[Federal Register Volume 78, Number 186 (Wednesday, September 25, 2013)]
[Proposed Rules]
[Pages 59122-59151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-23292]



[[Page 59121]]

Vol. 78

Wednesday,

No. 186

September 25, 2013

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 600





Office of the Secretary





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45 CFR Part 144





Basic Health Program: State Administration of Basic Health Programs; 
Eligibility and Enrollment in Standard Health Plans; Essential Health 
Benefits in Standard Health Plans; Performance Standards for Basic 
Health Programs; Premium and Cost Sharing for Basic Health Programs; 
Federal Funding Process; Trust Fund and Financial Integrity; Proposed 
Rule

  Federal Register / Vol. 78 , No. 186 / Wednesday, September 25, 2013 
/ Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 600

Office of the Secretary

45 CFR Part 144

[CMS-2380-P]
RIN 0938-AR93


Basic Health Program: State Administration of Basic Health 
Programs; Eligibility and Enrollment in Standard Health Plans; 
Essential Health Benefits in Standard Health Plans; Performance 
Standards for Basic Health Programs; Premium and Cost Sharing for Basic 
Health Programs; Federal Funding Process; Trust Fund and Financial 
Integrity

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish the Basic Health Program, 
as required by section 1331 of the Affordable Care Act. The Basic 
Health Program provides states the flexibility to establish a health 
benefits coverage program for low-income individuals who would 
otherwise be eligible to purchase coverage through the state's 
Affordable Insurance Exchange (Exchange, also called a Health Insurance 
Marketplace). The Basic Health Program would complement and coordinate 
with enrollment in a QHP through the Exchange, as well as with 
enrollment in Medicaid and the Children's Health Insurance Program 
(CHIP). This proposed rule sets forth a framework for Basic Health 
Program eligibility and enrollment, benefits, delivery of health care 
services, transfer of funds to participating states, and federal 
oversight. Additionally, this rule would amend other rules issued by 
the Secretary of the Department of Health and Human Services 
(Secretary) in order to clarify the applicability of those rules to the 
Basic Health Program.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on November 25, 
2013.

ADDRESSES: In commenting, please refer to file code CMS-2380-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-2380-P, P.O. Box 8016, Baltimore, MD 
21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-2380-P, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Jessica Schubel (410) 786-3032 or 
Carey Appold (410) 786-2117.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Table of Contents

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

I. Executive Summary
II. Background
    A. Introduction
    B. Stakeholder Consultation and Input
III. Provisions of the Proposed Rule
    A. Scope and definitions (Sec.  600.5)
    B. Establishment of a Basic Health Program
    1. Program description (Sec.  600.100)
    2. Basis, scope and applicability (Sec.  600.105)
    3. Basic Health Program Blueprint (Sec.  600.110)
    4. Development and submission of a BHP Blueprint (Sec.  600.115)
    5. Certification of a BHP Blueprint (Sec.  600.120)
    6. Revisions to a certified Blueprint (Sec.  600.125)
    7. Withdrawal of a Blueprint prior to implementation (Sec.  
600.130)
    8. Notice of timing of HHS action on a BHP Blueprint (Sec.  
600.135)
    9. State termination of BHP (Sec.  600.140)
    10. HHS withdrawal of certification and termination of a BHP 
(Sec.  600.142)
    11. State program administration and program operations (Sec.  
600.145)
    12. Enrollment assistance and information requirements (Sec.  
600.150)
    13. Tribal Consultation (Sec.  600.155)

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    14. Provision of BHP to American Indians and Alaskan Natives 
(Sec.  600.160)
    15. Nondiscrimination standards (Sec.  600.165)
    16. Annual report content and timing (Sec.  600.170)
    C. Federal Program Administration
    1. Federal program reviews and audits (Sec.  600.200)
    D. Eligibility and Enrollment
    1. Basis, scope and applicability (Sec.  600.300)
    2. Eligible individuals (Sec.  600.305)
    3. Application (Sec.  600.310)
    4. Certified Application Counselors (Sec.  600.315)
    5. Determination of eligibility for and enrollment in BHP (Sec.  
600.320)
    6. Coordination with other insurance affordability programs 
(Sec.  600.330)
    7. Appeals (Sec.  600.335)
    8. Periodic renewal of BHP eligibility (Sec.  600.340)
    9. Eligibility verification (Sec.  600.345)
    10. Privacy and security of information (Sec.  600.350)
    E. Standard Health Plan
    1. Basis, scope and applicability (Sec.  600.400)
    2. Standard health plan coverage (Sec.  600.405)
    3. Competitive contracting process (Sec.  600.410)
    4. Contracting qualifications and requirements (Sec.  600.415)
    5. Enhanced availability of standard health plans (Sec.  
600.420)
    6. Coordination with other insurance affordability programs 
(Sec.  600.425)
    F. Enrollee Financial Responsibilities
    1. Basis, scope and applicability (Sec.  600.500)
    2. Premiums (Sec.  600.505)
    3. Cost sharing (Sec.  600.510)
    4. Public schedule of enrollee premium and cost-sharing (Sec.  
600.515)
    5. General cost-sharing protections (Sec.  600.520)
    6. Disenrollment procedures and consequences for nonpayment of 
premiums (Sec.  600.525)
    G. Payment to States
    1. Basis, scope and applicability (Sec.  600.600)
    2. BHP payment methodology (Sec.  600.605)
    3. Secretarial determination of BHP payment amount (Sec.  
600.610)
    4. Deposit of federal BHP payment (Sec.  600.615)
    H. BHP Trust Fund
    1. Basis, scope and applicability (Sec.  600.700)
    2. BHP trust fund (Sec.  600.705)
    3. Fiscal policies and accountability (Sec.  600.710)
    4. Corrective action, restitution and disallowance of questioned 
BHP transactions (Sec.  600.715)
IV. Collection of Information Requirements
V. Response to Comments
VI. Regulatory Impact Analysis

Acronyms

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

[the] Act Social Security Act
Affordable Care Act The collective term for the Patient Protection 
and Affordable Care Act (Pub. L. 111-148) and the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152))
APTC Advance Payments of the Premium Tax Credit
BHP Basic Health Program
CHIP Children's Health Insurance Program
CMS Centers for Medicare & Medicaid Services
[the] Code Internal Revenue Code of 1986
EHBs Essential Health Benefits
FEHBP Federal Employees Health Benefits Program (5 U.S.C 8901, et 
seq.)
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
MAGI Modified adjusted gross income
PHS Act Public Health Service Act
PRA Paperwork Reduction Act of 1995
QHP Qualified Health Plan
SHOP Small Business Health Options Program

I. Executive Summary

    This proposed rule would implement section 1331 of the Patient 
Protection and Affordable Care Act (Pub. L. 111-148, enacted on March 
23, 2010) and the Health Care and Education Reconciliation Act of 2010 
(Pub. L. 111.152, enacted on March 30, 2010), which are collectively 
referred to as the Affordable Care Act. Section 1331 directs the 
Secretary to establish the Basic Health Program (BHP). In addition, 
this proposed rule would amend certain other federal regulations, 
clarifying their applicability to the new program.
    Beginning in 2014, individuals and small businesses will be able to 
purchase private health insurance coverage through competitive 
marketplaces, also termed ``Exchanges'' (or the Health Insurance 
Marketplace). At the same time, states will have the opportunity to 
provide coverage under Medicaid for a broader range of low-income 
individuals. New administrative procedures discussed in prior 
rulemaking establishes a system for coordinating coverage across all 
insurance affordability programs. Beginning January 1, 2015, under this 
proposed rule, states will have an additional option to establish a 
Basic Health Program for certain low-income individuals who would 
otherwise be eligible to obtain coverage through the Exchange.
    This proposed rule: (1) Establishes requirements for certification 
of state submitted BHP Blueprints, and state administration of the BHP 
consistent with that Blueprint; (2) establishes eligibility and 
enrollment requirements for standard health plan coverage offered 
through the BHP; (3) establishes requirements for the benefits covered 
by such standard health plans; (4) provides for federal funding of 
certified state BHPs; (5) establishes the purposes for which states can 
use such federal funding; (6) sets forth parameters for enrollee 
financial participation; and (7) establishes requirements for state and 
federal administration and oversight of BHP funds. This issuance 
addresses everything that we believe to be essential to the 
establishment and operation of the BHP, with the specific exception of 
details on payment which will be issued separately. We continue to 
review existing regulations to identify areas for further development 
and coordination and we invite comment on additional areas that might 
be included.

II. Background

A. Introduction

    Section 1331 of the Affordable Care Act provides states with a new 
coverage option, the Basic Health Program (BHP), for individuals who do 
not qualify for Medicaid but whose income does not exceed 200 percent 
of the federal poverty level (FPL). This proposed rule implements 
statutory provisions of the BHP and other provisions necessary to 
ensure coordination with the other coverage options that, along with 
BHP, are collectively referred to as ``insurance affordability 
programs'' (coverage obtained through an Exchange, Medicaid, and the 
Children's Health Insurance Program, along with premium tax credits and 
cost sharing reductions). Coordination is necessary to ensure that 
consumers are determined eligible for the appropriate program through a 
streamlined and seamless process and are enrolled in appropriate 
coverage without unnecessary paperwork or delay. This proposed rule 
also describes standards for state administration and federal oversight 
of the BHP.
    To maximize the coordination between BHP and other insurance 
affordability programs, rather than establish new and different rules 
for the BHP, we have proposed, when possible, to align BHP rules with 
existing rules governing coverage through the Exchange, Medicaid, or 
CHIP. This approach is supported by the statutory linkage between the 
minimum benefit coverage, maximum cost sharing, and overall funding for 
the BHP with the Exchange. It is also advisable in most instances to 
promote simplification and

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coordination among programs. Where necessary to accommodate unique 
features of the BHP, we have adapted existing regulations or 
established specific rules for the new program. Recognizing that states 
may choose different ways to structure their BHP, when possible, we 
offer states flexibility in choosing to administer the program in 
accordance with Exchange rules or those governing Medicaid or CHIP. In 
those sections in which we propose to offer states the choice, states 
must adopt all of the standards in the referenced Medicaid or Exchange 
regulations.

B. Stakeholder Consultation and Input

    HHS has consulted extensively with interested states and 
stakeholders on policies related to the BHP.
    On September 14, 2011 (76 FR 56767), HHS published a Request for 
Information (RFI) inviting the public to provide input regarding the 
development of standards for the establishment and operation of a BHP. 
In particular, HHS asked states, tribal representatives, consumer 
advocates, and other interested stakeholders to comment on the general 
establishment of the BHP, standard health plan requirements and 
contracting process, the coordination between the BHP and other state 
programs, eligibility and enrollment, amount of payment, and 
Secretarial oversight. The comment period closed on October 31, 2011.
    The public response to the RFI yielded comments from states, 
consumer advocacy organizations, health plans, and provider 
associations. The majority of the comments were related to the general 
administrative functions and standards for the BHP, the financial 
methodology used to determine a state's BHP payment amount, 
coordination between insurance affordability programs, benefit package, 
health plan selection and delivery systems, and the effect that the BHP 
may have on a state's Exchange.
    The comments received are described, where applicable, in 
discussing specific regulatory proposals.
    HHS also held a number of listening sessions with state 
representatives, consumer groups and health plans to gather input, and 
has directly engaged with interested states by establishing a 
``learning collaborative'' to seek state input related to operations 
and coordination of the BHP with other insurance affordability 
programs. We considered input from these stakeholder meetings and 
responses to the RFI as we developed the policies in this proposed 
rule.
    This proposed rule may be of interest to, and affect, American 
Indians/Alaska Natives. Therefore, we plan to consult with Tribes 
during the comment period and prior to publishing a final rule.

III. Provisions of the Proposed Rule

A. Scope and Definitions (Sec.  600.1 and Sec.  600.5)

    In Sec.  600.1, we set forth the overall design of the BHP 
established under the authority of section 1331 of the Affordable Care 
Act. Generally, this provision authorizes federal funding for states 
that elect to operate an alternative program for eligible low-income 
individuals instead of offering such coverage through qualified health 
plans in the Exchange, if the Secretary certifies that the alternative 
program meets certain requirements. This proposed rule would implement 
that authority.
    In proposed Sec.  600.5, we set forth definitions for terms that 
are used throughout this part. Where a term used in this part has been 
defined in section 36B of the Internal Revenue Code (the Code) or in 
published regulations codifying the Affordable Care Act as related to 
operation of the Exchange, the Medicaid program and CHIP, we have 
adopted those definitions here consistent with the explicit statutory 
direction at section 1331(h) of the Affordable Care Act that terms used 
in section 36B of the Code shall have the same meaning under BHP. These 
definitions would incorporate interpretations, guidance and operating 
methodologies applicable under section 36B of the Code, to ensure a 
coordinated approach. Definitions for ``Basic Health Program 
Blueprint,'' ``program year,'' ``certification,'' ``enrollee,'' 
``standard health plan,'' and ``standard health plan offeror'' are 
created for the purpose of this proposed rule. We propose to define a 
regional compact to mean an agreement between two or more states to 
jointly procure and enter into contracts with standard health plans 
covering eligible individuals in those states.
    We propose to adopt the definition of the ``single streamlined 
application'' used by both Medicaid and the Exchange, and found in 42 
CFR 431.907(b)(1) of this chapter and 45 CFR 155.405(a) and (b) .
    We propose to adopt the Exchange definitions of ``family and family 
size,'' ``household income,'' ``qualified health plan,'' ``residency,'' 
and ``modified adjusted gross income'' in accordance with 26 CFR 1.36B-
1. We are proposing to define ``Minimum essential coverage'' to have 
the meaning set forth in 26 CFR 1.5000A-2, including any coverage 
recognized by the Secretary under 26 CFR 1.5000A-2(f). Under that 
authority, we are also proposing to recognize BHP coverage as minimum 
essential coverage, and would specifically include BHP coverage in our 
definition. It is our intention to clarify that BHP meets the 
requirements for the individual mandate, and, as such, we invite 
comment on the placement of this provision.
    The proposed definition of ``Indian'' is the same as used in the 
Exchange for eligibility for cost-sharing reductions codified at 45CFR 
155.300(a). This definition means any individual defined in section 
4(d) of the Indian Self-Determination and Education Assistance Act 
(Pub. L. 93-638, 88 Stat. 2203), in accordance with section 1402(d)(1) 
of the Affordable Care Act. The definition of ``lawfully present'' 
found in 45 CFR 152.2 is also applied to BHP.

B. Establishment of a Basic Health Program

    We propose adding subpart B consisting of Sec.  600.100 through 
Sec.  600.170 to specify the general requirements for certification of 
a state BHP. In this subpart, we propose required elements of the BHP 
Blueprint and procedures for development and submission of the BHP 
Blueprint. We would then require that states operate the BHP in 
accordance with a BHP Blueprint that has been certified by the 
Secretary. We also set forth certain overall principles for operation 
of the BHP. When possible, we have drawn on definitions and standards 
applied to other insurance affordability programs to promote state 
flexibility and reduce administrative burden.
1. Program description (Sec.  600.100)
    Section 600.100 contains a general description of a state BHP that 
is operated in accordance with a BHP Blueprint certified by the 
Secretary to meet the requirements of this Part.
2. Basis, scope and applicability of subpart B (Sec.  600.105)
    Proposed Sec.  600.105 of subpart B specifies the general authority 
for and scope of standards proposed in part 600 that establish minimum 
requirements for the state option to operate a BHP.
3. Basic Health Program Blueprint (Sec.  600.110)
    This section sets forth standards related to the content of a BHP 
Blueprint. We are proposing to adopt the construct of the Exchange 
blueprint for the BHP and are using the Blueprint as the mechanism by 
which the

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Secretary will certify a state's proposed BHP and grant operational 
authority for the program. The Blueprint will include information 
necessary to establish compliance with many of the standards of the 
program. We further propose that the Blueprint be accompanied by a 
funding plan that identifies the funding sources, if any, beyond the 
BHP trust fund used to cover projected expenditures over a 12 month 
period. We recognize that it may be difficult to complete all sections 
of the Blueprint with certainty prior to finalizing contracts with 
standard health plan offerors or receiving notification of final 
funding amounts. Therefore, we intend to accept certain parts of the 
Blueprint in draft or proposed form, and provide states with a 
certification in principle, pending submission of final Blueprint 
provisions. We welcome comment on which aspects of the Blueprint will 
need to be submitted in draft or proposed form given the operational 
realities of program establishment.
    Finally, we propose in this section that HHS will post submitted 
Blueprints on-line in the interest of public transparency.
4. Development and submission of a BHP Blueprint (Sec.  600.115)
    We propose that the Governor or the Governor's designee must sign 
the state's Blueprint which must identify, by position or title, the 
agency and officials within that agency with responsibility for program 
operations, administration and finances.
    In Sec.  600.115 we propose to adopt the Exchange standard that a 
state must seek public comment on the BHP Blueprints, including 
significant revisions, before submission to the Secretary for 
certification. Unlike the Exchange process, which appears in statute, 
we have not proposed a specific list of stakeholders, with the 
exception of federally recognized tribes residing in the state, who 
must be addressed with public notification. We are extending 
flexibility to the state to contact stakeholders that may be affected. 
We welcome comment on any need to further require notification to 
particular interested parties.
5. Certification of a BHP Blueprint (Sec.  600.120)
    We propose to have the date of signature by the Secretary be the 
effective date of certification, before which no payments may be made 
under this part. Once certified, we propose that Blueprints remain in 
effect unless revised by the state, terminated by the state, or the 
Secretary withdraws certification.
    We propose standards for certification, which include sufficient 
information for the Secretary to establish compliance with the 
requirements of section 1331 of the Affordable Care Act and this Part, 
adequate planning for the integration of BHP with other insurance 
affordability programs, and sufficient planning to demonstrate 
operational readiness.
6. Revisions to a certified Blueprint (Sec.  600.125)
    At Sec.  600.125(a) we propose that a state wishing to make 
significant changes to the terms of its Blueprint must submit changes 
to the Secretary for review and certification. While not exhaustive, 
significant changes within this scope include changes that have a 
direct impact on the enrollee experience in BHP or the program 
financing.
7. Withdrawal of a BHP Blueprint prior to implementation (Sec.  
600.130)
    We propose in this section a process for withdrawing a BHP 
Blueprint, whether certified or not, as long as the state has not begun 
enrollment. If a state has begun enrollment, we consider the action a 
state would be taking as a program termination and the state would need 
to follow procedures as proposed in Sec.  600.140.
8. Notice and timing of HHS action on a BHP Blueprint (Sec.  600.135)
    We recognize that HHS has a responsibility to respond timely to a 
state requesting certification of a BHP Blueprint, or approval for 
revision of a certified Blueprint, to enable states to offer BHP as a 
part of the continuum of insurance affordability programs. We therefore 
propose at Sec.  600.135(a) that HHS will act on all certification 
requests, including revisions, in a timely manner. We propose at Sec.  
600.135(b) that a state will receive a response from HHS to a complete 
certification request that includes information on impediments to 
approval.
9. State termination of a BHP (Sec.  600.140)
    At Sec.  600.140 we propose that for a certified program that is 
operational, or has begun enrollment, a state wishing to cease the 
operation of their BHP must follow specific termination procedures. We 
propose that a state must submit notification to the Secretary to 
terminate its BHP 120 days in advance of the planned termination date 
along with a transition plan. Proposed termination procedures also 
include written notice to participating standard health plan offerors 
and enrollees at least 90 days in advance, as well as other enrollee 
protections to facilitate an orderly transition to other coverage 
without gaps in coverage. Section 600.140 further proposes that a state 
terminating its BHP will fulfill contractual obligations to standard 
health plans offerors, data reporting requirements to HHS, and the 
completion of any necessary financial reconciliation with the federal 
government. Notices to standard health plan offerors and enrollees must 
meet accessibility and readability standards set by the Exchange at 
Sec.  155.230(b).
10. HHS Withdrawal of Certification and Termination of a BHP (Sec.  
600.142)
    We propose standards and conditions for a Secretarial finding that 
a BHP Blueprint no longer meets certification standards based on 
findings in an annual review, a program review conducted in accordance 
with proposed Sec.  600.200, or from evidence of beneficiary harm, 
financial malfeasance or fraud. We propose that a state receive notice 
prior to withdrawal of certification and that all reasonable efforts 
are made to resolve the findings. Timing standards for notice to the 
state and eventual decertification are proposed. The effective date of 
an HHS determination withdrawing BHP certification is proposed as not 
earlier than 120 days following the finding of non-compliance.
11. State Program Administration and Program Operations (Sec.  600.145)
    We propose at Sec.  600.145(a) the requirements under which a state 
must operate its BHP.
    At Sec.  600.145(b) through (d), we propose certain principles to 
apply once a state has elected to implement a BHP. Specifically, the 
state must ensure that all persons have a right to apply, and if found 
eligible, to be enrolled into coverage that conforms to this part, and 
the state must operate the program statewide. The state would not be 
permitted to limit enrollment to a lower income level than prescribed 
in the statute, cap enrollment or impose waiting lists. These 
principles are set forth because individuals eligible for BHP in a 
state operating BHP are specifically excluded from receipt of the 
premium tax credit or cost-sharing reductions through the Exchange 
under section 1331(e)(2) of the Affordable Care Act and the 
establishment of a BHP must not leave individuals without an option for 
affordable coverage.
    Additionally, at Sec.  600.145(e) we propose a group of core 
operating functions that states must be able to perform to operate a 
BHP. These functions include making eligibility

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determinations using the single streamlined application, processing 
appeals, contracting with standard health plan offerors, performing 
oversight and financial integrity functions, providing consumer 
assistance, extending essential protections to American Indians and 
Alaska Natives, ensuring civil rights protections, and collecting and 
reporting data necessary for program operations and oversight. Finally, 
terminating the program, if necessary, in accordance with proposed 
Sec.  600.140 is also defined as a core operation. We solicit comment 
on whether these are, in fact, the core operating functions or whether 
there are other functions that should be recognized and considered 
essential to the successful establishment and operation of a BHP.
12. Enrollment Assistance and Information Requirements (Sec.  600.150)
    Section 600.150(a)(1), (2), (3) and (4) set forth proposed 
requirements for the provision of information to consumers that is 
accessible and explanatory, aiding individuals' knowledge about the 
program, enrollment choices, and covered benefits, including additional 
benefits provided outside of standard health plan coverage, as well as 
other benefit options and limitations. This information should 
facilitate enrollment and participation in BHP. We are proposing that 
information provided to consumers by participating standard health plan 
offerors should be publically available, be clear and informative 
regarding premiums, covered services, and cost-sharing and should 
follow state specifications for format. We propose that such 
information be provided in a manner that complies with accessibility 
and readability standards of the Exchange. Further, we propose that 
states require participating standard health plan offerors to make 
current provider lists available.
13. Tribal Consultation (Sec.  600.155)
    The BHP as proposed uses many Exchange concepts such as the 
development of a Blueprint to attain certification. Similarly, we 
extend in this rule many of the protections for American Indian/Alaska 
Native populations as are extended in the Exchange. To further this 
alignment, we propose in this section to use the tribal consultation 
agreements used by the state or federal Exchange for the BHP. We invite 
comment on this policy.
14. Basic Health Program Protections for American Indians and Alaska 
Natives (Sec.  600.160)
    We propose that states adopt the same protections for American 
Indian and Alaska Native populations as they would receive in an 
Exchange. In Sec.  600.160(a) we propose to apply the same special 
enrollment status for enrollment in standard health plans as 
established in 45 CFR 155.420, which permits Indians to enroll in 
Qualified Health Plans (QHPs) or change QHPs once per month. This 
status is independent of policies set by the state for open enrollment 
generally. We propose at Sec.  600.160(b) that a state permit tribal 
organizations to pay premiums on behalf of enrolled individuals as is 
permitted in the Exchange at 45 CFR 155.240. At Sec.  600.160(c) we 
propose that cost sharing may not be imposed on Indians to further 
align the Exchange's cost-sharing protections for Indians with 
household incomes at BHP levels. We also propose that BHP standard 
health plans must pay primary to Indian health programs for covered 
services; in other words, Indian health programs shall be the ``payers 
of last resort'' for services received through such programs that are 
covered by a standard health plan (with respect to the standard health 
plan).
15. Nondiscrimination standards (Sec.  600.165)
    We propose that the BHP and standard health plans must comply with 
all applicable non-discrimination statutes and the nondiscrimination 
requirements applicable to the Exchange and recipients of federal 
assistance.
16. Annual report content and timing (Sec.  600.170)
    In compliance with section 1331(f) of the Affordable Care Act, 
which substantially conforms to Exchange functions codified at 45 CFR 
155.200(c) through (f), we propose at Sec.  600.170(a) requirements for 
an annual report on the state's BHP. This report is both a mechanism to 
report state knowledge of any program fraud, waste or abuse, and to 
ensure compliance with eligibility verification requirements, the use 
of federal funds, and quality and performance standards. We continue to 
work towards aligning quality and performance expectations across all 
insurance affordability programs. We intend to issue additional 
guidance with respect to quality and performance standards, harmonizing 
the BHP to the maximum extent possible with requirements of QHPs in the 
Exchange, including quality ratings assigned under section 1311(c)(3) 
of the Affordable Care Act and consumer satisfaction surveys under 
section 1311(c)(4) of the Affordable Care Act, which will also align 
with our efforts for Medicaid and CHIP. We invite public comment on 
this approach.
    Finally, at Sec.  600.170(b) we propose a timing standard for 
annual reports, due 60 days prior to the end of each operational year. 
The annual report confirms the appropriate use of federal funds, as 
well as key operational features, confirming that the release of 
federal funding for the subsequent year is appropriate.

C. Federal Program Administration

    We propose to add subpart C consisting of Sec.  600.200 to specify 
the provisions for federal program administration of the BHP. In adding 
this proposed subpart, we have drawn from the administrative standards 
established for the other health insurance affordability programs to 
promote program efficiencies.
1. Federal program reviews and audits (Sec.  600.200)
    The proposed BHP review standards at Sec.  600.200(a) and (b) 
specify that HHS may review state administration of the BHP, as needed, 
but no less frequently than annually, to determine whether the state is 
complying with the federal requirements and provisions of its BHP 
Blueprint. We provide that the federal compliance review may either be 
based on the state's annual report, or on a separate direct federal 
review. We anticipate that separate federal reviews will generally be 
conducted only when there is a specific federal concern about program 
compliance. We then provide a protocol for identifying and resolving 
compliance concerns, providing opportunities for the state to 
substantiate compliance or develop corrective actions to address 
compliance. We also set forth a protocol for raising and resolving 
concerns about the improper use of BHP trust fund resources. Finally, 
the proposed audit standards in Sec.  600.200(c) provide that the HHS 
Office of Inspector General (OIG) may periodically audit state 
operations and standard health plan practices consistent with the 
purpose and processes applied in Medicaid, as described in Sec.  
430.33(a).

D. Eligibility and Enrollment

    As with other sections of this proposed rule, subpart D, which 
consists of Sec.  600.300 through Sec.  600.350, adopts eligibility and 
enrollment provisions from other insurance affordability programs 
wherever

[[Page 59127]]

possible. We have done this to prevent gaps in coverage, promote 
simplicity and continuity for consumers if they move from one insurance 
affordability program to another, or have family members eligible for 
different programs, to simplify program administration, promote reuse 
of administrative processes and infrastructure, and promote 
administrative simplification for states. In some instances we have 
adopted, with modification, standards from other insurance 
affordability programs or are proposing new rules to fit the 
eligibility and enrollment provisions of the BHP.
1. Basis, scope and applicability (Sec.  600.300)
    Section 600.300 of subpart D specifies the general authority for 
and scope of standards proposed in this subpart that establishes 
eligibility requirements for the BHP.
2. Eligible individuals (Sec.  600.305)
    We propose to implement the eligibility standards for the BHP in 
accordance with sections 1331(e)(1) and (e)(2) of the Affordable Care 
Act. Because BHP provides coverage in lieu of coverage through the 
Exchange that is supported by advanced payment of premium tax credits 
(APTC) and cost sharing reductions (CSR), we have adopted many of the 
eligibility rules used to determine eligibility for APTC and CSR in the 
Exchange and applied them to BHP. In some circumstances, particularly 
around eligibility processes, we propose to adopt Medicaid or CHIP 
rules, or to offer a state the option to apply either Exchange or 
Medicaid/CHIP rules. Where a state is given choice between applying 
Exchange standards or Medicaid standards, it is our intention that it 
chooses all the standards of Medicaid or the Exchange within one 
particular area.
    At Sec.  600.305(a) we propose to codify the eligibility 
requirements established in section 1331(e)(1) of the Affordable Care 
Act. With narrow exceptions, as reflected in the regulation text, 
individuals eligible for BHP would be eligible for premium tax credit 
support to enroll in a QHP in the Exchange if the state did not offer a 
BHP.
    In situations in which an individual is enrolled in both limited-
benefits Medicaid (because the Medicaid coverage does not meet the 
definition of minimum essential coverage (MEC) or because it does not 
include the 10 essential health benefits) and in the BHP, standard 
coordination of benefits rules set forth in Sec.  433.139(b)(1) of the 
Medicaid regulations would apply, with Medicaid serving as the 
secondary payer.
3. Application (Sec.  600.310)
    The Affordable Care Act requires the use of a single, streamlined 
application, developed by the Secretary, for all insurance 
affordability programs. We propose to codify at Sec.  600.310 this 
requirement for BHP by adopting by reference the regulations at Sec.  
431.907(b)(1) and 45 CFR 155.405(a) and (b). We further propose to 
adopt the Medicaid rule relating to an individual's opportunity to 
apply without delay (Sec.  435.906) and for assistance with an 
application at Sec.  435.908. We note that call centers required of the 
Exchange (Sec.  155.205(a)) are encouraged to provide information on 
all insurance affordability programs.
    The state may permit the use of authorized representatives to 
assist individuals with their applications or renewal of eligibility. 
If the state permits authorized representatives we propose that they 
follow the standards of either the Exchange (Sec.  155.227) or Medicaid 
(Sec.  435.923).
4. Certified Application Counselors (600.315)
    Some individuals may need assistance with completing applications, 
enrolling in coverage, or with ongoing communications once determined 
eligible. State Medicaid and CHIP agencies have long allowed 
beneficiaries to use application counselors to promote enrollment and 
assist with application preparation, and current regulations at Sec.  
435.908 provides for states to certify Medicaid application counselors 
to ensure that they are properly trained in applicable rules and 
requirements. Similarly, 45 CFR 155.225 provides for Exchanges to 
certify application counselors to help individuals apply for enrollment 
in QHPs. We propose at Sec.  600.315 to give a state the option to 
certify application counselors to assist individuals in applying for 
enrollment in in BHP, and to adopt the standards for a certification 
program found in either Sec.  155.225 (relating to the Exchange) or 
Sec.  435.908 (relating to Medicaid/CHIP). We expect the state to adopt 
all of either the Exchange of Medicaid standards.
5. Determination of eligibility for and enrollment in a BHP (Sec.  
600.320)
    At Sec.  600.320(a) we propose to allow BHPs to determine 
eligibility directly or to have eligibility determined by any 
governmental entity that determines eligibility for Medicaid, or the 
Exchange.
    At Sec.  600.320(b) we propose that the state adopt standards to 
conform with Sec.  435.912, similar to both Medicaid and CHIP, 
regarding the timeliness of eligibility determinations.
    At Sec.  600.320(c) we propose that the state determine the 
effective date for eligibility using the method in place for either the 
Exchange or Medicaid.
    Finally, at Sec.  600.320(d), we propose that the state choose 
between the enrollment policies of the Exchange or the continuous 
enrollment of Medicaid. If choosing the Exchange enrollment policies, 
the state must adopt open and special enrollment periods equivalent to 
those specified for the Exchange at 45 CFR 155.410 and Sec.  155.420 to 
minimize gaps in coverage for eligible individuals. Specifically, 
consistent with the Exchange provisions at 45 CFR 155.420(d), we 
propose to require the state to allow eligible individuals to enroll in 
BHP outside of the annual open enrollment period if, for example, they 
experience a triggering event including: the loss of minimum essential 
coverage; gaining a dependent or becoming a dependent; gaining status 
as a citizen, national or as lawfully present when previously he/she 
did not have such status; or making a permanent move. Additionally, 
Indians are provided one special enrollment per month.
6. Coordination with other Insurance Affordability Programs (Sec.  
600.330)
    We propose standards of coordination between insurance 
affordability programs in accordance with section 1331(c)(4) of the 
Affordable Care Act by adopting applicable provisions of 45 CFR 
155.345(a) and incorporating Sec.  435.1200 which pertain to 
coordination options and responsibilities for the Exchange and Medicaid 
respectively. Under existing regulations, Medicaid and CHIP agencies 
may make final Medicaid and CHIP eligibility determinations based on 
the BHP's assessment; or the state Medicaid or CHIP agency may accept a 
final eligibility determination made by a BHP that uses state Medicaid 
and CHIP eligibility rules and standards. Further, the Exchange may 
contract eligibility determinations to eligible entities. We propose to 
adapt the provisions of Sec.  435.1200(c) through (e) to BHP to reflect 
this flexibility and to establish the standards and guidelines to 
ensure a simple, coordinated and timely eligibility determination 
process and accurate eligibility determinations regardless of the 
option elected by the state.
    Specifically, we propose to require an agreement between the 
Medicaid/CHIP

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agency, the Exchange, and the BHP, that includes the same elements as 
those required in Sec.  155.345(a) and Sec.  435.1200(b)(3), to include 
a delineation of the responsibilities of each agency to minimize burden 
on individuals, as well as to ensure timely determinations of 
eligibility and enrollment in the appropriate program.
    Because all insurance affordability programs will be collecting the 
same information, the state will have the information necessary to 
evaluate MAGI based eligibility across programs. We propose to require 
that the state operate in full compliance with 45 CFR 155.345(a) and 
(h) regarding agreements with the Exchange, Medicaid and CHIP agencies, 
as well as the secure exchange of information including electronic 
account transfers.
    Similarly, we propose to require the BHP agency to notify any 
referring agency of final eligibility determinations in accordance with 
Sec.  600.330.
    An effective notification process is important to ensure a high 
quality consumer experience and a coordinated eligibility and 
enrollment system as provided under section 1413 of the Affordable Care 
Act and section 1943 of the Act. We propose to adopt the standards for 
notices, in accordance with Sec.  435.913 and Sec.  155.230, and the 
requirement for electronic notices in Sec.  435.918 for the BHP. 
Consistent with the provisions of the Affordable Care Act for a 
coordinated system across insurance affordability programs, we further 
propose to adopt the provisions for coordinated and combined notices at 
Sec.  435.1200.
7. Appeals (Sec.  600.335)
    Eligibility for BHP is largely based upon eligibility for 
participation in the Exchange, within applicable income limits. As 
such, many of the eligibility processes for BHP will be substantially 
the same as those for the Exchange. We propose that individuals will 
have an opportunity to appeal BHP eligibility determinations but that 
opportunity cannot be modeled on the Exchange appeal process because a 
core component of the Exchange appeals process is the federal level 
appeal. There is no independent authority for a federal level appeals 
process for BHP like the federal level appeal for the Exchange. 
Therefore, we propose that the state use the Medicaid appeals process 
for BHP, under an agreement with the Medicaid program. We appreciate 
that some state Medicaid programs may choose to delegate Medicaid 
appeals to the Exchange. In these states, there will not be complete 
alignment between appeals processes for Medicaid and BHP, since BHP 
appeals will not be inclusive of the federal process. We invite comment 
on this proposal.
8. Periodic Renewal of BHP eligibility (Sec.  600.340)
    Consistent with the Exchange, Medicaid and CHIP, we propose at 
Sec.  600.340(b) that the state shall re-determine an individual's 
eligibility every 12 months. If a state has chosen to match the 
Exchange policies on enrollment at Sec.  600.320(d), the 
redetermination process will occur as part of the annual open 
enrollment. If the state has chosen the 12 month renewal process of 
Medicaid, the redetermination process will occur 12 months from the 
initial determination. Consistent with the rules established for the 
Exchange, we propose to adopt the Exchange provisions at 45 CFR 
155.330(b) that the state require enrollees to report changes that 
could affect eligibility within 30 days, and must redetermine 
eligibility based on verified information received, or updated 
information from data sources.
    For purposes of encouraging continuity of care, we have also 
proposed that, if an enrollee remains eligible at annual 
redetermination, the state must maintain the individual's enrollment in 
the current standard health plan under BHP unless the individual 
affirmatively takes action to choose a different standard health plan.
9. Eligibility verification (Sec.  600.345)
    We propose that the state establish verification plans that are 
practical for all agencies determining eligibility for BHP. We propose 
to give the state the option to apply to BHP the same eligibility 
verification processes used by either the Exchange at 45 CFR 155.315 
and 320 or the Medicaid agency at Sec.  435.945 through Sec.  435.956.
    Regardless of which approach is chosen, the verification process 
must include verification of citizenship and lawfully present status. 
Self-attestation is not an acceptable verification method for 
citizenship and immigration status. The state may choose to verify 
additional factors and adopt reasonable verification procedures, and 
specify those factors for which self-attestation will be accepted.
10. Privacy and security of information (Sec.  600.350)
    The state must comply with all requirements on the use and 
disclosure of personally identifiable information in operating BHP that 
are applicable to the operation of an Exchange. We propose to apply to 
the BHP 45 CFR 155.260(b) which sets limits on the use and disclosure 
of personally identifiable information. We also propose to apply Sec.  
155.260(c), which clarifies that data sharing agreements made between 
BHP and other agencies must comply with other applicable law including 
section 1942 of the Act.

E. Standard Health Plan

    We propose to add subpart E consisting of Sec.  600.400 through 
Sec.  600.425 to specify the standard health plan coverage and the 
delivery of such coverage.
    Section 1331(b) of the Affordable Care Act provides that a standard 
health plan is a benefits plan which, at a minimum, provides essential 
health benefits described in section 1302(b) of the Affordable Care Act 
to BHP enrollees and, if offered by a health insurance issuer, has a 
medical loss ratio of at least 85 percent. Standard health plan 
offerors, as provided for in section 1331(g) of the Affordable Care 
Act, may include a licensed health maintenance organization, a licensed 
health insurance insurer, or a network of health providers.
    Section 1331(c) of the Affordable Care Act provides for the 
establishment of a competitive process for the state to contract with 
standard health plan offerors to provide standard health plan coverage. 
The statute requires that the competitive process include the selection 
of standard health plans, the negotiation of premiums, cost sharing and 
benefits, as well as the consideration of innovative features such as 
care coordination and incentives to encourage the use of preventive 
services and appropriate utilization of health care services. The 
competitive process must also take into account the health and resource 
differences of the BHP population and participating providers, 
techniques to manage service utilization, establishment of performance 
measures, enhancement of standard health plan availability to BHP 
enrollees and coordination with other insurance affordability programs.
    While much that is proposed in this subpart is new, given the need 
to set forth parameters in the establishment of a new program, we have 
adopted, where appropriate, existing Exchange or Medicaid standards 
consistent with our goal to create coordination across all insurance 
affordability programs, promote efficiencies and reduce administrative 
costs. This includes adopting the Exchange's coverage standards and 
protections at proposed Sec.  600.405. In light of the specific 
statutory requirement for a competitive

[[Page 59129]]

procurement process, we propose to require that the state adopt 
contracting processes consistent with the procurement standards and 
competition requirements set forth in 45 CFR 92.36(b) through (i). We 
have further adapted standards from the Exchange and Medicaid with 
respect to the contract requirements that apply when the state 
contracts for the provision of standard health plans.
1. Basis, scope and applicability (Sec.  600.400)
    Proposed Sec.  600.400(a) specifies the statutory basis, scope, and 
applicability for the provisions regarding the minimum coverage 
standards included in BHP's standard health plans as well as the 
delivery of such coverage, the competitive contracting process and 
contract requirements the state must use when contracting for the 
provision of standard health plans, and other applicable requirements 
to enhance the availability of standard health plan coverage.
2. Standard health plan coverage (Sec.  600.405)
    We propose in this section to align the minimum benefit BHP 
standard with 45 CFR 156.110 and 45 CFR 156.122 regarding prescription 
drug coverage, which defines the EHBs for the Exchange and includes any 
subsequent changes resulting from periodic reviews by the Secretary 
specified in 1302(b)(4)(G) and (H) of the Affordable Care Act. As 
required by statute, the minimum benefit standard must include at least 
the ten general EHB categories: Ambulatory patient services; emergency 
services; hospitalization; maternity and newborn care; mental health 
and substance use disorder services, including behavioral health 
treatment; prescription drugs; rehabilitative and habilitative services 
and devices; laboratory services; preventive and wellness services and 
chronic disease management; and pediatric services including oral and 
vision care. Provision of essential health benefits means that the 
standard health plan coverage provided by the BHP will not include any 
limitations on coverage that are not substantially equal to the EHB-
benchmark or reference plan. Nothing in this proposed rule should be 
interpreted to preclude a state from offering additional benefits 
within the state's standard health plan or in addition to the state's 
standard health plan.
    Additionally, section 1302(b)(4) of the Affordable Care Act 
requires that benefit design or implementation of benefit design cannot 
discriminate ``on the basis of an individual's age, expected length of 
life, or of an individual's present or predicted disability, degree of 
medical dependency, or quality of life or other health conditions.'' We 
further propose to implement this section by adopting the coverage 
protections set forth at 45 CFR 156.125, applicable to the Exchange.
    Within the construct of the required coverage of essential health 
benefits, there is no requirement in BHP that all enrollees receive the 
same or comparable benefits (known in Medicaid as the comparability 
requirement). States may have reason to provide specialized standard 
health plans to targeted populations to the extent that the targeting 
criteria are not based on pre-existing conditions or health status-
related factors, and the proposed regulation offers states that option. 
We are also proposing to adopt the Exchange's substitution and 
supplementation of coverage standards described at 45 CFR 156.115(b) 
and 45 CFR 156.110(b)(1) for the BHP. Additionally, we are proposing to 
adopt the Medicaid model permitting the selection of more than one 
option for establishing essential health benefits using a base 
benchmark or reference plan. We are proposing these policies, in 
combination, to provide states flexibility in benefit definition and 
configuration, while assuring that all standard health plans cover all 
ten essential health benefits, as well as other benefits based on the 
state's selected base benchmark plan.
    The intent of the reference plan is to reflect both the scope of 
services and limits offered by a typical employer plan in the state and 
set a reference or benchmark by which to measure the provision of 
substantially equal benefits. The permitted reference, or base 
benchmark plans as defined in 45 CFR 156.100(a)(1) through (4) are: the 
largest plan by enrollment in any of the three largest small group 
insurance products in the state's small group insurance market as 
defined in 45 CFR 155.20; any of the largest three state employee 
health benefit plans by enrollment; any of the largest three national 
Federal Employees Health Benefits Program (FEHBP) plan options by 
enrollment that are open to federal employees; or the largest insured 
commercial non-Medicaid HMO operating in the state. By permitting 
states to choose more than one base benchmark or reference plan in 
combination with substitution of benefits we are proposing to provide 
states flexibility to achieve similar plan structures as under 
alternative benefit plan structures in Medicaid. Substitution of 
benefits does not preclude states from drawing benefits from the 
Medicaid state plan to meet the EHB benchmark benefit package as long 
as they are actuarially equivalent and in the same EHB category, with 
the exception of prescription drugs for which substitution is not 
permitted.
    Plans providing essential health benefits in BHP must meet all the 
requirements in 45 CFR 156.115(a) defining substantially equal, 
prohibiting the exclusion of individuals from coverage in any benefit 
category, and complying with all the specific requirements for the 
provision of prescription drugs, mental health, substance abuse, 
preventive health services, and habilitative services.
    In addition to the essential health benefits described in detail 
previously, we propose to set forth conditions applicable when the 
standard health plan is subject to state insurance mandates requiring 
additional benefits. (This is not the same as a state choosing to add 
additional benefits only to its standard health plan(s).) We propose 
that the state adopt the determination of the Exchange at 45 CFR 
155.170(a)(3) in deciding which benefits, enacted after December 31, 
2011, are in addition to the EHBs and are, therefore, outside of the 
reference premium structure that will be used to determine the amount 
of the premium tax credit and cost sharing reductions forming the basis 
for federal payments to states. Payment for these benefits would come 
from either state funds or trust fund surplus.
    Finally, section 1303 of the Affordable Care Act sets forth special 
rules relating to coverage of abortion services and the segregation of 
funding for those services. Abortion services are prohibited from 
inclusion as essential health benefits and federal funding for abortion 
services, except in the case of endangerment of the woman's life, rape 
or incest, is prohibited. If states provide abortion services for which 
public funding is prohibited, the state is not eligible for any federal 
contribution, and payments for those services must be kept in separate 
allocation accounts.
3. Competitive contracting process (Sec.  600.410)
    The competitive contracting process is a unique feature to BHP, and 
while we have aligned, to the greatest extent possible, with existing 
standards for the Exchange, Medicaid, and CHIP, this section also 
proposes new standards specific to BHP consistent with the statute. To 
receive HHS certification, we propose that the state assure in its BHP 
Blueprint that it follows a competitive contracting process that 
includes a negotiation of the elements described in Sec.  600.410(d) as 
well as consideration of

[[Page 59130]]

the elements described in Sec.  600.410(e). We are interpreting the 
requirement for a competitive process to permit any state procedures 
that are consistent with the standards set out in section 45 CFR 
92.36(b) through (i). These standards provide a state considerable 
flexibility in how they solicit bids, how bids are evaluated, and how 
contracts are awarded, while ensuring that the competition will be open 
and free of unnecessary restrictions. While we understand that a state 
may be interested in joint procurements for BHP and other programs 
(such as Medicaid or other state health programs), the state must 
ensure that such a joint procurement meets the highest standards for 
competition of any of the involved programs, involves negotiation of at 
least the elements required under the BHP statute, does not 
unnecessarily restrict competition, and ensures that there is no cross-
subsidization of costs between programs. We invite comments on this 
approach as we are interested in ensuring both state flexibility and 
free and open competition for the provision of standard health plans.
    In Sec.  600.410(c), we propose exceptions to the initial 
implementation of a competitive contracting process in the event that 
the state is unable to implement such a process for program year 2015. 
The proposed exceptions are subject to HHS approval during the 
certification process as proposed in Sec.  600.120. We are seeking 
comment on this provision as we anticipate that a state may be 
interested in leveraging existing Medicaid managed care contracts to 
ensure an efficient and quick implementation of BHP effective January 
1, 2015. As these contracts may not have been procured consistent with 
the procedures proposed in this section, we have proposed this 
exception to help promote coordination and continuity of care during 
the initial implementation of BHP in 2015.
    We have proposed in Sec.  600.410(d) three elements specified in 
the statute that a state must negotiate during its competitive 
contracting process. In addition to proposing the negotiation of 
premiums, cost sharing and benefits, we propose that a state ensure the 
inclusion of innovative features in the negotiation process, such as 
care coordination, case management, the use of incentives to promote 
preventive services and encourage enrollee involvement in health care 
decision making, such as the ability for enrollees to select their 
providers. We further propose in paragraph (e) of this section that a 
state also include in its competitive process the consideration of 
health and resources differences of enrollees and health care 
providers. We also proposed in paragraph (e) that a state also include 
in its competitive process the use of managed care, or a similar 
process to improve the quality, accessibility, appropriate utilization, 
and efficiency costs and prices of services provided to enrollees as 
well as measures to prevent, identify theft, and address fraud, waste 
and abuse and ensure consumer protections. We share the goal of states 
to focus on improving the quality of care and health outcomes, and as 
such, have proposed that the state consider specific measures and 
standards that focus on these important objectives as well as consider 
how to coordinate with other health insurance affordability programs. 
We seek comment on the specific measures to consider and include in the 
final rule. Specifically, we are considering the use of measures that 
ensure enrollee protection, such as tracking and monitoring grievance 
and claims appeals while, at the same time, balancing our goals of 
state flexibility and effective contracting. Finally, in paragraph (f) 
of this section, we propose that nothing in this competitive process 
shall permit or encourage discrimination in enrollment based on pre-
existing conditions or other health status-related factors.
4. Contracting qualifications and requirements (Sec.  600.415)
    In Sec.  600.415(a), we propose the criteria by which an offeror is 
eligible to contract with a state for the administration and provision 
of one or more standard health plans under BHP. In addition to the 
criteria specified in statute, we propose that an eligible offeror also 
include a non-licensed health maintenance organization to the extent 
that the offeror participates in Medicaid or CHIP.
    The proposed eligible offeror criteria include a network of health 
care providers with the capacity to administer and provide standard 
health plan coverage. We do not anticipate that individual providers 
would be eligible to administer and provide a standard health plan. A 
network of providers, such as an independent physician association, or 
a large health system that provides, for example, both inpatient and 
outpatient health care services, or an accountable care organization, 
is necessary to not only deliver the coverage specified under the 
program but also to provide care coordination and case management as 
required by statute.
    Finally, we have proposed including a non-licensed health 
maintenance organization that participates in Medicaid or CHIP to 
provide the state with the flexibility to contract with Medicaid or 
CHIP managed care organizations that may not meet the requirements of a 
qualified health plan on the Exchange. We believe providing such 
flexibility furthers the objective of the program by encouraging 
continuity of care for BHP enrollees, who may frequently enroll and 
disenroll between the state's Medicaid program and BHP. We believe that 
the proposed requirements assure that non-licensed standard health plan 
offerors have the capacity to deliver high quality care to enrollees in 
a manner that is consistent with Medicaid standards; however, we invite 
comments on this approach.
    During the October 2011 RFI process, we received several comments 
regarding the use of managed care under BHP, and whether a state must 
contract with managed care organizations for the provision of standard 
health plans. While the statute directs that the state contract for the 
provision of a standard health plan under BHP, it does not restrict the 
state's option to contract with qualified health plans operating in the 
Exchange or with Medicaid managed care organizations. We believe the 
statute also provides a state with the flexibility to operate its BHP 
under an integrated care model as the state has the option to contract 
with a network of providers to provide a standard health plan to 
enrollees to the extent that the network of providers meet the elements 
specified in statute.
    With respect to the specific contract requirements for a standard 
health plan, we propose requiring that the state establish specific 
contract provisions that are unique to its BHP and applicable state 
laws to the extent needed to address network adequacy, service 
provision and authorization, quality and performance, enrollment 
procedures, disenrollment procedures, noticing, provisions protecting 
the privacy and security of personally identifiable information, and 
other applicable contract requirements as determined by the Secretary. 
We anticipate providing future guidance that will further describe the 
minimum contract requirements needed for HHS certification of a state's 
BHP; however, at this time, we will apply a ``safe harbor'' approach to 
a state incorporating the contract requirements from either 45 CFR part 
156 (the Exchange's qualified health plan requirements) or 42 CFR part 
438 (Medicaid managed care requirements). This ``safe harbor'' approach 
means that a state modeling its contract requirements off of the 
Exchange or Medicaid will meet the contract requirements for purposes 
of HHS

[[Page 59131]]

certification unless and until the next contract cycle after HHS issues 
additional guidance. We believe that the contract requirements under 
the Exchange and Medicaid assure the provision of high quality care 
while maintaining sufficient consumer protections; however, we invite 
comments on this approach to determine whether it accomplishes the 
objectives of promoting program efficiencies and promoting 
administrative simplicity.
    We further propose that a state include in its standard health plan 
contracts provisions that define a sound and complete procurement 
contract, as required by 45 CFR part 92(i), which is consistent with 
existing federal procurement guidance. Also under paragraph (b), we 
propose that contracts with standard health plans that provide health 
insurance coverage offered by a health insurance issuer must comply 
with the requirement at section 1331(b)(3) of the Affordable Care Act 
for a medical loss ratio of at least 85 percent. Finally, the state 
must, as proposed at Sec.  600.415(c), include in its BHP Blueprint the 
standard set of contract requirements that will be incorporated into 
its standard health plan contracts in order to receive HHS 
certification.
5. Enhanced availability of Standard Health Plans (Sec.  600.420)
    Section 1331(c)(3)(A) of the Affordable Care Act specifies that, to 
the maximum extent feasible, a state should seek to make multiple 
standard health plans available to individuals to ensure choice of 
standard health plans. While we recognize the number of standard health 
plans may not equal the number of QHPs offered in the Exchange, we 
believe that BHP applicants and enrollees should have not only choice 
of standard health plans, but also a similar experience to consumers 
purchasing coverage in the Exchange, including the ability to compare 
the benefits packages, premiums, cost-sharing charges, etc. between the 
available plans (this includes different standard health plans offered 
by the same standard health plan offeror). In order to ensure that BHP 
applicants and enrollees are afforded the opportunity to compare 
available standard health plans, we believe that a state must ensure 
that there are at least two standard health plans offered under the 
program. In addition to ensuring a similar coverage purchasing 
experience for BHP enrollees, we believe that offering at least two 
standard health plans will ensure there is always one standard health 
plan available in the event that the availability of the second 
standard health plan is affected. We understand that while choice of 
health plan may not always occur in Medicaid, BHP, unlike Medicaid, 
does not have a fee-for-service program available in the event that a 
single standard health plan suddenly becomes unavailable. We invite 
comment on the proposal to assure that at least two standard health 
plans are offered under the program.
    A state has the option, as defined in section 1331(c)(3)(B) of the 
Affordable Care Act, to enter into a regional compact with other states 
for the joint procurement of standard health plans. As this is a new 
option afforded to states operating a BHP, we propose in Sec.  600.420 
that a state may enter into a regional compact to provide standard 
health plans statewide, or in geographically specific areas within the 
states. If the state contracts for the provision of a geographically 
specific standard health plan, the state must assure in its BHP 
Blueprint that enrollees, regardless of residency within the State, 
continue to have choice of at least two standard health plans. The 
state must include in its BHP Blueprint which state(s) will participate 
in the regional compact; the specific areas within the participating 
states in which the standard health plans will operate, if applicable; 
an assurance that the competitive contracting process used in the joint 
procurement complies with proposed Sec.  600.410; and any variations in 
benefits, premiums and/or cost sharing that may result due to regional 
differences within the participating states. A state operating a 
geographically specific standard health plan under a regional compact 
must still operate a BHP statewide.
6. Coordination with other Insurance Affordability Programs (Sec.  
600.425)
    Due to income or household composition changes that may occur, 
coverage for some individuals will shift from BHP to the Exchange, 
Medicaid or CHIP coverage during open enrollment or in special 
enrollment periods during the year as well as possible shifts of 
coverage for some individuals from those other programs to BHP. Section 
1331(c)(4) of the Affordable Care Act requires that BHP coordinate with 
Medicaid, CHIP, the Exchange and any other state-administered health 
insurance program. This coordination is important not only for 
eligibility and enrollment, but also with respect to the provision of 
health care benefits as enrollees transition in or out of BHP. Our goal 
is to ensure that enrollees do not experience a disruption in care and 
that coordination exists between all insurance affordability programs 
to promote continuity of care. As such, we are proposing in Sec.  
600.425 that a state describe such coordination to prevent disruptions 
in care for transitioning enrollees. Examples of how a state can ensure 
coordination across the insurance affordability programs include, but 
are not limited to, describing how the state will:
    (1) Ensure that individuals who are undergoing an ongoing course of 
treatment can continue receiving such treatment and have access to 
their provider(s) through the duration of their prescribed treatment 
(or, as appropriate, until a transition can be made without disruption, 
inconvenience or burden for the enrollee);
    (2) Promote the sharing of data through the use of health 
information technology;
    (3) Promote access to the same providers and services through BHP 
available through other insurance affordability programs, through 
coordinated provider enrollment procedures, coordinated coverage 
procurement procedures, or similar coverage definitions and protocols; 
and
    (4) Use auto-enrollment protocols in BHP, Medicaid and CHIP that 
seek to maximize continuity with a provider.

F. Enrollee Financial Responsibilities

    We propose adding subpart F consisting of Sec.  600.500 through 
600.525 to specify the monthly premium and cost-sharing standards 
applicable to BHP.
1. Basis, scope and applicability (Sec.  600.500)
    Section 1331(a)(2)(A)(i) of the Affordable Care Act permits a state 
operating a BHP to collect monthly premiums to the extent that they do 
not exceed the amount of the monthly premium that the enrollee would 
have been required to pay if he or she had enrolled in the applicable 
second lowest cost silver plan, as defined in section 36B(b)(3)(B) of 
the Code, offered to the individual through an Exchange. The amount of 
the required monthly premium, either under BHP or under the applicable 
second lowest cost silver plan, will be determined after accounting for 
any premium tax credit and cost-sharing reduction.
    Section 1331(a)(2)(A)(ii) of the Affordable Care Act limits cost 
sharing for BHP enrollees with incomes at or below 150 percent of the 
FPL to the amount required under a platinum plan and for BHP enrollees 
with incomes above 150 percent of the FPL, the amount required under a 
gold plan.

[[Page 59132]]

    At Sec.  600.520, we propose to adopt three cost-sharing provisions 
that are directly based on Exchange requirements related to cost-
sharing protections for preventive health services, Indians, and the 
cost-sharing standards in QHPs that enroll consumers with similar 
incomes as BHP enrollees. Finally, at Sec.  600.525, we propose 
disenrollment procedures and consequences for nonpayment of premiums.
2. Premiums (Sec.  600.505)
    As discussed previously, the statute requires that a BHP enrollee's 
monthly premium not exceed the monthly premium the individual would 
have paid had he or she enrolled in a plan with a premium equal to the 
premium of the applicable benchmark plan, as defined in 26 CFR 1.36B-
3(f). In Sec.  600.505(a), we propose that a state assure in its BHP 
Blueprint that the BHP monthly premium does not exceed what an 
otherwise qualified enrollee would receive through the Exchange. The 
state must also assure that when determining the amount of the 
enrollee's monthly premium, it took into account reductions for the 
premium tax credit that would otherwise be available to the enrollee. 
As currently proposed, we are not requiring that the state assure that 
it accounted for the cost-sharing reduction when determining the 
enrollee's monthly premium as it is already assumed in the actuarial 
values of the applicable standard health plan. We further propose in 
this section that the state include in its BHP Blueprint the proposed 
enrollee monthly premium amounts for each group or groups of enrollees 
subject to the applicable premiums, the collection method and procedure 
for an enrollee to make his or her premium payment, and the 
consequences for nonpayment of premium.
3. Cost sharing (Sec.  600.510)
    We propose that the state include in its BHP Blueprint the group or 
groups of enrollees subject to cost sharing, and to assure that cost-
sharing standards, including the establishment of an effective system 
to ensure compliance, are in accordance with Sec.  600.520.
    We propose to adopt at Sec.  600.510(b) the Exchange's approach 
(which is also consistent with Medicaid's approach) to cost sharing for 
preventive health services as described at 45 CFR 147.130 and 45 CFR 
155.115(a)(4). These provisions establish that preventive services 
without cost sharing are a required element of the provision of 
essential health benefits. By cross referencing to these provisions, we 
propose to incorporate the same prohibition on the imposition of 
copayments, deductibles, coinsurance or other forms of cost sharing 
with respect to recommended preventive health services or items in BHP 
that applies to the provision of essential health benefits in other 
insurance affordability programs and in the overall marketplace. We 
believe that this approach is both required by the statutory provision 
that standard health plans offer essential health benefits, and also 
accomplishes the goal of not exceeding the cost sharing that would have 
otherwise occurred if the individual had been enrolled on the Exchange. 
Furthermore, this policy promotes consistent treatment and continuity 
of care for consumers who may move between BHP, the Exchange and 
Medicaid in a given coverage year.
4. Public schedule of enrollee premiums and cost sharing (Sec.  
600.515)
    Under Sec.  600.515(a), we propose that the state must ensure that 
applicants and enrollees have access to information concerning premiums 
and cost-sharing amounts for a specific item or service under a 
standard health plan that would apply for individuals at different 
income levels. We propose to align with the Exchange's minimum standard 
of publishing such information through an Internet Web site as well as 
through other means for individuals who do not have Internet access. In 
addition to the publication of the premiums and cost-sharing amounts, 
we propose that the state make publicly available information regarding 
the nonpayment of premiums. Under paragraph (b), we propose that the 
premium and cost sharing information must be made available to 
applicants for standard health plan coverage and for enrollees in such 
coverage at time of enrollment, re-enrollment, determination of 
eligibility, when premium and/or cost-sharing amounts change, and upon 
request by the individual. We believe that applying similar 
transparency standards utilized in the Exchange (and consistent with 
Medicaid and CHIP) will ensure efficiencies between insurance 
affordability programs as well as provide a more seamless experience 
for consumers who may transition out of, or into, the BHP.
5. General cost-sharing protections (Sec.  600.520)
    We propose at Sec.  600.520(a) to adopt similar cost-sharing 
protections for lower income enrollees that currently apply in CHIP at 
Sec.  457.530 and the Exchange at 45 CFR 156.420(e). In both insurance 
affordability programs, premiums and cost sharing may vary to the 
extent that they do not favor enrollees with higher incomes over those 
with lower incomes. At proposed Sec.  600.520(b), we have adopted the 
Exchange standards set forth at 45 CFR 156.420(b)(1) and (d) regarding 
the cost-sharing protections applied to Indians, which are also 
consistent with the rules in Medicaid and CHIP. Specifically, states 
will not be permitted to impose cost sharing on Indians enrolled in BHP 
for essential health benefits. We believe that these protections are 
legally required to ensure that this population does not experience 
higher cost sharing than what would otherwise have been required had 
they enrolled on the Exchange.
    As noted previously, section 1331(a)(2)(A)(ii) of the Affordable 
Care Act provides that the cost sharing required for individuals under 
150 percent of the FPL not exceed what is required under a platinum 
plan offered through the Exchange. Similarly, the statute specifies 
that the cost sharing required for individuals above 150 percent of the 
FPL not exceed what is required under a gold plan offered through the 
Exchange. We received many comments on this particular section of the 
statute during our October 2011 request for information. Specifically, 
we received questions regarding the actuarial value of the platinum and 
gold plans HHS would use to align BHP's on cost-sharing reduction 
standards. Actuarial value is a measure of the percentage of expected 
health care costs a health plan will cover, and can be considered a 
general summary measure of health plan generosity. Section 1302(d)(2) 
of the Affordable Care Act defines actuarial value relative to coverage 
of the EHB for a standard population, and is generally calculated by 
computing the ratio of the total expected payments by the plan for EHB 
over the total costs for the EHB the standard population is expected to 
incur. For example, a plan with an 80 percent actuarial value would be 
expected to pay, on average, 80 percent of a standard population's 
expected medical expenses for the EHB. The individuals covered by the 
plan would be expected to pay, on average, the remaining 20 percent of 
the expected expenses in the form of deductibles, co-payments, and 
coinsurance.
    We considered two options to ensure that BHP enrollees do not 
experience higher cost sharing when enrolled in BHP relative to what 
they would have experienced had they been enrolled through the 
Exchange. The first option we considered required BHP plans to meet the 
same actuarial value standards

[[Page 59133]]

applicable to Exchange plans for this population pursuant to the 
revisions made by section 1001(b)(1)(A) of HCERA to section 
1402(c)(2)(B) of the Affordable Care Act. The second option would be 
based on a comparison of the BHP plan to a selected model gold or 
platinum plan available under the Exchange. Under the first option, 
required cost sharing, on average, would not be more than 6 percent of 
the cost of coverage for the lowest income BHP population, and not more 
than 13 percent of the cost of coverage for other BHP enrollees. Under 
the second option, required cost sharing could exceed such levels but 
could not exceed the levels that would be required under the model 
Exchange plans.
    In our proposed rule, we have elected the first option as we have 
interpreted the revisions made by section 1001(b)(1)(A) of HCERA to the 
actuarial values described in section 1402(c)(2)(B) of the Affordable 
Care Act to apply to the applicable populations enrolled in BHP; 
therefore, proposed Sec.  600.520(c) adopts the cost-sharing standards 
set forth at 45 CFR 156.420(a)(1) and (2), (c) and (e). As proposed at 
Sec.  600.520(c), the cost-sharing standard for non-Indian enrollees 
with income below 150 percent of the FPL cannot exceed what is required 
under a platinum plan with an actuarial value of 94 percent. The cost-
sharing standard for non-Indian enrollees with incomes above 150 
percent of the FPL cannot exceed what is required under a gold plan 
with an actuarial value of 87 percent. By incorporating the Exchange 
cost-sharing standards at 45 CFR 156.420(a)(1) and (2), the out-of-
pocket cost-sharing maximums also apply to individuals enrolled in BHP. 
We invite comment on our proposed approach.
6. Disenrollment Procedures and Consequences for Nonpayment of Premiums 
(Sec.  600.525)
    We propose in paragraph (a)(1) of this section that a state assure 
compliance with the disenrollment procedures for nonpayment of premiums 
set forth at 45 CFR 155.430. At paragraph (a)(2), we propose that a 
state aligning its enrollment policy to 45 CFR 155.410 and Sec.  
155.420 comply with the premium grace period standards set forth at 45 
CFR 156.270 for required premium payment prior to disenrollment. We 
believe aligning the Exchange standards will ensure consistency for a 
state electing to model its BHP enrollment policies after the 
Exchange's. Should a state elect to implement a continuous enrollment 
policy similar to Medicaid, we propose in paragraph (b)(3), a 30-day 
premium grace period, which is consistent with the premium grace period 
standard that is applied in CHIP.
    At Sec.  600.525(b), we propose to again base consequences of 
nonpayment of premium to the state's enrollment policies. Specifically, 
in paragraph (b)(1), we propose that a state applying the Exchange 
enrollment policies to its BHP may not restrict reenrollment to BHP 
beyond the next open enrollment period, or if applicable, the next 
special enrollment period. At paragraph (b)(2), we propose that a state 
implementing a continuous enrollment policy apply the CHIP reenrollment 
standards set forth in Sec.  457.570(c). Specifically, a state would be 
prohibited from imposing a lockout period of more than 90 days, from 
continuing to impose a lockout period after an enrollee has paid past 
due premiums, and could not require collection of past due premiums as 
a condition of eligibility for reenrollment upon the expiration of the 
lockout period. Nothing in this proposed rule would preclude a state 
from continuing to seek past due premiums from an individual. Should a 
state elect to implement a premium lockout period, it must define the 
length of such a period in its BHP Blueprint. As with the disenrollment 
requirements described in paragraph (a), we believe that aligning the 
consequences of nonpayment of premiums to the state's enrollment 
policies with ensure program continuity and consistency.

G. Payments to States

    We propose adding subpart G consisting of Sec.  600.600 through 
Sec.  600.615 to specify the BHP payment methodology and the procedures 
by which HHS will determine a state's BHP payment amount.
1. Basis, scope and applicability (Sec.  600.600)
    Section 1331(d)(1) of the Affordable Care Act specifies that the 
Secretary must transfer each fiscal year federal funds to a state's BHP 
trust fund in the amount determined by the Secretary in accordance with 
the requirements set forth in section 1331(d)(3). Specifically, the 
statute requires the Secretary determine a per enrollee payment amount 
based on 95 percent of the premium tax credit under section 36B of the 
Code, and the cost-sharing reductions under section 1402 of the 
Affordable Care Act, that would have been provided to the enrollee in 
that fiscal year if he or she had been enrolled in a qualified health 
plan through an Exchange. When determining this payment amount, the 
statute further directs the Secretary to consider additional factors, 
such as age and income of the enrollee as well as geographic rating 
differences.
    Given the unique statutory requirements regarding the transfer and 
determination of a state's BHP payment amount, we propose, at Sec.  
600.605, the two components (the premium tax credit component and the 
cost-sharing reduction component) used in the general calculation of 
the state's federal payment. At Sec.  600.610, we propose the process 
by which the Secretary will determine the state's BHP amount, and in 
Sec.  600.615, we propose that HHS make quarterly federal deposits into 
the state's BHP trust fund.
2. BHP payment methodology (Sec.  600.605)
    As described previously, section 1331(d)(3) of the Affordable Care 
Act directs the Secretary to determine the amount of payment to equal 
95 percent of the premium tax credit and the cost-sharing reductions 
that the enrollee would have received had he or she enrolled in a 
qualified health plan through the Exchange. We received numerous 
comments during our October 2011 RFI process requesting clarity 
regarding the amount of the cost-sharing reductions that the Secretary 
will use when determining the BHP payment amount. Commenters expressed 
confusion by the placement of the comma in the statutory language and 
requested that HHS specify whether it would use 100 percent of the 
cost-sharing reductions, or 95 percent, which would coincide with the 
percentage of the premium tax credit. We have carefully considered this 
issue, and have interpreted the statute to read that the payment amount 
equals 95 percent of the cost-sharing reductions.
    We are interpreting the statutory language directing the Secretary 
to make payments on a fiscal year to apply to a federal fiscal year. In 
addition, while payments to states will be made based on the federal 
fiscal year, the determination of payment rates will be made consistent 
with the calendar year operations utilized on the Exchange. Given that 
the determination of BHP payment rates requires data from the Exchange, 
we believe that utilizing calendar year based data will provide a more 
accurate determination of the payment rate.
    We propose codifying in Sec.  600.605(b) the seven factors 
specified in statute that must be considered when determining a state's 
BHP payment amount. We anticipate that these seven factors will be 
included in the funding formula which will be published on an annual 
basis in the proposed payment

[[Page 59134]]

notice process as described further in Sec.  600.610.
    We are also seeking specific comments on our proposed approach to 
address the statutory requirement that the federal payment take into 
account the health status of the enrollee for purposes of determining 
risk adjustment and reinsurance payments that would have been made had 
the individual enrolled in a QHP through the Exchange. As finalized in 
the March 11, 2013 Federal Register notice of benefit and payment 
parameters for 2014, 45 CFR 153.400(a)(2)(iv) excludes BHP 
participating plans from contributions to the reinsurance program. As 
such, BHP plans are not eligible to receive reinsurance payments since 
they are not contributing to the program; therefore, we are proposing 
to exclude reinsurance payments from consideration in the BHP funding 
formula.
    With respect to risk adjustment, we have carefully considered this 
issue as we have received several comments from both states and 
stakeholders emphasizing the importance risk adjustment can have on not 
only a state's decision to elect BHP as an alternative source of 
coverage for low income adults, but also to the program's 
sustainability. Given the challenges associated with applying risk 
adjustment in the early years of both BHP and the individual market, we 
considered two possible approaches to recognize that BHP enrollees 
might differ from consumers in the individual market with respect to 
health status, associated health care service utilization, and program 
uptake. One possible approach we considered was to include BHP plans in 
risk adjustment as well as require that BHP enrollees and plans be 
included in the individual market risk pool. Under this approach, the 
funding mechanism would take into account the actual payments that 
would be made from that risk pool. The second approach was to account 
for the various differences between BHP enrollees and individual market 
enrollees in the BHP funding methodology only. We also considered under 
this approach the most appropriate time to include a risk adjustment 
factor in the BHP funding methodology; that is, whether we should 
address risk adjustment for year one or in the future, as well as the 
potential consequences of such timing.
    We have carefully considered both approaches, and have decided that 
the most appropriate approach is to develop a risk adjustment factor to 
include in the BHP funding methodology rather than include BHP in the 
individual market risk pool. Our rationale for this approach is 
twofold. Specifically, potential differences may exist between BHP and 
Exchange benefit packages and the market reform rules in the Affordable 
Care Act, such as the requirements for guaranteed issue, standard 
premium rating, and other such requirements may not apply to some 
standard health plan offerors. We believe that developing an 
appropriate factor in the BHP funding formula that accounts for the 
potential difference in health status between BHP enrollees and 
individual market enrollees would ensure that the BHP payment 
accurately reflects the statute's requirement to consider the impact of 
risk adjustment. In addition, we believe that this would provide a 
level of funding to BHP that more accurately reflects the expected 
health care costs for BHP enrollees.
    Finally, the risk adjustment method being applied in the individual 
market is a concurrent model, which means that a current year's 
experience is applied retrospectively to premiums; however, we are 
proposing, as discussed further below, to limit the retrospective 
adjustments in calculating the federal payment amount for BHP to a 
small set, including enrollment, to improve predictability for states 
in the amount of federal funding they will receive in a given fiscal 
year. In so doing, we are not proposing to retrospectively apply risk 
adjustment to the federal payment amount.
    While we seek comment on this approach, we will provide additional 
guidance that will further address this factor in our proposed Payment 
Notice which will be published in the fall of 2013 and will provide an 
additional opportunity for comment. Finally, we are not proposing to 
consider the issue of risk corridors in the BHP funding methodology as 
section 1342 of the Affordable Care Act specifically limits the program 
to QHPs.
    Section 1331(d)(3)(B) of the Affordable Care Act directs the 
Secretary to adjust the payment for any fiscal year to reflect any 
error in the determination of the payment amount in the preceding 
fiscal year. We believe that the statutory language supports the idea 
that an adjustment that would trigger a repayment obligation is limited 
to ``errors'' in the determination of payment, and does not include 
adjustments to improve the underlying methodology for the per member 
per month payment rates. Specifically, the statute does not appear to 
contemplate adjustment to the certified methodology as an error; 
instead, it appears to contemplate that adjustments to the methodology 
are only made prospectively and do not include retroactive corrections/
repayment. Section 1331(d)(3)(A) of the Affordable Care Act specifies 
that the Secretary must determine the payment based on a certified 
methodology, and to the extent that the determination accurately 
reflects that methodology, there would be no error. Furthermore, we 
believe that the statute supports the idea that no retrospective 
adjustment would be necessary, subsequent to certification of the 
methodology, if the adjustment is an improvement in the methodology 
(for example, based on new data or analysis that would improve the 
accuracy of that methodology). The following list includes several 
examples of when a retrospective adjustment may or may not occur:
     Retrospective adjustment would be warranted for 
mathematical errors in applying the certified methodology.
     Retrospective adjustment in aggregate payments would be 
warranted if based on incorrect enrollment data.
     Retrospective adjustment would not appear to be warranted 
if the determination accurately reflected the certified methodology, 
and thus was consistent with the requirements of section 1331(d)(3)(A) 
of the Affordable Care Act, even if, based on new data or analysis, the 
same methodology would not be certified for subsequent fiscal years.
    The interpretation of a prospective annual adjustment, except in 
the case of an error, means that the payment methodology published in 
accordance with the process set forth in Sec.  600.610 will remain in 
effect for an entire fiscal year. The Secretary will only change the 
methodology for the following fiscal year in order to improve the 
accuracy of the methodology or to reflect more accurate data sources 
and assumptions. Should a change in methodology occur, the change will 
be applied on a prospective basis only. In addition to limiting 
retrospective adjustments to error, we also propose, as described 
further below, to adjust a state's preceding fiscal year payment 
amounts based on actual enrollment in that year. We believe that this 
process will ensure the financial stability of the program as well as 
provide fiscal certainty for states as they develop their budgets each 
year.
3. Secretarial determination of BHP payment amount (Sec.  600.610)
    Section 1331(d)(3)(B) of the Affordable Care Act requires that the 
Chief Actuary of CMS, in consultation with the Department of Treasury's 
Office of Tax Analysis, certify the methodology to ensure that it meets 
the requirements set forth in the statute. The statute further provides 
that the certification must be based on sufficient

[[Page 59135]]

data from the state and from comparable states regarding their 
experiences with other insurance affordability programs.
    We propose, at Sec.  600.610(a), that beginning in fiscal year 
2015, and upon receipt of certification, HHS will determine and publish 
in the Federal Register a proposed payment notice describing the BHP 
payment methodology utilized to calculate the payment factors and 
federal payment amount for the next fiscal year. This proposed payment 
notice will be published in October of each year. For example, in 
October 2014, HHS will publish the proposed BHP payment methodology 
that would be used to calculate the payment rates for fiscal year 2016. 
This approach is consistent with how payment parameters for Exchanges 
will be determined as well as how CHIP allotments were determined 
during the initial implementation of the program. In addition, we 
propose that the proposed payment notice may require states to submit 
data in order for the Secretary to determine and publish the BHP 
payment factors and to support the calculation of an estimated federal 
payment amount for the fiscal year in a subsequent Federal Register 
notice. We believe that publishing a proposed payment notice that 
includes the payment methodology would provide appropriate opportunity 
for public comment. We believe this timing would provide a state the 
information it needs to appropriately budget for BHP each year as well 
as provide fiscal assurance, a concern raised during our October 2011 
RFI process from both states and other stakeholder groups.
    We propose in Sec.  600.610(b) that the Secretary determine and 
publish the final BHP payment methodology and payment factors that 
could be used to calculate an estimated federal payment amount based on 
a state's projected enrollment in a subsequent Federal Register notice. 
We propose publishing this notice in February of each year to provide 
states sufficient time to make any necessary adjustments to their BHP 
contracts well in advance of the new coverage year that begins in 
January. The final BHP payment amount will be calculated quarterly, as 
determined by using the final payment methodology and factors as well 
as actual enrollment and other data provided at regular intervals as 
specified in the notice. If needed, other applicable data will be used 
as determined by the Secretary in the final notice.
    Given the timing of this proposed regulation and the January 1, 
2015 implementation date, we intend to modify the publication dates of 
the payment notices for the first year of BHP implementation. 
Specifically, because we will need to gather data from an interested 
state in order to model and calibrate the payment method and associated 
factors needed to determine preliminary payment amount, we intend to 
determine and publish in the Federal Register a proposed payment notice 
describing the BHP payment methodology for fiscal year 2015 in the fall 
of 2013. This notice will include requests for data to help the 
Secretary determine payment amounts. A subsequent Federal Register 
notice containing the final fiscal year 2015 BHP funding methodology 
and payment amounts (which will be calculated by inputting the 
appropriate data into the final BHP funding methodology) will be 
published concurrently with the final BHP regulation. We invite comment 
on our proposed approach to the use, and publication, of the proposed 
and final payment notices, especially with respect to the variation in 
fiscal year 2014, to determine whether this approach ensures 
administrative and financial stability for states interested in 
participating in BHP.
    Under Sec.  600.610(c)(1,) we propose to determine, on a quarterly 
basis, state specific prospective aggregate payment amounts. This 
prospective amount will be calculated using the payment methodology and 
factors in the final payment notice. This prospective amount will be 
determined by multiplying the payment rates described in Sec.  
600.610(b) of this section by the projected number of BHP enrollees. 
This calculation may include different payment rates for enrollees 
related to the factors described in Sec.  600.605(b). We are proposing 
this approach to quarterly prospective aggregate payments to provide 
the state with financial stability and assurance.
    In Sec.  600.610(c)(2), we propose retrospective adjustments to the 
aggregate amount described in Sec.  600.610(c)(1) to account for any 
errors and to account for actual enrollment. The adjustment to account 
for actual enrollment would occur sixty days after the end of a 
quarter, and we would use the same method when determining a state's 
prospective aggregate payment amount; however, the enrollment numbers 
used in this calculation will be based on actual enrollment for the 
previous quarter rather than projected numbers. In the event that an 
adjustment to the payment amount is needed to account for differences 
in projected versus actual enrollment, we propose either depositing an 
additional payment in the state's BHP trust fund (to account for 
higher-than-projected enrollment), or a reduction in the state's 
upcoming quarter's prospective aggregate payment amount (to account for 
lower-than-projected enrollment). We have proposed this process given 
that statute only authorizes payment on a per enrollee basis; 
therefore, we have determined that payments in excess of the per 
enrollee amount would not be permitted by statute. As with our proposed 
approach to determining proposed and final payment notices, we seek 
comment on this method of calculating and adjusting aggregate BHP 
payment amounts.
    Finally, in Sec.  600.615, we propose to make quarterly deposits to 
the state's BHP trust fund based on the aggregate quarterly payment 
amounts discussed in Sec.  600.610(c).

H. BHP Trust Fund

    We propose adding subpart H consisting of Sec.  600.700 through 
600.715 to specify the use of BHP trust funds, establishment of fiscal 
policies and accountability, and restitution and disallowance 
procedures.
1. Basis, scope and applicability (Sec.  600.700)
    Section 1331(d)(2) of the Affordable Care Act specifies that a 
state implementing a BHP must establish a trust for the deposit of 
federal BHP payments. Because the trust fund is an integral feature of 
the BHP, we propose at Sec.  600.705 to set new standards with respect 
to the establishment of the trust fund as well as the standards for 
allowable BHP trust fund expenditures. We propose at Sec.  600.710 that 
a state establish appropriate fiscal and accountability standards to 
ensure that BHP trust funds are expended in accordance with the new 
standards set forth in Sec.  600.705. At Sec.  600.715, we propose 
restitution and disallowance procedures in the event that a 
determination is made that BHP trust funds have been improperly 
expended.
2. BHP Trust Fund (Sec.  600.705)
    Section 1331(d)(2) of the Affordable Care Act specifies that the 
state establish a trust fund to receive federal deposits for the 
provision of the BHP. The statute also provides that the state may use 
unspent BHP trust funds to reduce premiums and cost sharing, or to 
provide additional benefits, for BHP enrollees. Under Sec.  600.705(a), 
we propose that the state establish a trust fund at an independent 
entity, or as a subset account to the state's General Fund, and 
identify trustees responsible for oversight of the BHP trust fund along 
with individuals with the power to authorize withdrawal of funds. In 
addition to the federal deposits, we are

[[Page 59136]]

proposing in paragraph (b) that a state may deposit non-federal funds 
into its trust fund, which can include receipts from enrollees, 
providers or other third parties for standard health coverage. However, 
once non-federal funds have been deposited, such funds will be treated 
in the same manner as federal funds, must remain in the BHP trust fund 
and adhere to the same standards in accordance with paragraphs (c) and 
(d) in this section. We propose at Sec.  600.705(c) to codify the 
statutory requirement which permits the use of BHP trust funds only to 
reduce premiums and cost sharing of standard health plan coverage, or 
to provide additional benefits for, eligible individuals enrolled in 
standard health plans within the state.
    Finally, section 1331(d)(2) specifies particular limitations on the 
use of BHP trust funds. Specifically, states are not permitted to use 
BHP trust funds for purposes of meeting any matching or expenditure 
requirement of any federally-funded program, such as Medicaid or CHIP. 
We propose in Sec.  600.705(d) to specify this as well additional 
situations in which the expenditure of BHP trust funds are not 
permitted, including the statutory prohibition of the use of funds to 
cover administrative costs. In Sec.  600.705(e), we propose that a 
state may maintain in its trust fund a surplus or reserve of unexpended 
funds until such time as those funds are expended in accordance with 
the standards set forth in Sec.  600.705(c) and (d).
3. State fiscal policies and accountability (Sec.  600.710)
    We propose at Sec.  600.710 to require the inclusion of fiscal 
policies and accountability requirements in the state's BHP Blueprint 
so that the state can document the use of BHP trust funds for 
authorized purposes. Specifically, under Sec.  600.710(a), we propose 
that the state maintain an accounting and record system to ensure that 
BHP trust funds are properly maintained and expended. In accounting for 
such expenditures, the state must adhere to the cost principles 
applicable to governmental entities under Office of Management and 
Budget (OMB) Circulars A-87 and A-133.
    We propose at Sec.  600.710(b) that the state obtain an annual 
certification from the BHP trustees, the chief financial officer, or 
designee, certifying: (1) The program's financial statements for the 
fiscal year; (2) the separation of BHP trust funds from other state 
program funding to assure that BHP trust funds are not being used as 
the non-federal share to meet matching or expenditure requirements of 
any federally-funded program, such as Medicaid or CHIP; and (3) 
compliance with all federal requirements consistent with those 
specified for the administration and provision of the program. In 
accounting for such expenditures, the state must adhere to the cost 
principles applicable to governmental entities under Office of 
Management and Budget (OMB) Circulars A-87 and A-133.
    Under Sec.  600.710(c), we propose that the state conduct an 
independent audit of BHP trust fund expenditures over a period of three 
years to determine whether the expenditures made during this time 
period were allowable and applied only to costs associated with 
reducing premiums and/or cost sharing, or provision of benefits. The 
independent audit may be conducted as a sub-audit of the single state 
audit conducted in accordance with OMB Circular A-133, and must follow 
the cost accounting principles in OMB Circular A-87. We propose that 
the state conduct the independent annual audit consistent with the 
standards set forth in chapter 3 of the Government Accountability 
Office's Government Auditing Standards (which are also consistent with 
those in Medicaid). As currently proposed, the state may elect to 
contract with a third party to conduct the audit, or may elect to use a 
state agency to the extent that the state can assure the audit was 
conducted in an independent manner.
    We further propose in Sec.  600.710(d) that the state publish 
annual reports on the use of funds, including a separate line item that 
tracks the use of funds described in Sec.  600.705(e) to further reduce 
premiums and cost sharing, or for the provision of additional benefits, 
within 10 days of approval by the trustees. If applicable for the 
reporting year, the annual report must also contain the findings for 
the audit conducted in accordance with paragraph (c) of this section. 
At Sec.  600.710(e), we propose that the BHP Blueprint establish and 
maintain BHP trust fund restitution procedures, in the event that the 
state or trustees must restore funds to the trust fund due to 
unallowable expenditures. We propose that the state maintain records 
for three years after the date of submission of a final expenditure 
report, or beyond, in instances where audit findings have not been 
resolved, consistent with the current standards in CHIP.
4. Resolution of questions about BHP transactions: Corrective action, 
restitution and disallowance of improper expenditures from the BHP 
Trust Fund (Sec.  600.715)
    We propose at Sec. Sec.  600.715(a) and (b) that when a question 
about the proper use of trust fund resources arises through the 
application of state fiscal policies, or through state or federal 
review and audit processes, the state and BHP trustees shall review 
those questions, and develop a written response to the questions raised 
no later than 60 days upon receipt of such a report, unless otherwise 
specified in the report, review or audit. In addition, based on that 
review, the state and BHP trustees shall take corrective action to 
ensure proper use of funds and restitution of questioned funds, as 
appropriate, to the state's trust fund. We further propose in paragraph 
(b) of this section, to the extent that the state and the BHP trustees 
determine that BHP trust funds may not have been properly spent, they 
shall ensure restitution to the BHP trust fund of amounts questioned by 
HHS, OIG or state auditors or reviewers. These policies are consistent 
with the normal business operations and proper management of a trust 
fund, with the possibility of ongoing reconciliation and correction of 
expenditures in the context of ongoing relationships with contractors 
and other business associates.
    As proposed in Sec.  600.715(b), to the extent that the state and 
BHP trustees determine that BHP trust funds may not have been properly 
spent, they must ensure restitution to the trust fund of the amounts in 
question. This is consistent with the nature of a trust fund, and the 
fiduciary relationship that trustees and other controlling entities 
have in the management of a trust fund. Restitution may be made 
directly, or by a liable third party (which could include the recipient 
of the improper expenditures, or an indemnifying insurer). Trustees may 
be the beneficiaries of indemnification agreements entered into by the 
state, the BHP trustees or an insurer.
    We propose in Sec.  600.715(c) to provide considerable flexibility 
in the timing of such restitution; restitutions may occur in a lump sum 
amount, or in equal installments. Restitution to the BHP trust fund 
cannot exceed a two year period from the date of the written response 
in accordance with paragraph (a) of this section. We propose providing 
a state with flexibility to determine the restitution option that best 
fits the circumstances so as to ensure the

[[Page 59137]]

viability and sustainability of its program.
    We believe that most questioned expenditures will be resolved 
through these steps based on preliminary findings prior to any final 
determination that there has been an improper or unauthorized 
expenditure. To the extent that the BHP trustees and the state assure 
restitution of questioned BHP expenditures, the result will be that 
there will be no net improper or unauthorized expenditure. But if 
questioned funding is not restored to the BHP trust fund, and the 
questions are not otherwise resolved, then there would be an improper 
expenditure of federal funds. The state is not entitled to retain 
federal grant funding expended for purposes not statutorily authorized, 
and would need to return any such amounts.
    To provide for the return of federal funding not expended for 
statutory authorized purposes, we propose at Sec.  600.715(d) a 
procedure for HHS to disallow federal BHP funding that the Secretary 
(or a designated hearing officer) determines to have been improperly 
expended, after taking into account provisions for restitution of funds 
(other than when the restitution schedule elected by the BHP trustees 
and state has not been maintained). While we believe such disallowances 
will be rare in light of the oversight that we expect will be exercised 
on a state level through the trustees and the state audit process, 
disallowances are a necessary part of the federal oversight process and 
ensure that the statutory conditions for BHP funding are met.
    Because we believe that the issues underlying a federal 
disallowance will generally have been fully developed in these state 
level audit and reviews, or through federal audit and review processes 
that will provide ample opportunity for resolution by the BHP trustees 
and the state questions through corrective action and restitution, we 
provide for a simplified disallowance process. After notice of an 
initial finding that contains a written explanation of the basis for 
the determination, the state will have an opportunity to submit 
information and argument for administrative reconsideration. Upon 
receipt of such a submission, the Secretary (or designated hearing 
officer) will determine if further information or procedures are 
necessary. The Secretary will then issue a final decision within 90 
days after the later of the date of receipt of the reconsideration 
request or the date of the last scheduled proceeding or submission.
    In Sec.  600.715(f), we set forth the timing of the return of 
disallowed federal BHP funding. Disallowed federal BHP funding must be 
returned to HHS within 60 days after the later of the date of the 
disallowance notice or the final administrative reconsideration 
upholding the disallowance. Such repayment cannot be made from BHP 
trust funds, but must be made with other, non-federal, funds.
    Finally, we propose to revise the definition of ``individual 
market'' as described in 45 CFR 144.103 to clarify that Medicaid, CHIP 
and BHP coverage is not considered health insurance coverage available 
on the individual market.

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. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    To derive average costs, we used data from the U.S. Bureau of Labor 
Statistics for all salary estimates. The salary estimates include the 
cost of fringe benefits, calculated at 35 percent of salary, which is 
based on the March 2011 Employer Costs for Employee Compensation report 
by the Bureau.
    We are soliciting public comment on each of the section 
3506(c)(2)(A)-required issues for the following information collection 
requirements (ICRs):

A. ICRs Regarding the BHP Blueprint (Sec. Sec.  600.110, 600,115, 
600.125, 600.305, 600.320, 600.345, 600.405, 600.410, 600.415, 600.420, 
600.425, 600.505, 600.510, 600.525, 600.530, and 600.710)

    In Sec.  600.110, states wishing to participate in the BHP would 
prepare and submit a ``Blueprint'' to the Secretary for certification 
of the state's program. Although we intend to issue a template 
outlining the required components of a Blueprint, that template will be 
made available at a later time. In the meantime, we are setting out the 
Blueprint's burden estimates since its requirements are proposed in 
this proposed rule.
    Section 600.115, specifies that the Blueprint must be signed by the 
state's governor or signed by an official delegated by the governor. 
The Blueprint must identify the agency and officials, by position or 
title, who are responsible for program administration, operations, and 
financial oversight. The Blueprint would also be required to identify 
the required characteristics for all BHP Trust Fund trustees.
    In Sec.  600.305, the Blueprint would be required to be consistent 
with the standards used to determine BHP eligibility. The state may not 
impose conditions of eligibility other than those identified in this 
section.
    In Sec. Sec.  600.320 and 600.345, the Blueprint would be required 
to ensure that the state's enrollment, disenrollment, and verification 
policies are consistent with these sections. It must also include a 
plan to ensure coordination with and eliminate gaps in coverage for 
individuals transitioning between other insurance affordability 
programs.
    In Sec.  600.405, the Blueprint would be required to ensure that 
standard health plan coverage include (at a minimum) EHBs including any 
changes resulting from periodic reviews. While states have the option 
to allow benefits in addition to the EHBs, standard health plan 
coverage must be in compliance with 45 CFR 156.280 regarding abortion 
services.
    In Sec.  600.410, states would be required to assure that they 
comply with competitive contracting provisions in Sec.  600.410(b), 
(c), and (d). This includes but is not limited to a justification for 
states unable to implement a competitive contracting process for 
benefit year 2015 as well as a description of the process it will use 
to enter into contracts for standard health plans. The state must also 
include a proposed timeline for implementing a competitive contracting 
process and provide assurance that the process includes specific 
negotiation criteria.
    In Sec.  600.415, states would be required to enter into a contract 
(with an offeror) for the administration and provision of standard 
health plans. A standard set of contract requirements would be included 
in the Blueprint.
    In Sec.  600.420, the Blueprint would be required to include a 
description of how the state will ensure (to the greatest extent 
possible) enrollee choice of standard health plans. States may also 
enter into a joint procurement with

[[Page 59138]]

other states. States electing this option must address the Blueprint 
provisions in Sec.  600.420(b)(2).
    In Sec.  600.425, the Blueprint would be required to demonstrate 
how the state will ensure coordination with other insurance 
affordability programs.
    In Sec.  600.505, the Blueprint would be required to describe: the 
amount of the premium imposed on enrollees; the group or groups that 
are subject to the applicable premium; the collection method and 
procedure for the payment of an enrollee's premium; the disenrollment 
procedures and consequences of nonpayment of premiums. The Blueprint 
must also ensure that the total premium liability for an enrollee does 
not exceed the monthly premium that the enrollee would have paid had 
he/she enrolled in the second lowest cost silver plan offered through 
an Exchange.
    With regard to cost sharing imposed on enrollees, Sec.  600.510 
would require that the Blueprint identifies the group or groups of 
enrollees that may be subject to the cost sharing, and an assurance 
that the state has established a system to monitor and track the cost-
sharing standards specified in Sec.  600.520.
    In Sec.  600.525(a), the Blueprint would be required to assure that 
the state is in compliance with the disenrollment procedures described 
in 45 CFR 155.430.
    If a state has elected to implement a continuous enrollment policy, 
the state may also impose a lockout period after an enrollee has been 
disenrolled from the program. The Blueprint must define the length of 
the state's lockout period and assure that it will not continue to 
impose a premium lockout period after an enrollee's past due premiums 
have been paid and will not require the collection of past due premiums 
as a condition of eligibility for reenrollment once the state-defined 
lockout period has expired.
    In Sec.  600.710, the Blueprint would be required to ensure that 
the state's fiscal policies and accountability standards are consistent 
with this section. In this regard, the Blueprint must ensure that the 
BHP administering agency will maintain an accounting system and support 
fiscal records to assure that the trust funds are maintained and 
expended in accordance with federal requirements. The Blueprint would 
also be required to assure that the administering agency will obtain an 
annual certification from the state's BHP trustees, or chief financial 
officer (or designee), certifying the state's trust fund financial 
statements for the fiscal year, that the trust funds are not being used 
as the non-federal share to meet matching or expenditure requirements 
of any federally-funded program, and that the trust fund is used in 
accordance with federal requirements.
    The Blueprint would include an assurance that the administering 
agency will conduct an audit of trust fund expenditures, publish annual 
reports on the use of funds and audit findings (if applicable), 
establish and maintain trust fund restitution procedures, and retain 
records. The Blueprint must also be accompanied by a funding plan that 
describes the enrollment and cost projections for the first 12 months 
of operation and funding sources beyond the trust fund (if any). The 
plan must demonstrate that federal funds will only be used to reduce 
premiums and cost-sharing or to provide additional benefits.
    Finally, the Blueprint would be required to describe how the state 
will ensure program integrity, including how the state will address 
potential issues of fraud, waste, and abuse and ensure consumer 
protections.
    While a few states have expressed interest in pursuing the Basic 
Health Program in their state, HHS does not have an estimate of how 
many states will pursue this option. As such, we provide the burden 
estimate for one state and seek comment on the number of likely states 
to pursue this option. We estimate that it will take a state 
approximately 100 hours to develop the Blueprint and submit to the 
Secretary.
    For purposes of this estimate, we assume that meeting these 
requirements will take a health policy analyst 80 hours (at an average 
wage rate of $43 an hour) and a senior manager 20 hours (at an average 
wage rate of $77 an hour). The estimated cost burden for one state is 
$4,980.
    As described in Sec.  600.125, a state must notify HHS of any 
significant changes to its Blueprint. We estimate that it will take one 
state 12 hours to revise its Blueprint and submit it to HHS. We presume 
that it will take a health policy analyst 10 hours at $43 an hour and a 
senior manager 2 hours at $77 an hour to submit the change. The 
estimated cost burden for one state is $584.
    Since we estimate less than 10 annual respondents, the 
requirements/burden are exempt from formal OMB review and approval 
under 5 CFR 1320.3(c). Consequently, a PRA package is not applicable.

B. ICRs Regarding the Operation of a Basic Health Program (Sec. Sec.  
600.145, 600.150, and 600.170, and Subpart E)

    The ongoing burden associated with the requirements under Sec.  
600.145 is the time and effort it would take each participating State 
Medicaid Program to perform the recordkeeping and reporting portions of 
the core operating functions of a BHP including eligibility 
determinations and appeals as well as enrollment and disenrollment, 
health plan contracting, oversight and financial integrity, consumer 
assistance, and if necessary program termination.
    BHPs would function as part of a coordinated eligibility and 
enrollment structure over all insurance affordability programs. They 
need to maintain and transfer eligibility accounts with equal accuracy 
and efficiency as the Exchange, as well as maintain enrollment data 
reported monthly to HHS. As such, we are estimating equal burden to the 
Exchange for this function. We estimate that it will take 52 hours 
annually to ensure the collection of enrollment data. Additionally we 
estimate it will take 12 hours to submit monthly enrollment data and 12 
hours to reconcile data monthly.
    The BHP will issue notices to applicants and eligible individuals 
regarding eligibility status. These notices must be developed and 
processed in a coordinated fashion with other insurance affordability 
programs. The burden estimates here are only for added burden of 
customizing to the BHP. We estimate that it will take a state 16 hours 
annually to customize notices and processes for the BHP.
    We estimate that is will take 356 hours ((24 x 12) + 52 + 16) for a 
BHP to meet these reporting requirements for eligibility and enrollment 
functions. We presume that it will take an operations analyst 220 hours 
(at $55 an hour), a health policy analyst 80 hours (at $43 and hour) 
and a senior manager 56 hours (at $77 an hour). To carry out the 
requirements for this function, we estimate the total cost of the 
reporting burden to be $19,852 per state.
    Part 600, subpart E, describes reporting requirements associated 
with the core function of standard health plan contracting and 
operations. Each state BHP must contract with standard health plan 
offerors and require participating standard health plans to provide 
transparency in covered benefits, cost-sharing and participating 
providers by reporting and making public such information annually. We 
estimate that it will take a state 120 hours to create and evaluate the 
request for proposals for participating standard health plans. Using 
the same estimates as the Exchange, we presume that it will take an 
additional 24 hours to collect the information necessary to ensure that 
coverage and transparency requirements

[[Page 59139]]

are met for a total annual burden per state of 144 hours. We presume 
that it will take a health policy analyst 100 hours (at $43 an hour), 
an operations analyst 20 hours (at $55 an hour) and a senior manager 24 
hours (at $77 an hour). The cost burden per state is $7,248.
    Oversight and financial integrity are core functions of the BHP 
that include annual reporting requirements to HHS on the operation of 
the trust fund, providing annual data necessary to acquire and 
reconcile federal funding and complete financial sections of the annual 
report in Sec.  600.170. We estimate that it will take a state 
operating a BHP 24 hours annually to complete these reporting 
requirements. We presume that it will take an operations analyst 10 
hours (at $55 an hour), a financial analyst 10 hours (at $62 and hour) 
and a senior manager 4 hours (at $77 an hour) for cost burden of $1,478 
for one state.
    Finally, BHPs are required in Sec.  600.150 to ensure that there is 
enrollment assistance and information readily available to understand 
the program and any choices a consumer would have. We estimate that it 
will take a state 48 hours annually to create and share its format for 
required information with participating health plan offerors and to 
provide the necessary oversight to ensure that each offeror has 
complied with the specifications. Additionally, the state must publish 
enrollment choices, covered services and any options and limitations in 
a manner that meets accessibility and readability standards.
    The total burden estimate for program termination is 48 hours per 
state. We presume that it would take a health policy analyst 40 hours 
(at $43 an hour) and an operations analyst 8 hours (at $55 an hour) to 
fulfill the enrollment assistance and information requirements burden. 
The total cost burden to the state for this function is $2,160.
    Since we estimate less than 10 annual respondents, the 
requirements/burden are exempt from formal OMB review and approval 
under 5 CFR 1320.3(c). Consequently, a PRA package is not applicable.

C. ICRs Regarding the Termination of a Basic Health Program (Sec.  
600.140)

    Section 600.140 would direct a state electing to terminate its BHP 
to submit a notice and transition plan to the Secretary. We estimate 
that it would take a state 24 hours to create and submit such 
information. A state must submit written notice to all participating 
standard health plans and to all enrollees regarding their plans to 
terminate. Consistent with other notice estimates in the Exchange and 
BHP, we estimate that it would take 16 hours to prepare and submit each 
notification for a total of 32 hours per state. Finally, the state 
would be required to perform eligibility account transfers on behalf of 
enrollees. Due to the requirement that a state use the single 
eligibility service for all insurance affordability programs, we do not 
believe this requirement to necessitate much effort. We estimate that a 
state can fulfill this requirement in 8 hours.
    The total burden estimate for program termination is 64 hours (24 + 
32 + 8) per state. We presume that it would take a health policy 
analyst 44 hours (at $43 an hour), an operations analyst 10 hours (at 
$55 an hour) and a senior manager 10 hours (at $77 an hour) to fulfill 
the program termination reporting burden. The total cost burden to the 
state for this function is $3,212.
    Since we estimate less than 10 annual respondents, the 
requirements/burden are exempt from formal OMB review and approval 
under 5 CFR 1320.3(c). Consequently, a PRA package is not applicable.

D. Submission of PRA-Related Comments

    We invite public comments on these potential information collection 
requirements. If you comment on these information collection and 
recordkeeping requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
(CMS-2380-P) Fax: (202) 395-6974; or Email: [email protected].
    Comments must be received on/by November 25, 2013.

V. Response to Comments

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

VI. Regulatory Impact Statement (or Analysis)

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999) and the Congressional Review Act (5 U.S.C. 804(2)).
    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). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). The Basic Health Program provides states the flexibility to 
establish an alternative coverage program for low-income individuals 
who would otherwise be eligible to purchase coverage through Exchange. 
We are uncertain as to whether the effects of this rulemaking will be 
``economically significant'' as measured by the $100 million threshold, 
and hence not a major rule under the Congressional Review Act. We seek 
comment on the analysis provided below to help inform this assessment 
by

[[Page 59140]]

the time of the final rule. In accordance with the provisions of 
Executive Order 12866, this regulation was reviewed by the Office of 
Management and Budget.
1. Need for the Rule
    Section 1331 of the Affordable Care Act (codified at 42 USC Sec.  
18051) requires the Secretary to establish a Basic Health Program. This 
proposed rule implements that section.
2. Benefits
    We anticipate that the Basic Health Program will provide benefits 
to both consumers and states.
a. Benefits to Consumers
    The Basic Health Program (BHP) targets low-income individuals who 
would be eligible for premium and cost-sharing reductions, if they 
purchased health insurance through an Exchange. These individuals often 
have variable income that causes them to move between insurance 
programs. For example, if their income drops, they may be eligible for 
Medicaid, and when their income rises, they would be eligible to 
purchase insurance (with premium and cost-sharing reductions) on an 
Exchange. This variability in income can result in individuals moving 
back and forth between Medicaid and an Exchange, a phenomenon known as 
``churning.'' Because Medicaid health plans and health plans offered on 
Exchanges vary in terms of benefits, provider networks, cost-sharing, 
and administration, churn can be disruptive and lead to poorer health 
outcomes due to lack of continuity of care. Researchers have estimated 
that the Basic Health Program will significantly reduce the number of 
individuals that churn between Medicaid and Exchanges.\1\
---------------------------------------------------------------------------

    \1\ Hwang, A., S. Rosenbaum, and B. D. Sommers. ``Creation Of 
State Basic Health Programs Would Lead To 4 Percent Fewer People 
Churning Between Medicaid And Exchanges.'' Health Affairs 31.6 
(2012): 1314-1320.
    Buettgens, M., A. Nichols, and S. Dorn. ``Churning Under the ACA 
and State Policy Options for Mitigation: Timely Analysis of 
Immediate Health Policy Issues.'' Urban Institute (2012). Available 
at http://www.urban.org/UploadedPDF/412587-Churning-Under-the-ACA-and-State-Policy-Options-for-Mitigation.pdf.
---------------------------------------------------------------------------

    We request additional comments and data that would help us assess 
the benefits of a Basic Health Program to consumers.
b. Benefits to States
    Several states currently operate health insurance programs for low-
income adults with income above Medicaid eligibility levels. These 
states believe that the programs confer benefit to their residents 
beyond what those individuals could obtain by purchasing health 
insurance on an Exchange. The Basic Health Program established by this 
rule would give states the option to maintain these programs rather 
than sending those individuals to purchase insurance on the Exchange. 
We request additional comments and data that would help us assess the 
benefits of a Basic Health Program to states.
3. Costs
    The provisions of this rule were designed to minimize regulatory 
costs. Rarely did we create new administrative structures, both because 
the Basic Health Program does not include administrative funding and 
because of the need for states to coordinate with other insurance 
affordability programs. To the extent possible, we borrowed structures 
from existing programs. We request comments and data that would help us 
assess the costs of a Basic Health Program.
4. Transfers
    The provisions of this rule are designed to transfer funds that 
would be available to individuals for premium and cost-sharing 
reductions for coverage purchased on an Exchange to states to offer 
coverage through a Basic Health Program. In states that choose to 
implement a Basic Health Program, eligible individuals will not be able 
to purchase health insurance through the Exchange. As a result, fewer 
individuals will use the Exchange to purchase health insurance. This 
choice may have economic impact, and we seek comments and data that 
would help us assess that impact.
5. Regulatory Alternatives
    Many of the structures of the Basic Health Program are set out in 
statute, and therefore we were limited in the alternatives we could 
consider. When we had options, we attempted to limit the number of new 
regulatory structures we created. To make the program easier for states 
to implement, we adopt or adapt regulations from existing programs--
Medicaid, the Children's Health Insurance Program, and the Exchanges--
whenever possible, rather than create new structures. Two areas in 
which we had choices are reporting compliance with federal rules and 
contracting with standard health plans.
a. Reporting compliance with federal rules to HHS
    We followed the paradigm of adopting or adapting existing 
structures when creating a process for reporting state compliance with 
federal rules. Two existing structures we considered were the Exchange 
model of Blueprints and the Medicaid model of state plans. We chose to 
use the Blueprint model, which we believe will be less burdensome to 
states than the state plan model. We seek comments, data, and 
suggestions for alternative methods for states to report to HHS.
b. Contracting requirements
    Similarly when choosing how to regulate state contracts with 
standard health plans, we looked to models in the Exchange and Medicaid 
rather than creating new regulatory schemes. We have adopted, where 
possible, existing procurement requirements in order to minimize the 
burden on states. In addition, we have allowed states the option to 
seek an exemption from competitive contracting requirements for program 
year 2015 if they are unable to meet the requirements in the first year 
of the program. We seek comments, data, and suggestions for other 
alternatives to the contracting process we propose.

B. Unfunded Mandates Reform Act

    Section 2 02 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation, by state, 
local, or tribal governments, in the aggregate, or by the private 
sector. In 2013, that threshold is approximately $141 million. States 
have the option, but are not required, to establish a BHP. Thus, this 
proposed rules does not mandate expenditures by state governments, 
local governments, or tribal governments

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to prepare an initial regulatory flexibility analysis 
to describe the impact of the proposed rule on small entities, unless 
the head of the agency can certify that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The Act generally defines a ``small entity'' as (1) a proprietary firm 
meeting the size standards of the Small Business Administration (SBA); 
(2 ) a not-for-profit organization that is not dominant in its field; 
or (3) a small government jurisdiction with a population of less than 
50,000. Individuals and states are not included in the definition of a 
small entity. Few of the entities that meet the definition of a small 
entity as that term is used in the RFA would be impacted directly by 
this proposed rule.

[[Page 59141]]

    Because this proposed rule is focused on eligibility and enrollment 
in public programs, it does not contain provisions that would have a 
significant direct impact on hospitals, and other health care providers 
that are designated as small entities under the RFA. However, the 
provisions in this proposed rule may have a substantial, positive 
indirect effect on hospitals and other health care providers due to the 
substantial increase in the prevalence of health coverage among 
populations who are currently unable to pay for needed health care, 
leading to lower rates of uncompensated care at hospitals. The 
Department cannot determine whether this proposed rule would have a 
significant economic impact on a substantial number of small entities, 
and we request public comment on this issue.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis if a proposed rule may have a significant economic 
impact on the operations of a substantial number of small rural 
hospitals. For purposes of section 1102 (b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
metropolitan statistical area and has fewer than 100 beds. As indicated 
in the preceding discussion, there may be indirect positive effects 
from reductions in uncompensated care. Again, the Department cannot 
determine whether this proposed rule would have a significant economic 
impact on a substantial number of small rural hospitals, and we request 
public comment on this issue.

D. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct effects on States, preempts 
State law, or otherwise has Federalism implications. The BHP is 
entirely optional for states, and if implemented in a state, provides 
access to a pool of funding that would not otherwise be available to 
the state.
    We have consulted with states to receive input on how the 
Affordable Care Act provisions codified in this proposed rule would 
affect States. We have participated in a number of conference calls and 
in person meetings with state officials.
    We continue to engage in ongoing consultations with states that 
have expressed interest in implementing a BHP through the BHP Learning 
Collaborative, which serves as a staff level policy and technical 
exchange of information between CMS and the States. Through 
consultations with this Learning Collaborative, we have been able to 
get input from States on many of the specific issues addressed in this 
rule.

List of Subjects

42 CFR Part 600

    Administrative practice and procedure, Health care, Health 
insurance, Penalties, and Reporting and recordkeeping requirements, 
State and local governments.

45 CFR Part 144

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, under the authority at 
section 1331(a)(1) of the Affordable Care Act, the Centers for Medicare 
& Medicaid Services and the Office of the Secretary propose to amend 42 
CFR chapter IV and 45 CFR subtitle A, respectively, as set forth below.

Title 42

0
1. Subchapter I, consisting of part 600, is added to read as follows:

Subchapter I-- Basic Health Program

PART 600--ADMINISTRATION, ELIGIBILITY, ESSENTIAL HEALTH BENEFITS, 
PERFORMANCE STANDARDS, SERVICE DELIVERY REQUIREMENTS, PREMIUM AND 
COST SHARING, ALLOTMENTS, AND RECONCILATION

Subpart A--General Provisions and Definitions
Sec.
600.1 Scope.
600.5 Definitions and use of terms.
Subpart B-- Establishment and Certification of State Basic Health 
Programs
600.100 Program description.
600.105 Basis, scope, and applicability of subpart B.
600.110 BHP Blueprint.
600.115 Development and submission of the BHP Blueprint.
600.120 Certification of a BHP Blueprint.
600.125 Revisions to a certified BHP Blueprint.
600.130 Withdrawal of a BHP Blueprint prior to implementation.
600.135 Notice and timing of HHS action on a BHP Blueprint.
600.140 State termination of a BHP.
600.142 HHS withdrawal of certification and termination of a BHP.
600.145 State program administration and operation.
600.150 Enrollment assistance and information requirements.
600.155 Tribal consultation.
600.160 Protections for American Indian and Alaskan Natives.
600.165 Nondiscrimination standards.
600.170 Annual report content and timing.
Subpart C--Federal Program Administration
600.200 Federal program reviews and audits.
Subpart D--Eligibility and Enrollment
600.300 Basis, scope, and applicability.
600.305 Eligible individuals.
600.310 Application.
600.315 Certified application counselors.
600.320 Determination of eligibility for and enrollment in a 
standard health plan.
600.330 Coordination with other insurance affordability programs.
600.335 Appeals.
600.340 Periodic determination and renewal of BHP eligibility.
600.345 Eligibility verification.
600.350 Privacy and security of information.
Subpart E--Standard Health Plan
600.400 Basis, scope, and applicability.
600.405 Standard health plan coverage.
600.410 Competitive contracting process.
600.415 Contracting qualifications and requirements.
600.420 Enhanced availability of standard health plans.
600.425 Coordination with other insurance affordability programs.
Subpart F--Enrollee Financial Responsibilities
600.500 Basis, scope, and applicability.
600.505 Premiums.
600.510 Cost-sharing.
600.515 Public schedule of enrollee premium and cost sharing.
600.520 General cost-sharing protections.
600.525 Disenrollment procedures and consequences for nonpayment of 
premiums.
Subpart G--Payment to States
600.600 Basis, scope, and applicability.
600.605 BHP payment methodology.
600.610 Secretarial determination of BHP payment amount.
600.615 Deposit of Federal BHP payment.
Subpart H--BHP Trust Fund
600.700 Basis, scope, and applicability.
600.705 BHP trust fund.
600.710 Fiscal policies and accountability.
600.715 Corrective action, restitution, and disallowance of 
questioned BHP transactions

    Authority: Section 1331 of the Patient Protection and Affordable 
Care Act of 2010 (Pub. L. 111-148, 124 Stat. 119), as amended by the 
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152, 124 Stat 1029).

Subpart A--General Provisions and Definitions


Sec.  600.1  Scope.

    Section 1331 of the Patient Protection and Affordable Care Act, 
provides for the establishment of the Basic Health Program (BHP) under 
which a State may enter into contracts to offer two or more standard 
health plans providing at least

[[Page 59142]]

essential health benefits to eligible individuals in lieu of offering 
such individuals the opportunity to enroll in coverage through an 
Affordable Insurance Exchange. States that elect to operate a BHP will 
receive federal funding based on the amount of premium tax credits and 
cost-sharing reductions that would have been available if enrollees had 
obtained coverage through the Exchange.


Sec.  600.5  Definitions and use of terms.

    For purposes of this part, the following definitions apply:
    Advance payments of the premium tax credit means payment of the tax 
credits authorized by 26 U.S.C. 36B and its implementing regulations, 
which are provided on an advance basis to an eligible individual 
enrolled in a QHP through an Exchange in accordance with sections 1402 
and 1412 of the Affordable Care Act.
    Affordable Care Act is the Patient Protection and Affordable Care 
Act of 2010 (Pub. L. 111-148) as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152).
    Basic Health Program (BHP) Blueprint is the operational plan that a 
State must submit to the Secretary of Health and Human Services (HHS) 
for certification to operate a BHP.
    Certification means authority to operate the program which is 
required for program operations but it does not create an obligation on 
the part of the State to implement a BHP.
    Code means the Internal Revenue Code of 1986.
    Cost sharing means any expenditure required by or on behalf of an 
enrollee with respect to covered health benefits; such term includes 
deductibles, coinsurance, copayments, or similar charges, but excludes 
premiums, balance billing amounts for non-network providers and 
spending for non-covered services.
    Enrollee means an eligible individual who is enrolled in a standard 
health plan contracted to operate as part of a BHP.
    Essential health benefits means the benefits described under 
section 1302(b) of the Affordable Care Act.
    Family and family size is as defined at 26 CFR 1.36B-1(d).
    Federal fiscal year means the time period beginning October 1st and 
ending September 30th.
    Federal poverty level or FPL means the most recently published 
Federal poverty level, updated periodically in the Federal Register by 
the secretary of Health and Human Services under the authority of 42 
U.S.C. 9902(2.
    Household income is as defined in 26 CFR 1.36B-1(e)(1).
    Indian means any individual as defined in section 4 (d) of the 
Indian Self-Determination and Education Assistance Act (Pub. L 93-638).
    Lawfully present has the meaning given in 45 CFR 152.2
    Minimum essential coverage has the meaning set forth at 26 CFR 
1.5000A-2, including coverage recognized by the Secretary as minimum 
essential coverage pursuant to 26 CFR 1.5000A-2(f). Under that 
authority, the Secretary recognizes coverage through a BHP standard 
health plan as minimum essential coverage.
    Modified adjusted gross income is as defined in 26 CFR 1-36B-
1(e)(2).
    Premium means any enrollment fee, premium, or other similar charge 
paid to the standard health plan offeror.
    Preventive health services and items includes those services and 
items specified in 45 CFR 147.130(a).
    Program year means a calendar year for which a standard health plan 
provides coverage for eligible BHP enrollees.
    Qualified health plan or QHP means a health plan that has in effect 
a certification that it meets the standards described in subpart C of 
45 CFR part 156 issued or recognized by each Exchange through which 
such plan is offered in accordance with the process described in 
subpart K of 45 CFR, except that such term must not include a qualified 
health plan which is a catastrophic plan described in 45 CFR 155.20
    Reference plan is a synonym for the EHB benchmark plan and is 
defined at 45 CFR 156.100.
    Regional compact means an agreement between two or more States to 
jointly procure and enter into contracts with standard health plan 
offeror(s) for the administration and provision of a standard health 
plan under the BHP to eligible individuals in such States.
    Residency is determined in accordance with 45 CFR 155.305(a)(3).
    Single streamlined application has the same meaning as application 
defined at 42 CFR 431.907(b)(1) of this chapter and 45 CFR 155.405(a) 
and (b) .
    Standard health plan means a health benefits package, or product, 
that is provided by the standard health plan offeror.
    Standard health plan offeror means an entity that is eligible to 
enter into contracts with the State for the administration and 
provision of a standard health plan under the BHP.
    State means each of the 50 states and the District of Columbia as 
defined by section 1304 of the Act.

Subpart B--Establishment and Certification of State Basic Health 
Programs


Sec.  600.100  Program description.

    A State Basic Health Program (BHP) is operated consistent with a 
BHP Blueprint that has been certified by the Secretary to meet the 
requirements of this part. The BHP Blueprint is developed by the State 
for certification by the Secretary in accordance with the processes 
described in this subpart.


Sec.  600.105  Basis, scope, and applicability of subpart B.

    (a) Statutory basis. This subpart implements the following sections 
of the Act:
    (1) Section 1331(a)(1) which defines a Basic Health Program.
    (2) Section 1331(a)(2) which requires the Secretary to certify a 
Basic Health Program before it may become operational.
    (3) Section 1331(f) which requires Secretarial oversight through 
annual reviews.
    (b) Scope and applicability. (1) This subpart sets forth provisions 
governing the administration of the BHP, the general requirements for 
development of a BHP Blueprint required for certification, for program 
operations and for voluntary program termination.
    (2) This subpart applies to all States that submit a BHP Blueprint 
and request certification to operate a BHP.


Sec.  600.110  BHP Blueprint.

    The BHP Blueprint is a comprehensive written document submitted by 
the State to the Secretary for certification of a BHP in the form and 
manner specified by HHS. The program must be administered in accordance 
with all aspects of section 1331 of the Affordable Care Act and other 
applicable law, this chapter, and the certified BHP Blueprint.
    (a) Content of a Blueprint. The Blueprint will establish compliance 
with applicable requirements by including a description, or if 
applicable, an assurance of the following:
    (1) The minimum benefits offered under a standard health plan that 
assures inclusion of essential health benefits as described in section 
1302(b) of the Affordable Care Act, in accordance with Sec.  600.405.
    (2) The competitive process, consistent with Sec.  600.410, that 
the State will undertake to contract for the provision of standard 
health plans.

[[Page 59143]]

    (3) The standard contract requirements, consistent with Sec.  
600.415, that the State will incorporate in its standard health plan 
contracts.
    (4) The methods by which the State will enhance the availability of 
standard health plan coverage as described in Sec.  600.420.
    (5) The methods by which the State will ensure and promote 
coordination with other insurance affordability programs as described 
in Sec.  600.425.
    (6) The premium imposed under the BHP, consistent with the 
standards set forth in Sec.  600.505.
    (7) The cost sharing imposed under the BHP, consistent with the 
standards described in Sec.  600.510.
    (8) The disenrollment procedures and consequences for nonpayment of 
premiums consistent with Sec.  600.525, respectively.
    (9) The standards, consistent with Sec.  600.305 used to determine 
eligibility for the program.
    (10) The State's policies regarding enrollment, disenrollment and 
verification consistent with Sec. Sec.  600.320 and 600.345, along with 
a plan to ensure coordination with and eliminate gaps in coverage for 
individuals transitioning to other insurance affordability programs.
    (11) The fiscal policies and accountability procedures, consistent 
with Sec.  600.710.
    (12) The process by which BHP trust fund trustees shall be 
appointed, the qualifications and responsibilities of such trustees, 
and any arrangements to insure or indemnify such trustees against 
claims for breaches of their fiduciary responsibilities.
    (13) A description of how the State will ensure program integrity, 
including how it will address potential fraud, waste, and abuse and 
ensure consumer protections.
    (14) An operational assessment establishing operating agency 
readiness.
    (b) Funding plan. (1) The BHP Blueprint must be accompanied by a 
funding plan that describes the enrollment and cost projections for the 
first 12 months of operation and the funding sources, if any, beyond 
the BHP trust fund.
    (2) The funding plan must demonstrate that Federal funds will only 
be used to reduce premiums and cost-sharing or to provide additional 
benefits.
    (c) Transparency. HHS shall make a State's BHP Blueprint available 
on line.


Sec.  600.115  Development and submission of the BHP Blueprint.

    (a) State authority to submit the State Blueprint. A State BHP 
Blueprint must be signed by the State's Governor or by the official 
with delegated authority from the Governor to sign it.
    (b) State Basic Health Program officials. The State must identify 
in the BHP Blueprint the agency and officials within that agency, by 
position or title, who are responsible for program administration, 
operations, and financial oversight.
    (c) Opportunity for public comment. The State must provide an 
opportunity for public comment on the BHP Blueprint content described 
in Sec.  600.110 before submission to the Secretary for certification.
    (1) The State must seek public comment on any significant 
subsequent revisions prior to submission of those revisions to the 
Secretary for certification. Significant revisions are those that alter 
core program operations required by Sec.  600.145(e).
    (2) The process of seeking public comment must include Federally-
recognized tribes as defined in the Federally Recognized Indian Tribe 
List Act of 1994, 25 U.S.C. 479a, located in the State.
    (d) Submission and timing. The BHP Blueprint must be submitted in a 
manner and format specified by HHS. States may not implement the BHP 
prior to receiving certification. The date of implementation for this 
purpose is the first day enrollees would receive coverage under the 
BHP.


Sec.  600.120  Certification of a BHP Blueprint.

    (a) Effective date of certification. The effective date of the 
certification is the date of signature by the Secretary.
    (b) Payments for periods prior to certification. No payment may be 
made under this part for periods of BHP operation prior to the date of 
certification.
    (c) Period in which a certified Blueprint remains in effect. The 
certified Blueprint remains in effect until:
    (1) The Blueprint is replaced by Secretarial certification of an 
updated Blueprint containing revisions submitted by the State.
    (2) The State terminates the program consistent with Sec.  600.140.
    (3) The Secretary makes a finding that the BHP Blueprint no longer 
meets the standards for certification based on findings in the annual 
review, or reports significant evidence of beneficiary harm, financial 
malfeasance, fraud, waste or abuse by the BHP agency or the State 
consistent with Sec.  600.142.
    (d) Blueprint approval standards for certification. The Secretary 
will certify a BHP Blueprint provided it meets all of the following 
standards:
    (1) The Blueprint contains sufficient information for the Secretary 
to determine that the BHP will comply with the requirements of section 
1331 of the Affordable Care Act and this Part.
    (2) The BHP Blueprint demonstrates adequate planning for the 
integration of BHP with other insurance affordability programs in a 
manner that will permit a seamless, coordinated experience for a 
potentially eligible individual.
    (3) The Blueprint is a complete and comprehensive description of 
the BHP and its operations, demonstrating thorough planning and a 
concrete program design, without contingencies or reserved decisions on 
operational features.


Sec.  600.125  Revisions to a certified BHP Blueprint.

    (a) Submission of revisions. In the event that a State seeks to 
make significant change(s) that alter program operations described in 
the certified BHP Blueprint, the State must submit a revised Blueprint 
to the Secretary for review and certification.
    (b) Continued operation. The State is responsible for continuing to 
operate under the terms of the existing certified Blueprint until and 
unless a revised Blueprint is certified.


Sec.  600.130  Withdrawal of a BHP Blueprint prior to implementation.

    To the extent that a State has not enrolled eligible individuals 
into the BHP:
    (a) The State may submit a written request to stop any further 
consideration of a previously submitted BHP Blueprint, whether 
certified or not.
    (b) The written request must be signed by the governor, or the 
State official delegated to sign the BHP Blueprint by the governor.
    (c) HHS will respond with a written confirmation that the State has 
withdrawn the Blueprint.


Sec.  600.135  Notice and timing of HHS action on a BHP Blueprint.

    (a) Timely response. HHS will act on all certification and revision 
requests in a timely manner.
    (b) Issues preventing certification. HHS will notify the State in 
writing of any impediments to certification that arise in reviewing a 
proposed BHP Blueprint.


Sec.  600.140  State termination of a BHP.

    (a) If a State decides to terminate its BHP, the State must 
complete all of the following prior to the effective date of the 
termination or the indicated dates:
    (1) Submit written notice to the Secretary no later than 120 days 
prior to the proposed termination date accompanied by a proposed 
transition plan that describes procedures to assist

[[Page 59144]]

consumers with transitioning to other insurance affordability programs.
    (2) Resolve concerns expressed by the Secretary and obtain approval 
by the Secretary of the transition plan.
    (3) Submit written notice to all participating standard health plan 
offerors, and enrollees that it intends to terminate the program at 
least 90 days prior to the termination date. The notices to enrollees 
must include information regarding the State's assessment of their 
eligibility for all other insurance affordability programs in the 
State. Notices must meet the accessibility and readability standards at 
45 CFR 155.230(b).
    (4) Transmit all information provided as part of an application, 
and any information obtained or verified by the State or other agencies 
administering insurance affordability programs via secure electronic 
interface, promptly and without undue delay to the agency administering 
the Exchange and the Medicaid agency as appropriate.
    (5) Fulfill its contractual obligations to participating standard 
health plan offerors including the payment of all negotiated rates for 
participants, as well as plan oversight ensuring that participating 
standard health plan offerors fulfill their obligation to cover 
benefits for each enrollee.
    (6) Fulfill data reporting requirements to HHS.
    (7) Complete the annual financial reconciliation process with HHS 
to ensure full compliance with Federal financial obligations.
    (8) Refund any remaining balance in the BHP trust fund.
    (b) [Reserved]


Sec.  600.142  HHS withdrawal of certification and termination of a 
BHP.

    (a) The Secretary may withdraw certification for a BHP Blueprint 
based on a finding that the BHP Blueprint no longer meets the standards 
for certification based on findings in the annual review, findings from 
a program review conducted in accordance with Sec.  600.200 or from 
significant evidence of beneficiary harm, financial malfeasance, fraud, 
waste or abuse.
    (b) Withdrawal of certification for a BHP Blueprint shall occur 
only after the Secretary provides the State with notice of the proposed 
finding that the standards for certification are not met or evidence of 
harm or misconduct in program operations, a reasonable period for the 
State to address the finding (either by substantiating compliance with 
the standards for certification or submitting revisions to the 
Blueprint, or securing HHS approval of a corrective action plan), and 
an opportunity for a hearing before issuing a final finding.
    (c) The Secretary shall make every reasonable effort to resolve 
proposed findings without requiring withdrawal of BHP certification.
    (d) The effective date of an HHS determination withdrawing BHP 
certification shall not be earlier than 120 days following a final 
finding of noncompliance with the standards for certification.
    (e) Within 30 days following a final finding of noncompliance with 
the standards for certification, the State shall submit a transition 
plan that describes procedures to assist consumers with transitioning 
to other insurance affordability programs, and shall comply with the 
procedures described in Sec.  600.140(a)(2) through (8).


Sec.  600.145  State program administration and operation.

    (a) Program operation. The State must implement its BHP in 
accordance with the approved and certified State BHP Blueprint, any 
approved modifications to the State BHP Blueprint and the requirements 
of this chapter and applicable law.
    (b) Eligibility. All persons have a right to apply for a 
determination of eligibility and, if eligible, to be enrolled into 
coverage that conforms to these regulations.
    (c) Statewide program operation. A state choosing to operate a BHP 
must operate it statewide.
    (d) No caps on program enrollment. A State implementing a BHP must 
not be permitted to limit enrollment by setting an income level below 
the income standard prescribed in section 1331 of the Affordable Care 
Act, having a fixed enrollment cap or imposing waiting lists.
    (e) Core operations. A State operating a BHP must perform all of 
the following core operating functions:
    (1) Eligibility determinations as specified in Sec.  600.320.
    (2) Eligibility appeals as specified in Sec.  600.335.
    (3) Contracting with standard health plan offerors as specified in 
Sec.  600.410.
    (4) Oversight and financial integrity including, but not limited 
to, operation of the Trust Fund specified at Sec. Sec.  600.705 and 
600.710, compliance with annual reporting at Sec.  600.170, and 
providing data required by Sec.  600.610 for Federal funding and 
reconciliation processes.
    (5) Consumer assistance as required in Sec.  600.150.
    (6) Extending protections to American Indian/Alaska Natives 
specified at Sec.  600.160, as well as comply with the Civil Rights and 
nondiscrimination provisions specified at Sec.  600.165.
    (7) Data collection and reporting as necessary for efficient and 
effective operation of the program and as specified by HHS to support 
program oversight.
    (8) If necessary, program termination procedures at Sec.  600.145.


Sec.  600.150  Enrollment assistance and information requirements.

    (a) Information disclosure. (1) The State must make accurate, 
easily understood information available to potential applicants and 
enrollees about the BHP coverage option along with information about 
other insurance affordability programs.
    (2) The State must provide accessible information on coverage, 
including additional benefits that may be provided outside of the 
standard health plan coverage, any tiers of coverage it has built into 
the BHP, including who is eligible for each tier.
    (3) The State must require participating standard health plans to 
provide clear information on premiums; covered services including any 
limits on amount, duration and scope of those services; applicable 
cost-sharing using a standard format supplied by the State, and other 
data specified in, and in accordance with, 45 CFR 156.220.
    (4) The State must provide information in a manner consistent with 
45 CFR 155.205(c).
    (5) The State must require participating standard health plans to 
make publicly available, and keep up to date, the names and locations 
of currently participating providers.
    (b) [Reserved]


Sec.  600.155  Tribal consultation.

    The State must consult with Indian tribes located in the State on 
the development and execution of the BHP Blueprint using the State or 
Federal tribal consultation policy approved by the applicable State or 
Federal Exchange.


Sec.  600.160  Protections for American Indian and Alaskan Natives.

    (a) Enrollment. Indians must be extended the same special 
enrollment status in BHP standard health plans as applicable to 
enrollment in a QHP through the Exchange under 45 CFR 155.420(d)(8). 
Indians will be allowed to enroll in, or change enrollment in, standard 
health plans one time per month.
    (b) Premiums. The State must permit Indian tribes, tribal 
organizations and urban Indian organizations to pay standard health 
plan premiums on

[[Page 59145]]

behalf of BHP eligible and enrolled individuals.
    (c) Cost sharing. No cost sharing may be imposed on Indians under 
the standard health plan.
    (d) Requirement. Standard health plans must pay primary to health 
programs operated by the Indian Health Service, Indian tribes, tribal 
organizations, and urban Indian organizations for services that are 
covered by a standard health plan.


Sec.  600.165  Nondiscrimination standards.

    (a) The State and standard health plans, must comply with all 
applicable civil rights statutes and requirements, including Title VI 
of the Civil Rights Act of 1964, Title II of the Americans with 
Disabilities Act of 1990, Section 504 of the Rehabilitation Act of 
1973, the Age Discrimination Act of 1975, Section 1557 of the 
Affordable Care Act, and 45 CFR part 80, part 84, and part 91 and 28 
CFR part 35.
    (b) The State must comply with the nondiscrimination provision at 
45 CFR 155.120(c)(2).


Sec.  600.170  Annual report content and timing.

    (a) Content. The State must submit an annual report that includes 
any evidence of fraud, waste, or abuse on the part of participating 
providers, plans, or the State BHP agency known to the State, and a 
detailed data-driven review of compliance with the following:
    (1) Eligibility verification requirements for program participation 
as specified in Sec.  600.345.
    (2) Limitations on the use of Federal funds received by the BHP as 
specified in Sec.  600.705.
    (3) Requirements to collect quality and performance measures from 
all participating standard health plans focusing on quality of care and 
improved health outcomes as specified in sections 1311(c)(3) and (4) of 
the Affordable Care Act and as further described in Sec.  600.415.
    (4) Requirements specified by the Secretary at least 120 days prior 
to the date of the annual report as requiring further study to assess 
continued State compliance with Federal law, regulations and the terms 
of the State's certified Blueprint, based on a Federal review of the 
BHP pursuant to Sec.  600.200, and/or a list of any outstanding 
recommendations from any audit or evaluation conducted by the HHS 
Office of Inspector General that have not been fully implemented, 
including a statement describing the status of implementation and why 
implementation is not complete,
    (b) Timing. The annual reports, in the format specified by the 
Secretary, are due 60 days before the end of each operational year.

Subpart C--Federal Program Administration


Sec.  600.200  Federal program reviews and audits.

    (a) Federal compliance review of the State BHP. To determine 
whether the State is complying with the Federal requirements and the 
provision of its BHP Blueprint, HHS may review, as needed, but no less 
frequently than annually, the compliance of the State BHP with 
applicable laws, regulations and interpretive guidance. This review may 
be based on the State's annual report submitted under Sec.  600.170, or 
may be based on direct Federal review of State administration of the 
BHP Blueprint through analysis of the State's policies and procedures, 
reviews of agency operation, examination of samples of individual case 
records, and additional reports and/or data as determined by the 
Secretary.
    (b) Action on compliance review findings. The compliance review 
will identify the following action items:
    (1) Requirements that need further study or data to assess 
continued State compliance with Federal law, regulations and the terms 
of the State's certified Blueprint. Such findings must be addressed in 
the next State annual report due no more than 120 days after the date 
of the issuance of the Federal compliance review.
    (2) Requirements with which the State BHP does not appear to be in 
compliance that could be the basis for withdrawal of BHP certification. 
Such findings must be resolved by the State (either by substantiating 
compliance with the standards for certification or submitting revisions 
to the Blueprint) If not resolved, such action items can be the basis 
for a proposed finding for withdrawal of BHP certification.
    (3) Requirements with which the State BHP does not appear to be in 
compliance that are not a basis for withdrawal of BHP certification but 
require revision to the Blueprint must be resolved by the State. If not 
resolved, such action items can be the basis for denial of other 
Blueprint revisions.
    (4) Improper use of BHP trust fund resources. The State and the BHP 
trustees shall be given an opportunity to review and resolve concerns 
regarding improper use of BHP trust funds as indicated in Sec.  
600.715(a) through (c): either by substantiating the proper use of 
trust fund resources or by taking corrective action which include 
changes to procedures to ensure proper use of trust fund resources, and 
restitution of improperly used resources to the trust fund.
    (c) The HHS Office of Inspector General (OIG) may periodically 
audit State operations and standard health plan practices as described 
in Sec.  430.33(a) of this chapter. The State and the BHP trustees 
shall be given an opportunity to review and resolve concerns about 
improper use of BHP trust funds as indicated in Sec.  600.715(a) 
through (c): either by substantiating the proper use of trust fund, or 
by taking corrective action that includes changes to procedures to 
ensure proper use of trust fund resources, and restitution of 
improperly used resources to the trust fund. Final reports on those 
audits shall be transmitted to both the State and the Secretary for 
actions on findings.

Subpart D--Eligibility and Enrollment


Sec.  600.300  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements section 
1331(e) of the Affordable Care Act which sets forth eligibility 
standards for the BHP and prohibits eligible individuals from being 
treated as qualified individuals and enrolling in qualified health 
plans offered through the Exchange.
    (b) Scope and applicability. This subpart sets forth the 
requirements for all BHPs established under section 1331 of the 
Affordable Care Act regarding eligibility standards and application 
screening and enrollment procedures.


Sec.  600.305  Eligible individuals.

    (a) Eligibility standards The State must determine individuals 
eligible to enroll in a standard health plan if they:
    (1) Are residents of the State not eligible for the State's 
Medicaid program consisting of at least the essential health benefits 
codified in Sec.  600.405.
    (2) Have household income which exceeds 133 percent but does not 
exceed 200 percent of the FPL for the applicable family size, or, in 
the case of an individual who is a lawfully present non-citizen, 
ineligible for Medicaid due to such non-citizen status, whose household 
income does not exceed 200 percent of the FPL for the applicable family 
size.
    (3) Are not eligible to enroll in affordable minimum essential 
coverage. If an individual meets all other eligibility standards, and--
    (i) Is eligible for, or enrolled in, Medicaid or CHIP that does not 
meet the minimum essential coverage definition, the individual is 
eligible to enroll in a standard health plan without regard to

[[Page 59146]]

eligibility or enrollment in such other programs; or
    (ii) Is eligible for Employer Sponsored Insurance (ESI) that is 
unaffordable (as determined under section 5000A of the Internal Revenue 
Code), the individual is eligible to enroll in a standard health plan.
    (4) Are 64 years of age or younger.
    (5) Are either a citizen or lawfully present non-citizen.
    (6) Are not incarcerated, other than during a period pending 
disposition of charges.
    (b) Eligibility restrictions. The State may not impose conditions 
of eligibility other than those identified in this section, including, 
but not limited to, restrictions on eligibility based on geographic 
location or imposition of an enrollment cap or waiting period for 
individuals previously eligible for or enrolled in other coverage.


Sec.  600.310  Application.

    (a) Single streamlined application. The State must use the single 
streamlined application used by the State in accordance with Sec.  
435.907(b) of this chapter and 45 CFR 155.405(a) and (b).
    (b) Opportunity to apply and assistance with application. The terms 
of Sec. Sec.  435.906 and 435.908 of this chapter, requiring the State 
to provide individuals the opportunity to apply and receive assistance 
with an application in the Medicaid program, apply in the same manner 
to States in the administration of the BHP.
    (c) Authorized representatives. The State may choose to permit the 
use of an authorized representative designated by an applicant or 
beneficiary to assist with the individual's application, eligibility 
renewal and other ongoing communication with the BHP. If the State 
chooses this option, the State must follow the standards set forth at 
either 45 CFR 155.227 or 42 CFR 435.923.


Sec.  600.315  Certified application counselors.

    The State may have a program to certify application counselors to 
assist individuals to apply for enrollment in the BHP and other 
insurance affordability programs. If the State chooses this option, the 
State must follow the procedures and standards for such a program set 
forth in the regulations at either 45 CFR 155.225 or 42 CFR 435.908.


Sec.  600.320  Determination of eligibility for and enrollment in a 
standard health plan.

    (a) Determining eligibility to enroll in a standard health plan may 
be performed by a State or local governmental entity, including a 
governmental entity that determines eligibility for Medicaid or CHIP, 
and may be delegated by the state to an Exchange that is a government 
agency.
    (b) Timely determinations. The terms of 42 CFR 435.912 (relating to 
timely determinations of eligibility under the Medicaid program) apply 
to eligibility determinations for enrollment in a standard health plan 
exclusive of Sec.  435.912(c)(3)(i). The standards established by the 
State must be included in the BHP Blueprint.
    (c) Effective date of eligibility. The State must establish a 
uniform method of determining the effective date of eligibility for 
enrollment in a standard health plan following either the Exchange 
standards at 45 CFR 155.420(b)(1) or the Medicaid process at 42 CFR 
435.915.
    (d) Enrollment periods. The State must offer enrollment and special 
enrollment periods equivalent to the Exchange at 45 CFR 155.410 and 
155.420 or the State may follow the continuous eligibility standard of 
Medicaid.


Sec.  600.330  Coordination with other insurance affordability 
programs.

    (a) Coordination. The State must establish eligibility and 
enrollment mechanisms and procedures to maximize coordination with the 
Exchange, Medicaid and CHIP. The terms of 45 CFR 155.345(a) regarding 
the agreements between insurance affordability programs apply to a BHP. 
The State BHP agency must fulfill the requirements of 42 CFR 
435.1200(d) and (e) and, if applicable, paragraph (c) for BHP eligible 
individuals.
    (b) Coordinated determinations of eligibility. The agency 
administering BHP must establish and maintain processes to make income 
eligibility determinations using modified adjusted gross income (MAGI), 
and to ensure that applications received by the agency, to the extent 
warranted and permitted under delegations from other agencies 
administering insurance affordability programs, also result in 
eligibility assessments or determinations for those other programs. The 
BHP must also accept applications transferred from other agencies 
administering insurance affordability programs, and ensure that 
individuals assessed or determined eligible for BHP by such other 
agencies are afforded the opportunity to enroll in a standard health 
plan without undue delay. Individuals submitting applications to any of 
the aforementioned agencies must not be required to duplicate the 
submission of information.
    (c) Account transfers. The agency administering the BHP must 
participate in the secure exchange of information with agencies 
administering other insurance affordability programs, using the 
standards set forth under 45 CFR 155.345(h) regarding electronic 
account transfers.
    (d) Notification to referring agency. The terms in Sec.  
435.1200(d)(5) regarding the notification to other programs of the 
final determination of eligibility apply equally to States 
administering a BHP.
    (e) Notice of decision concerning eligibility. Every application 
for BHP shall result in a determination of eligibility or 
ineligibility, unless the application has been withdrawn, the applicant 
has died, or the applicant cannot be located. Notices of eligibility 
determinations shall be coordinated with other insurance affordability 
programs and Medicaid. Electronic notices shall be provided to the 
extent consistent with Sec.  435.918(b).


Sec.  600.335  Appeals.

    (a) Notice of eligibility appeal rights. Eligibility determinations 
must include a notice of the right to appeal the determination, and 
instructions regarding how to file an appeal.
    (b) Appeals process. Individuals must be given the opportunity to 
appeal BHP eligibility determinations through the appeals process of 
the state's Medicaid program, as set forth in an agreement with the 
Medicaid agency, however, this process may not confer a second level 
appeal or an appeal to the federal Department of Health and Human 
Services.
    (c) Accessibility. The appeals process must be conducted in a 
manner accessible to individuals with limited English proficiency and 
persons with disabilities.


Sec.  600.340  Periodic redetermination and renewal of BHP eligibility.

    (a) Period of eligibility. An individual is determined eligible for 
a period of 12 months unless the eligibility is redetermined based on 
new information received and verified from enrollee reports or data 
sources. The State must require enrollees to report changes in 
circumstances, at least to the extent that they would be required to 
report such changes if enrolled in coverage through the Exchange, 
consistent with 45 CFR 155.330(b).
    (b) Renewal of coverage. If an enrollee remains eligible for 
coverage in the BHP, the enrollee will be afforded notice of a 
reasonable opportunity to change plans to the extent the BHP offers a 
choice of plans, and shall remain in the plan selected for the

[[Page 59147]]

previous year unless such enrollee terminates coverage from the plan by 
selecting a new plan or withdrawing from a plan.
    (c) Procedures. The State shall choose to apply equally all the 
redetermination procedures described in either 45 CFR 155.335 or 42 CFR 
435.916(a) in administering a BHP.
    (d) Verification. The State must verify information needed to 
redetermine and renew eligibility in accordance with Sec.  600.345 and 
comply with the requirements set forth in Sec.  600.330 relating to 
screening individuals for other insurance affordability programs and 
transmitting such individuals' electronic accounts and other relevant 
information to the other program, as appropriate.
    (e) Notice to enrollee. The State must provide an enrollee with an 
annual notice of redetermination of eligibility. The annual notice 
should include all current information used for the most recent 
eligibility determination. The enrollee is required to report any 
changes with respect to information listed within the notice within 30 
days of the date of the notice. The State must verify information in 
accordance with Sec.  600.345.


Sec.  600.345  Eligibility verification.

    (a) The State must verify the eligibility of an applicant or 
beneficiary for BHP consistent either with the standards and procedures 
set forth in--
    (1) Medicaid regulations at Sec. Sec.  435.945 through 435.956 of 
this chapter; or
    (2) Exchange regulations at 45 CFR 155.315 and 155.320.
    (b) [Reserved]


Sec.  600.350  Privacy and security of information.

    The State must comply with the standards and procedures set forth 
in 45 CFR 155.260(b) and (c) as are applicable to the operation of the 
BHP.

Subpart E--Standard Health Plan


Sec.  600.400  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements sections 1331(b), (c), 
and (g) of the Affordable Care Act, which set forth provisions 
regarding the minimum coverage standards under BHP, as well as the 
delivery of such coverage, including the contracting process for 
standard health plan offerors participating in the BHP.
    (b) Scope and applicability. This subpart consists of provisions 
relating to all BHPs for the delivery of, at a minimum, the ten 
essential health benefits as described in section 1302(b) of the 
Affordable Care Act, the contracting process by which States must 
contract for the provision of standard health plans, the minimum 
requirements States must include in their standard health plan 
contracts, the minimum coverage standards provided by the standard 
health plan offeror, and other applicable requirements to enhance the 
coordination of the provision of standard health plan coverage.


Sec.  600.405  Standard health plan coverage.

    (a) Essential Health Benefits (EHBs). Standard health plan coverage 
must include, at a minimum, the essential health benefits as determined 
and specified under 45 CFR 156.110, and 45 CFR 156.122 regarding 
prescription drugs, except that States may select more than one base 
benchmark option from those codified at 45 CFR 156.100 for establishing 
essential health benefits for standard health plans. Additionally, 
States must comply with 45 CFR 156.122(a)(2) by requiring participating 
plans to submit their drug list to the State.
    (b) Additional required benefits. Where the standard health plan 
for BHP is subject to State insurance mandates, the State shall adopt 
the determination of the Exchange at 45 CFR 155.170(a)(3) in 
determining which benefits enacted after December 31, 2011 are in 
addition to the EHBs.
    (c) Periodic review. Essential health benefits must include any 
changes resulting from periodic reviews required by section 
1302(b)(4)(G) of the Affordable Care Act. The provision of such 
essential health benefits must meet all the requirements of 45 CFR 
156.115.
    (d) Non-discrimination in benefit design. The terms of 45 CFR 
156.125 apply to standard health plans offered under the BHP.
    (e) Compliance. The State must comply with prohibitions on federal 
funding for abortion services equivalent to the Exchange at 45 CFR 
156.280.


Sec.  600.410  Competitive contracting process.

    (a) General requirement. In order to receive initial HHS 
certification as described in Sec.  600.120, the State must assure in 
its BHP Blueprint that it complies with the requirements set forth in 
this section.
    (b) Contracting process. The State must:
    (1) Conduct the contracting process in a manner providing full and 
open competition consistent with the standards of 45 CFR 92.36(b) 
through (i);
    (2) Include a negotiation of the elements described in paragraph 
(d) of this section on a fair and adequate basis; and
    (3) Consider the additional elements described in paragraph (e) of 
this section.
    (c) Initial implementation exceptions. (1) If a State is not able 
to implement a competitive contracting process described in paragraph 
(b) of this section for program year 2015, the State must include a 
justification as to why it cannot meet the conditions in paragraph (b), 
as well as a description of the process it will use to enter into 
contracts for the provision of standard health plans under BHP.
    (2) The State must include a proposed timeline that implements a 
competitive contracting process, as described in paragraph (b) of this 
section, for program year 2016.
    (3) Initial implementation exceptions are subject to HHS approval 
consistent with the BHP Blueprint review process established in Sec.  
600.120, and may only be in effect for benefit year 2015.
    (d) Negotiation criteria. The State must assure that its 
competitive contracting process includes the negotiation of:
    (1) Premiums and cost sharing, consistent with the requirements at 
Sec. Sec.  600.505(e) and 600.510(e);
    (2) Benefits, consistent with the requirements at Sec.  600.405;
    (3) Inclusion of innovative features, such as:
    (i) Care coordination and care management for enrollees, with a 
particular focus on enrollees with chronic health conditions;
    (ii) Incentives for the use of preventive services; and
    (iii) Establishment of provider-patient relationships that maximize 
patient involvement in their health care decision-making, including the 
use of incentives for appropriate health care utilization and patient 
choice of provider.
    (e) Other considerations: The State shall also include in its 
competitive process criteria to ensure:
    (1) Consideration of health care needs of enrollees;
    (2) Local availability of, and access, to health care providers;
    (3) Use of a managed care process, or a similar process to improve 
the quality, accessibility, appropriate utilization, and efficiency of 
services provided to enrollees;
    (4) Performance measures and standards focused on quality of care 
and improved health outcomes as specified in Sec.  600.415;
    (5) Coordination between other health insurance affordability 
programs to ensure enrollee continuity of care as described in Sec.  
600.425; and

[[Page 59148]]

    (6) Measures to prevent, identify, and address fraud, waste and 
abuse and ensure consumer protections.
    (f) Discrimination. Nothing in the competitive process shall permit 
or encourage discrimination in enrollment based on pre-existing 
conditions or other health status-related factors.


Sec.  600.415  Contracting qualifications and requirements.

    (a) Eligible offerors for standard health plan contracts. A State 
may enter into contracts for the administration and provision of two or 
more standard health plans under the BHP with a:
    (1) Licensed health maintenance organization.
    (2) Licensed health insurance insurer.
    (3) Network of health care providers demonstrating capacity to meet 
the criteria set forth in Sec.  600.410(d).
    (4) Non-licensed health maintenance organization participating in 
Medicaid and/or CHIP.
    (b) General contract requirements. (1) A State contracting with 
eligible standard health plan offerors described in paragraph (a) of 
this section must include contract provisions addressing network 
adequacy, service provision and authorization, quality and performance, 
enrollment procedures, disenrollment procedures, noticing and appeals, 
provisions protecting the privacy and security of personally 
identifiable information, and other applicable contract requirements as 
determined by the Secretary to the extent that the service delivery 
model furthers the objectives of the program.
    (2) All contracts under this part must include provisions that 
define a sound and complete procurement contract, as required by 45 CFR 
92.36(i).
    (3) To the extent that the standard health plan is health insurance 
coverage offered by a health insurance issuer, the contract must 
provide that the medical loss ratio is at least 85 percent.
    (c) Notification of State election. To receive HHS certification, 
the State must include in its BHP Blueprint the standard set of 
contract requirements described in paragraph (b) of this section that 
will be incorporated into its standard health plan contracts.


Sec.  600.420  Enhanced availability of standard health plans.

    (a) Choice of standard health plans. The State must include in its 
BHP Blueprint an assurance that at least two standard health plans are 
offered under BHP, and if applicable, a description of how it will 
further ensure enrollee choice of standard health plans.
    (b) Use of regional compacts. (1) A State may enter into a joint 
procurement with other States to negotiate and contract with standard 
health plan offerors to administer and provide standard health plans 
statewide, or in geographically specific areas within the States, to 
BHP enrollees residing in the participating regional compact States.
    (2) A State electing the option described in paragraph (b)(1) of 
this section must include in its BHP Blueprint all of the following:
    (i) The other State(s) entering into the regional compact.
    (ii) The specific areas within the participating States that the 
standard health plans will operate, if applicable.
    (A) If the State contracts for the provision of a geographically 
specific standard health plan, the State must assure that enrollees, 
regardless of residency within the State, continue to have choice of at 
least two standard health plans.
    (B) [Reserved]
    (iii) An assurance that the competitive contracting process used in 
the joint procurement of the standard health plans complies with the 
requirements set forth in Sec.  600.410.
    (iv) Any variations that may occur as a result of regional 
differences between the participating states with respect to benefit 
packages, premiums and cost sharing, contracting requirements and other 
applicable elements as determined by HHS.


Sec.  600.425  Coordination with other insurance affordability 
programs.

    A State must describe in its BHP Blueprint how it will ensure 
coordination for the provision of health care services to promote 
enrollee continuity of care between Medicaid, CHIP, Exchange and any 
other state-administered health insurance programs.

Subpart F--Enrollee Financial Responsibilities


Sec.  600.500  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements section 1331(a) of the 
Affordable Care Act, which sets forth provisions regarding the 
establishment of the BHP and requirements regarding monthly premiums 
and cost sharing for enrollees.
    (b) Scope and applicability. This subpart consists of provisions 
relating to the imposition of monthly premiums and cost-sharing under 
all state BHPs.


Sec.  600.505  Premiums.

    (a) BHP Blueprint requirements. For premiums imposed on enrollees, 
the State must include, or if applicable, assure in its BHP Blueprint:
    (1) The monthly premium imposed on any enrollee does not exceed the 
monthly premium that the enrollee would have been required to pay had 
he or she enrolled in a plan with a premium equal to the premium of the 
applicable benchmark plan, as defined in 26 CFR 1.36B-3(f). The State 
must assure that when determining the amount of the enrollee's monthly 
premium, the State took into account reductions in the premium 
resulting from premium tax credit that the enrollee would have been 
paid on the enrollee's behalf.
    (2) The group or groups of enrollees subject to premiums.
    (3) The collection method and procedure for the payment of an 
enrollee's premium.
    (4) The consequences for an enrollee or applicant who does not pay 
a premium.
    (b) [Reserved]


Sec.  600.510  Cost-sharing.

    (a) BHP Blueprint requirements. For cost sharing imposed on 
enrollees, the State must include, or if applicable, assure in its BHP 
Blueprint:
    (1) The cost sharing imposed on enrollees meet the standards 
detailed in Sec.  600.520(c).
    (2) The group or groups of enrollees subject to the cost sharing.
    (3) An assurance that the State has established an effective system 
to monitor and track the cost-sharing standards consistent with Sec.  
600.520(b) and (c) of this part.
    (b) Cost sharing for preventive health services. A State may not 
impose cost sharing with respect to the preventive health services or 
items, as defined in, and in accordance with 45 CFR 147.130.


Sec.  600.515  Public schedule of enrollee premium and cost sharing.

    (a) The State must ensure that applicants and enrollees have access 
to information about all of the following, either upon request or 
through an Internet Web site:
    (1) The amount of and types of enrollee premiums and cost sharing 
for each standard health plan that would apply for individuals at 
different income levels.
    (2) The consequences for an applicant or an enrollee who does not 
pay a premium.
    (b) The information described in paragraph (a) of this section must 
be made available to applicants for standard health plan coverage and 
enrollees in such coverage, at the time of enrollment and reenrollment, 
after a redetermination of eligibility, when premiums, cost sharing, 
and annual

[[Page 59149]]

limitations on cost sharing are revised, and upon request by the 
individual.


Sec.  600.520  General cost-sharing protections.

    (a) Cost-sharing protections for lower income enrollees. The State 
may vary premiums and cost sharing based on household income only in a 
manner that does not favor enrollees with higher income over enrollees 
with lower income.
    (b) Cost-sharing protections to ensure enrollment of Indians. A 
State must ensure that standard health plans meet the standards in 
accordance with 45 CFR 156.420(b)(1) and (d).
    (c) Cost-sharing standards. A State must ensure that standard 
health plans meet:
    (1) The standards in accordance with 45 CFR 156.420(c) and (e); and
    (2) The cost-sharing reduction standards in accordance with 45 CFR 
156.420(a)(1) for an enrollee with household income at or below 150 
percent of the FPL, and 45 CFR 156.420(a)(2) for an enrollee with 
household income above 150 percent of the FPL.
    (3) The State must establish an effective system to monitor 
compliance with the cost-sharing reduction standards in paragraph (c) 
of this section, and the cost-sharing protections to ensure enrollment 
of Indians in paragraph (b) of this section to ensure that enrollees 
are not held responsible for such monitoring activity.


Sec.  600.525  Disenrollment procedures and consequences for nonpayment 
of premiums.

    (a) Disenrollment procedures due to nonpayment of premium. (1) A 
State must assure in its BHP Blueprint that it is in compliance with 
the disenrollment procedures described in 45 CFR 155.430.
    (2) A State electing to enroll eligible individuals in accordance 
with 45 CFR 155.410 and 420 must comply with the premium grace period 
standards set forth in 45 CFR 156.270 for required premium payment 
prior to disenrollment.
    (3) A State electing to enroll eligible individuals throughout the 
year must provide an enrollee a 30-day grace period to pay any required 
premium prior to disenrollment.
    (b) Consequences of nonpayment of premium. (1) A State electing to 
enroll eligible individuals in accordance with 45 CFR 155.410 and 420 
may not restrict reenrollment to BHP beyond the next open enrollment 
period.
    (2) A State electing to enroll eligible individuals throughout the 
year must comply with the reenrollment standards set forth in Sec.  
457.570(c). If applicable, the State must define the length of its 
premium lockout period in its BHP Blueprint.

Subpart G--Payment to States


Sec.  600.600  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements section 1331(d)(1) and 
(3) of the Affordable Care Act regarding the transfer of Federal funds 
to a State's BHP trust fund and the Federal payment amount to State for 
the provision of BHP.
    (b) Scope and applicability. This subpart consists of provisions 
relating to the methodology used to calculate the amount of payment to 
a state in a given Federal fiscal year for the provision of BHP and the 
process and procedures by which the Secretary establishes a State's BHP 
payment amount.


Sec.  600.605  BHP payment methodology.

    (a) General calculation. The Federal payment for an eligible 
individual in a given Federal fiscal year is the sum of the premium tax 
credit component, as described in paragraph (a)(1) of this section, and 
the cost-sharing reduction component, as described in paragraph (a)(2) 
of this section.
    (1) Premium tax credit component. The premium tax credit component 
equals 95 percent of the premium tax credit for which the eligible 
individual would have qualified had he or she been enrolled in a 
qualified health plan through an Exchange in a given calendar year, 
adjusted by the relevant factors described in paragraph (b) of this 
section.
    (2) Cost-sharing reduction component. The cost-sharing reduction 
component equals 95 percent of the cost of the cost-sharing reductions 
for which the eligible individual would have qualified had he or she 
been enrolled in a qualified health plan through an Exchange in a given 
calendar year adjusted by the relevant factors described in paragraph 
(b) of this section.
    (b) Relevant factors in the payment methodology. In determining the 
premium tax credit and cost-sharing reduction components described in 
paragraph (a) of this section, the Secretary will consider the 
following factors to determine applicable adjustments:
    (1) Age of the enrollee;
    (2) Income of the enrollee;
    (3) Self-only or family coverage;
    (4) Geographic differences in average spending for health care 
across rating areas;
    (5) Health status of the enrollee for purposes of determining risk 
adjustment payments and reinsurance payments had the enrollee been 
enrolled in a qualified health plan through an Exchange;
    (6) Reconciliation of the premium tax credit or cost-sharing 
reductions had such reconciliation occurred if an enrollee had been 
enrolled in a qualified health plan through an Exchange;
    (7) Marketplace experience in other states with respect to Exchange 
participation and the effect of the premium tax credit and cost-sharing 
reductions provided to residents, particularly those residents with 
income below 200 percent of the FPL; and
    (8) Other factors affecting the development of the methodology as 
determined by the Secretary.
    (c) Annual adjustments to payment methodology. The Secretary will 
adjust the payment methodology on a prospective basis to adjust for any 
changes in the calculation of the premium tax credit and cost-sharing 
reduction components.


Sec.  600.610  Secretarial determination of BHP payment amount.

    (a) Proposed payment notice. (1) Beginning in FY 2015 and each 
subsequent year thereafter, the Secretary will determine and publish in 
a Federal Register notice the next fiscal year's BHP payment 
methodology. The Secretary will publish this notice annually in October 
upon receiving certification from the Chief Actuary of CMS.
    (2) A State may be required to submit data in accordance with the 
published proposed payment notice in order for the Secretary to 
determine the State's payment rate as described in paragraph (b) of 
this section.
    (b) Final payment notice. (1) The Secretary will determine and 
publish the final BHP payment methodology and BHP payment amounts 
annually in February in a Federal Register notice.
    (2) Calculation of payment rates. State payment rates are 
determined by the Secretary using the final BHP payment methodology, 
data requested in the proposed payment notice described in paragraph 
(a) of this section, and, if needed, other applicable data as 
determined by the Secretary.
    (c) State specific aggregate BHP payment amounts. (1) Prospective 
aggregate payment amount. The Secretary will determine, on a quarterly 
basis, the prospective aggregate BHP payment amount by multiplying the 
payment rates described in paragraph (b) of this section by the 
projected number of enrollees. This calculation would be made for each 
category of enrollees based on enrollee

[[Page 59150]]

characteristics and the other relevant factors considered when 
determining the payment methodology. The prospective aggregate BHP 
payment amount would be the sum of the payments determined for each 
category of enrollees for a State.
    (2) Retrospective adjustment to state specific aggregate payment 
amount for enrollment and errors. (i) Sixty days after the end of each 
fiscal year quarter, the Secretary will calculate a retrospective 
adjustment to the previous quarter's specific aggregate payment amount 
by multiplying the payment rates described in paragraph (b) of this 
section by actual enrollment for the respective quarter. This 
calculation would be made for each category of enrollees based on 
enrollee characteristics and the other relevant factors considered when 
determining the payment methodology. The adjusted BHP payment amount 
would be the sum of the payments determined for each category of 
enrollees for a State.
    (ii) Upon determination that a mathematical error occurred during 
the application of the BHP funding methodology, the Secretary will 
recalculate the state's BHP payment amount and make any necessary 
adjustments in accordance with paragraph (c)(2)(iii) of this section.
    (iii) Any difference in the adjusted payment and the prospective 
aggregate payment amount will result in either:
    (A) A deposit of the difference amount into the State's BHP trust 
fund; or
    (B) A reduction in the upcoming quarter's prospective aggregate 
payment as described in paragraph (c)(1) of this section by the 
difference amount.


Sec.  600.615  Deposit of Federal BHP payment.

    HHS will make quarterly deposits into the state's BHP trust fund 
based on the aggregate quarterly payment amounts described in Sec.  
600.610(c).

Subpart H--BHP Trust Fund


Sec.  600.700  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements section 1331(d)(2) of 
the Affordable Care Act, which set forth provisions regarding BHP trust 
fund expenditures, fiscal policies and accountability standards and 
restitution to the BHP trust fund for unallowable expenditures.
    (b) Scope and applicability. This subpart sets forth a framework 
for BHP trust funds and accounting, establishing sound fiscal policies 
and accountability standards and procedures for the restitution of 
unallowable BHP trust fund expenditures.


Sec.  600.705  BHP trust fund.

    (a) Establishment of BHP trust fund. (1) The State must establish a 
BHP trust fund with an independent entity, or as a subset account 
within its General Fund.
    (2) The State must identify trustees responsible for oversight of 
the BHP trust fund.
    (3) Trustees must specify individuals with the power to authorize 
withdrawal of funds for allowable trust fund expenditures.
    (b) Non-Federal deposits. The State may deposit non-Federal funds, 
including such funds from enrollees, providers or other third parties 
for standard health plan coverage, into its BHP trust fund. Upon 
deposit, such funds will be considered BHP trust funds, must remain in 
the BHP trust fund and meet the standards described in paragraphs (c) 
and (d) of this section.
    (c) Allowable trust fund expenditures. BHP trust funds may only be 
used to:
    (1) Reduce premiums and cost sharing for eligible individuals 
enrolled in standard health plans under BHP; or
    (2) Provide additional benefits for eligible individuals enrolled 
in standard health plans as determined by the State.
    (d) Limitations. BHP trust funds may not be expended for any 
purpose other than those specified in paragraph (c) of this section. In 
addition, BHP trust funds may not be used for other purposes including 
but not limited to:
    (1) Determining the amount of non-Federal funds for the purposes of 
meeting matching or expenditure requirements for Federal funding;
    (2) Program administration of BHP or any other program;
    (3) Payment to providers not associated with BHP services or 
requirements; or
    (4) Coverage for individuals not eligible for BHP.
    (e) Year-to-year carryover of trust funds. A State may maintain a 
surplus, or reserve, of funds in its trust through the carryover of 
unexpended funds from year-to-year. Expenditures from this surplus must 
be made in accordance with paragraphs (b) and (c) of this section.


Sec.  600.710  Fiscal policies and accountability.

    A BHP Blueprint must provide that the BHP administering agency 
will:
    (a) Accounting records. Maintain an accounting system and 
supporting fiscal records to assure that the BHP trust funds are 
maintained and expended in accord with applicable Federal requirements, 
such as OMB Circulars A-87 and A-133.
    (b) Annual certification. Obtain an annual certification from the 
BHP trustees, the State's chief financial officer, or designee, 
certifying all of the following:
    (1) The State's BHP trust fund financial statements for the fiscal 
year.
    (2) The BHP trust funds are not being used as the non-Federal share 
for purposes of meeting any matching or expenditure requirement of any 
Federally-funded program.
    (3) The use of BHP trust funds is in accordance with Federal 
requirements consistent with those specified for the administration and 
provision of the program.
    (c) Independent audit. Conduct an independent audit of BHP trust 
fund expenditures, consistent with the standards set forth in chapter 3 
of the Government Accountability Office's Government Auditing 
Standards, over a 3-year period to determine that the expenditures made 
during the 3-year period were allowable as described in Sec.  
600.705(b) and in accord with other applicable Federal requirements. 
The independent audit may be conducted as a sub-audit of the single 
state audit conducted in accordance with OMB Circular A-133, and must 
follow the cost accounting principles in OMB Circular A-87.
    (d) Annual reports. Publish annual reports on the use of funds, 
including a separate line item that tracks the use of funds described 
in Sec.  600.705(e) to further reduce premiums and cost sharing, or for 
the provision of additional benefits within 10 days of approval by the 
trustees. If applicable for the reporting year, the annual report must 
also contain the findings for the audit conducted in accordance with 
paragraph (c) of this section.
    (e) Restitution. Establish and maintain BHP trust fund restitution 
procedures.
    (f) Record retention. Retain records for 3 years from date of 
submission of a final expenditure report.
    (g) Record retention related to audit findings. If any litigation, 
claim, financial management review, or audit is started before the 
expiration of the 3-year period, the records shall be retained until 
all litigation, claims or audit findings involving the records have 
been resolved and final action taken.


Sec.  600.715  Corrective action, restitution, and disallowance of 
questioned BHP transactions.

    (a) Corrective action. When a question has been raised concerning 
the authority for BHP trust fund expenditures in an OIG report, other 
HHS compliance review, State audit or otherwise, the BHP trustees and 
the State shall review the issues and develop a written

[[Page 59151]]

response no later than 60 days upon receipt of such a report, unless 
otherwise specified in the report, review or audit. To the extent 
determined necessary in that review, the BHP trustees and State shall 
implement changes to fiscal procedures to ensure proper use of trust 
fund resources.
    (b) Restitution. To the extent that the State and BHP trustees 
determine that BHP trust funds may not have been properly spent, they 
must ensure restitution to the BHP trust fund of the funds in question. 
Restitution may be made directly by the BHP trustees, by the State, or 
by a liable third party. The State or the BHP trustees may enter into 
indemnification agreements assigning liability for restitution of funds 
to the BHP trust fund.
    (c) Timing of restitution. Restitution to the BHP trust fund for 
any unallowable expenditure may occur in a lump sum amount, or in equal 
installment amounts. Restitution to the BHP trust fund cannot exceed a 
2-year period from the date of the written response in accordance with 
paragraph (a) of this section.
    (d) HHS disallowance of improper BHP trust fund expenditures. The 
State shall return to HHS the amount of federal BHP funding that HHS 
has determined was expended for unauthorized purposes, when no 
provision has been made to restore the funding to the BHP trust fund in 
accordance with paragraph (b) of this section (unless the restitution 
does not comply with the timing conditions described in paragraphs (c) 
of this section). When HHS determines that federal BHP funding is not 
allowable, HHS will provide written notice to the state and BHP 
Trustees containing:
    (1) The date or dates of the improper expenditures from the BHP 
trust fund;
    (2) A brief written explanation of the basis for the determination 
that the expenditures were improper; and
    (3) Procedures for administrative reconsideration of the 
disallowance based on a final determination.
    (e) Administrative reconsideration of BHP trust fund disallowances. 
(1) BHP Trustees or the State may request reconsideration of a 
disallowance within 60 days after receipt of the disallowance notice 
described in paragraph (d)(1) of this section by submitting a written 
request for review, along with any relevant evidence, documentation, or 
explanation, to HHS.
    (2) After receipt of a reconsideration request, if the Secretary 
(or a designated hearing officer) determines that further proceedings 
would be warranted, the Secretary may issue a request for further 
information by a specific date, or may schedule a hearing to obtain 
further evidence or argument.
    (3) The Secretary, or designee, shall issue a final decision within 
90 days after the later of the date of receipt of the reconsideration 
request or date of the last scheduled proceeding or submission.
    (f) Return of disallowed BHP funding. Disallowed federal BHP 
funding must be returned to HHS within 60 days after the later of the 
date of the disallowance notice or the final administrative 
reconsideration upholding the disallowance. Such repayment cannot be 
made from BHP trust funds, but must be made with other, non-Federal 
funds.

Title 45

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

0
2. The authority citation for part 144 continues to read as follows:

    Authority:  Secs. 2701 through 2763, 2791, and 2792 of the 
Public Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92.

0
3. Section 144.103 is amended by revising the definition of 
``individual market'' to read as follows:


Sec.  144.103  Definitions.

* * * * *
    Individual market means the market for health insurance coverage 
offered to individuals other than in connection with a group health 
plan, or other than coverage offered pursuant to a contract between the 
health insurance issuer with the Medicaid, Children's Health Insurance 
Program, or Basic Health programs.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: September 3, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: September 10, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-23292 Filed 9-20-13; 4:15 pm]
BILLING CODE 4120-01-P