[Federal Register Volume 79, Number 101 (Tuesday, May 27, 2014)]
[Rules and Regulations]
[Pages 30240-30353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11657]



[[Page 30239]]

Vol. 79

Tuesday,

No. 101

May 27, 2014

Part II





Department of Health and Human Services





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45 CFR Parts 144, 146, 147, et al.





Patient Protection and Affordable Care Act; Exchange and Insurance 
Market Standards for 2015 and Beyond; Final Rule

  Federal Register / Vol. 79 , No. 101 / Tuesday, May 27, 2014 / Rules 
and Regulations  

[[Page 30240]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 146, 147, 148, 153, 154, 155, 156, and 158

[CMS-9949-F]
RIN 0938-AS02


Patient Protection and Affordable Care Act; Exchange and 
Insurance Market Standards for 2015 and Beyond

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule addresses various requirements applicable to 
health insurance issuers, Affordable Insurance Exchanges 
(``Exchanges''), Navigators, non-Navigator assistance personnel, and 
other entities under the Patient Protection and Affordable Care Act and 
the Health Care and Education Reconciliation Act of 2010 (collectively 
referred to as the Affordable Care Act). Specifically, the rule 
establishes standards related to product discontinuation and renewal, 
quality reporting, non-discrimination standards, minimum certification 
standards and responsibilities of qualified health plan (QHP) issuers, 
the Small Business Health Options Program, and enforcement remedies in 
Federally-facilitated Exchanges. It also finalizes: A modification of 
HHS's allocation of reinsurance collections if those collections do not 
meet our projections; certain changes to allowable administrative 
expenses in the risk corridors calculation; modifications to the way we 
calculate the annual limit on cost sharing so that we round this 
parameter down to the nearest $50 increment; an approach to index the 
required contribution used to determine eligibility for an exemption 
from the shared responsibility payment under section 5000A of the 
Internal Revenue Code; grounds for imposing civil money penalties on 
persons who provide false or fraudulent information to the Exchange and 
on persons who improperly use or disclose information; updated 
standards for the consumer assistance programs; standards related to 
the opt-out provisions for self-funded, non-Federal governmental plans 
and related to the individual market provisions under the Health 
Insurance Portability and Accountability Act of 1996 including excepted 
benefits; standards regarding how enrollees may request access to non-
formulary drugs under exigent circumstances; amendments to Exchange 
appeals standards and coverage enrollment and termination standards; 
and time-limited adjustments to the standards relating to the medical 
loss ratio (MLR) program. The majority of the provisions in this rule 
are being finalized as proposed.

DATES: This rule is effective July 28, 2014 except for amendments to 45 
CFR 155.705 which are effective May 27, 2014.

FOR FURTHER INFORMATION CONTACT: For general matters and matters 
related to Parts 144, 146, 147, 148 and 154: Jacob Ackerman, (301) 492-
4179.
    For matters related to reinsurance, under Part 153: Adrianne 
Glasgow, (410) 786-0686.
    For matters related to risk corridors, under Part 153: Jaya 
Ghildiyal, (301) 492-5149.
    For matters related to non-interference with Federal law and non-
discrimination standards, and Navigator, non-Navigator assistance 
personnel, and certified application counselor program standards, under 
Part 155, subparts B and C: Tricia Beckmann, (301) 492-4328.
    For matters related to civil money penalties for noncompliant 
consumer assistance entities, under Part 155, subpart C: Emily Ames, 
(301) 492-4246.
    For matters related to enrollment of a qualified individual, under 
Part 155, subpart E: Jack Lavelle, (410) 786-0639.
    For matters related to civil money penalties for false or 
fraudulent information or improper use of information, under Part 155, 
subpart C; exemptions under Part 155, subparts D and G, and matters 
related to eligibility appeals, under Part 155, subparts F and H: 
Christine Hammer, (301) 492-4431.
    For matters related to special enrollment periods under Part 155, 
Subpart E: Spencer Manasse, (301) 492-5141.
    For matters related to the Small Business Health Options Program, 
under Part 155, subpart H: Christelle Jang, (410) 786-8438.
    For matters related to the required contribution percentage for 
affordability exemptions, under Part 155, subpart G: Ariel Novick, 
(301) 492-4309.
    For matters related to cost sharing, under Part 156, subpart B: Pat 
Meisol, (410) 786-1917.
    For matters related to quality standards, under Parts 155 and 156: 
Nidhi Singh Shah, (301) 492-5110.
    For matters related to enforcement remedies, under Part 156: Cindy 
Yen, (301) 492-5142.
    For matters related to minimum essential coverage, under Part 156, 
subpart G: Cam Clemmons, (410) 786-1565.
    For all other matters related to Parts 155 and 156: Leigha Basini, 
(301) 492-4380.
    For matters related to the medical loss ratio program, under Part 
158: Julie McCune, (301) 492-4196.

SUPPLEMENTARY INFORMATION: 

Electronic Access

    This Federal Register document is also available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S. Government Printing Office. This database can be 
accessed via the internet at http://www.gpo.gov/fdsys.

Table of Contents

I. Executive Summary
II. Background
    A. Legislative Overview
    B. Stakeholder Consultation and Input
    C. Structure of Final Rule
III. Provisions of the Proposed Regulations and Analysis and 
Responses to Public Comments
    A. Part 144--Requirements Relating to Health Insurance Coverage
    B. Part 146--Requirements for the Group Health Insurance Market
    C. Part 147--Health Insurance Reform Requirements for the Group 
and Individual Health Insurance Markets
    Guaranteed Availability and Guaranteed Renewability of Coverage 
(Sec. Sec.  147.104 and 147.106)
    a. No Effect on Other Laws
    b. Product Discontinuance and Uniform Modification of Coverage 
Exceptions to Guaranteed Renewability Requirements
    D. Part 148--Requirements for the Individual Health Insurance 
Market
    1. Conforming Changes to Individual Market Regulations 
(Sec. Sec.  148.101 through 148.128)
    2. Fixed Indemnity Insurance in the Individual Health Insurance 
Market (Sec.  148.220)
    E. Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment Under the Affordable Care Act
    1. Provisions and Parameters for the Permanent Risk Adjustment 
Program
    2. Provisions and Parameters for the Transitional Reinsurance 
Program
    3. Provisions for the Temporary Risk Corridors Program (Sec.  
153.500)
    F. Part 154--Health Insurance Issuer Rate Increases: Disclosure 
and Review Requirements
    G. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. Subpart B--General Standards Related to the Establishment of 
the Exchange Non-Interference With Federal Law and Non-
Discrimination Standards (Sec.  155.120)
    2. Subpart C--General Functions of an Exchange
    a. Civil Money Penalties for Violations of Applicable Exchange 
Standards by Consumer Assistance Entities in Federally-Facilitated 
Exchanges (Sec.  155.206)

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    b. Navigator, Non-Navigator Assistance Personnel, and Certified 
Application Counselor Program Standards (Sec. Sec.  155.210, 
155.215, and 155.225)
    c. Payment of Premiums (Sec.  155.240)
    d. Privacy and Security of Personally Identifiable Information 
(Sec.  155.260)
    e. Bases and Process for Imposing Civil Money Penalties for 
Provision of False or Fraudulent Information to an Exchange or 
Improper Use or Disclosure of Information (Sec.  155.285)
    3. Subpart D--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exchange Participation and Insurance 
Affordability Programs
    a. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  155.320)
    b. Eligibility Redetermination During a Benefit Year (Sec.  
155.330)
    4. Subpart E--Exchange Functions in the Individual Market: 
Enrollment in Qualified Health Plans
    a. Enrollment of Qualified Individuals in a QHP (Sec.  155.400)
    b. Initial and Annual Open Enrollment Periods (Sec.  155.410)
    c. Special Enrollment Periods (Sec.  155.420)
    d. Termination of Coverage (Sec.  155.430)
    5. Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs
    a. General Eligibility Appeals Requirements (Sec.  155.505)
    b. Dismissals (Sec.  155.530)
    c. Employer Appeals Process (Sec.  155.555)
    6. Subpart G--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exemptions
    a. Required Contribution Percentage
    b. Options for Conducting Eligibility Determinations for 
Exemptions (Sec.  155.625)
    7. Subpart H--Exchange Functions: Small Business Health Options 
Program
    a. Functions of a SHOP (Sec.  155.705)
    b. Enrollment Periods under SHOP (Sec.  155.725)
    c. SHOP Employer and Employee Eligibility Appeals Requirements 
(Sec.  155.740)
    8. Subpart O--Quality Reporting Standards for Exchanges
    a. Quality Rating System (Sec.  155.1400)
    b. Enrollee Satisfaction Survey System (Sec.  155.1405)
    H. Part 156--Health Insurance Issuer Standards under the 
Affordable Care Act, Including Standards Related to Exchanges
    1. Subpart B--Essential Health Benefits Package
    a. Prescription Drug Benefits (Sec.  156.122)
    b. Cost-Sharing Requirements (Sec.  156.130)
    2. Subpart C--General Functions of an Exchange
    a. QHP Issuer Participation Standards (Sec.  156.200)
    b. Enrollment Process for Qualified Individuals (Sec.  156.265)
    3. Subpart G--Minimum Essential Coverage
    a. Other Coverage that Qualifies as Minimum Essential Coverage 
(Sec.  156.602)
    b. Requirements for Recognition as Minimum Essential Coverage 
for Types of Coverage Not Otherwise Designated Minimum Essential 
Coverage in the Statute or This Subpart (Sec.  156.604)
    4. Subpart I--Enforcement Remedies in Federally-Facilitated 
Exchanges
    a. Available Remedies; Scope (Sec.  156.800)
    b. Bases and Process for Imposing Civil Money Penalties in 
Federally-Facilitated Exchanges (Sec.  156.805)
    c. Notice of Non-compliance (Sec.  156.806)
    d. Bases and Process for Decertification of a QHP Offered by an 
Issuer Through a Federally-Facilitated Exchange (Sec.  156.810)
    5. Subpart L--Quality Standards
    a. Establishment of Standards for HHS-Approved Enrollee 
Satisfaction Survey Vendors for Use by QHP Issuers in Exchanges 
(Sec.  156.1105)
    b. Quality Rating System (Sec.  156.1120)
    c. Enrollee Satisfaction Survey (Sec.  156.1125)
    I. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements
    1. Subpart A--Disclosure and Reporting
    a. ICD-10 Conversion Expenses (Sec.  158.150)
    2. Subpart B--Calculating and Providing the Rebate
    a. MLR and Rebate Calculations in States with Merged Individual 
and Small Group Markets (Sec. Sec.  158.211, 158.220, 158.231)
    b. Accounting for Special Circumstances (Sec.  158.221)
    c. Distribution of De Minimis Rebates (Sec.  158.243)
IV. Provisions of Final Regulations
V. Waiver of Delay in Effective Date
VI. Collection of Information Requirements
    A. ICRs Regarding Recertification for Certified Application 
Counselors (Sec.  155.225)
    B. ICRs Regarding Consumer Authorization (Sec. Sec.  155.210 and 
155.215)
    C. ICRs Regarding Enrollee Satisfaction & Marketplace Surveys 
(Sec. Sec.  155.1200, 156.1105, and 156.1125)
    D. ICR Regarding Quality Rating System (Sec.  156.1120)
    E. ICRs Regarding Quality Standards for Exchanges (Sec. Sec.  
155.1400 and 155.1405)
    F. ICR Regarding Medical Loss Ratio Requirements (Sec. Sec.  
158.150, 158.211, 158.220, 158.221, and 158.231)
    G. ICRs Regarding Civil Money Penalties (Sec. Sec.  155.206 and 
155.285)
    H. ICRs Regarding Fixed Indemnity Plans, Minimum Essential 
Coverage, Certifications of Creditable Coverage and HIPAA Opt-Out 
Election Notice, Notice of Discontinuation, Notice of Renewal 
(Sec. Sec.  146.152, 146.180, 147.106, 148.122, 148.220, and 
156.602)
    I. Emergency Clearance: Public Information Collection 
Requirements Submitted to the Office of Management and Budget (OMB)
VII. Regulatory Impact Analysis
    A. Summary
    B. Executive Orders 13563 and 12866
    1. Need for Regulatory Action
    2. Summary of Impacts
    3. Anticipated Benefits, Costs and Transfers
    C. Regulatory Alternatives
    1. Collecting ESS Data at the Product Level Instead of Each 
Product Per Metal Tier
    2. Using Medicaid CAHPS[supreg] As Is Instead of Adding 
Additional and New Questions to the ESS
    3. Collecting QRS Data for Each Product Per Metal Tier Instead 
of at the Product Level
    4. Using the Medicare Advantage (MA) CAHPS[supreg] Instrument 
and Star System
    D. Regulatory Flexibility Act
    E. Unfunded Mandates Reform Act
    F. Federalism
    G. Congressional Review Act
VIII. Regulations Text

Abbreviations

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)
    AV--Actuarial Value
    CAHPS[supreg]--Consumer Assessment of Healthcare Providers and 
Systems
    CFR--Code of Federal Regulations
    CMP--Civil Money Penalty
    CMS--Centers for Medicare & Medicaid Services
    CSR--Cost-Sharing Reductions
    EHB--Essential Health Benefits
    ERISA--Employee Retirement Income Security Act of 1974 (Pub. L. 
93-406)
    ESS--Enrollee Satisfaction Survey
    FFE--Federally-facilitated Exchange
    FF-SHOP--Federally-facilitated Small Business Health Options 
Program
    HCC--Hierarchical Condition Category
    HHS--United States Department of Health and Human Services
    HIPAA--Health Insurance Portability and Accountability Act of 
1996 (Pub. L. 104-191)
    IRS--Internal Revenue Service
    MLR--Medical Loss Ratio
    NAIC--National Association of Insurance Commissioners
    OMB--United States Office of Management and Budget
    OPM--United States Office of Personnel Management
    PHS--Act Public Health Service Act
    PRA--Paperwork Reduction Act of 1995
    QHP--Qualified health plan
    QRS--Quality Rating System
    SHOP--Small Business Health Options Program
    The Code--Internal Revenue Code of 1986

I. Executive Summary

    Since January 1, 2014, qualified individuals and small employers 
have been able to obtain private health insurance through Affordable 
Insurance Exchanges, or ``Exchanges'' (also known as Health Insurance 
Marketplaces, or ``Marketplaces'').\1\ The Exchanges

[[Page 30242]]

provide competitive marketplaces where individuals and small employers 
can compare available private health insurance options on the basis of 
price, quality, and other factors. The Exchanges help enhance 
competition in the health insurance market, improve choice of 
affordable health insurance, and give small businesses the same 
purchasing power as large businesses.
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    \1\ The word ``Exchanges'' refers to both State Exchanges, also 
called State-based Exchanges, and Federally-facilitated Exchanges 
(FFEs). In this final rule, we use the terms ``State Exchange'' or 
``FFE'' when we are referring to a particular type of Exchange. When 
we refer to ``FFEs,'' we are also referring to State Partnership 
Exchanges, which are a form of FFEs.
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    Individuals who enroll in QHPs through individual market Exchanges 
may be eligible to receive premium tax credits to make health insurance 
purchased through an Exchange more affordable and cost-sharing 
reductions (CSRs) that lower out-of-pocket expenses for health care 
services. The premium tax credits, combined with the new insurance 
reforms, have significantly increased the number of individuals with 
health insurance coverage. The premium stabilization programs--risk 
adjustment, reinsurance, and risk corridors--protect against adverse 
selection in the newly enrolled population. These programs, in 
combination with the MLR program and market reforms extending 
guaranteed availability (also known as guaranteed issue) protections, 
prohibiting the use of factors such as health status, medical history, 
gender, and industry of employment to set premium rates, will help to 
ensure that every American has access to high quality, affordable 
health insurance.
    This final rule addresses various requirements applicable to health 
insurance issuers, Exchanges, Navigators, non-Navigator assistance 
personnel, and other entities under the Affordable Care Act. 
Specifically, the rule establishes standards related to product 
discontinuation and renewal, quality reporting, non-discrimination 
standards, minimum certification standards and responsibilities of QHP 
issuers, the Small Business Health Options Program (SHOP), and 
enforcement remedies in Federally-facilitated Exchanges (FFEs). It also 
finalizes: A modification of HHS's allocation of reinsurance 
collections if those collections do not meet our projections; certain 
changes to allowable administrative expenses in the risk corridors 
calculation; modifications to the way we calculate the annual limit on 
cost sharing so that we round this parameter down to the nearest $50 
increment; an approach to indexing the required contribution used to 
determine eligibility for an exemption from the shared responsibility 
payment under section 5000A of the Internal Revenue Code; grounds for 
imposing CMPs on persons who provide false or fraudulent information to 
the Exchange and on persons who improperly use or disclose information; 
updated standards for Exchange consumer assistance programs; standards 
related to the opt-out provisions for self-funded, non-Federal 
governmental plans and related to the individual market provisions 
under the Health Insurance Portability and Accountability Act of 1996 
(HIPAA); amendments to Exchange appeals standards and coverage 
enrollment and termination standards; and time-limited adjustments to 
the standards relating to the MLR program.
    Product Discontinuance and Uniform Modification of Coverage 
Exceptions to Guaranteed Renewability Requirements: Under sections 2702 
and 2703 of the Public Health Service Act (PHS Act), as added by the 
Affordable Care Act, health insurance issuers in the group and 
individual markets must guarantee the availability and renewability of 
coverage unless an exception applies. In this final rule, we establish 
criteria for determining when modifications made by an issuer to the 
health insurance coverage for a product would and would not constitute 
the discontinuation of an existing product and the creation of a new 
product. The same criteria would apply to determine whether the rate 
filing is subject to submission and review under 45 CFR part 154. We 
also direct that issuers use standard consumer notices in a format 
designated by the Secretary when discontinuing or renewing a product in 
the group or individual market. Additionally, we clarify that the 
guaranteed availability and renewability requirements should not be 
construed to supersede other provisions of Federal law in certain 
circumstances.
    Conforming Changes to Individual Market Provisions: Sections 2741 
through 2744 of the PHS Act were added by HIPAA to improve the 
portability and continuity of coverage in the individual health 
insurance market. These provisions are implemented through regulations 
in 45 CFR part 148. In this final rule, we amend the individual market 
provisions in Part 148 to reflect the amendments made by the Affordable 
Care Act. These amendments are for clarity only.
    Fixed Indemnity Insurance in the Individual Market: Consistent with 
previously released guidance, we amend the criteria for fixed indemnity 
insurance to be treated as an excepted benefit in the individual health 
insurance market.\2\ The amendments eliminate the requirement that 
individual fixed indemnity insurance must pay on a per-period basis (as 
opposed to a per-service basis), and require on a prospective basis, 
among other things, that it be sold only to individuals who have other 
health coverage that is minimum essential coverage to be considered an 
excepted benefit.
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    \2\ FAQs about Affordable Care Act Implementation (Part XVIII) 
and Mental Health Parity Implementation, Q11 (January 9, 2014). 
Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/AffordableCareAct_implementation_faqs18.html and http://www.dol.gov/ebsa/faqs/faq-AffordableCareAct18.html.
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    HIPAA Opt-Out for Self-Funded, Non-Federal Governmental Plans: 
Prior to enactment of the Affordable Care Act, sponsors of self-funded, 
non-Federal governmental plans were permitted to elect to exempt those 
plans from (``opt out of'') certain provisions of title XXVII of the 
PHS Act. Consistent with previously released guidance, we finalize 
amendments to the non-Federal governmental plan regulations (45 CFR 
146.180) to reflect the amendments made by the Affordable Care Act to 
these provisions, with clarifications specifying that, in the case of a 
plan sponsor submitting opt-out elections for more than one 
collectively bargained health plan, each such plan must be listed in 
the opt-out election, and in the case of a plan sponsor submitting opt-
out elections for group health plans that are not subject to a 
collective bargaining agreement, the sponsor must submit separate 
election documents for each such plan.\3\
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    \3\ Amendments to the HIPAA opt-out provision (formerly section 
2721(b)(2) of the Public Health Service Act) made by the Affordable 
Care Act (September 21, 2010). Available at: http://www.cms.gov/CCIIO/Resources/Files/Downloads/opt_out_memo.pdf.
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    Essential Health Benefits (EHB) Prescription Drug Coverage: Under 
45 CFR 156.122(c), a plan providing EHB must have procedures in place 
that allow an enrollee to request and gain access to a clinically 
appropriate drug not covered by the plan. In this final rule, we are 
revising paragraph (c) to require that the plan's procedures include an 
expedited process for exigent circumstances that requires the health 
plan to make its coverage determination within no more than 24 hours 
after it receives the request and that requires the health plan to 
provide the drug for the duration of the exigency.
    Premium Stabilization Programs: The Affordable Care Act establishes 
three premium stabilization programs--risk adjustment, reinsurance, and 
risk

[[Page 30243]]

corridors--to protect against adverse selection. The Affordable Care 
Act directs that a permanent risk adjustment program be established in 
each State to mitigate the impacts of possible adverse selection and 
stabilize premiums in the individual and small group markets as and 
after insurance market reforms are implemented. The Affordable Care Act 
also directs that a transitional reinsurance program be established in 
each State to help stabilize premiums by helping to pay the cost of 
treating high-cost enrollees in the individual market from 2014 through 
2016. The Affordable Care Act directs the Secretary to establish and 
administer a temporary risk corridors program. In this final rule, we 
modify and finalize our proposal to allocate contributions collected 
under that program in the event of a shortfall in collections. In that 
event, we will allocate reinsurance contributions first to the 
reinsurance payment pool, and second to administrative expenses and the 
U.S. Treasury. We also finalize the proposal, unchanged, to increase 
the ceiling on allowable administrative costs and the floor on profits 
by 2 percent in the risk corridors calculation to account for 
uncertainty and changes in the market prior to and during benefit year 
2015.
    Exchange Establishment and QHP Issuer Standards: The rule amends 
oversight standards regarding QHP decertification and CMPs. It also 
directs that QHP issuers provide enrollees with an annual notice of 
coverage changes. This rule creates a process for survey vendors to 
appeal an HHS decision not to approve its application to become an 
enrollee satisfaction survey (ESS) vendor, as well as standards for 
revoking HHS-approval of ESS vendors. Finally, it establishes standards 
for the ESS and quality rating system (QRS) related to the display of 
such information by Exchanges and the submission of validated data by 
QHP issuers.
    We align the start of employer election periods in FF-SHOPs for 
plan years beginning in 2015 with the start of open enrollment in the 
corresponding individual market Exchange for the 2015 benefit year and, 
in all SHOPs, eliminate the 30-day minimum time frames for the employer 
and employee annual election periods. We also allow State Insurance 
Commissioners the opportunity to recommend that, in 2015, a SHOP not 
provide employers with the option of selecting a level of coverage as 
described in section 1302(d)(1) of the Affordable Care Act and making 
all QHPs at that level of coverage available to their employees if the 
commissioner can adequately explain that it is his or her expert 
judgment, based on a documented assessment of the full landscape of the 
small group market in his or her State, that not implementing employee 
choice would be in the best interest of small employers and their 
employees and dependents, given the likelihood that implementing 
employee choice would cause issuers to price products and plans higher 
in 2015 due to the issuers' beliefs about adverse selection. We allow 
the opportunity for a person appealing a determination of SHOP 
eligibility to withdraw an appeal by telephone, if the appeals entity 
is capable of accepting telephonic signatures.
    Civil Money Penalties for False Information or Improper Use of 
Information: The final rule specifies the grounds for imposing CMPs on 
persons who provide false or fraudulent information to the Exchange and 
on persons who use or disclose information in violation of section 
1411(g) of the Affordable Care Act. The grounds for imposing a penalty 
include: Negligent failure to provide correct information, knowing and 
willful provision of false or fraudulent information, and knowing and 
willful use or disclosure of information in violation of section 
1411(g). This section specifies the factors used to determine the 
amount of the CMP to be imposed against a person. The section also 
provides for the requirements for notices which must be provided to a 
person if HHS proposes to impose a CMP, and the processes a person may 
follow should the person wish to challenge HHS' determination that a 
CMP should be imposed, including a process pursuant to which a person 
may request a hearing before an administrative law judge. We also amend 
current privacy and security regulations at 45 CFR 155.260 to reference 
the new CMP provisions associated with knowingly and willfully using or 
disclosing information in violation of section 1411(g) of the 
Affordable Care Act.
    Civil Money Penalties for Consumer Assistance Entities: The final 
rule provides that HHS may impose CMPs against Navigators, non-
Navigator assistance personnel, certified application counselor 
designated organizations, and certified application counselors in FFEs, 
if these entities and/or individuals violate Federal requirements 
applicable to their activities.
    Navigator, Non-Navigator Assistance Personnel, and Certified 
Application Counselor Program Standards: In this final rule, we specify 
certain types of State laws applicable to Navigators, non-Navigator 
assistance personnel, and certified application counselors that HHS 
considers to prevent the application of the provisions of title I of 
the Affordable Care Act within the meaning of section 1321(d) of the 
Affordable Care Act. We also make several changes to update the 
standards applicable to these consumer assistance entities and 
individuals, such as prohibiting them from specified marketing or 
solicitation activities. We require Navigators and non-Navigator 
assistance personnel to obtain authorization before accessing a 
consumer's personally identifiable information and to prohibit them 
from charging consumers for their services. We also require that 
certified application counselors be recertified on at least an annual 
basis, and prohibit certified application counselors and certified 
application counselor designated organizations from receiving 
consideration, directly or indirectly, from health insurance issuers or 
stop loss insurance issuers in connection with the enrollment of 
consumers in QHPs or non-QHPs. We further provide that, in specific 
circumstances, certified application counselor designated organizations 
can serve targeted populations without violating the broad non-
discrimination requirement related to Exchange functions.
    Indexing of Cost-Sharing Requirements: Under Sec. Sec.  156.130(a) 
and 156.130(b), the annual limitation on cost sharing and the annual 
limitation on deductibles in the small group market for years after 
2014 are to be indexed by the premium adjustment percentage. We 
established our methodology for calculating the premium adjustment 
percentage in the 2015 Payment Notice. In this final rule, we provide 
for the annual limitation on cost sharing to be updated based on the 
premium adjustment percentage by rounding down to the nearest $50 
increment. We are eliminating the annual limit on deductibles for small 
group plans, consistent with the Protecting Access to Medicare Act of 
2014 (Pub. L. 113-93), which was signed into law on April 1, 2014.
    Required Contribution Percentage: Under section 5000A of the Code, 
an applicable individual must maintain minimum essential coverage for 
each month, qualify for an exemption, or make a shared responsibility 
payment. An individual may qualify for an exemption from the shared 
responsibility payment if the amount that he or she would be required 
to pay towards minimum essential coverage (required contribution) 
exceeds a particular percentage (the required

[[Page 30244]]

contribution percentage) of his or her household income. Under section 
5000A of the Code, the required contribution percentage for 2014 is 8 
percent, and for each plan year beginning in a calendar year after 
2014, the percentage, as determined by the Secretary of Health and 
Human Services (the Secretary), that reflects the excess of the rate of 
premium growth between the preceding calendar year and 2013 over the 
rate of income growth for the same period. In the preamble to this 
final rule, we establish a methodology for determining the percentage 
reflecting the excess of the rate of premium growth over the rate of 
income growth for plan years after 2014. We also establish a required 
contribution percentage for 2015 of 8.05 percent. For calendar years 
after 2015, the required contribution percentage will be published in 
the annual HHS notice of benefit and payment parameters.
    Eligibility Appeals: The rule amends standards related to 
eligibility appeals provisions in subparts F and H of Part 155. To 
facilitate the efficient conclusion of an appeal at the request of the 
appellant, we amend the withdrawal procedure to permit withdrawals made 
via telephonic signature.
    Minimum Essential Coverage: We clarify that entities other than 
plan sponsors (for example, issuers) can apply for their coverage to be 
recognized as minimum essential coverage, pursuant to the process 
outlined in 45 CFR 156.604 and guidance thereunder.
    Medical Loss Ratio: The MLR program created pursuant to the 
Affordable Care Act generally requires issuers to rebate a portion of 
premiums if their MLR fails to meet the applicable MLR standard in a 
State and market for the applicable reporting year. An issuer's MLR is 
the ratio of claims plus quality improvement activities to premium 
revenue, with the premium adjusted by the amounts paid for taxes, 
licensing and regulatory fees, and the premium stabilization programs. 
On December 1, 2010, we published an interim final rule entitled 
``Health Insurance Issuers Implementing Medical Loss Ratio (MLR) 
Requirements under the Patient Protection and Affordable Care Act'' (75 
FR 74864), which established standards for the MLR program. Since then, 
we have made several revisions and technical corrections to those 
rules. In this final rule, we modify the timeframe for which issuers 
can include their ICD-10 conversion costs in their MLR calculation. We 
also modify the regulation to clarify how issuers would calculate MLRs 
and rebates in States that require the individual and small group 
markets to be merged. We note that the standards for ICD-10 conversion 
costs and merged markets also apply to the risk corridors program. 
Further, we modify the regulation to account for the special 
circumstances of the issuers affected by the HHS transitional policy 
and the issuers impacted by systems challenges during the 
implementation of the Exchanges.

II. Background

A. Legislative Overview

    The Patient Protection and Affordable Care Act (Pub. L. 111-148) 
was enacted on March 23, 2010. The Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised 
several provisions of the Patient Protection and Affordable Care Act, 
was enacted on March 30, 2010. In this final rule, we refer to the two 
statutes collectively as the ``Affordable Care Act.''
    The Affordable Care Act reorganizes, amends, and adds to the 
provisions of title XXVII of the PHS Act relating to group health plans 
and health insurance issuers in the group and individual markets.
    Section 1201 of the Affordable Care Act added sections 2702 and 
2703 of the PHS Act. Section 2702 of the PHS Act generally requires an 
issuer that offers health insurance coverage in the individual or group 
market in a State to offer coverage to and accept every individual or 
employer in the State that applies for such coverage. Section 2703 of 
the PHS Act generally requires an issuer to renew or continue in force 
coverage in the group or individual market at the option of the plan 
sponsor or the individual.
    Prior to enactment of the Affordable Care Act, HIPAA amended the 
PHS Act to improve access to individual health insurance coverage for 
certain eligible individuals who previously had group coverage, and to 
guarantee the renewability of all coverage in the individual market. 
These reforms were added as sections 2741 through 2744 of the PHS Act.
    HIPAA also added PHS Act provisions permitting sponsors of self-
funded, non-Federal governmental plans to elect to exempt those plans 
from (``opt out of'') certain provisions of title XXVII of the PHS Act. 
This election was authorized under section 2721(b)(2) of the PHS Act, 
which is now designated as section 2722(a)(2) of the PHS Act by the 
Affordable Care Act.
    Section 2718 of the PHS Act, as added by the Affordable Care Act, 
generally requires health insurance issuers to submit an annual MLR 
report to HHS and provide rebates to consumers if they do not achieve 
specified MLRs.
    Sections 2722 and 2763 of the PHS Act, as implemented in 45 CFR 
146.145(b) and 148.220, provide that the requirements of parts A and B 
of title XXVII of the PHS Act shall not apply to any individual 
coverage or any group health plan (or group health insurance coverage) 
in relation to its provision of excepted benefits. Excepted benefits 
are described in section 2791(c) of the PHS Act. One category of 
excepted benefits, called ``noncoordinated excepted benefits,'' 
includes coverage for only a specified disease or illness, and hospital 
indemnity or other fixed indemnity insurance. Benefits in this category 
are excepted only if they meet certain conditions specified in the 
statute and regulations.
    Section 1302(b) requires the Secretary to define EHB, including 
prescription drugs.
    Section 1302(c) of the Affordable Care Act establishes an annual 
limitation on cost sharing for 2014, and provides that this limitation 
is to be increased for each year after 2014 by the percentage by which 
the average per capita premium for health insurance coverage in the 
United States for the preceding year exceeds the average per capita 
premium for 2013. Under section 1302(c), this limitation is to be 
rounded to the next lowest multiple of $50.
    Section 1311(b) of the Affordable Care Act provides that each State 
has the opportunity to establish an Exchange that: (1) Facilitates the 
purchase of insurance coverage by qualified individuals through QHPs; 
(2) provides for the establishment of a SHOP designed to assist 
qualified employers in the enrollment of their qualified employees in 
QHPs; and (3) meets other requirements specified in the Affordable Care 
Act.
    Section 1311(c)(3) of the Affordable Care Act requires the 
Secretary to develop a rating system to rate QHPs offered through an 
Exchange on the basis of quality and price. Section 1311(c)(4) of the 
Affordable Care Act directs the Secretary to establish an ESS system 
that would evaluate the level of enrollee satisfaction of members in 
QHPs offered through an Exchange, for each QHP with more than 500 
enrollees in the previous year. Sections 1311(c)(3) and 1311(c)(4) of 
the Affordable Care Act further require an Exchange to provide 
information to individuals and employers from the rating and ESS 
systems on the Exchange's Web site. We have already promulgated 
regulations in 45 CFR 155.200(d) that direct Exchanges to oversee 
implementation of ESSs and ratings of health care quality and

[[Page 30245]]

outcomes, and 45 CFR 156.200(b)(5) \4\ that directs QHP issuers that 
participate in Exchanges to report health care quality and outcomes 
information and to implement an ESS consistent with the Affordable Care 
Act.
---------------------------------------------------------------------------

    \4\ Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans; Exchange Standards for 
Employers; Final Rule, 77 FR 18310 (Mar. 27, 2012) (to be codified 
at 45 CFR parts 155, 156, & 157).
---------------------------------------------------------------------------

    Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Act 
direct all Exchanges to establish a Navigator program.
    Section 1312(a)(2) of the Affordable Care Act provides that a 
qualified employer may provide support for coverage of employees under 
a QHP by selecting any level of coverage under section 1302(d) to be 
made available to employees through a SHOP. Section 1312(a)(2) further 
provides that employees of an employer who makes such an election may 
choose to enroll in a QHP that offers coverage at that level.
    Section 1321(a) of the Affordable Care Act provides authority for 
the Secretary to establish standards and regulations to implement the 
statutory requirements related to Exchanges, QHPs and other components 
of title I of the Affordable Care Act. Section 1321(a)(1) directs the 
Secretary to issue regulations that set standards for meeting the 
requirements of title I of the Affordable Care Act with respect to, 
among other things, the establishment and operation of Exchanges. 
Section 1321(a)(2) requires the Secretary to engage in consultation to 
ensure balanced representation among interested parties.
    Section 1321 of the Affordable Care Act provides for State 
flexibility in the operation and enforcement of Exchanges and related 
requirements. Section 1321(d) provides that nothing in title I of the 
Affordable Care Act shall be construed to preempt any State law that 
does not prevent the application of title I of the Affordable Care Act. 
Section 1311(k) specifies that Exchanges may not establish rules that 
conflict with or prevent the application of regulations promulgated by 
the Secretary.
    Section 1321(c)(1) requires the Secretary of HHS (referred to 
throughout this rule as the Secretary) to establish and operate an FFE 
within States that either: (1) Did not elect to establish an Exchange; 
or (2) as determined by the Secretary, did not have any required 
Exchange operational by January 1, 2014.
    Section 1321(c)(2) of the Affordable Care Act provides that the 
provisions of section 2723(b) of the PHS Act \5\ shall apply to the 
enforcement under section 1321(c)(1) of requirements of section 
1321(a)(1), without regard to any limitation on the application of 
those provisions to group health plans. Section 2723(b) of the PHS Act 
authorizes the Secretary to impose CMPs as a means of enforcing the 
individual and group market reforms contained in Part A of title XXVII 
of the PHS Act when, in the Secretary's determination, a State fails to 
substantially enforce these provisions.
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    \5\ Section 1321(c) of the Affordable Care Act erroneously cites 
to section 2736(b) of the PHS Act instead of 2723(b) of the PHS Act. 
This was clearly a typographical error, and we have interpreted 
section 1321(c) of the Affordable Care Act to incorporate section 
2723(b) of the PHS Act.
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    Section 1341 of the Affordable Care Act requires the establishment 
of a transitional reinsurance program in each State to help pay the 
cost of treating high-cost enrollees in the individual market from 2014 
through 2016. Section 1342 of the Affordable Care Act directs the 
Secretary to establish a temporary risk corridors program that provides 
for the sharing in gains or losses resulting from inaccurate rate 
setting from 2014 through 2016 between the Federal government and 
certain participating health plans. Section 1343 of the Affordable Care 
Act establishes a permanent risk adjustment program that provides for 
payments to health insurance issuers that attract higher-risk 
populations, such as those with chronic conditions, and charges issuers 
that attract lower-risk populations thereby reducing incentives for 
issuers to avoid higher-risk enrollees.
    Section 1411(f)(1) of the Affordable Care Act provides that the 
Secretary, in consultation with the Secretary of the Treasury, the 
Secretary of Homeland Security, and the Commissioner of Social 
Security, shall establish procedures by which the Secretary or one of 
such other Federal officers hears and makes decisions with respect to 
appeals of any determination under subsection (e) and redetermines 
eligibility on a periodic basis in appropriate circumstances. Section 
1411(f)(2) of the Affordable Care Act provides that the Secretary shall 
establish a separate appeals process for employers who are notified 
under section 1411(e)(4)(C) of the Affordable Care Act that the 
employer may be liable for a tax imposed by section 4980H of the 
Internal Revenue Code of 1986 (the Code) with respect to an employee 
because of a determination that the employer does not provide minimum 
essential coverage through an employer-sponsored plan or that the 
employer does provide that coverage but it is not affordable coverage 
with respect to an employee.
    Section 1411(h) of the Affordable Care Act sets forth CMPs to which 
any person may be subject if that person provides inaccurate 
information as part of an Exchange application or improperly uses or 
discloses an applicant's information.
    Section 1501(b) of the Affordable Care Act added section 5000A to 
the Code. That section, as amended by the TRICARE Affirmation Act of 
2010 (Pub. L. 111-159, 124 Stat. 1123) and Public Law 111-173 (124 
Stat. 1215), requires nonexempt individuals to either maintain minimum 
essential coverage or make a shared responsibility payment for each 
month beginning in 2014. It also describes categories of individuals 
who may qualify for an exemption from the individual shared 
responsibility payment. Section 1311(d)(4)(H) of the Affordable Care 
Act specifies that the Exchange will, subject to section 1411 of the 
Affordable Care Act, grant certifications of exemption from the 
individual shared responsibility payment specified in section 5000A of 
the Code. Standards relating to these provisions were established in 
IRS regulations titled, ``Shared Responsibility Payment for Not 
Maintaining Minimum Essential Coverage Final Rule,'' published in the 
August 30, 2013 Federal Register (78 FR 53646) and HHS regulations 
titled, ``Exchange Functions: Eligibility for Exemptions; Miscellaneous 
Minimum Essential Coverage Provisions Final Rule,'' published in the 
July 1, 2013 Federal Register (78 FR 39494).

B. Stakeholder Consultation and Input

    HHS has consulted with stakeholders on policies related to the 
operation of Exchanges, including the SHOP and the premium 
stabilization programs. HHS has held a number of listening sessions 
with consumers, providers, employers, health plans, the actuarial 
community, and State representatives to gather public input. HHS 
consulted with stakeholders through regular meetings with the National 
Association of Insurance Commissioners (NAIC), regular contact with 
States through the Exchange Establishment grant and Exchange Blueprint 
approval processes, technical health care quality measurement experts, 
health care survey development experts, and meetings with Tribal 
leaders and representatives, health insurance issuers, trade groups, 
consumer advocates, employers, and other interested parties. In 
addition, HHS received public comment on various notices published in 
the Federal

[[Page 30246]]

Register relating to health care quality in the Exchanges,\6\ enrollee 
experience measures and domains,\7\ and the QRS, which provided 
valuable feedback on quality reporting and quality rating 
requirements.\8\ We considered all of the public input as we developed 
the policies in this final rule.
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    \6\ Request for Information Regarding Health Care Quality for 
Exchanges: http://www.gpo.gov/fdsys/pkg/FR-2012-11-27/pdf/2012-28473.pdf.
    \7\ Request for Domains, Instruments, and Measures for 
Development of a Standardized Instrument for Use in Public Reporting 
of Enrollee Satisfaction With Their Qualified Health Plan and 
Exchange: http://www.gpo.gov/fdsys/pkg/FR-2012-06-21/html/2012-15162.htm.
    \8\ Patient Protection and Affordable Care Act; Exchanges and 
Qualified Health Plans, Quality Rating System (QRS) Framework, 
Measures and Methodology; Notice with Comment, 78 FR 69418 (Nov. 19, 
2013).
---------------------------------------------------------------------------

C. Structure of Final Rule

    The regulations outlined in this final rule will be codified in 45 
CFR parts 144, 146, 147, 148, 153, 154, 155, 156, and 158. Part 144 
outlines requirements relating to health insurance coverage. Part 146 
outlines the group health insurance market requirements of the PHS Act 
added by HIPAA and other statutes, including opt-out provisions for 
sponsors of self-funded, non-Federal governmental plans. Part 147 
outlines health insurance reform requirements for the group and 
individual markets added by the Affordable Care Act, including 
standards related to guaranteed availability and guaranteed 
renewability of coverage. Part 148 outlines the individual health 
insurance market requirements of the PHS Act added by HIPAA and other 
statutes, including standards related to guaranteed availability with 
respect to certain eligible individuals and guaranteed renewability for 
all individuals. Part 153 outlines standards related to the reinsurance 
and risk corridors programs. Part 154 outlines standards related to the 
disclosure and review of rate increases. Part 155 outlines standards 
related to the operations and functions of an Exchange, including 
standards related to non-discrimination, accessibility, and enforcement 
remedies; standards applicable to the consumer assistance functions 
performed by Navigators, non-Navigator assistance personnel, and 
certified application counselors; standards related to eligibility 
appeals; standards related to exemptions; standards related to quality 
reporting; and standards related to SHOP. Part 156 outlines health 
insurance issuer responsibilities, including EHB prescription drug 
standards; the methodology for calculating the annual limit on cost-
sharing for years after 2014; minimum certification standards; 
standards for recognition of certain types of coverage as minimum 
essential coverage; quality standards for QHPs; and other QHP issuer 
responsibilities. Part 158 outlines standards related to the MLR 
program, including standards related to treatment of ICD-10 conversion 
costs, standards related to adjustments for issuers affected by the HHS 
transitional policy and issuers that incurred costs due to the 
technical issues during the implementation of the Exchanges, and 
standards related to MLR reporting and rebate calculations in States 
with merged individual and small group markets.

III. Provisions of the Proposed Regulations and Analysis and Responses 
to Public Comments

    The proposed rule titled, ``Patient Protection and Affordable Care 
Act; Exchange and Insurance Market Standards for 2015 and Beyond,'' was 
published in the Federal Register on March 21, 2014 (79 FR 15808), with 
comment period ending April 21, 2014 (referred to in this preamble as 
the ``proposed rule''). In total, we received approximately 220 
comments on the proposed rule. Comments represented a wide variety of 
stakeholders, including but not limited to States, tribes, tribal 
organizations, health plans, consumer groups, employer groups, 
healthcare providers, industry experts, and members of the public.
    Some comments were general public comments on the Affordable Care 
Act and the government's role in health care, but not specific to the 
proposed rule. We have not addressed such comments, and others that are 
not directly related to the proposed rule, because they are outside the 
scope of this final rule.
    In this final rule, we provide a summary of each proposed 
provision, a summary of and responses to the public comments received, 
and the provisions we are finalizing.
    Comment: Some commenters were concerned that the 30-day comment 
period did not provided sufficient opportunity for public review and 
comment on the proposed rule. One commenter stated that the proposed 
rule included many distinct policy issues, each of which should be 
addressed in separate rulemaking.
    Response: HHS provided a 30-day comment period, which is consistent 
with the Administrative Procedure Act and the policy established by the 
Assistant Secretary for Administration (ASA) and the Office of 
Management and Budget (OMB). Additionally, HHS discussed nearly all of 
the proposed policies in the preamble to the HHS Notice of Benefit and 
Payment Parameters for 2015 final rule published on March 11, 2014 (79 
FR 13744).\9\ HHS believes that interested stakeholders had adequate 
opportunity to provide comment on the policies established in this 
final rule.
---------------------------------------------------------------------------

    \9\ Patient Protection and Affordable Care Act; HHS Notice of 
Benefit and Payment Parameters for 2015, 79 FR 13744 (March 11, 
2014).
---------------------------------------------------------------------------

A. Part 144--Requirements Relating to Health Insurance Coverage

Definitions of Product and Plan (Sec.  144.103)
    See the discussion in section III.C.1.b, ``Product Discontinuance 
and Uniform Modification of Coverage Exceptions to Guaranteed 
Renewability Requirements.''

B. Part 146--Requirements for the Group Health Insurance Market

1. HIPAA Opt-Out Provisions for Plan Sponsors of Self-Funded, Non-
Federal Governmental Plans (Sec.  146.180)
    We proposed to codify the requirement that self-funded, non-Federal 
governmental plans may no longer elect to be exempt from (``opt out 
of'') requirements of title XXVII of the PHS Act related to limitations 
on preexisting condition exclusion periods; requirements for special 
enrollment periods; and prohibitions on health status discrimination. 
Self-funded, non-Federal governmental plans may, however, continue to 
opt-out of requirements related to benefits for newborns and mothers; 
parity in mental health and substance use disorder benefits; required 
coverage for reconstructive surgery following mastectomies; and 
coverage of dependent students on a medically necessary leave of 
absence.
    We also proposed to streamline the submission process by requiring 
that opt-out elections be submitted electronically in a format 
specified by the Secretary in guidance. We solicited comment on these 
proposals, including ways to improve the electronic submission process.
    The proposed rule provided a special effective date for self-
funded, non-Federal governmental plans maintained pursuant to a 
collective bargaining agreement ratified before March 23, 2010 (the 
date of enactment of the Affordable Care Act) that had opted out of the 
requirement categories which are no longer available for exemption. 
These collectively bargained plans may continue to be exempt from the

[[Page 30247]]

requirements until the first plan year following the expiration of such 
agreement.
    The effect of the Affordable Care Act amendments on the HIPAA opt-
out provisions was discussed in previous CMS guidance released on 
September 21, 2010.\10\
---------------------------------------------------------------------------

    \10\ Amendments to the HIPAA opt-out provision (formerly section 
2721(b)(2) of the Public Health Service Act) made by the Affordable 
Care Act (September 21, 2010). Available at: http://www.cms.gov/CCIIO/Resources/Files/Downloads/opt_out_memo.pdf.
---------------------------------------------------------------------------

    We noted that under the current regulations, plan sponsors of 
collectively bargained plans may submit one opt-out election for all 
group health plans subject to the same collective bargaining agreement. 
We solicited comment on whether the plan sponsor in such circumstances 
should be required to list all plans subject to the agreement. We also 
solicited comment on whether a single opt-out submission should be 
permitted in the case of multiple group health plans not subject to 
collective bargaining.
    Comment: One commenter supported a requirement that plan sponsors 
of collectively bargained plans must list in their opt-out election all 
group health plans subject to the collective bargaining agreement.
    Response: We establish this requirement in new paragraph (b)(1)(ix) 
of Sec.  146.180. Sponsors of group health plans not subject to 
collective bargaining will continue to be required to file a separate 
election for each group health plan.
    We solicited comments on whether the regulation should be modified 
to allow plan sponsors of multiple group health plans not subject to 
collective bargaining to submit one election for all of its group 
health plans. We did not receive any comments on this issue; 
accordingly, we are adding regulation text to clarify the current 
requirement that a separate election must be filed for each group 
health plan not subject to collective bargaining.
    We will continue to accept opt-out elections via U.S. Mail or 
facsimile until December 31, 2014. During this time, opt-out elections 
will continue to be accepted by mail to: Centers for Medicare & 
Medicaid Services (CMS), Center for Consumer Information and Insurance 
Oversight (CCIIO), Attn: HIPAA Opt-Out, 200 Independence Avenue SW., 
Room 733H-02, Washington, DC 20201. Elections may also continue to be 
submitted via facsimile at 301-492-4462. For elections submitted via 
U.S. mail, CMS will continue to use the postmark on the envelope in 
which the election is submitted to determine that the election is 
timely filed. If the latest filing date falls on a Saturday, Sunday, or 
a State or Federal holiday, CMS accepts a postmark or a fax on the next 
business day. Questions regarding the opt-out process can be submitted 
to CMS at [email protected]. CMS's Center for Consumer 
Information and Insurance Oversight makes publicly available on its Web 
site a list of self-funded, non-Federal governmental plans that have 
submitted an opt-out election and the PHS Act provisions subject to the 
election.\11\
---------------------------------------------------------------------------

    \11\ See List of HIPAA Opt-Out Elections for Self-Funded Non-
Federal Governmental Plans. Available at: http://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/hipaa-optout-nfgp-list-05-06-2014.pdf.
---------------------------------------------------------------------------

Summary of Regulatory Changes
    We are finalizing the revisions proposed in Sec.  146.180 of the 
proposed rule, with the following modifications. In paragraph (b), we 
add paragraph (b)(1)(ix) to state that, in the case of plan sponsor 
submitting one opt-out election for multiple group health plans subject 
to the same collective bargaining agreement, the opt-out election must 
list each group health plan subject to the agreement. Also in paragraph 
(b), we add paragraph (b)(1)(x) to state that, in the case of a plan 
sponsor submitting more than one opt-out election for plans that are 
not collectively bargained, a separate opt-out election must be 
submitted for each such plan. In paragraph (c)(3), we delete the 
special rule for timely filing with respect to opt out elections 
submitted by U.S. mail, and instead specify a special rule for timely 
filing that applies to electronic filings. The special rule indicates 
that, if the latest filing date falls on a Saturday, Sunday, or a State 
or Federal holiday, CMS accepts filings submitted the next business 
day.

C. Part 147--Health Insurance Reform Requirements for the Group and 
Individual Health Insurance Markets

Guaranteed Availability and Guaranteed Renewability of Coverage 
(Sec. Sec.  147.104 and 147.106)
a. No Effect on Other Laws
    We proposed that nothing in the guaranteed availability 
requirements should be construed to require an issuer to offer coverage 
where other Federal laws operate to prohibit the issuance of such 
coverage. Similarly, we proposed that nothing in the guaranteed 
renewability requirements should be construed to require an issuer to 
renew or continue in force coverage for which continued eligibility 
would otherwise be prohibited under applicable Federal law. We offered 
several examples of statutory exceptions to the guaranteed availability 
and renewability requirements in the preamble to the proposed rule (78 
FR 15815-6), and noted that only Federal law, not State law, can create 
such exceptions. We solicited comment on these clarifications, as well 
as other clarifications that may be helpful.
    Additionally, we proposed a technical correction in Sec.  
147.104(b)(1)(i) to delete duplicate regulatory text added in earlier 
rulemaking.\12\ We also proposed other minor regulatory revisions in 
paragraph (b)(1)(i) for clarity.
---------------------------------------------------------------------------

    \12\ Patient Protection and Affordable Care Act; Maximizing 
January 1, 2014 Coverage Opportunities, 78 FR 76212 (December 17, 
2013).
---------------------------------------------------------------------------

    Comment: Some commenters recommended the final rule enumerate all 
current Federal prohibitions on the sale of health insurance coverage 
that would create exceptions to the guaranteed availability and 
renewability requirements.
    Response: We believe it is neither appropriate nor practical to 
outline every specific exception to the guaranteed availability and 
renewability requirements and that a general rule of construction 
provides sufficient guidance to stakeholders.
    Comment: One commenter sought clarification on situations where 
issuers offering coverage through an Exchange can sell coverage to 
individuals who are enrolled in Medicare and recommended that HHS add 
additional questions within the eligibility application to prevent 
individuals from receiving advance payments of the premium tax credit 
(APTC) who are also enrolled in Medicare.
    Response: Section 1882(d)(3) of the Social Security Act (the 
``Medicare anti-duplication provision'') prohibits the sale of an 
individual market insurance policy that duplicates Medicare benefits to 
anyone known to be entitled to benefits under Part A (receiving free 
Part A) or enrolled in Part B or Premium Part A. This prohibition 
applies to individual health insurance coverage sold both through and 
outside an Exchange. This final rule clarifies that this prohibition 
creates an exception to the guaranteed availability provision where the 
prohibition would be violated by a sale.
    While the Medicare anti-duplication provision prohibits the sale or 
issuance of a policy, it does not provide for discontinuance or non-
renewal of a policy already issued, such as when an individual covered 
by an individual market policy becomes covered by

[[Page 30248]]

Medicare. As stated in the individual market regulations at 45 CFR 
148.122(b)(2), implementing the HIPAA guaranteed renewability 
provision, Medicare eligibility or entitlement is not a basis for non-
renewal or termination of individual health insurance coverage. For 
ease of reference we are adding Sec.  147.106(g)(2) of this final rule, 
which repeats the regulatory language in Sec.  148.122(b)(2). We note, 
however, that nothing in the Medicare anti-duplication provision or the 
guaranteed availability or renewability regulations prohibits an issuer 
from coordinating benefits under an individual health insurance policy 
with Medicare benefits in the case of a beneficiary. HHS will consider 
including questions in the FFE enrollment application to address this 
issue.

Summary of Regulatory Changes

    We are finalizing the proposed provisions with the following 
modification. We add Sec.  147.106(g)(2) to restate the standard under 
the HIPAA guaranteed renewability regulations at Sec.  148.122(b)(2) 
that Medicare eligibility or entitlement is not a basis for non-renewal 
or termination of an individual's health insurance coverage in the 
individual market.
b. Product Discontinuance and Uniform Modification of Coverage 
Exceptions to Guaranteed Renewability Requirements
    We proposed standards to define whether certain modifications to 
coverage constitute ``uniform modifications'' within the meaning of the 
PHS Act. These provisions were proposed in the guaranteed renewability 
regulations at 45 CFR 146.152, 147.106, and 148.122. Under the proposed 
rule, they would apply to issuers offering health insurance coverage in 
the group and individual markets, including both grandfathered and non-
grandfathered health plans.
    Specifically, we proposed that a modification made by an issuer 
solely pursuant to applicable Federal or State law would be considered 
a modification of the same product, and offered several examples of 
changes in response to Federal law that would constitute a modification 
of coverage.
    We further proposed that if an issuer makes changes to the health 
insurance coverage for a product that are not pursuant to applicable 
Federal or State law, the modifications would also be considered a 
uniform modification of coverage if the resulting product meets all of 
the following criteria:
     The product is offered by the same health insurance issuer 
(within the meaning of section 2791(b)(2) of the PHS Act);
     The product is offered as the same product type (for 
example, preferred provider organization (PPO) or health maintenance 
organization (HMO));
     The product covers a majority of the same counties in its 
service area;
     The product has the same cost-sharing structure, except 
for variation in cost sharing solely related to changes in cost and 
utilization of medical care, or to maintain the same level of coverage 
described in sections 1302(d) and (e) of the Affordable Care Act (for 
example, bronze, silver, gold, platinum or catastrophic); and
     The product provides the same covered benefits, except for 
changes in benefits that cumulatively impact the rate for the product 
by no more than 2 percent (not including changes required by applicable 
Federal or State law).

These proposed criteria were intended to provide flexibility for 
issuers to make reasonable adjustments to coverage, while ensuring 
predictability and continuity for consumers and minimizing unnecessary 
terminations of coverage.
    We proposed that States have flexibility to apply additional 
criteria that broaden the scope of what is considered a uniform 
modification, but that narrower State standards would be preempted.
    We also proposed to add a provision in Sec.  147.106(e)(1) to 
restate the uniform modification of coverage provision for individual 
health insurance coverage under Sec.  148.122(g). This was proposed for 
ease of reference and to facilitate issuer compliance.
    To provide clear information to consumers and help ensure they 
understand the changes and choices available to them in the individual 
and group markets, we proposed that issuers provide standard notices in 
a form and manner prescribed by the Secretary when discontinuing or 
renewing coverage. Contemporaneously with the proposed rule, we 
released draft standard notices that issuers would be required to use 
in each of these situations, and requested public comment.\13\ In the 
standard notices guidance, we noted that States would have the option 
of developing State-required notices for issuers to use in place of the 
Federal notices, if approved by CMS. State notices approved for use 
could not be modified in any way by the issuer.
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    \13\ Standard Notices When Discontinuing or Renewing a 
Particular Product in the Group or Individual Market (March 14, 
2014). Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/draft-discontinuance-renewal-notices-03-14-14.pdf.
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    Finally, we stated that HHS or the applicable State will review 
rate increases for existing products that an issuer withdrew and 
attempted to re-file within a 12-month period as new products in order 
to avoid rate review as if they were simply renewed, if the changes to 
the discontinued product do not differ from the uniform modification 
criteria outlined above. We indicated that the same criteria set forth 
under the guaranteed renewability standards will be used to determine 
whether the re-filed product is considered to be the same ``product'' 
for purposes of determining whether the rate filing is subject to 
submission and review under 45 CFR Part 154. We requested comment on 
whether this clarification, or a reference to the uniform modification 
criteria, should be incorporated into the rate review regulations.
    Comment: Some commenters recommended the proposed uniform 
modification of coverage provisions and standard notice requirements 
not apply in the large group market. They noted that large employers 
are sophisticated purchasers that typically negotiate customized 
products for their employees and that will receive little value from 
these protections. One commenter recommended the requirements not apply 
to grandfathered health plans, noting that grandfathered plans are 
already, as part of the requirements related to maintaining 
grandfathered status, subject to restrictions on benefit changes that 
make the proposed provisions unnecessary.
    Response: We recognize that purchasers in the large group market 
have greater leverage than those in the individual and small group 
markets. The guaranteed renewability statute contemplates these market 
differences by placing the requirement that modifications must be 
``consistent with State law and effective on a uniform basis'' only on 
products in the individual and small group markets, but not on products 
in the large group market.\14\ For these reasons, we do not believe 
that the same interpretation, providing additional protection of 
renewability, is necessary in the large

[[Page 30249]]

group market and are finalizing the regulation to apply only to 
coverage in the individual and small group markets.
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    \14\ The PHS Act guaranteed renewability sections enacted under 
HIPAA, section 2712 for the group market and 2742 for the individual 
market, both include exceptions for uniform modifications of 
coverage. We recognize that PHS Act section 2703 excludes reference 
in some paragraphs to the individual market. However, we note that 
the provisions of PHS Act section 2742 still apply, and we believe 
that the uniform modification exception is still applicable in the 
individual market.
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    We also note that, based on the statutory language requiring the 
changes to be ``effective on a uniform basis,'' we are adding 
regulation text explicitly stating that the interpretation of uniform 
modification provided for in this rule also requires that the 
modifications be made uniformly.
    Because the guaranteed renewability statutes applicable to 
grandfathered individual market policies and group health insurance 
plans, PHS Act sections 2742 and 2712, respectively, use the same terms 
as the statute enacted under the Affordable Care Act at PHS Act section 
2703, we decline to interpret the requirements differently for 
grandfathered plans. We note that in proposing to amend Sec.  146.152, 
we unintentionally proposed to replace paragraph (g) with the new 
paragraph regarding notice of renewal of coverage, rather than adding a 
new paragraph (h). In this final rule, we correctly add the new 
paragraph as paragraph (h). Similarly, we note that in proposing to 
amend Sec.  148.122, we unintentionally proposed to replace paragraph 
(h) with the new paragraph regarding notice of renewal of coverage, 
rather than adding a new paragraph (i). In this final rule, we 
correctly add the new paragraph as paragraph (i).
    Comment: The proposed rule provided that coverage modifications 
made ``solely pursuant to applicable Federal or State law'' would be 
considered a uniform modification of coverage. Some commenters 
requested clarification that references to Federal or State law also 
include Federal or State regulations or guidance. Another commenter 
urged HHS to allow issuers to increase out-of-pocket maximums based on 
annual index adjustments to the annual limitation on cost sharing 
without triggering a product discontinuance.
    Response: The regulation text of the proposed rule specified that 
modifications made ``solely pursuant to applicable Federal or State 
law'' would be considered uniform modifications of coverage. We did not 
intend the word ``law'' to limit the scope of this provision to 
statutory requirements. Therefore, we are modifying the regulation text 
to explicitly state that, for coverage modifications to meet this 
standard, they must be made ``solely pursuant to applicable Federal or 
State requirements.'' Such requirements could be based on statutes, 
rules, regulations and any other applicable authority imposing binding 
requirements on issuers.
    In response to the comment addressing the example we provided in 
the proposed rule of what would be considered ``solely pursuant to 
applicable Federal or State law,'' we also are adding language 
providing more detail on what constitutes a modification ``made solely 
pursuant to applicable Federal and State requirements.'' Specifically, 
the modification must be made within a reasonable time period after a 
Federal or State requirement is imposed or modified, and it must also 
be directly related to the imposition or modification of a Federal or 
State requirement. For example, if State legislation newly requires a 
minimum level of benefits (for example, imposing a new minimum visit 
limit on specific benefits) reducing covered benefits to meet the 
minimum requirement would not be directly related to the new 
requirement because the lesser coverage of the benefit coverage was 
previously permissible, and the modification did not have to be made in 
order for the issuer to comply with the State law. Accordingly, the 
modification would not be considered to have been ``made solely 
pursuant to'' the new requirement. Such a modification would have to 
meet the other criteria in the final rule to be considered a uniform 
modification of coverage.
    Comment: We received comments that requested clarification about 
whether and how the guaranteed renewability provisions apply to stand-
alone dental plans (SADPs).
    Response: Pursuant to Sec.  146.145(b)(3) and Sec.  148.220(b)(1), 
if an SADP is provided under a separate policy, certificate, or 
contract of insurance or is otherwise not an integral part of a group 
health plan, it would constitute excepted benefits and, therefore, 
generally would not be subject to the requirements of the PHS Act, 
including the guaranteed renewability requirements.
    However, in the 2015 Letter to Issuers in the Federally-facilitated 
Marketplaces (2015 Letter to Issuers),\15\ we indicated that we will 
apply the guaranteed renewability standards to determine whether a plan 
offered in 2014 is the same plan for purposes of recertifying the plan 
for sale in 2015 through the Federally-facilitated Exchange, and that 
this standard would also apply to the determination of whether SADPs 
are being renewed for purposes of recertification. This does not in any 
way change the status of SADPs as excepted benefits. We are merely 
using the uniform modification standard for the purpose of identifying 
SADPs that can be recertified and renewed, rather than certified as 
different plans from those that were Exchange-certified in 2014.
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    \15\ 2015 Letter to Issuers in the Federally-facilitated 
Marketplaces (March 14, 2014), available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2015-final-issuer-letter-3-14-2014.pdf.
---------------------------------------------------------------------------

    In the 2015 Payment Notice, we established the national annual 
limit on cost sharing for the pediatric dental EHB when offered through 
an SADP of $350 for one covered child and $700 for two or more covered 
children. We acknowledge that, given the change to the annual limit on 
cost sharing, SADP issuers may need to modify the cost sharing of their 
currently certified plans in order to meet the annual limit established 
for implementation in 2015.
    We interpret any uniform cost-sharing changes made to conform to 
the new national annual limit on cost sharing as meeting the uniform 
modification standard, because these modifications would meet the 
requirements under Sec.  147.106(e)(2) of this final rule, which 
provides that, ``modifications made uniformly and solely pursuant to 
applicable Federal or State requirements are considered a uniform 
modification of coverage.'' We further note that the general 
applicability of the annual limitation on cost sharing, if applied to 
all plans, would affect all consumers.
    Therefore, we would consider an SADP that is uniformly modified to 
reduce its annual limitation on cost sharing pursuant to the change in 
regulations to meet the standards in paragraph (e)(2) as being a 
renewal with a uniform modification of the same plan for the purposes 
of recertification.
    Comment: Several commenters urged HHS to more clearly distinguish 
whether the proposed uniform modification provisions would be applied 
to ``products'' or ``plans.'' Commenters explained that if our proposed 
rule were interpreted to apply to modifications made at the plan level, 
issuers would be forced to discontinue all plans associated with a 
product in order to make any plan-level changes (such as creating 
identical new plans to reflect network pricing)--causing significant 
market disruption and many unnecessary terminations of coverage for 
existing enrollees.
    Response: We interpret the guaranteed renewability provisions of 
section 2703 of the PHS Act to apply at the product-level. This 
statute, which closely resembles the guaranteed renewability statutes 
enacted under HIPAA, uses the terms ``health insurance coverage,'' 
which, as defined at section 2791 of the PHS Act, means ``benefits 
consisting of medical care (provided directly, through insurance or

[[Page 30250]]

reimbursement, or otherwise and including items and services paid for 
as medical care) under any hospital or medical service policy or 
certificate, hospital or medical service plan contract, or health 
maintenance organization contract offered by a health insurance 
issuer.'' We interpret the references to ``health insurance coverage'' 
throughout section 2703 of the PHS Act to mean what is referred to in 
the commercial health insurance context as a health insurance 
``product.''
    To clarify the application of these provisions in response to the 
above comments, we are codifying definitions of ``product'' and 
``plan'' for purposes of this rule. Because similar language and 
concepts apply in the guaranteed availability statutes and regulations, 
we will apply these definitions to those regulations as well, by 
codifying the definitions at Sec.  144.103. These definitions are 
adopted largely from the Web portal and the rate review regulations.
    Under this final rule, for purposes of guaranteed availability and 
guaranteed renewability, the term ``product'' means a discrete package 
of health insurance coverage benefits that a health insurance issuer 
offers using a particular product network type (for example, health 
maintenance organization (HMO), preferred provider organization (PPO), 
exclusive provider organization (EPO), point of service (POS), or 
indemnity) within a service area. This term generally reflects the 
definition of ``health insurance coverage'' in the PHS Act, which 
primarily refers to a specific contract of covered benefits, rather 
than a specific level of cost-sharing imposed.\16\
---------------------------------------------------------------------------

    \16\ See PHS Act section 2791(b)(1).
---------------------------------------------------------------------------

    For purposes of guaranteed availability and guaranteed 
renewability, the term ``plan'' means, with respect to an issuer and a 
product, the pairing of the health insurance coverage benefits under 
the product with a particular level of coverage (as described in 
sections 1302(d) and (e) of the Affordable Care Act) and service area. 
The combination of all plans within a product constitutes the total 
product that must be made available under guaranteed availability and 
renewed under guaranteed renewability to anyone in the service area of 
the plan in question, while the combined service areas of all plans 
constitute the service area of the product. If a product, or a plan 
under a product, does not have a defined service area, then the service 
area is the entire State in which the product is offered. To avoid any 
confusion, we also will change the reference to `termination of plan'' 
to ``termination of product'' at Sec.  146.152.(b)(4), Sec.  
147.106(b)(4), and Sec.  148.122(c)(3), and make a technical 
grammatical correction to Sec.  146.152.(b)(4) and Sec.  148.122(c)(3). 
This technical correction changes an ``and'' to an ``or,'' because an 
issuer is only required to comply with one and not both of the 
referenced paragraphs.
    Under these definitions, an issuer must guarantee availability and 
guarantee renewability at the option of the plan sponsor or individual 
of the particular product that they purchased in the group or 
individual market, including each of the plans available in the sponsor 
or individuals service area that are part of all the plans that 
comprise the product at the time of renewal. The product discontinuance 
and uniform modification exceptions to guaranteed renewability also 
apply at the product level. An issuer may discontinue offering a 
particular product in a market only if the issuer uniformly withdraws 
the product from that market. Similarly, an issuer may modify the 
health insurance coverage for a product if the issuer ensures the 
modification is effective uniformly for all plans within that product. 
Issuers have flexibility, however, to make modifications at the plan 
level or to discontinue plans within a product consistent with the 
provisions of (e)(2) or (3).
    As further described in subsequent responses to comments in this 
section, we are clarifying how three of the proposed criteria--related 
to cost-sharing, benefits, and service area--apply primarily at the 
plan level rather than the product level.
    Comment: A few commenters sought clarification about the changes 
that could be made under the criterion related to product type. Two 
commenters raised particular questions about changes with respect to 
combined product arrangements, such as adding a point of service (POS) 
option to a health maintenance organization (HMO) product or removing 
an exclusive provider organization (EPO) benefit from a preferred 
provider organization (PPO) product. One commenter recommended that 
restrictions on product type be limited to situations when a product 
transitions to or from an HMO.
    Response: While an issuer may offer particular benefits within a 
product using various network options, HHS believes most products 
generally are based on a single primary network type. For example, an 
HMO product with a POS option is nonetheless an HMO product, and a PPO 
product with an EPO benefit is nonetheless a PPO product. Accordingly, 
a product will not cease to be offered as the same product type solely 
because it adds or removes certain secondary network options. We 
believe referring to ``product network type'' more accurately conveys 
the intent of this requirement and make that revision in the final 
rule. We also provide the examples of HMO, PPO, EPO, POS and indemnity 
as product network types in the definition of ``product'' in Sec.  
144.103 of this final rule.
    Comment: Regarding the proposed service area criterion, a number of 
commenters recommended focusing only on service area reductions, rather 
than expansions. One commenter expressed concern about discriminatory 
service areas and suggested HHS establish standards to prevent issuers 
from dropping coverage in areas that are expected to have higher health 
risk. Two commenters noted that, in many States, product service areas 
are not filed with the State insurance department, presenting 
challenges for State regulators to administer requirements related to 
service areas.
    Response: Under the proposed rule, for modifications to be 
considered uniform modifications of coverage, a product must continue 
to cover a majority of the same counties in its service area. This 
standard prevents significant reductions in a product's service area; 
however, service area expansions of any degree would satisfy this 
standard, provided that a majority of the original product service area 
remains covered. We acknowledge the concerns but believe the standard 
established in this final rule balances consumers' interest in coverage 
stability and issuers' interest in flexibility to appropriately manage 
their provider networks. We note that, since 1996, the HIPAA guaranteed 
renewability provisions (sections 2712(b)(5) and 2742(b)(4) of the PHS 
Act, as codified prior to enactment of the Affordable Care Act) have 
allowed issuers to non-renew or discontinue coverage under a network 
plan if there is no longer any enrollee in connection with the plan who 
lives, resides, or works within the service area of issuer (or in the 
area for which the issuer is authorized to do business).
    In response to these comments, we are finalizing the rule so that 
the provision now requires that, ``The product continues to cover a 
majority of the same service area'' to be considered a uniform 
modification of coverage. We are making this change in recognition that 
a service area can be based on units other than counties, consistent 
with Sec.  147.102(b)(3), which indicates that

[[Page 30251]]

geographical rating areas can be based on counties, zip codes, or 
metropolitan statistical areas.
    Comment: Many commenters requested clarification about the extent 
of changes that could be made to a plan's cost-sharing structure. Some 
commenters interpreted the provision as limiting changes in the type of 
cost-sharing used (for example, a co-payment versus coinsurance) and 
recommended that issuers be allowed to revise specific cost-sharing 
amounts (for example, based on historical or anticipated utilization of 
a particular benefit). Other commenters requested flexibility to modify 
cost sharing as long as the plan maintains the same metal level, 
meaning the same actuarial value metal tier (or catastrophic coverage).
    Response: As stated above, we interpret the guaranteed renewability 
provisions of section 2703 of the PHS Act to apply at the product-
level. But, in accordance with our definitions of ``product'' and 
``plan,'' we note that cost-sharing applies at the plan level. Similar 
to the proposed rule, this final rule provides that, for a modification 
to be considered a uniform modification of coverage, each plan within 
the product must continue to have the same cost-sharing structure as 
before the modification, except for any variation in cost sharing 
solely related to changes in cost and utilization of medical care 
(medical inflation or demand for services based on inflationary 
increases in the cost of medical care), or to the extent that changes 
are necessary to maintain the same level of coverage (that is, bronze, 
silver, gold, platinum, or catastrophic). This provision is intended to 
establish basic parameters around cost sharing modifications to protect 
consumers from extreme changes in deductibles, copayments, coinsurance, 
while preserving issuer flexibility to make reasonable and customary 
adjustments from year to year. Further, States have flexibility to 
permit broader changes to cost sharing within the uniform modification 
provisions, as discussed below. We do not adopt the suggestion to allow 
all types of changes to cost sharing within a metal level, since this 
could be subject to manipulation and potential abuse. HHS will monitor 
compliance with this provision and may issue future guidance if 
necessary.
    Comment: The proposed rule provided that one of the criteria for 
uniform modification is that the product provides the same covered 
benefits, except for changes in benefits that cumulatively impact the 
rate for the product by no more than 2 percent (not including changes 
required by applicable Federal or State law). Some commenters sought 
clarification that benefit changes could either increase or decrease 
the rate by 2 percentage points without exceeding the 2 percent rate 
variation threshold. One commenter asked whether issuers could adjust 
for medical inflation when making this assessment. Other commenters 
requested clarification whether the provision includes both benefit 
enhancements and reductions. Some commenters requested clarification 
that benefit changes in response to Federal or State requirements, such 
as the addition of the pediatric dental benefit and State-mandated 
benefits, are excluded from the 2 percent rate variation threshold. One 
commenter recommended applying a separate rate change threshold to each 
EHB category and providing States and Exchanges the discretion to 
override benefit modifications that have the potential to substantially 
harm the consumer.
    Response: While benefit changes occur at the product level, 
consumers are affected by plan-adjusted index rates based on those 
changes. We believe that benefit changes that affect the rate for any 
plan within a product by more than 2 percent, regardless of whether 
they increase or decrease the rate, are significant to the consumer and 
should therefore constitute a new product offering. Therefore, in 
accordance with our definitions of ``product'' and ``plan'' for 
purposes of this rule and in response to these comments, we are 
finalizing the rule to state that, to be a uniform modification under 
this part of the rule, changes that cumulatively impact the plan-
adjusted index rate for any plan within the product must be within an 
allowable variation of +/-2 percentage points. This provision applies 
only to changes in covered benefits, not cost sharing. It includes 
changes both to EHB and non-EHB benefits covered under the plan, as 
well as increases or decreases in covered benefits. However, rate 
changes that are directly attributable to compliance with applicable 
Federal or State legal requirements concerning covered benefits (such 
as those related to the requirement to provide EHB) are excluded for 
purposes of determining the cumulative rate impact.
    Comment: Several commenters favored auto-enrollment of individuals 
whose product is discontinued, where issuers would ``map'' enrollees to 
another product offered by that issuer that most closely resembles the 
individuals' previous product. The commenters indicated this practice 
is common in the commercial market and Medicare Advantage and promotes 
continuity of coverage.
    Response: Nothing in this final rule prevents an issuer from auto-
enrolling individuals whose product is being discontinued into another 
available product offered by that issuer, as long as the issuer meets 
all of the requirements for product discontinuance under the guaranteed 
renewability regulations. This includes providing at least 90 days' 
notice of the discontinuation in writing and offering each individual 
the option to purchase, on a guaranteed availability basis, any other 
coverage offered by the issuer.
    There are some instances in which an individual may lose coverage 
under his or her particular plan but not under the product. For 
example, an issuer may decide to no longer offer a particular plan 
within a product or to modify a plan's service area within a product 
such that the plan no longer covers certain individuals. If these plan-
level changes do not give rise to a product-level discontinuance under 
this final rule, the product remains guaranteed renewable at the option 
of the plan sponsor or individual, as long other plans within that 
product cover their service area. Again, nothing in this rule prevents 
an issuer from re-enrolling individuals into another plan that covers 
their service area under the same product in which the individuals are 
enrolled. HHS expects that issuers would re-enroll individuals in a new 
plan providing the same metal level of coverage as their previous plan 
within the same product. If a plan at that metal level is not 
available, HHS expects that issuers will re-enroll individuals in a 
plan that is most similar in metal level to the individual's previous 
plan under the same product for that service area.
    We note that this does not address the operations of an Exchange, 
which may specify additional standards and processes for product 
termination, termination of enrollment, and re-enrollment in QHPs 
through an Exchange.
    Comment: Several commenters expressed support for using the uniform 
modification standards to determine whether a rate filing for a product 
that is discontinued and another product re-filed the following year is 
subject to submission and review under 45 CFR Part 154, noting that 
this is an important protection to prevent gaming of the rate review 
requirements. Some commenters specifically recommended the 
clarification be incorporated into the rate review regulations.
    Response: In response to comments, we have amended the definition 
of ``product'' in Sec.  154.102 to provide that the term includes any 
product that is discontinued and newly filed within a

[[Page 30252]]

12-month period in a market within a State that meets the standards of 
Sec.  147.106(e)(2) or (3) (relating to uniform modification of 
coverage).
    Comment: Many commenters supported the flexibility in the proposed 
rule for States to broaden, but not narrow, the scope of what is 
considered a uniform modification of coverage. Some commenters sought 
clarification about the meaning of ``broaden'' in this context. Other 
commenters recommended that State laws that prevent issuers from 
discontinuing or uniformly modifying coverage be expressly preempted by 
the Federal standards.
    Response: After further consideration of this issue, we have 
determined not to finalize the ability of States to apply additional 
criteria that broaden the scope of what would be considered a uniform 
modification in connection with some of the criteria provided for in 
this rule, because the characteristics of a product defined in those 
criteria are so integral to the product that they cannot be altered 
without fundamentally changing the health insurance coverage for that 
product. These include the criteria that a product must continue to 
offered by the same issuer (paragraph (c)(3)(i)), maintain the same 
product network type (paragraph (c)(3)(ii)), and provide, subject to 
specific exceptions, the same covered benefits (paragraph (c)(3)(v)). 
Modifications that result in a product that does not meet these 
criteria will not constitute a uniform modification under this final 
rule. This final rule does, however, continue to provide States 
flexibility to broaden the definition of uniform modification of 
coverage based on the criteria related to service area and cost-sharing 
structure. Thus, States could designate a lower threshold for meeting 
the service area standard than the requirement to continue to cover at 
least a majority of the same service area standard established in this 
final rule for which a product must maintain the same service area, or 
permit greater changes to a plan's cost-sharing structure, and still 
permit the changes to be considered a uniform modification under this 
final rule. We reiterate our statement from the preamble to the final 
rule published on February 27, 2013 under section 2703 of the PHS Act 
(78 FR 13419) that a State standard or requirement that prohibits an 
issuer from uniformly modifying coverage in accordance with this final 
rule would prevent the application of a Federal requirement and 
therefore be preempted.
    Comment: Some commenters supported the proposal to require standard 
consumer notices when issuers discontinue or renew coverage. Other 
commenters felt the notices were overly prescriptive and advocated for 
issuer flexibility to modify the notices. For example, commenters 
suggested HHS provide model notice language or specify minimum content 
requirements. Many commenters requested issuers have the ability to 
customize the notices in order to provide specific information to help 
consumers make informed purchase decisions, such as information about 
premiums, a description of benefit changes, and the policy year and 
enrollment deadlines. Some commenters recommended eliminating the 
renewal notice requirement altogether. Other commenters argued that 
States are in the best position to regulate on product discontinuance 
and renewal and suggested that notice requirements be left to the 
States.
    Response: While we acknowledge the advantages of tailored consumer 
communications, and recognize the importance of State involvement, the 
final rule adopts the proposed language that notices be provided in a 
form and manner specified by the Secretary. We plan to address the 
notices in future guidance and intend to address the use of State-
specific notices at that point in time.
    Comment: Several commenters recommended that notices be sent only 
to the group or individual market policyholder, arguing that it would 
be administratively burdensome for issuers and confusing for employees 
and dependents to receive information about product renewal and 
discontinuation when they are not the primary decision makers.
    Response: The final rule maintains the requirement that 
discontinuation notices must be provided to all enrollees under the 
plan or coverage. Section 2703(c)(1) of the PHS Act requires an issuer 
that elects to discontinue offering a particular product to provide at 
least 90 days' notice of the discontinuation in writing to each plan 
sponsor or individual provided that particular product and to ``all 
participants and beneficiaries covered under such coverage.'' We note 
that an issuer may satisfy this requirement by providing the notice 
only to the subscriber.
    By contrast, renewal notices are not required to be provided to 
participants, beneficiaries, or enrollees. Both the proposed rule and 
this final rule make clear that notices of renewal must only be 
provided to the plan sponsor (for example, employer) in the small group 
market or the individual market policyholder in the individual market.
    Comment: Several commenters recommended that renewal notices be 
sent prior to the beginning of the open enrollment period, rather than 
90 days before the end of the plan or policy year, to better align with 
the options and schedule of the Exchange.
    Response: The statute and regulations establish a 90-day notice 
requirement only for product discontinuation. In the final rule, we 
have added in Sec.  148.122(i) a requirement that renewal notices be 
delivered at least 60 calendar days before the date of renewal of the 
coverage for grandfathered products in the individual market and, in 
Sec.  147.106(f)(2) and Sec.  146.152(h), for all products in the small 
group market. For non-grandfathered products in the individual market, 
in response to the commenters' request to coordinate the notices with 
enrollment in the Exchange, we are requiring in Sec.  147.106(f)(1) the 
renewal notices be delivered before the first day of the annual open 
enrollment period. We believe this provides sufficient advance notice 
for consumers in non-grandfathered individual policies to review other 
options for coverage. Since the small group market has continuous year-
round open enrollment, the 60 day advanced notice of renewal provides 
sufficient notice to employers. Many grandfathered policies in the 
individual market have non-calendar policy years that do not line up 
with the annual open enrollment period in the individual market. 
Accordingly, the 60 day advanced notice requirement is more appropriate 
for these policies.
    Comment: Some commenters noted that the Federal notices will 
duplicate renewal notices developed by issuers, States, and Exchanges, 
and emphasized the need for coordination to prevent consumer confusion.
    Response: We agree and encourage issuers, States, and Exchanges to 
coordinate enrollee communications to the extent possible.
Summary of Regulatory Changes
    We are finalizing the uniform modification provisions proposed in 
Sec.  147.106 of the proposed rule with the following modifications and 
made corresponding changes in Sec.  146.152 and Sec.  148.122. We are 
adding regulation text explicitly stating that the interpretation of 
uniform modification provided for in this rule also requires that the 
modifications be made uniformly. We add language amending and 
clarifying the term ``pursuant to applicable Federal and State law''; 
replace ``product type'' with ``product network type''; and to specify 
that the product must continue to cover at least a majority of the same 
service area, and delete the reference to ``counties.'' We

[[Page 30253]]

only finalize the ability of States to apply additional criteria that 
broaden the scope of what would be considered a uniform modification in 
connection with the criteria involving service area and cost-sharing 
structure. We clarify that the criteria related to cost-sharing and 
covered benefits apply at the plan-level. We do not finalize the 
interpretation of uniform modification or the corresponding renewal 
notice requirements with respect to issuers in the large group market, 
only with respect to issuers offering coverage in the individual and 
small group markets.
    We also are adding definitions of ``product'' and ``plan'' at Sec.  
144.103; changing the reference to ``termination of plan'' to 
``termination of product'' at Sec.  146.152(b)(4), Sec.  147.106(b)(4), 
and Sec.  148.122(c)(3); and are amending the definition of ``product'' 
in the rate review regulations to reflect the interpretation of uniform 
modification, as applied in the rate review context.

D. Part 148--Requirements for the Individual Health Insurance Market

1. Conforming Changes to Individual Market Regulations (Sec. Sec.  
148.101 through 148.128)
    We proposed conforming revisions to the individual market 
provisions contained in 45 CFR Part 148 to remove provisions that are 
superseded by the prohibition on preexisting condition exclusions under 
new section 2704 of the PHS Act, added by the Affordable Care Act.\17\ 
We proposed these amendments generally apply when the final rule 
becomes effective. Under our proposal, however, the requirement to 
issue certificates of creditable coverage would continue to apply until 
December 31, 2014. This would allow individuals to continue to offset a 
preexisting condition exclusion that could potentially be imposed by a 
group health plan with a plan year from December 31, 2013 to December 
30, 2014. We indicated that these amendments were for clarity only and 
that they were consistent with amendments to the group market 
provisions and with previous CMS guidance.\18\ We solicited comment on 
these proposals.
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    \17\ The Affordable Care Act adds section 715(a)(1) of ERISA and 
section 9815(a)(1) of the Code to incorporate the provisions of part 
A of title XXVII of the PHS Act, including section 2704 of the PHS 
Act, into ERISA and the Code, and to make them applicable to group 
health plans and health insurance issuers providing health insurance 
coverage in connection with group health plans. PHS Act section 2704 
applies to grandfathered and non-grandfathered group health plans 
and group health insurance coverage, and non-grandfathered 
individual health insurance coverage. It does not apply to 
grandfathered individual health insurance coverage. For more 
information on grandfathered health plans, see section 1251 of the 
Affordable Care Act and its implementing regulations at 26 CFR 
54.9815-1251T, 29 CFR 2590.715-1251, and 45 CFR 147.140.
    \18\ See Ninety-Day Waiting Period Limitation and Technical 
Amendments to Certain Health Coverage Requirements Under the 
Affordable Care Act, 78 FR 10296 (February 24, 2014). See also 
Questions and Answers Related to Health Insurance Market Rules, Q2. 
Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/qa_hmr.html.
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    Comment: Two commenters stated that certificates of creditable 
coverage might continue to be needed in limited circumstances after 
2014, such as when a dependent is added to a grandfathered individual 
health insurance plan, which is not subject to the prohibition on 
preexisting condition exclusions. The commenters recommended that 
certificates be required to be provided upon request after December 31, 
2014.
    Response: While certain plans in the individual market, such as 
grandfathered health plans that are individual health insurance 
coverage and transitional individual market plans, may impose 
preexisting condition exclusions after 2014, such plans are not 
required to give credit for prior coverage against a preexisting 
condition exclusion period. Accordingly, there are no circumstances in 
which a certificate of creditable coverage will be relevant after 
December 30, 2014.
Summary of Regulatory Changes
    We are finalizing the amendments proposed in Sec. Sec.  148.101 
through 148.128 of the proposed rule without change.
2. Fixed Indemnity Insurance in the Individual Health Insurance Market 
(Sec.  148.220)
    As indicated in previous CMS guidance, which described our intended 
approach, we proposed to amend the criteria for fixed indemnity 
insurance to be treated as an excepted benefit in the individual health 
insurance market. Excepted benefits are exempt from many of the 
requirements of title XXVII of the PHS Act.
    Specifically, under the proposed rule, individual fixed indemnity 
policies would be considered an excepted benefit if the benefits are 
provided under a separate policy, certificate, or contract of insurance 
and all of the following criteria are met: (1) The benefits are 
provided only to individuals who have other health coverage that is 
minimum essential coverage within the meaning of section 5000A(f) of 
the Code; (2) there is no coordination between the provision of 
benefits and an exclusion of benefits under any other health coverage; 
(3) the benefits are paid in a fixed dollar amount per day of 
hospitalization or illness or per service (for example, $100/day or 
$50/visit) regardless of the amount of expenses incurred and without 
regard to the amount of benefits provided with respect to the event or 
service under any other health coverage; and (4) a notice is displayed 
prominently in the plan materials in at least 14-point type that has 
the following language: ``THIS IS A SUPPLEMENT TO HEALTH INSURANCE AND 
IS NOT A SUBSTITUTE FOR MAJOR MEDICAL COVERAGE. LACK OF MAJOR MEDICAL 
COVERAGE (OR OTHER MINIMUM ESSENTIAL COVERAGE) MAY RESULT IN AN 
ADDITIONAL PAYMENT WITH YOUR TAXES.''
    This proposal was intended to prevent disruption and address 
stakeholder concerns that many fixed indemnity insurance policies 
marketed today in the individual market do not qualify as excepted 
under the regulations at Sec.  148.220(b)(3) and, as further described 
in a frequently asked question (FAQ) published on January 24, 2013, 
because they pay on a per-service rather than a per-period basis.\19\ 
We solicited comment on this approach, including comments on the 
proposed notice language.
---------------------------------------------------------------------------

    \19\ See FAQs about Affordable Care Act Implementation (Part 
XI), Q7, available at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Affordable Care Act_implementation_faqs11.html and 
http://www.dol.gov/ebsa/faqs/faq-Affordable Care Act11.html.
---------------------------------------------------------------------------

    We explained that, to meet the standard that fixed indemnity 
insurance must be sold only to individuals who have other health 
coverage that is minimum essential coverage, the issuer would have to 
be ``reasonably assured'' that an individual purchasing a fixed 
indemnity policy has minimum essential coverage. We sought comment on 
the extent of verification issuers may need for reasonable assurance, 
including the possibility of consumer self-attestation. We also sought 
comment on whether the ``other health coverage that is minimum 
essential coverage'' standard was sufficient protection or if another 
standard may be appropriate (for example, requiring that fixed 
indemnity insurance be sold to individuals with other health coverage 
that meets the EHB requirements).
    We noted that under a safe harbor approach established by the 
Departments of HHS, Labor, and the Treasury (the Departments) for 
supplemental health insurance coverage to be considered an excepted 
benefit, the supplemental coverage must be issued by an entity that 
does not

[[Page 30254]]

provide the primary coverage under the plan.\20\ We indicated that were 
considering adopting a similar standard for individual fixed indemnity 
insurance to qualify as excepted and sought comment.
---------------------------------------------------------------------------

    \20\ See CMS Insurance Standards Bulletin 08-01 (available at 
http://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf); the Department of Labor's Employee Benefits Security 
Administration's Field Assistance Bulletin No. 2007-04 (available at 
http://www.dol.gov/ebsa/pdf/fab2007-4.pdf); and Internal Revenue 
Service Notice 2008-23 (available at http://www.irs.gov/irb/2008-7_IRB/ar09.html).
---------------------------------------------------------------------------

    Finally, we indicated that, in our view, most fixed indemnity 
products offered in the individual market today would largely satisfy 
these proposed criteria. We solicited comment, nonetheless, on how the 
proposal might affect existing market arrangements. We also solicited 
comment on whether applying the provisions for policy years beginning 
on or after January 1, 2015 would provide a sufficient transition 
period, and whether keeping the current regulatory criteria in place on 
a permanent or temporary basis could help to alleviate any potential 
market disruption.
    Comment: Several commenters questioned HHS's legal authority to 
impose the requirement that fixed indemnity insurance must be sold as 
supplement to minimum essential coverage in order to be an excepted 
benefit. They noted that Congress created another category of excepted 
benefits for supplemental coverage. Some commenters indicated that 
imposing the supplemental requirement was an encroachment of States' 
regulatory authority since States have the primary authority to 
regulate excepted benefits. One commenter stated that the proposal 
contravenes the holding of the Supreme Court that the government cannot 
compel individuals to engage in economic activity. One commenter stated 
that the requirement that fixed indemnity insurance be sold only as 
supplemental coverage to minimum essential coverage should be removed, 
and that Federal and State regulators, along with consumer and carrier 
representatives, should work together to develop requirements that will 
protect consumers and also retain coverage options.
    Response: We do not agree with these comments. As with all excepted 
benefits, what the coverage provides, rather than how it is labelled, 
is determinative of whether it is treated as excepted benefits. 
Accordingly, we have developed standards for when coverage would be 
considered exempt from the requirements of the Affordable Care Act and 
other provisions in Title XXVII of the PHS Act. In so doing, we have 
not encroached on State's regulatory authority to regulate excepted 
benefits. Under this final rule, States will continue to have primary 
enforcement authority over such benefits, using the Federal definition 
as a floor, consistent with the overall framework for implementing 
Title XXVII of the PHS Act. We note that the statutory category which 
includes fixed indemnity coverage as an excepted benefit conditions its 
status on the coverage being ``independent, noncoordinated'' benefits, 
presuming the existence of other coverage. For purposes of the 
individual market, we are clarifying that there must be such other 
coverage, and that the other coverage in question must be minimum 
essential coverage. Additionally, requiring that fixed indemnity 
insurance in the individual market must be sold as supplemental to 
minimum essential coverage in order to be an excepted benefit does not 
compel any individual to purchase minimum essential coverage or 
otherwise engage in any economic activity. We will continue to work in 
partnership with States, along with consumer and issuer 
representatives, as we always have, to develop and fine-tune approaches 
to all Affordable Care Act provisions, including revisiting any aspect 
of these fixed indemnity provisions, as appropriate and necessary.
    Comment: One commenter made the general assertion that the purpose 
of the excepted benefits provisions in the Affordable Care Act was not 
to indicate that the types of coverage listed as excepted benefits are 
excepted from the provisions of the Affordable Care Act, but to allow a 
health plan to include such categories of coverage under a health plan 
without having to conform this coverage (that is, the excepted 
benefits) to the provisions of the Affordable Care Act that apply to 
the health plan.
    Response: Section 2722 of the PHS Act (42 U.S.C. 300gg-21) reads in 
relevant part in subparagraph (c)(2): ``The requirements of subparts 1 
and 2 shall not apply to any individual coverage or any group health 
plan (or group health insurance coverage) in relation to its provision 
of excepted benefits described in section 2791(c)(3) of this title.'' 
We believe this statutory language is clear that the excepted benefits 
provisions apply to any individual coverage that meets the definition 
of any of the excepted benefits listed in section 2791(c)(3), 
including, but not limited to, hospital and other fixed indemnity 
policies. (We also believe that subparagraphs 2722(b), (c)(1), and 
(c)(3) are similarly clear that the excepted benefits provisions apply 
to any individual coverage in relation to its provision of any of the 
excepted benefits listed therein. In this final rule, we are making a 
relatively minor change to the introductory text (changing ``individual 
health insurance coverage'' to ``individual coverage''), to bring it 
into conformance with the wording of the statute.
    Comment: One commenter asserted that, because coverage provided as 
an excepted benefit can only be provided in relation to a health plan, 
proposed section 148.220(b)(4)(i), which states that fixed indemnity 
insurance is an excepted benefit only if, among other criteria, the 
individual has minimum essential coverage, is superfluous.
    Response: We disagree that the statute and current regulations 
already provided that fixed indemnity coverage (or any other excepted 
benefit listed in the statute) is only an excepted benefit if provided 
in relation to another health plan (although as noted above, this is 
implicit).
    Comment: While one commenter agreed with the inclusion of Sec.  
148.220(b)(4)(ii) and (iii) as requirements in order for fixed-
indemnity policies to qualify as excepted benefits, several commenters 
believed it would be beneficial to add in subparagraph (b)(4)(ii), a 
requirement that benefits may not be reduced on account of funds 
received from any other source. The commenter asserted that, in order 
to qualify as excepted benefits, a fixed indemnity policy should pay 
without regard to any other sources of payment.
    Response: We do not believe such a requirement would be necessary. 
Subparagraph (b)(4)(ii) is intended to address the statutory provision 
in the PHS Act at section 2791(c)(3) that hospital indemnity or other 
fixed indemnity insurance is an excepted benefit if the benefits are 
offered as independent, noncoordinated benefits. In this context, we 
interpret ``noncoordinated'' as meaning noncoordinated with other 
coverage, as opposed to noncoordinated with other sources of financial 
support, such as friends or family members.
    Comment: One commenter questioned whether it is the intent of HHS 
to regulate, and through such regulation prohibit, the sale of fixed 
indemnity policies on a stand-alone basis.
    Response: It is not the intent of HHS to regulate or prohibit the 
sale of fixed-indemnity policies on a stand-alone basis. Rather, the 
fixed indemnity insurance provisions set forth the circumstances under 
which such a

[[Page 30255]]

policy would or would not qualify as excepted benefits. In the preamble 
to the proposed regulation, we mentioned that this proposal for 
determining whether fixed indemnity policies are excepted benefits is 
consistent with previously released guidance describing our intended 
approach.
    Comment: One commenter argued that it would not make sense to 
require purchasers of fixed-indemnity coverage to have minimum 
essential coverage in order for the fixed indemnity coverage to be an 
excepted benefit, when there is no such requirement for other types of 
coverage to be an excepted benefit.
    Response: As noted in the preamble to the proposed regulation, we 
proposed that fixed indemnity policies in the individual market be 
permitted to pay on a per-medical-service basis, to accommodate the 
concerns of several stakeholders. In order to accommodate those 
concerns in a reasonable way, we are requiring that individuals who 
purchase fixed-indemnity policies in the individual market have other 
minimum essential coverage in order for the fixed indemnity policy to 
be an excepted benefit. Because we are not expanding the definition of 
any other type of excepted benefit as we are here, we do not believe it 
is necessary to impose new conditions on other categories of excepted 
benefits that the purchaser have other minimum essential coverage.
    Comment: The majority of commenters supported the disclosure 
requirement in order to inform consumers of the nature and extent of 
fixed indemnity insurance coverage. One commenter recommended that the 
notice requirement be expanded to indicate that the consumer has been 
advised on the difference between major medical coverage and fixed 
indemnity insurance and has been informed on how to acquire major 
medical coverage from the carrier. Another commenter stated that the 
last line of the HHS proposed disclosure notice could easily mislead 
consumers and cause them to think supplemental coverage is somehow tied 
to the tax provisions of the individual shared responsibility payment, 
and recommended that it be replaced with this line: ``This policy does 
not provide the minimum essential coverage that individuals may be 
required to have under the Affordable Care Act.'' One commenter 
requested clarification that the requirement that the notice be 
displayed in plan materials does not specifically require the notice be 
inserted in the filed contract forms. Several commenters recommended 
that the disclosure language be consumer tested. One commenter objected 
to a Federal prescription of specific wording.
    Response: We believe the proposed content of the notice is 
sufficient to meet its objectives. To ensure that the objectives are 
met, we believe the standardized language is necessary. With respect to 
where the notice is displayed, we believe, for policies issued after 
January 1, 2015, the most appropriate place is in the application for 
coverage, as this is the most likely document in which a purchaser of 
fixed indemnity coverage would actually see the notice. Therefore, in 
this final rule, we are requiring that the notice be displayed in the 
application. As described below, policies issued before January 1, 2015 
are not required to come into compliance with the notice requirements 
until the first renewal on or after January 1, 2015. For policies 
issued before January 1, 2015, we believe it would be appropriate for 
the notice to be delivered shortly before the first renewal date 
occurring on or after January 1, 2015, but we defer to State law on the 
timing. In an effort to minimize industry burden, we are not requiring 
that fixed indemnity insurers, in order for the coverage to be an 
excepted benefit, insert the notice in filed contract forms or into any 
other specific document.
    Comment: Many commenters opined that an attestation would be 
sufficient but others suggested that issuers be required to request 
documentation from the consumer verifying that they have minimum 
essential coverage. One commenter requested that the attestation be 
required upon renewal of the fixed indemnity coverage, noting that 
individuals could lose their minimum essential coverage after the 
initial attestation. Another commenter recommended that the attestation 
be expanded to have the consumer attest that the difference between 
major medical coverage and fixed indemnity insurance had been explained 
to them and had been informed on how to purchase major medical 
coverage.
    Response: Although methods in addition to attestation might help 
ensure that individuals have and maintain minimum essential coverage, 
we seek to balance this objective against the burden of verification. 
Therefore, this final rule requires that the purchaser of fixed 
indemnity coverage attest that he or she has minimum essential 
coverage, but does not require any further documentation. In this final 
rule, this is a one-time attestation upon issuance of the policy that 
does not have to be re-performed upon renewal of the policy or any 
other time. For policies issued before January 1, 2015, we believe it 
would be appropriate for the one-time attestation to be collected from 
the policyholder shortly before the first renewal occurring on or after 
October 1, 2016, but we defer to State law on the timing. We do not 
believe it is necessary that the attestation be expanded to have 
consumers attest that the difference between major medical coverage and 
fixed indemnity insurance had been explained to them and they had been 
notified about how to purchase major medical coverage.
    Comment: We proposed that individuals must have minimum essential 
coverage in order to be sold fixed indemnity insurance coverage but 
solicited comments on whether that was sufficient protection. As an 
alternative standard, we sought comment on whether individuals could be 
required to have a policy that provided all of the EHB. Many commenters 
opined that the requirement to have minimum essential coverage is 
sufficient protection. One commenter noted that minimum essential 
coverage is a defined term in the Affordable Care Act and can be 
applied nationally. Other commenters felt that the protection should be 
expanded to require individuals to have coverage that complied with the 
EHB requirement in order to be sold fixed indemnity insurance.
    Response: We believe it is appropriate and sufficient to require 
that fixed indemnity insurance be sold as supplemental to minimum 
essential coverage, in order to be an excepted benefit. As having 
minimum essential coverage is generally the standard for determining 
whether an individual complies with the shared responsibility 
provision, we believe it is also the appropriate standard for this 
purpose.
    Comment: One commenter requested clarification that fixed indemnity 
insurance can pay in a combination of per day and per service amounts, 
in addition to being able to pay per day or per service amounts.
    Response: We believe such a clarification would be helpful, and 
have changed ``or'' to ``and/or'' in this final rule. As part of this 
clarification, we are revising the phrase ``per day of hospitalization 
or illness'' so it reads ``per period of hospitalization or illness.'' 
This clarification makes this provision of the individual market rule, 
consistent with the corresponding provision in the group market rule on 
hospital and fixed indemnity policies.
    Comment: One commenter indicated that it should be clear that the 
fixed indemnity insurance provisions apply to individual products as 
defined in the PHS Act regardless of whether the products are filed as 
group products

[[Page 30256]]

under State law. The commenter noted that there can be conflicting 
definitions of group and individual products under State and Federal 
law.
    Response: The PHS Act defines individual market in terms of health 
insurance (that is, not in terms of excepted benefits), and defines 
individual health insurance coverage. Nonetheless, our intention is 
that Sec.  148.220 applies to excepted benefits sold in the 
``individual market'' as that term is defined in Sec.  144.103, absent 
the reference to ``health insurance.'' This would preempt any State law 
that classifies an individual product as a ``group'' product (for 
example, individual products sold through associations).
    Comment: Several commenters stated that fixed indemnity insurers 
should be permitted to sell policies to certain categories of 
individuals other than those who have minimum essential coverage, such 
as healthy and young or middle aged individuals with moderate income 
who cannot afford high-deductible coverage under the Affordable Care 
Act, but can afford a limited indemnity plan, those who qualify for a 
hardship exemption from the individual shared responsibility payment, 
and those who feel they cannot afford the price of minimum essential 
coverage offered to their dependents through an employer's health plan. 
These commenters asserted that eliminating a valid and possibly 
affordable option to provide these individuals with a source of 
assistance during a medical emergency is of concern. Several commenters 
believe the requirement to have minimum essential coverage will cause 
negative consequences for individuals living in States where the 
Medicaid expansion was not adopted, and who earn too much money to 
qualify for Medicaid but not enough to qualify for exchange subsidies, 
and to undocumented residents who are neither eligible for subsidies 
nor eligible to access the exchanges to acquire minimum essential 
coverage. Finally, one commenter observed that, according to the code 
at 26 U.S.C. 5000(A)(f)(4), residents of U.S. territories shall be 
``treated as having minimum essential coverage.'' Therefore, the 
commenter asked that we clarify in the final rule that fixed indemnity 
insurance sold to residents of the U.S. territories are treated as 
having minimum essential coverage, for purposes of the requirement that 
fixed indemnity insurance must be sold to individuals who have minimum 
essential coverage in order for the fixed indemnity coverage to be an 
excepted benefit.
    Response: While we do not agree that fixed indemnity insurers 
should be permitted to sell policies to every category of individuals 
who do not have minimum essential coverage, we accept the commenter's 
suggestion that those who are treated as having minimum essential 
coverage due to their status as residents of U.S. territories should be 
able to purchase fixed indemnity insurance without actually having 
minimum essential coverage. We believe it is consistent with the nature 
of Code section 5000A(f)(4)(B), to treat such individuals similarly to 
individuals who actually have minimum essential coverage, for purposes 
of whether a fixed indemnity insurer may sell them a policy without 
losing excepted benefits status. Therefore, we have incorporated this 
provision into this final rule. We believe that expanding this 
principle any further to other populations would erode the objective of 
attempting to ensure that as many individuals as possible enroll in 
minimum essential coverage. We also note that individuals who have 
hardship exemptions to the shared responsibility payment are permitted 
under Federal law to purchase a catastrophic plan, which typically 
provides economical health insurance benefits.
    Comment: Several commenters stated that as an alternative to the 
proposed requirement that fixed indemnity coverage be sold only to 
individuals who have minimum essential coverage in order for the fixed 
indemnity coverage to be an excepted benefit, fixed indemnity insurance 
should be considered excepted benefits if offered, marketed, and sold 
as supplemental insurance.
    Response: We do not believe that merely offering, marketing, and 
selling fixed indemnity policies as supplemental benefits, will 
effectively address the confusion about these policies that many 
consumers have, or will effectively contribute to the Affordable Care 
Act's goal of maximizing the number of individuals who have 
comprehensive, major medical coverage.
    Comment: One commenter was concerned that ``transitional 
policies,'' that is, policies that do not conform with certain 
Affordable Care Act requirements first applicable in 2014, but continue 
to be renewed for policy years ending on or before October 1, 2016 as a 
result of CMS' March 5, 2014 bulletin on Extension of Transitional 
Policy through October 1, 2016, might not constitute minimum essential 
coverage.
    Response: Such transitional policies are small employer or 
individual market policies that constitute minimum essential coverage.
    Comment: We sought comment on whether to add a requirement that a 
fixed indemnity policy must be issued by a different issuer than 
minimum essential coverage, in order for the fixed indemnity insurance 
to be an excepted benefit. Several commenters supported adding such a 
requirement, stating that doing so would be an appropriate 
interpretation of the requirement that fixed indemnity insurance be 
independent. Other commenters did not agree that this requirement be 
added. One such commenter did not believe that the problem of an issuer 
of major medical coverage carving out benefits for the purpose of 
selling an enrollee a fixed indemnity plan, exists in the commenter's 
local area, while others stated that, under the Affordable Care Act 
requirements, issuers offering major medical coverage in the individual 
and small group markets must include essential health benefits in their 
major medical coverage.
    Response: We agree with the commenters that such a requirement 
might harm consumers by limiting their choice of fixed indemnity 
issuers. Thus, we are not including such a requirement in this final 
rule. However, we remind commenters that section 2791(c)(3) of the 
Public Health Service Act, which prohibits fixed indemnity polices from 
coordinating with other coverage, would still apply.
    Comment: One commenter did not object to the proposed provisions 
taking effect for policy years beginning on or after January 1, 2015. 
Several commenters stated that the proposed provisions should apply to 
coverage issued on or after July 1, 2015, rather than coverage issued 
on or after January 1, 2015. One commenter stated that the provisions 
should apply to policies issued after December 31, 2015. One commenter 
noted that a January 1, 2015 date is unrealistic in light of the time 
needed for filing new products and applications, as well as the 
workload on State Insurance Departments in the coming months as they 
review filings and rates for insurance products to be sold in 2015.
    Response: In order to provide sufficient time for such insurers to 
prepare to meet the new minimum essential coverage and notice 
requirements, these two new requirements will apply to policies first 
issued on or after January 1, 2015. The notice requirement will also 
apply to existing policies starting with policy years beginning on or 
after January 1,

[[Page 30257]]

2015. Prior to that date, upon the final rule taking effect, the other 
criteria in section 148.220 will replace the existing regulatory 
criteria (as interpreted in our January 24, 2013 FAQ) for fixed 
indemnity insurance to be an excepted benefit.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  148.220 of the 
proposed rule with the following modifications. In the introductory 
text, we clarify that the requirements of parts 146 and 147 do not 
apply to ``any individual coverage'' (as opposed to individual health 
insurance coverage) that meet the relevant requirements of that 
section, consistent with statutory language. In paragraph (b)(4)(i), we 
indicate that the fixed indemnity benefits must be provided only to 
individuals who attest, in their application, that they have other 
health coverage that is minimum essential coverage, or that they are 
treated as having minimum essential coverage based on their status as a 
bona fide resident of any possession of the United States pursuant to 
Code section 5000A(f)(4)(B). In paragraph (b)(4)(iii), we clarify that 
the fixed indemnity benefit must be paid in a fixed dollar amount per 
period of hospitalization or illness ``and/or'' per service. In Sec.  
148.220(b)(4)(iv), we clarify that the notice to fixed indemnity 
policyholders must be displayed in the application. In new paragraph 
(b)(4)(v), we state that the requirement of paragraph (b)(4) (iv) 
applies to all hospital or other fixed indemnity insurance policy years 
beginning on or after January 1, 2015 and the requirement of paragraph 
(b)(4)(i) applies to hospital or other fixed indemnity insurance 
policies issued on or after January 1, 2015, and to hospital or other 
fixed indemnity policies issued before that date, upon their first 
renewal occurring on or after October 1, 2016.

E. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk 
Adjustment Under the Affordable Care Act

    As noted in the proposed rule, both the reinsurance and risk 
adjustment programs are subject to the fiscal year 2015 sequestration. 
The risk adjustment and reinsurance programs will be sequestered at a 
rate of 7.3 percent in fiscal year 2015. The Federal government's 2015 
fiscal year begins on October 1, 2014. HHS, in coordination with the 
OMB, has determined that, pursuant to section 256(k)(6) of the Balanced 
Budget and Emergency Deficit Control Act of 1985 as amended, and the 
underlying authority for these programs, funds that are sequestered in 
fiscal year 2015 from the reinsurance and risk adjustment programs will 
become available for payment to issuers in fiscal year 2016 without 
further Congressional action. Should Congress fail to enact deficit 
reduction that replaces the Joint Committee reductions, these programs 
would be sequestered in future fiscal years, and any sequestered 
funding would become available in the fiscal year following that in 
which it was sequestered.
    Comment: Several commenters asked that HHS clarify the details 
regarding the payment of sequestered funds, particularly for risk 
adjustment. One commenter suggested that reinsurance payments that 
might have otherwise been sequestered be made by prioritizing 
collections for reinsurance payments over collections for the U.S. 
Treasury. One commenter noted that a short delay in risk adjustment and 
reinsurance payments would not pose major problems for issuers.
    Response: As we stated in the proposed rule, we aim to make 
payments of sequestered fiscal year 2015 funds for the reinsurance and 
risk adjustment programs as soon as practicable in fiscal year 2016, 
which begins on October 1, 2015. We note that we cannot sequester 
amounts from reinsurance collections for the U.S. Treasury because the 
U.S. Treasury collections are not budgetary resources. Therefore, they 
are not subject to sequestration and do not affect HHS's required 
reductions under the sequestration law. We will provide further 
clarification regarding how the amount of sequestered funds will be 
calculated and paid in future guidance.
1. Provisions and Parameters for the Permanent Risk Adjustment Program
    We have received input from commenters suggesting that the 
coefficients in our risk adjustment models may not fully capture the 
relative actuarial risk of certain hierarchical condition categories 
(HCCs), in part because those conditions may be subject to changing 
therapies and higher trends in medical inflation. Although some 
inaccuracy in our coefficients is inevitable due to lags in the data, 
we believe that we will be able to mitigate this problem if we 
recalculate, on an annual basis, the weights assigned to the various 
HCCs and demographic factors in our risk adjustment models using the 
most recent data available, even in the years where we do not fully 
recalibrate the models. We intend to propose such a reweighting in the 
HHS notice of benefit and payment parameters for 2016, and we will 
consider having those updated coefficients apply also for the 2015 
benefit year. These adjusted models would be subject to public notice 
and comment.
2. Provisions and Parameters for the Transitional Reinsurance Program
    The Affordable Care Act directs that a transitional reinsurance 
program be established in each State to help stabilize premiums for 
coverage in the individual market from 2014 through 2016. In the 2014 
Payment Notice and the 2015 Payment Notice, we expanded on the 
standards set forth in subparts C and E of the Premium Stabilization 
Rule, and established the reinsurance payment parameters and uniform 
reinsurance contribution rate for the 2014 and 2015 benefit years. In 
this final rule, we finalize our allocation proposal, with one 
modification, so that, in the event of a shortfall in our collections, 
reinsurance contributions will first be allocated to the reinsurance 
payment pool, and second to administrative expenses and the U.S. 
Treasury.
    In the 2014 Payment Notice and the 2015 Payment Notice, we provided 
that, if total contributions collected for 2014 and 2015 exceed $12.02 
billion and $8.025 billion, respectively, we would allocate $2 billion 
to the U.S. Treasury, $20.3 or $25.4 million, as applicable, to 
administrative expenses, and all remaining contributions for 
reinsurance payments, thus prioritizing excess contributions towards 
reinsurance payments. Due to the uncertainty in our estimates of 
reinsurance contributions to be collected, and to help assure that the 
reinsurance payment pool is sufficient to provide the premium 
stabilization benefits intended by the statute, we proposed to adopt a 
similar prioritization in the event that reinsurance collections fall 
short of our estimates. Specifically, we proposed that, if collections 
fall short of our estimates for a particular benefit year, we would 
allocate contributions that are collected first to the reinsurance 
payment pool and administrative expenses, until our targets for 
reinsurance payments and administrative expenses are met. Once those 
targets are met, the remaining contributions collected for that benefit 
year would be allocated toward the U.S. Treasury.
    We sought comment on this proposal, including our legal authority 
to implement a prioritization of reinsurance contributions to 
reinsurance payments over payments to the U.S. Treasury.

[[Page 30258]]

    Comment: Several commenters supported our allocation proposal with 
respect to reinsurance collections if they fell short of our estimates 
for a particular benefit year. The commenters stated that the proposed 
allocation would further the premium stabilization effects of the 
program and provide more certainty that reinsurance payments will be 
fully funded. One commenter stated that section 1341 of the Affordable 
Care Act provides HHS with the discretion to allocate reinsurance 
contributions as HHS determines appropriate to carry out the goals of 
the statute and that the use of contributions first for reinsurance 
payments furthers the program's goal of stabilizing premiums. This 
commenter noted that section 1341 of the Affordable Care Act imposes 
few requirements on the expenditure of reinsurance contributions, 
stating that the statute does not specify that payments must be made to 
issuers and to the U.S. Treasury simultaneously, or that the U.S. 
Treasury must receive its full funding before reinsurance pool payments 
are made. Additionally, the commenter stated that section 1341 is 
silent on how reinsurance contributions are to be distributed if there 
are insufficient collections to satisfy the statutory obligations, 
providing HHS with flexibility to interpret and implement the statute 
and to decide the priority, method, and timing of the allocation of 
contributions. One commenter asked that we allocate contributions first 
to reinsurance payments and administrative expenses, and then roll over 
any excess funds for the subsequent benefit year, postponing the 
allocation of any contributions to the U.S. Treasury until the end of 
the reinsurance program. Some commenters suggested that under the 
revised allocation policy administrative expenses should have the same 
priority as payments to U.S. Treasury.
    Response: Section 1341 of the Affordable Care Act directs that a 
transitional reinsurance program be established in each State for a 
three-year period to reduce premiums and to ensure market stability for 
enrollees in the individual market as the new consumer protections and 
market reforms are implemented in 2014. The statute does not, however, 
prescribe how HHS should approach the distribution of reinsurance 
contributions if insufficient amounts are collected to fully fund all 
three components of the program (that is, reinsurance payments, 
administrative expenses, and payments to the U.S. Treasury). We agree 
that HHS has discretion to implement the program to determine the 
priority, method, and timing for the allocation of reinsurance 
contributions collected. Section 1341(b)(3)(B)(iii) uses mandatory 
language with respect to the collection of amounts for the reinsurance 
payment pool and states that the total contribution amounts ``shall . . 
. equal $10,000,000,000'' for 2014 and specific, lesser amounts for 
2015 and 2016. Thus, the statute explicitly directs the Secretary to 
collect these amounts for the reinsurance payment pool (based on the 
best estimates of the NAIC). On the other hand, the statute uses more 
permissive language in sections 1341(b)(3)(B)(ii) and (iv) with respect 
to the collection of amounts for administrative expenses and payments 
for the U.S. Treasury (that is, ``can'' and ``reflects'', 
respectively). We believe that this language, as well as language 
directing that amounts collected pursuant to section 1341(b)(3)(B)(iv) 
be collected ``in addition to the aggregate contribution amounts under 
clause (iii),'' as well as the general authority granted to the 
Secretary under section 1341(b)(3)(A) to design the method for 
determining the contribution amount toward reinsurance payments, gives 
the Secretary discretion to prioritize the collections for the 
reinsurance program. We also believe that it is significant that 
prioritizing the allocation of reinsurance contributions to the 
reinsurance payment pool furthers the statutory goals for this program 
by bringing more certainty to the individual market and helping 
moderate future premium increases.
    We are therefore finalizing our proposal, with one modification--we 
will not allocate reinsurance collections to administrative expenses or 
the U.S. Treasury until the reinsurance payment pool for a benefit year 
is funded. Thus, if our reinsurance collections fall short of our 
estimates for a particular benefit year, we will allocate reinsurance 
contributions collected first to the reinsurance payment pool, with any 
remaining amounts being then allocated to administrative expenses and 
the U.S. Treasury, on a pro rata basis. For example, as described in 
Table 1, for the 2014 benefit year, reinsurance contributions will go 
first to the reinsurance payment pool, up to $10 billion, and any 
additional contributions collected will be allocated to administrative 
expenses and the U.S. Treasury, on a pro rata basis, up to the total 
$12.02 billion.

 Table 1--Proportion of Reinsurance Contributions Collected Under the Uniform Reinsurance Contribution Rate for
   the 2014 Benefit Year for Reinsurance Payments, Payments to the U.S. Treasury, and Administrative Expenses
----------------------------------------------------------------------------------------------------------------
                                                                 If total contribution
                                        If total contribution    collections under the    If total contribution
                                        collections under the         2014 uniform        collections under the
                                             2014 uniform             reinsurance              2014 uniform
      Proportion or amount for:              reinsurance         contribution rate are         reinsurance
                                        contribution rate are    more than $10 billion,   contribution rate are
                                        less than or equal to    but less than or equal      more than $12.02
                                             $10 billion           to $12.02 billion             billion
----------------------------------------------------------------------------------------------------------------
Reinsurance payments.................  Total collections......  $10 billion............  Total collections less
                                                                                          $2.02 billion (U.S.
                                                                                          Treasury and
                                                                                          administrative
                                                                                          expenses).
Payments to the U.S. Treasury........  $0.....................  99.0 percent of the      $2 billion.
                                                                 total collections less
                                                                 $10 billion ($2
                                                                 billion/$2.02 billion).
Administrative expenses..............  $0.....................  1.0 percent of the       $20.3 million.
                                                                 total collections less
                                                                 $10 billion ($20.3
                                                                 million/$2.02 billion).
----------------------------------------------------------------------------------------------------------------

    Similarly, for the 2015 benefit year, in the event of a shortfall 
in our collections, reinsurance contributions will go first to the 
reinsurance payment pool, up to $6 billion, and any additional 
contributions collected will

[[Page 30259]]

be allocated to administrative expenses and the U.S. Treasury on a pro 
rata basis, up to the total $8.025 billion.

 Table 2--Proportion of Reinsurance Contributions Collected Under the Uniform Reinsurance Contribution Rate for
   the 2015 Benefit Year for Reinsurance Payments, Payments to the U.S. Treasury, and Administrative Expenses
----------------------------------------------------------------------------------------------------------------
                                                                 If total contribution
                                        If total contribution    collections under the    If total contribution
                                        collections under the         2015 uniform        collections under the
                                             2015 uniform             reinsurance              2015 uniform
      Proportion or amount for:              reinsurance         contribution rate are         reinsurance
                                        contribution rate are    more than $6 billion,    contribution rate are
                                        less than or equal to    but less than or equal      more than $8.025
                                              $6 billion           to $8.025 billion             billion
----------------------------------------------------------------------------------------------------------------
Reinsurance payments.................  Total collections......  $6 billion.............  Total collections less
                                                                                          $2.025 billion (U.S.
                                                                                          Treasury and
                                                                                          administrative
                                                                                          expenses).
Payments to the U.S. Treasury........  $0.....................  98.8 percent of the      $2 billion.
                                                                 total collections less
                                                                 $6 billion($2 billion/
                                                                 $2.025 billion).
Administrative expenses..............  $0.....................  1.2 percent of the       $25.4 million.
                                                                 total collections less
                                                                 $6 billion($25.4
                                                                 million/$2.025
                                                                 billion).
----------------------------------------------------------------------------------------------------------------

    We note that, in the 2015 Payment Notice, we amended 45 CFR 
153.405(c) to provide a bifurcated contribution collection schedule, 
under which contributing entities will submit reinsurance contributions 
via two payments. The first payment would have covered the contribution 
amount allocated to reinsurance payments and administrative expenses; 
the second payment would have covered the contribution amount allocated 
to payments to the U.S. Treasury for the applicable benefit year. In 
light of our revised allocation policy, contributions collected in the 
second collection will now be allocated for reinsurance payments to the 
extent the first collection does not fully fund the reinsurance payment 
pool. Therefore, for example, for the 2014 benefit year, if the first 
collection resulted in a total collection of $9 billion, contributions 
collected via the second collection up to $1 billion would be allocated 
for reinsurance payments. As we noted in the 2014 Payment Notice (78 FR 
15460), we have considered comments about deferring payments to the 
U.S. Treasury, but concluded that we have no authority to defer the 
collection of reinsurance contributions for those payments to the end 
of the program.
    Comment: In the 2015 Payment Notice, we established the reinsurance 
payment parameters for 2015. For 2015, we established an attachment 
point of $70,000, a reinsurance cap of $250,000, and a target 
coinsurance rate of 50 percent. Several commenters on this rule urged 
us to increase the premium stabilization effects of reinsurance by 
lowering the 2015 attachment point.
    Response: We intend to propose changes to the reinsurance 
parameters for 2015 generally consistent with these recommendations. 
Specifically, in the proposed 2016 Payment Notice, we intend to propose 
to lower the 2015 attachment point from $70,000 to $45,000. We may also 
propose to modify the target 2015 coinsurance rate based on estimates 
of roll-over of funding from 2014 and estimates of collections and 
payments for 2015. These proposals will be subject to notice and 
comment rulemaking.
Summary of Regulatory Changes
    We are finalizing this provision as proposed, with one 
modification: if reinsurance collections fall short of our estimates 
for a particular benefit year, we will allocate the reinsurance 
collections for that benefit year first to the reinsurance payment 
pool, and second to administrative expenses and payments to the U.S. 
Treasury on a pro rata basis.
3. Provisions for the Temporary Risk Corridors Program (Sec.  153.500)
    In the 2015 Payment Notice, we indicated that we would consider 
additional adjustments to the risk corridors program for benefit year 
2015. We did so recognizing that issuers of QHPs could face 
administrative costs and risk pool uncertainties from a number of 
sources in 2015. We believe those QHP issuers will face pricing 
uncertainties related to:
     Uncertainties in the number of renewals of plans that do 
not comply with 2014 market reforms and rating rules--States continue 
to weigh whether to permit transitional plans or whether to extend the 
transitional policy, and in States where those decisions have been 
publicized, the willingness of issuers in those States to continue to 
offer transitional plans remains unclear;
     The effects on the risk pool of the phase-out of high risk 
pools--this phase-out leads to uncertainty in the estimate of likely 
claims costs from these individuals;
     The greater difficulty and additional time it will take to 
fully assess the risk profile of 2014 enrollees given the six-month 
initial open enrollment period--issuers will have a shorter 2014 claims 
history on which to base modeling; and
     Uncertainty estimating the number of individuals in 
reinsurance-eligible plans, and the number of covered lives for which 
reinsurance contributions will be paid.
    As we discussed in the proposed rule, because relevant data will be 
difficult to obtain in the near term, we believe these uncertainties 
will continue through the summer of 2014, while issuers are in the 
process of setting their rates for the 2015 benefit year.
    We also recognized in the proposed rule that issuers of QHPs may 
face additional administrative costs in order to complete the 
transition into compliance with the 2014 market rules. In particular, 
issuers continue to face unanticipated infrastructure requirements 
around Exchanges in all States, including the distributed data 
collection methodology for risk adjustment and reinsurance.
    Therefore, in the proposed rule, we proposed to implement a 
national adjustment to the risk corridors formula set forth in subpart 
F of part 153 for each of the individual and small group markets by 
increasing the ceiling on allowable administrative costs (currently set 
at 20 percent, plus the

[[Page 30260]]

adjustment percentage, of after-tax premiums) by 2 percentage points. 
We also proposed to increase the profit margin floor in the risk 
corridors formula (currently set at 3 percent, plus the adjustment 
percentage, of after-tax premiums) by 2 percentage points. These 
increases to the profit floor and administrative cost ceiling in the 
risk corridors formula would increase a QHP issuer's risk corridors 
ratio if claims costs are unexpectedly high, thereby increasing risk 
corridors payments or decreasing risk corridors charges.
    We proposed these increases for 2015 for QHP issuers in every State 
because we believed that many of these additional administrative costs 
and risk pool uncertainties will be faced by issuers in all States, not 
just States adopting the transitional policy. Finally, under our 
authority under section 2718(c) of the PHS Act, we proposed that the 
MLR formula not take into account any additional risk corridors 
payments resulting from this adjustment. We requested comment on all 
aspects of this proposal.
    Comment: Several commenters supported our proposal to implement the 
proposed adjustment on a nationwide basis so that it would apply 
equally to QHP issuers in all States. No commenters suggested a 
regional or State-level approach.
    Response: We are finalizing the adjustment as proposed, and will 
apply the adjustment on a nationwide basis.
    Comment: One commenter stated its support of the proposed 
adjustment to raise the ceiling on administrative costs, but questioned 
the necessity of the proposed adjustment to profits.
    Response: We believe that an upward adjustment to the profit floor 
is necessary to account for unanticipated risk pool effects related to 
State decisions to adopt the transitional policy, the phase-out of high 
risk pools, and the six-month initial enrollment period, which would 
not be reflected in an issuer's administrative costs.
    Comment: A few commenters urged HHS to increase the magnitude of 
the proposed adjustment, and to extend the duration of the adjustment 
so that it would apply beyond the 2015 benefit year. One commenter 
believed that issuers could face significant operations and risk pool 
challenges for the 2015 benefit year, and recommended that HHS raise 
the ceiling on allowable administrative costs by 5 percentage points, 
instead of 2 percentage points, as proposed in the proposed rule. The 
commenters did not specifically indicate or estimate any additional or 
greater administrative costs or pricing uncertainties that would 
necessitate an increase beyond the proposed 2 percentage point 
increase. Several other commenters supported our proposal, stating that 
the 2 percentage point increase is reasonable to address additional 
administrative costs and operational uncertainties in the 2015 benefit 
year. One commenter noted that the proposed adjustment would suitably 
help smaller issuers forced to amortize fixed additional administrative 
costs over a smaller operational base.
    Response: We are finalizing the proposed 2 percentage point 
increase to the risk corridors allowable administrative cost ceiling 
and profit floor for benefit year 2015. Based on our internal estimates 
and the methodology used to determine the administrative cost 
adjustment to the MLR formula discussed elsewhere in this final rule, 
we believe that this 2 percentage point increase will suitably account 
for additional administrative costs and pricing uncertainties that QHP 
issuers will experience in benefit year 2015.
    Comment: One commenter requested that we modify the risk corridors 
formula so that reinsurance payments are not deducted from allowable 
costs, in order to enhance the protections of the risk corridors 
program.
    Response: Section 1342(c)(1)(B) of the Affordable Care Act states 
that allowable costs in the risk corridors calculation are to be 
reduced by risk adjustment and reinsurance payments received under 
sections 1341 and 1343. Therefore, we are maintaining the current 
definition of ``allowable costs'' for the risk corridors program.
    Comment: A number of commenters expressed concern with HHS's 
intention to implement the risk corridors program in a budget neutral 
manner, as described in the preamble to the proposed rule. These 
commenters were concerned that an approach that makes risk corridors 
payments only when sufficient risk corridors charges are received could 
result in reduced risk corridors payments to issuers. The commenters 
questioned how much the payment formula specified in the final rules 
for 2014 and 2015 may be relied upon in setting premiums, if payments 
might be reduced. Several commenters believed that an approach 
implementing the risk corridors program in a budget neutral manner was 
counter to the intent of Section 1342 of the Affordable Care Act, which 
states that the Secretary of HHS will establish a risk corridors 
program that is similar to the Medicare Part D risk corridors program, 
which is not budget neutral. One commenter believed that implementing 
the risk corridors program in a budget neutral manner would result in 
issuers sharing in the gains and losses of other issuers, would 
unintentionally affect market dynamics, and could result in solvency 
problems for some issuers if risk corridors receipts are insufficient 
to fully fund risk corridors payments.
    Response: We recognize the commenters' concerns. To provide greater 
clarity on how 2014 and 2015 payments will be made, we issued a 
bulletin on April 11, 2014, titled ``Risk Corridors and Budget 
Neutrality,'' describing how we intend to administer risk corridors in 
a budget neutral way over the three-year life of the program, rather 
than annually. Specifically, if risk corridors collections in the first 
or second year are insufficient to make risk corridors payments as 
prescribed by the regulations, risk corridors collections received for 
the next year will first be used to pay off the payment reductions 
issuers experienced in the previous year in a proportional manner, up 
to the point where issuers are reimbursed in full for the previous 
year, and remaining funds will then be used to fund current year 
payments. If any risk corridors funds remain after prior and current 
year payment obligations have been met, they will be held to offset 
potential insufficiencies in risk corridors collections in the next 
year.
    As we stated in the bulletin, we anticipate that risk corridors 
collections will be sufficient to pay for all risk corridors payments. 
That said, we appreciate that some commenters believe that there are 
uncertainties associated with rate setting, given their concerns that 
risk corridors collections may not be sufficient to fully fund risk 
corridors payments. In the unlikely event of a shortfall for the 2015 
program year, HHS recognizes that the Affordable Care Act requires the 
Secretary to make full payments to issuers. In that event, HHS will use 
other sources of funding for the risk corridors payments, subject to 
the availability of appropriations.
    Comment: One commenter asked that HHS apply this adjustment to all 
States for benefit year 2014. The commenter believed that this 
adjustment was necessary for the 2014 benefit year because of changes 
in the composition of the risk pools that were not anticipated when 
rates for the 2014 benefit year were developed.
    Response: In the 2015 Payment Notice, we implemented an adjustment 
to the risk corridors formula for the 2014 benefit year that would help 
to further mitigate any unexpected losses for issuers of plans subject 
to risk corridors attributable to the effects of the transitional 
policy. In States that adopt the transitional policy, this

[[Page 30261]]

adjustment would increase a QHP issuer's risk corridors ratio and its 
risk corridors payment amount to help offset losses that might occur 
under the transitional policy as a result of increased claims costs and 
unanticipated changes in the risk pool that were not accounted for when 
setting 2014 premiums. For the reasons discussed in the 2015 Payment 
Notice, we believe that this adjustment will suitably offset any losses 
that QHP issuers may incur as a result of the transitional policy, and 
that no further risk corridors adjustments are necessary for the 2014 
benefit year.
    Comment: One commenter requested that HHS allow non-QHPs to 
participate in the risk corridors program, so that plans that comply 
with requirements of the Affordable Care Act could receive risk 
corridors protections that would help to ameliorate changes in the risk 
pool resulting from the transitional policy.
    Response: We believe the risk corridors program is intended to 
share risk and stabilize premiums for QHPs (and certain substantially 
similar off-Exchange plans). Therefore, we decline to expand the 
participation criteria for this risk corridors adjustment. Data from 
all individual and small group market plans that comply with the 
Affordable Care Act market reforms will be included in a QHP issuer's 
risk corridors calculation as described in 45 CFR part 153, subpart F. 
However, consistent with our existing regulations set forth in subpart 
F of part 153, any risk corridors payment or charge amount, including 
any adjusted payment or charge amount resulting from the adjustment 
implemented in this final rule or the 2015 Payment Notice, will be 
calculated for a QHP issuer in proportion to the premium revenue that 
the issuer receives from its QHPs, as defined in Sec.  153.500.
    Comment: One commenter requested clarification about whether HHS 
intends to implement risk corridors budget neutrality on a national or 
a State level. The commenter believed that budget neutrality should be 
applied on an individual State level, because applying budget 
neutrality on a national level would add uncertainty to the rate 
setting process.
    Response: The risk corridors program is a Federally administered 
program that applies uniformly to all States.
Summary of Regulatory Changes
    We are finalizing our policy to increase the administrative cost 
ceiling and the profit margin floor by 2 percentage points, as 
proposed.

F. Part 154--Health Insurance Issuer Rate Increases: Disclosure and 
Review Requirements

Definition of Product (Sec.  154.102)
    See the discussion in section III.C.1.b, ``Product Discontinuance 
and Uniform Modification of Coverage Exceptions to Guaranteed 
Renewability Requirements.''

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

1. Subpart B--General Standards Related to the Establishment of the 
Exchange Non-Interference With Federal Law and Non-Discrimination 
Standards (Sec.  155.120)
    Under 45 CFR 155.120(c), States and Exchanges, when carrying out 
the requirements of Part 155, must comply with any applicable non-
discrimination statutes, and must not discriminate on the basis of 
race, color, national origin, disability, age, sex, gender identity or 
sexual orientation. The non-discrimination provisions of Sec.  
155.120(c) apply not just to the Exchanges themselves, but to Exchange 
contractors and all Exchange activities (including but not limited to 
marketing, outreach and enrollment), Navigators, non-Navigator 
assistance personnel, certified application counselors, and 
organizations designated to certify their staff and volunteers as 
certified application counselors (78 FR 42829). Under 45 CFR 155.105(f) 
this non-discrimination requirement applies to the FFEs.
    In the proposed rule, we proposed creating a limited exception to 
these non-discrimination requirements for an organization receiving 
Federal funds to provide services to a defined population under the 
terms of Federal legal authorities (for example, a Ryan White HIV/AIDS 
Program or an Indian health provider) that participates in the 
certified application counselor program under 45 CFR 155.225, to permit 
that organization to limit its provision of certified application 
counselor services to the same defined population without violating the 
non-discrimination provisions in existing Sec.  155.120(c). The intent 
of this proposal was to allow such organizations to provide certified 
application counselor services and assist their defined populations in 
enrolling in health coverage offered through the Exchanges consistent 
with the Federal legal authorities under which such organizations 
operate.
    To the extent that one of these organizations decides to take 
advantage of this exception, but is approached for certified 
application counselor services by an individual who is not included in 
the defined population that the organization serves, we proposed that 
the organization must refer the individual to other Exchange-approved 
resources, such as the toll-free Exchange call center, a Navigator, 
non-Navigator assistance personnel, or another designated certified 
application counselor organization, that is able to provide assistance 
to the individual. However, to the extent that one of these 
organizations decides that it will not take advantage of this proposed 
exception, we proposed that the non-discrimination provisions in 
existing Sec.  155.120(c) would apply. Therefore, if an organization 
decides that it will provide certified application counselor services 
to individuals that are not included in the defined population that it 
serves, it must provide those services to all individuals consistent 
with the non-discrimination provisions in existing Sec.  155.120(c).
    We also proposed to make a number of technical changes to existing 
Sec.  155.120(c) to accommodate this new limited exception.
    Comment: Commenters generally supported the proposed exception to 
the non-discrimination standards to allow an organization receiving 
Federal funds to limit their provision of assister services to that 
population. Several commenters requested that HHS clarify that these 
organizations are prohibited from discriminating against individuals 
who are within their defined population that the organization serves 
under the terms of Federal legal authorities.
    Response: With respect to the clarification requested from 
commenters, we are revising paragraph (c)(2) of Sec.  155.120 to 
clarify that organizations that limit their provision of certified 
application counselor services to a defined population under this 
exception must still comply with the non-discrimination provisions in 
paragraph (c)(1) with respect to the provision of these services to 
that defined population. For example, a Ryan White organization that 
participates in the certified application counselor program and limits 
its provision of certified application services to its target 
population under Federal legal authorities cannot discriminate among 
members of that target population on the basis of race, color, national 
origin, disability, age, sex, or any of the other prohibited factor in 
45 CFR 155.120(c) when providing those certified application counselor 
services.
    We are also making technical revisions to Sec.  155.120(c) to 
clarify here

[[Page 30262]]

that paragraph (1)(i) is included to highlight to organizations their 
obligations under other laws. Each organization needs to determine what 
other non-discrimination laws, which may be Federal or State laws, 
apply to them. We note that the reference to statutes incorporates 
regulatory requirements issued pursuant to statute. Paragraph (1)(ii), 
on the other hand, references the non-discrimination obligations that 
exist under this Rule.
    Consistent with this technical revision, we have made a change to 
the text of Sec.  155.120(c) to clarify that the exception to the non-
discrimination requirement at Sec.  155.120(c)(2) only applies in 
regard to the non-discrimination provisions created under this Rule. We 
cannot create exceptions in regard to requirements that exist under 
other laws.
    Comment: One commenter recommended extending the exception to 
organizations that provide services to defined populations that speak 
languages other than English, regardless of receipt of Federal funds to 
provide services to these populations.
    Response: We understand the desire for organizations interested in 
targeting specific populations to have flexibility to limit their 
provision of certified application counselor services to these 
populations. However, we believe it is appropriate to limit the 
exception to organizations that receive Federal funds to provide 
services to a defined population under Federal legal authorities 
because their beneficiaries are generally defined under Federal law. 
Although other organizations may choose to target the services they 
generally provide to specific populations, we do not believe it is 
appropriate to extend the exception in Sec.  155.120(c)(2) to these 
organizations. If all organizations were allowed to target certified 
application counselor services to specific, defined populations, the 
situation could arise where a consumer may not be able to readily 
access certified application counselor services because the consumer is 
not a part of a target population being serviced through the 
organizations in their area.
Summary of Regulatory Changes
    We are finalizing our proposals to make technical changes to Sec.  
155.120(c) and add a new limited exception to the non-discriminations 
provision in Sec.  155.120(c). We are also further revising new Sec.  
155.120(c)(2) to clarify that organizations that limit their provision 
of certified application counselor services to a defined population 
under this exception must still comply with the non-discrimination 
provisions in paragraph (c)(1)(ii) with respect to the provision of 
these services to that defined population.
2. Subpart C--General Functions of an Exchange
a. Civil Money Penalties for Violations of Applicable Exchange 
Standards by Consumer Assistance Entities in Federally-Facilitated 
Exchanges (Sec.  155.206)
    In Sec.  155.206, as part of HHS's enforcement authority under 
section 1321(c)(2) of the Affordable Care Act, we proposed to provide 
for the imposition of CMPs on Navigators, non-Navigator assistance 
personnel, and certified application counselors and certified 
application counselor designated organizations in FFEs, including State 
Partnership Exchanges, that do not comply with applicable Federal 
requirements. We explained that this proposal was designed to deter 
these entities and individuals from failing to comply with the Federal 
requirements that apply to them, and to ensure that consumers 
interacting with the Exchange receive high-quality assistance and 
robust consumer protection. We noted that as a general principle, while 
HHS intends to assess CMPs when appropriate, consistent with this final 
rule, we also intend to continue to work collaboratively with consumer 
assistance entities and personnel to prevent noncompliance issues and 
address any that arise before they reach the level where CMPs might be 
assessed.
    The Secretary, under the authority of sections 1311(i) and 
1321(a)(1) of the Affordable Care Act, has previously established a 
range of consumer assistance programs to help consumers apply for and 
enroll in QHPs and insurance affordability programs through the 
Exchange. These consumer assistance programs include the Navigator 
program described at section 1311(i) of the Affordable Care Act and 45 
CFR 155.210; the consumer assistance, outreach, and education functions 
authorized by section 1321(a)(1) of the Affordable Care Act and 
established at 45 CFR 155.205(d) and (e), which can include a non-
Navigator assistance personnel program; and the certified application 
counselor program authorized by section 1321(a)(1) of the Affordable 
Care Act and set forth at 45 CFR 155.225. Under these authorities and 
the authority granted to the Secretary by section 1321(c)(1) of the 
Affordable Care Act, the FFE has implemented a Navigator and certified 
application counselor program in all States that did not elect to 
establish an Exchange, and has implemented a non-Navigator assistance 
program in some of those States through an enrollment assistance 
contract.
    Under section 1321(c)(2) of the Affordable Care Act, the provisions 
of section 2723(b) of the PHS Act \21\ apply to the Secretary's 
enforcement, under section 1321(c)(1) of the Affordable Care Act, of 
the standards established by the Secretary under section 1321(a)(1) of 
the Affordable Care Act for meeting the requirements under title I of 
the Affordable Care Act, including the establishment and operation of 
Exchanges, without regard to any limitation on the application of the 
provisions of section 2723(b) of the PHS Act to group health plans. 
Section 2723(b) of the PHS Act provides the Secretary with authority to 
assess CMPs against health insurance issuers that fail to meet certain 
Federal requirements set forth in the PHS Act that apply to group 
health plans, in circumstances where, in the Secretary's determination, 
the State that regulates the issuer has failed to ``substantially 
enforce'' those requirements. We interpret the cross-reference to 
section 2723(b) of the PHS Act in section 1321(c)(2) of the Affordable 
Care Act as providing the Secretary with authority to assess CMPs to 
enforce requirements established under section 1321(a)(1) of the 
Affordable Care Act against any entity subject to those requirements, 
under circumstances where the Secretary is exercising her authority 
under section 1321(c)(1) of the Affordable Care Act. For purposes of 
this final rule, we would consider that any State that has not elected 
to establish an Exchange, and in which the Secretary has therefore had 
to establish and operate an Exchange under section 1321(c)(1), is not 
``substantially enforcing'' the requirements related to Exchanges that 
the Secretary has established under section 1321(a)(1).
---------------------------------------------------------------------------

    \21\ Section 1321(c)(2) of the Affordable Care Act erroneously 
cites to section 2736(b) of the PHS Act instead of 2723(b) of the 
PHS Act. This was clearly a typographical error, and we have 
therefore interpreted section 1321(c)(2) of the Affordable Care Act 
to incorporate section 2723(b) of the PHS Act.
---------------------------------------------------------------------------

    Accordingly, HHS has the authority under section 1321(c)(2) of the 
Affordable Care Act to assess CMPs against Navigators, non-Navigator 
assistance personnel, and certified application counselors and 
certified application counselor designated organizations in FFEs, 
including State Partnership Exchanges, for violations of the 
requirements of the Navigator, non-Navigator, and certified application 
counselor programs that the Secretary

[[Page 30263]]

established under section 1321(a)(1) of the Affordable Care Act. This 
rule sets forth the circumstances under which the Secretary would 
exercise this authority, and is based on the enforcement scheme laid 
out in section 2723(b) of the PHS Act, and the implementing regulations 
at 45 CFR 150.301 et seq.
    In Sec.  155.206(a), we proposed to establish the scope and purpose 
of the CMP provisions and explained when and against whom HHS would 
assess a CMP under this rule. At Sec.  155.206(a)(2), we proposed that 
HHS could permit an entity or individual to whom it has issued a notice 
of assessment of CMP to enter into a corrective action plan instead of 
paying the CMP. We specified that permitting an entity to enter into a 
corrective action plan would not limit HHS's authority to require 
payment of the assessed CMP if the corrective action plan is not 
followed. We explained that this approach would allow us not only to 
penalize violations if necessary, but also to prioritize working 
collaboratively with consumer assistance entities to ensure that 
improvements are made and future violations are prevented. We also 
explained that this approach would be consistent with the limitation on 
imposing CMPs that is set forth at PHS Act section 
2723(b)(2)(C)(iii)(II).
    We requested comments on whether we should provide for an expedited 
process through which HHS may assess and impose CMPs, if extenuating 
circumstances exist or if necessary to protect the public. We also 
considered implementing an approach that would give the HHS Office of 
Inspector General (OIG) concurrent authority with CMS to enforce 
violations under this section, and we requested comments on such an 
approach and how it might be structured.
    In Sec.  155.206(b), we proposed that the individuals and entities 
who would be subject to HHS' enforcement authority under this proposal 
would include the following entities in FFEs, including in State 
Partnership Exchanges: Navigators, non-Navigator assistance personnel 
(also referred to as in-person assistance personnel) authorized under 
Sec.  155.205(d) and (e), and certified application counselors and 
organizations designated as certified application counselor 
organizations. We explained that we refer to these individuals and 
entities as ``consumer assistance entities,'' but these CMPs could be 
assessed against both entities and individuals. We requested comment on 
whether all of the individuals and entities listed in proposed Sec.  
155.205(b) should be subject to CMPs, and on whether other entities and 
individuals should be added to that list.
    In Sec.  155.206(c), we proposed the grounds on which HHS could 
assess CMPs on the entities and individuals specified in Sec.  
155.206(b). Section 1321(c)(2) of the Affordable Care Act authorizes 
the Secretary to enforce the requirements of section 1321(a)(1) of the 
Affordable Care Act, which include the requirements established by the 
Secretary regarding Exchange consumer assistance functions. This 
statutory provision authorizes HHS to assess a CMP or, in lieu of a 
CMP, a corrective action plan against Navigators, non-Navigator 
assistance personnel, certified application counselors, and certified 
application counselor organizations in FFEs if HHS determines that 
these individuals or entities are not in compliance with the Exchange 
standards applicable to them. We proposed that these Exchange standards 
would include any applicable regulations implemented under title I of 
the Affordable Care Act, as interpreted through applicable HHS 
guidance, such as the regulations governing consumer assistance tools 
and programs of an Exchange at Sec.  155.205; those governing 
Navigators at Sec.  155.210 and Navigators in FFEs at Sec.  155.215; 
those governing certified application counselors at Sec.  155.225; and 
those under Sec.  155.215 governing non-Navigator assistance personnel 
in FFEs; as well as any applicable HHS guidance interpreting an 
existing regulatory or statutory provision.
    We note that Sec.  155.285 of this final rule extends CMPs to 
consumer assistance entities who misuse or impermissibly disclose 
personally identifiable information in violation of section 1411 of the 
Affordable Care Act. Therefore, we have not addressed penalties for 
those actions here. That section also extends CMPs to anyone providing 
false or fraudulent information on an Exchange application. 
Consequently, some conduct by consumer assistance entities may warrant 
CMPs under either Sec.  155.285 or Sec.  155.206, and in such cases we 
believe HHS has discretion to determine whether to assess a CMP under 
this regulation or under Sec.  155.285 of this subpart. However, we 
proposed in Sec.  155.206(c) that HHS would not assess a CMP under this 
section if a CMP has already been assessed for the same conduct under 
Sec.  155.285.
    In Sec.  155.206(d), we proposed the basis for initiating an 
investigation of a potential violation. We proposed that HHS could 
initiate an investigation based on any information it receives 
indicating that a consumer assistance entity might be in noncompliance 
with applicable Exchange standards.
    In Sec.  155.206(e), (f) and (g), we proposed the process that HHS 
would follow to investigate potential violations in order to determine 
whether the consumer assistance entity has engaged in noncompliance of 
applicable Exchange standards. Under Sec.  155.206(e), we proposed that 
if HHS learns of a potential violation through the means described in 
paragraph (d) in this section and determines that further investigation 
is warranted, HHS would provide written notice of its investigation to 
the consumer assistance entity. Such notice would describe the 
potential violation, provide 30 days from the date of the notice for 
the consumer assistance entity to respond and provide HHS with 
information and documents, including information and documents to 
refute an alleged violation, and would state that a CMP might be 
assessed if the consumer assistance entity fails to refute the 
allegations in HHS' determination.
    In Sec.  155.206(f), we proposed a process for a consumer 
assistance entity to request an extension from HHS when the entity 
cannot prepare a response to HHS's notice of investigation within the 
30 days provided in the notice. We proposed that if HHS granted the 
extension, the responsible entity would be required to respond to the 
notice of investigation within the time frame specified in HHS's letter 
granting the extension of time, and failure to respond within 30 days, 
or within the extended time frame, could result in HHS's imposition of 
the CMP that would apply based upon HHS's initial determination of a 
potential violation as set forth in the notice of investigation under 
Sec.  155.206(e).
    In Sec.  155.206(g), we proposed that HHS could review and consider 
documents or information received or collected in accordance with 
paragraph (d)(1) of this section or provided by the consumer assistance 
entity in response to receiving a notice in accordance with paragraph 
(e)(2) of this section. We also proposed that HHS may conduct an 
independent investigation into the alleged violation, which may include 
site visits and interviews, if applicable, and may consider the results 
of this investigation in its determination.
    In Sec.  155.206(h), we proposed the factors that HHS would use to 
determine the appropriate CMP amount, and to determine whether it would 
be appropriate to offer the entity or individual an opportunity to 
enter into a corrective action plan in place of the CMP. These proposed 
factors included HHS's assessment of the consumer

[[Page 30264]]

assistance entity's previous or ongoing record of compliance; the 
gravity of the violation, as determined in part by the frequency of the 
violation and the financial harm incurred by a consumer; and the 
culpability of the consumer assistance entity, as determined, in part, 
by whether the entity received payment for committing the violation.
    Section 2723(b)(2)(C)(i) of the PHS Act limits the amount of CMPs 
authorized under section 1321(c)(2) of the Affordable Care Act to $100 
for each day for each individual directly affected. Therefore in Sec.  
155.206(i), we proposed that the maximum daily amount of penalty 
assessed for each violation would be $100 for each day, for each 
consumer assistance entity, for each individual directly affected by 
the entity's non-compliance. We also proposed that, consistent with the 
approach under existing rules at 45 CFR 156.805(c), where HHS cannot 
determine the number of individuals directly affected, HHS may 
reasonably estimate this number based on available information, such as 
data from an FFE Navigator grantee's quarterly or weekly report 
concerning the number of consumers assisted. We requested comment on 
whether we should implement a cap on the total penalty that could be 
assessed by HHS.
    In proposed Sec.  155.206(j), we proposed that nothing in this 
section would limit HHS's authority to settle any issue or case 
described in the notice furnished in accordance with paragraph (e), or 
to compromise on any CMP provided for in this section.
    Section 2723(b)(2)(C)(iii) of the PHS Act places certain 
limitations on CMPs authorized under section 1321(c)(2) of the 
Affordable Care Act, including the limitation that HHS will not assess 
a CMP where the entity did not know, or exercising reasonable diligence 
would not have known, of the violation. We proposed to implement these 
limitations in Sec.  155.206(k). We also proposed, based on the HIPAA 
enforcement structure at 45 CFR 150.341, that the burden is on the 
consumer assistance entity to establish that the circumstances 
triggering these limitations existed.
    In Sec.  155.206(l), we proposed standards for notifying consumer 
assistance entities of the intent to assess a CMP, which notice would 
include an explanation of the entity's right to an appeal pursuant to 
the process set forth at 45 CFR Part 150, Subpart D, as provided in 
proposed Sec.  155.206(m). We sought comment on whether all aspects of 
that process should be applicable to appeals of these CMPs. Finally, in 
Sec.  155.205(n), we proposed that HHS may require payment of the 
proposed CMP if the consumer assistance entity does not timely request 
a hearing.
    We also requested comment on whether other provisions of 45 CFR 
Part 150 should be adopted and made applicable to the proposed 
enforcement scheme, and whether a specific limitations period should 
apply, and if so, what limitations period would be appropriate for 
violations of applicable Exchange standards by consumer assistance 
entities in FFEs.
    Comment: We received many comments in support of the proposed CMP 
provisions under Sec.  155.206. Some commenters expressed appreciation 
that the proposed rule struck a balance between holding consumer 
assistance entities accountable and protecting the public from 
wrongdoing, on the one hand, while not being overly punitive, on the 
other. A few commenters were concerned that the threat of CMPs might 
discourage participation in the Navigator, non-Navigator assistance 
personnel, or certified application counselor programs. Some commenters 
expressed concern that CMPs for violations of consumer assistance 
entity requirements would be an extreme response to such noncompliance, 
and one commenter expressed the view that the imposition of financial 
responsibility on consumer assistance entities muddies the distinction 
between these entities and agents and brokers.
    Response: We do not see similarities between these penalties and 
the licensing, errors and omissions coverage, or other financial 
responsibility requirements that States may impose on agents and 
brokers as a prerequisite to performing the duties of an agent or 
broker. Consumer assistance entities will have no required fees or 
payments under this section unless they violate the Federal 
requirements that apply to them as described in Sec.  155.206(c). On 
the other hand, States may require agents and brokers to pay licensing, 
errors and omissions coverage, or other financial responsibilities up 
front before acting as a licensed agent or broker. Any CMPs assessed 
under this provision would be penalties for noncompliance, aimed at 
discouraging and rectifying violations of Federal requirements by 
consumer assistance entities in the FFEs, rather than financial 
conditions of participation in the Navigator, non-Navigator assistance 
personnel, or certified application counselor programs for the FFEs. 
Additionally, we believe that many aspects of the final rule help 
ensure that individuals and entities are not deterred from performing 
consumer assistance functions in good faith, while also serving to 
protect members of the public from potential wrongdoing by consumer 
assistance entities. For example, the rule requires HHS to make 
individualized inquiries into the nature and consequences of each 
violation, and provides consumer assistance entities being investigated 
with the opportunity to explain the reasons behind their conduct. 
Further, the rule provides HHS with the opportunity to work 
collaboratively with entities by entering into a corrective action plan 
in lieu of paying a CMP, and HHS will continue to assist entities with 
avoiding and informally resolving any violations.
    Comment: A number of commenters recommended that HHS extend the CMP 
provisions to cover consumer assistance entities operating in State 
Exchanges, work in conjunction with State Exchanges when implementing 
this section, or require State Exchanges to implement similar 
provisions. Some commenters appeared to suggest that HHS should have 
the ability to assess CMPs against consumer assistance entities in 
State Exchanges where the State fails to substantially enforce the 
Federal standards applicable to consumer assistance entities.
    Response: Given the nature of the relationship between HHS and 
consumer assistance entities in FFEs, including the existence of formal 
agreements or grants between HHS and the FFE consumer assistance 
entities subject to these CMPs, and HHS's responsibility for providing 
training, technical assistance, and support to consumer assistance 
entities in FFEs, we believe that HHS is in the best position to 
exercise primary enforcement authority for Federal requirements that 
apply to consumer assistance entities in FFEs, including State 
Partnership Exchanges. At this time, we are not extending the CMP 
provisions under Sec.  155.206 to apply to consumer assistance entities 
working in State Exchanges. We will instead look to each State Exchange 
to exercise its authority to enforce any Federal requirements 
applicable to these assistance programs in the State Exchange. We may 
take additional action in the future.
    Comment: Some commenters believed that the proposed grounds for 
assessing CMPs in proposed Sec.  155.206(c) would not permit CMPs for 
violations of State Partnership Exchange rules where those rules differ 
from FFE rules.
    Response: The CMP provisions under Sec.  155.206 are directed at 
consumer assistance entities that violate Federal requirements for 
assisters in FFEs, including assisters in State Partnership Exchanges. 
Under current

[[Page 30265]]

Sec.  155.210(c)(1)(iii), as well as provisions finalized in this 
rulemaking at Sec.  155.215(f) and Sec.  155.225(d)(8), the consumer 
assistance entities subject to those regulations must meet any State 
licensing, certification, or other standards prescribed by the State, 
if applicable, so long as such standards do not prevent the application 
of the provisions of title I of the Affordable Care Act. Although HHS 
has authority under these provisions to enforce State requirements 
applicable to consumer assistance entities because the State 
requirements are incorporated into the entities' Federal regulatory 
requirements, at this time we do not intend to enforce State 
requirements using Sec.  155.206. We believe that States are in the 
best position to enforce their own requirements.
    Comment: We requested comment on whether CMS should have concurrent 
enforcement authority under the provisions of Sec.  155.206 with the 
HHS Office of the Inspector General (OIG), and if so, what process OIG 
would follow in enforcing these CMPs. The vast majority of commenters 
who responded to this request recommended against concurrent 
enforcement authority and believed that CMS is better situated than OIG 
to enforce CMPs for noncompliant consumer assistance entities. These 
commenters reasoned that because of CMS's expertise and familiarity 
with the outreach and enrollment process, as well as CMS's working 
relationships with consumer assistance entities, CMS would be the most 
effective enforcement authority and is in a better position to 
effectively collaborate with consumer assistance entities and pursue 
corrective action, when appropriate, to resolve issues that may arise. 
Only one commenter expressed a preference for including concurrent 
enforcement authority in Sec.  155.206 so that the OIG could exercise 
enforcement authority under appropriate circumstances.
    Response: We agree with the commenters who recommended against 
concurrent enforcement authority that, at least initially, CMS should 
have sole responsibility for CMP enforcement against noncompliant 
consumer assistance entities under this section. CMPs assessed under 
this section would be penalties for programmatic violations, and we 
agree that CMS is in the best position to investigate and enforce its 
own program standards. Additionally, consumer assistance entities who 
provide false or fraudulent information in an Exchange application on a 
consumer's behalf, or who improperly use or disclose a consumer's 
personally identifiable information, might be in violation of another 
CMP provision finalized in this rule, 45 CFR 155.285, which provides 
concurrent enforcement authority for CMS and OIG. Therefore, certain 
consumer assistance entity violations might fall under OIG 
jurisdiction, when appropriate. Additionally, as we indicated in the 
preamble to the proposed rule, we intend to continue to work 
collaboratively with consumer assistance entities to address 
noncompliance issues before they reach the level where a CMP might be 
assessed. Consequently, we do not anticipate that CMS will assess a 
large volume of CMPs against consumer assistance entities for 
noncompliance with Federal requirements. However, we note that we are 
not foreclosing the possibility that we would pursue the addition of 
OIG concurrent enforcement authority for these provisions at some point 
in the future.
    Comment: We also requested comments on whether we should implement 
an expedited process through which HHS might assess and impose CMPs if 
extenuating circumstances exist or if necessary to protect the public. 
One commenter did not believe an expedited process was necessary 
because the regulation as proposed contained sufficient mechanisms to 
prevent or address abuse by consumer assistance entities. Another 
commenter suggested that an expedited process should only be 
implemented at the request of the entity being investigated to ensure 
that no entity was denied adequate time to gather evidence and respond 
to the investigation.
    Response: We agree with the commenters' concerns. To ensure that 
consumer assistance entities are afforded adequate due process, we have 
not provided for an expedited investigative process in finalizing these 
provisions. Where exceptional circumstances exist, or if necessary to 
protect the public, HHS has the option to take swift action to address 
consumer assistance entity noncompliance by using remedies available 
pursuant to its agreements with these entities, such as the terms and 
conditions of Federal Navigator grants, agreements with Enrollment 
Assistance Program entities that provide non-Navigator in-person 
assistance, or agreements between HHS and certified application 
counselor designated organizations. If the circumstances warrant, we 
also will consider referring cases to appropriate law enforcement 
officials. Additionally, as we noted in the preamble to the proposed 
rule, we intend to continue to work collaboratively with consumer 
assistance individuals and entities to prevent noncompliance issues and 
address any problems that arise before they reach the level where CMPs 
might be assessed.
    Comment: Many commenters supported HHS's intention to prioritize 
the use of alternative remedies over assessment of CMPs. A large number 
of commenters strongly supported giving consumer assistance entities 
the opportunity to enter into a corrective action plan to correct the 
violation instead of paying a CMP. Some recommended that HHS require 
these entities to participate in a corrective action plan before 
assessing a CMP.
    Response: We agree that alternative remedies should be used where 
appropriate, and we have crafted this provision to include flexibility 
for HHS to help prevent and resolve noncompliance issues in lieu of 
collecting a CMP. However, we do not believe that requiring corrective 
action plans from consumer assistance entities will be a suitable 
response to every instance of noncompliance. For example, if a consumer 
assistance entity's conduct is so egregious that in order to protect 
the public we have terminated our relationship with the entity pursuant 
to our agreement or contract with the entity, a corrective action plan 
may not be appropriate. Therefore, we are finalizing Sec.  155.206(a) 
as proposed.
    Comment: We requested comment on whether all of the consumer 
assistance individuals and entities listed in proposed Sec.  155.206(b) 
should be subject to CMPs, and on whether other entities and 
individuals should be added to that list. Many commenters supported the 
inclusion of Navigator individuals and organizations, non-Navigator 
assistance personnel and entities, and certified application counselor 
designated organizations and individual certified application 
counselors operating in an FFE, as proposed. Several commenters 
recommended that volunteers serving as Navigators, non-Navigator 
assistance personnel, or certified application counselors should be 
exempt from CMPs under this section. One commenter argued that the 
Volunteer Protection Act protects volunteer certified application 
counselors from liability under this section. Another commenter 
suggested that Exchange employees should also be subject to CMPs.
    Response: We believe that the consumer protection interests that 
are served by the CMP provisions under Sec.  155.206 are equally 
important whether they apply to volunteer or paid staff providing 
application assistance. The

[[Page 30266]]

application of the Volunteer Protection Act of 1997 to CMPs assessed 
against volunteers of Navigator, non-Navigator assistance, or certified 
application counselor organizations would be examined by courts or 
other reviewing entities on a case-by-case basis. We further clarify 
that no Navigators, non-Navigator assistance personnel, or certified 
application counselors in the FFEs would be volunteers for the Federal 
government because the consumer assistance entities with which they are 
affiliated provide services to the public, not to the Federal 
government.
    While we will monitor the activities of FFE employees carefully and 
reserve the right to add them to this rule in the future, we do not 
believe it is necessary to extend these penalties to FFE employees at 
this time, because in our view, the range of employment-based remedies 
available to the FFE provides adequate enforcement authority in the 
event of employee misconduct. In addition, FFE employees might be 
subject to CMPs under Sec.  155.285 if they provide false or fraudulent 
information in an Exchange application or misuse consumers' personally 
identifiable information. We are finalizing Sec.  155.206(b) as 
proposed.
    Comment: Many commenters addressed our proposed grounds for 
assessing CMPs at Sec.  155.206(c). Some commenters worried that the 
proposed grounds for assessing penalties were stated too broadly, and 
did not provide adequate notice to consumer assistance entities and 
personnel regarding the specific requirements and standards that would 
apply when a determination is made as to whether a CMP should be 
assessed for noncompliance. These commenters recommended that we 
specify the statutory and regulatory requirements with which consumer 
assistance entities and personnel must comply to avoid potential CMPs, 
and various commenters suggested that these might include the 
regulatory requirements specific to consumer assistance entities at 45 
CFR 155.205, 155.210, 155.215, and 155.225; statutory and regulatory 
nondiscrimination requirements at 42 U.S.C. 18116, 45 CFR 155.105(f), 
and 155.120(c); and the Affordable Care Act requirements on health 
insurance consumer information at 42 U.S.C. 300gg-93, and affordable 
choices of health benefit plans at 42 U.S.C. 18031.
    Response: We agree that more specificity regarding the FFE 
requirements and standards that, if violated, might trigger CMPs under 
this section would help provide adequate notice to consumer assistance 
entities and help prevent inadvertent violations of those standards. 
Therefore, we have modified Sec.  155.206(c) to make more clear that 
the requirements and standards applicable to consumer assistance 
entities under this section refer to the Federal regulatory 
requirements applicable to consumer assistance entities that have been 
promulgated by the Secretary pursuant to section 1321(a)(1) of the 
Affordable Care Act, as well as the terms of any agreements, contracts, 
and grant terms and conditions between the consumer assistance entity 
and HHS, to the extent that these documents interpret those Federal 
regulatory requirements or set forth procedures for compliance with 
them. We note that HHS has authority to assess CMPs under section 
1321(c)(2) of the Affordable Care Act only to enforce requirements that 
the Secretary establishes under section 1321(a)(1) of the Affordable 
Care Act. Therefore, Federal requirements that have not been 
established pursuant to section 1321(a)(1) of the Affordable Care Act 
could not be enforced pursuant to this section.
    We have not included in the final rule a more specific list of the 
requirements that could be enforced under this section because we 
anticipate that these may change over time. However, we anticipate that 
any list of such requirements would include, but not be limited to, the 
requirements specific to consumer assistance entities at 45 CFR 
155.205(c)-(e), 155.210, 155.215, and 155.225; the Exchange 
nondiscrimination requirements at 45 CFR 155.105(f) and 155.120(c); and 
the Exchange privacy and security requirements implemented pursuant to 
45 CFR 155.260. Consumer assistance entities would also be required to 
comply with other future requirements when any such requirements go 
into effect.
    Comment: Some commenters were concerned that consumer assistance 
entities might be penalized for inadvertent, technical, or 
administrative errors, or misunderstandings, and wanted to ensure that 
consumer assistance personnel would not be responsible for errors due 
to system issues, complex and changing systems, policies, workarounds, 
as well as lack of information from issuers. Other commenters expressed 
concern about being found in noncompliance on the basis of 
subregulatory guidance or frequently answered questions (FAQs) that 
they may not have seen or known about. Some commenters suggested that 
HHS develop a publicly available, searchable database or warehouse of 
rules and processes. Additional commenters requested that we provide 
clarity regarding the level of violation that might trigger 
investigation, and asked that we limit the use of CMPs to cases of 
egregious behavior, such as when the violation was a result of willful 
neglect or results in significant harm to a consumer.
    Response: We expect that the changes we have made to proposed Sec.  
155.206(c) in this final rule will help provide clarity regarding the 
standards consumers assistance entities must meet in order to avoid any 
potential CMPs under this section. We also understand commenters' 
concerns about changes in best practices and FAQs. As we explained 
above, HHS's enforcement authority under this section extends only to 
requirements that are established under section 1321(a)(1) of the 
Affordable Care Act. From time to time, we have issued and will 
continue to issue best practices, FAQs, and other subregulatory 
guidance interpreting these requirements. We further note that we offer 
anyone being investigated under this section an opportunity to respond 
under Sec.  155.206(e) and (g), and consumer assistance entities may 
use this opportunity to discuss any barriers they may have encountered 
to fulfilling their duties as required, including confusion regarding 
requirements as interpreted through subregulatory guidance. Finally, 
pursuant to section 2723(b)(2)(C)(iii) of the PHS Act, we have provided 
in Sec.  155.206(k) that no penalties will be assessed for any period 
of time during which a consumer assistance entity neither knew nor 
exercising reasonable diligence should have known of the violation, or 
any time afterwards if the violation was corrected within 30 days and 
due to reasonable cause and not wilful neglect.
    Comment: Some commenters asked us to further define ``reasonably 
determined,'' the standard in Sec.  155.206(c) for HHS's finding that a 
consumer assistance entity has failed to comply with applicable Federal 
regulatory requirements.
    Response: In Sec.  155.206(c), we proposed that a reasonable 
determination would be ``based on the outcome of the investigative 
process outlined in paragraphs (d) through (i) of this section.'' This 
standard is meant to capture the fact that a CMP would not immediately 
be imposed, but instead imposed only after HHS provides a process 
involving notice, consideration of any additional information or 
documentation submitted by the consumer assistance entity pursuant to 
Sec.  155.206(e), consideration of the factors outlined in Sec.  
155.206(h), and the consumer assistance entity's right to a

[[Page 30267]]

hearing pursuant to Sec.  155.206(m). If HHS identifies circumstances 
that meet the standard set in Sec.  155.206(c), it will send a notice 
informing the consumer assistance entity of the assessment of a CMP 
under Sec.  155.206(l). The consumer assistance entity then has the 
right to request a hearing in front of an Administrative Law Judge in 
accordance with Sec.  155.206(m) before the CMP is levied.
    Comment: Several commenters advocated against the duplication of 
penalties in instances where certain types of violations may already 
subject them to other types of penalties. A few commenters noted that 
the Health Insurance Portability and Accountability Act already governs 
certain critical aspects of compliance related to protected health 
information.
    Response: We understand commenters' concern about the potential for 
a violation to be punished twice under different enforcement schemes, 
and we have amended Sec.  155.206(h) to include a factor allowing HHS 
to take into consideration whether other remedies or penalties have 
been assessed and/or imposed for the same conduct or occurrence. It 
would be the responsibility of the consumer assistance entity to bring 
such information to HHS's attention.
    Comment: Several commenters emphasized the need for consumer 
assistance training about CMP implementation, and more robust training 
regarding any rules whose violation might trigger a CMP investigation, 
including circumstances in which consumers' personally identifiable 
information (PII) can be collected, and appropriate uses and storage of 
PII. A few commenters were concerned that the restrictions on retaining 
consumer PII might prevent consumer assistance entities from keeping 
sufficient information to refute allegations of misconduct.
    Response: We believe that the protection of consumer information is 
one of the most critical duties of consumer assistance entities. 
Section 155.215(b)(2)(xi) requires all Navigators in FFEs, including 
State Partnership Exchanges, as well as all non-Navigator assistance 
personnel to which Sec.  155.215 applies, to receive training on the 
privacy and security standards applicable under Sec.  155.260 for 
handling and safeguarding consumers' personally identifiable 
information. Section 155.215(b)(1)(iii) requires that all Navigators in 
FFEs, including State Partnership Exchanges, and all non-Navigator 
assistance personnel to which Sec.  155.215 applies, complete and 
achieve a passing score on all approved certification examinations 
prior to carrying out any consumer assistance functions under Sec.  
155.205(d) and (e) or Sec.  155.210. And Sec.  155.225(d)(3) requires 
certified application counselors to comply with the Exchange's privacy 
and security standards adopted consistent with Sec.  155.260, and 
applicable authentication and data security standards. To implement 
these requirements, HHS has included detailed privacy and security 
requirements in its agreements, contracts, and grant terms and 
conditions with the consumer assistance entities that are carrying out 
functions in States with an FFE, including a State Partnership 
Exchange. We recognize that these strong consumer protections restrict 
the personal consumer information that consumer assistance entities are 
able to retain and therefore limit the information available to them in 
preparing a response to a notice of investigation in Sec.  155.206(e). 
If any consumer assistance entity feels limited in their ability to 
respond to a notice of investigation, we encourage them to explain any 
rules and policies that prevented them from retaining information they 
believe would have been exculpatory. HHS may take such explanations 
into account under the factors outlined in Sec.  155.206(h).
    Comment: We received a number of comments on our proposed bases for 
initiating an investigation of a potential violation in Sec.  
155.206(d). Commenters supported explicitly allowing any entity, 
individual, or individual's authorized representative to file a 
complaint with HHS alleging that a consumer assistance entity has 
violated the FFE rules applicable to them. Some commenters asked HHS to 
clarify the process for filing complaints, including whether complaints 
filed at other HHS offices for other enforcement purposes would, if 
applicable, be shared with the office responsible for initiating 
investigations under Sec.  155.206 and trigger investigations under 
this section. Other commenters asked that we require consumer 
assistance entities to post information about the complaint process to 
ensure that consumers understand their rights about how to file a 
complaint.
    Response: We anticipate providing further guidance regarding how 
and where individuals and entities may file complaints against consumer 
assistance entities or individuals. To ensure that the basis for 
initiating an investigation is sufficiently broad, we have modified 
proposed Sec.  155.206(d)(1) to clarify that all information received 
or learned by HHS, whether through communications from sources outside 
HHS or not, could trigger an investigation into consumer assistance 
entity noncompliance. For example, if HHS discovers possible 
noncompliance by reviewing data or information already available to it 
through its own monitoring efforts, rather than by reviewing new 
information given to it by external, non-HHS sources, under final Sec.  
155.206(d)(1) that information could serve as the basis for initiating 
an investigation. We have also modified proposed Sec.  
155.206(d)(1)(iii) to align it with language in Sec.  155.206(d)(1) and 
Sec.  155.206(d)(2) indicating that HHS may consider information ``that 
a consumer assistance entity may have engaged or may be engaging'' in 
noncompliance as described in Sec.  155.206(c). We are finalizing the 
rest of Sec.  155.206(d) as proposed.
    Comment: A few commenters asked for clarification regarding the 
standards HHS will use to determine whether an investigation is 
warranted. As proposed, Sec.  155.206(e) required HHS to provide 
consumer assistance entities notice of an investigation and 30 days to 
respond with evidence, each time HHS learns of a potential violation. 
Instead, commenters requested that HHS make a preliminary assessment of 
complaints to determine their credibility before initiating a formal 
investigation under Sec.  155.206(e), to avoid imposing unnecessary 
administrative burdens on consumer assistance entities, and to prevent 
individuals and organizations from submitting complaints with the 
purpose of disrupting Exchange operations.
    Response: We agree with commenters that HHS should not issue notice 
to a consumer assistance entity, with the accompanying 30 days to 
respond to the allegation, until HHS has determined that a formal 
investigation is warranted. We have amended Sec.  155.206(e) to specify 
that HHS will provide a written notice to the consumer assistance 
entity when HHS performs a formal investigation, rather than each time 
it learns of a potential violation.
    Comment: One commenter agreed that the CMP process, as proposed, 
provides a reasonable time frame to close out investigations. Another 
commenter asked that the time frame for consumer assistance entities to 
respond to the notice of investigation be increased from 30 days to 60 
days.
    Response: We believe 30 days to respond to HHS's notice of 
investigation in Sec.  155.206(e) is a reasonable amount of time, 
particularly because the consumer assistance entity may request an 
extension of another 30 days under Sec.  155.206(f) if the entity 
cannot prepare a response within the initial 30-day

[[Page 30268]]

period. Therefore, we are finalizing the 30-day response period in 
Sec.  155.206(e) as proposed.
    Comment: Commenters generally supported the proposed factors in 
Sec.  155.206(h) for determining noncompliance and the amount of any 
CMPs assessed. Several commenters appreciated the case-by-case nature 
of this process, and agreed that the determination should take into 
account factors like the consumer assistance entity's previous or 
ongoing record of compliance, the gravity and frequency of the 
violation, and any financial harm incurred by the consumer. One 
commenter suggested that HHS should assess penalties only if the 
violation is intentional and causes harm, and another asked that CMPs 
be suspended if the entity was acting in good faith on behalf of the 
individual assisted. One commenter recommended that we move the factor 
regarding the degree of culpability of the consumer assistance entity, 
proposed at Sec.  155.206(h)(2)(i), from the list of factors that HHS 
may consider under Sec.  155.206(h)(2), to the list of factors that HHS 
must consider under Sec.  155.206(h)(1).
    Response: We believe that the factors as proposed in Sec.  
155.206(h) are responsive to commenters concerns. For example, HHS is 
required to take into account the harm caused by a violation under 
Sec.  155.206(h)(1)(ii), which provides that HHS must take into account 
the gravity of the violation, which may be determined in part by 
whether the violation caused, or could reasonably be expected to cause, 
adverse impacts, and the magnitude of those impacts. We based these 
factors on a longstanding interpretation of what ``gravity of the 
violation'' means and what it may include under the HIPAA enforcement 
scheme at 45 CFR 150.317. HHS may also take into account the degree of 
culpability of the consumer assistance entity under Sec.  
155.206(h)(2)(i). We believe this factor will generally play an 
important role in HHS's determination of whether CMPs should be 
assessed, but we are finalizing this factor as proposed because the 
mandatory factors in Sec.  155.206(h)(1) track the requirements of 
section 2723(b)(2)(C)(ii) of the PHS Act, while the permissive factors 
in Sec.  155.206(h)(2) are not statutory requirements. Additionally, we 
believe that the limitations on CMPs described in Sec.  155.206(k) 
provide sufficient protections for consumer assistance entities acting 
in good faith on behalf of consumers. Therefore, we are finalizing the 
other factors listed in Sec.  155.206(h) as proposed, with the 
addition, as discussed above, of a factor regarding whether other 
remedies or penalties have been assessed and/or imposed for the same 
conduct or occurrence.
    Comment: One commenter requested clarity regarding whether HHS 
could assess a lesser amount per day than the maximum of $100, and 
recommended against the assessment of a lesser amount. One commenter 
suggested that when the number of individuals directly affected by the 
violation cannot be determined, there should be a maximum placed on the 
estimate calculated by HHS, based on the size of the consumer 
population previously assisted by the entity. One commenter requested 
that HHS exclude from the time frame for which a penalty is assessed 
any time during which the investigation is being conducted, provided 
the entity or individual stops the behavior at issue during that 
period.
    Response: The maximum penalty provided in Sec.  155.206(i) is the 
per-day limit on the amount of any CMP that may be assessed. HHS may 
determine that a lesser amount is appropriate, based on an analysis of 
the relevant factors in Sec.  155.206(h). We believe that a reasonable 
estimate of individuals directly affected, as we explained in the 
preamble to the proposed rule, would be based on available information, 
such as the data from a Federal Navigator grantee's quarterly or weekly 
report concerning the number of consumers assisted. Therefore, we do 
not think it is necessary to place a maximum on such an estimate based 
on the size of the population assisted by the entity. In addition, we 
have not included a requirement that would toll the maximum penalty 
from accruing while HHS conducts its investigation because of the 
possibility that consumers may continue to be affected by previous 
misconduct during this period, even if the entity has stopped the 
behavior at issue. However, under Sec.  155.206(k)(1)(ii), HHS cannot 
assess penalties for any period of time after a consumer assistance 
entity knew, or exercising reasonable diligence would have known, of 
the failure, if the violation was due to reasonable cause and not due 
to willful neglect and the violation was corrected within 30 days of 
the first day that any of the consumer assistance entities against whom 
the penalty would be imposed knew, or exercising reasonable diligence 
would have known, that the violation existed. Additionally, HHS may 
consider a consumer assistance entity's cessation of misconduct when 
determining whether penalties should be assessed and in what amount, 
under Sec.  155.206(h)(2)(ii). Taken together, we believe these factors 
strike the right balance to ensure that any CMPs assessed by HHS are 
reasonable and appropriate.
    Comment: We requested comment on whether we should provide a cap on 
the total penalty that could be assessed by HHS in addition to the 
maximum per day penalty. The majority of commenters who responded to 
this request recommended that we implement such an aggregate cap. These 
commenters were concerned that the lack of such a cap might chill 
participation, particularly for those organizations with fewer 
resources, and might unduly penalize consumer assistance entities for 
mistakes made due to lack of sophistication or confusion during the 
initial open enrollment period. A few commenters recommended against 
implementing an aggregate penalty cap because the cost-benefit of CMPs 
for certain violations might not serve as an adequate deterrent. One 
commenter recommended a tiered system of caps based on the time frame 
of the violation.
    Response: We agree with commenters that if we were to set an 
aggregate cap for CMPs assessed against a consumer assistance entity, 
CMPs might not serve as a sufficient deterrent for certain types of 
misconduct or noncompliance. Therefore, we are finalizing Sec.  
155.206(i) as proposed. However, we have modified the text of Sec.  
155.206(h) to make clear that, as was discussed in the preamble to the 
proposed rule, the factors listed are to be used not just to determine 
whether CMPs are warranted under the circumstances surrounding the 
violation, but also to determine the amount of any CMPs assessed. We 
believe this change will help HHS ensure that the amount of any penalty 
assessed is in proportion to the consumer assistance entity's 
violation.
    Comment: One commenter suggested that the CMPs collected by HHS 
related to consumer harm should be distributed to consumers as 
restitution.
    Response: Section 2723(b)(2)(G) of the PHS Act states that 
penalties collected under paragraph (b) of that Act must be ``expended 
for the purpose of enforcing the provisions with respect to which the 
penalty was imposed.'' HHS does not interpret restitution to consumers 
to fall within this statutory purpose, and therefore does not interpret 
the statute to permit restitution to consumers. Accordingly, we do not 
provide for consumer restitution as an alternative use of CMPs 
collected under this authority.
    Comment: One commenter expressed support for our proposal in Sec.  
155.206(j) that HHS retain authority to settle or

[[Page 30269]]

compromise on any penalties provided for in this section.
    Response: We agree that HHS should have the flexibility to settle 
or compromise on any penalties that could be collected. We are 
therefore finalizing Sec.  155.206(j) as proposed.
    Comment: Many commenters supported our proposal in Sec.  155.206(k) 
to implement the limitations that HHS will not assess a CMP where the 
entity did not know, or exercising reasonable diligence would not have 
known, of the violation; or for any period of time after a consumer 
assistance entity knew, or exercising reasonable diligence would have 
known, of the failure, if the violation was due to reasonable cause and 
not due to willful neglect and the violation was corrected within 30 
days of the first day that any of the consumer assistance entities 
against whom the penalty would be imposed knew, or exercising 
reasonable diligence would have known, that the violation existed. Some 
commenters expressed that these limitations would help encourage a 
broader group of organizations with varying degrees of experience to 
participate as consumer assistance entities, and ensure that CMPs are 
reserved for the most egregious offenses. Several commenters also 
supported our proposal to place the burden on demonstrating the 
existence of the factors that trigger these limitations on the consumer 
assistance entity.
    Response: We agree with these comments, and are finalizing Sec.  
155.206(k)(1) and (2) as proposed. We believe these limitations will 
help balance the interests of HHS, the Exchange, and consumers to have 
consumer assistance entities exercise reasonable diligence in 
understanding and executing their obligations, while not unnecessarily 
penalizing consumer assistance entities who are acting in good faith.
    Comment: We requested comment on whether a statute of limitations 
should apply to actions under this section. One commenter responded to 
this request, suggesting that a statute of limitations period would be 
appropriate and recommending a period of 5 years.
    Response: We agree that a statute of limitations period is 
appropriate. We believe such a period will help give assurance to 
consumer assistance entities that any violations will not be actionable 
indefinitely, particularly since we understand that some commenters are 
concerned about the potential for these penalties to discourage program 
participation. Additionally, HHS's goals in issuing this CMP rule are 
to encourage program compliance, prevent misconduct, and remedy 
violations promptly. We do not think these goals will be served by 
prosecuting violations many years after they have occurred.
    The regulations finalized elsewhere in this rulemaking at Sec.  
155.285 regarding application fraud and misuse of PII have adopted a 
six-year statute of limitations following the date of the occurrence. 
We believe that consistency with Sec.  155.285 regarding the statute of 
limitations period is important because the same conduct by a consumer 
assistance entity in an FFE might trigger CMPs under either that 
provision or under Sec.  155.206. Additionally, we believe that six 
years provides ample time for HHS to discover, investigate, and assess 
any potential CMP against a consumer assistance entity. We have 
therefore added a new Sec.  155.206(k)(3) to provide for a six-year 
statute of limitations period.
    Comment: We requested comment on whether all aspects of 45 CFR Part 
150, Subpart D should apply to appeals of CMPs assessed under Sec.  
155.206. No commenters responded to this request, although one 
commenter supported the proposed appeals process. One commenter 
recommended that CMPs should continue to accrue pending an appeal in 
the event the imposition of CMPs is upheld on appeal and the Exchange 
participant failed to correct the instance of noncompliance following 
the imposition.
    Response: We are finalizing Sec.  155.206(m)-(n) as proposed. We do 
not believe it is necessary to provide that CMPs should continue to 
accrue pending appeal. If HHS receives or learns of any information 
indicating that a consumer assistance entity may have engaged or may be 
engaging in noncompliant activity in violation of Sec.  155.206(c), 
including any violation for the period following an initial assessment, 
such as the period during which an appeal is pending, HHS could 
initiate a new investigation and assess new CMPs as appropriate.
    Comment: Several commenters agreed with our proposal that where 
conduct by consumer assistance entities may warrant CMPs under either 
Sec.  155.285 or Sec.  155.206, HHS has discretion to determine whether 
to assess a CMP under Sec.  155.285 or under Sec.  155.206. Other 
commenters recommended that consumer assistance entities be exempt from 
penalties under Sec.  155.285. A few argued that consumer assistance 
entities do not actually provide information as part of the process of 
applying for coverage or an exemption, and therefore it was difficult 
to see how they could provide false or fraudulent information in 
violation of section 1411(b) of the Affordable Care Act.
    Response: We disagree that consumer assistance entities should be 
exempt from the provisions of Sec.  155.285. Any Navigator, non-
Navigator assistance personnel, or certified application counselor who 
misuses consumer information in violation of section 1411(g) of the 
Affordable Care Act, or who knowingly enters false or fraudulent 
information in a consumer's application with or without the knowledge 
of the consumer, might be in violation of either Sec.  155.285 or Sec.  
155.206. Therefore, we maintain that where conduct by a consumer 
assistance entity may warrant CMPs under either Sec.  155.285 or Sec.  
155.206, HHS should have discretion to determine whether to assess a 
CMP under Sec.  155.285 or under Sec.  155.206. We have also finalized 
the portion of Sec.  155.206(c) that indicates that HHS will not assess 
a CMP under Sec.  155.206 if a CMP has been assessed for the same 
conduct under Sec.  155.285. If a consumer assistance entity is in a 
situation where CMPs could be imposed under both Sec.  155.285 and 
Sec.  155.206, when determining whether to assess CMPs under Sec.  
155.285, HHS will take the possibility that it may be penalizing 
conduct that is being investigated or has already been penalized under 
Sec.  155.206 into account as a factor under Sec.  155.285(b)(1)(viii).
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.206 of the 
proposed rule, with the following modifications. We modified proposed 
Sec.  155.206(c) to more clearly explain that HHS could assess a CMP 
against a consumer assistance entity for failure to comply with the 
Federal regulatory requirements applicable to the consumer assistance 
entity that have been implemented pursuant to section 1321(a)(1) of the 
Affordable Care Act, including provisions of any agreements, contracts, 
and grant terms and conditions that interpret those Federal regulatory 
requirements or establish procedures for compliance with them. We added 
language to final Sec.  155.206(d)(1), to specify that information 
learned, not just received, by HHS indicating that a consumer 
assistance entity may have engaged or may be engaging in activity 
specified in paragraph (c) may warrant an investigation. We modified 
Sec.  155.206(d)(1)(iii) to align with language elsewhere in this 
section that HHS may consider information ``that a consumer assistance 
entity may have engaged or may be engaging'' in noncompliance under 
Sec.  155.206(c),

[[Page 30270]]

rather than information concerning ``potential involvement'' in such 
activity. We revised Sec.  155.206(e) to specify that HHS must provide 
a written notice to a consumer assistance entity of its investigation, 
rather than requiring HHS to provide a written notice to an entity each 
time HHS learns of a potential violation. We revised Sec.  155.206(h) 
to clarify that, consistent with the preamble discussion of the 
proposed rule, the factors listed are to be used not just to determine 
whether CMPs are warranted, but also to determine the amount of any 
CMPs assessed. In Sec.  155.206(h)(1)(i), we removed the erroneous 
reference to corrective action plans ``under section (c) of this 
section.'' We also included a new factor at Sec.  155.206(h)(2)(iii) 
that allows HHS to take into consideration whether other remedies or 
penalties have been assessed and/or imposed for the same conduct or 
occurrence, and adjusted the numbering of the final factor (``Other 
such factors as justice may require'') from Sec.  155.206(h)(2)(iii) to 
Sec.  155.206(h)(2)(iv). In Sec.  155.206(i), we changed ``the 
Exchange'' to ``HHS'' for consistency with the rest of the section. We 
added new Sec.  155.206(k)(3) to provide for a six-year statute of 
limitations period. We corrected some numbering errors throughout Sec.  
155.206(l). We also made several minor wording changes throughout final 
Sec.  155.206, to replace ``Federally-facilitated Exchanges'' with ``a 
Federally-facilitated Exchange'' and to use the abbreviation ``CMP'' 
consistently.
b. Navigator, Non-Navigator Assistance Personnel, and Certified 
Application Counselor Program Standards (Sec. Sec.  155.210, 155.215, 
and 155.225)
1. Provisions Related to Non-Federal Requirements for Navigators, Non-
Navigator Assistance Personnel, and Certified Application Counselors 
(Sec. Sec.  155.210, 155.215, and 155.225)
    In the proposed rule, we proposed amending Sec.  155.210(c)(1)(iii) 
to add new paragraphs (A) through (F) to specify a non-exhaustive list 
of certain non-Federal requirements that would prevent the application 
of the provisions of title I of the Affordable Care Act within the 
meaning of section 1321(d) of the Affordable Care Act, with respect to 
the Navigator program. We also proposed amending Sec.  155.215(f) to 
make clear that we would consider the same types of non-Federal 
requirements listed in proposed Sec.  155.210(c)(1)(iii)(A) through (F) 
(except for 155.210(c)(1)(iii)(D)) to prevent the application of the 
provisions of title I of the Affordable Care Act within the meaning of 
section 1321(d) of the Affordable Care Act, when applied to non-
Navigator assistance personnel subject to Sec.  155.215. Similarly, 
with respect to the certified application counselor program, we 
proposed amending Sec.  155.225(d) to add a new paragraph (d)(8) to 
specify that certified application counselors must meet any licensing, 
certification or other standards prescribed by the State or Exchange, 
if applicable, so long as such standards do not prevent the application 
of the provisions of title I of the Affordable Care Act within the 
meaning of section 1321(d) of the Affordable Care Act. We further 
proposed in Sec.  155.225(d)(8) to specify a non-exhaustive list of 
non-Federal requirements, similar to those listed in proposed Sec.  
155.210(c)(1)(iii)(A) through (F) (except for 155.210(c)(1)(iii)(D)), 
that would prevent the application of the provisions of title I of the 
Affordable Care Act within the meaning of section 1321(d) of the 
Affordable Care Act, when applied to certified application counselors. 
We explained that the proposed amendments were intended as a non-
exhaustive list of certain non-Federal requirements that prevent the 
application of the provisions of title I of the Affordable Care Act in 
one or more of the following three ways: (1) On their face, they 
prevent Navigators, non-Navigator assistance personnel subject to Sec.  
155.215, and certified application counselors or their designated 
organizations from performing their Federally required duties; (2) on 
their face, they make it impossible for an Exchange to implement the 
consumer assistance programs it is authorized or required to operate in 
a manner consistent with Federal requirements; and (3) they conflict 
with Federal standards or requirements in specific factual 
circumstances based on how a non-Federal requirement is applied or 
implemented. In addition, we recognized that a Federal court may also 
find other non-Federal requirements that we did not expressly mention 
in the proposed rule to be preempted within the meaning of section 
1321(d) of the Affordable Care Act. We further explained that the 
proposed provisions would not preclude a State from establishing or 
implementing State law protections for its consumers, so long as such 
laws do not prevent the application of Federal requirements for the 
applicable consumer assistance programs. As an example, we stated that 
a State may require assisters to undergo fingerprinting or background 
checks before they can operate in a State, so long as a State's 
implementation of these additional requirements does not prevent the 
Exchange from implementing these programs in the State consistent with 
Federal standards or make it impossible for the assisters to perform 
their Federally-required duties.
    First, in proposed Sec. Sec.  155.210(c)(1)(iii)(A) and 
155.225(d)(8)(i), we proposed to specify that non-Federal requirements 
which require Navigators, non-Navigator assistance personnel subject to 
Sec.  155.215, and certified application counselors to refer consumers 
to other entities not required to provide them with fair, accurate, and 
impartial information or act in the consumer's best interests, would 
prevent the application of the provisions of title I of the Affordable 
Care Act within the meaning of section 1321(d) of the Affordable Care 
Act because such non-Federal requirements would conflict with an 
assister's duty to provide fair, accurate, and impartial information or 
to act in the consumer's best interests. Second, we proposed to specify 
under Sec. Sec.  155.210(c)(1)(iii)(B) and 155.225(d)(8)(ii) that non-
Federal requirements that prevent Navigators, non-Navigator assistance 
personnel subject to Sec.  155.215, and certified application 
counselors from providing services to all persons to whom they are 
required to provide assistance would also prevent the application of 
the provisions of title I of the Affordable Care Act because assisters 
are required to provide information and services in a fair and 
impartial manner and to provide information to employees about the full 
range of QHP options for which they are eligible, which we have 
interpreted to mean that assisters must have the ability to help any 
individual who presents themselves for assistance. With respect to 
proposed Sec. Sec.  155.210(c)(1)(iii)(A) and (B), we explained that 
where a State has elected to establish and operate only a SHOP Exchange 
pursuant to 45 CFR 155.100(a)(2), and has opted under 45 CFR 155.705(d) 
to permit Navigator duties at Sec.  155.210(e)(3) and (4) in the State 
SHOP-only Exchange to be fulfilled through referrals to agents and 
brokers, we would not consider the State's exercise of this option 
under Sec.  155.705(d) to prevent the application of the provisions of 
title I of the Affordable Care Act, since that option is authorized 
under Federal law. Third, under Sec. Sec.  155.210(c)(1)(iii)(C) and 
155.225(d)(8)(iii), we proposed to specify that non-Federal 
requirements that prevent Navigators, non-Navigator assistance 
personnel subject to

[[Page 30271]]

Sec.  155.215, and certified application counselors from providing 
advice regarding substantive benefits or comparative benefits of 
different health plans, would also prevent the application of the 
provisions of title I of the Affordable Care Act because assisters are 
required to provide information about QHPs, and to facilitate either 
selection of or enrollment in a QHP, and CMS interprets these 
requirements to mean that assisters must be prepared to discuss the 
terms and features of any coverage for which a consumer is or might be 
eligible, consistent with each consumer's expressed interests and 
needs. As proposed, these three provisions would apply to Navigators, 
non-Navigator assistance personnel subject to Sec.  155.215, and 
certified application counselors (or certified application counselor 
designated organizations) that are operating in State Exchanges or in 
FFEs. Fourth, under Sec. Sec.  155.210(c)(1)(iii)(D), we proposed that 
a non-Federal requirement that required a Navigator (but not a 
certified application counselor or non-Navigator assistance personnel) 
to hold an agent or broker license or to carry errors and omissions 
coverage (typically held only by licensed professionals such as agents 
and brokers) would also prevent the application of the provisions of 
title I of the Affordable Care Act because imposing these requirements 
on all Navigators in a State would mean that all Navigators would fall 
under only one type of entity listed in Sec.  155.210(c)(2), 
specifically, agents and brokers, in violation of the requirement set 
forth under Sec.  155.210(c)(2)(i) that there be two types of Navigator 
entities in each Exchange, and that at least one type must be a 
community and consumer-focused nonprofit group. We explained that we 
believed that the four provisions listed above should apply in both 
FFEs and State Exchanges because they address requirements that, in 
HHS's view, would facially conflict with Federal requirements or 
standards.
    The proposed rule also specified two additional provisions 
regarding certain non-Federal requirements that would prevent the 
application of the provisions of title I of the Affordable Care Act 
with respect to FFEs only. We explained that these two provisions would 
not apply in State Exchanges since we had observed an enhanced ability 
for a State Exchange to work with other offices within the State to 
establish Exchange standards and coordinate the implementation of State 
law applicable to assisters in a manner that does not conflict with 
Federal standards or prevent the State Exchange from implementing 
consumer assistance programs consistent with Federal requirements. 
Under proposed Sec. Sec.  155.210(c)(1)(iii)(E) and 155.225(d)(8)(iv), 
we proposed to specify that non-Federal requirements that impose 
standards that would prohibit individuals or entities from acting as 
Navigators, non-Navigator assistance personnel, or certified 
application counselors or certified application counselor designated 
organizations, when they would be eligible to participate in these 
respective capacities under FFE standards, would prevent the 
application of the provisions of title I of the Affordable Care Act 
within the meaning of section 1321(d) of the Affordable Care Act. We 
illustrated this provision in two examples. First, we explained that a 
non-Federal requirement that prohibits consumer assistance entities and 
individuals from receiving any consideration, directly or indirectly, 
from a health insurance issuer offering health insurance coverage in or 
outside of an Exchange, even if not in connection with the enrollment 
of individuals into a QHP, would not only exceed applicable Federal 
conflict-of-interest standards but would also render ineligible certain 
entities, such as hospitals and community health care clinics, that 
would otherwise be eligible to serve as Navigators, non-Navigator 
assistance personnel subject to Sec.  155.215, or certified application 
counselors and organizations. Second, we explained that a non-Federal 
law that prohibits an individual or entity from serving in an assister 
program on the basis that the individual or entity does not maintain 
its principal place of business in that State (which could include an 
organization that is organized in the State, but maintains its 
principal place of business outside of the State), would prevent the 
FFE from implementing consumer assistance programs that it is required 
or authorized to implement.\22\
---------------------------------------------------------------------------

    \22\ The preamble discussion to the proposed rule addressed only 
non-Federal requirements that would interpret ``principal place of 
business'' to mean that an organization could have only one 
principal place of business nationwide, similar to the legal concept 
that may be used in determining corporate citizenship for purposes 
of establishing diversity jurisdiction in Federal court, as required 
under 28 U.S.C. 1332(c).
---------------------------------------------------------------------------

    Finally, under proposed Sec. Sec.  155.210(c)(1)(iii)(F) and 
155.225(d)(8)(v), we proposed to specify that in an FFE, non-Federal 
requirements that, as applied or as implemented in the State, prevent 
the application of Federal standards applicable to Exchanges, 
Navigators, non-Navigator assistance personnel subject to Sec.  
155.215, or certified application counselors and certified application 
counselor designated organizations, would prevent the application of 
the provisions of title I of the Affordable Care Act within the meaning 
of section 1321(d). For example, with respect to the Navigator program, 
if a State with an FFE implemented a requirement that prevented the 
only Navigator entity operating in the State from continuing to perform 
its Federally-required duties, then such a provision, as applied, would 
prevent the Exchange from operating a Navigator program as required by 
section 1311(i)(1) of the Affordable Care Act and Sec.  155.210(a). As 
a second example, we explained that if a State imposed certain 
requirements as mandatory conditions for continuing to perform any 
applicable Federally-required duties, such as additional training or 
background or fingerprinting checks, which, on their face, we consider 
as generally permissible, but also set a deadline for compliance that 
made it impossible for any individual or entity approved by the FFE to 
comply on a timely basis, despite good faith efforts to comply, then as 
long as those assisters were prevented from fulfilling any of their 
Federally-required duties until they could come into compliance with 
the State requirements, the FFE would be prevented from operating the 
consumer assistance programs that it is required or authorized to 
implement consistent with Federal standards.
    Comment: A large number of commenters commended HHS for listing 
specific examples of non-Federal standards that would, in HHS's view, 
prevent the application of the provisions of title I of the Affordable 
Care Act, within the meaning of its section 1321(d). The commenters 
stated that the level of specificity in the proposed provisions and 
accompanying preamble provided important clarity regarding the types of 
non-Federal requirements that would prevent Navigators, non-Navigator 
assistance personnel and certified application counselors from 
performing their Federally-required duties. In expressing their 
support, these commenters stated that enrollment into Exchange coverage 
and insurance affordability programs during the initial open enrollment 
period was aided in significant part by assistance offered through in-
person assistance programs, and that these proposed regulations should 
be finalized to help facilitate the continued ability of assisters to 
provide in-person

[[Page 30272]]

assistance during the 2014 coverage year as well as during the next 
Exchange open enrollment period in fall 2014 and beyond.
    A few commenters objected to the proposed provisions and asserted 
that they were overly broad, and/or exceed the authority of HHS, in 
violation of the Tenth Amendment of the U.S. Constitution and the 
McCarran-Ferguson Act that provides, ``[t]he business of insurance, and 
every person engaged therein, shall be subject to the laws of the 
several States which relate to the regulation or taxation of such 
business.'' (15 U.S.C. 1012(a) (1945)) Citing 15 U.S.C. 1012(b), these 
commenters asserted that the McCarran-Ferguson Act exempts the business 
of insurance from most Federal regulation, providing that Federal 
statutes cannot be construed to invalidate, impair or supersede State 
insurance law unless they specifically relate to the business of 
insurance.
    Response: We agree that Navigators, non-Navigator assistance 
personnel, and certified application counselors have played and will 
continue to play an important role in providing application assistance 
to consumers, with respect to enrollment in both QHPs and insurance 
affordability programs. It is therefore important, in the view of HHS, 
to provide guidance regarding which types of non-Federal laws would, 
within the meaning of section 1321(d) of the Affordable Care Act, 
prevent the application of the Federal requirements to which assisters 
and Exchanges are subject. The finalized provisions are a non-
exhaustive list of non-Federal requirements that, in the view of HHS, 
prevent the application of the provisions of title I of the Affordable 
Care Act. We are therefore finalizing, with a few modifications, 
proposed Sec. Sec.  155.210(c)(1)(iii)(A)-(D) and (F) and 
155.225(d)(8)(i)-(iii) and (v).
    We are not finalizing proposed Sec. Sec.  155.210(c)(1)(iii)(E) and 
155.225(d)(8)(iv). The concerns raised by commenters about the breadth 
of these provisions, and the questions raised in comments raised about 
the interpretations we provided in the preamble to the proposed rule of 
the substantive Federal requirements whose application would be 
prevented by certain non-Federal requirements, have instead provided us 
with an opportunity to further define those substantive Federal 
requirements, consistent with our preamble discussion in the proposed 
rule, through the addition of language in Sec. Sec.  155.210(d)(4) and 
(e)(7) and Sec. Sec.  155.225(b)(3) and (g)(2) in the final rule.
    With respect to the proposed requirement that Navigators, non-
Navigator assistance personnel subject to Sec.  155.215 and certified 
application counselors maintain a physical presence in the Exchange 
service area, we are finalizing this requirement under Sec. Sec.  
155.210(e)(7) and 155.215(h) with respect to Navigators and non-
Navigator assistance personnel subject to Sec.  155.215, but we are not 
finalizing this requirement with respect to certified application 
counselors under proposed Sec.  155.225(b)(1)(iii). We are also 
modifying the proposed regulation text in Sec. Sec.  155.210(e)(7), 
155.215(h) and are finalizing a new provision at Sec.  155.225(b)(3) to 
clarify that in an FFE, Navigators, non-Navigator assistance personnel 
subject to 155.215 and certified application counselors, respectively, 
are not required to maintain their principal place of business in the 
Exchange service area, defined as the entire area served by the 
Exchange. A requirement that these assister entities maintain their 
principal place of business within the Exchange service area for an FFE 
would limit the pool of entities which would be eligible to serve in 
this capacity, and could prevent the FFE from fully implementing the 
consumer assistance programs that it is required (or authorized) to 
implement, within the meaning of section 1321(d) of the Affordable Care 
Act.
    With respect to the requirement under existing Sec. Sec.  
155.210(d)(4) and 155.215(a)(2)(i) (which applies Sec.  155.210(d)(4) 
to non-Navigator assistance personnel subject to Sec.  155.215 by 
cross-reference), and finalized in this rule at Sec.  155.225(g)(2), 
that Navigators, non-Navigator assistance personnel subject to Sec.  
155.215 and certified application counselors, respectively, are 
prohibited from receiving any consideration directly or indirectly from 
a health insurance issuer (or stop-loss insurance issuer) in connection 
with enrollment of any individuals in a QHP or non-QHP, we are 
modifying the text in Sec.  155.210(d)(4) and adding text in Sec.  
155.225(g)(2) to clarify that in the FFE, this requirement does not 
mean that a health care provider shall be ineligible to operate in an 
assister program solely because it receives consideration from a health 
insurance issuer for health care services provided. We make these 
clarifications to make it easier for the public to understand the 
purpose and scope of the applicable Federal standards in the FFE and to 
identify circumstances in which additional non-Federal requirements 
would be in conflict with Federal requirements. This places in 
regulation text previous interpretations of these provisions, in which 
we have stated that ``the prohibition on receiving direct or indirect 
consideration from a health insurance or stop loss insurance issuer 
[applies to] consideration received for enrolling individuals or 
employees in health insurance plans or stop loss insurance inside or 
outside the Exchanges; it does not apply to consideration received by a 
provider to support specific activities, such as the provision of 
medical services, that are not connected to the enrollment of 
individuals or employees in QHPs.'' (78 FR 42832) In addition, this 
prohibition does not apply in situations where an individual or entity 
that is otherwise eligible to serve as a Navigator, non-Navigator 
assistance personnel subject to Sec.  155.215, certified application 
counselor or certified application counselor designated organization, 
in accordance with applicable Exchange standards, receives 
consideration from a health insurance or stop loss insurance issuer 
that is not in connection with the enrollment of any individual(s) in a 
QHP or non-QHP.
    We do not agree that HHS is exceeding its authority in finalizing 
the proposed provisions. These provisions set forth HHS's 
interpretation of the preemption standard established by Congress in 
section 1321(d) of the Affordable Care Act, which provides that State 
laws that do not prevent the application of the provisions of title I 
of the Affordable Care Act are not preempted. This preemption standard 
applies to all of the Federal requirements applicable to Navigators, 
non-Navigator assistance personnel and certified application 
counselors, as well as to all of the Federal requirements that 
Exchanges implementing these programs must follow, as all these 
standards are authorized and established under title I of the 
Affordable Care Act. In section 1321(d) of the Affordable Care Act, 
therefore, in HHS's view, Congress made clear that while States 
continue to have authority to enact laws that affect programs 
established under the provisions of title I of the Affordable Care Act, 
that authority is not unlimited. Rather, States do not have the 
authority to enact laws that prevent the application of the provisions 
of title I of the Affordable Care Act, including the provisions that 
provide authority and establish Federal requirements for the Navigator 
programs, non-Navigator programs, and certified application counselor 
programs.

[[Page 30273]]

    Moreover, in promulgating the provisions in this final rule, HHS is 
simply interpreting how the preemption standard that Congress 
established in section 1321(d) of the Affordable Care Act applies to a 
non-exhaustive list of certain non-Federal requirements for these 
assister programs. HHS has a unique understanding of the statutes it 
administers and is responsible for interpreting, and Congress has 
expressly delegated to HHS, under section 1321(a)(1) of the Affordable 
Care Act, authority for issuing Federal regulations setting standards 
for meeting the requirements under the Affordable Care Act with respect 
to the establishment and operation of Exchanges, including the 
establishment and operation of the Navigator, non-Navigator, and 
certified application counselor programs. HHS expects that this final 
rule will provide valuable guidance to both States and assisters, as 
well as other stakeholders, by helping to resolve questions about the 
types of non-Federal laws that, in HHS's view, would prevent the 
application of the provisions of title I of the Affordable Care Act, 
within the meaning of section 1321(d) of the Affordable Care Act. We 
recognize that a Federal court might find that other non-Federal 
requirements not listed in this rule would prevent the application of 
Federal requirements within the meaning of section 1321(d).
    Comment: Some commenters, while supporting the provisions 
generally, also expressed concerns that the proposed regulations do not 
address non-Federal laws that create obstacles to the implementation of 
the goals of Federal law. Commenters urged us to specifically address 
requirements that impose unreasonable burdens for assisters in the 
performance of their Federally-required duties and expressed concern 
that by not doing so, HHS could be seen as interpreting section 1321(d) 
of the Affordable Care Act to preempt State law only when it is 
impossible for an assister or an Exchange to comply with both Federal 
and non-Federal requirements. Some of these commenters requested that 
HHS clarify that it does not mean to suggest that a non-Federal 
requirement that imposes an unreasonable burden on assisters or serves 
as an obstacle to the implementation of Federal law could not prevent 
the application of the provisions of title I of the Affordable Care 
Act, within the meaning of section 1321(d) of the Affordable Care Act.
    Response: These provisions contain a non-exhaustive list of 
circumstances under which HHS would consider a non-Federal requirement 
applicable to Navigators, non-Navigator assistance personnel, or 
certified application counselors to prevent the application of 
provisions of title I of the Affordable Care Act, within the meaning of 
section 1321(d) of the Affordable Care Act. There may be other types of 
non-Federal requirements, not specified in these provisions, that would 
also prevent the application of Federal requirements related to the 
assister programs. We do not intend to suggest that non-Federal 
requirements which place unreasonable burdens on assisters and assister 
entities or that create obstacles to the implementation of Federal law 
could not also prevent the application of title I of the Affordable 
Care Act within the meaning of section 1321(d) of the Affordable Care 
Act.
    Comment: Some commenters supported the proposed regulations' 
acknowledgement of the State's role in imposing State-level 
registration and other reasonable consumer protections for its 
residents. However, a few commenters asserted that the proposed 
provisions would prevent States from establishing additional consumer 
protections and would therefore conflict with section 1321(d) of the 
Affordable Care Act.
    Response: We clearly expressed in the preamble to the proposed 
rule, and reiterate here, that we do not intend the provisions 
regarding non-Federal requirements for assisters to suggest that a 
State cannot establish or implement additional State law protections 
for its consumers, such as requiring registration, passing 
fingerprinting and background checks, or completing State training, 
provided that its implementation of these additional requirements does 
not prevent the Exchange from implementing Navigator, non-Navigator and 
certified application counselor programs in the State consistent with 
Federal standards or prevent assisters in these programs from meeting 
Federal requirements. We acknowledge, however, that there is an 
apparent tension between the general permissibility of additional, non-
conflicting State requirements and the language in proposed Sec. Sec.  
155.210(c)(1)(iii)(E) and 155.225(d)(8)(iv), in which we proposed that 
non-Federal requirements that would render ineligible any assister 
entities or individuals that would otherwise be eligible to participate 
in an FFE would prevent the application of Federal requirements for 
assisters. Because these provisions could have been construed, contrary 
to our intent, as limiting the States' authority or ability to 
implement reasonable consumer protection measures in addition to those 
established by the FFE, we have decided not to finalize them. Instead, 
as we explain above, we are adding language to other provisions of the 
regulations governing the Navigator, non-Navigator, and certified 
application counselor programs to codify our interpretations of those 
provisions, consistent with our preamble discussion in the proposed 
rule and in other preambles (see 78 FR 42832), so that our existing 
policies related to these provisions are clarified.
    First, we are adding language to current Sec.  155.210(d)(4), which 
applies to non-Navigator assistance personnel subject to Sec.  155.215 
by cross-reference, as well as to new Sec.  155.225(g)(2) (which is 
being finalized in this rulemaking) to codify the principle we 
previously espoused in the preamble to the proposed rule: that a 
hospital or other health care provider shall not be ineligible to 
participate in the Navigator, non-Navigator assistance personnel, or 
certified application counselor program solely because it receives 
payment for health services from health insurance issuers. Our approach 
to finalizing this provision reflects the fact that HHS continues to 
have concerns regarding certain types of non-Federal requirements that 
were described in the preamble to the proposed rule. Specifically, we 
continue to have concerns about non-Federal requirements that would 
prohibit a hospital or other health care provider from participating in 
an assister program solely because it receives payment for health 
services from a health insurance issuer, because such non-Federal 
requirements could prevent the Exchange from operating an assister 
program that includes individuals and entities that are otherwise 
extremely well qualified.
    We also continue to have concerns about non-Federal requirements 
that require Navigators, non-Navigator assistance personnel subject to 
Sec.  155.215, and certified application counselors or certified 
application counselor designated organizations to maintain their 
principal place of business in the State, even though we are not 
finalizing the specific provisions that were directed at these types of 
non-Federal requirements in proposed Sec. Sec.  155.210(c)(1)(iii)(E) 
and 155.225(d)(8)(iv). We have therefore decided to add text to the 
Federal standards being finalized in this rulemaking at Sec. Sec.  
155.210(e)(7) and 155.215(h) to clarify that although Navigators and 
non-Navigator personnel subject to Sec.  155.215 must maintain a 
physical presence in the Exchange service area, they shall not be 
rendered ineligible to participate in the

[[Page 30274]]

applicable assister program merely because their principal place of 
business is outside of the Exchange service area. While we are not 
finalizing the proposed requirement in Sec.  155.225(b)(1)(iii)) which 
would have required an organization to maintain a physical presence in 
the Exchange service area in order to be designated as a certified 
application counselor organization by an Exchange, we are finalizing in 
Sec.  155.225(b)(3) the clarification that an organization shall not be 
rendered ineligible to participate in the applicable assister program 
merely because its principal place of business is outside of the 
Exchange service area. We hope that by codifying these principles 
through amendments to the regulations governing these assister 
programs, we will resolve any confusion caused by our proposals at 
Sec. Sec.  155.210(c)(1)(iii)(E) and 155.225(d)(8)(iv), while at the 
same time addressing the concerns about non-Federal requirements that 
motivated these proposals and were presented in the preamble discussion 
related to those proposals.
    Comment: Several commenters recommended that the list of provisions 
specifying non-Federal requirements that would prevent the application 
of the provisions of title I of the Affordable Care Act remain non-
exhaustive and that HHS should continue to engage in monitoring of non-
Federal requirements and their effects on consumer assistance functions 
that are required or permitted in an Exchange. A few commenters urged 
HHS to monitor the implementation of non-Federal requirements and their 
effects on assister programs, with one commenter suggesting that HHS be 
more proactive by delineating a process for how it will review non-
Federal standards in the event that these provisions become finalized 
as proposed.
    Response: We agree that, at this time, HHS should not attempt to 
provide an exhaustive list of provisions specifying the types of non-
Federal requirements that would prevent the application of Federal 
requirements. We agree that continued monitoring of the passage and 
implementation of non-Federal requirements as they apply to Navigators, 
non-Navigator assistance personnel subject to Sec.  155.215, and 
certified application counselors is critical to ensuring the 
implementation and ultimate success of consumer assistance functions of 
an Exchange to provide meaningful assistance to all consumers who seek 
such assistance. HHS has monitored, and will continue to monitor, new 
and existing non-Federal requirements as they are issued and 
implemented, and will continue to assess whether such laws prevent the 
application of the provisions of title I of the Affordable Care Act.
    Comment: We received comments on whether all the proposed 
provisions regarding non-Federal requirements should apply in State 
Exchanges or whether only some of the provisions would apply to State 
Exchanges, as proposed. A few commenters expressed support for applying 
certain of the proposed provisions in all types of Exchanges, while 
applying other types of provisions only in FFEs (including State 
Partnership Exchanges). Others recommended that the provisions should 
apply consistently ``across-the-board'' to all Exchanges because doing 
so would create a bright line across all Exchanges and make it easier 
for all stakeholders to administer the various consumer assistance 
programs in an efficient, cohesive fashion and would minimize confusion 
if a State transitions from an FFE to a State Exchange.
    Response: In light of the fact that we are not finalizing proposed 
Sec. Sec.  155.210(c)(1)(iii)(E) and 155.225(d)(8)(iv) in this final 
rule (and our related decision to instead clarify certain Federal 
standards as they apply to assisters in the FFE, as discussed above), 
there are five preemption provisions being finalized in this rule under 
renumbered Sec. Sec.  155.210(c)(1)(iii)(A)-(E) and four preemption 
provisions being finalized in both Sec.  155.215(f)(1)-(4) and Sec.  
155.225(d)(8)(i)-(iv). We agree with commenters that these specific 
provisions, as finalized, should be directed at non-Federal 
requirements in all Exchanges, including State Exchanges. We continue 
to anticipate, based on our observations thus far, that a State 
Exchange would have an enhanced ability to coordinate with other State 
offices to ensure that State law applicable to assisters does not 
prevent the application of Federal requirements applicable to 
Navigators, non-Navigators and certified application counselors. 
However, we acknowledge that it is possible that a non-Federal 
requirement, as applied or implemented in a State, could prevent a 
State Exchange from operating the consumer assistance programs it is 
required (or authorized) to implement, or otherwise prevent the 
Exchange from implementing applicable consumer assistance programs 
consistent with Federal requirements, or could prevent consumer 
assistance entities or individuals in the State from performing their 
Federally-required duties. Rather than rule out the possibility that an 
``as-applied'' conflict could occur with respect to a State Exchange, 
as captured in the provisions that were proposed at Sec. Sec.  
155.210(c)(1)(iii)(F) and 155.225(d)(8)(v) to be applicable only in an 
FFE, we are extending the applicability of these provisions, now 
renumbered as Sec. Sec.  155.210(c)(1)(iii)(E) and 155.225(d)(8)(iv), 
and reformatted in Sec.  155.215(f)(4), so that they apply equally to 
all types of Exchanges. Therefore, in finalizing these provisions, we 
have removed the reference to a ``Federally-facilitated Exchange.''
    We are also amending Sec.  155.210(e)(2) in the final rule, to 
specify, consistent with our discussion in the preamble to the proposed 
rule (see, for example, 79 FR 15828-15829), that in addition to the 
existing requirements under this provision and 155.210(e)(3) that 
Navigators must provide information and services in a fair, accurate, 
and impartial manner and must facilitate selection of a QHP, the duties 
of a Navigator include providing information that assists consumers 
with submitting the eligibility application; clarifying the 
distinctions among health coverage options, including QHPs; and helping 
consumers make informed decisions during the health coverage selection 
process. Under existing provisions at 45 CFR 155.215(a)(2)(i), these 
duties will also apply to non-Navigators subject to Sec.  155.215. In 
addition, in this rulemaking, we are finalizing a new Sec.  
155.225(c)(1), to make certified application counselors subject to a 
similar set of duties.
    We have also made a minor change to the parallel provisions for 
Navigators, non-Navigator personnel subject to Sec.  155.215, and 
certified application counselors that are being finalized under Sec.  
155.210(c)(1)(iii)(E), Sec.  155.215(f)(4) and Sec.  155.225(d)(8)(iv). 
Specifically, we changed the reference to standards that would, as 
applied or as implemented in a State, prevent the application of 
Federal requirements applicable to the Exchange's implementation of the 
respective Navigator, non-Navigator assistance personnel or certified 
application counselor program ``consistent with Federal requirements,'' 
by deleting ``consistent with Federal requirements'' to eliminate 
redundancy.
    Comment: Several commenters expressed support for the clear and 
specific acknowledgement in proposed Sec.  155.215(f) that non-
Navigator assistance personnel subject to Sec.  155.215 must meet non-
Federal requirements, as applicable, except when such non-Federal 
requirements prevent the application of the provisions of title I of 
the Affordable Care Act. As originally proposed,

[[Page 30275]]

Sec.  155.215(f) did not specify the types of non-Federal requirements 
which would prevent the application of title I of the Affordable Care 
Act, but instead incorporated them by reference to applicable 
provisions under proposed Sec.  155.210(c)(1)(iii). A few commenters 
requested that HHS, in the interest of added clarity and ease of 
comprehension, revise proposed Sec.  155.215(f) to spell out in the 
text of this provision the non-exhaustive list of non-Federal 
requirements that would prevent the application of the provisions of 
title I of the Affordable Care Act as applied to non-Navigator 
assistance personnel, rather than cross-referencing the applicable 
provisions under Sec.  155.210(c)(1)(iii), as we had originally 
proposed.
    Response: We agree with the comment that, consistent with section 
1321(d) of the Affordable Care Act, non-Navigator assistance personnel 
subject to Sec.  155.215 must meet any non-Federal requirements that 
may apply to them, so long as such requirements do not prevent the 
application of the provisions of title I of the Affordable Care Act. In 
the interest of added clarity and comprehension, we have modified this 
provision to add subparagraphs (1) through (4) to Sec.  155.215(f), in 
which we list the previously cross-referenced provisions proposed in 
the Navigator rule at Sec.  155.210(c)(1)(iii).
    Comment: Several commenters supported the clear and specific 
acknowledgement in proposed Sec.  155.225(d)(8) that certified 
application counselors and their designated organizations must meet 
non-Federal requirements, as applicable, except when such non-Federal 
requirements prevent the application of the provisions of title I of 
the Affordable Care Act. A few commenters asserted that the certified 
application counselor program operating in an FFE should not be subject 
to non-Federal requirements because, in the commenters' view, this 
program was created under HHS's regulatory authority--not by statute.
    Response: We are finalizing the provisions of Sec.  155.225(d)(8) 
with modifications consistent with those made to the parallel Navigator 
and non-Navigator provisions. These finalized provisions establish that 
certified application counselors must meet licensing, certification, or 
other standards prescribed by a State or Exchange, so long as they do 
not prevent the application of the provisions of title I of the 
Affordable Care Act.
    It is unclear to HHS why some commenters believe that a certified 
application counselor program operating in an FFE should not be subject 
to non-Federal requirements simply because it was established through 
an HHS regulation implementing the Affordable Care Act, rather than 
being expressly provided for by the statute. As we have previously 
explained, the Secretary established the certified application 
counselor program under the authority provided in section 1321(a)(1) of 
the Affordable Care Act. Section 1321(a)(1) directs and authorizes the 
Secretary to issue regulations setting standards for meeting the 
requirements under title I of the Affordable Care Act, with respect to, 
among other things, the establishment and operation of Exchanges. 
Therefore, the certified application counselor program is authorized by 
the statute, even if the program was established through rulemaking. 
Whether a certified application counselor organization should be 
subject to non-Federal requirements will turn on application of the 
preemption standard set forth in section 1321(d) of the Affordable Care 
Act, namely whether the non-Federal requirement prevents the 
application of the provisions of title I of the Affordable Care Act, 
regardless of whether it is operating in an FFE.
    Comment: Some commenters asserted that since 45 CFR 155.225(a) 
established that ``the Exchange must have a certified application 
counselor program that complies with the requirements of this 
section,'' it follows that it is the responsibility of ``the Exchange'' 
to regulate certified application counselors, and therefore any State 
that has opted for HHS to operate an FFE has relinquished authority to 
regulate the certified application counselor program in the State. In 
support of this view, the commenters noted a Federal court decision at 
St. Louis Effort for AIDS, et al. v. Huff, No. 13-4246-CV-C-ODS, 2014 
WL 273201, at *9 (W.D. Mo. Jan. 23, 2014) (order granting preliminary 
injunction). This decision is currently on appeal before the United 
States Court of Appeals for the Eighth Circuit, St. Louis Effort for 
AIDS v. Huff, No. 14-1520 (8th Cir. Appeal docketed Mar. 6, 2014). 
Accordingly, commenters recommended that proposed Sec.  155.225(d)(8) 
be modified to state: ``meets any licensing, certification, or other 
standards prescribed by the State or Exchange, as applicable'' 
(emphasis added).
    Response: The issue presented in these comments is the subject of 
pending litigation before the United States Court of Appeals for the 
Eighth Circuit in St. Louis Effort for AIDS v. Huff, No. 14-1520 (8th 
Cir. Appeal docketed Mar. 6, 2014). In light of that ongoing 
litigation, we are refraining from making the recommended change to 
Sec.  155.225(d)(8) of the final rule at this time. We will consider 
making changes in the future.
    Comment: We received several comments in support of proposed 
Sec. Sec.  155.210(c)(1)(iii)(A) and 155.225(d)(8)(i), with a few of 
these commenters noting that these provisions could bring an ancillary 
benefit of enhancing conflict-of-interest rules and mitigating the risk 
that assisters might receive ``kickbacks'' from entities not required 
to act impartially. Several of these commenters requested that we 
modify the provision to mirror the characterization included in the 
preamble by adding ``insurance agents and brokers'' explicitly into the 
rule text, in addition to retaining ``other entities not required to 
provide fair, accurate, and impartial information.'' On the other hand, 
a few commenters objected to the characterization in the preamble 
discussion of the proposed rule that, in their view, implied that 
licensed health insurance agents and brokers are permitted to engage in 
unfair acts or make false and misleading statements. The commenters 
explained that in most States, licensing and unfair trade practices 
laws require agents and brokers to refrain from engaging in deceptive 
behavior or making misrepresentations regarding benefits and terms of 
coverage.
    A few commenters, while supporting the proposed provision's 
specification that mandated referrals to third parties not required to 
provide information in a fair, impartial, accurate manner are in 
conflict with applicable Federal standards, also requested that we 
explain that this provision applies only to non-Federal requirements 
that mandate such referrals, and asked that we confirm that assisters 
would be permitted to refer consumers to agents and brokers voluntarily 
in specific circumstances, such as when the consumer's needs exceed the 
assister's expertise, or when the assister or entity lacks the capacity 
and resources to assist all individuals who seek assistance. In 
addition, a few commenters recommended that HHS clarify that this 
provision should not be construed to mean that assisters are barred 
from making referrals to entities not required to provide fair, 
accurate, and impartial information. These commenters suggested, for 
example, that assisters should be permitted to make such referrals when 
a consumer requests a specific recommendation regarding which plan to 
choose, because making a specific plan recommendation might violate an 
assister's duties under the

[[Page 30276]]

applicable Federal standards, and doing so might also violate certain 
State laws that prohibit anyone other than a licensed health insurance 
agent or broker from recommending a plan. In addition, a few commenters 
asserted that it is appropriate for Navigators to fulfill requirements 
to assist small employers with enrollment through referral to agents 
and brokers in instances where Navigators do not have expertise in 
small business insurance, because agents and brokers continue to be an 
important source of information and enrollment assistance for both 
individuals and for small employers.
    Response: We are finalizing this provision as proposed, with one 
modification with respect to proposed Sec.  155.225(d)(8)(i). We do not 
believe that the regulation, or our discussion in the preamble to the 
proposed rule, suggests that agents and brokers engage in unfair or 
deceptive practices. We nonetheless believe that that the proposed 
language describing ``entities not required to act in the best 
interests of applicants assisted'' was confusing on this point, and 
have replaced it, consistent with the changes we are finalizing in this 
rule to 155.225(c)(1), with a reference to ``entities not required to 
provide fair, accurate, and impartial information.'' We decline to 
mention agents and brokers explicitly in the regulation text, because, 
as some commenters point out, agents and brokers may be required to act 
impartially and may be subject to standards that would require them to 
provide fair, accurate, and impartial information in a way that is 
similar to Exchange-approved consumer assistance entities and 
individuals.
    We agree with the commenters who supported our view in the proposed 
rule that a non-Federal requirement mandating that Navigators, non-
Navigator assistance personnel subject to Sec.  155.215, and certified 
application counselors refer consumers to third parties not obligated 
to provide fair, accurate, and impartial information would conflict 
with the Federal duties required of Navigators, non-Navigator 
assistance personnel subject to Sec.  155.215, and certified 
application counselors and their designated organizations under various 
authorities: for Navigators, sections 1311(i)(3)(B) and 1311(i)(5) of 
the Affordable Care Act, as well as 45 CFR 155.210(e)(2) and 
155.215(a)(1)(iii); for Non-Navigator assistance personnel, 45 CFR 
155.215 (a)(2)(i) and (iv); and for certified application counselors, 
45 CFR 155.225(c)(1) as amended in this final rule. In light of the 
regulation text changes, discussed in greater detail below, that we 
make under Sec.  155.225(c)(1) to align that provision more 
consistently with the standards that apply across Exchange consumer 
assistance programs, and to explicitly specify that certified 
application counselors must provide information ``in a fair, accurate, 
and impartial manner,'' we are clarifying the language of final Sec.  
155.225(d)(8)(i). Specifically, we are finalizing Sec.  
155.225(d)(8)(i) to specify that a referral to a third party that is 
not required to ``act in the best interest'' of applicants assisted, as 
required under Sec.  155.225(d)(4), or to a third party that is not 
required to provide information in a fair, accurate, and impartial 
manner, as required under the clarifications to Sec.  155.225(c)(1) 
that we make in this final rule, would prevent certified application 
counselors from meeting Federal standards that apply to them. To 
reiterate and, in recognition of the fact that a third party may be 
required to act in the best interest of the applicants they assist or 
provide information in a fair, accurate, and impartial manner to the 
same extent that a certified application counselor is required to, we 
would not construe a non-Federal requirement that required such a 
referral to that particular type of third party to prevent the 
application of the provisions of title I of the Affordable Care Act.
    In addition, these comments present us with the opportunity to 
explain that we interpret certain Federal standards applicable to 
Navigators, non-Navigator assistance personnel subject to Sec.  
155.215, and certified application counselors and their designated 
organizations to prohibit these assisters from making specific plan 
recommendations. With respect to Navigators and the non-Navigator 
assistance personnel who are subject to Sec.  155.215, the 
recommendation of a specific plan would be inconsistent with CMS's 
interpretation of 45 CFR 155.210(e)(2) and (3) (applicable to 
Navigators in all Exchanges) and 45 CFR 155.215(a)(1)(iii) (applicable 
to Navigators in an FFE) and (a)(2)(i) and (iv) (applicable to non-
Navigator assistance personnel subject to Sec.  155.215, which require 
these assisters to provide information in a fair, accurate, and 
impartial manner, including by acknowledging other programs; to provide 
information to individuals and employees about the full range of QHP 
options and insurance affordability programs for which they are 
eligible; and to facilitate selection of a QHP. With respect to 
certified application counselors, the recommendation of a specific plan 
would violate their duties to act in the best interests of the consumer 
(45 CFR 155.225(d)(4)), to provide information to individuals and 
employees about the full range of QHP options and insurance 
affordability programs for which they are eligible, and help to 
facilitate their enrollment in QHPs and insurance affordability 
programs (45 CFR 155.225(c)(1) and (3)). Specifically, in our view, 
permitting assisters to recommend a specific plan would undermine one 
overall purpose of consumer assistance programs, which is to provide 
interpretive guidance that enables consumers to become fully informed 
and health literate, to assess the full range of their coverage options 
and the strengths and weaknesses of different options or plans based on 
the information provided to them, and ultimately to be able to make 
their own informed choices about which coverage option best meets their 
needs and budget. Further, Federal standards require an assister to act 
to ``facilitate'' plan selection or enrollment (as applicable), which 
we interpret to mean that the act of plan selection and enrollment 
itself rests with the consumer (see our previously expressed 
interpretations of these requirements in preamble at 78 FR 42844-45). 
Consistent with these principles, we are amending Sec.  155.210(e)(2) 
in the final rule, to specify that in addition to the existing 
requirement under this provision that Navigators provide information 
and services in a fair, accurate, and impartial manner, the duties of a 
Navigator include providing information that assists consumers with 
submitting the eligibility application; clarifying the distinctions 
among health coverage options, including QHPs; and helping consumers 
make informed decisions during the health coverage selection process. 
We are also adding these standards through amendments to Sec.  
155.225(c)(1) in the final rule, to clarify the existing duty of 
certified application counselors to provide information to individuals 
and employees about the full range of QHP options and affordability 
programs for which they are eligible which includes providing fair, 
impartial, and accurate information that assists consumers with 
submitting the eligibility application; clarifying the distinctions 
among health coverage options, including QHPs; and helping consumers 
make informed decisions during the health coverage selection process.
    While consumers need to make the ultimate decision regarding the 
type of coverage that best meets their health care needs and budget, 
assisters may

[[Page 30277]]

facilitate enrollment in a QHP by providing comprehensive information 
about the substantive benefits and features of a plan, clarifying the 
similarities and distinctions among plans, and assisting consumers with 
making informed decisions in the plan selection process, consistent 
with the consumer's expressed interests and needs. Therefore, as part 
of facilitating a consumer's enrollment in a QHP, or selection of a 
QHP, Navigators, non-Navigator assistance personnel subject to Sec.  
155.215, and certified application counselors may provide information 
to the consumer that includes, but is not limited to, information 
regarding plan features such as deductibles, coinsurance and 
copayments, coverage limitations or exclusions, identifying plans for 
which an eligible consumer may receive CSRs or other Federal financial 
assistance (for example, Ryan White HIV/AIDS Program premium and cost-
sharing assistance) and information about whether a particular provider 
or hospital is included within a plan's network. Offering this type of 
information is particularly important for consumers, who, without such 
assistance, might otherwise not complete the enrollment process or 
might not have all of the information they need to make a plan 
selection.
    To the extent an assister is asked by a consumer to recommend a 
plan, we interpret the above-cited authorities as requiring the 
assister to refrain from providing a recommendation or otherwise 
steering a consumer to a particular plan. In addition, if a consumer 
asks an assister to recommend a specific plan, an assister should 
remind the consumer that they are prohibited from making plan 
recommendations because Federal standards require them to remain fair 
and impartial. The assister may, consistent with the consumer's 
expressed needs and desires, determine that it is appropriate to inform 
the consumer of the general availability of licensed, Exchange-trained 
health insurance agents and brokers as a resource that could provide 
specific plan recommendations, if licensed health insurance agents or 
brokers are permitted to do so under State law. The assister may direct 
the consumer to listings of agents and brokers; however, the assister 
should not make a referral to any specific agent or broker or specific 
set of agents or brokers.
    With one limited exception,\23\ assisters may not fulfill their 
Federally-required duties through referrals to agents and brokers. As 
we have stated previously, Navigators subject to Sec.  155.215 (that 
is, Navigators in the FFEs and State Partnership Exchanges) and non-
Navigator assistance personnel subject to Sec.  155.215 must be 
prepared to serve both SHOP and the individual market Exchange, 
including small businesses with SHOP (see Sec.  155.215(b)(1)(v) and 78 
FR 42835-36). Certified application counselors in the FFEs are expected 
to assist employees with SHOP options and are permitted, but not 
required, to assist small employers with SHOP.\24\ In the event that a 
particular consumer's individual needs go beyond the assister's 
expertise, or the assister or entity lacks the resources to assist all 
individuals who present themselves for assistance, an assister may, 
consistent with the consumer's expressed needs and desires, determine 
that it is in the consumer's best interests to inform the consumer of 
the general availability of other consumer assistance entities who may 
possess the requisite expertise and capacity to assist them, including 
the Exchange Call Center, non-Navigator assistance personnel or 
certified application counselors. With respect to the FFEs, we note 
that HHS maintains on its Web site and at its Call Center a public 
registry of Exchange-approved consumer assistance resources in each 
FFE, including Navigators, non-Navigators, and certified application 
counselor organizations. HHS also maintains on its Web site links to 
agent and broker trade association Web sites, which would allow a 
consumer to look up agents and brokers in a particular local area. We 
encourage State Exchanges to make consumer assistance resources 
publicly available in a similar manner and understand that many, if not 
most, State Exchanges have done so.
---------------------------------------------------------------------------

    \23\ Sec.  155.705(d) permits a State operating a State SHOP-
only Exchange to allow Navigators to fulfill certain Navigator 
duties under Sec.  155.210(e)(3) and (4) through referrals to agents 
and brokers.
    \24\ See question 40 at http://marketplace.cms.gov/help-us/common-qandas-about-cac-designation.pdf.
---------------------------------------------------------------------------

    Comment: Many commenters indicated support for proposed Sec. Sec.  
155.210(c)(1)(iii)(B) and 155.225(d)(8)(ii) and agreed that non-Federal 
requirements that prevent Navigators, non-Navigator assistance 
personnel subject to 155.215, and certified application counselors from 
providing services to any individual who presents him or herself for 
assistance would prevent the application of the provisions of title I 
of the Affordable Care Act and should be interpreted as in conflict 
with the requirement for Navigator and non-Navigator assistance 
personnel subject to Sec.  155.215 to provide information and services 
fairly and impartially. However, a few commenters asserted that one 
type of non-Federal requirement discussed in the preamble to the 
proposed rule, which would require assisters to suggest or encourage 
any consumer who is insured, or previously bought insurance through the 
aid of an agent or broker, to consult with that agent or broker before 
enrolling in a plan, serves a legitimate purpose because it is designed 
to prevent consumers from making uninformed or impulsive decisions. 
These commenters asserted that these non-Federal requirements do not 
prevent assisters from performing their Federal obligations because 
they require merely ``advising'' an insured consumer that they should 
consider talking to an insurance professional before changing health 
plans and do not necessarily result in the assister being unable to 
perform application and enrollment assistance for these types of 
consumers, to the extent that these consumers reject the assister's 
advice to consult with an agent or broker. Some commenters argued that 
certain non-Federal requirements of this nature strike the right 
balance and should not be viewed as preventing assisters from 
performing their Federally-mandated duties. Specifically, these 
commenters reasoned that although certain non-Federal requirements of 
this nature require an assister to advise an individual to consult 
first with a health insurance professional with whom they may have 
consulted previously, they permit an assister to continue to provide 
services to that insured individual if that individual expresses a 
preference not to consult with that health insurance professional.
    Response: We are not persuaded by comments suggesting that 
assisters can uphold their duties to provide information in a fair and 
impartial manner and act in the consumer's best interests if they are 
required to advise a consumer to consult with an insurance professional 
when they learn that the consumer is insured or previously purchased 
health insurance with the aid of an agent or broker. While such non-
Federal requirements might be intended to prevent consumers from making 
impulsive or uninformed decisions, the same is true of the Federal 
standards for Navigators, non-Navigator assistance personnel, and 
certified application counselors. These Federal standards are designed 
to ensure that these Exchange-approved assisters help a consumer make a 
fully informed decision.

[[Page 30278]]

Specifically, assisters must provide information in a fair, accurate, 
and impartial manner, provide information on the full range of QHP 
options for which they are eligible, clarify distinctions among QHPs, 
and act in the consumer's best interests. Assisters must also provide 
fair, impartial, and accurate information that assists consumers with 
submitting the eligibility application; clarify the distinctions among 
health coverage options, including QHPs; and help consumers make 
informed decisions during the health coverage selection process, as 
specified in the modifications made to Sec.  155.210(e)(2) (which is 
made applicable to certain non-Navigators through reference in Sec.  
155.215(a)(2)(i)) and Sec.  155.225(c)(1) of this final rule.
    Further, we note that under existing regulations at Sec.  
155.210(d)(4) and 155.215(a)(2)(i) and regulations finalized in this 
final rule at Sec.  155.225(g)(2), Navigators, non-Navigator assistance 
personnel subject to Sec.  155.215, and certified application 
counselors are subject to a conflict of interest standard which 
prohibits them from receiving consideration, directly or indirectly, in 
connection with enrollment in a QHP or non-QHP; and the requirement 
that one of these assisters refer or direct a consumer to another 
individual, such as an agent or broker, who receives such consideration 
in connection with QHP enrollment, would be inconsistent with this 
conflict of interest requirement under Federal law.
    Comment: One commenter asserted that proposed Sec. Sec.  
155.210(c)(1)(iii)(B) and 155.225(d)(8)(ii)'s specification that 
prohibitions against an assister's ability to provide services to any 
individual who presents him or herself for assistance would prevent the 
application of the provisions of title I of the Affordable Care Act, 
were too broadly worded because they referred to ``services'' 
generically, and suggested that the provision be revised to read 
``services required of [assisters] by the Affordable Care Act to all 
persons to whom they are required to provide assistance.'' The 
commenter further asserted that the consumer assistance programs 
created under the Affordable Care Act are intended to assist the 
uninsured, and therefore consumers such as employers and employees with 
employer-sponsored insurance offered through the small group market as 
well as those shopping in the individual market who already have 
insurance are not the types of consumers to whom assisters are intended 
or required to provide assistance.
    Response: We are not modifying the regulation text in the manner 
suggested by the commenter. We do not agree with the commenter's view 
that the consumer assistance programs were created to serve the 
uninsured exclusively. As we explained in the preamble to the proposed 
rule, we interpret the requirement that Navigators and non-Navigator 
assistance personnel subject to Sec.  155.215 provide information and 
services fairly and impartially to require that that these assisters 
provide services to all consumers seeking assistance and have explained 
in preambles to prior rulemakings that all Navigators and non-Navigator 
assistance personnel should have the ability to help any individual who 
presents him or herself for assistance (see 78 FR 20589 and 78 FR 
42830). Further, Sec.  155.215(b)(1)(v) requires that Navigators in 
FFEs and State Partnership Exchanges, and non-Navigator assistance 
personnel subject to Sec.  155.215 be prepared to serve both the 
individual market Exchange and SHOP. In addition, section 1311(i)(3)(D) 
of the Affordable Care Act and Sec.  155.210(e)(4) provide that 
Navigators are required to assist ``any enrollee with a grievance, 
complaint, or question regarding their health plan, coverage, or a 
determination under such plan or coverage'' (emphasis added).\25\ 
Similarly, if a non-Federal requirement barred certified application 
counselors from assisting an employee with Exchange coverage, then such 
a requirement would prevent them from performing all of their Federal 
duties in amended Sec.  155.225(c)(1) and in existing Sec.  
155.225(c)(2) to provide information to employees about the full range 
of QHP options for which they are eligible--including providing fair, 
impartial, and accurate information that assists consumers with 
submitting the eligibility application; clarifying the distinctions 
among health coverage options, including QHPs; and helping consumers 
make informed decisions during the health coverage selection process 
and assist employees to apply for coverage in a QHP through the 
Exchange and for insurance affordability programs. Accordingly, 
assisters would violate these various Federal standards if they 
withheld application or enrollment services from a consumer on the 
basis of any particular status, including status as an insured 
individual.
---------------------------------------------------------------------------

    \25\ Sec.  155.705(d) permits a State operating a State SHOP-
only Exchange to allow Navigators to fulfill certain Navigator 
duties under Sec.  155.210(e)(3) and (4) through referrals to agents 
and brokers.
---------------------------------------------------------------------------

    Comment: We solicited specific comments related to the exception 
noted in proposed Sec. Sec.  155.210(c)(1)(iii)(A) and (B) with respect 
to non-Federal requirements for Navigators in States with a State SHOP-
only Exchange and a FFE for the individual market. A commenter 
supported our approach in the proposed rule to provide an exception in 
proposed Sec. Sec.  155.210(c)(1)(iii)(A) and (B) to account for 
existing Federal regulations that allow SHOP-only State Exchanges to 
permit Navigators to fulfill certain requirements through referral to 
agents and brokers.
    Response: We are finalizing Sec. Sec.  155.210(c)(1)(iii)(A) and 
(B) and Sec.  155.225(d)(8)(i) and (ii), as proposed, without 
modification. As we explained in the preamble to the proposed 
rulemaking promulgating Sec.  155.705(d), we believe that building and 
operating just a SHOP allows a State to move towards operating both a 
SHOP and an individual market Exchange. (78 FR 37044) Additionally, 
where the State elects to establish and operate only a SHOP Exchange, 
there will be two separate Navigator programs operating in the State: a 
Federal Navigator program for the individual market, and a State 
Navigator program for the SHOP. In conjunction with the various other 
areas of flexibility provided to States electing to operate a State 
SHOP-only Exchange, we continue to believe that it is prudent to give a 
State SHOP-only Exchange the flexibility to choose to focus its 
Navigator program on outreach and education to small employers by 
permitting SHOP Navigators to satisfy their duties under Sec. Sec.  
155.210(e)(3) and (4) through referrals to agents and brokers. Giving 
States this extra level of flexibility could further incentivize States 
to operate a SHOP Exchange as an intermediate step towards establishing 
and operating both a SHOP and an individual market Exchange in the 
future, because it could reduce operational costs in running a SHOP, 
and could help leverage existing coordination regarding small group 
market enrollment activities with the agent and broker community in the 
State, as may be applicable. While we recognize that allowing 
Navigators to fulfill two of their duties via referrals to agents and 
brokers might appear somewhat inconsistent with our general view that 
referrals to third parties who are not required to act impartially 
would prevent Navigators from meeting Federal standards, we believe 
that the benefit of providing administrative flexibility to a State 
SHOP-only Exchange's operation in this regard, and thus providing 
perhaps greater incentive to States to operate a SHOP-only

[[Page 30279]]

Exchange, compensates for the potential fact that a SHOP Navigator, if 
he or she makes referrals to agents and brokers, might be referring 
consumers to individuals who might not have the same duty to provide 
fair and impartial information. We therefore note, as we did in the 
preamble to the proposed rule, that we would not consider State laws or 
regulations that permit a State SHOP-only Exchange to take the option 
authorized under Federal regulations at Sec.  155.705(d) to prevent the 
application of the provisions of title I of the Affordable Care Act.
    Comment: We received a number of comments in support of proposed 
Sec. Sec.  155.210(c)(1)(iii)(C) and 155.225(d)(8)(iii) and the view 
expressed in those proposals that non-Federal requirements that 
prohibit assisters from providing advice regarding substantive benefits 
or comparative benefits of different health plans would prevent 
assisters from fulfilling their duty to facilitate selection of or (as 
applicable) enrollment in a QHP. In support of these proposals, 
commenters reasoned that while consumers should make the ultimate 
decision about what type of coverage meets their health care needs and 
budget, providing comprehensive information about the substantive 
benefits and features of a plan, clarifying the distinctions among 
plans, and assisting consumers with making informed decisions in the 
plan selection process, consistent with the consumer's expressed 
interests and needs, are critical components of facilitating enrollment 
in a QHP, particularly for consumers, who, without such assistance, 
might not complete the enrollment process. However, many commenters 
indicated that the inclusion of the word ``advice'' in the proposed 
provision improperly implies that assisters are permitted to make 
recommendations regarding plan selection or are permitted to 
``negotiate'' insurance, which are duties preserved for licensed health 
insurance agents and brokers in most States. To address this concern, 
these commenters recommended that we replace the word ``advice'' with 
``information.'' On the other hand, many other commenters urged 
retention of the word ``advice'' because the use of this term in non-
Federal laws and regulations is ambiguous enough to pose a conflict 
with an assister's duties under Federal requirements, given the nature 
of the information that assisters must provide in order to facilitate 
selection (or enrollment) in a QHP.
    Response: In light of these comments, we are finalizing this 
provision with a few modifications. We reiterate that as an aspect of 
assisters' Federally-required duties under Sec. Sec.  155.210(e)(2) and 
(3) (Navigators in all Exchanges), 155.215(a)(1)(iii) (Navigators in 
FFEs), 155.215(a)(2)(iv) (Non-Navigators in FFEs), and 155.225(c)(1) 
and (3) (certified application counselors in all Exchanges) to 
facilitate (as applicable) selection of a QHP or enrollment of eligible 
individuals in QHPs and insurance affordability programs and to provide 
information about coverage options, they are required to engage in 
substantive discussions about the terms and features of any coverage 
for which a consumer is or might be eligible, consistent with the 
consumer's expressed interests and needs. (See 79 FR 15829). This 
includes, but is not limited to, providing information regarding 
features such as deductibles, coinsurance and copayments, coverage 
limitations or exclusions, plans for which an eligible consumer may 
receive CSRs, and/or whether a particular provider or hospital is 
included within a plan's network. (79 FR 15829). We understand the 
difficulty faced by assisters to understand where the line should be 
drawn between a prohibition on ``advice'' and the ``information'' they 
are required to give to perform their duties, given the nature of the 
information that assisters must provide to fulfill their duties to 
provide fair and impartial information concerning enrollment in QHPs 
and insurance affordability programs and facilitate enrollment. In 
light of the need for further clarity, we have modified the applicable 
existing Federal standards, as we explained above, to clarify 
explicitly in the regulation text that providing fair, impartial, and 
accurate information that assists consumers with submitting the 
eligibility application, clarifying the distinctions among health 
coverage options, including QHPs, and helping consumers make informed 
decisions during the health plan coverage process, are components of an 
assister's Federally required duties. We are making these additions to 
the applicable Federal regulations for Navigators at Sec.  
155.210(e)(2), which applies to non-Navigator assistance personnel 
subject to Sec.  155.215 by a cross-reference at Sec.  
155.215(a)(2)(i), and to the applicable certified application counselor 
regulations at Sec.  155.225(c)(1).
    In addition, we agree that while consumers need to make the 
ultimate decision about what type of coverage meets their health care 
needs and budget, providing comprehensive information about the 
substantive benefits and features of a plan, clarifying the 
similarities and distinctions among plans, and assisting consumers with 
making informed decisions in the plan selection process, consistent 
with the consumer's expressed interests and needs, are a critical part 
of assisters' required duties, particularly for consumers, who, without 
such assistance, might otherwise not complete the enrollment process or 
might not have all of the information they need to make a plan 
selection. Therefore, a non-Federal requirement that prohibits 
assisters from providing ``advice'' regarding substantive benefits or 
comparative features of different health plans would prevent the 
application of the provisions of title I of the Affordable Care Act, 
insofar as such a requirement, as interpreted or applied under State 
law, would prohibit assisters from doing any of the following: (1) 
Providing fair, impartial, and accurate information that assists 
consumers with submitting the eligibility application; (2) clarifying 
the distinctions among health coverage options, including QHPs; or (3) 
helping consumers make informed decisions during the health coverage 
selection process. We have always interpreted the Affordable Care Act 
and our regulations implementing its provisions to prohibit Navigators, 
non-Navigator personnel subject to Sec.  155.215, and certified 
application counselors from recommending a particular plan or steering 
a consumer toward a particular plan or plans as because of their 
specified duties to distribute fair and impartial information to 
consumers and act in the consumer's best interests, while at the same 
time requiring them to provide consumers with all relevant and 
applicable information about the coverage options available to them. 
For example, we have stated that a Navigator cannot make the decision 
for an applicant as to which QHP to select, but they may play an 
important role in facilitating a consumer's enrollment in a QHP by 
providing fair, impartial, and accurate information that assists 
consumers with submitting the eligibility application, clarifying the 
distinctions among QHPs, and helping qualified individuals make 
informed decisions during the health plan selection process (78 FR 
20583; see also 79 FR 15829).
    Comment: We received a number of comments in support of our 
proposal at Sec.  155.210(c)(1)(iii)(D) that non-Federal requirements 
that would require Navigators to hold an agent or broker license or 
carry errors or omissions insurance would prevent the application of 
the requirement at

[[Page 30280]]

155.210(c)(2) that there to be at least two types of Navigator 
entities, including at least one community and consumer-focused 
nonprofit organization. However, many commenters stated that this 
provision should be modified to apply more broadly to include other 
types of assisters, such as non-Navigator assistance personnel subject 
to Sec.  155.215, certified application counselors and certified 
application counselor designated organizations. Further, a number of 
commenters recommended broadening the scope of the proposed provision 
to include other types of financial responsibility requirements, such 
as surety bond requirements or security deposits. These commenters 
noted that in some cases Navigators and other assisters have reported 
difficulty in obtaining surety bonds because issuers have been 
unwilling to underwrite a business service for which it is difficult to 
assess risk. Further, commenters described how some Navigators 
experienced so much difficulty in obtaining a surety bond from a vendor 
that they could only meet a non-Federal surety bond requirement by 
purchasing errors and omissions coverage. They reasoned that the 
potential imposition of civil money penalties for violations of privacy 
and security standards under Sec.  155.260 or program standards (as 
proposed in Sec. Sec.  155.206 and 155.285), as well as the 
availability of a special enrollment period for assister misconduct in 
accordance with Sec.  155.420(d)(10), would be sufficient remedies in 
the event that an assister causes consumer harm, such that a surety 
bond would not be necessary to protect consumers. On the other hand, a 
few commenters indicated that the proposed rule's scope was appropriate 
and indicated that non-Federal requirements that require some form of 
financial responsibility, such as a surety bond, serve as an added 
consumer protection to make a consumer whole in the event of fraud or 
some other wrongdoing on the part of the assister. These commenters 
further reasoned that requiring assisters to hold a surety bond or 
other proof of financial responsibility does not necessarily inhibit a 
community and consumer-focused nonprofit organization from 
participating in any consumer assistance program because surety bonds 
are generally available to all types of businesses.
    Response: We are finalizing this provision as proposed, with one 
modification. We appreciate commenters' concerns about the lack of 
parity that results from not extending this provision to non-Navigator 
assistance personnel subject to Sec.  155.215 and certified application 
counselors. At this time, however, we decline to extend this provision 
to these other types of consumer assistance programs because we are not 
able to discern a facial conflict between non-Federal requirements that 
would require non-Navigator assistance personnel or certified 
application counselors to hold an agent or broker license or carry 
errors and omissions insurance coverage and the Federal standards 
applicable to these programs. However, we recognize that within the 
meaning of the statutory preemption standard set forth at section 
1321(d) of the Affordable Care Act and proposed Sec. Sec.  
155.210(c)(1)(iii)(F) and 155.225(d)(8)(v), there might be specific 
factual circumstances in which these types of non-Federal requirements 
would prevent these individuals or entities from fulfilling their 
Federally required duties or would prevent an Exchange from operating 
the non-Navigator or certified application counselor programs that it 
is required (or authorized) to implement consistent with Federal 
requirements. In such cases, non-Federal requirements that require non-
Navigator assistance personnel subject to Sec.  155.215 or certified 
application counselors or their designated organizations to hold an 
agent or broker license or carry errors and omissions insurance or 
other forms of financial responsibility might prevent the application 
of the provisions of title I of the Affordable Care Act.
    In addition, at this time, we believe it is appropriate to limit 
the scope of this provision so that it is directed only at non-Federal 
laws requiring Navigators to hold an agent or broker license and are 
not finalizing the reference to laws that require Navigators to carry 
errors or omissions insurance, as proposed. As we explained in the 
preamble to the proposed rule, requiring that each Navigator be a 
licensed agent or broker would mean, in effect, that all Navigators 
would be agents and brokers, and would therefore prevent the 
application of Sec.  155.210(c)(2), which established the requirement 
that in all Exchanges, at least two types of entities, including one 
community and consumer-focused nonprofit group, must serve as 
Navigators. HHS has previously advised (see 77 FR 18331-32) that such 
requirements would prevent the application of Sec.  155.210(c)(2). 
Since we understand, based on the comments, that in at least some 
jurisdictions, errors and omissions insurance coverage is not 
exclusively available to agents and brokers and other types of 
professionals might carry it, we cannot discern a facial conflict 
between a non-Federal requirement requiring errors and omissions 
insurance and Federal requirements applicable to Navigators or the 
Exchange. However, as we made clear in prior rulemaking and now make 
explicit here in finalizing the regulation text, any non-Federal 
requirement that would, in effect, require all Navigators to be 
licensed agents or brokers would prevent the application of the Federal 
standards that apply to an Exchange's operation of the Navigator 
program (specifically, would prevent the application of 45 CFR 
155.210(c)(2)) and therefore would prevent the application of the 
provisions of title I of the Affordable Care Act. By removing the 
reference to errors and omissions coverage, we do not intend to 
foreclose the possibility that there might be specific factual 
circumstances under which a non-Federal financial responsibility 
requirement that does not facially conflict with a Federal requirement 
might, as applied or implemented, prevent the application of Federal 
requirements for Navigators within the meaning of section 1321(d) of 
the Affordable Care Act.
    Comment: Many commenters indicated support for proposed Sec. Sec.  
155.210(c)(1)(iii)(E) and 155.225(d)(8)(iv) and the accompanying 
preamble discussion illustrating HHS's views regarding situations in 
which non-Federal requirements prevent otherwise eligible and qualified 
Exchange-approved assisters from operating in a State with an FFE. In 
particular, these commenters stated that non-Federal requirements that 
prohibit consumer assistance entities from receiving any consideration, 
directly or indirectly, from a health insurance issuer, even if not in 
connection with QHP enrollment, are unnecessary and have precluded some 
extremely qualified organizations from serving as an Exchange-approved 
assister organization. A few commenters recommended that HHS explain 
the interplay of this proposed provision and existing Sec.  
155.210(d)(4) (applicable to Navigators and, through155.215(a)(2)(i), 
to non-Navigator assistance personnel subject to Sec.  155.215) and the 
parallel provision under proposed Sec.  155.225(g)(2) (for certified 
application counselors and their designated organizations) prohibiting 
these assisters from receiving any consideration directly or indirectly 
from any health insurance issuer or issuer of stop loss insurance in 
connection with the enrollment of any individuals (or employees, for 
Navigators) in a QHP or

[[Page 30281]]

a non-QHP. The commenters explained that it appeared that these Federal 
standards were ``somewhat in conflict'' with the proposed rule's 
preamble discussion which stated that in HHS's view, a non-Federal 
requirement that imposes prohibitions on receiving any financial 
compensation from a QHP issuer even if not in connection with 
enrollment, would go beyond these Federal conflict-of-interest rules.
    Response: As discussed above, we are not finalizing proposed 
Sec. Sec.  155.210(c)(1)(iii)(E) and 155.225(d)(8)(iv). We are 
convinced by the concerns raised by commenters that it may not be 
possible to specify through rulemaking where the line should be drawn 
between non-Federal eligibility standards that prevent the application 
of Federal requirements and those that do not. These types of non-
Federal requirements will likely need to be analyzed on a case by case 
basis. For example, a non-Federal requirement that, in its application, 
effectively limits the pool of assisters in the Exchange, to such an 
extent that the Exchange cannot operate its consumer assistance 
functions effectively, might prevent the application of the provisions 
of title I of the Affordable Care Act within the meaning of section 
1321(d) of the Affordable Care Act. As already addressed in detail 
above, we are not finalizing Sec. Sec.  155.210(c)(1)(iii)(E) and 
155.225(d)(8)(iv), but have determined that the better approach is to 
clarify in regulation text two standards that we discussed in the 
preamble connected to these proposed provisions. First, we specify that 
in an FFE, an entity that seeks to become a Navigator entity, non-
Navigator assistance personnel entity subject to Sec.  155.215, or 
certified application counselor organization shall not be ineligible to 
operate as an assister entity solely because its principal place of 
business is outside of the Exchange service area. Second, we specify 
that in an FFE, no health care provider shall be ineligible to operate 
as a Navigator, non-Navigator assistance personnel subject to Sec.  
155.215, or a certified application counselor solely because it 
receives consideration from a health insurance issuer for health care 
services provided. We are finalizing these standards, consistent with 
discussions set forth in preamble discussions in the proposed rule and 
in prior rulemaking (78 FR 42832), through the provisions at Sec. Sec.  
155.210(e)(7), 155.215(h) and 155.225(b)(3), with respect to the 
principal place of business standard, and in Sec.  155.210(d)(4) (made 
applicable to non-Navigator assistance personnel through Sec.  
155.215(a)(2)(i)) and Sec.  155.225(g)(2), with respect to the 
consideration standard.
    Comment: We received an overwhelming number of comments that 
supported including proposed Sec. Sec.  155.210(c)(1)(iii)(F) and 
155.225(d)(8)(v) in the final rule because the provisions appropriately 
recognized that other non-Federal requirements not specified expressly 
in other proposed provisions might also prevent the application of 
title I of the Affordable Care Act, if, as implemented or applied in a 
State, they would prevent assisters from performing their Federally 
required duties or prevent the Exchange from implementing the consumer 
assistance programs consistent with Federal standards. A few commenters 
recommended that this provision apply to State Exchanges in addition to 
FFEs. Several commenters identified a myriad of other types of non-
Federal requirements that, in the commenters' view, should be expressly 
included in the finalized regulations under these provisions, such as: 
establishing requirements for current Navigator grantees after 
Navigator grants have been awarded, setting unreasonable or duplicative 
training requirements, setting unreasonable time limitations on meeting 
State standards, imposing unreasonable costs on Navigators or other 
assisters, imposing credit rating reporting requirements, requiring a 
GED or high school diploma, or implementing State requirements in a 
manner that is unduly burdensome for Navigators or that disadvantages 
certain Navigator entities.
    Response: We are finalizing proposed Sec. Sec.  
155.210(c)(1)(iii)(F) and 155.225(d)(8)(v), which is now renumbered in 
this final rule under Sec. Sec.  155.210(c)(1)(iii)(E) and 
155.225(d)(8)(iv), as proposed, with a few modifications. We agree with 
the commenters who found that the proposed provisions appropriately 
recognize that non-Federal requirements, including but not limited to 
registration requirements, fingerprinting or background checks, and 
additional training, may not be in conflict with Federal standards on 
their face, but nevertheless could, as implemented or applied in a 
State, ultimately prevent assisters from meeting the Federal standards 
that apply to them or interfere with the Exchange's ability to operate 
the consumer assistance programs it is required (or authorized) to 
implement consistent with Federal requirements. In such circumstances, 
the non-Federal requirements would, in HHS's view, prevent the 
application of the provisions of title I of the Affordable Care Act 
within the meaning of section 1321(d). Consistent with our approach in 
the proposed rule, we do not think it is necessary or appropriate to 
enumerate in the final regulation text every type of non-Federal 
requirement that would fall under this provision. We view this 
provision largely as interpreting one way that the statutory preemption 
standard under section 1321(d) of the Affordable Care Act could apply 
to non-Federal requirements pertaining to assister programs in an 
Exchange. We decline to specify every conceivable type of non-Federal 
requirement which would, as applied or on its face, prevent the 
application of Federal requirements for assisters or assister programs 
in an Exchange. In many cases, the identification of such non-Federal 
requirements will depend on highly fact-specific circumstances that 
would be impractical, if not impossible, to enumerate in an exhaustive 
list. As explained in greater detail above, we agree with the 
recommendation that this provision should apply to State Exchanges in 
addition to FFEs because the preemption standard under section 1321(d) 
of the Affordable Care Act is generally applicable to all types of 
Exchanges. Therefore, in finalizing this provision, we have removed the 
reference that would have limited its applicability to FFEs. In 
addition, we have revised the provision to incorporate language 
included in preamble discussion to the proposed rule to state that a 
non-Federal requirement would also prevent the application of the 
provisions of title I of the Affordable Care Act if, as applied or 
implemented in the State, it prevents the Exchange's implementation of 
the applicable assister program consistent with Federal requirements 
under section 1311(i) of the Affordable Care Act, and 45 CFR 155.205, 
155.210, 155.215, and 155.225. For example, if a State registration 
requirement is implemented in a way that makes it impossible for any 
individuals or entities to operate as an Exchange-approved assister, 
that requirement would prevent the Exchange from operating the consumer 
assistance program that it is required (or authorized) to implement. As 
such, we believe it is important to clarify this possibility explicitly 
in the regulation text.
    Comment: A few commenters recommended that HHS specify that non-
Federal requirements that prohibit certain health centers from 
performing voter registration activity would also prevent the 
application of title I of the Affordable Care Act, since the National

[[Page 30282]]

Voter Registration Act of 1993 (``NVRA'') requires States to designate 
all offices in the State that provide ``public assistance'' (which may 
include health centers who are Exchange-approved consumer assistance 
entities) as ``voter registration agencies'' to perform voter 
registration activities (42 U.S.C. 1973gg-5(a)(2)(A)).
    Response: Because title I of the Affordable Care Act does not 
address voter registration activities, HHS expresses no view in this 
rulemaking regarding whether State laws regulating voter registration 
activities would be preempted by the NVRA.
2. Navigator, Non-Navigator Assistance Personnel, and Certified 
Application Counselor Program Standards (Sec. Sec.  155.210, 155.215, 
and 155.225)
    In the proposed rule, we also proposed a number of provisions to 
bring the standards for Navigators, non-Navigator assistance personnel 
subject to Sec.  155.215, and certified application counselors into 
alignment. Specifically, with respect to Navigators and non-Navigator 
assistance personnel subject to Sec.  155.215, we proposed that they 
must obtain consumer authorization before accessing an applicant's 
personally identifiable information (PII), and that a record of 
authorization be provided, just as is already the case for certified 
application counselors under Sec.  155.225(f). In addition, we proposed 
that Navigators and non-Navigator assistance personnel subject to Sec.  
155.215 must not charge any applicant or enrollee, or request or 
receive any form of remuneration from or on behalf of an applicant or 
enrollee, for application or other assistance related to the applicable 
assister's duties, just as is already the case for certified 
application counselors under Sec.  155.225(g). With respect to the 
certified application counselor program, we proposed that certified 
application counselors must be recertified on at least an annual basis 
and complete Exchange-required training, just as is already the case 
for Navigators in FFEs and State Partnership Exchanges and Non-
Navigator assistance personnel subject to Sec.  155.215, under Sec.  
155.215(b). Further, we proposed that certified application counselors 
and their organizations would be prohibited from receiving 
consideration, directly or indirectly, from health insurance issuers or 
stop loss issuers in connection with the enrollment of any individuals 
in a QHP or a non-QHP, just as is already the case for all Navigators 
and for non-Navigator assistance personnel subject to Sec.  155.215, 
under Sec. Sec.  155.210(d)(4) and 155.215(a)(2)(i).
    We also proposed a number of new standards for Navigators, non-
Navigator assistance personnel subject to Sec.  155.215, and certified 
application counselors. First, we proposed to require that these 
entities and individuals maintain a physical presence in their Exchange 
service area. We also proposed the following prohibitions on their 
conduct: providing compensation to individual Navigators, non-Navigator 
assistance personnel subject to Sec.  155.215, or certified application 
counselors on a per-application, per-individual assisted, or per-
enrollment basis; providing gifts, including gift cards or cash, unless 
they are of a nominal value, or providing promotional items that market 
or promote the products or services of a third party, to any applicant 
or potential enrollee in connection with or as an inducement for 
application assistance or enrollment; soliciting any consumer for 
application or enrollment assistance by going door-to-door or through 
other unsolicited means of direct contact, including calling a consumer 
to provide application or enrollment assistance without the consumer 
initiating the contact; and initiating any telephone call to a consumer 
using an automatic telephone dialing system, or an artificial or 
prerecorded voice.
    Comment: Commenters generally supported the alignment of provisions 
applicable to Navigators, non-Navigator assistance personnel subject to 
Sec.  155.215, and certified application counselors. However, some 
commenters raised concerns that applying the newly proposed provisions 
at Sec.  155.225(g)(3)-(6), without modification, to certified 
application counselors would be overly burdensome and would discourage 
individuals and organizations from serving as certified application 
counselors or certified application counselor entities.
    Response: We understand the concerns raised by commenters about 
potential burdens that the new provisions might place on certified 
application counselors. However, we are finalizing the certified 
application counselor provisions consistent with the finalization of 
parallel provisions for Navigators and the non-Navigator assistance 
personnel that are subject to Sec.  155.215. The purpose of aligning 
these provisions is to ensure that consumers are all afforded the same 
protections, no matter which type of assister they seek services from. 
As a result, we are not modifying the provisions specifically 
applicable to certified application counselors, except to bring them 
generally into alignment with the way we have finalized the parallel 
provisions for Navigators and the non-Navigator assistance personnel 
subject to Sec.  155.215. There are two instances where the provisions 
are not parallel because it is not appropriate due to fundamental 
differences between the certified application counselor program and the 
Navigator and non-Navigator assistance personnel programs. We are not 
finalizing any restriction for certified application counselors 
regarding the use of Exchange funds to purchase gifts and promotional 
items because certified application counselors are generally not 
expected to receive Exchange funds. These distinctions are further 
discussed below.
    Comment: Commenters agreed with and supported the proposal at Sec.  
155.210(d)(5) prohibiting Navigators and non-Navigator assistance 
personnel subject to Sec.  155.215 (applicable through a cross-
reference to Sec.  155.210(d) in Sec.  155.215(a)(2)(i)) from charging 
for application assistance services. Some commenters requested 
clarification that this does not otherwise prohibit an assister from 
charging for other services the assister might provide, such as 
clinical or legal services.
    Response: Given support from commenters for the provision 
prohibiting Navigators and non-Navigator assistance personnel from 
charging consumers for application or other assistance services, we are 
finalizing this provision without change. We note that the language in 
the provision specifically limits this prohibition to charging for 
application assistance or other assistance provided as part of 
Navigator duties. We interpret the cross-reference in Sec.  
155.215(a)(2)(i) to this provision in Sec.  155.210(d) to similarly 
limit the prohibition to charging for application assistance or other 
assistance provided as part of the duties of non-Navigator assistance 
personnel who are subject to Sec.  155.215. We also note that this 
provision would not prohibit Navigators or non-Navigator assistance 
personnel subject to Sec.  155.215 from charging consumers for 
services, such as clinical health care services or legal aid services, 
that are not provided as part of their duties as Navigators or non-
Navigator assistance personnel.
    Comment: We requested comment on the proposal to prohibit 
compensation paid to Navigators (proposed at Sec.  155.210(d)(6)), non-
Navigators subject to Sec.  155.215 (applicable through a cross-
reference to Sec.  155.210(d) in Sec.  155.215(a)(2)(i)), or certified 
application counselors (at Sec.  155.225(g)(3)) on a per-application, 
per-individual-assisted, or per-enrollment basis. We also asked

[[Page 30283]]

whether there might be other alternatives for building rewards for 
performance without creating adverse incentives. Several commenters 
agreed that compensation paid to individual assistance personnel on a 
per-application, per individual-assisted, or per-enrollment basis could 
provide adverse incentives and invite behavior that is not in the best 
interest of consumers. These commenters recommended, for the same 
reasons, that we extend the prohibition so that Exchange-funded 
assister entities, and not just individual assisters, should not be 
compensated on a per-application, per individual-assisted, or per-
enrollment basis. Other commenters raised concerns about this 
prohibition, noting that some State Exchanges are already using 
compensation models that would be prohibited by the proposed rule, and 
recommending that these States should be allowed to continue using 
their current compensation models. These commenters requested that, at 
a minimum, States currently using these compensation models be given an 
adequate transition period, with one recommendation being that this 
standard not become effective before the start of open enrollment for 
2016 coverage in the individual market Exchanges. In general, 
commenters opposed to this prohibition recommended that HHS further 
evaluate these compensation models, and assess their effects in States 
using them, prior to regulating their use.
    Response: We appreciate the concerns raised by commenters regarding 
this provision. We are finalizing these provisions, but have edited 
them to apply only to Navigators, non-Navigator assistance personnel, 
and certified application counselors in FFEs. We moved proposed Sec.  
155.210(d)(6) to Sec.  155.215(i) and specified that it is applicable 
only to Navigators in FFEs, including State Partnership Exchanges, and 
to non-Navigator assistance personnel in FFEs and State Partnership 
Exchanges, by indicating that it applies only to Navigators and non-
Navigator assistance personnel operating in an Exchange operated by HHS 
during the exercise of its authority under Sec.  155.105(f). This 
provision is not applicable to Navigators and non-Navigator assistance 
personnel in State Exchanges, even if those non-Navigator assistance 
personnel are funded with Exchange Establishment Grants. We have made a 
similar edit to Sec.  155.225(g)(3), by indicating that this provision 
applies only beginning November 15, 2014, and only to certified 
application counselors operating in an FFE, including a State 
Partnership Exchange.
    We are making these modifications in an effort to balance the 
interests of the FFEs and State Exchanges. We understand that there are 
some State Exchanges currently using these types of compensation models 
for Navigators, non-Navigator assistance personnel, and/or certified 
application counselors. These States have noted successful enrollment 
efforts with these compensation models, and it is not our intent to 
disrupt compensation practices that are currently used or authorized by 
State Exchanges. However, for assisters operating in the FFEs, 
including State Partnership Exchanges, we have an interest and a 
concern in ensuring that they are not incentivized to hurry through an 
assistance session with a consumer, and possibly to avoid assisting 
those consumers who may have complex situations that require them to 
have extra time for completing an application. Additionally, these 
compensation structures create an incentive for Navigators, non-
Navigator assistance personnel, and certified application counselors to 
focus primarily on facilitating enrollment in or selection of a QHP, as 
applicable, which is only one of the several duties required of 
Navigators and certified application counselors, and is not a required 
duty under Federal regulations for non-Navigator assistance personnel 
(although non-Navigator assistance personnel subject to Sec.  155.215 
may provide this assistance).\26\ We will continue to evaluate and 
monitor the use of these compensation models in State Exchanges, while 
we give further consideration to whether the proposed prohibitions 
should apply to all Navigators, non-Navigator assistance personnel, and 
certified application counselors in all Exchanges.
---------------------------------------------------------------------------

    \26\ Non-Navigator assistance personnel subject to Sec.  155.215 
are only required to carry out one of the Navigator duties set forth 
at Sec.  155.210(e), the duty at Sec.  155.210(e)(2) to provide 
fair, accurate, and impartial information and services that 
acknowledge other health programs; however non-Navigator assistance 
personnel subject to Sec.  155.215 are not prohibited from carrying 
out the other duties outlined for Navigators at Sec.  155.210(e).
---------------------------------------------------------------------------

    For all assisters to whom the final provisions will apply, the 
provisions prohibiting compensation on a per-application, per-
individual-assisted, or per-enrollment basis will become applicable 
November 15, 2014 to coincide with the beginning of the 2015 open 
enrollment period for the individual market Exchanges.
    Comment: Commenters generally supported the principle behind 
prohibiting Navigators (at proposed Sec.  155.210(d)(7)), non-Navigator 
assistance personnel subject to Sec.  155.215 (through the cross 
reference to Sec.  155.210(d) in Sec.  155.215(a)(2)(i)), and certified 
application counselors (at Sec.  155.225(g)(4)) from providing gifts, 
unless they are of nominal value, or providing promotional items that 
market or promote the products or services of a third party to 
applicants or potential enrollees as an inducement for application 
assistance or enrollment. However, most commenters who responded to 
this proposal raised concerns that the proposed language was too broad 
and would prohibit creative outreach and education strategies both 
relating to the FFE and to other community services. For example, some 
commenters raised a concern about whether this provision would prohibit 
an organization from reimbursing travel costs for consumers traveling 
long distances to receive application assistance, or from providing 
supplies or materials for legitimate care purposes (for example, 
diabetic testing supplies or medication samples) which in many cases 
would exceed $15. One commenter, on the other hand, raised a concern 
that this provision expressly allows the provision of gifts up to $15 
in value, since we defined nominal value in the proposed rule as a cash 
value of $15 of less, or an item worth $15 or less, based on the retail 
purchase price of the item regardless of the actual cost. In addition, 
commenters worried that the third-party promotional item prohibition 
would prevent assisters from providing promotional materials about the 
Exchange or other community resources, noting that promotional 
materials about other community resources can help connect consumers 
with additional supportive services. Commenters indicated that the use 
of gifts and promotional items have helped them successfully encourage 
individuals to seek application assistance, and therefore that a 
prohibition on using these tools in connection with application 
assistance would be too proscriptive. Many commenters recommended 
expressly excluding outreach and education activities from the 
prohibition on third-party promotional items. Commenters also requested 
clarification about parameters regarding the provision of gifts and 
third-party promotional items.
    Response: In light of the numerous comments received regarding this 
issue, we are modifying this provision to make clear that gifts and 
third-party promotional items are prohibited only when they are used to 
induce

[[Page 30284]]

enrollment. In other words, gifts and third-party promotional items are 
prohibited when they are conditioned on an applicant's enrollment in 
coverage with the help of the assister or the assister's organization. 
This means that while nominal gifts and third-party promotional items 
may be provided as a way of encouraging consumers to seek or receive 
application assistance, they cannot be conditioned on a consumer's 
actually enrolling in coverage. We agree with commenters that 
prohibiting gifts and third-party promotional items in connection with 
application assistance would potentially prohibit assisters from 
providing items promoting other available community services, such as 
an item which promotes the services of a school, hospital, or clinic in 
the community, simply because it was provided at the same time a 
consumer is present for Exchange application assistance. We do not want 
to prohibit assisters from providing items that are inherently 
beneficial to consumers only because a consumer is present for Exchange 
application assistance and not for other services.\27\ Therefore, 
promotional items may be provided so long as they are not provided to 
induce enrollment. We have finalized Sec.  155.210(d)(6) (renumbered 
from Sec.  155.210(d)(7) of the proposed rule) and Sec.  155.225(g)(4) 
to reflect this policy, and have omitted the language prohibiting the 
provision of gifts or third-party promotional items ``in connection 
with'' enrollment, and finalized the prohibition on providing them ``as 
an inducement for enrollment.'' We have also omitted the provisions' 
reference to application assistance, and only finalized the language 
relating to inducing enrollment.
---------------------------------------------------------------------------

    \27\ As previously noted, though, Navigators are not permitted 
to solicit customers for their other, non-Navigator-related services 
in connection with their Navigator duties (79 FR 15831). Therefore, 
while Navigators may provide items that are inherently beneficial to 
a consumer at the same time the consumer is receiving application 
assistance, these items may not be used as a means of soliciting the 
consumers for their other, non-Navigator-related services.
---------------------------------------------------------------------------

    Further, the nominal value limit does not apply to third-party 
promotional items, so these items may exceed $15 in value. We note that 
we would consider items such as diabetic testing supplies to be third-
party promotional items to the extent that they have the effect of 
promoting the brand for the supplies that are provided. We also note 
that there may be other Federal laws regarding providing promotional-
items to consumers, and these regulations do not supersede those laws. 
Therefore, assisters should ensure their compliance with all applicable 
laws.
    We are also modifying this provision to make clear that 
reimbursement for legitimate expenses, such as (but not limited to) 
expenses for travel or postage that a consumer incurs in seeking 
Exchange application assistance may exceed the nominal value threshold 
of $15. We anticipate that the circumstances where such reimbursement 
exceeds this amount will be rare. However, we acknowledge that 
commenters have indicated there may be times when consumers might incur 
expenses that exceed $15 when seeking Exchange application assistance, 
and we would not want to prohibit a reimbursement for legitimate 
expenses that exceed this amount.
    Because we are modifying the provisions to be less proscriptive, we 
are also adding a new provision at Sec.  155.210(d)(7) (applicable to 
non-Navigator assistance personnel to whom Sec.  155.215 applies 
through a cross-reference to Sec.  155.210(d) in Sec.  
155.215(a)(2)(i)) to clarify that in no event is it permissible for a 
Navigator or for non-Navigator assistance personnel subject to Sec.  
155.215 to use Exchange funds to purchase gifts or third-party 
promotional items for provision to applicants or potential enrollees. 
Pursuant to Affordable Care Act section 1311(d)(5)(B), all Exchanges, 
both FFEs (including State Partnership Exchanges) and State Exchanges, 
are prohibited from using any funds intended for the administrative and 
operational expenses of the Exchange for promotional giveaways. HHS 
would consider any funds used by an Exchange to pay for Navigator 
grants, to contract with or otherwise pay non-Navigator assistance 
personnel subject to Sec.  155.215 carrying out the consumer assistance 
functions under 45 CFR 155.205(d) and (e), and any Federal Exchange 
Establishment grant funds used to pay for non-Navigator activities,\28\ 
to be funds intended for the administrative and operational expenses of 
the Exchange. Therefore, Navigators and non-Navigator assistance 
personnel subject to Sec.  155.215 are prohibited from using funding 
received from an Exchange to purchase items for promotional giveaways. 
In this final rule, therefore, we are also prohibiting Navigators and 
non-Navigator assistance personnel subject to Sec.  155.215 from using 
Exchange funds to purchase gifts, including gift cards and cash, and 
promotional items.
---------------------------------------------------------------------------

    \28\ While section 1311(i)(6) of the Affordable Care Act 
prohibits Exchanges from using Exchange Establishment grant funds on 
Navigator grants, these funds can be used to fund the activities of 
non-Navigator assistance personnel (see 78 FR 20583-84).
---------------------------------------------------------------------------

    We are not including a provision regarding the use of Exchange 
funds by certified application counselors because certified application 
counselors generally are not expected or required to receive Exchange 
funds.
    Comment: Commenters generally supported our proposals at Sec. Sec.  
155.210(d)(8) and 155.225(g)(5) prohibiting Navigators, certified 
application counselors, and non-Navigator assistance personnel subject 
to Sec.  155.215 (through the cross-reference in Sec.  155.215(a)(2)(i) 
to Sec.  155.210(d)), from soliciting any consumer for application or 
enrollment assistance by going door-to-door or through other 
unsolicited means of direct contact. However, most commenters who 
addressed these provisions were concerned that the proposals might also 
prohibit solicitation with respect to outreach and education 
activities. Commenters noted that the proposed language would inhibit 
outreach activities that have proven effective with respect to Medicaid 
and CHIP outreach. Additional commenters noted that some organizations 
have had great success during the 2014 open enrollment with door-to-
door outreach and that at times some consumers were ready to enroll and 
wanted immediate application assistance. These commenters are concerned 
that the proposed language would prohibit these methods going forward. 
Some commenters requested that we clarify the definitions of 
``application or enrollment assistance'' and ``unsolicited means'' to 
help establish clear parameters of what is and is not prohibited.
    Response: We agree that that door-to-door consumer education and 
outreach can be a useful and effective method for improving public 
awareness about the Affordable Care Act, insurance affordability 
programs, and the Exchanges. We have edited the final provisions at 
Sec.  155.210(d)(8) and Sec.  155.225(g)(5) to clarify that the 
prohibitions on door-to-door solicitation for ``application or 
enrollment assistance'' prohibit assisters from engaging in door-to-
door solicitation for the purpose of offering in-home application or 
enrollment assistance; they do not prohibit assisters from going door-
to-door to conduct general consumer education or outreach, including to 
let the community know that the organization is available to provide 
application and enrollment assistance services to the public. In final 
Sec.  155.210(d)(8) and Sec.  155.225(g)(5), therefore, we specified 
that outreach

[[Page 30285]]

and education activities may be conducted by going door-to-door or 
through other unsolicited means of direct contact, including calling a 
consumer.
    We clarify that nothing in these provisions would prohibit a 
Navigator, non-Navigator assistance personnel, or certified application 
counselor from providing in-home application assistance, if such 
assistance is requested by a consumer. We note that in cases where a 
consumer is ill or has a disability that would make meeting an assister 
outside of the consumer's home difficult or impossible, in-home 
application and enrollment assistance might be appropriate. In these or 
other cases in which the consumer prefers in-home assistance or such 
assistance is appropriate for the consumer, the request for in-home 
assistance must come from the consumer and the consumer must give their 
consent. In such cases, we also recommend that two assistance personnel 
should go to the home, not one, because this is a best practice that 
promotes the safety of both the consumer and the assister.
    We further explain that by ``unsolicited means,'' we refer to any 
means of contacting consumers directly to help them apply for or enroll 
in coverage through the Exchange, where the consumer did not initiate, 
request, or give prior consent to the contact, although we reiterate 
that this provision does not apply to public education and outreach 
activities. Additionally, we have added language to allow for assisters 
to contact consumers for application assistance in cases where the 
individual assister or assister entity has a relationship with the 
consumer, but we note that other State or Federal laws may apply with 
regards to these preexisting relationships, and those laws must also be 
complied with.
    Comment: Commenters acknowledged the concerns that HHS addressed 
through the proposal that would prohibit Navigators (at Sec.  
155.210(d)(9)), non-Navigator assistance personnel (through the cross 
reference to Sec.  155.210(d) in Sec.  155.215(a)(2)(i)), and certified 
application counselors (at Sec.  155.225(g)(6)), from making robocalls, 
or calls that use an automatic telephone dialing system or an 
artificial or prerecorded voice, when initiating contact with 
consumers. However, commenters were concerned that the language of this 
proposal might be overly broad and might prohibit effective uses of 
such tools in ways that have strong benefits for consumers. For 
example, some organizations have used such tools to provide notice to 
consumers about upcoming enrollment events, sometimes partnering with 
other community organizations to target certain populations. Other 
organizations pointed out that in the future, such tools might be 
useful to remind consumers when it is time to re-enroll in coverage. 
Some commenters noted that many States already have laws that would 
apply to assisters to protect consumers from unwanted solicitation, and 
therefore further prohibitions are unnecessary. Many commenters 
provided recommendations for revising the proposed language and 
requested that certain clarifications be made if the proposed provision 
is finalized. For example, commenters recommended revising the language 
to allow the use of these tools for consumers who have previously 
provided contact information via an outreach or education event, or for 
consumers who may have a pre-existing relationship with the 
organization itself (for example, as a patient or a client). Health 
centers, in particular, requested a clarification that this provision 
would not prohibit their use of these tools in their capacity as a 
health center since, for example, automated dialing is frequently used 
to remind health center patients about upcoming appointments. Some 
commenters also noted that certain ``in-reach'' activities that use 
these types of tools are required of organizations in order for them to 
be eligible for HRSA grants provided in the Health Center Outreach and 
Enrollment Assistance program, and therefore this proposed provision 
could create a conflict for these organizations.
    Response: We understand that many entities operating as Navigators, 
non-Navigator assistance entities subject to Sec.  155.215, and 
certified application counselors also function as other types of 
organizations with an existing client base, such as community health 
clinics, hospitals, or primary care associations. These prohibitions on 
assister conduct are not meant to disrupt any outreach or in-reach 
strategies that these organizations use to connect with their client 
base outside of their work as Exchange Navigators, non-Navigator 
assistance personnel, or certified application counselors. Therefore, 
we clarify that the provision prohibiting Navigators (at Sec.  
155.210(d)(9)), non-Navigator assistance personnel (through the cross-
reference to Sec.  155.210(d) in Sec.  155.215(a)(2)(i)), and certified 
application counselors (at Sec.  155.225(g)(6)) from making calls using 
an automatic dialing system would not prohibit a health center from 
automatically dialing patients to remind them of upcoming health care 
appointments. We also appreciate commenters' interest in using 
automatic calls to communicate with consumers with whom they already 
have a relationship. Therefore, we are finalizing Sec.  155.210(d)(9) 
and Sec.  155.225(g)(6) with an exception added for cases where the 
individual assister or assister entity has a pre-existing relationship 
with the consumer. Although the edited regulation text at Sec.  
155.210(d)(9) refers to Navigators, we interpret the cross-reference in 
Sec.  155.215(a)(2)(i) to Sec.  155.210(d) mean that that provision 
also applies to non-Navigator assistance personnel to whom Sec.  
155.215 applies. We are also noting that other State or Federal laws 
may apply with regards to these pre-existing relationships, and those 
laws must also be complied with, and have included this caveat in the 
final Sec.  155.210(d)(9) and Sec.  155.225(g)(6). We will monitor and 
evaluate this practice.
    Comment: Some commenters requested that the disclosure of an 
assister's functions and responsibilities required under existing Sec.  
155.225(f)(1) and new Sec. Sec.  155.210(e)(6)(i) and 155.215(g)(1) 
also include disclosure of the nondiscrimination requirements 
applicable to the assister.
    Response: We agree that the nondiscrimination requirements 
applicable to the assister, such as those described in Sec.  155.120(c) 
and Sec.  155.105(f), would be appropriate information to include as 
part of the disclosure. While Sec.  155.210(e)(6), Sec.  155.215(g), 
and Sec.  155.225(f) require assisters to inform consumers about the 
assister's functions and responsibilities, we have not outlined 
specific content for this disclosure in these provisions.
    Comment: Commenters supported the proposed requirements that all 
Navigators (at Sec.  155.210(e)(6)) and the non-Navigator assistance 
personnel subject to Sec.  155.215 (at Sec.  155.215(g)) obtain 
authorization from consumers before accessing their personally 
identifiable information, together with our proposal in these 
provisions, as well as in the proposed amendment to existing Sec.  
155.225(f), that the Exchange must establish a reasonable retention 
period for maintaining these records. In FFEs, we proposed that this 
period would be three years, unless a different retention period has 
already been provided under other applicable Federal law. Some 
commenters recommended that we identify a specific period of time for 
which the authorization will be valid, such as two years, so that the 
authorization will automatically expire at the end of that time frame, 
as well as a separate period of time after the expiration for which the 
assister must

[[Page 30286]]

maintain the record of the authorization. Some commenters requested a 
retention period of only one year because plan years operate on a 12-
month cycle.
    Response: We are modifying these provisions to specify that in 
FFEs, the minimum retention period for the authorization form is no 
less than six years, unless a longer retention period has already been 
provided in applicable Federal law in the FFEs, including State 
Partnership Exchanges. The six-year minimum retention period is 
consistent with the statute of limitations that has been included in 
the CMP provisions being finalized in this rule under 45 CFR 155.206 
and 155.285, because we recognize that it may be relevant to some CMP 
investigations whether authorization for the disclosure of a consumer's 
personally identifiable information was given to an assister. We also 
note that there are record retention requirements already applicable to 
Navigators in the FFEs and State Partnership Exchanges under Federal 
grant laws, such as 45 CFR 92.42 and 45 CFR 74.53. Since we are 
specifying a minimum retention period of six years in this final rule, 
if a shorter retention period is provided under other applicable 
Federal requirements, the six-year minimum provided in Sec.  
155.210(e)(6)(ii), Sec.  155.215(g)(2), and Sec.  155.225(f)(2) will 
apply. We have modified these provisions to reflect this policy by 
indicating that in FFEs, the retention period is no less than six 
years, unless a different and longer retention period has already been 
provided under other applicable Federal law. Because we are aligning 
the requirement to obtain the authorization and maintain a record of 
the authorization so that there are consistent requirements for 
Navigators, non-Navigator assistance personnel subject to Sec.  
155.215, and certified application counselors, we think it is 
appropriate to apply a consistent retention period standard to all 
three assister types as well and are therefore modifying the provisions 
for consistency across all three assister types.
    We are not adding language to include an automatic expiration date 
for the authorization because it could become burdensome for a consumer 
consistently seeking services from the same assister to have to 
routinely fill out a new authorization form, and for the assister to 
have to maintain each new form for a minimum of six years. We do note, 
however, that consumers are allowed to revoke their authorization at 
any time, and may place a time restriction on the authorization, if 
they desire.
    Comment: Many commenters requested that we create a standard 
authorization form for assisters to use, rather than leaving it to 
assisters to create their own form, which commenters believed would 
cause assisters to incur considerable costs. Commenters also 
recommended that low literacy levels should be taken into consideration 
when creating the form, and that the form be translated into at least 
the top 15 languages to meet the needs of limited English proficient 
consumers served in an FFE.
    Response: We support the commenters' suggestion to have a model 
form to use for obtaining this authorization, and share the commenters' 
concerns about the costs to assisters of creating an authorization form 
if there were no model form available. We note that, for Navigators in 
FFEs, including State Partnership Exchanges, a model form is included 
in the grant award materials, and for certified application counselors 
in FFEs and State Partnership Exchanges, a model form is among the 
documents provided to certified application counselor designated 
organizations upon designation by the Exchange; in both cases, these 
forms are provided in both English and Spanish versions. HHS intends to 
develop a model form for use by non-Navigator assistance personnel in 
FFEs and State Partnership Exchanges in the future. We will take into 
consideration the comments regarding literacy levels and language 
translations as we develop a model authorization form for use by non-
Navigator assistance personnel subject to Sec.  155.215, and as we 
review the current Navigator and certified application counselor model 
forms for the FFEs and State Partnership Exchanges.
    Comment: Some commenters requested that the disclosure to consumers 
include information about the permissible and impermissible ways an 
assister may use a consumer's personally identifiable information, as 
well as how consumers may opt out of follow-up from the assister.
    Response: These regulations do not require specific content in the 
consumer authorization form. However, we note that the model 
authorization form currently provided in the FFE and State Partnership 
Exchange Navigator grant award materials and to certified application 
counselor designated organizations in the FFEs, including State 
Partnership Exchanges, includes information about how a consumer's 
personally identifiable information may be used, as well as an option 
for consumers to authorize follow-up contact from the Navigator or 
certified application counselor, as applicable. As we develop a model 
form for non-Navigator assistance personnel in the FFEs and State 
Partnership Exchanges, we will also consider including these same 
content elements.
    Comment: Commenters submitted several requests and recommendations 
regarding the form of the authorization. Many commenters requested that 
the authorization be allowed to be collected and maintained in 
electronic form to help reduce the costs and burden associated with 
paper forms. Some commenters also requested that a voice-recorded 
authorization be allowed when assisters are helping consumers over the 
phone. Additionally, several commenters requested that Exchanges be 
permitted to retain the record of authorization on behalf of the 
assister, noting that some State Exchanges are already doing this.
    Response: We note that these regulations do not specify acceptable 
formats for obtaining the authorization or for maintaining its record. 
Additionally, to allow for the flexibility in State Exchanges requested 
by commenters, we have modified the proposed language specifying that 
the authorization be provided ``in a form and manner as determined by 
the Secretary'' to indicate that the authorization must instead be 
provided in a form and manner as determined by the Exchange. As a 
result of this change, each Exchange will have discretion to determine 
the appropriate form and manner for these authorizations. In response 
to commenters' concerns about whether these regulations would prohibit 
a State Exchange from retaining these authorizations on behalf of their 
assisters, we have also revised the language in this provision of the 
final rule to indicate that the form and manner of the assistance 
entity's or personnel's maintenance of the authorization is to be 
determined by the Exchange. This modification will allow State 
Exchanges that have chosen to retain these authorizations on behalf of 
their assisters to continue to do so, provided it is consistent with 
the ``form and manner as determined by the Exchange.''
    We acknowledge that the language regarding the form and manner of 
obtaining or maintaining the authorization was not included with 
respect to certified application counselors at proposed Sec.  
155.225(f)(2). To align the provision with those provisions applicable 
to Navigators and non-Navigator assistance personnel subject to Sec.  
155.215, we are adding this language to Sec.  155.225(f)(2).

[[Page 30287]]

    Finally, we are deleting the cross references in proposed Sec.  
155.210(e)(6)(ii) to 45 CFR 92.42 and 45 CFR 74.53 due to the potential 
for these cross references to become obsolete or inaccurate in the 
future. We believe the remaining phrase ``other applicable Federal 
law'' will capture the intent of the cross references to ensure that 
Navigators comply with retention periods for maintaining these records 
in accordance with all Federal laws that may apply. This cross 
reference was only included in the proposed provision applicable to 
Navigators; therefore no change is necessary to the provisions at Sec.  
155.215(g)(2) or Sec.  155.225(f)(2).
    Comment: Several commenters raised concerns about the requirement 
for Navigators, non-Navigator assistance entities subject to Sec.  
155.215, and certified application counselor designated organizations 
to maintain a physical presence in their Exchange service area under 
proposed Sec.  155.210(e)(7) and Sec.  155.225(b)(1)(iii). Commenters 
claimed that this proposed provision eliminates vital flexibility for 
consumer assistance personnel, noting that these assistance personnel 
often provide effective service over the phone or internet. Commenters 
pointed out that in large, rural, or frontier States, consumers often 
rely on remote assistance. Commenters also mentioned that some State 
Exchanges are working on software that would allow assistance personnel 
to help clients remotely, by facilitating screen sharing and split 
screen views for assistance personnel and clients, and these commenters 
expressed the concern that the proposed language would inhibit such 
technological innovations. Commenters requested that, at a minimum, 
clarification be provided that this provision will not affect the 
ability of assisters to provide remote assistance to consumers. 
However, there were a few commenters who supported this requirement, 
and recommended that the provision be broadened to require Navigator 
organizations, non-Navigator assistance entities subject to Sec.  
155.215, and certified application counselor organizations to maintain 
a principal place of business within their Exchange service area.
    Response: The proposed requirement that Navigators, non-Navigator 
assistance personnel subject to Sec.  155.215, and certified 
application counselors maintain a physical presence in their service 
area so that face-to-face assistance can be provided was designed to 
ensure that these consumer assistance personnel understand and are able 
to meet the specific needs of the communities they serve, to foster 
trust between these consumer assistance personnel and community 
members, and to encourage participation in the Navigator, non-Navigator 
assistance, and certified application counselor programs by individuals 
whose backgrounds and experiences reflect those of the communities they 
serve.
    In light of the comments we received indicating that this 
requirement may be too restrictive for certified application counselor 
organizations already providing remote assistance, we are not 
finalizing proposed Sec.  155.225(b)(1)(iii) which would have required 
certified application counselor organizations to maintain a physical 
presence in the Exchange service area. We understand that unique 
circumstances may exist that would make remote assistance more 
effective or practical than face-to-face assistance, particularly when 
a certified application counselor is providing services to individuals 
or populations that might otherwise be difficult to reach. We continue 
to believe that face-to-face, in-person assistance is important, and we 
encourage certified application counselors to provide this type of 
assistance as much as possible. We will continue to evaluate the 
effectiveness of remote assistance offered by certified application 
counselors and certified application counselor organizations, to 
determine whether a physical presence requirement may be necessary in 
the future.
    We are finalizing these requirements at Sec.  155.210(e)(7) and 
Sec.  155.215(h) that Navigators and non-Navigator assistance personnel 
subject to Sec.  155.215 must maintain a physical presence in the 
Exchange service area, so that face-to-face assistance can be provided 
to applicants and enrollees. We believe this provision will improve the 
ability of Navigators and non-Navigator assistance personnel subject to 
Sec.  155.215 to provide culturally competent application and 
enrollment assistance. As we explained in the preamble to the proposed 
rule, this requirement may also facilitate State consumer protection 
efforts.
    We agree with commenters that remote application and enrollment 
assistance can be extremely important and effective, especially as a 
way to provide this assistance to consumers in rural or remote areas. 
Therefore, we want to make clear that nothing in this provision 
prohibits Navigators or non-Navigator assistance personnel subject to 
Sec.  155.215 from providing assistance via the telephone, Internet, or 
through other remote means, as long as the organization with which they 
are affiliated also maintains a physical presence in the Exchange 
service area, consistent with Sec.  155.210(e)(7) and Sec.  155.215(h). 
We also clarify that Exchange service area refers to the entire area 
served by the Exchange, and not to smaller regions within the area 
served by the Exchange.
    We disagree with comments suggesting that these assister 
organizations should be required to maintain a principal place of 
business within their Exchange service area. Many trusted national 
organizations have State or local branches that operate as Navigators, 
non-Navigator assistance personnel subject to Sec.  155.215, or 
certified application counselors, and who, partly because of their 
physical presence in the State, are able to provide high-quality 
assistance tailored to the needs of their communities. Therefore, we 
are finalizing Sec.  155.210(e)(7) as proposed with a modification to 
specify that in an FFE, no individual or entity shall be ineligible to 
operate as a Navigator solely because its principal place of business 
is outside of the Exchange service area. With respect to the certified 
application counselor program, we are adding a new Sec.  155.225(b)(3) 
to specify that in an FFE, no individual or entity shall be ineligible 
to operate in this program solely because its principal place of 
business is outside of the Exchange service area.
    We indicated in the preamble to the proposed rule that we were 
proposing to make the same provision specifying that Navigators 
maintain a physical presence in their Exchange service area under Sec.  
155.210(e)(7) also applicable to non-Navigator assistance personnel 
subject to Sec.  155.215, and we proposed adding a new paragraph under 
Sec.  155.215 for that purpose. However, the rule text of the proposed 
rule omitted the new paragraph under Sec.  155.215. In the final rule, 
therefore, we are correcting this oversight, and adding this standard 
to Sec.  155.215 as a new paragraph Sec.  155.215(h) to specify that 
all non-Navigator assistance personnel subject to Sec.  155.215 who 
operate in FFEs must maintain a physical presence in the Exchange 
service area, so that face-to-face assistance can be provided to 
applicants and enrollees. Similarly, we are modifying this provision to 
add a specification that no individual or entity shall be ineligible to 
operate as non-Navigator assistance personnel subject to Sec.  155.215 
solely because its principal place of business is outside of the 
Exchange service area.
Summary of Regulatory Changes
    We revised Sec.  155.210(c)(1)(iii) to remove reference to ``errors 
and

[[Page 30288]]

omissions insurance'' and replaced it with ``any requirement that, in 
effect, would require all Navigators in the Exchange to be licensed 
agents and brokers.''
    We are not finalizing proposed Sec. Sec.  155.210(c)(1)(iii)(E) and 
155.225(d)(8)(iv).
    We renumbered proposed Sec. Sec.  155.210(c)(1)(iii)(F) and 
155.225(d)(8)(v) as new Sec. Sec.  155.210(c)(1)(iii)(E) and 
155.225(d)(8)(iv). We modified newly renumbered Sec. Sec.  
155.210(c)(1)(iii)(E) and 155.225(d)(8)(iv) to extend these provisions 
to all Exchanges by removing the reference to ``in a Federally-
facilitated Exchange'' and by specifying that non-Federal standards 
that would, as applied or implemented in a State, prevent the 
application of Federal requirements applicable to Navigators (or non-
Navigator assistance personnel subject to Sec.  155.215), or certified 
application counselors or designated organizations or, as added in this 
final rule, ``the Exchange's implementation of the [respective 
assister] program'' would prevent the application of the provisions of 
title I of the Affordable Care Act. We revise Sec.  155.215(f) to add 
subparagraphs (1) through (4) explicitly under that provision, rather 
than incorporating by reference parallel provisions in the applicable 
Navigator standards under Sec.  155.210(c)(1)(iii), as was proposed.
    We revised Sec. Sec.  155.210(d)(4) and 155.225(g)(2) to add that 
in an FFE no health care provider individual or entity shall be 
ineligible to operate as Navigators (or non-Navigator assistance 
personnel subject to Sec.  155.215), or certified application 
counselors or certified application counselor designated organizations 
solely on the basis of receiving consideration from a health insurance 
issuer for health care services provided.
    We also revised Sec.  155.210(e)(7) to provide that in an FFE, no 
individual or entity shall be ineligible to operate as a Navigator 
solely because its principal place of business is outside of the 
Exchange service area. We added Sec.  155.215(h) to create a parallel 
provision to Sec. Sec.  155.210(e)(7) for non-Navigator assistance 
personnel subject to Sec.  155.215, as was discussed in the preamble to 
the proposed rule. We did not finalize Sec.  155.225(b)(1)(iii), but we 
added a new Sec.  155.225(b)(3) to specify that in an FFE, no 
individual or entity shall be ineligible to operate as a certified 
application counselor or designated organization solely because its 
principal place of business is outside of the Exchange service area.
    We moved Sec.  155.210(d)(6) to Sec.  155.215(i) and limited this 
provision, as well as Sec.  155.225(g)(3), to Navigators, non-Navigator 
assistance personnel, and certified application counselors operating in 
FFEs, including State Partnership Exchanges, and revised these 
provisions to specify that they do not take effect until November 15, 
2014.
    We renumbered proposed Sec.  155.210(d)(7) to Sec.  155.210(d)(6), 
and revised newly renumbered Sec.  155.210(d)(6) along with Sec.  
155.225(g)(4) to clarify that gifts, gift cards, or cash, and 
promotional items that market or promote the products or services of a 
third party provided by assisters to consumers are prohibited for the 
purposed of inducing enrollment, and that gifts, gift cards, or cash 
may exceed nominal value for the purpose of providing reimbursement for 
legitimate expenses incurred by a consumer in effort to receive 
Exchange application assistance, such as (but not limited to) travel or 
postage expenses. We also add new Sec.  155.210(d)(7) to prohibit the 
use of Exchange funds to purchase gifts or gift cards, or promotional 
items that market or promote the products or services of a third party, 
that would be provided to any applicant or potential enrollee.
    We revised Sec. Sec.  155.210(d)(8) and 155.225(g)(5) to clarify 
that the prohibitions on door-to-door solicitation for application or 
enrollment assistance do not prohibit Navigators, non-Navigator 
assistance personnel, or certified application counselors from going 
door-to-door to conduct general consumer education or outreach, or from 
soliciting consumers with whom the assister has a preexisting 
relationship so long as other applicable State and Federal laws are 
complied with.
    We revised Sec. Sec.  155.210(d)(9) and 155.225(g)(6) to clarify 
that the prohibitions on using an automatic telephone dialing system or 
an artificial or prerecorded voice to initiate a telephone call to a 
consumer, do not prohibit Navigators, non-Navigator assistance 
personnel, or certified application counselors from using those means 
to communicate with consumers with whom they already have a 
relationship, so long as other applicable State and Federal laws are 
complied with.
    We revised Sec. Sec.  155.210(e)(2) and 155.225(c)(1) to add that 
the duties of Navigators, non-Navigator assistance personnel subject to 
Sec.  155.215, and certified application counselors includes a duty to 
provide information in a fair, accurate, and impartial manner to 
individuals and employees about the full range of QHP options and 
insurance affordability programs for which they are eligible, which 
includes providing fair, impartial, and accurate information that 
assists consumers with submitting the eligibility application, 
clarifying the distinctions among QHPs, and helping consumers make 
informed decisions during the health coverage selection process.
    We made technical edits to preserve the grammatical pattern that 
appears in the existing list at Sec.  155.210(d)(1)-(4) and extended it 
through Sec.  155.210(d)(9) by placing semicolons after each 
subparagraph and moving the ``or'' following proposed Sec.  
155.210(d)(5) to follow Sec.  155.210(d)(8).
    We revised Sec. Sec.  155.210(e)(6)(ii) and 155.215(g)(2) to change 
the word ``Secretary'' to ``Exchange'' to allow for State Exchanges to 
determine their own appropriate form and manner for obtaining the 
consumer authorization that is required for a Navigator or non-
Navigator assistance personnel to obtain access to the consumer's 
personally identifiable information. We also specified that the 
Navigator and non-Navigator assistance personnel subject to Sec.  
155.215 must maintain a record of the authorization provided ``in a 
form and manner as determined by the Exchange,'' and that the period is 
no less than six years (not three years, as proposed), unless a 
different and longer retention period has already been provided. In 
Sec.  155.210(e)(6)(iii), we removed reference to 45 CFR 92.42 and 45 
CFR 74.53 and retain only ``other applicable Federal law.'' We also 
revised Sec.  155.225(f)(2) to add parallel language to require 
certified application counselors to obtain and maintain record of the 
authorization in a form and manner as determined by the Exchange, and 
to specify that the retention period is no less than six years, unless 
a different and longer retention period has already been provided under 
other applicable Federal law.
    We revised proposed Sec.  155.225(d)(8)(i) to replace the phrase 
``act in the best interest of applicants'' with the phrase ``provide 
fair, accurate, and impartial information.''
c. Payment of Premiums (Sec.  155.240)
    In order to address situations in which enrollees have mid-month 
changes in enrollment, we proposed in Sec.  155.240(e) standards for 
providing partial month premiums. First, we proposed to provide 
flexibility for Exchanges to establish a standardized methodology for 
partial month premiums or to rely on issuers to prorate premiums in 
accordance with

[[Page 30289]]

State law and issuer policies. Second, we proposed in Sec.  
155.240(e)(1) that, for the FFE, the premium for coverage lasting less 
than one month must equal the product of the premium for one month of 
coverage divided by the number of days in the month and the number of 
days for which coverage is being provided in the month.
    Comment: We received several comments expressing general support 
for the proposed provisions in Sec.  155.240(e). Commenters also 
specifically supported the proposed methodology for partial month 
premiums in the Federally-facilitate Exchange. Commenters viewed the 
methodology proposed in Sec.  155.240(e)(1) as an equitable and 
beneficial solution to a common issue that consumers face with respect 
to their health insurance premiums. The methodology proposed for the 
FFE was also noted as being simple and easy for consumers to 
understand. Additionally, several of these commenters requested that 
HHS require all Exchanges to use the partial month premium methodology 
originally proposed for the FFE to promote consistency across 
Exchanges.
    Response: We appreciate the support received for the proposed 
provisions in Sec.  155.240(e). We maintain that Exchanges are in the 
best position to determine the methodology used for partial month 
premiums within their jurisdiction. However, in the case of the FFE, 
the methodology we proposed is appropriate given the Exchange's unique 
circumstances. Specifically, CMS jointly administers the FFEs currently 
operating in multiple States, each of which may have different rules 
for proration and, therefore, the administrative burden to enforce 
varying rules across these States would be overwhelming without the 
implementation of a single, standard approach. For example, in order to 
provide the appropriate amount of advance premium tax credit to the 
issuer, the issuer must inform the Exchange of the premium amount 
charged to each individual. Without a standardized approach in the FFE, 
this information would come to us in a variety of forms in accordance 
with various State laws and issuer practices for partial month 
premiums, which would be burdensome to manage. Consequently, we note 
that the standards for partial month premiums in the FFE apply even if 
State requirements in those FFE States differ from this final rule. 
There is also a customer service advantage to using a single 
methodology because it makes it easier for customer service 
representatives to explain one clear, comprehensive policy for all 
consumers throughout the FFE. Because of the high degree of variability 
across the States in the FFE, we maintain that the proposed methodology 
for calculating prorated premiums is the most efficient and equitable 
approach. We are finalizing the regulation as proposed.
    Comment: A few members of the issuer community provided comment on 
the implementation of the proposed provision for the FFE. We received 
comments requesting that HHS limit premium proration to the FF-SHOP and 
not extend the policy to the individual market FFE. Commenters argued 
that current standard industry practices are simpler and more cost 
effective for issuers because they do not require reconciliation of 
daily proration. A commenter also noted that, because the Exchange will 
not perform premium aggregation in the individual market, there is no 
need to adopt a standard method for proration of premiums. Commenters 
noted that implementing the proposed policy would require 
reconfiguration of issuer information technology systems, including 
billing mechanisms, which takes significant time and investment; 
therefore, commenters requested that implementation not occur before 
the 2015 benefit year. These commenters also requested that the 
requirement not be implemented retroactively and, instead, for months 
prior to the effective date of this policy, issuers have the 
flexibility to use their own proration methodology or follow State law.
    Response: While premium aggregation is a compelling reason to adopt 
premium proration, there are numerous other reasons to adopt it as 
noted in the comment response above and in the proposed rule's 
preamble. We previously have been asked by States and issuers for 
guidance in this area and implementing a standard policy for the FFE 
will establish a clear standard with which issuers can comply and for 
consumers to understand. Issuers have also told us that proration of 
partial month premiums is a methodology that can be implemented. We 
believe that having a policy in place is vastly preferable to operating 
without any guidance and we remain committed to working closely with 
issuers on implementation. In order to ensure that issuers have 
sufficient time to implement this proposal, the FFE will implement it 
effective January 1, 2015. Issuers may also choose to implement the 
policy immediately. We also note that, in response to the comment, we 
will not seek retroactive implementation of the partial month premium 
policy for the FFE but note that State Exchanges have flexibility to 
determine how to implement their policy in this area.
    Comment: One commenter expressed concern that the preamble to this 
section specified the events for which an Exchange may require 
proration of premiums, such as voluntary withdrawal. The commenter 
believed that these policies are more suitably addressed at the State 
level, where they can reflect a State's unique market dynamics.
    Response: The examples used in the preamble to the proposed rule 
were illustrative of the policy but not intended to replace our 
previous guidance for partial month enrollments found at 45 CFR 155.420 
and 155.430.
    Comment: Finally, one commenter requested clarification as to 
whether a prorated premium could count as a first month's premium (for 
example, in the case of a newborn) and how that would also impact the 
3-month grace period provided in Sec.  156.270(d) and (e).
    Response: A partial month premium does count as a first month's 
premium. Additionally, payment of a prorated premium in full can be 
considered payment in full for the purpose of the 3-month grace period 
in Sec.  156.270(d) and (e).
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.240 without 
modification.
d. Privacy and Security of Personally Identifiable Information (Sec.  
155.260)
    We proposed amending Sec.  155.260(g) to add a reference to Sec.  
155.285, which is being added as part of this final rule. Section 
155.285 specifies the grounds for imposing CMPs, the notice required to 
be given to a person when a civil money penalty is assessed, and 
factors to be used to determine the amount of CMPs assessed, as well as 
some aspects of the process for imposing CMPs. We proposed this 
addition to Sec.  155.260(g) to clearly link these two regulatory 
provisions and to ensure that readers fully understand how CMPs will be 
assessed for any improper use or disclosure of information.
    Comment: We received some comments in support of the proposed 
amendments to Sec.  155.260(g). However, a few commenters also 
requested additional amendments to the provision. For example, one 
commenter requested that we amend Sec.  155.260(g) to clarify that 
outreach and follow-up efforts made by community assisters is not 
impeded by the reference to Sec.  155.285. Specifically, the commenter 
encouraged HHS to specify that, with

[[Page 30290]]

receipt of express consumer consent, PII can be used to conduct 
outreach to follow up with individuals who still need to complete 
applications or for outreach to help individuals maintain and renew 
existing health coverage. Another commenter suggested that the 
provision note that the use and retention of PII is permissible with 
the consumer's consent, in order to ensure consistency with the 
Navigator provisions at Sec.  155.210(e)(6) and Sec.  155.225(f) which 
permit such use. The commenter also requested amendments to Sec.  
155.260(a) and (b) to specify that retention of PII is permissible with 
the consent of the consumer.
    Response: We acknowledge the importance of consumer assistance 
entities being able to contact consumers in order to follow-up 
regarding applications for coverage or annual renewals. However, Sec.  
155.260 as proposed, does not impede these types of outreach. Rather, 
Sec.  155.260 prohibits improper use and disclosure of information, as 
described in the preamble to the proposed rule at Sec.  155.285. 
Similarly, a Navigator's use of information as described in Sec.  
155.210(e)(6) and Sec.  155.225(f) is not prohibited under Sec.  
155.260(g) and we do not see the need to include further clarification 
of that in the rule. Finally, the requested amendments to Sec.  
155.260(a) and (b) are outside the scope of this proposed rule. 
Therefore, we intend to finalize Sec.  155.260(g) as proposed.
    Comment: Some commenters expressed concern about the proposed 
amendment. Commenters thought the reference to Sec.  155.285 was 
duplicative and that the application of Sec.  155.260 may, in some 
cases, be broader than the specific prohibitions on disclosure intended 
by section 1411(g) of the Affordable Care Act and should not be linked 
to Sec.  155.260.
    Response: We disagree with the contention that the reference to 
Sec.  155.285 in Sec.  155.260 is duplicative. The cross-reference 
links the improper use and disclosure of PII to the imposition of CMPs 
as prescribed in section 1411(g) and (h) of the Affordable Care Act. 
Therefore, we finalize the provision as proposed.
    Comment: We received many comments to both Sec.  155.260 and Sec.  
155.285 requesting clarification about the role of PII with respect to 
CMPs.
    Response: Because of the relationship between Sec.  155.260 and 
Sec.  155.285, we address comments on Sec.  155.206 in the preamble 
related to Sec.  155.285(a) of this final rule.
Summary of Regulatory Changes
    We are finalizing the addition to Sec.  155.260 as proposed, with a 
minor change where we have inserted the numerical penalty amount 
instead of a reference to section 1411(h) of the Affordable Care Act 
where the maximum penalty is specified.
e. Bases and Process for Imposing Civil Money Penalties for Provision 
of False or Fraudulent Information to an Exchange or Improper Use or 
Disclosure of Information (Sec.  155.285)
    In Sec.  155.285(a), in accordance with the grounds on which 
penalties may be imposed as specified in section 1411(h) of the 
Affordable Care Act, we proposed the circumstances under which HHS may 
impose CMPs on a person if HHS determines that the person has provided 
false or fraudulent information as prohibited by section 1411(h)(1) or 
improperly used or disclosed information in violation of section 
1411(g). In Sec.  155.285(a)(1)(i), we proposed that if any person 
fails to provide correct information under section 1411(b) of the 
Affordable Care Act and such failure is attributable to negligence or 
disregard of any regulations of the Secretary, the person may be 
subject to a CMP. Under proposed Sec.  155.285(a)(1)(i), if a person 
fails to make a reasonable attempt to provide accurate, complete and 
comprehensive information and as a result provides incorrect 
information, the person may be subject to a CMP.
    Second, in Sec.  155.285(a)(1)(ii), we proposed that if a person 
knowingly and willfully provides false or fraudulent information under 
section 1411(b) of the Affordable Care Act, the person may be subject 
to a CMP. We noted that if consumer assistance personnel such as an 
agent, broker, Navigator, certified application counselor, or non-
Navigator assistance personnel, were to in some manner directly provide 
false or incorrect information required under section 1411(b), they may 
also be subject to a CMP. Third, in Sec.  155.285(a)(1)(iii), we 
proposed that if a person knowingly and willfully uses or discloses 
information in violation of Affordable Care Act section 1411(g), the 
person may be subject to a CMP. In Sec.  155.285(a)(1)(iii)(A) through 
(C), we proposed types of activities that would be in violation of 
section 1411(g) of the Affordable Care Act and in Sec.  155.285(a)(2), 
we proposed a definition of the term ``person.''
    In Sec.  155.285(b), we proposed the factors that HHS may take into 
consideration when determining the amount of CMPs to impose. In Sec.  
155.285(b)(3), we implemented the reasonable cause exception of section 
1411(h)(1)(A)(ii) of the Affordable Care Act pursuant to which no 
penalty will be imposed under Sec.  155.285(a)(1)(i) if HHS determines 
that there was a reasonable cause for the failure to provide correct 
information required on an Exchange application and that the person 
acted in good faith.
    In Sec.  155.285(c), we proposed maximum penalties for each 
different type of violation. In Sec.  155.285(d), we proposed standards 
for a notice of intent to issue a CMP that HHS must send to the person 
against whom the CMP may be imposed. In Sec.  155.285(d)(1)(i)-(viii), 
we proposed eight elements that must be included in the notice. We 
proposed that the person may request a hearing before an ALJ on the 
proposed penalty by filing a request pursuant to the procedure that 
will be outlined in the notice of intent to impose a penalty that the 
person receives.
    In Sec.  155.285(e), we proposed the consequences for a person who 
fails to request a hearing in a timely manner. We proposed that HHS may 
assess the proposed CMP 60 calendar days after the date of issuance 
printed on the notice of intent to issue a CMP. In Sec.  155.285(e)(1), 
we proposed that HHS will notify the person in writing of any penalty 
that has been imposed, the means by which the person can satisfy the 
penalty, and the date on which the penalty is due. We proposed in Sec.  
155.285(e)(2) that a person has no right to appeal a penalty with 
respect to which the person has not timely requested a hearing.
    In Sec.  155.285(f), we proposed to use the existing appeals 
framework in regulation at 45 CFR Part 150, Subpart D. In Sec.  
155.285(g), we proposed that CMS and OIG will share enforcement 
authority to impose the CMPs in Sec.  155.285.
    In Sec.  155.285(h), we proposed a settlement authority provision 
to ensure CMS is able to settle any issue or case described in Sec.  
155.285(a) if necessary. Finally, in Sec.  155.285(i), we proposed a 
six year statute of limitations, beginning from the date on which the 
violation occurred, within which HHS may impose a CMP against a person.
    Comment: We received some comments regarding Sec.  155.285(a)'s 
reference to basing the imposition of a CMP on ``credible evidence'' if 
HHS ``reasonably determines'' that someone has violated the rule. The 
commenters recommended that, because a CMP could be potentially 
significant, the standard should be based on a preponderance of the 
evidence. The commenters also noted that this

[[Page 30291]]

standard is consistent with the Administrative Procedures Act.
    Response: We maintain that the standard proposed in Sec.  
155.285(a) is appropriate in light of the fact that a CMP is not 
immediately imposed but, instead, imposed only after a process 
involving notice and the right to a hearing is provided. If HHS 
identifies circumstances that meet the standard set in Sec.  
155.285(a), the resultant action is a notice informing the person of 
the potential imposition of a CMP. The person then has the right to 
request a hearing in front of an ALJ in accordance with hSec.  
155.285(d)(2) before the CMP is levied. For these reasons, we finalize 
the standard as proposed.
    Comment: We received one comment regarding the definition of 
negligence, provided in Sec.  155.285(a)(i)(A). The commenter sought 
clarification as to what is considered a ``reasonable'' attempt to 
provide accurate, complete, and comprehensive information.
    Response: The proposed definition of ``negligence'' is modeled on 
section 6662 of the Internal Revenue Code and was incorporated based on 
the similarities between providing information on tax filing forms and 
completing an application for Exchange coverage. This definition should 
provide CMS and the public with ample history on which they may rely to 
assess negligence in this context. We also believe this definition is 
appropriate because it holds actions that are made through honest 
mistake and error (which are protected by the reasonable cause 
provision in Sec.  155.285(b)(3)) not culpable for a violation. We 
finalize the definition as proposed.
    Comment: We received many comments regarding the imposition of CMPs 
under Sec.  155.206 and Sec.  155.285. Some commenters recommended that 
HHS retain discretion to impose CMPs under both sections, citing some 
violations under Sec.  155.285 will also violate consumer assistance 
standards and, in those instances, HHS should levy penalties under both 
provisions. These commenters noted that allowing penalties under both 
provisions will give Navigators and assisters in the Federally-
facilitate Exchange an extra incentive to maintain the privacy of those 
they assist. Another group of commenters recommended that where 
violations of Sec.  155.206 and Sec.  155.285 overlap, HHS should use 
its discretion to impose a CMP under only one section. Similarly, many 
commenters in this cohort urged HHS to exempt consumer assistance 
entities from Sec.  155.285, explaining that assistance personnel do 
not actually provide information as part of the process of applying for 
coverage or an exemption, and therefore it was difficult to see how 
they could provide false or fraudulent information in violation of 
Sec.  155.285. These commenters considered imposing violations for 
consumer assistance entities under both sections would be duplicative.
    Response: We disagree that consumer assistance personnel should be 
exempt from the provisions of 45 CFR 155.285. Any Navigator, non-
Navigator assistance personnel, or certified application counselor who 
encourages a consumer to submit false or fraudulent information and 
then enters that information into the application for the consumer, or 
enters false or fraudulent information without the knowledge of the 
consumer, might be in violation of either Sec.  155.285 or Sec.  
155.206. Therefore, we maintain that where conduct by a consumer 
assistance entity may warrant CMPs under either Sec.  155.285 or Sec.  
155.206, HHS should have discretion to determine whether to impose a 
CMP under Sec.  155.285 or under Sec.  155.206. If a consumer 
assistance entity is in a situation where CMPs could be imposed under 
both Sec.  155.206 and Sec.  155.285, CMS will take that into account 
as a factor under Sec.  155.285(b)(1)(viii).
    Comment: Commenters expressed a general concern that the provisions 
of Sec.  155.285 might have a chilling effect on consumer assistance 
entities, particularly those that rely on voluntary participation. 
These commenters urged us to limit CMPs to egregious violations of 
selected requirements where there are no other enforcement mechanisms 
in place. Commenters felt that fewer people might be willing to become 
assisters if they feared being held responsible for CMPs, particularly 
for information provided and attested to by applicants.
    Response: We understand the concerns raised by commenters about the 
potential for these penalties to discourage participation as a consumer 
assistance entity. However, we are finalizing the provisions, and their 
application to consumer assistance entities, as proposed. The purpose 
of these provisions is to ensure consumer information is safeguarded, 
no matter where it is in the eligibility or enrollment process or 
whether the consumer seeks the assistance of a consumer assistance 
entity. HHS's goal in issuing the CMP rule is to encourage program 
compliance, prevent misconduct, and remedy violations promptly. We do 
not think these goals will be served by lessening the proposed 
standards for imposing CMPs.
    Comment: We received comments expressing support for the grounds 
proposed for imposing CMPs. These commenters viewed the authority to 
impose CMPs as an effective way to safeguard the use of consumer 
information. However, many commenters also sought clarification about 
what constitutes improper use and disclosure of PII under the NPRM and 
in relation to section 1411(g) of the Affordable Care Act. Several of 
these commenters requested that Sec.  155.285 be amended to note that, 
with receipt of consent, PII can be used to conduct outreach to follow 
up with individuals who still need to complete applications or for 
outreach to help individuals maintain and renew existing health 
coverage. Other commenters feared any relaxation of PII standards would 
compromise consumer information and cause harm.
    Response: Protection of consumer information is one of the most 
critical duties of consumer assistance entities and Exchanges. Section 
155.260 provides privacy and security standards handling and 
safeguarding consumers' PII. Section 155.260 also provides that the 
Secretary can determine additional uses and disclosures of PII and 
develop a framework through which Exchanges can seek the Secretary's 
approval of other requested uses and disclosures of eligibility and 
enrollment PII that would ensure the efficient operation of the 
Exchange, comply with other applicable law and policy, and require the 
consent of the individual subject of the PII prior to the requested use 
or disclosure. Uses and disclosures of information that are not 
permitted by Sec.  155.260 or otherwise permitted by statute or 
regulation, therefore, are prohibited. Those prohibited uses and 
disclosures are the focus of the penalties imposed in Sec.  155.285 to 
the extent they are knowing and willful. But, we note that some uses 
and disclosures, as specified in rule, are permissible with the 
specific consent of the consumer.
    Comment: We received several comments on the definition of 
``person'' in Sec.  155.285(a)(2). Some commenters found the broad 
definition of ``person'' warranted for imposing CMPs for violations of 
section 1411(g) of the Affordable Care Act. However, a portion of 
commenters requested that HHS exclude assisters from the definition of 
``person.'' We also received one comment noting that the inclusion of 
QHP issuers potentially creates confusion regarding the source of 
required application information provided to establish eligibility to 
purchase a QHP.
    Response: Exchanges involve the coordination of a wide variety of 
individuals and entities for their

[[Page 30292]]

success. Therefore, our definition of ``person'' is broad to encompass 
each of these and the possibility that they could engage in the actions 
enumerated in Sec.  155.285(a)(1). We want to ensure that these 
individuals and entities are on notice of the penalties they could 
incur for the misuse of information. The inclusion of assisters and 
similar consumer assistance entities within Sec.  155.285 is discussed 
in detail above in the comment response to questions regarding the 
application of Sec.  155.206 and Sec.  155.285 to assisters. Finally, 
the inclusion of QHP issuers in the definition is purposeful for the 
reasons noted above and we do not share the concern of the commenter 
that this creates confusion. Many of the entities included in the 
definition are required to provide information for use by the Exchange, 
including QHP issuers; however, it is only the provision of false or 
fraudulent information or improper use or disclosure of information 
that is penalized. We finalize the definition as proposed.
    Comment: We received many comments in support of the proposed 
provisions of Sec.  155.285(b), which lists the factors used to 
determine the amount of CMPs imposed. A few commenters suggested 
additional factors to be considered including, whether the violation 
resulted in other legal consequences for an individual, attempts at 
taking corrective action, and the extent to which assistance personnel 
were deceived by the consumer into providing false or incorrect 
information.
    Response: We appreciate the support we received for the proposed 
factors used to determine the amount of CMPs imposed. We have 
considered the factors commenters suggested and find that only minor 
revisions to the proposed set of factors are necessary. For example, we 
have added one additional factor at subparagraph (b)(1)(viii) to 
include a factor allowing HHS to take into consideration whether other 
remedies or penalties have been imposed for the same conduct or 
occurrence. We have also clarified the scope of the factors in 
subparagraphs (b)(2)(i) and (ii) to account for violations that could 
have resulted in financial harm or could have caused harm to an 
individual's reputation, respectively. We note that harm to an 
individual's reputation could include, for example, actions impacting a 
consumer's credit rating or incurring costs on behalf of another person 
without their knowledge or consent. Additionally, Sec.  155.285 does 
not require a corrective action plan, so we do not include corrective 
steps taken in the factors provided. We believe the extent to which 
assistance personnel were deceived by the consumer is adequately 
encompassed in subparagraph (b)(2). Therefore, we finalize the 
provisions with the modifications to Sec.  155.285(b)(1)(viii) and 
(b)(2)(i) and (ii) as noted above.
    Comment: We received considerable support for the reasonable cause 
provision proposed in Sec.  155.285(b)(3). In addition, several 
commenters sought clarification or safe harbors regarding circumstances 
where false information is provided due to a mistake or 
misunderstanding. We received a couple comments requesting a safe 
harbor specifically for QHP issuers who rely on information provided to 
them from both the Exchange and consumers, since QHP issuers may have 
no way to verify information independently. Another commenter sought a 
safe harbor for conduct relating to calendar years 2014 and 2015 
because of the uncertain environment issuers worked in during initial 
open enrollment. Commenters believed that levying a CMP in such cases 
would be too severe.
    Response: Section 155.285(b)(3) states that no penalty will be 
imposed if HHS determines that there was a reasonable cause for the 
failure to provide correct information and that the person acted in 
good faith. The situations commenters cited would likely fall within 
this exception. We note that violations must be knowing and willful and 
information provided merely by mistake and in good faith is not subject 
to a CMP.
    Comment: We received a handful of comments regarding the imposition 
of penalties, as described in Sec.  155.285(c). A few commenters 
expressed general support for the proposed provisions. One commenter 
shared concern that there is no maximum penalty defined, which could 
cause financial devastation to some consumer assistance entities. A 
couple commenters requested more clarity on what constitutes a 
submission of information and questioned whether an application which 
is started on the phone but completed online results in two submissions 
or one. Another commenter was concerned about permitting HHS to 
estimate the number of consumers affected by the violation to calculate 
the maximum penalty. The commenter supported, instead, using the number 
of consumers directly affected by the violation or placing a maximum on 
the estimate calculated by HHS based on the size of the consumer 
population served by the consumer assistance entity to prevent 
unreasonable penalties for the assister community. Finally, one 
commenter requested clarification that Sec.  155.285(c) does not limit 
penalties under State law or a State's ability to take action to 
protect consumers.
    Response: Although Sec.  155.285(c) provides a maximum cap per 
violation, there is no global cap on CMPs. CMPs are intended to 
discourage the misuse of information; therefore, we believe that 
providing a global cap on CMPs would defeat there intended purpose. In 
response to the questions received, we note that one application, no 
matter the number of modes used to complete it, is considered one 
submission for purposes of imposing a CMP. This concern is further 
mitigated by the availability of an appeal prior to the imposition of a 
penalty during which this issue may be explored. We finalize the 
provisions as proposed. Finally, in response to the request for clarity 
about the role of State law in relation to Sec.  155.285, we note that 
the standards in Sec.  155.285 do not limit a State's ability to impose 
penalties or protect consumers under State law.
    Comment: In response to Sec.  155.285(d), we received a comment 
requesting that notices be written clearly and be culturally and 
linguistically.
    Response: All Exchange-related notices, including those related to 
CMPs, must comply with the requirements for notices established in 
Sec.  155.230.
    Comment: Some commenters requested that Sec.  155.285(e) be amended 
to provide additional time to request a hearing. The commenters noted, 
that under the proposed regulation, there are no additional options for 
an individual who misses the 60-day timeframe to request a hearing. One 
commenter suggested permitting additional time to request a hearing 
under a good cause exception. Another commenter suggested permitting an 
additional 60-day period to request a hearing following the due date of 
a CMP payment. The commenter noted that a payment date may provide more 
effective notice to the individual and also that many entities may have 
segregated chains of duty and the appropriate person may not be 
notified in time to request a hearing.
    Response: We disagree with commenters that 60 days from the date of 
the notice in Sec.  155.285(d) is insufficient for an individual to 
request a hearing. We believe 60 days to be neither too short to 
provide adequate notice nor too long to delay the process of imposing a 
CMP. We finalize the provision as proposed.
    Comment: As proposed in Sec.  155.206, several commenters 
recommended that CMS first require any consumer assistance entity that 
is alleged to have provided false information or

[[Page 30293]]

improperly used or disclosed information to enter into a corrective 
action plan before a CMP could be issued.
    Response: We believe that Sec.  155.285 provides HHS or OIG 
sufficient flexibility to offer an entity or individual an opportunity 
to take corrective action or propose a plan of corrective action to 
avoid penalties prior to HHS or OIG issuing a notice of intent to 
impose a civil money penalty. Particularly, HHS might offer an 
opportunity for corrective action in relation to minor infractions that 
expose entities or individuals to a penalty under Sec.  155.285.
    Comment: Some commenters requested clarification regarding payment 
methodologies and timeframes for CMPs. For example, one commenter 
questioned whether the entirety of the penalty would be due upon 
payment of taxes or upon notification of being found guilty of a 
violation.
    Response: We do not provide this level of detail in the regulation 
at this time. We will address this issue in the future.
    Comment: One commenter expressed disagreement with the proposed 
six-year statute of limitations in Sec.  155.285(i). The commenter 
noted that between IRS review, issuer validation of payments, and other 
methods of cross-referencing and auditing, each incident of a violation 
should be able to be discovered within two years. The commenter also 
noted that a longer statute of limitations may lead to collection 
procedures, such as wage garnishments, to collect unpaid debt, which 
can extend the efforts needed to collect the money for a CMP.
    Response: We believe the six-year statute of limitations period is 
appropriate. This period is not indefinite and, therefore, will 
hopefully not discourage efforts by consumer assistance entities. 
However, HHS's goal in issuing the CMP rule is to encourage program 
compliance, prevent misconduct, and remedy violations promptly and, 
therefore, we do not want to provide a period that is too short to 
encourage strict compliance with the rule and provide protection for 
PII. We believe six years provides sufficient time for HHS to discover 
and investigate any potential CMPs and acknowledges the reality that in 
many situations, misuse of a consumer's personally identifiable 
information may not be discovered by a consumer and reported to HHS for 
some time after the unlawful use.
    Comment: Several commenters advocated against duplication of 
penalties in instances where certain types of violations may already 
subject them to other types of penalties. A few commenters noted that 
the Health Insurance Portability and Accountability Act already governs 
certain critical aspects of compliance related to the protection of 
consumer personal information.
    Response: We understand commenters' concern about the potential 
duplication of penalties, and have amended Sec.  155.285(b)(1) to 
include a factor allowing HHS to take into consideration whether other 
remedies or penalties have been imposed for the same conduct or 
occurrence. It would be the responsibility of the entity to bring such 
information to HHS's attention. However, we also note that HHS will 
consider referring cases to appropriate law enforcement officials based 
on the facts and circumstances of the violation.
    Comment: One commenter requested clarification regarding whether an 
individual would be held accountable for repayment of an overpayment of 
the advance premium tax credit or CSRs paid on a consumer's behalf, in 
addition to a CMP.
    Response: The provisions of Sec.  155.285 concern only the 
imposition of CMPs and not payment or repayment of advance payments of 
the premium tax credit or CSRs as a result of the misuse of 
information. This provision has no effect on the Department of 
Treasury's authority to recoup overpayments of the advance payment of 
the premium tax credit or CSRs paid on a consumer's behalf.
    Comment: We received one comment that, although, we reference PII, 
it is not defined in regulation.
    Response: There are various definitions of PII, and we believe the 
adoption of any one of them at this stage may unduly limit HHS's 
ability to adequately redress violations of the rule. Given the 
advanced state of technology and developments in the way information 
may be manipulated, combined, and ultimately used to re-identify 
persons based on de-identified data, we believe that PII is an evolving 
concept that may not be fully captured in a single definition. We, 
therefore, will not provide a specific definition of PII in the text of 
Sec.  155.285 at this time. We do note that OMB Memoranda M-07-16 (May 
22, 2007) generally defines PII as information which can be used to 
distinguish or trace an individual's identity, such as their name, 
social security number, biometric records, alone, or when combined with 
other personal or identifying information that is linked or linkable to 
a specific individual, such as date and place of birth, mother's maiden 
name.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.285 of the 
proposed rule regarding CMPs, with the following modifications: In an 
effort to prevent confusion, in Sec.  155.285(c) we have removed the 
references to section 1411(h)(1) and (2) of the Affordable Care Act and 
have instead inserted the numerical maximum penalty amounts. In Sec.  
155.285(a)(1)(ii), we have added ``or fraudulent'' after ``knows to be 
false'' to make the text consistent with section 1411(h)(1) of the 
Affordable Care Act. In Sec.  155.285(b)(1) and (2), we have added 
language to clarify that the factors in these provisions are 
``including, but not limited to'' the factors listed in their 
subparagraphs. In Sec.  155.285(b)(1)(viii), we have added a factor 
allowing HHS to take into consideration whether other remedies or 
penalties have been imposed for the same conduct or occurrence. We have 
clarified the scope of the factors in subparagraphs (b)(2)(i) and (ii) 
to account for violations that could have resulted in actual or 
potential financial harm or could have resulted in actual or potential 
harm to an individual's reputation, respectively. We have made a minor 
change to the wording in Sec.  155.285(d)(2) by substituting the word 
``appeal'' for ``request.'' We have also made a technical correction to 
substitute ``the notice of intent to issue a civil money penalty'' in 
Sec.  155.285(d)(2) with a cross reference to Sec.  155.285(f). In 
Sec.  155.285(f), we have rephrased the paragraph to read ``HHS has 
proposed to impose'' rather than ``HHS has imposed.'' Finally, we are 
substituting the reference to ``CMS'' with ``HHS'' in (g)(1) and, in 
consultation with OIG, we are finalizing concurrent jurisdiction with 
respect to Sec.  155.285(a)(1)(ii) and not Sec.  155.285(a)(1)(iii) at 
this time.
3. Subpart D--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
a. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  155.320)
    In Sec.  155.320(d)(4), we established an option under which a 
State Exchange could rely on HHS to conduct verifications of enrollment 
in an eligible employer-sponsored plan and eligibility for qualifying 
coverage in an eligible employer-sponsored plan for purposes of 
eligibility for advance payments of the premium tax credit. This option 
was made available for eligibility determinations that are effective on 
or after January 1, 2015. However, we have

[[Page 30294]]

determined that the benefit gained by having HHS provide this function 
is outweighed by the information technology development and 
administrative and consumer complexity that would be introduced for a 
State through this approach. As such, we proposed to strike paragraph 
(d)(4).
    Comment: We received comments from several State Exchanges urging 
HHS to retain the option of the employer-sponsored coverage 
verification process. Many of the comments focused on the need for 
State Exchanges to develop functionality and administrative capacity to 
verify employer-sponsored coverage in the absence of this Federally-
managed service and the administrative and financial burden this would 
place on State Exchanges. One commenter suggested retaining the service 
at the Federal level would take advantage of economies of scale rather 
than burdening each State Exchange, individually. Several States noted 
that their system builds and operating budgets could not accommodate 
this change in time for the 2015 benefit year and recommended that, if 
HHS does finalize the proposal, HHS postpone eliminating the service 
for an additional year.
    Response: We appreciate the comments received from State Exchanges 
on this proposed rule change. We understand the administrative costs 
and development burden associated with providing verifications for 
Exchange determinations. However, even with the Federally-managed 
service, State Exchanges and HHS would need to develop a way to send, 
receive, and process the information and provide dual customer service 
functionality to communicate with consumers. In addition, the State 
Exchange would need to modify systems to integrate the HHS verification 
response into what should be a near-real-time eligibility process. 
Therefore, we do not believe that there are significant efficiencies to 
be gained by providing this service to State Exchanges. However, we do 
understand the time and budget constraints some State Exchanges face in 
order to adjust their processes to accommodate this change and agree 
that additional time is needed for States to come into compliance with 
this requirement. Therefore, we are finalizing the provision as 
proposed, removing the original regulatory language at Sec.  
155.320(d)(4), but extending the flexibility previously provided at 78 
FR 42257 to permit State Exchanges to implement the sample-based 
reviews for employer-sponsored coverage for eligibility determinations 
for insurance affordability programs starting January 1, 2016.
    Comment: Additionally, some commenters shared concern that employer 
coverage data currently available to States is insufficient to perform 
this verification and that a comprehensive national resource is needed 
to sufficiently perform the verification. Without such a source, the 
commenters noted that States would have to employ and administer an 
alternative data source, causing a lack of uniform documentation and 
verification across Exchanges. The commenters suggested that HHS allow 
self-attestation to be sufficient verification until HHS can make 
available approved data sources for verification.
    Response: Verification standards for employer-sponsored coverage 
are provided in 45 CFR 155.320(d)(2) and include: (1) Federal 
employment data from the Office of Personnel Management, which is 
currently provided to State Exchanges by HHS, (2) SHOP data that is 
available to the State Exchange, and (3) any electronic data sources 
that are available to the Exchange and which have been approved by HHS. 
We remain committed to working with State Exchanges to develop 
effective solutions for verifying enrollment in an eligible employer-
sponsored plan and eligibility for qualifying coverage in an eligible 
employer-sponsored plan, and will work to make any additional 
electronic data sources that become available to HHS equally available 
to State Exchanges.
Summary of Regulatory Changes
    We are finalizing the changes to Sec.  155.320(d)(4) as proposed 
but note that we are extending the flexibility previously provided at 
78 FR 42257 to permit State Exchanges to implement the sample-based 
reviews for employer-sponsored coverage for eligibility determinations 
for insurance affordability programs starting January 1, 2016.
b. Eligibility Redetermination During a Benefit Year (Sec.  155.330)
    In the proposed rule, we proposed a technical correction in 
paragraph (d)(2)(ii) of Sec.  155.330 to remove the reference to 
paragraph (e)(3) of this section. In the final rule, titled, ``Medicaid 
and Children's Health Insurance Programs: Essential Health Benefits in 
Alternative Benefit Plans Eligibility Notices, Fair Hearing and Appeal 
Processes and Premiums and Cost Sharing; Exchanges: Eligibility and 
Enrollment, 78 FR 32319, we previously removed paragraph (e)(3) from 
this section. As such, we clarified in the proposed rule that paragraph 
(d)(2)(ii) should only refer to the standards specified in paragraph 
(e)(2) of this section.
Summary of Regulatory Changes
    We did not receive any comments on this proposal and are finalizing 
the provision as proposed.
4. Subpart E--Exchange Functions in the Individual Market: Enrollment 
in Qualified Health Plans
a. Enrollment of Qualified Individuals in a QHP (Sec.  155.400)
    In Sec.  155.400, we proposed to add paragraph (e) to establish 
that Exchanges may, and the FFE would, require payment of the first 
month's premium to effectuate enrollments.
    We also proposed to add paragraph (f), which would authorize 
Exchanges to provide requirements to QHP issuers regarding the 
instructions for processing electronic enrollment-related transactions.
    Additionally, in Sec.  156.265 we proposed to establish a 
requirement for issuers in the FFEs to collect premiums no later than 
the day before the coverage effective date. Our intention was to give 
the Exchange the flexibility to establish policy and process rules 
regarding premium payment.
    Comment: One commenter suggested that the Exchange should not 
provide instructions to issuers regarding payment of the first month's 
premium for enrollments. The commenter recommended that the Exchange 
should allow issuers to establish their own business rules on first 
month's premium for enrollments. However, another commenter supported 
establishing a date by which an enrollee must make a first premium 
payment to effectuate coverage creating greater transparency for 
payment deadlines and reducing cancellations of coverage due to failure 
to pay in a timely manner. We also received a comment that urged us to 
amend the regulation to allow payment of the first premium up to the 
day before the coverage effective date, rather than allowing plans to 
set payment dates that are earlier than this day. The commenter also 
suggested that issuers should be required to provide timely invoicing 
for consumers,
    Response: We recognize that decisions regarding payment of the 
first month's premium have traditionally been a business decisions made 
by issuers. Accordingly, we are not finalizing Sec.  156.265(d)(2) 
which would revise premium payment dates for first

[[Page 30295]]

month's premiums in the FFE, and are deleting current Sec.  
156.265(d)(2). We will therefore redesignate Sec.  156.265(d)(1) as 
Sec.  156.265(d). However, because we appreciate the comment about 
giving consumers adequate time to pay their first month's premium, we 
maintain the proposed Sec.  155.400(e) in the final rule to allow 
Exchanges to establish a consistent process throughout each Exchange 
regarding first month's premium. In particular, each Exchange can 
determine how to handle first month's premium payment dates for special 
enrollment periods that may occur close to or after the effective date. 
We believe giving each Exchange the flexibility to establish uniform 
guidance for all issuers for first month's premium for enrollments will 
benefit the Exchange, issuers, and consumers by ensuring a consistent 
operational procedure. It is our expectation that QHP issuers will send 
consumers their bills within one to two business days after receiving 
enrollment transactions to accomplish the goal of timely effectuating 
coverage.
    Comment: We received several comments that acknowledged 
establishing a payment due date the day before coverage is effective in 
most situations, but there are several scenarios that commonly occur 
today that make this approach challenging and in some cases, impossible 
to implement. For example, the birth of a child can cause retroactive 
coverage in which the premium cannot be paid by the effective date, or 
an individual may lose minimal essential coverage and be given an 
effective date with only one day prior to coverage effectiveness in 
which to pay. There are also instances where the consumer does not 
receive the bill until after the due date. One commenter voiced concern 
that some States give 10 day grace periods and recommended that we 
should allow the FFE the same flexibility offered to SBEs when it comes 
to how the first premium payment effectuates coverage.
    Response: For similar reasons given above, we are not finalizing 
Sec.  156.265(d)(2) which would establish premium payment dates for 
first month's premiums and expect the FFE to address this in 
subregulatory guidance.
Summary of Regulatory Changes
    We are finalizing Sec.  155.400(e) and (f) of the proposed rule 
without modification. Additionally, we are finalizing the provisions 
proposed in Sec.  156.265(d)(1) of the proposed rule as the entire 
paragraph (d), and we are not finalizing any Sec.  156.265(d)(2), 
allowing each Exchange to establish its own premium payment dates.
b. Initial and Annual Open Enrollment Periods (Sec.  155.410)
    In 45 CFR 155.410(d), we specified that starting in 2014, the 
Exchange must provide a written annual open enrollment notification to 
each enrollee no earlier than September 1, and no later than September 
30. In 45 CFR 155.335(d), we specified that notice of annual 
redetermination for coverage effective January 1, 2015 be provided as a 
single, consolidated notice with the notice specified in 45 CFR 
155.410(d). In the 2015 Payment Notice, we amended 45 CFR 155.410(e) to 
specify that for the benefit year beginning on January 1, 2015, the 
annual open enrollment period begins on November 15, 2014. Accordingly, 
we believe that it is appropriate to modify the timing of the notice of 
annual open enrollment and annual redetermination. We proposed two 
options for this notice: (1) shifting the period during which the 
notice would be sent by a month, so that the notice would be sent no 
earlier than October 1, and no later than October 31, and (2) shifting 
the period during which the notice would be sent by a month and 
lengthening this period so that the notice would be sent no earlier 
than October 1, and no later than November 15, provided that electronic 
notices are available for any consumer who contacts the Exchange on 
November 15. We sought comment on which of these options we should 
implement, or if we should implement another option.
    Comment: We received many comments from States, issuers, and 
consumer advocates about the timeline for issuing the notice of annual 
open enrollment and annual redetermination. The majority of comments 
from States and the issuer community support the extended timeframe of 
October 1 to November 15. States noted the additional flexibility to 
decide when to send the notice as a benefit to the extended timeframe. 
Issuers also saw a benefit to extending the timeframe because it would 
allow for additional attempts to contact enrollees if the first contact 
was unsuccessful. Several consumer advocacy groups found the shorter 
timeframe of October 1 to October 31 preferable because it would permit 
consumers two weeks advance notice before open enrollment and 
additional time for consumers to contact enrollment assisters and 
assemble any documents needed for redetermination.
    A limited number of commenters supported timeframes outside the two 
proposed options. One supported keeping the original timeframe for 
sending the notice no earlier than September 1 and no later than 
September 30; another sought flexibility to send notices no earlier 
than August 1. We also received a comment expressing concern over 
shifting the timeframe either way due to misalignment between open 
enrollment notices, issuer 90-day renewal notices, and Exchange 
redetermination notices.
    Response: In order to best meet the needs of Exchanges, which are 
responsible for sending the notices, and consumers, who need enough 
information about open enrollment in a timely manner, we are finalizing 
Sec.  155.410(d) to state that, starting in 2014, the Exchange must 
provide a written notice of annual open enrollment and redetermination 
to each enrollee no earlier than the first day of the month before the 
open enrollment period begins and no later than the first day of the 
open enrollment period. This reflects the second of our proposed 
options.
    Comment: We received one comment recommending that the notice be 
provided to existing enrollees as well as: (1) Potential enrollees who 
submitted applications after the close of the last open enrollment 
period and were subsequently determined eligible for a QHP but unable 
to enroll, (2) individuals who had applied for a special enrollment 
period but were denied during the past year, (3) individuals who had 
requested enrollment information from the Exchange during the period 
between open enrollment periods, and (4) individuals who were 
terminated from a QHP during the period between open enrollments 
periods.
    Response: This comment is outside the scope of the provisions 
included in the proposed rule; however, we note that Sec.  155.335(c) 
provides that the Exchange must provide every qualified individual with 
an annual redetermination notice that, for coverage effective January 
1, 2015, must be provided as a single, coordinated notice including 
notice of the annual open enrollment period. Therefore, outreach will 
extend to individuals beyond current enrollees. We also note that 
Exchanges have the flexibility to conduct outreach beyond the 
individuals cited in the rule.
    Comment: One commenter requested the addition of language 
clarifying that States may set an open enrollment period for the 
Exchange that is broader than the Federal open enrollment period.
    Response: This comment is beyond the scope of this rulemaking and 
we direct the commenter to the open

[[Page 30296]]

enrollment period rule at 45 CFR 155.410.
Summary of Regulatory Changes
    We are amending Sec.  155.410(d) to state that, starting in 2014, 
the Exchange must provide written notice of annual open enrollment to 
each enrollee no earlier than the first day of the month before the 
open enrollment period begins and no later than the first day of the 
open enrollment period.
c. Special Enrollment Periods (Sec.  155.420)
    In 45 CFR 155.420, we set forth provisions for special enrollment 
periods. In the proposed rule, we proposed amending Sec.  
155.420(b)(2)(ii), (d)(1), (d)(6)(iii) and (e), which pertain to the 
special enrollment period for loss of coverage; Sec.  155.420(b)(2)(i) 
and (iii), which pertain to effective dates for certain special 
enrollment periods; and Sec.  155.420(c), which pertains to the length 
of the special enrollment periods.
    In paragraph (b)(2)(i), we proposed to provide flexibility for 
coverage effective dates in the case of birth, adoption, placement for 
adoption, or placement in foster care. We require the Exchange to 
ensure that coverage is effective for a qualified individual or 
enrollee on the date of birth, adoption, placement for adoption, or 
placement in foster care, unless Exchanges permit the qualified 
individual or enrollee to elect a later coverage effective date. If the 
Exchange permits the qualified individual or enrollee to elect a later 
coverage effective date, the Exchange must ensure coverage is effective 
on the date elected by the qualified individual or enrollee.
    In Sec.  147.104(b)(2), we specified that a health insurance issuer 
in the individual market must provide, with respect to individuals 
enrolled in non-calendar year individual health insurance policies, a 
limited open enrollment period. Accordingly, in order to align Exchange 
regulations with those of the broader insurance market, in paragraph 
(d)(1), we proposed that the Exchange permit qualified individuals and 
their dependents to enroll in or change from one QHP to another if they 
are enrolled in a non-calendar year individual health insurance policy 
in 2014 described in Sec.  147.104(b)(2), even if issuers of such non-
calendar year policies offer to renew the policy. Thus, consumers whose 
individual health insurance policies would renew outside the Exchange 
open enrollment period would have an opportunity to enroll in an 
Exchange, just as they would if their policies were offered for renewal 
during the Exchange open enrollment period. Without this addition, 
consumers with individual health insurance policies renewing outside 
the Exchange open enrollment period would be required to renew such 
policies, and wait to terminate the policies during the Exchange open 
enrollment period, should they wish to enroll through the Exchange, 
thus disadvantaging these consumers as compared to consumers enrolled 
in calendar year individual market policies.
    In 26 CFR 1.5000A-2(b)(1)(ii)(C), the Secretary of the Treasury 
specified that coverage of pregnancy-related services under section 
1902(a)(10)(A)(i)(IV) and (a)(10)(A)(ii)(IX) of the Social Security Act 
(42 U.S.C. 1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX)) was not minimum 
essential coverage. In order to ensure that women losing eligibility 
for coverage of pregnancy-related services as described above are not 
left without an option to enroll in a QHP after the conclusion of 
Medicaid eligibility, in paragraph (d)(1), we proposed that the 
Exchange permit qualified individuals and their dependents to enroll in 
a new QHP if they lose eligibility for such pregnancy-related services. 
We solicited comments regarding whether there are other situations in 
which an individual loses coverage that is not defined as minimum 
essential coverage and should be provided with a special enrollment 
period.
    We proposed to add to paragraph (c) to specify that the Exchange 
must permit qualified individuals and their dependents to access the 
special enrollment periods described in paragraph (d)(1) for up to 60 
days prior to the end of the qualified individual's or his or her 
dependent's existing coverage. This is consistent with existing 
regulations in paragraph (d)(6)(iii) that are specific to an individual 
who is enrolled in an eligible employer-sponsored plan who is 
determined newly eligible for advance payments of the premium tax 
credit based in part on a finding that such individual is ineligible 
for qualifying coverage in an eligible employer-sponsored plan. To 
improve the clarity and structure of this rule, we proposed to move the 
language in paragraph (d)(6)(iii) regarding the 60 days prior access to 
the special enrollment period to paragraph (c). The proposed change, to 
paragraph (d)(1) that would expand the ability to report a change and 
select a plan in advance to all individuals who are described in 
paragraph (d)(1) is designed to allow an individual who is losing 
eligibility for coverage outside the Exchange to transition to coverage 
offered through an Exchange without a gap in coverage, but with 
protections to ensure that advance payments of the premium tax credit 
are not provided in advance of the loss of eligibility for minimum 
essential coverage outside the Exchange. Accordingly, we note that 
individuals are not eligible for advance payments of the premium tax 
credit until they are no longer enrolled in minimum essential coverage 
outside the Exchange. While consumers will be able to report the loss 
of coverage and select a QHP offered on the Exchange in advance of the 
loss, their coverage effective date will be no earlier than the first 
day of the month following the loss of coverage (for example, if the 
loss of minimum essential coverage is on May 31, 2014 and the consumer 
reports the loss on March 5, 2014, coverage will not be effective until 
June 1, 2014). Lastly, we proposed to make conforming changes to 
paragraphs (b)(2)(ii) and (e) to align with the changes in terminology 
proposed in paragraph (d)(1).
    In paragraphs (d)(4), (d)(5), (d)(9) and (d)(10), we provide 
special enrollment periods for errors of the Exchange or HHS, contract 
violations by the QHP, exceptional circumstances and misconduct by a 
non-Exchange entity. Existing paragraph (b)(2)(iii) specifies that for 
a plan selection made during one of the special enrollment periods 
under paragraphs (d)(4), (d)(5), and (d)(9), coverage must be effective 
on an appropriate date based on the circumstances of the special 
enrollment period, in accordance with guidelines issued by HHS, and 
provides two options for that effective date. We proposed to add 
special enrollment periods triggered under paragraph (d)(10) to those 
special enrollment periods for which these special coverage effective 
dates are available. In order to ensure that the Exchange has 
sufficient flexibility with which to address the types of scenarios 
that may trigger these special enrollment periods, we proposed to amend 
paragraph (b)(2)(iii) to remove the restriction to these two options. 
The resulting proposed regulatory text would allow the Exchange to set 
an effective date based on what is appropriate to the circumstances, in 
accordance with any guidelines issued by HHS. Similarly, in order to 
ensure that the Exchange sets the length of these same special 
enrollment periods to be appropriate to the circumstances of the 
specific enrollment period, we proposed to modify paragraph (c) to 
specify that the Exchange may define the length of these special 
enrollment periods as appropriate based on the circumstances of the 
special enrollment period, in accordance with any guidelines issued

[[Page 30297]]

by HHS. We believe that this flexibility is important to ensure that 
the special enrollment periods can be implemented as intended.
    Section 155.420(e) clarifies what qualifies as loss of coverage for 
purposes of the special enrollment period described in paragraph 
(d)(1). We proposed to modify this paragraph to clarify that voluntary 
termination does not qualify as loss of coverage for purposes of a 
special enrollment period, since the intent of this special enrollment 
period is to ensure that an individual who is losing coverage can 
transition to the Exchange without interruption, and not to allow an 
individual to switch from another form of coverage to the Exchange 
during the year when the other form of coverage remains available and 
he or she does not qualify for another special enrollment period 
described in this section. We solicited comments regarding this 
clarification.
    Comment: We received comments both in support of, and opposed to, 
the proposed language providing flexibility for Exchanges to allow 
either retroactive coverage back to the date of the birth, adoption, 
placement for adoption, or placement in foster care, or a coverage 
effective date later than the date of the birth, adoption, placement 
for adoption, or placement in foster care.. Some commenters supported 
providing prospective enrollment at the option of the Exchange, and the 
consumer. Other commenters opposed allowing retroactive coverage and 
preferred that Exchanges follow regular effective dates. One commenter 
suggested we clarify that coverage may be effective no later than the 
first of the month following the occurrence of the triggering event. 
Additionally, commenters sought clarification on the length of time 
before the coverage may become effective following the triggering event
    Response: Section 1311(c)(6)(C) of the Affordable Care Act which 
references section 9801 of the Internal Revenue Code of 1986 requires 
retroactivity for birth, adoption, or placement for adoption, and we 
received commenter support for allowing retroactive or prospective 
enrollment at the option of the Exchange. We therefore are finalizing 
paragraph (b)(2)(i) with the clarification that coverage may be 
effective no later than the first of the month following the occurrence 
of the triggering event at the option of the consumer. Without this 
clarification there is a potential for adverse selection whereby a 
consumer could choose an effective date on which they knew services 
would be utilized. Accordingly, we are finalizing this provision with 
the clarification. State Exchanges have flexibility when and if they 
will provide the option.
    Comment: One commenter recommended allowing for mid-month coverage 
effective dates in the case of loss of minimum essential coverage, as 
described in paragraph (d)(1) of this section.
    Response: We do not intend to allow for mid-month coverage 
effective dates in the case of loss of minimum essential coverage at 
this time. The language in (c)(2)(i) provides consumers with adequate 
flexibility to avoid a gap in coverage. We appreciate the comment and 
may consider mid-month coverage effective dates in future rulemaking.
    Comment: Commenters encouraged clarification on effective dates 
provided in Sec.  155.420(b)(2)(iii). Specifically, commenters 
recommended allowing for retroactive effective dates back to when the 
triggering event occurred and recommended retroactivity be at the 
option of the consumer.
    Response: The language proposed in this section does not prohibit 
Exchanges from providing retroactive coverage for special enrollment 
periods as described in paragraphs (d)(4), (d)(5), (d)(9), or (d)(10) 
of this section. Rather, the proposed language provides flexibility for 
Exchanges to determine the appropriate effective date based on the 
circumstances of the special enrollment period. Exchanges may provide 
retroactive coverage at the choice of the consumer provided it is 
deemed appropriate by the Exchange. Accordingly, we are finalized this 
paragraph as proposed.
    Comment: Commenters asked that HHS consistently define and apply 
effective dates and lengths of special enrollment periods to increase 
consistent application across enrollees. One commenter requested HHS 
develop a minimum length of 60 days for all special enrollment periods.
    Response: As provided in paragraph (b)(2)(iii) of this section, 
Exchanges must ensure that coverage is effective on an appropriate date 
based on the circumstances of the special enrollment period. Due to the 
unique circumstances of each special enrollment period, it could be 
harmful to the consumer to implement a general effective date policy. 
If a consumer does not agree with a special enrollment decision they 
may request an appeal of the effective date as provided in Sec.  
155.505(b)(1)(i). Therefore, we are finalizing this paragraph as 
proposed.
    Comment: One commenter recommended that special enrollment periods 
conclude at the end of the enrollment period, or when an individual 
selects a QHP, whichever is sooner.
    Response: The current regulation at Sec.  155.410(a)(1) provides 
that ``The Exchange must provide an initial open enrollment period and 
annual open enrollment periods consistent with this section, during 
which qualified individuals may enroll in a QHP and enrollees may 
change QHPs.'' This regulation does not provide for limiting consumers' 
opportunity to enroll during the specified enrollment periods. Because 
the language recommended by the commentator would directly conflict 
with Sec.  155.410(a)(1), we decline to accept this recommendation.
    Comment: One commenter requested the length of the special 
enrollment period provided in Sec.  155.420(d)(6)(iii) be extended to 
allow the employee time to receive the notice of their COBRA rights. 
The commenter also requested clarification that a consumer could elect 
COBRA coverage prior to their coverage effective date.
    Response: We believe that providing the individual with the 
flexibility provided in (c)(2)(ii) of this section to select an 
Exchange QHP based on their anticipated loss of qualifying employer 
sponsored coverage up to 60 days in advance of the loss combined with 
the 60 day special enrollment period provided in (c)(1) of this section 
will minimize any potential gap in coverage resulting from a loss of 
employment notwithstanding the required timeline associated with the 
employer notifying the group plan administrator and the group plan 
administration notifying the employee of their COBRA rights. On May 2, 
2014 we published a bulletin that provided a special enrollment period 
for persons eligible or COBRA and COBRA beneficiaries. Additionally, on 
May 2, 2014 the Department of Labor released revised model notices for 
group health plans to provide to covered employees and their families 
which provides updated information on COBRA benefits and the Exchange. 
Finally, we note that an individual could elect to enroll in COBRA 
coverage and enroll in Exchange coverage when he or she loses employer-
sponsored coverage, and disenroll from COBRA when Exchange coverage 
becomes effective. The consumer is not eligible for advance payments of 
the premium tax credit or CSRs while enrolled in COBRA. Accordingly, we 
are finalizing as proposed.
    Comment: One commenter requested that HHS extend the proposal to 
allow individuals prior access to a special enrollment period for 
individuals who are gaining access to a new QHP as a result of a move.

[[Page 30298]]

    Response: While we did not solicit comments on this provision. In 
future rulemaking we may allow consumers eligible for special 
enrollment periods other than those provided in (c)(2)(i) of this 
section to report in advance.
    Comment: Commenters supported the proposed flexibility provided for 
consumers to select a plan in advance of the triggering events 
described in paragraphs (d)(1) and (d)(6)(iii) of this section, which 
pertain to the loss of coverage or qualifying coverage in an eligible 
employer-sponsored plan, respectively to prevent a gap in coverage.
    Response: Given commenter support, we are finalizing this provision 
with clarification. We note that a consumer who loses coverage as 
described in paragraphs (d)(1) or (d)(6)(iii) may report a loss of 
coverage 60 days before or 60 days after the loss. If plan selection 
occurs on or before the date of the loss, the effective date will be 
the first day of the month following plan selection. If plan selection 
is made after the date of the loss, Exchanges may choose to either 
follow regular effective dates under paragraph (b)(1) of this section 
or allow for an effective date of the first of the month following plan 
selection, as the previous rule allowed for both scenarios. The FFE 
allows for coverage to be effective the first day of the month 
following plan selection when plan selection is made after the loss. 
For purposes of (d)(1) and (d)(6)(iii), the date of the ``loss of 
coverage'' means the last day a consumer would have coverage. Exchanges 
will have the flexibility provided under (b)(3)(i) of this section to 
allow for earlier effective dates if all issuers in the service area 
agree.
    Comment: Multiple commenters supported the proposed additions to 
establish a special enrollment period for consumers who are enrolled in 
non-calendar year individual health insurance policies. Commenters 
requested HHS align the length of the special enrollment period in 
accordance with 45 CFR 147.104(b)(2). Additionally, commenters 
requested this special enrollment period be provided to consumers whose 
transitional policy, or group health plan, is renewing.
    Response: Section 147.104(b)(2) allows consumer to report the non-
renewal in the plan 30 days prior to the date the policy year ends 
while 147.104(b)(4) provides 60 days for the special enrollment period. 
The proposed rule allows consumers to report their intent not to renew 
a non-calendar year policy (including a transitional policy) 60 days in 
advance of the date the policy year ends and select a plan although the 
coverage effective date will not be until the first day of the month 
following the termination date. Additionally, the proposed rule 
provides 60 days from that date to select a QHP through the Exchange. 
We are finalizing this provision in the proposed rule without 
modification. Since the intention of this provision is to align with 
the market rules, we are citing directly to Sec.  147.104(b)(2). In 
addition, on May 2, 2014 we released guidance allowing consumers in 
this scenario to report a loss of coverage to the Exchange under the 
authority provided in paragraph (d)(9) of this section.
    Comment: Commenters were supportive of the newly established 
special enrollment period for women losing pregnancy-related Medicaid 
coverage.
    Response: We are finalizing the language as proposed.
    Comment: Commenters requested special enrollment periods be 
established for a variety of triggering events including; pregnancy, 
tobacco cessation after six months which may impact the consumer's 
premium, same sex couples who enter into a legally recognized 
relationship other than marriage, individuals who make an individual 
responsibility payment for not having coverage in 2014, and persons who 
are victims of domestic violence. Additionally, commenters requested 
HHS regulate on certain special enrollment periods which exist in sub-
regulatory guidance including; benefit display errors and loss of 
exemptions.
    Response: We did not solicit comment on this provision and the 
comments received are out of scope with this regulation. However, 
Exchanges retain the flexibility provided in paragraph (d)(4) and 
(d)(9) of this section to define errors of the Exchange and provide 
special enrollment periods for exceptional circumstances to provide 
such special enrollment periods as determined appropriate by the 
Exchange. For instance, the Federally-facilitated Exchange recently 
provided guidance that survivors of domestic abuse are eligible for a 
limited duration special enrollment period as a result of guidance 
released by the Internal Revenue Service.
    Comment: Multiple commenters responded to our solicitation 
regarding situations other than loss of eligibility of pregnancy-
related services in which an individual loses coverage that is not 
defined as minimum essential coverage and should be provided a special 
enrollment period. Suggestions included; AmeriCorps, Indian Health 
Service, student health coverage that is not designated minimum 
essential coverage, foreign health coverage that is not designated 
minimum essential coverage, excepted benefits offered by an employer, 
medically needy Medicaid coverage, and family planning Medicaid 
services.
    Response: To ensure individuals who lose certain types of limited 
Medicaid coverage which generally meets their primary and specialty 
health care needs, but which is not recognized as minimum essential 
coverage, have the option to enroll in a QHP at the conclusion of 
Medicaid eligibility, we are expanding the special enrollment period to 
include loss of medically needy as well as pregnancy-related coverage 
which is not recognized as minimum essential coverage. With respect to 
the loss of medically needy coverage, we are limiting beneficiaries to 
one special enrollment period per calendar year based on loss of 
medically needy coverage. This enables individuals with only medically 
needy coverage to enroll in a QHP outside of the open enrollment 
period, but avoids permitting individuals to switch QHPs multiple times 
a year each time they reach the end of their medically needy budget 
period within the same calendar year. We are not extending a special 
enrollment period to individuals who lose Medicaid coverage of family 
planning services, as such coverage is limited to a narrow set of 
benefits which does not meet the covered individuals' primary or 
specialty health care needs, other than family planning services. HHS 
may provide a special enrollment period for other similar situations in 
future rulemaking or guidance. In addition, on May 2, 2014 we published 
a bulletin that provided a special enrollment period for individuals 
who are beginning service in the AmeriCorps State and National, VISTA, 
or NCCC programs and for individuals who are concluding their service 
in the AmeriCorps State and National, VISTA, or NCCC programs and are 
losing access to short-term limited duration coverage or self-funded 
coverage.
    Comment: We received comments requesting we clarify the criteria 
for qualifying events described in paragraphs (d)(4), (d)(5), (d)(9), 
and (d)(10). Commenters also requested clarification on the process for 
notifying consumers who are impacted by an exchange error.
    Response: We believe the ability for Exchanges to respond 
appropriately to the circumstances surrounding an individual's special 
enrollment period is necessary. CMS has previously issued

[[Page 30299]]

guidance describing guidelines on the criteria for special enrollment 
periods which fall under the authority of paragraphs (d)(4), (d)(9), 
and (d)(10) in the FFE.
    Comment: Commenters recommended amending paragraph (d)(6)(i) to 
include individuals who are not current Exchange enrollees. Such 
revision would allow the following groups of consumers to utilize the 
special enrollment period; people who live in States that did not adopt 
Medicaid expansion, people who divorce during the year, victims of 
domestic violence that occurs after May 31, 2014, people who experience 
the death of a spouse, and people who lose a job but did not enroll in 
employer-sponsored coverage because of high costs.
    Response: We note that many individuals in these circumstances may 
have other triggering events that would qualify them for an existing 
special enrollment period. However, we remain concerned that expanding 
paragraph (d)(6)(iii) could result in adverse selection and 
destabilization of the individual insurance market. We have provided 
sub-regulatory guidance on special enrollment periods under paragraph 
(d)(4) and (d)(9) of this section including for COBRA beneficiaries, 
survivors of domestic abuse, and people who divorce during the year and 
may continue to do so in the future. Accordingly, we are finalizing as 
proposed without additional modification.
    Comment: We received comments both for and against the proposed 
addition to paragraph (e) of this section stating that voluntary 
termination does not qualify an individual for a loss of coverage 
special enrollment period.
    Response: The proposed language clarifies existing regulations that 
termination includes voluntary termination by an enrollee. The 
intention of paragraph (e) of this section is to stabilize the market 
by preventing individuals from voluntarily terminating their coverage 
and then utilizing the loss of minimum essential coverage special 
enrollment period provided in paragraph (d)(1) of this section. 
Accordingly, we are finalizing as proposed.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in section Sec.  155.420 
of the proposed rule with the following modifications. In paragraph 
(b)(2)(i), we provide that coverage must be effective on the date of 
the birth, adoption or placement for adoption, placement for foster 
care, or the Exchange may allow the consumer to select a coverage 
effective date of the first of the month following the date of birth, 
adoption, placement for foster care, or placement for adoption. In 
paragraph (b)(2)(ii), we clarify that coverage is effective the first 
day of the month following plan selection. In paragraph (b)(2)(iii) we 
provide flexibility for Exchanges to ensure coverage is effective based 
on the specific circumstances of the special enrollment period. We also 
have added a new paragraph (b)(2)(iv) that clarifies a consumer's 
ability to select a plan 60 days before and after a loss of coverage 
described in subparagraph (d)(1) and (d)(6)(iii). Finally, in paragraph 
(d)(1), we define the date of the loss of coverage for each triggering 
event described under paragraph and establish a special enrollment 
period for individuals losing medically needy coverage.
d. Termination of Coverage (Sec.  155.430)
    We proposed to add paragraph (e) to Sec.  155.430 to establish the 
difference between a termination and a cancellation and establish the 
significance of a reinstatement action in the context of QHP coverage 
offered through an Exchange. Specifically, we proposed to specify that 
a cancellation is a specific type of termination action taken that ends 
a qualified individual's coverage on or before the effective date, thus 
rendering coverage as never effective. In contrast, a termination is an 
action taken after the effective date of coverage that ends an 
enrollee's coverage effective on a date after the coverage effective 
date. In a cancellation, the effect of the QHP's action would be that a 
qualified individual does not receive coverage from the QHP, whereas in 
a termination the QHP covers the enrollee for some period of time and 
would be liable for covered services that the enrollee received during 
the time period between the coverage effective date and the termination 
date, under the terms of the coverage. A reinstatement action is a 
correction of an erroneous termination or cancellation action resulting 
in restoration of an enrollment with no break in coverage.
    In addition to establishing the difference between cancellations 
and terminations, we also proposed that an Exchange may establish 
operational standards for QHP issuers for implementing terminations, 
cancellations, and reinstatements. Enrollment systems for both SBEs and 
the FFE continue to evolve, and we believe that the Exchange's ability 
to issue operational instructions will enable both the Exchange and the 
issuer community to respond more effectively to changing systems and 
changing processes. We believe the effectiveness of this approach has 
been demonstrated in other programs administered by CMS, specifically 
the Medicare Advantage and Medicare Part D programs.
    Further, we proposed to clarify in paragraph (d)(6) that the 
termination effective date for a QHP would be the day before the 
effective date of coverage in a different QHP even in cases of 
retroactive enrollments. This could occur when a consumer is granted a 
special enrollment period to change QHPs with a retroactive coverage 
effective date under 155.420(b)(2)(iii). For coverage that is 
terminated retroactively, CMS would adjust any applicable payments to 
the original QHP issuer based on the retroactive termination date, in 
order to recoup any advance payments of the premium tax credit and 
cost-sharing reductions made to the former issuer for the enrollee. The 
Exchange would be required to ensure that the former issuer refunds or 
credits any premium paid to the issuer by the enrollee and reverse 
claim payments for services rendered during the retroactive coverage 
period. We sought comment on whether to add a specific requirement to 
this effect on issuers in Part 156.
    Conversely, in the case of a retroactive coverage date, CMS would 
provide the gaining issuer any applicable advance payments of the 
premium tax credit and CSRs based on the retroactive coverage effective 
date. CSR reconciliation would occur for all CSRs provided beginning 
with the retroactive coverage date. The gaining issuer would collect 
the enrollee's portion of the premium for all months of coverage and 
would be required to adjudicate the enrollee's claims incurred during 
the retroactive period, and provide any applicable CSRs.
    Comment: We received several comments supporting the provision 
ensuring that consumers receive the benefit of the advance payments of 
the premium tax credits and CSRs to which they are entitled and 
refunded any premiums from the issuer from which the consumer 
terminated coverage. However, some commenters opposed the requirement 
for issuers to refund out-of-pocket payments since those payments are 
made by consumers directly to providers. Another commenter asked for 
clarification of the impact of a retroactive termination and effective 
date on deductibles and accumulators.
    Response: The Exchange must ensure that appropriate actions are 
taken following a retroactive termination. Under the policy finalized 
in this rule, when a retroactive termination and

[[Page 30300]]

enrollment results in the enrollee changing issuers, the Exchange must 
ensure that the former issuer refunds or credits any premium paid to 
the issuer by or for the enrollee for coverage after the retroactive 
date, reverses any claims for services provided after the retroactive 
termination date, and recoups payments made to providers for services 
provided to the enrollee after the retroactive termination date. The 
former issuer must also ensure that providers refund to the enrollee 
any cost sharing paid by or for the enrollee (other than CSRs to be 
reimbursed by the Federal government). CMS will also recoup any advance 
payments of the premium tax credit and CSRs provided to the issuer for 
the enrollee back to the retroactive termination date
    The gaining issuer in turn, should collect the enrollee's portion 
of the premium and is responsible for any covered services incurred, in 
each case for the period following the retroactive effective date of 
coverage. CMS will also provide the gaining issuer any applicable 
advance payments of the premium tax credit and CSRs for the enrollee 
back to the retroactive effective date of coverage. (We intend to 
provide additional guidance regarding how issuers should handle a claim 
that spans a period of time in which the enrollee has coverage from two 
separate issuers in such circumstances.) Providers are responsible for 
billing the gaining issuer for any covered services incurred back the 
retroactive enrollment date, and the issuer must ensure that the 
provider collects only the cost sharing for the covered service to 
reflect the enrollee's cost-sharing obligation for the service under 
the gaining issuer. We acknowledge that such an adjustment may result 
in the enrollee owing the provider additional funds, depending on the 
cost sharing and benefit structure of the new plan. We note that 
consistent with 45 CFR 156.410(c)(1) and our CMS Bulletin to Exchanges 
on the Availability of Retroactive Advance Payments of the PTC and CSRs 
in 2014 Due to Exceptional Circumstances, dated February 27, 2014, any 
refund or credit for any excess cost sharing or premium paid for or on 
behalf of the individual must be provided (or begin to be provided in 
the case of a credit) with 45 calendar days of the date of discovery of 
the excess cost sharing or premium paid.
    If an applicant switches QHP issuers, we do not require out-of-
pocket amounts paid under the prior plan to carry over to the new QHP 
issuer, but defer to issuers and State laws with regard to how out-of-
pocket payments under the former issuer's plan should be accounted for 
in the deductibles and limitations on cost sharing under the new 
issuer's plan.
    Comment: We received a comment recommending that if a consumer 
enrolls in a different QHP with the same issuer, the issuer should not 
be required to reverse claim payments, and should not be required to 
refund out-of-pocket payments, but could instead apply any cost-sharing 
paid to the new QHP's annual limitation on cost sharing. The same 
commenter also sought clarification on how out-of-pocket payments for 
prescription drugs, most of which are adjudicated at the point of sale, 
will be handled in the case of a change in QHP issuers with a 
retroactive effective date.
    Response: We are finalizing the proposed provision as proposed, 
noting that the processes set forth in the final rule are designed to 
ensure that consumers are provided the CSRs and advance payments of the 
premium tax credit for which they determined eligible, and are refunded 
any excess premiums paid or out-of-pocket payments made by or for the 
enrollee for covered benefits and services incurred. Applying enrollee 
cost sharing or other out-of-pocket spending already paid to the new 
QHP's accumulators, such as deductibles, or limitations on cost sharing 
or out-of-pocket spending, will not always be equivalent to providing a 
refund. For example, for an enrollee that does not exceed the 
deductible for a benefit year, simply accumulating excess cost sharing 
already paid may mean the enrollee will have paid more in cost sharing 
than required under the new plan. However, we recognize that, when the 
enrollee switch plans within the same issuer (or between variations of 
the same plan), reversing the claims and providing refunds may not be 
the most efficient way of adjusting the enrollee's portion of the 
premium and any differences in cost sharing. Therefore, in such 
circumstances, the Exchange and the issuer will be considered to be in 
compliance with the policy set forth in this rule as long the 
enrollee's premium payments and cost sharing are adjusted to reflect 
the enrollee's obligations under the new plan or variation and 
providers are made whole. Thus, the issuer may elect to make the 
enrollee whole for cost sharing directly through a refund or credit 
without requiring the provider to provide any refund directly to the 
enrollee, and may net provider payments to reflect the provider's 
obligations and payments due. Furthermore, consistent with 45 CFR 
156.425(b), in the case of a change in assignment to a different plan 
variation (or standard plan without CSRs) of the same QHP in the course 
of a benefit year under this section, the QHP issuer must ensure that 
any cost sharing paid by the applicable individual under the previous 
plan variations (or standard plan without CSRs) for that benefit year 
is taken into account in the new plan variation.
    Under the policy and processes set forth in this final rule, 
prescription claims should be treated in the same manner as other 
claims.
    Comment: Many commenters supported the new definitions for 
terminations and cancellations to codify the existing practices 
included in the enrollment standards as well as the inclusion of a 
definition for reinstatement. One commenter did not recommend guidance 
to issuers to follow operational instructions issued by the Exchange 
given the limited nature of retroactive effective dates that result in 
a termination. However, another commenter recommended that that HHS 
require, not solely permit, Exchanges to establish operational 
procedures for issuers in these circumstances and place a requirement 
on issuers to follow the established procedures. In doing so, all 
issuers participating in the Exchange would be required to comply with 
similar procedures on terminations, cancellations, and reinstatements 
to ensure a consistent process. Additionally, the commenter stated that 
simplifying the procedures among QHP issuers would be in the consumers' 
interest and avoid consumer confusion, especially in situations where 
members of the household may be in different QHPs.
    Response: We agree that if an Exchange establishes operational 
instructions for implementing terminations, cancellations, and 
reinstatements, then issuers should be required to follow such 
procedures. However, we still believe it is up to the Exchange to 
determine whether or not to establish procedures. Therefore, we are 
finalizing Sec.  155.430(e) as proposed, while adding a corresponding 
paragraph (j) to Sec.  156.270, to specify that QHP issuers must follow 
the transaction rules established by the Exchange in accordance with 
Sec.  155.430(e).
    Comment: We received a comment requesting that CMS reconsider the 
implementation of the 90-day grace period and require that health plans 
pay any claims during the entire grace period.
    Response: We note that the comment is outside the scope of this 
rulemaking. Requirements for issues regarding grace

[[Page 30301]]

periods are addressed at 45 CFR Sec.  156.270.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.430 of the 
proposed rule without modification. However, we are adding Sec.  
156.270(j) to specify that QHP issuers must follow the transaction 
rules established by the Exchange in accordance with Sec.  155.430(e) 
based on comments we solicited and ensuring a consistency of 
operational procedures among issuers in the Exchange.
5. Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs
a. General Eligibility Appeals Requirements (Sec.  155.505)
    In Sec.  155.505, we proposed a technical correction to paragraph 
(b)(4) by removing ``; and'' at the end of the paragraph and adding a 
period in its place.
Summary of Regulatory Changes
    We receive no comments on this proposal and are finalizing the 
provision as proposed.
b. Dismissals (Sec.  155.530)
    In Sec.  155.530, we proposed to amend paragraph (a)(1) to provide 
an additional method for appellants to withdraw appeal requests. The 
existing provision requires an appellant who wishes to withdraw his or 
her appeal request to do so in writing (hard copy or electronic). We 
proposed to include the alternative for an appellant to withdraw his or 
her appeal by telephone, if the appeals entity is capable of accepting 
telephonic withdrawals. In paragraphs (a)(1)(i)(A) and (B), we proposed 
the requirements for providing a telephonic withdrawal process. 
Specifically, we proposed that the appeals entity must record in full 
the appellant's statement and telephonic signature made under penalty 
of perjury, and provide a written (in hard copy or electronically) 
confirmation to the appellant documenting the telephonic interaction. 
We sought comment on this proposed amendment, including the proposed 
requirements for accepting telephonic withdrawals and the potential 
misalignment with Medicaid fair hearing rules caused by this proposed 
amendment.
    Comment: Nearly all the comments we received in response to the 
proposal to provide the option for telephonic withdrawals were 
supportive. This included many positive comments from State Exchanges. 
Commenters noted the additional method to withdraw appeals would ease 
the burden on appeals entities by protecting resources while providing 
an efficient means for consumers to end their appeal at their 
discretion. We also received support from consumer advocate groups for 
the proposed provision requiring written documentation of the 
telephonic interaction as well as the proposed requirement that the 
appellant's telephonic statement be recorded in full and include a 
telephonic signature made under penalty of perjury. However, we also 
received a comment requesting that we not finalize the provisions 
requiring the appellant's telephonic statement be recorded in full and 
a written confirmation because they are burdensome and duplicative. The 
commenter suggested that simply providing written documentation of a 
telephonic withdrawal with an option for the appellant to request to 
vacate the withdrawal within a specific period of time is sufficient.
    Response: We agree with commenters that incorporating this option 
for telephonic withdrawals will assist appeals entities in maintaining 
an efficient process by providing a convenient method for appellants to 
end an appeal at their option, thereby, protecting resources for other 
appeals-related activities. We understand the concern that the 
requirements for providing a telephonic withdrawal process are 
significant and call for both a full recording of the appellant's 
telephonic withdrawal and a confirmation of the telephonic withdrawal 
sent in writing. However, the appellant's right to a hearing is the 
central concern of the appeals process and any mechanism for 
relinquishing the right to the hearing must include sufficient 
safeguards. The requirement for both a recording and a written 
confirmation of the telephonic withdrawal are meant to ensure that the 
appellant's right to a hearing is safeguarded. Further, we note that 
the preamble to the proposed rule acknowledged that the requirement to 
provide confirmation of a telephonic withdrawal can be met through 
issuance of the dismissal notice, which is required to contain 
instructions on how to request to vacate the dismissal in accordance 
with Sec.  155.530(b)(3). Therefore, we finalize the provision for 
telephonic withdrawal as proposed.
    Comment: A few commenters cited the potential vulnerabilities of 
appellants under a telephonic withdrawal process. For instance, 
appellants may be vulnerable to coaching by appeals entity staff to 
withdraw their appeal over the telephone. Similarly, an appellant may 
feel pressured to withdraw an appeal prematurely after an informal 
resolution if the appeals entity initiates such a discussion with the 
appellant by telephone. However, the commenter also acknowledged that 
if an appellant initiates the call to withdraw the appeal, no such 
concern exists. One commenter recommended that HHS create scripted 
information about the significance of withdrawing an appeal that 
includes an attestation of understanding by the consumer to be used by 
Exchange appeals entities to help protect appellants.
    Response: While there is potential for undue influence on an 
appellant to close an appeal in some cases, we also realize that 
appeals entities aim to run an efficient process. As noted above, we 
believe the process we have proposed fairly balances these concerns and 
provides sufficient protections for appellants, including the 
requirement that telephonic withdrawals be recorded in full, made under 
penalty of perjury, and confirmed in writing. In addition, withdrawals 
result in dismissal notices under Sec.  155.530(b), which provide for 
the opportunity to request to vacate a dismissal for good cause. With 
these protections in place, we are confident that appellant's interests 
will be safeguarded.
    Comment: We received one comment on the alignment of our proposed 
policy with Medicaid fair hearing rules. The commenter opposed the 
potential misalignment caused by the proposed provision and noted that 
only permitting a written withdrawal, as in the current rule and in 
Medicaid fair hearing rules, is a strong consumer protection measure.
    Response: Although the option to implement telephonic withdrawals 
will put the Exchange rules out of alignment with the Medicaid fair 
hearing rules, it is our intent to provide a modernized appeals process 
that can take advantage of technology and still safeguard appellant 
rights, as noted above. CMS is considering its policy regarding written 
and telephonic withdrawals in Medicaid and may issue future guidance on 
this issue. However, we note that as a result of this current 
incongruence in rules, appeals entities must ensure that appellants are 
afforded the appropriate rights. Individuals appealing denials of 
Medicaid eligibility may not withdraw their appeal via telephone, even 
if the appeals entity meets the requirements for providing such a 
process under the Exchange rule. Current appellants of Medicaid 
eligibility determinations may only withdraw an appeal in writing in 
accordance with 42 CFR 431.223(a).
    Comment: Some commenters suggested that the written confirmation

[[Page 30302]]

of the telephonic withdrawal should include a mechanism for challenging 
the validity of the telephonic signature.
    Response: As noted in the preamble to the proposed rule, the 
requirement to provide confirmation of a telephonic withdrawal can be 
met through issuance of the dismissal notice, which is required to 
contain instructions on how to request to vacate the dismissal in 
accordance with Sec.  155.530(b)(3). However, even if the appeals 
entity decides to provide confirmation of the telephonic withdrawal in 
a notice separate from the dismissal notice, a dismissal notice, 
including instructions on requesting to vacate a dismissal, is required 
in the case of a withdrawal nonetheless. Therefore, all appellants who 
provide a telephonic withdrawal will receive instructions on requesting 
to vacate the dismissal, which would have the effect of reopening the 
appeal.
    Comment: We received one comment suggesting that telephonic 
withdrawals only be accepted through the Exchange toll-free number and 
that assisters, Navigators, and certified application counselors not be 
authorized to accept telephonic withdrawals.
    Response: If an appeals entity wishes to provide telephonic 
withdrawals in accordance with the final requirements, the appeals 
entity must maintain a phone line, capable of recording calls from 
appellants for the purposes of withdrawing an appeal. Whether that 
phone line is the same as the Exchange's customer service number or not 
is at the discretion of the appeals entity. We also note that, although 
appellants may seek assistance from assisters, Navigators, and 
certified application counselors, these consumer support entities are 
not authorized to operate any portion of the Exchange appeals process, 
including accepting telephonic withdrawals.
Summary of Regulatory Changes
    We are finalizing the provision as proposed and note, as in the 
proposed rule, that this change also impacts employer appeal 
withdrawals by cross-reference at Sec.  155.555(f)(1).
c. Employer Appeals Process (Sec.  155.555)
    We proposed to amend Sec.  155.555 by redesignating paragraphs 
(d)(1) through (d)(4) to more clearly delineate between the 
requirements associated with valid appeal requests versus invalid 
appeal requests. We note that under this proposed redesignation, 
paragraph (d)(4) would become new paragraph (d)(2), stating that upon 
receipt of an invalid appeal request, the appeals entity must promptly 
and without undue delay send written notice to the employer that the 
appeal request is not valid because it fails to meet the requirements 
of this section. New paragraph (d)(2) would also provide introductory 
language for the requirements provided in paragraphs (d)(2)(i) through 
(iv). The result of these proposed revisions would be to separate the 
requirements for valid appeal requests in redesignated paragraph (d)(1) 
and the requirements for invalid appeal requests in new paragraph 
(d)(2).
Summary of Regulatory Changes
    We received no comments on the proposed redesignations and are 
finalizing the redesignations as proposed.
6. Subpart G--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
a. Required Contribution Percentage
    Under section 5000A of the Code, an individual must maintain 
minimum essential coverage for each month, qualify for an exemption, or 
make a shared responsibility payment. Sections 5000A(d) and (e) provide 
for nine categories of exemptions, and authorize the Secretary to 
determine individuals' eligibility for some of the exemptions, 
including the hardship exemption. Sections 1.5000A-3(a) through (h) of 
26 CFR enumerate the circumstances in which an individual may be exempt 
from the shared responsibility payment. These grounds for exemption 
include: (1) under 26 CFR 1.5000A-3(e), the individual lacks affordable 
coverage because the individual's annualized required contribution for 
minimum essential coverage for the month exceeds the required 
contribution percentage of the individual's household income; (2) under 
26 CFR 1.5000A-3(h), the individual has in effect a hardship exemption 
certification issued by an Exchange because, based on the individual's 
projected household income, the individual is not eligible for 
affordable minimum essential coverage; and (3) as described in 45 CFR 
155.605(g)(5), the individual and one or more employed members of his 
or her family have been determined eligible for affordable self-only 
employer-sponsored coverage through their respective employers, but the 
aggregate cost of employer-sponsored coverage for all the employed 
members of the family exceeds 8 percent of household income for that 
calendar year. Determining eligibility for these exemptions requires 
comparison between the individual's share of the costs for obtaining 
minimum essential coverage and a certain percentage of the individual's 
household income, actual or projected, for the taxable year (the 
required contribution percentage). Under section 5000A(e)(1)(A) of the 
Code, the required contribution percentage is 8 percent. Section 
5000A(e)(1)(D) of the Code and 26 CFR 1.5000A-3(e)(2)(ii) further 
provide that, for plan years beginning in any calendar year after 2014, 
the percentage will be the percentage determined by the Secretary to 
reflect the excess of the rate of premium growth between the preceding 
calendar year and 2013 over the rate of income growth for that period.
    As discussed below, in this final rule, we establish a methodology 
for determining the excess of the rate of premium growth over the rate 
of income growth for a period, and establish the required contribution 
percentage for the 2015 calendar year. For calendar years after 2015, 
the required contribution percentage will be published in the annual 
HHS notice of benefit and payment parameters. We also define the 
required contribution percentage under Sec.  155.600(a) to mean the 
product of 8 percent and the rate of premium growth over the rate of 
income growth for the calendar year, rounded to the nearest one-
hundredth of one percent. Finally, we modify Sec.  155.605(g)(5), which 
currently sets the required contribution percentage at 8 percent, so 
that the required contribution percentage for purpose of section 5000A 
in future years reflects the required contribution percentage for the 
applicable calendar year.
Methodology for Determining the Excess of the Rate of Premium Growth 
Over the Rate of Income Growth
    In the proposed rule, we outlined and requested comments on 
methodologies for determining the excess of the rate of premium growth 
over the rate of income growth. We discussed an approach under which 
the rate of premium growth over the rate of income growth for a 
particular calendar year would be calculated as the quotient of (x) one 
plus the rate of premium growth between the preceding calendar year and 
2013, divided by (y) one plus the rate of income growth between the 
preceding calendar year and 2013. We sought comment on whether we 
should constrain this ratio to be greater than or equal to one, as well 
as the impact of these constraints on the excess of the rate of premium 
growth over the rate of income growth. We sought comment on this and 
other approaches for determining the excess of the rate of premium 
growth over the rate of income growth, and in particular, whether the 
excess of the rate of premium growth over income growth should be

[[Page 30303]]

calculated based on the difference between the growth rates, the ratio 
of the growth rates, or through other methods, and whether the result 
should be subject to other adjustments.
    In response to comments, we are finalizing the methodology outlined 
in the proposed rule, such that the rate of premium growth over the 
rate of income growth for a particular calendar year will be the 
quotient of (x) one plus the rate of premium growth between the 
preceding calendar year and 2013, carried out to ten significant 
digits, divided by (y) one plus the rate of income growth between the 
preceding calendar year and 2013, carried out to ten significant 
digits. The quotient will be carried out to ten significant digits, and 
multiplied by the required contribution percentage for 2014 (8 
percent). The result will then be rounded to the nearest hundredth of a 
percent, to yield the required contribution percentage for the calendar 
year. We do not constrain this percentage to be greater than or equal 
to one, or subject it to other adjustments or constraints.
    Comment: Several commenters supported our proposal that we perform 
this calculation using a ratio rather than a difference. One commenter 
suggested the formula be the quotient of (x) one plus the rate of 
premium growth between the preceding calendar year and 2013, over (y) 
one plus the difference between the rate of premium growth between the 
preceding calendar year and 2013, and the rate of income growth between 
the preceding calendar year and 2013, stating that this would minimize 
volatility of the formula. Some commenters supported permitting the 
ratio to be less than one, while another commenter suggested that the 
ratio should be constrained to be greater than or equal to one, to 
avoid the required contribution increasing when both premium growth and 
income growth are negative. One commenter suggested a ceiling on the 
index factor of 1.1 to ensure that premium contributions do not 
increase by more than 1 percent of consumers' incomes.
    Response: We believe that the methodology described above most 
accurately measures the relationship between changes in premiums and 
income. While we recognize some of the policy concerns raised by 
commenters, we believe that any constraints on the ratio could result 
in the required contribution percentage not fully reflecting the growth 
rates of premiums and income, which we believe is the general intent of 
the statute.
    Comment: Some commenters recommended delaying any adjustments to 
the required contribution percentage. One commenter stated that 
adjustments to the required contribution percentage and to the 
applicable percentages used to calculate the premium tax credits under 
section 36B of the Code should be delayed until at least 2016, to 
permit fuller assessments of the consequences of these adjustments. 
Another commenter suggested delaying any increase in premium 
contributions for the foreseeable future, noting significant technical 
and administrative costs, such as revising online calculators and 
coding Exchange functions.
    Response: While we recognize the commenters' concerns, we believe 
the required contribution percentage should track premium and income 
changes from year to year, and delaying this adjustment would conflict 
with the general intent of the statute. We also anticipate that the 
operational changes associated with these adjustments will be 
manageable.
    Premium Growth: In the proposed rule, we sought comment on whether 
we should use the premium adjustment percentage as a measure of premium 
growth for the purpose of calculating the adjustment to the required 
contribution percentage, and whether that adjustment should be 
constrained through the use of ceilings or floors. We also sought 
comment on whether other data sources or methods should be used to 
measure premium growth.
    Taking into consideration the comments received, we are finalizing 
our proposal to measure the rate of premium growth for a calendar year 
by using the premium adjustment percentage for the year, without any 
adjustments or constraints. We provided in the 2015 Payment Notice \29\ 
that the premium adjustment percentage, described at 45 CFR 156.130(e), 
will be published each year in the HHS notice of benefit and payment 
parameters, and will be used to adjust certain cost-sharing parameters 
established by the Affordable Care Act. As established in the 2015 
Payment Notice, the premium adjustment percentage for 2015 is 
4.213431463 percent.
---------------------------------------------------------------------------

    \29\ Patient Protection and Affordable Care Act; HHS Notice of 
Benefit and Payment Parameters for 2015, 79 FR 13744 (March 11, 
2014).
---------------------------------------------------------------------------

    Comment: Several commenters supported setting the rate of premium 
growth equal to the premium adjustment percentage. One commenter stated 
we should not consider constraining the annual rate of premium growth 
to equal or exceed zero, while another commenter argued that premium 
growth should constrained to be a positive number. Another commenter 
suggested that HHS use actual, rather than projected, growth in private 
insurance premiums, and suggested that HHS delay implementation of any 
adjustment until the 2016 plan year, when a number of significant 
market changes would have concluded and when actual premium growth 
between 2014 and 2015 will be known. One commenter was concerned that 
the trend in employer plan premiums may understate premium growth in 
the individual market.
    Response: The premium adjustment percentage is calculated based on 
projections of average per enrollee employer-sponsored insurance 
premiums from the National Health Expenditure Accounts (NHEA), which 
are calculated by the CMS Office of the Actuary. As discussed in the 
2015 Payment Notice, these projected premiums reflect premiums from 
nearly the entire private health insurance market. However, because 
these projected premiums will exclude premiums from the individual 
market, which are likely to be subject to a number of short-term 
effects related to implementation of market reforms, we believe these 
projections provide an appropriate measure of average per capita 
premiums for health insurance coverage for the initial years. However, 
as noted in the proposed rule, after the initial year(s) of 
implementation of market reforms, we may propose to change the 
methodology for calculating the premium adjustment percentage.
    Income Growth: In the proposed rule, we discussed measuring the 
rate of income growth for a calendar year as the percentage by which 
the per capita GDP for the preceding calendar year exceeds the per 
capita GDP for 2013, carried out to ten significant digits. We stated 
that we were considering using the projections of per capita GDP used 
for the NHEA.\30\ We sought comment on alternative sources of income 
data that we should consider, and whether adjustments should be made to 
our data source, or to the methodology outlined in the proposed rule. 
We also sought comment on whether we should seek to measure income 
growth per person under the age of 65 or per worker.
---------------------------------------------------------------------------

    \30\ See Table 1 in http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf.
---------------------------------------------------------------------------

    In response to comments, in this final rule, we are establishing as 
the measure of income growth for a calendar year the percentage by 
which the per capita GDP for the preceding calendar year exceeds the 
per capita GDP for 2013, carried out to ten significant digits, using 
the

[[Page 30304]]

projections of per capita GDP used for the NHEA. Under this 
methodology, the rate of income growth for 2015 is 3.608458790 percent. 
This measure is based on data sources that are consistent with the data 
sources used for determining premium projections, resulting in a 
consistent estimate of the ratio of premiums to income. In future years 
we may consider alternative income measures.
    Comment: Commenters supported using per capita GDP for the purpose 
of calculating income growth, stating that this is a widely used 
measure of income. One commenter noted that it would not be technically 
sound to measure growth in GDP per person under age 65 or per worker, 
because GDP estimates are not available for those subsets of the 
population. Another commenter suggested that we consider whether per 
capita GDP sufficiently accounts for inflation and housing costs, and 
whether it overstates the income growth rate for lower income 
populations. Another commenter urged HHS not to use wage growth.
    Response: Following consideration of comments received, we believe 
that growth in per capita GDP provides the most comprehensive and 
accurate measure of income growth available at this time. This measure 
is also consistent with the data that the CMS Office of the Actuary 
uses to project premiums for the NHEA. We may consider revising this 
measure in the future to account for future circumstances or data 
availability, including if alternative income measures or subsets of 
GDP become available.
    Comment: One commenter stated that in order to avoid an increase in 
the required contribution percentage during a recession, the annual 
change in per capita GDP should be constrained to equal or exceed zero, 
and that benchmark revisions should not be allowed to affect the 
calculation of the rate of income growth. Another commenter suggested 
that the formula should account for negative income changes, such that 
in a year where income decreases, there should be a decrease in the 
affordability threshold. Another commenter opposed negative income 
growth, because it would increase the required contribution percentage 
during times of economic decline.
    Response: We acknowledge that in a recession a negative change in 
per capita GDP could result in an increase in the ratio of premiums to 
income. However, we note that such occurrences have been rare in recent 
decades, and constraining income growth to be positive would risk the 
required contribution percentage not fully reflecting the growth rates 
of premiums and income, which we believe is the general intent of the 
statute.
Required Contribution Percentage for 2015
    The required contribution percentage for 2014 is 8.00 percent. 
Based on the methodology finalized in this final rule, the rate of 
premium growth over the rate of income growth for 2015 is 
1.04213431463/1.0360845879 or 1.005839028. This results in a required 
contribution percentage for 2015 of 8.00*1.005839028, or 8.05 percent, 
when rounded to the nearest one-hundredth of one percent.
Summary of Regulatory Changes
    We define the required contribution percentage under Sec.  
155.600(a) to mean the product of eight percent and the rate of premium 
growth over the rate of income growth for the calendar year, rounded to 
the nearest one-hundredth of one percent. We are also amending Sec.  
155.605(g)(5), so that the required contribution percentage for this 
exemption in future years reflects the required contribution percentage 
for the applicable calendar year.
b. Options for Conducting Eligibility Determinations for Exemptions 
(Sec.  155.625)
    In Sec.  155.625, we established an option under which a State 
Exchange could adopt an eligibility determination for an exemption from 
the shared responsibility payment that was made by HHS, provided that 
certain conditions were met. We proposed to revise Sec.  155.625 to 
remove the option for a State Exchange to adopt an eligibility 
determination for an exemption from the shared responsibility payment 
made by HHS for applications submitted on or after November 15, 2014. 
Under this proposal, HHS would continue to provide support in this area 
for applications up until that date.
    Comment: We received several comments, many from State Exchanges, 
urging HHS not to eliminate the option described in Sec.  155.625(b). 
Commenters opposed this change because of the burden, in terms of cost, 
time and resources it would put on State Exchanges to accommodate the 
provision of exemption determinations. Several commenters from State 
Exchanges noted that resources have already been allocated and 
timelines already established for the systems development and shared 
the concern that States will not have the resources or administrative 
capacity to carry out this function by November 15, 2014. Under the 
proposed timeline, one commenter anticipated that State Exchanges 
would, at best, only be able to implement a paper-based and manual 
exemption eligibility determination process. One commenter shared the 
belief that the current process could be modified to HHS' concerns by 
asking the consumer to include the information that only State 
Exchanges have, such as the lowest cost bronze plan. A majority of 
commenters agreed that, if HHS proceeds with the proposed change, State 
Exchanges need additional time to develop their own exemption 
processes; therefore, commenters suggested that implementation begin 
November 15, 2015. Finally, one commenter agreed that having a single 
entity conduct exemption determinations makes the most sense but, to 
achieve this, HHS must provide clear implementation standards to guide 
State Exchanges and consumers for uniform application of the law.
    Response: We appreciate the comments received on this proposed 
change, particularly those from State Exchanges. We acknowledge the 
impact of such a change on State Exchanges in terms of administrative 
costs and development timelines. As noted below, we are providing 
Exchanges additional time to make this change.
    Additionally, and as previously stated in the proposed rule, we 
support this change because the current procedure introduces 
significant information technology development and administrative 
burden into a process that could otherwise be executed at a single 
entity. For example, it requires coordinated information sharing 
systems between State Exchanges and HHS to send, receive, and process 
the information needed to make an exemption determination, particularly 
for those exemptions that require information only held by the State 
Exchange, such as the cost of the lowest-cost bronze plan net of 
advance payments of the premium tax credit. Furthermore, the current 
process requires dual customer service responsibilities at both HHS and 
the State Exchange, which creates challenges for consumers and Exchange 
customer service representatives. Therefore, we do not believe that 
there are significant efficiencies to be gained by HHS providing this 
service to State Exchanges.
    HHS is committed to providing technical assistance to State 
Exchanges to develop the capacity to handle the minimum functions of 
granting certificates of exemption. HHS has

[[Page 30305]]

developed and released a set of model paper applications that can be 
adopted by State Exchanges and will consider providing additional 
guidance, such as example standard operating procedures, to assist 
State Exchanges as they develop their own exemption processes. We do 
understand the time and budget constraints State Exchanges face in 
order to adjust their processes to accommodate this change and agree 
that additional time is needed for State Exchanges to come into 
compliance with this requirement. Accordingly, we are finalizing the 
provision with an amendment to eliminate the option for HHS to provide 
exemption determinations for State Exchanges for applications submitted 
after the start of open enrollment for the 2016 plan year.
Summary of Regulatory Changes
    We are amending Sec.  155.625(a) and (b) to state that the Exchange 
may adopt an exemption eligibility determination made by HHS for 
applications submitted before the start of open enrollment for the 2016 
plan year.
7. Subpart H--Exchange Functions: Small Business Health Options Program
a. Functions of a SHOP (Sec.  155.705)
    Sections 155.705(b)(2) and (3) currently provide that, for plan 
years beginning on or after January 1, 2015, all SHOPs must make 
available to qualified employers the option of selecting an actuarial 
value level of coverage as described in section 1302(d)(1) of the 
Affordable Care Act and make all QHPs at that level available to 
qualified employees (``employee choice''). Additionally, pursuant to 
section 1312(a)(2) of the Affordable Care Act, qualified employers may 
provide support for coverage of employees under a QHP by selecting any 
level of coverage under section 1302(d) to be made available to 
employees, and each employee of an employer that elects a level of 
coverage may choose to enroll in a QHP that offers coverage at that 
level. Based on communications with issuers and State Insurance 
Commissioners early in 2014, HHS became concerned that, in some 
circumstances, implementing employee choice in 2015 might significantly 
disrupt some small group markets, and it might therefore have a 
negative effect on the ability of small business owners to access 
coverage.
    To address these concerns, we proposed to amend Sec.  155.705(b)(2) 
and (3) to provide for a one year transition policy under which a SHOP 
would be permitted to not implement employee choice in 2015 under 
specific circumstances: (1) if employee choice would result in 
significant adverse selection in the State's small group market that 
could not be fully remediated by the single risk pool or premium 
stabilization programs; or (2) if there is an insufficient number of 
issuers offering QHPs or qualified SADPs to allow for meaningful plan 
choice among QHPs or qualified SADPs for all actuarial value levels in 
the State's SHOP. We proposed that meaningful choice would mean 
sufficient competition in the market to allow for participation in the 
SHOP from multiple issuers throughout the State.
    We proposed that a State regulatory agency, such as the State 
Department of Insurance, could submit a recommendation to the State's 
SHOP (or in the case of an FF-SHOP, to the Secretary) showing why 
either of the two proposed circumstances applied in 2015. We sought 
comment on whether the State regulatory agency recommendation should 
include a mitigation plan describing the process the State regulatory 
agency would take to ensure that full implementation of employee choice 
in 2016 would not result in the occurrence of either proposed 
circumstance. We proposed that the State would be required to provide 
in the recommendation to the SHOP concrete evidence that one of the two 
proposed circumstances applied. The SHOP would then evaluate the 
State's recommendation and determine whether the State's small group 
market would be significantly adversely affected as a result of the 
implementation of employee choice.
    In the preamble to the proposed rule, we also recognized the 
importance of the timing of a State regulatory agency's recommendation 
and the SHOP's decision regarding employee choice under this proposal. 
Whether or not employee choice is available in a SHOP may be relevant 
information for issuers to consider as they make QHP submissions, but 
State regulatory agencies also need time to evaluate market dynamics 
before they can make a recommendation about whether the SHOP should not 
implement employee choice in 2015. We considered establishing a 
deadline for the State regulatory agency's recommendation to the SHOP. 
We considered a timeline under which State regulatory agencies would 
make recommendations prior to the close of the initial QHP 
certification application window, with sufficient time for issuers to 
decide whether or not to participate in SHOP for the following plan 
year. We also considered a second timeline as follows: (1) All issuers 
interested in participating in SHOP would apply during the initial 
application window; (2) State regulatory agencies then would have a 
specific window of time within which to make a recommendation regarding 
whether to not implement employee choice in 2015 based on the 
applications received; (3) the SHOP would then have a specific window 
of time to decide whether to implement employee choice in 2015 based on 
that recommendation; (4) issuers could, based upon the SHOP's decision, 
decide whether to maintain, modify, or withdraw their QHP applications. 
In the FF-SHOPs, under this second scenario, issuers would be able to 
submit applications after the initial deadline to apply for QHP 
certification had passed.
    We are finalizing this provision with the following modifications. 
First, based on a careful re-evaluation of the two conditions under 
which the State regulatory agency could make the proposed 
recommendation, we have recognized that some issuers have concerns 
about the potential for adverse selection in the small group market 
under employee choice and these concerns might cause them to price 
their products and plans higher than they might otherwise price them if 
the SHOP did not offer employee choice. Therefore, in the final rule, 
we specify that a State Insurance Commissioner could recommend to the 
SHOP that employee choice not be implemented in that State in 2015 if 
the Commissioner can adequately explain that this would be in the best 
interest of small employers and their employees and dependents, given 
the likelihood that implementing employee choice would cause issuers to 
price their products and plans higher than they would otherwise price 
them. Second, we are finalizing the first timeline in the proposed 
rule, and are requiring that a State Insurance Commissioner make its 
recommendation to the SHOP, and that the SHOP make its decision about 
implementing employee choice, sufficiently in advance of the end of the 
QHP certification application window such that issuers can make 
informed decisions about whether to participate in the SHOP. In the FF-
SHOPs, State Insurance Commissioner must submit to HHS their 
recommendation on or before June 2, 2014. This will provide HHS (as 
operator of the FF-SHOPs) sufficient time to review any 
recommendations. HHS anticipates that its decision regarding the 
implementation of employee choice in States with an FF-SHOP would be 
made by June 10, 2014, which would provide sufficient time for

[[Page 30306]]

issuers to decide whether to participate in the SHOP for the following 
year.
    Comment: We received several comments in support of providing an 
opportunity for a State to recommend that a SHOP not implement employee 
choice in 2015, so that States and issuers could develop a Statewide 
plan for a full and successful implementation of employee choice in 
2016. We also received several comments opposing the proposal, stating 
that employee choice is both statutorily required and is a core element 
necessary to establish SHOP's value and attract participation by small 
employers. One commenter urged HHS to not implement employee choice in 
2015 only when there is clear harm that outweighs any of the value 
presented by employee choice and there is no other way to mitigate such 
harm. Several commenters expressed concern that an additional year 
without employee choice will not reduce the ultimate impact of any 
adverse selection concerns, but will just postpone its effects until 
2016. Commenters expressed concern that the deferral of employee choice 
could go on for years, and could possibly be permanent.
    Response: We believe that the option to permit a State to recommend 
that employee choice not be implemented, if the State fulfills the 
regulatory requirements, might be important to preserve market 
stability in certain States in 2015. We recognize that some State 
Insurance Commissioners and issuers have concerns about the potential 
for adverse selection in the small group market in light of the fact 
that employee choice will be a new feature in many markets and issuers 
at this point in time may feel that they do not have sufficient data 
available concerning expected enrollee risk in an employee choice 
environment. This may lead issuers to price coverage more 
conservatively than they otherwise would price it, even taking into 
account premium stabilization programs and other considerations. 
Further, we understand that some State Insurance Commissioners believe 
that this potential for adverse selection will result in less robust 
issuer participation in a SHOP that offers employee choice.
    Therefore, consistent with the proposal that this policy reflect 
issuer and State concerns about adverse selection we are finalizing 
Sec.  155.705(b)(3)(vi) to allow a SHOP to elect to provide employers 
only with the option set forth at paragraph (b)(3)(ii)(B), or in the 
case of a FF-SHOP, only with the option set forth at paragraph 
(b)(3)(iv)(B) only if the State's Insurance Commissioner can adequately 
explain that it is his or her expert judgment, based on a documented 
assessment of the full landscape of the small group market in his or 
her State, that not implementing employee choice in 2015 would be in 
the best interest of small employers and their employees and 
dependents, given the likelihood that implementing employee choice 
would cause issuers to price products and plans higher in 2015 due to 
the issuers' beliefs about adverse section. This transitional policy 
only applies for plan years beginning in 2015. We expect that by 2016, 
States and issuers will be able to learn from the experiences of 
issuers in a wider range of SHOPs that have implemented employee choice 
so that any adverse selection concerns will no longer be material. For 
example, we believe that by 2016, issuers will have much more 
information on which to make pricing and plan design decisions for an 
employee choice environment. HHS anticipates that the conditions for a 
State to recommend a transition in employee choice will apply in a 
subset of markets, and HHS remains committed to implementing employee 
choice in all SHOPs by 2016. In any event, in light of the statutory 
language providing that employee choice should be implemented in all 
SHOPs, this policy will not be extended beyond 2015. HHS will approve 
an FF-SHOP State's recommendations with the understanding that the 
transitional policy applies for one year.
    While the rule would also permit State-based SHOPs to decide 
against implementing employee choice in 2015, HHS believes it is 
unlikely that State-based SHOPs will opt not to implement employee 
choice in 2015 because most of them currently offer employee choice.
    We are not finalizing the proposal that States include a statement 
describing how the plan to increase meaningful choice or reduce adverse 
selection concerns for 2016 and beyond in their recommendation because 
HHS anticipates that the conditions that would support the State 
recommendation required under this final rule will not apply in most 
markets.
    Comment: One commenter does not support allowing States to not 
implement employee choice because the participation provision in 45 CFR 
Sec.  156.200(g) requires issuers with more than a 20 percent share of 
the State's small group market share participate in the FF-SHOP as a 
condition of participating in the FFE individual market. Therefore, 
most issuers participating in the FFE are unlikely to decline 
participating in an FF-SHOP. The commenter expressed the view that 
employee choice would make it easier for plans that do not meet the 20 
percent threshold to participate in an FF-SHOP, thus expanding the 
competitive choices available to small business employees.
    Response: 45 CFR 156.200(g) was finalized to help provide employers 
a choice of QHPs in FF-SHOPs. While employee choice may encourage 
rather than limit choice of issuers and plans, we believe that States 
are in the best position to make an assessment of the choice of issuers 
and plans that are available at this time.
    Comment: We received several comments on the proposed circumstance 
under which a State Insurance Commissioner could recommend that the 
SHOP not implement employee choice based on significant adverse 
selection that could not be remediated by the single risk pool or the 
premium stabilization programs. One commenter recommended that adverse 
selection could be addressed by limiting choice within one issuer. 
Another commenter stated that risk adjustment would eliminate the risk 
of adverse selection, but that this would not happen until several 
months after the State must submit its recommendation regarding 
employee choice. Another expressed concern about employers continuing 
to offer grandfathered health plans.
    Response: We generally agree with the commenters who questioned 
including the adverse selection circumstance as drafted in the proposed 
rule and agree that the single risk pool, risk adjustment program, and 
other considerations are likely to address adverse selection concerns 
in the small group market, including small group markets in which the 
SHOP offers employee choice. Nonetheless, we recognize that some State 
Insurance Commissioners and issuers have concerns about the potential 
for adverse selection in the small group market due to employee choice, 
given that this will be a new feature in many markets and issuers at 
this point in time may feel that they do not have sufficient data 
available concerning expected enrollee risk in an employee choice 
environment. This may lead to issuers to price products and plans more 
conservatively than they otherwise would price, even taking into 
account premium stabilization programs and other considerations. We 
also understand that some State Insurance Commissioners believe that 
issuer concerns about adverse selection will result in less robust 
issuer participation in a SHOP that offers employee choice. 
Accordingly, in this final rule, we have modified the proposed 
recommendation that the State Insurance Commissioner would submit 
regarding adverse

[[Page 30307]]

selection to better capture the circumstances under which issuers' 
concerns about adverse selection might negatively affect the small 
group market.
    Comment: Several commenters provided recommendations about how to 
define meaningful choice. Such definitions ranged from ensuring 
employees have a choice among health plans within those metal levels to 
ensuring there was at least one plan in every metal level.
    Response: In response to concerns from commenters, HHS is not 
finalizing the provision of the proposed rule that would permit the 
State Insurance Commissioner to recommend that the SHOP not implement 
employee choice based on a lack of meaningful choice among QHPs or 
SADPs. Instead, HHS is modifying the proposal to permit State Insurance 
Commissioners to submit a written recommendation to the SHOP adequately 
explaining that it is the State Insurance Commissioner's expert 
judgment, based on a documented assessment of the full landscape of the 
small group market in his or her State, that not implementing employee 
choice would be in the best interests of small employers and their 
employees and dependents, given the likelihood that implementing 
employee choice would cause issuers to price products and plans higher 
in 2015 due to the issuers' beliefs about adverse selection. A State 
Commissioner's recommendation must be based on concrete evidence, 
including but not limited to discussions with those issuers expected to 
participate in the SHOP in 2015.
    Comment: Several commenters are concerned about whether HHS will be 
ready to fully implement employee choice in the FF-SHOPs and 
recommended that concerns about operational readiness be added to the 
list of circumstances under which a State may recommend not 
implementing employee choice in 2015. They also stated that FF-SHOP 
functionality and design would also need to be completed well in 
advance of the launch and must be scalable to all FF-SHOP States.
    Response: HHS, with the assistance of appropriate vendors, has 
finalized business requirements necessary for the launch of the FF-SHOP 
online portal for 2015. We do not expect that operational and 
technological processes will pose a limitation to implementing employee 
choice and premium aggregation services in the FF-SHOPs.
    Comment: Some commenters support allowing a SHOP to have the 
discretion of determining whether employee choice would have to exist 
for both medical QHPs and SADPs. One commenter stated that SADPs do not 
have the protections of the single risk pool, risk corridors, and risk 
adjustment, which differentiates SADPs from QHPs.
    Response: Because of operational limitations in the build of the 
FF-SHOP online portal, employee choice will either be implemented or 
not implemented for both SADPs and QHPs in the FF-SHOPs, depending on 
whether State Insurance Commissioners submit recommendations consistent 
with this final rule. However, State-based SHOPs could choose to 
provide employee choice for medical QHPs and SADPs, or vice versa for 
the 2015 plan year, if their IT systems can accommodate employee choice 
variation by plan type, and if a recommendation from a State Insurance 
Commissioner consistent with this final rule would support that 
approach.
    Comment: Some commenters recommended that HHS require that the 
State's recommendation include concrete, specific details of employee 
choice's estimated impact on the small group market. One commenter 
specifically recommended that the requirement for concrete evidence be 
included in regulatory text. Other commenters recommended that HHS 
adopt a more simplified waiver process giving States, including State-
based SHOPs, greater discretion and flexibility in choosing SHOP 
options that meet local needs. These commenters stated that HHS should 
not include requirements, criteria, or standards that prescribe or 
limit State flexibility or State decision-making processes regarding 
implementation of employee choice. Additionally, some commenters urged 
HHS to require that a State's recommendation include a mitigation plan 
describing how any adverse effects of not implementing employee choice 
in 2015 would be addressed so that these conditions do not persist into 
2016. One commenter recommended that the requirement for a mitigation 
plan should indicate how the State intends to increase stand-alone 
dental plan participation in the employee choice market. Some 
commenters believe that all States should be required to have a public 
review and comment period on the State's recommendation to not 
implement employee choice in 2015 and that all evidence should be 
subject to public review and comment.
    Response: We are finalizing language in this rule requiring that 
the State's recommendation must be sent by the State's Insurance 
Commissioner to HHS (as operator of the FF-SHOP) or to the State-based 
SHOP and must be based on documented assessment of the full landscape 
of the State's small group market. HHS is not being prescriptive about 
the specific types of evidence that must be included in this documented 
assessment, as this evidence may vary based on the State's small group 
market. However, the documented assessment of the full landscape of the 
State's small group market in a State must support the Insurance 
Commissioner's expert judgment that not implementing employee choice 
would be in the best interests of small employers and their employees 
and dependents, given the likelihood that implementing employee choice 
would cause issuers to price products and plans higher in 2015 due to 
the issuers' beliefs about adverse selection. A State Insurance 
Commissioner's recommendation would need to be based on concrete 
evidence, including but not limited to discussions with those issuers 
expected to participate in the SHOP in 2015. Nonetheless, in order that 
SHOPs will make an informed, fair decision about whether to approve a 
State's recommendation, HHS has included in this final rule text the 
overarching standards on which the State Insurance Commissioner must 
base its recommendation. We think that the finalized standard 
accommodates the unique variation of States' small group markets and 
provides flexibility to States in making their recommendation to a 
SHOP. The timeline and schedule that is being finalized in this rule 
does not make it feasible for FF-SHOPs to solicit public input on a 
State's recommendation not to implement employee choice. However, 
State-based SHOPs and State Insurance Commissioners who make 
recommendations about not implementing employee choice in 2015 may 
choose to have a public comment period on their proposed 
recommendation. If a State elects to hold a public comment period, it 
must submit a summary of all comments received with its recommendation 
to not implement employee choice in 2015 to the relevant SHOP.
    Comment: We received several comments about how to address the 
timing issue presented in the preamble of the proposed rule. Some 
commenters prefer the timing option whereby the State agency would have 
to make recommendations prior to the close of the initial QHP 
certification application window, and stated that this provides time 
for QHPs to make informed participation decisions. One commenter 
recommended that the decision and announcement of a State's 
recommendation regarding employee

[[Page 30308]]

choice be made no later than one month prior to the deadline for filing 
rates for the 2015 benefit year to assure actuarially sound rates. One 
commenter preferred the second proposed timeline from the preamble of 
the proposed rule whereby issuers would have the option to maintain, 
modify, or withdraw their products from the SHOP market after the 
SHOP's employee choice decision has been made. Another commenter asked 
how issuers would file rates without knowing whether employee choice is 
required and was concerned that the timing of the letters from the 
States and the State decision were not in alignment with the QHP 
certification timelines.
    Response: HHS is finalizing in this rule that a State Insurance 
Commissioner should submit a recommendation to the SHOP, and that the 
SHOP should make a decision based on that recommendation, sufficiently 
in advance of the close of the QHP certification application window 
such that issuers can make informed decisions about whether to 
participate in the SHOP. In a FF-SHOP, State Insurance Commissioners 
must submit to HHS the recommendation on or before June 2, 2014, and 
HHS will make a decision based on any recommendations submitted by that 
deadline before the close of the QHP certification application window. 
Only States interested in not implementing employee choice would need 
to make a recommendation. State Insurance Commissioners making such 
recommendations should submit them via email to [email protected]. HHS 
expects that no later than June 10, 2014, the FF-SHOP will post the 
list of States approved for their transition of employee choice for one 
year, creating a public record. HHS will make publicly available the 
State's recommendation to the FF-SHOP and the results of its review in 
a written decision explaining whether HHS agreed with the State's 
recommendation. This timeline ensures that HHS' decisions will be made 
prior to the close of the initial QHP certification application window 
for the FF-SHOPs, with sufficient time for issuers to decide whether or 
not to participate in the FF-SHOP in 2015.
    This timeline reduces uncertainty for issuers because issuers will 
know if employee choice is being offered in a SHOP prior to the end of 
the QHP application period. Issuers will be able to make a decision 
about SHOP participation based on final information about whether 
employee choice will be implemented and will be less likely to seek to 
modify their rates or withdraw their applications.
    State-based SHOPs will be required to follow the same timeline as 
FF-SHOPs, but exact dates for State Insurance Commissioner 
recommendations and SHOP decisions may differ from the FF-SHOP.
Summary of Regulatory Changes
    We are finalizing the provision as proposed, with the modification 
that a SHOP's decision not to implement employee choice in 2015 should 
be based on a written recommendation submitted by the State Insurance 
Commissioner adequately explaining that it is the Insurance 
Commissioner's expert judgment, based on a documented assessment of the 
full landscape of the small group market in his or her State, that not 
implementing employee choice would be in the best interests of small 
employers and their employees and dependents, given the likelihood that 
implementing employee choice would cause issuers to price products and 
plans higher in 2015 due to the issuers' beliefs about adverse 
selection. A State Insurance Commissioner's recommendation must be 
based on concrete evidence, including but not limited to discussions 
with those issuers expected to participate in the SHOP in 2015. We 
clarify that this policy only applies in 2015 by adding the word 
``only.'' We also changed in Sec.  155.705(b)(3)(vi) the word options 
to be singular as one option is available for FF-SHOPs and another for 
State-based SHOPs. Finally, we have established in the final rule the 
first of two proposed timelines under which States to make their 
recommendations to SHOP.
b. Enrollment Periods Under SHOP (Sec.  155.725)
    We proposed amendments to Sec.  155.725(c) and (e) to amend the 
dates for the annual open enrollment periods for qualified employers 
and qualified employees in all SHOPs, both State-based and Federally-
facilitated. In proposed Sec. Sec.  155.725(c)(1), we proposed to align 
the start of annual employer election periods in all SHOPs for plan 
years beginning in 2015 with the start of open enrollment in the 
corresponding individual market Exchange for the 2015 benefit year. 
Under the proposal, the annual employer and employee election periods 
would begin no sooner than November 15, 2014 with employers making 
selections first, followed by employees. We are finalizing this 
proposal with one modification. Based on comments we received through 
the public comment period, we are modifying Sec.  155.725(c)(1) to 
limit this provision to FF-SHOPs. State-based SHOPs may start their 
annual employer election periods earlier than November 15, 2014. We 
further clarify that nothing in this rule eliminates the rolling 
monthly enrollments in the SHOPs outlined at 45 CFR 155.725(b) and the 
requirement also outlined at 45 CFR 155.725(b) that a plan year in the 
SHOP be 12 months.
    We note that pursuant to Sec.  147.104(b)(1)(i), group coverage 
purchased in the SHOP between November 15 and December 15 of each year 
is not subject to employer contribution or group participation rules. 
As explained in Chapter 5 of the 2015 Letter to Issuers published on 
March 14, 2014, FF-SHOPs do not enforce minimum participation 
requirements between November 15 and December 15 of each year, but they 
are enforced upon initial enrollment and at renewal outside of this 
window. Aligning the start of the annual employer election period in 
the FF-SHOPs with the start of the individual market Exchange such that 
the employer election period would begin no sooner than November 15, 
2014, will provide qualified employers and employees with a period of 
time to enroll for 2015 coverage when the FF-SHOP minimum participation 
provisions are not enforced. State-based SHOPs wishing to begin annual 
employer election periods prior to November 15 may extend the window of 
time when employers are not subject to employer contribution or group 
participation rules. For example, a State-based SHOP may extend the 
window of time during which minimum contribution and participation 
rules are not applicable from October 15 through December 15, so long 
as November 15 through December 15 is included in the time period.
    In Sec. Sec.  155.725(c)(2) and 155.725(e), we proposed to remove 
the required minimum lengths of both the annual employer election 
period and the employee open enrollment period to provide additional 
flexibility to all SHOPs and qualified employers. The existing minimum 
standards may make it difficult for groups participating in the SHOP to 
renew coverage in a timely manner, as under those minimums, it might 
take 75 days or longer to complete a group renewal. This proposal will 
permit employers to expedite their enrollment timeline. Also, this 
proposal increases a qualified employer's access to the most up-to-date 
rate information by permitting alignment with the quarterly rate update 
cycle. We are finalizing these provisions as proposed.
    Comment: We received several comments on our proposal to align the 
start of the employer election periods

[[Page 30309]]

for plan years beginning in 2015 with the start of open enrollment in 
the corresponding individual market Exchange for the 2015 plan year, as 
amended in the 2015 Payment Notice, so that the annual employer and 
employee election periods would begin no sooner than November 15, 2014. 
Some commenters supported having a uniform timeline for enrollment in 
the individual Exchange and SHOPs, to reduce confusion, improve 
efficiencies, and possibly bring about cost savings. Another commenter 
believed that there are too many election periods for different 
populations and therefore recommends that the annual open enrollment 
period be more spread out. One commenter recommended that employers be 
able to make decisions whether to participate in the SHOP prior to 
November 15 so that employees can shop in both Exchanges beginning 
November 15. We also received several comments recommending that State-
based SHOPs should have the flexibility to maintain their own employer 
election periods to remain in alignment with the broader small group 
market in the State. Several commenters noted that aligning the timing 
of the SHOP employer election period for 2015 with the individual 
market annual open enrollment period may pose challenges for certain 
State-based SHOPs, and encouraged HHS to maintain the flexibility 
afforded to State-based SHOPs discussed in the preamble to the Exchange 
Establishment final rule at 77 FR 18402-18403. For example, commenters 
observed that some State-based SHOPs see benefits from dedicating staff 
to separate enrollment periods for individuals and employees of 
qualified employers, rather than administering these enrollment periods 
concurrently.
    Response: To ensure States have the flexibility to operate their 
State-based SHOPs in a manner that works in their small group markets, 
we are finalizing this provision as proposed, but limiting it to FF-
SHOPs. State-based SHOPs will be able to begin their employer and 
employee election periods in a manner that works with their small group 
markets.
    Comment: Some comments were received in support of the proposal to 
remove the 30-day minimum timeframe for the employer and employee 
annual election period. However, several comments were also received 
stating that removing this minimum timeframe would cause system and 
human resource strain by forcing SHOP enrollment into a more compressed 
timeframe. Some commenters also stated that this approach does not 
compare favorably with traditional small group insurance coverage. One 
commenter stated that employers need a minimum of 30 days to evaluate 
their options, costs, and budget forecasts for the upcoming year and 
employees would then need a similar timeframe to make a decision by the 
15th of the month.
    Response: We believe that removing the 30-day minimum timeframe 
requirement provides the most flexibility to SHOPs, employers and 
employees, and allows consumers to obtain SHOP coverage in a quicker 
timeframe. This flexibility allows employers and employees to complete 
their shopping in a more condensed time, if desired. We note that 
nothing in this final rule removes the ability of a State-based SHOP or 
an employer to establish enrollment periods lasting at least 30 days.
Summary of Regulatory Changes
    We are finalizing the amendments proposed in Sec.  155.725 of the 
proposed rule with the modification that the provision aligning the 
annual employer election period with the start of the start of open 
enrollment in the corresponding individual market Exchange for the 2015 
benefit year applies only in FF-SHOPs. State-based SHOPs may start 
their annual employer election periods earlier than November 15, 2014.
c. SHOP Employer and Employee Eligibility Appeals Requirements (Sec.  
155.740)
    We proposed to amend Sec.  155.740(g) by redesignating paragraphs 
(g)(1) through (g)(3) to more clearly delineate the requirements 
associated with valid appeals separately from those associated with 
invalid appeals.
    We proposed to amend Sec.  155.740(i)(1)(i) by cross-referencing 
the withdrawal standards proposed in the individual market at Sec.  
155.530(a)(1). Under current rules, an appellant who wishes to withdraw 
his or her appeal request must do so in writing (hard copy or 
electronic). The amended provision would allow an appellant to withdraw 
his or her appeal request in writing or by telephone, if the appeals 
entity is capable of accepting telephonic withdrawals.
    Comment: We received a handful of comments regarding the proposed 
change to the SHOP appeals withdrawal procedure and all were supportive 
of the change. As with the individual market provision, commenters 
cited the benefits to having a telephonic withdrawal option, including 
increased efficiency for appellants to conclude the appeals process. 
Commenters also noted with support the importance of recording the 
telephonic interaction and providing written confirmation of the 
withdrawal along with instructions on how to request to vacate a 
withdrawal in order to protect the appellant's right to a hearing.
    Response: We agree with commenters that incorporating this option 
for telephonic withdrawals for SHOP employer and employee appeals will 
assist appeals entities in maintaining an efficient process by 
providing a convenient method for appellants to end an appeal at their 
option. We also consider the requirements to record the appellant's 
telephonic withdrawal and the telephonic signature under penalty of 
perjury in full along with sending written confirmation of the 
withdrawal to be critical safeguards for appellants and appreciate the 
support commenters expressed for these aspects of the process. We, 
therefore, finalize the provision for telephonic withdrawal as 
proposed.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.740 without 
modification.
8. Subpart O--Quality Reporting Standards for Exchanges
    In Sec.  155.1400, we proposed that the Exchange must prominently 
display on its Web site, in accordance with 45 CFR 155.205(b)(1)(v), 
quality rating information assigned for each QHP under the QRS, as 
calculated by HHS and in a form and manner specified by HHS, starting 
in 2016. We stated our intentions to have a beta testing period in 2015 
to provide early feedback to Exchanges and QHP issuers and begin public 
reporting of quality rating information during the 2016 open enrollment 
period for the 2017 coverage year. The standards for QHP issuers 
regarding the collection and submission of validated quality measures 
data for the QRS are described in Part 156, Subpart L of this final 
rule.
    Comment: Many commenters agreed with the proposed provision and 
supported our approach for HHS to provide calculated quality rating 
information for display on an Exchange Web site on an annual basis for 
the open enrollment period. One commenter requested clarification as to 
whether HHS will select and calculate the QRS rating for both the FFE 
and State Exchanges, or whether the State Exchanges will be able to 
select and calculate their own QRS ratings independent of HHS. 
Commenters suggested that State Exchanges be allowed to calculate 
quality ratings

[[Page 30310]]

using the same approach as the FFE but with data for plans operating 
within the State's Exchange and that beta test data be used to compare 
QHP quality rating results from HHS with State Exchange results to 
determine relative comparability in national versus State approaches.
    Response: We clarify that HHS will be obtaining data from all QHP 
issuers from all Exchanges consistent with Sec.  156.1120(a) and using 
a standardized methodology to calculate QHP quality ratings for display 
on the FFE Web site and to provide for display to State Exchanges on 
their Web sites. We believe that an approach where each Exchange 
displays quality ratings calculated by HHS based on a standard scoring 
methodology allows for reliable, uniform, and comparable QHP ratings 
across Exchanges. The HHS-calculated scores and rating information 
provided to a State Exchange by HHS will be for the QHPs offered on the 
Exchange in that State. We anticipate sharing the validated QRS summary 
measure level data with State Exchanges; however State Exchanges will 
be required to display the HHS-calculated quality ratings for QHPs 
offered on the Exchange in their respective States. At the same time, 
we believe it is important that States have opportunity to build on 
this uniform strategy by displaying additional quality measures that 
reflect local priorities and we anticipate issuing future guidance that 
will include standards for States who wish to exercise this 
flexibility.
    Comment: Many commenters urged HHS to require that State Exchanges 
display the data directly on their Web sites instead of linking to a 
Federal Web site.
    Response: We understand commenters' concerns regarding providing 
consumers direct access to QHP quality data on the Exchange Web site 
where they are choosing a plan and these comments will help inform 
consumer testing and final guidance regarding display of quality rating 
information. We agree that health plan quality-related information 
should be provided to consumers in an easily understandable format and 
manner to support the comparison of plan options. We intend to provide 
details regarding display requirements in future technical guidance and 
will work with State Exchanges that do not have the technical capacity 
to display data directly on their Web sites during the initial 
implementation phase-in period.
    Comment: Several commenters supported flexibility for States to 
display additional quality data and recommended that such data be 
collected and displayed consistently with the Federal measures. Other 
commenters expressed concern regarding States posting additional data 
because of the potential for conflicting measures to confuse consumers. 
They also expressed concern about consumer comprehension of displayed 
QRS data and allowing for approaches to meet diverse needs including 
regional, cultural, language, and demographic differences. One 
commenter suggested criteria for establishing governing principles for 
States choosing to display additional quality information, such as 
requiring States to only use NQF-endorsed measures or required measures 
for QHP accreditation. Another commenter suggested that States such as 
California that have implemented their own QHP quality ratings be used 
to inform quality reporting on the FFE.
    Response: We maintain in the final rule that the Exchange must 
prominently display the Federal QRS rating information, as calculated 
by HHS, and results from the ESS for each QHP on its Web site. We 
believe that the Federal quality standards regarding QRS establishes a 
foundation for a uniform, national strategy for monitoring quality 
activities in the Exchanges with a core set of measures and standard 
approaches to health plan quality reporting. We also believe it is 
important that States have the opportunity to build on this uniform 
strategy with the display of additional measures that reflect local 
priorities. We anticipate issuing future guidance that will include 
standards for States who wish to exercise this flexibility. However, we 
clarify that HHS would not include any State-level data in calculations 
for the Federal QRS. HHS is currently conducting research and consumer 
testing regarding display of consumer-friendly information and 
terminology of health plan quality data and as we noted in the proposed 
rule, we intend to issue technical guidance including standardized 
display requirements in the near future. We will work with States to 
prevent display of both Federal and State-level quality measure data in 
a manner that confuses consumers.
    Comment: Many commenters supported a five-star display for QRS 
ratings that would ensure consistency across commercial and Medicare 
markets and increase enrollee familiarity with the rating systems. One 
commenter recommended that CMS report QHP summary ratings at half-star 
levels (for example, 3.5, 4.0, 4.5) to enable consumers to better 
distinguish between plans, similar to the Medicare Advantage and Part D 
ratings.
    Response: As stated in the proposed rule, we intend to display star 
ratings that would be similar in style and format to that of Medicare 
Advantage and Prescription Drug Plan ratings. These comments regarding 
display requirements will inform the future technical guidance that we 
intend to issue in the near future. For more detailed information on 
the proposed QRS scoring specifications approach, including the 
proposed process of scoring QHPs and converting scores into ratings on 
a five-star scale, we refer commenters to the March 28, 2014, draft QRS 
Scoring Specifications document available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/QRS-Scoring-Specification.pdf.
    Comment: We also received a number of comments on quality measures 
for dental plans, sampling design and methodology for the ESS, quality 
rating and survey measure sets, QRS framework, process for selection of 
ESS vendors and quality reporting for QHPs offered outside the 
Exchange.
    Response: We have not addressed such comments, and others that are 
not directly related to the proposed rule, because they are outside the 
scope of this rulemaking.
Summary of Regulatory Changes
    For the reasons described above, we are finalizing the provision as 
proposed.
b. Enrollee Satisfaction Survey System (Sec.  155.1405)
    In Sec.  155.1405, we proposed that the Exchange would prominently 
display results from the ESS on its Web site, in accordance with Sec.  
155.205(b)(1)(iv), as calculated by HHS, and in a form and manner 
specified by HHS, starting in 2016. We also proposed that the display 
of the QRS information (which incorporates member experience data from 
the ESS) by an Exchange would meet the requirement of displaying the 
ESS information and satisfy the standard outlined in 45 CFR 
155.205(b)(1)(iv). The standards for QHP issuers regarding the 
collection and submission of validated data for the ESS are described 
in Part 156, Subpart L of this final rule.
    Comment: The majority of commenters supported the proposed display 
requirement for Exchanges in Sec.  155.1405. Several commenters did not 
support the approach to provide State Exchanges the flexibility to make 
ESS beta test results publicly available in 2015 because these results 
are intended

[[Page 30311]]

for process improvement and not official. Some commenters supported 
allowing all Exchanges to make the beta test information available in 
2015 to identify best practices and provide access to information to 
support consumer choice. One commenter suggested requiring several 
criteria to be met prior to publicly presenting ESS 2015 beta test 
results.
    Response: We agree that the purpose of the 2015 ESS beta test 
results is primarily for process improvement. However, we also believe 
that if reliable QHP-level assessment scores are available in the ESS 
beta test results, this information could provide important early 
feedback to Exchanges and consumers. We intend to provide State 
Exchanges and QHP issuers with the ESS beta test results with 
appropriate disclaimers including that beta test results are not 
finalized and are part of the survey development process. HHS would not 
require nor restrict a State Exchange from posting this information on 
its Web site but would encourage inclusion of appropriate disclaimers 
to inform the consumer about the limitations of the data (for example, 
the information reflects beta test results that are not finalized and 
are part of the survey development process). HHS does not plan on 
posting the 2015 ESS beta test results on the FFE Web site.
    Comment: Many commenters urged HHS to have a uniform policy for ESS 
scoring calculations and for display and require that complete ESS 
results, by metal-tier level, be made publicly available on all 
Exchange Web sites for consumers, accessible to researchers and 
advocates. One commenter expressed concern with displaying all ESS 
results including those scores not used in the QRS because of concerns 
that the survey may not capture information regarding a QHP's quality 
that are applicable to areas that a health plan can directly influence.
    Response: We intend to provide the HHS standardized, calculated 
full ESS results to State Exchanges and to display the results at the 
product-level on the FFE Web site and will provide further details 
regarding display of the data, to consumers, in future technical 
guidance. As noted in the proposed rule, we believe that by displaying 
the QRS information (which incorporates member experience data from the 
ESS), an Exchange would meet the requirement, during the initial years 
of implementation, of displaying the ESS information and satisfy the 
standards outlined in 45 CFR 155.205(b)(1)(iv) and 45 CFR 155.1405. 
Therefore, State Exchanges will have the flexibility, in the initial 
years, to decide whether to display the full ESS results, as calculated 
by HHS. In the initial years, we believe that display of ESS results 
should align with the QRS and be presented at the product-level. We 
anticipate using the metal level data, as reported to HHS, to inform 
ESS implementation in future years and will re-examine the possibility 
of displaying the ESS results at a more granular level following an 
analysis of the 2015 beta test results. We believe that the ESS will 
provide valuable information regarding QHPs offered on Exchanges to 
consumers since it is largely based on the industry standard 
CAHPS[supreg] 5.0 Health Plan Survey that assesses commercial and 
Medicaid health plans. In addition, we are considering different ways 
to make QHP quality data, including ESS results, publicly available and 
accessible to consumers in a meaningful way.
    Comment: A few commenters urged HHS to require State Exchanges to 
have a plan preview period for review of the ESS results. Some 
commenters requested that HHS provide access to full ESS results to 
issuers during a plan preview period, similar to QRS measure data. One 
commenter urged HHS to offer a three month plan preview period for QRS 
and ESS results at a different time than review of quality ratings for 
Medicare Advantage plans.
    Response: We appreciate the comments in support of HHS imposing a 
requirement on State Exchanges to have a plan preview period for review 
of the QRS and ESS results and may consider adopting this approach in 
future rulemaking. We note that some State Exchanges already have 
instituted a plan preview process for issuers to have the opportunity 
to review and correct data provided for display on Exchange Web sites. 
HHS also intends to host a plan preview period of QRS and ESS data for 
all QHP issuers participating in all Exchanges. We intend to balance 
alignment of data collection, submission, and plan preview timeframes 
for the QRS and ESS with existing processes, with the goal of minimal 
burden to issuers and State Exchanges.
Summary of Regulatory Changes
    We are finalizing this provision as proposed.

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

1. Subpart B--Essential Health Benefits Package
a. Prescription Drug Benefits (Sec.  156.122)
    Section 156.122(c) requires issuers that provide EHB to have 
procedures in place that allow an enrollee to request and gain access 
to clinically appropriate drugs not covered by the plan. In the 
proposed rule, we sought comment on amending the sought comment on 
amending the formulary exceptions standards under Sec.  156.122(c) to 
require that these processes can be expedited when necessary based on 
exigent circumstances, such as when an enrollee is suffering from a 
serious health condition or an enrollee is in a current course of 
treatment using a non-formulary drug. We considered, for example, 
whether issuers should be required to render decisions regarding 
formulary exceptions requests within 24 hours following the issuers' 
receipt of the exceptions requests, as suggested in the ``2014 Letter 
to Issuers on Federally-facilitated and State Partnership Exchanges'' 
(2014 Letter to Issuers).\31\ As clarification, the prescription drug 
standard in Sec.  156.122(a)(1) was not intended to discourage issuers 
from offering clinically appropriate drugs to enrollees, including 
combination drugs. We sought comment on what specific standards would 
be appropriate for defining this expedited exceptions process, and on 
all other aspects of this proposal.
---------------------------------------------------------------------------

    \31\ See Appendix C of the 2014 Letter to Issuers on Federally-
facilitated and State Partnership Exchanges (April 5, 2013). 
Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2014_letter_to_issuers_04052013.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters supported the proposal to add additional 
parameters in regulation for the exceptions process and had 
recommendations regarding the parameters, including the timing of the 
reviews and the need for expedited reviews due to exigent 
circumstances. Many commenters supported a general 72-hour review 
timeframe and a 24-hour review timeframe due to exigency when the life 
or immediate health of the insured is at stake. Several of these 
commenters recommended other standards in use today, such as the 
standards in the Medicare Part D program or Department of Labor 
standards for coverage determinations, and supported greater 
uniformity. Of those commenters who supported

[[Page 30312]]

greater uniformity, the majority of commenters favored a process 
similar to that in Medicare Part D. Conversely, some commenters did not 
support any additional regulatory standards regarding the exceptions 
process. These commenters cited the timing of the rulemaking, potential 
for conflicting State law, desire for flexibility in prescription drug 
management practices, and desire for a better understanding of drug 
access issues.
    Response: We have heard from several stakeholders about enrollee 
difficulty in accessing, understanding, and using issuers' exception 
processes under Sec.  156.122(c), since there is currently no 
requirement for uniformity across plans. Based on comments regarding 
the need for a uniform standard, we are finalizing standards for a 
health plan's exceptions process that includes a process for exigent 
circumstances. Specifically, we are modifying Sec.  156.122(c) to 
include a policy that allows an enrollee (or enrollee's designee) or 
the enrollee's prescribing physician (or other prescriber) to request 
an expedited exceptions process based on exigent circumstances that are 
defined as when an enrollee is suffering from a health condition that 
may seriously jeopardize the enrollee's life, health, or ability to 
regain maximum function or when an enrollee is undergoing a current 
course of treatment using a non-formulary drug. We are also finalizing 
a requirement that issuers must provide a decision on an exception 
request based on exigent circumstances and notify the enrollee (and the 
prescribing physician or other prescriber as appropriate) of the 
determination no later than 24 hours after receiving the request. We 
believe that this policy will better ensure enrollee access to critical 
medications in a timely manner. These provisions are effective for the 
2015 plan year.
    Comment: Commenters asked for clarification on operational 
considerations for implementing any specific exceptions process 
requirements, including a definition of ``exigent,'' when any 
timeframes begin, how long the enrollee has access to the medication if 
granted an exception, and if the enrollee is required to have access to 
the drug throughout the review processes.
    Response: The timeframe for expedited (24-hour) review begins when 
the issuer or its designee receives an exception request based on 
exigent circumstances. An enrollee or the enrollee's prescribing 
physician (or other prescriber) should strive to submit a complete 
request; however, issuers should not fail to commence review if they 
have not yet received information that is largely procedural but not 
necessary to begin review. Further, issuers should not request 
irrelevant or overly burdensome information.
    We believe an exigency exists when an enrollee is suffering from a 
health condition that may seriously jeopardize the enrollee's life, 
health, or ability to regain maximum function or when an enrollee is 
undergoing a current course of treatment using a non-formulary drug. 
Either the enrollee (or enrollee's designee) or prescribing physician 
(or other prescribing provider as appropriate) may submit the request 
for an expedited review based on exigent circumstances. Issuers must be 
equipped to intake these requests in writing, electronically, and 
telephonically.
    As part of the request for an expedited review based on exigent 
circumstances, the prescribing physician or other prescriber should 
support the request by including an oral or written statement that (1) 
an exigency exists and the basis for the exigency (that is, the harm 
that could reasonably come to the enrollee if the requested drug were 
not provided within the timeframes specified by the issuer's standard 
drug exceptions process), and (2) a justification supporting the need 
for the non-formulary drug to treat the enrollee's condition, including 
a statement that all covered formulary drugs on any tier will be or 
have been ineffective, would not be as effective as the non-formulary 
drug, or would have adverse effects.
    Following a favorable decision on the expedited request, the 
enrollee must be provided access to the prescribed drug without 
unreasonable delay. Therefore, issuers need to be prepared to 
communicate rapidly with pharmacies and pharmacy benefit managers, as 
applicable. At a minimum, we expect issuers to update certificates of 
coverage to reflect the availability of this process and to be able to 
provide instruction to enrollees or their designees and providers or 
their designees regarding how to use the process. While these review 
standards are specific to the expedited review process, we encourage 
issuers to have a similar type of review process in place for their 
non-expedited review under Sec.  156.122(c).
    While some commenters recommended that issuers be required to 
provide coverage of the drug in question pending the outcome of the 
expedited request, we are also cognizant that some commenters opposed 
the proposal altogether and that we are finalizing an expedited 
timeframe for coverage determination under this process due to exigency 
as no more than 24 hours. Therefore, while we encourage issuers to 
provide the drug pending the outcome of the exceptions request, we are 
not requiring it at this time.
    We are also concerned about enrollees having to continue to make 
requests under Sec.  156.122(c) throughout the plan year to access the 
same clinically appropriate drug not on the plan's formulary, whether 
for each refill or otherwise, and for exceptions granted pursuant to 
the exigent circumstance exceptions process, issuers must make the drug 
available to the enrollee for the duration of the exigency. We will 
monitor this issue to consider whether we should propose additional 
standards through rulemaking.
    Comment: Some commenters requested clarification as to whether 
drugs accessed through the exceptions process under Sec.  156.122(c) 
should count towards the plan's annual limit on cost sharing as 
established under Sec.  156.130(a), and other commenters noted concerns 
about cost-sharing and tiering for drugs accessed through the 
exceptions process. Other commenters commented on a variety of other 
issues related to the EHB prescription drug policy that were not 
mentioned in the proposed rule.
    Response: Because these issues are not specifically related to the 
exigent circumstance exceptions process standards for Sec.  156.122(c) 
and the preamble to the proposed rule, we consider them to be outside 
the scope of the rulemaking but will take them under consideration for 
future rulemaking.
    Comment: Commenters noted that there is no requirement to cover 
combination drugs considered first line therapy, but other commenters 
supported efforts to better ensure access to combination drugs, as well 
as requested requirements related to new drugs. Some commenters 
requested clarification that combination drugs do not have any special 
regulatory status in plans that must comply with EHB standards.
    Response: The requirements at Sec.  156.122(a)(1) were intended to 
be the minimum standard for an issuer providing EHB. The intention of 
the exceptions process at Sec.  156.122(c) is for enrollees to request 
and gain access to clinically appropriate drugs that are not on the 
plan's formulary, which could include combination drugs considered 
first line therapies and new drugs, particularly when these drugs are 
supported by sound science and widely accepted guidelines. While there 
is no mandate that a health plan cover these drugs under Sec.  
156.122(a)(1), in absence of coverage under Sec.  156.122(a)(1), 
combination drugs or new drugs may be

[[Page 30313]]

determined to be clinically appropriate for an enrollee under Sec.  
156.122(c). We do not intend for this policy to create any special 
regulatory status for combination drugs.
    Comment: Some commenters recommended that HHS use its enforcement 
authority for non-compliance with the exceptions process. Some 
commenters also recommended that HHS collect tracking data on the use 
of the exceptions process and provide assistance to enrollees who were 
denied coverage through the exceptions process.
    Response: Because States generally are the primary enforcers of the 
EHB prescription drug policy, we are not collecting nationwide data on 
the use of the exceptions process. Enrollees who are having difficulty 
accessing a health plan's exceptions process should first contact the 
issuer and then contact the State's Department of Insurance if 
necessary.
Summary of Regulatory Changes
    Based on comments received, we are finalizing revisions to Sec.  
156.122(c) to require that a health plan's procedures include an 
expedited exceptions process based on exigent circumstances that is 
defined as when an enrollee is suffering from a health condition that 
may seriously jeopardize the enrollee's life, health, or ability to 
regain maximum function or when an enrollee is undergoing a current 
course of treatment using a non-formulary drug and that the health plan 
must make its coverage determination on such requests within no more 
than 24 hours after receiving them and continue to provide the drug for 
the duration of the exigency.
b. Cost-Sharing Requirements (Sec.  156.130)
    Under Sec.  156.130(a), cost sharing for 2014 for self-only 
coverage may not exceed the annual dollar limit described in section 
223(c)(2)(A)(ii)(I) of the Code. The proposed rule also provided that 
under Sec.  156.130(b), for a plan year beginning in calendar year 
2014, the annual deductible for a health plan in the small group market 
for self-only coverage could not exceed $2,000. However, Sec.  
156.130(b) is being removed from the regulation text to comply with 
Public Law 113-93, which eliminated the limits on deductibles for plans 
in the small group market.
    For 2015 and later years, the annual limitation on cost sharing is 
to be increased by an amount equal to the product of the annual dollar 
amount described in section 223(c)(2)(A)(ii)(I) of the Code and the 
premium adjustment percentage established pursuant to paragraph (e) of 
that section. (The limitation for other than self-only coverage is 
twice the limitation for self-only coverage.) Under Sec.  156.130(d), 
any increase in these annual limits that does not result in a multiple 
of $50 is to be rounded to the next lowest multiple of 50 dollars.
    Section 156.130(e) provides that the premium adjustment percentage 
is the percentage (if any) by which the average per capita premium for 
health insurance coverage for the preceding calendar year exceeds such 
average per capita premium for health insurance for 2013, and that this 
percentage will be published annually in the HHS notice of benefit and 
payment parameters. The 2015 Payment Notice established our methodology 
for calculating the premium adjustment percentage.
    In calculating limitations on cost sharing and small group 
deductible in the proposed 2015 Payment Notice, we rounded these 
limitations up to the next lowest multiple of $50. However, we 
subsequently learned that the IRS convention for interpreting similar 
language for a number of longstanding tax parameters--such as indexing 
methodologies for the alternative minimum tax and the standard 
deduction--is to round down to the nearest applicable multiple. For 
example, the Department of the Treasury, in a rule on how employers 
should calculate average annual full-time-equivalent wages for purposes 
of the small employer health insurance tax credit, provides that if the 
result is not a multiple of $1,000, employers should round the result 
to the next lowest multiple of $1,000.\32\
---------------------------------------------------------------------------

    \32\ See 26 CFR 1.45R-2(f)(1).
---------------------------------------------------------------------------

    As a result, we proposed to align our rounding rules with those 
used by the Department of the Treasury and the Internal Revenue 
Service, by amending Sec.  156.130(d) to specify that when indexing the 
annual limitation on cost sharing and the annual limitation on small 
group deductibles for years after 2014, we will round to the multiple 
of 50 dollars that is lower than the number calculated by the formula.
    Under the proposed amendment, using the 2015 premium adjustment 
percentage of 4.213431463 percent we established in the 2015 Payment 
Notice and the 2014 maximum annual limitation on cost sharing of $6,350 
for self-only coverage, which was published by the IRS on May 2, 
2013,\33\ the 2015 maximum annual limitation on cost sharing would be 
$6,600 for self-only coverage and $13,200 for other than self-only 
coverage.
---------------------------------------------------------------------------

    \33\ See http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

    Similarly, under the proposed amendment to Sec.  156.130(d), we 
applied the premium adjustment percentage for 2015 to calculate the 
annual limit on deductibles for the small group market for 2015. 
However, after the proposed rule was published, on April 1, 2014, the 
President signed into law Protecting Access to Medicare Act for 2014, 
which includes a provision that eliminates the annual limitation on 
deductibles for plans in the small group market. Therefore, there is no 
annual limitation on deductibles for small group plans, and the premium 
adjustment percentage is no longer applicable.
    Comment: A number of commenters supported our proposal to round the 
annual limitation on cost sharing down to a lower multiple of $50, to 
be consistent with the practice at the Department of the Treasury. A 
few commenters requested that HHS use this final rule to amend the 
regulation to reflect new law, which eliminates the annual limit on 
deductibles for small group plans.
    Response: We agree with the comments and are removing references to 
an annual limit on deductibles for plans in the small group market from 
our regulations. We also note that issuers do not need to make any 
changes to their 2014 plan cost-sharing structures as a result of this 
change.
Summary of Regulatory Changes
    We are finalizing our proposal regarding rounding as proposed, and 
we are removing from our regulations references to the annual limit on 
deductibles for plans in the small group market under Sec.  156.130(b) 
from Sec.  156.130(c) and (d), and are removing Sec.  156.130(b). The 
2015 maximum annual limitation on cost sharing is $6,600 for self-only 
coverage and $13,200 for other than self-only coverage.
2. Subpart C--General Functions of an Exchange
a. QHP Issuer Participation Standards (Sec.  156.200)
    In Sec.  156.200(b)(5), we proposed technical amendments to clarify 
that implementing and reporting for the QRS and implementing a quality 
improvement strategy are conditions of participation in an Exchange. 
Specifically, we proposed to include a reference to sections 1311(c)(3) 
and (c)(1)(E) of the Affordable Care Act to correctly align with other 
quality standards listed as part of QHP certification standards, 
including the ESS.

[[Page 30314]]

    We also proposed to amend Sec.  156.200 to add paragraph (h) to 
require that, in order to receive QHP certification, the offering 
issuer attest that, subsequent to receiving such certification, it will 
comply with all operational requirements contained in Part 156, 
Subparts D, E, H, K, L, and M. We proposed to add paragraph (h) to 
ensure that issuers seeking QHP certification understand and have fully 
committed to compliance with all operational requirements.
Summary of Regulatory Changes
    We received comments in support of the proposed amendments and 
therefore are finalizing Sec.  156.200(b)(5) and (h) as proposed.
b. Enrollment Process for Qualified Individuals (Sec.  156.265)
    We refer readers to the preamble in connection with Sec.  155.400 
of this final rule for a discussion of comments on Sec.  156.265.
3. Subpart G--Minimum Essential Coverage
a. Other Coverage That Qualifies as Minimum Essential Coverage (Sec.  
156.602)
    The Affordable Care Act added section 5000A of the Code, which 
requires all non-exempt individuals to maintain minimum essential 
coverage or pay the individual shared responsibility payment. Section 
5000A(f) of the Code defines minimum essential coverage as any of the 
following: (1) Coverage under a specified government sponsored program; 
(2) coverage under an eligible employer-sponsored plan; (3) coverage 
under a health plan offered in the individual market within a State; 
(4) coverage under a grandfathered health plan. In addition, section 
5000A(f)(1)(E) of the Code directs the Secretary, in coordination with 
the Secretary of the Treasury, to designate other health benefits 
coverage as minimum essential coverage.
    The Treasury Department and the IRS published final regulations 
under Code section 5000A on August 30, 2013 (78 FR 53646).\34\ On July 
1, 2013, HHS published final regulations implementing certain functions 
of an Exchange for determining eligibility for and granting certain 
exemptions from the individual shared responsibility payment (78 FR 
39494).\35\ The HHS final regulations, codified in 45 CFR 156.602 and 
156.604, also designate certain types of coverage as minimum essential 
coverage, and outline substantive and procedural requirements for other 
types of coverage to apply for recognition as minimum essential 
coverage.
---------------------------------------------------------------------------

    \34\ Shared Responsibility Payment for Not Maintaining Minimum 
Essential Coverage, 78 FR 53646 (August 30, 2013).
    \35\ Patient Protection and Affordable Care Act; Exchange 
Functions: Eligibility for Exemptions; Miscellaneous Minimum 
Essential Coverage Provisions, 78 FR 39494 (July 1, 2013).
---------------------------------------------------------------------------

    We proposed to amend Sec.  156.602 by adding paragraph (e) to 
designate certain types of foreign group health coverage for 
expatriates as minimum essential coverage. These proposed provisions 
would codify previous CMS guidance published on October 31, 2013,\36\ 
with some additional detail.
---------------------------------------------------------------------------

    \36\ See CCIIO Sub-Regulatory Guidance: Process for Obtaining 
Recognition as Minimum Essential Coverage (October 31, 2013). 
Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mec-guidance-10-31-2013.pdf.
---------------------------------------------------------------------------

    We are not finalizing this section of the proposed rule at this 
time. We will consider finalizing the proposal in the future, and will 
address comments received on the proposal at that time. In the interim, 
stakeholders and others can rely on the published October 31, 2013 
guidance.
Summary of Regulatory Changes
    We are not finalizing the provision proposed in Sec.  156.602(e) of 
the proposed rule at this time.
b. Requirements for Recognition as Minimum Essential Coverage for Types 
of Coverage Not Otherwise Designated Minimum Essential Coverage in the 
Statute or This Subpart (Sec.  156.604)
    We proposed a technical correction in Sec.  156.604 to clarify that 
health insurance issuers and plan administrators, in addition to 
sponsors of coverage and government agencies, may apply to HHS on 
behalf of a plan or coverage for recognition as minimum essential 
coverage.
Summary of Regulatory Changes
    We received no comments on this proposal and are finalizing the 
provision as proposed.
4. Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges
a. Available Remedies; Scope (Sec.  156.800)
    In Sec.  156.800(d), we proposed that HHS may consult and share 
information about QHP issuers with other Federal and State regulatory 
and enforcement entities to the extent that the consultation and 
information is necessary for HHS to determine whether an enforcement 
remedy under subpart I is appropriate.
    Comment: We received multiple comments in support of our proposed 
regulation, including comments that requested we consider expanding 
this authority to include sharing information about QHP issuers to 
other State and Federal regulatory and enforcement entities that may 
need this information for their oversight purposes.
    Response: Because we intend to share information about QHP issuers 
used for oversight and enforcement activities with other State and 
Federal regulatory and enforcement entities, and such entities have 
legitimate oversight and enforcement purposes for using such 
information, we agree that it is not necessary or appropriate for us to 
limit the ways in which such entities could use the information we 
would be sharing in a manner that would prohibit legitimate oversight 
and enforcement activities. We are finalizing the regulation 
accordingly.
Summary of Regulatory Changes
    We are finalizing Sec.  156.800(d) as proposed, with the 
modification of removing ``to the extent that the consultation and 
information is necessary for HHS to determine whether an enforcement 
remedy under subpart I is appropriate'' and replacing it with ``to the 
extent that the consultation and information is necessary for purposes 
of State or Federal oversight activities.''
b. Bases and Process for Imposing Civil Money Penalties in Federally-
Facilitated Exchanges (Sec.  156.805)
    We did not receive comments on the proposed addition of Sec.  
156.805(d)(3) and are finalizing the provision as proposed.
c. Notice of Non-Compliance (Sec.  156.806)
    We proposed adding Sec.  156.806 to explain that HHS will provide a 
written notice to the issuer, to include a description of the potential 
violation, a 30-day period for the QHP issuer to respond and to provide 
additional information to refute an alleged violation.
    Comment: Some commenters requested that we permit extensions to the 
30-day period for QHP issuers to respond and to provide additional 
information to refute an alleged violation. One of these commenters 
also requested that we allow QHP issuers to have 60 days, rather than 
the proposed 30 days, to respond and provide additional information.
    Response: We believe that 30 days provides QHP issuers with 
sufficient opportunity to respond and provide

[[Page 30315]]

additional information to refute an alleged violation. Additionally, a 
QHP issuer that fails to act within the 30-day period will have an 
opportunity to request a hearing under Subpart J of 45 CFR Part 156. 
The QHP issuer will have the opportunity present its arguments and 
supporting documents at the time of the hearing.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  156.806 of the 
proposed rule without modification.
d. Bases and Process for Decertification of a QHP Offered by an Issuer 
Through a Federally-Facilitated Exchange (Sec.  156.810)
    In Sec.  156.810, we proposed several modifications to better align 
our bases for decertification, including bases for expedited 
decertifications, with regulatory provisions which have been finalized 
and to clarify certain regulatory text. We proposed rewording paragraph 
(a)(6) to clarify that the certification criteria means the standards 
under subpart C of this part. We also proposed in Sec.  156.810(d) that 
the FFE will be able to pursue an expedited decertification for 
violation of paragraph (a)(6). Additionally, we proposed clarifying in 
paragraph (a)(9) that violation of State or Federal law relating to 
internal claims and appeals and external review processes are bases for 
decertification under this paragraph. We proposed aligning the 
standards set forth under subparts K and M with the bases for 
decertification. We proposed adding a paragraph (12) to reflect that 
HHS may decertify a QHP if the QHP issuer substantially fails to meet 
the requirements related to the cases forwarded to QHP issuers under 
Subpart K, and adding a paragraph (13) to reflect that HHS may 
decertify a QHP if the QHP issuer substantially fails to meet the 
requirements in Subpart M.
    Comment: We received general comments supporting our modifications 
to Sec.  156.810, including the inclusion of Sec.  156.810(a)(6) as a 
basis for expedited decertification and clarification that HHS may 
pursue decertifications for violations of applicable standards under 
Subpart C of 45 CFR Part 156. In addition, we received comments 
requesting that HHS not include violations of the provisions set forth 
under Subparts K and M as bases for decertification because the 
commenters indicated that not all of the provisions proposed under 
these Subparts have been finalized. One of the commenters requested 
that we extend the good faith policy adopted for 2014 until all 
provisions under these Subparts have been finalized.
    Response: We recognize that there may be instances in which new 
regulations proposed under Subparts K or M have not yet been finalized. 
In such instances, HHS would not enforce these regulations until they 
have been finalized absent a separate authority to enforce these 
regulations. In the meantime, there are provisions set forth under 
Subparts K and M that have been finalized and are enforceable, and 
accordingly, we believe that our proposed modification to include those 
provisions in Sec.  156.810 is appropriate.\37\ In the 2015 Letter to 
Issuers, we stated that we did not intend to extend the 2014 good faith 
compliance safe harbor.
---------------------------------------------------------------------------

    \37\ Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, SHOP, and Eligibility Appeals, 78 FR 54070 
(August 30, 2013) (to be codified at 45 CFR parts 147, 153, 155, and 
156).
---------------------------------------------------------------------------

    Comment: One commenter requested that we expressly limit expedited 
decertifications to violations that put QHP enrollees' ability to 
access necessary medical items or services at risk or substantially 
compromise the operation of the Exchange.
    Response: We believe there may a few rare situations in which 
expedited decertifications may be necessary, but which may not be 
resulting from violations that put QHP enrollees' ability to access 
necessary medical items or services at risk or substantially compromise 
the operation of the Exchange. For example, if a QHP issuer loses its 
ability offer a QHP based on an applicable State law or State action, 
HHS would need a mechanism to remove the QHP from the Exchange 
expeditiously. Recognizing that such possibility should be rare, but 
possible, we decline to limit expedited decertifications as requested, 
and finalize this section as proposed.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  156.810 of the 
proposed rule, correcting only the numbering of the added provisions in 
paragraph (a).
5. Subpart L--Quality Standards
a. Establishment of Standards for HHS-Approved Enrollee Satisfaction 
Survey Vendors for Use by QHP Issuers in Exchanges (Sec.  156.1105)
    We proposed to amend Sec.  156.1105 to include monitoring and 
appeals processes for HHS-approved ESS vendors that would apply for 
plan years beginning 2015. In paragraph (d), we proposed that HHS will 
monitor HHS-approved ESS vendors to ensure ongoing compliance with the 
application and approval standards in paragraphs (a) and (b). Further, 
we proposed that if HHS determines that an approved vendor is non-
compliant with the standards outlined in paragraph (b), they may be 
removed from the approved list described in paragraph (c) and/or the 
submitted survey results may be ineligible to be included for ESS 
results. Lastly, we proposed in paragraph (e) an appeals process for an 
ESS vendor that submits an application to HHS for approval, as 
described in paragraph (a), and is not approved. Specifically, we 
proposed that an ESS vendor may appeal HHS's decision by notifying HHS 
in writing within 15 days of the notification of not being approved by 
HHS and submitting additional documentation demonstrating how the 
vendor meets the standards in paragraph (b). HHS would review the 
submitted documentation and make a final approval determination within 
30 days from receipt of the additional documentation. An ESS vendor 
that becomes approved via the appeals process would be included in the 
approved list, described in paragraph (c).
    Comment: Many commenters supported the provisions in Sec.  156.1105 
relating to the monitoring and appeals processes for ESS vendors. 
Several commenters requested clarification how, if HHS determines 
survey results ineligible to be included in ESS results because of a 
non-compliant vendor, the affected QHP's global quality rating would be 
calculated and displayed. Commenters urged HHS to minimize such 
circumstances when results would not be published and to have adequate 
disclaimers explaining the reason for ESS results that are unavailable. 
A few commenters urged HHS to add a hold harmless provision to mitigate 
the harm on compliant QHPs who should not be penalized due to vendor 
behavior and to have alternative processes in such circumstances such 
as permit use of prior year's scores.
    Response: We clarify that, if HHS determines an ESS vendor to be 
non-compliant with the required standards and its survey results are 
deemed ineligible to be included in ESS results, HHS would designate 
those ESS measures that are included in the QRS as not being available 
for the current reporting year. Similar to the business relationships 
that issuers have with survey vendors to administer other 
CAHPS[supreg]-like surveys for other products (for example, Medicare 
Advantage), we expect issuers to work closely with their contracted 
vendors to mitigate harm on compliant QHPs. In such circumstances, we 
will work with affected QHP issuers

[[Page 30316]]

and ESS vendors and consider approaches so that having unavailable ESS 
data is minimized (that is, opportunity to re-administer the survey 
using a compliant vendor). These standards and processes have been 
informed by our experience with the Medicare CAHPS[supreg] survey 
vendor program, under which it has been a rare occurrence for a vendor 
to be found non-complaint and its survey results deemed ineligible. We 
maintain and finalize the standards in 156.1105 as proposed.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  156.1105 of the 
proposed rule without modification.
b. Quality Rating System (Sec.  156.1120)
    In Sec.  156.1120, we proposed standards for QHP issuers offering 
coverage on Exchanges to collect and report the necessary information 
to implement the QRS pursuant to section 1311(c)(3) of the Affordable 
Care Act. In paragraph (a), we proposed data submission requirements 
for a QHP issuer for the information necessary to calculate the quality 
ratings for coverage offered on Exchanges under the QRS, and in Sec.  
156.1120(b), we proposed to direct a QHP issuer to annually submit data 
necessary to calculate the QHP's quality ratings to HHS and the 
Exchange, on a timeline and in a standardized form and manner specified 
by HHS. In paragraph (a)(1), we proposed that a QHP issuer must submit 
data to calculate quality ratings for each QHP that has been offered in 
an Exchange for at least one year. In paragraph (a)(2), we proposed to 
direct a QHP issuer to submit data that has been validated in a form 
and manner specified by HHS.
    In paragraph (a)(3), we proposed that a QHP issuer must include 
information in its data submission only for those QHP enrollees at the 
reporting level specified by HHS that is necessary to calculate the 
quality ratings.
    We noted that multi-State plans, as defined in Sec.  155.1000(a), 
are subject to reporting QRS data for calculation of quality ratings by 
HHS, as described in paragraph (a). The U.S. Office of Personnel 
Management (OPM) will provide guidance on quality reporting to issuers 
with whom it holds multi-State plan contracts.
    Lastly, in paragraph (c), we proposed that an issuer may reference 
its QHP's quality rating information in its marketing materials, in a 
manner specified by HHS. Similarly, in the subsequent section 156.1125 
regarding the ESS, we proposed a similar marketing standard in Sec.  
156.1125(c) that a QHP issuer may reference the ESS results for its 
QHPs in its marketing materials, in a manner specified by HHS.
    Comment: Many commenters expressed concern that the proposed data 
validation process provides an unfair advantage to NCQA, would lead to 
NCQA having a monopoly and eliminate competition among accrediting 
entities. Commenters also noted that the proposed approach could 
disadvantage those issuers seeking accreditation from the other two 
recognized accrediting entities. Some commenters stated that some 
issuers may incur additional fees for services already purchased by 
URAC which may increase consumer premiums and affect their ability to 
continue participating in Exchanges.
    Response: We acknowledge that in the initial years of QRS 
implementation, some QHP issuers may incur additional costs and burden 
for data validation since the QRS measure stewards may not be aligned 
with their chosen accrediting entity. However, we believe that the 
majority of QHP issuers offering coverage through the Exchanges in the 
initial years already have established relationships with HEDIS 
(Healthcare Effectiveness Data and Information Set) compliance auditors 
such that there should be minimal overall costs and burdens to the 
health care system. We refer commenters to the relevant estimated 
burden and costs in the Marketplace Quality Standards PRA package that 
is associated with the NPRM and available at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html. We believe that aligning QRS measure validation 
requirements with the existing processes of the measure stewards 
provides consistency to ensure that valid and appropriate data are used 
to calculate quality rating information for public reporting. HHS 
anticipates refining the QRS over time as we gain experience about 
measures that are the most appropriate to the Exchange and approaches 
to quality measurement and health plan reporting evolve. As the QRS 
matures, we intend to consider changes to measures as well as ways to 
minimize the burden of QRS data collection, validation and submission. 
In addition, we are exploring ways to further streamline and align the 
accreditation standards with the quality reporting requirements to 
reduce duplicative and overlapping requirements.
    Comment: Several commenters requested clarification of the data 
validation process and suggested alignment and coordination with the 
measure stewards so that there would not be multiple, independent audit 
requirements. They did not support having independent third party 
validation and monitoring by HHS because of concerns of duplicative 
requirements and cost. One commenter expressed concern regarding 
combining the HEDIS and CAHPS[supreg] validation processes causing 
issues with coordination with vendors and unnecessary burden.
    Response: We clarify that we intend to direct QHP issuers to follow 
the data validation process of the QRS measure stewards. We do not 
intend to combine data validation processes for HEDIS and CAHPS[supreg] 
or ESS measure data; however, we clarify that, consistent with Sec.  
156.1125(b)(2), the survey sample data that the QHP issuer will need to 
provide to their contracted ESS vendor would need to be validated in a 
form and manner specified by HHS. We anticipate directing QHP issuers 
to use an independent third party to perform this validation. We intend 
to allow issuers to use the same third party validator used for QRS 
measures for validating the ESS survey sample, similar to the HEDIS 
CAHPS[supreg] process. We anticipate releasing technical guidance in 
2014 to provide further details regarding data validation, finalized 
measures and measure specifications. We agree with commenters and 
believe that it is important to align and coordinate with existing data 
validation and submission requirements.
    Comment: Several commenters requested that if HHS uses proprietary 
measures related to one accrediting entity, that HHS require that those 
data sets and quality measures be made freely available to all QHP 
issuers and to recognized accrediting entities to avoid imposing 
additional regulatory costs on those issuers seeking accreditation 
through the other entities. Some commenters requested consideration of 
allowing reporting of either HEDIS or quality measure data from the 
other two accrediting entities.
    Response: We understand commenters' concerns regarding the need to 
make information on the QRS measure data sets available to all QHP 
issuers. We intend to provide details including QRS quality measure 
specifications (which will include details on the underlying measures 
that comprise the QRS) in technical guidance to be posted on an HHS Web 
site. Any organization may use the QRS measure specifications to report 
its performance without charge, and health plans may share their 
results. However, to designate the results as HEDIS data,

[[Page 30317]]

the results must have been audited by an NCQA-Certified HEDIS Auditor. 
A successful audit ensures reliability and comparability of results for 
measures that are designated as HEDIS. We believe that requiring 
submission of a standard set of QRS quality measures, validated in a 
consistent manner as specified by the measure stewards, for all QHP 
issuers is critical to the goals of the QRS including the ability to 
provide reliable, comparable, and uniform quality data to consumers 
regardless of the Exchange. In addition, we considered non-HEDIS health 
plan quality measures during the measure selection process. However, 
based on the measure selection and measure set evaluation criteria, 
that were developed using the National Quality Forum (NQF) Measure 
Evaluation Criteria and the Measures Application Partnership (MAP) 
Measure-Selection Criteria (which factored in importance, performance 
gap, reliability and validity, feasibility and alignment) the majority 
of proposed measures to be included in the QRS for the initial years 
are HEDIS measures. As noted in the proposed rule, after considering 
public comments and review of the measures outlined in the November 19, 
2013 Federal Register Notice with Comment \38\ on the QRS framework 
(QRS Notice), we intend to finalize the quality measures and anticipate 
publishing the finalized 2015 QRS measure set in the near future on a 
HHS Web site. We anticipate greater availability over time of more 
robust, data-driven clinical quality measures specified for health 
plans and which provide meaningful information regarding changes in a 
patient's health outcome and intend to continue to seek feedback 
regarding evolution of the QRS. In addition, we are exploring ways to 
further streamline and align the accreditation standards with the 
quality reporting requirements to reduce duplication and minimize the 
burden of QRS data collection, validation and submission.
---------------------------------------------------------------------------

    \38\ Patient Protection and Affordable Care Act; Exchanges and 
Qualified Health Plans, Quality Rating System (QRS) Framework, 
Measures and Methodology; Notice with Comment, 78 FR 69418 (Nov. 19, 
2013).
---------------------------------------------------------------------------

    Comment: One commenter requested that the QHP rating information be 
accessible in an easy electronic format and that the rating methodology 
be released to issuers at the same time as the scores are released to 
allow issuers to estimate their own ratings.
    Response: We agree and clarify that the QRS and ESS information 
will be easy to access in an electronic format. We intend to minimize 
burden by providing QRS and ESS information to issuers in an electronic 
format such as through Electronic File Transfers so that the vast 
majority of stakeholders would be able to easily download and view the 
data. Further we clarify that the 2015 beta test QRS scoring 
specifications and technical guidance which will include the ESS 
scoring methodology, would be released in 2014, in advance of the 
release of scores, to provide issuers ample time to estimate ratings if 
they so choose.
    Comment: Many commenters suggested revisions to the QRS measure 
set. Some commenters urged CMS to incorporate all CAHPS[supreg] 
measures from the ESS into the QRS and not just a subset.
    Response: As we noted earlier in the rule, we appreciate comments 
related to the QRS measure set, as well as the ESS measures, and they 
will inform future modifications and evolution of Exchange quality 
reporting; however, these comments are outside the scope of this 
rulemaking.
    Comment: Several commenters supported the proposed approach for 
product-level reporting for the QRS in the initial years because more 
granular reporting would not be feasible due to potential sample size 
issues. One commenter urged CMS to clarify what it means by product-
level reporting and to align the level of reporting with the process 
used by accreditors. Many commenters recommended collection and 
reporting for the QRS at the metal tier level because consumer 
experience will be different for plans at different metal levels and 
this information is critical for enrollees' ability to make informed 
decisions about a particular plan.
    Response: Although we acknowledge that consumer experience and 
characteristics may be different for QHPs at different metal levels, we 
believe that it is necessary, in the initial years of implementation, 
to provide a balanced approach regarding the level of data collection 
and public display for the QRS and ESS. We believe that there are fewer 
potential sample size issues with ESS reporting versus QRS reporting 
based on the populations eligible to participate in the ESS (that is, 
most measures include the entire enrollee population) and the 
limitations of eligible populations for the majority of QRS clinical 
quality measures (that is, most measures do not include the entire 
patient population, rather a subset of the population for which a 
clinical action is being measured). We also believe it is important to 
align the initial reporting of QRS information with the product-level 
requirements for QHP accreditation requirements. While we are 
maintaining the requirement that ESS data be submitted at the metal 
tier level, we anticipate aligning the public display of the ESS 
results with the QRS at the product-level for consistency across the 
quality measures and associated accreditation standards. We will re-
examine the possibility of displaying the ESS results at a more 
granular level following an analysis of the 2015 beta test results. HHS 
is currently researching implementation of a process to collect data in 
a way that would allow us to assess the feasibility of level of 
coverage (for example, platinum, gold, silver, bronze, and 
catastrophic) reporting for the QRS as Exchanges mature and QHP 
enrollment grows. We maintain in the final rule that a QHP issuer must 
submit data at the level that will be specified by HHS but reiterate 
that the level of data submission may not align with the level of 
public reporting during the initial implementation of the QRS and ESS 
to provide greater flexibility regarding calculating scores based on 
different factors including adequate sample sizes and reliable 
measurement data.
    Comment: Many commenters urged HHS to review and monitor the 
content of marketing materials as part of ongoing compliance reviews. 
Some commenters did not support the proposed marketing provision 
without accompanying HHS guidelines and a review process for marketing 
materials.
    Response: We are finalizing the marketing provisions for the QRS 
and ESS, in Sec.  156.1120 and Sec.  156.1125 respectively, as 
proposed. We believe that it is important to set initial guidelines 
regarding referencing the QRS ratings and ESS results in issuer 
marketing materials for its respective QHPs and will be issuing future 
technical guidance that provides details regarding use and display of 
QRS and ESS results in issuer marketing materials. We note that we will 
consider effective and streamlined approaches of reviewing marketing 
materials as QHP issuer monitoring and oversight activities evolve in 
future years. As we stated in the Exchange final rule, States have 
significant experience with, and existing infrastructure to support 
monitoring and oversight of health plan marketing activities. We 
encourage a streamlined approach of incorporating review of a QHP 
issuer's marketing materials referencing quality ratings and ESS 
results as part of an Exchange's monitoring and oversight activities.
    Comment: Some commenters supported the proposal to allow data 
collection based on combined populations if the plan offerings are the

[[Page 30318]]

same inside and outside the Exchange to enhance sample size and 
reliability of data. Several commenters did not support the proposed 
approach because of potential differences that may be reflected in 
quality, confusion for consumers and skewed QRS results. One commenter 
noted that some issuers may only offer QHPs on the Exchanges and 
therefore may not have the ability to combine data with products 
offered outside the Exchange. Commenters urged HHS to reconsider the 
proposed approach and consider alternatives such as comparison within a 
peer group.
    Response: We agree with commenters regarding potential differences 
in enrollee characteristics of QHPs offered inside and outside the 
Exchange that may impact QRS and ESS results. We believe that it is 
important for the reliability and validity of the QRS to have adequate 
sample sizes and have the appropriate enrollee data to reflect 
meaningful information and differences regarding QHP quality to 
consumers selecting plans in the Exchange. During the 2015 beta testing 
period, we will not use data from QHPs outside the Exchange. We will 
assess the impact that this approach has on quality ratings in the beta 
test and will consider the feasibility of alternative approaches to 
ensure appropriate sample size and reliability of data. We anticipate 
issuing future guidance on whether plan offerings outside the Exchange 
that would be considered the same as one that is certified as a QHP and 
offered through the Exchange, as defined in Sec.  153.500, can be 
included in the QRS and ESS.
    Comment: Several commenters supported alignment of accreditation 
standards with QRS, ESS and QIS reporting. One commenter supported 
continued use of HEDIS and CAHPS[supreg] measures to ensure alignment 
with accrediting entities.
    Response: We agree with commenters and note that to minimize burden 
and costs, it is important that alignment of QHP accreditation 
standards and quality reporting in the Exchanges be achieved as much as 
possible. We are considering updating standards for recognized 
accrediting entities and QHP accreditation in the near future and will 
solicit comment at that time regarding the potential of deeming QHP 
issuers and recognized accrediting entities in compliance with the 
accreditation requirements related to clinical quality measures and 
patient experience ratings by meeting the ESS and QRS requirements. We 
expect to continue use of robust, evidence-based measures including 
HEDIS, CAHPS[supreg] and other measures that reflect the National 
Quality Strategy priorities.
    Comment: Many commenters supported the proposed timeframes of QRS 
and ESS implementation including 2015 beta testing and public reporting 
during the 2016 open enrollment period for the 2017 coverage year. A 
few commenters urged HHS to finalize the QRS measures and measure 
specifications to provide to issuers by May 2014 at the latest so that 
issuers would have sufficient time to collect and submit data in time 
for beta testing. A few commenters expressed concern that consumers 
would have to wait until the 2016 open enrollment period to access 
quality rating information. And some commenters requested further delay 
for implementation because of the disproportionate financial and staff 
burden on new and smaller plans.
    Response: We believe that the 2015 beta testing and 2016 public 
reporting timeframes are appropriate and consistent with QHP issuer 
accreditation requirements for the FFE and most State Exchanges to 
report clinical quality and CAHPS[supreg] data in 2016. In addition, we 
believe the proposed timeframes offer a balanced approach to providing 
consumers with meaningful, tested QHP quality information and providing 
issuers ample time to prepare for collection and submission of 
validated data. The majority of plans already have established 
processes and experience for similar, existing quality reporting and we 
acknowledge that new and smaller plans may have increased burden; 
however, we believe that the phase in implementation of QRS and ESS 
beginning in 2015 with beta testing is the appropriate approach. We 
anticipate publishing the finalized QRS measure set soon after the 
publication of this final rule.
Summary of Regulatory Changes
    We are finalizing the proposed provision with the following 
modification: In paragraph Sec.  156.1120(a)(3), we replace ``at the 
reporting level specified by HHS'' with ``at the level specified by 
HHS'' to better distinguish between the level at which collection of 
QRS data as well as the level of public display of QRS data that would 
be required.
c. Enrollee Satisfaction Survey (Sec.  156.1125)
    At Sec.  156.1125(a), we proposed to direct QHP issuers to contract 
with an HHS-approved ESS vendor, as identified by Sec.  156.1105, to 
administer the ESS of the QHP's enrollees. We also proposed to direct a 
QHP issuer to authorize its contracted ESS vendor to report survey 
results to HHS and the Exchange on the issuer's behalf. In paragraph 
(b), we proposed several data requirements to clarify the standards for 
collection and submission of ESS data. At Sec.  156.1125(b)(1), we 
proposed to direct a QHP issuer to collect data of eligible enrollees 
for each QHP with more than 500 enrollees in the previous year that has 
been offered in an Exchange for at least one year following a survey 
sampling methodology provided by HHS. In paragraph (b)(2), we proposed 
to direct a QHP issuer to submit data, necessary to conduct the ESS, 
that has been validated in a form and manner specified by HHS.
    In paragraph (b)(3), we proposed to direct a QHP issuer to include 
only those QHP enrollees at the reporting level specified by HHS, for 
data submitted for the ESS.
    In paragraph (d), we proposed to direct a QHP issuer to submit data 
necessary to conduct the survey to its contracted ESS vendor on a 
timeline and in a form and manner specified by HHS. We stated our 
intention to align the timeframes of the proposed reporting 
requirements for the ESS and the QRS.
    We also noted that Multi-State Plans, as defined in 45 CFR 
155.1000(a), are subject to providing the data described in paragraph 
(b). The OPM will provide guidance on ESS reporting to issuers with 
whom it holds Multi-State Plan contracts.
    Comment: The majority of commenters supported the proposed approach 
of aligning the ESS with existing CAHPS[supreg] surveys and processes. 
Some commenters requested that we leverage the annual, existing 
CAHPS[supreg] survey to meet the ESS requirement. One commenter 
requested clarification of how the CAHPS[supreg] 5.0 Adult Medicaid 
Survey would be modified for the Exchanges.
    Response: We have leveraged existing CAHPS[supreg] surveys and 
processes in the development of the ESS (or QHP Enrollee Survey). In 
addition, we are considering approaches and will seek comment in future 
rulemaking for further alignment of QHP issuer accreditation and 
quality reporting in the Exchanges, including but not limited to ESS 
reporting. We clarify that the QHP Enrollee Survey includes all of the 
CAHPS[supreg] Health Plan 5.0 (Adult Medicaid) items with additional 
items based on a comprehensive review of the literature and related 
surveys, focus groups, stakeholder discussions, and input from a 
technical expert panel, as we described in the PRA supporting 
statements available under CMS Form

[[Page 30319]]

Number 10488 at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html.
    Comment: One commenter urged HHS to use the term ``experience'', 
rather than ``satisfaction'' when describing the survey because 
``experience'' is considered a more objective and relevant source of 
data. A few commenters sought clarification regarding enrollee 
eligibility for the ESS and the QHP sample size requirements. Two 
commenters recommended larger sample sizes to ensure adequate response 
rates and to align with commercial CAHPS[supreg] or other satisfaction 
surveys.
    Response: We have used the term ESS in this rule to mirror the 
statutory language of section 1311(c)(4) of the Affordable Care Act. 
However, the name of the ESS survey that will be administered to 
enrollees is ``QHP Enrollee Experience Survey''. We incorporate the 
size requirement in 156.1125(b) to align with the statutory language in 
section 1311(c)(4) that requires the development of an ESS to evaluate 
enrollee satisfaction with QHPs offered through an Exchange, ``for each 
such qualified health plan that had more than 500 enrollees in the 
previous year.'' We agree that adequate sample sizes and response rates 
are needed for statistically valid measurement rates. For more 
information on our approach to adequate sample size and response rates 
for the survey, we refer commenters to the PRA supporting statements 
available under CMS Form Number 10488 at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html.
    Comment: A few commenters supported collecting and reporting ESS 
measure data at the metal tier level to provide meaningful, 
disaggregated information to consumers. However, several commenters 
acknowledged that sample sizes could be too small to ensure valid and 
reliable measurement, especially in the early years of the Exchanges 
and therefore urged HHS to follow the same approach as QRS data 
collection, at the product-level.
    Response: We believe that, similar to the approach for QRS data 
collection and reporting, it is important to have a balanced approach 
that will allow for us to provide useful information to consumers while 
ensuring that the data is statistically significant and reliable. We 
agree with commenters and acknowledge that sample sizes may be too 
small to report at the metal-tier level and therefore maintain in the 
final rule the intention to publicly display ESS measure data at the 
product-level in alignment with the QRS. However, we note that we 
believe that there are fewer potential sample size issues with ESS 
reporting versus QRS reporting based on the populations eligible to 
participate in the ESS. Most measures for the ESS include the entire 
enrollee population, while the majority of QRS measures are limited 
because they would not extend to the entire patient population. Similar 
to the QRS, we clarify that we intend to require QHPs to submit data at 
a level specified by HHS that will allow for us to determine the 
feasibility of using more granular levels for data reporting and public 
display in the future. At this point in time, we anticipate requiring 
the submission of ESS data at the more granular metal tier level and 
will be issuing technical guidance in the near future that provides 
further details regarding the ESS data reporting process.
Marketplace Survey
    Sections 1313 and 1321(a) of the Affordable Care Act provide the 
Secretary with general authority to establish standards and regulations 
related to Exchanges, QHPs, and other components of title I of the 
Affordable Care Act. In Sec.  155.1200(b)(3), we direct State Exchanges 
to submit performance monitoring data on an annual basis, which would 
include information on consumer satisfaction. Pursuant to this legal 
authority, HHS proposed a consumer experience survey, or the 
Marketplace survey, to assess consumer experience with the Exchanges 
\39\ including obtaining information regarding aspects such as the 
application and eligibility determination process for Medicaid/
Children's Health Insurance Program (CHIP) coverage and the Insurance 
Affordability Programs.
---------------------------------------------------------------------------

    \39\ Agency Information Collection Activities: Health Insurance 
Marketplace Consumer Experience Surveys: Enrollee Satisfaction 
Survey and Marketplace Survey Data Collection; Notice, 78 FR 65658 
(Nov. 1, 2013).
---------------------------------------------------------------------------

    Comment: Many commenters supported establishing the Marketplace 
survey and directing State Exchanges to submit survey sampling data to 
HHS. Commenters also urged HHS to provide full access to the public of 
survey results, similar to the ESS. A few commenters recommended 
inclusion of Medicaid eligibles and data based on various demographics 
such as gender, language preference, and disability status.
    Response: We maintain that the purpose of the Marketplace survey is 
to inform the quality improvement of Exchanges; we, therefore, intend 
to provide Exchanges with the results of the Marketplace survey and 
will consider ways to make this information available to the public. We 
appreciate the comments regarding suggestions for sampling data 
criteria which will inform future years of Marketplace survey 
implementation and may consider directing State Exchanges to submit 
survey sampling data to HHS. For more information on the Marketplace 
Survey, we refer commenters to the PRA supporting statements available 
under the CMS Form Number 10488 at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html.
Summary of Regulatory Changes
    We are finalizing the proposals for ESS and Marketplace Surveys 
with the following modification: In paragraph Sec.  156.1125(b)(3), we 
replace ``at the reporting level specified by HHS'' with ``at the level 
specified by HHS'' to better distinguish between the level at which 
collection and submission of ESS data by QHP issuers that would be 
required, as opposed to the level of public display or reporting of ESS 
data by Exchanges that would be required.

I. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements

1. Subpart A--Disclosure and Reporting
a. ICD-10 Conversion Expenses (Sec.  158.150)
    In September 2012, the Secretary changed the date on which issuers 
are required to adopt ICD-10 as the standard medical code set from 
October 1, 2013 to October 1, 2014. Subsequently, the Protecting Access 
to Medicare Act of 2014 (Pub. L. 113-93), enacted on April 1, 2014, 
mandated that this date be further delayed to October 1, 2015. Because 
the ICD-10 implementation date has been postponed past 2013, issuers 
may incur conversion costs beyond 2013 that would otherwise have been 
incurred only in 2012 and 2013. Therefore, in the proposed rule, we 
proposed to permit issuers to continue including their ICD-10 
conversion costs as activities that improve health care quality (QIA), 
up to 0.3 percent of an issuer's earned premium in the relevant State 
and market, through the MLR reporting year in which ICD-10 
implementation is required by the Secretary.
    Comment: We received several comments supporting inclusion of ICD-
10 conversion costs in QIA past 2013, as well as several comments 
opposing inclusion of these costs past 2014. Some commenters supporting 
the extension

[[Page 30320]]

also requested that the 0.3 percent cap be raised to 0.4 percent.
    Response: Because data continue to show that ICD-10 expenses have 
not, on average, exceeded 0.3 percent of premium, we are not raising 
the cap to 0.4 percent. In addition, because we recognize that the 
recent Congressional delay of the ICD-10 implementation date to 2015 
may cause issuers to continue to incur implementation costs, such as 
concurrently maintaining ICD-9 and ICD-10 systems and performing 
additional testing, we are continuing to allow inclusion of ICD-10 
conversion costs in QIA through the MLR reporting year in which ICD-10 
implementation is required by the Secretary.
Summary of Regulatory Changes
    We are finalizing the changes to Sec.  158.150 as proposed.
2. Subpart B--Calculating and Providing the Rebate
a. MLR and Rebate Calculations in States with Merged Individual and 
Small Group Markets (Sec. Sec.  158.211, 158.220, 158.231)
    In the proposed rule, we proposed to amend Sec.  158.220(a) and 
Sec.  158.231(a) to specify that the individual and small group market 
data must always be aggregated if a State requires these two markets to 
be merged, and to amend Sec.  158.211 to clarify that if a State 
establishes a higher MLR standard for the merged market, this higher 
standard must be used to calculate any rebates for the merged market.
    Comment: We received one comment supporting the requirement to use 
the higher State MLR standards in calculating rebates. We received no 
comments specific to the proposed data aggregation standard in States 
that require the individual and small group markets to be merged.
    Response: We appreciate the comment regarding the higher State MLR 
standards.
Summary of Regulatory Changes
    We are finalizing the amendments proposed in Sec. Sec.  158.211, 
158.220, and 158.231 of the proposed rule without modification.
b. Accounting for Special Circumstances (Sec.  158.221)
    On November 14, 2013, the Federal government announced a policy 
under which, if certain conditions were met, it would decline to 
enforce certain specified 2014 market reforms against certain non-
grandfathered health insurance coverage in the individual or small 
group market renewed between January 1, 2014 and October 1, 2014, and 
requested that States adopt a similar non-enforcement policy.\40\ CMS 
noted in the Proposed 2015 Payment Notice (78 FR 72322) that this 
transitional policy would not have been anticipated by issuers in 
setting rates for 2014 and stated that we were exploring modifications 
to different programs (including but not limited to the MLR program) to 
help mitigate the impact of this policy.
---------------------------------------------------------------------------

    \40\ Letter to Insurance Commissioners, Center for Consumer 
Information and Insurance Oversight, November 14, 2013. Available 
at: http://www.cms.gov/CCIIO/Resources/Letters/Downloads/commissioner-letter-11-14-2013.pdf.
---------------------------------------------------------------------------

    As we explained in the proposed rule, issuers that provided 
transitional coverage may have incurred additional administrative 
costs, such as expenses related to developing and sending required 
consumers notices, and creating and submitting new policy and rate 
filings. As further stated in the proposed rule, we also recognize that 
issuers of QHPs in the individual and small group markets may have 
incurred costs due to technical issues during the launch of the State 
Exchanges and FFEs.
    Therefore, in the proposed rule, we proposed to account for the 
special circumstances of plans affected by the transitional policy and 
plans affected by the technical issues during the launch of the State 
Exchanges and FFEs by amending Sec.  158.221 to allow for an adjustment 
to the MLR calculation for such issuers. Specifically, we proposed to 
allow issuers offering transitional coverage in the individual and 
small group markets to multiply the incurred claims and expenses for 
quality improving activities incurred in 2014 in the MLR numerator by 
1.0001. We also proposed to allow issuers offering coverage through the 
State and Federal Exchanges in the individual and small group markets 
to multiply the incurred claims and expenses for quality improving 
activities incurred in 2014 in the MLR numerator by 1.0004. These 
adjustments would only extend to issuers in the individual and/or small 
group markets that offered transitional coverage or participated in the 
State Exchanges and FFEs, and only for the 2014 reporting year. A 
transitional policy cost adjustment to the formula for calculating an 
issuer's MLR would not apply in States that did not implement the 
transitional policy, or in States that did, to issuers that did not 
elect to implement it. Similarly, the proposed adjustment to the 
formula for calculating an issuer's MLR related to the initial Exchange 
technical issues would not be available to issuers that did not elect 
to participate in the Exchanges.
    Comment: Some commenters expressed support for adjustments to the 
MLR formula for plans affected by the transitional policy and plans 
affected by the technical issues during the launch of the State and 
Federal Exchanges. These commenters also expressed concern that the 
adjustments are inadequate, but none provided specific data to support 
this assertion or suggested specific alternative adjustments. 
Commenters requested that both adjustments also be provided for 2013; 
one of these commenters requested that the adjustment related to 
Exchange technical issues continue in 2015; while two of these 
commenters requested that the adjustment related to transitional policy 
continue while transitional coverage remains in force. One commenter 
additionally recommended that instead of multiplying the MLR numerator 
by an adjustment factor, CMS permit issuers to deduct actual 
administrative costs related to Exchange implementation from the MLR 
denominator. Another commenter recommended this alternative approach 
(that is, to permit a deduction of actual administrative expenses) for 
costs related to the transitional policy, and recommended that CMS 
waive the Exchange user fee for issuers affected by Exchange 
implementation problems instead of the proposed adjustment. Both these 
commenters argued that such alternative approaches would benefit 
issuers who meet or exceed the MLR standard.
    In contrast, other commenters expressed concern that adjustments to 
the MLR formula may undermine the MLR program's effectiveness in 
keeping premiums down, and urged CMS not to extend the proposed 
adjustments beyond 2014. One commenter further requested that issuers 
be required to demonstrate that they in fact incurred additional 
administrative costs.
    Response: The proposed adjustments were based on the best data 
available to us, and the types of expenses we considered were the types 
of expenses described by the commenters. Absent more specific and 
substantiated recommendations with accompanying supporting data, we do 
not have a basis for increasing the adjustments. Further, the costs 
issuers incurred in connection with the transitional policy are often 
one-time and will decline over time, and the same is true of the 
Exchanges-related costs as the functioning of the Exchanges improves in 
2015. Lastly, we recognize that the proposed adjustments to the MLR 
numerator only provide relief to issuers that did not meet the MLR 
standard, since such adjustments would merely cause issuers meeting the

[[Page 30321]]

MLR standard to exceed the standard by a larger percentage than they 
already did. However, we find that the alternative adjustments to the 
MLR denominator suggested by some commenters have similar limitations. 
In addition, such alternative adjustments would be more 
administratively burdensome to implement than the proposed uniform 
adjustments, and would be more susceptible to abuse. We believe that 
the proposed adjustments appropriately account for the special 
circumstances related to implementation of the transitional policy and 
initial technical problems of the Exchanges, while still requiring 
issuers to comply with the statutory MLR requirement.
Summary of Regulatory Changes
    We are finalizing the amendments proposed in Sec.  158.221 of the 
proposed rule without modification.
c. Distribution of De Minimis Rebates (Sec.  158.243)
    The MLR December 7, 2011 final rule defines the threshold amounts 
below which rebates are considered to be de minimis and sets forth the 
provisions for distribution of such rebates. In the proposed rule, we 
proposed to amend the provisions for de minimis rebates in Sec.  
158.243 to clarify how issuers must distribute rebates where: (1) all 
of an issuer's rebates are de minimis, or (2) distribution of de 
minimis rebates to enrollee(s) whose rebates are not de minimis would 
result in an enrollee receiving a rebate that exceeds the enrollee's 
annual premium. In these two situations, we proposed requiring the 
issuer to distribute de minimis rebates to enrollees in the policies 
that generated the de minimis rebates, and not to aggregate such 
rebates and distribute them to other enrollees whose rebates are not de 
minimis.
    Comment: We received several comments opposing the proposed 
amendments to the de minimis provisions. The commenters argue that 
requiring distribution of any de minimis rebates directly to enrollees 
is contrary to the rationale behind the MLR de minimis provision. The 
commenters assert that the administrative burden of directly 
distributing de minimis rebates would exceed the benefit to consumers. 
One of these commenters recommended including the total amount of de 
minimis rebates, when all of an issuer's rebates are de minimis, in 
premium rate calculations for the following year. This commenter also 
recommended that in cases where distribution of de minimis rebates to 
enrollee(s) whose rebate are not de minimis would result in an enrollee 
receiving a rebate that exceeds the enrollee's annual premium, the 
issuer be allowed to place the excess of the aggregated de minimis 
rebate over premium in a reserve fund, and use it first toward the cost 
of operating this fund, and second in premium rate calculations for the 
following year. Another commenter recommended that issuers be allowed 
to distribute the de minimis rebates to the State for use in health 
education.
    Response: We acknowledge the commenters' concern that the 
administrative costs of directly distributing de minimis rebates may 
impose administrative costs in excess of the rebate amounts. At this 
time, few, if any, enrollees are known to be affected by the two 
situations described in the proposed rule. Therefore, in order to 
consider alternative approaches to the treatment of de minimis rebates 
in these two situations, we are not finalizing the proposed 
clarifications and will address this issue in future rulemaking.
Summary of Regulatory Changes
    We are not finalizing the amendments proposed in Sec.  158.243 of 
the proposed rule at this time.

IV. Provisions of Final Regulations

    For the most part, this final rule incorporates the provisions of 
the proposed rule. Those provisions of this final rule that differ from 
the proposed rule are as follows:

Changes to Sec.  144.103

     Adds definitions of ``product'' and ``plan'' and clarifies 
that standards for uniform modification related to benefits and cost 
sharing apply at the plan-level.

Changes to Sec.  146.152

     Applies the definition of uniform modification of coverage 
and renewal notice requirements to issuers offering coverage in the 
small group market.
     Indicates that a State may only broaden the uniform 
modification standard criteria addressing cost-sharing structure and 
service area.
     Adds language to clarify and amend the term ``pursuant to 
applicable Federal or State requirements.''
     Deletes the reference to ``counties'' in the service area 
criterion.

Changes to Sec.  146.180

     Adds that an opt-out election for multiple self-funded, 
non-Federal governmental plans subject to a single collective 
bargaining agreement must specify each group health plan subject to the 
agreement.
     Adds that a sponsor submitting opt-out elections for 
multiple self-funded, non-Federal governmental plans that are not 
subject to a collective bargaining agreement, must submit a separate 
opt-out election document for each such plan.
     Replaces the special rule for timely filings of opt-out 
elections by U.S. mail with a special rule for timely filings of opt-
out elections in electronic format, and provides that if the latest 
filing date falls on a Saturday, Sunday, or a State or Federal holiday, 
CMS accepts filings submitted the next business day.

Changes to Sec.  147.106

     Applies the definition of uniform modification of coverage 
and renewal notice requirements only to issuers offering coverage in 
the individual and small group markets.
     Adds language to clarify and amend the term ``pursuant to 
applicable Federal or State requirements.''
     Indicates that a State may only broaden the uniform 
modification standard criteria addressing cost-sharing structure and 
service area.
     Deletes the reference to ``counties'' in the service area 
criterion.
     Adds that Medicare eligibility or entitlement is not a 
basis for nonrenewal or termination of an individual's health insurance 
coverage in the individual market.

Changes to Sec.  148.122

     Applies the definition of uniform modification of coverage 
and renewal notice requirements to issuers offering coverage in the 
individual market.
     Adds language to clarify and amend the term ``pursuant to 
applicable Federal or State requirements.''
     Indicates that a State may only broaden the uniform 
modification standard criteria addressing cost-sharing structure and 
service area.
     Deletes the reference to ``counties'' in the service area 
criterion.

Changes to Sec.  148.220

     Aligns introductory text with the statutory language.
     Clarifies that, to be an excepted benefit, fixed indemnity 
insurance in the individual market can be provided only to individuals 
who attest in their application (1) that they have other health 
coverage that is minimum essential coverage; or (2). that they are 
treated as having minimum essential coverage due to their status as a 
bona fide resident of any possession of the United States pursuant to 
Code section 5000A(f)(4)(B).
     Clarifies that fixed indemnity insurance pays in a fixed 
dollar amount per period of hospitalization or illness, per service, or 
both.

[[Page 30322]]

     Requires notice to be displayed in the application for the 
fixed indemnity insurance (as opposed to the plan materials).
     Adds a new paragraph specifying an applicability date for 
the minimum essential coverage and notice requirements to policies 
issued on or after January 1, 2015. For policies issued before that 
date, this paragraph also specifies an applicability date for the 
notice requirement to plan years beginning on or after January 1, 2015, 
and for the attestation requirement, to plan years beginning on or 
after October 1, 2016.

Changes to the Allocation of Reinsurance Contributions

     Modifies our allocation of reinsurance collections if 
those collections fall short of our estimates for a particular benefit 
year: we will allocate the reinsurance collections for that benefit 
year first to the reinsurance payment pool, and second to 
administrative expenses and the U.S. Treasury.

Changes to Sec.  155.120

     Makes technical revisions to Sec.  155.120(c) to clarify 
that organizations must comply with other, non-Exchange, applicable 
non-discrimination statutes.
     Revises Sec.  155.120(c)(2) to clarify that organizations 
that limit their provision of certified application counselor services 
to a defined population under this exception must still comply with the 
non-discrimination provisions in paragraph (c)(1)(ii) with respect to 
the provision of these services to that defined population.

Changes to Sec.  155.206

     Clarifies that the requirements applicable to consumer 
assistance entities under this section refer to the applicable Federal 
regulatory requirements that have been implemented pursuant to section 
1321(a)(1) of the Affordable Care Act, including provisions of any 
agreements, contracts, and grant terms and conditions between HHS and 
the consumer assistance entity that interpret those statutory and 
regulatory requirements or establish procedures for compliance with 
them.
     Clarifies that HHS must provide a written notice to a 
consumer assistance entity of its investigation, rather than requiring 
HHS to provide a written notice to an entity each time HHS learns of a 
potential violation.
     Adds a factor allowing HHS to take into consideration 
whether other remedies or penalties have been imposed for the same 
conduct or occurrence.
     Provides a six-year statute of limitations period.

Changes to Sec.  155.210

     Removes the provision specifying non-Federal standards 
that prohibit any individual or entity from acting as Navigators that 
would be eligible to participate under standards applicable to the FFE.
     Renumbers and extends to all Exchanges the provision 
regarding non-Federal standards that would, as applied or implemented 
in a State, prevent the application of Federal requirements applicable 
to Navigators. Adds specification for requirements that prevent the 
Exchange's implementation of the Navigator program consistent with 
Federal requirements.
     Revises the provision specifying requirements to carry 
errors and omissions coverage and replaces it with ``any requirement 
that, in effect, would render all Navigators in the Exchange to be 
licensed agents and brokers.''
     Adds that in an FFE, no health care provider individual or 
entity shall be ineligible to operate as a Navigator solely because it 
receives consideration from a health insurance issuer for health care 
services provided.
     Adds that in an FFE, no individual or entity shall be 
ineligible to operate as a Navigator solely on the basis that it does 
not maintain its principal place of business in the Exchange service 
area.
     Moves the provision prohibiting compensation on a per-
application, per-individual-assisted, or per-enrollment basis to Sec.  
155.215 to apply only in the FFE.
     Adds that gifts, gift cards, or cash may exceed nominal 
value for the purpose of providing reimbursement for legitimate 
expenses incurred by a consumer in effort to receive Exchange 
application assistance, such as, but not limited to, travel or postage 
expenses.
     Adds that Exchange funds cannot be used to purchase gifts 
or gift cards, or promotional items that market or promote the products 
or services of a third party.
     Adds that consumers may be solicited by going door-to-door 
or other unsolicited means of direct contact, including calling a 
consumer if there is a pre-existing relationship and other applicable 
laws are complied with.
     Adds that outreach and education activities may include 
going door-to-door or other unsolicited means of direct contact, 
including calling a consumer.
     Adds that automatic telephone dialing system or an 
artificial or prerecorded voice may be used to initiate contact 
consumers if there is a pre-existing relationship and other applicable 
laws are complied with.
     Changes the requirement to obtain authorization to access 
a consumer's personally identifiable information in a form and manner 
determined by the Secretary to a form and manner determined by the 
Exchange, adds that the authorization must be retained in a form and 
manner determined by the Exchange, and clarifies the retention period 
is no less than six years. Removes explicit reference to Federal 
regulations at 45 CFR 92.42 and 45 CFR 74.53.
     Clarifies that the duty to provide information in a fair, 
accurate and impartial manner includes providing fair, impartial, and 
accurate information that assists consumers with submitting the 
eligibility application, clarifying the distinctions among QHPs, and 
helping consumers make informed decisions during the health coverage 
selection process.

Changes to Sec.  155.215

     Expressly enumerates, rather than incorporates applicable 
provisions under Sec.  155.210 by reference, the provisions regarding 
non-Federal standards that would prevent the application of the 
provisions of title I of the Affordable Care Act as applied to the non-
Navigator assistance personnel program subject to Sec.  155.215.
     Removes the provision specifying non-Federal standards 
that prohibit any individual or entity from acting as non-Navigator 
assistance personnel subject to Sec.  155.215 that would be eligible to 
participate under standards applicable to the FFE.
     Extends to all Exchanges the provision regarding non-
Federal standards that would, as applied or implemented in a State, 
prevent the application of Federal requirements applicable to non-
Navigator assistance personnel subject to Sec.  155.215. Adds 
specification for requirements that prevent the Exchange's 
implementation of the non-Navigator assistance program consistent with 
Federal requirements.
     Adds that in an FFE, no health care provider individual or 
entity shall be ineligible to operate as non-Navigator assistance 
personnel solely because it receives consideration from a health 
insurance issuer for health care services provided.
     Adds that in an FFE, no individual or entity shall be 
ineligible to operate as non-Navigator assistance personnel solely on 
the basis that it does not maintain its principal place of business in 
the Exchange service area.

[[Page 30323]]

     Adds a provision prohibiting compensation on a per-
application, per-individual-assisted, or per-enrollment basis to Sec.  
155.215 to apply only in the Federally-facilitated Exchange.
     Adds an effective date of November 15, 2014 for the 
prohibition on compensation on a per-application, per-individual-
assisted, or per-enrollment basis.
     Changes the requirement to obtain and maintain 
authorization to access a consumer's personally identifiable 
information in a form and manner determined by the Secretary to a form 
and manner determined by the Exchange, and clarifies the retention 
period is no less than six years.

Changes to Sec.  155.225

     Adds duty to provide information to individuals and 
employees about the full range of QHP options and insurance 
affordability programs for which they are eligible, which includes 
providing fair, impartial, and accurate information that assists 
consumers with submitting the eligibility application, clarifying the 
distinctions among QHPs, and helping consumers make informed decisions 
during the health coverage selection process.
     Revises provision specifying referrals to third parties 
not required to act in the best interest of applicants assisted to 
those not required to provide fair, accurate, and impartial 
information.
     Removes the provision specifying non-Federal standards 
that prohibit any individual or entity from acting as certified 
application counselors that would be eligible to participate under 
standards applicable to the FFE.
     Renumbers and extends to all Exchanges the provision 
regarding non-Federal standards that would, as applied or implemented 
in a State, prevent the application of Federal requirements applicable 
to certified application counselors. Adds specification for 
requirements that prevent the Exchange's implementation of the 
certified application counselor program consistent with Federal 
requirements.
     Adds that in an FFE, no health care provider individual or 
entity shall be ineligible to operate as certified application 
counselors solely because it receives consideration from a health 
insurance issuer for health care services provided.
     Removes proposed requirement to maintain a physical 
presence in the Exchange service area. Adds that in an FFE, no 
individual or entity shall be ineligible to operate as a certified 
application counselor solely on the basis that it does not maintain its 
principal place of business in the Exchange service area.
     Adds that gifts, gift cards, or cash may exceed nominal 
value for the purpose of providing reimbursement for legitimate 
expenses incurred by a consumer in effort to receive Exchange 
application assistance, such as, but not limited to, travel or postage 
expenses.
     Adds that consumers may be solicited by going door-to-door 
or other unsolicited means of direct contact, including calling a 
consumer if there is a pre-existing relationship and other applicable 
laws are complied with.
     Adds that outreach and education activities may include 
going door-to-door or other unsolicited means of direct contact, 
including calling a consumer.
     Adds that automatic telephone dialing system or an 
artificial or prerecorded voice may be used to initiate contact 
consumers if there is a pre-existing relationship and other applicable 
laws are complied with.
     Adds an effective date of November 15, 2014 for the 
prohibition on compensation on a per-application, per-individual-
assisted, or per-enrollment basis, and limits the application of this 
provision to certified application counselors in FFEs.
     Adds a requirement to obtain and maintain authorization to 
access a consumer's personally identifiable information in a form and 
manner determined by the Secretary to a form and manner determined by 
the Exchange, and changes the retention period for the authorization to 
access a consumer's personally identifiable information to no less than 
six years.

Changes to Sec.  155.260

     Inserts the numerical penalty amount instead of a 
reference to section 1411(h) of the Affordable Care Act where the 
maximum penalty is specified.

Changes to Sec.  156.265

     Revises the provisions proposed in 156.265(d)(1) of the 
proposed rule as the entire paragraph (d), and removes all 
156.265(d)(2), allowing each Exchange to establish its own premium 
payment dates.

Changes to Sec.  156.270

     Directs that QHP issuers must follow the transaction rules 
established by the Exchange in accordance with Sec.  155.430(e).

Changes to Sec.  155.285

     Removes the references to sections 1411(h)(1) and (2) of 
the Affordable Care Act and instead inserts the numerical maximum 
penalty amounts.
     Adds a factor allowing HHS to take into consideration 
whether other remedies or penalties have been imposed for the same 
conduct or occurrence at Sec.  155.285(b)(1)(viii).

Changes to Sec.  155.410

     Clarifies that starting in 2014, the Exchange must provide 
written notice of annual open enrollment to each enrollee no earlier 
than the first day of the month before the open enrollment period 
begins and no later than the first day of the open enrollment period.

Changes to Sec.  155.420

     Clarifies that later coverage effective dates for birth, 
adoption, placement for adoption, or placement for foster care will be 
effective the first of the month.
     Clarifies that earlier effective dates are allowed if all 
issuers in an Exchange agree to effectuate coverage only on the first 
day of the specified month.
     Adds that consumers may report a move in advance of the 
date of the move.
     Establishes a special enrollment period for individuals 
losing medically needy coverage.

Changes to Sec.  155.625

     Clarifies, in paragraphs (a) and (b), that the Exchange 
may adopt an exemption eligibility determination made by HHS for 
applications submitted before the start of open enrollment for 2016.

Changes to Sec.  155.705

     Revises the conditions under which a SHOP may permit a 
one-year transition to employee choice.
     Adds a time frame for submission of the State Insurance 
Commissioner's recommendation that employee choice not be implemented 
and for the SHOP's decision based on that recommendation.
     Clarifies that the transitional policy only applies in 
2015.
     Revised in 155.705(b)(3)(vi) that options should be 
singular as one option is available for FF-SHOPs and another for State-
based SHOPs

Changes to Sec.  155.725

     Limits the annual employer and employee election period, 
which begins no sooner than November 15, 2014, so that it applies only 
in FF-SHOPs.

Changes to Sec.  156.122

     Requires a health plan's exception process to include the 
ability to expedite the reviews for exigent circumstances.

[[Page 30324]]

Changes to Sec.  156.130

     Removes the annual limitation on deductibles for small 
group plans.

Changes to Sec.  156.1120 and Sec.  156.1125

     Clarifies, for the QRS and the ESS, the distinction 
between the required level of data submission and collection by QHP 
issuers, specified by HHS, and the level of public reporting or display 
by Exchanges.

Changes to Sec.  158.243

     Does not finalize requirements for distribution of de 
minimis rebates.

V. Waiver of Delay in Effective Date

    Section 553(d) of the APA (5 U.S.C. 553(d)) requires that a final 
rule be effective not less than 30 days from the date of its 
publication in the Federal Register and the Congressional Review Act (5 
U.S.C. 801(a)(3)), which requires a 60-day delayed effective date for 
major rules. This 30-day delay in effective date can be waived, 
however, if otherwise provided by an agency for good cause found and 
published with the rule. For the reasons set forth below, we find good 
cause to waive the 30-day delay in effective date in connection with 
the amendments made in this rule at Sec.  155.705 related to employee 
choice, because the delay is impracticable and contrary to the public 
interest.
    A 30-day delay in the effectiveness of the amendments made to Sec.  
155.705 in this rule would mean that, in States with an FF-SHOP, State 
Insurance Commissioners could not comply with the deadline to recommend 
that employee choice not be implemented, and for a SHOP to make a 
decision based on that recommendation, as set forth in the rule. 
Pursuant to Sec.  155.705(b)(3)(vii), HHS requires that both the State 
Insurance Commissioner's recommendation and the SHOP's decision be 
completed prior to the end of the window within which QHPs can submit 
applications for QHP certification, and that in States with an FF-SHOP, 
the State Insurance Commissioner's recommendations must be submitted on 
or before June 2, 2014. The QHP certification application window for 
the FFE is expected to open on May 27, 2014, and is expected to close 
on June 27, 2014. This would mean that issuers would not know whether 
employee choice would be available in a State within an FF-SHOP prior 
to the close of the QHP application window. Accordingly, issuers would 
be unable to make fully informed decisions about SHOP participation and 
appropriate product pricing when compiling and submitting their QHP 
certification applications, including the rate information included in 
their applications. This uncertainty regarding implementation of 
employee choice potentially could result in fewer QHPs being offered in 
the State's FF-SHOP or products being unnecessarily priced higher than 
necessary, which would negatively affect the small employers that would 
participate in the FF-SHOP, as well as their employees. In order to 
avoid these potential harms to small employers and employees, we 
believe the 30-day delay in the effective date of this provision would 
be impracticable and contrary to the public interest.
    Additionally, it was impracticable for HHS to have proposed this 
approach sooner. The full scope of the issuer and State concerns about 
implementing employee choice that motivated the amendments to Sec.  
155.705 were not made known to HHS until early 2014. HHS previously had 
anticipated that its 2013 decision not to require employee choice in 
SHOPs in 2014 would provide issuers of QHPs and SADPs with ample time 
to prepare to fully implement employee choice for plan years beginning 
in 2015. However, early in 2014, HHS learned that some issuers and 
State Departments of Insurance continued to be concerned about the 
potential effect of employee choice on State small group markets. 
Because employee choice is, for the most part, a relatively new concept 
in the small group market and because many issuers and States do not 
have a lot of experience in an employee choice environment, we 
understand that some issuers believe they do not have sufficient 
information to make pricing and plan design decisions for 2015 that 
would not adversely affect small group market consumers.
    For the reasons outlined above, CMS finds good cause under the APA, 
5 U.S.C. 553(d)(3) to waive the delay in effective date and proceed 
directly with the issuance of a final rule with an immediate effective 
date.

VI. Collection of Information Requirements

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 30-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. This 
final rule contains information collection requirements (ICRs) that are 
subject to review by OMB. 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.
    We are soliciting public comment on each of these issues, which 
contain ICRs. All comments received on these ICRs will be addressed at 
the time the 30-day notice is published to solicit public comments.

A. ICRs Regarding Recertification for Certified Application Counselors 
(Sec.  155.225)

    Under Sec.  155.225(d)(7), certified application counselors are 
required to be recertified on at least an annual basis after 
successfully completing recertification training as required by the 
Exchange. Each Exchange is required to establish its own 
recertification process and standards consistent with these 
requirements. We expect that establishing a process for recertification 
will include creating a recertification request form (or similar 
document) in Exchanges that directly certify certified application 
counselors. We estimate that up to 18 State Exchanges will develop 
their own recertification request form.\41\ We estimate that the 
development of a recertification request form, as may be applicable for 
Exchanges that directly certify certified application counselors, will 
take a health policy analyst (at $49.35 labor cost per hour) up to 1 
hour to create, a senior manager (at $79.08 cost per hour) up to .5 
hours (30 minutes) for review, and an attorney up to .5 hours (at 
$90.15 labor cost per hour) for legal review. We estimate that the one-
time burden will be two hours with a cost burden of $134 for each 
Exchange, and the total burden for 18 State Exchanges will be 36 hours 
with a cost burden of $2,412.
---------------------------------------------------------------------------

    \41\ We estimate 18 State Exchanges (which includes Utah's SHOP) 
will develop their own processes for recertification. HHS will 
establish a single process in all FFEs.
---------------------------------------------------------------------------

    There are recordkeeping requirements associated with developing and 
maintaining a request form. We estimate that the time burden associated 
with maintaining a copy of the request form will be .016 hours (1 
minute); we assume that a mid-level health policy analyst will maintain 
electronic copies

[[Page 30325]]

of the form at minimal cost, which we estimate as $0.79 as a one-time 
requirement for the Exchange. The total burden for 18 Exchanges is 
estimated to be 1.08 hours and the total cost burden will be $14.22.
    There will also be third-party disclosure requirements for 18 State 
Exchanges associated with reviewing each certified application 
counselor's recertification request, which will require the Exchange to 
notify the individual of the result of its review and issue a new 
certificate for each individual who successfully completes 
recertification. This notice requirement will apply to the Exchange on 
an annual basis. We estimate that it will take a mid-level health 
policy analyst in the Exchange up to .08 hours (5 minutes) to notify an 
individual. The estimated cost burden is $4.11 for each individual 
notice, including the certificate. For purposes of this analysis, we 
estimate that there will be approximately 30,000 certified application 
counselors nationwide, or approximately 10,600 application counselors 
in 18 State Exchanges. The total cost burden will be approximately 
$2,422 for each State Exchange. The total burden for 18 State Exchanges 
will be approximately 883 hours and the total cost burden will be 
$43,593. There will be recordkeeping requirements associated with 
issuing each individual notice. We estimate that the time burden 
associated with maintaining a copy of the notice and certificate will 
be .016 hours (1 minute); we assume that a mid-level health policy 
analyst, with a labor cost of $49.35 an hour, will maintain electronic 
copies of the form at minimal cost, which we estimate as $0.79 per 
notice for each individual certified application counselor. The total 
recordkeeping burden for 10,600 certified application counselors in 18 
State Exchanges is estimated to be 170 hours and the total cost burden 
will be $8,374, or $265 per Exchange.
    For Exchanges that designate organizations to directly certify 
certified application counselors under Sec.  155.225(b)(1), there will 
be requirements associated with implementing a recertification process 
under the applicable Exchange's standards. We expect that this process 
will include creating and issuing a recertification request form (or 
similar document) for an organization's certified application 
counselors to submit to indicate their intention to be recertified and 
provide an updated conflicts of interest disclosure or other 
attestations as may be required. We estimate that up to 5,000 
designated organizations will develop their own recertification request 
form. We estimate that the development of a recertification request 
form will take a health policy analyst (at $49.35 labor cost per hour) 
up to 1 hour to create, a senior manager (at $79.08 labor cost per 
hour) up to .5 hours (30 minutes) for review, and an attorney (at 
$90.15 labor cost per hour) up to .5 hours (30 minutes) for legal 
review. We estimate that the one-time cost burden will be $134 for each 
organization. The total one-time burden for 5,000 organizations 
nationwide will be 10,000 hours and the total cost burden will be 
$670,000.
    There will be recordkeeping requirements associated with developing 
and maintaining a request form. We estimate that the time burden 
associated with maintaining a copy of the request form will be .016 
hours (1 minute); we assume that a mid-level health policy analyst with 
a labor cost of $49.35 an hour will maintain electronic copies of the 
form at minimal cost, which we estimate as $0.79 as a one-time 
requirement for each organization. The total one-time burden for 5,000 
organizations nationwide is estimated to be 80 hours and the total cost 
burden will be $3,950.
    There will also be third-party disclosure requirements for 
designated organizations associated with reviewing each certified 
application counselor's recertification request, which will require the 
organization to notify the individual of the result of its review and 
issue a new certificate as appropriate. This notice requirement will 
apply to the organization on an annual basis. For purposes of 
estimating the burden on designated organizations, we assume that of 
the estimated 30,000 certified application counselors nationwide, 
approximately 19,400 will be directly certified by designated 
organizations, or four certified applications counselors on average per 
designated organization. We estimate that it will take a mid-level 
health policy analyst up to .08 hours (5 minutes) to notify an 
individual and issue a new certificate. The estimated cost burden is 
$4.11 for each individual notice. For an estimated 19,400 certified 
application counselors nationwide, or approximately four certified 
application counselors on average in each organization, the total cost 
burden will be approximately $16.44 for each organization. The total 
burden for 5,000 designated organizations nationwide will be 
approximately 1,617 hours and the total cost burden will be 
approximately $79,734.
    There will be recordkeeping requirements associated with issuing a 
certificate. We estimate that the time burden associated with 
maintaining a copy of each certificate issued at recertification will 
be .016 hours (1 minute). We assume that a mid-level health policy 
analyst with a labor cost of $49.35 an hour will maintain electronic 
copies of the form at minimal cost, which we estimate as $0.79 per 
certificate for each organization. The total recordkeeping cost per 
organization will be $3.16. The total burden for 5,000 organizations 
nationwide will be 323 hours and the total cost burden will be 
approximately $ 15,326.
    There will be third-party disclosure requirements for individual 
certified application counselors associated with completing the 
requirements for recertification, whether done directly through the 
Exchange or through an Exchange-designated certified application 
counselor organization. Such recertification requirements will include 
completing Exchange required training and might also include satisfying 
other requirements consistent with the Exchange-established processes, 
such as providing conflicts of interest disclosures, other attestations 
and submitting a recertification request form (or similar document) and 
other attestations. These requirements will apply to certified 
application counselors on an annual basis. Although nothing prohibits 
individual certified application counselors or organizations from being 
funded through sources such as applicable private, State, or Federal 
programs, we expect that certified application counselors will not be 
guaranteed any specific funding. We estimate the professional wage of 
certified application counselors for this type of work as equivalent to 
that of an eligibility interviewer for assistance from government 
programs and agency resources. We estimate that it will take a 
certified application counselor with a labor cost of $26.65 an hour up 
to 0.17 hours (10 minutes) to complete and submit the recertification 
request to the organization or Exchange, as applicable. The estimated 
cost burden will be $4.53 for each individual seeking recertification. 
We estimate that there will be approximately 30,000 recertification 
requests provided, for a total burden of 5,000 hours and a total cost 
burden of $135,915 for all certified application counselors nationwide.
    There will be third-party disclosure requirements associated with 
taking recertification training. We expect that an individual certified 
application counselor will provide proof to the organization or 
Exchange that he or she has successfully completed the recertification 
training, in accordance with the Exchange's process. We

[[Page 30326]]

estimate that it will take a certified application counselor with a 
labor cost of $26.65 an hour up to .03 hours (2 minutes) to provide the 
training certificate to the organization or Exchange, as may be 
required. The total estimated cost burden is $0.80 for each individual 
seeking recertification. We estimate that there will be approximately 
30,000 training certificates provided, and the total burden will be 
1,000 hours, with a total cost burden of $24,000 for all certified 
application counselors nationwide.
    In addition, there will be recordkeeping requirements associated 
with the training certification. We expect each person who receives 
training will obtain and maintain a record of training certification. 
We estimate that the time burden associated with maintaining proof of 
training certification is .016 hours (1 minute), since we assume this 
proof will be maintained through electronic copies, at minimal cost. 
The total cost estimated for each individual to maintain proof of 
training certification will be $0.43. The total burden will be 500 
hours and the total cost burden will be $12,900 for all certified 
application counselors nationwide.

B. ICRs Regarding Consumer Authorization (Sec. Sec.  155.210 and 
155.215)

    For purposes of the ICRs associated with these provisions, we use 
the same labor cost estimates that were used in the final Navigator and 
non-Navigator assistance personnel standards rule (Patient Protection 
and Affordable Care Act; Exchange Functions: Standards for Navigators 
and Non-Navigator Assistance Personnel, July 17, 2013, 78 FR 42842). 
Navigator personnel and non-Navigator assistance personnel to which 
Sec.  155.215 applies are estimated to have a labor cost of $20 per 
hour. Project leads for Navigator and non-Navigator assistance entities 
to which Sec.  155.215 applies are estimated to have a labor cost of 
$29 per hour. Senior executives for Navigator and non-Navigator 
assistance entities to which Sec.  155.215 applies are estimated to 
have a labor cost of $48 per hour. These are estimates commonly used 
for estimating paperwork burden and do not represent a recommendation 
or a requirement of how much Navigator and non-Navigator personnel to 
which Sec.  155.215 applies are to be paid. There is nothing in the 
regulations that require any of these workers to be paid any specific 
amount.
    In the ICR currently approved under OMB control number 0938-1220, 
we noted that there were 105 Navigator grantee organizations at that 
time in FFEs, including SPEs, and we estimated that there were 3,000 
individuals working as Navigators. We estimated the number of non-
Navigator assistance project leads to be 300 and 1,800 for personnel 
and we use those estimates here as well.
    In accordance with Sec.  155.210(e)(6) and Sec.  155.215(g), 
Navigators, as well as those non-Navigator personnel to whom Sec.  
155.215 applies, will be required to maintain procedures to inform 
consumers of the functions and responsibilities of Navigators and non-
Navigator assistance personnel (as applicable), and to obtain 
authorization for the disclosure of consumer information to the 
Navigator or non-Navigator assistance personnel (as applicable). This 
will be a one-time requirement for the organization. We estimate that 
it will take a Navigator or non-Navigator assistance personnel project 
lead up to 2 hours to create the form for providing authorization to 
applicants, and a Navigator or non-Navigator senior executive up to 1 
hour to review the procedure, for a total time burden of up to 3 hours. 
We estimate the cost burden associated with creating this procedure 
will be $106 per organization. The total cost for all 105 Navigator 
grantee organizations is estimated to be $11,130. The total cost for 
all 300 non-Navigator assistance personnel organizations is estimated 
to be $31,800.
    There are also recordkeeping requirements associated with 
developing and maintaining a model agreement and authorization form. 
Each organization is expected to maintain a copy of the executed forms. 
We estimate that the time burden associated with maintaining a copy of 
executed agreement and authorization forms for each consumer will be 
0.016 hours (1 minute); we assume these will be maintained through 
electronic copies with minimal cost.
    In addition, there will be burdens on individual Navigators, as 
well as those non-Navigator assistance personnel to whom Sec.  155.215 
applies. Under Sec.  155.210(e)(6) and Sec.  155.215(g), respectively, 
Navigators and non-Navigator assistance personnel will be required to 
inform consumers of the functions and responsibilities of Navigators 
and non-Navigator assistance personnel and obtain authorization for the 
disclosure of consumer information to a Navigator or non-Navigator 
assistance personnel prior to obtaining the consumer's personally 
identifiable information. In the final rule on certified application 
counselors (78 FR 42824, 42854-42855), we estimated that it will take a 
certified application counselor 0.25 hours (15 minutes) to provide 
consumers with information about the functions and responsibilities of 
a certified application counselor, obtain their authorizations, and 
provide any applicable conflict of interest disclosures. Because here 
we are only estimating the time required to provide consumers with 
information about the functions and responsibilities of a Navigator or 
non-Navigator assistance personnel and obtain their authorization, we 
estimate that it will take a Navigator or non-Navigator assistance 
personnel 0.1667 hours (10 minutes) to perform this task. The total 
cost estimate for the consumer authorization process for Navigators and 
non-Navigator assistance personnel therefore will be $3.33. The total 
time burden on all 3,000 Navigators is estimated to be approximately 
500 hours, and the total cost burden on all 3,000 Navigators is 
estimated to be $9,990. The total time burden on all 1,800 non-
Navigator assistance personnel is estimated to be 300 hours, and the 
total cost burden on all 1,800 non-Navigator assistance personnel is 
estimated to be $5,994.

C. ICRs Regarding Enrollee Satisfaction & Marketplace Surveys 
(Sec. Sec.  155.1200, 156.1105 and 156.1125)

    In Sec.  156.1105 of this rule, we establish a monitoring and 
appeals process for HHS-approved ESS vendors. Specifically, in Sec.  
156.1105(d), we establish a process in which HHS will monitor approved 
vendors for ongoing compliance. HHS may require additional information 
from approved vendors to be periodically submitted in order to ensure 
continued compliance. We estimate that HHS will receive applications 
from approximately 40 ESS vendors. We estimate that it will take no 
longer than one hour for each vendor (at a cost of $24.10 per hour) to 
comply with any additional monitoring by HHS. Therefore, we estimate a 
total annual burden of 40 hours for all vendors for a total cost burden 
estimate of $964.00.
    In Sec.  156.1105(e) of this rule, we establish a process by which 
an ESS vendor that is not approved by HHS can appeal HHS's 
determination. It is estimated that filing an appeal with HHS will take 
no longer than one hour. We estimate that five survey vendors that 
apply may not be approved and all of those vendors will appeal HHS's 
determination and submit additional documentation to HHS. Therefore, we 
estimate five responses, for a total of five burden hours, for a total 
cost of $120.50.
    The burden estimate associated with quality standards for QHP 
issuers related to the ESS outlined in

[[Page 30327]]

Sec.  156.1125 will include the time and effort required for QHP 
issuers to collect, submit and validate ESS data on an annual basis. 
The burden and cost related to the survey respondents and ESS vendors 
associated with the ESS has been approved under OMB Control Number 
0938-1221. In addition, we estimate that each QHP will need an average 
of 54 hours or $1,349.60 for the ESS to be administered by mail, phone 
and/or by web for its QHPs. Assuming a total of 575 QHP issuers, we 
estimate that the annual burden will be 31,050 hours or $776,020.
    The burden with the Marketplace survey under Sec.  155.1200(b)(3) 
will include the time, cost and effort related to survey respondents 
and has been approved under OMB Control Number 0938-1221. In addition, 
we will revise the information collection currently approved under OMB 
Control Number 0938-1119 to account for any additional burden for an 
Exchange if sampling data is needed from State Exchanges for CMS to 
administer the Marketplace survey.

D. ICR Regarding Quality Rating System (Sec.  156.1120)

    The burden and cost estimates associated with quality standards for 
QHP issuers related to the QRS outlined in Sec.  156.1120 include 
estimates for QRS measure data collection, validation, and submission 
to CMS. We estimate that a total of 575 QHP issuers will collect and 
report QRS measure data, by product type, using administrative data 
sources and medical records. Using the BLS labor category estimates for 
a general operations manager, computer programmer, business operations 
specialist, registered nurse, and medical records and health 
information analyst, the estimated annual cost and hourly burden for a 
QHP issuer will be 1650 hours or $117,424, for an issuer who has 
performance measures data collection experience. We estimate that 
approximately eighty percent of all issuers, or 460 issuers, have such 
experience. We anticipate additional software purchases to generate 
measure data and rates and increased third-party data validation fees 
for issuers that do not have the experience in data collection and 
reporting for the QRS as required in Sec.  156.1120. Therefore, we 
estimate that the additional cost burden for each of the remaining 115 
issuers will be approximately $102,500 in the initial year as they 
develop their data collection systems and processes, for a total of 
approximately $11,787,500. We estimate 948,750 hours or $67,518,800 as 
the total annual burden for the anticipated 575 QHP issuers to collect 
and report QRS data.

E. ICRs Regarding Quality Standards for Exchanges (Sec. Sec.  155.1400 
and 155.1405)

    In Sec.  155.1400 and Sec.  155.1405, we direct that each Exchange 
must display, on its Web site, quality rating and ESS result 
information for QHPs offered on the Exchange. We estimate 18 State 
Exchanges and the FFE will collect the relevant QRS and ESS information 
for display. The burden estimate associated with these standards will 
include collection of the necessary data by each Exchange to display on 
its Web site. This burden and cost for Exchanges are currently approved 
under OMB Control Number 0938-1156 in the total estimates related to 
Sec.  155.205(b) which requires the Exchange to maintain an up-to-date 
Internet Web site that provides information including ESS and quality 
ratings, on available QHPs offered on the Exchange. The provisions of 
this final rule will not affect the burden.

F. ICR Regarding Medical Loss Ratio Requirements (Sec. Sec.  158.150, 
158.211, 158.220, 158.221, and 158.231)

    This rule amends the MLR provisions regarding the treatment of ICD-
10 conversion costs. This rule further provides MLR calculation 
adjustments for issuers affected by the transitional policy announced 
in the CMS letter dated November 14, 2013 and for issuers participating 
in the Exchanges. This rule also clarifies how issuers are to calculate 
their MLRs in States that require the small group market and individual 
market to be merged. Both MLRs and rebates are reported on the MLR 
annual reporting form.
    The burden for the existing information collection requirement is 
approved under OMB Control Number 0938-1164. This includes the annual 
reporting form and instructions that are currently used by issuers to 
submit MLR information to HHS. The MLR annual reporting form collects 
information on all distributed and owed rebate amounts. Prior to the 
July 31, 2015 deadline for the submission of the annual MLR report for 
the 2014 MLR reporting year, and in accordance with the PRA, HHS plans 
to solicit public comment and seek OMB approval for an updated MLR 
annual form that will reflect the changes in MLR calculations. We do 
not anticipate that the amendments finalized in this rule will increase 
the burden on issuers because the changes utilize data that is a subset 
of information that issuers already submit to HHS.

G. ICRs Regarding Civil Money Penalties (Sec. Sec.  155.206 and 
155.285)

    Section 155.206 describes the bases and processes HHS proposes to 
use to impose CMPs on noncompliant consumer assistance personnel and 
organizations. Section 155.285 describes the bases and processes HHS 
proposes to use to impose CMPs on persons who provide false or 
fraudulent information required under section 1411(b) of the Affordable 
Care Act or who knowingly and willfully use or disclose information in 
violation of section 1411(g) of the Affordable Care Act. The ICRs in 
these provisions are exempt from PRA requirements in accordance with 5 
CFR 1320.4(a)(2) because this information will be collected during the 
conduct of an administrative action or investigation involving an 
agency against specific individuals or entities.

H. ICRs Regarding Fixed Indemnity Insurance, Notice of Discontinuation, 
Notice of Renewal, Certifications of Creditable Coverage and HIPAA Opt-
Out Election Notice, (Sec. Sec.  146.152, 146.180, 147.106, 148.122, 
148.124, and 148.220)

    In Sec.  148.220 of this rule, we require that issuers of 
individual market fixed indemnity insurance provide a notice stating 
that the coverage is not a substitute for major medical coverage and 
that lack of minimum essential coverage may result in an additional 
payment with one's taxes. For policies issued after January 1, 2015 the 
notice must be included in the application for coverage and for 
policies issued before that date, the notice must be delivered shortly 
before the first renewal date occurring on or after January 1, 2015. 
HHS has provided the exact text of the notice and it will not need to 
be customized. Sections 146.152, 147.106 and 148.122 of this rule 
provide that issuers that discontinue a product in the group or 
individual market, and issuers that provide the option to renew 
coverage in the small group or individual market, must provide written 
notices to enrollees in a form and manner specified by the Secretary. 
HHS will provide the exact text of the notices in future guidance and 
they will not need to be customized. The burden associated with these 
notices are not subject to the Paperwork Reduction Act of 1995 in 
accordance with 5 CFR 1320.3(c)(2).
    Certifications of creditable coverage under Sec.  148.124 will no 
longer be required to be provided starting December 31, 2014. The 
burden is currently approved under OMB Control Number 0938-0702. In the 
individual

[[Page 30328]]

market, the anticipated reduction in annual burden hours will be 
835,517, with an anticipated reduction in cost of $25,625,306. The 
burden for HIPAA Opt-out Election notices under Sec.  146.180 is 
currently approved under OMB Control Number 0938-0702 as well. 
Electronic submission of opt-out election notice will also reduce costs 
for plans by eliminating the need for mailing paper forms.

I. Emergency Clearance: Public Information Collection Requirements 
Submitted to the Office of Management and Budget (OMB)

    In compliance with section 3506(c)(2)(A) of the Paperwork Reduction 
Act of 1995, the Centers for Medicare & Medicaid Services (CMS), 
Department of Health and Human Services, is publishing a summary of 
this proposed information collection for public comment. Interested 
persons are invited to send comments regarding this collection's 
proposed burden estimates or any other aspect of this collection of 
information, including any of the following subjects: (1) The necessity 
and utility of the proposed information collection for the proper 
performance of the agency's functions; (2) the accuracy of the 
estimated burden; (3) ways to enhance the quality, utility, and clarity 
of the information to be collected; and (4) the use of automated 
collection techniques or other forms of information technology to 
minimize the information collection burden.
    In compliance with section 3506(c)(2)(A) of the Paperwork Reduction 
Act of 1995, we have also submitted to the Office of Management and 
Budget (OMB) the proposed information collection for their emergency 
review. While the collection is necessary to ensure compliance with an 
initiative of the Administration, we are requesting emergency review 
under 5 CFR 1320(a)(2)(i) because public harm is reasonably likely to 
result if the regular clearance procedures are followed. The approval 
of this data collection process is essential to ensuring that States 
seeking to transition to employee choice in 2015 can submit 
recommendations to the SHOP by the deadline established in this final 
rule, which, in the FF-SHOPs, is on or before June 2, 2014. Without an 
emergency clearance process, many States seeking to not implement 
employee choice in 2015 will not be able to submit their recommendation 
and have it reviewed in a timely manner by the SHOP. Given the short 
time until the QHP certification window opens and closes, it is 
critical that the information concerning this process be posted by the 
day of publication of this final rule so issuers are aware if their 
particular States will not be implementing employee choice in 2015 
before they decide to participate and submit their final rates for 
certification during the initial QHP certification window. If CMS is 
required to delay recommendation collection and review, this will 
severely impede its ability to implement this transitional policy in 
the FF-SHOPs.
ICR Regarding 2015 Transition to Employee Choice (Sec.  155.705)
    For the FF-SHOP States that would like to submit a recommendation 
that the FF-SHOP not implement employee choice in 2015, pursuant to 
Sec.  155.705(b)(2), there will be a formal application process. This 
process will include the submission of a recommendation by the State's 
Insurance Commissioner. The written recommendation must adequately 
explain that it is the State Insurance Commissioner's expert judgment, 
based on a documented assessment of the full landscape of the small 
group market in his or her State, that not implementing employee choice 
would be in the best interests of small employers and their employees 
and dependents, given the likelihood that implementing employee choice 
would cause issuers to price products and plans higher in 2015 due to 
the issuers' beliefs about adverse selection. A State Insurance 
Commissioner's recommendation would need to be based on concrete 
evidence, including but not limited to discussions with those issuers 
expected to participate in the SHOP in 2015.
    We estimate that the development of an application by the Insurance 
Commissioner will take up to 40 hours to create (at $50.00 labor cost 
per hour). We estimate that up to 16 States will submit the application 
and the one-time cost burden will be $2,000 for each State. The total 
burden for all States is estimated to be 640 hours or $32,000.
    We are requesting OMB review and approval of this emergency 
collection by May 27, 2014, with a 180-day approval period. Written 
comments and recommendations for this emergency request only will be 
considered from the public if received by the date and address noted 
below.
    Copies of the supporting statement and any related forms can be 
found at: http://www.cms.hhs.gov/PaperworkReductionActof1995 or can be 
obtained by emailing your request, including your address, phone 
number, OMB number, and CMS document identifier, to: 
[email protected], or by calling the Reports Clearance Office at: 
410-786-1326.
    When commenting on this proposed information collection, please 
reference the CMS document identifier and the OMB control number. To be 
assured consideration, comments and recommendations must be received in 
one of the following ways by May 23, 2014:
    1. Electronically. You may submit your comments electronically to 
http://www.regulations.gov. Follow the instructions for ``Comment or 
Submission'' or ``More Search Options'' to find the information 
collection document(s) accepting comments.
    2. By regular mail. You may mail written comments to the following 
address:

CMS, Office of Strategic Operations and Regulatory Affairs, Division of 
Regulations Development, Attention: Document Identifier (CMS-10523), 
Room C4-26-05, 7500 Security Boulevard, Baltimore, Maryland 21244-1850, 
and,
OMB Office of Information and Regulatory Affairs, Attention: CMS Desk 
Officer, New Executive Office Building, Room 10235, Washington, DC 
20503, Fax Number: 202-395-6974.

VII. Regulatory Impact Analysis

A. Summary

    This final rule addresses various requirements applicable to health 
insurance issuers, Exchanges, Navigators, non-Navigator assistance 
personnel, and other entities under the Affordable Care Act. 
Specifically, the rule establishes standards related to product 
discontinuation and renewal, quality reporting, non-discrimination 
standards, minimum certification standards and responsibilities of QHP 
issuers, the SHOP, and enforcement remedies in FFEs. It also provides a 
number of amendments relating to the premium stabilization programs, 
calculation of annual limit on cost sharing, the MLR program, certified 
application counselor programs, affordability exemptions, standards 
regarding how enrollees may request access to non-formulary drugs under 
exigent circumstances, and guaranteed availability and renewability of 
coverage requirements. Additionally, it establishes the grounds for 
imposing CMPs on persons who provide false or fraudulent information to 
the Exchange and on persons improperly using or disclosing information; 
and modifies standards related to opt-out provisions for self-funded 
non-Federal

[[Page 30329]]

governmental plans and individual market provisions under HIPAA.
    CMS has crafted this rule to implement the protections intended by 
Congress in an economically efficient manner. We have examined the 
effects of this rule as required by Executive Order 12866 (58 FR 51735, 
September 1993, Regulatory Planning and Review), the Regulatory 
Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 
1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 
1995 (Pub. L. 104-4), Executive Order 13132 on Federalism, and the 
Congressional Review Act (5 U.S.C. 804(2)). In accordance with OMB 
Circular A-4, CMS has quantified the benefits, costs and transfers 
where possible, and has also provided a qualitative discussion of some 
of the benefits, costs and transfers that may stem from this final 
rule.

B. Executive Orders 13563 and 12866

    Executive Order 12866 (58 FR 51735) directs agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects; distributive impacts; and equity). Executive 
Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and 
reaffirms the principles, structures, and definitions governing 
regulatory review as established in Executive Order 12866.
    Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a final 
rule--(1) having an annual effect on the economy of $100 million or 
more in any one year, or adversely and materially affecting a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities 
(also referred to as ``economically significant''); (2) creating a 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year), and a ``significant'' regulatory action is subject to review by 
the OMB. HHS has concluded that this rule is likely to have economic 
impacts of $100 million or more in any one year, and therefore meets 
the definition of ``significant rule'' under Executive Order 12866. 
Therefore, HHS has provided an assessment of the potential costs, 
benefits, and transfers associated with this final regulation.
1. Need for Regulatory Action
    Starting in 2014, qualified individuals and qualified employers are 
able to obtain coverage provided through Exchanges. The provisions, 
amendments and clarifications in this final rule address stakeholder 
concerns and inquiries and help ensure smooth functioning of health 
insurance markets and Exchanges and ensure that individuals have access 
to high quality and affordable health insurance coverage. In addition, 
this rule amends the methodologies for calculating the MLR to address 
ICD-10 conversion costs, MLR and rebate calculations in States that 
require the individual and small group markets to be merged, and to 
accommodate the special circumstances of issuers affected by the 
transitional policy announced in the CMS letter dated November 14, 
2013, and issuers participating in the State and Federal Exchanges.
2. Summary of Impacts
    In accordance with OMB Circular A-4, Table VII.1 below depicts an 
accounting statement summarizing CMS's assessment of the benefits, 
costs, and transfers associated with this regulatory action. The period 
covered by the RIA is 2014-2018.
    HHS anticipates that the provisions of this final rule will help 
ensure that all consumers have access to quality and affordable health 
care coverage and are able to make informed choices, ensure smooth 
operation of Exchanges, ensure that premium stabilization programs work 
as intended, provide flexibility to SHOPs and employers, and protect 
consumers from fraudulent and criminal activities and help to mitigate 
issuers' unexpected administrative costs and uncertainties around 
operations and the risk pool, and to stabilize the market as it 
continues to transition to full compliance with Affordable Care Act 
requirements. Affected entities such as QHP issuers, Navigators and 
non-Navigator assistance personnel, designated certified application 
counselor organizations, certified application counselors, survey 
vendors, and States may incur costs to comply with the provisions in 
this final rule, including administrative costs related to notices, 
surveys, training, and recertification requirements. In accordance with 
Executive Order 12866, HHS believes that the benefits of this 
regulatory action justify the costs.

                                          Table VII.1--Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Benefits:
----------------------------------------------------------------------------------------------------------------
Qualitative:
* Ensure access to affordable and quality health insurance coverage for all individuals.
* Minimize unnecessary terminations of coverage and ensure predictability and continuity for consumers.
* Allow consumers to make informed choices.
* Lower out-of-pocket costs for individuals who purchase fixed indemnity insurance.
* Possible reduction in cost sharing due to adjustment in methodology for calculating annual limitations on cost-
 sharing.
* Help ensure sufficiency of funds in the reinsurance payment pool.
* Ensure consumer protection and privacy and security of PII.
* Discourage fraudulent or criminal activity by consumer assistance personnel and entities.
* Provide additional flexibility to FF-SHOPs and employers and allow employers to select plans with updated rate
 information.
* Improve consistency of MLR calculations among issuers in States with merged individual and small group markets
 and improve accuracy of rebate payments.
----------------------------------------------------------------------------------------------------------------
 

[[Page 30330]]

 
Costs:                                       Estimate                  Year          Discount         Period
                                                                          dollar    rate percent         covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/ $48.78 million \1\                         2013               7       2014-2018
 year)                           $49.52 million \1\                         2013               3       2014-2018
----------------------------------------------------------------------------------------------------------------
Net annual costs to enrollees related to ESS and Marketplace survey; recertification of certified application
 counselors by States; costs to States to submit recommendations to not implement employee choice in 2015;
 administrative costs incurred by survey vendors to appeal application denials; administrative costs to QHP
 issuers related to data submissions for QRS and ESS administration; costs related to notice and disclosure
 requirements for certified application counselor recertification; consumer authorization for Navigators and non-
 Navigator personnel; and a reduction in costs for issuers in the individual market due to discontinuation of
 certification of creditable coverage.
----------------------------------------------------------------------------------------------------------------
Qualitative:
* Costs to certified application counselors to obtain required training for recertification.
* Reduction in costs to consumers due to ability to make requests to dismiss appeals by telephone.
* Costs to issuers to comply with the standards for expedited review of a formulary exception request based on
 exigent circumstances.
----------------------------------------------------------------------------------------------------------------
Transfers:                                   Estimate                  Year          Discount         Period
                                                                          dollar    rate percent         covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/ $2.93 million                              2013               7       2014-2018
 year)                           $2.99 million                              2013               3       2014-2018
----------------------------------------------------------------------------------------------------------------
Net annual transfer of rebate dollars to enrollees from shareholders or nonprofit stakeholders, resulting from
 adjustment in MLR methodology for issuers in States with merged individual and small group markets.
----------------------------------------------------------------------------------------------------------------
Qualitative:
* Possible reduction in rebates paid by issuers to enrollees due to adjustment in MLR methodology for issuers
 affected by the November 2013 transitional policy and unexpected costs during the implementation of the
 Exchanges, and to account for ICD-10 conversion costs.
* Possible transfer of transitional reinsurance program funds collected by the Federal government to non-
 grandfathered reinsurance-eligible plans in the individual market.
* Possible increase in total risk corridors payment amounts made by the Federal government and decrease in total
 risk corridors receipts.
----------------------------------------------------------------------------------------------------------------
\1\ Note: Approximately $13 million in costs are estimated in the RIA below and the remaining costs related to
  ICRs are estimated in section VI above.

3. Anticipated Benefits, Costs and Transfers
    The impacts of the existing regulations that are being amended and 
clarified in this final rule have already been addressed in RIAs 
included in previous rulemaking. This RIA only includes the impacts of 
new provisions and any changes to previous estimates as a result of 
amendments to existing provisions.
Benefits
    Provisions of this final rule will help ensure that all individuals 
have access to affordable and quality health insurance coverage and the 
necessary information to make informed choices. Making quality rating 
and ESS information available to consumers will allow them to make 
informed choices and provide issuers with an incentive to improve 
quality of care and consumer experience. The results from the 
Marketplace survey will drive quality improvement in Exchanges by 
collecting information on the consumer experience with the Exchange. In 
addition, the quality rating and ESS information will also provide 
regulators and stakeholders with information to use for monitoring and 
oversight purposes. The amendments to special enrollment periods will 
ensure that individuals who experience loss of coverage or exceptional 
circumstances have continued access to healthcare. The provisions 
regarding the formulary exceptions process will ensure that enrollees 
will have continued access to necessary prescription drugs.
    The provisions of this final rule also establish minimum Federal 
standards that determine whether coverage modifications constitute 
continuance of an existing product in a market within a State for 
products offered both through and outside of an Exchange in the 
individual and small group markets. This will minimize unnecessary 
terminations of coverage and ensure predictability and continuity for 
consumers, while providing issuers the flexibility to make the 
necessary adjustments to coverage. The notices of product 
discontinuance and renewal will ensure that consumers have necessary 
information regarding their choices and the changes in coverage.
    The amendments for fixed indemnity insurance will allow such plans 
to be sold as secondary to other health insurance coverage that meets 
the definition of minimum essential coverage. Such plans may also be 
sold to individuals who are deemed to have minimum essential coverage 
based on their status as bona fide residents of U.S. territories. This 
will allow individuals that buy such coverage to lower their out-of-
pocket costs.
    The adjustments to the transitional reinsurance program will help 
ensure that the reinsurance payment pool is sufficient to provide the 
premium stabilization benefits intended by the statute. This policy may 
lower premiums by reducing the uncertainty associated with reinsurance 
payments to individual market plans eligible for reinsurance payments. 
The adjustments to the risk corridors formula for the 2015 benefit year 
will help to mitigate issuers' unexpected administrative costs and 
uncertainties around operations and the risk pool, and to stabilize the 
market as it continues to transition to full compliance with Affordable 
Care Act requirements.
    The provisions in this final rule will ensure that non-Federal 
requirements do not prevent Navigators, non-Navigator assistance 
personnel, certified application counselors and organizations from 
providing information and assisting individuals to make informed 
choices and obtain health insurance coverage. The provisions in this 
rule also specify some of the standards for Navigator and certified 
application counselor conduct that will ensure consumer protection

[[Page 30331]]

and ensure that Navigators provide information and services concerning 
enrollment in QHPs in a fair and impartial manner and that certified 
application counselors act in consumers' best interests. The rule will 
also provide HHS with the authority to impose CMPs on Navigators, non-
Navigator assistance personnel, certified application counselors, and 
certified application counselor organizations in the FFE who violate 
certain Exchange standards applicable to them. This will ensure that 
consumers interacting with the Exchange receive high-quality assistance 
and robust consumer protections. The provisions to impose CMPs for 
provision of false or fraudulent information, and improper use or 
disclosure of information will also ensure privacy and security of 
consumers' PII.
    Aligning the start of annual employer election periods in the FF-
SHOPs with the start of open enrollment in the corresponding individual 
market Exchange will benefit issuers. A uniform QHP filing and review 
timeline for both markets for 2015 will reduce confusion and provide 
efficiencies to scale in review, providing potential resource savings 
to QHP issuers. Removing the required minimum lengths of both the 
employer election period and the employee open enrollment period will 
provide additional flexibility to State-based SHOPs and employers and 
allow employers to select plans with the most up-to-date rate 
information.
    The amendment to provide a one-year transition policy under which a 
SHOP will be permitted to not implement employee choice in 2015 will 
alleviate State and issuer concerns that employee choice would cause 
issuers to price their products and plans higher in 2015 due to 
issuers' beliefs about adverse selection. Allowing for this 
transitional policy in 2015 will provide minimal disruption to small 
group markets.
    The amendment to our methodology for calculating the annual 
limitation on cost sharing may reduce cost sharing paid by some 
enrollees in the individual market.
    The amendments to the MLR methodology in States that require the 
small group market and individual market to be merged will improve the 
consistency of MLR calculations among issuers in those States and 
improve the accuracy of rebate payments.
    The methodology for determining the required contribution 
percentage will provide that determinations of affordability exemptions 
will take into account the rate of premium growth over the rate of 
income growth. We do not anticipate that this approach will 
significantly alter the number of individuals who are expected to 
enroll in health insurance plans or make shared responsibility 
payments.
Costs
    Affected entities will incur costs to comply with the provisions of 
this final rule. Costs related to ICRs subject to PRA are discussed in 
detail in section VI and include administrative costs incurred by 
survey vendors to appeal application denials; costs to QHP issuers 
related to data submissions for QRS, ESS administration; costs related 
to notice and disclosure requirements for certified application 
counselor recertification, consumer authorization for Navigators and 
non-Navigator assistance personnel; costs to States to submit a 
recommendation for a 2015 transition to employee choice; and a 
reduction in costs for issuers in the individual market due to 
discontinuation of certification of creditable coverage. In this 
section, we discuss other costs related to the provisions of this rule.
    Each Exchange must establish its own recertification process for 
certified application counselors and designated certified application 
counselor organizations. We expect that establishing a process for 
recertification will include updating recertification training 
materials in all Exchanges. We estimate that up to 18 State Exchanges 
will develop their own training materials. We expect that an Exchange 
will develop training materials for recertification on an annual basis. 
We assume that it will take a mid-level health insurance analyst (with 
an hourly labor cost of $49.35) 8 hours to update the training, 4 hours 
for a computer programmer (at $52.50 per hour) to update the online 
training module and 1 hour by a senior manager (at $79.08 per hour) to 
review. The total cost for each State Exchange is estimated to be 
approximately $680, and the total cost for18 State Exchanges will be 
approximately $12,240.
    The requirement for appeals entities to dismiss an appeal if the 
request is received via telephonic signature (if the appeals entity is 
capable of accepting telephonic withdrawals) will make the process more 
efficient and may reduce costs to the appellant.
    The ESS will impact enrollees responding to the survey, survey 
vendors and QHP issuers offering coverage in the Exchanges. In 2014, a 
psychometric test of the survey will be carried out, while in 2015 a 
beta test will be performed. The cost to issuers is addressed in 
section VI. We anticipate that in 2014, 4,200 enrollees will 
participate in the psychometric test and in 2015 onwards, 6,000,040 
enrollees will complete the survey. The total cost in 2014 of 
administering the survey to enrollees is estimated to be approximately 
$45,549 and the total cost to enrollees and survey vendors is estimated 
to be approximately $6,507,964 in 2015 and future years. In 2014, only 
one survey vendor will conduct the psychometric test and in the 
following years, about 40 vendors are expected to conduct the 
survey.\42\ In addition, each QHP issuer will have to contract with an 
ESS vendor. We estimate approximately $16,000 as the annual cost for a 
QHP issuer to contract with an ESS vendor, for a total annual cost of 
$9.2 million for 575 QHP issuers.
---------------------------------------------------------------------------

    \42\ Detailed burden estimates can be found in the Supporting 
Statement for the Health Insurance Marketplace Consumer Experience 
Surveys: Enrollee Satisfaction Survey and Marketplace Survey Data 
Collection, found at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html.
---------------------------------------------------------------------------

    The Marketplace survey will be administered by a survey vendor 
under contract with HHS. A psychometric test will be conducted in 2014 
with a beta test in 2015. Consumers will incur burden to respond to the 
survey. We estimate that each response will take 0.4 hours for a total 
of 3,150 responses requiring 1,260 hours in 2014 and a total of 61,200 
responses requiring 24,480 hours in 2015 onwards. Total costs will be 
approximately $30,366 in 2014 and $589,968 in following years.\43\
---------------------------------------------------------------------------

    \43\ Detailed burden estimates can be found in the Supporting 
Statement for the Health Insurance Marketplace Consumer Experience 
Surveys: Enrollee Satisfaction Survey and Marketplace Survey Data 
Collection, found at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html.
---------------------------------------------------------------------------

    Issuers that provide EHB should already have procedures in place 
that allow an enrollee to request and gain access to clinically 
appropriate drugs not covered by the plan. This final rule includes 
standards for a health plan's exception process that includes an 
expedited process for exigent circumstances. This final rule requires 
issuers to provide a decision on an exception request based on exigent 
circumstances and notify the enrollee or the enrollee's designee and 
the prescribing physician (or other prescriber as appropriate) of the 
determination no later than 24 hours after receiving the request. 
Depending on their current formulary exceptions processes, some issuers 
may incur costs to modify them to comply with these requirements.

[[Page 30332]]

Transfers
    Previously, the MLR regulation permitted inclusion of ICD-10 
conversion costs in quality improving activity expenses only through 
the 2013 MLR reporting year. However, the date by which issuers are 
required to adopt ICD-10 as the standard medical code has been 
postponed past 2013. Therefore, this final rule permits issuers to 
include their ICD-10 conversion costs through the MLR reporting year in 
which the Secretary requires conversion to be completed. Based on the 
2012 MLR data, we estimate that the ICD-10 provision reduced total 
rebates for 2012 by less than 2 percent.
    This final rule also accounts for the special circumstances of 
issuers affected by the CMS November 2013 transitional policy by 
allowing those issuers to multiply the incurred claims and expenses for 
quality improving activities incurred in 2014 in the MLR numerator by 
1.0001. This adjustment is limited to issuers that provided 
transitional coverage in the individual or small group markets in 
States that adopted the transitional policy. In addition, this final 
rule accounts for the special circumstances of the issuers that 
provided coverage through the State and Federal Exchanges by allowing 
those issuers to multiply the incurred claims and expenses for quality 
improving activities incurred in 2014 in the numerator by 1.0004. This 
adjustment is limited to issuers offering coverage in the individual or 
small group markets through the Exchanges. Based on the 2012 MLR data, 
we estimate that the adjustment for issuers affected by the 
transitional policy and for issuers affected by the Exchanges rollout 
may reduce the total rebates by 0.5 percent for 2014.
    In addition, this final rule amends the MLR methodology to clarify 
how issuers must calculate MLRs in States that require the small group 
market and individual market to be merged for MLR calculation purposes. 
This will improve the consistency of MLR calculations among issuers in 
those States and improve the accuracy of rebate payments. Currently, 
only Massachusetts and Vermont require the small group market and 
individual market to be merged Vermont requirements take effect in 
2014). If an issuer met the respective MLR standards in the separate 
markets, then this provision will not have any impact on rebates. 
However, if an issuer met the MLR standards only in one market and 
merging the two markets results in the issuer meeting (or being unable 
to meet) the MLR standards in the merged market, the issuer may have to 
pay lower (or higher) rebates and there will be a transfer from 
enrollees to issuers (or from issuers to enrollees). Based on the 2012 
MLR data, we anticipate that this change may result in issuers paying 
an additional $3.8 million in rebates.
    This rule revises the allocation of reinsurance contributions 
collected for the 2014 and 2015 benefit years so that if reinsurance 
collections fall short of our estimates, reinsurance collections are 
allocated first to the reinsurance pool, and second to administrative 
expenses and the U.S. Treasury on a pro rata basis. We expect that this 
policy will not have a significant effect on transfers, because we 
estimate that we will collect the full amount of reinsurance 
contributions to fully fund the reinsurance payment pool. This policy 
may lower premiums by reducing the uncertainty associated with 
reinsurance payments to individual market plans eligible for 
reinsurance payments. The Affordable Care Act creates a temporary risk 
corridors program for the years 2014, 2015, and 2016 that applies to 
QHPs, as defined in Sec.  153.500. The risk corridors program creates a 
mechanism for sharing gains and losses between the Federal government 
and QHP issuers. The Affordable Care Act establishes the risk corridors 
program as a Federal program; consequently, HHS will operate the risk 
corridors program under Federal rules. The risk corridors program will 
help protect against inaccurate rate setting in the early years of the 
Exchanges by limiting the extent of issuer losses and gains. For the 
2015 benefit year, we are adjusting the risk corridors formula to help 
mitigate QHP issuers' unexpected administrative costs. Although our 
initial modeling suggests that this adjustment can increase the total 
risk corridors payment amount made by the Federal government and 
decrease risk corridors receipts, we believe that this temporary 
program will be budget neutral on the net over three years.

C. Regulatory Alternatives

    Under the Executive Order, CMS is required to consider alternatives 
to issuing rules and alternative regulatory approaches. CMS considered 
the regulatory alternatives below:
1. Collecting ESS Data at the Product Level Instead of Each Product Per 
Metal Tier
    Under this alternative, HHS would have required QHPs to collect ESS 
data from a single sample for each product (versus each product in each 
metal tier). This option would have reduced the cost for issuers who 
offer the same product in multiple tiers. However, collecting data at 
the product level would have prevented consumers from understanding 
differences in enrollee satisfaction at the individual product per tier 
level, which may vary with differences in cost sharing. This would have 
reduced the benefits that consumers derive from ESS data.
2. Using Medicaid CAHPS[supreg] As Is Instead of Adding Additional and 
New Questions to the ESS
    Under this alternative, HHS would have required QHPs to collect 
enrollee satisfaction information using the Medicaid CAHPS[supreg] 
instrument without further enhancement. The ESS will include more 
questions than the Medicaid CAHPS[supreg]--including detailed questions 
about the patient's costs--that are particularly appropriate to 
Exchange enrollees. Eliminating these questions would have reduced the 
cost to issuers, but also would have reduced benefits that consumers 
derive from the ESS data.
3. Collecting QRS Data for Each Product Per Metal Tier Instead of at 
the Product Level
    Under this alternative, HHS would have required QHPs to collect the 
QRS data at the same level (individual product per metal tier) as they 
collect ESS information. Assuming that QHPs offer each product in two 
metal tiers this option would have doubled the cost to QHPs of 
collecting QRS data. However, it might not have appreciably increased 
consumer information about QHPs in the early years of the Exchanges if 
the quality of care in the same product does not differ significantly 
within tiers (that is, the variation should only be by the 
configuration of cost sharing within a limited range of actuarial 
value). Further, a QHP's enrollment size at the product metal level may 
be too small in the early years of Exchange implementation to ensure 
reliable results.
4. Using the Medicare Advantage (MA) CAHPS[supreg] Instrument and Star 
System
    Under this alternative, HHS would have required QHPs to collect 
enrollee satisfaction information from Exchange enrollees using the MA 
CAHPS[supreg] instrument. The ESS presently includes 29 more questions 
than MA CAHPS[supreg]. Use of the MA CAHPS[supreg] would have reduced 
the cost to consumers and also the QHP cost of data entry. However, the 
MA CAHPS[supreg] instrument and Star ratings are designed for a 
different population and are not necessarily suitable to measure 
experience among

[[Page 30333]]

Exchange enrollees. It also would have had limited applicability for 
use by consumers for QHP comparison and selection purposes.
    CMS believes that the options adopted for this final rule will be 
more efficient ways to extend the protections of the Affordable Care 
Act to enrollees without imposing significant burden on issuers and 
States.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires agencies that issue a 
rule to analyze options for regulatory relief of small businesses if a 
rule has a significant impact on a substantial number of small 
entities. The RFA generally defines a ``small entity'' as--(1) a 
proprietary firm meeting the size standards of the Small Business 
Administration (SBA), (2) a nonprofit organization that is not dominant 
in its field, or (3) a small government jurisdiction with a population 
of less than 50,000 (States and individuals are not included in the 
definition of ``small entity''). HHS uses as its measure of significant 
economic impact on a substantial number of small entities a change in 
revenues of more than 3 percent to 5 percent.
    As discussed in the Web Portal interim final rule with comment 
period published on May 5, 2010 (75 FR 24481), HHS examined the health 
insurance industry in depth in the RIA we prepared for the proposed 
rule on establishment of the Medicare Advantage program (69 FR 46866, 
August 3, 2004). In that analysis it was determined that there were 
few, if any, insurance firms underwriting comprehensive health 
insurance policies (in contrast, for example, to travel insurance 
policies or dental discount policies) that fell below the size 
thresholds for ``small entity'' established by the SBA. Based on data 
from MLR annual report submissions for the 2012 MLR reporting year,\44\ 
out of 510 companies offering comprehensive health insurance policies 
nationwide, there are 58 small entities, each with less than $35.5 
million in earned premiums, that offer individual or group health 
insurance coverage and will therefore be subject to the provisions of 
this final rule.\45\ Forty three percent of these small entities belong 
to holding groups, and many if not all of these small entities are 
likely to have other lines of business (for example, insurance business 
other than health insurance, and business other than insurance) that 
will result in their revenues exceeding $35.5 million. Based on this 
analysis, HHS expects that the provisions of this final rule will not 
affect a substantial number of small issuers.
---------------------------------------------------------------------------

    \44\ These data can be accessed at http://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
    \45\ The size threshold for ``small'' business established by 
the SBA is currently $35.5 million in annual receipts for health 
insurance issuers. See ``Table of Small Business Size Standards 
Matched To North American Industry Classification System Codes,'' 
effective July 23, 2013, U.S. Small Business Administration, 
available at http://www.sba.gov.
---------------------------------------------------------------------------

    The amendments to the annual employer and employee election periods 
in the SHOPs, including removing the required minimum lengths of both 
the employer election period and the employee open enrollment period 
will benefit State-based SHOPs and employers. HHS does not anticipate 
that this will impose any costs on small employers.
    Some of the entities that voluntarily act as Navigators and non-
Navigator assistance personnel subject to Sec.  155.215, or as 
designated certified application counselor organizations, may be small 
entities and will incur costs to comply with the provisions of this 
final rule. It should be noted that HHS, in its role as the operator of 
the FFEs, does not impose any fees on these entities for participating 
in their respective programs, nor are there fees for taking the 
Federally required training or completing continuing education or 
recertification in FFEs. Further, the cost burden related to continuing 
education and recertification, and recordkeeping will generally be 
considered an allowed cost that will be covered by the Navigator grants 
for the FFEs, and these grant funds may be drawn down as the grantee 
incurs such costs. The costs associated with these proposals may also 
be covered by other compensation provided by an Exchange, such as 
payments through contracts to non-Navigator assistance personnel. 
Though it is very likely that all costs associated with these proposals 
will be largely covered by affected entities' and individuals' funding 
sources, HHS cannot guarantee that all such costs will be covered 
because of the possibility of budget limitations applicable to the FFE 
in any given period, and because there may be variations in how State 
Exchanges provide funding for these programs. To the extent that all 
such costs will not be covered by these funding sources, other outside 
sources may also be available to cover unfunded costs that remain. 
Costs incurred by designated certified application counselor 
organizations related to continuing education and recertification and 
recordkeeping are expected to be low. In some circumstances funds from 
sources outside of the Exchange, including Federal funds such as Health 
Resources and Services Administration (HRSA) grants to health centers, 
or private or State funds may be available to cover certified 
application counselor costs.

E. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 
requires that agencies assess anticipated costs and benefits before 
issuing any final rule that includes a Federal mandate that could 
result in expenditure in any one year by State, local or tribal 
governments, in the aggregate, or by the private sector, of $100 
million in 1995 dollars, updated annually for inflation. In 2014, that 
threshold level is approximately $141 million.
    UMRA does not address the total cost of a final rule. Rather, it 
focuses on certain categories of cost, mainly those ``Federal mandate'' 
costs resulting from--(1) imposing enforceable duties on State, local, 
or tribal governments, or on the private sector; or (2) increasing the 
stringency of conditions in, or decreasing the funding of, State, 
local, or tribal governments under entitlement programs.
    This final rule includes mandates on State governments and the 
private sector. Issuers, non-Navigator assistance personnel, certified 
application counselors and Exchanges are expected to incur costs of 
approximately $13 million in 2014 and approximately $85 million in 2015 
onwards to comply with the provisions of this final rule. However, 
beginning in 2015, issuers in the individual market will experience a 
reduction in costs of approximately $26 million due to the 
discontinuation of the certification of creditable coverage. Consistent 
with policy embodied in UMRA, this final rule has been designed to be 
the least burdensome alternative for State, local and tribal 
governments, and the private sector while achieving the objectives of 
the Affordable Care Act.

F. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on State and local governments, 
preempts State law, or otherwise has Federalism implications.
    Since States are the primary regulators of health insurance 
coverage, State laws will continue to apply to health insurance 
coverage and the business of insurance. A State's authority to pass and 
implement

[[Page 30334]]

additional State requirements that affect programs established under 
the provisions of title I of the Affordable Care Act is not unlimited, 
however, but extends only to the implementation of requirements that 
would not prevent the application of the provisions of title I of the 
Affordable Care Act, including but not limited to those provisions 
which provide authority for functions of an Exchange, such as the 
application assistance provided by Navigator programs, non-Navigator 
programs and certified application counselor programs.
    The final rule provides that non-Navigator assistance personnel 
subject to Sec.  155.215, and certified application counselors must 
meet any licensing, certification or other standards prescribed by the 
State so long as such standards do not prevent the application of the 
provisions of title I of the Affordable Care Act, within the meaning of 
section 1321(d) of the Affordable Care Act. The final rule also 
includes a non-exhaustive list of non-Federal requirements applicable 
to Navigators, non-Navigator assistance personnel subject to Sec.  
155.215, and certified application counselors that, in HHS's view, 
prevent the application of the provisions of title I of the Affordable 
Care Act, within the meaning of section 1321(d) of the Affordable Care 
Act. They include non-Federal requirements that require referrals to 
entities or individuals not required to provide impartial information 
or act in a consumer's best interest; non-Federal requirements that 
prevent Navigators, non-Navigator assistance personnel subject to Sec.  
155.215, or certified application counselors from providing services to 
all individuals seeking assistance; non-Federal requirements that 
prevent these assisters from providing information regarding 
substantive benefits or comparative benefits of different health plans; 
non-Federal requirements that facially, or as applied, make it 
impossible to fulfill required duties; non-Federal standards that 
would, as applied or as implemented in a State, prevent an Exchange's 
implementation of the programs for Navigators, non-Navigator personnel 
subject to Sec.  155.215 and certified application counselors 
consistent with Federal requirements; and non-Federal requirements that 
Navigators hold an agent or broker license or requirements that, in 
effect, would require all Navigators in the Exchange to be licensed 
agents and brokers. These provisions provide HHS's interpretation of 
how the preemption standard that Congress established in section 
1321(d) of the Affordable Care Act applies to this non-exhaustive list 
of non-Federal requirements for these assister programs.
    The final rule establishes Federal standards to determine whether 
coverage modifications constitute the continuance of an existing 
product in a market within a State for coverage offered both through 
and outside of an Exchange in the individual and small group markets. 
Some States may have different definitions of what changes to a health 
insurance product constitute modifications and what changes constitute 
terminations and re-filings of new products. The definitions finalized 
in this rule will preempt any conflicting State definitions. The 
guaranteed renewability sections of the PHS Act provide in pertinent 
part that a uniform modification of coverage must be ``consistent with 
State law.'' We interpret this statutory language as governing the 
extent or type of modifications that may legally be made under State 
law. As discussed in the preamble to the final rule published on 
February 27, 2013 under section 2703 of the PHS Act (78 FR 13419), 
State laws that prevent issuers from uniformly modifying coverage to 
comply with Federal law requirements would, in effect, prevent the 
application of such requirements and therefore be preempted. States, 
however, have the flexibility to broaden the scope of two of the 
criteria for what is considered a uniform modification, but not narrow 
its scope.
    Some States already have requirements for and publicly report 
health plan quality and outcomes data, and we want to encourage State 
flexibility and innovation, consistent with the Affordable Care Act. In 
addition to prominently displaying quality rating information for each 
QHP, as calculated by HHS in accordance with the QRS, a State Exchange 
may display additional QHP quality-related information, as appropriate.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have Federalism 
implications or limit the policymaking discretion of the States, HHS 
has engaged in efforts to consult with and work cooperatively with 
affected States. HHS has consulted with stakeholders on policies 
related to the operation of Exchanges, including the SHOP and the 
premium stabilization programs. HHS has held a number of listening 
sessions with State representatives to gather public input. HHS 
consulted with State representatives through regular meetings with the 
NAIC and regular contact with States through the Exchange Establishment 
grant and Exchange Blueprint approval processes.
    Throughout the process of developing this final rule, HHS has 
attempted to balance the States' interests in regulating health 
insurance issuers and other entities, such as Navigators, non-Navigator 
assistance personnel, and certified application counselors with 
creating a Federal baseline for protecting the consumers' interests. By 
doing so, it is HHS' view that it has complied with the requirements of 
Executive Order 13132. Under the requirements set forth in section 8(a) 
of Executive Order 13132, and by the signatures affixed to this rule, 
HHS certifies that the CMS Center for Consumer Information and 
Insurance Oversight has complied with the requirements of Executive 
Order 13132 for the attached final rule in a meaningful and timely 
manner.

G. Congressional Review Act

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

List of Subjects

45 CFR part 144

    Health care, Health insurance, Reporting and record keeping 
requirements.

45 CFR Part 146

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Part 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements, State regulation of health insurance.

45 CFR Part 148

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

45 CFR Part 153

    Administrative practice and procedure, Adverse selection, Health 
care, Health insurance, Health records, Organization and functions

[[Page 30335]]

(Government agencies), Premium stabilization, Reporting and 
recordkeeping requirements, Reinsurance, Risk adjustment, Risk 
corridors, Risk mitigation, State and local governments.

45 CFR Part 154

    Administrative practice and procedure, Claims, Health care, Health 
insurance, Health plans, Penalties, Reporting and recordkeeping 
requirements.

45 CFR Part 155

    Administrative practice and procedure, Health care access, Health 
insurance, Reporting and recordkeeping requirements, State and local 
governments, Cost-sharing reductions, Advance payments of premium tax 
credit, Administration and calculation of advance payments of the 
premium tax credit, Plan variations, Actuarial value.

45 CFR Part 156

    Administrative appeals, Administrative practice and procedure, 
Administration and calculation of advance payments of premium tax 
credit, Advertising, Advisory Committees, Brokers, Conflict of 
interest, Consumer protection, Cost-sharing reductions, Grant programs-
health, Grants administration, Health care, Health insurance, Health 
maintenance organization (HMO), Health records, Hospitals, American 
Indian/Alaska Natives, Individuals with disabilities, Loan programs-
health, Organization and functions (Government agencies), Medicaid, 
Payment and collections reports, Public assistance programs, Reporting 
and recordkeeping requirements, State and local governments, Sunshine 
Act, Technical assistance, Women, and Youth.

45 CFR Part 158

    Administrative practice and procedure, Claims, Health care, Health 
insurance, Health plans, Penalties, Reporting and recordkeeping 
requirements, Premium revenues, Medical loss ratio, Rebating.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR parts 144, 146, 147, 148, 153, 154, 
155, 156, and 158 as set forth below:

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

0
1. 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
2. Section 144.103 is amended by adding new definitions of ``plan'' and 
``product'' in alphabetical order to read as follows:


Sec.  144.103  Definitions.

* * * * *
    Plan means, with respect to an issuer and a product, the pairing of 
the health insurance coverage benefits under the product with a metal 
tier level (as described in sections 1302(d) and (e) of the Affordable 
Care Act) and service area. The product comprises all plans offered 
within the product, and the combination of all plans offered within a 
product constitutes the total service area of the product.
* * * * *
    Product means a discrete package of health insurance coverage 
benefits that a health insurance issuer offers using a particular 
product network type within a service area.
* * * * *

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

0
3. The authority citation for part 146 continues to read as follows:

    Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and 
2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11 
through 300gg-23, 300gg-91, and 300gg-92).


0
4. Section 146.152 is amended by--
0
a. Revising paragraphs (b)(4), (c)(1) and (f); and
0
b. Adding new paragraph (h).
    The revision and addition read as follows:


Sec.  146.152  Guaranteed renewability of coverage for employers in the 
group market.

* * * * *
    (b) * * *
* * * * *
    (4) Termination of product. The issuer is ceasing to offer coverage 
in the market in accordance with paragraph (c) or (d) of this section 
and applicable State law.
* * * * *
    (c) * * *
    (1) The issuer provides notice in writing, in a form and manner 
specified by the Secretary, to each plan sponsor provided that 
particular product in that market (and to all participants and 
beneficiaries covered under such coverage) of the discontinuation at 
least 90 days before the date the coverage will be discontinued;
* * * * *
    (f) Exception for uniform modification of coverage. (1) Only at the 
time of coverage renewal may issuers modify the health insurance 
coverage for a product offered to a group health plan in the 
following--
    (i) Large group market; and
    (ii) Small group market if, for coverage available in this market 
(other than only through one or more bona fide associations), the 
modification is consistent with State law and is effective uniformly 
among group health plans with that product.
    (2) For purposes of paragraph (f)(1)(ii) of this section, 
modifications made uniformly and solely pursuant to applicable Federal 
or State requirements are considered a uniform modification of coverage 
if:
    (i) The modification is made within a reasonable time period after 
the imposition or modification of the Federal or State requirement; and
    (ii) The modification is directly related to the imposition or 
modification of the Federal or State requirement.
    (3) For purposes of paragraph (f)(1)(ii) of this section, other 
types of modifications made uniformly are considered a uniform 
modification of coverage if the health insurance coverage for the 
product in the small group market meets all of the following criteria:
    (i) The product is offered by the same health insurance issuer 
(within the meaning of section 2791(b)(2) of the PHS Act);
    (ii) The product is offered as the same product network type (for 
example, health maintenance organization, preferred provider 
organization, exclusive provider organization, point of service, or 
indemnity);
    (iii) The product continues to cover at least a majority of the 
same service area;
    (iv) Within the product, each plan has the same cost-sharing 
structure as before the modification, except for any variation in cost 
sharing solely related to changes in cost and utilization of medical 
care, or to maintain the same metal tier level described in sections 
1302(d) and (e) of the Affordable Care Act; and
    (v) The product provides the same covered benefits, except for any 
changes in benefits that cumulatively impact the rate for any plan 
within the product within an allowable variation of +/-2 percentage 
points (not including changes pursuant to applicable Federal or State 
requirements).

[[Page 30336]]

    (4) A State may only broaden the standards in paragraphs 
(f)(3)(iii) and (iv) of this section.
* * * * *
    (h) Notice of renewal of coverage. If an issuer in the small group 
market is renewing grandfathered coverage as described in paragraph (a) 
of this section, or uniformly modifying grandfathered coverage as 
described in paragraph (f) of this section, the issuer must provide to 
each plan sponsor written notice of the renewal at least 60 calendar 
days before the date the coverage will be renewed in a form and manner 
specified by the Secretary.

0
5. Section 146.180 is revised to read as follows:


Sec.  146.180  Treatment of non-Federal governmental plans.

    (a) Opt-out election for self-funded non-Federal governmental 
plans--(1) Requirements subject to exemption. The PHS Act requirements 
described in this paragraph are the following:
    (i) Limitations on preexisting condition exclusion periods in 
accordance with section 2701 of the PHS Act as codified before 
enactment of the Affordable Care Act.
    (ii) Special enrollment periods for individuals and dependents 
described under section 2704(f) of the PHS Act.
    (iii) Prohibitions against discriminating against individual 
participants and beneficiaries based on health status under section 
2705 of the PHS Act, except that the sponsor of a self-funded non-
Federal governmental plan cannot elect to exempt its plan from 
requirements under section 2705(a)(6) and 2705(c) through (f) that 
prohibit discrimination with respect to genetic information.
    (iv) Standards relating to benefits for mothers and newborns under 
section 2725 of the PHS Act.
    (v) Parity in mental health and substance use disorder benefits 
under section 2726 of the PHS Act.
    (vi) Required coverage for reconstructive surgery following 
mastectomies under section 2727 of the PHS Act.
    (vii) Coverage of dependent students on a medically necessary leave 
of absence under section 2728 of the PHS Act.
    (2) General rule. For plan years beginning on or after September 
23, 2010, a sponsor of a non-Federal governmental plan may elect to 
exempt its plan, to the extent the plan is not provided through health 
insurance coverage (that is, it is self-funded), from one or more of 
the requirements described in paragraphs (a)(1)(iv) through (vii) of 
this section.
    (3) Special rule for certain collectively bargained plans. In the 
case of a plan that is maintained pursuant to a collective bargaining 
agreement that was ratified before March 23, 2010, and whose sponsor 
made an election to exempt its plan from any of the requirements 
described in paragraphs (a)(1)(i) through (iii) of this section, the 
provisions of paragraph (a)(2) of this section apply for plan years 
beginning after the expiration of the term of the agreement.
    (4) Examples--(i) Example 1. A non-Federal governmental employer 
has elected to exempt its self-funded group health plan from all of the 
requirements described in paragraph (a)(1) of this section. The plan 
year commences September 1 of each year. The plan is not subject to the 
provisions of paragraph (a)(2) of this section until the plan year that 
commences on September 1, 2011. Accordingly, for that plan year and any 
subsequent plan years, the plan sponsor may elect to exempt its plan 
only from the requirements described in paragraphs (a)(1)(iv) through 
(vii) of this section.
    (ii) Example 2. A non-Federal governmental employer has elected to 
exempt its collectively bargained self-funded plan from all of the 
requirements described in paragraph (a)(1) of this section. The 
collective bargaining agreement applies to five plan years, October 1, 
2009 through September 30, 2014. For the plan year that begins on 
October 1, 2014, the plan sponsor is no longer permitted to elect to 
exempt its plan from the requirements described in paragraph (a)(1) of 
this section. Accordingly, for that plan year and any subsequent plan 
years, the plan sponsor may elect to exempt its plan only from the 
requirements described in paragraphs (a)(1)(iv) through (vii) of this 
section.
    (5) Limitations. (i) An election under this section cannot 
circumvent a requirement of the PHS Act to the extent the requirement 
applied to the plan before the effective date of the election.
    (A) Example 1. A plan is subject to requirements of section 2727 of 
the PHS Act, under which a plan that covers medical and surgical 
benefits with respect to a mastectomy must cover reconstructive surgery 
and certain other services following a mastectomy. An enrollee who has 
had a mastectomy receives reconstructive surgery on August 24. Claims 
with respect to the surgery are submitted to and processed by the plan 
in September. The group health plan commences a new plan year each 
September 1. Effective September 1, the plan sponsor elects to exempt 
its plan from section 2727 of the PHS Act. The plan cannot, on the 
basis of its exemption election, decline to pay for the claims incurred 
on August 24.
    (B) [Reserved]
    (ii) If a group health plan is co-sponsored by two or more 
employers, then only plan enrollees of the non-Federal governmental 
employer(s) with a valid election under this section are affected by 
the election.
    (6) Stop-loss or excess risk coverage. For purposes of this 
section--
    (i) Subject to paragraph (a)(6)(ii) of this section, the purchase 
of stop-loss or excess risk coverage by a self-funded non-Federal 
governmental plan does not prevent an election under this section.
    (ii) Regardless of whether coverage offered by an issuer is 
designated as ``stop-loss'' coverage or ``excess risk'' coverage, if it 
is regulated as group health insurance under an applicable State law, 
then for purposes of this section, a non-Federal governmental plan that 
purchases the coverage is considered to be fully insured. In that 
event, a plan may not be exempted under this section from the 
requirements described in paragraph (a)(1) of this section.
    (7) Construction. Nothing in this part should be construed as 
imposing collective bargaining obligations on any party to the 
collective bargaining process.
    (b) Form and manner of election--(1) Election requirements. The 
election must meet the following requirements:
    (i) Be made in an electronic format in a form and manner as 
described by the Secretary in guidance.
    (ii) Be made in conformance with all of the plan sponsor's rules, 
including any public hearing requirements.
    (iii) Specify the beginning and ending dates of the period to which 
the election is to apply. This period can be either of the following 
periods:
    (A) A single specified plan year, as defined in Sec.  144.103 of 
this subchapter.
    (B) The ``term of the agreement,'' as specified in paragraph (b)(2) 
of this section, in the case of a plan governed by collective 
bargaining.
    (iv) Specify the name of the plan and the name and address of the 
plan administrator, and include the name and telephone number of a 
person CMS may contact regarding the election.
    (v) State that the plan does not include health insurance coverage, 
or identify which portion of the plan is not funded through health 
insurance coverage.
    (vi) Specify each requirement described in paragraph (a)(1) of this 
section from which the plan sponsor elects to exempt the plan.
    (vii) Certify that the person signing the election document, 
including (if

[[Page 30337]]

applicable) a third party plan administrator, is legally authorized to 
do so by the plan sponsor.
    (viii) Include, as an attachment, a copy of the notice described in 
paragraph (f) of this section.
    (ix) In the case of a plan sponsor submitting one opt-out election 
for all group health plans subject to the same collective bargaining 
agreement, include a list of plans subject to the agreement.
    (x) In the case of a plan sponsor submitting opt-out elections for 
more than one group health plan that is not subject to a collective 
bargaining agreement, submit a separate election document for each such 
plan.
    (2) ``Term of the agreement'' defined. Except as provided in 
paragraphs (b)(2)(i) and (ii) of this section, for purposes of this 
section ``term of the agreement'' means all group health plan years 
governed by a single collective bargaining agreement.
    (i) In the case of a group health plan for which the last plan year 
governed by a prior collective bargaining agreement expires during the 
bargaining process for a new agreement, the term of the prior agreement 
includes all plan years governed by the agreement plus the period of 
time that precedes the latest of the following dates, as applicable, 
with respect to the new agreement:
    (A) The date of an agreement between the governmental employer and 
union officials.
    (B) The date of ratification of an agreement between the 
governmental employer and the union.
    (C) The date impasse resolution, arbitration or other closure of 
the collective bargaining process is finalized when agreement is not 
reached.
    (ii) In the case of a group health plan governed by a collective 
bargaining agreement for which closure is not reached before the last 
plan year under the immediately preceding agreement expires, the term 
of the new agreement includes all plan years governed by the agreement 
excluding the period that precedes the latest applicable date specified 
in paragraph (b)(2)(i) of this section.
    (3) Construction--(i) Dispute resolution. Nothing in paragraph 
(b)(1)(ii) of this section should be construed to mean that CMS 
arbitrates disputes between plan sponsors, participants, beneficiaries, 
or their representatives regarding whether an election complies with 
all of a plan sponsor's rules.
    (ii) Future elections not preempted. If a plan must comply with one 
or more requirements described in paragraph (a)(1) of this section for 
a given plan year or period of plan coverage, nothing in this section 
should be construed as preventing a plan sponsor from submitting an 
election in accordance with this section for a subsequent plan year or 
period of plan coverage.
    (c) Filing a timely election--(1) Plan not governed by collective 
bargaining. Subject to paragraph (c)(4) of this section, if a plan is 
not governed by a collective bargaining agreement, a plan sponsor or 
entity acting on behalf of a plan sponsor must file an election with 
CMS before the first day of the plan year.
    (2) Plan governed by a collective bargaining agreement. Subject to 
paragraph (d)(4) of this section, if a plan is governed by a collective 
bargaining agreement that was ratified before March 23, 2010, a plan 
sponsor or entity acting on behalf of a plan sponsor must file an 
election with CMS before the first day of the first plan year governed 
by a collective bargaining agreement, or by the 45th day after the 
latest applicable date specified in paragraph (b)(2)(i) of this 
section, if the 45th day falls on or after the first day of the plan 
year.
    (3) Special rule for timely filing. If the latest filing date 
specified under paragraphs (c)(1) or (c)(2) of this section falls on a 
Saturday, Sunday, or a State or Federal holiday, CMS accepts filings 
submitted on the next business day.
    (4) Filing extension based on good cause. CMS may extend the 
deadlines specified in paragraphs (c)(1) and (2) of this section for 
good cause if the plan substantially complies with the requirements of 
paragraph (e) of this section.
    (5) Failure to file a timely election. Absent an extension under 
paragraph (c)(4) of this section, a plan sponsor's failure to file a 
timely election under paragraph (c)(1) or (2) of this section makes the 
plan subject to all requirements of this part for the entire plan year 
to which the election would have applied, or, in the case of a plan 
governed by a collective bargaining agreement, for any plan years under 
the agreement for which the election is not timely filed.
    (d) Additional information required--(1) Written notification. If 
an election is timely filed, but CMS determines that the election 
document (or the notice to plan enrollees) does not meet all of the 
requirements of this section, CMS may notify the plan sponsor, or other 
entity that filed the election, that it must submit any additional 
information that CMS has determined is necessary to meet those 
requirements. The additional information must be filed with CMS by the 
later of the following dates:
    (i) The last day of the plan year.
    (ii) The 45th day after the date of CMS's written notification 
requesting additional information.
    (2) Timely response. For submissions via hard copy via U.S. Mail, 
CMS uses the postmark on the envelope in which the additional 
information is submitted to determine that the information is timely 
filed as specified under paragraph (d)(1) of this section. If the 
latest filing date falls on a Saturday, Sunday, or a State or Federal 
holiday, CMS accepts a postmark on the next business day.
    (3) Failure to respond timely. CMS may invalidate an election if 
the plan sponsor, or other entity that filed the election, fails to 
timely submit the additional information as specified under paragraph 
(d)(1) of this section.
    (e) Notice to enrollees--(1) Mandatory notification. (i) A plan 
that makes the election described in this section must notify each 
affected enrollee of the election, and explain the consequences of the 
election. For purposes of paragraph (e) of this section, if the 
dependent(s) of a participant reside(s) with the participant, a plan 
need only provide notice to the participant.
    (ii) The notice must be in writing and, except as provided in 
paragraph (e)(2) of this section with regard to initial notices, must 
be provided to each enrollee at the time of enrollment under the plan, 
and on an annual basis no later than the last day of each plan year (as 
defined in Sec.  144.103 of this subchapter) for which there is an 
election.
    (iii) A plan may meet the notification requirements of paragraph 
(e) of this section by prominently printing the notice in a summary 
plan description, or equivalent description, that it provides to each 
enrollee at the time of enrollment, and annually. Also, when a plan 
provides a notice to an enrollee at the time of enrollment, that notice 
may serve as the initial annual notice for that enrollee.
    (2) Initial notices. (i) If a plan is not governed by a collective 
bargaining agreement, with regard to the initial plan year to which an 
election under this section applies, the plan must provide the initial 
annual notice of the election to all enrollees before the first day of 
that plan year, and notice at the time of enrollment to all individuals 
who enroll during that plan year.
    (ii) In the case of a collectively bargained plan, with regard to 
the initial plan year to which an election under this section applies, 
the plan must provide the initial annual notice of the election to all 
enrollees before the first day of the plan year, or within 30 days 
after the latest applicable date specified in paragraph (b)(2)(i) of 
this section if

[[Page 30338]]

the 30th day falls on or after the first day of the plan year. Also, 
the plan must provide a notice at the time of enrollment to individuals 
who--
    (A) Enroll on or after the first day of the plan year, when closure 
of the collective bargaining process is reached before the plan year 
begins; or
    (B) Enroll on or after the latest applicable date specified in 
paragraph (b)(2)(i) of this section if that date falls on or after the 
first day of the plan year.
    (3) Notice content. The notice must include at least the following 
information:
    (i) The specific requirements described in paragraph (a)(1) of this 
section from which the plan sponsor is electing to exempt the plan, and 
a statement that, in general, Federal law imposes these requirements 
upon group health plans.
    (ii) A statement that Federal law gives the plan sponsor of a self-
funded non-Federal governmental plan the right to exempt the plan in 
whole, or in part, from the listed requirements, and that the plan 
sponsor has elected to do so.
    (iii) A statement identifying which parts of the plan are subject 
to the election.
    (iv) A statement identifying which of the listed requirements, if 
any, apply under the terms of the plan, or as required by State law, 
without regard to an exemption under this section.
    (f) Subsequent elections--(1) Election renewal. A plan sponsor may 
renew an election under this section through subsequent elections. The 
timeliness standards described in paragraph (c) of this section apply 
to election renewals under paragraph (f) of this section.
    (2) Form and manner of renewal. Except for the requirement to 
forward to CMS a copy of the notice to enrollees under paragraph 
(b)(1)(viii) of this section, the plan sponsor must comply with the 
election requirements of paragraph (b)(1) of this section. In lieu of 
providing a copy of the notice under paragraph (b)(1)(viii) of this 
section, the plan sponsor may include a statement that the notice has 
been, or will be, provided to enrollees as specified under paragraph 
(e) of this section.
    (3) Election renewal includes provisions from which plan not 
previously exempted. If an election renewal includes a requirement 
described in paragraph (a)(1) of this section from which the plan 
sponsor did not elect to exempt the plan for the preceding plan year, 
the advance notification requirements of paragraph (e)(2) of this 
section apply with respect to the additional requirement(s) of 
paragraph (a) of this section from which the plan sponsor is electing 
to exempt the plan.
    (4) Special rules regarding renewal of an election under a 
collective bargaining agreement--(i) If protracted negotiations with 
respect to a new agreement result in an extension of the term of the 
prior agreement (as provided under paragraph (b)(2)(i) of this section) 
under which an election under this section was in effect, the plan must 
comply with the enrollee notification requirements of paragraph (e)(1) 
of this section, and, following closure of the collective bargaining 
process, must file an election renewal with CMS as provided under 
paragraph (c)(2) of this section.
    (ii) If a single plan applies to more than one bargaining unit, and 
the plan is governed by collective bargaining agreements of varying 
lengths, paragraph (c)(2) of this section, with respect to an election 
renewal, applies to the plan as governed by the agreement that results 
in the earliest filing date.
    (g) Requirements not subject to exemption--(1) Genetic information. 
Without regard to an election under this section that exempts a non-
Federal governmental plan from any or all of the provisions of 
Sec. Sec.  146.111 and 146.121, the exemption election must not be 
construed to exempt the plan from any provisions of this part that 
pertain to genetic information.
    (2) Enforcement. CMS enforces these requirements as provided under 
paragraph (j) of this section.
    (h) Effect of failure to comply with certification and notification 
requirements--(1) Substantial failure--(i) General rule. Except as 
provided in paragraph (h)(1)(iii) of this section, a substantial 
failure to comply with paragraph (e) or (g)(1) of this section results 
in the invalidation of an election under this section with respect to 
all plan enrollees for the entire plan year. That is, the plan is 
subject to all requirements of this part for the entire plan year to 
which the election otherwise would have applied.
    (ii) Determination of substantial failure. CMS determines whether a 
plan has substantially failed to comply with a requirement of paragraph 
(e) or (g)(1) of this section based on all relevant facts and 
circumstances, including previous record of compliance, gravity of the 
violation and whether a plan corrects the failure, as warranted, within 
30 days of learning of the violation. However, in general, a plan's 
failure to provide a notice of the fact and consequences of an election 
under this section to an individual at the time of enrollment, or on an 
annual basis before a given plan year expires, constitutes a 
substantial failure.
    (iii) Exceptions--(A) Multiple employers. If the plan is sponsored 
by multiple employers, and only certain employers substantially fail to 
comply with the requirements of paragraph (e) or (g)(1) of this 
section, then the election is invalidated with respect to those 
employers only, and not with respect to other employers that complied 
with those requirements, unless the plan chooses to cancel its election 
entirely.
    (B) Limited failure to provide notice. If a substantial failure to 
notify enrollees of the fact and consequences of an election is limited 
to certain individuals, the election under this section is valid only 
if, for the plan year with respect to which the failure has occurred, 
the plan agrees not to apply the election with respect to the 
individuals who were not notified and so informs those individuals in 
writing.
    (2) Examples--(i) Example 1. A self-funded, non-Federal group 
health plan is co-sponsored by 10 school districts. Nine of the school 
districts have fully complied with the requirements of paragraph (e) of 
this section, including providing notice to new employees at the time 
of their enrollment in the plan, regarding the group health plan's 
exemption under this section from requirements of this part. One school 
district, which hired 10 new teachers during the summer for the 
upcoming school year, neglected to notify three of the new hires about 
the group health plan's exemption election at the time they enrolled in 
the plan. The school district has substantially failed to comply with a 
requirement of paragraph (e) of this section with respect to these 
individuals. The school district learned of the oversight six weeks 
into the school year, and promptly (within 30 days of learning of the 
oversight) provided notice to the three teachers regarding the plan's 
exemption under this section and that the exemption does not apply to 
them, or their dependents, during the plan year of their enrollment 
because of the plan's failure to timely notify them of its exemption. 
The plan complies with the requirements of this part for these 
individuals for the plan year of their enrollment. CMS would not 
require the plan to come into compliance with the requirements of this 
part for other enrollees.
    (ii) Example 2. Two non-Federal governmental employers cosponsor a 
self-funded group health plan. One employer substantially fails to 
comply with the requirements of paragraph (e) of this section. While 
the plan may limit the invalidation of the election to enrollees of the 
plan sponsor that is

[[Page 30339]]

responsible for the substantial failure, the plan sponsors determine 
that administering the plan in that manner would be too burdensome. 
Accordingly, in this example, the plan sponsors choose to cancel the 
election entirely. Both plan sponsors come into compliance with the 
requirements of this part with respect to all enrollees for the plan 
year for which the substantial failure has occurred.
    (i) Election invalidated. If CMS finds cause to invalidate an 
election under this section, the following rules apply:
    (1) CMS notifies the plan sponsor (and the plan administrator if 
other than the plan sponsor and the administrator's address is known to 
CMS) in writing that CMS has made a preliminary determination that an 
election is invalid, and States the basis for that determination.
    (2) CMS's notice informs the plan sponsor that it has 45 days after 
the date of CMS's notice to explain in writing why it believes its 
election is valid. The plan sponsor should provide applicable statutory 
and regulatory citations to support its position.
    (3) CMS verifies that the plan sponsor's response is timely filed 
as provided under paragraph (c)(3) of this section. CMS will not 
consider a response that is not timely filed.
    (4) If CMS's preliminary determination that an election is invalid 
remains unchanged after CMS considers the plan sponsor's timely 
response (or in the event that the plan sponsor fails to respond 
timely), CMS provides written notice to the plan sponsor (and the plan 
administrator if other than the plan sponsor and the administrator's 
address is known to CMS) of CMS's final determination that the election 
is invalid. Also, CMS informs the plan sponsor that, within 45 days of 
the date of the notice of final determination, the plan, subject to 
paragraph (i)(1)(iii) of this section, must comply with all 
requirements of this part for the specified period for which CMS has 
determined the election to be invalid.
    (j) Enforcement. To the extent that an election under this section 
has not been filed or a non-Federal governmental plan otherwise is 
subject to one or more requirements of this part, CMS enforces those 
requirements under part 150 of this subchapter. This may include 
imposing a civil money penalty against the plan or plan sponsor, as 
determined under subpart C of part 150.
    (k) Construction. Nothing in this section should be construed to 
prevent a State from taking the following actions:
    (1) Establishing, and enforcing compliance with, the requirements 
of State law (as defined in Sec.  146.143(d)(1)), including 
requirements that parallel provisions of title XXVII of the PHS Act, 
that apply to non-Federal governmental plans or sponsors.
    (2) Prohibiting a sponsor of a non-Federal governmental plan within 
the State from making an election under this section.

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND 
INDIVIDUAL HEALTH INSURANCE MARKETS

0
6. The authority citation for part 147 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), as amended.

0
7. Section 147.104 is amended by revising paragraph (b)(1)(i) and 
adding paragraph (h) to read as follows:


Sec.  147.104  Guaranteed availability of coverage.

* * * * *
    (b) * * *
    (1) * * *
    (i) Group market. (A) Subject to paragraph (b)(1)(i)(B) of this 
section, a health insurance issuer in the group market must allow an 
employer to purchase health insurance coverage for a group health plan 
at any point during the year.
    (B) In the case of a group health plan in the small group market 
that cannot comply with employer contribution or group participation 
rules for the offering of health insurance coverage, as allowed under 
applicable State law and in the case of a QHP offered in the SHOP, as 
permitted by Sec.  156.1250(c) of this subchapter, a health insurance 
issuer may restrict the availability of coverage to an annual 
enrollment period that begins November 15 and extends through December 
15 of each calendar year.
    (C) With respect to coverage in the small group market, and in the 
large group market if such coverage is offered through a Small Business 
Health Options Program (SHOP) in a State, coverage must become 
effective consistent with the dates described in Sec.  155.725(a)(2) of 
this subchapter, except as provided in paragraph (b)(1)(iii) of this 
section.
* * * * *

    (h) Construction. Nothing in this section should be construed to 
require an issuer to offer coverage otherwise prohibited under 
applicable Federal law.

0
8. Section 147.106 is amended by--
0
a. Revising paragraphs (b)(4), (c)(1), and (e);
0
b. Redesignating paragraphs (f), (g), and (h) as paragraphs (h), (i) 
and (j), respectively; and
0
c. Adding new paragraphs (f) and (g).
    The revisions and additions read as follows:


Sec.  147.106  Guaranteed renewability of coverage.

* * * * *
    (b) * * *
    (4) Termination of product. The issuer is ceasing to offer coverage 
in the market in accordance with paragraph (c) or (d) of this section 
and applicable State law.
* * * * *
    (c) * * *
    (1) The issuer provides notice in writing, in a form and manner 
specified by the Secretary, to each plan sponsor or individual, as 
applicable, provided that particular product in that market (and to all 
participants and beneficiaries covered under such coverage) of the 
discontinuation at least 90 calendar days before the date the coverage 
will be discontinued.
* * * * *
    (e) Exception for uniform modification of coverage. (1) Only at the 
time of coverage renewal may issuers modify the health insurance 
coverage for a product offered to a group health plan or an individual, 
as applicable, in the following:
    (i) Large group market.
    (ii) Small group market if, for coverage available in this market 
(other than only through one or more bona fide associations), the 
modification is consistent with State law and is effective uniformly 
among group health plans with that product.
    (iii) Individual market if the modification is consistent with 
State law and is effective uniformly for all individuals with that 
product.
    (2) For purposes of paragraphs (e)(1)(ii) and (iii) of this 
section, modifications made uniformly and solely pursuant to applicable 
Federal or State requirements are considered a uniform modification of 
coverage if:
    (i) The modification is made within a reasonable time period after 
the imposition or modification of the Federal or State requirement; and
    (ii) The modification is directly related to the imposition or 
modification of the Federal or State requirement.
    (3) Other types of modifications made uniformly are considered a 
uniform modification of coverage if the health insurance coverage for 
the product in the individual or small group market meets all of the 
following criteria:

[[Page 30340]]

    (i) The product is offered by the same health insurance issuer 
(within the meaning of section 2791(b)(2) of the PHS Act);
    (ii) The product is offered as the same product network type (for 
example, health maintenance organization, preferred provider 
organization, exclusive provider organization, point of service, or 
indemnity);
    (iii) The product continues to cover at least a majority of the 
same service area;
    (iv) Within the product, each plan has the same cost-sharing 
structure as before the modification, except for any variation in cost 
sharing solely related to changes in cost and utilization of medical 
care, or to maintain the same metal tier level described in sections 
1302(d) and (e) of the Affordable Care Act; and
    (v) The product provides the same covered benefits, except for any 
changes in benefits that cumulatively impact the plan-adjusted index 
rate (as described in Sec.  156.80(d)(2) of this subchapter) for any 
plan within the product within an allowable variation of +/-2 
percentage points (not including changes pursuant to applicable Federal 
or State requirements).
    (4) A State may only broaden the standards in paragraphs 
(e)(3)(iii) and (iv) of this section.
    (f) Notice of renewal of coverage. (1) If an issuer in the 
individual market is renewing non-grandfathered coverage as described 
in paragraph (a) of this section, or uniformly modifying non-
grandfathered coverage as described in paragraph (e) of this section, 
the issuer must provide to each individual written notice of the 
renewal before the date of the first day of the next annual open 
enrollment period in a form and manner specified by the Secretary.
    (2) If an issuer in the small group market is renewing coverage as 
described in paragraph (a) of this section, or uniformly modifying 
coverage as described in paragraph (e) of this section, the issuer must 
provide to each plan sponsor or individual, as applicable, written 
notice of the renewal at least 60 calendar days before the date of the 
coverage will be renewed in a form and manner specified by the 
Secretary.
    (g) Construction. (1) Nothing in this section should be construed 
to require an issuer to renew or continue in force coverage for which 
continued eligibility would otherwise be prohibited under applicable 
Federal law.
    (2) Medicare eligibility or entitlement is not a basis for 
nonrenewal or termination of an individual's health insurance coverage 
in the individual market.
* * * * *

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

0
9. The authority citation for part 148 is revised 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), as amended.


0
10. Section 148.101 is revised to read as follows:


Sec.  148.101  Basis and purpose.

    This part implements sections 2741 through 2763 and 2791 and 2792 
of the PHS Act. Its purpose is to guarantee the renewability of all 
coverage in the individual market. It also provides certain protections 
for mothers and newborns with respect to coverage for hospital stays in 
connection with childbirth and protects all individuals and family 
members who have, or seek, individual health insurance coverage from 
discrimination based on genetic information.

0
11. Section 148.102 is revised to read as follows:


Sec.  148.102  Scope, applicability, and effective dates.

    (a) Scope and applicability. (1) Individual health insurance 
coverage includes all health insurance coverage (as defined in Sec.  
144.103 of this subchapter) that is neither health insurance coverage 
sold in connection with an employment-related group health plan, nor 
short-term, limited-duration coverage as defined in Sec.  144.103 of 
this subchapter.
    (2) The requirements that pertain to guaranteed renewability for 
all individuals, to protections for mothers and newborns with respect 
to hospital stays in connection with childbirth, and to protections 
against discrimination based on genetic information apply to all 
issuers of individual health insurance coverage in the State.
    (b) Applicability date. Except as provided in Sec.  148.124 
(certificate of creditable coverage), Sec.  148.170 (standards relating 
to benefits for mothers and newborns), and Sec.  148.180 (prohibition 
of health discrimination based on genetic information), the 
requirements of this part apply to health insurance coverage offered, 
sold, issued, renewed, in effect, or operated in the individual market 
after June 30, 1997.


Sec.  148.103  [Removed]

0
12. Section 148.103 is removed.
0
13. Section 148.120 is revised to read as follows:


Sec.  148.120  Guaranteed availability of individual health insurance 
coverage to certain individuals with prior group coverage.

    The rules for guaranteeing the availability of individual health 
insurance coverage to certain eligible individuals with prior group 
coverage have been superseded by the requirements of Sec.  147.104 of 
this subchapter, which set forth Federal requirements for guaranteed 
availability of coverage in the group and individual markets.

0
14. Section 148.122 is amended by--
0
a. Revising paragraphs (a), (c)(3), (d)(1), and (g); and
0
b. Adding new paragraph (i).
    The revision and addition read as follows:


Sec.  148.122  Guaranteed renewability of individual health insurance 
coverage.

    (a) Applicability. This section applies to non-grandfathered and 
grandfathered health plans (within the meaning of Sec.  147.140 of this 
subchapter) that are individual health insurance coverage. See also 
Sec.  147.106 of this subchapter for requirements relating to 
guaranteed renewability of coverage with respect to non-grandfathered 
health plans.
* * * * *
    (c) * * *
    (3) Termination of product. The issuer is ceasing to offer coverage 
in the market in accordance with paragraph (d) or (e) of this section 
and applicable State law.
* * * * *
    (d) * * *
    (1) Provides notice in writing, in a form and manner specified by 
the Secretary, to each individual provided coverage of that type of 
health insurance at least 90 calendar days before the date the coverage 
will be discontinued.
* * * * *
    (g) Exception for uniform modification of coverage. (1) An issuer 
may, only at the time of coverage renewal, modify the health insurance 
coverage for a product offered in the individual market if the 
modification is consistent with State law and is effective uniformly 
for all individuals with that product.
    (2) For purposes of paragraph (g) of this section, modifications 
made uniformly and solely pursuant to applicable Federal or State 
requirements are considered a uniform modification of coverage if:
    (i) The modification is made within a reasonable time period after 
the imposition or modification of the Federal or State requirement; and

[[Page 30341]]

    (ii) The modification is directly related to the imposition or 
modification of the Federal or State requirement.
    (3) For purposes of paragraph (g) of this section, other types of 
modifications made uniformly are considered a uniform modification of 
coverage if the health insurance coverage for the product meets all of 
the following criteria:
    (i) The product is offered by the same health insurance issuer 
(within the meaning of section 2791(b)(2) of the PHS Act);
    (ii) The product is offered as the same product network type (for 
example, health maintenance organization, preferred provider 
organization, exclusive provider organization, point of service, or 
indemnity);
    (iii) The product continues to cover at least a majority of the 
same service area;
    (iv) Within the product, each plan has the same cost-sharing 
structure as before the modification, except for any variation in cost 
sharing solely related to changes in cost and utilization of medical 
care, or to maintain the same metal tier level described in sections 
1302(d) and (e) of the Affordable Care Act; and
    (v) The product provides the same covered benefits, except for any 
changes in benefits that cumulatively impact rate for any plan within 
the product within an allowable variation of +/- 2 percentage points 
(not including changes pursuant to applicable Federal or State 
requirements).
    (4) A State may only broaden the standards in paragraphs 
(g)(3)(iii) and (iv) of this section.
* * * * *
    (i) Notice of renewal of coverage. If an issuer is renewing 
grandfathered coverage as described in paragraph (b) of this section, 
or uniformly modifying grandfathered coverage as described in paragraph 
(g) of this section, the issuer must provide to each individual written 
notice of the renewal at least 60 calendar days before the date the 
coverage will be renewed in a form and manner specified by the 
Secretary.

0
15. Section 148.124 is revised to read as follows:


Sec.  148.124  Certification and disclosure of coverage.

    (a) General rule. The rules for providing certificates of 
creditable coverage and demonstrating creditable coverage have been 
superseded by the prohibition on preexisting condition exclusions. See 
Sec.  147.108 of this subchapter for rules prohibiting the imposition 
of a preexisting condition exclusion.
    (b) Applicability. The provisions of this section apply beginning 
December 31, 2014.

0
16. Section 148.126 is revised to read as follows:


Sec.  148.126  Determination of an eligible individual.

    The rules for guaranteeing the availability of individual health 
insurance coverage to certain eligible individuals with prior group 
coverage have been superseded by the requirements of Sec.  147.104 of 
this subchapter, which set forth Federal requirements for guaranteed 
availability of coverage in the group and individual markets.

0
17. Section 148.128 is revised to read as follows:


Sec.  148.128  State flexibility in individual market reforms--
alternative mechanisms.

    The rules for a State to implement an acceptable alternative 
mechanism for purposes of guaranteeing the availability of individual 
health insurance coverage to certain eligible individuals with prior 
group coverage have been superseded by the requirements of Sec.  
147.104 of this subchapter, which set forth Federal requirements for 
guaranteed availability of coverage in the group and individual 
markets.

0
18. Section 148.220 is amended by--
0
a. Revising the introductory text and paragraph (b)(3);
0
b. Redesignating paragraphs (b)(4) through (6) as paragraphs (b)(5) 
through (7), respectively; and
0
c. Adding new paragraph (b)(4).
    The revisions and additions read as follows:


Sec.  148.220  Excepted benefits.

    The requirements of this part and part 147 of this subchapter do 
not apply to any individual coverage in relation to its provision of 
the benefits described in paragraphs (a) and (b) of this section (or 
any combination of the benefits).
* * * * *
    (b) * * *
    (3) Coverage only for a specified disease or illness (for example, 
cancer policies) if the policies meet the requirements of Sec.  
146.145(b)(4)(ii)(B) and (C) of this subchapter regarding 
noncoordination of benefits.
    (4) Hospital indemnity or other fixed indemnity insurance only if--
    (i) The benefits are provided only to individuals who attest, in 
their fixed indemnity insurance application, that they have other 
health coverage that is minimum essential coverage within the meaning 
of section 5000A(f) of the Internal Revenue Code, or that they are 
treated as having minimum essential coverage due to their status as a 
bona fide resident of any possession of the United States pursuant to 
Code section 5000A(f)(4)(B).
    (ii) There is no coordination between the provision of benefits and 
an exclusion of benefits under any other health coverage.
    (iii) The benefits are paid in a fixed dollar amount per period of 
hospitalization or illness and/or per service (for example, $100/day or 
$50/visit) regardless of the amount of expenses incurred and without 
regard to the amount of benefits provided with respect to the event or 
service under any other health coverage.
    (iv) A notice is displayed prominently in the application materials 
in at least 14 point type that has the following language: ``THIS IS A 
SUPPLEMENT TO HEALTH INSURANCE AND IS NOT A SUBSTITUTE FOR MAJOR 
MEDICAL COVERAGE. LACK OF MAJOR MEDICAL COVERAGE (OR OTHER MINIMUM 
ESSENTIAL COVERAGE) MAY RESULT IN AN ADDITIONAL PAYMENT WITH YOUR 
TAXES.''
    (v) The requirement of paragraph (b)(4)(iv) of this section applies 
to all hospital or other fixed indemnity insurance policy years 
beginning on or after January 1, 2015, and the requirement of paragraph 
(b)(4)(i) of this section applies to hospital or other fixed indemnity 
insurance policies issued on or after January 1, 2015, and to hospital 
or other fixed indemnity policies issued before that date, upon their 
first renewal occurring on or after October 1, 2016.
* * * * *

PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND 
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT

0
19. The authority citation for part 153 continues to read as follows:

    Authority:  Secs. 1311, 1321, 1341-1343, Pub. L. 111-148, 24 
Stat. 119.


0
20. Section 153.500 is amended by revising the definition of 
``Adjustment percentage'' to read as follows:


Sec.  153.500  Definitions.

* * * * *
    Adjustment percentage means, with respect to a QHP:
    (1) For benefit year 2014, for a QHP offered by a health insurance 
issuer with allowable costs of at least 80 percent of after-tax premium 
in a transitional State, the percentage specified by HHS for such QHPs 
in the transitional State; and otherwise zero percent.

[[Page 30342]]

    (2) For benefit year 2015, for a QHP offered by a health insurance 
issuer in any State, two percent.
* * * * *

PART 154--HEALTH INSURANCE ISSUER RATE INCREASES: DISCLOSURE AND 
REVIEW REQUIREMENTS

0
21. The authority citation for part 154 continues to read as follows:

    Authority:  Section 2794 of the Public Health Service Act (42 
U.S.C. 300gg-94).


0
22. Section 154.102 is amended by revising the definition of 
``Product'' to read as follows:


Sec.  154.102  Definitions.

* * * * *
    Product means a package of health insurance coverage benefits with 
a discrete set of rating and pricing methodologies that a health 
insurance issuer offers in a State. The term product includes any 
product that is discontinued and newly filed within a 12-month period 
when the changes to the product meet the standards of Sec.  
147.106(e)(2) or (3) of this subchapter (relating to uniform 
modification of coverage).
* * * * *

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

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

    Authority:  Title I of the Affordable Care Act, sections 1301, 
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1332, 1334, 
1402, 1411, 1412, 1413, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 
18021-18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and 
18081-18083).


0
24. Section 155.120 is amended by revising paragraph (c) to read as 
follows:


Sec.  155.120  Non-interference with Federal law and non-discrimination 
standards.

* * * * *
    (c) Non-discrimination. (1) In carrying out the requirements of 
this part, the State and the Exchange must:
    (i) Comply with applicable non-discrimination statutes; and
    (ii) Not discriminate based on race, color, national origin, 
disability, age, sex, gender identity or sexual orientation.
    (2) Notwithstanding the provisions of paragraph (c)(1)(ii) of this 
section, an organization that receives Federal funds to provide 
services to a defined population under the terms of Federal legal 
authorities that participates in the certified application counselor 
program under Sec.  155.225 may limit its provision of certified 
application counselor services to the same defined population, but must 
comply with paragraph (c)(1)(ii) of this section with respect to the 
provision of certified application counselor services to that defined 
population. If the organization limits its provision of certified 
application counselor services pursuant to this exception, but is 
approached for certified application counselor services by an 
individual who is not included in the defined population that the 
organization serves, the organization must refer the individual to 
other Exchange-approved resources that can provide assistance. If the 
organization does not limit its provision of certified application 
counselor services pursuant to this exception, the organization must 
comply with paragraph (c)(1)(ii) of this section.

0
25. Section 155.206 is added to read as follows:


Sec.  155.206  Civil money penalties for violations of applicable 
Exchange standards by consumer assistance entities in Federally-
facilitated Exchanges.

    (a) Enforcement actions. If an individual or entity specified in 
paragraph (b) of this section engages in activity specified in 
paragraph (c) of this section, the Department of Health and Human 
Services (HHS) may impose the following sanctions:
    (1) Civil money penalties (CMPs), subject to the provisions of this 
section.
    (2) Corrective action plans. In the notice of assessment of CMPs 
specified in paragraph (l) of this section, HHS may provide an 
individual or entity specified in paragraph (b) of this section the 
opportunity to enter into a corrective action plan to correct the 
violation instead of paying the CMP, based on evaluation of the factors 
set forth in paragraph (h) of this section. In the event that the 
individual or entity does not follow such a corrective action plan, HHS 
could require payment of the CMP.
    (b) Consumer assistance entities. CMPs may be assessed under this 
section against the following consumer assistance entities:
    (1) Individual Navigators and Navigator entities in a Federally-
facilitated Exchange, including grantees, sub-grantees, and all 
personnel carrying out Navigator duties on behalf of a grantee or sub-
grantee;
    (2) Non-Navigator assistance personnel authorized under Sec.  
155.205(d) and (e) and non-Navigator assistance personnel entities in a 
Federally-facilitated Exchange, including but not limited to 
individuals and entities under contract with HHS to facilitate consumer 
enrollment in QHPs in a Federally-facilitated Exchange; and
    (3) Organizations that a Federally-facilitated Exchange has 
designated as certified application counselor organizations and 
individual certified application counselors carrying out certified 
application counselor duties in a Federally-facilitated Exchange.
    (c) Grounds for assessing CMPs. HHS may assess CMPs against a 
consumer assistance entity if, based on the outcome of the 
investigative process outlined in paragraphs (d) through (i) of this 
section, HHS has reasonably determined that the consumer assistance 
entity has failed to comply with the Federal regulatory requirements 
applicable to the consumer assistance entity that have been implemented 
pursuant to section 1321(a)(1) of the Affordable Care Act, including 
provisions of any agreements, contracts, and grant terms and conditions 
between HHS and the consumer assistance entity that interpret those 
Federal regulatory requirements or establish procedures for compliance 
with them, unless a CMP has been assessed for the same conduct under 45 
CFR 155.285.
    (d) Basis for initiating an investigation of a potential violation. 
(1) Information. Any information received or learned by HHS that 
indicates that a consumer assistance entity may have engaged or may be 
engaging in activity specified in paragraph (c) of this section may 
warrant an investigation. Information that might trigger an 
investigation includes, but is not limited to, the following:
    (i) Complaints from the general public;
    (ii) Reports from State regulatory agencies, and other Federal and 
State agencies; or
    (iii) Any other information that indicates that a consumer 
assistance entity may have engaged or may be engaging in activity 
specified in paragraph (c) of this section.
    (2) Who may file a complaint. Any entity or individual, or the 
legally authorized representative of an entity or individual, may file 
a complaint with HHS alleging that a consumer assistance entity has 
engaged or is engaging in an activity specified in paragraph (c) of 
this section.
    (e) Notice of investigation. When HHS performs an investigation 
under this section, it must provide a written notice to the consumer 
assistance entity of its investigation. This notice must include the 
following:

[[Page 30343]]

    (1) Description of the activity that is being investigated.
    (2) Explanation that the consumer assistance entity has 30 days 
from the date of the notice to respond with additional information or 
documentation, including information or documentation to refute an 
alleged violation.
    (3) State that a CMP might be assessed if the allegations are not, 
as determined by HHS, refuted within 30 days from the date of the 
notice.
    (f) Request for extension. In circumstances in which a consumer 
assistance entity cannot prepare a response to HHS within the 30 days 
provided in the notice of investigation described in paragraph (e) of 
this section, the entity may make a written request for an extension 
from HHS detailing the reason for the extension request and showing 
good cause. If HHS grants the extension, the consumer assistance entity 
must respond to the notice within the time frame specified in HHS's 
letter granting the extension of time. Failure to respond within 30 
days, or, if applicable, within an extended time frame, may result in 
HHS's imposition of a CMP depending upon the outcome of HHS's 
investigation of the alleged violation.
    (g) Responses to allegations of noncompliance. In determining 
whether to impose a CMP, HHS may review and consider documents or 
information received or collected in accordance with paragraph (d)(1) 
of this section, as well as additional documents or information 
provided by the consumer assistance entity in response to receiving a 
notice of investigation in accordance with paragraph (e)(2) of this 
section. HHS may also conduct an independent investigation into the 
alleged violation, which may include site visits and interviews, if 
applicable, and may consider the results of this investigation in its 
determination.
    (h) Factors in determining noncompliance and amount of CMPs, if 
any. In determining whether there has been noncompliance by the 
consumer assistance entity, and whether CMPs are appropriate:
    (1) HHS must take into account the following:
    (i) The consumer assistance entity's previous or ongoing record of 
compliance, including but not limited to compliance or noncompliance 
with any corrective action plan.
    (ii) The gravity of the violation, which may be determined in part 
by--
    (A) The frequency of the violation, taking into consideration 
whether any violation is an isolated occurrence, represents a pattern, 
or is widespread; and
    (B) Whether the violation caused, or could reasonably be expected 
to cause, financial or other adverse impacts on consumer(s), and the 
magnitude of those impacts;
    (2) HHS may take into account the following:
    (i) The degree of culpability of the consumer assistance entity, 
including but not limited to--
    (A) Whether the violation was beyond the direct control of the 
consumer assistance entity; and
    (B) The extent to which the consumer assistance entity received 
compensation--legal or otherwise--for the services associated with the 
violation;
    (ii) Aggravating or mitigating circumstances;
    (iii) Whether other remedies or penalties have been assessed and/or 
imposed for the same conduct or occurrence; or
    (iv) Other such factors as justice may require.
    (i) Maximum per-day penalty. The maximum amount of penalty imposed 
for each violation is $100 for each day for each consumer assistance 
entity for each individual directly affected by the consumer assistance 
entity's noncompliance; and where the number of individuals cannot be 
determined, HHS may reasonably estimate the number of individuals 
directly affected by the violation.
    (j) Settlement authority. Nothing in Sec.  155.206 limits the 
authority of HHS to settle any issue or case described in the notice 
furnished in accordance with paragraph (e) of this section or to 
compromise on any penalty provided for in this section.
    (k) Limitations on penalties. (1) Circumstances under which a CMP 
is not imposed. HHS will not impose any CMP on:
    (i) Any violation for the period of time during which none of the 
consumer assistance entities knew, or exercising reasonable diligence 
would have known, of the violation; or
    (ii) The period of time after any of the consumer assistance 
entities knew, or exercising reasonable diligence would have known, of 
the failure, if the violation was due to reasonable cause and not due 
to willful neglect and the violation was corrected within 30 days of 
the first day that any of the consumer assistance entities against whom 
the penalty would be imposed knew, or exercising reasonable diligence 
would have known, that the violation existed.
    (2) Burden of establishing knowledge. The burden is on the consumer 
assistance entity or entities to establish to HHS's satisfaction that 
the consumer assistance entity did not know, or exercising reasonable 
diligence would have known, that the violation existed, as well as the 
period of time during which that limitation applies; or that the 
violation was due to reasonable cause and not due to willful neglect 
and was corrected pursuant to the elements in paragraph (k)(1)(ii) of 
this section.
    (3) Time limit for commencing action. No action under this section 
will be entertained unless commenced, in accordance with Sec.  
155.206(l), within six years from the date on which the violation 
occurred.
    (l) Notice of assessment of CMP. If HHS proposes to assess a CMP in 
accordance with this section, HHS will send a written notice of this 
decision to the consumer assistance entity against whom the sanction is 
being imposed, which notice must include the following:
    (1) A description of the basis for the determination;
    (2) The basis for the CMP;
    (3) The amount of the CMP, if applicable;
    (4) The date the CMP, if applicable, is due;
    (5) Whether HHS would permit the consumer assistance entity to 
enter into a corrective action plan in place of paying the CMP, and the 
terms of any such corrective action plan;
    (6) An explanation of the consumer assistance entity's right to a 
hearing under paragraph (m) of this section; and
    (7) Information about the process for filing a request for a 
hearing.
    (m) Appeal of proposed sanction. Any consumer assistance entity 
against which HHS has assessed a sanction may appeal that penalty in 
accordance with the procedures set forth at 45 CFR part 150, subpart D.
    (n) Failure to request a hearing. (1) If the consumer assistance 
entity does not request a hearing within 30 days of the issuance of the 
notice of assessment of CMP described in paragraph (l) of this section, 
HHS may require payment of the proposed CMP.
    (2) HHS will notify the consumer assistance entity in writing of 
any CMP that has been assessed and of the means by which the consumer 
assistance entity may pay the CMP.
    (3) The consumer assistance entity has no right to appeal a CMP 
with respect to which it has not requested a hearing in accordance with 
paragraph (m) of this section unless the consumer assistance entity can 
show good cause in accordance with Sec.  150.405(b) of this subchapter 
for failing to timely exercise its right to a hearing.

[[Page 30344]]


0
26. Section 155.210 is amended--
0
a. By revising paragraph (c)(1)(iii);
0
b. In paragraph (d)(3) by removing ``or,'' after the semicolon;
0
c. By revising paragraph (d)(4);
0
d. By adding paragraphs (d)(5) through (9) and (e)(6) and (7); and
0
e. By revising paragraph (e)(2).
    The revision and additions read as follows:


Sec.  155.210  Navigator program standards.

* * * * *
    (c) * * *
    (1) * * *
    (iii) Meet any licensing, certification or other standards 
prescribed by the State or Exchange, if applicable, so long as such 
standards do not prevent the application of the provisions of title I 
of the Affordable Care Act. Standards that would prevent the 
application of the provisions of title I of the Affordable Care Act 
include but are not limited to the following:
    (A) Except as otherwise provided under Sec.  155.705(d), 
requirements that Navigators refer consumers to other entities not 
required to provide fair, accurate, and impartial information.
    (B) Except as otherwise provided under Sec.  155.705(d), 
requirements that would prevent Navigators from providing services to 
all persons to whom they are required to provide assistance.
    (C) Requirements that would prevent Navigators from providing 
advice regarding substantive benefits or comparative benefits of 
different health plans.
    (D) Requiring that a Navigator hold an agent or broker license or 
imposing any requirement that, in effect, would require all Navigators 
in the Exchange to be licensed agents or brokers.
    (E) Imposing standards that would, as applied or as implemented in 
a State, prevent the application of Federal requirements applicable to 
Navigator entities or individuals or applicable to the Exchange's 
implementation of the Navigator program.
* * * * *
    (d) * * *
    (4) Receive any consideration directly or indirectly from any 
health insurance issuer or issuer of stop loss insurance in connection 
with the enrollment of any individuals or employees in a QHP or a non-
QHP. Notwithstanding the requirements of this paragraph (d)(4), in a 
Federally-facilitated Exchange, no health care provider shall be 
ineligible to operate as a Navigator solely because it receives 
consideration from a health insurance issuer for health care services 
provided;
    (5) Charge any applicant or enrollee, or request or receive any 
form of remuneration from or on behalf of an individual applicant or 
enrollee, for application or other assistance related to Navigator 
duties;
    (6) Provide gifts, including gift cards or cash, unless they are of 
nominal value, or provide promotional items that market or promote the 
products or services of a third party, to any applicant or potential 
enrollee as an inducement for enrollment. Gifts, gift cards, or cash 
may exceed nominal value for the purpose of providing reimbursement for 
legitimate expenses incurred by a consumer in effort to receive 
Exchange application assistance, such as, but not limited to, travel or 
postage expenses;
    (7) Use Exchange funds to purchase gifts or gift cards, or 
promotional items that market or promote the products or services of a 
third party, that would be provided to any applicant or potential 
enrollee;
    (8) Solicit any consumer for application or enrollment assistance 
by going door-to-door or through other unsolicited means of direct 
contact, including calling a consumer to provide application or 
enrollment assistance without the consumer initiating the contact, 
unless the individual has a pre-existing relationship with the 
individual Navigator or Navigator entity and other applicable State and 
Federal laws are otherwise complied with. Outreach and education 
activities may be conducted by going door-to-door or through other 
unsolicited means of direct contact, including calling a consumer or
    (9) Initiate any telephone call to a consumer using an automatic 
telephone dialing system or an artificial or prerecorded voice, except 
in cases where the individual Navigator or Navigator entity has a 
relationship with the consumer and so long as other applicable State 
and Federal laws are otherwise complied with.
    (e) * * *
    (2) Provide information and services in a fair, accurate, and 
impartial manner, which includes providing information that assists 
consumers with submitting the eligibility application; clarifying the 
distinctions among health coverage options, including QHPs; and helping 
consumers make informed decisions during the health coverage selection 
process. Such information must acknowledge other health programs;
* * * * *
    (6) Ensure that applicants--
    (i) Are informed of the functions and responsibilities of 
Navigators;
    (ii) Provide authorization in a form and manner as determined by 
the Exchange prior to a Navigator's obtaining access to an applicant's 
personally identifiable information, and that the Navigator maintains a 
record of the authorization provided in a form and manner as determined 
by the Exchange. The Exchange must establish a reasonable retention 
period for maintaining these records. In Federally-facilitated 
Exchanges, this period is no less than six years, unless a different 
and longer retention period has already been provided under other 
applicable Federal law; and
    (iii) May revoke at any time the authorization provided the 
Navigator pursuant to paragraph (e)(6)(ii) of this section.
    (7) Maintain a physical presence in the Exchange service area, so 
that face-to-face assistance can be provided to applicants and 
enrollees. In a Federally-facilitated Exchange, no individual or entity 
shall be ineligible to operate as a Navigator solely because its 
principal place of business is outside of the Exchange service area.
* * * * *

0
27. Section 155.215 is amended by adding paragraphs (f) through (i) to 
read as follows:


Sec.  155.215  Standards applicable to Navigators and Non-Navigator 
Assistance Personnel carrying out consumer assistance functions under 
Sec. Sec.  155.205(d) and (e) and 155.210 in a Federally-facilitated 
Exchange and to Non-Navigator Assistance Personnel funded through an 
Exchange Establishment Grant.

* * * * *
    (f) State or Exchange standards. All non-Navigator entities or 
individuals carrying out consumer assistance functions under Sec.  
155.205(d) and (e) in an Exchange operated by HHS during the exercise 
of its authority under Sec.  155.105(f) and all non-Navigator 
assistance personnel funded through an Exchange Establishment Grant 
under section 1311(a) of the Affordable Care Act must meet any 
licensing, certification, or other standards prescribed by the State or 
Exchange, if applicable, so long as such standards do not prevent the 
application of the provisions of title I of the Affordable Care Act. 
Standards that would prevent the application of the provisions of title 
I of the Affordable Care Act include but are not limited to the 
following:
    (1) Requirements that non-Navigator entities or individuals refer 
consumers to other entities not required to provide fair, accurate, and 
impartial information.
    (2) Requirements that would prevent non-Navigator entities or 
individuals from providing services to all persons to

[[Page 30345]]

whom they are required to provide assistance.
    (3) Requirements that would prevent non-Navigator entities or 
individuals from providing advice regarding substantive benefits or 
comparative benefits of different health plans.
    (4) Imposing standards that would, as applied or as implemented in 
a State, prevent the application of Federal requirements applicable to 
non-Navigator entities or individuals or applicable to the Exchange's 
implementation of the non-Navigator assistance personnel program.
    (g) Consumer authorization. All non-Navigator entities or 
individuals carrying out consumer assistance functions under Sec.  
155.205(d) and (e) in an Exchange operated by HHS during the exercise 
of its authority under Sec.  155.105(f) and all non-Navigator 
assistance personnel funded through an Exchange Establishment Grant 
under section 1311(a) of the Affordable Care Act must establish 
procedures to ensure that applicants--
    (1) Are informed of the functions and responsibilities of non-
Navigator assistance personnel;
    (2) Provide authorization in a form and manner as determined by the 
Exchange prior to a non-Navigator assistance personnel's obtaining 
access to an applicant's personally identifiable information, and that 
the non-Navigator assistance personnel maintains a record of the 
authorization provided in a form and manner as determined by the 
Exchange. The Exchange must establish a reasonable retention period for 
maintaining these records. In Federally-facilitated Exchanges, this 
period is no less than six years, unless a different and longer 
retention period has already been provided under other applicable 
Federal law; and
    (3) May revoke at any time the authorization provided the non-
Navigator assistance personnel pursuant to paragraph (g)(2) of this 
section.
    (h) All non-Navigator entities carrying out consumer assistance 
functions under Sec.  155.205(d) and (e) in an Exchange operated by HHS 
during the exercise of its authority under Sec.  155.105(f) and all 
non-Navigator assistance personnel funded through an Exchange 
Establishment Grant under section 1311(a) of the Affordable Care Act 
must maintain a physical presence in the Exchange service area, so that 
face-to-face assistance can be provided to applicants and enrollees. In 
a Federally-facilitated Exchange, no individual or entity shall be 
ineligible to operate as a non-Navigator entity or as non-Navigator 
assistance personnel solely because its principal place of business is 
outside of the Exchange service area.
    (i) Prohibition on compensation per enrollment. Beginning November 
15, 2014, Navigators and Non-Navigator assistance personnel carrying 
out consumer assistance functions under Sec. Sec.  155.205(d) and (e) 
and 155.210, if operating in an Exchange operated by HHS during the 
exercise of its authority under Sec.  155.105(f), are prohibited from 
providing compensation to individual Navigators or non-Navigator 
assistance personnel on a per-application, per-individual-assisted, or 
per-enrollment basis.

0
28. Section 155.225 is amended--
0
a. By adding paragraph (b)(3);
0
b. By revising paragraph (c)(1);
0
c. In paragraph (d)(5) by removing ``and'' after the semicolon;
0
d. In paragraph (d)(6) by removing the period at the end of the 
paragraph and adding a semicolon in its place;
0
e. By adding paragraphs (d)(7) and (8); and
0
f. By revising paragraphs (f)(1) and (2) and (g).
    The revisions and additions read as follows:


Sec.  155.225  Certified application counselors.

* * * * *
    (b) * * *
    (3) In a Federally-facilitated Exchange, no individual or entity 
shall be ineligible to operate as a certified application counselor or 
organization designated by the Exchange under paragraph (b) of this 
section solely because its principal place of business is outside of 
the Exchange service area.
    (c) * * *
    (1) Provide information to individuals and employees about the full 
range of QHP options and insurance affordability programs for which 
they are eligible, which includes providing fair, impartial, and 
accurate information that assists consumers with submitting the 
eligibility application; clarifying the distinctions among health 
coverage options, including QHPs; and helping consumers make informed 
decisions during the health coverage selection process;
* * * * *
    (d) * * *
    (7) Is recertified on at least an annual basis after successfully 
completing recertification training as required by the Exchange; and
    (8) Meets any licensing, certification, or other standards 
prescribed by the State or Exchange, if applicable, so long as such 
standards do not prevent the application of the provisions of title I 
of the Affordable Care Act. Standards that would prevent the 
application of the provisions of title I of the Affordable Care Act 
include but are not limited to the following:
    (i) Requirements that certified application counselors refer 
consumers to other entities not required to provide fair, accurate, and 
impartial information.
    (ii) Requirements that would prevent certified application 
counselors from providing services to all persons to whom they are 
required to provide assistance.
    (iii) Requirements that would prevent certified application 
counselors from providing advice regarding substantive benefits or 
comparative benefits of different health plans.
    (iv) Imposing standards that would, as applied or as implemented in 
a State, prevent the application of Federal requirements applicable to 
certified application counselors, to an organization designated by the 
Exchange under paragraph (b) of this section, or to the Exchange's 
implementation of the certified application program.
* * * * *
    (f) * * *
    (1) Are informed of the functions and responsibilities of certified 
application counselors;
    (2) Provide authorization in a form and manner as determined by the 
Exchange prior to a certified application counselor obtaining access to 
an applicant's personally identifiable information, and that the 
organization or certified application counselor maintains a record of 
the authorization in a form and manner as determined by the Exchange. 
The Exchange must establish a reasonable retention period for 
maintaining these records. In Federally-facilitated Exchanges, this 
period is no less than six years, unless a different and longer 
retention period has already been provided under other applicable 
Federal law; and
* * * * *
    (g) Fees, consideration, solicitation, and marketing. Organizations 
designated by the Exchange under paragraph (b) of this section and 
certified application counselors must not--
    (1) Impose any charge on applicants or enrollees for application or 
other assistance related to the Exchange;
    (2) Receive any consideration directly or indirectly from any 
health insurance issuer or issuer of stop-loss insurance in connection 
with the enrollment of any individuals in a QHP or a non-QHP. In a 
Federally-facilitated Exchange, no health care provider shall be 
ineligible

[[Page 30346]]

to operate as a certified application counselor or organization 
designated by the Exchange under paragraph (b) of this section solely 
because it receives consideration from a health insurance issuer for 
health care services provided;
    (3) Beginning November 15, 2014, if operating in a Federally-
facilitated Exchange, provide compensation to individual certified 
application counselors on a per-application, per-individual-assisted, 
or per-enrollment basis;
    (4) Provide gifts, including gift cards or cash, unless they are of 
nominal value, or provide promotional items that market or promote the 
products or services of a third party, to any applicant or potential 
enrollee as an inducement for enrollment. Gifts, gift cards, or cash 
may exceed nominal value for the purpose of providing reimbursement for 
legitimate expenses incurred by a consumer in effort to receive 
Exchange application assistance, such as, but not limited to, travel or 
postage expenses.
    (5) Solicit any consumer for application or enrollment assistance 
by going door-to-door or through other unsolicited means of direct 
contact, including calling a consumer to provide application or 
enrollment assistance without the consumer initiating the contact, 
unless the individual has a pre-existing relationship with the 
individual certified application counselor or designated organization 
and other applicable State and Federal laws are otherwise complied 
with. Outreach and education activities may be conducted by going door-
to-door or through other unsolicited means of direct contact, including 
calling a consumer; or
    (6) Initiate any telephone call to a consumer using an automatic 
telephone dialing system or an artificial or prerecorded voice, except 
in cases where the individual certified application counselor or 
designated organization has a relationship with the consumer and so 
long as other applicable State and Federal laws are otherwise complied 
with.

0
29. Section 155.240 is amended by adding paragraph (e) to read as 
follows:


Sec.  155.240  Payment of premium.

* * * * *
    (e) Premium calculation. The Exchange may establish one or more 
standard processes for premium calculation.
    (1) For a Federally-facilitated Exchange, the premium for coverage 
lasting less than one month must equal the product of--
    (i) The premium for one month of coverage divided by the number of 
days in the month; and
    (ii) The number of days for which coverage is being provided in the 
month described in paragraph (e)(1)(i) of this section.
    (2) [Reserved]

0
30. Section 156.260 is amended by revising paragraph (g) to read as 
follows:


Sec.  155.260  Privacy and security of personally identifiable 
information.

* * * * *
    (g) Improper use and disclosure of information. Any person who 
knowingly and willfully uses or discloses information in violation of 
section 1411(g) of the Affordable Care Act will be subject to a CMP of 
not more than $25,000 per person or entity, per use or disclosure, 
consistent with the bases and process for imposing civil penalties 
specified at Sec.  155.285, in addition to other penalties that may be 
prescribed by law.

0
31. Section 155.285 is added to subpart C to read as follows:


Sec.  155.285  Bases and process for imposing civil penalties for 
provision of false or fraudulent information to an Exchange or improper 
use or disclosure of information.

    (a) Grounds for imposing civil money penalties. (1) HHS may impose 
civil money penalties on any person, as defined in paragraph (a)(2) of 
this section, if, based on credible evidence, HHS reasonably determines 
that a person has engaged in one or more of the following actions:
    (i) Failure to provide correct information under section 1411(b) of 
the Affordable Care Act where such failure is attributable to 
negligence or disregard of any rules or regulations of the Secretary 
with negligence and disregard defined as they are in section 6662 of 
the Internal Revenue Code of 1986:
    (A) ``Negligence'' includes any failure to make a reasonable 
attempt to provide accurate, complete, and comprehensive information; 
and
    (B) ``Disregard'' includes any careless, reckless, or intentional 
disregard for any rules or regulations of the Secretary.
    (ii) Knowing and willful provision of false or fraudulent 
information required under section 1411(b) of the Affordable Care Act, 
where knowing and willful means the intentional provision of 
information that the person knows to be false or fraudulent; or
    (iii) Knowing and willful use or disclosure of information in 
violation of section 1411(g) of the Affordable Care Act, where knowing 
and willful means the intentional use or disclosure of information in 
violation of section 1411(g). Such violations would include, but not be 
limited to, the following:
    (A) Any use or disclosure performed which violates relevant privacy 
and security standards established by the Exchange pursuant to Sec.  
155.260;
    (B) Any other use or disclosure which has not been determined by 
the Secretary to be in compliance with section 1411(g)(2)(A) of the 
Affordable Care Act pursuant to Sec.  155.260(a); and
    (C) Any other use or disclosure which is not necessary to carry out 
a function described in a contract with a non-Exchange entity executed 
pursuant to Sec.  155.260(b)(2).
    (2) For purposes of this section, the term ``person'' is defined to 
include, but is not limited to, all individuals; corporations; 
Exchanges; Medicaid and CHIP agencies; other entities gaining access to 
personally identifiable information submitted to an Exchange to carry 
out additional functions which the Secretary has determined ensure the 
efficient operation of the Exchange pursuant to Sec.  155.260(a)(1); 
and non-Exchange entities as defined in Sec.  155.260(b) which includes 
agents, brokers, Web-brokers, QHP issuers, Navigators, non-Navigator 
assistance personnel, certified application counselors, in-person 
assistors, and other third party contractors.
    (b) Factors in determining the amount of civil money penalties 
imposed. In determining the amount of civil money penalties, HHS may 
take into account factors which include, but are not limited to, the 
following:
    (1) The nature and circumstances of the conduct including, but not 
limited to:
    (i) The number of violations;
    (ii) The severity of the violations;
    (iii) The person's history with the Exchange including any prior 
violations that would indicate whether the violation is an isolated 
occurrence or represents a pattern of behavior;
    (iv) The length of time of the violation;
    (v) The number of individuals affected or potentially affected;
    (vi) The extent to which the person received compensation or other 
consideration associated with the violation;
    (vii) Any documentation provided in any complaint or other 
information, as well as any additional information provided by the 
individual to refute performing the violation; and
    (viii) Whether other remedies or penalties have been imposed for 
the same conduct or occurrence.
    (2) The nature of the harm resulting from, or reasonably expected 
to result

[[Page 30347]]

from, the violation, including but not limited to:
    (i) Whether the violation resulted in actual or potential financial 
harm;
    (ii) Whether there was actual or potential harm to an individual's 
reputation;
    (iii) Whether the violation hindered or could have hindered an 
individual's ability to obtain health insurance coverage;
    (v) The actual or potential impact of the provision of false or 
fraudulent information or of the improper use or disclosure of the 
information; and
    (vi) Whether any person received a more favorable eligibility 
determination for enrollment in a QHP or insurance affordability 
program, such as greater advance payment of the premium tax credits or 
cost-sharing reductions than he or she would be eligible for if the 
correct information had been provided.
    (3) No penalty will be imposed under paragraph (a)(1)(i) of this 
section if HHS determines that there was a reasonable cause for the 
failure to provide correct information required under section 1411(b) 
of the Affordable Care Act and that the person acted in good faith.
    (c) Maximum penalty. The amount of a civil money penalty will be 
determined by HHS in accordance with paragraph (b) of this section.
    (1) The following provisions provide maximum penalties for a single 
``plan year,'' where ``plan year'' has the same meaning as at Sec.  
155.20:
    (i) Any person who fails to provide correct information as 
specified in paragraph (a)(1)(i) of this section may be subject to a 
maximum civil money penalty of $25,000 for each application, as defined 
at paragraph (c)(1)(iii) of this section, pursuant to which a person 
fails to provide correct information.
    (ii) Any person who knowingly and willfully provides false 
information as specified in paragraph (a)(1)(ii) of this section may be 
subject to a maximum civil money penalty of $250,000 for each 
application, as defined at paragraph (c)(1)(iii) of this section, on 
which a person knowingly and willfully provides false information.
    (iii) For the purposes of this subsection, ``application'' is 
defined as a submission of information, whether through an online 
portal, over the telephone through a call center, or through a paper 
submission process, in which the information is provided in relation to 
an eligibility determination; an eligibility redetermination based on a 
change in an individual's circumstances; or an annual eligibility 
redetermination for any of the following:
    (A) Enrollment in a qualified health plan;
    (B) Premium tax credits or cost sharing reductions; or
    (C) An exemption from the individual shared responsibility payment.
    (2) Any person who knowingly or willfully uses or discloses 
information as specified in paragraph (a)(1)(iii) of this section may 
be subject to the following civil money penalty:
    (i) A civil money penalty for each use or disclosure described in 
paragraph (a)(1)(iii) of this section of not more than $25,000 per use 
or disclosure.
    (ii) For purposes of paragraph (c) of this section, a use or 
disclosure includes one separate use or disclosure of a single 
individual's personally identifiable information where the person 
against whom a civil money penalty may be imposed has made the use or 
disclosure.
    (3) These penalties may be imposed in addition to any other 
penalties that may be prescribed by law.
    (d) Notice of intent to issue civil money penalty. If HHS intends 
to impose a civil money penalty in accordance with this part, HHS will 
send a written notice of such intent to the person against whom it 
intends to impose a civil money penalty.
    (1) This written notice will be either hand delivered, sent by 
certified mail, return receipt requested, or sent by overnight delivery 
service with signature upon delivery required. The written notice must 
include the following elements:
    (i) A description of the findings of fact regarding the violations 
with respect to which the civil money penalty is proposed;
    (ii) The basis and reasons why the findings of fact subject the 
person to a penalty;
    (iii) Any circumstances described in paragraph (b) of this section 
that were considered in determining the amount of the proposed penalty;
    (iv) The amount of the proposed penalty;
    (v) An explanation of the person's right to a hearing under any 
applicable administrative hearing process;
    (vi) A statement that failure to request a hearing within 60 
calendar days after the date of issuance printed on the notice permits 
the assessment of the proposed penalty; and
    (vii) Information explaining how to file a request for a hearing 
and the address to which the hearing request must be sent.
    (2) The person may request a hearing before an ALJ on the proposed 
penalty by filing a request in accordance with the procedure to file an 
appeal specified in paragraph (f) of this section.
    (e) Failure to request a hearing. If the person does not request a 
hearing within 60 calendar days of the date of issuance printed on the 
notice described in paragraph (d) of this section, HHS may impose the 
proposed civil money penalty.
    (1) HHS will notify the person in writing of any penalty that has 
been imposed, the means by which the person may satisfy the penalty, 
and the date on which the penalty is due.
    (2) A person has no right to appeal a penalty with respect to which 
the person has not timely requested a hearing in accordance with 
paragraph (d) of this section.
    (f) Appeal of proposed penalty. Subject to paragraph (e)(2) of this 
section, any person against whom HHS proposed to impose a civil money 
penalty may appeal that penalty in accordance with the rules and 
procedures outlined at 45 CFR part 150, subpart D, excluding Sec. Sec.  
150.461, 150.463, and 150.465.
    (g) Enforcement authority. (1) HHS. HHS may impose civil money 
penalties up to the maximum amounts specified in paragraph (d) of this 
section for any of the violations described in paragraph (a) of this 
section.
    (2) OIG. In accordance with the rules and procedures of 42 CFR part 
1003, and in place of imposition of penalties by CMS, the OIG may 
impose civil money penalties for violations described in paragraph 
(a)(1)(ii) of this section.
    (h) Settlement authority. Nothing in this section limits the 
authority of HHS to settle any issue or case described in the notice 
furnished in accordance with Sec.  155.285(d) or to compromise on any 
penalty provided for in this section.
    (i) Limitations. No action under this section will be entertained 
unless commenced, in accordance with Sec.  155.285(d), within 6 years 
from the date on which the violation occurred.

0
32. Section 155.320 is amended by revising the section heading to read 
as follows and by removing paragraph (d)(4).


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

* * * * *
0
33. Section 155.330 is amended by revising paragraph (d)(2)(ii) to read 
as follows:


Sec.  155.330  Eligibility redetermination during a benefit year.

* * * * *
    (d) * * *
    (2) * * *

[[Page 30348]]

    (ii) Comply with the standards specified in paragraph (e)(2) of 
this section.
* * * * *

0
34. Section 155.400 is amended by adding paragraphs (e) and (f) to read 
as follows:


Sec.  155.400  Enrollment of qualified individuals into QHPs.

* * * * *
    (e) Premium payment. Exchanges may, and the Federally-facilitated 
Exchange will, require payment of the first month's premium to 
effectuate an enrollment.
    (f) Processing enrollment transactions. The Exchange may provide 
requirements to QHP issuers regarding the instructions for processing 
electronic enrollment-related transactions.

0
35. Section 155.410 is amended by revising paragraph (d) to read as 
follows:


Sec.  155.410  Initial and annual open enrollment periods.

* * * * *
    (d) Notice of annual open enrollment period. Starting in 2014, the 
Exchange must provide a written annual open enrollment notification to 
each enrollee no earlier than the first day of the month before the 
open enrollment period begins and no later than the first day of the 
open enrollment period.
* * * * *

0
36. Section 155.420 is amended by revising paragraphs (b)(2)(i) through 
(iii), (c), (d)(1), (d)(6)(iii), and (e) heading and introductory text 
to read as follows:


Sec.  155.420  Special enrollment periods.

* * * * *
    (b) * * *
    (2) * * *
    (i) In the case of birth, adoption, placement for adoption, or 
placement in foster care as described in paragraph (d)(2) of this 
section, the Exchange must ensure that coverage is effective for a 
qualified individual or enrollee on the date of birth, adoption, 
placement for adoption, or placement in foster care, or it may permit 
the qualified individual or enrollee to elect a coverage effective date 
of the first day of the month following the date of birth, adoption, 
placement for adoption, or placement in foster care. If the Exchange 
permits the qualified individual or enrollee to elect a coverage 
effective date of the first day of the month following the date of 
birth, adoption, placement for adoption, or placement in foster care, 
the Exchange must ensure coverage is effective on such date elected by 
the qualified individual or enrollee.
    (ii) In the case of marriage as described in paragraph (d)(2) of 
this section the Exchange must ensure that coverage is effective for a 
qualified individual or enrollee on the first day of the month 
following plan selection.
    (iii) In the case of a qualified individual or enrollee eligible 
for a special enrollment period as described in paragraphs (d)(4), 
(d)(5), (d)(9), or (d)(10) of this section, the Exchange must ensure 
that coverage is effective on an appropriate date based on the 
circumstances of the special enrollment period.
    (iv) In a case where a consumer loses coverage as described in 
paragraph (d)(1) or (d)(6)(iii) of this section, if the plan selection 
is made before or on the day of the loss of coverage, the Exchange must 
ensure that the coverage effective date is on the first day of the 
month following the loss of coverage. If the plan selection is made 
after the loss of coverage, the Exchange must ensure that coverage is 
effective in accordance with paragraph (b)(1) of this section or on the 
first day of the month following plan selection in accordance with 
paragraph (b)(2) of this section, at the option of the Exchange;
* * * * *
    (c) Availability and length of special enrollment periods. (1) 
General rule. Unless specifically stated otherwise herein, a qualified 
individual or enrollee has 60 days from the date of a triggering event 
to select a QHP.
    (2) Advance availability. (i) A qualified individual or his or her 
dependent who is described in paragraph (d)(1) of this section has 60 
days before and after the loss of coverage to select a QHP.
    (ii) A qualified individual or his or her dependent who is 
described in paragraph (d)(6)(iii) of this section has 60 days before 
and after the loss of eligibility for qualifying coverage in an 
eligible employer-sponsored plan to select a QHP.
    (3) Special rule. In the case of a qualified individual or enrollee 
who is eligible for a special enrollment period as described in 
paragraphs (d)(4), (d)(5), (d)(9), or (d)(10) of this section, the 
Exchange may define the length of the special enrollment period as 
appropriate based on the circumstances of the special enrollment 
period, but in no event shall the length of the special enrollment 
period exceed sixty (60) days.
    (d) * * *
    (1) The qualified individual or his or her dependent either:
    (i) Loses minimum essential coverage. The date of the loss of 
coverage is the last day the consumer would have coverage under his or 
her previous plan or coverage.
    (ii) Is enrolled in any non-calendar year health insurance policy 
that will expire in 2014 as described in Sec.  147.104(b)(2) of this 
subchapter, even if the qualified individual or his or her dependent 
has the option to renew the expiring non-calendar year individual 
health insurance policy. The date of the loss of coverage is the date 
in 2014 of the expiration of the non-calendar year policy;
    (iii) Loses pregnancy-related coverage described under section 
1902(a)(10)(A)(i)(IV) and (a)(10)(A)(ii)(IX) of the Social Security Act 
(42 U.S.C. 1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX)). The date of the 
loss of coverage is the last day the consumer would have pregnancy-
related coverage; or
    (iv) Loses medically needy coverage as described under section 
1902(a)(10)(C) of the Social Security Act only once per calendar year. 
The date of the loss of coverage is the last day the consumer would 
have medically needy coverage.
* * * * *
    (6) * * *
    (iii) A qualified individual or his or her dependent who is 
enrolled in an eligible employer-sponsored plan is determined newly 
eligible for advance payments of the premium tax credit based in part 
on a finding that such individual is ineligible for qualifying coverage 
in an eligible-employer sponsored plan in accordance with 26 CFR 1.36B-
2(c)(3), including as a result of his or her employer discontinuing or 
changing available coverage within the next 60 days, provided that such 
individual is allowed to terminate existing coverage.
* * * * *
    (e) Loss of coverage. Loss of coverage described in paragraph 
(d)(1) of this section includes those circumstances described in 26 CFR 
54.9801-6(a)(3)(i) through (iii) and in paragraphs (d)(1)(ii) through 
(iv) of this section. Loss of coverage does not include voluntary 
termination of coverage or other loss due to--
* * * * *

0
37. Section 155.430 is amended by revising paragraph (d)(6) and adding 
paragraph (e) to read as follows:


Sec.  155.430  Termination of coverage.

* * * * *
    (d) * * *

[[Page 30349]]

    (6) In the case of a termination in accordance with paragraph 
(b)(2)(v) of this section, the last day of coverage in an enrollee's 
prior QHP is the day before the effective date of coverage in his or 
her new QHP, including any retroactive enrollments effectuated under 
Sec.  155.420(b)(2)(iii). In cases of retroactive terminations dates, 
the Exchange will ensure that appropriate actions are taken to make 
necessary adjustments to advance payments of the premium tax credit, 
cost-sharing reductions, premiums, and claims.
* * * * *
    (e) Termination, cancellation, and reinstatement. The Exchange may 
establish operational instructions as to the form, manner, and method 
for addressing each of the following:
    (1) Termination. A termination is an action taken after a coverage 
effective date that ends an enrollee's coverage through the Exchange 
for a date after the original coverage effective date, resulting in a 
period during which the individual was covered by the issuer.
    (2) Cancellation. A cancellation is specific type of termination 
action that ends a qualified individuals' enrollment on the date 
coverage became effective resulting in coverage never having been 
effective with the QHP.
    (3) Reinstatement. A reinstatement is a correction of an erroneous 
termination or cancellation action and results in restoration of an 
enrollment with no break in coverage.


Sec.  155.505  [Amended]

0
38. Section 155.505 is amended in paragraph (b)(4) by removing ``; 
and'' at the end of the paragraph and adding a period in its place.

0
39. Section 155.530 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  155.530  Dismissals.

    (a) * * *
    (1) Withdraws the appeal request in writing or by telephone, if the 
appeals entity is capable of accepting telephonic withdrawals.
    (i) Accepting telephonic withdrawals means the appeals entity--
    (A) Records in full the appellant's statement and telephonic 
signature made under penalty of perjury; and
    (B) Provides a written confirmation to the appellant documenting 
the telephonic interaction.
    (ii) [Reserved]
* * * * *

0
40. Section 155.555 is amended by--
0
a. Redesignating paragraphs (d) introductory text, (d)(1), (d)(2) 
introductory text, (d)(2)(i), (ii), (iii), (d)(3), and (d)(4) as 
paragraphs (d)(1) introductory text, (d)(1)(i), (d)(1)(ii) introductory 
text, (d)(1)(ii)(A), (B), (C), (d)(1)(iii), and (d)(2), respectively; 
and
0
b. Revising new paragraph (d)(2) introductory text.
    The revision reads as follows:


Sec.  155.555  Employer appeals process.

* * * * *
    (d) * * *
    (2) Upon receipt of an invalid appeal request, the appeals entity 
must promptly and without undue delay send written notice to the 
employer that the appeal request is not valid because it fails to meet 
the requirements of this section. The written notice must inform the 
employer--
* * * * *
0
41. Section 155.600(a) is amended by adding a definition of ``Required 
contribution percentage'' in alphabetical order to read as follows:


Sec.  155.600  Definitions and general requirements.

    (a) * * *
    Required contribution percentage means the product of eight percent 
and the rate of premium growth over the rate of income growth for the 
calendar year, rounded to the nearest one-hundredth of one percent.
* * * * *

0
42. Section 155.605 is amended by revising paragraph (g)(5) to read as 
follows:


Sec.  155.605  Eligibility standards for exemptions.

* * * * *
    (g) * * *
    (5) Self-only coverage in an eligible employer-sponsored plan. The 
IRS may allow an applicant to claim an exemption for a calendar year if 
he or she, as well as one or more employed members of his or her 
family, as defined in 26 CFR 1.36B-1(d), has been determined eligible 
for affordable self-only employer-sponsored coverage pursuant to 
section 5000A(e)(1) of the Code through their respective employers for 
one or more months during the calendar year, but the aggregate cost of 
employer-sponsored coverage for all the employed members of the family 
exceeds the required contribution percentage of household income for 
that calendar year; or
* * * * *

0
43. Section 155.625 is revised to read as follows:


Sec.  155.625  Options for conducting eligibility determinations for 
exemptions.

    (a) Options for conducting eligibility determinations. The Exchange 
may satisfy the requirements of this subpart--
    (1) Directly or through contracting arrangements in accordance with 
Sec.  155.110(a); or
    (2) For an application submitted before the start of open 
enrollment for 2016, through the approach described in paragraph (b) of 
this section.
    (b) Use of HHS service. Notwithstanding the requirements of this 
subpart, for an application submitted before the start of open 
enrollment for 2016, the Exchange may adopt an exemption eligibility 
determination made by HHS, provided that--
    (1) The Exchange adheres to the eligibility determination made by 
HHS;
    (2) The Exchange furnishes to HHS any information available through 
the Exchange that is necessary for an applicant to utilize the process 
administered by HHS; and
    (3) The Exchange call center and Internet Web site specified in 
Sec.  155.205(a) and (b), respectively, provide information to 
consumers regarding the exemption eligibility process.

0
44. Section 155.705 is amended by--
0
a. Revising paragraphs (b)(2) and (b)(3)(ii) introductory text and 
(b)(3)(iv) introductory text; and
0
b. Adding paragraphs (b)(3)(vi) and (vii).
    The revisions and addition read as follows:


Sec.  155.705  Functions of a SHOP.

* * * * *
    (b) * * *
    (2) Employer choice requirements. With regard to QHPs offered 
through the SHOP for plan years beginning on or after January 1, 2015, 
the SHOP must allow a qualified employer to select a level of coverage 
as described in section 1302(d)(1) of the Affordable Care Act, in which 
all QHPs within that level are made available to the qualified 
employees of the employer, unless the SHOP makes an election pursuant 
to paragraph (b)(3)(vi) of this section.
    (3) * * *
    (ii) Unless the SHOP makes an election pursuant to paragraph 
(b)(3)(vi) of this section, for plan years beginning on or after 
January 1, 2015, a SHOP:
* * * * *
    (iv) Unless the Secretary makes an election pursuant to paragraph 
(b)(3)(vi) of this section, for plan years beginning on or after 
January 1, 2015, a Federally-facilitated SHOP will provide a qualified 
employer a choice of two methods to make QHPs available to qualified 
employees:
* * * * *

[[Page 30350]]

    (vi) For plan years beginning in 2015 only, the SHOP may, elect to 
provide employers only with the option set forth at paragraph 
(b)(3)(ii)(B) of this section, or in the case of a Federally-
facilitated SHOP, only with the option set forth at paragraph 
(b)(3)(iv)(B) of this section, only if the State Insurance Commissioner 
submits a written recommendation to the SHOP adequately explaining that 
it is the State Insurance Commissioner's expert judgment, based on a 
documented assessment of the full landscape of the small group market 
in his or her State, that not implementing employee choice would be in 
the best interests of small employers and their employees and 
dependents, given the likelihood that implementing employee choice 
would cause issuers to price products and plans higher in 2015 due to 
the issuers' beliefs about adverse selection. A State Insurance 
Commissioner's recommendation must be based on concrete evidence, 
including but not limited to discussions with those issuers expected to 
participate in the SHOP in 2015.
    (vii) For plan years beginning in 2015 only, a State Insurance 
Commissioner should submit the recommendation specified in paragraph 
(b)(3)(vi) of this section, and the SHOP should make a decision based 
on that recommendation sufficiently in advance of the end of the QHP 
certification application window such that issuers can make informed 
decisions about whether to participate in the SHOP. In a Federally-
facilitated-SHOP, State Insurance Commissioners must submit to HHS the 
recommendation specified in paragraph (b)(3)(vi) of this section on or 
before June 2, 2014, and HHS will make a decision based on any 
recommendations submitted by that deadline before the close of the QHP 
certification application window.
* * * * *

0
45. Section 155.725 is amended by revising paragraphs (c) and (e) to 
read as follows:


Sec.  155.725  Enrollment periods under SHOP.

* * * * *
    (c) Annual employer election period. (1) Notwithstanding any other 
paragraph in this section, for coverage beginning in 2015, in a 
Federally-facilitated SHOP a qualified employer's annual election 
period may begin no sooner than November 15, 2014.
    (2) The SHOP must provide qualified employers with a standard 
election period prior to the completion of the employer's plan year and 
before the annual employee open enrollment period, in which the 
qualified employer may change its participation in the SHOP for the 
next plan year, including--
    (i) The method by which the qualified employer makes QHPs available 
to qualified employees pursuant to Sec.  155.705(b)(2) and (3);
    (ii) The employer contribution towards the premium cost of 
coverage;
    (iii) The level of coverage offered to qualified employees as 
described in Sec.  155.705(b)(2) and (3); and
    (iv) The QHP or QHPs offered to qualified employees in accordance 
with Sec.  155.705.
* * * * *
    (e) Annual employee open enrollment period. The SHOP must establish 
a standardized annual open enrollment period for qualified employees 
prior to the completion of the applicable qualified employer's plan 
year and after that employer's annual election period.
* * * * *

0
46. Section 155.740 is amended by--
0
a. Redesignating paragraphs (g) introductory text, (g)(1) introductory 
text, (g)(1)(i), (g)(1)(ii), (g)(2), and (g)(3) as paragraphs (g)(1) 
introductory text, (g)(1)(i) introductory text, (g)(1)(i)(A), 
(g)(1)(i)(B), (g)(1)(ii), and (g)(2), respectively; and
0
b. Revising paragraph (i)(1)(i).
    The revision read as follows:


Sec.  155.740  SHOP employer and employee eligibility appeals 
requirements.

* * * * *
    (i) * * *
    (1) * * *
    (i) Withdraws the request in accordance with the standards set 
forth in Sec.  155.530(a)(1); or
* * * * *

0
47. Subpart O is added to read as follows:
Subpart O--Quality Reporting Standards for Exchanges
Sec.
155.1400 Quality rating system.
155.1405 Enrollee satisfaction survey system.

Subpart O--Quality Reporting Standards for Exchanges


Sec.  155.1400  Quality rating system.

    The Exchange must prominently display the quality rating 
information assigned to each QHP on its Web site, in accordance with 
Sec.  155.205(b)(1)(v), as calculated by HHS and in a form and manner 
specified by HHS.


Sec.  155.1405  Enrollee satisfaction survey system.

    The Exchange must prominently display results from the Enrollee 
Satisfaction Survey for each QHP on its Web site, in accordance with 
Sec.  155.205(b)(1)(iv), as calculated by HHS and in a form and manner 
specified by HHS.

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

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

    Authority:  Title I of the Affordable Care Act, sections 1301-
1304, 1311-1313, 1321-1322, 1324, 1334, 1342-1343, 1401-1402, Pub. 
L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-18024, 18031-18032, 
18041-18042, 18044, 18054, 18061, 18063, 18071, 18082, 26 U.S.C. 
36B, and 31 U.S.C. 9701).


0
49. Section 156.122 is amended by revising paragraph (c) to read as 
follows:


Sec.  156.122  Prescription drug benefits.

* * * * *
    (c) A health plan providing essential health benefits must have 
procedures in place that allow an enrollee to request and gain access 
to clinically appropriate drugs not covered by the health plan.
    (1) Such procedures must include a process for an enrollee, the 
enrollee's designee, or the enrollee's prescribing physician (or other 
prescriber) to request an expedited review based on exigent 
circumstances.
    (i) Exigent circumstances exist when an enrollee is suffering from 
a health condition that may seriously jeopardize the enrollee's life, 
health, or ability to regain maximum function or when an enrollee is 
undergoing a current course of treatment using a non-formulary drug.
    (ii) A health plan must make its coverage determination on an 
expedited review request based on exigent circumstances and notify the 
enrollee or the enrollee's designee and the prescribing physician (or 
other prescriber, as appropriate) of its coverage determination no 
later than 24 hours after it receives the request.
    (iii) A health plan that grants an exception based on exigent 
circumstances must provide coverage of the non-formulary drug for the 
duration of the exigency.
    (2) [Reserved]

0
50. Section 156.130 is amended by removing and reserving paragraph (b) 
and revising paragraphs (c) and (d) to read as follows:


Sec.  156.130  Cost-sharing requirements.

* * * * *
    (c) Special rule for network plans. In the case of a plan using a 
network of

[[Page 30351]]

providers, cost-sharing paid by, or on behalf of, an enrollee for 
benefits provided outside of such network shall not count toward the 
annual limitation on cost-sharing (as defined in paragraph (a) of this 
section).
    (d) Increase annual dollar limits in multiples of 50. For a plan 
year beginning in a calendar year after 2014, any increase in the 
annual dollar limits described in paragraph (a) of this section that 
does not result in a multiple of 50 dollars will be rounded down, to 
the next lowest multiple of 50 dollars.
* * * * *
    51. Section 156.200 is amended by revising paragraph (b)(5) and 
adding paragraph (h) to read as follows:


Sec.  156.200  QHP issuer participation standards.

* * * * *
    (b) * * *
    (5) Implement and report on a quality improvement strategy or 
strategies described in section 1311(c)(1)(E) of the Affordable Care 
Act consistent with the standards of section 1311(g) of the Affordable 
Care Act, disclose and report information on health care quality and 
outcomes described in sections 1311(c)(1)(H), (c)(1)(I), and (c)(3) of 
the Affordable Care Act, and implement appropriate enrollee 
satisfaction surveys consistent with section 1311(c)(4) of the 
Affordable Care Act;
* * * * *
    (h) Operational requirements. As a condition of certification of a 
QHP, an issuer must attest that it will comply with all QHP operational 
requirements described in subparts D, E, H, K, L, and M of this part.

0
52. Section 156.265 is amended by revising paragraph (d) to read as 
follows:


Sec.  156.265  Enrollment process for qualified individuals.

* * * * *
    (d) Premium payment. A QHP issuer must follow the premium payment 
process established by the Exchange in accordance with Sec.  155.240 of 
the subchapter.
* * * * *

0
53. Section 156.270 is amended by adding a new paragraph (j) to read as 
follows:


Sec.  156.270  Termination of coverage for qualified individuals.

* * * * *
    (j) Operational instructions. QHP issuers must follow the 
transaction rules established by the Exchange in accordance with Sec.  
155.430(e) of this subchapter.

0
54. Section 156.604 is amended by revising paragraphs (a)(2) heading 
and introductory text and (d) to read as follows:


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

    (a) * * *
    (2) Procedural requirements for recognition as minimum essential 
coverage. To be considered for recognition as minimum essential 
coverage, the sponsor of the coverage, government agency, health 
insurance issuer, or plan administrator must submit the following 
information to HHS:
* * * * *
    (d) Notice. Once recognized as minimum essential coverage, the 
sponsor of the coverage, government agency, health insurance issuer, or 
plan administrator must provide notice to all enrollees of its minimum 
essential coverage status and must comply with the information 
reporting requirements of section 6055 of the Internal Revenue Code and 
implementing regulations.

0
55. Section 156.800 is amended by adding paragraph (d) to read as 
follows:


Sec.  156.800  Available remedies; Scope.

* * * * *
    (d) Information sharing. HHS may consult and share information 
about QHP issuers with other Federal and State regulatory and 
enforcement entities to the extent that the consultation and 
information is necessary for purposes of State or Federal oversight and 
enforcement activities.

0
56. Section 156.805 is amended--
0
a. By adding paragraph (d)(3); and
0
b. By revising paragraph (e)(2).
    The revisions and additions read as follows:


Sec.  156.805  Bases and process for imposing civil money penalties in 
Federally-facilitated Exchanges.

* * * * *
    (d) * * *
    (3) HHS will deliver notice under this paragraph by either hand 
delivery, certified mail, return receipt requested, or by overnight 
delivery service with signature upon delivery required.
    (e) * * *
    (2) HHS will notify the issuer in writing of any penalty that has 
been assessed under this subpart and of the means by which the QHP 
issuer or another responsible entity may satisfy the CMP assessment.
* * * * *

0
57. Section 156.806 is added to read as follows:


Sec.  156.806  Notice of non-compliance.

    If HHS learns of a potential violation described in Sec.  156.805 
or if a State informs HHS of a potential violation, prior to imposing 
any CMPs, HHS must provide a written notice to the issuer, to include 
the following:
    (a) Describe the potential violation.
    (b) Provide 30 days from the date of the notice for the QHP issuer 
to respond and to provide additional information to refute an alleged 
violation.
    (c) State that a civil money penalty may be assessed if the 
allegations are not, as determined by HHS, refuted.

0
58. Section 156.810 is amended--
0
a. By revising paragraph (a)(6);
0
b. In paragraph (a)(9) by removing ``or'' after the semicolon;
0
c. In paragraphs (a)(10) and (11) by removing the period and adding a 
semicolon in its place;
0
d. By adding new paragraphs (a)(12) and (13); and
0
e. By revising paragraph (d) introductory text.
    The revisions and additions read as follows:


Sec.  156.810  Bases and process for decertification of a QHP offered 
by an issuer through a Federally-facilitated Exchange.

    (a) * * *
    (6) The QHP no longer meets the applicable standards set forth 
under subpart C of this part.
* * * * *
    (12) The QHP issuer substantially fails to meet the requirements 
related to the cases forwarded to QHP issuers under subpart K of this 
part; or
    (13) The QHP issuer substantially fails to meet the requirements 
related to the offering of a QHP under subpart M of this part.
* * * * *
    (d) Expedited decertification process. For decertification actions 
on grounds described in paragraphs (a)(6), (7), (8), or (9) of this 
section, HHS will provide written notice to the QHP issuer, enrollees, 
and the State department of insurance in the State in which the QHP is 
being decertified. The written notice must include the following:
* * * * *

0
59. Section 156.1105 is amended by adding paragraphs (d) and (e) to 
read as follows:


Sec.  156.1105  Establishment of standards for HHS-approved enrollee 
satisfaction survey vendors for use by QHP issuers in Exchanges.

* * * * *

[[Page 30352]]

    (d) Monitoring. HHS will periodically monitor HHS-approved enrollee 
satisfaction survey vendors to ensure ongoing compliance with the 
standards in paragraph (b) of this section. If HHS determines that an 
HHS-approved enrollee satisfaction survey vendor is non-compliant with 
the standards required in paragraph (b) of this section, the survey 
vendor may be removed from the approved list described in paragraph (c) 
of this section and/or the submitted survey results may be ineligible 
to be included for ESS results.
    (e) Appeals. An enrollee satisfaction survey vendor that is not 
approved by HHS after submitting the application described in paragraph 
(a) of this section may appeal HHS's decision by notifying HHS in 
writing within 15 days from receipt of the notification of not being 
approved and submitting additional documentation demonstrating how the 
vendor meets the standards in paragraph (b) of this section. HHS will 
review the submitted documentation and make a final approval 
determination within 30 days from receipt of the additional 
documentation.

0
60. Section 156.1120 is added to subpart L to read as follows:


Sec.  156.1120  Quality rating system.

    (a) Data submission requirement. (1) A QHP issuer must submit data 
to HHS and Exchanges to support the calculation of quality ratings for 
each QHP that has been offered in an Exchange for at least one year.
    (2) In order to ensure the integrity of the data required to 
calculate the QRS, a QHP issuer must submit data that has been 
validated in a form and manner specified by HHS.
    (3) A QHP issuer must include in its data submission information 
only for those QHP enrollees at the level specified by HHS.
    (b) Timeline. A QHP issuer must annually submit data necessary to 
calculate the QHP's quality ratings to HHS and Exchanges, on a timeline 
and in a standardized form and manner specified by HHS.
    (c) Marketing requirement. A QHP issuer may reference the quality 
ratings for its QHPs in its marketing materials, in a manner specified 
by HHS.
    (d) Multi-State plans. Issuers of multi-State plans, as defined in 
Sec.  155.1000(a) of this subchapter, must provide the data described 
in paragraph (a) of this section to the U.S. Office of Personnel 
Management, in the time and manner specified by the U.S. Office of 
Personnel Management.

0
61. Section 156.1125 is added to subpart L to read as follows:


Sec.  156.1125  Enrollee satisfaction survey system.

    (a) General requirement. A QHP issuer must contract with an HHS-
approved enrollee satisfaction survey (ESS) vendor, as identified by 
Sec.  156.1105, in order to administer the Enrollee Satisfaction Survey 
of the QHP's enrollees. A QHP issuer must authorize its contracted ESS 
vendor to report survey results to HHS and the Exchange on the issuer's 
behalf.
    (b) Data requirement. (1) A QHP issuer must collect data for each 
QHP, with more than 500 enrollees in the previous year that has been 
offered in an Exchange for at least one year and following a survey 
sampling methodology provided by HHS.
    (2) In order to ensure the integrity of the data required to 
conduct the survey, a QHP issuer must submit data that has been 
validated in a form and manner specified by HHS, and submit this data 
to its contracted ESS vendor.
    (3) A QHP issuer must include in its data submission information 
only for those QHP enrollees at the level specified by HHS.
    (c) Marketing requirement. A QHP issuer may reference the survey 
results for its QHPs in its marketing materials, in a manner specified 
by HHS.
    (d) Timeline. A QHP issuer must annually submit data necessary to 
conduct the survey to its contracted ESS vendor on a timeline and in a 
standardized form and manner specified by HHS.
    (e) Multi-State plans. Issuers of multi-State plans, as defined in 
Sec.  155.1000(a) of this subchapter, must provide the data described 
in paragraph (b) of this section to the U.S. Office of Personnel 
Management, in the time and manner specified by the U.S. Office of 
Personnel Management.

PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE 
REQUIREMENTS

0
62. The authority citation for part 158 is revised to read as follows:

    Authority: Section 2718 of the Public Health Service Act (42 
U.S.C. 300gg-18), as amended.

0
63. Section 158.150 is amended by revising paragraph (b)(2)(i)(A)(6) to 
read as follows:


Sec.  158.150  Activities that improve health care quality.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (A) * * *
    (6) Commencing with the 2012 reporting year and extending through 
the first reporting year in which the Secretary requires ICD-10 as the 
standard medical data code set, implementing ICD-10 code sets that are 
designed to improve quality and are adopted pursuant to the Health 
Insurance Portability and Accountability Act (HIPAA), 42 U.S.C. 1320d-
2, as amended, limited to 0.3 percent of an issuer's earned premium as 
defined in Sec.  158.130.
* * * * *

0
64. Section 158.211 is amended by revising paragraph (a) to read as 
follows:


Sec.  158.211  Requirement in States with a higher medical loss ratio.

    (a) State option to set higher minimum loss ratio. For coverage 
offered in a State whose law provides that issuers in the State must 
meet a higher MLR than that set forth in Sec.  158.210, the State's 
higher percentage must be substituted for the percentage stated in 
Sec.  158.210. If a State requires the small group market and 
individual market to be merged and also sets a higher MLR standard for 
the merged market, the State's higher percentage must be substituted 
for the percentage stated in Sec.  158.210 for both the small group and 
individual markets.
* * * * *

0
65. Section 158.220 is amended by revising paragraph (a) to read as 
follows:


Sec.  158.220  Aggregation of data in calculating an issuer's medical 
loss ratio.

    (a) Aggregation by State and by market. In general, an issuer's MLR 
must be calculated separately for the large group market, small group 
market and individual market within each State. However, if a State 
requires the small group market and individual market to be merged, 
then the data reported separately under subpart A of this part for the 
small group and individual market in that State must be merged for 
purposes of calculating an issuer's MLR and any rebates owing.
* * * * *

0
66. Section 158.221 is amended by adding paragraphs (b)(6) and (7) to 
read as follows:


Sec.  158.221  Formula for calculating an issuer's medical loss ratio.

* * * * *
    (b) * * *
    (6) The numerator of the MLR in the individual and small group 
markets in States that adopted the transitional policy outlined in the 
CMS letter dated November 14, 2013 must be the amount specified in 
paragraph (b) of this section, except that issuers that provided 
transitional coverage may

[[Page 30353]]

multiply the total incurred claims and expenditures for activities that 
improve health care quality incurred in 2014 in the respective State 
and market by a factor of 1.0001.
    (7) The numerator of the MLR in the individual and small group 
markets for issuers participating in the State and Federal Exchanges 
(sometimes referred to as ``Marketplaces'') must be the amount 
specified in paragraph (b) of this section, except that the total 
incurred claims and expenditures for activities that improve health 
care quality incurred in 2014 in the respective State and market may be 
multiplied by a factor of 1.0004.
* * * * *

0
67. Section 158.231 is amended by revising paragraph (a) to read as 
follows:


Sec.  158.231  Life-years used to determine credible experience.

    (a) The life-years used to determine the credibility of an issuer's 
experience are the life-years for the MLR reporting year plus the life-
years for the two prior MLR reporting years. If a State requires the 
small group market and individual market to be merged, then life-years 
used to determine credibility must be the life-years from the small 
group market and the individual market for the MLR reporting year plus 
the life-years from the small group market and the individual market 
for the two prior MLR reporting years.
* * * * *

    Dated: May 12, 2014.

Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: May 14, 2014.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-11657 Filed 5-16-14; 5:00 pm]
BILLING CODE 4120-01-P