[Federal Register Volume 79, Number 228 (Wednesday, November 26, 2014)]
[Proposed Rules]
[Pages 70674-70760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27858]



[[Page 70673]]

Vol. 79

Wednesday,

No. 228

November 26, 2014

Part III





Department of Health and Human Services





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





Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2016; Proposed Rule

  Federal Register / Vol. 79 , No. 228 / Wednesday, November 26, 2014 / 
Proposed Rules  

[[Page 70674]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

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

[CMS-9944-P]
RIN 0938-AS19


Patient Protection and Affordable Care Act; HHS Notice of Benefit 
and Payment Parameters for 2016

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would set forth payment parameters and 
provisions related to the risk adjustment, reinsurance, and risk 
corridors programs; cost sharing parameters and cost-sharing 
reductions; and user fees for Federally-facilitated Exchanges. It would 
also provide additional standards for the annual open enrollment period 
for the individual market for benefit years beginning on or after 
January 1, 2016, essential health benefits, qualified health plans, 
network adequacy, quality improvement strategies, the Small Business 
Health Options Program, guaranteed availability, guaranteed 
renewability, minimum essential coverage, the rate review program, the 
medical loss ratio program, and other related topics.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on December 22, 
2014.

ADDRESSES: In commenting, please refer to file code CMS-9944-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.

    2. By regular mail. You may mail written comments to the following 
address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-9944-P, P.O. Box 8016, Baltimore, MD 
21244-8016.

    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-9944-P, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.

    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)

    b. For delivery in Baltimore, MD--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: For general information: Laurie 
McWright, (301) 492-4311; or Jeff Wu, (301) 492-4305. For matters 
related to guaranteed availability, guaranteed renewability, rate 
review, and the U.S. territories: Jacob Ackerman, (301) 492-4179.
    For matters related to the risk adjustment program generally, the 
risk adjustment methodology, and the methodology for determining the 
reinsurance contribution rate and payment parameters: Kelly Horney, 
(410) 786-0558.
    For matters related to reinsurance generally, distributed data 
collection good faith compliance policy, and administrative appeals: 
Adrianne Glasgow, (410) 786-0686.
    For matters related to the definition of common ownership for 
reinsurance contribution purposes: Adam Shaw, (410) 786-1019.
    For matters related to risk corridors: Jaya Ghildiyal, (301) 492-
5149.
    For matters related to the QHP good faith compliance policy: Cindy 
Yen, (301) 492-5142.
    For matters related to essential health benefits, network adequacy, 
essential community providers, and other standards for QHP issuers: 
Leigha Basini, (301) 492-4380.
    For matters related to the Small Business Health Options Program: 
Christelle Jang, (410) 786-8438.
    For matters related to the Federally-facilitated Exchange user fee: 
Ruth Tabak, (301) 492-4220.
    For matters related to cost-sharing reductions and the premium 
adjustment percentage: Pat Meisol, (410) 786-1917.
    For matters related to re-enrollment, open enrollment periods, and 
exemptions from the shared responsibility payment under part 155: 
Christine Hammer, (301) 492-4431.
    For matters related to special enrollment periods under part 155: 
Spencer Manasse, (301) 492-5141.
    For matters related to minimum essential coverage: Cam Moultrie 
Clemmons, (206) 615-2338.
    For matters related to quality improvement strategies: Marsha 
Smith, (410) 786-6614.
    For matters related to the medical loss ratio program: Julie 
McCune, (301) 492-4196.
    For matters related to meaningful access to QHP information and 
consumer assistance tools and programs of an Exchange under part 155, 
and cost-sharing reduction notices under part 156: Tricia Beckmann, 
(301) 492-4328.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid

[[Page 70675]]

Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an 
appointment to view public comments, phone 1-800-743-3951.

Table of Contents

I. Executive Summary
II. Background
    A. Legislative and Regulatory Overview
    B. Stakeholder Consultation and Input
    C. Structure of Proposed Rule
III. Provisions of the Proposed HHS Notice of Benefit and Payment 
Parameters for 2016
    A. Part 144--Requirements Relating to Health Insurance Coverage
    1. Definitions (Sec.  144.103)
    a. Plan
    b. State
    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
    1. Guaranteed Availability of Coverage (Sec.  147.104)
    2. Guaranteed Renewability of Coverage (Sec.  147.106)
    D. Part 148--Requirements for the Individual Health Insurance 
Market
    E. Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment Under the Affordable Care Act
    1. Provisions for the State Notice of Benefit and Payment 
Parameters (Sec.  153.100)
    2. Provisions and Parameters for the Permanent Risk Adjustment 
Program
    a. Risk Adjustment User Fee
    b. Overview of the HHS Risk Adjustment Model
    c. Proposed Updates to Risk Adjustment Model
    d. List of Factors To Be Employed in the Model
    e. Cost-Sharing Reductions Adjustments
    f. Model Performance Statistics
    g. Overview of the Payment Transfer Formula
    h. HHS Risk Adjustment Methodology Considerations
    3. Provisions and Parameters for the Transitional Reinsurance 
Program
    a. Common Ownership Clarification
    b. Self-Insured Expatriate Plans (Sec.  153.400(a)(1)(iii))
    c. Determination of Debt (Sec.  153.400(c))
    d. Reinsurance Contribution Submission Process
    e. Consistency in Counting Methods for Health Insurance Issuers 
(Sec.  153.405(d))
    f. Snapshot Count and Snapshot Factor Counting Methods 
(Sec. Sec.  153.405(d)(2) and (e)(2))
    g. Uniform Reinsurance Contribution Rate for 2016
    h. Uniform Reinsurance Payment Parameters for 2016
    i. Uniform Reinsurance Payment Parameters for 2015
    j. Deducting Cost-Sharing Reduction Amounts From Reinsurance 
Payments
    4. Provisions for the Temporary Risk Corridors Program
    a. Application of the Transitional Policy Adjustment in Early 
Renewal States
    b. Risk Corridors Payments for 2016
    5. Distributed Data Collection for the HHS-Operated Risk 
Adjustment and Reinsurance Programs
    a. Good Faith Safe Harbor (Sec.  153.740(a))
    b. Default Risk Adjustment Charge (Sec.  153.740(b))
    c. Information Sharing (Sec.  153.740(c))
    F. Part 154--Health Insurance Issuer Rate Increases: Disclosure 
and Review Requirements
    1. General Provisions
    a. Definitions (Sec.  154.102)
    2. Disclosure and Review Provisions
    a. Rate Increases Subject to Review (Sec.  154.200)
    b. Submission of Rate Filing Justification (Sec.  154.215)
    c. Timing of Providing the Rate Filing Justification (Sec.  
154.220)
    d. CMS's Determinations of Effective Rate Review Programs (Sec.  
154.301)
    G. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. General Provisions
    a. Definitions (Sec.  155.20)
    2. General Functions of an Exchange
    a. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    b. 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 (Sec.  155.215)
    c. Standards for HHS-Approved Vendors of Federally-Facilitated 
Exchange Training for Agents and Brokers (Sec.  155.222)
    3. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance 
Affordability Programs
    a. Annual Eligibility Redetermination (Sec.  155.335)
    4. Exchange Functions in the Individual Market: Enrollment in 
Qualified Health Plans
    a. Enrollment of Qualified Individuals Into QHPs (Sec.  155.400)
    b. Annual Open Enrollment Period (Sec.  155.410)
    c. Special Enrollment Periods (Sec.  155.420)
    d. Termination of Coverage (Sec.  155.430)
    5. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
    a. Eligibility Standards for Exemptions (Sec.  155.605)
    b. Required Contribution Percentage (Sec.  155.605)
    6. Exchange Functions: Small Business Health Options Program 
(SHOP)
    a. Standards for the Establishment of a SHOP (Sec.  155.700)
    b. Functions of a SHOP (Sec.  155.705)
    c. Eligibility Standards for SHOP (Sec.  155.710)
    d. Enrollment of Employees Into QHPs Under SHOP (Sec.  155.720 
and Sec.  156.285)
    e. Enrollment Periods Under SHOP (Sec.  155.725 and Sec.  
156.285)
    f. Termination of Coverage (Sec.  155.735 and Sec.  156.285)
    7. Exchange Functions: Certification of Qualified Health Plans
    a. Certification Standards for QHPs (Sec.  155.1000)
    H. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    1. General Provisions
    a. Definitions (Sec.  156.20)
    b. FFE User Fee for the 2016 Benefit Year (Sec.  156.50)
    2. Essential Health Benefits Package
    a. State Selection of Benchmark (Sec.  156.100)
    b. Provision of EHB (Sec.  156.115)
    c. Collection of Data to Define Essential Health Benefits (Sec.  
156.120)
    d. Prescription Drug Benefits (Sec.  156.122)
    e. Prohibition on Discrimination (Sec.  156.125)
    f. Cost-Sharing Requirements (Sec.  156.130)
    g. Minimum Value (Sec.  156.145)
    3. Qualified Health Plan Minimum Certification Standards
    a. QHP Issuer Participation Standards (Sec.  156.200)
    b. Transparency in Coverage (Sec.  156.220)
    c. Network Adequacy Standards (Sec.  156.230)
    d. Essential Community Providers (Sec.  156.235)
    e. Health Plan Applications and Notices (Sec.  156.250)
    f. Enrollment Process for Qualified Individuals (Sec.  156.265)
    g. Segregation of Funds for Abortion Services (Sec.  156.280)
    4. Health Insurance Issuer Responsibility With Respect to 
Advance Payments of the Premium Tax Credit and Cost-Sharing 
Reductions
    a. Premium Adjustment Percentage (Sec.  156.130)
    b. Reduced Maximum Annual Limitation on Cost Sharing (Sec.  
156.130)
    c. Plan Variations (Sec.  156.420)
    d. Changes in Eligibility for Cost-Sharing Reductions (Sec.  
156.425)
    e. Cost-Sharing Reductions Reconciliation (Sec.  156.430)
    5. Minimum Essential Coverage
    a. Other Coverage That Qualifies as Minimum Essential Coverage 
(Sec.  156.602)
    6. Enforcement Remedies in Federally-Facilitated Exchanges
    a. Available Remedies; Scope (Sec.  156.800)
    b. Plan Suppression (Sec.  156.815)
    7. Quality Standards
    a. Quality Improvement Strategy (Sec.  156.1130)
    8. Qualified Health Plan Issuer Responsibilities
    a. Administrative Appeals (Sec.  156.1220(c))
    I. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements
    1. Treatment of Cost-Sharing Reductions in MLR Calculation
    2. Reporting of Federal and State Taxes
    3. Distribution of Rebates to Group Enrollees in Non-Federal 
Governmental Plans
IV. Collection of Information Requirements
V. Response to Comments

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VI. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Impact Estimates of the Payment Notice Provisions
    D. Regulatory Alternatives Considered
    E. Regulatory Flexibility Act
    F. Unfunded Mandates
    G. Federalism
    H. Congressional Review Act

Acronyms

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), as amended
AHFS--American hospital formulary system
AV--Actuarial value
CFR--Code of Federal Regulations
CMS--Centers for Medicare & Medicaid Services
ECP--Essential community provider
EHB--Essential health benefits
ERISA--Employee Retirement Income Security Act of 1974 (Pub. L. 93-
406)
FFE--Federally-facilitated Exchange
FF-SHOP--Federally-facilitated Small Business Health Options Program
FPL--Federal poverty level
FQHC--Federally qualified health center
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--Office of Management and Budget
OPM--United States Office of Personnel Management
PHS Act--Public Health Service Act
PRA--Paperwork Reduction Act of 1995
P&T committee--Pharmacy and therapeutics committee
QHP--Qualified health plan
QIS--Quality improvement strategy
SHOP--Small Business Health Options Program
The Code--Internal Revenue Code of 1986
TPA--Third-party administrator
URL--Uniform resource locator
USP--United States Pharmacopeia

I. Executive Summary

    Qualified individuals and qualified employers are now able to 
purchase private health insurance coverage through competitive 
marketplaces called Affordable Insurance Exchanges, or ``Exchanges'' 
(also called Health Insurance Marketplaces, or ``Marketplaces''). 
Individuals who enroll in qualified health plans (QHPs) through 
individual market Exchanges may be eligible to receive the premium tax 
credit to make health insurance more affordable and reductions in cost-
sharing payments to reduce out-of-pocket expenses for health care 
services. Additionally, in 2014, HHS began operationalizing the premium 
stabilization programs established by the Affordable Care Act. These 
programs--the risk adjustment, reinsurance, and risk corridors 
programs--are intended to mitigate the potential impact of adverse 
selection and stabilize the price of health insurance in the individual 
and small group markets. These programs, together with other reforms of 
the Affordable Care Act, are making high-quality health insurance 
affordable and accessible to millions of Americans.
    We have previously outlined the major provisions and parameters 
related to the advance payments of the premium tax credit, cost-sharing 
reductions, and premium stabilization programs. This rule proposes 
additional provisions and modifications related to the implementation 
of these premium stabilization programs, as well as key payment 
parameters for the 2016 benefit year.
    The HHS Notice of Benefit and Payment Parameters for 2014 (78 FR 
15410) (2014 Payment Notice) finalized the risk adjustment methodology 
that HHS will use when it operates risk adjustment on behalf of a 
State. Risk adjustment factors reflect enrollee health risk and the 
costs of a given disease relative to average spending. This proposed 
rule proposes to recalibrate the HHS risk adjustment models for 2016 by 
using 2010, 2011, and 2012 claims data from the Truven Health Analytics 
2010 MarketScan[supreg] Commercial Claims and Encounters database 
(MarketScan) to develop updated risk factors. We also propose that when 
2013 MarketScan data become available, we may recalculate these factors 
for publication in the final rule. We also seek comment on whether the 
recalculated risk factors should apply for 2015.
    Using the methodology set forth in the 2014 Payment Notice and the 
HHS Notice of Benefit and Payment Parameters for 2015 (79 FR 13744) 
(2015 Payment Notice), we propose a 2016 uniform reinsurance 
contribution rate of $27 annually per enrollee, and the 2016 uniform 
reinsurance payment parameters--a $90,000 attachment point, a $250,000 
reinsurance cap, and a 50 percent coinsurance rate. We also propose to 
decrease the attachment point for the 2015 benefit year from $70,000 to 
$45,000, while retaining the $250,000 reinsurance cap and a 50 percent 
coinsurance rate. We include proposals regarding the definition of 
``common ownership'' for purposes of determining whether a contributing 
entity uses a third-party administrator for core administrative 
functions. In addition, this proposed rule discusses the reinsurance 
contribution payment schedule and accompanying notifications.
    We also propose a clarification and a modification to the risk 
corridors program. We clarify that the risk corridors transitional 
adjustment policy established in the 2015 Payment Notice does not 
adjust the risk corridors calculation based on enrollment in a so-
called ``early renewal plan'' (a plan that renewed before January 1, 
2014 and before the end of its 12-month term) unless and until the plan 
renews in 2014 and becomes a transitional plan. Additionally, for the 
2016 benefit year, we are proposing an approach for the treatment of 
risk corridors collections under the policy set forth in our April 11, 
2014 FAQ on Risk Corridors and Budget Neutrality, if risk corridors 
collections available in 2016 exceed risk corridors payment requests 
from QHP issuers. We reiterate our previous guidance that in the 
unlikely event of a shortfall in the 2016 benefit year, HHS will use 
other sources of funding, subject to availability of appropriations. We 
also propose to extend the good faith safe harbor for non-compliance 
with the HHS-operated risk adjustment and reinsurance data requirements 
through the 2015 calendar year.
    We also propose several provisions related to cost sharing. First, 
we propose the premium adjustment percentage for 2016, which is used to 
set the rate of increase for several parameters detailed in the 
Affordable Care Act, including the maximum annual limitation on cost 
sharing for 2016. We propose the maximum annual limitations on cost 
sharing for the 2016 benefit year for cost-sharing reduction plan 
variations. For reconciliation of 2014 cost-sharing reductions, we 
propose to permit issuers whose plan variations meet certain criteria 
to estimate the portion of claims attributable to non-essential health 
benefits to calculate cost-sharing reductions provided.
    For 2016, we are proposing a Federally-facilitated Exchange (FFE) 
user fee rate of 3.5 percent of premium. This rule also proposes 
provisions to enhance the transparency and effectiveness of the rate 
review program. It also proposes standards related to minimum essential 
coverage, the individual market annual open enrollment period for 
benefit years beginning on or after January 1, 2016, and proposes minor 
amendments to a number of SHOP provisions to clarify how certain 
Exchange provisions apply to qualified employers and qualified 
employees. This rule proposes provisions relating to the treatment of

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cost-sharing reductions and certain taxes in medical loss ratio (MLR) 
and rebate calculations, as well as the distribution of rebates by 
group health plans not subject to Employee Retirement Income Security 
Act of 1974 (Pub. L. 93-406) (ERISA). The proposed rule would provide 
more specificity about the meaningful access requirements applicable to 
an Exchange and to QHP issuers related to access for individuals with 
disabilities and individuals with limited English proficiency. This 
proposed rule would require issuers to provide a summary of benefits 
and coverage (SBC) for each plan variation of the standard QHP and to 
provide adequate notice to enrollees of changes in cost-sharing 
reduction eligibility. This proposed rule also includes additional 
quality improvement strategy reporting provisions for QHP issuers. 
Finally, this proposed rule specifies the circumstances that may lead 
an Exchange to suppress a QHP from being offered to new enrollees 
through an Exchange, and would extend the good faith compliance policy 
for QHP issuers through the 2015 calendar year.
    We propose several provisions relating to essential health benefits 
(EHBs). This proposed rule proposes a definition of habilitative 
services, and provides examples of discriminatory plan designs. This 
proposed rule would also change existing EHB standards regarding 
coverage of prescription drugs by proposing that formularies be 
established by issuers' pharmacy and therapeutics committees (P&T 
committees). In addition, this proposed rule would amend requirements 
for essential community providers and network adequacy.

II. Background

A. Legislative and Regulatory 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 proposed rule, we refer to the 
two statutes collectively as the ``Affordable Care Act.''
    Subtitles A and C of title I of the Affordable Care Act 
reorganized, amended, and added to the provisions of part A of title 
XXVII of the Public Health Service Act (PHS Act) relating to group 
health plans and health insurance issuers in the group and individual 
markets.
    Section 2701 of the PHS Act, as added by the Affordable Care Act, 
restricts the variation in premium rates charged by a health insurance 
issuer for non-grandfathered health insurance coverage in the 
individual or small group market to certain specified factors. The 
factors are: family size, rating area, and age and tobacco use (within 
specified limits).
    Section 2701 of the PHS Act operates in coordination with section 
1312(c) of the Affordable Care Act. Section 1312(c) of the Affordable 
Care Act generally requires a health insurance issuer to consider all 
enrollees in all health plans (except for grandfathered health plans) 
offered by such issuer to be members of a single risk pool for each of 
its individual and small group markets. States have the option to merge 
the individual market and small group market risk pools under section 
1312(c)(3) of the Affordable Care Act.
    Section 2702 of the PHS Act, as added by the Affordable Care Act, 
requires health insurance issuers that offer health insurance coverage 
in the group or individual market in a State to offer coverage to and 
accept every employer and individual in the State that applies for such 
coverage unless an exception applies.
    Section 2703 of the PHS Act, as added by the Affordable Care Act, 
and sections 2712 and 2741 of the PHS Act, as added by the Health 
Insurance Portability and Accountability Act of 1996 (HIPAA) and 
codified prior to the enactment of the Affordable Care Act, require 
health insurance issuers that offer health insurance coverage in the 
group or individual market to renew or continue in force such coverage 
at the option of the plan sponsor or individual unless an exception 
applies.
    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 enrollees if they do not achieve 
specified MLR thresholds.
    Section 2794 of the PHS Act, as added by the Affordable Care Act, 
directs the Secretary of HHS (the Secretary), in conjunction with the 
States, to establish a process for the annual review of ``unreasonable 
increases in premiums for health insurance coverage.'' \1\ The law also 
requires health insurance issuers to submit to the Secretary and the 
applicable State justifications for unreasonable premium increases 
prior to the implementation of the increases. Section 2794(b)(2) 
further specifies that beginning with plan years beginning in 2014, the 
Secretary, in conjunction with the States, will monitor premium 
increases of health insurance coverage offered through an Exchange and 
outside of an Exchange.
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    \1\ The implementing regulations in part 154 limit the scope of 
the requirements under section 2794 of the PHS Act to health 
insurance issuers offering health insurance coverage in the 
individual market or small group market. See Rate Increase 
Disclosure and Review; Final Rule, 76 FR 29964, 29966 (May 23, 
2011).
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    Section 1302 of the Affordable Care Act provides for the 
establishment of an essential health benefits (EHB) package that 
includes coverage of EHB (as defined by the Secretary), cost-sharing 
limits, and actuarial value (AV) requirements. The law directs that 
EHBs be equal in scope to the benefits covered by a typical employer 
plan and that they cover at least the following 10 general categories: 
Ambulatory patient services; emergency services; hospitalization; 
maternity and newborn care; mental health and substance use disorder 
services, including behavioral health treatment; prescription drugs; 
rehabilitative and habilitative services and devices; laboratory 
services; preventive and wellness services and chronic disease 
management; and pediatric services, including oral and vision care.
    Sections 1302(b)(4)(A) through (D) establish that the Secretary 
must define EHB in a manner that: (1) Reflects appropriate balance 
among the 10 categories; (2) is not designed in such a way as to 
discriminate based on age, disability, or expected length of life; (3) 
takes into account the health care needs of diverse segments of the 
population; and (4) does not allow denials of EHBs based on age, life 
expectancy, disability, degree of medical dependency, or quality of 
life.
    Section 1302(d) of the Affordable Care Act describes the various 
levels of coverage based on actuarial value (AV). Consistent with 
section 1302(d)(2)(A) of the Affordable Care Act, AV is calculated 
based on the provision of EHB to a standard population. Section 
1302(d)(3) of the Affordable Care Act directs the Secretary to develop 
guidelines that allow for de minimis variation in AV calculations.
    Section 1311(b)(1)(B) of the Affordable Care Act directs that the 
SHOP assist qualified small employers in facilitating the enrollment of 
their employees in QHPs offered in the small group market. Sections 
1312(f)(1) and (2) of the Affordable Care Act define qualified 
individuals and qualified employers. Under section 1312(f)(2)(B) of the 
Affordable Care Act, beginning in 2017, States will have the option to

[[Page 70678]]

allow issuers to offer QHPs in the large group market through the 
SHOP.\2\
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    \2\ If a State elects this option, the rating rules in section 
2701 of the PHS Act and its implementing regulations will apply to 
all coverage offered in such State's large group market (except for 
self-insured group health plans) pursuant to section 2701(a)(5) of 
the PHS Act.
---------------------------------------------------------------------------

    Section 1311(c)(1)(B) of the Affordable Care Act requires the 
Secretary to establish minimum criteria for provider network adequacy 
that a health plan must meet to be certified as a QHP. Section 
1311(c)(1)(E) of the Affordable Care Act specifies that, to be 
certified as a QHP participating in Exchanges, each health plan must 
implement a quality improvement strategy (QIS), which is described in 
section 1311(g)(1) of the Affordable Care Act.
    Section 1311(c)(5) of the Affordable Care Act requires the 
Secretary to continue to operate, maintain and update the Internet 
portal developed under section 1103 of the Affordable Care Act to 
provide information to consumers and small businesses on affordable 
health insurance coverage options.
    Section 1311(c)(6)(B) of the Affordable Care Act states that the 
Secretary is to set annual open enrollment periods for Exchanges for 
calendar years after the initial enrollment period.
    Section 1301(a)(1)(B) of the Affordable Care Act directs all 
issuers of QHPs to cover the EHB package described in section 1302(a) 
of the Affordable Care Act, including coverage of the services 
described in section 1302(b) of the Affordable Care Act, to adhere to 
the cost-sharing limits described in section 1302(c) of the Affordable 
Care Act and to meet the AV levels established in section 1302(d) of 
the Affordable Care Act. Section 2707(a) of the PHS Act, which is 
effective for plan or policy years beginning on or after January 1, 
2014, extends the coverage of the EHB package to non-grandfathered 
individual and small group coverage, irrespective of whether such 
coverage is offered through an Exchange. In addition, section 2707(b) 
of the PHS Act directs non-grandfathered group health plans to ensure 
that cost sharing under the plan does not exceed the limitations 
described in sections 1302(c)(1) and (2) of the Affordable Care Act.
    Sections 1313 and 1321 of the Affordable Care Act provide the 
Secretary with the authority to oversee the financial integrity of 
State Exchanges, their compliance with HHS standards, and the efficient 
and non-discriminatory administration of State Exchange activities. 
Section 1321 of the Affordable Care Act provides for State flexibility 
in the operation and enforcement of Exchanges and related requirements.
    Section 1321(a) of the Affordable Care Act provides the Secretary 
with broad authority to establish standards and regulations to 
implement statutory requirements related to Exchanges, QHPs and other 
components of title I of the Affordable Care Act. Under the authority 
established in section 1321(a)(1) of the Affordable Care Act, the 
Secretary promulgated the regulations at Sec.  155.205(d) and (e). 
Section 155.205 authorizes Exchanges to perform certain consumer 
service functions, including the Navigator program described in Sec.  
155.210. Section 155.205(d) provides that each Exchange must conduct 
consumer assistance activities, and Sec.  155.205(e) provides that each 
Exchange must conduct outreach and education activities to inform 
consumers about the Exchange and insurance affordability programs to 
encourage participation. Section 155.205(d) and (e) also allow for the 
establishment of a non-Navigator consumer assistance program. Section 
155.215 establishes standards for Navigators and non-Navigator 
assistance personnel in Federally-facilitated Exchanges and for non-
Navigator assistance personnel that are funded with Exchange 
establishment grant funds under section 1311(a) of the Affordable Care 
Act.
    When operating an FFE under section 1321(c)(1) of the Affordable 
Care Act, HHS has the authority under sections 1321(c)(1) and 
1311(d)(5)(A) of the Affordable Care Act to collect and spend user 
fees. In addition, 31 U.S.C. 9701 permits a Federal agency to establish 
a charge for a service provided by the agency. Office of Management and 
Budget (OMB) Circular A-25 Revised establishes Federal policy regarding 
user fees and specifies that a user charge will be assessed against 
each identifiable recipient for special benefits derived from Federal 
activities beyond those received by the general public.
    Section 1321(c)(2) of the Affordable Care Act authorizes the 
Secretary to enforce the Exchange standards using civil money penalties 
(CMPs) on the same basis as detailed in section 2723(b) of the PHS Act. 
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 a State fails to 
substantially enforce these provisions.
    Section 1321(d) of the Affordable Care Act provides that nothing in 
title I of the Affordable Care Act should be construed to preempt any 
State law that does not prevent the application of title I of the 
Affordable Care Act. Section 1311(k) of the Affordable Care Act 
specifies that Exchanges may not establish rules that conflict with or 
prevent the application of regulations issued by the Secretary.
    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 in 
benefit years 2014 through 2016. Section 1342 of the Affordable Care 
Act directs the Secretary to establish a temporary risk corridors 
program that protects against inaccurate rate setting from 2014 through 
2016. Section 1343 of the Affordable Care Act establishes a permanent 
risk adjustment program that is intended to provide increased payments 
to health insurance issuers that attract higher-risk populations, such 
as those with chronic conditions, funded by payments from those that 
attract lower-risk populations, thereby reducing incentives for issuers 
to avoid higher-risk enrollees.
    Sections 1402 and 1412 of the Affordable Care Act provide for 
reductions in cost sharing for essential health benefits for qualified 
low- and moderate-income enrollees in silver level health plans offered 
through the individual market Exchanges. These sections also provide 
for reductions in cost sharing for Indians enrolled in QHPs at any 
metal level.
    Section 5000A of the Code, as added by section 1501(b) of the 
Affordable Care Act, requires all non-exempt individuals to maintain 
minimum essential coverage or make 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; and (4) coverage under a 
grandfathered health plan. Section 5000A(f)(1)(E) of the Code 
authorizes the Secretary of HHS, in coordination with the Secretary of 
the Treasury, to designate other health benefits coverage as minimum 
essential coverage.
1. Premium Stabilization Programs
    In the July 15, 2011 Federal Register (76 FR 41930), we published a 
proposed rule outlining the framework for the premium stabilization 
programs. We

[[Page 70679]]

implemented the premium stabilization programs in a final rule, 
published in the March 23, 2012 Federal Register (77 FR 17220) (Premium 
Stabilization Rule). In the December 7, 2012 Federal Register (77 FR 
73118), we published a proposed rule outlining the benefit and payment 
parameters for the 2014 benefit year to expand the provisions related 
to the premium stabilization programs and set forth payment parameters 
in those programs (proposed 2014 Payment Notice). We published the 2014 
Payment Notice final rule in the March 11, 2013 Federal Register (78 FR 
15410).
    In the December 2, 2013 Federal Register (78 FR 72322), we 
published a proposed rule outlining the benefit and payment parameters 
for the 2015 benefit year to expand the provisions related to the 
premium stabilization programs, setting forth certain oversight 
provisions and establishing the payment parameters in those programs 
(proposed 2015 Payment Notice). We published the 2015 Payment Notice 
final rule in the March 11, 2014 Federal Register (79 FR 13744).
2. Program Integrity
    In the June 19, 2013 Federal Register (78 FR 37032), we published a 
proposed rule that proposed certain program integrity standards related 
to Exchanges and the premium stabilization programs (proposed Program 
Integrity Rule). The provisions of that proposed rule were finalized in 
two rules, the ``first Program Integrity Rule'' published in the August 
30, 2013 Federal Register (78 FR 54070) and the ``second Program 
Integrity Rule'' published in the October 30, 2013 Federal Register (78 
FR 65046).
3. Exchanges
    We published a request for comment relating to Exchanges in the 
August 3, 2010 Federal Register (75 FR 45584). We issued initial 
guidance to States on Exchanges on November 18, 2010. We proposed a 
rule in the July 15, 2011 Federal Register (76 FR 41866) to implement 
components of the Exchange, and a rule in the August 17, 2011 Federal 
Register (76 FR 51202) regarding Exchange functions in the individual 
market, eligibility determinations, and Exchange standards for 
employers. A final rule implementing components of the Exchanges and 
setting forth standards for eligibility for Exchanges was published in 
the March 27, 2012 Federal Register (77 FR 18310) (Exchange 
Establishment Rule).
    We established standards for the administration and payment of 
cost-sharing reductions and the SHOP in the 2014 Payment Notice and in 
the Amendments to the HHS Notice of Benefit and Payment Parameters for 
2014 interim final rule, published in the March 11, 2013 Federal 
Register (78 FR 15541). The provisions established in the interim final 
rule were finalized in the second Program Integrity Rule. We also set 
forth standards related to Exchange user fees in the 2014 Payment 
Notice. We also established an adjustment to the FFE user fee in the 
Coverage of Certain Preventive Services Under the Affordable Care Act 
final rule, published in the July 2, 2013 Federal Register (78 FR 
39870) (Preventive Services Rule).
    In a final rule published in the July 17, 2013 Federal Register (78 
FR 42859), we established standards for Navigators and non-Navigator 
assistance personnel in Federally-facilitated Exchanges and for non-
Navigator assistance personnel funded through an Exchange establishment 
grant.
4. Essential Health Benefits, Actuarial Value
    We established requirements relating to EHBs and AVs in the 
Standards Related to Essential Health Benefits, Actuarial Value, and 
Accreditation Final Rule, which was published in the February 25, 2013 
Federal Register (78 FR 12834) (EHB Rule).
5. Market Rules
    A proposed rule relating to the 2014 health insurance market rules 
was published in the November 26, 2012 Federal Register (77 FR 70584). 
A final rule implementing the market rules was published in the 
February 27, 2013 Federal Register (78 FR 13406) (2014 Market Rules).
    A proposed rule relating to Exchanges and Insurance Market 
Standards for 2015 and Beyond was published in the March 21, 2014 
Federal Register (79 FR 15808) (2015 Market Standards Proposed Rule). A 
final rule implementing the Exchange and Insurance Market Standards for 
2015 and Beyond was published in the May 27, 2014 Federal Register (79 
FR 30240) (2015 Market Standards Rule).
6. Rate Review
    A proposed rule to establish the rate review program was published 
in the December 23, 2010 Federal Register (75 FR 81004). A final rule 
with comment period implementing the rate review program was published 
in the May 23, 2011 Federal Register (76 FR 29964) (Rate Review Rule). 
The provisions of the Rate Review Rule were amended in a final rule 
published in the September 6, 2011 Federal Register (76 FR 54969) and 
in the proposed and final 2014 Market Rules.
7. Medical Loss Ratio (MLR)
    We published a request for comment on PHS Act section 2718 in the 
April 14, 2010 Federal Register (75 FR 19297), and published an interim 
final rule with a 60-day comment period relating to the MLR program on 
December 1, 2010 (75 FR 74864). A final rule with a 30-day comment 
period was published in the December 7, 2011 Federal Register (76 FR 
76574). An interim final rule with a 60-day comment period was 
published in the December 7, 2011 Federal Register (76 FR 76596).

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, and meetings with Tribal leaders and 
representatives, health insurance issuers, trade groups, consumer 
advocates, employers, and other interested parties. We considered all 
of the public input as we developed the policies in this proposed rule.

C. Structure of Proposed Rule

    The regulations outlined in this proposed rule would be codified in 
45 CFR parts 144, 146, 147, 148, 153, 154, 155, 156 and 158. The 
proposed regulations in parts 144 propose a revised definition of the 
term ``plan'' and amendments relating to the definition of ``State'' 
for purposes of the group and individual market reforms added by the 
Affordable Care Act.
    The proposed regulations in parts 146, 147, and 148 would establish 
parallel provisions in the guaranteed renewability regulations that 
prohibit an issuer that is discontinuing a product from automatically 
enrolling plan sponsors or individuals into a product of another 
licensed health insurance issuer.
    The proposed regulations in part 153 outline the 2016 uniform 
reinsurance contribution rate, the uniform reinsurance payment 
parameters for the 2016 benefit year, and a modification to the 
attachment point for the 2015

[[Page 70680]]

benefit year. We propose an approach with respect to the transitional 
reinsurance program and the definition of ``common ownership'' for 
purposes of determining whether a contributing entity uses a third-
party administrator for core administrative functions. The proposed 
regulations also propose the risk adjustment user fee for 2016 and 
outline certain modifications to the HHS risk adjustment methodology. 
We propose to clarify that the risk corridors transitional adjustment 
policy does not adjust the risk corridors calculation based on 
enrollment in early renewal plans (plans that renewed before January 1, 
2014 and before the end of their 12-month term) unless and until the 
plan renews in late 2014 and becomes a transitional plan, and propose 
how to distribute any excess risk corridors funds at the end of the 3-
year program. We also propose to extend the good faith safe harbor for 
non-compliance with the HHS-operated risk adjustment and reinsurance 
data requirements into the 2015 calendar year.
    The proposed regulations in part 154 outline certain modifications 
to enhance the transparency and effectiveness of the rate review 
process. We propose to consider the impact of rate increases at the 
``plan'' level as opposed to the ``product'' level when determining 
whether a rate increase in the individual or small group market is 
subject to review. Part 154 also includes related revisions to the 
definition of ``rate increase'' and a new definition of ``plan.'' We 
further propose an approach to ensure that all rate increases in the 
individual and small group market--for both QHPs and non-QHPs--are 
filed on a uniform timeline, and that States with Effective Rate Review 
Programs provide public access from their Web site to information about 
proposed and final rate increases in the individual and small group 
markets by consistent times for every relevant State market.
    The proposed regulations in part 155 include a clarification 
related to the functions of an Exchange, and would establish the 
individual market open enrollment period for benefit years beginning on 
or after January 1, 2016. They also make certain proposals related to 
the SHOP Exchanges, which we discuss in greater detail below. We also 
propose to specify oral interpretation services standards for Exchanges 
and for QHP issuers offering coverage through Exchanges and certain 
agents and brokers. We propose to clarify the scope of the physical 
presence requirement at Sec.  155.215(h) with regard to non-Navigator 
assistance personnel in State Exchanges that are funded with section 
1311(a) Exchange Establishment grants.
    The proposed regulations in part 156 set forth provisions related 
to cost sharing, including the premium adjustment percentage, the 
maximum annual limitation on cost sharing, and the reductions in the 
maximum annual limitation for cost-sharing plan variations for 2016. 
They describe a limited exception to the process issuers are required 
to use to estimate the portion of claims for non-essential health 
benefits when calculating 2014 cost-sharing reductions provided. They 
also outline the 2016 FFE user fee rate, and include provisions related 
to the essential health benefits and the calculation of AV.
    In part 156, we also propose a clarification to the administrative 
appeals process applicable to the premium stabilization, cost-sharing 
reduction, advance payments of the premium tax credit, and FFE user fee 
programs. Part 156 also outlines health insurance issuer 
responsibilities, including consumer disclosure requirements in the 
summary of benefits and coverage (SBC) related to plan variations and 
changes in eligibility for cost-sharing reductions. Part 156 also 
includes proposals related to essential health benefits, including 
proposed collection of new benchmark plan information, clarification of 
habilitative services coverage, and examples of possible discriminatory 
plan designs. We also propose a change in the EHB prescription drug 
standard, amendments to network adequacy requirements, and amendments 
to essential community provider requirements. Part 156 also contains a 
proposal relating to the recognition of State high risk pool coverage 
as minimum essential coverage.
    The proposed regulations in part 158 propose clarifications 
regarding the treatment of cost-sharing reductions in MLR calculations, 
and amendments regarding the treatment of payroll taxes in MLR and 
rebate calculations, and relating to the distribution of rebates to 
group enrollees in non-Federal governmental and other group health 
plans not subject to ERISA.

III. Provisions of the Proposed HHS Notice of Benefit and Payment 
Parameters for 2016

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

1. Definitions (Sec.  144.103)
a. Plan
    In the 2015 Market Standards Rule, we codified a definition of 
``plan'' at Sec.  144.103. Under that definition, 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 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.
    We propose to amend this definition to provide further specificity 
about the characteristics that distinguish a plan. Specifically, we 
propose that the term ``plan'' mean, with respect to an issuer and a 
product, the pairing of the health insurance coverage benefits under 
the product with a particular cost-sharing structure, provider network, 
and service area. This definition would make clear that plans that 
differ in their cost-sharing requirements (such as copayments, 
coinsurance or deductibles), or that have different networks of 
contracted providers or different service areas, are considered to be 
different plans. This would be true even if the plans are offered at 
the same metal tier level.
    This definition is consistent with our approach for determining 
whether a plan offered outside the Exchange is the same plan as one 
that is certified as a QHP and offered through the Exchange.\3\ It is 
also consistent with the standards for determining whether a plan is 
the ``same'' or ``substantially the same'' as a QHP under Sec.  153.500 
and will therefore participate in the risk corridors program.\4\ The 
proposed amendments would also better align the defining features of a 
plan with the permitted plan-level adjustments under the single risk 
pool provision at Sec.  156.80. For these reasons, we are also 
proposing the same definition apply for purposes of part 154, rate 
review program, and part 156, health insurance issuer standards.
---------------------------------------------------------------------------

    \3\ Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, SHOP, and Eligibility Appeals, 78 FR at 54074 
(August 30, 2013).
    \4\ Id., at 78 FR 54073.
---------------------------------------------------------------------------

    We recognize that an issuer may, at the time of coverage renewal, 
make uniform modifications to a product, including modifying the cost 
sharing, provider network, and service area of a plan. We seek comment 
on when a plan should be considered the same plan for purposes of 
review for unreasonable rate increases, plan identification in the 
Health Insurance Oversight System (HIOS), and other programs based on 
changes in these characteristics. For instance, we seek comment on 
whether to adopt standards, similar to the

[[Page 70681]]

product-level standards for uniform modification of coverage at Sec.  
147.106(e), for identifying when plan-level modifications constitute 
the same or different plan, and the particular form such standards 
should take.
b. State
    On July 16, 2014, we issued letters to the Insurance Commissioners 
of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the 
Northern Mariana Islands clarifying the applicability of certain 
Affordable Care Act provisions to health insurance issuers in the U.S. 
territories.\5\ We had been informed by representatives of the 
territories that subjecting issuers in the territories to the new 
market reforms in the PHS Act was undermining the stability of the 
territories' health insurance markets. Accordingly, the letters 
explained that, in HHS's determination, the new provisions of the PHS 
Act enacted in title I of the Affordable Care Act are appropriately 
governed by the definition of ``State'' set forth in that title, and 
therefore do not apply to group and individual health insurance issuers 
in the territories. The portions of the PHS Act that will not apply to 
group or individual health insurance issuers in the U.S. territories 
are sections 2701 through 2719A and 2794. As explained in the letters, 
this analysis applies only to health insurance that is governed by the 
PHS Act. It does not affect the PHS Act requirements that were enacted 
in the Affordable Care Act and incorporated into ERISA and the Internal 
Revenue Code (the Code) and apply to group health plans (whether 
insured or self-insured), because such applicability does not rely upon 
the term ``State'' as it is defined in either the PHS Act or in the 
Affordable Care Act. Similarly, it also does not affect the PHS Act 
requirements that were enacted in the Affordable Care Act and apply to 
non-Federal governmental plans. As a practical matter, therefore, PHS 
Act, ERISA, and the Code requirements applicable to group health plans 
continue to apply to such coverage, and issuers selling policies to 
both private sector and public sector employers in the territories will 
want to make certain that their products comply with the relevant 
Affordable Care Act amendments to the PHS Act applicable to group 
health plans since their customers--the group health plans--are still 
subject to those provisions of the PHS Act that were enacted in the 
Affordable Care Act including the prohibition on lifetime and annual 
limits (PHS Act section 2711), the prohibition on rescissions (PHS Act 
section 2712), coverage of preventive health services (PHS Act section 
2713), and the revised internal and external appeals process (PHS Act 
section 2719), among other provisions.
---------------------------------------------------------------------------

    \5\ See for example, Letter to Virgin Islands on the Definition 
of State (July 16, 2014). Available at: http://www.cms.gov/CCIIO/Resources/Letters/Downloads/letter-to-Francis.pdf.
---------------------------------------------------------------------------

    We propose to codify this interpretation in Sec.  144.103. The 
proposed amendments would provide that, for purposes of the Affordable 
Care Act requirements implemented in part 147, the term ``State'' does 
not include the U.S. territories of Puerto Rico, the Virgin Islands, 
Guam, American Samoa, and the Northern Mariana Islands. The term 
``State'' would continue to include the territories for purposes of 
parts 146, 148, and 150. Furthermore, part 147 requirements would 
continue to apply to non-Federal governmental plans, consistent with 
the analysis in the letters to the territories. In proposing this 
amendment, we are also proposing a minor modification to the definition 
of ``State'' to replace the words ``several States'' with ``50 
States,'' so that the definition of ``State'' will read, ``State means 
each of the 50 States, the District of Columbia, Puerto Rico, the 
Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands; 
except that for purposes of part 147, the term does not include Puerto 
Rico, the Virgin Islands, Guam, American Samoa, and the Northern 
Mariana Islands.''
    We also propose to amend the regulations regarding rate review 
(Sec.  154.102) and EHB (Sec.  156.100) to reflect this interpretation. 
For a discussion of those provisions, see sections III.F.1.a and 
III.H.2.a of this preamble.

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

    For a discussion of the provisions of this proposed rule related to 
part 146, see section III.C.2 of this preamble.

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

1. Guaranteed Availability of Coverage (Sec.  147.104)
    Section 147.104(b)(2) incorporates certain triggering events for 
special enrollment periods described in the Exchange regulations at 
Sec.  155.420(d), and applies them to health insurance issuers offering 
non-grandfathered coverage in the individual market through or outside 
the Exchange. Sections 147.104(b)(2) and 155.420(d)(1)(ii) also 
establish a special enrollment period (also referred to as a limited 
open enrollment period) for individuals enrolled in non-calendar year 
individual health insurance policies when their policy year ends in 
2014.
    In this proposed rule, as described below, we propose to modify 
Sec.  155.420(d)(1)(ii) to extend the availability of the special 
enrollment period for a qualified individual and his or her dependent 
who, in any year, has coverage under a group health plan or individual 
health insurance coverage that is offered on a non-calendar year basis. 
Because the special enrollment period in Sec.  155.420(d)(1)(ii) is 
cross-referenced in Sec.  147.104(b)(2), the parallel regulation text 
in Sec.  147.104(b)(2) is no longer necessary, and we propose to remove 
it.
    We also propose to move the related regulation text in Sec.  
147.104(b)(2) that requires individual market and merged market plans 
to be offered on a calendar year basis. We propose to redesignate 
existing paragraphs (f) through (h) as paragraphs (g) through (i) and 
to codify the calendar-year requirement in new paragraph (f), with 
minor modifications for clarity.
    To further ensure consistency between plans offered through or 
outside the individual market Exchange, we also propose to amend Sec.  
147.104(b)(4) by cross-referencing Sec.  155.420(c)(2). Section 
147.104(b)(4) provides that an individual has 60 days from the date of 
a triggering event to select an individual market plan during a special 
enrollment period. This amendment would apply the advance availability 
provisions in Sec.  155.420(c)(2) to the broader individual market, 
allowing an individual 60 days before and after certain triggering 
events to make a plan selection through or outside the individual 
market Exchange.
    Finally, we propose to update the cross-reference in Sec.  
147.104(b)(1)(i)(C) to refer to Sec.  155.725 rather than Sec.  
155.725(a)(2), to conform with proposed amendments in Sec.  155.725 
described later in this preamble.
2. Guaranteed Renewability of Coverage (Sec.  147.106)
    The guaranteed renewability provisions of title XXVII of the PHS 
Act provide that an issuer may discontinue a product offered in the 
group or individual market if the issuer offers to each plan sponsor or 
individual who is enrolled in that particular product the option to 
purchase all (or, in the case of the large group market, any) other 
health insurance coverage currently being offered by the issuer in that 
market, and complies with other

[[Page 70682]]

requirements of those sections, as well as with any applicable State 
law.
    In previous guidance outlining our current regulatory 
interpretation of the product discontinuation provisions, we explained 
that an issuer does not satisfy the requirement to offer other coverage 
currently being offered ``by the issuer'' in the applicable market if 
it automatically enrolls a plan sponsor or individual into a product of 
another issuer that is separately licensed to engage in the business of 
insurance in a State.\6\ We propose to codify that interpretation by 
amending the guaranteed renewability regulations at Sec.  
146.152(c)(2), Sec.  147.106(c)(2), and Sec.  148.122(d)(2).
---------------------------------------------------------------------------

    \6\ See Insurance Standards Bulletin, Form and Manner of Notices 
When Discontinuing or Renewing a Product in the Group or Individual 
Market, section IV (September 2, 2014). Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Renewal-Notices-9-3-14-FINAL.PDF. See also Patient Protection and 
Affordable Care Act; Annual Eligibility Redeterminations for 
Exchange Participation and Insurance Affordability Programs; Health 
Insurance Issuer Standards under the Affordable Care Act, Including 
Standards Related to Exchanges, 79 FR at 53000 (September 5, 2014).
---------------------------------------------------------------------------

    We note that this proposal would not prevent an issuer that decides 
to discontinue all health insurance coverage in a market (market 
withdrawal) from automatically enrolling plan sponsors or individuals 
into a product of another licensed issuer, to the extent permitted by 
applicable State law. However, if the issuer terminates all coverage in 
a market or markets, it is subject to certain requirements outlined in 
Sec.  146.152(d), Sec.  147.106(d), and Sec.  148.122(e), as 
applicable. In particular, the issuer must provide at least 180 days' 
notice to the applicable State authority and to each plan sponsor or 
individual, as applicable, (and participants and beneficiaries covered 
under such coverage), and it is prohibited from issuing coverage in the 
market(s) or State involved for 5 years following the date of 
discontinuation. The issuer must also comply with any applicable State 
law.
    In instances when an issuer is not withdrawing from the market, we 
note that permitting the purchase and sale of products between issuers, 
whether through acquisitions of the product, statutory mergers of the 
issuers, or other corporate combinations, could create an opportunity 
for insurance holding companies to segment risk on the basis of health 
status between their subsidiary companies. However, we also do not want 
to impose undue constraints on standard corporate reorganization 
practices. Where an issuer may wish to transfer its product(s) to 
another issuer, it is not clear whether the purposes of the guaranteed 
renewability provisions are better served by requiring the ceding 
issuer to offer the consumer enrollment in a different product offered 
by that issuer, or by having the acquiring issuer automatically enroll 
the consumer in the transferred product, which may have the same 
benefits, cost sharing, and other plan features.
    We are considering how to interpret the guaranteed renewability 
provisions in the context of various corporate transactions involving a 
change of ownership, such as mergers, acquisitions, and similar 
business restructuring, as well as particular standards that may be 
necessary to ensure seamless coverage for enrollees and to facilitate 
the ongoing operational processes of HHS-administered programs. For 
example, we could allow for the retention of enrollees under a product 
that is being transferred to another issuer under certain types of 
transactions as permitted by applicable State law, but only if the same 
benefits, network, and other coverage features remain in place and the 
acquiring issuer agrees to accept liability for any payments and 
charges for the advance payments for the premium tax credit, cost-
sharing reductions, the FFE user fee, and the HHS-operated risk 
adjustment, reinsurance, and risk corridors programs. We believe that 
this allocation of liability would accord with many parties' 
expectations upon entering into such a transaction. We seek comment on 
such a standard, or what other allocation of liability should apply 
following such a transaction for each of these programs.
    In addition to interpretations of the guaranteed renewability 
provisions in this context, mid-year changes in ownership affect 
operational processes, in particular for the data and payment processes 
associated with the programs listed above. These programs utilize plan 
identification in the Health Insurance Oversight System (HIOS), and at 
this time, cannot easily accommodate changes in such identification 
that would result from certain mid-year changes in ownership. Therefore 
issuers subject to these programs must continue data and payment 
processes under the original HIOS identifying information for affected 
programs until operations for the coverage year are complete. 
Operational guidance addressing data submissions and payments and 
charges when an issuer participating in the programs listed above 
experiences a change of ownership will be forthcoming.
    To facilitate these operational processes, we propose to impose a 
notification requirement on issuers of a QHP, a plan otherwise subject 
to risk corridors, or a reinsurance-eligible plan or a risk adjustment 
covered plan, in cases of changes of ownership, as recognized by the 
State in which the issuer offers coverage. As an alternative, we also 
are considering defining a change of ownership for these purposes as a 
transaction that would cause a change in an issuer's tax identification 
number, or any change in legal ownership of an issuer's plan, for 
example through an asset sale or transfer or change in holding company 
ownership. We propose to require the post-transaction issuer to notify 
HHS of the transaction in the manner specified by HHS, by the later of 
the date the transaction is entered into or the 30th day prior to the 
effective date of the transaction. We anticipate that these timelines 
will not interfere with the negotiation and consummation of the 
transaction, but will permit the parties and HHS to clarify operational 
payment processes in a timely manner.
    We seek comment on how the guaranteed renewability provisions 
should be interpreted as related to the transfer of products or 
corporate transformations of issuers. In particular, we seek comment on 
what, if any, types of automatic enrollment practices should be 
permitted in connection with specific types of corporate transactions 
and whether the regulations should be amended to create an exception to 
the prohibition on auto-enrollment with a different issuer in certain 
situations involving changes of ownership; how common such transactions 
are and how they are typically structured; the extent to which State 
laws and regulations impose restrictions on such transactions, and how 
our interpretation of the guaranteed renewability provisions would best 
protect the interests of consumers. We also seek comment on how the 
timing of such transactions may interact with other applicable market 
reforms in the relevant market segment, such as the timing of index 
rate updates under the single risk pool provision at Sec.  156.80. We 
additionally seek comment on whether particular disclosure or special 
enrollment period provisions are necessary to ensure consumers are 
timely notified of a transaction affecting their coverage and given 
options for electing other coverage.
    Finally, we seek comment on all aspects of proposed notification to 
HHS, including the identity of the notifying issuer, the timing of the 
proposed notification, types of transactions for

[[Page 70683]]

which notification should be required, operational guidance that should 
be offered, and which issuer should be liable for payments and charges 
for the advance payments for the premium tax credit, cost-sharing 
reductions, the Federally-facilitated Exchange user fees, and the HHS-
operated risk adjustment, reinsurance, and risk corridors programs. We 
also seek comment on whether the notification requirement should apply 
to issuers of all plans subject to the guaranteed renewability 
requirements, including, for example, grandfathered health plans.

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

    For a discussion of the provisions of this proposed rule related to 
part 148, see section III.C.2 of this preamble.

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

1. Provisions for the State Notice of Benefit and Payment Parameters 
(Sec.  153.100)
    In Sec.  153.100(c), we established a deadline of March 1 of the 
calendar year prior to the applicable benefit year for a State to 
publish a State notice of benefit and payment parameters if the State 
is required to do so under Sec.  153.100(a) or (b)--that is, if the 
State is operating a risk adjustment program, or if the State is 
establishing a reinsurance program and wishes to modify the data 
requirements for issuers to receive reinsurance payments from those 
specified in the HHS notice of benefit and payment parameters for the 
benefit year, wishes to collect additional reinsurance contributions or 
use additional funds for reinsurance payments, or elects to use more 
than one applicable reinsurance entity. As of the date of publication 
of this proposed rulemaking, Connecticut is the only State that has 
elected to establish a transitional reinsurance program and 
Massachusetts is the only State that has elected to operate a risk-
adjustment program.
    We have previously recognized in the 2014 and 2015 Payment Notices 
that it may be difficult for States to publish such a notice by the 
required deadline if the final HHS notice of benefit and payment 
parameters for the applicable benefit year has not yet been published. 
Therefore, we propose to modify Sec.  153.100(c) so that the 
publication deadline for the State notice of benefit and payment 
parameters would be the later of March 1 of the calendar year prior to 
the applicable benefit year, or the 30th day following publication of 
the final HHS notice of benefit and payment parameters for that benefit 
year. This deadline corresponds to the extended deadlines we 
implemented for the 2014 and 2015 benefit years in the 2014 and 2015 
Payment Notices, respectively. We seek comment on this proposal.
2. Provisions and Parameters for the Permanent Risk Adjustment Program
    The risk adjustment program is a permanent program created by 
section 1343 of the Affordable Care Act that transfers funds from lower 
risk, non-grandfathered plans to higher risk, non-grandfathered plans 
in the individual and small group markets, inside and outside the 
Exchanges, to balance risk and maintain market stability. In subparts D 
and G of the Premium Stabilization Rule, we established standards for 
the administration of the risk adjustment program. A State that is 
approved or conditionally approved by the Secretary to operate an 
Exchange may establish a risk adjustment program, or have HHS do so on 
its behalf.
a. Risk Adjustment User Fee
    If a State is not approved to operate or chooses to forgo operating 
its own risk adjustment program, HHS will operate risk adjustment on 
the State's behalf. As described in the 2014 Payment Notice, HHS's 
operation of risk adjustment on behalf of States is funded through a 
risk adjustment user fee. Section 153.610(f)(2) provides that an issuer 
of a risk adjustment covered plan must remit a user fee to HHS equal to 
the product of its monthly enrollment in the plan and the per-enrollee-
per-month risk adjustment user fee specified in the annual HHS notice 
of benefit and payment parameters for the applicable benefit year.
    OMB Circular No. A-25R establishes Federal policy regarding user 
fees, and specifies that a user charge will be assessed against each 
identifiable recipient for special benefits derived from Federal 
activities beyond those received by the general public. The risk 
adjustment program will provide special benefits as defined in section 
6(a)(1)(b) of Circular No. A-25R to issuers of risk adjustment covered 
plans because it will mitigate the financial instability associated 
with potential adverse risk selection. The risk adjustment program also 
will contribute to consumer confidence in the health insurance industry 
by helping to stabilize premiums across the individual and small group 
health insurance markets.
    In the 2015 Payment Notice, we estimated Federal administrative 
expenses of operating the risk adjustment program to be $0.96 per-
enrollee-per-year, based on our estimated contract costs for risk 
adjustment operations. For the 2016 benefit year, we propose to use the 
same methodology to estimate our administrative expenses to operate the 
program. These contracts cover development of the model and 
methodology, collections, payments, account management, data 
collection, data validation, program integrity and audit functions, 
operational and fraud analytics, stakeholder training, and operational 
support. To calculate the user fee, we would divide HHS's projected 
total costs for administering the risk adjustment programs on behalf of 
States by the expected number of enrollees in risk adjustment covered 
plans (other than plans not subject to market reforms and student 
health plans, which are not subject to payments and charges under the 
risk adjustment methodology HHS uses when it operates risk adjustment 
on behalf of a State) in HHS-operated risk adjustment programs for the 
benefit year.
    We estimate that the total cost for HHS to operate the risk 
adjustment program on behalf of States for 2016 will be approximately 
$50 million, and that the risk adjustment user fee would be $1.75 per 
enrollee per year. The increased risk adjustment user fee for 2016 is 
the result of the increased contract costs to support the risk 
adjustment data validation process, which will be administered for the 
first time in 2016. We seek comment on this proposed risk adjustment 
user fee rate.
b. Overview of the HHS Risk Adjustment Model
    The HHS risk adjustment model predicts plan liability for an 
average enrollee based on that person's age, sex, and diagnoses (risk 
factors), producing a risk score. The HHS risk adjustment methodology 
utilizes separate models for adults, children, and infants to account 
for cost differences in each of these age groups. In each of the adult 
and child models, the relative costs assigned to an individual's age, 
sex, and diagnoses are added together to produce a risk score. Infant 
risk scores are determined by inclusion in one of 25 mutually exclusive 
groups based on the infant's maturity and the severity of its 
diagnoses. If applicable, the risk score is multiplied by a cost-
sharing reduction adjustment.
    The enrollment-weighted average risk score of all enrollees in a 
particular risk

[[Page 70684]]

adjustment-covered plan, or the plan liability risk score, within a 
geographic rating area is one input into the payment transfer formula, 
which determines an issuer's transfer (payment or charge) for that 
plan. Thus, the HHS risk adjustment model predicts individual-level 
risk scores, but is designed to predict average group costs to account 
for risk across plans, which, as we stated in the 2014 Payment Notice, 
accords with the Actuarial Standards Board's Actuarial Standards of 
Practice for risk classification.
c. Proposed Updates to Risk Adjustment Model
    We propose to continue to use the same risk adjustment methodology 
finalized in the 2014 Payment Notice, with changes to reflect more 
current data, as described here. As we stated above, in the adult and 
child models, enrollee health risks are estimated using the HHS risk 
adjustment model, which assigns a set of additive factors that reflect 
the relative costs of demographics and diagnoses. Risk adjustment 
factors are developed using claims data and reflect the costs of a 
given disease relative to average spending. The longer the lag in data 
used to develop the risk factors, the greater the potential that the 
costs of treating one disease versus another have changed in a manner 
not fully reflected in the risk factors.
    To provide risk adjustment factors that best reflect more recent 
treatment patterns and costs, we propose to recalibrate the HHS risk 
adjustment models for 2016 by using more recent claims data to develop 
updated risk factors. The risk factors published in the 2014 Payment 
Notice for use in 2014 and 2015 were developed using the Truven Health 
Analytics 2010 MarketScan[supreg] Commercial Claims and Encounters 
database (MarketScan); we are proposing to update the risk factors in 
the HHS risk adjustment model using 2010, 2011, and 2012 MarketScan 
data. We seek comment on this proposal.
    We propose to implement the recalibrated risk adjustment factors in 
2016 to provide sufficient time for issuers to account for risk 
adjustment model changes. However, we also seek comment on making the 
recalibrated HHS risk adjustment models effective beginning for the 
2015 benefit year instead of the 2016 benefit year.
    We also propose that if 2013 MarketScan data becomes available 
after the publication of this proposed rule, we would update the risk 
factors in the HHS risk adjustment model using the 3 most recent years 
of data available--MarketScan 2011, 2012, and 2013 data. These updated 
risk factors would be published and finalized in this final rule. We 
seek comment on this approach, including whether we should update risk 
factors based on 2013 MarketScan data when it becomes available after 
publication of this proposed rule, and whether the updated risk factors 
should be implemented for 2015, or 2016.
    We believe that using multiple years of data will promote market 
stability and minimize volatility in coefficients for certain rare 
diagnoses. In using multiple years of data to recalibrate the risk 
adjustment model, we considered either pooling data from 3 sample years 
or blending coefficients from three separately estimated calibrations, 
based on the 2010, 2011, and 2012 data. We examined the effects of 
pooling data and blending separate calibrations, and did not find a 
significant difference between the resulting coefficients. However, we 
believe that blending coefficients offers the advantage of transparency 
and ease in future recalibrations. Blending coefficients using the 3 
most recent years of separately estimated calibrations allows for most 
recent data to be incorporated into the model, while ensuring that 
coefficients remain relatively stable. We would publish the R-squared 
statistics of the 3 separately-estimated sample years and the blended 
coefficient for each risk adjustment factor. We seek comment on this 
approach.
    We made minor refinements to the underlying MarketScan 
recalibration samples from which the risk adjustment factors are 
derived. In particular, we changed our treatment of Age 0 infants 
without birth hierarchical condition categories (HCCs). There may be 
cases in which there is no separate infant birth claim from which to 
gather diagnoses. For example, at an operational level, mother and 
infant claims may be bundled such that infant diagnoses appear on the 
mother's record. Where newborn diagnoses appear on the mother's claims, 
HHS has issued operational guidance on how best to associate those 
codes with the appropriate infant.\7\ This assumes that the mother and 
infant enrollment records exist and can be matched.
---------------------------------------------------------------------------

    \7\ HHS-Developed Risk Adjustment Model Algorithm Software 
Instructions. June 2, 2014. http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/DIY-instructions-5-20-14.pdf.
---------------------------------------------------------------------------

    However, we are proposing a change in how we categorize age 0 
infants who do not have birth codes. We previously stated in the 
operational guidance referenced above that infants without birth codes 
would be assigned an ``Age 0, Term'' factor in risk adjustment 
operations. We did so under the assumption that issuers paid the birth 
costs, yet the birth HCCs were missing (perhaps because claims were 
bundled with the mother's, whose claims were excluded). Upon further 
analysis of age 0 and age 1 claims, we found that age 0 infants without 
birth HCCs had costs more similar to age 1 infants by severity level. 
We believe that these infants should be assigned to age 1 in situations 
where the issuer did not pay the birth costs during the plan year. For 
many age 0 infants without birth HCCs, the birth could have occurred in 
the prior year or was paid by a different issuer. We are proposing that 
age 0 infants without birth HCCs be assigned to ``Age 1'' by severity 
level. We have made this change in the recalibration samples that we 
are using to calculate risk factors for proposed implementation in the 
2016 benefit year. We are also proposing to make this change in the 
operation of the risk adjustment methodology for the year in which we 
would implement the recalibrated risk adjustment factors. We seek 
comment on this approach.
d. List of Factors To Be Employed in the Model
    The HHS risk adjustment models predict annualized plan liability 
expenditures using age and sex categories and the HHS HCCs included in 
the HHS risk adjustment model. Dollar coefficients were estimated for 
these factors using weighted least squares regression, where the weight 
was the fraction of the year enrolled.
    We are including the same HCCs that were included in the original 
risk adjustment calibration in the 2014 Payment Notice. For each model, 
the factors are the statistical regression dollar values for each HCC 
in the model divided by a weighted average plan liability for the full 
modeling sample. The factors represent the predicted relative 
incremental expenditures for each HCC. The proposed factors resulting 
from the blended factors from the 2010, 2011, and 2012 separately 
solved models are shown in the tables below. For a given enrollee, the 
sums of the factors for the enrollee's HCCs are the total relative 
predicted expenditures for that enrollee. Table 1 contains factors for 
each adult model, including the interactions. Table 3 contains the 
factors for each child model. Table 4 contains the factors for each 
infant model.

[[Page 70685]]



                                  Table 1--Adult Risk Adjustment Model Factors
----------------------------------------------------------------------------------------------------------------
                      Factor                         Platinum      Gold       Silver      Bronze    Catastrophic
----------------------------------------------------------------------------------------------------------------
                                               Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 21-24, Male...................................       0.245       0.197       0.139       0.079         0.063
Age 25-29, Male...................................       0.259       0.207       0.144       0.079         0.062
Age 30-34, Male...................................       0.314       0.252       0.176       0.095         0.074
Age 35-39, Male...................................       0.379       0.307       0.220       0.125         0.099
Age 40-44, Male...................................       0.464       0.379       0.281       0.169         0.138
Age 45-49, Male...................................       0.553       0.456       0.347       0.219         0.183
Age 50-54, Male...................................       0.711       0.593       0.464       0.305         0.257
Age 55-59, Male...................................       0.834       0.698       0.556       0.379         0.325
Age 60-64, Male...................................       1.005       0.844       0.681       0.475         0.412
Age 21-24, Female.................................       0.408       0.327       0.216       0.102         0.072
Age 25-29, Female.................................       0.516       0.417       0.289       0.153         0.117
Age 30-34, Female.................................       0.635       0.521       0.387       0.240         0.201
Age 35-39, Female.................................       0.738       0.615       0.479       0.329         0.288
Age 40-44, Female.................................       0.824       0.691       0.545       0.381         0.335
Age 45-49, Female.................................       0.858       0.718       0.567       0.393         0.343
Age 50-54, Female.................................       0.983       0.828       0.667       0.467         0.407
Age 55-59, Female.................................       1.019       0.856       0.690       0.481         0.418
Age 60-64, Female.................................       1.126       0.945       0.766       0.538         0.468
----------------------------------------------------------------------------------------------------------------
                                                Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS..........................................       5.788       5.291       4.962       4.962         4.971
Septicemia, Sepsis, Systemic Inflammatory Response      13.018      12.842      12.720      12.792        12.820
 Syndrome/Shock...................................
Central Nervous System Infections, Except Viral          7.352       7.230       7.147       7.178         7.190
 Meningitis.......................................
Viral or Unspecified Meningitis...................       5.066       4.796       4.649       4.590         4.578
Opportunistic Infections..........................      10.028       9.915       9.848       9.852         9.851
Metastatic Cancer.................................      25.642      25.144      24.784      24.890        24.924
Lung, Brain, and Other Severe Cancers, Including        11.814      11.428      11.169      11.196        11.204
 Pediatric Acute Lymphoid Leukemia................
Non-Hodgkin's Lymphomas and Other Cancers and            6.522       6.247       6.069       6.030         6.015
 Tumors...........................................
Colorectal, Breast (Age <50), Kidney, and Other          5.935       5.661       5.483       5.439         5.421
 Cancers..........................................
Breast (Age 50+) and Prostate Cancer, Benign/            3.467       3.259       3.129       3.075         3.055
 Uncertain Brain Tumors, and Other Cancers and
 Tumors...........................................
Thyroid Cancer, Melanoma, Neurofibromatosis, and         1.693       1.516       1.407       1.296         1.258
 Other Cancers and Tumors.........................
Pancreas Transplant Status/Complications..........       7.981       7.895       7.819       7.841         7.845
Diabetes with Acute Complications.................       1.333       1.184       1.095       0.977         0.933
Diabetes with Chronic Complications...............       1.333       1.184       1.095       0.977         0.933
Diabetes without Complication.....................       1.333       1.184       1.095       0.977         0.933
Protein-Calorie Malnutrition......................      14.895      14.913      14.901      14.977        15.000
Mucopolysaccharidosis.............................       2.334       2.196       2.112       2.052         2.032
Lipidoses and Glycogenosis........................       2.334       2.196       2.112       2.052         2.032
Amyloidosis, Porphyria, and Other Metabolic              2.334       2.196       2.112       2.052         2.032
 Disorders........................................
Adrenal, Pituitary, and Other Significant                2.334       2.196       2.112       2.052         2.032
 Endocrine Disorders..............................
Liver Transplant Status/Complications.............      17.442      17.225      17.090      17.131        17.150
End-Stage Liver Disease...........................       6.311       6.031       5.853       5.879         5.890
Cirrhosis of Liver................................       2.591       2.399       2.290       2.258         2.247
Chronic Hepatitis.................................       2.134       1.970       1.871       1.799         1.776
Acute Liver Failure/Disease, Including Neonatal          4.501       4.322       4.209       4.201         4.202
 Hepatitis........................................
Intestine Transplant Status/Complications.........      53.540      53.545      53.543      53.563        53.571
Peritonitis/Gastrointestinal Perforation/               13.301      13.001      12.793      12.848        12.867
 Necrotizing Enterocolitis........................
Intestinal Obstruction............................       7.360       7.048       6.853       6.898         6.917
Chronic Pancreatitis..............................       6.620       6.343       6.171       6.209         6.227
Acute Pancreatitis/Other Pancreatic Disorders and        3.357       3.132       2.999       2.956         2.944
 Intestinal Malabsorption.........................
Inflammatory Bowel Disease........................       3.091       2.816       2.655       2.539         2.495
Necrotizing Fasciitis.............................       7.589       7.358       7.198       7.230         7.242
Bone/Joint/Muscle Infections/Necrosis.............       7.589       7.358       7.198       7.230         7.242
Rheumatoid Arthritis and Specified Autoimmune            3.565       3.292       3.116       3.094         3.089
 Disorders........................................
Systemic Lupus Erythematosus and Other Autoimmune        1.289       1.138       1.050       0.952         0.917
 Disorders........................................
Osteogenesis Imperfecta and Other Osteodystrophies       3.519       3.299       3.151       3.092         3.071
Congenital/Developmental Skeletal and Connective         3.519       3.299       3.151       3.092         3.071
 Tissue Disorders.................................
Cleft Lip/Cleft Palate............................       1.728       1.545       1.437       1.349         1.322
Hemophilia........................................      46.995      46.679      46.437      46.451        46.455
Myelodysplastic Syndromes and Myelofibrosis.......      14.398      14.258      14.158      14.185        14.194
Aplastic Anemia...................................      14.398      14.258      14.158      14.185        14.194
Acquired Hemolytic Anemia, Including Hemolytic           9.323       9.130       8.996       8.989         8.989
 Disease of Newborn...............................
Sickle Cell Anemia (Hb-SS)........................       9.323       9.130       8.996       8.989         8.989
Thalassemia Major.................................       9.323       9.130       8.996       8.989         8.989
Combined and Other Severe Immunodeficiencies......       5.539       5.361       5.242       5.258         5.263
Disorders of the Immune Mechanism.................       5.539       5.361       5.242       5.258         5.263

[[Page 70686]]

 
Coagulation Defects and Other Specified                  3.167       3.053       2.976       2.952         2.943
 Hematological Disorders..........................
Drug Psychosis....................................       3.735       3.469       3.306       3.209         3.176
Drug Dependence...................................       3.735       3.469       3.306       3.209         3.176
Schizophrenia.....................................       3.199       2.922       2.760       2.675         2.649
Major Depressive and Bipolar Disorders............       1.857       1.674       1.561       1.439         1.397
Reactive and Unspecified Psychosis, Delusional           1.857       1.674       1.561       1.439         1.397
 Disorders........................................
Personality Disorders.............................       1.187       1.051       0.955       0.821         0.774
Anorexia/Bulimia Nervosa..........................       2.779       2.599       2.483       2.406         2.378
Prader-Willi, Patau, Edwards, and Autosomal              3.815       3.668       3.574       3.532         3.516
 Deletion Syndromes...............................
Down Syndrome, Fragile X, Other Chromosomal              1.384       1.280       1.203       1.120         1.090
 Anomalies, and Congenital Malformation Syndromes.
Autistic Disorder.................................       1.187       1.051       0.955       0.821         0.774
Pervasive Developmental Disorders, Except Autistic       1.187       1.051       0.955       0.821         0.774
 Disorder.........................................
Traumatic Complete Lesion Cervical Spinal Cord....      13.467      13.285      13.155      13.164        13.167
Quadriplegia......................................      13.467      13.285      13.155      13.164        13.167
Traumatic Complete Lesion Dorsal Spinal Cord......       9.938       9.745       9.616       9.614         9.613
Paraplegia........................................       9.938       9.745       9.616       9.614         9.613
Spinal Cord Disorders/Injuries....................       6.268       6.031       5.883       5.864         5.857
Amyotrophic Lateral Sclerosis and Other Anterior         4.060       3.784       3.618       3.579         3.571
 Horn Cell Disease................................
Quadriplegic Cerebral Palsy.......................       1.208       0.961       0.825       0.753         0.731
Cerebral Palsy, Except Quadriplegic...............       0.372       0.280       0.220       0.167         0.148
Spina Bifida and Other Brain/Spinal/Nervous System       0.301       0.207       0.156       0.139         0.133
 Congenital Anomalies.............................
Myasthenia Gravis/Myoneural Disorders and Guillain-      5.313       5.145       5.041       5.017         5.008
 Barre Syndrome/Inflammatory and Toxic Neuropathy.
Muscular Dystrophy................................       2.201       2.008       1.906       1.832         1.806
Multiple Sclerosis................................       8.413       7.975       7.673       7.736         7.756
Parkinson's, Huntington's, and Spinocerebellar           2.201       2.008       1.906       1.832         1.806
 Disease, and Other Neurodegenerative Disorders...
Seizure Disorders and Convulsions.................       1.578       1.403       1.296       1.207         1.177
Hydrocephalus.....................................       7.868       7.733       7.636       7.623         7.615
Non-Traumatic Coma, and Brain Compression/Anoxic        10.042       9.885       9.770       9.773         9.772
 Damage...........................................
Respirator Dependence/Tracheostomy Status.........      39.643      39.644      39.620      39.697        39.721
Respiratory Arrest................................      12.584      12.408      12.271      12.354        12.383
Cardio-Respiratory Failure and Shock, Including         12.584      12.408      12.271      12.354        12.383
 Respiratory Distress Syndromes...................
Heart Assistive Device/Artificial Heart...........      35.480      35.184      34.977      35.065        35.099
Heart Transplant..................................      35.480      35.184      34.977      35.065        35.099
Congestive Heart Failure..........................       3.651       3.522       3.438       3.440         3.441
Acute Myocardial Infarction.......................      11.824      11.431      11.143      11.303        11.358
Unstable Angina and Other Acute Ischemic Heart           6.167       5.830       5.628       5.667         5.686
 Disease..........................................
Heart Infection/Inflammation, Except Rheumatic....       7.052       6.895       6.793       6.780         6.775
Specified Heart Arrhythmias.......................       3.369       3.197       3.091       3.039         3.020
Intracranial Hemorrhage...........................      10.890      10.560      10.343      10.374        10.388
Ischemic or Unspecified Stroke....................       4.214       3.985       3.856       3.877         3.890
Cerebral Aneurysm and Arteriovenous Malformation..       4.887       4.638       4.491       4.462         4.452
Hemiplegia/Hemiparesis............................       6.179       6.069       5.988       6.049         6.071
Monoplegia, Other Paralytic Syndromes.............       3.942       3.789       3.697       3.675         3.668
Atherosclerosis of the Extremities with Ulceration      12.276      12.162      12.073      12.166        12.198
 or Gangrene......................................
Vascular Disease with Complications...............       8.278       8.061       7.919       7.940         7.948
Pulmonary Embolism and Deep Vein Thrombosis.......       4.709       4.510       4.386       4.372         4.369
Lung Transplant Status/Complications..............      34.373      34.131      33.949      34.046        34.078
Cystic Fibrosis...................................      11.033      10.684      10.430      10.438        10.440
Chronic Obstructive Pulmonary Disease, Including         1.101       0.970       0.884       0.791         0.759
 Bronchiectasis...................................
Asthma............................................       1.101       0.970       0.884       0.791         0.759
Fibrosis of Lung and Other Lung Disorders.........       2.568       2.426       2.343       2.310         2.299
Aspiration and Specified Bacterial Pneumonias and        8.848       8.747       8.678       8.703         8.713
 Other Severe Lung Infections.....................
Kidney Transplant Status..........................      11.117      10.782      10.581      10.596        10.608
End Stage Renal Disease...........................      40.465      40.171      39.935      40.097        40.149
Chronic Kidney Disease, Stage 5...................       2.400       2.272       2.200       2.193         2.194
Chronic Kidney Disease, Severe (Stage 4)..........       2.400       2.272       2.200       2.193         2.194
Ectopic and Molar Pregnancy, Except with Renal           1.430       1.234       1.123       0.918         0.831
 Failure, Shock, or Embolism......................
Miscarriage with Complications....................       1.430       1.234       1.123       0.918         0.831
Miscarriage with No or Minor Complications........       1.430       1.234       1.123       0.918         0.831
Completed Pregnancy With Major Complications......       3.914       3.381       3.175       2.970         2.940
Completed Pregnancy With Complications............       3.914       3.381       3.175       2.970         2.940
Completed Pregnancy with No or Minor Complications       3.914       3.381       3.175       2.970         2.940
Chronic Ulcer of Skin, Except Pressure............       2.554       2.413       2.332       2.320         2.318
Hip Fractures and Pathological Vertebral or             10.056       9.807       9.634       9.697         9.719
 Humerus Fractures................................
Pathological Fractures, Except of Vertebrae, Hip,        1.860       1.725       1.640       1.554         1.522
 or Humerus.......................................
Stem Cell, Including Bone Marrow, Transplant            32.497      32.482      32.463      32.490        32.499
 Status/Complications.............................

[[Page 70687]]

 
Artificial Openings for Feeding or Elimination....      11.444      11.324      11.232      11.295        11.316
Amputation Status, Lower Limb/Amputation                 6.152       5.974       5.855       5.894         5.910
 Complications....................................
----------------------------------------------------------------------------------------------------------------
                                               Interaction Factors
----------------------------------------------------------------------------------------------------------------
Severe illness x Opportunistic Infections.........      12.052      12.304      12.437      12.542        12.573
Severe illness x Metastatic Cancer................      12.052      12.304      12.437      12.542        12.573
Severe illness x Lung, Brain, and Other Severe          12.052      12.304      12.437      12.542        12.573
 Cancers, Including Pediatric Acute Lymphoid
 Leukemia.........................................
Severe illness x Non-Hodgkin`s Lymphomas and Other      12.052      12.304      12.437      12.542        12.573
 Cancers and Tumors...............................
Severe illness x Myasthenia Gravis/Myoneural            12.052      12.304      12.437      12.542        12.573
 Disorders and Guillain-Barre Syndrome/
 Inflammatory and Toxic Neuropathy................
Severe illness x Heart Infection/Inflammation,          12.052      12.304      12.437      12.542        12.573
 Except Rheumatic.................................
Severe illness x Intracranial Hemorrhage..........      12.052      12.304      12.437      12.542        12.573
Severe illness x HCC group G06 (G06 is HCC Group 6      12.052      12.304      12.437      12.542        12.573
 which includes the following HCCs in the blood
 disease category: 67, 68)........................
Severe illness x HCC group G08 (G08 is HCC Group 8      12.052      12.304      12.437      12.542        12.573
 which includes the following HCCs in the blood
 disease category: 73, 74)........................
Severe illness x End-Stage Liver Disease..........       2.611       2.768       2.841       2.942         2.971
Severe illness x Acute Liver Failure/Disease,            2.611       2.768       2.841       2.942         2.971
 Including Neonatal Hepatitis.....................
Severe illness x Atherosclerosis of the                  2.611       2.768       2.841       2.942         2.971
 Extremities with Ulceration or Gangrene..........
Severe illness x Vascular Disease with                   2.611       2.768       2.841       2.942         2.971
 Complications....................................
Severe illness x Aspiration and Specified                2.611       2.768       2.841       2.942         2.971
 Bacterial Pneumonias and Other Severe Lung
 Infections.......................................
Severe illness x Artificial Openings for Feeding         2.611       2.768       2.841       2.942         2.971
 or Elimination...................................
Severe illness x HCC group G03 (G03 is HCC Group 3       2.611       2.768       2.841       2.942         2.971
 which includes the following HCCs in the
 musculoskeletal disease category: 54, 55)........
----------------------------------------------------------------------------------------------------------------


      Table 2--HHS HCCs in the Severity Illness Indicator Variable
------------------------------------------------------------------------
                               Description
-------------------------------------------------------------------------
Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock.
Peritonitis/Gastrointestinal Perforation/Necrotizing Enter colitis.
Seizure Disorders and Convulsions.
Non-Traumatic Coma, Brain Compression/Anoxic Damage.
Respirator Dependence/Tracheostomy Status.
Respiratory Arrest.
Cardio-Respiratory Failure and Shock, Including Respiratory Distress
 Syndromes.
Pulmonary Embolism and Deep Vein Thrombosis.
------------------------------------------------------------------------


                                  Table 3--Child Risk Adjustment Model Factors
----------------------------------------------------------------------------------------------------------------
                      Factor                         Platinum      Gold       Silver      Bronze    Catastrophic
----------------------------------------------------------------------------------------------------------------
                                               Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male.....................................       0.264       0.196       0.108       0.031         0.010
Age 5-9, Male.....................................       0.179       0.130       0.065       0.003         0.000
Age 10-14, Male...................................       0.228       0.177       0.107       0.044         0.030
Age 15-20, Male...................................       0.306       0.247       0.174       0.100         0.080
Age 2-4, Female...................................       0.211       0.152       0.072       0.010         0.002
Age 5-9, Female...................................       0.142       0.100       0.044       0.001         0.000
Age 10-14, Female.................................       0.207       0.160       0.095       0.043         0.031
Age 15-20, Female.................................       0.358       0.285       0.191       0.096         0.072
----------------------------------------------------------------------------------------------------------------
                                                Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS..........................................       3.508       3.108       2.862       2.709         2.665
Septicemia, Sepsis, Systemic Inflammatory Response      18.633      18.476      18.371      18.395        18.404
 Syndrome/Shock...................................
Central Nervous System Infections, Except Viral         12.297      12.095      11.951      11.964        11.969
 Meningitis.......................................
Viral or Unspecified Meningitis...................       3.643       3.409       3.280       3.134         3.084
Opportunistic Infections..........................      23.813      23.736      23.693      23.677        23.669
Metastatic Cancer.................................      38.610      38.324      38.101      38.102        38.101
Lung, Brain, and Other Severe Cancers, Including        12.521      12.200      11.971      11.895        11.867
 Pediatric Acute Lymphoid Leukemia................
Non-Hodgkin`s Lymphomas and Other Cancers and            9.945       9.655       9.451       9.349         9.314
 Tumors...........................................
Colorectal, Breast (Age < 50), Kidney, and Other         3.870       3.641       3.473       3.332         3.282
 Cancers..........................................

[[Page 70688]]

 
Breast (Age 50+) and Prostate Cancer, Benign/            3.276       3.046       2.896       2.764         2.715
 Uncertain Brain Tumors, and Other Cancers and
 Tumors...........................................
Thyroid Cancer, Melanoma, Neurofibromatosis, and         1.665       1.482       1.354       1.217         1.169
 Other Cancers and Tumors.........................
Pancreas Transplant Status/Complications..........      33.090      32.913      32.794      32.834        32.845
Diabetes with Acute Complications.................       2.668       2.335       2.166       1.882         1.777
Diabetes with Chronic Complications...............       2.668       2.335       2.166       1.882         1.777
Diabetes without Complication.....................       2.668       2.335       2.166       1.882         1.777
Protein-Calorie Malnutrition......................      15.118      15.003      14.912      14.952        14.964
Mucopolysaccharidosis.............................       6.331       6.034       5.820       5.764         5.746
Lipidoses and Glycogenosis........................       6.331       6.034       5.820       5.764         5.746
Congenital Metabolic Disorders, Not Elsewhere            6.331       6.034       5.820       5.764         5.746
 Classified.......................................
Amyloidosis, Porphyria, and Other Metabolic              6.331       6.034       5.820       5.764         5.746
 Disorders........................................
Adrenal, Pituitary, and Other Significant                6.331       6.034       5.820       5.764         5.746
 Endocrine Disorders..............................
Liver Transplant Status/Complications.............      33.090      32.913      32.794      32.834        32.845
End-Stage Liver Disease...........................      14.421      14.253      14.144      14.137        14.138
Cirrhosis of Liver................................       5.357       5.183       5.063       5.006         4.989
Chronic Hepatitis.................................       0.950       0.790       0.664       0.562         0.533
Acute Liver Failure/Disease, Including Neonatal          7.729       7.577       7.462       7.433         7.425
 Hepatitis........................................
Intestine Transplant Status/Complications.........      33.090      32.913      32.794      32.834        32.845
Peritonitis/Gastrointestinal Perforation/               17.127      16.729      16.447      16.473        16.483
 Necrotizing Enterocolitis........................
Intestinal Obstruction............................       6.086       5.815       5.635       5.538         5.504
Chronic Pancreatitis..............................      13.304      12.986      12.777      12.788        12.793
Acute Pancreatitis/Other Pancreatic Disorders and        3.572       3.410       3.300       3.189         3.148
 Intestinal Malabsorption.........................
Inflammatory Bowel Disease........................       5.553       5.157       4.899       4.761         4.714
Necrotizing Fasciitis.............................       5.393       5.116       4.925       4.851         4.829
Bone/Joint/Muscle Infections/Necrosis.............       5.393       5.116       4.925       4.851         4.829
Rheumatoid Arthritis and Specified Autoimmune            3.062       2.821       2.650       2.510         2.465
 Disorders........................................
Systemic Lupus Erythematosus and Other Autoimmune        1.260       1.087       0.966       0.819         0.772
 Disorders........................................
Osteogenesis Imperfecta and Other Osteodystrophies       1.645       1.510       1.401       1.305         1.273
Congenital/Developmental Skeletal and Connective         1.645       1.510       1.401       1.305         1.273
 Tissue Disorders.................................
Cleft Lip/Cleft Palate............................       1.858       1.622       1.473       1.321         1.267
Hemophilia........................................      54.299      53.777      53.390      53.377        53.370
Myelodysplastic Syndromes and Myelofibrosis.......      24.525      24.330      24.187      24.183        24.182
Aplastic Anemia...................................      24.525      24.330      24.187      24.183        24.182
Acquired Hemolytic Anemia, Including Hemolytic           8.038       7.730       7.520       7.441         7.414
 Disease of Newborn...............................
Sickle Cell Anemia (Hb-SS)........................       8.038       7.730       7.520       7.441         7.414
Thalassemia Major.................................       8.038       7.730       7.520       7.441         7.414
Combined and Other Severe Immunodeficiencies......       6.604       6.386       6.246       6.182         6.157
Disorders of the Immune Mechanism.................       6.604       6.386       6.246       6.182         6.157
Coagulation Defects and Other Specified                  4.878       4.716       4.596       4.498         4.464
 Hematological Disorders..........................
Drug Psychosis....................................       4.456       4.181       4.016       3.931         3.905
Drug Dependence...................................       4.456       4.181       4.016       3.931         3.905
Schizophrenia.....................................       5.488       5.073       4.812       4.681         4.640
Major Depressive and Bipolar Disorders............       1.856       1.641       1.494       1.301         1.236
Reactive and Unspecified Psychosis, Delusional           1.856       1.641       1.494       1.301         1.236
 Disorders........................................
Personality Disorders.............................       0.948       0.810       0.694       0.491         0.417
Anorexia/Bulimia Nervosa..........................       2.504       2.293       2.144       2.047         2.014
Prader-Willi, Patau, Edwards, and Autosomal              3.328       3.078       2.933       2.900         2.887
 Deletion Syndromes...............................
Down Syndrome, Fragile X, Other Chromosomal              2.003       1.795       1.668       1.558         1.518
 Anomalies, and Congenital Malformation Syndromes.
Autistic Disorder.................................       1.824       1.614       1.470       1.278         1.213
Pervasive Developmental Disorders, Except Autistic       0.961       0.818       0.696       0.491         0.417
 Disorder.........................................
Traumatic Complete Lesion Cervical Spinal Cord....      15.854      15.746      15.662      15.736        15.762
Quadriplegia......................................      15.854      15.746      15.662      15.736        15.762
Traumatic Complete Lesion Dorsal Spinal Cord......      14.020      13.813      13.675      13.699        13.708
Paraplegia........................................      14.020      13.813      13.675      13.699        13.708
Spinal Cord Disorders/Injuries....................       5.531       5.265       5.099       5.009         4.980
Amyotrophic Lateral Sclerosis and Other Anterior        11.987      11.687      11.485      11.444        11.427
 Horn Cell Disease................................
Quadriplegic Cerebral Palsy.......................       4.773       4.463       4.269       4.294         4.304
Cerebral Palsy, Except Quadriplegic...............       1.400       1.172       1.037       0.931         0.896
Spina Bifida and Other Brain/Spinal/Nervous System       1.252       1.089       0.976       0.888         0.858
 Congenital Anomalies.............................
Myasthenia Gravis/Myoneural Disorders and Guillain-      8.606       8.390       8.246       8.178         8.151
 Barre Syndrome/Inflammatory and Toxic Neuropathy.
Muscular Dystrophy................................       3.364       3.138       2.992       2.896         2.864
Multiple Sclerosis................................       5.914       5.555       5.304       5.274         5.264
Parkinson's, Huntington's, and Spinocerebellar           3.364       3.138       2.992       2.896         2.864
 Disease, and Other Neurodegenerative Disorders...
Seizure Disorders and Convulsions.................       2.314       2.115       1.976       1.803         1.744
Hydrocephalus.....................................       6.470       6.320       6.219       6.207         6.203
Non-Traumatic Coma, and Brain Compression/Anoxic         9.166       8.977       8.853       8.819         8.804
 Damage...........................................
Respirator Dependence/Tracheostomy Status.........      40.570      40.448      40.351      40.512        40.563

[[Page 70689]]

 
Respiratory Arrest................................      14.474      14.256      14.114      14.125        14.126
Cardio-Respiratory Failure and Shock, Including         14.474      14.256      14.114      14.125        14.126
 Respiratory Distress Syndromes...................
Heart Assistive Device/Artificial Heart...........      33.090      32.913      32.794      32.834        32.845
Heart Transplant..................................      33.090      32.913      32.794      32.834        32.845
Congestive Heart Failure..........................       6.832       6.704       6.609       6.562         6.545
Acute Myocardial Infarction.......................       4.876       4.783       4.725       4.727         4.734
Unstable Angina and Other Acute Ischemic Heart           4.876       4.783       4.725       4.727         4.734
 Disease..........................................
Heart Infection/Inflammation, Except Rheumatic....      16.293      16.130      16.019      16.019        16.020
Hypoplastic Left Heart Syndrome and Other Severe         7.938       7.710       7.527       7.384         7.334
 Congenital Heart Disorders.......................
Major Congenital Heart/Circulatory Disorders......       2.264       2.133       2.003       1.855         1.810
Atrial and Ventricular Septal Defects, Patent            1.312       1.203       1.088       0.961         0.926
 Ductus Arteriosus, and Other Congenital Heart/
 Circulatory Disorders............................
Specified Heart Arrhythmias.......................       5.180       4.968       4.808       4.726         4.699
Intracranial Hemorrhage...........................      20.007      19.725      19.533      19.542        19.545
Ischemic or Unspecified Stroke....................       7.836       7.690       7.592       7.643         7.657
Cerebral Aneurysm and Arteriovenous Malformation..       4.674       4.421       4.264       4.194         4.161
Hemiplegia/Hemiparesis............................       6.060       5.920       5.837       5.815         5.807
Monoplegia, Other Paralytic Syndromes.............       5.353       5.170       5.061       5.033         5.026
Atherosclerosis of the Extremities with Ulceration      10.802      10.595      10.455      10.343        10.292
 or Gangrene......................................
Vascular Disease with Complications...............      15.629      15.437      15.310      15.322        15.331
Pulmonary Embolism and Deep Vein Thrombosis.......      14.822      14.613      14.473      14.504        14.515
Lung Transplant Status/Complications..............      33.090      32.913      32.794      32.834        32.845
Cystic Fibrosis...................................      13.994      13.502      13.147      13.156        13.161
Chronic Obstructive Pulmonary Disease, Including         0.524       0.443       0.345       0.210         0.168
 Bronchiectasis...................................
Asthma............................................       0.524       0.443       0.345       0.210         0.168
Fibrosis of Lung and Other Lung Disorders.........       5.214       5.066       4.954       4.868         4.840
Aspiration and Specified Bacterial Pneumonias and        9.469       9.373       9.291       9.304         9.308
 Other Severe Lung Infections.....................
Kidney Transplant Status..........................      17.992      17.577      17.297      17.316        17.326
End Stage Renal Disease...........................      38.852      38.586      38.382      38.492        38.527
Chronic Kidney Disease, Stage 5...................      11.138      10.943      10.809      10.718        10.690
Chronic Kidney Disease, Severe (Stage 4)..........      11.138      10.943      10.809      10.718        10.690
Ectopic and Molar Pregnancy, Except with Renal           1.276       1.084       0.957       0.719         0.629
 Failure, Shock, or Embolism......................
Miscarriage with Complications....................       1.276       1.084       0.957       0.719         0.629
Miscarriage with No or Minor Complications........       1.276       1.084       0.957       0.719         0.629
Completed Pregnancy With Major Complications......       3.462       2.960       2.749       2.485         2.425
Completed Pregnancy With Complications............       3.462       2.960       2.749       2.485         2.425
Completed Pregnancy with No or Minor Complications       3.462       2.960       2.749       2.485         2.425
Chronic Ulcer of Skin, Except Pressure............       1.579       1.481       1.390       1.310         1.284
Hip Fractures and Pathological Vertebral or              6.169       5.861       5.643       5.527         5.491
 Humerus Fractures................................
Pathological Fractures, Except of Vertebrae, Hip,        2.058       1.921       1.798       1.635         1.582
 or Humerus.......................................
Stem Cell, Including Bone Marrow, Transplant            33.090      32.913      32.794      32.834        32.845
 Status/Complications.............................
Artificial Openings for Feeding or Elimination....      15.660      15.540      15.451      15.602        15.651
Amputation Status, Lower Limb/Amputation                10.245       9.973       9.802       9.701         9.658
 Complications....................................
----------------------------------------------------------------------------------------------------------------


                                 Table 4--Infant Risk Adjustment Models Factors
----------------------------------------------------------------------------------------------------------------
                       Group                         Platinum      Gold       Silver      Bronze    Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity Level 5 (Highest)...     410.348     408.872     407.691     407.693       407.703
Extremely Immature * Severity Level 4.............     218.224     216.730     215.551     215.509       215.506
Extremely Immature * Severity Level 3.............      62.449      61.375      60.541      60.202        60.106
Extremely Immature * Severity Level 2.............      62.449      61.375      60.541      60.202        60.106
Extremely Immature * Severity Level 1 (Lowest)....      62.449      61.375      60.541      60.202        60.106
Immature * Severity Level 5 (Highest).............     217.679     216.228     215.075     215.072       215.086
Immature * Severity Level 4.......................      93.597      92.104      90.918      90.899        90.906
Immature * Severity Level 3.......................      50.841      49.478      48.421      48.331        48.317
Immature * Severity Level 2.......................      33.561      32.279      31.304      31.068        31.006
Immature * Severity Level 1 (Lowest)..............      33.561      32.279      31.304      31.068        31.006
Premature/Multiples * Severity Level 5 (Highest)..     168.945     167.526     166.408     166.364       166.363
Premature/Multiples * Severity Level 4............      34.579      33.195      32.161      31.973        31.939
Premature/Multiples * Severity Level 3............      19.070      17.942      17.128      16.748        16.633
Premature/Multiples * Severity Level 2............      10.224       9.307       8.652       8.095         7.907
Premature/Multiples * Severity Level 1 (Lowest)...       6.921       6.234       5.664       5.018         4.810
Term * Severity Level 5 (Highest).................     144.955     143.654     142.633     142.485       142.440
Term * Severity Level 4...........................      19.307      18.234      17.478      17.000        16.862
Term * Severity Level 3...........................       6.881       6.181       5.640       4.964         4.724
Term * Severity Level 2...........................       4.010       3.481       3.021       2.286         2.029

[[Page 70690]]

 
Term * Severity Level 1 (Lowest)..................       1.718       1.442       1.026       0.349         0.176
Age1 * Severity Level 5 (Highest).................      63.225      62.492      61.921      61.814        61.786
Age1 * Severity Level 4...........................      10.493       9.956       9.554       9.291         9.218
Age1 * Severity Level 3...........................       3.645       3.281       2.973       2.642         2.549
Age1 * Severity Level 2...........................       2.286       2.001       1.735       1.383         1.281
Age1 * Severity Level 1 (Lowest)..................       0.623       0.518       0.334       0.161         0.125
Age 0 Male........................................       0.695       0.642       0.625       0.587         0.557
Age 1 Male........................................       0.147       0.125       0.117       0.089         0.077
----------------------------------------------------------------------------------------------------------------


     Table 5--HHS HCCS Included in Infant Model Maturity Categories
------------------------------------------------------------------------
      Maturity category                     HCC/description
------------------------------------------------------------------------
Extremely Immature...........  Extremely Immature Newborns, Birthweight
                                <500 Grams.
Extremely Immature...........  Extremely Immature Newborns, Including
                                Birthweight 500-749 Grams.
Extremely Immature...........  Extremely Immature Newborns, Including
                                Birthweight 750-999 Grams.
Immature.....................  Premature Newborns, Including Birthweight
                                1000-1499 Grams.
Immature.....................  Premature Newborns, Including Birthweight
                                1500-1999 Grams.
Premature/Multiples..........  Premature Newborns, Including Birthweight
                                2000-2499 Grams.
Premature/Multiples..........  Other Premature, Low Birthweight,
                                Malnourished, or Multiple Birth
                                Newborns.
Term.........................  Term or Post-Term Singleton Newborn,
                                Normal or High Birthweight.
Age 1........................  All age 1 infants.
------------------------------------------------------------------------


     Table 6--HHS HCCs Included in Infant Model Severity Categories
------------------------------------------------------------------------
      Severity category                           HCC
------------------------------------------------------------------------
Severity Level 5 (Highest)...  Metastatic Cancer.
Severity Level 5.............  Pancreas Transplant Status/Complications.
Severity Level 5.............  Liver Transplant Status/Complications.
Severity Level 5.............  End-Stage Liver Disease.
Severity Level 5.............  Intestine Transplant Status/
                                Complications.
Severity Level 5.............  Peritonitis/Gastrointestinal Perforation/
                                Necrotizing Enterocolitis.
Severity Level 5.............  Respirator Dependence/Tracheostomy
                                Status.
Severity Level 5.............  Heart Assistive Device/Artificial Heart.
Severity Level 5.............  Heart Transplant.
Severity Level 5.............  Congestive Heart Failure.
Severity Level 5.............  Hypoplastic Left Heart Syndrome and Other
                                Severe Congenital Heart Disorders.
Severity Level 5.............  Lung Transplant Status/Complications.
Severity Level 5.............  Kidney Transplant Status.
Severity Level 5.............  End Stage Renal Disease.
Severity Level 5.............  Stem Cell, Including Bone Marrow,
                                Transplant Status/Complications.
Severity Level 4.............  Septicemia, Sepsis, Systemic Inflammatory
                                Response Syndrome/Shock.
Severity Level 4.............  Lung, Brain, and Other Severe Cancers,
                                Including Pediatric Acute Lymphoid
                                Leukemia.
Severity Level 4.............  Mucopolysaccharidosis.
Severity Level 4.............  Major Congenital Anomalies of Diaphragm,
                                Abdominal Wall, and Esophagus, Age <2.
Severity Level 4.............  Myelodysplastic Syndromes and
                                Myelofibrosis.
Severity Level 4.............  Aplastic Anemia.
Severity Level 4.............  Combined and Other Severe
                                Immunodeficiencies.
Severity Level 4.............  Traumatic Complete Lesion Cervical Spinal
                                Cord.
Severity Level 4.............  Quadriplegia.
Severity Level 4.............  Amyotrophic Lateral Sclerosis and Other
                                Anterior Horn Cell Disease.
Severity Level 4.............  Quadriplegic Cerebral Palsy.
Severity Level 4.............  Myasthenia Gravis/Myoneural Disorders and
                                Guillain-Barre Syndrome/Inflammatory and
                                Toxic Neuropathy.
Severity Level 4.............  Non-Traumatic Coma, Brain Compression/
                                Anoxic Damage.
Severity Level 4.............  Respiratory Arrest.
Severity Level 4.............  Cardio-Respiratory Failure and Shock,
                                Including Respiratory Distress
                                Syndromes.
Severity Level 4.............  Acute Myocardial Infarction.
Severity Level 4.............  Heart Infection/Inflammation, Except
                                Rheumatic.
Severity Level 4.............  Major Congenital Heart/Circulatory
                                Disorders.
Severity Level 4.............  Intracranial Hemorrhage.
Severity Level 4.............  Ischemic or Unspecified Stroke.
Severity Level 4.............  Vascular Disease with Complications.
Severity Level 4.............  Pulmonary Embolism and Deep Vein
                                Thrombosis.
Severity Level 4.............  Aspiration and Specified Bacterial
                                Pneumonias and Other Severe Lung
                                Infections.
Severity Level 4.............  Chronic Kidney Disease, Stage 5.
Severity Level 4.............  Hip Fractures and Pathological Vertebral
                                or Humerus Fractures.
Severity Level 4.............  Artificial Openings for Feeding or
                                Elimination.
Severity Level 3.............  HIV/AIDS.
Severity Level 3.............  Central Nervous System Infections, Except
                                Viral Meningitis.

[[Page 70691]]

 
Severity Level 3.............  Opportunistic Infections.
Severity Level 3.............  Non-Hodgkin`s Lymphomas and Other Cancers
                                and Tumors.
Severity Level 3.............  Colorectal, Breast (Age <50), Kidney and
                                Other Cancers.
Severity Level 3.............  Breast (Age 50+), Prostate Cancer, Benign/
                                Uncertain Brain Tumors, and Other
                                Cancers and Tumors.
Severity Level 3.............  Lipidoses and Glycogenosis.
Severity Level 3.............  Adrenal, Pituitary, and Other Significant
                                Endocrine Disorders.
Severity Level 3.............  Acute Liver Failure/Disease, Including
                                Neonatal Hepatitis.
Severity Level 3.............  Intestinal Obstruction.
Severity Level 3.............  Necrotizing Fasciitis.
Severity Level 3.............  Bone/Joint/Muscle Infections/Necrosis.
Severity Level 3.............  Osteogenesis Imperfecta and Other
                                Osteodystrophies.
Severity Level 3.............  Cleft Lip/Cleft Palate.
Severity Level 3.............  Hemophilia.
Severity Level 3.............  Disorders of the Immune Mechanism.
Severity Level 3.............  Coagulation Defects and Other Specified
                                Hematological Disorders.
Severity Level 3.............  Prader-Willi, Patau, Edwards, and
                                Autosomal Deletion Syndromes.
Severity Level 3.............  Traumatic Complete Lesion Dorsal Spinal
                                Cord.
Severity Level 3.............  Paraplegia.
Severity Level 3.............  Spinal Cord Disorders/Injuries.
Severity Level 3.............  Cerebral Palsy, Except Quadriplegic.
Severity Level 3.............  Muscular Dystrophy.
Severity Level 3.............  Parkinson`s, Huntington`s, and
                                Spinocerebellar Disease, and Other
                                Neurodegenerative Disorders.
Severity Level 3.............  Hydrocephalus.
Severity Level 3.............  Unstable Angina and Other Acute Ischemic
                                Heart Disease.
Severity Level 3.............  Atrial and Ventricular Septal Defects,
                                Patent Ductus Arteriosus, and Other
                                Congenital Heart/Circulatory Disorders.
Severity Level 3.............  Specified Heart Arrhythmias.
Severity Level 3.............  Cerebral Aneurysm and Arteriovenous
                                Malformation.
Severity Level 3.............  Hemiplegia/Hemiparesis.
Severity Level 3.............  Cystic Fibrosis.
Severity Level 3.............  Fibrosis of Lung and Other Lung
                                Disorders.
Severity Level 3.............  Pathological Fractures, Except of
                                Vertebrae, Hip, or Humerus.
Severity Level 2.............  Viral or Unspecified Meningitis.
Severity Level 2.............  Thyroid, Melanoma, Neurofibromatosis, and
                                Other Cancers and Tumors.
Severity Level 2.............  Diabetes with Acute Complications.
Severity Level 2.............  Diabetes with Chronic Complications.
Severity Level 2.............  Diabetes without Complication.
Severity Level 2.............  Protein-Calorie Malnutrition.
Severity Level 2.............  Congenital Metabolic Disorders, Not
                                Elsewhere Classified.
Severity Level 2.............  Amyloidosis, Porphyria, and Other
                                Metabolic Disorders.
Severity Level 2.............  Cirrhosis of Liver.
Severity Level 2.............  Chronic Pancreatitis.
Severity Level 2.............  Inflammatory Bowel Disease.
Severity Level 2.............  Rheumatoid Arthritis and Specified
                                Autoimmune Disorders.
Severity Level 2.............  Systemic Lupus Erythematosus and Other
                                Autoimmune Disorders.
Severity Level 2.............  Congenital/Developmental Skeletal and
                                Connective Tissue Disorders.
Severity Level 2.............  Acquired Hemolytic Anemia, Including
                                Hemolytic Disease of Newborn.
Severity Level 2.............  Sickle Cell Anemia (Hb-SS).
Severity Level 2.............  Drug Psychosis.
Severity Level 2.............  Drug Dependence.
Severity Level 2.............  Down Syndrome, Fragile X, Other
                                Chromosomal Anomalies, and Congenital
                                Malformation Syndromes.
Severity Level 2.............  Spina Bifida and Other Brain/Spinal/
                                Nervous System Congenital Anomalies.
Severity Level 2.............  Seizure Disorders and Convulsions.
Severity Level 2.............  Monoplegia, Other Paralytic Syndromes.
Severity Level 2.............  Atherosclerosis of the Extremities with
                                Ulceration or Gangrene.
Severity Level 2.............  Chronic Obstructive Pulmonary Disease,
                                Including Bronchiectasis.
Severity Level 2.............  Chronic Ulcer of Skin, Except Pressure.
Severity Level 1 (Lowest)....  Chronic Hepatitis.
Severity Level 1.............  Acute Pancreatitis/Other Pancreatic
                                Disorders and Intestinal Malabsorption.
Severity Level 1.............  Thalassemia Major.
Severity Level 1.............  Autistic Disorder.
Severity Level 1.............  Pervasive Developmental Disorders, Except
                                Autistic Disorder.
Severity Level 1.............  Multiple Sclerosis.
Severity Level 1.............  Asthma.
Severity Level 1.............  Chronic Kidney Disease, Severe (Stage 4).
Severity Level 1.............  Amputation Status, Lower Limb/Amputation
                                Complications.
Severity Level 1.............  No Severity HCCs.
------------------------------------------------------------------------


[[Page 70692]]

e. Cost-Sharing Reductions Adjustments
    We propose to continue to include an adjustment for the receipt of 
cost-sharing reductions in the model, and propose to continue not to 
adjust for receipt of reinsurance payments in the model. We have 
updated the adjustments to the HHS risk adjustment models for 
individuals who receive cost-sharing reductions to be consistent with 
the cost-sharing reductions advance payment formula finalized in the 
2015 Payment Notice, for implementation in 2015 benefit year risk 
adjustment. We note that the silver plan variant and zero cost-sharing 
factors are unchanged from those finalized in the 2014 Payment Notice. 
The adjustment factors are set forth in Table 7. These adjustments are 
multiplied against the sum of the demographic, diagnosis, and 
interaction factors. We will continue to evaluate this adjustment as 
more data becomes available. We seek comment on this approach.

               Table 7--Cost-Sharing Reduction Adjustment
------------------------------------------------------------------------
                                                              Induced
         Household income                  Plan AV          utilization
                                                              factor
------------------------------------------------------------------------
                     Silver Plan Variant Recipients
------------------------------------------------------------------------
100-150% of FPL...................  Plan Variation 94%..            1.12
150-200% of FPL...................  Plan Variation 87%..            1.12
200-250% of FPL...................  Plan Variation 73%..            1.00
>250% of FPL......................  Standard Plan 70%...            1.00
------------------------------------------------------------------------
                      Zero Cost-Sharing Recipients
------------------------------------------------------------------------
<300% of FPL......................  Platinum (90%)......            1.00
<300% of FPL......................  Gold (80%)..........            1.07
<300% of FPL......................  Silver (70%)........            1.12
<300% of FPL......................  Bronze (60%)........            1.15
------------------------------------------------------------------------
                     Limited Cost-Sharing Recipients
------------------------------------------------------------------------
>300% of FPL......................  Platinum (90%)......            1.00
>300% of FPL......................  Gold (80%)..........            1.07
>300% of FPL......................  Silver (70%)........            1.12
>300% of FPL......................  Bronze (60%)........            1.15
------------------------------------------------------------------------

f. Model Performance Statistics
    To evaluate model performance, we examined its R-squared and 
predictive ratios. The R-squared statistic, which calculates the 
percentage of individual variation explained by a model, measures the 
predictive accuracy of the model overall. The predictive ratios measure 
the predictive accuracy of a model for different validation groups or 
subpopulations. The predictive ratio for each of the HHS risk 
adjustment models is the ratio of the weighted mean predicted plan 
liability for the model sample population to the weighted mean actual 
plan liability for the model sample population. The predictive ratio 
represents how well the model does on average at predicting plan 
liability for that subpopulation. A subpopulation that is predicted 
perfectly would have a predictive ratio of 1.0. For each of the HHS 
risk adjustment models, the R-squared statistic and the predictive 
ratio are in the range of published estimates for concurrent risk 
adjustment models.\8\ Because we are proposing to blend the 
coefficients from separately solved models based on MarketScan 2010, 
2011 and 2012 data, we are publishing the R-squared statistic for each 
model and year separately to verify their statistical validity. The R-
squared statistic for each model is shown in Table 8.
---------------------------------------------------------------------------

    \8\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis of 
Claims-Based Tools for Health Risk Assessment.'' Society of 
Actuaries. April 2007.

                           TABLE 8--R-Squared Statistic for HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
                                                                                R-squared statistic
----------------------------------------------------------------------------------------------------------------
                      Risk adjustment model                            2010            2011            2012
----------------------------------------------------------------------------------------------------------------
Platinum Adult..................................................          0.3619          0.3684          0.3937
Platinum Child..................................................          0.3030          0.2835          0.2856
Platinum Infant.................................................          0.2892          0.3371          0.2845
Gold Adult......................................................          0.3572          0.3636          0.3896
Gold Child......................................................          0.2985          0.2786          0.2805
Gold Infant.....................................................          0.2871          0.3351          0.2821
Silver Adult....................................................          0.3537          0.3602          0.3865
Silver Child....................................................          0.2949          0.2749          0.2767
Silver Infant...................................................          0.2858          0.3339          0.2807
Bronze Adult....................................................          0.3519          0.3582          0.3842
Bronze Child....................................................          0.2919          0.2721          0.2737
Bronze Infant...................................................          0.2859          0.3341          0.2808
Catastrophic Adult..............................................          0.3511          0.3574          0.3833

[[Page 70693]]

 
Catastrophic Child..............................................          0.2907          0.2710          0.2726
Catastrophic Infant.............................................          0.2859          0.3340          0.2808
----------------------------------------------------------------------------------------------------------------

g. Overview of the Payment Transfer Formula
    We do not propose to alter our payment transfer methodology. Plan 
average risk scores would be calculated as the member month-weighted 
average of individual enrollee risk scores. We defined the calculation 
of plan average actuarial risk and the calculation of payments and 
charges in the Premium Stabilization Rule. In the 2014 Payment Notice, 
we combined those concepts into a risk adjustment payment transfer 
formula. Risk adjustment transfers (payments and charges) would be 
calculated following the completion of issuer risk adjustment data 
reporting. The payment transfer formula includes a set of cost 
adjustment terms that require transfers to be calculated at the 
geographic rating area level for each plan (that is, HHS would 
calculate two separate transfer amounts for a plan that operates in two 
rating areas).
    The payment transfer formula is designed to provide a per member 
per month (PMPM) transfer amount. The PMPM transfer amount derived from 
the payment transfer formula would be multiplied by each plan's total 
member months for the benefit year to determine the total payment due 
or charge owed by the issuer for that plan in a rating area.
(1) Overview of the Payment Transfer Formula
    Though we do not propose to change the payment transfer formula 
from what was finalized in the 2014 Payment Notice (78 FR 15430-15434), 
we believe it would be useful to republish the formula in its entirety, 
since we are proposing to recalibrate the HHS risk adjustment model. 
Transfers (payments and charges) will be calculated as the difference 
between the plan premium estimate reflecting risk selection and the 
plan premium estimate not reflecting risk selection. As finalized in 
the 2014 Payment Notice, the HHS risk adjustment payment transfer 
formula is:

[GRAPHIC] [TIFF OMITTED] TP26NO14.001

Where:

PS = State average premium;
PLRSi = plan i's plan liability risk score;
AVi = plan i's metal level AV;
ARFi = allowable rating factor;
IDFi = plan i's induced demand factor;
GCFi = plan i's geographic cost factor;
si = plan i's share of State enrollment;

and the denominator is summed across all plans in the risk pool in 
the market in the State.

    The difference between the two premium estimates in the payment 
transfer formula determines whether a plan pays a risk transfer charge 
or receives a risk transfer payment. Note that the value of the plan 
average risk score by itself does not determine whether a plan would be 
assessed a charge or receive a payment--even if the risk score is 
greater than 1.0, it is possible that the plan would be assessed a 
charge if the premium compensation that the plan may receive through 
its rating practices (as measured through the allowable rating factor) 
exceeds the plan's predicted liability associated with risk selection. 
Risk adjustment transfers are calculated at the risk pool level and 
catastrophic plans are treated as a separate risk pool for purposes of 
risk adjustment.
h. HHS Risk Adjustment Methodology Considerations
    In the 2014 Payment Notice, we finalized the methodology that HHS 
will use when operating a risk adjustment program on behalf of a State. 
In the second Program Integrity Rule (78 FR 65046), we clarified the 
modification to the transfer formula to accommodate community rated 
States that utilize family tiering rating factors. We are further 
clarifying this formula to ensure that the allowable rating factor 
(ARF) is appropriately applied in the transfer formula in community 
rated States for 2014 risk adjustment. In the second Program Integrity 
rule, we stated that the ARF formula should be modified so that the 
numerator is a summation over all subscribers of the product of the 
family tiering factor and the subscriber member months, and the 
denominator the sum of billable member months. However, we do not 
believe the formula accurately reflects that description, as it does 
not distinguish between subscriber months (months attributed to the 
sole subscriber) and billable member months (months attributed to all 
allowable members of the family factored into the community rating). 
The calculation of ARF for family tiering States that was published in 
the second Program Integrity rule that would be calculated at the level 
of the subscriber, was as follows:

[GRAPHIC] [TIFF OMITTED] TP26NO14.002

Where:

ARFs is the rating factor for the subscriber(s) (based on 
family size/composition), and Ms is the number of billed 
person-months that are counted in determining the premium(s) for the 
subscriber(s).

    While the preamble description in the second Program Integrity rule 
is correct, as we noted, the formula itself is incorrect in that it 
does not distinguish between billable member months and subscriber 
months by using the same variable for both. Therefore, we are proposing 
a technical change to the ARF calculation for family tiering States, as 
follows:

[GRAPHIC] [TIFF OMITTED] TP26NO14.003

Where:

ARFi is the allowable rating factor for plan i,
ARFs is the allowable rating factor--also known as the 
family rating tier--for subscriber (family) s in plan i,
MSs is the number of subscriber months for subscriber s, 
and
MBs is the number of billable member months for 
subscriber (family) s.


[[Page 70694]]


    The numerator is summed over the product of the allowable rating 
factor and the number of subscriber months (that is, months of family 
subscription), and the denominator is the sum over all billable 
members. Each family unit covered under a single contract is considered 
a single ``subscriber.'' Therefore, a family of four that purchases 
coverage for a period from January through December will accumulate 12 
subscriber months (MSs), although coverage is being provided 
for 48 member months (both billable and non-billable). Billable members 
are individuals who are counted for purposes of placing the subscriber 
in a family tier. For example, in a community rated State that rates 
based on two adults and one or more children with one full year of 
enrollment, the family of four would have 36 billable member months 
(MBs), (12 billable member months for the subscriber, 12 
billable member months for the second adult, and 12 billable months for 
the first child). We seek comment on this proposed clarification.
3. 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, 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 benefit year. In the 2015 Payment Notice, we established the 
reinsurance payment parameters and uniform reinsurance contribution 
rate for the 2015 benefit year and certain oversight provisions related 
to the operation of the reinsurance program.
a. Common Ownership Clarification
    The definition of a ``contributing entity'' at Sec.  153.20 
provides that for the 2015 and 2016 benefit years, a contributing 
entity is (i) a health insurance issuer or (ii) a self-insured group 
health plan, including a group health plan that is partially self-
insured and partially insured, where the health insurance coverage does 
not constitute major medical coverage, that uses a third party 
administrator (TPA) in connection with claims processing or 
adjudication, including the management of internal appeals, or plan 
enrollment for services other than for pharmacy benefits or excepted 
benefits within the meaning of section 2791(c) of the PHS Act. A self-
insured group health plan will not be deemed to use a TPA for this 
purpose if it uses an unrelated third party: (a) To obtain a provider 
network and related claims repricing services; or (b) for up to 5 
percent of claims processing or adjudication or plan enrollment, based 
on either the number of transactions processed by the third party, or 
the value of the claims processing and adjudication and plan enrollment 
services provided by the third party.
    The definition of a ``contributing entity'' does not include 
qualifying self-administered, self-insured group health plans for the 
purpose of the requirement to make reinsurance contributions for the 
2015 and 2016 benefit years. In the preamble to the 2015 Payment 
Notice, we indicated that we consider a TPA to be, with respect to a 
self-insured group health plan, an entity that is not under common 
ownership or control with the self-insured group health plan or its 
plan sponsor that provides the specified core administrative services 
(79 FR 13773).
    We have received a number of inquiries seeking clarification on how 
to determine common ownership or control for purposes of the definition 
of a ``contributing entity'' in Sec.  153.20. In response, we propose 
to clarify that principles similar to the controlled group rules of 
section 414(b) and (c) of the Code should be used to determine whether 
the TPA is under common ownership or control with the self-insured 
group health plan or the plan sponsor.
    We believe that applying principles similar to the controlled group 
rules under the Code are appropriate for use in determining whether a 
TPA is under common ownership or control with the self-insured group 
health plan or plan sponsor for purposes of the definition of a 
``contributing entity'' under Sec.  153.20 because they are familiar to 
many stakeholders. We also note that similar common ownership or 
control rules apply for other purposes under the Affordable Care Act, 
such as the shared responsibility payment for applicable large 
employers that do not offer full-time employees and dependents the 
opportunity to enroll in minimum essential coverage. See, for example, 
section 4980H(c)(2)(C)(i) of the Code, which states that all persons 
treated as a single employer under section 414 are to be treated as one 
employer. Additionally, section 9010(c)(3) of the Affordable Act 
applies similar controlled group rules for purposes of the annual fee 
on health insurance issuers.
    We seek comment on this proposal and on alternative definitions 
that are based on existing standards that would be familiar to 
stakeholders for determining whether a TPA is under common ownership or 
control with the self-insured group health plan or its sponsor for 
purposes of the definition of ``contributing entity'' at Sec.  153.20.
b. Self-Insured Expatriate Plans (Sec.  153.400(a)(1)(iii))
    Section 1341(b)(3)(B) of the Affordable Care Act and the 
implementing regulations at Sec.  153.400(a)(1) require contributing 
entities to make reinsurance contributions for major medical coverage 
that is considered to be part of a commercial book of business. In the 
2014 Payment Notice (78 FR 15457), we stated that we interpret this 
language to exclude expatriate health coverage, as defined by the 
Secretary, and we codified this approach in regulatory text at Sec.  
153.400(a)(1)(iii). In the March 8, 2013, FAQs about the Affordable 
Care Act Implementation Part XIII,\9\ an expatriate health plan is 
defined as an insured group health plan with respect to which 
enrollment is limited to primary insured who reside outside of their 
home country for at least 6 months of the plan year and any covered 
dependents, and its associated group health insurance coverage. 
Therefore, under our current regulation, self-insured expatriate plans 
that would otherwise meet the conditions outlined in the March 2013 FAQ 
are required to make reinsurance contributions if these plans provide 
major medical coverage, unless another exemption in Sec.  153.400(a) 
applies, because the definition in the FAQ applies only to insured 
expatriate plans.
---------------------------------------------------------------------------

    \9\ Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs13.html.
---------------------------------------------------------------------------

    We propose to amend Sec.  153.400(a)(1)(iii), which currently 
exempts expatriate health coverage, as defined by the Secretary, from 
reinsurance contributions, so that it also exempts, beginning for the 
2015 benefit year, any self-insured group health plan with respect to 
which enrollment is limited to participants who reside outside of their 
home country for at least 6 months of the plan year, and any covered 
dependents. This approach and definition, applicable solely to this 
program, is consistent with FAQs discussed above for insured expatriate 
health plans and aligns the definition for this time-limited program. 
We seek comment on this proposed amendment.

[[Page 70695]]

c. Determination of Debt (Sec.  153.400(c))
    Consistent with the determination of debt provision set forth in 
Sec.  156.1215(c), we propose to clarify in a new Sec.  153.400(c) that 
any amount owed to the Federal government by a self-insured group 
health plan (including a group health plan that is partially self-
insured and partially insured, where the health insurance coverage does 
not constitute major medical coverage), including reinsurance 
contributions that are not remitted in full in a timely manner, would 
be a determination of a debt. We seek comment on this proposal.
d. Reinsurance Contribution Submission Process
    On May 22, 2014, we released an FAQ about the reinsurance 
contribution submission process.\10\ As detailed in this FAQ, we have 
implemented a streamlined process for the collection of reinsurance 
contributions. A contributing entity, or a TPA or administrative 
services-only (ASO) contractor on behalf of the contributing entity, 
will complete all required steps for the reinsurance contribution 
submission process on www.pay.gov (Pay.gov). The ``ACA Transitional 
Reinsurance Program Annual Enrollment and Contributions Submission 
Form'' available on Pay.gov must be completed and submitted by a 
contributing entity or a TPA or ASO contractor on its behalf no later 
than November 15, 2014, 2015, or 2016, as applicable, under Sec.  
153.405(b). The form includes basic company and contact information, 
and the annual enrollment count for the applicable benefit year. The 
form will auto-calculate the contribution amounts owed.
---------------------------------------------------------------------------

    \10\ Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Reinsurance-contributions-process-FAQ-5-22-14.pdf.
---------------------------------------------------------------------------

    We propose to amend Sec.  153.405(b), requiring a contributing 
entity to submit its annual enrollment count of the number of covered 
lives of reinsurance contribution enrollees for the applicable benefit 
year to HHS no later than November 15 of benefit year 2014, 2015, or 
2016. When November 15 does not fall on a business day, we propose that 
a contributing entity submit its annual enrollment count of the number 
of covered lives of reinsurance contribution enrollees for the 
applicable benefit year to HHS no later than November 15, 2014, 2015, 
or 2016, or if such date is not a business day, the next business day. 
Similarly, because November 15, 2015 and January 15, 2017 do not fall 
on a business day, we propose in Sec.  153.405(c)(2) that a 
contributing entity must remit reinsurance contributions to HHS no 
later than January 15, 2015, 2016, or 2017, as applicable, or, if such 
date is not a business day, the next applicable business day, if making 
a combined contribution or the first payment of the bifurcated 
contribution; and no later than November 15, 2015, 2016, or 2017, as 
applicable, or, if such date is not a business day, the next applicable 
business day, if making the second payment of the bifurcated 
contribution.
    Although we stated in the 2015 Payment Notice (79 FR 13776) that, 
for operational reasons, HHS would not permit contributing entities to 
elect to make the entire benefit year's reinsurance contribution by 
January 15, 2015, 2016, or 2017, as applicable, we have resolved those 
operational difficulties, and will offer contributing entities the 
option to pay: (1) the entire 2014, 2015, or 2016 benefit year 
contribution in one payment no later than January 15, 2015, 2016, or 
2017, as applicable (or, if such date is not a business day, the next 
applicable business day), reflecting the entire uniform contribution 
rate applicable to each benefit year (that is, $63 per covered life for 
2014, $44 per covered life for 2015, and a proposed $27 per covered 
life for 2016); or (2) in two separate payments for the 2014, 2015, or 
2016 benefit years, with the first remittance due by January 15, 2015, 
2016, and 2017, as applicable (or, if such date is not a business day, 
the next applicable business day), reflecting the first payment of the 
bifurcated contribution (that is, $52.50 per covered life for 2014, 
$33.00 per covered life for 2015, and a proposed $21.60 per covered 
life for 2016); and the second remittance due by November 15, 2015, 
2016, or 2017, as applicable (or, if such date is not a business day, 
the next applicable business day) reflecting the second payment of the 
bifurcated contribution (that is, $10.50 reinsurance fee per covered 
life for 2014, $11.00 per covered life for 2015, and a proposed $5.40 
per covered life for 2016).
    Under Sec.  153.405(c)(1), HHS must notify the contributing entity 
of the reinsurance contribution amount allocated to reinsurance 
payments and administrative expenses to be paid for the applicable 
benefit year following submission of the annual enrollment count. We 
clarify that this notification will occur when the contributing entity 
enters the gross annual enrollment count into the Pay.gov form and the 
form auto-calculates the contribution amount owed. No separate 
notification or invoice will be sent to a contributing entity, unless a 
discrepancy in data or payment has been identified after the form is 
submitted. In addition, we propose to delete Sec.  153.405(c)(2), to be 
consistent with HHS permitting flexibility for a contributing entity 
(or the TPA or ASO contractor on its behalf) to remit the entire 
contribution in one payment, rather than requiring a bifurcated 
payment. Notification of the reinsurance contribution amount related to 
the allocation for reinsurance payments, administrative expenses, and 
payments to the U.S. Treasury for the applicable benefit year will also 
be made through the automatic calculation of this amount when a 
contributing entity (or the TPA or ASO contractor on its behalf) 
completes the reinsurance contribution submission process and submits 
the Form through Pay.gov.
    We also propose to amend and redesignate Sec.  153.405(c)(3) to 
(c)(2) to clarify that a contributing entity must remit its 
contribution payment for the applicable benefit year to occur no later 
than January 15, 2015, 2016, or 2017, as applicable (or, if such date 
is not a business day, the next applicable business day) if making a 
combined payment or the first payment of the bifurcated payment, and no 
later than November 15, 2015, 2016, or 2017, as applicable (or, if such 
date is not a business day, the next applicable business day) if making 
the second payment of the bifurcated payment. However, we note that the 
form must be completed and the reinsurance contribution payment(s) must 
be scheduled no later than November 15, 2014, 2015, or 2016, as 
applicable, to successfully comply with the deadline set forth in Sec.  
153.405(b) and complete the reinsurance contribution submission process 
through Pay.gov. The reinsurance contribution payments must be 
scheduled by this deadline regardless of whether the contributing 
entity (or the TPA or ASO contractor on its behalf) is remitting a 
single combined payment or two payments under the bifurcated schedule.
    We note that under certain circumstances, if a contributing entity 
elects to follow the bifurcated schedule, then the contributing entity 
would be required to submit two separate forms through Pay.gov. 
However, in this circumstance, the annual enrollment count reported on 
both forms must be the same. This is consistent with Sec.  153.405(b) 
and previous guidance, which provide that no later than November 15 of 
benefit year 2014, 2015, or 2016, as applicable, a contributing entity 
must submit an annual enrollment count of the number of covered lives 
of reinsurance

[[Page 70696]]

contribution enrollees one time for the applicable benefit year to HHS.
    Finally, we propose to amend Sec.  153.405(g)(4)(1)(i) and (ii), 
which require a plan sponsor who maintains multiple group health plans 
to report to HHS the average number of covered lives calculated, the 
counting method used, and the names of the multiple plans being treated 
as a single group health plan as determined by the plan sponsor. A plan 
sponsor will continue to be required to determine this information, but 
will only need to report to HHS the average number of covered lives 
calculated and the other data elements required through the Pay.gov 
reinsurance contribution submission process. Under Sec.  153.405(h), 
plan sponsors should retain this additional information (that is, the 
counting method used and the names of the multiple plans being treated 
as a single group health plan), as this information may be requested to 
assess the plan sponsor's compliance with the reinsurance contribution 
requirements, if necessary. We seek comment on these proposals.
e. Consistency in Counting Methods for Health Insurance Issuers (Sec.  
153.405(d))
    As noted in the 2014 Payment Notice (78 FR15462), the counting 
methods for the transitional reinsurance program are designed to align 
with the methods permitted for purposes of the fee to fund the Patient-
Centered Outcomes Research Trust Fund (PCORTF). The PCORTF Final Rule 
(77 FR 72729) requires consistency in the use of counting methods for 
calculating covered lives for the duration of the year. In response to 
stakeholder questions, to promote administrative efficiencies, and to 
minimize the potential for strategic reporting of enrollment counts for 
reinsurance purposes, we propose to amend Sec.  153.405(d) to similarly 
require a contributing entity that is a health insurance issuer to use 
the same counting method to calculate its annual enrollment count of 
covered lives of reinsurance contribution enrollees in a State 
(including both the individual and group markets) for a benefit year 
even if the fully insured major medical plans for which reinsurance 
contributions are required enroll different covered lives. If a health 
insurance issuer has multiple major medical plans covering different 
lives in different States, the issuer may use different counting 
methods for all major medical plans in each State (including both the 
individual and group markets). We note that this consistency 
requirement, if finalized as proposed, would be required for the 2015 
and 2016 benefit years. As noted in an FAQ issued on October 21, 
2014,\11\ we also encourage this approach for the 2014 benefit year. 
This proposal would not prevent an issuer from using different counting 
methods for different benefit years. We do not propose a similar 
requirement for self-insured group health plans because we believe in 
many instances, a plan sponsor's multiple group health plans may be 
administered by different entities, making uniformity of counting 
method potentially more difficult. We seek comment on this proposal, 
including with respect to whether such uniformity of counting method is 
more difficult for self-insured group health plans.
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    \11\ Available at: https://www.regtap.info/, FAQ #6037.
---------------------------------------------------------------------------

f. Snapshot Count and Snapshot Factor Counting Methods (Sec. Sec.  
153.405(d)(2) and (e)(2))
    Under Sec.  153.400(a)(1), reinsurance contributions are generally 
required for major medical coverage that is considered to be part of a 
commercial book of business, but contributions are not required to be 
paid more than once with respect to the same covered life. Reinsurance 
contributions are generally calculated based on the number of covered 
lives covered by a plan or coverage that provides major medical 
coverage. The reinsurance contribution required from a contributing 
entity is calculated by multiplying the number of covered lives 
(determined under a permitted counting method set forth in Sec.  
153.405(d) through Sec.  153.405(g)) during the applicable calendar 
year for all applicable plans and coverage of the contributing entity 
by the applicable contribution rate for the respective benefit year.
    We seek to clarify how two of the counting methods set forth in 
Sec. Sec.  153.405(d)(2) and (e)(2) are to be used in those situations 
when a plan terminates or is established in the middle of a quarter to 
effectuate the principle that contributions are required to be paid 
once with respect to the same covered life. Under the snapshot count 
method, described at Sec.  153.405(d)(2), to determine the number of 
covered lives for the purposes of reinsurance contributions, the issuer 
or self-insured group health plan must add the total number of lives 
covered on any date (or more dates, if an equal number of dates are 
used for each quarter) during the same corresponding month in each of 
the first 3 quarters of the benefit year, and divide that total by the 
number of dates on which a count was made. Under the snapshot factor 
method, described at Sec.  153.405(e)(2), to determine the number of 
covered lives for the purposes of reinsurance contributions, the self-
insured group health plan must add the total number of lives covered on 
any date (or more dates, if an equal number of dates are used for each 
quarter) during the same corresponding month in each of the first 3 
quarters of the benefit year (provided that the date used for the 
second and third quarters must fall within the same week of the quarter 
as the corresponding date used for the first quarter), and divide that 
total by the number of dates on which a count was made, except that the 
number of lives covered on a date is calculated by adding the number of 
participants with self-only coverage on the date to the product of the 
number of participants with coverage other than self-only coverage on 
the date and a factor of 2.35. For each of these counting methods, the 
same months must be used for each quarter (for example, January, April, 
July), and the date used for the second and third quarter must fall 
within the same week of the quarter as the corresponding date used for 
the first quarter.
    We understand that a health insurance plan or coverage may be 
established, terminated, or change funding mechanisms (that is, from 
fully insured to self-insured or self-insured to fully insured), in the 
middle of a quarter. In these circumstances, it is possible that the 
new plan or coverage would not have covered lives enrolled in the plan 
or coverage for the entire quarter. If this occurs, a contributing 
entity could, due to its selection of dates, be required to pay an 
amount significantly greater or lesser than the amount that would be 
due based on its average count of covered lives over the course of the 
9-month counting period. To avoid this result, we clarify that, if the 
plan or coverage in question had enrollees on any day during a quarter 
and if the contributing entity elects to (and is permitted to) use 
either the snapshot count or snapshot factor method, it must choose a 
set of counting dates for the 9-month counting period such that the 
plan or coverage has enrollees on each of the dates, if possible. 
However, the enrollment count for a date during a quarter in which the 
plan or coverage was in existence for only part of the quarter can be 
reduced by a factor reflecting the amount of time during the quarter 
for which the plan or coverage was not in existence. This approach is 
intended to accurately capture the amount of time during the quarter 
for which major medical coverage that is part of a commercial book of 
business and subject to

[[Page 70697]]

reinsurance contributions was provided to enrollees, while not 
requiring contributions to be paid more than once with respect to the 
same covered life. For example, a contributing entity that has a plan 
that terminates on August 31st (that is, 62 days into the third 
quarter) would not be permitted to use September 1st as the date for 
the third quarter under the snapshot count or snapshot factor methods 
because this would not properly reflect the number of covered lives of 
reinsurance contribution enrollees under the plan in the third quarter 
of the benefit year. However, it would be entitled to reduce its count 
of covered lives during that quarter by 30/92, the proportion of the 
quarter during which the plan had no enrollment. This reduction factor 
would only be applicable for the snapshot count and snapshot factor 
methods set forth in Sec. Sec.  153.405(d)(2) and (e)(2), respectively, 
as all of the other permitted counting methods automatically account 
for partial year enrollment.
g. Uniform Reinsurance Contribution Rate for 2016
    Section 153.220(c) provides that HHS is to publish in the annual 
HHS notice of benefit and payment parameters the uniform reinsurance 
contribution rate for the upcoming benefit year. Section 
1341(b)(3)(B)(iii) of the Affordable Care Act specifies that $10 
billion for reinsurance contributions are to be collected from 
contributing entities in 2014 (the reinsurance payment pool), $6 
billion in 2015, and $4 billion in 2016. Additionally, sections 
1341(b)(3)(B)(iv) and 1341(b)(4) of the Affordable Care Act direct that 
$2 billion in funds are to be collected for contribution to the U.S. 
Treasury in 2014, $2 billion in 2015, and $1 billion in 2016. Finally, 
section 1341(b)(3)(B)(ii) of the Affordable Care Act allows for the 
collection of additional amounts for administrative expenses. Taken 
together, these three components make up the total dollar amount to be 
collected from contributing entities for each of the 2014, 2015, and 
2016 benefit years under the uniform reinsurance contribution rate.
    As discussed in the 2014 and 2015 Payment Notices, each year, the 
uniform reinsurance contribution rate will be calculated by dividing 
the sum of the three amounts (the reinsurance payment pool, the U.S. 
Treasury contribution, and administrative costs) by the estimated 
number of enrollees in plans that must make reinsurance contributions:
[GRAPHIC] [TIFF OMITTED] TP26NO14.004

    As discussed in greater detail below, we are proposing to collect 
$32 million for administrative expenses for the 2016 benefit year. 
Therefore, the total amount to be collected would be approximately 
$5.032 billion. Our estimate of the number of enrollees in plans that 
must make reinsurance contributions yields an annual per capita 
contribution rate of $27 for the 2016 benefit year.
(1) Allocation of Uniform Reinsurance Contribution Rate
    Section 153.220(c) provides that HHS is to establish in the annual 
HHS notice of benefit and payment parameters for the applicable benefit 
year the proportion of contributions collected under the uniform 
reinsurance contribution rate to be allocated to reinsurance payments, 
payments to the U.S. Treasury, and administrative expenses. In the 2014 
and 2015 Payment Notices, we stated that reinsurance contributions 
collected for the 2014 and 2015 benefit years would be allocated pro 
rata to the reinsurance payment pool, administrative expenses, and the 
U.S. Treasury, up to $12.02 billion for 2014 and up to $8.025 billion 
for 2015. However, we amended this approach in the 2015 Market 
Standards Rule,\12\ such that, if 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 the U.S. 
Treasury and administrative expenses, on a pro rata basis. We propose 
to follow a similar approach for the 2016 benefit year, such that if 
reinsurance contributions fall short of our estimates, contributions 
collected will first be allocated to the reinsurance payment pool, with 
any remaining allocated on a pro rata basis to administrative expenses 
and payments to the U.S. Treasury. We note that consistent with the 
statement in the 2015 Payment Notice (79 FR 13777), if we collect more 
than the statutorily required amount in the 2016 benefit year we 
propose to use any excess contributions for reinsurance payments for 
the current benefit year by increasing the coinsurance rate for the 
2016 benefit year up to 100 percent before rolling over any remaining 
funds to the next year. Additionally, we anticipate expending all 
reinsurance contributions collected for the 2016 benefit year for 2016 
requests for reinsurance payments rather than reserving any of the 
excess funds rolled over or collected for the 2016 benefit year in 
future years. However, because allowing excess funds to roll over for 
the 2017 benefit year could help stabilize 2017 premiums, we seek 
comment on rolling over any excess funds to the 2017 benefit year as an 
alternative to this approach.
---------------------------------------------------------------------------

    \12\ 79 FR 20557-59.
---------------------------------------------------------------------------

(2) Administrative Expenses
    In the 2015 Payment Notice, we estimated that the Federal 
administrative expenses of operating the reinsurance program would be 
$25.4 million, based on our estimated contract and operational costs. 
We propose to use the same methodology to estimate the administrative 
expenses for the 2016 benefit year. These estimated costs would cover 
the costs related to contracts for developing the uniform reinsurance 
payment parameters and the uniform reinsurance contribution rate, 
collecting reinsurance contributions, making reinsurance payments, and 
conducting account management, data collection, program integrity and 
audit functions, operational and fraud analytics, training for entities 
involved in the reinsurance program, and general operational support. 
To calculate our proposed reinsurance administrative expenses for 2016, 
we divided HHS's projected total costs for administering the 
reinsurance programs on behalf of States by the expected number of 
covered lives for which reinsurance contributions are to be made for 
2016.
    We estimate this amount to be approximately $32 million for the 
2016 benefit year. This estimate increased for the 2016 benefit year 
due to increased

[[Page 70698]]

audit and data validation contract costs. We believe that this amount 
reflects the Federal government's significant economies of scale, which 
helps to decrease the costs associated with operating the reinsurance 
program. Based on our estimate of covered lives for which reinsurance 
contributions are to be made for 2016, we are proposing a uniform 
reinsurance contribution rate of $0.17 annually per capita for HHS 
administrative expenses. We provide details below on the methodology we 
used to develop the 2016 enrollment estimates.
    Similar to the allocation for 2015, for the 2016 benefit year, we 
allocated the administrative expenses equally between contribution and 
payment-related activities. Because we anticipate that our additional 
activities in the 2016 benefit year, including our program integrity 
and audit activities, will also be divided approximately equally 
between contribution and payment-related activities, we again propose 
to allocate the total administrative expenses equally between these two 
functions. Therefore, as shown in Table 9, we expect to apportion the 
annual per capita amount of $0.17 of administrative expenses as 
follows: (a) $0.085 of the total amount collected per capita for 
administrative expenses for the collection of contributions from 
contributing entities; and (b) $0.085 of the total amount collected per 
capita for administrative expenses for reinsurance payment activities, 
supporting the administration of payments to issuers of reinsurance-
eligible plans.

              Table 9--Breakdown of Administrative Expenses
                          [Annual, per capita]
------------------------------------------------------------------------
                                                             Estimated
                        Activities                            expenses
------------------------------------------------------------------------
Collecting reinsurance contributions from health                  $0.085
 insurance issuers and certain self-insured group health
 plans...................................................
Calculation and disbursement of reinsurance payments.....          0.085
                                                          --------------
    Total annual per capita expenses for HHS to perform            0.17
     all reinsurance functions...........................
------------------------------------------------------------------------

    If HHS operates the reinsurance program on behalf of a State, HHS 
would retain the annual per capita fee to fund HHS's performance of all 
reinsurance functions, which would be $0.17. If a State establishes its 
own reinsurance program, HHS would transfer $0.085 of the per capita 
administrative fee to the State for purposes of administrative expenses 
incurred in making reinsurance payments, and retain the remaining 
$0.085 to offset HHS's costs of collecting contributions. We note that 
the administrative expenses for reinsurance payments will be 
distributed to those States that operate their own reinsurance program 
in proportion to the State-by-State total requests for reinsurance 
payments made under the uniform reinsurance payment parameters.
h. Uniform Reinsurance Payment Parameters for 2016
    Our goal in setting the reinsurance payment parameters is to 
achieve the greatest impact on rate setting, and therefore premiums, 
through reductions in plan risk, while minimizing interference with the 
current commercial reinsurance market. Section 1341(b)(2)(B) of the 
Affordable Care Act directs the Secretary, in establishing standards 
for the transitional reinsurance program, to include a formula for 
determining the amount of reinsurance payments to be made to issuers 
for high-risk individuals that provides for the equitable allocation of 
funds. In the Premium Stabilization Rule, we provided that reinsurance 
payments to eligible issuers will be made for a portion of an 
enrollee's claims costs paid by the issuer (the coinsurance rate, meant 
to reimburse a proportion of claims while giving issuers an incentive 
to contain costs) that exceeds an attachment point (when reinsurance 
would begin), subject to a reinsurance cap (when the reinsurance 
program stops paying claims for a high-cost individual). The 
coinsurance rate, attachment point, and reinsurance cap together 
constitute the uniform reinsurance payment parameters.
    Given the smaller pool of reinsurance contributions to be collected 
for the 2016 benefit year, we are proposing that the uniform 
reinsurance payment parameters for the 2016 benefit year be established 
at an attachment point of $90,000, a reinsurance cap of $250,000, and a 
coinsurance rate of 50 percent. We estimate that these uniform 
reinsurance payment parameters will result in total requests for 
reinsurance payments of approximately $4 billion for the 2016 benefit 
year. We believe setting the coinsurance rate at 50 percent and 
increasing the attachment point allows for the reinsurance program to 
help pay for nearly the same group of high-cost enrollees as was the 
case for the 2014 and 2015 benefit years, while still encouraging 
issuers to contain costs. We believe that maintaining the reinsurance 
cap for the 2016 benefit year while ensuring that the coinsurance rate 
sufficiently compensates issuers for high-risk individuals will make it 
easier for issuers to estimate the effects of reinsurance. We believe 
that these uniform reinsurance payment parameters will support the 
reinsurance program's goals of promoting nationwide premium 
stabilization and market stability while providing issuers incentives 
to continue to effectively manage enrollee costs. We seek comment on 
this proposal.
    As discussed in the 2014 and 2015 Payment Notices, to assist with 
the development of the uniform reinsurance payment parameters and the 
premium adjustment percentage index, HHS developed the Affordable Care 
Act Health Insurance Model (ACAHIM). The ACAHIM generates a range of 
national and State-level outputs for 2016, using updated assumptions 
reflecting more recent data, but using the same methodology described 
in the 2014 and 2015 Payment Notices.\13\
---------------------------------------------------------------------------

    \13\ See the proposed 2014 Payment Notice (77 FR 73160) and the 
proposed 2015 Payment Notice (78 FR 72344) for more information on 
the ACAHIM methodology.
---------------------------------------------------------------------------

    Specifically, the ACAHIM uses the Health Intelligence Company, LLC 
(HIC) database from calendar year 2010, with the claims data trended to 
2016 to estimate total medical expenditures per enrollee by age, 
gender, and area of residence. The expenditure distributions are 
further adjusted to take into account plan benefit design, or ``metal'' 
level (that is, ``level of coverage,'' as defined in Sec.  156.20) and 
other characteristics of individual insurance coverage in an Exchange. 
To describe a State's coverage market, the ACAHIM computes the pattern 
of enrollment using the model's predicted number and composition of 
participants in a coverage market. These estimated

[[Page 70699]]

expenditure distributions were the basis for the uniform reinsurance 
payment parameters.
i. Uniform Reinsurance Payment Parameters for 2015
    In the 2015 Market Standards Rule,\14\ we stated that we intended 
to propose to lower the 2015 attachment point from $70,000 to $45,000 
for the 2015 benefit year. We believe that lowering the attachment 
point to $45,000 would allow the reinsurance program to make more 
payments for high-cost enrollees in individual market reinsurance-
eligible plans without increasing the contribution rate. We do not 
propose to adjust the 2015 coinsurance rate of 50 percent or 
reinsurance cap of $250,000. We seek comment on this proposal.
---------------------------------------------------------------------------

    \14\ 79 FR 30259.
---------------------------------------------------------------------------

j. Deducting Cost-Sharing Reduction Amounts From Reinsurance Payments
    We propose to modify the methodology finalized in the 2015 Payment 
Notice (79 FR 13780) regarding the deduction of cost-sharing reduction 
amounts from reinsurance payments. Under Sec.  156.410, if an 
individual is determined eligible to enroll in an individual market 
Exchange QHP and elects to do so, the QHP issuer must assign the 
individual to a standard plan or cost-sharing plan variation based on 
the enrollment and eligibility information submitted by the Exchange. 
Issuers of individual market Exchange QHPs will receive cost-sharing 
reduction payments for enrollees that have effectuated coverage in 
cost-sharing plan variations. To avoid double payment by the Federal 
government, we indicated in the 2014 Payment Notice (78 FR 15499) that 
the enrollee-level claims data submitted by an issuer of a reinsurance-
eligible plan should be net of cost-sharing reductions provided through 
a cost-sharing plan variation (which are reimbursed by the Federal 
government).
    In the 2015 Payment Notice (79 FR 13780), we explained the 
methodology HHS will use to deduct the amount of cost-sharing 
reductions paid on behalf of an enrollee enrolled in a QHP in an 
individual market through an Exchange. For each enrollee enrolled in a 
QHP plan variation,\15\ we will subtract from the QHP issuer's total 
plan paid amounts for the enrollee in a reinsurance-eligible plan the 
difference between the annual limitation on cost sharing for the 
standard plan and the annual limitation on cost sharing for the plan 
variation. For policies with multiple enrollees, such as family 
policies, we stated we would allocate the difference in annual 
limitation in cost sharing across all enrollees covered by the family 
policy in proportion to the enrollees' QHP issuer total plan paid 
amounts.
---------------------------------------------------------------------------

    \15\ Except for limited cost-sharing plan variations, for which 
we stated we would not reduce the QHP issuer's plan paid amounts.
---------------------------------------------------------------------------

    We also stated that for an enrollee who is assigned to different 
plan variations during the benefit year, we would calculate the 
adjustment for cost-sharing reductions based on the annual limitation 
on cost sharing applicable to the plan variation in which the enrollee 
was last enrolled during the benefit year, because cost sharing 
accumulates over the benefit year across plan variations of the same 
standard plan.
    We are proposing to modify this policy; we propose that if an 
enrollee is assigned to different plan variations during the benefit 
year, we would calculate the adjustment for cost-sharing reductions 
based on the difference between the annual limitation on cost sharing 
for the standard plan and the average annual limitation on cost sharing 
in the plan variations (including any standard plan), weighted by the 
number of months the enrollee is enrolled in each plan variation during 
the benefit year. This approach will also permit us to allocate the 
difference in annual limitations in a family policy to individual 
family members when a member exits or enters the policy mid-year, or if 
there are other changes in circumstances that impact the cost-sharing 
reductions provided to enrollees covered by the family policy. We are 
not proposing any changes to the approach finalized in the 2015 Payment 
Notice with respect to the QHP issuer's plan paid amounts for purposes 
of calculating reinsurance payments for an Indian in a limited cost-
sharing plan variation. We seek comment on this proposed modification, 
as well as alternative approaches to deducting CSR amounts from 
reinsurance payments.
4. Provisions for the Temporary Risk Corridors Program
a. Application of the Transitional Policy Adjustment in Early Renewal 
States
    On November 14, 2013, the Federal government announced a 
transitional policy under which it will not consider certain health 
insurance coverage in the individual or small group markets that is 
renewed for a policy year starting after January 1, 2014, under certain 
conditions to be out of compliance with specified 2014 market rules, 
and requested that States adopt a similar non-enforcement policy.\16\ 
HHS extended this transitional policy on March 5, 2014, permitting 
issuers to renew transitional policies through policy years beginning 
on or before October 1, 2016.\17\ In the 2015 Payment Notice, HHS 
implemented an adjustment to the risk corridors formula for the 2014 
benefit year to help further mitigate any unexpected losses 
attributable to the effects of the transitional policy for QHP issuers 
in a State that adopts the transitional policy. Under Sec.  153.500, we 
will effectuate this adjustment to the risk corridors formula for each 
of the individual and small group markets by increasing the profit 
margin floor (from 3 percent of after-tax profits) and the allowable 
administrative costs ceiling (from 20 percent of after-tax profits) to 
help offset losses that might occur under the transitional policy as a 
result of increased claims costs not accounted for when setting 2014 
premiums. Because we believe that the Statewide effect on this risk 
pool would increase with an increase in the percentage enrollment in 
transitional plans in the State, we stated that we would vary the 
State-specific percentage adjustment to the risk corridors formula with 
the percentage of member-months enrollment in these transitional plans 
in the State.\18\
---------------------------------------------------------------------------

    \16\ 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.
    \17\ Insurance Standards Bulletin Series--Extension of 
Transitional Policy through October 1, 2016, Center for Consumer 
Information and Insurance Oversight, March 5, 2014. Available at: 
http://www.cms.gov/CCIIO/Resources/Letters/Downloads/commissioner-letter-11-14-2013.PDF.
    \18\ As stated in the 2015 Payment Notice, HHS will calculate 
the amount of the adjustment that applies to each State based on the 
State's member-month enrollment count for transitional plans and 
non-transitional plans in the individual and small group markets.
---------------------------------------------------------------------------

    In response to stakeholder questions, we propose to clarify that 
the transitional adjustment applies only with respect to plans under 
the transitional policy--that is, plans that renew after January 1, 
2014 for which HHS and the applicable State are not enforcing market 
rules. We would further clarify that member-months of enrollees in 
early renewal plans will not be counted towards the risk corridors 
transitional policy adjustment (that is, unless and until the plan 
becomes a transitional plan in a transitional State upon renewal in 
2014).\19\ We believe

[[Page 70700]]

that this approach for counting member months towards the risk 
corridors transitional adjustment is consistent with the intent of the 
transitional policy adjustment set forth in the 2015 Payment Notice 
because issuers could have been able to account for the risk of early 
renewals in their 2014 rate setting. We request comment on this 
approach.
---------------------------------------------------------------------------

    \19\ Title 45 Part 153, Section 530 of the Code of Federal 
Regulations (CFR) sets forth the data requirements for this 
information collection. A notice was published in the Federal 
Register on September 5, 2014, providing the public with a 60-day 
period to submit written comments on the information collection 
requirement associated with the Transitional Adjustment Reporting 
form.
---------------------------------------------------------------------------

b. Risk Corridors Payments for 2016
    To provide greater clarity on how risk corridors payments will be 
made, we issued a bulletin on April 11, 2014, titled ``Risk Corridors 
and Budget Neutrality,'' which described how we intend to administer 
risk corridors in a budget neutral way over the 3-year life of the 
program.\20\ Specifically, we stated that 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, we stated that they 
will be held to offset potential insufficiencies in risk corridors 
collections in the next year. Our April 11, 2014 bulletin stated that 
we would establish in future guidance how we would calculate risk 
corridors payments in the event that cumulative risk corridors 
collections do not equal cumulative risk corridors payment requests.
---------------------------------------------------------------------------

    \20\ The Centers for Medicare and Medicaid Services, Center for 
Consumer Information and Insurance Oversight. ``Risk Corridors and 
Budget Neutrality''. April 11, 2014. Available at: https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/faq-risk-corridors-04-11-2014.pdf.
---------------------------------------------------------------------------

    We now propose that if, for the 2016 benefit year, cumulative risk 
corridors collections exceed cumulative risk corridors payment 
requests, we would make an adjustment to our administrative expense 
definitions (that is, the profit margin floor and the ceiling for 
allowable administrative costs) to account for the excess funds. That 
is to say, if, when the risk corridors program concludes, cumulative 
risk corridors collections exceed both 2016 payment requests under the 
risk corridors formula and any unpaid risk corridors amounts from 
previous years,\21\ we would increase the administrative cost ceiling 
and the profit floor in the risk corridors formula by a percentage 
calculated to pay out all collections to QHP issuers. The 
administrative cost ceiling and the profit floor would be adjusted by 
the same percentage.
---------------------------------------------------------------------------

    \21\ In our bulletin on ``Risk Corridors and Budget Neutrality'' 
dated April 11, 2014, we stated that if, in 2014 or 2015, requests 
for risk corridors payments exceed risk corridors collections, we 
would reduce risk corridors payments pro rata, but would make up 
those deficiencies to the extent collections exceed payment requests 
in later years.
---------------------------------------------------------------------------

    We propose to determine the percentage adjustment to the 
administrative cost ceiling and profit margin floor by evaluating the 
amount of excess risk corridors collections (if any) available after 
risk corridors payments for benefit year 2016 have been calculated. As 
stated in our bulletin on risk corridors budget neutrality, after 
receiving charges from issuers for the 2016 benefit year, we would 
first prioritize payments to any unpaid risk corridors payments 
remaining from the 2015 benefit year. We would then calculate benefit 
year 2016 risk corridors payments for eligible issuers based on the 3 
percent profit floor and 20 percent allowable administrative cost 
ceiling, as required by regulation. If, after making 2015 payments and 
calculating (but not paying) risk corridors payments for benefit year 
2016, we determine that the aggregate amount of collections (including 
any amounts collected for 2016 and any amounts remaining from benefit 
years 2014 and 2015) exceed what is needed to make 2016 risk corridors 
payments, we would implement an adjustment to the profit floor and 
administrative cost ceiling to increase risk corridors payments for 
eligible issuers for benefit year 2016. We would examine data that 
issuers have submitted for calculation of their 2016 risk corridors 
ratios (that is, allowable costs and target amount) and determine, 
based on the amount of collections available, what percentage increase 
to the administrative cost ceiling and profit floor could be 
implemented for eligible issuers while maintaining budget neutrality 
for the program overall. Although all eligible issuers would receive 
the same percentage adjustment, the amount of additional payment made 
to each issuer would vary based on the issuer's allowable costs and 
target amount. Once HHS has calculated the adjustment and applied it to 
eligible issuers' risk corridors formulas, it would make a single risk 
corridors payment for benefit year 2016 that would include any 
additional, adjusted payment amount.
    Because risk corridors collections are a user fee to be used to 
fund premium stabilization under risk corridors and because we intend 
to implement the risk corridors program in a budget neutral manner, we 
propose to limit this adjustment to excess amounts collected. We 
propose to apply this adjustment to allowable administrative costs and 
profits for the 2016 benefit year only to plans whose allowable costs 
(as defined at Sec.  153.500) are at least 80 percent of their after-
tax premiums, because issuers under this threshold would generally be 
required to pay out MLR rebates to consumers.\22\ In the past, we have 
sought to align the definitions we use for the risk corridors program, 
including those of ``allowable administrative costs'' and ``profits,'' 
with the manner in which these concepts are treated in the MLR program, 
to ensure that the programs are consistent in their effects. We note 
that for plans whose ratio of allowable costs to after-tax premium are 
below 80 percent, the 3 percent risk corridors profit margin and 20 
percent allowable administrative cost ceiling would continue to apply. 
Furthermore, we propose that, to the extent that applying the proposed 
adjustment to a plan could increase its risk corridors payment and 
affect its MLR calculation, the MLR calculation will ignore these 
adjustments. This is consistent with our previous policy with respect 
to the adjustments to these definitions for 2014 and 2015 in the 2015 
Payment Notice and the 2015 Market Standards Rule. We request comment 
on this approach.
---------------------------------------------------------------------------

    \22\ Because of some differences in the MLR numerator and the 
definition of allowable costs that applies with respect to the risk 
corridors formula, in a small number of cases, an issuer with 
allowable costs that are at least 80 percent of after-tax premium, 
may be required to pay MLR rebates to consumers.
---------------------------------------------------------------------------

    As previously stated, we anticipate that risk corridors collections 
will be sufficient to pay for all risk corridors payments. HHS 
recognizes that the Affordable Care Act requires the Secretary to make 
full payments to issuers. In the unlikely event that risk corridors 
collections, including any potential carryover from the prior years, 
are insufficient to make risk corridors payments for the 2016 program 
year, HHS will use other sources of funding for the risk corridors 
payments, subject to the availability of appropriations.

[[Page 70701]]

5. Distributed Data Collection for the HHS-Operated Risk Adjustment and 
Reinsurance Programs
a. Good Faith Safe Harbor (Sec.  153.740(a))
    In the second Program Integrity rule,\23\ HHS finalized a good 
faith safe harbor policy which provided that civil money penalties 
(CMPs) will not be imposed for non-compliance with the HHS-operated 
risk adjustment and reinsurance data requirements during 2014, if the 
issuer has made good faith efforts to comply with these 
requirements.\24\ That safe harbor parallels a similar safe harbor for 
QHP issuers in FFEs under Sec.  156.800.
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    \23\ Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, Premium Stabilization Programs and Market 
Standards, 78 FR 65046 (October 30, 2013).
    \24\ We note that HHS also clarified in a March 28, 2014 FAQ 
that CMPs would not be imposed on an issuer for non-compliance 
during the 2014 calendar year, if the issuer made good efforts to 
comply with these requirements. See, FAQ 1212, published March 28, 
2014. https://www.regtap.info/faq_viewu.php?id=1212.
---------------------------------------------------------------------------

    We propose to amend Sec.  153.740(a) to extend the safe harbor for 
non-compliance with the HHS-operated risk adjustment and reinsurance 
data requirements during the 2015 calendar year if the issuer has made 
good faith efforts to comply with these requirements. This proposal 
acknowledges that the distributed data collection requirements have 
been the subject of modifications through the 2014 calendar year, 
including the introduction of cloud-based virtual options for the 
distributed data environments. We note that good faith efforts could 
include notifying, communicating with, and cooperating with HHS with 
respect to issues that arise with the establishment and provisioning of 
the issuers' dedicated distributed data environment.
    The extension of this good faith safe harbor will not affect HHS's 
ability to assess issuers of risk adjustment covered plans a default 
risk adjustment charge under Sec.  153.740(b).\25\ Additionally, we 
note that the good faith safe harbor does not apply to non-compliance 
with dedicated distributed data environment standards applicable during 
2016, even if the non-compliance in the 2016 calendar year relates to 
data for the 2015 benefit year. Issuers of risk adjustment covered 
plans and reinsurance-eligible plans must establish dedicated 
distributed data environments in 2014 and begin loading data according 
to a quarterly schedule provided by HHS. The good faith safe harbor 
would apply, for example, to noncompliance with the 2015 benefit year 
schedule for loading data to the dedicated distributed data environment 
during the 2015 calendar year. However, the data loading schedule 
applicable to the 2015 benefit year for risk adjustment and reinsurance 
data extends into the 2016 calendar year (the final loading deadline is 
April 30, 2016, which will enable HHS to calculate risk adjustment 
payments and charges and reinsurance payments for the 2015 benefit year 
by June 30, 2016). The good faith safe harbor would not extend to non-
compliance with any 2016 calendar year obligations, even if those 2016 
obligations apply for 2015 benefit year data. We seek comment on this 
proposal.
---------------------------------------------------------------------------

    \25\ According to 45 CFR 153.740(b), ``If an issuer of a risk 
adjustment covered plan fails to establish a dedicated distributed 
data environment or fails to provide HHS with access to the required 
data in such environment in accordance with Sec.  153.610(a), Sec.  
153.700, Sec.  153.710, or Sec.  153.730 such that HHS cannot apply 
the applicable Federally certified risk adjustment methodology to 
calculate the risk adjustment payment transfer amount for the risk 
adjustment covered plan in a timely fashion, HHS will assess a 
default risk adjustment charge.''
---------------------------------------------------------------------------

b. Default Risk Adjustment Charge (Sec.  153.740(b))
    In the second Program Integrity Rule and the 2015 Payment Notice, 
HHS indicated that a default risk adjustment charge will be assessed if 
an issuer does not establish a dedicated distributed data environment 
or submits inadequate risk adjustment data. However, we did not 
establish how the money collected from the default charge will be 
allocated among risk adjustment covered plans.
    We are proposing to allocate collected per member per month default 
charge funds proportional to each plan's relative revenue requirement, 
the product of PLRS*IDF*GCF (Plan Liability Risk Score * Induced Demand 
Factor * Geographic Cost Factor) relative to the market average of 
these products, across all risk adjustment covered plans in the market 
in the State. This approach would allocate funds proportionally to a 
plan's enrollment, adjusted for factors such as health risk, actuarial 
value, and geographic cost differences. This approach would also 
allocate the default charge funds in accordance with plans' expected 
revenue requirements as calculated in the transfer formula. By 
contrast, an approach that allocates risk adjustment default charge 
funds in accordance with enrollment or premiums, for example, would 
favor plans with lower metal levels, low risk selection, or lower 
geographic costs.
    This allocation would occur only in risk adjustment markets with at 
least one noncompliant plan, and these steps would be used to calculate 
each compliant plan's allocation of the default charges collected from 
the noncompliant plan(s). We would calculate risk transfers among the 
compliant plans only and exclude all data from noncompliant plans. 
Using the same inputs of the compliant plans as used in the transfer 
formula, we would calculate the distribution of default charges paid by 
noncompliant plans among the compliant plans using the following 
formula:

[GRAPHIC] [TIFF OMITTED] TP26NO14.005


Where:

DCi is the total amount of default charges allocated to plan i;
``Total default charges collected'' is the sum, in dollars, 
collected from all noncompliant plans (aggregate dollars, that is, 
not on a per member per month basis); Other terms are as defined in 
the usual risk transfer calculations, and restricted to compliant 
plans only (si = plan i's share of State enrollment; PLRSi = plan 
i's plan liability risk score, IDFi= plan i's induced demand factor, 
GCFi = plan i's geographic cost factor); and
i indexes compliant plans, and the summation in the denominator is 
over compliant plans only.

    We seek comment on this approach.
c. Information Sharing (Sec.  153.740(c))
    In Sec.  153.740, we established the enforcement remedies available 
to HHS for an issuer of a risk adjustment covered plan or a 
reinsurance-eligible plan's failure to comply with HHS-operated risk 
adjustment and reinsurance data requirements. Consistent with the 
policy set forth at Sec.  156.800(d), as finalized in the 2015 Market 
Standards Rule,\26\ we propose adding paragraph (c) to clarify that HHS 
may consult and share information about issuers of a risk adjustment

[[Page 70702]]

covered plan or a reinsurance-eligible plan 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 against the issuer of the risk adjustment covered 
plan or reinsurance-eligible plan under Sec.  153.740 is appropriate. 
For example, HHS may consult other Federal and State regulatory and 
enforcement entities to identify issuers within a State who have failed 
to establish a dedicated distributed data environment. No personally 
identifiable information would be transferred as part of such a 
consultation. We seek comment on this proposal.
---------------------------------------------------------------------------

    \26\ 79 FR 30240.
---------------------------------------------------------------------------

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

1. General Provisions
    This section includes proposals related to the rate review program 
under part 154. Unless otherwise specified, the amendments in this part 
would apply beginning with rates filed during the 2015 calendar year 
for coverage effective on or after January 1, 2016. We seek comment on 
whether the proposal provides States and issuers sufficient time to 
transition to the new rate review timeframe.
a. Definitions (Sec.  154.102)
    Section 154.102 sets forth definitions used for purposes of the 
rate review provisions in part 154. In this proposed rule, we propose 
to add a definition ``plan'' and to amend the definitions of 
``individual market,'' ``small group market,'' ``rate increase'' and 
``State.'' We propose that these definitions would become effective for 
rate filings submitted during the 2015 calendar year for coverage 
effective January 1, 2016.
    We propose that the term ``plan'' have the meaning given the term 
in Sec.  144.103. For a discussion of the proposed amendments related 
to the term ``plan,'' see section III.A.1.a of this preamble.
    We propose amending the terms ``individual market'' and ``small 
group market'' to also have the meaning given such terms in Sec.  
144.103. Under that section, the term ``individual market'' means the 
market for health insurance coverage offered to individuals other than 
in connection with a group health plan. The term ``small group market'' 
means the health insurance market under which individuals obtain health 
insurance coverage (directly or through any arrangement) on behalf of 
themselves (and their dependents) through a group health plan 
maintained by a small employer. By incorporating the definition of 
small group market in Sec.  144.103, we are also incorporating the 
definition of small employer in Sec.  144.103. We are also 
incorporating all aspects of the individual market and small group 
market definitions as described in Sec.  144.102, including Sec.  
144.102(c), with respect to coverage provided through associations. 
These proposed changes will more fully harmonize the applicability of 
the rate review provisions with the rating reforms under the Affordable 
Care Act, including the premium rating and single risk requirements.
    We propose amending the term ``rate increase'' to mean any increase 
of the rates for a specific product or plan within a product offered in 
the individual or small group market. This change is for consistency 
with our proposal in Sec.  154.200, discussed below, to require the 
consideration of rate increases at the plan level as opposed to the 
product level when determining whether a rate increase is subject to 
review.
    We lastly propose amending the definition of ``State'' to exclude 
the U.S. territories of Puerto Rico, the Virgin Islands, Guam, American 
Samoa, and the Northern Mariana Islands. The change reflects HHS's 
determination, described in more detail in section III.A.1.b of this 
preamble, that certain provisions of the PHS Act enacted in title I of 
the Affordable Care Act that apply to health insurance issuers are 
appropriately governed by the definition of ``State'' set forth in that 
title. This proposed amendment would codify the approach that the rate 
review provisions (section 2794 of the PHS Act) do not apply to health 
insurance issuers in the U.S. territories.\27\
---------------------------------------------------------------------------

    \27\ See e.g., Letter to Virgin Islands on the Definition of 
State (July 16, 2014). Available at: http://www.cms.gov/CCIIO/Resources/Letters/Downloads/letter-to-Francis.pdf.
---------------------------------------------------------------------------

2. Disclosure and Review Provisions
a. Rate Increases Subject to Review (Sec.  154.200)
    In Sec.  154.200, we propose to make technical corrections to the 
text of paragraphs (a)(1) and (2) to clarify that rate increases are 
applicable to a 12-month period that begins on January 1 rather than 
September 1 as currently specified in those paragraphs. The proposed 
corrections are necessary to align the text of the rate review 
regulation with rate effective dates under Sec.  156.80, which requires 
a single risk pool index rate to be established and effective for a 
State market by January 1 of each calendar year.
    In paragraph (c), we propose to modify the standard for determining 
whether a rate increase is subject to review. Under the current 
regulations, a rate increase in the individual or small group market is 
subject to review if the rate increase is 10 percent or more, or the 
increase meets or exceeds an applicable State-specific threshold 
established in accordance with Sec.  154.200. The percent increase is 
calculated as the average increase for all enrollees with coverage 
under the product weighted by premium volume.
    We propose to amend paragraph (c) to require the consideration of 
rate increases at the plan level (as that term is proposed to be 
defined in Sec.  154.102) as opposed to the product level when 
determining whether the increase is subject to review. Under this 
approach, if an increase in the plan-adjusted index rate (as described 
in the single risk pool provision at Sec.  156.80) for any plan within 
a product in the individual or small group market meets or exceeds the 
applicable threshold, the product (including all plans within the 
product) would be subject to review to determine whether the rate 
increase is unreasonable. The rate increase would trigger review even 
if the average increase for the product itself did not meet or exceed 
the applicable threshold.
    We believe considering the impact of rate increases at the plan 
level is the appropriate level of aggregation when determining whether 
an increase is subject to review, because consumers are affected by 
rate increases at the plan level. This approach would ensure that all 
rate increases at or above the specified threshold in the individual or 
small group market are reviewed by the applicable State or CMS to 
determine whether the rate increase is unreasonable. This will further 
help protect consumers against unreasonable rate increases, eliminating 
the possibility that a plan could experience a significant rate 
increase and still avoid review because the average increase for the 
product does not meet or exceed the applicable threshold.
    We seek comment on this proposal, including on the benefits and 
costs to States of carrying out the plan-level trigger for review.
b. Submission of Rate Filing Justification (Sec.  154.215)
    Under Sec.  154.215, health insurance issuers are required to 
submit a Rate Filing Justification for all products in the issuer's 
single risk pool, on a form and in a manner prescribed by the 
Secretary, when any product in the individual or small group market is 
subject to a rate increase. This

[[Page 70703]]

requirement was finalized in the 2014 Market Rules to carry out the 
Secretary's responsibility, in conjunction with the States, under PHS 
Act section 2794(b)(2)(A) to monitor premium increases of health 
insurance coverage offered through an Exchange and outside of an 
Exchange beginning in 2014.
    We explained in the preamble to the 2014 Market Rules this 
provision requires the completion of a Rate Filing Justification for 
all proposed rate increases, whether or not the rate increase meets or 
exceeds the subject to review threshold (78 FR 13420). To better 
reflect the intent of this requirement, we are proposing to modify the 
text of paragraph (a) of Sec.  154.215 to expressly state that ``all'' 
proposed rate increases includes a rate increase with respect to ``any 
plan within a product'' in the individual or small group market that is 
subject to a rate increase. This clarification would become effective 
with the effective date of the final rule.
c. Timing of Providing the Rate Filing Justification (Sec.  154.220)
    Section 154.220 provides that if a State requires a proposed rate 
increase to be filed with the State prior to implementation of the 
increase, the health insurance issuer must send CMS and the applicable 
State the Rate Filing Justification on the date the issuer submits the 
proposed rate increase to the State. For all other States, the health 
insurance issuer must send CMS and the applicable State the Rate Filing 
Justification prior to the implementation of the rate increase.
    There is currently wide variation in State submission timelines and 
practices for reviewing proposed rate increases. Some States require 
that all rates must be filed at the same time. Others require rate 
filings after the date the QHP submissions are required to be made, 
creating a situation in which QHPs must file rates before non-QHPs. 
Some States have not adopted specific rate filing timeframes but 
instead rely on ``file and use'' laws, which provide that a rate (or 
rate increase) may go into effect as soon as it is filed with the 
State. Others prohibit posting of final rates until the date that the 
coverage begins.
    We propose to modify Sec.  154.220 to establish a uniform timeline 
by which health insurance issuers must submit a completed Rate Filing 
Justification to CMS and, when applicable, to the State. We propose 
that a health insurance issuer must submit the Rate Filing 
Justification by the earlier of the following: (1) The date by which 
the State requires that a proposed rate increase be filed with the 
State; or (2) the date specified by the Secretary in guidance. We are 
considering specifying in future guidance a deadline to coincide with 
the end of the QHP application window for the FFE for issuers to 
complete and submit the Rate Filing Justification for proposed rate 
increases in the individual and small group markets for both QHPs and 
non-QHPs. We seek comments on this date.
    The proposed approach would assure that all rate increases in every 
relevant State market for both QHPs and non-QHPs are filed by a 
consistent time each year. This would improve predictability and 
transparency, reduce the opportunity for anti-competitive behavior, and 
establish a more meaningful opportunity for consumers and other 
stakeholders to comment on proposed rate increases before rates are 
finalized. It would also ensure that State and Federal regulators have 
adequate time for review prior to implementation of a rate increase. We 
note that States would have flexibility to impose earlier rate filing 
deadlines to meet their specific State needs.
    We seek comment on all aspects of this proposal.
d. CMS's Determinations of Effective Rate Review Programs (Sec.  
154.301)
    Section 154.301 sets forth criteria for evaluating whether a State 
has an Effective Rate Review Program in the individual and small group 
markets. If a State meets the criteria to have an Effective Rate Review 
Program, CMS adopts the State's determination as to whether a rate 
increase that is subject to review is unreasonable. If a State does not 
meet the criteria to have an Effective Rate Review Program, then CMS 
conducts the review and makes a determination about whether a rate 
increase is unreasonable.
    We propose to amend Sec.  154.301(b) to specify the timeframe and 
manner for a State with an Effective Rate Review Program to provide 
public access to information about proposed and final rate increases if 
the State elects to make such information available to the public.
    In paragraph (b)(1)(i), we propose that, for proposed rate 
increases subject to review, the State must provide access from its Web 
site to at least the information contained in Parts I, II, and III of 
the Rate Filing Justification that CMS makes available on its Web site 
(or provide CMS's web address for such information) and have a 
mechanism for receiving public comments on those proposed rate 
increases.\28\ If a State elects to post information about proposed 
rate increases on its Web site, the information would be required to be 
posted no later than the date specified by the Secretary in guidance. 
We are considering specifying in future guidance a deadline of 10 
business days after receipt of all rate filings in the relevant State 
market for information to be posted about proposed rate increases that 
are subject to review. We seek comment on this proposed deadline.
---------------------------------------------------------------------------

    \28\ Pursuant to Sec.  154.215(h)(2), CMS posts on its Web site 
the information contained in Parts I and III of each Rate Filing 
Justification that is not a trade secret or confidential commercial 
or financial information as defined in HHS's Freedom of Information 
Act regulations, 45 CFR 5.65.
---------------------------------------------------------------------------

    In paragraph (b)(1)(ii), we propose that, for all final rate 
increases, the State must provide access from its Web site to at least 
the information contained in Parts I, II, and III of the Rate Filing 
Justification that CMS makes available on its Web site (or provide 
CMS's web address for such information). This would include information 
about rate increases that both meet or exceed the review threshold and 
those not subject to review. The information would be required to be 
posted no later than the first day of the annual open enrollment 
period. States could make additional information available to the 
public or make the information available earlier than this deadline at 
their option. We seek comment on this proposed deadline.
    In paragraph (b)(2), we propose that if a State intends to make the 
information about proposed rate increases in paragraph (b)(1)(i) 
available to the public prior to the date specified by the Secretary, 
or if it intends to make the information about final rate increases in 
paragraph (b)(1)(ii) available to the public prior to the first day of 
the annual open enrollment period, the State must notify CMS in 
writing, no later than 30 days prior to the date it intends to make the 
information public, of its intent to do so and the date it intends to 
make the information public. This information will enable CMS to better 
coordinate and manage public expectations regarding the availability of 
the rate information, increasing transparency nationally into the rate-
setting process.
    Finally, we propose in paragraph (b)(3) that the State must ensure 
the information it posts on its Web site under proposed paragraphs 
(b)(1)(i) and (b)(1)(ii) (or in addition to the information required 
under those paragraphs) is made available to the public at a uniform 
time for all proposed or final rate increases, as applicable, in the 
relevant market segment and without regard to whether

[[Page 70704]]

coverage is offered through or outside an Exchange. These provisions 
would provide consumers with timely access to information about 
proposed and final rate increases in States that elect to make such 
information available to the public. They would also promote fair 
market competition between issuers in the Exchange and non-Exchange 
markets and further enhance transparency of the rate-setting process.
    We are considering establishing as a condition of an Effective Rate 
Review Program that the State post on its Web site information about 
proposed and final rate increases, rather than providing the option to 
simply provide CMS's web address for such information. We seek comment 
on this proposal. We also seek comments on the timeframes for making 
proposed and final rate information available to the public, including 
how the timeframes may interact with current State rate review 
practices and might affect the State's workload.

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

1. General Provisions
a. Definitions (Sec.  155.20)
    In Sec.  155.20, we propose to amend the definitions of 
``applicant,'' ``enrollee,'' and ``qualified employee.'' First, the 
proposed amendments to applicant, enrollee, and qualified employee 
would specify that a qualified employer could elect to offer coverage 
through a SHOP to its former employees that may include retirees, as 
well as former employees to whom an employer might be obligated to 
provide continuation coverage under applicable State or Federal law. 
Second, the proposed amendments specify that a qualified employer could 
also elect to offer coverage through the SHOP to dependents of 
employees or former employees. Third, the proposed amendments specify 
that business owners may enroll in SHOP coverage provided that at least 
one employee enrolls. We propose to amend these definitions to make it 
clear that SHOPs may allow small group enrollment practices that were 
in place before the Affordable Care Act to continue, to preserve 
continuity for issuers and employers, and to reduce the administrative 
complexity involved with transitioning to SHOP coverage for qualified 
employers.
    We propose to amend the definition of ``applicant'' with respect to 
the group market so that it would include not only an employer or 
employee seeking eligibility for enrollment in a QHP through the SHOP, 
but also a former employee seeking eligibility for enrollment in a QHP 
through the SHOP. We are also proposing to amend the definition of 
applicant so that it would reflect that an employer, employee, or 
former employee could seek eligibility to enroll his or her dependents 
in a QHP through the SHOP, if the qualified employer offers dependent 
coverage through the SHOP.
    We propose to define ``qualified employee'' as any employee or 
former employee of a qualified employer who has been offered health 
insurance coverage by such qualified employer through the SHOP for 
himself or herself and, if the qualified employer offers dependent 
coverage through the SHOP, for his or her dependents.
    We note that we would not consider dependents to be applicants or 
qualified employees--rather, dependents' eligibility to participate in 
SHOP is linked to the eligibility of the qualified employee. Similarly, 
we would not consider business owners (including sole proprietors, 
owners of more than 2 percent of an S corporation or of more than 5 
percent of a C corporation, partners owning more than 5 percent of a 
partnership, or members owning more than 5 percent of a limited 
liability company (LLC), or working spouses, domestic partners, and 
other family members of these types of business owners) to be qualified 
employees. Consistent with current market practice, these types of 
business owners may, however, enroll in coverage through the SHOP if at 
least one employee has enrolled in such coverage through the SHOP. We 
also note that under our interpretation of the definition of employee 
at Sec.  155.20, a qualified employer may not offer SHOP coverage 
exclusively to former employees. A qualified employer must have at 
least one employee who enrolls in order for the coverage to be issued 
through the SHOP to a former employee.
    We propose to amend the definition of ``enrollee'' so that the term 
would include not only qualified individuals and qualified employees 
(as that term would be amended as proposed in this rulemaking), but 
also dependents of qualified employees. The proposed amendments to 
enrollee would also establish that business owners and their dependents 
could also enroll in coverage through the SHOP, provided that at least 
one employee enrolls in coverage through the SHOP. Including these 
individuals in the definition of enrollee would mean that where these 
individuals are permitted to enroll in coverage through the SHOP, the 
SHOP and QHPs must provide them with the same rights and privileges as 
qualified employees who are enrollees, such as timely notice of changes 
in coverage as described in subpart H of part 155 and Sec.  156.285. We 
note that this has no impact on the tax treatment of premiums paid by 
the business owner for coverage for themselves and their dependents.
    While we have attempted to ensure that the modifications of these 
definitions are consistent with the intended usage of these terms 
throughout subpart H, we seek comment on all aspects of the proposed 
modifications to these definitions, including comments on any perceived 
unintended consequences resulting from the proposed modifications of 
these terms, and comments on whether other provisions of the Exchange 
rules in part 155 and 156 would also need to be amended to implement 
the changes proposed in these definitions. We note that these 
definitions apply only with respect to the provisions of 45 CFR, and 
should not be read as interpreting these terms for any purposes under 
Title I of ERISA.
2. General Functions of an Exchange
a. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    Section 155.205(c) sets forth standards applicable to consumer 
assistance tools and programs of Exchanges for providing meaningful 
access to information for individuals with disabilities and individuals 
with limited English proficiency. Currently, these provisions also 
apply through Sec.  155.230(b) to applications, forms, and notices used 
or provided by the Exchange, and through a cross-reference to Sec.  
155.230(b) in Sec.  156.250, to QHP issuer applications and notices. 
Information provided as part of any consumer assistance functions under 
Sec.  155.205(d) and (e), including the Navigator program described in 
Sec.  155.210, must meet the standards of Sec.  155.205(c). In 
addition, if an Internet Web site of an agent or broker (referred to in 
this section as a ``web-broker'') is used by a consumer to complete a 
QHP selection, that Web site must disclose and display all QHP 
information provided by the Exchange or directly by QHP issuers 
consistent with the requirements of Sec.  155.205(c), under Sec.  
155.220(c)(3)(i). We propose to amend Sec.  155.205(c) to specify the 
oral interpretation services that are required for certain entities 
subject to Sec.  155.205(c). Specifically, with respect to Exchanges, 
QHP issuers, and web-brokers only, we propose that the requirement to 
provide oral

[[Page 70705]]

interpretation services under Sec.  155.205(c)(2)(i) would include 
making available telephonic interpreters in at least 150 languages. We 
propose this specific standard so that in every Exchange consumers with 
limited English proficiency would have greater access to essential 
information provided by Exchanges, web-brokers, and QHP issuers when 
shopping for and accessing health coverage. In addition, this proposed 
standard would detail for Exchanges, web-brokers, and QHP issuers how 
they must provide meaningful access to information to individuals with 
limited English proficiency. We also propose amendments to Sec.  
156.250 that are discussed below, and that would require QHP issuers to 
provide all information that is critical for obtaining health insurance 
coverage or access to health care services through the QHP, including 
applications, forms, and notices, to qualified individuals, applicants, 
qualified employers, qualified employees, and enrollees in accordance 
with the standards described in Sec.  155.205(c), including the 
provision of telephonic interpretive services in at least 150 
languages.
    We are proposing to limit the applicability of the proposed 150 
languages standard to Exchanges, web-brokers, and QHP issuers. These 
groups, in many cases, already maintain a call center with language 
line capacity in 150 or more languages, which we believe to be the 
industry standard for language line services. We do not propose that 
this standard would apply to Navigators and non-Navigator assistance 
personnel because the smaller non-profit organizations that frequently 
make up the bulk of these consumer assistance entities have limited 
resources. For example, small entities and individuals are encouraged 
to apply for Navigator grants in the FFEs, particularly by partnering 
with other entities or individuals to form a consortium, and these 
entities frequently lack the infrastructure to support telephonic 
interpreter services in multiple languages.
    We solicit comment on all aspects of this proposal. In particular, 
we seek specific comment on whether Navigators and non-Navigator 
assistance personnel should be required to meet the proposed standard, 
whether directly or through referral, such as through a referral to the 
Exchange call center. We also seek specific comment on whether 
requiring web-brokers to provide telephonic interpretive services in 
150 languages would have an adverse impact on them, as well as on 
whether there are alternative means that should be provided to web-
brokers by which they can meet their existing obligations to provide 
oral interpretation services (such as through referral to the Exchange 
call center).
    We also solicit specific comments on whether we should consider 
more or different language accessibility standards in Sec.  155.205(c). 
For instance, some stakeholders have suggested ideas such as requiring 
written translations in the languages spoken by the applicable State's 
top ten Limited English Proficiency (LEP) groups or spoken by 10,000 
persons or greater, whichever yields the greater number of languages; 
oral interpretation in as many languages as are generally available by 
telephonic interpreter services (which we understand is at least 150 
languages); taglines (short statements informing individuals of the 
availability of language access services)in the top 30 non-English 
languages spoken nationwide on documents required by State or Federal 
law or containing information that is critical to obtaining health 
insurance coverage or access to health care services through a QHP; Web 
site content translated in each non-English language spoken by an LEP 
population that reaches 10 percent of the State population; and a 
uniform requirement that written translations, taglines on notices and 
Web site content, and oral interpretation services must be provided in 
the top 15 languages spoken by LEP individuals in the United States. We 
note that taglines in 15 languages are generally contained in all 
standard notices sent by the FFE. We solicit comments on these 
suggestions.
    We also solicit comment on whether we should require more specific 
accessibility standards under other requirements under Sec.  
155.205(c), such as the requirement to provide written translations for 
individuals with limited English proficiency, and auxiliary aids and 
services to individuals with disabilities, and taglines indicating the 
availability of language services or auxiliary aids and services. We 
remind relevant covered entities of the obligations they might have 
under other Federal laws to meet existing effective communication 
requirements for individuals with disabilities, as such obligations are 
independent of the responsibilities they may have under Sec.  
155.205(c), Sec.  155.230(b), Sec.  156.200(e), and Sec.  156.250. 
Finally, we solicit comment on whether this proposal would present 
implementation challenges for Exchanges, web-brokers, and QHP issuers 
if it becomes effective before the beginning of the open enrollment 
period in the individual market for the 2016 benefit year.
b. 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 (Sec.  155.215)
    In the 2015 Market Standards Rule, we added regulatory language at 
Sec.  155.215(h), which states in relevant part that ``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.'' We have since 
recognized that this wording could create confusion about whether the 
requirement applies to the non-Navigator entity receiving funding 
through an Exchange Establishment grant, or whether it applies to each 
individual providing non-Navigator assistance. CMS currently interprets 
the provision as applying only to non-Navigator assistance personnel 
entities, such that only the entity must maintain a physical presence 
in the Exchange service area, consistent with our application of the 
requirement to non-Navigator assistance personnel in an Exchange 
operated by HHS under its authority under Sec.  155.105(f). To make 
this policy clear, we propose to amend Sec.  155.215(h) to limit it to 
entities, so it would read ``all non-Navigator entities 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.'' We believe that this amendment strikes an appropriate 
balance in allowing individuals providing non-Navigator assistance 
subject to Sec.  155.215 to provide assistance via the telephone, 
Internet, or through other remote means, particularly in circumstances 
in which remote assistance would be more effective or practical than 
face-to-face assistance, while also ensuring that the organization with 
which they are affiliated is in a position to understand and meet the 
specific needs of the communities they serve and to facilitate consumer 
protection efforts, as applicable, in their State. If the non-Navigator 
is not affiliated with a larger entity, we would consider the 
individual to be the entity specified in

[[Page 70706]]

the amended language under proposed Sec.  155.215(h). We are also 
proposing to add the title ``Physical presence'' to paragraph (h) for 
improved clarity.
c. Standards for HHS Approved Vendors of Federally-Facilitated Exchange 
Training for Agents and Brokers (Sec.  155.222)
    Section 1312(e) of the Affordable Care Act directs the Secretary of 
HHS to establish procedures under which a State may allow agents and 
brokers to enroll individuals and employers in any QHP in the 
individual or small group market offered through an Exchange, and to 
assist individuals in applying for advance payments of the premium tax 
credit and cost-sharing reductions for QHPs sold through an Exchange. 
Under Sec.  155.220, we established procedures to support the State's 
ability to permit agents and brokers to assist individuals, employers 
or employees with enrollment in QHPs offered through an Exchange, 
subject to applicable Federal and State requirements. As described at 
Sec.  155.220(d), an agent or broker that enrolls qualified individuals 
through an Exchange, or assists individuals in applying for advance 
payments of the premium tax credit or cost-sharing reductions, must 
comply with the terms of the agreement between the agent or broker and 
the Exchange. Under the terms of this general agreement, agents and 
brokers must register with the Exchange, and must receive training in 
the range of QHP options and insurance affordability programs. In 
addition, all agents and brokers must execute the applicable privacy 
and security agreement(s) required by Sec.  155.260(b).
    For plan years 2014 and 2015, the procedures established under 
section 1312(e) of the Affordable Care Act involved HHS implementation 
of FFE training of agents and brokers. HHS also provided technical 
support and help desk services to agents and brokers with questions 
related to that training. In this rule, for 2016 and future plan years, 
we propose changing the procedures related to FFE agent and broker 
training so that the certain training and information verification 
functions could also be provided by HHS-approved vendors. Under this 
proposal, HHS would provide an additional avenue by which agents and 
brokers could complete the training requirements necessary to work with 
consumers seeking coverage through the FFE. HHS would recognize the 
successful completion of an Exchange training program from an HHS-
approved vendor as sufficient to satisfy the requirement to receive 
training in the range of QHP options and the insurance affordability 
programs. We propose that to become an HHS-approved vendor, the 
organization must demonstrate that it meets the standards in Sec.  
155.222(b), under an approval process established by HHS. We further 
propose that no training program would be recognized unless it included 
an information verification component under which the vendor confirms 
the identity and applicable State licensure of the person who is 
credited with successful completion of the training program. 
Organizations interested in becoming HHS-approved vendors must have HHS 
approval by the applicable deadline. In our proposed standards for HHS-
approved vendors of an alternative training and information 
verification process, we seek to make FFE training and registration 
process easier for agents and broker, and attract greater agent and 
broker participation in the FFEs through partnership with vendors.
    In Sec.  155.222(a), we propose an application and approval process 
for vendors seeking recognition as HHS-approved vendors for FFE 
training and information verification for agents and brokers. As part 
of an approved training and information verification program, we 
propose that the vendor must require agents and brokers to complete 
identity proofing, provide identifying information, and successfully 
complete the required curriculum. We propose that only HHS-approved 
vendors that meet the designated standards will have their training and 
information verification programs recognized. We believe that under 
this approach, we will be able to leverage the experience, contacts, 
and networks of approved vendors while ensuring that the training and 
information verification programs adhere to uniform standards for 
content, format, and delivery. We propose that vendors be approved for 
one-year terms, and that vendors seeking to continue their recognition 
as HHS-approved vendors for FFE agent and broker training and 
information verification the following year must be re-approved through 
a process to be determined by HHS. If this proposal is finalized, we 
anticipate developing vendor application forms. We seek comment on the 
proposed approach outlined above. We also seek comment on what 
additional components a training program should include in order to 
qualify for HHS approval (for example, facilitating agent and broker 
creation of FFE accounts).
    In paragraph (b), we propose the standards that a vendor must meet 
to be approved by HHS to offer FFE training and information 
verification to agents and brokers. These standards are based on the 
approval criteria for Enrollee Satisfaction Survey vendors at Sec.  
156.1105. We believe that the establishment of these standards will 
help ensure that vendors are approved using an objective methodology, 
and that approved vendors will successfully carry out the agent and 
broker FFE training and information verification and safeguard the data 
related to these functions. We seek comment on these proposals.
    In paragraph (b)(1) we propose that the vendor submit a complete 
and accurate application by the deadline established by HHS. We propose 
that, as part of the application, the vendor must demonstrate prior 
experience with successfully conducting online training and identity 
proofing, as well as providing technical support to a large customer 
base. HHS would only approve vendors with no current or past 
regulatory, enforcement, or legal actions taken against the vendor by a 
State or Federal regulator in the last 3 years, beginning from the 
application or renewal application deadline under this section.
    We propose in paragraph (b)(2) that the vendor be required to 
adhere to HHS specifications for content, format, and delivery of 
training and information verification. Training includes developing and 
hosting FFE courses, exams, and curriculums for agents and brokers. HHS 
would require vendors to have their training approved for continuing 
education units accepted by State regulatory entities.
    In paragraph (b)(3) we propose that vendors be required to collect, 
store, and share with HHS all data from agent and broker users of the 
vendor's training and information verification in a manner specified by 
HHS, and protect the data in accordance with applicable privacy and 
security laws and regulations. HHS would expect vendors to be able to 
securely receive and transfer large data files in formats commonly used 
in the information technology industry.
    In paragraph (b)(4), we propose that the vendor be required to 
execute an agreement with HHS, in a form and manner to be determined by 
HHS, which requires the vendor to comply with HHS guidelines for 
interfacing with HHS data systems, the implementation of the training 
and information verification processes, and the use of all data 
collected. In addition to executing the agreement, vendors would be 
required to comply with all applicable State and Federal laws, 
including applicable privacy and security standards. HHS would require 
that the vendor adopt a fee structure that is generally consistent with 
the fee

[[Page 70707]]

structure for comparable trainings offered by the vendor to comparable 
audiences.
    In paragraph (b)(5), we propose that the vendor be required to 
permit any individual who holds a valid license or equivalent State 
authority to sell health insurance products to access the vendor's 
training and information verification process. HHS is considering 
whether vendors should be permitted to offer the training to other 
members of the public who are interested in learning about the 
Exchanges.
    In paragraph (c), we propose that once HHS has completed the 
approval process for vendors for a given year, HHS would publish a list 
of approved entities on an HHS Web site. In paragraph (d), we propose 
that HHS may monitor and audit approved vendors and their records 
related to the FFE training and information verification functions to 
ensure the approved vendors' ongoing compliance with the standards 
outlined in paragraph (b). We propose that if HHS determines that the 
approved vendor is no longer in compliance with standards under 
paragraph (b), HHS may remove the vendor from the list described in 
this section, and may direct the vendor to cease performing the 
training and information verification functions described in this 
subpart. We propose that the vendor may invoke the appeals process 
proposed in paragraph (e) if its approval has been revoked. We seek 
comment on this process.
    In paragraph (e), we propose an appeals process for a vendor whose 
application is denied, or whose approval to offer training and 
information verification is revoked. Specifically, we propose that such 
a vendor may appeal HHS's decision by notifying HHS in writing within 
15 days of receipt of the notification by HHS of not being approved or 
having its approval revoked, and submitting additional documentation 
demonstrating how the vendor meets the standards in paragraph (b) and 
(if applicable) the terms of their agreement with HHS. HHS will review 
the submitted documentation and make a final determination within 30 
days from receipt of the submission of the additional documentation. A 
vendor that gains approval via the appeals process would be included in 
the approved list, described in paragraph (c). We seek comment on this 
proposed appeals process.
3. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
a. Annual Eligibility Redetermination (Sec.  155.335)
    The current re-enrollment provisions codified at Sec.  155.335(j) 
prioritize re-enrollment with the same issuer in the same or a similar 
plan with the goal of maximizing continuity of coverage and care. 
However, because premiums may change significantly from one year to the 
next, the plans that are most competitively priced in one year may not 
continue to be the most competitively priced in subsequent years. For 
this reason, default enrollment in the same or similar plan may 
sometimes encourage consumers to remain in plans that are significantly 
more expensive than the lowest cost plans in the market. Because we 
believe that many consumers place a high value on low premiums when 
selecting a plan, we believe that consumers could benefit from 
alternative re-enrollment hierarchies.
    In particular, we are exploring implementing in the FFE an approach 
under which an enrollee, at the time of initial enrollment, would be 
offered a choice of re-enrollment hierarchies and could opt into being 
re-enrolled by default for the subsequent year into a low-cost plan 
(such as the QHP of the same metal level with the lowest premium in the 
enrollee's service area, or one of the three such QHPs with the lowest 
premiums by random allocation), rather than his or her current plan or 
the plan specified in the current re-enrollment hierarchy. This 
alternative enrollment hierarchy could be triggered if the enrollee's 
current plan's premium increased from the prior year, or increased 
relative to the premium of other similar plans (such as plans of the 
same metal tier), by more than a threshold amount, such as 5 percent or 
10 percent. As is the case under the existing approach, a consumer 
would retain the option to take action to enroll in a different plan 
during open enrollment if he or she wished to do so. We are considering 
applying an alternative hierarchy for the first time when re-enrolling 
consumers for the 2017 coverage year. On this timeline, consumers could 
opt in to the alternative hierarchy during open enrollment in 2015 (or 
during special enrollment periods occurring during 2016).
    We seek comment on such an approach, including with respect to how 
to ensure that consumers understand the risk of being default re-
enrolled in a plan with a significantly different provider network, 
benefits, cost-sharing structure, or service area; what premium growth 
in the current plan (or what growth relative to other similar plans) 
would trigger re-enrollment into a low-cost plan, and how to determine 
which enrollees get assigned to which plans, if random enrollment into 
one of the three lowest cost QHPs of the metal level in the enrollee's 
service area is implemented. We also seek comment on how these types of 
default re-enrollment procedures have functioned in other programs and 
settings, and what lessons can be drawn from those experiences. 
Finally, we seek comment on whether such approaches may influence 
issuers' pricing decisions, such as by causing them to price more 
competitively in order to retain or attract enrollees who have opted to 
be re-enrolled into a low-cost plan.
    We are also considering providing this flexibility to State-based 
Exchanges to implement alternative re-enrollment hierarchies such as 
the one described above, beginning in 2016, at their option. We believe 
that providing this flexibility could offer an opportunity to gather 
valuable information about alternative re-enrollment structures and 
share lessons learned across Exchanges in hopes of improving the re-
enrollment process and the consumer experience.
    We seek comment on whether to permit State-based Exchanges the 
flexibility to implement these alternative re-enrollment hierarchies 
beginning with 2016 open enrollment, whether to provide flexibility to 
SBEs to establish other hierarchies, and whether to adopt any such 
alternatives in the FFE for 2017 open enrollment.
4. Exchange Functions in the Individual Market: Enrollment in Qualified 
Health Plans
a. Enrollment of Qualified Individuals Into QHPs (Sec.  155.400)
    We propose to amend Sec.  155.400(e) to explicitly provide for an 
Exchange to establish a standard policy for setting deadlines for 
payment of the first month's premium. We recognize that decisions 
regarding payment of the first month's premium have traditionally been 
business decisions made by issuers, subject to State rules. However, we 
believe that having uniform deadlines for all issuers for payment of a 
first month's premium to effectuate enrollments could benefit issuers 
and consumers by ensuring a consistent operational procedure.
    In the Federally-facilitated Exchanges, we are considering payment 
deadlines tied to the coverage effective date for

[[Page 70708]]

regular effective dates (meaning coverage effective the first day of 
the following month for plan selections made between the first and 
fifteenth of the month, and coverage effective the first day of the 
second month following a plan selection made between the 16th and the 
end of the month). Some options we are considering would be to provide 
consumers until the coverage effective date, or the day before the 
coverage effective date, to make their first month premium payment. 
Alternatively, we could provide consumers additional time after the 
coverage effective date to make their premium payment. For example, we 
could provide 5 days, 10 days, or 30 days after the coverage effective 
date, or something in between. We seek comment on the period of time 
following the coverage effective date an issuer could be required or 
permitted to accept a first month's premium payment for that coverage.
    With respect to effective dates other than regular effective dates, 
meaning retroactive or accelerated coverage effective dates resulting 
from enrollment under certain special enrollment periods (including 
birth and marriage), resulting from the resolution of appeals, or 
resulting from amounts newly due for prior coverage based on issuer 
corrections of under-billing, we are considering a premium payment 
deadline of 10-15 business days from when the issuer receives the 
enrollment transaction.
    We seek comment on which proposed premium payment deadlines give 
issuers an acceptable amount of time to send an invoice and allow for 
timely payment by the consumer, and give consumers sufficient time to 
make the payment. It is our expectation that QHP issuers will send the 
consumer the bill within one to two business days after receiving the 
enrollment transaction to accomplish this goal. We also seek comment on 
how such a policy would likely affect issuer operations and consumers' 
ability to obtain coverage.
    We note that because this rulemaking will likely not be finalized 
until after open enrollment for 2015, any such deadlines would not be 
applicable for that open enrollment period. We anticipate providing 
flexibility to issuers on premium payment deadlines for this open 
enrollment period to account for the timing of default re-enrollments 
this year.
b. Annual Open Enrollment Period (Sec.  155.410)
    In Sec.  155.410, we propose to amend paragraph (e), which provides 
the dates for the annual open enrollment period in which qualified 
individuals and enrollees may apply for or change coverage in a QHP. We 
propose to restructure paragraph (e) by placing the current provision 
regarding the 2015 benefit year in paragraph (e)(1) and the proposed 
requirement for all benefit years beginning on or after 2016 in 
paragraph (e)(2). Specifically, in paragraph (e)(2), we propose that 
for benefit years beginning on or after January 1, 2016, the annual 
open enrollment period begins on October 1 and extends through December 
15 of the calendar year preceding the benefit year. We also propose to 
redesignate the annual open enrollment coverage effective date 
provisions in paragraphs (f) and (f)(1) through (3) as (f)(1) and 
(f)(1)(i) through (iii), and to add a new (f)(2), which would specify 
that, for enrollments made under any annual open enrollment periods for 
benefit years beginning on or after January 1, 2016, coverage would be 
effective on January 1 of the year following the open enrollment 
period. For example, for any enrollment completed under the open 
enrollment period between October 1 and December 15, 2015, coverage 
would be effective on January 1, 2016.
    We propose this time period and coverage effective date for several 
reasons. First, because of increasing consumer familiarity with the 
Exchange, we believe that the proposed open enrollment period, which is 
shorter than prior open enrollment periods, will still provide 
consumers sufficient time to enroll or change coverage in a QHP. 
Second, the proposed open enrollment period does not cross calendar 
years, which we anticipate will reduce consumer confusion regarding 
effective dates for coverage because all coverage would be effective on 
January 1 of the following year. This will be less complicated for 
Exchanges and issuers to implement. Finally, we anticipate that the 
proposed open enrollment period will provide consumers with sufficient 
time to review changes to their current plans, take advantage of 
consumer assistance resources, and compare plans and complete plan 
selection as needed. We note the annual open enrollment period and 
coverage effective dates will also apply to non- grandfathered policies 
in the individual market outside the Exchange through the cross-
reference at Sec.  147.104(b)(1)(ii). We seek comment on this proposal, 
including whether the open enrollment period should end earlier in 
December to ensure sufficient time for issuers and Exchanges to 
accommodate current enrollees switching plans or being enrolled through 
the default re-enrollment hierarchy for coverage effective January 1.
c. Special Enrollment Periods (Sec.  155.420)
    In Sec.  155.420, we make certain proposals relating to special 
enrollment periods. We propose to revise paragraphs (b)(2)(i), 
(b)(2)(ii), (b)(2)(iv), and add paragraphs (b)(2)(v), (b)(2)(vi), and 
(b)(2)(vii), which pertain to effective dates for special enrollment 
periods; to amend paragraphs (c)(2)(i) and (c)(2)(ii), which pertain to 
availability and length of special enrollment periods, and to revise 
paragraphs (d)(1)(ii), (d)(1)(v), (d)(2), (d)(4), and remove paragraph 
(d)(10), which pertain to specific types of special enrollment periods. 
We also propose to delete the option for consumers to choose a coverage 
effective date of the first of the month following the birth, adoption, 
placement for adoption, or placement in foster care. We seek comment on 
these proposed changes, including whether we should retain the ability 
for consumers to choose the first of the month following the birth, 
adoption, placement for adoption, or placement in foster care in 
addition to providing for regular coverage effective dates.
    In paragraph (b)(2)(i), we propose to change one of the options for 
coverage effective dates in the case of birth, adoption, placement for 
adoption, or placement in foster care. Currently, a consumer may choose 
between the date of the birth, adoption, placement for adoption, or 
placement in foster care; and, if permitted by the Exchange, the first 
of the month following the birth, adoption, placement for adoption, or 
placement in foster care. We continue to require the Exchange to allow 
for coverage to be effective for a qualified individual or enrollee on 
the date of birth, adoption, placement for adoption, or placement in 
foster care, but propose to permit the Exchange to allow a qualified 
individual or enrollee to elect a regular coverage effective date in 
accordance with paragraph (b)(1) of this section. We seek comment on 
this proposal.
    We propose to amend paragraphs (b)(2)(iv) and (c)(2). The proposed 
change to (c)(2) would become effective January 1, 2016, and would 
allow consumers advanced access to the special enrollment period where 
a qualified individual or enrollee, or his or her dependent, gains 
access to new QHPs due to a permanent move under (d)(7). Prior to 
January 1, 2016, consumers who gain access to new QHPs as described 
under (d)(7) would continue to select a QHP in accordance with 
paragraph (c)(1). The proposed

[[Page 70709]]

changes to (b)(2)(iv) also would allow these persons to have a coverage 
effective date of the first day of the month following the move if plan 
selection is made before or on the day of the loss of coverage. If plan 
selection is made after the loss of coverage, the Exchange must ensure 
that coverage is effective in accordance with the regular effective 
dates under paragraph (b)(1) or on the first day of the following 
month, at the option of the Exchange. Current regulations require 
consumers to complete their permanent move before they are granted a 
special enrollment period, creating potential gaps in coverage. This 
amendment would help prevent such gaps. We seek comment on this 
proposal.
    In addition, we propose to add new paragraphs (b)(2)(v) and 
(b)(2)(vi), which pertain to effective dates for coverage that must be 
obtained under court orders, including child support orders, and the 
death of an enrollee or his or her dependent. In paragraph (b)(2)(vi), 
we propose to require an Exchange to make coverage effective the first 
day the court order is effective to minimize any gap in coverage the 
individual may experience. We would allow Exchanges to provide 
consumers with a choice for regular effective dates under paragraph 
(b)(1) of this section to minimize duplicative coverage the child may 
have. We seek comment on this proposal, and other polices that would 
provide consumers who must obtain coverage for an individual under a 
court order the most protective effective date.
    In paragraph (b)(2)(vi), we propose to require that an Exchange 
ensure coverage is effective the first day of the month following a 
death of the enrollee or his or her dependent, and at the option of the 
Exchange and the consumer, allow for regular effective dates under 
paragraph (b)(1) of this section. The effective date of the coverage 
under this special enrollment period is intended to work in conjunction 
with the effective date for termination due to death provided in Sec.  
155.430(d)(7). When a consumer dies in the middle of the month, and the 
enrollment group is no longer valid, our expectation is that issuers 
would continue coverage for the enrollment group through the end of the 
month. The alternative would be to align the effective date of coverage 
with the date of death which would require proration of premiums and 
advance payments of the premium tax credit. We seek comment on which 
proposal is most beneficial to the consumer.
    We propose to combine paragraphs (c)(2)(i) and (c)(2)(ii) to a new 
paragraph (c)(2) to simplify the regulatory text. In addition, we 
propose to allow consumers to report a permanent move 60 days in 
advance of the move for the purposes of receiving special enrollment 
period to reduce the likelihood of a gap in coverage. We understand 
this requirement may not be operationally feasible for the 2015 benefit 
year and, as such, propose to not require Exchanges to meet this 
requirement prior to January 1, 2016.
    We seek comment on these proposed amendments.
    We propose to amend paragraph (d)(1)(ii) which provides a special 
enrollment period for individuals enrolled in non-calendar year 
individual health insurance coverage when their policy year ends in 
2014. We propose that this special enrollment period be available with 
respect to a qualified individual or his or her dependent who, in any 
year, has coverage under a group health plan or an individual plan with 
a plan or policy year that is not offered on a calendar year basis. We 
recognize that group health plans as well as grandfathered and 
transitional individual market plans are not required to be offered on 
a calendar year basis and may, therefore, come up for renewal outside 
of the annual open enrollment period for the individual market. This 
special enrollment period would give individuals enrolled in such plans 
the opportunity to enroll in an individual market QHP through the 
Exchange when their plan renews without having to wait until the next 
available open enrollment period. We seek comments on this proposal.
    We propose to amend paragraph (d)(2) to include new paragraphs (i) 
and (ii). Paragraph (i) is changed from the original paragraph (d)(2) 
to include situations where a court order requires a qualified 
individual to cover a dependent or other person. We are adding this 
provision to allow for situations where a qualified individual is 
required to cover a dependent or other person who either was not 
previously covered under the qualified individual's health plan, or 
where a dependent voluntarily terminates coverage, in order to be added 
to the qualified individual's health plan and therefore, would not 
qualify for a special enrollment period under paragraph (d)(1)(i) of 
this section. We seek comment on this addition.
    We propose to amend paragraph (d)(2) to add a new paragraph (ii) to 
allow enrollees who experience a loss of a dependent or lose dependent 
status through legal separation, divorce, or death to be determined 
eligible for a special enrollment period. The special enrollment period 
will be available to all enrollees who lose a dependent or are no 
longer considered a dependent on the application. Currently, depending 
on the circumstances surrounding the divorce, legal separation, or 
death, the applicant may be determined eligible for a special 
enrollment period. This amendment would ensure that when an applicant 
experiences a life event that changes their familial structure such 
that their current plan no longer fits their needs, they are able to 
switch plans. We seek comment on the proposed amendments.
    We propose to amend paragraph (d)(4), which allows a special 
enrollment period where enrollment or non-enrollment in a QHP is 
unintentional, inadvertent, or erroneous, and is the result of the 
error, misrepresentation, or inaction of an officer, employee, or agent 
of the Exchange or HHS, or its instrumentalities as evaluated and 
determined by the Exchange, to also include situations where a non-
Exchange entity is providing enrollment assistance. Concurrently, we 
propose to strike paragraph (d)(10) which provides a separate special 
enrollment period for non-Exchange entity misconduct. We believe this 
modification, which would allow the Exchange to correct its own errors 
as well as errors of non-Exchange entities, will give the Exchange the 
authority to remedy these errors. For purposes of this section, non-
Exchange entities include, all those entities listed at 78 FR 65064 as 
possible non-Exchange entities in the final rulemaking for Sec.  
155.420(d)(10): Agents and brokers assisting consumers in an Exchange 
under Sec.  155.220, certified application counselors, as described in 
Sec.  155.225, and navigators as described in Sec.  155.210, issuer 
application assisters as described in Sec.  155.415; a QHP as described 
in Sec.  155.20, or non-Navigator assistance personnel as authorized by 
Sec. Sec.  155.205(d) and (e) and 155.215. The current special 
enrollment period for misconduct of non-Exchange entities provided in 
paragraph (d)(10) of this section is limited to those situations where 
the consumer either: (1) Was not enrolled in a QHP; (2) was not 
enrolled in the QHP selected by the individual; or (3) is eligible for 
but is not receiving advance payments of the premium tax credit or 
cost-sharing reductions. During our first year of operations, we have 
learned that errors can arise involving non-Exchange entities that 
would be most sufficiently addressed by modifying paragraph (d)(4) of 
this section, as discussed above, to allow the Exchange to take 
appropriate action to

[[Page 70710]]

correct or eliminate the effects of misconduct or error on behalf of a 
non-Exchange entity. We seek comment on this proposal.
    We propose to amend paragraph (d)(6) to create a special enrollment 
period for a qualified individual in a non-Medicaid expansion State who 
was previously ineligible for advance payments of the premium tax 
credit solely because the qualified individual had a household income 
below 100 percent FPL, who was ineligible for Medicaid during that same 
timeframe, and experiences a change in household income that makes the 
individual newly eligible for advance payments of the premium tax 
credit. Prior to the change in household income, such an individual had 
no option for affordable health insurance coverage, and we believe it 
is appropriate to provide an opportunity for enrollment when changed 
circumstances make coverage accessible to them. We seek comments on 
this proposal.
    We also seek comments on other situations that may warrant a 
special enrollment period, particularly situations specific to the 
initial years in which consumers have an opportunity to purchase 
coverage through an Exchange.
d. Termination of Coverage (Sec.  155.430)
    Under our current rules, Sec.  155.430(b)(1) requires an Exchange 
to permit an enrollee to terminate his or her coverage in a qualified 
health plan (QHP) following appropriate notice to the Exchange or the 
QHP. We propose to amend this paragraph by adding a sentence to clarify 
that, to the extent the enrollee has the right to cancel the coverage 
under applicable State laws, including ``free look'' cancellation 
laws--that is, laws permitting cancellation within a certain period of 
time, even following effectuation of the enrollment, the enrollee may 
do so, in accordance with the requirements of such laws. Furthermore, 
we propose to amend Sec.  155.430(d)(2) to add a new paragraph 
(d)(2)(v) allowing a retroactive termination effective date when an 
enrollee initiates the termination, if specified by applicable State 
laws, such as ``free look'' provisions.
    We also invite comments on further standardization that may be 
needed with Sec.  147.106.
    Additionally, we propose to amend Sec.  155.430(b)(1) by removing 
the language requiring the appropriate notice to the Exchange or QHP 
since the notice requirement is addressed in Sec.  155.430(d) and this 
would give greater flexibility for other enrollee initiated 
terminations where appropriate notice is not defined. For example, in 
the case of death, we state that the last day of coverage is the date 
of death, but we do not require a specific amount of notice of death to 
the Exchange or QHP.
    We also propose to explicitly state that the requirement for 
Exchanges to ensure appropriate actions are taken in connection with 
retroactive terminations, currently set forth in paragraph (d)(6) 
regarding special enrollment periods, applies to all retroactive 
terminations, including valid cancellations of coverage under a ``free 
look'' law. To do so, we propose to move the applicable language to a 
new paragraph (d)(8). We also propose to add reconciliation of Exchange 
user fees to the list of items Exchanges would need to address. Under 
that requirement, the Exchange will ensure that appropriate actions are 
taken to make necessary adjustments to advance payments of the premium 
tax credit, cost-sharing reductions, Exchange user fees, premiums, and 
claims, while to adhering to any State law. For example, this would 
mean that the QHP issuer would be required to return any premium paid 
by the enrollee, and to refund to HHS any advance payment of the 
premium tax credit or cost-sharing reductions paid for that enrollee 
for the period after the termination effective date (and the Exchange 
would refund any user fee paid on behalf of the enrollee for the period 
after the termination effective date). We note that, under our 
proposal, the enrollee would not become eligible to receive a special 
enrollment period as a direct result of the ``free look'' cancellation.
    We also propose to add a new paragraph (b)(1)(iii) which would 
require Exchanges to establish processes for a third party to report 
the death of a consumer. We propose that, as part of these processes, 
an Exchange must allow a third party, including a consumer's authorized 
representative, to report the death of a consumer for purposes of 
initiating termination of the deceased consumer's enrollment. To 
substantiate a report of the death of an enrollee, the Exchange may, 
but is not required to, request documentation. This process will 
provide more flexibility for consumers to initiate the termination of 
Exchange enrollment of an enrollee who has not selected an authorized 
representative. We seek comment on this proposal.
    Sections 2702 and 2703 of the PHS Act, as added by the Affordable 
Care Act, and their implementing regulations at Sec. Sec.  147.104 and 
147.106, generally require health insurance issuers offering non-
grandfathered group or individual health insurance coverage to 
guarantee the availability and renewability of the coverage unless an 
exception applies. QHPs offered through the Exchange or SHOP are health 
insurance coverage in the individual and small group markets, 
respectively. Accordingly, QHPs are subject to market-wide requirements 
in title XXVII of the PHS Act, including guaranteed availability and 
guaranteed renewability.
    Under guaranteed availability requirements, an issuer may not 
refuse to accept individuals or employers who apply for such coverage 
unless an exception applies. Under guaranteed renewability 
requirements, an issuer must offer to renew or continue in force 
coverage at the option of the individual or employer and may not non-
renew or discontinue the individual's or employer's coverage unless an 
exception applies. There are several exceptions to these 
requirements,\29\ but whether a consumer is determined to be a 
qualified individual or qualified employer for purposes of enrollment 
through the Exchange is not one of them. For these reasons, we have 
interpreted the guaranteed availability requirements to mean that a QHP 
offered through the Exchange generally must be available outside the 
Exchange.\30\ We have similarly interpreted the guaranteed renewability 
requirements to mean that a QHP offered through the Exchange generally 
must be renewable outside the Exchange.\31\
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    \29\ The statutory exceptions to guaranteed availability include 
special rules for network plans, limited network capacity, and 
limited financial capacity. The statutory exceptions to guaranteed 
renewability include non-payment of premiums, fraud, violation of 
participation or contribution rules, termination of coverage, 
movement outside service area, association membership ceases.
    \30\ See e.g., ``Frequently Asked Questions on Health Insurance 
Market Reforms and Marketplace Standards,'' May 16, 2014. Available 
at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Final-Master-FAQs-5-16-14.pdf). See also ``Frequently 
Asked Question on Qualified Health Plans and Guaranteed Availability 
Standards,'' June 3, 2014. Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/faq_on_qhps_and_guaranteed_availability_6314.pdf.
    \31\ We note that an exception to the requirement that QHP must 
be guaranteed available and renewable outside the Exchange arises 
from the statutory permission for QHPs offered through the Exchange 
or SHOP to omit coverage of the pediatric dental EHB where a stand-
alone dental plan offering the pediatric dental EHB is offered 
through the Exchange or SHOP. This is not similarly permitted when 
the plan is offered outside the Exchange or SHOP. This results in 
certain QHPs only being legally available in the market when offered 
through the Exchange or SHOP. If the QHP omits coverage of the 
pediatric dental EHB, the issuer would not be required to offer, 
renew, or continue enrollment in the QHP outside the Exchange, but 
could do so, at the enrollee's option, if the issuer is ``reasonably 
assured'' that the enrollee has obtained such coverage through an 
Exchange-certified stand-alone dental plan. Patient Protection and 
Affordable Care Act; Standards Related to Essential Health Benefits, 
Actuarial Value, and Accreditation, 78 FR at 12834, 12853 (February 
25, 2013).

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[[Page 70711]]

    We have identified certain aspects of the Exchange and SHOP 
regulations, particularly relating to termination of coverage, that 
could be interpreted as being inconsistent with the guaranteed 
availability right of consumers to purchase QHPs outside the Exchanges, 
and with the guaranteed renewability right of consumers to retain QHP 
coverage outside the Exchange. For example, the Exchange regulations 
list several circumstances under which the Exchange ``may initiate 
termination of an enrollee's coverage in a QHP, and must permit a QHP 
issuer to terminate such coverage.'' \32\ Among these listed 
circumstances are cases in which ``[t]he enrollee is no longer eligible 
for coverage in a QHP through the Exchange,'' and in which ``[t]he QHP 
. . . is decertified.'' \33\ While these two situations would make the 
individual ineligible to enroll in a QHP through the Exchange, and 
therefore ineligible for the premium tax credit or cost-sharing 
reductions, issuers cannot necessarily terminate coverage under the 
guaranteed renewability provisions.
---------------------------------------------------------------------------

    \32\ 45 CFR 155.430(b)(2); with respect to SHOP coverage see 
also 45 CFR 156.285, 156.270, 155.735.
    \33\ 45 CFR 155.430(b)(2)(i) and part of (b)(2)(iv).
---------------------------------------------------------------------------

    To better align with market-wide guaranteed availability and 
guaranteed renewability requirements, we propose to amend the Exchange 
regulations in parts 155 and 156 that could be construed as limiting 
coverage in a QHP to coverage through the Exchange. For example, we 
intend to revise certain references to ``termination of coverage,'' so 
that they refer to termination of an individual's enrollment status as 
a qualified individual receiving coverage ``through the Exchange,'' not 
termination of the coverage altogether, where applicable. Specifically, 
we intend in the final rule to modify the following provisions that may 
be viewed as inconsistent with our interpretations of guaranteed 
availability and guaranteed renewability: Sec. Sec.  155.430, 155.735, 
156.270, 156.285, and 156.290. We anticipate there may be other 
provisions of the Exchange and SHOP regulations for which conforming 
amendments may also be necessary. These amendments would become 
effective with the effective date of the final rule.
    We seek comment on these proposals.
5. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
a. Eligibility Standards for Exemptions (Sec.  155.605)
    In Sec.  155.605, we propose amendments to two hardship exemptions 
and a correction to a cross-reference. First, we propose to amend Sec.  
155.605(g)(3) to provide a hardship exemption to an individual who is 
not a dependent of another taxpayer and whose gross income is less than 
the individual's minimum threshold for filing a Federal income tax 
return. We expect that the Internal Revenue Service (IRS) and the 
Department of the Treasury will publish guidance allowing individuals 
who are eligible for this exemption to claim it on their tax returns 
without obtaining a hardship exemption certificate number from the 
Exchange. It is further anticipated that the IRS and the Department of 
the Treasury will provide that individuals who are eligible for this 
exemption are not required to file Federal income tax returns to claim 
the exemption. We expect that the IRS and the Department of Treasury 
will finalize these policies in time for consumers filing 2014 Federal 
income taxes. We anticipate that this proposed change will affect a 
small group of people, and will greatly simplify the process for 
claiming this exemption on a Federal tax return. We seek comment on 
this proposal.
    Second, we propose amending Sec.  155.605(g)(6)(i) to correct the 
citation to 42 CFR 447.50 by changing it to 42 CFR 447.51, which cross-
references the Medicaid definition for Indian.
    Third, we propose new paragraph Sec.  155.605(g)(6)(iii) that will 
align the exemption process for members of Federally-recognized Tribes 
and those individuals who are eligible for services through the Indian 
Health Service (IHS), a Tribal health facility, or an Urban Indian 
organization (ITU). Under current regulations, members of Federally-
recognized Tribes may apply for an exemption from the shared 
responsibility payment directly with the Exchange, or they may claim 
the exemption when they file their tax returns without applying for an 
exemption from the Exchange. However, those who are applying for a 
hardship exemption based on their eligibility to receive services from 
an ITU are required to submit an exemption application to the Exchange. 
These varying application requirements cause confusion for American 
Indian and Alaska Native families. The proposed amendment will provide 
individuals who are eligible for services through an ITU with the same 
exemption process available to tribal members by permitting them to 
claim the exemption on their Federal income tax returns without 
obtaining an exemption certificate number. We expect that the IRS and 
the Department of Treasury will finalize policies to accommodate this 
proposal for consumers filing 2014 Federal income taxes. We seek 
comment on this proposal.
b. Required Contribution Percentage (Sec.  155.605)
    Under section 5000A of the Code, an individual must have minimum 
essential coverage for each month, qualify for an exemption, or make a 
shared responsibility payment with his or her Federal income tax 
return. Section 5000A of the Code and section 1311(d)(4)(H) of the 
Affordable Care Act authorizes the Secretary to determine individuals' 
eligibility for exemptions, including the hardship exemption. Under 
section 5000A(e)(1) of the Code, an individual is exempt if the amount 
that he or she would be required to pay for minimum essential coverage 
(required contribution) exceeds a particular percentage (the required 
contribution percentage) of his or her actual household income for a 
taxable year. In addition, under Sec.  155.605(g)(2) an individual is 
exempt if his or her required contribution exceeds the required 
contribution percentage of his or her projected household income for a 
year. Finally, under Sec.  155.605(g)(5) certain employed individuals 
are exempt if, on an individual basis, the cost of self-only coverage 
is less than the required contribution percentage but the aggregate 
cost of self-only coverage through employers exceeds the required 
contribution percentage and no family coverage is available through an 
employer at a cost less than the required contribution percentage.
    The required contribution percentage for 2014 is 8 percent under 
section 5000A(e)(1)(A) of the Code. Section 5000A(e)(1)(D) of the Code 
and 26 CFR 1.5000A-3(e)(2)(ii) provide that for plan years after 2014, 
the required contribution percentage is the percentage determined by 
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 that period. In the 2015 Market Standards Rule, we 
established a method for determining the excess of the rate of premium 
growth over the rate of income growth each year, and published the 2015 
rate. We stated that future adjustments would be published annually in 
the HHS

[[Page 70712]]

notice of benefit and payment parameters.
    Under the method previously established, the rate of premium growth 
over the rate of income growth for 2016 is determined by (x) one plus 
the premium growth between the preceding year (in this case, 2015), and 
2013, carried out to ten significant digits, divided by (y) one plus 
the rate of income growth between the preceding year (2015), and 2013, 
carried out to ten significant digits.\34\ The result of this 
calculation is carried out to ten significant digits and multiplied by 
the required contribution percentage specified in section 
5000A(e)(1)(A) of the Code (8.00 percent). The result is then rounded 
to the nearest hundredth of a percent, to yield the required 
contribution percentage for 2016.
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    \34\ We defined premium growth for this measure as the same 
annually adjusted measure of premium growth used below in this rule 
to establish the annual maximum and reduced maximum limitations on 
cost sharing for plan benefit designs. That is, the premium 
adjustment percentage.
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    Under the methodology described above, the total rate of premium 
growth for the two-year period from 2013-2015 is 1.0831604752, or 8.3 
percent. We describe the methodology for obtaining this number below in 
Sec.  156.130(e). In the 2015 Market Standards rule, we also 
established a methodology for calculating the rate of income growth for 
the purpose of calculating the annual adjustment to the required 
contribution percentage.
    The measure of income growth is based on projections of per capita 
Gross Domestic Product (GDP) used for the National Health Expenditure 
Accounts (NHEA), which is calculated by the CMS Office of the Actuary. 
Accordingly, using the NHEA data, the rate of income growth for 2016 is 
the percentage (if any) by which the most recent projection of per 
capita GDP for the preceding calendar year ($56,660 for 2015) exceeds 
the per capita GDP for 2013, ($53,186), carried out to ten significant 
digits. The total rate of income growth for the two-year period from 
2013-2015 is estimated to be 1.0653179408 or 6.5 percent. We note that 
the 2013 per capita GDP used for this calculation has been updated to 
reflect the latest NHEA data.
    Thus, the excess of the rate of premium growth over the rate of 
income growth for 2013-2015 is 1.0831604752/1.0653179408, or 
1.0167485534, or 1.7 percent. This results in a required contribution 
percentage for 2016 of 8.00*1.0167485534, or 8.13 percent, when rounded 
to the nearest one-hundredth of one percent.
6. Exchange Functions: Small Business Health Options Program (SHOP)
a. Standards for the Establishment of a SHOP (Sec.  155.700)
    We propose to amend Sec.  155.700(b) such that the previous 
definition of ``group participation rule'' would conform with the 
terminology we propose to use in Sec.  155.705(b)(10). Specifically, we 
propose to modify the term to refer to a ``group participation rate,'' 
which is a minimum percentage of all eligible individuals or employees 
of an employer that must be enrolled.
b. Functions of a SHOP (Sec.  155.705)
    Section 155.705 was amended in the 2015 Market Standards Rule. In 
Sec.  155.705, we propose to redesignate paragraph (b)(4)(ii)(B) as new 
paragraph (b)(4)(ii)(C), redesignate paragraph (b)(4)(ii)(A) as new 
paragraph (b)(4)(ii)(B), add new paragraph (b)(4)(ii)(A), and amend 
paragraphs (b)(4)(i)(B), (b)(7), and (b)(10).
    In the proposed amendment to paragraph (b)(4)(i)(B) and proposed 
new (b)(4)(ii)(A), we propose to permit the SHOP to assist a qualified 
employer in the administration of continuation coverage in which former 
employees seek to enroll through the SHOP. The proposed amendment to 
paragraph (b)(4)(i)(B) would modify the requirement that the total 
amount of all premiums due from a given qualified employer must be 
collected from the qualified employer by the SHOP. This is because, at 
new paragraph (b)(4)(ii)(A), we propose that where a qualified employer 
is offering Federal or State continuation coverage \35\ under 29 U.S.C. 
1161 et seq. or any applicable State law, and where a SHOP has entered 
into an agreement with a qualified employer to provide this service, 
the SHOP may assist the employer in administration of such coverage by 
billing for and collecting premiums for the continuation coverage 
directly from the former employee, rather than the employer, if the 
qualified employer elects to have the SHOP carry out this function. The 
SHOP would then remit the premium payments to the issuers offering the 
continuation coverage. We propose this policy to reduce the burden on 
small businesses related to the administration of continuation coverage 
in which former employees seek to enroll through the SHOP. A qualified 
employer may find it difficult to harmonize the timeline for the 
collection of continuation coverage premiums and the timeline for the 
collection of premiums in the SHOP. Permitting the SHOP to collect 
continuation coverage premiums directly from the former employee 
ensures that both the employer and the former employee may fully 
exercise their payment grace periods while reducing the likelihood of 
complex billing problems. We are not proposing that SHOPs, including 
the Federally-facilitated SHOP, take on other functions related to the 
administration of continuation coverage, such as administration of 
required notices. Additionally, in light of the administrative 
complexities associated with administering payments for State-mandated 
continuation coverage across all States with an FF-SHOP, we propose 
that an FF-SHOP may elect to limit this service to the billing and 
collection of premiums related to Federally mandated (``COBRA'') 
continuation coverage.
---------------------------------------------------------------------------

    \35\ Consolidated Omnibus Budget Reconciliation Act of 1985 
(Pub. L. 99-272) (``COBRA''), or applicable State law.
---------------------------------------------------------------------------

    We also note that the IRS has promulgated specific standards 
regarding payments for COBRA continuation coverage at 26 CFR 54.4980B-
8. We note that where such standards and any other applicable COBRA 
standards in 26 CFR part 54 are more protective than the standards the 
SHOP has established for administration of payment (such as, for 
example, grace periods) the IRS rules must apply. We seek comment on 
all aspects of this proposal, including the interaction of the FF-
SHOP's payment grace periods and termination policies at Sec.  155.735 
with the COBRA rules IRS has codified in 26 CFR part 54.
    We are considering whether to permit the Federally-facilitated SHOP 
to accept premium payment using a credit card, and seek comment on 
whether to do so. Currently, qualified employers participating in the 
Federally-facilitated SHOP may only pay premiums to the Federally-
facilitated SHOP using a check or bank draft. While HHS has received 
comments from stakeholders urging it to permit qualified employers to 
pay premiums using a credit card, we seek comment on the extent to 
which employers would utilize this option. These stakeholders stated, 
and we agree, that it may be more convenient for a small employer to 
pay by credit card than by check or bank draft. Additionally, we note 
that an employer that finances its premium payment with a credit card 
may be able to better align its premium payments with its monthly 
receipts. We seek comment on all aspects of this potential policy, 
including how many FF-SHOP employers expect to use credit cards for 
payment, whether they would use this

[[Page 70713]]

method of payment every month or only for their initial payment, and 
what credit and debit cards the FF-SHOP should consider accepting.
    We also propose to revise paragraph (b)(7) to align the SHOP 
regulations with the Protecting Access to Medicare Act of 2014 (Pub. L. 
113-93), which repealed requirements related to deductible maximums for 
employer-sponsored coverage at section 1302(c)(2) of the Affordable 
Care Act. This proposal would remove the only reference in the SHOP 
regulations to the requirements of Affordable Care Act section 
1302(c)(2).
    In paragraph (b)(10), we propose to modify the calculation of 
minimum participation rates in the SHOP. We propose that a SHOP (both a 
State-based and a Federally-facilitated SHOP) that elects to establish 
a minimum participation rate would be required to establish a single, 
uniform rate that applies to all groups and issuers in the SHOP, rather 
than establishing general rules about minimum participation rates or a 
threshold over which the minimum percentage may not be raised. 
Therefore, if the SHOP authorizes a minimum participation rate, such a 
rate would have to be based on the rate of employee participation in 
the SHOP and in coverage through another group health plan; 
governmental coverage such as Medicare, Medicaid, or TRICARE; coverage 
sold through the individual market; or in other minimum essential 
coverage, and not on the rate of employee participation in any 
particular QHP or QHPs of any particular issuer. If this proposal is 
finalized, State-based SHOPs would be expected to conform to it by its 
effective date.
    In section (b)(10)(i), we propose to amend existing language about 
employees ``accepting coverage under the employer's group health plan'' 
to instead refer to employees ``accepting coverage offered by a 
qualified employer'' to better account for employee choice.
    We also propose to amend section (b)(10) regarding how the minimum 
participation rate would be calculated in the SHOP and how it would be 
calculated in the Federally-facilitated SHOP. In many States, when an 
issuer calculates the group's minimum participation rate, the issuer 
includes employees who enroll in coverage through sources other than 
the group health plan being insured. Essentially, under this approach, 
``participation'' is interpreted to refer to participation in health 
coverage, rather than participation in the specific coverage offered 
through the SHOP. For this reason, we propose to calculate the minimum 
participation rate as the number of full-time employees accepting 
coverage offered by the qualified employer through the SHOP plus the 
number of full-time employees who are enrolled in coverage through 
another group health plan, in governmental coverage (such as Medicare, 
Medicaid or TRICARE), in coverage sold through the individual market, 
or in other minimum essential coverage, divided by the number of full-
time employees offered coverage through the SHOP. Additionally, we 
believe that references to coverage offered ``through another group 
health plan'' would also include coverage offered in connection with an 
employee organization and joint board comprised of equal employer and 
employee representatives (multiemployer plan). Because minimum 
participation rates were designed to reduce the likelihood that a 
significant percentage of employees might wait to get coverage until 
they are sick, this policy objective would be met with respect to 
employees having any existing coverage, not just coverage under their 
employer's group health plan.
    The effect of this approach to calculating minimum participation 
rates would be an increased likelihood the group would meet the 
issuer's minimum participation rate even if a significant proportion of 
the group's employees enroll in other coverage. While the Federally-
facilitated SHOP's minimum participation rate was established to 
accommodate the variety of minimum participation rates that exist 
across States, it relied upon a uniform definition of who was included 
in the rate's calculation that did not include certain other forms of 
coverage in which an employee might enroll. Therefore, this proposal 
would align the Federally-facilitated SHOP's minimum participation rate 
methodology with the current practice of issuers in many States. We 
note that certain types of coverage, such as excepted benefits, were, 
and would continue to be, excluded from other permissible coverage used 
in the calculation of the minimum participation rate because the 
coverage provided through the purchase of an excepted benefit is not 
the type of coverage purchased through the SHOP and subject to the 
minimum participation requirement. We seek comment on whether this 
definition of which employees would be included in the calculation 
should be extended beyond the SHOP to the entire small-group market in 
order to create uniformity among issuer practices and prevent further 
gaming by issuers through their use of non-standard definitions for 
other acceptable coverage.
c. Eligibility Standards for SHOP (Sec.  155.710)
    In Sec.  155.710, we propose to amend paragraph (e) to specify that 
where an employer has offered dependent coverage, a qualified employee 
would be eligible to enroll his or her dependents in coverage through 
the SHOP.
d. Enrollment of Employees Into QHPs Under SHOP (Sec.  155.720 and 
Sec.  156.285)
    In Sec.  155.720, we propose to amend the list structure of 
paragraph (b) by replacing the ``; and'' in (b)(6) with a period, and 
adding an ``and'' at the end of (b)(5). We also propose to remove 
paragraph (b)(7),which requires all SHOPs to establish effective dates 
for employee coverage in the SHOP. Current Sec.  155.720(b)(7) would be 
redundant if the proposed requirements to establish effective dates 
under Sec.  155.725 are finalized as proposed.
    We propose to amend paragraph (e) to refer to enrollees and not 
qualified employees, and would also remove a reference in this section 
to Sec.  156.260(b) in keeping with the proposed amendments to Sec.  
155.725 regarding coverage effective dates that are described below. We 
continue to believe that a QHP issuer's notice to an enrollee of the 
coverage effective date provides important confirmation to the enrollee 
that his or her enrollment has been processed. This amendment would 
also establish that issuers must provide this notice to anyone who 
enrolled in coverage through the SHOP under the proposed amendments to 
the definitions of qualified employee and enrollee advanced in this 
rulemaking, if those amendments are finalized as proposed, including 
dependents (including a new dependent of the employee, when the 
dependent separately joins the plan), former employees of a qualified 
employer, and certain business owners. We note that the notices 
required under this proposal could be incorporated into existing 
notifications that QHPs provide to their new customers, for example in 
a welcome document. We also propose a conforming amendment to Sec.  
156.285(c) to ensure that QHP issuers participating in the Federally-
facilitated SHOP would provide notice to a new enrollee of the 
enrollee's effective date of coverage.
e. Enrollment Periods Under SHOP (Sec.  155.725 and Sec.  156.285)
    We propose to amend paragraphs (a), (g), (h), and (j)(5) of Sec.  
155.725 and

[[Page 70714]]

Sec.  156.285(b)(1) and (b)(4) to provide clarity regarding the 
effective dates for coverage that all SHOP Exchanges must establish. We 
are continuing to evaluate whether other provisions of our regulations 
would require conforming amendments to reflect these proposals, and 
welcome comment on this topic as well as on these proposals generally. 
First, we propose to remove the reference at current Sec.  
155.725(a)(1) to the start of the initial open enrollment period for 
2014 coverage, and the reference in current Sec.  155.725(a)(2) to 
Sec.  156.260. The start of the initial open enrollment period for 2014 
coverage occurred in the past and thus the reference to it is no longer 
relevant. We propose to remove the reference to effective dates under 
Sec.  156.260 because we are proposing to specify effective dates in 
Sec.  155.725 or to more directly cross-reference the appropriate 
effective date.
    Second, we propose to amend Sec.  155.725(h) so that SHOPs would 
need only to establish effective dates for employees enrolling in 
coverage during the initial group enrollment and the employee annual 
open enrollment period, rather than for special enrollment periods, 
because SHOPs must ensure that effective dates for employees enrolling 
during special enrollment periods are consistent with the effective 
dates specified in Sec.  155.420(b). We propose to provide this 
flexibility during the initial and annual open enrollment periods in 
order to provide SHOPs with the ability to encourage issuers to 
accommodate coverage effective dates for a group as soon as possible 
under local market conditions. However, we propose to continue to keep 
effective dates for special enrollment periods standardized to ensure a 
minimum standard for special enrollment periods and because there are 
existing mechanisms within Sec.  155.420(b) for a SHOP to achieve 
earlier effective dates for special enrollment periods. At proposed 
paragraph (h)(2), we would also codify the effective dates for coverage 
in the Federally-facilitated SHOP for enrollments during initial and 
annual open enrollment periods. Specifically, we are proposing to 
include language in the SHOP regulations specifying the same effective 
dates that were previously adopted for the Federally-facilitated SHOP 
under our interpretation of the cross reference in Sec.  156.285(b)(4) 
to Sec.  156.260, which in turn cross-references Sec.  155.410(c). 
Former Sec.  155.720(b)(7) conflicted with these cross references, such 
that while Sec.  155.720(b)(7) could have been interpreted to permit 
each SHOP to establish its own rules for effective dates for coverage, 
these cross references appeared to require the use of effective dates 
determined based on Sec.  155.410(c). The effective dates proposed for 
the Federally-facilitated SHOP in this rulemaking are the effective 
dates HHS interpreted as applicable to the Federally-facilitated SHOP 
under the former rule. However, we note that the dates set forth in 
Sec.  155.725(h)(2) would apply only to the Federally-facilitated SHOP 
and State-based SHOPs would be free to establish their own effective 
dates for initial and annual open enrollment.
    Third, we propose several amendments to paragraph Sec.  155.725(g) 
regarding enrollment for newly qualified employees. A newly qualified 
employee is an employee who becomes eligible to participate in the 
employer's group health plan outside of a qualified employer's initial 
or annual enrollment period; for example, because he or she was hired 
outside of those periods. We are moving current paragraph (g) to 
proposed paragraph (g)(1), and are proposing amendments to the existing 
language to make explicit our interpretation of current paragraph (g), 
which is that a newly qualified employee becomes eligible for an 
enrollment period that begins on the first day of becoming a newly 
qualified employee regardless of whether the employee is subject to a 
waiting period. The current rule text could also be read to mean that a 
newly qualified employee's coverage would begin on the first day of 
becoming a qualified employee, and this proposal will make it clear 
that this is not our interpretation of the provision. Thus, in the case 
of a newly hired employee offered coverage by an employer, the 
employee's enrollment period would begin on the date of his or her 
hiring. Additionally, we propose that the duration of a newly qualified 
employee's enrollment period be at least 30 days. We propose a minimum 
of 30 days because we believe that a shorter period would not provide 
an employee sufficient time to compare QHPs where employee choice is 
offered. Where the employee is subject to a waiting period in excess of 
45 days, we propose that the duration of the employee's enrollment 
period extend until 15 days before what would be the conclusion of the 
waiting period if the employee selected a plan on the first day of 
becoming eligible. We propose this to permit an employee in an extended 
waiting period more time to select a plan. We note that if an employee 
waits to choose a plan until the end of such an extended enrollment 
period, this could have the effect of further delaying the effective 
date of coverage, consistent with Sec.  147.116(a).
    We also propose to add a new paragraph (g)(2) in Sec.  155.725 to 
provide that the effective date for a newly hired employee would be 
determined using the same rule for initial and open enrollments that 
would be established by the SHOP under proposed Sec.  155.725(h). Thus, 
in the Federally-facilitated SHOP, coverage effective dates for newly 
qualified employees would be established according to Sec.  
155.725(h)(2): plan selections made between the first and the fifteenth 
day of any month would be effective the first day of the following 
month, and plan selections made between the 16th and the last day of 
any month would be effective the first day of the second following 
month. A newly qualified employee may also be subject to a waiting 
period under Sec.  147.116, however, and in such cases the effective 
date may be on the first day of a month that is later than the month in 
which coverage would take effect under the usual rules established by 
the SHOP under Sec.  155.725(h). However, in no case could the 
effective date fail to comply with the limitations on waiting period 
durations at Sec.  147.116 of this subchapter. For example, in the case 
of an employee who was hired and offered coverage on March 1, where the 
employer has a waiting period of 60 days, the earliest coverage 
effective date under proposed Sec.  155.725(g)(2) would be May 1. If 
the newly qualified employee selects a plan on March 5, the coverage 
would be effective May 1.
    We seek comment on all aspects of this proposal, including on the 
interactions between a waiting period and the effective date, adverse 
selection concerns, and ease of administration.
    Fourth, we propose to amend paragraph Sec.  155.725(j)(5) to make 
it more clear that the effective dates for special enrollment periods 
in the SHOP should be determined according to Sec.  155.420(b).
    Fifth, we propose to harmonize Sec.  156.285(b)(1) and (4) with the 
proposed amendments to effective dates described above, to specify that 
QHP issuers must abide by the effective dates established under Sec.  
155.725 and must enroll qualified employees in accordance with the 
qualified employer's initial and annual enrollment periods in Sec.  
155.725.
    We also propose to amend Sec.  155.725(b) to harmonize rolling 
enrollment in the SHOP with the regulations applicable to guaranteed 
availability in States with merged

[[Page 70715]]

individual and small group markets. Section 147.104(b)(2) requires that 
all individual or small group health insurance coverage sold in a State 
with merged individual and small group risk pools be offered on a 
calendar year basis, meaning that it must end on December 31 of the 
year in which the policy was issued. Section 155.725(b), in contrast, 
requires that SHOPs permit qualified employers to purchase coverage for 
a small group at any point throughout the calendar year, and that SHOPs 
ensure that a participating group's plan year lasts for 12 months 
beginning with the first effective date of coverage. Section 155.725(b) 
was intended to ensure that qualified employers can offer health 
insurance through the SHOP at any point during the year while receiving 
a guaranteed rate 12 months following the purchase of coverage, 
consistent with the current practice in the small group market. We now 
propose to harmonize these two provisions, by proposing that SHOP plans 
in a State with merged risk pools would terminate on December 31st of 
the year in which they were issued, even if certain qualified 
employers' plan years would thus be shorter than 12 months. This 
proposal would not affect a small employer's ability to enroll in 
coverage at any point in the year. Instead, it would standardize the 
renewal date of such a plan in a State with merged risk pools at the 
beginning of each calendar year.
    We also propose to modify paragraph (i) to permit a SHOP to elect 
to renew a qualified employer's offer of coverage where the employer 
has taken no action during its annual election period to modify or 
withdraw the prior year's offer of coverage. The qualified employer's 
offer would not be automatically renewed under this proposal if the 
employer is no longer eligible to participate in the SHOP--for example, 
because it no longer operates a business within the State served by the 
SHOP or no longer has at least one employee. Renewal would also not be 
automatic if the employer is offering a single QHP and that QHP will no 
longer be available through the SHOP. We are proposing this 
modification at the request of State-based SHOPs that desire to conform 
to existing small group market practice regarding automatic annual 
renewal of coverage for an employer group. A SHOP would not be required 
to implement this rule.
    Finally, we also propose to add paragraph (k) to make clear that 
SHOP coverage may not be effectuated if the policy may not be issued to 
the employer because the group fails to meet an applicable minimum 
participation rate.
f. Termination of Coverage (Sec.  155.735 and Sec.  156.285)
    In Sec.  155.735, we propose to amend paragraph (c)(2)(ii) to 
specify that in the Federally-facilitated SHOP, a termination of 
coverage due to non-payment of premiums would be effective on the last 
day of the month for which the Federally-facilitated SHOP received full 
payment. Prior to this proposal, the effective date of such a 
termination was not specified in the rule.
    In paragraph (c)(2)(iii), we propose to specify that, in the 
Federally-facilitated SHOP, a qualified employer whose coverage was 
terminated for non-payment of premiums could be reinstated in its prior 
coverage only once per calendar year. We propose that the number of 
reinstatements for a given qualified employer be counted on a calendar 
year basis, rather than on a plan year basis, for ease of 
administration. The purpose of this proposal is to discourage employers 
in the Federally-facilitated SHOP from repeatedly failing to make 
timely payments for health insurance coverage. We note that any 
employer whose group's coverage is terminated under this proposal could 
reapply to the Federally-facilitated SHOP by submitting a new 
application. However, the enrollment based on the new application would 
be a new plan, not a reinstatement into the plan that was terminated 
based on non-payment, and therefore amounts paid toward the deductible 
and annual limitations on cost-sharing would not be carried over from 
the previous plan, and information submitted on the original 
application, including basic information about the employer group and 
the employee roster, would not carry over to the new application.
    In paragraphs (d)(1)(iii) and (g) of Sec.  155.735 and in Sec.  
156.285(d)(1)(ii), we propose to amend certain existing notice 
requirements by transferring them from QHP issuers to the SHOP. Under 
current Sec.  156.285(d)(1)(ii), a QHP issuer must notify an enrollee 
and a qualified employer if the enrollee or employer is terminated due 
to a loss of eligibility, due to a qualified employer's non-payment of 
premiums, due to a rescission of coverage for fraud or 
misrepresentation of material fact in accordance with Sec.  147.128, or 
because the QHP issuer elects not to seek recertification with the 
Exchange for its QHP. We propose to transfer two of these notice 
requirements to the SHOP. At Sec.  155.735(g)(1), we propose that the 
SHOP be required to provide notice to the enrollee if an enrollee is 
terminated due to non-payment of premium or a loss of eligibility for 
participation in the SHOP, including when an enrollee loses eligibility 
due to a qualified employer's loss of eligibility. We also propose at 
Sec.  155.735(g)(2) that the SHOP be required to provide notice to 
qualified employers for termination due to nonpayment of premiums or 
where applicable, due to loss of the employer's eligibility. This 
provision would generally apply to terminations for loss of an 
employer's eligibility when the employer lost eligibility for a reason 
other than the employer reporting information to the SHOP that resulted 
in the loss of eligibility. For example, this provision would apply 
where the SHOP learned through an employee appeals process that the 
employer refused to provide coverage to all full-time employees, which 
is a condition of the qualified employer's eligibility under Sec.  
155.710(b)(2). Typically, we expect employers to lose eligibility 
voluntarily because they have informed the SHOP that they no longer 
intend to offer coverage to all full-time employees or because they no 
longer have a business location in the SHOP's service area. Where the 
employer is actively informing the SHOP that it no longer meets the 
SHOP eligibility requirements, we believe providing notification to the 
employer of the loss of eligibility would be unnecessary.
    HHS is proposing to shift these notice requirements to the SHOP 
because HHS believes the SHOP would be in a better position to provide 
notices to enrollees and qualified employers with respect to 
terminations for loss of eligibility and nonpayment of premiums. The 
SHOP will have better information regarding the timing of non-payment 
and why an enrollee or employer lost his or her eligibility than a QHP 
issuer.
    Through the proposed amendments to the definition of ``enrollee'' 
discussed above, we also propose to expand the class of people who 
would receive notices under the proposed amendments to Sec.  155.735 
and Sec.  155.285(d)(1)(ii). Thus, for example, notice would be given 
by the SHOP under these amendments to a dependent of a qualified 
employee who is enrolled in coverage through the SHOP when the 
dependent loses coverage.
    Through proposed amendments to Sec.  156.285(d)(1)(ii) and Sec.  
155.735(d)(1)(iii), we also propose that QHP issuers in the SHOP would 
continue to be required to provide notice to qualified employers and 
enrollees when an enrollee's coverage is terminated due to a rescission 
in

[[Page 70716]]

accordance with Sec.  147.128, and when an enrollee's coverage is 
terminated due to an election by a QHP issuer not to seek 
recertification with the Exchange for its QHP. We are proposing to 
amend Sec.  155.735(d)(1)(iii), which currently refers to terminations 
of SHOP coverage due to a QHP's termination or decertification, by 
adding a reference to terminations of SHOP coverage due to the non-
renewal of a QHP's certification. By proposing to include a cross-
reference to Sec.  155.735(d)(1)(iii) in Sec.  156.285(d)(1)(ii), we 
also propose to expand the notice a QHP issuer must provide regarding 
the discontinuation of a product in which a qualified employee is 
enrolled to include circumstances where the QHP is terminated or is 
decertified as described in Sec.  155.1080. In HHS's view, QHP issuers 
are best positioned to provide meaningful notice when coverage is 
terminated due to a rescission in accordance with Sec.  147.128 or when 
the QHP is terminated, decertified, or its certification is not 
renewed.
    We also propose that each notice required under Sec.  155.735 (g) 
and the proposed amendments to Sec.  156.285(d)(1)(ii) would have to be 
provided by the SHOP or QHP issuer promptly and without undue delay. We 
propose this timeframe because we believe it provides flexibility to 
SHOPs and issuers when such notices may be sent either electronically 
or by mail. We would consider an electronic notice that was sent no 
more than 24 hours after the SHOP or QHP issuer determined coverage was 
to be terminated to have been provided ``promptly and without undue 
delay.'' In the case of paper notices, we would consider notices that 
were mailed no later than 48 hours after the SHOP determined coverage 
was to be terminated to have been provided ``promptly and without undue 
delay.''
7. Exchange Functions: Certification of Qualified Health Plans
a. Certification Standards for QHPs (Sec.  155.1000)
    In Sec.  155.1000, we propose to add paragraph (d) to harmonize QHP 
certification with rolling enrollment in the SHOP. Under Sec.  
155.725(b), an employer may start participating in the SHOP at the 
beginning of any month in the calendar year. Such coverage lasts for 12 
months, unless earlier terminated.\36\ This means that groups enrolled 
in the SHOP might have coverage that does not begin and end on a 
calendar year basis. A QHP that is certified on a calendar year basis 
is not, however certified to cover an employer group after the calendar 
year of its certification ends, even if the group's plan year extends 
into the next calendar year. Therefore, we propose that if a SHOP 
certifies QHPs on a calendar year basis, the certification must be in 
effect for the duration of any employer's plan year that began in the 
calendar year for which the plan was certified. Under this approach, 
the certification could be in effect beyond the end of the calendar 
year of the QHP's certification if the plan year of an employer group 
enrolled in the QHP ended later than the end of that calendar year. In 
no case in which a SHOP certified QHPs on a calendar year basis would 
the certification be in effect after December of the year following the 
calendar year for which the plan was certified.
---------------------------------------------------------------------------

    \36\ As discussed in section III.G.7.d of this proposed rule, 
under amendments proposed in this rulemaking, SHOP plans in States 
that have merged their individual and small group markets would 
terminate on December 31st of the year in which they were issued, 
even if the plan year would thus be shorter than 12 months.
---------------------------------------------------------------------------

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

1. General Provisions
a. Definitions (Sec.  156.20)
    For the reasons described in section III.A.1 of this preamble, we 
propose to amend Sec.  156.20 to add a definition of ``plan,'' which 
would have the meaning given the term in Sec.  144.103 as proposed to 
be amended in this rulemaking.
b. FFE User Fee for the 2016 Benefit Year (Sec.  156.50)
    Section 1311(d)(5)(A) of the Affordable Care Act contemplates an 
Exchange charging assessments or user fees to participating health 
insurance issuers, or otherwise generating funding to support its 
operations. In addition, 31 U.S.C. 9701 permits a Federal agency to 
establish a charge for a service provided by the agency. If a State 
does not elect to operate an Exchange or does not have an approved 
Exchange, section 1321(c)(1) of the Affordable Care Act directs HHS to 
operate an Exchange within the State. Accordingly, at Sec.  156.50(c), 
we specified that a participating issuer offering a plan through an FFE 
must remit a user fee to HHS each month that is equal to the product of 
the monthly user fee rate specified in the annual HHS notice of benefit 
and payment parameters for the applicable benefit year and the monthly 
premium charged by the issuer for each policy under the plan where 
enrollment is through an FFE.
    OMB Circular No. A-25R establishes Federal policy regarding user 
fees, and specifies that a user charge will be assessed against each 
identifiable recipient for special benefits derived from Federal 
activities beyond those received by the general public. As in benefit 
years 2014 and 2015, issuers seeking to participate in an FFE in 
benefit year 2016 will receive two special benefits not available to 
the general public: (1) The certification of their plans as QHPs; and 
(2) the ability to sell health insurance coverage through an FFE to 
individuals determined eligible for enrollment in a QHP. These special 
benefits are provided to participating issuers through the following 
Federal activities in connection with the operation of FFEs:
     Provision of consumer assistance tools.
     Consumer outreach and education.
     Management of a Navigator program.
     Regulation of agents and brokers.
     Eligibility determinations.
     Enrollment processes.
     Certification processes for QHPs (including ongoing 
compliance verification, recertification and decertification).
     Administration of a SHOP Exchange.
    OMB Circular No. A-25R further states that user charges should 
generally be set at a level so that they are sufficient to recover the 
full cost to the Federal government of providing the service when the 
government is acting in its capacity as sovereign (as is the case when 
HHS operates an FFE). Accordingly, we propose to set the 2016 user fee 
rate for all participating FFE issuers at 3.5 percent. The user fee 
rate assessed on FFE issuers is the same as the 2015 user fee rate. In 
addition, we intend to seek an exception to OMB Circular No. A-25R, 
which requires that the user fee charge be sufficient to recover the 
full cost to the Federal government of providing the special benefit. 
We seek this exception to ensure that the FFE can support many of the 
goals of the Affordable Care Act, including improving the health of the 
population, reducing health care costs, and providing access to health 
coverage as advanced by Sec.  156.50(d). We seek comments on this 
proposal.
2. Essential Health Benefits Package
a. State Selection of Benchmark (Sec.  156.100)
    We propose to amend paragraph (c) of Sec.  156.100 to delete the 
language regarding the default base-benchmark plan in the U.S. 
territories of Guam, the U.S. Virgin Islands, American Samoa,

[[Page 70717]]

and the Northern Mariana Islands. The change reflects HHS's 
determination, described in more detail in section III.A.1.b of this 
proposed rule, that certain provisions of the PHS Act enacted in title 
I of the Affordable Care Act that apply to health insurance issuers are 
appropriately governed by the definition of ``State'' set forth in that 
title. Therefore, the rules regarding EHB (section 2707 of the PHS Act) 
do not apply to health insurance issuers in the U.S. territories. We 
are also proposing to make a technical change to this section by 
replacing ``defined in Sec.  156.100 of this section'' with ``described 
in this section.'' We note that this has no effect on Medicaid and CHIP 
programs and that Alternative Benefit Plans will still have to comply 
with the essential health benefit requirements. We seek comments on 
these proposals.
b. Provision of EHB (Sec.  156.115)
    Section 1302(b)(1) of the Affordable Care Act provides that the 
Secretary is to define the essential health benefits (EHB) that must be 
covered under section 1302(a)(1) by issuers under non-grandfathered 
small employer and individual market insurance plans. The Secretary's 
definition must include 10 enumerated benefit categories, and result in 
a benefit package with a ``scope'' that is equal to that under a 
``typical'' employer plan ``as determined by the Secretary.'' In our 
initial regulations defining EHB, we adopted a benchmark plan approach, 
codified at Sec.  156.100 and Sec.  156.110, under which each State can 
elect to base the EHB that must be covered in that State on one of 
several specified ``benchmark'' plans (for example the largest health 
plan by enrollment in any of the three largest small group insurance 
products).
    The benchmark plan selected by the State may be modified in certain 
ways permitted under the regulations, and must be modified to comply 
with requirements specified in the regulations. For example, we require 
under Sec.  156.115(a)(3) that the benefit design of the plan must 
comply with the mental health parity requirements under the Mental 
Health Parity and Addiction Equity Act, even where those requirements 
would not otherwise apply. In this proposed rule, we are proposing 
certain new EHB requirements that would have to be met in order for an 
issuer to be considered to be offering EHB.
    One of the 10 categories of benefits that must, under section 
1302(b)(1)(G) of the Act, be included under the Secretary's definition 
of EHB is ``[r]ehabilitative and habilitative services and devices.'' 
If a benchmark plan does not include habilitative services, Sec.  
156.110(c)(6) of the current EHB regulations requires the issuer to 
cover habilitative services as specified by the State under Sec.  
156.110(f) or, if the State does not specify, then the issuer must 
cover habilitative services in the manner specified in Sec.  
156.115(a)(5). Section 156.115(a)(5) states that a health plan may 
provide habilitative coverage by covering habilitative services 
benefits that are similar in scope, amount, and duration to benefits 
covered for rehabilitative services or otherwise determine which 
services are covered and report the determination to HHS. In some 
instances, those options have not resulted in comprehensive coverage 
for habilitative services. Therefore, we propose amending Sec.  
156.115(a)(5) to establish a uniform definition of habilitative 
services that may be used by States and issuers. In addition, we 
propose to remove Sec.  156.110(c)(6) because that provision gives 
issuers the option to determine the scope of habilitative services.
    We believe that adopting a uniform definition of habilitative 
services would minimize the variability in benefits and lack of 
coverage for habilitative services versus rehabilitative services. 
Defining habilitation services clarifies the difference between 
habilitative and rehabilitation services. Habilitative services, 
including devices, are provided for a person to attain, maintain or 
prevent deterioration of a skill or function never learned or acquired 
due to a disabling condition. Rehabilitation services, including 
devices, on the other hand, are provided to help a person regain, 
maintain or prevent deterioration of a skill or function that has been 
acquired but then lost or impaired due to illness, injury, or disabling 
condition.
    We seek comment on whether we should maintain the current policy, 
define habilitative services as described below or permit the use of 
one or more other specified definitions.
    The proposed definition comes from the Glossary of Health Coverage 
and Medical Terms: \37\ ``health care services that help a person keep, 
learn, or improve skills and functioning for daily living. Examples 
include therapy for a child who is not walking or talking at the 
expected age. These services may include physical and occupational 
therapy, speech-language pathology and other services for people with 
disabilities in a variety of inpatient and/or outpatient settings.''
---------------------------------------------------------------------------

    \37\ http://www.cms.gov/CCIIO/Resources/Files/Downloads/uniform-glossary-final.pdf.
---------------------------------------------------------------------------

    We considered and invite comment on whether we should require 
certain specified services to be included as habilitative services.
    We are not proposing any changes to Sec.  156.110(f). Several 
States have made such a determination following benchmark selection for 
the 2014 plan year, and we wish to continue to defer to States on this 
matter as long as the State definition complies with EHB policies 
including non-discrimination. Therefore, under the proposed amendments, 
if the base-benchmark plan does not include coverage of habilitative 
services, the State may determine which services are included in that 
category, as stated in Sec.  156.110(f). If the State does not 
supplement missing habilitative services or does not supplement in an 
EHB-compliant manner, issuers should cover habilitative services as 
defined in Sec.  156.115(a)(5)(i).
    We also propose to revise current Sec.  156.115(a)(5)(ii) to 
provide that plans required to provide EHB cannot impose limits on 
coverage of habilitative services that are less favorable than any such 
limits imposed on coverage of rehabilitative services. Since the 
statutory category includes both rehabilitative and habilitative 
services and devices, we interpret the statute to require coverage of 
each. Therefore, issuers that previously excluded habilitative 
services, but subsequently added them, would be required under our 
proposal to impose separate limits on each service rather than 
retaining the rehabilitative services visit limit and having 
habilitative services count toward the same visit limit. Because we are 
proposing to establish a uniform definition of habilitative services in 
new Sec.  156.115(a)(5)(i), we are also proposing to delete Sec.  
156.110(c)(6), which would remove the option for issuers to determine 
the scope of the habilitative services. In Sec.  156.110 we make a 
technical change to amend the list structure of paragraph (c) by 
replacing the ``and'' in (c)(5) with a period and adding an ``and'' at 
the end of (c)(4).
    In the preamble of the EHB Rule, we stated that pediatric services 
should be provided until at least age 19 (78 FR 12843). States, 
issuers, and stakeholders have requested clarification on this 
standard. To provide this clarification, we propose amending Sec.  
156.115(a) to add paragraph (a)(6), specifying that EHB coverage for 
pediatric services should continue until the end of the plan year in 
which the enrollee turns 19 years of age. This is proposed as a minimum 
requirement.
    This age limit is consistent with section 1201 of the Affordable 
Care

[[Page 70718]]

Act,\38\ which phased in the prohibition on preexisting conditions 
exclusions by first prohibiting them for children under age 19, as well 
as the age limit for eligibility to enroll in CHIP. In addition, as 
noted in the EHB Rule, this proposed policy aligns with Medicaid (78 FR 
12843), which requires States to cover children up to age 19 with 
family incomes up to 100 percent of the Federal Poverty Level (FPL) as 
a mandatory eligibility category. We propose the end of the plan year 
in which one attains age 19 is best for continuity of care. We seek 
comment on this proposed standard.
---------------------------------------------------------------------------

    \38\ Section 1201 of the Affordable Care Act added section 2704 
of the PHS Act, which prohibited preexisting condition exclusions. 
Section 1255 of the Affordable Care Act states that the provisions 
of section 2704 of the PHS Act, as they apply to enrollees who are 
under 19 years of age, shall become effective for plan years 
beginning on after September 23, 2010.
---------------------------------------------------------------------------

c. Collection of Data To Define Essential Health Benefits (Sec.  
156.120)
    In the Essential Health Benefits Bulletin,\39\ we first stated our 
intent to define EHB based on a benchmark plan. We outlined ten 
possible options, including four different plan benchmark types, from 
which a State could select its benchmark plan. We finalized this 
benchmark approach in the EHB Rule at Sec. Sec.  156.100 and 156.110 of 
our regulations.
---------------------------------------------------------------------------

    \39\ Essential Health Benefits Bulletin (December 16, 2011), 
available at: http://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
---------------------------------------------------------------------------

    In the Patient Protection and Affordable Care Act; Data Collection 
to Support Standards Related to Essential Health Benefits; Recognition 
of Entities for the Accreditation of Qualified Health Plans final rule 
(EHB Data Collection Rule),\40\ we required issuers in each State that 
offered the three largest health insurance products by enrollment as of 
March 31, 2012 to submit certain data to HHS by September 4, 2012. 
These data, gathered from 2012 plans, were used to determine, for each 
State, the benefits and limitations of the three largest small group 
products by enrollment, which were potential benchmark plans.
---------------------------------------------------------------------------

    \40\ Patient Protection and Affordable Care Act; Data Collection 
to Support Standards Related to Essential Health Benefits; 
Recognition of Entities for the Accreditation of Qualified Health 
Plans, 77 FR 42658 (July 20, 2013) (codified at 45 CFR part 156).
---------------------------------------------------------------------------

    The EHB Rule unintentionally deleted Sec.  156.120, which included 
the data submission requirement. We are proposing to allow each State 
to select a new base-benchmark plan for the 2017 plan year. We would 
allow States to choose a 2014 plan that meets the requirements of Sec.  
156.110 as the new base-benchmark plan, so that issuers can design 
substantially equal EHB-compliant products for the 2017 plan year. We 
believe that this would ultimately create efficiencies for issuers in 
designing plans. Specifically, the use of updated base-benchmark plans 
should minimize confusion because most 2014 plans are compliant with 
Sec.  156.110 and the various market reform requirements that became 
applicable for plan and policy years beginning in 2014. Those 2014 
market reform requirements include removal of annual and lifetime 
dollar limits on EHBs and compliance with the Mental Health Parity and 
Addiction Equity Act of 2008.
    If a category of base-benchmark plans under Sec.  156.100(a)(1)-(4) 
does not include a plan that that meets the requirements of Sec.  
156.110, we are considering permitting the State to select a base-
benchmark plan that does not meet the requirements of Sec.  156.110 in 
that category. However, States would still need to supplement their 
base-benchmark plan to ensure that all 10 categories of benefits are 
covered in a benchmark plan. We seek comment on this issue, including 
alternate ways of addressing situations in which a State has few 
potential base-benchmark plans that meet the requirements of Sec.  
156.110 from which to choose.
    We now propose to re-codify part of Sec.  156.120, in a manner 
similar to that which appeared in our regulations prior to the 
effective date of the EHB Rule. We propose to require a State that 
chooses a new benchmark plan in the State or, if a State does not 
choose a new benchmark plan, the issuer of the default benchmark plan 
must provide benchmark plan data as of a date specified by HHS. We 
anticipate collection of new benchmark plan data for the 2017 plan year 
and the data discussed in Sec.  156.120(b), including administrative 
data and descriptive information pertaining to all health benefits in 
the plan, treatment limitations, drug coverage, and exclusions. We 
believe that this information is already included in the issuer's form 
filing that the issuer submitted to the State regulator. The 
definitions previously adopted for the terms health benefits, health 
insurance product, health plan, small group market, State and treatment 
limitations are still applicable. We seek comment on this proposal.
d. Prescription Drug Benefits (Sec.  156.122)
    Another category of benefits that must be covered under the 
Secretary's definition of EHB is ``prescription drugs'' under section 
1302(b)(1)(F). While we generally implemented this part of the 
definition by deferring to the scope of coverage under a benchmark 
plan, we imposed specific additional requirements under Sec.  156.122. 
For example, under current Sec.  156.122(a)(2), we require that an 
issuer's drug list be submitted to the Exchange, the State, or United 
States Office of Personnel Management (OPM) as appropriate. Under this 
section, we are proposing several revisions to the EHB prescription 
drug benefit requirements.
    First, we are proposing to retain Sec.  156.122(a)(2) with one 
modification to change ``drug list'' to ``formulary drug list'' for 
uniformity purposes for this section. We are also proposing to renumber 
this paragraph from Sec.  156.122(a)(2) to Sec.  156.122(a)(1).
    Under our current regulations at Sec.  156.122(a)(1) that we are 
proposing to replace, EHB plans are required to cover the greater of 
one drug per United States Pharmacopeia (USP) category or class or the 
same number of drugs in each USP category and class as the State's EHB 
benchmark plan. To implement this requirement, we worked with issuers, 
States, the NAIC, and other stakeholders to facilitate the use of the 
USP classification system based on USP Model Guidelines Version 5.0. We 
also provided a tool for States and issuers to count clinically 
distinct drugs and categorize them into the USP system.
    The intention of Sec.  156.122(a)(1) was to require comprehensive 
coverage and establish a common organizational tool for plans to report 
drug coverage. However, we have found that issuers have often had 
difficulty developing formularies that conform to the USP drug category 
and class system. Because the USP system was developed for the Medicare 
population, some drugs that are likely to be prescribed for the larger 
EHB population were not reflected. There were also many operational 
challenges associated with the drug count standard: Newly approved 
drugs were not counted; some drugs were counted in multiple USP 
classes; discontinued drugs had to be manually removed from the 
counting tool; and issuers had to submit justifications to explain 
their inability to meet the benchmark count due to system issues. We 
also found that the drug count review did not encourage the inclusion 
of newly-approved drugs and did not provide an incentive for issuers to 
cover innovative products or other products that would not be counted 
using this counting standard. For these reasons, we are proposing an 
alternative to the above drug count standard, which we discuss below. 
We are also seeking comment on a second alternative that

[[Page 70719]]

could be adopted in lieu or in combination with our proposal below.
    We are proposing to replace the drug count standard with a 
requirement in Sec.  156.122(a)(2) that plans adopt a pharmacy and 
therapeutics (P&T) committee and use that committee to ensure that the 
plan's formulary drug list covers a sufficient number and type of 
prescription drugs. We are proposing P&T committee standards that must 
be met for the prescription drug coverage to be considered EHB. We 
believe that the use of a P&T committee in conjunction with the other 
standards that we are proposing would help ensure that an issuer's 
formulary drug list covers a broad array of prescription drugs. The 
Medicare Part D Prescription Drug Program (Medicare Part D), the NAIC 
and other stakeholders have defined standards by which a P&T committee 
should function.\41\ We are interested in comments regarding these 
standards and whether we should adopt them in lieu of or in addition to 
the standards we are proposing. If this proposal is finalized, plans 
that are required to cover EHB would cover drugs based on a qualitative 
rather than merely quantitative perspective, which we believe will 
provide enrollees with a more robust formulary drug list.
---------------------------------------------------------------------------

    \41\ Medicare Part D plans are required to maintain P&T 
committees by the Social Security Act Sec.  1860D-4(b)(3)(G) 
codified at 42 CFR Sec.  423.120(b), 42 CFR Sec.  423.272(b)(2). 
NAIC has a Model Act entitled Health Carriers Prescription Drug 
Benefit Management Model Act (July 2003) that includes P&T Committee 
provisions at: http://www.naic.org/store/free/MDL-22.pdf.
---------------------------------------------------------------------------

    We propose to specify P&T committee standards on membership, 
meetings, and establishment and development of a formulary drug list. 
For P&T committee membership, we propose requiring the P&T committee to 
include members from a sufficient number of clinical specialties to 
adequately represent the needs of enrollees. For instance, we would 
expect that the P&T committee members include experts in chronic 
diseases and in the care of individuals with disabilities. We propose 
that the majority of members be practicing physicians, practicing 
pharmacists and other practicing health care professionals. We also 
solicit comments on whether the types of other practicing health care 
professionals should be more narrowly defined to only include other 
practicing health care professionals who can prescribe drugs. 
Additionally, we propose to require that members of the P&T committee 
that have a conflict of interest with respect to the issuer or a 
pharmaceutical manufacturer would be permitted to sit on the P&T 
committee but would be prohibited from voting on matters for which the 
conflict exists. In addition to these requirements, we would also 
propose that at least 20 percent of the P&T committee's membership must 
have no conflict of interest with respect to either the issuer or to 
any pharmaceutical manufacturer. Under these standards, a member who 
holds more than one health care license, for example, as a nurse 
practitioner and a pharmacist, would only count as one person. We also 
solicit comments on the percentage of committee members that should 
have no conflict of interest, and the proposed requirement that the 
members of the P&T committee with conflicts of interest should be 
permitted to sit on the P&T committee but would be prohibited from 
voting on matters for which the conflict exists. We considered 
requiring a set number of participants to be independent and have no 
conflicts of interest, but we were concerned that absent a limitation 
on the total number committee members, requiring a specific number of 
committee members to be independent and not have a conflict of interest 
would have a variable impact, depending on the size of the P&T 
committee. We are also proposing that the P&T committee would be 
responsible for defining a reasonable definition of conflict of 
interest and for managing the conflicts of interest of its committee 
members. As part of this standard, the P&T committee would require its 
P&T committee members to sign a conflict of interest statement 
revealing economic or other relationships with entities, including the 
issuer and any pharmaceutical manufacturers, affected by drug coverage 
decisions that could influence committee decisions. We solicit comments 
on this proposed standard, including the implementation of this 
conflict of interest standard, whether there are additional conflict of 
interest standards that should apply and what would constitute a 
conflict of interest. In particular, we seek comments on what could be 
considered a permissible relationship with respect to the issuer or a 
pharmaceutical manufacturer. If this provision is finalized, we would 
consider providing further guidance regarding conflict of interest.
    We also propose that the P&T committee must meet at least 
quarterly, and maintain written documentation of all decisions 
regarding formulary drug list's development and revision. With respect 
to formulary drug list establishment and management, we are proposing 
that the P&T committee must develop and document procedures to ensure 
appropriate drug review and inclusion on the formulary drug list, as 
well as make clinical decisions based on scientific evidence, such as 
peer-reviewed medical literature, and standards of practice, such as 
well-established clinical practice guidelines. The P&T committee must 
consider the therapeutic advantages of prescription drugs in terms of 
safety and efficacy when selecting formulary drugs and making 
recommendations with respect to their formulary tier. The P&T committee 
must review both newly FDA-approved drugs and new uses for existing 
drugs. We also propose that a P&T committee must ensure that an 
issuer's formulary drug list covers a range of drugs across a broad 
distribution of therapeutic categories and classes and recommended drug 
treatment regimens that treat all disease states and does not 
substantially discourage enrollment by any group of enrollees.
    Lastly, we propose to require that issuers' formularies provide 
appropriate access to drugs that are included in broadly accepted 
treatment guidelines and which are indicative of and consistent with 
general best practice formularies in widespread use. Broadly accepted 
treatment guidelines and general best practices could be based on 
industry standards or other appropriate guidelines that are issued by 
expert organizations that are current at the time. For instance, 
broadly accepted treatment guidelines could include guidelines provided 
in the National Guideline Clearinghouse (NGC), which is a publicly 
available database of evidence-based clinical practice guidelines and 
related documents.\42\ As a result of this proposed policy, we would 
expect that a health plan's formulary drug list would ensure that 
appropriate access is being afforded to drugs in widely accepted 
national treatment guidelines and which are indicative of general best 
practices at the time. Given our proposal to use broadly accepted 
treatment guidelines and best practices, we would also expect that 
plans' formulary drug lists be similar to those formulary drug lists 
then currently in widespread use. We also note that States have primary 
responsibility for enforcing EHB requirements and if finalized, States 
would be responsible for the oversight and enforcement of the P&T 
committee standards. Currently, for QHPs, we have provided States with 
tools to review formulary drug lists and if these provisions are 
finalized, we could consider developing additional tools

[[Page 70720]]

and resources to assist States in reviewing formulary drug lists. We 
seek comment on these proposed revisions to Sec.  156.122(a), including 
the oversight and enforcement of these standards, and whether other 
standards are needed for P&T committees.
---------------------------------------------------------------------------

    \42\ http://www.ahrq.gov/professionals/clinicians-providers/guidelines-recommendations/index.html.
---------------------------------------------------------------------------

    As an alternative to, or in combination with, the above-proposed 
P&T committee requirements, we are also considering whether to replace 
the USP standard with a standard based on the American Hospital 
Formulary Service (AHFS). AHFS is a widely used formulary reference 
system in the private insurance market and is often used for developing 
formularies for the population being covered by EHB. The AHFS system is 
a 4-tier hierarchical drug classification system that is updated and 
published annually by the American Society of Health-System 
Pharmacists. These tiers are grouped based on similar pharmacologic, 
therapeutic, and chemical characteristics. Compared to the USP system, 
the AHFS system is more gradual and has more classifications than the 
USP system. We believe that using the AHFS system that incorporates 
these additional classifications would better ensure that a broader 
distribution of drugs would be required to be covered to the meet the 
drug count standard than in the current USP system where there are 
fewer categories and classes. Because we believe that many issuers are 
already familiar with the AFHS system, we would expect that the impact 
from switching from the USP system would be minimal, and we have 
received comments from stakeholders recommending that we consider using 
AHFS as an alternative to USP.
    We seek comment on the proposed P&T committee standard and whether 
we should consider adopting AHFS or another drug classification system, 
as well as on any other standards that may be appropriate for this 
purpose. We are particularly interested in comments on how to use AHFS 
to develop a minimum standard for issuers to meet. For instance, for 
the AHFS system, we could switch the current minimum standard that 
requires coverage of at least the greater of one drug in every USP 
category and class or the same number of drugs in each USP category and 
class as the State's EHB-benchmark plan to require at least the greater 
of one drug in each AHFS class and subclass or the same number of drugs 
in each AHFS class and subclass as the State's EHB-benchmark plan.
    If we were to finalize a P&T committee process in combination with 
a drug count standard based on either the AHFS system or the USP 
system, we would expect the health plan would establish and maintain 
its formulary drug list in compliance with the P&T committee standards, 
and in addition, the resulting health plan's formulary drug list would 
also need to comply with the drug count standard. However, we seek 
comment on how the drug count system could be used in combination with 
a P&T committee approach, such as specifying that the formulary drug 
list is generally being designed by the P&T committee, but that it must 
also include at least one drug in each AHFS class and subclass or USP 
category and class.
    We could also continue to use the existing USP drug count standard, 
and update the USP drug count system to use a more current version. 
States and issuers are now familiar with the USP drug count standard, 
having used it to develop formularies for the 2014 and 2015 plan years. 
One of the advantages of the USP system is that it is publicly 
available, in comparison to the AHFS, which must be licensed.
    We also recognize that a requirement to transition to a P&T 
committee standard or another drug count standard will require lead 
time for States, issuers and pharmacy benefit managers to implement. 
Therefore, we are proposing to implement Sec.  156.122(a)(2) starting 
with the 2017 plan year. We seek comments on this proposed timing of 
implementation.
    Section 156.122(c) currently requires issuers of EHB plans to have 
procedures in place that allow an enrollee to request and gain access 
to clinically appropriate drugs not covered by the plan. We believe 
this requirement is necessary to ensure that an issuer provides the 
level of drug coverage to cover the EHB category of prescription drugs. 
This requirement, commonly referred to as the ``exceptions process,'' 
applies to drugs that are not included on the plan's formulary drug 
list, as opposed to the appeals process codified at Sec.  147.136, 
which applies if an enrollee receives an adverse benefit determination 
for a drug that is included on the plan's formulary drug list. Under 
current Sec.  156.122(c)(1) (effective in 2015), such procedures must 
include a process that allows an enrollee, the enrollee's designee, or 
the enrollee's prescribing physician (or other prescriber) to request 
an expedited review based on exigent circumstances. Exigent 
circumstances exist when an enrollee is suffering from a serious 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. 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. 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.
    We recognize the importance of the procedures under Sec.  
156.122(c) for enrollees, especially for those with unique and complex 
health conditions. The intention of the exceptions process is to better 
ensure enrollee access to clinically appropriate, non-formulary drugs 
prescribed for them. However, we believe that enrollees who are trying 
to gain access to a drug through the exceptions process laid out in 
current Sec.  156.122(c) would benefit if we set clearer and more 
uniform standards for issuers that receive an exception request. We 
believe that these additional parameters are also needed to better 
ensure that enrollees can obtain drugs that we believe should be 
covered as prescription drugs under the definition of EHB. 
Specifically, we are proposing to build on the expedited exception 
process that we established for 2015 by proposing to also adopt similar 
requirements for the standard exception process. We are also proposing 
to adopt standards for a secondary external review process if the first 
exception request is denied by the plan (regardless of whether the 
exception is requested using the standard process or the expedited 
process).
    Under proposed Sec.  156.122(c), a health plan providing EHB must 
have certain exception processes in place that allow an enrollee, the 
enrollee's designee, or the enrollee's prescribing physician (or other 
prescriber) to request and gain access to clinically appropriate drugs 
not otherwise covered by the health plan, and when an exception 
requested under one of these processes is granted, the plan must treat 
the excepted drug as EHB for all purposes, including accrual to the 
annual limitation on cost-sharing. Proposed Sec.  156.122(c)(1) sets 
forth the standard exception process. Under this process, we are 
proposing that a health plan have a process for an enrollee, the 
enrollee's designee, or the enrollee's prescribing physician (or other 
prescriber) to request a standard review of a decision for a drug is 
not covered by the plan. We propose that the health plan must make its 
coverage determination on a standard exception

[[Page 70721]]

request 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 72 hours after it receives the 
request. We are proposing to require a health plan that grants an 
exception based on the standard review process to provide coverage of 
the non-formulary drug for the duration of the prescription, including 
refills and are clarifying that in such a case the excepted drug would 
be considered EHB for all purposes, including for purposes of counting 
towards the annual limitation on cost sharing. As stated in the EHB 
Rule (78 FR 12845), plans are permitted to go beyond the number of 
drugs offered by the benchmark without exceeding EHB. Therefore, if the 
plan is covering drugs beyond the number of drugs covered by the 
benchmark, all of these drugs are EHB and must count towards the annual 
limitation on cost sharing.
    The expedited exception process currently appears in our 
regulations at Sec.  156.122(c)(1), and we are proposing to move that 
section to a new Sec.  156.122(c)(2) and to replace ``Such procedures 
must include'' with ``A health plan must have'' in current paragraph 
(c)(1) (proposed as a new paragraph (c)(2)(i)).
    In Sec.  156.122(c)(3) we propose that if the health plan denies an 
exception request for a non-formulary drug, the issuer must have 
process for an enrollee, the enrollee's designee, or the enrollee's 
prescribing physician (or other prescriber, as appropriate) to request 
that an independent review organization review the exception request 
and the denial of that request by the plan. For this external exception 
review, we propose to apply the same timing that applied to the initial 
review. Thus, if the enrollee requested the drug under the proposed 
standard process and the request was denied, then the independent 
review organization would have to make its determination and the health 
plan would have to notify the enrollee or enrollee's designee and the 
prescribing physician (or other prescriber, as appropriate) no later 
than 72 hours after the time it receives the external exception review 
request. Likewise, if the initial exception request is for an expedited 
review and that request is denied by the plan, then the independent 
review organization must make its coverage determination and provide 
appropriate notification no later than 24 hours after the time it 
receives the external exception review request. We also propose that 
the independent review organization would have to be accredited by a 
nationally recognized private accrediting organization and the issuer 
could use the same independent review organization for the external 
review for the drug exception process that the plan may contract with 
under the final external review decision under Sec.  147.136. We seek 
comment on this proposal, including whether permitting issuers to use 
the same independent review organization that it may use to conduct 
external reviews under Sec.  147.136 would ensure consumers access to 
an independent review while minimizing the burden on States, plans, and 
issuers.
    As discussed in the 2015 Market Standards Rule, we received 
comments from stakeholders supporting these types of requirements for 
the exception process under Sec.  156.122(c) and these parameters 
reflect our previous guidance on Sec.  156.122(c) under Appendix C of 
the 2014 Letter to Issuers on Federally-facilitated and State 
Partnership Exchanges (2014 Letter to Issuers).\43\ We solicit comments 
on all of the proposed requirements, and whether any additional 
standards are needed for the exception process. Lastly, we are also 
proposing to apply the revised Sec.  156.122(c) to the 2016 plan year, 
and solicit comments on this proposed timing.
---------------------------------------------------------------------------

    \43\ 2014 Letter to Issuers on Federally-facilitated and State 
Partnership Exchanges. http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2014_letter_to_issuers_04052013.pdf.
---------------------------------------------------------------------------

    Under Sec.  156.122(d), we propose adding a requirement to the EHB 
prescription drug benefit that a health plan must publish an up-to-
date, accurate, and complete list of all covered drugs on its formulary 
drug list, including any tiering structure that it has adopted and any 
restrictions on the manner in which a drug can be obtained, in a manner 
that is easily accessible to plan enrollees, prospective enrollees, the 
State, the Exchange, HHS, OPM, and the general public. We also solicit 
comment on whether the formulary tiering information should include 
cost sharing information, such as the enrollee's applicable pharmacy 
deductible (for example, $100), copayment (for example, $20), or cost 
sharing percentage for the enrollee (for example, 20 percent).
    We are proposing that a formulary drug list is easily accessible 
when the general public is able to view the formulary drug list on the 
plan's public Web site through a clearly identifiable link or tab and 
without creating or accessing an account or entering a policy number. 
The general public should be able to easily discern which formulary 
drug list applies to which plan if the issuer maintains multiple 
formularies, and the plan associated with each formulary drug list 
should be clearly identified on the plan's Web site. We are proposing 
this requirement to better ensure transparency of the EHB prescription 
drug benefit and to help consumers make more informed choices about 
their health care coverage.
    As a result of this proposed requirement, we would expect the 
issuers' formulary drug list URL link to be up-to-date and we interpret 
up-to-date to mean that the formulary drug list URL must accurately 
list all of the health plan's covered drugs at that time. We solicit 
comments on this timing. Also, the formulary drug list URL link under 
this section should be the same direct formulary drug list URL link for 
obtaining information on prescription drug coverage in the Summary of 
Benefits and Coverage, in accordance with Sec.  147.200(a)(2)(i)(K). We 
propose that this requirement would be effective beginning with the 
2016 plan year. We solicit comments on these proposed requirements, 
including whether we should require that additional types of 
information be included in the formulary drug list.
    As part of this proposed requirement that issuers' formulary drug 
list must be made available to the general public, we are also 
considering requiring issuers to make this information publicly 
available on their Web sites in a machine-readable file and format 
specified by HHS. The purpose of establishing machine-readable files 
with the formulary drug list data would be to provide the opportunity 
for third parties to create resources that aggregate information on 
different plans. We believe this option would increase transparency by 
allowing software developers to access this information and create 
innovative and informative tools to help enrollees better understand 
plans' formulary drug lists. As an alternative, we are also considering 
whether the formulary drug list information could be submitted to HHS 
though an HHS-designed standardized template, but we recognize that 
there may be challenges with keeping this type of template information 
updated. Thus, we specifically solicit comments on these options, 
including the technical requirements for developing a machine-readable 
file and format for a formulary drug list, as well as other technical 
considerations, such as processes and considerations that should be 
taken into account for the updating of this information under either of 
the options being considered.
    Currently, issuers are permitted to elect the method for providing 
covered

[[Page 70722]]

drugs to enrollees, and may use a mail order pharmacy to do so. While 
this generally is more cost-effective and more convenient for enrollees 
than requiring the enrollee to visit a retail pharmacy to obtain 
prescription drugs, there are circumstances under which obtaining drugs 
via mail order may not be viable. For example, obtaining prescription 
drugs through mail order may not be a viable option when an individual 
does not have a stable living environment and does not have a permanent 
address. In those cases, individuals may not always have the ability to 
keep a mail order pharmacy delivery confidential. There are also cases 
in which a drug needs to be provided immediately (for example, 
antibiotics or pain relievers). In such cases, we do not believe that 
making drugs available only by mail order constitutes fulfilling the 
obligation under 1302(b)(1)(F) of the Affordable Care Act to provide 
prescription drug coverage as part of EHB. We also believe that making 
drugs available only by mail order would discourage enrollment by, and 
thus discriminate against, transient individuals and certain 
individuals who have conditions that they wish to keep confidential.
    Accordingly, under Sec.  156.122(e), we are proposing to add new 
requirements to the EHB prescription drug definition to require that 
enrollees be provided with the option to access their prescription drug 
benefit through retail (brick-and-mortar or non-mail order) pharmacies. 
If finalized, this requirement would mean that a health plan that is 
required to cover the EHB package cannot have a mail order only 
prescription drug benefit. This proposed requirement would still allow 
a health plan to charge a higher cost-sharing amount when obtaining the 
drug at an in-network retail pharmacy than he or she would pay for 
obtaining the same covered drug at a mail-order pharmacy. However, as a 
part of these requirements, we propose to clarify that this additional 
cost sharing for the covered drug would count towards the plan's annual 
limitation on cost sharing under Sec.  156.130 and would need to be 
taken into account when calculating the actuarial value of the health 
plan under Sec.  156.135. Additionally, issuers will still retain the 
flexibility under this proposed policy to charge a lower cost sharing 
amount when obtaining the drug at an in-network retail pharmacy too. 
While this proposal requires coverage of a drug at an in-network retail 
pharmacy, for plans that do not have a network, the enrollee should be 
able to go to any pharmacy to access their prescription drug benefit 
and those plans would, therefore, comply this proposed standard.
    We also recognize as part of this proposed requirement that certain 
drugs have limited access requirements and cannot always be accessed 
through in-network retail pharmacies. For this reason, we are proposing 
that the health plan may restrict access to a particular drug when: (1) 
The FDA has restricted distribution of the drug to certain facilities 
or practitioners (including physicians); or (2) appropriate dispensing 
of the drug requires extraordinary special handling, provider 
coordination, or patient education that cannot be met by a retail 
pharmacy. For instance, certain drugs have a Risk Evaluation and 
Mitigation Strategies (REMS) that include Elements to Assure Safe Use 
that may require that pharmacies, practitioners or healthcare settings 
that dispense the drug to be specially certified and can limit access 
to the drugs to certain health care settings.\44\ We propose that 
additional education or counseling alone would not qualify a drug to be 
restricted to limited distribution to a non-retail pharmacy within the 
overall pharmacy network. If the health plan finds it necessary to 
restrict access to a drug for either of the two reasons listed above, 
it must indicate this restricted access on the formulary drug list that 
we are proposing plans must make publicly available under Sec.  
156.122(d).
---------------------------------------------------------------------------

    \44\ FDA requires a Risk Evaluation and Mitigation Strategies 
(REMS) for certain drugs to ensure that the benefits of a drug or 
biological product outweigh its risks. The following is FDA's list 
of currently approved REMS at: http://www.fda.gov/drugs/drugsafety/postmarketdrugsafetyinformationforpatientsandproviders/ucm111350.htm.
---------------------------------------------------------------------------

    We are soliciting comments on these proposed requirements, 
including whether additional standards should be adopted to ensure 
enrollee access to the EHB prescription drug benefit, or whether 
additional exemptions to accessing drugs at in-network retail 
pharmacies should be permitted. We are proposing these requirements as 
market-wide standards to ensure the uniformity of the EHB prescription 
drug benefit and proposing to implement these requirements beginning 
with the 2017 plan year. However, we are soliciting comments on this 
timing and whether it should be implemented in 2016.
    In addition to the proposed provisions above, we are also aware 
that new enrollees in plans that are required to cover EHB may be 
unfamiliar with what is covered on their new plan's formulary drug 
list, and how to use the plan's prescription drug exceptions process. 
Also, some enrollees whose drugs are covered by the plan's formulary 
may need to obtain prior authorization or go through step therapy in 
order to have coverage for the drug. Since new enrollees may need more 
immediate coverage for drugs that they have been prescribed and are 
currently taking, we urge issuers to temporarily cover non-formulary 
drugs (including drugs that are on an issuer's formulary but require 
prior authorization or step therapy) as if they were on formulary (or 
without imposing prior authorization or step therapy requirements) 
during the first 30 days of coverage. We encourage plans to adopt this 
policy to accommodate the immediate needs of enrollees, while allowing 
the enrollee sufficient time to go through the prior authorization or 
drug exception processes. We are considering whether requirements may 
be needed in this area.
e. Prohibition on Discrimination (Sec.  156.125)
    Section 1302(b)(4) of the Affordable Care Act directs the Secretary 
to address certain standards in defining EHB, including elements 
related to balance, discrimination, the needs of diverse sections of 
the population, and denial of benefits. We have interpreted this 
provision as a prohibition on discrimination by issuers providing EHB. 
Within Sec.  156.125, which implements these provisions, we finalized 
in the EHB Rule that an issuer does not provide EHB if its benefit 
design, or the implementation of its benefit design, discriminates 
based on an individual's age, expected length of life, present or 
predicted disability, degree of medical dependency, quality of life, or 
other health conditions.
    Since we finalized Sec.  156.125, we have become aware of benefit 
designs that we believe would discourage enrollment by individuals 
based on age or based on health conditions, in effect making those plan 
designs discriminatory, thus violating this prohibition. Some issuers 
have maintained limits and exclusions that were included in the State 
EHB-benchmark plan. As we have previously stated in guidance, EHB-
benchmark plans may not reflect all requirements effective for plan 
years starting on or after January 1, 2014. Therefore, when designing 
plans that are substantially equal to the EHB-benchmark plan, issuers 
should design plan benefits, including coverage and limitations, to 
comply with requirements and

[[Page 70723]]

limitations that apply to plans beginning in 2014.\45\
---------------------------------------------------------------------------

    \45\ Guide to Reviewing EHB Benchmark Plans--http://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html#review benchmarks.
---------------------------------------------------------------------------

    We caution both issuers and States that age limits are 
discriminatory when applied to services that have been found clinically 
effective at all ages. For example, it would be arbitrary to limit a 
hearing aid to enrollees who are 6 years of age and younger since there 
may be some older enrollees for whom a hearing aid is medically 
necessary. Although we do not enumerate which benefits fall into each 
statutory EHB category, issuers should not attempt to circumvent 
coverage of medically necessary benefits by labeling the benefit as a 
``pediatric service'', thereby excluding adults.
    We also caution issuers to avoid discouraging enrollment of 
individuals with chronic health needs. For example, if an issuer 
refuses to cover a single-tablet drug regimen or extended-release 
product that is customarily prescribed and is just as effective as a 
multi-tablet regimen, we believe that, absent an appropriate reason for 
such refusal, such a plan design effectively discriminates against, or 
discourages enrollment by, individuals who would benefit from such 
innovative therapeutic options. As another example, if an issuer places 
most or all drugs that treat a specific condition on the highest cost 
tiers, we believe that such plan designs effectively discriminate 
against, or discourage enrollment by, individuals who have those 
chronic conditions.
    As we indicated in the 2014 Letter to Issuers, we will notify an 
issuer when we see an indication of a reduction in the generosity of a 
benefit in some manner for subsets of individuals that is not based on 
clinically indicated, reasonable medical management practices.\46\ We 
conduct this examination whenever an EHB plan reduces benefits for a 
particular group. Issuers are expected to impose limitations and 
exclusions based on clinical guidelines and medical evidence, and are 
expected to use reasonable medical management. Issuers may be asked to 
submit justification with supporting document to HHS or the State 
explaining how the plan design is not discriminatory.
---------------------------------------------------------------------------

    \46\ Letter to Issuers on Federally-facilitated and State 
Partnership Exchanges, April 5, 2013, page 15 and 2015 Letter to 
Issuers in the Federally-facilitated Marketplaces, March 14, 2014, 
page 29.
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    Other nondiscrimination and civil rights laws may apply, including 
the Americans with Disabilities Act, section 1557 of the Affordable 
Care Act, Title VI of the Civil Rights Act of 1964, the Age 
Discrimination Act of 1975, section 504 of the Rehabilitation Act of 
1973 and State law. Compliance with Sec.  156.125 is not determinative 
of compliance with any other applicable requirements and Sec.  156.125 
does not apply to the Medicaid and CHIP programs, including EPSDT, and 
Alternative Benefit Plans.
    We also note that all non-grandfathered health insurance plans in 
the individual and small group market that are subject to the EHB 
requirements are also subject to the guaranteed renewability 
requirements under Sec.  147.106, which allow issuers to make uniform 
modifications to a product only at the time of coverage renewal. For 
example, an EHB plan may not change cost sharing for a particular 
benefit mid-year.
f. Cost-Sharing Requirements (Sec.  156.130)
    We propose to amend Sec.  156.130 to clarify how the annual 
limitation on cost sharing applies to plans that operate on a non-
calendar year, and to make a technical correction to the special rule 
for network plans. First, we propose to add a new Sec.  156.130(b), 
which would provide that non-calendar year plans that are subject to 
the annual limitation on cost sharing in section 1302(c)(1) must adhere 
to the annual limitation that is specific to the calendar year in which 
the plan begins. That annual limitation amount would serve as the 
maximum for the entire plan year. We propose this requirement to 
clarify that non-calendar plans subject to Sec.  156.130 are not 
permitted to reset the plan's annual limitation on cost sharing at the 
end of the calendar year when the end of the calendar year is not the 
end of the plan year. The purpose of this proposed change is to ensure 
that the enrollee should only be required to accumulate cost sharing 
that applies to one annual limit per plan year. We believe that this 
requirement ensures an important consumer protection and we solicit 
comments on this proposal.
    Under section 1302(c)(3) of the Affordable Care Act, the term 
``cost-sharing'' includes deductibles, coinsurance, copayments, or 
similar charges, and any other expenditure required of an individual 
that is a qualified medical expense (within the meaning of section 
223(d)(2) of the Internal Revenue Code of 1986) for EHB covered under 
the plan. Expenditures that meet this definition of cost sharing must, 
under section 1302(c) of the Affordable Care Act, count toward the 
annual limitation on cost sharing incurred under a health plan that is 
required to cover EHB. The term ``cost-sharing'' does not include 
premiums, balance billing amounts for non-network providers, or 
spending for non-covered services. This definition was codified in 
Sec.  155.20.
    In this proposed rule, we propose to make a technical correction to 
the text of Sec.  156.130(c) on the special rule for network plans to 
replace ``shall not'' with ``is not required to.'' This correction is 
in accordance with the Affordable Care Act Implementation FAQs (Set 18) 
that was prepared jointly by the Departments of Labor, Health and Human 
Services (HHS), and the Treasury.\47\ This proposed amendment is to 
clarify that issuers have the option to count the cost sharing for out-
of-network services towards the annual limitation on cost sharing, but 
are not required to do so. This out-of-network cost sharing would not 
count toward the calculation of actuarial value under Sec.  
156.135(b)(4) or meeting a given level of coverage under Sec.  156.140.
---------------------------------------------------------------------------

    \47\ http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs18.html. (January 8, 2014).
---------------------------------------------------------------------------

    In addition to the above proposed changes to Sec.  156.130, we also 
propose clarifying that the annual limitation on cost sharing for self-
only coverage applies to all individuals regardless of whether the 
individual is covered by a self-only plan or is covered by a plan that 
is other than self-only. In both of these cases, an individual's cost 
sharing for the EHB may never exceed the self-only annual limitation on 
cost sharing. For example, under the proposed 2016 annual limitation on 
cost sharing, if an other than self-only plan has an annual limitation 
on cost sharing of $10,000 and one individual in the family plan incurs 
$20,000 in expenses from a hospital stay, that particular individual 
would only be responsible for paying the cost sharing related to the 
costs of the hospital stay covered as EHB up to the annual limit on 
cost sharing for self-only coverage that is proposed to be $6,850 for 
2016. However, for a plan with other than self-only coverage, as long 
as the plan applies an annual limitation on cost sharing that is at or 
below the annual limitation for self-only coverage (proposed to be 
$6,850 for 2016) for each individual in the plan and at or below the 
annual limitation for other than self-only coverage (which is proposed 
to be $13,700 for 2016), the issuer has flexibility on how to apply the 
plan's annual limitation on cost sharing between the individuals in the 
plan.
    We seek comments on these requirements and clarifications. We also 
seek comments on whether other requirements and clarifications are

[[Page 70724]]

needed regarding the annual limitation on cost sharing and its 
application.
g. Minimum Value (Sec.  156.145)
    Section 1401(a) of the Affordable Care Act added a new section 36B 
to the Code, providing a premium tax credit for certain individuals 
with household incomes between 100 percent and 400 percent of the 
Federal poverty level who enroll in, or who have one or more family 
members enroll in an individual market QHP through an Exchange, and who 
are not otherwise eligible for MEC. An employer-sponsored plan is MEC, 
but for purposes of the premium tax credit under Code section 
36B(c)(2)(C)(ii) an employee is generally treated as not eligible for 
MEC under an employer-sponsored plan unless the plan is affordable and 
provides minimum value (MV). An employer-sponsored plan provides MV 
only if the plan's share of the total allowed costs of benefits 
provided under the plan is greater than or equal to 60 percent of the 
costs. An employee who is eligible for coverage under an employer-
sponsored plan that is both affordable and provides MV to the employee 
may not a receive premium tax credit under Code section 36B for 
coverage in a qualified health plan. If the employer coverage does not 
provide MV, the employee may be entitled to a premium tax credit even 
if the coverage is affordable.
    Section 1513 of the Affordable Care Act added a new section 4980H 
to the Code providing for shared responsibility for employers regarding 
health coverage. An applicable large employer that does not offer 
coverage that is affordable and provides MV may be liable for an 
employer shared responsibility payment under section 4980H of the Code 
if one or more of its full-time employees receives a premium tax 
credit.
    The MV standard of 60 percent of the total allowed costs of 
benefits provided under the plan is equivalent to the plan's share of 
total allowed costs required for a bronze level qualified health plan 
offered on an Exchange. Section 1302(d)(2)(C) of the Affordable Care 
Act provides that regulations promulgated by the Secretary of HHS under 
section 1302(d)(2), addressing actuarial value, apply ``in determining 
under this title, the Public Health Service Act, and the Internal 
Revenue Code . . . the percentage of the total allowed costs of 
benefits provided under a group health plan or health insurance 
coverage that are provided by such plan or coverage.'' (Emphasis 
added.) Accordingly, HHS regulations under section 1302(d) implementing 
actuarial value requirements, which an insurer offering essential 
health benefits (EHB) must meet in order for a non-grandfathered 
individual market or small group health insurance plan to be considered 
a bronze plan under section 1302(d)(1)(3) of the Affordable Care Act, 
also form the basis for determining the percentage of the total allowed 
costs of benefits provided for purposes of whether the value of 
coverage meets the MV standard under Code section 36B(c)(2)(C)(ii).
    HHS published final regulations under section 1302(d)(2) on 
February 25, 2013 (78 FR 12834). The regulations at Sec.  156.20 define 
the percentage of the total allowed costs of benefits as (1) the 
anticipated covered medical spending for EHB coverage paid by a health 
plan for a standard population, (2) computed in accordance with the 
plan's cost sharing, and (3) divided by the total anticipated allowed 
charges for EHB coverage provided to the standard population. HHS 
regulations at Sec.  156.145(b)(2) apply this definition in the context 
of MV by taking into account benefits a plan provides that are included 
in any one of the state EHB benchmarks.
    The IRS and Treasury Department published proposed regulations on 
May 3, 2013 (78 FR 25909), applying the HHS regulations in defining MV 
for employer-sponsored plans. The proposed regulations provide that the 
MV percentage is determined by dividing a plan's anticipated medical 
spending (based on the plan's cost-sharing) for plan benefits that are 
EHB covered under a particular EHB benchmark plan for the MV standard 
population by the total allowed charges for EHB coverage for the 
standard population and converting the result to a percentage. Proposed 
26 CFR 1.36B-6(c). Taxpayers may apply the proposed regulations for 
taxable years ending before January 1, 2015.
    The final HHS regulations and proposed Treasury regulations allow 
plans to determine the MV percentage by using the MV Calculator 
published by HHS. It has come to our attention that certain group 
health plan designs that provide no coverage of inpatient hospital 
services are being promoted, and that representations are being made, 
based on the MV Calculator, that these plan designs cover 60 percent of 
the total allowed costs of benefits provided under the plans and thus 
provide MV. We understand that these designs have been promoted as a 
way of both minimizing the cost of the plan to the employer (a 
consequence not only of excluding inpatient hospitalization benefits 
but also of making an offer of coverage that a substantial percentage 
of employees will not accept) and avoiding potential liability for 
employer shared responsibility payments. Employers adopting these plan 
designs seek, by offering coverage that is affordable to the employee 
and that purports to provide MV, to deny their employees the ability to 
obtain a premium tax credit that could result in the employer becoming 
subject to a section 4980H employer shared responsibility payment.
    In Notice 2014-69 (2014-48 IRB, November 24, 2014), released on 
November 4, 2014, HHS and Treasury advised that regulations would be 
proposed providing that plans that fail to provide substantial coverage 
of inpatient hospital or physician services do not provide MV. Allowing 
these designs to be treated as providing MV not only would allow an 
employer to avoid the shared responsibility payment that the statute 
imposes when an employer does not offer its full-time employees 
adequate health coverage, but would adversely affect employees 
(particularly those with significant health risks) who understandably 
find this coverage unacceptable, by denying them access to a premium 
tax credit for individual coverage purchased through an Exchange. Plans 
that omit critical benefits used disproportionately by individuals in 
poor health will enroll far fewer of these individuals, effectively 
driving down employer costs at the expense of those who because of 
their individual health status are discouraged from enrolling.
    That the MV standard may be interpreted to require that employer-
sponsored plans cover critical benefits is evident in the structure of 
the Affordable Care Act, the context in which the grant of the 
authority to the Secretary to prescribe regulations under section 1302 
was enacted, and the policy underlying the legislation. Section 1302(b) 
authorizes the Secretary of HHS to define the EHB to be offered by 
individual market and small group health insurance plans, provided that 
this definition ``include at least'' 10 specified categories of 
benefits, and that the benefits be ``equal to the scope of benefits 
provided under a typical employer plan.'' To ``inform this 
determination'' as to the scope of a typical employer plan, section 
1302(b)(2)(A) provides that ``the Secretary of Labor shall conduct a 
survey of employer sponsored coverage to determine the benefits 
typically covered by employers, including multiemployer plans, and 
provide a report on such survey to the Secretary

[[Page 70725]]

[of HHS].'' \48\ (Emphasis added.) These provisions suggest that, while 
detailed requirements for EHB in the individual and small group health 
insurance markets were deemed necessary, the benefits covered by 
typical employer plans providing primary coverage at the time the 
Affordable Care Act was enacted were seen as sufficient to satisfy the 
Act's objectives with respect to the breadth of benefits needed for 
health plan coverage and, in fact, to serve as the basis for 
determining EHB. They also suggest that any meaningful standard of 
minimum coverage may require providing certain critical benefits.
---------------------------------------------------------------------------

    \48\ See Department of Labor. Special Report: Selected Medical 
Benefits: A Report from the Department of Labor to the Department of 
Health and Human Services. http://www.bls.gov/ncs/ebs/sp/selmedbensreport.pdf.
---------------------------------------------------------------------------

    Employer-sponsored plans in the large group market and self-insured 
employers continue to have flexibility in designing their plans. They 
are not required to cover all EHB. Providing flexibility, however, does 
not mean that these plans should not be subject to minimum 
requirements. A plan that excludes substantial coverage for inpatient 
hospital and physician services is not a health plan in any meaningful 
sense and is contrary to the purpose of the MV requirement to ensure 
that an employer-sponsored plan, while not required to cover all EHB, 
nonetheless must offer coverage with minimum value at least roughly 
comparable to that of a bronze plan offered on an Exchange.
    For these reasons, the Secretary has concluded that the provisions 
of section 1302(d)(2) of the Affordable Care Act--requiring that the 
regulations for determining the percentage of the total allowed costs 
of benefits that apply to plans that must cover all EHB also be applied 
as a basis for determining minimum value--reflect a statutory design to 
provide basic minimum standards for health benefits coverage through 
the MV requirement, without requiring large group market plans and 
self-insured plans to meet all EHB standards. Given the scope of 
benefits covered by typical employer plans, the MV requirement is 
properly viewed as a means of ensuring that employer-sponsored plans 
satisfy basic minimum standards while also accommodating flexibility in 
the design of those plans.
    Employers have been able to claim that plans without coverage of 
inpatient hospital services provide MV under the current quantitative 
MV test by designing a benefit package that, based on standardized 
actuarial assumptions used in the MV calculator, offsets the absence of 
actuarial value derived from spending on inpatient hospital coverage 
with increased spending on other benefits. Accordingly, some plan 
designs may pass the current quantitative test without offering a 
critical benefit universally understood to be included in any minimally 
acceptable employer health plan coverage, and which the Department of 
Labor study determined was included in all employer plans it surveyed.
    As noted previously, we have concluded that the quantitative test 
for MV is not exclusive. Accordingly, we propose to amend Sec.  156.145 
to require that, in order to provide minimum value, an employer-
sponsored plan not only must meet the quantitative standard of the 
actuarial value of benefits, but also must provide a benefit package 
that meets a minimum standard of benefits. Specifically, we propose to 
revise Sec.  156.145 to provide that, in order to satisfy MV, an 
employer plan must provide substantial coverage of both inpatient 
hospital services and physician services.
    We seek comment on ways to determine whether a plan has offered 
``substantial'' benefits for the purposes of this proposal.
    We are not proposing to require that large employer or self-insured 
employer group health plans provide all EHB as defined under section 
1302 of the Affordable Care Act. Rather, we are proposing only to 
require that, in order to provide MV, employer-sponsored plans provide 
substantial coverage of the two types of benefits that we believe were 
envisioned for health plan coverage meeting the MV standard. We have 
concluded that plans that omit these types of coverage fail to meet 
universally accepted minimum standards of value expected from, and 
inherent in the nature of, any arrangement that can reasonably be 
called a health plan intended to provide the primary health coverage 
for employees.
    Consistent with Notice 2014-69, we propose that these changes to 
our regulations on MV will apply to employer-sponsored plans, including 
plans that are in the middle of a plan year, immediately on the 
effective date of the final regulations. However, because some 
employers adopted plans prior to publication of Notice 2014-69, we 
propose that the final regulations not apply before the end of the plan 
year (as in effect under the terms of the plan on November 3, 2014) to 
plans that before November 4, 2014, entered into a binding written 
commitment to adopt, or began enrolling employees into, the plan, so 
long as that plan year begins no later than March 1, 2015. For these 
purposes, a binding written commitment exists when an employer is 
contractually required to pay for an arrangement, and a plan begins 
enrolling employees when it begins accepting employee elections to 
participate in the plan. The Department of the Treasury and the IRS are 
expected to publish proposed regulations making clear that this delayed 
applicability date applies solely for purposes of Code section 4980H. 
At no time will any employee be required to treat a plan that fails to 
provide substantial coverage of inpatient hospital services or 
physician services as providing MV for purposes of eligibility for 
premium tax credit under Code section 36B. We seek comment on this 
proposed applicability date.
3. Qualified Health Plan Minimum Certification Standards
a. QHP Issuer Participation Standards (Sec.  156.200)
    We propose to revise Sec.  156.200(b)(7), to require that a QHP 
issuer comply with the standards under 45 CFR part 153 and not just the 
standards related to the risk adjustment program. This proposed 
revision would clarify that a QHP issuer maintains responsibility for 
its compliance and, under Sec.  156.340, the compliance of any of its 
delegated or downstream entities with the standards set forth in 45 CFR 
part 153, not just those specifically pertaining to risk adjustment. We 
seek comment on this proposal.
b. Transparency in Coverage (Sec.  156.220)
    The transparency in coverage standards established under section 
1311(e)(3) of the Affordable Care Act, as implemented at Sec.  
155.1040(a) and Sec.  156.220, require health insurance issuers that 
offer a QHP in accordance with a certification from an Exchange to 
provide specified information to HHS, the Exchange, and the State 
insurance commissioner and to make this information available to the 
public in ``plain language.'' In a frequently asked question dated 
April 29, 2013,\49\ HHS clarified that, to comply with section 
1311(e)(3), issuers offering QHPs certified by an Exchange would be 
required to begin submitting this information only after QHPs have been 
certified for one benefit year.\50\ Because

[[Page 70726]]

a full year of claims data will be available, we anticipate the 
collection and public display of the required information listed in 
Sec.  156.220 from QHP issuers offering coverage through Exchanges 
beginning in 2016. We seek comment on the form and manner of data 
collection that will be most useful to consumers selecting a QHP in an 
Exchange. Specifically, we seek comment on how HHS should further 
specify, in guidance, the data elements to be collected, the format 
that should be used, and the timeframe or schedule for submission. We 
also seek comment on mechanisms that issuers could use to submit the 
information to HHS and how to minimize duplication with information 
that issuers must already submit to HHS, States or other entities (for 
example, accreditation organizations). We seek comment on the manner in 
which HHS, the Exchanges and QHPs should publicly display the collected 
information. We also request comment related to whether State-based 
Exchanges should display the same information and in the same format 
and manner as in an FFE.
---------------------------------------------------------------------------

    \49\ Affordable Care Act Implementation Set 15, available at: 
http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs15.html.
    \50\ The FAQ also states that because section 2715A of the PHS 
Act simply extends the transparency provisions set forth in section 
1311(e)(3) of the Affordable Care Act to group health plans and 
health insurance issuers offering group and individual health 
insurance coverage, the Departments clarified that the reporting 
requirements under section 2715A of the PHS Act will become 
applicable to group health plans and health insurance issuers 
offering group and individual health insurance coverage no sooner 
than when the reporting requirements under section 1311(e)(3) of the 
Affordable Care Act become applicable. Nothing in these proposed 
regulations would apply any transparency reporting requirements 
related to section 2715A of the PHS Act, incorporated into section 
715(a)(1) of ERISA and section 9815(a)(1) of the Code.
---------------------------------------------------------------------------

c. Network Adequacy Standards (Sec.  156.230)
    In Sec.  156.230, we established the minimum network adequacy 
criteria that health and dental plans must meet to be certified as 
QHPs, under the Secretary's authority in section 1311(c)(1)(B) of the 
Affordable Care Act. We propose modifying Sec.  156.230(a) to specify 
that this section only applies to QHPs that use a provider network and 
that a provider network includes only providers that are contracted as 
in-network. This means that the general availability of out-of-network 
providers will not be counted for purposes of meeting network adequacy 
requirements.
    We believe that networks that provide sufficient access to benefits 
are a priority for issuers and consumers. HHS continues to take great 
interest in ensuring strong network access, particularly for QHPs that 
must meet the standards in Sec.  156.230. HHS is aware that the NAIC 
has formed a workgroup that is drafting a model act relative to network 
adequacy and will await the results of this workgroup before proposing 
significant changes to network adequacy policy. For 2016, HHS expects 
to continue the reasonable access standard adopted in the 2015 Letter 
to Issuers in the Federally-facilitated Marketplaces (2015 Letter to 
Issuers) \51\ and assess the provider networks information submitted as 
part of the QHP certification process. We urge State-based Exchanges to 
employ the same standard when examining network adequacy.
---------------------------------------------------------------------------

    \51\ 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 addition to the proposed provisions above, we are also cognizant 
that new enrollees in QHPs may need a transition period to switch to a 
provider that is in-network in their new plan. We encourage QHP issuers 
that use a network of providers to offer new enrollees transitional 
care for an ongoing course of treatment. We suggest that this begin 
with the effective date of coverage of a new enrollee and last for at 
least 29 days thereafter (for a minimum of 30 days). These benefits 
would extend to health care services furnished by any provider to the 
new enrollee, regardless of whether the provider is in the plan's 
network, as long as the enrollee received health services from that 
provider under an ongoing course of treatment in the 90 days prior to 
the effective date of coverage. Because different plans may have 
different provider networks, when an individual enrolls in a new health 
plan, he or she may be undergoing a course of treatment with a provider 
that is not in the new issuer's provider network. In such a case, it 
may take time for the new enrollee to select a new in-network provider 
and to meet with the new provider to ensure that there is no disruption 
in treatment. We encourage issuers to adopt this policy to accommodate 
the immediate needs of enrollees, while allowing the enrollee 
sufficient time to go through the process of selecting an in-network 
provider in their new plan. We are considering whether requirements may 
be needed in this area.
    Under Sec.  156.230(b), we propose changing the current text to 
read as (b)(1) and adding (b)(2) in order to strengthen the provider 
directory requirement. Specifically, we propose that a QHP issuer must 
publish an up-to-date, accurate, and complete provider directory, 
including information on which providers are accepting new patients, 
the provider's location, contact information, specialty, medical group, 
and any institutional affiliations, in a manner that is easily 
accessible to plan enrollees, prospective enrollees, the State, the 
Exchange, HHS and OPM. As part of this requirement, we propose that a 
QHP issuer must update the directory information at least once a month, 
and that a provider directory will be considered easily accessible when 
the general public is able to view all of the current providers for a 
plan on the plan's public Web site through a clearly identifiable link 
or tab without having to create or access an account or enter a policy 
number. The general public should be able to easily discern which 
providers participate in which plan(s) and provider network(s) if the 
health plan issuer maintains multiple provider networks and the plan(s) 
and provider network(s) associated with each provider should be clearly 
identified on the Web site. We seek comment on this proposal, including 
with respect to how often updating should occur.
    We also are considering requiring issuers to make this information 
publicly available on their Web sites in a machine-readable file and 
format specified by HHS. The purpose of establishing machine-readable 
files with this data would be to provide the opportunity for third 
parties to create resources that aggregate information on different 
plans. We believe this would increase transparency by allowing software 
developers to access this information and create innovative and 
informative tools to help enrollees better understand the availability 
of providers in a specific plan. As an alternative, we could also 
require that this information be submitted to HHS though an HHS-
designed standardized template, but we recognize that there may be 
challenges with keeping this type of template information updated. 
Thus, we specifically solicit comments on these options, including the 
technical requirements for developing a machine-readable file and 
format for a provider directory, as well as other technical 
considerations, such as processes and considerations that should be 
taken into account for the updating of this information under either of 
the options being considered.
    We are proposing these requirements to enhance transparency of QHP 
provider directories and to help consumers make more informed decisions 
about their health care coverage. We solicit comments on these proposed 
requirements, as well as with respect to how frequently provider data 
should be updated, and whether

[[Page 70727]]

additional types of information should be required to be included in 
the provider directory.
    We also seek comment on the feasibility and merits of incorporating 
information on physical accessibility for individuals with 
disabilities, including accessibility information regarding facilities 
and equipment, or other information that would be important to 
enrollees and potential enrollees, as a part of network adequacy 
standards in the future.
d. Essential Community Providers (Sec.  156.235)
    At Sec.  156.235, we propose to strengthen the essential community 
provider (ECP) standard in accordance with section 1311(c)(1)(C) of the 
Affordable Care Act, which requires that a QHP's network include ECPs, 
where available, that serve predominantly low-income and medically-
underserved populations. As established in section 1311(c)(1)(C) of the 
Affordable Care Act, ECPs include entities defined in section 
340B(a)(4) of the PHS Act and providers described in section 
1927(c)(1)(D)(i)(IV) of the Social Security Act as set forth by section 
211 of Pub. L. 111-8. Additionally, we propose that ECPs may include 
not-for-profit or State-owned providers that would be entities 
described in section 340B of the PHS Act but do not receive Federal 
funding under the relevant section of law, as these providers satisfy 
the same 340B requirements and therefore meet the definition of ECPs by 
virtue of the following description in section 1311(c)(1)(C) of the 
Affordable Care Act--``such as health care providers defined in section 
340B(a)(4) of the PHS Act and providers in section 1927(c)(1)(D)(i)(IV) 
of the Act.'' For the same reasons described above, we propose that 
such providers also include not-for-profit or governmental family 
planning service sites that do not receive a grant under Title X of the 
PHS Act. Other providers that provide health care to populations 
residing in low-income zip codes or Health Professional Shortage Areas 
could also be considered ECPs. We propose that the above proposals 
apply to plan years 2016 and thereafter.
    While commercial health insurance issuers may have a limited 
history in working with ECPs, ECPs provide important access points in 
low-income and medically underserved communities. Based on our 
experience with QHP certification for 2014 and 2015, we have determined 
that specifying a quantitative standard will assist issuers in ensuring 
that, in future QHP certification years, they are providing sufficient 
consumer access to ECPs to satisfy the requirement in section 
1311(c)(1)(C) of the Affordable Care Act. Therefore, we propose in new 
paragraph (a)(2)(i) of this section that, for QHP certification cycles 
beginning with the 2016 benefit year, a health plan seeking 
certification to be offered through an FFE must satisfy the general ECP 
standard described in paragraph (a)(1) of this section by demonstrating 
in its applications for QHP certification a sufficient percentage, as 
determined annually by HHS and specified in HHS guidance, of available 
ECPs in the plan's service area have a contractual agreement to 
participate in the plan's provider network. For purposes of this 
general ECP standard, multiple providers at a single location will 
count as a single ECP toward the issuer's satisfaction of the proposed 
ECP participation standard to ensure a sufficient number and geographic 
distribution of ECPs as required under Sec.  156.235(a). Any update to 
the general ECP inclusion standards would be based on HHS's post-
certification assessments of the adequacy of ECP participation and 
geographic distribution of such providers and evidence of contractual 
negotiation efforts provided by issuers in the ECP supplemental 
response forms.
    In addition, we propose in paragraph (a)(2)(ii) of this section 
that, to satisfy the general ECP standard, the issuer of the plan 
seeking certification as a QHP in an FFE would be required to offer 
contracts for participation in the plan for which a certification 
application is being submitted to the following: (1) All available 
Indian health providers in the service area, applying the special terms 
and conditions necessitated by Federal law and regulations as 
referenced in the recommended model QHP addendum for Indian health 
providers developed by HHS; and (2) at least one ECP in each ECP 
category (see Table 10) in each county in the service area, where an 
ECP in that category is available and provides medical or dental 
services that are covered by the issuer plan type. We expect that 
issuers will offer contracts in good faith. A good faith contract 
should offer the same rates and contract provisions as other contracts 
accepted by or offered to similarly situated providers that are not 
ECPs.

               Table 10--ECP Categories and Types in FFEs
------------------------------------------------------------------------
       Major ECP category                   ECP provider types
------------------------------------------------------------------------
Federally Qualified Health        FQHC and FQHC ``Look-Alike''
 Centers (FQHC).                   Clinics,\52\ Outpatient health
                                   programs/facilities operated by
                                   tribes, tribal organizations,
                                   programs operated by Urban Indian
                                   Organizations.
Ryan White Providers............  Ryan White HIV/AIDS Providers.
Family Planning Providers.......  Title X Family Planning Clinics and
                                   Title X ``Look-Alike'' Family
                                   Planning Clinics.\53\
Indian Health Providers.........  Tribes, Tribal Organization and Urban
                                   Indian Organization Providers, Indian
                                   Health Service Facilities.
Hospitals.......................  Disproportionate Share Hospital (DSH)
                                   and DSH-eligible Hospitals,
                                   Children's Hospitals, Rural Referral
                                   Centers, Sole Community Hospitals,
                                   Free-standing Cancer Centers,
                                   Critical Access Hospitals.
Other ECP Providers.............  STD Clinics, TB Clinics, Hemophilia
                                   Treatment Centers, Black Lung
                                   Clinics, Community Mental Health
                                   Centers, Rural Health Clinics and
                                   other entities that serve
                                   predominantly low-income, medically
                                   underserved individuals.
------------------------------------------------------------------------

    We propose to add paragraph (a)(3) to this section to specify that 
if an issuer's QHP certification application to the FFE does not 
satisfy the ECP standard described in paragraph (a)(2) of this section, 
the issuer must include as part of its application a narrative 
justification describing how the provider network(s) of the plans for 
which certification applications have been submitted provides an 
adequate level of service for individuals residing in low-income zip 
codes or Health Professional Shortage Areas within the plan's service 
area and how the plan's provider network will be strengthened toward 
satisfaction of the ECP standard prior to the start of the benefit 
year. The narrative justification should include the following: The 
number of contracts

[[Page 70728]]

offered to ECPs for the benefit year; the number of additional 
contracts the issuer expects to offer for the benefit year and the 
timeframe of planned negotiations; the names of the ECP hospitals 
FQHCs, Ryan White providers, family planning providers, Indian health 
providers, and other ECPs to which the issuer has offered contracts, 
but with whom an agreement has not yet been reached; and contingency 
plans for how the issuer's provider network(s), as currently designed, 
will provide adequate care to enrollees who might otherwise be cared 
for by relevant ECPs. Through HHS's post-certification assessments, HHS 
may examine an issuer's progress toward satisfying the applicable ECP 
standard to ensure that the issuer continues to qualify for offering 
its plan on the Exchange, while OPM would retain this responsibility 
for issuers of multi-State plans, acting in coordination with HHS as 
may be appropriate.
---------------------------------------------------------------------------

    \52\ For more information on FQHC ``Look-Alike'' Clinics, see 
http://bphc.hrsa.gov/about/lookalike/index.html and section 
1861(a)(4) and section 1905(l)(2)(B) of the Social Security Act.
    \53\ For more information on Title X ``Look-Alike'' Clinics, see 
section 1927(c)(1)(D)(i)(IV) of the Social Security Act.
---------------------------------------------------------------------------

    We propose to redesignate current paragraph (a)(3) as paragraph 
(a)(4), in which we clarify that nothing in the requirements under 
paragraphs (a)(1) through (a)(3) of this section requires any QHP to 
provide coverage for any specific medical procedure provided by the 
ECP. We also propose to redesignate current paragraph (a)(2) as 
paragraph (a)(5).
    We propose in paragraph (b)(1) that the alternate ECP standard 
described in Sec.  156.235(a)(5) will apply to issuers that offer QHPs 
in any Exchange. Additionally, for plans seeking QHP certification in 
FFEs, we propose that a QHP issuer described in paragraph (a)(5) of 
this section be determined to have a sufficient number and geographic 
distribution of employed or contracted providers by demonstrating in 
its QHP application that the number of its providers in the following 
locations meets a percentage specified in HHS guidance, of the number 
of available ECPs in the service area: (i) Located within a Health 
Professional Shortage Areas; or (ii) located within five-digit zip 
codes in which 30 percent or more of the population falls below 200 
percent of the FPL. For purposes of this alternate ECP standard, 
multiple providers at a single location will count as one ECP toward 
the available ECPs in the plan's service area and toward the issuer's 
satisfaction of the proposed ECP participation standard to ensure a 
sufficient number and geographic distribution of ECPs as required under 
Sec.  156.235(a). Any modification to the alternate ECP inclusion 
standard would be based on HHS's post-certification assessments of the 
adequacy of ECP participation and geographic distribution of such 
providers to ensure reasonable and timely access to such ECPs for low-
income, medically underserved individuals.
    Furthermore, we propose in new paragraph (b)(3) of this section 
that if a QHP certification application of a plan for the FFE does not 
satisfy the alternate ECP standard described in paragraph (b)(2) of 
this section, the issuer must include as part of its QHP application a 
narrative justification describing how the issuer's provider network(s) 
provides an adequate level of service for low-income and medically 
underserved enrollees. When assessing whether an issuer has provided a 
satisfactory narrative justification under either the general or 
alternate ECP standard, as applicable, HHS will take into account 
factors and circumstances identified in the ECP Supplemental Response 
Form,\54\ along with an explanation of how the issuer will provide 
access for individuals residing in low-income zip codes or Health 
Professional Shortage Areas within the plan's service area and how the 
plan's provider network will be strengthened toward satisfaction of the 
ECP standard prior to the start of the benefit year. Additionally, 
justifications that include verification of contracts offered in good 
faith, that include terms that a willing, similarly-situated, non-ECP 
provider would accept or has accepted, would be considered toward 
satisfaction of the ECP standard.
---------------------------------------------------------------------------

    \54\ More information on the supplemental response can be found 
on the CCIIO Web site at: http://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/qhp.html.
---------------------------------------------------------------------------

    We propose in paragraph (c) of this section to remove the language 
defining ECPs as meeting the criteria on the initial date of the 
regulation's publication. We propose this change in recognition of the 
fact that the universe of ECPs, as well as the databases we use to 
delineate this universe, may vary over time for many reasons, including 
demographic and provider characteristics. We request comment on this 
proposed change.
    We seek comment on these proposals.
e. Health Plan Applications and Notices (Sec.  156.250)
    Existing Sec.  156.250 establishes basic standards for the format 
of applications and notices provided by QHP issuers to enrollees. 
Specifically, QHP issuers must adhere to the readability and 
accessibility standards established for Exchange applications, forms, 
and notices in Sec.  155.230(b). The referenced standard, in turn, 
requires QHP issuers to conform to the standards outlined in Sec.  
155.205(c), which provide that information must be provided in plain 
language and in a manner that is accessible and timely to individuals 
living with disabilities and individuals who are limited English 
proficient, and that individuals must be informed of the availability 
of such accessibility services. To improve the readability of this 
referenced standard, we propose to amend Sec.  156.250 to replace the 
cross-reference to the Exchange application and notices provision at 
Sec.  155.230(b) with a cross-reference to Sec.  155.205(c). We also 
propose to change the title of the provision to ``Meaningful access to 
qualified health plan information'' for improved clarity. As discussed 
above, amendments to Sec.  155.205(c) with respect to oral 
interpretation services are also being proposed.
    As participants in one or more Exchanges, QHP issuers interact with 
qualified individuals, qualified employers, qualified employees, and 
applicants, in addition to enrollees. QHP issuers provide these 
individuals with a wide range of information that assists these 
individuals with accessing and understanding health coverage. We 
propose to extend the requirements of Sec.  156.250 so that not only 
applications and notices to enrollees, but all information that is 
critical for obtaining health insurance coverage or access to health 
care services through the QHP to qualified individuals, applicants, 
qualified employers, qualified employees, and enrollees, is provided in 
a manner consistent with Sec.  155.205(c). In addition, we propose that 
information would be deemed to be critical for obtaining health 
insurance coverage or access to health care services if the issuer is 
required by State or Federal law to provide the document to a qualified 
individual, applicant, qualified employer, qualified employee, or 
enrollee. For example, because the summary of benefits and coverage 
(SBC) disclosure is required to be provided by law under section 2715 
of the Public Health Service Act and its implementing regulations at 
Sec.  147.200, a QHP issuer would be required to provide the SBC in a 
manner consistent with Sec.  155.205(c). In addition, based on our 
proposed standard, we would consider information that is critical for 
obtaining health coverage or access to health care services to include: 
Applications; consent, grievance, appeal, and complaint forms; notices 
pertaining to the denial, reduction, modification, or termination of 
services, benefits, non-payment, or coverage; a plan's explanation of 
benefits or similar claim processing information; QHP ratings 
information; rebate notices;

[[Page 70729]]

correspondence containing information about eligibility and 
participation criteria; notices advising individuals of the 
availability of free language assistance; and letters or notices that 
require a signature or response from the qualified individual, 
applicant, qualified employer, qualified employee, or enrollee. We 
would not consider marketing materials that are available for 
advertising purposes only and not otherwise required by law to be 
critical for obtaining health insurance coverage or access to health 
care services through the QHP, and therefore an issuer would not be 
required to be make such materials accessible to individuals with 
disabilities or limited English proficiency. We seek comment on all 
aspects of this proposal, with a particular interest in whether the 
parameters set forth above are reasonable, whether there is other 
information that should be considered to be ``critical'' and thus 
subject to the requirements of Sec.  155.205(c), and whether the term 
``critical'' should be further defined in regulation text. Finally, we 
solicit comment on whether this proposal would present implementation 
challenges for QHP issuers if it becomes effective before the beginning 
of the open enrollment period in the individual market for the 2016 
benefit year.
f. Enrollment Process for Qualified Individuals (Sec.  156.265)
    Sections 155.240 and 155.400 explicitly authorize Exchanges to 
establish certain requirements related to premium payment for 
enrollment in QHPs through the Exchange. Section 156.265 currently only 
cross-references Sec.  155.240. To clarify that both sets of 
requirements apply to QHPs, we propose that a QHP issuer must follow 
the premium payment process established by the Exchange in accordance 
with Sec.  155.240 and the payment rules established in Sec.  
155.400(e).
g. Segregation of Funds for Abortion Services (Sec.  156.280)
    Section 1303 of the Affordable Care Act and Sec.  156.280 specify 
accounting and other standards for issuers of QHPs through the Exchange 
in the individual market that cover abortion services for which public 
funding is prohibited (also referred to as non-excepted abortion 
services). The statute and regulations establish that unless otherwise 
prohibited by State law, a QHP issuer may elect to cover such services. 
If an issuer elects to cover such services under a QHP sold through the 
individual market Exchange, the issuer must take certain steps to 
ensure that no premium tax credit or cost-sharing reduction funds are 
used to pay claims for abortion services for which public funding may 
not be used.
    We are providing guidance on an individual market Exchange issuer's 
responsibilities with respect to requirements related to QHP coverage 
of abortion services for which public funding is prohibited. HHS works 
with stakeholders, including States and issuers, to help them fully 
understand and follow the statutes and regulations governing the 
provision of health insurance coverage under a QHP through the 
Exchange. As is the case with many provisions in the Affordable Care 
Act, States and State insurance commissioners are the entities 
primarily responsible for implementing and enforcing the provisions in 
section 1303 of the Affordable Care Act related to individual market 
QHP coverage of non-excepted abortion services. OPM may issue guidance 
related to these provisions for multi-State plan issuers.
    Under section 1303(b)(2)(B) of the Affordable Care Act, as 
implemented in Sec.  156.280(e)(2)(i), individual market Exchange 
issuers must collect a separate payment from each enrollee, for an 
amount equal to the AV of the coverage for abortions for which public 
funding is prohibited. However, section 1303 of the Affordable Care Act 
and Sec.  156.280 do not specify the method an issuer must use to 
comply with the separate payment requirement. This provision may be 
satisfied in a number of ways. Several such ways include, but are not 
limited to: sending the enrollee a single monthly invoice or bill that 
separately itemizes the premium amount for non-excepted abortion 
services; sending a separate monthly bill for these services; or 
sending the enrollee a notice at or soon after the time of enrollment 
that the monthly invoice or bill will include a separate charge for 
such services and specify the charge. Section 1303 of the Affordable 
Care Act permits, but does not require a QHP issuer to separately 
identify the premium for non-excepted abortion services on the monthly 
premium bill in order to comply with the separate payment requirement. 
A consumer may pay the premium for non-excepted abortion services and 
for all other services in a single transaction, with the issuer 
depositing the funds into the issuer's separate allocation accounts as 
required by section 1301(b)(2)(C) of the Affordable Care Act, as 
implemented in Sec.  156.280(e)(2)(ii) and 156.280(e)(3).
    Section 1303(b)(2)(D) of the Affordable Care Act, as implemented in 
Sec.  156.280(e)(4), establishes requirements for individual market 
Exchange issuers with respect to how much they must charge each QHP 
enrollee for coverage of abortions for which public funding is 
prohibited. A QHP issuer must estimate the basic per enrollee, per 
month cost, determined on an average actuarial basis, for including 
coverage of non-excepted abortion services. In making this estimate, a 
QHP issuer may not estimate the basic cost of coverage for non-excepted 
abortion services to be less than one dollar per enrollee, per month. 
This means that an issuer must charge each QHP enrollee a minimum 
premium of one dollar per month for coverage of non-excepted abortion 
services.
4. Health Insurance Issuer Responsibility With Respect to Advance 
Payments of the Premium Tax Credit and Cost-Sharing Reductions
a. Premium Adjustment Percentage (Sec.  156.130)
    Section 1302(c)(4) of the Affordable Care Act directs the Secretary 
to determine an annual premium adjustment percentage, which is used to 
set the rate of increase for three parameters detailed in the 
Affordable Care Act: the maximum annual limitation on cost sharing 
(defined at Sec.  156.130(a)), the required contribution percentage by 
individuals for minimum essential health coverage the Secretary may use 
to determine eligibility for hardship exemptions under section 5000A of 
the Code, and the assessable payment amounts under section 4980H(a) and 
(b) of the Code (finalized at 26 CFR 54.4980H in the ``Shared 
Responsibility for Employers Regarding Health Coverage,'' published in 
the February 12, 2014 Federal Register (79 FR 8544)). 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.
    We established a methodology for estimating average per capita 
premium for purposes of calculating the premium adjustment percentage 
in the 2015 Payment Notice.
    Under that methodology, the premium adjustment percentage is 
calculated based on the projections of average per enrollee employer-
sponsored insurance (ESI) premiums from the NHEA, which is calculated 
by the CMS Office of the Actuary.

[[Page 70730]]

    Accordingly, using the ESI data, the premium adjustment percentage 
for 2016 is the percentage (if any) by which the most recent NHEA 
projection of per enrollee ESI premiums for 2015 ($5,744) exceeds the 
most recent NHEA projection of per enrollee ESI premiums for 2013 
($5,303).\55\ Therefore, the proposed premium adjustment percentage for 
2016 is 8.316047520 percent. We note that the 2013 premium used for 
this calculation has been updated to reflect the latest NHEA data. We 
are also proposing the following cost-sharing parameters for calendar 
year 2016, based on our proposed premium adjustment percentage for 
2016.
---------------------------------------------------------------------------

    \55\ See http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology2012.pdf and Table 17 in http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf for 
additional information.
---------------------------------------------------------------------------

    Maximum Annual Limitation on Cost Sharing for Calendar Year 2016. 
Under Sec.  156.130(a)(2), for the 2016 calendar year, cost sharing for 
self-only coverage may not exceed the dollar limit for calendar year 
2014 increased by an amount equal to the product of that amount and the 
premium adjustment percentage for 2016, and for other than self-only 
coverage, the limit is twice the dollar limit for self-only coverage. 
Under Sec.  156.130(d), these amounts must be rounded down to the next 
lowest multiple of 50. Using the premium adjustment percentage of 
8.316047520 for 2016 we established above, 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,\56\ we propose that the 2016 
maximum annual limitation on cost sharing be $6,850 for self-only 
coverage and $13,700 for other than self-only coverage.
---------------------------------------------------------------------------

    \56\ See http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

b. Reduced Maximum Annual Limitation on Cost Sharing (Sec.  156.130)
    Sections 1402(a) through (c) of the Affordable Care Act direct 
issuers to reduce cost sharing for EHBs for eligible individuals 
enrolled in a silver level QHP. In the 2014 Payment Notice, we 
established standards related to the provision of these cost-sharing 
reductions. Specifically, in 45 CFR part 156 subpart E, we specified 
that QHP issuers must provide cost-sharing reductions by developing 
plan variations, which are separate cost-sharing structures for each 
eligibility category that change how the cost sharing required under 
the QHP is to be shared between the enrollee and the Federal 
government. At Sec.  156.420(a), we detailed the structure of these 
plan variations and specified that QHP issuers must ensure that each 
silver plan variation has an annual limitation on cost sharing no 
greater than the applicable reduced maximum annual limitation on cost 
sharing specified in the annual HHS notice of benefit and payment 
parameters. Although the amount of the reduction in the maximum annual 
limitation on cost sharing is specified in section 1402(c)(1)(A) of the 
Affordable Care Act, section 1402(c)(1)(B)(ii) of the of the Affordable 
Care Act states that the Secretary may adjust the cost-sharing limits 
to ensure that the resulting limits do not cause the AVs of the health 
plans to exceed the levels specified in 1402(c)(1)(B)(i) (that is, 73 
percent, 87 percent or 94 percent, depending on the income of the 
enrollee(s)). Accordingly, we propose to use a method we established in 
the 2014 Payment Notice for determining the appropriate reductions in 
the maximum annual limitation on cost sharing for cost-sharing plan 
variations. As we proposed above, the 2016 maximum annual limitation on 
cost sharing would be $6,850 for self-only coverage and $13,700 for 
other than self-only coverage. We analyzed the effect on AV of the 
reductions in the maximum annual limitation on cost sharing described 
in the statute to determine whether to adjust the reductions so that 
the AV of a silver plan variation will not exceed the AV specified in 
the statute. Below, we describe our analysis for the 2016 benefit year 
and our proposed results.
    Reduced Maximum Annual Limitation on Cost Sharing for Benefit Year 
2016. Consistent with our analysis in the 2014 and 2015 Payment 
Notices, we developed three model silver level QHPs, and analyzed the 
impact on AV of the reductions described in the Affordable Care Act to 
the estimated 2016 maximum annual limitation on cost sharing for self-
only coverage ($6,850). The model plan designs are based on data 
collected for 2015 plan year QHP certification to ensure that they 
represent a range of plan designs that we expect issuers to offer at 
the silver level of coverage through the Exchange. For 2016, the model 
silver level QHPs included a PPO with typical cost-sharing structure 
($6,850 annual limitation on cost sharing, $2,000 deductible, and 20 
percent in-network coinsurance rate), a PPO with a lower annual 
limitation on cost sharing ($4,600 annual limitation on cost sharing, 
$2,550 deductible, and 20 percent in-network coinsurance rate), and an 
HMO ($6,850 annual limitation on cost sharing, $2,700 deductible, 20 
percent in-network coinsurance rate, and the following services with 
copays that are not subject to the deductible or coinsurance: $500 
inpatient stay per day, $350 emergency department visit, $25 primary 
care office visit, and $50 specialist office visit). All three model 
QHPs meet the AV requirements for silver level health plans.
    We then entered these model plans into the proposed 2016 AV 
calculator developed by HHS and observed how the reductions in the 
maximum annual limitation on cost sharing specified in the Affordable 
Care Act affected the AVs of the plans. We found that the reduction in 
the maximum annual limitation on cost sharing specified in the 
Affordable Care Act for enrollees with a household income between 100 
and 150 percent of the Federal poverty line (FPL) (\2/3\ reduction in 
the maximum annual limitation on cost sharing), and 150 and 200 percent 
of the FPL (\2/3\ reduction), would not cause the AV of any of the 
model QHPs to exceed the statutorily specified AV level (94 and 87 
percent, respectively). In contrast, the reduction in the maximum 
annual limitation on cost sharing specified in the Affordable Care Act 
for enrollees with a household income between 200 and 250 percent of 
FPL (\1/2\ reduction), would cause the AVs of two of the model QHPs to 
exceed the specified AV level of 73 percent. As a result, we propose 
that the maximum annual limitation on cost sharing for enrollees in the 
2016 benefit year with a household income between 200 and 250 percent 
of FPL be reduced by approximately \1/5\, rather than \1/2\. We further 
propose that the maximum annual limitation on cost sharing for 
enrollees with a household income between 100 and 200 percent of the 
FPL be reduced by approximately \2/3\, as specified in the statute, and 
as shown in Table 11. These proposed reductions in the maximum annual 
limitation on cost sharing should adequately account for unique plan 
designs that may not be captured by our three model QHPs. We also note 
that selecting a reduction for the maximum annual limitation on cost 
sharing that is less than the reduction specified in the statute would 
not reduce the benefit afforded to enrollees in aggregate because QHP 
issuers are required to further reduce their annual limitation on cost 
sharing, or reduce other types of cost sharing, if the required 
reduction does not cause the AV of the QHP to meet the specified

[[Page 70731]]

level. We welcome comment on this analysis and the proposed reductions 
in the maximum annual limitation on cost sharing for 2016.
    We note that for 2016, as described in Sec.  156.135(d), States are 
permitted to submit for approval by HHS State-specific data sets for 
use as the standard population to calculate AV. No State submitted a 
data set by the September 1 deadline.

  Table 11--Reductions in Maximum Annual Limitation on Cost Sharing for
                                  2016
------------------------------------------------------------------------
                                                        Reduced  maximum
                                     Reduced  maximum        annual
                                          annual         limitation on
       Eligibility category           limitation on    cost  sharing for
                                    cost  sharing for  other  than self-
                                        self-only        only  coverage
                                    coverage for 2016       for 2016
------------------------------------------------------------------------
Individuals eligible for cost-                 $2,250             $4,500
 sharing reductions under Sec.
 155.305(g)(2)(i) (that is, 100-
 150 percent of FPL)..............
Individuals eligible for cost-                  2,250              4,500
 sharing reductions under Sec.
 155.305(g)(2)(ii) (that is, 150-
 200 percent of FPL)..............
Individuals eligible for cost-                  5,450             10,900
 sharing reductions under Sec.
 155.305(g)(2)(iii) (that is, 200-
 250 percent of FPL)..............
------------------------------------------------------------------------

c. Plan Variations (Sec.  156.420)
    Sections 1402 and 1412 of the Affordable Care Act provide for 
reductions in cost sharing on essential health benefits for qualified 
low- and moderate-income enrollees in silver level health plans offered 
in the individual market through the Exchanges. Section 1402(d) of the 
Affordable Care Act also provides for Indians with household income 
below 300 percent FPL to be enrolled in QHPs with zero cost sharing at 
any metal level. Implementing regulations, Sec.  156.400 et seq., set 
forth health insurance issuer responsibilities with respect to the 
administration of reductions in cost sharing for eligible individuals. 
In addition, section 2715 of the PHS Act and its implementing 
regulation, Sec.  147.200, require group health plans and health 
insurance issuers offering group or individual health insurance 
coverage to provide a written summary of benefits and coverage (SBC) 
for each benefit package to all covered entities and individuals, 
including individuals in the individual market, applying for coverage.
    While individual health insurance issuers (including QHP issuers) 
must provide an SBC for each benefit package, current regulations do 
not specifically address an issuer's responsibilities to provide an SBC 
reflecting a QHP with cost-sharing reductions applied, known as a plan 
variation of the QHP. Consequently, a consumer who is eligible for 
cost-sharing reductions may receive an SBC that does not accurately 
represent the cost sharing he or she will be responsible for when 
receiving essential health benefits. Under the authority stated above, 
we propose to amend Sec.  156.420 to add Sec.  156.420(h) and require 
QHP issuers to provide SBCs that accurately represent plan variations 
in a manner consistent with the requirements set forth at Sec.  147.200 
to ensure that consumers have access to SBCs that accurately represent 
cost-sharing responsibilities for all coverage options, including plan 
variations, and are provided adequate notice of the plan variations.
    We propose that QHP issuers would be required to provide SBCs for 
plan variations no later than the first day of the next Exchange open 
enrollment period for the individual market for the 2016 benefit year, 
in accordance with Sec.  155.410(e). We seek comments on whether the 
proposed applicability date would present implementation challenges for 
QHP issuers as well as on other aspects of this proposal. As discussed 
above, we note that QHP issuers would be required to provide the SBC in 
a manner that is consistent with the meaningful access requirements 
under Sec.  155.205(c).
d. Changes in Eligibility for Cost-Sharing Reductions (Sec.  156.425)
    Under the authority in sections 1402 and 1412 of the Affordable 
Care Act, which provide for reductions in cost sharing on essential 
health benefits for qualified low- and moderate-income enrollees in 
silver level health plans offered in the individual market on 
Exchanges, we propose to amend Sec.  156.425 to clarify when a QHP 
issuer would be required to provide an SBC if an individual's 
assignment to a standard plan or plan variation of the QHP changes in 
accordance with Sec.  156.425(a). We propose that a QHP issuer must 
provide an SBC that accurately represents a new plan variation (or the 
standard plan variation) as soon as practicable after receiving notice 
from the Exchange of the individual's change in eligibility, but in no 
case later than 7 business days following receipt of notice. We propose 
that QHP issuers would be required to provide SBCs in accordance with 
this proposed paragraph beginning on the first day of the benefit year 
that begins on January 1, 2016. We seek comments on this proposal.
e. Cost-Sharing Reductions Reconciliation (Sec.  156.430)
    Sections 1402(a)-(c) of the Affordable Care Act provide for cost-
sharing reductions for essential health benefits (EHB) provided by a 
qualified health plan. Cost-sharing reductions are advanced to issuers 
throughout the benefit year, and reconciled by HHS following the 
benefit year against actual cost-sharing amounts provided by issuers to 
enrollees.
    The reconciliation process requires QHP issuers to submit to HHS 
the total allowed costs for EHB charged for each plan variation policy, 
the amounts paid by the issuer, and the amounts paid by or on behalf of 
the enrollee (other than by the Federal government under section 1402 
of the Affordable Care Act), as well as the amounts that would have 
been paid by the enrollee under the standard plan. Under the standard 
methodology described at Sec.  156.430(c)(2), costs paid by the issuer 
under the standard plan are calculated by applying actual cost-sharing 
requirements for the standard plan to the allowed costs for EHB under 
the enrollee's policy for the benefit year. The difference is the 
amount of cost-sharing reductions provided.
    As stated above, HHS will not reimburse issuers for reductions in 
out-of-pocket spending for benefits other than EHB. However, we 
understand that because of technology challenges in these early years 
of the cost-sharing reduction program, some issuers are presently 
unable to differentiate on a

[[Page 70732]]

policy level between EHB claims and non-EHB claims, as required by HHS 
when applying the standard cost-sharing reduction reconciliation 
methodology. The difficulty occurs in plan designs that allow enrollee 
out-of-pocket spending for EHB and non-EHB claims alike to accumulate 
toward deductibles and the reduced annual limit on cost sharing. Such 
plan designs benefit enrollees by allowing them to reach their spending 
limits sooner. As a result, for the purpose of cost-sharing reduction 
reconciliation, we propose to allow QHP issuers to submit percentage 
estimates of the portion of claims attributable to non-EHB for the 2014 
benefit year, and to reduce the total claims amount by that percentage, 
to arrive at an estimated total EHB amount. The percentage estimate 
would be the estimate of expected non-EHB claims costs previously 
submitted for each plan variation on the Uniform Rate Review Template 
(URRT) \57\ and which HHS used to calculate 2014 advance CSR payments. 
An issuer using this procedure would be required to do so for all plan 
variations for which the criteria below are met.
---------------------------------------------------------------------------

    \57\ Percentage of the total allowed costs of benefits as 
defined at 45.CFR 156.20 means the anticipated covered medical 
spending for EHB coverage (as defined in Sec.  156.110(a) of this 
subchapter) paid by a health plan for a standard population, 
computed in accordance with the plan's cost-sharing, divided by the 
total anticipated allowed charges for EHB coverage provided to a 
standard population, and expressed as a percentage.
---------------------------------------------------------------------------

    As described in proposed Sec.  156.430(c)(2)(i), this exception to 
permit QHP issuers to use plan-specific URRT estimates of non-EHB 
claims would be limited to plan designs in which out-of-pocket expenses 
for non-EHB benefits accumulate toward the deductible and reduced 
annual limitation on cost sharing, but for which copayments and 
coinsurance rates for non-EHB are not reduced. This limitation helps 
assure that the estimated percentage, which is calculated based on the 
proportion of claims attributable to EHB, does not overstate the 
proportion of reduced out-of-pocket spending associated with EHB. In 
addition, the exception would apply only when non-EHB estimated 
percentages account for less than 2 percent of total claims, helping 
assure that any inaccuracies in the estimate are unlikely to result in 
significant inaccuracies in total cost-sharing reduction reimbursement.
5. Minimum Essential Coverage
a. Other Coverage That Qualifies as Minimum Essential Coverage (Sec.  
156.602)
    Section 5000A of the Code, as added by section 1501(b) of the 
Affordable Care Act, requires all non-exempt applicable individuals to 
maintain minimum essential coverage or make 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; and (4) coverage under a 
grandfathered health plan. In addition, section 5000A(f)(1)(E) of the 
Code authorizes the Secretary of HHS, in coordination with the 
Secretary of the Treasury, to designate other health benefits coverage 
as minimum essential coverage. The Department of the Treasury and the 
IRS published final regulations under Code section 5000A on August 30, 
2013 (78 FR 53646), codified at 26 CFR 1.5000A-1 through -5.\58\
---------------------------------------------------------------------------

    \58\ Shared Responsibility Payment for Not Maintaining Minimum 
Essential Coverage, 78 FR 53646 (August 30, 2013).
---------------------------------------------------------------------------

    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).\59\ The HHS final regulations 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. In Sec.  156.602 
HHS designated the following types of health benefits coverage as 
minimum essential coverage: (1) Self-funded student health plans for 
plan or policy years beginning on or before December 31, 2014; (2) 
Refugee Medical Assistance supported by the Administration for Children 
and Families (45 CFR part 400 subpart G); (3) Medicare advantage plans; 
and (4) State high risk pools (as defined in section 2744 of the PHS 
Act) for plan or policy years beginning on or before December 31, 2014. 
In addition, Sec.  156.604 outlines the substantive and procedural 
requirements for other types of health benefit coverage, not 
statutorily specified in section 5000A of the Code and not designated 
as minimum essential coverage in Sec.  156.602, to apply to HHS for 
recognition as minimum essential coverage. On October 31, 2013, CMS 
published guidance explaining the administrative process by which such 
plans may apply for recognition as minimum essential coverage.\60\
---------------------------------------------------------------------------

    \59\ Patient Protection and Affordable Care Act; Exchange 
Functions: Eligibility for Exemptions; Miscellaneous Minimum 
Essential Coverage Provisions, 78 FR 39494 (July 1, 2013).
    \60\ 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.
---------------------------------------------------------------------------

    In Sec.  156.602(d), HHS applied a one-year transitional period in 
2014 to State high risk pool coverage in anticipation of States 
phasing-out State high risk pools. Some States, however, will still 
have high risk pools in 2015 because they did not enact legislation to 
terminate the program. Some of these State high risk pools will be 
closed to new enrollment. At least one high risk pool that will still 
be in existence in 2015 primarily provides supplemental coverage to 
Medicare beneficiaries under age 65.
    We understand the difficulty of transitioning individuals from 
State high risk pool coverage into QHPs through the Exchanges or into 
another form of minimum essential coverage. High risk pools provide 
coverage to vulnerable populations of consumers. Accordingly, we 
propose to revise Sec.  156.602(d) by eliminating the one-year 
transition period for State high risk pool coverage and designating as 
minimum essential coverage any qualified high risk pool established in 
any State as defined by section 2744(c)(2) of the PHS Act that is 
currently in existence. We propose that this recognition will not be 
applied to State high risk pools that are formed after the publication 
date of this proposed rule. This should provide State legislators the 
opportunity to continue to evaluate the number of high risk pool 
enrollees, benefits and cost sharing associated with each State high 
risk pool. State legislatures may decide to eliminate high risk pool 
coverage once high risk pool enrollees no longer rely on State high 
risk pool coverage and have transitioned into QHPs through the 
Exchanges or into other forms of minimum essential coverage. We seek 
comments on this proposal. Specifically, we seek comments on whether 
State high risk pools should be permanently designated as minimum 
essential coverage or whether the designation should be time-limited 
(for example, for 2015 only). We also seek comments on the cut-off date 
for formation of State high risk pools that will qualify for 
recognition under this proposed rule.

[[Page 70733]]

6. Enforcement Remedies in Federally-Facilitated Exchanges
a. Available Remedies; Scope (Sec.  156.800)
    In the first Program Integrity Rule, HHS finalized Sec.  
156.800(c), which established a good faith compliance policy for QHP 
issuers offering coverage through an FFE for the 2014 calendar year. 
Specifically, the first Program Integrity Rule provides that HHS will 
not impose sanctions under subpart I of 45 CFR part 156 against a QHP 
issuer in an FFE if the QHP issuer has made good faith efforts to 
comply with applicable Exchange requirements. HHS adopted the good 
faith compliance policy to help QHP issuers become familiar with the 
standards unique to the FFEs during the initial stage of operations.
    We recognize that during 2014, CMS issued revised guidance on some 
Exchange processes and also implemented some new processes. To help QHP 
issuers adjust to these processes, HHS provided guidance and technical 
assistance through various forums. We are aware that despite HHS's 
support and the QHP issuers' good faith efforts, some QHP issuers 
offering coverage through an FFE nonetheless experienced difficulties 
adapting to these processes. However, we found that most QHP issuers 
were proactive in contacting their assigned HHS account managers to 
request technical assistance or clarifications to existing policies, 
standards and processes to ensure their own compliance with FFE 
standards. When potential issues were identified, the vast majority of 
QHP issuers demonstrated a willingness to cooperate with HHS to resolve 
these issues.
    HHS is committed to ensuring that QHP issuers have the opportunity 
to learn from their experiences in 2014 without undue concern about 
being subject to formal enforcement actions when the QHP issuer has 
made reasonable efforts to comply with applicable standards. While 
immediate formal enforcement actions may be appropriate in some cases, 
we continue to prefer resolving most compliance issues by providing 
technical assistance. Accordingly, we propose extending the good faith 
compliance standard under Sec.  156.800(c) through the end of calendar 
year 2015. We believe this one-year extension will encourage QHP 
issuers to continue to self-report any potential compliance issues or 
other problems that may affect their ability to comply with applicable 
FFE standards in 2015 and future years, and to continue making 
improvements to their processes and systems, including training their 
staff about FFE operations and applicable standards. Further, if HHS 
determines that an issuer is not acting in good faith, that issuer may 
be subject to enforcement remedies including civil monetary penalties 
and decertification, if applicable.
    Finally, we note that irrespective of the good faith compliance 
standard, QHP issuers are required to comply with all applicable FFE 
standards (and any applicable Federal or State laws including privacy, 
security and fraud) at the time of certification and on an ongoing 
basis. It should also be noted that QHP issuers have an independent 
obligation to comply with Federal civil rights laws and regulations to 
the extent they receive Federal financial assistance, and this proposed 
modification would not limit or otherwise restrict these laws and 
regulations. We expect our ongoing coordination with States and other 
regulatory entities to help streamline communications regarding 
potential compliance issues and avoid unnecessary duplication of 
oversight efforts. For issuers of multi-State plans, HHS will 
coordinate as appropriate with OPM to address compliance issues. We 
seek comment on this proposal.
b. Plan Suppression (Sec.  156.815)
    In the Exchange Establishment Rule, HHS finalized Sec.  155.205(b), 
which sets forth the required content and information to be included on 
an Exchange Web site. Among other things, this rule implemented the 
Secretary's obligations under section 1311(c)(5) of the Affordable Care 
Act to continue to operate, maintain, and update the Internet portal 
developed under section 1103 of the Affordable Care Act to provide 
information to consumers and small businesses on affordable health 
insurance coverage options. Under the rule, an Exchange Web site must 
provide information to consumers on each available QHP's premiums, 
cost-sharing arrangements, summaries of benefits and coverage, coverage 
(``metal'') level, results of the enrollee satisfaction survey, quality 
ratings, medical loss ratio information, transparency in coverage 
information, and provider directory. The FFE Web site is located at 
www.HealthCare.gov and provides enrollees, consumers, and other 
stakeholders with access to QHP data to facilitate an informed plan 
selection when shopping for or enrolling in QHPs on an Exchange. The 
information provided on the FFE Web site is also presented to consumers 
enrolling through a HealthCare.gov call center representative, by 
direct enrollment through a QHP issuer's Web site, or through the Web 
site of an agent or broker under Sec.  155.220(c)(3).
    During the 2014 plan year, we identified situations that made it 
necessary for purposes of protecting consumers' interests to suppress 
certain QHPs from each of the avenues of enrollment: enrollment through 
the HealthCare.gov Web site, enrollment by a HealthCare.gov call center 
representative, direct enrollment through a QHP issuer Web site, and 
enrollment through a Web site of an agent or broker. When a QHP is 
suppressed, the QHP temporarily will not be available for enrollment 
through the FFE. When all conditions that are grounds for suppression 
are resolved, the QHP will be unsuppressed.
    In Sec.  156.815(a), we propose a definition of suppression which 
would mean that a suppressed QHP temporarily would not be available for 
enrollment through the FFE.
    In Sec.  156.815(b), we list each of the proposed bases for 
suppression of a QHP in the FFE. Our first proposed basis for 
suppression, Sec.  156.815(b)(1), is the issuer's notifying HHS of its 
withdrawal of the QHP from the FFE when one of the exceptions to 
guaranteed renewability of coverage related to discontinuing a 
particular product or discontinuing all coverage under Sec.  147.106(c) 
or (d) applies. The purpose of this proposed basis for suppression is 
to clarify the method that we will use to prevent consumers from 
enrolling in a plan through the FFE after the issuer has notified HHS 
of its intent to legally withdraw the QHP from the FFE. We note that, 
per Sec.  156.290(a)(2), issuers withdrawing QHPs from a FFE will be 
expected to fulfill their obligations to cover benefits for enrollees 
through the end of the enrollees' plan or benefit year and to comply 
with other applicable regulations.
    In Sec.  156.815(b)(2), we propose to suppress a QHP when we 
determine that the FFE has incorrect data about the QHP. This basis for 
suppression is intended for situations where incorrect or incomplete 
QHP data have been submitted to the FFE by the QHP issuer but the 
issuer intends to continue offering the QHP on the FFE after the data 
issue is resolved. We believe that suppression of a QHP with incorrect 
or incomplete data until the correct or complete information is 
available is in the best interest of the consumers. The decision to 
suppress based on incorrect data will be based on the severity of the 
issue. For example, a QHP with incorrectly submitted rates generally 
would be suppressed until the rating data are corrected.

[[Page 70734]]

    In Sec.  156.815(b)(3), we propose to suppress a QHP that is in the 
process of decertification under Sec.  156.810 or the appeal of a 
decertification under subpart J of part 156. We believe it is necessary 
to suspend further enrollment in plans on the FFE where it is likely 
that consumers will be substantially harmed if the QHP is decertified 
in the near future. When a QHP is decertified, a consumer enrolled in 
that QHP will no longer be eligible for advance payments of the premium 
tax credit under Sec.  155.305(f)(3) or cost-sharing reductions under 
Sec.  155.305(g)(1) if they choose to remain enrolled in that plan 
after decertification. If a consumer enrolls in a new plan that is 
decertified shortly thereafter, the consumer will need to enroll in 
another QHP to retain access to advance payments of the premium tax 
credit and cost-sharing reductions. We believe the best way to bolster 
consumer confidence in the offerings on the FFE and to assist consumers 
in retaining their subsidies is to prevent further enrollment in a plan 
at risk of decertification until a determination on decertification is 
made. HHS will attempt to resolve decertification and appeal 
proceedings in as timely a manner as possible to minimize any adverse 
effect of suppression on QHP issuers.
    In Sec.  156.815(b)(4), we propose to suppress a QHP when the QHP 
is the subject of a pending, ongoing, or final State regulatory or 
enforcement action that could affect the issuer's ability to enroll 
consumers or otherwise relates to the issuer's ability to offer QHPs in 
the FFE and would necessitate the removal of a QHP from the FFE until 
the condition triggering the State action has been resolved. This basis 
for suppression is intended to protect consumers from enrollment in 
plans that State insurance regulators have identified as possibly or 
actually in violation of applicable State or Federal laws and 
regulations. We recognize that, in the case of pending State regulatory 
or enforcement action, QHP issuers may ultimately be cleared of alleged 
wrongdoing. To mitigate the harmful effect of such a scenario, we will 
base our suppress decision in this instance on the specific details of 
the pending regulatory or enforcement action, such as, the scope and 
severity of the alleged violation and the recommendation of State 
insurance regulators. We are committed to working with State insurance 
regulators to inform decisions about QHP suppression under this 
proposal.
    In Sec.  156.815(b)(5), we propose allowing suppression of a QHP 
when either the special rule for network plans under Sec.  147.104(c) 
or the application of financial capacity limits provision under Sec.  
147.104(d) apply. For example, if an issuer demonstrates to its State 
department of insurance (DOI) that it does not have the financial 
reserves necessary to offer additional coverage and the DOI places an 
enrollment restriction on a QHP to prevent it from enrolling new 
consumers, commonly referred to as an enrollment cap, we may suppress 
the QHP until the State DOI has lifted the restriction. We intend to 
coordinate with States to the greatest extent possible in determining 
whether suppression under this section is appropriate.
    In Sec.  156.815(c), we propose to suppress a QHP that is a multi-
State plan upon notification by OPM. Under 45 CFR 800.103, OPM may 
contract with health insurance issuers to provide at least two multi-
State plans on Exchanges and SHOPs in each State. When OPM determines 
that a compliance violation under subpart E of 45 CFR part 800 or one 
of the grounds for suppression in Sec.  156.815(b) exists, the Exchange 
may suppress the multi-State plan upon notification by OPM of the 
violation or other grounds for suppression. We will continue to 
coordinate efforts with OPM when multi-State plan compliance violations 
are found.
    We invite comments on these proposed regulations, including whether 
the proposed bases for suppression are appropriate and whether an 
appeals process should be available following suppression decisions.
7. Quality Standards
a. Quality Improvement Strategy (Sec.  156.1130)
    Section 1311(c)(1)(E) of the Affordable Care Act specifies that to 
be certified as a QHP for participation on an Exchange, each health 
plan must implement a quality improvement strategy (QIS), which is 
described in section 1311(g)(1) of the Affordable Care Act. Section 
1311(g)(1) of the Affordable Care Act describes this strategy as a 
payment structure that provides increased reimbursement or other 
incentives to improve the health outcomes of plan enrollees, prevent 
hospital readmissions, improve patient safety and reduce medical 
errors, implement wellness and health promotion activities, and reduce 
health and health care disparities. Section 1311(g)(2) of the 
Affordable Care Act requires the Secretary to develop guidelines 
associated with the QIS in consultation with health care quality 
experts and stakeholders, including periodic reporting of the 
activities that the plan has conducted to implement the QIS, to the 
applicable Exchange, as described in section 1311(g)(3) of the 
Affordable Care Act. We have already issued regulations in Sec.  
155.200(d) to direct Exchanges to evaluate quality improvement 
strategies, and at Sec.  156.200(b), which directs QHP issuers to 
implement and report on a quality improvement strategy or strategies 
consistent with standards set forth in section 1311(g) of the 
Affordable Care Act as a QHP certification criteria for participation 
in an Exchange. This rule proposes standards and the associated 
timeframe for QHP issuers to submit the necessary information to 
implement QIS standards for QHPs offered through an Exchange under 
section 1311(g) of the Affordable Care Act beginning in calendar year 
2016.
    Many provisions in the Affordable Care Act build on related value-
based purchasing concepts. HHS has already implemented several programs 
(for example, the Medicare Shared Savings Program, the Hospital Value-
Based Purchasing Program, and the Physician Value-Based Payment 
Modifier) that focus on rewarding provider-level organizations that use 
innovative payment and service delivery models to lower costs and 
improve quality of health care for Medicare beneficiaries. Although 
these programs are provider-focused and relate to the Medicare program, 
their elements are closely aligned to the statutory requirements of a 
QIS for QHPs offered in an Exchange, including, rewarding quality and 
value through market-based incentives for improving health outcomes 
through care coordination activities, preventing hospital readmissions, 
and improving patient safety. We believe it is important to align with 
public and private payment and service delivery programs, as 
appropriate, to support the goals of better health outcomes and lower 
health care costs. The Center for Medicare and Medicaid Innovation has 
also recognized the importance of multi-payer engagement in quality 
improvement, releasing models such as Pioneer Accountable Care 
Organizations and the Comprehensive Primary Care Initiative that 
require participating providers to work with both public and private 
payers on care redesign and efficiency. We encourage QHP issuers to 
consider diverse approaches to value-based payment and enrollee 
incentives to reward quality and value in health care.
    The HHS National Strategy for Quality Improvement in Health Care 
(National Quality Strategy) defines

[[Page 70735]]

priorities that guide efforts to improve health and health care quality 
for individuals and communities. It also identifies policy levers, such 
as payment rewards or incentives for providers, and consumer incentives 
and benefit designs, which represent a business function, resource or 
action that stakeholders can use to align with the National Quality 
Strategy and drive quality improvement for better, more affordable 
health care.\61\ The CMS Quality Strategy is built on the foundation of 
the National Quality Strategy and operationalizes the priorities of the 
National Quality Strategy to improve health outcomes for all consumers, 
including those who seek coverage through the Exchange. We propose to 
establish QIS standards that use market-based incentives for QHPs 
offered through the Exchanges, and that align with the National Quality 
Strategy, the CMS Quality Strategy, and other Federal, State and 
private sector initiatives, as applicable. We acknowledge that there 
are numerous existing public and private industry standard initiatives 
that focus on health plan quality improvement strategies and 
activities. We believe that aligning QHP issuer standards for quality 
improvement strategies in Exchanges with existing initiatives would 
reinforce national health care quality priorities while reducing the 
burden on health plans and stakeholders to implement different and 
multiple program requirements. This approach is also consistent with 
the alignment of the quality rating system for QHPs offered through an 
Exchange under section 1311(c)(3) of the Affordable Care Act to the 
National Quality Strategy.\62\
---------------------------------------------------------------------------

    \61\ The National Strategy for Quality Improvement in Health 
Care available at http://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm.
    \62\ 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).
---------------------------------------------------------------------------

    We believe that it is important that the proposed QIS standards 
leverage existing initiatives and quality improvement strategy tools 
for QHP issuers to help strengthen health care system-wide efforts to 
improve health outcomes and lower costs. We reviewed several existing 
initiatives in the public and private sectors \63\ such as Federal 
health plan quality improvement evaluation programs, private 
accreditation programs, and other private sector programs to guide the 
development of the framework for the QIS for QHPs offered through the 
Exchanges and establish the proposed standards outlined in this rule.
---------------------------------------------------------------------------

    \63\ Initiatives include, the Medicaid External Quality Review 
(EQR) program, the Medicare Advantage Quality Improvement Project 
and Chronic Care Improvement Program (QIP/CCIP) Program, the 
Accreditation Association for Ambulatory Health Care (AAAHC), 
National Committee for Quality Assurance (NCQA), URAC, Integrated 
Health Association (IHA) Value Based Pay for Performance (P4P) 
Program, National Business Coalition on Health eValue8 Request for 
Information.
---------------------------------------------------------------------------

    Based on our research, feedback from a QIS Technical Expert Panel 
(TEP), and discussions with stakeholders, we developed the following 
principles to guide the development, implementation, and evolution of 
the QIS standards: (1) The QHP issuer's QIS will focus on one or more 
of the following topics outlined in section 1311(g)(1) of the 
Affordable Care Act: Improving health outcomes, implementation of 
activities to prevent hospital readmissions, implementation of 
activities to improve patient safety and reduce medical errors, 
implementation of wellness and health promotion activities, and 
implementation of activities to reduce health and health care 
disparities; (2) HHS will seek to minimize administrative burdens 
through alignment of the QIS data collection and submission standards, 
where possible, with public and private quality improvement and public 
reporting programs; (3) The QIS standards will be flexible enough to 
encourage QHP issuer innovation and promote a culture of continuous 
quality improvement providing the QHP issuer's strategy is relevant to 
the characteristics and needs of its enrollees and the Exchange; (4) 
The QIS standards will allow for flexibility for State Exchanges while 
still establishing minimum requirements, upon which States, if desired, 
can build additional reporting requirements in accordance with their 
needs; (5) The QIS standards will be developed in a public and 
transparent manner that will seek stakeholder feedback throughout its 
development and implementation. We believe that these guiding 
principles and general framework for the QIS standards will promote 
efficiency, flexibility, and transparency to best engage QHP issuers 
and serve consumers to improve health and health care quality in the 
Exchanges.
    In Sec.  156.1130(a), we propose that a QHP issuer participating in 
an Exchange for at least 2 years must implement and report information 
regarding a quality improvement strategy which includes a payment 
structure to provide increased reimbursement or other market-based 
incentives in accordance with the health care topic areas in section 
1311(g)(1) of the Affordable Care Act, for each QHP offered in an 
Exchange consistent with the guidelines developed by HHS under section 
1311(g) of the Affordable Care Act. We note that the statutory QIS 
requirements, similar to the other Exchange quality standards, extend 
to all Exchange types, including a State Exchange and the FFE. For the 
QIS, we propose to provide State Exchanges flexibility to establish the 
timeline, format, validation, and other requirements related to the 
annual submission of QIS data by QHP issuers that participate in their 
respective Exchanges. Under this proposal, the establishment and 
implementation of such standards and other requirements by State 
Exchanges would support compliance with Sec.  155.200(d), which 
requires the Exchange to evaluate and oversee implementation of the QIS 
(among other QHP issuer quality initiatives on coverage offered through 
Exchanges). We envision the standards that will be used for the FFE 
will provide the starting point for State Exchanges to build upon.
    We propose to phase in QIS implementation standards and reporting 
requirements to provide QHP issuers the necessary time to understand 
the populations enrolling in a QHP offered through the Exchange and to 
build quality performance data on its QHP enrollees. We believe that 
implementation of a QIS should be a continuous improvement process for 
which the QHP issuers are required to define the health outcome needs 
of their enrollees, set goals for improvement, and use increased 
reimbursement to their providers or other market-based incentives to 
stimulate achievement of those goals. We believe this proposed approach 
is consistent with other QHP issuer quality standards for coverage 
offered through an Exchange including implementation and reporting for 
the patient safety standards, Quality Rating System (QRS), and Enrollee 
Satisfaction Survey (ESS), outlined in subpart L of part 156. We 
further note that, consistent with existing regulations at Sec.  
156.200(h), we anticipate that QHP issuers participating in Exchanges 
would be required to attest to compliance with QIS standards, along 
with the other QHP issuer quality initiatives for coverage offered 
through Exchanges established under subpart L of part 156, as part of 
the QHP application process.
    In paragraph (b), we propose to direct a QHP issuer to submit 
validated data in a form, manner and reporting frequency specified by 
the Exchange to support evaluation of quality improvement strategies in 
accordance with

[[Page 70736]]

Sec.  155.200(d) and Sec.  156.200(b)(5). We anticipate using the data 
collected as part of information used to evaluate and oversee 
compliance of QHP issuers in FFEs with the Exchange QIS standards and 
encourage State Exchanges to adopt a similar approach. We propose that 
beginning in 2016, a QHP issuer participating in the FFE for at least 2 
years would submit a QIS implementation plan to HHS and the applicable 
Exchange for each QHP offered in the Exchange, followed by annual 
progress updates. We anticipate that the implementation plan for a QHP 
issuer's proposed QIS will reflect a payment structure that provides 
increased reimbursement or other market-based incentives for addressing 
at least one of the topics specified in section 1311(g)(1) of the 
Affordable Care Act.
    The QIS design should include elements such as: A rationale that 
describes its relevance to the QHP's enrollee population; proposed 
performance measures and targets; description of activities to reduce 
health and health care disparities, as well as other chosen topics, 
goals, timeline, and information about barriers and mitigation 
planning. For example, we are considering requesting information from 
QHP issuers regarding the percentage of payments to providers that is 
adjusted based on quality and cost of health care services. We believe 
that QHP issuers measuring and reporting such information related to 
payment models that link quality and value of health care services is 
an important part of an issuer's QIS. We also believe that information 
regarding provider payment models and market-based incentives that link 
quality and value would promote transparency of such health plan 
quality data to Exchanges to help make better informed QHP 
certification decisions. We propose that one year after submitting the 
QIS implementation plan, the QHP issuer would submit information 
including, an annual update including a description of progress of QIS 
implementation activities, analysis of progress using proposed measures 
and targets, and any modifications to the QIS. Currently, we do not 
intend to require specific performance measures to be included in a 
QIS; however, we anticipate that health plan quality measures required 
for the QRS could be incorporated in a QHP issuer's QIS. We believe 
that the proposed implementation and reporting for the QIS over time 
would provide meaningful QIS data from QHP issuers by minimizing 
administrative effort while also allowing for flexibility and 
innovation. We anticipate issuing technical guidance in the future that 
will provide operational details including data validation, other data 
submission processes, timeframes and potential minimum enrollment size 
threshold for coverage offered through the FFE. This guidance would be 
updated on an annual basis (or more frequently as may be necessary). We 
propose to allow State Exchanges to establish the data validation and 
submission requirements for QIS data from QHP issuers that participate 
in their respective Exchanges.
    In paragraph (c), we propose to direct a QHP issuer to submit data 
annually for activities that are conducted related to implementation of 
its QIS, in a manner and timeframe specified by the Exchange. For 
example, an issuer that participates in the FFE for two consecutive 
years for coverage beginning in January 2014 and January 2015 would 
submit a QIS implementation plan to the FFE during the fall 2016 post-
certification period, and in a format specified by HHS. A progress 
update on the QHP issuer's QIS activities would be required the 
following year. Similarly, an issuer participating in the FFE for the 
first time during the 2015 open enrollment period for the 2016 coverage 
year would submit an implementation plan in the 2018 post-certification 
period to align with our proposed approach of phasing in the QIS over 
time and allowing a QHP issuer 2 years to collect data and develop 
quality improvement strategies for its QHPs offered through an 
Exchange, before the submission of an implementation plan is required. 
A progress update on the QHP issuer's QIS activities would be required 
the following year. We propose to allow State Exchanges to establish 
the specific timeline and format requirements for the annual submission 
of QIS data by QHP issuers that participate in their respective 
Exchanges.
    We seek comment on the proposed general requirement in paragraph 
(a) that describes the QIS and the applicability to QHP issuers that 
have been participating for at least 2 years in an Exchange. We seek 
comment on whether the proposed QIS standards should be applicable to 
all types of QHPs offered through the Exchange (for example, stand-
alone dental plans, QHPs providing child-only coverage, and health 
savings accounts) or if different standards should be developed for the 
different types of QHPs offered through the Exchange. We also seek 
comment regarding whether certain types of QHPs offered through the 
Exchange should be excluded from the QIS certification requirement.
    We seek comment on the proposed data requirement in paragraph (b) 
and the proposed timeline in paragraph (c). We seek comment on the 
proposed approach of directing QHP issuers to provide information 
regarding an implementation plan followed by annual progress updates. 
We seek comment on whether there should be a minimum QHP enrollment 
size threshold to trigger the applicability of QIS standards proposed 
in Sec.  155.1130. We also seek comment on what information is 
important to include for HHS and an Exchange to effectively monitor and 
evaluate a QIS. We seek comment on requiring information relating to 
provider payment models, such as an issuer's minimum target or goal set 
with regards to the percentage of provider payments adjusted for 
quality and cost, to be submitted for compliance with QIS standards 
proposed in Sec.  155.1130. We also seek comment on whether QIS data 
submitted and evaluated under section 1311(g) should be collected in a 
uniform or standardized format or publically displayed to encourage 
transparency, support comparison of QHP issuer QIS activities, and 
align with other quality standards for QHP issuers.
    We note that multi-State plans, as defined in Sec.  155.1000(a), 
are subject to reporting QIS data for evaluation, as described in 
paragraph (b). This rulemaking proposes to codify this general 
requirement at Sec.  156.1130(d). We anticipate that OPM will provide 
guidance on QIS reporting to issuers with whom it holds multi-State 
plan contracts.
8. Qualified Health Plan Issuer Responsibilities
a. Administrative Appeals (Sec.  156.1220(c))
    In the 2015 Payment Notice, we established an administrative 
appeals process designed to address unresolved discrepancies regarding 
advance payments of the premium tax credit, advance payments of cost-
sharing reductions, FFE user fee payments, payments and charges for the 
premium stabilization programs, cost-sharing reduction reconciliation 
payments and charges, and assessments of default risk adjustment 
charges. We established a three-tier appeals process: a request for 
reconsideration under Sec.  156.1220(a); a request for an informal 
hearing before a CMS hearing officer under Sec.  156.1220(b); and a 
request for review by the Administrator of CMS under Sec.  156.1220(c).

[[Page 70737]]

    Under Sec.  156.1220(a), we provided that an issuer may file a 
request for reconsideration of a processing error by HHS, HHS's 
incorrect application of the relevant methodology, or HHS's 
mathematical error only for advance payments of the premium tax credit, 
advance payments of cost-sharing reductions, FFE user fee payments, 
payments and charges for the premium stabilization programs, cost-
sharing reduction reconciliation payments and charges, and assessments 
of default risk adjustment charges for a benefit year. In Sec.  
156.1220(a)(6), we stated that a reconsideration decision would be 
final and binding for decisions regarding the advance payments of the 
premium tax credit, advance payments of cost-sharing reductions, and 
FFE user fees. A reconsideration decision with respect to other matters 
would be subject to the outcome of a request for informal hearing filed 
in accordance with Sec.  156.1220(b).
    Under Sec.  156.1220(b), an issuer that elects to challenge the 
reconsideration decision may request an informal hearing before a CMS 
hearing officer. The CMS hearing officer's decision would be final and 
binding, but subject to any Administrator's review initiated in 
accordance with Sec.  156.1220(c).
    We stated in Sec.  156.1220(c)(1) that if the CMS hearing officer 
upholds the reconsideration decision, the issuer is permitted to 
request a review by the Administrator of CMS within 15 calendar days of 
the date of the CMS hearing officer's decision. We are proposing to 
modify this process to also permit CMS the opportunity to request 
review of the CMS hearing officer's decision, and to permit the 
Administrator of CMS to decline to review the CMS hearing officer's 
decision. Specifically, we propose to amend Sec.  156.1220(c)(1) to 
permit either the issuer or CMS to request review by the Administrator 
of the CMS hearing officer's decision. We propose to provide that any 
request for review of the hearing officer's decision must be submitted 
to the Administrator of CMS within 15 calendar days of the date of the 
hearing officer's decision, and must specify the findings or issues 
that the issuer or CMS challenges. We propose that the issuer or CMS be 
permitted to submit for review by the Administrator a statement 
supporting the decision of the CMS hearing officer.
    We also propose to amend Sec.  156.1220(c)(2) to provide the 
Administrator of CMS with the discretion to review or not review the 
decision of the CMS hearing officer after receiving a request for 
review under Sec.  156.1220(c)(1). We believe such discretion will 
permit the Administrator to focus resources on the priority matters, 
including disputes with implications for other issuers. In keeping with 
our current process set forth in Sec.  156.1220(c), we propose that if 
the Administrator elects to review the CMS hearing officer's decision, 
the Administrator will review the statements of the issuer and CMS, and 
any other information included in the record of the CMS hearing 
officer's decision, and will determine whether to uphold, reverse, or 
modify the CMS hearing officer's decision. We propose that the issuer 
or CMS be required to prove its case by clear and convincing evidence 
with respect to issues of fact, and that the Administrator will send 
the decision and the reasons for the decision to the issuer. As 
established in Sec.  156.1220(c)(3), the Administrator's decision is 
final and binding.
    We note that this process is consistent with the Medicare Advantage 
risk adjustment data validation audit dispute and appeal processes set 
forth in 42 CFR 422.311 and believe that this proposal will strengthen 
the administrative appeal process by providing CMS the opportunity to 
appeal inconsistencies from prior decisions and focus resources on 
disputes affecting many issuers. We seek comment on this proposal.

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

1. Treatment of Cost-Sharing Reductions in MLR Calculation
    The Premium Stabilization rule (77 FR 17220) aligned the definition 
of ``allowable costs'' under the risk corridors program at Sec.  
153.500 with the definition of incurred claims under the MLR program at 
Sec.  158.410 and expenditures for health care quality and health 
information technology under Sec.  158.150-Sec.  158.151. In the 2014 
Payment Notice, we additionally specified that allowable costs under 
risk corridors must be reduced by the amount of cost-sharing reduction 
payments received from HHS. While the MLR regulation describes a number 
of adjustments to an issuer's incurred claims in the MLR calculation, 
it currently does not describe how incurred claims should be adjusted 
to reflect cost-sharing reduction receipts by the issuer. To align the 
calculations between the two programs, we propose to specify that cost-
sharing reduction payments should be deducted from incurred claims 
under the MLR program just as they are deducted from allowable costs 
under the risk corridors program. As we previously stated in the 2014 
Payment Notice, it is our understanding that in most fee-for-service 
arrangements, cost-sharing reductions will be passed through to the 
fee-for-service provider, and therefore no adjustment to incurred 
claims for cost-sharing reduction payments is required to account for 
any retained payments. In contrast, in capitated arrangements, cost-
sharing reduction payments should be accounted for as a reduction to 
incurred claims because capitation payments (which are reflected 
directly in an issuer's incurred claims) will be raised to account for 
the reductions in providers' cost-sharing income, and the issuer will 
retain the cost-sharing reduction payments. For these reasons, we 
propose to amend Sec.  158.140(b)(1) to clarify that cost-sharing 
reduction payments received by the issuer, to the extent not reimbursed 
to the provider furnishing the item or service, must be deducted from 
incurred claims.
2. Reporting of Federal and State Taxes
    The MLR December 1, 2010 interim final rule (75 FR 74864) directs 
issuers to report Federal and State taxes and assessments that are 
excluded from premium in the MLR and rebate calculations separately 
from Federal and State taxes and assessments not excluded from premium 
in MLR and rebate calculations. Specifically, the interim final rule 
notes that Federal taxes excluded from premium in the MLR include all 
Federal taxes and assessments allocated to health insurance coverage 
reported under section 2718 of the PHS Act. The Federal taxes not 
excluded from premium in the MLR under the interim final rule include 
Federal income taxes on investment income and capital gains. The State 
taxes excluded from premium in the MLR under the interim final rule 
include State income, excise, premium, and certain other taxes, and for 
certain issuers, community benefit expenditures. The State taxes not 
excluded from premium in the MLR under the interim final rule include 
State sales taxes and ceded premium taxes. While our technical guidance 
and the instructions for the MLR report required by section 2718 of the 
PHS Act provide some additional details regarding certain types of 
taxes that may or may not be excluded from premium, we believe that the 
current reference to all taxes and assessments allocated to health 
insurance coverage reported under section 2718 of the PHS Act would 
benefit from further clarification for future MLR reporting years. 
Specifically, employment taxes such as the employer and employee shares 
of the Federal Insurance Contributions Act

[[Page 70738]]

(FICA) and the Railroad Retirement Tax Act (RRTA) taxes, the Federal 
Unemployment Act (FUTA) and State unemployment taxes, and other similar 
taxes represent an administrative cost that is more directly related to 
an issuer's overhead rather than to the characteristics of its health 
insurance business in a particular State and market. Therefore, in this 
rulemaking, we propose to amend the provisions for the reporting of 
Federal and State taxes in Sec.  158.162(a)(2) and (b)(2) to provide 
that Federal and State employment taxes should not be excluded from 
premium in the MLR and rebate calculations.
3. Distribution of Rebates to Group Enrollees in Non-Federal 
Governmental Plans
    The December 7, 2011 MLR Rebate Requirements for Non-Federal 
Governmental Plans interim final rule (76 FR 76596) directs issuers to 
distribute rebates to the group policyholders of non-Federal 
governmental plans. Under CMS's direct enforcement authority over non-
Federal governmental plans, the interim final rule further directs the 
group policyholders of such plans to use the portion of the rebate 
attributable to the amount of premium paid by subscribers of such plans 
for the benefit of subscribers in one of three prescribed ways. These 
provisions were put in place to ensure that rebates are used for the 
benefit of enrollees of non-Federal governmental plans, who do not 
receive the protections of Employee Retirement Income Security Act of 
1974 (ERISA), as amended. Under ERISA and implementing regulations, 
most plan participants are assured that the rebate (when the rebate is 
determined to be a plan asset) is applied for their benefit within 3 
months of receipt by the policyholder. Currently, no similar protection 
is afforded to subscribers of non-Federal governmental plans.
    In this proposed rule, we propose to amend the provisions for 
distribution of rebates in Sec.  158.242(b) to require group 
policyholders of non-Federal governmental plans to use the subscribers' 
portion of the rebate for the subscribers' benefit within 3 months of 
receipt of the rebate by the group policyholder. Under this proposal, 
plans will continue to be able to use the rebate to reduce the 
subscribers' portion of premium for the subsequent policy year 
(including by spreading it over the 12 months of the policy year) as 
long as the subsequent policy year commences within 3 months of receipt 
of the rebate by the group policyholder. If the subsequent policy year 
commences outside this 3-month window, the group policyholder of a non-
Federal governmental plan must distribute the subscribers' portion of 
the rebate within 3 months in the form of a cash refund or by applying 
a mid-policy year premium credit to the subscriber's portion of 
premium. We note that, because under Sec.  158.242(b)(3) group health 
plans that are not governmental plans and are not subject to ERISA 
(such as church plans) must follow the same rebate distribution rules 
in order to receive the rebate directly, the same distribution deadline 
will apply to such plans. Policyholders that are non-Federal 
governmental or other group health plans not subject to ERISA that do 
not apply or distribute rebates within 3 months of receipt will be 
required to pay interest on the rebates, much the same as issuers are 
required to do if they do not disburse the rebate to the policyholder 
by the due date. This proposed policy will ensure that consumers 
enrolled in group health plans not subject to ERISA do not experience 
unnecessary delays in receiving the benefit of the rebates.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. This 
proposed rule contains information collection requirements (ICRs) that 
are subject to review by OMB. A description of these provisions is 
given in the following paragraphs with an estimate of the annual 
burden, summarized in Table 13. 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 for the 
following sections of this proposed rule that contain ICRs. We 
generally used data from the Bureau of Labor Statistics to derive 
average labor costs (including a 35 percent increase for fringe 
benefits and overhead) for estimating the burden associated with the 
ICRs.

A. ICRs Regarding Standards for Notification of Change of Ownership 
(Sec.  146.152(i), Sec.  147.106(g), Sec.  148.122(j))

    When an issuer that offers a QHP, a plan otherwise subject to risk 
corridors, a risk adjustment covered plan, or a reinsurance eligible 
plan experiences a change in ownership, the issuer would be required to 
notify HHS of a change of ownership in a manner to be specified by HHS 
and provide the legal name, Health Insurance Oversight System (HIOS) 
plan identifier, and tax identification number of the original and 
post-transaction issuers and the effective date of the change of 
ownership. The information would have to be submitted by the latest of 
(1) the date the transaction is entered into; or (2) the 30th day prior 
to the effective date of the transaction. The burden associated with 
this proposed requirement would be the time and effort for the issuer 
to notify HHS of a change of ownership. We estimate that it would take 
an insurance operations analyst 30 minutes (at an hourly wage rate of 
$56.63) to prepare the data related to the change of ownership, and 10 
minutes for a senior manager (at an hourly wage rate of $103.95) to 
review the data and transmit it electronically to HHS. We estimate that 
it would cost an issuer $45.65 to comply with this reporting 
requirement. Although at this time we cannot precisely estimate the 
number of issuers that would be reporting changes of ownership, we 
expect that no more than 20 issuers would be subject to this reporting 
requirement annually, for a total burden of $913.

B. ICRs Regarding Effective Rate Review Programs (Sec.  154.301)

    In Sec.  154.301(b)(2), we propose that if a State intends to make 
the information contained in Parts I, II, and III of the Rate Filing 
Justification regarding proposed rate increases subject to review 
available to the public prior to the date specified in guidance by the 
Secretary, or if it intends to make the information contained in Parts 
I, II, and III of the Rate Filing Justification regarding final rate 
increases available to the public prior to the first day of the annual 
open enrollment period for the applicable calendar year, the State must 
notify CMS in writing of its intent to publish this information at 
least 30 days before it makes the information public and the date it 
intends to make the information public. We intend to seek OMB approval 
and solicit public comment on this information collection

[[Page 70739]]

requirement, in accordance with the Paperwork Reduction Act of 1995, at 
a future date.

C. ICRs Regarding Standards for HHS-Approved Vendors of Federally-
Facilitated Exchange Training for Agents and Brokers (Sec.  155.222)

    In Sec.  155.222, we describe the information collection and 
disclosure requirements that pertain to the approval of vendors' FFE 
agent and broker training programs, including information verification 
and administration of identity proofing. The burden estimate associated 
with these disclosure requirements includes the time and effort 
required for vendors to develop, compile, and submit the application 
information and any documentation or agreement necessary to support 
oversight in the form and manner required by HHS. We estimate that HHS 
would receive applications from nine or fewer vendors, and that it will 
take each vendor approximately 10 hours to complete an application and 
the agreement, at a cost of $24.10 per hour. Therefore, we estimate a 
total burden of approximately 90 hours and a cost of $2,169 as a result 
of this proposed requirement. HHS anticipates developing a model vendor 
application that will include data elements necessary for HHS review 
and approval. If the proposal is finalized, HHS would solicit public 
comment on the model application, estimate the burden on vendors for 
complying with this provision of the regulation, and submit the 
application for OMB approval in the future. We request comment on the 
burden for the application and review process for these entities. In 
addition, HHS will consider current training costs for State licensed 
agents and brokers for comparable training offered by the vendor to 
comparable audiences when reviewing vendor applications.
    In Sec.  155.222(d), we propose a process through which HHS would 
monitor approved vendors for ongoing compliance. HHS may require 
additional information from approved vendors to be periodically 
submitted in order to ensure continued compliance related to the 
obligations described in this section. We estimate that HHS would 
receive applications from nine or fewer vendors. We estimate that it 
will take no longer than 10 hours (at a cost of $24.10 per hour) for 
each vendor to comply with any additional monitoring by HHS. Therefore, 
we estimate a total annual burden of 90 hours for all vendors for a 
total cost burden estimate of $2,169. In Sec.  155.222(e) of this 
proposed rule, we propose to establish a process by which a vendor 
whose application is not approved or whose approval is revoked by HHS 
can appeal HHS's determination. We discuss the costs associated with 
the proposed appeals process in the Regulatory Impact Analysis (RIA) 
section of this proposed rule.

D. ICRs Regarding Collection of Data To Define Essential Health 
Benefits (Sec.  156.120)

    In Sec.  156.120, we propose to give States an opportunity to 
select a new base-benchmark plan to serve as a reference plan to define 
EHB in that State for the 2017 plan year. The information collection 
associated with State selection and submission of a benchmark plan and 
associated benefits is currently approved under OMB Control Number 
0938-1174. We expect to collect less information for the 2017 plan year 
than we previously collected for this purpose, and therefore expect to 
revise our current burden estimate to reflect the reduced burden on 
issuers. We intend to seek OMB approval and solicit public comment on 
this information collection requirement, in accordance with the 
Paperwork Reduction Act of 1995, at a future date.

E. ICRs Regarding Prescription Drug Benefits (Sec.  156.122)

    In Sec.  156.122, we propose to require health plans that are 
required to comply with EHB to establish a P&T Committee according to 
the process and standards proposed in this rule. We expect that health 
plans have already established P&T Committees that meet these standards 
and follow these processes. We propose recordkeeping requirements for 
the P&T committee in this proposed rule. However, because we believe 
that issuers are already required to maintain such documentation, such 
as for accreditation purposes, and issuers tend to use the same 
formulary drug list for multiple plans, we believe that our propose 
recordkeeping requirement will only impose minimal additional burden on 
issuers. We, therefore, estimate that it will take a compliance officer 
approximately 8 hours (at an hourly wage rate of $43.34) to prepare for 
and attend meetings on a quarterly basis, and maintain the required 
documentation. Therefore, for approximately 2,400 plans in the 
individual and small group market that would be subject to this 
requirement, we estimate an aggregate annual burden of 76,800 hours 
($3,328,512) associated with this proposed requirement.

F. ICRs Regarding Termination Notices for SHOP (Sec.  
156.285(d)(1)(ii)) and Sec.  155.735(d)(1)(iii) and (g))

    We are proposing in Sec.  156.285(d)(1)(ii) and Sec.  
155.735(d)(1)(iii) and (g) to require QHP issuers participating in the 
SHOP to provide notices to qualified employers and enrollees related to 
terminations due to rescission in accordance with Sec.  147.128 and due 
to the QHP's termination, decertification, or non-renewal of 
certification, while shifting the burden of notifying qualified 
employers and enrollees of terminations due to loss of eligibility or 
nonpayment of premiums to the SHOP. We note that, while our current 
rules require issuers to provide notice of terminations when coverage 
is rescinded in accordance with Sec.  147.128, or when the issuer 
elects not to seek recertification for a QHP offered through the SHOP, 
this proposal would expand QHP issuers' notice requirements to 
circumstances in which the QHP terminates or is decertified in 
accordance with Sec.  155.1080. The proposed notices must inform the 
enrollee and qualified employer, promptly and without undue delay, of 
the termination effective date and the reason for the termination. The 
burden estimate associated with this requirement includes the time and 
effort needed to develop the notice and to distribute it through an 
automated process to qualified employer and the enrollee, as 
appropriate. We estimate that approximately 445 QHP issuers (including 
dental issuers) will participate on the SHOP. We estimate that it will 
take approximately 35 hours annually to develop and transmit this 
notice, including 4 hours for a health policy analyst (at an hourly 
wage rate of $58.05), 3 hours for an operations analyst (at an hourly 
wage rate of $56.63), 25 hours for a computer programmer (at an hourly 
wage rate of $48.61), 2 hours for a fulfillment manager (at an hourly 
wage rate of $27.00), and 1 hour for a senior manager (at an hourly 
wage rate of $103.95). Therefore, we estimate an aggregate burden of 
15,575 hours across and $790,004 for QHP issuers participating in the 
SHOP as a result of this proposed requirement.
    Based on the above per-notice development rates and hours, we 
believe that each State-based SHOP would spend roughly 70 hours 
annually to prepare the 2 termination notices (35 hours per notice), 
for a total cost of $3,550 to design and implement the notices proposed 
under Sec.  155.725(g). We estimate that there will be

[[Page 70740]]

approximately 18 State-based SHOPs, and that all State-based SHOPs 
would be subject to this requirement. Therefore, we estimate an 
aggregate burden of 1,260 hours and $63,900 for State-based SHOPs as a 
result of this proposed requirement.

G. ICRs Regarding Plan Variation Notices and Changes in Eligibility for 
Cost-Sharing Reductions (Sec.  156.420 and Sec.  156.425)

    In Sec.  156.420(h), we propose that an issuer must provide a 
summary of benefits and coverage (SBC) for each plan variation of a QHP 
it offers in accordance with the rules set forth under Sec.  156.420 
(referred to in this section as a ``plan variation SBC''), in a manner 
that is consistent with the standards set forth in Sec.  147.200. In 
Sec.  156.425(c), we propose that if an individual's assignment to a 
plan variation or standard plan without cost-sharing reductions changes 
in the course of a benefit year (in accordance with Sec.  156.425(a)), 
an issuer must provide an SBC in a manner consistent with the standards 
set forth in Sec.  147.200, as soon as practicable after receiving 
notice from the Exchange of the individual's change in eligibility and 
no later than 7 business days following receipt of notice. The burden 
associated with this proposed requirement would be the time and effort 
necessary for an issuer to create and provide plan variation SBCs to 
affected individuals under Sec.  156.420.
    Nearly all issuers that would be affected by this proposal already 
incurred one-time start-up costs related to implementing the SBC 
requirements established under Sec.  147.200, and are already providing 
SBCs that reflect the standard QHPs they offer.\64\ We estimate that 
QHP issuers would leverage existing processes to generate and 
distribute plan variation SBCs under proposed Sec.  156.420(h). We 
estimate that issuers would incur additional burden to produce and 
distribute plan variation SBCs under the proposed Sec. Sec.  156.420(h) 
and 156.425(c). The additional burden would be associated with three 
tasks: (1) Producing plan variation SBCs; (2) distributing plan 
variation SBCs; and (3) distributing a plan variation SBC (or standard 
QHP without cost-sharing reductions) after a change in eligibility in 
the course of a benefit year. We intend to revise the information 
collection approved under OMB Control Number 0938-1187 to reflect this 
additional burden.
---------------------------------------------------------------------------

    \64\ Summary of Benefits and Coverage and Uniform Glossary Final 
Rule (``SBC Final Rule''), 77 FR 8690 (Feb. 14, 2012). We have 
already received OMB approval under OMB control number 0938-1146 for 
the collection of information requirements related to the SBC 
provisions as finalized under current rules.
---------------------------------------------------------------------------

1. Producing Plan Variation SBCs
    Because stand-alone dental plans (SADPs) are not required to 
complete SBCs, we exclude these plans from the number of QHPs that we 
estimate would be required to comply with the proposed requirement. We 
estimate that approximately 575 issuers participate in the Exchange, 
and that each issuer offers one QHP per metal level, with four zero 
cost-sharing plan variations and four limited cost-sharing plan 
variations (two per metal level per QHP) and three silver plan 
variations.\65\ Therefore, we estimate that each issuer offers 11 plan 
variations, and would produce 11 SBCs to reflect each plan variation, 
for a total of 6,325 plan variation SBCs annually. We estimate that it 
will take up to one hour to produce each plan variation SBC, for an 
annual time burden of 11 hours for each issuer. We estimate that it 
would take an information technology (IT) professional 5 hours (at an 
hourly wage rate of $54.39), a benefits/sales professional 5.5 hours 
(an hourly wage rate of $44.90) per hour, and an attorney 30 minutes 
(at an hourly wage rate of $84.96) to comply with the proposed 
requirements. Therefore, we estimate a total annual cost burden of 
$561.44 per issuer, and $322,828 (6,325 hours) for all issuers affected 
by this proposed requirement.
---------------------------------------------------------------------------

    \65\ Under Sec.  156.420(a), for each of its silver health plans 
that an issuer offers, the issuer must offer three variations of the 
standard silver plan that reflect, in addition to the applicable 
annual limitation on cost-sharing, the following: (1) A silver plan 
variation with cost-sharing reductions such that the actuarial value 
(AV) of the variation is 94 percent plus or minus the de minimis 
variation for a silver plan variation; (2) a silver plan variation 
with cost-sharing reductions such that the AV of the variation is 87 
percent plus or minus the de minimis variation for a silver plan 
variation; and (3) a silver plan variation with cost-sharing 
reductions such that the AV of the variation is 73 percent plus or 
minus the de minimis variation for a silver plan variation. Under 
Sec.  156.420(b), for each QHP at any metal level that an issuer 
offers, the issuer must offer two variations to American Indians/
Alaska Natives that reflect the following: (1) A variation of the 
QHP with all cost sharing eliminated; and (2) a variation of the QHP 
with no cost-sharing on any item or service that is an essential 
health benefit furnished directly by the Indian Health Service, an 
Indian Tribe, Tribal Organization, or Urban Indian Organization, or 
through referral under contract health services.
---------------------------------------------------------------------------

2. Distributing Plan Variation SBCs
    We are unable to estimate the number of CSR-eligible enrollees at 
this time and the related burden on issuers to provide for these 
disclosures. We expect that the vast majority (approximately 95 
percent) of the total number of plan variation SBCs provided in 
accordance with proposed Sec.  156.420(h) would be sent prior to 
enrollment and electronically at minimal cost, under the timing and 
form requirements set forth in Sec.  147.200(a)(1)(iv) and (a)(4)(iii). 
Of the remaining number of plan variation SBCs that would be provided, 
we estimate that approximately 4 percent of these disclosures would be 
sent in other instances, in accordance with the other timing 
requirements that may apply, including, requests for a plan variation 
SBC made by a consumer in the course of the benefit year. We expect 
that the vast majority of these disclosures would be provided 
electronically at minimal cost. We assume that there are costs for 
paper disclosures, but no costs for electronic disclosures.\66\ We 
expect that up to one percent of plan variation SBCs would be provided 
in paper form. We estimate that the labor costs associated with 
distributing each SBC would be $1.63 (3 minutes for an administrative 
assistant at an hourly wage rate of $32.59), and that printing, 
mailing, and supply costs would be $0.69 per SBC ($0.05 to print each 
page and $0.49 for first class postage), for a total costs of $2.32 per 
SBC. We estimate an annual burden of $331 for each QHP issuer and an 
aggregate burden of $190,240 for all issuers that would be subject to 
the proposed requirement.
---------------------------------------------------------------------------

    \66\ SBC Final Rule, 77 FR 8691 (Feb. 14, 2012).
---------------------------------------------------------------------------

3. Notice After Changes in Eligibility for Cost-Sharing Reductions
    In Sec.  156.425(c), we propose to require an issuer to provide 
adequate notice to the individual about the availability of the SBC 
that accurately reflects the applicable plan variation of the QHP (or 
the standard QHP without CSRs) if an enrollee's eligibility for CSRs 
changes in the course of a benefit year. Similarly, if an enrollee 
changes QHPs as the result of a special enrollment period in accordance 
with Sec.  155.420(d)(6), the issuer of the new QHP would be required 
to provide the individual with an SBC that accurately reflects the new 
QHP. We are unable to estimate the number of CSR-eligible enrollees who 
would experience a change in eligibility for CSRs at this time and the 
related burden on issuers to provide for these disclosures. We expect 
that the vast majority (approximately 99 percent) of the total number 
of SBCs provided in accordance with proposed Sec.  156.425(c) would be 
sent electronically at minimal cost. We estimate that the labor costs 
associated with producing each SBC would be approximately $1.63 (3 
minutes for an administrative assistant at an hourly wage rate of 
$32.59), and that printing, and mailing costs would

[[Page 70741]]

be $0.69 ($0.05 to print each page and $0.49 for first class postage), 
for a total cost of $2.32 per SBC. We estimate a total annual cost of 
$165 for each QHP issuer and $95,120 for all QHP issuers that would be 
subject to this proposed requirement.

H. ICRs Regarding the Collection and Reporting of Quality Improvement 
Strategies (Sec.  156.1130)

    In Sec.  156.1130, we propose requirements for QHP issuers related 
to data collection and submission of information regarding a quality 
improvement strategy (QIS). QIS standards will establish the minimum 
requirements for the FFE, States with plan management functions and 
that State Exchanges must follow. State Exchanges can, if desired, 
build additional reporting requirements in accordance with their needs. 
Based on current agency estimates of the number of major medical QHPs 
and stand-alone dental plans (SADPs) being offered through the 
Exchange, we estimate that 677 QHP issuers would collect and report QIS 
data annually. This estimate assumes 677 QHP issuers (all QHP issuers 
in all Marketplace types, including SADPs) and covers the annual costs 
for a QHP issuer over a 3-year period (2016-2018). The burden 
associated with submitting initial attestations as part of the QHP 
certification process is currently accounted for under OMB Control 
Number 0938-1187. We estimate that it would take each QHP issuer 48 
hours (at a cost of $3,372) to collect this QIS data and to submit this 
information to the Exchange. Therefore, we estimate an aggregate burden 
of 32,496 hours and $2,282,844 as the total annual burden for the 
anticipated 677 QHP issuers associated with these proposed 
requirements.
    If SADPs are not included, the estimate assumes 575 QHP issuers 
(all issuers in all Marketplaces excluding SADPs) and covers the annual 
costs for a QHP issuer over a 3-year period (2016-2018). The burden 
associated with submitting initial attestations as part of the QHP 
certification process is currently accounted for under OMB Control 
Number 0938-1187. We estimate that it would take each QHP issuer 48 
hours (at a cost of $3,372) to collect this QIS data and to submit this 
information to the Exchange. Therefore, we would estimate an aggregate 
burden of 27,600 hours and $1,938,900 as the total annual burden for 
the anticipated 575 QHP issuers associated with these proposed 
requirements, if SADPs are not included.

                                             Table 12--Annual Reporting, Recordkeeping and Disclosure Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Hourly
                                                                             Burden per     Total      labor cost  Total labor     Total
             Regulation  section(s)                Number of    Responses     response      annual         of        cost of      capital/   Total  cost
                                                  respondents                 (hours)       burden     reporting    reporting   maintenance       ($)
                                                                                           (hours)        ($)          ($)       costs  ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   155.222(a)...............................            9            9        10.00           90        24.10        2,169            0        2,169
Sec.   155.222(d)...............................            9            9        10.00           90        24.10        2,169            0        2,169
Sec.   155.725(g)...............................           18           36        35.00        1,260        50.71       63,900            0       63,900
Sec.   156.122..................................        2,400        2,400        32.00       76,800        43.34    3,328,512            0    3,328,512
Sec.   156.285(d)...............................          445          445        35.00       15,575        50.72      790,004            0      790,004
Sec.   156.420..................................          575        6,325         1.00        6,325        51.04      322,828            0      322,828
Sec.   156.420..................................          575       81,000         0.05        4,050        32.59      131,990       58,250      190,240
Sec.   156.425..................................          575       41,000         0.05        2,025        32.59       65,995       29,125       95,120
Sec.   156.1130.................................          677          677           48       32,496        70.25    2,282,844            0    2,282,844
                                                 -------------------------------------------------------------------------------------------------------
    Total.......................................        2,400  ...........  ...........      138,711  ...........    6,990,411       87,375    7,007,786
--------------------------------------------------------------------------------------------------------------------------------------------------------

Submission of PRA-Related Comments
    We have submitted a copy of this proposed rule to OMB for its 
review of the rule's information collection requirements. These 
requirements are not effective until they have been approved by OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collections referenced above, access CMS' 
Web site at http://www.cms.hhs.gov/PaperworkReductionActof1995; email 
your request, including your address, phone number, OMB control number, 
and CMS document identifier, to [email protected]; or call the 
Reports Clearance Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements. If you comment on these information collection and 
recordkeeping requirements, please submit your comments electronically 
as specified in the ADDRESSES section of this proposed rule. Please 
include ``CMS-9944-P,'' the ICR's OMB control number, and the CMS 
document ID number in your comment.
    PRA-specific comments must be received by January 26, 2015.

V. Response to Comments

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

VI. Regulatory Impact Statement (or Analysis)

A. Statement of Need

    This proposed rule proposes standards related to the premium 
stabilization programs (risk adjustment, reinsurance, and risk 
corridors) for the 2016 benefit year, as well as certain modifications 
for the 2015 benefit year, that will protect issuers from the potential 
effects of adverse selection and protect consumers from increases in 
premiums due to issuer uncertainty. The Premium Stabilization Rule and 
the 2014 and 2015 Payment Notices provided detail on the implementation 
of these programs, including the specific parameters for the 2014 and 
2015 benefit years applicable to these programs. This rule also 
proposes additional standards related to essential health benefits, 
meaningful access in the Exchange, consumer assistance tools and 
programs of an Exchange, non-Navigator assistance personnel, cost-
sharing parameters and cost-sharing reduction notices, quality 
improvement strategy standards for issuers of qualified health plans 
participating in Exchanges, guaranteed availability and guaranteed 
renewability, minimum essential coverage, the medical loss ratio

[[Page 70742]]

program, the Small Business Health Options Program, and FFE user fees.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 202 of the Unfunded Mandates Reform Act 
of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for 
rules with economically significant effects ($100 million or more in 
any 1 year).
    OMB has determined that this proposed rule is ``economically 
significant'' within the meaning of section 3(f)(1) of Executive Order 
12866, because it is likely to have an annual effect of $100 million in 
any 1 year. Accordingly, we have prepared an RIA that presents the 
costs and benefits of this proposed rule.
    Although it is difficult to discuss the wide-ranging effects of 
these provisions in isolation, the overarching goal of the premium 
stabilization, market standards, and Exchange-related provisions and 
policies in the Affordable Care Act is to make affordable health 
insurance available to individuals who do not have access to affordable 
employer-sponsored coverage. The provisions within this proposed rule 
are integral to the goal of expanding coverage. For example, the 
premium stabilization programs help prevent risk selection and decrease 
the risk of financial loss that health insurance issuers might 
otherwise expect in 2016 and the advance payments of the premium tax 
credit and cost-sharing reduction programs assist low- and moderate-
income consumers and American Indians/Alaska Natives in purchasing 
health insurance. The combined impacts of these provisions affect the 
private sector, issuers, and consumers, through increased access to 
health care services including preventive services, decreased 
uncompensated care, lower premiums, establishment of quality 
improvement strategy standards, and increased plan transparency. 
Through the reduction in financial uncertainty for issuers and 
increased affordability for consumers, these provisions are expected to 
increase access to affordable health coverage.
    HHS anticipates that the provisions of this proposed rule will help 
further the Department's goal of ensuring that all consumers have 
access to quality and affordable health care and are able to make 
informed choices, that Exchanges operate smoothly, that premium 
stabilization programs work as intended, that SHOPs are provided 
flexibility, and that employers and consumers are protected from 
fraudulent and criminal activities. Affected entities such as QHP 
issuers would incur costs to comply with the proposed provisions, 
including administrative costs related to notices, quality improvement 
strategy requirements, training and recertification requirements, and 
establishing a larger provider network. In accordance with Executive 
Order 12866, HHS believes that the benefits of this regulatory action 
justify the costs.

C. Impact Estimates of the Payment Notice Provisions and Accounting 
Table

    In accordance with OMB Circular A-4, Table 13 below depicts an 
accounting statement summarizing HHS's assessment of the benefits, 
costs, and transfers associated with this regulatory action.
    This proposed rule implements standards for programs that will have 
numerous effects, including providing consumers with affordable health 
insurance coverage, reducing the impact of adverse selection, and 
stabilizing premiums in the individual and small group health insurance 
markets and in an Exchange. We are unable to quantify certain benefits 
of this proposed rule--such as improved health outcomes and longevity 
due to continuous quality improvement and increased insurance 
enrollment--and certain costs--such as the cost of providing additional 
medical services to newly-enrolled individuals. The effects in Table 13 
reflect qualitative impacts and estimated direct monetary costs and 
transfers resulting from the provisions of this proposed rule for 
reinsurance contributing entities and health insurance issuers. The 
annualized monetized costs described in Table 13 reflect direct 
administrative costs to these entities as a result of the proposed 
provisions, and include administrative costs related to notices, 
quality improvement strategy requirements, and training and 
recertification requirements that are estimated in the Collection of 
Information section of this proposed rule. The annual monetized 
transfers described in Table 13 include costs associated with the 
reinsurance contribution fee and the risk adjustment user fee paid to 
HHS by issuers, and additional MLR rebate payments from issuers to 
consumers. We note estimated transfers in Table 13 do not reflect any 
FFE user fees paid by insurance issuers because we cannot estimate 
those fee totals. We also note that, while we are proposing a 2016 
reinsurance contribution rate that is lower than the 2014 and 2015 
reinsurance contribution rates, total reinsurance administrative 
expenses, included in the reinsurance contribution rate, will slightly 
increase from 2015 to 2016. In addition, as a result of HHS's increased 
contract costs related to risk adjustment operations and risk 
adjustment data validation, we are proposing to collect a total of $50 
million in risk adjustment user fees or $1.75 per enrollee per year 
from risk adjustment issuers, which is greater than the $0.96 per-
enrollee-per-year risk adjustment user fee amount established for 
benefit year 2015. This increase is due in large part to risk 
adjustment data validation costs that will occur in 2016. We are also 
including costs associated with administrative appeals under Sec.  
156.1220 in the RIA of this proposed rule.

                                           Table 13--Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Benefits:
----------------------------------------------------------------------------------------------------------------
Qualitative:
* Increased enrollment in the individual market leading to improved access to health care for the previously
 uninsured, especially individuals with medical conditions, which will result in improved health and protection
 from the risk of catastrophic medical expenditures.

[[Page 70743]]

 
* Encourage continuous quality improvement among QHP issuers to improve health outcomes at lower costs.
* Allow Exchanges to make informed QHP certification decisions.
* Increasing coverage options for small businesses and part-time employees while mitigating the effect of
 adverse selection.
* Ensure that consumers in group health plans not subject to ERISA receive the benefit of MLR rebates in a
 timely manner.
----------------------------------------------------------------------------------------------------------------
Costs:                                      Estimate           Year dollar      Discount rate    Period covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)......  7.00 million.........              2014                7%         2015-2018
                                     7.00 million.........              2014                3%         2015-2018
----------------------------------------------------------------------------------------------------------------
Quantitative:
----------------------------------------------------------------------------------------------------------------
* Costs incurred by issuers and contributing entities to comply with provisions in the proposed rule.
* Costs incurred by States for complying with audits of State-operated reinsurance programs.
----------------------------------------------------------------------------------------------------------------
Transfers:                                  Estimate           Year dollar      Discount rate    Period covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)......  63.61 million........              2014                7%         2015-2018
                                     63.52 million........              2014                3%         2015-2018
----------------------------------------------------------------------------------------------------------------
* Transfers reflect incremental cost increases from 2015-2016 for reinsurance administrative expenses and the
 risk adjustment user fee, which are transfers from contributing entities and health insurance issuers to the
 Federal government. Transfers also reflect annual transfer from shareholders or nonprofit stakeholders to
 enrollees of rebates paid by issuers for coverage in the individual and group markets, resulting from
 clarification regarding MLR methodology to account for Federal and State employment taxes.
* Unquantified: Lower premium rates in the individual market due to the improved risk profile of the insured,
 competition, and pooling.
----------------------------------------------------------------------------------------------------------------

    This RIA expands upon the impact analyses of previous rules and 
utilizes the Congressional Budget Office's (CBO) analysis of the 
Affordable Care Act's impact on Federal spending, revenue collection, 
and insurance enrollment. Table 14 summarizes the effects of the risk 
adjustment and reinsurance programs on the Federal budget from fiscal 
years 2015 through 2018, with the additional, societal effects of this 
proposed rule discussed in this RIA. We do not expect the provisions of 
this proposed rule to significantly alter CBO's estimates of the budget 
impact of the risk adjustment, reinsurance and risk corridors programs 
that are described in Table 14. For this RIA, we are shifting the 
estimates for the risk adjustment and reinsurance programs to reflect 
the 4-year period from fiscal years 2015 through 2018, because CBO's 
scoring of the risk adjustment and reinsurance programs assumed that 
payments and charges would begin in 2014, when in fact these payments 
and charges will begin in the 2015 calendar year for the 2014 benefit 
year. The CBO assumed that aggregate collections for the risk corridors 
program would offset payments made to other issuers. We note that 
transfers associated with the risk adjustment and reinsurance programs 
were previously estimated in the Premium Stabilization Rule; therefore, 
to avoid double-counting, we do not include them in the accounting 
statement for this proposed rule (Table 13).
    In addition to utilizing CBO projections, HHS conducted an internal 
analysis of the effects of its regulations on enrollment and premiums. 
Based on these internal analyses, we anticipate that the quantitative 
effects of the provisions proposed in this rule are consistent with our 
previous estimates in the 2015 Payment Notice for the impacts 
associated with the cost-sharing reduction program, the advance 
payments of the premium tax credit program, the premium stabilization 
programs, and FFE user fee requirements.

   Table 14--Estimated Federal Government Outlays and Receipts for the Risk Adjustment, Reinsurance, and Risk Corridors Programs From FY 2014-2018, in
                                                                   Billions of Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Year                                 2014            2015            2016            2017            2018          2014-2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Risk Adjustment, Reinsurance, and Risk Corridors Program               0              18              19              22              15              74
 Payments...............................................
Risk Adjustment, Reinsurance, and Risk Corridors Program               0              19              18              22              15              74
 Collections *..........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over time. Source: Congressional Budget Office.
  Updated Estimates of the Insurance Coverage Provisions of the Affordable Care Act.

1. Rate Review
    The proposed rule would trigger review of rate increases that meet 
or exceed the applicable review threshold when such increases happen at 
the ``plan'' level rather than at the ``product'' level. This would 
protect consumers against unreasonable rate increases for their plans, 
since, under current regulations, it is possible for a plan to 
experience a rate increase higher than the threshold and still avoid 
review because the average rate increase for the product does not meet 
or exceed the threshold. Issuers already submit this level of 
information under an existing information collection and are not likely 
to experience significant increase in costs related to their 
submissions. States may have to review more submissions and experience 
an increase in related costs. The proposal to establish a uniform 
timeframe by which issuers in every State must submit a completed Rate 
Filing Justification to CMS and the applicable State for all rate 
increases, including both QHPs and non-QHPs, would provide timely 
information to consumers and other stakeholders and

[[Page 70744]]

ensure that State and Federal regulators have adequate time for review 
prior to implementation of a rate increase. This approach would also 
reduce the potential for anti-competitive behavior and promote fair 
market competition between issuers in the Exchange and non-Exchange 
markets. The proposed amendment to specify the timing for States to 
make proposed and final rate increase information available to the 
public would ensure that consumers have timely access to this 
information.
2. Change of Ownership Notification Requirement
    We propose in Sec.  147.106(g) that when an issuer of a QHP, a plan 
otherwise subject to risk corridors, a risk adjustment covered plan, or 
a reinsurance-eligible plan, experiences a change in ownership as 
recognized by the State in which the plan is offered, the issuer must 
notify HHS in a manner specified by HHS, by the later of (1) the date 
the transaction is entered into; or (2) the 30th day prior to the 
effective date of the transaction. We expect that upon notification, 
issuers may need to work with HHS to clarify operational processes 
related to the HHS-administered programs, and will follow forthcoming 
guidance related to such operational processes. We estimate the 
administrative costs associated with the proposed notification 
requirement in the Collection of Information section of this proposed 
rule.
3. Appeals Process for HHS-Approved Vendors for FFE Training of Agents 
and Brokers
    In Sec.  155.222, we propose information collection and disclosure 
requirements that pertain to the approval of vendors to have their FFE 
agent and broker training and information verification programs 
recognized for agents and brokers assisting with or facilitating 
enrollment in individual market or SHOP coverage through the FFE. We 
also establish a monitoring and appeals process for such HHS-approved 
vendors. We estimate that five vendors that apply may not have their 
application approved, and one vendor may have their approval revoked, 
and all of those vendors will appeal HHS's determination and submit 
additional documentation to HHS. We estimate that filing an appeal with 
HHS will take no longer than one hour. Therefore, at an hourly wage 
rate of $24.10, we estimate a total cost of $144.60 as a result of this 
proposed appeals process.
4. Risk Adjustment
    The risk adjustment program is a permanent program created by the 
Affordable Care Act that transfers funds from lower risk, non-
grandfathered plans to higher risk, non-grandfathered plans in the 
individual and small group markets, inside and outside the Exchanges. 
We established standards for the administration of the risk adjustment 
program, in subparts D and G of part 45 of the CFR.
    A State approved or conditionally approved by the Secretary to 
operate an Exchange may establish a risk adjustment program, or have 
HHS do so on its behalf. As described in the 2014 and 2015 Payment 
Notices, if HHS operates risk adjustment on behalf of a State, it will 
fund its risk adjustment program operations by assessing a risk 
adjustment user fee on issuers of risk adjustment covered plans. For 
the 2016 benefit year, we estimate that the total cost for HHS to 
operate the risk adjustment program on behalf of States for 2016 will 
be approximately $50 million, and that the risk adjustment user fee 
would be approximately $1.75 per enrollee per year. The increased risk 
adjustment user fee for 2016 is the result of the increased contract 
costs to support the risk adjustment data validation process.
5. Reinsurance
    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 by helping to pay the cost of 
treating high-cost enrollees. In the 2014 and 2015 Payment Notices, we 
expanded upon the standards set forth in subparts C and E of the 
Premium Stabilization Rule and established the 2014 and 2015 uniform 
reinsurance payment parameters and national contribution rate. In this 
proposed rule, we set forth the 2016 uniform reinsurance payment 
parameters and contribution rate and also propose a modification to the 
2015 benefit year attachment point.
    Section 153.220(c) provides that HHS will publish the uniform per 
capita reinsurance contribution rate for the upcoming benefit year in 
the annual HHS notice of benefit and payment parameters. Section 
1341(b)(3)(B)(iii) of the Affordable Care Act specifies that $10 
billion for reinsurance contributions is to be collected from 
contributing entities in 2014 (the reinsurance payment pool), $6 
billion in 2015, and $4 billion in 2016. Additionally, sections 
1341(b)(3)(B)(iv) and 1341(b)(4) of the Affordable Care Act direct that 
$2 billion in funds is to be collected for contribution to the U.S. 
Treasury in 2014, $2 billion in 2015, and $1 billion in 2016. Finally, 
section 1341(b)(3)(B)(ii) of the Affordable Care Act allows for the 
collection of additional amounts for administrative expenses. Taken 
together, these three components make up the total dollar amount to be 
collected from contributing entities for 2014, 2015 and 2016 benefit 
years of the reinsurance program under the uniform per capita 
contribution rate.
    In the 2015 Payment Notice, we estimated that the Federal 
administrative expenses of operating the reinsurance program would be 
$25.4 million, based on our estimated contract and operational costs. 
We propose to use the same methodology to estimate the administrative 
expenses for the 2016 benefit year. We estimate this amount to be 
approximately $32 million for the 2016 benefit year. This estimate 
increased for the 2016 benefit year due to increased audit and data 
validation contract costs. We believe that this figure reflects the 
Federal government's significant economies of scale, which helps to 
decrease the costs associated with operating the reinsurance program. 
Based on our estimate of covered lives for which reinsurance 
contributions are to be made for 2016, we are proposing a uniform 
reinsurance contribution rate of $0.17 annually per capita for HHS 
administrative expenses. If a State establishes its own reinsurance 
program, HHS would transfer $0.085 of the per capita administrative fee 
to the State for purposes of administrative expenses incurred in making 
reinsurance payments, and retain the remaining $0.085 to offset the 
costs of collecting contributions. We note that the administrative 
expenses for reinsurance payments will be distributed to those States 
that operate their own reinsurance program in proportion to the State-
by-State total requests for reinsurance payments made under the uniform 
reinsurance payment parameters.
6. Risk Corridors
    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. Section 1342 of the Affordable Care Act directs the 
Secretary to establish a temporary risk corridors program that protects 
issuers against inaccurate rate setting from 2014 through 2016. The 
Affordable Care Act establishes the risk corridors program as a Federal 
program; consequently, HHS will operate the risk corridors program 
under Federal rules with no State variation.
    In this proposed rule, we are proposing a clarification to the risk 
corridors transitional adjustment for

[[Page 70745]]

benefit year 2014. We are proposing to clarify that we intend to 
implement the risk corridors transitional adjustment for transitional 
plans only, as stated in the 2015 Payment Notice. This proposed 
clarification does not affect the impact of the risk corridors 
transitional adjustment.
    For benefit year 2016, we are also proposing the treatment of 
excess risk corridors collections that may remain after the 3-year 
duration of the program. We are proposing to adjust the allowable 
administrative cost ceiling and profit floor so that any excess risk 
corridors collections that remain in benefit year 2016 are paid out to 
eligible QHP issuers. We anticipate that collections will fully offset 
payments over the 3-year duration of the program. Consequently, we do 
not believe that this proposal will have a monetary impact on QHP 
issuers or the Federal government.
7. SHOP
    The SHOP facilitates the enrollment of eligible employees of small 
businesses into small group health insurance plans. A qualitative 
analysis of the costs and benefits of establishing a SHOP was included 
in the RIA published in conjunction with the Exchange Establishment 
Rule.\67\
---------------------------------------------------------------------------

    \67\ Available at: http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
---------------------------------------------------------------------------

    Please see the Collection of Information section of this proposed 
rule for the costs expected to be incurred by State-based SHOPs and QHP 
issuers participating in the SHOP related to the proposed notification 
requirements related to terminations of coverage. We believe this cost 
is justified because SHOPs are best positioned to provide meaningful 
notice regarding terminations due to loss of eligibility and nonpayment 
of premiums in a timely manner, while issuers are best positioned to 
provide meaningful notice when coverage is terminated due to a 
rescission in accordance with Sec.  147.128 or when the QHP is 
terminated, decertified, or its certification is not renewed. In this 
proposed rule, we also seek comment on whether to permit the Federally-
facilitated SHOP to accept premium payment using a credit card and the 
impact of this potential policy, including how many FF-SHOP employers 
expect to use credit cards for payment.
8. User Fees
    To support the operation of FFEs, we require in Sec.  156.50(c) 
that a participating issuer offering a plan through an FFE must remit a 
user fee to HHS each month equal to the product of the monthly user fee 
rate specified in the annual HHS notice of benefit and payment 
parameters for the applicable benefit year and the monthly premium 
charged by the issuer for each policy under the plan where enrollment 
is through an FFE. For the 2016 benefit year, we propose a monthly user 
fee rate equal to 3.5 percent of the monthly premium. We do not have an 
aggregate estimate of the collections from the user fees at this time 
because we do not yet have a count of the number of States in which HHS 
will run an FFE or Federally-facilitated SHOP in 2016. For the user fee 
charge assessed on issuers in the FFE, we intend to seek an exception 
to OMB Circular No. A-25R, which requires that the user fee charge be 
sufficient to recover the full cost to the Federal government of 
providing the special benefit. We seek this exception to ensure that 
the FFE can support many of the goals of the Affordable Care Act, 
including improving the health of the population, reducing health care 
costs, and providing access to health coverage as advanced by Sec.  
156.50(d).
9. Essential Health Benefits, Cost Sharing, and Actuarial Value
    Issuers may incur minor administrative costs associated with 
altering benefits, cost-sharing and/or AV parameters of their plan 
designs to ensure compliance with the EHB requirements under this 
proposed rule. For example, issuers that do not currently meet the 
standards for EHB prescription drug coverage will incur contracting and 
one-time administrative costs to bring their prescription drug benefits 
into compliance. HHS expects that the process for compliance with the 
proposed EHB requirements will not significantly add to existing 
compliance costs because issuers have extensive experience in offering 
products with various benefits and levels of cost sharing and these 
modifications are expected to be relatively minor for most issuers.
    In addition, we are proposing standards for a health plan's 
formulary exception process that includes an external review. We 
believe that issuers that provide EHB already have formulary exceptions 
processes and procedures in place that allow an enrollee to request and 
gain access to clinically appropriate drugs not covered by the plan. We 
do not expect the proposed requirements to significantly increase the 
volume of reviews conducted under issuers' contracts with Independent 
Review Organizations. Therefore, we do anticipate that this proposed 
requirement would result in any significant new cost for issuers.
10. Network Adequacy
    Issuers may incur minor administrative costs associated with 
updating their provider directory to ensure compliance with the 
requirements under this proposed rule. Since issuers already maintain a 
directory and the expected modification is to re-locate that directory 
to a more user-friendly location on the issuer Web site, HHS expects 
that compliance will not demand any additional resources.
11. Downstream Entities
    We propose to revise Sec.  156.200(b)(7), to require that a QHP 
issuer comply with the standards under 45 CFR part 153 and not just the 
standards related to the risk adjustment program. Under Sec.  156.340, 
notwithstanding any relationship(s) that a QHP issuer may have with 
delegated and downstream entities, a QHP issuer maintains 
responsibility for its compliance and the compliance of any of its 
delegated or downstream entities, as applicable, with all applicable 
standards, including the standards of subpart C of part 156 for each of 
its QHPs on an ongoing basis. Because we believe that QHP issuers have 
existing agreements with downstream entities that define 
responsibilities, we do not believe that this requirement will impose 
an additional burden on QHP issuers.
12. Provisions Related to Cost Sharing
    The Affordable Care Act provides for the reduction or elimination 
of cost sharing for certain eligible individuals enrolled in QHPs 
offered through the Exchanges. This assistance will help many low- and 
moderate-income individuals and families obtain health insurance--for 
many people, cost sharing is a barrier to obtaining needed health 
care.\68\
---------------------------------------------------------------------------

    \68\ Brook, Robert H., John E. Ware, William H. Rogers, Emmett 
B. Keeler, Allyson Ross Davies, Cathy D. Sherbourne, George A. 
Goldberg, Kathleen N. Lohr, Patricia Camp and Joseph P. Newhouse. 
The Effect of Coinsurance on the Health of Adults: Results from the 
RAND Health Insurance Experiment. Santa Monica, CA: RAND 
Corporation, 1984. Available at: http://www.rand.org/pubs/reports/R3055.
---------------------------------------------------------------------------

    To support the administration of the cost-sharing reduction 
program, we set forth in this proposed rule the reductions in the 
maximum annual limitation on cost sharing for silver plan variations. 
Consistent with our analysis in the 2014 and 2015 Payment Notices, we 
developed three model silver level QHPs and analyzed the impact on 
their AVs of the reductions described in the Affordable Care Act to the 
estimated

[[Page 70746]]

2016 maximum annual limitation on cost sharing for self-only coverage 
($6,850). We do not believe these changes will result in a significant 
economic impact. Therefore, we do not believe the provisions related to 
cost-sharing reductions in this proposed rule will have an impact on 
the program established by and described in the 2015 Payment Notice.
    We also proposed the premium adjustment percentage for the 2016 
benefit year. 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. 
The annual premium adjustment percentage sets the rate of increase for 
three parameters detailed in the Affordable Care Act: The annual 
limitation on cost sharing (defined at Sec.  156.130(a)), the required 
contribution percentage by individuals for minimum essential health 
coverage the Secretary may use to determine eligibility for hardship 
exemptions under Section 5000A of the Code, and the section 4980H(a) 
and section 4980H(b) assessable payment amounts (finalized at 26 CFR 
54.4980H in the ``Shared Responsibility for Employers Regarding Health 
Coverage,'' published in the Federal Register on February 12, 2014 (79 
FR 8544). We believe that the proposed 2016 premium adjustment 
percentage of 8.316047520 percent is well within the parameters used in 
the modeling of the Affordable Care Act, and we do not expect that 
these proposed provisions will alter CBO's April 2014 baseline 
estimates of the budget impact.
    The proposed rule would also replace the one-year period with 
ongoing recognition of State high risk pools as minimum essential 
coverage, which would facilitate transition of enrollees into QHPs 
through the Exchange or into other forms of minimum essential coverage, 
while ensuring continued access to coverage.
13. Minimum Essential Coverage
    The proposed rule would replace the one-year temporary designation 
with ongoing recognition of State high risk pools as minimum essential 
coverage. This would facilitate the transition of State high risk pool 
enrollees into QHPs through the Exchange or into other forms of minimum 
essential coverage, while ensuring continued access to coverage. It 
would also help ensure that this vulnerable population will not be 
subject to the shared responsibility payment during this transition, 
and thereby avoid an increase in out-of-pocket costs.
14. Quality Improvement Strategy
    The proposed standards requiring QHP issuers participating in 
Exchanges to establish and submit information regarding a quality 
improvement strategy would encourage continuous quality improvement 
among QHP issuers to help strengthen system-wide efforts to improve 
health outcomes at lower costs, promote provider payment models that 
link quality and value of services, allow for flexibility and 
innovation of diverse market-based incentive approaches, encourage 
meaningful improvements as well as provide regulators and stakeholders 
with information to use for monitoring and evaluation purposes. We 
discuss the administrative costs associated with submitting this 
information in the Collection of Information section of this proposed 
rule.
15. Administrative Appeals
    In Sec.  156.1220, we establish an administrative appeals process 
to address unresolved discrepancies for advance payment of the premium 
tax credit, advance payment and reconciliation of cost-sharing 
reductions, FFE user fees, and the premium stabilization programs, as 
well as any assessment of a default risk adjustment charge under Sec.  
153.740(b). We estimated the burden associated with the administrative 
appeals process in the 2015 Payment Notice, and in the Supporting 
Statement approved under OMB Control Number 0938-1155. We will revise 
the information collection currently approved OMB Control Number 0938-
1155 with an October 31, 2015 expiration date. We do not believe that 
the provisions in this proposed rule will alter the economic impact of 
this requirement that was estimated in the 2015 Payment Notice.
16. Medical Loss Ratio
    This proposed rule would clarify the treatment of cost-sharing 
reductions in the MLR calculations. This proposed rule would also 
ensure timely distribution of rebates for the benefit of subscribers of 
group health plans not subject to ERISA. Specifically, the proposed 
amendments to the MLR provisions governing the distribution of rebates 
to group enrollees in non-Federal governmental and other group health 
plans not subject to ERISA would ensure that group policyholders of 
such plans do not withhold the benefit of rebates from the enrollees 
for longer than 3 months. We do not anticipate that this proposed 
provision in this proposed rule will have any significant effect on MLR 
program estimates. This proposed rule would also amend the MLR 
regulations to provide that premium in MLR and rebate calculations 
should not be reduced by the amount of Federal and State employment 
taxes. Assuming that all issuers previously interpreted the MLR 
December 1, 2010 interim final rule to reduce premium by the amount of 
Federal and State employment taxes, based on MLR data for the 2013 MLR 
reporting year, the proposed clarification regarding the treatment of 
such taxes in the MLR and rebate calculations would result in 
additional rebate payments from issuers to consumers of approximately 
$35 million.

D. Regulatory Alternatives Considered

    In the preamble discussion of the 2016 reinsurance payment 
parameters, we also considered, when setting forth the proposed 2016 
reinsurance payment parameters, a set of uniform reinsurance payment 
parameters that would have substantially lowered the reinsurance cap, 
but believe those uniform reinsurance payment parameters would have 
raised the complexity of estimating the effects of reinsurance for 
issuers.
    We also considered expanding the risk corridors transitional 
adjustment to apply to early renewal plans. This approach would have 
increased the impact of the risk corridors adjustment and altered the 
impact analysis related to the risk corridors transitional adjustment 
that was published in the 2015 Payment Notice. However, we decided not 
to propose this alternate policy.
    We considered ending the good faith compliance policy for QHP 
issuers. However we determined that subjecting QHP issuers to increased 
punitive actions in the early years of the Exchange would be less 
effective than working with issuers to address compliance issues.
    We considered not suppressing QHPs on the FFE, but this approach 
would have resulted in less flexibility for the FFE to address 
situations that could affect consumers' interests. For example, this 
alternative would increase the burden for consumers who may have to 
select a new QHP mid-year if their QHP was decertified.
    We also considered not recognizing vendors for training and 
registration of agents and brokers in the FFE. However, we believe that 
recognizing vendors will make it easier for agents and brokers to 
identify appropriate vendors who meet HHS standards for training and 
registration.

[[Page 70747]]

    Additionally, we considered not requiring QIS reporting for QHP 
issuers. However, we decided to propose the policy in this proposed 
rule because we believe that QIS reporting will result in higher 
quality QHPs being offered in the Exchange and make it easier for 
consumers to select a high quality QHP.

E. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601, et seq.) (RFA) 
requires agencies to prepare an initial regulatory flexibility analysis 
to describe the impact of the proposed rule on small entities, unless 
the head of the agency can certify that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The RFA generally defines a ``small entity'' as (1) A proprietary firm 
meeting the size standards of the Small Business Administration (SBA), 
(2) a not-for-profit organization that is not dominant in its field, or 
(3) a small government jurisdiction with a population of less than 
50,000. States and individuals are not included in the definition of 
``small entity.'' HHS uses a change in revenues of more than 3 to 5 
percent as its measure of significant economic impact on a substantial 
number of small entities.
    In this proposed rule, we propose standards for the risk 
adjustment, reinsurance, and risk corridors programs, which are 
intended to stabilize premiums as insurance market reforms are 
implemented and Exchanges facilitate increased enrollment. Because we 
believe that insurance firms offering comprehensive health insurance 
policies generally exceed the size thresholds for ``small entities'' 
established by the SBA, we do not believe that an initial regulatory 
flexibility analysis is required for such firms.
    For purposes of the RFA, we expect the following types of entities 
to be affected by this proposed rule:
     Health insurance issuers.
     Group health plans.
     Reinsurance entities.
    We believe that health insurance issuers and group health plans 
would be classified under the North American Industry Classification 
System (NAICS) code 524114 (Direct Health and Medical Insurance 
Carriers). According to SBA size standards, entities with average 
annual receipts of $35.5 million or less would be considered small 
entities for these NAICS codes. Issuers could possibly be classified in 
621491 (HMO Medical Centers) and, if this is the case, the SBA size 
standard would be $32.5 million or less.
    In this proposed rule, we proposed standards for employers that 
choose to participate in a SHOP Exchange. The SHOPs are limited by 
statute to employers with at least one but not more than 100 employees. 
For this reason, we expect that many employers who would be affected by 
the proposals would meet the SBA standard for small entities. We do not 
believe that the proposals impose requirements on employers offering 
health insurance through the SHOP that are more restrictive than the 
current requirements on small businesses offering employer sponsored 
insurance. We believe the processes that we have established constitute 
the minimum amount of requirements necessary to implement the SHOP 
program and accomplish our policy goals, and that no appropriate 
regulatory alternatives could be developed to further lessen the 
compliance burden.
    We believe that a substantial number of sponsors of self-insured 
group health plans could qualify as ``small entities.'' This proposed 
rule provides HHS with the authority to audit these entities. However, 
we do not believe that the burden of these audits is likely to reflect 
more than 3 to 5 percent of such an entity's revenues.
    Based on data from MLR annual report submissions for the 2013 MLR 
reporting year, approximately 141 out of 500 issuers of health 
insurance coverage nationwide had total premium revenue of $38.5 
million or less. This estimate may overstate the actual number of small 
health insurance companies that would be affected, since 77 percent of 
these small companies belong to larger holding groups, and many if not 
all of these small companies are likely to have non-health lines of 
business that would result in their revenues exceeding $38.5 million. 
Only 16 of these small entities owed a rebate for the 2013 reporting 
year, and none of these small entities are estimated to experience a 
rebate increase of more than 0.1 percent of total premium revenue under 
the proposed provisions. None of the small entities that did not 
previously owe rebates are expected to owe rebates as a result of the 
proposed provisions. Based on data from MLR annual report submissions 
for the 2013 MLR reporting year, approximately 286,750 out of 1.6 
million small group policyholders and 13,500 out of 228,000 large group 
policyholders nationwide were owed rebates for the 2013 reporting year. 
It is uncertain how many of the group policyholders obtaining coverage 
from health insurance issuers subject to MLR are both (a) small 
entities that fall below the size thresholds set by the SBA for various 
industries, and (b) enrolled in group health plans not subject to 
ERISA, and would therefore be subject to the proposed provisions 
related to MLR. However, the proposed provisions only establish a 
deadline for the use of MLR rebates by certain policyholders similar to 
the deadline that is already followed by most group policyholders, and 
do not otherwise alter the requirements for rebate use by such 
policyholders. In addition, the proposed clarification regarding how 
health insurance issuers must treat cost-sharing reductions in their 
MLR calculations simply aligns the MLR regulatory language with the 
risk corridors program.

F. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a proposed rule that includes any 
Federal mandate that may result in expenditures in any 1 year by a 
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 is approximately $141 million. 
Although we have not been able to quantify the user fees that will be 
associated with this proposed rule, the combined administrative cost 
and user fee impact on State, local, or Tribal governments and the 
private sector may be above the threshold. Earlier portions of this RIA 
constitute our UMRA analysis.

G. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule that imposes 
substantial direct costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. Because States have 
flexibility in designing their Exchange and Exchange-related programs, 
State decisions will ultimately influence both administrative expenses 
and overall premiums. States are not required to establish an Exchange 
or risk adjustment or reinsurance program. For States electing to 
operate an Exchange, risk adjustment or reinsurance program, much of 
the initial cost of creating these programs will be funded by Exchange 
Planning and Establishment Grants. After establishment, Exchanges will 
be financially self-sustaining, with revenue sources at the discretion 
of the State. Current State Exchanges charge user fees to issuers.
    In HHS's view, while this proposed rule would not impose 
substantial direct

[[Page 70748]]

requirement costs on State and local governments, this regulation has 
Federalism implications due to direct effects on the distribution of 
power and responsibilities among the State and Federal governments 
relating to determining standards relating to health insurance that is 
offered in the individual and small group markets. Each State electing 
to establish an Exchange must adopt the Federal standards contained in 
the Affordable Care Act and in this proposed rule, or have in effect a 
State law or regulation that implements these Federal standards. 
However, HHS anticipates that the Federalism implications (if any) are 
substantially mitigated because under the statute, States have choices 
regarding the structure and governance of their Exchanges and risk 
adjustment and reinsurance programs. Additionally, the Affordable Care 
Act does not require States to establish these programs; if a State 
elects not to establish any of these programs or is not approved to do 
so, HHS must establish and operate the programs in that State.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have Federalism 
implications or limit the policy making discretion of the States, HHS 
has engaged in efforts to consult with and work cooperatively with 
affected States, including participating in conference calls with and 
attending conferences of the National Association of Insurance 
Commissioners, and consulting with State insurance officials on an 
individual basis.
    Throughout the process of developing this proposed rule, HHS has 
attempted to balance the States' interests in regulating health 
insurance issuers, and Congress' intent to provide access to Affordable 
Insurance Exchanges for consumers in every State. By doing so, it is 
HHS's view that we have complied with the requirements of Executive 
Order 13132.

H. Congressional Review Act

    This proposed 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, and Reporting and recordkeeping 
requirements.

45 CFR Part 146

    Health care, Health insurance, and Reporting and recordkeeping 
requirements.

45 CFR Part 147

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

45 CFR Part 148

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

45 CFR Part 153

    Administrative practice and procedure, Adverse selection, Health 
care, Health insurance, Health records, Organization and functions 
(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, Required Contribution Percentage, Cost-sharing reductions, 
Advance payments of the 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 the 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 proposes to amend 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 revising the definitions of ``Plan'' 
and ``State'' 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 
particular cost-sharing structure, provider network, and service area. 
The product comprises all plans offered with those characteristics and 
the combination of the service areas for all plans offered within a 
product constitutes the total service area of the product.
* * * * *
    State means each of the 50 States, the District of Columbia, Puerto 
Rico, the Virgin Islands, Guam, American Samoa, and the Northern 
Mariana Islands; except that for purposes of part 147, the term does 
not include Puerto Rico, the Virgin Islands, Guam, American Samoa, and 
the Northern Mariana Islands.
* * * * *

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

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


[[Page 70749]]


    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 revising paragraph (c)(2) to read as 
follows:


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

* * * * *
    (c) * * *
    (2) The issuer offers to each plan sponsor provided that particular 
product the option, on a guaranteed issue basis, to purchase all (or, 
in the case of the large group market, any) other health insurance 
coverage currently being offered by the issuer to a group health plan 
in that market. An issuer that automatically enrolls a plan sponsor 
into a product of another health insurance issuer does not satisfy the 
requirement of this paragraph (c)(2); and
* * * * *

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

0
5. 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
6. Section 147.104 is amended by--
0
A. Revising paragraphs (b)(1)(i)(C), (b)(2), and (b)(4).
0
B. Redesignating paragraphs (f) through (h) as paragraphs (g) through 
(i).
0
C. Adding new paragraph (f).
    The revisions and addition read as follows:


Sec.  147.104  Guaranteed availability of coverage.

* * * * *
    (b) * * *
    (1) * * *
    (i) * * *
    (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 of this 
subchapter, except as provided in paragraph (b)(1)(iii) of this 
section.
* * * * *
    (2) Limited open enrollment periods. A health insurance issuer in 
the individual market must provide a limited open enrollment period for 
the events described in Sec.  155.420(d) of this subchapter, excluding 
Sec.  155.420(d)(3) (concerning citizenship status), Sec.  
155.420(d)(8) (concerning Indians), and Sec.  155.420(d)(9) (concerning 
exceptional circumstances).
* * * * *
    (4) Length of enrollment periods. (i) In the group market, 
enrollees must be provided 30 calendar days after the date of the 
qualifying event described in paragraph (b)(3) of this section to elect 
coverage.
    (ii) In the individual market, enrollees must be provided 60 
calendar days after the date of an event described in paragraph (b)(2) 
and (b)(3) of this section to elect coverage, as well as 60 calendar 
days before certain triggering events as provided for in Sec.  
155.420(c)(2) of this subchapter.
* * * * *
    (f) Calendar year plans. An issuer that offers coverage in the 
individual market, or in a merged market in a State that has elected to 
merge the individual market and small group market risk pools in 
accordance with section 1312(c)(3) of the Affordable Care Act, must 
ensure that such coverage is offered on a calendar year basis with a 
policy year ending on December 31 of each calendar year.
* * * * *
0
7. Section 147.106 is amended by--
0
A. Revising paragraph (c)(2).
0
B. Redesignating paragraphs (g) through (j) as paragraphs (h) through 
(k).
0
C. Adding new paragraph (g).
    The revision and addition read as follows:


Sec.  147.106  Guaranteed renewability of coverage.

* * * * *
    (c) * * *
    (2) The issuer offers to each plan sponsor or individual, as 
applicable, provided that particular product the option, on a 
guaranteed availability basis, to purchase all (or, in the case of the 
large group market, any) other health insurance coverage currently 
being offered by the issuer to a group health plan or individual health 
insurance coverage in that market. An issuer that automatically enrolls 
a plan sponsor or individual, as applicable, into a product of another 
health insurance issuer does not satisfy the requirement of this 
paragraph (c)(2).
* * * * *
    (g) Notification of change of ownership. If an issuer of a QHP, a 
plan otherwise subject to risk corridors, a risk adjustment covered 
plan, or a reinsurance-eligible plan experiences a change of ownership, 
as recognized by the State in which the plan is offered, the issuer 
must notify HHS in a manner specified by HHS, by the later of--
    (1) The date the transaction is entered into; or
    (2) The 30th day prior to the effective date of the transaction.
* * * * *

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

0
8. The authority citation for part 148 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
9. Section 148.122 is amended by revising paragraph (d)(2) to read as 
follows:


Sec.  148.122  Guaranteed renewability of individual health insurance 
coverage.

* * * * *
    (d) * * *
    (2) Offers to each covered individual, on a guaranteed issue basis, 
the option to purchase any other individual health insurance coverage 
currently being offered by the issuer for individuals in that market. 
An issuer that automatically enrolls an individual into a product of 
another health insurance issuer does not satisfy the requirement of 
this paragraph (d)(2).
* * * * *

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

0
10. 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
11. Section 153.100 is amended by revising paragraph (c) to read as 
follows:


Sec.  153.100  State notice of benefit and payment parameters.

* * * * *
    (c) State notice deadlines. If a State is required to publish an 
annual State notice of benefit and payment parameters for a particular 
benefit year, it must do so by the later of March 1 of the calendar 
year prior to the applicable benefit year, or by the 30th day following 
the publication of the final HHS notice of benefit and payment 
parameters for that benefit year.
* * * * *
0
12. Section 153.400 is amended by revising paragraph (a)(1)(iii) and 
adding paragraph (c) to read as follows:

[[Page 70750]]

Sec.  153.400  Reinsurance contribution funds.

    (a) * * *
    (1) * * *
    (iii) Such plan or coverage is expatriate health coverage, as 
defined by the Secretary, or for the 2015 and 2016 benefit years only, 
is a self-insured group health plan with respect to which enrollment is 
limited to participants who reside outside of their home country for at 
least 6 months of the plan year, and any covered dependents; or
* * * * *
    (c) Determination of a debt. Any amount owed to the Federal 
government by a self-insured group health plan (including a group 
health plan that is partially self-insured and partially insured, where 
the health insurance coverage does not constitute major medical 
coverage) and its affiliates for reinsurance is a determination of a 
debt.
0
13. Section 153.405 is amended by--
0
A. Revising paragraphs (b), (c)(1), (d) introductory text, (g)(4)(i) 
introductory text, and (g)(4)(ii) introductory text.
0
B. Removing paragraph (c)(2).
0
C. Redesignating paragraph (c)(3) as paragraph (c)(2).
0
D. Revising newly designated paragraph (c)(2).
    The revisions read as follows:


Sec.  153.405  Calculation of reinsurance contributions.

* * * * *
    (b) Annual enrollment count. No later than November 15 of benefit 
year 2014, 2015, or 2016, as applicable, or, if such date is not a 
business day, the next business day, a contributing entity must submit 
an annual enrollment count of the number of covered lives of 
reinsurance contribution enrollees for the applicable benefit year to 
HHS. The count must be determined as specified in paragraphs (d) 
through (g) of this section, as applicable.
    (c) * * *
    (1) Following submission of the annual enrollment count described 
in paragraph (b) of this section, HHS will notify the contributing 
entity of the reinsurance contribution amount allocated to reinsurance 
payments, administrative expenses and the U.S. Treasury to be paid for 
the applicable benefit year.
    (2) A contributing entity must remit reinsurance contributions to 
HHS no later than January 15, 2015, 2016, or 2017, as applicable, or, 
if such date is not a business day, the next business day, if making a 
combined contribution or the first payment of the bifurcated 
contribution, and no later than November 15, 2015, 2016, or 2017, as 
applicable, or, if such date is not a business day, the next business 
day, if making the second payment of the bifurcated contribution.
    (d) Procedures for counting covered lives for health insurance 
issuers. A health insurance issuer must use the same method in a 
benefit year for all of its health insurance plans in the State 
(including both the individual and group markets) for which reinsurance 
contributions are required. To determine the number of covered lives of 
reinsurance contribution enrollees under all health insurance plans in 
a State for a benefit year, a health insurance issuer must use one of 
the following methods:
* * * * *
    (g) * * *
    (4) * * *
    (i) Multiple group health plans including an insured plan. If at 
least one of the multiple plans is an insured plan, the average number 
of covered lives of reinsurance contribution enrollees must be 
calculated using one of the methods specified in either paragraph 
(d)(1) or paragraph (d)(2) of this section, applied across the multiple 
plans as a whole. The following information must be determined by the 
plan sponsor:
* * * * *
    (ii) Multiple group health plans not including an insured plan. If 
each of the multiple plans is a self-insured group health plan, the 
average number of covered lives of reinsurance contribution enrollees 
must be calculated using one of the methods specified either in 
paragraph (e)(1) or paragraph (e)(2) of this section, applied across 
the multiple plans as a whole. The following information must be 
determined by the plan sponsor:
* * * * *
0
14. 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--
    (i) 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
    (ii) Zero percent.
    (2) For benefit year 2015, for a QHP offered by a health insurance 
issuer in any State, 2 percent.
    (3) For benefit year 2016--
    (i) For a QHP offered by a health insurance issuer with allowable 
costs of at least 80 percent of after-tax premium, the percentage 
specified by HHS; and otherwise.
    (ii) Zero percent.
* * * * *
0
15. Section 153.740 is amended by revising paragraph (a) and adding 
paragraph (c) to read as follows:


Sec.  153.740  Failure to comply with HHS-operated risk adjustment and 
reinsurance data requirements.

    (a) Enforcement actions. If an issuer of a risk adjustment covered 
plan or reinsurance-eligible plan fails to establish a dedicated 
distributed data environment in a manner and timeframe specified by 
HHS; fails to provide HHS with access to the required data in such 
environment in accordance with Sec.  153.700(a) or otherwise fails to 
comply with the requirements of Sec. Sec.  153.700 through 153.730; 
fails to adhere to the reinsurance data submission requirements set 
forth in Sec.  153.420; or fails to adhere to the risk adjustment data 
submission and data storage requirements set forth in Sec. Sec.  
153.610 through 153.630, HHS may impose civil money penalties in 
accordance with the procedures set forth in Sec.  156.805 of this 
subchapter. Civil monetary penalties will not be imposed for non-
compliance with these requirements during the 2014 or 2015 calendar 
year under this paragraph if the issuer has made good faith efforts to 
comply with these requirements.
* * * * *
    (c) Information sharing. HHS may consult and share information 
about issuers of risk adjustment covered plans and reinsurance-eligible 
plans with other Federal and State regulatory and enforcement entities 
to the extent the consultation and information is necessary for 
purposes of State or Federal oversight and enforcement activities.

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

0
16. 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
17. Section 154.102 is amended by--
0
A. Revising the definitions of ``Individual market,'' ``Rate 
increase,'' ``Small group market,'' and ``State.''
0
B. Adding a definition of ``Plan'' in alphabetical order.
    The revisions and addition read as follows:


Sec.  154.102  Definitions.

* * * * *

[[Page 70751]]

    Individual market has the meaning given the term in Sec.  144.103 
of this subchapter.
* * * * *
    Plan has the meaning given the term in Sec.  144.103 of this 
subchapter.
* * * * *
    Rate increase means any increase of the rates for a specific 
product or plan within a product offered in the individual or small 
group market.
* * * * *
    Small group market has the meaning given the term in Sec.  144.103 
of this subchapter.
    State means each of the 50 States and the District of Columbia.
* * * * *
0
18. Section 154.200 is amended by revising paragraphs (a) and (c) to 
read as follows:


Sec.  154.200  Rate increases subject to review.

    (a) A rate increase filed for coverage effective on or after 
January 1, 2016 is subject to review if:
    (1) The rate increase is 10 percent or more for any plan within the 
product applicable to a 12-month period that begins on January 1, as 
calculated under paragraph (c) of this section; or
    (2) The rate increase for any plan within the product meets or 
exceeds a State-specific threshold applicable to a 12-month period that 
begins on January 1, as calculated under paragraph (c) of this section, 
determined by the Secretary. A State-specific threshold shall be based 
on factors impacting rate increases in a State to the extent that the 
data relating to such State-specific factors is available by August 1. 
States interested in proposing a State-specific threshold for approval 
are required to submit a proposal to the Secretary by August 1.
* * * * *
    (c) A rate increase meets or exceeds the applicable threshold set 
forth in paragraph (a) of this section if an increase in the plan-
adjusted index rate (as described in Sec.  156.80 of this subchapter) 
for any plan within the product meets or exceeds the applicable 
threshold.
* * * * *
0
19. Section 154.215 is amended by revising paragraph (a) to read as 
follows:


Sec.  154.215  Submission of rate filing justification.

    (a) If any plan within a product is subject to a rate increase, a 
health insurance issuer must submit a Rate Filing Justification for all 
products in the single risk pool, including new or discontinuing 
products, on a form and in a manner prescribed by the Secretary.
* * * * *
0
20. Section 154.220 is revised to read as follows:


Sec.  154.220  Timing of providing the rate filing justification.

    A health insurance issuer must submit to CMS and the applicable 
State a Rate Filing Justification for all rate increases that are filed 
for coverage effective on or after January 1, 2016, by the earlier of 
the following:
    (a) The date by which the State requires that a proposed rate 
increase be filed with the State; or
    (b) The date specified in guidance by the Secretary.
0
21. Section 154.301 is amended by revising paragraph (b) to read as 
follows:


Sec.  154.301  CMS's determinations of Effective Rate Review Programs.

* * * * *
    (b) Public disclosure and input. (1) In addition to satisfying the 
provisions in paragraph (a) of this section, a State with an Effective 
Rate Review Program must provide:
    (i) For proposed rate increases subject to review, access from its 
Web site to at least the information contained in Parts I, II, and III 
of the Rate Filing Justification that CMS makes available on its Web 
site (or provide CMS's Web address for such information), and have a 
mechanism for receiving public comments on those proposed rate 
increases, no later than the date specified in guidance by the 
Secretary.
    (ii) For all final rate increases (including those not subject to 
review), access from its Web site to at least the information contained 
in Parts I, II, and III of the Rate Filing Justification that CMS makes 
available on its Web site (or provide CMS's Web address for such 
information), no later than the first day of the annual open enrollment 
period for the applicable calendar year.
    (2) If a State intends to make the information in paragraph 
(b)(1)(i) of this section available to the public prior to the date 
specified by the Secretary, or if it intends to make the information in 
paragraph (b)(1)(ii) of this section available to the public prior to 
the first day of the annual open enrollment period for the applicable 
calendar year, the State must notify CMS in writing, no later than 30 
days prior to the date it intends to make the information public, of 
its intent to do so and the date it intends to make the information 
public.
    (3) A State with an Effective Rate Review Program must ensure the 
information in paragraphs (b)(1)(i) and (ii) of this section is made 
available to the public at a uniform time for all proposed and final 
rate increases, as applicable, in the relevant market segment and 
without regard to whether coverage is offered through or outside an 
Exchange.
* * * * *

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

0
22. 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
23. Section 155.20 is amended by--
0
A. Revising paragraph (2) of the definition of ``Applicant.''
0
B. Revising the definitions of ``Enrollee'' and ``Qualified employee''.
    The revisions read as follows:


Sec.  155.20  Definitions.

* * * * *
    Applicant * * *
    (2) An employer, employee, or former employee seeking eligibility 
for enrollment in a QHP through the SHOP for himself or herself, and, 
if the qualified employer offers dependent coverage through the SHOP, 
seeking eligibility to enroll his or her dependents in a QHP through 
the SHOP.
* * * * *
    Enrollee means a qualified individual or qualified employee 
enrolled in a QHP. Enrollee also means the dependent of a qualified 
employee enrolled in a QHP through the SHOP. Provided that at least one 
employee enrolls in a QHP through the SHOP, enrollee also means a 
business owner enrolled in a QHP through the SHOP, or the dependent of 
a business owner enrolled in a QHP through the SHOP.
* * * * *
    Qualified employee means any employee or former employee of a 
qualified employer who has been offered health insurance coverage by 
such qualified employer through the SHOP for himself or herself and, if 
the qualified employer offers dependent coverage through the SHOP, for 
his or her dependents.
* * * * *
0
24. Section 155.205 is amended by revising paragraph (c)(2)(i) to read 
as follows:

[[Page 70752]]

Sec.  155.205  Consumer assistance tools and programs of an Exchange.

* * * * *
    (c) * * *
    (2) * * *
    (i) Oral interpretation. For Exchanges, QHP issuers, and agents or 
brokers subject to Sec.  155.220(c)(3)(i) only, this standard includes 
telephonic interpreter services in at least 150 languages;
* * * * *
0
25. Section 155.215 is amended by revising paragraph (h) 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.

* * * * *
    (h) Physical presence. 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 entities 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.
* * * * *
0
26. Section 155.222 is added to read as follows:


Sec.  155.222  Standards for HHS-approved vendors of Federally-
facilitated exchange training for agents and brokers.

    (a) Application for approval. A vendor must be approved by HHS, in 
a form and manner to be determined by HHS, in order to have its 
training and information verification program recognized for agents and 
brokers assisting with or facilitating enrollment in individual market 
or SHOP coverage through the Exchange consistent with Sec.  155.220. As 
part of the training program, the vendor must require agents and 
brokers to complete identity proofing, provide identifying information, 
and successfully complete the required curriculum. HHS will approve 
vendors on an annual basis for a given plan year, and each vendor must 
submit an application for each year that approval is sought.
    (b) Standards. To be approved by HHS and maintain its status as an 
approved vendor for plan year 2016 and future plan years, a vendor must 
meet each of the following standards:
    (1) Submit a complete and accurate application by the deadline 
established by HHS, which includes demonstration of prior experience 
with successfully conducting online training and identity proofing, as 
well as providing technical support to a large customer base.
    (2) Adhere to HHS specifications for content, format, and delivery 
of training and information verification.
    (3) Collect, store, and share with HHS all data from agent and 
broker users of the vendor's training and information verification in a 
manner specified by HHS, and protect the data in accordance with 
applicable privacy and security laws and regulations.
    (4) Execute an agreement with HHS, in a form and manner to be 
determined by HHS, which requires the vendor to comply with HHS 
guidelines for interfacing with HHS data systems, the implementation of 
the training and information verification processes, and the use of all 
data collected.
    (5) Permit any individual who holds a valid State license or 
equivalent State authority to sell health insurance products to access 
the vendor's training and information verification.
    (c) Approved list. A list of approved vendors will be published on 
an HHS Web site.
    (d) Monitoring. HHS may periodically monitor and audit vendors 
approved under this subpart, and their records related to the training 
and information verification functions described in this section, to 
ensure ongoing compliance with the standards in paragraph (b) of this 
section. If HHS determines that an HHS-approved vendor is not in 
compliance with the standards required in paragraph (b) of this 
section, the vendor may be removed from the approved list described in 
paragraph (c) of this section and may be required by HHS to cease 
performing the training and information verification functions 
described under this subpart.
    (e) Appeals. A vendor that is not approved by HHS after submitting 
the application described in paragraph (a) of this section, or an 
approved vendor whose agreement is revoked under paragraph (d) 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 and (if applicable) the 
terms of their agreement with HHS. HHS will review the submitted 
documentation and make a final approval determination within 30 days 
from receipt of the additional documentation.
0
27. Section 155.400 is amended by revising paragraph (e) 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. An Exchange may establish a standard policy 
for setting premium payment deadlines.
* * * * *
0
28. Section 155.410 is amended by revising paragraphs (e) and (f) to 
read as follows:


Sec.  155.410  Initial and annual open enrollment periods.

* * * * *
    (e) Annual open enrollment period. (1) For the benefit year 
beginning on January 1, 2015, the annual open enrollment period begins 
on November 15, 2014, and extends through February 15, 2015.
    (2) For benefit years beginning on or after January 1, 2016, the 
annual open enrollment period begins on October 1 and extends through 
December 15 of the calendar year preceding the benefit year.
    (f) Effective date. (1) For the benefit year beginning on January 
1, 2015, the Exchange must ensure coverage is effective--
    (i) January 1, 2015, for QHP selections received by the Exchange on 
or before December 15, 2014.
    (ii) February 1, 2015, for QHP selections received by the Exchange 
from December 16, 2014 through January 15, 2015.
    (iii) March 1, 2015, for QHP selections received by the Exchange 
from January 16, 2015 through February 15, 2015.
    (2) For enrollments made under any annual open enrollment periods 
for benefit years beginning on or after January 1, 2016, the Exchange 
must ensure that coverage is effective as of January 1 of the year 
following the open enrollment period.
* * * * *
0
29. Section 155.420 is amended by--
0
A. Revising paragraphs (b)(2)(i), (b)(2)(iv), (c)(2), (d)(1)(ii), 
(d)(2), and (d)(4).
0
B. Adding paragraphs (b)(2)(v), (b)(2)(vi), and (d)(6)(iv).
0
C. Removing paragraph (d)(10).
    The revisions and additions read as follows:

[[Page 70753]]

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)(i) 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 
in accordance with paragraph (b)(1) of this section. If the Exchange 
permits the qualified individual or enrollee to elect a coverage 
effective date in accordance with paragraph (b)(1) of this section, the 
Exchange must ensure coverage is effective on the date duly selected by 
the qualified individual or enrollee.
* * * * *
    (iv) If a consumer loses coverage as described in paragraph (d)(1), 
(d)(6)(iii), or gains access to a new QHP as described in paragraph 
(d)(7) of this section, if the plan selection is made before or on the 
day of the triggering event, 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 triggering event, the 
Exchange must ensure that coverage is effective in accordance with 
paragraph (b)(1) of this section or on the first day of the following 
month, at the option of the Exchange.
    (v) In the case of a court order as described in paragraph 
(d)(2)(i) of this section, the Exchange must ensure that coverage is 
effective for a qualified individual or enrollee on the date the court 
order is effective, or it may permit the qualified individual or 
enrollee to elect a coverage effective date in accordance with 
paragraph (b)(1) of this section. If the Exchange permits the qualified 
individual or enrollee to elect a coverage effective date in accordance 
with paragraph (b)(1) of this section, the Exchange must ensure 
coverage is effective on the date duly elected by the qualified 
individual or enrollee.
    (vi) If an enrollee or his or her dependent dies as described in 
paragraph (d)(2)(iv) of this section, the Exchange must ensure that 
coverage is effective on the first day of the month following the 
death, or it may permit the enrollee or his or her dependent to elect a 
coverage effective date in accordance with paragraph (b)(1) of this 
section. If the Exchange permits the enrollee or his or her dependent 
to elect a coverage effective date in accordance with paragraph (b)(1) 
of this section, the Exchange must ensure coverage is effective on the 
date duly elected by the enrollee or his or her dependent.
* * * * *
    (c) * * *
    (2) Advanced availability. A qualified individual or his or her 
dependent who is described in paragraph (d)(1), (d)(6)(iii) or, 
effective January 1, 2016, (d)(7), of this section, has 60 days before 
and after the triggering event to select a QHP. Prior to January 1, 
2016, a qualified individual or his or her dependent who is described 
in paragraph (d)(7) of this section may select a QHP in accordance with 
paragraph (c)(1) of this section.
* * * * *
    (d) * * *
    (1) * * *
    (ii) Is enrolled in any non-calendar year group health plan or 
individual health insurance coverage, even if the qualified individual 
or his or her dependent has the option to renew such coverage. The date 
of the loss of coverage is the last day of the plan or policy year;
* * * * *
    (2)(i) The qualified individual gains a dependent or becomes a 
dependent through marriage, birth, adoption, placement for adoption, or 
placement in foster care, or through a child support order or other 
court order.
    (ii) The enrollee loses a dependent or is no longer considered a 
dependent through divorce or legal separation as defined by State law 
in the State in which the divorce or legal separation occurs, or if the 
enrollee, or his or her dependent, dies.
* * * * *
    (4) The qualified individual's or his or her dependent's, 
enrollment or non-enrollment in a QHP is unintentional, inadvertent, or 
erroneous and is the result of the error, misrepresentation, 
misconduct, or inaction of an officer, employee, or agent of the 
Exchange or HHS, its instrumentalities, or a non-Exchange entity 
providing enrollment assistance or conducting enrollment activities. 
For purposes of this provision, misconduct includes the failure to 
comply with applicable standards under this part, part 156 of this 
subchapter, or other applicable Federal or State laws as determined by 
the Exchange.
* * * * *
    (6) * * *
    (iv) A qualified individual in a non-Medicaid expansion State who 
was previously ineligible for advance payments of the premium tax 
credit solely because of a household income below 100 percent FPL, who 
was ineligible for Medicaid during that same timeframe, who has 
experienced a change in household income that makes the qualified 
individual newly eligible for advance payments of the premium tax 
credit.
* * * * *
0
30. Section 155.430 is amended by revising paragraphs (b)(1)(i) and 
(d)(6), and adding paragraphs (b)(1)(iii), (d)(2)(v), and (d)(8) to 
read as follows:


Sec.  155.430  Termination of coverage.

* * * * *
    (b) * * *
    (1) * * *
    (i) The Exchange must permit an enrollee to terminate his or her 
coverage in a QHP, including as a result of the enrollee obtaining 
other minimum essential coverage. To the extent the enrollee has the 
right to cancel the coverage under applicable State laws, including 
``free look'' cancellation laws, the enrollee may do so, in accordance 
with such laws.
* * * * *
    (iii) The Exchange must establish process to permit individuals, 
including enrollees' authorized representatives, to report the death of 
an enrollee for purposes of initiating termination of the enrollee's 
Exchange enrollment. The Exchange may require the reporting party to 
submit documentation of the death. Any applicable premium refund, or 
premium due, must be processed by the deceased enrollee's qualified 
health plan in accordance with State law.
* * * * *
    (d) * * *
    (2) * * *
    (v) The retroactive termination date requested by the enrollee, if 
specified by applicable State laws.
* * * * *
    (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).
* * * * *
    (8) 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, claims, and user fees.
* * * * *
0
31. Section 155.605 is amended by revising paragraphs (g)(3) and 
(g)(6)(i) and adding paragraph (g)(6)(iii) to read as follows:

[[Page 70754]]

Sec.  155.605  Eligibility standards for exemptions.

* * * * *
    (g) * * *
    (3) Filing threshold. The IRS may allow an applicant to claim an 
exemption without obtaining an exemption certificate number from an 
Exchange for a taxable year if, for such year, the applicant could not 
be claimed as a dependent by another taxpayer and the applicant's gross 
income was less than the applicant's applicable return filing threshold 
described in section 5000A(e)(2) of the Code;
* * * * *
    (6) * * *
    (i) The Exchange must determine an applicant eligible for an 
exemption for any month if he or she is an Indian eligible for services 
through an Indian health care provider, as defined in 42 CFR 447.51 and 
not otherwise eligible for an exemption under paragraph (f) of this 
section, or an individual eligible for services through the Indian 
Health Service in accordance with 25 U.S.C. 1680c(a), (b), or (d)(3).
* * * * *
    (iii) The IRS may allow an applicant to claim the exemption 
specified in paragraph (g)(6) of this section without obtaining an 
exemption certificate number from an Exchange.
0
32. Section 155.700(b) is amended by removing the definition of ``Group 
participation rule'' and by adding the definition of ``Group 
participation rate'' to read as follows:


Sec.  155.700  Standards for the establishment of a SHOP.

* * * * *
    (b) * * *
    Group participation rate means the minimum percentage of all 
eligible individuals or employees of an employer that must be enrolled.
* * * * *
0
33. Section 155.705 is amended by--
0
A. Revising paragraph (b)(4)(i)(B).
0
B. Redesignating paragraphs (b)(4)(ii)(A) and (b)(4)(ii)(B) as 
paragraphs (b)(4)(ii)(B) and (b)(4)(ii)(C), respectively.
0
C. Adding new paragraph (b)(4)(ii)(A).
0
D. Revising paragraphs (b)(7), (b)(10) introductory text, and 
(b)(10)(i).
    The additions and revisions read as follows:


Sec.  155.705  Functions of a SHOP.

* * * * *
    (b) * * *
    (4) * * *
    (i) * * *
    (B) Collect from each employer the total amount due and make 
payments to QHP issuers in the SHOP for all enrollees except as 
provided for in paragraph (b)(4)(ii)(A) of this section; and
* * * * *
    (ii) * * *
    (A) The SHOP may, upon an election by a qualified employer, enter 
into an agreement with a qualified employer to facilitate the 
administration of continuation coverage by collecting premiums for 
continuation coverage enrolled in through the SHOP directly from a 
qualified employee and remitting premium payments for this coverage to 
QHP issuers. A Federally-facilitated SHOP may elect to limit this 
service to the collection of premiums related to Federally mandated 
continuation coverage.
* * * * *
    (7) QHP availability in merged markets. If a State merges the 
individual market and the small group market risk pools in accordance 
with section 1312(c)(3) of the Affordable Care Act, the SHOP may permit 
a qualified employee to enroll in any QHP meeting level of coverage 
requirements described in section 1302(d) of the Affordable Care Act.
* * * * *
    (10) Participation rules. Subject to Sec.  147.104 of this 
subchapter, the SHOP may authorize a uniform group participation rate 
for the offering of health insurance coverage in the SHOP, which must 
be a single, uniform rate that applies to all groups and issuers in the 
SHOP. If the SHOP authorizes a minimum participation rate, such rate 
must be based on the rate of employee participation in the SHOP and in 
coverage through another group health plan, governmental coverage (such 
as Medicare, Medicaid, or TRICARE), coverage sold through the 
individual market, or in other minimum essential coverage, not on the 
rate of employee participation in any particular QHP or QHPs of any 
particular issuer.
    (i) Subject to Sec.  147.104 of this subchapter, a Federally-
facilitated SHOP must use a minimum participation rate of 70 percent, 
calculated as the number of full-time employees accepting coverage 
offered by a qualified employer plus the number of full-time employees 
who, at the time the employer submits the SHOP group enrollment, are 
enrolled in coverage through another group health plan, governmental 
coverage (such as Medicare, Medicaid, or TRICARE), coverage sold 
through the individual market, or in other minimum essential coverage, 
divided by the number of full-time employees offered coverage.
* * * * *
0
34. Section 155.710 is amended by revising paragraph (e) to read as 
follows:


Sec.  155.710  Eligibility standards for SHOP.

* * * * *
    (e) Employee eligibility requirements. An employee is a qualified 
employee eligible to enroll in coverage through a SHOP if such employee 
receives an offer of coverage from a qualified employer. A qualified 
employee is eligible to enroll his or her dependents in coverage 
through a SHOP if the offer from the qualified employer includes an 
offer of dependent coverage.
0
35. Section 155.720 is amended by:
0
A. Removing ``;'' from paragraph (b)(5) and adding ``; and'' it its 
place.
0
B. Removing ``; and'' from paragraph (b)(6) and adding a period in its 
place.
0
C. Removing paragraph (b)(7).
0
D. Revising paragraph (e).
    The revisions read as follows:


Sec.  155.720  Enrollment of employees into QHPs under SHOP.

* * * * *
    (e) Notification of effective date. The SHOP must ensure that a QHP 
issuer notifies an enrollee enrolled in a QHP through the SHOP of the 
effective date of his or her coverage.
* * * * *
0
36. Section 155.725 is amended by revising paragraphs (a), (b), (g), 
(h), (i), and (j)(5) and by adding paragraph (k) to read as follows:


Sec.  155.725  Enrollment periods under SHOP.

    (a) General requirements. The SHOP must ensure that enrollment 
transactions are sent to QHP issuers and that such issuers adhere to 
coverage effective dates in accordance with this section.
    (b) Rolling enrollment in the SHOP. The SHOP must permit a 
qualified employer to purchase coverage for its small group at any 
point during the year. The employer's plan year must consist of the 12-
month period beginning with the qualified employer's effective date of 
coverage, unless the plan is issued in a State that has elected to 
merge its individual and small group risk pools under section 
1312(c)(3) of the Affordable Care Act, in which case the plan year will 
end on December 31 of the calendar year in which coverage first became 
effective.
* * * * *
    (g) Newly qualified employees. (1) The SHOP must provide an 
employee who becomes a qualified employee outside of the initial or 
annual open enrollment period an enrollment period beginning on the 
first day of becoming a qualified employee. A newly qualified employee 
must have at least 30 days from the

[[Page 70755]]

beginning of his or her enrollment period to select a QHP. The 
enrollment period must end no sooner than 15 days prior to the date 
that any applicable employee waiting period longer than 45 days would 
end if the employee made a plan selection on the first day of becoming 
eligible.
    (2) The effective date of coverage for a QHP selection received by 
the SHOP from a newly qualified employee must always be the first day 
of a month, and must generally be determined in accordance with Sec.  
155.725(h), unless the employee is subject to a waiting period 
consistent with Sec.  147.116 of this subchapter, in which case the 
effective date may be on the first day of a later month, but in no case 
may the effective date fail to comply with Sec.  147.116 of this 
subchapter.
    (h) Initial and annual open enrollment effective dates. (1) The 
SHOP must establish effective dates of coverage for qualified employees 
enrolling in coverage for the first time, and for qualified employees 
enrolling during the annual open enrollment period described in 
paragraph (e) of this section.
    (2) For a QHP selection received by the Federally-facilitated SHOP 
from a qualified employee in his or her initial or annual open 
enrollment period:
    (i) Between the first and fifteenth day of any month, the 
Federally-facilitated SHOP must ensure a coverage effective date of the 
first day of the following month
    (ii) Between the 16th and last day of any month, the Federally-
facilitated SHOP must ensure a coverage effective date of the first day 
of the second following month.
    (i) Renewal of coverage. (1) If a qualified employee enrolled in a 
QHP through the SHOP remains eligible for coverage, such employee will 
remain in the QHP selected the previous year unless--
    (i) The qualified employee terminates coverage from such QHP in 
accordance with standards identified in Sec.  155.430;
    (ii) The qualified employee enrolls in another QHP if such option 
exists; or
    (iii) The QHP is no longer available to the qualified employee.
    (2) The SHOP may treat a qualified employer offering coverage 
through the SHOP as offering the same coverage under Sec.  
155.705(b)(3) at the same level of contribution under Sec.  
155.705(b)(11) unless:
    (i) The qualified employer is no longer eligible to offer such 
coverage through the SHOP;
    (ii) The qualified employer elects to offer different coverage or a 
different contribution through the SHOP;
    (iii) The qualified employer withdraws from the SHOP; or
    (iv) In the case of a qualified employer offering a single QHP, the 
single QHP is no longer available through the SHOP.
    (j) * * *
    (5) The effective dates of coverage for special enrollment periods 
are determined using the provisions of Sec.  155.420(b).
* * * * *
    (k) Limitation. Qualified employees will not be able to enroll 
unless the employer group meets any applicable minimum participation 
rate implemented under Sec.  155.705(b)(10).
0
37. Section 155.735 is amended by revising paragraphs (c)(2)(ii), 
(c)(2)(iii), and (d)(1)(iii) and adding paragraph (g) to read as 
follows:


Sec.  155.735  Termination of coverage.

* * * * *
    (c) * * *
    (2) * * *
    (ii) If premium payment is not received 31 days from the first of 
the coverage month, the Federally-facilitated SHOP may terminate the 
qualified employer for lack of payment. The termination would take 
effect on the last day of the month for which the Federally-facilitated 
SHOP received full payment.
    (iii) If a qualified employer is terminated due to lack of premium 
payment, but within 30 days following its termination the qualified 
employer requests reinstatement, pays all premiums owed including any 
prior premiums owed for coverage during the grace period, and pays the 
premium for the next month's coverage, the Federally-facilitated SHOP 
must reinstate the qualified employer in its previous coverage. A 
qualified employer may be reinstated in the Federally-facilitated SHOP 
only once per calendar year.
    (d) * * *
    (1) * * *
    (iii) The QHP in which the enrollee is enrolled, terminates, is 
decertified as described in Sec.  155.1080, or its certification as a 
QHP is not renewed;
* * * * *
    (g) Notice of termination. (1) If any enrollee's coverage through 
the SHOP is terminated due to non-payment of premiums or due to a loss 
of the enrollee's eligibility to participate in the SHOP, including 
where an enrollee loses his or her eligibility because a qualified 
employer has lost its eligibility, the SHOP must, promptly and without 
undue delay, provide the enrollee with a notice of termination of 
coverage that includes the termination effective date and reason for 
termination.
    (2) If an employer group's coverage through the SHOP is terminated 
due to non-payment of premiums or, where applicable, due to a loss of 
the qualified employer's eligibility to offer coverage through the 
SHOP, the SHOP must, promptly and without undue delay, provide the 
employer with a notice of termination of coverage that includes the 
termination effective date and the reason for termination.
0
38. Section 155.1000 amended by adding paragraph (d) to read as 
follows:


Sec.  155.1000  Certification standards for QHPs.

* * * * *
    (d) Special rule for SHOP. In a SHOP that certifies QHPs on a 
calendar-year basis, the certification shall remain in effect for the 
duration of any plan year beginning in the calendar year for which the 
QHP was certified, even if the plan year ends after the calendar year 
for which the QHP was certified.

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

0
39. The authority citation for part 156 continues 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
40. Section 156.20 is amended by adding a definition of ``Plan'' in 
alphabetical order to read as follows:


Sec.  156.20  Definitions.

* * * * *
    Plan has the meaning given the term in Sec.  144.103 of this 
subchapter.
* * * * *
0
41. Section 156.100 is amended by revising paragraph (c) to read as 
follows:


Sec.  156.100  State selection of benchmark.

* * * * *
    (c) Default base-benchmark plan. If a State does not make a 
selection using the process described in this section, the default 
base-benchmark plan will be the largest plan by enrollment in the 
largest product by enrollment in the State's small group market.
0
42. Section 156.110 is amended by revising paragraphs (c)(4) and (c)(5) 
and removing paragraph (c)(6) to read as follows.

[[Page 70756]]

Sec.  156.110  EHB-benchmark plan standards.

* * * * *
    (c) * * *
    (4) The plan described in paragraph (b)(2)(i) of the section with 
respect to pediatric oral care benefits; and
    (5) The plan described in paragraph (b)(3)(i) of this section with 
respect to pediatric vision care benefits.
* * * * *
0
43. Section 156.115 is amended by revising paragraph (a)(5) and adding 
paragraph (a)(6) to read as follows:


Sec.  156.115  Provision of EHB.

    (a) * * *
    (5) If the EHB-benchmark plan does not include coverage for 
habilitative services as described in Sec.  156.110(f), the plan must:
    (i) Cover health care services that help a person keep, learn, or 
improve skills and functioning for daily living; and
    (ii) Provide coverage of habilitative services in a manner no less 
favorable than coverage of rehabilitative services.
    (6) For pediatric services that are required under Sec.  
156.110(a)(10), provide coverage for enrollees until at least the end 
of the plan year in which the enrollee turns 19 years of age.
* * * * *
0
44. Section 156.120 is added to read as follows:


Sec.  156.120  Collection of data to define essential health benefits.

    (a) Definitions. The following definitions apply to this section, 
unless the context indicates otherwise:
    Health benefits means benefits for medical care, as defined at 
Sec.  144.103 of this subchapter, which may be delivered through the 
purchase of insurance or otherwise.
    Health insurance product has the meaning given to the term in Sec.  
159.110 of this subchapter.
    Health plan has the meaning given to the term, ``Portal Plan'' in 
Sec.  159.110 of this subchapter.
    Small group market has the meaning given to the term in Sec.  
155.20 of this subchapter.
    State has the meaning given to the term in Sec.  155.20 of this 
subchapter.
    Treatment limitations include limits on benefits based on the 
frequency of treatment, number of visits, days of coverage, or other 
similar limits on the scope or duration of treatment. Treatment 
limitations include only quantitative treatment limitations. A 
permanent exclusion of all benefits for a particular condition or 
disorder is not a treatment limitation.
    (b) Reporting requirement. A State that selects a base-benchmark 
plan or an issuer that offers a default base-benchmark plan in 
accordance with Sec.  156.100 must submit to HHS the following 
information in a form and manner, and by a date, determined by HHS:
    (1) Administrative data necessary to identify the health plan;
    (2) Data and descriptive information for each plan on the following 
items:
    (i) All health benefits in the plan;
    (ii) Treatment limitations;
    (iii) Drug coverage; and
    (iv) Exclusions.
0
45. Section 156.122 is amended by--
0
A. Revising paragraphs (a)(1), (a)(2), and (c).
0
B. Adding paragraphs (d) and (e).
    The revisions and additions read as follows:


Sec.  156.122  Prescription drug benefits.

    (a) * * *
    (1) Submits its formulary drug list to the Exchange, the State or 
OPM.
    (2) Uses a pharmacy and therapeutic (P&T) committee that meets the 
following standards
    (i) Membership standards. The P&T committee must:
    (A) Have members that represent a sufficient number of clinical 
specialties to adequately meet the needs of enrollees.
    (B) Consist of a majority of individuals who are practicing 
physicians, practicing pharmacists and other practicing health care 
professionals.
    (C) Prohibit any member with a conflict of interest with respect to 
the issuer or a pharmaceutical manufacturer from voting on any matters 
for which the conflict exists.
    (D) Require at least 20 percent of its membership have no conflict 
of interest with respect to the issuer and any pharmaceutical 
manufacturer.
    (ii) Meeting standards. The P&T committee must:
    (A) Meet at least quarterly.
    (B) Maintain written documentation of the rationale for all 
decisions regarding formulary drug list development or revision.
    (iii) Formulary drug list establishment and management. The P&T 
committee must:
    (A) Develop and document procedures to ensure appropriate drug 
review and inclusion.
    (B) Make clinical decisions based on scientific evidence such as 
peer reviewed medical literature, standards of practice such as well-
established clinical practice guidelines and other sources of 
appropriate information.
    (C) Consider the therapeutic advantages of drugs in terms of safety 
and efficacy when selecting formulary drugs and making recommendations 
on placing them on formulary tiers.
    (D) Review new FDA-approved drugs and new uses for existing drugs.
    (E) Ensure the issuer's formulary drug list:
    (1) Covers a range of drugs across a broad distribution of 
therapeutic categories and classes and recommended drug treatment 
regimens that treat all disease states and does not substantially 
discourage enrollment by any group of enrollees; and
    (2) Provides appropriate access to drugs that are included in 
broadly accepted treatment guidelines and which are indicative of, and 
consistent with, general best practice formularies currently in 
widespread use.
* * * * *
    (c) A health plan providing essential health benefits must have the 
following processes in place that allow an enrollee, the enrollee's 
designee, or the enrollee's prescribing physician (or other prescriber, 
as appropriate) to request and gain access to clinically appropriate 
drugs not otherwise covered by the health plan (a request for 
exception). In the event that an exception request is granted, the plan 
must treat the excepted drug(s) as an essential health benefit, 
including by counting any cost-sharing towards the plan's annual 
limitation on cost-sharing under Sec.  156.130 and when calculating the 
plan's actuarial value under Sec.  156.135.
    (1) Standard exception request. (i) A health plan must have a 
process for an enrollee, the enrollee's designee, or the enrollee's 
prescribing physician (or other prescriber) to request a standard 
review of a decision that a drug is not covered by the plan.
    (ii) A health plan must make its determination on a standard 
exception 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 72 hours following receipt of the 
request.
    (iii) A health plan that grants a standard exception request must 
provide coverage of the non-formulary drug for the duration of the 
prescription, including refills.
    (2) Expedited exception request. (i) A health plan must have 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.
    (ii) Exigent circumstances exist when an enrollee is suffering from 
a health condition that may seriously jeopardize the enrollee's life, 
health, or ability to

[[Page 70757]]

regain maximum function or when an enrollee is undergoing a current 
course of treatment using a non-formulary drug.
    (iii) 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 following receipt of the request.
    (iv) 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.
    (3) External exception request review. (i) If the health plan 
denies a request for a standard exception paragraph (c)(1) of this 
section or for an expedited exception under paragraph (c)(2) of this 
section, the health plan must have a process for the enrollee, the 
enrollee's designee, or the enrollee's prescribing physician (or other 
prescriber) to request an external exception review by an independent 
review organization to review the original exception request and 
subsequent denial of such request.
    (ii) A health plan must make its determination on the external 
exception request 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 72 hours following its receipt 
of the request, if the original request was a standard exception 
request under paragraph (c)(1) of this section, and no later than 24 
hours following its receipt of the request, if the original request was 
an expedited exception request under paragraph (c)(2) of this section.
    (d)(1) A health plan must publish an up-to-date, accurate, and 
complete list of all covered drugs on its formulary drug list, 
including any tiering structure that it has adopted and any 
restrictions on the manner in which a drug can be obtained, in a manner 
that is easily accessible to plan enrollees, prospective enrollees, the 
State, the Exchange, HHS, the U.S. Office of Personnel Management, and 
the general public. A formulary drug list is easily accessible when:
    (i) It can be viewed on the plan's public Web site through a 
clearly identifiable link or tab without requiring an individual to 
create or access an account or enter a policy number; and
    (ii) If an issuer offers more than one plan, when an individual can 
easily discern which formulary drug list applies to which plan.
    (2) [Reserved]
    (e) A health plan must have the following access procedures:
    (1) A health plan must allow enrollees to access prescription drug 
benefits at in-network retail pharmacies, unless:
    (i) The drug is subject to restricted distribution by the U.S. Food 
and Drug Administration; or
    (ii) The drug requires special handling, provider coordination, or 
patient education that cannot be provided by a retail pharmacy.
    (2) If a health plan charges enrollees a higher cost-sharing amount 
for obtaining a covered drug at a retail pharmacy, the higher cost-
sharing will count towards the plan's annual limitation on cost-sharing 
under Sec.  156.130 and must be accounted for in the plan's actuarial 
value calculated under Sec.  156.135.
0
46. Section 156.130 is amended by adding paragraph (b) and revising 
paragraph (c) to read as follows:


Sec.  156.130  Cost sharing requirements

* * * * *
    (b) Non-calendar year plans. Non-calendar year plans subject to 
paragraph (a) of this section must adhere to the annual limitation on 
cost sharing beginning on the date the plan begins and ending one year 
later.
    (c) Special rule for network plans. In the case of a plan using a 
network of providers, cost sharing paid by, or on behalf of, an 
enrollee for benefits provided outside of such network is not required 
to count toward the annual limitation on cost sharing (as defined in 
paragraph (a) of this section).
* * * * *
0
47. Section 156.145 is amended by revising paragraph (a) introductory 
text to read as follows:


Sec.  156.145  Determination of minimum value.

    (a) Acceptable methods for determining MV. An employer-sponsored 
plan provides minimum value (MV) only if the percentage of the total 
allowed costs of benefits provided under the plan is greater than or 
equal to 60 percent, and the benefits under the plan include 
substantial coverage of inpatient hospital services and physician 
services. An employer-sponsored plan may use one of the following 
methods to determine whether the percentage of the total allowed costs 
of benefits provided under the plan is not less than 60 percent.
* * * * *
0
48. Section 156.200 is amended by revising paragraph (b)(7) to read as 
follows:


Sec.  156.200  QHP issuer participation standards.

* * * * *
    (b) * * *
    (7) Comply with the standards under 45 CFR part 153.
* * * * *
0
49. Section 156.230 is amended by revising paragraph (a) introductory 
text and (b) to read as follows:


Sec.  156.230  Network adequacy standards.

    (a) General requirement. Each QHP issuer that uses a provider 
network must ensure that the provider network consisting of in-network 
providers, as available to all enrollees, meets the following 
standards--
* * * * *
    (b) Access to provider directory. (1) A QHP issuer must make its 
provider directory for a QHP available to the Exchange for publication 
online in accordance with guidance from HHS and to potential enrollees 
in hard copy upon request. In the provider directory, a QHP issuer must 
identify providers that are not accepting new patients.
    (2) A QHP issuer must publish an up-to-date, accurate, and complete 
provider directory, including information on which providers are 
accepting new patients, the provider's location, contact information, 
specialty, medical group, and any institutional affiliations, in a 
manner that is easily accessible to plan enrollees, prospective 
enrollees, the State, the Exchange, HHS and OPM. A provider directory 
is easily accessible when--
    (i) The general public is able to view all of the current providers 
for a plan in the provider directory on the issuer's public Web site 
through a clearly identifiable link or tab and without creating or 
accessing an account or entering a policy number; and
    (ii) If a health plan issuer maintains multiple provider networks, 
the general public is able to easily discern which providers 
participate in which plans and which provider networks.
0
50. Section 156.235 is revised to read as follows:


Sec.  156.235  Essential community providers.

    (a) General ECP standard. (1) A QHP issuer that uses a provider 
network must include in its provider network a sufficient number and 
geographic distribution of essential community providers (ECPs), where 
available, to ensure reasonable and timely access to a broad range of 
such providers for low-income individuals or individuals residing in 
Health Professional Shortage Areas within the QHP's service area, in 
accordance with the Exchange's network adequacy standards.

[[Page 70758]]

    (2) A plan applying for QHP certification to be offered through an 
FFE has a sufficient number and geographic distribution of ECPs if it 
demonstrates in its QHP application that--
    (i) The network includes as participating providers at least a 
minimum percentage, as specified by HHS, of available ECPs in each 
plan's service area with multiple providers at a single location 
counting as a single ECP toward both the available ECPs in the plan's 
service area and the issuer's satisfaction of the ECP participation 
standard; and
    (ii) The issuer of the plan offers contracts to--
    (A) All available Indian health providers in the service area, 
applying the special terms and conditions necessitated by federal law 
and regulations as referenced in the recommended model QHP addendum for 
Indian health providers developed by HHS; and
    (B) At least one ECP in each of the five ECP categories (Federally 
Qualified Health Centers, Ryan White Providers, Family Planning 
Providers, Indian Health Providers, Hospitals and other ECP providers) 
in each county in the service area, where an ECP in that category is 
available and provides medical or dental services that are covered by 
the issuer plan type.
    (3) If a plan applying for QHP certification to be offered through 
an FFE does not satisfy the ECP standard described in paragraph (a)(2) 
of this section, the issuer must include as part of its QHP application 
a narrative justification describing how the plan's provider network 
provides an adequate level of service for low-income enrollees or 
individuals residing in Health Professional Shortage Areas within the 
plan's service area and how the plan's provider network will be 
strengthened toward satisfaction of the ECP standard prior to the start 
of the benefit year.
    (4) Nothing in paragraphs (a)(1) through (a)(3) of this section 
requires any QHP to provide coverage for any specific medical procedure 
provided by an ECP.
    (5) A plan that provides a majority of covered professional 
services through physicians employed by the issuer or through a single 
contracted medical group may instead comply with the alternate standard 
described in paragraph (b) of this section.
    (b) Alternate ECP standard. (1) A plan described in paragraph 
(a)(5) of this section must have a sufficient number and geographic 
distribution of employed providers and hospital facilities, or 
providers of its contracted medical group and hospital facilities, to 
ensure reasonable and timely access for low-income individuals or 
individuals residing in Health Professional Shortage Areas within the 
plan's service area, in accordance with the Exchange's network adequacy 
standards.
    (2) A plan described in paragraph (a)(5) of this section applying 
for QHP certification to be offered through an FFE has a sufficient 
number and geographic distribution of employed or contracted providers 
if it demonstrates in its QHP application that the number of its 
providers in the following locations satisfies a minimum percentage, 
specified by HHS, of available ECPs in the plan's service area. 
Multiple providers at a single location count as a single ECP, if--
    (i) Located within Health Professional Shortage Areas; or
    (ii) Located within five-digit zip codes in which 30 percent or 
more of the population falls below 200 percent of the Federal Poverty 
Level.
    (3) If a plan does not satisfy the alternate ECP standard described 
in paragraph (b)(2) of this section, the issuer must include as part of 
its QHP application a narrative justification describing how the plan's 
provider networks provides an adequate level of service for low-income 
enrollees or individuals residing in Health Professional Shortage Areas 
within the plan's service area and how the plan's provider network will 
be strengthened toward satisfaction of the ECP standard prior to the 
start of the benefit year.
    (c) Definition. An essential community provider is a provider that 
serves predominantly low-income, medically underserved individuals, 
including a health care provider defined in section 340B(a)(4) of the 
PHS Act; or described in section 1927(c)(1)(D)(i)(IV) of the Act as set 
forth by section 221 of Public Law 111-8, unless the provider has lost 
its status under either of these sections, 340(B) of the PHS Act or 
1927 of the Act as a result of violating Federal law.
    (d) Payment rates. Nothing in paragraph (a) of this section must be 
construed to require a QHP issuer to contract with an ECP if such 
provider refuses to accept the generally applicable payment rates of 
such issuer.
    (e) Payment of Federally qualified health centers. If an item or 
service covered by a QHP is provided by a Federally-qualified health 
center (as defined in section 1905(l)(2)(B) of the Act) to an enrollee 
of a QHP, the QHP issuer must pay the Federally qualified health center 
for the item or service an amount that is not less than the amount of 
payment that would have been paid to the center under section 1902(bb) 
of the Act for such item or service. Nothing in this paragraph (e) 
precludes a QHP issuer and Federally-qualified health center from 
agreeing upon payment rates other than those that would have been paid 
to the center under section 1902(bb) of the Act, as long as that rate 
is at least equal to the generally applicable payment rate of the 
issuer described in paragraph (d) of this section.
0
51. Section 156.250 is revised to read as follows:


Sec.  156.250  Meaningful access to qualified health plan information.

    A QHP issuer must provide all information that is critical for 
obtaining health insurance coverage or access to health care services 
through the QHP, including applications, forms, and notices, to 
qualified individuals, applicants, qualified employers, qualified 
employees, and enrollees in accordance with the standards described in 
Sec.  155.205(c) of this subchapter. Information is deemed to be 
critical for obtaining health insurance coverage or access to health 
care services if the issuer is required by law or regulation to provide 
the document to a qualified individual, applicant, qualified employer, 
qualified employee, or enrollee.
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 
this subchapter and the payment rules established in Sec.  155.400(e) 
of this subchapter.
* * * * *
0
53. Section 156.285 is amended by--
0
A. Revising paragraphs (b)(1), (b)(4) and (d)(1)(ii);
0
B. Redesignating paragraph (c)(3), (c)(4), (c)(5), (c)(6), and (c)(7) 
as (c)(4), (c)(5), (c)(6), (c)(7), and (c)(8) respectively; and
0
C. Adding new paragraph (c)(3).
    The revisions and addition read as follows:


Sec.  156.285  Additional standards specific to SHOP.

* * * * *
    (b) * * *
    (1) Enroll a qualified employee in accordance with the qualified 
employer's initial and annual employee

[[Page 70759]]

open enrollment periods described in Sec.  155.725 of this subchapter;
* * * * *
    (4) Adhere to effective dates of coverage established in accordance 
with Sec.  155.725 of this subchapter.
* * * * *
    (c) * * *
    (3) Provide new enrollees with notice of their effective date of 
coverage consistent with Sec.  155.720(e) of this subchapter.
* * * * *
    (d) * * *
    (1) * * *
    (ii) If a QHP issuer terminates an enrollee's coverage in 
accordance with Sec.  155.735(d)(1)(iii) or (v) of this subchapter, the 
QHP issuer must, promptly and without undue delay, provide the 
qualified employer and the enrollee with a notice of termination of 
coverage that includes the termination effective date and reason for 
termination.
* * * * *
0
54. Section 156.410 is amended by removing the second paragraph 
designated as paragraph (d)(4)(ii) and adding paragraph (d)(4)(iii) to 
read as follows:


Sec.  156.410  Cost-sharing reductions for enrollees.

* * * * *
    (d) * * *
    (4) * * *
    (iii) If the excess cost sharing was not paid by the provider, 
then, if the enrollee requests a refund, the refund must be provided to 
the enrollee within 45 calendar days of the date of the request.
0
55. Section 156.420 is amended by adding paragraph (h) to read as 
follows:


Sec.  156.420  Plan variations.

* * * * *
    (h) Notice. No later than the first day of the Exchange open 
enrollment period for the 2016 benefit year, for each plan variation 
that an issuer offers in accordance with the rules of this section, an 
issuer must provide a summary of benefits and coverage that accurately 
represents each plan variation consistent with the requirements set 
forth in Sec.  147.200 of this subchapter.
0
56. Section 156.425 is amended by adding paragraph (c) to read as 
follows:


Sec.  156.425  Changes in eligibility for cost-sharing reductions.

* * * * *
    (c) Notice upon assignment. Beginning on January 1, 2016, if an 
individual's assignment to a standard plan or plan variation of the QHP 
changes in accordance with paragraph (a) of this section, the issuer 
must provide to that individual a summary of benefits and coverage that 
accurately reflects the new plan variation (or standard plan variation 
without cost-sharing reductions) in a manner consistent with Sec.  
147.200 of this subchapter as soon as practicable following receipt of 
notice from the Exchange, but not later than 7 business days following 
receipt of notice.
0
57. Section 156.430 is amended by adding paragraph (c)(2)(i) and by 
reserving paragraph (c)(2)(ii) to read as follows:


Sec.  156.430  Payment for cost-sharing reductions.

* * * * *
    (c) * * *
    (2) * * *
    (i) For reconciliation of cost-sharing reduction amounts advanced 
for the 2014 benefit year, an issuer of a QHP may calculate claims 
amounts attributable to EHB, including cost sharing amounts 
attributable to EHB, by reducing total claims amounts by the plan-
specific percentage estimate of non-essential health benefit claims 
submitted on the 2014 Uniform Rate Review Template, if the following 
conditions are met:
    (A) The non-essential health benefits percentage estimate is less 
than 2 percent; and
    (B) Out-of-pocket expenses for non-EHB benefits are included in the 
calculation of amounts subject to a deductible or annual limitation on 
cost sharing, but copayments and coinsurance rates on non-EHB benefits 
are not reduced under the plan variation.
    (ii) [Reserved]
* * * * *
0
58. Section 156.602 is amended by revising paragraph (d) to read as 
follows:


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

* * * * *
    (d) State high risk pool coverage. A qualified high risk pool 
established on or before November 26, 2014 in any State as defined by 
section 2744(c)(2) of the Public Health Service Act.
* * * * *
0
59. Section 156.800 is amended by revising paragraph (c) to read as 
follows:


Sec.  156.800  Available remedies; Scope.

* * * * *
    (c) Compliance standard. For calendar years 2014 and 2015, 
sanctions under this subpart will not be imposed if the QHP issuer has 
made good faith efforts to comply with applicable requirements.
* * * * *
0
60. Section 156.815 is added to subpart I to read as follows:


Sec.  156.815  Plan suppression.

    (a) Suppression means temporarily making a QHP certified to be 
offered through the FFE unavailable for enrollment through the FFE.
    (b) Grounds for suppression. A QHP may be suppressed as described 
in paragraph (a) of this section on one or more of the following 
grounds:
    (1) The QHP issuer notifies HHS of its intent to withdraw the QHP 
from an FFE when one of the exceptions to guaranteed renewability of 
coverage related to discontinuing a particular product or discontinuing 
all coverage under Sec.  147.106(c) or (d) of this subchapter applies;
    (2) Data submitted for the QHP is incomplete or inaccurate;
    (3) The QHP is in the process of being decertified as described in 
Sec.  156.810(c) or Sec.  156.810(d) or the QHP issuer is appealing a 
completed decertification as described in subpart J of this part;
    (4) The QHP issuer offering the QHP is the subject of a pending, 
ongoing, or final State regulatory or enforcement action or 
determination that could affect the issuer's ability to enroll 
consumers or otherwise relates to the issuer offering QHPs in the FFE; 
or
    (5) One of the exceptions to guaranteed availability of coverage 
related to special rules for network plans or financial capacity limits 
under Sec.  147.104(c) or (d) of this subchapter applies.
    (c) A multi-State plan may be suppressed as described in paragraph 
(a) of this section if OPM notifies the Exchange that:
    (1) OPM has found a compliance violation within the multi-State 
plan, or
    (2) One of the grounds for suppression in paragraph (b) exists for 
the multi-State plan.
0
61. Section 156.1130 is added to subpart L to read as follows:


Sec.  156.1130  Quality improvement strategy.

    (a) General requirement. A QHP issuer participating in an Exchange 
for 2 or more consecutive years must implement and report on a quality 
improvement strategy including a payment structure that provides 
increased reimbursement or other market-based incentives in accordance 
with the health care topic areas in section 1311(g)(1) of the 
Affordable Care Act, for each QHP offered in an Exchange, consistent 
with the guidelines developed by HHS under section 1311(g) of the 
Affordable Care Act.

[[Page 70760]]

    (b) Data requirement. A QHP issuer must submit data, that has been 
validated in a manner and timeframe specified by the Exchange to 
support the evaluation of quality improvement strategies in accordance 
with Sec.  155.200(d) of this subchapter.
    (c) Timeline. A QHP issuer must submit data annually to evaluate 
compliance with the standards for a quality improvement strategy in 
accordance with paragraph (a) of this section, in a manner and 
timeframe specified by the Exchange.
    (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 (b) of this section to the U.S. Office of Personnel 
Management, in the manner and timeframe specified by the U.S. Office of 
Personnel Management.
0
62. Section 156.1220 is amended by revising paragraph (c) to read as 
follows:


Sec.  156.1220  Administrative appeals.

* * * * *
    (c) Review by the Administrator. (1) Either the issuer or CMS may 
request review by the Administrator of CMS of the CMS hearing officer's 
decision. A request for review of the CMS hearing officer's decision 
must be submitted to the Administrator of CMS within 15 calendar days 
of the date of the CMS hearing officer's decision, and must specify the 
findings or issues that the issuer or CMS challenges. The issuer or CMS 
may submit for review by the Administrator a statement supporting the 
decision of the CMS hearing officer.
    (2) After receiving a request for review, the CMS Administrator has 
the discretion to elect to review the CMS hearing officer's decision or 
to decline to review the CMS hearing officer's decision. If the 
Administrator elects to review the CMS hearing officer's decision, the 
Administrator will also review the statements of the issuer and CMS, 
and any other information included in the record of the CMS hearing 
officer's decision, and will determine whether to uphold, reverse, or 
modify the CMS hearing officer's decision. The issuer or CMS must prove 
its case by clear and convincing evidence with respect to issues of 
fact. The Administrator will send the decision and the reasons for the 
decision to the issuer.
    (3) The Administrator's determination is final and binding.

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

0
63. The authority citation for part 158 continues to read as follows:

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

0
64. Section 158.140 is amended by adding paragraph (b)(1)(iii) to read 
as follows:


Sec.  158.140  Reimbursement for clinical services provided to 
enrollees.

* * * * *
    (b) * * *
    (1) * * *
    (iii) Cost-sharing reduction payments received by the issuer to the 
extent not reimbursed to the provider furnishing the item or service.
* * * * *
0
65. Section 158.162 is amended by revising paragraph (a)(2) and adding 
paragraph (b)(2)(iv) to read as follows:


Sec.  158.162  Reporting of Federal and State taxes.

    (a) * * *
    (2) Federal taxes not excluded from premium under subpart B which 
include Federal income taxes on investment income and capital gains, as 
well as Federal employment taxes, as other non-claims costs.
    (b) * * *
    (2) * * *
    (iv) State employment and similar taxes and assessments.
* * * * *
0
66. Section 158.242 is amended by adding paragraph (b)(1)(v) to read as 
follows:


Sec.  158.242  Recipients of rebates.

* * * * *
    (b) * * *
    (1) * * *
    (v) All rebate distributions made under paragraphs (b)(1)(i), (ii), 
or (iii) of this section must be made within 3 months of the 
policyholder's receipt of the rebate. Rebate distributions made after 3 
months must include late payment interest at the current Federal 
Reserve Board lending rate or 10 percent annually, whichever is higher, 
on the total amount of the rebate, accruing from the date payment was 
due under this section.
* * * * *

    Dated: November 14, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 19, 2014.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-27858 Filed 11-21-14; 4:15 pm]
BILLING CODE 4120-01-P