Federal Register, Volume 81 Issue 172 (Tuesday, September 6, 2016)

[Federal Register Volume 81, Number 172 (Tuesday, September 6, 2016)]
[Proposed Rules]
[Pages 61456-61536]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20896]

[[Page 61455]]

Vol. 81

Tuesday,

No. 172

September 6, 2016

Part III

Department of Health and Human Services

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45 CFR Parts 144, 146, 147, 148, et al.

Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2018; Proposed Rule

Federal Register / Vol. 81 , No. 172 / Tuesday, September 6, 2016 /
Proposed Rules

[[Page 61456]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 146, 147, 148, 153, 154, 155, 156, 157, and 158

[CMS-9934-P]
RIN 0938-AS95

Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2018

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 program; cost-sharing
parameters and cost-sharing reductions; and user fees for Federally-
facilitated Exchanges and State-based Exchanges on the Federal
platform. It also provides additional guidance relating to standardized
options; qualified health plans; consumer assistance tools; network
adequacy; the Small Business Health Options Program; stand-alone dental
plans; fair health insurance premiums; guaranteed renewability; the
medical loss ratio program; eligibility and enrollment; 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 October 6, 2016.

ADDRESSES: In commenting, please refer to file code CMS-9934-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-9934-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-9934-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, Lindsey
Murtagh, (301) 492-4106, or Michelle Koltov, (301) 492-4225 for general
information.
Lisa Cuozzo, (410) 786-1746, for matters related to fair health
insurance premiums, guaranteed renewability, and single risk pool.
Michael Cohen, (301) 492-4277, for matters related to the Pre-
Existing Condition Insurance Plan Program.
Kelly Drury, (410) 786-0558, or Krutika Amin, (301) 492-5153, for
matters related to risk adjustment.
Adrianne Patterson, (410) 786-0686, for matters related to
sequestration, risk adjustment data validation discrepancies, and
administrative appeals.
Emily Ames, (301) 492-4246, for matters related to language access.
Dana Krohn, (301) 492-4412, for matters related to periodic data
matching, redeterminations of advance payments of the premium tax
credit, and appeals.
Ryan Mooney, (301) 492-4405, for matters related to premium
payment, billing, and terminations due to fraud.
Christelle Jang, (410) 786-8438, for matters related to the Small
Business Health Options Program (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 mid-year
withdrawals, and other standards for QHP issuers.
Ielnaz Kashefipour, (301) 492-4376, for matters related to
standardized options.
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 and direct enrollment.
Allison Yadsko, (410) 786-1740, for matters related to levels of
coverage and actuarial value.
Pat Meisol, (410) 786-1917, for matters related to cost-sharing
reductions, reconciliation of the cost-sharing reduction portion of
advance payments discrepancies, and the premium adjustment percentage.
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 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 2018
A. Part 144--Requirements Relating to Health Insurance Coverage
B. Part 146--Requirements for the Group Health Insurance Market

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C. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
D. Part 148--Requirements for the Individual Health Insurance
Market
E. Part 152--Pre-Existing Condition Insurance Plan Program
F. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment Under the Affordable Care Act
G. Part 154--Health Insurance Issuer Rate Increases: Disclosure
and Review Requirements
H. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
I. Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
J. Part 157--Employer Interactions With Exchanges and Shop
Participation
K. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
IV. Collection of Information Requirements
A. ICRs Regarding Upload of Risk Adjustment Data
B. ICRs Regarding Data Validation Requirements When HHS Operates
Risk Adjustment
C. ICR Regarding the Interim and Final Discrepancy Reporting
Processes for Risk Adjustment Data Validation When HHS Operates Risk
Adjustment
D. ICR Regarding Standardized Options in SBE-FPs
E. ICR Regarding Differential Display of Standardized Options on
the Web sites of Agents and Brokers and QHP Issuers
F. ICR Regarding Ability of States To Permit Agents and Brokers
To Assist Qualified Individuals, Qualified Employers, or Qualified
Employees Enrolling in QHPs
G. ICR Regarding Eligibility Redeterminations
H. ICR Regarding Termination of Exchange Enrollment or Coverage
I. ICR Regarding QHP Issuer Request for Reconsideration
J. ICR Regarding Notification by Issuers Denied Certification
K. ICR Regarding the Discrepancy Reporting Processes for the
Reconciliation of the Cost-Sharing Reduction Portion of Advance
Payments
L. ICRs Regarding Administrative Appeals
M. ICR Regarding Medical Loss Ratio
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
CPI Consumer price index
ECP Essential community provider
ED Enrollment duration
EDGE External data gathering environment
EHB Essential health benefits
ESRD End Stage Renal Disease
FDA Food and Drug Administration
FFE Federally-facilitated Exchange
FF-SHOP Federally-facilitated Small Business Health Options Program
FPL Federal poverty level
FR Federal Register
FTE Full-time equivalent
HCC Hierarchical condition category
HDHP High deductible health plan
HHS United States Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
HMO Health maintenance organization
IRS Internal Revenue Service
LEP Limited English proficient/proficiency
MLR Medical loss ratio
NAIC National Association of Insurance Commissioners
NDC National Drug Code
NHEA National Health Expenditure Accounts
OMB Office of Management and Budget
PCIP Pre-Existing Condition Insurance Plan
PHS Act Public Health Service Act
PI Personal income
PMPM Per member per month
PPO Preferred provider organization
QHP Qualified health plan
QIA Quality improvement activities
RXC Prescription Drug Categories
SADP Stand-alone dental plan
SBC Summary of benefits and coverage
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.)
USP United States Pharmacopeia

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 claim a premium tax credit to make health insurance
premiums 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 risk adjustment program
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, to further promote stable premiums in the
individual and small group markets, we propose several updates to the
risk adjustment methodology based on our experience with the program to
date that are intended to refine the methodology's ability to estimate
risk. In particular, we propose updates to better estimate the risk
associated with enrollees who are not enrolled for a full 12 months, to
use prescription drug data to update the predictive ability of our risk
adjustment models, and to establish transfers that will better account
for the risk of high-cost enrollees. We propose a number of policies
relating to the use of external data gathering environment (EDGE)
server data for recalibration of our risk adjustment models, and the
use of more recent data for future calibrations. We also propose
several amendments to the risk adjustment data validation process,
including proposals relating to the review of prescription drug data
and the establishment of a discrepancy identification and
administrative appeals process.
In addition to provisions aimed at stabilizing premiums, we propose
several provisions related to cost-sharing parameters. First, we
propose the premium adjustment percentage for 2018, 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 2018. We also propose the maximum annual limitations on
cost sharing for the 2018 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.
We also propose a number of amendments that we believe would help
promote consumer choice in health

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plans. These include a proposal specifying that at least one QHP in the
silver coverage level and at least one QHP in the gold coverage level
must be offered throughout each service area in which a QHP issuer
offers coverage through the Exchange; and a proposal to permit a
broader de minimis range for the actuarial value of bronze plans to
permit greater flexibility in benefit design and to accommodate
proposed updates to the 2018 Actuarial Value (AV) Calculator.
Our proposal requiring QHP issuers on an Exchange to participate in
the Exchange for a full plan year (unless a basis for suppression
applies) as a QHP certification requirement would help ensure that
individuals enrolling through special enrollment periods and newly
qualified employees have access to a range of plans that is generally
comparable to the range of plans that can be accessed by those who
enroll during an open enrollment period. We also seek comment on
whether to remove a requirement tying participation in the individual
market Federally-facilitated Exchanges to participation in the
Federally-facilitated Small Business Health Options Programs.
We also propose to expand the medical loss ratio (MLR) provision
allowing issuers to defer reporting of policies newly issued with a
full 12 months of experience (rather than policies newly issued and
with less than 12 months of experience) in that MLR reporting year, and
to limit the total rebate liability payable with respect to a given
calendar year. We propose several changes to our guaranteed
renewability regulations that would address instances where issuers may
inadvertently trigger a 5-year prohibition on re-entering an applicable
market. In these select instances, we believe it is appropriate to
allow issuers to remain in the applicable market, and believe allowing
so will improve the availability of choice for consumers. We also
propose a change to our age rating rules for children.
In this proposed rule, we propose several provisions regarding when
and how consumers may choose and enroll in plans. This rule includes
proposals relating to codifying several special enrollment periods that
are already available to consumers in order to ensure the rules are
clear and to limit abuse; the enrollment processes in the Small
Business Health Options Program (SHOP); and binder payment deadlines.
We also propose several amendments related to insurance affordability
programs, including regarding eligibility determinations, and periodic
data matching.
We are proposing a number of amendments to assist consumers in
selecting and enrolling in QHPs and insurance affordability programs.
In the HHS Notice of Benefit and Payment Parameters for 2017 Final Rule
(2017 Payment Notice), we established standardized options, which we
will display on HealthCare.gov in a manner that distinguishes them from
other QHPs, and a categorization of network depth. We believe both
policies will make it easier for consumers to select health plans
through HealthCare.gov. In this proposed rule, we expand upon both
policies. For standardized options, we propose four bronze standardized
options (including one health savings account-eligible high deductible
health plan), and three standardized options at each of the silver,
silver cost-sharing reduction variations, and gold metal levels. We
propose to select one standardized option at each metal level and one
at each cost-sharing reduction plan variation level for use in each
State. We hope that by increasing the scope of potential standardized
designs, we will better accommodate State cost-sharing laws. We also
propose to make differential display of standardized options available
in State-based Exchanges on the Federal platform (SBE-FPs) at the
State's option, as well as to require differential display of
standardized options by QHP issuers and web-brokers using a direct
enrollment pathway to facilitate enrollment through a Federally-
facilitated Exchange (FFE) or SBE-FP. Additionally, we propose a number
of standards and consumer protections that would apply to a web-broker
or issuer using the direct enrollment pathway. We propose to augment
our network adequacy display policy to account for QHPs that are part
of an integrated delivery system. We also make proposals relating to
the essential community provider requirements and propose amendments to
the standards regarding providing taglines in non-English languages
indicating the availability of language services.
We seek comment on potential ways to further support the transition
of former Pre-Existing Condition Insurance Plan (PCIP) Program
enrollees into the Exchange to ensure that they do not experience a
lapse in coverage.
We also propose several amendments that would strengthen Exchanges'
oversight capabilities. These include proposals requiring issuers
attempting to rescind coverage purchased through the Exchange to show
that the rescission is appropriate; and making explicit HHS's authority
to impose civil money penalties (CMPs) in situations where QHP issuers
are non-responsive or uncooperative with compliance reviews. We also
propose an avenue through which issuers can appeal a non-certification
or decertification.
Finally, in this proposed rule, we propose minor adjustments to our
rules governing the single risk pool, SHOP, user fees, and notices,
including notices related to SHOP, decertification, and appeals.

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.''
The Affordable Care Act reorganizes, amends, and adds to the
provisions 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, geographic 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 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 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 former section 2712 and section 2742 of the PHS Act, as added by
the Health Insurance Portability and Accountability Act of 1996
(HIPAA), 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 medical
loss ratio 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 directs the Secretary, in conjunction with the States,
to monitor premium increases of health insurance coverage offered
through an Exchange or outside of an Exchange beginning with plan years
starting in 2014.
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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.
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Section 1101 of the Affordable Care Act required the Secretary to
establish a temporary high-risk health insurance pool program to
provide health insurance coverage from the establishment of the program
until January 1, 2014 for eligible individuals, namely U.S. residents
who are U.S. citizens or lawfully present in the U.S.; did not have
other health insurance coverage in the 6 months preceding enactment;
and have a pre-existing condition. Section 1101 also requires that the
Secretary develop procedures to provide for the transition of eligible
individuals enrolled in this health insurance coverage into qualified
health plans offered through an Exchange to avoid a lapse in coverage.
Section 1302 of the Affordable Care Act provides for the
establishment of an essential health benefits (EHB) package that
includes coverage of EHB (as defined by the Secretary), cost-sharing
limits, and actuarial value (AV) requirements. The law directs that
EHBs be equal in scope to the benefits covered by a typical employer
plan and that they cover at least the following 10 general categories:
Ambulatory patient services; emergency services; hospitalization;
maternity and newborn care; mental health and substance use disorder
services, including behavioral health treatment; prescription drugs;
rehabilitative and habilitative services and devices; laboratory
services; preventive and wellness services and chronic disease
management; and pediatric services, including oral and vision care.
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 market coverage, irrespective of whether
such coverage is offered through an Exchange. In addition, section
2707(b) of the PHS Act directs non-grandfathered group health plans to
ensure that cost sharing under the plan does not exceed the limitations
described in section 1302(c)(1) 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, AV is calculated based on the
provision of EHB to a standard population. Section 1302(d)(3) of the
Affordable Care Act directs the Secretary to develop guidelines that
allow for de minimis variation in AV calculations.
Section 1311(b)(1)(B) of the Affordable Care Act directs that the
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 under
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)(C) of the Affordable Care Act states that the
Secretary is to provide for special enrollment periods specified in
section 9801 of the Internal Revenue Code of 1986 (the Code) and other
special enrollment periods under circumstances similar to such periods
under part D of title XVIII of the Social Security Act (the Act).
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.
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 a Federally-facilitated Exchange under section
1321(c)(1) of the Affordable Care Act, HHS has the

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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. Furthermore, these user fees are
appropriated to CMS in the CMS Program Management appropriation.
Section 1321(c)(2) of the Affordable Care Act authorizes the
Secretary to enforce the Exchange standards using 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 with respect to health insurance issuers
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 1343 of the Affordable Care Act establishes a risk
adjustment program in which States, or HHS on behalf of States,
collects charges from health insurance issuers that attract lower-risk
populations in order to use those funds to provide payments to health
insurance issuers that attract higher-risk populations, such as those
with chronic conditions, 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.
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).
In the December 2, 2015 Federal Register (80 FR 75487), we
published a proposed rule outlining the benefit and payment parameters
for the 2017 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 2017 Payment Notice). We published the 2017 Payment Notice
final rule in the March 8, 2016 Federal Register (81 FR 12203).
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). We also set forth standards related to Exchange
user fees in the 2014 Payment Notice.
In the 2017 Payment Notice we established additional Exchange
standards, including requirements for State Exchanges using the Federal
platform and standardized options.
In an interim final rule with comment published in the May 11, 2016
Federal Register (81 FR 29146) we amended the parameters of certain
special enrollment periods.
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

[[Page 61461]]

Accreditation Final Rule, which was published in the February 25, 2013
Federal Register (78 FR 12833) (EHB Rule).
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\5\ Essential Health Benefits Bulletin. (Dec. 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. Feb.
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).
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 relating to the MLR program on December 1, 2010 (75
FR 74863). A final rule was published in the December 7, 2011 Federal
Register (76 FR 76573). An interim final rule 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).
8. Pre-Existing Condition Insurance Plan Program
We published an interim final rule in the July 30, 2010 Federal
Register (75 FR 45013) setting forth implementing regulations for the
Pre-Existing Condition Insurance Plan Program. An amendment to this
interim final rule was published in the August 30, 2012 Federal
Register (77 FR 52614). We published an interim final rule in the May
22, 2013 Federal Register (78 FR 30218).

B. Stakeholder Consultation and Input

HHS has consulted with stakeholders on policies related to the
operation of Exchanges, including the SHOPs, 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.
On March 31, 2016, we hosted a public conference to discuss the
potential improvements to the Federally certified HHS-operated risk
adjustment methodology. Prior to the conference, we published the
``March 31, 2016, HHS-Operated Risk Adjustment Methodology Meeting:
Discussion Paper'' (``White Paper''),\7\ on which we received public
comment. These comments are available at: https://www.regtap.info/uploads/library/RA_Onsite_Discussion_Paper_Comments_5CR_080916.pdf.
---------------------------------------------------------------------------

\7\ Available at: https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

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, 148, 153, 154, 155, 156, 157 and 158.
The proposed regulations in parts 144 and 154 would make conforming
revisions to the regulatory definitions of ``plan'' and ``product.''
The proposed regulations in parts 146, 147 and 148 would address
two scenarios in which the discontinuation of all coverage currently
offered by an issuer within a market and State will not be treated as a
market withdrawal for purposes of the guaranteed renewability
requirements. The proposed regulations in part 147 would also create
multiple child age bands for rating purposes, and would amend the
provision regarding limited open enrollment periods (also known as
special enrollment periods) in the individual market to reflect the
proposed amendments regarding special enrollment periods in the
Exchanges.
The discussion in part 152 seeks comment on potential approaches to
ensure the successful transition of former Pre-Existing Condition
Insurance Plan (PCIP) Program enrollees to the Exchange without a lapse
in coverage, under the PCIP statute.
The proposed regulations in part 153 include the risk adjustment
user fee for 2018 and outline a number of proposed modifications to the
HHS risk adjustment methodology, including modifications to: (1)
Address partial year enrollment; (2) use prescription drug data to
predict actuarial risk; and (3) alter the methodology to better account
for high-cost enrollees. We also propose to use EDGE server data to
recalibrate the risk adjustment models, and propose revisions to the
risk adjustment data validation process.
The proposed regulations in part 155 include several amendments
regarding standardized options, including the 2018 cost-sharing
structures for standardized options. Other proposals in part 155 are
related to the eligibility and verification processes for insurance
affordability programs. We propose to amend rules related to enrollment
of qualified individuals into QHPs and make various proposals related
to the SHOPs. We propose to amend the regulations requiring Exchanges,
QHP issuers, and web-brokers to provide taglines in non-English
languages. We propose the required contribution percentage for 2018. We
propose a new policy regarding appealing denials of QHP certification.
We also propose amendments to the standards applicable in State
Exchanges using the Federal platform for SHOP functions in parts 155
and 156. We also propose amendments to the regulations applicable to
qualified employers in the SHOPs in part 157.
The proposed regulations in part 156 set forth proposals related to
cost-sharing parameters, 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
2018. We also propose the user fee rate applicable in the FFEs and SBE-
FPs. The proposed regulations also include an amendment providing for
calibration of the single risk pool index rate. We also propose changes
regarding AV, levels of coverage, and essential community provider
requirements.
The proposed amendments to the regulations in part 158 propose

[[Page 61462]]

revisions related to deferral of reporting of experience for newer
business, as well as revisions related to limiting the total rebate
liability payable with respect to a given calendar year.

III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2018

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

1. Definitions (Sec. 144.103)
We propose to revise the regulatory definitions of ``plan'' and
``product'' in Sec. 144.103. Specifically, we propose to remove
language from each definition that would restrict a plan or product
from being considered the same plan or product when it is no longer
offered by the same issuer, but is still offered by a different issuer
in the same controlled group. We also propose to add a second sentence
to clarify that, in the case of a product that has been modified,
transferred, or replaced, the product will be considered to be the same
product when it meets the standards for uniform modification of
coverage at Sec. 146.152(f), Sec. 147.106(e), or Sec. 148.122(g), as
applicable. For further discussion of the provisions of this proposed
rule related to the transfer or replacement of all products in a market
in a State, please see the preamble to Sec. 147.106. Finally, for
purposes of clarity, we propose to include examples of product network
types in the definition of ``product'' in Sec. 144.103, including
health maintenance organization (HMO), preferred provider organization
(PPO), exclusive provider organization, point of service, and
indemnity.

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

1. Guaranteed Renewability of Coverage for Employers in the Group
Market (Sec. 146.152)
For a discussion of the provisions of this proposed rule related to
part 146, please see the preamble to Sec. 147.106.

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

1. Fair Health Insurance Premiums (Sec. 147.102)
Section 2701 of the PHS Act, as implemented at 45 CFR
147.102(a)(3), permits premium rates to vary based on age within a
ratio of 3 to 1 for adults. Section 147.102(d) provides for uniform age
bands, including a single age band for individuals age 0 through 20. In
the proposed 2017 Payment Notice (80 FR 75496), we stated that we
recognized that the Federal child age band and factor may need to be
updated to better reflect the health risk of children. While average
health care costs vary by the age of the child, in general, claim costs
are highest for children age 0 through 4, followed by individuals age
15 through 20. Children age 5 through 14 generally have lower claim
costs. Having one age band for individuals age 0 through 20, together
with the current child age factor, may result in significant premium
increases for an individual when reaching age 21. In general, the
premium at age 21 is 57% higher than the premium at age 20. Therefore,
we sought comment regarding age rating for children to inform our
reconsideration of the child age rating factor in the Federal uniform
age curve.\8\
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\8\ Under 45 CFR 147.102(e), each State may establish a uniform
age rating curve in the individual or small group market, or both
markets, for rating purposes. If a State does not establish a
uniform age rating curve or provide information on such age curve in
accordance with Sec. 147.103, a default uniform age rating curve
specified in guidance by the Secretary will apply in that State that
takes into account the rating variation permitted for age under
State law.
---------------------------------------------------------------------------

Most comments submitted to HHS in response to the proposed 2017
Payment Notice supported continuing to spread the cost of newborns
across a broader age band, and supported a more gradual transition in
premiums up to age 21. Some stakeholders also indicated that the
default child age factor of 0.635 should be higher, stating that the
relatively low child age factor currently leads to insufficient
premiums for children. We conducted an analysis of total annual cost
from a national commercial database that incorporates 2015 claims data
from the individual and small group markets. Based on this analysis, we
propose to amend Sec. 147.102(d) to create multiple child age bands
and propose a corresponding increase in the overall child age factor.
We propose one age band for individuals age 0 through 14 and then
single-year age bands for individuals age 15 through 20, effective for
plan years or policy years beginning on or after January 1, 2018.
Establishing single-year age bands beginning at age 15 would be likely
to result in small annual increases in premiums for children age 15 to
20, which would help mitigate large premium increases attributable to
age due to the transition from a child to an adult age rating. However,
we solicit comments on alternative approaches that would achieve these
objectives.
We recognize that age rating factors have a significant impact on
issuers' approach to developing health insurance rates and therefore
also propose age rating factors for the default Federal standard child
age curve. These factors, listed in Table 1, correspond to the proposed
change to child age bands. We solicit comments on these child age
rating factors and whether they should be implemented at one time or
phased in over a 3-year period. As stated in the preamble to the 2014
Market Rules (78 FR at 13413), we intend to revise the default Federal
standard age curve periodically in guidance, but no more frequently
than annually, to reflect market patterns in the individual and small
group markets. We propose to reflect this approach by amending Sec.
147.102(e). We intend to monitor the effect of these new age bands and
rating factors, if finalized, to determine whether further refinements
are needed.

Table 1--CMS Standard Age Curve for Children
------------------------------------------------------------------------
Current Proposed
Age premium ratio premium ratio
------------------------------------------------------------------------
0-14.................................... 0.635 0.765
15...................................... 0.635 0.833
16...................................... 0.635 0.859
17...................................... 0.635 0.885
18...................................... 0.635 0.913
19...................................... 0.635 0.941
20...................................... 0.635 0.970
------------------------------------------------------------------------

2. Guaranteed Availability of Coverage (Sec. 147.104)
For a discussion of the provisions of this proposed rule related to
limited open enrollment periods (also known as special enrollment
periods) in Sec. 147.104, please see the preamble to Sec. 155.420.
The guaranteed availability requirement in section 2702 of the PHS
Act generally requires each health insurance issuer that offers health
insurance coverage in the group or individual market in a State to
accept every employer or individual in the State that applies for such
coverage. However, in the case of an issuer that offers coverage
through a network plan, the issuer may limit its offer of coverage to
individuals in the individual market who live or reside in the service
area of such network plan, and to employers in the small group or large
group market with employees who live, work, or reside in the service
area of such network plan.\9\
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\9\ In the 2014 Market Rules, we codified in regulation the
ability of an issuer of a network plan to limit the availability to
individuals who live or reside in the service area, noting that
``[w]hile PHS Act section 2702(c)(1)(A) does not explicitly include
a corresponding exception allowing issuers to limit the sale of
individual market coverage to individuals who live or reside in the
individual market plan's service area, failing to recognize such an
exception would eliminate an issuer's ability to define a service
area for its individual market business within a State. Moreover,
references to persons with individual market coverage in paragraph
(c)(1) and subparagraph (c)(1)(B) of PHS Act section 2702 suggest
that such persons with individual market coverage also were intended
to be described in paragraph (c)(1)(A).''

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[[Page 61463]]

This protection under Federal law does not require that the
employer have a principal business address within the issuer's service
area.\10\ In the 2017 Payment Notice, we amended Sec. 147.102 to
ensure that a network plan could be appropriately rated for sale to an
employer with employees in multiple geographical rating areas,
consistent with both the rating rules and the guaranteed availability
requirements.
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\10\ However, this provision does not require an issuer to offer
coverage to an employer whose place of business is located outside
the State in which the issuer is licensed to do business. Further,
this provision does not require an issuer to offer coverage to an
employer if doing so would exceed the scope of the issuer's State
licensure (for example, the issuer's product is not approved for
sale to an employer where the situs of the contract is outside the
issuer's service area).
---------------------------------------------------------------------------

We understand that some issuers have unique network sharing
agreements with other affiliated issuers through which an employer's
employees may access in-network coverage outside the service area of
the primary issuer, using the provider network of the affiliated
issuers. Under the terms of these agreements, the affiliated issuers
require the employer itself to be located in the issuer's service area
in order to be eligible to purchase coverage, and the issuers agree not
to offer products to an employer whose business headquarters is outside
of the primary issuer's service area. For example, affiliated issuers A
and B have service areas A and B, respectively. Under the terms of the
agreements, an employer with business headquarters in service area A
could purchase coverage from issuer A to cover its employees in both
service areas A and B, but that employer could not purchase coverage
from issuer B.
We understand these issuers believe issuer B satisfies the
guaranteed availability requirements because the employer is guaranteed
coverage from issuer A, and its employees in service area B can have
access to the coverage under the plan issued by issuer A using issuer
B's network. These issuers explain that this system promotes simplicity
for employers, who can purchase a single plan from one of the locally
affiliated issuers serving the employer's area to cover their employees
in multiple service areas.
We seek comment on whether and how restricting an employer's
ability to purchase coverage from an issuer, when the offering of such
coverage would not exceed the scope of the issuer's license from the
applicable State authority, may limit employers' options.
We also seek comments on these and other similar arrangements and
whether or how they could be structured, consistent with State
licensure requirements, to satisfy the guaranteed availability right of
employers to purchase all products that are approved for sale from an
issuer when the employer has employees who live, work, or reside within
the issuer's service area.
3. Guaranteed Renewability of Coverage (Sec. 147.106)
a. Market Withdrawal Exception to Guaranteed Renewability Requirements
PHS Act section 2703(c)(2)(B) provides that a health insurance
issuer that elects to discontinue all health insurance coverage in the
individual or group market in a State is prohibited from re-entering
the applicable market for at least 5 years. The 5-year ban on market
re-entry is codified at Sec. 147.106(d)(2). However, we recognize that
interpreting certain issuer transactions or reorganizations to be
withdrawals from the market, triggering the 5-year ban on market re-
entry, may have unintended effects and may not be necessary to ensure
the continuity of coverage for consumers, which is a primary focus of
the protections in the guaranteed renewability statute.
For example, as part of a corporate reorganization, an issuer could
transfer all of its products to another related issuer, where the
products otherwise would be considered the same products based on the
uniform modification standards at Sec. 147.106(e). More specifically,
an issuer with multiple lines of business, such as a Medicaid managed
care line and a commercial line, could decide to create a subsidiary
and transfer its commercial line of business to the subsidiary. In such
cases, enrollees in the commercial products maintain continuity of
coverage when their plans and products are not changed beyond what is
permitted by the scope of the uniform modification provisions. We also
note that several States evaluate transactions at the holding company
level and have informed HHS that a transaction of the type described in
this example would not trigger the 5-year ban on market re-entry and
corresponding notice requirement under State law.
We recognize that interpreting such a transfer to constitute a
market withdrawal could have the unintended consequences of potentially
raising conflicts with State approaches and unnecessarily limiting
issuer corporate structuring transactions. Therefore, to align with
State approaches to corporate structuring or other transactions within
a controlled group of issuers, and to avoid unintended market bans
where continuity of coverage is effectively provided, we propose to
amend Sec. 147.106(e)(3)(i) to provide that, for purposes of
guaranteed renewability, a product will be considered to be the same
product when offered by a different issuer within an issuer's
controlled group, provided it otherwise meets the standards for uniform
modification of coverage.\11\
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\11\ As we explained in an FAQ related to Market Reforms,
https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/qa_hmr.html, enrollees in a grandfathered product can maintain that
coverage if that coverage continues to be offered and the coverage
does not make a change that would cause the product to cease to be
grandfathered as provided for in regulations. See 26 CFR 54.9815-
1251(g)(1); 29 CFR 2590.715-1251(g)(1); and 45 CFR 147.140(g)(1).
---------------------------------------------------------------------------

For this purpose, we propose to use a definition based on the
Internal Revenue Service (IRS) definition of controlled group that
applies for purposes of determining whether a group of two or more
persons is treated as a single covered entity under the health
insurance providers fee under section 9010 of the Affordable Care Act
and 26 CFR 57.2(c). Specifically, for purposes of guaranteed
renewability, we propose that ``controlled group'' means a group of two
or more persons that is treated as a single employer under section
52(a), 52(b), 414(m), or 414(o) of the Internal Revenue Code of 1986,
as amended. We propose that definition for consistency with other
Affordable Care Act provisions, including sections 9008 and 9010, which
pertain to the branded prescription drug fee and health insurance
providers fee, respectively, and are familiar to health insurance
issuers. We note that the definition of issuer group under 45 CFR
156.20 is also familiar to issuers and we are considering whether to
use a similar definition for purposes of these regulations. That
section provides that the term issuer group means all entities treated
under subsection (a) or (b) of section 52 of the Code as a member of
the same controlled group of corporations as (or under common control
with) a health insurance issuer, or issuers affiliated by the common
use of a nationally licensed service mark. We solicit comment on
whether this or another definition would be appropriate.
As a result of this proposal, issuers transferring products to
another issuer in their controlled group that otherwise remain within
the scope of a uniform modification would not be required to

[[Page 61464]]

send discontinuation notices under paragraph (c)(1) or (d)(1), as
applicable. However, because this interpretation considers the
transferred product to be the same as the product previously offered,
the issuer of the coverage at the time notice must be provided (whether
the current issuer or the acquiring issuer) would be required to
provide a renewal notice in accordance with the timeframe specified in
the regulation. We also propose that States that interpret or apply
market withdrawal provisions differently under State law would not be
prohibited by this interpretation from considering products transferred
to a different issuer within a controlled group to be a new product and
the scenario a market withdrawal. We propose to make conforming
amendments at Sec. Sec. 146.152(f)(3)(i) and 148.122(g)(3)(i).
Because, under this interpretation, the products would be considered
the same products for purposes of continuity of coverage for the
enrollees, we also propose that the products be considered the same
products for purposes of the Federal rate review requirements, to the
extent applicable, and therefore we propose conforming amendments as
described in the preamble to Sec. 154.102. For States where HHS is
responsible for enforcement of the guaranteed renewability provisions
of the PHS Act, we propose to adopt this interpretation and not
consider the transfer of products to a different issuer within a
controlled group to be a market withdrawal when the conditions in this
proposed rule are met, where permitted under applicable State law.
There is a second situation where we have determined that it may
not be appropriate to interpret an issuer's actions to constitute a
market withdrawal resulting in a 5-year ban on market re-entry. When an
issuer discontinues offering all of its products and seeks to offer new
products within the same market, if the changes made to the new
products exceed the scope of a uniform modification of coverage, we
have considered such an action to be a market withdrawal, subject to
the 5-year ban on market re-entry.\12\ In such a scenario an issuer
might, for example, offer only products A, B, and C one year, but then
offer only products D, E, and F the next year, where products D, E and
F differ from products A, B and C in ways that do not meet the criteria
for uniform modification of coverage. This scenario is different from
the first scenario mentioned above because the new products are offered
by the same issuer that previously offered the discontinued products.
State regulators and other interested parties have indicated that this
scenario is not viewed by some States as a market withdrawal under
State law, as long as the issuer continues to provide a product in the
same market in which it previously offered the discontinued
products.\13\ As noted above, we believe ensuring continuity of
coverage for consumers is a primary focus of the protections in the
guaranteed renewability statute. Unlike the circumstances described in
the prior scenario, where the enrollee has continuity of the product,
but with a related issuer, in the situation described here, enrollees
would have continuity with the same issuer, but would not have the
protection of the limitations imposed by the uniform modification
provision. Notwithstanding our prior interpretation described in the
Uniform Modification and Plan/Product Withdrawal FAQ,\14\ we recognize
that the statute could be interpreted to mean that, as long as an
issuer has a product available in the applicable market (even if that
issuer discontinues all of its previously offered products), it has not
withdrawn from the applicable market. Adopting this interpretation may
be in the best interest of consumers, as imposing the 5-year ban on
market re-entry in these circumstances could diminish consumer choice
and market competition.
---------------------------------------------------------------------------

\12\ Uniform Modification and Plan/Product Withdrawal FAQ (Jun.
15, 2015), available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/uniform-mod-and-plan-wd-FAQ-06-15-2015.pdf.
\13\ We also note that, in the context of reenrollment through
an Exchange in coverage under a different product, we stated that,
under certain limited circumstances, enrollments completed under the
hierarchy specified in 45 CFR 155.335(j) will be considered to be a
renewal of the enrollee's coverage.
\14\ Uniform Modification and Plan/Product Withdrawal FAQ (Jun.
15, 2015). Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/uniform-mod-and-plan-wd-FAQ-06-15-2015.pdf.
---------------------------------------------------------------------------

We note that, under our current interpretation requiring that the
issuer leave at least one product in place that meets uniform
modification standards to avoid the 5-year market ban on re-entry, the
issuer would remain subject to Federal rate review under section 2794
with respect to at least one product. Under the new interpretation, an
issuer would be able to avoid Federal rate review altogether without
triggering the 5-year ban by sufficiently altering all of its existing
products. To prevent issuers from avoiding Federal rate review
requirements in this manner, we propose to permit issuers to replace
their entire portfolio of products without triggering the 5-year ban
under the market withdrawal provision when an issuer replaces its
entire portfolio of products in a market with products that are
different in ways that are not within the scope of uniform
modifications, provided the issuer reasonably identifies which newly
offered product (or products) replace which discontinued product (or
products) and subjects the new product (or products) to the Federal
rate review process under part 154 (to the extent otherwise applicable
to coverage of the same type and in the same market (for example, the
Federal rate review process does not apply in the U.S. territories)) as
if it were the same product as the discontinued product it
replaces.\15\ An issuer's identification of which new product replaces
which discontinued product would be considered reasonable if it
reflects the issuer's expectations regarding significant transfer of
enrollment from one product to the other (for example, because the
products have been cross-walked for auto-reenrollment). We also propose
that States that interpret or apply market withdrawal provisions
differently under State law would not be prohibited from continuing to
consider the scenario described here as a market withdrawal. For States
where HHS is responsible for enforcement of the guaranteed renewability
provisions of the PHS Act, we propose to adopt this interpretation and
not consider this scenario to constitute a market withdrawal when the
conditions outlined in this proposed rule are met, where permitted
under applicable State law.
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\15\ Under this interpretation, issuers of health insurance
products offered in the U.S. territories would be able to replace
their products in those markets without subjecting the new products
to the Federal rate review process and without triggering the 5-year
ban.
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We note that in the second scenario, consumers generally will still
get the protection required under the product discontinuance provision
under guaranteed renewability, including a special enrollment period
for loss of minimum essential coverage to select another product made
available by the same or a different issuer, and a notice from the
issuer of the product discontinuance at least 90 days in advance of the
termination of coverage.\16\
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\16\ As noted earlier, under certain limited circumstances,
enrollments through an Exchange into a different product that are
completed under the hierarchy specified in 45 CFR 155.335(j) will be
considered to be a renewal of the enrollee's coverage. In such
cases, a special enrollment period is not available, and a renewal
notice is sent.
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To reflect our proposed interpretations in these two scenarios,

[[Page 61465]]

we propose to add a new paragraph (d)(3) to Sec. 147.106 to provide
that an issuer has not discontinued offering all health insurance
coverage in a market if a member of the issuer's controlled group
continues to offer and make available for enrollment at least one
product of the original issuer that is considered to be the same
product (as proposed to be amended in Sec. 144.103 of this proposed
rule), meaning that any change to the product is within the scope of a
uniform modification of coverage under Sec. 147.106(e), or if the
issuer continues to offer and make available a product in the
applicable market in a State and subjects the new product to the rate
review requirements under part 154 of this title (to the extent
otherwise applicable to coverage of the same type and in the same
market) as if that part applied to that product, and reasonably
identifies a discontinued product that corresponds to the new product
for purposes of such rate review. We also propose to make conforming
amendments to Sec. Sec. 146.152(d)(3) and 148.122(e)(4).
We solicit comment on all aspects of these proposals.
b. Guaranteed Renewability in the Individual Market and Medicare
Eligibility
The guaranteed renewability provision at Sec. 147.106(h)(2) states
that Medicare eligibility or entitlement is not a basis for nonrenewal
or termination of an individual's health insurance coverage in the
individual market. The anti-duplication provision at section 1882(d)(3)
of the Act prohibits the sale or issuance of an individual health
insurance policy to an individual entitled to benefits under Part A or
enrolled under Part B of Medicare \17\ with knowledge that the policy
duplicates health benefits to which the individual is otherwise
entitled under Medicare or Medicaid, but does not expressly prohibit
the renewal of individual health insurance coverage to someone who
becomes entitled to benefits under Part A or enrolls under Part B while
enrolled in the individual market coverage. There also is no
prohibition on issuers covering Medicare beneficiaries under group
health insurance policies.
---------------------------------------------------------------------------

\17\ For information on when individuals are entitled to,
eligible for, or able to enroll in Medicare, see https://www.cms.gov/medicare/eligibility-and-enrollment/origmedicarepartabeligenrol/index.html.
---------------------------------------------------------------------------

Under 45 CFR 147.106, in certain circumstances, issuers can satisfy
their guaranteed renewability obligations by, at the end of a policy
year, reenrolling Medicare beneficiaries who were enrolled in
individual market health insurance coverage when they obtained Medicare
coverage into a different plan within the same individual health
insurance product, or into a different plan within a different
individual health insurance product issued by the same issuer of the
beneficiary's existing individual market coverage. This may occur, for
example, when an issuer makes revisions to a product that exceed the
scope of uniform modification of coverage, thus replacing the existing
product with a new product. Under our proposal earlier in this section
of the preamble, issuers also could satisfy their guaranteed
renewability obligations by reenrolling Medicare beneficiaries into
individual market health insurance coverage that is considered the same
product but that is issued by a different issuer within the issuer's
controlled group. We solicit comments on whether the guaranteed
renewability statute and the anti-duplication provision at section
1882(d)(3) of the Act should together be interpreted to require or
prohibit renewal of a Medicare beneficiary's individual market
coverage, if the issuer has knowledge that the renewed coverage would
duplicate the Medicare beneficiary's benefits: (1) In a plan under the
same contract of insurance; (2) under a plan that was modified but is
considered under the guaranteed renewability provisions to be the same
plan but that would require a new contract; (3) under a different plan
within the same product; (4) under a different product with the same
issuer; or, as discussed earlier in this preamble; (5) under the same
product offered by a different issuer within the issuer's controlled
group. We are particularly interested in information about how
requiring or prohibiting renewal in these circumstances could affect
individuals' decisions to enroll in the Medicare program, their
premiums and out-of-pocket costs if they were insured in the Medicare
program versus the individual market, and the effect on Medicare's and
the insurance plans' risk pools.
We have become aware of an issue that has arisen with respect to
coordination of benefits between Medicare and individual health
insurance coverage. Since Medicare Secondary Payer rules do not apply
to health coverage in the individual health insurance market, Medicare
always pays primary to individual health insurance coverage. Some
issuers have a provision in their individual health insurance policies
indicating that the coverage will pay secondary to Medicare not only
for individuals who are currently covered by Medicare but also for
those who could obtain Medicare coverage (such as those individuals who
must pay for Part A coverage) but who are not currently covered. We
solicit comments on the effects of such provisions on consumers, their
premiums, and out-of-pocket costs, how these provisions could affect
individuals' decisions to enroll in the Medicare program or individual
market coverage, and the effects these provisions and those decisions
could have on the Medicare and individual market risk pools, as well as
whether this is a permissible coordination of benefits provision with
respect to the individuals who could but do not have Medicare coverage.
Given that the Medicare Secondary Payer rules have different provisions
for End Stage Renal Disease (ESRD) beneficiaries, we also welcome
comments on whether a legal basis exists to treat coordination of
benefit provisions that relate to coverage in the individual market for
Medicare beneficiaries differently for Medicare beneficiaries who are
entitled to benefits under Medicare Part A and eligible to enroll under
Part B under the ESRD provisions at 42 U.S.C. 426-1.

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

1. Guaranteed Renewability of Individual Health Insurance Coverage
(Sec. 148.122)
For a discussion of the provisions of this proposed rule related to
part 148, please see the preamble to Sec. 147.106.

E. Part 152--Pre-Existing Condition Insurance Plan Program

1. Pre-Existing Condition Insurance Plan Program (Sec. 152.45)
Section 1101 of the Affordable Care Act directed HHS to establish a
temporary Federal high risk pool program in 2010 to provide health
insurance coverage to individuals who were U.S. citizens or nationals
or lawfully present in the United States, did not have other health
insurance coverage in the 6 months preceding enactment, and had a pre-
existing condition. Section 1101(g)(3)(B) directed HHS to develop
procedures to provide for the transition of eligible individuals
enrolled in health insurance coverage offered through the high risk
pool HHS established into qualified health plans offered through an
Exchange. Those procedures should, in particular, ensure that there is
no lapse in coverage with respect to the individual and may extend
coverage after the termination of the risk pool involved, if the
Secretary determines necessary to avoid such a lapse.

[[Page 61466]]

Starting in 2010, shortly after the Affordable Care Act was
enacted, HHS established and began operating the risk pool program
required under section 1101, which it called the Pre-Existing Condition
Insurance Plan (PCIP) Program, to provide health insurance coverage to
eligible individuals, as defined in the Affordable Care Act. Beginning
in 2013, HHS worked to enroll these individuals in QHPs through the
Exchanges. However, for a variety of reasons, individuals from the
high-risk pool established under section 1101 may find it difficult to
obtain and maintain coverage in QHPs without a lapse in coverage.
We are therefore seeking information regarding whether and how the
remaining funds provided under section 1101 might be used to ensure the
successful transition of former PCIP enrollees to the Exchange without
a lapse in coverage, consistent with section 1101(g)(3)(B) and its
objective of ensuring that high-risk individuals with preexisting
conditions are able to transition successfully into the new Exchanges
without a lapse in coverage. We seek information, in particular, on the
best ways to identify former PCIP enrollees in a QHP of an issuer that
has participated in the Exchange from 2014 to 2017, available methods
for determining their claims costs, and the necessity of taking steps
to ensure that they do not experience a lapse in coverage. If it is not
possible to identify former PCIP enrollees, HHS also seeks information
about other appropriate measures to assess the size and impact of
former PCIP enrollment on existing issuers.

F. 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 2017,\18\ both the transitional
reinsurance program and risk adjustment program are subject to the
fiscal year 2017 sequestration. The Federal government's 2017 fiscal
year will begin on October 1, 2016. The reinsurance program will be
sequestered at a rate of 6.9 percent for payments made from fiscal year
2017 resources (that is, funds collected during the 2017 fiscal year).
To meet the sequestration requirement for the risk adjustment program
for fiscal year 2017, HHS will sequester risk adjustment payments made
using fiscal year 2017 resources in all States where HHS operates risk
adjustment, at a sequestration rate of 7.1 percent. HHS estimates that
increasing the sequestration rate for all risk adjustment payments made
in fiscal year 2017 to all issuers in the States where HHS operates
risk adjustment by 0.16 percent will permit HHS to meet the required
national risk adjustment program sequestration percentage of 6.9
percent noted in the OMB Report to Congress.
---------------------------------------------------------------------------

\18\ OMB Report to the Congress on the Joint Committee
Reductions for Fiscal Year 2017 (Feb. 9, 2016). Available at:
https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/jc_sequestration_report_2017_house.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 2017 from the
reinsurance and risk adjustment programs will become available for
payment to issuers in fiscal year 2018 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. Definition of Large Employer for the Risk Adjustment and Risk
Corridors Programs (Sec. 153.20)
We propose deleting the definition of ``large employer'' set forth
in Sec. 153.20, which defines a large employer as having the meaning
given to the term at 45 CFR 155.20.\19\ HHS provided notice of our
intent to propose these changes in a public FAQ \20\ which clarified
how an issuer should count an employer's employees to determine whether
an employer is a small employer or large employer for purposes of the
risk adjustment and risk corridors programs.
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\19\ 45 CFR 155.20 defines a large employer, in connection with
a group health plan with respect to a calendar year and a plan year,
as 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.
\20\ FAQs #15450 and #15449, published on April 12, 2016
available at: https://www.regtap.info/faq_viewu.php?id=15450 and
https://www.regtap.info/faq_viewu.php?id=15449.
---------------------------------------------------------------------------

In that FAQ, we clarified that for the risk adjustment program, the
issuer should use the employee counting method used to determine group
size under State law, unless that counting method does not account for
employees that are not full-time. If the State counting method does not
take non-full-time employees into account, then the issuer should use
the counting method under section 4980H(c)(2) of the Code.\21\ The FAQ
also noted that under section 1304(b)(4)(D) of the Affordable Care Act
and Sec. 155.710(d), when a small employer participating in a SHOP
ceases to be a small employer solely by reason of an increase in the
number of its employees, it will continue to be treated as a small
employer for purposes of SHOP participation for as long as it continues
to purchase coverage through the SHOP, and the issuer should treat such
an employer as a small employer for purposes of risk adjustment. We
note that nothing in this proposal supersedes or conflicts with the
option under section 1312(f)(2)(B)(i) of the Affordable Care Act, which
would allow large employers to participate in a SHOP, at the option of
a State.
---------------------------------------------------------------------------

\21\ See 79 FR 8544.
---------------------------------------------------------------------------

In the FAQ, HHS also clarified that for the risk corridors program,
the issuer should use the employee counting method used to determine
group size under State law (see Sec. 153.510(f)). However, under
section 1304(b)(4)(D) of the Affordable Care Act and Sec. 155.710(d),
when a small employer participating in a SHOP ceases to be a small
employer solely by reason of an increase in the number of its
employees, it will continue to be treated as a small employer for
purposes of SHOP participation for as long as it continues to purchase
coverage through the SHOP, and the issuer should treat such an employer
as a small employer for purposes of risk corridors.
We seek comment on this proposal.
3. 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 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

[[Page 61467]]

the Secretary to operate an Exchange may establish a risk adjustment
program, or have HHS do so on its behalf.
On March 31, 2016, HHS convened a public conference to discuss
potential updates to the HHS risk adjustment methodology for the 2018
benefit year and beyond. Prior to the conference, we also issued a
White Paper that was available for public comment.\22\ The conference
and White Paper focused on what we have learned from the 2014 benefit
year of the risk adjustment program, and specific areas of potential
refinements to the methodology, including prescription drug modeling,
addressing partial year enrollment, future recalibrations using risk
adjustment data, and a discussion of the risk adjustment transfer
formula. We received numerous thoughtful and substantive comments to
the White Paper and at the conference, which directly informed the
policy proposals in this Payment Notice.
---------------------------------------------------------------------------

\22\ March 31, 2016, HHS-Operated Risk Adjustment Methodology
Meeting: Discussion Paper (Mar. 24, 2016). Available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

a. Risk Adjustment Applied to Plans in the Individual and Small Group
Markets (Sec. 153.20)
Section 1312(c) of the Affordable Care Act directs issuers to use a
single risk pool for a market--the individual or small group market--
when developing rates and premiums. Section 1312(c)(3) of the
Affordable Care Act gives States the option to merge the individual and
small group market into a single risk pool. To align risk pools for the
risk adjustment program and rate development, we stated in the 2014
Payment Notice that we would merge markets when operating risk
adjustment on behalf of a State if the State elects to do the same for
single risk pool purposes.\23\ When the individual and small group
markets are merged, we stated that the State average premium would be
the average premium of all applicable individual and small group market
plans in the applicable risk pool, and calculations under the transfer
equation would occur across all plans in the applicable risk pool in
the individual and small group markets.
---------------------------------------------------------------------------

\23\ See 78 FR at 15419.
---------------------------------------------------------------------------

Under the section 1312(c)(3) definition of a merged market and its
implementing regulations at Sec. Sec. 156.80 and 147.104, issuers in a
merged individual and small group market must offer the same plans at
the same rates to all applicants in the merged market, must offer
coverage on a calendar year basis, and may not make quarterly rate
adjustments to rates for small group market plans. Some States with
markets that are not merged under the Federal merged market provisions
require issuers to use a combined individual and small group experience
to establish a market-adjusted index rate, but separate the markets for
applying plan adjustment factors and for other purposes. This allows
small group issuers to make quarterly rate changes that would not
otherwise be allowable under the definition at section 1312(c)(3).
Because States that use a combined individual and small group
experience to establish a market-adjusted index rate operate in large
part as a merged market for purposes of rate setting, we believe they
should be risk adjusted as merged markets if the State so elects. Risk
adjustment directly impacts rate setting, and as such, should reflect
the markets in which States allow issuers to set premiums. Beginning
for 2017 benefit year risk adjustment, when HHS will operate risk
adjustment on behalf of all States, we propose to expand our
interpretation of merged market for purposes of HHS risk adjustment as
described in the 2014 Payment Notice to include States that meet the
definition of merged market at section 1312(c)(3), as well as States
that use a combined individual and small group experience to establish
a market-adjusted index rate. HHS will communicate with States that use
a combined individual and small group experience to establish a market-
adjusted index rate to determine whether they elect to be treated as a
merged market for purposes of HHS risk adjustment. We seek comment on
this proposal.
b. 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 for adults, children, or
infants is multiplied by a cost-sharing reductions adjustment.
The enrollment-weighted average risk score of all enrollees in a
particular risk adjustment covered plan, also referred to as 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
accords with the Actuarial Standards Board's Actuarial Standards of
Practice for risk classification.
c. Proposed Updates to the Risk Adjustment Model (Sec. 153.320)
For the 2018 benefit year risk adjustment model, HHS will continue
to incorporate the methodological improvements finalized in the 2017
Payment Notice, such as incorporating preventive services in our
simulation of plan liability and using more granular trend rates that
better reflect the growth in specialty drug expenditures and drugs
generally as compared to medical and surgical expenditures. Consistent
with our discussion in the White Paper, we are proposing a number of
updates to the risk adjustment model, including: (1) Adjustment factors
for partial year enrollment; (2) prescription drug utilization factors;
and (3) modifying transfers to account for high-cost enrollees. We also
propose to recalibrate our risk adjustment models using the most recent
available data following the publication of the final Payment Notice
for the applicable benefit year, and seek comments on other
considerations to improve the model's risk prediction in future
rulemaking.
i. Partial Year Enrollment
After the 2014 benefit year of risk adjustment, we received
feedback indicating that some issuers experienced higher than expected
claims costs for partial year enrollees. We sought comment in the 2017
Payment Notice on how the risk adjustment methodology could be adjusted
to more directly reflect the experience of partial year enrollees, and
we received comments generally supporting an adjustment addressing
partial year enrollees in the risk adjustment model. We also received
feedback to the White Paper that some believe the methodology does not
fully capture the risk associated with enrollees with chronic
conditions who may not have accumulated diagnoses in their partial year
of enrollment.
In general, we believe that individual and small group health plans
are risk adjusted accurately under the HHS risk

[[Page 61468]]

adjustment methodology. In light of our experience with the 2014
benefit year, we have observed that risk adjustment may not fully
account for when a plan's enrollees differ substantially from the
market average with respect to characteristics that are not adjusted
for in the risk adjustment model. For example, if a plan has an
enrollee population with enrollment duration that differs from the
market average, and the risk associated with the enrollment duration is
not fully captured through other aspects of the methodology, then for
that plan, partial year enrollment may not be fully accounted for in
the HHS risk adjustment methodology. As we noted in the White Paper, if
the risk adjustment methodology does not fully capture risk for partial
year enrollment, and if the plan had lower than average enrollment
duration, the plan's risk score might be lower than it might have been
otherwise.\24\
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\24\ White Paper at p. 36. Available at: https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

As we discussed in the White Paper, we reviewed the predicted
expenditures, actual expenditures, and predictive ratios (that is, the
ratios of predicted to actual weighted mean plan liability
expenditures) by enrollment duration groups (for each: 1 Month, 2
months, and so on up to 12 months) annualized for 2014
MarketScan[supreg] adults in our risk adjustment concurrent modeling
sample. We found that actuarial risk for all adult enrollees with short
enrollment periods tends to be slightly under predicted, and for adult
enrollees with full enrollment periods (12 months) tends to be over
predicted in our methodology. One potential explanation for these
results is that because risk adjustment is calculated on a per member
per month basis, the model predicts costs for chronic conditions, which
are often spread more evenly over time, better than costs for sudden
acute events, which are often concentrated in a small number of months,
when the enrollment is only for part of the year.
We discussed various approaches to address this issue in the White
Paper, including the use of additional factors and the use of wholly
separate models that account for duration of enrollment and metal
level.
There was a broadly held preference among commenters to the White
Paper for adding enrollment duration (for each: 1 Month, 2 months, and
so on up to 11 months \25\) binary indicator variables as additional
risk factors, as opposed to separate models based on enrollment
duration. After reviewing this feedback, we announced on June 8, 2016,
that we intended to propose that, beginning for the 2017 benefit year,
the risk adjustment model include adjustment factors for partial year
enrollees in risk adjustment covered plans.\26\
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\25\ Twelve months is the reference group and therefore is not
included.
\26\ Available at: https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf.
---------------------------------------------------------------------------

Based on analysis we performed on the MarketScan[supreg] data, the
use of additional risk factors by number of enrollment months that
decrease monotonically as the number of months of enrollment increases
(with 12 months being the reference group) appears to best address
partial year enrollment in the risk adjustment model in the short term,
starting in 2017. We also believe that our proposal to add prescription
drug utilization in the risk adjustment model will capture additional
costs for partial year enrollees beginning in the 2018 benefit year
(see discussion below).
We are proposing to recalibrate the 2017 risk adjustment adult
model to reflect the incorporation of partial year enrollment duration
(ED) factors. Those factors are labeled ``ED_01 . . . ED_11'' in the
list of factors for the 2017 risk adjustment adult model at the bottom
of Table 3 below.\27\ We are proposing to incorporate partial year ED
factors in the risk adjustment model methodology for the reasons
discussed above, starting with the 2017 benefit year. We are proposing
to amend our regulations at Sec. 153.320(a)(1) to allow for HHS to
make this update for the 2017 benefit year. Currently, this provision
states that a risk adjustment methodology must be Federally certified,
and one way a risk adjustment methodology may become Federally
certified is to be developed by HHS and published in the annual HHS
notice of benefit and payment parameters for the applicable benefit
year. We propose to change this provision to state that the methodology
may be developed by HHS and published in rulemaking in advance of the
benefit year. While HHS would generally make changes to the risk
adjustment methodology in the annual HHS notice of benefit and payment
parameters for the applicable benefit year, under this rule, in cases
where we have identified a change that we can implement prior to the
benefit year, and where we can provide issuers with sufficient notice
and detail on the proposed change so that issuers may reasonably
account for the change, HHS would have the authority to implement the
change prior to the beginning of the applicable benefit year in other
rulemaking. For our proposed change to address partial year enrollment,
we notified issuers of our intent to propose this change in prior
guidance, and provided significant detail on the policy.\28\ We seek
comment on this approach.
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\27\ This table replaces Table 1 published at 81 FR 12220-12223
as the final adult model for the 2017 benefit year.
\28\ See https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf.
---------------------------------------------------------------------------

We are also proposing to incorporate partial year enrollment
duration factors in the 2018 risk adjustment adult model. Those factors
are labeled ``ED_01, . . . ED_11'' in the list of factors for the 2018
risk adjustment adult model near the bottom of Table 4. We seek comment
on recalibrating the adult models for the 2017 and 2018 benefit years
to address partial year enrollment.
We are not making this change in the child and infant models as
those models are based on a smaller dataset that does not provide
adequate representation of partial year enrollment in these
populations. We will reassess both the proposed partial year enrollment
adjustment methodology, and whether we can make this adjustment in the
child and infant models in the future. We also intend to continue to
explore approaches under which we would use separate models for
enrollees with different enrollment durations, rather than including
partial year enrollment factors in the risk adjustment model, and may
implement such an approach in future years. While we do not believe,
based on the current data available and the analyses we have been able
to perform, that using separate models for each enrollment duration is
currently feasible, we believe that using separate models may better
capture how the pattern of costs associated with particular diagnoses
varies across enrollees with different enrollment durations,
particularly for sudden acute events.
ii. Prescription Drug Hybrid Model
As discussed in the White Paper, HHS has been considering whether
to propose the incorporation of prescription drug utilization
indicators into the HHS risk adjustment model, beginning for the 2018
benefit year, to create a ``hybrid'' drug-diagnosis risk adjustment
model. We are aware that there are advantages and disadvantages to
including prescription drug utilization indicators in the HHS risk
adjustment model and we seek comment on our proposal.

[[Page 61469]]

Many commenters to the White Paper stated that drug information can
effectively indicate health risk in cases where diagnoses may be
missing. For example, diagnoses may be missing if clinicians fail to
enter the condition on a patient's chart, or if there is stigma
associated with certain health conditions that leads providers not to
record these diagnoses on claims, or if the enrollee simply does not
visit a physician during the term of his or her enrollment. However,
even in these cases, prescriptions may be filled, providing information
on health status.
Drug utilization patterns can also provide information on the
severity of the illness. The hierarchical condition categories (HCCs)
already capture information about illness severity from diagnoses, but
drugs can potentially measure the severity of illness within a given
HCC. A patient may receive first, second, or third lines of treatment
involving different medications that indicate increasing levels of
severity.
Additionally, commenters have noted that drug data can be available
sooner and more easily than diagnoses from medical claims. In addition,
commenters have noted that because prescription drug data is
standardized, it is particularly useful for calibrating and measuring
health risk because the prescription drug data will have less
variability in coding.
Incorporating prescription drug utilization into the risk
adjustment model will help reflect costs incurred by plans for
medications for their enrollees in plans' risk scores.
Adding drug data to a diagnosis-based model also introduces
operational complexities. Clinical indications for drugs can change
quickly, which requires frequent updates to the model calibration and
possibly to the therapeutic classification groupings as well. Because
the model is calibrated before the start of the benefit year, it may be
difficult to assess all updates or upcoming utilization pattern
changes. Additional data requirements increase the administrative
burden associated with calibrating and applying the model. Issuers of
risk adjustment covered plans would be required to report prescription
drug utilization as well as diagnoses, and audit and verification of
the reported data would be necessary.
We have also indicated our concern that incorporating prescription
drug utilization in the model may provide an incentive to overprescribe
medications. Drug models may be particularly susceptible to this sort
of behavior when there are inexpensive drugs included in therapeutic
classes that are statistically linked to high total medical
expenditures; in these situations, a small cost to the insurance plan
(reimbursement for the drug) can bring a relatively large increase in
revenue through the risk adjustment program.
In analyzing if and how to propose to use drug data in the risk
adjustment model, we sought to strike a reasonable balance between
increasing predictive accuracy and reducing incentives for
overprescription. One way we sought to do so was by focusing on drugs
for which guidelines on when they should be prescribed are clear.
However, substantial uncertainty or disagreement across providers
exists over the circumstances in which drugs should be prescribed.
In addition, incorporating drug utilization makes risk adjustment
sensitive to variations in drug utilization patterns that exist for
reasons other than enrollee health status. Health plans with lower
prescribing rates, for example health plans primarily covering
individuals in rural areas with low access to pharmacies, would
incorrectly appear to have healthier populations, and would pay higher
risk charges or receive lower risk payments. Other things being equal,
drug utilization is expected to be lower in plans with higher cost
sharing (such as bronze or silver plans) and with aggressive drug
utilization management, such as prior authorization, step therapy,
quantity limits, restrictive formularies, and more stringent
requirements to qualify for coverage of expensive drugs.
Furthermore, the lack of clear, one-to-one associations between
most drug classes and diagnoses makes development of a ``hybrid'' drug-
diagnosis risk adjustment model that incorporates and integrates drug
and diagnosis risk markers challenging.
Few drug classes are indicated for only one medical condition. Many
drug classes are widely prescribed ``off label'' for indications that
are not U.S. Food and Drug Administration (FDA)-approved. Utilization
of such drug classes can have very different implications for health
care expenditures depending on the reasons for which they are
prescribed. Presence of a drug class may not discriminate between high
and low cost individuals if it is used for both high and low cost
conditions. Some drug classes may be used both for diagnoses that have
been included in the HHS-HCC model, as well as for diagnoses that have
been intentionally excluded, making it problematic to maintain this
distinction in a hybrid drug-diagnosis risk adjustment model. Specific
drugs within a drug class may have varying indications; the utilization
of such drug classes may not unambiguously indicate the presence of a
specific diagnosis.
Acknowledging all of the above considerations, we indicated in the
June 8, 2016, guidance noted above that we intend to propose to
incorporate a small number of prescription drug classes as predictors
in the HHS risk adjustment methodology for the 2018 benefit year to
impute missing diagnoses and to indicate severity of illness.\29\ We
propose to incorporate a small number of prescription drugs in the risk
adjustment model for the 2018 benefit year. We are proposing this
change to the model with substantial attention to the concerns
presented above in determining which drug groups to include and
exclude, and the proposed model type used for each drug-diagnosis pair.
To ensure this change to the model does not inadvertently increase the
perverse incentives described above, we will monitor and evaluate the
impact of incorporating prescription drugs in the model on utilization
patterns. Using the enrollee-level data that we are proposing to
collect in Sec. 153.610, in addition to other relevant data sources,
we would seek to evaluate whether incorporation of drugs in the model
affects the utilization of drugs included in the model. Based on our
evaluation, we would add or remove drug diagnosis pairs to or from the
model for future benefit years through notice and comment rulemaking.
We seek comment on this proposal.
---------------------------------------------------------------------------

\29\ Available at: https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf.
---------------------------------------------------------------------------

To develop hybrid drug-diagnosis risk adjustment models, we need a
manageable number of clinically and empirically cohesive drug classes.
We created several Prescription Drug Categories (RXCs) to select and
group the drugs to be included in a hybrid diagnoses-and-drugs risk
adjustment model.
Each prescription drug is assigned a National Drug Code (NDC)
maintained by the FDA. There are over 190,000 NDCs, which include
prescription drugs as well as over-the-counter medications. NDC codes
are reported in prescription drug claims data. Due to the large number
of individual NDCs, it is necessary to use a therapeutic classification
system that classifies individual NDCs into aggregated categories of
related drugs used for similar therapeutic purposes, or having similar
pharmacological properties.
In the White Paper, we had initially based the RXCs on the American
Hospital Formulary Service

[[Page 61470]]

Pharmacologic-Therapeutic Classification^(copyright), which
is published by the Board of the American Society of Health-System
Pharmacists[supreg]. We chose at that point to use the American
Hospital Formulary Service classification because it is widely used,
widely available, comprehensive, and regularly updated. Because the
American Hospital Formulary Service classification and mappings from
NDCs are proprietary, however, we determined that using the United
States Pharmacopeia (USP) classification would be better suited for use
with HHS risk adjustment to maintain consistency with the essential
health benefits requirements and for public access and transparency.
The USP classification also provides chemical ingredient level
identifications for drug classifications; that is, unlike American
Hospital Formulary Service, USP includes comparable levels of detail to
identify and group drugs used for only one diagnosis with other drugs
used for multiple diagnosis codes. NDC codes are classified into 153
USP therapeutic classes. Drawing on the principles and criteria
described below, we selected appropriate USP therapeutic classes and
combined and edited those classes in order to create ``payment'' RXCs,
each of which is closely associated with a specific HCC or group of
HCCs that are potentially suitable for inclusion in a payment risk
adjustment model. Most USP classes are somewhat heterogeneous. To
designate a class of drugs to serve as an indicator that a medical
diagnosis is present, we needed to comprehensively review the drugs in
each USP class to select only those that are closely associated with
the diagnosis.
The development of a hybrid HHS-HCC risk adjustment model requires
selecting drug-diagnosis pairs (RXC-HCC pairs) to include in the model.
Similar to our approach in the 2014 Payment Notice when initially
determining the HCCs to be included in the HHS risk adjustment models,
we used a set of principles to guide our decision making. Development
of the RXC-HCC pairs was an iterative process that required recurring
consultations with a panel of clinician consultants.
Principle 1--RXC categories should be clinically meaningful. Each
RXC is composed of a set of NDCs. These codes should all relate to a
reasonably well-specified pharmacologic, therapeutic or chemical
characteristic that defines the category. RXCs must be sufficiently
clinically specific to minimize opportunities for discretionary coding.
Clinical meaningfulness improves the face validity of the
classification system to clinicians and the model's interpretability.
Principle 2--RXCs should predict total medical and drug
expenditures. NDCs in the same RXC should be reasonably homogeneous
with respect to their effect on current year costs.
Principle 3--RXCs that will affect payments should have adequate
sample sizes to permit accurate and stable estimates of expenditures.
RXCs used in establishing payments should have adequate sample sizes in
available datasets. For example, it is difficult to reliably determine
the expected cost of extremely rare categories.
Principle 4--In creating an individual's clinical profile,
hierarchies should be used to characterize the person's illness level
within each RXC where appropriate, while the effects of unrelated
prescriptions accumulate. Because each new medical event adds to an
individual's total disease burden, unrelated prescriptions in different
RXCs should increase predicted costs of care. However, the most severe
manifestation of a given disease process principally defines its impact
on costs. Therefore, related RXCs should be treated hierarchically,
with those associated with more severe manifestations of a condition
dominating (and eliminating the effect of) less serious ones.
Principle 5--Providers should not be penalized for prescribing
additional NDCs (monotonicity). This principle has two consequences for
modeling: (1) No RXC should carry a negative payment weight; and (2) an
RXC that is higher-ranked in a drug hierarchy (causing lower-rank drugs
in the same hierarchy to be excluded) should have at least as large a
payment weight as lower-ranked RXCs in the same hierarchy.
Principle 6--The classification should assign NDCs to only one RXC
(mutually exclusive classification). Because each NDC can map to more
than one RXC, the classification should map NDCs to the primary RXC
based on considerations such as route of administration, intended
application of the product, ingredient list identifier, label, dosage
form, and strength of the drug.
Principle 7--Discretionary and non-credible drug categories should
be excluded from payment models. RXCs that are particularly subject to
intentional or unintentional discretionary prescribing variation or
inappropriate prescribing by health plans or providers, or that are not
clinically or empirically credible as cost predictors, should not be
included. Excluding these RXCs reduces the sensitivity of the model to
prescribing variation, prescribing proliferation, and gaming.
We used clinical and statistical assessments to appropriately
balance all seven principles. In designing the RXCs, principles 5
(monotonicity) and 6 (mutually exclusive classification), were
generally followed. Clinical meaningfulness (principle 1) is often best
served by creating a very large number of detailed clinical groupings.
However, a large number of groupings conflicts with adequate sample
sizes for each category (principle 3). We approached the balancing of
our principles by designing a drug classification system using
empirical evidence on frequencies and predictive power; clinical
judgment on relatedness, specificity, and severity of RXCs; and
professional judgment on incentives and likely provider responses to
the classification system. The RXC risk adjustment model balances these
competing goals to achieve prescription drug-based classes for use in
risk adjustment.
In addition to following the set of principles described above, we
carefully considered selection of high-cost drugs, to avoid overly
reducing the incentives for issuers to strive for efficiency in
prescription drug utilization. We also carefully considered selection
of drugs in areas exhibiting a rapid rate of technological change, as a
drug class that is associated with a specific, costly diagnosis in one
year may no longer be commonly used for that condition the next, in
which case the cost predictions based on previous years of data would
be inaccurate.
Based on these considerations, we propose a small number of drug-
diagnosis pairs for the proposed hybrid model. We selected RXCs to
impute diagnoses and to indicate the severity of diagnoses otherwise
indicated through medical coding. We worked with clinician consultants
to tailor the RXCs used for imputation based on their expertise in
treatment patterns as well as statistical indicators such as positive
predictive value. Clinicians also informed our determination of RXCs
for use as severity-only indicators in the model. For the severity-only
RXCs, the presence of a prescription in the drug class signals a more
severe case of the related diagnosis, which is likely to incur greater
medical expenditures relative to someone with the same diagnosis, but
not the drug. Severity-only RXCs are not specified in the model to
impute the associated diagnosis when an HCC is not present. We are
proposing limiting the number of prescription drug classes included as
predictors to only those drug classes

[[Page 61471]]

where the risk of unintended effects on provider prescribing behavior
is low; as described above, we intend to monitor prescription drug
utilization for unintended effects and may remove drug classes based on
such evidence in future rulemaking.
Table 2 shows the list of RXC-HCC pairs that we propose to include
in the initial hybrid model. Each pair is designated as either an
imputation/severity or a severity-only relationship. For each pair,
Table 2 shows the coefficient for the diagnosis (HCC), the drug
utilization (RXC), and both.
The drug-diagnosis pairs can include more than one HCC. For
example, the list includes a diabetes drug-diagnosis relationship that
includes three HCCs (diabetes with acute complication, diabetes with
chronic complication, and diabetes without complication) which are
grouped together in the model estimation. This RXC can be interpreted
as an indication that the individual should have a diagnosis of one of
these three diabetes HCCs. In addition, an RXC can be linked in the
model to more than one HCC, and vice-versa. For example, RXC 8 (Immune
suppressants and immunomodulators) has an imputation/severity
relationship with HCC 056 (Rheumatoid arthritis and specified
autoimmune disorders), and also has a severity-only relationship with
HCC 048 (Inflammatory bowel disease).
While ten of the RXC-HCC pairs have three levels of incremental
predicted costs (diagnosis only, prescription drug only, both diagnosis
and prescription drug), indicating that they can be used to impute a
particular condition, the model also includes two RXC-HCC pairs that
will be used for severity only--that is, they will predict incremental
costs for enrollees with the diagnosis only, and with both the
diagnosis and the prescription drug. There are no additional costs
predicted for an enrollee taking the drug who lacks the associated
diagnosis. Table 2 lists the RXC-HCC pairs we are proposing to
incorporate in the adult models for the 2018 benefit year. Table 4
incorporates the full set of HCCs and RXC-HCCs and their associated
coefficients that we are proposing to implement in the 2018 adult
models.

Table 2--Drug-Diagnosis (RXC-HCC) Pairs Chosen for the Hybrid Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
RXC RXC Label HCC HCC Label Proposed RXC use
----------------------------------------------------------------------------------------------------------------
1............... Hepatitis C 037C, 036, 035, 034.. Chronic Hepatitis C, imputation/severity.
Antivirals. Cirrhosis of Liver, End-
Stage Liver Disease, and
Liver Transplant Status/
Complications.
2............... HIV/AIDS Antivirals.. 001.................. HIV/AIDS.................. imputation/severity.
3............... Antiarrhythmics...... 142.................. Specified Heart imputation/severity.
Arrhythmias.
4............... End Stage Renal 184, 183, 187, 188... End Stage Renal Disease, imputation/severity.
Disease (ESRD) Kidney Transplant Status,
Phosphate Binders. Chronic Kidney Disease,
Stage 5, Chronic Kidney
Disease, Severe (Stage 4).
5............... Anti-inflammatories 048, 041............. Inflammatory Bowel imputation/severity.
for inflammatory Disease, Intestine
bowel disease (IBD). Transplant Status/
Complications.
6a.............. Anti-Diabetic Agents, 019, 020, 021, 018... Diabetes with Acute imputation/severity.
Except Insulin and Complications, Diabetes
Metformin Only. with Chronic
Complications, Diabetes
without Complication,
Pancreas Transplant
Status/Complications.
6b.............. Insulin.............. 019, 020, 021, 018... Diabetes with Acute imputation/severity.
Complications; Diabetes
with Chronic
Complications; Diabetes
without Complication,
Pancreas Transplant
Status/Complications.
7............... Multiple Sclerosis 118.................. Multiple Sclerosis........ imputation/severity.
Agents.
8............... Immune Suppressants 056, 057, 048, 041... Rheumatoid Arthritis and imputation/severity.
and Immunomodulators. Specified Autoimmune
Disorders, Systemic Lupus
Erythematosus and Other
Autoimmune Disorders,
Inflammatory Bowel
Disease, Intestine
Transplant Status/
Complications.
9............... Cystic Fibrosis 159, 158............. Cystic Fibrosis, Lung imputation/severity.
Agents. Transplant Status/
Complications.
10.............. Ammonia Detoxicants.. 036, 035, 034........ Cirrhosis of Liver, End- severity-only.
Stage Liver Disease,
Liver Transplant Status/
Complications.
11.............. Diuretics, Loop and 130, 129, 128........ Congestive Heart Failure, severity-only.
Select Potassium- Heart Transplant, Heart
Sparing. Assistive Device/
Artificial Heart.
----------------------------------------------------------------------------------------------------------------

We propose to incorporate the RXC-HCC pairs--some of which are used
to impute a diagnosis and calibrate the severity of the condition, and
others of which are used only as an indication of severity--into the
adult risk adjustment model, beginning in the 2018 benefit year. We
intend to evaluate the effects of this change to determine whether to
continue, broaden, or reduce this set of factors in the HHS risk
adjustment models. We seek comment on this approach, including comments
on the list of RXC-HCC pairs.
iii. High-Cost Risk Pooling
The HHS risk adjustment model reflects the average cost for
individuals with a given set of demographic characteristics and
diagnoses. Our experience with the 2014 benefit year risk adjustment
demonstrated the model may underpredict costs for extremely high-cost
enrollees since predicted plan liabilities reflect the average costs
for individuals with the set of demographic characteristics and
diagnoses included in the model. As a consequence, even with risk
adjustment in place, issuers may retain an incentive to engage in risk
selection in order to avoid these very high-cost enrollees (called
``high-cost enrollees'' throughout this proposal). Recent research has
shown that adjusting for high-cost enrollees in a risk adjustment model
benefits the model fit and predictive ability for the remaining risk
population.\30\ To mitigate any residual incentive for risk selection

[[Page 61472]]

to avoid high-cost enrollees, and to ensure that the actuarial risk of
a plan with high-cost enrollees is better reflected in the risk
adjustment transfers to issuers with high actuarial risk, we propose to
alter the risk adjustment methodology to better account for high-cost
enrollees so that transfers resulting from the risk adjustment
methodology from high actuarial risk plans to low actuarial risk plans
better reflect the actuarial risk of risk adjustment covered plans in a
market, across all States. We also seek to offset the need for issuers
to build large risk premiums into their rates to account for these
cases by giving issuers greater predictability on expenditures.
---------------------------------------------------------------------------

\30\ Schillo, S., G. Lux, J. Wassem and F. Buchner (2016) ``High
Cost Pool or High Cost Groups--How to Handle Highest Cost Cases in a
Risk Adjustment Mechanism?'' Health Policy (120): 141-147.
---------------------------------------------------------------------------

To account for the incorporation of high-cost risk in the risk
adjustment model, we propose to adjust the risk adjustment model for
high-cost enrollees by excluding a percentage of costs above a certain
threshold level in the calculation of enrollee-level plan liability
risk scores so that risk adjustment factors are calculated without the
high-cost risk. Secondly, to account for the issuers' actuarial risk
for costs associated with the high-cost enrollees, we would apply an
adjustment for each issuer of a risk adjustment covered plan to account
for a percentage of all high-cost enrollees' costs above the threshold.
We would set the threshold and percentage of costs at a level that
would continue to incentivize issuers to control costs while improving
the risk prediction of the risk adjustment model. Issuers with the
high-cost enrollees would receive an adjustment to account for
actuarial risk for the percentage of costs above the threshold in their
respective transfers. Using claims data submitted to the EDGE server by
issuers of risk adjustment covered plans, HHS will calculate the total
amount of paid claims costs for high-cost enrollees above the
threshold. HHS would then calculate an adjustment as a percent of the
issuer's total premiums in the respective market, which would be
applied to the total transfer amount in that market, maintaining the
balance of payments and charges within the risk adjustment program. We
are proposing a uniform percentage of premium adjustment across all
States for the individual (including catastrophic and non-catastrophic
plans and merged market plans) and small group markets. We believe
pooling across all States for purposes of calculating this adjustment
would be most effective in reducing the impact of high-cost enrollees
to better reflect actuarial risk, and seek comment on this proposal.
Creating a uniform pool of high-cost enrollees, by risk pool or market,
could result in some States or geographic areas subsidizing issuers
with high-cost enrollees in other States or geographic areas, as we
discussed at the conference and commenters to the White Paper noted. We
believe pooling high-cost enrollees across all States on whose behalf
we are operating the risk adjustment program could prevent certain
States with high-cost enrollees from bearing a disproportionate amount
of unpredictable risk.
In the White Paper we discussed a threshold of $1 million and a
coinsurance rate of 80 percent (where the issuer would be liable for 20
percent of costs above $1 million for an enrollee). Commenters
expressed concerns about the potential for issuers to ``game'' this
policy by shifting costs to the risk adjustment program, and not pay
sufficient attention to cost containment for costs above the threshold.
While we believe these inordinately high costs reflect random risk
selection for certain issuers, we are sensitive to these concerns,
particularly in the first year of this adjustment in the risk
adjustment model. Therefore, beginning for the 2018 benefit year, we
are proposing a threshold of $2 million and a coinsurance rate of 60
percent (where the issuer would be liable for 40 percent of costs above
$2 million). Beginning with the 2018 benefit year recalibration, we
would also incorporate these parameters in our recalibration of the
model by truncating at 40 percent of costs above $2 million in our
dataset used to simulate plan liability. Doing so will produce more
accurate predictive coefficients that reflect the impact of the high-
cost enrollee pool. To help mitigate concerns raised, while still
helping protect issuers from the unpredictable risk of exceptionally
high costs, we have designed this proposal based on what we discussed
at the conference and comments received on the White Paper.
As discussed above, beginning for the 2018 benefit year, we propose
to adjust issuers' risk adjustment transfers by a percent of premium
amount that would be determined based on the aggregate costs of the
high-cost risk pool above $2 million at 60 percent coinsurance in the
benefit year. This adjustment to the transfer formula would be made for
all issuers of risk adjustment covered plans in the individual
(including catastrophic and non-catastrophic plans and merged market
plans), or small group market, across all States, based on total
premiums in the respective market. We would create two high-cost risk
pools across all States: One for the individual market (including
catastrophic, non-catastrophic, and merged market plans), and one for
the small group market. To calculate the adjustments, risk adjustment
covered plans would be assessed an adjustment to fund the applicable
pools and we would perform additional data quality metrics to determine
an issuer's eligibility for high-cost risk pool adjustments, even if
the issuer failed the data quality analysis for a risk adjustment
transfer and was assessed a default charge under Sec. 153.740(b) on
that basis. At the proposed threshold and coinsurance, we expect total
adjustments as a result of this policy nationally to be very small as a
percent of premiums (less than one tenth of one percent of total
premiums for either market). We believe the inclusion of this policy,
in combination with the transfers attributable to the plan liability
risk scores, will allow us to better assess total actuarial risk for
each risk adjustment eligible plan, and thereby to ensure that risk
adjustment is appropriately compensating issuers. We seek comment on
this proposal. We also seek comment on whether to cap the adjustments
if they exceed a certain amount.
iv. Other Considerations
We had previously reported that based on the commercial
MarketScan[supreg] data, the HHS risk adjustment models slightly
underpredict risk for low-cost enrollees, and slightly overpredict risk
for enrollees with high expenditures.\31\ We have received feedback
that HHS should adjust the risk adjustment models for the
underprediction of risk for low cost enrollees, and the overprediction
of risk for enrollees with high expenditures, which affects the plan
liability risk scores of plans that enroll more healthy individuals or
plans that enroll more individuals with the most extreme chronic health
conditions. We are considering the implementation of the following
policies, beginning with the 2018 benefit year, in order to improve
model performance for these subpopulations, and seek comment on these
approaches. We are considering use of a constrained regression
approach, under which we would estimate the adult risk adjustment model
using only the age-sex variables. We would then re-estimate the model
using the full set of HCCs, while constraining the value of the age-sex
coefficients to be same as those from the first estimation. We believe
that this two-step estimation approach would result in age-sex
coefficients of greater magnitude, potentially helping us

[[Page 61473]]

predict the risk of the healthiest subpopulations more accurately.
Similarly, we are considering approaches in which our first estimation
of the model would include additional independent variables intended to
account for potential non-linearities in risk for the highest-risk
subpopulations, and then removing those additional variables in the
second estimation. We are considering creating separate models for
enrollees with and without HCCs to derive two separate sets of age-sex
coefficients. We believe such an approach could also help improve the
models' predictive ratios for the healthiest subpopulations, though
this model would have a separate set of age-sex coefficients for
individuals with no HCCs and the individuals with HCCs. Finally, we are
evaluating an approach in which we would directly adjust plan liability
risk scores outside of the model for these subpopulations. For example,
we could potentially make an adjustment to the plan liability risk
scores calculated through the HHS risk adjustment models that would
adjust for such an underprediction or overprediction in actuarial risk
by directly increasing low plan liability risk scores and directly
reducing high plan liability risk scores in order to better match the
relative risks of these subpopulations. We note that while we believe
modifications of this type could improve the model's performance along
this specific dimension, there is a risk that such modifications could
unintentionally worsen model performance along other dimensions on
which the model currently performs well. For this reason, we are
continuing to evaluate the effect of these types of modifications on
all aspects of the model's performance before choosing to implement
such an approach, and would not implement these types of modifications
if we determined that doing so would have material unintended
consequences for the model's performance along other dimensions. We
seek comment on methods discussed above as well as other methods to
improve the predictive ratios of the HHS risk adjustment models.
---------------------------------------------------------------------------

\31\ Available at: https://www.cms.gov/mmrr/Downloads/MMRR2014_004_03_a03.pdf.
---------------------------------------------------------------------------

In addition, we have received feedback regarding our transfer
methodology in community rated States. In the 2014 Payment Notice, we
stated that billable members exclude children who do not count towards
family rates. In the second Program Integrity Rule, we clarified the
modification to the transfer formula to accommodate community rated
States that utilize family tiering rating factors. In the case of
family tiering States, billable members are based on the number of
children that implicitly count towards the premium under a State's
family rating factors. We have received feedback that there may be
alternative methodologies for calculating billable member months in
family tiering States, such as by adjusting for the expected actual
number of members on the policy, not the number of members that
implicitly count towards the premium. We seek comment on whether our
methodology for calculating billable member months in family tiering
States should be altered, and how.
v. Data Timing for Risk Adjustment Recalibrations
We have used the three most recent years of MarketScan[supreg] data
to recalibrate the 2016 and 2017 benefit year risk adjustment models.
This approach has allowed for using the blended, or averaged,
coefficients from three years of separately solved models, which
promotes stability for the risk adjustment coefficients year-to-year,
particularly for conditions with small sample sizes. This approach in
previous years has also required that we finalize coefficients based on
data that does not become available until after the publication of the
proposed Payment Notice. We received several comments to the 2017
Payment Notice proposed rule requesting that the Payment Notice
schedule be moved up to accommodate substantive comments and to permit
issuers more time between the publication of the Payment Notice and the
commencement of issuers' certification activities. In order to
accommodate commenters' request for an earlier Payment Notice schedule,
we would not be able to incorporate an additional recent year of data.
We also received many comments on how to best address the data lag for
HHS risk adjustment and better reflect new treatments that may be
associated with high-cost conditions. We had discussed in the White
Paper the use of only 2014 MarketScan[supreg] data for the 2018 benefit
year recalibration; using blended, three year data coefficients would
mitigate any introductions of new costs for particular conditions by
two years of older data. However, commenters to the White Paper
supported continuing to use a 3-year blend for 2018 benefit year
recalibration. We are proposing to continue to use the 3-year blend for
2018 benefit year recalibration.
We noted at the conference that we were considering releasing more
recent, updated final coefficients closer to the respective risk
adjustment benefit year using more recent data available in guidance
after the risk adjustment methodology for the corresponding benefit
year has been finalized in the applicable Payment Notice. Commenters
supported releasing coefficients closer to the benefit year that
reflect the most recent data. We are proposing to amend our regulations
at Sec. 153.320(b)(1)(i) to allow for HHS to provide draft
coefficients in an annual Payment Notice, as well as the intended
datasets to be used to calculate final coefficients and the date by
which the final coefficients will be released in guidance. We are
considering using 2015, 2016, and 2017 MarketScan[supreg] data for 2018
risk adjustment, publishing the final, blended coefficients in the
early spring of 2019, prior to final 2018 benefit year risk adjustment
calculations. We have previously finalized the risk adjustment
methodology, including the final coefficients prior to rate setting and
benefits being provided to members. We seek comment on this proposal,
specifically the timing of the release of final coefficients and
whether such a practice would affect issuer expectations with respect
to the methodology to be applied.
We also seek comment on the timing of the publication of the final
coefficients, providing a few options to reduce the data lag as much as
possible. As the first option, we could release final coefficients for
the 2018 benefit year risk adjustment model in the spring of 2017 that
would reflect the incorporation of 2015 MarketScan[supreg] data, after
it becomes available, blended with 2013 and 2014 MarketScan[supreg]. On
the other hand, we could release final coefficients for the 2018
benefit year risk adjustment model in the spring of 2019, prior to the
April 30, 2019, data submission deadline for the 2018 benefit year that
would reflect 2015, 2016, and 2017 blended MarketScan[supreg] data. We
could also provide interim coefficients in the spring of 2018 using
2014, 2015 and 2016 blended MarketScan[supreg] data, in addition to the
interim coefficients that would be published in the 2018 Payment Notice
final rule using 2013 and 2014 data. As noted above, we would continue
to finalize the risk adjustment methodology for the corresponding year
through notice and comment in the applicable annual Payment Notice.
We seek comment on this proposal.
d. List of Factors To Be Employed in the Model (Sec. 153.320)
For the 2018 benefit year, in addition to the RXCs we are proposing
to include in the adult risk adjustment model, we are also proposing to
separate the

[[Page 61474]]

Chronic Hepatitis HCC into two new HCCs for Hepatitis C and Hepatitis A
and B, in the adult, child, and infant models. This would increase the
total HCCs in the HHS risk adjustment methodology from 127 to 128. The
proposed factors resulting from the blended factors from the 2013 and
2014 separately solved models (with the incorporation of partial year
enrollment and prescription drugs reflected in the adult models only)
are shown in the Tables 4 through 9. The adult, child, and infant
models have been truncated to account for the high-cost enrollee pool
payment parameters ($2 million threshold, 60 percent coinsurance).
Table 4 contains factors for each adult model, including the
interactions.\32\
---------------------------------------------------------------------------

\32\ We note that the interaction factors are additive, and not
hierarchical in nature--that is, an enrollee could have several,
additive interactions.
---------------------------------------------------------------------------

Table 5 contains the HHS HCCs in the severity illness indicator
variable. Table 6 contains the factors for each child model. Table 6
contains the factors for each infant model.

Table 3--Final Adult Risk Adjustment Model Factors for 2017 Benefit Year
----------------------------------------------------------------------------------------------------------------
Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 21-24, Male................. 0.199 0.148 0.092 0.056 0.055
Age 25-29, Male................. 0.189 0.137 0.080 0.043 0.043
Age 30-34, Male................. 0.245 0.180 0.107 0.059 0.059
Age 35-39, Male................. 0.312 0.234 0.147 0.089 0.088
Age 40-44, Male................. 0.391 0.301 0.199 0.130 0.129
Age 45-49, Male................. 0.471 0.369 0.253 0.174 0.173
Age 50-54, Male................. 0.611 0.492 0.355 0.260 0.258
Age 55-59, Male................. 0.701 0.567 0.414 0.306 0.304
Age 60-64, Male................. 0.810 0.654 0.478 0.349 0.347
Age 21-24, Female............... 0.339 0.262 0.171 0.111 0.110
Age 25-29, Female............... 0.399 0.308 0.203 0.132 0.130
Age 30-34, Female............... 0.539 0.428 0.305 0.224 0.222
Age 35-39, Female............... 0.633 0.513 0.380 0.294 0.292
Age 40-44, Female............... 0.713 0.579 0.433 0.336 0.335
Age 45-49, Female............... 0.724 0.585 0.432 0.327 0.325
Age 50-54, Female............... 0.821 0.671 0.501 0.382 0.379
Age 55-59, Female............... 0.829 0.672 0.495 0.367 0.364
Age 60-64, Female............... 0.876 0.706 0.513 0.372 0.370
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................ 8.943 8.450 8.099 8.142 8.143
Septicemia, Sepsis, Systemic 10.685 10.510 10.404 10.460 10.461
Inflammatory Response Syndrome/
Shock..........................
Central Nervous System 6.636 6.535 6.470 6.491 6.492
Infections, Except Viral
Meningitis.....................
Viral or Unspecified Meningitis. 4.664 4.428 4.269 4.227 4.227
Opportunistic Infections........ 8.507 8.406 8.340 8.322 8.321
Metastatic Cancer............... 24.307 23.874 23.573 23.632 23.633
Lung, Brain, and Other Severe 12.629 12.295 12.061 12.065 12.066
Cancers, Including Pediatric
Acute Lymphoid Leukemia........
Non-Hodgkin`s Lymphomas and 5.852 5.617 5.440 5.393 5.392
Other Cancers and Tumors.......
Colorectal, Breast (Age < 50), 5.159 4.924 4.743 4.695 4.694
Kidney, and Other Cancers......
Breast (Age 50+) and Prostate 2.965 2.792 2.655 2.602 2.601
Cancer, Benign/Uncertain Brain
Tumors, and Other Cancers and
Tumors.........................
Thyroid Cancer, Melanoma, 1.459 1.304 1.167 1.076 1.074
Neurofibromatosis, and Other
Cancers and Tumors.............
Pancreas Transplant Status/ 5.458 5.236 5.093 5.115 5.115
Complications..................
Diabetes with Acute 1.192 1.053 0.929 0.825 0.824
Complications..................
Diabetes with Chronic 1.192 1.053 0.929 0.825 0.824
Complications..................
Diabetes without Complication... 1.192 1.053 0.929 0.825 0.824
Protein-Calorie Malnutrition.... 13.677 13.685 13.695 13.756 13.757
Mucopolysaccharidosis........... 2.285 2.165 2.066 2.013 2.013
Lipidoses and Glycogenosis...... 2.285 2.165 2.066 2.013 2.013
Amyloidosis, Porphyria, and 2.285 2.165 2.066 2.013 2.013
Other Metabolic Disorders......
Adrenal, Pituitary, and Other 2.285 2.165 2.066 2.013 2.013
Significant Endocrine Disorders
Liver Transplant Status/ 16.044 15.870 15.760 15.773 15.773
Complications..................
End-Stage Liver Disease......... 7.110 6.870 6.712 6.730 6.731
Cirrhosis of Liver.............. 3.856 3.694 3.572 3.538 3.537
Chronic Hepatitis............... 3.856 3.694 3.572 3.538 3.537
Acute Liver Failure/Disease, 4.429 4.268 4.158 4.147 4.147
Including Neonatal Hepatitis...
Intestine Transplant Status/ 32.610 32.560 32.521 32.564 32.563
Complications..................
Peritonitis/Gastrointestinal 11.825 11.566 11.387 11.416 11.417
Perforation/Necrotizing
Enterocolitis..................
Intestinal Obstruction.......... 6.542 6.277 6.105 6.124 6.124

[[Page 61475]]

Chronic Pancreatitis............ 5.458 5.236 5.093 5.115 5.115
Acute Pancreatitis/Other 2.710 2.522 2.385 2.337 2.336
Pancreatic Disorders and
Intestinal Malabsorption.......
Inflammatory Bowel Disease...... 3.667 3.401 3.197 3.105 3.103
Necrotizing Fasciitis........... 6.581 6.382 6.243 6.258 6.258
Bone/Joint/Muscle Infections/ 6.581 6.382 6.243 6.258 6.258
Necrosis.......................
Rheumatoid Arthritis and 4.854 4.592 4.399 4.389 4.389
Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and 1.212 1.077 0.957 0.872 0.871
Other Autoimmune Disorders.....
Osteogenesis Imperfecta and 3.126 2.927 2.766 2.706 2.705
Other Osteodystrophies.........
Congenital/Developmental 3.126 2.927 2.766 2.706 2.705
Skeletal and Connective Tissue
Disorders......................
Cleft Lip/Cleft Palate.......... 1.310 1.149 1.020 0.952 0.951
Hemophilia...................... 46.447 46.159 45.940 45.946 45.947
Myelodysplastic Syndromes and 12.671 12.534 12.439 12.449 12.449
Myelofibrosis..................
Aplastic Anemia................. 12.671 12.534 12.439 12.449 12.449
Acquired Hemolytic Anemia, 9.742 9.580 9.457 9.448 9.448
Including Hemolytic Disease of
Newborn........................
Sickle Cell Anemia (Hb-SS)...... 9.742 9.580 9.457 9.448 9.448
Thalassemia Major............... 9.742 9.580 9.457 9.448 9.448
Combined and Other Severe 5.438 5.290 5.186 5.188 5.188
Immunodeficiencies.............
Disorders of the Immune 5.438 5.290 5.186 5.188 5.188
Mechanism......................
Coagulation Defects and Other 2.810 2.712 2.631 2.603 2.603
Specified Hematological
Disorders......................
Drug Psychosis.................. 3.832 3.576 3.381 3.288 3.286
Drug Dependence................. 3.832 3.576 3.381 3.288 3.286
Schizophrenia................... 3.196 2.940 2.749 2.685 2.684
Major Depressive and Bipolar 1.720 1.552 1.408 1.312 1.311
Disorders......................
Reactive and Unspecified 1.720 1.552 1.408 1.312 1.311
Psychosis, Delusional Disorders
Personality Disorders........... 1.190 1.054 0.920 0.823 0.822
Anorexia/Bulimia Nervosa........ 2.704 2.537 2.400 2.342 2.341
Prader-Willi, Patau, Edwards, 2.648 2.517 2.414 2.364 2.364
and Autosomal Deletion
Syndromes......................
Down Syndrome, Fragile X, Other 1.073 0.965 0.861 0.788 0.787
Chromosomal Anomalies, and
Congenital Malformation
Syndromes......................
Autistic Disorder............... 1.190 1.054 0.920 0.823 0.822
Pervasive Developmental 1.190 1.054 0.920 0.823 0.822
Disorders, Except Autistic
Disorder.......................
Traumatic Complete Lesion 12.012 11.856 11.742 11.739 11.740
Cervical Spinal Cord...........
Quadriplegia.................... 12.012 11.856 11.742 11.739 11.740
Traumatic Complete Lesion Dorsal 9.161 9.003 8.889 8.877 8.877
Spinal Cord....................
Paraplegia...................... 9.161 9.003 8.889 8.877 8.877
Spinal Cord Disorders/Injuries.. 5.641 5.430 5.278 5.249 5.249
Amyotrophic Lateral Sclerosis 3.027 2.790 2.623 2.583 2.583
and Other Anterior Horn Cell
Disease........................
Quadriplegic Cerebral Palsy..... 1.229 1.016 0.855 0.791 0.790
Cerebral Palsy, Except 0.135 0.073 0.039 0.016 0.015
Quadriplegic...................
Spina Bifida and Other Brain/ 0.077 0.022 0.000 0.000 0.000
Spinal/Nervous System
Congenital Anomalies...........
Myasthenia Gravis/Myoneural 5.252 5.104 4.998 4.975 4.975
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy.....................
Muscular Dystrophy.............. 2.150 1.984 1.862 1.787 1.786
Multiple Sclerosis.............. 13.598 13.194 12.910 12.956 12.957
Parkinson`s, Huntington`s, and 2.150 1.984 1.862 1.787 1.786
Spinocerebellar Disease, and
Other Neurodegenerative
Disorders......................
Seizure Disorders and 1.503 1.344 1.213 1.143 1.142
Convulsions....................
Hydrocephalus................... 6.394 6.272 6.171 6.144 6.144
Non-Traumatic Coma, and Brain 9.200 9.064 8.958 8.953 8.952
Compression/Anoxic Damage......
Respirator Dependence/ 34.709 34.699 34.698 34.764 34.765
Tracheostomy Status............
Respiratory Arrest.............. 10.541 10.391 10.296 10.360 10.361
Cardio-Respiratory Failure and 10.541 10.391 10.296 10.360 10.361
Shock, Including Respiratory
Distress Syndromes.............
Heart Assistive Device/ 35.115 34.870 34.711 34.771 34.772
Artificial Heart...............
Heart Transplant................ 35.115 34.870 34.711 34.771 34.772
Congestive Heart Failure........ 3.281 3.173 3.096 3.090 3.090
Acute Myocardial Infarction..... 10.133 9.797 9.582 9.693 9.695
Unstable Angina and Other Acute 5.231 4.955 4.782 4.796 4.797
Ischemic Heart Disease.........
Heart Infection/Inflammation, 6.303 6.168 6.068 6.046 6.046
Except Rheumatic...............
Specified Heart Arrhythmias..... 2.834 2.685 2.569 2.515 2.515
Intracranial Hemorrhage......... 9.426 9.147 8.956 8.965 8.965
Ischemic or Unspecified Stroke.. 3.167 2.982 2.870 2.875 2.876

[[Page 61476]]

Cerebral Aneurysm and 3.947 3.748 3.605 3.563 3.563
Arteriovenous Malformation.....
Hemiplegia/Hemiparesis.......... 5.466 5.372 5.315 5.358 5.359
Monoplegia, Other Paralytic 3.457 3.324 3.230 3.211 3.211
Syndromes......................
Atherosclerosis of the 10.936 10.837 10.782 10.850 10.852
Extremities with Ulceration or
Gangrene.......................
Vascular Disease with 7.731 7.546 7.419 7.419 7.420
Complications..................
Pulmonary Embolism and Deep Vein 3.845 3.678 3.558 3.531 3.531
Thrombosis.....................
Lung Transplant Status/ 36.420 36.228 36.104 36.181 36.182
Complications..................
Cystic Fibrosis................. 18.022 17.696 17.452 17.474 17.474
Chronic Obstructive Pulmonary 0.951 0.833 0.723 0.648 0.646
Disease, Including
Bronchiectasis.................
Asthma.......................... 0.951 0.833 0.723 0.648 0.646
Fibrosis of Lung and Other Lung 1.894 1.774 1.685 1.644 1.643
Disorders......................
Aspiration and Specified 7.595 7.521 7.472 7.486 7.486
Bacterial Pneumonias and Other
Severe Lung Infections.........
Kidney Transplant Status........ 10.187 9.922 9.747 9.738 9.738
End Stage Renal Disease......... 38.453 38.219 38.071 38.191 38.193
Chronic Kidney Disease, Stage 5. 2.087 1.988 1.924 1.919 1.919
Chronic Kidney Disease, Severe 2.087 1.988 1.924 1.919 1.919
(Stage 4)......................
Ectopic and Molar Pregnancy, 1.357 1.170 0.991 0.806 0.803
Except with Renal Failure,
Shock, or Embolism.............
Miscarriage with Complications.. 1.357 1.170 0.991 0.806 0.803
Miscarriage with No or Minor 1.357 1.170 0.991 0.806 0.803
Complications..................
Completed Pregnancy With Major 3.651 3.168 2.877 2.726 2.727
Complications..................
Completed Pregnancy With 3.651 3.168 2.877 2.726 2.727
Complications..................
Completed Pregnancy with No or 3.651 3.168 2.877 2.726 2.727
Minor Complications............
Chronic Ulcer of Skin, Except 2.360 2.236 2.153 2.137 2.137
Pressure.......................
Hip Fractures and Pathological 9.462 9.246 9.102 9.137 9.138
Vertebral or Humerus Fractures.
Pathological Fractures, Except 2.011 1.880 1.766 1.695 1.694
of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone 31.030 31.024 31.019 31.037 31.037
Marrow, Transplant Status/
Complications..................
Artificial Openings for Feeding 10.041 9.948 9.888 9.926 9.927
or Elimination.................
Amputation Status, Lower Limb/ 5.262 5.111 5.014 5.043 5.044
Amputation Complications.......
----------------------------------------------------------------------------------------------------------------
Interaction Factors
----------------------------------------------------------------------------------------------------------------
Severe illness x Opportunistic 10.392 10.618 10.787 10.882 10.884
Infections.....................
Severe illness x Metastatic 10.392 10.618 10.787 10.882 10.884
Cancer.........................
Severe illness x Lung, Brain, 10.392 10.618 10.787 10.882 10.884
and Other Severe Cancers,
Including Pediatric Acute
Lymphoid Leukemia..............
Severe illness x Non-Hodgkin`s 10.392 10.618 10.787 10.882 10.884
Lymphomas and Other Cancers and
Tumors.........................
Severe illness x Myasthenia 10.392 10.618 10.787 10.882 10.884
Gravis/Myoneural Disorders and
Guillain-Barre Syndrome/
Inflammatory and Toxic
Neuropathy.....................
Severe illness x Heart Infection/ 10.392 10.618 10.787 10.882 10.884
Inflammation, Except Rheumatic.
Severe illness x Intracranial 10.392 10.618 10.787 10.882 10.884
Hemorrhage.....................
Severe illness x HCC group G06 10.392 10.618 10.787 10.882 10.884
(G06 is HCC Group 6 which
includes the following HCCs in
the blood disease category: 67,
68)............................
Severe illness x HCC group G08 10.392 10.618 10.787 10.882 10.884
(G08 is HCC Group 8 which
includes the following HCCs in
the blood disease category: 73,
74)............................
Severe illness x End-Stage Liver 1.899 2.034 2.136 2.220 2.221
Disease........................
Severe illness x Acute Liver 1.899 2.034 2.136 2.220 2.221
Failure/Disease, Including
Neonatal Hepatitis.............
Severe illness x Atherosclerosis 1.899 2.034 2.136 2.220 2.221
of the Extremities with
Ulceration or Gangrene.........
Severe illness x Vascular 1.899 2.034 2.136 2.220 2.221
Disease with Complications.....
Severe illness x Aspiration and 1.899 2.034 2.136 2.220 2.221
Specified Bacterial Pneumonias
and Other Severe Lung
Infections.....................
Severe illness x Artificial 1.899 2.034 2.136 2.220 2.221
Openings for Feeding or
Elimination....................
Severe illness x HCC group G03 1.899 2.034 2.136 2.220 2.221
(G03 is HCC Group 3 which
includes the following HCCs in
the musculoskeletal disease
category: 54, 55)..............
----------------------------------------------------------------------------------------------------------------

[[Page 61477]]

Enrollment Duration Factors
----------------------------------------------------------------------------------------------------------------
One month of enrollment......... 0.515 0.441 0.396 0.386 0.386
Two months of enrollment........ 0.454 0.381 0.329 0.318 0.318
Three months of enrollment...... 0.387 0.321 0.270 0.258 0.258
Four months of enrollment....... 0.316 0.264 0.221 0.211 0.211
Five months of enrollment....... 0.273 0.228 0.188 0.176 0.176
Six months of enrollment........ 0.248 0.208 0.170 0.156 0.156
Seven months of enrollment...... 0.217 0.186 0.155 0.145 0.144
Eight months of enrollment...... 0.166 0.142 0.118 0.110 0.109
Nine months of enrollment....... 0.114 0.103 0.092 0.089 0.089
Ten months of enrollment........ 0.114 0.103 0.092 0.089 0.089
Eleven months of enrollment..... 0.100 0.092 0.084 0.082 0.082
----------------------------------------------------------------------------------------------------------------

TABLE 4--Draft Adult Risk Adjustment Model Factors for 2018 Benefit Year
----------------------------------------------------------------------------------------------------------------
HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 21-24, Male.... 0.176 0.140 0.095 0.052 0.049
Age 25-29, Male.... 0.160 0.125 0.080 0.036 0.033
Age 30-34, Male.... 0.206 0.160 0.105 0.048 0.044
Age 35-39, Male.... 0.270 0.215 0.148 0.079 0.074
Age 40-44, Male.... 0.337 0.273 0.196 0.114 0.108
Age 45-49, Male.... 0.408 0.335 0.249 0.155 0.149
Age 50-54, Male.... 0.533 0.447 0.346 0.234 0.227
Age 55-59, Male.... 0.608 0.510 0.397 0.272 0.264
Age 60-64, Male.... 0.702 0.588 0.460 0.312 0.304
Age 21-24, Female.. 0.303 0.249 0.179 0.106 0.101
Age 25-29, Female.. 0.351 0.286 0.207 0.122 0.116
Age 30-34, Female.. 0.485 0.405 0.312 0.214 0.209
Age 35-39, Female.. 0.572 0.483 0.383 0.280 0.275
Age 40-44, Female.. 0.644 0.545 0.434 0.320 0.315
Age 45-49, Female.. 0.652 0.549 0.434 0.310 0.304
Age 50-54, Female.. 0.738 0.627 0.501 0.361 0.353
Age 55-59, Female.. 0.742 0.626 0.496 0.347 0.339
Age 60-64, Female.. 0.780 0.654 0.513 0.351 0.341
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HCC001........................... HIV/AIDS........... 6.183 5.760 5.473 5.469 5.539
HCC002........................... Septicemia, Sepsis, 9.552 9.383 9.283 9.330 9.368
Systemic
Inflammatory
Response Syndrome/
Shock.
HCC003........................... Central Nervous 6.422 6.330 6.272 6.293 6.313
System Infections,
Except Viral
Meningitis.
HCC004........................... Viral or 4.503 4.287 4.163 4.106 4.139
Unspecified
Meningitis.
HCC006........................... Opportunistic 7.320 7.228 7.177 7.153 7.165
Infections.
HCC008........................... Metastatic Cancer.. 22.731 22.324 22.054 22.096 22.169
HCC009........................... Lung, Brain, and 11.734 11.425 11.226 11.215 11.265
Other Severe
Cancers, Including
Pediatric Acute
Lymphoid Leukemia.
HCC010........................... Non-Hodgkin's 5.463 5.251 5.110 5.051 5.077
Lymphomas and
Other Cancers and
Tumors.
HCC011........................... Colorectal, Breast 4.767 4.556 4.412 4.350 4.375
(Age <50), Kidney,
and Other Cancers.
HCC012........................... Breast (Age 50+) 2.781 2.627 2.522 2.457 2.472
and Prostate
Cancer, Benign/
Uncertain Brain
Tumors, and Other
Cancers and Tumors.
HCC013........................... Thyroid Cancer, 1.329 1.199 1.101 0.996 1.002
Melanoma,
Neurofibromatosis,
and Other Cancers
and Tumors.
HCC018........................... Pancreas Transplant 4.775 4.576 4.459 4.475 4.514
Status/
Complications.
HCC019........................... Diabetes with Acute 0.647 0.575 0.511 0.432 0.430
Complications.
HCC020........................... Diabetes with 0.647 0.575 0.511 0.432 0.430
Chronic
Complications.
HCC021........................... Diabetes without 0.647 0.575 0.511 0.432 0.430
Complication.
HCC023........................... Protein-Calorie 12.908 12.906 12.897 12.961 12.969
Malnutrition.
HCC026........................... Mucopolysaccharidos 2.037 1.934 1.861 1.798 1.806
is.
HCC027........................... Lipidoses and 2.037 1.934 1.861 1.798 1.806
Glycogenosis.

[[Page 61478]]

HCC029........................... Amyloidosis, 2.037 1.934 1.861 1.798 1.806
Porphyria, and
Other Metabolic
Disorders.
HCC030........................... Adrenal, Pituitary, 2.037 1.934 1.861 1.798 1.806
and Other
Significant
Endocrine
Disorders.
HCC034........................... Liver Transplant 11.899 11.778 11.711 11.700 11.720
Status/
Complications.
HCC035........................... End-Stage Liver 3.843 3.664 3.556 3.533 3.561
Disease.
HCC036........................... Cirrhosis of Liver. 1.336 1.218 1.144 1.089 1.101
HCC037C.......................... Chronic Viral 0.913 0.801 0.726 0.667 0.677
Hepatitis C.
HCC037B.......................... Chronic Hepatitis, 0.913 0.801 0.726 0.667 0.677
Other/Unspecified.
HCC038........................... Acute Liver Failure/ 3.843 3.664 3.556 3.533 3.561
Disease, Including
Neonatal Hepatitis.
HCC041........................... Intestine 30.139 30.077 30.019 30.075 30.090
Transplant Status/
Complications.
HCC042........................... Peritonitis/ 10.733 10.494 10.340 10.353 10.395
Gastrointestinal
Perforation/
Necrotizing
Enterocolitis.
HCC045........................... Intestinal 6.002 5.756 5.611 5.611 5.654
Obstruction.
HCC046........................... Chronic 4.775 4.576 4.459 4.475 4.514
Pancreatitis.
HCC047........................... Acute Pancreatitis/ 2.419 2.255 2.152 2.092 2.112
Other Pancreatic
Disorders and
Intestinal
Malabsorption.
HCC048........................... Inflammatory Bowel 2.046 1.872 1.751 1.655 1.669
Disease.
HCC054........................... Necrotizing 6.007 5.828 5.710 5.716 5.748
Fasciitis.
HCC055........................... Bone/Joint/Muscle 6.007 5.828 5.710 5.716 5.748
Infections/
Necrosis.
HCC056........................... Rheumatoid 2.278 2.137 2.035 1.968 1.982
Arthritis and
Specified
Autoimmune
Disorders.
HCC057........................... Systemic Lupus 1.030 0.918 0.836 0.737 0.740
Erythematosus and
Other Autoimmune
Disorders.
HCC061........................... Osteogenesis 2.905 2.727 2.600 2.526 2.543
Imperfecta and
Other
Osteodystrophies.
HCC062........................... Congenital/ 2.905 2.727 2.600 2.526 2.543
Developmental
Skeletal and
Connective Tissue
Disorders.
HCC063........................... Cleft Lip/Cleft 1.143 1.002 0.908 0.827 0.839
Palate.
HCC066........................... Hemophilia......... 42.231 41.976 41.792 41.785 41.825
HCC067........................... Myelodysplastic 12.207 12.080 11.999 12.004 12.026
Syndromes and
Myelofibrosis.
HCC068........................... Aplastic Anemia.... 12.207 12.080 11.999 12.004 12.026
HCC069........................... Acquired Hemolytic 8.782 8.635 8.534 8.511 8.532
Anemia, Including
Hemolytic Disease
of Newborn.
HCC070........................... Sickle Cell Anemia 8.782 8.635 8.534 8.511 8.532
(Hb-SS).
HCC071........................... Thalassemia Major.. 8.782 8.635 8.534 8.511 8.532
HCC073........................... Combined and Other 4.911 4.779 4.696 4.688 4.709
Severe
Immunodeficiencies.
HCC074........................... Disorders of the 4.911 4.779 4.696 4.688 4.709
Immune Mechanism.
HCC075........................... Coagulation Defects 2.568 2.480 2.417 2.380 2.388
and Other
Specified
Hematological
Disorders.
HCC081........................... Drug Psychosis..... 3.749 3.517 3.368 3.255 3.277
HCC082........................... Drug Dependence.... 3.749 3.517 3.368 3.255 3.277
HCC087........................... Schizophrenia...... 3.103 2.871 2.722 2.639 2.668
HCC088........................... Major Depressive 1.630 1.484 1.381 1.273 1.282
and Bipolar
Disorders.
HCC089........................... Reactive and 1.630 1.484 1.381 1.273 1.282
Unspecified
Psychosis,
Delusional
Disorders.
HCC090........................... Personality 1.142 1.028 0.930 0.819 0.820
Disorders.
HCC094........................... Anorexia/Bulimia 2.692 2.539 2.431 2.367 2.382
Nervosa.
HCC096........................... Prader-Willi, 2.409 2.290 2.211 2.148 2.159
Patau, Edwards,
and Autosomal
Deletion Syndromes.
HCC097........................... Down Syndrome, 0.849 0.756 0.680 0.594 0.595
Fragile X, Other
Chromosomal
Anomalies, and
Congenital
Malformation
Syndromes.
HCC102........................... Autistic Disorder.. 1.142 1.028 0.930 0.819 0.820
HCC103........................... Pervasive 1.142 1.028 0.930 0.819 0.820
Developmental
Disorders, Except
Autistic Disorder.
HCC106........................... Traumatic Complete 11.189 11.036 10.934 10.921 10.945
Lesion Cervical
Spinal Cord.
HCC107........................... Quadriplegia....... 11.189 11.036 10.934 10.921 10.945
HCC108........................... Traumatic Complete 8.762 8.617 8.520 8.501 8.523
Lesion Dorsal
Spinal Cord.
HCC109........................... Paraplegia......... 8.762 8.617 8.520 8.501 8.523
HCC110........................... Spinal Cord 5.523 5.325 5.201 5.163 5.191
Disorders/Injuries.
HCC111........................... Amyotrophic Lateral 2.567 2.353 2.220 2.162 2.191
Sclerosis and
Other Anterior
Horn Cell Disease.
HCC112........................... Quadriplegic 1.020 0.881 0.784 0.706 0.716
Cerebral Palsy.
HCC113........................... Cerebral Palsy, 0.168 0.111 0.070 0.030 0.033
Except
Quadriplegic.
HCC114........................... Spina Bifida and 0.046 0.000 0.000 0.000 0.000
Other Brain/Spinal/
Nervous System
Congenital
Anomalies.

[[Page 61479]]

HCC115........................... Myasthenia Gravis/ 5.158 5.020 4.933 4.905 4.924
Myoneural
Disorders and
Guillain-Barre
Syndrome/
Inflammatory and
Toxic Neuropathy.
HCC117........................... Muscular Dystrophy. 2.075 1.927 1.838 1.751 1.763
HCC118........................... Multiple Sclerosis. 3.652 3.459 3.335 3.267 3.289
HCC119........................... Parkinson's, 2.075 1.927 1.838 1.751 1.763
Huntington's, and
Spinocerebellar
Disease, and Other
Neurodegenerative
Disorders.
HCC120........................... Seizure Disorders 1.447 1.308 1.211 1.127 1.137
and Convulsions.
HCC121........................... Hydrocephalus...... 5.884 5.771 5.685 5.652 5.667
HCC122........................... Non-Traumatic Coma, 8.606 8.480 8.389 8.378 8.396
and Brain
Compression/Anoxic
Damage.
HCC125........................... Respirator 32.063 32.042 32.021 32.093 32.106
Dependence/
Tracheostomy
Status.
HCC126........................... Respiratory Arrest. 9.458 9.316 9.223 9.280 9.312
HCC127........................... Cardio-Respiratory 9.458 9.316 9.223 9.280 9.312
Failure and Shock,
Including
Respiratory
Distress Syndromes.
HCC128........................... Heart Assistive 31.966 31.751 31.611 31.636 31.677
Device/Artificial
Heart.
HCC129........................... Heart Transplant... 31.966 31.751 31.611 31.636 31.677
HCC130........................... Congestive Heart 2.074 1.978 1.912 1.873 1.883
Failure.
HCC131........................... Acute Myocardial 9.396 9.079 8.878 8.975 9.044
Infarction.
HCC132........................... Unstable Angina and 4.759 4.510 4.368 4.366 4.412
Other Acute
Ischemic Heart
Disease.
HCC135........................... Heart Infection/ 5.703 5.585 5.507 5.477 5.492
Inflammation,
Except Rheumatic.
HCC142........................... Specified Heart 2.065 1.948 1.869 1.802 1.811
Arrhythmias.
HCC145........................... Intracranial 8.616 8.359 8.198 8.189 8.231
Hemorrhage.
HCC146........................... Ischemic or 2.891 2.725 2.634 2.629 2.660
Unspecified Stroke.
HCC149........................... Cerebral Aneurysm 3.677 3.501 3.391 3.335 3.357
and Arteriovenous
Malformation.
HCC150........................... Hemiplegia/ 4.955 4.864 4.808 4.848 4.869
Hemiparesis.
HCC151........................... Monoplegia, Other 3.104 2.983 2.909 2.881 2.899
Paralytic
Syndromes.
HCC153........................... Atherosclerosis of 9.488 9.411 9.360 9.434 9.459
the Extremities
with Ulceration or
Gangrene.
HCC154........................... Vascular Disease 7.268 7.097 6.989 6.978 7.005
with Complications.
HCC156........................... Pulmonary Embolism 3.480 3.331 3.236 3.195 3.215
and Deep Vein
Thrombosis.
HCC158........................... Lung Transplant 31.358 31.201 31.097 31.176 31.215
Status/
Complications.
HCC159........................... Cystic Fibrosis.... 7.004 6.736 6.550 6.529 6.569
HCC160........................... Chronic Obstructive 0.897 0.797 0.718 0.631 0.634
Pulmonary Disease,
Including
Bronchiectasis.
HCC161........................... Asthma............. 0.897 0.797 0.718 0.631 0.634
HCC162........................... Fibrosis of Lung 1.730 1.624 1.557 1.508 1.518
and Other Lung
Disorders.
HCC163........................... Aspiration and 6.798 6.731 6.689 6.697 6.711
Specified
Bacterial
Pneumonias and
Other Severe Lung
Infections.
HCC183........................... Kidney Transplant 7.065 6.838 6.705 6.674 6.710
Status.
HCC184........................... End Stage Renal 23.772 23.578 23.450 23.516 23.559
Disease.
HCC187........................... Chronic Kidney 0.395 0.326 0.286 0.280 0.292
Disease, Stage 5.
HCC188........................... Chronic Kidney 0.395 0.326 0.286 0.280 0.292
Disease, Severe
(Stage 4).
HCC203........................... Ectopic and Molar 1.283 1.127 1.008 0.814 0.806
Pregnancy, Except
with Renal
Failure, Shock, or
Embolism.
HCC204........................... Miscarriage with 1.283 1.127 1.008 0.814 0.806
Complications.
HCC205........................... Miscarriage with No 1.283 1.127 1.008 0.814 0.806
or Minor
Complications.
HCC207........................... Completed Pregnancy 3.466 3.027 2.823 2.625 2.694
With Major
Complications.
HCC208........................... Completed Pregnancy 3.466 3.027 2.823 2.625 2.694
With Complications.
HCC209........................... Completed Pregnancy 3.466 3.027 2.823 2.625 2.694
with No or Minor
Complications.
HCC217........................... Chronic Ulcer of 2.003 1.903 1.843 1.825 1.840
Skin, Except
Pressure.
HCC226........................... Hip Fractures and 9.015 8.812 8.682 8.709 8.747
Pathological
Vertebral or
Humerus Fractures.
HCC227........................... Pathological 2.028 1.913 1.830 1.750 1.758
Fractures, Except
of Vertebrae, Hip,
or Humerus.
HCC251........................... Stem Cell, 28.116 28.117 28.113 28.139 28.143
Including Bone
Marrow, Transplant
Status/
Complications.

[[Page 61480]]

HCC253........................... Artificial Openings 9.095 9.005 8.946 8.979 8.999
for Feeding or
Elimination.
HCC254........................... Amputation Status, 4.508 4.378 4.298 4.323 4.351
Lower Limb/
Amputation
Complications.
----------------------------------------------------------------------------------------------------------------
Interaction Factors
----------------------------------------------------------------------------------------------------------------
SEVERE x HCC006.................. Severe illness x 9.355 9.550 9.669 9.785 9.768
Opportunistic
Infections.
SEVERE x HCC008.................. Severe illness x 9.355 9.550 9.669 9.785 9.768
Metastatic Cancer.
SEVERE x HCC009.................. Severe illness x 9.355 9.550 9.669 9.785 9.768
Lung, Brain, and
Other Severe
Cancers, Including
Pediatric Acute
Lymphoid Leukemia.
SEVERE x HCC010.................. Severe illness x 9.355 9.550 9.669 9.785 9.768
Non-Hodgkin`s
Lymphomas and
Other Cancers and
Tumors.
SEVERE x HCC115.................. Severe illness x 9.355 9.550 9.669 9.785 9.768
Myasthenia Gravis/
Myoneural
Disorders and
Guillain-Barre
Syndrome/
Inflammatory and
Toxic Neuropathy.
SEVERE x HCC135.................. Severe illness x 9.355 9.550 9.669 9.785 9.768
Heart Infection/
Inflammation,
Except Rheumatic.
SEVERE x HCC145.................. Severe illness x 9.355 9.550 9.669 9.785 9.768
Intracranial
Hemorrhage.
SEVERE x G06..................... Severe illness x 9.355 9.550 9.669 9.785 9.768
HCC group G06 (G06
is HCC Group 6
which includes the
following HCCs in
the blood disease
category: 67, 68).
SEVERE x G08..................... Severe illness x 9.355 9.550 9.669 9.785 9.768
HCC group G08 (G08
is HCC Group 8
which includes the
following HCCs in
the blood disease
category: 73, 74).
SEVERE x HCC035.................. Severe illness x 1.895 2.007 2.070 2.170 2.164
End-Stage Liver
Disease.
SEVERE x HCC038.................. Severe illness x 1.895 2.007 2.070 2.170 2.164
Acute Liver
Failure/Disease,
Including Neonatal
Hepatitis.
SEVERE x HCC153.................. Severe illness x 1.895 2.007 2.070 2.170 2.164
Atherosclerosis of
the Extremities
with Ulceration or
Gangrene.
SEVERE x HCC154.................. Severe illness x 1.895 2.007 2.070 2.170 2.164
Vascular Disease
with Complications.
SEVERE x HCC163.................. Severe illness x 1.895 2.007 2.070 2.170 2.164
Aspiration and
Specified
Bacterial
Pneumonias and
Other Severe Lung
Infections.
SEVERE x HCC253.................. Severe illness x 1.895 2.007 2.070 2.170 2.164
Artificial
Openings for
Feeding or
Elimination.
SEVERE x G03..................... Severe illness x 1.895 2.007 2.070 2.170 2.164
HCC group G03 (G03
is HCC Group 3
which includes the
following HCCs in
the
musculoskeletal
disease category:
54, 55).
----------------------------------------------------------------------------------------------------------------
Enrollment Duration Factors
----------------------------------------------------------------------------------------------------------------
One month of 0.526 0.470 0.427 0.411 0.414
enrollment.
Two months of 0.434 0.381 0.335 0.316 0.319
enrollment.
Three months of 0.386 0.337 0.291 0.270 0.272
enrollment.
Four months of 0.303 0.264 0.226 0.209 0.211
enrollment.
Five months of 0.263 0.229 0.194 0.175 0.176
enrollment.
Six months of 0.241 0.212 0.180 0.163 0.163
enrollment.
Seven months of 0.214 0.190 0.163 0.148 0.148
enrollment.
Eight months of 0.166 0.148 0.128 0.115 0.116
enrollment.
Nine months of 0.111 0.100 0.089 0.085 0.085
enrollment.
Ten months of 0.106 0.098 0.089 0.085 0.085
enrollment.
Eleven months of 0.088 0.083 0.079 0.077 0.077
enrollment.
----------------------------------------------------------------------------------------------------------------
Prescription Drug Utilization Indicators
----------------------------------------------------------------------------------------------------------------
RXC 01........................... Anti-Hepatitis C 23.898 23.451 23.158 23.236 23.320
(HCV) Agents.
RXC 02........................... Anti-HIV Agents.... 6.331 5.889 5.594 5.432 5.482
RXC 03........................... Antiarrhythmics.... 2.320 2.226 2.149 2.079 2.083
RXC 04........................... Phosphate Binders.. 13.417 13.308 13.238 13.249 13.271
RXC 05........................... Inflammatory Bowel 1.990 1.822 1.708 1.541 1.543
Disease Agents.
RXC 06b.......................... Insulin............ 1.379 1.258 1.134 0.975 0.966

[[Page 61481]]

RXC 06a.......................... Anti-Diabetic 0.575 0.502 0.428 0.326 0.319
Agents, Except
Insulin and
Metformin Only.
RXC 07........................... Multiple Sclerosis 16.971 16.286 15.836 15.832 15.945
Agents.
RXC 08........................... Immune Suppressants 10.134 9.586 9.234 9.242 9.339
and
Immunomodulators.
RXC 09........................... Cystic Fibrosis 17.443 17.133 16.931 17.071 17.144
Agents.
RXC 01 x HCC37C, 036, 035, 034... Additional effect 3.212 3.350 3.439 3.522 3.512
for enrollees with
RXC Anti-Hepatitis
C (HCV) Agents and
HCC (Liver
Transplant Status/
Complications or
End-Stage Liver
Disease or
Cirrhosis of Liver
or Chronic Viral
Hepatitis).
RXC 02 x HCC001.................. Additional effect -2.238 -1.888 -1.645 -1.437 -1.465
for enrollees with
RXC Anti-HIV
Agents and HCC HIV/
AIDS.
RXC 03 x HCC142.................. Additional effect -0.102 -0.076 -0.035 0.037 0.046
for enrollees with
RXC
Antiarrhythmics
and HCC Specified
Heart Arrhythmias.
RXC 04 x HCC184, 183, 187, 188... Additional effect 7.775 7.850 7.890 7.978 7.973
for enrollees with
RXC Phosphate
Binders and HCC
(End Stage Renal
Disease or Kidney
Transplant Status
or Chronic Kidney
Disease, Stage 5
or Chronic Kidney
Disease, Severe
(Stage 4)).
RXC 05 x HCC048, 041............. Additional effect -1.296 -1.208 -1.126 -1.028 -1.026
for enrollees with
RXC Inflammatory
Bowel Disease
Agents and (HCC
Inflammatory Bowel
Disease or
Intestine
Transplant Status/
Complications).
RXC 06b x HCC018, 019, 020, 021.. Additional effect 0.265 0.233 0.289 0.371 0.397
for enrollees with
RXC Insulin and
(HCC Pancreas
Transplant Status/
Complications or
Diabetes with
Acute
Complications or
Diabetes with
Chronic
Complications or
Diabetes without
Complication).
RXC 06a x HCC018, 019, 020, 021.. Additional effect -0.203 -0.184 -0.141 -0.118 -0.116
for enrollees with
RXC Anti-Diabetic
Agents, Except
Insulin and
Metformin Only and
(HCC Pancreas
Transplant Status/
Complications or
Diabetes with
Acute
Complications or
Diabetes with
Chronic
Complications or
Diabetes without
Complication).
RXC 07 x HCC118.................. Additional effect -1.213 -0.849 -0.619 -0.449 -0.484
for enrollees with
RXC Multiple
Sclerosis Agents
and HCC Multiple
Sclerosis.
RXC 08 x HCC056 or 057, and 048 Additional effect 0.022 0.024 0.038 0.012 0.009
or 041. for enrollees with
RXC Immune
Suppressants and
Immunomodulators
and (HCC
Inflammatory Bowel
Disease or
Intestine
Transplant Status/
Complications) and
(HCC Rheumatoid
Arthritis and
Specified
Autoimmune
Disorders or
Systemic Lupus
Erythematosus and
Other Autoimmune
Disorders).
RXC 08 x HCC056.................. Additional effect -1.934 -1.747 -1.615 -1.481 -1.495
for enrollees with
RXC Immune
Suppressants and
Immunomodulators
and HCC Rheumatoid
Arthritis and
Specified
Autoimmune
Disorders.
RXC 08 x HCC057.................. Additional effect -0.891 -0.759 -0.656 -0.522 -0.526
for enrollees with
RXC Immune
Suppressants and
Immunomodulators
and HCC Systemic
Lupus
Erythematosus and
Other Autoimmune
Disorders.
RXC 08 x HCC048, 041............. Additional effect 0.948 1.194 1.330 1.513 1.493
for enrollees with
RXC Immune
Suppressants and
Immunomodulators
and (HCC
Inflammatory Bowel
Disease or
Intestine
Transplant Status/
Complications).

[[Page 61482]]

RXC 09 x HCC159, 158............. Additional effect 18.100 18.294 18.402 18.379 18.340
for enrollees with
RXC Cystic
Fibrosis Agents
and (HCC Cystic
Fibrosis or Lung
Transplant Status/
Complications).
RXC 10 x HCC036, 035, 034........ Additional effect 7.113 7.080 7.054 7.145 7.164
for enrollees with
RXC Ammonia
Detoxicants and
(HCC Liver
Transplant Status/
Complications or
End-Stage Liver
Disease or
Cirrhosis of
Liver).
RXC 11 x HCC130, 129, 128........ Additional effect 2.263 2.270 2.284 2.369 2.382
for enrollees with
RXC Diuretics,
Loop and Select
Potassium-sparing
and (HCC Heart
Assistive Device/
Artificial Heart
or Heart
Transplant or
Congestive Heart
Failure).
----------------------------------------------------------------------------------------------------------------

Table 5--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 6--Draft Child Risk Adjustment Model Factors for 2018 Benefit Year
----------------------------------------------------------------------------------------------------------------
Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male................... 0.207 0.151 0.085 0.029 0.025
Age 5-9, Male................... 0.142 0.102 0.053 0.011 0.008
Age 10-14, Male................. 0.204 0.160 0.103 0.057 0.053
Age 15-20, Male................. 0.271 0.220 0.158 0.102 0.098
Age 2-4, Female................. 0.163 0.114 0.058 0.015 0.012
Age 5-9, Female................. 0.116 0.081 0.039 0.008 0.006
Age 10-14, Female............... 0.192 0.150 0.099 0.059 0.056
Age 15-20, Female............... 0.309 0.250 0.177 0.109 0.104
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................ 4.686 4.277 4.006 3.895 3.948
Septicemia, Sepsis, Systemic 15.212 15.056 14.964 14.980 15.011
Inflammatory Response Syndrome/
Shock..........................
Central Nervous System 9.957 9.790 9.682 9.681 9.708
Infections, Except Viral
Meningitis.....................
Viral or Unspecified Meningitis. 2.484 2.302 2.192 2.092 2.112
Opportunistic Infections........ 20.790 20.728 20.685 20.673 20.682
Metastatic Cancer............... 32.805 32.584 32.417 32.401 32.434
Lung, Brain, and Other Severe 11.049 10.801 10.617 10.544 10.573
Cancers, Including Pediatric
Acute Lymphoid Leukemia........
Non-Hodgkin's Lymphomas and 8.747 8.507 8.333 8.231 8.255
Other Cancers and Tumors.......
Colorectal, Breast (Age <50), 3.175 2.986 2.846 2.724 2.737
Kidney, and Other Cancers......
Breast (Age 50+) and Prostate 2.813 2.640 2.513 2.398 2.408
Cancer, Benign/Uncertain Brain
Tumors, and Other Cancers and
Tumors.........................
Thyroid Cancer, Melanoma, 1.561 1.423 1.311 1.190 1.194
Neurofibromatosis, and Other
Cancers and Tumors.............
Pancreas Transplant Status/ 26.035 25.914 25.841 25.846 25.867
Complications..................
Diabetes with Acute 2.340 2.054 1.887 1.622 1.632
Complications..................
Diabetes with Chronic 2.340 2.054 1.887 1.622 1.632
Complications..................
Diabetes without Complication... 2.340 2.054 1.887 1.622 1.632
Protein-Calorie Malnutrition.... 12.106 12.025 11.965 11.995 12.012
Mucopolysaccharidosis........... 8.087 7.841 7.660 7.612 7.644
Lipidoses and Glycogenosis...... 8.087 7.841 7.660 7.612 7.644
Congenital Metabolic Disorders, 8.087 7.841 7.660 7.612 7.644
Not Elsewhere Classified.......

[[Page 61483]]

Amyloidosis, Porphyria, and 8.087 7.841 7.660 7.612 7.644
Other Metabolic Disorders......
Adrenal, Pituitary, and Other 8.087 7.841 7.660 7.612 7.644
Significant Endocrine Disorders
Liver Transplant Status/ 26.035 25.914 25.841 25.846 25.867
Complications..................
End-Stage Liver Disease......... 11.991 11.852 11.762 11.751 11.773
Cirrhosis of Liver.............. 9.308 9.167 9.070 9.044 9.062
Chronic Viral Hepatitis C....... 4.024 3.889 3.787 3.730 3.743
Chronic Hepatitis, Other/ 2.271 2.151 2.049 1.965 1.971
Unspecified....................
Acute Liver Failure/Disease, 11.991 11.852 11.762 11.751 11.773
Including Neonatal Hepatitis...
Intestine Transplant Status/ 26.035 25.914 25.841 25.846 25.867
Complications..................
Peritonitis/Gastrointestinal 13.534 13.230 13.022 13.021 13.071
Perforation/Necrotizing
Enterocolitis..................
Intestinal Obstruction.......... 4.748 4.541 4.395 4.297 4.317
Chronic Pancreatitis............ 9.837 9.629 9.502 9.493 9.527
Acute Pancreatitis/Other 2.186 2.075 1.987 1.889 1.892
Pancreatic Disorders and
Intestinal Malabsorption.......
Inflammatory Bowel Disease...... 6.044 5.699 5.465 5.348 5.386
Necrotizing Fasciitis........... 3.999 3.795 3.647 3.572 3.596
Bone/Joint/Muscle Infections/ 3.999 3.795 3.647 3.572 3.596
Necrosis.......................
Rheumatoid Arthritis and 3.788 3.572 3.404 3.301 3.321
Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and 1.335 1.216 1.112 0.990 0.989
Other Autoimmune Disorders.....
Osteogenesis Imperfecta and 1.489 1.379 1.285 1.201 1.206
Other Osteodystrophies.........
Congenital/Developmental 1.489 1.379 1.285 1.201 1.206
Skeletal and Connective Tissue
Disorders......................
Cleft Lip/Cleft Palate.......... 1.502 1.322 1.192 1.064 1.075
Hemophilia...................... 55.750 55.302 54.985 54.945 55.012
Myelodysplastic Syndromes and 15.915 15.761 15.654 15.632 15.652
Myelofibrosis..................
Aplastic Anemia................. 15.915 15.761 15.654 15.632 15.652
Acquired Hemolytic Anemia, 7.294 7.048 6.875 6.784 6.812
Including Hemolytic Disease of
Newborn........................
Sickle Cell Anemia (Hb-SS)...... 7.294 7.048 6.875 6.784 6.812
Thalassemia Major............... 7.294 7.048 6.875 6.784 6.812
Combined and Other Severe 6.252 6.092 5.982 5.915 5.931
Immunodeficiencies.............
Disorders of the Immune 6.252 6.092 5.982 5.915 5.931
Mechanism......................
Coagulation Defects and Other 4.546 4.429 4.333 4.257 4.264
Specified Hematological
Disorders......................
Drug Psychosis.................. 5.380 5.147 4.999 4.923 4.952
Drug Dependence................. 5.380 5.147 4.999 4.923 4.952
Schizophrenia................... 5.083 4.726 4.492 4.375 4.420
Major Depressive and Bipolar 1.873 1.677 1.527 1.350 1.356
Disorders......................
Reactive and Unspecified 1.873 1.677 1.527 1.350 1.356
Psychosis, Delusional Disorders
Personality Disorders........... 0.729 0.624 0.520 0.377 0.372
Anorexia/Bulimia Nervosa........ 2.892 2.708 2.576 2.504 2.524
Prader-Willi, Patau, Edwards, 3.492 3.304 3.194 3.154 3.180
and Autosomal Deletion
Syndromes......................
Down Syndrome, Fragile X, Other 1.736 1.577 1.469 1.376 1.390
Chromosomal Anomalies, and
Congenital Malformation
Syndromes......................
Autistic Disorder............... 1.671 1.512 1.383 1.224 1.226
Pervasive Developmental 0.835 0.726 0.612 0.447 0.437
Disorders, Except Autistic
Disorder.......................
Traumatic Complete Lesion 12.558 12.507 12.489 12.562 12.579
Cervical Spinal Cord...........
Quadriplegia.................... 12.558 12.507 12.489 12.562 12.579
Traumatic Complete Lesion Dorsal 12.180 12.010 11.883 11.877 11.912
Spinal Cord....................
Paraplegia...................... 12.180 12.010 11.883 11.877 11.912
Spinal Cord Disorders/Injuries.. 4.250 4.044 3.905 3.816 3.836
Amyotrophic Lateral Sclerosis 7.619 7.407 7.257 7.196 7.221
and Other Anterior Horn Cell
Disease........................
Quadriplegic Cerebral Palsy..... 2.991 2.764 2.631 2.634 2.675
Cerebral Palsy, Except 0.778 0.617 0.514 0.422 0.436
Quadriplegic...................
Spina Bifida and Other Brain/ 1.275 1.146 1.054 0.976 0.986
Spinal/Nervous System
Congenital Anomalies...........
Myasthenia Gravis/Myoneural 8.788 8.631 8.520 8.481 8.502
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy.....................
Muscular Dystrophy.............. 2.941 2.765 2.650 2.563 2.580
Multiple Sclerosis.............. 7.769 7.471 7.263 7.206 7.246
Parkinson`s, Huntington`s, and 2.941 2.765 2.650 2.563 2.580
Spinocerebellar Disease, and
Other Neurodegenerative
Disorders......................
Seizure Disorders and 1.905 1.753 1.628 1.483 1.486
Convulsions....................
Hydrocephalus................... 4.590 4.479 4.408 4.389 4.406
Non-Traumatic Coma, and Brain 6.647 6.522 6.434 6.385 6.397
Compression/Anoxic Damage......

[[Page 61484]]

Respirator Dependence/ 34.991 34.882 34.817 34.931 34.967
Tracheostomy Status............
Respiratory Arrest.............. 11.820 11.625 11.511 11.500 11.535
Cardio-Respiratory Failure and 11.820 11.625 11.511 11.500 11.535
Shock, Including Respiratory
Distress Syndromes.............
Heart Assistive Device/ 26.035 25.914 25.841 25.846 25.867
Artificial Heart...............
Heart Transplant................ 26.035 25.914 25.841 25.846 25.867
Congestive Heart Failure........ 6.567 6.472 6.394 6.342 6.348
Acute Myocardial Infarction..... 9.084 8.927 8.826 8.828 8.852
Unstable Angina and Other Acute 5.051 4.971 4.917 4.926 4.938
Ischemic Heart Disease.........
Heart Infection/Inflammation, 14.351 14.240 14.165 14.137 14.149
Except Rheumatic...............
Hypoplastic Left Heart Syndrome 5.764 5.584 5.432 5.305 5.313
and Other Severe Congenital
Heart Disorders................
Major Congenital Heart/ 1.573 1.475 1.361 1.239 1.235
Circulatory Disorders..........
Atrial and Ventricular Septal 1.097 1.010 0.908 0.808 0.807
Defects, Patent Ductus
Arteriosus, and Other
Congenital Heart/Circulatory
Disorders......................
Specified Heart Arrhythmias..... 3.684 3.526 3.401 3.320 3.333
Intracranial Hemorrhage......... 14.176 13.948 13.803 13.784 13.820
Ischemic or Unspecified Stroke.. 7.895 7.786 7.721 7.720 7.739
Cerebral Aneurysm and 3.545 3.356 3.235 3.172 3.192
Arteriovenous Malformation.....
Hemiplegia/Hemiparesis.......... 4.484 4.389 4.333 4.314 4.330
Monoplegia, Other Paralytic 3.148 3.018 2.937 2.899 2.917
Syndromes......................
Atherosclerosis of the 14.633 14.377 14.225 14.131 14.168
Extremities with Ulceration or
Gangrene.......................
Vascular Disease with 16.113 15.969 15.873 15.876 15.899
Complications..................
Pulmonary Embolism and Deep Vein 14.661 14.521 14.435 14.448 14.475
Thrombosis.....................
Lung Transplant Status/ 26.035 25.914 25.841 25.846 25.867
Complications..................
Cystic Fibrosis................. 19.127 18.718 18.428 18.452 18.522
Chronic Obstructive Pulmonary 0.396 0.334 0.249 0.153 0.147
Disease, Including
Bronchiectasis.................
Asthma.......................... 0.396 0.334 0.249 0.153 0.147
Fibrosis of Lung and Other Lung 4.160 4.036 3.936 3.862 3.873
Disorders......................
Aspiration and Specified 10.367 10.322 10.287 10.315 10.324
Bacterial Pneumonias and Other
Severe Lung Infections.........
Kidney Transplant Status........ 15.081 14.777 14.581 14.566 14.616
End Stage Renal Disease......... 38.217 38.061 37.962 38.031 38.065
Chronic Kidney Disease, Stage 5. 3.038 2.903 2.802 2.685 2.688
Chronic Kidney Disease, Severe 3.038 2.903 2.802 2.685 2.688
(Stage 4)......................
Ectopic and Molar Pregnancy, 1.033 0.878 0.754 0.549 0.541
Except with Renal Failure,
Shock, or Embolism.............
Miscarriage with Complications.. 1.033 0.878 0.754 0.549 0.541
Miscarriage with No or Minor 1.033 0.878 0.754 0.549 0.541
Complications..................
Completed Pregnancy With Major 2.991 2.587 2.391 2.161 2.216
Complications..................
Completed Pregnancy With 2.991 2.587 2.391 2.161 2.216
Complications..................
Completed Pregnancy with No or 2.991 2.587 2.391 2.161 2.216
Minor Complications............
Chronic Ulcer of Skin, Except 2.057 1.969 1.888 1.819 1.823
Pressure.......................
Hip Fractures and Pathological 5.729 5.486 5.302 5.192 5.214
Vertebral or Humerus Fractures.
Pathological Fractures, Except 1.351 1.233 1.116 0.982 0.977
of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone 26.035 25.914 25.841 25.846 25.867
Marrow, Transplant Status/
Complications..................
Artificial Openings for Feeding 13.409 13.305 13.251 13.357 13.391
or Elimination.................
Amputation Status, Lower Limb/ 7.806 7.556 7.407 7.306 7.336
Amputation Complications.......
----------------------------------------------------------------------------------------------------------------

Table 7--Draft Infant Risk Adjustment Model Factors for 2018 Benefit Year
----------------------------------------------------------------------------------------------------------------
Group Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity 336.506 335.265 334.332 334.271 334.459
Level 5 (Highest)..............
Extremely Immature * Severity 183.468 182.244 181.331 181.224 181.402
Level 4........................
Extremely Immature * Severity 70.513 69.447 68.657 68.493 68.642
Level 3........................
Extremely Immature * Severity 29.465 28.557 27.854 27.519 27.614
Level 2........................
Extremely Immature * Severity 29.465 28.557 27.854 27.519 27.614
Level 1 (Lowest)...............
Immature * Severity Level 5 178.009 176.784 175.861 175.795 175.980
(Highest)......................
Immature * Severity Level 4..... 80.832 79.582 78.649 78.554 78.740
Immature * Severity Level 3..... 45.204 44.114 43.299 43.140 43.289
Immature * Severity Level 2..... 29.465 28.557 27.854 27.519 27.614
Immature * Severity Level 1 26.402 25.374 24.608 24.351 24.477
(Lowest).......................
Premature/Multiples * Severity 133.590 132.392 131.511 131.378 131.555
Level 5 (Highest)..............
Premature/Multiples * Severity 30.629 29.458 28.605 28.391 28.552
Level 4........................

[[Page 61485]]

Premature/Multiples * Severity 16.302 15.378 14.694 14.308 14.399
Level 3........................
Premature/Multiples * Severity 8.445 7.691 7.131 6.599 6.637
Level 2........................
Premature/Multiples * Severity 5.825 5.277 4.774 4.196 4.187
Level 1 (Lowest)...............
Term * Severity Level 5 115.287 114.176 113.343 113.147 113.297
(Highest)......................
Term * Severity Level 4......... 16.144 15.252 14.603 14.155 14.235
Term * Severity Level 3......... 6.053 5.490 4.998 4.409 4.397
Term * Severity Level 2......... 3.715 3.284 2.849 2.209 2.166
Term * Severity Level 1 (Lowest) 1.570 1.351 0.965 0.436 0.387
Age 1 * Severity Level 5 49.286 48.692 48.242 48.122 48.198
(Highest)......................
Age 1 * Severity Level 4........ 8.659 8.213 7.871 7.641 7.678
Age 1 * Severity Level 3........ 3.182 2.901 2.635 2.374 2.380
Age 1 * Severity Level 2........ 1.997 1.779 1.544 1.267 1.257
Age 1 * Severity Level 1 0.529 0.441 0.299 0.196 0.189
(Lowest).......................
Age 0 Male...................... 0.601 0.558 0.540 0.494 0.490
Age 1 Male...................... 0.140 0.123 0.112 0.085 0.084
----------------------------------------------------------------------------------------------------------------

Table 8--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 9--HHS HCCs Included in Infant Model Severity Categories
------------------------------------------------------------------------
Severity category HCC
------------------------------------------------------------------------
Severity Level 5 (Highest)... Metastatic Cancer.
Severity Level 5............. Pancreas Transplant Status/Complications.
Severity Level 5............. Liver Transplant Status/Complications.
Severity Level 5............. End-Stage Liver Disease.
Severity Level 5............. Intestine Transplant Status/
Complications.
Severity Level 5............. Peritonitis/Gastrointestinal Perforation/
Necrotizing Enterocolitis.
Severity Level 5............. Respirator Dependence/Tracheostomy
Status.
Severity Level 5............. Heart Assistive Device/Artificial Heart.
Severity Level 5............. Heart Transplant.
Severity Level 5............. Congestive Heart Failure.
Severity Level 5............. Hypoplastic Left Heart Syndrome and Other
Severe Congenital Heart Disorders.
Severity Level 5............. Lung Transplant Status/Complications.
Severity Level 5............. Kidney Transplant Status.
Severity Level 5............. End Stage Renal Disease.
Severity Level 5............. Stem Cell, Including Bone Marrow,
Transplant Status/Complications.
Severity Level 4............. Septicemia, Sepsis, Systemic Inflammatory
Response Syndrome/Shock.
Severity Level 4............. Lung, Brain, and Other Severe Cancers,
Including Pediatric Acute Lymphoid
Leukemia.
Severity Level 4............. Mucopolysaccharidosis.
Severity Level 4............. Major Congenital Anomalies of Diaphragm,
Abdominal Wall, and Esophagus, Age < 2.
Severity Level 4............. Myelodysplastic Syndromes and
Myelofibrosis.
Severity Level 4............. Aplastic Anemia.
Severity Level 4............. Combined and Other Severe
Immunodeficiencies.
Severity Level 4............. Traumatic Complete Lesion Cervical Spinal
Cord.
Severity Level 4............. Quadriplegia.
Severity Level 4............. Amyotrophic Lateral Sclerosis and Other
Anterior Horn Cell Disease.
Severity Level 4............. Quadriplegic Cerebral Palsy.
Severity Level 4............. Myasthenia Gravis/Myoneural Disorders and
Guillain-Barre Syndrome/Inflammatory and
Toxic Neuropathy.
Severity Level 4............. Non-Traumatic Coma, Brain Compression/
Anoxic Damage.
Severity Level 4............. Respiratory Arrest.
Severity Level 4............. Cardio-Respiratory Failure and Shock,
Including Respiratory Distress
Syndromes.
Severity Level 4............. Acute Myocardial Infarction.
Severity Level 4............. Heart Infection/Inflammation, Except
Rheumatic.
Severity Level 4............. Major Congenital Heart/Circulatory
Disorders.
Severity Level 4............. Intracranial Hemorrhage.
Severity Level 4............. Ischemic or Unspecified Stroke.

[[Page 61486]]

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.
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.

[[Page 61487]]

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

e. Cost-Sharing Reductions (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
reductions adjustment factors for 2018 risk adjustment are unchanged
from those finalized in the 2017 Payment Notice and are set forth in
Table 10. These adjustments are effective for 2016, 2017, and 2018 risk
adjustment, and are multiplied against the sum of the demographic,
diagnosis, and interaction factors. We anticipate adjusting these
factors in the annual HHS notice of benefit and payment parameters for
the 2019 benefit year as additional enrollee-level data from the
individual market becomes available. We seek comment on this approach.

Table 10--Cost-Sharing Reductions Adjustment
------------------------------------------------------------------------
Induced
Household income Plan AV utilization
factor
------------------------------------------------------------------------
Silver Plan Variant Recipients
------------------------------------------------------------------------
100-150% of FPL................ Plan Variation 94%..... 1.12
150-200% of FPL................ Plan Variation 87%..... 1.12
200-250% of FPL................ Plan Variation 73%..... 1.00
>250% of FPL................... Standard Plan 70%...... 1.00
------------------------------------------------------------------------
Zero Cost-Sharing Recipients
------------------------------------------------------------------------
<300% of FPL................... Platinum (90%)......... 1.00
<300% of FPL................... Gold (80%)............. 1.07
<300% of FPL................... Silver (70%)........... 1.12
<300% of FPL................... Bronze (60%)........... 1.15
------------------------------------------------------------------------
Limited Cost-Sharing Recipients
------------------------------------------------------------------------
>300% of FPL................... Platinum (90%)......... 1.00
>300% of FPL................... Gold (80%)............. 1.07
>300% of FPL................... Silver (70%)........... 1.12
>300% of FPL................... Bronze (60%)........... 1.15
------------------------------------------------------------------------

f. Model Performance Statistics (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.\33\ Because we are proposing to blend the
coefficients from separately solved models based on MarketScan[supreg]
2013 and 2014 data in the proposed 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 11.
---------------------------------------------------------------------------

\33\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis
of Claims-Based Tools for Health Risk Assessment.'' Society of
Actuaries. April 2007.

[[Page 61488]]

Table 11--R-Squared Statistic for HHS Risk Adjustment Models
------------------------------------------------------------------------
R-Squared statistic
Risk adjustment model -------------------------------
2013 2014
------------------------------------------------------------------------
Platinum Adult.......................... 0.4070 0.4005
Platinum Child.......................... 0.2947 0.2908
Platinum Infant......................... 0.3354 0.3200
Gold Adult.............................. 0.4026 0.3956
Gold Child.............................. 0.2902 0.2860
Gold Infant............................. 0.3335 0.3180
Silver Adult............................ 0.3993 0.3918
Silver Child............................ 0.2866 0.2821
Silver Infant........................... 0.3324 0.3168
Bronze Adult............................ 0.3971 0.3893
Bronze Child............................ 0.2836 0.2789
Bronze Infant........................... 0.3323 0.3165
Catastrophic Adult...................... 0.3975 0.3898
Catastrophic Child...................... 0.2839 0.2792
Catastrophic Infant..................... 0.3326 0.3168
------------------------------------------------------------------------

g. Overview of the Payment Transfer Formula (Sec. 153.320)
In order to maintain the balance of payments and charges that net
to zero within each State market, we propose to account for high-cost
enrollees through transfer terms (a payment term and a charge term)
that would be calculated separately from the State transfer formula.
Thus, the non-outlier pooling portion of plan risk will continue to be
calculated as the member month-weighted average of individual enrollee
risk scores. We previously 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 (total payments and charges including outlier
pooling) 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.
The total payment or charge is thus calculated to balance the State
market risk pool in question. In addition to the total charge collected
and payment made for the State market risk pool, we propose to add to
the risk adjustment methodology additional transfers that would reflect
the payments and charges assessed with respect to the costs of high-
risk enrollees. In particular, we would add one term that would reflect
60 percent of costs above $2 million, the proposed threshold for our
payments for these enrollees, and another term that would reflect a
percentage of PMPM premium adjustment to the transfer formula for the
high-cost enrollee pool to maintain the balance of payment and charges
within the risk adjustment program. We seek comment on this approach to
balance transfers between high and low risk plans.
We received feedback in the 2017 Payment Notice and the White Paper
from commenters who believe that the inclusion of administrative costs
in the Statewide average premium incorrectly increases risk adjustment
transfers based on costs that are unrelated to the risk of the enrollee
population. Comments ranged from requesting that administrative
expenses be removed entirely from the Statewide average premium to
requesting that HHS consider basing risk adjustment transfers on a
portion of Statewide average premium--namely, the portion representing
the sum of claims, claims adjustment expenses, and taxes that are
calculated on premiums after risk adjustment transfers by using a
specified percentage of Statewide average premiums. While commenters
have stated that the inclusion of administrative costs in the Statewide
average premium harms efficient plans, we note that low cost plans do
not necessarily indicate efficient plans. Should a plan be low cost
with low claims costs, it is likely an indication of mispricing, as the
issuer should be pricing for average risk. However, we recognize that
commenters are concerned that including fixed administrative costs in
the Statewide average premium may increase risk adjustment transfers
for all issuers based on a percentage of costs that are not dependent
on enrollee risk. We have considered some of the potential effects of
excluding certain fixed administrative costs from the Statewide average
premium. This modification to the treatment of administrative costs in
the Statewide average premium would lower absolute risk adjustment
transfers for all issuers by an equal percentage. We also note that
administrative costs are affected by claims costs and that correctly
measuring the portion of administrative costs unaffected by claims
costs may be difficult. An incorrect measurement of administrative
costs could then result in plans with high risk enrollees being
undercompensated. We are continuing to evaluate the impact of
administrative expenses on risk adjustment transfers, and seek comment
on removing a portion of administrative expenses from the Statewide
average premium for the 2018 benefit year or for future benefit years.
i. The Payment Transfer Formula
The payment transfer formula is unchanged from what was finalized
in the 2014 Payment Notice (78 FR 15430 through 15434). We believe it
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 61489]]

[GRAPHIC] [TIFF OMITTED] TP06SE16.000

Where:

PS = State average premium;
PLRSt = 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 adjustment
charge or receives a risk adjustment 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 (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.
This existing formula would be multiplied by the number of member
months to determine the total payment or charge assessed with respect
to plan average risk scores for a plan's geographic rating area for the
market for the State and this payment or charge will be added to the
transfer terms described above to account for the costs of high-risk
enrollees.
h. Risk Adjustment Issuer Data Requirements (Sec. 153.610)
In the 2014 Payment Notice, HHS established an approach for
obtaining the necessary data for reinsurance and risk adjustment
calculations through a distributed data collection model that prevented
the transfer of individuals' protected health information. Under Sec.
153.700, each issuer must establish an EDGE server through which it
provides HHS access to enrollment, claims, and encounter data. To
safeguard enrollees' privacy, each issuer must establish a unique
masked enrollee identification number for each enrollee, and may not
include personally identifiable information in such masked enrollee
identification number. Under the EDGE server approach issuers currently
provide plan-level data to HHS.
The lack of enrollee-level data under this approach limits HHS's
ability to use that enrollee-level data from risk adjustment covered
plans to improve the risk adjustment model recalibration. As we
discussed in the White Paper, access to enrollee-level data with masked
enrollee IDs would permit HHS to recalibrate the risk adjustment model
using actual data from issuers' individual and small group populations,
as opposed to the MarketScan[supreg] commercial database that
approximates individual and small group market populations, while
continuing to safeguard the privacy and security of protected health
information. Therefore, beginning for the 2019 benefit year, while
maintaining the underlying goals of the distributed data approach,
including information privacy and security, we propose to recalibrate
the risk adjustment model using masked, enrollee-level EDGE server data
from the 2016 benefit year. A separate report would be run on issuers'
EDGE servers to access select data elements in the enrollee, medical
claim, pharmacy claim and supplemental diagnosis files, with masked
enrollee ID, plan/issuer ID, rating area, and State. This approach
would allow for the creation of a masked, enrollee-level dataset and
would not permit HHS to know the identity of the enrollee, the plan ID,
the issuer ID, rating area, State or the EDGE server from which the
data was extracted. HHS would provide additional information regarding
the data elements it would collect and the related process
considerations in future guidance.
HHS would use the enrollee-level dataset to recalibrate the risk
adjustment model and inform development of the Actuarial Value
Calculator and Methodology, which HHS releases annually, to describe
how issuers of non-grandfathered health plans in the individual and
small group markets are to calculate actuarial value for purposes of
determining metal levels. We believe this data could prove a valuable
source for calibrating other HHS programs in the individual and small
group markets, and that a public use file derived from these data could
be a valuable tool for governmental entities and independent
researchers to better understand these markets.
We believe that the proposal described above, which minimizes the
burden from the issuer by only requiring issuers to execute a new EDGE
command for the report to be run on issuers' EDGE servers, permits
important improvements to the HHS-operated risk adjustment program
while continuing to safeguard privacy and security. We request comment
on this proposal.
i. 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, as defined
in 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.
To promote operational efficiency, we propose to amend Sec.
153.610(f)(2) to revise the calculation of the risk adjustment user fee
to be equal to the product of an issuer's billable monthly enrollment
(billable member months) and the per enrollee per month risk adjustment
user fee specified in the annual HHS notice of benefit and payment
parameters. Billable member months exclude children who do not count
toward family rates or family policy premiums.\34\ This revision to
base the total user fee on billable member months rather than
enrollment member months ensures consistency with calculating user fees
based on premium revenue generated by issuers, which aligns with the
FFE user fee policy. We note that this change would not affect the PMPM
risk adjustment user fee rate due to the small relative difference
between billable member months and enrollee member months. Therefore,
we propose to implement this change beginning for the 2016 benefit year
risk adjustment user fee collection, which will be collected in 2017,
maintaining the user fee rate set in the 2016 and 2017 Payment Notices.
We seek comment on this proposal.
---------------------------------------------------------------------------

\34\ 78 FR 15432.
---------------------------------------------------------------------------

OMB Circular No. A-25R establishes Federal policy regarding user
fees, and

[[Page 61490]]

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 will also 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 2017 Payment Notice, we estimated Federal administrative
expenses of operating the risk adjustment program to be $1.56 per
enrollee per year, or $0.13 PMPM, based on our estimated contract costs
for risk adjustment operations. For the 2018 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 billable member months 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 the 2018 benefit year will
be approximately $35 million, and that the risk adjustment user fee
would be $1.32 per billable enrollee per year (assuming we finalize our
proposal to assess these costs by billable member months discussed
above), or $0.12 PMPM. The risk adjustment user fee contract costs for
2018 include costs related to 2018 risk adjustment data validation, and
are higher than the 2017 contract costs because some contracts were
modified and rebid. However, because enrollment is estimated to be
higher in 2018 than 2017, the PMPM amount is lower than that finalized
for the 2017 benefit year. We seek comment on this proposal.
j. Data Validation Requirements When HHS Operates Risk Adjustment
(Sec. 153.630)
HHS will conduct risk adjustment data validation in any State where
HHS is operating risk adjustment on a State's behalf under Sec.
153.630. The purpose of risk adjustment data validation is to ensure
issuers are providing accurate high-quality information to HHS, which
is crucial for the proper functioning of the risk adjustment program.
Risk adjustment data validation consists of an initial validation audit
and a second validation audit. Under Sec. 153.630, each issuer of a
risk adjustment covered plan must engage an independent initial
validation audit entity. The issuer provides demographic, enrollment,
and medical record documentation for a sample of enrollees selected by
HHS to its initial validation audit entity for data validation.
i. Materiality Threshold for Risk Adjustment Data Validation
HHS has been evaluating the burden associated with the risk
adjustment data validation program, particularly considering the fixed
costs associated with hiring an initial validation audit entity and
submitting results to HHS, which may be a large portion of some
issuers' administrative costs. Beginning for the 2017 benefit year risk
adjustment data validation program, HHS is proposing to implement a
materiality threshold. This would mean that issuers that fall below a
certain threshold would not be required to conduct risk adjustment data
validation each year and would instead be subject to random and
targeted sampling. We would expect the random sampling to include
issuers below the threshold being subject to an initial validation
audit approximately every 3 years, barring any risk-based triggers that
would warrant annual participation. Potential risk-based metrics we are
considering using to select issuers at or below this threshold for more
frequent initial validation audits include the issuer's prior risk
adjustment data validation results, and material changes in risk
adjustment data submission, as measured by our quality metrics. We are
proposing to use a threshold of total premiums of $15 million--a
threshold at which 1 percent of an issuer's premiums would cover the
estimated $150,000 cost of the initial validation audit. Issuers at or
below this threshold would not be subject to annual initial validation
audit requirements. We estimate that issuers above this threshold
represent risk adjustment covered plans that cover approximately 98.5
percent of membership nationally and as such, annual audit of issuers
at or below the threshold is not material for purposes of risk
adjustment data validation. We seek comment on this proposal, including
with respect to the appropriate threshold and the risk-based metrics we
should use.
Because risk adjustment data validation error rates are applied to
the subsequent year's data, we are considering whether to base the
participation requirement metric on the benefit year or the subsequent
benefit year. On the one hand, risk adjustment data validation is
measuring the accuracy of risk scores from the benefit year. On the
other hand, risk adjustment data validation results directly adjust the
risk adjustment transfers of issuers participating in risk adjustment
in the following benefit year. We note that, even if an issuer is
exempt from initial validation audit requirements using the proposed
materiality threshold, HHS may require issuers to make records
available for review or to comply with an audit by the Federal
government under Sec. 153.620. We seek comment on this approach.
We propose that issuers not materially affecting risk adjustment
data validation that are not required to perform an initial validation
audit would still have their payments adjusted based on an error rate.
We are considering an error rate for an issuer not subject to an
initial validation audit in a particular year that could be the average
negative error rate nationally, or the average negative error rate
within a State, or its error rate in past audits. We seek comment on
this approach.
ii. Inclusion of Pharmacy Claims in Risk Adjustment Data Validation
Beginning with the 2018 benefit year, as discussed above, the
proposed HHS risk adjustment methodology would take into account
prescription drug utilization for purposes of determining an enrollee's
risk score. HHS proposes to use a hybrid model that employs
prescription drug data to supplement diagnostic data by serving as a
proxy for a missing diagnosis in cases where diagnostic data are likely
to be incomplete and as an indicator of the severity of an enrollee's
illness. We propose to require that, with respect to validation of
prescription drug utilization of sampled enrollees, an issuer must
provide an initial validation audit entity all paid pharmacy claims for
an enrollee, against which the initial validation audit entity will
validate the associated prescription drug class in the HHS risk
adjustment methodology and the impact on the enrollee's risk score.

[[Page 61491]]

Therefore, we propose to amend the first sentence of Sec.
153.630(b)(7)(ii) to include enrollees' paid pharmacy claims.
iii. Risk Adjustment Data Validation Discrepancy and Administrative
Appeals Process
Under Sec. 153.630(d), an issuer may appeal the findings of a
second validation audit or the application of a risk score error rate
to its risk adjustment payments and charges. In the 2015 Payment
Notice, we stated that we would ``provide additional guidance on the
appeals process and schedule in future rulemaking.'' \35\ As we noted
in the 2015 Payment Notice, HHS will not permit an issuer to appeal the
results of the initial validation audit, as the initial validation
audit entity is under contract with the issuer and HHS does not produce
the initial validation audit results. We are proposing to amend Sec.
153.630(d) to clarify that an issuer may appeal the findings of a
second validation audit or the calculation of a risk score error rate.
We make this clarification to distinguish the calculation of a risk
score error rate from the application of a risk score error rate as the
calculation is a separate reason for which an issuer could appeal. We
further propose to clarify that if an issuer intends to appeal the
application of a risk score error rate to its risk adjustment payments
and charges, HHS would deem this a risk adjustment payment or charge
amount appeal under Sec. 156.1220(a)(1)(ii). In this proposed rule, we
also propose an interim and final discrepancy reporting process for the
risk adjustment data validation program and we propose codification of
the process by which an issuer may file an appeal of the findings of a
second validation audit or the calculation of a risk score error rate.
---------------------------------------------------------------------------

\35\ HHS Notice of Benefit and Payment Parameters for 2015, 79
FR 13768
---------------------------------------------------------------------------

First, we propose an interim discrepancy reporting process by which
an issuer must confirm the risk adjustment data validation initial
audit sample provided by HHS under Sec. 153.630(b)(1) or file a
discrepancy report. We propose amending Sec. 153.630 by removing the
introductory language and adding paragraph (d)(1) to provide that in
the manner set forth by HHS, within 15 calendar days of notification of
the initial validation audit sample set forth by HHS, an issuer must
confirm the sample or file a discrepancy report to dispute the HHS risk
adjustment data validation initial validation audit sample set forth by
HHS. In light of the timing of this interim discrepancy reporting
process, we do not propose to permit issuers to appeal the resolution
of any interim discrepancy disputing the sample. We believe that
providing an interim administrative appeals process or permitting
issuers to appeal the HHS risk adjustment data validation initial
validation audit sample after completion of the entire risk adjustment
data validation process for a benefit year would delay the HHS risk
adjustment data validation process. Additionally, we believe that it
could be efficient to resolve any issues related to the risk adjustment
data validation initial audit sample provided by HHS under Sec.
153.630(b)(1) during an interim discrepancy reporting process. We
propose to require confirmation of the sample, in the form of an
attestation, in order to ensure that issuers thoroughly review the
initial validation audit sample determined by HHS.
Second, we propose a final, formal discrepancy reporting process,
by which an issuer must confirm the findings of the second validation
audit or the calculation of a risk score error rate, or notify us if
the issuer identifies a discrepancy with the findings of a second
validation audit or the calculation of a risk score error rate. We
propose adding paragraph (d)(2) to Sec. 153.630 to provide that in the
manner set forth by HHS, an issuer must attest to or report a
discrepancy within 15 calendar days of notification of the findings of
a second validation audit or the calculation of a risk score error rate
to dispute the findings of a second validation audit or the calculation
of a risk score error rate. We believe this discrepancy reporting
process will enable HHS to work with issuers to resolve discrepancies
prior to the notification or risk adjustment payments or charges due
under Sec. 153.310(e) and application of the risk score error rate to
the issuer's risk adjustment payments and charges.
As we will discuss in further detail in the preamble to Sec.
156.1220(a), we also propose requiring issuers to report a discrepancy
if the issue is identifiable prior to filing a request for
reconsideration as set forth in 45 CFR 156.1220. As such, we propose to
amend Sec. 156.1220(a)(4)(ii), to provide that notwithstanding Sec.
156.1220(a)(1), 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.
153.630(d)(2) or Sec. 153.710(d)(2), it was so identified and remains
unresolved.
Third, we propose to amend Sec. 153.630 to add paragraph (d)(3) to
clarify the process by which an issuer can appeal the findings of a
second validation audit or the calculation of a risk score error rate.
We propose requiring issuers to use the administrative appeals process
set forth in Sec. 156.1220. We believe issuers will appreciate a
discrepancy reporting window and leveraging the existing administrative
appeals processes.
HHS will provide in future guidance the process for issuers to
report discrepancies. We believe that providing issuers 15 calendar
days to review the HHS risk adjustment data validation sample set, will
provide adequate time for issuers to notify HHS prior to the execution
of the initial validation audit. Additionally, we believe providing
issuers 30 calendar days from the results of the second validation
audit or the calculation of a risk score error rate based on risk
adjustment data validation, will provide adequate time for issuers to
notify HHS prior to filing a formal request for reconsideration of such
discrepancy. As with the discrepancy reporting process set forth in
Sec. 153.710(d), HHS will work with issuers to resolve any
discrepancies related to risk adjustment data validation prior to final
risk adjustment payments and charges for a benefit year. We seek
comment on these timeframes and these discrepancy reporting and appeal
proposals.

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

1. Definitions (Sec. 154.102)
We propose to revise the definition of ``product'' in Sec.
154.102. Specifically, we propose to remove language that would
restrict a product's being considered the same product when it is no
longer offered by the same issuer, but by a different issuer in the
same controlled group. This amendment is necessary in light of our
proposed interpretation of guaranteed renewability provisions, as
discussed in the preamble to Sec. 147.106. We are not proposing
changes to the definition of ``plan'' because the definition for that
term in Sec. 154.102 cross-references the definition in Sec. 144.103.
Therefore, if finalized as proposed, the amendments to the definition
of ``plan'' in Sec. 144.103 would also apply for purposes of the rate
review requirements under 45 CFR part 154. For further discussion of
the reason for this proposed amendment, please see the preamble to
Sec. 147.106.

[[Page 61492]]

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

1. Standardized Options (Sec. 155.20)
a. Standardized Options Approach for 2018
In the 2017 Payment Notice, HHS finalized six standardized options
(also now referred to as Simple Choice plans), one at each of the
bronze, silver, silver cost-sharing reduction variation, and gold
levels of coverage, designed to be similar to the most popular
(enrollment-weighted) QHPs in the 2015 individual market FFEs. We
propose to change the standardized options from the 2017 versions in
order to reflect changes in QHP enrollment-weighted data from 2015 to
2016, including SBE-FP QHP enrollment-weighted data, and to the extent
practicable, to comply with various State cost-sharing standards.
Therefore, for the 2018 plan year, HHS proposes three new sets of
standardized options, based on an analysis of enrollment-weighted 2016
individual market FFE and SBE-FP QHPs (see Tables 12, 13 and 14). The
second and third sets are different from the first set only to the
extent necessary to comply with State cost-sharing laws. The second set
of standardized options is designed to work in States that: (1) Require
that cost sharing for physical therapy, occupational therapy, or speech
therapy be no greater than the cost sharing for primary care visits;
(2) limit the amount that can be charged for each drug tier; or (3)
require that all drug tiers carry a copayment rather than coinsurance.
The third set of standardized options is designed to work in a State
with maximum deductible requirements and other cost-sharing standards.
Like the 2017 standardized options, the proposed 2018 standardized
options each have a single provider tier, fixed deductible, fixed
annual limitation on cost sharing, and fixed copayment or coinsurance
for a key set of essential health benefits that comprise a large
percentage of the total allowed costs for a typical population of
enrollees. These fixed cost-sharing values are for in-network care
only. Unlike the 2017 standardized options, the proposed 2018 options
at the silver, silver cost-sharing reduction variations, and gold
levels of coverage have separate medical and drug deductibles,
reflecting the commonality of this cost-sharing structure in QHPs at
these levels of coverage. The proposed standardized options at the
silver 87 percent cost-sharing reduction plan variation, silver 94
percent cost-sharing reduction plan variation, and gold levels of
coverage have a drug deductible equal to $0, meaning no deductible
applies to the drugs.
The bronze standardized options as proposed rely on finalization of
the proposal discussed in the preamble to Sec. 156.140 to permit a
broader de minimis range for bronze plans. If that proposal is not
adopted, the plans would be revised to comply with the de minimis range
in our regulations, while still reflecting 2016 enrollment weighted
data, and State cost-sharing requirements for the second set of
standardized options.
For 2018, we also propose a fourth standardized option at the
bronze level of coverage that qualifies as a high deductible health
plan (HDHP) under section 223 of the Code, eligible for use with a
health savings account (HSA). HDHPs are an option valued by many
consumers--enrollment in HDHPs across 2016 individual market FFE and
SBE-FP QHPs constituted 9.2 percent of all FFE and SBE-FP QHP
enrollment in 2016. Pursuant to the terms of the Code, the IRS releases
the maximum annual limitation on cost sharing and minimum annual
deductible for HDHPs annually in the spring, subsequent to the annual
HHS notice of benefit and payment parameters rulemaking process.
Therefore, we propose that if any changes to the HDHP standardized
option would be required to reflect differences between the HDHP
standardized option finalized in the 2018 Payment Notice and the
subsequently released maximum annual limitation on cost sharing and
minimum annual deductible for HDHPs, HHS would publish those changes in
guidance. Accordingly, we propose to amend the definition of
``standardized option'' at Sec. 155.20 to provide for a plan to be
considered a standardized option if it is: (1) A QHP offered for sale
through an individual market Exchange with a standardized cost-sharing
structure specified by HHS in rulemaking; or (2) an HDHP QHP offered
for sale through an individual market Exchange with a standardized
cost-sharing structure specified by HHS in guidance issued solely to
modify the cost-sharing structure specified by HHS in rulemaking to the
extent necessary to align with requirements to qualify as an HDHP under
section 223 of the Code and meet HHS AV requirements.
b. Standardized Options in SBE-FPs
In the 2017 Payment Notice, we designed a set of standardized
options based on enrollment-weighted 2015 FFE QHP data, and indicated
we anticipated differentially displaying these HHS-designed
standardized options. We noted that SBE-FPs may have their own State-
designed standardized plans that differ from HHS-designed standardized
options, but that the HealthCare.gov platform would not be able to
differentially display these State-designed standardized plans.
For 2018, the HealthCare.gov platform remains unable to provide
differential display to State-designed standardized plans that differ
from the HHS-designed standardized options. However, we propose that
SBE-FPs may choose to allow HHS-designed standardized options to
receive differential display on HealthCare.gov, just as the plans would
if offered through an FFE. We propose that an SBE-FP must notify HHS if
it wants HHS-designed standardized options to receive differential
display by a date to be specified in guidance that will be set to
provide sufficient time to operationalize the State's choice on
HealthCare.gov. We seek comment on this proposal.
c. State Customization
In the 2017 Final Payment Notice, HHS explained that it would not
be possible for HealthCare.gov to accommodate customization of
standardized options by State in 2017. Specifically, to reduce
operational complexity, HHS did not vary the standardized options by
State or by region, and instead finalized one set of standardized
options across all FFEs that issuers would have the option to offer in
2017.
As noted above, some States regulate cost sharing on specific
benefits under State authorities. We seek to accommodate, to the extent
practicable, State cost-sharing requirements under our proposed 2018
standardized options. To do so, we have designed three bronze
standardized options (in addition to the bronze HDHP), and three
standardized options at each of the silver, silver cost-sharing
reduction plan variations, and gold levels of coverage, as set forth in
Tables 13 and 14. We propose to select for each FFE State one of the
three standardized options at each level of coverage (plus the HDHP
option at the bronze level, if permissible under State cost-sharing
standards) that meets any existing State cost-sharing requirements. We
propose that this selection will be published in the final 2018 Payment
Notice. We propose to do the same for each SBE-FP State that notifies
HHS that it chooses to have HHS standardized options receive
differential display on the HealthCare.gov platform. If issuers in the
FFE States and those in the SBE-FP States that choose to have
differential

[[Page 61493]]

display of HHS standardized options offer the standardized options
selected for the State (that is, the one standardized option at each
level of coverage selected for the State, in addition to the HDHP
option if permissible under State standards), those plans would receive
differential display in the Exchange for the 2018 plan year.
Additionally, many States have oral chemotherapy access laws, which
require coverage of oral chemotherapy at parity with intravenous
chemotherapy or cap patients' monthly cost sharing for chemotherapy
drugs (both oral and intravenous). We propose to clarify that these
chemotherapy access requirements do not conflict with the HHS
standardized plan designs because issuers can design benefit packages
that comply with both the standardized options requirements and State
oral chemotherapy access laws.
We believe that the proposals discussed above will allow issuers in
States with cost-sharing laws that would conflict with a single set of
standardized options to offer standardized options. Furthermore, by
making it possible for issuers to offer standardized options while
complying with State cost-sharing rules, we believe this limited State
customization will enhance the shopping experience of consumers in more
States than was previously possible. We welcome comments from each
State regarding the standardized option at each level of coverage that
the State believes would be most suitable for that State, and whether
modifications should be made to any of the proposed State-customized
standardized options to further accommodate State cost-sharing rules.
We also seek comment from States, issuers, and other stakeholders on
State cost-sharing requirements that would affect the design of
standardized options, as well as comments generally on this approach
for standardized options in 2018.

Table 12--2018 Proposed Standardized Options
--------------------------------------------------------------------------------------------------------------------------------------------------------
HSA-eligible Silver 73% CSR Silver 87% CSR Silver 94% CSR
Bronze bronze HDHP Silver plan variation plan variation plan variation Gold
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actuarial Value (%).......... 62.68%.......... 61.97%.......... 71.05%.......... 73.95%.......... 87.61.......... 94.69.......... 80.65%.
Deductible (Med/Rx).......... $6,650.......... $6,000.......... $3,500/$500..... $3,000/$200..... $700/$0........ $250/$0........ $1,400/$0.
Annual Limitation on Cost $7,350.......... $6,000.......... $7,350.......... $5,850.......... $2,450......... $1,250......... $5,000.
Sharing.
Emergency Room Services...... 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
deductible.
Urgent Care.................. $75 (*)......... No charge after $75 (*)......... $75 (*)......... $40 (*)........ $25 (*)........ $60 (*).
deductible.
Inpatient Hospital Services.. 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
deductible.
Primary Care Visit........... $35 (*)......... No charge after $30 (*)......... $30 (*)......... $10 (*)........ $5 (*)......... $20 (*).
deductible.
Specialist Visit............. $75 (*)......... No charge after $65 (*)......... $65 (*)......... $25 (*)........ $10 (*)........ $50 (*).
deductible.
Mental Health/Substance Use $35 (*)......... No charge after $30 (*)......... $30 (*)......... $10 (*)........ $5 (*)......... $20 (*).
Disorder Outpatient Office deductible.
Visit.
Imaging (CT/PET Scans, MRIs). 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
deductible.
Speech Therapy............... 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
deductible.
Occupational Therapy/Physical 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
Therapy. deductible.
Laboratory Services.......... 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
deductible.
X-rays and Diagnostic Imaging 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
**. deductible.
Skilled Nursing Facility..... 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
deductible.
Outpatient Facility Fee (for 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
example, Ambulatory Surgery deductible.
Center).
Outpatient Surgery Physician/ 40%............. No charge after 20%............. 20%............. 20%............ 5%............. 20%.
Surgical Services. deductible.
Generic Drugs................ $35 (*)......... No charge after $15 (*)......... $15 (*)......... $5 (*)......... $3 (*)......... $10 (*).
deductible.
Preferred Brand Drugs........ 35%............. No charge after $50 (*)......... $50 (*)......... $25 (*)........ $5 (*)......... $40 (*).
deductible.
Non-Preferred Brand Drugs.... 40%............. No charge after $100 (*)........ $100 (*)........ $50 (*)........ $10 (*)........ $75 (*).
deductible.
Specialty Drugs.............. 45%............. No charge after 40%............. 40%............. 30%............ 25%............ 30%.
deductible.
--------------------------------------------------------------------------------------------------------------------------------------------------------
(*) = not subject to the deductible
** Note: Excludes x-rays and diagnostic imaging associated with office visits (except for high-deductible health plans (HDHPs).

[[Page 61494]]

Table 13--2018 Proposed Standardized Options for States Requiring Occupational Therapy, Physical Therapy, or Speech Therapy Cost-Sharing Parity with
Primary Care Visits or States Requiring Copayments or Copayment Limits on Drugs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Silver 73% CSR Silver 87% CSR Silver 94% CSR
Bronze Silver plan variation plan variation plan variation Gold
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actuarial Value (%)............. 62.79%............ 71.03%............ 73.88%............ 87.70............. 94.68............. 80.60%.
Deductible (Med/Rx)............. $6,650............ $3,500/$500 Rx.... $3,000/$200 Rx.... $700/$0........... $250/$0........... $1,400/$0.
Annual Limitation on Cost $7,350............ $7,350............ $5,850............ $2,450............ $1,250............ $5,000.
Sharing.
Emergency Room Services......... 40%............... 20%............... 20%............... 20%............... 5%................ 20%.
Urgent Care..................... $75 (*)........... $75 (*)........... $75 (*)........... $40 (*)........... $25 (*)........... $60 (*).
Inpatient Hospital Services..... 40%............... 20%............... 20%............... 20%............... 5%................ 20%.
Primary Care Visit.............. $35 (*)........... $30 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $20 (*).
Specialist Visit................ $75 (*)........... $65 (*)........... $65 (*)........... $25 (*)........... $10 (*)........... $50 (*).
Mental Health/Substance Use $35 (*)........... $30 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $20 (*).
Disorder Outpatient Office
Visit.
Imaging (CT/PET Scans, MRIs).... 40%............... 20%............... 20%............... 20%............... 5%................ 20%.
Speech Therapy.................. $35 (*)........... $30 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $20 (*).
Occupational Therapy/Physical $35 (*)........... $30 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $20 (*).
Therapy.
Laboratory Services............. 40%............... 20%............... 20%............... 20%............... 5%................ 20%.
X-rays and Diagnostic Imaging ** 40%............... 20%............... 20%............... 20%............... 5%................ 20%.
Skilled Nursing Facility........ 40%............... 20%............... 20%............... 20%............... 5%................ 20%.
Outpatient Facility Fee (e.g., 40%............... 20%............... 20%............... 20%............... 5%................ 20%.
Ambulatory Surgery Center).
Outpatient Surgery Physician/ 40%............... 20%............... 20%............... 20%............... 5%................ 20%.
Surgical Services.
Generic Drugs................... $35 (*)........... $15 (*)........... $15 (*)........... $5 (*)............ $3 (*)............ $10 (*).
Preferred Brand Drugs........... $40 (copay applies $50 (*)........... $50 (*)........... $25 (*)........... $5 (*)............ $40 (*).
only after
deductible).
Non-Preferred Brand Drugs....... $45 (copay applies $100 (*).......... $100 (*).......... $50 (*)........... $10 (*)........... $75 (*).
only after
deductible).
Specialty Drugs................. $50 (copay applies $150 (copay $150 (copay $75 (*)........... $20 (*)........... $100(*).
only after applies only applies only
deductible). after deductible). after deductible).
--------------------------------------------------------------------------------------------------------------------------------------------------------
(*) = not subject to the deductible.
** Note: Excludes x-rays and diagnostic imaging associated with office visits.

Table 14--2018 Proposed Standardized Options for States with Deductible Maximums and Other Cost-Sharing Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Silver 73% CSR Silver 87% CSR Silver 94% CSR
Bronze Silver plan variation plan variation plan variation Gold
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actuarial Value (%)............. 64.84%............ 70.28%............ 73.94%............ 87.61%............ 94.53%............ 80.80%.
Deductible...................... $3,000............ $3,000............ $3,000............ $700.............. $250.............. $1,000.
Annual Limitation on Cost $7,150............ $7,000............ $5,850............ $2,450............ $1,250............ $5,000.
Sharing.
Emergency Room Services......... 50%............... 40%............... 20%............... 20%............... 5%................ 30%.
Urgent Care..................... $50 (*)........... $50 (*)........... $50 (*)........... $40 (*)........... $25 (*)........... $40 (*).
Inpatient Hospital Services..... $500 (per day; 40%............... 20%............... 20%............... 5%................ 30%.
applies only
after deductible).
Primary Care Visit.............. $35 (*first 3 $30 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $25 (*).
visits; then
subject to
deductible and
$35 copay after
deductible).
Specialist Visit................ $75 (applies only $60 (*)........... $60 (*)........... $25 (*)........... $10 (*)........... $40 (*).
after deductible).
Mental Health/Substance Use $35 (applies only $30 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $25 (*).
Disorder Outpatient Office after deductible).
Visit.
Imaging (CT/PET Scans, MRIs).... $100 (applies only $100 (*).......... $100 (*).......... $75 (*)........... $40 (*)........... $100 (*).
after deductible).
Speech Therapy.................. $35 (applies only $50 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $25 (*).
after deductible).
Occupational Therapy/Physical $35 (applies only $50 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $25 (*).
Therapy. after deductible).

[[Page 61495]]

Laboratory Services............. 50%............... 40%............... 20%............... 20%............... 5%................ 30%.
X-rays and Diagnostic Imaging**. 50%............... 40%............... 20%............... 20%............... 5%................ 30%.
Skilled Nursing Facility........ $500 (per day; 40%............... 20%............... 20%............... 5%................ 30%.
applies only
after deductible).
Outpatient Facility Fee (e.g., 50%............... 40%............... 20%............... 20%............... 5%................ 30%.
Ambulatory Surgery Center).
Outpatient Surgery Physician/ 50%............... 40%............... 20%............... 20%............... 5%................ 30%.
Surgical Services.
Generic Drugs................... $25 (*)........... $25 (*)........... $15 (*)........... $5 (*)............ $3 (*)............ $10 (*).
Preferred Brand Drugs........... 50%............... $75 (*)........... $75 (*)........... $25 (*)........... $5 (*)............ $25 (*).
Non-Preferred Brand Drugs....... 50%............... $75 (*)........... $75 (*)........... $50 (*)........... $10 (*)........... $50 (*).
Specialty Drugs................. 50%............... $75 (*)........... $75 (*)........... $50 (*)........... $10 (*)........... $50 (*).
--------------------------------------------------------------------------------------------------------------------------------------------------------
(*) = not subject to the deductible
** Note: Excludes x-rays and diagnostic imaging associated with office visits.

2. General Functions of an Exchange
a. Functions of an Exchange (Sec. 155.200)
In the 2017 Payment Notice, we established that a State Exchange
could elect to enter into a Federal platform agreement through which it
agrees to rely on HHS for services related to the individual market
Exchange, the SHOP Exchange, or both. In Sec. 155.200(f)(2), we
required 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 in an FFE. Requiring QHPs and QHP
issuers in SBE-FPs to meet these same requirements ensures 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.
We propose to amend Sec. 155.200(f) by adding a new paragraph
(f)(4) that would require State Exchanges that use the Federal platform
for certain SHOP functions to establish standards and policies
consistent with certain Federally-facilitated Small Business Health
Options Program (FF-SHOP) requirements. In contrast to the requirements
contained in Sec. 155.200(f)(2), which pertain primarily to ensuring a
consistent experience on HealthCare.gov, compliance with the
requirements we propose to include in Sec. 155.200(f)(4) would be
necessary because the FF-SHOP requirements listed in paragraph (f)(4)
are an integral part of the FF-SHOP platform's functionality and system
build, making compliance with the requirements necessary from an
operational perspective for State Exchanges to use the Federal platform
for these SHOP functions. Additionally, requiring compliance with these
requirements, rather than customizing the FF-SHOP platform's system
build, would avoid sizeable costs associated with permitting State-
based Exchanges to use the Federal platform for SHOP functions.
Therefore, we propose to add a new paragraph (f)(4) to require that
SBE-FPs that utilize the Federal platform for certain SHOP functions
establish standards and policies with respect to the following topics
that are consistent with the following rules applicable in FF-SHOPs:
Premium calculation, payment, and collection requirements
as specified at Sec. 155.705(b)(4) (for SBE-FPs using the Federal
platform for SHOP eligibility, enrollment, or premium aggregation
functions);
The timeline for rate changes set forth at Sec.
155.705(b)(6)(i)(A) (for SBE-FPs using the Federal platform for SHOP
enrollment or premium aggregation functions);
Minimum participation rate requirements and calculation
methodologies set forth at Sec. 155.705(b)(10) (for SBE-FPs using the
Federal platform for SHOP enrollment functions);
Employer contribution methodologies set forth at Sec.
155.705(b)(11)(ii) (for SBE-FPs using the Federal platform for SHOP
enrollment or premium aggregation functions);
Annual employee open enrollment period requirements set
forth at Sec. 155.725(e)(2) (for SBE-FPs using the Federal platform
for SHOP enrollment functions);
Initial group enrollment or renewal coverage effective
date requirements set forth at Sec. 155.725(h)(2) (for SBE-FPs using
the Federal platform for SHOP enrollment functions); and
Termination of SHOP coverage or enrollment rules set forth
at Sec. 155.735 (for SBE-FPs using the Federal platform for SHOP
eligibility, enrollment, or premium aggregation functions).
These amendments would become effective with the effective date of
the final rule.
We seek comment on this proposal, including on whether it would
conflict with current State requirements, and on whether other FF-SHOP
requirements should apply in SBE-FPs utilizing the Federal platform for
SHOP functions, for the reasons discussed above.
b. Consumer Assistance Tools and Programs of an Exchange (Sec.
155.205)
Section 155.205(c)(2)(iii)(A) and (B) require Exchanges, QHP
issuers, and agents or brokers subject to Sec. 155.220(c)(3)(i)
(``web-brokers'') to provide taglines in non-English languages
indicating the availability of language services. These entities must
include taglines on Web site content and documents that are critical
for obtaining health insurance coverage or access to health care
services through a QHP for qualified individuals, applicants, qualified
employers, qualified employees, or enrollees. The taglines must
indicate the availability of language services in at least the top 15
languages spoken by the limited English proficient (LEP) population of
the relevant State, as determined in HHS guidance. In March 2016, HHS
issued guidance providing language data and sample taglines in the top
15 languages spoken by the LEP population in each State.\36\ A similar
tagline requirement

[[Page 61496]]

appears in the final rule implementing section 1557 of the Affordable
Care Act (81 FR 31376 (May 18, 2016)), which prohibits discrimination
on the basis of race, color, national origin, sex, age, or disability
in certain health programs and activities.\37\ The section 1557
implementing regulation applies to every health program or activity
administered by an Exchange, every health program or activity
administered by HHS, and every health program or activity, any part of
which receives Federal financial assistance provided or made available
by HHS.\38\ The section 1557 implementing regulation, as well as other
applicable Federal civil rights laws, apply independently of the
regulations governing Exchanges and health insurance issuers.
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\36\ Ctr. Consumer Info. & Ins. Oversight, Ctrs. for Medicaid &
Medicare Serv., Guidance and Population Data for Exchanges,
Qualified Health Plan Issuers, and Web-Brokers to Ensure Meaningful
Access by Limited-English Proficient Speakers Under 45 CFR
155.205(c) and 156.250 (March 30, 2016), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Language-access-guidance.pdf; Appendix A--Top 15 Non-English
Languages by State, available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Appendix-A-Top-15.pdf;
Appendix B--Sample Translated Taglines, available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Appendix-B-Sample-Translated-Taglines.pdf.
\37\ 42 U.S.C. 18116; 45 CFR part 92. Section 92.8(d)(1)
requires each covered entity to ``post taglines in at least the top
15 languages spoken by individuals with limited English proficiency
of the relevant State or States.'' The principle of aggregation with
respect to the tagline requirement at Sec. 92.8(d)(1) is discussed
in the section 1557 final rule at 81 FR 31376, 31400.
\38\ 45 CFR 92.2(a). In addition to the tagline requirement at
Sec. 92.8(d)(1), the section 1557 implementing regulation
identifies other obligations of a covered entity, such as the
obligation to have marketing practices and benefit designs in a
health-related insurance plan or policy or other health-related
coverage that are nondiscriminatory. See id. Sec. 92.207.
---------------------------------------------------------------------------

In the preamble to the 2016 Payment Notice, we stated that if an
entity's service area covers multiple States, the top 15 languages
spoken by LEP individuals may be determined by aggregating the top 15
languages spoken by all LEP individuals among the total population of
the relevant States (80 FR 10788). We also restated this policy in the
March 2016 guidance. We propose to amend Sec. 155.205(c)(2)(iii) to
provide more specificity about when entities subject to Sec.
155.205(c)(2)(iii)(A) and (B) would be permitted to aggregate LEP
populations across States to determine the languages in which taglines
must be provided, in light of questions that have arisen about this
issue since publication of the 2016 Payment Notice.
At Sec. 155.205(c)(2)(iii)(A), we propose that if an Exchange is
operated by an entity operating multiple Exchanges, or relies on an
eligibility or enrollment platform that is relied on by multiple
Exchanges, the Exchange may aggregate the LEP populations across all
the States served by the entity that operates the Exchange or its
eligibility or enrollment platform to determine the top 15 languages
required for taglines under Sec. 155.205(c)(2)(iii)(A). For example,
under this proposal, all Exchanges that use the eligibility and
enrollment platform on which the FFEs (including FFEs where States
perform plan management functions) and SBE-FPs rely would be permitted
to aggregate languages across the States with Exchanges that rely on
this platform.
At Sec. 155.205(c)(2)(iii)(A), we also propose that a QHP issuer
would be permitted to aggregate the LEP populations across all States
served by the health insurance issuers within the issuer's controlled
group, whether or not those health insurance issuers offer plans
through the Exchange in each of those States, to determine the top 15
languages in which it must provide taglines. For consistency, we
propose to define an issuer's controlled group using the definition in
Sec. 147.106(d)(3)(i) of this proposed rule, which would define a
controlled group as a group of two or more persons that is treated as a
single employer under section 52(a), 52(b), 414(m), or 414(o) of the
Code. Therefore, a QHP issuer that is a subsidiary of a corporate
entity or holding company that is treated as a single employer under
section 52(a), 52(b), 414(m), or 414(o) of the Code, and whose
subsidiary health insurance issuers serve multiple States, would be
permitted to meet the tagline requirement by including taglines on Web
sites and critical documents in at least the top 15 languages spoken by
the aggregated LEP populations of all States served by the corporate
entity's or holding company's subsidiary health insurance issuers,
rather than in the top 15 languages spoken by the limited English
proficient population of each individual QHP issuer's State of
licensure or State served. On the other hand, a QHP issuer association
or federation comprised of multiple companies that are not treated as a
single employer under section 52(a), 52(b), 414(m), or 414(o) of the
Code, and are thus not considered to be a controlled group, would not
be permitted to aggregate across the States served by the health
insurance issuers in its entire association or federation; rather, the
QHP issuer members of the association or federation would be permitted
to aggregate only across the States served by the health insurance
issuers within each issuer's controlled group.
With respect to summaries of benefits and coverage (SBCs) provided
under section 2715 of the PHS Act, consistent with the SBC Instruction
Guide for Individual Health Insurance Coverage \39\ and the SBC
Instruction Guide for Group Coverage,\40\ QHP issuers would still be
required to provide an addendum with their SBCs with language taglines
in the top 15 languages spoken by the LEP populations of the relevant
State or States for QHPs offered through an Exchange. Any additional
taglines required under section 2715 of the PHS Act and the
implementing regulations \41\ must also be included in this addendum.
However, any taglines that are included in the addendum are not
required to also be included in the SBC document. The addendum, which
must only include tagline information required by the applicable
language access standards, must be provided along with the SBC and is
not considered a part of the SBC document. Therefore, the addendum will
not count towards the four double-sided page limit for the SBC under
PHS Act section 2715(b)(1).
---------------------------------------------------------------------------

\39\ Summary of Benefits and Coverage: Instruction Guide for
Individual Health Insurance Coverage (April 2017), available at
https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Individual-Instructions-508-MM.pdf.
\40\ Summary of Benefits and Coverage: Instruction Guide for
Group Coverage (April 2017), available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Group-Instructions-4-4-clean-MM-508.pdf
\41\ 45 CFR 147.200(a)(5) requires that group health plans and
health insurance issuers offering group and individual health
insurance coverage provide taglines in a particular non-English
language if 10 percent or more of the population residing in the
county is literate only in that same non-English language.
---------------------------------------------------------------------------

Additionally, our proposed policy related to aggregating LEP
populations to determine the top 15 languages in which taglines must be
provided does not apply to the tagline requirements under rules
implementing sections 2715 and 2719 of the PHS Act. This means, for
example, that a QHP issuer that is a member of a controlled group whose
health insurance issuers serve three States, and that therefore
aggregates the LEP populations across those three States to determine
the top 15 languages in which it must provide taglines in its SBC
addendum under Sec. 155.205(c)(2)(iii)(A), must still include in its
SBC addendum taglines in all of the languages triggered by the
threshold under Sec. 147.200(a)(5), which requires a tagline when 10
percent or more of the population residing in a county is

[[Page 61497]]

literate only in a particular non-English language, without aggregating
the LEP populations across the counties in its service area. The same
would apply to tagline requirements under section 2719 of the PHS Act
and its implementing regulations.
We also propose amendments to Sec. 155.205(c)(2)(iii)(B), to
specify that web-brokers that are licensed in and serving multiple
States would be permitted to aggregate the LEP populations in the
States they serve to determine the top 15 languages in which they must
provide taglines under Sec. 155.205(c)(2)(iii)(B).
We believe our proposed approach balances two important policy
objectives: Ensuring that LEP individuals have notice of language
assistance services, and minimizing burden on the entities subject to
the rule, including by minimizing the potential need for costly
information systems changes. This approach would establish a floor, and
if it is finalized, QHP issuers, web-brokers, and Exchanges would be
permitted to provide non-aggregated, State-specific taglines, or
taglines in more than the required 15 languages. We believe our
proposed approach would help promote consistency with the tagline
requirements at 45 CFR 92.8(d)(1) and 81 FR 31400, which permit covered
entities that serve individuals in more than one State to aggregate the
number of individuals with limited English proficiency in those States
to determine the top 15 languages required by Sec. 92.8(d)(1). We seek
comment on whether the proposed approach strikes the appropriate
balance.
We are also proposing amendments to Sec. 155.205(c)(2)(iii)(A) and
(B) to specify that Exchanges, QHP issuers, and web-brokers may satisfy
tagline requirements with respect to Web site content if they post a
Web link prominently on their home page that directs individuals to the
full text of the taglines indicating how individuals may obtain
language assistance services, and if they also include taglines on any
standalone document linked to or embedded in the Web site, such as one
in portable document format (PDF) or word processing software format,
that is critical within the meaning of the rule. Thus, for example, if
a QHP issuer included a link to a PDF of its provider directory or
formulary drug list on its Web site, it would be required to provide a
link to taglines on its Web site home page and to provide taglines on
that PDF document. In HHS's view, providing a prominent link to
taglines on the home page of a Web site gives sufficient notice to
consumers that language services are available. We note that entities
subject to section 1557 of the Affordable Care Act are still required
to comply with the section 1557 requirements regarding taglines placed
on their home pages.\42\
---------------------------------------------------------------------------

\42\ In particular, we note the separate requirement for
entities covered under section 1557 of the Affordable Care Act that
links to taglines from the home page of a covered entity's Web site
must be posted as ``in language'' Web links, which are links written
in each of the 15 non-English languages posted conspicuously on the
home page that direct the individual to the full text of the tagline
indicating how the individual may obtain language assistance
services. For instance, a tagline directing an individual to a Web
site with the full text of a tagline written in Haitian Creole
should appear as ``Kreyol'' rather than ``Haitian Creole.'' (45 CFR
92.8(1)(iii); 81 FR 31396.)
---------------------------------------------------------------------------

In the case of ``critical'' standalone documents linked to or
embedded in the Web site, there is a good chance that a consumer might
land on such documents without going through an entity's home page
first (for example, from a link on another Web site), and it is also
likely that such documents would not contain a link to the entity's
home page. In contrast, Web pages within the Web site that are not
standalone linked or embedded documents are more likely to contain a
prominent link to the home page. Under this proposal, if an entity
subject to Sec. 155.205(c)(2)(iii)(A) or (B) includes the required
taglines in a standalone ``critical'' document linked to or embedded in
the Web site of another entity subject to Sec. 155.205(c)(2)(iii)(A)
or (B), then the taglines standard will be deemed to be met by the
entity that links to or embeds the ``critical'' document in its Web
site, for purposes of that document. For example, if a web-broker posts
a ``critical'' document provided to it by an affiliated QHP issuer, and
the QHP issuer includes the taglines in that document that the issuer
would be required to include, then the web-broker can rely on those
taglines for purposes of compliance with Sec. 155.205(c)(2)(iii)(B)
when it posts that document (as provided by the QHP issuer with the
required taglines), even if the QHP issuer and web-broker are not
required to provide taglines in the same 15 languages.
We solicit comments on all aspects of these proposals. In
particular, we seek comments on whether we should consider alternative
standards for identifying the States across which Exchanges, QHP
issuers, and web-brokers may aggregate languages for purposes of Sec.
155.205(c)(2)(iii)(A) and (B), and on whether our proposed approach
strikes an appropriate balance between facilitating access for LEP
populations and minimizing burden on the entities subject to the rule.
Additionally, because the final rule implementing section 1557 of
the Affordable Care Act (81 FR 31376 (May 18, 2016)) imposes on the
covered entities to which that rule applies a similar set of
obligations with respect to language access taglines, we are
considering whether there is a need for the separate language access
tagline requirements for Exchanges, QHP issuers, and web-brokers under
Sec. 155.205(c)(2)(iii)(A) and (B). We seek comment on what, if any,
additional protections for LEP consumers the standards under Sec.
155.205(c)(2)(iii)(A) and (B) provide that are not included in the
section 1557 implementing regulation, and on whether the Sec.
155.205(c)(2)(iii)(A) and (B) requirements are largely duplicative of
the section 1557 implementing regulation. We note that not every entity
subject to Sec. 155.205(c)(2)(iii)(A) or (B) is a ``covered entity''
subject to section 1557 and its implementing regulation. We are
committed to ensuring that LEP consumers have sufficient notice of
language assistance services, while also seeking to minimize the burden
on the entities subject to both the section 1557 implementing
regulation and Exchange language access requirements, including by
minimizing duplicative requirements and the potential need for costly
information systems changes. For these reasons, and for continuity with
our existing requirements and the principle that LEP consumers should
have notice of language access services whether they are being served
by an Exchange, QHP issuer, or a web-broker,\43\ we are considering
amending Sec. 155.205(c)(2)(iii) to replace the tagline requirements
currently set forth at Sec. 155.205(c)(2)(iii)(A) and (B) with a
provision requiring Exchanges, QHP issuers, and web-brokers to follow
certain standards under Sec. 92.8 when providing the taglines required
under Sec. 155.205(c)(2)(iii). Under this alternative proposal, to the
extent that any entity subject to existing Sec. 155.205(c)(2)(iii)(A)
and (B) is not a covered entity within the meaning of section 1557 and
its implementing regulation, the standards under Sec. 92.8 would apply
as if such entity were a covered entity. We are also considering
limiting the cross-reference such that Exchanges, QHP issuers, and web-
brokers would have to comply only with the standards related to
taglines at Sec. 92.8(d)(1) and (f) when providing the taglines
required under Sec. 155.205(c)(2)(iii), and would not have

[[Page 61498]]

to comply with other notice requirements in Sec. 92.8, such as Sec.
92.8(a). This approach would be similar to our existing regulations and
would not require documents to include additional information, such as
nondiscrimination disclosures and grievance processes, that are not
contemplated by Sec. 155.205(c)(2)(iii)(A) and (B), unless the entity
providing taglines is separately subject to Sec. 92.8. Under this
alternative proposal, we are also considering retaining the requirement
that taglines must be provided on critical documents within the meaning
of Sec. 155.205(c)(2)(iii)(A) and (B), rather than applying the
requirement at Sec. 92.8(f)(1)(i) related to significant publications
and significant communications. However, we seek comment on this
approach and on whether describing the types of materials on which
taglines must be provided by Exchanges, QHP issuers, and web-brokers by
instead referring to significant publications and significant
communications at Sec. 92.8(f)(1)(i) would help streamline these
requirements for entities subject to Sec. 155.205(c)(2)(iii)(A) and
(B). We are also considering removing Sec. 155.205(c)(2)(iii)(A) and
(B) entirely. In any case, as noted above, the section 1557
implementing regulation applies independently of the regulations
governing Exchanges and health insurance issuers. We request comments
on all of these considerations, including with respect to what other
conforming changes to Sec. 155.205(c)(2)(iii) or other regulations
such as Sec. 156.250 might be advisable in order to implement a policy
of relying upon the substantive standards under section 1557 and
associated rulemaking and guidance for the language access protections
under Sec. 155.205(c)(2)(iii).
---------------------------------------------------------------------------

\43\ See 80 FR 10788.
---------------------------------------------------------------------------

c. Ability of States To Permit Agents and Brokers To Assist Qualified
Individuals, Qualified Employers, or Qualified Employees Enrolling in
QHPs (Sec. 155.220)
Consistent with section 1312(e) of the Affordable Care Act, we
established procedures under Sec. 155.220 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 standards that apply when using the direct enrollment
pathway and 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. We also established FFE standards of conduct
under Sec. 155.220(j) for agents and brokers that assist consumers in
enrolling in coverage through the FFEs to protect consumers and ensure
the proper administration of the FFEs. In this rulemaking, we propose
to build on this foundation with the adoption of new procedures and
additional consumer protection standards for agents and brokers that
assist with enrollments through Exchanges. We also solicit additional
comments to help further inform the development and implementation of
the enhanced direct enrollment pathway.
i. Differential Display of Standardized Options on the Web Sites of
Agents and Brokers
Under current rules, web-brokers and issuers that use the direct
enrollment pathway to facilitate enrollment through an Exchange that
offers standardized options are not required to give differential
display to standardized options. In the 2017 Payment Notice, we noted
that we would be conducting consumer testing to help us evaluate ways
in which standardized options, when certified by an FFE, could be
displayed on our consumer-facing plan comparison features in a manner
that makes it easier to find and identify them, including
distinguishing them from non-standardized plans. We noted that we
anticipate differentially displaying the standardized options to allow
consumers to compare plans based on differences in price and quality
rather than cost-sharing structure, as well as providing information to
explain the standardized options concept to consumers.
We added a new provision to Sec. 155.205(b)(1) codifying the
Exchange's authority to differentially display standardized options on
our consumer-facing plan comparison and shopping tools. We did not
require QHP issuers or web-brokers to adhere to differential display
requirements of standardized options when using a non-Exchange Web site
to facilitate enrollment in a QHP through an Exchange for the 2017 plan
year, but we noted that we would consider whether to propose such a
requirement in the future. Elsewhere in this document, we propose for
the 2018 plan year and beyond, to allow SBE-FPs to choose to allow HHS-
designed standardized options to receive differential display on
HealthCare.gov, just as the plans would if offered through an FFE.
For the 2018 plan year and beyond, we propose to require web-
brokers and issuers that use the direct enrollment pathway to
differentially display standardized options when they facilitate
enrollment through an FFE or an SBE-FP that has elected to implement
differential display; however, we would not require the manner of
differentiation to be identical to the one adopted for displaying
standardized options on HealthCare.gov. We recognize that web-brokers
and issuers may have system constraints that prevent them from
mirroring the HealthCare.gov display approach, and so propose that if a
web-broker or issuer that uses the direct enrollment pathway wants to
deviate from the manner adopted by HHS for display on HealthCare.gov,
such deviations would be permitted, subject to approval by HHS. In
approving deviations, HHS would consider whether the same level of
differentiation and clarity is being provided under the deviation
requested by the web-broker or issuer as is provided on HealthCare.gov.
Therefore, we propose to amend Sec. 155.220(c)(3)(i) governing web-
brokers by adding new paragraph (c)(3)(i)(H), and to amend Sec.
156.265(b)(3) governing QHP issuers engaged in direct enrollment by
adding new paragraph (b)(3)(iv) to require differential display of all
standardized options in accordance with the requirements under Sec.
155.205(b)(1) in a manner consistent with that adopted by HHS for
display on the FFE Web site, unless HHS approves a deviation.
ii. Enhanced Direct Enrollment Process
In the 2017 Payment Notice (81 FR at 12258), we discussed a
proposal to implement an enhanced direct enrollment process to
facilitate enrollment through Exchanges that rely on the Federal
platform for their eligibility and enrollment functions, namely FFEs or
SBE-FPs. If we were to

[[Page 61499]]

implement this process, it would be an additional option for a web-
broker or QHP issuer to conduct direct enrollment activities; those
entities could also continue to conduct direct enrollment through the
current process, which requires a consumer to be redirected to
HealthCare.gov in order to apply for coverage and receive an
eligibility determination. In the 2017 Payment Notice, we discussed
establishing an enhanced direct enrollment pathway, and stated that HHS
would continue to analyze the necessary protections that need to be in
place before moving forward with that new process. We now seek
additional comments from the public as described below.
Under the direct enrollment process today, a consumer is redirected
from the Web site of the direct enrollment partner (issuer or web-
broker) to HealthCare.gov to complete the eligibility application and
obtain an eligibility determination. Under the enhanced direct
enrollment process that we are considering, a consumer might remain on
the Web site of the direct enrollment partner (QHP issuer or web-
broker) to submit information necessary for an eligibility
determination without being redirected to HealthCare.gov. The enhanced
direct enrollment partner would pass information collected for the
eligibility application to the Exchange. The Exchange would then
generate the eligibility determination and pass the eligibility results
back to the enhanced direct enrollment partner. The consumer could see
the results on the direct enrollment partner's Web site. Just as with
the current direct enrollment process, the Exchanges would continue to
make the eligibility determination under enhanced direct enrollment,
and eligibility verification information the Exchanges receive from
other government agencies would not be disclosed to the enhanced direct
enrollment partner. We believe that an enhanced direct enrollment
process would allow the consumer to have a more streamlined experience
and would permit the Exchange to offer a diverse set of enrollment
channels to reach consumers.
Although offering additional enrollment channels may make it easier
for consumers to access coverage under qualified health plans, we must
consider any additional risks this enrollment channel may pose to
consumer privacy and the security of the consumer data that will be
provided to enhanced direct enrollment partners. We solicit comment on
these additional risks, as well as comment on any additional privacy
and security safeguards and other consumer protections that should be
implemented. We intend to conduct a privacy impact assessment as
required by OMB Memorandum M-10-23. These comments will inform our
identification and assessment of privacy and security risks presented
by the enhanced direct enrollment pathway. This assessment will also
help us to identify necessary safeguards that need to be in place to
protect the personal data that consumers would entrust to enhanced
direct enrollment partners.
iii. Additional Protections for the Current Direct Enrollment Process
and FFE Standard of conduct for Agents and Brokers
We also propose in this rule a number of modifications to existing
requirements and the establishment of new requirements for agents and
brokers that use the current direct enrollment process to ensure
adequate consumer protection if a web-broker is facilitating enrollment
through an FFE or SBE-FP. We propose to make a number of the same
changes to Sec. 156.1230, which governs QHP issuers using direct
enrollment, to ensure that consumers have similar protections when
enrolling through a direct enrollment channel, whether they enroll
using a web-broker, or a QHP issuer, and seek comment on whether any
additional requirements should apply, or if any of these requirements
should be modified, removed, or enhanced when applied to QHP issuers
using the direct enrollment channel. First, we propose to add Sec.
155.220(c)(3)(i)(I) to require web-brokers to display information
provided by HHS pertaining to eligibility for the advance payments of
the premium tax credit (APTC) and cost-sharing reductions in a
prominent manner. This will increase the likelihood that consumers
understand their potential eligibility for APTC and cost-sharing
reductions and potential liability for excess APTC repayment, and can
factor those determinations into their QHP selection and the amount of
APTC they elect to take.
Second, under Sec. 155.310(d)(2), an Exchange may only provide
APTC if the Exchange receives certain attestations from the tax filer,
and must permit an enrollee to accept less than the full amount of APTC
for which the enrollee is eligible. Therefore, in order for an Exchange
to provide APTC to a consumer who enrolls through the enhanced direct
enrollment pathway, the direct enrollment partner must provide
enrollees with an opportunity to input their desired amount of APTC and
provide the required APTC-related attestations. HHS is aware that some
web-brokers are not consistently permitting enrollees to select an
amount for APTC under the existing direct enrollment pathway, and
believes that permitting such would streamline the current direct
enrollment pathway for consumers. Accordingly, we propose to add Sec.
155.220(c)(3)(i)(J) to require web-brokers to allow consumers to select
an APTC amount and make related attestations in accordance with the
requirements of Sec. 155.310(d)(2). We note that this would be
consistent with 45 CFR 156.1230(a)(1)(v), under which QHP issuer direct
enrollment partners are currently required to allow consumers to select
an APTC amount and make related attestations.
Third, we propose to add Sec. 155.220(c)(3)(i)(K) to require the
agent or broker of record who assisted the consumer with enrollment
through the Exchange (that is, the agent or broker whose National
Producer Number is listed on the Exchange application) to support post-
enrollment activities necessary for the consumer to effectuate his or
her coverage or resolve issues related to his or her enrollment,
including discrepancies related to eligibility. For example, we are
aware of situations when consumers inadvertently failed to make their
binder payments and lost their coverage without their knowledge. HHS
would require the agent or broker to support the consumer to help
ensure that consumers are educated about how to make the binder
payment. Similarly, we would require the agent or broker to support the
resolution of open data matching issues. We understand that many agents
and brokers provide this type of assistance today to their clients
after initial enrollment, helping with questions or problems that may
arise regarding billing, claims or appeals. We believe that this
proposal will help ensure that consumers who access an agent or
broker's direct enrollment channel would have access to the skilled
assistance and expertise of licensed agents and brokers beyond the
initial QHP selection and enrollment process. We intend to provide
further guidance on the extent of this required post-enrollment
support, and solicit comment on types and extent of support that agents
and brokers should be required to provide. We also solicit comments on
what additional safeguards, if any, should be put in place to protect
consumers and their data.
Fourth, we propose to add Sec. 155.220(c)(3)(i)(L) to require web-
brokers to demonstrate operational readiness, including compliance with
applicable privacy and security

[[Page 61500]]

requirements, prior to accessing either the current or enhanced direct
enrollment pathway. This is intended to build upon the onboarding and
testing process that web-brokers undergo under existing procedures for
the current direct enrollment process. This process would require the
web-broker to demonstrate that it has implemented required privacy and
security measures and that it satisfies the technical specifications,
testing requirements, and onboarding procedures applicable to the
direct enrollment process that the web broker is using prior to
accessing the Exchange. Consistent with Sec. 155.220(c)(5), we intend
to conduct ongoing monitoring and audits to verify that compliance
throughout the term of the web-broker's registration with the Exchange.
Fifth, we propose adding Sec. 155.220(c)(3)(i)(M), to allow HHS to
immediately suspend the agent or broker's ability to transact
information with the Exchange as part of the direct enrollment pathway
if HHS discovers circumstances that pose unacceptable risk to Exchange
operations or its information technology systems. The suspension would
last until HHS is satisfied that the risk has been removed or
sufficiently mitigated. For example, a web-broker's access to the
direct enrollment pathway may be suspended if it is determined that the
web-broker is using an enrollment process other than the HHS-approved
processes, presenting a risk of inaccurate eligibility determinations
or presenting unacceptable security or privacy risks to consumer data.
We note that this direct enrollment requirement is similar to the one
at Sec. 155.220(c), which applies to agents or brokers making their
Web site available to another agent or broker. We seek comment on
whether these or other similar requirements should be combined. In
addition, we propose to add language to Sec. 155.220(c)(3)(i)(E) to
require an agent or broker to cooperate with any audit under this
section. This would include responding to requests for information in a
timely fashion, as well as providing access upon request to documents
or other materials necessary to confirm compliance with applicable
requirements.
Sixth, consistent with Sec. 155.220(c)(4), web-brokers are
permitted to provide access, through a contract or other arrangement,
to their direct enrollment pathway to another agent or broker to help
an applicant complete the QHP selection process, and must comply with
certain obligations when doing so. We understand that a number of web-
brokers provide access to their direct enrollment pathway to other
agents and brokers who host their own third-party Web sites. To better
protect consumers accessing these downstream third-party Web sites that
connect to the web-broker's direct enrollment pathway, we are proposing
to add language to Sec. 155.220(c)(4)(i)(E) to require web-brokers
that provide this access to be responsible for ensuring those Web sites
are compliant with this section.
HHS is also considering different methods for completing the
monitoring and audits authorized by Sec. 155.220(c)(5). For example,
HHS, its designee, or an approved third party could perform the
onboarding testing or audit. Where approved third parties perform
onboarding reviews and audits, we anticipate that they would be
approved by HHS and would need the capability to audit web-brokers'
ability to securely collect, maintain, and transmit eligibility
application information in a manner determined by HHS and to otherwise
review compliance with HHS rules. For third parties to be approved to
conduct these activities, we expect that the auditor would need to
submit an application to HHS demonstrating prior experience in
verifying these sorts of capabilities, and, if approved, enter into an
agreement with HHS governing the auditor's compliance with HHS audit
and verification standards, interface with HHS systems, and data use.
The auditor would be required to collect, store, and share data with
HHS on these verifications, and protect that data in accordance with
HHS standards. The auditor would be subject to monitoring and periodic
certification by HHS, and would be compensated by the agents or brokers
who engaged the auditor. If HHS elects to allow third parties to
perform such verifications, we would establish a process for evaluating
and approving third party vendors in a manner similar to the one
established in Sec. 155.222. We solicit comment on our proposal to
allow third parties to perform monitoring and audits authorized by
Sec. 155.220(c). We also seek comment on whether we should establish a
process for recognizing third parties to perform such monitoring, what
protections are needed, and the factors HHS should consider in
evaluating and approving organizations for this type of role.
Finally, we propose to amend Sec. 155.220(j)(2)(i) to provide that
an agent or broker that assists with or facilitates enrollment of
qualified individuals in a manner that constitutes enrollment through
an FFE or SBE-FP, or assists individuals in applying for APTC and cost-
sharing reductions for QHPs sold through an FFE or SBE-FP, must refrain
from having a Web site that HHS determines could mislead consumers into
believing they are visiting HealthCare.gov. For example, our experience
shows that Web sites that utilize combinations of colors, text sizes
and fonts or layout similar to those used on HealthCare.gov have caused
confusion among consumers. Web sites whose URL address or marketing
name could suggest the Web site is owned or endorsed by HealthCare.gov
would also be inappropriate. We believe that it is important to avoid
consumer confusion around which Web sites are operated by the FFE or
SBE-FP, and which ones are operated by issuers, or agents or brokers.
We would be interested in feedback on criteria for determining whether
a Web site is misleading to consumers.
We seek comment on all aspects of this proposal and specifically
seek comment on whether direct enrollment with a QHP issuer should be
permitted for enrollments through all SBE-FPs, or at the option of SBE-
FPs.
d. General Standards for Exchange Notices (Sec. 155.230)
Section 155.230 outlines standards for notices required to be sent
by the Exchange to individuals or employers. We propose amending
paragraph Sec. 155.230(d)(2) to specify that electronic notices would
be the default method for sending required SHOP Exchange notices,
unless otherwise required by Federal or State law. The proposed
amendment would make mailed paper notices optional, at the election of
the employer or employee, as applicable, unless other Federal or State
law would not permit this.\44\ We propose this change because we have
received feedback from SHOP consumers and issuers that electronic
notices are the preferred method of communication. In addition,
electronic notices provide a more cost effective way for SHOPs to
distribute required notices. However, we are aware that some people
(and employers) may still prefer mailed paper notices, and therefore
propose that paper notices distributed through standard mail would
continue to be available for those that select paper notices as the
preferred method of communication. Employers and employees
participating in FF-SHOPs or in SBE-FPs utilizing the Federal platform
for SHOP functions will continue to be able to select their preferred
communication method when

[[Page 61501]]

completing the eligibility applications online at HealthCare.gov. We
note that to the extent that a SHOP is required to provide notices in a
particular format to meet its obligation to perform effective
communication with an individual with a disability under the Americans
with Disabilities Act of 1990 (42 U.S.C. Ch. 126), section 504 of the
Rehabilitation Act, or section 1557 of the Affordable Care Act, a SHOP
should comply with those requirements.
---------------------------------------------------------------------------

\44\ See Federally-facilitated Marketplace (FFM) and Federally-
facilitated Small Business Health Options Program (FF-SHOP)
Enrollment Manual available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf,
for a list of the FF-SHOP Exchange notices.
---------------------------------------------------------------------------

We note that this amendment would not change the requirement that a
SHOP comply with the requirements for electronic notices in 42 CFR
435.918(b)(2) through (5) for the employer or employee. We seek comment
on this proposal.
We also propose to add a new paragraph Sec. 155.230(d)(3) to give
individual market Exchanges and SHOPs flexibility to send notices
through standard mail, instead of electronically, if an individual
market Exchange or SHOP is unable to send select notices electronically
due to technical limitations, even if an election has been made to
receive such notices electronically. Our regulation currently requires
that, should an individual's, employee's, or employer's notice
preference be electronic notices, an individual market Exchange must
send required notices according to this preference, and our proposed
amendment to paragraph (d)(2) would require that a SHOP provide
electronic notices unless paper notices are selected as the preferred
communication method. However, Exchanges or SHOPs may have
technological limitations that prevent them from sending certain
notices electronically. In these situations, we would like to provide
flexibility for an individual market Exchange or SHOP to instead notify
the individual, employee, or employer through standard mail. We
encourage individual market Exchanges or SHOPs who might need to
exercise this option to explain to individuals, employees, or employers
that some required notices may be sent through standard mail, and
encourage additional outreach be conducted, as needed, so the
individual, employee, or employer understands the content of the
standard mail notice itself. We seek comment on this proposal.
e. Payment of Premiums (Sec. 155.240)
When an enrollee stops receiving the benefit of advance payments of
the premium tax credit, for example as a result of a data matching
inconsistency period expiring, the enrollee will be responsible for a
greater premium amount. For individuals who have agreed to pay premiums
via electronic funds transfer (EFT), this could mean the withdrawal of
a larger than expected amount from the enrollee's bank account, and
could result in financial hardship. We recognize that issuers have
different procedures in place to provide notice to enrollees affected
by a larger-than-expected EFT withdrawal and to avoid potential
consumer hardship. We are considering future rulemaking that would
require safeguards for consumers, such as reversal or termination of
EFTs, with or without simultaneous paper-billing, when EFT amounts are
of a larger-than-expected amount. We seek comment regarding the scope
of any potential problem related to larger-than-expected EFT
withdrawals, issuers' experience with these withdrawals, industry best
practices, State regulations in this area, and whether Federal
rulemaking is needed.
3. Exchange Functions in the Individual Market: Eligibility
Determinations for Exchange Participation and Insurance Affordability
Programs
a. Eligibility Redetermination During a Benefit Year (Sec. 155.330)
Paragraph (d)(1)(ii) of Sec. 155.330 requires the Exchange to
periodically examine available data sources for eligibility
determinations for certain government health programs, including
Medicare, Medicaid, and the Children's Health Insurance Program (CHIP),
for Exchange enrollees on whose behalf APTC or the cost-sharing
reduction portion of advance payments are being paid. We are proposing
to amend paragraph (d)(1)(ii) to require the Exchange to periodically
examine data sources for information on either eligibility
determinations for or enrollment in the specified government programs.
The proposed change would provide Exchanges with flexibility to use
information about enrollment in the specified government health
programs, rather than information about eligibility determinations.
Having this flexibility may be particularly valuable if data on
eligibility determinations (as distinct from enrollment) are not
available. When deciding whether to examine data sources for
eligibility determinations or enrollment information, Exchanges should
consider which data source best meets the criteria of timeliness,
accuracy, and availability.
We propose to add a new paragraph Sec. 155.330(e)(2)(iii) related
to periodic examination of data sources. Currently, paragraph (e)(2)(i)
describes the procedures for redetermination and notification of
eligibility when, through a data matching process under Sec.
155.330(d), an Exchange identifies updated information regarding death
or any factor of eligibility not regarding income, family size, or
family composition. Our regulations have not previously addressed how
an Exchange should use updated information regarding compliance with
the income tax filing and reconciliation requirement under Sec.
155.305(f)(4). Due to certain operational and legal impediments
explained below, we believe that the procedures in paragraph (e)(2)(i)
may not be appropriate in these cases. Proposed new paragraph
(e)(2)(iii) would require an Exchange to choose among three
alternatives for when the Exchange identifies updated information
regarding compliance with the income tax filing and reconciliation
requirement under Sec. 155.305(f)(4): (A) Follow the procedures
specified in paragraph (e)(2)(i) of this section; (B) follow
alternative procedures specified by the Secretary in guidance; or (C)
follow an alternative process proposed by the Exchange and approved by
the Secretary based on a showing that the process meets the approval
criteria outlined below.
An Exchange enrollee's continued eligibility for APTC may be
jeopardized when the person responsible for reconciling the tax credit
on a tax return fails to do so as required in Sec. 155.305(f)(4).
However, Exchange operational concerns, the need for close cooperation
with the IRS, timelines for tax filing (including requesting an
extension of the tax filing deadline), timelines for updating the IRS
database that provides information about income tax return filing and
reconciliation, and restrictions on the disclosure of Federal tax
information affect an Exchange's processes for making redeterminations
and communicating with enrollees regarding redeterminations.
In light of these complexities, specific procedures for handling
these redeterminations may be warranted that balance Exchange
operational flexibility, the need for program integrity protections and
procedural protections for enrollees and tax filers. Accordingly, under
proposed paragraph (e)(2)(iii), Exchanges must follow the procedures
specified in Sec. 155.330(e)(2)(i) (provided the Exchange is able to
maintain adequate safeguards for Federal tax information consistent
with section 6103 of the Code with respect to the confidentiality,
disclosure, maintenance, or use of such information), procedures
described in guidance published by the Secretary, or alternative
procedures approved by the

[[Page 61502]]

Secretary. The guidance established by the Secretary could, for
example, provide that an Exchange would follow specified procedures for
providing notice and, if there is a dispute about the IRS tax filing
data regarding the tax filer (or his or her spouse, if applicable),
provide an opportunity for the enrollee to contest.
An Exchange would also be permitted to choose alternative
procedures for periodic data matching to verify whether a tax filer has
complied with the filing and reconciliation requirement, subject to
approval by the Secretary. Approval would require a showing by the
Exchange that the alternative procedures would facilitate continued
enrollment in coverage with financial assistance for which the enrollee
remains eligible, provide appropriate information about the process to
the enrollee (including regarding any action by the enrollee necessary
to obtain the most accurate redetermination of eligibility), and
provide adequate program integrity protections and safeguards for
Federal tax information under section 6103 of the Code with respect to
the confidentiality, disclosure, maintenance, or use of such
information.
Additionally, in paragraph (g), we propose to allow alternate
methods of recalculating APTC during the benefit year. Currently,
paragraph (g) provides that when an Exchange makes an eligibility
redetermination in accordance with Sec. 155.330 that results in a
change in the amount of APTC, the Exchange must recalculate the amount
of APTC to account for any payments already made on behalf of the tax
filer for the benefit year. The goal of the recalculation is to provide
the total advance payments for the benefit year that correspond to the
tax filer's total projected and allowed premium tax credit for the
benefit year.
We propose for coverage years through 2023 to permit the Exchange
to recalculate APTC in accordance with an eligibility redetermination
under Sec. 155.330 using an alternate method approved by the
Secretary. Approval would require a showing by the Exchange that the
alternative procedure provides adequate program integrity protections,
minimizes administrative burden on the Exchange, and limits negative
impacts on consumers, where possible. We make this change based on
Exchange feedback and believe the proposed change will account for the
differences in Exchange systems and mitigate complexities. We believe
this change balances the need for Exchange flexibility in the near term
with the goal of providing accurate determinations for APTC and
protecting tax filers from the potential for an excess APTC repayment,
where possible. We seek comment on this proposal and on the period of
time for which it should be available.
We seek comment on these proposals.
4. Exchange Functions in the Individual Market: Enrollment in Qualified
Health Plans
a. Enrollment of Qualified Individuals into QHPs (Sec. 155.400)
We propose to amend Sec. 155.400 to add additional flexibility to
the binder payment rules. Specifically, we propose to add Sec.
155.400(e)(2) to give Exchanges the discretion to allow issuers
experiencing billing or enrollment problems due to high volume or
technical errors to implement a reasonable extension of the binder
payment deadlines the issuer has set under Sec. 155.400(e)(1). We
propose that the FFEs and SBE-FPs will, and State Exchanges may, allow
these reasonable extensions, which in the case of most high volume
situations or technical errors we would not expect to be more than 45
calendar days' duration. Based on our experience from multiple open
enrollment periods, billing or enrollment problems, particularly in
cases where an issuer experienced technical errors or a processing
backlog caused by a large volume of enrollments, can affect enrollees'
ability to submit timely binder payments. We believe providing issuers
with the option to allow reasonable binder payment deadline extensions,
which must be implemented in a uniform and nondiscriminatory manner,
would prevent enrollees from having their coverage cancelled due to
non-payment when those enrollees did not have adequate time to make
their binder payments and appropriately balances issuer flexibility and
consumer protectiveness.
We also propose to specify that all binder payment rules, including
the proposed amendment, in Sec. 155.400(e) apply to SBE-FPs in
addition to FFEs. We believe that all entities on the Federal platform
should utilize the same binder payment rules in order to simplify
operational implementation of enrollment processing and confirmation
using the Federal platform, and consider these rules to fall within the
regulations pertaining to issuer eligibility and enrollment functions
that a QHP issuer must comply with in order to participate in an SBE-
FP, under Sec. 156.350. We seek comment on this proposal.
Additionally, in the preamble to Sec. 156.270 in the 2017 Payment
Notice, we stated as part of our interpretation of Sec. 156.270(d)
that a binder payment is not necessary when an enrollee enrolls, either
actively or passively, in a plan within the same insurance product. We
understand that this may be different than issuer practice prior to the
Affordable Care Act and that issuers may have operational challenges in
distinguishing between enrollment in the same product versus a
different product. To minimize operational concerns, we seek comment on
whether we should amend the binder payment requirement in Sec.
155.400(e) to not require a binder payment when a current enrollee
enrolls, either actively or passively, in any plan with the same
issuer, and on the appropriate timeframe for making such a change.
b. Special Enrollment Periods (Sec. 155.420)
Special enrollment periods, a longstanding feature of employer-
sponsored coverage, exist to ensure that people who lose health
insurance during the year, or who experience other qualifying events,
have the opportunity to enroll in coverage. We are committed to making
sure that special enrollment periods are available to those who are
eligible for them and equally committed to avoiding any misuse or abuse
of special enrollment periods.
In 2016, we added warnings on HealthCare.gov about inappropriate
use of special enrollment periods, eliminated special enrollment
periods that are no longer needed as the Exchanges mature, and
tightened eligibility rules. In addition, we introduced a special
enrollment confirmation process under which consumers enrolling through
the most common special enrollment periods are directed to provide
documentation to confirm their eligibility for the special enrollment
period.
We have heard competing concerns about how these actions are
affecting the Exchange risk pools. Some have stated that additional
changes are needed to prevent individuals from misusing special
enrollment periods to sign up for coverage only after they become
sick.\45\ Others have stated that any differential costs for the
special enrollment period

[[Page 61503]]

population reflect the very low take-up rates for special enrollment
periods among eligible individuals. They claim that verification
processes worsen the problem by creating new barriers to enrollment,
with healthier, less motivated individuals, the most likely to be
deterred.
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\45\ We have heard similar concerns about potential gaming and
adverse selection that could result from the grace period for
payment of premiums for qualified individuals receiving advance
payments of the premium tax credit. While we seek additional
information on this concern as well, we expect that changes to grace
period policy would require legislation.
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We seek comment on these issues, especially data that could help
distinguish misuse of special enrollment periods from low take-up of
special enrollment periods among healthier eligible individuals,
evidence on the impact of eligibility verification approaches,
including pre-enrollment verification, on health insurance enrollment,
continuity of coverage, and risk pools (whether in the Exchange or
other contexts), and input on what special enrollment period-related
policy or outreach changes, including in the final rule, could help
strengthen risk pools.
In this rule, we also seek to ensure transparency, stability, and
appropriate utilization of special enrollment periods by codifying
certain special enrollment periods that were made available through
prior guidance. Therefore, in order to provide clarity and certainty to
all stakeholders, we propose to codify:
Paragraph (d)(8)(ii) for the special enrollment period for
dependents of Indians who are enrolled or are enrolling in a QHP
through an Exchange at the same time as an Indian;
Paragraph (d)(10) for the special enrollment period for
victims of domestic abuse or spousal abandonment and their dependents
who seek to apply for coverage apart from the perpetrator of the abuse
or abandonment;
Paragraph (d)(11) for the special enrollment period for
consumers and their dependents who apply for coverage and are later
determined ineligible for Medicaid or CHIP;
Paragraph (d)(12) for the special enrollment period that
may be triggered by material plan or benefit display errors on the
Exchange Web site, including errors related to service areas, covered
services, and premiums; and
Paragraph (d)(13) for the special enrollment period that
may be triggered when a consumer resolves a data matching issue
following the expiration of an inconsistency period.
We propose to codify the special enrollment period for dependents
of Indians who are enrolling at the same time as the Indian, as defined
by section 4 of the Indian Health Care Improvement Act, in paragraph
(d)(8)(ii) so that Indians and non-Indian members of the household may
maintain the same coverage and so that this special enrollment period
is consistently applied across Exchanges. This special enrollment
period has enabled mixed status Indian families to enroll in or change
coverage together through the Exchange. We propose to codify the
special enrollment period for victims of domestic abuse or spousal
abandonment in paragraph (d)(10) so that, as specified in July 2015
guidance,\46\ victims of domestic abuse or spousal abandonment, along
with their dependents, can enroll in coverage separate from their
abuser or abandoner. This special enrollment period has provided a
needed pathway to new coverage for consumers in these situations. We
propose to codify the special enrollment period for consumers who apply
for coverage during the Exchange annual open enrollment period or due
to a qualifying event and are determined ineligible for Medicaid or
CHIP in paragraph (d)(11), so that consumers who applied for coverage
when they were eligible to do so can ultimately enroll in coverage
through the Exchange. This special enrollment period has ensured that
consumers who were incorrectly assessed potentially eligible for
Medicaid or CHIP have a pathway to coverage. We propose to codify the
special enrollment period for material plan or benefit display errors
in paragraph (d)(12), so that consumers who enrolled in a plan based on
incorrect plan or benefit information can select a new plan that better
suits their needs. We propose to codify the special enrollment period
for data matching issues that are cleared after the deadline for
resolving has passed in paragraph (d)(13), so that consumers who submit
required documents to prove that they are qualified individuals may
enroll in coverage through the Exchange. This special enrollment period
has enabled consumers who are not able to submit required documents
prior to the deadline associated with their data matching issue to
enroll in coverage upon submitting sufficient documents. We seek
comments on these proposals to codify existing special enrollment
periods.
---------------------------------------------------------------------------

\46\ Updated Guidance on Victims of Domestic Abuse and Spousal
Abandonment (Jul. 27, 2015). Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated-Guidance-on-Victims-of-Domestic-Abuse-and-Spousal-Abandonment_7.pdf.
---------------------------------------------------------------------------

We also propose to make a variety of technical corrections to
correct punctuation in paragraphs (d)(1)(i) and (iii), and to update
the cross-references in paragraph (b)(2)(iii) (regarding coverage
effective dates) to reflect the applicable newly codified special
enrollment periods. All of these changes reflect existing FFE practice
in implementing special enrollment periods authorized by the Affordable
Care Act and existing regulations, and do not create new special
enrollment periods for consumers.
We note that certain special enrollment periods in Sec. 155.420
are incorporated into the individual market guaranteed availability
regulations at Sec. 147.104(b) and apply to all issuers offering non-
grandfathered individual market coverage, whether through or outside of
an Exchange. Additionally, certain special enrollment periods in Sec.
155.420 also apply in the SHOPs and are incorporated into the SHOP
regulations at Sec. Sec. 155.725(j) and 156.285(b). Except for the
proposed additions of paragraphs (d)(8)(ii) and (d)(13), which are
applicable only with respect to coverage offered through an Exchange,
the proposed changes to special enrollment periods in this notice of
proposed rulemaking would apply throughout the individual market, and
we therefore propose conforming amendments to Sec. 147.104(b). We seek
comment on this approach to aligning the proposed amendments with the
individual-market-wide and SHOP special enrollment periods.
c. Termination of Exchange Enrollment or Coverage (Sec. 155.430)
We propose to amend Sec. 155.430(b)(2)(iii) to specify that when
an issuer seeks to rescind coverage, in accordance with Sec. 147.128,
in a QHP purchased through an Exchange, the issuer must first
demonstrate, to the reasonable satisfaction of the Exchange, that the
rescission is appropriate, if so required by the Exchange. In FFEs and
SBE-FPs, HHS anticipates generally requiring such a demonstration.
Section 2712 of the PHS Act and Sec. 147.128 prohibit an issuer from
rescinding coverage unless the individual (or a person seeking coverage
on behalf of the individual) performs an act, practice, or omission
that constitutes fraud, or makes an intentional misrepresentation of
material fact, as prohibited by the terms of the plan or coverage. We
do not seek to restrict issuers' ability to rescind coverage when an
individual or a party seeking coverage on behalf of an individual
fraudulently enrolls the individual in coverage. However, because the
Exchanges generally must be involved in all enrollment processes,
including the process of rescinding coverage for plans purchased
through the Exchange, it is necessary for the issuer to provide
information to the Exchange in order to implement the rescission.
Additionally, it is important for consumer protection and the orderly
functioning of Exchanges that

[[Page 61504]]

individuals whose eligibility has been verified and enrollments
processed according to Exchange rules can be sure that their coverage
will not be rescinded by issuers without a showing that the enrollment
was fraudulent, or due to an intentional misrepresentation of material
fact, as prohibited by the terms of the plan or coverage, meeting the
requirements for rescission under Sec. 147.128. The FFEs or SBE-FPs
would not hinder an issuer seeking to rescind on grounds demonstrating
fraud or intentional misrepresentation of material fact, such as the
enrollment of a non-existent or deceased person. We seek comment on
this proposal.
5. Appeals of Eligibility Determinations for Exchange Participation and
Insurance Affordability Programs
a. General Eligibility Appeals Requirements (Sec. 155.505)
In Sec. 155.505, we propose to add paragraph (h) permitting the
Exchange appeals entity to utilize paper-based appeals processes for
the acceptance of appeal requests, the provision of appeals notices,
and the secure transmission of appeals-related information between
entities, when the Exchange appeals entity is unable to establish and
perform otherwise required related electronic functions, as further
described below. In the first Program Integrity Rule, 78 FR 54069 (Aug.
30, 2013), we provided flexibility for Exchanges to implement a paper-
based appeals process for the first year of operations (October 1, 2013
through December 31, 2014). Our goal was to allow Exchanges to operate
efficient, effective paper-based appeals processes, while providing
time to modernize their appeals programs. We believed this approach
balanced the interests of both appellants and Exchanges.
We extended this flexibility through December 31, 2016 in guidance
published on October 23, 2014 \47\ and March 22, 2016.\48\ In these
documents, we acknowledged that Exchanges face many challenges and
competing priorities regarding system development. Currently, some
Exchange appeals entities are continuing to work towards full
compliance with the regulatory requirements related to electronic
appeals processes.
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\47\ Subregulatory Guidance Memorandum (Oct. 23, 2014),
available at https://www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/Paper-based-Appeals-Process-Guidance.pdf.
\48\ Subregulatory Guidance Memorandum (Mar. 22, 2016),
available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Extension-for-paper-based-appeals-3-22-2016.pdf).
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Accordingly, we are proposing to add Sec. 155.505(h) so the
Exchange appeals entity may establish secure and expedient paper-based
appeals processes that ensure appropriate procedural protections for
appellants when it is unable to fulfill the electronic requirements
related to individual market eligibility appeals, employer appeals, and
SHOP employer and employee appeals as described in part 155, subparts
C, D, F, and H. These electronic requirements include: Accepting appeal
requests submitted by telephone or internet (Sec. 155.520(a)(1)(i) and
(iv)), sending electronic notices (Sec. 155.230(d)), and establishing
secure electronic interfaces to transfer eligibility and appeal records
between appeals entities and Exchanges or Medicaid or CHIP agencies
(Sec. 155.345(i)(1); Sec. 155.510(b)(1)(ii) and (b)(2); Sec.
155.520(d)(1)(ii) and (iii) and (d)(3) and (4); Sec. 155.545(b)(3);
Sec. 155.555(e)(1); and Sec. 155.740(h)(1)). We are also proposing
corresponding amendments to Sec. 155.555(b) (regarding employer
appeals) and Sec. 155.740(b)(2) (regarding SHOP appeals) to include
cross-references to proposed Sec. 155.505(h).
This proposal addresses the ongoing challenge of implementing
complex electronic appeals processes, while adequately protecting
appellants' procedural rights. We expect that appeals entities will
continue to work towards modernizing and automating their appeals
processes, and that they will implement electronic appeals processes as
they are able, to the extent such processes may enhance appellants'
experience or the overall efficiency of eligibility appeals.
We seek comment on this proposal.
b. Employer Appeals Process (Sec. 155.555)
Section 155.555(b) sets forth the requirements for employer appeals
processes established either by an Exchange or HHS. As described above,
we propose to amend Sec. 155.555(b) to include cross-references to
proposed Sec. 155.505(h), which would permit an employer appeals
process to utilize paper-based appeals processes for the acceptance of
appeal requests, the provision of appeals notices, and the secure
transmission of appeals-related information between entities, when the
Exchange appeals entity is unable to establish and perform otherwise
required related electronic functions.
6. 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(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(d)(2)(iv), certain employed individuals are exempt if, on an
individual basis, the cost of self-only coverage is less than the
required contribution percentage, but the aggregate cost of 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
of HHS 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.
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 in the 2015 Market Standards Rule (79 FR 30302), and we 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.\49\
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\49\ 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.
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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

[[Page 61505]]

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.\50\ (Below, in Sec. 156.130, we propose the 2018 premium
adjustment percentage of 16.17303196 (or an increase of about 16.2
percent) over the period from 2013 to 2017. This reflects an increase
of about 2.6 percent over the 2017 premium adjustment percentage
(1.1617303196/1.1325256291).)
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\50\ 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.
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As the measure of income growth for a calendar year, we established
in the 2017 Payment Notice that we would use per capita personal income
(PI). Under the approach finalized in the 2017 Payment Notice, and
using the NHEA data, the rate of income growth for 2018 is the
percentage (if any) by which the most recent projection of per capita
PI for the preceding calendar year ($51,388 for 2017) exceeds per
capita PI for 2013 ($44,528), carried out to ten significant digits.
The ratio of per capita PI for 2017 over the per capita PI for 2013 is
estimated to be 1.1540603665 (that is, per capita income growth of
about 15.4 percent). This reflects an increase of about 4.0 percent
relative to the increase for 2013 to 2016 (1.1540603665/1.1101836394).
Thus, using the 2018 premium adjustment percentage proposed in this
rule, the excess of the rate of premium growth over the rate of income
growth for 2013 to 2017 is 1.1617303196/1.1540603665, or 1.0066460588.
This results in a proposed required contribution percentage for 2018 of
8.00*1.0066460588, or 8.05 percent, when rounded to the nearest one-
hundredth of one percent, a decrease of 0.11 percentage points from
2017 (8.05317 - 8.16100). The excess of the rate of premium growth over
the rate of income growth also is used for determining the applicable
percentage in section 36B(b)(3)(A) and the required contribution
percentage in section 36B(c)(2)(C).
7. Enrollment Periods Under SHOP (Sec. 155.725)
Section 155.725(g) describes the process for newly qualified
employees to enroll in coverage through a SHOP and the coverage
effective date for newly qualified employees. We propose to amend
paragraphs (g)(1) and (2) and add new paragraph (g)(3).
Currently, Sec. 155.725(g)(1) requires both that: (1) The
enrollment period for an employee who becomes a qualified employee
outside of the initial or annual open enrollment period starts on the
first day of becoming a newly qualified employee; and (2) a newly
qualified employee must have at least 30 days from the beginning of his
or her enrollment period to make a plan selection. The latter
requirement is intended to guarantee that the employee has sufficient
time to make an informed decision about his or her health coverage
needs. We do not propose changes to this latter requirement, but we
propose to change the day the enrollment period begins.
Before a newly qualified employee may make a plan selection through
a SHOP, his or her employer must notify the SHOP about the newly
qualified employee. Qualified employers in an FF-SHOP or SBE-FP using
the Federal platform for SHOP eligibility or enrollment functions
generally report newly qualified employees by adding the employee to
the employee roster or by calling the FF-SHOP call center. If, however,
a qualified employer waits to take either action, a newly qualified
employee might not be able to begin the enrollment process until after
the date upon which the employee became eligible, and might not have a
full 30 days to make a coverage decision, as contemplated by the
current regulations. We are concerned that there might be a similar
delay in State-based SHOPs.
To ensure that newly qualified employees have the full 30 days to
enroll, we propose, at Sec. 155.725(g)(1), that SHOPs would be
required to provide an employee who becomes a qualified employee
outside of the initial or annual open enrollment period with a 30-day
enrollment period that begins on the date the qualified employer
notifies the SHOP about the newly qualified employee. We also propose
that qualified employers would be required to notify the SHOP about a
newly qualified employee on or before the 30th day after the day that
the employee becomes eligible for coverage, and are also proposing a
conforming amendment to the requirements for qualified employers at
Sec. 157.205(f)(1). Together with the other proposed amendments to
paragraph (g) discussed below, this proposal would ensure that the
proposed policy of starting the 30-day enrollment period on the date of
the qualified employer's notice to the SHOP would not delay the
effective date of coverage beyond the limits on waiting periods imposed
under Sec. 147.116, and would also ensure that newly qualified
employees are provided with a full 30 days to make their health
coverage decisions after their employer has notified the SHOP about
them.
We also propose to remove the requirement in current Sec.
155.725(g)(1) that enrollment periods for newly qualified employees
must end no sooner than 15 days prior to the date that any applicable
employee waiting period longer than 45 days would end if the employee
made a plan selection on the first day of becoming eligible. We are
proposing to remove this requirement because the proposed amendments at
paragraphs (g)(2) and (3) discussed below are expected to minimize the
risk of employers exceeding waiting period limitations, as defined at
Sec. 147.116, and because we believe that removing this requirement
will in some circumstances give newly qualified employees a longer
period of time to make coverage decisions. For example, suppose that a
new employee who is not a variable hour employee is hired and offered
coverage by the qualified employer on April 25 and that the qualified
employer imposes a 60-day waiting period that begins on the date of
hire (and under Sec. 147.116 and the proposed amendments to paragraph
(g)(3) discussed below ends June 23). The qualified employer notifies
the SHOP on May 25 about the newly qualified employee, and the
enrollment period begins on that date and will end on June 23. The
newly qualified employee makes a plan selection on May 26. If we
maintained the requirements that coverage effective dates for newly
qualified employees must generally be determined in accordance with
Sec. 155.725(h) (see discussion below of proposed amendments to this
requirement) and that enrollment periods for newly qualified employees
must begin on the date that the employee becomes eligible, and end no
sooner than 15 days prior to the date that any applicable employee
waiting period longer than 45 days would end if the employee made a
plan selection on the first day of becoming eligible, the newly
qualified employee's enrollment period would have ended on June 9 and
the employee would have a coverage effective date of July 1. However,
under the proposed amendments we are making to this section, the newly
qualified employee would be provided a full 30-day enrollment period
with the same coverage effective date of July 1.
Current paragraph (g)(2) provides that a newly qualified employee's
coverage effective date must always be the first day of a month, and
must generally be determined in accordance with

[[Page 61506]]

paragraph (h), unless the employee is subject to a waiting period
consistent with Sec. 147.116, in which case the effective date may be
on the first day of a later month, but in no case may the effective
date fail to comply with Sec. 147.116. Thus, in an FF-SHOP, under the
current rule, coverage for a newly qualified employee generally takes
effect the first day of the following month for a plan selection made
on or before the 15th day of a month, and takes effect the first day of
the second following month for a plan selection made after the 15th day
of a month, unless coverage must take effect on a later date due to the
application of a waiting period consistent with Sec. 147.116. We
propose to modify paragraph (g)(2) to specify that the coverage
effective date for a newly qualified employee would be the first day of
the month following the plan selection, (rather than being determined
in accordance with paragraph (h)), unless the employee is subject to a
waiting period consistent with Sec. 147.116 and proposed paragraph
(g)(3), in which case the effective date would be on the first day of
the month following the end of the waiting period, but in no case may
the effective date fail to comply with Sec. 147.116. The proposed
amendments to paragraph (g)(2) also specify that: (1) If a newly
qualified employee's waiting period ends on the first day of a month
and the employee has already made a plan selection by that date,
coverage would also be effective on that date; and (2) if a newly
qualified employee makes a plan selection on the first day of a month
and any applicable waiting period has ended by that date, coverage
would be effective on that date. These amendments would minimize the
risk of an employer exceeding the limitations on waiting period length
at Sec. 147.116 due to SHOP enrollment timelines and processes.
Additionally, in order to ensure that SHOP operations consistent
with these proposed amendments would not cause a qualified employer to
exceed the limits on waiting periods under Sec. 147.116, we propose to
amend Sec. 155.725(g)(2) to require that if a qualified employer with
variable hour employees makes regularly having a specified number of
hours of service per period (or working full-time) a condition of
employee eligibility for coverage offered through a SHOP, any
measurement period that the qualified employer uses to determine
eligibility under Sec. 147.116(c)(3)(i) must not exceed 10 months with
respect to coverage offered through the SHOP (rather than the 12-month
measurement period otherwise allowed under Sec. 147.116(c)(3)(i)).
This aspect of the proposal is intended to ensure that coverage takes
effect within the limitations on waiting period length at Sec.
147.116(c)(3)(i) for variable hour employees, under which coverage must
take effect no later than 13 months from the employee's start date,
plus, if the employee's start date is not the first day of a calendar
month, the time remaining until the first day of the next calendar
month. Specifically, for qualified employers that condition eligibility
for coverage on an employee regularly having a specified number of
hours of service per period (or working full-time), if it cannot be
determined that a newly-hired employee is reasonably expected to
regularly work that number of hours per period (or work full-time), the
qualified employer may take a reasonable period of time, not to exceed
10 months and beginning on any date between the employee's start date
and the first day of the first calendar month following the employee's
start date, to determine whether the employee meets the eligibility
condition.
We seek comment on whether any of the proposed timeframes might
result in a situation in which an employer or issuer falls out of
compliance with Sec. 147.116.
Consistent with Sec. 147.116, as long as the employee subject to a
waiting period may make a plan selection that results in coverage
becoming effective within the timeframes required under Sec. 147.116,
coverage that begins later as a result of the employee's delay in
making a plan selection would not constitute a failure to comply with
the waiting period limitations under Sec. 147.116. As a result of our
proposal at paragraph (g)(2) of this section, when a newly qualified
employee subject to a waiting period makes a plan selection, coverage
would begin the first day of the first month that follows the
expiration of the waiting period, as long as that date is consistent
with the requirements in Sec. 147.116. However, if the first day of
the first month following the expiration of the waiting period for this
employee would be outside the limits under Sec. 147.116, the SHOP
would be required under paragraph (g)(2) to ensure that coverage takes
effect within the required timeframe. To avoid this scenario and the
operational complications it would cause for SHOPs, we are also
proposing to specify in a new paragraph (g)(3) that waiting periods in
a SHOP may not exceed 60 days in length. If an individual subject to a
waiting period could have had an effective date within the timeframes
in Sec. 147.116 by making a plan selection at the beginning of the
enrollment period, but delays making a plan selection, consistent with
Sec. 147.116(a), coverage would begin the first day of the first month
following the end of the waiting period, even if this would not be
within the timeframes in Sec. 147.116.
In addition to specifying that waiting periods in SHOPs would not
exceed 60 days, proposed paragraph (g)(3) would also specify the
calculation methodology for waiting periods in SHOPs. Under this
proposed amendment, waiting periods in SHOPs would be calculated
beginning on the date the employee becomes eligible--regardless of when
the qualified employer notifies the SHOP about the newly qualified
employee. For example, a 60-day waiting period would be calculated as
the date an employee becomes otherwise eligible plus 59 days. Under
this methodology, the date the employee becomes otherwise eligible
counts as the first day of the waiting period. We propose this
amendment to ensure that employers will remain in compliance with Sec.
147.116 when factoring in certain aspects of the SHOP enrollment
timeline, such as the 30 days employers would have under these proposed
amendments to notify the SHOP about a newly qualified employee, the 30
days newly qualified employees have to make a plan selection, and the
coverage effective dates that would apply under these proposed
amendments to Sec. 155.725(g). To minimize operational complexity in
the Federal platform build for the SHOP, we are also proposing
amendments to paragraph (g)(3) to specify that a Federally-facilitated
SHOP or a State-based SHOP that uses the Federal platform for SHOP
eligibility or enrollment functions would only allow waiting periods of
0, 15, 30, 45, and 60 days.
Nothing in this proposal would change the rule that in no case may
the effective date for a newly qualified employee fail to comply with
Sec. 147.116. This proposal would not change Sec. 147.116 and the
proposals described in this section of the preamble apply only for
purposes of the SHOPs.
We propose to amend paragraph (j)(2)(i) to reflect the proposed
codification of existing special enrollment periods discussed in the
preamble to Sec. 155.420, specifically those proposed to be codified
at Sec. 155.420(d)(10), (11) and (12).
We seek comment on all aspects of these proposals.

[[Page 61507]]

8. SHOP Employer and Employee Eligibility Appeals Requirements (Sec.
155.740)
We propose to amend Sec. 155.740(b)(2) to include a cross-
reference to proposed Sec. 155.505(h). This amendment would permit
SHOP employer and employee eligibility appeals processes to use a
secure and expedient paper-based process if the appeals entity cannot
fulfill certain electronic requirements.
9. Request for Reconsideration (Sec. 155.1090)
We propose a new section Sec. 155.1090 to allow an issuer to
request reconsideration of denial of certification of a plan as a QHP
for sale through an FFE. We propose that an issuer that has applied to
an FFE for certification of QHPs and has been denied certification must
submit to HHS a written request for reconsideration within 7 calendar
days of the date of written notice of denial of certification in the
form and manner specified by HHS in order to obtain a reconsideration.
We further propose that the issuer must include any and all
documentation in support of its request when it submits its request for
reconsideration. We propose that requests may be submitted and
considered only after an issuer has submitted a complete, initial
application for certification and been denied. In Sec. 155.1090(a)(3),
we propose that HHS would provide the issuer with a written
reconsideration decision, and that decision would constitute HHS's
final determination. We believe this approach would afford issuers an
opportunity to furnish any additional facts and information that might
not have been considered as part of an FFE's initial decision to deny
certification. We believe the short timeline is required to permit us
to implement a decision to certify a plan following a request for
reconsideration in time for open enrollment. We intend to provide
future guidance on the form and manner by which issuers should submit
requests for reconsideration. We intend for the Office of Personnel
Management to maintain authority over reconsideration of applications
from issuers to offer a multi-State plan. We invite comments on this
reconsideration proposal.

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

1. General Provisions
a. FFE User Fee for the 2018 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 2017, issuers seeking to participate in an FFE in benefit
year 2018 will receive two special benefits not available to the
general public: (1) The certification of their plans as QHPs; and (2)
the ability to sell health insurance coverage through an FFE to
individuals determined eligible for enrollment in a QHP. These special
benefits are provided to participating issuers through the following
Federal activities in connection with the operation of FFEs:
Provision of consumer assistance tools.
Consumer outreach and education.
Management of a Navigator program.
Regulation of agents and brokers.
Eligibility determinations.
Enrollment processes.
Certification processes for QHPs (including ongoing
compliance verification, recertification and decertification).
Administration of a SHOP Exchange.
OMB Circular No. A-25R further states that user 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 2018 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 through 2017 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
comment on this proposal.
Additionally, we note that some commenters have suggested that the
FFE would be able to increase enrollment by allocating more funds to
outreach and education, or reallocating resources from other funding
sources when available to pay for those expenses if necessary. We seek
comment on how much funding to devote to outreach and education, the
method to determine such funding, and the effectiveness of certain
outreach investments to inform future FFE funding allocations. We also
seek comment on whether HHS should expressly designate a specific
portion or amount of the FFE user fee to be allocated directly to
outreach and education activities, recognizing the need for HHS to
continue to adequately fund other critical Exchange operations such as
the call center, HealthCare.gov, and eligibility and enrollment
activities.
State-based Exchanges on the Federal platform enter into a Federal
platform agreement with HHS to leverage the systems established by the
FFE to perform certain Exchange functions, and to enhance efficiency
and coordination between State and Federal programs. Accordingly, in
Sec. 156.50(c)(2), we specify that an issuer offering a plan through
an SBE-FP 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, unless the State-based Exchange and HHS
agree on an alternative mechanism to collect the funds. The functions
provided to issuers in the SBE-FPs 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

[[Page 61508]]

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. The
user fee rate for SBE-FPs is 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 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 personnel who perform
the functions set forth in Sec. 155.400 to facilitate enrollment in
QHPs. Based on this methodology, 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 would recover funding to support FFE
operations incurred by the Federal government associated with providing
the services described above. We seek comment on this proposal. In the
2017 Payment Notice, we set the user fee rate for SBE-FPs at 1.5
percent of premiums charged, rather than the full rate of 3.0, in order
to provide a transition year during which States could adjust to the
assessment of a user fee in SBE-FP States. We seek comment on whether
the impact of increasing the SBE-FP user fee rate to the full rate
should be spread over one additional year.
We note that we intend to review the costs incurred to provide
these special benefits each year, and revise the user fee rate for
issuers in the FFEs and SBE-FPs accordingly in the annual HHS notice of
benefit and payment parameters.
b. Single Risk Pool (Sec. 156.80)
Under Sec. 156.80, an issuer must establish an index rate for each
State market in the single risk pool. The index rate must be based on
the total combined claims costs for providing essential health benefits
within the single risk pool of that State market. The index rate also
must be adjusted on a market-wide basis for the State based on the
total expected market-wide payments and charges under the risk
adjustment program and Exchange user fees. We propose to amend Sec.
156.80(d) to remove the reference to the transitional reinsurance
program, which was for benefit years 2014 through 2016.
As stated in the Unified Rate Review Instructions, calibration for
age, geography, and tobacco use is permissible as long as the
calibration is applied uniformly in the single risk pool. These
calibration adjustments generally allow for the permissible rating
factors under section 2701 of the PHS Act and 45 CFR 147.102 to be
applied correctly to the issuer's plans. For example, we use the term
``age calibration'' to refer to an adjustment to the index rate, made
uniformly for all plans in the risk pool, to reflect the fact that
without calibration, the plan-adjusted index rate reflects the average
age of the issuer's risk pool and the uniform age rating curve does
not. Therefore, age calibration is necessary in order to correctly
apply the age curve and calculate the premium rates. The same rationale
applies when applying geographic and tobacco rating factors to the
plan-adjusted index rate.
To more explicitly reflect how the rating factors under 45 CFR
147.102 and the index rating methodology under 45 CFR 156.80 work
together, we propose to restructure paragraph (d)(1) as paragraphs
(d)(1)(i) through (iv), adding new paragraph (d)(1)(iii) to provide
that the index rate must be calibrated on a market-wide basis to
correspond to an age rating factor of 1.0, a geographic rating factor
of 1.0, and a tobacco rating factor of 1.0, in a manner specified by
the Secretary in guidance. Because it is essentially an adjustment to
the index rate, the calibration from the single risk pool index rate to
the allowable rating factors may not vary by plan; it must be made
uniformly for all plans in a State and market. We would provide
detailed technical guidance through Unified Rate Review Instructions to
ensure accurate and uniform application of the calibration methodology
proposed here. We seek comment on this proposed codification.
2. Essential Health Benefits Package
a. Premium Adjustment Percentage (Sec. 156.130)
Section 1302(c)(4) of the Affordable Care Act directs the Secretary
to determine an annual premium adjustment percentage, which is used to
set the rate of increase for three parameters detailed in the
Affordable Care Act: The maximum annual limitation on cost sharing
(defined at Sec. 156.130(a)), the required contribution percentage
used to determine eligibility for certain 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 CMS Office of the
Actuary. Accordingly, using the employer-sponsored insurance data, the
premium adjustment percentage for 2018 is the percentage (if any) by
which the most recent NHEA projection of per enrollee employer-
sponsored insurance premiums for 2017 ($5,962) exceeds the most recent
NHEA projection of per enrollee employer-sponsored insurance premiums
for 2013 ($5,132).\51\ Using this formula, the proposed premium
adjustment percentage for 2018 is 16.17303196 percent. We note that the
2013 premium used for this calculation has been updated to reflect the
latest NHEA data. Based on the proposed 2018 premium adjustment
percentage, we propose the following cost-sharing parameters for
calendar year 2018.
---------------------------------------------------------------------------

\51\ See ``NHE Projections 2015-2025--Tables'' available at:
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html in Tables 1 and 17. A detailed
description of the NHE projection methodology is available at
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
---------------------------------------------------------------------------

Maximum Annual Limitation on Cost Sharing for Calendar Year 2018.
Under Sec. 156.130(a)(2), for the 2018 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 2018, 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
16.17303196 percent for 2018 that we propose above, and the 2014
maximum annual

[[Page 61509]]

limitation on cost sharing of $6,350 for self-only coverage, which was
published by the IRS on May 2, 2013,\52\ we propose that the 2018
maximum annual limitation on cost sharing would be $7,350 for self-only
coverage and $14,700 for other than self-only coverage. This represents
a 2.8 percent increase above the 2017 parameters of $7,150 for self-
only coverage and $14,300 for other than self-only coverage.
---------------------------------------------------------------------------

\52\ See http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

b. Reduced Maximum Annual Limitation on Cost Sharing (Sec. 156.130)
Sections 1402(a) through (c) of the Affordable Care Act direct
issuers to reduce cost sharing for essential health benefits for
eligible individuals enrolled in a silver level QHP. In the 2014
Payment Notice, we established standards related to the provision of
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
continue 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 2018 maximum annual limitation on cost sharing would be $7,350 for
self-only coverage and $14,700 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 2018 benefit year and our proposed
results.
Consistent with our analysis in the past four 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
2018 maximum annual limitation on cost sharing for self-only coverage
($7,350). The test plan designs are based on data collected for 2017
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 2018, the test silver level QHPs
included a PPO with typical cost-sharing structure ($7,350 annual
limitation on cost sharing, $2,215 deductible, and 20 percent in-
network coinsurance rate), a PPO with a lower annual limitation on cost
sharing ($4,950 annual limitation on cost sharing, $2,895 deductible,
and 20 percent in-network coinsurance rate), and an HMO ($7,350 annual
limitation on cost sharing, $3,375 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 $55 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 2018 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
2018 benefit year with a household income between 200 and 250 percent
of FPL be reduced by approximately \1/5\, rather than \1/2\, consistent
with what we have proposed in previous years. This would allow issuers
the flexibility in designing innovative plans with varying lower
maximum annual limitation on cost sharing and deductibles for the 73
percent plans. 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 15. 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 2018.
We note that for 2018, as described in Sec. 156.135(d), States are
permitted to submit for approval by HHS State-specific datasets for use
as the standard population to calculate AV. The deadline for submitting
a dataset for the 2018 plan year is September 1, 2016.\53\
---------------------------------------------------------------------------

\53\ The annual deadline for submitting State specific data for
the actuarial value calculator was announced August 15, 2014. See
https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/final-state-avc-guidance.pdf.

[[Page 61510]]

Table 15--Reductions in Maximum Annual Limitation on Cost Sharing for
2018
------------------------------------------------------------------------
Reduced maximum
Reduced maximum annual limitation
annual limitation on cost sharing for
Eligibility category on cost sharing for other than self-
self-only coverage only coverage for
for 2018 2018
------------------------------------------------------------------------
Individuals eligible for $2,450 $4,900
cost-sharing reductions
under Sec.
155.305(g)(2)(i) (that is,
100-150 percent of FPL)....
Individuals eligible for 2,450 4,900
cost-sharing reductions
under Sec.
155.305(g)(2)(ii) (that is,
150-200 percent of FPL)....
Individuals eligible for 5,850 11,700
cost-sharing reductions
under Sec.
155.305(g)(2)(iii) (that
is, 200-250 percent of FPL)
------------------------------------------------------------------------

c. Levels of Coverage: Bronze Plans (Sec. 156.140)
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. A plan's level of coverage, referred to as the
plan's actuarial value, is determined on the basis of the essential
health benefits provided to a standard population. Section 1302(d)(1)
of the Affordable Care Act requires the level of coverage for a bronze
plan to have an AV of 60 percent, a silver plan to have an AV of 70
percent; a gold plan to have an AV of 80 percent; and a platinum plan
to have an AV of 90 percent. In addition, section 1302(d)(3) states
that the Secretary is to develop guidelines to provide for a de minimis
variation in the actuarial valuations used in determining the level of
coverage of a plan to account for differences in actuarial estimates.
Currently, Sec. 156.140(c) permits a de minimis variation of +/-2
percentage points.\54\
---------------------------------------------------------------------------

\54\ Under Sec. 156.400, the de minimis variation for a silver
plan variation means a single percentage point.
---------------------------------------------------------------------------

All plans subject to the annual limitation on cost sharing at
section 1302(c) of the Affordable Care Act have a minimum level of
generosity that limits the lowest AV that a plan can achieve. For
instance, a plan with a deductible of $7,350 that is equal to the
annual limitation on cost sharing of $7,350 (which is the proposed 2018
annual limitation on cost sharing) with no services covered until the
deductible and annual limitation on cost sharing are met, other than
preventive services required to be covered without cost sharing under
section 2713 of the PHS Act and 45 CFR 147.130, has an AV of 58.54
percent based on the draft 2018 AV Calculator. Because of the annual
limitation on cost sharing, the AV for this type of plan is within the
de minimis range of a bronze level of coverage. This type of plan does
not have first dollar coverage (except for certain required preventive
services), and is not a HDHP under 26 U.S.C. 223(c)(2) eligible for use
with a health savings account because the annual limit on cost sharing
under the plan is likely higher than the annual out of pocket expense
limit for HDHPs for 2018. Furthermore, the bronze plan described above
is less generous than a catastrophic plan, because a catastrophic plan
is required by section 1302(e)(1)(B) of the Affordable Care Act and
Sec. 156.155(a)(4) to provide at least three primary care visits
before reaching the deductible.
We note that in future recalibrations of the AV Calculator, if
claims costs increase faster than the annual limitation on cost
sharing, issuers' flexibility in designing different bronze plans may
be reduced. In order to address this difficulty in designing bronze
plans that are at least as generous as catastrophic plans and meet the
AV requirements using future AV Calculators, we propose to permit a
broader de minimis range for bronze plans. The purpose of the current
de minimis variation of +/- 2 percentage points is to give issuers the
flexibility to set cost-sharing rates while ensuring consumers can
easily compare plans of similar generosity. Thus, the de minimis range
is intended to allow plans to float within a reasonable range and is
not intended to freeze plan designs, which could prevent innovation in
the market. However, we do recognize the unique challenges that may be
posed for bronze plan designs under future AV Calculators, and we
therefore propose to amend Sec. 156.140(c) to increase the allowable
de minimis range for bronze plans under certain circumstances.
Outside of HDHPs, which have separate cost-sharing requirements,
under future AV Calculators, if actuarial values increase
significantly, bronze plans may be required to limit the services for
which the plan pays before the deductible is reached. Enrollment data
from the FFEs show that consumers have a preference for plans that
cover and pay for services below the deductible. Because we believe
that the Affordable Care Act did not intend for bronze plans to be less
generous than catastrophic plans, which are required to provide at
least three primary care visits before the deductible, we believe that
it is important to allow bronze plans to retain at least one service
before the deductible. Therefore, through our authority under section
1302(d)(3) of the Affordable Care Act, which directs the Secretary to
develop guidelines to provide for a de minimis variance in the
actuarial valuations used in determining the level of coverage of a
plan to account for differences in actuarial estimates, and section
1321(a)(1)(A) and (D) of the Affordable Care Act, which allows the
Secretary to issue regulations setting standards for meeting the
requirements for the establishment and operation of Exchanges, as well
as such other requirements as the Secretary determines appropriate, we
propose to allow bronze plans that cover and pay for at least one major
service before the deductible, other than preventive services (some of
which are required by Federal laws and regulations to have zero cost
sharing) to have an allowable variance in AV of -2 percentage points
and +5 percentage points. The purpose of this proposal is to ensure
flexibility in bronze plan designs--particularly, to permit the design
of bronze plans that will satisfy AV requirements and still remain at
least as generous as catastrophic plans.
We therefore propose that the major services covered and paid for
by the plan before the deductible that trigger the increased de minimis
range be similar in scope and magnitude to the three primary care
visits before the deductible required under catastrophic coverage. To
permit issuers the flexibility to address enrollees' varying health
needs, we propose that the major

[[Page 61511]]

services an issuer may elect to cover and pay for before the deductible
in order to access the broader de minimis range be: Primary care
visits; specialist visits; inpatient hospital services; generic,
specialty, or preferred branded drugs; or emergency room services. We
selected these services as they can be used by individuals with a wide
variety of conditions and they have a significant AV impact. We solicit
comments on this proposal and the proposed definition of major
services, as well as comments on whether any of these major services
should be excluded from the list or other major services should added
to this list. We also solicit comments on whether major services should
be defined based on all or some of the service inputs listed in the AV
Calculator. This policy does not exempt issuers from their obligations
to comply with mental health and substance use disorder parity
requirements, including the rule that a deductible cannot be applied to
mental health or substance use disorder benefits in a classification
unless it is no more restrictive than the predominant deductible
applicable to substantially all medical/surgical benefits in the same
classification.
We also propose that the major service covered and paid for before
the deductible must apply a reasonable cost-sharing rate to the service
to ensure that the service is reasonably covered. We also solicit
comments on what should be considered a reasonable cost-sharing rate
for the major service. Lastly, to ensure that a bronze plan can be as
least as generous as a catastrophic plan, we propose that a bronze plan
with at least three primary care services under the deductible would
qualify as having a major service under the deductible.
In addition to ensuring that bronze plans can remain at least as
generous as catastrophic coverage, we believe it is important to ensure
that bronze plans can remain eligible to be HDHPs that may be paired
with a health savings account. Therefore, we propose that if a bronze
plan meets the Federal requirements to be an HDHP, the allowable
variation in AV for those plans is -2 percentage points and +5
percentage points. These HDHPs would not be required to cover at least
one major service before the deductible, outside of certain preventive
services, to meet the requirements for the extended bronze plan de
minimis range, but instead, these plans would be required to meet the
requirements to be a HDHP within the meaning of 26 U.S.C. 223(c)(2),
including the annual out-of-pocket expense limit for HDHPs. We solicit
comments on this proposal.
We also seek comment on the proposed size of the de minimis range,
which is proposed as -2 percentage points and +5 percentage points, and
whether the +5 percentage points should be higher or lower. Based on
our initial analysis of 2017 bronze plans submitted for QHP
certification in the FFEs, most 2017 bronze plans are either HDHPs or
are plans providing one of the major services defined above before
deductible. We believe that this policy will not be disruptive to the
current bronze plan market as it will allow more flexibility in
designing bronze plans within the increased de minimis range as well as
allow more options for issuers to leave 2017 cost-sharing structures
unchanged.
In connection with the release of the proposed 2018 Payment Notice,
we are also releasing the draft versions of the 2018 AV Calculator,
including the 2018 AV Calculator Methodology and User Guide, for
comment on the Center for Consumer Information and Insurance Oversight
Web site.\55\ As part of the draft 2018 AV Calculator, we added the
option to calculate AV for a bronze plan with an extended de minimis
range to align with this proposed policy. (We note that under this
option, the AV Calculator will not automatically flag a plan in the
bronze extended de minimis range that does not comply with the
requirement to cover one major service before the deductible.) Our
intention will be to align the final 2018 AV Calculator with any
provisions that are finalized through this rulemaking.
---------------------------------------------------------------------------

\55\ The draft 2018 AV Calculator and Methodology will be posted
under the ``Plan Management'' section of CCIIO's Web site at:
https://www.cms.gov/cciio/resources/regulations-and-guidance/index.html.
---------------------------------------------------------------------------

d. Application to Stand-Alone Dental Plans Inside the Exchange (Sec.
156.150)
In the 2017 Payment Notice, we finalized Sec. 156.150(a), which
establishes a formula to increase the annual limitation on cost sharing
for stand-alone dental plans. Specifically, we finalized that for plan
years beginning after 2017, the annual limitation for an SADP for one
covered child is $350 increased by the percentage increase of the
consumer price index (CPI) for dental services for the year two years
prior to the applicable plan year over the CPI for dental services for
2016; and, the annual limitation for an SADP for two or more covered
children is twice that.
The formula increases the dollar limit for one covered child
(currently set at $350) by the percentage increase of the CPI for
dental services for the year two years prior to the applicable plan
year over the CPI for 2016. For plan year 2018, the percentage increase
of the CPI for dental services for the two years prior to the
applicable plan year would be equal to the CPI for 2016, resulting in a
zero percent increase for plan year 2018. Therefore, for plan year
2018, the dental annual limitation on cost sharing would be $350 for
one child and $700 for one or more children. The annual limitation on
cost sharing for plan year 2019 will be addressed in the annual HHS
notice of benefit and payment parameters for the 2019 benefit year.
3. Qualified Health Plan Minimum Certification Standards
a. QHP Issuer Participation Standards (Sec. 156.200)
Section 156.200(c)(1) implements section 1301(a)(1)(C)(ii) of the
Affordable Care Act to require as part of QHP participation standards
that each QHP issuer offer at least one QHP in the silver coverage
level and at least one QHP in the gold coverage level.
As evidenced by QHP application submissions to the FFEs, QHP
issuers have generally interpreted this requirement to apply at the
service area level, as opposed to at the Exchange level, meaning that
an issuer must offer at least one QHP in the silver coverage level and
at least one QHP in the gold coverage level throughout each service
area in which it will offer a QHP through the Exchange (that is, one
QHP that has an AV of 70 percent and one QHP that has an AV of 80
percent, plus or minus two percentage points). If the requirement were
to be interpreted at the Exchange level, a QHP issuer could be in
technical compliance with the requirement by offering one QHP in the
silver coverage level and at least one QHP in the gold coverage level
in a very limited service area, and not offer such coverage through the
Exchange in a meaningful way. We believe that the Affordable Care Act
did not intend to allow an issuer to offer a silver and gold QHP
through the Exchange in merely one service area in a State, while
offering other products through the Exchange, such as bronze or
catastrophic QHPs, in other service areas. The proposal seeks to
eliminate the possibility of such gaming. Provisions of the Affordable
Care Act sought to ensure an adequate choice of QHPs and coverage to
consumers. We are proposing this change to ensure that consumers have
an adequate choice of QHPs at different coverage levels. Further, the
Affordable Care Act also assumed calculation of the advance payment of
the premium tax credit based on the availability of a second

[[Page 61512]]

lowest cost silver plan. As such, we propose to modify our regulations
to more accurately align with QHP issuer practice and our
interpretation of the intention of the Affordable Care Act.
Section 1311(c)(1) and 1321(a)(1)(A) and (B) of the Affordable Care
Act provide the Secretary of HHS with the authority to establish
certification criteria for QHPs and Exchanges. Therefore, we are
proposing to require QHP issuers to offer at least one silver and one
gold coverage level QHP through the Exchange throughout each service
area in which the issuer offers coverage through the Exchange. The
offering of both silver and gold level QHPs is important to ensure
adequate choice to Exchange consumers, as well as to ensure that a
second lowest cost silver plan is available for calculating advance
payments of the premium tax credit for consumers. We further clarify
that an issuer can meet this standard by offering a multi-State plan in
both silver coverage and gold coverage levels throughout each service
area in which it offers other QHPs through an Exchange. We seek to
establish this policy by proposing amendments to existing paragraph
(c)(1).
Specifically, we propose to amend paragraph (c)(1) to require a QHP
issuer to offer through the Exchange at least one QHP in the silver
coverage level and at least one QHP in the gold coverage level, as
described in Sec. 156.140, throughout each service area in which it
offers coverage through the Exchange. This added specificity will
ensure that issuers applying for certification of their QHPs offer a
silver and gold plan throughout each service area in which they offer
coverage through the Exchange.
In the 2014 Payment Notice, in order to help ensure that qualified
employers and qualified employees enrolling through an FF-SHOP are
offered a robust set of QHP choices, we finalized a policy at Sec.
156.200(g) under which an individual market FFE will certify a QHP only
if the QHP issuer (or an issuer in the same issuer group) offers
through the FF-SHOP of the State at least one QHP in the silver
coverage level and at least one QHP in the gold coverage level, unless
no issuer in the issuer group has at least a 20 percent share of the
small group market share in the State, based on earned premiums. This
policy is intended to leverage issuers' participation in the FFEs to
promote fuller issuer participation in the FF-SHOPs, particularly in
the initial years of the FF-SHOPs. We indicated in the preamble of the
2014 Payment Notice, in response to a commenter who suggested we
reevaluate the policy in two years, that we would evaluate the
effectiveness of the tying provision on an ongoing basis.
We now seek comment, based on feedback from stakeholders, on
whether the policy at Sec. 156.200(g) is still necessary or
appropriate in the FF-SHOPs. We did not finalize this policy to apply
to State-based SHOPs, nor are we aware of any State-based SHOPs that
have implemented a similar policy. We are also cognizant that the
policy may be discouraging issuer participation on the individual
market FFEs. We therefore seek comment on whether we should eliminate
this policy for the FF-SHOPs, for plan years beginning on or after
January 1, 2018.
We recognize that eliminating the SHOP participation provision
could have the effect of reducing FF-SHOP issuer participation in
States, and seek comment on the implications for small businesses and
how to accommodate such an effect. For example, in such a circumstance,
in consideration of the ongoing investments that would be required to
maintain the FF-SHOPs, including for premium aggregation services, we
are considering providing for elimination of enrollment through FF-SHOP
Web sites and providing for alternative means of enrollment into SHOP
QHPs, either in States that would be particularly affected by this
change or in all FF-SHOPs. An FF-SHOP Web site would still be
maintained, consistent with section 1311(d)(4)(C) of the Affordable
Care Act, but would not support online enrollment, except perhaps for
the continuation of services for existing groups in the FF-SHOP through
the end of any plan year that began before January 1, 2018. In
addition, we seek comment on how entities such as web-brokers or third
party administrators could help to facilitate enrollment in available
SHOP QHPs. We seek comment on what other regulatory provisions would
need to be modified or eliminated in such a circumstance, and on
whether provisions relating to the operation of enrollment through a
SHOP Web site should generally be optional at the election of the
Exchanges, including State-based SHOPs.
b. Network Adequacy Standards (Sec. 156.230)
At Sec. 156.230, we established the minimum criteria for network
adequacy that issuers must meet to have plans certified as QHPs,
including SADPs, in accordance with the Secretary's authority in
section 1311(c)(1)(B) of the Affordable Care Act. Included at Sec.
156.230(a)(2) is the requirement that all issuers 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.
In the 2017 Payment Notice, HHS finalized a policy to provide
information about QHP network breadth on HealthCare.gov in order to
assist consumers with plan selection. For the 2017 benefit year, we
intend to pilot a network breadth indicator in certain States on
HealthCare.gov to denote a QHP's relative network coverage.\56\ HHS
will make this network breadth classification available to consumers in
those States at the point of plan comparison. The results of the pilot
will determine if HHS expands the pilot to more States for 2018. The
specifics of how the network breadth indicator is calculated are
described in the Final 2017 Letter to Issuers in the Federally-
facilitated Marketplaces.\57\
---------------------------------------------------------------------------

\56\ Network Breadth Pilot (August 19, 2016), available at
https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Network-Classification-Pilot-Guidance-81916.pdf.
\57\ Final 2017 Letter to Issuers in the Federally facilitated
Marketplaces (Feb. 29, 2016) available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2017-Letter-to-Issuers-2-29-16.pdf.
---------------------------------------------------------------------------

For the 2018 plan year, HHS is considering whether to incorporate
more specificity into these indicators, and, in particular, how to
identify for consumers whether a particular plan is offered as part of
an integrated delivery system. For integrated delivery systems, the
breadth of the network for a plan as calculated through the network
breadth methodology may not accurately describe the ability of a
consumer to access providers relative to consumers enrolled in plans
that are not part of an integrated delivery system in the same county.
We propose to incorporate this specificity into the network information
displayed for plan year 2018 in all States where network breadth is
displayed in 2018.
To define which plans utilize an integrated delivery system, we
propose to use the alternate essential community provider standard in
45 CFR 156.235(b). Thus, we would identify a plan as part of an
integrated delivery system if it provides a majority of covered
professional services through physicians employed by the issuer, or
through a single contracted medical group. If HHS finalizes this
policy, we would provide additional details in the 2018 Letter to

[[Page 61513]]

Issuers in the Federally-facilitated Marketplace.
We seek comment on all aspects of this proposal. In particular, we
seek comment on whether we should make such a differentiation, and how
best to indicate that a plan has an integrated delivery system--
including on whether we should provide additional explanatory text to
the current indicator that the plan receives, or whether we should
establish a separate indicator. We seek comment on what words to use in
either case to best convey the value of this classification to
consumers. We also seek comment on our proposal to identify integrated
delivery systems by using the alternate essential community provider
standard, and whether there are plans that would not meet this
definition but are best categorized in this group; and, if there is a
continuum of plan arrangements to consider with respect to network
integration, how best to classify those plans and provide that
information to consumers.
Also, as a reminder, the requirement established in the 2017
Payment Notice at Sec. 156.230(e) that QHP issuers count an essential
health benefit provided by an out-of-network ancillary provider at an
in-network facility towards the in-network annual limitation on cost
sharing for QHPs in certain circumstances begins applying in benefit
year 2018. That is, if a QHP 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 ancillary provider, that cost sharing
would apply towards the annual limitation on cost sharing.
Alternatively, the plan could provide a written notice to the
enrollee by the longer of when the issuer would typically respond to a
timely submitted prior authorization request, or 48 hours before the
provision of the benefit. The written notice would state that
additional costs may be incurred for the EHB provided by an out-of-
network ancillary 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. This alternative would not be available if
the issuer does not meet the timeframe established in regulation. We
are proposing that this policy applies to QHPs, both on and off
Exchanges, regardless of whether the QHP covers out-of-network
services, and seek comment on other policy changes that could limit
``surprise bills'' for consumers. As stated in the 2017 Payment Notice,
we intend to continue to monitor these situations, including issuers'
timely compliance with this provision, to consider whether further
rulemaking is needed.
c. Essential Community Providers (Sec. 156.235)
In the 2017 Payment Notice, we finalized that, for QHP
certification cycles beginning with the 2018 benefit year, HHS would
credit issuers for multiple contracted or employed full-time equivalent
(FTE) practitioners at a single location, up to the number of available
FTE practitioners reported to HHS by the essential community provider
(ECP) facility through the ECP petition process and published on the
HHS ECP list. As HHS conducts additional provider outreach to collect
provider data necessary to implement a methodology that would credit
issuers for multiple contracted or employed full-time equivalent
practitioners at a single location, we propose in Sec.
156.235(a)(2)(i) to continue the 2017 benefit year calculation
methodology that a plan applying for QHP certification to be offered
through a Federally-facilitated Exchange must demonstrate in its QHP
application that its network includes as participating providers at
least a minimum percentage, as specified by HHS, of available ECPs in
each plan's service area, with multiple providers at a single location
counting as a single ECP toward both the available ECPs in the plan's
service area and the issuer's satisfaction of the ECP participation
standard. Similarly, in Sec. 156.235(b)(2)(i), we propose to continue
the 2017 benefit year calculation methodology that a plan described in
Sec. 156.235(a)(5) applying for QHP certification to be offered
through a Federally-facilitated Exchange demonstrate in its QHP
application that 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 ECPs in the plan's service area with multiple providers at a
single location counting as a single ECP. We seek comment on these
proposals. We are also considering changes to the counting of hospital
ECPs for the 2019 benefit year and seek comment on the best approach
for measuring hospital participation.
d. Enrollment Process for Qualified Individuals (Sec. 156.265)
We propose an amendment to Sec. 156.265 requiring differential
display of standardized options. A discussion of the proposed provision
is contained in the preamble discussion regarding Sec. 155.220, which
concerns standards for agents and brokers using the direct enrollment
process.
We solicit comments on this proposal.
e. Issuer Participation for the Full Plan Year (Sec. 156.272)
We propose adding Sec. 156.272 to provide as a condition of
certification that QHP issuers in all individual market Exchanges must
make their QHPs available for enrollment through the Exchange for the
full plan year for which the plan was certified, unless a basis for
suppression under Sec. 156.815 applies. We also propose that issuers
in all SHOP Exchanges must make their QHPs available for enrollment
through the SHOP Exchange for the full plan year for which the plan was
certified, unless a basis for suppression under Sec. 156.815 applies.
This requirement would ensure that consumers enrolling in the
individual market during limited open enrollment periods have the same
plan choice as those who enrolled during open enrollment, and that
qualified employers and qualified employees would have generally
consistent plan choices throughout the plan year.
If this proposal is finalized, under our existing civil money
penalty authority at Sec. 156.805(a)(1), QHP issuers in FFEs and FF-
SHOPs that do not comply with Sec. 156.272(a) and (b) could be subject
to CMPs. (Issuers would not be subject to CMPs if a basis for
suppression under Sec. 156.815 applies.) We also propose at Sec.
156.272(c) that if an issuer fails to comply with those sections, HHS
could, at its discretion, preclude that issuer from participating in
the FFEs and FF-SHOPs, for up to the two succeeding years.
We seek comments on this proposal, including the applicability of
this section to all Exchanges and the potential use of CMPs for QHP
issuers in the FFEs and FF-SHOPs.
f. Non-Certification and Decertification of QHPs (Sec. 156.290)
Currently, under Sec. 156.290(b), when a QHP issuer elects to not
seek certification for a subsequent, consecutive certification cycle
with the Exchange, it is required to provide notification to enrollees.
However, a QHP issuer is not required to provide notification to
enrollees when it seeks

[[Page 61514]]

but is denied certification for a subsequent, consecutive certification
cycle by the Exchange. We propose to require that QHP issuers provide
such notice within 30 days of the date of an Exchange's denial of
certification for a subsequent, consecutive certification cycle.
Requiring notice in a timely manner would allow enrollees to be
prepared to participate in the upcoming open enrollment period. We also
propose to amend the section title from Non-renewal and decertification
of QHPs to Non-certification and Decertification of QHPs, and revise
the paragraph headings for Sec. 156.290(a) and (b) to reflect that
QHPs are certified on an annual basis rather than renewed. We seek
comment on these proposals.
g. Other Considerations
Increasingly, the Exchanges serve as laboratories for innovations
through which QHPs develop new ways to provide quality, cost-effective
health care that responds to consumers' preferences and needs. We have
heard from issuers about innovations around paying for high-quality
care, working with health care professionals to encourage coordinated
care, standardizing benefits in ways that promote high-value care, and
using data analytics to engage with consumers in creative ways that
improve their health and bolster retention. We also continue to seek to
foster market-driven programs in the Exchanges that can improve the
management of costs and care, and that provide consumers with quality,
person-centered coverage. As we stated in the 2017 Payment Notice, we
believe that innovative issuer, provider, Exchange, and local programs
or strategies can successfully promote and manage care, in a manner
that contributes to 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 for 2018 in order to better
meet the goals of affordability, quality, and access to care.
4. Eligibility and Enrollment Standards for Qualified Health Plan
Issuers on State-Based Exchanges on the Federal Platform (Sec.
156.350)
In the 2017 Payment Notice we established, in Sec. 156.350, that
in order to participate in an SBE-FP, 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 in an
FFE. These regulations and guidance include those requirements
specified in paragraphs (a)(1) through (3) of Sec. 156.350, which
currently include Sec. 156.285(c)(8)(iii). For the same reasons that
we propose to add new paragraph Sec. 155.200(f)(4), we also propose to
amend paragraph Sec. 156.350(a)(2) to specify that, in order to
participate in an SBE-FP using the Federal platform for SHOP enrollment
functions, a QHP issuer would be required to send enrollment
reconciliation files on at least a monthly basis according to a
process, timeline, and file format established by the FF-SHOPs,
consistent with Sec. 156.285(c)(5). Issuers in States operating an
SBE-FP for SHOP enrollment functions would be required to follow the
process applicable in the FF-SHOPs, as described in Sec.
156.285(c)(5). This amendment would become effective with the effective
date of the final rule. We seek comment on this proposal.
5. Reconciliation of the Cost-Sharing Reduction Portion of Advance
Payments Discrepancies and Appeals (Sec. 156.430(h))
As implemented in the regulations at 45 CFR 156.430, HHS reconciles
the cost-sharing reduction portion of advance payment amounts by
comparing what the enrollee in a cost-sharing reduction plan variation
actually paid in cost sharing to what the enrollee would have paid if
enrolled in a standard plan. In order to facilitate reconciliation of
the cost-sharing reduction portion of advance payments to the actual
amount provided for enrollees in cost-sharing reduction variation
plans, issuers must report the amount they paid for each eligible
medical claim, the amount enrollees paid for the claims, and the amount
of cost sharing that would have been paid for the same services under
the corresponding standard plan. This information is used to reconcile
the actual cost-sharing amounts provided for each policy in a plan
variation to the estimated payments that the issuer had been paid in
advance. As set forth at Sec. 156.410(d)(3), issuers are not
reimbursed for any cost-sharing reductions provided to enrollees who
were erroneously assigned to a plan variation more generous than the
one for which they are eligible. As set forth at Sec. 155.430(d)(4),
any cost-sharing reductions, to the extent thereby or otherwise
erroneously provided (such as cost-sharing reductions for non-EHB or
non-covered services or cost-sharing reductions provided after a policy
has been terminated) must be excluded from the reconciliation process.
In order to ensure the integrity of reconciliation of the cost-
sharing reduction portion of advance payments for the 2014 and 2015
benefit years, we implemented automatic system checks that validated
data at the time of data submission, for example matching QHP or
subscriber IDs to HHS data for a benefit year, and verifying the issuer
used the applicable methodology and submitted applicable attestations.
This resulted in the rejection of some cost-sharing reduction amounts
submitted by issuers. Additionally, some issuers were unable to prepare
complete data files in time to meet the cost-sharing reduction data
submission deadline. In order to provide issuers with an opportunity to
address potential errors that would have directly impacted the
calculation of their reconciled cost-sharing reduction amounts, HHS
implemented a process for reporting data discrepancies for the 2014 and
2015 benefit year.\58\
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\58\ On June 23, 2016 CMS released FAQs and technical
specifications on the discrepancy resolution process for issuers to
follow to report a discrepancy related to reconciliation of the
cost-sharing reduction portion of advance payments. The technical
specifications are available on the Center for Consumer Information
and Insurance Oversight Web site: https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Cost-Sharing-Reduction-Reconciliation-Discrepancy-Resolution-Inbound-Specification.pdf.
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We propose adding new paragraph (h)(1) to Sec. 156.430 to require
that any issuer that reports a discrepancy and seeks to dispute the
notification of the amount of reconciliation of the cost-sharing
reduction portion of advance payments, in the manner set forth by HHS,
must report the discrepancy to HHS within 30 calendar days of
notification of the amount of reconciliation of the cost-sharing
reduction portion of advance payments as described in Sec. 156.430(e).
We further propose to codify in Sec. 156.430(h)(2) that an issuer
may appeal the amount of reconciliation of the cost-sharing reduction
portion of advance payments, under the process set forth in Sec.
156.1220 of this subchapter, only if it has submitted a discrepancy
report for its cost-sharing reduction reconciled amounts for the
applicable benefit year. We note that irrespective of whether an issuer
has filed a discrepancy report under Sec. 156.430, a request for
reconsideration under Sec. 156.1220 may only be filed to contest a
processing error by HHS, HHS's incorrect application of the relevant
methodology, or HHS's mathematical error, as required under Sec.
156.1220.
We seek comment on these proposals.

[[Page 61515]]

6. Compliance Reviews of QHP Issuers in Federally-Facilitated Exchanges
(Sec. 156.715)
At Sec. 156.715, we previously established that a QHP issuer is
subject to compliance reviews to ensure ongoing compliance with
Exchange requirements and standards. In Sec. 156.715(b), we require
QHP issuers to make available to HHS records that pertain to their
activities in an FFE. In the first few years of FFE operations, the
vast majority of QHP issuers were responsive and cooperative with the
compliance reviews. QHP issuers generally submitted requested documents
on time and were responsive to requests for additional information.
However, a few QHP issuers were less responsive to HHS, which resulted
in unnecessary delays of the compliance reviews. We propose to amend
this section to specify HHS's authority to impose remedies authorized
under subpart I of part 156 in situations where the QHP issuer is non-
responsive or uncooperative with the compliance reviews authorized
under this section.
7. Qualified Health Plan Issuer Responsibilities
a. Administrative Appeals (Sec. 156.1220)
As discussed in the preamble to Sec. 153.630, we propose adding
paragraphs (a)(1)(vii) and (viii) to Sec. 156.1220, providing an
administrative appeals right to issuers to contest only a processing
error by HHS, HHS's incorrect application of the relevant methodology,
or HHS's mathematical error with respect to the findings of a second
validation audit as a result of risk adjustment data validation; or the
calculation of a risk score error rate as a result of risk adjustment
data validation, respectively. Also as discussed in the preamble to
Sec. Sec. 153.630 and 156.430(h), we propose requiring issuers to file
a report for discrepancies related to risk adjustment data validation
and discrepancies related the reconciliation of the cost-sharing
reduction portion of advance payments, if the issue is identifiable,
prior to filing a request for reconsideration as set forth at Sec.
156.1220. As such, we propose to amend Sec. 156.1220(a)(4)(ii), to
provide that, notwithstanding Sec. 156.1220(a)(1), 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, the issuer notified HHS of the dispute through the
applicable process for reporting a discrepancy set forth in Sec.
153.630(d)(2), Sec. 153.710(d)(2), or Sec. 156.430(h)(1), and the
dispute has not been resolved.
Because risk adjustment payments and charges for the 2015 benefit
year will not be adjusted as a result of the risk adjustment data
validation process, we do not believe an administrative appeal right is
necessary for the 2015 benefit year. Therefore, we propose that the
first year of risk adjustment data validation appeals would begin with
the 2016 benefit year, which is the first year that risk adjustment
data validation will affect the amount of risk adjustment payments and
charges. As such, we propose to limit the proposed new Sec.
156.1220(a)(1)(vii) and (viii) (specifying that an issuer may file a
request for reconsideration under this section to contest a processing
error by HHS, HHS's incorrect application of the relevant methodology,
or HHS's mathematical error, with respect to the findings of a second
validation audit or the calculation of a risk score error rate as a
result of risk adjustment data validation) to administrative appeals
with respect to risk adjustment data for the 2016 benefit year and
beyond.
We propose to amend Sec. 156.1220(a)(2) regarding the materiality
threshold for filing a request for reconsideration to include a
reference to the administrative appeals related to the risk adjustment
data validation process. We also propose to amend Sec.
156.1220(a)(3)(ii) to add a reference to risk adjustment data
validation and to provide that issuers have 30 calendar days to request
reconsideration from the date of the notification of the findings of a
second validation audit and the calculation of a risk score error rate
as a result of risk adjustment data validation. We believe 30 calendar
days is sufficient for issuers to review the findings of a second
validation audit or the calculation of a risk score error rate as a
result of risk adjustment data validation and to submit a request for
reconsideration. We seek comment on these timeframes and the appeal
proposal.
b. Direct Enrollment With the QHP Issuer in a Manner Considered To Be
Through the Exchange (Sec. 156.1230)
In this rule, we proposed a number of modifications and new
requirements in Sec. 155.220 which would apply to web-brokers using
the direct enrollment channel. We propose to add a number of these
standards to Sec. Sec. 156.265 and 156.1230(b) so that they also apply
to issuers using direct enrollment on a Federally-facilitated Exchange.
Specifically, in Sec. 156.1230, we propose to: (1) Specify that HHS
may immediately suspend the QHP issuer's ability to transact
information with the Exchange if HHS discovers circumstances that pose
unacceptable risk to Exchange operations or Exchange information
technology systems until the incident or breach is remedied or
sufficiently mitigated to HHS's satisfaction; (2) require QHP issuers
to demonstrate operational readiness and compliance with applicable
requirements prior to their Web sites being used to complete QHP
selections; and (3) require QHP issuers to provide consumers with
correct information regarding FFEs, QHPs offered through the FFEs and
insurance affordability programs, and refrain from marketing or conduct
that is misleading, coercive, or discriminatory. A more detailed
discussion of these proposed provisions is contained in the preamble
discussion regarding Sec. 155.220.
We solicit comments on these proposals and specifically seek
comment on whether direct enrollment with a QHP issuer should be
permitted for enrollments through all SBE-FPs, or at the option of SBE-
FPs.
c. Other Notices (Sec. 156.1256)
Section 156.1256 requires health insurance issuers offering
coverage through an FFE or an SBE-FP to notify enrollees of material
plan or benefit display errors under certain circumstances. We propose
to change the paragraph cross-referenced in Sec. 156.1256 from Sec.
155.420(d)(4) to Sec. 155.420(d)(12) to reflect our proposal to codify
in Sec. 155.420(d)(12) the special enrollment period for material plan
or benefit display errors. Since the noticing requirement in Sec.
156.1256 is limited to material plan or benefit display errors and
resulting special enrollment periods, proposed Sec. 155.420(d)(12) is
a more appropriate reference for this section. We also propose to make
some minor non-substantive changes to the regulation text. We seek
comments on this proposal.

J. Part 157--Employer Interactions With Exchanges and Shop
Participation

For a discussion of the provisions of this proposed rule related to
part 157, please see the preamble to Sec. 155.725.

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

1. Newer Experience (Sec. 158.121)
a. Deferred Reporting of Newer Business
Section 2718(c) of the PHS Act provides that, subject to the
certification of the Secretary, the NAIC is to establish standardized
medical loss ratio methodologies that take into consideration (among
other things) the

[[Page 61516]]

special circumstances of newer plans. Consistent with the NAIC's
recommendation to HHS,\59\ the MLR December 1, 2010 interim final rule
(75 FR 74863) allows issuers to defer reporting of experience of
policies newly issued and with fewer than 12 months of experience until
the following reporting year, if such policies contribute to 50 percent
or more of the issuer's total earned premium for the MLR reporting
year. As explained in the interim final rule, the rationale for
deferring experience of newly issued policies is that claims experience
can be substantially lower than the premium revenue from those policies
during the year in which the coverage is issued (although this may
occur to a lesser extent in the current environment than prior to
introduction of the Affordable Care Act market reforms), and could
create a barrier to the entry of new issuers into a market.
---------------------------------------------------------------------------

\59\ National Association of Insurance Commissioners--Model
Regulation Service, Regulation for Uniform Definitions and
Standardized Methodologies for Calculation of the Medical Loss Ratio
for Plan Years 2011, 2012 and 2013 per Section 2718(b) of the Public
Health Service Act (Oct 27, 2010), available athttp://www.naic.org/documents/committees_ex_mlr_reg_asadopted.pdf.
---------------------------------------------------------------------------

However, the NAIC's recommendation was developed in 2010, prior to
implementation of many Affordable Care Act market reforms. As a result,
the current MLR regulation allows issuers to defer reporting the
experience of new policies that were in effect for fewer than 12
months, but not for those in effect for the full 12 months. This
limitation does not account for the fact that beginning in 2014,
issuers of non-grandfathered health insurance coverage in the
individual and small group markets generally must offer coverage for a
consecutive 12-month period (which may be on a calendar year basis or
otherwise). Consequently, issuers entering these markets in substantial
part in 2014 or later whose policies contribute to 50 percent or more
of the issuer's total earned premium for the MLR reporting year are
unable to defer reporting of this new business for MLR purposes because
such coverage has a full 12 months of experience. Therefore, to align
MLR reporting with the requirement that non-grandfathered coverage
generally must provide coverage for a consecutive 12-month period, we
propose to modify Sec. 158.121 to allow issuers to defer, for MLR
purposes, reporting of data for newer experience if 50 percent or more
of the issuer's total earned premium for the MLR reporting year is
attributable to newly issued policies with 12 full months of
experience, rather than policies with less than 12 months of
experience. We seek comments on this proposal.
2. Rebating Premium if the Applicable Medical Loss Ratio Standard Is
Not Met (Sec. Sec. 158.232, 158.240)
a. Limit on Rebate Liability
Section 2718(b)(1)(B)(ii) of the PHS Act requires, beginning on
January 1, 2014, the MLR to be calculated as an average of 3
consecutive years of experience. When an established issuer's MLR falls
below the applicable MLR standard in a given year, the 3-year averaging
spreads the actual payment of the rebate over the period of 3 years.
This allows issuers to offset low and high MLRs within any 3-year
period, enabling issuers to potentially pay a lower overall rebate.
However, issuers that newly enter the market in 2014 or later are only
able to calculate their first two MLRs based on 1 or 2 years of
experience. Consequently, the experience of the first 1 or 2 years can
have a disproportionate and overlapping impact on such issuers' average
MLRs in their first 3 years in the market, and the 3-year averaging
required by section 2718(b)(1)(B)(ii) can lead to distorted MLR
calculations and could be a barrier to the entry of new issuers into a
market. As a result of the 3-year averaging rule, a new issuer that has
an MLR that is initially low but increases within the first 3 years in
the market may end up paying a higher total rebate over those initial 3
years than an established issuer with stable enrollment with the same
experience in each of those 3 years. In addition, the 3-year averaging
rule can have a similar impact on an established issuer that rapidly
and significantly expands its presence in the market.
We note that only a narrow subset of issuers are affected in this
way by 3-year averaging: Specifically, new issuers and established
issuers that experience rapid growth (either by entering a new market
or rapidly and significantly expanding their presence in an existing
market) and whose MLR falls below the standard in one year and
increases within the following 2 years.
Consistent with the requirement under section 2718(c) of the PHS
Act to design standardized MLR methodologies that take into
consideration (among other things) the special circumstances of smaller
and newer plans, we propose to amend Sec. Sec. 158.240 and 158.232 to
mitigate the impact of 3-year averaging on these issuers and thereby
reduce barriers to entry and promote competition in health insurance
markets. Specifically, we propose to modify Sec. 158.240 by adding a
new paragraph (d) and redesignating the existing paragraphs (d) and (e)
as paragraphs (e) and (f), respectively, to provide flexibility to
limit in appropriate cases an issuer's total rebate liability payable
with respect to a given calendar year. We also propose conforming
amendments to paragraph (c) to recognize the proposed new flexibility
under new paragraph (d). Under this proposal, if an issuer elects this
flexibility, the maximum single-year rebate liability attributable to a
given calendar year would be limited to no more than the amount
determined based on the issuer's MLR calculated using only that year's
experience. In these circumstances, we propose to adjust the maximum
rebate liability attributable to a given calendar year in each of the
two subsequent reporting years to reflect restatement of claims
incurred in that calendar year as of March 31 following each of those 2
subsequent reporting years. The restatement of incurred claims would
ensure that the rebate liability with respect to the calendar year in
question is corrected either upward or downward, as appropriate, in the
two subsequent years in order to implement the 3-year averaging
requirement. Similarly, we propose that an issuer that elects this
option would have to adjust the maximum rebate liability attributable
to a given calendar year in the 2 subsequent reporting years to reflect
the credibility adjustment applicable in each of those 2 subsequent
reporting years. That is, the rebate liability attributable to year 1
would be recalculated in year 2 using a credibility adjustment based on
the sum of life-years for years 1 and 2. This approach is consistent
with the manner in which the credibility adjustment was applied with
respect to all issuers when the MLR requirements were first
implemented. We seek comments on this proposal.
We also propose that for an issuer that elects this option, for
each reporting year, after the issuer recalculates the maximum rebate
liability with respect to each calendar year in the aggregation using
restated incurred claims and updated credibility adjustment (as
applicable), the outstanding rebate liability with respect to each year
in the aggregation would be determined by reducing the maximum rebate
liability with respect to that year by any rebate payments made toward
it in the two prior years (as applicable). Any rebate payable for a
given reporting year would be applied toward the outstanding

[[Page 61517]]

rebate liability of the earliest year in the relevant aggregation
first. If the rebate calculated for the reporting year based on a
multi-year average MLR (2- or 3-year average, as applicable) exceeds
the combined outstanding rebate liability for all calendar years
included in the aggregation, then under our proposal, the actual rebate
payable by the issuer for that reporting year would be limited to the
amount of the combined outstanding rebate liability. Conversely, if the
total rebate calculated for the reporting year based on a multi-year
average MLR is lower than the combined outstanding rebate liability for
all years included in the aggregation, then we propose that the actual
rebate payable by the issuer for that reporting year be limited to the
amount calculated for the reporting year based on a multi-year average
MLR. Therefore, our proposal would generally prevent the total rebate
amount paid by an issuer with respect to any given calendar year over
the course of 3 consecutive years from exceeding the rebate amount
resulting from the ratio of the issuer's incurred claims and quality
improvement activity expenses to the issuer's after-tax earned premium
for that calendar year, with applicable adjustments, falling below the
applicable MLR standard. At the same time, our proposal is designed to
benefit only new issuers and established issuers that experience rapid
growth whose MLR falls below the standard in one year and increases
within the following 2 years. This is because the combined outstanding
rebate liability for all years included in the aggregation will
generally equal or exceed the rebate calculated for the reporting year
based on a 3-year average MLR for established issuers that do not
experience rapid growth. Therefore, our proposed limit on the rebate
liability would not benefit such issuers.
For a simplified illustration of our proposal, suppose that a new,
fully-credible individual market issuer reports year 1 incurred claims
and quality improvement activity expenses (QIA) of $500,000 and premium
adjusted for applicable taxes and fees of $1,000,000 (and no other
relevant revenue or expenses relevant to the MLR calculation); year 2
incurred claims and QIA of $700,000 and after-tax premium of
$1,000,000; and incurred claims and QIA of $800,000 and after-tax
premium of $1,000,000 thereafter. Under our proposal, the rebate
liability for year 1 would be calculated as (80% - $500,000/$1,000,000)
* $1,000,000 = $300,000; and the issuer would consequently pay a
$300,000 rebate for year 1. Suppose that after year 2, the issuer
determines that its year 1 incurred claims and QIA were in fact
$550,000 rather than $500,000. The issuer's 2-year average MLR would
equal ($550,000 + $700,000)/($1,000,000 + $1,000,000) = 62.5% and the
corresponding rebate would equal (80% - 62.5%) * $1,000,000 = 175,000.
Under our proposal, the issuer's preliminary MLR with respect to year 1
as adjusted by the newer incurred claims and QIA data would be
calculated as $550,000/$1,000,000 = 55% and the corresponding rebate
liability as (80% - 55%) * $1,000,000 = $250,000. The preliminary MLR
with respect to year 2 would be calculated as $700,000/$1,000,000 = 70%
and the corresponding rebate liability as (80% - 70%) * $1,000,000 =
$100,000. The $300,000 rebate initially paid for year 1 would be
applied first against the year 1 rebate liability of $250,000, with the
remaining $50,000 applied against the year 2 rebate liability of
$100,000, resulting in a combined outstanding rebate liability of
$250,000 + $100,000 - $300,000 = $50,000. Because the combined
outstanding rebate liability is lower than the rebate based on the 2-
year average MLR, the rebate payable for year 2 is limited to the lower
amount, or $50,000; whereas under the current MLR regulations, the
issuer would be required to pay $175,000 in rebates for year 2. In year
3, the rebate based on the 3-year average MLR would be $116,667, while
the combined outstanding rebate liability would be zero, resulting in
no rebate payable for year 3.
In recognition of the fact that, as discussed above, only a limited
subset of issuers may be disadvantaged by the three-year averaging rule
and would be able to benefit from this proposal, we propose to make the
use of the rebate liability limit optional for issuers. To further
facilitate application of this proposal in the least burdensome manner,
as well as to address an existing ambiguity regarding applicability of
the credibility adjustment, we additionally propose to clarify Sec.
158.232 by defining the term ``preliminary MLR'' to refer to an MLR
calculated without applying any credibility adjustment, and by
explicitly specifying instances where Sec. 158.232 is intended to
refer to experience of a single year, rather than 3 years. These
proposed amendments to Sec. 158.232(d), (e), and (f) will enable
issuers that wish to take advantage of the rebate liability limit to
rely on the single-year, preliminary MLRs that issuers already
calculate as part of determining their credibility adjustment, and
minimize the additional reporting associated with calculating the
outstanding rebate liability if an issuer elects to exercise the
flexibility proposed in Sec. 158.240(d). We seek comments on all
aspects of this proposal.

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 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 16. To fairly evaluate whether an
information collection should be approved by OMB, section 3506(c)(2)(A)
of the Paperwork Reduction Act of 1995 requires that we solicit comment
on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this proposed rule that contain ICRs. We
generally used data from the Bureau of Labor Statistics to derive
average labor costs (including a 100 percent increase for fringe
benefits and overhead) for estimating the burden associated with the
ICRs.\60\
---------------------------------------------------------------------------

\60\ See May 2015 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates at http://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------

A. ICRs Regarding Upload of Risk Adjustment Data (Sec. 153.610)

Under the HHS-operated risk adjustment program, HHS uses a
distributed data collection approach for enrollee-level enrollment,
claims and encounter data that reside on an issuer's dedicated data
environment. Under Sec. 153.710(a), an issuer of a risk adjustment
covered plan in a State where HHS is operating the risk adjustment or
reinsurance program on behalf of the State, as applicable, must provide
HHS, through the dedicated data environment, access to enrollee-

[[Page 61518]]

level plan enrollment data, enrollee claims data, and enrollee
encounter data, as specified by HHS. Under Sec. 153.610(a), HHS is
proposing that an issuer must submit or make accessible all required
risk adjustment data for its risk adjustment covered plans in
accordance with the risk adjustment data collection approach
established by the State, or by HHS on behalf of the State, including
any data that is ``protected health information'' as that term is
defined at 45 CFR 160.103 for purposes of recalibrating the HHS risk
adjustment model, in the form and manner specified by HHS. This
proposal entails HHS sending a command to all issuers' EDGE servers
that issuers must execute, which would provide HHS a dataset that does
not identify the EDGE server, plan, issuer, geographic rating area,
State, or enrollee, for purposes of obtaining enrollee-level data upon
which we can recalibrate the HHS risk adjustment models. Because this
EDGE report requires no new data elements and only requires an issuer
to execute the command, we do not believe this provision imposes
additional burden on issuers of risk adjustment covered plans described
under the information collection currently approved under OMB Control
Number 0938-1155.

B. ICRs Regarding Data Validation Requirements When HHS Operates Risk
Adjustment (Sec. 153.630)

Under Sec. 153.630(b), an issuer that offers at least one risk
adjustment covered plan in a State where HHS is operating risk
adjustment on behalf of the State for the applicable benefit year must
have an initial validation audit performed on its risk adjustment data.
The cost associated with this requirement is the issuer's time and
effort to provide HHS with source claims, records, and enrollment
information to validate enrollee demographic information for initial
and second validation audits and the issuer's cost to employ an
independent auditor to perform the initial validation audit on a
statistically valid sample of enrollees. We estimate that each issuer
sample will consist of approximately 200 enrollees, and we anticipate
that this audit will affect approximately 825 issuers. Beginning with
2018 risk adjustment data validation, HHS proposes to require the
review of paid pharmacy claims for all sample enrollees in the initial
validation audit. Based on 2015 EDGE reinsurance data, we believe
approximately half of all enrollees have pharmacy claims, and of those
that do, we would expect approximately six pharmacy claims per
enrollee. Therefore, we expect that it would require 30 minutes for an
auditor (at a labor cost of $72 per hour) and cost approximately $36
per enrollee to validate paid pharmacy claims. We assume that an
initial validation audit would be performed on 165,000 enrollees, with
half of them, or 82,500 enrollees, having pharmacy claims. Based on the
information above, we estimate that the total additional burden per
issuer for initial validation auditors to review and validate paid
pharmacy claims would be 50 hours and cost approximately $3,600.
Therefore, for 825 issuers, the total annual burden of conducting
initial validation audits would be 41,250 hours with an equivalent cost
of approximately $2.97 million. We will revise the information
collection currently approved under OMB Control Number 0938-1155 with
an October 31, 2017 expiration date to account for this additional
burden.

C. ICR Regarding the Interim and Final Discrepancy Reporting Processes
for Risk Adjustment Data Validation When HHS Operates Risk Adjustment
(Sec. 153.630(d))

Under Sec. 153.630(d)(1), we propose that in the manner set forth
by HHS, an issuer must confirm the sample or file a discrepancy report
within 15 calendar days to dispute the HHS risk adjustment data
validation sample set forth by HHS in the HHS-RADV Final Reports. In
Sec. 153.630(d)(2), we propose that in the manner set forth by HHS, an
issuer may file a discrepancy report within 30 calendar days to dispute
the findings of a second validation audit or the calculation of a risk
score error rate.
We estimate that 825 issuers of risk adjustment covered plans would
be subject to this requirement, and that issuers would review the HHS-
risk adjustment data validation final reports, specifically the initial
validation audit sample set for the interim discrepancy reporting
process. For the final discrepancy reporting process, set forth in
proposed Sec. 153.630(d)(2), issuers would review the results of the
second validation audit and the calculation of a risk score error rate.
On average, we estimate that it would take a business operations
specialist (at an hourly labor cost of $78) approximately 2 hours to
respond to an interim report and 6 hours to respond to the interim and
final discrepancy reporting process. The total burden for each issuer
would be 8 hours with an equivalent cost of $624. Therefore, we
estimate an aggregate annual burden of 6,600 hours with an equivalent
cost of $514,800 for 825 issuers as a result of these requirements. We
will revise the information collection currently approved under OMB
Control Number 0938-1155 with an October 31, 2017 expiration date to
account for this additional burden.

D. ICR Regarding Standardized Options in SBE-FPs (Sec. 155.20)

In proposed Sec. 155.20, we propose that an SBE-FP must notify HHS
if it wants HHS-designed standardized options to receive differential
display, by a date to be specified in guidance. We anticipate that
fewer than 10 SBE-FPs would submit this information to HHS annually.
Under 5 CFR 1320.3(c)(4), this ICR is not subject to the PRA as it
would affect fewer than 10 entities in a 12-month period.

E. ICR Regarding Differential Display of Standardized Options on the
Web Sites of Agents and Brokers (Sec. 155.220) and QHP Issuers (Sec.
156.265)

We propose to require web-brokers and QHP issuers that utilize the
direct enrollment pathway to differentially display standardized
options in the 2018 plan year and beyond, consistent with the approach
adopted by HHS for display on the Exchange Web site, unless HHS
approved a deviation. This policy would require direct enrollment
entities to prominently display standardized options in a manner that
makes them clear to consumers. We estimate that a total of 160 web-
brokers and QHP issuers participate in the FFEs and SBE-FPs and would
be required to comply with the standard. We estimate it would take a
mid-level software developer (at a rate of $96.82 per hour)
approximately 2 hours annually to develop a differential display for
standardized options. We estimate an annual cost burden of
approximately $193.64 per direct enrollment entity. The total annual
burden will be 320 hours with an equivalent cost of approximately
$30,982.40.
We anticipate that fewer than 10 web-brokers and issuers would
submit a request to deviate from the manner adopted by HHS for display
on HealthCare.gov. Under 5 CFR 1320.3(c)(4), this ICR is not subject to
the PRA as it would affect fewer than 10 entities in a 12-month period.

F. ICR Regarding Ability of States To Permit Agents and Brokers To
Assist Qualified Individuals, Qualified Employers, or Qualified
Employees Enrolling in QHPs (Sec. 155.220)

We propose a number of requirements for web-brokers related to the
direct enrollment process such as prominently displaying information
regarding consumers' eligibility for APTC, allowing consumers to make
attestations regarding APTC, and providing for the

[[Page 61519]]

maintenance of electronic records for purposes of audit. At Sec. Sec.
156.265 and 156.1230, we propose a number of parallel provisions for
issuers using the direct enrollment channel. We would provide
additional detail regarding the specific requirements under these rules
in guidance in the future. At that time, we would estimate the burden
associated with these requirements, solicit public comment, and request
OMB approval in accordance with the PRA, as may be necessary.

G. ICR Regarding Eligibility Redeterminations (Sec. 155.330)

We propose to permit an Exchange to choose among three alternatives
when the Exchange identifies updated information regarding compliance
with the income tax filing and reconciliation requirement under Sec.
155.305. An Exchange may either follow the process described in
paragraph (e)(2)(i), a process specified by the Secretary in guidance,
or an alternative process proposed by the Exchange and approved by the
Secretary. HHS anticipates that it would require Exchanges requesting
approval for an alternative process to submit a brief description of
the alternative process, and a justification for how the process
satisfies the approval criteria outlined in Sec.
155.330(e)(2)(iii)(C). Given the availability of two alternative
processes, we anticipate that fewer than 10 Exchanges would submit a
proposal. Therefore, under 5 CFR 1320.3(c)(4), this ICR is not subject
to the PRA as it would affect fewer than 10 entities in a 12-month
period.
We also propose to permit the Exchange to recalculate APTC using
the procedure described in Sec. 155.330(g)(1) or an alternate
procedure approved by HHS on a transitional basis. HHS anticipates that
it would require participating Exchanges to submit a brief description
of the alternate procedure and the extent to which the alternate
procedure would protect tax filers from an excess APTC repayment. Here
too, we anticipate that fewer than 10 Exchanges would submit a
proposal. Under 5 CFR 1320.3(c)(4), this ICR is not subject to the PRA
as it would affect fewer than 10 entities in a 12-month period.

H. ICR Regarding Termination of Exchange Enrollment or Coverage (Sec.
155.430(b)(2)(iii))

We are proposing to amend Sec. 155.430(b)(2)(iii) to clarify that
when an issuer seeks termination of a QHP purchased on an Exchange via
a rescission under Sec. 147.128, it must first demonstrate, to the
reasonable satisfaction of the Exchange, that the basis for the
rescission is appropriate, if the Exchange requires such a
demonstration. This would require the issuer to provide information
related to the termination to the Exchange. We do not anticipate that
all Exchanges will subject issuers to this requirement. We anticipate
that fewer than 10 issuers would be subject to this requirement
annually. Under 5 CFR 1320.3(c)(4), this ICR is not subject to the PRA
as it would affect fewer than 10 entities in a 12-month period.

I. ICR Regarding QHP Request for Reconsideration (Sec. 155.1090)

We propose to add Sec. 155.1090 to create a process for an issuer
that has applied to an FFE for certification of QHPs and has been
denied certification to request reconsideration. We anticipate that
fewer than 10 issuers per year would request reconsideration. Under 5
CFR 1320.3(c)(4), this ICR is not subject to the PRA as it would affect
fewer than 10 entities in a 12-month period.

J. ICR Regarding Notification by Issuers Denied Certification (Sec.
156.290)

In proposed Sec. 156.290 we propose that QHP issuers would be
required to provide a notification to enrollees within 30 days of the
date of HHS's denial of certification for a subsequent, consecutive
certification cycle. We anticipate that fewer than 10 issuers would be
subject to this requirement annually. Under 5 CFR 1320.3(c)(4), this
ICR is not subject to the PRA as it would affect fewer than 10 entities
in a 12-month period.

K. ICR Regarding the Discrepancy Reporting Processes for the
Reconciliation of the Cost-sharing Reduction Portion of Advance
Payments (Sec. 156.430(h))

Under Sec. 156.430(h)(1), we proposed that, if an issuer files a
discrepancy report to dispute the notification of the amount of
reconciliation of the cost-sharing reduction portion of advance
payments, it must file the discrepancy report within 30 calendar days
of notification of the amount of reconciliation of the cost-sharing
reduction portion of advance payments as described in Sec. 156.430(e),
in the manner set forth by HHS.
We estimate that of approximately 360 QHP issuers that submit cost-
sharing reduction reconciliation data, less than \1/3\ would file a
discrepancy report to dispute the notification of the amount of
reconciliation of the cost-sharing reduction portion of advance
payments. Issuers would review the notification of the amount of
reconciliation of the cost-sharing reduction portion of advance
payments for this discrepancy reporting process. On average, we
estimate that it would take a business operations specialist (at an
hourly labor cost of $78) approximately 6 hours to review the
requirements of the discrepancy reporting process, to determine whether
the issuer should submit a discrepancy report, to categorize the
discrepancy, and to write a description of the discrepancy for
submission to HHS. Additionally, we estimate that it would take a
computer programmer (at an hourly labor cost of approximately $78)
approximately 12 hours to develop the pipe-delimited file for reporting
the discrepancy, based on the technical specifications published by
HHS, and to submit the discrepancy file to HHS through the electronic
file transfer system. Therefore, we estimate that the total burden for
each issuer would be approximately 18 hours with an equivalent cost of
$1,404. Therefore, assuming that no more than 120 issuers would submit
a discrepancy, we estimate a total aggregate annual burden of
approximately 2,160 hours with an equivalent cost of $168,480 for
issuers as a result of these requirements. We will revise the
information collection currently approved under OMB Control Number
0938-1266 with a December 31, 2017 expiration date to account for this
additional burden.

L. ICRs Regarding Administrative Appeals (Sec. 156.1220)

In 45 CFR 156.1220, we established an administrative appeals
process to address any issues or errors for advance payment of the
premium tax credit, advance payment and reconciliation of cost-sharing
reductions, FFE user fees, and the premium stabilization programs, as
well as any assessment of a default risk adjustment charge under Sec.
153.740(b). We propose revising Sec. 156.1220 to also address
administrative appeals relating to the risk adjustment data validation
process.
Under Sec. 153.630(d), an issuer may appeal the findings of a
second validation audit or the calculation of a risk score error rate.
We propose to amend Sec. 153.630(d) by clarifying the process by which
an issuer can appeal the findings of a second validation audit or the
calculation of a risk score error rate. We propose requiring issuers to
use the administrative appeals process set forth in Sec. 156.1220.
Under Sec. 156.1220(a), we propose to clarify that an issuer may
file a request for reconsideration under this section to contest a
processing error by HHS,

[[Page 61520]]

HHS's incorrect application of the relevant methodology, or HHS's
mathematical error with respect to the findings of a second validation
audit or the calculation of a risk score error rate.
While the hours involved in a request for reconsideration might
vary, for purposes of this burden estimate we estimate that it would
take a business operations specialist 1 hour (at an hourly labor cost
of $78) to make the comparison and submit a request for reconsideration
to HHS. We estimate that 9 issuers, representing approximately 1
percent of issuers of risk adjustment covered plans, subject to risk
adjustment data validation, would submit a request for reconsideration,
resulting in a total aggregate annual burden of 9 hours with an
equivalent cost of approximately $702.

M. ICR Regarding Medical Loss Ratio (Sec. 158.240)

We are proposing to amend Sec. 158.240 to allow issuers the option
of limiting the total rebate payable over the course of a 3-year period
with respect to a given calendar year. We anticipate that implementing
this proposal would require minor changes to the MLR annual reporting
form and we may revise the information collection currently approved
under OMB Control Number 0938-1164 to reflect the proposed policy.
However, only a small number of issuers would elect the option of
additional reporting and we do not expect that the proposed policy
would increase the burden.

TABLE 16--Annual Reporting, Recordkeeping and Disclosure Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly
Burden per Total labor cost Total labor
Regulation Section OMB Number of Responses response annual of cost of Total cost
Control No. respondents (hours) burden reporting reporting ($)
(hours) ($) ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 153.630 Risk Adjustment Data Validation.. 0938-1155 825 82,500 0.5 41,250 72 2,970,000 2,970,000
Sec. 153.630(d) Discrepancy Reporting 0938-1155 825 1650 4 6,600 78 514,800 514,800
Processes for Risk Adjustment Data Validation..
Sec. Sec. 155.220, 156.265 Differential NEW 160 160 2 320 96.82 30,982 30,982
Display of Standardized Options................
Sec. 156.430(h) Discrepancy Reporting for cost- 0938-1266 120 1 18 2,160 78 168,480 168,480
sharing reduction reconciliation...............
Sec. 156.1220 Administrative Appeals.......... NEW 9 9 1 9 68 702 702
-------------------------------------------------------------------------------------------------------
Total....................................... ........... 1,114 84,320 25.5 50,339 392.82 3,684,964 3,684,964
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 16.

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 risk adjustment program
for the 2017 and 2018 benefit years, as well as certain modifications
to the program that will protect against the potential effects of
adverse selection. The Premium Stabilization Rule and previous Payment
Notices provided detail on the implementation of this program,
including the specific parameters for the 2014, 2015, 2016, and 2017
benefit years applicable to this program. This rule proposes additional
standards related to enrollment and eligibility, consumer assistance
tools and programs of an Exchange, web-brokers, cost-sharing
parameters, qualified health plans, network adequacy, stand-alone
dental plans, guaranteed renewability, the rate review program, the
medical loss ratio program, the Small Business Health Options Program,
and FFE user fees. These proposed standards represent incremental
amendments that are intended to continue to strengthen the Exchanges,
improve the stability of the market, and enhance the choices available
to consumers, while supporting consumers' ability to make informed
choices when purchasing health insurance.

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).

[[Page 61521]]

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 risk
adjustment program helps prevent risk selection and decrease the risk
of financial loss that health insurance issuers might otherwise expect
in 2018 and Exchange financial assistance helps low- and moderate-
income consumers and American Indians/Alaska Natives purchase health
insurance. The combined impacts of these provisions affect the private
sector, issuers, and consumers, through increased access to health care
services, decreased uncompensated care, lower premiums, 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 HHS's goal of ensuring that all consumers have access to
quality, affordable health care and are able to make informed choices,
that Exchanges operate smoothly, that the risk adjustment program works
as intended, and that SHOPs are provided flexibility. Affected entities
such as QHP issuers would incur costs to comply with the proposed
provisions. 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 17 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
a number of effects, including providing consumers with affordable
health insurance coverage, reducing the impact of adverse selection,
and stabilizing premiums in the individual and small group health
insurance markets and in an Exchange. We are unable to quantify certain
benefits of this proposed rule--such as improved health outcomes and
longevity due to continuous quality improvement, and increased
insurance enrollment--and certain costs--such as the cost of providing
additional medical services to newly-enrolled individuals. The effects
in Table 17 reflect qualitative impacts and estimated direct monetary
costs and transfers resulting from the provisions of this proposed
rule. The annualized monetized costs described in Table 17 reflect
direct administrative costs to health insurance issuers and web-brokers
as a result of the proposed provisions, and include administrative
costs related to requirements that are estimated in the Collection of
Information section of this proposed rule. The annual monetized
transfers described in Table 17 include costs associated with the risk
adjustment user fee paid to HHS by issuers, and a decrease in MLR
rebates to consumers. For 2018, we are proposing to collect a total of
$35 million in risk adjustment user fees or $1.32 per enrollee per year
from risk adjustment issuers, an increase from $24 million in benefit
year 2017 when we established a $1.56 per-enrollee-per-year risk
adjustment user fee amount. As in 2017, the risk adjustment user fee
contract costs for 2018 include costs for risk adjustment data
validation; however, we expect increased enrollment in 2018 HHS risk
adjustment covered plans, which decreases the per enrollee amount.
The annual monetized transfers described in Table 17 include a
decrease in MLR rebates to consumers.

TABLE 17--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..........................................
Improved transparency and shopping experience for consumers due to new, updated standardized
options and their differential display; and protections relating to direct enrollment......................
Provide adequate time to newly qualified employees to make informed decisions regarding their
coverage in the SHOP.......................................................................................
Ensure plan choice, allowing individuals to find coverage that fit their needs.....................
----------------------------------------------------------------------------------------------------------------
Costs: Estimate Year Discount Period
(million) dollar rate covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)................... $3.68 2016 7 2017-2021
3.68 2016 3 2017-2021
----------------------------------------------------------------------------------------------------------------
Costs reflect administrative costs incurred by issuers and web-brokers to comply with provisions in this final
rule.
----------------------------------------------------------------------------------------------------------------
Transfers: Estimate Year Discount Period
(million) dollar rate covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)................... $22.2 2016 7 2017-2021
22.6 2016 3 2017-2021
----------------------------------------------------------------------------------------------------------------
Transfers include risk adjustment user fees for 2018-2021 (assuming that they remain the same during
this time period), which are transfers from health insurance issuers to the Federal government; and a reduction
in total rebate payments by issuers which is a transfer from enrollees to shareholders or nonprofit
stakeholders in individual, small and large group markets, resulting from adjustment in MLR methodology.
Qualitative:
More accurate risk adjustment charges and payments due to change in risk adjustment methodology....
----------------------------------------------------------------------------------------------------------------

[[Page 61522]]

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 temporary risk corridors program and the
transitional reinsurance program end after the benefit year 2016.
Therefore, the costs associated with those programs are not included in
Tables 17 or 18 for fiscal years 2019-2021. Table 18 summarizes the
effects of the risk adjustment program on the Federal budget from
fiscal years 2017 through 2021, with the additional, societal effects
of this proposed rule discussed in this RIA. We do not expect the
provisions of this proposed rule to significantly alter CBO's estimates
of the budget impact of the premium stabilization programs that are
described in Table 18. 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 18).

Table 18--Estimated Federal Government Outlays and Receipts for the Risk Adjustment, Reinsurance, and Risk Corridors Programs From Fiscal Year 2017-2021
[In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year 2017 2018 2019 2020 2021 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Risk Adjustment, Reinsurance, and Risk Corridors Program 10 8 8 9 9 44
Payments...............................................
Risk Adjustment, Reinsurance, and Risk Corridors Program 11 7 8 9 9 44
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 outlaid in the FY 2016-FY 2020 timeframe. CBO does not expect
a shortfall in these programs.
Source: Congressional Budget Office. Federal Subsidies for Health Insurance Coverage for People Under Age 65: Tables From CBO's March 2016 Baseline
https://www.cbo.gov/sites/default/files/51298-2016-03-HealthInsurance.pdf.

1. Fair Health Insurance Premiums
The proposed regulations would amend Sec. 147.102(d) to create
multiple child age bands rather than a single age band for all
individuals aged 0 through 20. Establishing single-year age bands
starting at age 15 is likely to result in small annual increases in
premiums for children age 15 to 20, which would help mitigate large
premium increases attributable to age due to the transition from child
to adult age rating.
2. Guaranteed Renewability
This proposed rule would specify the circumstances in which the
discontinuation of all coverage currently offered by an issuer in a
market in a State would not be considered a market withdrawal subject
to the 5-year ban on market re-entry. We believe this proposal is
generally consistent with State regulation of health insurance and
therefore would not have a material impact on issuers or enrollees.
These changes would benefit consumers since imposing the 5-year ban on
market re-entry in these situations could result in disruption for
consumers and reduced competition in some markets.
3. Risk Adjustment
The risk adjustment program is a program created by the Affordable
Care Act in which States, or HHS on behalf of States, collects charges
from health insurance issuers that attract lower-risk populations in
order to use those funds to provide payments to health insurance
issuers that attract higher-risk populations, such as those with
chronic conditions, thereby reducing incentives for issuers to avoid
higher-risk enrollees. We established standards for the administration
of the risk adjustment program, in subparts D and G of part 45 of the
CFR. The proposed modifications to the risk adjustment model aims to
improve the methodology and would result in more accurate risk
adjustment charges and payments and mitigate any residual incentive for
risk selection.
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, 2016 and 2017
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 2018 benefit year, we estimate that the total cost for HHS to
operate the risk adjustment program on behalf of States for 2018 will
be approximately $35 million, and that the risk adjustment user fee
would be approximately $1.32 per enrollee per year. The risk adjustment
user fee contract costs for 2018 include costs related to 2018 risk
adjustment data validation, and are higher than the 2017 contract costs
as the result of some contracts that were rebid.
4. SHOP
The SHOPs facilitate the enrollment of eligible employees of
eligible small employers into small group market 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.\61\
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\61\ Available at http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
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In Sec. 155.230(d)(2), we propose requiring SHOPs to make
electronic notices the default method of sending SHOP notices to
employers and employees, unless otherwise required by State or Federal
law. Electronic notices would provide a more cost effective way for
SHOPs to distribute required notices and should decrease the SHOP's
costs for notifications.
In Sec. 155.725(g), we propose changes to the enrollment process
for newly qualified employees. We believe the proposed amendments would
provide newly qualified employees with adequate time to make informed
decisions regarding their coverage and are likely to have a negligible
impact on plan premiums and would ensure that employers do not exceed
the waiting period limits under Sec. 147.116.
5. Direct Enrollment--Standardized Options Differential Display and
Privacy/Security and Oversight
We did not require QHP issuers or web-brokers to adhere to
differential display requirements of standardized options when using a
non-Exchange Web site to facilitate enrollment in a QHP through an
Exchange for the 2017 plan year, but we noted that we would consider
whether to propose such a standard in the future. We now propose to
amend Sec. 155.220(c)(3)(i) by adding

[[Page 61523]]

new paragraph (c)(3)(i)(H) to require web-brokers to differentially
display standardized options consistent with the approach adopted by
HHS, unless a deviation is approved by HHS and to amend Sec.
156.265(b)(3) by adding new paragraph (b)(3)(iv) to likewise require
QHP issuers that conduct direct enrollment to differentially display
standardized options in such manner approved by HHS. Requiring web-
brokers and QHP issuers using the direct enrollment pathway to make
changes to their respective QHP display systems may result a slight
increase in administrative costs but would help further our goal of
ensuring that all consumers have access to quality and affordable
health care and are able to make informed choices.
In Sec. Sec. 155.220, 156.265, and 156.1230, we propose
requirements for web-brokers and issuers related to the direct
enrollment process that would provide consumer protections and ensure
that consumers have necessary information to select coverage that would
best fit their needs. Web-brokers and issuers would incur
administrative costs to comply with these requirements.
6. Eligibility and Enrollment Provisions
In Sec. 155.400, we propose to provide Exchanges with the
discretion to allow issuers experiencing billing or enrollment problems
due to high volume or technical errors to implement a reasonable
extension of the binder payment deadlines in Sec. 155.400(e)(1). This
proposal aims to retain consumers on the Exchange and to mitigate the
problems associated with issuers receiving high-volumes of enrollments
in a short timeframe. There would be no added cost to issuers who
choose to implement the optional binder payment extensions, while
ensuring that they would not lose enrollees who have not paid their
binder payments simply because they did not receive their bills due to
a processing backlog or a technical error. Consumers would benefit by
having a reasonable amount of time to pay their binder payments, which
should prevent coverage cancellations due to enrollment irregularities
which are not the fault of the consumer.
In Sec. 155.420, we propose to codify several special enrollment
periods that are already provided through the Exchange. By codifying
these, we seek to ensure that these existing special enrollment periods
are applied consistently across Exchanges, and to provide both issuers
and consumers with greater certainty in how these special enrollment
periods are applied. We believe that this certainty would contribute to
greater stability in the market, and in the use of these special
enrollment periods, specifically.
We propose to amend Sec. 155.430(b)(2)(iii) to require that when
an issuer seeks termination of a QHP on an Exchange via a rescission
for fraud or misrepresentation of material fact under Sec. 147.128, it
must first demonstrate, to the reasonable satisfaction of the Exchange,
that the basis for the rescission is appropriate, if the Exchange
requires such a demonstration. This would not restrict issuers' ability
to rescind coverage when an individual or a party working on behalf of
an individual fraudulently enrolls in coverage, while protecting
consumers whose verification and enrollment conform to FFE and SBE-FP
rules and guidance.
7. Standardized Options
We are proposing new standardized options for 2018, which are
updated versions of the ones finalized in the 2017 Payment Notice. As
in 2017, offering standardized options will be voluntary for QHP
issuers in 2018. In keeping with the methodology used to design
standardized options in 2017, we designed the proposed 2018
standardized plans based on the median cost-sharing features of the
most popular 2016 QHPs, based on enrollment to ensure minimal market
disruption and impact on premiums. For 2018, we are proposing
additional standardized options at each metal level and plan variation
with the goal of having at least one option at each metal level that
would comply with every State's respective cost-sharing laws as
applicable. Each applicable State would have one standardized option at
each metal level and plan variation that issuers would then be able to
choose to offer. In the 2017 Payment Notice, we attempted to estimate
the potential impact that the introduction of standardized options
would have on premiums established by QHPs. As we previously estimated,
we do not anticipate that standardized options would impact 2018 plan
premiums significantly. Rather, the proposed options would allow each
applicable State to have a set of standardized options that most
closely reflects QHPs in the State while meeting any State cost-sharing
mandates. This policy should continue to improve simplicity and
transparency for consumers during the shopping experience. To the
extent it facilitates consumer shopping, it could put modest downward
pressure on premiums.
8. User Fees
To support the operation of FFEs, we require in Sec. 156.50(c)
that a participating issuer offering a plan through an FFE must remit a
user fee to HHS each month equal to the product of the monthly user fee
rate specified in the annual HHS notice of benefit and payment
parameters for the applicable benefit year and the monthly premium
charged by the issuer for each policy under the plan where enrollment
is through an FFE. In this proposed rule, for the 2018 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. We had estimated the user fee transfers in the
2017 Payment Notice and there are no additional incremental charges. To
avoid double-counting, we do not include the user fee costs in the
accounting statement for this rule (Table 17). 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).
9. Levels of Coverage
At Sec. 156.140, we propose to change the de minimis range of
bronze plans under certain circumstances. We believe that this policy
would not be disruptive to the current bronze plan market as it would
allow more bronze plans the flexibility in creating plan designs within
the increased de minimis range, as well as allow more options for
issuers to leave 2017 cost-sharing structures unchanged. We also
believe this policy would allow issuers to continue to offer a range of
bronze plans as the AV Calculator is updated in future years, which is
good for consumers. Plans are not required to utilize this proposed
option, and we do not anticipate any significant impact on average
bronze plan premiums from this proposed policy.
10. 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

[[Page 61524]]

many low- and moderate-income individuals and families obtain health
insurance--for many people, cost sharing is a barrier to obtaining
needed health care.\62\
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\62\ 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
2018 maximum annual limitation on cost sharing for self only coverage
$7,350. We do not believe these changes would result in a significant
economic impact. Therefore, we do not believe the provisions related to
cost-sharing reductions in this proposed rule would have an impact on
the program established by and described in the 2015, 2016, and 2017
Payment Notices.
We also proposed the premium adjustment percentage for the 2018
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 used to determine eligibility for certain
exemptions under section 5000A of the Code, and the assessable payments
under sections 4980H(a) and 4980H(b). We believe that the proposed 2018
premium adjustment percentage of 16.17303196 percent is well within the
parameters used in the modeling of the Affordable Care Act, and we do
not expect that these proposed provisions would alter CBO's March 2015
baseline estimates of the budget impact.
11. Qualified Health Plan Minimum Standards
In Sec. 156.200(c), we propose to specify that, to satisfy the
requirements in these sections, QHPs must be offered through the
applicable Exchange at both the silver and gold coverage levels
throughout each service area in which the issuer applying for
certification offers coverage through the Exchange. Since most issuers
are already following these requirements, it is unlikely that there
would be any impact on premiums, while ensuring continued plan choice
for consumers.
In the 2017 Payment Notice, we finalized a network breadth policy
through which we would categorize networks based on their relative
size, in addition to other policies. We seek comment regarding how this
should apply to ``integrated plans,'' such as staff model HMOs. We
expect the policy would continue to improve transparency for consumers
and the shopping experience.
Proposed Sec. 156.272 would establish as a condition of
certification that QHP issuers must make their QHPs available for
enrollment through the Exchanges for the duration of the timeframe for
which the plan was certified, unless a basis for suppression under
Sec. 156.815 applies. QHP issuers in FFEs and FF-SHOPs that do not
comply with this requirement could be subject to CMPs or a two-year
ban. This would raise costs or burdens on issuers, who could be forced
to remain on the Exchange or face a 2-year ban or CMPs in certain
situations. However, we do not believe that violations of the proposed
requirement of full year participation under Sec. 156.272 are
happening on a wide scale, which minimizes any potential impact.
12. Medical Loss Ratio
In this proposed rule, we propose to amend Sec. 158.121 to align
with the requirement that, beginning in 2014, issuers must offer non-
grandfathered coverage for a consecutive 12-month period and enable
more issuers to defer reporting of the experience of new business in
the MLR calculation. In general, deferring reporting of new business
effectively enables new and rapidly growing issuers to use a 4-year,
rather than a 3-year average MLR. This in turn increases the likelihood
that low MLRs in the initial years will be offset by higher MLRs in
later years and that only a portion of the rebates generated by the
experience of initial years will ultimately be paid. Deferring
reporting of new business also eliminates the rebate payment following
the first year and instead spreads it over the following 3 years (that
is, includes the rebate attributable to year 1 with rebates payable for
years 2 through 4). Based on data from the 2013 and 2014 MLR reporting
years, we estimate that allowing issuers to defer experience of newly
sold policies with full 12 months of experience when 50 percent or more
of an issuer's earned premium comes from such policies could reduce
total rebate payments from issuers to consumers over a 4-year period by
up to a total of $11.6 million.
We additionally propose to amend Sec. 158.240 to allow issuers the
option of limiting the total rebate payable over the course of a 3-year
period with respect to a given calendar year, as well as to clarify
references to single-year and preliminary MLRs in Sec. 158.232. We
estimate no impact from the proposed clarifications to Sec. 158.232
because these clarifications are intended to simplify reporting for
purposes of calculating the rebate limit proposed in Sec. 158.240 and
do not change the manner in which issuers currently calculate the
credibility adjustment. Because the proposed amendments to Sec.
158.240 generally would only impact new and rapidly growing established
issuers whose MLRs initially fall below the standard and increase in
subsequent years, the magnitude of the impact of the proposed limit on
the rebate liability would depend on how issuers' enrollment and MLRs
change in 2015 and later. Because the majority of new issuers have
expanded or intend to expand into new markets in 2014 or later, the
2014 and earlier MLR reports, which are the only data source available
at this time, are an insufficient source of data on the types of
issuers that would be impacted by this proposal. In addition,
significant reporting differences exist between 2011-13 and 2014 and
later MLR data, and some rebates that were paid for 2014 are likely to
be outliers and may therefore exaggerate estimates. Consequently, while
we expect the proposal to decrease the amount of rebates paid by new
and rapidly growing issuers to consumers, we are not able to estimate
the magnitude of the decrease with a high degree of certainty.

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.
For the proposals in parts 146, 147 and 148, we considered not
changing our interpretation of what constitutes a market withdrawal
when an issuer transfers all of its products to a related issuer or
replaces all of its products with new products with changes that exceed
the scope of a uniform modification of coverage. However, this approach
could result in fewer product offerings, as issuers would be obligated

[[Page 61525]]

to leave the market due to the 5-year prohibition on issuing coverage
after discontinuing all coverage in a market. This approach could also
unnecessarily restrict issuer corporate structuring transactions,
reduce market competition and consumer choice, and conflict with
States' approaches.
For the proposals in part 147, we considered not changing the
uniform child age band. This approach would have maintained the use of
a single age band for rating purposes for all individuals age 0 through
20. We determined that creating multiple child age bands more
accurately reflects the health risk of children and minimizes the
increase in premium attributable to age when an individual attains age
21.
For the proposals in part 153, we considered various approaches to
addressing partial year enrollment in the risk adjustment model,
including separate models by enrollment duration, and interaction
factors of enrollment duration combined with high- and medium-cost
conditions. However, based on commenter feedback to the March 31, 2016
White Paper and our analysis of MarketScan[supreg] data, HHS determined
that the enrollment duration additive factors are preferred and will
best address partial year enrollees in the short term.
We considered four different hybrid models for the inclusion of
prescription drugs in the HHS risk adjustment methodology: An
imputation only model, a prescription drug-dominant model, a flexible
model, and a severity only model. Commenters to the White Paper
suggested that we use the imputation only model or the flexible model,
with constraints to prevent an issuer from being compensated less for
recording prescription drug utilization for an enrollee. We have
imposed constraints on the flexible model so that the coefficients for
the drug terms are greater than zero, preventing such a situation. We
are adding two severity-only drug-diagnosis pairs on top of ten
imputation/severity drug-diagnosis pairs.
We considered a threshold of $1 million and a coinsurance rate of
80 percent for the proposed high-cost enrollee pool in the risk
adjustment proposal, which was supported by commenters to the White
Paper. However, many more commenters suggested that the high-cost
enrollee pool could be subject to gaming among issuers and would not
incentivize cost containment efforts. Therefore, we are proposing a
higher threshold of $2 million and a 60 percent coinsurance rate for
the high-cost enrollee pool in the risk adjustment model. We also
considered a PMPM adjustment to the transfer formula for this high-cost
enrollee pool, but we are proposing a percent of per member per month
premium adjustment to the transfer formula, to better align with the
transfer formula's adjustment at the billable member month premiums.
We considered using only 2014 MarketScan[supreg] data for 2018
recalibration. However, commenters to the White Paper preferred to
continue using the three-year blended approach. Commenters also
supported issuing final coefficients in guidance, which we have
proposed to do and are seeking comment on the timing of those final
coefficients.
We considered alternative methodologies to recalibrating the 2019
risk adjustment model using EDGE summary level data instead of enrollee
level data, as was proposed by one commenter to the White Paper.
However, using EDGE summary level data would not enhance the existing
risk adjustment models, as the model specifications would need to be
known to create the models, and thus would prevent exploratory research
and other types of analyses required for research, development and
refinement of the risk adjustment models for their continuous
improvement. Further, if summary level data were used, quality checks
could not be performed on the input data, and additional improvements
to address partial year enrollment could not be explored.
For the proposals regarding standardized options, we considered
taking no action in designing additional plans per metal level to
account for State cost-sharing laws. However, without this proposed
change, issuers in States with conflicting cost-sharing laws would not
be able to offer standardized options. We believe that it is important
for issuers in each State in which an FFE or SBE-FP operates to have
the choice to offer standardized options. We also considered designing
a set of standardized plans for each State. However, HHS currently
lacks the resources to propose this option.
For the proposal at Sec. 155.205(c)(2)(iii), we considered
requiring QHP issuers and web-brokers subject to the rule to look only
to the LEP populations in the State where the entity is registered or
licensed, such as through an issuer's Health Insurance Oversight System
(HIOS) ID, when identifying the languages in which taglines must be
provided under the rule. However, we believe that using such a
definition would not recognize that many insurance companies use a
common technology platform for their issuers across multiple States,
and would pose difficult operational challenges for many such entities
without significantly improving access.
For the proposal at Sec. Sec. 155.220 and 156.265, we considered
not requiring differential display of standardized options by web-
brokers or QHP issuers. However, this would have made it less likely
that consumers using a non-Exchange Web site would be aware of the
standardized options available. We believe that the requirement for
differential display of standardized options will help consumers using
non-Exchange Web sites more easily compare and choose amongst the
available plans. We note that we would not require the manner of
differentiation to be identical to the one adopted for displaying
standardized options on HealthCare.gov, and issuers are not required to
offer, and consumers are not required to purchase, standardized
options.
For proposals at Sec. 155.400, we considered alternatives to our
proposal to allow issuers the option to extend binder payment deadlines
when issuers experience volume-related backlogs or technical errors
that make it difficult for enrollees to pay their binder payments on
time. For example, we considered relying on ad hoc solutions, such as
extensions or remedies resembling reinstatements, when problems arise.
We believed, however, that codifying the proposed optional extensions
will give issuers and consumers alike more certainty and provide for
better remedies when consumers experience difficulties during the
enrollment process.
For the proposals at Sec. 155.420, we considered not codifying the
existing special enrollment periods for consumers who are or were a
victim of domestic abuse or spousal abandonment and need to enroll in
coverage apart from his or her abuser or abandoner, have been
determined ineligible for Medicaid or CHIP, have been impacted by a
material plan or benefit display error, or have resolved a citizenship
or immigration inconsistency post-expiration, all currently provided
through guidance. We also considered not standardizing the availability
of the special enrollment period for Indians to non-Indian dependents
enrolling at the same time as the Indian. However, we believe that
codifying these special enrollment periods provides needed permanence
and clarity for these special enrollment periods. This is important to
ensure that they continue to be available, are equitably applied across
Exchanges, and that consumers, assisters, issuers, and other
stakeholders

[[Page 61526]]

have a common understanding of the parameters and coverage effective
dates associated with each of these special enrollment periods. In this
rule, we seek to ensure transparency, stability, and appropriate
utilization of special enrollment periods by codifying certain special
enrollment periods that we have made available in prior guidance. After
weighing our options, we determined that codifying these currently
available special enrollment periods is in the best interest of
consumers and other Exchange stakeholders.
We considered alternatives to amending Sec. 155.430 in order to
protect consumers from having their coverage rescinded for reasons the
FFE does not consider reasonable, such as rescissions based on
allegations of fraud, despite the disputed information having been
verified by the FFE during the enrollment process. One alternative was
to issue guidance that would explain to issuers that rescissions based
on claims of fraud arising from information provided to and verified by
the FFE would not be permissible. Another alternative considered was to
work with issuers to prevent rescissions considered unreasonable by the
FFE, but to decline to pursue rulemaking. After considering all
options, we chose to amend Sec. 155.430(b)(2)(iii) in order to provide
more consumer protection.
For the proposals related to SHOPs, we considered maintaining
several provisions for the SHOPs. Specifically, we considered
maintaining the current requirements at Sec. 155.725(g)(1) and (2),
which provide that an employee who becomes a qualified employee outside
of the initial or annual open enrollment period must have an enrollment
period beginning on the first day of becoming a qualified employee, and
require the effective date of coverage to generally be determined in
accordance with Sec. 155.725(h). Similarly, we considered maintaining
the current requirements at Sec. 155.230(d)(2), which require paper
notices to be the default option for SHOPs, so that employers and
employees must opt into electronic notices. Finally, we considered
maintaining existing requirements in State-based Exchanges using the
Federal platform for SHOP eligibility, enrollment, or premium
aggregation functions. However, we decided to propose the policies in
this proposed rule in order to ensure that employers do not exceed the
waiting period limits under Sec. 147.116, to provide SHOPs with more
cost-effective alternatives to sending notices, to ensure efficient
SHOP operations, and to minimize the potential customization costs that
could be associated with permitting State-based Exchanges to use the
Federal platform for SHOP functions.
We considered alternative proposals for increasing the de minimis
range for bronze plans. We considered simply increasing the de minimis
range for bronze plans to extend above 62 percentage points without
requiring that plans include certain plan design features in order to
qualify for the extended de minimis range. This option could give
issuers, and as a result consumers, more flexibility and choice with
regards to bronze plan designs. However, we believe that the proposed
policy better ensures that bronze plans are not less generous than
catastrophic plans.
For the proposals at Sec. 156.200(c)(1), we propose to specify
that, to satisfy the requirements in that section, QHPs must be offered
through an Exchange at both the silver and gold coverage levels
throughout each service area in which the issuer offers coverage
through the Exchange. We could have opted not to specify this in
regulation; however, issuers could have misinterpreted the policy and
not offered a silver and gold plan in the applicable service areas.
This could result in fewer silver and gold plans available for
consumers to select, and thus less choice for consumers. It also could
complicate the calculation of the APTC for an individual market
consumer. By revising our regulation, we ensure that consumers have an
adequate choice of QHPs at different coverage levels to select from and
that we are able to calculate APTC for all eligible individual market
consumers.
For the proposals at Sec. 156.272 to require issuer participation
for the entirety of the period for which the plan was certified, we
considered taking no action. However, we are concerned that inaction
could result in limited access for qualified individuals and qualified
employees outside of open enrollment periods.
For the proposed changes to Sec. 156.290, we considered not making
any changes. However, that could have led to enrollees in plans that
are not certified for a subsequent, consecutive certification cycle not
knowing as soon as possible that they may have to choose another plan
during the annual open enrollment period.
For the proposals in part 158, we considered an alternative
proposal for addressing the impact of MLR and rebate calculation on new
and rapidly growing issuers. Specifically, we considered allowing new
and rapidly growing issuers to include in the MLR calculation rebates
they paid within the first 2 years of entering or expanding in a State
market, which would be similar to how the 3-year average calculation
was phased in for all issuers when the MLR requirements were first
implemented. However, in contrast to the initial years of
implementation of the MLR requirements, when all issuers had to
calculate their first two MLRs using only 1 or 2 years of data,
presently, as described in more detail in the preamble to this proposed
rule, only a small subset of issuers are affected by the 3-year
averaging in a manner that merits an adjustment. We note that inclusion
of rebates paid for prior years in the MLR calculation for the current
year is generally not appropriate for established and certain new
issuers, as it would distort the 3-year average and effectively lower
the MLR standards required by section 2718 of the PHS Act. Therefore,
the prior year rebate approach would need to be limited to only the new
and growing issuers that are adversely affected by the 3-year
averaging. In practice, it would be extremely challenging to define
enrollment or premium levels, growth rates, and patterns in year-over-
year changes in MLRs that would appropriately distinguish new and
growing issuers that are disadvantaged by the 3-year averaging from
issuers that merely experience ordinary enrollment fluctuations or
otherwise would gain an unfair advantage by being able to include prior
year rebates in their MLR calculation. Because the proposed approach of
limiting the total rebate liability payable with respect to a given
calendar year is designed to only benefit new and rapidly growing
issuers who are negatively impacted by the 3-year averaging, we believe
that the proposed approach is a more effective and objective way to
reduce barriers to entry and promote competition in health insurance
markets while at the same time preserving the protections promised to
consumers by the law.

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

[[Page 61527]]

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
program, which are intended to stabilize premiums as insurance market
reforms are implemented and Exchanges facilitate increased enrollment.
Because we believe that insurance firms offering comprehensive health
insurance policies generally exceed the size thresholds for ``small
entities'' established by the SBA, we do not believe that an initial
regulatory flexibility analysis is required for such firms.
For purposes of the RFA, we expect the following types of entities
to be affected by this proposed rule:
Health insurance issuers.
Group health plans.
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.
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 nine of these 118 potentially small entities, all of them
part of larger holding groups, are estimated to experience a decrease
in the rebate amount under the proposed amendments to the MLR
provisions of this proposed rule in part 158. Therefore, we do not
expect the proposed provisions of this rule regarding MLR to affect a
substantial number of small entities.
In this proposed rule, we proposed standards for employers that
choose to participate in a SHOP Exchange. The SHOPs generally 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 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 for SHOP eligibility and enrollment
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.

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 State,
local, or Tribal governments, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2016, that threshold is approximately $146 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 Exchanges 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 program. For States that elected to operate an
Exchange or, risk adjustment program, much of the initial cost of
creating these programs were funded by Exchange Planning and
Establishment Grants. After establishment, Exchanges must 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 determining standards relating to
health insurance that is offered in the individual and small group
markets. However, HHS anticipates that the Federalism implications (if
any) are substantially mitigated because under the statute and our
proposals, States have choices regarding the structure, governance, and
operations of their Exchanges and risk adjustment program. For example,
our proposals relating to binder payment rules and termination of
coverage are intended to provide State Exchanges with significant
flexibility. 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. Additionally, States have the
option to establish and operate their own SHOP without also
establishing and operating their own individual market Exchange. Our
proposals requiring SBE-FPs to establish requirements that are
consistent with certain Federal requirements when using the Federal
platform for certain SHOP functions would not apply should the State
decide not to use the Federal platform for these SHOP functions.
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

[[Page 61528]]

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 148

Administrative practice and procedure, Health care, Health
insurance, Penalties, 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, Advertising, Brokers,
Conflict of interest, Consumer protection, Grant administration, Grant
programs--health, Health care, Health insurance, Health maintenance
organizations (HMO), Health records, Hospitals, Indians, Individuals
with disabilities, Intergovernmental relations, Loan programs--health,
Medicaid, Organization and functions (Government agencies), Public
assistance programs, Reporting and recordkeeping requirements,
Technical assistance, Women and youth.

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 157

Employee benefit plans, Health insurance, Health maintenance
organizations (HMO), Health records, Hospitals, Indians, Individuals
with disabilities, Medicaid, Organization and functions (Government
agencies), Public assistance programs, Reporting and recordkeeping
requirements, Technical assistance, Women and 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, 148,
153, 154, 155, 156, 157 and 158 as set forth below.

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

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

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

0
2. Section 144.103 is amended by revising the introductory text of the
definition of ``plan'' and by revising the definition of ``product'' to
read as follows:

Sec. 144.103 Definitions.

* * * * *
Plan means, with respect to a product, the pairing of the health
insurance coverage benefits under the product with a particular cost-
sharing structure, provider network, and service area. The product
comprises all plans offered with those characteristics and the
combination of the service areas for all plans offered within a product
constitutes the total service area of the product. With respect to a
plan that has been modified at the time of coverage renewal consistent
with Sec. 147.106 of this subchapter--
* * * * *
Product means a discrete package of health insurance coverage
benefits that are offered using a particular product network type (such
as health maintenance organization, preferred provider organization,
exclusive provider organization, point of service, or indemnity) within
a service area. In the case of a product that has been modified,
transferred, or replaced, the new product will be considered to be the
same as the modified, transferred, or replaced product when the changes
to the modified, transferred, or replaced product meet the standards of
Sec. 146.152(f), Sec. 147.106(e), or Sec. 148.122(g) of this
subchapter (relating to uniform modification of coverage), as
applicable.
* * * * *

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

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

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

0
4. Section 146.152 is amended by adding paragraph (d)(3) and revising
paragraph (f)(3)(i) to read as follows:

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

* * * * *
(d) * * *
(3) For purposes of this paragraph (d), subject to applicable State
law, an issuer is not considered to have discontinued offering all
health insurance coverage in a market if--
(i) The issuer or a member of the issuer's controlled group
continues to offer and make available in the applicable market in the
State at least one product of the issuer that is considered to be the
same product as a product the issuer had been offering (as defined in
Sec. 144.103 of this subchapter). For purposes of this section, the
term controlled group means a group of two or more persons that is
treated as a single employer under section 52(a), 52(b), 414(m), or
414(o) of the Internal Revenue Code of 1986, as amended; or
(ii) The issuer continues to offer and make available at least one
product in the applicable market in the State, even if such product is
not considered to be the same product as a product the issuer had been
offering (as defined in Sec. 144.103 of this subchapter), provided the
issuer subjects that product to the rate review requirements under part
154 of this title (to the extent otherwise

[[Page 61529]]

applicable to coverage of the same type and in the same market) as if
that part applied to that product, and reasonably identifies a
discontinued product that corresponds to the new product for purposes
of such rate review.
* * * * *
(f) * * *
(3) * * *
(i) The product is offered by the same health insurance issuer
(within the meaning of section 2791(b)(2) of the PHS Act), or a member
of the issuer's controlled group (as defined in paragraph (d) of this
section);
* * * * *

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 paragraphs (d)(1) and (e) to
read as follows:

Sec. 147.102 Fair health insurance premiums.

* * * * *
(d) * * *
(1) Child age bands. (i) A single age band for individuals age 0
through 14.
(ii) One-year age bands for individuals age 15 through 20.
* * * * *
(e) Uniform age rating curves. Each State may establish a uniform
age rating curve in the individual or small group market, or both
markets, for rating purposes under paragraph (a)(1)(iii) of this
section. If a State does not establish a uniform age rating curve or
provide information on such age curve in accordance with Sec. 147.103,
a default uniform age rating curve specified in guidance by the
Secretary to reflect market patterns in the individual and small group
markets will apply in that State that takes into account the rating
variation permitted for age under State law.
* * * * *
0
7. Section 147. 104 is amended by revising paragraph (b)(2) to read as
follows:

Sec. 147.104 Guaranteed availability of coverage.

* * * * *
(b) * * *
(2) Limited open enrollment periods. A health insurance issuer in
the individual market must provide a limited open enrollment period for
the events described in Sec. 155.420(d) of this subchapter, excluding
Sec. Sec. 155.420(d)(3) of this subchapter (concerning citizenship
status), 155.420(d)(8) of this subchapter (concerning Indians),
155.420(d)(9) of this subchapter (concerning exceptional
circumstances), and 155.420(d)(13) of this subchapter (concerning
eligibility for insurance affordability programs or enrollment in the
Exchange).
* * * * *
0
8. Section 147.106 is amended by adding paragraph (d)(3) and revising
paragraphs (e)(3)(i) to read as follows:

Sec. 147.106 Guaranteed renewability of coverage.

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

0
9. The authority citation for part 148 continues to read as follows:

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

0
10. Section 148.122 is amended by adding paragraph (e)(4) and revising
paragraph (g)(3)(i) to read as follows:

Sec. 148.122 Guaranteed renewability of individual health insurance
coverage.

* * * * *
(e) * * *
(4) For purposes of this paragraph (e), subject to applicable State
law, an issuer is not considered to have discontinued offering all
health insurance coverage in a market if--
(i) The issuer or a member of the issuer's controlled group
continues to offer and make available in the applicable market in the
State at least one product of the issuer that is considered to be the
same product as a product the issuer had been offering (as defined in
Sec. 144.103 of this subchapter). For purposes of this section, the
term controlled group means a group of two or more persons that is
treated as a single employer under section 52(a), 52(b), 414(m), or
414(o) of the Internal Revenue Code of 1986, as amended; or
(ii) The issuer continues to offer and make available at least one
product in the applicable market in the State, even if such product is
not considered to be the same product as a product the issuer had been
offering (as defined in Sec. 144.103 of this subchapter), provided the
issuer subjects that product to the rate review requirements under part
154 of this title (to the extent otherwise applicable to coverage of
the same type and in the same market) as if that part applied to that
product, and reasonably identifies a discontinued product that
corresponds to the new product for purposes of such rate review.
* * * * *
(g) * * *
(3) * * *
(i) The product is offered by the same health insurance issuer
(within the meaning of section 2791(b)(2) of the PHS Act) or member of
the issuer's controlled group (as defined in paragraph (e) of this
section);
* * * * *

[[Page 61530]]

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

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

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

Sec. 153.20 [Amended]

0
12. Section 153.20 is amended by removing the definition of ``Large
employer''.
0
13. Section 153.320 is amended by revising paragraphs (a)(1) and
(b)(1)(i) to read as follows:

Sec. 153.320 Federally certified risk adjustment methodology.

(a) * * *
(1) The risk adjustment methodology is developed by HHS and
published in advance of the benefit year in rulemaking; or
* * * * *
(b) * * *
(1) * * *
(i) Draft factors to be employed in the model, including but not
limited to demographic factors, diagnostic factors, and utilization
factors, if any, the dataset(s) to be used to calculate final
coefficients, and the date by which final coefficients will be released
in guidance;
* * * * *
0
14. Section 153.610 is amended by revising paragraph (f)(2) to read as
follows:

Sec. 153.610 Risk adjustment issuer requirements.

* * * * *
(f) * * *
(2) Remit to HHS an amount equal to the product of its monthly
billable enrollment in the risk adjustment covered plan multiplied by
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.
0
15. Section 153.630 is amended by--
0
a. Redesignating paragraphs (b)(7)(iii) and (iv) as paragraphs
(b)(7)(iv) and (v), respectively;
0
b. Adding a new paragraph (b)(7)(iii); and
0
c. Revising paragraph (d).
The addition and revision read as follows:

Sec. 153.630 Data validation requirements when HHS operates risk
adjustment.

* * * * *
(b) * * *
(7) * * *
(iii) Beginning in the 2018 benefit year, validating enrollee
health status through review of all relevant paid pharmacy claims;
* * * * *
(d) Risk adjustment data validation disputes and appeals. (1)
Within 15 calendar days of notification of the initial validation audit
sample determined by HHS, in the manner set forth by HHS, an issuer
must confirm the sample or file a discrepancy report to dispute the
initial validation audit sample determined by HHS.
(2) Within 30 calendar days of notification of the findings of a
second validation audit or the calculation of a risk score error rate,
in the manner set forth by HHS, an issuer must confirm the audit or
error rate, or file a discrepancy report to dispute the findings of a
second validation audit or the calculation of a risk score error rate
as result of risk adjustment data validation.
(3) An issuer may appeal the findings of a second validation audit
or the calculation of a risk score error rate as result of risk
adjustment data validation, under the process set forth in Sec.
156.1220 of this subchapter.
* * * * *

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

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

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

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

Sec. 154.102 Definitions.

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

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

0
18. 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
19. Section 155.20 is amended by revising the definition of
``standardized option'' to read as follows:

Sec. 155.20 Definitions.

* * * * *
Standardized option means a QHP offered for sale through an
individual market Exchange that either--
(1) Has a standardized cost-sharing structure specified by HHS in
rulemaking; or
(2) Is a high deductible health plan with a standardized cost-
sharing structure specified by HHS in rulemaking or in HHS guidance
issued solely to modify the cost-sharing structure specified by HHS in
rulemaking to the extent necessary to align with high deductible health
plan requirements under section 223 of the Internal Revenue Code of
1986, as amended, and HHS actuarial value requirements.
* * * * *
0
20. Section 155.200 is amended by adding paragraph (f)(4) to read as
follows:

Sec. 155.200 Functions of an Exchange.

* * * * *
(f) * * *
(4) A State Exchange on the Federal platform that utilizes the
Federal platform for certain SHOP functions, as set forth in paragraphs
(f)(4)(i) through (vii), must--
(i) If utilizing the Federal platform for SHOP eligibility,
enrollment, or premium aggregation functions, establish standard
processes for premium calculation, premium payment, and premium
collection that are consistent with the requirements applicable in a
Federally-facilitated SHOP under Sec. 155.705(b)(4);
(ii) If utilizing the Federal platform for SHOP enrollment or
premium aggregation functions, require its QHP issuers to make any
changes to rates in accordance with the timeline applicable in a
Federally-facilitated SHOP under Sec. 155.705(b)(6)(i)(A);
(iii) If utilizing the Federal platform for SHOP enrollment
functions, establish minimum participation rate requirements and
calculation methodologies that are consistent with those applicable in
a Federally-facilitated SHOP under Sec. 155.705(b)(10);
(iv) If utilizing the Federal platform for SHOP enrollment or
premium aggregation functions, establish employer contribution
methodologies that are consistent with the

[[Page 61531]]

methodologies applicable in a Federally-facilitated SHOP under Sec.
155.705(b)(11)(ii);
(v) If utilizing the Federal platform for SHOP enrollment
functions, establish annual employee open enrollment period
requirements that are consistent with Sec. 155.725(e)(2);
(vi) If utilizing the Federal platform for SHOP enrollment
functions, establish effective dates of coverage for an initial group
enrollment or a group renewal that are consistent with the effective
dates of coverage applicable in a Federally-facilitated SHOP under
Sec. 155.725(h)(2); and
(vii) If utilizing the Federal platform for SHOP eligibility,
enrollment, or premium aggregation functions, establish policies for
the termination of SHOP coverage or enrollment that are consistent with
the requirements applicable in a Federally-facilitated SHOP under Sec.
155.735.
0
21. Section 155.205 is amended by revising paragraphs (c)(2)(iii)(A)
and (B) to read as follows:

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

* * * * *
(c) * * *
(2) * * *
(iii) * * *
(A) For Exchanges and QHP issuers, beginning no later than the
first day of the individual market open enrollment period for the 2017
benefit year, this standard also includes taglines on Web site content
and any document that is critical for obtaining health insurance
coverage or access to health care services through a QHP for qualified
individuals, applicants, qualified employers, qualified employees, or
enrollees. A document is deemed to be critical for obtaining health
insurance coverage or access to health care services through a QHP if
it is required to be provided by law or regulation to a qualified
individual, applicant, qualified employer, qualified employee, or
enrollee. Such taglines must indicate the availability of language
services in at least the top 15 languages spoken by the limited English
proficient population of the relevant State or States, as determined in
guidance published by the Secretary. If an Exchange is operated by an
entity operating multiple Exchanges, or relies on an eligibility or
enrollment platform that is relied on by multiple Exchanges, the
Exchange may aggregate the limited English proficient populations
across all the States served by the entity that operates the Exchange
or its eligibility or enrollment platform to determine the top 15
languages required for taglines. A QHP issuer may aggregate the limited
English proficient populations across all States served by the health
insurance issuers within the issuer's controlled group (as defined
under Sec. 147.106(d)(3)(i) of this subchapter), whether or not those
health insurance issuers offer plans through the Exchange in each of
those States, to determine the top 15 languages required for taglines.
Exchanges and QHP issuers may satisfy tagline requirements with respect
to Web site content if they post a Web link prominently on their home
page that directs individuals to the full text of the taglines
indicating how individuals may obtain language assistance services, and
if they also include taglines on any critical standalone document
linked to or embedded in the Web site.
(B) For an agent or broker subject to Sec. 155.220(c)(3)(i),
beginning on the first day of the individual market open enrollment
period for the 2017 benefit year, or when such entity has been
registered with the Exchange for at least 1 year, whichever is later,
this standard also includes taglines on Web site content and any
document that is critical for obtaining health insurance coverage or
access to health care services through a QHP for qualified individuals,
applicants, qualified employers, qualified employees, or enrollees. A
document is deemed to be critical for obtaining health insurance
coverage or access to health care services through a QHP if it is
required to be provided by law or regulation to a qualified individual,
applicant, qualified employer, qualified employee, or enrollee. Such
taglines must indicate the availability of language services in at
least the top 15 languages spoken by the limited English proficient
population of the relevant State or States, as determined in guidance
published by the Secretary. An agent or broker subject to Sec.
155.220(c)(3)(i) that is licensed in and serving multiple States may
aggregate the limited English populations in the States it serves to
determine the top 15 languages required for taglines. An agent or
broker subject to Sec. 155.220(c)(3)(i) may satisfy tagline
requirements with respect to Web site content if it posts a Web link
prominently on its home page that directs individuals to the full text
of the taglines indicating how individuals may obtain language
assistance services, and if it also includes taglines on any critical
standalone document linked to or embedded in the Web site.
* * * * *
0
22. Section 155.220 is amended by:
0
a. Revising paragraph (c)(3)(i)(E);
0
b. Removing the word ``and'' at the end of paragraph (c)(3)(i)(F);
0
c. Removing the period at the end of paragraph (c)(3)(i)(G) and adding
``; and'' in its place;
0
d. Adding paragraphs (c)(3)(i)(H) through (M);
0
e. Revising paragraphs (c)(4)(i)(E); and
0
f. Revising paragraph (j)(2)(i).
The additions and revisions 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) * * *
(3)(i) * * *
(E) Maintain audit trails and records in an electronic format for a
minimum of ten years and cooperate with any audit under this section;
* * * * *
(H) Differentially display all standardized options in accordance
with the requirements under Sec. 155.205(b)(1) in a manner consistent
with that adopted by HHS for display on the Federally-facilitated
Exchange Web site, unless HHS approves a deviation;
(I) Prominently display information provided by HHS pertaining to a
consumer's eligibility for advance payments of the premium tax credit
or cost-sharing reductions;
(J) Allow the consumer to select an amount for advance payments of
the premium tax credit, if applicable, and make related attestations in
accordance with Sec. 155.310(d)(2);
(K) Support post-enrollment activities necessary for the consumer
to effectuate his or her coverage or resolve issues related to his or
her enrollment, including discrepancies related to eligibility;
(L) Demonstrate operational readiness and compliance with
applicable requirements prior to the agent or broker's Internet Web
site being used to complete the QHP selection; and
(M) HHS may immediately suspend the agent or broker's ability to
transact information with the Exchange if HHS discovers circumstances
that pose unacceptable risk to Exchange operations or Exchange
information technology systems until the incident or breach is remedied
or sufficiently mitigated to HHS's satisfaction.
* * * * *
(4)(i) * * *
(E) Report to HHS and applicable State departments of insurance any
potential material breach of the standards in paragraphs (c) and (d) of
this section, or the agreement entered into under Sec. 155.260(b), by
the agent or

[[Page 61532]]

broker accessing the Internet Web site, should it become aware of any
such potential breach. An agent or broker that provides access to its
Web site or ability to transact information with HHS to another agent
or broker Web site is responsible for ensuring that the other agent's
or broker's Web site is in compliance with this section; and
* * * * *
(j) * * *
(2)(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 (including by having a direct enrollment Web site that HHS
determines could mislead a consumer into believing they are visiting
HealthCare.gov), coercive, or discriminates based on race, color,
national origin, disability, age, sex, gender identity, or sexual
orientation;
* * * * *
0
23. Section 155.230 is amended by revising paragraph (d)(2) and adding
paragraph (d)(3) to read as follows:

Sec. 155.230 General standards for Exchange notices.

* * * * *
(d) * * *
(2) Unless otherwise required by Federal or State law, the SHOP
must provide required notices electronically or, if an employer or
employee elects, through standard mail. If notices are provided
electronically, the SHOP must comply with the requirements for
electronic notices in 42 CFR 435.918(b)(2) through (5) for the employer
or employee.
(3) In the event that an individual market Exchange or SHOP is
unable to send select required notices electronically due to technical
limitations, it may instead send these notices through standard mail,
even if an election has been made to receive such notices
electronically.
0
24. Section 155.330 is amended by revising paragraphs (d)(1)(ii),
(e)(2)(i) introductory text, and (g)(1) and adding paragraph
(e)(2)(iii) to read as follows:

Sec. 155.330 Eligibility redetermination during a benefit year.

* * * * *
(d) * * *
(1) * * *
(ii) For an enrollee on whose behalf advance payments of the
premium tax credit or cost-sharing reductions are being provided,
eligibility determinations for or enrollment in Medicare, Medicaid,
CHIP, or the Basic Health Program, if a Basic Health Program is
operating in the service area of the Exchange.
* * * * *
(e) * * *
(2) * * *
(i) Except as provided in paragraph (e)(2)(iii) of this section, if
the Exchange identifies updated information regarding death, in
accordance with paragraph (d)(1)(i) of this section, or regarding any
factor of eligibility not regarding income, family size, or family
composition, or tax filing status, the Exchange must--
* * * * *
(iii) If the Exchange identifies updated information that the tax
filer for the enrollee's household or the tax filer's spouse did not
comply with the requirements described in Sec. 155.305(f)(4), the
Exchange when redetermining and providing notification of eligibility
for advance payments of the premium tax credit must:
(A) Follow the procedures specified in paragraph (e)(2)(i) of this
section;
(B) Follow the procedures in guidance published by the Secretary;
or
(C) Follow alternative procedures approved by the Secretary based
on a showing by the Exchange that the alternative procedures would
facilitate continued enrollment in coverage with financial assistance
for which the enrollee remains eligible, provide appropriate
information about the process to the enrollee (including regarding any
action by the enrollee necessary to obtain the most accurate
redetermination of eligibility), and provide adequate program integrity
protections and safeguards for Federal tax information under section
6103 of the Internal Revenue Code with respect to the confidentiality,
disclosure, maintenance, or use of such information.
* * * * *
(g) * * *
(1) When an eligibility redetermination in accordance with this
section results in a change in the amount of advance payments of the
premium tax credit for the benefit year, the Exchange must:
(i) Recalculate the amount of advance payments of the premium tax
credit in such a manner as to account for any advance payments already
made on behalf of the tax filer for the benefit year for which
information is available to the Exchange, such that the recalculated
advance payment amount is projected to result in total advance payments
for the benefit year that correspond to the tax filer's total projected
premium tax credit for the benefit year, calculated in accordance with
26 CFR 1.36B-3 (or, if less than zero, be set at zero); or
(ii) For benefit years through 2023, recalculate advance payments
of the premium tax credit using an alternate method that has been
approved by the Secretary.
* * * * *
0
25. Section 155.400 is amended by adding paragraph (e)(2) to read as
follows:

Sec. 155.400 Enrollment of qualified individuals into QHPs.

* * * * *
(e) * * *
(2) Premium payment deadline extension. Exchanges may, and the
Federally-facilitated Exchange will, allow issuers experiencing billing
or enrollment problems due to high volume or technical errors to
implement a reasonable extension of the binder payment deadlines in
paragraph (e)(1) of this section.
* * * * *
0
26. Section 155.420 is amended by:
0
a. Revising paragraphs (b)(2)(iii), (d)(1)(i) and (iii), and (d)(8);
0
b. Removing the period at the end of paragraph (d)(10) and adding a
semicolon in its place; and
0
c. Adding paragraphs (d)(10), (11), (12), and (13).
The revisions and additions read as follows:

Sec. 155.420 Special enrollment periods.

* * * * *
(b) * * *
(2) * * *
(iii) In the case of a qualified individual or enrollee eligible
for a special enrollment period as described in paragraph (d)(4), (5),
(9), (11), (12), or (13) of this section, the Exchange must ensure that
coverage is effective on an appropriate date based on the circumstances
of the special enrollment period.
* * * * *
(d) * * *
(1) * * *
(i) Loses minimum essential coverage. The date of the loss of
coverage is the last day the consumer would have coverage under his or
her previous plan or coverage;
* * * * *
(iii) Loses pregnancy-related coverage described under section
1902(a)(10)(A)(i)(IV) and (a)(10)(A)(ii)(IX) of the Act (42 U.S.C.
1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX)). The date of the loss of
coverage is the last day the consumer would have pregnancy-related
coverage; or
* * * * *

[[Page 61533]]

(8) The qualified individual--
(i) Who gains or maintains status as an Indian, as defined by
section 4 of the Indian Health Care Improvement Act, may enroll in a
QHP or change from one QHP to another one time per month; or
(ii) Who is or becomes a dependent of an Indian, as defined by
section 4 of the Indian Health Care Improvement Act and is enrolled or
is enrolling in a QHP through an Exchange on the same application as
the Indian, may change from one QHP to another one time per month, at
the same time as the Indian;
* * * * *
(10) A qualified individual or enrollee--
(i) Is a victim of domestic abuse or spousal abandonment, as
defined by 26 CFR 1.36B-2T, as amended, including a dependent or
unmarried victim within a household, is enrolled in minimum essential
coverage and seeks to enroll in coverage separate from the perpetrator
of the abuse or abandonment; or
(ii) Is a dependent of a victim of domestic abuse or spousal
abandonment, on the same application as the victim, may enroll in
coverage at the same time as the victim;
(11) A qualified individual or dependent--
(i) Applies for coverage on the Exchange during the annual open
enrollment period or due to a qualifying life event, is assessed by the
Exchange as potentially eligible for Medicaid or the Children's Health
Insurance Program (CHIP), and is determined ineligible for Medicaid or
CHIP by the State Medicaid or CHIP agency either after open enrollment
has ended or more than 60 days after the qualifying event; or
(ii) Applies for coverage at the State Medicaid or CHIP agency
during the annual open enrollment period, and is determined ineligible
for Medicaid or CHIP after open enrollment has ended;
(12) The qualified individual or enrollee, or his or her dependent,
adequately demonstrates to the Exchange that a material error related
to plan benefits, service area, or premium influenced the qualified
individual's or enrollee's decision to purchase a QHP; or
(13) At the option of the Exchange, the qualified individual
provides satisfactory documentary evidence to verify his or her
eligibility for an insurance affordability program or enrollment in a
qualified health plan through the Exchange following termination of
Exchange enrollment due to a failure to verify such status within the
time period specified in Sec. 155.315 or is under 100 percent of the
Federal poverty level and did not enroll in coverage while waiting for
HHS to verify his or her citizenship, status as a national, or lawful
presence.
* * * * *
0
27. Section 155.430 is amended by revising paragraph (b)(2)(iii) to
read as follows:

Sec. 155.430 Termination of Exchange enrollment or coverage.

* * * * *
(b) * * *
(2) * * *
(iii) The enrollee's coverage is rescinded in accordance with Sec.
147.128 of this subchapter, after a QHP issuer demonstrates, to the
reasonable satisfaction of the Exchange, if required by the Exchange,
that the rescission is appropriate;
* * * * *
0
28. Section 155.505 is amended by adding paragraph (h) to read as
follows:

Sec. 155.505 General eligibility appeals requirements.

* * * * *
(h) Electronic requirements. If the Exchange appeals entity cannot
fulfill the electronic requirements of subparts C, D, F, and H of this
part related to acceptance of telephone- or Internet-based appeal
requests, the provision of appeals notices electronically, or the
secure electronic transfer of eligibility and appeal records between
appeals entities and Exchanges or Medicaid or CHIP agencies, the
Exchange appeals entity may fulfill those requirements that it cannot
fulfill electronically using a secure and expedient paper-based
process.
0
29. Section 155.555 is amended by revising paragraph (b) to read as
follows:

Sec. 155.555 Employer appeals process.

* * * * *
(b) Exchange employer appeals process. An Exchange may establish an
employer appeals process in accordance with the requirements of this
section and Sec. Sec. 155.505(f) through (h) and 155.510(a)(1) and (2)
and (c). Where an Exchange has not established an employer appeals
process, HHS will provide an employer appeals process that meets the
requirements of this section and Sec. Sec. 155.505(f) through (h) and
155.510(a)(1) and (2) and (c).
* * * * *
0
30. Section 155.725 is amended by revising paragraphs (g)(1) and (2)
and (j)(2)(i) and adding paragraph (g)(3) to read as follows:

Sec. 155.725 Enrollment periods under SHOP.

* * * * *
(g) * * *
(1) The SHOP must provide an employee who becomes a qualified
employee outside of the initial or annual open enrollment period with a
30-day enrollment period beginning on the date the qualified employer
notifies the SHOP about the newly qualified employee. Qualified
employers must notify the SHOP about a newly qualified employee on or
before the thirtieth day after the day that the employee becomes
eligible for coverage.
(2) The effective date of coverage for a QHP selection received by
the SHOP from a newly qualified employee is the first day of the month
following plan selection, unless the employee is subject to a waiting
period consistent with Sec. 147.116 of this subchapter and paragraph
(g)(3) of this section, in which case the effective date will be on the
first day of the month following the end of the waiting period, but in
no case may the effective date fail to comply with Sec. 147.116 of
this subchapter. If a newly qualified employee's waiting period ends on
the first day of a month and the employee has already made a plan
selection by that date, coverage must take effect on that date. If a
newly qualified employee makes a plan selection on the first day of a
month and any applicable waiting period has ended by that date,
coverage must be effective on that date. If a qualified employer with
variable hour employees makes regularly having a specified number of
hours of service per period, or working full-time, a condition of
employee eligibility for coverage offered through a SHOP, any
measurement period that the qualified employer elects to use under
Sec. 147.116(c)(3)(i) to determine whether an employee meets the
applicable eligibility conditions with respect to coverage offered
through the SHOP must not exceed 10 months, beginning on any date
between the employee's start date and the first day of the first
calendar month following the employee's start date.
(3) Waiting periods in a SHOP are calculated beginning on the date
the employee becomes eligible for coverage, regardless of when a
qualified employer notifies the SHOP about the newly qualified
employee, and must not exceed 60 days in length. Waiting periods in a
Federally-facilitated SHOP or a State-based SHOP that uses the Federal
platform for SHOP eligibility or enrollment functions must be 0, 15,
30, 45 or 60 days in length.
* * * * *
(j) * * *
(2) * * *
(i) Experiences an event described in Sec. 155.420(d)(1) (other
than paragraph

[[Page 61534]]

(d)(1)(ii)), or experiences an event described in Sec. 155.420(d)(2),
(4), (5), (7), (8), (9), (10), (11), or (12);
* * * * *
0
31. Section 155.740 is amended by revising paragraph (b)(2) to read as
follows:

Sec. 155.740 SHOP employer and employee eligibility appeals
requirements.

* * * * *
(b) * * *
(2) The appeals entity must conduct appeals in accordance with the
requirements established in this section and Sec. Sec. 155.505(e)
through (h) and 155.510(a)(1) and (2) and (c).
* * * * *
0
32. Section 155.1090 is added to subpart K to read as follows:

Sec. 155.1090 Request for reconsideration.

(a) Request for reconsideration of denial of certification specific
to a Federally-facilitated Exchange--(1) Request for reconsideration.
The Federally-facilitated Exchanges will permit an issuer that has
submitted a complete application to a Federally-facilitated Exchange
for certification of a health plan as a QHP and is denied certification
to request reconsideration of such action.
(2) Form and manner of request. An issuer submitting a request for
reconsideration under paragraph (a)(1) of this section must submit a
written request for reconsideration to HHS, in the form and manner
specified by HHS, within 7 calendar days of the date of the written
notice of denial of certification. The issuer must include any and all
documentation the issuer wishes to provide in support of its request
with its request for reconsideration.
(3) HHS reconsideration decision. HHS will provide the issuer with
a written notice of the reconsideration decision. The decision will
constitute HHS's final determination.
(b) [Reserved]

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

0
33. 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
34. Section 156.80 is amended by revising paragraph (d)(1) to read as
follows:

Sec. 156.80 Single risk pool.

* * * * *
(d) * * *
(1) In general. A health insurance issuer must establish an index
rate that is effective January 1 of each calendar year for a State
market described in paragraphs (a) through (c) of this section.
(i) The index rate must be based on the total combined claims costs
for providing essential health benefits within the single risk pool of
that State market.
(ii) The index rate must be adjusted on a market-wide basis for the
State based on the total expected market-wide payments and charges
under the risk adjustment program and Exchange user fees (expected to
be remitted under Sec. 156.50(b) or (c) and (d) as applicable plus the
dollar amount under Sec. 156.50(d)(3)(i) and (ii) expected to be
credited against user fees payable for that State market).
(iii) The index rate must be calibrated on a market-wide basis to
correspond to an age rating factor of 1.0, a geographic rating factor
of 1.0, and a tobacco use rating factor of 1.0, in a manner specified
by the Secretary in guidance.
(iv) The premium rate for all of the health insurance issuer's
plans in the relevant State market must use the applicable market-wide
adjusted index rate, subject only to the plan-level adjustments
permitted in paragraph (d)(2) of this section.
* * * * *
0
35. Section 156.140 is amended by revising paragraph (c) to read as
follows:

Sec. 156.140 Levels of coverage.

* * * * *
(c) De minimis variation. The allowable variation in the AV of a
health plan that does not result in a material difference in the true
dollar value of the health plan is 2 percentage points,
except if a health plan under paragraph (b)(1) of this section (a
bronze health plan) either covers and pays for at least one major
service, other than preventive services, before the deductible or meets
the requirements to be a high deductible high plan within the meaning
of 26 U.S.C. 223(c)(2), in which case the allowable variation in AV for
such plan is -2 percentage points and +5 percentage points.
0
36. Section 156.200 is amended by revising paragraph (c)(1) to read as
follows:

Sec. 156.200 QHP issuer participation standards.

* * * * *
(c) * * *
(1) At least one QHP in the silver coverage level and at least one
QHP in the gold coverage level as described in Sec. 156.140 throughout
each service area in which it offers coverage through the Exchange;
and,
* * * * *
0
37. Section 156.235 is 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. 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; 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 providers in the plan's service area.
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; and
* * * * *
0
38. Section 156.265 is amended by:
0
a. Removing the word ``and'' at the end of paragraph (b)(3)(ii);
0
b. Removing the period at the end of paragraph (b)(3)(iii) and adding
``; and'' in its place; and
0
c. Adding paragraph (b)(3)(iv).
The addition reads as follows:

Sec. 156.265 Enrollment process for qualified individuals.

* * * * *
(b) * * *
(3) * * *
(iv) Differentially display all standardized options in accordance
with the requirements under Sec. 155.205(b)(1) of this subchapter in a
manner consistent with that adopted by HHS for display on the
Federally-

[[Page 61535]]

facilitated Exchange Web site, unless HHS approves a deviation.
* * * * *
0
39. Section 156.272 is added to read as follows:

Sec. 156.272 Issuer participation for full plan year.

(a) An issuer offering a QHP through an individual market Exchange
must make the QHP available for enrollment through the Exchange for the
full plan year for which the plan was certified, including to eligible
enrollees during limited open enrollment periods, unless a basis for
suppression applies under Sec. 156.815.
(b) Unless a basis for suppression under section 156.815 applies,
an issuer offering a QHP through a SHOP must make the QHP available for
enrollment through the SHOP for the full plan year for which the QHP
was certified.
(c) An issuer offering a QHP through a Federally-facilitated
Exchange or a Federally-facilitated SHOP that does not comply with
paragraph (a) or (b) of this section may, at the discretion of HHS, be
precluded from offering QHPs in a Federally-facilitated Exchange or
Federally-facilitated SHOP for up to the two succeeding plan years.
0
40. Section 156.290 is amended by revising the section heading and
paragraphs (a) introductory text and (b) to read as follows:

Sec. 156.290 Non-certification and decertification of QHPs.

(a) Non-certification for a subsequent, consecutive certification
cycle. If a QHP issuer elects not to seek certification for a
subsequent, consecutive certification cycle with the Exchange, the QHP
issuer, at a minimum, must--
* * * * *
(b) Notice of QHP non-certification for a subsequent, consecutive
certification cycle. (1) If a QHP issuer elects not to seek
certification for a subsequent, consecutive certification cycle with
the Exchange for its QHP, the QHP issuer must provide written notice to
each enrollee.
(2) If a QHP issuer is denied certification for a subsequent,
consecutive certification cycle by the Exchange, it must provide
written notice to each enrollee within 30 days of the Exchange's denial
of certification.
* * * * *
0
41. Section 156.350 is amended by revising paragraph (a)(2) 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) * * *
(2) Section 156.285(c)(5) and (c)(8)(iii) regarding the enrollment
process for SHOP; and
* * * * *
0
42. Section 156.430 is amended by adding paragraph (h) to read as
follows:

Sec. 156.430 Payment for cost-sharing reductions.

* * * * *
(h) Reconciliation of the cost-sharing reduction portion of advance
payments discrepancies and appeals. (1) If an issuer reports a
discrepancy and seeks to dispute the notification of the amount of
reconciliation of the cost-sharing reduction portion of advance
payments, it must report the discrepancy to HHS within 30 calendar days
of notification of the amount of reconciliation of the cost-sharing
reduction portion of advance payments as described in paragraph (e) of
this section, in the manner set forth by HHS.
(2) An issuer may appeal the amount of reconciliation of the cost-
sharing reduction portion of advance payments, under the process set
forth in Sec. 156.1220.
0
43. Section 156.715 is amended by adding paragraph (f) to read as
follows:

Sec. 156.715 Compliance reviews of QHP issuer in Federally-
facilitated Exchanges.

* * * * *
(f) Failure to comply. A QHP issuer that fails to comply with a
compliance review under this section may be subject to enforcement
remedies under subpart I of this part.
0
44. Section 156.1220 is amended by--
0
a. Removing the word ``or'' at the end of paragraph (a)(1)(v);
0
b. Removing the period at the end of paragraph (a)(1)(vi) and adding
``; or'' in its place;
0
c. Adding paragraph (a)(1)(vii) and (viii); and
0
d. Revising paragraphs (a)(2), (a)(3)(ii), and (a)(4)(ii).
The revisions and additions read as follows:

Sec. 156.1220 Administrative appeals.

(a) * * *
(1) * * *
(vii) The findings of a second validation audit as a result of risk
adjustment data validation with respect to risk adjustment data for the
2016 benefit year and beyond; or
(viii) The calculation of a risk score error rate as a result of
risk adjustment data validation with respect to risk adjustment data
for the 2016 benefit year and beyond.
(2) Materiality threshold. Notwithstanding paragraph (a)(1) of this
section, an issuer may file a request for reconsideration under this
section only if the amount in dispute under paragraph (a)(1)(i) through
(viii) of this section, as applicable, is equal to or exceeds 1 percent
of the applicable payment or charge listed in that paragraph (a)(1)(i)
through (viii) payable to or due from the issuer for the benefit year,
or $10,000, whichever is less.
(3) * * *
(ii) For a risk adjustment payment or charge, including an
assessment of risk adjustment user fees, the findings of a second
validation audit, or the calculation of a risk score error rate as a
result of risk adjustment data validation, within 30 calendar days of
the date of the notification under Sec. 153.310(e) 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, the issuer notified HHS of the
dispute through the applicable process for reporting a discrepancy set
forth in Sec. Sec. 153.630(d)(2), 153.710(d)(2), and 156.430(h)(1) of
this subchapter, it was so identified and remains unresolved.
* * * * *
0
45. Section 156.1230 is amended by adding paragraphs (b)(1), (2), and
(3) to read as follows:

Sec. 156.1230 Direct enrollment with the QHP issuer in a manner
considered to be through the Exchange.

* * * * *
(b) * * *
(1) HHS may immediately suspend the QHP issuer's ability to
transact information with the Exchange if HHS discovers circumstances
that pose unacceptable risk to Exchange operations or Exchange
information technology systems until the incident or breach is remedied
or sufficiently mitigated to HHS's satisfaction.
(2) The QHP issuer must demonstrate operational readiness and
compliance with applicable requirements prior to the QHP issuer's
Internet Web site being used to complete a QHP selection.
(3) The QHP issuer must 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 (including by having a direct enrollment Web
site that HHS

[[Page 61536]]

determines could mislead a consumer into believing they are visiting
HealthCare.gov), coercive, or discriminates based on race, color,
national origin, disability, age, sex, gender identity, or sexual
orientation.
0
46. Section 156.1256 is revised to read as follows:

Sec. 156.1256 Other notices.

As directed by a Federally-facilitated Exchange, a health insurance
issuer that is offering QHP coverage through a Federally-facilitated
Exchange or a State-based Exchange on the Federal platform 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)(12) of this subchapter, within 30 calendar days after
being notified by a Federally-facilitated Exchange that the error has
been fixed, if directed to do so by a Federally-facilitated Exchange.

PART 157--EMPLOYER INTERACTIONS WITH EXCHANGES AND SHOP
PARTICIPATION

0
47. The authority citation for part 157 continues to read as follows:

Authority: Title I of the Affordable Care Act, Sections 1311,
1312, 1321, 1411, 1412, Pub. L. 111-148, 124 Stat. 199.

0
48. Section 157.205 is amended by revising paragraph (f)(1) to read as
follows:

Sec. 157.205 Qualified employer participation in a SHOP.

* * * * *
(f) * * *
(1) Newly eligible dependents and, on or before the thirtieth day
after the day that the employee becomes eligible for coverage, newly
qualified employees; and
* * * * *

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

0
49. 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
50. Section 158.121 is revised to read as follows:

Sec. 158.121 Newer experience.

If, for any aggregation as defined in Sec. 158.120, 50 percent or
more of the total earned premium for an MLR reporting year is
attributable to policies newly issued in that MLR reporting year, then
the experience of these policies may be excluded from the report
required under Sec. 158.110 for that same MLR reporting year. If an
issuer chooses to defer reporting of newer business as provided in this
section, then the excluded experience must be added to the experience
reported in the following MLR reporting year.
0
51. Section 158.232 is amended by revising paragraphs (d)(1) and (2)
and (e)(1) and (2) and adding paragraph (f) to read as follows:

Sec. 158.232 Calculating the credibility adjustment.

* * * * *
(d) * * *
(1) Each year in the aggregation included experience of at least
1,000 life-years; and
(2) The issuer's preliminary MLR, as defined under paragraph (f) of
this section, for each year in the aggregation was below the applicable
MLR standard, as established under Sec. Sec. 158.210 and 158.211.
(e) * * *
(1) Each year in the aggregation included experience of at least
1,000 life-years; and
(2) The issuer's preliminary MLR, as defined under paragraph (f) of
this section, for each year in the aggregation was below the applicable
MLR standard, as established under Sec. Sec. 158.210 and 158.211.
(f) Preliminary MLR. Preliminary MLR means the ratio of the
numerator, as defined in Sec. 158.221(b) and calculated as of March
31st of the year following the year for which the MLR report required
in Sec. 158.110 is being submitted, to the denominator, as defined in
Sec. 158.221(c), calculated using only a single year of experience,
and without applying any credibility adjustment.
0
52. Section 158.240 is amended by--
0
a. Revising paragraph (c)(1);
0
b. Redesignating paragraphs (d) and (e) as paragraphs (e) and (f),
respectively; and
0
c. Adding a new paragraph (d).
The revision and addition read as follows:

Sec. 158.240 Rebating premium if the applicable medical loss ratio
standard is not met.

* * * * *
(c) * * *
(1) For each MLR reporting year, an issuer must rebate to the
enrollee, subject to paragraph (d) of this section, the total amount of
premium revenue, as defined in Sec. 158.130, received by the issuer
from the enrollee, after subtracting Federal and State taxes and
licensing and regulatory fees as provided in Sec. Sec. 158.161(a) and
158.162(a)(1) and (b)(1), and after accounting for payments or receipts
for risk adjustment, risk corridors, and reinsurance as provided in
Sec. 158.130(b)(5), multiplied by the difference between the MLR
required by Sec. 158.210 or Sec. 158.211, and the issuer's MLR as
calculated under Sec. 158.221.
* * * * *
(d) Limitation on total rebate payable for each year in the
aggregation. For any State and market, an issuer may elect to limit the
amount of rebate payable for the MLR reporting year to the issuer's
total outstanding rebate liability with respect to all years included
in the aggregation. If an issuer elects this option, the outstanding
rebate liability with respect to a specific year in the aggregation
must be calculated by multiplying the denominator with respect to that
year, as defined in Sec. 158.221(c), by the difference between the MLR
required by Sec. 158.210 or Sec. 158.211 for the MLR reporting year,
and the sum of the issuer's preliminary MLR for that year, as defined
under Sec. 158.232(f), and the credibility adjustment applicable to
the current MLR reporting year. The outstanding rebate liability with
respect to a specific year must be reduced by any rebate payments
applied against it in prior MLR reporting years. A rebate paid for an
MLR reporting year must be applied first to reduce the outstanding
rebate liability with respect to the earliest year in the aggregation.
* * * * *

Dated: August 11, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
Dated: August 24, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-20896 Filed 8-29-16; 4:15 pm]
BILLING CODE 4120-01-P