[Federal Register Volume 80, Number 231 (Wednesday, December 2, 2015)]
[Proposed Rules]
[Pages 75488-75588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29884]



[[Page 75487]]

Vol. 80

Wednesday,

No. 231

December 2, 2015

Part II





Department of Health and Human Services





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





Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2017; Proposed Rule

  Federal Register / Vol. 80 , No. 231 / Wednesday, December 2, 2015 / 
Proposed Rules  

[[Page 75488]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

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

[CMS-9937-P]
RIN 0938-AS57


Patient Protection and Affordable Care Act; HHS Notice of Benefit 
and Payment Parameters for 2017

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule sets 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 also 
provides additional standards for the annual open enrollment period for 
the individual market for the 2017 benefit year; essential health 
benefits; cost-sharing requirements; qualified health plans; updated 
standards for Exchange consumer assistance programs; network adequacy; 
patient safety standards; the Small Business Health Options Program; 
stand-alone dental plans; acceptance of third-party payments by 
qualified health plans; the definitions of large employer and small 
employer; fair health insurance premiums; guaranteed availability; 
student health insurance coverage; the rate review program; the medical 
loss ratio program; eligibility and enrollment; exemptions and appeals; 
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 21, 
2015.

ADDRESSES: In commenting, please refer to file code CMS-9937-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-9937-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-9937-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: 
    Jeff Wu, (301) 492-4305, Krutika Amin, (301) 492-5153, or Lindsey 
Murtagh (301) 492-4106, for general information.
    David Mlawsky, (410) 786-6851, for matters related to fair health 
insurance premiums, the single risk pool, guaranteed availability, 
guaranteed renewability, and student health insurance coverage.
    Kelly Drury, (410) 786-0558, for matters related to risk 
adjustment.
    Adrianne Glasgow, (410) 786-0686, for matters related to 
reinsurance, distributed data collection, and administrative appeals of 
financial transfers.
    Melissa Jaffe, (301) 492-4129, for matters related to risk 
corridors.
    Lisa Cuozzo, (410) 786-1746, for matters related to rate review.
    Jennifer Stolbach, (301) 492-4350, for matters related to 
establishing a State Exchange, and State-based Exchanges on the Federal 
Platform.
    Emily Ames, (301) 492-4246, and Michelle Koltov, (301) 492-4225, 
for matters related to Navigators and non-Navigator assistance 
personnel under part 155.
    Joan Matlack, (301) 492-4223, for matters related to certified 
application counselors under part 155.
    Briana Levine, (301) 492-4247, for matters related to agents and 
brokers.
    Dana Krohn, (301) 492-4412, for matters related to employer 
notification and verification.
    Rachel Arguello, (301) 492-4263, for matters related to open 
enrollment periods and special enrollment periods under part 155.
    Anne Pesto, (410) 786-3492, for matters related to eligibility 
determinations and appeals of eligibility determinations for Exchange 
participation and insurance affordability programs, and eligibility 
determinations for exemptions.
    Kate Ficke, (301) 492-4256, for matters related to exemptions from 
the shared responsibility payment.
    Christelle Jang, (410) 786-8438, for matters related to the SHOP.
    Krutika Amin, (301) 492-5153, for matters related to the Federally-
facilitated Exchange user fee.
    Leigha Basini, (301) 492-4380, for matters related to essential 
health benefits, network adequacy, essential community providers, and 
other standards for QHP issuers.
    Ielnaz Kashefipour, (301) 492-4376, for matters related to 
standardized options and third party payment of premiums and cost 
sharing.
    Rebecca Zimmermann, (301) 492-4396, for matters related to stand-
alone dental plans.
    Cindy Chiou, (301) 492-5142, for matters related to QHP issuer 
oversight.
    Pat Meisol, (410) 786-1917, for matters related to cost-sharing 
reductions and the premium adjustment percentage.
    Nidhi Singh Shah, (301) 492-5110, for matters related to patient 
safety standards.
    Christina Whitefield, (301) 492-4172, for matters related to the 
medical loss ratio program.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of

[[Page 75489]]

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

Table of Contents

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 2017
    A. Part 144--Requirements Relating to Health Insurance Coverage
    B. Part 146--Requirements for the Group Health Insurance Market
    C. Part 147--Health Insurance Reform Requirements for the Group 
and Individual Health Insurance Markets
    D. Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment Under the Affordable Care Act
    E. Part 154--Health Insurance Issuer Rate Increases: Disclosure 
and Review Requirements
    F. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    G. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    H. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements
IV. Collection of Information Requirements
    A. ICRs Regarding Submission of Risk Corridors Data
    B. ICRs Regarding Submission of Rate Filing Justification
    C. ICRs Regarding Election to Operate an Exchange After 2014
    D. ICRs Regarding Standards for Certified Application Counselors
    E. ICRs Regarding Network Adequacy Standards
    F. ICR Regarding Monthly SHOP Enrollment Reconciliation Files 
Submitted by Issuers
    G. ICR Regarding Patient Safety Standards
V. Response to Comments
VI. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Impact Estimates of the Payment Notice Provisions and 
Accounting Table
    D. Regulatory Alternatives Considered
    E. Regulatory Flexibility Act
    F. Unfunded Mandates
    G. Federalism
    H. Congressional Review Act

Acronyms and Abbreviations

Affordable Care Act--The collective term for the Patient Protection 
and Affordable Care Act (Pub. L. 111-148) and the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), as amended
APTC--Advance payments of the premium tax credit
AV--Actuarial value
CBO--Congressional Budget Office
CFR--Code of Federal Regulations
CHIP--Children's Health Insurance Program
CMP--Civil money penalties
CMS--Centers for Medicare & Medicaid Services
CSR--Cost-sharing reduction
ECN--Exemption certificate number
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
FR--Federal Register
FTE--Full-time equivalent
GDP--Gross Domestic Product
HCC--Hierarchical condition category
HHS--United States Department of Health and Human Services
HIOS--Health Insurance Oversight System
HIPAA--Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
IRS--Internal Revenue Service
MEC--Minimum essential coverage
MLR--Medical loss ratio
NAIC--National Association of Insurance Commissioners
NHEA--National Health Expenditure Accounts
OMB--Office of Management and Budget
OPM--United States Office of Personnel Management
PHS Act--Public Health Service Act
PII--Personally Identifiable Information
PMPM--Per member per month
PRA--Paperwork Reduction Act of 1995
PSO--Patient safety organization
QHP--Qualified health plan
SADPs--Stand-alone dental Plans
SBE--State-based Exchange
SBE-FP--State-based Exchange on the Federal platform
SHOP--Small Business Health Options Program
The Code--Internal Revenue Code of 1986 (26 U.S.C. 1, et seq.)

I. Executive Summary

    The Affordable Care Act enacted a set of reforms that are making 
high quality health insurance coverage and care more affordable and 
accessible to millions of Americans. These reforms include the creation 
of competitive marketplaces called Affordable Insurance Exchanges, or 
``Exchanges'' (in this proposed rule, we also call an Exchange a Health 
Insurance Marketplace\SM\,\1\ or Marketplace\SM\) through which 
qualified individuals and qualified employers can purchase health 
insurance coverage. In addition, many individuals who enroll in 
qualified health plans (QHPs) through individual market Exchanges are 
eligible to receive a 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. These Affordable Care Act 
reforms also include the premium stabilization programs (that is, risk 
adjustment, reinsurance and risk corridors) and rules that are intended 
to mitigate the potential impact of adverse selection and stabilize the 
price of health insurance in the individual and small group markets. In 
previous rulemaking, we have outlined the major provisions and 
parameters related to many Affordable Care Act programs.
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    \1\ Health Insurance Marketplace\SM\ and Marketplace\SM\ are 
service marks of the U.S. Department of Health & Human Services.
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    In this proposed rule, we seek to improve States' ability to 
operate efficient Exchanges through a proposal that leverages the 
economies of scale available through the Federal eligibility and 
enrollment platform and information technology infrastructure. We 
propose to codify a new Exchange model--the State-based Exchange on the 
Federal platform (SBE-FP). This model would enable State-based 
Exchanges (SBEs) to execute certain processes using the Federal 
eligibility and enrollment infrastructure. Under the proposal, the SBE-
FP would be required to enter into a Federal platform agreement with 
HHS that would define a set of mutual obligations, including the set of 
Federal services upon which the SBE-FP relies. Under this Exchange 
model, certain requirements that were previously only applicable to 
QHPs offered on a Federally-facilitated Exchange (FFE) and their 
downstream and delegated entities would apply to QHPs offered on an 
SBE-FP and their downstream and delegated entities. In addition, we 
propose that agents and brokers facilitating enrollments through SBE-
FPs would need to comply with the FFE registration and training 
requirements. For 2017, we propose a user fee for QHPs offered through 
SBE-FPs to offset Federal costs of providing this infrastructure.

[[Page 75490]]

    We also propose a number of incremental amendments that we believe 
will improve the stability of the Exchanges while improving the choices 
available to consumers and supporting consumers' ability to make 
informed choices when purchasing health insurance. These include the 
introduction of ``standardized options'' in the individual market, 
which will improve competition and consumer transparency. These 
amendments are complemented by a series of additional amendments 
designed to enhance consumers' ability to make informed choices about 
their health coverage, increase the accessibility of high quality 
health insurance, and improve competition, transparency, and 
affordability.
    Our proposal for standardized options is intended to simplify the 
consumer shopping experience by allowing consumers to more easily 
compare plans across issuers in the individual market FFEs. We propose 
a standardized option with a specified cost-sharing structure at each 
of the bronze, silver (with cost-sharing reduction (CSR) plan 
variations), and gold metal levels. We do not propose to restrict 
issuers' non-standardized option offerings. We anticipate 
differentially displaying these standardized options to allow consumers 
to compare plans based on differences in price and quality rather than 
cost-sharing structure.
    We are also proposing to standardize a number of policies relating 
to network adequacy for QHPs on the FFEs. We propose a quantitative 
network adequacy threshold to be selected by the State and a Federal 
default network adequacy standard that would apply otherwise, that is 
based on the standard currently used for review and several provisions 
relating to provider transition for QHPs. We also discuss in this 
proposed rule a standardized categorization of network depth for QHPs 
in these Exchanges and their display on HealthCare.gov. Finally, we 
propose a standard for when an enrollee receives an essential health 
benefit at an in-network setting provided by an out-of-network 
provider.
    As part of our efforts to provide consumers simplicity and 
transparency in their choices, we are considering giving the FFEs the 
authority to selectively contract with issuers. We would use this 
authority primarily to strengthen oversight in the short term.
    We also seek to improve consumers' ability to make choices 
regarding health insurance coverage by ensuring they receive high-
quality assistance in their interactions with the Exchange. The 
proposed rule would amend program requirements for Navigators, certain 
non-Navigator assistance personnel, and certified application 
counselors. These amendments would require Navigators to assist 
consumers with certain post-enrollment issues, serve underserved and 
vulnerable populations, and require Navigators and non-Navigator 
assistance personnel to complete training prior to conducting outreach 
and education activities. We would also amend our rules regarding the 
use of gifts by Navigators, certain non-Navigator assistance personnel 
and certified application counselors. In addition, we propose that 
certified application counselor designated organizations would be 
required to submit data and information related to the organization's 
certified application counselors, upon the request of the Exchanges in 
which they operate.
    We believe transparency is critical to informed decision-making, 
and this proposed rule includes several proposals to increase 
transparency. This proposed rule proposes provisions to enhance the 
transparency of rates in all States and the effectiveness of the rate 
review program.
    In this proposed rule, we propose several provisions regarding when 
consumers may choose and enroll in plans. This rule proposes dates for 
the individual market annual open enrollment period for the 2017 
benefit year. For 2017, we propose to maintain the same open enrollment 
period we adopted for 2016--that is, November 1, 2016, through January 
31, 2017.
    We also propose to codify a number of Exchange policies relating to 
exemptions in order to provide certainty and transparency around these 
policies for all stakeholders.
    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. Last year, we 
recalibrated the HHS risk adjustment models for 2016 by using 2011, 
2012, and 2013 claims data from the Truven Health Analytics 2010 
MarketScan[supreg] Commercial Claims and Encounters database 
(MarketScan) to develop updated risk factors. Similarly, this year we 
propose to do so using the 2012, 2013, and 2014 claims data, when the 
2014 MarketScan data become available.
    If any reinsurance contribution amounts remain after calculating 
reinsurance payments for the 2016 benefit year (including after HHS 
would increase the coinsurance rate to 100 percent for the 2016 benefit 
year), we propose to lower the 2016 attachment point of $90,000 to pay 
out any remaining contribution amounts for the 2016 benefit year. We 
also propose several changes to the risk corridors program for 2015 and 
2016. We propose that, for 2015 risk corridors and MLR reporting, if 
the issuer reported a certified estimate of 2014 cost-sharing 
reductions on its 2014 MLR and Risk Corridors Annual Reporting Form 
that is lower than the actual cost-sharing reductions provided, HHS 
would make an adjustment to the issuer's 2015 risk corridors payment or 
charge amount in order to address the impact of the inaccurate 
reporting on the risk corridors and MLR calculations for the 2014 
benefit year. We also propose that the issuer must adjust the cost-
sharing reduction amounts it reports for the 2015 MLR and risk 
corridors reporting cycle by any difference between 2014 reported and 
actual cost-sharing reductions amounts.
    We also propose that for the 2015 and later benefit years, the 
issuer must true up claims liabilities and reserves used to determine 
the allowable costs reported for the risk corridors program for the 
preceding benefit year to reflect the actual claims payments made 
through June 30 of the year following the benefit year. In addition, we 
propose changes to the definition of ``unpaid claim reserves'' and 
related requirements for reporting incurred claims for the MLR program 
beginning with the 2015 reporting year to require issuers to utilize a 
6-month (rather than a 3-month) claims run out period.
    In addition to provisions aimed at stabilizing premiums, we propose 
several provisions related to cost sharing. First, we propose the 
premium adjustment percentage for 2017, 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 2017. We 
propose the maximum annual limitations on cost sharing for the 2017 
benefit year for cost-sharing reduction plan variations. This proposed 
rule also proposes standards for stand-alone dental plans (SADPs) 
related to the annual limitation on cost sharing, and would amend 
standards related to the acceptance of third party payments for 
premiums and cost sharing by QHP issuers.
    This proposed rule includes several incremental improvements that 
seek to ensure Americans have access to not only affordable, but also 
robust, high-quality health care coverage. This proposed rule would 
amend

[[Page 75491]]

requirements for QHPs, including essential community providers (ECPs) 
and meaningful difference requirements. There are also proposed 
technical amendments to QHP issuer oversight provisions. This rule 
proposes amendments to further strengthen the patient safety 
requirements for QHP issuers offering coverage through Exchanges.
    For consumers purchasing coverage through the Small Business Health 
Options Program (SHOP), we propose a new ``vertical choice'' model for 
Federally-facilitated SHOPs for plan years beginning on or after 
January 1, 2017, under which employers would be able to offer qualified 
employees a choice of all plans across all available levels of coverage 
from a single issuer.
    Finally, in this proposed rule, as outlined, we propose adjustments 
to our programs and rules, as we do each year, so that our rules and 
policies reflect the latest market developments. We propose the 
following changes and clarifications to the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) and Affordable Care 
Act health insurance reform requirements. We propose revisions to the 
definitions of small employer and large employer to bring them into 
conformance with recently enacted legislation. We also propose 
provisions to ensure that a network plan in the small group market with 
a limited service area can be appropriately rated based on geography. 
We propose that an issuer subject to the guaranteed availability 
requirements may--in the limited circumstances of when the exception to 
the guaranteed renewability requirement related to discontinuing a 
particular product, or the exception related to discontinuing all 
coverage in a market, applies--deny coverage to individuals and 
employers. Lastly, we propose provisions regarding the application of 
the actuarial value (AV) and single risk pool provisions to student 
health insurance coverage.

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, age and tobacco use.
    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.\2\
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    \2\ Before enactment of the Affordable Care Act, the Health 
Insurance Portability and Accountability Act of 1996 amended the PHS 
Act (formerly section 2711) to generally require guaranteed 
availability of coverage for employers in the small group market.
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    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 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 the issuers 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.'' \3\ 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) of the 
PHS Act further specifies that beginning with plan years starting 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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    \3\ 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 1252 of the Affordable Care Act provides that any standard 
or requirement adopted by a State under title I of the Affordable Care 
Act, or any amendment made by title I of the Affordable Care Act, shall 
be applied uniformly to all health plans in each insurance market to 
which the standard and requirement apply.
    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 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.
    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)

[[Page 75492]]

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.
    Section 1302(d) of the Affordable Care Act describes the various 
levels of coverage based on actuarial value. Consistent with section 
1302(d)(2)(A) of the Affordable Care Act, actuarial value 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 
Small Business Health Options Program assist qualified small employers 
in facilitating the enrollment of their employees in qualified health 
plans 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 allow issuers to 
offer QHPs in the large group market through an Exchange.\4\
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    \4\ 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.
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    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)(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.
    Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Act 
direct all Exchanges to establish a Navigator program.
    Section 1311(h)(1) of the Affordable Care Act specifies that a QHP 
may contract with health care providers and hospitals with more than 50 
beds only if they meet certain patient safety standards, including use 
of a patient safety evaluation system, a comprehensive hospital 
discharge program, and implementation of health care quality 
improvement activities. Section 1311(h)(2) of the Affordable Care Act 
also provides the Secretary flexibility to establish reasonable 
exceptions to these patient safety requirements and section 1311(h)(3) 
of the Affordable Care Act allows the Secretary flexibility to issue 
regulations to modify the number of beds described in section 
1311(h)(1)(A) of the Affordable Care Act.
    Section 1321(a) of the Affordable Care Act provides broad authority 
for the Secretary to establish standards and regulations to implement 
the statutory requirements related to Exchanges, QHPs and other 
components of title I of the Affordable Care Act. Section 1321(a)(1) 
directs the Secretary to issue regulations that set standards for 
meeting the requirements of title I of the Affordable Care Act with 
respect to, among other things, the establishment and operation of 
Exchanges.
    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.
    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 reduces the impact of inaccurate rate setting from 2014 
through 2016. Section 1343 of the Affordable Care Act establishes a 
permanent risk adjustment program 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, 
among other things, 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 Internal Revenue Code of 1986 (the Code), as 
added by section 1501(b) of the Affordable Care Act, requires all non-
exempt individuals to maintain minimum essential coverage (MEC) for 
each month 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.
    The Protecting Affordable Coverage for Employees Act (Pub. L. 114-
60) amended section 1304(b) of the Patient Protection and Affordable 
Care Act and section 2791(e) of the PHS Act to amend the definition of 
small employer in

[[Page 75493]]

these statutes to mean, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 1 but not more than 50 employees on business days 
during the preceding calendar year and who employs at least 1 employee 
on the first day of the plan year. It also amended these statutes to 
make conforming changes to the definition of large employer, and to 
provide that a State may treat as a small employer, with respect to a 
calendar year and a plan year, an employer who employed an average of 
at least 1 but not more than 100 employees on business days during the 
preceding calendar year and who employs at least 1 employee on the 
first day of the plan year.
1. Premium Stabilization Programs
    In the July 15, 2011 Federal Register (76 FR 41929), we published a 
proposed rule outlining the framework for the premium stabilization 
programs. We implemented the premium stabilization programs in a final 
rule, published in the March 23, 2012 Federal Register (77 FR 17219) 
(Premium Stabilization Rule). In the December 7, 2012 Federal Register 
(77 FR 73117), 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 15409).
    In the December 2, 2013 Federal Register (78 FR 72321), 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 13743).
    In the November 26, 2014 Federal Register (79 FR 70673), we 
published a proposed rule outlining the benefit and payment parameters 
for the 2016 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 2016 Payment Notice). We published the 2016 Payment Notice 
final rule in the February 27, 2015 Federal Register (80 FR 10749).
2. Program Integrity
    In the June 19, 2013 Federal Register (78 FR 37031), 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 54069) and the ``second Program 
Integrity Rule'' published in the October 30, 2013 Federal Register (78 
FR 65045).
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 41865) to implement 
components of the Exchanges, and a rule in the August 17, 2011 Federal 
Register (76 FR 51201) 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 18309) (Exchange 
Establishment Rule).
    We established standards for 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 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 
39869) (Preventive Services Rule).
    In a final rule published in the July 17, 2013 Federal Register (78 
FR 42823), we established standards for Navigators and non-Navigator 
assistance personnel in FFEs and for non-Navigator assistance personnel 
funded through an Exchange establishment grant. This final rule also 
established a certified application counselor program for Exchanges and 
set standards for that program.
4. Essential Health Benefits and Actuarial Value
    On December 16, 2011, HHS released a bulletin \5\ (the EHB 
Bulletin) that outlined an intended regulatory approach for defining 
EHB, including a benchmark-based framework. HHS also published a 
bulletin that outlined its intended regulatory approach to calculations 
of AV on February 24, 2012.\6\ A proposed rule relating to EHBs and AVs 
was published in the November 26, 2012 Federal Register (77 FR 70643). 
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 12833) (EHB Rule).
---------------------------------------------------------------------------

    \5\ ``Essential Health Benefits Bulletin.'' December 16, 2011. 
Available at: https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
    \6\ ``Actuarial Value and Cost-Sharing Reductions Bulletin.'' 
February 24, 2012. Available at: https://www.cms.gov/CCIIO/Resources/Files/Downloads/Av-csr-bulletin.pdf.
---------------------------------------------------------------------------

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 health insurance 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 81003). A final rule 
with comment period implementing the rate review program was published 
in the May 23, 2011 Federal Register (76 FR 29963) (Rate Review Rule). 
The provisions of the Rate Review Rule were amended in final rules 
published in the September 6, 2011 Federal Register (76 FR 54969), the 
February 27, 2013 Federal Register (78 FR 13405), the May 27, 2014 
Federal Register (79 FR 30339), and the February 27, 2015 Federal 
Register (80 FR 10749).

[[Page 75494]]

7. Medical Loss Ratio
    We published a request for comment on section 2718 of the PHS Act 
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 74863). A final rule with a 30-day 
comment period was published in the December 7, 2011 Federal Register 
(76 FR 76573). An interim final rule with a 60-day comment period was 
published in the December 7, 2011 Federal Register (76 FR 76595). A 
final rule was published in the Federal Register on May 16, 2012 (77 FR 
28790).

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. We have held a number of listening sessions 
with consumers, providers, employers, health plans, the actuarial 
community, and State representatives to gather public input. We 
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 
public input we received 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, 153, 154, 155, 156 and 158. The proposed 
regulations in part 144 would, consistent with recent legislation, 
revise the definitions of ``large employer'' and ``small employer.''
    The proposed regulations in parts 146 and 147 would codify an 
exception to the guaranteed availability requirement when the exception 
to the guaranteed renewability requirement related to discontinuing a 
particular product or discontinuing all coverage in a market applies.
    The proposed regulations in part 147 would clarify the definition 
of principal business address for purposes of geographic rating. We 
further propose provisions regarding the treatment of student health 
insurance coverage with regard to the AV and single risk pool 
requirements.
    The proposed regulations in part 153 amend the audit provision for 
the reinsurance program to clarify that this authority also extends to 
third parties who assist contributing entities with their obligations 
under this program. The proposed regulations also include the risk 
adjustment user fee for 2017 and outline certain modifications to the 
HHS risk adjustment methodology. We propose to clarify reporting 
requirements for the risk adjustment, reinsurance, and risk corridors.
    The proposed regulations in part 154 outline certain modifications 
to enhance the transparency and effectiveness of the rate review 
program. We propose to collect a Unified Rate Review Template from all 
issuers offering single risk pool coverage in the individual and small 
group market, including coverage with rate decreases or unchanged 
rates, as well as rates for new plans. We also announce our intention 
to disclose all proposed rate increases for single risk pool coverage 
at a uniform time on the CMS Web site, including rates with increases 
of less than 10 percent. We also reiterate the process for establishing 
the uniform timeline that proposed rate increases subject to review and 
all final rate increases (including those not subject to review) for 
single risk pool coverage must be posted at a uniform time by States 
with Effective Rate Review Programs. Finally, we specify the rate 
filing requirements for student health insurance coverage.
    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 the 2017 benefit year. 
Certain proposals in part 155 are related to the eligibility and 
verification processes related to eligibility for insurance 
affordability programs. We also propose to amend and clarify rules 
related to enrollment of qualified individuals into QHPs. We describe 
changes to the process of submitting certain exemption applications and 
options for State Exchanges to handle exemptions. The proposed 
regulations also include a Federal platform agreement through which a 
State Exchange may rely on the FFE for certain functions as an SBE-FP. 
We propose that QHP issuers on an SBE-FP be required to comply with 
certain provisions relating directly to the eligibility and enrollment 
platform, and propose to require that SBE-FPs promulgate regulations at 
least as stringent as a number of FFE regulations, to maintain 
consistency of the HealthCare.gov experience. We also make various 
proposals related to the SHOPs. We propose to amend the standards 
applicable to the consumer assistance functions performed by 
Navigators, non-Navigator assistance personnel, and certified 
application counselors. We also discuss our approach to denial of QHP 
certification, and outline proposed modifications to standards for FFE-
registered agents and brokers and requirements for HHS-approved vendors 
of FFE training.
    The proposed regulations in part 156 set forth proposals 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 2017. We propose 
a clarification to the administrative appeals process applicable to the 
premium stabilization, Exchange financial assistance, and FFE user fee 
programs. Part 156 also includes proposals related to essential health 
benefits, including clarification to the policy regarding additional 
State-required benefits. We propose amendments to network adequacy 
requirements (including application of out-of-network costs to the 
annual limitation on cost sharing for EHBs covered under QHPs in the 
small group and individual markets), and essential community provider 
requirements. We propose establishing standardized options for cost-
sharing structures, indexing for the stand-alone dental plan annual 
limitation on cost sharing, changes to our process for updating the AV 
Calculator for QHPs, meaningful difference standards for QHPs, and 
minor changes to QHP issuer oversight standards. We also propose 
additional modifications to acceptance of third party payments by QHP 
issuers and the next phase for patient safety standards for issuers of 
QHPs offered on Exchanges.
    The proposed amendments to the regulations in part 158 propose 
revisions related to the definitions of ``large employer'' and ``small 
employer'' consistent with recent legislation, as well as revisions 
related to the reporting of incurred claims.

III. Provisions of the Proposed HHS Notice of Benefit and Payment 
Parameters for 2017

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

1. Definitions (Sec.  144.103)
    Under Sec.  144.103, the term ``plan year'' means, for a group 
health plan, the year that is designated as the plan year in the plan 
document of the group health plan. However, if the plan document does 
not

[[Page 75495]]

designate a plan year or if there is no plan document, then the plan 
year is--
     The deductible or limit year used under the plan;
     If the plan does not impose deductibles or limits on a 
yearly basis, then the plan year is the policy year;
     If the plan does not impose deductible or limits on a 
yearly basis, and either the plan is not insured or the insurance 
policy is not renewed on an annual basis, then the plan year is the 
employer's taxable year; or
     In any other case, the plan year is the calendar year.\7\
---------------------------------------------------------------------------

    \7\ Under Sec.  147.104(b)(1)(i), in the small group market, 
including under Sec.  155.725 in the SHOP, issuers generally must 
permit small employers to purchase coverage at any point during the 
year. In the SHOP, the employer's plan year must consist of the 12-
month period beginning with the qualified employer's effective date 
of coverage. With respect to an employer that purchases coverage in 
the small group market in a State that has elected to merge its 
individual and small group risk pools under section 1312(c) of the 
Affordable Care Act, the plan year will begin on the qualified 
employer's effective date of coverage, which might be any day during 
the year, and end on December 31 of the calendar year in which 
coverage first became effective.
---------------------------------------------------------------------------

    We are not proposing any changes to the definition of ``plan year'' 
in this proposed rule. However, we note that whichever definition 
applies under Sec.  144.103, we interpret the term plan year to mean a 
period that is no longer than 12 months with respect to grandfathered 
and non-grandfathered group health plans. Plan years that exceed 12 
months are inconsistent with the Affordable Care Act, including the 
rate review and single risk pool requirements, which both contemplate 
12-month or shorter plan years. The Departments of Labor and the 
Treasury, which respectively have jurisdiction over parallel 
definitions in the Employee Retirement Income Security Act of 1974 
(ERISA) and the Code, have advised HHS that they concur with this 
interpretation.
    Also under Sec.  144.103, because of the original Affordable Care 
Act definitions, the term large employer currently is defined to mean, 
in connection with a group health plan with respect to a calendar year 
and a plan year, an employer who employed an average of at least 101 
employees on business days during the preceding calendar year and who 
employs at least 1 employee on the first day of the plan year. In the 
case of plan years beginning before January 1, 2016, a State may elect 
to define large employer by substituting ``51 employees'' for ``101 
employees.'' The term small employer currently is defined to mean, in 
connection with a group health plan with respect to a calendar year and 
a plan year, an employer who employed an average of at least 1 but not 
more than 100 employees on business days during the preceding calendar 
year and who employs at least 1 employee on the first day of the plan 
year. In the case of plan years beginning before January 1, 2016, a 
State may elect to define small employer by substituting ``50 
employees'' for ``100 employees.'' These regulatory definitions were 
consistent with section 1304(b) of the Affordable Care Act and section 
2791(e) of the PHS Act.
    However, both of those sections have recently been amended by the 
Protecting Affordable Coverage for Employees Act (Pub. L. 114-60). 
Therefore, we propose to revise the regulatory definitions of large 
employer and small employer in Sec.  144.103 to conform to this 
legislation. Specifically, we propose to revise the regulatory 
definition of large employer to mean, in connection with a group health 
plan with respect to a calendar year and a plan year, an employer who 
employed an average of at least 51 employees on business days during 
the preceding calendar year and who employs at least 1 employee on the 
first day of the plan year, but would provide that a State may elect to 
define large employer by substituting ``101 employees'' for ``51 
employees.'' Conversely, we propose to revise the regulatory definition 
of small employer to mean, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 1 but not more than 50 employees on business days 
during the preceding calendar year and who employs at least 1 employee 
on the first day of the plan year, but would provide that a State may 
elect to define small employer by substituting ``100 employees'' for 
``50 employees.'' Consistent with section 1304(b) of the Affordable 
Care Act and section 2791(e) of the PHS Act, we also propose to codify 
statutory language providing that in the case of an employer that was 
not in existence throughout the preceding calendar year, the 
determination of whether the employer is a large employer or a small 
employer be based on the average number of employees that it is 
reasonably expected the employer will employ on business days in the 
current calendar year.
    Finally, we propose to correct a cross-reference in the definition 
of excepted benefits under Sec.  144.103, which should refer to the 
group market provisions in Sec.  146.145(b) as opposed to Sec.  
146.145(c).

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

1. Guaranteed Availability of Coverage for Employers in the Small Group 
Market (Sec.  146.150)
    Part 146 includes pre-Affordable Care Act HIPAA requirements on 
group health insurance issuers, including Sec.  146.150, which requires 
health insurance issuers in the small group market to guarantee the 
availability of coverage, with some specific exceptions. We propose to 
add paragraph (g) to Sec.  146.150, providing an exception to the 
guaranteed availability requirement when the exceptions to the 
guaranteed renewability requirement in Sec.  146.152(c) or (d) related 
to discontinuing a particular product or all coverage in a market 
apply. For a further discussion of this proposal, see the discussion of 
Sec.  147.104, ``Guaranteed Availability of Coverage,'' in this 
proposed rule at part 147, ``Health Insurance Reform Requirements for 
the Group and Individual Health Insurance Markets.''

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

1. Fair Health Insurance Premiums (Sec.  147.102)
    Under section 2701 of the PHS Act and regulations at Sec.  147.102, 
the rating area for a small group plan is the group policyholder's 
principal business address. We propose to amend Sec.  147.102(a)(1)(ii) 
to provide that if the employer has registered an in-State principal 
business address with the State, that location is the principal 
business address. We note that an in-State address registered solely 
for purposes of service of process would not be considered the 
employer's principal business address, unless it is a substantial 
worksite for the employer's business. If an in-State principal business 
address is not registered with the State or is only registered for 
purposes of service of process and is not a substantial worksite, the 
employer would designate as its principal business address the business 
address within the State where the greatest number of employees work in 
the applicable State.
    When a network plan offered in a State has a limited service area, 
the policy described above could result in an issuer having to make a 
plan available to an employer (because the employer has an employee who 
lives, works, or resides in the service area), but not be able to apply 
a geographic rating factor under the current rule, because the issuer 
might not have

[[Page 75496]]

established rates applicable to the location of the employer's 
principal business address outside the plan's service area.
    We propose to amend Sec.  147.102 to provide for an additional 
principal business address to be identified within a plan's service 
area so that the plan can be appropriately rated for sale to the 
employer. In such instances, the additional principal business address 
would be the business address within the plan's service area where the 
greatest number of employees work as of the beginning of the plan year, 
or, if there is no such business address, an address within the rating 
area selected by the employer that reasonably reflects where the 
greatest number of employees within the plan's service area live or 
reside as of the beginning of the plan year.
    We note that SHOPs, including the Federally-facilitated Small 
Business Health Options Programs (FF-SHOPs), may use the address that 
was used to establish a qualified employer's eligibility for 
participation in the SHOP to determine the applicable geographic rating 
area when calculating premiums for participating employers. The SHOPs, 
including the FF-SHOPs, may not be able to accommodate multiple 
principal business addresses within a State for premium calculation 
purposes. As a result, when a single application is completed in a 
State, plan availability and premium calculations will be based on the 
principal business address entered on the FF-SHOP employer user 
interface.
    Under Sec.  147.102(b), States have considerable flexibility in 
establishing rating areas. Rating areas must be based on counties, 
three-digit zip codes, or metropolitan statistical areas and non-
metropolitan statistical areas, and generally will be presumed adequate 
if State-established rating areas are no greater in number than the 
number of metropolitan statistical areas in the State plus one. States 
may seek approval from CMS for a greater number of rating areas 
provided they are actuarially justified, are not unfairly 
discriminatory, reflect significant differences in health care unit 
costs, lead to stability in rates over time, and apply uniformly to all 
issuers in a market.
    We have observed wide variations in the size of rating areas in the 
various States. We are concerned that, within States, this could lead 
to pockets of smaller rating areas with higher-risk groups, which 
potentially compromises the risk-spreading objective that the single 
risk pool requirement is intended to achieve. At the same time, States 
are the primary regulators of health insurance, and we believe it is 
important to recognize the unique needs of each State. We also 
recognize the consumer disruption that could result from changes to 
rating areas. Therefore, we seek comments on whether we should seek 
more uniformity in the size of rating areas or establish a minimum size 
for rating areas, and if so, how that should be achieved, consistent 
with the principle of flexibility for States. For example, to help 
ensure uniformity in rating areas, we could require that each rating 
area in a State be one geographically contiguous area, and that the 
relative population of each rating area not vary by more than a 
specified percentage. To help ensure that rating areas are sufficiently 
large, we could direct that each State have a maximum number of rating 
areas equal to the number of metropolitan statistical areas in the 
State, plus one. We also seek comment on how we could improve 
uniformity and sufficient size for risk pooling in a manner that would 
preserve flexibility to accommodate the unique needs of each State.
    We also recognize the inconsistency that can occur between an 
issuer's rating area and the service area of some of its network-based 
plans. Under current Sec.  155.1055, the service area of a QHP must be 
established without regard to racial, ethnic, language, health status-
related factors, or other factors that exclude specific high utilizing, 
high cost, or medically underserved populations. We believe it could be 
beneficial from an insurance market perspective for the rating area and 
the service area to generally be consistent, to provide that health 
insurance issuers offer a full array of products in larger geographic 
areas. We seek comment on whether and how to achieve this objective, 
including whether to achieve it through regulation, and if so, how our 
regulations should be revised for this purpose.
    Section 147.102(e) provides for a uniform age curve in each State. 
When a State does not specify an age curve, a Federal default uniform 
age curve will apply. We are investigating the child age rating factor 
in the Federal uniform age curve, and seek to determine whether the 
default factor is appropriate, or fails to adequately differentiate the 
health risk of children of different ages. We seek comment and data on 
the most appropriate child age curve, and the policy reasons underlying 
any recommendation.
2. Guaranteed Availability of Coverage (Sec.  147.104)
a. Product Discontinuance and Market Withdrawal Exceptions to 
Guaranteed Availability
    Section 147.104 includes several exceptions to the guaranteed 
availability requirement. We have been asked whether there is an 
exception to this requirement in the small group, large group, and 
individual markets when an issuer avails itself of the exception to the 
guaranteed renewability requirement in Sec.  147.106(c) (discontinuing 
a particular product), or in Sec.  147.106(d) (discontinuing all 
coverage). The exception to the guaranteed renewability requirement in 
Sec.  147.106(c) requires an issuer to provide notice in writing, in a 
form and manner specified by the Secretary, to each plan sponsor or 
individual, as applicable, (and to all participants and beneficiaries 
covered under such coverage) of the discontinuation at least 90 
calendar days before the date the coverage will be discontinued. The 
exception to the guaranteed renewability requirement in Sec.  
147.106(d) requires an issuer to provide notice in writing to the 
applicable State authority and to each plan sponsor or individual, as 
applicable (and to all participants and beneficiaries covered under the 
coverage) of the discontinuation at least 180 calendar days prior to 
the date the coverage will be discontinued. We have been asked whether 
the guaranteed availability requirement requires health insurance 
issuers discontinuing a product, or all coverage, to guarantee the 
availability of coverage during these 90- and 180-day (or other 
applicable) time periods. We do not believe an issuer should be 
required to guarantee the availability of a product the issuer is in 
the process of discontinuing, while the issuer is attempting to wind 
down its operations for that product. Therefore, we propose to 
redesignate paragraphs (e) through (i) as (f) through (j), and add a 
new paragraph (e) to Sec.  147.104, providing for an exception to the 
guaranteed availability requirement when the exceptions to the 
guaranteed renewability requirement in Sec.  147.106(c) or (d) related 
to discontinuing a particular product, or the exception related to 
discontinuing all coverage in a market, apply. The exception would be 
effective for the duration of the notice periods discussed above. We 
acknowledge that the statute does not expressly contain such an 
exception to the guaranteed availability requirement. However, the 
statutory requirement under the guaranteed renewability

[[Page 75497]]

provision requires issuers to provide at least 90-day or 180-day 
advance notice to enrollees prior to discontinuation of the coverage. 
If additional consumers continue to enroll after notice is given, the 
issuer would not be able to provide the required advance notice to 
these new enrollees before discontinuing coverage. Accordingly, we are 
interpreting the interaction between the guaranteed availability and 
guaranteed renewability provisions to permit an issuer to deny 
enrollments during the applicable product discontinuance or market 
withdrawal notice period. However, we propose in paragraph (e)(3) that 
this exception does not relieve issuers of their obligations to 
existing policyholders, such as enrolling dependents under a special 
enrollment right during the 90-day or 180-day period.
    We understand that some States may wish issuers to guarantee the 
availability of products until the end of the applicable notice period, 
and any such requirement would continue to apply.
    We also propose a new paragraph (e)(2), under which an issuer that 
denies coverage under these provisions must apply the denial uniformly 
to all employers or individuals in the large group, small group, or 
individual market, as applicable, in the State consistent with 
applicable State law, and without regard to the claims experience or 
any health-status related factor relating to those individuals or 
employers and their employees (or their respective dependents).
    We seek comment on these proposals.
b. Minimum Participation and Contribution Rules
    Section 2702 of the PHS Act generally requires health insurance 
issuers in the group and individual markets to guarantee the 
availability of coverage. In the 2014 Market Rules final rule, we 
determined that small employers accordingly could not be denied 
coverage for failure to satisfy minimum participation or contribution 
requirements. In recognition of the potential for adverse selection, 
however, under our authority to define open enrollment periods at Sec.  
147.104, we permitted health insurance issuers offering non-
grandfathered plans in the small group market to limit the availability 
of coverage to small employers that do not meet an issuer's employer 
contribution or group participation rules to an annual enrollment 
period of November 15 to December 15 of each year. We continue to 
recognize that the use of minimum participation or contribution rules 
to limit when coverage can be obtained can guard against adverse 
selection, in that some employers might wait to purchase insurance only 
when medical need arises. We also acknowledge the possibility that 
minimum contribution rules might promote employee take-up and help 
spread insurance risk across a broad and diverse pool of individuals. 
However, several features of the Affordable Care Act make participation 
and contribution rules less relevant, including the individual shared 
responsibility provisions, under which non-exempt individuals must 
maintain minimum essential coverage (such as might be available through 
a group health plan) or make an individual shared responsibility 
payment, and the employer shared responsibility provisions, under which 
applicable large employers (in general, employers with at least 50 
full-time employees (including full-time equivalent employees)) must 
either offer coverage that is affordable and that provides minimum 
value to their full-time employees (and their dependents) or 
potentially make an assessable payment to the IRS.
    Based on our experience since the finalization of the rule 
providing for the November 15 to December 15 enrollment window, we are 
concerned that the limitation of the enrollment window could result in 
some applicable large employers that intend to avoid an employer shared 
responsibility payment by offering coverage being unable to reasonably 
offer coverage, if a State were to expand the small group market to 
include employers with up to 100 employees.
    In recognition of this dynamic, we note that a State electing to 
expand its small group market to include employers with up to 100 
employees may opt, under its own authority, to prohibit a small group 
health insurance issuer from restricting the availability of small 
group coverage based on employer contribution or group participation 
rules. Alternatively, in cases where a State expands the definition of 
a small employer to include up to 100 employees, we could amend the 
guaranteed availability regulations, with respect to small employers 
with 51-100 employees or with respect to all small employers 
altogether, to achieve this objective. We seek comment on such an 
approach.
3. 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 requirements of those sections, as well 
as with any applicable State law. Title XXVII of the PHS Act includes 
several exceptions to the guaranteed renewability provisions, including 
when a group health plan sponsor has violated a material plan provision 
relating to employer contribution or group participation rules, 
provided applicable State law allows an exception to guaranteed 
renewability under such circumstances; and for coverage made available 
in the individual market, or small or large group market only through 
one or more bona fide associations, if the individual's or employer's 
membership in the association ceases. Although the Affordable Care Act 
removed from title XXVII these exceptions as they applied to guaranteed 
availability, it did not do so with respect to guaranteed renewability. 
Therefore, a large employer whose coverage is non-renewed for one of 
these reasons, and a small employer whose coverage is non-renewed due 
to membership ceasing in an association, could be seen to have a right 
to immediately purchase that same coverage (if available in the market) 
from that same issuer in accordance with guaranteed availability. This 
renders effectively meaningless these two exceptions to guaranteed 
renewability in these contexts. To address this potential ambiguity 
regarding the interplay between guaranteed renewability and guaranteed 
availability, we propose to remove these guaranteed renewability 
exceptions from the regulations at Sec.  147.106. We seek comment on 
other ways in which this ambiguity could be addressed.
4. Student Health Insurance Coverage (Sec.  147.145)
a. Index Rate Setting Methodology for Student Health Insurance Coverage
    Under 45 CFR 147.145, student health insurance coverage is a type 
of individual health insurance coverage that, subject to limited 
exceptions, must comply with the PHS Act requirements that apply to 
individual health insurance coverage. However, section 1560(c) of the 
Affordable Care Act provides that nothing in title I of the Affordable 
Care Act (or an amendment made by title I) is to be construed to 
prohibit an institution of higher

[[Page 75498]]

education from offering a student health insurance plan to the extent 
that the requirement is otherwise permitted under applicable Federal, 
State, or local law. HHS has exercised its authority under section 
1560(c) to modify some of its rules as applied to student health 
insurance coverage, including those related to the guaranteed 
availability, guaranteed renewability, and single risk pool 
requirements.
    Our intent in exempting student health insurance coverage from the 
single risk pool requirement was to provide that student health 
insurance issuers need not include their student health insurance 
coverage in their overall individual market (or merged market) risk 
pool, and also need not have one single risk pool composed of their 
total statewide book of student health insurance business. Rather, we 
intended that issuers could establish separate risk pools from their 
individual health insurance market single risk pool (or merged market 
risk pool, where applicable) for student health insurance coverage, 
including by establishing separate risk pools for different 
institutions of higher education, or multiple risk pools within a 
single institution, provided the risk pools were based on a bona fide 
school-related classification (for example, graduate students and 
undergraduate students) and not a health status-related factor as 
described in Sec.  146.121. However, we have learned that student 
health insurance issuers may be using certain rating factors that would 
be prohibited under the single risk pool regulation in Sec.  156.80(d) 
to establish rates for institutions of higher education, on the basis 
that student health insurance coverage has been exempted from those 
single risk pool index rating requirements under our regulations. 
Examples of such rating factors include the percentage of students 
enrolled in the coverage, or the length of time the college or 
university has had coverage through the issuer. Section 156.80(d) 
requires a health insurance issuer to base its index rate only on the 
total combined claims costs for providing EHB (subject to certain 
adjustments).
    We do not intend to disrupt rate setting for student health 
insurance, but we do seek to ensure that rates are based on actuarially 
justified factors. To clarify our intent, we propose, for plan years 
beginning on or after January 1, 2017, that student health insurance 
coverage be subject to the index rate setting methodology of the single 
risk pool provision in the regulation at Sec.  156.80(d). However, 
student health insurance issuers still would be permitted to establish 
separate risk pools from their individual health insurance market 
single risk pool (or merged market risk pool, where applicable) for 
student health insurance coverage, including by establishing separate 
risk pools for different institutions of higher education, or multiple 
risk pools within a single institution, provided they are based on a 
bona fide school-related classification (for example, graduate students 
and undergraduate students) and not a health status-related factor as 
described in Sec.  146.121. Consistent with our single risk pool 
policy, the index rates for these risk pools would be based upon 
actuarially justified estimates of claims. Permissible plan-level 
adjustments to these index rates would be limited to those permitted 
under our rules. This approach would continue to allow rates for 
student health insurance coverage to reflect the unique characteristics 
of the student population at the particular institution, while more 
clearly delineating our intent with regard to the treatment of student 
health insurance coverage. We seek comment on any potential operational 
challenges associated with this proposal, including potential 
challenges related to filing rates for student health insurance 
coverage and how this policy might be adjusted to address those 
challenges.
b. Actuarial Value Requirements for Student Health Insurance Plans
    Many colleges and universities have reported to us that they offer 
student health insurance plans that are rich in benefits (for example, 
providing an actuarial value of 96 percent) and that they are reluctant 
to reduce the level of benefits to meet an actuarial value metal level. 
Because enrollees in student health insurance plans are not typically 
selecting among such plans, there is less need for standardization of 
actuarial levels in this part of the individual market. Therefore, we 
propose to add an exemption to the requirements for student health 
insurance coverage in Sec.  147.145, under which, for plan years 
beginning on or after January 1, 2017, student health insurance 
coverage would be exempt from the actuarial value requirements under 
section 1302(d) of the Affordable Care Act, as implemented in 
Sec. Sec.  156.135 and 156.140, but would be required to provide an 
actuarial value of at least 60 percent. To determine a plan's actuarial 
value for purposes of the application of the 60 percent actuarial value 
requirement to student health insurance coverage, we propose to require 
student health insurance coverage issuers to obtain certification by an 
actuary that the plan provides an actuarial value of at least 60 
percent. This determination would be required to be made by a member of 
the American Academy of Actuaries, based on analysis in accordance with 
generally accepted actuarial principles and methodologies.
    We considered making modifications to the AV Calculator for the 
purposes of determining the actuarial value for student health 
insurance plans. However, the standard population in the AV Calculator 
is more diverse than the expected population in student health 
insurance plans, such that the AV Calculator's calculations might be 
less accurate. That said, we solicit comments on whether the AV 
Calculator should be used for this purpose.
    We also solicit comments on whether to require student health 
insurance issuers to specify, in their SBCs, summary plan descriptions, 
enrollment materials, marketing materials, or other materials, the 
actuarial value of the coverage, the next lowest metal level the 
coverage would otherwise satisfy, based on its actuarial value, or any 
other data that would give enrollees and prospective enrollees 
information about the actuarial value of the coverage.

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

1. Sequestration
    In accordance with the OMB Report to Congress on the Joint 
Committee Reductions for Fiscal Year 2016,\8\ both the transitional 
reinsurance program and permanent risk adjustment program are subject 
to the fiscal year 2016 sequestration. The Federal government's 2016 
fiscal year began on October 1, 2015. The reinsurance program will be 
sequestered at a rate of 6.8 percent for payments made from fiscal year 
2016 resources (that is, funds collected during the 2016 fiscal year). 
To meet the sequestration requirement for the risk adjustment program 
for fiscal year 2016, HHS will sequester risk adjustment payments made 
using fiscal year 2016 resources in all States where HHS operates risk 
adjustment at a sequestration rate of 7.0 percent. HHS estimates that 
increasing the sequestration rate for all risk adjustment payments made 
in fiscal year 2016 to all issuers in the States where HHS operates 
risk adjustment by 0.2 percent will permit HHS to meet the required 
national risk adjustment program

[[Page 75499]]

sequestration percentage of 6.8 percent noted in the OMB Report to 
Congress.
---------------------------------------------------------------------------

    \8\ Available at: https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_jc_sequestration_report_speaker.pdf.
---------------------------------------------------------------------------

    HHS, in coordination with the OMB, has determined that, under 
section 256(k)(6) of the Balanced Budget and Emergency Deficit Control 
Act of 1985, as amended, and the underlying authority for these 
programs, the funds that are sequestered in fiscal year 2016 from the 
reinsurance and risk adjustment programs will become available for 
payment to issuers in fiscal year 2017 without further Congressional 
action. If the Congress does not enact deficit reduction provisions 
that replace the Joint Committee reductions, these programs would be 
sequestered in future fiscal years, and any sequestered funding would 
become available in the fiscal year following that in which it was 
sequestered.
2. Provisions and Parameters for the Permanent Risk Adjustment Program
    In subparts D and G of 45 CFR part 153, we established standards 
for the administration of the 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. 
In accordance with Sec.  153.310(a), 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. Overview of the HHS Risk Adjustment Model (Sec.  153.320)
    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 adjustment-covered plan, or the plan liability risk 
score, within a geographic rating area is one of the inputs into the 
risk adjustment payment transfer formula, which determines the payment 
or charge that an issuer will receive or be required to pay for that 
plan. Thus, the HHS risk adjustment model predicts 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.
b. Proposed Updates to the Risk Adjustment Model (Sec.  153.320)
    We propose to continue to use the same risk adjustment methodology 
finalized in the 2014 Payment Notice. We propose to make certain 
updates to the risk adjustment model to incorporate preventive services 
into our simulation of plan liability, and to reflect more current 
data. The proposed data updates are similar to the ones we effectuated 
for 2016 risk adjustment in the 2016 Payment Notice. We propose to 
recalculate the weights assigned to the various hierarchical condition 
categories (HCCs) and demographic factors in our risk adjustment models 
using the most recent data available. As we previously described, 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 attributable to 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 2017 by using more recent claims data to develop 
updated risk factors. The risk factors published in the 2016 Payment 
Notice for use in 2016 were developed using the Truven Health Analytics 
2011, 2012 and 2013 MarketScan[supreg] Commercial Claims and Encounters 
database (MarketScan); we are proposing to update the risk factors in 
the HHS risk adjustment model using 2012, 2013, and 2014 MarketScan 
data. We would publish and finalize the updated factors in the final 
rule. We seek comment on this proposal.
    We are proposing to incorporate preventive services into our 
simulation of plan liability in the recalibration of the risk 
adjustment models for 2017. We identified preventive services for the 
2012 and 2013 MarketScan samples using procedure and diagnosis codes, 
prescription drug therapeutic classes, and enrollee age and sex. We 
relied on lists of preventive services from several major issuers, the 
preventive services used for the AV Calculator, and Medicare's 
preventive services benefit to operationalize preventive services 
definitions for incorporation in the risk adjustment models. We then 
adjusted plan liability by adding 100 percent of preventive services 
covered charges to simulate plan liability for all metal levels. We 
also applied standard benefit cost sharing rules by metal level to 
covered charges for non-preventive services. Total adjusted simulated 
plan liability is the sum of preventive services covered charges, and 
non-preventive services simulated plan liability.
    We re-estimated the risk adjustment models by metal level, 
predicting plan liability adjusted to account for preventive services 
without cost sharing. We compared the model coefficients predicting 
original (that is, non-adjusted for preventive services) and adjusted 
simulated plan liability. Adjusting for preventive services increases 
age-sex coefficients relative to HCC coefficients, especially in the 
higher cost-sharing metal tiers (bronze and silver), and in age/sex 
ranges with high preventive services expenditures (for example, young 
adult females). The implication of the changes to the model 
coefficients is that the risk scores of healthy enrollees (whose risk 
scores are based solely on model age-sex coefficients) will likely rise 
relative to the risk scores of the less healthy (whose risk scores 
include one or more HCC coefficients in addition to an age-sex 
coefficient), especially in bronze and silver plans. As a result of the 
risk score changes for individuals, we expect that the incorporation of 
preventive services would increase the risk scores of bronze and silver 
plans with healthier enrollees relative to other plans' risk scores 
when preventive services are taken into account. This incorporation of 
preventive services will more accurately compensate risk adjustment 
covered plans with enrollees who use preventive services. We seek 
comment on this approach.
    Additionally, we are evaluating how we may incorporate prescription 
drug data in the Federally certified risk adjustment methodology that 
HHS uses when it operates risk adjustment. Prescription drug data could 
be used in the risk adjustment methodology to supplement diagnostic 
data by using the prescription drug data as a severity indicator, or as 
a proxy for diagnoses is in cases where diagnostic data are likely

[[Page 75500]]

to be incomplete. We are assessing these approaches, with particular 
sensitivity to reliability and the potential for strategic behavior 
with respect to prescribing behavior. As we noted in the 2014 Payment 
Notice, we did not include prescription drugs to predict expenditures 
to avoid creating adverse incentives to modify discretionary 
prescribing. We are evaluating whether we can improve the models' 
predictive power through the incorporation of prescription drugs 
without unduly incentivizing altered prescribing behavior. We seek 
comment and any data that may inform effective methods of incorporating 
prescription drug data in future recalibrations.
    Similarly, we believe we could more accurately account for high-
cost conditions with new treatments that are not reflected in our model 
due to lags in the data available to us for recalibration. We believe 
that stability across our models is important, but seek comment and 
data that may inform better methods of accurately compensating for new 
treatments for high cost conditions. For example, we seek comment on 
whether there are ways to model the severity of these conditions in a 
manner that will more fully capture the highest cost enrollees.
    Lastly, we would like to explore the effect of partial year 
enrollment in the HHS risk adjustment methodology. We have received 
input that issuers are experiencing higher than expected claims costs 
for partial-year enrollees. We have also received input that the 
methodology does not capture enrollees with chronic conditions who may 
not have accumulated diagnoses in their partial year enrollment. At the 
same time, as compared to full year enrollees of the same relative 
risk, partial year enrollees are less likely to have spending that 
exceeds the deductible or annual limitation on cost sharing. We seek 
comment and data on how the methodology could be made more predictive 
for partial year enrollees.
c. List of Factors To Be Employed in the Model (Sec.  153.320)
    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 2012 and 2013 separately solved 
models (with the incorporation of preventive services) 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 2 contains the HHS HHCs in the severity illness 
indicator variable. Table 3 contains the factors for each child model. 
Table 4 contains the factors for each infant model.

                                  Table 1--Adult Risk Adjustment Model Factors
----------------------------------------------------------------------------------------------------------------
                    Factor                        Platinum       Gold        Silver       Bronze    Catastrophic
----------------------------------------------------------------------------------------------------------------
                                               Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 21-24, Male...............................        0.242        0.183        0.117        0.077         0.076
Age 25-29, Male...............................        0.249        0.186        0.117        0.074         0.073
Age 30-34, Male...............................        0.296        0.220        0.135        0.082         0.080
Age 35-39, Male...............................        0.356        0.268        0.170        0.104         0.103
Age 40-44, Male...............................        0.435        0.335        0.221        0.143         0.142
Age 45-49, Male...............................        0.518        0.405        0.277        0.188         0.186
Age 50-54, Male...............................        0.662        0.531        0.380        0.274         0.272
Age 55-59, Male...............................        0.755        0.607        0.439        0.318         0.316
Age 60-64, Male...............................        0.907        0.733        0.538        0.395         0.392
Age 21-24, Female.............................        0.404        0.315        0.211        0.144         0.143
Age 25-29, Female.............................        0.491        0.383        0.262        0.181         0.180
Age 30-34, Female.............................        0.613        0.488        0.350        0.259         0.257
Age 35-39, Female.............................        0.704        0.570        0.423        0.327         0.325
Age 40-44, Female.............................        0.785        0.638        0.477        0.369         0.367
Age 45-49, Female.............................        0.802        0.649        0.480        0.364         0.362
Age 50-54, Female.............................        0.905        0.739        0.554        0.421         0.419
Age 55-59, Female.............................        0.921        0.748        0.554        0.412         0.409
Age 60-64, Female.............................        1.003        0.814        0.601        0.445         0.442
----------------------------------------------------------------------------------------------------------------
                                                Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS......................................        5.924        5.438        5.099        5.113         5.114
Septicemia, Sepsis, Systemic Inflammatory            11.809       11.632       11.526       11.587        11.589
 Response Syndrome/Shock......................
Central Nervous System Infections, Except             7.068        6.960        6.891        6.914         6.914
 Viral Meningitis.............................
Viral or Unspecified Meningitis...............        4.995        4.743        4.574        4.530         4.530
Opportunistic Infections......................        9.345        9.238        9.168        9.156         9.156
Metastatic Cancer.............................       24.911       24.456       24.139       24.207        24.209
Lung, Brain, and Other Severe Cancers,               11.344       10.991       10.744       10.751        10.752
 Including Pediatric Acute Lymphoid Leukemia..
Non-Hodgkin`s Lymphomas and Other Cancers and         6.079        5.829        5.643        5.597         5.596
 Tumors.......................................
Colorectal, Breast (Age <50), Kidney, and             5.522        5.272        5.082        5.034         5.034
 Other Cancers................................
Breast (Age 50+) and Prostate Cancer, Benign/         3.188        3.005        2.861        2.807         2.806
 Uncertain Brain Tumors, and Other Cancers and
 Tumors.......................................
Thyroid Cancer, Melanoma, Neurofibromatosis,          1.556        1.392        1.248        1.153         1.152
 and Other Cancers and Tumors.................

[[Page 75501]]

 
Pancreas Transplant Status/Complications......        5.898        5.665        5.517        5.542         5.543
Diabetes with Acute Complications.............        1.261        1.113        0.984        0.875         0.873
Diabetes with Chronic Complications...........        1.261        1.113        0.984        0.875         0.873
Diabetes without Complication.................        1.261        1.113        0.984        0.875         0.873
Protein-Calorie Malnutrition..................       14.543       14.553       14.565       14.629        14.630
Mucopolysaccharidosis.........................        2.246        2.121        2.018        1.963         1.962
Lipidoses and Glycogenosis....................        2.246        2.121        2.018        1.963         1.962
Amyloidosis, Porphyria, and Other Metabolic           2.246        2.121        2.018        1.963         1.962
 Disorders....................................
Adrenal, Pituitary, and Other Significant             2.246        2.121        2.018        1.963         1.962
 Endocrine Disorders..........................
Liver Transplant Status/Complications.........       15.618       15.437       15.325       15.338        15.339
End-Stage Liver Disease.......................        5.957        5.705        5.543        5.560         5.561
Cirrhosis of Liver............................        2.417        2.245        2.128        2.094         2.093
Chronic Hepatitis.............................        2.212        2.059        1.942        1.881         1.880
Acute Liver Failure/Disease, Including                4.584        4.410        4.290        4.284         4.284
 Neonatal Hepatitis...........................
Intestine Transplant Status/Complications.....       35.083       35.028       34.981       35.010        35.009
Peritonitis/Gastrointestinal Perforation/            12.704       12.429       12.241       12.279        12.279
 Necrotizing Enterocolitis....................
Intestinal Obstruction........................        6.960        6.679        6.497        6.526         6.527
Chronic Pancreatitis..........................        5.898        5.665        5.517        5.542         5.543
Acute Pancreatitis/Other Pancreatic Disorders         2.929        2.728        2.583        2.538         2.537
 and Intestinal Malabsorption.................
Inflammatory Bowel Disease....................        3.154        2.884        2.680        2.572         2.571
Necrotizing Fasciitis.........................        7.009        6.797        6.650        6.671         6.671
Bone/Joint/Muscle Infections/Necrosis.........        7.009        6.797        6.650        6.671         6.671
Rheumatoid Arthritis and Specified Autoimmune         3.718        3.455        3.263        3.242         3.242
 Disorders....................................
Systemic Lupus Erythematosus and Other                1.235        1.092        0.968        0.880         0.879
 Autoimmune Disorders.........................
Osteogenesis Imperfecta and Other                     3.474        3.263        3.094        3.035         3.034
 Osteodystrophies.............................
Congenital/Developmental Skeletal and                 3.474        3.263        3.094        3.035         3.034
 Connective Tissue Disorders..................
Cleft Lip/Cleft Palate........................        1.507        1.336        1.200        1.130         1.130
Hemophilia....................................       42.711       42.402       42.168       42.178        42.179
Myelodysplastic Syndromes and Myelofibrosis...       12.218       12.073       11.973       11.984        11.985
Aplastic Anemia...............................       12.218       12.073       11.973       11.984        11.985
Acquired Hemolytic Anemia, Including Hemolytic        9.749        9.576        9.446        9.441         9.441
 Disease of Newborn...........................
Sickle Cell Anemia (Hb-SS)....................        9.749        9.576        9.446        9.441         9.441
Thalassemia Major.............................        9.749        9.576        9.446        9.441         9.441
Combined and Other Severe Immunodeficiencies..        5.252        5.095        4.985        4.991         4.992
Disorders of the Immune Mechanism.............        5.252        5.095        4.985        4.991         4.992
Coagulation Defects and Other Specified               2.989        2.884        2.801        2.774         2.773
 Hematological Disorders......................
Drug Psychosis................................        3.809        3.542        3.340        3.241         3.240
Drug Dependence...............................        3.809        3.542        3.340        3.241         3.240
Schizophrenia.................................        3.100        2.840        2.647        2.568         2.567
Major Depressive and Bipolar Disorders........        1.777        1.601        1.450        1.346         1.344
Reactive and Unspecified Psychosis, Delusional        1.777        1.601        1.450        1.346         1.344
 Disorders....................................
Personality Disorders.........................        1.188        1.050        0.913        0.805         0.803
Anorexia/Bulimia Nervosa......................        2.786        2.612        2.469        2.406         2.405
Prader-Willi, Patau, Edwards, and Autosomal           2.824        2.684        2.579        2.531         2.531
 Deletion Syndromes...........................
Down Syndrome, Fragile X, Other Chromosomal           1.042        0.933        0.828        0.752         0.751
 Anomalies, and Congenital Malformation
 Syndromes....................................
Autistic Disorder.............................        1.188        1.050        0.913        0.805         0.803
Pervasive Developmental Disorders, Except             1.188        1.050        0.913        0.805         0.803
 Autistic Disorder............................
Traumatic Complete Lesion Cervical Spinal Cord       13.957       13.787       13.663       13.665        13.666
Quadriplegia..................................       13.957       13.787       13.663       13.665        13.666
Traumatic Complete Lesion Dorsal Spinal Cord..       10.170       10.005        9.884        9.875         9.875
Paraplegia....................................       10.170       10.005        9.884        9.875         9.875
Spinal Cord Disorders/Injuries................        6.086        5.864        5.707        5.679         5.679
Amyotrophic Lateral Sclerosis and Other               3.246        2.997        2.827        2.787         2.788
 Anterior Horn Cell Disease...................
Quadriplegic Cerebral Palsy...................        1.400        1.183        1.020        0.960         0.959
Cerebral Palsy, Except Quadriplegic...........        0.000        0.000        0.000        0.000         0.000
Spina Bifida and Other Brain/Spinal/Nervous           0.126        0.033        0.000        0.000         0.000
 System Congenital Anomalies..................
Myasthenia Gravis/Myoneural Disorders and             5.285        5.129        5.018        4.995         4.995
 Guillain-Barre Syndrome/Inflammatory and
 Toxic Neuropathy.............................
Muscular Dystrophy............................        2.211        2.034        1.907        1.835         1.834
Multiple Sclerosis............................        9.367        8.954        8.667        8.708         8.710
Parkinson's, Huntington's, and Spinocerebellar        2.211        2.034        1.907        1.835         1.834
 Disease, and Other Neurodegenerative
 Disorders....................................
Seizure Disorders and Convulsions.............        1.485        1.319        1.184        1.109         1.108
Hydrocephalus.................................        7.352        7.229        7.123        7.098         7.097
Non-Traumatic Coma, and Brain Compression/            9.834        9.691        9.579        9.574         9.574
 Anoxic Damage................................
Respirator Dependence/Tracheostomy Status.....       37.369       37.364       37.365       37.433        37.434
Respiratory Arrest............................       11.456       11.296       11.192       11.262        11.264
Cardio-Respiratory Failure and Shock,                11.456       11.296       11.192       11.262        11.264
 Including Respiratory Distress Syndromes.....

[[Page 75502]]

 
Heart Assistive Device/Artificial Heart.......       35.695       35.429       35.257       35.324        35.325
Heart Transplant..............................       35.695       35.429       35.257       35.324        35.325
Congestive Heart Failure......................        3.387        3.271        3.190        3.186         3.186
Acute Myocardial Infarction...................       10.835       10.482       10.255       10.380        10.382
Unstable Angina and Other Acute Ischemic Heart        5.666        5.370        5.186        5.209         5.210
 Disease......................................
Heart Infection/Inflammation, Except Rheumatic        6.510        6.365        6.260        6.240         6.239
Specified Heart Arrhythmias...................        3.099        2.940        2.818        2.765         2.764
Intracranial Hemorrhage.......................       10.244        9.944        9.743        9.761         9.761
Ischemic or Unspecified Stroke................        3.640        3.440        3.319        3.331         3.332
Cerebral Aneurysm and Arteriovenous                   4.354        4.138        3.986        3.947         3.946
 Malformation.................................
Hemiplegia/Hemiparesis........................        6.079        5.979        5.919        5.967         5.967
Monoplegia, Other Paralytic Syndromes.........        3.944        3.803        3.705        3.688         3.688
Atherosclerosis of the Extremities with              11.784       11.679       11.619       11.694        11.695
 Ulceration or Gangrene.......................
Vascular Disease with Complications...........        8.222        8.025        7.892        7.898         7.898
Pulmonary Embolism and Deep Vein Thrombosis...        4.155        3.978        3.852        3.829         3.829
Lung Transplant Status/Complications..........       35.331       35.127       34.994       35.078        35.080
Cystic Fibrosis...............................       12.237       11.906       11.656       11.667        11.667
Chronic Obstructive Pulmonary Disease,                1.009        0.883        0.768        0.687         0.686
 Including Bronchiectasis.....................
Asthma........................................        1.009        0.883        0.768        0.687         0.686
Fibrosis of Lung and Other Lung Disorders.....        2.091        1.961        1.867        1.828         1.827
Aspiration and Specified Bacterial Pneumonias         8.033        7.949        7.895        7.913         7.914
 and Other Severe Lung Infections.............
Kidney Transplant Status......................       10.464       10.180        9.997        9.991         9.991
End Stage Renal Disease.......................       40.683       40.431       40.270       40.401        40.403
Chronic Kidney Disease, Stage 5...............        2.212        2.102        2.031        2.026         2.026
Chronic Kidney Disease, Severe (Stage 4)......        2.212        2.102        2.031        2.026         2.026
Ectopic and Molar Pregnancy, Except with Renal        1.372        1.177        0.993        0.798         0.794
 Failure, Shock, or Embolism..................
Miscarriage with Complications................        1.372        1.177        0.993        0.798         0.794
Miscarriage with No or Minor Complications....        1.372        1.177        0.993        0.798         0.794
Completed Pregnancy With Major Complications..        3.837        3.331        3.033        2.879         2.880
Completed Pregnancy With Complications........        3.837        3.331        3.033        2.879         2.880
Completed Pregnancy with No or Minor                  3.837        3.331        3.033        2.879         2.880
 Complications................................
Chronic Ulcer of Skin, Except Pressure........        2.399        2.270        2.183        2.168         2.168
Hip Fractures and Pathological Vertebral or           9.757        9.532        9.381        9.425         9.426
 Humerus Fractures............................
Pathological Fractures, Except of Vertebrae,          1.951        1.817        1.700        1.626         1.624
 Hip, or Humerus..............................
Stem Cell, Including Bone Marrow, Transplant         32.229       32.225       32.223       32.243        32.243
 Status/Complications.........................
Artificial Openings for Feeding or Elimination       10.912       10.812       10.748       10.791        10.792
Amputation Status, Lower Limb/Amputation              6.029        5.865        5.760        5.790         5.791
 Complications................................
----------------------------------------------------------------------------------------------------------------
                                               Interaction Factors
----------------------------------------------------------------------------------------------------------------
Severe illness x Opportunistic Infections.....       11.440       11.678       11.854       11.949        11.950
Severe illness x Metastatic Cancer............       11.440       11.678       11.854       11.949        11.950
Severe illness x Lung, Brain, and Other Severe       11.440       11.678       11.854       11.949        11.950
 Cancers, Including Pediatric Acute Lymphoid
 Leukemia.....................................
Severe illness x Non-Hodgkin's Lymphomas and         11.440       11.678       11.854       11.949        11.950
 Other Cancers and Tumors.....................
Severe illness x Myasthenia Gravis/Myoneural         11.440       11.678       11.854       11.949        11.950
 Disorders and Guillain-Barre Syndrome/
 Inflammatory and Toxic Neuropathy............
Severe illness x Heart Infection/Inflammation,       11.440       11.678       11.854       11.949        11.950
 Except Rheumatic.............................
Severe illness x Intracranial Hemorrhage......       11.440       11.678       11.854       11.949        11.950
Severe illness x HCC group G06 (G06 is HCC           11.440       11.678       11.854       11.949        11.950
 Group 6 which includes the following HCCs in
 the blood disease category: 67, 68)..........
Severe illness x HCC group G08 (G08 is HCC           11.440       11.678       11.854       11.949        11.950
 Group 8 which includes the following HCCs in
 the blood disease category: 73, 74)..........
Severe illness x End-Stage Liver Disease......        2.193        2.336        2.443        2.529         2.530
Severe illness x Acute Liver Failure/Disease,         2.193        2.336        2.443        2.529         2.530
 Including Neonatal Hepatitis.................
Severe illness x Atherosclerosis of the               2.193        2.336        2.443        2.529         2.530
 Extremities with Ulceration or Gangrene......
Severe illness x Vascular Disease with                2.193        2.336        2.443        2.529         2.530
 Complications................................
Severe illness x Aspiration and Specified             2.193        2.336        2.443        2.529         2.530
 Bacterial Pneumonias and Other Severe Lung
 Infections...................................
Severe illness x Artificial Openings for              2.193        2.336        2.443        2.529         2.530
 Feeding or Elimination.......................
Severe illness x HCC group G03 (G03 is HCC            2.193        2.336        2.443        2.529         2.530
 Group 3 which includes the following HCCs in
 the musculoskeletal disease category: 54, 55)
----------------------------------------------------------------------------------------------------------------


[[Page 75503]]


      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.................................        0.251        0.167        0.082        0.032         0.031
Age 5-9, Male.................................        0.176        0.113        0.048        0.012         0.011
Age 10-14, Male...............................        0.224        0.158        0.084        0.045         0.044
Age 15-20, Male...............................        0.290        0.216        0.134        0.084         0.083
Age 2-4, Female...............................        0.205        0.131        0.061        0.024         0.024
Age 5-9, Female...............................        0.140        0.086        0.033        0.006         0.005
Age 10-14, Female.............................        0.210        0.148        0.083        0.050         0.050
Age 15-20, Female.............................        0.348        0.262        0.165        0.105         0.104
----------------------------------------------------------------------------------------------------------------
                                                Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS......................................        3.608        3.174        2.855        2.743         2.742
Septicemia, Sepsis, Systemic Inflammatory            18.093       17.932       17.830       17.855        17.856
 Response Syndrome/Shock......................
Central Nervous System Infections, Except            12.330       12.136       11.998       12.005        12.005
 Viral Meningitis.............................
Viral or Unspecified Meningitis...............        3.826        3.606        3.444        3.341         3.340
Opportunistic Infections......................       23.638       23.563       23.513       23.505        23.505
Metastatic Cancer.............................       38.499       38.239       38.029       38.030        38.030
Lung, Brain, and Other Severe Cancers,               13.275       12.966       12.718       12.660        12.660
 Including Pediatric Acute Lymphoid Leukemia..
Non-Hodgkin's Lymphomas and Other Cancers and         9.665        9.384        9.151        9.061         9.060
 Tumors.......................................
Colorectal, Breast (Age <50), Kidney, and             3.995        3.755        3.539        3.419         3.417
 Other Cancers................................
Breast (Age 50+) and Prostate Cancer, Benign/         3.123        2.910        2.725        2.614         2.612
 Uncertain Brain Tumors, and Other Cancers and
 Tumors.......................................
Thyroid Cancer, Melanoma, Neurofibromatosis,          1.892        1.713        1.548        1.438         1.436
 and Other Cancers and Tumors.................
Pancreas Transplant Status/Complications......       33.115       32.960       32.863       32.876        32.877
Diabetes with Acute Complications.............        2.630        2.290        2.028        1.773         1.770
Diabetes with Chronic Complications...........        2.630        2.290        2.028        1.773         1.770
Diabetes without Complication.................        2.630        2.290        2.028        1.773         1.770
Protein-Calorie Malnutrition..................       14.811       14.720       14.655       14.683        14.683
Mucopolysaccharidosis.........................        6.419        6.134        5.907        5.866         5.865
Lipidoses and Glycogenosis....................        6.419        6.134        5.907        5.866         5.865
Congenital Metabolic Disorders, Not Elsewhere         6.419        6.134        5.907        5.866         5.865
 Classified...................................
Amyloidosis, Porphyria, and Other Metabolic           6.419        6.134        5.907        5.866         5.865
 Disorders....................................
Adrenal, Pituitary, and Other Significant             6.419        6.134        5.907        5.866         5.865
 Endocrine Disorders..........................
Liver Transplant Status/Complications.........       33.115       32.960       32.863       32.876        32.877
End-Stage Liver Disease.......................       13.699       13.535       13.419       13.421        13.422
Cirrhosis of Liver............................       12.715       12.528       12.391       12.343        12.344
Chronic Hepatitis.............................        1.566        1.405        1.257        1.186         1.185
Acute Liver Failure/Disease, Including               13.286       13.119       12.987       12.966        12.967
 Neonatal Hepatitis...........................
Intestine Transplant Status/Complications.....       33.115       32.960       32.863       32.876        32.877
Peritonitis/Gastrointestinal Perforation/            16.433       16.077       15.815       15.844        15.845
 Necrotizing Enterocolitis....................
Intestinal Obstruction........................        6.156        5.905        5.705        5.620         5.619
Chronic Pancreatitis..........................        9.291        9.008        8.815        8.801         8.800
Acute Pancreatitis/Other Pancreatic Disorders         2.803        2.658        2.528        2.436         2.435
 and Intestinal Malabsorption.................
Inflammatory Bowel Disease....................        5.919        5.531        5.229        5.120         5.118
Necrotizing Fasciitis.........................        5.073        4.814        4.608        4.555         4.554
Bone/Joint/Muscle Infections/Necrosis.........        5.073        4.814        4.608        4.555         4.554
Rheumatoid Arthritis and Specified Autoimmune         3.361        3.116        2.901        2.803         2.801
 Disorders....................................
Systemic Lupus Erythematosus and Other                1.226        1.061        0.899        0.778         0.776
 Autoimmune Disorders.........................
Osteogenesis Imperfecta and Other                     1.704        1.565        1.432        1.357         1.356
 Osteodystrophies.............................
Congenital/Developmental Skeletal and                 1.704        1.565        1.432        1.357         1.356
 Connective Tissue Disorders..................
Cleft Lip/Cleft Palate........................        1.660        1.433        1.242        1.127         1.125
Hemophilia....................................       56.279       55.780       55.399       55.383        55.384

[[Page 75504]]

 
Myelodysplastic Syndromes and Myelofibrosis...       17.181       17.007       16.867       16.847        16.847
Aplastic Anemia...............................       17.181       17.007       16.867       16.847        16.847
Acquired Hemolytic Anemia, Including Hemolytic        7.999        7.705        7.476        7.409         7.407
 Disease of Newborn...........................
Sickle Cell Anemia (Hb-SS)....................        7.999        7.705        7.476        7.409         7.407
Thalassemia Major.............................        7.999        7.705        7.476        7.409         7.407
Combined and Other Severe Immunodeficiencies..        6.480        6.287        6.134        6.076         6.075
Disorders of the Immune Mechanism.............        6.480        6.287        6.134        6.076         6.075
Coagulation Defects and Other Specified               5.201        5.051        4.911        4.837         4.835
 Hematological Disorders......................
Drug Psychosis................................        5.249        4.979        4.782        4.717         4.717
Drug Dependence...............................        5.249        4.979        4.782        4.717         4.717
Schizophrenia.................................        5.328        4.926        4.626        4.528         4.527
Major Depressive and Bipolar Disorders........        1.935        1.707        1.495        1.332         1.329
Reactive and Unspecified Psychosis, Delusional        1.935        1.707        1.495        1.332         1.329
 Disorders....................................
Personality Disorders.........................        0.781        0.645        0.486        0.344         0.341
Anorexia/Bulimia Nervosa......................        2.818        2.603        2.423        2.357         2.356
Prader-Willi, Patau, Edwards, and Autosomal           3.727        3.503        3.351        3.317         3.317
 Deletion Syndromes...........................
Down Syndrome, Fragile X, Other Chromosomal           1.555        1.360        1.203        1.114         1.113
 Anomalies, and Congenital Malformation
 Syndromes....................................
Autistic Disorder.............................        1.867        1.660        1.462        1.308         1.305
Pervasive Developmental Disorders, Except             0.923        0.772        0.592        0.421         0.418
 Autistic Disorder............................
Traumatic Complete Lesion Cervical Spinal Cord       13.459       13.418       13.402       13.481        13.482
Quadriplegia..................................       13.459       13.418       13.402       13.481        13.482
Traumatic Complete Lesion Dorsal Spinal Cord..       11.430       11.214       11.066       11.066        11.066
Paraplegia....................................       11.430       11.214       11.066       11.066        11.066
Spinal Cord Disorders/Injuries................        5.506        5.254        5.060        4.983         4.982
Amyotrophic Lateral Sclerosis and Other               8.929        8.672        8.473        8.435         8.435
 Anterior Horn Cell Disease...................
Quadriplegic Cerebral Palsy...................        4.067        3.800        3.630        3.648         3.648
Cerebral Palsy, Except Quadriplegic...........        0.974        0.772        0.616        0.531         0.530
Spina Bifida and Other Brain/Spinal/Nervous           1.210        1.053        0.917        0.845         0.843
 System Congenital Anomalies..................
Myasthenia Gravis/Myoneural Disorders and             9.746        9.558        9.412        9.372         9.372
 Guillain-Barre Syndrome/Inflammatory and
 Toxic Neuropathy.............................
Muscular Dystrophy............................        3.762        3.552        3.387        3.308         3.307
Multiple Sclerosis............................        6.689        6.337        6.076        6.037         6.037
Parkinson's, Huntington's, and Spinocerebellar        3.762        3.552        3.387        3.308         3.307
 Disease, and Other Neurodegenerative
 Disorders....................................
Seizure Disorders and Convulsions.............        2.136        1.942        1.755        1.619         1.617
Hydrocephalus.................................        6.047        5.916        5.820        5.814         5.814
Non-Traumatic Coma, and Brain Compression/            8.776        8.612        8.487        8.448         8.447
 Anoxic Damage................................
Respirator Dependence/Tracheostomy Status.....       42.997       42.897       42.854       42.982        42.984
Respiratory Arrest............................       13.335       13.131       12.994       12.998        12.998
Cardio-Respiratory Failure and Shock,                13.335       13.131       12.994       12.998        12.998
 Including Respiratory Distress Syndromes.....
Heart Assistive Device/Artificial Heart.......       33.115       32.960       32.863       32.876        32.877
Heart Transplant..............................       33.115       32.960       32.863       32.876        32.877
Congestive Heart Failure......................        7.307        7.189        7.087        7.047         7.046
Acute Myocardial Infarction...................       11.965       11.749       11.601       11.612        11.613
Unstable Angina and Other Acute Ischemic Heart        6.781        6.652        6.566        6.583         6.584
 Disease......................................
Heart Infection/Inflammation, Except Rheumatic       16.783       16.643       16.539       16.519        16.519
Hypoplastic Left Heart Syndrome and Other             6.142        5.922        5.704        5.578         5.575
 Severe Congenital Heart Disorders............
Major Congenital Heart/Circulatory Disorders..        1.945        1.808        1.640        1.529         1.527
Atrial and Ventricular Septal Defects, Patent         1.370        1.252        1.106        1.021         1.019
 Ductus Arteriosus, and Other Congenital Heart/
 Circulatory Disorders........................
Specified Heart Arrhythmias...................        4.748        4.549        4.375        4.309         4.308
Intracranial Hemorrhage.......................       17.965       17.699       17.514       17.509        17.510
Ischemic or Unspecified Stroke................        8.807        8.679        8.600        8.623         8.624
Cerebral Aneurysm and Arteriovenous                   4.116        3.893        3.725        3.664         3.663
 Malformation.................................
Hemiplegia/Hemiparesis........................        5.352        5.230        5.146        5.127         5.127
Monoplegia, Other Paralytic Syndromes.........        3.500        3.334        3.220        3.178         3.178
Atherosclerosis of the Extremities with              15.636       15.350       15.141       15.046        15.045
 Ulceration or Gangrene.......................
Vascular Disease with Complications...........       18.385       18.204       18.079       18.077        18.077
Pulmonary Embolism and Deep Vein Thrombosis...       15.215       15.029       14.908       14.927        14.928
Lung Transplant Status/Complications..........       33.115       32.960       32.863       32.876        32.877
Cystic Fibrosis...............................       14.859       14.403       14.062       14.084        14.084
Chronic Obstructive Pulmonary Disease,                0.484        0.390        0.262        0.170         0.169
 Including Bronchiectasis.....................
Asthma........................................        0.484        0.390        0.262        0.170         0.169
Fibrosis of Lung and Other Lung Disorders.....        3.395        3.241        3.101        3.038         3.037
Aspiration and Specified Bacterial Pneumonias         9.223        9.149        9.092        9.104         9.104
 and Other Severe Lung Infections.............
Kidney Transplant Status......................       14.429       14.054       13.797       13.798        13.798
End Stage Renal Disease.......................       39.233       39.038       38.913       38.998        38.999

[[Page 75505]]

 
Chronic Kidney Disease, Stage 5...............       10.493       10.315       10.152       10.039        10.037
Chronic Kidney Disease, Severe (Stage 4)......       10.493       10.315       10.152       10.039        10.037
Ectopic and Molar Pregnancy, Except with Renal        1.160        0.967        0.768        0.565         0.561
 Failure, Shock, or Embolism..................
Miscarriage with Complications................        1.160        0.967        0.768        0.565         0.561
Miscarriage with No or Minor Complications....        1.160        0.967        0.768        0.565         0.561
Completed Pregnancy With Major Complications..        3.354        2.882        2.584        2.386         2.385
Completed Pregnancy With Complications........        3.354        2.882        2.584        2.386         2.385
Completed Pregnancy with No or Minor                  3.354        2.882        2.584        2.386         2.385
 Complications................................
Chronic Ulcer of Skin, Except Pressure........        1.654        1.541        1.428        1.366         1.365
Hip Fractures and Pathological Vertebral or           5.891        5.601        5.355        5.259         5.257
 Humerus Fractures............................
Pathological Fractures, Except of Vertebrae,          1.718        1.565        1.392        1.270         1.268
 Hip, or Humerus..............................
Stem Cell, Including Bone Marrow, Transplant         33.115       32.960       32.863       32.876        32.877
 Status/Complications.........................
Artificial Openings for Feeding or Elimination       15.795       15.698       15.662       15.783        15.785
Amputation Status, Lower Limb/Amputation              8.011        7.729        7.525        7.418         7.416
 Complications................................
----------------------------------------------------------------------------------------------------------------


                                 Table 4--Infant Risk Adjustment Models Factors
----------------------------------------------------------------------------------------------------------------
                     Group                        Platinum       Gold        Silver       Bronze    Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity Level 5               409.050      407.618      406.498      406.512       406.513
 (Highest)....................................
Extremely Immature * Severity Level 4.........      203.011      201.612      200.519      200.501       200.502
Extremely Immature * Severity Level 3.........       54.774       53.619       52.671       52.503        52.501
Extremely Immature * Severity Level 2.........       54.774       53.619       52.671       52.503        52.501
Extremely Immature * Severity Level 1 (Lowest)       54.774       53.619       52.671       52.503        52.501
Immature * Severity Level 5 (Highest).........      193.052      191.689      190.621      190.640       190.641
Immature * Severity Level 4...................       91.573       90.161       89.057       89.058        89.059
Immature * Severity Level 3...................       54.774       53.619       52.671       52.503        52.501
Immature * Severity Level 2...................       31.501       30.277       29.298       29.119        29.116
Immature * Severity Level 1 (Lowest)..........       31.501       30.277       29.298       29.119        29.116
Premature/Multiples * Severity Level 5              180.068      178.688      177.612      177.587       177.588
 (Highest)....................................
Premature/Multiples * Severity Level 4........       34.716       33.374       32.329       32.210        32.210
Premature/Multiples * Severity Level 3........       18.143       17.052       16.164       15.859        15.855
Premature/Multiples * Severity Level 2........        9.619        8.708        7.919        7.456         7.447
Premature/Multiples * Severity Level 1                6.761        6.055        5.326        4.813         4.803
 (Lowest).....................................
Term * Severity Level 5 (Highest).............      148.077      146.787      145.765      145.664       145.663
Term * Severity Level 4.......................       17.881       16.823       15.955       15.592        15.587
Term * Severity Level 3.......................        6.615        5.913        5.209        4.662         4.651
Term * Severity Level 2.......................        3.999        3.438        2.791        2.206         2.195
Term * Severity Level 1 (Lowest)..............        1.717        1.385        0.811        0.379         0.371
Age 1 * Severity Level 5 (Highest)............       55.723       55.014       54.446       54.372        54.371
Age 1 * Severity Level 4......................        9.659        9.128        8.675        8.484         8.481
Age 1 * Severity Level 3......................        3.494        3.127        2.751        2.528         2.524
Age 1 * Severity Level 2......................        2.210        1.911        1.570        1.327         1.323
Age 1 * Severity Level 1 (Lowest).............        0.603        0.465        0.288        0.206         0.205
Age 0 Male....................................        0.723        0.672        0.641        0.584         0.582
Age 1 Male....................................        0.168        0.148        0.127        0.101         0.100
----------------------------------------------------------------------------------------------------------------


     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.

[[Page 75506]]

 
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.
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.

[[Page 75507]]

 
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.
------------------------------------------------------------------------

d. Cost-Sharing Reductions Adjustments (Sec.  153.320)
    We propose to continue including an adjustment for the receipt of 
cost-sharing reductions in the model to account for increased plan 
liability due to increased utilization of health care services by 
enrollees receiving cost-sharing reductions. The proposed cost-sharing 
reduction adjustment factors for 2017 risk adjustment are unchanged 
from those finalized in the 2016 Payment Notice and are set forth in 
Table 7. These adjustments are effective for 2015, 2016, and 2017 risk 
adjustment, and are multiplied against the sum of the demographic, 
diagnosis, and interaction factors. We will continue to evaluate this 
adjustment in future years as more data becomes available. We seek 
comment on this approach.

               Table 7--Cost-Sharing Reduction Adjustment
------------------------------------------------------------------------
                                                   Induced utilization
       Household income             Plan AV               factor
------------------------------------------------------------------------
                     Silver Plan Variant Recipients
------------------------------------------------------------------------
100-150% of FPL..............  Plan Variation                       1.12
                                94%.
150-200% of FPL..............  Plan Variation                       1.12
                                87%.
200-250% of FPL..............  Plan Variation                       1.00
                                73%.
>250% of FPL.................  Standard Plan                        1.00
                                70%.
------------------------------------------------------------------------
                      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

[[Page 75508]]

 
>300% of FPL.................  Gold (80%)......                     1.07
>300% of FPL.................  Silver (70%)....                     1.12
>300% of FPL.................  Bronze (60%)....                     1.15
------------------------------------------------------------------------

e. Model Performance Statistics (Sec.  153.320)
    To evaluate the model's 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.\9\ Because we are proposing to blend the 
coefficients from separately solved models based on MarketScan 2012 and 
2013 data (and 2012, 2013, and 2014 data in the final rule), 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.
---------------------------------------------------------------------------

    \9\ 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                                2012                     2013
----------------------------------------------------------------------------------------------------------------
Platinum Adult................................................                   0.3936                   0.3820
Platinum Child................................................                   0.2855                   0.2774
Platinum Infant...............................................                   0.2844                   0.3215
Gold Adult....................................................                   0.3895                   0.3775
Gold Child....................................................                   0.2804                   0.2722
Gold Infant...................................................                   0.2823                   0.3195
Silver Adult..................................................                   0.3858                   0.3735
Silver Child..................................................                   0.2757                   0.2674
Silver Infant.................................................                   0.2808                   0.3182
Bronze Adult..................................................                   0.3836                   0.3713
Bronze Child..................................................                   0.2732                   0.2649
Bronze Infant.................................................                   0.2807                   0.3181
Catastrophic Adult............................................                   0.3836                   0.3712
Catastrophic Child............................................                   0.2732                   0.2648
Catastrophic Infant...........................................                   0.2807                   0.3181
----------------------------------------------------------------------------------------------------------------

f. Overview of the Payment Transfer Formula (Sec.  153.320)
    We do not propose to alter our payment transfer methodology. Plan 
average risk scores will continue to 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) will be calculated after issuers have completed 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 will 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
    Although we do not propose to change the payment transfer formula 
from what was finalized in the 2014 Payment Notice (78 FR 15430 through 
15434), we believe it would be useful to republish the formula in its 
entirety, since, as noted above, 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:

[[Page 75509]]

[GRAPHIC] [TIFF OMITTED] TP02DE15.002


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.

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.
g. State-Submitted Alternate Risk Adjustment Methodology
    The Commonwealth of Massachusetts has expressed interest in having 
an HHS-operated risk adjustment program, beginning in the 2017 benefit 
year. If HHS operates risk adjustment in Massachusetts for 2017 using 
the Federally certified methodology we use in all States in which we 
operate risk adjustment, we would announce this in the final rule.
h. Risk Adjustment User Fee (Sec.  153.610(f))
    As noted above, 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 with the 
meaning of Sec.  153.20 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 2016 Payment Notice, we estimated Federal administrative 
expenses of operating the risk adjustment program to be $1.75 per 
enrollee per year, based on our estimated contract costs for risk 
adjustment operations. For the 2017 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 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 2017 will be approximately 
$52 million, and that the risk adjustment user fee would be $1.80 per 
enrollee per year. The risk adjustment user fee contract costs for 2017 
include costs related to 2017 risk adjustment data validation, and are 
slightly higher than the 2016 contract costs as the result of some 
contracts that were rebid. We do not anticipate Massachusetts' decision 
to use the Federal risk adjustment methodology will substantially 
affect the risk adjustment user fee rate for 2017.
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. In the 2016 Payment 
Notice, we established the reinsurance payment parameters and uniform 
reinsurance contribution rate for the 2016 benefit year and certain 
clarifying provisions related to the operation of the reinsurance 
program.
a. Decreasing the Reinsurance Attachment Point for the 2016 Benefit 
Year
    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 non-grandfathered, individual market issuers for 
high-risk claims that provides for the equitable allocation of funds. 
In the Premium Stabilization Rule (77 FR 17228), we provided that 
reinsurance payments to issuers of reinsurance-eligible plans 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.
    We finalized in the 2015 Payment Notice (79 FR 13777) that HHS will 
use

[[Page 75510]]

any excess contributions for reinsurance payments for a benefit year by 
increasing the coinsurance rate for that benefit year up to 100 percent 
before rolling over any remaining funds in the next year. If any 
contribution amounts remain after calculating reinsurance payments for 
the 2016 benefit year (and after HHS increases the coinsurance rate to 
100 percent for the 2016 benefit year), we propose to decrease the 2016 
attachment point of $90,000 to pay out any remaining contribution 
amounts in an equitable manner for the 2016 benefit year. We believe 
that expending all remaining reinsurance contribution funds as payments 
for the 2016 benefit year will support the reinsurance program's goals 
of promoting nationwide premium stabilization and market stability in 
the early years of Exchange operations while providing issuers with 
incentives to continue to effectively manage enrollee costs. The final 
attachment point and coinsurance rate for the 2016 benefit year will be 
calculated based on total available reinsuance collections and accepted 
reinsurance payment requests. We seek comment on this proposal.
b. Audit Authority Extends to Entities That Assist Contributing 
Entities (Sec.  153.405(i))
    In accordance with Sec.  153.405(i), HHS or its designee has the 
authority to audit a contributing entity to assess compliance with the 
reinsurance program requirements. In 2014, HHS implemented a 
streamlined approach through which a contributing entity, or a third 
party such as a third party administrator or an administrative 
services-only contractor acting on behalf of a contributing entity, 
could register on Pay.gov, calculate the annual enrollment count and 
schedule reinsurance contribution payments. During the 2014 
contribution submission process, many third party administrators and 
administrative services-only contractors assisted contributing entities 
by calculating the contributing entity's annual enrollment count and 
maintaining the records necessary to validate that enrollment. To 
ensure that reported annual enrollment counts are calculated correctly 
in accordance with Sec. Sec.  153.405(d) through 153.405(g) and 
applicable guidance, we propose to amend Sec.  153.405(i) to specify 
that the audit authority extends to any third party administrators, 
administrative services-only contractors, or other third parties that 
complete any part of the reinsurance contribution submission process on 
behalf of contributing entities or otherwise assist contributing 
entities with compliance with the requirements for the transitional 
reinsurance program. This would include third party administrators, 
administrative services-only contractors or other third parties that 
provide contributing entities with their annual enrollment counts or 
maintain records to substantiate the annual enrollment counts, even if 
the third party does not submit the annual enrollment count to HHS. 
Additionally, we propose to amend Sec.  153.405(i) to specify that a 
contributing entity that chooses to use a third party administrator, 
administrative services-only contractor, or other third party to 
complete the reinsurance contribution submission process on its behalf 
must ensure that this third party administrator, administrative 
services-only contractor, or other third party cooperate with any audit 
under this section. Contributing entities, not third party 
administrators, administrative services-only contractors, or other 
third parties, remain responsible for the payment of reinsurance 
contributions. We seek comment on these amendments.
4. Provisions for the Temporary Risk Corridors Program
    This section contains proposals related to the temporary risk 
corridors program, and therefore applies only to issuers of QHPs, as 
defined at Sec.  153.500, with respect to the benefit years 2014 
through 2016.
a. Risk Corridors Payment Methodology (Sec.  153.510(g))
    To ensure the integrity of data used in risk corridors and MLR 
calculations, in prior guidance \10\ we indicated that we would propose 
in the HHS Notice of Benefit and Payment Parameters for 2017 an 
adjustment to correct for any inaccuracies in risk corridors payment 
and charge amounts that could result from issuers reporting a certified 
estimate of cost-sharing reductions on the 2014 MLR and Risk Corridors 
Annual Reporting Form.\11\ The use of a certified estimate that is 
lower than the actual cost-sharing reductions provided would affect the 
MLR calculation and the risk corridors financial transfers by 
increasing incurred claims and allowable costs, thereby increasing the 
MLR and potentially increasing the risk corridors payment or lowering 
the risk corridors charge. We believe that requiring an update of these 
reported amounts through recalculation of the risk corridors and MLR 
amounts for the 2014 benefit year will be disruptive to the market and 
consumers, as well as administratively burdensome and difficult to 
operationalize for issuers and HHS. Therefore, consistent with our 
earlier guidance, we are proposing to add a new paragraph (g) to the 
risk corridors payment methodology set forth in Sec.  153.510 to 
propose that if the issuer reported a certified estimate of 2014 cost-
sharing reductions on its 2014 MLR and Risk Corridors Annual Reporting 
Form that is lower than the actual cost-sharing reductions provided (as 
calculated under Sec.  156.430(c) for the 2014 benefit year, which will 
take place in the spring of 2016), HHS would make an adjustment to the 
amount of the issuer's 2015 benefit year risk corridors payment or 
charge measured by the full difference between the certified estimate 
reported and the actual cost-sharing reductions provided as calculated 
under Sec.  156.430(c) in order to address the impact of the inaccurate 
reporting on the risk corridors and MLR calculations for the 2014 
benefit year. We seek comment on this proposal.
---------------------------------------------------------------------------

    \10\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Advance-CSR-Payment-and-RC-MLR-submission_6192015.pdf.
    \11\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Advance-CSR-Payment-and-RC-MLR-submission_6192015.pdf
---------------------------------------------------------------------------

b. Risk Corridors Data Requirements (Sec.  153.530)
    Due to the fact that the actual value of cost-sharing reductions 
provided by an issuer was not available in time for risk corridors and 
MLR reporting for 2014, for the purpose of adjusting allowable costs in 
the risk corridors calculation and incurred claims in the MLR 
calculation for 2014, HHS instructed issuers to report the amount of 
the cost-sharing reduction portion of the advance payments received by 
the issuer for 2014 (to the extent not reimbursed to the provider 
furnishing the item or service).\12\ Additionally, issuers were 
permitted to report a certified estimate of the amount of cost-sharing 
reductions provided in 2014 (to the extent not reimbursed to the 
provider furnishing the item or service) in their risk corridors and 
MLR reporting for the 2014 benefit year.
---------------------------------------------------------------------------

    \12\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Advance-CSR-Payment-and-RC-MLR-submission_6192015.pdf
---------------------------------------------------------------------------

    We propose to amend Sec.  153.530 to add a new paragraph 
(b)(2)(iii) to require an issuer to adjust the cost-sharing reduction 
amount it reports on its 2015 risk corridors and MLR forms by the 
difference (if any) between the reported cost-sharing reduction amount 
used to adjust allowable costs and

[[Page 75511]]

incurred claims on the 2014 MLR Annual Reporting Form and the actual 
cost-sharing reductions provided by the issuer for the 2014 benefit 
year (as calculated under Sec.  156.430(c) for the 2014 benefit year, 
which will take place in the spring of 2016). Issuers must report the 
amount as calculated under Sec.  156.430(c) when reporting risk 
corridors and MLR for the applicable benefit year. As discussed 
elsewhere in this preamble, we are proposing to modify the issuer data 
reporting requirements in Sec.  153.710(h)(1)(iii) to reflect this 
change.
    In addition, in the May 23, 2012 Premium Stabilization Rule (77 FR 
17220), we defined ``allowable costs'' to reference the MLR term 
``incurred claims'' and to include quality improvement activity 
expenditures as defined in the MLR rule. Incurred claims, as defined in 
Sec.  158.140 for the MLR program, are generally comprised of claims 
incurred during the reporting year and paid through the applicable run-
out period beyond the end of the year, plus the liabilities and 
reserves estimating claims incurred during the reporting year but still 
unpaid at the end of the run-out period, with certain other 
adjustments.
    Thus, the MLR definition of incurred claims relies only on reserves 
and liabilities at the end of the reporting year, rather than a trued 
up year-over-year change in reserves and liabilities. In the MLR 
calculation, these drawbacks are mitigated to some extent because the 
MLR calculation is based on 3 years of data, and consequently the 
estimates of unpaid claims are trued up over the following 2 years. 
However, because the risk corridors calculation is based on only a 
single year of data, an issuer's estimate of unpaid claims is never 
trued up, and consequently any inaccuracy in these estimates can have a 
significant impact on the accuracy of the risk corridors payment or 
charge calculation.
    Therefore, to preserve the integrity of the risk corridors program, 
we propose to amend Sec.  153.530 to add a new paragraph (b)(2)(iv) to 
require issuers to adjust the claims reported as allowable costs for 
the 2015 and later benefit years by the amount by which the issuer's 
estimate of unpaid claims for the preceding benefit year exceeded (or 
fell below) the actual payments that the issuer made after the date of 
the estimate for claims attributable to the preceding benefit year. For 
example, if in calculating its 2014 allowable costs, an issuer 
overestimated the amount of claims it incurred in 2014 that were unpaid 
as of March 31, 2015, then under this proposal, in calculating its 2015 
allowable costs, the issuer would be required to subtract the amount by 
which its March 31, 2015 claims estimate exceeded the actual payments 
for 2014 claims that the issuer made between March 31, 2015 and June 
30, 2016 (the claims reserves and liabilities valuation dates for the 
2014 and 2015 benefit years, respectively). We seek comment on the most 
appropriate way to true up estimates of unpaid claims for 2016. For 
example, we could provide for a 2017 payment or charge (calculated with 
2018 MLR), provide for a simplified true-up process, require that the 
2016 estimate be based on actual 2014 and 2015 amounts, or provide for 
no true-up at all in the final year.
5. Distributed Data Collection for the HHS-Operated Programs
a. Interim Dedicated Distributed Data Environment Reports (Sec.  
153.710(d))
    Effective for the 2016 benefit year, we propose deleting Sec.  
153.710(d), which sets forth an interim discrepancy reporting process 
by which an issuer must notify HHS of any discrepancy it identifies 
between the data to which the issuer has provided access to HHS through 
its dedicated distributed data environment (that is, an issuer's EDGE 
server) and the interim dedicated distributed data environment report, 
or confirm to HHS that the information in the interim report accurately 
reflects the data to which the issuer has provided access to HHS 
through its dedicated distributed data environment in accordance with 
Sec.  153.700(a) for the timeframe specified in the report. Many 
issuers viewed the interim discrepancy process for the 2014 benefit 
year as an additional burden and an administrative reporting exercise 
that they had to complete in order to preserve their appeal rights. The 
process also required significant resources and extensive support from 
HHS. Additionally, the information collected during the 2014 interim 
formal discrepancy process largely focused on the problems that issuers 
were encountering with the data submission process, as opposed to 
issues involving the dedicated distributed data environment report 
matching the data the issuer made accessible in its environment. HHS is 
committed to working with issuers prior to the data submission deadline 
to address any data issues so that reinsurance payment and risk 
adjustment transfer calculations can be made accurately and timely. 
After the initial submission period and prior to the data submission 
deadline (that is, April 30 of the year following the applicable 
benefit year), issuers should identify any problems that the issuer is 
experiencing in loading complete and accurate data; HHS must know about 
these data issues during this period to assist issuers in addressing 
these issues prior to the data submission deadline and in advance of 
reinsurance payment and risk adjustment transfer calculations. 
Throughout the data collection period, HHS will continue to maintain a 
help desk to assist issuers with data submission errors and to provide 
technical assistance. We believe that removing the requirement to file 
an interim discrepancy report starting in the 2016 benefit year will 
alleviate the administrative burden on issuers and HHS, as well as 
streamline outreach and communications during the data submission 
window. In light of this proposal, we propose to remove any cross-
references to the interim discrepancy reporting process currently 
codified at Sec.  153.710(d) in Sec. Sec.  153.710 and 156.1220. We 
also propose conforming amendments to redesignate paragraph (e) as 
paragraph (d), as well as to revise and redesignate paragraph (f) as 
(e). We seek comment on this proposal and the proposed effective date.
b. Evaluation of Quality and Quantity of EDGE Data Submissions (Sec.  
153.710(f))
    Under Sec.  153.740(b), if an issuer of a risk adjustment covered 
plan fails to provide HHS with access to the required data in a 
dedicated data environment 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. 
Similarly, under Sec. Sec.  153.420 and 153.740(a), an issuer of a 
reinsurance-eligible plan will forfeit reinsurance payments it 
otherwise might have received if the issuer fails to establish a 
dedicated data environment or fails to meet certain data requirements. 
HHS released guidance on April 24, 2015, entitled ``Evaluation of EDGE 
Data Submissions'' describing the approach it would use, starting with 
data submissions for the 2014 benefit year, to evaluate whether an 
issuer provided access in a dedicated data environment to data that was 
sufficient for HHS to calculate reinsurance payments and apply the HHS 
risk adjustment methodology.\13\ The approach evaluated the sufficiency 
of an issuer's data in terms of the quantity and quality of the data. 
In this rulemaking, we propose to

[[Page 75512]]

codify this practice for future benefit years to support the integrity 
of payments and charges made under the HHS-operated risk adjustment 
program and payments under the reinsurance program, both of which 
depend upon the submission of accurate and complete data by issuers to 
their EDGE servers.
---------------------------------------------------------------------------

    \13\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-guidance-42415-final.pdf.
---------------------------------------------------------------------------

    Consistent with the approach for review of 2014 benefit year data, 
to determine if an issuer meets data quantity standards, HHS would 
compare an issuer's self-reported baseline data on its total enrollment 
and claims counts by market to the issuer's data submitted to its 
dedicated data environment. An issuer with a low enrollment count 
following the submission deadline would be subject to a default risk 
adjustment charge under Sec.  153.740(b). An issuer with a low claims 
count following the submission deadline would be subject to a default 
risk adjustment charge if the default charge is lower than the charge 
it would have received through the risk adjustment transfer 
calculation. Additionally, an issuer with either a low enrollment count 
or a low claims count would forgo reinsurance payments for any claims 
that it failed to submit. HHS proposes to set forth in guidance, on an 
annual basis, the appropriate threshold by which HHS will deem data 
sufficient as to quantity for a given benefit year. HHS will also 
specify in guidance the format and timeline for submission of baseline 
data to HHS.
    To determine if an issuer meets the data quality standards required 
for HHS to calculate reinsurance payments and apply the HHS risk 
adjustment methodology, HHS proposes to perform an outlier analysis 
using select metrics that target reinsurance data quality and risk 
adjustment data quality. For the 2014 benefit year, HHS used the 
following five key metrics: Percentage of all enrollees with at least 
one HCC; average number of conditions per enrollee with at least one 
HCC; issuer average risk score; percentage of individual market 
enrollees with reinsurance payments; and average reinsurance payment 
per enrollee for which the issuer would receive reinsurance payments. 
Similar to data quantity, HHS plans to describe in guidance, on an 
annual basis, the metrics used for a given benefit year. An issuer may 
be assessed a risk adjustment default charge if it does not meet data 
quality standards on any of the risk adjustment metrics and may forfeit 
reinsurance payments it might otherwise have received if it does not 
meet data quality standards for any of the reinsurance metrics.
    HHS would conduct these data quality and quantity analyses after 
the deadline for submission of data specified in Sec.  153.730 (that 
is, April 30, of the year following the applicable benefit year). In 
Sec.  153.710, we propose to add a paragraph (f). In the new paragraph 
(f), we propose to specify that HHS will assess default risk adjustment 
charges based on these analyses no later than the date of the 
notification provided by HHS under Sec.  153.310(e) (that is, June 30 
of the year following the applicable benefit year); and to describe the 
responsibilities of issuers in relation to the quality and quantity 
analyses. In Sec.  153.710(f)(1), we propose to codify the requirement 
for issuers to provide baseline data on their total enrollment and 
claims counts by market, in a format and on a timeline that we intend 
to specify in guidance. In Sec.  153.710(f)(2), we propose that if HHS 
identifies a data anomaly that would cause the data that a risk 
adjustment covered plan or a reinsurance-eligible plan made available 
through a dedicated data environment to fail HHS's quality thresholds, 
the issuer may, within 10 calendar days of receiving notification of 
the anomaly, submit an explanation of the anomaly for HHS to consider 
in determining whether the issuer met the reinsurance and risk 
adjustment data requirements.
    HHS expects to perform informal data sufficiency analyses 
throughout the data submission process. Issuers are encouraged to 
provide explanations and corrected enrollment or claims counts at any 
time during the data submission process. The timeframe we propose in 
Sec.  153.710(f)(2) would apply to the final data sufficiency analyses 
only, which are performed following the deadline for submission of data 
specified in Sec.  153.730 (that is, April 30, of the year following 
the applicable benefit year). We seek comment on this proposal.
c. Data Requirements (Sec.  153.710(g))
    We are proposing to make conforming amendments to the introductory 
language at Sec.  153.710(g)(1) to remove the cross-references to the 
interim discrepancy reporting process currently codified at Sec.  
153.710(d). However, because we have learned in the first year of the 
implementation of the premium stabilization and Exchange financial 
assistance programs that flexibility is often needed in reporting the 
amounts on risk corridors and MLR forms, we also propose that HHS have 
the ability to modify these instructions in sub-regulatory guidance. 
Our intent in issuing any such guidance would be to avoid having the 
application of the instructions in exceptional circumstances lead to 
unfair or misleading financial reporting. We propose to capture this 
flexibility through a new proposed paragraph at Sec.  153.710(g)(3).
    We also propose to change Sec.  153.710(g)(1)(iii) to require an 
issuer to report the amount of cost-sharing reductions calculated under 
Sec.  156.430(c) in its annual MLR and risk corridors report, 
regardless of whether the issuer had any unresolved discrepancy under 
Sec.  156.1210, or whether the issuer had submitted a request for 
reconsideration under Sec.  156.1220(a)(1)(v). Additionally, consistent 
with the process outlined in Sec.  153.710(g)(2), we propose to require 
an issuer to adjust the cost-sharing reduction amount it reports on its 
2015 risk corridors and MLR forms by the difference (if any) between 
the reported cost-sharing reduction amount used to adjust allowable 
costs and incurred claims on the 2014 MLR Annual Reporting Form and the 
amount of cost-sharing reductions as calculated under Sec.  156.430(c) 
for the 2014 benefit year.
    Consistent with the approach currently outlined in Sec.  
153.710(g)(2), we propose to amend this paragraph to require an issuer 
to report any adjustment made or approved by HHS for any risk 
adjustment payment or charge, reinsurance payment, cost-sharing 
reduction payment to reflect actual cost-sharing reduction amounts 
received, or risk corridors payment or charge, where the adjustment has 
not been accounted for in a prior MLR and Risk Corridors Annual 
Reporting Form in the next following year. By way of example, if an 
issuer's risk adjustment charges or payments are adjusted as a result 
of the administrative appeals process, the issuer should adjust these 
reported amounts in the next MLR and risk corridors reporting cycle, 
after the appeal has been resolved. Similarly, if HHS makes changes to 
an issuer's risk adjustment charges or payments after the risk 
corridors and MLR reporting cycle has closed for the applicable 
reporting year, the issuer should adjust these reported amounts in the 
next MLR and risk corridors reporting cycle to account for the 
difference between the reported amounts and the amounts actually 
received or paid for the previous benefit year. However, if an issuer 
is notified about the modification during an open MLR and risk 
corridors submission period, it must report the modified amounts in 
that open reporting cycle.
    We also propose to clarify in Sec.  153.710(g)(1)(iii) that cost-
sharing reduction amounts to be reported under this section must 
exclude amounts reimbursed to providers of services or

[[Page 75513]]

items. This clarifying language is consistent with how the instructions 
for cost-sharing reductions amounts are reported under Sec.  
153.530(b)(2)(iii) (risk corridors data requirements) and Sec.  
158.140(b)(iii) (MLR data requirements).
    Lastly, we propose to revise paragraph (g)(1)(iv) to require that 
for medical loss ratio reporting only, issuers should report the risk 
corridors payment to be made or charge assessed by HHS, as reflected 
under Sec.  153.510.
d. Good Faith Safe Harbor
    In the second Program Integrity Rule, we finalized Sec.  
153.740(a), which permits HHS to impose civil money penalties upon 
issuers of risk adjustment covered plans and reinsurance-eligible plans 
for failure to adhere to certain standards relating to their dedicated 
distributed data environments. In the preamble to that rule, we stated 
that if we are able to determine that an issuer of a risk adjustment 
covered plan or reinsurance-eligible plan is making good faith efforts 
to comply with the standards set forth in Sec.  153.740(a), consistent 
with our policy codified at Sec.  156.800(c), we would not seek to 
impose CMPs for noncompliance with those standards during 2014 (78 FR 
65061). In the 2016 Payment Notice (80 FR 10780), we extended the good 
faith safe harbor to the 2015 calendar year, and stated that we would 
not apply the good faith safe harbor to non-compliance with dedicated 
distributed data environment standards applicable during the 2016 
calendar year, even where the non-compliance relates to data for the 
2015 benefit year. As we have previously said, we are not proposing to 
extend the good-faith safe harbor. Starting in the 2016 calendar year 
and beyond, civil money penalties may be imposed 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, even if the issuer has made good 
faith efforts to comply with these requirements.
e. 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. In the 2016 Payment Notice, 
we established how a default risk adjustment charge will be allocated 
among risk adjustment covered plans.
    As described in the second final Program Integrity Rule, the total 
risk adjustment default charge for a risk adjustment covered plan would 
equal a per member per month amount multiplied by the plan's 
enrollment.

Tn = Cn*En

Where:

Tn = total default risk adjustment charge for a plan n;
Cn = the PMPM amount for plan n; and
En = the total enrollment (total billable member months) 
for plan n.

    In the second final Program Integrity Rule, we provided that 
En could be calculated using an enrollment count provided by 
the issuer, using enrollment data from the issuer's MLR and risk 
corridors filings for the applicable benefit year, or other reliable 
data sources.
    In the 2015 Payment Notice, we determined that we would calculate 
Cn--the PMPM amount for a plan--equal to the product of the 
Statewide average premium (expressed as a PMPM amount) for a risk pool 
and the 75th percentile plan risk transfer amount expressed as a 
percentage of the respective Statewide average PMPM premiums for the 
risk pool. The nationwide percentile would reflect only plans in States 
where HHS is operating the risk adjustment program and would be 
calculated based on the absolute value of plan risk transfer amounts. 
The PMPM amount determined using the method described here would be 
multiplied by the non-compliant plan's enrollment, as determined using 
the sources finalized in the second final Program Integrity Rule, to 
establish the plan's total default risk adjustment charge.
    For the second year of risk adjustment, the 2015 benefit year, we 
are proposing to calculate Cn in the same manner, but 
increased to the 90th percentile plan risk transfer amount expressed as 
a percentage of the respective Statewide average PMPM premiums for the 
risk pool. We believe that the 75th percentile was reasonable for the 
initial year of risk adjustment, as we did not yet know the 
distribution of risk adjustment transfers and issuers were more likely 
to experience technical difficulties in establishing a dedicated 
distributed data environment. In the second year of risk adjustment, 
now that issuers have set up EDGE servers and participated in the 
calculation of risk adjustment transfers, we believe that adjusting the 
default charge upwards to the 90th percentile of plan risk transfer 
amounts expressed as a percentage of the respective Statewide average 
PMPM premiums for the risk pool will encourage continued compliance 
with risk adjustment data submission requirements. We are concerned 
that, absent this change, some issuers may prefer receiving a default 
charge at the 75th percentile over participating in the risk adjustment 
program; a default charge at this level lacks sufficient deterrent 
value. In contrast, we believe the proposed 90th percentile default 
charge will adequately incentivize issuers to participate in the risk 
adjustment program. We seek comment on this approach.
    For the 2016 benefit year, we propose a separate calculation of 
Cn for issuers where En Statewide, in the 
individual and small group markets combined, is 500 billable member 
months or less. For these issuers, we are proposing to calculate 
Cn, or the PMPM charge for a plan, as 14 percent of premium, 
which we have calculated as the mean charge as a percent of premium of 
issuers with 500 billable member months or fewer in the 2014 benefit 
year in the small group market. We are basing the charge itself on the 
experience of small group issuers in the 2014 benefit year, as we 
believe that individual market issuers are more likely to set up an 
EDGE server because of the availability of reinsurance. Limiting the 
applicability in the 2016 benefit year of this default charge to 
issuers with 500 billable member months or fewer is intended to ensure 
that the only issuers with this option are ones that are so small that 
their removal from the overall risk adjustment risk pool would have a 
minimal impact on transfers nationwide. In 2014, approximately 125 
issuers would have had fewer than 500 member months in the individual 
and small group markets combined. Of those approximately 125 small 
issuers, 80 were assessed risk adjustment charges greater than the 
proposed default charge of 14 percent of premium PMPM. Those charges 
amounted to less than 0.09 percent of total risk adjustment charges 
assessed nationally. Assuming every one of those issuers elect to 
accept the proposed 14 percent default risk charge, and none of

[[Page 75514]]

the small issuers that owed risk adjustment payments, or with charges 
below 14 percent of premium PMPM, did so (which we believe unlikely, 
due to the administrative expenses of setting up an EDGE server), the 
assessment of the proposed 14 percent of premium default charge on 
those 80 issuers (and only those 80 issuers) would have resulted in a 
0.05 percent (that is, one twentieth of one percent) reduction in risk 
adjustment charges collected nationally. Because issuers of this size 
are immaterial to the overall risk adjustment risk pools and have a 
disproportionately high operational burden to comply with risk 
adjustment data submission requirements, we believe that a separate 
default charge for these issuers would promote efficiency and data 
quality in the risk adjustment program. We propose to establish this 
risk adjustment default charge as the mean charge in the small group 
for these small issuers, or 14 percent of statewide average premium 
PMPM, to compensate on average for the absence of these immaterial 
amounts in the affected risk pools. We intend that this policy would 
apply only to the very smallest issuers, in recognition of the 
disproportionately high operational burden on these issuers, and seek 
comment on this approach.
f. Insolvent Issuers
    We are aware that a health insurance issuer may become insolvent or 
exit a market during a benefit year. In some cases, another entity, 
such as another issuer or liquidator may take over the issuer's 
operations, or a State guaranty fund may become responsible for paying 
claims for the insolvent issuer. In some instances when this occurs, 
both the entity seeking to acquire business from an insolvent issuer 
and the insolvent issuer lack a full year's data to submit for the risk 
adjustment or reinsurance programs.
    To address this concern, we propose to clarify that an entity 
acquiring or entering into another arrangement with an issuer to serve 
the current enrollees under a plan, or a State guaranty fund that is 
responsible for paying claims on behalf of the insolvent issuer, with 
substantially the same terms may accrue the previous months of claims 
experience for purposes of risk adjustment and reinsurance to fully 
reflect the enrollees' risk and claims costs. We propose the 
``substantially the same'' standard because we understand that in many 
of these situations an acquiring entity's platform may require some 
adjustments to the plan arrangements. To meet this standard would 
require the carryover of accumulators for deductibles and annual 
limitations on cost sharing. If the ``substantially the same'' standard 
is met, and the insolvent issuer and acquiring entity agree that the 
acquiring entity will accrue the previous months of claims experience, 
the acquiring entity must take responsibility for submitting to HHS 
complete and accurate claims and baseline information for that benefit 
year (including data from the insolvent issuer) in accordance with 
HHS's operational guidance. We also recognize that guaranty funds may 
not meet all of the requirements to be considered a risk adjustment 
covered plan or reinsurance eligible plan (for example, they may not 
meet the definition of ``health insurance issuer''), and so we propose 
to permit a guaranty fund to participate in those programs 
notwithstanding these definition, to the extent it has taken over 
liability for a risk adjusted covered plan or reinsurance eligible plan 
during a benefit year.
    We seek comment on these policies, including with respect to 
permissible ways in which the acquiring entity's arrangements may 
differ and other ways of ensuring the submission of the data necessary 
for HHS to calculate the risk adjustment financial transfer amounts and 
the reinsurance payment amounts when another party will take over 
operations of the insolvent issuer, or pay claims on behalf of the 
insolvent issuer, during a benefit year. We also solicit comments on 
whether additional flexibility is needed with respect to the data 
submission requirements for the reinsurance and risk adjustment 
programs, such as with respect to the definition of a ``paid claim'' to 
account for situations when an issuer is unable to pay claims for 
covered services, for example, due to insolvency.

E. 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. The amendments in this part would apply to rates filed 
during the 2016 calendar year for coverage effective on or after 
January 1, 2017.
2. Disclosure and Review Provisions
a. Rate Increases Subject To Review (Sec.  154.200)
    In Sec.  154.200, we propose amending paragraph (c)(2) to provide 
that a rate increase for single risk pool coverage \14\ beginning on or 
after January 1, 2017 meets or exceeds the applicable threshold for 
review if the average increase, including premium rating factors 
described in Sec.  147.102 of the subchapter, for all enrollees 
weighted by premium volume for any plan within the product meets or 
exceeds the applicable threshold. We previously provided that a rate 
increase for single risk pool coverage beginning on or after January 1, 
2017 meets or exceeds the applicable threshold if an increase in the 
plan-adjusted index rate for any plan within the product meets or 
exceeds the applicable threshold.
---------------------------------------------------------------------------

    \14\ The phrase ``single risk pool coverage'' is used to 
describe non-grandfathered health insurance coverage in the 
individual or small group (or merged) market that is subject to all 
of the single risk pool provisions at 45 CFR 156.80. Although we are 
proposing that student health insurance plans be subject to the 
index rating methodology specified in 45 CFR 56.80(d), such plans 
would not have to be included in an issuers' individual (or merged) 
market single risk pool. Rather they could be included in one or 
more separate risk pools. Student health plan issuers submit the 
required rate filing information using the Rate Review Justification 
Template rather than the Unified Rate Review Template. Student 
health insurance plans are referred to as ``non-single risk pool 
coverage'' for purposes of the requirements established in 45 CFR 
part 154.
---------------------------------------------------------------------------

    We propose this change under paragraph (c)(2) because the plan-
adjusted index rate does not reflect changes to adjustments for rating 
area, family size, age, or tobacco factors. Therefore, it would be 
possible for an issuer to change geographic rating area factors such 
that members in a certain rating area receive a larger increase, even 
though the overall rate increase would not be subject to rate review 
because the plan-adjusted index rate does not increase by 10 percent or 
more. We believe the annual review of unreasonable increases must 
include review of the underlying rates that are used to develop the 
premiums, as opposed to the actual premiums themselves. We do not 
expect this to result in additional rate increases that meet the 
threshold, but will measure rate increases in plans more accurately. We 
seek comment on this proposal. Consistent with the approach finalized 
in the 2016 Payment Notice (80 FR 10781), we note that starting with 
rates filed for single risk pool coverage beginning on or after January 
1, 2017, rate increases would be calculated at the plan level as 
opposed to the product level when determining whether an increase is 
subject to review. We are not proposing any changes to that policy.
b. Submission of Rate Filing Justification (Sec.  154.215)
    Under Sec.  154.215, health insurance issuers are currently 
required to submit a Rate Filing Justification for all single

[[Page 75515]]

risk pool coverage products (including new or discontinued products) 
when any plan within a product in the individual or small group (or 
merged) market is subject to a rate increase, regardless of the size of 
the increase. This requirement was established, in part, to carry out 
the Secretary's responsibility, in conjunction with the States, under 
section 2794(b)(2)(A) of the PHS Act to monitor premium increases of 
health insurance coverage offered through an Exchange and outside of an 
Exchange beginning in 2014. However, our experience with the rate 
review program has shown that premium increases cannot reasonably be 
monitored without evaluating the net effect on premiums, including the 
impact of rate decreases, plans with unchanged rates, and new plans' 
rates. We therefore propose to revise paragraphs (a) and (b) to address 
this gap in information.
    We propose to revise paragraph (a)(1) to require health insurance 
issuers to submit the Unified Rate Review Template (also known as Part 
I of the Rate Filing Justification) for all single risk pool coverage 
products in the individual or small group (or merged) market, 
regardless of whether any plan within a product is subject to a rate 
increase. We note that most issuers offering single risk pool coverage 
already submit a Unified Rate Review Template because:
     A plan within the issuer's single risk pool has a rate 
increase;
     The issuer's State regulator requires submission of the 
Rate Filing Justification for all rates;
     The issuer is seeking to offer a QHP through a Federally-
Facilitated or State Partnership Exchange; or
     The issuer chooses to use the Rate Filing Justification to 
satisfy the requirement to annually set an index rate.
    We believe that requiring the submission of the Unified Rate Review 
Template, rather than requiring submission of a new document, will 
reduce administrative burden for issuers while providing the Secretary 
and the States with the information necessary to more effectively carry 
out their responsibilities to monitor premium increases inside and 
outside of Exchanges.
    We propose to revise paragraph (a)(2) so that issuers must submit a 
Unified Rate Review Template and an Actuarial Memorandum (also known as 
Parts I and III of the Rate Filing Justification) when a plan within a 
product is subject to a rate increase. The Unified Rate Review Template 
and Actuarial Memorandum are submitted at the risk pool level, but the 
requirement to submit is based on increases at the plan level. This is 
the current policy but we are revising regulatory text for clarity.
    We propose to revise paragraph (a)(3) to provide that all three 
parts of the Rate Filing Justification (that is, the Unified Rate 
Review Template, a written description justifying a rate increase, and 
the Actuarial Memorandum) must be filed when a plan within a product 
has a rate increase that is subject to review. The information is 
submitted at the risk pool level, but the requirement to submit is 
based on increases at the plan level. This is the current policy but we 
are revising regulatory text for clarity.
    We also propose to revise paragraph (b) to provide that a Unified 
Rate Review Template, a written description justifying a rate increase, 
and rate filing documentation (commonly referred to as an Actuarial 
Memorandum) are part of a Rate Filing Justification. One or all of 
those parts of the Rate Filing Justification may be required by CMS and 
the State, depending on the change, if any, to plan rates. We also 
propose to remove and reserve paragraph (c), as it would be unnecessary 
in light of the proposed amendments to paragraphs (a) and (b).
    These proposed amendments and clarifications will ensure that the 
rate review process is transparent regardless of whether coverage is 
included in the individual market or small group market single risk 
pool, and will allow HHS and the States to more effectively monitor 
premium increases for coverage offered through or outside of an 
Exchange. Furthermore, the proposed amendments and clarifications will 
introduce consistent submission requirements for all issuers of single 
risk pool coverage, regardless of whether the issuer is increasing, 
decreasing, or maintaining rates.
    We also remind issuers of student health insurance plans to use the 
Rate Review Justification (RRJ) module of the Health Insurance 
Oversight System (HIOS) to submit the required rate filing 
information.\15\ Even though we propose to amend Sec.  147.145 in this 
rulemaking (see III.C.4. of this preamble) to extend the index rate 
setting methodology to student health insurance plans for plan years 
beginning on or after January 1, 2017, we do not propose to change the 
form or manner of submission of rate filing information under 45 CFR 
part 154 for such coverage. In States without Effective Rate Review 
programs, issuers would be required to submit Preliminary 
Justifications for all student health insurance plans with rate 
increases subject to review to CMS by the earlier of the date that the 
issuer files the Preliminary Justification with the State or a date 
prior to implementation of the rate increase. In the States where CMS 
enforces the Public Health Service Act requirements, as amended by the 
Affordable Care Act, issuers must submit rate filings for student 
health insurance plan coverage for (a) rate increases of 10 percent or 
more into the HIOS RRJ module; and (b) rate increases of less than 10 
percent into the HIOS Document Collection Form Filing Module.
---------------------------------------------------------------------------

    \15\ See Rate Review Student Health Plans FAQ published on 
August 12, 2015. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Rate_Review_Student_Health_Plans_FAQ_20150812_Final.pdf.
---------------------------------------------------------------------------

    We propose to permit the Secretary to specify in guidance, as 
provided under Sec.  154.220(b)(2), different submission deadlines for 
Rate Filing Justifications for single risk pool coverage plans versus 
non-single risk pool coverage plans.
    In accordance with paragraph (h)(2), we intend to make public on an 
HHS 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' Freedom of 
Information Act regulations, 45 CFR 5.65. We intend to disclose such 
information for all single risk pool coverage proposed rate increases 
(regardless of whether the increase is subject to review) and for all 
final rate increases. We note that we currently make such information 
available to the public for single risk pool coverage proposed rate 
increases subject to review and all final rates. The disclosure of 
information for all single risk pool coverage proposed rate increases, 
rather than only proposed rate increases subject to review, will 
provide the public with more comprehensive information and increase the 
transparency of the rate setting process.
c. Timing of Providing the Rate Filing Justification (Sec.  154.220)
    Section 154.220 establishes time frames for required rate filing 
justifications. As previously discussed, we propose to collect a 
Unified Rate Review Template for all single risk pool coverage products 
in the individual or small group (or merged) market, regardless of 
whether any plan within a product is subject to a rate increase. We 
propose technical changes to the language in this section to align with 
this proposal to remove references to rate increases and clarify that 
the time frames listed pertain to all single risk

[[Page 75516]]

pool coverage products with or without rate changes. Specifically, we 
propose to revise the introductory language to this section with 
accompanying edits to the language in paragraphs (b) and (b)(1).
d. Submission and Posting of Final Justifications for Unreasonable Rate 
Increases (Sec.  154.230)
    We propose a technical change to paragraph (c)(2)(i). That 
paragraph currently includes a reference to Sec.  154.215(i) but no 
such paragraph exists. We propose to fix the typographical error and 
change the cross reference to Sec.  154.215(h).
e. 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 
(or merged) markets. In the 2016 Payment Notice (80 FR 10783), we 
provided that the criteria for determining whether a State has an 
Effective Rate Review program includes making rate information 
available to the public at a uniform time (rather than on a rolling 
basis) for proposed rate increases subject to review and all final rate 
increases, including those not subject to review (as applicable) for 
single risk pool coverage in the relevant market segment and without 
regard to whether coverage is offered through an Exchange or outside of 
an Exchange. As this was the first year for these uniform posting 
requirements, and because the uniform timelines were published by CMS 
well into 2015, CMS understands that some States had significant 
challenges in meeting the specified timelines for rates filed for 
coverage beginning on or after January 1, 2016. For rates filed for 
coverage beginning on or after January 1, 2017, we intend to make a 
proposed timeline for release of rate information for single risk pool 
coverage available for comment from States and other stakeholders in 
December and finalize the timeline no later than March. We believe the 
comment process will allow States and other stakeholders to identify in 
advance any challenges that the timeline may pose and allow us to make 
adjustments as may be necessary to accommodate State-specific needs and 
other considerations. We also believe this process will better support 
States that seek to operate an Effective Rate Review program in 
compliance with these requirements for rates filed for coverage 
beginning on or after January 1, 2017.
    We consider the posting of proposed rate increases that are subject 
to review and the posting of all final rate increases (including those 
not subject to review) for single risk pool coverage at a uniform time 
a criterion for a State retaining its designation as having an 
Effective Rate Review Program. We will continue to monitor States to 
ensure that single risk pool coverage rate filings are posted at a 
uniform time, in the relevant market segment and without regard to 
whether the coverage is offered through or outside of an Exchange, in 
accordance with these requirements and guidance issued by CMS.

F. 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 definition of 
``applicant'' for the small group market so that the term also includes 
an employer seeking eligibility to purchase coverage through a SHOP, 
without necessarily enrolling in that coverage themselves. The current 
definition of an applicant contemplates an employer, employee, or 
former employee seeking eligibility for enrollment in a QHP through the 
SHOP for himself or herself. For consistency with our existing 
regulations governing the SHOP application process at Sec. Sec.  
155.710 and 155.715 and for consistency with how the small group market 
typically works, we propose that the term applicant also include an 
employer who is seeking eligibility to purchase coverage through a 
SHOP, but who is not seeking to enroll in that coverage himself or 
herself.
    We also propose to amend Sec.  155.20 to add a definition for 
``Federal platform agreement'' to apply to this part. We propose to 
define a Federal platform agreement to mean an agreement entered into 
by a State Exchange and HHS, under which the State Exchange elects to 
rely on the Federal platform to carry out select Exchange functions.
    We also propose to modify the definitions of a ``small employer'' 
and ``large employer'' at Sec.  155.20 to align with the Protecting 
Affordable Coverage for Employees Act (Pub. L. 114-60), which was 
recently enacted, as further described in the preamble for Sec.  
144.103. As described in that section of the preamble, consistent with 
section 1304(b) of the Affordable Care Act and section 2791(e) of the 
PHS Act, we propose to codify that in the case of an employer that was 
not in existence throughout the preceding calendar year, the 
determination of whether the employer is a large employer or a small 
employer be based on the average number of employees that it is 
reasonably expected the employer will employ on business days in the 
current calendar year. We do not propose to change the applicability of 
the counting methodology under 4980H(c)(2) of the Code to these 
definitions, but we propose to eliminate language about the timing of 
its applicability, which will no longer be relevant when this rule is 
finalized.
2. General Standards Related to the Establishment of an Exchange
a. Election To Operate an Exchange After 2014 (Sec.  155.106)
    We propose to modify the timeframes for submission and approval of 
documentation specifying how an Exchange established by a State or a 
regional Exchange meets the Exchange approval standards (that is, the 
Exchange Blueprint). Based on our experience over the last two open 
enrollment periods, we believe the current Exchange Blueprint 
application deadlines for States intending to operate a State Exchange 
do not sufficiently balance the need to provide States with time to 
adequately prepare their Blueprint applications against the need to 
ensure HHS has sufficient time to accurately assess a State's progress 
and ability to timely build the necessary Exchange information 
technology. In our experience, the process for seeking approval to 
operate a State Exchange involves substantial technical assistance and 
collaboration between HHS and the State in developing plans to 
transition from one Exchange operational model and information 
technology infrastructure to another, including key milestones, 
deadlines, and contingency measures. Since the completion of some of 
these key milestones and deadlines would need to occur prior to the 
submission of the Blueprint application, we propose that we will make 
that technical assistance available and initiate the transition 
planning process following submission of a declaration letter from the 
State, as provided for in the Blueprint approval process. The 
declaration letter would serve as formal notification to HHS of a 
State's intent to pursue approval to operate a State Exchange, and will 
initiate coordination between the State and HHS on a transition plan. 
We would seek a declaration letter approximately 21 months prior to the 
beginning of the SBE's first annual enrollment and 9 months prior to 
the beginning of an SBE-FP's first annual open enrollment.
    In Sec.  155.106(a)(2), we propose to require States that are 
establishing a State Exchange (not including a State Exchange using the 
Federal platform for

[[Page 75517]]

select functions) to submit an Exchange Blueprint at least 15 months 
prior to the date the Exchange proposes to begin open enrollment as a 
State Exchange. We also propose in Sec.  155.106(a)(3) to increase the 
time that the State must have in effect an approved or conditionally 
approved Exchange Blueprint from 6.5 months to 14 months prior to the 
date the Exchange proposes to begin open enrollment as a State 
Exchange. We recognize that in some situations the open enrollment 
period may not have been established when Blueprints are due. 
Therefore, we propose in paragraph (a)(5), if the open enrollment 
period for the year the State intends to begin operating an SBE has not 
been established, a State should assume open enrollment will begin on 
the same date as open enrollment is to begin for the year in which they 
are submitting the Blueprint.
    We propose to revise paragraph (b) to clarify that HHS will operate 
the Exchange if a State Exchange ceases operations.
    We propose to add a paragraph (c) to establish requirements for a 
State that elects to operate an SBE-FP. These States must submit an 
Exchange Blueprint (or submit an update to an existing approved 
Exchange Blueprint) at least 3 months prior to the date open enrollment 
is to begin for the State as an SBE-FP; and must have in effect an 
approved, or conditionally approved, Exchange Blueprint and operational 
readiness assessment at least 2 months prior to the date on which the 
Exchange proposes to begin open enrollment as an SBE-FP. If the State 
Exchange has a conditionally approved Exchange Blueprint application, 
we propose that it would not be required to submit a new Blueprint 
application, but must submit any significant changes to that 
application for HHS approval at least 3 months prior to the date on 
which the Exchange proposes to begin open enrollment as an SBE-FP. Upon 
receipt of approval or conditional approval of the Exchange Blueprint 
or amended Blueprint, and prior to the start of the open enrollment 
period, we propose that these States must execute a Federal platform 
agreement and be required to coordinate with HHS on a transition plan.
    Lastly, we want to be clear that we are only proposing changes to 
the timelines for submission of the Blueprint application. We are not 
otherwise proposing any modifications to the information and documents 
that States must submit as part of the actual Exchange Blueprint 
application.
    We seek comment on these proposals.
b. Additional Required Benefits (Sec.  155.170)
    Section 1311(d)(3)(B) of the Affordable Care Act permits a State, 
at its option, to require QHPs to cover benefits in addition to the 
essential health benefits, but requires a State to make payments, 
either to the individual enrollee or to the issuer on behalf of the 
enrollee, to defray the cost of these additional State-required 
benefits. In the 2016 Payment Notice, we instructed States to select a 
new EHB base-benchmark plan to take effect beginning for the 2017 plan 
year. The final EHB base-benchmark plans selected as a result of this 
process have been made publicly available.\16\
---------------------------------------------------------------------------

    \16\ Available at https://downloads.cms.gov/cciio/FinalListofBMPs_15_10_21.pdf.
---------------------------------------------------------------------------

    Section 1311(d)(3)(B) of the Affordable Care Act refers to 
situations in which the State requires QHPs to cover benefits. That 
section is not specific to State statutes and we have interpreted that 
section to apply not only in cases of legislative action but also in 
cases of State regulation, guidance, or other State action. Therefore, 
we propose to reword Sec.  155.170(a)(2) to make clear that a benefit 
required by the State through action taking place on or before December 
31, 2011 is considered an EHB.
    In the EHB Rule (78 FR 12837 through 12838), we discussed Sec.  
155.170(a)(2), which implements section 1311(d)(3)(B) of the Affordable 
Care Act. In our discussion of that provision, we provided that 
``State-required benefits enacted on or before December 31, 2011 (even 
if not effective until a later date) may be considered EHB, which would 
obviate the requirement for the State to defray costs for these State-
required benefits.'' This policy continues to apply. Therefore, 
benefits required by a State through action taking place after December 
31, 2011 that directly apply to the QHPs are not considered EHB (unless 
enactment is directly attributable to State compliance with Federal 
requirements, as discussed below).
    Although benefits requirements enacted by States after December 31, 
2011 that directly apply to the QHP and that were not enacted for 
purposes of compliance with Federal requirements are not considered 
EHB,\17\ the base-benchmark plan might cover some of those non-EHB. 
Nonetheless, issuers must treat those benefits as they would other non-
EHB, such as those identified in Sec.  156.115(d) \18\ and the State 
must defray the cost. We propose to codify this interpretation in Sec.  
155.170(a)(2). We seek comment on this proposal.
---------------------------------------------------------------------------

    \17\ The 2016 Payment Notice provides that States are not 
expected to defray the cost of State-required benefits enacted on or 
after January 1, 2012 that were required in order to comply with new 
Federal requirements. (80 FR 10749, 10813 (Feb. 27, 2015)).
    \18\ An issuer of a plan offering EHB may not include routine 
non-pediatric dental services, routine non-pediatric eye exam 
services, long-term/custodial nursing home care benefits, or non-
medically necessary orthodontia as EHB.
---------------------------------------------------------------------------

    At Sec.  155.170(a)(3), we currently require the Exchange to 
identify which additional State-required benefits, if any, are in 
excess of EHB. We propose to amend paragraph (a)(3) to designate the 
State, rather than the Exchange, as the entity that identifies which 
State-required benefits are not EHB. We propose this change because we 
believe insurance regulators are generally more familiar with State-
required benefits. We believe each State should determine the 
appropriate State entity best suited to identify newly required 
benefits. Additionally, for consistency of terminology, we propose to 
amend paragraph (a)(3) to replace the reference to ``in excess of EHB'' 
to ``in addition to EHB.''
    In current Sec.  155.170(c)(2)(iii), we require QHP issuers to 
quantify the cost attributable to each additional State-required 
benefit and report their calculations to the Exchange. We also propose 
to designate the State as the entity that receives issuer calculations 
in paragraph (c)(2)(iii). Since the State is required by statute to 
remit a payment to an enrollee or issuer, we believe the calculation 
should be sent directly to the State rather than to the Exchange. We 
seek comment on this proposal.
    The 2016 Payment Notice specified that a State may need to 
supplement habilitative services if the base-benchmark plan does not 
cover such services. If a State supplements the base-benchmark plan, 
there is no requirement to defray the cost of the benefits added 
through supplementation, as long as the State imposes the requirement 
to comply with the Affordable Care Act or another Federal requirement. 
Examples of such Federal requirements include: Requirements to provide 
benefits and services in each of the 10 categories of EHB; requirements 
to cover preventive services; requirements to comply with the Mental 
Health Parity and Addiction Equity Act; and the removal of 
discriminatory age limits from existing benefits.
    In some States, the base-benchmark plan may be a large group (non-
Medicaid HMO) or State employee plan. We have received questions 
regarding State-required benefits that are

[[Page 75518]]

embedded in those large group (non-Medicaid HMO) base-benchmark plans. 
As stated earlier in this section, if the State-required benefit in 
question was required by State action after December 31, 2011, applies 
directly to the QHP, and was not enacted for purposes of compliance 
with Federal requirements, the benefit is not considered EHB, even if 
the benefit is embedded in the base-benchmark plan. However, a benefit 
required only in the large group market and reflected in a large group 
base-benchmark plan is not an EHB for QHPs offered in the individual or 
small group markets because such a benefit requirement does not apply 
directly to those plans, and to the extent it is included in the base-
benchmark plan, it may be ``substituted'' for, in accordance with Sec.  
156.115(b). Therefore, the State would not have to defray the cost of 
individual and small group market QHPs covering State-required benefits 
that are required in the large group market only. (However, to the 
extent the State permits large group plans to be sold as QHPs through 
the State's Exchange, the State would have to defray the cost of the 
large group QHPs covering the mandated benefit.) We note that plans 
subject to the EHB requirements offered in the individual and small 
group markets in those States would have to be substantially equal to 
the base-benchmark plan, and therefore may cover the State-required 
benefit as EHB since it is embedded in the base-benchmark plan. In such 
a case, the benefit is an EHB because it is covered by the base-
benchmark plan, but the cost of coverage by individual and small group 
QHPs does not have to be defrayed, because the State-required benefit 
does not apply directly to those QHPs.
    Some States have imposed new benefit requirements only on 
individual and small group plans that are not QHPs such that only 
individual and small group plans sold outside the Exchange must cover 
the State-required benefit. We note that a QHP generally may be sold 
outside the Exchanges in which case it would be subject to the new 
benefit requirements. States are cautioned, however, that imposing 
different benefit mandates depending on a plan's status as a QHP or 
because it is sold through the Exchange may violate section 1252 of the 
Affordable Care Act. Under this section, State standards or 
requirements implementing, or related to, standards or requirements in 
title I of the Act must be applied uniformly within a given insurance 
market. Thus, if a State requires that non-QHPs in the individual or 
small group market provide any benefits, under section 1252, the State 
must require QHPs sold through the Exchange to provide those same 
benefits, and consistent with our earlier stated policy at Sec.  
155.170(a)(2), States would generally be required to defray the cost of 
QHPs providing the required benefits if they were required through 
State action taking place after December 31, 2011.
    As noted earlier, the Protecting Affordable Coverage for Employees 
Act, enacted in October 2015, amended the definitions of small employer 
and large employer in section 1304(b) of the Affordable Care Act and 
section 2791(e) of the PHS Act such that a small employer is generally 
\19\ an employer with 1-50 employees, with the option for States to 
expand the definition of small employer to 1-100 employees.\20\ We have 
proposed amendments to Sec.  144.103 to reflect these statutory 
amendments.
---------------------------------------------------------------------------

    \19\ Prior to enactment of the Protecting Affordable Coverage 
for Employees Act, small employer was defined to mean, in connection 
with a group health plan with respect to a calendar year and a plan 
year, an employer who employed an average of at least 1 but not more 
than 100 employees on business days during the preceding calendar 
year and who employs at least 1 employee on the first day of the 
plan year. In case of plan years beginning before January 1, 2016, a 
State was able to elect to define small employer by substituting 
``50 employees'' for ``100 employees''. For ease of reference with 
regard to this section, we will refer to employers as having 1-50 or 
1-100 employees.
    \20\ States that elect to extend the small employer definition 
were requested to notify CMS of their election by October 30, 2015 
at [email protected].
---------------------------------------------------------------------------

    Several States have enacted benefit requirements that would apply 
to small group insurance plans offered to employers with 51-100 
employees, but not to employers with 1-50 employees. This may arise 
because the State-required benefit was designed to apply only in the 
large group market when the large group market included employers with 
more than 50 employees, but the State has since then availed itself of 
the option to define a ``small employer'' as an employer with 1-100 
employees.
    Section 2702 of the PHS Act and Sec.  147.104 generally require an 
issuer to offer all approved products to any individual or employer in 
the market for which the product was approved and to accept any 
individual or employer that applies for any approved product in a given 
market. If a State elects to expand the definition of small employer so 
that it covers employers with 1-100 employees, all products approved 
for sale in the small group market (defined by the State as 1-100 
employees) generally must be offered to employers with 1-100 employees. 
This effectively means that existing State benefits mandates that apply 
to insurance coverage sold to employers with 51-100 employees would 
then effectively also apply to all products sold to employers with 1-
100 employees. As long as the benefit was required by State action 
taken on or before December 31, 2011, the expansion of coverage would 
not trigger the requirement to defray, because the expansion was 
required to comply with Federal guaranteed availability laws. If a 
State does not opt to expand the definition of small employer to 1-100 
employees, then any State-required benefits applicable in the large 
group market (including to employers with 51-100 employees) would 
continue to not apply in the small group market. If a State-required 
benefit was imposed by State action taking place January 1, 2012 or 
later, then defrayal generally would be required.
3. General Functions of an Exchange
a. Functions of an Exchange (Sec.  155.200)
    We propose to amend Sec.  155.200(a) to include reference to 
subpart M, which establishes oversight and program integrity standards 
for State Exchanges, and subpart O, which establishes quality reporting 
standards for Exchanges. These subparts were not originally 
incorporated into this paragraph because they were finalized after 
Sec.  155.200(a) was finalized. We propose incorporating them now 
because we view them as providing important safeguards for consumers.
    We also propose to amend Sec.  155.200 by adding a paragraph (f) to 
address SBE-FPs. This arrangement is intended to permit a State 
Exchange to leverage existing Federal assets and operations by relying 
on HHS services for performing certain Exchange functions, particularly 
eligibility and enrollment functions. The SBE-FP would also rely on HHS 
to perform certain consumer call center functions and casework 
processes, and maintain related information technology infrastructure. 
The SBE-FP would retain responsibility for plan management functions, 
subject to certain rules requiring the SBE-FP to require its QHP 
issuers to comply with certain FFE standards governing QHPs and issuers 
(as proposed in Sec.  155.200(f)(2) of this proposed rule), and 
consumer support functions, subject to FFE rules governing consumer 
assistance functions.
    Under Sec.  155.200(f)(1), we propose that a State may receive 
approval or conditional approval to operate an SBE-FP under proposed 
Sec.  155.106(c) and meet its obligations under Sec.  155.200(a)

[[Page 75519]]

by entering into a Federal platform agreement with HHS. In the Federal 
platform agreement, an SBE-FP would indicate its decision to rely on 
HHS for services related to the individual market Exchange, the SHOP 
Exchange, or both the individual market and SHOP Exchanges. The Federal 
platform agreement would specify the Federal services on which the 
State Exchange relies, the user fee that HHS will collect from issuers 
in that SBE-FP for the Federal services (as specified at Sec.  
156.50(c)(2)), and other mutual obligations relating to the 
arrangement, including obligations for the transfer of data. We intend 
to release the Federal platform agreement at a later date. We note that 
at this point the Federal services on which SBE-FPs may rely will come 
as an entire package. That is, HHS will not at this time offer a 
``menu'' of Federal services from which an SBE-FP may select some but 
not other services on the Federal platform. However, we will explore 
the feasibility of doing so in the future.
    The Federal platform agreement would also specify expectations 
between the State and HHS across various operational areas.
    Although the SBE-FPs would retain primary, formal responsibility 
for overseeing QHPs and issuers, we propose under Sec.  155.200(f)(2) 
to require an SBE-FP to establish and oversee certain requirements for 
its QHPs and QHP issuers that are no less strict than the requirements 
that apply to QHPs and QHP issuers on an FFE. We propose these 
requirements to include the existing and proposed standards under the 
following sections: Sec.  156.122(d)(2) (the requirement for QHPs to 
make available published up-to-date, accurate, and complete formulary 
drug list on its Web site in a format and at times determined by HHS); 
Sec.  156.230 (network adequacy standards); Sec.  156.235 (essential 
community providers standards); Sec.  156.298 (meaningful difference 
standards); Sec.  156.330 (changes of ownership of issuers 
requirement); Sec.  156.340(a)(4) (QHP issuer compliance and compliance 
of delegated and downstream entities requirements); Sec.  156.705 
(maintenance of records standard), Sec.  156.715 (compliance reviews 
standard); and Sec.  156.1010 (casework standards).
    Applying the changes of ownership issuers' requirement to SBE-FPs 
will help fulfill the Federal platform's need for data and technical 
consistency. It will ensure that HHS maintains the most accurate and 
updated information to present to consumers through its branded 
platform, HealthCare.gov. HHS must be able to monitor and provide 
regulatory oversight over change in control situations. Change in 
control has a significant operational impact on the Federal platform 
and requires the expenditure of considerable technical resources to 
effectuate the change throughout the multiple systems that constitute 
the Federal platform.
    Applying the formulary drug list, network adequacy, meaningful 
difference, and essential community providers standards will ensure 
that all QHPs on HealthCare.gov meet a consistent minimum standard and 
that consumers obtaining coverage as a result of applying through 
Healthcare.gov are guaranteed plans that meet these minimum standards. 
For example, all QHP issuers must meet a ``reasonable access'' network 
adequacy standard, but FFE issuers must meet additional network 
adequacy standards. It is important to HHS that shoppers at 
HealthCare.gov do not enroll in plans that fail to meet these minimum 
standards, so we propose that SBE-FPs that wish to rely on the 
HealthCare.gov platform require its issuers to meet these minimum 
standards as well, since their consumers are obtaining the coverage 
through HealthCare.gov. SBE-FPs may exceed these minimum standards to 
the extent they do not present display problems on HealthCare.gov. 
Although the SBE-FPs are legally distinct from FFEs, this difference 
will not always be apparent to Healthcare.gov consumers. Not having 
these standards apply may lead to consumer confusion and dilution of 
consumer goodwill with respect to the plans available on 
HealthCare.gov. The States would conduct QHP certification reviews for 
these standards.
    Applying the QHP issuer compliance and compliance of delegated or 
downstream entities requirement at Sec.  156.340(a)(4), which involves 
the maintenance of records standards of Sec.  156.705 and the 
compliance reviews for QHP issuers standards of Sec.  156.715, will 
ensure that the SBE-FP has authority at least as strong as that 
possessed by HHS to enforce compliance with these standards and will 
ensure that the SBE-FP and HHS are able to access all records upon 
request from the issuers in the SBE-FPs.
    Applying the casework standards at Sec.  156.1010 will ensure that 
the SBE-FP and HHS can respond to problems about which they both bear 
responsibility. Since SBE-FPs must use the Health Insurance Casework 
System (HICS) for handling consumer casework and meeting casework 
resolution timeframes, the SBE-FP would not be overseeing casework 
processes. However, as with all other Exchange types, State Departments 
of Insurance will still handle appropriate consumer complaints related 
to issuers in their States. For cases that are Exchange-related, or 
those in which the consumer has chosen to contact the Exchange even 
after contacting the appropriate Department of Insurance, HHS would 
oversee the routing and resolution of casework. HHS' intent is to work 
collaboratively with the SBE-FP, similar to how HHS works with SPMs.
    Finally, we propose under Sec.  155.200(f)(3) that HHS will work 
with SBE-FPs to enforce the FFE standards listed under Sec.  
155.200(f)(2) directly against SBE-FP issuers or plans, when the SBE-FP 
is not substantially enforcing one or more of these requirements. In 
that circumstance, we propose that HHS would have the authority to 
suppress a plan under Sec.  156.815. This will ensure that consumers 
shopping for coverage on HealthCare.gov have access to plans that are 
in compliance with the FFE standards with which SBE-FP issuers must 
comply as a condition of offering QHPs through a State Exchange on the 
Federal platform.
    We intend to work closely and collaboratively with SBE-FPs, and 
believe that our collaboration with States that currently use the 
Federal platform with respect to enforcement matters has been close and 
effective. We seek comments on all aspects of this proposal.
b. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    We propose two amendments to Sec.  155.205 to address functions of 
an SBE-FP. First, because an SBE-FP relies on HHS to carry out call 
center functions, we propose to amend Sec.  155.205(a) to exempt an 
SBE-FP from the requirement to operate a toll-free call center, and 
instead provide that an SBE-FP must at a minimum operate a toll-free 
telephone hotline to respond to requests for assistance to consumers in 
their State, in accordance with section 1311(d)(4)(B) of the Affordable 
Care Act. We seek comments on this proposal.
    Secondly, we propose to amend Sec.  155.205(b) by adding paragraph 
(b)(7) to provide that an SBE-FP must, at a minimum, operate an 
informational Internet Web site through which consumers can also be 
directed to HealthCare.gov, in accordance with section 1311(d)(4)(C) of 
the Affordable Care Act. We seek comments on this proposal.

[[Page 75520]]

c. Standards Applicable to Navigators under Sec. Sec.  155.210 and 
155.215; Standards Applicable to Consumer Assistance Tools and Programs 
of an Exchange under Sec.  155.205(d) and (e); and Standards Applicable 
to Non-Navigator Assistance Personnel in an FFE and to Non-Navigator 
Assistance Personnel Funded through an Exchange Establishment Grant 
(Sec. Sec.  155.205, 155.210 and 155.215)
    We have previously established a range of consumer assistance 
programs to help consumers apply for and enroll in QHPs and insurance 
affordability programs through the Exchange. These consumer assistance 
programs include the Navigator program described at section 
1311(d)(4)(K) and (i) of the Affordable Care Act and Sec.  155.210. 
Among other duties, section 1311(i)(3) of the Affordable Care Act 
requires Navigators to conduct public education activities to raise 
awareness of the availability of QHPs; to distribute fair and impartial 
information concerning enrollment in QHPs and the availability of 
Exchange financial assistance under the Affordable Care Act; to 
facilitate enrollment in QHPs; and to provide referrals to certain 
State agencies for any enrollee with a grievance, complaint, or 
question regarding their health plan, coverage, or a determination 
under such plan or coverage.
    We have also established under Sec.  155.205(d) and (e) that each 
Exchange must provide consumer assistance, outreach, and education 
functions. These must include a Navigator program and can include a 
non-Navigator assistance personnel program.
    We propose to amend Sec.  155.210(e) by adding a new paragraph 
(e)(8) that would require Navigators in all Exchanges to provide 
targeted assistance to serve underserved and/or vulnerable populations 
within the Exchange service area. Section 155.210(b)(2)(i) already 
requires Navigators to have expertise in the needs of underserved and 
vulnerable populations. We believe that also requiring Navigators to 
provide targeted assistance to underserved and vulnerable populations 
is critical to improving access to health care for communities that 
often experience a disproportionate burden of disease. In keeping with 
the spirit of section 1311(i)(3)(A) of the Affordable Care Act, which 
directs that Navigator entities must conduct public education 
activities to raise awareness about the availability of QHPs, we 
believe that Navigators should focus their outreach and enrollment 
assistance efforts on harder-to-reach populations and the remaining 
uninsured, to build increased awareness of the coverage options 
available through the Exchange and to help new consumers find 
affordable health coverage that meets their needs.
    Because the characteristics of underserved and vulnerable 
populations may vary over time and from region to region, we do not 
propose to define and identify these populations for all Exchanges. 
Instead, we propose to permit each Exchange to define and identify the 
underserved and vulnerable populations in its service area, and to 
update these definitions as necessary. This could include an Exchange 
allowing its Navigator grantees to propose, for the Exchange's approval 
(for example, in their grant applications), which communities to 
target. In Federally-facilitated Exchanges, we would identify 
populations as vulnerable or underserved through our Navigator Funding 
Opportunity Announcements, and would give FFE Navigator grant 
applicants an opportunity to propose additional communities to target 
during the grant application process. Vulnerable or underserved 
populations might include, for example, populations that are 
disproportionately without access to coverage or care, or are at a 
greater risk for poor health outcomes. We propose that these would be 
the primary criteria used to identify such populations within the FFEs. 
Members of these populations could be identified by age groups, 
demographics, disease, geography, or other characteristics as defined 
or approved by the Exchange. We believe reaching vulnerable or 
underserved populations is important to increasing awareness among the 
remaining uninsured of the coverage options available through the 
Exchange, helping new consumers find affordable coverage that meets 
their needs, and narrowing health disparities. In Federally-facilitated 
Exchanges, our proposal would apply beginning with the application 
process for Navigator grants awarded in 2018.
    We seek comment on all aspects of this proposal, including on how 
Exchanges, including the FFEs, should identify vulnerable or 
underserved populations in their service areas, and on the appropriate 
process and timeframes under which these populations would be 
identified. Additionally, although we have not proposed to extend this 
requirement to certified application counselors and non-Navigator 
assistance personnel subject to Sec.  155.215, we encourage certified 
application counselors and non-Navigator assistance personnel to 
prioritize reaching and assisting the vulnerable and underserved 
populations identified by the Exchange in their communities, and we 
recognize that many of these assisters already focus their efforts on 
such populations.
    We note that Navigators would not exclusively be serving these 
target populations, since all Navigators are required to assist any 
consumer seeking assistance. As we have explained in prior rulemakings, 
we interpret Navigators' duty to provide fair and impartial information 
and services under Sec.  155.210(e)(2) to require that all Navigators 
should have the ability to help any individual who seeks assistance, 
even if that consumer is not a member of the community or group the 
Navigator intends to target (see 78 FR 20589; 78 FR 42830; 79 FR 30270; 
79 FR 30278).
    In Sec.  155.210, we propose to add paragraph (e)(9) to specify 
that Navigators in all Exchanges would be required to help consumers 
with certain other types of assistance, including post-enrollment 
assistance. This proposal is designed to ensure that consumers would 
have access to skilled assistance beyond applying for and enrolling in 
health coverage, including, for example, assistance with the process of 
filing Exchange eligibility appeals or with applying through the 
Exchange for exemptions from the individual shared responsibility 
payment, providing basic information about reconciliation of premium 
tax credits, and understanding basic concepts related to using health 
coverage. Section 1311(i)(3)(D) of the Affordable Care Act and Sec.  
155.210(e)(4) already expressly require Navigators to provide post-
enrollment assistance by referring consumers with complaints, 
questions, or grievances about their coverage to appropriate State 
agencies. This suggests that Congress anticipated that consumers would 
need assistance beyond the application and enrollment process, and that 
Navigators would maintain relationships with consumers and be a source 
of such assistance.
    Consistent with the requirements under section 1311(i)(3)(B) and 
(C) of the Affordable Care Act that Navigators distribute fair and 
impartial information concerning enrollment in QHPs and facilitate 
enrollment in QHPs, and pursuant to the Secretary's authority under 
section 1321(a)(1)(A) of the Affordable Care Act, we propose at Sec.  
155.210(e)(9)(i) to require Navigators in all Exchanges to help 
consumers with the process of filing appeals of Exchange eligibility 
determinations. We are not proposing to establish a duty for Navigators 
to represent a consumer in an appeal, sign an appeal request, or file 
an appeal on the consumer's behalf. We believe that helping consumers

[[Page 75521]]

understand Exchange appeal rights when they have received an adverse 
eligibility determination, and assisting them with the process of 
completing and submitting appeal forms, would help to facilitate 
enrollment and would help consumers obtain fair and impartial 
information about enrollment, including information about available 
exemptions from the individual shared responsibility payment that would 
help consumers decide whether or not to enroll in coverage. We would 
interpret this proposal to include helping consumers file appeals of 
eligibility determinations made by an Exchange (including SHOP 
Exchanges) related to enrollment in a QHP, special enrollment periods, 
exemptions from the individual shared responsibility payment that are 
granted by the Exchange, participation as an employer in a SHOP, and 
any insurance affordability program, including eligibility 
determinations for Exchange financial assistance, Medicaid, the 
Children's Health Insurance Program (CHIP), and Basic Health Programs.
    We also propose at Sec.  155.210(e)(9)(ii) to require that 
Navigators in all Exchanges help consumers understand and apply for 
exemptions from the individual shared responsibility payment that are 
granted by the Exchange. We believe that it would be consistent with 
the Secretary's rulemaking authority under section 1321(a)(1)(A) of the 
Affordable Care Act to require Navigators to provide assistance with 
exemptions that the Exchange must grant under section 1311(d)(4)(H) of 
the Affordable Care Act. Additionally, we believe that this proposal is 
consistent with Navigators' duty under section 1311(i)(3)(B) of the 
Affordable Care Act to distribute fair and impartial information 
concerning enrollment in QHPs, since impartial information concerning 
the availability of exemptions from the individual shared 
responsibility payment would help consumers make informed decisions 
about whether or not to enroll in coverage.
    This assistance with Exchange-granted exemptions would include 
informing consumers about the requirement to maintain minimum essential 
coverage and the individual shared responsibility payment; helping 
consumers fill out and submit Exchange-granted exemption applications 
and obtain any necessary forms prior to or after applying for the 
exemption; explaining what the exemption certificate number is and how 
to use it; and helping consumers understand and use the Exchange tool 
to find bronze plan premiums. This duty would also include explaining 
the general purpose of Internal Revenue Service (IRS) Form 8965 to 
consumers, consistent with IRS published guidance on the topic, and 
explaining how to access this form and related tax information on 
irs.gov.
    Navigators may not provide tax assistance or interpret tax rules 
within their capacity as Exchange Navigators, and this proposal would 
not require Navigators to help consumers apply for exemptions claimed 
through the tax filing process. We would interpret this proposal, 
however, to require helping consumers generally understand the 
availability of exemptions claimed through the tax filing process and 
how to obtain them. This interpretation would help ensure that 
Navigators share information about the full scope of possible 
exemptions while not providing actual tax assistance or tax advice. We 
request comment on whether we should require that, prior to providing 
this assistance and information, Navigators provide consumers with a 
disclaimer stating that they are not acting as tax advisers and cannot 
provide tax advice within their capacity as Exchange Navigators. We 
seek comment on whether such a disclaimer would help avoid consumer 
misunderstandings and detrimental reliance on Navigator advice, or 
whether it might be unnecessary, impractical, or cause consumer 
confusion.
    We also seek comment on whether a Navigator's duty to provide 
assistance with filing exemption applications under proposed Sec.  
155.210(e)(9)(ii) and filing appeals of exemption application denials 
under proposed Sec.  155.210(e)(9)(i) should be limited, for example, 
to consumers who have applied for or have been denied coverage or 
financial assistance, or whether another limitation should apply. We 
are cognizant of the resource limitations that Navigators and their 
funding agencies may face, and do not want to reduce the assistance 
available to consumers seeking coverage, as opposed to those who only 
seek to avoid the individual shared responsibility penalty. At the same 
time, we recognize that consumers may be unable to access coverage for 
a wide variety of reasons, including their financial circumstances, 
coverage gaps, and other personal or systemic obstacles, and want to be 
sure that experienced help is available so that these consumers are 
fully aware of and can access their exemptions options. We seek comment 
on these issues.
    In addition, we propose at Sec.  155.210(e)(9)(iii) to require 
Navigators to help consumers with the Exchange-related components of 
the premium tax credit reconciliation process, such as by ensuring they 
have access to their Forms 1095-A and receive general, high-level 
information about the purpose of this form that is consistent with 
published IRS guidance on the topic. This proposal stems from the 
requirement under section 1311(i)(3)(B) of the Affordable Care Act that 
Navigators distribute fair and impartial information concerning the 
availability of the premium tax credits under section 36B of the Code. 
Consumers who receive advance payments of the premium tax credit may 
need help with a variety of issues related to reconciliation. 
Navigators would be required to help consumers obtain IRS Forms 1095-A 
and 8962, and the instructions for both, and to provide general 
information, consistent with applicable IRS guidance, about the 
significance of the forms. Navigators would also be required to help 
consumers understand (1) how to report errors on the Form 1095-A; (2) 
how to find silver plan premiums using the Exchange tool; and (3) the 
difference between advance payments of the premium tax credit and the 
premium tax credit and the potential implications for enrollment and 
re-enrollment of not filing a tax return and reconciling any advance 
payments of the premium tax credit that were paid on consumers' behalf.
    As noted above, Navigators may not provide tax assistance or 
advice, or interpret tax rules and forms within their capacity as 
Exchange Navigators, but their expertise related to the consumer-facing 
aspects of the Exchange, including eligibility and enrollment rules and 
procedures, uniquely qualifies them to help consumers understand and 
obtain information from the Exchange that is necessary to the premium 
tax credit reconciliation process. Because this proposal would include 
a requirement that Navigators provide consumers with information and 
assistance understanding the availability of IRS resources, Navigators 
would be expected to familiarize themselves with the availability of 
materials on irs.gov, including the Form 8962 instructions, IRS 
Publication 974 Premium Tax Credit, and relevant FAQs, and to refer 
consumers with questions about tax law to those resources or to other 
resources, such as free tax return preparation assistance from the 
Volunteer Income Tax Assistance or Tax Counseling for the Elderly 
programs. Again, we request comment on whether we should require that, 
prior to providing this information and assistance, Navigators provide

[[Page 75522]]

consumers with a disclaimer stating that they are not acting as tax 
advisers and cannot provide tax advice within their capacity as 
Exchange Navigators.
    To help ensure consumers have seamless access to Exchange-related 
tax information beyond the basic information that Navigators can 
provide, we propose at 155.210(e)(9)(v) that Navigators be required to 
refer consumers to licensed tax advisers, tax preparers, or other 
resources for assistance with tax preparation and tax advice related to 
consumer questions about the Exchange application and enrollment 
process, exemptions from the requirement to maintain minimum essential 
coverage and the individual shared responsibility payment, and premium 
tax credit reconciliation.
    We interpret the Navigator duties to facilitate enrollment in QHPs 
in section 1311(i)(3)(C) of the Affordable Care Act, to distribute fair 
and impartial information concerning enrollment in QHPs under section 
1311(i)(3)(B) of the Affordable Care Act, and to conduct public 
education activities to raise awareness about the availability of QHPs 
in section 1311(i)(3)(A) of the Affordable Care Act to include helping 
consumers understand the kinds of decisions they will need to make in 
selecting coverage, and how to use their coverage after they are 
enrolled. We have previously stated that one overall purpose of 
consumer assistance programs is to help consumers become fully informed 
and health literate. (See 79 FR 30276.) To improve consumers' health 
literacy related to coverage generally, and to ensure that individual 
consumers are able to use their coverage meaningfully, we propose at 
Sec.  155.210(e)(9)(iv) to require Navigators in all Exchanges to help 
consumers understand basic concepts related to health coverage and how 
to use it. These activities could be supported through the use of 
existing resources such as the HHS ``From Coverage to Care'' 
initiative, which we encourage Navigators to review, and which are now 
available in multiple languages at https://marketplace.cms.gov/c2c. 
This proposal would improve consumers' access to health coverage 
information not just when selecting a plan, but also when using their 
coverage. For example, Navigators could help consumers understand (1) 
key terms used in health coverage materials, such as ``deductible'' and 
``coinsurance,'' and how they relate to the consumer's health plan; (2) 
the cost and care differences between a visit to the emergency 
department and a visit to a primary care provider under the coverage 
options available to the consumer; (3) how to identify in-network 
providers to make and prepare for an appointment with a provider; (4) 
how the consumer's coverage addresses steps that often are taken after 
an appointment with a provider, such as making a follow-up appointment 
and filling a prescription; and (5) the right to coverage of certain 
preventive health services without cost sharing. We anticipate that 
this assistance would vary depending on each consumer's needs and 
goals. We invite comment on whether we should provide additional 
specificity for Navigators related to this proposed duty to help 
consumers understand and use their coverage, and if so, which 
additional topics should be included.
    We note that under Sec.  155.215(b)(2), Navigators in FFEs must 
already be trained on the tax implications of enrollment decisions, the 
individual responsibility to have health coverage, eligibility appeals, 
and rights and processes for QHP appeals and grievances. To ensure that 
Navigators in all States receive training in every area for which there 
would be a corresponding Navigator duty, we propose to require all 
Exchanges, including State Exchanges, to provide training that would 
prepare Navigators for the additional areas of responsibility proposed 
in this rulemaking. In proposed Sec.  155.210(b)(2)(v) through (viii), 
therefore, we would require Exchanges to develop and disseminate 
training standards to be met by all entities and individuals carrying 
out Navigator functions to ensure expertise in: The process of filing 
appeals of Exchange eligibility determinations; general concepts 
regarding exemptions from the requirement to maintain minimum essential 
coverage and the individual shared responsibility payment, including 
the application process for exemptions granted through the Exchange, 
and IRS resources on exemptions; the Exchange-related components of the 
premium tax credit reconciliation process and IRS resources on this 
process; and basic concepts related to health coverage and how to use 
it.
    We note that providing assistance with certain other post-
enrollment issues already falls within the scope of existing required 
Navigator duties. We interpret the requirement to facilitate enrollment 
in a QHP under section 1311(i)(3)(C) of the Affordable Care Act, and 
the requirement at Sec.  155.210(e)(2) to provide information that 
assists consumers with submitting the eligibility application, to 
include assistance with updating an application for coverage through an 
Exchange, including reporting changes in circumstances and assisting 
with submitting information for eligibility redeterminations.
    Additionally, Navigators are already permitted, but not required, 
to help with a variety of other post-enrollment issues. For example, we 
interpret the requirements in Sec.  155.210(e)(1) and (2) that 
Navigators conduct public education activities to raise awareness about 
the Exchange and provide fair and impartial information about the 
application and plan selection process to mean that Navigators may 
educate consumers about their rights with respect to coverage available 
through an Exchange, such as nondiscrimination protections, 
prohibitions on preexisting condition exclusions, and preventive 
services available without cost-sharing. We also interpret these 
requirements, together with the requirement in section 1311(i)(3)(B) of 
the Affordable Care Act that Navigators distribute fair and impartial 
information concerning enrollment in QHPs, and the availability of 
Exchange financial assistance, to mean that Navigators may assist 
consumers with questions about paying premiums for coverage or 
insurance affordability programs enrolled in through an Exchange. 
Finally, we interpret the requirement in section 1311(i)(3)(D) of the 
Affordable Care Act and Sec.  155.210(e)(4) to provide referrals for 
certain post-enrollment issues to mean that Navigators may help 
consumers obtain assistance with coverage claims denials. We request 
comments on whether we should make any of the above interpretations 
explicit in the regulation and whether there are additional post-
enrollment duties required or permitted by these provisions that should 
be made explicit as either required or simply permitted (but not 
required) duties, as well as whether there are other forms of post-
enrollment assistance that Exchanges should require Navigators to 
provide, commensurate with their general legal authority, but which are 
not already specifically required under our regulations.
    Although we have not proposed to extend any of the requirements 
under proposed Sec.  155.210(e)(8) or (9) to non-Navigator assistance 
personnel subject to Sec.  155.215, we note that the requirement to 
provide information that assists consumers with submitting the 
eligibility application under Sec.  155.210(e)(2), which would include 
helping consumers report changes in circumstances and submit 
information for eligibility redeterminations, also applies to certain 
non-Navigator assistance personnel through Sec.  155.215(a)(2)(i). We 
also note that

[[Page 75523]]

under Sec.  155.215, the training requirements for these non-Navigator 
assistance personnel are the same as for Navigators in States with an 
FFE.
    We have also not proposed to extend any of these requirements to 
certified application counselors. However, nothing prevents non-
Navigator assistance personnel or certified application counselors from 
helping with activities that are consistent with their existing 
regulatory duties. We request comments on whether we should extend 
these proposed requirements to help with post-enrollment and other 
activities to these assisters.
    We propose to amend Sec. Sec.  155.205(d) and 155.215(b)(1)(i) to 
specify that any individual or entity carrying out consumer assistance 
functions under Sec.  155.205(d) and (e) or Sec.  155.210, in both 
State Exchanges and FFEs, would be required to complete training prior 
to performing any assister duties, including before conducting outreach 
and education activities, as well as before providing application and 
enrollment assistance. Section 155.215(b), which establishes training 
standards for Navigators and non-Navigator assistance personnel in FFEs 
and for non-Navigator assistance personnel funded through Exchange 
Establishment grants under section 1311(a) of the Affordable Care Act, 
requires that these assisters must obtain certification by the Exchange 
prior to carrying out any consumer assistance functions under Sec.  
155.205(d) and (e) or Sec.  155.210. We also propose to amend Sec.  
155.215(b)(1)(i) to specify that the consumer assistance functions 
referenced in that provision would include outreach and education 
activities. In addition, we propose to amend Sec.  155.205(d) to 
specify that training would have to be completed not only before 
providing the assistance described in that paragraph, but also before 
conducting the outreach and education activities specified in paragraph 
(e). These proposals would require that Navigators, non-Navigator 
assistance personnel subject to Sec.  155.215, and other entities and 
persons providing consumer assistance under Sec.  155.205(d) and 
consumer outreach and education activities under Sec.  155.205(e), 
complete training prior to carrying out any consumer assistance 
functions, including outreach and education activities.
    We note that nothing in the Exchange regulations prohibits 
individuals or organizations from conducting outreach about Exchanges 
and providing application and enrollment assistance without being 
trained and certified as Navigators, non-Navigator assistance 
personnel, certified application counselors, or other kinds of 
Exchange-approved assisters. However, this proposal would ensure that 
individuals and organizations do not perform any Exchange outreach and 
education activities or application and enrollment assistance while 
identifying as or holding themselves out to the public as Navigators, 
non-Navigator assistance personnel, or certified application 
counselors, prior to completing Exchange requirements, including 
training and certification. This proposal would also help ensure that 
Navigators and non-Navigator assistance personnel are providing 
accurate information when performing outreach and education activities.
    Section 155.210(d)(6) currently prohibits Navigators from providing 
to an applicant or potential enrollee any gifts unless they are of 
nominal value; or any promotional items that market or promote the 
products or services of a third party, when those promotional items are 
being used as an inducement for enrollment. Through a cross-reference 
to Sec.  155.210(d) in Sec.  155.215(a)(2)(i) and a parallel provision 
in Sec.  155.225(g)(4), this prohibition also applies to non-Navigator 
assistance personnel subject to Sec.  155.215, and to certified 
application counselors.
    We have received questions indicating that there is general 
confusion about when gifts and promotional items can be provided to 
applicants and potential enrollees. To reduce this confusion, we 
propose to amend Sec. Sec.  155.210(d)(6) and 155.225(g)(4) to specify 
that gifts of any value (including third-party promotional items of any 
value) should never be provided to applicants or potential enrollees as 
an inducement for enrollment. We also propose to specify that gifts 
that are not provided as an inducement for enrollment may be provided 
to applicants and potential enrollees if they do not exceed nominal 
value.\21\ This proposed nominal value restriction would apply both to 
each individual gift and to the cumulative value of multiple gifts, 
including promotional items, which are provided by these types of 
assisters to an applicant or potential enrollee. We further propose 
that the nominal value restriction on the cumulative value of multiple 
gifts would only apply to single encounters between the assister and an 
individual applicant or potential enrollee, and not to multiple 
encounters, so that assisters would not have to collect PII as a means 
of tracking the number and value of gifts provided to an individual 
consumer across multiple encounters, such as all encounters in a single 
calendar year or enrollment season. Since we anticipate that gifts or 
promotional items of a nominal value, such as pens, magnets or 
keychains, could be provided to consumers at outreach and education 
events or at other forums attended by members of the general public, we 
do not want to establish a nominal value restriction that would be 
difficult or burdensome for assisters to enforce, or that would require 
the unnecessary collection of PII from consumers. We would consider a 
single outreach or educational event to be a ``single encounter''; that 
is, assisters would not be permitted to provide multiple gifts to the 
same consumer at the same outreach event if the cumulative value of 
those gifts exceeded nominal value. We seek comments on all aspects of 
this proposal, including whether the nominal value restriction should 
apply to a single encounter with an individual consumer, as proposed, 
or whether a longer timeframe, such as all encounters with an 
individual consumer in a calendar year, in an enrollment season, or in 
total, would be preferable.
---------------------------------------------------------------------------

    \21\ We have previously defined ``nominal value'' as a cash 
value of $15 or less, or an item worth $15 or less, based on the 
retail purchase price of the item, regardless of the actual cost. 
(79 FR 15831 and 79 FR 30283).
---------------------------------------------------------------------------

    Finally, to simplify the rule, we propose to define ``gifts,'' for 
purposes of Sec. Sec.  155.210(d)(6) and 155.225(g)(4), to include gift 
items, gift cards, cash cards or cash, as well as promotional items 
that market or promote the products or services of a third party. We 
further propose to amend language in Sec. Sec.  155.210(d)(6) and 
155.225(g)(4) that currently provides that gifts, gift cards, or cash 
may exceed nominal value for the purpose of providing reimbursement for 
legitimate expenses incurred by a consumer in an effort to receive 
Exchange application assistance, such as travel or postage expenses. We 
propose to amend this language to indicate that the reimbursement of 
legitimate expenses, such as travel or postage expenses, when incurred 
by a consumer in an effort to receive Exchange application assistance, 
would not be considered a gift, and therefore, would not be subject to 
the proposed restrictions on providing gifts.
    Our proposal seeks to strike a balance between permitting these 
types of assisters to provide small gifts and promotional items as part 
of creative outreach and education strategies, while ensuring that 
gifts, including promotional items, are never provided to applicants 
and potential enrollees to

[[Page 75524]]

induce enrollment. We believe this outright prohibition on providing 
gifts and promotional items, of any value, to induce enrollment, is 
consistent with the duties of these assisters to provide information 
and services to consumers in a fair, accurate, and impartial manner, 
including clarifying the distinctions among health coverage options, 
and helping consumers make informed decisions during the health 
coverage selection process. We believe it would be inconsistent with 
these duties for an assister to try to influence the consumer's 
decision about whether to enroll in coverage by providing them with a 
gift to induce enrollment.
    In addition, the duty of these assisters to provide information and 
services in a fair, accurate and impartial manner would make it 
inappropriate for them to engage in activities that give the appearance 
that they are endorsing, promoting, or marketing the products or 
services of third party business interests when performing their 
authorized activities and services. At the same time, we believe that 
any appearance that these assisters are endorsing, promoting, or 
marketing the products or services of a third party, is substantially 
mitigated if the items are only of nominal value and not provided to 
induce enrollment, since it is unlikely that gifts of a nominal value 
will influence a consumer's health coverage selection and enrollment 
decisions. We also recognize that providing gifts, including 
promotional items, of a nominal value may help to attract applicants 
and potential enrollees to engage in a discussion with these assisters 
during an outreach event and encourage consumers to consider seeking 
Exchange application assistance. For these reasons, we do not want to 
entirely prohibit these types of assisters from using gifts and 
promotional items as part of their outreach efforts.
    Finally, we note that existing regulations under Sec.  
155.210(d)(7) already prohibit the use of Exchange funds to purchase 
gifts or gift cards, or promotional items that market or promote the 
products or services of a third party, that would be provided to any 
applicant or potential enrollee. We do not propose to amend this 
provision.
    We request comments on all aspects of our proposals.
d. Ability of States To Permit Agents and Brokers To Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
    Section 1312(e) of the Affordable Care Act directs the Secretary to 
establish procedures under which a State may permit agents and brokers 
to enroll qualified individuals and qualified employers in QHPs through 
an Exchange, and to assist individuals in applying for financial 
assistance for QHPs sold through an Exchange. Under Sec.  155.220, we 
established procedures to support the States' 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.
    At Sec.  155.220(c), we established parameters for enrollment of 
qualified individuals through an Exchange with the assistance of an 
agent or broker. At Sec.  155.220(c)(1), we established that an agent 
or broker who assists with enrollment through the Exchange must ensure 
completion of an eligibility verification and enrollment application 
through the Exchange Web site as described Sec.  155.405. In Sec.  
155.220(c)(3), we established the standards that apply when a Web site 
of an agent or broker is used to complete the QHP selection.
    As described at Sec.  155.220(d), an agent or broker that enrolls 
qualified individuals through an Exchange, or assists individuals in 
applying for Exchange financial assistance, must comply with the terms 
of a general agreement with the Exchange, as well as register with the 
Exchange and 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 required by Sec.  
155.260(b) to provide assistance with enrollment through the Exchange.
    In Sec.  155.220(g), we established standards under which HHS may 
terminate an agent's or broker's general agreement with the FFEs for 
cause. We established that HHS may pursue termination with notice of an 
agent's or broker's agreement with the FFEs if, in HHS's determination, 
a specific finding of noncompliance or pattern of noncompliance is 
sufficiently severe. As established, the termination for cause of the 
general agreement with notice means that after a 30-day opportunity to 
resolve the matter, HHS would take necessary steps to prohibit an agent 
or broker from assisting or enrolling individuals in a QHP offered 
through an FFE, or a web-broker's ability to securely exchange 
information with HHS, if the matter is not resolved to the satisfaction 
of HHS. As of the date of termination, an agent or broker would no 
longer be registered with the FFEs and would not be able to assist with 
enrollment through the FFEs or exchange information with HHS. Certain 
obligations of the agent or broker would survive that termination, 
including the duty to protect and maintain the privacy and security of 
personally identifiable information (PII) it has created, collected, 
accessed, or acquired through its relationship with the FFEs. We 
established that an agent or broker may be considered noncompliant if 
HHS finds that the agent or broker violated: (a) Any standard specified 
under Sec.  155.220; (b) any term or condition of its agreement with 
the FFEs required under paragraph (d) of this section, or if, the 
agent's or broker's FFE privacy and security agreements under Sec.  
155.260(b) are terminated; (c) any applicable State law; or (d) any 
other applicable Federal law.
    In Sec.  155.220(h), we established a one-level process through 
which an agent or broker may request reconsideration of HHS's decision 
to terminate for cause an agreement required under Sec.  155.220(d). We 
established that an agent or broker must submit a request for 
reconsideration to the HHS reconsideration entity within 30 calendar 
days of the date of the written termination notice from HHS. We 
established that the HHS reconsideration entity would provide the agent 
or broker with a written reconsideration decision within 30 calendar 
days of the date it receives the request for reconsideration. This 
decision constitutes HHS's final determination.
i. New Exchange Standards for Web-Brokers
    As specified at Sec.  155.220(c)(1), an agent or broker who assists 
with an enrollment through the Exchange must ensure that the applicant 
completes an eligibility verification and enrollment application 
through the Exchange Internet Web site. Under this standard, agents and 
brokers that use a non-Exchange Web site to assist consumers in the QHP 
selection and enrollment process (``direct enrollment'' through a 
``web-broker'') must redirect an applicant to go directly to the 
Exchange Web site to complete the application and receive an 
eligibility determination. HHS is considering an option under which an 
applicant could remain on the web-broker's Web site to complete the 
application and enroll in coverage, and the web-broker's Web site can 
obtain eligibility information from the Exchange to support the 
consumer in selecting and enrolling in a QHP with Exchange financial 
assistance. The intent is to have this information exchange occur 
through an Exchange-approved web service as described below, enhancing 
the direct enrollment

[[Page 75525]]

process. This option would provide Exchanges offering direct enrollment 
and web-brokers more operational flexibility to expand front-end, 
consumer-facing channels for enrollment through a seamless consumer 
experience.
    HHS solicits comments related to the current consumer experience 
with web-brokers and the potential integration of the streamlined 
eligibility application if a non-FFE Web site is used for the entire 
process. We request comment on how much flexibility a web-broker should 
have relative to the consumer experience on its Web site, using the 
direct enrollment channel, to provide an end-to-end eligibility and 
enrollment experience. We propose that web-brokers be required to use 
the FFE single streamlined application without deviation from the 
language of the application questions and the sequence of information 
required for an eligibility determination or redetermination. This will 
ensure that the information gathered when an applicant completes an 
application on the Exchange Web site will also be collected to send to 
the Exchange for an eligibility determination or redetermination that 
is accurate and consistent across any channel used for enrollment. We 
seek comment on this standard. HHS is also considering how to ensure 
that consumers understand that they are applying for Exchange coverage, 
such as through specific branding or wording requirements if a non-FFE 
front-end Web site is used for the entire application and enrollment 
process, and we seek comment on this as well.
    Accordingly, we propose to revise Sec.  155.220(c)(1) to ensure 
that an applicant who initiates enrollment directly with the web-broker 
for enrollment through the Exchange receives an eligibility 
determination for coverage through the Exchange Web site or through an 
Exchange-approved web service via the FFE single streamline 
application. This maintains the role of the Exchange in determining 
eligibility. We propose to adopt similar changes to the standards for 
the use of QHP issuer Web sites under Sec.  156.265(b)(2)(ii). Please 
see section III.G.4.c for this accompanying preamble discussion. We 
seek comment on this proposal.
    We are also soliciting comments about the current agent and broker 
provisions in Sec.  155.220 as applied to web-brokers. We are 
interested in feedback on consumer and agent/broker experiences with 
enrollment through web-brokers, any concerns with privacy and security 
of the information transmitted through web-brokers by expanding direct 
enrollment to incorporate the FFE single streamlined application, and 
suggestions for improvements in the future, such as increased 
monitoring and oversight activities. For example HHS is considering 
expanding audits, requiring additional information display requirements 
(such as the lowest cost plan at each metal level) beyond those 
outlined in Sec.  155.220(c)(3) to ensure that consumers understand 
basic information about cost and availability of qualified health 
plans, and requiring HHS approval of alternative enrollment pathway 
processes. Additional requirements to safeguard consumer information or 
enhancements to improve the consumer and web-broker experience are also 
being considered. These may include establishing more robust privacy 
and security requirements, requiring adoption of cyber security best 
practices, additional web-broker reporting requirements and specificity 
as to the collection and use of consumer information. We note that the 
current oversight provisions for the general agreement, registration, 
training, termination, and reconsideration in Sec.  155.220(d) through 
(h), as well as the changes in paragraphs (f), (g), (j), and (k) 
proposed below, would apply to web-brokers.
ii. New Standards for Termination of Agent and Broker Agreements With 
the FFEs
    We propose to amend existing paragraph (g)(2)(ii) that an agent or 
broker may be determined noncompliant if HHS finds that the agent or 
broker violated any term or condition of the agreement with the FFEs 
required under paragraph (d) of this section, or any term or condition 
of an agreement with the FFEs required under Sec.  155.260(b).
    We propose to add paragraph (g)(5) to Sec.  155.220(g) to address 
suspension or termination of an agent's or broker's agreements with the 
FFEs in cases involving potential fraud or abusive conduct. These cases 
would include cases in which there is an allegation of potential fraud 
or abusive conduct that HHS finds to be credible; or any report of 
potential fraud or abusive conduct made by a State or Federal agency or 
law enforcement. We propose to add this paragraph to give HHS authority 
to act quickly to terminate access to HHS systems in these instances to 
prevent further harm to consumers and to support the efficient and 
effective administration of the FFEs.
    We propose in Sec.  155.220(g)(5)(i)(A) that if HHS reasonably 
suspects that an agent or broker may have engaged in fraud or abusive 
conduct using PII of Exchange applicants or enrollees, or in connection 
with an Exchange enrollment or application, HHS may suspend the agent's 
or broker's agreement and accompanying registration with the FFEs for 
up to 90 calendar days, with the suspension effective as of the date of 
the notice to the agent or broker. This would apply whether the 
activity or conduct in question was committed directly by the agent or 
broker, or through a third party who acts at the direction of or on 
behalf of the agent or broker. This immediate and temporary suspension 
would prohibit the agent or broker from assisting with or facilitating 
enrollment in coverage in a manner that constitutes enrollment through 
the FFEs, including enrollment through the FFE Application Programming 
Interface, while the investigation is conducted during this 90-day 
period. Immediate suspension is critical in these circumstances to stop 
additional potentially fraudulent enrollments through the FFE during 
the period of investigation. Although the agent or broker would not be 
provided with advance notice, we propose under Sec.  
155.220(g)(5)(i)(B) that the agent or broker may submit evidence to HHS 
to rebut the allegation during this 90-day period. If HHS determines 
that the agent or broker satisfactorily addresses the concerns at 
issue, HHS would lift the temporary suspension and notify the agent or 
broker. We further propose under Sec.  155.220(g)(5)(i)(B) that failure 
to submit information during this 90-day period may result in 
termination of the agreement for cause effective immediately under 
Sec.  155.220(g)(5)(ii).
    We propose in Sec.  155.220(g)(5)(ii) that if HHS reasonably 
confirms the credibility of an allegation that an agent or broker 
engaged in fraud or abusive conduct using personally identifiable 
information of Exchange enrollees or applicants, or in connection with 
an Exchange enrollment or application, or is notified by a State or law 
enforcement authority of the State or law enforcement authority's 
finding or determination of fraud or behavior that would constitute 
abusive conduct in such a circumstance, HHS will notify the agent or 
broker and terminate, immediately and permanently, the agent's or 
broker's agreements with the FFEs for cause. In contrast to termination 
for other violations listed in Sec.  155.220(g), we propose that 
following an HHS reasonable confirmation of such an allegation or such 
a State or law enforcement notification, termination would occur 
without 30 days' advance notice and would be effective upon the date of 
the termination notice. An agent or broker who engages in fraud or

[[Page 75526]]

abusive conduct may pose immediate harm to consumers and to HHS's 
ability to properly administer the FFEs. Under this scenario, following 
the reasonable confirmation by HHS (that is, the FFE) of fraud or 
abusive conduct, HHS would notify the agent or broker of HHS's 
termination action. We note that we would coordinate with OIG and other 
State and Federal agencies (including law enforcement) as appropriate 
when investigating these situations. Similar to any termination for 
cause described in paragraph (g)(1), any termination notice would 
include information on the agent's or broker's right to seek 
reconsideration as described in Sec.  155.220(h). HHS currently works 
with States and local law enforcement to investigate and resolve 
suspected incidents of fraud. We note that termination proposed in 
Sec.  155.220(g) only applies to the FFE agreement described in 
paragraph (d) of this section, and the agreements required under Sec.  
155.260(b)(2). While States remain the primary oversight authority for 
agents and brokers, HHS reserves the right to take any other 
permissible enforcement or remedial action against an agent or broker 
for violation of Federal requirements.
    In Sec.  155.220(g)(5)(iii), we propose that during the 90-day 
suspension period, as well as following the termination of the FFE 
agreements for cause, the agent or broker would not be registered with 
the FFEs, or be permitted to assist with or facilitate enrollment of 
qualified individuals, qualified employers, or qualified employees 
through an FFE, or assist individuals in applying for Exchange 
financial assistance for QHPs. However, consistent with the FFE 
agreement described in Sec.  155.260(b)(2), the agent or broker must 
continue to protect any PII accessed during the term of the agreement 
with the FFEs. Section 155.260(g) includes penalties for failure to 
continue protecting PII as described in the Sec.  155.260(b)(2) 
agreement. For consistency with these proposed termination standards, 
we propose corresponding updates to paragraph (g)(4). We also propose 
to amend existing paragraph (f)(4) to remove the reference to paragraph 
(g) for further alignment of these regulatory provisions.
    We solicit comment on all aspects of these proposals, including: 
The appropriate length of time for the temporary suspension period 
under Sec.  155.220(g)(5)(i); whether we should provide authority for 
HHS to suspend an agent's or broker's agreements with the FFEs for 
cause for conduct other than potential fraud or abusive conduct; and 
whether we should include a provision permitting HHS to immediately 
terminate (that is, without the advance 30-day notice currently 
provided under Sec.  155.220(g)(3)) an agent's or broker's agreements 
with the FFEs for cause for suspected conduct other than fraud or 
abusive conduct. We are also considering whether the notice 
requirements captured in Sec.  155.220(f)(3)(i) that currently apply to 
agent or broker initiated terminations should also be extended to 
terminations for cause under Sec.  155.220(g), including these proposed 
grounds for termination for cause under Sec.  155.220(g)(5). In 
addition, see Sec.  155.430 below for a discussion of proposals related 
to retroactive termination of coverage for consumers affected by 
potential fraudulent activity by a third party related to enrollment 
through the FFEs.
iii. FFE Standards of Conduct for Agents and Brokers
    We propose adding a paragraph Sec.  155.220(j) to establish 
standards of conduct for agents and brokers that assist consumers to 
enroll in coverage through the FFEs to protect consumers and ensure the 
proper administration of the FFEs. We are proposing these standards of 
conduct to protect against agent and broker conduct that is harmful 
towards consumers, or prevents the efficient operation of the FFEs. In 
Sec.  155.220(j)(1)(i) through (iii), we propose to capture as part of 
these standards of conduct the requirements that an agent or broker 
that assists with or facilitates enrollment of qualified individuals, 
qualified employers, or qualified employees through an FFE, or assists 
individuals in applying for Exchange financial assistance for QHPs sold 
through the FFEs, must (i) have executed the required agreement under 
Sec.  155.260(b)(2); (ii) be registered with the FFEs as described in 
paragraph (d)(1) of this section; and (iii) comply with the FFE 
standards of conduct proposed in this paragraph. We note that signing 
of the FFE agreement as well as all required registration steps must be 
completed prior to assisting with or facilitating enrollment of 
qualified individuals, qualified employers, or qualified employees 
through an FFE, or assisting individuals in applying for Exchange 
financial assistance for QHPs sold through the FFEs.
    In Sec.  155.220(j)(2), we propose to capture as part of the 
standards of conduct the requirements that the agents and brokers 
described in paragraph (j)(1) must: (i) Provide consumers with correct 
information, without omission of material fact, regarding the FFEs, 
QHPs (including SADPs \22\) offered through the FFEs, and insurance 
affordability programs, and refrain from marketing or conduct that is 
misleading or coercive, or discriminates based on race, color, national 
origin, disability, age, sex, gender identity, or sexual orientation; 
(ii) provide the FFEs with correct information under section 1411(b) of 
the Affordable Care Act; (iii) obtain the consent of the individual, 
employer, or employee prior to assisting with or facilitating 
enrollment in coverage through an FFE, or assisting with the 
application for financial assistance for QHPs sold through the FFEs; 
(iv) protect consumer PII in accordance with Sec.  155.260(b)(3) and 
the agreement described in Sec.  155.260(b)(2); and (v) comply with all 
applicable Federal and State laws and regulations. We note that these 
proposed standards for conduct extend to naming of businesses and Web 
sites associated with agents, brokers or web-brokers, and that use of 
``Exchange,'' ``Marketplace,'' or other words in a name or URL that 
would reasonably cause confusion with a Federal program or Web site may 
be considered misleading under paragraph (j)(1)(i).
---------------------------------------------------------------------------

    \22\ As detailed in the Patient Protection and Affordable Care 
Act; Establishment of Exchanges and Qualified Health Plans; Exchange 
Standards for Employers; Final Rule and Interim Final Rule (77 FR 
18310, 18315) (March 27, 2012), with some limited exceptions, SADPs 
are considered a type of QHP. We expect agents, brokers, and web-
brokers registered with the FFEs to comply with applicable rules and 
requirements in connection with SADPs, just as they must comply with 
those rules in connection with medical QHPs.
---------------------------------------------------------------------------

    In Sec.  155.220(j)(3), we propose that an agent or broker will be 
considered to be in compliance with the standard of conduct 
requirements to provide consumers and the FFEs with correct information 
if HHS determines that there was a reasonable cause for any failure to 
provide correct information and that the agent or broker acted in good 
faith.
    We further propose that violation of these standards of conduct may 
result in termination for cause of the agent's or broker's agreements 
with the FFEs as described in paragraph Sec.  155.220(g) or the 
imposition of other penalties authorized by law. We will continue to 
coordinate our enforcement activities with States, other Federal 
agencies, and local and Federal law enforcement, and anticipate 
imposing penalties (beyond the termination of the FFE agreements) only 
in instances where States do not or are unable to act.
    We expect that States will continue to license and monitor agents 
and brokers, and will continue to have primary responsibility to 
oversee and regulate all

[[Page 75527]]

agents and brokers, both inside and outside of the Exchanges. All State 
laws and regulations related to agents and brokers, including State 
requirements related to appointments, contractual relationships with 
issuers, and licensing and marketing requirements, will continue to 
apply. To avoid duplication of oversight activities related to agents 
and brokers assisting with enrollment through an FFE, we propose that 
HHS will continue to focus its oversight activities primarily on 
ensuring that agents and brokers assisting with enrollment through an 
FFE meet the standards outlined in Sec.  155.220. In particular, HHS 
plans to focus on protecting the privacy and security of PII of 
applicants and enrollees through the FFEs, as well as the misuse of 
such PII, to the extent this is not already covered under existing 
State or Federal efforts. We will continue to collaborate with State 
regulators to resolve cases of potential misconduct and to further 
develop standard operating procedures for the FFEs that will be 
critical to HHS oversight of agents and brokers registered to assist 
with enrollment through the FFEs.
iv. Penalties Other Than Termination of the Agreements With the FFEs
    In Sec.  155.220(k), we propose penalties for agents and brokers 
registered with the FFEs other than termination of the agreements with 
the FFEs. In Sec.  155.220(k)(1), we propose that if HHS determines 
that an agent or broker fails to comply with the requirements of Sec.  
155.220, he or she may be denied the right to enter into an agreement 
with the FFEs in future years, and may be subject to CMPs as described 
in Sec.  155.285 if the violation involved the provision of false or 
fraudulent information to an Exchange or the improper use or disclosure 
of information. In Sec.  155.220(k)(2), we propose that the denial of 
the right to enter into an agreement with the FFEs in future years 
would be subject to 30 calendar days' advance notice and the 
reconsideration process established in Sec.  155.220(h). The imposition 
of CMPs for the provision of false or fraudulent information to an 
Exchange or the improper use of disclosure of information would be 
subject to the advance notice and appeals process described in Sec.  
155.285.
    We are also proposing a denial of the right to enter into future 
agreements with the FFEs in cases where an agent or broker has not 
completed FFE registration requirements, and not entered into the 
required agreements with the FFEs, but has enrolled qualified 
individuals, qualified employers, or qualified employees in coverage in 
a manner that constitutes enrollment through an FFE, or assisted 
individual market consumers with submission of applications for 
Exchange financial assistance through an FFE and has sought 
compensation based on the enrollment through the FFEs in his or her 
capacity as an agent or broker. We note that Sec.  155.285 applies to 
agents and brokers, and we propose to specify here that agents and 
brokers may also be subject to CMPs as described in Sec.  155.285 for 
noncompliance if the violation involved the provision of false or 
fraudulent information to an Exchange or the improper use or disclosure 
of information. We seek comment on these additional proposed penalties, 
including the length of time for which the prohibition on entering into 
an agreement with the FFEs would apply in these cases.
    We intend to continue to collaborate with State regulators to 
further develop standard operating procedures for an FFE that will be 
critical to HHS's oversight of agents and brokers registered to assist 
with enrollment through an FFE and to ensure the efficient and 
effective administration of the FFEs. We encourage comment on the 
information required to carry out these activities, and on any 
definitions, timeframes, or procedures described in our proposed 
amendments to Sec.  155.220.
v. Agents and Brokers Assisting Consumers With Enrollment in Coverage 
Through SBE-FPs
    We propose adding Sec.  155.220(l) to provide that an agent or 
broker who enrolls qualified individuals, qualified employers, or 
qualified employees in coverage in a manner that constitutes enrollment 
through an SBE-FP, or assists individual market consumers with 
submission of applications for Exchange financial assistance through an 
SBE-FP must comply with all applicable FFE standards in Sec.  155.220. 
We believe it is important to extend the FFE standards in Sec.  155.220 
to agents and brokers who assist with enrollments through an SBE-FP due 
to the HHS's role in operating the FFE infrastructure and the 
accompanying access that this provides to HHS data systems. We also 
propose that agents and brokers in SBE-FP States would be able to 
satisfy the requirement for training in Sec.  155.220(d)(2) by taking 
FFE training offered by a vendor as described in Sec.  155.222.
e. Standards for HHS-Approved Vendors of FFE Training for Agents and 
Brokers (Sec.  155.222)
    At Sec.  155.222, we previously established a process for HHS to 
approve vendors to offer training and information verification services 
through which State licensed agents and brokers could complete the 
training requirements necessary to assist consumers seeking coverage 
through the FFEs. As part of an approved training and information 
verification program, we stated that the vendor must require agents and 
brokers to successfully complete identity proofing, provide identifying 
information, and successfully complete the required curriculum. 
Further, we established that no vendor 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.
    We propose eliminating the Sec.  155.222 requirement that vendors 
perform information verification functions, including State licensure 
verification and identity proofing. Section 155.220(e) requires an 
agent or broker that enrolls qualified individuals through the Exchange 
or assists with the submission of applications for financial assistance 
through an Exchange to comply with applicable State law, which includes 
requirements related to operating as an insurance producer, such as 
licensure. We expect that QHP issuers will adhere to the Sec.  
156.340(a)(3) requirement to ensure their delegated and downstream 
entities, which include affiliated agents and brokers, comply with the 
standards of Sec.  155.220 with respect to assisting with enrollments 
in QHPs, including the requirement to comply with applicable State law. 
The FFE will continue to provide identity proofing services to 
facilitate the registration of agents or brokers as required by Sec.  
155.220(d)(1). We propose these changes to avoid duplication of 
efforts. If QHP issuers are ensuring that their affiliated agents and 
brokers are complying with State law, such as licensure, it is not 
necessary for vendors to do so as well. Consistent with this proposal, 
we propose amending Sec.  155.222(a)(1) to provide that a vendor must 
be approved by HHS, and remove the reference to information 
verification. We also propose in Sec.  155.222(a)(2) to remove the 
requirements that vendors must require agents and brokers to provide 
proof of valid State licensure.
    Consistent with these changes proposed for Sec.  155.222(a), we 
propose amending Sec.  155.222(b)(1) through (5) and (d) to remove 
standards for information verification, identity proofing, verification 
of agents' and brokers' valid State licensure, and all

[[Page 75528]]

related standards that support these functions. We propose to eliminate 
the requirements in paragraphs (b)(1)(i) through (ii) to submit an 
application demonstrating prior experience with verification of State 
licensure and identity proofing; instead, we propose to combine into 
paragraph (b)(1) the existing requirements to demonstrate prior 
experience with online training and technical support for a large 
customer base. In paragraph (b)(2), we propose to eliminate the 
requirement to adhere to HHS specifications for content, format, and 
delivery of information verification; separately, in (b)(2), we propose 
to include SBE-FP States in the requirement to offer continuing 
education units (CEUs) in five FFE States. In paragraph (b)(3), we 
propose to eliminate the requirement that vendors collect, store, and 
share with HHS all data from agent and broker users of the vendor's 
training; instead we propose that vendors would only be required to 
collect, store and share with HHS FFE training completion data. In 
paragraph (b)(4), we propose to amend the standards for the agreement 
that vendors must execute with HHS, to eliminate the requirement that 
vendors implement information verification processes. We propose 
amending Sec.  155.222(b)(5) and (d) to remove references to 
information verification. We solicit comment on the proposals to 
eliminate these requirements related to information verification.
    We propose adding a paragraph (b)(6) to require vendors to provide 
technical support to agent and broker users of the vendor's FFE 
training as specified by HHS. Currently, paragraph (b)(1) requires 
vendors to demonstrate prior experience with providing technical 
support to a large customer base. We propose adding this requirement to 
specify that a vendor must provide tier-one help desk support to assist 
agents and broker accessing the vendor's FFE training platform from the 
CMS Enterprise Portal. Tier-one support includes, for any inquiry 
received by the vendor's help desk, intake, initial response, and 
resolution of inquiry through a scripted response or re-routing to 
another help desk. The scope of inquiries that must be answered through 
scripted response will be provided by HHS in guidance. We seek comments 
on the requirement that a vendor must provide technical assistance as 
specified by HHS to agent and broker users of the vendor's FFE 
training.
    We note that HHS has the authority to require approved vendors to 
provide technical support, as well as FFE training, in accordance with 
HHS guidelines and in a manner and format that complies with Section 
508 of the Rehabilitation Act of 1973. The World Wide Web Consortium's 
Web Content Accessibility Guidelines (WCAG) 2.0 Level AA standards is 
an alternative that we propose would also be considered an acceptable 
national standard for Web site accessibility. For more information see, 
the WCAG Web site at http://www.w3.org/TR/WCAG20/.
f. Standards Applicable to Certified Application Counselors (Sec.  
155.225)
    This proposed rule would also require certified application 
counselor organizations to report performance data to an Exchange, in 
order to improve the ability of each Exchange to monitor the work of 
the organizations it has designated as certified application counselor 
organizations. In accordance with the Secretary's authority under 
section 1321(a)(1)(A) of the Affordable Care Act to establish standards 
related to the operation of Exchanges, we propose to amend Sec.  
155.225(b)(1) to provide that certified application counselor 
designated organizations must, as a condition of their designation as 
certified application counselor organizations by the Exchange, provide 
the Exchange with information and data related to the number and 
performance of the organization's certified application counselors, and 
about the consumer assistance being provided by the organization's 
certified application counselors, upon request, in the form and manner 
specified by the Exchange.
    Section 155.225(b)(1)(ii) already requires certified application 
counselor designated organizations to maintain a registration process 
and method to track the performance of certified application 
counselors, but it does not specify the type of performance information 
that must be tracked, nor does it require that information to be 
provided to the Exchange.
    The proposed requirement would give Exchanges valuable information 
to aid in their oversight of certified application counselor programs, 
and would help improve Exchanges' understanding of the scope of 
consumer assistance being provided in the Exchange service area. The 
proposed requirement would also improve the consumer assistance 
functions of the Exchange in other significant ways, for example, by 
providing information that could help an Exchange focus its outreach 
and education efforts, target its recruitment of certified application 
counselor organizations, and identify the need for increased technical 
assistance and support for certified application counselor 
organizations.
    Under this proposal, Exchanges could establish reporting standards 
as they determine appropriate based on their own specific needs and 
objectives. In States with FFEs, HHS proposes that it would begin 
collecting information and data from certified application counselor 
designated organizations on a monthly basis beginning in January 2017. 
We propose that the kind of information and data that the FFEs would 
require from these organizations will include, at a minimum, data 
regarding the number of individuals who have been certified by the 
organization; the total number of consumers who received application 
and enrollment assistance from the organization; and of that number, 
the number of consumers who received assistance applying for and 
selecting a QHP, enrolling in a QHP, or applying for Medicaid or CHIP. 
We anticipate that the monthly reports submitted to the FFEs would 
provide information and data from the preceding month, and would be 
submitted electronically, through HIOS or another electronic submission 
vehicle. We also expect that some of the data that FFEs would require 
from certified application counselor designated organizations would be 
similar to what is collected from Navigator grantees in the FFEs.\23\ 
We do not expect this information collection to include consumers' PII. 
HHS recognizes the importance of certified application counselors, and 
we intend that any FFE information collection would be straightforward 
and place little additional burden on certified application counselor 
organizations.
---------------------------------------------------------------------------

    \23\ The data collection requirements for FFE Navigator grantees 
in 2015-2016 are specified in the Information Collection Request 
(OMB control number 0938-1215) under the Cooperative Agreement to 
Support Navigators in Federally-facilitated and State Partnership 
Exchanges (see the PRA package associated with 80 FR 36810). http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201507-0938-001.
---------------------------------------------------------------------------

    We request comments on this proposal, on the scope of information 
and data that Exchanges should collect, and on HHS's specific proposals 
for collecting information and data from certified application 
counselor organizations in the FFEs, including the proposed scope and 
timing of reports by these organizations to the FFEs.
    As discussed earlier in this preamble in a parallel proposal to 
amend Sec.  155.210(d)(6), we propose to amend Sec.  155.225(g)(4), 
which prohibits certified application counselors in all Exchanges from 
providing certain kinds of gifts and promotional items to an applicant 
or potential enrollee. For the

[[Page 75529]]

same reasons discussed above, we propose to amend Sec.  155.225(g)(4) 
consistent with our proposed amendments to Sec.  155.210(d)(6).
    We seek comment on all aspects of this proposal
g. Privacy and Security of Personally Identifiable Information (Sec.  
155.260)
    Section 155.260(a)(1) refers to insurance affordability programs, 
as defined in Sec.  155.20. We propose to make a technical correction 
to this paragraph so that Sec.  155.300, which contains the definition 
of insurance affordability programs, is referenced instead.
h. Oversight and Monitoring of Privacy and Security Requirements (Sec.  
155.280)
    Section 155.280(a) permits HHS to oversee and monitor the FFEs and 
non-Exchange entities associated with FFEs to ensure compliance with 
the privacy and security standards established and implemented by an 
FFE under Sec.  155.260. Section 155.280(a) also provides authority for 
HHS to monitor State Exchanges for compliance with the privacy and 
security standards established and implemented by the State Exchanges 
under Sec.  155.260. We propose amending paragraph (a) to permit HHS to 
also oversee and monitor SBE-FPs' compliance with the privacy and 
security standards established and implemented by an FFE under Sec.  
155.260.
4. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
a. Options for Conducting Eligibility Determinations (Sec.  155.302)
    We propose to amend Sec.  155.302(a) by adding an option for an 
SBE-FP to satisfy the requirement of conducting eligibility 
determinations by relying on HHS to carry out eligibility determination 
activity and other requirements within subpart D, through a Federal 
platform agreement. We seek comments on this proposal.
b. Eligibility Process (Sec.  155.310(h))
    We propose to amend Sec.  155.310(h) related to the requirement 
that the Exchange must notify an employer that an employee has been 
determined eligible for Exchange financial assistance upon such 
determination. This notice serves two main purposes. First, it informs 
an employer that it may be liable for the payment assessed under 
section 4980H of the Code because one of the employer's employees was 
determined eligible for Exchange financial assistance.\24\ Second, it 
may reduce an employee's tax liability because in the event an employer 
prevails in an employer appeal described in Sec.  155.555, the Exchange 
will redetermine the employee's eligibility (including for Exchange 
financial assistance) or notify the employee of the requirement to 
report changes in eligibility, as discussed in the preamble section 
III.F.6.g of this proposed rule. Currently under Sec.  155.310(h), the 
Exchange is directed to notify an employer that an employee has been 
determined eligible for Exchange financial assistance. We propose to 
revise this requirement so that the Exchange must notify an employer 
that an employee has been determined eligible for Exchange financial 
assistance only if the employee has also enrolled in a QHP through the 
Exchange. For purposes of this provision, an employee is determined 
eligible for cost-sharing reductions when the employee is determined 
eligible for cost-sharing reductions based on income in accordance with 
Sec.  155.305(g) or Sec.  155.350(a).
---------------------------------------------------------------------------

    \24\ Only certain employers (called applicable large employers) 
are subject to the employer shared responsibility provisions under 
section 4980H of the Code. In general, applicable large employers 
must either offer minimum essential coverage that is ``affordable'' 
and that provides ``minimum value'' to their full-time employees 
(and their dependents), or make an employer shared responsibility 
payment to the IRS if at least one full-time employee receives the 
premium tax credit under section 36B of the Code. For more 
information on which employers are subject the employer shared 
responsibility provisions and under what circumstances an applicable 
large employer will be subject to a payment (and how the payments 
are calculated), see Shared Responsibility for Employers Regarding 
Health Coverage; Final Rule, 79 FR 8544 (Feb. 12, 2014).). Liability 
for the employer shared responsibility payment is determined 
independently by the IRS. More information on the IRS process can be 
found at www.irs.gov.
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    We believe this change better reflects the statutory requirement to 
send employer notices and will reduce confusion among employers and 
employees. The relevant statutes that address the employer notice 
requirement contemplate that employer notices will be provided for 
enrolled individuals who have been determined eligible for Exchange 
financial assistance. Sections 4980H(a)(2) and (b)(1)(B) of the Code 
provide that an assessable payment may be imposed on an employer if at 
least one full-time employee is certified as having enrolled in a QHP 
for which Exchange financial assistance is allowed or paid for the 
employee.
    In the case of an employee who has been determined eligible for 
Exchange financial assistance but has not enrolled in a QHP, it would 
be inaccurate and confusing to send a notice under Sec.  155.310(h) 
because the employer receiving the notice would not be liable for a 
payment assessed under section 4980H of the Code if its employee does 
not enroll in a QHP through the Exchange (even if the employee could 
have received Exchange financial assistance if the employee had 
enrolled in a QHP). Futhermore, because sections 36B(b)(1) and 
(c)(2)(A) of the Code provide that a premium tax credit amount may not 
be allowed for any month in which, as of the first day of the month a 
tax filer (or the tax filer's spouse or tax dependent) was not enrolled 
in a QHP through the Exchange, a notice under Sec.  155.310(h) serves 
no purpose in protecting an employer from potential tax liability under 
section 4980H or an employee from tax liability under section 36B when 
the employee has been determined eligible for Exchange financial 
assistance but has not enrolled in a QHP through the Exchange. We also 
propose to revise paragraph (h)(2) so that a notice sent in accordance 
with Sec.  155.310(h) must indicate that an employee has been 
determined eligible for Exchange financial assistance and has enrolled 
in a QHP through the Exchange.
    Additionally, for purposes of operational efficiency with regard to 
the timing of the employer notification required under paragraph (h), 
we propose that the Exchange may choose to either (a) notify employers 
on an employee-by-employee basis as eligibility determinations are made 
for Exchange financial assistance and enrollment in a QHP through the 
Exchange, or (b) notify employers for groups of employees who are 
determined eligible for Exchange financial assistance and enroll in a 
QHP through the Exchange. Under both options, the Exchange must notify 
employers within a reasonable timeframe following any month an employee 
was determined eligible for either form of Exchange financial 
assistance and enrolled in a QHP, with the goal to notify employers as 
soon as possible to provide the greatest benefit to enrollees. We seek 
comment on these proposals.
c. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  155.320)
    We propose to revise Sec.  155.320(c)(3)(vi) to allow the Exchange 
to establish a reasonable threshold at which the Exchange must follow 
the alternate verification process for decreases in the annual 
household income between the applicant's

[[Page 75530]]

attestation of projected annual household income and the annual income 
computed in accordance with Sec.  155.320(c)(3)(ii)(A). The reasonable 
threshold would be subject to approval by HHS. Current regulations 
require the Exchange to follow the alternate verification process under 
Sec.  155.320(c)(3)(vi) if either (1) the attested annual household 
income submitted by the consumer is more than 10 percent less than 
income data received from trusted data sources, or (2) if no data is 
available from trusted data sources. We recognize that many consumers 
have difficulty projecting their annual household income and complying 
with the verification requirements. Annual household income may 
fluctuate year to year and throughout the year, making it difficult for 
consumers to project their income for the year ahead. Income data from 
trusted data sources can be up to 2 years old. In addition, consumers 
with lower incomes have a smaller margin for error in dollar terms 
under the current percentage-based threshold. We recognize that the 
current threshold of 10 percent may not be adequate to allow for normal 
variation in a consumer's annual household income, and may be too 
sensitive a threshold in terms of triggering the alternate verification 
process. Accordingly, we propose that the Exchange may set a reasonable 
threshold for when an applicant enters the alternate verification 
process in cases where the applicant's attestation of projected annual 
household income is lower than income data received from trusted data 
sources. A reasonable standard would allow for a realistic variation in 
a consumer's projected annual household income for the year for which 
they are seeking coverage from previous years' income data received 
from trusted data sources and may be defined in terms of a percentage, 
or a percentage and a fixed dollar amount (for example, the greater of 
20 percent or $5,000). A threshold set less than 10 percent would not 
be a reasonable standard since it would not allow for small projected 
reductions in income from a previous year. HHS will provide additional 
guidance on what constitutes a reasonable threshold. This proposal 
would allow the Exchange to establish a threshold that effectively 
maintains program integrity, while minimizing burdens to consumers to 
the extent possible. It would also allow the Exchange to make 
adjustments in future years as more data becomes available. We seek 
comment on this proposal.
    In Sec.  155.320(d), we make certain proposals related to 
alternative processes relating to verification of enrollment in an 
eligible employer-sponsored plan and eligibility for qualifying 
coverage in an eligible employer-sponsored plan.
    In paragraph (d)(3), we propose to redesignate paragraph (d)(3)(i) 
as (d)(3)(ii) and redesignate paragraph (d)(3)(ii) as (d)(3)(i). To 
preserve the accuracy of the redesignated paragraph (d)(3)(ii), we 
propose to update the cross-reference to paragraph (d)(3)(ii) with 
(d)(3)(i), and paragraph (d)(3)(iii) with (d)(4)(i), discussed below. 
We also propose to remove paragraph (d)(3)(iii), which requires the 
Exchange to select a statistically significant random sample of 
applicants for whom the Exchange does not have data as specified in 
paragraphs (d)(2)(i) through (iii) and take steps to contact any 
employer identified on the application for the applicant and the 
members of his or her household to verify whether the applicant is 
enrolled in an eligible employer-sponsored plan or is eligible for 
qualifying coverage in an eligible employer-sponsored plan for the 
benefit year for which coverage is requested. This process is referred 
to as ``sampling.'' We propose to modify this requirement, and describe 
that proposal in our discussion of proposed paragraph (d)(4) below. We 
believe these amendments to paragraph (d)(3) will organize and simplify 
the regulatory text.
    We propose to add paragraph (d)(4) concerning a survey of 
verification procedures. In paragraph (d)(4), we propose that the 
Exchange must follow the procedures described in paragraph (d)(4)(i) 
or, in the alternative, for benefit years 2016 and 2017, the Exchange 
may follow the procedures specified in paragraph (d)(4)(ii), for any 
benefit year for which it does not reasonably expect to obtain 
sufficient verification data as described in paragraphs (d)(2)(i) 
through (iii). For the purposes of this section, the Exchange 
reasonably expects to obtain sufficient verification data for any 
benefit year when, for the benefit year, the Exchange is able to obtain 
data about enrollment in and eligibility for qualifying coverage in an 
eligible employer-sponsored plan from at least one electronic data 
source that is available to the Exchange and has been approved by HHS, 
based on evidence showing that the data source is sufficiently current, 
accurate, and minimizes administrative burden, as described in 
paragraph (d)(2)(i).
    In paragraph (d)(4)(i), we propose that the Exchange may conduct 
sampling. This paragraph is substantially the same as current paragraph 
(d)(3)(iii), with three differences. First, we propose to remove the 
absolute requirement to conduct sampling, and for benefit years 2016 
and 2017, allow the Exchange to implement an alternate process approved 
by HHS. This proposal and rationale is described in more detail in the 
discussion of paragraph (d)(4)(ii), below. Second, we propose to remove 
the language that currently appears in paragraph (d)(3)(iv) since the 
relief it provided only applied to eligibility determinations that were 
effective before January 1, 2015. Third, we propose to replace two 
internal cross-references to paragraph (d)(3)(iii) with appropriate 
cross-references to paragraph (d)(4)(i).
    We propose moving the sampling requirement from paragraph (d)(3) 
and adding it to new paragraph (d)(4) to more accurately reflect the 
role of the sampling process. Paragraph (d)(3) contains standards for 
``[v]erification procedures'' applicable to all applicants for Exchange 
financial assistance. The sampling process, however, does not involve 
verification of eligibility information for all applicants, and is 
primarily intended to serve as a way for the Exchange to gain insight 
into whether consumers provide accurate information on the application 
regarding their enrollment in and eligibility for qualifying coverage 
in an eligible employer-sponsored plan and the effectiveness of an 
Exchange's verification of such information.
    In paragraph (d)(4)(ii), we propose to permit an Exchange the 
option to implement an alternate process approved by HHS for the 
benefit years 2016 and 2017. We believe this option will provide 
Exchanges with needed flexibility as verification processes are refined 
and employer databases compiled over the next several years, to improve 
long-term verification programs. We seek comment on these proposals.
d. Medicare Notices
    Over the course of the first two years of Exchange operations, we 
have realized the importance of providing notification to enrollees in 
coverage through the Exchange of their potential eligibility for 
Medicare. We recognize the importance of a smooth transition to 
Medicare coverage, and seek comment on whether and how to implement a 
notification that an enrollee may have become eligible for Medicare. 
For example, for enrollees in an FFE, we are considering ``pop up'' 
text on HealthCare.gov for individuals who are going to turn 65 during 
the benefit year. We seek comment on this and other ways to promote 
smooth coverage transitions.

[[Page 75531]]

5. Exchange Functions in the Individual Market: Enrollment in Qualified 
Health Plans
a. Annual Eligibility Redetermination (Sec.  155.335(j))
    In the 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 final 
rule (79 FR 52994, 53000 (Sept. 5, 2014)), we established a renewal and 
re-enrollment hierarchy at Sec.  155.335(j) to minimize potential 
enrollment disruptions. To further minimize potential disruptions of 
enrollee eligibility for cost-sharing reductions, we propose to amend 
Sec.  155.335(j)(1) to create a new re-enrollment hierarchy for all 
enrollees in a silver-level QHP that is no longer available for re-
enrollment. Specifically, if such an enrollee's current silver-level 
QHP is not available and the enrollee's current product no longer 
includes a silver-level QHP available through the Exchange, the 
enrollee's coverage would be renewed in a silver-level QHP in the 
product offered by the same issuer that is the most similar to the 
enrollee's current product, rather than in a plan one metal level 
higher or lower than his or current silver-level QHP, but within the 
same product. Transitioning enrollees in this manner is an 
operationally efficient way of maintaining continuity for enrollees 
eligible for cost-sharing reductions, and, because the benchmark plans 
for establishing the amount of the premium tax credit for which an 
eligible taxpayer is eligible is a silver-level plan, continued 
enrollment in a silver-level plan, as opposed to enrollment in a plan 
at a different metal level but in the same product is likely to be more 
consumer protective. We request comment on this proposal, including the 
best means of determining which product is most similar to the 
enrollee's current product. We also seek comment on whether the 
hierarchy should permit a QHP enrollee to be automatically re-enrolled 
into a plan not available through an Exchange, and under what 
circumstances such a re-enrollment should occur.
    In the 2016 Payment Notice proposed rule, we also noted that we are 
exploring a change to the re-enrollment hierarchy at Sec.  155.335(j), 
which currently prioritizes re-enrollment with the same issuer in the 
same or a similar plan. As we discussed in that rulemaking, many 
consumers place a high value on low premiums when selecting a plan, and 
the approach we were exploring would recognize that plans that have 
competitively priced premiums in one year may not continue to be the 
most competitively priced in subsequent years. As a result, 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 available to the enrollee.
    We are considering an approach under which an enrollee in an FFE 
would be offered a choice of re-enrollment hierarchies at the time of 
initial enrollment, and could thereby opt into being re-enrolled by 
default for the subsequent year into a low-cost plan, rather than his 
or her current plan or the plan specified in the current re-enrollment 
hierarchy. The 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. For example, in those conditions, the enrollee 
would be placed into a QHP of the same metal level with the lowest 
premium in the enrollee's service area, or perhaps one of three such 
QHPs with the lowest premiums, by random allocation or another 
appropriate allocation process. 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 received a number of comments regarding the discussion in the 
2016 Payment Notice proposed rule. Some commenters supported the 
approach generally. Other commenters stated that the approach does not 
give adequate deference to the plan an enrollee has selected during 
open enrollment, or to the impact of cost sharing. A number of 
commenters had concerns that consumers may not realize that opting into 
a default enrollment hierarchy based on low-cost premiums may result in 
other significant changes to their coverage, and emphasized the 
importance of education by the Exchanges with respect to this re-
enrollment hierarchy. We received a few alternative ideas for re-
enrollment hierarchies, including basing re-enrollment on factors 
consumers identify as most important to them, or basing re-enrollment 
on the consumer's original choice of premium. Similarly, one commenter 
suggested implementing this approach only for those consumers currently 
enrolled in the lowest-cost or second-lowest cost silver plan.
    Continuing the discussion in the 2016 Payment Notice, we are 
requesting further comment on this concept to update our policy in the 
final rule. In particular, we are interested in understanding how to 
ensure that consumers understand the increased risk of being re-
enrolled automatically in a plan with a significantly different 
provider network, benefits, cost-sharing structure, or service area. We 
seek comment on the timing and form of the notice related to plan re-
enrollment that the Federally-facilitated Exchange would provide to 
consumers opting in to such an enrollment hierarchy. We seek comment on 
whether hierarchies that considered factors other than metal level or 
premiums, such as plan type (for example, HMO versus PPO) or network 
breadth could help to reduce the risk that consumers are re-enrolled 
automatically into a plan that does not suit their needs. We are 
interested in comments on 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, for example if enrollees are allocated 
among one of the three lowest cost QHPs of the metal level in the 
enrollee's service area. We seek comment on how best to deal with the 
risk of providing small plans with excess enrollment, in order to avoid 
destabilizing such plans with a deluge of new enrollments. As we did 
last year, we 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 the appropriate timeframe for implementing such an alternative 
hierarchy.
b. Enrollment of Qualified Individuals into QHPs (Sec.  155.400)
i. Rules for First Month's Premium Payments for Individuals Enrolling 
With Regular, Special, and Retroactive Coverage Effective Dates.
    We propose to amend Sec.  155.400(e) related to the payment of the 
first month's premium (that is, binder payments), including deadlines, 
to codify previously released guidance in section 8.2 of the updated 
Federally-facilitated Marketplace and Federally-facilitated Small 
Business Health Options Program Enrollment Manual,\25\ that specified 
our interpretation of these requirements. Specifically, we propose to 
amend Sec.  155.400(e)(1)(i) and (ii) to

[[Page 75532]]

provide that, for prospective coverage, the binder payment must consist 
of the first month's premium. To provide added flexibility for issuers, 
we also would add to the rule to specify that the deadline for a binder 
payment related to prospective coverage with a prospective special 
effective date, would have to be no earlier than the coverage effective 
date and no later than 30 calendar days from the date the issuer 
receives the enrollment transaction or the coverage effective date, 
whichever is later. This would align the requirement for enrollments 
with prospective special effective dates with the requirement for 
enrollments with regular effective dates. We propose to add Sec.  
155.400(e)(1)(iii) to reflect our interpretation, intended to limit the 
risk that issuers would provide retroactive coverage without receiving 
sufficient premium payments from enrollees, that applicants requesting 
coverage being effectuated under retroactive effective dates, such as 
coverage in accordance with a special enrollment period or a successful 
eligibility appeal, must pay a binder payment that consists of all 
premium due (meaning the premium for all months of retroactive 
coverage). If the applicant pays only the premium for one month of 
coverage, we propose that the issuer would be required to enroll the 
applicant in prospective coverage in accordance with regular effective 
dates. We also propose to specify that the deadline for payment of all 
premium due must be no earlier than 30 calendar days from the date the 
issuer receives the enrollment transaction or notification of the 
enrollment. This change to the binder payment rules is intended to 
allow issuers flexibility to set a reasonable deadline for enrollees to 
submit payment of retroactive premium, the total amount of which may 
consist of payment for several months of coverage.
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    \25\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated_ENR_Manual.pdf.
---------------------------------------------------------------------------

    Based on our experience implementing the grace period provisions 
under our previous rulemaking, particularly in cases involving advance 
payments of the premium tax credit, that require full payments of 
amounts due to avoid being put in a grace period and to avoid 
termination of enrollment, we have identified the need for additional 
flexibility for issuers to establish reasonable policies regarding 
premium collection that would allow issuers to collect a minimal amount 
of premium less than that which is owed without necessarily triggering 
the consequences for non-payment of premiums. For example, in the 
Exchange Establishment Rule, we established that enrollees receiving 
advance payments of the premium tax credit have to pay full payments of 
all outstanding premiums owed in order to avoid entering a grace period 
or having their coverage terminated. In response to requests from 
issuers, we propose to add flexibility to this rule to allow issuers 
the option to adopt a premium payment threshold policy to avoid 
situations in which an enrollee who owes only a de minimis amount of 
premium has his or her enrollment terminated for non-payment of 
premiums.
    Accordingly, at new Sec.  155.400(g), we propose to codify a 
provision related to premium payment threshold policies, thereby 
allowing additional issuer flexibility regarding when amounts collected 
will be considered to satisfy the obligation to pay amounts due, so 
long as issuers implement such a policy uniformly and without regard to 
health status and that the premium payment threshold adopted is 
reasonable. This would allow issuers flexibility to effectuate an 
enrollment, not to place an enrollee in a grace period for failure to 
pay 100 percent of the amount due, or not to terminate enrollments 
after exhaustion of the applicable grace period for enrollees who owe 
only a small amount of premium within the threshold.
    We seek comment on these proposals.
ii. Reliance on HHS To Carry Out Enrollment and Related Functions.
    We also propose to amend Sec.  155.400 by adding a new paragraph 
(h) to reflect that SBE-FPs must rely on HHS to implement the functions 
related to eligibility and enrollment within subpart E, through the 
Federal platform agreement. This reflects that eligibility and 
enrollment functions must be performed together in the FFE, and that 
neither function can be performed separately by an SBE-FPs at this 
time. We seek comments on this proposal.
c. 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 amend paragraph (e)(2) to define the open enrollment period 
for coverage year 2017, which would be November 1 through January 31. 
We also propose to amend the annual open enrollment period coverage 
effective date provisions in paragraphs (f)(2)(i) through (iii) to 
include the coverage effective dates for 2017.
    We propose this time period and these coverage effective dates to 
remain consistent with the 2016 open enrollment period. This time frame 
will continue to partially overlap with the annual open enrollment 
period for Medicare and most employer offerings, which will benefit 
consumers by facilitating smooth transitions between coverage and 
creating process efficiencies for issuers handling enrollments and re-
enrollments during the same period. We seek comments on this proposal.
    We are also considering defining the open enrollment period for 
coverage year 2018, and seek comment on what that period should be. For 
example, we could incrementally shift to an earlier open enrollment 
period, while maintaining the same duration, such that the open 
enrollment period for benefit year 2018 would run from October 15, 2017 
through January 15, 2018. Alternatively, we could shift to an earlier 
open enrollment period and shorten its duration simultaneously, such 
that the open enrollment period would run from October 15, 2017 through 
December 15, 2017. We note that open enrollment periods for health 
coverage typically end before the end of the year prior to the benefit 
year to promote full-year coverage. However, in the short run, as 
eligible consumers are learning about their options and the individual 
shared responsibility requirement and newly insured consumers are 
learning how to re-enroll into coverage for the next benefit year, we 
note that there is value in a longer open enrollment period. We would 
also face significant operational limitations in moving the beginning 
of the open enrollment period to an earlier time. However, if we do not 
shift the beginning of the open enrollment period to an earlier date, 
ending the period before the end of the year would result in a shorter 
open enrollment period. We seek comment on the length, start, and end 
of the open enrollment period for 2018 and subsequent years.
d. Special Enrollment Periods (Sec.  155.420)
    Special enrollment periods are available to consumers under a 
variety of circumstances as described in Sec.  155.420. We seek comment 
and any available data on existing special enrollment periods.
    In addition, we have heard concerns that these special enrollment 
periods may be subject to abuse. We seek comment regarding this, and 
data, if available. Elsewhere in this document, we propose an amendment 
to Sec.  155.430(b)(2)(vi) that would allow the

[[Page 75533]]

Exchange to initiate cancellation or retroactive termination of an 
enrollee's enrollment, after a determination has been made that the 
enrollment was due to fraudulent activity. We believe this proposal 
would provide us with an important tool for addressing potential gaming 
of these rules.
e. Termination of Coverage (Sec.  155.430)
    Under our current rules, Sec.  155.430(b)(1) requires an Exchange 
to permit an enrollee to cancel or terminate his or her coverage in a 
QHP following appropriate notice to the Exchange or the QHP issuer. We 
propose to add paragraph (b)(1)(iv) to allow an enrollee to 
retroactively cancel or terminate his or her enrollment in a QHP 
through the Exchange in the limited circumstances set forth below. For 
enrollees whose enrollment or continued enrollment in a QHP resulted 
from an error, misconduct, or fraud committed by an entity other than 
the enrollee, we aim to increase flexibility under the regulations to 
permit such enrollees to avoid the consequences of that entity's 
actions by canceling the QHP coverage. To this end, we propose to 
redesignate current paragraph (b)(2)(vi) as (b)(2)(vii) and add a new 
paragraph (b)(2)(vi) to permit the Exchange to cancel an enrollee's 
enrollment in a QHP under certain circumstances. This rule would permit 
cancellations of fraudulent enrollments that the Exchange discovers, 
even if the enrollee is never aware of the enrollment.
    New paragraph (b)(1)(iv)(A) would provide that the enrollee would 
be permitted to retroactively terminate his or her coverage or 
enrollment if he or she demonstrates to the Exchange that he or she 
attempted to terminate his or her coverage or enrollment and 
experienced a technical error that did not allow the enrollee to 
effectuate termination of his or her coverage or enrollment through the 
Exchange. Such an enrollee would have 60 days after he or she 
discovered the technical error to request retroactive termination. This 
aligns with our standard 60-day window for special enrollment periods.
    We propose a new paragraph (d)(9), which would provide that the 
retroactive termination date under paragraph (b)(1)(iv)(A) would be no 
sooner than 14 days after the earliest date that the enrollee could 
demonstrate that he or she contacted the Exchange to terminate his or 
her coverage or enrollment through the Exchange, unless the issuer 
agrees to an earlier effective date as set forth in Sec.  
155.430(d)(2)(iii). This 14-day window aligns with the regulation on 
voluntary, enrollee-initiated prospective terminations.
    We propose in paragraph (b)(1)(iv)(B) to provide for cancellation 
for an enrollee who demonstrates to the Exchange that his or her 
enrollment in a QHP through the Exchange was unintentional, 
inadvertent, or erroneous and was the result of the error or misconduct 
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. Such an enrollee would 
have 60 days from the point he or she discovered the unintentional, 
inadvertent, or erroneous enrollment to request cancellation, to align 
with our standard 60-day special enrollment period window. In 
determining whether an enrollee has demonstrated to the Exchange that 
his or her enrollment meets the criteria for cancellation under this 
paragraph, the Exchange would examine the totality of the circumstances 
surrounding the enrollment, such as whether the enrollee was enrolled 
in other minimum essential coverage at the time of his or her QHP 
enrollment and whether he or she submitted claims for services rendered 
to the QHP. These factors would serve to indicate the intentions of the 
enrollee and whether the enrollment really was undesired and would be 
weighed in making a determination whether a cancellation is warranted. 
This approach offers a broad and fair analysis of the enrollee's 
intentions and balances the interests and protection of consumers with 
the interests of issuers. For example, we believe that, without 
additional evidence to the contrary, one reasonably could assume that 
an enrollee who was enrolled in other minimum essential coverage at the 
time of his or her QHP enrollment and who submitted no claims to that 
QHP likely did not intend to enroll in such QHP. Conversely, claims 
submitted by an enrollee to the QHP would weigh against the enrollee's 
request for cancellation because, barring contrary evidence, the 
Exchange would view submittal of such claims to constitute a 
ratification of the enrollee's contract with the QHP issuer, even if 
the enrollee did not intend to enroll in QHP coverage. We seek comment 
on what other factors are indicative of an enrollee's bona fide intent 
and can limit ``gaming,'' and should be considered in this analysis.
    In paragraph (b)(1)(iv)(C), we propose to allow cancellations for 
enrollees who are enrolled in a QHP without their knowledge or consent 
due to the fraudulent activity of any third party, including third 
parties who have no connection with the Exchange. Such an enrollee 
would have 60 days from the point at which he or she discovered the 
fraudulent enrollment to request cancellation, to align with our 
standard 60-day special enrollment period window.
    New paragraph (d)(10) would provide that for cancellation or 
retroactive terminations granted in accordance with paragraphs 
(b)(1)(iv)(B) and (C), the cancellation or termination date would be 
the original coverage effective date or a later date, as determined 
appropriate by the Exchange, based on the circumstances of the 
cancellation or termination.
    Under our current rules, Sec.  155.430(b)(2) allows the Exchange to 
initiate termination of an enrollee's coverage or enrollment in a QHP 
through the Exchange, and permits a QHP issuer to terminate such 
coverage or enrollment in certain circumstances. Amended paragraph 
(b)(2)(ii)(A) reflects the change to Sec.  156.270(d) and (g) that 
gives an enrollee who, upon failing to timely pay premium, is receiving 
advance payments of the premium tax credit (APTC), a three-month grace 
period. The changes to Sec.  156.270 are described in section 
``Termination of Coverage or Enrollment for Qualified Individuals'' of 
the preamble.
    We propose in new paragraph (b)(2)(vi) that the Exchange could 
cancel an enrollee's enrollment that the Exchange determines was due to 
fraudulent activity, including fraudulent activity by a third party 
with no connection with the Exchange.
    New paragraph (d)(11) would provide that for cancellations granted 
in accordance with paragraph (b)(2)(vi), the cancellation date would be 
the original coverage effective date. The Exchange only would send the 
cancellation transaction following reasonable notice to the enrollee 
(recognizing that where no contact information is available that notice 
may be impossible or impracticable).
    Our current guidance recognizes that at some point, the Exchange 
must discontinue the ability for enrollees to retroactively adjust 
coverage for the preceding coverage year. To this end, we are 
considering codifying a deadline for requesting cancellations or 
retroactive terminations. We seek comment on these proposals.
6. Appeals of Eligibility Determinations for Exchange Participation and 
Insurance Affordability Programs
a. General Eligibility Appeals Requirements (Sec.  155.505)
    In Sec.  155.505, we make certain proposals related to the general

[[Page 75534]]

eligibility appeals requirements. Currently, paragraph (b)(1) of this 
section states that an applicant or enrollee has the right to appeal an 
eligibility determination made in accordance with subpart D. This right 
includes the right to appeal determinations of eligibility for QHP 
enrollment periods, such as special enrollment periods. To clarify the 
scope of applicants' and enrollee's right to appeal, we are proposing 
to add paragraph (b)(1)(iii) which would more explicitly state that 
applicants and enrollees have the right to appeal a determination of 
eligibility for an enrollment period. This change would apply to 
appeals provided by the HHS appeals entity and a State Exchange appeals 
entity.
    Similarly, we propose new paragraph (b)(5) to clarify that 
applicants and enrollees have the right to appeal a decision issued by 
the State Exchange appeals entity. Section 155.520(c) already provides 
that an appellant who disagrees with a decision of a State Exchange 
appeals entity may request an appeal to the HHS appeals entity within 
30 days of the notice of appeal decision. New paragraph (b)(5) would 
clarify applicants' and enrollees' existing right to appeal any 
decision issued by a State Exchange appeals entity in accordance with 
Sec.  155.545(b), in addition their right to appeal a denial of a 
request to vacate a dismissal made by a State Exchange appeals entity, 
as described in Sec.  155.505(b)(4).
    Finally, in paragraph (b)(4), we propose to correct a typographical 
error by replacing the word ``or'' with the word ``of,'' and to replace 
``pursuant to'' with ``under,'' so the last clause of the paragraph 
would read, ``. . . made under paragraph (c)(2)(i) of this section. . 
.''. We seek comment on these proposals.
b. Appeals Coordination (Sec.  155.510)
    We propose to revise Sec.  155.510(a)(1) to give the appeals entity 
and agencies administering insurance affordability programs more 
flexibility in obtaining documentation and information from appellants. 
To minimize burden on appellants, Sec.  155.510(a)(1) currently 
prohibits the appeals entity or agency administering insurance 
affordability programs from asking an appellant to provide information 
or documentation that the appellant already provided. However, when 
such information or documentation is not available to the appeals 
entity or agency, this provision may also prevent the appeals entity or 
agency from obtaining information that is necessary to properly 
adjudicate the appellant's appeal. As a result, the appeals entity is 
deprived of documentation that could support a decision favorable to 
the appellant.
    Accordingly, we propose to revise paragraph (a)(1) to allow the 
appeals entity, the Exchange, or the agency administering insurance 
affordability programs to request information or documentation from the 
appellant that the appellant already has provided if the agency does 
not have access to such information or documentation and cannot 
reasonably obtain it. We believe this revision balances the need to 
minimize the burden on the appellant as well as the need to ensure that 
all information necessary for the appellant's appeal is available to 
the appeals entity, Exchange, or agency administering the insurance 
affordability program, which ultimately will inure to the appellant's 
benefit by helping to ensure a correct appeal decision and eligibility 
determination. We seek comment on this proposal.
c. Appeal Requests (Sec.  155.520)
    We propose to add paragraph (d)(2)(i)(D), concerning appellants 
whose appeal request is determined invalid for failure to request an 
appeal by the date determined in paragraph (b) or (c) of this section. 
Currently, when an appellant's request is invalid because it is 
untimely, it is not possible for the appellant to cure the defect as 
contemplated under Sec.  155.520(d)(2)(i)(C). Therefore, the appeals 
entity dismisses the appeal in accordance with Sec.  155.530(a)(3). If 
the appellant makes a written request within 30 days of the date of the 
notice of dismissal showing good cause why the dismissal should be 
vacated, the appeals entity must vacate the dismissal in accordance 
with Sec.  155.530(d). Accordingly, an appellant who shows good cause 
why his or her appeal should proceed even though the appeal request was 
untimely (for example, an appellant who was unable to submit a timely 
appeal request because he or she was hospitalized with a serious 
condition) currently may proceed with an appeal, but the process is 
circuitous.
    This proposed addition of (d)(2)(i)(D) would require the appeals 
entity to notify an appellant that, in the event the appeal request is 
invalid because it was not timely submitted, the appeal request may be 
considered valid if the applicant or enrollee demonstrates within a 
reasonable timeframe determined by the appeals entity that failure to 
timely submit was due to exceptional circumstances and should not 
preclude the appeal. This would allow the appellant to demonstrate 
before the appeal is dismissed that failure to submit a timely appeal 
request was due to exceptional circumstances constituting good cause 
why the appeal should proceed, which would minimize burden on the 
appellant as well as administrative burden on the appeals entity.
    The appeals entity may determine what constitutes an exceptional 
circumstance that should not preclude an appeal notwithstanding the 
appellant's failure to timely submit an appeal request. An appeals 
entity may, for instance, find that circumstances making timely 
submission impossible constitute an exceptional circumstance. A weather 
emergency, such as a blizzard, a hurricane or a tornado, may cause 
power outages making it impossible to prepare, mail, or fax appeal 
requests to the appeals entity. Similarly, such disasters may cause 
consumers to lose access to the documents they need to complete and 
submit appeal requests. Likewise, if a consumer suffers a catastrophic 
medical event and is consequently unable to submit an appeal request on 
time, the appeals entity may determine that this constitutes an 
exceptional circumstance under the proposed exception.
    The appeals entity may also determine what is considered a 
reasonable timeframe for an appellant to demonstrate an exceptional 
circumstance. For example, if an appellant was unable to send an appeal 
request on time due to a snow storm and power outage and sent the 
request four months after the snow storm and power outage had been 
resolved, the appeals entity may find that the appellant experienced an 
exceptional circumstance as contemplated by this proposed rule, but 
that the appellant waited an unreasonable amount of time to demonstrate 
it. Without such flexibility for the appeals entity, appellants who 
experienced an exceptional circumstance would have an unlimited amount 
of time to request that the appeals entity consider their appeal. We 
seek comment on this proposal.
d. Dismissals (Sec.  155.530)
    We propose to revise Sec.  155.530(a)(4) to allow an appeal to 
continue when an appellant dies if the executor, administrator, or 
other duly authorized representative of the estate requests to continue 
the appeal. We seek comment on this proposal.
e. Informal Resolution and Hearing Requirements (Sec.  155.535)
    In Sec.  155.535, we propose amendments to the informal resolution 
and notice of hearing requirements. In Sec.  155.535(a),

[[Page 75535]]

we propose a change to clarify that the requirements of the informal 
resolution process described in paragraphs (a)(1) through (4) apply to 
both the HHS appeals entity and a State Exchange appeals entity.
    In Sec.  155.535(b), we propose providing two exceptions to the 
requirement that the appeals entity must send written notice to the 
appellant of the date, time, and location or format of the hearing no 
later than 15 days prior to the hearing date. In paragraph (b)(1), we 
propose an exception when an appellant requests an earlier hearing 
date. Currently, the 15-day notice requirement prevents an appellant 
from selecting a hearing date within 15 days even if such a date is 
available and desired by the appellant. In paragraph (b)(2), we propose 
an exception to the notice requirement under paragraph (b) when a 
hearing date sooner than 15 days is necessary to process an expedited 
appeal, as described in Sec.  155.540(a), and the appeals entity and 
appellant have mutually agreed to the date, time, and location or 
format of the hearing. If finalized, this amendment would create 
efficiency for the appeals process as a whole and create a more 
agreeable experience for the appellant. In addition, it would allow for 
an earlier hearing when there is an immediate need for a health 
service. We seek comment on these proposals.
f. Appeal Decisions (Sec.  155.545)
    We propose several changes to Sec.  155.545. In paragraph (b)(1), 
we propose to remove the third appearance of the word ``of'' to correct 
a typographical error. We also propose to revise paragraph (c)(1)(i) to 
include cross references to Sec.  155.330(f)(4) and (5), which discuss 
effective dates for certain special enrollment periods described in 
Sec.  155.420. This change aligns with our proposed change Sec.  
155.505(b) to clarify that applicants and enrollees have the right to 
appeal a determination of eligibility for an enrollment period.
    Finally, we propose to revise Sec.  155.545(c)(1)(ii) so that the 
coverage effective date for eligible appellants requesting a 
retroactive appeal decision effective date is the coverage effective 
date that the appellant did receive or would have received if the 
appellant had enrolled in coverage under the incorrect eligibility 
determination that is the subject of the appeal. This is consistent 
with the coverage effective dates consumers receive in comparable 
situations when given the option for retroactive coverage, such as in 
the case of certain special enrollment periods. We seek comment on this 
proposal.
g. Employer Appeals Process (Sec.  155.555)
    We also propose to amend Sec.  155.555(l) to give the Exchange more 
operational flexibility in implementing an employer appeal decision. 
Currently under Sec.  155.555(l), when an employer appeal decision 
affects an employee's eligibility, the Exchange is directed to 
redetermine the employee's eligibility and the eligibility of the 
employee's household members, if applicable. An employer's appeal 
decision may affect an employee's eligibility when the employer 
prevails in the appeal by establishing that it does offer the employee 
employer-sponsored coverage that meets the minimum value standard and 
is affordable for the employee, and the HHS appeals entity therefore 
finds that the employee is not eligible for Exchange financial 
assistance.
    We propose to amend Sec.  155.555(l) by revising paragraph (l) and 
adding paragraphs (l)(1) and (2). Under proposed paragraph (l), after 
receipt of the notice under paragraph (k)(3) of this section, the 
Exchange must follow the requirements in either paragraph (l)(1) or (2) 
if the appeal decision affects the employee's eligibility. Under 
proposed paragraph (l)(1), the Exchange must promptly redetermine the 
employee's eligibility and the eligibility of the employee's household 
members, if applicable, in accordance with the standards specified in 
Sec.  155.305, as currently provided in paragraph (l). Under proposed 
paragraph (l)(2), the Exchange must promptly notify the employee of the 
requirement to report changes in eligibility as described in Sec.  
155.330(b)(1). The FFE intends to implement the latter procedure to 
give employees the opportunity to report any additional changes in 
their eligibility information to help ensure the most accurate 
redetermination of eligibility for insurance affordability programs. We 
believe this amendment will also give the Exchange greater operational 
flexibility.
    Additionally, we propose to make a technical correction to Sec.  
155.555(e)(1) by removing the cross-reference to paragraph (d)(3) of 
this section, which does not exist, and replacing it with paragraph 
(d)(1)(iii). We seek comment on these proposals.
7. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
a. Eligibility Standards for Exemptions (Sec.  155.605)
    We are proposing to clarify and streamline policies related to 
exemptions and are proposing to amend Sec.  155.605 to reflect those 
changes. The proposed changes will simplify and streamline the process 
for members of health care sharing ministries, members of Indian 
tribes, and incarcerated individuals by directing consumers solely to 
the tax filing process to claim these exemptions. To claim one of these 
exemptions on a tax return, the individual needs only to file IRS Form 
8965, Health Coverage Exemptions, with his or her tax return. 
Presently, the Exchange process requires that an application be 
submitted to the Exchange, and the Exchange review, process, and 
respond to the application. If the individual does not complete the 
Exchange application with all required information, the individual will 
be asked to submit the missing information before the application can 
be processed. The follow-up steps may result in a significant delay to 
the individual's application if he or she does not submit the 
information on a timely basis. Further, the Exchange may only grant 
certain exemptions on a retrospective basis so that the individual may 
need to submit multiple applications throughout the year. Finally, the 
Exchange may not grant exemptions for members of health care sharing 
ministries and individuals who were incarcerated for the previous year 
if the individual requests the exemption after December 31 of the 
previous year. This adds confusion when many individuals are preparing 
their tax returns, assessing their exemption eligibility and 
discovering that they can apply with the Exchange. Corresponding 
requirements do not exist in the tax return process; consumers simply 
claim the exemption on IRS Form 8965 when filing the tax return. 
Therefore, we propose that the Exchange would no longer make 
eligibility determinations for exemptions based on membership in a 
health care sharing ministry, membership in an Indian tribe, or 
incarceration status, and therefore propose to delete paragraphs (d) 
through (f). We propose to redesignate paragraph (g) as paragraph (d).
    We also propose to add a new paragraph (e), under which we propose 
that certain exemptions authorized under Section 5000(A) of the 
Internal Revenue Code may be claimed during the tax filing process 
without obtaining an exemption certificate number (ECN) from the 
Exchange. In previous guidance, we identified these exemptions and 
provided that they may be claimed on a tax return without obtaining an 
ECN.\26\ The IRS has also

[[Page 75536]]

published guidance identifying these exemptions, and allowing eligible 
individuals to claim the exemption without first obtaining an ECN.\27\ 
These proposed regulations codify our prior guidance.
---------------------------------------------------------------------------

    \26\ HHS Centers for Medicare & Medicaid Services, Shared 
Responsibility Guidance-Filing Threshold Hardship Exemption (Sept. 
18, 2014), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Filing-Threshold-Exemption-Guidance-9-18-14.pdf.
    \27\ Notice 2014-76, 2014-50 I.R.B. 946 (December 8, 2014), 
available at https://www.irs.gov/pub/irs-irbs/irb14-50.pdf.
---------------------------------------------------------------------------

    An ECN is not required for an exemption that can be claimed on a 
tax return. Rather, an individual can simply list the appropriate code 
to claim the exemption per the instructions to Form 8965. The varying 
requirements between the IRS and the Exchange exemption processes may 
cause confusion for applicants. Further, we intend to permit 
individuals who have already been granted an ECN from the Exchange on a 
continuing basis (such as for members of Federally recognized tribes or 
individuals eligible for services through an Indian health care 
provider) to use their ECN on their Federal income tax return to claim 
this exemption until such time that they no longer are eligible for 
this exemption. An individual will be able to obtain information about 
his or her ECN after the Exchange ceases processing tribal membership 
exemptions. We also propose a clarifying amendment to Sec.  155.605(b) 
to remove the cross-reference to paragraphs (f)(2) and (g) and replace 
it with paragraphs (c)(2) and (d). We seek comment on all aspects of 
this proposal.
    We propose to redesignate Sec.  155.605(g), which discusses 
hardship exemptions, as Sec.  155.605(d), and reorganize and revise the 
newly redesignated paragraph (d). In newly redesignated Sec.  
155.605(d)(1), we propose to limit the amount of time a general 
hardship exemption may cover to the remainder of the calendar year from 
the date the hardship commenced plus the next calendar year, plus the 
month before the hardship began. We believe that such a maximum period 
for the hardship exemption provides the individual with a sufficient 
period of time during which he or she will be covered by the exemption, 
and sufficient time for the individual to recover from the hardship. We 
propose that an individual would need to submit a new hardship 
exemption application to the Exchange to request subsequent hardship 
exemptions on the same basis, however the Exchange may use the proof of 
hardship submitted with the previous application as long as it is 
within 3 years of an individual's initial application for the hardship 
exemption. We propose that individuals would not be required to submit 
additional proof within 3 years of their initial application because we 
believe that this proof would be sufficiently current to support an 
additional exemption application. We seek comment on this proposal, in 
particular with respect to the timeframes--both the maximum timeframe 
for the length of the hardship exemption, and the 3-year timeline for 
submission of new supporting evidence.
    Next, we propose to revise newly redesignated Sec.  155.605(d)(2) 
to set out specific examples of events and circumstances that qualify 
an individual for a hardship exemption under the umbrella of the 
general set of events and circumstances described under newly 
redesignated Sec.  155.605(d)(1). We note that these specific proposed 
criteria are not intended to limit the Exchange's ability to determine 
individuals' eligibility for a hardship exemption based on other 
criteria provided through guidance, covering a specified duration, such 
as the exemption available to individuals enrolled in CHIP Buy-In plans 
in 2014. The specific illustrative criteria we propose to add are:
     Homelessness;
     Eviction or facing eviction or foreclosure;
     Received a shut-off notice from a utility company;
     Experienced domestic violence;
     Experienced the death of a family member;
     Experienced a fire, flood or other nature or human-caused 
disaster that caused substantial damage to your property;
     Filed for bankruptcy;
     Experienced unexpected increases in necessary expenses due 
to caring for an ill, disabled or aging family member;
     Seeking categorical Medicaid eligibility under section 
1902(f) of the Social Security Act (the Act) for ``209(b)'' States 
(codified at Sec.  435.121);
     Seeking Medicaid coverage provided to medically needy 
individuals under section 1902(a)(10(C) of the Act that is not included 
as government-sponsored minimum essential coverage under IRS 
regulations and not recognized as MEC by the Secretary of HHS in 
accordance with the CMS State Health Official (SHO) Letter #14-002;
     Enrolled in Medicaid coverage provided to a pregnant woman 
that is not included as government-sponsored minimum essential coverage 
under IRS regulations and not recognized as minimum essential coverage 
by the Secretary of HHS in accordance with CMS SHO #14-002;
     Enrolled in CHIP coverage provided to an unborn child that 
includes comprehensive prenatal care for the pregnant mother; or
     As a result of an eligibility appeals decision the 
individual is eligible for enrollment in a qualified health plan 
through the Exchange, lower costs on the individual's monthly premiums 
or CSRs for a time period when the individual was not enrolled in a QHP 
through the Exchange. These criteria were previously laid out in 
Exchange guidance, and capture many of the reasons why an individual 
has requested a hardship exemption to date. We seek comment on this 
proposal.
    We propose to revise newly redesignated paragraph (d)(3) to require 
that a hardship event or circumstance must have occurred within 3 years 
from the date of the individual's hardship application submitted to the 
Exchange. This proposed paragraph is in line with the requirement that 
an Exchange may only accept an application for a hardship exemption up 
to 3 calendar years after the month or months during which the 
applicant attests that the hardship occurred under Sec.  155.610(h). 
The same hardship event or circumstance may qualify an individual for 
two ECNs that cover a period of 4 years total.
    For example, assume an individual experiences a hardship event in 
January 2015 and submits a hardship application to the Exchange in 
February 2015. If the individual otherwise qualifies for the exemption, 
the individual may be granted an ECN spanning December 2014 through 
December 2016. If the individual submits a second hardship application 
in January 2017 noting that the exemption is requested for the same 
event covered by the original ECN that occurred in January 2015, the 
individual may be granted a second ECN that extends through December 
2018.
    Next, consider an individual who experiences a hardship event in 
January 2015 and submits a hardship application to the Exchange in 
January 2018. The individual is eligible for a hardship exemption from 
December 2014 through December 2016, and the individual may request a 
second ECN to cover through December 2018.
    Finally, consider an individual who experiences a hardship event in 
January 2015 and submits a hardship application to the Exchange in 
January 2019. The individual is not eligible for an exemption for the 
January 2015 event because it happened more than 3 years from the date 
of the individual's exemption application. However, if the individual 
can show the Exchange that

[[Page 75537]]

the event continued or a new hardship qualifying event occurred anytime 
from January 2016 to January 2019, the individual would be eligible for 
a hardship exemption. We seek comment on this proposal and on whether 3 
years is the appropriate length of time, or whether a shorter period is 
warranted.
    In addition, we propose to amend newly redesignated Sec.  
155.605(d)(5), which provides an exemption for a calendar year to an 
individual who has been determined ineligible for Medicaid for one or 
more months during a benefit year solely as a result of a State not 
implementing section 2001(a) of the Affordable Care Act. We propose to 
remove the requirement to obtain an eligibility determination from the 
individual's appropriate State Medicaid office. Instead, we propose 
that this exemption be made available to an individual who would be 
determined ineligible for Medicaid for one or more months during a 
benefit year solely as a result of a State not implementing section 
2001(a) of the Affordable Care Act. By removing the requirement to 
obtain a Medicaid determination, we believe that we are reducing State 
administrative costs and are alleviating a significant burden on 
individuals who do not request this exemption until the previous 
calendar year has passed and are therefore unable to obtain a Medicaid 
determination for the previous year. We anticipate that this proposed 
change will simplify the process for filing an exemption application 
with the Exchange. We seek comment on this proposal.
    Finally, we propose Sec.  155.605(e)(4) to allow individuals to 
claim the exemption described in section F of I.R.S. Notice 2014-76 
(Dec. 8, 2014), relating to certain individuals who reside in a State 
that did not expand Medicaid eligibility, on their Federal income tax 
return without first obtaining an ECN from the Exchange. We propose to 
allow this exemption to be claimed beginning for the 2015 tax year so 
that there is no gap in the ability for consumers to claim this 
exemption on a tax return.
b. Required Contribution Percentage (Sec.  155.605(e)(3))
    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. 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 (the 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) (redesignated as Sec.  155.605(d)(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) (redesignated as Sec.  
155.605(d)(5)), certain employed individuals are exempt if, on an 
individual basis, the cost of individual coverage is less than the 
required contribution percentage, but the aggregate cost of individual 
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.
    Section 5000A established the 2014 required contribution percentage 
at 8 percent. For plan years after 2014, section 5000A(e)(1)(D) of the 
Code and 26 CFR 1.5000A-3(e)(2)(ii) provide that 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 (79 FR 30302), we established a 
methodology for determining the excess of the rate of premium growth 
over the rate of income growth for plan years after 2014. We also said 
future adjustments would be published annually in the HHS notice of 
benefit and payment parameters.
    Under the HHS methodology, the rate of premium growth over the rate 
of income growth for a particular calendar year is the quotient of (x) 
1 plus the rate of premium growth between the preceding calendar year 
and 2013, carried out to ten significant digits, divided by (y) 1 plus 
the rate of income growth between the preceding calendar year and 2013, 
carried out to ten significant digits.\28\
---------------------------------------------------------------------------

    \28\ We also defined the required contribution percentage at 
Sec.  155.600(a) to mean the product of 8 percent and the rate of 
premium growth over the rate of income growth for the calendar year, 
rounded to the nearest one-hundredth of one percent.
---------------------------------------------------------------------------

    As the measure of premium growth for a calendar year, we 
established in the 2015 Market Standards Rule that we would use the 
premium adjustment percentage. The premium adjustment percentage is 
based on projections of average per enrollee employer-sponsored 
insurance premiums from the National Health Expenditure Accounts 
(NHEA), which are calculated by the CMS Office of the Actuary. \29\ In 
Sec.  156.130 of this proposed rule, we propose the 2017 premium 
adjustment percentage of 1.1325256291 (or about 13.3 percent) over the 
period from 2013 to 2016. This reflects an increase of about 5.1 
percent for 2015-2016.
---------------------------------------------------------------------------

    \29\ For any given year the premium adjustment percentage is the 
percentage (if any) by which the most recent NHEA projection of per 
enrollee employer-sponsored insurance premiums for the current year 
exceeds the most recent NHEA projection of per enrollee employer-
sponsored insurance premiums for 2013.
---------------------------------------------------------------------------

    As the measure of income growth for a calendar year, we established 
in the 2015 Market Standards Rule that we would use per capita Gross 
Domestic Product (GDP), using the projections of per capita GDP used 
for the NHEA, which is calculated by the Office of the Actuary.
    However, as noted in the 2015 Market Standards Rule (79 FR 30304), 
we stated that we would consider alternative measures of income and 
premium growth should projections of those measures become available. 
As part of its projections of National Health Expenditures, the Office 
of the Actuary published projections of personal income (PI) for the 
first time in September 2014 and subsequently in July 2015. As a 
result, we are considering substituting this new measure of per capita 
PI for per capita GDP in the calculation for the required contribution 
percentage. We believe per capita PI better aligns with the statutory 
intent of measuring the income of an individual than per capita GDP. 
The projections of PI published by the Office of the Actuary are 
consistent with the measure published by the Bureau of Economic 
Analysis, which reflects income received by individuals from all 
sources, including income from participation in production. 
Specifically, it includes compensation of employees (received), 
supplements to wages and salaries, proprietors' income with adjustments 
for inventory valuation and capital consumption, personal income 
receipts on assets, rental income, and personal current transfer 
receipts, less contributions for government social insurance.
    The Office of the Actuary's PI projection is generated using the 
University of Maryland's Long Term Inter-industry Forecasting Tool. The 
Long Term Inter-industry Forecasting Tool model is a macro-economic 
model that is based on the historical relationships that exist between 
PI growth, GDP growth, and changes in other macro-economic variables. 
For instance, the correlation between PI and GDP is influenced by 
fluctuations in

[[Page 75538]]

taxes and government transfer payments, depreciation of capital stock, 
and retained earnings and transfer payments of private business.\30\ 
Estimates of GDP in the NHE projections reflect economic assumptions 
from the 2015 Medicare Trustees Report and are updated to incorporate 
the latest available consensus data from the monthly Blue Chip Economic 
Indicators. These same economic assumptions are used for producing 
projections of PI and employer-sponsored insurance premiums, so using 
this estimate will generate an internally consistent estimate of the 
growth in premiums relative to growth in income. We welcome comments on 
whether to substitute per capita PI for per capita GDP in the 
calculation to establish the rate of income growth for the required 
contribution percentage.
---------------------------------------------------------------------------

    \30\ Projections of PI and GDP are available from Table 1 at: 
Centers for Medicare & Medicaid Services. National Health 
Expenditure Data: Projected. http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html.
---------------------------------------------------------------------------

    We will continue to consider other changes to the measures of 
income per capita and premium growth as additional information becomes 
available and as we gain experience with the current measures, and seek 
comment on other indices that we should develop or consider. For 
example, we have considered a measure of per capita personal income 
that does not include government transfers such as social security, 
Medicare, and Medicaid. We welcome comments on whether we should seek 
to develop such a measure of income, and whether we should use this or 
another alternative measure to establish the rate of income growth for 
the required contribution percentage.
    Since updating the required contribution percentage for 2017 
requires calculating the cumulative difference between premium growth 
and income growth between the preceding calendar year and 2013, we 
propose to replace per capita GDP with per capita PI for all years 
beginning in 2013 and then calculate cumulative income growth through 
2016. We propose this retrospective approach as it allows for 
consistency across all years with the most recent data available. We 
note that potential future changes based on new data that are not 
available for 2013 may be made on a prospective basis.
    Under this proposal, using the NHEA data, the rate of income growth 
for 2017 is the percentage (if any) by which the most recent projection 
of per capita PI for the preceding calendar year ($49,875 for 2016) 
exceeds the per capita PI for 2013, ($44,925), carried out to ten 
significant digits. The total rate of income growth for the 3-year 
period from 2013-2016 is estimated to be 1.1101836394 (or about 11.0 
percent). This reflects an increase of about 2.68 percent for 2015-
2016.
    Thus, using the proposed 2017 premium adjustment percentage, the 
excess of the rate of premium growth over the rate of income growth for 
2013-2016 is 1.1325256291/1.1101836394, or 1.0201245892. This results 
in a required contribution percentage for 2017 of 8.00*1.0201245892, or 
8.16 percent, when rounded to the nearest one-hundredth of one percent, 
an increase of 0.37 percentage points from 2016. The required 
contribution percentage is also used for 36B(b)(3)(A) and (c)(2)(C).
c. Eligibility Process for Exemptions (Sec.  155.610)
    In Sec.  155.610, we propose to delete a cross-reference and add a 
paragraph about the handling of incomplete exemption applications 
received by the Exchange.
    First, we propose to strike the cross-reference to paragraph (f) in 
Sec.  155.610(h)(1) as we propose elsewhere in this proposed rule that 
the Exchange will no longer process exemption applications related to 
membership in an Indian tribe.
    Second, we propose to add new paragraph Sec.  155.610(k) regarding 
how the Exchange will handle incomplete exemption applications 
submitted to the Exchange. We propose that the Exchange will handle 
incomplete exemption applications similarly to how it handles 
incomplete health coverage applications under Sec.  155.310(k). 
Specifically, when the Exchange receives an application that does not 
contain sufficient information to make an eligibility determination, 
the Exchange will: (1) Provide notice to the applicant indicating that 
information necessary to complete an eligibility determination is 
missing, specifying the missing information, and providing instructions 
on how to provide the missing information; (2) provide the applicant 
with a period of no less than 10 and no more than 90 days starting from 
the date on which the notice is sent to the applicant to provide the 
information needed to complete the application to the Exchange; and (3) 
if the Exchange does not receive the requested information, the 
Exchange will notify the applicant that the Exchange will not process 
the application and will provide appeal rights to the applicant. We 
seek comment on this proposal.
d. Verification Process Related to Eligibility for Exemptions (Sec.  
155.615)
    In Sec.  155.615, we propose deletions related to exemptions that 
we are proposing elsewhere in this proposed rule to remove from the 
Exchange exemption eligibility determination process, and an addition 
to align with newly added paragraphs pertaining to a general hardship 
exemption.
    First, we propose conforming edits to delete Sec.  155.615(c), (d), 
(e), and (f)(3) in accordance with our proposal to remove the option to 
obtain an ECN from the Exchange for certain exemptions.
    Next, we propose to add paragraph Sec.  155.615(c)(2) to align with 
the 3-year time frame requirement proposed in Sec.  155.605(d)(3). We 
propose that if the hardship-qualifying event or circumstance in Sec.  
155.605(d)(1) began more than 3 years from the date the exemption 
application was submitted, and if the event or circumstance continued 
beyond the initial 3-year period, the Exchange must verify the 
applicant continued to experience the hardship to which he or she is 
attesting during a period that is within 3 years from the date of the 
exemption application submitted under Sec.  155.605(d)(1). We believe 
that this requirement places minimum burden on the applicant while 
ensuring that the Exchange appropriately meets the requirements in 
paragraph (c)(1) of this section under the proposed 3-year time frame 
in Sec.  155.605(d)(3). We seek comment on this proposal.
e. Options for Conducting Eligibility Determinations for Exemptions 
(Sec.  155.625)
    We propose to amend Sec.  155.625(a)(2) and (b) to remove the 
deadline after which a State Exchange was to be required to process 
exemption applications for residents of the State by the start of open 
enrollment for 2016, and to permit an Exchange to adopt an exemption 
eligibility determination made by HHS indefinitely. Based on HHS's 
operation of this service to date, we have determined that the HHS 
exemption option is an efficient process for State Exchanges that has 
minimized confusion for consumers. This proposed rule follows an FAQ 
published on July 28, 2015 in which HHS stated that it will not take 
any enforcement action against State Exchanges that continue to use the 
HHS service for exemptions beyond the start of open enrollment for 
2016. Therefore, we propose to delete paragraphs (b)(1), (2) and (3). 
We seek comment on this proposal.

[[Page 75539]]

8. Exchange Functions: Small Business Health Options Program (SHOP)
a. Functions of a SHOP (Sec.  155.705)
    Sections 155.705(b)(2) and (3) set forth regulations related to 
employer choice in SHOPs. We are proposing to add new paragraphs 
(b)(3)(viii) and (ix) to specify that the FF-SHOPs would provide 
additional options for employer choice for plan years beginning on or 
after January 1, 2017.
    For plan years beginning in 2015, employers offering coverage in 
certain FF-SHOP States have two options for providing coverage: they 
can offer a single plan or they can offer ``horizontal'' choice, in 
which an employer selects a single actuarial value coverage level and 
makes all plans at that coverage level available to the qualified 
employees. These same two options are available to participating 
employers in all FF-SHOP States for plan years beginning on or after 
January 1, 2016. For plan years beginning on or after January 1, 2017, 
we propose to add paragraphs (b)(3)(viii) and (ix) to this section to 
add an additional employer choice option available to consumers 
participating in FF-SHOPs. We are proposing to add a ``vertical 
choice'' option for QHPs and SADPs under which employers will be able 
to offer qualified employees a choice of all plans across all available 
levels of coverage from a single issuer, for plan years beginning on or 
after January 1, 2017. We anticipate that this ``vertical choice'' 
option would be appealing to employers because it gives employees 
greater flexibility across coverage levels, and that it may encourage 
more issuers to participate in SHOPs because issuers would be able to 
offer all of their plans to employees. Issuers may also prefer this 
option because it minimizes the risk of adverse selection by limiting 
choices to their own plans. By offering multiple plans to an employer, 
the issuer may be more likely to enroll a greater share of the 
employer's group than if multiple issuers offering coverage in a single 
coverage level were vying for members of the group. By doing so, the 
issuer would be likely to enroll a more diverse risk pool from the 
employer's group, minimizing the risk of adverse selection. We note 
that existing SHOP regulations at Sec.  155.705(b)(3)(i)(B) and 
(b)(3)(ii)(B) provide State-based SHOPs with the flexibility to provide 
employers with vertical choice or other options for providing employer 
choice in addition to ``horizontal'' choice, and these amendments would 
not affect State-based SHOPs' flexibility in this regard.
    We are also seeking comment on whether the FF-SHOPs should make 
other employer choice options available. For example, we are 
considering allowing participating employers to select an actuarial 
value level of coverage, after which employees could choose from plans 
available at that level and at the level above it. We also seek comment 
on whether to give the State in which the FF-SHOP is operating an 
opportunity to recommend whether the FF-SHOP in that State should 
implement any additional model of employer choice. Under this approach, 
a State regulatory agency, such as the State Department of Insurance, 
could submit a letter to the Secretary with a recommendation for the 
employer choice models that should be offered in their State, based on 
the additional models of employer choice the FF-SHOP has made 
available. The FF-SHOP would then evaluate the State's recommendation 
and determine whether to make the additional models of employer choice 
available in the State. In all States, the FF-SHOPs would continue to 
give employers the option of offering a single QHP (or SADP) as well as 
the option of offering a choice of all QHPs (or SADPs) at a single 
actuarial value level of coverage, and States would not be given an 
opportunity to recommend that these options not be implemented in their 
State.
    We also propose adding a new Sec.  155.705(b)(3)(x) to provide that 
the employer choice models that would be available for SBE-FPs 
utilizing the Federal platform for SHOP enrollment functions would be 
the ones that are available through the FF-SHOP platform, because 
employer choice is an integral part of the FF-SHOP platform's 
enrollment functionality and system build. If we finalize an approach 
under which States with an FF-SHOP would be given an opportunity to 
recommend whether the FF-SHOP in that State should implement any 
additional models of employer choice that would ultimately be finalized 
as a result of these proposals, the same opportunity would be made 
available to a State with an SBE-FP.
    We propose to amend paragraph (b)(4)(ii)(B) to specify the timeline 
under which qualified employers in a FF-SHOP must make initial premium 
payments. Specifically, we are proposing to add paragraph 
(b)(4)(ii)(B)(1) to specify that in the FF- SHOPs, payment for the 
group's first month of coverage must be received by the premium 
aggregation services vendor on or before the 20th day of the month 
prior to the month that coverage begins. This means electronic payments 
must be completed or the premium aggregation services vendor must have 
receipt of any hard copy check on or before the 20th day of the month 
prior to the month that coverage would begin. HHS currently advises 
employers participating in FF-SHOPs to submit initial premium payments 
electronically by the 15th of the month prior to the coverage effective 
date to ensure that there is sufficient time for the payment to be 
cleared. Selecting the 20th of the month provides sufficient time to 
cancel coverage prior to the effective date. Under this proposal, if an 
initial premium payment is not received by the premium aggregation 
services vendor on or before the 20th day of the month prior to the 
month that coverage would begin, coverage would not be effectuated. If 
this happens, the employer could apply to purchase coverage that would 
be effective at the beginning of another month during the year, as 
coverage would not have been effectuated. The group would not need to 
submit a new application, but would need to select a new coverage 
effective date. Therefore, the grace period and reinstatement 
opportunities under Sec.  155.735(c)(2) that are provided to groups 
that do not make timely payments after coverage has taken effect are 
not relevant in this context, and we are proposing amendments to the 
introductory language of Sec.  155.735(c)(2) to reflect this.
    In circumstances where an FF-SHOPs would be retroactively 
effectuating coverage for qualified employer groups, the FF-SHOP would 
need to receive payment prior to effectuating coverage. We seek comment 
on the timing of when premium payment must be received by an FF-SHOP 
when coverage is effectuated retroactively. We are considering a policy 
under which payments for the first month's coverage and all months of 
the retroactive coverage would have to be received and processed no 
later than 30 days after the event that triggers the eligibility for 
retroactive coverage. We believe 30 days would provide sufficient time 
for groups to make these payments.
    In paragraph (b)(4)(ii)(C)(2) of this section, we propose to 
correct a cross reference to Sec.  155.705(b)(4)(ii)(B)(1) that should 
have been updated to cross-reference Sec.  155.705(b)(4)(ii)(C)(1) when 
Sec.  155.705(b)(4)(ii)(A) was added in the 2016 Payment Notice.
    We also propose amendments to Sec.  155.705(b)(11)(ii), which 
governs employer contributions to premiums in FF-SHOPs and applies to 
both medical and dental plans. Section 155.705(b)(11)(ii) currently 
states that the FF-SHOP ``must use'' the reference plan contribution 
methodology

[[Page 75540]]

currently set forth at Sec.  155.705(b)(11)(ii). We propose to amend 
this provision to provide for FF-SHOPs to use a ``fixed contribution 
methodology,'' in addition to the reference plan methodology set forth 
in the current regulation. The amendments would specify that when an 
employer decides to offer a single plan to qualified employees, the 
employer would be required to use the fixed contribution methodology. 
Specifically, when offering a single plan, the employer would 
contribute a fixed percentage of the plan's premium for each qualified 
employee, and (if applicable) for each dependent of a qualified 
employee. This policy for employers offering a single plan is 
consistent with what was described in the preamble to the Patient 
Protection and Affordable Care Act; Establishment of Exchanges and 
Qualified Health Plans; Small Business Health Options Program 
rulemaking (78 FR 33233), in which we explained that when a choice of 
plans is not available to the employee, the single QHP offered by the 
employer would be the reference plan under the reference plan 
methodology described in the current regulation. See 78 FR 33236. While 
the proposed methodology would be consistent with our interpretation of 
the current regulation in circumstances where a choice of plans is not 
offered, we are proposing to codify how the contribution methodology 
would be handled operationally in those circumstances. Additionally, we 
propose to permit employers to choose between the reference plan 
contribution methodology set forth in the current regulation and the 
proposed fixed contribution methodology when offering a choice of 
plans. When offering a choice of plans, an employer opting for the 
fixed percentage contribution methodology would contribute a fixed 
percentage of the premiums across all plans in which any qualified 
employee and, if applicable, any dependent of a qualified employee, is 
enrolled. The dollar amount of the fixed percentage contribution would 
vary from enrollee to enrollee based on their age and the plan they 
choose. We believe that offering these two employer contribution 
methodologies to employers offering a choice of plans would provide 
employers with flexibility to contribute to their qualified employees' 
plans in a manner that is appropriate for the group. We are also 
proposing to add language to Sec.  155.705(b)(11)(ii) explaining that a 
tobacco surcharge, if applicable, would be added to the monthly premium 
after the employer contribution is applied to the premium so that the 
financial impact of the surcharge is borne by the tobacco user, as 
opposed to being shared with the employer or other enrollees. We also 
propose to streamline the discussion of the reference plan contribution 
methodology described in Sec.  155.705(b)(11)(ii), and propose removing 
Sec.  155.705(b)(11)(ii)(D) because the FF-SHOPs are currently not able 
to support basing employer contributions on calculated composite 
premiums.
    We seek comment on these proposals.
b. Eligibility Determination Process for SHOP (Sec.  155.715)
    We propose to amend Sec.  155.715(g)(1), which sets forth what a 
SHOP must do if a qualified employer withdraws from the SHOP, to 
distinguish between terminations of enrollment and terminations of 
coverage. This regulation currently provides that, if an employer 
ceases to purchase coverage through a SHOP, the SHOP must ensure that 
each QHP terminates the coverage of the qualified employee who is 
enrolled in the QHP through the SHOP. Consistent with guaranteed 
availability and guaranteed renewability, coverage purchased through a 
SHOP might in many circumstances continue outside a SHOP in a manner no 
longer considered to be enrollment through the SHOP. Therefore, we 
propose to specify that the termination described in this paragraph 
would be a termination of the employer group's enrollment through the 
SHOP, rather than a termination of the group's coverage. For example, 
in many circumstances, an employer may offer to continue the same 
coverage outside of the SHOP, in which case the issuer should not 
terminate the coverage.
    We seek comment on this proposal.
c. Enrollment Periods Under SHOP (Sec.  155.725)
    Section 155.725(c) discusses the annual employer election period. 
We are proposing to delete paragraph (c)(1) because it is outdated, 
redesignate current paragraph (c)(2) as (c) introductory text and 
redesignate the remaining paragraphs to reflect the new structure of 
paragraph (c).
    We propose to redesignate Sec.  155.725(e) as Sec.  155.725(e)(1) 
and add paragraph (e)(2). To provide adequate time for qualified 
employees in FF-SHOPs to make coverage selections during their annual 
open enrollment period, we propose adding paragraph (e)(2) to specify 
that qualified employers in the FF-SHOP must provide qualified 
employees an annual open enrollment period of at least one week. This 
proposed amendment, like all of Sec.  155.725(e), would apply only with 
respect to renewals.
    We are also proposing amendments to Sec.  155.725(h)(2) to specify 
that the event that triggers a group's coverage effective date in a FF-
SHOP is not the plan selections of the individual enrollees, but the 
employer's submission of all plan selections for the group (which we 
call the group enrollment), and to allow employers to opt for a 
coverage effective date later than the standard dates provided for 
under the rule. The proposed amendments would permit qualified 
employers to set enrollment periods for their qualified employees that 
could include plan selections both before and after the 15th of a 
month, and would also permit employers to select a coverage effective 
date later than the standard dates provided for under the rule. 
Employers would be able to select a coverage effective date up to 2 
months in advance, provided that small group market rates are available 
for the quarter in which the employer would like coverage to take 
effect. This would allow employers to maximize their enrollment periods 
so that they could begin the SHOP enrollment process as soon as small 
group market rates are available for the quarter in which they would 
like coverage to take effect. Under the proposed amendments, if an 
employer submits its group enrollment by the 15th day of any month, the 
FF-SHOP would ensure a coverage effective date of the first day of the 
following month, unless the employer opts for a later effective date 
for which rates are available. If an employer submits its group 
enrollment between the 16th day of the month and the last day of the 
month, we propose that the FF-SHOP must ensure a coverage effective 
date of the first day of the second following month, unless the 
employer opts for a later effective date for which rates are available.
    We propose to amend Sec.  155.725(i)(1), which currently provides 
that if a qualified employee enrolled in a QHP through a SHOP remains 
eligible for coverage, that qualified employee will remain in the QHP 
selected the previous year, unless certain exceptions apply. We propose 
to provide that a SHOP be permitted to, but need not, provide for auto-
renewals of qualified employees, and also propose to revise the 
language of the provision for consistency with our interpretation of 
guaranteed renewability. If a SHOP does not provide for auto-renewals 
for qualified employees, qualified employees would have to review and 
provide a response to the employer's renewal offer of coverage. If 
auto-renewal is available,

[[Page 75541]]

qualified employees need not take any action to continue in the prior 
year's coverage through the SHOP. We are proposing this amendment to 
reflect current operational capabilities in the FF-SHOPs.
    Additionally, we propose to amend paragraph (j)(2)(i) of this 
section to remove a reference to Sec.  155.420(d)(10), which was 
deleted in the 2016 Payment Notice. We also propose to amend the 
paragraph to specify that there would not be a SHOP special enrollment 
period when a qualified employee or dependent of a qualified employee 
experiences an event described in Sec.  155.420(d)(1)(ii), which 
provides for a special enrollment period for individuals enrolled in a 
non-calendar-year group health plan.
    We seek comment on these proposals.
d. Termination of SHOP Enrollment or Coverage (Sec.  155.735)
    For the reasons discussed above in the preamble discussion of our 
proposed amendments to Sec.  155.705(b)(4), we are proposing to modify 
the introductory language of Sec.  155.735(c)(2) to specify that the 
provisions related to termination of employer group health coverage for 
non-payment of premiums in FF-SHOPs under paragraph (c)(2) would not 
apply to premium payments for the first month of coverage.
    We are also proposing amendments to Sec.  155.735(d). Under 
existing regulations at Sec.  155.735(d)(2), terminations of FF-SHOP 
coverage or enrollment are effective on the last day of the month in 
which the FF-SHOP receives notice for enrollees that change from one 
QHP to another during the employer's annual open enrollment period or 
during a special enrollment period. We propose that if an enrollee 
changes from one QHP to another during the annual open enrollment 
period or during a special enrollment period, the last day of coverage 
would be the day before the effective date of coverage in the 
enrollee's new QHP. We believe that this would prevent any instances of 
double coverage as well as avoid a gap in coverage.
    We also propose to require at Sec.  155.735(d)(2)(iii) that the FF-
SHOPs send advance notices to qualified employees before their 
dependents age off of their plan. This notice would be sent 90 days in 
advance of the date when the child dependent enrollee is no longer 
eligible for coverage under the plan the employer purchased through the 
FF-SHOP because he or she has reached the maximum child dependent age 
for the plan. The notice would include information about the plan the 
dependent is currently enrolled in, the date the dependent would age 
off the plan, and information about next steps. In the FF-SHOPs, 
consistent with current Sec.  155.735(d)(2) and proposed Sec.  
155.735(d)(2)(i), a dependent aging off of the plan loses eligibility 
for dependent coverage at the end of the month of the dependent's 26th 
birthday or at the end of the month in which the issuer has set the 
maximum dependent age limit (but in some cases might have the option to 
keep the coverage for a period of time after that date under applicable 
continuation coverage laws). This notice is intended to be a courtesy 
notice as enrollees would still receive a termination notice when their 
coverage through the SHOP is terminating.
e. SHOP Employer and Employee Eligibility Appeals Requirements (Sec.  
155.740)
    In Sec.  155.740, we make certain proposals relating to SHOP 
appeals. We propose to amend paragraphs (c)(2) and (d)(2) to provide 
that employers and employees may file an appeal not only if a SHOP 
fails to provide an eligibility determination in a timely manner but 
also if a SHOP fails to provide timely notice of an eligibility 
determination, in accordance with Sec.  155.715(e) and (f). We propose 
these amendments in order to better align the SHOP appeals provisions 
with individual market Exchange appeals. We note that the FF-SHOPs 
provide the notice of eligibility automatically when an application is 
submitted. For the FF-SHOPs, the date of eligibility determination and 
eligibility notice are generally the same date.
    We also propose to amend paragraph (l)(3) to allow employers and 
employees who successfully appeal a denial of SHOP eligibility to 
select whether the effective date of coverage or enrollment through the 
SHOP under their appeal decision will be retroactive to the effective 
date of coverage or enrollment through the SHOP that the employer or 
employee would have had if they had correctly been determined eligible, 
or prospective from the first day of the month following the date of 
the notice of the appeal decision. The current version of paragraph 
(l)(3) requires all SHOP appeal decisions to be retroactive to the date 
the incorrect eligibility determination was made. This proposed change 
would grant employers and employees added flexibility regarding the 
effective date of coverage or enrollment through the SHOP under their 
appeal decision and would be better aligned with current and proposed 
policy for individual market Exchange appeals. For example, an employer 
or employee would have flexibility under this proposal to opt for a 
prospective effective date because he or she did not want to pay 
retrospective premiums. We also propose to revise paragraph (l)(3) to 
specify that if eligibility is denied under an appeal decision, the 
effective date of the coverage or enrollment through the SHOP under the 
appeal decision would be the first day of the month following the date 
of the notice of the appeal decision. We seek comment on these 
proposals.
9. Exchange Functions: Certification of Qualified Health Plans
a. Certification Standards for QHPs (Sec.  155.1000)
    In the first few years of FFE operations, HHS has generally used an 
``open market'' approach to QHP certification, accepting plans that met 
the minimum QHP certification criteria. As the new QHP market 
developed, it has been valuable to maintain predictability for issuers, 
and that remains an important consideration. For example, elsewhere in 
this rulemaking, we propose codifying and making transparent standards 
related to network adequacy. At the same time we are exploring the most 
useful tools to ensure that QHPs offer consumers a quality product. In 
this section, we seek comment on a means of improving product value by 
using the authority to deny certification to QHP applications.
1. Denial of Certification
    Section 1311(e)(1)(B) of the Affordable Care Act states that 
Exchanges may certify a health plan as a QHP if ``(A) such health plan 
meets the requirements for certification as promulgated by the 
Secretary . . . and (B) the Exchange determines that making available 
such health plan through such Exchange is in the interests of qualified 
individuals and qualified employers.'' Section 1311(e)(1)(B) thereby 
affords Exchanges the discretion to deny certification of QHPs that 
meet minimum QHP certification standards, but are not ultimately in the 
interests of qualified individuals and qualified employers. We 
interpret the ``interest'' standard to mean QHPs should provide quality 
coverage to consumers to meet the Affordable Care Act's goals.
    Section 155.1000 provides Exchanges with broad discretion to 
certify health plans that otherwise meet the QHP certification 
standards specified in part 156. HHS will continue to focus denials of 
certification in the FFEs based on the ``interest of the qualified 
individuals and qualified employers'' standard to

[[Page 75542]]

cases involving the integrity of the FFEs and the plans offered through 
them. Examples of issues that could result in non-certification of a 
plan include concerns related to an issuer's material non-compliance 
with applicable requirements, an issuer's financial insolvency, or data 
errors related to QHP applications and data submissions. Under this 
approach, HHS could consider an assessment of past performance, 
including with respect to oversight concerns raised through compliance 
reviews and consumer complaints received and the frequency and extent 
of any data submission errors. HHS would adopt a measured approach in 
exercising this authority that would take into consideration several 
factors, including available market competition and the availability of 
operational resources.
    As we consider this approach, we anticipate seeking more specific 
comment. We seek comment on this proposal generally, and on these and 
any other factors HHS should consider when evaluating QHPs to determine 
if they meet the interests of consumers and businesses. HHS would also 
ensure any future policy changes do not interfere with State 
activities. We seek comments, specifically from States and other 
stakeholders, on this aspect of the proposal.
    We note that the OPM has the sole discretion for contracting with 
multi-State plans and as such retains the authority to selectively 
contract with multi-State plans.

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

1. Standardized Options
a. Standardized Option Definition (Sec.  156.20)
    The Affordable Care Act gives Exchanges considerable flexibility in 
certification and oversight of QHPs. An excessive number of health plan 
options makes consumers less likely to make any plan selection, more 
likely to make a selection that does not match their health needs, and 
more likely to make a selection that leaves them less satisfied. In 
studies of consumer behavior in Medicare Part D, Medicare Advantage, 
and Medigap, a choice of 15 or fewer plans was associated with higher 
enrollment rates, while a choice of 30 or more plans led to a decline 
in enrollment rates.\31\ In 2015, across the 37 Exchanges using the 
HealthCare.gov platform, the number of health plan choices available 
per county varied from 2 to 54 plans at the bronze level, 2 to 73 plans 
at the silver level, and 1 to 43 plans at the gold level.\32\ Our 
experience in the first two open enrollment periods suggests that many 
consumers, particularly those with a high number of health plan 
options, find the large variety of cost-sharing structures available on 
the Exchanges difficult to navigate.
---------------------------------------------------------------------------

    \31\ Chao Zhou and Yuting Zhang, ``The Vast Majority Of Medicare 
Part D Beneficiaries Still Don't Choose The Cheapest Plans That Meet 
Their Medication Needs.'' Health Affairs, 31, no.10 (2012):2259-
2265.
    \32\ The average number of plans available per county in 2015 
were: 12 bronze plans, 15 silver plans, and 9 gold plans. Available 
at: https://www.cms.gov/cciio/resources/data-resources/marketplace-puf.html.
---------------------------------------------------------------------------

    We believe that standardized options will provide these consumers 
the opportunity to make simpler comparisons of plans offered by 
different issuers within a metal level. Consumers will be able to focus 
their decision making on the providers in the plan networks, premiums, 
benefits, and quality, and will not be required to make complex 
tradeoffs among cost-sharing differences among a large number of plans. 
Taken together, standardized options, EHB, AV, and QHP certification 
standards can significantly simplify consumers' ability to compare 
plans and make informed choices.
    To simplify the consumer plan selection process, HHS is proposing 
to establish ``standardized options'' in the individual market FFEs. 
These plans would have standardized cost sharing for a key set of EHB 
that comprise a large percentage of the total allowable costs for an 
average enrollee. We propose that issuers would not be required to 
offer standardized options in 2017 and would retain the flexibility to 
offer non-standardized plans, but we are considering ways that 
standardized options, when certified by an FFE, could be displayed on 
HealthCare.gov in a manner that makes it easier for consumers to find 
and identify them, including distinguishing them from non-standardized 
plans.
    We propose cost-sharing structures for standardized options at the 
bronze, silver (and associated silver cost-sharing reduction plan 
variations), and gold levels of coverage. At Sec.  156.20, we propose 
adding a definition for standardized option. A standardized option 
would be defined as a QHP with a standardized cost-sharing structure 
specified by HHS and that is offered for sale through an individual 
market FFE (see Table 9 for proposed models). We envision standardized 
options to include a single provider tier, a fixed in-network 
deductible, a fixed annual limitation on cost sharing, and standardized 
copayments and coinsurance for a key set of EHB that comprise a large 
percentage of the total allowable costs for an average enrollee. We 
seek comment on this proposal.
b. Standardized Option Design Principles
    We have designed one bronze standardized option, one silver 
standardized option, one standardized option for each silver CSR plan 
variation, and one gold standardized option. We are not proposing a 
platinum standardized option because only a small proportion of QHP 
issuers in the FFEs offered platinum plans in 2015. Silver plans are 
the most common and popular plans in the FFEs.\33\ As such, we 
encourage issuers to offer at least one standardized option at the 
silver level of coverage (along with the associated standardized silver 
CSR plan variations) to simplify the consumer shopping experience for 
the greatest number of enrollees. We intend to propose standardized 
option changes annually. We seek comment on these proposals.
---------------------------------------------------------------------------

    \33\ In 2015, across the FFEs, there were a total of: 263 
catastrophic, 1864 bronze, 2500 silver, 1774 gold, and 551 platinum 
plans. Available at: https://www.cms.gov/cciio/resources/data-resources/marketplace-puf.html.
---------------------------------------------------------------------------

c. General Features of the Standardized Options
    To minimize market disruption, we have designed the standardized 
options to be as similar as possible to the most popular 2015 FFE QHPs 
(based on enrollment), and we have sought a cost-sharing structure that 
would generally not raise premiums. In arriving at these standardized 
option designs, we also consulted the standardized option designs 
offered in the SBEs that have provided standardized plans since the 
2014 plan year (California, Connecticut, Massachusetts, New York, 
Oregon, and Vermont).
i. Drug Formularies
    We propose that standardized options have the four drug tiers 
currently utilized in our consumer-facing applications at this time--
generic, preferred brand, non-preferred brand, and specialty drug 
tiers. However, we propose to allow issuers to offer additional lower-
cost tiers if desired. Slightly more than half (56 percent) of the 
proposed 2016 FFE QHPs have more than four drug tiers. We seek comment 
on this design element.

[[Page 75543]]

ii. Provider Tiers
    We propose that standardized options have no more than one in-
network provider tier. Varying cost sharing by provider tier affects 
the actuarial value of a plan, making it difficult to standardize a 
cost-sharing structure. Further, only 14 percent of FFE enrollees are 
currently enrolled in QHPs with more than one in-network tier, and only 
6 percent of enrollees are covered by an issuer that does not offer a 
single-tier plan in addition to a multi-tier plan in the same county. 
We seek comment on this design element.
iii. Deductible-Exempt Services
    In designing the standardized options, we seek to exempt from the 
deductible certain routine services, such as primary care, specialist 
visits (at the silver and gold metal levels), and generic drugs, to 
ensure that access to coverage translates into access to care for 
routine and chronic conditions and that enrollees receive some up-front 
value for their premium dollars. Again, in terms of this feature, we 
designed the standardized options to be as similar as possible to the 
most popular 2015 FFE QHPs (based on enrollment). Among those 2015 FFE 
QHPs, over 85 percent of silver plan enrollees and over 50 percent of 
bronze plan enrollees selected plans that cover certain services prior 
to application of the deductible. (The figure for gold plan enrollees 
was over 90 percent. However, many gold plans have a $0 deductible, for 
which the concept of deductible-exempt services would not be 
meaningful.) Primary care and generic drugs are the services most 
likely to be covered without a deductible at all three metal levels. 
Other services that are also likely to be covered prior to the 
deductible, particularly by silver and gold plans, include specialist 
visits and mental/behavioral health and substance use disorder 
outpatient services. We seek comment on this design element.
iv. Copayment vs. Coinsurance
    We sought to balance consumer preference for copayments over 
coinsurance with the potential impact on premiums. Research shows that 
consumers often prefer copayments to coinsurance because the former are 
more transparent and make it easier for consumers to predict their out-
of-pocket costs. On the other hand, setting fixed copayments on a 
national level could lead to disparate premium effects due to regional 
and issuer-specific cost differences. We seek comment on this design 
element.
d. Specific Standardized Option Designs
    The proposed 2017 bronze standardized option closely resembles a 
catastrophic plan, with a few key exceptions. The plan has a $6,650 
deductible, an annual limitation on cost sharing equal to the maximum 
allowable annual limitation on cost sharing for 2017 (proposed to be 
$7,150), and 50 percent coinsurance. Primary care visits (for the first 
three visits) and mental health/substance use outpatient services are 
exempt from the deductible, and have a copayment of $45. Generic drugs 
are also exempt from the deductible and have a copayment of $35. Note 
that for all standardized options, cost-sharing rules for preventive 
services under Sec.  147.130 apply (we do not list this benefit 
category in Table 9).
    The proposed 2017 silver standardized option has a $3,500 
deductible, an annual limitation on cost sharing equal to the maximum 
allowable annual limitation on sharing for 2017, and a 20 percent 
enrollee coinsurance rate. Primary care visits, mental health/substance 
use outpatient services, specialist visits, urgent care visits, and all 
drug benefits are exempt from the deductible, and all of the 
deductible-exempt benefits have copayments instead of co-insurance, 
except for specialty drugs, which are subject to a 40 percent 
coinsurance rate. Emergency room services are subject to the 
deductible, with a $400 copayment applicable after the deductible.
    The proposed 2017 silver cost-sharing reduction standardized 
options reduce all cost sharing parameters successively to meet the 73 
percent, 87 percent, and 94 percent AV requirements. Where possible, 
the cost-sharing reduction standardized options and the non-cost-
sharing reduction standardized silver option maintain similar 
differentials between the cost sharing for certain benefits like 
primary care and specialty visits.
    The proposed 2017 gold standardized option has a $1,250 deductible, 
a $4,750 annual limitation on cost sharing, and a 20 percent enrollee 
coinsurance rate. Primary care visits, mental health and substance use 
outpatient services, specialist visits, urgent care visits, and all 
drug benefits are not subject to the deductible. All of the benefits 
not subject to the deductible have copayments except for specialty 
drugs. We seek comment on these designs, in particular with respect to 
whether particular cost-sharing elements, such as deductibles or 
copayments for particular services, should be modified.

                                                       Table 9--Proposed 2017 Standardized Options
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Silver 73%          Silver 87%          Silver 94%
                                        Bronze              Silver          actuarial value     actuarial value     actuarial value          Gold
                                                                               variation           variation           variation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actuarial Value (%).............  61.8..............  71.00.............  73.55.............  87.47.............  94.3..............  79.98.
Deductible......................  $6,650............  $3,500............  $3,000............  $700..............  $250..............  $1,250.
Annual Limitation on Cost         $7,150............  $7,150............  $5,700............  $2,000............  $1,250............  $4,750.
 Sharing.
Emergency Room Services.........  50%...............  $400 (copay         $300 (copay         $150 (copay         $100 (copay         $250 (copay
                                                       applies only        applies only        applies only        applies only        applies only
                                                       after deductible.   after deductible).  after deductible).  after deductible).  after
                                                                                                                                       deductible).
Urgent Care.....................  50%...............  $75 (*)...........  $75 (*)...........  $40 (*)...........  $25 (*)...........  $65 (*).
Inpatient Hospital Services.....  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Primary Care Visit..............  $45 (* first 3      $30 (*)...........  $30 (*)...........  $10 (*)...........  $5 (*)............  $20 (*).
                                   visits, then
                                   subject to
                                   deductible and
                                   50% coinsurance).
Specialist Visit................  50%...............  $65 (*)...........  $65 (*)...........  $25 (*)...........  $15 (*)...........  $50 (*).
Mental Health/Substance Use       $45 (*)...........  $30 (*)...........  $30 (*)...........  $10 (*)...........  $5 (*)............  $20 (*).
 Disorder Outpatient Services.

[[Page 75544]]

 
Imaging (CT/PET Scans, MRIs)....  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Rehabilitative Speech Therapy...  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Rehabilitative OT/PT............  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Laboratory Services.............  50%...............  20%...............  20%...............  20%...............  5%................  20%.
X-rays..........................  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Skilled Nursing Facility........  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Outpatient Facility Fee.........  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Outpatient Surgery Physician/     50%...............  20%...............  20%...............  20%...............  5%................  20%.
 Surgical.
Generic Drugs...................  $35 (*)...........  $10 (*)...........  $10 (*)...........  $5 (*)............  $3 (*)............  $10 (*).
Preferred Brand Drugs...........  50%...............  $50 (*)...........  $50 (*)...........  $25 (*)...........  $5 (*)............  $30 (*).
Non-Preferred Brand Drugs.......  50%...............  $100 (*)..........  $100 (*)..........  $50 (*)...........  $10 (*)...........  $75 (*).
Specialty Drugs.................  50%...............  40% (*)...........  40% (*)...........  30% (*)...........  25% (*)...........  30% (*).
--------------------------------------------------------------------------------------------------------------------------------------------------------
(*) = not subject to the deductible.

    We propose that an issuer may offer multiple plans through an FFE 
for each standardized option within a service area when the plans are 
meaningfully different, such as offering an HMO standardized option and 
a PPO standardized option at a certain metal level. We seek comment on 
this proposal.
    To reduce operational complexity, we do not propose to vary the 
standardized options by State or region. Instead, we propose one set of 
standardized options for all FFEs, including those in which States 
perform plan management functions. We recognize that some States 
regulate the level of cost sharing applied to certain benefits, such as 
emergency room services and specialty drugs. We invite comment from 
States and other stakeholders on the proposed standardized options, and 
how they may interact with State-specific cost-sharing laws or 
regulations, as well as any potential options for incorporating State 
cost-sharing requirements into the standardized option framework.
    We do not propose to limit the number of non-standardized options 
that an issuer may offer through an FFE; however, meaningful difference 
standards at Sec.  156.298 and other QHP certification standards still 
apply. There is currently no such cap on the number of plans that an 
issuer offering a QHP through an FFE can offer, or on the number of 
issuers that can offer coverage at each metal level in an FFE. In this 
proposed rule, we do not propose to limit the total number of QHPs that 
may be sold through an FFE in a rating area or county. However, we may 
consider limiting the number of plan options in future plan years, to 
further simplify the health plan shopping experience for consumers. We 
seek comment as to whether we should limit the number of non-
standardized options an issuer may offer through an FFE in future 
years.
    We are considering making modifications to our consumer-facing plan 
comparison features to readily allow consumers to identify standardized 
options, and seek comment on how we should do so. We intend to conduct 
consumer testing to help us make this determination. We also anticipate 
providing information to explain the standardized option concept to 
consumers. We expect to provide information about specific design 
features through issuer testing of plan data and other fora. We seek 
comment on these proposals, including whether there should be a 
requirement on QHP issuers or web-brokers to differentially display 
standardized options when a non-FFE Web site is used to facilitate 
enrollment in an FFE. Multi-State plan issuers may use the standardized 
options noted above. OPM, at its discretion, may design additional 
standardized options applicable only to multi-State plan issuers, 
though we would not display these OPM options in a differential manner 
in order to preserve consistency in the standardized options identified 
on the FFE.
2. FFE User Fee for the 2017 Benefit Year (Sec.  156.50)
    Section 1311(d)(5)(A) of the Affordable Care Act permits an 
Exchange to charge assessments or user fees on participating health 
insurance issuers as a means of 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 specify 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 FFEs 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 to 2016, issuers seeking to participate in an FFE in benefit 
year 2017 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

[[Page 75545]]

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 fee 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 2017 user fee 
rate for all participating FFE issuers at 3.5 percent. This user fee 
rate assessed on FFE issuers is the same as the 2014 to 2016 user fee 
rate. In addition, we intend to seek an exception from 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, in cases where user fee collections do not cover the 
full cost of the special benefit. We seek comments on this proposal.
    Additionally, we have proposed under Sec. Sec.  155.106(c) and 
155.200(f) to allow State Exchanges to enter into a Federal platform 
agreement with HHS so that the State Exchange may rely on the Federal 
platform for certain Exchange functions to enhance efficiency and 
coordination between State and Federal programs, and to leverage the 
systems established by the FFE to perform certain Exchange functions. 
We propose in Sec.  156.50(c)(2) to charge SBE-FP issuers a user fee 
for the services and benefits to the issuers provided by HHS. For 2017, 
these functions will include the Federal Exchange information 
technology and call center infrastructure used in connection with 
eligibility determinations for enrollment in QHPs and other applicable 
State health subsidy programs, as defined at section 1413(e) of the 
Affordable Care Act and enrollment in QHPs under Sec.  155.400. As 
previously discussed, 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. If our 
proposals under Sec. Sec.  155.106(c) and 155.200(f) are finalized, 
issuers seeking to participate in an SBE-FP in benefit year 2017 will 
receive special benefits not available to the general public: The 
ability to sell health insurance coverage through a State Exchange that 
realizes efficiencies by relying on the Federal platform to enroll 
individuals determined eligible for enrollment in a QHP, including 
individuals who may be eligible for insurance affordability programs 
that may support premiums paid to issuers offering plans through the 
State Exchange by way of the Federal platform (HealthCare.gov), and the 
ability to sell health insurance coverage to small employers eligible 
to purchase QHPs for its employees through a SHOP exchange. Other 
services that will be provided to issuers offering plans through State 
Exchanges on the Federal platform include the Federal Exchange 
information technology and call center infrastructure used in 
connection with eligibility determinations for enrollment in QHPs and 
other applicable State health subsidy programs. We propose to charge 
issuers offering QHPs through an SBE-FP a user fee rate of 3.0 percent 
of the monthly premium charged by the issuer for each policy under a 
plan offered through an SBE-FP. This fee will recover funding to 
support FFE operations incurred by the Federal government associated 
with providing the services described above.
    The proposed user fee rate was calculated based on the proportion 
of FFE costs that are associated with the FFE information technology 
infrastructure, the consumer call center, and eligibility and 
enrollment services, and allocating a share of those costs to issuers 
in the relevant SBE-FPs. A significant portion of expenditures for FFE 
services are associated with the information technology, call center 
infrastructure, and personnel who conduct eligibility determinations 
for enrollment in QHPs and other applicable State health subsidy 
programs as defined at section 1413(e) of the Affordable Care Act, and 
who perform the functions set forth in Sec.  155.400 to facilitate 
enrollment in QHPs. We intend to review the costs incurred to provide 
these special benefits each year, and revise the user fee rate for 
issuers in SBE-FPs accordingly in the annual HHS notice of benefit and 
payment parameters. Additional guidance on user fee collection 
processes will be provided in the future.
    While a user fee rate of 3.0 percent is reflective of HHS's actual 
costs, we recognize that States that are currently using the Federal 
platform may find the abrupt change of the proposed user fee in 2017 
challenging for their health insurance markets. Therefore, HHS is also 
considering reducing for the 2017 benefit year the user fee rate by one 
half or one third (that is, to 1.5 or 2.0 percent) for the issuers in 
State Exchanges utilizing the Federal platform, to provide these States 
additional time to integrate this user fee rate. In future years, 
issuers in SBE-FPs would be charged the full user fee rate for SBE-FPs 
to cover their full share of costs incurred by the FFE for those 
services. We seek comment on this proposal and this possible reduction.
    Additionally, to ease administrative burdens on issuers and States, 
at the request of SBE-FPs, pursuant to the authority under the 
Intergovernmental Cooperation Act of 1968 (IGCA), HHS will seek to 
offer States the option to have HHS collect an additional user fee from 
issuers at a rate specified by the State to cover costs incurred by the 
State-based Exchange for the functions the State retains. If HHS grants 
requests to provide such services, States may be required to reimburse 
HHS any additional costs that are associated with HHS's provision of 
such service. This coordination between the State and Federal programs 
will reduce administrative burden on issuers as well as the SBEs-FP.
3. Single Risk Pool (Sec.  156.80)
    In the small group market, an issuer may update rates on a 
quarterly basis, provided that any changes to rates have effective 
dates of January 1, April 1, July 1, or October 1. In the preamble to 
the second Program Integrity Rule (78 FR 65067), we explained that any 
new rates set by an issuer would apply for new or renewing coverage on 
or after the rate effective date, and would apply for the entire the 
plan year. We propose to codify this policy in Sec.  156.80(d)(3)(ii), 
and to make non-substantive changes to the wording of that paragraph, 
including to delete an outdated reference to when quarterly rate 
changes could first be implemented.
    For all issuers, we also reiterate that Sec.  156.80(d)(2) permits 
a health insurance issuer to vary the plan-adjusted index rate for a 
particular plan from its market-wide index rate adjusting only for the 
explicitly stated factors. Any plan level adjustment not

[[Page 75546]]

specifically stated, including adjusting for morbidity of plan 
enrollees, is not permissible.
4. Essential Health Benefits Package
a. Prescription Drug Benefits (Sec.  156.122)
    Current Sec.  156.122(c) requires plans providing EHB to have 
procedures 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 covered by the 
plan. Such procedures must include a process to request an expedited 
review based on exigent circumstances. Under the expedited process, the 
issuer must make its coverage determination no later than 24 hours 
after it receives the request. This requirement, commonly referred to 
as the ``exceptions process,'' applies to drugs that are not included 
on the plan's formulary drug list. For plan years beginning in 2016, 
these processes must also include certain processes and timeframes for 
the standard review process, and have an external review process if the 
internal review request is denied. The costs of the non-formulary drug 
provided through the exceptions process count towards the annual 
limitation on cost sharing and AV of the plan.
    As discussed in the 2016 Payment Notice (80 FR 10750), the 
exceptions process established in this section is distinct from the 
coverage appeals process established under Sec.  147.136. Specifically, 
the drug exceptions process applies to drugs that are not included on 
the plan's formulary drug list, while the coverage appeals regulations 
apply if an enrollee receives an adverse benefit determination for a 
drug that is included on the plan's formulary drug list. Because these 
two processes serve different purposes, we believe they are not 
duplicative and we do not propose to change these definitions. However, 
we also clarified in the 2016 Payment Notice that ``nothing under this 
policy (Sec.  156.122(c)) precludes a State from requiring stricter 
standards in this area.''
    Since finalizing the rule, we have received additional comment 
regarding States' coverage appeals laws and regulations and non-
formulary drugs. For example, if a State is subjecting non-formulary 
drugs to the standards under Sec.  147.136 as opposed to Sec.  
156.122(c), the State's coverage appeals laws or regulations would 
provide the enrollee with a different process for review, and as a 
result a different process for obtaining coverage of the non-formulary 
drug. Specifically, Sec.  147.136 has separate requirements for its 
external review process. Also, Sec.  147.136(b)(ii)(G) allows for a 
secondary level of internal review before the final internal review 
determination for group plans. Therefore, if the State is subjecting 
non-formulary drugs to Sec.  147.136 and the issuers are also required 
to comply Sec.  156.122(c), the issuer may have to satisfy two 
standards for non-formulary drugs.
    We are considering amending the rule to establish that a plan, in a 
State that has coverage appeals laws or regulations that are more 
stringent than or are in conflict with our exceptions process under 
Sec.  156.122(c), and that include reviews for non-formulary drugs, 
satisfies Sec.  156.122(c) if it complies with the State's coverage 
appeals laws or regulations. The purpose of Sec.  156.122(c) is to 
ensure that an enrollee has the ability to request and gain access to 
clinically appropriate drugs not covered by the plan. Regardless of 
whether a State's coverage appeals laws or regulations are satisfying 
Sec.  156.122(c) or if the issuer is meeting Sec.  156.122(c) through 
its exception process, we would expect that an enrollee would retain 
the ability to request and gain access to clinically appropriate drugs 
not covered by the plan. Therefore, we solicit comments on the scope of 
application of State appeals laws or regulations that are allowing 
determinations for non-formulary drugs for this purpose, especially 
under medical necessity provisions and whether these provisions would 
allow the enrollee the ability to request and gain access to clinically 
appropriate drugs not covered by the plan in all cases through a 
State's coverage appeals laws or regulations. As the State is the 
primary enforcer of the EHB requirements, the State would determine 
whether its coverage appeals laws or regulations would satisfy Sec.  
156.122(c) and therefore, would allow the issuers in the State to defer 
to the States' coverage laws or regulations. We note that we consider 
multi-State plans that comply with OPM's coverage appeals requirements 
to satisfy Sec.  156.122(c), and we are considering codifying this 
interpretation.
    We are also considering amending the process at Sec.  156.122(c) to 
allow for a second level of internal review. For example, we are 
considering using the same timelines as the first level of internal 
review, 72 hours for the standard review request and 24 hours for the 
expedited review request. We seek comments on all of these proposals.
    Lastly, opioid abuse has become a public health crisis in recent 
years. In 2013, nearly 2 million Americans abused prescription 
painkillers, and each day, nearly 7,000 people receive emergency 
department care for misusing these drugs. We recognize that medication-
assisted treatments for substance use disorders might not be available 
to all consumers as an essential health benefit. Therefore, we seek 
comment on whether the substance use disorder requirement in essential 
health benefits needs additional clarification with regard to 
medication-assisted treatment for opioid addiction.
b. 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 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. 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.
    Under the methodology established in the 2015 Payment Notice and 
amended in the 2015 Market Standards Rule for estimating average per 
capita premium for purposes of calculating the premium adjustment 
percentage, the premium adjustment percentage is calculated based on 
the projections of average per enrollee employer-sponsored insurance 
premiums from the NHEA, which is calculated by the Office of the 
Actuary. Accordingly, using the employer-sponsored insurance data, the 
premium adjustment percentage for 2017 is the percentage (if any) by 
which the most recent NHEA projection of per enrollee employer-
sponsored insurance premiums for 2016 ($6,076) exceeds the most recent 
NHEA projection of per enrollee employer-sponsored insurance premiums 
for 2013 ($5,365).\34\ Using

[[Page 75547]]

this formula, the proposed premium adjustment percentage for 2017 is 
13.25256291 percent. We note that the 2013 premium used for this 
calculation has been updated to reflect the latest NHEA data. Based on 
the proposed 2017 premium adjustment percentage, we propose the 
following cost-sharing parameters for calendar year 2017.
---------------------------------------------------------------------------

    \34\ See https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology2012.pdf 
and Table 17 (located in the NHE Projections 2014-2024--Tables link) 
found here https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html 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 2017. 
Under Sec.  156.130(a)(2), for the 2017 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 2017, 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 
13.25256291 percent for 2017 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,\35\ we propose that the 
2017 maximum annual limitation on cost sharing would be $7,150 for 
self-only coverage and $14,300 for other than self-only coverage.
---------------------------------------------------------------------------

    \35\ See http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

c. 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 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 section 1402(c)(1)(B)(i) of the 
Affordable Care Act (that is, 73 percent, 87 percent, or 94 percent, 
depending on the income of the enrollee). 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 
2017 maximum annual limitation on cost sharing would be $7,150 for 
self-only coverage and $14,300 for other than self-only group 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 2017 benefit year and our proposed 
results.
    Consistent with our analysis in the 2014, 2015, and 2016 Payment 
Notices, we developed three test silver level QHPs, and analyzed the 
impact on AV of the reductions described in the Affordable Care Act to 
the estimated 2017 maximum annual limitation on cost sharing for self-
only coverage ($7,150). The test plan designs are based on data 
collected for 2016 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 Exchanges. For 2017, the test 
silver level QHPs included a PPO with typical cost-sharing structure 
($7,150 annual limitation on cost sharing, $2,175 deductible, and 20 
percent in-network coinsurance rate), a PPO with a lower annual 
limitation on cost sharing ($4,800 annual limitation on cost sharing, 
$2,775 deductible, and 20 percent in-network coinsurance rate), and an 
HMO ($7,150 annual limitation on cost sharing, $3,000 deductible, 20 
percent in-network coinsurance rate, and the following services with 
copayments 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 test 
QHPs meet the AV requirements for silver level health plans.
    We then entered these test plans into the proposed 2017 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 test 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 
2017 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 10. 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 level. 
We welcome comment on this analysis and the proposed reductions in the 
maximum annual limitation on cost sharing for 2017.
    We note that for 2017, as described in Sec.  156.135(d), States are 
permitted to

[[Page 75548]]

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 10--Reductions in Maximum Annual Limitation on Cost Sharing for
                                  2017
------------------------------------------------------------------------
                                                        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 for
                                    coverage for 2017         2017
------------------------------------------------------------------------
Individuals eligible for cost-                 $2,350             $4,700
 sharing reductions under Sec.
 155.305(g)(2)(i) (that is, 100-
 150 percent of FPL)..............
Individuals eligible for cost-                  2,350              4,700
 sharing reductions under Sec.
 155.305(g)(2)(ii) (that is, 150-
 200 percent of FPL)..............
Individuals eligible for cost-                  5,700             11,400
 sharing reductions under Sec.
 155.305(g)(2)(iii) (that is, 200-
 250 percent of FPL)..............
------------------------------------------------------------------------

d. AV Calculation for Determining Level of Coverage (Sec.  156.135)
    Section 2707(a) of the PHS Act and section 1302 of the Affordable 
Care Act direct issuers of non-grandfathered health insurance in the 
individual and small group markets, including QHPs, to ensure that 
plans meet a level of coverage specified in section 1302(d)(1) of the 
Affordable Care Act and codified at Sec.  156.140(b). On February 25, 
2013, HHS published the EHB Rule (78 FR 12833) implementing section 
1302(d) of the Affordable Care Act that required that, to determine the 
level of coverage for a given metal tier level, the calculation of AV 
be based upon the provision of EHB to a standard population. Section 
156.135(a) establishes that AV is generally to be calculated using the 
AV Calculator developed and made available by HHS for a given benefit 
year. In the 2015 Payment Notice (79 FR 13743), we established at Sec.  
156.135(g) provisions for updating the AV Calculator in future plan 
years and provided an overview of how we would consider each of these 
updates and our approach towards making these updates.
    As discussed in the 2015 Payment Notice, we recognize the 
importance of balancing the interests of ensuring that the AV 
Calculator accurately reflects the current market and that changes to 
the AV Calculator minimize disruption to current plan designs through 
keeping AVs stable. In considering updates to the AV Calculator under 
the factors established under Sec.  156.135(g), we found the need for 
greater flexibility than provided for under current regulations to 
better ensure updates to the AV Calculator achieve these objectives.
    For example, in the preamble of the 2015 Payment Notice, we 
established our methodology for developing the trend factor. We stated 
that ``when updating the trending factor in the AV Calculator, we will 
use two sources of data, one to reflect the individual market and one 
to reflect the small group market, to develop a single trend factor 
that could be applied to the AV Calculator.'' \36\ However, in 
considering options for updating the trend factor annually under this 
policy, we found that this policy unduly limits our options. For 
instance, costs for specific services, such as specialty drugs, are 
currently increasing at a significantly different rate than other 
medical services. Trending costs based on each service type could 
capture those different rates of cost growth more accurately and better 
ensure that the trend adjustments in the AV Calculator reflect the 
actual market.
---------------------------------------------------------------------------

    \36\ 79 FR 13811. Col 1. [March 11, 2014].
---------------------------------------------------------------------------

    We propose to revise Sec.  156.135(g) to allow for additional 
flexibility in our approach and options for updating of the AV 
Calculator in the future. We propose that HHS will update the AV 
Calculator annually for material changes that may include costs, plan 
designs, the standard population, developments in the function and 
operation of the AV Calculator and other actuarially relevant factors. 
Specifically, we would not be required to make each of these changes 
each year, but we could include these types of material changes in our 
annual updating of the AV Calculator. Under this proposed policy, we 
will continue to make updates to the AV Calculator, as we have in 
previous years, including updates to the trend factor, algorithms 
changes and user interface changes. We will also update the claim data 
and demographic distribution being used in the AV Calculator as needed 
and continue to update the AV Calculator's annual limitation on cost 
sharing based on a projected estimate to allow for compliance with 
Sec.  156.130(a). The major difference under the proposed Sec.  
156.135(g) will be that the methodology, data sources, and trigger for 
making updates in the AV Calculator would be more flexible than the 
current Sec.  156.135(g). For instance, we propose that specific 
timelines and materiality thresholds for updating the continuance 
tables to reflect more current enrollment and claims data will no 
longer be specified by the regulation. This will allow us more options 
in considering approaches to making changes in the AV Calculator, 
particularly as the health insurance market and the AV Calculator 
evolve, new methodological approaches are developed, and new data 
becomes available. In developing the annual updates to the AV 
Calculator, we will continue to take into consideration stakeholder 
feedback on needed changes to the AV Calculator (through 
[email protected]) and to publicly release a draft version of 
the AV Calculator and the AV Calculator Methodology for comment before 
releasing the final AV Calculator. We also understand the importance 
for issuers and States to have time to use the final version of the AV 
Calculator to develop and adjust plan designs and we hope that by 
providing the additional flexibility under proposed Sec.  156.135(g), 
we will have more options that could allow us to release the AV 
Calculator sooner. We solicit comments on the proposed Sec.  
156.135(g).
e. Application to Stand-Alone Dental Plans Inside the Exchange (Sec.  
156.150)
    In Sec.  156.150, we propose revisions to increase the annual 
limitation on cost sharing for SADPs. In the 2015 Payment Notice, we 
established that the annual limitation on cost sharing for an SADP 
covering the pediatric dental EHB under

[[Page 75549]]

Sec.  155.1065 in any Exchange may not exceed $350 for one covered 
child and $700 for two or more covered children.
    To make adjustments to the annual limitation on cost sharing in 
subsequent years to keep pace with inflation, we propose in paragraph 
(a)(1) that for a plan year beginning after 2016, the dollar limit 
applicable to a SADP for one covered child be increased by an amount 
equal to the product of that amount and the quotient of consumer price 
index for dental services for the year 2 years prior to the benefit 
year, divided by the consumer price index for dental services for 2016. 
In paragraph (a)(2), we propose that the dollar limit for two or more 
covered children be twice the dollar limit for one child described in 
paragraph (a)(1) of this section.
    We considered using the premium adjustment percentage defined in 
Sec.  156.130(e), but ultimately decided that the dental CPI would be a 
more appropriate adjuster for the annual limitation on cost sharing as 
it is based on dental services. The annual limitation on cost sharing 
should increase over time to keep pace with inflation and moderate 
potential increases in premium. This is similar to the approach for 
medical QHPs. We seek comment on whether the premium adjustment 
percentage defined in Sec.  156.130(e) should be used instead. We would 
propose and finalize the annual increase to the dental annual 
limitation on cost sharing in the annual Payment Notice.
    In paragraph (c), we propose to define the dental CPI, which is a 
sub-component of the U.S. Department of Labor's Bureau of Labor 
Statistics Consumer Price Index specific to dental services. We would 
use the annual dental CPI published by the Department of Labor.
    In paragraph (d), we propose that increases in the annual dollar 
limits for one child that do not result in a multiple of $25 will be 
rounded down, to the next lowest multiple of $25. We believe this 
provision will result in stability in SADPs, making changes in annual 
limits that are based on round figures in moderate increments.
    We seek comment on these proposals.
5. Qualified Health Plan Minimum Certification Standards
a. Network Adequacy Standards (Sec.  156.230)
    At Sec.  156.230, we established the minimum criteria for network 
adequacy that health and dental plan issuers must meet to be certified 
as QHPs, including SADPs, in accordance with the Secretary's authority 
in section 1311(c)(1)(B) of the Affordable Care Act. Section 
156.230(a)(2) requires all issuers to maintain a network that is 
sufficient in number and types of providers to assure that all services 
will be accessible without unreasonable delay. Section 156.230(b) sets 
forth standards for access to provider directories requiring issuers to 
publish an up-to-date, accurate, and complete provider directory for 
plan years beginning on or after January 1, 2016 and Sec.  156.230(c) 
requires QHPs in the FFE to make this provider directory data available 
on its Web site in an HHS specified format and also submit this 
information to HHS in a format and manner and at times determined by 
HHS.
i. State Selection of Minimum Network Adequacy Standards
    The National Association of Insurance Commissioners' (NAIC's) 
Network Adequacy Model Review Subgroup has been doing significant work 
in the area of network adequacy, which includes work towards 
development of a Network Adequacy Model Act that States could adopt in 
whole or in part. We will continue to monitor the NAIC work and look 
forward to partnering with States and the NAIC in developing and 
promulgating network adequacy protections. In the interest of 
furthering this work, we are proposing standards related to network 
adequacy below, but will take into consideration the NAIC's final 
recommendation as we assess these policies.
    In recognition of the traditional roles States have in developing 
and enforcing network adequacy standards, we propose that FFEs would 
rely on State reviews for network adequacy in States in which an FFE is 
operating, provided that HHS determines that the State uses an 
acceptable quantifiable network adequacy metric commonly used in the 
health insurance industry to measure network adequacy, approved by HHS.
    We anticipate that HHS would determine that a State's network 
adequacy assessment methodology meets the standard above if the State 
selects one or more standards from a list of metrics provided by HHS 
and applies them prospectively to the QHP issuers in the State. HHS 
intends to detail the specific criteria and process for meeting the 
standard in each annual Letter to Issuers, but we anticipate including 
at least the following metrics:
     Prospective time and distance standards at least as 
stringent as the FFE standard.
     Prospective minimum provider-covered person ratios for the 
specialties with the highest utilization rate for its State.
    HHS would discuss with States their selection in advance of the 
start of the certification cycle to determine whether the State's 
network adequacy standard would be acceptable under the standard above. 
We would thereafter notify issuers via subregulatory guidance whether 
the State standards or Federal default standards apply.
    If HHS determines that a State's nework adequacy standard is 
acceptable under the standard above, the State would certify to the FFE 
which plans meet the network adequacy standard, and the FFE in that 
State would rely on the State's review for purposes of determining 
whether a QHP meets the requirements under Sec.  156.230(a)(2), 
although those issuers would still be required to submit to HHS 
provider data, attest to the HHS network adequacy certification 
requirements, and meet other applicable HHS standards, including the 
other standards under Sec.  156.230.
    We welcome comments on this proposal, including suggestions for 
additional State network adequacy methodologies that the FFEs could 
rely on, and other factors we might consider.
    In States that do not review for network adequacy, or do not select 
a standard as described above, the FFE would conduct an independent 
review under a Federal default standard. We propose the Federal default 
standard at Sec.  156.230(d) to be a time and distance standard. For 
the certification cycle for plan years beginning in 2017, we anticipate 
evaluating the QHP issuer networks under this standard based on the 
numbers and types of providers, in addition to their general geographic 
location. In particular, we propose to calculate a time and distance 
standard at the county level. We are considering using standards 
similar to those used in Medicare Advantage, utilizing the National 
Provider Identifier database, and focusing on the specialties that 
enrollees most generally use. HHS is also carefully considering other 
network standards, including those of individual States, accrediting 
entities, and Federal health care programs, as it develops the time and 
distance standards for the FFEs. We solicit comments on whether these 
proposed standards are appropriate. We also seek comment specifically 
on whether they are appropriate for SADPs, and, if not, what standards 
for SADPs would be more appropriate, and the basis for any deviation.
    The county-specific time and distance parameters that plans will be 
required to meet, including specifications for

[[Page 75550]]

specific provider and facility types, would be detailed annually in 
conjunction with the Letter to Issuers.
    We also propose that issuers that are unable to meet the specified 
standards would be able to submit a justification to account for any 
variances, and that the FFE would review the justification to determine 
whether the variance is reasonable based on circumstances, such as the 
availability of providers and variables reflected in local patterns of 
care.
    It is not our intent in establishing these default standards to 
prohibit certification of plans with narrow networks or otherwise 
impede innovation in plan design. Instead, we intend to establish a 
minimum floor consistent with the levels generally maintained in the 
market today, so that generally a very small number of plans would be 
idenfitied as having networks deemed inadequate. The Federal default 
standard would provide issuers with more transparency regarding our 
certification processes and will be designed and implemented to achieve 
results similar to those yielded by the reviews conducted by the FFEs 
in prior certification cycles. We believe this will promote 
predictability for issuers in the course of certification. We note that 
multi-State plan options will be considered to meet the network 
adequacy requirements under Sec.  156.230(a)(2) if they meet network 
adequacy standards established by OPM.
    We seek comments on this proposal, including how we might develop 
time and distance standards appropriate for the FFEs, the use of 
Medicare Advantage or other standards and other factors we should 
examine in measuring network adequacy, and suggestions of other models 
we might consider.
ii. Additional Network Adequacy Standards
    We also propose other additional network-related standards under 
Sec.  156.230(e) and (f).
    In the new Sec.  156.230(e)(1), we propose to require QHP issuers 
in all FFEs to notify enrollees about a discontinuation in their 
network coverage of a contracted provider. We believe that it is 
important for enrollees to be notified of changes to the network on a 
timely basis. Consumers need accurate information about which providers 
are in-network to ensure that they can optimize their health insurance 
coverage and make cost effective choices. Therefore, we propose that a 
QHP in an FFE be required to make a good faith effort to provide 
written notice of a discontinued provider, 30 days prior to the 
effective date of the change or otherwise as soon as practicable, to 
all enrollees who are patients seen on a regular basis by the provider 
or receive primary care from the provider whose contract is being 
discontinued, irrespective of whether the contract is being 
discontinued due to a termination for cause or without cause, or due to 
a non-renewal. We propose that a discontinued provider includes cases 
of where the provider is being removed and where the provider is 
leaving the network. We solicit comments on this proposed provision, 
including the timeframe for notification and whether separate timeframe 
requirements are needed for primary care providers versus other types 
of providers that a patient sees on a regular basis. We also solicit 
comments on an appropriate definition of ``regular basis,'' or whether 
the implementation of that phrase should be left to the good faith 
interpretation of the issuer. For instance, we considered whether we 
should define regular basis if the enrollee has seen the provider 
within the last 3 months, 6 months or 12 months. To satisfy this 
requirement, we expect the issuer to try to work with the provider to 
obtain the list of affected patients or to use their claims data system 
to identify enrollees who see the affected providers. As part of the 
notice, we encourage issuers to notify the enrollee of other comparable 
in-network providers in the enrollee's service area, provide 
information on how an enrollee could access the plan's continuity of 
care coverage, and encourage the enrollee to contact the plan with any 
questions.
    In developing the proposed notification standard under Sec.  
156.230(e)(1), we considered Medicaid Managed Care and Medicare 
Advantage's notification requirements and considered the work by the 
NAIC's Network Adequacy Model Review Subgroup. For instance, Medicare 
Advantage's notification requirements are similar to the proposed Sec.  
156.230(e)(1), and require that the Medicare Advantage organization 
make a good faith effort to provide written notice of a termination of 
a contracted provider at least 30 calendar days before the termination 
effective date to all enrollees who are patients seen on a regular 
basis by the provider whose contract is terminating, irrespective of 
whether the termination was for cause or without cause. Medicare 
Advantage also requires that when a contract termination involves a 
primary care professional, all enrollees who are patients of that 
primary care professional must be notified.\37\ Medicaid Managed Care, 
on the other hand, requires the Managed Care Organization, the Prepaid 
Inpatient Health Plan, and, when appropriate, the Prepaid Ambulatory 
Health Plan or Primary Care Case Manager, to make a good faith effort 
to give written notice of termination of a contracted provider, within 
15 days after receipt or issuance of the termination notice, to each 
enrollee who received his or her primary care from, or was seen on a 
regular basis by the terminated provider.\38\ We seek comments on other 
standards for notifying enrollees about their network coverage in cases 
of discontinuation, including States' standards and whether exceptions 
should be allowed for States' that already require notification to 
enrollees when a provider leaves the network.
---------------------------------------------------------------------------

    \37\ 42 CFR 422.111(e).
    \38\ 42 CFR 438.10(f)(5).
---------------------------------------------------------------------------

    We are also proposing in Sec.  156.230(e)(2) a provision for QHP 
issuers in all FFEs to ensure continuity of care for enrollees in cases 
where a provider is terminated without cause. Specifically, we propose 
to require the issuer, in cases where the provider is terminated 
without cause, to allow an enrollee in active treatment to continue 
treatment until the treatment is complete or for 90 days, whichever is 
shorter, at in-network cost-sharing rates. Additionally, in proposed 
paragraph (e)(2), we propose a definition of active treatment as 
meaning: (1) An ongoing course of treatment for a life-threatening 
condition; (2) an ongoing course of treatment for a serious acute 
condition; (3) the second or third trimester of pregnancy; or (4) an 
ongoing course of treatment for a health condition for which a treating 
physician or health care provider attests that discontinuing care by 
that physician or health care provider would worsen the condition or 
interfere with anticipated outcomes. Under the proposed definition of 
active treatment, an ongoing course of treatment would include 
treatments for mental health and substance use disorders that fall 
within the proposed definition. For the purposes of the active 
treatment definition, we propose to interpret a life-threatening 
condition as a disease or condition for which likelihood of death is 
probable unless the course of the disease or condition is interrupted; 
and a serious acute condition as a disease or condition requiring 
complex on-going care which the covered person is currently receiving, 
such as chemotherapy, post-operative visits, or radiation therapy. 
Finally, under paragraph (e)(2)(ii), we

[[Page 75551]]

propose that any decisions made for a request for continuity of care be 
subject to the health benefit plan's internal and external grievance 
and appeal processes in accordance with applicable State or Federal law 
or regulations. We solicit comments on this proposed section of the 
regulation, including the definitions of ``active treatment,'' ``life-
threatening condition,'' and ``serious acute condition'' and whether 
exceptions should be allowed for States' standards that already require 
coverage of continuity of care for enrollees. We also solicit comments 
about whether enrollees in their second or third trimester of pregnancy 
should be allowed to extend obstetric care through the postpartum 
period, which could require the continuity of care standard to extend 
beyond 90 days. If these enrollees were allowed to extend obstetric 
care through the postpartum period, we solicit comment on the 
definition of the postpartum period, such as for 6 weeks after birth, 
and whether the allowance of care through the postpartum period should 
apply for broader types of care than for obstetric care. We also 
solicit comments on proposed Sec.  156.230(e)(1) and (2) on the 
distinction between a termination with or without cause versus when a 
provider leaves the network because the provider's contract is non-
renewed. Specifically, we solicit comments on whether Sec.  
156.230(e)(2) should incorporate cases where the provider's contract is 
non-renewed or whether we should consider a non-renewal of the 
provider's contract as a termination without cause under Sec.  
156.230(e)(1) and (2). Lastly, we seek comments about what other 
possible provisions may be needed to protect an enrollee when a 
provider contract is terminated and can be implemented with limited 
burden on issuers.
    In general, our network adequacy rules for QHPs require that a 
network plan maintain a network sufficient to assure that all services 
will be accessible without unreasonable delay. However, there may be 
occasions when an enrollee obtains an EHB outside the QHP's network 
because the enrollee unknowingly receives out-of-network care. An 
enrollee may have made reasonable efforts to stay within the QHP's 
network when obtaining an EHB service, but then unknowingly received 
care from an out-of-network provider in an in-network setting (for 
example, an anesthesiologist or pathologist). To address these 
circumstances, we propose to add a new Sec.  156.230(f).
    In that paragraph, we propose to require, notwithstanding Sec.  
156.130(c) of the subpart, for a network to be deemed adequate, each 
QHP that uses a provider network must count cost sharing paid by an 
enrollee for an EHB provided by an out-of-network provider in an in-
network setting under certain circumstances towards the enrollee's 
annual limitation on cost sharing. That is, if an enrollee received an 
EHB in an in-network setting, such as an in-network hospital, but as 
part of the provision of the EHB the enrollee was charged out-of-
network cost-sharing for an EHB provided by an out-of-network provider 
(such as anesthesiology or pathology services, for example), that cost-
sharing would apply towards the annual limitation on cost-sharing. The 
enrollee could still be responsible for out-of-network cost sharing, 
and balance billing, for other benefits received from an out-of-network 
provider at any time, but not for cost sharing for a covered EHB 
provided in-network or out-of-network in a circumstance described in 
this paragraph after the annual limitation is met.
    Alternatively, the plan could provide a written notice to the 
enrollee at least 10 business days before the provision of the benefit 
that additional costs may be incurred for EHB provided by an out-of-
network provider in an in-network setting, including balance billing 
charges, unless such costs are prohibited under State law, and that any 
additional charges may not count toward the in-network annual 
limitation on cost sharing. Such notice could be provided during 
preauthorization. If the plan provides such notice, this rule would not 
require the plan to apply the out-of-network cost sharing towards the 
enrollee's annual limit on cost sharing or to be responsible for 
covering out-of-network cost sharing above the annual limit. This 
alternative would not be available if fewer than 10 business days' 
notice is provided, including in cases where that amount of time is not 
available (for example, in urgent but non-emergency care situations).
    We believe that this proposal balances financial protection for 
consumers against surprise out-of-network cost sharing, while 
maintaining the larger part of the QHP's cost-sharing structure. The 10 
business days' advance notice provision is intended to allow the 
enrollee to arrange for an in-network provider to provide the EHB; we 
solicit comments on whether this time frame should be shorter or 
longer. We would expect the issuer would provide this notification to 
the enrollee at the time it notifies the provider with any pre-
authorization documents. The issuer would also be permitted to send a 
``form'' document--that is, one that is not customized to the 
particular situation at issue--but it could not rely on a blanket 
notification through its Web site or provided at enrollment, for 
example. We seek comment on this proposal and if we should instead 
require the issuer to provide customized information to the consumer 
including information on potential in-network providers.
    We acknowledge that some States and issuers may offer consumers in 
these scenarios protections which go beyond what we are proposing here 
for QHPs. Several States have enacted laws that similarly provide 
consumers financial protection from the high out-of-pocket expenditures 
associated with receiving out-of-network care. States, relying on their 
authority to regulate both providers and issuers, generally impose 
requirements on both, whereas our proposal focuses on QHP issuers. 
States have generally included in their laws mechanisms to address the 
level of reimbursement an issuer must pay an out-of-network provider. 
For example, States have required payment of all charges, set the rate 
at a percentage of a fee schedule, and set forth a process through 
which providers and issuers must resolve disputes about charges. Some 
States have also prohibited balance billing consumers for certain out-
of-network services, ranging from only emergency services to any 
covered service. This proposal is not intended to preempt any State 
laws that would be more consumer protective. We note that this proposal 
would apply to QHPs in all Exchanges. We seek comment on these 
proposals.
    We are also soliciting comments regarding other network adequacy 
standards that may be appropriate to apply to QHPs in an FFE in future 
years, including standards included in the work being done by the 
NAIC's Network Adequacy Model Review Subgroup. One policy we are 
considering is whether a QHP in an FFE should have a network resilience 
policy for disaster preparedness. Network resilience refers to the 
provider network's capacity to withstand and recover from natural or 
man-made disasters that may threaten enrollees' continuous access to 
quality care. Disasters may negatively impact an issuer's network and 
can result in delay in services. Therefore, issuers who have a network 
resilience policy will be better prepared to ensure that their network 
can provide reasonable access under adverse circumstances. Some 
examples of appropriate network resilience policies might include 
business continuity planning, consideration of temporary policy changes 
in the event of a disaster, and/or disclosure or communication plans.

[[Page 75552]]

We solicit comments on this possible future policy and the examples 
provided, including thoughts on what type of policy would be reasonable 
and operationally feasible.
    In addition, certain States measure network adequacy based on 
enrollee wait times for scheduled appointments. As a result, we are 
interested in comments on the variation in wait times depending on the 
type of provider, such as for primary care or non-primary care 
services. Additionally, we also solicit comments as to whether we 
should add a wait time standard as an option under the proposed 
permissible State standards mentioned in this preamble, or if we should 
apply a broad wait time standard across QHPs in the FFEs.
    We are also soliciting comments on whether an issuer should be 
required to survey all of its contracted providers on a regular basis 
to determine if a sufficient number of network providers are accepting 
new patients. Additionally, we solicit comments on transparency of 
issuers' standards for selecting and tiering of participating providers 
for QHPs in an FFE and whether issuers should be required to make 
available their selecting and tiering criteria for review and approval 
by HHS and the State upon request. We are proposing Sec.  156.230(e) as 
a requirement for QHPs in the FFEs and Sec.  156.230(f) as a 
requirement for QHPs in all Exchanges. However, we solicit comments on 
whether these provisions should apply to all QHPs or only QHPs in the 
FFEs. We also solicit comments on applying Sec.  156.230(e) and (f) to 
SADPs and whether other standards should be provided for these 
provisions for stand-alone dental plans. We note that Sec.  156.230(f) 
applies to cost sharing incurred in connection with EHB, and, of dental 
benefits, only pediatric dental is EHB.
    In addition to the policies above, we are also considering 
providing on HealthCare.gov a rating of each QHP's relative network 
coverage. This rating or classification could be made available to a 
consumer when making a plan selection. We believe that such a rating 
would help an enrollee select the plan that best meets his or her 
needs, and we anticipate that this analysis would compare the breadth 
of the QHP network at the plan level as compared to the breadth of the 
other plan networks for plans available in the same geographic area.
    We anticipate analyzing the QHP network by calculating the number 
of specific providers that are accessible within specified time and 
distance standards. We would then classify the QHP networks into three 
categories. We are considering performing the calculation based on the 
provider information submitted by all QHP issuers in the existing 
network adequacy FFE QHP certification template, but comments on 
potential additional data collections are welcome.
    This network breadth rating would allow an enrollee to better 
understand plans' design, and, like other consumer tools, could help 
improve plan satisfaction. We anticipate providing additional details 
about how we would classify networks in the Letter to Issuers and in 
the QHP certification instructions, and solicit comments on what types 
of methods should be used to identify each network's breadth, what 
specific specialties should be included in the analysis, what sorts of 
adjustments should be made to address provider shortages, and other 
possible data sources to obtain information about available providers 
in the area. We welcome comments on the best way to make this 
information available to consumers, and any other comments related to 
this topic.
b. Essential Community Providers (Sec.  156.235)
    On June 5, 2015, we proposed through a Paperwork Reduction Act 
notice a provider petition process to update the ECP list against which 
issuer compliance with the ECP standard is measured. We expect that 
this data collection for the 2017 benefit year should be completed by 
the end of 2015, although HHS will provide additional opportunities for 
ECPs to submit provider data to HHS for benefit years beyond 2017. If 
the degree of provider participation in this data collection effort 
through the ECP petition allows HHS to assemble a more complete listing 
of ECPs, we believe the proposals described below would strengthen the 
ECP standard.
    We propose that, for the 2017 QHP certification cycle, HHS will 
continue to credit a health plan seeking certification to be offered 
through an FFE 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. For 
QHP certification cycles beginning with the 2018 benefit year, we 
solicit public comment on crediting issuers for multiple contracted 
full-time equivalent (FTE) practitioners at a single location, up to 
the number of available FTE practitioners reported to HHS by the ECP 
facility through the provider petition process and published on the HHS 
ECP list. HHS would apply this credit in the numerator of an issuer's 
percentage satisfaction of the general ECP standard described in 
paragraphs (a)(1) and (2) of this section. The denominator of an 
issuer's percentage satisfaction of the ECP standard would reflect the 
number of available FTE practitioners reported to HHS by each ECP 
facility that appears on the HHS ECP list located in the issuer's plan 
service area. Once we have collected this FTE practitioner data through 
the provider petition process, we believe that crediting an issuer for 
multiple contracted FTE practitioners at a single location would more 
accurately reflect the issuer's ECP participation in its network. 
Therefore, we propose for QHP certification cycles beginning with the 
2018 benefit year to revise Sec.  156.235(a)(2)(i) to credit an issuer 
for multiple contracted FTE practitioners at a single location, up to 
the number of available FTE practitioners reported to HHS by the ECP 
facility and reflected on the HHS ECP list, toward the issuer's 
satisfaction of the ECP participation standard.
    In the final 2016 Payment Notice, we stated that we would consider 
disaggregating certain ECP categories to ensure better access to a 
wider variety of health care services. However, our analysis of the 
available ECPs in each of the additional categories considered for 
disaggregation (that is, children's hospitals, rural health clinics, 
free-standing cancer centers, community mental health centers, and 
hemophilia treatment centers) does not support further ECP category 
disaggregation at this time. We believe there are too few ECPs within 
each of these additional categories appearing on our HHS ECP list to 
afford issuers sufficient flexibility in their contracting. We may 
revisit this consideration in the future and encourage QHP issuers to 
include in their networks these additional providers to best meet the 
needs of the populations they serve.
    For the same reasons described for our proposal to revise Sec.  
156.235(a)(2)(i), we propose in Sec.  156.235(b)(2)(i) that issuers 
that qualify for the alternate ECP standard described in Sec.  
156.235(a)(5) that seek certification to be offered through an FFE (or 
SBE-FP) be credited for multiple contracted FTE practitioners at a 
single location toward the issuer's satisfaction of the alternate ECP 
standard described in paragraphs (b)(1) and (2) of this section, 
beginning with the 2018 benefit year. We propose that for the 2017 
benefit year, HHS will continue to credit an issuer that qualifies for 
the alternate ECP standard and is seeking certification to be offered 
through an FFE with multiple providers at a single location counting as 
a single

[[Page 75553]]

ECP toward both the available ECPs in the plan's service area and the 
issuer's satisfaction of the ECP participation standard. We seek 
comment on these proposals.
c. Enrollment Process for Qualified Individuals (Sec.  156.265)
    Under Sec.  156.265(b)(2), if an applicant initiates enrollment 
directly with the QHP issuer for enrollment through the Exchange 
(direct enrollment through an issuer), the QHP issuer must redirect an 
applicant to go directly to the Exchange Web site to complete the 
application and receive an eligibility determination. HHS is 
considering options under which an applicant could remain on the QHP 
issuer's Web site to complete the application and enroll in coverage, 
and the QHP issuer's Web site can obtain eligibility information from 
the Exchange in order to support the consumer in selecting and 
enrolling in a QHP with Exchange financial assistance. The intent is to 
have this information exchange occur through an Exchange-approved web 
service, as described in Sec.  155.220, enhancing the current direct 
enrollment process. This option would provide Exchanges offering direct 
enrollment and QHP issuers more operational flexibility to expand 
front-end, consumer-facing channels for enrollment through a more 
seamless consumer experience.
    For a discussion of the options we are considering in the direct 
enrollment scenario, see the discussion regarding direct enrollment by 
web-brokers in our discussion of changes to Sec.  155.220. We seek 
comment on these options, and whether standards should differ for a 
web-broker compared to a QHP issuer, and how to maintain privacy and 
security.
    Accordingly, we propose to revise Sec.  156.265(b)(2)(ii) to ensure 
that an applicant who initiates enrollment directly with the QHP issuer 
for enrollment through the Exchange receives an eligibility 
determination for coverage through the Exchange through the Exchange 
Web site or through an Exchange-approved web service via the FFE single 
streamline application. This maintains the role of the Exchange in 
determining eligibility. We seek comment on this proposal.
d. Termination of Coverage or Enrollment for Qualified Individuals 
(Sec.  156.270)
    We propose to amend Sec.  156.270(d) to specify that a QHP issuer 
must provide a 3-month grace period to an enrollee who, upon failing to 
timely pay his or her premiums, is receiving advance payments of the 
premium tax credit. Because we believe that changing the length of an 
enrollee's grace period during the middle of such a grace period would 
be confusing to enrollees and could result in otherwise avoidable 
terminations for failure to pay premium, enrollees receiving APTC who 
enter a grace period for failing to timely pay premiums and who lose 
their eligibility for APTC during the grace period would be able to 
complete the remaining portion of the grace period as though the loss 
of eligibility for APTC did not occur. The proposed amendment to Sec.  
156.270(d) also eliminates language limiting the 3-month grace period 
for enrollees who are receiving APTC to only those enrollees who made a 
payment during the benefit year. This would permit enrollees renewing 
coverage that does not require a binder payment who fail to pay January 
premiums in full (or fail to pay within an issuer's premium payment 
threshold policy, if applicable) to receive the full grace period of 3 
months. This change would align more closely with our interpretation of 
the interaction between grace periods, guaranteed availability and 
renewability, and the binder payment requirement, that a binder payment 
is not necessary when an enrollee enrolls, either actively or 
passively, in a plan within the same insurance product, and would 
prevent enrollees who re-enroll in the same plan or product from 
unfairly losing their right to a grace period because they do not make 
a payment for January coverage. Finally, we propose to codify with 
regard to the grace period standards our policy described in the 
preamble for Sec.  155.400 of this part that if an enrollee receiving 
advance payments of the premium tax credit can satisfy the requirement 
to pay all outstanding premiums, or if the enrollee satisfies an 
issuer's premium payment threshold implemented under Sec.  155.400(g), 
if applicable, the QHP issuer must not terminate for non-payment of 
premium the enrollee's enrollment through the Exchange. This change to 
the rule would reflect the extension of the premium threshold policy to 
enrollees who are in a grace period for non-payment of premium.
e. Additional Standards Specific to SHOP (Sec.  156.285)
    Sections 155.720(g) and 156.285(c)(5) currently provide that SHOPs 
and QHP issuers must reconcile enrollment information on no less than a 
monthly basis. We propose to amend Sec.  156.285(c)(5) to specify 
additional details about how a QHP issuer offering a QHP through a FF-
SHOP should reconcile enrollment files with the FF-SHOP. Specifically, 
the proposed amendments would provide that the issuer must send 
enrollment reconciliation files on at least a monthly basis according 
to a process and timeline established by the FF-SHOP, and in a file 
format specified by the FF-SHOP.
    We are also proposing to delete Sec.  156.285(d)(2) consistent with 
our interpretation of guaranteed availability and renewability. If a 
qualified employer withdraws from a SHOP, the SHOP, not the issuer, 
should terminate the group's enrollment through the SHOP, and coverage 
might in many circumstances continue outside the SHOP.
f. Meaningful Difference Standard for Qualified Health Plans in the 
Federally-Facilitated Exchanges (Sec.  156.298)
    At Sec.  156.298, we propose modifications to the meaningful 
difference standard for QHPs in the FFEs. We propose to remove the 
criterion in paragraph (b)(5) that otherwise identical plans would be 
considered meaningfully different on the basis of one QHP being health 
savings account eligible. A QHP's health savings account eligibility is 
a cost-sharing status that may be assessed by examining the QHP's cost 
sharing, which is included at paragraph (b)(1). This criterion is 
therefore redundant.
    We also propose to delete ``self-only'' and ``non-self-only'' from 
paragraph (b)(6). Self-only (that is, individual) plans do not allow 
any dependent relationships, while non-self-only (that is, enrollee 
group) plans allow at least one dependent relationship type. An 
individual can enroll in individual and enrollee group plans. The 
allowance of dependents is the only difference between two plans if 
they are identified as individual or enrollee group only. We have 
determined that these statuses alone are not indicative of meaningful 
differences among QHPs. We will maintain the ``child-only'' versus non-
child-only status. We further propose to redesignate paragraph (b)(6) 
as paragraph (b)(5) and add the word ``or'' to paragraph (b)(4). We 
seek comment on the proposed changes.
g. Other Considerations
    We remind issuers that certain other Federal civil rights laws 
impose non-discrimination requirements. Issuers that receive Federal 
financial assistance, including in connection with offering a QHP on an 
Exchange, are subject to Title VI of the Civil Rights Act of 1964, the 
Age Discrimination Act of 1975, section 504 of the Rehabilitation Act 
of 1973, and section 1557 of the Affordable

[[Page 75554]]

Care Act. The Office for Civil Rights (OCR), which enforces these 
statutes, published a notice of proposed rulemaking on September 9, 
2015 (80 FR 54172) on the requirements of section 1557. Issuers that 
intend to seek certification of one or more QHPs are directed to that 
proposed rule and to http://www.hhs.gov/ocr/civilrights for additional 
information.
    We also seek to foster market-driven programs that can improve the 
management of costs and care. We note that innovative issuer, provider, 
and local programs or strategies may be successful in promoting and 
managing care, potentially resulting in better health outcomes and 
lower rates while creating important differentiation opportunities for 
market participants. We seek comment on ways in which we can facilitate 
such innovation, and in particular on whether there are regulations or 
policies in place that we should modify in order to foster this 
innovation.
6. Standards for Qualified Health Plan Issuers on Federally-Facilitated 
Exchanges and State-Based Exchanges on the Federal Platform
    To make it operationally feasible for a State-based Exchange to 
rely on the Federal platform for eligibility and enrollment functions, 
issuers and plans offered on the SBE-FP must comply with rules, as 
interpreted and implemented in policy and guidance related to the 
Federal eligibility and enrollment infrastructure. These would be the 
same requirements related to eligibility and enrollment that are 
applicable to QHP issuers and plans on FFEs. For example, SBE-FP 
special enrollment periods must be administered within the guidelines 
of the FFE special enrollment periods, as it is not possible at this 
time for the FFE to accommodate State customization in policy or 
operations, such as State-specific SEPs, application questions, display 
elements in plan compare, or data analysis. Additionally, if the FFE is 
to perform eligibility and enrollment functions, the FFE would also 
need to provide for certain consumer tools (plan compare, premium 
estimator, second-lowest cost silver plan tool, etc.) to support those 
functions. Thus, the FFE would need SBE-FP QHP plan data by the dates 
specified in the annual Letter to Issuers to provide for enough time 
for adequate testing and loading of the data into the various consumer 
tools the FFE offers. Issuers must also comply with certain FFE 
enrollment policies and operations (for example, premium payment and 
grace period rules, effective date logic, acceptable transaction codes, 
and reconciliation rules) for the FFE to successfully process 834 
transactions with issuers and minimize any data discrepancies for 
reconciliation.
    Therefore, we propose to add Sec.  156.350 to address eligibility 
and enrollment standards for QHP issuers participating on an SBE-FP. In 
paragraph (a) of new Sec.  156.350, we would require QHP issuers 
participating in an SBE-FP to comply with HHS regulations, and guidance 
related to the eligibility and enrollment functions for which the 
State-based Exchange relies on the Federal platform. For example, those 
issuers would be required to comply with operational standards in the 
Federally-facilitated Marketplace and Federally-facilitated Small 
Business Health Options Program Enrollment Manual. We provide in 
paragraph (a) a list of provisions with which QHP issuers participating 
in an SBE-FP would be required to comply. These provisions relate to 
eligibility and enrollment functions directly, or are critical to 
enabling HHS to assess compliance with eligibility and enrollment 
functions. For example, we would require QHP issuers to comply with the 
requirements regarding compliance reviews of QHP issuers to the extent 
relating directly to applicable eligibility and enrollment functions. 
Without this requirement, we would be severely limited in our ability 
to determine whether an issuer is complying with the requirements 
related directly to the Federal platform's eligibility and enrollment 
functions. In paragraph (b), we propose to permit these issuers to 
directly enroll applicants in a manner that is considered to be through 
the Exchange, under Sec.  156.1230, just as QHP issuers on FFEs are 
permitted.
    In paragraph (c), we propose that if an SBE-FP does not 
substantially enforce the eligibility and enrollment standards 
described in paragraph (a), then HHS may enforce against the issuer or 
plan using the enforcement remedies and processes described in subpart 
I of part 156. We also propose that the administrative review process 
in subpart J of part 156 would apply to enforcement actions taken 
against QHP issuers or plans under proposed Sec.  156.350. Because 
timely compliance with paragraph (a) is vital to the smooth functioning 
of the Federal platform and because the Federal platform would apply a 
uniform compliance and enforcement regime for reasons of efficiency and 
speed, we believe it is appropriate that HHS have this authority in 
this circumstance.
    Because this proposal would insert a section applicable to SBE-FPs 
in subpart D, which currently describes only standards for QHP issuers 
on the FFEs, we propose to amend the title of subpart D to read 
Standards for Qualified Health Plan Issuers on Federally-Facilitated 
Exchange and State-Based Exchanges on the Federal Platform.
    We seek comment on this proposal.
7. Enforcement Remedies in Federally-Facilitated Exchanges (Sec. Sec.  
156.800, 156.805, 156.810, and 156.815)
    We propose to revise paragraph Sec.  156.805(d). We believe 
paragraph (d) provides insufficient information on the effect of 
appealing a CMP. In the interest of aligning our CMP and 
decertification regulations, we propose to rename paragraph (d) 
``Request for hearing.'' Next, we propose to revise paragraph (d)(1) to 
state affirmatively the issuer's right to file a request for hearing on 
the assessment of a CMP. Finally, we propose to add paragraph (d)(2), 
stating that the request for hearing will suspend the assessment of CMP 
until a final administrative decision on the appeal. A similar 
provision exists in the decertification regulation at Sec.  156.810.
    We propose to amend Sec.  156.810 by revising paragraph (e) to 
present the appeal rights of QHP issuers and the impact of an appeal 
more clearly. Specifically, we propose to provide for the issuer's 
appeal right in paragraph (e). Then in paragraph (e)(1) and its 
paragraphs, we propose to explain how an appeal will affect the 
effective date of a decertification depending on whether the 
decertification is standard or expedited.
    Previously, we finalized Sec.  156.800(c), in which we stated that 
sanctions will not be imposed on a QHP issuer on an FFE if it has made 
good faith efforts to comply with applicable requirements for calendar 
years 2014 and 2015. We are not proposing to extend this policy. 
Starting in the 2016 calendar year and beyond, sanctions may be imposed 
if a QHP issuer on an FFE fails to comply with applicable standards, 
even if the QHP issuer has made good faith efforts to comply with these 
requirements.
    Section 156.810 contains bases for decertification of a QHP. One of 
the bases for decertification, Sec.  156.810(a)(5), authorizes 
decertification if a QHP issuer is hindering the efficient and 
effective operation of a Federally-facilitated Exchange. We interpret 
the efficient and effective operation of the FFEs to include displaying 
plans that will provide coverage to enrollees who purchase coverage 
under that plan. Where an issuer has informed HHS that

[[Page 75555]]

it cannot continue to provide coverage under a QHP, HHS will interpret 
this information to mean that the efficient and effective operation of 
the FFE will be hindered because it will incorrectly display plans on 
the FFE platform. In such a case, HHS may take all necessary steps to 
suppress and/or decertify the QHP.
    We propose to add new bases for decertification to Sec.  156.810 to 
address situations where a QHP issuer is the subject of a pending or 
existing State enforcement action, including a consent order, or where 
HHS has reasonably determined that an issuer lacks the funds to 
continue providing coverage to its consumers for the remainder of the 
plan year. Under its obligation to determine that making a plan 
available on the FFEs is in the interest of qualified individuals and 
employers, HHS is proposing to adopt these decertification bases as a 
consumer protection measure.
    We welcome comments on these proposals.
8. Quality Standards
a. Patient Safety Standards for QHP Issuers (Sec.  156.1110)
    In Sec.  156.1110, we established the first phase of patient safety 
standards, beginning on January 1, 2015, for QHP issuers to verify that 
certain contracted hospitals meet Medicare Hospital Conditions of 
Participation requirements regarding a quality assessment and 
performance improvement program and a discharge planning process. We 
propose to strengthen QHP patient safety standards in accordance with 
section 1311(h) of the Affordable Care Act for plan years beginning on 
or after January 1, 2017. In addition to hospital requirements to meet 
certain quality and patient safety standards delineated in the Medicare 
Conditions of Participation, HHS has engaged with several initiatives 
such as the Patient Safety Organization (PSO) program, Hospital 
Engagement Networks and the Quality Improvement Organizations, to 
broaden the national impact on reducing patient harm. By leveraging the 
successful work already being done at national, regional, and local 
hospital systems for health care quality improvement and harm 
reduction, we believe that alignment of the QHP issuer standards with 
effective patient safety interventions will achieve greater impact. 
Therefore, we propose amending Sec.  156.1110 to capture the current 
patient safety standards that continue to apply for plan years 
beginning before January 1, 2017 in new paragraph (a)(1). We also 
propose to add new paragraph (a)(2)(i)(A) to specify that for plan 
years beginning on or after January 1, 2017, a QHP issuer that 
contracts with a hospital with greater than 50 beds must verify that 
the hospital uses a patient safety evaluation system as defined in 42 
CFR 3.20. The patient safety evaluation system is defined in the PHS 
Act as the collection, management, or analysis of information for 
reporting to or by a Patient Safety Organization.\39\ We propose in 
Sec.  156.1110(a)(2)(i)(B) to require that a QHP issuer that contracts 
with a hospital with greater than 50 beds must ensure that the hospital 
implemented a comprehensive person-centered discharge program to 
improve care coordination and health care quality for each patient. We 
believe that use of a data-driven approach, analytic feedback, and 
shared learning to advance patient safety, such as working with a PSO, 
are essential to implementing meaningful interventions to improve 
patient health care quality.
---------------------------------------------------------------------------

    \39\ See, 42 U.S.C. 299b-21(6); and http://www.pso.ahrq.gov/regulations/fnlrule01.pdf.
---------------------------------------------------------------------------

    In accordance with the flexibility provided to the Secretary under 
section 1311(h)(2) of the Affordable Care Act to establish reasonable 
exceptions to the QHP issuer patient safety requirements, we propose in 
Sec.  156.1110(a)(2)(ii), that the hospital may implement evidence-
based initiatives to reduce all cause preventable harm,\40\ prevent 
hospital readmission, improve care coordination and improve health care 
quality through the collection, management and analysis of patient 
safety events by a means other than reporting of such information to or 
by a PSO. For example, a QHP issuer may comply with the proposed 
patient safety standards if the applicable QHP issuer-contracted 
hospital participates through the Partnership for Patients initiative 
as part of a Hospital Engagement Network.\41\ We believe this would 
allow for flexibility and promote alignment for hospitals that already 
engage in effective national, State, public and private patient safety 
programs. Although hospital patient safety programs are diverse, we 
believe that promoting a common goal of preventing the risk of patient 
harm in an effective, sustainable way is important. We also believe it 
is important to recognize the core components of a hospital patient 
safety program, including development of comprehensive patient safety 
systems to identify, report and analyze data; tracking of process and 
outcome measures; encouraging a culture of safety with leadership and 
health care provider support and expertise; and engaging patients and 
families in quality improvement and action plans. Over time, as PSO 
activities continue to expand in scope, maturity and effectiveness to 
advance efforts to ensure patient safety, we anticipate continuing to 
reassess the reasonable exceptions to the QHP issuer patient safety 
requirements outlined in Sec.  156.1110(a)(2)(ii). We expect that QHP-
issuer contracted hospitals with more than 50 beds will contract with a 
PSO and implement a comprehensive person-centered discharge program to 
improve care coordination and health care quality for each patient. HHS 
will continue to monitor the status of the PSO program and other 
patient safety initiatives and will develop additional requirements or 
guidance, if needed, to support effective patient safety strategies and 
harmonization of evidence-based standards and requirements under Sec.  
156.1110.
---------------------------------------------------------------------------

    \40\ All cause preventable harm or all adverse events-any event 
during the care process that results in harm to a patient, 
regardless of cause (https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-19.pdf).
    \41\ http://partnershipforpatients.cms.gov/about-the-partnership/aboutthepartnershipforpatients.html.
---------------------------------------------------------------------------

    In addition, HHS strongly supports hospital tracking of patient 
safety events using the Agency for Healthcare Research and Quality 
Common Formats,\42\ which are a useful tool for a hospital regardless 
of what patient safety interventions are implemented for ongoing, data-
driven quality assessment. The Agency for Healthcare Research and 
Quality anticipates releasing version 2.0 of the Common Formats for 
Event Reporting--Hospitals, which would define a systematic process for 
reporting adverse events, near misses and unsafe conditions, and allow 
a hospital to report harm from all causes. We believe that use of 
Common Formats, and aligning with existing HHS recommendations for 
hospitals,\43\ is integral whether a hospital chooses to work with a 
PSO to comply with the proposed requirement in Sec.  156.1110(a)(2)(i) 
or implements the alternative approach under the reasonable exception 
provision as proposed in Sec.  156.1110(a)(2)(ii).
---------------------------------------------------------------------------

    \42\ https://www.pso.ahrq.gov/common.
    \43\ https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-19.pdf.
---------------------------------------------------------------------------

    We believe these proposed amendments to QHP issuer patient safety 
requirements would support these common aspects and goal, and also 
align with the established

[[Page 75556]]

requirements in Sec.  156.1130 for a QHP quality improvement strategy, 
specifically the outlined quality improvement strategy topic areas from 
section 1311(g) of the Affordable Care Act, including implementation of 
activities to prevent hospital readmissions and implementation of 
activities to improve patient safety and reduce medical errors.
    We propose in Sec.  156.1110(b) to amend the documentation 
requirement to specify that, for plan years beginning on or after 
January 1, 2017, a QHP issuer to collect information from each of its 
contracted hospitals with greater than 50 beds to demonstrate that 
those hospitals meet the patient safety standards required in paragraph 
(a)(2) of this section. Such information could include a copy of the 
current agreement to partner with a PSO, a Hospital Engagement Network, 
or a Quality Improvement Organization. The documentation should reflect 
implementation of PSO activities, such as PSOs and hospitals working 
together to collect, report and analyze patient safety events, and 
implementation of a comprehensive person-centered hospital discharge 
program to demonstrate compliance with the proposed requirements in 
Sec.  156.1110(a)(2)(i); or implementation of other patient safety 
initiatives to reduce all cause preventable harm, prevent hospital 
readmission, improve care coordination and improve health care quality 
through the collection, management and analysis of patient safety 
events to demonstrate compliance with the reasonable exception 
provision proposed to be captured in Sec.  156.1110(a)(2)(ii). We also 
propose to remove paragraph (d) from section Sec.  156.1110 because it 
is no longer needed given the clarifying proposed effective date 
language within paragraphs (a) and (b). We clarify that, at this time, 
HHS does not intend to amend the number of hospital beds threshold 
authorized by section 1311(h)(3) of the Affordable Care Act and does 
not intend to begin implementing the provisions in section 
1311(h)(1)(B) regarding non-hospital health care providers.
    We seek comment on the proposed amendments to paragraphs (a) and 
(b), and the proposed deletion of paragraph (d). We seek comment 
specifically on the proposals to require that a QHP issuer that 
contracts with a hospital with greater than 50 beds must verify that 
the hospital uses a patient safety evaluation system and implements a 
comprehensive person-centered discharge program to improve care 
coordination and health care quality for each patient. We also seek 
comment on the reasonable exception provision under which the QHP 
issuer-contracted hospital with greater than 50 beds may implement 
evidence-based initiatives other than working with a PSO to reduce all 
cause preventable harm, prevent hospital readmission, improve care 
coordination and improve health care quality through the collection, 
management and analysis of patient safety events. We are considering 
providing that QHP issuers must ensure that their contracted hospitals 
as described in section 1311(h) are standardizing reporting of patient 
safety events with the use of the Agency for Healthcare Research and 
Quality Common Formats, and we seek comment regarding this potential 
requirement. We seek comment on the types of information, such as 
hospital agreements with PSOs, HENs or QIOs, that may be submitted to a 
QHP issuer to comply with the proposed standard in Sec.  
156.1110(b)(2). We also seek comment on the proposed documentation 
standard, including the burden and costs, to require a QHP issuer to 
track information and demonstrate compliance with meeting the new 
patient safety standards described in paragraph (a)(2).
9. Qualified Health Plan Issuer Responsibilities
a. Payment and Collections Processes (Sec.  156.1215)
    In the 2015 Payment Notice, HHS established a monthly payment and 
collections cycle for insurance affordability programs, user fees, and 
premium stabilization programs. In 2017, as discussed elsewhere in this 
document, we are proposing to charge issuers in State-based Exchanges 
that utilize the Federal platform for eligibility and enrollment 
services a user fee for the use of the platform. To streamline our 
payment and collections process, we propose that, for 2017 and later 
years, for purposes of the netting process, the reference to FFE user 
fees in Sec.  156.1215(b) would be interpreted to include any fees for 
issuers in State-based Exchanges using the Federal platform, as well as 
user fees that HHS collects on behalf of the State-based Exchange using 
the Federal platform.
    In the 2015 Payment Notice, we established in Sec.  156.1215(c) 
that any amount owed to the Federal government by an issuer and its 
affiliates is the basis for calculating a debt owed to the Federal 
government. Similarly, we propose that, for 2015 and later years, for 
purposes of calculating the debt owed to the Federal government, we 
would interpret the reference to FFE user fees to include any fees for 
issuers in State-based Exchanges using the Federal platform, as well as 
user fees that HHS collects on behalf of the State-based Exchange using 
the Federal platform.
    We solicit comments on these proposals, including whether the 
current regulations should be amended to reflect this interpretation.
b. Administrative Appeals (Sec.  156.1220)
    In the 2015 Payment Notice (79 FR 13818), we established an 
administrative appeals process for issuers. We established a three-
tiered 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). We note that should we 
finalize our proposal around SBE-FPs, we would interpret this 
administrative appeals process to apply to user fee payments that we 
collect from SBE-FP QHP issuers that offer plans on an SBE-FP.
    Under Sec.  156.1220(a), an issuer may only file a request for 
reconsideration based on the following: a processing error by HHS, 
HHS's incorrect application of the relevant methodology, or HHS's 
mathematical error. For example, an issuer may file a request for 
reconsideration that challenges the assessment of a default risk 
adjustment charge if the issuer believes the default charge was 
assessed because HHS incorrectly applied its methodology regarding data 
quantity and data sufficiency standards; however, the issuer may not 
file a request for reconsideration to challenge the methodology itself. 
We note that we are seeking comment on the proposed requirements 
related to the data quantity and data sufficiency methodology for the 
reinsurance and risk adjustments programs elsewhere in this proposed 
rule. We also clarify that an issuer may not file a request for 
reconsideration regarding issues arising from the issuer's failure to 
load complete and accurate data to its dedicated distributed data 
environment within the data submission window. Errors by the issuer are 
not appealable.
    We seek to clarify these grounds for appeal for the risk adjustment 
and reinsurance programs, as follows. In line with our proposal to 
delete Sec.  153.710(d), we propose to make conforming amendments to 
modify Sec.  156.1220 to remove cross-references to the interim 
discrepancy reporting process. Under Sec.  156.1220(a)(4)(ii), a 
reconsideration relating to risk adjustment or

[[Page 75557]]

reinsurance may only be requested if, to the extent the issue could 
have been previously identified by the issuer to HHS under the final 
discrepancy reporting process proposed to be redesignated at Sec.  
153.710(d)(2), it was so identified and remains unresolved. As proposed 
to be redesignated, Sec.  153.710(d)(2) states that an issuer must 
identify to HHS any discrepancies it identified in the final 
distributed data environment reports. We clarify that issuers may 
identify issues during the discrepancy reporting process under newly 
designated Sec.  153.710(d)(2) that are not subject to appeal; issuers 
may identify issues that are not processing errors by HHS, HHS's 
incorrect application of the relevant methodology, or HHS's 
mathematical errors. We clarify that, in contrast, an issuer may only 
request a reconsideration of unresolved issues that were identified 
under the final discrepancy reporting process proposed to be 
redesignated at Sec.  153.710(d)(2), if contesting a processing error 
by HHS, HHS's incorrect application of the relevant methodology, or 
HHS's mathematical error. The existence of an unresolved discrepancy is 
not alone a sufficient basis on which to request a reconsideration.
    We also seek to clarify the grounds for appeal for the risk 
corridors program. An issuer may not file a request for reconsideration 
to challenge the standards for the risk corridors program, including 
those established in Sec. Sec.  153.500 through 153.540 and in guidance 
issued by HHS. In addition, appeals related to data for programs other 
than risk corridors covered in Sec.  156.1220(a) cannot be grounds for 
risk corridors appeals.
    We also propose to shorten the deadline for filing a request for 
reconsideration in Sec.  156.1220(a)(3) from 60 to 30 calendar days. 
This proposal will permit HHS to resolve administrative appeals, 
calculate final payments and charges, and make payments in a more 
expedited manner. Additionally, we propose to clarify that an issuer 
must pay the full amount owed to HHS as set forth in the applicable 
notification, even if the issuer files a request for reconsideration 
under Sec.  156.1220. Failure to pay an amount owed will result in 
interest accruing after the applicable payment deadline. Therefore, if 
an appeal is unsuccessful, and the issuer has not already remitted the 
charge amount owed, the issuer would owe the debt plus the interest, 
and administrative fees which accrue from delayed payment. If an appeal 
is successful, HHS will refund the amount paid in accordance with the 
final appeal decision.
    Therefore, we propose that the request for reconsideration must be 
filed in accordance with the following timeframes: (i) For the premium 
tax credit and cost-sharing reduction portions of the advance payments, 
or FFE user fee charges, within 30 calendar days after the date of the 
final reconsideration notification specifying the aggregate amount of 
such advance payments or user fees for the applicable benefit year; 
(ii) for a risk adjustment payment or charge, including an assessment 
of risk adjustment user fees, within 30 calendar days of the date of 
the notification under Sec.  153.310(e); (iii) for a reinsurance 
payment, within 30 calendar days of the date of the notification 
provided under Sec.  153.240(b)(1)(ii); (iv) for a default risk 
adjustment charge, within 30 calendar days of the date of the 
notification of such charge; (v) for reconciliation of the cost-sharing 
reduction portion of the advance payments, within 30 calendar days of 
the date of the notification of such payment or charge; and (vi) for a 
risk corridors payment or charge, within 30 calendar days of the date 
of the notification of such payment or charge for the purposes of Sec.  
153.510(d). We propose to clarify that the last submission of data to 
which the issuer has attested serves as the notification for purposes 
of Sec.  153.510(d). We seek comment on this proposal.
c. Third Party Payment of Qualified Health Plan Premiums (Sec.  
156.1250)
    On March 19, 2014, we published in the Federal Register an interim 
final rule (IFR) with comment period titled, Patient Protection and 
Affordable Care Act; Third Party Payment of Qualified Health Plan 
Premiums (79 FR 15240). The IFR requires individual market QHP issuers, 
including SADP issuers, to accept premium and cost-sharing payments 
made on behalf of enrollees by: The Ryan White HIV/AIDS Program; other 
Federal and State government programs that provide premium and cost 
sharing support for specific individuals; and Indian tribes, tribal 
organizations, and urban Indian organizations. The IFR applies the 
requirements at Sec.  156.1250 to all individual market QHPs and SADPs, 
regardless of whether they are offered through an FFE, an SBE, or 
outside of an Exchange.
    The IFR also amended Sec.  156.805 to ensure that Sec.  156.1250 
could be enforced. Specifically, the IFR amended Sec.  156.805(a)(1) 
to: Provide that Sec.  156.805 targets violations of issuer standards 
and requirements of part 153 that are applicable to issuers; clarify 
that substantial non-compliance with any Exchange standard or 
requirement applicable to issuers in the FFE is grounds for imposing 
CMPs; and explicitly reference part 156 to clarify that substantial 
non-compliance with the Exchange standards applicable to issuers 
offering QHPs in the FFEs under part 156, including new Sec.  156.1250, 
may be a basis for the imposition of CMPs under Sec.  156.805.
    Prior to publishing the IFR, HHS issued two ``Frequently Asked 
Questions'' documents regarding premium and cost-sharing payments made 
by third parties on behalf of QHP enrollees. In an FAQ issued on 
November 4, 2013 (the November FAQ), HHS encouraged QHP issuers not to 
accept third-party payments made on behalf of enrollees by hospitals, 
other healthcare providers, and other commercial entities due to 
concerns that such practices could skew the insurance risk pool and 
create an uneven field in the Exchanges.\44\ On February 7, 2014, HHS 
issued another FAQ (the February FAQ) clarifying that the November FAQ 
did not apply to third party premium and cost-sharing payments made on 
behalf of enrollees by Indian tribes, tribal organizations, and urban 
Indian organizations; State and Federal government programs (such as 
the Ryan White HIV/AIDS Program); or private, not-for-profit 
foundations that base eligibility on financial status, do not consider 
enrollees' health status, and provide assistance for an entire 
year.\45\ In the February FAQ, HHS affirmatively encouraged QHP issuers 
to accept such payments given that Federal or State law or policy 
specifically envisions third party payment of premium and cost-sharing 
amounts by these entities.
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    \44\ http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/third-party-qa-11-04-2013.pdf.
    \45\ http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/third-party-payments-of-premiums-for-qualified-health-plans-in-the-marketplaces-2-7-14.pdf.
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    We received 174 comments in response to the March 19, 2014 IFR. The 
comments ranged from general support of or opposition to the IFR's 
provisions to very specific questions or comments. Based on these 
comments, we propose to make some modifications to the policy finalized 
in the IFR.
    Several commenters requested that final regulations clarify that 
``Federal and State government programs'' include programs administered 
by a State's political sub-divisions (for example, counties and 
municipalities). Several other commenters expressed confusion regarding 
the definition of

[[Page 75558]]

``State and Federal government programs,'' particularly in the case 
where an entity is both a (Federal or State) government program as well 
as a health care provider. These commenters expressed concern that 
Sec.  156.1250 does not make a distinction between government programs 
(such as Ryan White HIV/AIDS programs) and programs that involve 
Federal grantees receiving considerable public funding. Other 
commenters expressed concern that the category of Federal and State 
government programs is too broad, and does not provide adequate notice 
of which payments must be accepted.
    We propose to amend Sec.  156.1250 to clarify that a Federal or 
State government program includes programs of the political 
subdivisions of the State, namely counties and municipalities, which we 
refer to as ``local governments.'' Including this clarification in 
regulations will ensure that States have the flexibility to distribute 
care and Exchange financial assistance to their vulnerable populations 
through local governments, consistent with their statutory and 
regulatory authority.
    In terms of the distinction between programs sponsored and operated 
by the government (such as the Ryan White HIV/AIDS programs) and 
programs that involve Federal grantees that receive considerable public 
funding, we acknowledge that programs such as the Ryan White HIV/AIDS 
program operate by working with cities, States, and local community-
based organizations to provide services in line with their statutory 
authority. Sections 2604(c)(3)(F), 2612(c)(3)(F), and 2651(c)(3)(F) of 
the PHS Act authorize Ryan White HIV/AIDS program grantees and sub-
grantees to use program funds for premium and cost-sharing assistance. 
These grantees and sub-grantees must provide the assistance through 
third-party payments as they are prohibited from making payments 
directly to patients. Though many Ryan White HIV/AIDS program grantees 
are State and local governments, not all are; similarly, many of the 
State and local government grantees administer funds through sub-
grantees that are not government entities. We propose to distinguish 
government programs from government grantees such that the requirement 
at Sec.  156.1250 applies to government programs, but not necessarily 
to entities that are government grantees, unless specifically 
authorized and funded by the Federal, State, or local government 
program to make the payments on behalf of the program, consistent with 
the government programs' statutory and regulatory authority to provide 
premium and cost-sharing assistance through grants and grantees. In 
other words, if such Federal, State, and local governments are 
authorized to administer their premium and cost-sharing assistance 
through grantees or sub-grantees, the payments may not be rejected on 
the grounds that they did not come directly from the government 
programs. In such cases, the source of the Exchange financial 
assistance is the government program, and administration or 
distribution of that assistance through grants and grantees is 
authorized under statute or regulation. We seek comment on this 
proposal and also on whether final regulations should list out the 
specific entities that qualify as government programs for purposes of 
this provision.
    We also propose to require entities that make third party payments 
of premiums under this section to notify HHS, in a format and timeline 
specified in guidance. We propose that the notification must reflect 
the entity's intent to make payments of premiums under this section and 
the number of consumers for whom it intends to make payments. We seek 
comment on this requirement, and on what information entities should 
provide as part of this notification.
    We also propose to clarify that while issuers offering individual 
market QHPs, including SADPs, generally do not collect cost-sharing 
payments, they are required to accept third party cost-sharing payments 
on behalf of enrollees in circumstances where the issuer or the 
issuer's downstream entity accepts cost-sharing payments from plan 
enrollees. Although generally cost-sharing payments are made to 
providers, rather than to issuers, there are certain contractual 
circumstances where an issuer's non-provider downstream entity engages 
in activities on behalf of the issuer, including the collection of 
cost-sharing payments. For example, an issuer's pharmacy benefits 
manager may collect cost-sharing payments from the issuer's plan 
enrollees for prescription drugs. We propose to clarify that in such 
situations, the rules at Sec.  156.1250 regarding third-party payments 
would apply to cost sharing. We seek comment on these proposals.
    We received a number of comments requesting that final regulations 
require issuers to accept third-party payments from not-for-profit, 
charitable organizations. Several comments stated that requiring QHP 
issuers to accept third party payments from Ryan White HIV/AIDS 
programs but not from other disease-specific programs is unfair to 
those individuals with other diseases or conditions. Several other 
commenters expressed that many not-for-profit foundations and 
charitable organizations offer premium and cost-sharing assistance to 
individuals based on both financial status and diagnosis of a 
particular condition or disease.
    We are considering whether we should expand the list of entities 
from whom issuers are required to accept payment under Sec.  156.1250 
to include not-for-profit charitable organizations organizations in 
future years. If we did include not-for-profit charitable 
organizations, we would intend to include guardrails intended to 
minimize risk pool impacts, such as limiting assistance to individuals 
not eligible for other MEC and requiring assistance until the end of 
the calendar year. In making this determination, we intend to carefully 
review data provided by entities currently making third party premium 
payments and data related to the overall risk pool to better understand 
the impact of these payments.
d. Other Notices (Sec.  156.1256)
    We propose to add a new Sec.  156.1256, which would add a 
requirement for issuers, in the case of a plan or benefit display error 
included in Sec.  155.420(d)(4), to notify their enrollees within 30 
calendar days after the error is identified, if directed to do so by 
the FFE. We believe that enrollees should be made aware of any error 
that may have impacted their QHP selection and enrollment and any 
associated monthly or annual costs. Therefore, we are proposing a 
requirement for issuers to notify their enrollees of such error, should 
such error occur, as well as the availability of a special enrollment 
period, under Sec.  155.420(d)(4), for the enrollee to select a 
different QHP, if desired. We seek comment on this proposal.

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

1. Definitions (Sec.  158.103)
    To ensure consistency in the definitions of ``large employer'' and 
``small employer'' between the MLR regulation and the market reform 
requirements, and to reflect the recent amendments to section 2791(e) 
of the PHS Act and section 1304(b) of the Affordable Care Act that were 
made by the Protecting Affordable Coverage for Employees Act (Pub. L. 
114-60), we propose to revise the regulatory definitions of ``large 
employer'' and ``small employer'' in Sec.  158.103 to cross-

[[Page 75559]]

reference the definitions of those terms in Sec.  144.103.
2. Reporting of Incurred Claims (Sec. Sec.  158.103 and 158.140(a))
    The MLR December 1, 2010 interim final rule (75 FR 74864) and the 
May 16, 2012 technical corrections thereto (77 FR 28788) direct issuers 
to report incurred claims with a 3-month run-out period, and define 
unpaid claim reserves to mean reserves and liabilities established to 
account for claims that were incurred during the MLR reporting year but 
had not been paid within 3 months of the end of the MLR reporting year. 
The run-out period improves the accuracy of reported incurred claims by 
using the actual claims payments that take place during the run-out 
period, instead of the estimated claims liabilities and reserves, in 
the calculation of claims incurred in the reporting year.
    Prior to the 2014 MLR reporting year, the deadline for submitting 
MLR reports to the Secretary was June 1 of the year following the 
reporting year. The 2014 Payment Notice (78 FR 15410) moved the 
reporting deadline from June 1 to July 31 of the year following the 
reporting year to accommodate inclusion of the transitional reinsurance 
and risk adjustment amounts, which HHS generally publishes by June 30, 
in the MLR and risk corridors calculations.
    Because the MLR reporting deadline applicable to the 2014 and later 
reporting years occurs later in the year, the incurred claims valuation 
can also occur later in the year. Therefore, we propose to amend the 
definition of unpaid claims reserves in Sec.  158.103 and the 
requirements for reporting incurred claims in Sec.  158.140(a) to 
utilize a 6-month, rather than a 3-month run-out period beginning with 
the 2015 reporting year. This proposed amendment would require incurred 
claims to be calculated as of June 30, rather than March 31, of the 
year following the reporting year. We note that this approach is 
consistent with the proposal outlined in section III.D.3.a. of this 
preamble regarding the treatment of incurred but not received claims 
for the risk corridors program. We seek comment on this proposal.
    Finally, we are inviting comment on whether we should modify the 
treatment of a health insurance issuer's investments in fraud 
prevention activities for MLR reporting purposes in the final rule. We 
are considering amending the MLR regulation to permit the counting of a 
health insurance issuer's investments in fraud prevention activities 
among those expenses attributable to incurred claims. We solicit 
comments on this approach, including whether safeguards against 
potential abuse should be included (for example, an upper limit on this 
allowance, such as a percentage based on the ratio of issuers' fraud 
reduction expenses reported under Sec.  158.140(b)(iv) and issuers' 
earned premium as defined in Sec.  158.130); whether we should collect 
fraud prevention activity expense data as an informational item on the 
MLR Annual Reporting Form before amending the regulation; as well as on 
potential alternative treatment of these expenses for MLR reporting or 
rebate calculation purposes. We seek comment on this issue from all 
stakeholders, and specific actual data, if available, including with 
respect to the additional incentives that would result for health plan 
investments of this sort.

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 11. To fairly evaluate whether an 
information collection should be approved by OMB, section 3506(c)(2)(A) 
of the Paperwork Reduction Act of 1995 (PRA) 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.\46\
---------------------------------------------------------------------------

    \46\ See May 2014 Bureau of Labor Statistics, Occupational 
Employment Statistics, National Occupational Employment and Wage 
Estimates at http://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

A. ICRs Regarding Submission of Risk Corridors Data (Sec.  153.530)

    We are proposing to amend the risk corridors program requirements 
at Sec.  153.530 to require issuers to true-up claims liabilities and 
reserves used to determine the allowable costs reported for the 
preceding benefit year to reflect the actual claims payments made 
through June 30 of the year following the benefit year. Although this 
proposal would require issuers to submit data indicating the difference 
between their incurred liability estimated as of March 31 and June 30, 
we believe that issuers will be recording these amounts as part of 
their normal business practices, and that there will be no new data 
elements and no additional burden as a result of this proposal. 
Therefore, in accordance with the implementing regulations of the PRA 
at 5 CFR 1320.3(b)(2), we believe the burden associated with this 
requirement would be exempt as it associated with a usual and customary 
business practice.

B. ICRs Regarding Submission of Rate Filing Justification (Sec.  
154.215)

    This proposed rule would require health insurance issuers to submit 
a Unified Rate Review Template for all single risk pool coverage 
regardless of whether there is a plan within a product that experiences 
a rate increase. The existing information collection requirement is 
approved under OMB Control Number 0938-1141. This includes the unified 
rate review template and instructions for rate filing documentation 
that issuers currently use to submit rate information to HHS for rate 
increases of any size for single risk pool coverage and rate increases 
that meet or exceed the subject to review threshold for non-single risk 
pool coverage. As detailed in the accompanying preamble discussion, we 
believe most issuers already report this information. Therefore, we do 
not expect issuers to incur a burden associated with this proposed 
regulation. Prior to the deadline for the submission of rate 
information to CMS for rates for single risk pool coverage effective on 
or after January 1, 2017, HHS intends to solicit public comment on and 
seek OMB approval for revisions to the information collection template 
and instructions approved under OMB Control Number 0938-1141.

C. ICRs Regarding Election To Operate an Exchange After 2014 (Sec.  
155.106)

    This proposed rule would modify the dates for application 
submission and approval for States seeking to operate an SBE, and have 
an approved or

[[Page 75560]]

conditionally-approved Exchange Blueprint application and operational 
readiness assessment. HHS does not propose modifying the documents that 
States already must submit as part of the required Exchange Blueprint 
application. Therefore, HHS does not anticipate any additional impact 
to the administrative burden associated with the proposed regulatory 
changes to Sec.  155.106. HHS proposes utilizing the existing PRA 
package approved under OMB Control Number 0938-1172 for the Exchange 
Blueprint application.

D. ICRs Regarding Standards for Certified Application Counselors (Sec.  
155.225(b)(1)(iii))

    Section 155.225(b)(1)(ii) requires certified application counselor 
designated organizations to maintain a registration process and 
methodology to track the performance of certified application 
counselors. This proposed rule would add a new Sec.  155.225(b)(1)(iii) 
requiring certified application counselor designated organizations to 
provide the Exchange with information and data regarding the 
performance of the organization's certified application counselors, and 
the consumer assistance they provide. Although the current requirement 
at Sec.  155.225(b)(1)(ii) does not specify the type of performance 
information that must be tracked, or require that the information be 
provided to the Exchange, we expect that certified application 
counselor designated organizations already have a tracking process in 
place to collect performance information from individual certified 
application counselors, and that individual certified application 
counselors are already recording and submitting this required 
information to their organization. Therefore, we expect this proposal 
to have minimal impact on individual certified application counselors 
and on certified application counselor designated organizations.
    The proposed Sec.  155.225(b)(1)(iii) would add a new burden of 
compiling the performance information and submitting it to the 
Exchanges. In States with FFEs, HHS anticipates that, beginning in 
January 2017, it would collect three performance data points each month 
from certified application counselor designated organizations: The 
number of individuals who have been certified by the organization; the 
total number of consumers who received application and enrollment 
assistance from the organization; and of that number, the number of 
consumers who received assistance applying for and selecting a QHP, 
enrolling in a QHP, or applying for Medicaid or CHIP. We anticipate 
that this data would be reported to FFEs electronically, through HIOS 
or another electronic submission vehicle. For the purpose of estimating 
costs and burdens, we assume that State Exchanges will collect the same 
information with the same frequency, although our proposal gives 
Exchanges the flexibility to determine which data to collect and the 
form and manner of the collection. We estimate that certified 
application counselor designated organizations will have a mid-level 
health policy analyst prepare the reports and a senior manager will 
review each monthly report. HHS expects that a mid-level health policy 
analyst (at an hourly wage rate of $40.64) will spend 2 hours each 
month to provide the required monthly submissions and a senior manager 
(at an hourly wage rate of $91.31) will spend \3/8\ hour to review the 
submissions. Therefore, we estimate each monthly report will require 
2.375 hours and a cost burden of $115.52 per month per organization, or 
28.50 hours with a cost (12 monthly reports) of $1,386.25 annually per 
certified application counselor designated organization. Nationwide, we 
estimate there are 5,000 certified application counselor designated 
organizations, resulting in an annual cost burden of $6,931,200 and 
142,500 hours for certified application counselor designated 
organizations.
    Under proposed Sec.  155.225(b)(1)(iii), if an Exchange requests 
these certified application counselor reports, the Exchange would also 
need to review the reports. We assume that all Exchanges will require 
monthly reports and will utilize in-house staff to review them. We 
assume that an employee earning a wage that is equivalent to a mid-
level GS-11 employee would review monthly report submissions from 
certified application counselor designated organizations.\47\ We 
estimate that a mid-level employee (at an hourly wage rate of $43.13) 
will spend 10 minutes reviewing each monthly report for a cost burden 
of approximately $7.19 per monthly report per certified application 
counselor designated organization. For State Exchanges, we estimate 
that there are 1,500 certified application counselor designated 
organizations resulting in a cost burden of 3,000 hours and 
approximately $129,390 annually. Costs to the FFEs are estimated 
separately in the Regulatory Impact Analysis section of this proposed 
rule.
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    \47\ Federal wage rates are available at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2015/GS_h.pdf.
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E. ICRs Regarding Network Adequacy Standards (Sec.  156.230(e) and (f))

    Proposed Sec.  156.230(e) would require that QHP issuers make a 
good faith effort to provide written notice of discontinuation of a 
provider 30 days prior to the effective date of the change or otherwise 
as soon as practicable, to enrollees who are patients seen on a regular 
basis by the provider or who receive primary care from the provider 
whose contract is being discontinued, irrespective of whether the 
contract is being discontinued due to a termination for cause or 
without cause, or due to a non-renewal. This is a third-party 
disclosure requirement. We estimate that a total of 475 issuers 
participate in the FFE and would be required to comply with the 
proposed standard. We propose an estimate of 5 percent of providers 
discontinue contracts per year and that an issuer in the FFE covers 
7,500 National Provider Identifiers, which means that we estimate an 
issuer would have 375 provider discontinuations in a year. For each 
provider discontinuation, we propose an estimate that it will take a 
database administrator 30 minutes for data analysis to produce the list 
of affected enrollees at $55.37 an hour and an administrative assistant 
30 minutes to develop the notification and send the notification to the 
affected enrollees, at $29.93 an hour. The total costs per an issuer 
would be $15,993.75. The total annual costs estimate would be 
$7,597,031. Because we are already collecting information regarding 
network classifications as part of the existing QHP certification 
process, we do not believe that this proposal described in the preamble 
will result in additional information collection requirements for 
issuers.
    Proposed Sec.  156.230(f) would require QHP issuers to provide a 
notice to enrollees of the possibility of out-of-network charges from 
an out-of-network provider in an in-network setting at least 10 
business days prior to the benefit being provided to avoid counting the 
out-of-network costs against to the annual limitation on cost sharing. 
This provision would apply to all QHPs, which includes 575 issuers. We 
estimate it would take an issuer's mid-level health policy analyst (at 
an hourly wage rate of $54.87) approximately 6 minutes to create a 
notification and send the proposed information. We estimate that 
approximately 2 notices would be sent for every 100 enrollees. Assuming 
approximately 9 million enrollees in QHPs 2017, we estimate QHPs would 
send approximately 180,000 total

[[Page 75561]]

notices, for a total hours of 18,000, with a total cost of $987,660.

F. ICR Regarding Monthly SHOP Enrollment Reconciliation Files Submitted 
by Issuers (156.285(c)(5))

    Proposed amendments to Sec.  156.285(c)(5) would specify that 
issuers in a Federally-facilitated SHOP would send monthly enrollment 
reconciliation files to the SHOP according to a process, timeline and 
file format established by the FF-SHOP. CMS anticipates that it would 
require FF-SHOP issuers to submit a standard file with specific data 
elements and submit their files in a process set out by the SHOP, no 
less frequently than on a monthly basis.
    Issuers of QHPs available through the SHOP are already required 
under the current version of Sec.  156.285(c)(5) ``to reconcile 
enrollment files with the SHOP at least monthly.'' Therefore, we expect 
this proposal to have minimal impact on SHOP issuers.

G. ICR Regarding Patient Safety Standards (Sec.  156.1110)

    In Sec.  156.1110(a)(2), we propose that for plan years beginning 
on or after January 1, 2017, a QHP issuer that contracts with a 
hospital with greater than 50 beds must verify that the hospital uses a 
patient safety evaluation system and implements a mechanism for 
comprehensive person-centered hospital discharge to improve care 
coordination and health care quality for each patient. We also propose 
in Sec.  156.1100(a)(2)(ii) to establish reasonable exceptions to these 
new QHP issuer patient safety requirements such that the hospital may 
implement evidence-based initiatives to reduce all cause preventable 
harm, prevent hospital readmission, improve care coordination and 
improve health care quality through the collection, management and 
analysis of patient safety events (rather than requiring reporting of 
such information to or by a Patient Safety Organization). The burden 
estimate associated with the information collection, recordkeeping, and 
disclosure requirements to demonstrate compliance with these standards 
includes the time and effort required for QHP issuers to maintain and 
submit to the applicable Exchanges, documentation including but not 
limited to, hospital agreements to partner with a Patient Safety 
Organization, a Hospital Engagement Network, or a Quality Improvement 
Organization that demonstrate that each of its contracted hospitals 
with greater than 50 beds meets the patient safety standards required 
in Sec.  156.1110(a)(2) for plan years beginning on or after January 1, 
2017. QHP issuers may not already be collecting such network provider 
information; therefore, we estimate the cost and burden to collect this 
administrative information as follows: For a total of 600 QHP issuers, 
offering 15 plans as potential QHPs, we estimate each issuer would 
require one senior manager an average of 3 hours to collect and 
maintain the hospital agreements or other information necessary to 
demonstrate compliance as required in Sec.  156.1110(a)(2) for their 
QHPs offered on Exchanges for plan years beginning on or after January 
1, 2017. For a senior manager (at an hourly wage rate of $91.31), we 
estimate the total annual cost for a QHP issuer to be $273.93. 
Therefore, we estimate a total annual burden of 1,800 hours, resulting 
in an annual cost of $164,358.

H. ICR Regarding Third Party Payment of Qualified Health Plan Premiums 
(Sec.  156.1250)

    We are proposing to require entities that make third party payments 
of premiums under this section to notify HHS, in a format and timeline 
specified in guidance. We expect that the notification would reflect 
the entity's intent to make payments of premiums under this section and 
the number of consumers for whom it intends to make payments. We 
estimate it would take approximately four hours to analyze the number 
of consumers the entity intends to make payments of premiums on behalf 
of, draft a notification and send the proposed information by a mid-
level health policy analyst (at an hourly wage rate of $54.87). 
Assuming 500 entities exist that make third party payments and each 
would send one notice, we estimate a total burden of 2,000 hours 
resulting in an annual cost of $109,740.

I. ICRs Regarding Other Notices (Sec.  156.1256)

    We are proposing to add a new section at Sec.  156.1256 to require 
that, in the event of a plan or benefit display error, QHP issuers 
notify their enrollees within 30 calendar days after the error is 
identified, both of the plan or benefit display error and of the 
opportunity to enroll in a new QHP under a special enrollment period at 
Sec.  155.420(d)(4), if directed to do so by the FFE. This provision 
would apply to all QHPs in the FFEs, which includes 475 issuers. We 
estimate it would take approximately 30 minutes to amend a form notice, 
add SEP language provided by the FFE, and send the proposed information 
by an issuer's mid-level health policy analyst (at an hourly wage rate 
of $54.87). We estimate that approximately 4 percent of enrollees would 
receive such a notice. Assuming approximately 7 million FFE enrollees, 
we estimate QHPs in the FFEs would send approximately 280,000 total 
notices, for a total hours of 140,000, with a total cost of $7,681,800.
    However, although this proposal would require issuers to send 
notices for the specified situation, sending these notices is already 
part of normal issuer business practices and issuers are already 
working with the FFE to include language in their notices about special 
enrollment periods, as applicable and appropriate. Therefore, there 
will be no additional information required by issuers and no new 
administrative burden as a result of this proposal. In accordance with 
the implementing regulations of the PRA at 5 CFR 1320.3(b)(2), we 
believe the burden associated with this requirement would be exempt as 
it associated with a usual and customary business practice.

                                                                 Table 11--Annual Reporting, Recordkeeping and Disclosure Burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Burden per                     Hourly labor     Total labor
             Regulation section                       OMB Control number             Number of       Responses       response      Total annual       cost of         cost of     Total cost ($)
                                                                                    respondents                       (hours)     burden (hours)   reporting ($)   reporting ($)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   155.225(b)(1)(iii)--certified         0938-1172..........................           5,000          60,000           2.375         142,500           48.64       6,931,200       6,931,200
 application counselor organizations.
Sec.   155.225(b)(1)(iii)--State Exchange..  0938-1172..........................           1,500           1,500           0.167           3,000           43.13         129,390         129,390
Sec.   156.230(e)..........................  0938-NEW...........................             475         178,125               1             375           42.65       7,597,031       7,597,031
Sec.   156.230(f)..........................  0938-NEW...........................             575         180,000             0.1          18,000           54.87         987,660         987,660
Sec.   156.1110............................  0938-1249..........................             600           9,000             0.2           1,800           91.31         164,358         164,358
Sec.   156.1250............................  0938-NEW...........................             500             500               4           2,000           54.87         109,740         109,740
Sec.   156.1256............................  0938-NEW...........................             475         280,000             0.5         140,000           54.87       7,681,800       7,681,800
                                                                                 ---------------------------------------------------------------------------------------------------------------

[[Page 75562]]

 
    Total..................................  ...................................           6,100  ..............  ..............         334,675  ..............      23,601,179      23,601,179
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: There are no capital/maintenance costs associated with the information collection requirements contained in this rule; therefore, we have removed the associated column from Table 11.

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-9937-P,'' the ICR's OMB control number, and the CMS 
document ID number in your comment.
    PRA-specific comments must be received by February 1, 2016.

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 Analysis

A. Statement of Need

    This rule proposes standards related to the premium stabilization 
programs (risk adjustment, reinsurance, and risk corridors) for the 
2017 benefit year, as well as certain modifications to these programs 
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 previous Payment 
Notices provided detail on the implementation of these programs, 
including the specific parameters for the 2014, 2015, and 2016 benefit 
years applicable to these programs. This rule proposes additional 
standards related to essential health benefits, meaningful access in 
the Exchange, consumer assistance tools and programs of an Exchange, 
Navigators, non-Navigator assistance personnel, agents and brokers 
registered with the Federally-facilitated Exchange, certified 
application counselors, cost-sharing parameters and cost-sharing 
reduction notices, essential community providers, qualified health 
plans, network adequacy, stand-alone dental plans, acceptance of third-
party payments by QHP issuers, patient safety standards for issuers of 
qualified health plans participating in Exchanges, guaranteed 
availability and guaranteed renewability, minimum essential coverage, 
the rate review program, the medical loss ratio 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 2017 and Exchange financial assistance assists 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 the next phase of 
patient safety 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.

[[Page 75563]]

Affected entities such as QHP issuers would incur costs to comply with 
the proposed provisions, including administrative costs related to 
notices, new patient safety 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 12 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, improved patient safety and 
increased insurance enrollment--and certain costs--such as the cost of 
providing additional medical services to newly-enrolled individuals. 
The effects in Table 12 reflect qualitative impacts and estimated 
direct monetary costs and transfers resulting from the provisions of 
this proposed rule for health insurance issuers. The annualized 
monetized costs described in Table 12 reflect direct administrative 
costs to health insurance issuers as a result of the proposed 
provisions, and include administrative costs related to notices, new 
patient safety 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 12 include costs associated with FFE user fees, the risk 
adjustment user fee paid to HHS by issuers, changes in the overall 
transfer amount for the risk corridors program for fiscal years 2017 
through 2018, and an increase in MLR rebates to consumers. We are 
proposing to collect a total of $52 million in risk adjustment user 
fees or $1.80 per enrollee per year from risk adjustment issuers, which 
is slightly more than the $50 million generated in benefit year 2016 
when we established a $1.75 per-enrollee-per-year risk adjustment user 
fee amount. As in 2016, the risk adjustment user fee contract costs for 
2017 include additional costs for risk adjustment data validation; 
however, we expect increased enrollment in 2017 HHS risk adjustment 
covered plans, which decreases the per enrollee amount. Also, the 
increase in FFE user fee collections is the result of expected growth 
in enrollment in the FFEs rather than an increase in the user fee rate, 
which at 3.5 percent remains the same from 2016 to 2017. Beginning in 
2017, we are also proposing to charge a user fee for SBEs that utilize 
the Federal platform for eligibility and enrollment services. This user 
fee rate would be set at 3.0 percent for benefit year 2017.

                                           Table 12--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..........................................
     Continuous quality improvement among QHP issuers to reduce patient harm and improve health outcomes
     at lower costs.............................................................................................
     More informed Exchanges QHP certification decisions................................................
     Increased coverage options for small businesses and employees with minimal adverse selection.......
----------------------------------------------------------------------------------------------------------------
Costs:                                              Estimate       Year dollar    Discount rate   Period covered
                                                                                       (percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)..................          $23.91            2015                7       2016-2020
                                                          23.91            2015                3       2016-2020
----------------------------------------------------------------------------------------------------------------
Quantitative:
     Costs incurred by issuers to comply with provisions in the proposed rule...........................
----------------------------------------------------------------------------------------------------------------
Transfers:                                          Estimate       Year dollar    Discount rate   Period covered
                                                                                       (percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)..................          $21.73            2015                7       2016-2020
                                                          21.84            2015                3       2016-2020
----------------------------------------------------------------------------------------------------------------
 Transfers reflect an additional $2 million annual cost of risk adjustment user fees (the total risk
 adjustment user fee amount for 2015 was $50 million), which are transfers from health insurance issuers to the
 Federal government. Transfers also reflect an additional $31 million in rebates from entities subject to
 medical loss ratio (MLR) requirements to consumers, an increase of $105 million in the amount of user fees
 collected from State-based Exchanges that use the Federal platform for eligibility and enrollment, which are
 transfers from issuers to the Federal government, and a total decrease of $112 million in the amount of risk
 corridors transfers between issuers of qualified health plans (QHPs).
 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. The Affordable Care Act ends the temporary 
risk corridors program and, in this rulemaking, we propose to end the 
transitional reinsurance program after the benefit year 2016. 
Therefore, the costs associated with those programs are not included in 
Tables 12 or 13 for fiscal years 2019-2020. Table 13 summarizes the 
effects of the risk adjustment program on the Federal budget from 
fiscal years 2016 through 2020, with the additional, societal effects 
of this proposed rule discussed in this RIA. We do not expect the 
provisions of this proposed rule to

[[Page 75564]]

significantly alter CBO's estimates of the budget impact of the premium 
stabilization programs that are described in Table 13. We estimate that 
the proposal to true up claims liabilities and reserves used to 
determine allowable costs for the risk corridors program will reduce 
the overall risk corridors transfer amount by $112 million in each of 
fiscal years 2017 and 2018. 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 12).
    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 2016 Payment Notice for the impacts 
associated with the advance payments of cost-sharing reductions and 
premium tax credits, the premium stabilization programs, and FFE user 
fee requirements.

   Table 13--Estimated Federal Government Outlays and Receipts for the Risk Adjustment, Reinsurance, and Risk
                                  Corridors Programs From Fiscal Year 2016-2020
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
               Year                     2016         2017         2018         2019         2020      2016-2020
----------------------------------------------------------------------------------------------------------------
Risk Adjustment, Reinsurance, and          16.5         19.5           13           15           16           80
 Risk Corridors Program Payments..
Risk Adjustment, Reinsurance, and          15.5         18.5           13           15           16           78
 Risk Corridors Program
 Collections\*\...................
----------------------------------------------------------------------------------------------------------------
Note 1: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments
  over time.
Note 2: The CBO score reflects an additional $2 million in collections in FY 2015 that are outlayed in the FY
  2016-FY 2020 timeframe. CBO does not expect a shortfall in these programs.
 
Source: Congressional Budget Office. Insurance Coverage Provisions of the Affordable Care Act--CBO's March 2015
  Baseline Table https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2015-03-ACAtables.pdf.

1. Fair Health Insurance Premiums
    The proposed regulations would permit an additional principal 
business address to be identified for a small employer that is within 
the service area of an issuer's network plan, in instances where the 
issuer is rating based on geography and the employer's principal 
business address is not within that service area. This would ensure 
that the network plan can be appropriately rated for sale to the group 
policyholder, benefitting both issuers and employers.
2. Guaranteed Availability
    This proposed rule would codify certain exceptions to guaranteed 
availability. Because we believe this codification is consistent with 
current industry practice under current standards, we do not believe 
this change will have a material impact on issuers or enrollees.
2. Student Health Insurance Coverage
    This proposed rule would subject student health insurance coverage 
to the index rating methodology under the single risk pool regulation, 
but specify that issuers may establish one or more separate risk pools 
for each institution of higher education, provided they are based on a 
bona fide school-related classification and not related to health 
status. The proposed rule would also eliminate the requirement that 
issuers of student health insurance coverage provide coverage comprised 
of the specific metal levels, and instead require such issuers to 
provide insurance policies that provide at least 60 percent AV. This 
would provide flexibility for colleges and universities to offer 
student health insurance plans that are more generous than the standard 
metal levels. This would affect an estimated 41 issuers that offer 
student health insurance coverage nationwide and approximately 1.3 
million students and dependents enrolled in such plans.\48\
---------------------------------------------------------------------------

    \48\ Source: Data from Medical Loss Ratio submissions for 2013 
reporting year.
---------------------------------------------------------------------------

3. 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, 2015, and 2016 
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 2017 benefit year, we estimate that the total cost for HHS to 
operate the risk adjustment program on behalf of States for 2017 will 
be approximately $52 million, slightly more than in 2016, and that the 
risk adjustment user fee would be approximately $1.80 per enrollee per 
year. This user fee reflects both increased contract costs to support 
the risk adjustment data validation process in 2017 and an expected 
increase in enrollment in risk adjustment covered QHPs.
4. Risk Corridors
    The Federally operated temporary risk corridors program ends in 
benefit year 2016 as required by statute. Because risk corridors 
charges are collected in the year following the applicable benefit 
year, and risk corridors payments lag receipt of collections by one 
quarter, we estimate that risk corridors transfers will continue 
through fiscal year 2018. We are proposing that for the 2015 and later 
benefit years, the issuer must true up claims liabilities and reserves 
used to determine the allowable costs reported for the preceding 
benefit year to reflect the actual claims payments made through June 30 
of the year following the benefit year. This proposed amendment would 
provide for a more accurate risk corridors calculation by substituting 
actual experience in place of estimates. Some issuers overestimate 
their claims and liabilities, while others underestimate them. Based on 
the 2014 MLR and risk corridors data, we estimate that this proposed 
amendment will result in a combined total reduction of approximately 
$315 million in risk corridors payments or increase in risk

[[Page 75565]]

corridors charges for some issuers; and a combined total increase of 
approximately $203 million in risk corridors payments or decrease in 
risk corridors charges for other issuers. The estimated net impact of 
the proposed amendment would thus be a reduction of approximately $112 
million in total transfers between issuers.
5. Rate Review
    In Sec.  154.215, we propose to amend the criteria for submission 
of the Unified Rate Review Template for single risk pool coverage to 
HHS. We estimated the burden associated with the rate filing process in 
the Supporting Statement approved under OMB Control Number 0938-1141. 
We intend to revise the information collection currently approved under 
OMB Control Number 0938-1141 to clarify instructions related to 
completing the template for single risk pool coverage that has a rate 
decrease, no rate change and for new plans.
6. Additional Required Benefits
    In Sec.  155.170, we propose to amend the requirement for coverage 
of benefits in addition to the essential health benefits. Specifically, 
we propose to reword Sec.  155.170(a)(2) to make clear that a benefit 
required by the State through action taking place on or before December 
31, 2011 is considered an EHB and one required by the State through 
action taking place after December 31, 2011 is considered in addition 
to EHB. As we see this as a clarification, we do not anticipate an 
additional burden on States or issuers. At Sec.  155.170(a)(3), we 
currently require the Exchange to identify which additional State-
required benefits, if any, are in excess of EHB. We propose to amend 
paragraph (a)(3) to designate the State, rather than the Exchange, as 
the entity that identifies which State-required benefits are not EHB. 
Because Exchanges have generally been relying upon State Departments of 
Insurance in determining what constitutes an essential health benefit, 
we do not anticipate any additional burden to States because of this 
modification.
7. Standards for Navigators and Certain Non-Navigator Assistance 
Personnel
    This proposed rule would amend some of the standards for consumer 
assistance functions under Sec.  155.205(d) and (e), as well as for the 
activities of Navigators and non-Navigator assistance personnel subject 
to Sec.  155.215. The proposed changes include ensuring consumers have 
access to skilled assistance with Exchange-related issues beyond 
applying for and enrolling in coverage. Such post enrollment and other 
assistance would include assisting consumers with applying for 
exemptions from the individual shared responsibility payment that are 
granted through the Exchange, with the process of filing Exchange 
appeals, and with understanding basic concepts related to health 
coverage and how to use it. The proposed rule would also require 
Navigators to provide targeted assistance to serve underserved and/or 
vulnerable populations, as identified by each Exchange. Our proposals 
would also specify that any individual or entity carrying out consumer 
assistance functions under Sec.  155.205(d) and (e) or Sec.  155.210 
must complete training prior to performing any assister duties, 
including conducting outreach and education activities.
    Our proposal to amend Sec. Sec.  155.205(d) and 155.215(b)(1)(i) 
related to completing training for Navigators and certain non-Navigator 
assistance personnel only applies to the timing of the training and 
does not have any impact on the training itself. Therefore, it would 
not affect the burden or cost for entities already subject to training 
requirements. Because under existing Sec.  155.215(b)(2), Navigators in 
FFEs must already be trained on the tax implications of enrollment 
decisions, the individual responsibility to have health coverage, 
eligibility appeals, and rights and processes for QHP appeals and 
grievances, we expect our amendments to Sec.  155.210(b)(2)(v) through 
(viii) to have minimal impact on FFE training. If any SBEs do not 
already provide training on these topics, we expect they would incur 
minimal costs in developing and implementing this training. Our 
proposal requiring Navigators to serve underserved and vulnerable 
populations will have an increased benefit for consumers, especially 
hard to reach populations. All costs associated with reaching these 
consumers in FFEs would be considered allowable costs that would be 
covered by the Navigator grants for the FFEs and that may be drawn down 
as the grantee incurs such costs. Additionally, Sec.  155.210(b)(2)(i) 
already requires Navigators in all States to receive training on 
serving underserved and vulnerable populations.
8. Certified Application Counselors
    This proposed rule would require certified application counselor 
organizations to submit data and information to the Exchanges regarding 
the performance of their certified application counselors and the 
consumer assistance they provide, upon request, in a form and manner 
specified by the Exchange. Under proposed Sec.  155.225(b)(1)(iii), if 
an Exchange requests these certified application counselor reports, the 
Exchange would also need to review them. We assume that all Exchanges 
will require monthly reports and will utilize in-house staff to review 
them. We assume that an employee earning a wage that is equivalent to a 
mid-level GS-11 employee would review monthly report submissions from 
certified application counselor designated organizations.\49\ We 
estimate that a mid-level employee (at an hourly wage rate of $43.13) 
will spend 10 minutes reviewing each monthly report for a cost burden 
of approximately $7.19 per monthly report per certified application 
counselor designated organization. We estimate the costs of this 
proposal for State Exchanges in the Collection of Information 
Requirements section of this proposed rule. For the FFEs, we estimate 
there are 3,500 certified application counselor designated 
organizations, resulting in a total annual burden for FFEs of 7,000 
hours, at a cost of $301,910.
---------------------------------------------------------------------------

    \49\ Federal wage rates are available at http://www.opm.gov/policy-data-oversight/pay-leave/salries-wages/salary-tables/pdf/2015/GS_h.pdf.
---------------------------------------------------------------------------

9. SHOP
    The SHOP facilitates the enrollment of eligible employees of small 
employers 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.\50\
---------------------------------------------------------------------------

    \50\ Available at: http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
---------------------------------------------------------------------------

    The proposed Sec.  155.735(d)(2)(iii) would require the FF-SHOPs to 
send qualified employees a notice notifying them that their child 
dependent(s) are no longer eligible for dependent child coverage under 
their plan because of age. The notice would be sent 90 days in advance 
of the date when the dependent enrollee loses eligibility for dependent 
coverage. We estimate the Federally-facilitated SHOPs will spend 
roughly 35 hours annually, per State, to prepare the notice, for a 
total cost of $1,775, per State, to design and implement the notices 
proposed under Sec.  155.735(d)(2)(iii). We estimate that there will be 
approximately 32 States operating under the Federally-facilitated SHOPs 
and all will be subject to this requirement. Therefore, we estimate a 
total annual cost of $58,575 for the FF-SHOPs as a result of this 
requirement.

[[Page 75566]]

10. Standardized Options
    In assessing the burden associated with implementing standardized 
options, as described in Sec.  156.20, we assessed the potential impact 
on premiums established by QHP issuers in the FFEs. Due to the many 
complex factors that issuers consider when setting premiums, it is 
impossible to fully predict how each QHP issuer would price a 
standardized option prior to HHS sharing the standardized option with 
stakeholders and soliciting feedback. We anticipate that an issuer will 
price a standardized option based on how similar or different the 
standardized option is to the issuer's current shelf (plan offerings). 
Because of the large variation across the country, we expect that how 
standardized options will be priced will vary by issuer and by State. 
We do not anticipate that it will significantly affect 2017 plan 
premiums. We expect that issuers will offer standardized options at a 
given metal level if the standardized options are similar to their 
existing plans and can be priced competitively.
    The premium impact on issuers' non-standard plan offerings is 
difficult to estimate.
    Among the six State Exchanges that standardized plans and required 
standardized options to be offered by QHP issuers in 2014, two 
(California and New York) that attempted to conduct premium impact 
analysis found that introduction of the requirement on issuers to offer 
standardized options was associated with a negligible or downward 
impact on premiums. However, these SBEs found it was difficult to 
isolate the effects of plan standardization on premiums given the many 
changes that occurred in the insurance market in 2014 (including the 
uptake in individual market enrollment, the movement to narrow 
networks, and active purchasing and rate negotiation in California).
    Again, we note that there is a great deal of uncertainty in how 
this policy will affect Exchanges due to several considerations:
     While we propose to standardize cost-sharing on key 
essential health benefits, there are a wide range of other benefit 
design parameters that we will not standardize. It is not clear how 
this differentiation will manifest among plans or affect consumer 
choice.
     There is also wide geographic variation in health care 
markets, including with respect to prices, plan designs, and provider 
networks. As such, we anticipate that the take-up of standardized 
options and their impacts on consumers will vary in different locations 
across the country.
11. 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. In this proposed rule, for the 2017 benefit year, we 
propose a monthly FFE user fee rate equal to 3.5 percent and, for a 
State-based Exchange that relies on the Federal platform, 3.0 percent 
of the monthly premium. For the user fee charges assessed on issuers in 
the FFE and State-based Exchanges using the Federal platform, 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).
12. Actuarial Value
    The proposed Sec.  156.135(g) changes current Sec.  156.135(g) to 
allow for additional flexibility in our approach and options for 
updating of the AV Calculator in the future. Issuers may incur minor 
administrative costs associated with altering cost-sharing parameters 
of their plan designs to ensure compliance with AV requirements when 
utilizing the AV calculator from year-to-year. These requirements are 
established in the EHB Rule. Since issuers have extensive experience in 
offering products with various levels of cost sharing and since these 
modifications are expected to be relatively minor for most issuers, HHS 
expects that the process for computing AV with the AV Calculator will 
not demand many additional resources.
13. Network Adequacy
    In Sec.  156.230(f), we propose to require QHPs in the FFEs to 
count certain out-of-network cost sharing towards the in-network annual 
limitation on cost sharing for enrollees who receive EHB from an out-
of-network provider at an in-network setting. The premium impact will 
vary based on existing State laws. It is difficult to estimate a 
nationwide effect with precision. We seek comment on the impact of this 
policy.
14. 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.\51\
---------------------------------------------------------------------------

    \51\ 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.
---------------------------------------------------------------------------

    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 previous 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 
2017 maximum annual limitation on cost sharing for self only coverage 
($7,150). 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 and 2016 Payment 
Notices.
    We also proposed the premium adjustment percentage for the 2017 
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 coverage 
the Secretary may use to determine eligibility for hardship exemptions 
under section 5000A of the Code, and the assessable payments under 
sections 4980H(a) and 4980H(b). We believe that the proposed 2017 
premium adjustment percentage of 13.25256291 percent is well within the 
parameters used in the modeling of the Affordable Care Act, and we do 
not expect that these

[[Page 75567]]

proposed provisions will alter CBO's March 2015 baseline estimates of 
the budget impact.
15. Stand-Alone Dental Plans
    In Sec.  156.150, we propose increasing the annual limitation on 
cost sharing for stand-alone dental plans being certified by the 
Exchanges. We believe that the benefit of increasing the annual limit 
on cost sharing is that issuers would be able to offer consumers SADPs 
that provide preventive care without any cost sharing, similar to what 
is generally offered by SADPs in the large group market. This proposal 
may also decrease the likelihood of premium increases.
16. Meaningful Difference
    In Sec.  156.298, we propose to remove health savings account 
eligibility and the individual coverage or enrollment group coverage 
criteria as options for meeting the meaningful difference standard. As 
we believe the health savings account eligibility criterion to overlap 
with cost-sharing criterion (that is, we believe that a plan that meets 
the meaningful difference standard for health savings account 
eligibility would also meet the standard under the cost-sharing 
criterion), we do not believe that removing this criterion will have 
any impact on issuers. Additionally, our records indicate that no self-
only coverage plans were reviewed for meaningful difference in 2015 and 
none are offered for 2016 Open Enrollment. As such, we estimate that 
the impact of this proposed change is negligible.
17. Patient Safety Standards
    The proposed next phase of patient safety standards requires QHP 
issuers participating in Exchanges to track hospital participation 
agreements with PSOs or other evidence-based patient safety 
initiatives. We believe this proposed requirement to verify that 
hospitals with greater than 50 beds use a patient safety evaluation 
tool and implement a comprehensive person-centered hospital discharge 
program would encourage continuous quality improvement among QHP 
issuers by strengthening system-wide efforts to reduce patient harm in 
a measurable way, improve health outcomes at lower costs, allow for 
flexibility and innovation in patient safety interventions and 
practices, and encourage meaningful health care quality improvements. 
We discuss the administrative costs associated with submitting this 
information in the Collection of Information section of this proposed 
rule.
18. Acceptance of Certain Third Party Payments
    On March 19, 2014, we published in the Federal Register an interim 
final rule (IFR) with comment period titled, Patient Protection and 
Affordable Care Act; Third Party Payment of Qualified Health Plan 
Premiums (79 FR 15240). In Sec.  156.1250, we propose to refine this 
rule to require individual market QHPs and SADPs to accept premium 
payments made by certain third parties. This rule proposes to clarify 
the circumstances in which individual market QHPs and SADPs must accept 
payments made by Ryan White HIV/AIDS program; Federal and State 
government programs that provide premium and cost sharing support for 
specific individuals; and Indian tribes, tribal organizations, and 
urban Indian organizations. We do not believe these actions would 
impose any significant new costs on issuers because we assume that most 
issuers already accept such payments under our interim final rule.
19. Medical Loss Ratio
    In this proposed rule, we propose to amend the definition of unpaid 
claims reserves in Sec.  158.103 and the requirements for reporting 
incurred claims in Sec.  158.140(a) to utilize a 6-month, rather than a 
3-month, run-out period beginning with the 2015 reporting year. This 
proposed amendment would require incurred claims to be calculated as of 
June 30, rather than March 31, of the year following the reporting 
year. This proposed amendment would provide for a more accurate MLR and 
risk corridors calculation by reducing reliance on estimates. Some 
issuers overestimate their claims and liabilities, while others 
underestimate them. We estimate that this proposed provision would 
increase rebate payments from issuers to consumers by a net total of 
approximately $12 million.
    In addition, we are proposing to amend the risk corridors program 
requirements at Sec.  153.530 to require issuers to true-up claims 
liabilities and reserves used to determine the allowable costs reported 
for the preceding benefit year to reflect the actual claims payments 
made through June 30 of the year following the benefit year. We 
estimate the impact of this proposal on the risk corridors program 
elsewhere in this RIA. Because risk corridors payments and charges are 
a component of the MLR and rebate calculation, the impact of this 
proposed provision on risk corridors payments and charges will affect 
MLR rebates to consumers. We estimate that this proposed provision 
would increase rebate payments from issuers to consumers by an 
estimated net total of $19 million for the 2015 MLR reporting year.

D. Regulatory Alternatives Considered

    In developing the policies contained in this proposed rule, we 
considered numerous alternatives to the presented proposals. Below we 
discuss the key regulatory alternatives that we considered.
    Regarding the 2017 required contribution percentage, which 
establishes the threshold for spending on minimum essential health care 
required for an affordability exemption from the individual 
responsibility requirement, we considered continuing to use the per 
capita gross domestic product as the measure of income growth. However, 
a new measure of income growth, per capita personal income, became 
available for the first time last year as part of the National Health 
Expenditure's projections, and includes not only participation in 
production but also transfer payments. We believe that this broader 
measure of personal income more accurately reflects individual income 
than GDP per capita.
    For proposed Sec.  155.200(f), we considered a number of 
alternatives. We considered not codifying the SBE-FP model, and winding 
down use of the Federal platform by SBEs. This would have forced SBEs 
to find a way to perform all required Exchange eligibility and 
enrollment functions themselves, including the implementation of an 
Exchange technology platform, or else convert to FFEs. We made the 
proposal we did because we believe that it is technically feasible and 
will permit a number of SBEs to access the Federal government's greater 
economies of scale. We also considered a more customized option, under 
which an SBE would be permitted to select from a menu of Federal 
services. While we are considering providing more flexibility to SBE-
FPs in the future, at this point we do not have the operational ability 
to permit that level of customization. Finally, we considered 
alternatives under which issuers and other delegated and downstream 
entities in States with SBE-FPs would not be required to meet FFE 
standards, or HHS would not participate in enforcement against issuers 
violating those FFE rules. As discussed in this proposed rule, we 
believe that applying Federal standards to issuers and their downstream 
entities for SBE-FPs helps promote consistent minimum standards 
associated with HealthCare.gov.

[[Page 75568]]

    Regarding the exemptions program, we considered maintaining the 
option under which individuals can receive certification of certain 
exemptions from the Exchange, rather than transitioning the process for 
obtaining those exemption types fully to the IRS. However, we believe 
that this approach contributes to confusion and unnecessarily creates 
additional hurdles for individuals claiming these exemptions. We also 
considered whether to cede other exemption types to the IRS, in 
addition to the exemptions for Indian status, members of health care 
sharing ministries, and incarceration. However, to minimize potential 
consumer confusion, we opted only to streamline the exemptions process 
and not to expand the scope of exemptions that the IRS may grant.
    We propose issuing hardship exemptions when a consumer shows their 
hardship is ongoing at the time of application. Hardship exemptions are 
issued for months within the current calendar year plus the next, plus 
the months before and after the hardship ends. When consumers approach 
the Exchange near the end of the calendar year, we typically can only 
grant them a hardship exemption for a few months. We believe the 
current approach may not give consumers sufficient time to seek 
coverage before their hardship exemption expires, and therefore 
proposed extending the length of the hardship exemption. Many enrollees 
eligible for a hardship exemption are currently facing significant life 
disruptions, and may need more time to find coverage.
    For employer choice in the FF-SHOPs, we considered offering an 
additional employer choice option that would permit an employer to 
select an actuarial value level of coverage, after which employees 
could choose from plans available at that level and at the level above 
it. Recognizing that small group market dynamics differ by State, we 
decided to seek comment on, but not propose this option at this time. 
We also considered requiring all SHOPs to offer these additional 
employer choice options, but instead opted to maintain State-based 
SHOPs' flexibility under the current regulations, so that States can 
decide whether implementing additional employer choice options would be 
in the best interest of small group market consumers in their State.
    We considered requiring QHP issuers to offer standardized options 
as a condition of participation in the FFEs. However, we believe that 
markets and Exchanges may be at different stages of readiness for 
standardized options, and that the cost-sharing structure that HHS 
specifies may not be well tailored for all States. Similarly, we 
believe that some issuers may have difficulty offering standardized 
options in the short run because of operational constraints.
    In developing proposed Sec.  156.230, we considered waiting for the 
NAIC's workgroup to complete its work on drafting a revised model act 
on network adequacy and not proposing changes to the network adequacy 
standard for 2017. As discussed in the preamble of the final rule for 
the HHS Notice of Benefit and Payment Parameters for 2016 (80 FR 
10750), HHS had planned to await the results of the NAIC's workgroup to 
develop a revised model act before proposing significant changes to 
network adequacy policy. However, since the NAIC workgroup has not 
completed its work, we have decided to proceed with proposing some 
concepts from the draft versions of the NAIC model act to strengthen 
network adequacy requirements, particularly for QHPs being offered in 
the FFEs. We propose these requirements to ensure certain consumer 
protections and standards are being provided to enrollees in 2017. As 
an alternative, we also considered proposing more concepts from the 
NAIC's drafts of the model act in the area of network adequacy, such as 
requiring issuers to submit for review and approval an access plan and 
establishing requirements for what the access plan must include. 
However, we are cognizant of the burden on issuers to implement many 
policy changes in one year, especially when these changes affect 
issuers' QHP certification applications. Therefore, we will continue to 
monitor the NAIC's workgroup efforts to develop a model act on network 
adequacy, and will consider whether additional standards will be needed 
in future years.
    In Sec.  156.230(f), regarding QHP enrollees in the FFE who receive 
an EHB from an out-of-network provider in an in-network setting, we 
considered an alternative under which all cost sharing, regardless of 
notification, would count towards the in-network annual limitation on 
cost sharing, or to accrue at in-network rates. However, we recognize 
that the issuer often has a limited ability to control the use of out-
of-network providers, and are wary of the impact of such a policy on 
premiums.
    In Sec.  156.1110, we considered maintaining the current approach 
of aligning with Medicare hospital Conditions of Participation 
standards and not establishing further regulations at this time for QHP 
issuers to collect information, such as hospital participation 
agreements with PSOs, to comply with new patient safety standards for 
plan years beginning on or after January 1, 2017. However, we decided 
to propose the policy in this proposed rule because we believe that 
strengthening patient safety standards and aligning with current, 
effective patient safety interventions will achieve greater impact for 
consumers, in terms of health care quality improvement and harm 
reduction, resulting in higher quality QHPs being offered in the 
Exchanges. Additionally, we considered proposing an approach that did 
not include establishing reasonable exceptions to the requirements for 
a QHP issuer that contracts with a hospital with greater than 50 beds 
to utilize a patient safety evaluation system and implement a mechanism 
for comprehensive person-centered hospital discharges, as described in 
section 1311(h)(1) of the Affordable Care Act. However, we determined 
that it is important to support national patient safety efforts, 
promote evidence-based patient safety interventions and allow for 
flexibility, innovation, and minimal burden for issuers and hospitals.

E. Regulatory Flexibility Act

    The Regulatory Flexibility Act, (5 U.S.C. 601, et seq.), 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

[[Page 75569]]

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.
    We believe that health insurance issuers and group health plans 
would be classified under the North American Industry Classification 
System code 524114 (Direct Health and Medical Insurance Carriers). 
According to SBA size standards, entities with average annual receipts 
of $38.5 million or less would be considered small entities for these 
North American Industry Classification System 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 50 employees, 
unless a State opts to provide that employers with from 1 to 100 
employees are ``small employers.'' 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 a 
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.
    Some of the entities that voluntarily act as Navigators and non-
Navigator assistance personnel subject to Sec.  155.215, or as 
designated certified application counselor organizations, might be 
small entities and could incur costs to comply with the provisions of 
this proposed rule. It should be noted that HHS, in its role as the 
operator of the FFEs, does not impose any fees on these entities for 
participating in their respective programs, nor are there fees for 
taking the Federally required training or completing continuing 
education or recertification in FFEs. The cost burden related to our 
proposals about reaching vulnerable and underserved populations and 
providing post-enrollment and other assistance would apply to 
Navigators in all Exchanges. The costs associated with these proposals 
would generally be considered an allowable cost that would be covered 
by the Navigator grants for the FFEs, and these grant funds may be 
drawn down as the grantee incurs such costs. Depending upon applicable 
State law and how States with State Exchanges implement their Navigator 
grant programs, the same might be true in those States. Though it is 
very likely that many costs associated with these proposals would be 
covered by affected entities' and individuals' funding sources, HHS 
cannot guarantee that all such costs would be covered because of the 
possibility of budget limitations applicable to the FFEs in any given 
period, and because there may be variations in how State Exchanges 
implement their Navigator grant programs.
    The costs related to the proposed reporting requirement for 
designated certified application counselor organizations would be borne 
by those organizations, which do not receive funding from Exchanges for 
these services. The costs incurred by designated certified application 
counselor organizations for the reporting of performance metrics are 
expected to be low.
    Based on data from MLR annual report submissions for the 2014 MLR 
reporting year, approximately 118 out of 525 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 may be affected, since almost 80 
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 seven of these 118 potentially small entities, all of 
them part of larger holding groups, are estimated to experience an 
increase or decrease in the rebate amount under the proposed amendments 
to the MLR provisions of this proposed rule in part 158, including one 
entity that did not owe a rebate for the 2014 reporting year. Two 
additional entities may experience a small (less than 2.5 percent) 
change in their risk corridors payments and charges under the MLR 
provisions of this proposed rule. Based on data from the 2014 MLR and 
risk corridors annual report submissions, 20 of these 118 potentially 
small entities had risk corridors payments or charges for the 2014 
benefit year. Only one of these entities is estimated to experience a 
decrease in its risk corridors payment under the proposed provisions in 
Sec.  153.530(b)(2)(iv), with no impact on its rebate liability. 
Therefore, we do not expect the proposed provisions of this rule to 
affect a substantial number of small entities.

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 2015, that threshold is approximately $144 million. 
Although we have not been able to quantify all costs, 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 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

[[Page 75570]]

determining standards relating to health insurance that is offered in 
the individual and small group markets. For example, our proposal 
permitting a State to elect to utilize the Federal platform for 
enrollment and eligibility services may make certain SBEs more 
economically feasible, providing more options for States seeking to 
exercise the right to establish and operate n Exchange. 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.
    While 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.
    States will continue to license, monitor, and regulate agents and 
brokers, both inside and outside of Exchanges. All State laws related 
to agents and brokers, including State laws related to appointments, 
contractual relationships with issuers, licensing, marketing, conduct, 
and fraud will continue to apply.

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 for review.

List of Subjects

45 CFR Parts 144, 146, and 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Part 153

    Administrative practice and procedure, Health care, Health 
insurance, Health records, Organization and functions (Government 
agencies), Reporting and recordkeeping requirements.

45 CFR Part 154

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

45 CFR Part 155

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

45 CFR Part 156

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

45 CFR Part 158

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

    For the reasons set forth in the preamble, the Department of Health 
and Human Services proposes to amend 45 CFR parts 144, 146, 147, 150, 
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 paragraph (1) of the 
definition of ``Excepted benefits'' and revising the definitions of 
``Large employer'' and ``Small employer'' to read as follows:


Sec.  144.103  Definitions.

* * * * *
    Excepted benefits * * *
    (1) Group market provisions in 45 CFR part 146, subpart D, is 
defined in 45 CFR 146.145(b); and
* * * * *
    Large employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 51 employees on business days during the preceding 
calendar year and who employs at least 1 employee on the first day of 
the plan year. A State may elect to define large employer by 
substituting ``101 employees'' for ``51 employees.'' In the case of an 
employer that was not in existence throughout the preceding calendar 
year, the determination of whether the employer is a large employer is 
based on the average number of employees that it is reasonably expected 
the employer will employ on business days in the current calendar year.
* * * * *
    Small employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 1 but not more than 50 employees on business days 
during the preceding calendar year and who employs at least 1 employee 
on the first day of the plan year. A State may elect to define small 
employer by substituting ``100 employees'' for ``50 employees.'' In the 
case of an employer that was not in existence throughout the preceding 
calendar year, the determination of whether the employer is a small 
employer is based on the average number of employees that it is 
reasonably expected the employer will employ on business days in the 
current calendar year.
* * * * *

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

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

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

0
4. Section 146.150 is amended by--
0
a. In paragraph (a) introductory text, removing the reference 
``paragraphs (c)

[[Page 75571]]

through (f)'' and adding in its place the reference ``paragraphs (c) 
through (g)''.
0
b. Adding paragraph (g).
    The addition reads as follows:


Sec.  146.150  Guaranteed availability of coverage for employers in the 
small group market.

* * * * *
    (g) Exception for discontinuing a particular product or all 
coverage. (1) If an issuer decides to discontinue offering a particular 
product or all coverage in the small group market in accordance with 
Sec.  146.152, the issuer may between the time of providing the 
relevant notice and discontinuing the coverage --
    (i) Deny health insurance coverage in that product when the 
exception to guaranteed renewability of coverage related to 
discontinuing the particular product under Sec.  146.152(c) applies.
    (ii) Deny health insurance coverage in the small group market when 
the exception to guaranteed renewability of coverage related to 
discontinuing all coverage under Sec.  146.152(d) applies.
    (2) An issuer that denies coverage under this paragraph (g) must 
apply paragraph (g)(1) of this section uniformly to all small employers 
in the State consistent with applicable State law and without regard to 
the claims experience or any health-status related factor relating to 
those employers and their employees (or their respective dependents).
    (3) Nothing in this paragraph (g) relieves an issuer of its 
obligations with respect to existing policyholders, such as enrolling 
dependents under an applicable special enrollment period.
* * * * *

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 147.102 is amended by revising paragraph (a)(1)(ii) to read 
as follows:


Sec.  147.102  Fair health insurance premiums.

    (a) * * *
    (1) * * *
    (ii) Rating area, as established in accordance with paragraph (b) 
of this section. For purposes of this paragraph (a), rating area is 
determined--
    (A) In the individual market, using the primary policyholder's 
address.
    (B) In the small group market, using the group policyholder's 
principal business address. For purposes of this paragraph, principal 
business address means the principal business address registered with 
the State or, if a principal business address is not registered with 
the State, or is registered solely for purposes of service of process 
and is not a substantial worksite for the employer's business, the 
business address within the State where the greatest number of 
employees of such employer works. If, for a network plan, the group 
policyholder's principal business address is not within the service 
area of such plan, and the policyholder has employees who live, reside, 
or work within the service area, the principal business address for 
purposes of the network plan is deemed to be the business address 
within the plan's service area where the greatest number of employees 
work as of the beginning of the plan year. If there is no such business 
address, the principal business address for purposes of the network 
plan is deemed to be an address within the rating area selected by the 
employer that reasonably reflects where the greatest number of 
employees within the plan's service area live or reside as of the 
beginning of the plan year.
* * * * *
0
7. Section 147.104 is amended by--
0
a. In paragraph (a), removing the reference ``paragraphs (b) through 
(d)'' and adding in its place the reference ``paragraphs (b) thorugh 
(e)''.
0
b. Redesignating paragraphs (e) through (i) as paragraphs (f) through 
(j), respectively.
0
c. Adding paragraph (e).
    The addition reads as follows:


Sec.  147.104  Guaranteed availability of coverage.

* * * * *
    (e) Exception for discontinuing a particular product or all 
coverage. (1) If an issuer decides to discontinue offering a particular 
product or all coverage in the large group, small group, or individual 
market in accordance with Sec.  147.106, the issuer may between the 
time of providing the relevant notice and discontinuing the coverage--
    (i) Deny health insurance coverage in that product when the 
exception to guaranteed renewability of coverage related to 
discontinuing the particular product under Sec.  147.106(c) applies.
    (ii) Deny health insurance coverage in that market when the 
exception to guaranteed renewability of coverage related to 
discontinuing all coverage under Sec.  147.106(d) applies.
    (2) An issuer that denies coverage under this paragraph (e) must 
apply paragraph (e)(1) of this section uniformly to all employers or 
individuals in the large group, small group, or individual market, as 
applicable, in the State consistent with applicable State law and 
without regard to the claims experience or any health-status related 
factor relating to those individuals or employers and their employees 
(or their respective dependents).
    (3) Nothing in this paragraph (e) relieves an issuer from any of 
its obligations with respect to existing policyholders, such as 
enrolling dependents under an applicable special enrollment period.
* * * * *
0
8. Section 147.145 is amended by revising paragraph (b)(3) and adding 
paragraph (b)(4) to read as follows:


Sec.  147.145  Student health insurance coverage.

* * * * *
    (b) * * *
    (3) Single risk pool. For plan years beginning on or after January 
1, 2017, student health insurance coverage is subject to the index 
rating provisions of Sec.  156.80(d) of this subchapter. For purposes 
of the preceding sentence, a health insurance issuer that offers 
student health insurance coverage may establish one or more separate 
risk pools for each institution of higher education, if the distinction 
between or among groups of students (or dependents of students) who 
form the risk pool is based on a bona fide school-related 
classification and not based on a health factor as described in Sec.  
146.121 of this subchapter.
    (4) Levels of coverage. The requirement to provide a specific level 
of coverage described in section 1302(d) of the Affordable Care Act 
does not apply to student health insurance coverage for plan years 
beginning on or after January 1, 2017. However, the benefits provided 
by such coverage must provide at least 60 percent actuarial value, as 
certified by a member of the American Academy of Actuaries using 
generally accepted actuarial principles.
* * * * *

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

0
9. 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
10. Section 153.405 is amended by revising paragraph (i) to read as 
follows:

[[Page 75572]]

Sec.  153.405  Calculation of reinsurance contributions.

* * * * *
    (i) Audits. HHS or its designee may audit a contributing entity to 
assess its compliance with the requirements of this subpart. HHS or its 
designee may audit a third party administrator, administrative 
services-only contractor, or other third party who assists a 
contributing entity with its obligations under this subpart to assess 
compliance with the requirements of this subpart. A contributing entity 
that chooses to use a third party administrator, administrative 
services-only contractor, or other third party to assist with its 
obligations under this subpart must ensure that the third party 
administrator, administrative services-only contractor, or other third 
party cooperate with any audit under this section.
0
11. Section 153.510 is amended by adding paragraph (g) to read as 
follows:


Sec.  153.510  Risk corridors establishment and payment methodology.

* * * * *
    (g) Adjustment to risk corridors payments and charges. If an issuer 
reported a certified estimate of 2014 cost-sharing reductions on its 
2014 MLR and Risk Corridors Annual Reporting Form that is lower than 
the actual value of cost-sharing reductions calculated under Sec.  
156.430(c) of this subchapter for the 2014 benefit year, HHS will make 
an adjustment to the amount of the issuer's 2015 benefit year risk 
corridors payment or charge measured by the full difference between the 
certified estimate of 2014 cost-sharing reductions reported and the 
actual value of cost-sharing reductions provided as calculated under 
Sec.  156.430(c) for the 2014 benefit year.
0
12. Section 153.530 is amended by revising paragraphs (b)(2)(ii) and 
(iii) and adding paragraph (b)(2)(iv) to read as follows:


Sec.  153.530  Risk corridors data requirements.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Any reinsurance payments received by the issuer for the non-
grandfathered health plans under the transitional reinsurance program 
established under subpart C of this part;
    (iii) A cost-sharing reduction amount equal to the amount of cost-
sharing reductions for the benefit year as calculated under Sec.  
156.430(c) of this subchapter, to the extent not reimbursed to the 
provider furnishing the item or service.
    (iv) For the 2015 and later benefit years, any difference between--
    (A) The sum of unpaid claims reserves and claims incurred but not 
reported, as set forth in Sec. Sec.  158.103 and 158.140(a)(2) and (3) 
of this subchapter, that were reported on the MLR and Risk Corridors 
Annual Reporting Form for the year preceding the benefit year; and
    (B) The actual claims incurred during the year preceding the 
benefit year and paid between the valuation date of the unpaid claims 
reserves and liabilities described above and June 30 of the year 
following the benefit year.
* * * * *
0
13. Section 153.710 is amended by--
0
a. Removing paragraph (d).
0
b. Redesignating paragraphs (e) and (f) as paragraphs (d) and (e), 
respectively.
0
c. Revising newly redesignated paragraph (e).
0
d. Adding paragraph (f).
0
e. Revising paragraphs (g) introductory text, (g)(1) introductory text, 
(g)(1)(iii) and (iv), and (g)(2).
0
f. Adding paragraph (g)(3).
    The revisions and additions read as follows:


Sec.  153.710  Data requirements.

* * * * *
    (e) Unresolved discrepancies. If a discrepancy first identified in 
a final dedicated distributed data environment report in accordance 
with paragraph (d)(2) of this section remains unresolved after the 
issuance of the notification of risk adjustment payments and charges or 
reinsurance payments under Sec.  153.310(e) or Sec.  153.240(b)(1)(ii), 
respectively, an issuer of a risk adjustment covered plan or 
reinsurance-eligible plan may make a request for reconsideration 
regarding such discrepancy under the process set forth in Sec.  
156.1220(a) of this subchapter.
    (f) Data sufficiency. If an issuer of a risk adjustment covered 
plan fails to provide sufficient required data, such that HHS cannot 
apply the applicable methodology to calculate the risk adjustment 
payment transfer amount for the risk adjustment covered plan in a 
timely or appropriate fashion, then HHS will assess a default risk 
adjustment charge under Sec.  153.740(b). A default charge will be 
assessed under this paragraph no later than the date of the 
notification provided by HHS under Sec.  153.310(e). If an issuer of a 
reinsurance eligible plan fails to provide data sufficient for HHS to 
calculate reinsurance payments, the issuer will forfeit reinsurance 
payments for claims it fails to submit.
    (1) Data quantity. An issuer of a risk adjustment covered plan or a 
reinsurance-eligible plan must provide, in a format and on a timeline 
specified by HHS, data on its total enrollment and claims counts by 
market, which HHS may use in evaluating whether the issuer provided 
access in the dedicated distributed data environment to a sufficient 
quantity of data to meet reinsurance and risk adjustment data 
requirements.
    (2) Data quality. If, following the deadline for submission of data 
specified in Sec.  153.730, HHS identifies an anomaly that would cause 
the data that a risk adjustment covered plan or a reinsurance-eligible 
plan made available through a dedicated data environment to fail HHS's 
data quality thresholds, the issuer may, within 10 calendar days of 
receiving notification of the anomaly, submit an explanation of the 
anomaly for HHS to consider in determining whether the issuer met the 
reinsurance and risk adjustment data requirements.
    (g) Risk corridors and MLR reporting. Except as provided in 
paragraph (g)(3) of this section:
    (1) Notwithstanding any discrepancy report made under paragraph 
(d)(2) of this section, or any request for reconsideration under Sec.  
156.1220(a) of this subchapter with respect to any risk adjustment 
payment or charge, including an assessment of risk adjustment user 
fees; reinsurance payment; cost-sharing reduction payment or charge; or 
risk corridors payment or charge, unless the dispute has been resolved, 
an issuer must report, for purposes of the risk corridors and MLR 
programs:
* * * * *
    (iii) A cost-sharing reduction amount equal to the actual amount of 
cost-sharing reductions for the benefit year as calculated under Sec.  
156.430(c) of this subchapter, to the extent not reimbursed to the 
provider furnishing the item or service; and
    (iv) For medical loss ratio reporting only, the risk corridors 
payment to be made or charge assessed by HHS under Sec.  153.510.
    (2) An issuer must report any adjustment made or approved by HHS 
for any risk adjustment payment or charge, including an assessment of 
risk adjustment user fees; any reinsurance payment; any cost-sharing 
reduction payment or charge; or any risk corridors payment or charge; 
where such adjustment has not be accounted for in a prior MLR and Risk 
Corridor Annual Reporting Form, in the MLR and Risk Corridors Annual 
Reporting Form for the following reporting year.
    (3) In cases where HHS reasonably determines that the reporting 
instructions in paragraph (g)(1) or (2) of this section would lead to 
unfair or

[[Page 75573]]

misleading financial reporting, issuers must mitigate or correct their 
data submissions in a form and manner to be specified by HHS.

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

0
14. 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
15. Section 154.200 is amended by revising paragraph (c)(2) to read as 
follows:


Sec.  154.200  Rate increases subject to review.

* * * * *
    (c) * * *
    (2) For rates filed for single risk pool coverage beginning on or 
after January 1, 2017, the average increase, including premium rating 
factors described in Sec.  147.102 of this subchapter, for all 
enrollees weighted by premium volume for any plan within the product 
meets or exceeds the applicable threshold.
* * * * *
0
16. Section 154.215 is amended by revising paragraphs (a) and (b) 
introductory text and removing and reserving paragraph (c) to read as 
follows:


Sec.  154.215  Submission of rate filing justification.

    (a) A health insurance issuer must submit to CMS and to the 
applicable State (if the State accepts such submissions) the 
information specified below on a form and in a manner prescribed by the 
Secretary.
    (1) For all single risk pool coverage products, including new and 
discontinuing products, the Unified Rate Review Template, as described 
in paragraph (d) of this section;
    (2) For each single risk pool coverage product that includes a plan 
that is subject to a rate increase, regardless of the size of the 
increase, the Unified Rate Review Template and Actuarial Memorandum, as 
described in paragraph (f) of this section;
    (3) For each single risk pool coverage product that includes a plan 
with a rate increase that is subject to review under Sec.  154.210, all 
parts of the Rate Filing Justification, as described in paragraph (b) 
of this section
    (b) A Rate Filing Justification includes one or more of the 
following:
* * * * *
(c) [Reserved]
* * * * *
0
17. Section 154.220 is amended by revising the introductory text and 
paragraphs (b) introductory text and (b)(1) to read as follows:


Sec.  154.220  Timing of providing the rate filing justification.

    A health insurance issuer must submit applicable sections of the 
Rate Filing Justification for all single risk pool coverage in the 
individual or small group market, as follows:
* * * * *
    (b) For coverage effective on or after January 1, 2017, by the 
earlier of the following:
    (1) The date by which the State requires submission of a rate 
filing; or
* * * * *
0
18. Section 154.230 is amended by revising paragraph (c)(2)(i) to read 
as follows:


Sec.  154.230  Submission and posting of Final Justifications for 
unreasonable rate increases.

* * * * *
    (c) * * *
    (2) * * *
    (i) The information made available to the public by CMS and 
described in Sec.  154.215(h).
* * * * *

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

0
19. 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
20. Section 155.20 is amended by--
0
a. In the definition of ``Applicant'', revising paragraph (2).
0
b. Adding the definition of ``Federal platform agreement'' in 
alphabetical order.
0
c. Revising the definitions of ``Large employer'' and ``Small 
employer''.
    The addition and revisions read as follows:


Sec.  155.20  Definitions.

* * * * *
    Applicant * * *
    (2) For SHOP:
    (i) An employer seeking eligibility to purchase coverage through 
the SHOP; or
    (ii) An employer, employee, or a 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.
* * * * *
    Federal platform agreement means an agreement between a State 
Exchange and HHS under which a State Exchange elects to rely on the 
Federal platform to carry out select Exchange functions.
* * * * *
    Large employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 51 employees on business days during the preceding 
calendar year and who employs at least 1 employee on the first day of 
the plan year. In the case of an employer that was not in existence 
throughout the preceding calendar year, the determination of whether 
the employer is a large employer is based on the average number of 
employees that it is reasonably expected the employer will employ on 
business days in the current calendar year. A State may elect to define 
large employer by substituting ``101 employees'' for ``51 employees.'' 
The number of employees must be determined using the method set forth 
in section 4980H(c)(2) of the Code.
* * * * *
    Small employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least one but not more than 50 employees on business days 
during the preceding calendar year and who employs at least one 
employee on the first day of the plan year. In the case of an employer 
that was not in existence throughout the preceding calendar year, the 
determination of whether the employer is a small employer is based on 
the average number of employees that it is reasonably expected the 
employer will employ on business days in the current calendar year. A 
State may elect to define small employer by substituting ``100 
employees'' for ``50 employees.'' The number of employees must be 
determined using the method set forth in section 4980H(c)(2) of the 
Code.
* * * * *
0
21. Section 155.106 is amended by--
0
a. Revising paragraphs (a) introductory text, (a)(2) and (3), and (b) 
introductory text.
0
b. Adding paragraphs (a)(4), (a)(5), and (c).
    The revisions and additions read as follows:

[[Page 75574]]

Sec.  155.106  Election to operate an Exchange after 2014.

    (a) Election to operate an Exchange. Except as provided in 
paragraph (c) of this section, a State electing to seek approval of its 
Exchange must:
* * * * *
    (2) Submit an Exchange Blueprint application for HHS approval at 
least 15 months prior to the date on which the Exchange proposes to 
begin open enrollment as a State Exchange;
    (3) Have in effect an approved, or conditionally approved, Exchange 
Blueprint and operational readiness assessment at least 14 months prior 
to the date on which the Exchange proposes to begin open enrollment as 
a State Exchange;
    (4) Develop a plan jointly with HHS to facilitate the transition to 
a State Exchange; and
    (5) If the open enrollment period for the year the State intends to 
begin operating an SBE has not been established, this deadline must be 
calculated based on the date open enrollment began or will begin in the 
year in which the State is submitting the Blueprint application.
    (b) Transition process for State Exchanges that cease operations. 
If a State intends to cease operation of its Exchange, HHS will operate 
the Exchange on behalf of the State. Therefore, a State that intends to 
cease operations of its Exchange must:
* * * * *
    (c) Process for State Exchanges that seek to utilize the Federal 
platform for select functions. A State seeking approval as a State 
Exchange utilizing the Federal platform to support select functions 
through a Federal platform agreement under Sec.  155.200(f) must:
    (1) If the State Exchange does not have a conditionally approved 
Exchange Blueprint application, submit one for HHS approval at least 3 
months prior to the date on which the Exchange proposes to begin open 
enrollment as an SBE-FP;
    (2) If the State Exchange has a conditionally approved Exchange 
Blueprint application, submit any significant changes to that 
application for HHS approval, in accordance with Sec.  155.105(e), at 
least 3 months prior to the date on which the Exchange proposes to 
begin open enrollment as an SBE-FP;
    (3) Have in effect an approved, or conditionally approved, Exchange 
Blueprint and operational readiness assessment at least 2 months prior 
to the date on which the Exchange proposes to begin open enrollment as 
an SBE-FP, in accordance with HHS rules, as a State Exchange utilizing 
the Federal platform;
    (4) Upon approval, or conditional approval, of the Exchange 
Blueprint, execute a Federal platform agreement prior to the start of 
the open enrollment period for which the State Exchange desires to 
begin utilizing the Federal platform; and
    (5) Coordinate with HHS on a transition plan to be developed 
jointly between HHS and the State.
0
22. Section 155.170 is amended by revising paragraphs (a)(2), (a)(3), 
and (c)(2)(iii) to read as follows:


Sec.  155.170  Additional required benefits.

    (a) * * *
    (2) A benefit required by State action taking place on or before 
December 31, 2011 is considered an EHB. A benefit required by State 
action taking place on or after January 1, 2012, other than for 
purposes of compliance with Federal requirements, is considered in 
addition to the essential health benefits.
    (3) The State will identify which State-required benefits are in 
addition to the EHB.
* * * * *
    (c) * * *
    (2) * * *
    (iii) Reported to the State.
0
23. Section 155.200 is amended by revising paragraph (a) and adding 
paragraph (f) to read as follows:


Sec.  155.200  Functions of an Exchange.

    (a) General requirements. An Exchange must perform the functions 
described in this subpart and in subparts D, E, F, G, H, K, M, and O of 
this part unless the State is approved to operate only a SHOP by HHS 
under Sec.  155.100(a)(2), in which case the Exchange operated by the 
State must perform the functions described in subpart H of this part 
and all applicable provisions of other subparts referenced in that 
subpart. In a State that is approved to operate only a SHOP, the 
individual market Exchange operated by HHS in that State will perform 
the functions described in this subpart and in subparts D, E, F, G, K, 
M, and O of this part.
* * * * *
    (f) Requirements for State Exchanges on the Federal platform. (1) A 
State that receives approval or conditional approval to operate a State 
Exchange on the Federal platform under Sec.  155.106(c) may meet its 
obligations under paragraph (a) of this section by relying on Federal 
services that the Federal government agrees to provide under a Federal 
platform agreement.
    (2) A State Exchange on the Federal platform must establish and 
oversee requirements for its issuers that are no less strict than the 
following requirements that are applied to Federally-facilitated 
Exchange issuers:
    (i) Data submission requirements under Sec.  156.122(d)(2) of this 
subchapter;
    (ii) Network adequacy standards under Sec.  156.230 of this 
subchapter;
    (iii) Essential community providers standards under Sec.  156.235 
of this subchapter;
    (iv) Meaningful difference standards under Sec.  156.298 of this 
subchapter;
    (v) Changes of ownership of issuers requirements under Sec.  
156.330 of this subchapter;
    (vi) QHP issuer compliance and compliance of delegated or 
downstream entities requirements under Sec.  156.340(a)(4) of this 
subchapter; and
    (vii) Casework requirements under Sec.  156.1010 of this 
subchapter.
    (3) If a State is not substantially enforcing any requirement 
listed under Sec.  155.200(f)(2) of this subchapter with respect to a 
QHP issuer or plan in a State-based Exchange on the Federal platform, 
HHS may enforce that requirement directly against the issuer or plan by 
means of plan suppression under Sec.  156.815 of this subchapter.
0
24. Section 155.205 is amended by--
0
a. Revising paragraphs (a) and (d)(1).
0
b. Adding paragraph (b)(7).
    The addition and revisions read as follows:


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

    (a) Call center. The Exchange must provide for operation of a toll-
free call center that addresses the needs of consumers requesting 
assistance and meets the requirements outlined in paragraphs (c)(1), 
(c)(2)(i), and (c)(3) of this section, unless it enters into a Federal 
platform agreement through which it relies on HHS to carry out call 
center functions, in which case the Exchange must provide at a minimum 
a toll-free telephone hotline to respond to requests for assistance.
    (b) * * *
    (7) A State-based Exchange on the Federal platform must at a 
minimum maintain an informational Internet Web site.
* * * * *
    (d) * * *
    (1) The Exchange must have a consumer assistance function that 
meets the standards in paragraph (c) of this section, including the 
Navigator program described in Sec.  155.210. Any individual providing 
such consumer assistance must be trained regarding QHP options, 
insurance affordability programs, eligibility, and benefits rules and 
regulations governing all insurance affordability programs operated in 
the State, as implemented in the State, prior

[[Page 75575]]

to providing such assistance or the outreach and education activities 
specified in paragraph (e) of this section.
* * * * *
0
25. Section 155.210 is amended by--
0
a. Revising paragraphs (b)(2)(iii) and (iv).
0
b. Adding paragraphs (b)(2)(v), (vi), (vii), and (viii).
0
c. Revising paragraph (d)(6).
0
d. In paragraph (e)(7), removing the period at the end of the paragraph 
and adding a semicolon in its place.
0
e. Adding paragraphs (e)(8) and (9).
    The revisions and additions read as follows:


Sec.  155.210  Navigator program standards.

* * * * *
    (b) * * *
    (2) * * *
    (iii) The range of QHP options and insurance affordability 
programs;
    (iv) The privacy and security standards applicable under Sec.  
155.260;
    (v) The process of filing Exchange eligibility appeals;
    (vi) General concepts regarding exemptions from the requirement to 
maintain minimum essential coverage and from the individual shared 
responsibility payment, including the application process for 
exemptions granted through the Exchange, and IRS resources on 
exemptions;
    (vii) The Exchange-related components of the premium tax credit 
reconciliation process and IRS resources on this process; and
    (viii) Basic concepts related to health coverage and how to use it.
* * * * *
    (d) * * *
    (6) Provide to an applicant or potential enrollee gifts of any 
value as an inducement for enrollment. The value of gifts provided to 
applicants and potential enrollees for purposes other than as an 
inducement for enrollment must not exceed nominal value, either 
individually or in the aggregate, when provided to that individual 
during a single encounter. For purposes of this paragraph (d)(6), the 
term gifts includes gift items, gift cards, cash cards, cash, and 
promotional items that market or promote the products or services of a 
third party, but does not include the reimbursement of legitimate 
expenses incurred by a consumer in an effort to receive Exchange 
application assistance, such as travel or postage expenses.
* * * * *
    (e) * * *
    (8) Provide targeted assistance to serve underserved or vulnerable 
populations, as identified by the Exchange, within the Exchange service 
area.
    (i) In a Federally-facilitated Exchange, this paragraph (e)(8) will 
apply beginning with the Navigator grant application process for 
Navigator grants awarded in 2018. The Federally-facilitated Exchange 
will identify populations as vulnerable or underserved that are 
disproportionately without access to coverage or care, or that are at a 
greater risk for poor health outcomes, in the funding opportunity 
announcement for its Navigator grants, and applicants for those grants 
will have an opportunity to propose additional vulnerable or 
underserved populations in their applications for the Federally-
facilitated Exchange's approval.
(ii) [Reserved]
    (9) Provide information and assistance with--
    (i) The process of filing Exchange eligibility appeals;
    (ii) Understanding and applying for exemptions from the individual 
shared responsibility requirement that are granted through the 
Exchange, understanding the availability of exemptions from the 
requirement to maintain minimum essential coverage and from the 
individual shared responsibility payment that are claimed through the 
tax filing process and how to apply for them, and understanding the 
availability of IRS resources on this topic;
    (iii) Understanding the Exchange-related components of the premium 
tax credit reconciliation process, and the availability of IRS 
resources on this process;
    (iv) Understanding basic concepts related to health coverage and 
how to use it; and
    (v) Referrals to licensed tax advisers, tax preparers, or other 
resources for assistance with tax preparation and tax advice related to 
consumer questions about the Exchange application and enrollment 
process, exemptions from the requirement to maintain minimum essential 
coverage and from the individual shared responsibility requirement, and 
premium tax credit reconciliations.
* * * * *
0
26. Section 155.215 is amended by revising paragraph (b)(1)(i) to read 
as follows:


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

* * * * *
    (b) * * *
    (1) * * *
    (i) Obtain certification by the Exchange prior to carrying out any 
consumer assistance functions or outreach and education activities 
under Sec.  155.205(d) and (e) or Sec.  155.210;
* * * * *
0
27. Section 155.220 is amended by--
0
a. Revising paragraph (c)(1), (f)(4), (g)(2)(ii), (g)(3), and (g)(4);
0
b. Adding paragraphs (g)(5), (j), (k), and (l).
    The revisions and additions read as follows:


Sec.  155.220  Ability of States to permit agents and brokers to assist 
qualified individuals, qualified employers, or qualified employees 
enrolling in QHPs.

* * * * *
    (c) * * *
    (1) The agent or broker ensures the applicant's completion of an 
eligibility verification and enrollment application through the 
Exchange Internet Web site or an Exchange approved web service using 
the FFE single streamline application;
* * * * *
    (f) * * *
    (4) When termination of the agreement between the agent or broker 
and the Exchange under paragraph (d) of this section becomes effective 
under paragraph (f) of this section, the agent or broker will no longer 
be registered with the Federally-facilitated Exchanges, or be permitted 
to assist with or facilitate enrollment of qualified individuals, 
qualified employers or qualified employees in coverage in a manner that 
constitutes enrollment through a Federally-facilitated Exchange, or be 
permitted to assist individuals in applying for advance payments of the 
premium tax credit and cost-sharing reductions for QHPs. The agent's or 
broker's agreement with the Exchange under Sec.  155.260(b) will also 
be terminated through the termination for cause process set forth in 
that agreement. The agent or broker must continue to protect any 
personally identifiable information accessed during the term of either 
of these agreements with the Federally-facilitated Exchange.
    (g) * * *
    (2) * * *
    (ii) Any term or condition of the agreement with the Federally-
facilitated

[[Page 75576]]

Exchange required under paragraph (d) of this section, or any term or 
condition of the agreement with the Federally-facilitated Exchange 
required under Sec.  155.260(b);
* * * * *
    (3) HHS will notify the agent or broker of the specific finding of 
noncompliance or pattern of noncompliance made under paragraph (g)(1) 
of this section, and after 30 days from the date of the notice, may 
terminate the agreement for cause if the matter is not resolved to the 
satisfaction of HHS.
    (4) After the period in paragraph (g)(3) of this section has 
elapsed and the agreement under paragraph (d) of this section is 
terminated, the agent or broker will no longer be registered with the 
Federally-facilitated Exchanges, or be permitted to assist with or 
facilitate enrollment of a qualified individual, qualified employer, or 
qualified employee in coverage in a manner that constitutes enrollment 
through a Federally-facilitated Exchange, or be permitted to assist 
individuals in applying for advance payments of the premium tax credit 
and cost-sharing reductions for QHPs. The agent's or broker's agreement 
with the Exchange under Sec.  155.260(b) will also be terminated 
through the process set forth in that agreement. The agent or broker 
must continue to protect any personally identifiable information 
accessed during the term of either of these agreements with a 
Federally-facilitated Exchange.
    (5) In cases involving potential fraud or abusive conduct--
    (i)(A) If HHS reasonably suspects that an agent or broker may have 
engaged in fraud or abusive conduct using personally identifiable 
information of an Exchange enrollee or applicant, or in connection with 
an Exchange enrollment or application, HHS may temporarily suspend the 
agent's or broker's agreements required under paragraph (d) of this 
section and under Sec.  155.260(b) for up to 90 calendar days. The 
suspension will be effective starting on the date of the notice that 
HHS sends to the agent or broker advising of the suspension under this 
paragraph (g)(5)(i).
    (B) The agent or broker may submit evidence in a form and manner to 
be specified by HHS, to rebut the allegation during this 90-day period. 
If the agent or broker fails to submit such evidence during the 
suspension period, HHS may terminate the agent's or broker's agreements 
required under paragraph (d) of this section and under Sec.  155.260(b) 
for cause under paragraph (g)(5)(ii) of this section.
    (ii) If HHS reasonably confirms the credibility of an allegation 
that an agent or broker engaged in fraud or abusive conduct (or is 
notified by a State or law enforcement authority of the State or law 
enforcement authority's finding or determination of fraud or behavior 
that would constitute abusive conduct) using personally identifiable 
information of Exchange enrollees or applicants, or in connection with 
an Exchange enrollment or application, HHS will terminate the agent's 
or broker's agreements required under paragraph (d) of this section and 
under Sec.  155.260(b) for cause. The termination will be effective 
starting on the date of the notice that HHS sends to the agent or 
broker advising of the termination of the agreements under this 
paragraph (g)(5)(ii).
    (iii) During the suspension period under paragraph (g)(5)(i) of 
this section and following termination of the agreements under 
paragraph (g)(5)(ii) of this section, the agent or broker will not be 
registered with the Federally-facilitated Exchanges, or be permitted to 
assist with or facilitate enrollment of qualified individuals, 
qualified employers, or qualified employees in coverage in a manner 
that constitutes enrollment through a Federally-facilitated Exchange, 
or be permitted to assist individuals in applying for advance payments 
of the premium tax credit and cost-sharing reductions for QHPs. In the 
case of termination under paragraph (g)(5)(ii) of this section, the 
agent's or broker's agreement with the Exchange under Sec.  155.260(b) 
will also be terminated as of the date of the notice. The agent or 
broker must continue to protect any personally identifiable information 
accessed during the term of either of these agreements with a 
Federally-facilitated Exchange.
* * * * *
    (j) Federally-facilitated Exchange standards of conduct. (1) An 
agent or broker that assists with or facilitates enrollment of 
qualified individuals, qualified employers, or qualified employees, in 
coverage in a manner that constitutes enrollment through a Federally-
facilitated Exchange, or assists individuals in applying for advance 
payments of the premium tax credit and cost-sharing reductions for QHPs 
sold through a Federally-facilitated Exchange, must--
    (i) Have executed the required agreement under paragraph Sec.  
155.260(b);
    (ii) Be registered with the Federally-facilitated Exchanges under 
paragraph (d)(1) of this section; and
    (iii) Comply with the standards of conduct in paragraph (j)(2) of 
this section.
    (2) Standards of conduct. An individual or entity described in 
paragraph (j)(1) of this section must--
    (i) Provide consumers with correct information, without omission of 
material fact, regarding the Federally-facilitated Exchanges, QHPs 
offered through the Federally-facilitated Exchanges, and insurance 
affordability programs, and refrain from marketing or conduct that is 
misleading or coercive, or discriminates based on race, color, national 
origin, disability, age, sex, gender identity, or sexual orientation;
    (ii) Provide the Federally-facilitated Exchanges with correct 
information under section 1411(b) of the Affordable Care Act;
    (iii) Obtain the consent of the individual, employer, or employee 
prior to assisting with or facilitating enrollment through a Federally-
facilitated Exchange, or assisting the individual in applying for 
advance payments of the premium tax credit and cost-sharing reductions 
for QHPs;
    (iv) Protect consumer personally identifiable information according 
to Sec.  155.260(b)(3) and the agreement described in Sec.  
155.260(b)(2); and
    (v) Comply with all applicable Federal and State laws and 
regulations.
    (3) An agent or broker will be considered to be in compliance with 
paragraphs (j)(2)(i) and (ii) of this section if HHS determines that 
there was a reasonable cause for the failure to provide correct 
information and that the agent or broker acted in good faith.
    (k) Penalties other than termination of the agreement with the 
Federally-facilitated Exchanges. (1) If HHS determines that an agent or 
broker has failed to comply with the requirements of this section, in 
addition to any other available remedies, that agent or broker--
    (i) May be denied the right to enter into agreements with the 
Federally-facilitated Exchanges in future years; and
    (ii) May be subject to civil money penalties as described in Sec.  
155.285.
    (2) HHS will notify the agent or broker of the proposed imposition 
of penalties under paragraph (k)(1)(i) of this section and, after 30 
calendar days from the date of the notice, may impose the penalty if 
the agent or broker has not requested a reconsideration under paragraph 
(h) of this section. The proposed imposition of penalties under 
paragraph (k)(1)(ii) of this section will follow the process outlined 
under Sec.  155.285.
    (l) Application to State-Based Exchanges using a Federal platform. 
An agent or broker who enrolls qualified individuals, qualified 
employers, or

[[Page 75577]]

qualified employees in coverage in a manner that constitutes enrollment 
through an State-Based Exchange using a Federal platform, or assists 
individual market consumers with submission of applications for advance 
payments of the premium tax credit and cost-sharing reductions through 
an State-Based Exchange using a Federal platform must comply with all 
applicable Federally-facilitated Exchange standards in this section.
0
28. Section 155.222 is amended by--
0
a. Revising the section heading.
0
b. Revising paragraphs (a)(1), (a)(2), (b)(1) through (5), and (d).
0
c. Adding paragraph (b)(6).
    The revisions and addition read as follows:


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

    (a) * * *
    (1) A vendor must be approved by HHS, in a form and manner to be 
determined by HHS, to have its training program recognized for agents 
and brokers assisting with or facilitating enrollment in individual 
market or SHOP coverage through the Federally-facilitated Exchanges 
consistent with Sec.  155.220.
    (2) As part of the training program, the vendor must require agents 
and brokers to provide identifying information and successfully 
complete the required curriculum.
* * * * *
    (b) * * *
    (1) Submit a complete and accurate application by the deadline 
established by HHS, which includes demonstration of prior experience 
with successfully conducting online training, as well as providing 
technical support to a large customer base.
    (2) Adhere to HHS specifications for content, format, and delivery 
of training, which includes offering continuing education units (CEUs) 
for at least five States in which a Federally-facilitated Exchange or 
State-Based Exchange using a Federal platform is operating.
    (3) Collect, store, and share with HHS training completion data 
from agent and broker users of the vendor's training in a manner, 
format, and frequency specified by HHS, and protect all data from agent 
and broker users of the vendor's training in accordance with applicable 
privacy and security requirements.
    (4) Execute an agreement with HHS, in a form and manner to be 
determined by HHS, which requires the vendor to comply with applicable 
HHS guidelines for implementing the training and interfacing with HHS 
data systems, 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.
    (6) Provide technical support to agent and broker users of the 
vendor's training as specified by HHS.
* * * * *
    (d) Monitoring. HHS may periodically monitor and audit vendors 
approved under this subpart, and their records related to the training 
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 functions described 
under this subpart.
* * * * *
0
29. Section 155.225 is amended by adding paragraph (b)(1)(iii) and 
revising paragraph (g)(4) to read as follows:


Sec.  155.225  Certified application counselors.

* * * * *
    (b) * * *
    (1) * * *
    (iii) Provides data and information to the Exchange regarding the 
number and performance of its certified application counselors and 
regarding the consumer assistance provided by its certified application 
counselors, upon request, in the form and manner specified by the 
Exchange. Beginning in January 2017, in a Federally-facilitated 
Exchange, organizations designated by the Exchange must submit monthly 
reports that include, at a minimum, data regarding the number of 
individuals who have been certified by the organization; the total 
number of consumers who received application and enrollment assistance 
from the organization; and of that number, the number of consumers who 
received assistance in applying for and selecting a QHP, enrolling in a 
QHP, or applying for Medicaid or CHIP.
* * * * *
    (g) * * *
    (4) Provide to an applicant or potential enrollee gifts of any 
value as an inducement for enrollment. The value of gifts provided to 
applicants and potential enrollees for purposes other than as an 
inducement for enrollment must not exceed nominal value, either 
individually or in the aggregate, when provided to that individual 
during a single encounter. For purposes of this paragraph (g)(4), the 
term gifts includes gift items, gift cards, cash cards, cash, and 
promotional items that market or promote the products or services of a 
third party, but does not include the reimbursement of legitimate 
expenses incurred by a consumer in an effort to receive Exchange 
application assistance, such as travel or postage expenses.
* * * * *
0
30. Section 155.260 is amended by revising paragraph (a)(1) 
introductory text to read as follows:


Sec.  155.260  Privacy and security of personally identifiable 
information.

    (a) * * *
    (1) Where the Exchange creates or collects personally identifiable 
information for the purposes of determining eligibility for enrollment 
in a qualified health plan; determining eligibility for other insurance 
affordability programs, as defined in Sec.  155.300; or determining 
eligibility for exemptions from the individual responsibility 
provisions in section 5000A of the Code, the Exchange may only use or 
disclose such personally identifiable information to the extent such 
information is necessary:
* * * * *
0
31. Section 155.280 is amended by revising paragraph (a) to read as 
follows:


Sec.  155.280  Oversight and monitoring of privacy and security 
requirements.

    (a) General. HHS will oversee and monitor the Federally-facilitated 
Exchanges, State-based Exchanges on the Federal platform, and non-
Exchange entities required to comply with the privacy and security 
standards established and implemented by a Federally-facilitated 
Exchange pursuant to Sec.  155.260 for compliance with those standards. 
HHS will oversee and monitor State Exchanges for compliance with the 
standards State Exchanges establish and implement pursuant to Sec.  
155.260. State Exchanges will oversee and monitor non-Exchange entities 
required to comply with the privacy and security standards established 
and implemented by a State Exchange in accordance to Sec.  155.260.
* * * * *
0
32. Section 155.302 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  155.302  Options for conducting eligibility determinations.

    (a) * * *
    (1) Directly, through contracting arrangements in accordance with 
Sec.  155.110(a), or as a State-based Exchange on the Federal platform 
through a Federal platform agreement under which HHS carries out 
eligibility

[[Page 75578]]

determinations and other requirements contained within this subpart; or
* * * * *
0
33. Section 155.310 is amended by revising paragraphs (h) introductory 
text and (h)(2) to read as follows:


Sec.  155.310  Eligibility process.

* * * * *
    (h) Notice of an employee's receipt of advance payments of the 
premium tax credit and cost-sharing reductions to an employer. The 
Exchange must notify an employer that an employee has been determined 
eligible for advance payments of the premium tax credit and cost-
sharing reductions and has enrolled in a qualified health plan through 
the Exchange within a reasonable timeframe following a determination 
that the employee is eligible for advance payments of the premium tax 
credit and cost-sharing reductions in accordance with Sec.  155.305(g) 
or Sec.  155.350(a) and enrollment by the employee in a qualified 
health plan through the Exchange. Such notice must:
* * * * *
    (2) Indicate that the employee has been determined eligible advance 
payments of the premium tax credit and cost-sharing reductions and has 
enrolled in a qualified health plan through the Exchange;
* * * * *
0
34. Section 155.320 is amended by--
0
a. Revising paragraphs (c)(3)(vi) and (d)(3).
0
b. Adding paragraph (d)(4).
    The revisions and addition read as follows:


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

* * * * *
    (c) * * *
    (3) * * *
    (vi) Alternate verification process for decreases in annual 
household income estimates and for situations in which tax return data 
is unavailable. If a tax filer qualifies for an alternate verification 
process based on the requirements specified in paragraph (c)(3)(iv) of 
this section and the applicant's attestation to projected annual 
household income, as described in paragraph (c)(3)(ii)(B) of this 
section, is more than a reasonable threshold below the annual household 
income computed in accordance with paragraph (c)(3)(ii)(A) of this 
section, or if data described in paragraph (c)(1)(i) of this section is 
unavailable, the Exchange must attempt to verify the applicant's 
attestation of the tax filer's projected annual household income by 
following the procedures specified in paragraph (c)(3)(vi)(A) through 
(G) of this section. For the purposes of this paragraph (c)(3)(vi), a 
reasonable threshold is established by the Exchange in guidance and 
approved by HHS, but must not be less than10 percent, and can also 
include a threshold dollar amount. The Exchange's threshold is subject 
to approval by HHS.
* * * * *
    (d) * * *
    (3) Verification procedures. (i) If an applicant's attestation is 
not reasonably compatible with the information obtained by the Exchange 
as specified in paragraphs (d)(2)(i) through (iii) of this section, 
other information provided by the application filer, or other 
information in the records of the Exchange, the Exchange must follow 
the procedures specified in Sec.  155.315(f).
    (ii) Except as specified in paragraph (d)(3)(i) or (d)(4)(i) of 
this section, the Exchange must accept an applicant's attestation 
regarding the verification specified in paragraph (d) of this section 
without further verification.
    (4) Alternate procedures. For any benefit year for which it does 
not reasonably expect to obtain sufficient verification data as 
described in paragraphs (d)(2)(i) through (iii) of this section, the 
Exchange must follow the procedures specified in paragraph (d)(4)(i) of 
this section or, for benefit years 2016 and 2017, the Exchange may 
follow the procedures specified in paragraph (d)(4)(ii) of this 
section. For purposes of this paragraph (d)(4), the Exchange reasonably 
expects to obtain sufficient verification data for any benefit year 
when, for the benefit year, the Exchange is able to obtain data about 
enrollment in and eligibility for qualifying coverage in an eligible 
employer-sponsored plan from at least one electronic data source that 
is available to the Exchange and that has been approved by HHS, based 
on evidence showing that the data source is sufficiently current, 
accurate, and minimizes administrative burden, as described under 
paragraph (d)(2)(i) of this section.
    (i) Select a statistically significant random sample of applicants 
for whom the Exchange does not have any of the information specified in 
paragraphs (d)(2)(i) through (iii) of this section and--
    (A) Provide notice to the applicant indicating that the Exchange 
will be contacting any employer identified on the application for the 
applicant and the members of his or her household, as defined in 26 CFR 
1.36B-1(d), to verify whether the applicant is enrolled in an eligible 
employer-sponsored plan or is eligible for qualifying coverage in an 
eligible employer-sponsored plan for the benefit year for which 
coverage is requested;
    (B) Proceed with all other elements of the eligibility 
determination using the applicant's attestation, and provide 
eligibility for enrollment in a QHP to the extent that an applicant is 
otherwise qualified;
    (C) Ensure that advance payments of the premium tax credit and 
cost-sharing reductions are provided on behalf of an applicant who is 
otherwise qualified for such payments and reductions, as described in 
Sec.  155.305, if the tax filer attests to the Exchange that he or she 
understands that any advance payments of the premium tax credit paid on 
his or her behalf are subject to reconciliation;
    (D) Make reasonable attempts to contact any employer identified on 
the application for the applicant and the members of his or her 
household, as defined in 26 CFR 1.36B-1(d), to verify whether the 
applicant is enrolled in an eligible employer-sponsored plan or is 
eligible for qualifying coverage in an eligible employer-sponsored plan 
for the benefit year for which coverage is requested;
    (E) If the Exchange receives any information from an employer 
relevant to the applicant's enrollment in an eligible employer-
sponsored plan or eligibility for qualifying coverage in an eligible 
employer-sponsored plan, the Exchange must determine the applicant's 
eligibility based on such information and in accordance with the 
effective dates specified in Sec.  155.330(f), and if such information 
changes his or her eligibility determination, notify the applicant and 
his or her employer or employers of such determination in accordance 
with the notice requirements specified in Sec.  155.310(g) and (h);
    (F) If, after a period of 90 days from the date on which the notice 
described in paragraph (d)(4)(i)(A) of this section is sent to the 
applicant, the Exchange is unable to obtain the necessary information 
from an employer, the Exchange must determine the applicant's 
eligibility based on his or her attestation regarding coverage provided 
by that employer.
    (G) To carry out the process described in paragraph (d)(4)(i) of 
this section, the Exchange must only disclose an individual's 
information to an employer to the extent necessary for the employer to 
identify the employee.
    (ii) Establish an alternative process approved by HHS.
* * * * *
0
35. Section 155.335 is amended by revising paragraph (j) to read as 
follows:

[[Page 75579]]

Sec.  155.335  Annual eligibility redetermination.

* * * * *
    (j) Re-enrollment. If an enrollee remains eligible for enrollment 
in a QHP through the Exchange upon annual redetermination and--
    (1) QHPs under the product under which the QHP in which he or she 
is enrolled remain available through the Exchange for renewal, 
consistent with Sec.  147.106 of this subchapter, such enrollee will 
have his or her enrollment through the Exchange in a QHP under that 
product renewed, unless he or she terminates coverage, including 
termination of coverage in connection with voluntarily selecting a 
different QHP, in accordance with Sec.  155.430. The Exchange will 
ensure that re-enrollment in coverage under this paragraph (j)(1) 
occurs under the same product (except as provided in paragraph 
(j)(1)(iii)(A) of this section) in which the enrollee was enrolled, as 
follows:
    (i) The enrollee's coverage will be renewed in the same plan as the 
enrollee's current QHP, unless the current QHP is not available through 
the Exchange.
    (ii) If the enrollee's current QHP is not available through the 
Exchange, the enrollee's coverage will be renewed in a QHP at the same 
metal level as the enrollee's current QHP within the same product.
    (iii) If the enrollee's current QHP is not available through the 
Exchange and the enrollee's product no longer includes a QHP at the 
same metal level as the enrollee's current QHP and--
    (A) The enrollee's current QHP is a silver level plan, the enrollee 
will be re-enrolled in a silver level QHP under a different product 
offered by the same QHP issuer that is most similar to the enrollee's 
current product. If no such silver level QHP is available for 
enrollment through the Exchange, the enrollee's coverage will be 
renewed in a QHP that is one metal level higher or lower than the 
enrollee's current QHP under the same product;
    (B) The enrollee's current QHP is not a silver level plan, the 
enrollee's coverage will be renewed in a QHP that is one metal level 
higher or lower than the enrollee's current QHP under the same product; 
or
    (iv) If the enrollee's current QHP is not available through the 
Exchange and the enrollee's product no longer includes a QHP that is at 
the same metal level as, or one metal level higher or lower than the 
enrollee's current QHP, the enrollee's coverage will be renewed in any 
other QHP offered under the product in which the enrollee's current QHP 
is offered in which the enrollee is eligible to enroll.
    (2) No plans under the product under which the QHP in which he or 
she is enrolled are available through the Exchange for renewal, 
consistent with Sec.  147.106 of this subchapter, such enrollee may be 
enrolled in a QHP under a different product offered by the same QHP 
issuer, to the extent permitted by applicable State law, unless he or 
she terminates coverage, including termination of coverage in 
connection with voluntarily selecting a different QHP, in accordance 
with Sec.  155.430. The Exchange will ensure that re-enrollment in 
coverage under this paragraph (j)(2) occurs as follows:
    (i) The enrollee will be re-enrolled in a QHP at the same metal 
level as the enrollee's current QHP in the product offered by the same 
issuer that is the most similar to the enrollee's current product;
    (ii) If the issuer does not offer another QHP at the same metal 
level as the enrollee's current QHP, the enrollee will be re-enrolled 
in a QHP that is one metal level higher or lower than the enrollee's 
current QHP in the product offered by the same issuer through the 
Exchange that is the most similar to the enrollee's current product; or
    (iii) If the issuer does not offer another QHP through the Exchange 
at the same metal level as, or one metal level higher or lower than the 
enrollee's current QHP, the enrollee will be re-enrolled in any other 
QHP offered by the same issuer in which the enrollee is eligible to 
enroll.
* * * * *
0
36. Section 155.400 is amended by revising paragraph (e) and adding 
paragraphs (g) and (h) 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 a binder payment to effectuate an 
enrollment or to add coverage retroactively to an already effectuated 
enrollment. Exchanges may, and the Federally-facilitated Exchange will, 
establish a standard policy for setting premium payment deadlines:
    (1) In a Federally-facilitated Exchange:
    (i) For prospective coverage to be effectuated under regular 
coverage effective dates, as provided for in Sec. Sec.  155.410(f) and 
155.420(b)(1), the binder payment must consist of the first month's 
premium, and the deadline for making the binder payment must be no 
earlier than the coverage effective date, and no later than 30 calendar 
days from the coverage effective date;
    (ii) For prospective coverage to be effectuated under special 
effective dates, as provided for in Sec.  155.420(b)(2), the binder 
payment must consist of the first month's premium, and the deadline for 
making the binder payment must be no earlier than the coverage 
effective date and no later than 30 calendar days from the date the 
issuer receives the enrollment transaction or the coverage effective 
date, whichever is later.
    (iii) For coverage to be effectuated under retroactive effective 
dates, as provided for in Sec.  155.420(b)(2), the binder payment must 
consist of the premium due for all months of retroactive coverage 
through the first prospective month of coverage, and, the deadline for 
making the binder payment must be no earlier than 30 calendar days from 
the date the issuer receives the enrollment transaction. If only the 
premium for one month of coverage is paid, only prospective coverage 
should be effectuated, in accordance with regular effective dates.
(2) [Reserved]
* * * * *
    (g) Premium payment threshold. Exchanges may, and the Federally-
facilitated Exchange will, allow issuers to implement, a premium 
payment threshold policy under which issuers can consider enrollees to 
have paid all amounts due if the enrollees pay an amount sufficient to 
maintain a percentage of total premium paid out of the total premium 
owed equal to or greater than a level prescribed by the issuer, 
provided that the level is reasonable and that the level and the policy 
are applied in a uniform manner to all enrollees. If an applicant or 
enrollee satisfies the premium payment threshold policy, the issuer 
may:
    (1) Effectuate an enrollment based on payment of the binder payment 
under paragraph (e) of this section.
    (2) Avoid triggering a grace period for non-payment of premium, as 
described by Sec.  156.270(d) of this subchapter or a grace period 
governed by State rules.
    (3) Avoid terminating the enrollment for non-payment of premium as, 
described by Sec. Sec.  156.270(g) of this subchapter and 
155.430(b)(2)(ii)(A) and(B).
    (h) Requirements. A State Exchange may rely on HHS to carry out the 
requirements of this section and other requirements contained within 
this subpart E through a Federal platform agreement.
0
37. Section 155.410 is amended by revising paragraphs (e)(2) and (f)(2) 
to read as follows:

[[Page 75580]]

Sec.  155.410  Initial and annual open enrollment periods.

* * * * *
    (e) * * *
    (2) For the benefit years beginning on January 1, 2016 and on 
January 1, 2017, the annual open enrollment period begins on November 1 
of the calendar year preceding the benefit year, and extends through 
January 31 of the benefit year.
    (f) * * *
    (2) For the benefit years beginning on January 1, 2016 and on 
January 1, 2017, the Exchange must ensure that coverage is effective--
    (i) January 1 for QHP selections received by the Exchange on or 
before December 15 of the calendar year preceding the benefit year.
    (ii) February 1 for QHP selections received by the Exchange from 
December 16 of the calendar year preceding the benefit year through 
January 15 of the benefit year.
    (iii) March 1 for QHP selections received by the Exchange from 
January 16 through January 31 of the benefit year.
* * * * *
0
38. Section 155.430 is amended by--
0
a. Adding paragraph (b)(1)(iv).
0
b. Revising paragraphs (b)(2)(ii)(A).
0
c. Redesignating paragraph (b)(2)(vi) as paragraph (b)(2)(vii).
0
d. Adding paragraphs (b)(2)(vi) and (d)(9), (10), and (11)
    The additions and revision read as follows:


Sec.  155.430  Termination of Exchange enrollment or coverage.

* * * * *
    (b) * * *
    (1) * * *
    (iv) The Exchange must permit an enrollee to retroactively 
terminate or cancel his or her coverage or enrollment in a QHP in the 
following circumstances:
    (A) The enrollee demonstrates to the Exchange that he or she 
attempted to terminate his or her coverage or enrollment in a QHP and 
experienced a technical error that did not allow the enrollee to 
terminate his or her coverage or enrollment through the Exchange, and 
requests retroactive termination within 60 days after he or she 
discovered the technical error.
    (B) The enrollee demonstrates to the Exchange that his or her 
enrollment in a QHP through the Exchange was unintentional, 
inadvertent, or erroneous and was the result of the error or misconduct 
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. Such enrollee must 
request cancellation within 60 days of discovering the unintentional, 
inadvertent, or erroneous enrollment. For purposes of this paragraph 
(b)(1)(iv)(B), misconduct includes the failure to comply with 
applicable standards under this part, part 156 of this subchapter, or 
other applicable Federal or State requirements as determined by the 
Exchange.
    (C) The enrollee was enrolled in a QHP without his or her knowledge 
or consent due to the fraudulent activity of any third party, including 
third parties who have no connection with the Exchange, and requests 
cancellation within 60 days of discovering of the fraudulent 
enrollment.
    (2) * * *
    (ii) * * *
    (A) The exhaustion of the 3-month grace period, as described in 
Sec.  156.270(d) and (g) of this subchapter, required for enrollees, 
who when first failing to timely pay premiums, are receiving advance 
payments of the premium tax credit;
* * * * *
    (vi) The enrollee was enrolled in a QHP due to fraudulent activity, 
including fraudulent activity by a third party with no connection with 
the Exchange.
* * * * *
    (d) * * *
    (9) In case of a retroactive termination in accordance with 
paragraph (b)(1)(iv)(A) of this section, the termination date will be 
no sooner than 14 days after the date that the enrollee can demonstrate 
he or she contacted the Exchange to terminate his or her coverage or 
enrollment through the Exchange, unless the issuer agrees to an earlier 
effective date as set forth in paragraph (d)(2)(iii) of this section.
    (10) In case of a retroactive cancellation or termination in 
accordance with paragraph (b)(1)(iv)(B) or (C) of this section, the 
cancellation date or termination date will be the original coverage 
effective date or a later date, as determined appropriate by the 
Exchange, based on the circumstances of the cancellation or 
termination.
    (11) In the case of cancellation in accordance with paragraph 
(b)(2)(vi) of this section, the Exchange may cancel the enrollee's 
enrollment upon its determination that the enrollment was performed 
fraudulently and following reasonable notice to the enrollee (where 
possible). The termination date will be the original coverage effective 
date.
* * * * *
0
39. Section 155.505 is amended by adding paragraphs (b)(1)(iii) and 
(b)(5) and revising paragraph (b)(4) to read as follows:


Sec.  155.505  General eligibility appeals requirements.

* * * * *
    (b) * * *
    (1) * * *
    (iii) A determination of eligibility for an enrollment period, made 
in accordance with Sec.  155.305(b);
* * * * *
    (4) A denial of a request to vacate dismissal made by a State 
Exchange appeals entity in accordance with Sec.  155.530(d)(2), made 
under paragraph (c)(2)(i) of this section; and
    (5) An appeal decision issued by a State Exchange appeals entity in 
accordance with Sec.  155.545(b), consistent with Sec.  155.520(c).
* * * * *
0
40. Section 155.510 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  155.510  Appeals coordination.

    (a) * * *
    (1) Minimize burden on appellants, including not asking the 
appellant to provide duplicative information or documentation that he 
or she already provided to an agency administering an insurance 
affordability program or eligibility appeals process, unless the 
appeals entity, Exchange, or agency does not have access to the 
information or documentation and cannot reasonably obtain it;
* * * * *
0
41. Section 155.520 is amended by adding paragraph (d)(2)(i)(D) to read 
as follows:


Sec.  155.520  Appeal requests.

* * * * *
    (d) * * *
    (2) * * *
    (i) * * *
    (D) That, in the event the appeal request is not valid due to 
failure to submit by the date determined under paragraph (b) or (c) of 
this section, as applicable, the appeal request may be considered valid 
if the applicant or enrollee sufficiently demonstrates within a 
reasonable timeframe determined by the appeals entity that failure to 
timely submit was due to exceptional circumstances and should not 
preclude the appeal.
* * * * *
0
42. Section 155.530 is amended by revising paragraph (a)(4) to read as 
follows:


Sec.  155.530  Dismissals.

    (a) * * *
    (4) Dies while the appeal is pending, except if the executor, 
administrator, or

[[Page 75581]]

other duly authorized representative of the estate requests to continue 
the appeal.
* * * * *
0
43. Section 155.535 is amended by revising paragraphs (a) introductory 
text and (b) to read as follows:


Sec.  155.535  Informal resolution and hearing requirements.

    (a) Informal resolution. The HHS appeals process will provide an 
opportunity for informal resolution and a hearing in accordance with 
the requirements of this section. A State Exchange appeals entity may 
also provide an informal resolution process prior to a hearing. Any 
information resolution process must meet the following requirements:
* * * * *
    (b) Notice of hearing. When a hearing is scheduled, the appeals 
entity must send written notice to the appellant of the date, time, and 
location or format of the hearing no later than 15 days prior to the 
hearing date unless--
    (1) The appellant requests an earlier hearing date; or
    (2) A hearing date sooner than 15 days is necessary to process an 
expedited appeal, as described in Sec.  155.540(a), and the appeals 
entity has contacted the appellant to schedule a hearing on a mutually 
agreed upon date, time, and location or format.
* * * * *
0
44. Section 155.545 is amended by revising paragraphs (b)(1) and 
(c)(1)(i) and (ii) to read as follows:


Sec.  155.545  Appeal decisions.

* * * * *
    (b) * * *
    (1) Must issue written notice of the appeal decision to the 
appellant within 90 days of the date an appeal request under Sec.  
155.520(b) or (c) is received, as administratively feasible.
* * * * *
    (c) * * *
    (1) * * *
    (i) Prospectively, on the first day of the month following the date 
of the notice of appeal decision, or consistent with Sec.  
155.330(f)(2), (3), (4), or (5), if applicable; or
    (ii) Retroactively, to the coverage effective date the appellant 
did receive or would have received if the appellant had enrolled in 
coverage under the incorrect eligibility determination that is the 
subject of the appeal, at the option of the appellant.
* * * * *
0
45. Section 155.555 is amended by revising paragraphs (e)(1) 
introductory text and (l) to read as follows:


Sec.  155.555  Employer appeals process.

* * * * *
    (e) * * *
    (1) Upon receipt of a valid appeal request under this section, or 
upon receipt of the notice under paragraph (d)(1)(iii) of this section, 
the Exchange must promptly transmit via secure electronic interface to 
the appeals entity--
* * * * *
    (l) Implementation of the appeal decision. After receipt of the 
notice under paragraph (k)(3) of this section, if the appeal decision 
affects the employee's eligibility, the Exchange must promptly:
    (1) Redetermine the employee's eligibility and the eligibility of 
the employee's household members, if applicable, in accordance with the 
standards specified in Sec.  155.305; or
    (2) Notify the employee of the requirement to report changes in 
eligibility as described in Sec.  155.330(b)(1).
* * * * *
0
46. Section 155.605 is amended by:
0
a. In paragraph (b), removing the reference ``paragraphs (c)(2), 
(f)(2), and (g) of this section'' and adding in its place the reference 
``paragraphs (c)(2) and (d) of this section'';
0
b. Removing paragraphs (d), (e) and (f);
0
c. Redesignating paragraph (g) as paragraph (d);
0
d. Revising newly redesignated paragraph (d); and
0
c. Adding paragraph (e).
    The revision and addition read as follows:


Sec.  155.605  Eligibility standards for exemptions.

* * * * *
    (d) Hardship--(1) General. The Exchange must grant a hardship 
exemption to an applicant eligible for an exemption for at least the 
month before, the month or months during which, and the month after a 
specific event or circumstance, if the Exchange determines that the 
applicant has suffered a hardship in relation to his or her ability to 
obtain coverage because they experienced one or more of the events or 
circumstances listed in paragraph (d)(1)(i) through (iii) or (d)(2) of 
this section. Notwithstanding the length of the hardship, any hardship 
exemption granted pursuant to this paragraph (d) may be granted for a 
maximum period that is not to exceed the month before the event or 
circumstance and the remainder of the calendar year during which the 
hardship commenced, plus the next calendar year.
    (i) He or she experienced financial or domestic circumstances, 
including an unexpected natural or human-caused event, such that he or 
she had a significant, unexpected increase in essential expenses that 
prevented him or her from obtaining coverage under a qualified health 
plan;
    (ii) The expense of purchasing a qualified health plan would have 
caused him or her to experience serious deprivation of food, shelter, 
clothing or other necessities; or
    (iii) He or she has experienced other circumstances that prevented 
him or her from obtaining coverage under a qualified health plan.
    (2) Examples of events and circumstances for which the Exchange 
must grant a hardship exemption to an applicant based on paragraph 
(d)(1) of this section include:
    (i) Individuals that the Exchange determines are homeless.
    (ii) Individuals who have been evicted or facing eviction or 
foreclosure.
    (iii) Individuals who have received a shut-off notice from a 
utility company.
    (iv) Individuals who have experienced domestic violence.
    (v) Individuals who have experienced the death of a family member.
    (vi) Individuals who have experienced a fire, flood or other nature 
or human-caused disaster that caused substantial damage to your 
property.
    (vii) Individuals who have filed for bankruptcy.
    (viii) Individuals who had medical bills which resulted in 
substantial debt
    (ix) Individuals who experienced unexpected increases in necessary 
expenses due to caring for an ill, disabled or aging family member.
    (x) Individuals who are seeking categorical Medicaid eligibility 
under section 1902(f) of the Act for ``209(b)'' States (codified at 42 
CFR 435.121).
    (xi) Individuals who are seeking Medicaid coverage provided to 
medically needy individuals under section 1902(a)(10)(C) of the Social 
Security Act 42 U.S.C. 1396(a)(10)(C) that is not recognized as 
government-sponsored minimum essential coverage (MEC) under IRS 
regulations or HHS regulations or guidance.
    (xii) Individuals who are enrolled in Medicaid coverage provided to 
a pregnant women that is not recognized as government-sponsored MEC 
under IRS regulations or HHS regulations or guidance.
    (xiii) Individuals who are enrolled in CHIP coverage provided to an 
unborn child that includes comprehensive prenatal care for the pregnant 
mother.
    (xiv) Individuals who are eligible for enrollment in a qualified 
health plan

[[Page 75582]]

(QHP) through the Exchange, lower costs on the individual's monthly 
premiums or cost-sharing reductions for a time period when the 
individual was not enrolled in a QHP through the Exchange as a result 
of an eligibility appeals decision.
    (3) The hardship event or circumstance described under paragraph 
(d)(1) or (2) of this section must have occurred within 3 years of the 
date the applicant submits an application to the Exchange under Sec.  
155.610, except in the case of applicants who are or who were homeless 
or experienced domestic violence.
    (i) The date of submission of an application means the date of 
receipt of the application by the Exchange via the channels available 
for the submission of an application, as described in Sec.  155.610(d) 
or the date the application was signed by the submitter.
    (ii) [Reserved]
    (4) Lack of affordable coverage based on projected income. The 
Exchange must determine an applicant eligible for an exemption for a 
month or months during which he or she, or another individual the 
applicant attests will be included in the applicant's family, as 
defined in 26 CFR 1.36B-1(d), is unable to afford coverage in 
accordance with the standards specified in section 5000A(e)(1) of the 
Code, provided that--
    (i) Eligibility for this exemption is based on projected annual 
household income;
    (ii) An eligible employer-sponsored plan is only considered under 
paragraphs (d)(4)(iii) and (iv) of this section if it meets the minimum 
value standard described in Sec.  156.145 of this subchapter.
    (iii) For an individual who is eligible to purchase coverage under 
an eligible employer-sponsored plan, the Exchange determines the 
required contribution for coverage such that--
    (A) An individual who uses tobacco is treated as not earning any 
premium incentive related to participation in a wellness program 
designed to prevent or reduce tobacco use that is offered by an 
eligible employer-sponsored plan;
    (B) Wellness incentives offered by an eligible employer-sponsored 
plan that do not relate to tobacco use are treated as not earned;
    (C) In the case of an employee who is eligible to purchase coverage 
under an eligible employer-sponsored plan sponsored by the employee's 
employer, the required contribution is the portion of the annual 
premium that the employee would pay (whether through salary reduction 
or otherwise) for the lowest cost self-only coverage.
    (D) In the case of an individual who is eligible to purchase 
coverage under an eligible employer-sponsored plan as a member of the 
employee's family, as defined in 26 CFR 1.36B-1(d), the required 
contribution is the portion of the annual premium that the employee 
would pay (whether through salary reduction or otherwise) for the 
lowest cost family coverage that would cover the employee and all other 
individuals who are included in the employee's family who have not 
otherwise been granted an exemption through the Exchange.
    (iv) For an individual who is ineligible to purchase coverage under 
an eligible employer-sponsored plan, the Exchange determines the 
required contribution for coverage in accordance with section 
5000A(e)(1)(B)(ii) of the Code, inclusive of all members of the family, 
as defined in 26 CFR 1.36B-1(d), who have not otherwise been granted an 
exemption through the Exchange and who are not treated as eligible to 
purchase coverage under an eligible employer-sponsored plan, in 
accordance with paragraph (d)(4)(ii) of this section; and
    (v) The applicant applies for this exemption prior to the last date 
on which he or she could enroll in a QHP through the Exchange for the 
month or months of a calendar year for which the exemption is 
requested.
    (vi) The Exchange must make an exemption in this category available 
prospectively, and provide it for all remaining months in a coverage 
year, notwithstanding any change in an individual's circumstances.
    (5) Ineligible for Medicaid based on a State's decision not to 
expand. The Exchange must determine an applicant eligible for an 
exemption for a calendar year if he or she would be determined 
ineligible for Medicaid for one or more months during the benefit year 
solely as a result of a State not implementing section 2001(a) of the 
Affordable Care Act.
    (e) Eligibility for an exemption through the IRS. Hardship 
exemptions in this paragraph can be claimed on a Federal income tax 
return without obtaining an exemption certificate number. The IRS may 
allow an individual to claim the hardship exemptions described in this 
paragraph (e) without requiring an exemption certificate number from 
the Exchange.
    (1) Filing threshold. The IRS may allow an applicant to claim an 
exemption specified in HHS Guidance published September 18, 2014, 
entitled, Shared Responsibility Guidance--Filing Threshold Hardship 
Exemption,'' and in IRS Notice 2014-76, section B.
    (2) Self-only coverage in an eligible employer-sponsored plan. The 
IRS may allow an applicant to claim an exemption specified in HHS 
Guidance published November 21, 2014, entitled, ``Guidance on Hardship 
Exemptions for Persons Meeting Certain Criteria,'' and in IRS Notice 
2014-76, section A.
    (3) Eligible for services through an Indian health care provider. 
The IRS may allow an applicant to claim the exemption specified in HHS 
Guidance published September 18, 2014, entitled, ``Shared 
Responsibility Guidance--Exemption for Individuals Eligible for 
Services through an Indian Health Care Provider,'' and in IRS Notice 
2014-76, section E.
    (4) Ineligible for Medicaid based on a State's decision not to 
expand. The IRS may allow an applicant to claim the exemption specified 
in HHS Guidance published November 21, 2014, entitled, ``Guidance on 
Hardship Exemptions for Persons Meeting Certain Criteria,'' and in IRS 
Notice 2014-76, section F.
0
47. Section 155.610 is amended by revising paragraph (h)(1) and adding 
paragraph (k) to read as follows:


Sec.  155.610  Eligibility process for exemptions.

* * * * *
    (h) * * *
    (1) Except for the exemptions described in Sec.  155.605(c) and 
(d), after December 31 of a given calendar year, the Exchange may 
decline to accept an application for an exemption that is available 
retrospectively for months for such calendar year, and must provide 
information to individuals regarding how to claim an exemption through 
the tax filing process.
* * * * *
    (k) Incomplete application. (1) If an applicant submits an 
application that does not include sufficient information for the 
Exchange to conduct a determination for eligibility of an exemption the 
Exchange must--
    (i) Provide notice to the applicant indicating that information 
necessary to complete an eligibility determination is missing, 
specifying the missing information, and providing instructions on how 
to provide the missing information; and
    (ii) Provide the applicant with a period of no less than 10 and no 
more than 90 days, in the reasonable discretion of the Exchange, from 
the date on which the notice described in paragraph (k)(1) of this 
section is sent to the applicant to provide the information needed to 
complete the application to the Exchange; and
    (iii) Not proceed with the applicant's eligibility determination 
during the

[[Page 75583]]

period described in paragraph (k)(2) of this section.
    (2) If the Exchange does not receive the requested information 
within the time allotted in paragraph (k)(1)(ii) of this section, the 
Exchange must notify the applicant in writing that the Exchange cannot 
process the application and provide appeal rights to the applicant.
0
48. Section 155.615 is amended by-
0
a. Removing paragraphs (c), (d), and (e).
0
b. Redesignating paragraphs (f), (g), (h), (i), (j), and (k) as 
paragraphs (c), (d), (e), (f), (g), and (h), respectively.
0
c. Revising newly redesignated paragraph (c)(1).
0
d. Removing newly redesignated paragraph (c)(3).
0
e. Further redesignating newly redesignated paragraph (c)(2) as 
paragraph (c)(3).
0
f. Adding paragraph (c)(2).
    The revision and addition read as follows:


Sec.  155.615  Verification process related to eligibility for 
exemptions.

* * * * *
    (c) Verification related to exemption for hardship--(1) In general. 
For any applicant who requests an exemption based on hardship, except 
for the hardship exemptions described in Sec.  155.605(d)(3), the 
Exchange must verify whether he or she has experienced the hardship to 
which he or she is attesting.
    (2) Hardship. If the hardship-qualifying event or circumstance in 
Sec.  155.605(d)(1) began more than 3 years prior to the date the 
exemption application was submitted, as specified in Sec.  
155.605(d)(3)(i), and the event or circumstance continued beyond the 
initial 3-year period, the Exchange must verify the applicant continued 
to experience the hardship to which he or she is attesting during a 
period that is within 3 years from the date of the exemption 
application submitted under Sec.  155.605(d)(1).
* * * * *
0
49. Section 155.625 is amended by revising paragraphs (a)(2) and (b) to 
read as follows:


Sec.  155.625  Options for conducting eligibility determinations for 
exemptions.

    (a) * * *
    (2) By use of the HHS service under paragraph (b) of this section.
    (b) Use of HHS service. Notwithstanding the requirements of this 
subpart, the Exchange may adopt an exemption eligibility determination 
made by HHS.
0
50. Section 155.705 is amended by:
0
a. Adding paragraphs (b)(3)(viii), (ix), and (x).
0
b. In paragraph (b)(4)(ii)(B), removing the semicolon and adding a 
colon in its place.
0
c. Adding paragraph (b)(4)(ii)(B)(1) and adding and reserving paragraph 
(b)(4)(ii)(B)(2).
0
d. Revising paragraphs (b)(4)(ii)(C)(2) and (b)(11)(ii)(A), (B), and 
(C).
0
e. Removing paragraphs (b)(11)(ii)(D) and (E).
    The revisions and additions read as follows:


Sec.  155.705  Functions of a SHOP.

* * * * *
    (b) * * *
    (3) * * *
    (viii) For plan years beginning on or after January 1, 2017, a 
Federally-facilitated SHOP will provide a qualified employer a choice 
of three methods to make QHPs available to qualified employees and 
their dependents:
    (A) The employer may choose a level of coverage as described in 
paragraph (b)(2) of this section;
    (B) The employer may choose a single QHP; or
    (C) The employer may offer its qualified employees a choice of all 
QHPs offered through a Federally-facilitated SHOP by a single issuer 
across all available levels of coverage, as described in section 
1302(d)(1) of the Affordable Care Act and implemented in Sec.  
156.140(b) of this subchapter.
    (ix) For plan years beginning on or after January 1, 2017, a 
Federally-facilitated SHOP will provide a qualified employer a choice 
of three methods to make stand-alone dental plans available to 
qualified employees and their dependents:
    (A) The employer may choose to make available a single stand-alone 
dental plan;
    (B) The employer may choose to make available all stand-alone 
dental plans offered through a Federally-facilitated SHOP at a level of 
coverage as described in Sec.  156.150(b)(2) of this subchapter; or
    (C) The employer may offer its qualified employees a choice of all 
plans offered through a Federally-facilitated SHOP by a single issuer 
across all available levels of coverage, as described in Sec.  
156.150(b)(2) of this subchapter.
    (x) States operating as a State-based Exchange utilizing the 
Federal platform for SHOP enrollment functions will have the same 
employer choice models available as States with a Federally-facilitated 
SHOP.
    (4) * * *
    (ii) * * *
    (B) * * *
    (1) In a Federally-facilitated SHOP, payment for the group's first 
month of coverage must be received by the premium aggregation services 
vendor on or before the 20th day of the month prior to the month that 
coverage begins.
(2) [Reserved]
    (C) * * *
    (2) The number of days for which coverage is being provided in the 
month described in paragraph (b)(4)(ii)(C)(1) of this section.
* * * * *
    (11) * * *
    (ii) * * *
    (A) When the employer offers a single plan to qualified employees, 
the employer must use a fixed contribution methodology under which the 
employer contributes a fixed percentage of the plan's premium for each 
qualified employee and, if applicable, for each dependent of a 
qualified employee. A tobacco surcharge, if applicable, will be applied 
after the employer's contribution is applied to the premium.
    (B) When the employer offers a choice of plans to qualified 
employees, the employer may use a fixed contribution methodology or a 
reference plan contribution methodology. Under the fixed contribution 
methodology, the employer contributes a fixed percentage of the 
premiums for each qualified employee and, if applicable, for each 
dependent of a qualified employee, across all plans in which any 
qualified employee, and, if applicable, any dependent of a qualified 
employee, is enrolled. Under the reference plan contribution 
methodology, the employer will select a plan from within the level of 
coverage offered as described in paragraphs (b)(2) and (3) of this 
section to serve as a reference plan on which contributions will be 
based, and then will define a percentage contribution toward premiums 
under the reference plan; the resulting contribution amounts under the 
reference plan will be applied toward any plan in which a qualified 
employee or, if applicable, any dependent of a qualified employee, is 
enrolled, up to the lesser of the contribution amount or the total 
amount of any premium for the selected plan before application of a 
tobacco surcharge, if applicable. A tobacco surcharge, if applicable, 
will be applied after the employer's contribution is applied to the 
premium.
    (C) The employer will define a percentage contribution toward 
premiums for employee-only coverage and, if dependent coverage is 
offered, a percentage contribution toward premiums for dependent 
coverage. To

[[Page 75584]]

the extent permitted by other applicable law, for plan years beginning 
on or after January 1, 2015, a Federally-facilitated SHOP may permit an 
employer to define a different percentage contribution for full-time 
employees from the percentage contribution it defines for non-full-time 
employees, and it may permit an employer to define a different 
percentage contribution for dependent coverage for full-time employees 
from the percentage contribution it defines for dependent coverage for 
non-full-time employees.
* * * * *
0
51. Section 155.715 is amended by revising paragraph (g)(1) to read as 
follows:


Sec.  155.715  Eligibility determination process for SHOP.

* * * * *
    (g) * * *
    (1) Each QHP terminates the enrollment through the SHOP of the 
employer's enrollees enrolled in a QHP through the SHOP; and
* * * * *
0
52. Section 155.725 is amended by revising paragraphs (c), (e), (h)(2), 
(i)(1) introductory text, and (j)(2)(i) to read as follows:


Sec.  155.725  Enrollment periods under SHOP.

* * * * *
    (c) Annual employer election period. The SHOP must provide 
qualified employers with a standard election period prior to the 
completion of the employer's plan year and before the annual employee 
open enrollment period, in which the qualified employer may change its 
participation in the SHOP for the next plan year, including--
    (1) The method by which the qualified employer makes QHPs available 
to qualified employees pursuant to Sec.  155.705(b)(2) and (3);
    (2) The employer contribution towards the premium cost of coverage;
    (3) The level of coverage offered to qualified employees as 
described in Sec.  155.705(b)(2) and (3); and
    (4) The QHP or QHPs offered to qualified employees in accordance 
with Sec.  155.705.
* * * * *
    (e) Annual employee open enrollment period. (1) The SHOP must 
establish a standardized annual open enrollment period for qualified 
employees prior to the completion of the applicable qualified 
employer's plan year and after that employer's annual election period.
    (2) Qualified employers in a Federally-facilitated SHOP must 
provide qualified employees with an annual open enrollment period of at 
least one week.
* * * * *
    (h) * * *
    (2) For a group enrollment received by the Federally-facilitated 
SHOP from a qualified employer at the time of an initial group 
enrollment or renewal:
    (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 unless the employer opts for a later 
effective date within a quarter for which small group market rates are 
available.
    (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 unless the employer opts for a later 
effective date within a quarter for which small group market rates are 
available.
* * * * *
    (i) * * *
    (1) If a qualified employee enrolled in a QHP through the SHOP 
remains eligible for enrollment through the SHOP in coverage offered by 
the same qualified employer, the SHOP may provide for a process under 
which the employee will remain in the QHP selected the previous year, 
unless--
* * * * *
    (j) * * *
    (2) * * *
    (i) Experiences an event described in Sec.  155.420(d)(1) (other 
than paragraph (d)(1)(ii)), or experiences an event described in Sec.  
155.420(d)(2), (4), (5), (7), (8), or (9);
* * * * *
0
53. Section 155.735 is amended by revising paragraphs (c)(2) 
introductory text and (d)(2) to read as follows:


Sec.  155.735  Termination of SHOP enrollment or coverage.

* * * * *
    (c) * * *
    (2) In an FF-SHOP, for premium payments other than payments for the 
first month of coverage--
* * * * *
    (d) * * *
    (2) In the FF-SHOP, termination is effective:
    (i) In the case of a termination in accordance with paragraphs 
(d)(1)(i), (ii), (iii), and (v) of this section, termination is 
effective on the last day of the month in which the Federally-
facilitated SHOP receives notice of the event described in paragraph 
(d)(1)(i), (ii), (iii), or (v) of this section.
    (ii) In the case of a termination in accordance with paragraph 
(d)(1)(iv) 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 for any retroactive enrollments effectuated 
under Sec.  155.420(b)(2).
    (iii) The FF-SHOP will send qualified employees a notice notifying 
them in advance of a child dependent's loss of eligibility for 
dependent child coverage under their plan because of age. The notice 
will be sent 90 days in advance of the date when the dependent enrollee 
would lose eligibility for dependent child coverage. The enrollee will 
also receive a separate termination notice when coverage is terminated, 
under Sec.  155.735(g).
* * * * *
0
54. Section 155.740 is amended by revising paragraphs (c)(2), (d)(2), 
and (l)(3) to read as follows:


Sec.  155.740  SHOP employer and employee eligibility appeals 
requirements.

* * * * *
    (c) * * *
    (2) A failure by the SHOP to provide a timely eligibility 
determination or a timely notice of an eligibility determination in 
accordance with Sec.  155.715(e).
    (d) * * *
    (2) A failure by the SHOP to provide a timely eligibility 
determination or a timely notice of an eligibility determination in 
accordance with Sec.  155.715(f).
* * * * *
    (l) * * *
    (3) Be effective as follows:
    (i) If an employer is found eligible under the decision, then at 
the employer's option, the effective date of coverage or enrollment 
through the SHOP under the decision can either be made retroactive to 
the effective date of coverage or enrollment through the SHOP that the 
employer would have had if the employer had been correctly determined 
eligible, or prospective to the first day of the month following the 
date of the notice of the appeal decision.
    (ii) If an employee is found eligible under the decision, then at 
the employee's option, the effective date of coverage or enrollment 
through the SHOP under the decision can either be made effective 
retroactive to the effective date of coverage or enrollment through the 
SHOP that the employee would have had if the employee had been 
correctly determined eligible, or prospective to the first day of the 
month following the date of the notice of the appeal decision.
    (iii) If the employer or employee is found ineligible under the 
decision, then the decision is effective on the first

[[Page 75585]]

day of the month following the date of the notice of the appeal 
decision.
* * * * *

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

0
55. 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
56. Section 156.20 is amended by adding a definition of ``Standardized 
option'' in alphabetical order to read as follows:


Sec.  156.20  Definitions.

* * * * *
    Standardized option means a QHP with a standardized cost-sharing 
structure specified by HHS and that is offered for sale through an 
individual market Federally-facilitated Exchange.
0
57. Section 156.50 amended by revising paragraph (c) to read as 
follows:


Sec.  156.50  Financial support.

* * * * *
    (c) Requirement for Federally-facilitated Exchange user fee. (1) To 
support the functions of Federally-facilitated Exchanges, a 
participating issuer offering a plan through a Federally-facilitated 
Exchange must remit a user fee to HHS each month, in the time frame and 
manner established by HHS, equal to the product of the monthly user fee 
rate specified in the annual HHS notice of benefit and payment 
parameters for Federally-facilitated Exchanges for the applicable 
benefit year and the monthly premium charged by the issuer for each 
policy under the plan where enrollment is through a Federally-
facilitated Exchange.
    (2) To support the functions of State-based Exchanges on the 
Federal platform, a participating issuer offering a plan through a 
State-based Exchange that elects to utilize the Federal Exchange 
platform for certain Exchange functions described in Sec.  155.200 of 
this subchapter, as specified in a Federal platform agreement, must 
remit a user fee to HHS, in the timeframe and manner established by 
HHS, equal to the product of the sum of the monthly user fee rate 
specified in the annual HHS notice of benefit and payment parameters 
for State-based Exchanges that use the Federal platform for the 
applicable benefit year plus any additional user fee rate that HHS will 
collect on behalf of the Sate-based Exchange, multiplied by the monthly 
premium charged by the issuer for each policy under the plan where 
enrollment is through the State-based Exchange on the Federal platform.
* * * * *
0
58. Section 156.80 is amended by revising paragraph (d)(3)(ii) to read 
as follows:


Sec.  156.80  Single risk pool.

* * * * *
    (d) * * *
    (3) * * *
    (ii) A health insurance issuer in the small group market (not 
including a merged market) may establish index rates and make the 
marketwide adjustments under paragraph (d)(1) of this section, and make 
the plan-level adjustments under paragraph (d)(2) of this section, no 
more frequently than quarterly. Any changes to rates must have 
effective dates of January 1, April 1, July 1, or October 1. Such rates 
may only apply to coverage issued or renewed on or after the rate 
effective date and will apply for the entire plan year of the group 
health plan.
* * * * *
0
59. Section 156.135 is amended by revising paragraph (g) to read as 
follows:


Sec.  156.135  AV calculation for determining level of coverage.

* * * * *
    (g) Updates to the AV Calculator. HHS will update the AV Calculator 
annually for material changes that may include costs, plan designs, the 
standard population, developments in the function and operation of the 
AV Calculator and other actuarially relevant factors.
0
60. Section 156.150 is amended by adding paragraphs (a)(1) and (2), 
(c), and (d) to read as follows:


Sec.  156.150  Application to stand-alone dental plans inside the 
Exchange.

    (a) * * *
    (1) For plan years beginning after 2016, for one covered child--the 
dollar limit applicable to a stand-alone dental plan for one covered 
child specified in this paragraph (a) increased by an amount equal to 
the product of that amount and the quotient of consumer price index for 
dental services for the year 2 years prior to the benefit year, divided 
by the consumer price index for dental services for 2016.
    (2) For plan years after 2016, for two or more covered children--
twice the dollar limit for one child described in paragraph (a)(1) of 
this section.
* * * * *
    (c) Consumer price index for dental services defined. The consumer 
price index for dental services is a sub-component of the US Department 
of Labor's Bureau of Labor Statistics Consumer Price Index specific to 
dental services.
    (d) Increments of cost sharing increases. Any increase in the 
annual dollar limits described in paragraph (a)(1) of this section that 
does not result in a multiple of 25 dollars will be rounded down, to 
the next lowest multiple of 25 dollars.
0
61. Section 156.230 is amended by adding (d), (e), and (f) to read as 
follows.


Sec.  156.230  Network adequacy standards.

* * * * *
    (d) Minimum threshold. A QHP in a Federally-facilitated Exchange 
meets the standard under paragraph (a)(2) of this section if its 
network is determined adequate under the following standards:
    (1) In a State that implements an acceptable quantifiable network 
adequacy metric commonly used in the health insurance industry to 
measure network adequacy, under that metric; or
    (2) In any other State, under the Federal time and distance 
standard, based on minimum number of providers and average time and 
distance to those providers. QHPs that cannot meet the time and 
distance standard established by HHS may satisfy this requirement by 
reasonably justifying variances from this standard based on such 
factors as the availability of providers and variables reflected in 
local patterns of care.
    (e) Provider transitions. A QHP issuer in a Federally-facilitated 
Exchange must--
    (1) Make a good faith effort to provide written notice of 
discontinuation of a provider 30 days prior to the effective date of 
the change or otherwise as soon as practicable, to enrollees who are 
patients seen on a regular basis by the provider or who receive primary 
care from the provider whose contract is being discontinued, 
irrespective of whether the contract is being discontinued due to a 
termination for cause or without cause, or due to a non-renewal;
    (2) In cases where a provider is terminated without cause, allow an 
enrollee in active treatment to continue treatment until the treatment 
is complete or for 90 days, whichever is shorter, at in-network cost-
sharing rates.
    (i) For the purposes of paragraph (e)(2) of this section, active 
treatment means:

[[Page 75586]]

    (A) An ongoing course of treatment for a life-threatening 
condition;
    (B) An ongoing course of treatment for a serious acute condition;
    (C) The second or third trimester of pregnancy; or
    (D) An ongoing course of treatment for a health condition for which 
a treating physician or health care provider attests that discontinuing 
care by that physician or health care provider would worsen the 
condition or interfere with anticipated outcomes.
    (ii) Any decisions made for a request for continuity of care under 
paragraph (e)(2) of this section must be subject to the health benefit 
plan's internal and external grievance and appeal processes in 
accordance with applicable State or Federal law or regulations.
    (f) Out-of-network cost sharing. Notwithstanding Sec.  156.130(c), 
for a network to be deemed adequate, each QHP that uses a provider 
network must:
    (1) Count the cost sharing paid by an enrollee for an essential 
health benefit provided by an out-of-network provider in an in-network 
setting towards the enrollee's annual limitation on cost sharing; or
    (2) Provide a written notice to the enrollee at least ten business 
days before the provision of the benefit that additional costs may be 
incurred for an essential health benefit provided by an out-of-network 
provider in an in-network setting, including balance billing charges, 
unless such costs are prohibited under State law, and that any 
additional charges may not count toward the in-network annual 
limitation on cost sharing.
0
62. Section 156.235, as amended on February 27, 2015 (80 FR 10873), is 
further amended by revising paragraphs (a)(2)(i) and (b)(2)(i) to read 
as follows:


Sec.  156.235  Essential community providers.

    (a) * * *
    (2) * * *
    (i) The network includes as participating practitioners at least a 
minimum percentage, as specified by HHS, of available essential 
community providers in each plan's service area. For plan years 
beginning prior to January 1, 2018, multiple providers at a single 
location will count as a single essential community provider toward 
both the available essential community provider s in the plan's service 
area and the issuer's satisfaction of the essential community provider 
participation standard. For plan years beginning on or after January 1, 
2018, multiple contracted or employed full-time equivalent 
practitioners at a single location will count toward both the available 
essential community providers in the plan's service area and the 
issuer's satisfaction of the essential community provider participation 
standard; and
* * * * *
    (b) * * *
    (2) * * *
    (i) The number of its providers that are located in Health 
Professional Shortage Areas or five-digit zip codes in which 30 percent 
or more of the population falls below 200 percent of the Federal 
Poverty Line satisfies a minimum percentage, specified by HHS, of 
available essential community provider in the plan's service area. For 
plan years beginning prior to January 1, 2018, multiple providers at a 
single location will count as a single essential community provider 
toward both the available essential community providers in the plan's 
service area and the issuer's satisfaction of the essential community 
provider participation standard. For plan years beginning on or after 
January 1, 2018, multiple contracted or employed full-time equivalent 
practitioners at a single location will count toward both the available 
essential community providers in the plan's service area and the 
satisfaction of the essential community provider participation 
standard; and
* * * * *
0
63. Section 156.265 is amended by revising paragraph (b)(2)(ii) to read 
as follows:


Sec.  156.265  Enrollment process for qualified individuals.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Ensure the applicant received an eligibility determination for 
coverage through the Exchange through the Exchange Internet Web site or 
an Exchange approved web service using the FFE single streamline 
application.
* * * * *
0
64. Section 156.270 is amended by revising paragraphs (d) introductory 
text and (g) to read as follows:


Sec.  156.270  Termination of coverage or enrollment for qualified 
individuals.

* * * * *
    (d) Grace period for recipients of advance payments of the premium 
tax credit. A QHP issuer must provide a grace period of 3 months for an 
enrollee, who when failing to timely pay premiums, is receiving advance 
payments of the premium tax credit. During the grace period, the QHP 
issuer must:
* * * * *
    (g) Exhaustion of grace period. If an enrollee receiving advance 
payments of the premium tax credit exhausts the 3-month grace period in 
paragraph (d) of this section without paying all outstanding premiums, 
subject to a premium payment threshold implemented under Sec.  
155.400(g) of this subchapter, if applicable, the QHP issuer must 
terminate the enrollee's enrollment through the Exchange on the 
effective date described in Sec.  155.430(d)(4) of this subchapter, 
provided that the QHP issuer meets the notice requirement specified in 
paragraph (b) of this section.
* * * * *
0
65. Section 156.285 is amended by revising paragraph (c)(5) and 
removing and reserving paragraph (d)(2) to read as follows:


Sec.  156.285  Additional standards specific to SHOP

* * * * *
    (c) * * *
    (5) In a Federally-facilitated SHOP, must send enrollment 
reconciliation files on at least a monthly basis according to a 
process, timeline, and file format established by the Federally-
facilitated SHOP;
* * * * *
    (d) * * *
(2) [Reserved]
* * * * *
0
66. Section 156.298 is amended by--
0
a. Revising paragraph (b)(4).
0
b. Removing paragraph (b)(5).
0
c. Redesignating paragraph (b)(6) as paragraph (b)(5).
0
d. Revising newly redesignated paragraph (b)(5).
    The revision reads as follows:


Sec.  156.298  Meaningful difference standard for Qualified Health 
Plans in the Federally-facilitated Exchanges.

* * * * *
    (b) * * *
    (4) Plan type; or
    (5) Child-only versus non Child-only plan offerings.
* * * * *
0
67. The heading of subpart D is revised to read as follows:

Subpart D--Standards for Qualified Health Plan Issuers on 
Federally-Facilitated Exchanges and State-Based Exchanges on the 
Federal Platform

0
68. Section 156.350 is added to subpart D to read as follows:


Sec.  156.350  Eligibility and enrollment standards for Qualified 
Health Plan issuers on State-based Exchanges on the Federal platform.

    (a) In order to participate in a State-based Exchange on the 
Federal platform,

[[Page 75587]]

a QHP issuer must comply with HHS regulations, and guidance pertaining 
to issuer eligibility and enrollment functions as if the issuer were an 
issuer of a QHP on a Federally-facilitated Exchange. These requirements 
include--
    (1) Section 156.285(a)(4)(ii) regarding the premiums for plans 
offered on the SHOP;
    (2) Section 156.285(c)(8)(iii) regarding enrollment process for 
SHOP; and
    (3) Section 156.715 regarding compliance reviews of QHP issuers, to 
the extent relating directly to applicable eligibility and enrollment 
functions.
    (b) HHS will permit issuers of QHPs in each State-based Exchange on 
the Federal platform to directly enroll applicants in a manner that is 
considered to be through the Exchange, as if the issuers were issuers 
of QHPs on Federally-facilitated Exchanges under Sec.  156.1230(a), to 
the extent permitted by applicable State law.
    (c) If the State-based Exchange on the Federal platform does not 
substantially enforce a requirement in paragraph (a) of this section 
against the issuer or plan, then HHS may do so, in accordance with the 
enforcement remedies in subpart I of this part, subject to the 
administrative review process in subpart J of this part.
0
69. Section 156.805 is amended by revising paragraph (d) to read as 
follows:


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

* * * * *
    (d) Request for hearing. (1) An issuer may appeal the assessment of 
a civil money penalty under this section by filing a request for 
hearing under an applicable administrative hearing process.
    (2) If an issuer files a request for hearing under this paragraph 
(d), the assessment of a civil money penalty will not occur prior to 
the issuance of the final administrative decision in the appeal.
* * * * *
0
70. Section 156.810 is amended by revising paragraphs (a)(12) and (13) 
and (e) and adding paragraphs (a)(14) and (15) to read as follows:


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

    (a) * * *
    (12) The QHP issuer substantially fails to meet the requirements 
related to the cases forwarded to QHP issuers under subpart K of this 
part;
    (13) The QHP issuer substantially fails to meet the requirements 
related to the offering of a QHP under subpart M of this part;
    (14) The QHP issuer offering the QHP is the subject of a pending, 
ongoing, or final State regulatory or enforcement action or 
determination that relates to the issuer offering QHPs in the 
Federally-facilitated Exchanges; or
    (15) HHS reasonably believes that the QHP issuer lacks the 
financial viability to provide coverage under its QHPs until the end of 
the plan year.
* * * * *
    (e) Request for hearing. An issuer may appeal the decertification 
of a QHP offered by that issuer under paragraph (c) or (d) of this 
section by filing a request for hearing under an applicable 
administrative hearing process.
    (1) If an issuer files a request for hearing under this paragraph 
(e):
    (i) If the decertification is under paragraph (b)(1) of this 
section, the decertification will not take effect prior to the issuance 
of the final administrative decision in the appeal, notwithstanding the 
effective date specified in paragraph (b)(1) of this section.
    (ii) If the decertification is under paragraph (b)(2) of this 
section, the decertification will be effective on the date specified in 
the notice of decertification, but the certification of the QHP may be 
reinstated immediately upon issuance of a final administrative decision 
that the QHP should not be decertified.
    (2) [Reserved]
0
71. Section Sec.  156.1110 is amended by revising paragraphs (a) and 
(b) and removing paragraph (d) to read as follows:


Sec.  156.1110  Establishment of patient safety standards for QHP 
issuers.

    (a) Patient safety standards. A QHP issuer that contracts with a 
hospital with greater than 50 beds must verify that the hospital, as 
defined in section 1861(e) of the Act:
    (1) For plan years beginning before January 1, 2017, is Medicare-
certified or has been issued a Medicaid-only CMS Certification Number 
(CCN) and is subject to the Medicare Hospital Conditions of 
Participation requirements for--
    (i) A quality assessment and performance improvement program as 
specified in 42 CFR 482.21; and
    (ii) Discharge planning as specified in 42 CFR 482.43.
    (2) For plan years beginning on or after January 1, 2017--
    (i)(A) Utilizes a patient safety evaluation system as defined in 42 
CFR 3.20; and
    (B) Implements a mechanism for comprehensive person-centered 
hospital discharge to improve care coordination and health care quality 
for each patient; or
    (ii) Implements evidence-based initiatives to reduce all cause 
preventable harm, prevent hospital readmission, improve care 
coordination and improve health care quality through the collection, 
management and analysis of patient safety events.
    (3) A QHP issuer must ensure that each of its QHPs meets the 
patient safety standards in accordance with this section.
    (b) Documentation. A QHP issuer must collect:
    (1) For plan years beginning before January 1, 2017, the CCN from 
each of its contracted hospitals with greater than 50 beds, to 
demonstrate that those hospitals meet patient safety standards required 
in paragraph (a)(1) of this section; and
    (2) For plan years beginning on or after January 1, 2017, 
information, from each of its contracted hospitals with greater than 50 
beds, to demonstrate that those hospitals meet patient safety standards 
required in paragraph (a)(2) of this section.
* * * * *
0
72. Section 156.1220 is amended by revising paragraphs (a)(3) and 
(a)(4)(ii) to read as follows:


Sec.  156.1220  Administrative appeals.

    (a) * * *
    (3) Time for filing a request for reconsideration. The request for 
reconsideration must be filed in accordance with the following 
timeframes:
    (i) For advance payments of the premium tax credit, advance 
payments of cost-sharing reductions, or Federally-facilitated Exchange 
user fee charges, within 30 calendar days after the date of the final 
reconsideration notification specifying the aggregate amount of advance 
payments of the premium tax credit, advance payments of cost-sharing 
reductions, and Federally-facilitated Exchange user fees for the 
applicable benefit year;
    (ii) For a risk adjustment payment or charge, including an 
assessment of risk adjustment user fees, within 30 calendar days of the 
date of the notification under Sec.  153.310(e) of this subchapter;
    (iii) For a reinsurance payment, within 30 calendar days of the 
date of the notification under Sec.  153.240(b)(1)(ii) of this 
subchapter;

[[Page 75588]]

    (iv) For a default risk adjustment charge, within 30 calendar days 
of the date of the notification of the default risk adjustment charge;
    (v) For reconciliation of cost-sharing reductions, within 30 
calendar days of the date of the notification of the cost-sharing 
reduction reconciliation payment or charge; and
    (vi) For a risk corridors payment or charge, within 30 calendar 
days of the date of the notification under Sec.  153.510(d) of this 
subchapter.
    (4) * * *
    (ii) Notwithstanding paragraph (a)(1) of this section, a 
reconsideration with respect to a processing error by HHS, HHS's 
incorrect application of the relevant methodology, or HHS's 
mathematical error may be requested only if, to the extent the issue 
could have been previously identified by the issuer to HHS under Sec.  
153.710(d)(2) of this subchapter, it was so identified and remains 
unresolved.
* * * * *
0
73. Section 156.1250 is revised to read as follows:


Sec.  156.1250  Acceptance of certain third party payments.

    (a) Issuers offering individual market QHPs, including stand-alone 
dental plans, and their downstream entities, must accept premium and 
cost-sharing payments from the following third-party entities on behalf 
of plan enrollees:
    (1) A Ryan White HIV/AIDS Program under title XXVI of the Public 
Health Service Act;
    (2) An Indian tribe, tribal organization, or urban Indian 
organization; and
    (3) A local, State, or Federal government program, including a 
grantee directed by a government program to make payments on its behalf 
consistent with the program's statutory authority.
    (b) An entity making third party payments of premiums under 
paragraph (a) of this section must notify HHS of its intent to do so, 
and the expected number of consumers for which it will do so, in a 
format and timeline established by HHS.
0
74. Section 156.1256 is added to subpart M to read as follows:


Sec.  156.1256  Other notices.

    As directed by the FFE, health insurance issuer that is offering 
QHP coverage through an FFE must notify its enrollees of material plan 
or benefit display errors and the enrollees' eligibility for a special 
enrollment period, included in Sec.  155.420(d)(4) of this subchapter, 
within 30 calendar days after the error is identified.

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

0
75. 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
76. Section 158.103 is amended by revising the definitions of ``Large 
Employer'', ``Small Employer'', and ``Unpaid claim reserves'' to read 
as follows:


Sec.  158.103  Definitions.

* * * * *
    Large Employer has the meaning given the term in Sec.  144.103 of 
this subchapter.
* * * * *
    Small Employer has the meaning given the term in Sec.  144.103 of 
this subchapter.
* * * * *
    Unpaid claim reserves means reserves and liabilities established to 
account for claims that were incurred during the MLR reporting year but 
had not been paid within 6 months of the end of the MLR reporting year.
0
77. Section 158.140 is amended by revising paragraph (a) introductory 
text to read as follows:


Sec.  158.140  Reimbursement for clinical services provided to 
enrollees.

    (a) General requirements. The report required in Sec.  158.110 must 
include direct claims paid to or received by providers, including under 
capitation contracts with physicians, whose services are covered by the 
policy for clinical services or supplies covered by the policy. In 
addition, the report must include claim reserves associated with claims 
incurred during the MLR reporting year, the change in contract 
reserves, reserves for contingent benefits and the medical claim 
portion of lawsuits, and any incurred experience rating refunds. 
Reimbursement for clinical services, as defined in this section, is 
referred to as ``incurred claims.'' All components of and adjustments 
to incurred claims, with the exception of contract reserves, must be 
calculated based on claims incurred only during the MLR reporting year 
and paid through June 30th of the following year. Contract reserves 
must be calculated as of December 31st of the applicable year.
* * * * *

    Dated: October 23, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 17, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-29884 Filed 11-20-15; 4:15 pm]
 BILLING CODE 4120-01-P