during a
presumptive eligibility period under either of those sections. While
not necessarily requiring establishment of a formal training program,
current regulations at Sec. 435.1102(b) require states to provide
qualified entities with information on relevant state policies and
procedures and how to fulfill their responsibilities in making
presumptive eligibility determinations. This requirement is unchanged
in this rulemaking and will apply in the case of hospitals electing to

[[Page 42177]]

be a qualified hospital under Sec. 435.1110. If a hospital does not
follow state policies and procedures, or is not successful in helping
individuals to submit regular applications in accordance with standards
established by the state, proposed Sec. 435.1110(d)(2) would require
states to institute appropriate corrective action, including (but not
requiring) termination of the hospital as a qualified hospital. We are
revising proposed Sec. 435.1110(d) by adding paragraph (d)(3) to
provide that the agency may disqualify a hospital as a qualified
hospital only after it has first provided the hospital with additional
training or taken other reasonable corrective action measures.
Comment: A few commenters requested that states should be able to
receive 100 percent FMAP for any recoupments or disallowances CMS may
seek related to an improper eligibility determination by a hospital.
One commenter questioned whether a state can make a qualified hospital
liable when a presumptive eligibility determination results in a denial
for a full Medicaid category.
Response: Under existing regulations, there is no recoupment for
Medicaid provided during a presumptive eligibility period resulting
from erroneous determinations made by qualified entities. Payment for
services is guaranteed during a presumptive eligibility period; without
such a guarantee, providers could not rely on the determination. Under
this provision, states will not be permitted to recoup money from the
hospital (and CMS will not recoup FFP from the state). However, under
Sec. 425.1110(d)(2), a state may disqualify a hospital from conducting
presumptive eligibility determinations if the state finds that the
hospital is not making, or is not capable of making, accurate
presumptive eligibility determinations in accordance with applicable
state policies and procedures. Such a disqualification is permitted
only after the state has provided additional training or taken
reasonable corrective action measures to address the issue. Finally, we
clarify that states may not make a qualified hospital liable when an
individual who was found presumptively eligible by the hospital submits
a full application and is subsequently denied Medicaid eligibility.
Comment: Some commenters requested that for individuals determined
presumptively eligible by a hospital for the adult group under Sec.
435.119 of the March 2012 Medicaid final eligibility rule, a state
should receive 100 percent federal funding for services provided unless
and until the individual completes the eligibility process and is
determined not ``newly eligible'' or eligible for coverage under the
adult group. Commenters suggested that enhanced federal funding is
necessary because there will not be sufficient information available to
determine whether the presumptively eligible individual should be
claimed at 100 percent federal funding or the state's regular FMAP at
the time of the initial presumptive eligibility determination.
Response: While we understand the commenters' concerns, there is no
basis to provide the 100 percent FMAP during a presumptive eligibility
period. The state would receive the increased FMAP provided under the
Affordable Care Act only for individuals who the state determines
actually (not presumptively) qualify for Medicaid under the adult group
and are determined to be ``newly eligible.'' The methodology for such
claims is set forth in the final FMAP regulation (78 FR 19918).
However, states may retroactively adjust claiming to receive the
enhanced matching rate for individuals determined presumptively
eligible who subsequently complete a regular application, are
determined by the state to be eligible for Medicaid under the adult
group and are found to be ``newly eligible.'' Such retroactive
adjustment may extend back to the first month of the month in which the
regular application was filed or up to 3 months prior to the month of
application in accordance with Sec. 435.914 of the regulations
(redesignated at Sec. 435.915 in the March 2012 Medicaid final
eligibility rule).
Comment: One commenter requested that we confirm that Sec.
435.1110(b)(2) of the proposed rule gives states the option to require
that to participate as a qualified hospital, a hospital must assist
individuals in completing and submitting the full application and help
individuals understand any documentation requirements. The commenter
suggested that this function is the same as that of an application
counselor and requests clarification on whether a state could also
require that a hospital that performs presumptive eligibility
determinations must follow regulations in Sec. 435.908 relating to
certified application counselors.
Response: Although we are not requiring hospitals that perform
presumptive eligibility determinations to also furnish services of
certified application counselors, states may impose specific
requirements on hospitals to ensure that they fulfill their role in
assisting individuals with completing and submitting the full
application. At a minimum, states have a responsibility to ensure that
an individual determined presumptively eligible by qualified hospitals
is informed about how to apply and can obtain an application.
Comment: We received several comments on the viability of
presumptive eligibility determinations with the advent of real-time
eligibility determinations. One commenter recommended that states
should have the latitude to require hospitals to use the state's online
application system and determine presumptive eligibility only if a
real-time full eligibility determination cannot be made. Another
commenter suggested that if eligibility can be determined in real-time,
then there is no need for presumptive eligibility, and asked us to
clarify whether the state could terminate use of presumptive
eligibility without violating the Affordable Care Act's Maintenance of
Medicaid Eligibility requirements, as added by section 2001(b) of the
Affordable Care Act (codified at sections 1902(a)(74) and 1902(gg) of
the Social Security Act (the Act).
Response: We agree that the promise of real-time eligibility
determinations makes the role of presumptive eligibility different than
it has been in the past. In situations in which the individual files a
regular application right away, the presumptive eligibility period
would likely be considerably shorter--and eliminated altogether, as a
practical matter, if a real-time determination is made. However, even
with the most modernized systems, there inevitably will be individuals
for whom a real-time eligibility determination will not be possible.
There also will be individuals who will not be comfortable with the
online application, and will instead opt to use the paper application.
In such situations and for such individuals, presumptive eligibility
remains a useful tool to facilitate prompt coverage and enrollment in
the program. States have flexibility to minimize the length of
presumptive eligibility periods by requiring that hospitals and other
qualified entities assist individuals in submitting the single
streamlined application online. States may not terminate use of
presumptive eligibility for pregnant women or individuals with breast
or cervical cancer prior to 2014 or for children prior to October 1,
2019 without violating maintenance of effort.
Comment: One commenter requested clarification on how hospital
presumptive eligibility will interact with eligibility in breast and
cervical cancer groups.

[[Page 42178]]

Response: If a state has elected to provide presumptive eligibility
for individuals with breast or cervical cancer under Sec.
435.1103(c)(2), it can limit qualified entities under that section to
providers which conduct screenings for breast and cervical cancer under
the state's Centers for Disease Control and Prevention (CDC) breast and
cervical cancer early detection program (BCCEDP), and if it has done
so, the state may limit hospitals which may determine presumptive
eligibility for individuals with breast or cervical cancer on that
basis to hospitals that conduct screenings under the state's BCCEDP. In
states that do not opt to provide presumptive eligibility for
individuals with Breast or Cervical Cancer under Sec. 435.1103(c),
states similarly may limit hospitals' ability to determine presumptive
eligibility for individuals with breast or cervical cancer under Sec.
435.1110 to those that conduct screenings under the state's BCCEDP.
6. Coordinated Medicaid/CHIP Open Enrollment Process (Sec. 435.1205
and Sec. 457.370)
We proposed to implement section 1943 of the Act and section 1413
of the Affordable Care Act to require that Medicaid and CHIP agencies
begin accepting the single streamlined application during the initial
open enrollment period to ensure a coordinated transition to new
coverage that will become available in Medicaid and through the
Exchange in 2014. Our proposed rule seeks to ensure that no matter
where applicants submit the single, streamlined application during the
initial open enrollment period, they will receive an eligibility
determination for all insurance affordability programs and be able to
enroll in appropriate coverage for 2014, if eligible, without delay.
Comment: Many commenters supported the proposal in Sec.
435.1205(c)(1) that Medicaid and CHIP agencies to begin accepting the
single streamlined application and MAGI determinations from the
Exchange and to process MAGI eligibility starting in October 2013.
Commenters believe this is necessary to ensure coordination with the
Exchange, and to facilitate a seamless transition to the new coverage
that will become available in Medicaid and through the Exchanges in
2014. Many commenters acknowledged that the public will be hearing
about new coverage options throughout the summer and fall of 2013, and
expressed concern that it would result in confusion if, when people
went to apply for coverage and were found eligible for Medicaid (or
their children eligible for Medicaid or CHIP), they were told to return
several months later and submit a new application.
Response: We agree with the commenters that acceptance of the
single streamlined application by state Medicaid and CHIP agencies
starting in October 2013 is needed to ensure coordination with the
Exchange, and in facilitating new coverage that will be available to
Medicaid-eligible eligible individuals in January 2014. Therefore, we
are finalizing the rule as proposed and confirm that individuals may
not be required to return in January to reapply.
Comment: Some commenters expressed concern that it is unreasonable
to require states to comply with the prescribed time frames for
coordinated enrollment with the Exchange in the proposed rule. They
noted that states must make major policy, operations, and systems
changes to implement federal requirements, which will impact agency
eligibility staff, vendors, clients, and other stakeholders. Pending
final and complete federal guidance, it is a significant challenge for
states to develop policies, design efficient business processes, build
systems and new interfaces, and effectively communicate changes to
clients and stakeholders by the proposed federal implementation dates.
One commenter noted that its state legacy system cannot process or
transfer electronic accounts, which means that the proposed rule has
effectively shortened the timeframe to implement its new eligibility
system by 3 months. Another commenter noted that Medicaid eligibility
systems, policies and staff are not structured to operate in a time-
limited open enrollment environment or to apply competing eligibility
criteria concurrently, and cannot be changed to do so with only a few
months' notice.
Commenters recommended that Medicaid agencies not be required to
begin accepting streamlined applications or determinations from the
Exchange prior to January 1, 2014. Instead, during the initial open
enrollment from October 1, 2013 to December 31, 2013, commenters
requested that at state option, individuals may be required to apply
separately to the Medicaid agency and to the Exchange and to have their
eligibility determined by the corresponding agency. One state
suggested, as an alternative, the information exchanged will be limited
to only the Medicaid-specific information that is included in the
single streamlined application.
Response: We appreciate the operational challenges states face in
preparing for implementation of the Affordable Care Act, but we believe
that these effective dates are central to the success of open
enrollment and we have consistently targeted the October 1 date as we
have worked with states to finance and develop their IT systems. We
have identified a set of seven critical success factors that states
must meet by October 1 in an attempt to prioritize what must be
accomplished within this timeframe. We have regularly shared these with
states via webinars, on the CALT at https://calt.cms.gov/sf/go/doc16369?nav=1, through State Operational Technical Assistance (SOTA)
calls and in IT gate reviews. These include the following: (1) Ability
to accept application data, (2) MAGI rules engine in eligibility
system, (3) MAGI Conversion, (4) Submission of state income thresholds
and flexibilities, (5) Connection to Federally Facilitated Exchange (or
establishment of State Based Exchange), (6) Connection to Federal Data
Services Hub, and (7) Ability to confirm Minimum Essential Coverage.
We recognize the efforts that states are making across a broad
range of areas, and have released regulations, information technology
(IT) guidance, funding opportunities, business process models and other
tools to assist states as they design, develop, implement, and operate
new systems. We will continue to help states fully comply with all
relevant eligibility and enrollment changes, as well as achieve the
necessary degree of interoperability between IT components in the
federal and state entities that work together to provide health
insurance coverage through Medicaid and CHIP, and Exchanges. We are
finalizing the regulation as proposed.
Comment: Several commenters expressed concern that, in the states
which are relying on the FFE and will not be ready to implement the
single, streamlined application by October 2013, there is a significant
risk that people who apply for coverage through the FFE will be told
that they are likely eligible for Medicaid or CHIP, and be sent away
without any real opportunity to enroll in coverage or complete the
application process. These commenters recommended that HHS strengthen
this provision by setting forth a specific timeframe and set of
procedures that states must follow to ensure that they are ready to
implement the single, streamlined application when open enrollment
begins in October 2013. Specifically, they recommended modifying the
final rule to require states

[[Page 42179]]

relying on the FFE to submit information, by September 1, 2013, on
whether they intend to: (1) accept the FFE's determinations of
Medicaid/CHIP eligibility; or (2) to treat the FFE's finding as an
assessment and complete the eligibility determination themselves. In
addition, they recommend including a provision to clearly outline that
before a state can elect the option to treat the FFE's findings as an
assessment, the state must demonstrate that it is (or will be by
October 2013) capable of acting upon such assessments in full
accordance with federal law.
Response: We have a process in place for working with states on
implementation, including the adoption of mitigation strategies where
necessary. We do not believe that a change in the regulations is needed
to effectuate these strategies.
Comment: Many commenters believe that it would be time-consuming
and impractical to require states to evaluate all cases for eligibility
effective in 2013, but that there is a subset of cases that states
should be required to evaluate. Specifically, parents whose MAGI-based
income falls very close to the state's current income eligibility
threshold for parents should be evaluated based on 2013 eligibility
rules. Commenters suggested HHS provide guidance to states on the
appropriate MAGI income threshold to use for determining whether an
individual appears to be potentially eligibility under 2013 rules and
should be assessed for eligibility using those rules. Some commenters
also believe that states should be required to inform people when it
appears that their children qualify for coverage under 2013 Medicaid
and CHIP rules because families are more likely to pursue applications
if they believe that their children will be found eligible for
coverage. Finally, a few commenters believed states should be given the
option to notify a subset of applicants about the process to apply for
coverage with an effective date in 2013 (for example, only those
applicants who appear to be potentially eligible under 2013 rules based
on the available information provided on the single streamlined
application).
Some commenters stated that they are already planning for an
October 2013 implementation date of MAGI eligibility and requested that
states be given this option without need for a waiver. These commenters
recommend states have flexibility in handling applications based on
2013 rules for assessing 2014 coverage. States should be allowed to
request applicants submit supplemental form that includes additional
information to make MAGI determination, or to redirect applicants to
new application; or, states should have flexibility to process
applications using 2013 rules and determine eligibility based on MAGI
proxy when possible.
Response: We recognize the challenge of appropriately evaluating
all applications submitted during the open enrollment period under both
the MAGI-based rules effective January 1, 2014 and under rule in effect
in 2013. However, all applicants must have the opportunity to have
their Medicaid eligibility assessed based on existing Medicaid rules
for 2013 as well as for prospective enrollment effective January 2014.
At a minimum under the regulation at Sec. 435.1205(c)(4)(ii), states
must inform individuals who submit the single streamlined application
during October-December 2013 that coverage may be available in 2013,
but that a different application will need to be completed for
consideration of such coverage, and how the individual can obtain and
submit such application. Alternatively, under Sec. 435.1205(c)(4)(i),
states can use the information on the single streamlined application
submitted to make a determination of eligibility effective in 2013,
based on 2013 rules, following up with the individual to obtain
additional information if needed through additional questions or use of
a supplemental form, if needed. States also can pursue a combination of
these strategies--using the process outlined in Sec. 435.1205(c)(4)(i)
for targeted individuals more likely to be found eligible under 2013
rules (for example, parents and caretaker relatives with MAGI-based
income within a threshold margin of the applicable income standard and
individuals indicating potential disability on the single streamlined
application), while directing those not seen as likely-eligible under
the 2013 rules to submit a separate application in accordance Sec.
435.1205(c)(4)(ii).
States may wish to avoid having to operate two sets of rules for
children, parents and caretaker relatives, pregnant women and other
non-disabled, non-elderly adults that may be eligible for Medicaid
enrollment during this period. To address this, we are offering states
the opportunity to begin using the new MAGI-based methodology for these
populations effective October 1, 2013, to coincide with the start of
the open enrollment period. See State Health Official Letter
13-003: Facilitating Medicaid and CHIP Enrollment and Renewal
in 2014 at http://www.medicaid.gov/Federal-Policy-Guidance/Downloads/SHO-13-003.pdf.
Comment: One commenter stated that requiring post-eligibility data
matching to ensure continued eligibility as of January 1, 2014 for
individuals determined not eligible in October-December but eligible in
January, creates an enormous burden during a time when new systems are
being implemented and states will be experiencing the largest influx of
newly eligible individuals into their system. The commenter noted this
would create duplication of efforts when an individual who was
determined eligible prior to January is already notified of their
reporting requirements and states should be allowed to rely on
recipients reporting rather than handling the same cases twice in a 3-4
month timeframe.
Response: Post-eligibility data matching is an option for states to
ensure continued eligibility as of January 1, 2014 and/or through the
first regularly-scheduled renewal. It is not required. The agency also
has the option to schedule the first renewal for individuals who apply
during the open enrollment period, and determined eligible effective
January 1, 2014, to occur anytime between 12 months from the date of
application and January 1, 2015. Consistent with Sec. 435.916,
beneficiaries are required to report any change in circumstances that
may impact their eligibility. In the absence of any reported change
that could affect eligibility, no post-eligibility data matching is
required.
Comment: One commenter requested that CMS clarify Sec.
435.1205(c)(3)(ii) that this state option [to schedule the first
renewal under Sec. 435.916 to occur anytime between 12 months from the
date of application and January 1, 2015] authorizes less than annual
periods of coverage/eligibility before renewal in instances where
renewal date is set before January 1, 2015.
Response: This option does allow for less than 1 year of coverage
for a limited time. For example, if someone applies on November 1,
2013, and is determined eligible for coverage to begin January 1, the
state may schedule renewal on November 1, 2014. This would result in
less than a year of coverage. This one-time option is intended to
provide for ease of administration in the renewal of coverage for a
large number of individuals whose coverage begins on January 1, 2014
and would otherwise need to be renewed at the same time.
Comment: We sought comments in the proposed rule on which sections
of both this rulemaking as well as the March 2012 Medicaid eligibility
final regulation need to be effective October 1, 2013 (as opposed to
January 1, 2014) to enable states to meet their

[[Page 42180]]

responsibilities under Sec. 435.1205 and Sec. 457.370 of this
rulemaking. We received no comments in response to this request.
Response: In the absence of any comments regarding this question,
we have determined that the following provisions of the March 2012
Medicaid eligibility final rule are effective October 1, 2013 for
purposes of effectuating Sec. 435.1205 and Sec. 457.370 of this final
regulation during the initial open enrollment period beginning October
1, 2013:
Sections 435.603, 435.911, 435.1200, 457.315, 457.330 and
457.348;
Amendments to Sec. Sec. 431.10, 431.11, 435.110, 435.116,
435.119, 435.907, 435.916, 435.940-435.956, 457.340 and 457.350, and
the redesignation of Sec. 435.911 through Sec. 435.914 as Sec.
435.912 through Sec. 435.915.
In addition, the following provisions of this final rule are
effective October 1, 2013: Sec. Sec. 435.918, 435.1205, 457.370, and
revisions to Sec. Sec. 431.10, 431.11, 431.201, 431.205, 431.206,
431.211, 431.213, 431.230, 431.231, 431.240, 435.119, 435.603, 435.907,
435.1200, 457.110(a)(1), 457.348, and 457.350.
Although effective for purposes of codification in the Code of
Federal Regulations October 1, 2013 for application during the initial
October 1-December 31 open enrollment period, absent a waiver under
Sec. 1115 of the Social Security Act approved by the Secretary,
financial eligibility based on MAGI-based methodologies codified at
Sec. 435.603 and Sec. 457.315 and eligibility for adults under Sec.
435.119 are not effective under the Affordable Care Act until January
1, 2014. Technical revisions to Sec. 435.119 to retain the
applicability date of January 1, 2014, even as the effective date of
that section is moved to October 1, 2013, are made in this rulemaking.
No revisions to Sec. 435.603 or Sec. 457.315 are required, as those
sections, as published in the March 2012 Medicaid final eligibility
rule, already provide for the January 1 applicability date.
7. Children's Health Insurance Program Changes
a. CHIP Waiting Periods (Sec. 457.340, Sec. 457.350, Sec. 457.805
and Sec. 457.810)
We proposed revisions to existing regulations regarding prevention
of substitution of coverage at Sec. 457.805 to limit the use of CHIP
waiting periods to a maximum of 90 days. This policy aligns with
section 1201 of the Affordable Care Act, which amended section 2708 of
the Public Health Service Act to prohibit waiting periods exceeding 90
days for health plans and health insurance issuers offering group or
individual coverage. This standard, though not directly applicable to
CHIP, is currently exceeded in roughly half of the states that impose
CHIP waiting periods today. We also proposed to require several
exemptions to waiting periods, consistent with policies that many
states have in place today, such as for individuals working for
employers that stopped offering coverage of dependents. We received the
following comments on our proposed waiting period policy as described
below.
Comment: Many commenters urged CMS to eliminate waiting periods on
January 1, 2014, rather than permit states to continue to impose
waiting periods of any length of time for children. A few commenters
encouraged CMS to retain its current policy of providing states with
the discretion to maintain waiting periods and establish their own
procedures to minimize displacement of private insurance, and some
states expressed their intent to eliminate waiting periods in their
CHIP programs in 2014. One commenter suggested that waiting periods be
applied only to children with family incomes above 200 percent of the
FPL. Commenters' concerns with the proposed 90-day waiting period were
related to the administrative burden of waiting periods for state CHIP
agencies and Exchanges, potential hindrances to streamlined and
coordinated enrollment, disruptions in continuity of care for children
and a lack of evidence of substitution.
Response: While we acknowledge the commenters' concerns related to
the continuation of waiting periods for children in 2014, we also see a
need to permit states flexibility to determine an appropriate
substitution prevention strategy, with a full range of options from
monitoring to imposition of waiting periods up to 90 days. Some states
have already eliminated their CHIP waiting periods and we encourage
other states to consider taking this step. Nothing in this final rule
precludes a state from doing so. States may also elect to eliminate
waiting periods specifically for children at lower income levels and/or
identify additional exemptions to the waiting period beyond those
required in this rule. Therefore, to maintain states' flexibility in
identifying substitution strategies while also limiting the period of
time a child may not be eligible for CHIP due to a waiting period, we
are finalizing the provisions at Sec. 457.350, Sec. 457.805 and Sec.
457.810 as proposed to permit states to impose a waiting period of no
more than 90 days, with certain specified exemptions. We note that this
policy is consistent with the 90-day maximum waiting period described
in Section 1201 of the Affordable Care Act.
Comment: Many commenters were concerned that the proposed policy
for a maximum 90-day waiting period would require states and Exchanges
to set up administratively complicated processes to temporarily enroll
children in QHPs and to receive APTCs and CSRs while awaiting CHIP
eligibility during the waiting period. Several commenters expressed
concerns with the administrative complexity of the interactions that
must occur between the Exchange and the CHIP agency if a waiting period
is in place, including the requirement at Sec. 457.350 for the CHIP
agency to send the electronic record back to the Exchange for
enrollment in a QHP if the child is determined not eligible for CHIP.
These commenters also expressed concern that these potential
complications do not align with the streamlined eligibility and
enrollment process envisioned by the Affordable Care Act. Many
commenters stated that requiring the change to a 90-day maximum waiting
period policy would be administratively burdensome and costly to states
at a time when information technology systems are already overburdened
in preparation for significant eligibility changes in 2014. Some
commenters highlighted that it is likely that some state systems will
not have the capacity to track children who are locked out of CHIP
during a waiting period and others expressed concern as to whether
states or the Federal government have the capacity to smoothly
implement waiting periods in the manner suggested in the proposed rule
without a disruption in coverage for children. Some commenters also
indicated that if waiting periods were to exist in 2014, state CHIP
agencies would need to both track when these children would become
eligible for CHIP and also initiate action to enroll children in the
program.
Response: For states that opt to apply a waiting period in 2014, we
agree that transitioning a child from one insurance affordability
program to another upon the conclusion of a 90-day waiting period may
present operational challenges. States must take into consideration
their system capabilities and weigh the perceived benefits of opting to
have a waiting period against any additional administrative or system
requirements needed to effectuate a seamless transition of such
children from coverage in the Exchange and APTC to the state's CHIP at
the conclusion of the 90-day period. We agree that CHIP agencies will
need to track when these children become

[[Page 42181]]

eligible for CHIP as required at Sec. 457.350. In addition, we have
further clarified at Sec. 457.340(d)(4), that without requiring new
applications or information previously provided, CHIP agencies must
implement processes to ensure a smooth transition for children from
coverage through the Exchange to CHIP at the end of a waiting period,
as well as facilitate the enrollment of otherwise CHIP-eligible
children who have satisfied the waiting period, but who were not
covered in the Exchange. For example, a state could automatically
enroll a previously determined CHIP-eligible child at the end of the
waiting period without requesting any additional information from the
family. Another option would be for a state to suspend applications for
all children subject to a waiting period. Once these children have
completed the waiting period, the state would then reactivate the
application and determine whether the child is eligible for CHIP based
on the information previously provided on the application. There is
nothing in the above options that precludes a state from checking data
sources for updated information or processing a change in circumstances
reported by the family.
Comment: Many commenters stressed that waiting periods of any
length could negatively impact children's access to continuous and
coordinated health coverage. For example, commenters expressed concern
that the proposed rule permitting CHIP-eligible children to enroll in
qualified health plans (QHPs) in the Exchange during a waiting period,
and subsequently enroll in CHIP at the end of a waiting period, will
stimulate churning between QHPs and CHIP. These commenters emphasized
that disruptions in coverage will impact the health status of children
who are left uninsured and/or may have to change plans or providers.
Some commenters stated that movement between plans and programs will
inhibit the QHPs' ability to measure the quality of care provided to
children, and makes it difficult to hold plans accountable for
improvements in quality outcomes for children over time.
Response: We acknowledge that the use of waiting periods may create
delays in eligibility for CHIP and increase the likelihood of churning
between the Exchange and CHIP, which could result in disruptions in
coverage that could negatively impact the health status of children.
Therefore, this final rule confirms states' ability to eliminate
waiting periods to accommodate these concerns. In addition, the final
rule codifies the limitation of waiting periods to a maximum of 90
days, to be consistent with waiting periods under section 1201 of the
Affordable Care Act. We encourage states to examine the costs and
benefits of imposing a waiting period in the context of the Affordable
Care Act. To make the transition from Exchange coverage to CHIP as
smooth as possible for children, states that do choose to maintain
waiting periods will need to meet the requirements at Sec. 457.350(i),
including providing notification to the appropriate insurance
affordability program (for example, the Exchange) promptly and without
undue delay of the date on which the waiting period will end and the
child will be eligible to enroll in CHIP. We will provide states with
technical assistance in this area.
Comment: Several commenters indicated that while there were initial
concerns upon implementation of CHIP in the late 1990s that the
incentives for substitution of public coverage for private coverage
would be significant, states and researchers have had ample opportunity
to examine this issue over the last 15 years. These commenters stated
that numerous studies have shown that substitution is difficult to
measure, there continues to be much conjecture regarding the degree to
which substitution occurs, and that there is no evidence that
procedures like waiting periods actually prevent substitution. These
commenters also noted that there is evidence that uninsured children,
including children in waiting periods, frequently forego medical
services due to high out-of-pocket costs.
One state reported that during an almost 15-year period, there has
been no evidence that crowd out is a concern, including for children at
higher income levels. The commenter reported that the percentage of
children in families who dropped their employer sponsored coverage and
substituted it for CHIP has been consistently below 2 percent since the
inception of CHIP. This commenter recommended that we permit monitoring
of crowd out at all income levels rather than continuing to require a
substitution strategy, such as a waiting period, for higher income
children. Another commenter stated that in their experience in
operating CHIP, nearly all families with former employer-sponsored
insurance meet at least one of the exemptions to waiting periods
included in its CHIP state plan.
Response: We recognize that there is a robust but inconclusive
evidence base in the literature calling into question the prevalence of
substitution. And, we are therefore, revising our existing regulations
to provide states with flexibility to determine how best to operate
their CHIP programs. The preamble of the existing regulation (66 FR
2490, January 11, 2001) required that states that provide CHIP coverage
to children at or below 200 percent of the Federal poverty level (FPL)
must have procedures for monitoring the rate of substitution of
coverage, between 200 and 250 percent of the FPL must monitor
substitution and identify specific strategies to limit substitution if
levels become unacceptable, and for coverage above 250 percent of the
FPL states must describe how substitution is monitored and implement
specific strategies to prevent substitution. We clarify in this final
rule that effective January 1, 2014, monitoring of substitution is a
sufficient approach for addressing substitution at all income levels.
We expect that if this monitoring demonstrates a high rate of
substitution, a state will consider strategies such as improving public
outreach about the range of health coverage options that are available
in that state.
Comment: Some commenters requested that CMS provide clarity
regarding the criteria for specific exemptions (for example, children
with special health care needs), and suggested additional types of
mandatory exemptions at the Federal level (for example, employees that
have employers that have changed health plans or products). Some
commenters noted that states have previously implemented many of the
proposed required exemptions and that the majority of applicants
already qualify for state-identified exemptions to the waiting period.
Response: As noted by some commenters, many of the mandatory
exemptions in the proposed rule have previously been instituted by
states on a voluntary basis and have been effective. Therefore, we are
adopting in our final rule the proposed exemptions at Sec. 457.805. In
addition, and as discussed in the preamble of our proposed rule, we are
adding an affordability exemption at Sec. 457.805(a)(i) for cases when
a child's parent is determined eligible for APTC for enrollment in a
QHP through the Exchange because the employer-sponsored insurance (ESI)
in which the family was enrolled is determined unaffordable in
accordance with 26 CFR 1.36B-2(c)(3)(v). We consider this exemption to
be essential to preventing families from having to choose between
continuing ESI that has been determined to be unaffordable for the
parent, and thereby forgoing premium tax credits and cost-sharing
reductions for enrollment in an QHP, or dropping the ESI and allowing
their child to go without coverage for a period of time to

[[Page 42182]]

qualify for CHIP. We note that states continue to have the flexibility
to provide additional exemptions beyond those specified in this final
rule, but other than the affordability exemption at Sec.
457.805(a)(i), there will be no additional exemptions added in this
final rule. We note that we intend to issue further sub-regulatory
guidance related to criteria for required waiting period exemptions.
Comment: One commenter requested that CMS delay the effective date
of this provision to give states adequate time to make the necessary
changes related to its waiting period policy, such as a change in state
law and/or budget.
Response: This provision will be effective on January 1, 2014
unless a change in state law is needed for a state to comply with this
provision. Specifically, for states with annual legislative sessions,
the effective date for the application of the 90-day maximum waiting
period and required exemptions must be no later than the first day of
the next fiscal year beginning after the close of the first regular
session of the 2014 state legislature. For states that have a 2-year
legislative session, each year of the session is considered a separate
regular session for this purpose.
b. Limiting CHIP Premium Lock-Out Periods (Sec. 457.570)
We proposed to define a CHIP premium lock-out as a period not
exceeding 90 days when, at state option, a CHIP eligible child may not
be permitted to reenroll in coverage if they have unpaid premiums or
enrollment fees. Following a premium lock-out period, we proposed that
the child must be permitted to enroll without regard to past due
premiums. We proposed at Sec. 457.570 to permit states to impose
premium lock-out periods only for families that have not paid
outstanding premiums or enrollment fees, and only up to a 90-day
period. We also specified that a premium lock-out period must end once
a family has paid the premium or enrollment fee. We also invited
comments on any alternative late payment policies to encourage families
to make their CHIP premium payments in a timely manner to avoid gaps in
coverage. We received the following comments concerning the proposed
lock-out period provision.
Comment: The majority of commenters supported the proposed rule
requiring reasonable notice of non-payment, limiting the use of lock-
outs only for non-payment of premiums (and only as long as the non-
payment continues, and subject to a 90-day maximum), and disallowing
states from requiring payment of outstanding premiums at the end of the
lock-out period before re-enrollment. In particular, commenters
strongly supported that the CHIP agency must review the family's
circumstances (Sec. 435.570(b)) to determine if their income has
declined, making the child eligible for Medicaid or a lower cost-
sharing category. Some commenters also strongly opposed the imposition
of lock-out periods for any length of time for a CHIP child, and urged
CMS to modify Sec. 457.570 to ban lock-out periods. These commenters
indicated that lock-outs are contrary to the goals of a reformed health
system, as well as the health of children. Some commenters stressed
that a quarter of a year without health insurance can have a
significant impact on a child's healthy development, a child should not
be subject to penalties for a failure to pay by another family member,
and the Affordable Care Act recognizes that children should connect
with their medical home eight times in the first year of life alone.
One commenter also stated that lock-out periods in CHIP create
disruptions in care, burdens on families, unnecessarily increase
administrative costs, and that the elimination of lock-out periods is
an important consumer protection.
A few commenters asked whether the process of premium collection
and debt forgiveness will be aligned with the premium collection
regulations for the Exchange.
Response: In response to the support of our proposed rule by the
majority of commenters, and comments received by states related to the
need to continue to have non-payment of premium policies in place to
manage program costs (as described below), we are adopting in our final
rule the proposed provisions that authorized states to institute a
maximum 90-day lock-out period for non-payment of premiums. Lock-outs
are permitted for non-payment of premiums, but only as long as the non-
payment continues and subject to a 90-day maximum. We also want to
clarify that requirements related to reasonable notice of nonpayment,
and review of the family's circumstances to determine if their income
has declined (for example, making the child eligible for Medicaid or a
lower cost-sharing category), are existing regulatory provisions that
we have not modified by this rulemaking.
We appreciate the concerns expressed by some commenters with regard
to the potential impact of any lock-out period on children, and for
these reasons, we also adopted in the final rule the proposed
restriction that lock-out periods may only apply to families who have
not paid their premiums, and must end if a family pays its past due
premium. We have also maintained the requirement that children must be
permitted to enroll in CHIP subsequent to a 90-day lock-out period
regardless of whether the family continues to owe past due premiums. In
addition, we are also including requirements for non-payment of premium
that are intended to align CHIP policies with policies applicable in
the Exchange, to the extent possible. In CHIP and for those individuals
with APTC in the Exchange, individuals are provided with a premium
payment grace period, may be disenrolled for non-payment of premiums,
and will not be required to pay past due premiums to reenroll in
coverage. Exchange eligible individuals will have a longer grace period
(90 days as opposed to 30 days) than CHIP, but will not be permitted to
enroll in coverage until the next open enrollment period. Therefore,
the amount of time an individual may have to wait before reenrollment
in a Qualified Health Plan will vary, depending on when the premiums
are missed in relation to the next scheduled open enrollment period,
but will be no longer than 90 days for a child in CHIP.
We note that neither CHIP nor the Exchange have explicit rules
governing debt forgiveness policies. More information on the Exchange
rules related to non-payment of premiums is available at http://www.gpo.gov/fdsys/pkg/FR-2012-03-27/pdf/2012-6125.pdf.
Comment: A few commenters requested clarification on policies
governing non-payment of premiums. They requested clarification on
policies related to ``forgiving'' past due premiums and enrollment
fees, as well as whether a state can continue to try to obtain the
outstanding premium amount without affecting eligibility. One commenter
indicated that funds should be recoverable using a debt collection
process. The same commenter also asked how many cycles of premium
forgiveness would be allowed for an individual. Another commenter asked
CMS to generally clarify what steps states and health plans would be
permitted to take in situations in which a CHIP enrollee re-enrolls
after a lock-out period and again does not pay premiums.
Response: We believe that disenrolling a child from coverage and
potentially requiring a child to go without coverage up to 90 days
(assuming the family has not paid the premium or enrollment fee), is a
significant deterrence to prevent a family from establishing a pattern
of non-payment of premiums and re-enrollment. Therefore, this rule does
not place a limit/cap on the number of times

[[Page 42183]]

an individual may be re-enrolled after non-payment of their premiums.
Nothing in this rule precludes a state from electing to establish
policies for collecting debt from families that have not made their
premium payments. Nor does this rule preclude states and health plans
from offering incentives to encourage timely payment of premiums.
Comment: Some commenters recommended that states only be permitted
to terminate coverage during a continuous eligibility period for
failure to pay premiums as proposed at Sec. 457.342(b) after complying
with the disenrollment protections at Sec. 457.570. Several commenters
stressed that the proposed rule should be strengthened to capture the
intent noted in the preamble that ``prohibiting a child from enrollment
after the family pays the unpaid premium or enrollment fee is counter
to promoting enrollment in and continual coverage.'' Some commenters
also recommended that the final rule specify that if a family pays its
outstanding premium between the end of their payment grace period and
before the end of the lock-out period, the child be reinstated back to
the effective end date with no gap in coverage and no loss of 12-month
continuous eligibility (if applicable).
Response: We agree that coverage terminations occurring during a
continuous eligibility period for failure to pay premiums can be
implemented only after complying with the disenrollment protections at
Sec. 457.570, and we have modified Sec. 457.342(b) to clarify this
requirement. In addition to the preamble language describing that
families that pay their premiums or enrollment fees prior to the end of
a lock-out period must be re-enrolled in CHIP, we have also specified
this requirement at Sec. 457.570(c)(2) under this final rule. Section
2103(e)(3) of the Act describes a statutory premium grace period during
which CHIP enrollees may pay their monthly premiums before being
disenrolled. This provision requires States to grant individuals
enrolled in separate child health programs a 30-day grace period, from
the beginning of a new coverage period, to pay any required premium
before enrollment may be terminated. The new coverage period begins the
month following the last period for which a premium was paid. Aside
from these requirements, states have, and will continue to have,
flexibility to determine when coverage can be reinstated. As specified
in our proposed rule at Sec. 457.342(b), continuous eligibility may be
terminated for failure to pay required premiums or enrollment fees.
Comment: Some commenters expressed concerns for potential
unintended consequences of the proposed policies. One commenter stated
that the proposed rule creates an incentive for individuals who are
otherwise able to pay their premium to cycle through CHIP eligibility
every other three month period and encourages gaps in access to medical
services for children, who may subsequently present to the CHIP with
higher acuity levels and higher cost needs. The commenter also stated
that the proposed rule increases costs for states and the federal
government, and diminishes health outcomes for children. The commenter
encouraged CMS to continue to require member accountability in the CHIP
program by allowing the collection of outstanding premiums in the
presence of a 90-day grace period. Another commenter objected to the
proposed rule to limit lock-out periods to 90 days and allow an
individual to re-enroll upon payment of past due premiums, regardless
of whether the lock-out period has expired. The commenter stated that
this approach creates adverse selection, in that families may stop
paying their premium when they may not have immediate health care
needs, and then again pay their premiums only when they are in need of
health care. Additionally, this commenter stated individuals should be
required to pay any past due premiums as a condition of retaining
eligibility for CHIP, even after a lock-out period has been satisfied.
This commenter also stated that the proposed rule discards the plain
statutory authority of title XXI that delegates this policy to states.
Another commenter noted that CHIP is a ``stepping stone'' between
Medicaid and employer-sponsored insurance or Exchange coverage, and
that premiums in its current CHIP are minimal in comparison to
employer-based coverage and private coverage. The commenter requested
that premiums not be waived in states with requirement to repay
outstanding premiums and no lock-out period. The commenter stated that
waiving premiums does not promote responsibility, intrinsic value, or
the effective management of program costs for states.
Response: The goal of allowing coverage for families that make
current payments must be balanced with the concern that families will
game the system to try to obtain coverage without paying premiums. We
agree that there may be situations where families either elect, or are
unable to pay their premiums multiple times during a given year.
However, we are not aware of any evidence that these situations
represent a significant number of cases. And, as stated in our response
to the comment above, as long as states adhere to regulations at Sec.
457.570, nothing in this rule precludes a state from continuing to
establish policies for collecting debt from families that have not made
their premium payments. We also encourage states to continue
implementing approaches for simplifying premium payment arrangements
and coping with administrative concerns families may have, and we
continue to encourage states in this area to minimize the number of
families that are disenrolled for non-payment of premiums.
Comment: One commenter stated that if CHIP lock-out periods are
allowed in 2014, CMS should prohibit states that use this option from
requiring children subject to a lock-out period to reapply for coverage
and that a child returning to coverage following a lock-out period
should be handled in the same manner as a renewal. The commenter
believes that because such children were eligible for CHIP apart from
non-payment of premiums or enrollment fees, the state agency should be
able to reassess eligibility based on available electronic data sources
and families should only be asked for additional information if what
has already been provided and currently available electronic data are
not sufficient to establish eligibility.
Response: While we encourage states to consider the potential
administrative cost savings and reduced burden on families that could
result from assigning a pending eligibility status to a child for non-
payment of premiums rather than requiring a new application, we will
continue to permit states to have the flexibility to make this
decision.
Comment: One commenter requested clarification on whether a child
can receive APTC or CSR during a premium lock-out period.
Response: We anticipate that this issue will be addressed in
further guidance from the Department of Treasury.
Comment: The preamble to our proposed rule specified that a state
may not require the collection of past due premiums or enrollment fees
as a condition of eligibility for reenrollment once the lock-out period
has expired, regardless of the length of the lock-out period. One
commenter recommended that this policy also be specified in Sec.
457.570(c)(2).
Response: Section 457.570(c)(2) clearly specifies that ``a state
may not require the collection of past due premiums or enrollment fees
as a condition of eligibility for reenrollment

[[Page 42184]]

once the State-defined lock out period has expired, regardless of the
length of the lock-out period.'' We have not made any modifications to
this section.
Comment: Some commenters indicated that providing multiple ways to
pay premiums and sending multiple, non-threatening payment due
reminders are helpful in encouraging payment. These commenters
suggested that CMS consider future sub-regulatory guidance to states to
promote best practices in premium payments.
Response: Most CHIPs report efforts to facilitate payment of
premiums and enrollment fees, easing the process for families, and the
majority of states also send multiple payment due reminders and allow a
variety of payment methods (such as allowing families to make payments
at multiple locations). We will consider issuing further sub-regulatory
guidance in this area.
8. Premium Assistance (Sec. 435.1015)
We proposed to codify the last sentence of section 1905(a) of the
Act that authorizes payment of ``other insurance premiums for medical
or any other type of remedial care or the cost thereof'' to support
enrollment of individuals eligible for Medicaid in plans in the
individual market, including enrollment in QHPs doing business on the
Exchange. Premium assistance is one mechanism for facilitating the
coordinated system of coverage between Medicaid, CHIP, and the Exchange
in 2014. It provides an option for states to assist families who wish
to enroll in the same health plan when some family members are eligible
for either Medicaid or CHIP while other family members obtain coverage
in the Exchange with advance payments of the premium tax credit, and it
can provide a way to minimize the extent to which individuals have to
change plans when their circumstances change such that their
eligibility for an affordable health insurance plan changes. The
proposed rule reflected longstanding statutory provisions in light of
the new coverage options available in 2014. We received the following
comments to proposed premium assistance provisions:
Comment: Many commenters were supportive of states' ability to use
premium assistance authority to purchase private insurance coverage for
health plans in the individual market, including QHPs doing business on
the Exchange. At the same time, however, they emphasized the importance
of ensuring that Medicaid and CHIP-eligible individuals receive the
full scope of services to which they are guaranteed in Medicaid and
CHIP, such as the full range of pediatric services provided in Medicaid
and CHIP. Commenters urged CMS to take steps to ensure that states
provide families and individuals with all of the information they need
regarding the benefits to which they are entitled. They noted that the
information states track to ensure cost-effectiveness should also be
used to assess whether children and adults are receiving the full
package of Medicaid or CHIP services. One commenter suggested that
states should be required to ensure that beneficiaries experience a
seamless enrollment process and that they have a single insurance card
and point of contact for all benefits.
Response: Under all premium assistance arrangements, Medicaid and
CHIP-eligible individuals remain Medicaid or CHIP beneficiaries and
continue to be entitled to all Medicaid/CHIP benefits and cost sharing
protections. Thus, we require at Sec. 435.1015(a)(2) and (a)(3) that
the state agency furnish all benefits covered under the state plan that
are not available through the individual health plan and also that the
individual does not incur any cost sharing in excess of that allowed in
Medicaid. We expect states to have mechanisms in place to ensure that
beneficiaries understand their available choices of either direct state
plan coverage or coverage through premium assistance for an individual
health plan, including a QHP in the Exchange, under the premium
assistance option, as well as how to access any additional benefits or
cost sharing assistance. Therefore, we have revised Sec. 435.1015(b)
to include provisions requiring informed choice and information on the
process for accessing additional benefits and help with cost sharing,
if the individual elects to receive coverage through the premium
assistance option. We do not believe, however, that it is appropriate
to direct through rulemaking the specific procedures states must employ
to provide any necessary ``wraparound'' benefits or cost sharing; under
the state plan option, states have the flexibility to determine how
best to meet these cost sharing and benefit responsibilities. We have
also clarified in Sec. 435.1015(b) that states must require that
individuals who have elected to receive premium assistance must obtain
covered items and services through the individual health plan to the
extent that the insurer is contractually or otherwise responsible to
pay for such benefits.
Comment: Some commenters expressed specific concerns about cost
sharing policies and urged CMS to consider putting additional
beneficiary protections in place specific to premium assistance to
ensure that people understand the cost sharing differences between
Medicaid and CHIP and QHPs. They recommended that we create
requirements for coordination between Medicaid and the QHP issuer to
ensure that people do not exceed permissible cost sharing and asked CMS
to provide guidance on how to monitor cost sharing.
Response: We expect states to have mechanisms in place to provide
benefits that wrap around health plan coverage to the extent that the
health plan offers fewer benefits, or has greater cost sharing
requirements than in Medicaid or CHIP. These mechanisms will need to be
coordinated with the health plan to successfully implement a premium
assistance program. As noted above, we are requiring at Sec.
435.1015(b) that states inform individuals how to access additional
benefits not provided by the insurer, and also inform individuals how
to receive cost sharing assistance. We are not proposing any specific
requirements about the way in which such coordination can be
effectuated, however, because we believe that states should have
flexibility to develop effective coordination procedures consistent
with state systems and procedures, including variation in state health
care delivery systems.
Comment: Many commenters requested clarification of the cost-
effectiveness test for premium assistance. They stressed the importance
of a strong cost-effectiveness test to ensure that taxpayer dollars are
spent wisely and also that beneficiaries do not lose important benefits
and cost sharing protections. They were concerned that the proposed
rule could be interpreted to include only the cost of premiums to
purchase coverage and not to include in the test the costs associated
with paying copayments, deductibles, and other cost sharing
requirements. They believe that this should be clarified in the final
rule to explicitly include cost sharing. Other commenters stated that
this cost-effective analysis should be performed on an annual basis to
ensure that the premium assistance program remains cost-effective even
if Medicaid and the individual market experience different rates of
cost growth.
Response: Consistent with our approach to cost-effectiveness in all
premium assistance authorities, we intend for states to consider the
cost sharing requirements of the private health plan (and therefore the
cost of providing the cost sharing protections) when determining
whether premium assistance is a cost-effective option, and we agree
that this should be clarified. Therefore, we are revising Sec.
435.1015(a)(4) accordingly. States

[[Page 42185]]

implementing premium assistance must describe their cost-effectiveness
methodology, and to the extent that such a methodology relies on annual
per person costs, we would expect states to be re-running the analysis
at least annually, as new cost data is available.
Comment: Many commenters requested additional detail on how the
option would be operationalized by state Medicaid agencies, Exchanges,
and QHPs. One noted that successful premium assistance programs require
robust data sharing, data mining, automated calculations using cost-
effective algorithms, and strong relationships with private insurers.
Some commenters requested that CMS provide states with a template or
other tools to simplify the implementation of premium assistance.
Response: We will continue to provide technical assistance to
states on the operational aspects of pursuing this premium assistance
approach, relying on the experience states have had over the years
implementing premium assistance.
Comment: Some commenters stated that families should have the
choice of either premium assistance or direct Medicaid state plan
coverage, even when premium assistance is cost-effective for the state,
and they supported the proposed rule's provision that states may not
require enrollment in premium assistance as a condition of Medicaid
eligibility. Other commenters requested that CMS remove the voluntary
participation requirement either entirely, or if this requirement is
retained, they asked that states be allowed to make participation in
premium assistance mandatory for certain Medicaid enrollees, such as
adults up to 138 percent of the FPL who would be part of the state's
Medicaid expansion population, or for pregnant women with incomes above
133 percent of the FPL.
Response: Consistent with the statute, we are retaining the
provision at Sec. 435.1015(b) that states may not require a Medicaid-
eligible individual, as a condition of receiving Medicaid benefits, to
enroll in a health plan in the individual market through a premium
assistance arrangement. Enrollment in individual market coverage is not
a statutory condition for eligibility. We are also clarifying in Sec.
435.1015(b) that states must require that individuals who have elected
to receive premium assistance must obtain covered items and services
through the individual health plan to the extent that the insurer is
contractually or otherwise responsible to pay for such benefits. This
is consistent with the provision in section 1902(a)(17) of the Act
that, in determining the amount of medical assistance, states may
consider available resources, and the provision in section 1902(a)(25)
of the Act that requires that states ensure that liable third parties
pay primary to Medicaid. We address the issue of requiring enrollment
in premium assistance for certain populations in the last response in
this section.
Comment: Several commenters expressed concern that permitting state
Medicaid programs to establish premium assistance programs could affect
premiums in the Exchange. Some commenters recommended that CMS revise
the proposed Sec. 435.1015(a)(4) to require that premium assistance
not increase federal costs and not increase premiums in the individual
market.
Response: Medicaid beneficiaries enrolled in a QHP would be
included in the individual market single risk pool of the health
insurance issuer of the plan in which they are enrolled, just as any
other individual obtaining coverage through such plans. Sec.
435.1015(a)(4) requires the cost of premium assistance to be
``comparable'' to the cost of providing direct coverage under the state
plan. We do not use a more restrictive word to allow flexibility
because the amount, duration, and scope of the QHP coverage, or the
nature of the QHP service delivery system, might be different from
direct coverage under the state plan.
Comment: Some commenters stated that CMS must take additional steps
to ensure that states do not steer family members of Medicaid-eligible
individuals into less expensive plans to accommodate a premium
assistance model and also to ensure that any enrollees who will be
using premium tax credits have sufficient choice in QHPs. The
commenters stated that regulations should require states to remain
impartial in providing all available information on all QHPs so the
family can choose the best plan or plans for the entire family, and
also that Navigators, application assisters, and application counselors
must be trained on the premium assistance program and provide impartial
assistance to families.
Response: As noted above (and at Sec. 435.1015(b)), when a state
implements the state plan premium assistance option, the beneficiary's
participation must be voluntary. We also expect states to ensure that
application assisters and certified application counselors comply with
the requirements in Sec. 435.908 of this part and Sec. 457.340 under
subpart C of part 457, which include requirements that they be
effectively trained in the eligibility and benefits rules and
regulations governing enrollment in a QHP through the Exchange and all
insurance affordability programs operated in the state. In addition,
the Exchange regulations at 45 CFR 155.210 require that Exchange
Navigators provide impartial information and assistance. A Medicaid or
CHIP enrollee who is receiving benefits in whole or in part through a
premium assistance arrangement with a QHP will not be eligible for a
premium tax credit under section 36B of the Internal Revenue Code
because such credits are not available to individuals who, for the
coverage month, are eligible for minimum essential coverage through
Medicaid or CHIP.
Comment: A few commenters questioned whether section 1905(a)(29) of
the Act creates the authority for premium assistance in the individual
market. Many commenters recommended that CMS eliminate the proposed
policy to allow premium assistance for plans in the individual market,
or otherwise tightly circumscribe it, citing cost concerns, as well as
concerns about the operational complexity and potential consumer
confusion for consumers created by the ``wrap'' requirement.
Response: As we stated in the preamble of the proposed rule (78 FR
4624 and 4625), in section 1905(a)(29) of the Act, ``medical
assistance'' is defined to include payment of part or all of the cost
of ``other insurance premiums for medical or any other type of remedial
care or the cost thereof.'' We have interpreted this provision to
permit payment of FFP for premiums for health plans for Medicaid-
eligible individuals, provided the state determines it cost-effective
to do so. CMS has approved state premium assistance programs under this
authority prior to the enactment of the Affordable Care Act. The
Affordable Care Act provided for new rules regulating the operation of
the individual and small group insurance markets, and expanded access
to insurance coverage through QHPs participating in the Exchange. This
results in new opportunities for states to deliver Medicaid coverage
through the purchase of private health insurance in the individual
market. Our goal is to work with states to ensure that their premium
assistance approaches result in a cost-effective, seamless, and
coordinated system of health care for beneficiaries.
Comment: Several commenters recommended delaying implementation of
premium assistance until rates are determined for QHPs in the Exchange,
and the individual market has settled from the changes it will
experience in

[[Page 42186]]

2014, and states have experience implementing the Medicaid expansion.
Response: As we noted above, premium assistance is an option
available under current law. Some states have already expressed
interest in using the premium assistance model to deliver benefits to
their Medicaid expansion beneficiaries through QHPs doing business on
the Exchange. In addition, beginning in 2014, some low-income children
will be covered by Medicaid or CHIP while their parents obtain coverage
in the Exchange with advance payments of the premium tax credit, and
premium assistance provides an opportunity for state Medicaid and CHIP
programs to offer coverage to such families through the same plan, even
if supported by different payers. It also provides opportunities for
continuity of care by increasing the likelihood that individuals could
remain in the same health plan when moving back and forth between
Medicaid and Exchange coverage due to fluctuations in income or other
changes in circumstances. We are not establishing new authority but
rather ensuring that the existing authority reflects the new coverage
options in the individual and small group markets established by the
Affordable Care Act.
Comment: Many commenters supported the retention of the proposed
regulation text that makes FFP available for payment of health plan
premiums for ``individuals'' eligible for Medicaid. They believe that
this language supports the enrollment of Medicaid-eligible individuals
in individual market plans, including plans offering family coverage,
while not incorporating limiting definitions of ``family'' that would
unnecessarily limit the benefits of the rule to individuals in families
that do not comprise a taxpayer household. One commenter asked for CMS
to clarify the meaning of ``family'' as used in the premium assistance
section of the preamble of the proposed rule. The commenter also
questioned whether this option is limited to Medicaid and CHIP-eligible
individuals who have family members enrolled in an individual health
plan, and if so, asked if we proposed to limit this option to members
of the same tax household, MAGI assistance group, or to immediate
family members.
Response: We have not proposed a definition of ``family'' that is
unique to premium assistance. Regulations at Sec. 435.603 of this part
(and at Sec. 457.301 and Sec. 457.315 under subpart C of part 457 for
CHIP) contain definitions and requirements related to family size,
household, and MAGI-based income for the purposes of Medicaid and CHIP
eligibility determinations.
The premium assistance option permits Medicaid or CHIP funds to be
used to deliver coverage to Medicaid or CHIP-eligible individuals
through the purchase of private health insurance, and it is not limited
to Medicaid or CHIP-eligible individuals who have family members
enrolled in a QHP. In some cases, the Medicaid or CHIP beneficiary
could be enrolled in a health plan that provides individual coverage
only, while in other situations, the Medicaid or CHIP beneficiary would
be enrolled in a health plan that provides family coverage, depending
on the categories of family coverage offered in the Exchange.
Comment: Some commenters, who were in favor of the continued
authorization of premium assistance programs, stated that states should
be allowed to determine how to make the concept work and urged CMS to
allow complete state flexibility in designing and implementing benefit
structures and cost sharing requirements.
Response: Individuals receiving coverage through premium assistance
are Medicaid beneficiaries and are entitled to the full range of
protections, including benefits and cost sharing, available under the
law. States have flexibility under the state plan option to design how
they will effectuate the coverage that is required while meeting
applicable statutory and regulatory requirements. To the extent a state
needs additional flexibility, the state may wish to explore
demonstration options under section 1115 of the Act.
Comment: Several commenters recommended that premium assistance
programs might require, or best be operated under, a Medicaid section
1115 demonstration.
Response: States have the flexibility to adopt premium assistance
as an option under the state plan if it is voluntary for beneficiaries
and adheres to all applicable statutory and regulatory provisions.
Enrollment in individual market coverage is not a statutory condition
of eligibility. Some states have expressed interest in submitting
proposals for section 1115 demonstrations to require enrollment in
premium assistance and to allow for consideration of a broader range of
factors when cost-effectiveness is assessed. In response to these
inquiries, we will consider approving a limited number of premium
assistance demonstrations that are determined to further the objectives
of the Medicaid program and which will test these new arrangements and
inform policy. For states that implement premium assistance through a
section 1115 demonstration, which could include mandatory enrollment
into premium assistance, we will only consider demonstrations under
which states make arrangements with the health plan to provide
wraparound benefits and cost sharing assistance. For further
information on the section 1115 option, including guidelines for
proposals, please refer to Premium Assistance Frequently Asked
Questions (FAQs) that CMS issued on March 29, 2013, available at http://medicaid.gov/State-Resource-Center/FAQ-Medicaid-and-CHIP-Affordable-Care-Act-ACA-Implementation/Downloads/FAQ-03-29-13-Premium-Assistance.pdf
9. Changes to Modified Adjusted Gross Income and MAGI Screen
We proposed to implement sections 1902(e)(14) and 1943 of the Act,
and section 1413 of the Affordable Care Act as they pertain to the
definition of ``modified adjusted gross income'' (MAGI) and ``household
income'' in section 36B(d)(2) of the Internal Revenue Code of 1986
(``36B definitions''). We also proposed a modification to previously
issued regulations implementing section 1902(e)(14)(I) of the Act. The
proposed rule applied the 5 percent disregard established by the Act
for purposes of determining the income eligibility of an individual for
medical assistance whose eligibility is determined based on MAGI,
provided the determination was for the eligibility group with the
highest income standard under which the individual could be determined
eligible using MAGI-based methodologies. The proposed changes are
discussed in more detail in the January 22, 2013 Medicaid Eligibility
proposed rule (78 FR 4625 through 4627). We received the following
comments concerning the proposed changes to MAGI provisions:
Comment: Some commenters supported the proposal to apply the 5
percent disregard only to the highest income threshold under a MAGI-
group available for the individual and the related impact on the number
of individuals for whom states will be able to claim the ``newly
eligible'' enhanced match rate.
Response: The Affordable Care Act established a 5 percentage point
of the FPL disregard ``for the purposes of determining income
eligibility'' for individuals whose eligibility is based on MAGI. The
objective of the proposal is to balance giving beneficiaries the
benefit of the disregard for eligibility purposes, with the intent to
give states the opportunity to claim enhanced match for all newly
eligible individuals

[[Page 42187]]

if the state chooses to extend coverage to the new adult group. We
propose doing so by ensuring that the disregard is applied to the
income calculation of individuals for whom the disregard matters for a
determination of eligibility for Medicaid under MAGI-based rules--that
is, those for whom the application of the disregard means the
difference between being eligible for Medicaid and being ineligible.
These individuals are those whose income is within 5 FPL percentage
points of the highest net income standard for which they can obtain
Medicaid eligibility under MAGI-based income rules. The disregard would
not be applied for a determination of eligibility for a particular
eligibility group, but rather for eligibility for Medicaid.
Comment: One commenter questioned whether the proposed policy is
consistent with federal law, which the commenter views as entitling all
applicants to the 5 percent disregard. The commenter stated that our
proposed policy could affect beneficiaries' cost sharing or benefits
because it could result in a change in their eligibility groups. Some
commenters noted that, for example, some parents could receive ABP
coverage instead of the traditional Medicaid benefit package. The
commenters noted, however, that this concern should be minimal since
newly eligible adults who are medically frail and likely to need
additional services covered under the regular Medicaid benefit package
would have a choice of benefit package, between what is offered through
an ABP that is based on section 1937 requirements, inclusive of EHB's,
and ABP coverage that is not subject to section 1937 requirements, and
includes the services approved in the state's Medicaid plan. Other
commenters cited concerns about pregnant women and categories that
offer only limited pregnancy-related services.
Response: The proposal to apply the 5 percent disregard to
determine Medicaid eligibility rather than eligibility for a particular
category is consistent with section 1902(e)(14)(I) of the Act. It is
not necessarily the case that not applying the 5 percent disregard for
purposes of determining eligibility category would result in moving
individuals into a different eligibility group with different benefit
and possibly cost-sharing rules because if the 5 percent disregard were
applied as a general disregard, states would set income eligibility
standards at levels that would compensate for that impact. For example,
if the 5 percent disregard was applied generally, states might set the
income eligibility standard for parents at a level 5 percent less than
they would otherwise. Moreover, any adverse impact of a shift of
beneficiaries from the parent group to the new adult group with
coverage through an ABP will be minimized by the medically frail
exception to benchmark coverage limitations. For pregnant women with
income at the border between full benefits and pregnancy-related
benefits, although the absence of the disregard may result in a
pregnancy-related benefit package instead of full benefits, our March
2012 rule revised Sec. 435.116(d)(3) to clarify that a State's
coverage of pregnancy-related services must be consistent with Sec.
440.210(a)(2) and Sec. 440.250(p), which allows States to provide
additional services related to pregnancy to pregnant women (see 77 FR
17149).
Comment: Several commenters recommended that CMS not revise the
MAGI disregard rules. They raised concerns that there is too little
time for states to make the systems and business process updates
required to comply with the October 1, 2013 open enrollment period.
They noted that the proposed rule requires more complex programming
compared to simply adding 5 percent to all MAGI-based categories and
that this policy could impact a state's ability to implement the MAGI
requirements timely. In addition, they noted that although the 90/10
matching funds are available to make such systems-related changes,
states must still finance 10 percent of the cost of these changes
despite experiencing severe budgetary issues.
Response: We understand that many states relied upon the March 2012
final eligibility rule when planning their eligibility system builds
for 2014. We appreciate that it may be difficult at this point in time
to make programming changes for eligibility systems and have those
changes take effect by January 1, 2014. In light of this challenge, we
are finalizing our proposal, but we will not take any compliance
actions for states whose systems cannot accommodate this eligibility
determination requirement. We will approve eligibility determination
systems even if as of January 1, 2014, the system applies the 5 percent
disregard across the board to all individuals whose eligibility is
determined using MAGI-based rules, based on a state's assurance that by
January 1, 2015 the state will update the system to apply the disregard
only for a determination of eligibility for Medicaid under MAGI-based
rules.
Comment: Some commenters requested that states that are not
expanding to cover the new adult group--and thus not claiming enhanced
FMAP--should have the option to use the new calculation and continue to
apply the 5 percent across- the-board disregard. Others requested that
all states be given the option to apply the 5 percent disregard only to
the highest income threshold under MAGI as proposed in our proposed
rule.
Response: We believe that applying the 5 percent FPL disregard to
determine eligibility based on overall eligibility rather than
eligibility group is the best interpretation of section 1902(e)(14)(I)
of the Act. Therefore, we are adopting our proposed policy as final,
subject to the flexibility in implementation schedules discussed above.
Comment: One commenter asked whether the 5 percent MAGI income
disregard would be applicable to only eligibility for the coverage
group or whether it would also be applicable to cost-sharing or premium
determinations --within the coverage group.
Response: Under this final rule, the 5 percent disregard under
section 1902(e)(14)(I) of the Act applies to income determinations
relative to Medicaid eligibility. It does not apply to determine into
which eligibility group an individual should be placed. Nor is it
intended to be applied to determine income for premium or cost-sharing
payments.
Comment: One commenter requested clarification about whether, in a
state that implements the eligibility expansion under section 2001 of
the Affordable Care Act (that is, adopts the adult group), the state
would need to apply the 5 percent disregard to a parent or caretaker
relative age 65 or older that was not eligible for the expansion group.
Response: The 5 percent disregard is not applied based on an
eligibility group, but based on whether the disregard would affect
MAGI-based income eligibility for Medicaid as stated above. In the case
of a parent or caretaker relative age 65 or older, the 5 percent
disregard would be applied in determining MAGI-based income if the
individual would otherwise be ineligible based on income. For example,
if the parent/caretaker eligibility standard in a state was 80 percent
of FPL and the individual's income before application of the disregard
put them over the 80 percent standard, the 5 percent disregard would be
applied and the individual would be eligible if the disregard brought
their countable income below 80 percent of the FPL.
Comment: Another commenter asked for clarification of whether the 5
percent is only applied when an individual would not be eligible in
another group

[[Page 42188]]

or if it would apply to all individuals being determined for
eligibility in the group. The commenter specifically asked about
whether the 5 percent disregard would be applied to keep family
coverage in the Transitional Medical Assistance (TMA) group.
Response: TMA is beyond the scope of this rulemaking. TMA will be
addressed in future guidance.
Comment: Several commenters questioned whether applying the 5
percent disregard to the MAGI income standards equivalent being
produced through the process generally referred to as `MAGI conversion'
creates a double counting of the disregard. Other commenters asked
whether states are being required to expand their income levels for
pregnant women and children by 5 percent due to application of the
disregard.
Response: We considered carefully the requirements in section
1902(e)(14)(A) of the Act in our December 2012 guidance to states on
the establishment of converted MAGI-based income standards equivalent
to levels used at the enactment of the Affordable Care Act (``MAGI
conversion''). See http://www.medicaid.gov/Federal-Policy-Guidance/downloads/SHO12003.pdf. Under this guidance, converted MAGI-based
income standards are set without regard to the 5 percent disregard,
since the MAGI income conversion requirements in section 1902(e)(14)(A)
of the Act are independent of the 5 percent disregard at section
1902(e)(14)(I) of the Act. MAGI-equivalent income standards are
established taking into account disregards that are currently in effect
but which will no longer be in effect under MAGI. As a result, there is
no double-counting of the 5 percent disregard. The 5 percent disregard
would apply once when calculating an individual's MAGI-based income if
the individual would otherwise be ineligible.
Comment: Several commenters requested clarification regarding how
the 5 percent disregard under MAGI applies to applicants under a
separate CHIP program. Similarly, commenters asked how the 5 percent
disregard is applied to individuals at the boundary between Medicaid
and CHIP eligibility.
Response: The 5 percent disregard should be applied to individuals
who may be eligible for the highest income standard under the
applicable Title of the Act (for example, Title XIX or Title XXI) for
which the individual may be determined eligible using MAGI-based
methodologies. Therefore, in states that have separate CHIP programs,
the income disregard should be applied both for the highest Title XIX
eligibility group available to the child, as well as to the separate
CHIP program to cover similarly situated children at a higher income
standard. The result would be that children with a MAGI in the 5
percent band above the Medicaid income standard at issue would be
determined eligible for Medicaid. To clarify, we are modifying the
language in the final rule at Sec. 435.603(d)(4) to specify that the 5
percent disregard should be applied to the highest income standard in
the applicable Title of the Act under which the individual may be
determined eligible using MAGI-based methodologies. We do not believe
this will impact the children for whom the state can claim enhanced
match, because the state can claim enhanced match for any child whose
income is greater than the upper income threshold under Medicaid on
March 31, 1997, whether that child is covered under Title XIX or Title
XXI.
Comment: One commenter asked whether there is any reason it would
not be permissible for a state to program its eligibility system to
build in the 5 percent disregard and effectively set the income limit
at 5 percent higher than the state's established limit for MAGI related
eligibility groups.
Response: Because the disregard is applied at the individual level,
increasing the eligibility income standard for a group would not be the
best way to program an eligibility system. Furthermore, doing so would
be inconsistent with the statutory purpose of developing a uniform
income determination methodology applicable in all states, which could
be applied by the Exchange as well as the State Medicaid or CHIP
agency. Therefore, this would not be permissible. Instead if the
eligibility system cascades sequentially through possible eligibility
options, it should apply the 5 percent as one last eligibility step,
only when the system has returned a determination of ineligibility
because the individual is over scale for income.
10. Single State Agency--Delegation of Eligibility Determinations to
Exchanges (Sec. 431.10 and Sec. 431.11)
We proposed to revert to the policy proposed in the Medicaid
eligibility proposed rule published on August 17, 2011 (76 FR 51148),
that single state Medicaid agencies will be limited to delegating
eligibility determinations to Exchanges that are government agencies
maintaining personnel standards on a merit basis. We retained many of
the provisions strengthening the control and oversight responsibilities
of the single state agency including the authority to issue policies,
rules and regulations on program matters and to exercise discretion in
the administration or supervision of the plan. We also proposed to make
changes to Sec. 431.11 regarding state organization. We received the
following comments concerning the proposed changes to the single state
agency provisions:
Comment: The majority of commenters strongly support the decision
to revert to the policy originally proposed in the August 2011 Medicaid
eligibility rule that delegation of the authority to determine
eligibility for Medicaid is limited to Exchanges that are government
agencies maintaining personnel standards on a merit basis. One state
specifically commented that it supports this change as it allows states
to maintain program integrity. Several other commenters noted that this
construct has been a consistent legal interpretation for many decades.
Other commenters noted that many state Medicaid employees are trained
social workers who have the knowledge and experience to help our
country's most vulnerable citizens, ensuring consistency and
accessibility to benefits.
Response: We appreciate commenters support for our proposed policy,
and therefore, we are adopting in this final rule the policy that
delegation of the authority to determine eligibility for Medicaid is
limited to Exchanges that are government agencies maintaining personnel
standards on a merit basis. This is the policy that we originally
proposed in our August 2011 proposed rule and that was re-proposed in
the January 2013 proposed rule. We believe that under the best read of
the statute, determining Medicaid eligibility is an inherently
governmental function that must be performed by governmental agencies.
For purposes of delegation, we are treating a quasi-governmental
entity or public authority running an Exchange and employing merit
system protection principles as a government agency such that
delegation to it would be permitted. Although we were explicit in the
proposed regulation at Sec. 431.10(c)(1)(i)(B), Sec. 431.10(c)(2) and
Sec. 431.10(c)(3)(i) regarding authority to delegate to public
authorities, we are deleting these references to public authorities in
the final rule to conform with the Exchange regulation which only
explicitly requires at Sec. 155.20 that Exchanges be governmental
agencies or non-profit entities established by a state.
Comment: Some commenters wrote that they especially appreciate the
recognition that Medicaid agencies would not be parties to contractual

[[Page 42189]]

relationships between the Exchange and an entity engaged by the
Exchange to determine eligibility, which would make it impossible for
the Medicaid agency to provide appropriate oversight. They support
maintaining the requirement that the Medicaid agency provide oversight
when responsibility for the eligibility determination is delegated to
another agency, because monitoring and oversight is necessary
regardless of whether the delegation is to a government or non-
government agency. They recommended that such oversight should include
review of a sample of eligibility decisions made by the Exchange,
scrutiny of the ``logic'' used in information technology systems to
ensure that Medicaid policy is being applied in an accurate manner,
regular observations of the processes used by the Exchange in making
eligibility determinations, participation by Medicaid agency staff in
training of Exchange staff, and monitoring of complaints and appeals.
Many commenters suggested more specific requirements in regulation that
should be added to Sec. 431.10(d), specifying the oversight and
monitoring required in the agreement between the Medicaid agency and
Exchange or Exchange appeals entity include training for the Exchange
or Exchange appeals entity, as well as monitoring of the systems being
built.
Response: We agree that the single state agency should be required
to provide oversight when responsibility for the eligibility
determination is delegated to another agency and are finalizing our
proposal requiring this. We appreciate the commenter's various
suggestions regarding quality control and oversight by the Medicaid
agency and believe they are within the ambit of what is intended by
Sec. 431.10(c)(3)(ii), requiring the Medicaid agency to exercise
appropriate oversight over the eligibility determinations and appeals
decisions made by such agencies to ensure compliance with paragraphs
(c)(2) and (c)(3)(i) of this section and institute corrective action as
needed. We believe Sec. 431.10(c)(3)(ii) can be exercised in various
ways including those suggested by the commenters. We also agree that
participation by Medicaid agency staff in training of Exchange staff
would be valuable. We believe that the requirements in Sec. 431.10(d)
which specify the requirements for the agreement between the Medicaid
agency and the Exchange or Exchange appeals entity include the
requisite quality control and oversight language.
Comment: Many commenters recommended ways to ensure a coordinated
system by engaging non-profits and private contractors in the process
of supporting the Medicaid and CHIP eligibility determination, while
not allowing them to determine eligibility. Recommendations included
providing assistance to consumers with the application and enrollment
process as certified application counselors and operating call centers,
providing basic information to potential applicants. One commenter
suggested that any contract over the amount of $1 million entered into
by the State for services which support eligibility determination, such
as data-matching or application/eligibility screening, be submitted to
the Department of Health and Human Services for review.
Response: We agree that certified application counselors and call
center administration are ways to engage non-profits and private
contractors in the Medicaid eligibility process while assuring all
final eligibility determinations are made by governmental entities.
However, we do not believe it necessary to subject state contracts for
support services related to eligibility determinations to special
oversight rules. We believe that the single state agency's
responsibility for determining and/or overseeing eligibility
determinations includes oversight of such support functions.
Comment: One commenter noted that, while there is value in
continuing the role of public employees in Medicaid eligibility
determinations, this decision can be expected to have the inadvertent
effect of requiring ``hand offs'' in some states between privatized
Exchanges and Medicaid agencies. Specifically, in states operating a
privatized Exchange, the Exchange will now be unable to conduct a full
Medicaid determination, which means that an individual who applies for
coverage via an Exchange and is found likely eligible for Medicaid will
be ``bounced'' to the Medicaid agency for a final determination.
Families with children, in particular, are likely to be ``bounced''
because they are eligible for Medicaid or CHIP at far higher income
levels than adults in all states. As a result the commenter recommended
that Sec. 435.1200(d) include a new subpart requiring states to report
to HHS and to make publicly available data on the share of applicants
who are determined potentially eligible for Medicaid or CHIP by an
Exchange who are eventually enrolled. Moreover, they recommended that
procedures should be outlined for HHS to evaluate the data and take
corrective action if data revealed that significant numbers of people
are ``falling through the cracks'' because they must navigate multiple
agencies when trying to secure coverage for themselves or their
children.
Response: States will be required to establish performance
standards in their state plans in accordance with Sec. 435.912. To
further this work, earlier this year, we issued a request for
information (RFI) regarding performance indicators for Medicaid and
CHIP business functions. The RFI explained that CMS intends to begin
collecting and reporting on information including data regarding
individual (applicant and beneficiary) experience with eligibility and
enrollment. One of the indicators proposed under the eligibility and
enrollment domain was ``accurate eligibility determinations,''
including a proposed ``accurate transfer rate''. The accurate transfer
rate would be measured by the percent of individuals transferred to
Medicaid, CHIP, or the Exchange, as applicable, who are determined
eligible by that agency. We are currently reviewing the comments
received and finalizing our proposal for implementation of performance
reporting. For further information about the RFI, see our Web site at
http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Data-and-Systems/Downloads/RFI-Performance-Indicators-1-24-13.pdf.
Comment: One commenter requested that we provide public access to
agreements between the Medicaid agency and other entities conducting
determinations. Some commenters also requested that we require public
posting of the agreements on internet Web sites.
Response: We have provided in Sec. 431.10(d) that agreements with
federal, state or local entities making eligibility determinations or
appeals decisions be available to the Secretary upon request. To the
extent that the Secretary requests and obtains a copy of an agreement
under Sec. 431.10(d), the public can request a copy of the agreement
through the Freedom of Information Act, 5 U.S.C. 552. These agreements
may also be obtained at the state level under state freedom of
information act laws.
Comment: Some commenters opposed this policy reversal from the
previous Medicaid eligibility rule, and noted that, since that rule was
issued, several states have relied on it to inform their decisions on
establishing a State-Based Exchange, as well as to plan for Exchange
and Medicaid systems and operations in future years. They believe these
decisions and activities cannot easily be amended or changed in a short
timeframe, and this policy change could have a major impact on the work
states have completed, as well as their future

[[Page 42190]]

plans. They requested that CMS revoke the proposed change.
Response: We appreciate the challenges facing states, which is why
we signaled nearly a year ago on May 16, 2012, in guidance titled
``General Guidance on Federally-facilitated Exchanges'' our intent, in
light of public comments received on the final Medicaid and Exchange
eligibility regulations, to propose further comment regarding ways that
States could ensure coordinated systems when engaging non-profits and
private contractors in the process of making Medicaid eligibility
evaluations, while having government agencies make eligibility
determinations. See http://cciio.cms.gov/resources/files/ffe_guidance_final_version_051612.pdf. We have also shared our intent to
propose revised rules in webinars with states on the eligibility rules
and in individual state meetings.
11. Conversion of Federal Minimum Income Standards for Section 1931 of
the Act (Sec. 435.110 and Sec. 435.116)
We proposed to require conversion of the federal minimum income
standard for section 1931 of the Act to comport with the new rules
regarding modified adjusted gross income (MAGI) that will take effect
on January 1, 2014. Sections 1902(e)(14)(A) and (E) of the Act ensure
that, in the aggregate, individuals who would have been eligible under
Medicaid rules in effect prior to the Affordable Care Act remain
eligible once the new MAGI-based methodologies go into effect. Our
proposal to direct conversion of the federal minimum standard for
section 1931 implements the conversion requirements in the statute more
consistently, which is particularly important in light of the Supreme
Court's decision in National Federation of Independent Business v.
Sebelius, ---- U.S. ----; 132 S. Ct. 2566; 183 L.Ed. 2d 450 (2012). The
proposed changes are discussed in more detail in the January 22, 2013
proposed rule (78 FR 4628 and 4629).
We received no comments on our proposed policy to convert the
federal minimum standard for section 1931 of the Act, and therefore,
are finalizing our proposal in Sec. 435.110. This policy relates to
the coverage levels for parents and caretaker relatives in states that
do not implement the eligibility expansion in section 2001 of the
Affordable Care Act to provide coverage for the low-income adult group.
In addition, because pregnancy benefits for pregnant women under Sec.
435.116(d)(4)(i) are tied to the same May 1, 1988 AFDC income standard
for the applicable family size, we are finalizing our proposal in Sec.
435.116 that this income limit should also be converted.

B. Essential Health Benefits in Alternative Benefit Plans

Section 1937 of the Act provides states with the flexibility to
amend their Medicaid state plans to provide for the use of benefit
packages other than the standard Medicaid state plan benefit package
offered in that state, for certain populations defined by the state.
These ABPs are based on benchmark or benchmark-equivalent packages.
There are four benchmark packages described in section 1937 of the Act:
The benefit package provided by the Federal Employees
Health Benefit plan (FEHB) Standard Blue Cross/Blue Shield Preferred
Provider Option;
State employee health coverage that is offered and
generally available to state employees;
The health insurance plan offered through the Health
Maintenance Organization (HMO) with the largest insured commercial non-
Medicaid enrollment in the state; and
Secretary-approved coverage, which is a benefit package
the Secretary has determined to provide coverage appropriate to meet
the needs of the population provided that coverage.
Benchmark-equivalent coverage is provided when the aggregate
actuarial value of the proposed benefit package is at least actuarially
equivalent to the coverage provided by one of the benefit packages
described above, for the identified Medicaid population to which it
will be offered. Section 1937 of the Act further provides that certain
categories of benefits must be provided in any benchmark-equivalent
plan, and other categories of benefits must include ``substantial
actuarial value'' compared to the benchmark package.
That said, we appreciate that it may be difficult at this point to
make changes to the ABP that take effect by January 1, 2014. In light
of this challenge, we will partner with states to work as quickly as
possible to come into full compliance with these provisions. We do not
intend to pursue compliance actions on these issues to the extent that
states are working toward but have not completed a transition to the
new ABPs on January 1, 2014.
Conforming Changes to Medicaid To Align With Essential Health Benefits
We proposed to implement section 2001(c) of the Affordable Care Act
that modifies the benefit provisions of section 1937 of the Act.
Specifically, section 2001(c) of the Affordable Care Act added mental
health benefits and prescription drug coverage to the list of benefits
that must be included in benchmark-equivalent coverage; required the
provision of Essential Health Benefits (EHBs) beginning in 2014; and
directed that section 1937 benefit plans that include medical/surgical
benefits and mental health and/or substance use disorder benefits
comply with the Paul Wellstone and Pete Domenici Mental Health Parity
and Addiction Equity Act of 2008 (MHPAEA).
In addition, we proposed to implement section 1902(k)(1) of the
Act, which requires that medical assistance for, the new eligibility
adult group for low-income adults under section 1902(a)(10)(A)(i)(VIII)
of the Act must receive medical assistance provided through an ABP
(which must include coverage of EHBs as of the same date).
We also proposed to implement section 1937(a)(2)(B)(viii) of the
Act, which provides that individuals in the new mandatory eligibility
group for former foster care children under age 26 are exempt from
mandatory enrollment in an ABP.
We proposed to implement section 1937(b)(7) of the Act, which
provides that medical assistance to individuals described in section
1905(a)(4)(C) of the Act (individuals of child bearing age) through
enrollment in an ABP shall include family planning services and
supplies.
We proposed to codify in Sec. 440.345(e) the process to determine
how often states would need to update ABPs after December 31, 2015.
We also proposed to add a new Sec. 440.347 to incorporate section
2001(c)(5) of the Affordable Care Act.
Furthermore, anti-discrimination provisions found at section
1302(b)(4) of the Affordable Care Act were proposed to be codified
Sec. 440.347(e).
1. General Comments
Comment: One commenter stated they support the structure for
implementing EHBs as proposed.
Response: CMS appreciates the support.
2. Alignment With Essential Health Benefits Provisions
a. Scope of Alternative Benefit Plans (Sec. 440.305)
We proposed to add the new adult eligibility group as an
eligibility group that must receive benefits consistent with section
1937 of the Act. We also proposed that groups provided ABP coverage
under section 1937 of the Act may be identified based on individual
characteristics and not by the amount or level of FMAP funding.

[[Page 42191]]

Comment: Many commenters commended the addition of language
prohibiting states from targeting Medicaid expansion populations solely
on the basis of applicable matching rate. In addition, many commenters
applauded language proposing to codify the flexibility HHS has given to
states to use the Secretary-approved option in section 1937 of the Act
to extend comprehensive Medicaid coverage to the newly-eligible
expansion population. The commenters further urged CMS to partner with
states to ensure that this population's full range of mental health and
substance use needs and other health needs will be met.
Response: We thank the commenters for their support.
Comment: One commenter questioned the inclusion of the sentence
which states, ``Enrollment in ABPs must be based on the characteristics
of the individual rather than the amount or level of federal matching
funds.'' The commenter stated this to be an unnecessary statement since
eligibility for FMAP is based on eligibility category. It is unclear
why enrollment in a benchmark plan would impact FMAP.
Response: People who qualify for eligibility under the new adult
eligibility group will be determined to be either newly eligible or
already eligible. For Medicaid coverage provided to the newly eligible
population, the state will receive 100 percent FMAP in 2014 and for
those who are determined to be eligible under December 2009 state
rules, the state will receive its otherwise applicable FMAP. We
included this language to clarify that states may not design different
benefit packages based on the level of FFP they will receive, but
rather the benefit package should be designed based on the medical
needs of the population being served.
Comment: One commenter believed that the use of ABPs will assist
states with expanding coverage in a meaningful way. However, the new
adult population may have unique health care needs, including a high
incidence of behavioral health and social issues. The commenter
believed that the use of the ABPs would be most beneficial if they are
used to tailor the scope of services and alignment of benefits to
ensure adequate delivery systems for high need populations.
Response: Section 1937 of the Act offers flexibility for states to
provide medical assistance by designing different benefit packages plan
for different groups of eligible individuals. We agree with the
commenter that ABPs can be successfully designed to meet the needs of
the new adult population, including those with varying health care
needs. As long as each benefit package contains all of the EHBs, much
flexibility exists for states to meet the needs of beneficiaries.
Comment: One commenter was concerned that individuals age 50 to 64
may not be provided EHBs that are at least equal to those available to
high-income individuals who purchase coverage on the commercial
markets.
Response: We understand that there could be some variation in EHBs
as defined for the individual market and for Medicaid based on the
selection of different benchmark plans to define EHBs. But the
flexibility to select different benchmark plans to define EHBs for
Medicaid ABPs will allow states to address the unique needs of each
circumstance and promote administrative simplicity, while still
providing a floor for coverage. As long as that floor is met, Medicaid
beneficiaries in the new adult group can also receive benefits from the
selected coverage options under section 1937 of the Act or through
substitution of benefits.
Comment: One commenter stated it is important that all individuals
obtaining Medicaid coverage under the Affordable Care Act receive
health coverage appropriate for their needs, including strong coverage
for mental health and substance use disorders. The commenter also wrote
it is important that traditionally Medicaid eligible populations that
may be enrolled in ABPs are guaranteed adequate coverage.
Response: ABP flexibility is an option that states can choose to
use in redesigning their current Medicaid benefit program. The
requirement that ABPs include EHBs and comply with mental health parity
requirements ensures a minimum level of sufficiency of the coverage.
Comment: One commenter requested that HHS require or give states
the option to provide EPSDT coverage to 19- and 20-year olds who
qualify for the new adult group.
Response: The existing provisions of Sec. 440.345 require states
to make available EPSDT services as defined in section 1905(r) of the
Act that are medically necessary for those individuals under age 21 who
are covered under the State plan. We did not propose to change this
requirement. To the extent that any medically necessary EPSDT services
are not covered through the ABP plan, states must supplement the ABP
plan to ensure access to these services. EPSDT provisions apply to 19-
and 20-year olds who qualify for the new adult group.
Comment: One commenter believed that the Affordable Care Act
provided an unprecedented opportunity to improve access to somatic and
behavioral health treatment for the ``jail-involved'' population. The
commenter noted that up to 6 million incarcerated individuals have
income below 133 percent which would make them newly eligible for
Medicaid under the Affordable Care Act. These individuals could
represent up to \1/3\ of the newly eligible population, underscoring
the importance of considering the particular circumstances of
incarcerated individuals in implementation of the Affordable Care Act.
Response: Paragraph (A) following section 1905(a)(29) of the Act
and implementing regulations at Sec. 435.1009, specify that Medicaid
is prohibited from making payments for care or services for any
individual who is an inmate of a public institution, except as an
inpatient in a medical institution. We read this prohibition to apply
generally to medical assistance, whether provided through the regular
coverage plan or through an ABP. Regular coverage or regular Medicaid
benefit package is defined as Medicaid state plan services including
services defined in section 1905(a), 1915(i), 1915(j) and 1945
authorities. Thus, while we agree with the commenter that incarcerated
individuals may be eligible for Medicaid, they would not be entitled to
ABP benefits inconsistent with the payment exclusion. We note that this
is consistent with the exclusion of incarcerated individuals from
eligibility to enroll in coverage through the Exchanges. It is also
consistent with the responsibility under the Eighth Amendment of the
United States Constitution of governmental entities to provide
necessary medical care to individuals who they are holding as inmates,
which effectively creates a liable third party for such care.
States should suspend, rather than terminate, the Medicaid
eligibility of individuals who are enrolled in Medicaid when entering a
public institution, so as to ensure ease of reinstitution of coverage
post-release. Additionally, if an individual is not already enrolled in
Medicaid, states can enroll eligible individuals prior to their release
so that the individual can receive Medicaid covered services in a
timely manner upon discharge.
Comment: One commenter believed that the new eligibility category
is likely to attract younger and healthier populations than traditional
Medicaid. The commenter believed that a percentage of those who are
newly eligible will acquire a condition or

[[Page 42192]]

disability after they are enrolled in an ABP. The commenter recommended
that HHS standardize an effective process for ensuring that
beneficiaries whose health status changes have the opportunity to
access in a timely manner other ABP or traditional state Medicaid plans
which meet their needs. The following standards were suggested: A
process for participants to request and receive clinically appropriate
benefits not routinely covered by the plan; a process for participants
to request and receive coverage for benefits beyond the limits set by
the plan where extraordinary circumstances exist; and a process for
participants to request and receive coverage of specialty care not
routinely coverage by the plan when medically necessary and
appropriate.
Response: As noted, states have the flexibility to define different
benefit packages to meet the needs of disparate populations. In
addition, individuals in the new adult group meeting the exemption
criterion found in section 1937 of the Act have the ability to choose
between ABP benchmark coverage designed by the state using the rules of
section 1937 of the Act including EHBs as a minimum level of coverage,
or ABP benchmark coverage defined as the state's approved regular state
plan benefit package, which is not subject to the requirements of
section 1937 of the Act.
Comment: One commenter supported providing states with flexibility
to add state plan benefits and services found in base-benchmark plans
to benchmark-equivalent benefits. The commenter also believed it would
helpful to clarify that adding such benefits would be possible and
appropriate for individuals in the Medicaid expansion group.
Response: We appreciate the commenter's support, and clarify here
that individuals in the new adult group can receive benchmark-
equivalent coverage or Secretary-approved coverage which can include a
broader range of services than in public employee or commercial
benchmark coverage options.
Comment: One commenter interpreted the proposed rule to say that
individuals who are newly eligible adults--and not deemed medically
frail--do not qualify for additional services above and beyond what is
required under section 1937 of the Act and the EHB. Based on that
interpretation, if a state wanted to provide wrap around services for a
particular population, in which some of the newly eligible would fall
under, it would not be allowable unless the state created a Secretary-
approved plan that incorporates the benefits into the underlying plan.
The commenter requested that CMS clarify and/or confirm the
interpretation of this provision.
Response: We confirm that the individual's interpretation is
correct. Section 1902(k)(1) of the Act provides that individuals in the
new adult group receive benchmark or benchmark-equivalent coverage
subject to the requirements of section 1937 of the Act (except that
individuals who would otherwise be exempt may choose to receive
benchmark or benchmark-equivalent coverage that is not limited by
section 1937 of the Act, and thus have the option of benchmark or
benchmark-equivalent coverage that is equal to the Medicaid benefit
package otherwise available). Such coverage can be in the form of
Secretary-approved coverage, which may, at state option, include a
broader range of services than public employee or commercial benchmark
options.
Comment: Many commenters requested CMS clarify that the federal
matching rate is based on the individual and not the services provided.
A few commenters requested clarification that services provided through
the Secretary-approved ABP process for Medicaid expansion individuals
will be covered at the enhanced rate and that Medicaid expansion
individuals who are exempted into traditional Medicaid coverage will
also be covered at the enhanced rate.
Response: We clarify that the enhanced FMAP rate for newly eligible
individuals is available for all services they receive. The matching
rate is based on the individual, not on the services provided to them.
Comment: One commenter urged HHS to clarify the flexibility that
states will have to design multiple ABPs targeting specific
populations. The commenter understands this provision will allow states
to put in place ABPs for sub-populations within the newly eligible
group (that is, people living with chronic viral hepatitis or other
chronic conditions) and urges CMS to clarify that this is an
appropriate use of the ABP flexibility.
Response: Section 1937 of the Act provides states with significant
flexibility to design Medicaid benefit coverage under the State plan.
There are many options in selecting an ABP, and states may offer
different ABPs to different targeted populations (except that, as
discussed elsewhere, targeting cannot be based on the amount or level
of federal matching funding). Section 1937 of the Act provides states
with the statutory construct to provide an ABP without regard to
requirements at sections 1902(a)(1) (related to state-wideness) and
1902(a)(10)(B) (related to comparability) of the Act. This flexibility
is provided at Sec. 440.376 and Sec. 440.380, respectively.
Comment: One commenter was unclear why the term ABP is being used.
The Affordable Care Act references ABPs specifically for evaluation of
the ABPs as required under the Class Independence Advisory Council.
Other sections reference alternative benefits or programs specifically
under section 1937 of the Act or the establishment of Basic Health
Plans. The commenter believed the use of the term is confusing and
unnecessary since benchmark plans are not alternative plans or programs
as originally identified in the law. Another commenter found Sec.
440.305 confusing as paragraph (a) refers to ``benchmark and benchmark-
equivalent'' however paragraph (b) refers to ABP. The commenter
suggested revising paragraph (a) by replacing benchmark and benchmark-
equivalent with ABP.
Response: The Deficit Reduction Act of 2005 amended the Act by
adding a new section 1937 of the Act to provide for the use of benefit
packages other than the standard benefit package, namely benchmark and
benchmark-equivalent packages. The Affordable Care Act made statutory
changes to section 1937 of the Act, one of which is the requirement
that section 1937 coverage packages include EHBs. We issued regulations
outlining how the precise parameters of EHBs will be established in the
non-grandfathered plans in the individual and small group markets and,
to some degree, how they will be implemented in section 1937 coverage
plans. In that regulation, the term ``base-benchmark'' was used to
refer to the base plan used by states to determine EHBs for coverage
plans in the non-grandfathered plans in the individual and small group
markets. That base-benchmark plan becomes the EHB-benchmark plan after
it is supplemented with any missing categories of EHBs. In an effort to
prevent confusion between the term ``benchmark'' used for the non-
grandfathered plans in the individual and small group markets, and the
use of ``benchmark'' by section 1937 coverage plans, we chose from the
statutory construct of section 1937 of the Act the term ``Alternative
Benefit Plan'' (ABP) to hereafter refer to Medicaid benchmark and
benchmark-equivalent plans as ABP.
Comment: One commenter indicated that there was no adult group
under section 1902(a)(10)(A)(i)(VIII) of the Act on or before February
8, 2006 so the

[[Page 42193]]

exception in subsection (b) does not appear to fit.
Response: Section 6044 of the Deficit Reduction Act of 2005 amended
Title XIX by adding a new section 1937 of the Act that allows States to
amend their Medicaid State plan to provide for ABPs and limits
application of this provision to individuals whose eligibility is based
on an eligibility category under section 1905(a) of the Act that could
have been covered under the State's plan on or before February 8, 2006.
In 2010, section 2001(a)(1) of the Affordable Care Act amended Title
XIX to establish a new optional adult eligibility group for low-income
adults age 19 to 64. Effective January 1, 2014, States that implement
this new eligibility group must provide medical assistance for that
group through an ABP. As specified, all provisions of section 1937 of
the Act apply to the new adult eligibility group except that those
individuals in the new adult group who meet the exemption criteria will
have a choice between ABP benchmark benefits as defined by the state
under the rules of section 1937 of the Act and ABP benchmark benefits
defined as the state's approved Medicaid state plan, without regards to
the rules of section 1937 of the Act.
Comment: A few commenters believed the final rule should clarify
that an ABP designed for individuals within the new adult eligibility
group can align with traditional Medicaid coverage through the process
of designing of a Secretary-approved plan.
Response: We understand the importance of this issue, and reiterate
guidance here. Secretary-approved coverage, which can include the full
regular Medicaid state plan benefit package, is one of the four
statutorily specified coverage benchmarks available under section 1937
of the Act. States can choose to use Secretary-approved coverage to
significantly align the benefits offered to the new adult eligibility
group with the regular state Medicaid package. Like with the other
three statutorily specified coverage benchmarks, the Secretary-approved
coverage must include EHBs as described in section 1302(b) of the
Affordable Care Act and applicable regulations. In all cases, EHBs are
first defined as the benefits from the base benchmark plan and
supplemented with benefits from other base benchmark plans as
necessary. CMS is clarifying in this rule that substitution of benefits
as defined at Sec. 156.115(b) is applicable to EHBs in ABPs. We
believe that states will appreciate this added flexibility.
Substitution of benefits can occur benefit by benefit. The benefits
must fit into the same EHB category and the benefits being interchanged
must be actuarially equivalent. Benefits do not have to be similar in
nature, they must only be in the same EHB category and actuarially
equivalent. Furthermore, states may substitute more than one benefit
that when combined are actuarially equivalent to a single benefit.
States may use their Medicaid state plan benefits for substitution if
the state plan benefit is actuarially equivalent and in the same EHB
category of benefit that will be replaced.
Comment: Consistent with the provisions of sections 1902(k)(1) and
1903(i)(36) of the Act, the commenter requested that CMS confirm that
the coverage for individuals eligible only through section
1902(a)(10)(A)(i)(VIII) of the Act is limited to benchmark or
benchmark-equivalent coverage.
Response: That is correct. This still leaves states with
significant flexibility to design coverage using the options of
benchmark coverage, which includes Secretary-approved coverage, and
benchmark equivalent coverage. Section 1937 of the Act must also
provide EHBs, which through selection of a base-benchmark plan,
supplementation and substitution, will be used to define the EHBs. EHBs
are then incorporated with the section 1937 benchmark coverage to lead
to a complete benefit package.
Comment: Several commenters stated that the option to offer
specialized benefit packages, in the form of more than one ABP, to
different target populations creates an administrative burden and
confusion for families. The option to offer specialized benefit
packages might require more than one design process and public notice;
additional actuarial analyses of the different benefit packages for
rate setting; an extra process for tracking individuals; and a state's
contracted MCOs would have to manages different benefit packages.
Response: The flexibility to provide specialized benefit packages
to one or more targeted populations is at the option of the state. Each
state will determine whether it is appropriate or administratively
feasible to design and offer different benefit packages for different
groups of beneficiaries.
Comment: One commenter was concerned with the disparities in
coverage that the proposed EHB policy would create. That is, the
guidance suggests that the policy only mandatorily applies to the newly
eligible category of adults. In states that wish to take up the new
expansion option this creates a situation in which the higher income
expansion population will receive a more generous benefit package than
the existing population would receive.
Response: We understand the commenter's concern, and it is true
that the benefit package may be different because of the requirement
that ABPs provide EHBs. However, it is not clear that the ABP benefit
package provided to the new adult eligibility group will be more
generous than the existing Medicaid benefit package. In addition, we
remind readers that the EHB requirements apply to all individuals
receiving services through an ABP, not just those in the new adult
group.
Summary: We did not make any changes to proposed regulation text as
a result of comments in this section.
b. Exempt Individuals (Former Foster Care Children) (Sec. 440.315)
We proposed to implement section 1937(a)(2)(B)(viii) of the Act,
added by section 2004 of the Affordable Care Act, as amended by section
10201(a) of the Affordable Care Act, by providing that individuals
eligible under section 1902(a)(10)(A)(i)(IX) of the Act will be exempt
from mandatory enrollment in an ABP.
Comment: Many commenters commended HHS for confirming that the new
former foster care children group is exempt from mandatory enrollment.
Many other commenters expressed support for affirming at Sec.
440.315(h) that former foster care children are statutorily exempt from
mandatory enrollment in an ABP, and therefore, can access the full
Medicaid benefit, including EPSDT services, up to age 21.
Response: We appreciate commenter support. Individuals under age 21
receive EPSDT either through the ABP or as additional coverage that
supplements the ABP.
Comment: One commenter wrote that while the proposed rule clarifies
that former foster care youth up to age 26 are eligible for full
Medicaid benefits, may not be mandated into an ABP, and will have
access to full EPSDT services up to age 21, after age 21, former foster
care youth will no longer have access to EPSDT benefits and requested
clarification as to the meaning of ``full Medicaid benefits.''
According to the commenter, the American Academy of Pediatrics recently
reported that children in foster care experience significantly higher
rates of medical and mental health challenges, and therefore, believes
that youth aging out of foster care require comprehensive health
coverage that recognizes their unique needs. Once a youth turns 21 they
lose EPSDT coverage but continue to have the same health needs. The
commenter

[[Page 42194]]

therefore requested that CMS define ``full Medicaid benefits'' to
include benefits akin to EPSDT, including dental coverage, mental
health services and physical health care.
One commenter stated she appreciates the clarification that former
foster care children are exempt from mandatory enrollment in an ABP and
that they will receive full Medicaid benefits. However, it is not clear
whether this means they can receive EPSDT. The commenter urged CMS to
consider mandating, or at a minimum, allowing states to provide EPSDT
benefits for this at risk population because in a majority of states
oral health is not part of the adult Medicaid benefit package and
evidence suggests that roughly 35 percent of children in foster care
have significant oral health problems. Making sure oral health issues
are addressed as former foster care youth move into adulthood will have
a significant impact.
Response: We acknowledge that children in foster care generally
experience significantly higher rates of medical and mental health
challenges and that these health challenges often continue after aging
out of foster care. For this reason, Congress provided statutory
protection for an individual who receives aid or assistance under part
B of title IV of the Act for children in foster care or an individual
for whom adoption or for whom foster care assistance is made available
under part E of title IV of the Act, without regard to age, by
exempting these individuals from mandatory enrollment in an ABP.
Under the existing provisions of Sec. 440.345, States must make
available EPSDT services, as defined in section 1905(r) of the Act, for
those individuals under age 21 who are enrolled in an ABP. To the
extent that medically necessary EPSDT services are not otherwise
covered through the ABP for individuals under 21, states are required
to supplement the ABP to ensure access to these services. However,
there is no statutory authority to require states to provide EPSDT
services beyond age 21. We note that states have the flexibility to
design an ABP targeted to former foster care children that provides a
more comprehensive array of health coverage than is provided through
the regular state plan and to offer voluntary enrollment in such a
plan. Through the ABP option, states can provide this population with
oral health and other services not otherwise available to adults
through State plan coverage.
Summary: We have not changed proposed regulation text as a result
of comments received in this section.
c. Benchmark-Equivalent Health Benefits Coverage (Prescription Drugs
and Mental Health Benefits) (Sec. 440.335)
We proposed to implement section 2001(c) of the Affordable Care Act
that added mental health benefits and prescription drug coverage to the
list of benefits that must be included in benchmark-equivalent
coverage.
Comment: Many commenters were supportive of paragraphs (b)(7) and
(b)(8) implementing the statutory requirements for benchmark-equivalent
coverage to include prescription drugs and mental health benefits. A
few commenters commended the broad list of services included in the
proposed rule.
Response: We agree that the inclusion of prescription drugs and
mental health benefits as defined within ABPs are important and
necessary and we appreciate the support of commenters regarding the
coverage of the benchmark-equivalent health benefits.
Comment: A few commenters were pleased that HHS listed services
that can be vital to people with disabilities and chronic health
conditions as allowable in benchmark-equivalent and Secretary-approved
coverage.
Response: We acknowledge the special medical needs of individuals
with chronic health conditions. The final rule provides a clear path to
coverage for chronic disease management under Sec. 440.347.
Comment: A number of commenters requested that CMS clarify
paragraph (c)(1). The commenters believed that CMS is suggesting it
will use a similar policy for benchmark-equivalent coverage as it does
for Secretary-approved coverage and, thus, allow addition of benefits
through the benchmark-equivalent coverage process. The commenters
believed there is no legal impediment to this approach and supported
it. The commenters urged CMS to confirm this interpretation.
Response: We confirm this interpretation. The rule provides states
the flexibility to include coverage for benefits beyond the required
coverage and allows for states to create benchmark-equivalent coverage
that can include benefits not available through the benchmark options.
Comment: Numerous commenters were confused by the language in Sec.
440.335(c)(1) allowing addition of services available in ``2 or more''
benchmark options, as opposed to the language of ``1 or more'' which
appears in Sec. 440.330 and in current regulation. The commenters
believed this may be a clerical error and recommended the ``1 or more''
language to maximize state flexibility.
Response: A clerical error was made in Sec. 440.335(c)(1). The
regulation has been corrected to read, ``. . . for any additional
benefits of the type which are covered in 1 or more of the standard
benchmark . . .''
Comment: One commenter was concerned that only provision Sec.
440.335(c)(1) was being amended leaving (c)(2) and (c)(3) intact. The
commenter believed this will result in conflict with newly added Sec.
440.335(b)(7) and (8) as these provisions provided that four benefits
(prescription drugs, mental health, vision and hearing services) must
represent 75 percent of the actuarial value and are not required to be
covered.
Response: We disagree that the existing provision Sec.
440.335(c)(2) will conflict with Sec. 440.335(b)(7) and (b)(8). The
actuarial value of the coverage for prescription drugs, mental health
services; vision services; and hearing services must still be at least
75 percent of the actuarial value of the coverage for that category of
service in the benchmark plan used for comparison by the state.
However, provision Sec. 440.335(c)(3) is in conflict with Sec.
440.335(b)(7) and (b)(8). The state will, by default, meet the
conditions of (c)(3) because prescription drugs and mental health
services are now required benchmark-equivalent coverage and states will
not have an option to provide such coverage as regulation currently
allows. States also have the ability to add vision and hearing services
through new requirements for additional coverage at Sec. 440.335(c),
for individuals not in the new adult group. Individuals in the new
adult group can receive these vision and hearing services, at state
option, through the use of Secretary-approved coverage. Therefore, we
have stricken Sec. 440.335(c)(3) from the final rule.
Summary: As a result of comments received in response to the
proposed regulation, CMS has deleted Sec. 440.335(c)(3) from the final
rule. Additionally, an error was made in Sec. 440.335(c)(1). The
regulation has been corrected to read, ``. . . for any additional
benefits of the type which are covered in 1 or more of the standard
benchmark coverage packages described in Sec. 440.330(a) through (c)
of this part or State plan benefits . . .'' Otherwise, CMS has not made
any changes to this section.
d. EPSDT and Other Required Benefits (Family Planning Services and
Supplies) (Sec. 440.345)
We proposed to codify section 2303(c) of the Affordable Care Act by
adding

[[Page 42195]]

paragraph (b) to Sec. 440.345 to provide that ABP coverage provided to
individuals described in section 1905(a)(4)(C) of the Act (individuals
of child bearing age), include family planning services and supplies.
Comment: Many commenters thanked CMS for codifying the important
provision requiring that ABP coverage provided to individuals of child-
bearing age include family planning services and supplies. This will
help insure that Medicaid beneficiaries can access essential family
planning services and supplies regardless of the type of Medicaid plan
in which they are enrolled.
Response: We thank the commenters for their support.
Comment: One commenter requested further clarification as to the
specific services and supplies that fall into this category.
Clarification was also requested on which services are covered for
individuals of child bearing age, including minors who can be
considered to be sexually active, who are eligible under the state
plan, and who want such services required under section 1905(a)(4)(C)
of the Act. Because family planning services are not clearly defined in
federal law or regulation, the commenter urged CMS to clarify in this
rule that family planning services and supplies include but are not be
limited to: examination and treatment by medical professionals;
medically appropriate laboratory examinations and tests; counseling
services and patient education; medically approved methods; procedures,
pharmaceutical supplies; and devices to prevent contraception and
infertility services, including sterilization reversal.
Several recommended HHS clarify family planning to specify coverage
of section 1905(a)(4)(C) of the Act services and supplies and require
states to assure compliance with section 1902(a)(23) of the Act freedom
of choice for family planning services and supplies, since it is likely
that many states will contract with managed care organizations, some of
which may have no Medicaid experience. They believe that explicitly
requiring freedom of choice will increase the likelihood that all plans
will comply with the freedom of choice requirement.
Response: Family planning services and supplies are described in
section 1905(a)(4)(C) of the Act. We have chosen not to use this rule
as the vehicle for issuing additional guidance on family planning
services, as such guidance would need to have broader implications than
this rule provides. In addition, we do not believe it is necessary to
address issues relating to beneficiary choice of family planning
provider in this provision, since this provision deals only with
coverage issues under an ABP, and not with issues such as freedom of
choice of provider. That issue is separately addressed in our
regulations at Sec. 431.51 and Sec. 441.20.
Comment: One commenter addressed section 2(B)(1) of the preamble,
specifically the statement ``Consistent with the current law, states
have the flexibility within those statutory and regulatory constructs
to adopt prior authorization and other utilization control measures, as
well as policies that promote the use of generic drugs.'' The commenter
is concerned that the interpretation of this statement could provide
too much flexibility for states in the use of utilization control
measures, creating a barrier to necessary family planning supplies for
Medicaid enrollees, as women need access to the full range of
contraceptive methods to utilize the method most effective for them.
The commenter requested HHS to issue sub-regulatory guidance that
prohibits barriers to the full range of FDA-approved contraceptive
methods guaranteed under the Affordable Care Act.
Response: Prior authorization and utilization control measures are
common practices used within regular Medicaid, public employee, and
commercial insurance products. Benefit packages designed within ABPs
also have this flexibility. These approaches should not be used as a
barrier to needed services. This proposed rule and final rule added the
Affordable Care Act requirement that all ABPs must include coverage of
family planning services and supplies. Nothing in the final rule
authorizes deviation from the protection of beneficiary free choice of
family planning provider, consistent with section 1902(a)(23) of the
Act and Sec. 431.51, or an exception to the requirement at Sec.
441.20 that the state plan provide that beneficiaries are protected
from coercion or mental pressure and are free to choose the method of
family planning to be used.
Comment: One commenter wrote that discrimination in benefit plan
design is a persistent practice in the insurance industry and the
exclusion of treatment for infertility is one example. Infertility
affects an estimated 12 percent of women of child bearing age and
infertility treatments are more commonly prescribed for women than for
men. Another commenter recommended that the list of required categories
of services for benchmark-equivalent coverage incorporate each of the
benefits including family planning services and supplies required under
EHB as specified in Sec. 440.347(a) for consistency and clarity and to
ensure consumer protections.
Response: Coverage of infertility services is generally at the
option of the state. However, coverage of infertility services becomes
part of the ABP benefit package either: (1) if the state selects a
coverage plan under section 1937 of the Act that includes such coverage
or chooses to include such coverage as part of a benchmark-equivalent
coverage plan; or, (2) if the base-benchmark plan chosen by the State
to define EHBs covers infertility treatment in an EHB category, unless
the state elects the option set forth in 45 CFR 156.115(b) to
substitute actuarially equivalent benefits in defining EHBs. We are
reiterating here that CMS is clarifying in this rule that substitution
of benefits as defined at 45 CFR 156.115(b) is applicable to EHBs in
ABPs. We believe that states will appreciate this added flexibility.
Under 45 CFR 156.115(b)(1), substitution of benefits can occur benefit
by benefit. The benefits must fit into the same EHB category and the
benefits being interchanged must be actuarially equivalent.
Furthermore, states may substitute more than one benefit that when
combined are actuarially equivalent to a single benefit. States may use
their Medicaid state plan benefits for substitution if the state plan
benefit is actuarially equivalent and in the same category of benefit
that will be replaced. We do believe it is necessary to explicitly list
the EHB categories in the regulation text for benchmark-equivalent
coverage, as section 1937 of the Act was amended to require both
benchmark and benchmark-equivalent coverage to include all EHBs. States
will identify substituted benefits in the ABP SPA when submitted to
CMS.
Summary: We will not be making changes to proposed regulation text
as a result of comments received.
e. EPSDT and Other Required Benefits (Mental Health Parity) (Sec.
440.345)
Section 2001(c) of the Affordable Care Act directed that benefit
plans under section 1937 of the Act that include medical and surgical
benefits and mental health and/or substance use disorder benefits
comply with MHPAEA and we codified this at Sec. 440.345(c) in the
proposed rule.
Comment: Almost all commenters expressed support for the
requirement in Sec. 440.345(c) requiring that mental health or
substance abuse benefits must be provided by ABPs and must comply with
MHPAEA. Many also commended CMS for clarifying that ABPs must include
mental health parity as this will

[[Page 42196]]

lead to the provision of necessary services to millions of individuals.
A number of commenters wrote about how extremely important it is that
all individuals gaining Medicaid eligibility under the Affordable Care
Act receive coverage appropriate for their needs including strong
coverage of mental health and substance use disorders. Many expressed
their appreciation for CMS's strong support for this provision. Many
stated that they appreciated the proposed rule's explicit recognition
of the Affordable Care Act requirement that ABPs must provide the EHBs,
including mental health and substance use disorder (MH/SUD) services.
Response: CMS thanks the commenters for their support on the
language in the regulation.
Comment: Some commenters asked CMS to provide additional detail on
how the requirements of MHPAEA apply to ABPs including details on how
to supplement benchmark or benchmark-equivalent coverage to bring it
into compliance with parity and how to identify violations in parity
compliance. Commenters requested clarification that MHPAEA requires
ABPs to offer the same scope of MH/SUD services as medical services,
including adequate prescription drug coverage.
Response: On January 16, 2013, CMS released a State Health Official
Letter regarding the application of MHPAEA to Medicaid MCOs, CHIP, and
ABPs. This guidance specifically states that all Medicaid ABPs
(including Secretary-approved coverage) must meet the parity
requirements, regardless of whether services are delivered in managed
care or non-managed care arrangements. This includes ABPs for
individuals in the new low-income Medicaid expansion group, effective
January 1, 2014.
Comment: Many commenters wrote that more than just requiring
compliance was needed in this final rule because of the documented
disparity between coverage of medical surgical benefits and coverage of
MH/SUD services in commercial and employer health coverage. With about
one quarter of adults suffering from a diagnosed mental health
disorder, disparity in services and cost sharing has wide ranging
impact. Some stated that studies and literature indicate deficits in
employer coverage of mental health benefits and that limits on MH/SUD
services were lower than those for medical surgical benefits. Some
commenters stated that in clarifying the application of mental health
parity CMS should make clear that if psychiatric rehabilitation
services are provided, so must psychiatric habilitation be required,
and that CMS should assure that a robust package of mental health
coverage is part of ABPs. Commenters indicated that supplementation,
substitution, parity and other protections are the best approaches for
EHBs to meet the complex health needs of the low-income adults who will
gain Medicaid eligibility under expansion. The commenters encouraged
CMS to do whatever is within its authority to encourage all plans to
expand their mental health and substance use disorder treatment to
provide better care by providing the full range of MH/SUD services and
to ultimately reduce costs and unnecessary loss of productivity and
life.
Response: States must offer services in all ten EHB categories,
including MH/SUD services, and must provide such MH/SUD services in a
manner that complies with the parity requirements of MHPAEA. We do not
intend to require or request states to include specific services within
EHB categories offered by their ABP. As states determine their ABP
service package, states must use all of the EHB services from the base-
benchmark plan selected by the state to define EHBs for Medicaid,
substituting or supplementing as necessary. We believe this will allay
concerns expressed by commenters, as commercial plans must also adhere
to mental health parity requirements.
Comment: One commenter wrote that final MHPAEA regulations are not
yet released, and therefore, CMS should provide a detailed framework
for determining and enforcing parity compliance in this final rule. The
commenter recommended that HHS establish a clear process for how states
can modify a plan to ensure parity compliance if it is not compliant;
clarify that the term ``treatment limitation'' includes both
quantitative and non-quantitative treatment limitations and includes
limits on scope of service and duration of treatment; require full
disclosure of benefit and medical management criteria from states and
plans to ensure MHPAEA compliance in ABPs; ensure that ABPs may not
apply a financial requirement or treatment limitation, as specified in
MHPAEA; include examples of parity violations and detailed information
on how to supplement coverage that falls short of the parity
requirements; and review all ABPs to ensure compliance with MHPAEA.
Response: The January 16, 2013 CMS State Health Officials Letter
provided a framework for States to apply MHPAEA to ABPs. Since the
release of this State Health Officials Letter, we have also provided
technical assistance to states regarding the application of MHPAEA to
ABPs prior to submission of the ABP state plan amendments.
Comment: A commenter requested that we clarify the applicability of
mental health parity to Medicaid managed care organizations that
provide benchmark or benchmark-equivalent coverage. The commenter
wanted to know if states would be required to provide services (for
example; rehabilitation, habilitation, substance abuse services, etc.)
that are optional services for Medicaid programs if they are not
currently covered.
Response: The January 16, 2013 State Health Official Letter
specifically states that all Medicaid ABPs (including Secretary-
approved coverage) must meet the parity requirements, regardless of
whether services are delivered in managed care or non-managed care
arrangements. In addition, under Sec. 440.347, ABPs must include MH/
SUD services regardless of whether they are currently covered in the
state's Medicaid plan.
Comment: One commenter requested that CMS clarify the guidelines
concerning ABP benefit substitutions that involve mental health
benefits. One wrote that substitutions should not be allowed if they
would diminish the value of the mental health coverage provided by the
EHB-benchmark plan on which ABP benefits are based. The commenter
recommended that this issue be carefully monitored; if possible, CMS
should develop an easily applied, objective test to evaluate whether a
proposed benefit substitution would reduce the value of mental health
coverage compared to the mental health coverage provided by the EHB
benchmark plan. Additionally, some commenters stated there still is
confusion about how to apply the parity requirements. Commenters
encouraged CMS to issue explicit guidance on whether benchmark plans
will be evaluated for compliance with parity requirements as necessary
before they are approved by CMS as ABPs.
Response: As discussed above and below in the summary, substitution
will be allowed according to provisions at 45 CFR 156.115(b) except
that states will perform substitution rather than issuers. We will
review all ABP state plan amendment requests from states against
applicable federal laws and regulations, including MHPAEA.
Comment: Some commenters wrote that because they are not
specifically enumerated in MHPAEA, inpatient mental health substance
abuse disorder (MH/SUD) services are often not

[[Page 42197]]

covered. Many commenters stated that the definition of ``inpatient'' in
the Interim Final Rules implementing MHPAEA leaves the definition up to
the state and insurance companies. This is important and unfortunate
because it allows for avoidance of MHPAEA and invites litigation. A
number of commenters stated that HHS can easily rectify this deficiency
by explicitly mandating residential coverage as an ``inpatient service
which must be offered on par with medical/surgical coverage.'' Some
urged CMS to explicitly restate the requirement that all Medicaid ABPs
must cover MH/SUD services. A number of comments stated that inpatient
services must be defined as including residential services, including
Institutions for Mental Diseases (IMDs). HHS can improve the
interpretation of relevant definitions by incorporating by reference
those definitions as set forth by the American Psychiatric Association
in its Diagnostic and Statistical Manual of Mental Disorders. By
offering a federal floor of required services states can take comfort
that they have met the mandated requirement. One commenter wrote that
IMD restrictions present an access barrier for the expansion population
and the Affordable Care Act is clear that ABPs should include the EHB
hospitalization and mental health services that are included in
commercial coverage that must cover EHB. Another commenter wrote that
HHS should prohibit ABPs from including mental health benefits that are
subject to higher limitations on amount, scope, and duration than
benefits intended for physical/medical conditions, or narrowly
specifying that mental health services cannot be a component of other
EHB categories, such as the mental health rehabilitation needs that are
required following a traumatic medical event.
Response: States must offer services in all ABPs that reflect the
ten EHB categories, including MH/SUD services. We do not intend to
require states to include specific services within EHB categories
offered through an ABP. Nor are we specifically requiring coverage of
any particular residential mental health services as part of
``inpatient services,'' provided that the coverage complies with
MHPAEA. States may, however, be required to provide residential mental
health services that are included in the section 1937 coverage plan
that is the basis for the ABP, or that is included in the base-
benchmark plan selected by states to define EHBs for Medicaid.
We clarify, however, that the IMD payment exclusion does apply to
all medical assistance, even medical assistance furnished through an
ABP. This means that FFP is not available for any services, including
services provided through an ABP, furnished to an individual under age
65 who resides in an IMD, except for inpatient psychiatric hospital
services furnished to individuals under age 21. Finally, we clarify
that the requirement that all ABPs comply with MHPAEA includes
compliance with MHPAEA requirements regarding treatment limits.
Comment: A commenter wrote that under the traditional Medicaid
program, the term ``medical assistance'' does not include care or
services for any individual who is a patient in an institution for
mental disease, but benchmark coverage does not have an express
exclusion of care and services for such individuals. The commenter
asserted that for benchmark coverage, which includes coverage for EHBs,
exclusion of these same services for patients residing in an IMD would
directly conflict with the plain language of the law because section
1937 of the Act provides for no exception for individuals between ages
of 21 and 65 residing in an IMD, but does contain an exemption from
other provisions of Title XIX (to which the IMD exclusion applies). The
commenter states that just as an ABP is exempt from complying with the
requirements related to state-wideness and comparability in the
Medicaid statute because they conflict with the benchmark authority, so
too is the plan exempt from complying with the IMD exclusion which
cannot be applied in a consistent manner with the EHB requirements. The
commenter also added that, just as application of the IMD exclusion to
an ABP would be ``directly contrary'' to a state's ability to offer
EHBs, the exclusion is also contrary to any of the benchmark/benchmark-
equivalent coverage described in the statute. Another commenter argued
the same points and also stated that the IMD exclusion is not
consistent with the definition of an ABP to include, among a selection
of plans, the health insurance plan offered through the HMO that has
the largest insured commercial non-Medicaid enrollment in the state. As
such coverage would necessarily be available on par to individuals
residing inside and outside of an IMD, the commenter asserted that
Congress never intended the IMD exclusion to apply to Medicaid
beneficiaries enrolled in an ABP.
Response: We do not agree with the commenters' statements that the
IMD exclusion does not apply to medical assistance furnished through an
ABP. The IMD exclusion is not a service or benefit exclusion. It is a
payment exclusion that applies to all Medicaid services provided to an
individual residing in an IMD, not solely a payment exclusion for
services provided in or by an IMD. The statute excludes services
furnished to residents of an IMD from the term ``medical assistance,''
and we read this exclusion to apply whether medical assistance is
furnished through regular coverage or through an ABP. (Above we clarify
that we have a parallel reading of the similar payment exclusion for
inmates of a public institution.) Thus, we clarify that the IMD payment
exclusion applies to coverage offered through ABPs. Benefits furnished
through ABPs can be structured so that individuals have inpatient
options for mental health treatment outside of IMDs, but to the extent
that an individual resides in an IMD, the IMD exclusion would apply. We
are not aware of any contrary congressional intent, and this position
is consistent with the express statutory exclusion from the definition
of medical assistance.
Comment: A few commenters stated that MH/SUD services are sometimes
provided in facilities that are considered an institution of mental
disease for which FFP is excluded and requested that CMS reconcile the
requirement that these services must be provided as an EHB.
Response: For the reasons discussed above, we are clarifying that
the IMD payment exclusion does apply to medical assistance furnished
through ABPs. We expect that ABPs will ensure that coverage for MH/SUD
services is available consistent with MHPAEA and the final regulations
that govern EHBs under Medicaid. There may be options for inpatient
services other than inpatient services in IMDs that states may wish to
consider to meet MHPAEA obligations under ABPs.
Comment: One commenter stated that exclusions for otherwise-covered
benefits such as mental health services that treat eating disorders and
gender disorders should not be permitted, as these exclusions carve out
coverage explicitly on the basis of health condition and are
discriminatory.
Response: We will review ABP state plan amendments to ensure their
compliance with applicable federal statutes and regulations, including
MHPAEA, and EHB anti-discrimination provisions.
Comment: One commenter stated that healthcare providers who provide
MH/SUD treatment services were encouraged by the passage of MHPAEA but
many states and insurance companies are ``stonewalling'' implementation
and inclusion of MH/

[[Page 42198]]

SUD treatment as a mandate. EHB requirements will not correct this
problem unless HHS rules provide better clarity regarding
implementation of parity, in particular inclusion of inpatient
services.
Response: MHPAEA does not require the provision of specific MH/SUD
services. Rather, it requires these services to be provided in parity
with medical/surgical services, when benefit packages include both sets
of services. The release of the January 13, 2013 State Health Official
Letter has provided initial guidance to states and managed care plans
regarding the application of MHPAEA to the Medicaid program. We believe
that guidance provides useful information to states regarding their
efforts to apply MHPAEA to their Medicaid ABPs. In addition, CMS is
reminding commenters that inpatient hospitalization is a required EHB
for ABPs.
Comment: One commenter stated that Medicaid regulations should
employ the same disorder carve-outs for the expansion population as
used for existing populations and remain in compliance with federal
parity laws. Further, states should not be required to provide
different or additional MH/SUD benefits to the expansion populations
than what is furnished to existing beneficiaries.
Response: This regulation does not prohibit states from using their
current delivery systems or designing new delivery systems to offer
EHBs, including MH/SUD services. States are required to offer MH/SUD
services consistent with the process set forth in this regulation
regarding the development of ABPs and MHPAEA. Because of the need to
select a public employee or commercial plan to define EHBs for
Medicaid, there could be differences between the ABP benefit package
and the services otherwise offered in the regular Medicaid coverage
package.
Comment: Many commenters strongly urged CMS to release final MHPAEA
regulations as soon as possible and to include how to apply parity to
EHBs and ABPs and to give examples of violations. A commenter stated
that without the final rule on MHPAEA, effective compliance will not be
possible. Another commenter requested prompt release of additional
guidance referenced in the January 13, 2013 State Health Official
Letter, concerning any requirements to apply parity principles across
multiple managed care delivery systems and urged a flexible approach to
measuring parity in carve-out setting in promotion of continuity for
existing arrangements and authorities.
Response: A response on the timing of a final MHPAEA regulation is
beyond the scope of this regulation.
Comment: One commenter wrote that insurance companies have sought
to avoid implementation of MHPAEA and states that do not currently
require mental health parity may be concerned that compliance will
result in the state incurring the costs associated with the expansion
of state mandates. Two commenters stated that there are lingering
concerns with some of the parity language in the proposed regulation,
which states in Sec. 440.345 that ABPs that provide both medical and
surgical benefits, and mental health or substance use disorder
benefits, must comply with MHPAEA. CMS should revise this language to
make it clearer and more accurate. The commenters asserted that MHPAEA
does not apply to coverage under section 1937 of the Act that is
delivered in a non-managed care arrangement; rather the Affordable Care
Act extended the protections of MHPAEA to this coverage without
amending MHPAEA. Specifically, regarding coverage under section 1937 of
the Act, the Affordable Care Act requires that ``the financial
requirements and treatment limitations applicable to such mental health
or substance use disorder benefits comply with the requirements of
section 2705(a) of the PHS Act (MHPAEA) in the same manner as such
requirements apply to a group health plan'' and the final rule should
include similar language.
Response: It is unclear exactly what the commenter is asking, in
terms of incurring expenses associated with state benefit requirements.
Therefore, we will not be able to respond to this comment at this time.
We disagree with the commenters' assertion that mental health parity
requirements do not apply to ABPs using non-managed care delivery
systems. Parity requirements apply to all ABPs, regardless of the use
of managed care.
Comment: One commenter wrote that because of changes in the income
eligibility standards we expect Medicaid expansion is more likely to
enroll individuals who are working but have no insurance and who need
this coverage to access treatment to maintain employment. People with
addictions enter treatment at different phases and will use different
parts of the continuum, and elimination of any part of the continuum
would violate MHPAEA and cost human lives. The commenter urged CMS to
adopt the same standards set forth in the proposed rule for the
Affordable Care Act standards related to EHB, Actuarial Value, and
Accreditation for purposes of Medicaid ABPs. Additionally, the
commenter stated that MHPAEA holds out the promise that everyone will
be able to get help but strong enforcement of MHPAEA is necessary.
Response: It is unclear exactly what the commenter is asking.
Therefore, we will not be able to respond to this comment at this time.
Comment: A commenter wrote that this rule as proposed rule fails to
link MHPAEA compliance to adherence to the Interim Final Rule which
operationalizes MHPAEA. The previously issued Proposed Rule for
Standards Related to Essential Health Benefits, which addressed the
design of EHBs for commercial market insurance beneficiaries, made
specific reference to the Interim Final Rule effectuating MHPAEA. The
proposed rule simply says the EHBs of ABPs must comply with MHPAEA. The
commenter questioned whether this lack of direct reference to the
existing law mean Medicaid ABPS need not comply with all provisions of
the Interim Rule. The commenter strongly urges CMS to clarify whether
or not these ABPs must comply with all provisions of the Interim Final
Rule and what if any law, in whole, or in part, it will use to assess
ABP compliance with MHPAEA.
Response: On January 16, 2013, CMS released a State Health Official
Letter regarding the application of MHPAEA to Medicaid MCOs, CHIP, and
ABPs. This guidance specifically states that all Medicaid ABPs,
including Secretary-approved coverage, must meet the parity
requirements, regardless of whether services are delivered in managed
care or non-managed care arrangements.
Comment: Several commenters wrote that exclusions of mental health,
substance use disorders and behavioral health treatments that fail to
meet the parity standards required by MHPAEA are discriminatory.
Despite existing parity requirements state implementation and
enforcement of MHPAEA has varied widely and patients seeking metal
health services are frequently subjected to excessive and inappropriate
non-quantitative limitations. Another commenter stated that CMS should
identify a standard to determine whether the coverage provided complies
with non-discrimination provisions of the Affordable Care Act.
Response: As stated in the January 13th State Health Official
Letter, ABPs must comply with MHPAEA.
Comment: One commenter suggested that the goal of Affordable Care
Act coverage was to include the 10 EHBs including mental health and
substance use disorder services.

[[Page 42199]]

Response: We agree with the commenter that one goal of Affordable
Care Act coverage was to include coverage of the 10 EHB categories,
including mental health and substance use disorder services in ABPs. We
support providing a floor of coverage to Medicaid beneficiaries. As
mental health parity also applies, this will lead to parity among
mental health and substance use services and other medical and surgical
services.
Summary: We will not be making changes to proposed regulation text
as a result of these comments. However, we are clarifying that the
payment exclusion for services provided to individuals residing in an
institute of mental disease (IMD) continues to apply to all individuals
participating in ABPs. This is important because many commercial
products offer coverage of residential services in settings that for
Medicaid purposes are considered IMDs, and federal matching funds will
not be available for medical assistance for individuals who reside in
such settings.
f. EPSDT and Other Required Benefits (ABPs Include EHBs and All Updates
and Modifications) (Sec. 440.345)
We proposed at Sec. 440.345(d) the requirement that ABPs provide
EHBs and include all updates and modifications thereafter by the
Secretary to the definition of EHBs.
Comment: Several commenters wrote that the revisions make Federally
Qualified Health Center (FQHC) requirements within ABPs less clear. The
EHBs are the floor of ABP coverage and that the requirement to provide
EHBs within ABP does not circumvent existing requirements within
section 1937 of the Act, which includes coverage of FQHCs. The
commenter stated to identify that the regulation as drafted is
confusing as subsections (a) describing the requirement that at least
the ten categories of EHBs be included in section 1937 of the Act and
(b) describing the requirements to include the benefits covered in one
of the state selected benchmark plans and subsection (a) does not
indicate that it is a floor. The commenters requested that CMS
reiterate or clarify revisions to the regulation to reaffirm this.
Response: There are several benefits specified by section 1937 of
the Act that are required in addition to EHBs. We did not change Sec.
440.365, which reflects section 1937(b)(4) of the Act, providing that
states must assure access to these services through the benchmark or
benchmark-equivalent coverage or otherwise, to rural health clinic
services and FQHC services, even if the state does not contract with an
FQHC or rural health clinic and that payment for these services must be
made in accordance with the payment provisions of section 1902(bb) of
the Act. The inclusion of EHBs within section 1937 of the Act
establishes a minimum level for benefits, to which other benefits
required as part of section 1937 of the Act are added.
Comment: Many commenters were supportive of the Affordable Care
Act's application of EHB requirements to ABPs and providing a floor of
benefits. Some commenters also supported inclusion of updates and
modifications made thereafter. Some commenters went further to support
the inclusion of mental health and substance use disorder benefits as
consistent with the MHPAEA.
One commenter generally supported implementing EHBs in ABPs to
provide a stable set of core services for people receiving benefits in
the ABP, and to help align the rules for patients and providers to
ensure continuity of care. This is important for people who will churn
between Medicaid, the commercial markets and potentially a state basic
health plan.
Response: CMS appreciates the support of commenters.
Comment: A few commenters identified that EHB definitions will
affect how individuals maintain access to health care, services and
drugs and biologicals that they need.
Response: We agree with these commenters. The new coverage will
likely be different from the coverage that beneficiaries receive today.
States will have discretion regarding how to define EHBs using the
process outlined in this regulation, namely selecting the base-
benchmark plan to define EHBs. For Medicaid, we remind readers that
EHBs are only the floor for coverage, and states have options for
offering coverage that exceeds this floor. States can also add
additional coverage for beneficiaries receiving ABPs who are not
eligible for the new adult group.
Comment: One commenter suggested that home care services should be
included in the Medicaid ABP to the same extent that they are included
in the existing regular Medicaid program.
Response: The rules for establishing coverage are different between
the regular state Medicaid program and flexibility provided within
section 1937 of the Act. States must provide home health services as a
mandatory benefit in the regular Medicaid state plan. This is not a
minimum requirement for coverage under of section 1937 of the Act and
is not required as an element of EHBs.
Comment: One commenter requested clarification that the Affordable
Care Act established a floor of coverage using EHBs. Benefits should
not be limited solely to EHBs as no ceiling was established. The
Affordable Care Act only restricts costs for state mandated benefits
from being passed onto the federal government via the EHBs.
Response: Yes, EHBs are considered a minimum level of coverage.
ABPs are not limited solely to EHB benefits; ABPs are constructed based
on the coverage plan under section 1937 of the Act selected by the
state, including EHBs based on the state selected base benchmark plan,
supplemented as necessary and subject to substitution of actuarially
equivalent benefits as permitted under 45 CFR 156.115(b). The section
1937 coverage plan selected by the state can include a Secretary-
approved coverage plan that may include benefits that are not available
under other section 1937 coverage options. Furthermore, ABPs are
required to cover certain benefits including rural health clinics,
FQHCs, and family planning services and supplies. EPSDT services for
individuals below age 21 also apply within section 1937 of the Act.
MHPAEA also applies to the provision of MH/SUD services.
Comment: One commenter requested that CMS consider adding an EHB
requirement for hospitals and pediatricians to conduct risk assessments
of all newborns for severe respiratory syncytial virus (RSV) disease.
Response: These services can be covered if states select coverage
options that cover such services. Furthermore, children must receive
all EPSDT services as part of the ABP, and states may consider such
risk assessments to be part of the required EPSDT screening services.
For the new adult group, only 19- and 20-year olds will be covered by
EPSDT. There are both requirements and flexibility for states in both
selecting plans and constructing EHBs and section 1937 coverage
options. Please refer to the summary at the end of this section for
further discussion of these steps and flexibilities.
Summary: We have not made any changes to regulation text, based on
public comments received.
g. EPSDT and Other Required Benefits (Process for Updating EHBs) (Sec.
440.345)
In Sec. 440.345(e), we proposed that the ABPs that include EHBs
will remain effective through December 31, 2015 without a need for
updating. We also proposed that we will consult with states and
stakeholders and evaluate the

[[Page 42200]]

process to determine updates to the ABPs after that date.
Comment: Several commenters offered support of the intent of our
proposed policy concerning the updating of ABPs that have been
determined to include EHBs as of January 1, 2014. One commenter
supported the Department's intent to issue future guidance for updating
EHB benefits for 2016 and subsequent years. Similarly, another
commenter indicated support of the alignment of the transition period
for updating ABPs with the transition period designated for updating
EHBs in 45 CFR Part 156.
Response: We appreciate the support.
Comment: A few commenters indicated concern that imposing a
requirement to update section 1937 benchmark plans would add
significant new workload for states. One commenter believed that there
is currently no statutory requirement to make updates to section 1937
plans, and suggested that the Secretary allow for grandfathering of
currently offered section 1937 benchmark benefit plans. Many commenters
also recommended that HHS reserve some authority to resolve significant
problems with the benefits package during this time period by revising
the proposed provision to add that states with approved ABPs as of
January 1, 2014 do not have to update benefits until December 31, 2015,
``unless the Secretary determines that there are exceptional
circumstances to update a plan.'' Several commenters urged the
Department to set up a formal mechanism to ensure that adequate data is
collected for ABPs in 2014 and 2015 to inform updating benefits in 2016
through a transparent process in which consumers help guide any
necessary changes. Similarly, several other commenters urged the
Department to consider a more robust stakeholder engagement in all
aspects of processes used to assess the current EHB approach and
whether to adopt a new approach in 2016.
Response: CMS has been working with states to submit state plan
amendments using a standardized template that includes the information
needed for approval from CMS. The CMS review process allows for
resolution of issues identified within the ABP prior to approval. We
aligned the timeframes with CMS policy to allow for implementation
efficiencies. As we develop the process, we will take into account
balancing potential workload of the state and CMS and the need for
information to keep the ABP current with changing commercial market
products. It is important for ABPs to stay current with changes in the
base-benchmark as well as with public employee or commercial plans that
may have been selected as section 1937 coverage options. Commercial
plans are usually updated annually. All ABP SPAs are required to have
public notice and approved SPAs will be placed on a CMS Web site. We
are also updating the Medicaid Statistical Information System (MSIS) to
improve the quality, accuracy, and timeliness of data submitted to CMS
by states. That said, we appreciate that it may be difficult at this
point to make changes to the ABP that take effect by January 1, 2014.
In light of this challenge, we will partner with states to work as
quickly as possible to come into full compliance with these provisions.
We do not intend to pursue compliance actions on these issues to the
extent that states are working toward but have not completed a
transition to the new ABPs on January 1, 2014.
Comment: One commenter indicated that the applicability of the
proposed provision was unclear when applied to states that choose not
to expand coverage as of January 1, 2014, but might choose to offer a
benchmark benefit plan prior to December 31, 2015.
Response: These provisions apply to all existing and new ABPs that
have an effective date of January 1, 2014 or later.
Summary: We will not be making changes to proposed regulation text
as a result of comments received.
h. Essential Health Benefits (Sec. 440.347)
We proposed to add EHBs within section 1937 of the Act and that
individuals in the new adult group who meet the criteria for exemption
from mandatory enrollment will receive a choice of benchmark coverage
defined as the benefit package using section 1937 rules or the state's
approved Medicaid state plan that is not subject to the section 1937
rules. We proposed a process for establishing EHBs within an ABP that
is consistent with the general provisions for established EHBs in the
individual and small group market, but reflects the particular
circumstances of Medicaid. In particular, the process reflects the fact
that the state establishes coverage rather than an insurance issuer,
and that the coverage is consistent with the requirements of section
1937 of the Act. We also proposed that, while EHBs will be defined by
the state using a selected base benchmark from the list of those plans
that can be chosen to define EHBs in the individual and small group
market, the base benchmark plan for defining EHBs for Medicaid can be
different than the base benchmark plan chosen for the commercial
market. We further proposed that there could be more than one base
benchmark plan for defining EHBs for Medicaid ABPs.
Comment: One commenter stated they support the structure for
implementing Essential Health Benefits as proposed.
Response: CMS appreciates the support.
Comment: One commenter supported Sec. 440.347, which allows states
to have more than one ABP to reflect the health care needs of a
targeted population and use a different base benchmark plan for each
ABP. A few commenters supported HHS implementing the statutory
requirements to at a minimum include EHBs. One commenter supported the
general approach to coverage of EHBs. Another commenter supported
states having broad flexibility to choose a benchmark plan, including
the same options available in the commercial market and the ability to
use a different plan from the one that was selected for the state's
commercial plans. This commenter also recommended that the state's
Medicaid State Plan be considered for Secretary-approved coverage for
the ABPs. They requested clarification of the timeframe for approval of
Secretary-approved plans.
Response: We appreciate the support of our policy to allow states
the flexibility to use different base benchmarks in Medicaid from those
used for the non-grandfathered plans in the individual and small group
markets.
We confirm that Secretary-approved coverage is part of the ABP
template, and can include the full coverage otherwise available under
the approved state plan, as long as all requirements of this regulation
are met. The entire template is considered a state plan amendment to be
completed and submitted by the state to CMS for approval. The timing of
action on state plan amendments is addressed in our regulations at
Sec. 430.16, which include one 90-day review period, the option for
CMS to request additional information, and an additional 90-day review
period.
Comment: One commenter requested that HHS clarify that states can
design ABPs for subpopulations within the newly eligible group.
Response: We confirm that states can offer different ABPs to
subpopulations within the newly eligible group. Under section
1937(a)(1)(A) of the Act, coverage through an ABP can be offered to
``groups specified by the State'' without regard to the comparability
or statewideness requirements at section 1902(a)(10)(B) of the Act and
Sec. 440.240. (Other requirements, such as civil rights protections,
still apply and may affect the nature of the groups that a state may
specify.) As a result, states may offer ABPs that are appropriate for
the unique

[[Page 42201]]

characteristics of subgroups of the new adult group; for example,
states may offer different ABPs to individuals in different geographic
regions, or to individuals who have particular medical, service or
support needs.
Comment: The flexibility for states to select EHBs at Sec.
440.347(b) and (c) to achieve targeting of populations causes more harm
than good according to some commenters. The commenters believe that
states already have significant flexibility to target ABPs through the
Secretary-approved process and the targeting flexibility adds little
but creates confusion. CMS would be better served in terms of
administrative simplicity, oversight, and consumer understanding if one
EHB standard was applicable in the commercial markets and ABPs. These
commenters recommend that HHS require states to use the state-selected
base benchmark plan that applies for the commercial markets for ABPs as
well. Another commenter believes that EHBs should establish a minimum
floor of coverage and that all plans should be required to use the
state-selected base-benchmark plan that applies for the commercial
markets for purposes of section 1937 of the Act as well. This will
reduce administrative burden and better align standards between EHB in
the commercial markets and in Medicaid.
Response: The flexibility provided at Sec. 440.347(b) and (c)
permits states to design different benefit packages that at a minimum
include EHBs. Alternatively, one benefit package could be used for
multiple populations. States also have the choice to use the same base
benchmark in ABPs and the commercial markets, which would result in
aligning standards for EHB in coverage under ABPs and the commercial
markets. We have adopted policies that would maximize state flexibility
while ensuring sufficient coverage for beneficiaries.
Comment: One commenter is seeking clarification of the phrase set
forth in Sec. 440.347 ``consistent with the requirements set forth in
45 CFR [part] 156'', particularly if it adds obligations to the
requirement to select a benchmark plan that includes benefits in each
of the ten EHB categories. A few commenters request clarification of
the specific provisions of 45 CFR Part 156 related to EHB that apply.
Response: This regulation is consistent with the EHB requirements
under 45 CFR Part 156, but specifically addresses the application of
those requirements for purposes of compliance with section 1937 of the
Act as amended by section 2001(c) of the Affordable Care Act. The base-
benchmark plans for defining EHBs include the same choices in both
Medicaid and the non-grandfathered plans in the individual and small
group markets. States may choose a different base benchmark plan for
Medicaid than for the individual and small group markets. But,
recognizing that Medicaid coverage is provided in a different context
than coverage in the individual and small group markets, we provide
that states may choose a different base benchmark plan for Medicaid
than the individual and small group markets, and may choose more than
one base benchmark plan for Medicaid. We also provide that states
exercise the options available in the individual and small group market
to insurance issuers. This regulation identifies those aspects of 45
CFR part 156 that are modified within Medicaid under the section of the
preamble entitled ``Modifications in Applying the Provisions of This
Proposed Rule to Medicaid.''
Comment: Several commenters suggested that the list of required
categories of services for benchmark-equivalent coverage include the
EHBs as specified in Sec. 440.347(a) for consistency and clarity as
ABP coverage must include at least the EHBs. Another commenter
suggested that CMS should pursue parity between Medicaid state plan
benefits and the new ABP for newly eligible adults to assist with
``churn'' between Medicaid and the commercial markets.
Response: Section 1302 of the Affordable Care Act establishes EHBs
that must be provided as part of benchmark benefit coverage. A
benchmark-equivalent benefit package must be actuarially equivalent to
the benchmark plan that is chosen. We do not believe it is necessary to
specifically add the EHB categories to benchmark-equivalent coverage
because we are instead setting out procedures to ensure that coverage
includes EHBs that govern both benchmark and benchmark-equivalent
coverage.
Comment: Section 440.347(c) allows states to select more than one
EHB option for ABPs. A few commenters urged CMS to limit states to
choosing a single EHB option for Medicaid to provide a floor of
benefits. They asserted that Congress intended consistency among ABPs
by applying EHB requirements to them. Some commenters asserted that
allowing for selection of multiple options will create unnecessary
administrative burdens on state Medicaid programs and this commenter
suggests that there should be only one EHB benchmark option for ABPs.
But other commenters agreed with our proposed rule that, because ABPs
serve a different population than private health plans, the single EHB
benchmark does not need to be the same as the one chosen for the
state's individual and small group market. Another commenter asked that
CMS clarify that states do not have the flexibility to vary amount,
duration, and scope of benefits within populations on a plan-by-plan
basis as currently allowed, which would only increase complexity. This
commenter also requested clarification related to whether the limited
authority provided through the DRA and now expanded through this rule
can be superseded by section 1115 authority. This commenter also
responded that a state may try to combine flexibilities for EHB, ABP,
premium assistance, and amount, duration, and scope to shift to a model
that has not been adequately explored for unintended consequences.
Response: While it is true that coverage of EHBs will be required
for non-grandfathered plans offered in both the individual and small
group markets and Medicaid, we think it is important to provide states
flexibility to define EHBs as appropriate in each context. In the non-
grandfathered plans offered in the individual and small group markets,
states have some flexibility to define EHBs through selection of a base
benchmark plan. For Medicaid coverage, we believe that additional
flexibility will enable states to tailor coverage to the needs of the
Medicaid population. While states can, for simplicity, choose one
standard to determine EHB in both the individual and group markets and
in Medicaid, they are not required to do so. We are permitting states
flexibility to choose a single standard or multiple standards for EHB
in Medicaid to ensure a full range of coverage options. States must
determine whether multiple standards would result in administrative
burdens. We are reminding states that the floor of coverage is EHBs
defined by the benefits, including limitations on amount, duration, and
scope, from the selected base benchmark plan (but states may be
required to, or may have options to, cover benefits above that floor
consistent with section 1937 of the Act). Please refer to the summary
at the end of this section for further discussion of these steps and
flexibilities.
Comment: Several commenters recommend that the Department ensure
that Secretary-approved coverage is actuarially equivalent to the other
benchmark coverage options. These commenters support the clarification
that Secretary-approved coverage must provide robust benefits. However,
these commenters indicate that it is important

[[Page 42202]]

for Secretary-approved coverage to provide the same level of coverage
as other benchmark plan options to prevent newly eligible people from
receiving lesser coverage.
Response: This rule is not intended to change the assessment of
Secretary-approved coverage, except to the extent that it must include
EHBs. The standard that we apply for assuring the sufficiency of the
benefit package established using Secretary-approved coverage is
whether the benefits are appropriate to meet the needs of the
population provided that coverage, as outlined in Sec. 440.330(d).
EHBs establish a floor of benefits for ABP populations and must be
provided with Secretary-approved coverage as with any ABP. Secretary-
approved coverage permits states flexibility to design a benefit plan
that might differ from the other options available under section 1937
of the Act. As mentioned previously, in all cases a state must first
select a base benchmark to define EHBs. The EHBs in the base benchmark
plan serve as the minimum floor of coverage that is supplemented for
any missing EHBs. Using substitution, states may achieve a benefit
package that includes benefits from the regular state plan.
Comment: One commenter believed that extending full Medicaid
benefits to the newly-eligible expansion population, supplemented as
needed to comply with the EHB, parity, and other protections in the
law, is the best approach for meeting the complex health needs of low-
income adults who will gain Medicaid eligibility under the expansion.
The commenter urged CMS to work with States to ensure that this
population's full range of substance use disorders and mental health
needs and other health needs will be met. The commenter further
suggested that CMS include language in the final rule that explicitly
restates the requirement that all Medicaid ABPs must cover mental
health services and substance use disorder services for all enrollees.
Response: States have much flexibility, but are not required to use
benefits from their regular Medicaid benefit package for the new adult
coverage group, as long as EHBs are assured. The statute and regulation
direct that mental health parity requirements and EHB requirements,
including the provision of mental health and substance use services, be
met. In some circumstances, we anticipate that the coverage furnished
to the new adult coverage group may include certain benefits, such as
certain substance abuse treatment services, that the state has elected
not to cover under the state's regular Medicaid benefit package.
Comment: The commenter stated general agreement with the approach
that CMS has recommended for the ABP to be offered to certain
populations under the expansion of Medicaid. The commenter requested
clarification that the state would choose an ABP from four benchmark
packages and would compare that choice to the private market EHB,
supplementing coverage of the ABP if necessary to ensure that all EHB
categories are included.
Response: There are both requirements and flexibility for states in
constructing EHBs and section 1937 coverage options. Please refer to
the summary at the end of this section for further discussion of these
steps and flexibilities.
Comment: One commenter would like to underscore the importance of
promoting seamless coverage among low-income individuals. Many of the
individuals newly eligible for Medicaid in 2014 are likely to have
fluctuations in income, and therefore are likely to ``churn'' between
Medicaid and subsidized Exchange insurance coverage. This churn could
result in treatment disruptions among patients and create
administrative complexity for Exchanges, plans, and providers. Thus,
promoting seamless coverage for this population and ensuring
coordination of care during coverage transitions will be critical.
Response: We appreciate the circumstances that the commenter
identified for individuals that may have fluctuations in income. States
have options for minimizing treatment disruptions and CMS will work
with states to promote continuity of care.
Comment: One commenter urges CMS to consider revising certain
sections of the proposed rule to allow states the greatest opportunity
to develop ABPs that are reflective of the population that they serve
and ensure the long-term financial sustainability of this category of
eligibility. This commenter believes that the proposed regulations
create a cumbersome and confusing process and appear to strongly
incentivize states to essentially mirror state plan benefits. This
commenter wants maximum creativity to define the benefit package that
will be provided to the newly eligible population, and encourages CMS
to use this opportunity to allow for greater innovation at the state
level by allowing design of benefit packages that simply take pieces of
both Medicaid and the commercial market while also covering all EHBs.
This approach will lead states to compare Medicaid to private and
commercial market benefits and potentially add benefits to the Medicaid
state plan.
Response: We believe that the regulations offer significant
flexibility for states to create benefit packages for all or for
different groups of its newly eligible population. Appropriate benefit
package design for the population's needs may contribute to long-term
financial stability.
Comment: A few commenters were concerned with disparities in
coverage as the guidance suggests that the policy only mandatorily
applies to the newly eligible category of adults. In states that expand
their Medicaid programs to include these new categories of eligibility,
they note that a higher income expansion population will receive a more
generous package than existing populations. This will create a churn in
Medicaid where states will likely have to expand coverage for all adult
populations within Medicaid to prevent churn. They assert that this
would result in significant financial cost to states to expand benefits
to all adults as new benefits for the existing population are
ineligible for the enhanced match offered under the Affordable Care Act
for the newly eligible expansion population.
Response: The Medicaid statute provides that coverage may be
different for those people who receive coverage through an ABP
established under section 1937 and those who receive regular Medicaid
coverage. People in the new adult group must receive benchmark or
benchmark-equivalent benefits, including EHBs. Consistent with the
statute, the rules promulgated in this regulation will apply to all
ABPs, not just for those people in the new adult group. As long as ABP
(including EHB) requirements are met, states have significant
flexibility in designing benefit package options that approximate
regular state plan benefits.
Comment: Many commenters recommended that ABPs provide appropriate
coverage to meet the needs of the population in all ten EHB categories
as per the general requirements of Sec. 440.330. These commenters
suggest that the lack of a minimum standard in each of the ten
categories is a flaw in the Exchange EHB standard that gets further
magnified in Medicaid. For women's health, this is particularly
important in terms of preventive services, prescription drugs, and
maternity care. Several commenters support the EHB requirement as a
strong floor for ABPs and indicate that states should have ample
flexibility to add to the floor. These commenters also provided
recommended regulatory language for Sec. 440.347(a) through (c).
Response: EHBs are a floor to coverage and states have flexibility
to

[[Page 42203]]

design an ABP that includes coverage above the minimum level of EHBs.
Section 1302(b)(2) of the Affordable Care Act directs the Secretary to
determine EHBs by reference to benefits typically offered in the group
market, which is the same standard that we are applying in Medicaid by
requiring that states determine EHBs by selecting a base benchmark from
among the regulatory options described in Sec. 156.100. All benefits
within the base benchmark that defines EHBs will need to be
incorporated into the ABP, supplemented as necessary and subject to
substitution of actuarially equivalent benefits as permitted under 45
CFR 156.115(b). But the ABP can include other benefits based on the
state choice of coverage option.
For groups other than those in the new adult group, states can also
offer additional benefits to supplement the benchmark or benchmark
equivalent coverage that includes EHB and other required services.
Sections 1902(k)(1) and 1903(i)(26) clarify that individuals in the new
adult group receive benchmark or benchmark-equivalent coverage (that
includes EHB and other required services and, as we explain below, for
individuals who would otherwise be exempt from enrollment in an ABP,
the option to receive an ABP that consists of regular Medicaid
coverage). We intend to issue an ABP state plan amendment template and
corresponding implementation guides for the states to use when
submitting ABP state plan amendments.
Comment: One commenter supports requiring coverage of all ten EHBs,
as this will go a long way toward ensuring that Medicaid participants
have adequate health care coverage. They request that HHS define the
scope and services within each of the ten benefit categories to ensure
that the covered services are at a minimum the same and provide a level
of guaranteed coverage. This is necessary to ensure that there is
adequate coverage within categories and balance between categories, and
necessary to determine if ABPs are equivalent to the EHB package and
comply with Affordable Care Act.
Response: We thank the commenter for the support.
Comment: One commenter indicated that ABPs should include an array
of home care services that exist in traditional Medicaid benefit
programs to comply with the American with Disabilities Act and Supreme
Court Olmstead decision. To the extent that EHBs include institutional
care or inpatient settings, a state must offer a choice of ``the least
restrictive environment.'' Similarly, states that choose to provide
services to individuals enrolled in ABPs that involve care in an
institution should be required to include home and community-based care
as well.
Response: Section 1902(k)(1) of the Act provides that medical
assistance for the new adult eligibility group is limited to benchmark
and benchmark-equivalent coverage. Section 1902(k)(1) of the Act also
provides an exception to the requirements of section 1937 of the Act
for individuals who would be described in the exemptions at section
1937(a)(2) of the Act. This means that individuals in the new adult
eligibility group that otherwise meet the exemption criteria are
required to be enrolled in benchmark or benchmark-equivalent coverage,
but their benchmark or benchmark-equivalent coverage is not limited by
the requirements of section 1937 of the Act. Therefore, these
individuals must have a choice to receive ABP benefits as defined by
the state applying the requirements of section 1937 of the Act using
benchmark or benchmark-equivalent coverage (including EHBs and other
required coverage) or ABP benefits defined without regard to the
requirements of section 1937 of the Act, which consists of regular
Medicaid coverage under the state plan. Home care is not a standardized
term in Medicaid, so clarification would be needed to determine which
Medicaid benefit category is actually applicable.
We agree that states are obligated to comply with the Americans
with Disabilities Act and the Olmstead decision.
Comment: One commenter requests that crisis services be included in
the mental health and substance abuse services category in the EHB
package. This commenter requests that it be offered by qualified health
plans and in new Medicaid expansion benefits in each state. These are
important services to the safety net and for 24/7 crisis care, suicide
prevention and access to emergency health care services, especially in
communities where emergency mental health clinics or mobile health
services are unavailable.
Response: CMS is not requiring specific services to be included in
any of the EHB categories, but all ABPs must include all EHBs defined
through the process described in our regulations.
Comment: Several commenters suggest that EHBs should comply with a
consistent standard across ABPs as they are concerned that the proposed
rule allows for states to select more than one option for establishing
EHB to implement multiple ABPs for targeted populations. These
commenters also recognize the need for states to target populations to
address specific health care needs.
Response: We are providing flexibility for states to select base
benchmark plans in Medicaid that are different than the one selected
for the individual and small group market, and to select multiple base
benchmark plans, to maximize the ability for states to define ABPs that
serve the unique needs of Medicaid populations and subpopulations.
Comment: One commenter requested CMS include autism coverage in the
EHB package to correct the omission. Lack of coverage can create
significant financial burden on families and discourages autism
professionals from practice. Families also may decide to not pursue
treatment.
Response: States have choices in determining in the benefit package
that will be covered in their state within federal guidelines, but all
ABPs must provide for coverage of EPSDT services for individuals under
the age of 21. We expect that services to treat autism may be covered
through a variety of coverage categories and many would be included in
a state's ABP either because the services are within the section 1937
coverage option or included as part of EHBs.
Comment: One commenter applauds HHS for including coverage of the
full package of EHBs, as it includes coverage of screening and brief
counseling for domestic and interpersonal violence, in the Medicaid
ABPs.
Response: We thank the commenter for the support. While it is not
certain that every ABP will include counseling for domestic and
interpersonal violence, such services will be provided if they are part
of the EHBs.
Comment: One commenter believes that strong and comprehensive
oversight and enforcement of EHBs and nondiscrimination standards at
the state and federal level will help ensure consistent coverage of
transplant benefits and eliminate discriminatory insurance practices.
Therefore, the commenter asserted, ABPs must cover all EHB categories
without discrimination for people who have or will acquire health
conditions that lead to end stage organ failure. The commenter stated
that a wide range of medical services are required during the
transplant process and fall under the categories of ambulatory
services, hospitalization, chronic disease management, mental health
services, rehabilitative services, and prescription drugs. The
commenter urged that all of these treatments must be covered under
ABPs.

[[Page 42204]]

Response: If transplant services are covered as part of the
coverage option chosen by the state, or the benefits under the selected
base benchmark plan, as supplemented (and subject to permissible
substitution of benefits), then they will be covered as part of the
ABP.
Comment: According to one commenter, the Affordable Care Act
specifies that entities covered under section 340B(a)(4) of the Public
Health Services Act, which includes federally recognized Hemophilia
Treatment Centers, be designated as essential community providers and
that designation requires that qualified health plan networks to
include Hemophilia Treatment Centers. This commenter requests that
state Medicaid programs be encouraged or required to include essential
community providers in their networks.
Response: Coverage through an ABP remains subject to requirements
under the state plan to provide for beneficiary free choice of
provider, and provider payment rates that are consistent with
efficiency, economy, and quality of care and assure sufficient access
to services. States have options to limit free choice of provider in
some circumstances, for example, managed care service delivery
consistent with section 1932 of the Act, or through selective
contracting arrangements authorized under a waiver under either section
1915 of the Act or section 1115(a) of the Act. In any of these cases,
states must assure sufficient beneficiary access to services.
Comment: Several commenters suggested that the review of EHB, in
the private insurance market and Medicaid, consider whether limits in
coverage and changes in medical evidence or scientific advancement
affect whether enrollees have difficulty accessing services. The EHB
should be based on the most recent and reliable clinical evidence
available and a process should be developed to inform and shape EHBs
based on these factors over time. If not available, there should be an
allowance for some physician discretion.
Response: Consistent with the provisions of section 1302(b) of the
Affordable Care Act, CMS has in the regulations at 45 CFR part 156
defined EHBs by reference to coverage plans available in the commercial
market.
Comment: Several commenters also requested that review of EHBs be
disaggregated to include demographic categories. HHS should require
states to report enrollees' race, ethnicity, language, sex, and
disability status data uniformly, as well as data on other demographic
areas such as sexual orientation and gender identity, as described in
section 4302 of the Affordable Care Act.
Response: This information does not appear to be related to the
review of EHBs. We note, however, that we are developing a Transformed
Medicaid Statistical Information System that will include expanded data
elements regarding beneficiaries, claims and providers per Affordable
Care Act.
Comment: One commenter supports inclusion of all ten EHB to reflect
appropriate balance in each category and requested that anesthesia and
pain management services be included in the ten categories of benefits
covered by the ABPs. This commenter also requested that CRNAs and other
non-physician providers who bill for Medicare Part B be included in
Medicaid ABPs.
Response: The coverage of particular services will depend upon the
coverage option selected by the state, and the EHBs that are determined
based on the state-selected base benchmark plan, as supplemented (and
subject to substitution of actuarially equivalent benefits) consistent
with the process described in 45 CFR part 156. This rule will not
affect the ability of states to set provider qualifications for covered
services.
Comment: One commenter requested that dollar limits on a specific
category of benefits and targeted use of utilization management
techniques be prohibited.
Response: Annual dollar limits are prohibited in the public
employee or commercial plans that are the basis for coverage options
and the base benchmark options according to section 2711 of the Public
Health Service Act. Utilization management techniques are common
practice for benefit management and will continue to be allowed in
Medicaid. We expect that these practices will be non-discriminatory and
not impede access to needed, covered services.
Comment: One commenter indicated that HHS should specify in the
final rule that to meet the health care needs of diverse segments of
the population, an ABP must provide a process for participants to
request and receive: clinically appropriate benefits not routinely
covered by the plan, especially when the ABP is less costly than the
covered benefit; coverage for benefits beyond limits set by the plan;
coverage of specialty care not routinely covered by the plan when
medically necessary and appropriate.
Response: We are specifying in the final rule that, if an
individual in the new adult group meets the criteria for exemption from
mandatory enrollment in an ABP that would otherwise be applicable, then
the individual would have a choice of an ABP that includes at least the
EHBs, and is subject to the requirements of section 1937 of the Act, or
benchmark or benchmark-equivalent coverage that is not subject to the
requirements of section 1937 of the Act, and thus, includes all regular
Medicaid state plan benefits. Other individuals do not have that choice
but this rule does not affect their right to appeal denials of coverage
through the state's fair hearing system.
Comment: Commenters requested clarification and further guidance on
the supplementation process established in both the proposed rule for
the EHBs in the commercial market and the proposed rule for EHBs in
Medicaid ABPs. Many commenters requested that CMS clarify what benefits
would constitute coverage in each category and identify a threshold to
trigger supplementation of a benefit category. It appears that a single
service could be determined to be sufficient to define an EHB in
Medicaid and therefore would not achieve MHPAEA compliance. A few
commenters also stated that a single service would not meet non-
discrimination requirements in addition to the balance requirement,
which requires a much stronger minimum set of benefits in each
category. One commenter requested clarification of the Medicaid EHB
supplementation process including the extent to which the scope of
services in one EHB category must be consistent with services offered
other health service categories. Several commenters believe that
additional provisions need to be added to ensure that the level of
benefits in each EHB category are meaningful and adequate to meet the
needs of the population. Several commenters also requested that CMS
clarify what benefits would constitute coverage in each category and
explain how CMS would enforce the non-discrimination and balance
requirements.
Response: Supplementation occurs when a base-benchmark plan does
not include items or services within one or more of the categories of
EHB. Benefits from the base benchmark that are determined to be EHBs
must be included as an EHB, unless substituted by the state. While the
rules at Sec. 156.115(b) indicates that the ``issuer'' may substitute
benefits, in Medicaid, the state functions as the issuer and we thus
provide that the state can exercise the option to substitute benefits.
We indicated that requirements at Sec. 156.110 apply unless we
specifically modified the approach in Medicaid. Section 156.110(e) that
specifies balance requirements also apply to EHBs

[[Page 42205]]

established in Medicaid. All benefits within the section 1937 coverage
option must also be provided. CMS will conduct a review of all ABP SPAs
to determine appropriateness for approval.
There are both requirements and flexibility for states in
constructing EHBs and section 1937 coverage options. Please refer to
the summary at the end of this section for further discussion of these
steps and flexibilities.
Comment: The HHS February 17, 2012 Bulletin allows for substitution
of services within the rehabilitative and habilitative benefit,
allowing the plan to facilitate substitution of services at the
provider level based on patient need not predetermined by the issuer,
according to one commenter. The November 20, 2012 Patient Protection
and Affordable Care Act; Standards related to Essential Health
Benefits, Actuarial Value, and Accreditation proposed rule indicated
that the issuer would create a substituted benefit plan, which would
leave providers with no choice but to provide services in the benefit
package and potentially lead to an individual choosing a plan that does
not cover the services that they need.
Response: States, not issuers, define benefits within section 1937
of the Act. Section 156.115(b) outlines the substitution policy that
will also be applicable to Medicaid except that, in Medicaid, states
have the role of issuers and will indicate the substituted benefits.
Substitution requires that benefits be in the same EHB category and
that they are actuarially equivalent. This means that a state for
example, could substitute a personal care benefit for an in vitro
fertilization benefit in the EHB Ambulatory Services category, as long
as they were actuarially equivalent. Within the rehabilitative and
habilitative services and devices EHB, benefits can be substituted as
long as the resulting benefits still provide for coverage of both
rehabilitative and habilitative services. We expect that the benefit
design will result in clinically appropriate services based on medical
necessity. The resulting ABP, which includes EHBs that have been
supplemented if necessary, individual benefits that have at state
option been substituted, and benefits from the section 1937 coverage
option, must be approved by CMS. Once approved, a description of the
benefits included in the final ABP should be publicly available so that
beneficiaries are knowledgeable of the benefits to which they are
entitled. That said, we appreciate that it may be difficult at this
point to make changes to the ABP that take effect by January 1, 2014.
In light of this challenge, we will partner with states to work as
quickly as possible to come into full compliance with these provisions.
We do not intend to pursue compliance actions on these issues to the
extent that states are working toward but have not completed a
transition to the new ABPs on January 1, 2014.
Comment: Many commenters are concerned that there is no requirement
regarding adequacy of benefits. These commenters specifically requested
that HHS provide a cross-reference to Sec. 440.230(b) and state
explicitly that the requirement that every service offered through the
Medicaid state plan ``be sufficient in amount, duration, and scope to
reasonably achieve its purpose'' also applies to EHBs in the ABPs. A
few commenters recommended that the regulations be revised to require
states to supplement the benefits in a benchmark plan if any service in
the EHB category is not sufficient in amount, duration, or scope to
reasonably achieve its purpose.
Response: Under section 1937of the Act, states are authorized to
offer ABPs that include benefits derived from public employee or
commercial market products, essential health benefits and certain other
required benefits. Sufficiency standards applicable to the traditional
Medicaid benefit package generally do not apply to ABPs. If Secretary-
approved coverage is chosen as the section 1937 coverage option,
however, then we would require that the benefit package must ``provide
appropriate coverage to meet the needs of the population provided that
coverage'' under Sec. 440.330(d). Sufficiency standards at Sec.
440.230 will be applied in our review of proposed Secretary-approved
coverage.
Comment: Many commenters requested that CMS reconsider the proposed
approach and define comprehensive federal EHBs for section 1937
coverage that all states would be required to use to supplement their
chosen benchmark or benchmark-equivalent coverage. They urged that CMS
should go further and require states to cover comprehensive benefits in
each of the EHB categories and work with states to ensure that minimum
coverage is met. One commenter went further to suggest that CMS and HHS
adopt a comprehensive, national EHB in 2016, when the trial period for
the current approach is complete.
Response: EHBs in Medicaid will generally be defined in the same
fashion as they are defined in the individual and small group market,
except for certain EHB categories discussed in the proposed rule and
this final rule. This approach allows the public employee or commercial
market plan selected by the state to define EHBs for Medicaid to set
the floor for EHB coverage (with supplementation as needed and
substituted as desired). States then have the authority to offer other
services (including through Secretary-approved coverage for the new
adult group).
Comment: One commenter requested that HHS clarify that the
requirement for balance among EHB categories ensures robust coverage in
each category and cannot be used to lower other categories if one or
more categories lacks robust coverage.
Response: Consistent with the requirements of 45 CFR 156.110, EHB
categories must be appropriately balanced to ensure that benefits are
not unduly weighted toward any category. Any benefits that are
determined to be EHBs from the base benchmark plan must be provided.
Section 1937 of the Act also has an ``equal to'' standard that
indicates that all benefits from a section 1937 coverage option must be
provided. When Secretary-approved coverage is used, benefits must meet
Medicaid sufficiency standards as well as the requirement that the
benefit package be appropriate to meet the needs of the population.
Comment: Many commenters reiterated concerns regarding the EHB
proposed rule and EHB benchmark plan standards. This concern remains
for ABPs as the Department does not sufficiently define the scope of
coverage in any statutorily required category specifically maternity
care. The base benchmark plans may include coverage of maternity
services, but the plan documents do not specify which services define
maternity coverage or provide details on coverage including limits. The
lack of clear definitions further complicates the substitution and
supplementation methodology. Several commenters want the Department to
establish clear standards for what must be covered as required by
sections 1302(b)(1) and 1302(b)(4)(C) of the Affordable Care Act to
ensure a comprehensive standard. The adoption of coverage should not
result in a discriminatory benchmark.
One commenter expressed concerns related to the ambiguously defined
EHB categories and encouraged HHS to definitively confirm the extent to
which cost effective, clinically effective nutrition care services such
as medical nutrition therapy are included as EHBs within Medicaid
benchmark and benchmark-equivalent plans. This commenter requests
adequate federal oversight and approval of benchmark plan selection by
HHS to reflect the vital and unique role that nutrition plays in

[[Page 42206]]

improving and maintaining health for all Americans, but also recognizes
the need to define EHBs flexibly. This commenter seeks clarification in
the final rule on the metrics and bases upon which HHS will determine
whether a benchmark or benchmark-equivalent plan meets the EHBs
mandated by Affordable Care Act.
Response: Section 1937 of the Act permits states to offer coverage
through an ABP without regard to sufficiency requirements that are
applicable to regular state plan benefits, except that we would apply
sufficiency standards in our review of proposed Secretary-approved
coverage as the section 1937 coverage option. Substitution is allowed
in section 1937 of the Act using requirements found at 45 CFR
156.115(b) except that the state will be exercising the option for
substitution rather than an individual market issuer.
Comment: Commenters requested that CMS provide clear regulatory
guidance to states to ensure that the process for supplementing
coverage to meet the additional requirements of Affordable Care Act is
clear. This is especially important given that EHBs are not universally
covered well by state Medicaid programs such as mental health and
substance use services. Furthermore, for states that choose to use
benchmark-equivalent coverage, this commenter requests that CMS
establish clear limits on states' ability to use benchmark-equivalent
coverage to undermine the EHB protections as it appears that under the
proposed rule that they can reduce the value of EHBs under the
benchmark-equivalent option to anything short of elimination. These
commenters request that CMS ensure the comprehensiveness of the
benefits for all beneficiaries covered by section 1937 of the Act
regardless of the ABP chosen by the state.
Response: Benchmark-equivalent benefit packages must be at least
actuarially equivalent to one of the section 1937 benchmark coverage
options and must include benefits within certain categories of basic
services. In addition, the Affordable Care Act amended section 1937 of
the Act to require the provision of EHBs in benchmark equivalent
coverage, so we do not believe that use of this section 1937 coverage
authority will undermine the EHB protections. The process for
supplementation is found at 45 CFR 156.110(b)(1) through (4) and
substitution requirements are at Sec. 156.110(b). All benchmark-
equivalent coverage packages must adhere to section 1937 requirements,
and must not violate the EHB anti-discrimination principles.
Comment: One commenter recommended that HHS specify in the final
rule that ABPs must include benefits routinely covered by the benchmark
plan, regardless of whether those benefits are listed in the data
collection template used to report base benchmark benefits to HHS.
Furthermore, all benefits within categories of care that list more than
one benefit must be covered. For example, an ABP should be required to
cover as three distinct benefits rehabilitative services, habilitative
services, and rehabilitative and habilitative devices as opposed to
only covering one of them.
Response: We intend to develop a template for states to use to
define the ABP in Medicaid that will result in the submission of a
state plan amendment. This is a different process than the one used for
states to submit the base benchmark benefits for the individual and
small group market. A state can select a different base benchmark plan
for the individual and small group market than it does for Medicaid
purposes. We anticipate issuing further guidance on these operational
issues.
Comment: One commenter strongly encourages CMS to provide further
guidance on alignment issues during the plan comparison and
supplementation process. This commenter encourages CMS to clarify that
during supplementation, states must create the most comprehensive
benefit package possible, drawing from services covered in either the
section 1937 coverage option or the comparison base benchmark plan,
which could include drawing across categories if necessary to create a
robust set of services that will result in adequate coverage of EHBs.
Response: To clarify, the ABP must include as a floor the EHBs
covered by the base benchmark plan selected by the state to define EHBs
for Medicaid, supplemented as necessary and subject to substitution of
actuarially equivalent benefits as permitted under 45 CFR 156.115(b).
Balance requirements of 45 CFR 156.110(e) also apply. In addition, the
ABP must include any benefits from the section 1937 coverage option
that are not in the base benchmark plan, whether they are EHBs or not.
If the section 1937 coverage option that is one of the three public
employee or commercial products provides a service in a greater amount,
duration, or scope than the EHB provided in the base benchmark plan,
the state must utilize that section 1937 standard for that service. If
the section 1937 coverage option is Secretary-approved coverage, then
the state may choose which benefit to use.
Comment: One commenter requests that HHS specify that appropriate
balance of EHB coverage includes coverage of benefits across the care
continuum, prohibits substitution between categories of EHB (for
example, prohibit coverage of rehab therapy but include drug coverage)
and between benefits (cover wheelchairs instead of rehabilitative
hospital care to restore a person's ability to walk), cover all EHBs
within the settings and by specialists which provide the current
standard of care, and protect patients' access to appropriate and
medically necessary care as provided by skilled medical professionals.
Response: Substitution of benefits can be achieved when defining
the EHBs according to 45 CFR 156.115(b). Benefits must be in the same
EHB category and actuarially equivalent. Balance requirements at 45 CFR
156.110(e) apply, as CMS did not indicate that they do not apply in
Medicaid. CMS will be reviewing each state plan submission. As with all
Medicaid services, states will establish medical necessity criteria for
the receipt of ABP services.
Comment: A commenter indicated understanding that benefit
substitution among EHB categories would be prohibited for ABPs as it is
prohibited for Exchange plans. However, this commenter believes that
substitution even within benefit categories could be extremely
problematic for children's and pregnant women's access to needed
services. Commenters urged HHS to prohibit substitutions or at a
minimum give states the flexibility to disallow substitutions. If
benefit substitution within categories is retained, this commenter
recommends that a more restrictive standard than an actuarial
equivalence test on the value of the benefits compared to the EHB
benchmark plan be implemented.
Response: Substitution of benefits within EHB categories will be at
state option, according to parameters described in 45 CFR 156.115(b).
This process will be the same for Exchange plans and ABPs, except that
states will be in the role of the health insurance issuer for purposes
of substitution.
Comment: Commenters note that in some states the EHB benchmark
covers services beyond those included in the Medicaid state plan. They
argue that requiring states to supplement coverage to make it
comparable to the EHB benchmark is not a workable solution for states,
particularly for states that wish to expand in 2014. They further
assert that some of the immediate operational challenges include the
need to enroll new providers, set reimbursement rates, design claims
and

[[Page 42207]]

payment rules, and incorporate those rules into systems, and if managed
care is used, new capitation rates will need to be designed, which will
result in a large administrative burden.
Response: It is true that ABPs under section 1937 of the Act will
contain different benefits than those offered in regular Medicaid,
based on the coverage options and EHBs that a state elects. These
differences are inherent in the statutory design. While EHBs will
establish a minimum level of benefits, that level may result in greater
or lesser benefits than are available under regular Medicaid. ABPs
require that benefits that are based on commercial insurance products
include the benefit, the benefit description and limitations on amount,
duration, and scope as the minimum standard. States have been working
with CMS toward defining EHBs and ABPs and as part of that process
states may need to undertake contracting activities and system changes
to offer and administer the ABP.
Comment: In the proposed rule concerning EHBs, requirements could
be different in different states according to one commenter. Since two
of the four benchmarks are tied to what is available to state employees
in the state and what is available from the largest HMO in the state,
employers may have confusion about the requirements in a particular
state. This commenter requests identification of who oversees an
employer that has employees with a principle place of employment in
multiple states, and wonders whether it would be the Department of
Labor.
Response: The standards discussed in this regulation relate to the
implementation of EHBs for Medicaid. Employers do not offer Medicaid as
part of their offerings to employees and therefore, this question is
outside the scope of this regulation.
Comment: One commenter asked if, given the requirement that states
must supplement the benchmark package if EHBs are not covered, states
would be required to add these benefits to the state plan under the
Secretary-approved coverage option that is based on state plan
coverage. The commenter asserted that it is unclear if the state must
supplement services that are covered in the base-benchmark selection
for the Exchange, and that it is unclear if supplementation is only for
the benchmark plans provided to newly eligible individuals or if states
that are seeking to provide a Secretary-approved benchmark plan to
newly eligible individuals will be required to amend the state plan to
add the new EHB services not otherwise covered. The commenter also
asked whether states would now be required to add services that are not
currently covered and categorized as optional, and also wondered if EHB
supplementation only applies to benefits for newly eligible people or
must the state meet this requirement for all benchmarks offered
regardless of population.
Response: States are required as part of the ABP to cover all EHBs.
While most of the EHBs are also included under regular Medicaid
coverage, there may be exceptions. For example, substance abuse
services and habilitative services may not be part of a State's regular
Medicaid benefit. The EHB requirement applies to any ABP offered by the
state, including those based on Secretary-approved coverage.
Comment: One commenter indicated that the regulatory language fails
to specify that states must supplement missing categories. This
commenter recommends that the Department clarify that states must
follow the process established in 45 CFR part 156 to ensure that any
missing categories are supplemented in the final rule. The Department
should also ensure that benefit design in ABPs does not result in less
comprehensive benefits than the private insurance market, and
therefore, ABPs should be required to include benefits at least as
robust as those in the state's full EHB package.
Response: EHBs establish a floor of benefits for ABPs offered under
section 1937 of the Act and are based on commercial market products,
which means at a minimum EHBs will include benefits at least as robust
as those in the base benchmark chosen by the state. The supplementation
process in section 1937 of the Act will follow 45 CFR 156.110(b).
Comment: Several commenters generally supported the proposed
process to designing the Medicaid ABP. However, HHS must establish
transparent, minimum standards for states using ``Secretary-approved''
coverage. It will be critical to ensure that the state cannot develop
an ABP based on the weakest benefit level available at each step of the
process. The commenters expressed concern that the rule offers very
little guidance about what the ABP must cover to meet the ten
categories of EHBs required by Affordable Care Act and the scope of
required coverage. They indicated that this lack of clarity may lead to
people in the Medicaid expansion group not receiving the full range of
services available to people at higher income levels accessing private
market or Exchange coverage in their state. An additional commenter
expressed that the youngest and most vulnerable citizens, the birth to
three population, need to have access to all necessary high quality,
comprehensive physical, developmental, mental health and medical care
to ensure positive growth and development.
Response: Current and proposed regulation at Sec. 440.335(d)
states that Secretary-approved coverage must be appropriate to meet the
needs of the population being served. CMS will review proposed
Secretary-approved coverage against that standard. And CMS will apply
the sufficiency standards of Sec. 440.230 in evaluating benefits
included in Secretary-approved coverage. In addition, all ABPs,
including Secretary-approved, must include the full range of EPSDT
services for individuals under age 21, which ensures that they will
have access to comprehensive screening and necessary medical care.
Comment: Several commenters expressed concern regarding the process
proposed by CMS to demonstrate compliance with EHB, saying it is too
burdensome and applying the EHB definition that was created for small
group health plans for commercial products in the private market
needlessly complicates section 1937 of the Act. They asserted that
requiring that states begin by using one of the ten commercial
benchmark plans as the EHB base is not useful for states that want to
use the full Medicaid benefit set under Secretary-approved coverage.
They argued that using the full Medicaid benefit set allows all
Medicaid clients to receive the same benefit set and states would not
have to operationalize a post-eligibility review process to screen
people for opting out of the ABP for the traditional state plan. Their
position was that, given the number of changes that states must
implement in 2014, maintaining a single benefit set reduces
administrative burden and confusion for clients and minimizes the
number of required system changes. According to one commenter, it is
essential that the new adult group have the same benefit set as the
full state Medicaid benefit set. Furthermore, the commenter asserted
that the mandatory Medicaid benefit set should be an option to serve as
the basis for demonstrating EHB compliance under the Secretary-approved
option without supplementation. A few commenters recommend that HHS
create a second definition of EHB compliance that would be based on the
Medicaid mandatory benefit set, limit that definition to the ABP in
Medicaid programs, and allow states to use this benefit set as the
basis to build a

[[Page 42208]]

coverage option for Secretary-approved coverage.
Response: Section 2001(c) inserted new paragraph (b)(5) into
section 1937 of the Act. This amendment requires that benchmark and
benchmark-equivalent benefit packages must provide EHBs described in
section 1302(b) of the Affordable Care Act, beginning January 1, 2014.
The same process to define EHBs applies to both commercial plans and
Medicaid, with adjustments only to reflect the unique nature of
Medicaid. Thus, EHBs must be established within section 1937 using one
of the state options for base benchmark plans as set forth in 45 CFR
part 156. States may still elect to offer Medicaid state plan benefits
in their section 1937 coverage option using Secretary-approved
coverage, as long as all requirements of this regulation are met.
Comment: Many commenters indicated that states electing state plan
benefits using the Secretary-approved option should not be required to
supplement with additional EHB services. Although they acknowledged
that section 1937 of the Act requires inclusion of EHBs as defined
under section 1302(b) of the Affordably Care Act, they asserted that
this does not mandate importation of entire segments of coverage from
private plans nor does it require a wholesale matching of these
offerings in Medicaid. They asserted that implementing EHBs in section
1937 of the Act in this way is onerous and could result in the
relatively less vulnerable, higher income expansion group as compared
with Medicaid beneficiaries receiving more generous benefits such as
substance use disorder services. They further asserted that Congress
certainly could not have intended for the new enrollees to end up
receiving more robust coverage than the categorically needy base. They
stated that this also creates administrative complexity for states and
a situation where incoming beneficiaries who may be disabled must
choose between disparate benefit schedules. The commenters believed
that the only way to mitigate disparate benefit schedules is for states
to expand all benefits for existing and new eligible beneficiaries,
something states are not in a fiscal position to do. They further
asserted that the Affordable Care Act did not authorize a departure
from long standing state discretion under Title XIX to develop
appropriately balanced benefits and suggested that, if states must
expand all benefits for existing and newly eligible beneficiaries, then
states must receive 100 percent FFP for these benefits.
Response: We believe that our response to the question above also
responds to this question; the statute requires that all ABPs, even
Secretary-approved coverage, include EHBs. There are both requirements
and flexibilities for states in constructing EHBs and section 1937
coverage options. The process for defining and including EHBs is the
process used under section 1302(b) of the Affordable Care Act, adapted
to the unique circumstances of the Medicaid program.
Comment: One commenter indicated that the intersection of Sec.
440.345(d) and Sec. 440.347(a) is confusing, and recommends that CMS
clarify in regulation that EHBs form a floor for the ABPs and do not
supplant any preexisting requirements under section 1937 of the Act and
42 CFR part 440, subpart C. Regulations would be clearer if Sec.
440.347 were worded as a definition of EHB rather than a restatement of
the mandate to include EHB in an ABP and for clarity should simply
reference relevant provisions in 45 CFR part 156.
Response: Section 440.345(d) is intended to establish the universe
of benefits required within the ABPs. In addition, state must assure
access to RHC and FQHC services and transportation to and from
medically necessary services as set forth at Sec. 440.365 and Sec.
440.390 respectively. Section 440.347 is intended to specify the
categories of EHBs and the process by which those EHBs are established
within the ABP. Both sections should be read in conjunction to the
other.
Summary: We are adopting the following approach for treatment of
individuals in the new adult group who meet the exemption criteria from
mandatory enrollment in benchmark or benchmark-equivalent coverage in
the final rule. If an individual in the new adult population meets the
criteria for exemption, then they have a choice of the ABP based on
benchmark or benchmark-equivalent coverage including at least the EHBs,
or an ABP with coverage defined as the state's approved Medicaid
traditional state plan, which is not subject to any other requirement
of section 1937 of the Act, including EHB requirements. We are not
making any changes as a result of these comments.
i. Essential Health Benefits (Non-Discrimination Policy) (Sec.
440.347)
Section 1302(b)(4) of the Affordable Care Act provides that benefit
design cannot discriminate and CMS codified this section of the
Affordable Care Act at Sec. 440.347(e). Benefit design discrimination
policies do not prevent states from using targeting criteria to group
people together to receive specific benefit packages.
Comment: One commenter expressed support for the inclusion of the
new provision clarifying that individuals cannot be discriminated
against based on their ``age, expected length of life, or an
individual's present or predicted disability, degree of medical
dependency, or quality of life or other health conditions.'' The
commenter seeks age-appropriate care and benefits for children, whether
through family or child-only coverage.
Response: We appreciate the support.
Comment: Several commenters indicated that while they understand
that section 1937 of the Act allows states the flexibility to amend
Medicaid state plans to provide certain populations (as defined by the
state) with benefits packages other than those offered in the standard
Medicaid state plan, HHS must closely monitor this and ensure there is
no discrimination in benefit design for certain populations.
Response: Benefit design should not discriminate against
individuals who receive a benefit package under section 1937 of the Act
based on age, disability, life expectancy or condition but may include
benefits designed to meet the special medical needs of segments of the
covered population. Benefit packages designed in section 1937 of the
Act include the same oversight as the regular Medicaid state plan.
Aside from the EHB anti-discrimination requirements, Sec. 440.230(c)
indicates that state Medicaid agencies cannot arbitrarily deny or
reduce the amount, duration, or scope of a required service to an
otherwise eligible recipient based solely on diagnosis, type of illness
or condition.
Comment: Several commenters expressed support of the requirement
that EHB benefit design cannot discriminate on the basis of an
individual's age, expected length of life, or an individual's present
or predicted disability, degree of medical dependency, or quality of
life or other health conditions. The commenters believe these non-
discrimination provisions will require vigorous monitoring and strong
enforcement.
Response: We thank the commenters for their support. We expect
states to comply with these provisions and implement benefit packages
that do not discriminate. ABPs will be subject to the same monitoring
process as currently used in the Medicaid state plan.
Comment: Many commenters expressed support for the inclusion of a
non-discrimination provision in Sec. 440.347(e). But some commenters
pointed out that, while the proposed

[[Page 42209]]

rule recognized the importance of non-discriminatory plan design Sec.
440.347(e) fails to state the full range of nondiscrimination
protections applicable to the EHB. Many commenters expressed concern
that the preamble only references section 1302(b)(4) of the Act and the
requirements proposed in Sec. 440.347(e) state only the protections
under that statutory provision. Therefore the commenters believe that
the requirements in Sec. 440.347(e) reflect an incomplete and
insufficient standard. The commenters believe that the protections
under section 1557 of the Affordable Care Act also apply, and the final
rule must expressly state a comprehensive and consistent
nondiscrimination standard, explicitly requiring EHB benefit design to
comply with section 1557 of the Affordable Care Act. The commenters
recommend the final rule be revised to include the language used in the
nondiscrimination standard set out in the proposed EHB rule. The
commenters believe that without the additional requirements the
benefits of both section 1557 and the Affordable Care Act as a whole in
ensuring comprehensive coverage for all individuals will be undermined.
Lastly, the commenters also requested the regulation prohibit ABPs from
including all of the following:
Participant cost-sharing designs that are more burdensome
on some benefits than others.
Unreasonable and arbitrary visit and dollar limits on a
specific category of benefits, so as to discourage participation by
individuals with brain injury.
Targeted use of utilization management techniques for some
benefits, and not to others.
Defining the benefits in such a way to exclude coverage
for those services based upon age, disability, expected length of life,
or the willingness or capacity to participate in wellness programs or
behavioral incentive programs.
Response: Some of the protections sought by commenters are already
contained in laws applicable to state Medicaid programs. Section 430.2,
an existing regulation, identifies other regulations applicable to
state Medicaid programs including 45 CFR part 80, which requires that
programs receiving federal assistance, through the Department of Health
and Human Services, include effectuation of Title VI of the Civil
Rights Act of 1964 and 45 CFR part 84, which implements Section 504 of
the Rehabilitation Act of 1973, prohibiting disability discrimination.
In addition, state Medicaid programs are subject to the Age
Discrimination Act of 1975. Therefore, these protections are already
applicable to Medicaid.
We appreciate commenters pointing out deficiencies in Sec.
440.347(e) and have revised it to align with the regulation
implementing EHBs in the Exchanges.
Comment: A few commenters indicated appreciation of CMS's work to
revise current Medicaid rules such that they incorporate statutory non-
discrimination provisions from section 1302(b)(4). The commenters
strongly encourage CMS to also codify all statutory non-discrimination
provisions applicable to issuers of QHPs that meet EHB requirements.
CMS should specify that Sec. 156.200 and Sec. 156.225 also apply to
ABPs. Section 156.200 specifically prohibits discrimination based on
factors including but not limited to race, disability, and age. Section
156.225 codifies section 1311(c)(1)(A) of the Affordable Care Act which
prohibits marketing practices and benefit designs that result in
discrimination against individuals with significant or high cost health
care needs. The commenters believe that all Affordable Care Act non-
discrimination provisions applicable to QHPs issuers and EHB standards
must similarly apply to ABPs in Medicaid to ensure consistency of
standards across all forms of all health care coverage.
Response: The requirements in 45 CFR part 156 apply to QHP issuers
and not Medicaid managed care plans. However, there are similar
protections in place in the regulations governing Medicaid managed care
plans. If ABPs are delivered through a Medicaid managed care plan,
those protections, including marketing, appeals and grievances,
beneficiary information, and non-discrimination based on health status
will apply to the Medicaid managed care plans providing ABP benefits.
There are similar protections on many of these issues for Medicaid fee
for service delivery systems, requiring fair hearing, free choice of
provider, and beneficiary information.
We take this opportunity to clarify that States have the
flexibility to use managed care to deliver ABP benefits without regard
to statewideness and comparability of services. Further, freedom of
choice of provider may also be disregarded to the extent the State can
demonstrate that freedom of choice would be contrary to the effective
and efficient implementation of an ABP.
Comment: Many commenters also recommended Sec. 440.347(e) be
amended as follows: EHBs cannot be based on a benefit design or
implementation of a benefit design that discriminated on the basis of
an individual's race, color, national origin, sex, sexual orientation,
gender identity, age expected length of life, or of an individual's
present or predicted disability, degree of medical dependency, or
quality of life or other health conditions. Other commenters
recommended Sec. 440.347(e) be amended as follows: (e) EHBs cannot be
based on a benefit design or implementation of a benefit design that
discriminates on the basis of an individual's age, expected length of
life, an individual's present or predicted disability, degree of
medical dependency, or quality of life or other health conditions,
race, color, national origin, language, sex, sexual orientation or
gender identity.
Response: The suggested change to Sec. 440.347(e) is unnecessary
because the protections described are already reflected in existing
Medicaid regulations.
Comment: Many commenters expressed concern about the lack of
guidance under the proposed rule for monitoring and enforcement of the
proposed nondiscrimination provisions, and believe that the final rule
must better define how individual states will assess, monitor, and
enforce the law's nondiscrimination provisions. Moreover, the
commenters do not believe it is sufficient to delegate all monitoring
and enforcement to states. The commenters recommend the final rule
define how CMS will take enforcement action when states are not
ensuring compliance with the nondiscrimination standards established
under the Affordable Care Act. The commenters also recommend that CMS
develop a clear standard for what constitutes a discriminatory benefit
design. This standard must address both individual cases of intentional
discrimination and benefit designs that are facially neutral but that
have the effect of systematically disadvantaging members of protected
classes. Ultimately, this standard must make clear that the
determination of whether a coverage limitation or exclusion is
discriminatory should turn on the degree to which the benefit design is
based on sound standards of clinical appropriateness rather than on
arbitrary distinctions between health conditions or personal
characteristics. To assist federal and state regulators in rectifying
discrimination in benefit design, CMS should follow up on the final
rule with sub-regulatory guidance explaining how to evaluate products
for impermissible discrimination and providing examples of
discriminatory benefit designs such as those listed above. In addition,
CMS should require trained evaluators in each state to regularly and
transparently review

[[Page 42210]]

coverage available through ABPs for discriminatory benefit designs and
to ensure identified instances of discrimination are remedied in an
expedient manner. Where CMS determines that a state Medicaid agency is
not fulfilling its responsibilities in this area, CMS should establish
a review procedure to focus on ensuring that all services deemed part
of the EHBs are available to all eligible individuals for whom they are
medically necessary, without arbitrary discrimination on the basis of
any protected personal characteristic.
Response: ABPs are Medicaid state plan amendments and are subject
to the same monitoring and oversight that occurs in the Medicaid state
plan. Under this process, states review applicable requirements and
design their program, including ABPs. The proposed design is submitted
to CMS for approval, and CMS reviews the proposal for compliance with
federal requirements. If approved, CMS may also review state
implementation for compliance with federal requirements. In addition,
issues can be raised by beneficiaries through the fair hearing process
if services are denied. As with any Medicaid service, we recognize the
important role that all stakeholders play in making CMS aware of any
perceived ABP noncompliance. We will consider issuing further guidance
on this topic.
Comment: One commenter is concerned that the proposed rule does not
establish sufficiently robust oversight or enforcement framework to
provide states with essential guidance to implement such a program. The
regulatory text does not expressly require the Exchanges, states or OPM
to monitor plans for compliance with the prohibition on discrimination.
This commenter urges CMS to adopt an express requirement in the
regulatory text of the rule that the Exchanges, states and OPM monitor
for non-discrimination.
Response: Medicaid is a federal and state partnership and as such,
states have the first line of responsibility to design and implement
their program in compliance with federal requirements, including the
non-discrimination requirements. Federal oversight is implemented using
the existing state plan process, as well as ongoing monitoring of
program operations.
Comment: Several commenters expressed concern that applying the EHB
standard to prescription drug coverage in Medicaid would not provide
appropriate protections for people with chronic conditions like cancer,
diabetes, Parkinson's, HIV/AIDS, schizophrenia, epilepsy, obesity and
organ transplant recipients. The commenters believe that focusing on a
number of drugs covered, as opposed to ensuring a breadth of drugs are
covered, could result in a selection of drugs that meets the minimum
requirement but discriminates against potential enrollees.
Response: While we understand the commenters' concerns, the statute
permits states a certain amount of flexibility in determining and
structuring ABPs that meet the needs of enrollees and are consistent
with overall state objectives. We must clarify a statement in the
preamble to the proposed rule, indicating that requirements under
section 1927 of the Act are applicable to ABPs under section 1937 of
the Act. Section 1927 of the Act does not affect the flexibility of
states to define ABP benefit packages consistent with a coverage
benchmark and including EHBs. The amount, duration, and scope of
prescription drug coverage would thus be governed by the requirements
of section 1937 of the Act. To the extent that a prescription drug is
within the scope of the ABP benefit as a covered outpatient drug,
section 1927 of the Act is then applicable. For such covered outpatient
drugs, since payment is available under the state plan, all drug rebate
obligations under the rebate agreement are required for drug
manufacturers under 1927(b) of the Act.
To explain in more detail, the amount, duration, and scope of
coverage for an ABP is determined under section 1937 of the Act, which
authorizes benchmark or benchmark-equivalent coverage ``notwithstanding
any other provision that would be directly contrary.'' But, the drug
rebate obligation applies under section 1927 of the Act when payment is
made under the Medicaid state plan for covered outpatient drugs as part
of the ABP. In addition, to the extent that covered outpatient drugs
are within the scope of ABP coverage, the protections and limitations
for such coverage under section 1927 of the Act apply. So, for example,
to the extent that coverage under an ABP includes a class of covered
outpatient drugs, a state could impose limitations on that coverage
only consistent with the provisions of section 1927(d) of the Act. In
general the requirements for prescription drug coverage under section
1937 of the Act, through the requirement for coverage of EHBs, will
mean that ABPs will meet existing section 1927 requirements for
Medicaid payment of covered outpatient drugs, which we believe will
address the commenters' concerns. We discuss the interaction between
the requirements for prescription drug coverage under section 1937 of
the Act with the requirements for covered outpatient drugs under
section 1927 of the Act in further detail later in this final rule.
Comment: Some of the commenters are concerned that CMS allows
states to place limitations on amount, duration, and scope and adopt
prior authorization and other utilization control measures, as well as
policies that promote the use of generic drugs. The commenters believe
that for people living with chronic conditions, use of utilization
management techniques can have a detrimental impact and inhibit people
from accessing needed treatments. The commenters also believe that
these limitations can violate the non-discrimination requirements in
the law.
In particular, commenters indicated that it is imperative that non-
discrimination protections found in Sec. 440.347 are strictly and
clearly applied to the ABP prescription drug benefit. HIV care and
treatment standards maintained by Federal agencies recommend a
combination of medications for effective management of HIV disease (see
http://www.aidsinfo.nih.gov). Quantitative limits on the number of
drugs covered per month are discriminatory against people with HIV and
others whose quality of life and health depend on access to a specific
regimen of multiple prescription drugs to treat both HIV and co-
occurring conditions as recommended by their medical provider. The
application of the non-discrimination provisions should prohibit states
from applying quantitative limits on monthly drug coverage for the
expansion population, and the commenters urged that this standard also
be applied to the traditional Medicaid population. If monthly drug
limits are considered, there must be provisions to allow for a timely
override process that does not delay immediate and uninterrupted access
to the medications when recommended by a medical provider.
Commenters also requested that CMS adopt a more robust standard for
evaluating limitations on amount, duration, and scope and prior
authorization and utilization control measures that may be
discriminatory by design. These evaluations should be specific to the
population and based on sound medical evidence regarding the
prescription drugs necessary to provide adequate coverage. Restrictions
to prescription drug coverage in Medicaid, such as monthly drug limits,
could leave some Medicaid beneficiaries with less comprehensive
coverage than that offered to individuals covered in the

[[Page 42211]]

Exchange because of limitations that are discriminatory based on health
care need.
A few commenters also expressed concern that the proposed rule does
not discuss the circumstances in which a limitation on drug coverage
could violate the non-discrimination requirement. CMS should provide
additional guidance about its interpretation of the nondiscrimination
rule and its enforcement strategies, particularly for prescription
drugs. The commenters believe that this should include oversight
functions to actively monitor and test for discriminatory plan design
and implementation, and to report such activities to CMS. For instance,
the implications of plan substitutions within a category of EHBs or
prescription drug cost-sharing designs for high risk enrollees should
be considered.
Response: States have considerable flexibility in implementing the
provision of Medicaid services through ABPs. While this flexibility
permits states in some instances to limit prescription drug coverage
based on the coverage offered under other public employee or commercial
plans, it also includes the ability to exceed the amount, duration, and
scope of prescription drugs covered by those plans, as long as the
services provided are consistent with the Medicaid requirements.
The non-discrimination provisions adopted in this final rule at
Sec. 440.347 require that states will need to assess whether their ABP
benefits, including any limitations placed on the amount, duration and
scope of any benefit, discriminate on the basis of the individual's
age, expected length of life or any individual's present or predicted
disability, degree of medical dependency, or quality of life or other
health conditions. We will consider whether additional sub-regulatory
guidance on these matters is needed.
Comment: One commenter stated that private market carriers argue
that exclusions for services or drugs commonly provided for the
treatment of conditions such as HIV/AIDS are not discriminatory because
they apply to all plan enrollees, regardless of their specific negative
effect on people with these conditions.
Response: Under the law, states must assess whether their ABP
benefit designs, including service or drug exclusions that are applied
to all beneficiaries, discriminate based on an individual's age,
expected length of life, or an individual's present or predicted
disability, degree of medical dependency, or quality of life or other
health condition contrary to the non-discrimination provisions being
adopted in this final rule at Sec. 440.347.
Comment: One commenter suggested that in developing an analysis
framework to aid in testing for discriminatory plan benefits, CMS must
ensure that ABPs refrain from using benefit designs that treat patients
in a disparate manner based on age. For example, where FDA approves a
drug or biologic for use in patients within a certain population, such
as pediatrics, the commenter argued that ABPs should not be permitted
to restrict coverage or employ varying utilization techniques for
children of different age ranges within that pediatric population. The
commenter requested CMS' vigilant oversight to protect children from
being subject to age-based discrimination in accessing FDA-approved
products.
Response: The non-discrimination provisions adopted in this final
rule at Sec. 440.347 require that states will need to assess whether
their ABP benefits, including any limitations placed on the amount,
duration and scope of any benefit, discriminate on the basis of the
individual's age, expected length of life or any individual's present
or predicted disability, degree of medical dependency, or quality of
life or other health conditions. A limitation on medically necessary
care provided to pediatric patients would violate the requirement under
section 1937 of the Act that ABPs include the full range of medically
necessary EPSDT screening and treatment services. Thus, the issue would
not be one of benefit design but of compliance in providing a covered
benefit.
Comment: A few commenters stated that CMS should adopt similar
guidance and review processes as required under Medicare Part D program
in the Medicaid EHB final rule. These proven non-discrimination
policies and processes have been critically important in assuring that
all Medicare beneficiaries--from the healthiest beneficiaries to the
most vulnerable beneficiaries with serious and chronic illnesses--can
obtain affordable Part D coverage that meets their individual needs.
Additionally, CMS' experience assessing Medicare Advantage plans' cost-
sharing and benefit designs for discriminatory effects may help point
the way.
Response: We appreciate the comments regarding the use of Part D
non-discrimination standards and will consider those standards as we
evaluate these issues and the need for further guidance.
Comment: Several commenters indicated that meaningful non-
discrimination protections will require a thoughtful and thorough
review of preferred drug lists (PDLs). They stated that the following
approaches could help ensure meaningful access: (1) PDLs should only be
permitted to categorize a drug as non-preferred when there are genuine
therapeutic alternatives classified as preferred; (2) PDLs should allow
for appropriate access to drugs or drug classes needed for adherence to
widely accepted treatment guidelines; (3) The most commonly used
medications (or therapeutically similar medications) for conditions
with high prevalence in the Medicaid population should be categorized
as preferred drugs; and (4) Most importantly, medications used by
particularly vulnerable Medicaid beneficiaries, such as those living
with HIV/AIDS, cancer or serious mental illness, should be largely
available as preferred drugs, given the importance of avoiding medical
complications and interruptions in therapy for individuals with those
conditions.
Response: For covered outpatient drugs, a PDL is permitted under
section 1927 of the Act, as long as it is under a prior authorization
program that meets the requirements of section 1927(d)(5) of the Act.
Furthermore, as we discuss in the cost sharing sections of this final
rule, a PDL may also be established for cost sharing purposes.
Comment: Many commenters expressed concern that the regulation did
not provide examples of what would be considered discriminatory benefit
design. The commenters request CMS identify a clear standard to
determine whether the coverage provided complies with the non-
discrimination provisions of the Affordable Care Act. Additionally, the
commenters believe that CMS should provide examples to States of what
would constitute violations, monitor ABP coverage for compliance with
the non-discrimination requirements, and enforce these provisions of
the law. Many other commenters added that the rule also did not
establish a process to bring discriminatory benefit design or practice
into compliance. CMS should consider developing more detail in the
final regulation defining these protections. This should include a
process for bringing a State's chosen benchmark or benchmark-equivalent
option into compliance with the law.
Response: States will submit Medicaid state plan amendments for
federal approval to implement ABPs and receive FFP. The state will
assure in that submission that they will comply with non-discriminatory
requirements as set forth in Sec. 440.347(e). If issues are

[[Page 42212]]

detected with adherence to these requirements, we will pursue
appropriate action with the state to rectify the issues. As always, we
appreciate the ongoing input of stakeholders to help inform states and
CMS of concerns relating to these matters.
Comment: One commenter indicated that it is unclear how the
requirement that EHBs cannot be based on a benefit design or
implementation of a benefit design that discriminates on the basis of
an individual's age, expected length of life, or of an individual's
present or predicted disability, degree of medical dependency, or
quality of life or other health condition will be evaluated in the
context of benchmark plans for specified population. It is unclear
whether targeting permitted under other sections such as section
1915(i) of the Act would be permitted. The commenter wondered whether
it would preclude the establishment of specialty plans based on
diagnosis.
Response: Section 1937 of the Act does allow for a waiver of
comparability at Sec. 440.230(c); thus permitting states to identify
groups of people, populations, based on certain characteristics such as
presence of a chronic condition. States can then design benefit
packages that are suitable for the population, but this activity does
not permit benefit designs that are inherently discriminatory.
Comment: A few commenters expressed concern that neither earlier
rules on EHB nor this proposed rule specifically define
``discrimination'' in the context of discriminatory benefit design. The
commenters urge HHS to develop and promulgate a definition of
``discrimination'' that will allow states to evaluate health plans
uniformly. The proposed rule delegates entirely to states the task of
evaluating EHB for discriminatory design or intent with no further
guidance at all. The absence of a definition of discrimination will
inevitably lead to a 50-state patchwork of definitions. The commenters
strongly believe that the definition of discriminatory benefit design
should not vary among states.
Response: Medicaid is a federal and state partnership that allows
states to design state-specific programs within broad federal
guidelines and, more generally, that allocates responsibilities to both
states and the federal government. By identifying states as accountable
for determining that benefit design is not discriminatory, we recognize
their important role in assuring compliance with this important
statutory directive. Such accountability does not negate federal
responsibility. As noted, we will consider whether further guidance on
discrimination benefit design would be useful.
Comment: One commenter pointed to the Affordable Care Act's
provision barring discrimination in EHB as prohibiting disability-based
discrimination in making decisions about coverage, reimbursement rates,
establishing incentive programs, and designing benefits, and the
commenters believe those requirements should apply to Medicaid ABPs.
The commenter recommends the Department provide additional guidance
concerning applications of the Affordable Care Act EHB non-
discrimination mandate to ABPs. The commenter believes the Department
should also identify a minimum scope of services that plans must cover
to comply with the Affordable Care Act's parity and nondiscrimination
requirements and the requirement that EHB take into account the ``needs
of diverse segments of the population, including . . . persons with
disabilities.''
Response: The United State Supreme Court decision in Olmstead v.
L.C. rendered on June 22, 1999 held that unjustified segregation of
people with disabilities constitutes discrimination in violation of
Title II of the ADA. Public agencies must provide services to people in
the community when services are appropriate, people do not oppose
services in the community, and the community-based services can be
reasonably accommodated, taking into account the resources available to
the entity and the needs of others who are receiving disability
services from the entity. Medicaid beneficiaries must receive services
in the most integrated setting appropriate. We agree with the commenter
that benefit design, including rate structures, should not create a
pathway to institutionalization or segregation. Setting is not an
appropriate targeting criterion, because it is potentially
discriminatory as different benefits could be designed based on where
individuals live and therefore, it would not be acceptable as a waiver
of comparability.
Comment: Many commenters recommend CMS use the following data to
determine compliance with the non-discrimination requirements:
Medical necessity requirements for Medicaid must be
evaluated and standardized, and HHS should monitor state implementation
of medical necessity to ensure that people living with HIV, chronic
disabilities and other chronic and complex conditions have unimpeded
access to essential care and treatment.
Utilization management techniques, exclusions, and service
limits must be closely monitored to ensure that plans have not put in
place barriers to services or excluded or limited certain items or
services solely to deny access to care for people with chronic and
complex health conditions. The commenters urge HHS to develop a list of
practices that amount to discrimination to help guide monitoring and
enforcement activities. For instance, requiring step therapy for HIV
treatment without a medical override provision is a discriminatory
utilization management technique that should be barred. Similarly, a
monthly limit on prescription drugs (for example, several states have
monthly limits of three or four prescription drugs) is also per-se
discriminatory, as applied to people living with HIV and other chronic
conditions.
Physician network size and composition must be evaluated
to ensure that Medicaid managed care plan networks include providers
that are able to deliver quality care for people living with HIV and
other chronic and complex conditions. A plan network that excludes HIV
providers violates network adequacy standards outlined in qualified
health plan standards and is a discriminatory plan design practice that
forecloses access to EHB services. In addition, patient protections
(for example, standing out-of-network referrals) will be necessary to
ensure a smooth transition to coverage and to support continuity in
care. The commenters strongly urge CMS to require Medicaid managed care
plans to contract with Essential Community Providers, including Ryan
White medical providers.
For chronic and complex conditions, where the standard of
care is rapidly evolving, reference to clinical guidelines is
particularly important to ensure that coverage decisions are based on
established medically accepted guidelines.
Response: Thank you for your suggestions. We agree that Medicaid
managed care provider networks need to be adequate to provide services
to all of their members. It is at state discretion to include (or not)
standards for managed care providers in the contracts that the state
holds with the managed care organizations in the state. Managed care
entities can contract with any provider operating within the scope of
their license to provide services.
Comment: A few commenters recommend ongoing procedures for states
to monitor and share data on how they are meeting their benefit design
and anti-discrimination obligations over time, and make this
information transparent and readily available in at

[[Page 42213]]

least an aggregate fashion to HHS, the public, and to health advocates.
Response: We appreciate the comments. We are currently redesigning
data collection procedures and standards and will consider these
comments.
Comment: One commenter is requesting that any coverage under the
Affordable Care Act, including Medicaid Programs, adequately cover
therapies that cancer patients absolutely must take whether or not
there is an actuarial equivalent at a lower cost. Coverage of drugs and
services related to cancer care should not create cost barriers to
patients through cost-sharing schemes such as burdensome co-pays and
co-insurance. To do so would be unfairly discriminatory, and could
impact a patient's ability to access their care, particularly low-
income patients enrolled in Medicaid. The commenter would like to see
strong protections and oversight established to prevent discrimination.
Response: We agree that a patient's ability to pay cost sharing
imposed for a service can affect a patient's access to care and that
low-income patients are particularly sensitive to such costs. Medicaid
cost sharing rules at Sec. 447.52 generally and Sec. 447.53 for drugs
apply to ABPs. States design cost sharing for therapies and drugs using
those rules, and cost sharing rules may not be implemented in a manner
that would be discriminatory. Annual dollar limits on services will not
be allowed on benefits in the public employee or commercial plans that
are the basis for the base benchmark options used to define EHBs per
section 2711 of the Affordable Care Act.
Comment: A few commenters believe that Sec. 440.347(e) sets out a
strong non-discrimination requirement. However, the commenters also
believe that there will be times when individuals are going to need
access to legal advocacy to seek redress from discrimination and
enforce these due process protections. The commenters recommend that
the states be required to assist individuals to use the due process and
appeals processes, this would include: (1) Information and assistance
in pursuing complaints and appeals; (2) negotiation and mediation; (3)
case advocacy assistance in interpreting relevant law; (4) reporting on
patterns of non-compliance by plans as appropriate; and (5) individual
case advocacy in administrative hearings and court proceedings relating
to program benefits.
Response: We appreciate these suggestions; however, they are
outside the scope of this regulation.
Comment: Many commenters representing the Lesbian Gay Bi-Sexual and
Transgender (LGBT) community stated that the final rules must also
address gaps in enforcement of this prohibition on discriminatory
exclusions by providing clear guidance to state Medicaid agencies on
implementation of these nondiscrimination standards. Enforcement is a
major concern for these commenters in two areas: (i) instances of
discrimination against individual enrollees, and (ii) discriminatory
benefit design. The former is very important for LGBT enrollees, and
they encourage CMS to work with state Medicaid Directors to ensure that
robust and transparent appeals procedures are equally available to all
individuals who need them. With regard to discriminatory benefits
design, they are particularly concerned about enforcement in the
context of potential disagreement as to what kinds of benefit
limitations and exclusions constitute impermissible discrimination in
benefit design.
Response: We appreciate the concerns expressed by these commenters.
We intend to work with states on these matters as well as consider ways
in which discrimination for LGBT enrollees may be rooted in benefit
limitations and exclusions as well as in appeals processes.
Comment: Several commenters stated that the proposed rule requires
that a Medicaid benchmark plan's benefit design cannot be
discriminatory, and the final regulation must ensure adequate
protections against discrimination. The commenters recommend the
regulation require the following non-discrimination standards:
Processes for review of plan benefits design to avoid
discrimination caused by unfair utilization management techniques or
other plan design elements.
Requirements for plans to disclose to all prospective and
current members all utilization management techniques as well as all
limits on services.
Final authority at the federal level to approve any state
non-discrimination review processes to ensure appropriate measures are
in place to guarantee that plans are meeting the requirements of this
section.
Federal monitoring programs to ensure appropriate checks
are in place to guarantee that plans are meeting federal requirements.
In addition, the commenters urge CMS to clarify that Medicaid cost-
sharing limits apply to the managed care organizations participating in
the Medicaid program. For more details on non-discrimination standards,
the commenters refer CMS to its proposed regulatory language for a
comprehensive set of patient protections.
Response: In Medicaid, utilization management processes are at
state discretion. States have flexibility to design and implement the
Medicaid program in the state according to state policies and
procedures. States will assure in the state plan amendment submission
that anti-discrimination practices at Sec. 440.347(e) are met. We
clarify here that Medicaid cost sharing parameters apply to services
provided in a managed care delivery system. Furthermore, we have
oversight responsibility of state programs to insure that federal rules
and requirements are being followed.
Comment: One commenter pointed out that Sec. 440.347 deals
exclusively with patient non-discrimination. The commenter indicated
that there is also provider discrimination within health plans, where
sometimes entire classes of healthcare professionals are excluded from
providing services under the benefit solely based on their licensure or
certification. The commenter believes such discrimination can limit or
deny patient choice and access to a range of beneficial, safe and cost-
efficient healthcare professionals, impairing competition, patient
access to care, and optimal healthcare delivery. The commenter
recommends the rule require ABPs offering EHBs to align payment systems
to adhere to existing state provider non-discrimination laws as
applicable, and to the federal provider non-discrimination provision in
the Patient Protection and Affordable Care Act (Sec. 1201, Subpart 1,
creating a new Public Health Service Act Sec. 2706, ``Non-
Discrimination in Health Care'', 42 U.S.C. 300gg-5) slated to take
effect January 1, 2014.
Response: We require that all providers are operating within the
scope of their licensure or certification when providing services to
Medicaid beneficiaries.
Summary: We appreciate the comments and suggestions and may
consider further guidance. No change in the substance of the regulatory
text is needed. However, CMS made grammatical changes to the regulation
text at Sec. 440.347(e) as a result of comments received in this
section.
3. Modifications in Applying the Provisions of This Final Rule to
Medicaid
We proposed in the implementation of section 1937 of the Act and
the provisions in the Affordable Care Act relating to EHBs, a process
in Medicaid

[[Page 42214]]

for designing ABPs. The Affordable Care Act modified section 1937 of
the Act to implement two standards for minimum coverage provision; not
only must EHBs, as defined by the Secretary, be provided, but all
requirements of section 1937 of the Act continue to apply. Furthermore,
we outlined expectations for specific EHBs as they are implemented in
Medicaid including: habilitative services; pediatric or and vision
services; prescription drugs; preventive services as an EHB; and the
fact that all other Title XIX provisions apply.
a. Essential Health Benefits (Rehabilitative and Habilitative Services
and Devices) (Sec. 440.347)
The proposed rule requested comment on an approach for defining
habilitative services in Medicaid and we reserved regulatory text to do
so. We received varied comments, and are adopting in this final rule
the requirement that services covered by the base benchmark are the
floor of EHB coverage, substituted as desired by the state. Under 45
CFR 156.110(f), if no habilitative services and devices are included in
the base benchmark, states have the option to determine generally the
required EHB services that are in the category of habilitative services
and devices. If the state has done so, the base benchmark, and coverage
under the ABP, must reflect that determination. If the state has not
made a general determination of the habilitative services that are
required for this EHB category, the state must exercise the option set
forth in 45 CFR 156.115(a)(5) to determine EHB for the specific ABP.
Under that option, habilitative services and devices must be included
as EHBs either in an amount, duration, and scope no more restrictive in
terms of treatment and benefit limitations than rehabilitative services
and devices, or otherwise to an extent determined by the state and
reported to HHS. In other words, if the base benchmark does not include
habilitative services and devices, ABP coverage must, at a minimum, be
based on the general state determination of habilitative services and
devices that are included in EHBs, or on a Medicaid-specific
determination for the particular ABP.
While we are not prescribing a specific definition of habilitative
services and devices for purposes of ABP coverage of EHB, we clarify
here that states may choose to adopt service definitions similar to
those issued by the National Association of Insurance Commissioners
(NAIC), as follows: rehabilitative services and devices are defined as
services and devices provided to assist a person to prevent
deterioration and regain or maintain a skill or function acquired and
then lost or impaired due to illness, injury or disabling conditions.
The NAIC also defines habilitative services and devices as services and
devices provided for a person to prevent deterioration or attain or
maintain a skill or function never learned or acquired due to a
disabling condition. CMS will consider the need for future guidance,
once experience is gained in implementing these EHB services and
devices. We also note that while there is a definition of habilitative
services under existing sections 1915(c) and 1915(i) of the Act, this
definition is not necessarily applicable and may in fact not be
appropriate for the population covered under ABPs.
Comment: A number of commenters believed that by requiring coverage
of habilitative services in the ten mandatory EHB categories, Congress
clearly indicated its intent to meet the health needs of individuals
with functional limitations following illness, injury, disability or
due to a chronic condition. The commenters recommended that HHS develop
an objective minimum national standard for habilitative services based
on ``appropriate coverage to meet the needs of the population,'' and
allow states flexibility to add to this minimum for purposes of
innovation.
A few commenters recommended HHS better define this category of
services including providing clarity as to how plan definitions and
scope of coverage will be assessed to ensure compliance with non-
discrimination provisions. A number of commenters requested HHS cover
habilitation at parity with rehabilitation, with some comments
suggesting this standard also require habilitative services under
Medicaid to be at least as generously defined as in the private market.
Many commenters requested that HHS require coverage of habilitative
devices without arbitrary restrictions and caps that limit the
effectiveness of the benefit.
Several commenters recommended HHS include a set of habilitative
services specifying the minimum type of services to be provided and
specify that these services are a floor.
Many commenters recommended that habilitation be covered separate
and distinct from rehabilitation. For example, the plan cannot
substitute rehabilitation for habilitation or apply only a single visit
limit to both benefits. Each benefit must have separate and distinct
limits which are applied based on medical necessity, not an arbitrary
cap.
One commenter requested that HHS recognize that habilitative
services are similar in type and scope to rehabilitative services (for
example, physical therapy, occupational therapy, speech-language
pathology). One commenter believed that habilitation should be covered
in the same setting and include the same type of providers and
specialists as covered in the rehabilitation benefit.
A number of commenters believed that setting clear, comprehensive,
and uniform standards for habilitative services will prevent non-
aligned localized definitions that could create serious problems across
programs and states. A few commenters requested formal guidance on what
the minimal expectation is for habilitative services.
A few commenters believed that when states adopt the habilitative
benefit for ABP, HHS require that they do not impose financial
requirements, quantitative treatment limitations, or financial
limitations that are more restrictive than the predominant requirements
or limitations that apply to all other benefit categories.
Response: We believe the provision of habilitative services is in
addition to rehabilitative services and devices as an EHB. As EHBs are
based on commercial market products, we are interpreting rehabilitative
services as an EHB to more closely align with commercial market
definitions, rather than the broader definition of rehabilitation in
Medicaid. We therefore, are establishing that the commercial market
definition of EHBs is the floor of coverage, subject to substitution
flexibilities. If the commercial market coverage is not adequate,
states, not issuers, define the benefit. At state discretion, as
indicated above, states may offer coverage of habilitative services and
devices that is no more restrictive in terms of amount, duration, and
scope than rehabilitative services and devices. We expect that the
services will be clinically appropriate to meet the needs of
individuals based on medical necessity. We have added this flexibility
for states to define a minimum standard of coverage if the commercial
market benefits are not adequate. We are suggesting, but not requiring,
definitions of rehabilitative and habilitative services and devices, as
indicated above, and will consider needs for future guidance. We are
reiterating that the benefit flexibility under an ABP allows states
considerable latitude to define the benefit package for each population
and there may be services that are covered in some settings but not in
other settings, or that are covered when furnished by some
practitioners but not others. This is

[[Page 42215]]

flexibility that exists currently in the commercial marketplace, and is
extended to state Medicaid programs under section 1937 of the Act.
Comment: One commenter recommended that the coverage and medical
necessity determinations for habilitative services and devices should
be based on clinical judgment of the effectiveness of the therapy,
service, or device to address the deficit. In addition, HHS should make
clear that such benefits are to cover maintenance of function not just
improvements, to assure that individuals in need have access to care
that prevents deterioration of their conditions.
One commenter requested that HHS inform states that habilitative
services need to be medically necessary and plans must be clear on how
they define and determine medical necessity.
Response: States may require that all services covered under
Medicaid be medically necessary. Determining the specific coverage of
habilitative services and devices will be done by the state, based on
services found in the base benchmark plan selected by the state to
define EHBs for Medicaid, and substituted as desired. If a base
benchmark plan does not include habilitative services, consistent with
45 CFR 156.110(f) and 156.115(f), States will determine which services
are included as EHB in the habilitative services and devices category.
We agree with the commenter that habilitative services, generally
speaking, cover acquisition and maintenance of skills, while
rehabilitative services cover restoration of previously acquired
skills, but we are not setting forth a specific definition of these
terms at this time.
Comment: One commenter recommended that HHS look to state Medicaid
programs as a guide for defining what habilitation services should be
covered under the EHB. A number of commenters requested that HHS
require states and plans to adopt the definition of habilitative
services put forth by the NAIC, which was included in the Department's
proposed rule defining medical and insurance terminology. Many
commenters recommend that if the NAIC definition is not used, an
alternate definition to consider is provided in Medicaid law under
section 1915(c)(5)(A) of the Act.
Response: We appreciate these suggestions and find the definitions
of rehabilitative services and devices and habilitative services and
devices extremely useful. Habilitative services and devices as
described in the base benchmark plan is the floor of coverage, subject
to substitution flexibility. If a base benchmark plan does not include
habilitative services, consistent with 45 CFR 156.110(f) and
156.115(f), States will determine which services are included as EHB in
the habilitative services and devices category. States may choose to
offer habilitative services and devices in no more restrictive in terms
of amount, duration, and scope of treatment than is applied for
rehabilitative services and devices.
Comment: One commenter requested the state-defined habilitative
benefit definition, as applied to section 1937 ABP in Medicaid, should
not be extended to QHPs on the Exchange. This commenter indicated that
in many states, Medicaid takes an expansive view of habilitative
services, and there is a risk that if applied to the commercial market,
this could raise costs on QHPs in the Exchange. States should have the
option to either separately define habilitative services for Medicaid
or apply the state-defined habilitative definition for the Exchange to
the Medicaid programs, but not apply a broad Medicaid habilitative
service definition to QHPs in the Exchange.
Response: This regulation is focused on the parameters of the
habilitative services and devices that are EHBs for purposes of section
1937 ABPs under the Medicaid program and, this regulation does not
apply to QHPs.
Comment: Many commenters recommended that states should be allowed
to define habilitative services for their Medicaid program.
Response: We are adopting the position in this final rule that
states will have the ability to define habilitative services and
devices. If the base benchmark plan selected by the state to define
EHBs, does not include habilitative services and devices, states will
define the habilitative services and devices that will be regarded as
this EHB category and must be covered in the ABP. In so doing, states
can choose to offer habilitative services and devices that are at a
minimum no more restrictive in terms of amount, duration, and scope
than rehabilitative services and devices.
Comment: One commenter requested that HHS continue to allow states
and issuers the flexibility to define habilitative services for the
individual and small group markets as proposed in the EHB proposed rule
and not be required to follow Medicaid definitions.
Response: We reiterate that this regulation applies only to the
Medicaid program, and has no bearing on the provision of habilitative
services in the individual and small group markets.
Comment: One commenter requested HHS clarify that states will be
deemed to cover habilitation if they provide ABP enrollees with such
services through a section 1915(c) waiver program.
Response: The new adult eligibility group is not eligible for
enrollment in section 1915(c) waivers. However, states may also add
section 1915(i) services to the ABP using Secretary-approved coverage,
which may include some habilitative services and devices. But we do not
see a reason to ``deem'' compliance with the habilitative services and
devices EHB requirements just because a state may include some
habilitative services and devices in those ways. The state must still
determine habilitative services and devices that are EHBs in accordance
with this regulation.
Comment: A few commenters recommended that if HHS does not use a
national standard for Medicaid habilitative service benefits, then
states should be required to base their definitions on documented and
evidence-based criteria, such as those endorsed by a relevant national
academy of providers or national disease group; and states should not
automatically be allowed to use their Exchange habilitative services
definitions unless it independently meets the criteria stated above.
Response: We expect that states will consider the efficacy of
services, evidence-based criteria, and the needs of the populations
being served as they are designing habilitative services, based on the
services found in the base benchmark selected by the state to define
EHBs for Medicaid, and supplemented and substituted as necessary and
desired.
Comment: Many commenters recommended that the state-defined
habilitative services for Exchanges should not apply to Medicaid.
Instead, some commenters indicated that states should be required to
define habilitative services through a public process that establishes
minimum standards for coverage, while taking into account unique
circumstances of the Medicaid population, including the impact of a
restrictive definition on access to critical services in early
intervention and special education. One commenter believed that states
should have the option to offer parity.
Response: In terms of complying with EHB requirements, the same
basic framework applies to both ABPs and plans in the individual and
small group markets. But that basic framework includes considerable
flexibility that states can exercise in the Medicaid context. While
states will ultimately determine coverage of habilitative services we
encourage states to do so in recognition of the unique needs of the

[[Page 42216]]

Medicaid population. As states work to identify coverable habilitative
services, they are expected to consider input from the public in making
the decisions. ABPs are subject to public notice requirements in Sec.
440.386.
Comment: One commenter requested that the final rule ensure that
the state's Medicaid definition of habilitation is at least as generous
as the definition used for Exchange plans.
Response: While we believe that the procedures we are adopting to
determine habilitative services included in EHB for Medicaid will
generally be at least as generous as the parallel procedures for the
individual and group market, we are not requiring that result. We
believe that the procedures for Medicaid will lead to appropriate
coverage for Medicaid beneficiaries while recognizing the state's role
in designing Medicaid coverage.
Comment: Many commenters recommended against HHS allowing any of
the potential flexibility, authorized in the Exchange, for issuers to
define the habilitative benefit. Commenters were concerned that issuers
would limit the range of services too narrowly.
Response: States will retain flexibility to design services covered
within the rehabilitative and habilitative services and devices EHB
consistent with the procedures set forth in this final regulation.
Comment: A few commenters recommended HHS require states to
establish the same definition of habilitative services for ABP, QHPs,
and Exchange, due to the significant amount of churn associated with
the population being served. One commenter believed that habilitative
services should have a common definition, but that definition should
not necessarily determine what is covered by the Exchange or Medicaid.
Those habilitative services that are to be covered should be separately
established by the Exchange and by Medicaid, since this is a question
of affordability and comprehensiveness.
Response: We recognize the possibility for churn between Medicaid
and the individual and small group markets. We believe the flexibility
reflected in this regulation provides the basis for continuity between
the commercial market and Medicaid. We are also allowing states to use
provider qualifications from the commercial market plans to help
minimize the possibility for provider changes if a person's plan
changes.
Comment: One commenter indicated that currently under Medicaid,
habilitation services are defined in statute and provided as an
alternative to institutional services such as nursing home care. As
noted in the regulation, employers do not cover the service consistent
with Medicaid requirements. As a result, if parity is required without
consideration of the scope of habilitation services offered, the result
could be states exceeding the EHB standard. States should be provided
the flexibility to define and provide coverage of habilitation
services.
Response: Habilitative services and devices are coverable services
under the section 1915(c) waiver program and the waiver program does
provide a suggested definition. Section 1915(i) also allows coverage of
habilitative services and devices where states define the service. We
are giving states flexibility to define habilitative services and
devices within the standards finalized in this regulation. In addition,
states may offer either habilitative or rehabilitative services in
excess of these standards.
Comment: Numerous commenters believed that states should not be
allowed to define habilitative services through parity with
rehabilitative services since the two service sets have totally
distinct purposes and impact different sets of individuals. They
asserted that parity is a poor standard because there is no certainty
that the rehabilitative services level is itself adequate to begin
with.
Response: We appreciate the commenters' concerns. We are
establishing that the state may determine the ABP-covered benefit
beyond the benefits included in the base benchmark plan,. To the extent
that the base benchmark has no habilitative services, the state may
elect to include as the EHB category habilitative services and devices
coverage that is no more restrictive in amount, duration, and scope
than the coverage of rehabilitative services and devices. We
acknowledge that this standard does not guarantee provision of any
particular habilitative or rehabilitative service. This will be in
large part determined by the services offered in the plan selected by
the state to define EHBs for Medicaid.
Comment: One commenter requested HHS, at a minimum, afford
flexibility to issuers allowing them to either provide parity by
covering habilitative services in the same manner as rehabilitative
services or report the services it decides to cover to HHS.
Response: The procedures we have adopted recognize that states have
the role that issuers have in the individual and small group market.
Federal Medicaid works directly with state governments and not issuers.
Therefore, we believe that having states define the habilitative
services benefit instead of issuers, using the procedures finalized
here, is the most appropriate approach.
Comment: One commenter believed that habilitative services
complement rehabilitative services and are integral to ensuring that
the beneficiary receives comprehensive care that restores him/her to
maximum functional levels. This commenter stated that both substitution
among and parity between these services could be problematic if the
beneficiary's medical condition requires significantly more
rehabilitative services than habilitative services and vice versa.
Response: States may implement utilization management processes
that allow for individuals who need additional services beyond the
limits established in the ABP to receive such services based on medical
necessity. States could substitute rehabilitative services for
rehabilitative services and habilitative services for habilitative
services.
Comment: A number of commenters recommended that HHS remove the
requirement that state Medicaid programs cover habilitative services,
as this is not a separate mandated category of EHB services. Instead, a
Section 1937 plan that covers either rehabilitative or habilitative
services should be deemed to cover items and services within the
general EHB category for rehabilitative-habilitative services.
Alternatively, a few commenters recommended that HHS clarify that
ABPs must cover all of the benefits within categories of care that list
more than one benefit, as is the case for rehabilitative and
habilitative services and devices. In particular, a plan should not be
considered to meet the requirement of covering all EHBs unless it
covers, as three distinct benefits, rehabilitative services,
habilitative services, and rehabilitative and habilitative devices, as
opposed to covering only one of the many benefits included in this
category.
Response: Habilitative services are listed as a required benefit
category of EHB at section 1302(b)(1)(G) of the Affordable Care Act. It
is part of a category of EHBs, but is distinct from rehabilitative
services and devices. Both rehabilitative and habilitative services and
devices must be offered in all ABPs.
Comment: A number of commenters supported access to habilitative
services and devices including autism services, durable medical
equipment, orthotics, prosthetics, low vision aides, hearing aids,
augmentative communication devices that aid in speech and hearing, and
other assistive technology and supplies that are often critical to
ensure

[[Page 42217]]

individuals are able to function independently in the community.
Response: We appreciate the comment and agree that these types of
services could assist people with living in the community. We are not
requiring any specific services to be offered within this EHB category.
Comment: A number of commenters requested that HHS require coverage
of services without age restrictions. They indicated that a pediatric-
only habilitative benefit is inadequate, especially as the new
eligibility category is for adults only.
Response: EHBs including rehabilitative and habilitative services
and devices apply to all individuals who receive a benefit package in
ABPs, regardless of age. For the new adult group, only individuals who
are ages 19 and 20 will qualify for EPSDT services.
Comment: A few commenters requested HHS prohibit the exclusion of
specific conditions or diagnoses from accessing the benefit.
Response: ABPs allow for comparability to be waived, which results
in allowing for targeting of individuals to specific benefit packages.
However, all individuals in the new adult group and other individuals
the state either mandates or offers voluntary enrollment into an ABP
must receive all EHBs, including habilitative and rehabilitative
services and devices.
Comment: A few commenters recommended that states should define
habilitation using EPSDT criteria.
Response: Section 1905(a) of the Act does not include a service
category for ``habilitation services'' so it is not useful to look to
EPSDT coverage for guidance and EPSDT criteria do not apply under law
to adults. For children, however, the EPSDT benefit must provide
eligible individuals with any medically necessary service that is
coverable under a section 1905(a) service category. Consistent with the
law, these regulations extend the EPSDT benefit, which also includes
children covered in an ABP. Therefore, children in an ABP should
receive any covered section 1905(a) benefits that they require based on
medical necessity.
Comment: A few commenters requested that HHS cover habilitation
services, which maintain an individual's functional status, as defined
by the HHS Summary of Benefits and Coverage regulations.
Response: The HHS Summary of Benefits and Coverage regulations
apply to private insurance markets, which do not include Medicaid.
Comment: A few commenters cautioned against restricting services in
EHB plans without allowing for an exception process.
Response: States do have the flexibility to allow for exception
processes for utilization management of the benefit; such exceptions
must be based on medical need.
Comment: One commenter recommended that the habilitative benefit
cover the full array of health and ancillary service needs of children
with special health care needs. The commenter believed that this is
especially important for children aging out of foster care, as these
children are at greater risk of having a chronic condition requiring
habilitative services.
A few commenters indicated that it is inappropriate for any one
service to satisfy the requirement for a benchmark plan covering
habilitative services. For example, providing only Applied Behavioral
Analysis to children under the benchmark plan is inadequate to satisfy
the full requirement of coverage of habilitative services. These
commenters requested that the benchmark plan utilized be as
comprehensive in its coverage as feasible. One commenter recommended
defining habilitation and contrasting it with rehabilitation to help
clarify the distinction between the two benefits.
Response: We remind readers that states must not only comply with
the standards finalized in this regulation, but must also include all
habilitative services covered in the public employee or commercial plan
selected by the state to define EHBs for Medicaid, supplemented and
substituted as necessary and permitted.
Comment: One commenter believed there should be no exclusion for
services that may be educationally-relevant, as is the current policy
in Medicaid.
Response: Payment for Medicaid services must be for services that
are medical or remedial in nature as specified by the particular
authority from which the service is derived.
Comment: One commenter requested HHS provide states a description
of maintenance programs and clarify at what point services are no
longer covered.
Response: The level at which services no longer have clinical value
is determined by the state through medical necessity criteria.
Comments: One commenter requested that HHS clarify the clinical
settings in which habilitative services may be covered and ensure that
there is a prohibition against ``school'' exclusions.
Response: Settings in which services are furnished are largely
determined by the providers authorized by the state to deliver
services. Practitioners within schools can become Medicaid providers if
they meet the provider qualifications as established by the state. In
ABPs, states may use provider qualifications for the benefit as defined
for the commercial market, Medicaid provider qualification rules for
the benefit, or a combination of both.
Comment: A few commenters requested information related to the cost
of adding habilitative services.
Response: Habilitative services are not included in the benefit
package typically included in the Medicaid state plan, and our limited
experience does not allow for extrapolation for a nationally required
service. States will initially receive 100 percent FMAP starting
January 1, 2014 to cover the cost of providing services to individuals
who are considered newly eligible in the new adult group, and that
funding will decline to 90 percent FMAP in 2020. For individuals who
are considered not newly eligible in the new adult group and those who
are not in the new adult group, FMAP will be provided at the state's
regular FMAP rate.
Comment: Many commenters recommended that HHS prohibit the use of
cost-sharing requirements or utilization management tools which target
the habilitation benefit and are not applied to other EHB benefits.
Response: We are not accepting this comment because states have the
flexibility to impose cost sharing consistent with the exemptions and
beneficiary protections set forth in sections 1916 and 1916A of the
Act, which we address separately in this final rule. There is no
exemption under those provisions for habilitation services. In
determining how to exercise the flexibility to impose cost sharing,
however, we recognize that states must consider their obligations under
the Americans with Disabilities Act and must not implement a
discriminatory benefit design.
Comment: A few commenters were disappointed that HHS has chosen not
to provide states any guidance regarding the habilitation benefit in
ABP.
Response: In the proposed rule, we solicited public comments on the
EHB requirements for rehabilitative and habilitative services,
including devices. We received considerable numbers of comments, and
considered those comments carefully. We weighed concerns about burden
and cost of expansive coverage against the benefits of wider access for
beneficiaries to needed care. We also considered the treatment of these
benefits in the commercial market. Based on this consideration, we are
issuing in this

[[Page 42218]]

final regulation the policy for coverage of rehabilitative and
habilitative services, including devices. We hope that these policies
provide the guidance requested by commenters.
Comment: Many commenters requested HHS stipulate in the final
regulation an ongoing process for data collection and evaluation
related to ABP and Exchange coverage of habilitative services and
devices. If this data were compared to the model definition of
habilitation, that would give parameters for determining the adequacy
of coverage for the first year of ABP and exchange operation.
Response: CMS collects data from states in a variety of ways. The
data will be available to help states, CMS and others determine what
services are actually being provided, and it will help to inform us for
future coverage decisions.
Comment: One commenter indicated that states should be able to
include as Medicaid state plan services any habilitative services
included in either its Exchange EHB benchmark or ABP.
Response: Habilitative services are only required in the Medicaid
program for individuals in an ABP. Many states cover habilitative
services under their section 1915(c) waivers. States interested
offering habilitative services in other contexts should initiate
conversations with CMS.
Comment: One commenter believed the habilitative benefit proposed
to be defined in the November 20, 2012 EHB proposed regulation is
wholly inadequate and urged HHS to pursue promulgation of a strong,
uniform definition of habilitative services for ABPs, as well as those
offered through the Exchange.
Response: The scope of this regulation is related to the definition
of habilitation services as EHBs for purposes of Medicaid ABPs under
section 1937 of the Act. This regulation does not extend to the
definition of habilitation services as EHBs for purposes of the
individual and small group markets.
Comment: One commenter recommended that HHS have the authority to
amend state defined coverage of habilitative services should evidence
show that they provide insufficient coverage for users.
Response: We anticipate that states will provide appropriate
coverage of this service but section 1937 of the Act gives states a
certain amount of flexibility to define ABPs that include the minimum
coverage defined as EHBs.
Comment: One commenter believed that by requiring section 1937
plans to cover habilitative services, CMS is creating a disconnect
between the scope of services offered under the state plan and section
1937 coverage, in essence making the section 1937 plans more generous
than current Medicaid state plans (which goes against congressional
intent).
Response: The Affordable Care Act established habilitative services
as part of the EHB category ``Rehabilitative and Habilitative Services
and Devices.'' EHBs are required to be offered as part of ABPs and are
not required in other Medicaid state plan benefits for adults. ABP
benefit packages will be different from those defined as the Medicaid
state plan.
Comment: One commenter believed that requiring habilitative
coverage does little to ensure that appropriate services are available
to individuals, as those requiring habilitative services are likely to
be considered ``medically frail'', exempting them from mandatory
enrollment in the benchmark package.
Response: Individuals in the new adult group who meet the criteria
to otherwise be determined to be exempt for medical frailty, will have
a choice between ABP coverage that is defined in accordance with the
requirements of section 1937 of the Act, including the EHB
requirements, or ABP coverage that is defined as the coverage available
under the state's approved Medicaid state plan. People who are not in
the new adult group and are eligible for voluntary enrollment may be
given a choice by the state between the benefit package defined using
the ABP or the state's approved Medicaid state plan. An individual who
has such an election may obtain needed habilitation services if the
state has elected to provide such coverage under the state plan under
section 1915(i) of the Act. If not, such individuals who need
habilitative services may wish to voluntarily enroll in an ABP defined
under section 1937 of the Act, if the EHB benefit package, inclusive of
habilitative services, meets their needs.
Summary: We solicited public comments related to this provision in
the proposed rule. We clarify in regulation text that the state will
define rehabilitative and habilitative services. Services covered by
the base benchmark are the floor of EHB coverage, substituted as
desired by the state. Under 45 CFR 156.110(f), if no habilitative
services and devices are included in the base benchmark, states have
the option to determine generally the required EHB services that are in
the category of habilitative services and devices. If the state has
done so, the base benchmark, and coverage under the ABP, must reflect
that determination. If the state has not made a general determination
of the habilitative services that are required as this EHB category,
the state must exercise the option set forth in 45 CFR 156.115(a)(5) to
determine EHB for the specific ABP. Under that option, habilitative
services and devices must be included as EHBs either in an amount,
duration, and scope no more restrictive in terms of treatment and
benefit limitations than rehabilitative services and devices, or
otherwise to an extent determined by the state and reported to HHS. In
other words, if the base benchmark does not include habilitative
services and devices, ABP coverage must, at a minimum, be based on the
general state determination of habilitative services and devices that
are included in EHBs, or on a Medicaid-specific determination for the
particular ABP.
b. Pediatric Oral and Vision and EPSDT Services
For Medicaid, medically necessary services, including pediatric
oral and vision services, must be provided to eligible individuals
under the age of 21 according to requirements of the EPSDT benefit. We
clarified in the proposed rule that any limitations relating to
pediatric services that may apply in the individual or small group
market does not apply to Medicaid. In this final rule, we made no
change from the proposed rule.
Comment: Several commenters expressed appreciation for and support
of the clarifying language in the preamble that confirmed that
medically necessary services provided to eligible beneficiaries under
the age of 21 must be provided under the EPSDT program, and that any
limitation relating to pediatric services based on benchmarks would not
apply to Medicaid for children enrolled in ABPs.
One commenter added that the EPSDT benefit ensures that Medicaid
eligible children have access to a complete range of medically
necessary services, concluding that this will prove especially
important for children with chronic conditions.
A separate commenter believed that the pediatric services category
for benchmark plans for all populations must include a comprehensive
pediatric services benefit modeled after EPSDT.
Response: We generally agree with these commenters, that the EPSDT
benefit is important in offering increased access and a comprehensive
range of medically necessary services for children under the age of 21.
For children enrolled in Medicaid, all medically necessary services in
general, including pediatric oral and vision

[[Page 42219]]

services, are covered under the Medicaid EPSDT benefit, which applies
to every section 1937 ABP. As a result, EHB supplementation for
pediatric services is not necessary in Medicaid.
When assuring access to EPSDT services, a state has the option to
offer medically necessary services to eligible children through either
benchmark and benchmark-equivalent plan benefits without limitation or,
alternatively, a state may meet the ESPDT requirement by providing
services in combination with an eligible individual's benchmark or
benchmark-equivalent plan as additional benefits. The state Medicaid
program must assure that eligible individuals enrolled in ABP coverage
receive EPSDT services that can be accessed in the most beneficial and
seamless manner for the population being served.
Comment: One commenter believed that subjecting ABP benefit
categories to EPSDT requirement, such as preliminary screening, would
water down ABP benefit packages and serve as an artificial barrier to
care that children need. The commenter believed that a robust pediatric
vision services benefit, as envisioned by Congress in the Affordable
Care Act, based on coverage typical in the commercial market, should
not be interrupted by imposing a harmful screening requirement.
Response: We disagree. The commenter may have a misunderstanding of
the EPSDT screening requirements. States are required to adopt EPSDT
screenings (that is, preventive visits) for well-child, vision,
hearing, and dental services. States may also adopt a national
periodicity schedule such as Bright Futures (the Guidelines for health
of the American Academy of Pediatrics). Services are provided based on
these periodicity schedules and at other intervals as determined
medically necessary. The inclusion of screening requirements as part of
the EPSDT mandate should not in any way ``water down'' benefits
provided under ABPs to individuals under the age of 21. It should serve
to ensure that children receive the necessary screenings and any
additional services and treatments according to appropriate standards
of care.
Summary: No changes were made. CMS clarified in regulation text
that EPSDT applies to pediatric services including oral and vision care
as a result of comments received in this section.
c. Essential Health Benefits (Prescription Drugs) (Sec. 440.347)
In the proposed rule, we proposed to add a new paragraph (b)(7) to
include benchmark-equivalent health benefits coverage for prescription
drugs. We also indicated in the preamble that section 1927 of the Act
requirements for covered outpatient drugs also apply to such
prescription drug benefits as an EHB. As we previously discussed, we
are clarifying in this final rule that this statement may have been
over-inclusive, since section 1927 requirements do not apply to ABPs to
the extent that they conflict with the flexibility under section 1937
of the Act for states to define the amount, duration, and scope of the
benefit for covered outpatient drugs. We received the following
comments:
Comment: A few commenters expressed support of paragraph (b)(7) of
Sec. 440.335, which implements the statutory requirements for
benchmark equivalent coverage of prescription drugs.
Response: We appreciate the commenters' support for the coverage of
prescription drugs as required under section 1937 of the Act.
Comment: A few commenters indicated that in the current Medicaid
program, states limit the number of drugs and include other utilization
control measures that are harmful to patients and deny them the
therapies that meet their health needs as prescribed by their
physician. Some state Medicaid programs limit patients to two to four
brand name drugs per month. Such limitations clearly do not meet
patients' needs and the commenter urges CMS not to allow states to
adopt them for the expansion population. Patients should be able to
access the medications that they need as prescribed by their
physicians. If they are not able to access appropriate medications,
patients may become ill, impacting healthcare spending in the long run.
The commenters further seek clarification on what is being proposed
in the rule's recommendation regarding prescription drug limits. While
the rule proposes that the ABP has to meet the benefits in the state-
selected EHB for the private market, the rule separately appears to
replace the ABPs EHB drug benefit category with that described in
section 1927 of the Act. In the final rule, the commenters ask for
clarification on this matter and specifically on whether the ABP drug
benefit is trumped by what is outlined in section 1927 of the Act,
including with respect to any limitations. Furthermore, they are
greatly concerned by the seemingly open ended ability of states to
impose limits, and recommend that quantity limitations not apply to the
ABP.
Another commenter states that CMS' final rule must clearly specify
all the drug access protections that apply to Medicaid ABPs. The
commenter believes that these protections are essential in the Medicaid
context because Medicaid beneficiaries represent a vulnerable
population that tends to have lower health status and fewer resources
to obtain needed care.
Response: States have considerable flexibility in designing benefit
packages for ABPs, including in the process of ensuring coverage of
EHBs. While this flexibility permits states in some instances to limit
prescription drug coverage based on the coverage offered under other
public employee or commercial plans, it also includes the ability to
exceed the amount, duration, and scope of prescription drugs covered
under those plans. We also clarify that nothing in the commercial
market implementation of EHBs, including prescription drugs, directly
prohibits the utilization of monthly quantity limits. In developing
ABPs, states must include prescription drug coverage to at least
reflect the EHB-benchmark plan standards, including the requirement to
have procedures in place that allow an enrollee to request and gain
access to clinically appropriate drugs not otherwise covered. We
believe these requirements will result in coverage that is similar to
the coverage otherwise required under regular Medicaid state plan
coverage.
Comment: A few commenters stated that they support the rules
governing coverage of prescription drugs under Medicaid (section 1927
of the Act) applying to the ABP requiring coverage of nearly all of the
drugs produced by manufacturers who participate in the Medicaid drug
rebate program. The breadth of coverage offered by the Medicaid drug
benefit is important to meet the medication needs of people with HIV
who rely on a complex and unique drug regimen to treat HIV infection
and manage serious co-occurring conditions, such as heart disease,
serious mental illnesses and hepatitis B or C. However, they have
serious concerns regarding the flexibility afforded to states to apply
quantitative limits on drug coverage, particularly given that these
limits are not common practice in the private insurance market.
Allowing these types of limits in ABPs threatens access to lifesaving
care and treatment and undermines the letter and spirit of the
Affordable Care Act's EHB requirements for newly eligible Medicaid
beneficiaries. It will also have the effect of undermining the adequacy
of prescription drug coverage for those

[[Page 42220]]

with chronic health needs. The commenters recommend that HHS apply the
section 1927 requirement for the range of covered medications, but
prohibit additional authority for quantitative limits or other limits
except as legally applicable based on the underlying ABP and EHB
benchmarks. The commenters further recommend that Sec. 440.347 be
amended to read: ``(e)Prescription drugs. Prescription drugs will be
offered at a minimum in accordance with the requirements of section
1927 of the Act and implementing regulations.''
Response: While drug rebate obligations under section 1927(b) of
the Act are applicable to payment for covered outpatient drugs covered
through an ABP, the amount, duration and scope of coverage for an ABP
is determined under section 1937 of the Act, which authorizes benchmark
or benchmark-equivalent coverage ``notwithstanding any other provisions
that would be directly contrary.'' This being the case, we do not have
the authority to require states, when establishing its benefits under
its ABP, to meet the coverage requirements of section 1927 of the Act.
Doing so would be directly contrary to flexibility with respect to the
amount, duration, and scope of coverage provided under section 1937 of
the Act. As for the commenters' concerns with the limits provided under
section 1927 of the Act as they apply to the Medicaid population,
especially on disease specific or chronic care populations, we note
that states have considerable discretion in the provision of Medicaid
services including the ability to define the amount, duration, and
scope of prescription drugs covered under ABPs. We also clarify that
nothing in the commercial market implementation of EHBs, including
prescription drugs, prohibits the utilization of monthly quantity
limits.
Comment: One commenter stated that in 2014, the Affordable Care Act
requires that ABPs cover at ``least essential health benefits, as
described in section 1302(b) of Affordable Care Act''. The commenter
continues that while CMS proposes that the EHB requirements described
in its November 2012 EHB proposed rule apply to ABPs, the Medicaid EHB
proposed rule does not spell out the minimum prescription drug coverage
requirements that will govern ABPs.
The commenter requests CMS clarify that Medicaid ABPs must cover at
least the same number of drugs in a particular United States
Pharmacopeia (USP) class that the state-selected benchmark plan
pertinent to the ABP covers, consistent with the ``Standards Related to
Essential Health Benefits, Actuarial Value, and Accreditation''
proposed rule. The commenter also requests that CMS consider
identifying classes of drugs in which broad access to different drugs
within the class is essential to assure that vulnerable patients have
prompt access to the right medicine for a serious illness, and bolster
the drug coverage requirements for those drug classes accordingly.
Response: As indicated above, states have considerable discretion
in the provision of Medicaid services including the ability to define
the amount, duration, and scope of prescription drug coverage under an
ABP. In developing ABPs, states must include prescription drug coverage
consistent with the EHB-benchmark plan standards. These standards are
set forth at 45 CFR 156.122 and include the requirement that health
plans have procedures in place that allow an enrollee to request and
gain access to clinically appropriate drugs not covered by the health
plan. We believe such requirements will result in coverage that is
similar to the coverage otherwise required under regular Medicaid state
plan coverage.
Comment: One commenter is concerned with the adequacy of the EHB
prescription drug benefit, which will apply to Medicaid beneficiaries
enrolled in ABPs effective January 1, 2014. Medicaid beneficiaries in
ABPs including those low-income adults who are newly eligible for
Medicaid under Affordable Care Act are entitled to coverage for EHB.
The proposed rule codifies this requirement and incorporates the
definitions and standards that were specified for EHB coverage in the
individual and small group market in the EHB proposed rule that CMS
published on November 26, 2012, including CMS' proposed formulary
standard for the prescription drug benefit. While the final rule states
that USP will be used at least through ``the years 2014 and 2015 during
the transitional EHB policy'' and thus it applies to the Medicaid ABPs
during that time, the commenter urges CMS reconsider the use of the USP
system as it is currently structured after 2015 given that many
significant concerns remain. The commenter lists the following concerns
regarding the EHB prescription drug benefit:
The inadequacy of the USP to represent the full range of
categories and classes of drugs needed by the populations covered by
the EHB, including Medicaid beneficiaries enrolled in ABPs, because the
USP was created as a classification system to be used by Medicare Part
D plans;
The need to incorporate specific protections for
vulnerable populations to ensure appropriate access to vital
medications;
The need to expand the USP categories and classes and
include more detail to adequately represent the drugs needed by
enrollees in plans subject to EHB;
The inability of USP categories and classes to capture all
medical benefit drugs, including physician-administered drugs, and the
need for CMS to specify that plans must offer robust coverage of drugs
that are included as part of a comprehensive medical benefit, including
a wider range of therapies, and should not rely on the USP categories
and classes when determining coverage for physician-administered
therapies;
A requirement that new therapies be reviewed and added to
plan formularies within 90 to 180 days through a process that mirrors
the review process performed by independent Pharmacy and Therapeutic
Committees in Medicare Part D to support timely access to new and
innovative medications;
A requirement for specific appeals and exceptions
procedures to ensure that patients have access to needed treatments,
and the application of these procedures also apply to drugs that are
covered as part of a comprehensive medical benefit; and,
The need for CMS to provide specific guidance about
Medicaid ABPs regarding acceptable and unacceptable utilization
management techniques, without which there is a real risk that plans
could apply utilization management tools in a way that discriminates
against individuals with more significant health care needs.
Response: We appreciate the comments submitted regarding the
application of the EHB requirements to ABPs, including the commenter's
concerns with the use of the USP classification system. As stated
above, states have considerable discretion in the provision of Medicaid
services including the ability to define the amount, duration, and
scope of coverage under an ABP. We also clarify that nothing in the
commercial market implementation of EHBs, including prescription drugs,
prohibits the use of utilization management tools. In developing ABPs,
states must include prescription drug coverage to reflect the EHB-
benchmark plan standards, including the requirements at section 45 CFR
156.122. We believe these requirements will result in coverage that

[[Page 42221]]

is similar to the coverage otherwise required under regular state plan
coverage.
Comment: A few commenters indicated that the preamble to the
proposed rule says that all drugs of the companies that participate in
the drug rebate program should be included in the ABP; however that
language is not included in the language of the proposed regulation.
The commenters recommended that the regulatory language be amended to
correct that omission. Additionally, commenters agreed with HHS' legal
conclusion, stated at 78 FR 4631, that section 1927 of the Act applies
to ABPs and believe that this is a critical protection requiring
coverage of a range of drugs necessary to meet the needs of the
Medicaid population. The commenter recommends that HHS' explicitly
state this requirement in the regulation.
Response: As noted earlier, we must clarify a statement in the
preamble to the proposed rule, indicating that coverage requirements
under section 1927 of the Act are applicable to ABPs under section 1937
of the Act. While drug rebate obligations under the rebate agreement
are required for drug manufacturers under section 1927(b) of the Act,
the amount, duration and scope of drug coverage under an ABP is
determined under section 1937 of the Act. The drug rebate obligation
applies because payment is made under the Medicaid state plan for
covered outpatient drugs as part of the ABP. The amount, duration, and
scope of coverage for an ABP are determined under section 1937 of the
Act, which authorizes benchmark or benchmark-equivalent coverage
``notwithstanding any other provision that would be directly
contrary.'' That said, to the extent that covered outpatient drugs are
within the scope of coverage, the non-coverage provisions under section
1927(d) of the Act would apply. For example, states will continue to be
permitted to apply certain permissible restrictions such as prior
authorization. However, when establishing such programs, states must
continue to adhere to the requirements that states must respond within
24 hours for pre-authorization requests, except for excluded drugs
listed at section 1927(d)(2) of the Act, and that at least a 72-hour
supply of a covered outpatient prescription drug must be dispensed in
an emergency situation. Further, we are revising Sec. 440.345 to add a
new paragraph (f) that states that when states pay for covered
outpatient drugs under their ABP's prescription drug coverage, they
must comply with the requirements of section 1927 of the Act.
Comment: A few commenters believed that ABPs are required by
statute to include all outpatient drugs in the Medicaid drug rebate
program, as well as meet the requirements for prescription drugs as
proposed in the EHB proposed rule for the commercial market. These
commenters also believe that in the absence of prescription drug
coverage in a particular category or class, the ABP benefit must
include at least one drug. They also recommend that the final rule
clarify that prescription drug coverage within ABPs must provide the
greater of the statutorily required coverage described in section 1927
of the Act, or the required EHB coverage described in the proposed rule
issued November 26, 2012. Another commenter recommended that CMS
require each ABP's coverage of prescription drugs to be consistent with
the state's EHB standard.
Response: As indicated above, states have considerable flexibility
in implementing the provision of Medicaid services through ABPs. In
developing ABPs, states must include prescription drug coverage to
reflect the EHB-benchmark plan standards at section 45 CFR 156.122 for
prescription drug coverage. We believe these requirements will result
in coverage that is similar to the coverage otherwise required under
regular state plan coverage.
Comment: A few commenters indicated that the regulatory text is
correct at part 440, but the preamble is not, in that the rebate
statute section 1927 of the Act does not apply to ABPs. They reasoned
that the benefits under section 1937 of the Act are mandatory benefits,
and they explicitly refer to the prescription drugs of the essential
health benefits and not to the covered outpatient drugs of the
voluntary Medicaid benefit to which section 1927 of the Act applies.
Thus, the EHB's prescription drug coverage, which requires the greater
of one drug in a class or the number of drugs in the class in the
benchmark plan, should apply to ABPs. If it is determined that section
1927 of the Act applies, then all the requirements and protections of
section 1927 of the Act should apply to ABPs.
A commenter stated that the rebate statute applies exclusively to
covered outpatient drugs; it requires manufacturers to pay rebates on
covered outpatient drugs (when they are paid for under a state Medicaid
plan); and it limits the restrictions that states can place on access
to covered outpatient drugs. The statute defines a ``covered outpatient
drug'' in terms of what is included in the definition and what is
excluded. This commenter believes the term ``covered outpatient drug''
is a well understood term of art meaning those drugs to which the
Medicaid rebate statute applies. If Congress had intended the Medicaid
rebate statute to apply to Medicaid ABPs, then Congress would have
stated this explicitly and described the drugs covered under an ABP as
``covered outpatient drugs.'' When Congress decided to apply the rebate
statute to Medicaid managed care organizations, Congress made its
decision clear and took the steps necessary to make its decision
workable. For example, Congress explicitly revised the rebate statute
to provide that covered outpatient drugs for which payment was made
under the state Medicaid plan includes ``such drugs as dispensed to
individuals enrolled with a Medicaid managed care organization if the
organization is responsible for coverage of such drugs,'' among other
changes.
By contrast, the commenters assert that Congress took an entirely
different approach with Medicaid ABPs. Unlike in the Medicaid MCO case,
Congress never mentioned Medicaid rebates in the statutory provision
authorizing ABPs, never mentioned ABPs in the Medicaid rebate statute,
never established any mechanism for ABPs to report drug utilization
data to states and for states to include this data in manufacturers'
rebate invoices, and never provided that state payments to ABPs would
be premised on the understanding that states would collect Medicaid
rebates.
Similarly, the commenters indicate that section 1937 of the Act
makes no mention of covered outpatient drugs. Instead, the drug-related
provisions in section 1937 of the Act provide only that (1) benchmark-
equivalent coverage must include ``prescriptions drugs'' (among other
basic services required in benchmark-equivalent plans) and (2) starting
in 2014, all ABPs must provide ``at least essential health benefits as
described in section 1302(b) of Affordable Care Act, which benefits
include prescription drugs.'' Thus in both of the statutory provisions
referencing ABPs' drug coverage, Congress omitted the term denoting
those drugs that are subject to the Medicaid rebate statute and instead
incorporated different terms with no connection to the rebate statute.
And Congress' decision to omit ``covered outpatient drug'' terminology
is consistent with its decisions: (1) not to require to authorize
reporting of ABP drug utilization data to states and manufacturers; and
(2) not to address any implications of state rebate collection on ABP
payments. Congress'

[[Page 42222]]

decision not to apply the rebate statute also is consistent with the
purpose of section 1937 of the Act, which is to give State Medicaid
programs more flexibility and allow them to operate more like
commercial payers.
Another commenter stated that the prescription drug benefit to be
provided to Medicaid beneficiaries under section 1937 of the Act is not
the same benefit as the ``prescribed drugs'' provided under a State
plan under section 1905(a)(12) of the Act. Indeed, the coverage for
prescription drugs made available to the Medicaid expansion population
is derived from a different statutory authority than the traditional
Medicaid option to provide coverage for ``prescribed drugs.'' The
benefit under section 1905(a)(12) of the Act is optional for a State,
while the prescription drug provided by an ABP is mandatory in accord
with EHB requirements established by Affordable Care Act. Therefore,
the commenter contends, and urges CMS to clarify in the final rule,
that there is no statutory basis to apply section 1927 of the Act to
these ABPs.
In short, the commenters believe the statutory evidence
demonstrates that Congress decided not to apply the Medicaid rebate
statute to ABPs. When a word or phrase has become a term of art with a
specialized meaning, that specialized meaning governs. Likewise, when
Congress uses a term of art in one statutory provision but omits it in
another (like section 1937 of the Act), then Congress intends a
different meaning; ``where Congress includes particular language in one
section of a statute but omits it in another . . ., it is generally
presumed that Congress acts intentionally and purposefully in disparate
inclusion or exclusion.'' Accordingly, applying the rebate statute to
ABPs would be directly contrary to section 1937 of the Act and thus
prohibited.
Response: Drug rebate obligations are required for drug
manufacturers under 1927(b) of the Act when payment occurs for covered
outpatient drugs covered through an ABP. However, the amount, duration,
and scope of drug coverage under an ABP are determined under section
1937 of the Act. That is, the drug rebate obligation applies because
payment is made under the Medicaid state plan for covered outpatient
drugs provided as part of the ABP prescription drug benefit. The
amount, duration, and scope of coverage for an ABP are determined under
section 1937 of the Act, which authorizes benchmark or benchmark-
equivalent coverage ``notwithstanding any other provision that would be
directly contrary.'' That said, to the extent that covered outpatient
drugs are within the scope of coverage, the non-coverage provisions of
section 1927 of the Act would apply.
Comment: A commenter indicated that they anticipate that requiring
ABPs to satisfy the requirements of both section 1927 of the Act and
the EHB formulary standard may present significant practical challenges
for the ABPs. The proposed rule does not explain how these two sets of
requirements will fit together or whether and when the requirements of
section 1927 of the Act will take precedence over the EHB formulary
standard. For example, section 1927 of the Act requires manufacturers
and the Secretary to enter into an agreement under which manufacturers
must pay rebates to state Medicaid agencies for utilization of the
manufacturer's covered outpatient drugs, in return for the state
coverage of such drugs, which may be restricted only within the set
confines of section 1927(d) of the Act. The proposed EHB prescription
drug benefit, by contrast, requires coverage of at least the greater of
(1) one drug in every USP category and class; or (2) the same number of
drugs in each category and class as the EHB benchmark plan.
Response: As we stated earlier, there is no authority to require
states to meet requirements of section 1927 of the Act related to the
amount, duration and scope of covered outpatient drugs under an ABP.
States have some discretion in the provision of Medicaid services
including the ability to define the amount, duration, and scope of
coverage under an ABP. In developing ABPs, states must include
prescription drug coverage to reflect the standards used to define EHBs
for Medicaid. As stated earlier, we believe these requirements at 45
CFR 156.122 will result in coverage that is similar to the coverage
otherwise required under regular Medicaid state plan coverage.
Comment: A few commenters indicated that to the extent that CMS
nonetheless decides to apply section 1927 to ABPs, it is of the utmost
importance that CMS apply and stringently enforce both the coverage and
access requirements of that section. CMS should explicitly indicate
that the section 1927 safeguards on coverage and exclusions apply, in
addition to the prescription drug benefit requirements of the EHB
proposed rule. Any requirements for payment of rebates under section
1927 of the Act without adherence to the coverage and exclusion
limitations violates the intent and spirit of that section.
Another commenter indicated that the Medicaid rebate statute
requires states that provide payment for drugs to cover all ``covered
outpatient drugs'' of manufacturers that sign a Medicaid rebate
agreement, subject to certain limitations on coverage that the statute
describes very specifically. The rebate statute explicitly lists the
limited circumstances in which a State Medicaid program may exclude or
otherwise restrict coverage of a drug manufactured by a company with a
Medicaid rebate agreement.
Response: While drug rebate obligations under the rebate agreement
with drug manufacturers under section 1927(b) of the Act are applicable
to covered outpatient drugs covered through an ABP, the amount,
duration, and scope of drug coverage under an ABP are determined under
section 1937 of the Act alone. The drug rebate obligation applies when
payment is made for covered outpatient drugs in accordance under the
Medicaid state plan, including a state's ABP. The amount, duration, and
scope of coverage for an ABP is determined under section 1937 of the
Act, which authorizes benchmark or benchmark-equivalent coverage
``notwithstanding any other provision that would be directly
contrary.''
Comment: One commenter recommended that the prescription drug
benefit under ABPs should include all over-the-counter and prescription
medications approved by the FDA to treat tobacco cessation. The
commenter continues that tobacco cessation medications are currently on
the list of ``drugs subject to restriction'' in section 1927(d) of the
Act, and therefore, states are allowed to exclude coverage of these
drugs.
Response: Effective January 1, 2014, section 1927(d) of the Act
requires states to provide coverage of non-prescription and
prescription covered outpatient drugs used to treat tobacco cessation
for all Medicaid beneficiaries. Notwithstanding that requirement, we
note that there is no authority to require states to meet requirements
of section 1927 of the Act related to the amount, duration, and scope
of covered outpatient drugs under an ABP. States have considerable
discretion in the provision of Medicaid services including the ability
to define the amount, duration, and scope of coverage under an ABP. In
developing ABPs, states must include prescription drug coverage to
reflect the standards for defining EHBs in Medicaid. As stated earlier,
we believe these requirements at 45 CFR 156.122 will result in coverage
that is similar to the coverage otherwise required under regular
Medicaid state plan coverage.

[[Page 42223]]

Comment: A few commenters indicated that the agency says that the
states have the flexibility to ``adopt prior authorization and other
utilization control measures, as well as policies that promote use of
generic drugs.'' The commenters believe there is potential for conflict
between the prescription drug coverage of an ABP supplemented by the
states' essential health benefit standard, and a drug benefit that is
consistent with the State's Medicaid program. The commenter urged
clarification of the coverage standard accompanied by protections to
ensure that patients can appeal utilization controls that might prevent
them from receiving necessary medications.
One commenter recommended that CMS monitor the implementation of
traditional Medicaid and ABP PDLs and utilization management
techniques, and act to stop burdensome limitations that reduce access
to care and could impact patient health because of limited access to
needed drugs. The commenter also recommends requiring that decisions
regarding PDLs take into account evidence-based clinical practice
guidelines, and not just of drugs; and that CMS require that states
only be permitted to classify a drug as non-preferred when there are
genuine therapeutic alternatives classified as preferred.
Response: Prescription drug coverage under an ABP is still subject
to the provisions related to drug rebates, as well as the non-coverage
provisions under section 1927(d) of the Act. Therefore, states will
continue to be permitted to apply certain permissible restrictions such
as prior authorization. However, when establishing such programs,
states must continue to adhere to the requirements that states must
respond within 24 hours for pre-authorization requests, except for
excluded drugs listed at section 1927(d)(2) of the Act, and that at
least a 72-hour supply of a covered outpatient prescription drug must
be dispensed in an emergency situation.
Furthermore, a state Medicaid agency's Pharmacy and Therapeutics
(P&T) Committee typically makes decisions on inclusion of preferred
drugs in a therapeutic class when establishing a state's PDL.
Specifically, the P&T Committee reviews evidence-based information,
along with review of comparative clinical trials to make such decisions
regarding a state's PDL. A PDL is permitted under section 1927 of the
Act, as long as it is under a prior authorization program that meets
the requirements of section 1927(d)(5) of the Act.
Comment: One commenter recommends that individuals have access to
the full range of available clotting factors without limitation through
restrictive drug formularies, which negatively impacts patient care.
Patients and physicians should make the choice of which therapy is
appropriate. The commenter also noted that hemophilia patients should
have access to a range of specialty pharmacy providers. Several
commenters recommend that CMS require states to implement beneficiary
protections consistent with Medicare Part D, including consideration of
specific drugs, tiering, and utilization management strategies used in
each formulary.
Response: As we stated earlier, there is no authority to require
states to meet requirements of section 1927 of the Act related to the
amount, duration and scope of covered outpatient drugs under an ABP.
States have considerable discretion in the provision of Medicaid
services including the ability to define the amount, duration, and
scope of coverage under an ABP. In developing ABPs, states must include
prescription drug coverage to reflect the standards for defining EHBs
in Medicaid. As we have noted in prior responses, we believe these
requirements will result in coverage that is similar to the coverage
otherwise required under regular Medicaid state plan coverage.
Comment: One commenter stated that section 2001(c) of Affordable
Care Act modified the benefit provisions of section 1937 of the Act.
Among other things, section 2001(c) of the Affordable Care Act added
mental health benefits and prescription drug coverage to the list of
benefits that must be included in benchmark equivalent coverage; and
directed that ABPs that include medical/surgical benefits and mental
health and/or substance use disorder benefits comply with the Mental
Health Parity and Addiction Equity Act of 2008.
This being the case, the commenter encourages CMS to clarify and
strengthen the guidance on drug formularies in the current parity
regulations which make it difficult to determine whether a formulary
satisfies the law's parity standards.
Response: While we appreciate the commenter's concern, the Interim
Final Regulation regarding the Mental Health Parity and Addiction
Equity Act of 2008 is not the subject of this final rule.
Comment: One commenter suggested that CMS provide guidance to
states on medication assisted treatment of substance abuse disorder.
Specifically, states should be required to cover Methadone,
Buprenorphine, Vivitrol, etc., in the EHB and that where needed states
should expand the formulary to include all FDA approved medications for
the treatment of substance use disorders.
Response: CMS is not providing guidance regarding specific services
offered in each of the ten essential health benefits in this final
rule.
Comment: One commenter requests that CMS encourage state Medicaid
programs to utilize the 340B drug purchasing program provided by
hemophilia treatment centers or HTCs so that individuals with
hemophilia can receive their pharmacy services from their HTC. HTCs
with 340B programs integrate clinical and pharmacy services to provide
comprehensive high-quality care to patients and closely monitor drug
utilization, allowing for more immediate changes in treatment and
better management of treatment costs. Patients benefit from lower cost
prescriptions that reduce out-of-pocket spending and accumulation of
costs towards caps on health insurance expenditures and ongoing
education and support to ensure that they appropriately assess their
treatment needs. Medicaid programs will benefit from better management
of overall treatment costs through close monitoring of bleeds and
factor use to reduce complications.
Response: We appreciate the comments regarding the 340B program and
coverage of drugs for hemophilia; however, the State's utilization of
the 340B drug purchasing program is outside the scope of this rule.
Comment: CMS should establish clear requirements to assure that
utilization data for populations eligible to receive Medicaid rebates
is maintained separately from data from other lines of business. That
is, the final regulation must provide clear rules to assure that plans
maintain data on prescription drug claims appropriately and do not mix
data from populations eligible for Medicaid rebates with data for other
enrollees not eligible for Medicaid rebates. Because many plans may
offer products in the exchanges as well as participate in Medicaid
managed care (under either section 1903(m) of the Act, as well as
Medicaid ABPs) the potential for confusion is high and clear rules are
needed to assure that utilization for rebate-eligible patients is
maintained separately from data for other lines of business.
Response: If the state administers its ABP via a Medicaid MCO, the
state will need to ensure the MCO distinguishes these claims from its
other lines of business for the purpose of claiming

[[Page 42224]]

Medicaid rebates consistent with the current requirement for such
claims under section 1927 of the Act. CMS expects to issue
subregulatory guidance on collecting manufacturer rebates for ABPs.
Manufacturers are not required under section 1927 of the Act to pay
rebates absent a Medicaid payment for the drugs, which would not be
present in the case of drugs dispensed to Medicaid beneficiaries that
are enrolled in qualified health plans where the only Medicaid payment
was premium assistance for the beneficiary.
Summary: Based upon the comments requesting clarification as to
whether or not section 1927 of the Act applies to prescription drug
coverage provided under a state's ABP, we will be adding paragraph (f)
to Sec. 440.345 to require that when states pay for covered outpatient
drugs under their ABP's prescription drug coverage, states must comply
with the requirements under section 1927 of the Act.
4. All Other Title XIX Provisions Apply
We clarified in the proposed rule that all other Title XIX of the
Act provisions apply unless, as spelled out in section 1937 of the Act,
a state can satisfactorily demonstrate that implementing such other
provisions would be directly contrary to their ability to implement
ABPs under section 1937 of the Act.
Comment: We received one comment requesting that CMS elaborate on
what is meant by the preamble language that all other provisions under
title XIX of the Act apply, and whether states are required to cover
the current mandatory Medicaid benefits, and ensure non-emergency
transportation, when using an ABP for the new adult expansion group.
Response: The Medicaid benchmark and benchmark-equivalent coverage
was first authorized by the DRA, which included language stating that
``notwithstanding any other provision of title XIX'' states can offer
medical assistance to certain Medicaid beneficiaries through benchmark
or benchmark-equivalent benefit packages. As a result of CHIPRA changes
to the DRA, CMS regulations were revised to implement this change in
law. CHIPRA language provides clearly that a state's benchmark or
benchmark-equivalent programs may vary only from statutory requirements
explicitly waived in section 1937 of the Act (statewideness and
comparability), unless states can demonstrate that other provisions not
identified in section 1937 of the Act would be directly contrary to
their ability to implement ABP. As such, in the proposed rule, we
offered clarifying language in the preamble to reiterate that this
current policy continues to apply. Due to statutory requirements,
states may not disregard any provisions of title XIX and are therefore
required to assure that all populations receiving ABPs, including the
new adult expansion group, have access to transportation necessary to
obtain Medicaid covered services.
Summary: No changes will be made to the proposed regulation as a
result of comments received in this section.
5. Preventive Services as an EHB
The EHB Final rule specified that, to provide EHB, a plan must
provide coverage of preventive services. This requires plans to cover a
broad range of preventive services including ``A'' or ``B'' services
recommended by the United States Preventive Services Task Force;
Advisory Committee for Immunization Practices recommended vaccines;
preventive care and screening of infants, children and adults recommend
by HRSA's Bright Futures program, and additional preventive services
for women recommended by the Institute of Medicine. We proposed that
Title XIX premium and cost sharing provisions apply to preventive
services for adults, but not for children.
Comment: Many commenters commended HHS for including in ABPs the
full range of preventive services required in the EHB, including all of
the services specified in section 2713 of the PHS Act. The commenters
believed this is a critical provision for vulnerable populations and
will help achieve the Affordable Care Act objective of shifting health
care emphasis from expensive interventions to cost-effective
prevention. The commenters requested that HHS explicitly state this
requirement (currently in the preamble at 78 FR 4631) in the regulation
itself.
Response: The language in the preamble to the proposed rule,
originating in section 2713 of the PHS Act, was included as a reference
to the requirement to cover preventive services as part of providing
EHB, which has been implemented by regulation codified at 45 CFR
147.130. We do not believe this requires further clarification in this
final rule.
Comment: A number of commenters asked CMS to clarify its preamble
language, ``Title XIX premium and cost sharing provisions apply to
preventive services.'' Specifically, CMS should clarify whether it
intends this to apply to the ABPs for the new expansion population and/
or to current state Medicaid plan services.
Response: We agree that this issue needs to be clarified,
particularly in light of the issuance of the final rules implementing
EHB requirements for the individual and small group markets. In the
final regulations issued February 25, 2013 at 78 FR 12835, the
provision of EHB was defined at 45 CFR 156.115(a)(4) to ``include
preventive health services described in [45 CFR] Sec. 147.130''. That
cross referenced provision describes the requirement for coverage of
preventive services without cost sharing. As explained in the preamble
to the proposed regulations, at 77 FR 70644, 70651 (Nov. 26, 2012), the
intent was to include in the EHB coverage obligation the prohibition on
cost sharing for preventive health services. Thus, while Medicaid cost
sharing provisions at sections 1916 and 1916A of the Act apply
generally to preventive services provided in ABPs, cost sharing may not
be applied to preventive services that are within the definition of
EHBs (described in 45 CFR 147.130). An ABP may include preventive
services beyond the floor of coverage required as EHBs, and cost
sharing may be applied to such preventive services at state option to
the extent permissible under sections 1916 and 1916A of the Act.
Comment: One commenter requested clarification on whether the full
range of United States Preventive Services Task Force (USPSTF) ``A''
and ``B'' services is specific to benchmark benefits offered to
individuals that are newly eligible.
Response: These services, along with IOM-recommended women's
preventive services, ACIP-recommended vaccines, and HRSA's Bright
Futures recommendations, comprise the preventive services EHB category
that will be provided to all individuals in an ABP, including those in
the new adult group. In addition, coverage of USPSTF ``A'' and ``B''
preventive services under section 4106 of the Affordable Care Act
applies, at state option, to preventive services furnished under the
regular state plan. States implementing the preventive services EHB in
their ABP without cost sharing will be eligible for the additional 1
percentage point of FMAP (for newly eligible individuals, this
increased FMAP will be available once Federal reimbursement of services
drops below 100 percent).
Comment: A few commenters were concerned that other preventive
screenings recommended by the CDC are not included in the proposed
rule. The commenters recommended the inclusion of all CDC hepatitis B
and C screening recommendations as required components of Medicaid's
ABPs.
Response: CMS recognizes the importance of CDC recommendations
related to preventive services. The proposed rule was not meant to be
an

[[Page 42225]]

exhaustive list of all recommendations made by government agencies such
as the USPSTF. States have the option to adopt CDC recommendations as
long as they are in line with EHB preventive service statutory and
regulatory guidance.
Comment: A few commenters requested that HHS clearly define which
tobacco cessation treatments are required to be covered as a preventive
service under EHB. The commenters believed this definition should be
comprehensive, and include--and require--all tobacco cessation
medications approved by the FDA as well as individual, group and phone
counseling. The commenters believed it should be based on and reference
the most recent version of the Public Health Service Guideline Treating
Tobacco Use and Dependence, to ensure that when and if the guideline is
updated the benefit will be revised as appropriate.
Response: We appreciate the commenter's recommendations. Tobacco
cessation programs are important preventive services. However, states
have been given latitude on how to furnish this service within the
bounds of statute, regulation, and sub-regulatory guidance. Tobacco
cessation for pregnant women is defined in section 4107 of Affordable
Care Act and is located at section 1905(a)(4)(D) of the Act. We also
issued a letter to State Medicaid Directors dated June 24, 2011 that
clarified policy related to this provision. The only tobacco cessation
services required to be furnished in the EHB package are those
recommended by the entities designated in section 2713 of the Public
Health Service Act.
Comment: Many commenters requested greater definition of the
preventive services that states are required to cover to meet the EHB
requirement. The commenters found it difficult to determine what
preventive health services are covered and what the scope and limits of
the coverage may be.
Response: The definition of preventive services as an EHB includes
a broad range of preventive services including: ``A'' or ``B'' services
recommended by the United States Preventive Services Task Force;
Advisory Committee for Immunization Practices (ACIP) recommended
vaccines; preventive care and screening for infants, children and
adults recommended by HRSA's Bright Futures program/project; and
additional preventive services for women recommended by Institute of
Medicine (IOM). Further definition was not provided as these standards
were established by experts in the field of prevention.
Comment: A few commenters requested that HHS provide the following
guidance:
Clarify in the language of the final rule that Medicaid
ABP must cover all section 2713 services.
Clarify that section 2713 coverage requirements apply even
where there is overlap with EHB categories.
Create standards to ensure that section 2713 preventive
service coverage offers meaningful incentives to providers.
Encourage states to align traditional Medicaid coverage
with the section 2713 preventive services requirement.
Response: We appreciate the commenters' request to include further
descriptions within the final rule. The rule, as written, requires
states to provide a robust set of preventive services that align with
Sec. 147.130. The Affordable Care Act established Sec. 4106 effective
January 1, 2013 within regular Medicaid coverage, which includes a
subset of the services implemented in Sec. 2713 of the Public Health
Service Act (PHSA). A State Medicaid Director Letter on Sec. 4106 was
released on February 1, 2013 (http://www.medicaid.gov/Federal-Policy-Guidance/downloads/SMD-13-002.pdf).
Comment: One commenter requested clarification regarding the
interval after which a preventive service rated with an A or B by the
USPSTF must be included in EHBs for Medicaid plans. The commenter
encouraged HHS to establish an interval of no later than the 1-year
minimum specified in section 2713(b)(1) of the Public Health Service
Act, irrespective of any other timetable HHS choose for updating the
EHBs more broadly over time.
Response: Section 2713(b)(1) and (2) of the Public Health Service
Act set forth the interval between the date on which a recommendation
described in subsection (a)(1) or (a)(2) or a guideline under
subsection (a)(3) is issued and the plan year for which of the
requirements described in subsection (a) is effective for the service
described in such recommendation or guideline. We believe that such an
interval is appropriate for applicable preventive services included in
the ABP.
Comment: One commenter requested specificity around the process by
which USPSTF recommendations will be incorporated into EHBs over time
and the process for determining the frequency and intensity of USPSTF-
recommended behavioral interventions.
Response: A broad range of preventive services including all ``A''
or ``B'' services recommended by the United States Preventive Services
Task Force must be incorporated in the EHB and are required to be
implemented according to the effective date of the submitted SPA. If
states want an effective date of January 1, 2014 for the entire ABP
including these preventive services, then a SPA will need to be
submitted by the end of the first calendar quarter of 2014. States are
expected to keep abreast of changes to the USPSTF-recommended services
to ensure provision of a current array of services.
Comment: One commenter indicated that, to the extent that HHS does
not specify the number of covered visits to registered dietician
specialists for medical nutrition therapy, national practice guidelines
should determine appropriate coverage.
Response: We encourage states to consult and rely on national
practice guidelines, as they design their benefit packages.
Comment: One commenter requested that while HHS may be reluctant to
explicitly require coverage of obesity treatment, HHS should clarify
whether management of obesity and metabolic disorders are chronic
disease management services and are therefore covered services under
the ``Preventive and Wellness Services and Chronic Disease Management''
category of the EHB package. One commenter believed that beneficiaries
affected by severe obesity should have access to bariatric surgery with
comprehensive pre- and post-surgery nutrition evaluation and counseling
to ensure the efficacy and cost effectiveness of the bariatric surgery
benefit over the long term.
Response: ``A'' or ``B'' services recommended by the United States
Preventive Services Task Force must be incorporated in the EHB. Current
USPSTF guidelines provide for the screening and counseling for obesity
in both children and adults. Aside from the services specified at
section 2713 of the Public Health Service Act, we are not mandating the
provision of specific services through the EHB package. We agree that
bariatric surgery, complete with appropriate counseling, can be a
valuable service, and it will covered in the ABP if it is included in
EHB definitions of the public employee or commercial plan selected by
the state to define EHBs for Medicaid, supplemented and substituted as
necessary and permitted. States may also choose to add this service to
their ABP.
Comment: One commenter asked HHS to clarify whether a state that
chooses to use its current state plan as the ABP would need to add
services to the state plan for ABP recipients if not all preventive
services are included. The

[[Page 42226]]

commenter also asked whether states would need to amend the state plan
and provide these services for all Medicaid recipients of the state
plan services.
Response: The regular state plan does not need to be amended to
reflect the breadth and depth of required preventive service coverage
in an ABP. States will have to comply with the definition of preventive
services for the EHB category within the ABP. States using Secretary-
approved coverage to implement a benefit package similar to their
Medicaid state plan would need to ensure provision of all EHB
preventive services through the ABP, even if such services are not
available under the state plan. A state plan amendment will be required
to implement an ABP for the new adult group and for any other
categorically needy eligibility groups that a state may wish to enroll
in an ABP.
Comment: A number of commenters recommended that HHS apply the PHS
Act 2713 cost-sharing prohibition for preventive services under section
2713 of the PHS Act to the same preventive services covered by ABPs.
The commenters believed these protections are essential to provide
meaningful coverage to vulnerable population and avoid the unfair
outcome of greater cost-sharing for poorer individuals. The commenters
believed cost sharing on preventive services should be prohibited based
on the authority of section 2713 of the PHS Act. One commenter believed
that cost-sharing for preventive services is prohibited under the
definition of EHB in regulations at 45 CFR 156.115, which state that
the EHB include ``preventive health services described in [45 CFR]
Sec. 147.30.'' The commenter explained that this section lists the
services included in the definition of preventive health services and
states that insurers ``may not impose any cost-sharing requirements
(such as copayment, coinsurance, or deductible) for those items or
services.'' The commenter believed the definition of preventive
services in the EHB is unique in that it incorporated a prohibition on
cost-sharing in the definition of the benefit. The commenter believed
that by requiring EHB in ABPs, Congress intended to carry that
prohibition on cost-sharing into Medicaid's ABPs. A number of
commenters believed that prohibiting cost sharing for preventive
services is consistent with the provision giving states a percentage
point increase in their FMAP under section 4106 of the Affordable Care
Act.
Response: We appreciate the concerns commenters raised regarding
cost sharing for preventive services and we are adopting their
suggested policies in light of the provisions of the recently issued
EHB regulations for the individual and group markets at 45 CFR
156.115(a)(4). As stated above, states may not impose cost sharing for
preventive services included in ABPs that are within the scope of EHBs,
as defined at 45 CFR 147.130, but may impose cost sharing consistent
with sections 1916 and 1916A of the Act on preventive services that go
beyond that scope. This is because the definition of preventive
services for purposes of the EHBs precludes cost sharing, and Medicaid
ABPs must include EHBs. We clarify that the broader prohibitions on
cost sharing for preventive services at section 2713 of the PHS Act
apply only to group health plans and health insurance issuers providing
group or individual health insurance coverage, and do not apply to
Medicaid. For preventive health services beyond the scope of EHBs, we
note that cost sharing is not allowed for preventive services provided
to children under sections 1916 and 1916A(b)(ii) of the Act. We agree
with commenters that this preclusion of cost sharing for preventive
service EHBs is consistent with the policies set forth in section 4106
of the Affordable Care Act, which added section 1905(b)(5) to the Act,
giving states an increase in the federal medical assistance percentage
for preventive services if the state did not impose cost sharing on
such services.
Comment: A number of commenters believe that cost sharing should
not be applied to the EPSDT population.
Response: While we discuss cost sharing issues at greater length in
discussing the streamlined cost sharing regulations being issued in
this final rule, for EPSDT for individuals enrolled in ABPs, we note
that sections 1916 and 1916A(b)(ii) of the Act preclude cost sharing
for individuals under age 18 who are mandatorily eligible, and preclude
cost sharing for preventive services (such as well baby and well child
care and immunizations) provided to children under 18 years of age
regardless of family income. Section 1916(b)(2)(a) of the Act further
states that cost sharing cannot be imposed under the plan for services
furnished to individuals under 18 years of age (and, at the option of
the State, individuals under 21, 20, or 19 years of age, or any
reasonable category of individuals 18 years of age or over). These
provisions also apply to ABPs.
Summary: No changes will be made to the proposed regulation as a
result of comments received in this section.
6. Other Changes To Simplify, Modernize, and Clarify Medicaid Benchmark
Requirements and Coverage Requirements
We proposed to make certain changes to the regulations to promote
simplification and clarification where needed, and provide some
additional flexibilities to states regarding benefit options. We
received the following comments:
a. Diagnostic, Screening, Preventive, and Rehabilitative Services
(Preventive Services) (Sec. 440.130)
We proposed to conform our regulatory definition of preventive
services at Sec. 440.130(c) with the statute relating to the issue of
who can be providers of preventive services. Our current regulation
states that preventive services must be provided by a physician or
other licensed practitioner. This is not in alignment with the
statutory provision at section 1905(a)(13) of the Act that defines
``services . . . recommended by a physician or other licensed
practitioner of healing arts within the scope of their practice under
state law.'' We proposed to change the rule to make clear that
physicians or other licensed practitioners may recommend these
services. In our proposed rule, we inadvertently used punctuation that
would have had the effect of eliminating the other three prongs of the
preventive services definition, and we are restoring those prongs in
this final rule.
Comment: Many commenters commended HHS for conforming the
regulatory definition relating to who can provide preventive services
at section 1905(a)(13) of the Act that defines ``services . . .
recommended by a physician or other licensed practitioner of healing
arts within the scope of their practice under State law.'' Many
commenters believed this change will improve access to preventive
services, expand access to evidence based practices, and provide
greater partnership between providers and advocates. The commenters
urged CMS to preserve this important provision in the final rule.
Response: We agree that the amended regulatory definition of who
can provide preventive services will result in improved access to
preventive services and facilitate partnership between providers and
advocates. This provision has been codified in the final rule.
Comment: A number of commenters believed that the amended
regulatory definition will be especially important to low-income people
who disproportionately access care through

[[Page 42227]]

community-based and support services and may experience significant
stigma and lower trust levels with other providers.
One commenter believed current Medicaid regulations surrounding
Sec. 440.130(c) have significantly limited the available care and
treatment for Medicaid and CHIP-enrolled children who suffer from
chronic diseases.
Response: The amended definition may result in greater access for
individuals who suffer from chronic disease as the pool of providers
could increase significantly.
Comment: A few commenters commended HHS for making reference to
this regulatory change in a February 1, 2013 letter to State Medicaid
Director. The letter stated that if the proposed regulatory change is
finalized, then preventive services recommended by USPSTF or ACIP, and
provided by practitioners other than physicians or other licensed
practitioners, are eligible for the 1 percentage point FMAP increase
established under the Affordable Care Act.
Response: We attempt to provide as much notice as possible related
to rule making and appreciate the commenter's support.
Comment: One commenter believed the proposed language, ``(c)
Preventive services means services recommended by a physician or other
licensed practitioner of the healing arts acting within the scope of
authorized practice under state law'', was overly broad.
Response: The regulation is consistent with statutory language in
section 1905(a)(13) of the Act. The final rule increases the number of
providers able to furnish services. We are not changing regulation text
at Sec. 440.130(c)(1) through (c)(3).
Comment: One commenter believed that the proposed new definition in
the rule represents a far broader view of the term ``preventive
services'' than Congress contemplated in Affordable Care Act. For
purposes of describing what services are included in EHB, ``preventive
services'' are already extensively described at Sec. 147.130. The
proposed revision in the definition of ``preventive services'' at Sec.
440.130 would not primarily affect the scope of preventive services
required to be offered as EHB in the state benchmark plans. Rather, the
amendment would greatly expand the scope of the preventive services
benefit that may be offered as an optional service under standard state
MA plans.
Response: This change is not based on an interpretation of
``preventive services'' as it is used in the Affordable Care Act for
purposes of EHB, but an interpretation of the coverage of preventive
services under regular Medicaid under section 1905(a)(13) of the Act.
This regulatory change will primarily impact the provision of
preventive services under the regular state Medicaid plan. Section 4106
of the Affordable Care Act, `Improving Access to Preventive Services
for Eligible Adults in Medicaid,' broadens the section 1905(a)(13)
preventive services benefit by providing a 1 percentage point FMAP
increase on clinical preventive services that are assigned a grade of A
or B by the USPSTF.
Comment: A number of commenters believed the new definition could
have a significant fiscal impact on states' Medicaid programs because,
as a part of EPSDT, the expanded scope of services must be offered to
recipients under age of 21.
Response: While we acknowledge that this change will result in
additional providers being authorized to provide preventive services,
it accurately reflects the statutory language for the preventive
services benefit. In addition, broadening the scope of providers who
can provide preventive services in the Medicaid program may reduce,
rather than increase, program expenditures by making available services
in the most efficient and effective settings. Providing broader access
to these types of providers and benefits may assist individuals with
improved health.
Comment: A number of commenters requested clarification on
preventive services. The commenters believed that the definition
provided (Sec. 440.130) is broad and will be difficult for states to
operationalize without more detail. The commenters requested a more
precise definition that includes the current procedural terminology
codes for each preventive service and that HHS work with states to
develop preventive definitions. Without such guidance states and the
federal government could end up inappropriately paying for air
conditioners, ineffective weight loss programs, or similar services
which are simply not appropriate.
Response: States still have the ability to restrict preventive
services to direct patient care that is medically necessary and is for
the purpose of preventing disease, disability and other health
conditions or their progression, prolonging life and promoting physical
and mental health and efficiency. The commenters may have been confused
because we inadvertently proposed to eliminate these other prongs of
the preventive services definition, which we preserve in this final
rule. States also have some options in determining coverage of
preventive services, and can specify the options, and specific billing
codes, for covered preventive services using the state plan amendment
process.
Comment: One commenter urged HHS to retain the current regulatory
definition which established that the allowable providers of preventive
services are physicians or other licensed practitioners. The commenter
disagreed that the provider requirements for preventive services under
the Affordable Care Act should be aligned with Medicaid provider
requirements for the optional benefit category as established under
section 1905(a)(13) of the Act. The commenter stated that the benefits
are distinctly different and have different purposes, particularly for
children up to the age 21.
Response: We disagree with this position. Both section 1905(a)(13)
of the Act and Affordable Care Act provide for a more robust set of
preventive services than the current regulations, in allowing a broader
pool of providers to deliver such services. In making this change in
the final rule, we are aligning our regulation with the statutory
coverage provision. States will continue to have some flexibility to
determine the scope of covered preventive services in their state by
submitting a SPA to do so.
Comment: Many commenters were concerned that this broad language
would allow for unlimited services as recommended by health care
providers and other providers of the healing arts. These commenters
requested that this be clarified to impose reasonable limits on
services.
Response: Under existing rules, states can establish limitations on
amount, duration, and scope, on the optional preventive services
provided the resulting benefit is sufficient to meet the purpose of the
benefit. CMS reviews each state plan amendment submitted by states to
determine the sufficiency of the benefit.
Comment: One commenter recommended closer integration of community
prevention and lifestyle changes into the Medicare and Medicaid
programs, as an important opportunity to both effectively and often
less expensively treat and prevent chronic disease, such as heart
disease and diabetes.
Response: We agree that greater coordination between Medicare and
Medicaid will provide efficiencies and health outcomes for individuals
with chronic disease as well as other conditions. Medicaid continues to
build closer and more integrated community preventive services with
Medicare.
Comment: One commenter believed that Registered Dieticians should
be designated as the recognized providers

[[Page 42228]]

of nutrition services, including medical nutrition therapy and
nutrition counseling because of RD's demonstrated competency and
effectiveness. This commenter stated that nutrition counseling is
medically necessary for chronic disease states in which dietary
adjustment has a therapeutic role, when it is prescribed by a physician
and furnished by qualified provider.
Response: We believe that Registered Dieticians have an important
role in furnishing nutrition services. All preventive services should
be furnished by qualified providers within their scope of practice.
Comment: One commenter urged HHS to clarify that Sec. 440.130 of
the proposed regulation does not dictate who can provide preventive
services; it merely dictates what providers can recommend them,
consistent with the totality of the statute.
Response: The proposed regulation does not dictate who can provide
preventive services; it defines who can recommend such services. States
will have discretion to determine which providers will provide the
service using the state plan amendment process.
Summary: No changes to the proposed regulation will be made as a
result of comments received in this section.
b. Public Notice (Sec. 440.386)
The proposed rule added a new provision to allow states greater
flexibility when required to publish public notice associated with an
ABP state plan amendment (SPA). We proposed modifying the public notice
requirement for ABPs to require that such notice be given prior to
implementing a SPA when the new ABP provides individuals with a benefit
package equal to or enhanced beyond the state's approved state plan, or
adds additional services to an existing ABP. We proposed the
requirement to publish public notice no less than two weeks prior to
submitting a SPA that establishes an ABP that provides coverage that is
less than the coverage by a state's approved state plan or includes
cost sharing of any type. Based on public comment, we are negating what
we proposed, as we do not believe that 2 weeks is a sufficient time
period. We will be reverting back to our existing policy of requiring
the states to provide ``a reasonable opportunity to comment'' on all
ABP SPAs prior to their submission to CMS.
Comment: Many commenters supported requiring states to give public
notice before implementation of a SPA that established an ABP. The
commenters also commended HHS for requiring states to provide public
notice regarding how they must comply with the requirement that
children have access to EPSDT.
Many commenters believed that the proposed public notice
requirements at Sec. 440.386 are problematic and HHS should not use
them as a model for all SPAs. Some commenters believed proposed Sec.
440.386 repeats the language of Sec. 440.305(d) requiring a
``reasonable opportunity'' for public comment, but then limits the
public comment period to just two weeks for certain ABPs which the
state Medicaid agency determines provide less coverage or higher cost
sharing than existing benchmark plans, and other commenters believed
that two weeks is an inadequate amount of time for meaningful
stakeholder consideration and input.
Many commenters believed HHS should require an advance notice and
comment period of no less than 30 days as this aligns with other
comment periods (such as the state comment period for section 1115
waivers) and is particularly important because of the time and effort
required to conduct the benefit-by-benefit comparisons between non-
aligned Medicaid state plans, ABP proposals and EHBs which will be
necessary to provide meaningful input.
Response: We have considered all of the comments concerning the
requirement for public notice and agree with the commenters that two
weeks is not sufficient to allow for a meaningful timeframe in which
public comments can be solicited and considered. We are therefore
revising Sec. 440.386 to revert to our existing ABP public notice
policy currently found at Sec. 440.305(d). We would also like to
clarify that the public notice requirements at Sec. 440.386 are
applicable only to section 1937 ABPs.
Comment: A number of commenters requested HHS require a mandatory
15-day period (sometimes referred to as a ``cool down'' period) for
states to review comments received and incorporate suggestions into the
final ABP submission.
A few commenters believed that Sec. 440.386 creates a two tiered
process whereby the state's own evaluation of an ABP determines whether
it is subject to public notice and comment. The commenters believed
this kind of agency determination defeats the very purpose of
transparency and stakeholder input.
Many commenters believed that there is no compliance provision to
help ensure meaningful participation by the public, unlike the
reporting requirement of Sec. 431.412(viii) for section 1115
demonstrations. The commenters requested that any SPAs, including those
establishing ABPs, should be subject to the same transparency and
public input procedures and reporting requirement modeled upon those
governing section 1115 demonstrations to help ensure meaningful
participation by the public, and that HHS understands the issues raised
at the state level when making the SPA approval decision.
Response: In revising Sec. 440.386 to revert to our existing
policy, we believe that we have provided a minimum floor that allows
sufficient time for stakeholder feedback and state review.
Comment: Numerous commenters requested that at a minimum, SPAs that
materially change a state Medicaid program should be subject to
increased transparency and stakeholder input requirements.
Response: States will be required to follow existing public notice
requirements, which requires that the state must have provided the
public with advance notice of the State plan amendment and reasonable
opportunity to comment prior to the submission of the SPA.
Comment: A few commenters recommended that states should be
required to provide detailed information on the ABP options under
consideration.
Response: The state is required to provide information regarding
the ABP through the public notice process.
Comment: A number of commenters requested that HHS include specific
requirements for adequate public posting of the proposal, including
that it be posted on an internet Web site, as well as a clear
description of the process and timeline for comment submission.
Response: We believe that states should have the flexibility to
determine how best to provide public notice to the populations in their
state.
Comment: One commenter believed that notice and stakeholder
engagement requirements should explicitly include HIV/AIDS programs
within health departments.
Response: We believe that all stakeholder groups, including HIV/
AIDS, will be served by the public notice policy.
Comment: One commenter noted that there were a number of different
sources of information for public notice (including 59 FR 49249
(September 27, 1994); Sec. 447.205; and new transparency requirements
for waiver and waiver renewals (see State Health Official (SHO) Letter
12-001)) and HHS could achieve efficiencies by streamlining
notice requirements.

[[Page 42229]]

Response: While there are various methods for providing public
notice across programs, we believe that each serves its own purpose for
that program. The public notice regulations under Sec. 440.386 provide
the most efficient and effective policy for ABPs.
Comment: One commenter proposed that HHS further define
``substantial'', which triggers the ``notice and comment'' requirement.
The commenter requested that HHS adopt a universal definition of
``substantial'' so that there is no confusion of the word's meaning.
Response: ``Substantial'' is used in the ABP public notice
requirements. It means that eligibility, enrollment, benefits, cost
sharing, payment methodologies, or delivery systems have changed
significantly to affect beneficiaries.
Comment: One commenter believed that requiring public notice for a
SPA when an ABP provides a benefit package equal to or enhanced beyond
a state's approved state plan was puzzling. The commenter believed it
added yet another public notice requirement with questionable return,
particularly when this occurs prior to implementation. The commenter
agreed that prior public notice should be required when providing a
lesser benefit package than the approved State Plan, adding cost
sharing or reducing benefits.
Response: We believe, for the purpose of transparency, ABPs should
be disseminated to the public. We believe it is important that all
beneficiaries are made aware of changes being made to ABPs.
Comment: One commenter requested that when a SPA is submitted
providing less coverage the public should have at least 30 days to
submit comments and the agency should provide a summary of the comments
it receives and how the comments were addressed when it submits the SPA
to CMS for approval.
Response: Based on comments related to this section of the
regulation, we will be continuing with the existing ABP public notice
requirements. Requiring the state to provide a summary of the comments
it receives and how the comments were addressed when it submits the SPA
to CMS for approval could be too onerous to operationalize depending on
the magnitude of comments received. CMS reserves the right to request,
when appropriate, specific information on public comments.
Comment: A few commenters requested that HHS publically release all
ABPs selected and allow an opportunity for public comment to ensure
plan adequacy.
Response: All approved SPAs are public documents. If the commenter
would like to comment on a particular SPA they may contact their
specific state.
Comment: Many commenters recommended HHS amend Sec. 430.12 by
adding new paragraph (d) or deleting Sec. 440.386 (a) and (b) and
replacing them with language that would require a 30 day public comment
period and a 15 day review period for the state and outlined the detail
to be included in the public notice. These commenters also included
requirements for publication of public notice and information to be
included in the SPA.
Response: We appreciate the commenters' thorough language
recommendations. However, we believe that the current public notice
policy sufficiently balances the need for transparency while preventing
the impediment of the approval of SPAs in a timely manner.
Comment: One commenter requested that HHS monitor the public
information on Medicaid programs and State-Based Exchange, provide and
consider issuing guidance on how to communicate benefit packages to
enrollees and plan members in a clear and effective way, incorporating
low literacy-level principles. The commenter suggested that HHS should
consider requiring states to undergo a public stakeholder review
process for these materials.
Response: We thank the commenter for these recommendations and will
take them under further review however they are beyond the scope of
this regulation.
Comment: One commenter requested that HHS require all state plan
amendments be made public and subject to comment.
Response: While we agree it is a good practice for states to place
SPAs online; requiring states to do so is beyond the scope of this
regulation.
Comment: One commenter asked if HHS was going to require additional
public notice requirements on anything that is related to cost-sharing.
Response: Cost sharing of any type requires public notice per Sec.
440.386.
Comment: One commenter believed there was a technical error made in
the Part 440-services. The commenter noted that the general provisions
section Sec. 440.305 to Sec. 440.386 is not mentioned in the
description of the changes to either Sec. 440.305 or Sec. 440.386.
Response: CMS will take this opportunity to delete Sec. 440.305(d)
as a new Sec. 440.386 has been added for public notice.
Summary: CMS will delete Sec. 440.305(d), which was the section
describing public notice requirements, as a new Sec. 440.386 has been
added for public notice. We have reverted to our existing public notice
requirements based on public comment on this section of the rule.
c. Exempt Individuals (Modifying Definition of Medically Frail) (Sec.
440.315)
The proposed rule updated the definition of the ``medically frail''
category of individuals exempted from mandatory enrollment, and
solicited comment about whether to add SUD to the definition. The final
rule adds individuals with chronic SUDs to the definition of
``medically frail'', based on the overwhelming support in public
comments.
Comment: Many commenters strongly supported CMS's definition of
exempt individuals and clarification of medically frail. In supporting
the definition of medically, many commenters also thanked the Secretary
for including in the definition of medically frail, individuals with
serious or disabling mental illness, (including children with serious
emotional disturbances), and individuals with physical, intellectual or
developmental disabilities that significantly impair their ability to
perform one or more activities of daily living; many commenters agreed
that individuals with a disability determination based on Social
Security criteria should be exempted from mandatory enrollment in an
ABP.
One commenter stated that medically frail are an identifiable
population with unique care and cost characteristics and this
definition provides an opportunity for these individuals through
practices that may not be included in the products offered through
state exchanges.
Response: We are pleased with the overwhelming support for the
clarified definition of ``medically frail'' displayed in the majority
of comments.
Comment: Many of the commenters urged CMS to include individuals
with substance use disorders in the definition of medically frail
because individuals with substance use disorders (SUD) have similar
health needs as those with the other complex conditions included in the
definition, and ABP coverage may be less likely to provide needed
services and supports typically provided by Medicaid.
Many commenters also pointed out that individuals with SUD cannot
be considered disabled under Social Security law if SUD is a
contributing

[[Page 42230]]

factor material to the determination that the individual is disabled,
regardless of the severity of the SUD. Particular concern was raised
about benchmark coverage in states that may choose the weakest
available benchmark plan option in an effort to limit perceived
financial risk for the state, or to avoid political risk. Concern was
also raised that beneficiaries living in states offering fewer benefits
``suffer'' from placement in clinically inappropriate levels of care
resulting in poor outcomes and higher federal costs.
One commenter wrote that SUD should be included in the definition
of medically frail because scientific research indicates that addiction
is a chronic brain disorder with intrinsic behavioral and social
components, similar to other forms of mental illness.
In supporting clarification of the definition of medically frail, a
commenter wrote that the definition should include all those with
disabling conditions because the reference plans that may serve as the
model for benefits in ABPs are employer-sponsored insurance plans and
may not be adequate to serve the needs of those who are too medically
frail to work.
Another commenter wrote that it supported clarifying the definition
of medically frail by including all those with disabling conditions.
Medicaid should provide more comprehensive benefits for individuals and
this language will allow it to do so since employer sponsored plans
often inadequately cover substance use disorders, therefore the
commenter supports adding SUD to the definition of medically frail.
Alternatively, a few commenters recommended that CMS not require
that individuals with SUD be considered exempt from mandatory ABP
enrollment. This commenter wrote that because states must design their
ABPs to include a comprehensive array of mental and behavioral health
services, inclusive of substance use treatment at parity with physical
health services, it seems unnecessary and overly prescriptive to
mandate the exemption of individuals with SUDs.
Response: Since publication, in 2010, of the Final Rule: State
Flexibility for Medicaid Benefit Packages, numerous stakeholders have
raised concern that individuals with SUD may not be appropriate for
enrollment in an ABP because ABPs may not provide the same level of
care provided by the standard Medicaid State plan. Individuals with a
substance use disorder may have chronic health conditions and need an
expanded array of behavioral health and possibly long term services and
supports.
Considering the overwhelming support for including SUD in the
definition of medically frail, we have modified Sec. 440.315(f) to
include as medically frail, individuals with chronic SUD. While we
recognize that substance use is among the EHBs, we believe that
individuals with this condition could be medically frail and should
have the choice to elect voluntary enrollment in an ABP or receive full
state plan benefits (for individuals in the new adult group, through an
ABP that consists of full state plan benefits).
Comment: One commenter wrote that while the definition of
``medically frail'' appropriately clarifies that individuals with
serious mental illnesses and children with serious emotional
disturbances are included among ``individuals with disabling mental
disorders'' it inappropriately excludes people with psychiatric
disabilities from another listed group--``individuals with a physical,
intellectual or developmental disability that significantly impairs
their ability to perform one or more activities of daily living.''
People with psychiatric disabilities should continue to be included in
that group. Particularly due to the lack of clarity about what may
count as a ``serious mental illness,'' it is important to ensure that
people with mental illness have the same opportunity as people with
other disabilities to qualify for exemption on the grounds that their
disability significantly impairs their ability to perform one or more
daily living activities.
Response: We acknowledge that individuals with serious mental
illness tend to have significant co-morbid conditions that are going to
require a different array of mental health and medical services, and
long term services and supports that may not be available through an
ABP. However, we do not believe it is necessary to explicitly specify
that individuals with psychiatric disorders also qualify for
``medically frail'' due to deficiencies in activities of daily living.
Individuals only need to meet one criterion within this definition to
qualify for the exemption to mandatory enrollment. Section 440.315(f)
provides states with a minimum standard for identifying individuals who
are medically frail and states have the flexibility to expand this
definition.
Comment: A commenter wrote that the term medically frail should be
replaced with individuals with disabilities.
Response: We are retaining the term medically frail in our
regulations because that term is specified in section 1937 of the Act
and we believe it would be confusing to use a different term for the
exemption.
Comment: One commenter stated that CMS should avoid defining any
new categories of medically frail as the concept of medically frail as
outlined in the proposed rule is incomplete and unworkable, and more
time and thought needs to be put into this before moving forward with
final rules. The commenter believes there are both operational and
implementation challenges to the new concept of medically frail
contained in the proposed rule and since there is no clear definition
of medically frail, or guidance on how a state would go about making
that determination, if the rules were implemented as written, the
likely result would be a significant disruption of the eligibility
process and a large number of appeals.
Response: Section 440.315 provides states with a minimum standard
for exempting specified categories of individuals from mandatory
enrollment in an ABP. We do not expect these exemptions to mandatory
enrollment to be disruptive to the eligibility process as eligibility
determination occurs first as a separate process. States will not need
to determine whether a beneficiary qualifies as medically frail upfront
but will need to have a process for identifying individuals who cannot
be mandatorily enrolled into an ABP.
Comment: We received many comments requesting that CMS provide
further clarification regarding the operationalization and coverage
implications of the proposed revision to the definition of medically
frail, as well as clarifying how the revised definition will impact
implementation.
One commenter indicated that states have limited experience with
ABP coverage under section 1937 of the Act, and it is unclear how
exemption from mandatory enrollment in an ABP for individuals defined
as medically frail (and other categories of exempt individuals) would
be operationalized on a broader scale. Further, it may be operationally
challenging to identify the range of individuals included in the
proposed definition as medically frail, prior to eligibility
determination and plan enrollment, particularly for individuals with
SUDs.
Several commenters requested CMS to provide clear, objective
standards for defining medically frail, such as the criteria used to
determine eligibility for Supplemental Security Income. One comment
also expressed concern that

[[Page 42231]]

any approach to identifying individuals who could be exempt from
mandatory enrollment in an ABP not stigmatize individuals or create
unintended barriers to seeking treatment. Several commenters wrote that
the definition of medically frail is vague and will be difficult for
states to operationalize. Another wrote that the impact of the
medically frail definition will be significantly mitigated if CMS
clarifies that a state's existing Medicaid benefit package will be
deemed to meet the ABP standards under the Secretary-approved coverage
option.
One commenter expressed concern that the definition of medically
frail is so broad that there could be confusion, inconsistency, and
costly implications to having such a broad set of individuals eligible
for exemption and recommended that CMS should clearly and carefully
define the set of individuals who would be exempt and not include
individuals with chemical dependency in the definition.
A number of commenters encouraged HHS to develop a systemic plan
for how the medically frail that are enrolled into an ABP, based on the
streamlined application collecting minimal information about disability
or function, will be identified for exemption and stated HHS must
develop requirements and supports for states to identify exemption
eligibility.
Several commenters expressed concern that the process of ensuring
that all exempt individuals are identified and enrolled in the benefit
plan that best service their health care needs (either an ABP or
traditional Medicaid) will be very burdensome or difficult for states
and asked that CMS provide further guidance on how this can be
accomplished. Several of these commenters stated that ABPs are not well
aligned with traditional Medicaid and urged CMS to provide further
guidance to states on methods and strategies for identifying exempted
individuals through the streamlined application process and enrolling
them in the appropriate coverage.
Another commenter envisioned situations where it may be beneficial
for a medically frail individual to have access to an ABP rather than
traditional Medicaid and urged CMS to design processes that ensure that
individuals have the ability to make an informed choice about their
Medicaid benefit options.
Another commenter voiced concern that the proposed rule does not
require a process to ensure that individuals are appropriately
identified as potentially exempt when they apply for coverage. This
commenter pointed out that individuals with serious mental illnesses
and disabilities may not realize that they may qualify as exempt if
they do not receive clear notification concerning (1) The possibility
that they may be exempt, (2) the process for determining whether they
are exempt, and (3) how to opt out of enrollment in an ABP if they are
exempt. The final rule should require this type of notice and process.
Response: CMS acknowledges that many states will not have prior
experience with implementation of an ABP, or with identifying
individuals who are exempt from mandatory enrollment or who meet the
criteria for exemption. We anticipate that for existing eligible
individuals the state, if it chooses, will be able to screen
beneficiaries it intends to enroll to identify exempt individuals by
eligibility category and through the use of historic medical encounter
data.
For newly enrolled individuals, who are eligible based on income
rather than disability, the state will not initially have information
concerning their current health status or historic encounter data.
Therefore, the enrollment process could be important to identifying if
an individual meets the criteria of the statutory exemptions. One
appropriate screening option includes beneficiaries identifying
themselves as meeting the exemption criteria. We encourage states to
implement a process to screen for exempt individuals using this minimum
standard for identifying individuals who are medically frail. Proposed
regulations that were not finalized as part of this rule at Sec.
435.917(b) and (c) set forth the information that must be provided to
an individual regarding benefits and services and provide that the
information must be sufficient to enable the individual to make an
informed choice. Sample beneficiary notices will be provided to the
states by CMS, incorporating questions posed to beneficiaries to aide
in the self-identification process. While the individual is being
provided with this information through options counseling, the
individual could be initially enrolled in benchmark or benchmark-
equivalent coverage that is subject to section 1937 requirements.
Comment: One commenter wrote that the phrase ``disabling mental
disorders'' relies on non-measurable terms. The commenter believes that
specific disorders, including SUDs, should be added if they meet a
defined disability test. CMS should provide states with the flexibility
to define medically frail or provide states with general guidelines
that an individual would have to meet to qualify and allow states to
set defined criteria.
Response: To ensure appropriate service protection for individuals
with disabilities and special medical needs, we have included a basic
definition of medically frail that we anticipate will ensure that
vulnerable individuals with special medical needs are not mandatorily
enrolled in an ABP that may not provide appropriate medical treatment
for their individual medical condition. Section 440.315(f) provides
states with a minimum standard for defining medically frail
populations.
Comment: Several commenters stated that the underlying goal of the
exemption from mandatory enrollment of vulnerable populations is to
protect access to needed services. There may be instances where amount,
duration and scope limitations are more restrictive under the Medicaid
state plan rather than under the ABP, highlighting the need for
beneficiaries to receive easily understandable information that allows
them to compare coverage options.
Response: CMS thanks the commenters' for acknowledging the
underlying purpose for exempting certain populations from mandatory
enrollment in an ABP and concurs with this comment. Beneficiaries need
to make individualized determinations of the benefit package (either
the ABP or the regular state plan) that best meets their needs.
Comment: Several commenters requested CMS provide further guidance
on the enrollment and selection process for medically frail
beneficiaries as this will be critical for those who qualify to be able
to select the benefit plan that best meets their health care needs. The
commenter wants to assure that, depending on the circumstances,
medically frail individuals will not be forced into a plan that
provides fewer benefits than the traditional Medicaid plan or the ABP.
Response: The purpose of the criteria for the exempt categories is
to assure that individuals with special medical needs will be enrolled
in a coverage plan that best provides necessary services. The design
and implementation of a process to determine medical frailty will
likely be specific to each state. However, states will have to follow
proposed regulations that were not finalized as part of this rule at
Sec. 435.917(b) and (c) in that sufficient information must be
provided to an individual about benefits and services to enable the
individual to make an informed choice.
Comment: One commenter requested that CMS allow states to define
the

[[Page 42232]]

exempt medically frail population using objective measurable criteria.
Response: Section 440.315 provides states with a minimum set of
criteria for exempting specified categories of individuals from
mandatory enrollment in an ABP or for individuals in the new adult
group, a choice between benchmark coverage that is either coverage
defined in the ABP or benchmark coverage that is the state's regular
approved Medicaid state plan.
Comment: One commenter recommended that the definition of
``medically frail'' include individuals that meet the Medicaid Health
Home eligibility requirements in section 2703 of the Affordable Care
Act.
Response: We believe that many enrollees in health homes, as they
are individuals with chronic conditions that are serious and complex,
will be covered by the existing definition of medically frail. But not
all health home enrollees have that level of medical need, and we have
determined that the suggested revision would not serve the limited
purposes of the exemption.
Comment: One commenter requested that the definition of medically
frail include all people with disabilities, because this definition is
one of the most essential provisions among all of the proposed rules,
and because persons with disabilities would be imperiled as a result of
mandatory enrollment in an ABP modeled after a commercial plan.
One commenter stated that inclusion of individuals with SSI appears
to broaden the definition of medically fragile for which there is
currently no standard definition and historically states have been able
to define. As a result, determinations for SSI will likely differ as
other considerations are included in the determination.
Response: In defining medically frail, Sec. 440.315 (f) covers a
wide range of populations that will be determined to be eligible for
voluntary enrollment, or in the case of individuals determined eligible
for the new adult group, eligible to choose to receive benchmark
benefits as defined in the ABP or benchmark benefits that are the
state's approved Medicaid state plan, assuring that these individuals
will receive care that is appropriate to their medical needs. As
proposed, Sec. 440.315(f) specifically includes individuals with
disabling mental disorders (including children with serious emotional
disturbances and adults with serious mental illness), individuals with
serious and complex medical conditions, individuals with a physical,
intellectual or developmental disability that significantly impairs
their ability to perform one or more activities of daily living, and
individuals with a disability determination, based on Social Security
criteria, or in states that apply more restrictive criteria than the
Supplemental Security Income (SSI) program, as the state plan criteria.
Sufficient information must be provided to an individual about benefits
and services to enable the individual to make an informed choice
according to proposed regulations that were not finalized as part of
this rule at Sec. 435.917(b) and (c).
Section 440.315(f) provides states with a minimum standard for
identifying individuals who are medically frail and states have the
flexibility to expand this definition.
Comment: One commenter wrote that, by including in the final rule
such a broad description of medically frail, CMS could substantially
increase the number of individuals who would be exempt from mandatory
enrollment in section 1937 benefit plans. The commenter asserted that
this would allow the states less flexibility in creating plans to best
meet the needs of these individuals. The commenter wrote that this is
particularly true if individuals with SUDs were to be included in the
definition and strongly recommended not including people with SUD in
the medically frail category as mental health and SUD services are
required benefits under the EHB benefits package. The commenter also
questioned the reasoning behind including people with SUD in the
definition of medically frail.
Response: We do not agree that the definition of medically frail is
too expansive and will unduly limit state flexibility. Nor do we think
that inclusion of individuals with SUDs will be problematic. We
recognize that a broader definition of medically frail individuals will
mean that such individuals will only elect to enroll in an ABP if the
benefits are designed to meet their needs at least as well as regular
state plan coverage.
Comment: One commenter wrote that if newly eligible individuals
meet the criteria for exemption and are exempt from section 1937 of the
Act, the Federal government needs to clarify if the enhanced funding
for this group would be available for all services provided to those
individuals.
Response: Yes, enhanced FMAP is available for all services provided
to a newly eligible individual, whether that person chooses the ABP
based on a benchmark or benchmark equivalent package that includes the
EHBs in compliance with section 1937 of the Act, or chooses an ABP
equal to the state's approved regular state plan.
Comment: A number of commenters expressed concern how individuals
who are exempt will be identified and requested further guidance on
enrollment and selection process for medically frail so that those
exempt can select the plan that best meets their needs. Several
commenters recommended adding a requirement that the notice provided to
individuals who have been found eligible for the expansion group
include detailed information regarding how one can qualify for an
exemption and the services and supports that would be available to a
person who is exempt from mandatory enrollment in an ABP, and should
include information regarding how to request and receive an exemption.
A commenter suggested that this requirement should be added to Sec.
435.917. Another stated that those who may be exempt will need clear,
consumer friendly information and decision support to help them
understand their choices.
Another commenter voiced concern that the proposed rule does not
require a process to ensure that individuals are appropriately
identified as potentially exempt when they apply for coverage.
Individuals with serious mental illnesses and disabilities may not
realize that they may qualify as exempt if they do not receive clear
notification concerning (1) The possibility that they may be exempt,
(2) the process for determining whether they are exempt, and (3) how to
opt out of enrollment in an ABP if they are exempt. The final rule
should require this type of notice and process.
A commenter expressed concern that the proposed rule does not issue
requirements outlining the process states should use to identify people
who are exempt and this is particularly pertinent given the ongoing
confusion about whether or not states will be able to claim enhanced
federal match for Medicaid expansions individuals who are exempt from
ABP enrollment. The commenter fears states will incur high
administrative costs managing different federal match rates for
different Medicaid expansion individuals, creating an incentive to
develop processes that implicitly or explicitly discourage exempt
individuals from taking advantage of their right to enroll in
traditional Medicaid.
One commenter voiced concern that including in the definition of
medically frail individuals with disabling mental disorders,
individuals with serious and complex medical conditions, individuals
with physical and intellectual or developmental disabilities that
significantly impair

[[Page 42233]]

their ability to perform one or more activities of daily living, or
individuals with a disability determination based on Social Security
criteria does not appear to be couched entirely within SSA disability
criteria and that some individuals with substance use disorders who are
not otherwise considered ``disabled'' under Medicaid may be viewed as
medically frail and exempt for ABP. Therefore, individuals with SUDs
would be included in a higher-level, comprehensive Medicaid benefit
package, thereby increasing costs to the state without the benefit of
the higher federal match under the Medicaid expansion to newly eligible
adults.
Response: We intend that, as amended, Sec. 440.315 may expand the
number of individuals who will qualify as exempt beyond the scope of
those who are otherwise considered disabled to include other
individuals whose medical needs mean that they are medically frail. We
also agree that exempt individuals will need clear, consumer friendly
information and decision support to help them understand their choices.
For Medicaid beneficiaries who are not in the new adult group, existing
requirements at Sec. 440.320 requires the state to provide each
individual considering voluntary enrollment in an ABP a comparison of
the ABP option versus the State plan option before the individual
chooses to enroll. The comparison must also include information on the
cost-sharing obligations of beneficiaries. CMS has proposed
requirements that were not finalized as part of this rule at Sec.
435.917(b) and (c) that an individual must receive information based on
eligibility regarding benefits and services that are available to them.
Information must be sufficient for the individual to make an informed
choice. Proposed regulations that were not finalized as part of this
rule at Sec. 435.917(b) and (c) will apply to all Medicaid
beneficiaries including adults in the new eligibility group.
Individuals in the new adult group who otherwise meet criteria for
exemption from mandatory enrollment may be enrolled in benchmark or
benchmark-equivalent coverage subject to section 1937 requirements
during the options counseling period to insure coverage during this
time.
Comment: Several commenters stated that CMS should further clarify
which medical conditions are considered ``serious and complex'' and
urged CMS to specify that chronic conditions such as HIV/AIDS and viral
hepatitis, which may have co-morbidities, are serious and complex and
individuals with serious and complex conditions should be exempted from
mandatory enrollment in an ABP. Many commenters strongly recommended
that HHS also include in the definition of medically frail or special
medical needs, individuals with chronic health conditions because
individuals with chronic illness should not be forced into an ABP
package that will not meet their predictable needs, as this may lead to
higher long term costs associated with poorly managed chronic
conditions.
One commenter indicated it was assumed that chronic kidney disease
and end stage renal disease were considered to be chronic diseases and
another commenter indicated that individuals with Cystic Fibrosis fall
squarely within the medically frail definition.
Another commenter wrote that it was assumed that long term cancer
survivors managing complex treatment or a complicated set of late and
long-term effects would fit the description of complex medical
conditions and therefore could choose the most appropriate benefit
plan.
Some commenters also stated that being forced into a health plan
that does not meet the needs of a person with chronic illness may lead
to higher long-term costs associated with poorly managed chronic
conditions.
One of the commenters urged CMS to specifically include in the
definition of medically frail individuals with chronic viral hepatitis.
Response: The exemption categories established by statute and the
proposed clarification in Sec. 440.315 are intended to provide states
with a minimum standard for exempting vulnerable populations. We agree
with the commenters that illnesses such as HIV/AIDS, viral hepatitis,
cancer and end stage renal disease are all serious chronic medical
conditions. It would not be possible for CMS to include an exhaustive
list of conditions that should qualify as medically frail, but we
believe that the criteria as currently drafted is broad enough to
include individuals for whom a choice of service package is most
appropriate.
Comment: Several commenters suggested that benchmark exempt
populations are vulnerable and best serviced by traditional Medicaid.
Response: We expect the exemptions process or the process designed
for individuals in the new adult group will provide these individuals
with an informed choice of the benefit package that best meets their
needs.
Comment: A commenter wrote that the current exemption definition
would create the need for a new frailty determination process for all
newly eligible adults for states that implement an ABP that is
different from the standard benefit. This is a concern for one state as
it becomes an administration burden for the consumer and the state
system with considerable fiscal implications and proposes a common
benefit for adult populations in Medicaid that would avoid the frailty
determination and exemption process.
Response: We acknowledge the writer's concerns, and are not
requiring any specific processes for implementing the exemptions
criteria for the new adult group. We provided a minimum standard for
identification of individuals who are medically frail and proposed
regulations that were not finalized as part of this rule at Sec.
435.917(b) and (c) regarding benefits option counseling should be
followed. Individuals may receive benchmark or benchmark-equivalent
coverage subject to 1937 requirements during the options counseling
period to insure coverage during this time.
Comment: Two commenters wrote that some states have Medicaid and
other public health care programs that have developed special
initiatives designed to meet the needs of enrollees who have substance
use disorders. They indicated that these initiatives may include
provision of care management series, discouraging drug-seeking behavior
by requiring care to be provide by a specified doctor and hospital,
etc. The commenters asserted that exempting these individuals from
mandatory ABP enrollment would make it far more difficult for Medicaid
Programs to meet these individuals' health care needs. While the
writers agree with the characterization of a substance use disorder as
``medically frail'', and thereby exempting them from mandatory
enrollment in an ABP, it would make it more difficult for Medicaid
Programs to meet these individuals' care needs.
Response: We appreciate the commenters' concern but do not agree
that exempting individuals with chronic SUD from mandatory ABP
enrollment would make it more difficult for Medicaid programs to meet
the individuals' health care needs. Section 1937 of the Act provides
states with the flexibility to redesign current Medicaid benefit
coverage to provide unique programs for targeted populations and
encourages states to be creative in the design of its coverage
packages. The exemption of individuals with chronic SUD is not an
impediment to providing quality care that meets the specific needs of
this population. Conversely, the flexibility provided by ABPs

[[Page 42234]]

encourages states to design comprehensive benefit packages that would
encourage voluntary enrollment.
Comment: One commenter wrote that states should be able to employ
traditional Medicaid disability assessments in evaluating medically
frail exemption and limit receipt of long term care services and
supports to those undergoing asset testing. To ensure long term
stability and a fiscally sound expansion, the commenter requested
sufficient flexibility to limit receipt of non-EHB services including
long term care services, to the non-expansion population via state plan
amendment or section 1915(c) waiver and recommended revision to the
medically frail exemption to align with the disability assessments
already in use within Medicaid.
Response: We disagree with this commenter. We believe the current
construct of the medically frail exemption category is in keeping with
legislative construct
Comment: A commenter wrote that the proposed revision to the
definition of medically frail seems to run against the Affordable Care
Act's benefit design for the expansion population, that is, coverage
tied to section 1937 of the Act and incorporation of an EHB standard
from the individual and small group markets, which excludes coverage
from long-term care and supports. The commenter asserted that
Affordable Care Act congressional goals to contain the costs of the
Medicaid expansion may be jeopardized if states are faced with
widespread eligibility for long term care services without the
traditional program integrity tools used to filter such services based
on objective need. The commenter further asserted that existing ABP
rules already exempt a broad range of vulnerable individuals as
compared to traditional disability assessment and that within what is
likely to be a large exempted class, these beneficiaries will access
benefits otherwise excluded from the EHB standard, namely institutional
or long term care through the state plan, at sizable cost to states and
the federal government. Of particular concern to the commenter is the
application of personal care services to a large exempt segment of the
new adult group and these long-term care benefits would be accessed in
the streamlined MAGI enrollment where asset evaluation would be
prohibited.
Response: The Affordable Care Act did not change the categories of
individuals exempted from mandatory enrollment, and added the provision
at section 1902(k)(1) of the Act, which contemplates that individuals
who meet the conditions for exemption would receive ABP coverage that
is not subject to the requirements of section 1937 of the Act. There is
nothing in the Affordable Care Act that would preclude us from
clarifying and amplifying the term ``medically frail'' to include
populations that have high medical needs resulting from disabling
mental disorders, substance use disorders, serious and complex medical
conditions, or disabilities. We are clarifying in this final rule that
the exemptions to benchmark or benchmark-equivalent coverage do not
directly apply to the new adult population, but if an individual in the
new adult population meets the criteria for exemption, then that
individual has a choice of an ABP based on benchmark or benchmark-
equivalent coverage including EHBs, or an ABP defined as the state's
approved Medicaid regular state plan, which is not subject to EHB
requirements. Please see more detailed response above for additional
information related to this provision.
Summary: We changed the proposed regulation language at Sec.
440.315(f) by adding ``chronic substance use disorders'' to the
definition of the medically frail exemption category.
d. Benchmark Health Benefits Coverage (Adding Benefits to Secretary-
Approved Coverage) (Sec. 440.330)
In the proposed rule, we amended Sec. 440.330(d) by broadening the
benefits available as Secretary-approved coverage from section 1905(a)
benefits to benefits of the type that are available under 1 or more of
the standard benchmark coverage packages or state plan benefits
described in sections 1905(a), 1915(i), 1915(j), 1915(k) or 1945 of the
Act, or any other Medicaid state plan benefits enacted under Title XIX,
or benefits available under base benchmark plans described in Sec.
156.100.
e. Secretary-Approved Health Benefits Coverage and Sec. 440.330(d) and
State Plan Requirements for Providing Additional Services (Adding
Benefits to Additional Coverage) (Sec. 440.335)
Comment: Many commenters offered general support for the
flexibility allowed in the proposed rule to include a broader range of
selected benefits through a Secretary-approved coverage package.
Some commenters noted that the ability of states to select coverage
corresponding to their full traditional Medicaid benefit as their ABP,
which would be presented under the Secretary-approved coverage option,
offers a clear distinction between the section 1937 benchmark options
and the EHB benchmark options set forth in 45 CFR part 156.
Many commenters believed that the proposed language correctly
offered states the option to use the Secretary-approved option in
section 1937 of the Act to extend comprehensive Medicaid coverage to
the new adult expansion group and that extending full Medicaid benefits
to this population, supplemented as needed to comply with the EHBs,
mental health parity and other protections in the law, is the best
approach for meeting the complex health needs of the low-income adults
who will gain Medicaid eligibility under the expansion.
Response: The proposed provisions for defining Secretary-approved
coverage sought to balance statutory requirements for establishing a
minimum coverage standard through ABP with the flexibility that states
may need when considering the appropriate range of ABP coverage
relative to the medical needs of the population being served. States
may also substitute benefits using the state's approved Medicaid state
plan benefits as long as the benefits are in the same EHB category and
they are actuarially equivalent. We appreciate the commenters' support.
Comment: Some commenters were not clear on which state plan
benefits may be included and, thus, urged HHS to clarify that state
plan benefits enacted under Title XIX are available for inclusion
through the Secretary-approved process irrespective of whether they
have otherwise been implemented in a particular state Medicaid program.
As an example, those commenters noted that a state that may conceivably
want to design a Medicaid benchmark targeting vulnerable populations,
such as individuals with dementia, and include a particularly relevant
home support service that is not an otherwise available service in the
state's Medicaid program.
Response: We wish to clarify for commenters that any benefits
described in sections 1905(a), 1915(i), 1915(j), 1915(j) or 1945 of the
Act, and any benefits included in a selected benchmark coverage option
may be included in an ABP whether or not those benefits are offered
through a particular Medicaid program.
Comment: Many commenters requested that, in addition to the
provisions that Secretary-approved coverage must meet the needs of the
target population, HHS revise language to require that the final
Secretary-approved benefits package be at least actuarially equivalent
to one of the first

[[Page 42235]]

three benchmark options, indicating that this would ensure that states
use the Secretary-approved option to provide a benefit that is
innovative and comprehensive, and not solely to provide a benefit that
is lesser.
Many of the same commenters recommend amending Sec. 440.330(d) to
read as follows: Any other health benefits coverage that the Secretary
determines, upon application by a State, provides appropriate coverage
to meet the needs of the population provided that coverage, and is at
least actuarially equivalent to one of the benchmark options in
paragraphs (a), (b), or (c). Secretarial coverage may include benefits
of the type that are available under 1 or more of the standard
benchmark coverage packages defined in Sec. 440.330(a) through (c) of
this chapter, State plan benefits described in sections 1905(a),
1915(i), 1915(j), 1915(k), and 1945 of the Act (whether actually
covered in the state plan or not), any other Medicaid State plan
benefits enacted under title XIX, or benefits available under base
benchmark plans described in Sec. 156.100.
Response: For commenters requesting that we require an actuarial
equivalence study for Secretary-approved coverage against one of the
three benchmark options at Sec. 440.330(a) through (c), the statute
defines Secretary-approved coverage as one of the minimum standards for
benchmark coverage, and as such, the benchmark options in Sec.
440.330(a) through (d) should serve as a reference for states
considering the benchmark-equivalent coverage option offered in other
regulatory provisions at Sec. 440.335. Section 1937 of the Act does
not expressly mandate an actuarial study of Secretary-approved coverage
Therefore, we are adopting Sec. 440.330(d) as proposed, and we believe
that our clarification here will serve to clarify that a state plan
benefit need not be offered through the regular state Medicaid program
for its inclusion in benchmark coverage, or benchmark-equivalent
coverage.
Comment: Many commenters indicated support of the intent to revise
Sec. 440.335(c)(1) to similarly align policy for benchmark-equivalent
coverage as it does for Secretary-approved coverage and, thus, allow
addition of benefits through the benchmark-equivalent coverage process.
Commenters believed that there are no legal impediments to this
approach and urged HHS to finalize the revision.
Similarly, other commenters commended the Secretary for continuing
to allow states the option for coverage of additional benefits in
excess of the minimum required coverage for benchmark-equivalent plans
and for revising the language to include home and community-based
services available under state plan options among these potential
additional benefits.
Many other commenters applauded HHS's inclusion of various options
for LTSS and care coordination support. Commenters generally offered
strong support and commended the decision to enable states the
flexibility necessary to align ABPs with state-plan options for home
and community-based services, self-directed personal assistance
services and attendant services, and other state Medicaid plan benefits
described in section 1915(i), (j), (k) and section 1945 of the Act.
One commenter indicated that the flexibility to offer such services
may provide states further opportunity to offer home and community-
based services to particular populations since the proposed rule
retains the section 1937 waiver of comparability that allows states to
choose target populations for receipt of specialized benefit packages.
The commenter offered an example of a state that could design benefit
packages that help support community living, including employment for
persons with disabilities.
One commenter was concerned that states may not take advantage of
this flexibility, and suggested that CMS consider issuing additional
guidance to states regarding the ability to cover services critical to
chronic care management for the new adult eligibility group, such as
the new health home benefit.
Similarly, another commenter requested that CMS clarify how
authorities at sections 1915(i) and 1945 will be used given that
individuals that would most likely benefit from these authorities will
be exempt from enrollment:
Response: CMS is providing states with additional options to craft
benefit packages that most appropriately meet the needs of the
population being served. Benefits that can now be included as
Secretary-approved coverage may in fact assist people who do not yet
qualify as medically frail. For instance, if someone needs assistance
with medication administration, they may not yet meet the definition of
medically frail, but they may benefit significantly from the service
and in fact avoid progression toward that exemption group or meeting
the associated criteria. We are in support of melding regular medical/
surgical benefits with home- and community-based services that support
people living the community and potentially avoiding or delaying
hospitalization or institutionalization.
Comment: One commenter indicated recognition that section 1915(i)
of the Act has proven to be a particularly critical tool available to
states to expand home and community based services and supports to
cover a broad array of services that enable individuals with mental
illnesses to succeed in their own homes.
Response: We are in agreement with the commenter that section
1915(i) of the Act can serve as a critical tool available to states to
expand an array of services that enable individuals with chronic
condition to succeed independently. For this reason, we will finalize
regulations to include section 1915(i) of the Act as a viable state
plan option that states may consider for inclusion when selecting an
ABP.
Comment: A few commenters requested clarification from CMS that
states may include section 1915(c) of the Act and other waiver-based
services in their ABPs. Commenters stated concern that states may need
flexibility to include additional services, such as personal care and
other services that enable Medicaid beneficiaries to remain in their
homes to their ABPs because section 1915(c) of the Act was not
referenced in Sec. 440.360.
Similarly, many state Medicaid agencies stated that the regulatory
sections should expressly specify that states may provide ABP enrollees
with access to section 1915(c) programs. The commenters indicated
belief that section 1915(c) services are ``state plan benefits enacted
under Title XIX'' given that section 1915(c) is found in Title XIX and
offers services that a state plan may include as ``medical assistance
under such a plan.'' The commenters also requested that CMS confirm
their reading of Sec. Sec. 440.330, 440.360, allowing states the
option to provide enrollees with section 1915(c) waiver services either
as part of Secretary-approved ABP or as ``additional services''
available to non-expansion enrollees.
Response: Section 1915(c) of the Act is not a state plan benefit,
and therefore, is not consistent with our general principle that
Secretary-approved or additional coverage consists of coverage under
one of the benchmark coverage options or regular state plan benefits.
Because the same services provided under section 1915(c) of the Act may
be provided under section 1915(i) of the Act, which can be offered in
an ABP, we do not see any reason to add section 1915(c) benefits as an
exception to this general principle.

[[Page 42236]]

Summary: No changes to the proposed regulation were made as a
result of these comments.
f. Benchmark-Equivalent Health Benefits Coverage and Sec. 440.360
State Plan Requirements for Providing Additional Services (Adding
Benefits to Additional Coverage) (Sec. 440.335)
In the proposed rule, we amended Sec. 440.335(c) and Sec. 440.360
by broadening the benefits available as additional coverage from
section 1905(a) benefits to benefits of the type that are available
under 1 or more of the standard benchmark coverage packages or state
plan benefits described in sections 1905(a), 1915(i), 1915(j), 1915(k)
or 1945 of the Act, or any other Medicaid state plan benefits enacted
under Title XIX, or benefits available under base benchmark plans
described in Sec. 156.100.
Comment: Many commenters believed that the proposed rule would
prohibit states from providing wrap-around or other additional benefits
to newly-eligible adults, but would allow states to provide additional
benefits for other populations in ABPs.
Many commenters shared the belief that the Affordable Care Act does
not appear to prohibit states from providing additional services to the
newly-eligible populations and that CMS should allow states flexibility
to provide additional services to the newly eligible population without
having to go through the additional process required for Secretary-
approved coverage. Those commenters believed that if CMS determines
that the law prohibits states from providing additional benefits to the
newly-eligible population, it should allow states the ability to simply
add these benefits using a streamlined process under the Secretary-
approved option or through another mechanism.
Several commenters urged CMS to clarify through the final rule that
states may provide additional benefits to ABPs for those eligible
through section 1902(a)(10)(A)(i)(VIII) of the Act through the
Secretary-approved coverage option, so as to not implicate the
restriction on additional coverage for the new adult group contained
through Sec. 440.360. Those commenters believed that the proposed
language is misleading and could be interpreted that the expansion
population is not able to receive additional benefits in any
circumstances, noting that the intent of the proposed rule is that the
expansion group is limited to benchmark ABP coverage.
A number of commenters requested that CMS allow states the
flexibility to provide additional benefits beyond what is minimally
required in the benchmark to any or all populations in ABPs, including
the expansion population.
Similarly, another commenter urged CMS to allow states to be as
expansive as they want to be in offering health care services to all
beneficiaries of ABPs, including the newly eligible Medicaid expansion
population, beyond what is minimally required within each state's ABP.
Other commenters noted that states may identify deficiencies and
gaps in the commercial benchmark plan options that fall outside parity,
non-discrimination, EHB and other requirements. In this situation,
commenters believed that a state should be able to add benefits easily
for its expansion population and CMS should provide states with all
available flexibility to do so.
Response: Section 1902(k)(1) of the Act is very clear that
individuals eligible through the new adult expansion group are limited
to benchmark or benchmark-equivalent coverage. In addition, there is a
payment exclusion under section 1903(i)(26) of the Act for FFP in any
additional coverage. ``Additional services'' authorized under section
1937 fall outside benchmark and benchmark-equivalent coverage. But we
are addressing this concern by allowing states increased flexibility
under this final rule to include broader benefits and services that are
appropriate for the population being covered and that are similar to
the benefit types listed in Sec. 440.360, through Secretary-approved
coverage or benchmark-equivalent coverage.
Comment: Many commenters indicated strong support for HHS' proposed
policy and commended the Department for clarifying the authority for
states to provide a wide range of benefits in developing Secretary-
approved coverage. In continuing, those commenters noted that many
consumer stakeholders have misunderstood the allowance for inclusion of
benefits under Secretary-approved coverage due to the general
prohibition on adding services to Medicaid benchmarks and requested
that the Department clarify that benefits can be added, but only
through the Secretary-approved process.
Other commenters urged CMS to consolidate these sections and
clarify that, despite the prohibition on adding services to Medicaid
benchmarks, states have the flexibility to offer additional and richer
benefits to all those enrolled in ABPs, including the expansion group,
by choosing the Secretary-approved coverage option. Those commenters
also requested clarification that the federal match otherwise available
for these populations is available for the additional benefits when
they are approved by the Secretary.
Similarly, other commenters requested that CMS clarify and confirm
that the interpretation of this provision within the proposed rule is
that if a state wanted to provide wrap-around services for a particular
population that some of the ``newly eligible'' population may fall
under, it does not appear that would be allowed unless the state
creates a Secretary-approved plan that incorporates the benefits into
the underlying plan itself.
One commenter indicated that it would be helpful for CMS to clarify
that adding additional benefits is possible for individuals in the
newly eligible group, and that the prohibition on additional coverage
for the expansion group at Sec. 440.360 only applies to benefits that
have not been included in the benchmark package selected by the state.
The commenter also suggested that both benchmark-equivalent coverage
and Secretary-approved coverage provide the state flexibility to
include benefits that can be covered through a Medicaid state plan or a
base benchmark option available to the state.
Response: We reassert the statutory construct that does not allow
the new adult group to received ``additional'' services. However, the
broadening of Secretary-approved coverage to include the same options
for services accomplishes the goal of allowing individuals in the new
adult group access to that same robust benefit package. We reiterate
that services provided under an ABP do not have to be offered under the
regular state plan.
Comment: Several commenters recognized that the Secretary's
clarification that additional benefits may include those available
under base benchmark plans (described in Sec. 156.100), in additional
to standard benchmark coverage packages or standard state plan
benefits. Those commenters were concerned about flexibility for states
to model ABPs after any base benchmark, noting that not every base
benchmark plan option may provide appropriate benefit levels for the
Medicaid population.
One commenter familiar with the needs of underserved and poor
populations with chronic conditions was appreciative that the EHB rules
builds upon protections already offered through existing rules that
allow states to enroll certain populations in Medicaid benchmark plans,
and grants states significant flexibility through regulations at Sec.
440.360 to develop a more comprehensive benefits package

[[Page 42237]]

that will better meet the needs of people with HIV and others with
chronic conditions.
Response: As mentioned in previous responses, we believe the
statute requires states to balance the appropriateness of the ABP
package when considering the population being covered. Therefore, we
believe our regulations encourage states to consider other options if
their analysis reveals that the base benchmark options elected do not
provide an appropriate level of benefits relative to the population
being covered.
Comment: A few commenters wished to emphasize that section 1937 of
the Act requires states to provide FQHC services to beneficiaries who
receive ABP coverage in the same manner as CMS previously stated and
conveyed in the agency's April 30, 2010 final rule. The commenters
emphasized that for situations where no FQHCs are available to section
1902(a)(10)(A)(i)(VII) of the Act enrollees under their managed care
plan, then the state must provide the beneficiary enrolled in ABP
coverage with FQHC services on a per-visit basis as required by section
1902(bb) of the Act. Alternatively, if a managed care entity is able to
provide FQHC services to any beneficiary receiving ABP coverage,
payments for such services must be made on a cost-related prospective
payment system basis, with state supplemental payments provided where
the PPS payment would exceed the amount provided under the managed care
contract.
Commenters indicated concern that because Sec. 440.360 is silent
on states' obligation to provide FQHC and RHC services as part of
benchmark or benchmark-equivalent coverage, the proposed regulation
fails to distinguish clearly between required and ``additional
benefits'' for the section 1937 package and that the omission of FQHC
services from the list creates the impression that these services are
not a required benefit within section 1937 coverage.
Several commenters recommended that CMS clarify the FQHC services
requirement by: (a) Consolidating Sec. 440.365 into Sec. 440.345; or
(b) independently reference Sec. 440.365 in Sec. 440.360 by having
the first sentence of regulatory provision Sec. 440.360 read, ``In
addition to the requirements of Sec. 440.345 and Sec. 440.365.''
Response: We agree with the commenters that regulations at Sec.
440.365 continue to require that the state must provide that
individuals enrolled in an ABP have access, through that coverage or
otherwise, to rural health clinic services and FQHC services. Such
required services are required as part of Sec. 440.365 and a state
must assure to CMS that they are providing these services, which is
different than adding additional services described at Sec. 440.360.
FQHCs are considered Essential Community Providers in the commercial
market, and we anticipate these entities playing a critical role in
Medicaid ABPs as well. When these providers are part of the ABP
provider network, reimbursement to them must adhere to statutory
requirements.
Summary: Minor grammatical edits to the proposed regulation were
made as a result of these comments.
g. Other Comments Received
We received various other comments that did not relate specifically
to provisions proposed in the proposed rule.
Comment: One commenter stated that to realize the opportunity
presented by the Affordable Care Act, it is essential that individuals
who are admitted to jail and are eligible for Medicaid be enrolled in
Medicaid either during incarceration or immediately upon release to the
community. By law federal Medicaid matching funds are not available for
the costs of needed items and services for individuals who are enrolled
in Medicaid while they are inmates, unless they are admitted to a
medical institution for treatment during the period of incarceration.
Nonetheless, the suspension of benefits does not affect the Medicaid
eligibility of inmates or their ability to enroll in the program if
eligible.
Response: Paragraph (A) following section 1905(a)(29) of the Act
and implementing regulations at Sec. 435.1009, exclude from the
definition of medical assistance care or services for any individual
who is an inmate of a public institution, except as an inpatient in a
medical institution. We read this exclusion to apply generally to
medical assistance, whether provided through the regular coverage plan
or through an ABP. Thus, while we agree with the commenter that
incarcerated individuals may be eligible for Medicaid, they would not
be entitled to benefits inconsistent with the exclusion. We note that
this is consistent with the exclusion of incarcerated individuals from
eligibility to enroll in coverage through the Exchange. It is also
consistent with the responsibility under the Eighth Amendment of the
United States Constitution of governmental entities to provide
necessary medical care to individuals who they are holding as inmates,
which effectively creates a liable third party for such care.
Individuals who are enrolled in Medicaid when entering a public
institution should have their eligibility suspended, rather than
terminated, as they remain eligible. This also ensures ease of
reinstitution of coverage post-release. Additionally, if an individual
is not already enrolled in Medicaid, states are encouraged to enroll
eligible individuals prior to their release so that the individual can
receive Medicaid covered services in a timely manner upon discharge.
Comment: A commenter requested additional guidance as to what type
of information CMS will need to approve an ABP state plan amendment and
how CMS will determine if mental health parity has been met.
Response: We will be issuing a template for states to use to submit
ABPs as a state plan amendment. At this time, mental health parity will
be determined to be met with an assurance by the state. We will be
developing more specific policy related to this topic in the near
future.
Comment: One commenter requested CMS clarify what Medicaid category
the EHBs are applicable. The commenter wondered whether EHBs only apply
to the expansion population and ABPs or does it also apply to
individuals who are currently eligible for Medicaid. The commenter
questioned whether, for example, current Medicaid benefits would need
to be adjusted to include habilitative services.
Response: EHBs apply only to section 1937 of the Act and were not
extended into regular Medicaid. Therefore, regular Medicaid state plan
benefits will not include the EHBs.
Summary: No changes to the proposed regulation were made as a
result of these comments.
7. Summary
ABPs are intended to offer states flexibility in designing benefit
packages for the Medicaid population that are benchmarked to public
employee or commercial plans. To ensure coverage of the kinds of
services that will also be assured for those purchasing coverage in the
individual and small group market, the law also requires that ABPs
cover the ten EHBs specified by law.
Recognizing that states face challenges in administering both their
state plan benefits and ABPs, we have sought to provide as much
flexibility in aligning those packages as possible. That said, we
appreciate that it may be difficult at this point to make changes to
the ABP that take effect by January 1, 2014. In light of this
challenge, we will partner with states to work as quickly as possible
to come into full compliance

[[Page 42238]]

with these provisions. We do not intend to pursue compliance actions on
these issues to the extent that states are working toward but have not
completed a transition to the new ABPs on January 1, 2014. To establish
its base benchmark for EHBs for Medicaid, the state can select the same
or a different plan than the base benchmark used for the Exchanges.
Once having selected the base benchmark plan for EHBs, the state maps
the benefits to EHB categories, and then can engage in supplementation
and/or substitution:
Through supplementation at 45 CFR 156.110, the state must
add EHBs to a base benchmark plan that is missing a required category
of EHBs. States can supply the missing EHBs from other base benchmark
plans.
Through substitution at 45 CFR 156.115(b), the state can
replace one or more of the benefits within each category of EHB, as
long as it maps appropriately to the category and the services are
actuarially equivalent to the services that are being substituted.
State Medicaid programs can use this process to substitute Medicaid
state plan benefits for public employee or commercial plan benefits,
for example, as long as applicable requirements are met. States must
provide notification to CMS that they have engaged in substitution and
have an actuarial certification and analysis available for inspection.
States must assure, as they evaluate their base benchmark for EHBs
and take these steps that they also properly account for special
Medicaid considerations discussed in this rule. When states pay for
covered outpatient drugs under the ABP prescription drug benefit, they
must comply with the requirements under section 1927 of the Act.
Habilitative services and devices are defined by what is in the state
selected base benchmark plan, substituted as desired. If not defined in
the base benchmark, the state will define the benefit. For example,
states may offer coverage of habilitative services and devices that is
no more restrictive in terms of amount, duration, and scope than the
rehabilitative services and devices covered under the applicable
benchmark plan. We expect that the services will be clinically
appropriate to meet the needs of individuals based on medical
necessity. Pediatric oral and vision care must follow requirements of
the EPSDT benefit.
The final base benchmark plan for EHBs for Medicaid, after
completion of these steps, provides the floor for Medicaid coverage to
individuals in the ABP.
States also select a section 1937 coverage option. If the section
1937 coverage option and the plan initially selected as the base
benchmark for EHBs are the same, the state will meet all requirements
by specifying as the final ABP the final base benchmark, as
supplemented and subject to permissible substitution, and further
supplemented to the extent necessary to ensure coverage required under
section 1937 of the Act, including EPSDT services, family planning
services, and FQHC and RHC services.
If the section 1937 coverage option and the selected base benchmark
plan are different (including when the state elects Secretary approved
coverage option or benchmark equivalent coverage), states have to take
the following steps to construct their final ABP:
If any other benefits are available in the section 1937
coverage option, add that benefit.
For any benefits in common from the section 1937 public
employee or commercial market plan options, but with one having more
robust qualities related to amount, duration, or scope, the benefit
with the more robust coverage.
For any benefits in common from the section 1937
Secretary-approved coverage option, but with one having more robust
qualities related to amount, duration, or scope, determine whether to
apply the benefit with the more robust coverage.
Alternatively, a state can first determine their ultimate goal in
creating their benefit package (for example, wanting to create an ABP
that mirrors the state's regular Medicaid state plan benefit package as
much as possible), and develop their ABP starting first with the
selection of their 1937 coverage option. This would entail comparing
the state plan benefit package with the base benchmark benefit package,
supplementing the state plan benefit with EHBs as necessary, and
applying permissible substitution of benefits consistent with 45 CFR
156.115(b) to better align with state plan benefits.

C. Exchanges: Eligibility and Enrollment

Throughout this proposed rule, we proposed technical corrections to
regulation sections in part 155 to replace references to section 36B of
the Code with the corresponding sections to the Department of
Treasury's final rule, Health Insurance Premium Tax Credit (26 CFR
1.36B-0 et seq.), published in the May 23, 2012 Federal Register (77 FR
30377). We are finalizing these technical corrections as proposed.
1. Definitions (Sec. 155.20)
In Sec. 155.20, we proposed technical corrections to the
definitions of ``advance payments of the premium tax credit'' and
``application filer,'' and added a definition of ``catastrophic plan''
by referencing the appropriate statutory provision within the
Affordable Care Act. We did not receive specific comments on these
technical corrections, and are thus finalizing them as proposed.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.20 of the
proposed rule with a technical correction to the definition of advance
payments of the premium tax credit, which we clarify refers to the
payment of the tax credit authorized by 26 U.S.C. 36B and its
implementing regulations.
2. Approval of a State Exchange (Sec. 155.105)
In Sec. 155.105, we proposed a technical correction to replace the
reference to section 36B of the Code to the applicable Treasury
regulation. We did not receive specific comments on this section, and
are thus finalizing the provision as proposed.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.105 of the
proposed rule without modification.
3. Functions of an Exchange (Sec. 155.200)
In Sec. 155.200, we proposed to clarify that the Exchange must
also perform the minimum functions described in subpart F concerning
appeals. The only comments we received supported this clarification.
Summary of Regulatory Changes
We intend to finalize the clarification to paragraph (a) at a
future date when subpart F is finalized, and so thus maintain the
previous language from the Exchange final rule.
4. Authorized Representatives (Sec. 155.227)
We proposed to add Sec. 155.227, establishing minimum requirements
for the designation of authorized representatives who may act on an
applicant's or enrollee's behalf in the individual and small group
markets. We noted in the preamble that the proposed rule for authorized
representatives for Exchanges closely tracks the proposed rule for
authorized representatives for Medicaid.
In paragraph (a), we proposed that the Exchange must permit
applicants and enrollees in the individual and small

[[Page 42239]]

group markets to designate an individual person or organization to act
on that applicant or enrollee's behalf. We also proposed that an
applicant or enrollee may have such a representative through operation
of state law, subject to applicable privacy and security requirements.
We also proposed that the Exchange must not restrict the option to
designate an authorized representative to only certain groups of
applicants or enrollees. We noted that the Exchange should ensure that
the authorized representative agrees to maintain, or be legally bound
to maintain, the confidentiality of any information regarding the
applicant or enrollee provided by the Exchange, and that authorized
representatives should adhere to applicable authentication and data
security standards. Additionally, we proposed that the Exchange should
ensure that the authorized representative is responsible for fulfilling
all responsibilities encompassed within the scope of the authorized
representation, as described in this section, to the same extent as the
person he or she represents.
In paragraph (b), we proposed the situations when the Exchange must
permit an applicant or enrollee to designate an authorized
representative. We also proposed that the single, streamlined
application described in Sec. 155.405 will provide applicants the
opportunity to designate an authorized representative and will collect
the information necessary for such representative to enter into any
associated agreements with the Exchange as part of the application
process. We noted that applicants and enrollees who do not designate an
authorized representative on their applications will subsequently be
able to do so through electronic, paper formats, and other modalities,
as described in Sec. 155.405(c)(2). We also noted that legal
documentation of authority to act on behalf of an applicant or enrollee
under state law, such as a court order establishing legal guardianship
or a power of attorney, may serve in the place of the applicant or
enrollee's designation.
In paragraph (c), we proposed that the Exchange must permit an
applicant or enrollee to authorize a representative to--(1) Sign the
application on the individual's behalf; (2) submit an update or respond
to a redetermination for the individual; (3) receive copies of the
individual's notices and other communications from the Exchange; and
(4) act on behalf of the individual in all other matters with the
Exchange.
In paragraph (d), we proposed that the Exchange must permit an
applicant or enrollee to change or withdraw an authorization at any
time. We also noted the authorized representative also may withdraw his
or her representation by notifying the Exchange and the applicant or
enrollee.
In paragraph (e), we proposed that an authorized representative
acting as either a staff member or volunteer of an organization and the
organization itself must sign an agreement meeting the requirements
proposed in regards to Exchange certified application counselors. We
noted that while the protections afforded by such an agreement are
important when an authorized representative is a member or volunteer of
an organization, we believe that they are not logical in cases where an
authorized representative is not acting on behalf of an organization.
We sought comments on applying the protections in paragraph (e) to
authorized representatives more broadly.
In paragraph (f), we proposed that the Exchange require authorized
representatives to comply with any applicable state and federal laws
concerning conflicts of interest and confidentiality of information.
In paragraph (g), we proposed that the designation of an authorized
representative must be in writing, including a signature, or through
another legally binding format, and be accepted through all of the
modalities described in Sec. 155.405(c) of this part.
We received the following comments concerning the proposed
authorized representative provisions.
Comment: Several commenters recommended that the Exchange be
required to make clear the powers and duties authorized representatives
may have with respect to the Exchange, as well as all other
requirements of Sec. 155.227, in a manner that is easily
understandable by both the authorized representative and applicant or
enrollee.
Response: In the final rule, we added a provision to paragraph (a)
specifying that the Exchange must provide information regarding the
powers and duties that an authorized representative may have with
respect to Exchange activities to both the applicant or enrollee and
the authorized representative.
Comment: Several commenters suggested that an authorized
representative should have an affirmative duty to notify the Exchange
and the applicant or enrollee on whose behalf he or she is acting of
any revocation or material change in the authorized representative's
legal authority to act on behalf of the applicant or enrollee. These
commenters also suggested that such a material change or revocation
should result in revocation of the authorized representative's
authority to act on behalf of the consumer for Exchange purposes.
Response: We have clarified in Sec. 155.227(d)(2) of the final
rule that an authorized representative must notify the Exchange and the
applicant or enrollee on whose behalf he or she is acting when the
authorized representative no longer has legal authority to act on
behalf of the applicant or enrollee.
Comment: Several commenters asked HHS to clarify which legal
documentation may serve in the place of an affirmative representation
to designate an authorized representative. Other commenters recommended
clarifying that a power of attorney may be used for such a purpose only
if it authorizes the holder to act in the types of activities permitted
under Sec. 155.227(c). One commenter recommended that legal
documentation to act as an authorized representative be required, as
opposed to optional, to protect vulnerable applicants or enrollees.
Another commenter recommended adding language that authorizes the
Exchange to dictate the form or manner of the authorization. A few
commenters also expressed concerns about the proposed requirement that
the designation of an authorized representative be in writing including
a signature or other legally binding format.
Response: In paragraph (a)(2), we outline the form and manner of
how an applicant or enrollee may designate another person as his or her
authorized representative, specifying that this designation should be
in a legally binding format. We also provide examples of legal
documentation that could be used to designate an authorized
representative in lieu of a signed document, including, but not limited
to, a court order establishing legal guardianship or a power of
attorney. While we do not require that legal documentation be provided
before the Exchange may recognize an individual as an authorized
representative, we anticipate that Exchanges will have procedures in
place to ensure that applicants and enrollees have control over whom
they designate as an authorized representative. For example, Exchanges
have flexibility to require that the designation should occur through a
signed agreement or legally binding document. In general, an Exchange
could accept any document that is valid for designating an authorized

[[Page 42240]]

representative in the state, and that permits the holder to perform the
activities specified in Sec. 155.227(c), in place of an affirmative
representation to designate an authorized representative. We emphasize
that to be used in this manner, documentation has to give the authority
needed to be an authorized representative for the activities specified
in Sec. 155.227(c).
Comment: A few commenters inquired about the relationship between
an authorized representative designated through the Exchange and a QHP
issuer, and recommended that an applicant or enrollee be required to
complete a separate authorization form to designate a representative to
act on his or her behalf in interactions with the QHP issuer.
Commenters expressed an understanding that QHP issuers would be
responsible for developing and executing the authorized representative
forms that govern interactions between the enrollee and the issuer.
Response: Subject to applicable law, we believe that the authorized
representative designated by an applicant or enrollee through the
Exchange process should also be able to serve in the same capacity with
the QHP issuer, and that streamlining this process is important to
minimize the burden on applicants or enrollees who need authorized
representation. Therefore, we would urge QHP issuers to allow an
Exchange authorized representative to serve in the same capacity with
the QHP issuer. We note that the companion guide \2\ that will be used
by all Exchanges for sending enrollment data to QHP issuers has fields
that may accommodate this information.
---------------------------------------------------------------------------

\2\ Standard Companion Guide Transaction Information, (March 22,
2013). Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/companion-guide-for-ffe-enrollment-transaction-v15.pdf.
---------------------------------------------------------------------------

Comment: Some commenters suggested that HHS develop some conflict
of interest standards to ensure that consumers are protected when
interacting with entities that may benefit from becoming an authorized
representative. Other commenters suggested banning all organizations
from becoming authorized representatives, because some entities may
benefit from becoming an authorized representative.
Response: We appreciate the comments and plan to monitor
organizations acting as authorized representatives over time to
determine whether more specificity is needed. Additionally, Sec.
155.227(e) of the final rule clarifies that authorized representatives
must comply with applicable state and federal laws regarding conflicts
of interest.
Comment: Several commenters recommended that an applicant or
enrollee should be able to authorize their representative to engage in
fewer than all of the activities described in the proposed rule.
Response: In the final rule, we maintain language specifying that
an Exchange must allow applicants and enrollees to authorize a
representative to perform the full range of activities listed in the
rule. We also add language to Sec. 155.227(c) clarifying that the
Exchange may (but need not) permit consumers to authorize fewer than
all of the listed activities, so long as the Exchange is able to track
the specific permissions for each authorized representative. We note
that for plan years beginning before January 1, 2015, the FFE will not
have the operational capacity to support the authorization of
representatives to perform less than the full range of activities
listed in the rule.
Comment: Several commenters urged that the provision in proposed
Sec. 155.227(d) that the applicant or enrollee notify both the
Exchange and the representative that the representative is no longer
authorized to act on his or her behalf be removed. Other commenters
suggested that the applicant or enrollee should notify only the
Exchange.
Response: In the final rule, we clarify that the responsibility for
notifying a representative whose authorization has been discontinued by
an applicant or enrollee falls only on the Exchange.
Comment: One commenter expressed support for a policy that would
permit the Exchange to terminate a designation after a given period of
time to be determined by the Exchange. This commenter noted that this
aligns with the 5-year limit on authorizations from enrollees to allow
Exchanges to request tax information for conducting annual
redeterminations in accordance with Sec. 155.335(k).
Response: In the final rule, we have added a provision specifying
that authorized representatives will notify the Exchange if they are no
longer authorized to act in that capacity. As long as a person has the
authority to act as an authorized representative, there is no need to
terminate or reauthorize that relationship after a set amount of time.
An applicant or enrollee may also modify the authorization at any time.
Comment: A commenter suggested that compliance agreements for
authorized representatives should be available directly from HHS,
instead of Exchanges, for entities such as multi-employer plans that
are subject to federal regulation under ERISA, the Code, and the Taft-
Hartley Act, but not to state insurance regulation. The commenter noted
that the relationships between plans and plan participants and
beneficiaries established under the Taft-Hartley Act should continue to
be recognized in regulations implementing the Affordable Care Act.
Response: We expect that authorized representatives will be used
primarily by applicants and enrollees who are unable to represent
themselves or who are seriously challenged in representing themselves
in their relationship with the Exchange. Accordingly, authorized
representatives' agreements are between an applicant or enrollee and
his or her authorized representative regarding representation before
the Exchange.
Comment: One commenter sought clarification on whether staff or
volunteers of organizations must be trained and certified as Exchange
certified application counselors under proposed Sec. 155.225(b) to
serve as authorized representatives.
Response: The rule does not require authorized representatives to
be trained and certified as certified application counselors. The role
of an authorized representative is distinct from the role of a
certified application counselor. Specifically, certified application
counselors, for which standards will be finalized in a future
regulation, provide guidance and assistance to applicants and enrollees
who will interact with the Exchange on their own behalf, while
authorized representatives are commonly used by applicants or enrollees
who are unable to represent themselves, and have the legal authority to
actually sign for an applicant or enrollee and make other decisions on
his or her behalf.
Comment: Several commenters suggested that requiring organizations
to enter into agreements and follow a set of standards as proposed in
Sec. 155.227(e) will lead to disruptions in the availability of
assistance and lead to real harm to persons who need assistance. Other
commenters expressed concerns that every authorized representative
would have to be certified.
Response: In light of the commenters' concerns, and the protections
for consumers that already apply to all Exchange authorized
representatives, we have not finalized the proposed requirement that
organizations and staff and volunteers of organizations sign a separate
agreement. We recognize that authorized representatives are given
significant authority, and accordingly, we need to ensure that the
privacy and security of applicants' and enrollees' personal data are
protected. We note

[[Page 42241]]

that all authorized representatives, not just organizations and those
working for organizations, will be subject to the privacy and security
standards established and implemented by the Exchange consistent with
45 CFR 155.260 through agreements, as is required by 45 CFR
155.260(b)(2). This will be further clarified in subregulatory
guidance. Since all authorized representatives will be subject to
privacy and security standards, in this final rule, we removed the
requirement for organizations and staff and volunteers of organizations
to sign a separate agreement.
We have also not finalized the provision in the proposed rule that
would have subjected authorized representatives who are staff and
volunteers of organizations, and their organizations, to the proposed
standards for Exchange certified application counselors. This proposal
was motivated in large part by a concern that staff and volunteers of
such organizations might be likely to have conflicts of interest. This
concern, however, is addressed by Sec. 155.227(e), which clarifies
that authorized representatives must comply with applicable state and
federal laws regarding conflicts of interest.
Comment: One commenter suggested requiring legal documentation when
an applicant or enrollee changes or withdraws his or her authorization.
Response: Applicants and enrollees will not always have legal
documents to substantiate discontinuing an authorization. When an
applicant or enrollee appoints a new authorized representative,
including to replace an existing authorized representative, he or she
should follow the same process as an applicant or enrollee who appoints
an authorized representative for the first time.
Comment: Another commenter recommended that an enrollee should not
be able to designate an authorized representative if he or she failed
to do so during the application process.
Response: We see no need to limit an applicant or enrollee's
ability to designate an authorized representative solely to the
application process, particularly as some enrollees may develop a need
for an authorized representative after submitting an application,
choosing a plan, and maintaining coverage for many years.
Comment: Several commenters sought clarification about whether an
applicant or enrollee who applies through the Exchange with the
assistance of an authorized representative and is subsequently
transferred to the state Medicaid agency would need to redesignate his
or her authorized representative.
Response: If the application is transferred to the state Medicaid
agency, the authorized representative designation would be transferred
as well.
Comment: One commenter inquired about whether the Exchange will be
deemed liable for any breaches of confidentiality that are beyond the
control of the Exchange. A commenter also requested that HHS modify
language to make it clear that it is the legal duty of the authorized
representative to maintain confidentiality in daily practice.
Response: We appreciate this comment and recognize that this issue
applies more broadly. There are potentially some instances in which a
person that provides application assistance, including an authorized
representative, could negligently disclose an applicant's or enrollee's
information under circumstances that the Exchange could not have
prevented. We note that authorized representatives will need to comply
with the same privacy and security standards that the Exchange adopts
consistent with Sec. 155.260, or with more stringent standards,
pursuant to Sec. 155.260(b). Additionally, paragraph (e) of the final
rule requires authorized representatives to comply with applicable
state and federal laws concerning conflicts of interest and
confidentiality of information.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.227 of the
proposed rule, with a few modifications. For clarity and consistency
with the terminology defined in Sec. 155.20, and to make it clear that
we intend authorized representatives to provide assistance both in the
SHOP Exchanges and in the individual market Exchanges, we replaced the
terms ``individual'' and/or ``employee'' with the terms ``applicant''
and/or ``enrollee'' to describe the people helped by authorized
representatives. To further indicate that we intend authorized
representatives to provide assistance both in the SHOP and in the
individual market Exchanges, we clarify in Sec. 155.227(a) that an
applicant or enrollee can designate an authorized representative in the
individual or small group market Exchange and have added ``subpart H''
to the regulation text to account for the functions that an authorized
representative may perform in a SHOP. To avoid confusion with the
defined term ``qualified individual,'' we use the term ``person''
instead of ``individual'' in the final rule when describing individual
persons acting as an authorized representative.
We added paragraph (a)(5) to specify that the Exchange must provide
information about the powers and duties of an authorized representative
both to the applicant or enrollee and to the authorized representative.
We redesignated proposed paragraphs (c)(1) through (c)(4) as (c)(1)(i)
through (c)(1)(iv), and added a new paragraph (c)(2), which allows an
Exchange to permit an applicant or enrollee to authorize a
representative to perform fewer than all of the activities described in
paragraph (c)(1) of this section, provided that the Exchange tracks the
specific permissions of each authorized representative. Additionally,
we removed paragraph (d)(1), and redesignated proposed paragraphs
(d)(2) and (d)(3) as paragraphs (d)(1) and (d)(2). We modified the
language in redesignated paragraph (d)(1) to explain that the Exchange,
not the applicant or enrollee, will notify the authorized
representative when an applicant or enrollee notifies the Exchange that
he or she is no longer represented by his or her previously authorized
representative. We further modified redesignated paragraph (d)(2) to
clarify that an authorized representative will notify the Exchange and
the applicant or enrollee on whose behalf he or she is acting when the
authorized representative no longer has legal authority to act on
behalf of the applicant or enrollee. We also deleted paragraph (e) and
redesignated paragraphs (f) and (g) as (e) and (f), respectively. We
also made the following technical corrections. We made a technical
correction in paragraph (a)(1) to specify that authorized
representatives are permitted to assist individuals apply for
eligibility determinations or redeterminations for exemptions from the
shared responsibility payment under subpart G of this part. We made
technical corrections in paragraphs (a)(2) and (g) to clarify that the
designation of an authorized representative must be in a written
document signed by the applicant or enrollee instead of saying it must
be in writing, including a signature. We also added the word ``must''
to paragraphs (a)(3), (a)(4), and (f) to clarify that the activities
described in those paragraphs are required Exchange functions. We made
a technical correction in paragraph (d) to move the words ``the
applicant or enrollee notifies'' to the paragraph they modify. Finally,
we made a technical correction in paragraph (f), to clarify what is
meant by legally binding format

[[Page 42242]]

by adding ``as described in Sec. 155.227(a)(2).''
5. General Standards for Exchange Notices (Sec. 155.230)
In Sec. 155.230, we proposed to make a technical correction in
paragraph (a) to clarify that the general standards for notices apply
to all notices sent by the Exchange to individuals or employers.
We also proposed to revise paragraph (a) by redesignating paragraph
(a)(1) as paragraph (a)(4) and redesignating paragraph (a)(2) as
paragraph (a)(5). We proposed to revise redesignated (a)(2) to change
``; and'' to ``.'' We proposed to add new paragraph (a)(1) to indicate
that any notice required to be sent by the Exchange to individuals or
employers must be written and include an explanation of the action that
is reflected in the notice, including the effective date of the action,
and we proposed to add new paragraph (a)(2) to require the notice to
include any factual findings relevant to the action. We proposed to
revise paragraph (a)(3) to clarify that the notice must include the
citation to, or identification of, the relevant regulations that
support the action. We note that the contents of notices are subject to
privacy and security provisions in Sec. 155.260, including the
limitations on disclosure of information.
Furthermore, we proposed to add paragraph (d) to allow the Exchange
to provide notices either through standard mail, or if an individual or
employer elects, electronically, provided that standards for use of
electronic notices are met as set forth in Sec. 435.918, which
contains a parallel provision. We did not propose that the standards
specifically described under proposed paragraph (d) would apply to the
SHOP, and sought comment regarding this issue. We received the
following comments concerning the proposed provisions for standards for
Exchange notices:
Comment: Several commenters supported our proposal to clarify that
the general standards for notices under Sec. 155.230 apply to notices
sent by the Exchange to both individuals and employers, and they
supported the changes and additions proposed under paragraph (a). Many
commenters indicated that the Exchange should be required to include
contact information for both customer service and consumer assistance
resources in notices, and commenters indicated that HHS should make
copies of the applicable statute or regulation available upon request
by consumers. One commenter stated the notice needs to include a clear
explanation of any next steps and the timeframe by which action needs
to be taken, while another commenter emphasized that notices should
contain information about where individualized and unbiased counseling
is available for the individual. Lastly, a few commenters suggested
that we add ``laws or regulations'' to Sec. 155.230(a)(3).
Response: In response to comments received, we clarify that while
the standards under Sec. 155.230 generally do apply to notices sent by
the individual market Exchange to both individuals and employers, HHS
does not expect that the Exchange will have the information necessary
to provide an employer with a choice to receive the notice specified in
Sec. 155.310(h) regarding eligibility for advance payments of the
premium tax credit electronically, as we do not expect that individuals
will provide email information for employers on the application.
Accordingly, we expect that notices sent from the Exchange to employers
will likely be provided by standard mail, at least in the early years
of program implementation. We will continue to work with employers
regarding how best to implement notices from the Exchange to employers
in an efficient manner.
We intend to consider the suggestions regarding notice content in
the development of model notices, and encourage Exchanges to do the
same in developing notices they will use. We expect that notices will
include clear information about next steps and timeframe by which
action needs to be taken. We acknowledge the value of including contact
information for both customer service and consumer assistance resources
in notices. We recognize that including a list of all available
consumer assistance resources will make the notice longer, and so note
that this is an area in which Exchanges have flexibility. We also note
that applicable federal regulations are and will remain available
through public Web sites.
Comment: Several commenters reinforced their support for the use of
plain language to help notify enrollees of their rights and to properly
explain health coverage options that may be available to consumers. One
commenter recommended the notice include clear information about how to
get help if the individual does not understand the notice, as well as
clear information that an individual does not have to take the premium
tax credit in advance.
Response: All notices specified under 45 CFR parts 155 and 156 are
required to meet the accessibility standards described under Sec.
155.205(c), which specify that information must be provided in plain
language and in a manner accessible to limited English proficient
individuals. We expect Exchanges to make consumers aware of the
reconciliation process applicable to advance payments of the premium
tax credit as a part of the initial Exchange educational materials, as
well as at the time that an individual selects a QHP. HHS is working
with states to identify all key messages that should be communicated to
individuals through notices and other Exchange processes, and will take
these comments into consideration for implementation.
Comment: Commenters generally expressed support for the electronic
notice standards proposed under Sec. 155.230(d), while some expressed
concerns or suggestions related to the proposed standards. Commenters
raised a variety of concerns about how consumers who elect to receive
electronic notices may not actually receive them, including as a result
of not checking email regularly. One commenter urged that Exchanges
should be required to change the enrollee's delivery method for notices
if the Exchange finds that electronic notices are not being opened. One
commenter suggested that written notifications should cease only after
clear and unambiguous expression from an enrollee that they no longer
wish to receive paper notifications, and that the Exchange should be
required to track whether electronic notices are delivered and opened
by an enrollee. Another commenter recommended that individuals be
allowed to decide which notices they receive electronically or by mail.
One commenter suggested that electronic notices should be in addition
to, rather than replace, mailed paper notices. Lastly, one commenter
recommended modifying the notice provision so that if an individual
elects to receive electronic notices, the Exchange also always would
send a mailed notice in addition to the electronic notice when the
Exchange is taking an adverse action or when the consumer is required
to take an additional action to maintain his or her eligibility for
enrollment in a QHP, advance payments of the premium tax credit, or
cost-sharing reductions.
Response: We do not expect that the Exchange will track and monitor
when an individual opens emails and electronic notices. As described in
the electronic notice standards under Sec. 435.918, which are
incorporated by reference under Sec. 155.230(d), applicants will
receive paper notices by mail until they affirmatively elect to receive
electronic notices. We expect Exchanges to remain consistent in their
overall

[[Page 42243]]

approach to distributing notices, as required under Sec. 155.230(d).
Individuals will be able to control how they receive notices.
Additionally, under Sec. 435.918(b)(6), an individual will be able to
request any notice posted in the individual's electronic account to be
sent through regular mail. Furthermore, nothing precludes the Exchange
from providing an individual with the choice to receive some types of
notices electronically and others through regular mail (for example,
notices concerning adverse actions). Accordingly, we are finalizing
this provision as proposed, with one modification to allow the
individual market Exchange to choose to delay the implementation of the
process described in 42 CFR 435.918(b)(1) regarding sending a mailed
confirmation of the choice to receive electronic notices, given the
time available for implementation.
Comment: Some commenters supported the exclusion of the SHOP
Exchange from the electronic notice standards under Sec. 155.230(d),
while others expressed support for the SHOP being able to send all
notices electronically. Many commenters urged that employers in the
SHOP should have a choice regarding to how they receive notices, and
some expressed concern about employers not having a choice. One
commenter recommended that the SHOP be allowed to choose between
offering both written and electronic notices, to allow qualified
employers and employees to select which method they prefer; or to only
offer paper notices. The commenter noted that allowing states to adopt
an electronic-only approach for notice delivery might be problematic
for some employers. Another commenter indicated that the proposed rule
is not clear about what the default format would be for notices sent by
the SHOP.
Response: Based on the comments received and because we believe it
is important for employers to be able to choose how they receive
notices, we are modifying the proposed rule to allow an employer or
employee in any SHOP to elect to receive electronic notices, provided
that the standards for electronic notices in Sec. 435.918(b)(2),
(b)(3), (b)(4), and (b)(5) are met for the employer or employee.
Accordingly, the SHOP must: (1) Permit the employer or employee to
change such election, at any time, and inform the employer or employee
of this right; (2) Post notices to the employer or employee's
electronic account within one business day of notice generation; (3)
Send an email or other electronic communication alerting the employer
or employee when a notice has been posted; and (4) If an electronic
communication is undeliverable, send the notice by regular mail within
three business days of the date of the failed electronic communication.
Comment: Several commenters asked for clarification regarding how
electronic notice standards apply to QHP issuers, and they suggested
that QHP issuers also be allowed to offer enrollees the option of
receiving electronic notices. Some commenters recommended that the
Exchange adopt electronic notice standards for QHP issuers similar to
those applicable to the individual market Exchange. One commenter
recommended that the single, streamlined application include an option
for applicants to elect to receive notices from the QHP issuer
electronically, in addition to the election to receive notices from the
Exchange electronically. One commenter requested that a provision be
added permitting managed care organizations to provide electronic
notices.
Response: The provisions related to electronic notice standards
under part 155 of the proposed rule apply to the individual market and
SHOP Exchange. We acknowledge the importance of QHP issuers being able
to send, and enrollees being able to choose to receive, electronic
notices, and we clarify that nothing in this regulation precludes QHP
issuers from offering their enrollees the option to receive notices
electronically. We understand that most QHP issuers already make
electronic notices available as an option to their current enrollees,
and we are supportive of QHP issuers continuing to make this option
available to enrollees when they are participating in the Exchange.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.230 of the
proposed rule with a few modifications. We renumber proposed paragraph
(d) as paragraph (d)(1) and modify it to specify the electronic notice
standards for an individual market Exchange, while also adding
paragraph (d)(2) to establish the electronic notice standards for a
SHOP. We also add language to allow the individual market Exchange to
choose to delay the implementation of the process described in 42 CFR
435.918(b)(1) regarding sending a mailed confirmation of the choice to
receive electronic notices. We provide in paragraph (d)(2) that an
employer or employee in any SHOP may elect to receive electronic
notices, provided that the requirements for electronic notices in Sec.
435.918(b)(2), (b)(3), (b)(4), and (b)(5) are met for the employer or
employee.
6. Definitions and General Standards for Eligibility Determinations
(Sec. 155.300)
In Sec. 155.300, we proposed technical corrections in paragraph
(a) to the definitions of ``minimum value,'' ``modified adjusted gross
income,'' and ``qualifying coverage in an eligible employer-sponsored
plan,'' and also removed the definition of ``adoption taxpayer
identification number.'' We are finalizing the technical corrections as
proposed, with an additional technical correction to specify the
appropriate definition of minimum value.
Comment: Several commenters recommended that HHS should not cross-
reference in Sec. 155.300 to the affordability standard for eligible
employer-sponsored coverage in the Department of the Treasury's premium
tax credit regulation, 26 CFR 1.36B-0 et seq., as the Department of the
Treasury regulation is based on individual rather than family coverage.
Response: The Department of the Treasury maintains the legal
authority to interpret and implement the eligibility standards for the
premium tax credit, including those related to affordability and
minimum value of coverage in an eligible employer-sponsored plan,
because those are based on provisions of the Code. The proposed
technical corrections do not revise the policy regarding the Exchange's
determination of the affordability of eligible employer-sponsored
coverage, but simply update the cross-reference to align with the
Department of the Treasury's implementing regulation. As such, we are
finalizing the technical corrections as proposed.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.300 of the
proposed rule with a technical correction to specify the appropriate
definition of minimum value.
7. Options for Conducting Eligibility Determinations (Sec. 155.302(a)
and (b), and (d))
In Sec. 155.302, we promulgated provisions as interim final with
request for comments in the Exchange final rule (77 FR 18310, at 18451-
52). We proposed to modify some of the provisions in Sec. 155.302 in
the proposed rule (78 FR 4594, 4635).
In paragraph (a) of the interim final rule, we provided that the
Exchange may fulfill its minimum functions under this subpart by either
executing all eligibility functions, directly or through contracting
arrangements described in

[[Page 42244]]

Sec. 155.110(a), or through a combination of this approach and one or
both of the approaches identified in paragraphs (b) and (c), which
apply when other entities make eligibility determinations for insurance
affordability programs. We proposed a revision to the interim final
rule in paragraph (a)(1) to specify that Medicaid and CHIP eligibility
determinations made by the Exchange may only be made by a government
agency that maintains personnel standards on a merit basis.
In paragraph (b) of the interim final rule, we provided that the
Exchange may conduct an assessment of eligibility for Medicaid and CHIP
rather than an eligibility determination for Medicaid and CHIP,
provided that the Exchange make such an assessment based on the
applicable Medicaid and CHIP MAGI-based income standards and
citizenship and immigration status, using verification rules and
procedures consistent with Medicaid and CHIP regulations, without
regard to how such standards are implemented by the state Medicaid and
CHIP agencies.
In paragraph (b)(2) of the interim final rule, we provided that
notices and other activities that must be conducted in connection with
an eligibility determination for Medicaid or CHIP would be conducted by
the Exchange consistent with the standards identified in this subpart
or by the applicable state Medicaid or state CHIP agency consistent
with applicable law.
In paragraph (b)(3) of the interim final rule, we provided that if
the Exchange assesses an applicant potentially eligible for Medicaid or
CHIP, the Exchange would transmit such the applicant's information to
the State Medicaid or CHIP agency for a formal determination of
eligibility for such insurance affordability program. We explained in
the preamble to the interim final rule that the Exchange would consider
the applicant ineligible for Medicaid or CHIP for purposes of
eligibility for advance payments of the premium tax credit and cost-
sharing reductions until the state Medicaid or CHIP agency notified the
Exchange that the applicant was eligible for Medicaid or CHIP.
In paragraph (b)(4) of the interim final rule, we proposed that if
the Exchange assesses an applicant not potentially eligible for
Medicaid or CHIP based on the applicable Medicaid and CHIP MAGI-based
income standards, the Exchange must consider such an applicant as
ineligible for Medicaid or CHIP for purposes of determining eligibility
for advance payments of the premium tax credit and cost-sharing
reductions, and notify the applicant and provide him or her with the
opportunity to withdraw his or her application for Medicaid and CHIP or
request a full determination of eligibility for Medicaid and CHIP from
the applicable state agencies. To the extent that an applicant
withdraws his or her application for Medicaid and CHIP, the applicant
would not receive a formal approval or denial for Medicaid and CHIP.
We proposed a revision to the interim final rule in paragraph
(b)(4)(i)(A) to specify that, if an applicant who is not assessed as
potentially eligible for Medicaid or CHIP by the Exchange withdraws his
or her application for Medicaid or CHIP, and then appeals his or her
eligibility determination for advance payments of the premium tax
credit or cost-sharing reductions and is found potentially eligible for
Medicaid or CHIP, the Medicaid or CHIP application is not considered
withdrawn. The purpose of this revision is to reinstate the Medicaid
and CHIP application date, which is used in determining the effective
date of coverage under Medicaid and CHIP.
We provided in paragraph (b)(4)(i)(B) that the Exchange must notify
and provide an applicant who is assessed as not potentially eligible
for Medicaid and CHIP with the opportunity to request a full
determination of eligibility for Medicaid and CHIP by the applicable
state Medicaid and CHIP agencies. For an applicant who requests a full
Medicaid and CHIP determination, we provided that the Exchange must
transmit all information provided as part of the application, update,
or renewal that initiated the assessment, and any information obtained
or verified by the Exchange to the state Medicaid and CHIP agency. We
provided that the Exchange must consider such an applicant as
ineligible for Medicaid or CHIP for purposes of determining eligibility
for advance payments of the premium tax credit and cost-sharing
reductions until the state Medicaid or CHIP agency notifies the
Exchange that the applicant has been determined eligible for Medicaid
or CHIP.
We provided in paragraph (b)(5) that, under an assessment model
discussed above, the Exchange must adhere to the eligibility
determination for Medicaid or CHIP made by the Medicaid or CHIP agency.
We provided in paragraph (b)(6) that the Exchange and the applicable
state Medicaid and CHIP agencies must enter into an agreement
specifying their respective responsibilities in connection with
eligibility determinations for Medicaid and CHIP, which requirement
complements the standards in Sec. 435.1200(d). In accordance with
these standards, when the Exchange performs an assessment and
transmitted it to the state Medicaid or CHIP agency, and the Exchange
is providing advance payments of premium tax credits pending an
eligibility determination for Medicaid and CHIP, the Exchange will
receive a notification of the final determination of eligibility for
Medicaid and CHIP made by the receiving agency. This approach helps
avoid duplicative requests for information from applicants and
verification of information.
We proposed a revision to the interim final rule in paragraph
(b)(5) to specify that the Exchange also will adhere to the appeals
decision for Medicaid or CHIP eligibility determinations made by the
state Medicaid or CHIP agency or appeals entity for such agency.
In paragraph (d) of the interim final rule, we provided the
standards to which the Exchange must adhere when assessments of
eligibility for Medicaid and CHIP based on MAGI and eligibility
determinations for advance payments of the premium tax credit and cost-
sharing reductions are made in accordance with paragraphs (b) and (c);
such standards include that all eligibility processes are streamlined
and coordinated across applicable agencies, that such arrangement does
not increase administrative costs and burden on applicants, enrollees,
beneficiaries, or application filers, or increase delay, and that
applicable requirements under part 155 and section 6103 of the Code are
met.
Comment: Several commenters raised concerns regarding Sec.
155.302(a) as promulgated in the interim final rule, as they believed
it could permit non-public agencies to conduct eligibility
determinations for Medicaid and CHIP, which they worried would have a
negative impact on consumer assistance, timeliness, accuracy, and the
potential for conflicts of interest. Some commenters wanted to ensure
that agreements between state Medicaid agencies and private entities
related to the eligibility determination process would be relayed to
HHS for appropriate review. Several commenters recommended clear
language to specify that a private Exchange is not permitted to make
final determinations regarding an applicant's eligibility for Medicaid
and CHIP. One commenter wanted HHS to strengthen the conflict of
interest language and specify that the Exchange may not contract out
eligibility determinations for advance payments of the premium tax
credit and cost-sharing reductions due to such determinations being
inherently governmental.
Response: We appreciate these comments regarding the interim final
rule, as well as comments received

[[Page 42245]]

regarding the proposed revisions to paragraph (a)(1) of the interim
final rule that would specify that any contracting arrangement for
eligibility determinations for Medicaid and CHIP is subject to the
standards in 42 CFR 431.10(c)(2). In response to these comments, we are
finalizing Sec. 155.302(a) with the proposed revision to paragraph
(a)(1), with a minor clarification to specify that the reference to 42
CFR 431.10(c)(2) is specific to contracting arrangements for
eligibility determinations for Medicaid and CHIP. Specifically, this
means that an Exchange contractor may make eligibility determinations
for Medicaid and CHIP if it is a government agency or public authority
that maintains personnel standards on a merit basis. We note that 42
CFR 431.10(d) specifies that agreements regarding the delegation of
eligibility determinations by state Medicaid agencies must be available
to the Secretary, upon request. Exchanges are permitted to contract
eligibility determinations for advance payments of the premium tax
credit and cost-sharing reductions in accordance with Sec. 155.110(a).
Comment: Many commenters expressed concerns about the potential
bifurcation of the eligibility process under Sec. 155.302(b) for
Medicaid, CHIP, and advance payments of the premium tax credit and
cost-sharing reductions in terms of its impact on various stakeholders.
Commenters urged that HHS maintain the ``no wrong door'' approach
envisioned by the Affordable Care Act to ensure that an individual is
appropriately screened for all relevant insurance affordability
programs. As such, some commenters requested that by 2016, HHS revisit
the decision to allow states to implement eligibility systems in the
manner as described in the interim final rule, while also evaluating
whether more Exchanges move from making assessments to determinations
during the intervening time period. Commenters recommended that, if HHS
retains this provision, HHS should specify that states must demonstrate
they have the capacity to manage electronic accounts and applicant
information in so as not to increase the burden on individuals and
families by requesting duplicate information or increase the
administrative costs for state Medicaid and CHIP agencies related to
file transfers or unnecessarily duplicative verification processes.
Some commenters wanted HHS to require the Exchange to notify the
transferring program that it had received the electronic account and
report its final eligibility determination, to protect applicants.
Furthermore, commenters urged HHS to establish a process for monitoring
and enforcing the standards, as well as educating the public, regarding
the division of eligibility responsibilities between the Exchange and
relevant Medicaid and CHIP agencies. Commenters stated that if such
monitoring uncovers noncompliance with performance standards or other
requirements, HHS should require the Exchanges and state Medicaid and
CHIP agencies to submit corrective action plans.
Response: We appreciate the suggestions from commenters, and note
that many of these recommendations are already included in the interim
final rule. We intend to monitor the efficiency of how states implement
assessment or determination models to determine whether to propose
revisions in future years. We believe that the existing language in
Sec. 155.302(b) is augmented by Sec. 155.345(g) and 42 CFR 435.1200,
which specify that the Exchange and the state Medicaid and CHIP
agencies must have the capacity to manage electronic accounts, and also
that the Exchange will notify the transferring Medicaid or CHIP agency
regarding the receipt of an electronic account as well as of its final
eligibility determination. Accordingly, we do not modify this provision
further to address these comments. Although we do not establish a
formal process for monitoring and taking enforcement action for
noncompliance with these standards in the regulation text, HHS will
continue to evaluate the need for such processes during the
implementation of these regulations.
Comment: Several commenters suggested that states should adopt
procedures that would allow Exchanges to assess eligibility for
Medicaid based on factors other than MAGI, and potentially also
allowing the Exchange to assess eligibility for other programs,
including the Supplemental Nutritional Assistance Program. Some
commenters urged HHS to require Exchanges to develop appropriate
screening standards to identify vulnerable populations that might be
eligible for certain programs on a basis other than MAGI.
Response: This comment is outside the scope of Sec. 155.302(b) of
the interim final rule, as this provision only concerns the use of MAGI
determinations, while Sec. 155.345(b) concerns the duties of the
Exchange for Medicaid eligibility based on factors other than MAGI. We
note that Exchanges are not precluded from entering into agreements
with Medicaid and CHIP agencies to make eligibility determinations for
Medicaid based on factors other than MAGI.
Comment: Some commenters requested that HHS provide greater
specificity throughout Sec. 155.302(b) to indicate that contracting
agreements, verifications rules and standards, notices, and other
activities discussed must adhere to the specific standards of
Sec. Sec. 155.302(d) and 155.345(g), and 42 CFR part 431, subpart E.
Response: As noted earlier, Sec. 155.302(b) only applies in place
of the standards elsewhere in subpart D that specify that the Exchange
will make eligibility determinations for Medicaid and CHIP based on
MAGI, rather than assessments; it does not conflict with standards
provided elsewhere in subpart D that address other components of the
eligibility process that are unaffected by whether the Exchange is
making assessments or determinations of eligibility for Medicaid and
CHIP. As such, Exchanges are still guided by other provisions in
subpart D, such as Sec. 155.345(g). Provisions in 42 CFR part 431
concern standards for Medicaid agencies, which continue to apply to
Medicaid agencies in accordance with that part notwithstanding the role
of the Exchange for Medicaid eligibility. Finally, Sec. 155.302(a)(2)
already specifically states that use of the option in Sec. 155.302(b)
is subject to Sec. 155.302(d), so we do not believe that it is
necessary to add further references to Sec. 155.302(d).
Comment: Some commenters supported the increased level of
flexibility for the Exchange to make assessments of eligibility for
Medicaid and CHIP based on MAGI, rather than determinations. However,
these commenters expressed concerns about relying on applicants who are
not assessed as potentially eligible for Medicaid or CHIP based on MAGI
to self-identify as potentially eligible based on non-MAGI standards or
proactively request a full determination from the state Medicaid and
CHIP agencies, as opposed to placing greater burden on the Exchange to
take additional steps to proactively identify applicants who might be
Medicaid eligible based on non-MAGI standards. One commenter also asked
HHS to clarify that in cases where an Exchange conducts an assessment
of Medicaid eligibility; the assessment must include an assessment of
Medicaid eligibility on bases other than MAGI. These commenters
suggested that HHS encourage states to utilize a process whereby
individuals who enroll in a QHP, but are subsequently determined
eligible for Medicaid, are able to transition into the same carrier's
Medicaid product if the

[[Page 42246]]

QHP also operates a Medicaid health plan.
Response: We appreciate the concerns regarding how to create a
streamlined process that is minimally burdensome on individuals and
families, and results in accurate eligibility determinations. Under
Sec. 155.345(b) and (c), the Exchange will evaluate applications for
applicants who are not eligible for Medicaid based on MAGI for possible
Medicaid eligibility based on factors other than MAGI, and must provide
an opportunity for applicants and enrollees to request a full
determination of Medicaid eligibility based on factors other than MAGI.
If the Exchange evaluates an applicant as potentially eligible for
Medicaid based on factors other than MAGI, or the applicant or enrollee
requests a full determination of Medicaid eligibility, Sec. 155.345(d)
specifies that the Exchange will transmit the applicant's information
to the state Medicaid agency for a full determination. The Exchange has
the same responsibilities regarding eligibility for Medicaid based on
factors other than MAGI under the assessment and the determination
models, which we believe is appropriate because the single, streamlined
application that will be used by the Exchange does not request all the
information necessary to conduct a full determination of Medicaid
eligibility based on factors other than MAGI. Rather, it includes an
opportunity for an application filer to indicate that an applicant has
limitations in daily activities or lives in a medical facility or
nursing home, which are factors that are considered in determining
eligibility for Medicaid based on factors other than MAGI. If answered
affirmatively, the Exchange will trigger a referral to the applicable
state Medicaid agency such that the state Medicaid agency can determine
the applicant's eligibility for Medicaid, including based on factors
other than MAGI. Further, we note that the assessment of eligibility
for Medicaid based on MAGI is designed to be a robust evaluation, and
we expect that the number of applicants who will receive an assessment
that is inconsistent with the final determination will be limited. We
note that while comments related to HHS encouraging a process to help
individuals transition between QHPs and Medicaid products of the same
carrier is outside the scope of this regulation, Exchanges maintain the
flexibility to pursue such an option.
Comment: Some commenters noted the need for high levels of
coordination between the Exchange and state Medicaid and CHIP agencies.
A few commenters also wanted HHS to provide guidance with a view toward
minimizing the situations in which an individual will enroll in a QHP
through the Exchange pending the outcome of a Medicaid or CHIP
eligibility determination and then be subsequently determined eligible
for Medicaid or CHIP.
Response: We agree that a high degree of coordination is needed to
manage an assessment model, and believe that the language in Sec.
155.302(b) and (d), as well as Sec. 155.345, prescribes an appropriate
set of standards. We recognize the challenges that may occur related to
individuals who enroll in a QHP pending the outcome of a Medicaid or
CHIP eligibility determination, but we believe that these are
outweighed by the benefits associated with providing eligible
individuals with health coverage pending the completion of an
eligibility determination for Medicaid or CHIP, and we note that
enrolling in a QHP through the Exchange during such a period is the
individual's choice. With that, we expect that as states implement
their Exchanges and as eligibility systems for the Exchange, Medicaid,
and CHIP mature, the need for multiple entities to take part in
processing an application will lessen, and the time needed to complete
the entire eligibility process will also decrease, which will reduce
the need for interim coverage.
Comment: One commenter worried that the remainder of subpart D
concerning the eligibility process was not updated to reflect Sec.
155.302(b).
Response: We note that Sec. 155.302(b) provides that the Exchange
may conduct an assessment of MAGI-based eligibility for Medicaid and
CHIP, rather than a determination of eligibility for Medicaid and CHIP,
in accordance with the specified standards, ``[n]otwithstanding the
requirements of this subpart[.]'' In view of this language, we did not
update other provisions in subpart D to reflect Sec. 155.302(b). We
note that Sec. 155.302(b) does not supersede other provisions, such as
those in Sec. 155.345, that set additional standards for Exchanges in
coordinating with Medicaid and CHIP agencies.
Comment: Some commenters worried that the Exchange assessment
provision would allow the Exchange the assess eligibility without
applying Medicaid rules and procedures. Commenters recommended that,
under an assessment model, the Exchange should provide presumptive
eligibility for Medicaid, which they believed was particularly
important for children and pregnant women, while the application is
transferred to the Medicaid and CHIP agencies and a determination is
made. One commenter suggested HHS develop a universal model for
tracking children as they move from one coverage type to another, which
Exchanges should be required to implement.
Response: Section 155.302(b)(1) specifies that an assessment will
be made based on, ``the applicable Medicaid and CHIP MAGI-based income
standards and citizenship and immigration status, using verification
rules consistent with 42 CFR parts 435 and 457, without regard to how
such standards are implemented by the State Medicaid and CHIP
agencies.'' We maintain this language in this final rule, which ensures
that the Exchange will use standard Medicaid rules and procedures in
making an eligibility assessment. We appreciate the commenter's
recommendations related to presumptive eligibility, but note that HHS'
approach in establishing an assessment model was premised on having the
Medicaid or CHIP agency make all eligibility determinations that result
in the provision of benefits under Medicaid or CHIP. Accordingly, we do
not specify that the Exchange will make presumptive determinations
under an assessment model. HHS will continue to work with Exchanges and
Medicaid and CHIP agencies to ensure that vulnerable populations, such
as children and pregnant women, receive the correct eligibility
determinations for insurance affordability programs in a timely
fashion.
Comment: Some commenters recommended that the interim final rule be
amended to eliminate or strictly limit differences between the
procedures used by Exchanges in assessing eligibility for Medicaid and
CHIP, and those used by state Medicaid and CHIP agencies in determining
eligibility, with HHS permitting Federally-facilitated Exchanges and
State Partnership Exchanges to have slightly more flexibility for
differences than State-based Exchanges.
Response: We agree that the differences between the procedures used
by Exchanges and their partner Medicaid and CHIP agencies in conducting
eligibility determinations should be limited, and believe that Sec.
155.302(b)(1) already accomplishes this to a significant extent. We
reiterate that an assessment under Sec. 155.302(b) will be robust and
will involve the execution of detailed MAGI-based eligibility rules and
verification procedures. Further, we believe that there is little
reason for the use of an assessment model in a state that operates a
state-based Exchange, given the availability of shared information
technology services and the status of the

[[Page 42247]]

state-based Exchange as a state, rather than a federal, entity. We
intend to continue to work closely with states to ensure that systems
and processes are appropriately integrated, with the goal of reducing
administrative costs, burden on consumers, and the time needed to
complete the eligibility process.
Comment: Several commenters recommended that HHS set a specific
timeliness standard regarding the electronic transmission of the
application along with all relevant information collected from either
the application or available electronic data sources from the Exchange
to the state Medicaid or CHIP agency to ensure that eligibility
determinations are provided without undue delay. Some commenters
requested that HHS specify that an Exchange must complete an
eligibility determination in no more than 30 days (with up to 60 days
for evaluations based on factors other than MAGI under Sec.
155.345(b)) and complete the transfer of an individual's electronic
file, where required, within one business day; some commenters also
urged greater alignment between Exchange and Medicaid timeliness and
other performance standards.
Response: In Sec. 155.302(b)(3) and (b)(4)(ii)(A), we specify that
information will be transferred promptly, and without undue delay.
Further, in Sec. 155.310(e)(1), we specify that the Exchange will make
an eligibility determination promptly, and without undue delay. We
believe that this is an appropriate approach to initial timeliness
standards, given the fact that this is an entirely new program, and we
intend to work closely with states to monitor and improve the
timeliness of all aspects of the eligibility and enrollment process.
Further, we note that we agree with the commenter's suggestion
regarding the alignment of performance standards, and intend to issue
future guidance on this topic.
Comment: Several commenters suggested that HHS modify Sec.
155.302(b)(6) related to the standards for agreements entered into
between the Exchange and state Medicaid and CHIP agencies to provide
greater specificity regarding eligibility determinations, transfer
procedures, notice and appeals processes, and consumer assistance.
Additionally, these commenters asked that the agreements be made
readily available to the public in addition to HHS, while also
providing a period for public review and comments on the agreements
prior to their approval by HHS.
Response: We finalize Sec. 155.302(b)(6) from the interim final
rule with a clarification that, like the agreements specified in Sec.
155.345(a), the agreement under Sec. 155.302(b)(6) will be made
available to HHS upon request. To the extent that the Secretary
requests and obtains a copy of an agreement under Sec. 155.302(b)(6),
the public can request the agreement through the Freedom of Information
Act, 5 U.S.C. 552. The public may also obtain copies of these
agreements under applicable state freedom of information laws. We
believe that there are ample opportunities for public input for
Exchange operations, particularly given that the standards that will
govern the content of these agreements are specified in this
regulation. We also note again that Sec. 155.302(b) does not supersede
other provisions, such as those in Sec. 155.345, that set additional
standards for Exchanges in coordinating with Medicaid and CHIP
agencies.
Comment: One commenter wanted to ensure that HHS would review and
approve all state Medicaid verification plans.
Response: This comment is outside of the scope of this regulation.
We note, however, that as described in 42 CFR 435.945(j), state
Medicaid verification plans must be available to the Secretary of HHS
upon request, thereby enabling appropriate oversight of verification
standards.
Comment: One commenter sought clarification as to whether an
Exchange could choose to perform neither an assessment nor a
determination for Medicaid and CHIP.
Response: We clarify that the Exchange must make either
determinations or assessments for Medicaid and CHIP based on MAGI for
applications that include a request for an eligibility determination
for insurance affordability programs. However, we note that the
Exchange is permitted to contract with an eligible contracting entity,
including the state Medicaid agency, to conduct eligibility
determinations for Medicaid and CHIP, consistent with Sec. 155.302(a).
Comment: Several commenters recommended that an applicant who
appears to be eligible for Medicaid based on factors other than MAGI be
flagged by the Exchange early in the process, and if the Exchange does
not assess such an applicant as potentially eligible for Medicaid or
CHIP based on MAGI, the applicant should not have to request a full
eligibility determination from the state agency under Sec.
155.302(b)(4)(i)(B) to receive an eligibility determination for
Medicaid based on factors other than MAGI.
Response: As noted above, Sec. 155.302(b) does not supersede Sec.
155.345(b), which specifies that the Exchange will assess information
provided on an application by an applicant who is not eligible for
Medicaid based on MAGI to determine whether he or she is potentially
eligible for Medicaid based on factors other than MAGI. We clarify that
this provision applies in an Exchange that is implementing the option
under Sec. 155.302(b), such that if the Exchange does not assess an
applicant as potentially eligible for Medicaid based on MAGI, it will
then examine the application to determine whether to transfer the
applicant to the state Medicaid agency for consideration of Medicaid
eligibility based on other factors.
Comment: Commenters recommended that the provision at Sec.
155.302(b)(4)(i)(A), allowing an individual the opportunity to withdraw
his or her Medicaid and CHIP application, be eliminated or modified to
allow only individuals above a certain income threshold to withdraw
their Medicaid and CHIP applications. Others commenters were concerned
that language notifying an individual of his or her opportunity to
withdraw would be confusing and lead to individuals being dissuaded
from pursuing a Medicaid or CHIP eligibility determination.
Response: When an applicant requests an eligibility determination
for insurance affordability programs, the single, streamlined
application is an application for Medicaid and CHIP (as well as for
eligibility for enrollment in a QHP through the Exchange, and related
insurance affordability programs), so it needs to end in either a final
determination of eligibility for Medicaid or CHIP (approval or denial),
or a withdrawal of the application as it relates to Medicaid and CHIP.
When a state Medicaid or CHIP agency elects to have the Exchange make
assessments of Medicaid or CHIP eligibility, rather than
determinations, the Exchange is unable to provide a final determination
of Medicaid or CHIP eligibility, including a denial of Medicaid or CHIP
eligibility. Accordingly, withdrawal allows the assessment model to
function such that an applicant does not require a formal, final denial
of Medicaid and CHIP from the state Medicaid or CHIP agency to gain
eligibility for advance payments of the premium tax credit and cost-
sharing reductions, if otherwise eligible. This approach provides
significant efficiencies for consumers by not requiring multiple
eligibility determinations, as well as for Exchanges and Medicaid and
CHIP agencies. Given that the proposed approach preserves the
application date for purposes of

[[Page 42248]]

Medicaid and CHIP in the event of an appeal, we note that the only
implication of withdrawing an application in this context is that the
applicant can no longer request a determination from the state Medicaid
or CHIP agency based on the withdrawn application, and would instead
need to submit another application to be considered for those programs
(other than on appeal).
We acknowledge commenters' concerns regarding the potential for
confusion when an applicant is given the opportunity to withdraw his or
her Medicaid and CHIP application. To reduce the potential for consumer
confusion and administrative burden on the consumer and the Exchange
associated with this requirement, we offer the following option in
implementing this provision. Upon notifying an applicant that the
Exchange has assessed him or her as not potentially eligible for
Medicaid or CHIP, the Exchange will provide an opportunity for the
applicant to request a determination of Medicaid or CHIP eligibility
from the state Medicaid or CHIP agency. Rather than expressly asking
the applicant if he or she wants to withdraw the application for
purposes of Medicaid or CHIP eligibility (instead of requesting a
determination from the state agencies), the Exchange may consider the
application withdrawn for purposes of Medicaid and CHIP eligibility if
the applicant does not affirmatively request a determination from the
state Medicaid or CHIP agency within a time period specified in the
notice to the applicant, provided that the notice that communicates the
opportunity to request a determination from the state Medicaid or CHIP
agency and the time limit for doing so also specifies that the Exchange
will take this approach to withdrawal. This will allow an appropriate
disposition for each application, as it relates to Medicaid and CHIP,
and will help alleviate any confusion associated with the opportunity
to expressly withdraw an application, without creating any adverse
impacts for consumers.
Comment: A few commenters requested language that explicitly
preserves the date of application when an applicant withdraws his or
her Medicaid or CHIP application.
Response: Provisions related to preserving the date of the Medicaid
or CHIP application are contained in this final rule at 42 CFR
435.907(h).
Comment: Commenters supported the inclusion of language that
requires the application to not be considered withdrawn if, upon
appeal, the applicant is found potentially eligible for Medicaid or
CHIP. A few commenters requested that any subsequent review finding
potential eligibility for Medicaid or CHIP be sufficient to nullify the
withdrawal.
Response: We are finalizing proposed language requiring the
application to not be considered withdrawn if, upon appeal, the
applicant is found potentially eligible for Medicaid or CHIP. The
additional suggestions to amend this provision would expand the scope
of the provision beyond its intended scope. Further, it would be
impossible to administer the commenters' suggestion to nullify a
withdrawal when any future review finds potential eligibility for
Medicaid or CHIP eligibility, beyond the parameters established in this
rule, since subsequent eligibility determinations and redeterminations
will not necessarily be connected to the withdrawn application.
Comment: Commenters supported the additional proposed language in
Sec. 155.302(b)(5) requiring the Exchange to adhere to State Medicaid
or CHIP agency appeals decisions.
Response: We are finalizing the proposed language with a
modification such that the Exchange appeals entity, in addition to the
Exchange, will adhere to the eligibility determination or appeals
decision for Medicaid or CHIP made by the Medicaid or CHIP agency, or
the appeals entity for such agency.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.302(a) with
one clarification that any contracting arrangement for eligibility
determinations for Medicaid and CHIP is subject to the standards in
Sec. 431.10(c)(2). We are finalizing the provision proposed in Sec.
155.302(b)(5) with a slight technical modification to add ``Exchange
appeals entity.'' We are finalizing Sec. 155.302(b)(6) of the interim
final rule issued at 77 FR 18310, 18451-52 with a modification to
specify that the agreement under Sec. 155.302(b)(6) must be made
available to HHS upon request. We are finalizing the provisions
proposed in paragraph (d) of the proposed rule without modification. We
are otherwise finalizing the other provisions of the interim final rule
with the exception of Sec. 155.302(c), which we are not finalizing at
this time. We are leaving the text of Sec. 155.302(c) as an interim
final rule as published at 77 FR 18310, 18451-52.
8. Eligibility Standards (Sec. 155.305)
In Sec. 155.305, we proposed to add paragraph (a)(3)(v) regarding
residency standards for eligibility for enrollment in a QHP when an
individual attests to being temporarily absent from the service area of
the Exchange but intends to return to the service area of the Exchange
and otherwise meets the residency standards, unless another Exchange
verifies that the individual meets the residency standard in that
Exchange. We also proposed technical corrections within paragraph (f)
to replace the references to section 36B of the Code to the application
Treasury regulations.
We proposed to amend paragraph (f)(3) to clarify the availability
of advance payments of the premium tax credit and cost-sharing
reductions to applicants enrolled in a QHP, that is not a catastrophic
plan, through the Exchange. We did not receive specific comments on
this amendment, and we are thus finalizing the provision as proposed.
We also proposed to add paragraph (h) to codify the eligibility
standards for enrollment through the Exchange in a QHP that is a
catastrophic plan, which are based on age or having in effect a
certificate of exemption from the shared responsibility payment under
section 5000A of the Code in specific categories. We proposed that all
Exchanges must conduct eligibility determinations for a QHP that is a
catastrophic plan within the Exchange.
Comment: Commenters generally offered support for the provision at
Sec. 155.305(a)(3)(v) specifying that the Exchange not deny or
terminate an individual's eligibility for enrollment in a QHP through
the Exchange if he or she meets the residency standards described in
paragraph (a)(3) but for a temporary absence from the service area of
the Exchange. A few commenters recommended deleting the phrase that
allowed the Exchange to deny or terminate eligibility if another
Exchange verifies that the individual meets the residency standard of
such Exchange; others suggested rephrasing the provision to allow an
individual to maintain residency in the Exchange service area unless he
or she is enrolled in another Exchange. Commenters recommending
revisions disagreed with how this language would limit an applicant's
ability to establish residency, under the rules described in Sec.
155.305(a)(3), in more than one Exchange.
Response: We are finalizing the provision without the proposed
clause ``unless another Exchange verifies that the individual meets the
residency standard of such Exchange.'' As commenters pointed out, under
some circumstances, certain individuals may

[[Page 42249]]

establish residency for purposes of Exchange enrollment in multiple
Exchange service areas simultaneously (for example, under Sec.
155.305(a)(3)(iv)(B), if a parent expects to claim a child who lives in
another state on the parent's tax return, the child may enroll in a QHP
through the Exchange either in the child's state of residence, or the
parent's state of residence). Accordingly, while generally, applicants
will establish residency in the Exchange service area in which they
intend to reside, since there are exceptions to this general principle,
this clause limiting residency to one Exchange service area is
unnecessary.
Comment: In response to the provision proposed at Sec.
155.305(a)(3)(v), some commenters expressed concern about operational
challenges specific to providing and coordinating coverage while
individuals are temporarily residing outside the Exchange service area.
A few commenters asked that we further define the term ``temporary'' to
ensure that the term is used consistently across Exchanges, and to help
reduce consumer confusion and administrative inefficiencies.
Response: We acknowledge that coordinating care for applicants
while they are temporarily absent from the service area of the Exchange
through which they enroll in a QHP may present challenges for QHP
issuers. However, we believe this challenge is outweighed by the
importance of maintaining continuity of coverage while an individual is
temporarily absent from a particular Exchange service area.
Additionally, in paragraph (a)(3)(v), we specify that ``temporarily
absent'' means the applicant must intend to return to the Exchange
service area when the purpose of the absence has been accomplished, so
we do not believe that further definition is required in regulation. To
ensure that applicants understand the implications of applying for
coverage through a particular Exchange, we encourage Exchanges to
notify applicants that they may want to apply for coverage through the
Exchange where they meet the residency requirements and wish to most
frequently access benefits.
Furthermore, this provision should not be construed to impose any
additional requirements on QHP issuers related to maintaining networks
outside the Exchange service area or coordinating care for applicants
temporarily absent from the Exchange service area.
Comment: Commenters were divided regarding the Exchange's role in
determining eligibility for catastrophic plans inside and outside the
Exchange, as some expressed support for what they interpreted as HHS
limiting enrollment for catastrophic coverage to enrollment through the
Exchange in QHPs that are catastrophic plans and urged flexibility for
an Exchange to decide not to conduct eligibility determinations for
catastrophic plans, while other commenters requested that the Exchange
conduct eligibility determinations for QHPs that are catastrophic plans
for enrollment both through and not through the Exchange. Commenters
also urged HHS to clarify that an applicant still must be determined
eligible for a QHP to enroll in a catastrophic plan through the
Exchange. Commenters wanted to ensure that the Exchange would provide
clear information to applicants considering purchasing different QHPs,
including by describing the significance of enrolling in a catastrophic
plan for applicants who are also determined eligible for advance
payments of the premium tax credit.
Response: We note that paragraph (h) only concerns eligibility for
enrollment through the Exchange in a QHP that is a catastrophic plan.
The Exchange will not be conducting eligibility determinations for
enrollment outside the Exchange, including in a catastrophic plan. In
finalizing this provision, we are modifying the provision from its
proposed form to clarify that an individual must be determined eligible
for enrollment in a QHP through the Exchange in accordance with Sec.
155.305(a) in addition to meeting the specific eligibility standards
for enrollment in a catastrophic QHP through the Exchange. We believe
that maintaining the provision specifying that the Exchange will
determine eligibility for a QHP that is a catastrophic plan through the
Exchange preserves flexibility for young adults and people for whom
coverage would otherwise be unaffordable to have access to health
coverage, and thus confirm that Exchanges will conduct determinations
of eligibility for enrollment in a QHP that is a catastrophic plan
through the Exchange. We expect that Exchanges will fully inform
qualified individuals regarding the implications of enrolling in a QHP
that is a catastrophic plan through the Exchange as they consider
various health coverage options, particularly as it affects their
eligibility for insurance affordability programs.
Comment: Some commenters wanted us to clarify that Exchanges would
grant certificates of exemption to all applicants eligible for
enrollment in a catastrophic plan, which applicants could use to enroll
in catastrophic plans outside the Exchange (at least temporarily), and
suggested that issuers of catastrophic plans outside the Exchange
should be permitted to rely solely on an attestation by the applicant
that he or she is eligible to enroll in a catastrophic plan.
Response: This provision does not concern catastrophic plans
offered outside of the Exchange. As discussed in the Market Reforms
final rule at 78 FR 13423, the statutory provisions related to
eligibility for catastrophic plans apply to such coverage offered both
inside and outside an Exchange. We maintain that approach and clarify
that nothing in this proposal modifies the Market Reforms final rule
related to the eligibility standards for a catastrophic plan.
Similarly, the eligibility standards for catastrophic plans generally
are specified at Sec. 156.155(a)(5), which provides that a
catastrophic plan can only cover an individual who has either not
attained the age of 30 prior to the first day of the plan or policy
year, or has received a certificate of exemption in specified
categories. While we specify that the Exchange will only conduct
determinations of eligibility for enrollment through the Exchange in a
QHP that is a catastrophic plan, in HHS' Exemptions and Miscellaneous
Minimum Essential Coverage proposed rule, at 78 FR 7368, we propose
that the Exchange will determine eligibility for exemptions from the
shared responsibility payment, and will provide a notice and an
exemption certificate number to any individual determined eligible for
such an exemption. If that provision is finalized as proposed, an
issuer of a catastrophic plan offered outside the Exchange could
request a copy of this notice from an applicant to validate his or her
eligibility for enrollment in the catastrophic plan.
Comment: Some commenters requested that the Exchange's eligibility
standards for enrollment through the Exchange in a QHP that is a
catastrophic plan align with preamble language in the Market Reforms
proposed rule at 77 FR 70601 such that an enrollee who turns 30 in the
middle of a coverage year would remain enrolled in the catastrophic
plan for the duration of the plan year. One commenter also sought
clarification that for coverage obtained through the Exchange, the
first day of the plan year will always be the first of the year.
Response: The eligibility standards related to age described in
this provision follow the approach discussed within the Market Reforms
proposed

[[Page 42250]]

rule at 77 FR 70601. As such, we clarify that an enrollee turning 30 in
the middle of a coverage year could remain enrolled in a QHP that is a
catastrophic plan through the Exchange for that particular coverage
year as long as he or she was not 30 prior to beginning of the plan
year. We note that Sec. 147.104(b)(1)(ii) clarifies that in the
individual market, the coverage effective dates must align with Sec.
155.410 regarding initial open enrollment, and as such, for coverage
obtained in the individual market through the Exchange, the first day
of the plan year will always be the first day of the calendar year.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.305 of the
proposed rule with two slight modifications: to remove the clause
``unless another Exchange verifies that the individual meets the
residency standard of such Exchange'' in paragraph (a)(3)(v), and to
revise paragraph (h)(1) to clarify an applicant must be eligible for
enrollment in a QHP through the Exchange to be determined eligible for
enrollment through the Exchange in a QHP that is a catastrophic plan.
9. Eligibility Process (Sec. 155.310)
In Sec. 155.310, we proposed to add paragraph (i) regarding a
certification program under the Secretary's program for determining
eligibility for advance payments of the premium tax credit and cost-
sharing reductions in accordance with section 1411(a) of the Affordable
Care Act. We noted that this certification program would be distinct
from the notice to employers required by section 1411(e)(4)(B)(iii) of
the Affordable Care Act and paragraph (h) of Sec. 155.310. We proposed
that the certification to the employer would consist of methods adopted
by the Secretary of Treasury as part of the determination of potential
employer liability under section 4980H of the Code. We clarified that
the certification program would address not only individuals on whose
behalf advance payments of the premium tax credit and cost-sharing
reductions are provided, but also individuals claiming the premium tax
credit only on their tax returns. We solicited comments on this
proposal.
We proposed to amend previous language from paragraphs (i) and
(i)(1), and combine those paragraphs in new paragraph (j), to align
with proposed revisions in Sec. 155.335, which specified that the
Exchange will redetermine eligibility on an annual basis for all
qualified individuals, not only enrollees. We proposed to remove the
previous paragraph (i)(2), which addressed situations in which a
qualified individual did not select a plan before the date on which his
or her eligibility would have been redetermined as a part of the annual
redetermination process. Due to the proposed change to Sec.
155.335(a), this paragraph would no longer be necessary. We received
the following comments concerning the proposed provisions:
Comment: One commenter expressed support for the proposal to
implement a certification process consisting of methods adopted by the
Secretary of Treasury as part of the determination of potential
employer liability under section 4980H of the Code, as described in
proposed Sec. 155.310(i). In addition, several commenters expressed
concern over the disclosure of applicant information to the employer
for use in the certification process. Commenters were concerned that
disclosing names in this context could have a chilling effect on
employees who wish to seek Exchange coverage, making it less likely
that individuals would enroll.
Response: For purposes of the certification program proposed and
finalized in Sec. 155.310(i), we believe that only the minimum
personally identifiable information necessary should be released to an
employer. Additional information regarding the certification program is
found in the regulations associated with Sec. 4980H of the Code.
Comment: Commenters recommended removing the provision specifying
that the Exchange will have an applicant attest to the accuracy of the
information on file for him or her when he or she was previously
determined eligible for enrollment in a QHP through the Exchange, did
not select a QHP during his or her enrollment period, or was ineligible
for an enrollment period, and then seeks a new enrollment period prior
to his or her annual redetermination. Commenters characterized this as
an undue burden on qualified individuals, since enrollees are not
required to make the same attestation about their eligibility criteria
remaining constant.
Response: This provision was largely carried over from the Exchange
final rule, with modifications to address changes proposed in Sec.
155.335. It is important for the Exchanges to ensure all eligibility
criteria are satisfied with accurate information, before determining
eligibility for benefits, some of which the enrollee could be liable to
repay if eligibility information is not accurate at the time of
enrollment. Moreover, enrollees are required to report changes that may
affect their eligibility based on the standards in Sec. 155.305
throughout the year, and thus no additional burden is being placed on
qualified individuals. Lastly, one alternative to this proposal would
be to require qualified individuals who do not enroll in coverage when
initially determined eligible to file a new application, which would be
more burdensome than the approach in Sec. 155.310(j). Accordingly, we
are finalizing Sec. 155.310(j) as proposed, with a slight technical
correction for clarity to note that this paragraph only refers to an
applicant who is determined eligible for enrollment in a QHP through
the Exchange.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.310 of the
proposed rule with a technical correction to specify that paragraph (j)
only refers to an applicant who is determined eligible for enrollment
in a QHP through the Exchange .
10. Verification Process Related to Eligibility for Enrollment in a QHP
Through the Exchange (Sec. 155.315)
In Sec. 155.315, we proposed a technical correction in paragraph
(b)(2) to clarify the procedures for an Exchange when the Social
Security Administration indicates an individual is deceased.
We proposed to clarify the circumstances that trigger the
inconsistency process described in paragraph (f)(1) and (2), such as
when required electronic data is not contained within the electronic
data source, and when sources of required data are not reasonably
expected to be available within two days of the initial attempt to
reach the data source. We also proposed to amend paragraph (f)(4) to
clarify that during the clerical error resolution period provided in
paragraph (f)(1), as well as during the period provided in paragraph
(f)(2)(ii), the Exchange proceeds with the eligibility determination
and provides eligibility for enrollment in a QHP and advance payments
of the premium tax credit and cost-sharing reductions, as applicable,
during such period, to the extent the applicant is otherwise qualified
and meets the standards specified in paragraph (f)(4).
We proposed to add paragraph (j) concerning the verification
process related to eligibility for enrollment through the Exchange in a
QHP that is a catastrophic plan. We proposed that the Exchange may
either accept the applicant's attestation of age without further
verification or examine available

[[Page 42251]]

electronic data sources that have been approved by HHS for this
purpose. To verify an applicant's exemption from the shared
responsibility payment, we proposed that this would be accomplished
either through use of the Exchange's records, or through verification
of paper documentation if the certificate was issued by a different
Exchange. In terms of the inconsistency process described in paragraph
(f) of this section, we noted that applicant would not be determined
eligible for enrollment through the Exchange in a QHP that is a
catastrophic plan until verification of necessary information can be
completed. We received comments that addressed both the eligibility
standards and verification process related to QHPs that are
catastrophic plans offered through the Exchange, and have addressed
those comments above the preamble to Sec. 155.305(h). As such, we are
finalizing this paragraph as proposed.
Comment: Several commenters supported our proposed technical
correction in paragraph (b)(2) regarding situations in which the Social
Security Administration indicates that an individual is deceased.
Others recommended allowing additional time, and many commenters
suggested providing an additional 90 days when an applicant has
demonstrated a good faith effort to resolve the issue. Some commenters
sought clarification on the availability of appeal rights regarding
inconsistencies with Social Security Administration data, specifically,
whether individuals had the right to appeal during the 90-day period or
whether they must wait until after a final determination has been made.
Response: As noted in Sec. 155.315(f)(3), the Exchange has the
authority to extend the inconsistency period within Sec.
155.315(f)(2)(ii) based on a good faith effort on the part of the
applicant. We note that an applicant will not be able to appeal an
eligibility decision until he or she receives a notice containing an
approval or denial of eligibility. Further details regarding appeals
will be provided in subsequent rulemaking. We continue to work with the
Social Security Administration and other federal agencies to determine
the role of other federal agencies in the appeals process. Accordingly,
we are finalizing the provision as proposed.
Comment: Some commenters disagreed with the proposal at Sec.
155.315(f) that specifies that the Exchange must trigger the
inconsistency period when electronic data is required but it is not
reasonably expected that data sources will be available within 2 days
of the initial request to the data source. Commenters recommended that
if verification cannot occur promptly, or in ``real time,'' the
inconsistency period should be triggered immediately, along with the
provision of eligibility based on an applicant's attestation. Some
commenters mentioned specifically that an inability to verify
citizenship and immigration status through electronic data should lead
to the immediate trigger of the inconsistency period, to align with
Medicaid regulations.
Commenters supported timelines according to which the Exchange
should be required to contact the application filer for documentation
or additional information when data sources are unavailable. Some
commenters supported the requirement of a 2-day period prior to
requesting information from the application filer, and some recommended
extending it to 5 days. Commenters also recommended that the Exchange
continue to attempt data matches after notifying the application filer
so the entire burden is not immediately shifted to the application
filer.
Response: Since the publication of the proposed rule, we have
confirmed that data from IRS, SSA, and DHS should be available every
day. Accordingly, we are modifying the proposed provision to finalize
the rule to reduce the waiting period reduced from 2 days to 1 day.
Further, we also add new paragraph (f)(6) to clarify the applicability
of Sec. 155.315(f).
First, in paragraph (f)(6), we specify that that the Exchange will
not apply such a waiting period when electronic data to support the
verifications specified in Sec. 155.315(d) (residency), or Sec.
155.320(b) (minimum essential coverage, other than minimum essential
coverage in an eligible employer-sponsored plan) is required but it is
not reasonably expected that electronic data sources will be available
within 1 day of the initial request to the data source; instead, the
Exchange will accept the applicant's attestation regarding the factor
of eligibility for which the unavailable data source is relevant. While
the data matching described in this subpart for these factors of
eligibility is important, we do not believe that it should hold up an
eligibility determination or cause the eligibility process to default
to paper documentation when electronic data sources are unavailable. We
also note that the use of electronic data as a primary method of
verification of residency is an option for Exchanges. In addition, we
clarify that Sec. 155.320(d)(3)(iii) specifies that when the Exchange
does not have information from data sources for the verifications
related to enrollment in an eligible employer-sponsored plan and
eligibility for qualifying coverage in an eligible employer-sponsored
plan, the Exchange will move forward with a sampling process.
Second, we clarify that Sec. 155.320(c)(3) (family size and income
for purposes of eligibility for advance payments of the premium tax
credit and cost-sharing reductions) already specifies procedures to
address situations in which electronic data sources with information
about current, MAGI-based income are unavailable. We believe that these
procedures should continue to govern these situations.
We acknowledge commenters' concerns about providing eligibility
determinations in a timely fashion when electronic data sources are
delayed in responding or do not respond. The proposed language at Sec.
155.315(f) minimizes the administrative and consumer burden associated
with requesting documentation and providing coverage for a short period
of time (when electronic data sources may quickly become available and
indicate eligibility for a different insurance affordability program),
with the need to provide prompt eligibility determinations.
Accordingly, when electronic data from IRS, SSA, or DHS is necessary
but unavailable, and it is reasonably expected that the necessary
electronic data source will be available within 1 day, the Exchange
will wait 1 day before making an eligibility determination, so as to
not generate an eligibility determination that may be shown to be
invalid less than 24 hours later. This approach also avoids the need to
request documentation when an electronic data match will make the
documentation request unnecessary less than 24 hours later. If it is
not reasonably expected that the necessary electronic data source will
be available within 1 day, or it is reasonably expected that the
necessary electronic data source will be available within 1 day, but
this expectation proves incorrect, then the Exchange will determine the
applicant's eligibility using his or her attestation regarding the
factor of eligibility for which the electronic data source is
unavailable, and will follow the remaining procedures in Sec.
155.315(f) to attempt to complete the verification. We believe this
approach is responsive to commenters' concerns and satisfies the need
to reduce administrative burden and the burden on application filers
while still ensuring accurate eligibility determinations. We also note
that the Exchange has the flexibility to continue checking whether such
data sources

[[Page 42252]]

have become available leading up to the triggering of the inconsistency
period and during such inconsistency period.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.315 of the
proposed rule, with a few modifications. We are modifying paragraph (f)
to provide that if key electronic data sources are unavailable and not
reasonably expected to be available within 1 day, the Exchange will
make an eligibility determination based on an applicant's attestation
and trigger the inconsistency period in paragraph (f). The proposed
language specified a 2-day period. We also added a new paragraph (f)(6)
to clarify that the Exchange will accept an applicant's attestation
regarding three specific factors of eligibility when electronic data is
required but it is not reasonably expected that data sources will be
available within 1 day of the initial request to the data source. We
are also modifying paragraph(f)(5) of this section by deleting
paragraph (f)(5)(ii) and combining paragraph (f)(5)(i) with paragraph
(f)(5), because the language that previously appeared in paragraph
(f)(5)(ii) regarding effective dates conflicted with the requirements
under Sec. 155.330(f). Lastly, we modify the language in paragraph (j)
related to the verification of eligibility for enrollment through the
Exchange in a QHP that is a catastrophic plan for purposes of clarity.
11. Verifications Related to Eligibility for Insurance Affordability
Programs (Sec. 155.320)
In Sec. 155.320, we proposed to amend and make technical
corrections in paragraph (c)(1), in accordance with the legislative
change made by Public Law 112-56 concerning the treatment of Social
Security benefits related to MAGI, to incorporate Social Security
benefits when verifying projected annual household income. We also
proposed to remove language concerning an adoption taxpayer
identification number, and to replace references to section 36B of the
Code with the applicable Treasury regulation. We received comments
supporting these revisions without further suggestions, and are thus
finalizing the amendments and technical corrections as proposed.
We proposed to amend and make technical corrections in paragraph
(c)(3) to specify that the Exchange verify that neither advance
payments of the premium tax credit nor cost-sharing reductions are
already provided on behalf of an individual, and align with the revised
policy that the Exchange incorporate Social Security benefits when
verifying projected annual household income. We did not receive
specific comments regarding the proposed changes to paragraph (c)(3),
and are thus finalizing the changes as proposed.
We proposed to clarify when additional verification is necessary as
part of the process to verify an expected increase in projected annual
household income when compared to annual income data. We proposed to
add language regarding the circumstances under which annualized current
income data will be sufficient to support an expected decrease in
projected annual household income. We also proposed to replace
references to section 36B of the Code with references to the applicable
Treasury regulation.
We proposed to consolidate paragraphs (d) and (e), currently
entitled ``Verification related to enrollment in an eligible employer-
sponsored plan'' and ``Verification related to eligibility for
qualifying coverage in an eligible employer-sponsored plan,''
respectively, into new paragraph (d). The standards proposed in
paragraph (d) set forth the rules for verifying enrollment in an
eligible employer-sponsored plan and eligibility for qualifying
coverage in an eligible employer-sponsored plan. We proposed that the
Exchange must verify whether an applicant reasonably expects to be
enrolled in an eligible employer-sponsored plan or is eligible for
qualifying coverage in an eligible employer-sponsored plan for the
benefit year for which coverage is requested. As a result of the
proposed consolidation of paragraphs (d) and (e), we proposed to
redesignate paragraph (f) as paragraph (e).
In paragraph (d)(2), we proposed the data sources the Exchange will
use to verify access to employer-sponsored coverage, which include (1)
Data about enrollment in an eligible employer-sponsored plan and
eligibility for qualifying coverage in an eligible employer-sponsored
plan from any electronic data sources that are available to the
Exchange and which have been approved by HHS for this purpose based on
evidence showing that such data sources are sufficiently current,
accurate, and minimize administrative burden; (2) data regarding
enrollment in an eligible employer-sponsored plan or eligibility for
qualifying coverage in an eligible employer-sponsored plan based on
federal employment obtained by transmitting identifying information
specified by HHS to HHS; (3) data from the SHOP that operates in the
state in which the Exchange is operating; and (4) any available data
regarding the employment of an applicant and the members of his or her
household, as defined in 26 CFR 1.36B-1(d), from any electronic data
sources that are available to the Exchange and have been approved by
HHS for this purpose, based on evidence showing that such data sources
are sufficiently current, accurate, and minimize administrative burden.
We proposed that data regarding employment would not be used to
identify inconsistencies that need to be resolved to maintain
eligibility, and would instead only be used to determine whether an
individual should be part of the pool of individuals from which a
sample is taken for review. We solicited comment on whether data
regarding employment should only be used as a point of information for
applicants to help prompt accurate attestations, and not as a point of
comparison for the purposes of identifying inconsistencies as part of
the verification described in this paragraph, since these data sources
do not directly address enrollment in an eligible employer-sponsored
plan or eligibility for qualifying coverage in an eligible employer-
sponsored plan. We also solicited comment on the feasibility of making
the necessary systems connections by October 1, 2013, and whether
alternative approaches should be considered for the first year of
operations.
To verify enrollment in an eligible employer-sponsored plan and
eligibility for qualifying coverage in an eligible employer-sponsored
plan, we proposed that the Exchange follow the inconsistency process
specified in Sec. 155.315(f) if an applicant's attestation is not
reasonably compatible with information from a data source authorized by
HHS, data regarding federal employment, data from SHOP, or other
information provided by the application filer or in the records of the
Exchange. Further, if the Exchange does not have any of the information
from a data source authorized by HHS, from data regarding federal
employment, or from data from the SHOP for an applicant, and either
does not have any available electronic data regarding the employment of
an applicant and the members of his or her household or an applicant's
attestation is not reasonably compatible with any available data
regarding the employment of an applicant and the members of his or her
household, we proposed that the Exchange would place the applicant into
a pool of applicants from which it would select a statistically-
significant sample of applicants, from whose employers the Exchange
would request information regarding enrollment in an

[[Page 42253]]

eligible employer-sponsored plan and eligibility for qualifying
coverage in an eligible employer-sponsored plan.
We solicited comments on whether handling inconsistencies with any
available data regarding the employment of an applicant and the members
of his or her household through the sampling process, rather than
through the procedures specified in Sec. 155.315(f), is a suitable
approach.
We requested comments on a methodology by which an Exchange could
generate a statistically significant sample of applicants and whether
there are ways to focus the sample on individuals who are most likely
to have access to affordable, minimum value coverage.
In clause (d)(3)(iii)(A), we proposed that the Exchange would
provide notice to an applicant who is selected as part of the sample
indicating that the Exchange would be contacting any employer
identified on the application for the applicant and the members of his
or her household, as defined in 26 CFR 1.36B-1(d), to verify whether
the applicant is enrolled in an eligible employer-sponsored plan or is
eligible for qualifying coverage in an eligible employer-sponsored plan
for the benefit year for which coverage is requested. We sought comment
on ways the Exchange may communicate this sampling process to consumers
with the intention of minimizing confusion.
We proposed that the Exchange would proceed with all other elements
of the eligibility determination using the applicant's attestation
while the sample-based review is occurring, and provide eligibility for
enrollment in a QHP through the Exchange to the extent that an
applicant is otherwise qualified. Consistent with Sec. 155.315(f), we
proposed that during the sample-based review, the Exchange would ensure
that advance payments of the premium tax credit and cost-sharing
reductions are provided on behalf of an applicant who is otherwise
qualified for such payments and reductions, as described in under Sec.
155.305 of this subpart, if the tax filer attests to the Exchange that
he or she understands that any advance payments of the premium tax
credit paid on his or her behalf are subject to reconciliation.
When an applicant is selected for the sample-based review, we
proposed in clause (d)(3)(iii)(D) that the Exchange make reasonable
attempts to contact any employer identified on the application for the
applicant and the members of his or her household, as defined in 26 CFR
1.36B-1(d), to verify whether the applicant is enrolled in an eligible
employer-sponsored plan or is eligible for qualifying coverage in an
eligible employer-sponsored plan for the benefit year for which
coverage is requested.
We discussed one alternative approach, under which the Exchange
would request documentation from consumers who were selected as part of
the sample, instead of attempting to contact their employers. We chose
not to propose this approach since the application will already solicit
all necessary information from consumers, so it is unclear what would
be gained through a second information request to consumers. We
solicited comment on this alternative and other alternatives to
implement this process while minimizing burden on consumers, employers,
and Exchanges. We also sought comment on ways the Exchange can most
efficiently interact with employers, including other entities that
employers may rely upon to support this process, such as third-party
administrators.
In clause (d)(3)(iii)(E), we proposed that if the Exchange receives
any information from an employer relevant to the applicant's enrollment
in an eligible employer-sponsored plan or eligibility for qualifying
coverage in an eligible employer-sponsored plan as a result of the
sample-based review, the Exchange would determine the applicant's
eligibility based on such information and in accordance with the
effective dates specified in Sec. 155.330(f) of this subpart and, if
such information changes the applicant's eligibility determination,
notify the applicant and his or her employer or employers of such
determination in accordance with the notice requirements specified in
Sec. 155.310(g) and (h) of this part.
We also proposed that if, after a period of 90 days from the date
on which the notice specified in clause (d)(3)(iii)(A) is sent to the
applicant, the Exchange is unable to obtain the necessary information
from an employer, the Exchange will determine the applicant's
eligibility based on his or her attestation regarding that employer. We
solicited comment on this proposal to not provide an additional notice
to the applicant and his or her employer when the applicant's
eligibility does not change as a result of the sample-based review and
whether it is preferable to include an additional notice to the
applicant and employer at the end of the 90-day period.
In clause (d)(3)(iii)(G), we proposed that to carry out the
sampling process described above, the Exchange must only disclose an
individual's information to an employer to the extent necessary for the
employer to identify the employee. We solicited comments on this
proposed approach and whether there are ways these procedures can
further minimize burden on the Exchange, employers, and consumers.
We also highlighted steps we are taking to help consumers with
providing information related to access to employer-sponsored coverage
on the application. We suggested the use of a voluntary pre-enrollment
template to assist applicants in gathering the information about access
to coverage through an eligible employer-sponsored plan as required by
the Exchange to determine eligibility for advance payments of the
premium tax credit and cost-sharing reductions. We sought comments on
the use of this pre-enrollment template and ways it could be used to
assist consumers with providing the necessary information to complete
the verification described in paragraph (d) while minimizing burden on
employers.
Lastly, in paragraph (d)(4), we also proposed that the Exchange may
rely on HHS to conduct this verification. We proposed that under this
option, the Exchange would send applicant information to HHS; HHS would
take on all verification activities specified in regulation, including
data matching with the Office of Personnel Management (OPM), SHOP,
available employment data, and the sample-based review; and the
Exchange would integrate the result into its eligibility process and
send the individual and employer notices described in Sec. 155.310(g)
and (h) of this part. Further, we proposed that under such an
arrangement, the Exchange and HHS would enter into an agreement
specifying their respective responsibilities in connection with the
verifications described in paragraph (d); other activities required in
connection with the verifications described are performed by the
Exchange in accordance with the standards identified in this subpart or
by HHS in accordance with the agreement; and the Exchange provides all
relevant application information to HHS through a secure, electronic
interface, promptly and without undue delay. We solicited comments on
this proposed option.
Comment: In reference to the proposed language at Sec.
155.320(c)(3)(vi)(C), which specifies that the Exchange will request
additional information regarding projected annual household income when
an application filer's attestation is in excess of annual income data,
but below annualized current income data by a ``significant amount,''
commenters recommended that the phrase ``significant amount'' be
replaced with a percent threshold. Some commenters

[[Page 42254]]

recommended a threshold of 20 percent, specifically.
Response: To preserve the Exchange's flexibility to determine what
may constitute a significant amount, we are finalizing this provision
as proposed.
Comment: Commenters recommended replacing the standard ``not
reasonably compatible'' with the term ``significantly and materially
incompatible,'' defined further by commenters as ``making an important
change to the outcome.'' Such commenters suggested only using the
process described in Sec. 155.315(f) if an attestation is
significantly and materially incompatible with other information.
Further, commenters suggested easing verification rules for individuals
who comply with information requests, including attestations, and for
whom required data is not available.
Response: In Sec. 155.300(d) of the Exchange final rule, we
include in the definition of ``reasonably compatible'' that the
``difference or discrepancy does not impact the eligibility of the
applicant, including the amount of advance payments of the premium tax
credits or category of cost-sharing.'' This definition allows for
Exchange flexibility in verifying application information, and where
appropriate, the final rule provides for a more prescriptive reasonable
compatibility standard, in reference to specific verifications. We
believe it is an ideal approach to provide flexibility in the case of
many verifications, but for areas in which the outcome of the
eligibility determination is sensitive to small changes, provide a more
specific approach. Therefore, we finalize the reasonable compatibility
standards used in Sec. 155.320(c), with some changes described herein,
and without changing the overall definition of ``reasonable
compatibility,'' defined in Sec. 155.300(d), which is used throughout
Exchange and Medicaid regulations.
For income verification, for the first year of operations, we are
providing Exchanges with temporarily expanded discretion to accept an
attestation of projected annual household income without further
verification, as described below. Under current regulations, when data
described in paragraph (c)(1)(i) of this section is available for the
tax household but the attested annual household income is more than 10
percent below the annual income computed in accordance with clause
(c)(3)(ii)(A) of this section, the Exchange must use annualized data
from the MAGI-based income sources, specified in paragraph (c)(1)(ii),
to the extent it is available, to verify the attestation of annual
household income. If such data is not available or does not support the
attestation, clause (c)(3)(vi)(C) specifies that the Exchange must
follow the procedures specified in Sec. 155.315(f)(1) through (4),
which includes requesting documentation to verify the attestation of
project annual household income. The attestation is not supported by
the data when the attestation is more than 10 percent below the annual
income as computed using data sources. For the first year of
operations, we will exercise enforcement discretion under this
provision such that each Exchange will have the option, only when the
attestation under (c)(3)(ii)(B) is greater than ten percent below the
annual household income computed in accordance with clause
(c)(3)(ii)(A) and MAGI-based income data from the sources specified in
paragraph (c)(1)(ii) is unavailable to request a reasonable explanation
for the discrepancy from the applicant, and if such explanation is
insufficient, follow the procedures specified in Sec. 155.315(f)(1)
through (4) for a statistically significant sample of the population
that would otherwise be subject to such procedures under clause
(c)(3)(vi)(D). For those individuals who are not part of this sample,
the Exchange may accept the attestation of projected annual household
income without further verification for purposes of the Exchange's
eligibility determination. We expect that any Exchange that exercises
this option will monitor the process closely and adjust the targeting
and size of the sampled population as needed to ensure an effective
verification process. We note that we believe this exercise of
enforcement discretion concerning the Exchange's obligations to verify
income information in these specific circumstances is made in the
context of all information--including the actual household income
amounts for 2014--being available at the end of the year for the
reconciliation performed under section 36B(f) of the Code.
Comment: We received comments that asked if, following the 90-day
inconsistency period under Sec. 155.315(f), when invoked under clause
(c)(3)(vi)(C) of this section, the applicant has not responded and data
sources indicate that the applicant is eligible for Medicaid or CHIP,
the Exchange should notify the applicant and offer to enroll him or her
in Medicaid or CHIP, in states where the Exchange can make that
determination, or transmit the file to the Medicaid or CHIP agency if
the Exchange cannot make that determination.
Response: This recommendation is not specific to Sec.
155.320(c)(3). However, we note that, under Sec. 155.320(c)(3)(iii),
an attestation that reflects an increase compared to the tax data would
generally be accepted without further verification (for purposes of
eligibility for advance payments of the premium tax credit and cost-
sharing reductions); therefore, if an applicant attests to a projected
annual household income that would qualify him or her for advance
payments of the premium tax credit or cost-sharing reductions but MAGI-
based income sources indicate that income is lower than the applicant's
attestation, even if such data indicates Medicaid or CHIP eligibility,
the attestation would be accepted without further verification. We note
that this scenario assumes that the applicant has not attested to
projected annual household income that would be consistent with
eligibility for Medicaid or CHIP under the applicable MAGI standard.
Comment: One commenter expressed support for continuing to examine
ways in which employer reporting under the Affordable Care Act can be
streamlined both in timeframe and in the number of elements to prevent
inefficient or duplicative reporting.
Response: We agree with the commenter. As stated in the proposed
rule, the Administration will continue to consider ways to streamline
reporting under the Affordable Care Act.
Comment: One commenter recommended that applicants should first
attest to whether or not they have any offer of coverage. The commenter
suggested it is unnecessary to verify enrollment in or eligibility for
qualifying coverage in an eligible employer-sponsored plan for everyone
who applies for insurance affordability programs. Another commenter
recommended that the Exchange only ask for general information about
employee contributions to the employer-sponsored plan, eligibility for
the plan, and whether the plan provides minimum value rather than
specifically identifying to the employer the particular employee who
has requested premium tax credits.
Response: We appreciate the commenter's suggestion regarding ways
to expedite the application process, and are working to consider
similar suggestions received based on the public comment period for the
single, streamlined application. To this end, we have designed the
employer-sponsored coverage section of the single, streamlined
application to ask a threshold question of whether the individual has
an offer of coverage through a job, including an offer through a spouse
or parent's job and then if the answer is ``no,'' allow the

[[Page 42255]]

individual to skip the remaining employer-sponsored coverage questions
on the application. We will also collect employer contact information
as necessary to send the employer notice described in Sec. 155.310(h).
The paper application for enrollment in a QHP through the Exchange and
insurance affordability programs can be found at: http://www.cciio.cms.gov/resources/other/Files/AttachmentC_042913.pdf.
Comment: We received several comments regarding available data
sources proposed in Sec. 155.320(d)(2). Some commenters suggested that
HHS work on developing an employer-sponsored coverage data source that
would be available to states at a significantly reduced cost.
One commenter specifically recommended that data sources that
reflect information regarding employment be used as a point of
information for applicants only, and not as a basis for identifying an
inconsistency that must be resolved to maintain eligibility. The
commenter suggested that relying on employment data to support the
verification of enrollment in an eligible employer-sponsored plan and
eligibility for qualifying coverage in an eligible employer-sponsored
plan may create a barrier to coverage and unduly delay enrollment of
eligible applicants.
One commenter requested that data regarding federal employment as
specified in Sec. 155.320(d)(2)(ii) be made available through the
federal data services hub and requested that HHS release a technical
description of the service as soon as possible.
Response: As one commenter noted, HHS conducted an extensive search
of available data sources and found that no comprehensive data source
will be available by October 1, 2013. Current legislative and
operational barriers prohibit HHS from requiring employers to report
information directly to Exchanges or requiring Exchanges to obtain
employer data from the Internal Revenue Service. The proposed rule
included an interim solution to support this verification until a more
robust verification process can be developed. We remain committed to
working with any interested parties on solutions that make employer
reporting more efficient.
We agree with the comment above suggesting that employment data not
be used as the basis for generating inconsistencies or identifying
individuals for inclusion in the sample-based review, since it is not
specific to employer-sponsored coverage. Accordingly, we do not believe
that it is necessary to specify the use of employment data, and so are
removing paragraph (d)(2)(iv) and modifying paragraph (d)(3)(iii) to
remove the provision specifying that the Exchange will obtain
employment data. We clarify that notwithstanding this deletion,
Exchanges may use employment data as a tool to assist consumers in
providing accurate attestations to the Exchange regarding employer-
sponsored coverage.
Lastly, we are currently working with our federal partners at the
Office of Personnel Management to develop a service through the hub to
verify data regarding federal employment as is necessary to implement
proposed 155.320(d)(2)(ii). We expect to release a detailed technical
description of this service in the near future.
Comment: We received several comments on the pre-enrollment
template developed to assist consumers with collecting information
related to eligibility for qualifying coverage in an eligible employer-
sponsored plan. Many commenters expressed support for the voluntary
template and efforts to facilitate employers reporting such information
to Exchanges. One commenter suggested that employers pre-populate the
form and distribute it online to employees without being specifically
requested to do so by individual employees. Another commenter expressed
concern over asking employees to gather information from employers,
suggesting that it could pose problems and force employees not to seek
Exchange coverage.
A few commenters suggested ways to implement the template including
providing the template on the date of hire or in conjunction with other
information about employer-sponsored coverage provided by the employer
to employees. One commenter suggested large employers have an incentive
to report this information to employees to avoid having employees
request information from them on an individual basis. Another commenter
suggested that the template would need to allow employers to report
multiple premium contributions and/or plan actuarial values.
Response: We developed the pre-enrollment template, which is a tool
to help an individual complete the questions related to employer-
sponsored coverage on the single, streamlined application, based on
extensive input from employers and other stakeholders. While the use of
the template is voluntary, we believe it will facilitate the collection
of related employer-sponsored coverage information from employers, and
in doing so, streamline the application process, and increase the
accuracy of eligibility determinations. To this end, we also note that
employers have the option of combining the employer coverage tool with
the notice specified under section 18B of the Fair Labor Standards Act,
as added by section 1512 of the Affordable Care Act found at this link,
http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf. As noted in the proposed
rule, we also anticipate that employers will find additional ways to
provide this information to their employees, including posting this
pre-populated tool on a company Web site, or making this information
available during benefit fairs, and we are supportive of additional
efforts by employers to disseminate this information efficiently. The
employer coverage tool can be found at: http://cciio.cms.gov/resources/other/Files/AttachmentC_042913.pdf.
Comment: Several commenters generally supported the sampling
approach proposed in Sec. 155.320(d)(3)(iii) and noted that contacting
the employer directly is the most accurate and efficient way to verify
information regarding access to qualifying employer-sponsored coverage.
One commenter specifically supported the proposed approach to rely on
the Exchange to reach out to employers for information about employer-
sponsored coverage rather than relying on individuals to get the
information from their employer.
Some commenters expressed concern over the sampling approach,
suggesting the process was burdensome for employers and Exchanges.
Commenters urged HHS to develop sampling procedures that are as
unobtrusive as possible and do not create confusion for an individual
or an individual's employer. One commenter urged the Administration to
encourage States to use uniform processes in conjunction with HHS. One
commenter recommended that final regulations specify timelines and
specific information required for employer responses under Sec.
155.320(d)(3)(iii). Another commenter also recommended that final
regulations permit employers to designate third-party administrators to
respond and act on their behalf for the sample-based review.
Some noted that contacts to employers create risks for employees
who may have a very weak position or status with employers. Some
commenters suggested that employees should be able to opt out of having
the Exchange contact their employer. One commenter suggested that any
verification process adopted by HHS should not invite retaliation
against employees in any way. Another commenter suggested that the
notice to

[[Page 42256]]

employers in Sec. 155.310(h) communicate that employers are explicitly
prohibited from retaliating against employees and provide accessible
information about how employees may pursue a complaint or seek redress,
including the time limit for filing a complaint.
Response: We believe the sampling approach proposed in Sec.
155.320(d)(3)(iii) is the best interim approach for effectively
completing this verification while minimizing burden on Exchanges and
employers. As noted in the proposed rule, we believe that employers are
in the best position to provide information regarding the employer-
sponsored coverage that they offer to their employees. We maintain the
approach of relying on Exchanges to reach out to a select number of
employers to verify applicant information with some minor
clarifications.
We also appreciate the concerns raised related to burden on
Exchanges and employers. We intend for Exchanges to contact employers
in a standardized manner and only ask for information that is necessary
for verifying access to qualifying employer-sponsored coverage. We do
not include a timing standard for employers to respond to Exchange
inquiries; however we expect that employers will respond to Exchange
inquiries in a timely manner. With that stated, as proposed and
finalized in Sec. 155.320(d)(3)(iii)(F), after a period of 90 days,
the Exchange will conclude the sample-based review.
Regarding the recommendation that final regulations permit
employers to designate third-party administrators to respond and act on
their behalf for this verification, we note that this rule finalizes
standards related to Exchanges and therefore standards regarding
activities of employers are outside the scope of this regulation.
However, we believe that this would be a feasible approach, as long as
it is consistent with any other authorities that may govern the
delegation of employer responsibilities to other entities.
We also acknowledge the comment expressing the concern that
contacting employers might create risks for employees who may have a
very weak position or status with employers. Section 18C of the Fair
Labor Standards Act, as added by section 1558 of the Affordable Care
Act, provides protections for employees that prohibit discrimination
because the employee has received advance payments of the premium tax
credit or cost-sharing reductions, and for other specified reasons.
Allowing an individual to opt out of the sampling process under
Sec. 155.320(d)(3)(iii) would prevent the Exchange from receiving
accurate information for some individuals and increase the potential
for a tax liability for the tax filer at tax filing. The opt-out
process would also compromise the randomness, and potentially the
statistical validity of the sample. Accordingly, we do not adopt this
suggestion.
Comment: We received several comments strongly supporting the
approach in Sec. 155.320(d)(3)(iii)(C), reflecting the statutory
requirement in section 1411(e)(4) of the Affordable Care Act, allowing
an individual to receive advance payments of the premium tax credits
and cost-sharing reductions during the 90-day sampling period if the
individual is otherwise qualified. One commenter supported the
recognition that applicants should be made aware that any advance
payments of the premium tax credit could be subject to reconciliation.
We also received comments in support of the provision in Sec.
155.320(d)(3)(iii)(F) allowing the Exchange to use an applicant's
attestation if no information is received from the employer. Another
commenter noted that the burden of resolving inconsistencies should
fall first on the Exchanges and only reach individuals when the
Exchanges have exhausted all available means to resolve the
inconsistency.
Response: We believe it is important for the eligibility
determination process to be consistent in how and when the Exchange
requests supporting documentation throughout the eligibility
determination process and to avoid unnecessary delay in eligibility
determinations. We agree with commenters regarding the importance of
collecting an attestation from a tax filer regarding his or her
understanding of reconciliation prior to making advance payments of the
premium tax credit, and therefore maintain this in the final rule.
Additionally, we are finalizing our proposal to rely on an applicant's
attestation if the Exchange is unable to obtain the necessary
information from an employer.
Comment: One commenter was concerned that the timeframe for
employers to provide information (within 90 days of notice regarding
the Exchange's intent to verify the applicant's enrollment in an
eligible employer-sponsored plan or eligibility for qualifying coverage
through an eligible employer-sponsored plan) is too long and
recommended shortening this period to 30 days.
Response: In proposed section Sec. 155.320(d)(3)(iii), which we
maintain in the final rule, we provide that an Exchange will proceed
with an applicant's eligibility determination during the sampling
process and ensure that advance payments of the premium tax credit and
cost-sharing reductions are provided on behalf of an applicant who is
otherwise qualified for such payments and reductions. This process is
intended to ensure that eligibility determinations are not delayed due
to the Exchange not being able to contact an employer. Under our
authority under section 1411(a) and (d) of the Affordable Care Act and
after consideration of a shorter timeframe, we came to the conclusion
that 90 days is consistent with other similar processes, such as the
inconsistency period specified in Sec. 155.315(f), and will also allow
an appropriate opportunity for receiving a response from employers.
Comment: Commenters supported the option to allow an Exchange to
fulfill the requirements of this verification by relying on HHS to
perform it. One commenter noted that this option is particularly
helpful as no acceptable data sources will be available in their state
by October 1, 2013. One commenter was pleased with this provision,
noting that it welcomed efforts to reduce administrative and cost
burdens involved with Exchange eligibility determination processes. One
commenter expressed the need for more information from HHS specifying
the steps it will take to complete this verification, and detail on the
particular information HHS anticipates it will need. One commenter
suggested a provision be included in the agreement between HHS and the
Exchange to hold applicants harmless if a glitch in communication
occurs. The commenter also suggested that consumers should not be
required to submit duplicative information. One commenter asked that
HHS consider expanding its employer-sponsored plan enrollment and
eligibility verification process to include the sending of notices to
individuals and employers described in Sec. 155.310(g) and (h), which
occurs after an eligibility determination is made.
Response: After reviewing and considering the appropriate public
comments and completing a technical analysis, we have concluded that
the service described in the proposed rule is not feasible for
implementation for the first year of operations. This service would
involve a large amount of systems development on both the state and
federal side, which cannot occur in time for October 1, 2013. As such,
in the final rule, we maintain the proposed language, with a
clarification that the option to rely on HHS to perform this
verification is effective for eligibility

[[Page 42257]]

determinations that are effective on or after January 1, 2015--meaning
that the Exchange will be able to rely on HHS to perform this function
as part of the eligibility determination system under section 1411 of
the Affordable Care Act beginning with open enrollment for the 2015
plan year.
To provide relief to state-based Exchanges that were planning to
rely on this service, we note that we are also delaying the date by
which an Exchange must implement the sample-based review. For
eligibility determinations for insurance affordability programs that
are effective before January 1, 2015, we added paragraph (d)(3)(iv) to
specify that if the Exchange does not have any of the information
specified in Sec. 155.320(d)(2)(i) through (d)(2)(iii) for an
applicant, the Exchange may accept the applicant's attestation
regarding enrollment in an eligible employer-sponsored plan and
eligibility for qualifying coverage in an eligible employer-sponsored
plan for the benefit year for which coverage is requested without
further verification, instead of following the procedure in Sec.
155.320(d)(3)(iii).
While we believe it is important for Exchanges to implement the
procedure in Sec. 155.320(d)(3)(iii) to support program integrity and
minimize financial risks on behalf of the tax filer at reconciliation,
we acknowledge that some Exchanges may not have the resources and
operational capability to conduct the sampling process in the first
year. We note that the FFE will implement the verification process as
specified in Sec. 155.320(d).
For October 1, 2013, we expect that Exchanges will use OPM data
provided by HHS and available through the hub and SHOP data available
through the SHOP that corresponds to the individual market Exchange to
identify inconsistencies with attested information, and follow the
process established in Sec. 155.315(f) to resolve any such
inconsistencies. We plan to continue working closely with Exchanges,
and may propose regulatory amendments as necessary, to implement an
increasingly effective verification process over time.
We also note that we considered whether the distribution of notices
could be part of a future service performed by HHS. The eligibility
notices cited by the commenter involve information beyond what is
involved with this verification service, including individual
eligibility results, and the commenter's proposal therefore would add
significant complexity to an already-complex service. Accordingly, we
are finalizing this provision as proposed.
Comment: We solicited comment regarding the feasibility of making
the necessary systems connections to support the verification of
enrollment in an eligible employer-sponsored plan and eligibility for
qualifying coverage in an eligible employer-sponsored plan by October
1, 2013, and whether alternative approaches should be considered for
the first year of operations. Several commenters expressed general
support of the approach to verifying access to qualifying employer-
sponsored coverage. However, one commenter expressed concern over the
complexity of the verification procedures and questioned whether
Exchanges will be able to implement these processes consistently by
October 1, 2013. A small number of commenters recommended that HHS
consider limiting verification to those situations in which it is
essential to comply with the Affordable Care Act. One commenter agreed
with the recommendation that the proposed strategy for verification
should be temporary and that it should be revisited in 2016 when more
data become available.
Response: We appreciate feedback from commenters on the proposed
approach. We acknowledge the timing concerns with implementing the
policies in the proposed rule for October 1, 2013 and will continue to
work with Exchanges to develop interim solutions within the general
construct of these regulations and related guidance. We believe that
the proposed approach is minimally burdensome, particularly based on
the approval of use of a sample-based review provided in Sec.
155.320(d)(3)(iii) instead of an inconsistency process, and another
approach would necessitate manual review for a larger number of
individuals. Accordingly, in the final rule, we maintain the provisions
proposed in Sec. 155.320(d) with continued anticipation that the
strategy will evolve as additional data and data sources become
available and as more information is gained when the sample-based
review is implemented.
Comment: One commenter recommended that HHS allow Exchanges the
flexibility to define the factors that would trigger the sample-based
review and how to conduct the necessary investigations. Another
commenter proposed that Exchanges should have flexibility to use
whatever information they have at their disposal to identify
individuals who are likely to have employer-sponsored coverage and to
conduct a minimum number of follow up reviews.
Response: We recognize that some Exchanges may have access to
additional data sources that could be useful for these purposes. We
note that proposed Sec. 155.320(d)(2)(i), which we are finalizing as
proposed, allows the use of electronic data sources that are approved
by HHS, which could include state-based or state-developed data
sources. We encourage states to work with HHS to incorporate these data
sources and other existing processes into the Exchange verification
process.
Comment: We received several comments on standards related to
notices proposed throughout Sec. 155.320. Commenters suggested that
any notices be clearly written in plain language at an appropriate
reading level for employees with limited education and LEP individuals.
One commenter recommended that notice of applicants' appeal rights be
provided to applicants if information from an employer results in a
change to their eligibility status.
Specifically regarding the notice described in Sec.
155.320(d)(3)(iii), one commenter suggested the notice clearly specify
that the employee was selected as part of a purely random sample,
rather than due to any indication of misinformation or inappropriate
action on the part of the employee. Additionally, one commenter
supported HHS developing notices and otherwise educating employers to
help employers understand their potential tax liabilities. Finally, one
commenter urged Exchange personnel, Navigators, certified application
counselors and all consumer assistance personnel to be trained on these
verification procedures.
Response: All notices described in this part are subject to the
general notices standards under Sec. 155.230, which include standards
related content provided in the notice, including notice of appeal
rights, and that the notices must conform to accessibility and
readability standards. We agree that information regarding this
verification will be important for Navigators and other entities
helping consumers apply for coverage and intend to include information
about this verification process related in training materials and other
guidance documents produced by HHS.
Comment: One commenter raised concerns over the potential for
confusion that could result from unnecessary notifications to employers
by Exchanges, for example, when employers receive the notice specified
in Sec. 155.310(h) regarding potential tax liability under Sec. 4980H
of the Code even

[[Page 42258]]

though the employer may not in fact have any tax liability.
Response: The proposed rule did not modify the requirements related
to the employer notice as described in Sec. 155.310(h) and therefore
the comment is outside of the scope of this rule.
Comment: One commenter recommended that the verification process
and information supplied should be considered confidential, and
recommended that the final rule include language clarifying this and
prohibiting the sharing of this information with anyone not directly
required to verify the information. The commenter specified that the
employer representative verifying the information at request of the
Exchange should be prohibited from sharing the Exchange's request for
the information with any person not directly responsible for providing
the information.
Response: We agree with the suggestion that information supplied
during the verification process described in Sec. 155.320(d)(3)(iii)
should be protected and not disclosed to unauthorized parties. When an
Exchange reaches out to an employer to confirm whether an applicant is
enrolled in an eligible employer-sponsored plan or eligible for
qualifying coverage in an eligible employer-sponsored plan, we do not
intend for the Exchange staff to disclose the employee's household
income or any other taxpayer information, except the employee's name or
other identifying information. The employer would need to identify the
employee to provide the Exchange with information about the plan
options available to the employee. The Exchange would rely on
information provided by the employee or employer when communicating
with the employer, so that only the appropriate employer
representatives are consulted during the sample-based review. We also
note that like all information created, collected, used, or disclosed
by the Exchange, information regarding employer-sponsored coverage is
subject to the privacy and security protections established in Sec.
155.260.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.320(c)
without modification. We are finalizing the provisions proposed in
Sec. 155.320(d), with a few modifications. In paragraph (d)(2)(iii),
we clarify that the Exchange must obtain any available data from the
SHOP that corresponds to the state in which the Exchange is operating.
In paragraph (d)(3)(iii), we modify language to specify that the
Exchange must select a statistically significant random sample of
applicants for whom the Exchange does not have any of the information
specified in paragraphs (d)(2)(i) through (d)(2)(iii). Based on
comments suggesting that employment data only be used to prompt
applicants to encourage accurate attestations, we removed paragraph
(d)(2)(iv). Additionally, we clarified paragraph (d)(4) to specify that
the ability for the Exchange to satisfy the provisions of paragraph (d)
by relying on HHS is effective for eligibility determinations for
advance payments of the premium tax credit and cost-sharing reductions
that are effective on or after January 1, 2015, and to clarify that the
division of responsibilities under this option is subject to guidance
issued by the Secretary. To accommodate this change, we added paragraph
(d)(3)(iv) to clarify that for eligibility determinations for advance
payments of the premium tax credit and cost-sharing reductions that are
effective before January 1, 2015, if the Exchange does not have any of
the information specified in paragraphs (d)(2)(i) through (d)(2)(iii)
for an applicant, the Exchange may accept an applicant's attestation
regarding enrollment in an eligible employer-sponsored plan and
eligibility for qualifying coverage in an eligible employer-sponsored
plan for the benefit year for which coverage is requested, without
further verification under paragraph (d)(3)(iii) of this section.
Additionally, we deleted paragraph (d)(4)(iv) to remove the agreement
associated with having HHS conduct this verification. Finally, we
removed paragraph (e) and redesignated paragraph (f) as paragraph (e).
As a result of the consolidation of former paragraphs (d) and (e) in
paragraph (d) of this final rule, we also make a technical correction
to Sec. 155.615(f)(2)(i) to modify the cross-reference in that
provision to reference Sec. 155.320(d).
12. Eligibility Redetermination During a Benefit Year (Sec. 155.330)
In Sec. 155.330, we proposed to amend paragraph (d)(1) to clarify
that the Exchange would only conduct periodic examination of data
sources to identify eligibility determinations for Medicare, Medicaid,
CHIP, or the BHP, for enrollees on whose behalf advance payments of the
premium tax credit or cost-sharing reductions are being provided. We
also proposed revising paragraph (e) to specify how the Exchange would
proceed when data matching indicates that an individual is deceased,
such that the Exchange would modify eligibility status to account for
the data after 30 days without a response to the notice sent. In
situations where the Exchange identifies updated information regarding
income, family size, or family composition, except information
regarding death, we clarified that the enrollee-reported information
would be subject to verification.
We also solicited comments about adding a provision to specify that
Exchanges would include language in the eligibility determination
notice after a redetermination resulting in a change in an enrollee's
level of cost-sharing reductions to also describe the specific changes
to an enrollee's deductible, co-pays, coinsurance, and other forms of
cost-sharing reductions if they remained enrolled in the same QHP.
We proposed to amend paragraph (f) to incorporate changes as a
result of eligibility appeals decisions, as well as changes that affect
only enrollment or premiums, but do not affect eligibility. The
proposed changes to paragraph (f) were designed to align eligibility
effective dates and enrollment effective dates with one another, and to
accommodate the limited situations in which retroactive eligibility may
be necessary.
In paragraph (f)(1), we proposed that changes resulting from a
redetermination, from an appeal decision, or affecting enrollment or
premiums only, be implemented on the first day of the month following
notice of the change. In paragraph (f)(2), we proposed that the
Exchange may determine a reasonable point in a month, no earlier than
the 15th, after which a change will not be effective until the first
day of the month after the month specified in paragraph (f)(1).
In paragraph (f)(3), we proposed that the Exchange must implement
changes resulting in a decreased amount of advance payments of the
premium tax credit or cost-sharing reductions that occur after the 15th
of the month, on the first day of the month after the month specified
in paragraph (f)(1). In paragraph (f)(4), we proposed that the Exchange
must implement changes that result in an increased level of cost-
sharing reductions that occur after the 15th of the month, on the first
day of the month after the month specified in paragraph (f)(1). Changes
that result in an increased amount of advance payments of the premium
tax credit would be implemented under paragraphs (f)(1) and (f)(2).
In paragraph (f)(5), we proposed that the Exchange implement a
change associated with birth, adoption, placement for adoption,
marriage, or loss of minimum essential coverage, on the coverage
effective dates described in Sec. 155.420(b)(2)(i) and (ii). In
paragraph

[[Page 42259]]

(f)(6), we proposed that the Exchange may implement a change associated
with the events described in Sec. 155.420(d)(4), (d)(5), and (d)(9) on
an effective date that is based on the specific circumstances of each
situation. In redesignated paragraph (f)(7), we proposed to maintain
the existing language of what was originally paragraph (f)(3).
Comment: Commenters expressed general support for HHS' proposal
regarding when the Exchange determines through periodic data matching
that an individual is deceased. One commenter sought clarification
about whether the Exchange could terminate coverage retroactively to
the date of death to align with non-group market standards.
Response: In response to comments, we clarify in finalizing Sec.
155.430(d) that the Exchange will terminate coverage retroactively to
the date of death. This revision is discussed in more detail in the
response to comments regarding that provision below.
Comment: Multiple commenters expressed strong support for including
a provision in the final rule such that Exchange would include language
regarding a change in an enrollee's level of cost-sharing reductions as
a result of a redetermination in the eligibility determination notice
sent to the enrollee. Several commenters requested that the notice also
include information about the enrollee's eligibility for a special
enrollment period as well as the deadline to make a decision to select
a new plan if they so desired. Commenters also recommended that the
notice include the potentially negative financial impact of changing
QHPs. One commenter requested additional guidance regarding the
implementation of cost-sharing reductions generally, and another stated
that it could not comply with such a proposed change in Exchange design
at this stage.
Response: We clarify that Sec. 155.230(a)(1) specifies that the
Exchange will provide language in the eligibility determination notice
to the enrollee explaining the action reflected in the notice, which in
this case includes the fact that an enrollee has been determined
eligible for a new cost-sharing reduction level, his or her eligibility
for a special enrollment period, the requisite deadlines, and the
possible ramifications if an enrollee decides to change QHPs (for
example, deductible resetting, whereby an individual who had accrued
expenses towards the deductible cap for his or her previous QHP would
have to start again from $0 in making cost-sharing payments towards the
deductible and out-of-pocket limit). Since regulations do not specify
that the Exchange will provide detailed, plan-specific information on
cost-sharing reductions after initial plan selection, we will not
require that it be provided by the Exchange when a change occurs.
Rather, we expect that QHPs will make this information available. We
will also not specify that the Exchange will describe the specific
changes that could occur in different plans, which could require as
many variations as there are plans. Exchanges maintain the flexibility
to provide more detail. HHS provided general guidance regarding the
implementation of cost-sharing reductions in subpart E of the final
Payment Notice at 78 FR 15410, 15474 et. seq.
Comment: Commenters generally supported the effective dates we
proposed in Sec. 155.330(f). Several commenters urged HHS to
prioritize continuity of coverage in defining effective dates. Other
commenters cautioned against requiring eligibility effective dates that
would necessitate the return or repayment of claims, premiums, advance
payments of the premium tax credit, or cost-sharing reduction payments.
Response: We appreciate the importance of continuity of coverage,
as well as the importance of clarity for consumers. As such, we are
finalizing the provisions proposed in Sec. 155.330(f), with two
modifications for clarity. First, we consolidate the provisions
formerly proposed in Sec. 155.330(f)(3) and Sec. 155.330(f)(4) into a
single provision covering decreases in advance payments of the premium
tax credit and changes in cost-sharing reductions. Second, we remove
the requirement formerly proposed in Sec. 155.330(f)(7), because the
termination of coverage requirement in Sec. 155.430(d)(3) renders
Sec. 155.330(f)(7) duplicative.
Comment: Commenters requested that HHS require transparency and
plain language in communicating effective dates to consumers, given the
complexity of changing benefits, programs, and coverage.
Response: We agree that transparency and plain language are of the
upmost importance, and urge states and QHP issuers to share successful
communication strategies among one another. We note that Sec.
155.230(b) specifies that all notices will be in plain language. HHS
will also share model notice language for Exchanges to adapt to their
specific needs.
Comment: Some commenters questioned why advance payments of the
premium tax credit and cost-sharing reductions could not always be
implemented as of the first of the following month.
Response: The 15th-of-the-month cutoff specified in Sec.
155.330(f)(3) concerning changes that result in a decreased amount of
advance payments of the premium tax credit and changes in levels of
eligibility for cost-sharing reductions aims to prevent consumers from
incurring financial liabilities that may result from such changes in
eligibility, which could also be very problematic for QHP issuers to
implement. However, as noted above, Exchanges have flexibility to set a
reasonable cut-off date for implementing changes that result in an
increased level of advance payments of the premium tax credit, such
that they could always be implemented on the first day of the following
month, Accordingly, we are finalizing this provision as proposed.
Comment: Some commenters sought reassurance that Exchanges would
remain the system of record--the final authority on applicants' and
enrollees' eligibility for enrollment through the Exchange and receipt
of advance payments of the premium tax credit and cost-sharing
reductions--and that all changes would be communicated to QHP issuers.
Some commenters also requested flexibility for issuers to communicate
changes to enrollees, consistent with current practices.
Response: Exchanges are intended to be the final authority on
applicants' and enrollees' eligibility for enrollment in a QHP through
the Exchange, advance payments of the premium tax credit, and cost-
sharing reductions (subject to applicable appeals). As specified in
Sec. 155.310(g) and Sec. 155.400(b)(1), Exchanges will communicate
information about all eligibility and enrollment changes to both
enrollees and their health insurance issuers in a timely fashion. We
also encourage QHP issuers to communicate transparently with enrollees
regarding changes to their coverage, including how changes in an
enrollee's eligibility for cost-sharing reductions may affect the
enrollee's out-of-pocked costs related to coverage, provided that such
communications are not confusing for consumers.
Comment: Commenters supported our proposal in paragraph (f)(4) of
this section to align enrollment effective dates with eligibility
effective dates, but sought clarification on eligibility effective
dates for individuals who opt not to select a new plan upon
experiencing one of the special enrollment period triggering events
described in Sec. 155.420(b)(2).
Response: We clarify that the eligibility effective dates in

[[Page 42260]]

Sec. 155.330(f)(4) apply only in situations in which an individual
uses the special enrollment period to select a plan upon experiencing
one of the triggering events described in Sec. 155.420(b)(2).
Eligibility for individuals who experience a change related to
marriage, birth, adoption, placement in foster care, or loss of minimum
essential coverage, and who opt to maintain their existing QHP, follows
the effective dates otherwise specified within Sec. 155.330(f).
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.330, with
some modifications. First, we clarified that the effective dates in
paragraph (f)(1)(ii) are based on the date specified in the appeal
decision, and removed cross-references to appeals provisions in
paragraph (f)(1)(ii), as we are not finalizing provisions related to
eligibility appeals at this time. However, we maintain the substance of
the provision, and intend to replace the cross-references when we
finalize subpart F. Second, we consolidated the provisions formerly
proposed in Sec. 155.330(f)(3) and Sec. 155.330(f)(4) into a single
requirement in paragraph (f)(3) for decreases in advance payments of
the premium tax credit and changes in cost-sharing reductions. Third,
we modified newly designated (f)(4) to clarify that the Exchange will
implement a change associated with the events described in Sec.
155.420(b)(2)(i) and (ii) of this part on the effective dates described
in Sec. 155.420(b)(2)(i) and (ii) of this part respectively, instead
of on the first day of the following month. Fourth, we removed the
requirement formerly proposed in Sec. 155.330(f)(7), because the
termination of coverage requirement in Sec. 155.430(d)(3) renders
Sec. 155.330(f)(7) duplicative.
13. Annual Eligibility Redetermination (Sec. 155.335)
In Sec. 155.335, we proposed to amend paragraphs (a), (b), (c),
(e), (f), (g), (h), (k), and (l) of this section to specify that
subject to the limitations specified in paragraph (l) and new paragraph
(m), the Exchange will conduct an annual eligibility redetermination
for all qualified individuals, not only those who are enrolled in a
QHP. Our proposal was to replace the word ``enrollee'' with the term
``qualified individual'' in these paragraphs.
We proposed to amend paragraph (b) to include data regarding Social
Security benefits as defined under 26 CFR 1.36B-1(e)(2)(ii). This
reflects the revision we proposed to make in Sec. 155.320(c)(1)(i)(A).
We proposed to make technical corrections to paragraph (l) to
specify that, if the Exchange does not have authorization to use a
qualified individual's tax information, the Exchange will redetermine
the qualified individual's eligibility only for enrollment in a QHP
through the Exchange.
We proposed to add new paragraph (m), which would provide that, if
a qualified individual does not select a QHP before the redetermination
described in this section, and is not enrolled in a QHP through the
Exchange at any time during the benefit year for which such
redetermination is made, the Exchange must not automatically conduct a
subsequent redetermination of his or her eligibility for a future
benefit year.
Comment: Commenters supported HHS' proposal to allow all qualified
individuals to be redetermined for eligibility for enrollment in a QHP
through the Exchange, regardless of whether they have enrolled in a QHP
through the Exchange during the coverage year. Several commenters
recommended omitting Sec. 155.335(m), the special rule, to allow
states to continue redeterminations for non-enrolled qualified
individuals, for at least 3 more years.
Response: We continue to believe that one redetermination for a
qualified individual who does not select a QHP represents an
appropriate balance between providing consumers with a streamlined
ability to obtain coverage and the burden on the Exchange associated
with redeterminations and on consumers who are not interested in
enrolling. We intend to monitor take-up rates within the FFE and
encourage state-based Exchanges to do the same, as this data will
inform whether changes to this policy might be appropriate in the
future. Accordingly, we are finalizing this provision as proposed.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.335 of the
proposed rule without modification, except we reserve paragraphs (c)(1)
and (c)(2) as we continue to evaluate the appropriate information that
will be included in the annual redetermination notice, and modify
paragraph (c)(3) such that the previous reference to paragraph (c)(1),
which is now reserved, instead refers to paragraph (b), which
accurately refers to the updated information being retrieved by the
Exchange.
14. Administration of Advance Payments of the Premium Tax Credit and
Cost-Sharing Reductions (Sec. 155.340)
In Sec. 155.340, we proposed technical corrections in paragraphs
(b) and (c) to replace the reference to section 36B of the Code to the
applicable Treasury regulation. We did not receive specific comments on
this section, and are thus finalizing the provision as proposed.
Summary of Regulatory Changes
We are finalizing the technical corrections proposed in Sec.
155.340 of the proposed rule to specify the appropriate definition of
minimum value.
15. Coordination With Medicaid, CHIP, the Basic Health Program, and the
Pre-existing Condition Insurance Plan (Sec. 155.345)
In Sec. 155.345, we proposed to make a technical correction to
paragraph (a) to clarify that the agreements that the Exchange enters
into with the agencies administering Medicaid, CHIP, and the BHP, if
applicable, must include a clear delineation of the responsibilities of
each ``agency'' as opposed to each ``program.'' We proposed to amend
paragraph (a)(2) to specify that the agreement the Exchange enters into
with other agencies administering insurance affordability programs
addresses the responsibilities of each agency to ensure prompt
determinations of eligibility and enrollment in the appropriate program
without undue delay, based on the date the application is submitted to,
or redetermination is initiated by, the Exchange or another agency
administering an insurance affordability program. We proposed to change
the ordering of agencies listed for purposes of clarity. We also
proposed to redesignate paragraph (a)(3) as paragraph (a)(4), and add a
new paragraph (a)(3) to ensure that, as of January 1, 2015, the
agreement delineates responsibilities for the provision of a combined
eligibility notice, as defined in Sec. 435.4, to individuals and
members of the same household, to the extent feasible, for enrollment
in a QHP through the Exchange and for all insurance affordability
programs. Section 155.345(a)(3)(i) proposed that prior to January 1,
2015, the notice include coordinated content, as defined in Sec.
435.4, while Sec. 155.345(a)(3)(ii) and (g)(7) addressed the
implementation of a combined eligibility notice requirement as of
January 1, 2015.
We proposed a phased-in approach for the provision of a combined
eligibility notice in cases where the Exchange is performing
assessments of

[[Page 42261]]

eligibility for Medicaid and CHIP based on MAGI.
We noted that, based on the operational readiness of the Exchange
and other agencies administering insurance affordability programs,
combined eligibility notices may be implemented earlier that January 1,
2015, but that in states where the FFE is conducting assessments rather
than final determinations of eligibility, the FFE will only be able to
provide an eligibility notice that includes coordinated content prior
to January 1, 2015 (and not combined eligibility notices) for
eligibility determinations made by the FFE.
We proposed to make a technical correction in paragraph (f) to cite
to the applicable Treasury regulation instead of Section 36B of the
Code.
We proposed a series of technical corrections throughout paragraphs
(f) and (g) to clarify various provisions and to redesignate paragraphs
as necessary to accommodate the changes described in the proposed rule.
We proposed to add paragraph (g)(7) to require combined eligibility
notices effective January 1, 2015.
Comment: We received comments recommending that notices be
consolidated and coordinated for all family members applying together
even when individuals are eligible for different programs, at the very
least for the initial eligibility determination notice. Commenters
suggested that all notices need to clearly state by name all
individuals to whom the notice applies, especially when notices are
regarding termination. Some commenters indicated that the notice with
coordinated content should clearly inform an individual what he or she
is or may be eligible for, and should never begin with the
ineligibility information. Commenters suggested that all agreements
between the Exchange and the agencies administering Medicaid and CHIP
be approved by HHS and be made publicly available, including on a
public Web site. Some commenters stated that the public should be given
an opportunity to provide input on the agreements and any changes that
are made to the agreements.
Response: We are finalizing this section as proposed, with minor
modifications to reserve two provisions for finalization at a future
date. We anticipate that initial eligibility determination notices will
be consolidated for family members who apply together. Additionally, we
expect that information about the program for which an individual is
eligible, if any, will be displayed in notices before information about
programs for which the individual is not eligible. We are reserving
paragraphs (a)(3) and (g)(7), regarding coordinated content and
combined notices, respectively, which we intend to finalize at a later
date with the parallel Medicaid provisions. The Federally-facilitated
Exchange will provide coordinated content in notices for October 1,
2013. We will take these recommendations into consideration as we
develop model eligibility determination notices. We are not specifying
that agreements between Medicaid and CHIP agencies and Exchanges be
approved by HHS, as we think that the standards included in regulation
represent an appropriate level of federal oversight at this time.
However, we will work with Exchanges to monitor operations over time,
and reevaluate this decision as needed.
Comment: Many commenters expressed support for combined eligibility
notices. Some commenters expressed general support of the phased in
approach for combined eligibility notices, but strongly recommended
minimizing the delay in the implementation of combined notices so that
it only affects the initial annual open enrollment period. Commenters
suggested that the requirement for a combined eligibility notice should
be effective for redetermination notices and eligibility notices for
the open enrollment period beginning on October 15, 2014. Some
commenters were supportive of the January 1, 2015 implementation date
of combined eligibility notices, while others recommended a January 1,
2016 implementation date. One commenter recommended that the effective
date be set as January 1, 2014, and that HHS allow those states that
cannot update their technology in time for January 2014 to seek
approval from HHS for delaying implementation, rather than a nationwide
delay in implementation. Many commenters asked HHS to reiterate that
the phased-in approach does not diminish the principles of the
Affordable Care Act to promote coordination between the Exchange,
Medicaid, and CHIP, beginning in October 2013.
Response: We appreciate commenters' suggestions. We intend to
finalize this provision at a future date with the parallel Medicaid
provision, and so have reserved paragraph (g)(7) for the purposes of
this rule. The Federally-facilitated Exchange will provide coordinated
content in notices for October 1, 2013.
Comment: Several commenters noted that state flexibility is
important in determining when to issue combined or separate,
coordinated eligibility notices. One commenter opposed the requirement
for agencies administering insurance affordability programs to provide
coordinated content in notices before January 1, 2014, and specifically
recommended that at initial annual open enrollment each agency should
be responsible for issuing its own eligibility determination notice
based on the eligibility determination completed for the program or
programs that agency administers, without regard for the other
insurance affordability programs. Many other commenters, however,
expressed support for a coordinated eligibility notice prior to the
implementation of a combined eligibility notice. Another commenter
believed that the state is best suited to determine which agency should
provide the notice of eligibility determination, and opposed to the
requirement under Sec. 155.345(a)(3)(ii) that the combined eligibility
notice be provided by the agency that makes the last determination of
eligibility. One commenter noted that HHS should consider additional
situations where a combined eligibility notice is feasible, but not
beneficial to the applicant(s). Another commenter suggested that HHS
consider additional flexibility for notices to be sent immediately for
consumers who receive a final eligibility determination, and include an
explanation in the notice about the status of any other determinations
that are in progress for other applicants in the household.
Many commenters stated that HHS should ensure that the combined
eligibility notice includes complete information about Medicaid appeal
rights. Other commenters stated that the combined eligibility notice
should include a statement that the individual might be eligible for
additional benefits and more affordable coverage through Medicaid, and
specify how the individual can be screened for Medicaid eligibility.
Response: In the proposed rule, HHS noted two situations in which
the combined eligibility notice would not be advantageous for
consumers, and HHS sought comment on additional situations in which the
combined eligibility notice would not be advantageous. As one commenter
suggested, HHS explained one situation in which a combined eligibility
notice is not appropriate is where multiple family members apply
together, and some members receive a final eligibility determination
while other members need to be transferred to a different agency for a
final determination to be made for other insurance affordability
programs. We will work closely with states to determine when the
issuance of

[[Page 42262]]

a combined eligibility notice is not appropriate, including situations
in which it is not advantageous for the last agency that makes a
determination of eligibility based on MAGI to issue a combined
eligibility notice. Furthermore, we clarify that while the Exchange
will make determinations or assessments of MAGI-based eligibility for
Medicaid and CHIP in accordance with Sec. 155.305(c) and (d), and
Sec. 155.302(b), the Exchange is not required to complete the Medicaid
and CHIP enrollment process for eligible individuals.
We expect that combined eligibility notices will include a
description of appeal rights in accordance with Sec. 155.230(a)(5),
including Medicaid appeal rights, as well as information about how an
individual can request a full eligibility determination from the state
Medicaid or CHIP agency. And, as noted above, we intend to finalize
paragraphs (a)(3) and (g)(7) at a future date alongside parallel
Medicaid provisions, and we are reserving these paragraphs for the
purposes of this final rule.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.345 of the
proposed rule with a few minor modifications. We reserve Sec. Sec.
155.345(a)(3) and (g)(7) for finalization at a later date. Pursuant to
the discussion in the preamble associated with 42 CFR 431.10(c) and
(d), we add new paragraph (h) to clarify that the Exchange and the
Exchange appeals entity must adhere to the eligibility determination or
appeals decision for Medicaid or CHIP made by the State Medicaid or
CHIP agency, or the appeals entity for such agency, which is consistent
regardless of whether the Exchange is making eligibility determinations
or assessments for Medicaid and CHIP. Accordingly, we redesignate
previous paragraphs (h) and (i) as paragraphs (i) and (j).
16. Special Eligibility Standards and Process for Indians (Sec.
155.350)
In Sec. 155.350, we proposed to make a technical correction in
paragraph (a)(1) to replace the reference to section 36B of the Code
with a reference to the applicable Treasury regulation. We did not
receive specific comments on this section, and are thus finalizing the
provision as proposed.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.350 of the
proposed rule without modification.
17. Enrollment of Qualified Individuals Into QHP's (Sec. 155.400)
In Sec. 155.400, we proposed to add paragraph (b)(3) to clarify
the requirement that the Exchange send updated eligibility and
enrollment information for all enrollment-related transactions to HHS
promptly and without undue delay. This added further specificity to the
existing requirement that the Exchange send eligibility and enrollment
information to HHS under paragraph (b)(1) of this section. After
considering several comments in response to this proposal, we are
finalizing the provision as proposed.
Comment: Commenters were supportive of the proposal that the
Exchange would send updated information for all enrollment-related
transactions to HHS promptly and without undue delay. One commenter
sought clarification about cancellations, and wanted to ensure that QHP
issuers did not violate the Affordable Care Act's ban on discrimination
in coverage of benefits related to preexisting conditions. Another
commenter inquired about whether the specific issuer reporting
requirements associated with this provision may vary according to the
different Exchange models.
Response: We note that the cancellations by QHP issuers referred to
in the preamble to this provision in the proposed rule could occur for
various reasons, such as when an individual voluntarily cancels his or
her health insurance selection before the coverage effective date. In
terms of issuer reporting requirements, each Exchange maintains
flexibility to determine its own issuer reporting requirements relative
to enrollment transactions, consistent with the law and applicable
regulations. This provision specifically addresses only the requirement
that the Exchanges report updated eligibility and enrollment
information to HHS.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.400 of the
proposed rule without modification.
18. Special Enrollment Periods (Sec. 155.420)
In Sec. 155.420, we proposed to clarify the scope of the special
enrollment periods throughout this section and add paragraph (a)(2)
clarifying that our usage of ``dependent'' refers to any individual who
is or who may become eligible for coverage under the terms of a QHP
because of a relationship to a qualified individual enrollee.
We proposed to amend paragraph (b) to specify that the effective
dates described therein apply both to qualified individuals first
enrolling in a QHP through the Exchange through a special enrollment
period, as well as to current enrollees. As the effective dates
regarding advance payments of the premium tax credit and cost-sharing
reductions are now addressed in Sec. 155.330(f), we proposed removing
such language in paragraph (b)(2)(i). We also solicited comments as to
whether we should expand the special effective dates in paragraph
(b)(2)(i) concerning birth, adoption, or placement of adoption to cover
children placed in foster care as well, which would also necessitate a
corresponding change to the triggering events described within
paragraph (d)(2) that specifically address that special enrollment
period.
We proposed to add paragraph (b)(2)(iii) regarding the effective
dates for a special enrollment period under paragraphs (d)(4), (d)(5),
and (d)(9) to align with a similar provision proposed in Sec.
155.330(f). This would ensure that the Exchange could tailor an
effective date based on the circumstances surrounding an error by the
Exchange, a contract violation by the QHP issuer, or other
``exceptional circumstances''.
To align the effective dates under this section with the effective
dates for eligibility as proposed in Sec. 155.330(f), we proposed to
add paragraph (b)(4) to ensure that the Exchange adhere the modified
effective dates related to advance payments of the premium tax credit
and cost-sharing reductions proposed in Sec. 155.330(f). As such, we
proposed to remove language in paragraphs (b)(2) and (b)(3) that
previously addressed this issue.
We also proposed to amend paragraph (d) to specify which triggering
events will allow a qualified individual or enrollee, or his or her
dependent to qualify for a special enrollment period. This was designed
to permit all members of a household, in certain situations, to enroll
in or change QHP's together in response to an event experienced by one
member of the household, and we proposed technical corrections
throughout paragraph (d) to ensure that the revised language allows for
the dependent to qualify for a special enrollment period as well,
subject to whether the QHP covers the dependent. While we did not
modify the scope of each triggering event described within paragraph
(d), we solicited comments regarding whether we should permit such
movement of related individuals for other special enrollment periods.
We proposed to add language specifying that the triggering event in
the case of a QHP decertification is the date of the notice of
decertification,

[[Page 42263]]

whereas the triggering event in all other cases associated with a
qualified individual or his or her dependent losing minimum essential
coverage is the date the individual or dependent loses eligibility for
minimum essential coverage.
We also proposed to amend paragraphs (d)(6)(i) and (ii) to specify
that the Exchange will provide a special enrollment period for an
enrollee or his or her dependent enrolled in the same QHP who is
determined newly eligible or newly ineligible for advance payments of
the premium tax credit or who experiences a change in eligibility for
cost-sharing reductions. We also modified the language within paragraph
(d)(6)(iii) to allow a qualified individual or his or her dependent who
is enrolled in qualifying coverage in an eligible employer-sponsored
plan and who are determined newly eligible for advance payments of the
premium tax credit to qualify for this special enrollment period prior
to when he or she will cease to be eligible for qualifying coverage in
an eligible employer-sponsored plan, provided that eligibility for
advance payments of the premium tax credit and cost-sharing reductions
are not available for an individual who is enrolled in an eligible
employer-sponsored plan. Allowing these qualified individuals or
dependents to be determined eligible for this special enrollment period
up to 60 days prior to the end of his or her employer-sponsored
coverage protects them from potential gaps in coverage.
Finally, we proposed to add a new paragraph (d)(10) to provide a
special enrollment period for a qualified individual or his or her
dependent that is enrolled in an eligible employer-sponsored plan that
does not provide qualifying coverage, and is allowed to terminate his
or her existing coverage. The Exchange would allow such an individual
to access this special enrollment period up to 60 days prior to the end
of his or her coverage in an eligible employer-sponsored plan, to
protect them from potential gaps in coverage.
Comment: Several commenters supported our clarification in
paragraph (a) aligning the definition of ``dependent'' to refer to
those family members that would be eligible to enroll in coverage under
a QHP, and commended HHS for allowing dependents to change QHPs or
enroll in a new QHP together with their family members for certain
special enrollment periods when eligible. Some commenters wanted to
ensure that family members would be adequately informed about the
benefits of enrolling in plans together as well as the potential
drawbacks of failing to do so. However, several comments also raised
concerns that this proposed definition was too plan-specific and would
ultimately lead to greater confusion among families in terms of
eligibility for special enrollment periods. Other commenters sought
flexibility for the definition of ``dependent'' to correspond with
state law, as opposed to a potentially narrower definition set by a QHP
issuer.
Response: We believe that clarifying that the meaning of
``dependent'' aligns with 26 CFR 54.9801-2, the regulation implementing
section 9801(f) of the Code, throughout this section, including for the
special enrollment periods not specified in section 9801(f) of the
Code, helps to promote efficient operations and uniform standards to
guide QHP issuers and Exchanges. Furthermore, this will ensure that
state laws regarding the definition of ``dependent'' will be maintained
within the Exchange, as this does not contradict state laws, but rather
corresponds with state laws that already require issuers cover certain
dependents. We intend to provide the appropriate information through
the eligibility determination notice to an individual and their family
members to adequately inform them of all of their options when
determined eligible for a special enrollment period.
Comment: Some commenters supported our proposal to expand certain
special enrollment periods to dependents to allow family members to
enroll in a new QHP together in response to an event experience by one
member of the tax household, while others sought clarification or an
expansion of this approach to other triggering events. Commenters
requested clarification as to whether the proposed rules sought to
limit the applicability of special enrollment periods to dependents
enrolled in the same QHP with an enrollee, or to members of the tax
household who may be receiving a portion of the advance payments of the
premium tax credit, as well as if paragraph (d)(2) limited the special
enrollment period to only the qualified individual and the ``new''
dependent. Other commenters recommended that the special enrollment
period in paragraph (d)(3) related to citizenship or immigration status
should apply both to the individual who is newly qualified along with
eligible dependents.
Response: As noted above regarding the definition of ``dependent'',
family members eligible to enroll in a QHP are determined eligible for
a special enrollment period when specified in paragraph (d) of this
section. This is not limited to only those members of a tax household
on whose behalf advance payments of the premium tax credit are provided
or who are enrolled in the same QHP. When a family member who
experiences any of the triggering events in paragraph (d) of this
section, that includes dependents in addition to qualified individuals
or enrollees, selects a QHP as part of a special enrollment period, the
Exchange will permit all members of the tax household to enroll
together assuming they are all eligible to enroll in the particular
QHP. If a specific family member experiences a triggering event, but
fails to select a QHP within the relevant special enrollment period,
his or her dependent does not have the ability to choose a different
QHP during this period separately. Furthermore, in response to
comments, we clarify that the special enrollment period in paragraph
(d)(3) of this section, related to citizenship or immigration status,
will apply to both the individual who is newly qualified as well as his
or her dependents, if eligible for coverage under a QHP. We note that
the special enrollment period described in paragraph (d)(3) only
applies to an individual who was not previously a citizen, national, or
lawfully present, as opposed to an individual switching between one of
these statuses.
Comment: In response to HHS' solicitation for comments regarding
modifying the special effective dates in paragraph (b)(2), which
correspond directly to the triggering events described within paragraph
(d)(2), many commenters urged HHS to include the placement of a foster
child as a triggering event within the special enrollment period.
Several commenters also raised concerns about our proposed
modifications to the triggering event for the special enrollment period
described in paragraph (d)(6), related to being newly eligible or
ineligible for advance payments of the premium tax credit, or a change
in eligibility for cost-sharing reductions. Some commenters opposed our
proposal that only enrollees would be eligible for this special
enrollment period if newly eligible or ineligible for advance payments
of the premium tax credit instead of qualified individuals at any point
during the coverage year, and recommended that we not finalize this
proposal in favor of retaining the language adopted in the Exchange
final rule.
Response: We appreciate the comments regarding placement in foster
care as it related to special effective dates, and will add language in
paragraph (b)(2) to include the placement of a foster child as one of
the triggering events listed therein, as well as make the corresponding
change

[[Page 42264]]

regarding the special enrollment period in paragraph (d)(2). We note,
however, that due to the availability of Medicaid to foster children,
it is unclear how frequently this special enrollment period will be
used. Due to ongoing considerations regarding the risk pool, we are
finalizing our proposed modifications to paragraph (d)(6) to specify
that this special enrollment period only applies to those individuals
who are already enrolled in a QHP through the Exchange.
Comment: Multiple commenters expressed general support for the
modifications we proposed to special enrollment periods throughout
paragraph (d), including our proposal to allow a prospective special
enrollment period for qualified individuals enrolled in eligible
employer-sponsored coverage to prevent gaps in coverage. In regards to
the proposed revision to paragraph (d)(6)(iii) related to employer-
sponsored coverage, some commenters suggested that the triggering event
should not be limited to when an individual is enrolled in employer-
sponsored coverage, but should also cover non-enrolled individuals
whose offer of employer-sponsored coverage does not meet the
affordability or minimum value standards. Other commenters wanted HHS
to allow a qualified individual to be determined eligible for advance
payments of the premium tax credit within the window of their special
enrollment period, but prior to when their employer-sponsored coverage
ended.
Response: We believe that individuals with an affordable offer of
employer-sponsored coverage that meets minimum value should be
encouraged to enroll in a plan with their employer. If after enrolling,
their lowest-cost self-only plan option changes during the coverage
year such that it no longer meets the affordability and minimum value
standards, and an individual reports this to the Exchange, the Exchange
will accordingly determine them eligible for a special enrollment
period under paragraph (d)(6). As such, this provision creates
incentives for individuals to enroll in affordable employer-sponsored
coverage, while also minimizing potential gaps in coverage if a change
in coverage occurs during the year such that an applicant would be
newly eligible for advance payments of the premium tax credit if their
employer terminates coverage or changes their plan options. In
addition, we are consolidating proposed paragraph (d)(10), which
provided a special enrollment period to an individual who was enrolled
in non-qualifying coverage in an eligible employer-sponsored plan, into
paragraph (d)(6) and modifying it to clarify that consistent with the
eligibility standards for advance payments of the premium tax credit,
the special enrollment period is available for an individual who is
enrolled in any eligible employer-sponsored plan, and is not eligible
for qualifying coverage in an eligible employer-sponsored plan. For
example, this modification ensures that an individual who is enrolled
in family coverage but for whom the lowest-cost self-only plan is
unaffordable in accordance with the Code can access this special
enrollment period, as intended in the proposed regulation. We will
maintain the prospective ability for an enrollee to select a QHP up to
60 days before their eligible employer-sponsored coverage ends or their
employer allows him or her to drop coverage if the lowest-cost self-
only plan offer is non-qualifying. We note that the Exchange cannot
provide an individual with advance payments of the premium tax credit
while he or she is enrolled in eligible employer-sponsored coverage, as
specified in 26 CFR 1.36B-2(a)(2).
Comment: A few commenters raised concerns regarding the notice that
individuals would receive if determined eligible for a special
enrollment period, and wanted to ensure that the notice would prevent
confusion by providing clear guidance to individuals by helping them
understand the premiums they would be responsible for, and to help them
enroll in a QHP in a timely fashion.
Response: The Exchange will not have information regarding actual
premiums at the time of an initial eligibility determination notice,
since an individual will not have selected a plan at that point. HHS
also developed model notices, released alongside this final rule, that
reflect how an Exchange should clearly communicate an individual's
eligibility for an SEP and the instructions for how he or she can
enroll in a QHP.
Comment: Several commenters also urged HHS to specify additional
triggering events for special enrollment periods. Some commenters
recommended additional triggering events described in Medicare Part D,
unaffordable rate increases, and misinformation provided to an
individual regarding minimum essential coverage or advance payments of
the premium tax credit or cost-sharing reductions. One commenter wanted
HHS to include any change in family size as a triggering event, raising
particular concerns about pregnancy to allow a woman enrolled in a
catastrophic plan to change QHPs prior to the birth of a newborn.
Several commenters requested that HHS clarify that certain triggering
events would qualify as a special enrollment period under ``exceptional
circumstances'' described in paragraph (d)(9) of this section, such as
provider religious objections to covering certain health services to
women.
Response: We believe that the current special enrollment periods
previously proposed appropriately account for changes in circumstances
that necessitate when individuals would need to select a new or
different QHP and balance these needs with considerations regarding the
risk pool. In addition, we note that Sec. 147.104(b)(2) specifies that
in 2014, an Exchange must provide a special enrollment period for
individuals enrolled in non-calendar year individual health insurance
policies beginning on the date that is 30 days prior to the date the
policy year ends in 2014.
Furthermore, a state may establish additional special enrollment
periods to supplement those described in this section as long as they
are more consumer protective than those contained in this section and
otherwise comply with applicable laws and regulations.
HHS intends to issue further guidance related to how Exchanges will
determine the triggering events that constitute ``exceptional
circumstances'' under paragraph (d)(9) of this section. For the issue
raised regarding provider religious objections, we believe that there
are other remedies available to consumers who encounter such
situations.
Comment: One commenter sought clarification that the special
enrollment periods only apply to the individual market as opposed to
the small group market.
Response: We confirm that the language in Sec. 155.420 regarding
special enrollment periods only applies in its entirety to the
individual market. Separate provisions pertain to the small group
market as discussed at Sec. 155.725(a)(3), which excludes Sec.
155.420(d)(3) and (d)(6).
Comment: Some commenters raised concerns regarding our proposals
within this section that pertain to effective dates. Commenters
requested clarification on whether the effective dates related to
errors by the Exchange or contract violations by QHP issuers would
involve setting retroactive enrollment dates. Some commenters suggested
that the Exchange provide flexibility to individuals related to
retroactivity for errors as some

[[Page 42265]]

individuals may not want the Exchange to implement an earlier effective
date. If allowing for retroactivity, commenters urged that the
Exchange's flexibility related to errors or contract violations should
only be provided to correct the unfair outcome. Commenters asked that
the effective date be set for the individual on what it would have been
without the error, and requested that the Exchange only set the
effective date according to paragraph (b)(1) of this section if the
date on which the determination would have been effective without the
error cannot be ascertained. Several commenters also raised concerns
about HHS' proposal to remove the language about effective dates for
advance payments of the premium tax credit and cost-sharing reductions
within this section. Some commenters worried about an Exchange
instituting earlier effective dates under paragraph (b)(3) of this
section, particularly the FFE in 2014.
Response: Outside of a technical correction within paragraph (b)(3)
of this section, we did not propose any changes to the provision
related to the Exchange instituting earlier effective dates if all
participating QHP issuers agree to effectuate coverage in a shorter
timeframe. We believe that there are sufficient regulatory safeguards
for QHP issuers in 2014 if they inform the Exchange that they are not
prepared to institute earlier effective dates. In terms of the
Exchange's flexibility related to retroactive eligibility and
enrollment in cases of errors or contract violations, we note that the
outcome is still contingent on an individual selecting a QHP when
determined eligible for a special enrollment period. This preserves the
ability for an individual to choose to enroll on a particular date, or
to choose not to enroll.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.420 of the
proposed rule with the following modifications. First, in paragraphs
(b)(2)(i) and (d)(2), we expand the special enrollment period and
special effective dates for birth, adoption, and placement for adoption
to also include placement in foster care. Second, in paragraph (d)(3),
we clarify that the special enrollment period for an individual who was
not a citizen, national, or lawfully present non-citizen and gains such
status also applies to his or her dependents, if eligible under the
Exchange eligibility rules. Third, we modify paragraph (d)(6) to
incorporate the special enrollment period proposed in paragraph
(d)(10), with modifications to reflect that it accommodates individuals
who are enrolled in an eligible employer-sponsored plan, but are not
eligible for qualifying coverage in an eligible employer-sponsored
plan. Accordingly, we delete paragraph (d)(10).
19. Termination of Coverage (Sec. 155.430)
In Sec. 155.430, we proposed to amend paragraph (b)(1) to clarify
that it specifically refers to enrollee-initiated terminations. We
proposed to add paragraph (b)(1)(i) to account for circumstances in
which, through periodic data matching, an Exchange finds an enrollee
eligible for other minimum essential coverage, thus resulting in the
enrollee's ineligibility for advance payments of the premium tax
credit. We also proposed in paragraph (b)(1)(ii), that at the time of
plan selection, the Exchange would provide a qualified individual with
the opportunity to choose to remain enrolled in a QHP if the Exchange
identifies that he or she has become eligible for other minimum
essential coverage, and the enrollee does not request a termination in
accordance with paragraph (b)(1)(i).
We proposed to amend paragraph (d)(1) to specify that changes in
advance payments of the premium tax credit and cost-sharing reductions,
including terminations, adhere to the effective dates specified in
Sec. 155.330(f).
Comment: Several commenters cautioned against requiring retroactive
termination effective dates that would necessitate the return or
repayment of claims, premiums, advance payments of the premium tax
credit, or cost-sharing reduction payments. However, other commenters
urged HHS to modify termination effective dates in Sec. 155.430(d)
such that for qualified individuals who gained, or were going to gain
other coverage, the termination effective dates would be the day before
the other coverage begins, regardless of when the enrollee notifies the
Exchange of his or her other coverage.
Response: We appreciate the comments concerning this provision, and
have modified the termination effective date at Sec.
155.430(d)(2)(iii) for enrollee-requested terminations such that QHP
issuers and Exchanges may only terminate coverage effective on or after
the date on which the enrollee requests termination, and not
retroactively. We have also clarified in Sec. 155.430(d)(2)(iv) that
the last day of coverage in a QHP for an enrollee who is determined
eligible for Medicaid, CHIP or the BHP is the day before the individual
is determined eligible for such coverage, rather than retroactive to
the Medicaid or CHIP eligibility effective date.
Comment: One commenter recommended amending Sec. 155.430(d) to
specify that changes in eligibility, including terminations, must
adhere to the effective dates specified in Sec. 155.330(f), to ensure
alignment of processes.
Response: We agree with the commenter, and have modified the
termination effective dates in Sec. 155.430(d)(3) to cross-reference
Sec. 155.330(f).
Comment: Commenters sought clarification of why an enrollee who is
eligible for other minimum essential coverage would elect to remain
enrolled in a QHP without advance payments of the premium tax credit.
Response: While 26 CFR 1.36B-2 specifies that premium tax credits
are not available to support enrollment in a QHP through the Exchange
for an individual who is eligible for other minimum essential coverage,
such an individual is free to remain enrolled in a QHP through the
Exchange, without advance payments of the premium tax credit and cost-
sharing reductions, if he or she remains eligible for enrollment in a
QHP through the Exchange. It is possible that an individual would want
to maintain enrollment without advance payments of the premium tax
credit and cost-sharing reductions for continuity of coverage reasons.
As we proposed in 155.430(b)(2)(ii), the Exchange must provide an
opportunity at the time of QHP selection for an individual to choose to
remain enrolled in a QHP if he or she has become eligible for other
minimum essential coverage. If the individual does not choose to remain
enrolled in a QHP upon such a change, the Exchange would initiate
termination upon completion of the redetermination process specified in
Sec. 155.330.
Comment: Commenters recommended that in addition to the opportunity
at plan selection, enrollees should be given a second opportunity to
elect to remain enrolled in a QHP without advance payments of the
premium tax credit and cost-sharing reductions when the Exchange finds
the enrollee is eligible for other minimum essential coverage through a
periodic data match.
Response: Exchanges are free to provide additional opportunities
for individuals to request termination, or to request to remain
enrolled in a QHP without advance payments of the premium tax credit or
cost-sharing reductions, upon losing eligibility for such benefits. In
paragraph (b)(1)(ii), we have clarified that the opportunity provided
at the time of plan selection is effective both in cases of periodic
data matching as well as when an enrollee reports gaining eligibility
for other

[[Page 42266]]

minimum essential coverage that would make him or her ineligible for
advance payments of the premium tax credit and cost-sharing reductions.
Comment: A commenter raised a concern that the proposed revision to
the termination provision in Sec. 155.430(b)(2) broadly permits an
individual whose coverage was already effectuated during the initial
open enrollment period to notify the Exchange or QHP issuer of his or
her termination of coverage, and switch QHPs.
Response: Individuals are free to terminate enrollment in a QHP
through the Exchange at any time. Individuals who wish to begin other
coverage in a QHP through the Exchange must be within an open or
special enrollment period to do so. Each Exchange has the flexibility
to decide whether to allow enrollees for whom coverage has been
effectuated to change QHPs during any remaining time in an open or
special enrollment period. For October 1, 2013, the FFE will not permit
an enrollee to change QHPs in such a situation. As noted above, such an
individual may qualify for a new special enrollment period as specified
in 45 CFR 155.420.
Comment: One commenter noticed that the proposed provisions did not
clarify whether the Exchange would be permitted to terminate coverage
retroactively to the date of death. The commenter recommended that the
Exchanges have the flexibility to align with non-group market
standards, and allow for retroactive terminations when the Exchange
obtains updated information regarding a death.
Response: We agree with the commenter, and have added paragraph
Sec. 155.430(d)(7) to clarify that in the case of termination due to
death, the last day of coverage is the date of death, which means that
coverage could be terminated retroactively.
Comment: A commenter noticed that there were conflicting provisions
regarding terminations at Sec. 155.430 and Sec. 156.270(b). Section
156.270(b) specifies that QHP issuers must notify both the Exchange and
enrollees of the effective date and reason for termination at least 30
days prior to the last day of coverage, and Sec. 155.430(d) specifies
that in some cases, QHP issuers may effectuate termination in fewer
than 30 days.
Response: We have modified Sec. 156.270(b) in this final rule to
align the coverage termination standards for Exchanges and QHP issuers.
We have also clarified that QHP issuers will promptly notify both
enrollees and the Exchange of the termination reason and termination
effective date when the QHP initiates a termination.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.430 of the
proposed rule, with the following modifications: We modified paragraph
(b)(1)(ii) to specify that the opportunity provided by the Exchange at
the time of plan selection for an individual to choose to remain
enrolled in a QHP if he or she becomes eligible for other minimum
essential coverage applies both to situations in which eligibility for
other minimum essential coverage is identified via a periodic data
match, as well as situations in which the individual reports the change
to the Exchange. We modified the termination effective date provision
at paragraph (d)(2)(iii), for enrollee-requested terminations, such
that QHP issuers and Exchanges may only terminate prospectively, not
retroactively. We modified paragraph (d)(2)(iv), which concerns
terminations for enrollees who are determined eligible for Medicaid,
CHIP or the BHP, such that the last day of coverage is the day before
the individual is determined eligible for such coverage, rather than
retroactive to the Medicaid or CHIP eligibility effective date. We also
modified the termination effective dates in paragraph (d)(3) to cross-
reference Sec. 155.330(f). We added paragraph (d)(7) to clarify that
in the case of termination due to death, the last day of coverage is
the date of death. In addition, we are finalizing an amendment to Sec.
156.270(b) to align the coverage termination requirements for Exchanges
and QHP issuers.

D. Medicaid Premiums and Cost Sharing

1. Responses to General Comments (Sec. 447.51 through Sec. 447.57)
Comment: Many commenters supported the streamlined and consolidated
approach to the revised cost sharing rules. One commenter believed that
removing the distinction between the requirements of sections1916 and
1916A of the Act was confusing and lost some of the differences in the
statutory provisions. The commenter was also concerned that under the
revised rules, states will no longer have to explicitly invoke the use
of alternative (section 1916A of the Act) cost sharing through the
state plan amendment process. One commenter stated that CMS should not
provide more specific requirements in the regulations to give states
more flexibility.
Response: We maintain the streamlined and consolidated structure in
the final regulation, which we believe is consistent with the
flexibilities and limitations provided in both sections 1916 and 1916A
of the Act. We believe that consolidation will simplify the rules for
beneficiaries, providers, and states, and will also simplify the state
plan amendment (SPA) process. States will continue to be required to
submit a SPA to impose new or revised cost sharing or premiums, and CMS
will review such SPAs to ensure compliance with the regulations and
statute.
Comment: Two commenters recommended that rather than remove current
Sec. 447.58 and reserve it, this provision should be used to implement
the long-standing statutory provision that the cost sharing provisions
of sections 1916 and 1916A of the Act cannot be waived unless a state
meets the criteria required under section 1916(f) of the Act.
Response: The terms of section 1916(f) of the Act, relating to the
requirements states must meet for the Secretary to approve a waiver of
the cost sharing provisions of sections 1916 and 1916A of the Act are
clear. We do not believe it is necessary at this time to issue
regulations setting forth the Secretary's substantive authority under
section 1115 of the Act, and such an action would be outside of the
scope of this rulemaking. We note that we issued procedural regulations
at 77 FR 11678 (Feb. 27, 2012) governing demonstration applications in
accordance with section 1115(d) of the Act (as added by section
10201(i) of the Affordable Care Act).
Comment: One commenter stated that given the statutory constraints
implemented in the regulations, states should be given additional
flexibility through the use of a standard waiver template applicable to
newly eligible adults. One commenter stated that for MAGI-based
eligibility groups, states should be able to impose premiums and cost
sharing on individuals with income over 100 percent of the FPL that is
equivalent to what those individuals would be subject to if they were
enrolled in the Exchange.
Response: Section 1916A of the Act and these regulations provide
considerable flexibility for states to impose cost sharing on
individuals with income over 100 percent of the FPL, including the
ability to target cost sharing, charge higher amounts, and make the
cost sharing enforceable. But the statute provides for cost sharing
protections for the Medicaid population that are not the same as the
protections for individuals enrolled in coverage through the Exchange.
To waive the

[[Page 42267]]

Medicaid cost sharing requirements and go beyond the flexibilities
provided in section 1916A of the Act for individuals covered under the
state plan, the Secretary must find that the requirements of section
1916(f) of the Act have been met. We do not believe that a template for
waiving the cost sharing requirements in accordance with section
1916(f) of the Act is needed at this time. Except for certain specified
eligibility groups, sections 1916 and 1916A of the Act limit premiums
imposed under the state plan on those with income over 150 percent of
the FPL.
Comment: One commenter noted that it appears we left in place
Sec. Sec. 447.66 through 447.82 of the current regulations and
suggested that CMS remove these sections.
Response: This was a drafting error and we have removed those
sections in the final rule. Those sections reflected alternative
premiums and cost sharing requirements under section 1916A of the Act
that have been integrated into new streamlined cost sharing regulations
that reflect both sections 1916 and 1916A of the Act.
2. Definitions (Sec. 447.51)
We proposed to add a definition for premiums, which includes
enrollment fees and other similar charges. We also proposed to add a
definition for cost sharing to encompass deductibles, copayments,
coinsurance, and other similar charges. Because each of these charges
would be included within cost sharing, we proposed to remove separate
requirements related to deductibles, copayments, and coinsurance;
instead all cost sharing would be subject to a single set of rules. We
also proposed new definitions for purposes of the premium and cost
sharing regulations for preferred drugs, emergency and non-emergency
services, and alternative non-emergency service providers, since the
cost sharing rules vary for these items and services. We received the
following comments concerning the proposed definitions:
Comment: Several commenters recommended that we revise the
definition of alternative non-emergency service provider at Sec.
447.54 to mean ``a Medicaid-participating provider, such as a
physician's office, health care clinic, community health center,
hospital outpatient department, or similar provider that is actually
available and accessible and can provide clinically appropriate
services for the diagnosis or treatment of a non-emergency condition in
a timely manner.''
Response: We are finalizing the definition as proposed in Sec.
447.51. The revisions suggested by the commenters regarding the
alternative non-emergency provider being available and accessible and
being able to provide for the diagnosis or treatment of a non-emergency
condition are implicit in the requirements that must be met at Sec.
447.54(d) before the imposition of cost sharing for non-emergency use
of the ED. However, we have revised the definition of non-emergency
services for clarity; this revision is not a substantive change.
Comment: Several commenters recommended that we remove the term
``coinsurance'' from the definition of cost sharing at Sec. 447.51,
since few states charge coinsurance and the statute does not use the
term. They discussed that eliminating the term ``coinsurance'' would
further the goal of simplification.
Response: We agree that very few states elect the option to charge
coinsurance, but it is still an option available to states under the
statute, which allows for other ``similar charges.'' Therefore we are
maintaining the term ``coinsurance'' in the definition of cost sharing
in the final rule. With the streamlining of the regulations in this
final rule, states that do elect to charge coinsurance must ensure it
does not exceed the limits defined in Sec. 447.52-54.
Comment: We solicited comments on whether we should add definitions
of ``inpatient stay'' and ``outpatient services'' to take into account
situations in which an individual is discharged and soon thereafter
returns to an inpatient facility for continued treatment of the same
condition. One commenter supported the inclusion of a definition of
``inpatient stay'' and recommended that we adopt the approach taken in
Medicare to define a ``benefit period'' and prohibit a second copay for
any inpatient stay within the same benefit period. Some commenters also
supported the addition of a definition of ``outpatient services''
giving states broad flexibility to determine which services may be
subject to cost sharing. No commenters opposed adding definitions of
these terms.
Response: We are adding a definition of ``inpatient stay'' in the
final rule at Sec. 447.51 to mean the services received during a
continuous period of inpatient days in either a single medical
institution or multiple medical institutions, and also to include a
return to an inpatient institution after a brief period when the return
is for treatment of a condition that was present in the initial period.
We also add that the definition of ``inpatient'' has the same meaning
as in Sec. 440.2. We believe this is in the best interest of
beneficiaries with chronic conditions who may have frequent visits to
the hospital or other institution for treatment of the same condition,
and is consistent with the limitations on cost sharing established in
the statute. We also add a definition of ``outpatient services'' for
purposes of cost sharing to mean any service or supply not meeting the
definition of an inpatient stay. This definition will include cost
sharing for any services outside an institutional setting, not
otherwise exempt by statute or regulations, excluding drugs and non-
emergency use of the hospital emergency department which are defined
separately. We note that these definitions are applicable only to cost
sharing and do not constitute any change in definition specific to the
provision of benefits or services.
Comment: One commenter requested CMS provide additional information
to states regarding how the proposed definition of cost sharing will
affect the offset to expenses that states can report for Medicaid FFP
(Sec. 447.51).
Response: Nothing in the definition of ``cost sharing'' at Sec.
447.51 changes the rule related to FFP. Per Sec. 447.56(e), which is
unchanged from current rules, no FFP is available for any premiums or
cost sharing that should have been paid by the beneficiary, except for
amounts that the agency pays as bad debts of providers who are paid in
accordance with Medicare reasonable cost principles.
Comment: One commenter recommended revising the definition of a
premium at Sec. 447.51 to exclude enrollment fees because premiums are
generally applied on an annual or periodic basis whereas enrollment
fees are generally a onetime payment. The commenter recommends that
states should have the flexibility to require an enrollment fee in
addition to premiums.
Response: The statute defines a premium to include any enrollment
fee or similar charge, and therefore the limitations on total premium
charges include both premiums and enrollment fees. As the Secretary
does not have the authority to change this requirement, we are
finalizing the definition of premiums as proposed. States do have the
flexibility to impose both a monthly premium and an initial enrollment
fee within the limitations for premiums described in this rule.
3. Update to Maximum Nominal Cost Sharing (Sec. 447.52)
We proposed to implement sections 1916(a)(3) and (b)(3) of the Act
relating

[[Page 42268]]

to nominal cost sharing, and to revise the maximum amount of nominal
cost sharing for outpatient services. For beneficiaries with incomes at
or below 100 percent of the FPL, cost sharing for outpatient services
may not exceed nominal. For those with income above 100 percent of the
FPL, cost sharing can either be limited to nominal or may extend up to
10 or 20 percent of the cost of the service, depending on the income of
the beneficiary. Currently, maximum allowable nominal cost sharing is
tied to what the agency pays for the service, not to exceed $3.90 for
services for which the state pays more than $50. Because this can be
confusing and burdensome for states, providers, and beneficiaries, we
proposed to allow instead a flat $4 maximum allowable charge for
outpatient services. This is a modest $0.10 increase from the current
maximum, and as we noted as a basis for the proposed rule, the majority
of state services are reimbursed at more than $50. The proposed changes
are discussed in more detail in the January 22, 2013 Medicaid
Eligibility Expansion proposed rule (78 FR 4658 and 4659). We received
the following comments concerning the proposed update to the maximum
nominal cost sharing provisions:
Comment: Many commenters wanted CMS to eliminate cost sharing for
Medicaid beneficiaries altogether because of the extensive research
showing that cost sharing on low-income populations creates barriers to
accessing needed care, with particular consequence for those with
special health care needs. One commenter recommended that CMS revise
the cost sharing regulations to align with the lowest eligibility
threshold for Medicaid based on modified adjusted gross income created
by the Affordable Care Act (for example, 133 percent of the FPL) and
create two tiers of cost sharing--one for those with income at or below
133 percent of the FPL and one for those with income above 133 percent
of the FPL. One other commenter recommended that individuals with
income below 133 percent of the FPL should be exempt from cost sharing.
Response: We recognize the studies indicating that cost sharing may
impact beneficiaries' access to needed and prescribed services, given
the low incomes of most of those who are enrolled in Medicaid. However,
the statute authorizes states to impose cost sharing, subject to
certain limitations. Additionally, the Affordable Care Act did not
modify the cost sharing provisions of sections 1916 and 1916A of the
Act. Section 1916A of the Act distinguishes between individuals with
income at or below 100 percent of the FPL, those with income above 100
and at or below 150 percent of the FPL, and those with income above 150
percent of the FPL. We do not have the authority to revise the income
thresholds set out in statute or to preclude states from imposing cost
sharing on individuals with income under 133 percent of the FPL
consistent with the limitations in sections 1916 and 1916A of the Act,
as implemented in these regulations. States do not, of course, have to
implement cost sharing to the extent authorized by the statute, and
most do not do so. We note that in Sec. 447.51 of the final rule we
add a definition of Federal poverty level (FPL) to use the acronym
throughout the regulation. No substantive change is intended.
Comment: Several commenters stated that cost sharing is unnecessary
in the context of managed care because the point of managed care is to
manage utilization and ensure care is provided in the most appropriate
settings. The commenters argue that managed care already achieves the
goals that states are attempting to achieve through cost sharing and
that cost sharing interferes with the medical management effectuated
through managed care programs. Another commenter believed the rules did
not provide enough flexibility in the managed care context. One
commenter requested that CMS clarify that Medicaid agencies can permit
managed care organizations to not impose cost sharing on enrollees.
Response: While managed care can play a role in ensuring more
appropriate utilization of health care services, the statute does not
limit the imposition of cost sharing to fee-for-service delivery
systems. In general, states may not establish different cost sharing
requirements for beneficiaries served by a fee-for-service versus a
managed care delivery system unless all beneficiaries have the same
opportunity to participate in fee-for-service versus managed care and
to enjoy the benefits of lower cost sharing imposed under one service
delivery mechanism versus the other. Section 4708(b) of the Balanced
Budget Act of 1997 specifically removed the statutory cost sharing
exemption for enrollees in managed care organizations. Managed care
organizations may choose not to impose state plan cost sharing on their
members, but the state must still consider the amount of cost sharing
under the state plan in determining the actuarial soundness of the
capitated payment to the managed care organization. Section 1916A of
the Act allows states to target cost sharing to specified eligibility
groups, as described at Sec. 447.52(d) of this final rule, and states
may target cost sharing specifically to those eligibility groups who
may be enrolled in managed care, but the targeting must be based on the
eligibility group and not solely on the basis of enrollment in managed
care. However, states may charge different co-pays to incentivize the
use of certain care models--for example lower co-pays to encourage use
of primary care medical homes or other patient-centered coordinated
care models--to the extent that those models provide a different
service from those offered at a more traditional medical provider, and
the particular model of care is broadly available to beneficiaries.
This is permissible because the state is differentiating co-payments
based on the service provided, and because all individuals have the
choice to receive such services, comparability is met.
Comment: Some commenters recommended that CMS should restore the
use of the term ``nominal,'' as that term is used in the existing
regulations. They argue that the Act specifically limits cost sharing
to ``nominal'' amounts and directs the Secretary to determine what
constitutes a ``nominal'' amount each year to ensure that cost sharing
amounts are not onerous for beneficiaries.
Response: The streamlining proposed does not negate the
requirements at section 1916 of the Act that cost sharing for certain
populations be nominal in amount. Section 1916 of the Act gives the
Secretary authority to define nominal cost sharing, which we do at
proposed Sec. Sec. 447.52, 447.53 and 447.54. The amounts described in
these sections are the maximum that can be imposed on individuals with
income at or below 100 percent of the FPL, since these individuals may
not be subject to the higher cost sharing allowable under section 1916A
of the Act. The proposed amounts will be updated annually based on the
CPI-U, starting October 1, 2015. As mentioned, in streamlining the
regulations implementing sections 1916 and 1916A of the Act, we did not
use the term ``nominal'' in the regulatory text, but the amounts
permitted were set based on the determination that they were nominal
amounts.
Comment: Many commenters agreed with severing the tie between
maximum cost sharing amounts and what the agency pays for the service
but believed that a flat $4 maximum amount proposed at Sec. 447.52 was
too burdensome for Medicaid beneficiaries with income at or below 100
percent of the FPL. Many commenters recommended that CMS should set
maximum cost sharing amounts based on the income and health status of
the

[[Page 42269]]

beneficiaries and recommended using Medicare as a model, which
establishes two tiers for Part D copayments for individuals with income
at or below 100 percent of the FPL and individuals with incomes over
100 percent of the FPL, and recommend the Medicaid cost sharing maximum
should be limited to $2.10 for those at or below 100 percent of the FPL
which is the approximate average of the FY 2013 maximum copayment
amounts.
Response: Sections 1916 and 1916A of the Act allow for different
levels of cost sharing for individuals with income at or below 100
percent of the FPL versus those with income over 100 percent of the
FPL, similar to the two-tiered structure established for Medicare Part
D which the commenters recommend. Section 1916A of the Act further
differentiates maximum cost sharing levels for those with income above
100 or at or below 150 percent of the FPL and those with income over
150 percent of the FPL. Current regulations already allow states to
charge all non-exempt beneficiaries up to $3.90 for many services, and
as described previously, we believe the $4 maximum charge is
comparable, particularly given that the next update to this nominal
amount has been postponed under this rule until October 1, 2015. We
also note that while this is the maximum level at which states may set
their cost sharing obligations, they may establish lower levels of cost
sharing.
We note that under current regulations at Sec. 447.56, states have
the option to establish different cost sharing charges for individuals
at different income levels. We inadvertently omitted this section from
the proposed rule and are restoring this option in the final rule at
Sec. 447.52(g). We specify in the final rule that if the state imposes
cost sharing charges that vary by income, it must ensure that lower
income individuals have lesser cost sharing than higher income
individuals.
Comment: One commenter expressed concern that the simplified $4
maximum for individuals with income at or below 100 percent of the FPL
would create a disparity with the percentage-based maximum cost sharing
for individuals with income above 100 percent of the FPL.
Response: It was not our intent to establish a cost sharing system
under which lower income beneficiaries could be subjected to higher
cost sharing than their higher income counterparts. Our intent was to
define maximum nominal cost sharing, as described under sections
1916(a)(3) and (b)(3) of the Act, as $4 for outpatient services. If a
state seeks to use the authority provided under section 1916 of the Act
to impose nominal cost sharing on individuals with income at or below
100 percent of the FPL, such cost sharing must also be applied to
individuals with income above 100 percent of the FPL. Section 1916 of
the Act does not allow for targeted cost sharing on different groups of
individuals, so any cost sharing established under this authority is
applicable to all non-exempt individuals. The 10 and 20 percent
maximums established for individuals with income over 100 percent of
the FPL are specific to cost sharing established under the authority of
section 1916A of the Act. This authority specifically allows for cost
sharing of up to 10 percent of the cost of the service for individuals
above 100 and at or below 150 percent of the FPL and 20 percent for
individuals with income above 150 percent of the FPL, with slightly
different maximums for drugs and non-emergency use of the emergency
department. For a specific outpatient service, a state may establish
nominal cost sharing under the authority of section 1916 of the Act for
all non-exempt individuals covered under the state plan in an amount
not to exceed $4 (as adjusted for inflation), and the state may also
establish targeted cost sharing for specified individuals under section
1916A of the Act for that same outpatient service, in an amount not to
exceed 10 percent of the cost of the service. In such a case, the cost
sharing imposed under the section 1916 authority may not exceed 10
percent of the cost of the service if that amount is less than the
maximum nominal amount allowed for individuals with income under 100
percent of the FPL, because the state must ensure that lower income
individuals are charged less than individuals with higher income, as
described at Sec. 447.52(g).
Comment: We solicited comments on the best approach to cost sharing
for an inpatient stay for individuals with income at or below 100
percent of the FPL. We indicated we were considering a maximum cost
sharing amount less than what is allowed in current regulation. Most
commenters believed that the current regulations allowing cost sharing
of up to 50 percent of what the agency pays for the first day of
inpatient care was too great a burden for individuals at this income
level. A few commenters recommended a maximum copayment of $10, one
commenter recommended $100, and many recommended that the cost sharing
for inpatient care should be the same as for outpatient services and be
limited to $4.
Response: We are revising the regulations to limit maximum cost
sharing charges for an inpatient stay, for individuals with income at
or below 100 percent the FPL, to $75. This $75 limit will encompass
most hospital cost sharing established by state Medicaid programs today
and will align with the ratio of cost sharing for inpatient versus
outpatient services with similar charges provided under private
insurance plans. To provide a transition period for the small number of
states with existing inpatient cost sharing exceeding $75, we are
adding a new paragraph at Sec. 447.52(b)(2). Under paragraph (b)(2),
states with inpatient cost sharing that exceeds $75, as of July 15,
2013, must submit a plan to CMS that provides for reducing inpatient
cost sharing to $75 by July 1, 2017. We redesignate the succeeding
paragraphs, accordingly.
Comment: We solicited comments on whether we should define nominal
cost sharing differently for community-based long term services and
supports (LTSS) due to the frequency with which these services are
provided and utilized by beneficiaries. Many commenters supported a
separate approach to LTSS because they are concerned about the
financial burden that an individual needing these services could face
if a state were allowed to charge up to $4 for each service and most
recommended that such services be exempted from cost sharing.
Commenters were also concerned that allowing cost sharing for LTSS
would discourage individuals from utilizing LTSS and leave many to opt
for institutional care, which is more costly for states in the long
run. Some commenters recommended that consideration be given to
limiting the number of copayments permitted per week, month, or other
specified timeframe for those with significant service needs, including
adults with serious mental illness. One commenter opposed establishing
different limits for community-based long term services and supports as
it would be administratively burdensome for states. This commenter also
pointed out that no specific mention is made in the regulations to
long-term care community-based services provided under sections
1915(c), 1915(d), 1915(i), or 1915(k) of the Act. The commenter
suggested that perhaps these defined packages are the more appropriate
starting place if separate cost-sharing rules for these services are
considered, but we need to take into account the fact that some
individuals already contribute to the cost of these services in
accordance with the post-eligibility treatment of income rules under
part 435 subpart H.
Response: We agree with commenters that additional protections for
non-

[[Page 42270]]

exempt individuals receiving community-based LTSS are appropriate to
ensure that receiving care in the community, rather than in an
institution, remains a financially viable option for such individuals,
but the statute does not authorize the Secretary to require an
exemption. We note that few states now impose cost sharing on LTSS. We
encourage all states to consider the significant consequences of
imposing cost sharing on such services, and remind states that they are
required to comply with the Americans with Disabilities Act and Section
504 of the Rehabilitation Act as interpreted in the Olmstead v. L.C.
and E.W (``Olmstead'') to ensure they are not placing individuals at
risk of institutionalization. While we are not directing an exemption
for LTSS, we agree with commenters that additional protections are
necessary for individuals with high service needs, and we are revising
the proposed aggregate limit for premiums and cost sharing to protect
all beneficiaries with high medical needs. As discussed further under
Sec. 447.56, the 5 percent aggregate limit applies to all individuals
regardless of income. In addition, if premiums and cost sharing could
exceed 5 percent of family income, states are required to have a
mechanism to track such premiums and cost sharing in a manner that does
not rely on beneficiaries. To provide protections to individuals with
high service needs and ensure their cost sharing does not exceed the
aggregate limit, we encourage states to consider prospectively ending a
beneficiary's cost sharing obligation at a specified time of the
applicable month or quarter given the frequency of utilization and the
predictability of services provided under an approved plan of care, for
example. We note that such an approach must take into account the cost
sharing for items or services that may be received outside the plan of
care, such as drugs for example, which would also contribute to the 5
percent aggregate limit.
We considered different options for a separate definition of
nominal cost sharing specific to LTSS but have determined the most
effective way to ensure ongoing affordability of care for beneficiaries
who are frequent and regular consumers of care, including but not
limited to those who need LTSS, is to ensure that there is an effective
aggregate cap on cost sharing. Aggregate out of pocket limits are a
common practice in the commercial market and we believe the extension
of the aggregate limit is consistent with industry practice and will
provide the greatest protections for beneficiaries, consistent with
statutory provisions, while still maintaining states' flexibility to
establish appropriate cost sharing mechanisms for their programs.
Comment: One commenter believed that proposed Sec. 447.52(b)(2),
which relates to maximum allowable cost sharing when the state does not
have fee-for-service payment rates, is confusing and could be read to
only apply to those with income at or below 100 percent of the FPL.
Response: We agree and have revised the paragraph, redesignated in
this final rule as Sec. 447.52(b)(3), to be clear that, ``in states
that do not have fee-for-service payment rates, any cost sharing
imposed on individuals at any income level may not exceed the maximum
amount established for individuals with income at or below 100 percent
of the FPL.'' The same clarification to the regulation text is made at
Sec. 447.53(c).
Comment: Some commenters recommended that the Secretary provide
states the flexibility to determine the cost sharing methodology that
best aligns with their delivery system and provider categories, for
example allowing flat co-payments and premiums, co-payments based on a
percentage of what the agency pays for the service, or premiums
calculated as a percentage of family income.
Response: The regulations at proposed Sec. Sec. 447.52, 447.53 and
447.54 establish maximum limits on the cost sharing that states can
impose. While we are no longer requiring that the maximum cost sharing
amounts be based on what the agency pays for the service, nothing in
the regulations preclude states from setting their cost sharing amounts
on such basis provided that the amounts charged do not exceed maximum
permissible levels. Similarly, provided that the specific limits set
out in the statute and codified in the regulations--including the
aggregate limit not to exceed 5 percent of family income--are
respected, states have the flexibility under Sec. 447.55 to structure
premiums in the manner suggested, although, as noted, statutory
authority to impose premiums is limited.
Comment: We received several comments suggesting we clarify that
states can apply different levels of cost sharing for their current
Medicaid populations as compared to adults who will become eligible
under the adult group.
Response: In general, any cost sharing established under the state
plan must apply to all beneficiaries who are not specifically exempted
per the requirements at Sec. 447.56(a) to ensure comparability. There
are two exceptions to this requirement, as follows. First, states may
vary the cost sharing obligation by income level, reflected at Sec.
447.52(g) of the final rule, such that individuals with family income
below a certain threshold could be subject to lower cost sharing than
those at higher income levels. A state could, for example, decide not
to impose cost sharing on individuals with incomes below 50 percent of
the FPL, and to impose a $1 copayment on individuals with income above
50 percent of the FPL. We note that states should have adequate
processes in place to ensure providers and beneficiaries are aware of
who can be charged what cost sharing so it is appropriately applied.
Second, reflected at Sec. 447.52(d), as redesignated in the final
rule, states may establish different levels of cost sharing for
targeted groups of individuals with income above 100 percent of the
FPL. In this final rule, we clarify that for cost sharing imposed for
non-preferred drugs and non-emergency services furnished in an ED,
states may target to specified individuals with income below 100
percent of the FPL as well as those above, as discussed below. Thus,
states could impose different cost sharing on individuals eligible in
the new Adult group, or any other eligibility group, with income
greater than 100 percent of the FPL than that imposed on other
beneficiaries.
Comment: One commenter stated that proposed Sec. 447.52(f), which
lists the information that must be included in the state plan for each
cost sharing charge imposed, is revised from the current regulations
atSec. 447.53(d) but that we did not provide a rationale for the
revisions.
Response: We consolidated the state plan requirements currently
contained in Sec. Sec. 447.53(d) and 447.68 into one new section,
redesignated as Sec. 447.52(i) in the final regulation. The state plan
requirements for tracking beneficiary cost sharing related to the
aggregate limit are contained in Sec. 447.56(f)(2) of this final rule.
In consolidating the state plan requirements for cost sharing under the
authority of both sections 1916 and 1916A of the Act, we sought
generally to maintain the current requirements, while removing any
unnecessary regulatory provisions. For example, we removed the
requirement that states describe the basis for determining the charge,
because these regulations no longer require states to base their cost
sharing charges on what the agency pays for the service and this
provision was no longer necessary. We note that we are making minor
technical changes to paragraph Sec. 447.52(i)(4) to improve the
structure of the paragraph

[[Page 42271]]

and delete extraneous language. No substantive changes are intended.
Comment: One commenter recommended that CMS require that state
plans identify whether a cost sharing charge is being imposed under the
authority of section 1916 or section 1916A of the Act.
Response: With the streamlining of the regulations we do not
believe it is necessary for states to specify what authority they are
relying on to impose cost sharing. In their state plan, the states
seeking to impose or continue cost sharing will need to detail who will
be subject to cost sharing, for what service, how much, and whether
providers may deny services for lack of payment. We will review state
plan amendments to ensure compliance with sections 1916 and 1916A of
the Act and these regulations.
Comment: One commenter requested that we clarify that the
regulation authorizes states to allow providers to deny services for
nonpayment of cost sharing, but does not confer authority on states to
require providers to do so. One commenter recommended that we include a
provision that providers are not prevented from reducing or waiving the
application of a cost sharing requirement on a case-by-case basis.
Response: The requirements at Sec. Sec. 447.52(e)(1) and (e)(2),
as redesignated in this final rule, are clear that, while states may
allow providers to deny services to individuals with income above 100
percent of the FPL who have failed to pay cost sharing charges, states
are not required to permit providers to do so (and providers may only
deny services if the state opts to permit them to do so). Further,
Sec. 447.52(e)(3) is clear that even if the state exercises this
option, providers are not prohibited from nonetheless electing to
provide the service to individuals who do not pay their cost sharing
obligations. This is not at state option--it is a provider option--and
we do not believe it is necessary to be included in the state plan.
Comment: A few commenters suggested that the regulations authorize
states to allow providers to deny services for non-payment of cost
sharing charges in more situations, including for those with income at
or below 100 percent of the FPL. The commenters believe that such
provider enforcement, particularly in the context of nonemergency use
of the emergency room, would be appropriate.
Response: We are unable to extend the scope of the regulations
beyond the statutory authority provided in sections 1916 and 1916A of
the Act, both of which only allow states to impose provider-enforceable
cost sharing to non-exempt individuals with income over 100 percent of
the FPL and thereby assure the provision of services to lower income
individuals who may not be able to afford the charge. These provisions
of sections 1916 and 1916A of the Act cannot be waived unless the state
meets the requirements of section 1916(f) of the Act.
Comment: One commenter recommended that the table at Sec.
447.52(b) be clarified to clearly specify that the amounts are maximum
amounts to correspond with the language in Sec. 447.52(b).
Response: We agree with the commenter and have made the revision to
Sec. Sec. 447.52(b), 447.53(b) and 447.54(b).
Comment: One commenter asked if cost sharing must be imposed or if
it is an allowable activity.
Response: States are not required to impose cost sharing, it is an
option. Some states do not impose cost sharing. Furthermore, if a state
does impose cost sharing, it has the option to charge less than the
maximum amounts. Many states do so today.
Comment: One commenter requested clarification as to whether Sec.
447.52(e) (relating to the prohibition against multiple charges)
includes premiums.
Response: Sec. 447.52(e) has been redesignated as Sec. 447.52(f)
in this final rule and pertains to cost sharing only, which is defined
in Sec. 447.51 to include any copayment, coinsurance, deductible or
similar charge. Premiums are not encompassed in this definition, and
states may impose both a premium and cost sharing on a given individual
subject to the applicable conditions on such charges.
Comment: One commenter recommended revising the rule to allow
states to waive or reduce cost-sharing for outpatient services
delivered by designated high-value providers or in high-value care
settings, even if those services may otherwise be subject to cost-
sharing. One commenter requested clarification that the cost sharing
rules may not be applied to different types of practitioners based on
their licensure and that cost sharing within a category of services is
not used to discriminate against health care practitioners acting
within their state-defined licensure.
Response: Nothing in the regulations prevents a state from
determining which services are subject to cost sharing and the amount
charged, or by what type of provider the service is delivered. As
suggested by the commenter, states could differentiate cost sharing for
services provided by a designated high value provider as long as the
state ensures that all beneficiaries have access to such providers.
Comment: One commenter recommended that we include in the final
rule, language currently at Sec. 447.60 that was omitted from the
proposed rule, which requires that any cost sharing charges imposed by
managed care organization on Medicaid enrollees be in accordance with
the requirements set forth in the regulations.
Response: We agree with the commenter. The omission of this
provision was not intentional and we have included this requirement in
the final rule at Sec. 447.52(h).
Comment: One commenter believed that if deductibles are an option
for a state, they should be administered at an individual level on an
annual basis because the commenter believes monthly and/or family-level
deductibles are complex, confusing, and not the standard generally used
by health plans especially when combined with other cost sharing.
Response: Deductibles are permitted at an individual level under
the statute and these regulations. Any deductible imposed by a state
must be within the maximum amounts established in Sec. Sec. 447.52-54,
and subject to the aggregate limit described in Sec. 447.56(f) of this
final rule.
4. Higher Cost Sharing Permitted for Individuals With Incomes Above 100
Percent of the FPL (Sec. 447.52)
We proposed to consolidate the current multiple cost sharing rules
implementing sections 1916 and 1916A of the Act, respectively, into one
set of streamlined cost sharing regulations for both statutory
authorities at proposed Sec. 447.52. Under section 1916 of the Act,
states may impose nominal cost sharing on individuals not exempted by
the statute. Under section 1916A of the Act, statute states may impose
cost sharing at higher than nominal levels for nonexempt individuals
with incomes above 100 percent of the FPL. For individuals with income
above 100 and at or below 150 percent of the FPL, section 1916A of the
Act permits cost sharing for nonexempt services up to 10 percent of the
cost paid by the state for such services. (Different rules, discussed
below, pertain to cost sharing for drugs and emergency department
services). For individuals with income above 150 percent of the FPL,
such cost sharing may not exceed 20 percent of the cost paid by the
state. We received the following comments concerning the proposed
provision for higher cost sharing permitted for individuals with
incomes above 100 percent of the FPL:

[[Page 42272]]

Comment: A few commenters were concerned that we proposed to permit
cost sharing for children.
Response: We did not propose new policy in the proposed rule
related to cost sharing for children. Section 1916A of the Act permits
states to impose cost sharing on certain children by exempting children
covered under mandatory eligibility categories. This statutory option,
implemented at Sec. 447.70 of the current regulations, is retained in
this rulemaking at Sec. 447.56(a)(1)(i) through (VI). We revised the
description of children who are exempt from premiums and cost sharing
at Sec. 447.56(a)(1)(i)(iii) to reflect the consolidation of different
statutory eligibility groups for children under a single regulatory
section at Sec. 435.118 of the March 2012 final rule. We also made a
technical change to the description of children exempt from premiums
and cost sharing under Sec. 447.56(a)(1)(i)(iv) to reflect the changes
in the types of assistance available under Title IV-E of the Act. These
are not substantive changes and are intended solely to assist states in
appropriately identifying those children who may be charged premiums
and cost sharing and exempting those who may not, as described in the
statute.
Comment: One commenter recommended that CMS specify health centers'
statutory responsibility related to the grants provided under section
330 of the Public Health Services Act (PHSA) to provide services
regardless of ability to pay and clarify that states may not impose on
health centers any obligations that conflict with these requirements.
The same commenter also recommended that CMS add an exception at Sec.
447.56(c)(3), entitling FQHCs to full Medicaid payment in situations in
which they are required to collect cost sharing that would directly
conflict with the section 330 requirements to waive a portion of the
Medicaid cost sharing, and at Sec. 447.56(e)(1) to authorize FFP for
cost sharing amounts waived by an FQHC. At a minimum, the commenter
recommends that CMS and HRSA issue joint guidance to minimize the
tension between the Medicaid and section 330 of the PHSA regulations
concerning patient payment obligations for services provided by FQHCs.
Response: The obligations of FQHCs related to their section 330
grants, as well as reimbursement to FQHCs, are beyond the scope of this
regulation. This regulation does not require that FQHCs bill patients
for cost sharing, but it does require that the payment to the provider
take into account the cost sharing obligation. This requirement that
states deduct a beneficiary's cost sharing obligation from the payment
to providers is not new policy. It is contained in current regulations
at Sec. Sec. 447.57 and 447.82, redesignated at Sec. 447.56(c) in
this final rule. FQHC services are not specified as exempt from cost
sharing under sections 1916 or 1916A of the Act and we do not believe
that the Secretary has authority to mandate that states nonetheless
exempt such services from cost sharing based on FQHCs' section 330
obligations. States, however, do have the flexibility to exempt
particular services (including FQHC services) from cost sharing and/or
to adjust the amount of cost sharing imposed, consistent with the
regulations.
Comment: Some commenters recommended permitting flat-dollar
copayments for all income groups, which they think would be easiest for
enrollees and providers to understand and for Medicaid plans to
administer. One commenter requested that we clarify how a limit based
on 10 percent of the cost the agency pays for the service for
individuals with family income above 100 percent but at or below 150
percent of the FPL and 20 percent of the cost the agency pays for the
service for individuals with income over 150 percent of the FPL, would
apply to FQHC services reimbursed under the prospective payment system
(PPS). The commenter is concerned that because the amount of
reimbursement under the PPS varies by health center, the maximum
allowable cost sharing obligation for a particular service or visit
would differ from health center to health center, and that this would
be administratively burdensome for states, managed care plans, and
providers; inequitable for beneficiaries; and could impede access to
FQHC services. The commenter recommends that we revise the rule to
provide that the maximum cost sharing for all individuals for FQHC
services reimbursed under the PPS rate be the same as the maximum rate
for individuals with income at or below 100 percent of the FPL.
Response: Section 1916A of the Act sets the maximum allowable cost
sharing for individuals with income over 100 percent and at or below
150 percent of the FPL at 10 percent of what the agency pays for the
service and for individuals with income over 150 percent of the FPL, at
20 percent of what the agency pays. We do not have the authority to
change the maximum amount to a flat fee. We note that these percentages
represent the maximum allowable charges. States have the flexibility to
establish lesser cost sharing amounts for any service, and they may use
a flat fee as long as it does not exceed the maximum level permitted.
In determining the cost sharing for a particular service, states also
can use the average payment made for the service across providers or
units of the service to develop a consistent cost sharing amount within
the maximum amount allowed by statute and regulation.
Comment: One commenter asked for clarification regarding the
definitions of income that states should use in setting cost sharing
charges, other than to say that the definitions of household income in
Sec. 435.603 should be used in determining the aggregate limit on
cost-sharing. The commenter sought further clarification on the meaning
of ``family income'' and suggested that states be required to describe
their methodology in their state plan for approval by the Secretary as
reasonable.
Response: In the interest of streamlining the requirements and
reducing administrative burden, we are not requiring states to include,
in their state plans, the methodology for determining income specific
to premiums and cost sharing. For individuals whose financial
eligibility is determined based on modified adjusted gross income
(MAGI), ``family income'' for the purposes of imposing premiums or cost
sharing or for defining the aggregate limit means ``household income''
using MAGI-based methods, as set forth in Sec. 435.603. For
individuals who are exempt from MAGI under section 1902(e)(14)(D) of
the Act, implemented at Sec. 435.603(j) of the regulations, we are
still examining options related to income determinations.
Comment: One commenter stated that we do not have the authority to
allow targeted cost sharing because it would violate comparability and
recommended that we delete proposed Sec. 447.52(c), relating to
``targeted cost sharing.'' Another commenter stated that additional
targeting and variation of cost sharing within groups would add
unnecessary complexity and should not be used.
Response: We are retaining the option for states to target cost
sharing to specified groups of individuals. Comparability is required
for cost sharing imposed under section 1916 of the Act. However,
section 1916A(a)(1) of the Act provides that, ``a State, at its option
and through a state plan amendment, may impose premiums and cost
sharing for any group of individuals (as specified by the State) and
for any type of services . . . and may vary such premiums and cost
sharing among such groups or types, consistent with the limitations
established under this

[[Page 42273]]

section.'' This provision is codified in current regulations at Sec.
447.62(a). Therefore, at redesignated Sec. 447.52(d) of the final rule
states may apply targeted cost sharing on specified groups of
individuals; such cost sharing is limited to individuals with income
over 100 percent of the FPL, per the requirements of section 1916A of
the Act. We have revised Sec. 447.52(d), adding paragraphs (1) and (2)
to clarify that for cost sharing imposed for non-preferred drugs and
non-emergency services furnished in an ED, the state may target to
individuals below 100 percent of the FPL as well as those above, as
allowed by section 1916A of the Act.
Comment: We solicited comments on whether the regulations should
specify ways in which states may target different defined groups of
individuals (with income over 100 percent of the FPL) for differential
cost sharing under proposed Sec. 447.52(c). One commenter suggested
that the regulation should make it clear that targeting must be
reasonable, that individuals with lower incomes may not be charged more
than those with higher incomes, and that targeting may not discriminate
based on gender, physical or mental disability, age, race, ethnicity,
or any other protected classification. Another commenter requested that
the Secretary include criteria that must be considered by states in
targeting cost sharing to particular types of beneficiaries.
Response: Section 1916A of the Act gives states authority to target
premiums and cost sharing to any group of individuals with income above
100 percent of the FPL (for cost sharing imposed for non-preferred
drugs or non-emergency use of the emergency department, states can
target to individuals at all income levels as discussed above), and to
vary such premiums and cost sharing among the groups. In examining all
the possible ways in which targeting could be applied, we believe
targeting based on eligibility group or income level are the only
targeting methods consistent with section 1916A of the Act, which will
not lead to discriminatory practices. Thus, states can choose to impose
premiums or cost sharing on individuals with income above 100 percent
of the FPL in particular eligibility groups and to vary them by income
level within the group. States may not target solely on the basis of
delivery system--managed care, fee-for-service, and primary care case
management--but may target eligibility groups covered through a
specific service delivery system like managed care. States may not
target based on disease-type or chronic condition. We note that states
can impose cost sharing on whichever non-exempt service they choose for
individuals at any income level subject to limitations in the
regulations, and are not required to impose cost sharing on all non-
exempt services in the state plan. For the recommendation regarding
lower income versus higher income individuals, as noted above, we added
Sec. 447.52(g) to specify that if a state imposes income-related
charges, it may not impose a higher charge for lower-income individuals
than is charged for higher-income individuals.
5. Cost Sharing for Drugs (Sec. 447.53)
We proposed to establish a single provision governing cost sharing
for drugs which would apply to nonexempt individuals at all income
levels. To provide additional flexibility to states, and to further
encourage the use of preferred drugs, we proposed to define ``nominal
cost sharing'' as no more than $8 for non-preferred drugs and $4 for
preferred drugs for individuals with income at or below 150 percent of
the FPL. For individuals with family income above 150 percent of the
FPL, per section 1916A(c) of the Act, a higher cost sharing charge may
be established for non-preferred drugs, not to exceed 20 percent of the
cost the agency pays for the drug. While states may not impose cost
sharing on exempt individuals for preferred drugs, states may elect to
impose cost sharing for non-preferred drugs on individuals who are
otherwise exempt up to the nominal cost sharing amount. Cost sharing
for a non-preferred drug must be limited to the amount imposed for a
preferred drug if the individual's prescribing provider determines that
the preferred drug for treatment of the same condition either will be
less effective for the individual or will have adverse effects for the
individual or both. Under the proposed rule, states would have the
flexibility to apply differential cost sharing for preferred versus
non-preferred drugs. For example, a state may charge $1 for preferred
and $5 for non-preferred drugs or $0 for preferred and $8 for non-
preferred drugs. We received the following comments concerning the
proposed cost sharing for drugs provisions:
Comment: A few commenters suggested we take an approach that
distinguishes between formulary generic and formulary brand drugs
(instead of preferred and non-preferred). One commenter noted that this
approach may be more helpful in the managed care context. One commenter
requested clarification as to whether the requirement that all drugs be
considered preferred for cost sharing purposes if the agency does not
differentiate between preferred and non-preferred, is a de facto
preferred status. The commenter was concerned that this could result in
lower cost sharing for more expensive brand name drugs that are not
identified by the state as non-preferred. One commenter was opposed to
the definition of preferred drugs at proposed Sec. 447.51 to include
all drugs if the agency does not differentiate between preferred and
non-preferred drugs.
Response: Section 1916A of the Act allows states to have different
cost sharing levels for preferred and non-preferred drugs, but does not
speak to generic versus brand name drugs. States may use a variety of
methods to determine preferred and non-preferred drugs including
whether the drug is a brand or generic. States also maintain other cost
control measures, such as mandatory generic substitution policies. The
definition of preferred drugs, which includes all drugs if the agency
does not differentiate between preferred and non-preferred drugs, is
consistent with section 1916A(c) of the Act and current regulations at
Sec. 447.70(a).
Comment: Several commenters disagreed with the proposed policy to
allow cost sharing for up to $4 for preferred drugs and $8 for non-
preferred drugs. They described research showing that even low
prescription drug copayments may cause very low income people to defer
filling prescriptions. The commenters argue that Medicaid beneficiaries
cannot be incentivized to select a preferred drug, as is accomplished
with some success among middle class consumers; instead, with such high
cost sharing differentials, Medicaid enrollees will go without the
``non-preferred'' drug even if it is medically necessary and would work
far more effectively than a preferred drug. These commenters recommend
that CMS define nominal drug cost sharing in relation to the income and
health status of the Medicaid population and amend the table at Sec.
447.53(b) to establish maximum cost sharing as follows: individuals
with family income at or below 150 percent of the FPL--Preferred drugs:
$1.10, Non-preferred drugs: $3.30; individuals with family income
exceeding 150 percent of the FPL--Preferred drugs: $1.10; Non-preferred
drugs: $4.20. Two other commenters expressed concern with the $8 copay
for non-preferred drugs if states have latitude to classify most or all
of the brand-name drugs in a therapeutic class as non-preferred. One
commenter stated the proposed increase in cost sharing is unnecessary
because states already have many tools to

[[Page 42274]]

control prescription drug costs and have high utilization of generic
drugs. Other commenters appreciated the flexibility proposed for cost
sharing. One commenter welcomed the increased maximum cost sharing, and
one commenter stated that allowing states to charge higher cost sharing
for non-preferred drugs, when effective, lower-cost alternatives are
available, is a reasonable policy.
Response: We agree that cost sharing is just one of many tools that
states may use to manage drug utilization, and states may determine
that higher cost sharing does not enhance their efforts to promote the
use of preferred drugs. However, we also agree that it is a tool
permitted under the statute. In the final rule we are maintaining the
option for states to impose cost sharing of up to $4 for preferred
drugs and $8 for non-preferred drugs for all individuals, including
those with income at or below 150 percent of the FPL, and for those
with income above 150 percent of the FPL, to continue to establish
higher non-preferred drug cost sharing of up to 20 percent of the cost
of the drug. As described at Sec. 447.53(e), as revised in the final
rule, if a prescriber finds that the non-preferred drug is medically
necessary, the state must have a process in place to limit cost sharing
for that drug to the amount for preferred drugs.
Comment: One commenter suggested that the final rule require a cap
on cost sharing for non-preferred drugs as a necessary protection for
this vulnerable population.
Response: The 5 percent aggregate limit on cost sharing in the
current regulation and included in this final regulation at Sec.
447.56(f) applies to all cost sharing, including that for non-preferred
drugs. States have the option to establish additional cost sharing
limits for particular services, such as drugs at Sec. 447.56(f)(5) of
the final rule, but we do not have the authority to mandate a cost
sharing cap specific to non-preferred drugs.
Comment: A few commenters stated that CMS was circumventing the
statutory requirements of section 1916A of the Act by setting two
different maximum ``nominal'' amounts for preferred and non-preferred
drugs because the Act requires that cost sharing for all drugs imposed
on individuals with income under 150 percent of the FPL must not exceed
the ``nominal'' cost sharing as otherwise determined under section 1916
of the Act. Additionally, the commenter notes that section 1916A of the
Act explicitly allows states to charge up to twice the nominal amount
for non-emergency care furnished in an emergency department, so if
Congress intended to allow the same for non-preferred drugs, Congress
would have provided such an option in the statute.
Response: Section 1916 of the Act gives the Secretary the authority
to define nominal cost sharing. There is nothing in the statute which
requires a single definition of what is considered to be nominal.
Moreover, the general cost differential between preferred and non-
preferred drugs merits a different nominal maximum for each type,
therefore we believe it is appropriate to establish a $4 nominal
maximum for preferred drugs and an $8 nominal maximum for non-preferred
drugs.
Comment: One commenter expressed concern for vulnerable populations
that require certain classes of drugs, such as HIV antiretroviral
drugs, and recommended they be available at the ``preferred'' drug
cost-sharing level.
Response: States have the discretion to designate which covered
drugs within each class of drugs will be considered preferred or non-
preferred. Beneficiaries must always have access to necessary drugs at
the preferred drug rate because a given drug cannot be considered non-
preferred unless the state has an equivalent drug available at the
preferred rate. In addition, Sec. 447.53(e), as revised in this final
rule, requires states to provide a non-preferred drug at the preferred
drug cost sharing level, if the prescribing provider determines that
the preferred drug would be less effective or have adverse effects on
the individual.
Comment: A few commenters recommended that we convert the non-
preferred prescription drug copayment to a flat dollar amount for
individuals with incomes over 150 percent of the FPL instead of basing
cost sharing on what the agency pays for the drug.
Response: As discussed above, section 1916A of the Act sets the
maximum allowable non-preferred drug cost sharing level for individuals
with income over 150 percent of the FPL at 20 percent of what the
agency pays for the drug. CMS does not have the authority to change the
maximum amount allowed to a flat fee, but states may construct their
charges as flat fees as long as such fees are within the maximums
established by law.
Comment: One commenter supported the proposed increase of allowable
cost sharing for non-preferred drugs when Medicaid recipients and not
Medicaid pharmacy providers bear responsibility for the higher cost
sharing. The commenter requested that, when enhanced cost sharing for
prescription drugs is implemented, we mandate states to condition
services on the payment of such cost sharing. Alternatively, the
commenter requested that CMS mandate states to develop a mechanism
whereby participating pharmacies can submit unpaid cost sharing amount
to the state for payment. One commenter recommended that HHS require
states to implement cost sharing provisions for prescription drugs and
to permit providers to withhold medication (whether preferred or non-
preferred) from beneficiaries for failure to pay cost sharing.
Response: The imposition of premiums or cost sharing is an option
permitted states under sections 1916 and 1919A of the Act and cannot be
mandated by the Secretary. The statute stipulates that providers,
including pharmacies, may not deny services to individuals with income
at or below 100 percent of the FPL due to inability to pay their cost
sharing obligation. States have the option to allow providers to deny
services to individuals with income over 100 percent of the FPL if they
do not pay required cost sharing. If a state opts to allow providers to
deny services if the individual does not pay the cost sharing, this
must be indicated in their state plan. Regardless of whether an
individual pays the cost sharing, states must deduct the payment made
to the provider by the amount of the individual's cost sharing
obligation in accordance with Sec. 447.56(c) of this final rule. We do
not have the statutory authority to alter these requirements in the
manner being suggested by the commenters.
Comment: One commenter requested clarification as to whether states
have the option to impose cost sharing for non-preferred drugs on
individuals otherwise exempt from cost sharing. One commenter
recommended that states should have the option to impose cost sharing
on exempt individuals for certain classes of prescription drugs that
the state identifies as elective or controversial, such as narcotics.
Response: Section 1916A of the Act allows states to impose cost
sharing for non-preferred drugs on otherwise exempt individuals,
provided that such cost sharing does not exceed a nominal amount. At
Sec. 447.53(b) of the final rule, we have defined nominal cost sharing
for preferred drugs as no more than $4 and for non-preferred drugs at
no more than $8. We are revising Sec. 447.53(d) in the final rule to
clarify that cost sharing for non-preferred drugs imposed on otherwise
exempt populations cannot exceed the nominal amount defined in Sec.
447.53(b) in accordance with section 1916A(c) of the Act. While states
may impose cost sharing on some drugs and not other drugs, all cost
sharing must be

[[Page 42275]]

consistent with the requirements of Sec. 447.53(b) and, if there are
no drugs identified as non-preferred drugs in a class, cost sharing for
drugs in that class cannot exceed the nominal amounts for preferred
drugs. Identification of ``elective'' or ``controversial'' drugs is
beyond the scope of this regulation.
Comment: A few commenters stated that the proposed cost-
effectiveness standard for determining which drugs are non-preferred is
inappropriate and does not include the anti-discrimination protections
contained in the Affordable Care Act. The commenter believed that this
standard would threaten access to needed treatment and would result in
broad, one-size-fits-all policies that do not reflect important
differences in individual beneficiary needs and circumstances. One
commenter recommended that the definition of preferred drugs not be
restricted to low-cost or exclusively generic agents, and should
encourage the inclusion of high-value brand agents, especially when a
generic equivalent is not available. The commenter believed that
preferred and non-preferred drugs should be chosen based on clinical
value, not solely on the basis of acquisition price. One commenter
recommended that the definition of preferred and non-preferred drugs be
determined based on clinical assessment of the individual. One
commenter recommended that the definition of preferred drugs be
expanded to include the generic equivalent of brand named drugs.
Response: The definition of preferred drugs for cost sharing
purposes at Sec. 447.51 does not prescribe the type of drugs that the
state designates as preferred or non-preferred, and requiring the
inclusion of certain drugs on a state's preferred drug list is beyond
the scope of this regulation. However we do not believe that preferred
drug programs limit individuals' access to necessary drugs. These
regulations require that states establish a process through which a
beneficiary can access a non-preferred drug, which his or her provider
has determined to be medically necessary for the beneficiary, with cost
sharing limited to the amount applicable to preferred drugs. We believe
that this policy would not violate any non-discrimination standards
since all beneficiaries are subject to the Medicaid requirements of the
preferred drug list, which direct that it be developed in a manner that
does not discriminate against any particular class of individual, or
type of disability or disease. In addition, as previously noted in
guidance (SMDL 04-006, September 9, 2004), states need to
assure that patients continue to have access to needed medications so
in addition to cost considerations, a preferred drug list should be
based on clinical criteria that considers the efficacy of the drug to
others in that class.
Comment: Several commenters were concerned that allowing states to
impose cost sharing of up to 20 percent of what the agency pays for a
non-preferred drug, for individuals with income over 150 percent of the
FPL, would be overly burdensome for individuals with chronic
conditions.
Response: Section 1916A(2)(B) of the Act provides for the
flexibility to impose cost sharing at these levels for individuals with
incomes above 150 percent of the FPL. We did not propose to change this
flexibility, which is codified at Sec. 447.74 of the current
regulations, and is moved to Sec. 447.53 in this final rule. The
Secretary does not have the authority to change or reduce the
percentage of the cost of the item or service that is the maximum
allowable cost sharing because the statute is clear. We note that such
cost sharing is subject to the aggregate limit codified at Sec.
447.56(f) of this final rule.
Comment: Several commenters suggested that we revise Sec.
447.53(e) to provide more detailed requirements for the process states
must have in place to allow for cost sharing at the preferred drug
level, in the case of a non-preferred drug that the prescribing
provider has determined would be less effective or may adversely affect
the individual. The commenters stated that any process should take into
account the electronic claims processing used by pharmacies and
pharmacists and should be easy for the prescriber to invoke. Several
commenters also recommended that states be required to describe their
process in the state plan and provider manuals. One commenter believed
that this requirement undermined the intent of the regulations to
encourage the use of less expensive preferred drugs because for a state
to actually cover a non-preferred drug, the prescriber already has to
receive prior-authorization, meaning most, if not all non-preferred
drugs would have to be provided at the lower cost sharing amount.
Response: States must have a process in place for providing prior
authorization of medically necessary drugs that meets the existing
requirements at section 1927(d)(5) of the Act, therefore we are not
prescribing additional requirements in this regulation or requiring
states to describe the process in their state plan. However, we are
revising the final rule to add the word ``timely'' to the process
states must use to allow for cost sharing at the preferred drug level
in accordance with the section 1927 of the Act. We will monitor state
implementation and determine whether additional guidance is necessary.
6. Cost Sharing for Emergency Department (ED) Services (Sec. 447.54)
Sections 1916(a)(3) and 1916(b)(3) of the Act, allow states to
obtain a waiver to impose cost sharing for non-emergency use of the ED
that does not exceed twice the nominal amount for other outpatient
services. Section 1916A(e)(2)(A) of the Act also allows cost sharing
for individuals with income above 100 percent of the FPL and at or
below 150 percent the FPL in an amount not to exceed twice the nominal
amount as determined by the Secretary. We proposed to consolidate
current regulations at Sec. 447.54(b) and Sec. 447.72 related to non-
emergency use of the ED into proposed Sec. 447.54. To facilitate
states' ability to utilize flexibility provided in existing
regulations, for all individuals with income at or below 150 percent of
the FPL, we proposed to allow cost sharing of no more than $8, which
represents twice nominal, for non-emergency use of the ED without
requiring a waiver. The proposed changes are discussed in more detail
in the January 22, 2013 Medicaid Eligibility Expansion proposed rule
(78 FR 4659 and 4660). We received the following comments concerning
the proposed provision for cost sharing specific to non-emergency use
of the ED:
Comment: Many commenters opposed the policy to allow up to $8 for
non-emergency use of the ED because it might cause individuals with
incomes at or below 150 percent of the FPL to forego necessary
services, including potentially lifesaving services, and because many
Medicaid beneficiaries go to the ED because they lack access to regular
sources of primary care. Foregoing necessary services may result in
adverse health outcomes requiring more expensive care later. Many
commenters recommended that the maximum allowable cost sharing should
be set at $3.30 for individuals with family income at or below 100
percent of the FPL, $6.30 for individuals with family income from 101-
150 percent of the FPL and $12.00 for individuals with family income
above 150 percent of the FPL. Several other commenters recommended that
the maximum allowable cost sharing amount for non-emergency use of the
ED be limited to $4 to align with what is proposed for other services.
Several commenters recommended that CMS allow states the flexibility to
impose cost sharing for

[[Page 42276]]

non-emergency use of the ED that exceeds $8, to decrease inappropriate
use of the ED. One commenter recommended that up to three times the
outpatient services copayment (rather than two) should be allowed in
states that are working to expand access to alternative options for
care. Many commenters recommended that for individuals with family
income at or below 100 percent of the FPL, we revise the regulations to
allow cost sharing for non-emergency use of the ED, only when no cost
sharing (rather than lesser cost sharing) is imposed to receive such
care through an outpatient department or other alternative health care
provider in the geographic area of the hospital ED involved.
Response: We believe it is important for states to have options to
incentivize care in the most appropriate settings and to encourage
individuals to develop a regular source of care, to the extent that
beneficiaries are assured timely access to needed care. One option to
achieve this is through cost sharing initiatives, therefore, we are
finalizing Sec. 447.54(b) as proposed, however we note that we have
made some minor technical changes in the final rule to spell out the
term emergency department instead of using the acronym ED and to refer
to non-emergency services instead of treatment. The technical changes
are for clarification only and are not intended to be substantive. The
$8 maximum for non-emergency use of the ED is twice the nominal amount
for outpatient services, which is the maximum allowable cost sharing
permitted under sections 1916 and 1916A of the Act for individuals with
income at or below 150 percent of the FPL. The statute does not limit
the amount states can impose for non-emergency use of the ED on
individuals with income over 150 percent of the FPL (other than through
the aggregate cap of 5 percent of family income), and we do not have
the authority to limit such cost sharing through regulation. Section
1916 of the Act requires that there be an accessible alternative
provider to provide the services, but does not require that there be no
cost sharing for such services and section 1916A of the Act requires
there be lesser cost sharing for services provided by the alternative
provider, or no cost sharing if the cost sharing is being applied to an
otherwise exempt individual. To streamline the requirements to make it
administratively feasible for states to meet this requirement, we are
maintaining the proposed policy in the final rule that services
provided by an alternative provider must be available with lesser cost
sharing or no cost sharing only if the individual is otherwise exempt
from cost sharing. We note that for individuals with income at or below
100 percent of the FPL the state may not allow a provider--including a
hospital ED--to deny services in the event that an individual is unable
to pay the cost sharing.
We note that in the final rule we are deleting Sec. 431.57 of this
subchapter relating to the waiver of cost sharing requirements for
states to impose cost sharing for non-emergency services furnished in
an ED. This language is redundant with Sec. 447.54(b) of the final
rule, which allows states may impose cost sharing up to twice the
nominal amount for such services through the state plan. In addition to
this technical change, we updated the citations to the cost sharing
regulations at Sec. Sec. 435.121, 435.831, 436.831, 438.108, 440.250,
447.15, 447.20, and 457.540.
Comment: One commenter recommended that CMS make public the amount
of documented Medicaid savings in states that have imposed cost sharing
for non-emergency use of the ED.
Response: We are not revising the rule to require states to
document savings. However, we will examine available options for
sharing best practices and other data available from states with
successful ED diversion programs.
Comment: Several commenters noted a drafting error at Sec.
447.54(c), which they believe should be revised to read: ``. . . not to
exceed the maximum amount established in paragraph (b) of this section.
. .'' The commenters also believed we made an error in Sec. 447.54(d),
which they think should read ``. . . to impose cost sharing under
paragraph (a), (b) or (c) of this section of non-emergency. . . .''
Response: We agree that there was a drafting error in paragraph (c)
and have corrected the provision in this final rule. However, paragraph
(d) was written as intended, and is finalized as proposed. Paragraphs
(a) and (c) provide the authority to impose cost sharing, while
paragraph (b) describes the maximum allowable amounts.
Comment: One commenter recommended that cost sharing for non-
emergency use of the ED should be permitted for any visit to the ED
that does not result an inpatient stay.
Response: Sections 1916 and 1916A of the Act prohibit cost sharing
for emergency services. As there are many emergency conditions and
services that do not result in an inpatient stay, the commenters'
suggested policy would violate the statute.
Comment: Many commenters recommended that states that impose cost
sharing for non-emergency services provided in an ED be required to
permit newly-enrolled individuals to make at least one non-emergency ED
visit before requiring them to pay this cost-sharing obligation.
Response: States have the option to establish such a policy under
current regulations and the new rule as finalized, but we do not think
it appropriate to require it.
Comment: Some commenters suggested that we designate underserved
areas and/or certain periods of time in which insufficient access
warrants exemption from cost sharing for non-emergency use of the ED.
Response: Per Sec. 447.54(d), before imposing cost sharing for
non-emergency use of the ED, the hospital must provide the individual
with a name of and location of an available and accessible provider and
provide a referral to coordinate scheduling. If geographical or other
circumstances prevent the hospital from meeting this requirement, the
cost sharing may not be imposed.
Comment: Several commenters asked that we refrain from adding more
specificity or requirements in the regulation itself, for example
imposing further requirements or pre-conditions on a state's authority
to impose cost sharing for non-emergency services provided in an ED,
which they believed would limit the ability of states to account for
variation across states. A few commenters were concerned that we had
added a new requirement in stipulating that hospitals ensure that an
alternative provider is available to provide needed services with
lesser or no cost sharing. They were concerned the use of the term
``ensure'' in proposed Sec. 447.54(d)(2)(ii) would require hospitals
to ``ensure'' something beyond their control, presenting unnecessary
administrative burden for state administrators and hospitals. Many
commenters stated that CMS should remove the requirements at proposed
Sec. 447.54(d)(2)(iii) that ED staff provide a referral and coordinate
scheduling with an available and accessible alternative non-emergency
services provider, because it is administratively burdensome and takes
time and resources away from patient care. In addition, they argue that
compliance is infeasible given hospitals' limited access to current,
accurate information on the availability of appointments with other
providers. The commenters believed that these requirements will make it
difficult for states to take up the

[[Page 42277]]

option afforded under the statute and that it would be less costly for
an ED to provide treatment for the non-emergency conditions than to
coordinate a referral. One commenter stated that the requirement to
provide a referral is unnecessary because in many state managed care
programs, every enrollee has a primary care provider and 24-hour call-
in lines are available, enabling hospitals providing the care to
contact either the enrollee's primary care provider or the 24-hour
call-in line as an alternative to following the steps listed in Sec.
447.54(d). Another commenter stated that the language in proposed Sec.
447.54(d)(2)(iii) differs from the requirement at current Sec.
447.80(b)(2)(iii), and that the revised language would impose
additional burdens on states' ability to effectively implement cost
sharing. The commenter noted that current Sec. 447.80(b)(2)(iii)
requires hospitals to provide ``a referral to coordinate scheduling of
treatment by an available and accessible alternative non-emergency
services provider,'' while proposed Sec. 447.54(d)(2)(iii) requires
hospitals to ``coordinate scheduling and provide a referral for
treatment by this provider.''
Response: We did not intend to add additional requirements for
hospitals related to cost sharing for non-emergency use of the ED.
Rather, our intent was to clarify the existing language. To eliminate
any confusion, we are replacing the word ``ensure'' with ``determine''
in Sec. 447.54(d)(2)(iii), as redesignated in the final regulation.
This is consistent with the statutory requirement that before
collecting cost sharing for non-emergency use of the ED, hospitals must
provide individuals with the name and location of an available and
accessible provider that can provide the service with lesser or no cost
sharing. States share in this responsibility, of course, and will need
to work with hospitals to ensure that hospitals are able to determine
whether such care is available and accessible. The goal underlying the
policy is to ensure that the right care is provided at the right time
in an appropriate setting.
The language in proposed Sec. 447.54(d)(2)(iii), redesignated at
Sec. 447.54(d)(2)(iv) of this final rule, was intended to clarify the
referral requirement, which is in current regulation at Sec.
447.80(b)(2), and which reflects statutory language. We did not intend
to change the substance of the rule. However, to avoid any confusion we
are revising Sec. 447.54(d)(2)(iv) to reinstate the language from the
current rule that hospitals must provide a referral to coordinate
scheduling for treatment by an alternative provider. To confirm that
the alternative non-emergency services provider is ``actually available
and accessible'' as required by statute, it is important that
scheduling be done onsite, with the beneficiary present, to the maximum
extent possible. We recognize that this may not be possible during
certain hours of the night, in which case follow-up scheduling may be
necessary. Hospitals can and should take advantage of the existence of
a call line and assigned primary care providers in satisfying the
coordination requirements in the statute and regulations, and states
should assure, before imposing such cost sharing, that procedures are
in place that can facilitate hospitals' ability to carry out these
responsibilities, including outside of regular business hours.
Comment: One commenter requested clarification of the referral
requirement, including whether a patient should have a scheduled
appointment, or just the information necessary to make an appointment,
with an alternative provider when he or she leaves the hospital;
whether community clinics or FQHCs may serve as alternative, non-
emergency providers for referral from the ED; and the appropriate
process for completing a referral when physician offices are closed.
One commenter requested that we define ``timely manner'' in proposed
Sec. 447.54(d)(2)(ii).
Response: The regulations are not prescriptive on the exact process
to be used by hospitals. States have flexibility to establish processes
to meet the coordination goals in the statute and regulations in a
manner that best accommodates their systems and provider networks. The
extent to which a state relies on managed care or establishes patient
centered medical homes, for example, may impact how a state would meet
the requirements in the regulation. As noted above, whenever possible,
hospitals should attempt to schedule the appointment while the patient
is present, but if that is not feasible, the hospital would need to
follow up to ensure that an alternative provider is ``actually
available and accessible'' in a timely manner, as required by statute.
Section 1916A (e)(4)(B) of the Act describes an alternative non-
emergency services provider as one ``that can provide clinically
appropriate services for the diagnosis or treatment of a condition
contemporaneously with the provision of the non-emergency services that
would be provided in an emergency department.'' Any Medicaid
participating providers, including clinics that can do so, are
acceptable. Because we do not think that there is a uniform definition
of timeliness that is appropriate for all situations, we are not
defining ``timely manner'' in the regulation. In meeting a general
timeliness standard, however, states should direct hospitals to
consider the medical needs of the individual to assess (1) whether care
is needed right away or if a short delay in treatment would be
sufficient, and (2) any particular challenges the person may face in
accessing follow-up care, such as leave from employment, child care, or
ability to receive language assistance services or accessible care for
people with disabilities. States will need to work with the hospitals,
non-emergency providers, and managed care organizations participating
in their Medicaid programs to design a referral network and system that
fulfills the statutory requirements prior to imposing cost sharing
amounts for non-emergency services provided by a hospital ED. The
intent of this provision is to provide an additional tool to ensure
that care is provided in a timely and appropriate manner to drive
better quality at lower costs. It is not to be implemented in a way
that results in people not getting the care they need.
Comment: One commenter believed that we omitted from proposed Sec.
447.54(d) some of the statutory requirements that hospitals must meet
before collecting cost sharing for non-emergency use of the ED,
including the obligation to inform the recipient that he or she does
not have an emergency medical condition and the requirement to notify
the recipient of the applicable cost sharing for treatment of a non-
emergency condition in the ED.
Response: We did not omit any of the statutory requirements in the
proposed rule. The requirement that the hospital inform individuals
whether or not they need emergency services, and of the cost sharing
obligation to receive services in the ED is implicit in the
requirements that the assessment be performed and that the hospital
provide the individual with the name and location of an available and
accessible alternative provider that can provide services with lesser
or no cost sharing. We do not see a need to state as much explicitly in
the text of the regulation. However, for clarity, we have added a new
paragraph (i) at Sec. 447.54(d)(2) requiring hospitals to ``inform the
individual of the amount of his or her cost sharing obligation for non-
emergency services provided in the emergency department.'' Proposed
Sec. Sec. 447.54(d)(2)(i) through (iii) are redesignated in this final
rule as Sec. Sec. 447.54(d)(2)(ii) through (iv), respectively.

[[Page 42278]]

Comment: A few commenters recommended that the Secretary ensure
that the safeguards at Sec. 447.54(d) are observed by states that
impose cost sharing for non-emergency use of the ED.
Response: We will ensure through the state plan amendment process
that the requirements of Sec. 447.54(d) are met, and expect to oversee
implementation to the extent feasible.
Comment: One commenter recommended that the final rule include
requirements for oversight and reporting to ensure that higher cost-
sharing is not imposed without verification of the availability of
alternative providers able to furnish non-emergency care. In addition,
the commenter recommended enhanced requirements for verification in
rural and other areas with a shortage of primary care physicians and
specialists that will see Medicaid patients that there is available and
accessible care by an alternative provider. A few commenters
recommended that, at a minimum, the ED should be required to specify
what the particular patient's cost-sharing obligation will be,
including in the case of a patient with income above 150 percent of the
FPL, that the patient may be responsible for 100 percent of the
charges. The commenter also believed that, prior to an emergency room
providing non-emergency care to a Medicaid beneficiary the hospital
should be required to obtain written consent from the individual to
receive the non-emergency care in the ED and to take responsibility for
any cost-sharing obligation for such care.
Response: The statute, codified at Sec. 447.54(d) in this
rulemaking, sets forth clear requirements that states must effectuate
to establish cost sharing for non-emergency use of the ED, including a
requirement that hospitals provide information on available and
accessible providers who can provide the needed non-emergency services
with lesser or no cost sharing. States must ensure that hospitals are
able to meet these requirements, whether in a rural, suburban, or urban
setting. We ensure that states are in compliance with the statute and
regulations through the state plan amendment process and will consider
whether further reporting is necessary for oversight purposes. For cost
sharing for individuals with income above 150 percent of the FPL, we
note that the statute does not require states to make such patients
responsible for 100 percent of the charges for non-emergency use of the
ED, but also does not limit the cost sharing that states can impose on
individuals in this income bracket for non-emergency use of the ED. At
proposed Sec. 447.52(b)(3), finalized in this rulemaking at Sec.
447.52(c), any cost sharing imposed for any service may not equal or
exceed the amount the agency pays for the service; such cost sharing is
also limited by the 5 percent aggregate limit described at Sec.
447.56(f).
Comment: Several commenters stated that the rule does not provide a
clear methodology for determining ``non-emergency'' status. One
commenter highlighted the preamble discussion in the proposed
regulation about the difficulty in determining whether a service is
needed to address an emergency situation based on Current Procedural
Terminology (CPT) codes alone, and the lack of guidance on other
standards that could be used, and requested that CMS more clearly
define ``non-emergency'' or provide states latitude to define as
needed. Another commenter shared our concerns about CPT codes and noted
that, while the imposition of non-emergency ED cost sharing is not
administratively feasible without some type list, any protocols must
also avoid violation of the emergency screening requirements under the
Emergency Medical Treatment and Active Labor Act (EMTALA). One
commenter stated that the EMTALA requirements are sufficient to
determine which individuals should be subject to cost sharing for non-
emergency use of the ED, and that states should not have to describe
the processes in the state plan. Another commenter expressed concern
about beneficiaries' general ability to distinguish between
``emergency'' and ``non-emergency'' symptoms. The commenter was
concerned that adequate protections be in place to ensure that
beneficiaries are not punished for seeking emergency care when doing so
is appropriate under a prudent layperson standard. Another commenter
agreed that in distinguishing between ``emergency'' and ``non-
emergency'' conditions, hospitals must use the prudent layperson
definition, not a discharge diagnosis. One commenter stated clinical
reviews of ER claims to look at presenting conditions such as chest
pain seem would be administratively burdensome, and could delay
treatment, referral, or payment to providers. Other commenters
requested that we either clearly define ``non-emergency'' services or
provide states with the latitude to define them as needed, and several
commenters asked us to maintain the maximum level of flexibility in the
rule to facilitate appropriate and feasible implementation of non-
emergency ED cost sharing.
Response: ``Non-emergency'' services are defined at Sec. 447.51,
which cross references to the current definition of emergency services
at Sec. 438.114. This definition relies on a prudent layperson
standard, in that a medical condition manifests itself by acute
symptoms of sufficient severity that a prudent layperson that possesses
an average knowledge of health and medicine could deduce that they need
emergency medical attention. We agree that it is difficult to implement
a system to differentiate non-emergency from emergency services for
cost sharing purposes in a way that ensures beneficiary protections
consistent with the prudent layperson standard. We continue to believe
that the use of diagnosis and procedure codes alone is not an
appropriate process for determining non-emergency services, as doing so
would not adequately protect beneficiaries legitimately seeking ED
services based on the prudent layperson standard, for whom a CPT code
assigned after care is provided may indicate a non-emergency condition.
We sought comments on feasible methodologies for states and hospitals
to use to make this distinction, but did not receive any
recommendations. Therefore, we are not making any revisions in the
final rule to prescribe how states can and should distinguish between
``emergency'' and ``non-emergency'' conditions for cost sharing
purposes. We remain open to states' proposals for distinguishing
between ``emergency'' and ``non-emergency'' conditions and will review
such proposals through the state plan amendment process. As successful
models emerge we will develop further guidance.
Comment: One commenter asked if would be reasonable to have the
Medicaid agency reimburse hospitals for the medical screening that they
must conduct. Another commenter asked if a hospital could be reimbursed
for providing a referral and giving advice on other appropriate
providers.
Response: To the extent the provider properly bills the Medicaid
agency for an assessment or evaluation conducted on a Medicaid
beneficiary, the provider would be entitled to payment for the service
as provided for in the state's Medicaid State plan. States may also
establish payment specifically for the medical screening exam required
by EMTALA and/or for coordination of referrals to alternative non-
emergency services providers.
Comment: One commenter suggested that CMS allow hospitals to charge
the maximum allowable cost-sharing amount for non-emergent care, and
then refund the beneficiary if needed. The

[[Page 42279]]

commenter expressed concern that hospitals will not be able to impose
cost sharing on beneficiaries after they have left the ED.
Response: The statute requires that before providing and imposing
cost sharing for non-emergency services in an ED, the hospital must
inform the beneficiary of the cost sharing obligation tied to those
services and provide the name and location of an available, accessible,
alternative provider that can provide the services with no or lesser
cost sharing. This allows the beneficiary to forgo treatment in the ED
if they do not have the ability to pay the cost sharing. If the
individual decides to stay and receive the services at the ED, the
hospital can impose the cost sharing while the person is still present.
Comment: One commenter stated that for hospitals, the collection of
Medicaid cost-sharing amounts for non-emergency care in ED settings can
prove difficult, leading to lack of payment and increases in bad debt.
Response: The statute allows states to impose cost sharing for non-
emergency care in an ED and sets out the requirements that hospitals
must meet to collect such cost sharing. We do not have the authority to
take away this option or ignore the statutory requirements and will
work with states and the hospital community to share best practices and
potentially issue further guidance.
Comment: One commenter requested clarification as to whether urgent
care centers are subject to the guidelines for cost sharing for non-
emergency use of the ED.
Response: No, this rule only pertains to non-emergency services
furnished in an ED.
Comment: A few commenters supported what they believed was a new
option regarding cost sharing for non-emergency services provided in
the ED to beneficiaries who are otherwise exempt from cost sharing.
Response: This is not a new option. This is a statutory option
described at section 1916A(e)(2)(B) of the Act and codified in current
regulations at Sec. 447.70(b).
Comment: One commenter stated that instead of focusing on cost
sharing, which could result in harm to patients, we should focus on
best practices for medically sound ways of reducing unnecessary
emergency department visits, such as electronic exchange of patient
information, care coordination, patient education on appropriate use of
the ED, and guidelines for prescribing narcotics. One commenter was
concerned that focusing on cost sharing does not address why patients
seek care in an ED, and that hospitals trying to decrease non-emergency
ED use will inadvertently run afoul of either EMTALA or their state's
emergency access rules. The commenter recommended that some form of
safe harbor be established for hospitals trying, in good faith, to
encourage the most appropriate use of resources for non-emergency care.
Response: We agree that there are many strategies which states can
and have implemented to address the problem of non-emergency use of
hospital EDs. However, whether or not cost sharing is the most
effective way to address non-emergency use of the ED, it is an option
provided to states in the statute. We are available to work with all
states in exploring the full range of options to reduce non-emergency
use of the ED, and to share best practices which emerge.
7. Premiums (Sec. 447.55)
We proposed one simplified, consolidated section of the regulations
to implement the options authorized under sections 1916 and 1916A of
the Act relating to the imposition of premiums on individuals with
family income above 150 percent of the FPL, and describe the options to
impose premiums for specific populations. The proposed changes are
discussed in more detail in the January 22, 2013 Medicaid Eligibility
Expansion proposed rule (78 FR 4660). We received the following
comments concerning the proposed premiums provisions:
Comment: Several commenters recommended that we revise proposed
Sec. 447.55(a)(2) to clarify that states are allowed to impose
premiums on qualified disabled and working individuals if the
individual's income exceeds 150 percent of FPL. The commenters also
noted that proposed Sec. 447.55(c) does not reflect statutory
requirements in section 1916 of the Act that limit aggregate premium
expenses for individuals provided medical assistance under section
1902(a)(10)(A)(ii)(XV) or 1902(a)(10)(A)(ii)(XVI) of the Act and the
Ticket to Work and Work Incentives Improvement Act of 1999 (TWWIIA), to
no more than 7.5 percent of the individual's family income for those
whose annual income does not exceed 450 percent of the FPL.
Response: We agree with the commenters. Due to a drafting error,
the allowable premiums and limitations described at proposed Sec.
447.55 were not clear. We have revised paragraph (a) and paragraph (c)
(redesignated as paragraph (b) for clarity), of Sec. 447.55 to address
this error. Paragraph (b)(1) describes the limitations on prepayment;
paragraph (b)(2) describes the options for terminating an individual
for failure to pay, paragraph (b)(3) describes the statutory
requirements noted by the commenter for individuals receiving medical
assistance under TWWIIA, and paragraph (b)(4) describes the state's
option to waive premiums for any individual or family. In addition to
these clarifications, we revised the description of pregnant women who
may be charged premiums at Sec. 447.55(a)(1) to reflect the
consolidation of different statutory eligibility groups for pregnant
women under a single regulatory section at Sec. 435.116 of the March
2012 final rule. This is not a substantive change and is intended
solely to assist states in appropriately identifying those
beneficiaries who may be charged premiums, as described in the statute.
As noted above, we made a similar revision to the description of
children who are exempt from premiums and cost sharing at Sec.
447.56(a)(1)(i) through (iii) of this final rule.
Comment: Several commenters recommended that Sec. 447.55 be
revised to clarify that premiums can only be imposed on medically needy
individuals after their spend-down amount is met and they are receiving
Medicaid; they cannot be included as part of the spend down.
Response: An individual cannot be subject to a premium unless he or
she is eligible for Medicaid. States may not impose a premium until the
month in which the individual has met his or her spend-down and becomes
eligible.
Comment: Several commenters recommended that the regulations
require a process for waiving premiums in cases of undue hardship; and
that the process adopted by a state should be set forth in the state
plan and reflected in state law and other public documents. One
commenter asked for CMS to provide examples of ``hardship.''
Response: The decision to waive premiums due to hardship is a
matter of state policy. Such policies do not require prior
authorization from the Secretary. Therefore we are not revising the
regulations as suggested.
Comment: One commenter stated that ``sliding scale'' premiums
imposed on the medically needy under Sec. 457.55 must actually
``slide'' so that there is a lowest-income group of individuals for
whom there is no premium and that premiums for higher income
individuals increase linearly or quasi-linearly up to $20 for those at
or near 150 percent of the FPL. One commenter stated the $20 allowable
premium should be removed from the regulation.

[[Page 42280]]

Response: Section 1916 of the Act expressly permits states to
impose premiums on medically needy individuals on a sliding scale, but
does not require that the lowest income medically needy individuals are
charged $0 premiums. Current regulations at Sec. 447.52 allow for
premiums on a sliding-scale basis up to $19, and we are finalizing the
proposal to increase that amount to $20. We have revised the
regulations at Sec. 447.55(a)(5) to clarify that, if premiums are
imposed on medically needy individuals on a sliding scale, the agency
must impose an appropriately higher premium for individuals at higher
levels of income, with $20 being the maximum allowable premium at the
highest income level. States may choose to set their highest premium at
a level below $20.
Comment: One commenter asked for clarification of the consequences
for ``non-payment'' that are described at proposed Sec.
447.55(c)(1)(ii) and (2)(ii). The commenter recommends that termination
be allowed for failure to make full payment, and that partial payment
is not adequate to prevent termination from the program.
Response: As noted previously, due to a drafting error, we have
revised Sec. 447.55(c) (redesignated as paragraph (b) of the final
rule) to clarify the consequences for non-payment for all individuals
subject to premiums. As described in paragraph (2), except for
medically needy individuals, states have the option to terminate any
individual who has failed to pay all or part of his or her premium
obligation. The state may not terminate an individual prior to 60 days
after the failure to pay the premium. The state may not terminate an
individual who, during that time period, has paid the premium due in
full. To reiterate current policy, we also added a new paragraph (5) to
Sec. 447.56(b) to indicate that no further consequences can be applied
for non-payment of Medicaid premiums, including ``lock-out'' periods.
We note that we redesignated paragraph (c) as paragraph (b) in the
final rule to move the state plan requirements after the section
related to consequences for non-payment. This change is to improve the
flow of the regulation and is not intended to be substantive.
Comment: One commenter was concerned that proposed Sec. 447.55(c)
would permit states to terminate Medicaid coverage for failure to pay
premiums for as little as 60 days. While the commenter calls this an
improvement over the current regulation, which they believe does not
establish any minimum grace period, the commenter believed that states
should be encouraged to work with beneficiaries on a payment schedule
to avoid a termination.
Response: Proposed Sec. 447.55(c), redesignated as Sec. 447.55(b)
in the final rule, does not represent new policy. This option,
established under both sections 1916 and 1916A of the Act, is currently
codified at Sec. 447.80 for individuals with income over 150 percent
of the FPL who are subject to premiums under section 1916A of the Act.
In this final rule, we are simply codifying the requirements as they
relate to premiums imposed under the authority of section 1916(c) of
the Act.
8. Limitations on Premiums and Cost Sharing (Sec. 447.56)
We proposed a single streamlined approach to implement the
limitations on premium and cost sharing established under sections 1916
and 1916A of the Act wherever the policies align. Sections 1916(a),
(b), and (j), and 1916A(b)(3) of the Act specify certain groups of
individuals as exempt from premiums and/or cost sharing, including
certain children, pregnant women, certain American Indians and Alaska
Natives (AI/ANs), certain individuals residing in an institution,
individuals receiving hospice care and individuals eligible under the
optional eligibility group for individuals with breast and cervical
cancer under Sec. 435.213 of this part. The proposed changes are
discussed in more detail in the January 22, 2013 Medicaid Eligibility
Expansion proposed rule (78 FR 4660 and 4661). We received the
following comments concerning the proposed limitations on premiums and
cost sharing provisions:
Comment: Two commenters recommended that proposed Sec. 447.54(c),
which permits states to impose cost sharing for non-emergency use of
the ED on individuals otherwise exempt from cost sharing, should not
apply to AI/AN beneficiaries who are exempt from cost sharing.
Response: We are finalizing the regulation as proposed. Sections
1916A(c)(2)(B) and 1916A(e)(2)(B) of the Act permit states to charge
nominal cost sharing to individuals otherwise exempt from cost sharing
under section 1916A(b)(3)(B) of the Act for non-preferred drugs and
non-emergency use of an ED. There is no differential treatment under
the statute for AI/ANs as compared to other individuals who are
otherwise exempt from cost sharing. However, such cost sharing must be
limited to the nominal and neither a pharmacy nor a hospital ED may
deny services if the individual does not pay the cost sharing.
Comment: We solicited comments about requiring states to
periodically renew an AI/AN's cost sharing exemption based on current
or previous use of a service from an Indian health care provider or
through referral under contract health services. A number of commenters
supported proposed Sec. 447.56(a)(1)(vii) to exempt AI/ANs who are
currently receiving, or have ever received a service from an Indian
health care provider or through referral under contract health services
from any cost sharing. Several commenters were concerned that requiring
renewal of status for the exemption would be administratively
burdensome for both AI/AN individuals and state Medicaid agencies and
could lead to exempt individuals being subject to impermissible cost
sharing. A few commenters recommended that if renewal of the AI/AN
exemption status is required, that such renewal be limited to no more
than once every three years, which is the period of time used by IHS
for determining ``active users'' in an IHS or tribal service unit. No
commenters supported a renewal policy for AI/AN exemption.
Response: We are adopting the AI/AN exemption as proposed because
we do not see any particular utility in requiring renewal of status,
since the underlying eligibility for IHS or tribal health services is
unlikely to change, and we agree that renewal of status can be
burdensome for both the beneficiary and the provider. Once the
exemption for an individual at Sec. 447.56(a)(1)(x), as redesignated
in this final rule, is established, a renewal of such exemption will
not be necessary. We note that we added a definition of contract health
service at Sec. 447.51 for clarity and made a technical correction
under the definition of Indian to reflect revised citations to 25 U.S.C
due to changes made by the Affordable Care Act. We do not intend these
to be substantive changes to the regulations.
Comment: One commenter recommended we permit states to implement
specific processes to track separate cost sharing for AI/ANs related to
the 5 percent aggregate limit as permitted by current regulation.
Response: We do not see a need for states to separately track cost
sharing for AI/AN beneficiaries, the majority of whom are exempt from
cost sharing under the regulations. For any individuals permissibly
subject to cost sharing, the same 5 percent aggregate limit applied to
other beneficiaries, and the same requirement to track cost sharing
charges, would apply.

[[Page 42281]]

Comment: A few commenters suggested states should have broad
latitude in applying verification procedures to exempt AI/ANs who are
eligible for or currently or have ever received a service from an
Indian provider or through referral under contract health services
(CHS) from premiums and cost sharing respectively, and that procedures
that create the least burden on individuals, including electronic
processes, be employed by states. They recommended that self-
attestation of status for the AI/AN cost sharing exemption be
permitted, that if verification is required that electronic data
matching should be used to the maximum extent possible, and that we
provide a list of possible documents which states could use when
electronic verification is not available.
Response: There are no specific federal requirements regarding the
process for verifying premiums and cost sharing exemptions for AI/ANs.
States have flexibility to establish their own processes for verifying
who is eligible to receive or has ever received a service from an
Indian provider or through referral under CHS, including the use of
self-attestation, electronic data matches or reasonable paper
documentation, as long as the process is not unduly burdensome on AI/
ANs.
Comment: One commenter requested that CMS clarify that family
planning supplies are exempt from differential cost-sharing for non-
preferred drugs. Another commenter recommended that CMS clarify that
the limitations on premiums and cost sharing also apply to family
planning-related services, including office visits. Commenters believed
that this clarification is particularly important for coverage of
family planning under the state plan, permitted under section
1902(a)(10)(A)(ii)(XXI) of the Act, as added by section 2303 of the
Affordable Care Act, which defines ``medical assistance'' covered under
this option to include both family planning and family planning-related
services.
Response: Under sections 1916 and 1916A of the Act and Sec. 447.53
and Sec. 447.70 of the current regulation, family planning services
and supplies, including contraceptives and pharmaceuticals for which
the state properly claims or could claim at an enhanced federal match,
are exempt from cost sharing. We did not propose any changes to this
exemption, which is codified at Sec. 447.56(a)(2)(ii) of this final
rule. We do not have the statutory authority to require states to
exempt ``family planning-related services,'' which are a separate
category of services, but states have the option to do so.
Comment: One commenter requested that we clarify that pregnant
women receiving services during a period of presumptive eligibility are
also exempt from premiums and cost sharing.
Response: Individuals who are receiving benefits during a
presumptive eligibility period, but who have not yet been determined
Medicaid eligible by the agency, based on a regular application,
including pregnant women, may not be subjected to the premiums. In
addition, all pregnancy-related services are exempt from cost sharing,
including during a period of presumptive eligibility. As described in
the March 2012 final eligibility rule, ``Pregnancy related services''
is presumed to include all services otherwise covered under the state
plan unless the state has justified classification of a service as not
pregnancy-related in its state plan.
Comment: Many commenters supported the provision in proposed Sec.
447.56(a)(1)(v) to give states the option to exempt individuals from
cost sharing if they are receiving long term services and supports in a
home or community-based setting and are required to contribute to the
cost of care in a manner similar to the post-eligibility treatment of
income for institutionalized individuals under part 435 subpart H of
the regulations. Many commenters recommended that we require states to
exempt such individuals because imposing cost sharing could push
individuals into more restrictive settings in violation of the
requirements of the Americans with Disabilities Act (ADA), as applied
by the Supreme Court in the Olmstead decision. A few commenters
recommended that we require states to exempt all individuals receiving
services in a home and community-based setting regardless of whether
they are required to contribute to the cost of their care. Finally, one
commenter asked that we clarify that we are not proposing to extend the
same post-eligibility treatment of income rules used for institutional
services to individuals receiving services in a home and community-
based setting who, in addition to any contribution for the cost of
their care, also generally have to cover other basic living expenses,
such as for housing and food, and would not be able to cover such
expenses if they were required to contribute all but a nominal amount
of their income to cover the cost of the services received, as is the
case for institutionalized individuals.
Response: As noted above, we do not see a statutory basis to
require this exemption, therefore in the final rule, at Sec.
447.56(a)(1)(viii), as redesignated, we maintain the option for states
to exempt individuals receiving services in a home and community-based
setting, whose medical assistance is reduced by amounts reflecting
available income other than required for personal needs. This option is
consistent with state authority under section 1916A of the Act to
target cost sharing to specified groups. In addition, states may target
cost sharing at particular types of services, and could determine not
to impose cost sharing on home and community-based services. We also
note that if an individual has his or her medical assistance reduced to
account for available income, the individual would be able to deduct
any premiums or cost sharing from the calculation of available income
used to determine the level of medical assistance provided. There would
be no modification of current regulations relating to post-eligibility
treatment of income or share-of-cost. Again, we remind states of their
obligations under Olmstead.
Comment: One commenter recommended that former foster care children
covered under Sec. 435.150 should be exempt from premiums and cost
sharing. Several commenters recommended that states be given the
express option to exclude medically frail individuals from cost
sharing.
Response: While we understand that these are populations upon which
states may not wish to impose cost sharing, we do not see a clear basis
to support a federally-mandated exemption. States are free to use
targeted cost sharing, in accordance with Sec. 447.52(d), to limit the
impact of cost sharing as needed to address issues of non-exempt
populations that the state determines are particularly vulnerable.
Comment: One commenter requested clarification on the provision at
Sec. 447.56(c)(3), which is specific to providers that the agency
reimburses under Medicare reasonable cost reimbursement principles. The
commenter asked whether the policy that an agency may increase its
payment to offset uncollected deductible, coinsurance, copayment, or
similar charges that are bad debts of such providers was a change or
consistent with current law.
Response: This policy is contained in the current regulations at
Sec. 447.57(b). However, consistent with the new definition of cost
sharing included at Sec. 447.51 of this final rule, we are replacing
the reference to ``deductible, coinsurance, copayment, or similar''
with ``cost sharing'' in the final rule.

[[Page 42282]]

Comment: Many commenters recommended that we amend sections 1916
and 1916A of the Act to clarify that the preventive services included
in the EHBs are exempt from cost sharing, because low income
individuals enrolled in Medicaid ABPs may be responsible for cost
sharing for some of the preventive services that are available to
higher income individuals in the private market with no cost sharing.
Response: Section 1916A of the Act and the final rule at Sec.
447.56(a)(2)(iii) do require exemption of preventive services for
children under age 18. At a minimum such services must include those
specified at Sec. 457.520, which reflect the well-baby and well child
care and immunizations in the Bright Futures guidelines issued by the
American Academy of Pediatrics. We do not see a basis to broaden this
statutory exemption under the Medicaid program to extend to preventive
services for older individuals. States have the flexibility to exempt
additional services from cost sharing and could determine to exempt
preventive services for all beneficiaries.
Comment: Many commenters recommended that we exempt services
associated with ``never events'' from cost sharing.
Response: We agree with commenters that services associated with
``never events'' should not be subject to cost sharing. In accordance
with Sec. 447.26(c)(1), ``no medical assistance will be paid for
``provider preventable conditions'' as defined in this section. We
interpret medical assistance in this context to include any state plan
imposed cost sharing, and providers, who are not permitted to claim
reimbursement from the agency for these services, also are not entitled
to charge the beneficiary any cost sharing amount. To clarify this
requirement, we have included provider-preventable services, also known
as ``never events,'' among the list of exempted services at Sec.
447.56(a)(2)(v).
Comment: One commenter recommended that we revise Sec.
447.56(a)(2)(iv) to require that all services provided to pregnant
women be considered as pregnancy-related, except those services
specifically identified in the state plan as not being related to the
pregnancy, only if the state is able to justify and the Secretary
concurs, that the service is not pregnancy-related.
Response: States have the discretion to determine pregnancy-related
services within the parameters of Sec. 440.210(a)(2). We are seeking
to align the standard related to cost sharing with what is required for
the provision of pregnancy-related services, and maintain in the final
rule that all services provided to pregnant women will be considered
pregnancy related unless the state has justified classification of a
service as not pregnancy-related in its state plan.
Comment: One commenter asked that we clarify what is meant by
``nonexempt'' and ``otherwise exempt populations,'' per the reference
to allowing states to impose cost-sharing at higher than nominal levels
for nonexempt individuals and applying cost sharing to otherwise exempt
populations at Sec. 447.56.
Response: Exempt populations are defined at sections 1916(a), (b)
and (j) and 1916A(b) of the Act and at Sec. 447.53 and Sec. 447.70 of
the current regulations. These populations are exempt from cost sharing
under section 1916 and 1916A(a) of the Act, respectively, but are not
exempt from cost sharing under section 1916A(c) or (e) of the Act,
which pertain to alternative cost sharing for non-preferred drugs and
non-emergency use of the ED. These exemptions were consolidated at
Sec. 447.56(a) of the proposed rule and maintained in the final rule.
When using the term ``nonexempt'' we are referring to beneficiaries who
do not fall into one of the groups exempted under Sec. 447.56(a) of
the final rule and therefore may be subject to cost sharing.
``Otherwise exempt populations'' refers to those populations that are
generally required to be exempted from cost sharing but are not exempt
from cost sharing under section 1916A(c) or (e) of the Act. Section
1916A of the Act allows states to impose cost sharing for drugs and
non-emergency use of the ED on ``otherwise exempt populations,''
meaning that such cost sharing may be imposed on beneficiaries who are
exempted from all other cost sharing per Sec. 447.56(a).
Comment: Many commenters were concerned that the aggregate limit
described in proposed Sec. 447.56(f) does not apply to individuals
with income at or below 100 percent of the FPL. Another commenter was
concerned that these rules created a new requirement for states to
apply the aggregate limit to cost sharing imposed under section 1916 of
the Act. A few commenters urged the Secretary to lower the aggregate
limit to something less than 5 percent.
Response: Under sections 1916 and 1916A of the Act, aggregate
premiums and cost sharing imposed may not exceed 5 percent of an
individual's income. This is a statutory limit and we do not have the
authority to require states to apply a lower cap. However, we are
revising the final regulation at Sec. 447.56(f)(1), and redesignating
the succeeding paragraphs accordingly, to provide that the aggregate
limit applies to all premiums and cost sharing incurred by all
individuals in the Medicaid household, at all income levels. At Sec.
447.56(f)(2) of the final rule, we maintain the requirement in current
regulation that states must track all incurred Medicaid premiums and
cost sharing for all members of the Medicaid household, if such
premiums and cost sharing could place any family member at risk of
reaching the aggregate limit.
Comment: Many commenters recommended we revise proposed Sec.
447.56(f)(3) to require states to inform beneficiaries, at risk of
reaching the aggregate limit, of the automated process used to track
premiums and cost sharing, and how they can obtain ongoing information
about how far they are from reaching the limit.
Response: Section 447.56(f)(2), as redesignated in this final rule,
requires that if a state imposes cost sharing that could result in
individuals reaching the aggregate limit, the state must describe their
process for tracking the premiums and cost sharing in their state plan.
Current regulations at Sec. 447.64(d)(2), redesignated atSec.
447.56(f)(3) in this final rule, do require the state to notify
beneficiaries and providers when the beneficiary reaches the cap. We
are revising this paragraph to restore language currently in Sec.
447.68(d) that was inadvertently removed in the proposed rule
indicating that the state must inform beneficiaries and providers of
the beneficiaries' aggregate limit. States must also have a process in
place for beneficiaries to request a reassessment of their aggregate
limit. We believe these rules provide the best balance between
minimizing administrative burden on states and modernizing the Medicaid
program to ensure beneficiaries are not charged amounts in excess of
the aggregate. We do not believe these rules prevent states from
establishing processes by which beneficiaries can regularly check their
status regarding the aggregate limit. To allow states flexibility, we
are not specifying the mechanisms by which such notifications must
occur.
Comment: One commenter recommended that the regulation should use a
single, annual (not monthly) cost sharing maximum, such as that used
for the Part D low-income subsidy, since renewals are completed on an
annual basis, and therefore cost-sharing maximums are most effectively
implemented on a well-established calendar-year basis.
Response: Section 1916A of the Act requires that the aggregate
limit be applied on a monthly or quarterly basis

[[Page 42283]]

as determined by the state; an annual limit is not permitted under the
statute.
Comment: One commenter requested that we clarify what is meant by
``premiums or cost sharing rules that could place beneficiaries at risk
of reaching the aggregate family limit'' in proposed Sec.
447.56(f)(3).
Response: If a state imposes premiums and/or cost sharing at a
level that could result in cumulative premiums and cost sharing
exceeding 5 percent of a beneficiary's family income (for all family
members on Medicaid, over the course of a month or quarter as
determined by the state), the state must implement an effective
tracking mechanism to ensure the cap is not exceeded. For example, a
state may establish a prescription drug copayment targeted to
individuals with family income above 150 percent of the FPL, and set
the copay at $1 for preferred drugs and $2 for non-preferred drugs. If
this is the only cost sharing to which these individuals are subject,
and they do not pay a premium, then it is unlikely that any beneficiary
would accumulate cost sharing charges in excess of 5 percent of his or
her family income, and the state would not have to establish a tracking
mechanism. However, if these same beneficiaries were also assessed a
premium of 4 percent of family income, beneficiaries may be at risk of
reaching the aggregate limit and the state would need to establish a
tracking mechanism. Anyone with income under 100 percent of the FPL,
who is subject to any cost sharing would likely be at risk of reaching
the aggregate limit and a tracking mechanism would likely be required.
We will work with states to determine their need for a tracking
mechanism through the state plan amendment process.
We note that if more than one Medicaid beneficiary resides in a
household, then the premiums or copayments of each beneficiary in the
household would count toward the aggregate limit. We do not
specifically define when cost sharing may place beneficiaries at risk
of reaching the aggregate limit, because of the many different
combinations of cost sharing and premium charges which it would be
possible for states to impose. We will monitor state compliance through
the state plan amendment process.
Comment: One commenter requested further guidance on ways to track
cost sharing for beneficiaries who change plans during the year.
Response: For individuals who change plan mid-year, the state must
establish a mechanism to continue tracking through the transition to
ensure that they do not exceed the cap. Alternatively, a state could
suspend any additional cost sharing until the next monthly or quarterly
period begins. We have in the past encouraged, and continue to
encourage, states to track cost sharing through their Medicaid
Management Information System (MMIS). As we review state plan
amendments and conduct audits, we will share best practices that emerge
among states to promote effective and efficient tracking systems.
Comment: Many commenters recommended that we remove the requirement
at proposed Sec. 447.56(f)(3) that states have an automated mechanism
for tracking each family's incurred premiums and cost sharing because
it is costly and presents a substantial administrative and operational
burden on state Medicaid agencies, their contractors, and providers.
Instead, the commenters recommended that the state should have an
opportunity to develop its own mechanism for tracking a Medicaid
enrollee's premium and cost sharing spending. A few commenters also
recommended that states should have the option of having the enrollees
track their own information. One commenter asked that we clarify that a
state that delegates responsibility for the administration of cost
sharing to managed care organizations must ensure the availability of
complete and timely information necessary for performing this role.
Response: We have revised Sec. 447.56(f)(2) in this final rule to
remove the word ``automated'' and replace it with ``effective.'' CMS
will review state proposals through the state plan amendment process to
ensure that tracking mechanisms employed by states are effective in
ensuring that incurred premiums and cost sharing do not exceed the
aggregate limit and that the tracking mechanism does not rely on
beneficiaries. We note that under current regulations states must
account for cost sharing amounts in their MMIS to ensure appropriate
provider payment and must calculate each family's aggregate limit--from
data in the state's eligibility system--and provide that information to
the beneficiary. States may claim federal matching funds to update
their MMIS and eligibility systems as necessary to implement a tracking
system that uses the data already available in their systems to
implement the aggregate limit. States have the flexibility to develop
any effective process that does not rely on beneficiaries, and contains
timely and accurate information so that beneficiaries do not exceed
their aggregate limits. In addition, a state may delegate this
responsibility, as appropriate, to their managed care organizations
although we are not requiring that they do so. Tracking of premiums and
cost sharing is standard industry practice among health plans,
including those that participate in the Medicaid program, and is
consistent with implementing the requirements of the Affordable Care
Act out-of-pocket limits for all Americans, which will require tracking
by all private health insurance plans.
Comment: One commenter stated that the flexibilities provided in
the proposed rule, including the higher cost sharing limits, are
negated by the continued application of the aggregate limit. The
commenter argues that the high cost sharing limits effectively will
serve as a provider rate cut, which will trigger further decrease in
access to health care for Medicaid beneficiaries. The commenter
recommends that we allow exceptions to the 5 percent aggregate limit
and the automated tracking requirements, allowing states to propose in
their state plan reasonable assumptions and methodologies to limit
maximum out-of-pocket costs at an individual or family level. The
commenter believed such an approach, coupled with provisions for
exceptions and an appeals process involving clear timelines to preserve
access to care, would be consistent with the spirit of the statute.
Response: We do not understand the connection that the commenter is
making between the aggregate limit and effective provider reimbursement
rates. Once the limit is reached, the beneficiary may not be charged
any cost sharing amounts, and providers will be paid the full
reimbursement rate by the state. Regardless, the application of an
aggregate limit, which is common practice in commercial insurance as
well, is required by section 1916A of the Act, as added by the Deficit
Reduction Act of 2005; we do not have authority to eliminate this
requirement through regulation.
9. Beneficiary and Public Notice Requirements (Sec. 447.57)
We proposed to codify existing policy to ensure that beneficiaries,
providers, and the general public all have access to effective notice
of Medicaid premium and cost sharing charges. Appropriate vehicles for
providing notice might include the agency Web site, newspapers with
wide circulation, web, and print media reaching racial, ethnic, and
linguistic minorities, stakeholder meetings, and formal notice and
comment in accordance with the state's

[[Page 42284]]

administrative procedures. We received the following comments
concerning the proposed provisions for beneficiary and public notice
requirements:
Comment: One commenter asked for clarification on what constitutes
a method to which applicants, beneficiaries, and providers are ``likely
to have access,'' and whether publication on a state Web site would be
an acceptable method. One commenter strongly disagreed that state
legislative hearings do not provide sufficient public, beneficiary and
provider notice and recommended that such hearings be included as one
of the options for providing sufficient notice.
Response: To allow flexibility for different state processes while
ensuring provision of meaningful notice, we are not prescribing the
particular method or format that states must use to provide the
required notice, but instead proposed parameters at Sec. 447.57,
finalized with one revision (discussed below) in this rulemaking,
regarding what constitutes sufficient notice. We provided examples of
acceptable methods in the preamble to the proposed rule, including
notice on the state agency's Web site. As stated in the preamble to the
proposed rule, we do not believe that legislation discussed at a
hearing or posted on a Web site is adequate, since state legislation
and legislative hearings often are not accessible or understandable to
many beneficiaries, providers or other interested members of the
public.
Comment: Many commenters supported the proposal to require that
states provide additional public notice if proposed cost sharing is
substantially modified during the state plan amendment (SPA) approval
process. Many of these same commenters also recommended that we require
states to provide at least a 30-day comment period on any revisions to
a SPA involving premiums or cost sharing charges. A few commenters were
concerned that the proposed rule would be too burdensome on states and
recommended that no additional public notice requirements be imposed on
states.
Response: We have revised the regulations at Sec. 447.57(c) to
require states to provide additional public notice if proposed cost
sharing is substantially modified during the SPA approval process. We
are also applying this rule to premiums that are substantially modified
during the SPA process. We are not, however, accepting the
recommendation that states should have to provide a second 30 day
comment period for any revisions made to the state's cost sharing
policy during the SPA approval process, as we believe this would be
overly burdensome on states and significantly delay the SPA process.

III. Provisions of the Final Regulations

For the most part, this final rule incorporates the provisions of
the proposed rule. We received many comments about the complexity of
the proposed rules and the significance of the changes that need to be
made to fully implement the provisions of the Affordable Care Act. Many
commenters were concerned about the short timeframes for implementation
and about states' ability to make needed changes to policy, operations,
and information technology systems. We recognize that the timing of
this rule may result in implementation challenges, especially from a
systems perspective. Therefore, we have evaluated the provisions of the
January proposed rule that are necessary to meet the deadlines and are
finalizing in this rule only those provisions that we believe states
will be reasonably able to (or have already been planning to) implement
by January 1, 2014. Remaining provisions will be finalized in future
rulemaking. Those provisions, included in this final rule, that differ
from the proposed rule are as follows:

Change to Sec. 431.10

Clarified responsibilities of single state agency related
to delegation of fair hearings.

Change to Sec. 431.201

Added the definition of ``send.''

Change to Sec. 431.205

Clarified language in Sec. 431.205(b).

Change to Sec. 431.206

Clarified in Sec. 431.206(d) that an individual has a
right to a hearing before the Medicaid agency instead of the Exchange
or Exchange appeals entity.

Change to Sec. 435.603

Specified in Sec. 435.603(d)(4) that the 5 percent
disregard should be applied to the highest income standard in the
applicable Title of the Act under which the individual may be
determined eligible using MAGI-based methodologies.

Change to Sec. 435.908

Deleted paragraph Sec. 435.908(c)(3)(i).

Change to Sec. 435.918

Allowed for delayed implementation of electronic notices
and required that the Agency ensure that an individual's election to
receive notices electronically is confirmed by regular mail and that
the individual is informed of his or her right to change such election.

Change to Sec. 435.923

Clarified in Sec. 435.923(a) that any authorization
granted under operation of state law may serve in place of written
authorization by the applicant or beneficiary.

Change to Sec. 435.1015

Clarified that states are required to consider the cost
sharing requirements of the private health plan when determining
whether premium assistance is a cost-effective option.

Changes to Sec. 435.1110

Revised Sec. 435.1110(c)(1) to make clear that states
electing to limit the presumptive eligibility determinations which
hospitals can make must permit the hospitals to make presumptive
eligibility determinations based on income for all of the populations
included in Sec. 435.1102 and Sec. 435.1103.
Adding paragraph (d)(3) to provide that the agency may
disqualify a hospital as a qualified hospital only after it has first
provided the hospital with additional training or taken other
reasonable corrective action measures.

Change to Sec. 435.1200

Codified Sec. 435.1200(d)(5) of proposed rule at Sec.
435.1200(d)(6).

Changes to Sec. 447.51

Added definition of ``inpatient stay'' and ``outpatient
services.''
Added definition of Federal poverty level (FPL) to use the
acronym throughout the regulation. No substantive change is intended.
Added a definition of contract health service, for clarity
(not a substantive change to the regulations).

Changes to Sec. 447.52

Revised the maximum cost sharing allowed for an inpatient
stay to $75 and added a new paragraph at (b)(2), to require states with
inpatient cost sharing that exceeds the amount in the final rule, as of
July 15, 2013, to submit a plan to CMS that provides for reducing
inpatient cost sharing to $75 on or before July 1, 2017.
Revised paragraph (b)(3) to be clear that, ``in states
that do not have fee-for-service payment rates, any cost sharing
imposed on individuals at any income level may not exceed the maximum
amount established for individuals with income at or below 100 percent
of the FPL.

[[Page 42285]]

Revised Sec. 447.52(d), adding paragraphs (1) and (2) to
clarify that for cost sharing imposed for non-preferred drugs and for
non-emergency services provided in a hospital emergency department
under, the agency may target to a specified group of individuals
regardless of income.
Added and amended paragraph (g) to restore the option to
establish different cost sharing charges for individuals at different
income levels.
Added paragraph (h) to restore requirement that any cost
sharing charges imposed by managed care organization on Medicaid
enrollees be in accordance with the requirements set forth in the
regulations.
Added paragraph (i) to consolidate the state plan
requirements currently contained in Sec. 447.53(d) and Sec. 447.68.

Changes to Sec. 447.53

Revised paragraph (d) to clarify that cost sharing for
non-preferred drugs imposed on otherwise exempt populations cannot
exceed the nominal amount defined in Sec. 447.53(b) in accordance with
section 1916A(c) of the Act.
Revised paragraph (e) to require that states must have a
timely process to allow for cost sharing at the preferred drug level if
the prescribing provider determines that the preferred drug would be
less effective or have adverse effects on the individual to ensure that
access to necessary drugs is not delayed.

Changes to Sec. 447.54

Amended paragraph (d)(2)(iii) to replace the word
``ensure'' with ``determine.''
Added new paragraph (i) at Sec. 447.54(d)(2) requiring
hospitals to inform the individual of the amount of his or her cost
sharing obligation for non-emergency services provided in the ED.

Changes to Sec. 447.55

Due to a drafting error we revised this section to
accurate reflect who can be charged premiums and what consequences for
non-payment exist for specified groups.
Revised at paragraph (a)(1) the description of pregnant
women who can be charged premiums to reflect the consolidation of
different statutory eligibility groups for pregnant women under a
single regulatory section at Sec. 435.116 of the March 2012 final
rule. This is not a substantive change and is intended solely to assist
states in appropriately identifying those pregnant women who may be
charged as described in the statute.
Revised paragraph (a)(5) to clarify that, if premiums are
imposed on a sliding scale, the agency must impose an appropriately
higher premium for individuals at higher levels of income, with $20
being the maximum allowable premium at the highest income level.
Added a new paragraph (5) to Sec. 447.55(b) to indicate
that no further consequences can be applied for non-payment of Medicaid
premiums, including ``lock-out'' periods.

Changes to Sec. 447.56

Revised at paragraph (a)(1)(i) the description of children
who are exempt from premiums and cost sharing at Sec. 447.56(a)(1)(i)
through (iii) and (iv) to reflect the consolidation of different
statutory eligibility groups for children under a single regulatory
section at Sec. 435.118 of the March 2012 final rule, and to reflect
the changes in the types of assistance available under Title IV-E of
the Act. These are not substantive changes and are intended solely to
assist states in appropriately identifying those children who may be
charged premiums and cost sharing and exempting those who may not, as
described in the statute.
Amended paragraph (a)(2)(v) to include provider-
preventable services, also known as ``never events,'' among the list of
exempted services.
Revised paragraph (f)(2) to restore language currently in
Sec. 447.68(d) that was inadvertently removed in the proposed rule
indicating that the state must inform beneficiaries and providers of
the beneficiaries' aggregate limit.

Changes to Sec. 447.57

Revised language at paragraph (c) to require states to
provide additional public notice if proposed cost sharing is
substantially modified during the SPA approval process.

Change to Sec. 457.110

Required that states provide individuals with a choice to
receive notices and information required under this subpart and subpart
K of this part, in electronic format or by regular mail.

Change to Sec. 457.570

Adding paragraph (c)(2).

Change to Sec. 457.810

Added language requiring protections against substitution
of coverage in states that operate premium assistance programs.

Changes to Sec. 155.20

Clarifies the definition of advance payments of the
premium tax credit.

Changes to Sec. 155.200

Removes the reference to subpart F, as it will be
finalized in a future rule.

Changes to Sec. 155.227

Clarifies that for the purpose of Sec. 155.227, the terms
``applicant'' and ``enrollee'' describe people on whose behalf
authorized representatives are acting, and that the term ``person''
describes an individual acting as an authorized representative.
Clarifies that authorized representatives are permitted to
provide assistance in the individual and SHOP Exchanges, as well as for
individuals seeking an exemption from the shared responsibility
payment.
Adds language ensuring that the Exchange provides
information to both the applicant or enrollee and the authorized
representative regarding the powers and duties of an authorized
representative.
Adds language allowing an Exchange to permit an applicant
or enrollee to authorize their representative to perform fewer than all
of the activities described in this section, provided that the Exchange
tracks the specific permissions of each authorized representative.
Clarifies that an authorized representative will notify
the Exchange and the applicant or enrollee on whose behalf he or she is
acting when the authorized representative no longer has legal authority
to act on behalf of the applicant or enrollee.
Clarifies that the Exchange, not the applicant or
enrollee, will notify the authorized representative when an applicant
or enrollee notifies the Exchange that an authorized representative is
no longer acting on his or her behalf.
Removes the provision that organizations as well as staff
and volunteers of organizations must enter an agreement with the
Exchange.

Changes to Sec. 155.230

Clarifies electronic notice standards for an individual
market Exchange, and specifies that the individual market Exchange may
choose to delay the implementation of the process described in Sec.
435.918(b)(1) regarding sending a mailed confirmation of the choice to
receive electronic notices.
Adds standards to distinguish notice standards for a SHOP
and adds language to allow an employer or employee in any SHOP to elect
to receive electronic notices.

[[Page 42286]]

Changes to Sec. 155.300

Clarifies the appropriate cross-reference for the
definition of minimum value.

Changes to Sec. 155.302

Clarifies that any contracting arrangement for eligibility
determinations for Medicaid and CHIP is subject to the standards in
Sec. 431.10(c)(2).
Clarifies that the Exchange appeals entity, in addition to
the Exchange, must adhere to the eligibility determination or appeals
decision for Medicaid or CHIP made by the Medicaid or CHIP agency, or
the appeals entity for such agency.
Specifies that the agreement under Sec. 155.302(b)(6)
will be made available to HHS upon request.

Changes to Sec. 155.305

Removes the clause ``unless another Exchange verifies that
the individual meets the residency standard of such Exchange'' related
to temporary residence.
Clarifies that an applicant must be eligible for
enrollment in a QHP through the Exchange to be determined eligible for
enrollment through the Exchange in a QHP that is a catastrophic plan.

Changes to Sec. 155.310

Clarifies that the provision regarding duration of
eligibility determinations without enrollment only refers to an
applicant who is determined eligible for enrollment in a QHP through
the Exchange.

Changes to Sec. 155.315

Modifies procedures for situations in which key data
sources are unavailable and not reasonably expected to be available
within 1 day, such that the Exchange will make an eligibility
determination based on an applicant's attestation and trigger the
inconsistency period in paragraph (f).
Clarifies that the Exchange will accept an applicant's
attestation regarding three specific factors of eligibility when
electronic data is required but it is not reasonably expected that data
sources will be available within 1 day of the initial request to the
data source, and that for purposes of eligibility for advance payments
of the premium tax credit and cost-sharing reductions, other sections
in this subpart already address situations in which data regarding
MAGI-based income is unavailable.
Clarifies that paragraph (f)(5)(i) of this section will
follow the effective dates specified in Sec. 155.330(f).
Modifies the language concerning the verification related
to eligibility for enrollment through the Exchange in a QHP that is a
catastrophic plan for the purpose of clarity.

Changes to Sec. 155.320

Clarifies that the Exchange must obtain any available data
from the SHOP that corresponds to the State in which the Exchange is
operating.
Modifies language to specify that the Exchange must select
a statistically significant random sample of applicants for whom the
Exchange does not have any of the information specified in paragraphs
(d)(2)(i) through (d)(2)(iii).
Removes language specifying that the Exchange must use any
available data regarding employment of an applicant and members of his
or her household.
Specifies that for eligibility for enrollment in a QHP
through the Exchange that is effective before January 1, 2015, if the
Exchange does not have any of the information specified in paragraphs
(d)(2)(i) through (d)(2)(iii) for an applicant, the Exchange may accept
an applicant's attestation regarding enrollment in an eligible
employer-sponsored plan and eligibility for qualifying coverage in an
eligible employer-sponsored plan for the benefit year for which
coverage is requested without further verification, instead of
following sampling procedures.
Clarifies that the ability for the Exchange to satisfy the
provisions of paragraph (d) of this section by relying on HHS is
effective for eligibility for enrollment in a QHP through the Exchange
that is effective on or after January 1, 2015, and clarifies that the
division of responsibilities under this option is subject to guidance
issued by the Secretary.
Removes language concerning the agreement associated with
having HHS conduct this verification.

Changes to Sec. 155.330

Removes cross-references to appeals provisions, and
clarifies that an Exchange must implement changes resulting from an
appeal decision on the date specified in the appeal decision.
Consolidates standards for decreases in advance payments
of the premium tax credit and changes in cost-sharing reductions.
Specifies that a change associated with birth, adoption,
placement for adoption and placement in foster care must be implemented
on the coverage effective date described in Sec. 155.420(b)(2)(i) and
(ii).
Removes duplicative cross-references regarding termination
of coverage.

Changes to Sec. 155.340

Clarifies the appropriate cross-reference for the minimum
value standard.

Changes to Sec. 155.345

Reserves paragraphs (a)(3) and (g)(7) for future
finalization.
Clarifies that the Exchange and Exchange appeals entity
will adhere to the eligibility determination or appeals decision
relating to an individual's eligibility for Medicaid or CHIP made by
the state's Medicaid or CHIP agency or the appeals entity for such
agency.

Changes to Sec. 155.420

Clarifies that the special effective dates for birth,
adoption, and placement for adoption also apply to placement in foster
care.
Expands special enrollment period for birth, adoption, and
placement for adoption to also include placement in foster care.
Clarifies that the special enrollment period for an
individual who was not a citizen, national, or lawfully present non-
citizen and gains such status also applies to his or her dependents, if
eligible for coverage through the Exchange.
Modifies the special enrollment period for enrollees newly
eligible or ineligible for advance payments of the premium tax credit
or who experience a change in eligibility for cost-sharing reductions
to reflect that the special enrollment period accommodates individuals
enrolled in an eligible employer-sponsored plan, but not eligible for
qualifying coverage in an eligible employer-sponsored plan.

Changes to Sec. 155.430

Modifies language to allow applicants and enrollees to
request termination from their QHP, in the event they report access to
other minimum essential coverage and become ineligible for advance
payments of the premium tax credit and cost-sharing reductions.
Modifies standards for enrollee-requested termination
effective dates, such that QHP issuers and Exchanges may only terminate
prospectively, and not retroactively.
Clarifies that terminations for enrollees who are
determined eligible for Medicaid, CHIP or the BHP, such that the last
day of coverage is the day before the individual is determined eligible
for such coverage, rather than

[[Page 42287]]

retroactive to the Medicaid or CHIP eligibility effective date.
Aligns termination effective dates to appropriately cross-
reference with eligibility effective dates.
Adds language to clarify that in the case of termination
due to death, the last day of coverage is the date of death.

Changes to Sec. 156.270

Modifies coverage termination requirements such that
standards for QHP issuers align with those for Exchanges.

IV. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. To
fairly evaluate whether an information collection should be approved by
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995
requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In the January 22, 2013 (78 FR 4593) proposed rule, we requested
public comment on each of the rule's information collection
requirements (ICRs). The comments and our response are discussed below.

Background

This final rule continues to implement key provisions of the
Affordable Care Act including the completion of the streamlining of
eligibility for children, pregnant women, and adults that were
initiated in the Medicaid eligibility final rule published on March 23,
2012 (77 FR 17144). This rule also modifies CHIP rules relating to
substitution of coverage and premium lock-out periods, which are
important to a coordinated system of coverage across programs. Finally,
this rule includes provisions related to authorized representatives,
the procedures for verifying access to qualifying employer-sponsored
coverage, catastrophic coverage and other provisions related to
eligibility and enrollment.
The policies in this rule will result in a reduction in burden for
individuals applying for and renewing coverage, as well as for states.
The Medicaid program and CHIP will be made easier for states to
administer and for individuals to navigate by streamlining Medicaid
eligibility and simplifying Medicaid and CHIP eligibility rules for
most individuals. Even though there are short-term burdens associated
with the implementation of the final rule, the Medicaid program and
CHIP will be easier for states to administer over time due to the
streamlined eligibility and coordinated efforts for Medicaid, CHIP, and
the new affordable insurance exchanges.
The final rule also continues to implement provisions related to
the establishment of Exchanges. This final rule: (1) Specifies
standards related to authorized representatives, (2) outlines criteria
related to the verification of enrollment in and eligibility for
minimum essential coverage through an eligible employer-sponsored plan,
and (3) further specifies or amend standards related to other
eligibility and enrollment provisions. The description of the burden
estimates associated with these provisions is included in the
information collection requirements outlined in section D.
Section A outlines the information collection requirements that
involve Medicaid and CHIP eligibility and enrollment. Section B
outlines the information collection requirements that involve Exchange
eligibility and enrollment.
We used data from the Bureau of Labor Statistics to derive average
costs for all estimates of salary in establishing the information
collection requirements. Salary estimates include the cost of fringe
benefits, calculated at 35 percent of salary, which is based on the
June 2012 Employer Costs for Employee Compensation report by the U.S.
Bureau of Labor Statistics.

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

1. ICRs Regarding State Plan Amendments
1a. Sections 431.10, 431.11, 431.206, 431.211, 431.213, 431.230,
431.231, 431.240, 435.110, 435.116, 435.603, 435.907, 435.908, 435.918,
435.1101, 435.1102, 435.1103, 435.1110, 435.1200, 435.1205, 440.130,
440.210, 440.220, 440.305, 440.315, 440.330, 440.335, 440.345, 447.52-
54, 457.110, 457.340, 457.350, 457.351, 457.355, 457.570, and 457.805
These amendments to the Medicaid and CHIP state plans are necessary
to reflect changes in statute and federal policy. While we are aware of
the need to estimate the PRA burden associated with the submission of
state plan amendments related to the provisions identified above, those
amendments will be addressed as part of the electronic state plan
filing process being developed by CMS (the MACPro system) and submitted
to OMB for approval under OCN 0938-1188 (CMS-10434).
1b. Sections 435.113, 435.114, 435.223, and 435.510
Since we are eliminating the provisions in Sec. Sec. 435.113,
435.114, 435.223, and 435.510, states will no longer be required to
submit state plan amendments related to those provisions. The
provisions have been approved by OMB under OCN 0938-1147).

B. Medicaid Eligibility and Enrollment

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

[[Page 42288]]

purpose of developing the cost, we estimate that half of these agencies
will establish an agreement with an organization to conduct fair
hearings. We estimate a one-time burden of 50 hours to develop an
agreement that can be used with the organization. It will take an
additional 10 hours for Medicaid and 10 hours for a separate CHIP
agency to negotiate and execute the agreement with the organization for
a total time burden of 2,880 hours [(53 + 43)/2 x (50 + 10)] across all
agreements. For the purpose of the cost, we estimate it will take a
health policy analyst 40 hours at $49.35 an hour and a senior manager
10 hours at $79.08 an hour to complete the model agreement (for a total
of $2,764.80) plus 10 additional hours ($49.35) for a health policy
analyst to execute a completed agreement with each organization. The
estimated cost for each agreement is $3,258.30 for a total cost of
$156,398.40.
2. ICRs Regarding Fair Hearing Processes (Sec. Sec. 431.205(e), and
431.206(d) and (e))
In Sec. Sec. 431.205(e) and 431.206(e), the hearing system and
information must be accessible to persons who are limited English
proficient and to persons with disabilities. While states are required
to make the hearing system accessible, we believe the associated burden
is exempt from the PRA (see 5 CFR 1320.3(b)(2)) since we believe that
the time, effort, and financial resources necessary to comply with this
requirement will be incurred by persons during the normal course of
their activities and should, therefore, be considered as a usual and
customary business practice.
In Sec. 431.206(d), states are required to inform individuals that
they may have their hearing before the agency (instead of the Exchange
or the Exchange appeals entity) and the method by which the individual
may make such election. There are 53 Medicaid agencies (the 50 states,
the District of Columbia, Northern Mariana Islands, and American Samoa)
and 43 CHIP agencies for a total of 96 agencies that will be subject to
this requirement. The burden associated with providing this choice is
developing the process and workflow to enable the choice and sending
the request for the fair hearing to the appropriate agency. We estimate
it will take each agency an average of 70 hours to create the process
and workflow required in providing the choice. For the purpose of the
cost, we estimate it will take a health policy analyst 40 hours at
$49.35 an hour, a senior manager 10 hours at $79.08 an hour, and a
computer programmer 20 hours at $52.50 to complete the process and
workflow. The estimated cost for each agency is $3814.80. The total
estimated cost is $366,220.80.
3. ICRs Regarding Application Counselors (Sec. 435.908(c))
In Sec. 435.908(c), states have the option to authorize certain
staff and volunteers of organizations to act as certified application
counselors. The burden associated with the requirements to assist
individuals with the application process is the time and effort
necessary for the state to create agreements with these organizations,
to create a registration process for assistors, and to train staff on
the eligibility and confidentiality rules and requirements and how to
assist applicants with the completing the application.
We estimate the 50 states, the District of Columbia, Northern
Mariana Islands, and American Samoa will establish agreements with on
average 20 organizations in their state or territory for a total of
1,060 agreements related to application assistance. As part of this
estimate, we assumed that state Medicaid and CHIP agencies will be
party to the same agreements and, therefore, will not establish
separate agreements.
The first burden associated with this provision is the time and
effort necessary for the state Medicaid and CHIP agencies to establish
an agreement. To develop an agreement, we estimate that it will take
each of the 53 states and territories 50 hours to develop a model
agreement. For the purpose of the cost, we estimate it will take a
health policy analyst 40 hours at $49.35 an hour and a senior manager
10 hours at $79.08 to develop an agreement. The estimated cost is
$2,764.80 (per state) or $146,534.40 (total) while the total annual
hour burden is 2,650 hours.
To negotiate and complete the agreement, we estimate that each of
the 53 states/territories will execute 20 agreements. For the purpose
of the cost, we estimate it will take a health policy analyst 10 hours
at $49.35 an hour to execute each agreement. The estimated cost is
$9,870 (per state) or $523,110 (total) while the total annual hour
burden is 10,600 hours.
To develop and execute the model agreements, the total cost is
$669,644.40 for 13,250 hours of labor.
The next burden associated with this provision is the time and
effort necessary for the 53 states and territories to establish the
registration process and workflow for the application counselors. We
estimate it will take each state or territory an average of 70 hours
(3,710 total hours) to create the registration process and workflow for
the application counselors. For the purpose of the cost, we estimate it
will take a health policy analyst 40 hours, at $49.35 an hour, a senior
manager 10 hours, at $79.08 an hour, and a computer programmer 20 hours
at $52.50 to complete the registration process and workflow. The
estimated cost for each state or territory is $3,814.80. The total
estimated cost is $202,184.40.
The next burden associated with this provision is the time and
effort necessary for the 53 state Medicaid and CHIP agencies to provide
training to the application counselors. For the purpose of the cost, we
estimate it will take a training specialist 40 hours at $26.64 an hour
and a training and development manager 10 hours at $64.43 an hour to
develop training materials for the application counselors, for a total
time burden of 2,650 hours. The estimated cost for each state or
territory is $1,709.90. The total estimated cost is $90,624.70.
Lastly, we estimate that each state or territory will offer 50
hours of training sessions to train individuals to assist applicants
with Medicaid and CHIP applications for a total time burden of 2650
hours. For the purpose of the cost, we estimate it will take a training
specialist 50 hours at $26.64 an hour to train the application
counselors. The estimated cost for each agency is $1,332. The total
estimated cost is $70,596.
4. ICRs Regarding Eligibility Determination Notices (Sec. 435.918,
Sec. 457.110)
In Sec. 435.918 and Sec. 457.110, states must electronically
provide notices to individuals when elected.
The burden associated with the requirements to deliver notices is
the time necessary for the state staff to: (1) Familiarize themselves
with the requirements related to notices; (2) develop the language for
approval, denial, termination, suspension, and change of benefits
notices; and (3) program the language in the Medicaid and CHIP notice
systems so that the notice can be populated and generated based on the
outcome of the eligibility determination and be delivered in an
electronic format.
We estimate 53 state Medicaid agencies (the 50 states, the District
of Columbia, Northern Mariana Islands, and American Samoa) and 43 CHIP
agencies (in states that have a separate or combination CHIP), totaling
96 agencies, will be subject to this requirement. We estimate that it
will take each Medicaid and CHIP agency 194 hours annually to develop,

[[Page 42289]]

automate, and distribute the notice of eligibility determination. For
the purpose of the cost burden, we estimate it will take a health
policy analyst 138 hours at $49.35 an hour, a senior manager 4 hours at
$79.08, an attorney 20 hours at $90.14, and a computer programmer 32
hours at $52.50 to complete the notices. The estimated cost burden for
each agency is $10,609.42. The total estimated cost burden is
$1,018,504.30, and the total annual hour burden is 18,624 hours.
5. ICRs Regarding Authorized Representatives (Sec. 435.923(a))
Section 435.923(a) sets out minimum requirements for the
designation of authorized representatives. We are also applying these
provisions to state CHIP agencies through the addition of a cross
reference in Sec. 457.340.
We are aware of the need to estimate the PRA burden associated with
the collection of information related to authorizing an individual to
act as a representative of an applicant, to permit self-attestation for
individuals who do not have access to documentation, and the
citizenship and immigration verification requirements. These
requirements were addressed as part of the single, streamlined
application under OCN 0938-1191 (CMS-10440).
6. ICRs Regarding Presumptive Eligibility Determined by Hospitals
(Sec. 435.1110)
Under Sec. 435.1110(d)(1), states may establish state-specific
standards for qualified hospitals that conduct presumptive eligibility
determinations related to the success of assisting individuals
determined presumptively eligible who submit a regular application and/
or are approved for eligibility by the agency. States also have a great
deal of flexibility in determining and implementing the standards
appropriate for their programs as well as appropriate corrective action
measures for hospitals which do not meet the state standards.
This change is necessary to reflect changes in federal policy. A
state's election of state-specific standards will affect their Medicaid
state plan. While we are aware of the need to estimate the burden
associated with the submission of the state plan amendment, that
amendment will be addressed under the electronic state plan filing
process being developed by CMS (the MACPro system) and submitted to OMB
for approval under OCN 0938-1188 (CMS-10434). The amendment and its
estimated burden will also be made available for public comment through
the PRA process.
In Sec. Sec. 435.1101(b) and 457.355 (by reference to Sec.
435.1101), states are required to provide qualified entities with
training in all applicable policies and procedures related to
presumptive eligibility. The burden associated with this provision is
the time and effort necessary for the states and territories to provide
training to the hospitals. We estimate 50 states, the District of
Columbia, Northern Mariana Islands, and American Samoa will be subject
to this requirement. As part of this estimate, we assumed that state
Medicaid agencies and CHIP agencies, where there are separate agencies,
will develop and use the same training.
For the purpose of the cost, we estimate it will take a training
specialist 40 hours at $26.64 an hour and a training and development
manager 10 hours at $64.43 an hour to develop training materials for
the qualified entities, for a total time burden of 2,650 hours. The
estimated cost for each state or territory is $1,709.90. The total
estimated cost is $90,624.70.
We also estimate that each state or territory will offer 50 hours
of training sessions to qualified entities, for a total time burden of
2,650 hours. For the purpose of the cost, we estimate it will take a
training specialist 50 hours at $26.64 an hour to train the qualified
entities. The estimated cost for each agency is $1,332. The total
estimated cost is $70,596.
7. ICRs Regarding ABP SPA-Related Requirements (Sec. Sec. 440.305,
440.315, 440.330, 440.335, 440.345, 440.347, 440.360, and 440.386)
In the proposed rule, CMS requested comment on habilitative
services (Sec. 440.347(d)) and on the ``medically frail'' definition
(Sec. 440.315(f)). Comments and CMS' response can be found in section
B.3.a of this preamble. We also requested comment on essential health
benefits (rehabilitative and habilitative services and devices) (Sec.
440.347). See section II.B. of this preamble for the comments and our
response. Additional comments were solicited for exempt individuals
(modifying definition of ``medically frail'') (Sec. 440.315). Comments
and CMS' response can be found in the ABP portion of this preamble.
CMS also received many comments on the proposed changes to: (1) The
public notice requirement in Sec. 440.386 (see section II.B.7.b. of
this preamble for the comment and our response); (2) public notice in
Sec. 440.386 and prescription drug coverage in Sec. 440.345(f) (see
section II.B.3.i. of this preamble for the comment and our response);
(3) essential health benefits (non-discrimination policy) under Sec.
440.347 (see section II.B.2.d of this preamble); and (4) EPSDT and
other required benefits (family planning services and supplies) under
Sec. 440.345 (see the comments and responses section of the ABP
portion of this preamble). As a result of comments received, CMS is
finalizing the public notice requirements in this final rule without
change.
We also received a number of comments requesting clarification to
our statement in the preamble that the section 1927 requirements apply
to the ABP prescription drug benefit. Specifically, commenters
requested clarification, as part of this final rule, as to how section
1927 of the Act applies to prescription drug coverage under the ABP
since ABP requirements for prescription drug coverage must meet the
minimum EHB prescription drug requirements at section 1937 of the Act.
Based upon those comments, we have clarified in the regulation that
when states pay for covered outpatient drugs under a state's ABP, the
section 1927 requirements apply. There is no additional information
collection burden associated with this clarification.
While this rule has finalized policy related to these provisions,
these policies do not result in any additional information collection
requirements. Rather, the policy clarifications are interpretations of
information that is already being collected.
The information collection requirements and burden estimates
associated with Sec. Sec. 440.305, 440.315, 440.330, 440.335, 440.345,
440.347, 440.360, and 440.386 have been approved by OMB through March
31, 2016, under OCN 0938-1188 (CMS-10434). This rule will not impose
any new or revised SPA-related reporting, recordkeeping, or third party
disclosure requirements and, therefore, does not require additional OMB
review under the authority of the Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.).
8. ICRs Regarding Cost Sharing and Premiums (Sec. Sec. 447.52, 447.53,
447.54, 447.55 and 447.56)
The Deficit Reduction Act of 2005 (DRA) established a new section
1916A of the Act, which gives states additional flexibility, allowing
for alternative premiums and cost sharing, beyond what is allowed under
section 1916 of the Act, for somewhat higher income beneficiaries. Such
alternative cost sharing may be targeted to specific groups of
beneficiaries and payment may be required as a condition of

[[Page 42290]]

providing services. Thus, in accordance with the DRA we reviewed and
made changes to the current cost sharing and premiums regulations under
Sec. Sec. 447.52 through 447.56.
In a review of these sections we found that 45 states including the
District of Columbia impose cost-sharing and 40 states impose premiums
on beneficiaries. While these provisions are subject to the PRA, we
believe that any changes a state makes to its current state plan under
any of these sections is a usual and customary practice under 5 CFR
1320.3(b)(2) and, as such, the burden associated with it is exempt from
the PRA.
For those states electing to impose cost-sharing or premiums for
the first time will only need to submit a state plan amendment one time
for review. We estimate it will take each agency in this circumstance
an average of 2 hours to fill out the state plan pre-print for either
cost-sharing or premiums and submit it for approval. Thus we anticipate
six states may impose cost-sharing and 11 states and the District of
Columbia may impose premiums on beneficiaries. For the purpose of the
cost burden, we estimate it will take a health policy analyst 1 hour at
$49.35 an hour and a senior manager 1 hour at $79.08 an hour to
complete the process and submission of each new state plan amendment.
The estimated cost burden for each agency is $128.43. The total
estimated cost burden is $2,183.31.
9. ICRs Regarding Beneficiary and Public Notice Requirements (Sec.
447.57)
In Sec. 447.57(a), 53 Medicaid agencies will be required to make
available a public schedule describing current premiums and cost
sharing requirements containing the information in paragraphs (a)(1)
through (6). In Sec. 447.57(b), agencies are required to make the
public schedule available to those identified in paragraphs (b)(1)
through (4).
Prior to submitting a SPA for Secretary approval to establish or
modify existing premiums or cost sharing or change the consequences for
non-payment, Sec. 447.57(c) requires that the state: (1) Provide the
public with advance notice of the SPA (specifying the amount of
premiums or cost sharing and who is subject to the charges); (2)
provide a reasonable opportunity to comment on SPAs that propose to
substantially modify premiums and cost sharing; (3) submit
documentation to demonstrate that these requirements were met; and (4)
provide additional public notice if cost sharing is modified during the
SPA approval process.
In Sec. 447.57(d), the information must be provided in a manner
that ensures that affected beneficiaries and providers are likely to
have access to the notice and are able to provide comments on proposed
state plan amendments.
We estimate it will take each Medicaid agency an average of 6 hours
to create the process and workflow required in providing the schedule
and notice. For the purpose of the cost burden, we estimate it will
take a health policy analyst 4 hours at $49.35 an hour and a senior
manager 2 hours at $79.08 an hour to complete the process and workflow.
The estimated cost burden for each agency is $355.56. The total
estimated cost burden is $18,844.68.

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

For purposes of presenting an estimate of paperwork burden, we
reflect the participation of 18 State-Based Exchanges. It is important
to note that the Exchange provisions found in part 155, subparts D and
E discussed below involve several information collections that will
occur through the single, streamlined application for enrollment in a
QHP and for insurance affordability programs described in Sec.
155.405. We have accounted for the burden associated with these
collections in the Supporting Statement for Data Collection to Support
Eligibility Determinations for Insurance Affordability Programs and
Enrollment through Health Benefits Exchanges, Medicaid, and Children's
Health Insurance Program Agencies (CMS-10440; OCN 0938-1191).
We also highlight that the Supporting Statement includes several
information collections from regulatory provisions finalized in the
Exchange final rule (77 FR 18310). We have included these information
collections in this PRA package to address PRA requirements related to
those provisions as they were not included in the information
collection section of the Exchange final rule.
Lastly, we have not included information regarding information
collections associated with certified application counselors,
eligibility appeals, and SHOP coordination with individual market
Exchanges, which we will finalize at a future date with the
corresponding regulatory provisions.
1. ICRs Regarding Authorized Representatives (Sec. 155.227)
Section 155.227(a) provides that an applicant or enrollee, subject
to applicable privacy and security requirements, may designate an
individual person or organization as his or her authorized
representative. One method for designating an authorized representative
is by submitting legal documentation of the representative's authority.
Exchanges have the option to make available an ``Appointment of
Authorized Representative Form'' at the time of application or anytime
thereafter for an individual to designate an authorized representative.
Such a form would collect identifying and contact information about the
applicant, enrollee, and requested authorized representative. Requested
data elements would include the following for both the applicant or
enrollee and the requested representative: name, address, phone number,
email address, date of birth, and relationship. The applicant,
enrollee, or authorized representative could obtain the form from the
Exchange Web site or from an assister (such as a Navigator, non-
Navigator in-person assister, etc.), and could submit it to the
Exchange by mail or online at any time. We expect that the Exchange
would use this information to authorize the authorized representative
to act on behalf of the applicant or enrollee. An authorized
representative could also submit this form if the applicant or enrollee
is unable to do so.
HHS is currently developing a model Appointment of Authorized
Representative Form to be used by the Federally-facilitated Exchanges
and will make that form available to State-based Exchanges, which would
also decrease the burden on State-based Exchanges to develop such a
form. If a state opts not to use the form provided by HHS, we estimate
the burden associated for the time and effort necessary for a State-
based Exchange to develop the Appointment of Authorized Representative
Form to be 30 hours. This includes a 10 hours from a mid-level health
policy analyst at an hourly cost of $49.35 and 10 hours from an
operations analyst at an hourly cost of $54.45 for drafting the form
with 4 hours of managerial oversight at an hourly cost of $79.08 and 6
hours of legal review at an hourly cost of $90.14. The estimated cost
per State-based Exchange is $1,895, for a total cost of $34, 113 for 18
State-based Exchanges.
For an applicant, enrollee, or prospective authorized
representative, we estimate that it will take up to 5 minutes to review
instructions and complete an Appointment of Authorized Representative
Form. While we expect most applicants, enrollees, or prospective
authorized representatives to complete the Authorized Representative
Form, an applicant, enrollee, or prospective authorized

[[Page 42291]]

representative may also comply with this provision by providing the
necessary information online, by phone, by mail, or in-person. We
expect a similar burden on the applicant, enrollee, or authorized
representative to comply with this provision through such means. If the
applicant, enrollee, or authorized representative chooses to submit an
``Appointment of Authorized Representative Form,'' the burden for a
State-based Exchange to process the submitted information will be
approximately 10 minutes at a cost of $3.39 per submission. We
anticipate that an eligibility support staff person will scan,
digitize, and link the form to an applicant's or enrollee's account,
review the submitted information, and update the authorized
representative's and applicant's or enrollee's account, if applicable.
2. ICRs Regarding Notices (Sec. Sec. 155.302, 155.310, 155.315,
155.320, 155.330, 155.335, 155.345, 155.355, 155.410, 155.715, 155.720,
155.725, and 155.1080)
Several provisions in subparts D and E outline specific scenarios
in which the Exchange will send a notice to individuals and employers
throughout the eligibility and enrollment process. HHS is currently
developing model eligibility determination notices and several other
models for notices described in 45 CFR parts 155, 156, and 157 which
will decrease the burden on Exchanges to establish such notices. For
some notices, the Exchange will include specific notice text in another
notice, such as the eligibility determination notice, rather than send
an entirely separate notice (effectively, two notices are combined into
one). The purpose of these notices is to alert the individuals and
employers who receive the notice of actions taken by the Exchange. 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. The notice may be in paper
or electronic format but must be in writing and sent after an
eligibility determination has been made by the Exchange. We anticipate
that a large volume of enrollees will request electronic notification
while others will opt to receive the notice by mail. As a result of
certain enrollees opting to receiving the notice by mail in some
instances, we estimated the associated mailing costs for the time and
effort needed to mail notices in bulk to enrollees as appropriate.
We expect that the electronic eligibility determination notice will
be dynamic and include information tailored to all possible outcomes of
an application throughout the eligibility determination process. To
develop the paper and electronic notices, Exchange staff will need to
learn eligibility rules and draft notice text for various decision
points, follow up, referrals, and appeals procedures. A health policy
analyst, senior manager, and legal counsel will review the notice. The
Exchange will then engage in review and editing to incorporate changes
from the consultation and user testing including review to ensure
compliance with plain writing, translation, and readability standards.
We intend that Exchanges will work closely with the state Medicaid or
CHIP agency to develop coordinated notices. Finally, a developer will
program the template notice into the eligibility system so that the
notice may be populated and generated in the correct format according
to an individual's preference to receive notices, via paper or
electronically, as the applicant moves through the eligibility process.
If a state opts not to use the model notices provided by HHS, we
estimate that the Exchange effort related to the development and
implementation of the eligibility notice will necessitate 44 hours from
a health policy analyst at an hourly cost of $49.35 to learn
eligibility rules and draft notice text; 20 hours from an attorney at
an hourly cost of $90.14 and 4 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 $107,478 for 18 State-Based Exchanges. We expect
that the burden on the Exchange to maintain this notice will be
significantly lower than to develop it.
Section 155.310(h) specifies that the Exchange will notify an
employer that an individual in an employee's tax household has been
determined eligible for advance payments of the premium tax credit and/
or cost-sharing reductions based in part on the employer not offering
minimum essential coverage or not offering qualifying coverage in an
eligible employer-sponsored plan. Upon making such an eligibility
determination, the Exchange will send a notice to the employer with
information identifying the employee, along with a notification that
the employer may be liable for the payment under section 4980H of the
Code, and that the employer has a right to appeal this determination.
Because this notice will be sent to an employer at the address as
provided by an application filer on the application, we anticipate all
of these notices will be sent by mail. As a result, we estimated the
associated mailing costs for the time and effort needed to mail notices
in bulk to employers. Like the eligibility notice, the employer notice
above will be developed and programmed into the eligibility system.
However, unlike the eligibility notice, we expect the information on
the employer notice to be minimal in comparison to the eligibility
notice and therefore the burden on the Exchange to develop the notice
to be substantially less. Further, as with the individual eligibility
notice, HHS will provide model notice text for Exchanges to use in
developing this notice.
3. ICRs Regarding Verification of Enrollment in an Eligible Employer-
Sponsored Plan and Eligibility for Qualifying Coverage in an Eligible
Employer-Sponsored Plan (Sec. 155.320)
Section 155.320(d) proposes the process for the verification of
enrollment in an eligible employer-sponsored plan and eligibility for
qualifying coverage in an eligible employer-sponsored plan. Paragraph
(d)(2) specifies that the Exchange will obtain relevant data from any
electronic data source available to the Exchange which has been
approved by HHS, as well as data from certain specified electronic data
sources. This will involve the development and execution of data
sharing agreements; however, this burden is already captured in the
data sharing agreements described in Sec. 155.315. As these
verification activities will all be electronic, we do not expect for
there to be any additional burden than that which is required to design
the overall eligibility and enrollment system.
Paragraph (d)(3)(iii)(A) proposes that the Exchange provide notice
to certain applicants indicating that the Exchange will be contacting
any employer identified on the application to verify whether the
applicant is enrolled in an eligible employer-sponsored plan or is
eligible for qualifying coverage in an eligible employer-sponsored plan
for the benefit year for which coverage is requested. The burden
associated with this notice to certain applicants is addressed in
155.310(g) as this will not be a separate notice, but incorporated into
the eligibility determination notice described in the above paragraph.
In paragraph (d)(3)(iii)(D), we propose that the Exchange make
reasonable attempts to contact any employer to which the applicant
attested

[[Page 42292]]

employment to verify whether the applicant is enrolled in an eligible
employer-sponsored plan or is eligible for qualifying coverage in an
eligible employer-sponsored plan for the benefit year for which
coverage is requested. We note that the flexibility we provide to
State-Based Exchanges for the first year of operations will
significantly reduce the burden of this information collection in the
first year.
It is difficult to estimate the burden associated with this
information collection as the calculation involves identifying the
number of individuals for whom employer-sponsored coverage information
will be unavailable. As such, below, we estimate the time and cost
associated with the Exchange making a reasonable attempt to contact one
employer. We estimate the time associated with this information
collection to be a total of 2.2 hours per employer at a total cost of
$34.
4. ICRs Regarding Electronic Transmissions (Sec. Sec. 155.310,
155.315, 155.320, and 155.340)
Sections 155.310, 155.315, 155.320, 155.330, and 155.340 involve
the electronic transmission of data to determine eligibility for
enrollment in a QHP and for insurance affordability programs. Section
155.310(d)(3) specifies that the Exchange must notify the state
Medicaid or CHIP agency and transmit all information from the records
of the Exchange for an applicant determined eligible for Medicaid or
CHIP to the Medicaid or CHIP agency to ensure that the Medicaid or CHIP
agency can provide the applicant with coverage promptly and without
undue delay. This applicant information will be transmitted
electronically from the Exchange to the agency administering Medicaid
or CHIP once a determination has been made that the applicant is
eligible for such program. The purpose of this data transmission is to
notify the agency administering Medicaid or CHIP that an individual is
newly eligible and thus the agency should facilitate enrollment in a
plan or delivery system. Data will be transmitted through a secure
electronic interface.
Sections 155.315 and 155.320 include transactions necessary to
verify applicant information. We expect there to be no transactional
burden associated with the electronic transactions needed to implement
Sec. Sec. 155.315 and 155.320. As these transmission functions will
all be electronic, we do not expect for there to be any additional
burden than that which is required to design the overall eligibility
and enrollment system.
In Sec. 155.340, the Exchange must provide the relevant
information, such as the dollar amount of the advance payment and the
cost-sharing reductions eligibility category, to enable advance
payments of the premium tax credit and cost-sharing reductions,
reconciliation of the advance payments of the premium tax credit, and
administration of the employer responsibility requirements. As we
anticipate that these transmissions of information will all be
electronic, we do not expect for there to be any additional burden than
that which is required to design the overall eligibility and enrollment
system.
5. ICRs Regarding Reporting Changes (Sec. Sec. 155.315, 155.330, and
155.335)
Section 155.315(f) outlines the process for resolving
inconsistencies identified through the verification process. In Sec.
155.330(c)(1), we state that the Exchange will verify any information
reported by an enrollee in accordance with the processes specified in
Sec. Sec. 155.315 and 155.320 prior to using such information in an
eligibility redetermination. Section 155.335(e) provides that the
Exchange will require a qualified individual to report any changes for
the information listed in the notice described in Sec. 155.335(c) of
this section within 30 days from the date of the notice. It is not
possible at this time to provide estimates for the number of applicants
for whom a reported change will necessitate the adjudication of
documentation, but we anticipate that this number will decrease as
applicants become more familiar with the eligibility process and as
more data become available. As such, for now, we note that the burden
associated with this provision is one hour for an individual to collect
and submit documentation, and 12 minutes (or 0.2 hours) for eligibility
support staff at an hourly cost of $28.66 to review the documentation.
6. ICRs Regarding Enrollment and Termination (Sec. Sec. 155.400,
155.405, and 155.430)
In part 155, subpart E, we describe the requirements for Exchanges
in connection with enrollment and disenrollment of qualified
individuals through the Exchange. These information collections are
associated with sending eligibility and enrollment information to QHP
issuers and to HHS, maintaining records of all enrollments in QHPs
through the Exchange, reconciling enrollment information with QHP
issuers and HHS, and retaining and tracking coverage termination
information. The burden estimates associated with these provisions
include the time and cost to meet these record requirements. We
estimate that it will take 142 hours annually for an Exchange to meet
these recordkeeping requirements for a total of 2,556 hours for 18
State-Based Exchanges.
In the case of the requirement related to termination standards,
the burden includes estimates related to the maintenance and
transmission of coverage termination information, as well as the time
and effort needed to develop the system to collect and store the
information. We estimate that it will take 30 hours of a health policy
analyst at an hourly rate of $58.05, 20 hours for a computer programmer
at an hourly rate of $52.50, and 20 hours for an operations analyst at
an hourly rate of $54.45 for a total of 70 hours annually per Exchange
and a total of 1,260 hours for 18 Exchanges, for the time and effort to
meet this standard. We estimate a cost of $3,881 for one Exchange and a
total cost of 69,858 for 18 State-Based Exchanges.
7. ICRs Regarding Agreements (Sec. Sec. 155.302 and 155.345)
Section 155.345(a) specifies that an Exchange and the corresponding
state Medicaid and CHIP agencies will enter in to an agreement
regarding the coordination of eligibility determinations, and Sec.
155.302(b)(6) specifies that to the extent that an Exchange is making
assessments of eligibility for Medicaid and CHIP, rather than
determinations, the Exchange will enter into an agreement with the
state Medicaid and CHIP agencies regarding this arrangement. These
agreements are necessary to minimize burden on individuals, ensure
prompt determinations of eligibility and enrollment in the appropriate
program without undue delay and to provide standards for transferring
an application between the Exchange and other entities administering
insurance affordability programs. The specific number of agreements
needed may vary depending on how states choose to divide
responsibilities regarding eligibility determinations; where the
Exchange is making assessments, we expect that the agreement described
in Sec. 155.302(b)(6) will be combined with the agreement in Sec.
155.345(a).
The burden associated with this provision is the time and effort
necessary for the Exchange to establish or modify an agreement for
eligibility determinations and coordination of eligibility and
enrollment functions. If an Exchange chooses to draft separate
agreements for each insurance affordability program, then the estimate
will likely increase.

[[Page 42293]]

In either case, we estimate it will take each Exchange an average
of 105 hours to create a new agreement, although we assume that such
agreements will be largely standardized across states, and that HHS
will provide model agreements for state Medicaid and CHIP agencies and
the Exchange to use. This includes a mid-level health policy analyst
and an operations analyst reviewing the agreement with managerial
oversight and comprehensive review of the agreement by operations
analyst. We estimate a cost of $6,733 per Exchange.
8. ICRs Regarding Notices From QHP Issuers (Sec. Sec. 156.260,
156.265, 156.270, and 156.290)
First, Sec. 156.260(b) provides that QHP issuers will notify a
qualified individual of his or her effective date of coverage, in
accordance with the effective dates of coverage established by the
Exchange in accordance with Sec. 155.410(c) and (f). Second, under
Sec. 156.270(b), QHP issuers will send a notice of termination of
coverage to an enrollee if the enrollee's coverage in the QHP is being
terminated in accordance with Sec. 155.430(b)(1)(i), (b)(2)(ii) or
(b)(2)(iii). Third, Sec. 156.270(f) provides that QHP issuers will
provide enrollees with a notice about the grace period for non-payment
of premiums. QHP issuers will send this notice to enrollees who are
delinquent on premium payments. Fourth, Sec. 156.265(e) provides that
QHP issuers will provide new enrollees with an enrollment information
package, which we anticipate that issuers may combine with the
notification of coverage effective date described in Sec. 156.260(b).
Lastly, under Sec. 156.290(b), QHP issuers will provide a notice to
enrollees if the issuer elects not to seek recertification of a QHP.
We anticipate that some of the above QHP issuer required notices
are similar in nature to the notices that issuers currently send to
enrollees. For example, it is standard practice for issuers to provide
new enrollees with information about their enrollment in a plan, their
effective date of coverage, and if and when their coverage is
terminating. Accordingly, we anticipate that QHP issuers will review,
update, and revise notice templates that they utilize currently as they
work to address the notice requirements described below and to ensure
that the notices include the appropriate information. Similar to
notices that will be issued by the Exchange, we expect that for QHP-
issued notices, an analyst will develop text, and a peer analyst,
manager, and legal counsel for the issuer will review the notices,
including a review to ensure compliance with plain writing, language
access, and readability standards as required under Sec. 156.250(c).
Finally, a developer will need to incorporate programming changes into
the issuer's noticing system to account for the changes and updates
that will be necessary to ensure that the QHP issuer is in compliance
with the notice standards set forth in this rule and to ensure the
notice can be populated and generated according to an individual's
preference to receive notices. We estimate that the burden related to
the development and implementation of this notice will necessitate 44
hours from a health policy analyst at an hourly cost of $49.35 to learn
appeals rules and draft notice text; 20 hours from an attorney at an
hourly cost of $90.14 and four hours from a senior manager at an hourly
cost of $79.08 to review the notice; and 32 hours from a computer
programmer at an hourly cost of $52.50 to conduct the necessary
development. In total, we estimate that this will take a total of 100
hours for each QHP issuer, at a cost of approximately $5,971 per
issuer. We expect that the burden on QHP issuers to maintain this
notice will be significantly lower than to develop it.
However, we believe that the burden estimate described under Sec.
155.310(g) likely represents an upper bound estimate of the burden on
issuers to develop each of these notices as in some cases the notice
described under Sec. 155.310(g) will be somewhat more dynamic to
address the additional information we expect to be included in that
notice.
Since the above estimate applies to one notice, and we described 5
notices under part 156, the total burden estimate is $40,710. Due to
uncertainty regarding the number of individuals who will choose to
receive paper notices, as well as some uncertainty regarding the
frequency of circumstances that will trigger notices in accordance with
this part, we have only included an estimate of the printing and
mailing costs for a QHP issuer to send one notice to a qualified
individual or enrollee.
9. ICRs Regarding Notices and Third-Party Disclosures in the SHOP
(Sec. Sec. 157.205(e) and (f))
45 CFR part 157 includes several instances in which qualified
employers participating in the SHOP Exchange will need to provide
information to employees or to the SHOP Exchange. We include the data
elements for these notifications in appendix A of this PRA package. For
the individual market Exchange, we anticipate that a large share of
enrollees will elect to receive electronic notices while the rest will
receive notices by mail. We do not make this assumption for notices
described here as we expect that qualified employers would provide
notices to employees in whatever format the qualified employer usually
provides notices to employees; in paper, electronically, or in a
combination of both formats. We estimate that the associated printing
costs for paper notices will be approximately $0.10 per notice. We do
not take mailing costs into consideration for notices provided by
qualified employers, as we expect that if qualified employers provide
notices in paper format, the employer may provide the employee with the
notice in person, instead of mailing the notice. We do not have a
reasonable way to estimate total printing costs for notices provided by
qualified employers in the SHOP Exchange due to uncertainty regarding
the number of employees who will choose to receive paper notices, as
well as some uncertainty regarding the frequency of circumstances that
will trigger notices in accordance with this part.
First, Sec. 157.205(e) specifies that a qualified employer provide
an employee with information about the enrollment process. A qualified
employer will inform each employee that he or she has an offer of
coverage through the SHOP Exchange, and instructions for how the
employee can apply for and enroll in coverage. We anticipate that the
qualified employer will also provide information about the acceptable
formats in which an employee may submit an application; online, on
paper, or by phone, as described under Sec. 157.205(c). If the
employee being offered coverage was hired outside an initial or annual
enrollment period, the notice will also inform the employee if he or
she is qualified for a special enrollment period. Second, in Sec.
157.205(f) we provide that a qualified employer will notify the SHOP
Exchange regarding an employee's change in eligibility for enrollment
in a QHP through the SHOP Exchange, including when a dependent or
employee is newly eligible, or is no longer eligible.
We expect that the information that qualified employers will
provide to employees and the SHOP Exchange, as described above, will be
somewhat standardized. Additionally, we anticipate that qualified
employers will generate notices using a manual process. We expect that
for a qualified employer to establish a notice, the qualified employer
will need 20 hours from a human resources specialist at an hourly cost
of $40.68 to develop the text; and

[[Page 42294]]

four hours from a human resources manager at an hourly cost of $75.01
and ten hours from an attorney at an hourly cost of $90.14 to review
the notices. We do not anticipate that a developer will be needed to
develop the notices described in this part since we expect that in most
cases, these notices will be manually generated on demand. Accordingly,
we expect that the burden hours for developing each of the notices will
be approximately 34 hours, for a total of 68 hours per qualified
employer, at a total cost of $4,030. We expect that the burden on the
qualified employer to maintain the notices will be significantly lower
than to develop the notices.

D. Summary of Annual Burden Estimates

Table 1--Proposed Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per
Regulation section(s) OMB & CMS ID Respondents Responses response Total annual Labor cost of Total cost ($)
s (total) (hours) burden (hours) reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
42 CFR 431.10, 431.11, and OCN 0938-New; CMS- 48 48 60 2,880 3,258 (per 156,398
457.1120. 10456. respondent).
Sec. Sec. 435.917, 435.918, OCN 0938-New; CMS- 96 96 194 18,624 10,609 (per 1,018,504
457.110, and 457.340. 10456. respondent).
Sec. Sec. 435.923 and OCN 0938-New; CMS- 53 1060 12.5 13,250 12,635 (per 669,644
457.340 (develop and execute 10456. respondent).
agreements).
Sec. Sec. 435.923 and OCN 0938-New; CMS- 53 53 70 3,710 3,815 (per 202,184
457.340 (create registration 10456. respondent).
process and work flow).
Sec. Sec. 435.923 and OCN 0938-New; CMS- 53 53 50 2,650 1,710 (per 90,625
457.340 (develop training 10456. respondent).
materials).
Sec. Sec. 435.923 and OCN 0938-New; CMS- 53 53 50 2,650 1,332 (per 70,596
457.340 (train application 10456. respondent).
assistors).
Sec. Sec. 435.1101(b) and OCN 0938-New; CMS- 53 53 50 2,650 1,710 (per 90,625
457.355. 10456. respondent).
Sec. 447.57................. 0938-New; CMS- 53 53 6 318 210 (per respondent). 11,130
10456.
Sec. 155.227 (ICRs Regarding OCN 0938-New; CMS- 18 18 30 540 1,895 (per 34,113
Authorized Representatives). 10400. respondent).
Sec. Sec. 155.302, 155.310, OCN 0938-New; CMS- 18 18 100 1,800 5,971 (per 107,478
155.315, 155.320, 155.330, 10400. respondent).
155.335, 155.345, 155.410,
155.715, 155.720, 155.725,
and 155.1080 (ICRs Regarding
Notices).
Sec. 155.320 (ICRs Regarding OCN 0938-New; CMS- 1 .............. 2.2 .............. 34 (for one ..............
Verification of Enrollment in 10400. respondent).
an Eligible Employer-
Sponsored Plan and
Eligibility for Qualifying
Coverage in an Eligible
Employer-Sponsored Plan).

[[Page 42295]]

Sec. Sec. 155.315, 155. OCN 0938-New; CMS- 18 18 .2 .............. 29 (for one 5.73
330, 155.335 (ICRs Regarding 10400. respondent).
Reporting Changes).
Sec. Sec. 155.400 and 405 OCN 0938-New; CMS- 18 18 142 2,556 7,254 (per 136,314
(ICRs Regarding Enrollment). 10400. respondent).
Sec. 155.430 (ICRs Regarding OCN 0938-New; CMS- 18 18 70 1,260 3,881 (per 69,858
Termination). 10400. respondent).
Sec. Sec. 155.302, 155.345 OCN 0938-New; CMS- 18 18 105 1,890 6,733 (per 121,194
(ICRs Regarding Agreements). 10400. respondent).
Sec. Sec. 156.260, 156.265, OCN 0938-New; CMS- 18 18 100 1,800 5,971 (per 107,478
156.270, and 156.290 (ICRs 10400. respondent).
Regarding Notices from QHP
Issuers).
Sec. 157.205(e) and (f) OCN 0938-New; CMS- .............. .............. 68 .............. 4,030 (per ..............
(ICRs Regarding Notices and 10400. respondent).
Third Party Disclosures in
the SHOP).
-------------------------------------------------------------------------------------------------------------------------
Total..................... ................. .............. .............. .............. 55,578 ..................... 2,886,146.73
--------------------------------------------------------------------------------------------------------------------------------------------------------

E. 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
the OMB.
To obtain copies of the supporting statement and any related forms
for the proposed paperwork collections referenced above, access the CMS
Web site at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html, or call the Reports
Clearance Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you comment on these information collection and
recordkeeping requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this final rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attention: CMS Desk Officer,
(CMS-2334-P) Fax: (202) 395-6974; or Email: [email protected]. PRA-specific comments must be received by
August 5, 2013.

V. Regulatory Impact Analysis

A. Overall Impact

We have examined the impact of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993) and
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011). Executive Orders 12866 and 13563 direct agencies to
assess all costs and benefits of available regulatory alternatives and,
if regulation is necessary, to select regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for rules with
economically significant effects ($100 million or more in any 1 year).
The Office of Management and Budget has determined that this rulemaking
is ``economically significant'' within the meaning of section 3(f)(1)
of Executive Order 12866, because it is likely to have an annual effect
of $100 million in any one year. Accordingly, we have prepared a
Regulatory Impact Analysis that presents the costs and benefits of this
rulemaking. The RIA published with the March 2012 Medicaid eligibility
final rule detailed the impact of the Medicaid eligibility changes
related to implementation of the Affordable Care Act. The majority of
Medicaid eligibility provisions included in this final rule were
described in that detailed RIA and do not need to be repeated here. In
the April 30, 2010 final rule on State Flexibility for Medicaid Benefit
Packages, the assumptions utilized in modeling the estimated economic
impact of the associated provisions took into perspective the costs of
the benefit package for the new adult group. Coverage of these benefits
was already accounted for in the April 30, 2010 final rule, and
therefore, does not need to be repeated here.
For coverage beginning on or after January 1, 2014, individuals and
small businesses will be able to purchase private health insurance--
known as qualified health plans--through competitive marketplaces
called Affordable Insurance Exchanges, or ``Exchanges.'' This final
rule: (1) outlines criteria related to the verification of enrollment
in an eligible employer-sponsored plan and eligibility for qualifying
coverage in an eligible

[[Page 42296]]

employer-sponsored plan in connection with advance payments of the
premium tax credit and cost-sharing reductions; and (2) further
specifies or amends other eligibility and enrollment provisions to
provide detail necessary for state implementation. This rule continues
to afford states substantial discretion in the design and operation of
the Exchange established by a state, with greater standardization
provided where directed by the statute or where there are compelling
practical, efficiency or consumer protection reasons.

B. Estimated Impact of the Medicaid Premium and Cost Sharing Provisions

The provisions in this final rule related to Medicaid premiums and
cost sharing clarify and update existing flexibilities and provide new
flexibility for states for cost sharing for outpatient services, drugs,
and non-emergency use of the emergency department. As states
contemplate the changes required under the Affordable Care Act, more
states may consider utilizing these flexibilities to either establish
or expand cost sharing. We believe these proposed policies will
encourage less costly care and decreased use of unnecessary services,
which will reduce state and federal costs for the specified services.
The following chart summarizes our estimate of the anticipated effects
of this final rule.

Table 2--Estimated Total Impact of Changes in Maximum Medicaid Cost Sharing, FY 2014-2018
[In millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year 2014 2015 2016 2017 2018 2014-2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Federal..................................... -25 -45 -70 -70 -70 -280
State....................................... -15 -30 -45 -45 -50 -185
-----------------------------------------------------------------------------------------------------------
Total................................... -40 -75 -115 -115 -120 -465
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: CMS' Office of the Actuary

We estimate that this final rule will result in total savings of
$465 million over 5 years, including $280 million in cost savings to
the federal government and $185 million in savings to states. These
savings may be attributed primarily to the increased maximum allowable
cost sharing for outpatient services, drugs, and non-emergency use of
the emergency department. Such savings are offset only nominally by the
decreased maximum allowable cost sharing for an inpatient stay. In
addition to direct savings from increased cost sharing, we assume some
declines in utilization as enrollees subject to new cost sharing
requirements choose to decrease their use of services.

C. Estimated Impact of Exchange Provisions

The provisions in this final rule amend select provisions of the
Exchange Establishment final rule (77 FR 18319, March 27, 2012). Our
approach in this regulatory impact analysis was to build off of the
analysis presented in the Exchange Establishment final rule, available
at http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf. We do not believe the provisions in this final rule
significantly alter our prior estimates of the impact of Exchanges on
the budget or on enrollment in health insurance, and therefore, this
final rule does not significantly alter the regulatory impact analysis
drafted as part of such rulemaking. This section summarizes benefits
and costs of the Exchange provisions presented in this final rule.
1. Methods of Analysis
The estimates in this analysis reflect estimates from the FY 2014
President's Budget for State Planning and Establishment Grants, which
incorporate the costs associated with state implementation of the
provisions proposed in this rule.
2. Benefits of the Proposed Regulation
The provisions included in this final rule amend provisions of the
Exchange Establishment final rule. We do not believe the modifications
made significantly alter the benefits associated with these provisions.
Therefore, we refer to the benefits discussion included in the
regulatory impact analysis associated with the Exchange Establishment
final rule for a full analysis. The Exchange Establishment final rule
regulatory impact analysis can be found at http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
3. Costs of the Proposed Regulation
The Affordable Care Act and the implementing regulations found in
subpart D of this final rule and the Exchange Establishment final rule
provide for a streamlined system based on simplified eligibility rules,
and an expedited process that will facilitate enrollment of eligible
individuals and minimize costs to states, Exchanges and to the federal
government. To support this new eligibility structure, states seeking
to operate Exchanges are expected to build new or modify existing
information technology (IT) systems. We believe that how each state
builds and assembles the components necessary to support its Exchange
and Medicaid infrastructure will vary and depend on the level of
maturity of current systems, current governance and business models,
size, and other factors. It is important to note that, although states
have the option to establish and operate an Exchange, there is no
federal requirement that each state establish an Exchange. We believe
the proposed provisions provide options and flexibility to states that
minimize costs and burden on Exchanges, consumers, employers and other
entities. We also believe that overall administrative costs may
increase in the short term as states build IT systems; however, in the
long term, states may see savings through the use of more efficient
systems.
Any administrative costs incurred in the development of IT
infrastructure to support the Exchange may be funded through Exchange
Planning and Establishment Grants to states. The federal government
expects that these grants will fund the development of IT systems that
can be used by many states who either develop their own Exchanges or
who partner with the federal government to provide a subset of Exchange
services.\3\ Costs for IT infrastructure that will also support
Medicaid must be allocated to Medicaid, but are eligible for a 90
percent federal matching rate to assist in development.\4\
---------------------------------------------------------------------------

\3\ For example, CMS has awarded a number of Early Innovator
grants to develop efficient and replicable IT systems that can
provide the foundation for other states' work in this area. These
amounts vary from $6 million to $48 million per state.
\4\ Medicaid Program; Federal Funding for Medicaid Eligibility
Determination and Enrollment Activities, Final rule, 75 FR 21950
(April 19, 2011).

---------------------------------------------------------------------------

[[Page 42297]]

In general, as noted in our discussion of benefits, we anticipate
that the final rule will increase take-up of health insurance;
therefore, one type of rule-induced cost will be associated with
providing additional medical services to newly-enrolled individuals. A
recent study found that insured individuals received more hospital care
and more outpatient care than their uninsured counterparts.\5\
---------------------------------------------------------------------------

\5\ Finkelstein, A. et al., (2011). The Oregon Health Insurance
Experiment: Evidence from the First Year,'' National Bureau of
Economic Research Working Paper Series, 17190.
---------------------------------------------------------------------------

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

Table 3--Estimated Federal Government Outlays for the Affordable Insurance Exchanges FY 2013-FY2017
[In billions of dollars]
----------------------------------------------------------------------------------------------------------------
Year 2013 2014 2015 2016 2017 2013-2017
----------------------------------------------------------------------------------------------------------------
Grant Authority for Exchange 1.5 2.1 1.7 0.8 0.2 6.2
Start up \a\...............
----------------------------------------------------------------------------------------------------------------
\a\ FY 2014 President's Budget.

D. Alternatives Considered

We considered two alternatives to the Exchange provisions.
Alternative #1: Require paper documentation to verify
access to employer-sponsored coverage.
Section 155.320(d) of the final rule provides a process for
verification related to enrollment in an eligible employer-sponsored
plan and eligibility for qualifying coverage in an eligible employer-
sponsored plan. The proposed process relies on available electronic
data sources, with the use of paper documentation in situations in
which information submitted by an applicant is not reasonably
compatible with information in electronic data sources, along with a
sample-based review for situations in which no data is available.
The alternative model we considered would require the Exchange to
require individuals to submit paper documentation to verify this
information in all circumstances. This may increase the burden on
individuals to submit this documentation to the Exchange, which may not
be readily available to the applicant, but on employers, who will have
to produce this information at the request of applicants, and will also
require additional time and resources for Exchanges to accept and
process the paper documentation needed for an eligibility
determination. In addition, it could ultimately increase the amount of
time it will take for an individual to receive health coverage through
the Exchange or an insurance affordability program, could reduce the
number of states likely to operate an Exchange due to increased
administrative costs, and could dissuade individuals from seeking
coverage through the Exchange.
Alternative #2: Require Paper Notices from the Exchange
In Sec. 155.230(d), we provide that the Exchange will provide the
option to an individual or employer to receive notices electronically.
We anticipate that this will be accommodated by the Exchange generating
electronic notices, storing them on a secure Web site, and notifying
individuals and employers through a generic email or text message
communication that a notice is available for review.
The alternative model would require the Exchange to send all
notices in paper form via US mail. This would significantly increase
administrative costs for printing and mailing, and also generate
significant volumes of undeliverable mail which would be returned to
the Exchange.
Summary of Costs for Each Alternative
The paper-driven process outlined under alternatives 1 and 2 would
ultimately increase the amount of time it would take for an individual
to receive health coverage through the Exchange or an insurance
affordability program, would increase administrative costs, and would
dissuade individuals from seeking coverage through the Exchange.

E. Limitations of the Analysis

A number of challenges face estimators in projecting the Exchange,
Medicaid, and CHIP benefits and costs under the Affordable Care Act and
its implementing regulations, including this final rule. Health care
cost growth is difficult to project, especially for people who are
currently not in the health care system--the population targeted for
the Medicaid eligibility changes and new insurance affordability
programs. Such individuals could have pent-up demand and thus have
costs that may be initially higher than other enrollees in health
coverage, while they might also have better health status than those
who have found a way (for example, ``spent down'') to enroll in
Medicaid.
For the Exchange provisions, we use the President's Fiscal Year
2014 Budget as an estimate of the costs associated with the Exchange
provisions. It is difficult to isolate the effects associated with
these particular provisions of the Affordable Care Act, and therefore,
in this analysis, we discuss the evidence relating to the provisions of
this final rule in combination with related provisions of the
Affordable Care Act. Further, with limited previous data and
experiences, there is even greater uncertainty than in estimating the
implications of modifying a previously existing program. Accordingly,
we supplement the regulatory impact analysis with a qualitative
discussion on the specific provisions of this rule.

F. Accounting Statement

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

[[Page 42298]]

Table 4--Accounting Statement: Classification of Estimated Net Costs and Transfers
[In millions]
----------------------------------------------------------------------------------------------------------------
Units
Category Estimates -----------------------------------------------------
Year dollar Discount rate Period covered
----------------------------------------------------------------------------------------------------------------
Benefits
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/ Not Estimated........ 2012 7% 2013-2017
year).
Not Estimated........ 2012 3% 2013-2017
----------------------------------------------------------------------------------------------------------------
Qualitative........................ The Exchanges, combined with other actions being taken to implement the
Affordable Care Act, will improve access to health insurance, with
numerous positive effects, including reduced morbidity and fewer medical
bankruptcies. The Exchange will also serve as a distribution channel for
insurance reducing administrative costs as a part of premiums and
providing comparable information on health plans to allow for a more
efficient shopping experience.
----------------------------------------------------------------------------------------------------------------
Costs*
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/ 1,311................ 2012 7% 2013-2017
year).
1,283................ 2012 3% 2013-2017
----------------------------------------------------------------------------------------------------------------
Qualitative........................ Unquantified costs include State implementation costs above the amount
covered by Federal grants; and increased medical costs associated with
more widespread enrollment in health insurance.
----------------------------------------------------------------------------------------------------------------
Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/ 54.4................. 2013 7% 2014-2018
year).
55.3................. 2013 3% 2014-2018
----------------------------------------------------------------------------------------------------------------
From Whom to Whom.................. Beneficiaries to Federal Government
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